6 Questions Foreclosure Buyers Should Ask

Is now a good time to buy a foreclosure?

This is a very common question from both real estate professionals and prospective buyers. Obviously, because local market conditions vary, the answer is different from market to market. But there are questions that buyers in any market should be asking before they make an offer on a property in foreclosure.

What's the first step buyers need to take?

Require buyers you work with to be pre-approved for a loan before you help them shop for a foreclosure. If they're thinking of buying a foreclosure as an investment or second home, they need to understand that financing the home will be more difficult and more expensive than financing a primary residence. Lenders typically charge higher interest rates and require a larger down payment for investment or second homes.

How can you tell a bad foreclosure from a good one?

Certainly there are great deals in many markets for both investors and buyers looking for a primary residence. But making a sound deal can be tricky. Buyers need to be wary of unpaid liens, including mortgage debt, taxes, construction loans, home equity lines of credit, and possibly a second or third mortgage. Any or all of these financial obligations could become your clients' responsibility when they purchase a property in foreclosure. Unless the property goes through a foreclosure auction and becomes a bank-owned REO, the outstanding foreclosure liens and fees could be simply transferred to the new owner—your clients. Don't let them fall into the same financial trap as the previous owner.

If I'm a qualifying borrower, can I appeal to banks for better loan terms?

Lenders are drowning in defaults—particularly in hard-hit real estate markets such as Arizona, California, Florida, Michigan, Nevada, and Ohio—so they may be motivated to cut a deal. If your clients have a good credit score, many banks will offer them a below-market-rate loan on a bank-owned home. Unlike paying down with points, this doesn't cost anything in fees, and it gives them the ability to spend more for the home.

What are the costs of buying a foreclosure?

It takes money to make money. The best opportunities are for buyers with cash. If your clients are planning to rent out the property or even resell it for a quick profit, make sure they consider the carrying costs, including sales commissions, marketing costs, vacancies, taxes, insurance, and maintenance costs. Once you've calculated all the expenses, add on another 10 percent to 15 percent. If they don't build in a "surprise fund," your clients might be the next foreclosure statistic.

How does choice of neighborhood affect foreclosure investments?

Clients looking for a good investment should generally avoid neighborhoods overrun with foreclosures, particularly newer subdivisions in overbuilt exurban areas. Investors will be tempted to buy foreclosures in these areas because they offer the steepest discounts—but they also carry the most risk of further depreciation. Look in well established neighborhoods with good schools and transportation. If you're in a market where prices are still falling, encourage your clients to factor falling prices into any offer they submit on a foreclosed property.

Source: James J. Saccacio is chief executive officer of RealtyTrac, a Web site that tracks properties in foreclosure.

Tip from a Top Producer: Be Frank with Sellers

I tell clients, "Don't be emotional about the sale. You want to sell it. If you don't price it where I recommend, don't get mad at me or move the listing if it's not selling. Keep your home clean, free of debris, and staged as well as you can. Don't call me every day. I'll give you a weekly report of showings and feedback."

—Michael Weaster, Southwest Director, Century 21 Excel, Houston

Short Sales A to Z

Short Sale Exprience and Success!

Homeowners and Buyers pay no commissions! Homeowners pay no closing costs either, and manys occassions, we can get the closing costs paid by the lien holder for the buyers as well.

Beryl Gosney and his short sale team and partners work Short Sales as the main focus of their reral estate business. Check out their many websites that are valuable information resources on the subject of Short Sales.

in reference to: YouTube - SearchStories's Channel (view on Google Sidewiki)

HAMP to be cut?

The House Financial Services Committee (HFSC) is meeting today to discuss and "markup" its oversight plan for the 112th Congress. On the docket of proposed federal budget cuts are 12 different housing programs, with only one being replaced.  The most well known of the programs the committee wants to curtail are the Making Home Affordable Programs, established about a year ago. House members on the committee wrote they have been underwhelmed by the $75 billion mammoth known as Home Affordable Modification Program (HAMP)and its counterpart Home Affordable Refinance Program (HARP) that were supposed to assist nine million borrowers at risk of foreclosure.  Since HAMP's launch in March 2009, about 579,659 permanent modifications have been completed, according to Treasury data. Also under this segment is a $200 billion commitment to purchase Fannie Mae and Freddie Mac preferred stock. 

"HAMP's foreclosure mitigation initiatives have failed to help a sufficient number of distressed homeowners to justify the program's cost," the plan said. "Accordingly, the Committee recommends rescinding unspent and unobligated balances currently committed to these programs."  The Federal Housing Administration Refinance Program is also on the chopping block because of its less than impressive performance in the first two months it was implemented.

The $8 billion program, designed to offer underwater borrowers a refinance, received only 35 applications between Sept. 7, 2010 and the end of October that same year, according to the HFSC.  The committee is aimed to discontinue NeighborWorks America, a government-charter, nonprofit corporation with a national network of affiliated organizations that focus on community reinvestment activities such as mediation counseling. The program, an allocated cost of $195 million, overlaps the functions of the Department of Housing and Urban Development  (HUD) and "are duplicative of existing HUD programs and can be consolidated," the oversight plan says.  Only HOPE IV will be replaced. The program uses funds to convert distressed or dangerous public housing developments into mixed-use housing and costs $200 million annually. The committee is proposing to replace it with Choice Neighborhoods, an existing program that serves the same function and costs $140 million less. 

Among other programs the committee also wants to abolish are Rural Housing and Economic Development, which currently receives $25 million annually to provide grants to non-profit organizations for capacity home building in rural areas, and the Neighborhood Stabilization Program, which gives federal funds to states and local governments with high concentrations of foreclosed homes, subprime mortgage loans and delinquent home mortgages. Approximately $1 billion was allocated for NSP.

(no subject)

IS THE HAMP PROGRAM IN DANGER OF FAILING? 

Anyone who has tried to get a loan modification through the Home Affordable Modification Program (HAMP) knows what a frustrating and, most-often, unsuccessful "solution" this has been for upside-down homeowners seeking to save their homes.  As I have previously reported, only 4.6% of applicants ever obtain a permanent HAMP modification and, as of those, 60% later fail generally because there is no principal reduction. 

HAMP was created in 2009 as a part of President Obama's plan to stabilize the housing market and help struggling homeowners get relief and avoid foreclosure.  Yet for 2010, HAMP modifcations declined compared to lender's own proprietary modifications.

Meanwhile, these have been dwarfed by foreclosures, 2.6 million foreclosures started and 1 million completed.  In a report to Congress published the first week of February, Neil Barofsky described the drawbacks and potential problems the bank bailout had created in regard to companies deemed "too-big-to-fail."

His report also covered controversial issues surrounding the Home Affordable Modification Program (HAMP), designed by Treasury as a foreclosure prevention effort.  Barofsky is the special inspector general for the Troubled Asset Relief Program (TARP). The HAMP initiative, including incentive payouts to servicers, borrowers, and investors, is funded with TARP dollars. 

HAMP, Barofsky says in the report, "continues to fall dramatically short of any meaningful standard of success."  According to Barofsky, the program was doomed from the beginning, because it was inefficiently designed with inconsistent rules that have been revised too frequently. He calls the 522,000 permanent modifications the program provided in 2010 "anemic," and calls attention to the more than 792,000 trial and permanent modifications that have been canceled and more than 152,000 that are still in limbo. 

In December, the Congressional Oversight Panel estimated that at this rate, HAMP will generate anywhere from 700,000 to 800,000 permanent modifications, a far cry from the 3 to 4 million modifications predicted by Treasury.

Not only does Barofsky assert that HAMP is not working because of poor design and implementation, but he also says another issue is the participation and administration of the program by servicers.

Servicers, he says, have been compounding the problems of the program with unnecessary delays, by failing to follow program standards, and even by misplacing borrower paperwork. Treasury's reaction to these issues has been lenient because of a fear that enforcing the program rules will encourage servicers to discontinue use of HAMP all together.

"Without meaningful servicer accountability," Barofsky writes, "the program will continue to flounder. Treasury needs to recognize the failings of HAMP and be willing to risk offending servicers. And if getting tough means risking servicer flight, so be it; the results could hardly be much worse." 

In response to the Barofsky Report, three congressmen on the Oversight and Government Reform Committe have proposed a bill to end the program.  "HAMP is a colossal failure," said Rep. Jim Jordan (R-Ohio), who is chair of the Oversight subcommittee on Regulatory Affairs, Stimulus Oversight and Government Spending.

He continued, "In many cases, it has hurt the very people it promised to help. It's one more example of why government interference in the private sector doesn't work and that's why it should be repealed." 

 

Rep. Patrick T. McHenry (R- North Carolina), , who chairs the Oversight subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs, thinks enough is enough.

"The number of homeowners kicked out of HAMP – and arguably left worse off by participating in the program- exceeds the number actually helped by hundreds of thousands," he said. 

What the future holds for HAMP and how this will impact the millions of financially-strapped borrowers trying to save their homes is unknown.

Don't expect any improvement from the government. As frustrating as the present system is, it is the only path to modification.  Don't quit trying but don't put yourself in a deeper hole in the process.

Get good, qualified information early and watch for changes.

Will The States Compel Mortgage Loan Modification? – Foreclosure Fraud

On October 3rd, I wrote about the stoppage of foreclosures across the country as a result of the discovery lender's use of "robo-signers" in preparing fraudulent foreclosure documents.  As expected, the lenders' pro-active stoppage removed any pressure on the Federal government to impose a foreclosure moratorium and soon, as the lenders realized that there would not be any consequences, the foreclosures resumed in full.  But as they may soon come to learn, there are consequences in life when we do something wrong.

Although the Fed has not acted, the Attorneys General of many States have stepped up and are threatening criminal prosecutions of lenders. As reported in today's Wall Street Journal, Ohio's Attorney General has criticized a number of banks and loan-servicing companies, including Wells Fargo & Co.; Ally Financial Inc.'s GMAC Mortgage; Bank of America Corp.; and J.P. Morgan Chase & Co. Mr. Cordray said the banks are trying to paper over fraud committed in foreclosures with temporary fixes that don't address underlying problems in the banks' practices: "It is not acceptable for a party who believes they submitted false court documents to merely replace those documents. Wells Fargo and any other banks are not simply allowed a 'do-over"….."The banks are committing fraud on the court, essentially perjury, and then saying 'Whoops! You caught me! Here's some different evidence and use that instead."   In an interview Friday, Mr. Cordray said the banks would "be well-served to work out a settlement with the borrowers to modify the loans and work out payments."

Here in California, Attorney General Jerry Brown called on lenders to stop foreclosures while the robo-signer issue is investigated. But no stoppage has been ordered. Further, he has announced that California has joined a coalition of 50 attorneys general and dozens of state banking regulators in a multi-state effort to demand that lenders find solutions to serious and potentially widespread problems in the foreclosure process across the country.  This might signal a concerted effort to push lenders to modify loans as a way of possibly avoiding legal action against them for fraud.

The big question for everyone is whether this is a sign of real action at the State level to assist upside-down property owners or whether this is just election year rhetoric.  With the election tomorrow, perhaps we'll learn more after the push for votes goes away.

Of course the problem for most people seeking modification will be finding help with the modification process. Due to the extent of loan modification scams nationwide, most States (including California) have essentially outlawed loan modifiers. Jerry Brown has called consumer fraud prevention a top priority but by this he specifically means "Loan Modification Fraud" not fraud by lenders.  For example, in October he filed a $60 million lawsuit to shut down companies offering "forensic audits" of loans which might reveal defective or fraudulent loan docs.  Without private sector assistance, those seeking loan modifications will be at the mercy of whatever the lender's representatives tell them. That may not necessarily be truthful or in the borrower's best interest.

Meanwhile don't expect anything from Washington. Presidential advisor Elizabeth Warren has been charged with setting up a new Consumer Financial Protection Bureau. Although the title is encouraging, she has already suggested the agency may not become deeply entangled with the issue. She said, State attorney generals likely will take the lead in dealing with the latest U.S. foreclosure mess.  So to continue, don't look for help from Washington.

The rise and fall of a foreclosure

By MICHELLE CONLIN

AP Business Writer

FORT LAUDERDALE, Fla. -- During the housing crash, it was good to be a foreclosure king. David Stern was Florida's top foreclosure lawyer, and he lived like an oil sheik. He piled up a collection of trophy properties, glided through town in a fleet of six-figure sports cars and, with his bombshell wife, partied on an ocean cruiser the size of a small hotel.

When homeowners fell behind on their mortgages, the banks flocked to "foreclosure mills" like Stern's to push foreclosures through the courts on their behalf. To his megabank clients - Bank of America, Goldman Sachs, GMAC, Citibank and Wells Fargo - Stern was the ultimate Repo Man.

At industry gatherings, Stern bragged in his boyish voice of taking mortgages from the "cradle to the grave." Of the federal government's disastrous homeowner relief plan, which was supposed to keep people from getting evicted, he quipped: "Fortunately, it's failing."

The worse things got for homeowners, the better they got for Stern.

That is, until last fall, when the nation's foreclosure machine blew apart and Stern's gilded world came undone. Within a few months, Stern went from being the subject of a gushing magazine profile to being the subject of a Florida investigation, class-action lawsuits and blogger Schadenfreude that, at last long, the "foreclosure king" was dead.

"What Stern represents is an industry that was completely unrestrained, unchecked, unpunished and unsupervised," says Florida defense attorney Matt Weidner. "This was business gone wild."

The rise and fall of Stern, now 50, provides an inside look at how the foreclosure industry worked in the last decade - and how it fell apart. It also shows how banks, together with their law firms, built a quick-and-dirty foreclosure machine that was designed to take as many houses as fast as possible.

Not long ago, the world of back-office bank procedures was of little interest to the public. But revelations last fall about robo-signers powering through hundreds of foreclosure affidavits a day, without verifying a single sentence, changed all that. Today the banking industry's eviction juggernaut is under intense scrutiny as allegations of systemic foreclosure fraud mount.

The 50 state attorneys general are conducting a foreclosure industry probe. So are state and federal regulators. Class-action lawsuits are gathering force, and, with increasing frequency, state judges are tossing out foreclosure suits in favor of homeowners. The developments are prolonging the housing market depression, casting doubt on mortgage ownership and calling into question whether mortgage-backed securities are, in fact, backed by nothing at all.

The Florida attorney general's economic crimes division is investigating three law firms, including Stern's, over allegations that they created fraudulent legal documents, gouged homeowners with inflated fees, steered business to companies they owned and filed foreclosures without proving the bank actually had a legal interest in the loan. Florida authorities characterize the foreclosure process at these law firms as a "virtual morass" of "fake documents" and depicted Stern's operations as something akin to the TV show "Lost" - only instead of people that went missing, it was paperwork. Stern's employees churned out bogus mortgage assignments, faked signatures, falsified notarizations and foreclosed on people without verifying their identities, the amounts they owed or who owned their loans, according to employee testimony. The attorney general is also looking at whether Stern paid kickbacks to big banks.

"There's a David Stern in every state, sometimes more than one," says Jacksonville Legal Aid attorney April Charney, who has successfully stopped foreclosure for hundreds of Florida families.

Stern denied repeated requests for comment. He did not answer inquiries at his office or at his main residence in Fort Lauderdale. Stern's lawyer, Jeffrey Tew, agreed to an interview in late December at his Miami office, then canceled it the night before without further comment.

Stern's story, starting with his law degree in 1986 from the South Texas College of Law, can be pieced together through thousands of pages of court documents, myriad depositions and scores of interviews.

After working at a law firm for mortgage lenders, Stern started his own practice in Fort Lauderdale in 1994. Four years later, he got a massive break: the mortgage giant Fannie Mae, a government-backed agency that provides market stability for mortgage lenders, named Stern to its exclusive attorney network. That meant Fannie directed banks to use Stern's firm when foreclosing in Florida. Fannie also named Stern Attorney of the Year in 1998 and 1999. Employees from that era remember an office that liked to party together. Stern enjoyed dressing up for his office bashes. One time he sauntered on stage turned out like Michael Jackson.

Almost from the beginning, Stern faced trouble. In 1998, he was named in a class-action lawsuit alleging that he padded fees on foreclosed homeowners. Stern settled for $2.2 million. According to legal testimony at the time from a Fannie Mae official, Fannie was warned about troubles at the Stern firm. But Fannie continued referring cases to Stern. Fannie Mae spokeswoman Amy Bonitatibus says, "At all times, Fannie Mae has had a reasonable expectation that our servicers and the law firms adhere to proper procedures and conduct under the law. In instances where we learn that servicers or law firms are not adhering to our requirements or applicable law, we immediately engage and take appropriate action, which may include termination."

Soon after, Stern was sued again, this time for sexual harassment. A former paralegal alleged that Stern created a "sexually-laden" atmosphere in which he routinely "touched and grabbed and subjected to simulated intercourse" his employees. Stern settled that suit in 2000 for an undisclosed amount.

By this time, lawyers and homeowner activists were also warning lenders, federal regulators and the Florida Bar about Stern. In 2002, the Florida Supreme Court reprimanded Stern for submitting "potentially misleading" fee affidavits.

None of the accusations stalled the firm's steroidal growth. After the economy crashed in the fall of 2008 and ravaged the housing market, Florida, along with Nevada, Arizona and California, became foreclosure central. Stern's caseload rose from 15,000 foreclosures in 2006 to 70,400 in 2009. His staff tripled to more than 1,200. To keep up with demand, Stern set up offices in the Philippines. When the U.S. staff responsible for entering bank data in the foreclosure files logged off, the offshore workers logged on.

Revenue swelled from $41 million in 2006 to $260 million in 2009, according to an SEC filing. The firm moved into a plush, marble-floored headquarters near Miami that was all glass and fountains. By now Stern was driving a Bugatti and had bought at least $60 million in property, including a 16,000-square-foot island compound that sits behind two security gates.

But all the paperwork Stern's firm was cranking out to make this fortune would soon come back to haunt him. The foreclosure business is a volume game. Banks typically pay law firms like Stern's about $1,400 for each successful foreclosure. But the banks can pay a lot less if the firm doesn't successfully foreclose within a certain time frame, usually around six months.

With so many foreclosures flooding in, Stern's firm couldn't keep up. Stern took shortcuts by hiring the young and cheap. "The girls would come out on the floor not knowing what they were doing," says Tammie Lou Kapusta, who worked in Stern's foreclosure department in 2008 and 2009. "Mortgages would get placed in different files. They would get thrown out. There was just no real organization when it came to original documents."

Employee depositions paint a picture of a firm under constant pressure from the banks to move faster. The longer it took to foreclose, the more money the banks stood to lose. Like so many in the industry, Stern had a strategy to cope with all the volume and velocity: robo-signing. One employee testified that Stern's chief lieutenant, a one-time file clerk named Cheryl Samons who rose to become the firm's chief operating officer, signed as many as 1,000 foreclosure affidavits a day without reading a single word. The employee said Samons' hand got so tired that she told three other employees to forge her signature. Samons also signed numerous mortgage assignments with a notary stamp that didn't even exist at the time of signing. Notary stamps are only valid for four years. The only way Samons could have signed mortgage assignments at the time they were supposedly notarized was if she had been capable of time travel.

Stern rewarded Samons with a new BMW SUV every year, paid all her bills and took care of the mortgage payment on her home, according to testimony from two employees. Samons did not respond to request for comment.

Billings surged. So did the dysfunction.

Kapusta testified that she received 100 phone calls a day from people who never received their foreclosure notices or who wanted loan modifications but couldn't get through to the banks. If she talked too long on the phone, Kapusta testified, Samons would yell at her. "Everything was about getting the judgment entered because we had to report to the banks," Kapusta said.

Stern battled to keep the chaos inside his firm a secret. In 2008 and 2009, whenever the Fannie Mae auditors were about to touch down in Miami for their routine monitoring, Stern's employees sometimes toiled through the night, ripping the stickers and client codes off of Fannie files and replacing them with those of a different lender. Then, as an extra precaution, they hauled the disguised files to a remote back room.

Stern then gave Fannie officials the white-glove treatment, with catered meals and chauffeuring. The incomplete files stayed hidden until the auditors left town.

Fannie Mae's Bonitatibus says that, "To our knowledge, no one at Fannie Mae has had their expenses paid by the Stern Law firm."

Early 2010 brought Stern's biggest coup. He spun off a chunk of his business called DJSP that performed mortgage process services like title searches and lien monitoring and took it public. The deal reportedly made Stern $146 million, including $55 million cash.

DJSP stock started trading in January at about $10 a share. Within months, battered by rumors of indiscretions at Stern's firm, it was worth half. On July 20, two investors filed a securities-fraud class action alleging that Stern knowingly misled them by failing to disclose the problems within the business. "DJSP was a scam," says Bill Warner, a Sarasota private eye who successfully defended himself against a foreclosure suit brought by Stern.

At the end of July, Florida attorney Kenneth Trent, who had blocked Stern from foreclosing on a homeowner who was current on his mortgage, filed a federal lawsuit against Stern's firm under a statute normally reserved for gangsters, the Racketeer Influenced and Corrupt Organizations Act-or RICO. Days later, the Florida attorney general launched an investigation against Stern's firm and three other foreclosure mills. The AG's arguments were similar to those brought in Trent's class action.

At first, Stern railed against the media, saying he would defend the company and its reputation against the allegations. Then, in September, he dropped out of sight. Equally elusive is Cheryl Samons, who is no longer with the firm. She left no contact information.

In October, one by one, the megabanks started to withdraw their cases from Stern's firm. Fannie fired Stern on Oct. 22. Stern's staff of 1,200 has dwindled to 200. DJSP's stock, worth as much as $13 in April, now trades for pennies.

The firm's fall has spawned more chaos in Florida's circus-like foreclosure courts. A slew of homes Stern foreclosed on that sold for $240,000 each during the credit bubble sold at auction as orphaned cases for $200. Recently, even the most infamous "rocket docket," in Lee County, where judges were reported to have signed off on a foreclosure every 30 seconds, ground to a virtual standstill as the Stern firm withdrew from case after case. Some of Stern's remaining lawyers show up court with greasy hair, fleece jackets and food-stained clothing. As for Stern, if federal and state prosecutors file criminal charges, he could end up in prison.

Meanwhile, Stern's payment on his $12 million line of credit with Bank of America is late. So is the rent on his headquarters.

He's now in default.

Read more: http://www.miamiherald.com/2011/02/06/v-fullstory/2053704/the-rise-and-fall-of-a-foreclosure.html#ixzz1DX1paX5m

BOA settles for $3 billion

Bank of America (BOA) said that it paid nearly $1.3 billion to Freddie Mac and more than $1.3 billion to Fannie Mae on Dec. 31 to resolve a faulty mortgage loan dispute involving Countrywide Financial Corp.  The $2.6 billion worth of payments to Freddie and Fannie, combined with potential losses on future repurchases from government-sponsored enterprises, adds up to $3 billion in expenses, according to BOA. Bank of America also expects to take an additional $2 billion charge to fourth-quarter results from the decline in the mortgage business, bringing the total impact to the company to $5 billion.

"Our goals remain the same: put these issues behind us; focus on serving customers and clients; and continue to help distressed homeowners facing difficult times," said Bank of America Chief Executive Brian Moynihan.  The deals with Freddie Mac and Fannie Mae don't cover loan servicing obligations, other contractual obligations or loans contained in private label securitizations. But the agreements are a sign that the bank is working quickly to deal with buyback claims.  Fannie Mae said in a statement that the Bank of America deal was a "fair and responsible resolution" of the outstanding claims. The company said the agreement accounts for about 44% of the $7.7 billion in repurchase requests outstanding with all of its seller servicers as of Sept. 30, 2010.

2011 - boom in hiring?

After three years of economic pain, a growing number of economists think 2011 will finally bring what everyone's been hoping for: More jobs and a self-sustaining recovery.  "We're looking at some leading indicators on employment, and they're all flashing green lights," said Bernard Baumohl of the Economic Outlook Group, a Princeton, N.J. research firm.  Baumohl and some other economists forecast between 2.5 million and 3 million jobs being added to U.S. payrolls in 2011, about triple the gains likely to be recorded in 2010 and what would be the best one-year jump since the white hot labor market of 1999.  That wouldn't be enough to climb out of the 8-million job crater created by the Great Recession and won't bring down the unemployment rate by a significant amount. An improved job market could even bring a short-term rise in the jobless rate, as those discouraged from job hunting resume looking for work and are once again counted as unemployed.  But the forecasted hiring boo
m could get the economy back into gear and provide real relief for many Americans. 

Those projecting better hiring in 2011 point to a number of factors. Among them, job openings by employers rose 17% from June to October of this year, the most recent reading available from the Labor Department, and are up by about a third compared to a year earlier.  And there has been a downward trend in newly laid-off workers filing for initial jobless claims, which fell below 400,000 in the most recent reading for the first time since the summer of 2008. That might have been distorted by the holiday season and bad weather, but the four-week average is also at a two-plus year low.  On the business front, capital expenditures -- typically followed by expansion and hiring -- have been on the rise.  Baumohl says another non-traditional employment indicator, the number of day-care workers, has been edging up for four months and is now about 2% higher than a year ago. "People need more day care when they've got jobs to go to."

WSJ - year end report and outlook

For housing markets, the past year was another bumpy ride. Home prices stabilized in the first half of 2010 as the government offered tax credits to spur sales, but transactions plunged to 15-year lows after that stimulus expired. Sales have rebounded only modestly and at the current pace, it would take 9½ months to work through the volume of existing homes listed for sale.  The market dodged a bullet in March when the Federal Reserve ended its purchases of $1.25 trillion in mortgage-backed securities. Many analysts expected rates to rise, but they defied expectations by falling to 60-year lows, thanks first to the European debt crisis and later as the U.S. recovery faltered. (As the year ended, rates were rising but they remained historically low.)  

Tail winds to spur a recovery are gathering. Large price declines have made housing more affordable than at any point in the last decade. New housing construction is stuck at its lowest levels in more than 40 years. "That will help absorb supply in ways that a lot of people underestimate," Mr. Lawler said.  But sellers also still will have to chop prices. Overall, prices are down 29.6% from their July 2006 peak to October 2010, according to the Standard & Poor's/Case-Shiller price index. Many analysts expect home prices to decline by an additional 5% before stabilizing later this year.

"We're bouncing along a bottom," said Ivy Zelman, chief executive of housing research firm Zelman & Associates.  Moreover, credit standards are still tight. And while mortgage delinquencies peaked in February 2010, foreclosures could remain at an elevated level for years as banks work through a huge backlog. The most realistic "best case" scenario for 2011 would "simply be a year in which things do not get worse," wrote Morgan Stanley housing analysts in a research report.  One of the most stubborn problems is the 10.8 million homeowners who owe more than their homes are worth, or 22.5% of all mortgage borrowers, according to CoreLogic Inc. These so-called underwater borrowers can't easily sell their homes, and they are at risk of defaulting if they lose their jobs.  Housing faces additional uncertainty because the government is set to reconsider how aggressively to support homeownership. Deficit hawks have their sights set on scaling back the mortgage-interest deduction, and
  the Obama administration later this month will put forth a proposal on how to revamp Fannie Mae and Freddie Mac and the broader mortgage market. 

"What goes on in Washington will be of critical importance to housing," said John Burns, an Irvine, Calif.-based home-building consultant.  Another wild card: Regulators and prosecutors could uncover sloppy practices from the heyday of the housing boom. In September, some of the nation's largest banks, including units of Bank of America Corp. and J.P. Morgan Chase & Co., were forced to suspend foreclosures due to potentially fraudulent document-handling procedures.  Banks say they haven't evicted anyone who hasn't defaulted, but the foreclosure machinery has been slow to restart nonetheless. Some real-estate lawyers warn that problems could be worse if it turns out that loans weren't properly recorded or transferred during the process of bundling mortgages and selling them as securities.  Banks already face rising costs as foreclosures become more time-consuming. Investors, meanwhile, are pursuing new efforts to force banks to buy back money-losing mortgage bonds.

Greenback in for a wild ride?

Say what you want about the current state of the American economy, when investors seek a safe harbor in which to ride out an economic storm, it is the venerable greenback that continues to offer the most comfort.  The greenback has gained more than 8% against the Euro since January. In June, the euro tumbled to a four-year low against the dollar, when the near-collapse of the Greek economy caught the market by surprise.  Progress was made in repairing the global economy in 2010 but Europe is still under pressure, and that could be a big plus for the U.S. dollar. No one wants to be caught holding euros right now for fear another round of insolvency rumors will drag the troubled currency even lower.  Ultimately, investors seek the greatest level of certainty possible, and this is as true for central banks as it is for individuals. China and Russia alone hold nearly two trillion in U.S.-denominated assets.

Aside from Europe's risks, there are a number of domestic factors which will likely have an impact on the value of the dollar over the next 12 months.  Analysts are pretty much in agreement that the current fed funds rate of just 0% to 0.25% -- intended to support consumer spending by making loans more affordable -- will remain in effect for the duration of the year. The fed funds rate is the rate at which banks lend excess funds overnight to one another.  In addition to its low interest rate policy, the Fed has just kicked-off a second round of quantitative easing, known as "QE2". Seen by many as a last ditch, 'bet everything on the farm' act of desperation, the scheme calls for the Fed to purchase $600 billion in bank-held assets to increase the supply of cash in the economy.  If the combination of low interest rates and increased liquidity encourages a wave of lending and gets consumers spending again, that could strengthen the dollar. 

While the tea-leaf readers are predicting a much slower recovery period than those following recessions of the past, recent signs suggest that the job market is showing signs of life.  In ordinary times, a U.S. dollar outlook based on growth and employment alone would suggest the dollar is due for further devaluation.  These are not, however, ordinary times, and as bad as it appears in America, the short-term prognosis for Europe and Great Britain is even more challenging. Japan is also dealing with a slowing economy teetering on the point of deflation.  In this era of financial uncertainty, it is easy to make the case for a 'flight to safety' to the dollar.

MLN - Pace of Florida foreclosures "flabbergasting"

The average Florida homeowner who went into foreclosure in November hadn't paid his mortgage in 10 months.  The 307 day delay between the first late payment and a foreclosure referral, reported in a study released this week, was called ``flabbergasting'' by one financial expert who said mortgages typically go to foreclosure by the third delinquent payment.  Jacksonville-based LPS Applied Analytics, which tracks home loans nationwide and issued its November Mortgage Monitor report, ranks Florida among the top states for the average length of time it takes to refer a home to foreclosure.  The average Maryland home doesn't go to foreclosure until 358 days following the first late payment. New York is at 344 days. California tops the list at 367 days. 

"I am absolutely, utterly flabbergasted that this could be true,'' said Skip McDonough, a broker with Family Mortgage in Jupiter. "It flies in the face of prudent management and due diligence on the part of the lender.''  Herb Blecher, senior vice president of LPS Applied Analytics, said it's the first time the company has done a state-by-state measure of pre-foreclosure loan delinquency.  The data include homes that are in foreclosure for a second time, possibly following a loan modification or short-sale attempt. Those loans, which Blecher said are not a majority, would extend the time to foreclosure because the report measures from the first late payment to the most recent foreclosure referral.  The report also found that 18% of loans nationwide with 24 or more missed payments are not in foreclosure. About 15% of loans with 18 months of no payments remain out of foreclosure. 

"We are looking at a very large pool of very delinquent loans,'' Blecher said.  Many struggling homeowners undoubtedly see delays in the foreclosure process as a benefit. But for homeowner associations trying to collect late fees and neighbors of vacant properties, foreclosure postponements can mean lower home values and a reduction in maintenance.  Bob Clinton, president-elect of the Florida Association of Mortgage Professionals, Palm Beaches chapter, said the banks are ``notoriously'' unprepared to handle the millions of foreclosures nationwide, as well as the loan modifications.  ``They don't have the staff or depth of talent that this economy calls for,'' Clinton said. ``It used to be foreclosure was a big, big deal. Nowadays, it's like someone turned on a faucet and they can't stop it.''

Foreclosure Investigation Update and more

Foreclosure investigation to be revealed in January 2011

Treasury Secretary, Timothy Geithner and the Housing and Urban Development Secretary Shaun Donovan, said in a joint-statement that they expect the Administration task force assigned to investigate fraudulent mortgage foreclosure practices to present its results to them next month.  According to a Post Chronicle report published today, the task force consists of a group of officials from 11 federal agencies.  "The task force will take whatever action is necessary to hold accountable any institution that acted improperly," Secretaries Geithner and Donovan asserted in their joint-statement.  The task force was formed to probe allegations of fraudulent foreclosure documentation in the wake of the 'robo-signers' scandal that has sparked public outrage with major lending banks. 

Banks, facing intensifying demands from investors that they buy back billions of dollars worth of defaulted mortgages they sold to the investors, now have to brace for more challenges in the proportions of the recent financial crisis. The two officials have continually stated that the administration to date has not yet seen any signs of 'systemic' troubles with home foreclosures that might threaten U.S. financial stability, or structural problems that could hurt mortgage-related investments. Outside of the task force, state attorneys general of all 50 U.S. states, are co-operating and looking into alleged bank failures to properly review foreclosure processes and wrongly evict homeowners.

Mortgage applications down

The Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending December 17, 2010 decreased 18.6% on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index decreased 20.0% compared with the previous week.   The Refinance Index decreased 24.6% from the previous week. The Refinance Index has declined six straight weeks and is at its lowest level since the week ending April 30, 2010.  The seasonally adjusted Purchase Index decreased 2.5% from one week earlier. The unadjusted Purchase Index decreased 4.9% compared with the previous week and was 8.4% lower than the same week one year ago.  "Refinance application volume dropped sharply this week as mortgage rates held near six month highs," said Michael Fratantoni, MBA's Vice President of Research and Economics. 

"Purchase applications fell for a second week, with the level of applications little changed over the past month, indicating that home sales are likely to remain relatively weak over the next few months."   The four week moving average for the seasonally adjusted Market Index is down 9.8%.  The four week moving average is down 1.2% for the seasonally adjusted Purchase Index, while this average is down 12.7% for the Refinance Index.  The refinance share of mortgage activity decreased to 72.3% of total applications from 76.7% the previous week. This is the lowest refinance share observed in the survey since early June 2010. The adjustable-rate mortgage (ARM) share of activity increased to 6.1% from 5.5% of total applications from the previous week.

GDP up

According to the Commerce Department, gross domestic product (GDP) grew at an annual rate of 2.6% in the three months ended in September, up from the previous reading of a 2.5% rise.  Economists expected the third and final reading of third quarter GDP, which is a measure of goods and services produced in the United States, to tick up to 2.7%, according to a consensus of economist opinion from Briefing.com.  Third-quarter growth estimates were revised to reflect a $121.4 billion increase in business inventories rather than the $111.5 billion rise reported last month. Inventories added 1.61 percentage points to GDP growth. 

Excluding inventories, the economy expanded at a 0.9 percent pace rather than 1.2%.  The government calculates GDP as a measure of goods and services produced in the United States. The number is often revised multiple times. This is the third and final reading for the quarter.  While the pace of economic growth is improving, the rate is still considered weak for a recovery.  But outlooks are improving. In a survey of economists conducted during the last week by CNNMoney.com, the consensus forecast for economic growth during the fourth quarter rose to 3.1%.  Just three months ago, economists were looking for a 2.5% for the last three months of the year.

Olick - business leaders to government:  "Urgent"

"In a bold statement underscoring the precarious state of the nation's mortgage market, 52 industry executives sent an 'open letter' to the government's top six money managers.  'We the undersigned write to you regarding the urgent need to develop national standards for originating, selling and servicing mortgage loans,' the letter begins. 'The private residential mortgage securitization market is frozen as to new issuance. The housing market is suffering from a dearth of credit, which is causing a serious lack of confidence among potential homebuyers.'  The letter was sent to the heads of the Federal Reserve, the FDIC, the Treasury Department, the SEC, the FHFA and the Comptroller of the Currency. 

Not only does it demand a 'gold standard' for what exactly constitutes a residential mortgage, but given the 'ongoing litany of revelations pertaining to inadequate servicing, lost loan modification documents, and improper foreclosures which reveal significant problems in the mortgage servicing industry,' it makes eleven separate recommendations designed to protect not just borrowers but investors as well.  Referring to 'misaligned incentives and tranche warfare,' in the securitization market, it demands appropriate action to maximize the net present value of the mortgages for the benefit of all investors in a securitization rather than the benefit of any particular class of investors.'  What's striking is the slightly desperate tone of the letter, as the housing and mortgage markets teeter between a double dip and a lengthy flat lining recovery…all in the face of historic new regulation and restructuring.  'The chaotic situation in the mortgage market today demands immedia
te action to ensure all parties are treated fairly and to restore the confidence needed to support a recovery in real estate markets and the entire U.S. economy.'  If you think there was a lot to talk about in housing this year, just wait."

Fed helped stocks, not economy

According to a CNBC Fed Survey in December, the Federal Reserve's policy to purchase $600 billion of bonds in a program widely known as QE2 has been mostly ineffective at lowering interest rates and will do little to improve the unemployment rate.  The survey of 76 economists, bond and stock traders, and analysts, found 63% saying the Fed's program has been ineffective at lowering interest rates.  A similar percentage believes the program will not help lower the unemployment rate.  But respondents to the survey say the Fed program has played an important part in raising stock and commodity prices.  In fact, nearly three-quarters of the group say the Fed's bond purchase program has helped raise stock prices, while 63% see it as a reason why commodity prices are higher.  The Federal Reserve has been the subject of strong criticism since launching its QE2 program in November. Fed Chairman Ben Bernanke suggested it was a way to lower interest rates and unemployment. Since N
ovember, however, yields on treasuries have risen by nearly a percentage point.

Asked the reason for the increase in yields, 61% of the survey respondents said the main reason was a stronger growth outlook. Their next choice was a worsening outlook for the deficit, likely the result of the recent tax compromise in Washington, followed by a rise in the inflation forecast.  "The economy is strengthening and the extension of the Bush tax cuts for all taxpayers is playing a more important role in boosting growth expectations than QE2 is," says RDQ  Economics chief economist John Ryding.  Overall, 72% believe the Fed will follow through and purchase the entire $600 billion of Treasuries announced in November. Twenty% believe the Fed will do less than that amount, and 8% think the Fed will do more. 

As for QE3, 41% of market participants think there is a chance the Fed will continue to increase the size of its portfolio after June 2011. On average, those who believe in QE3 look for the Fed to add an additional $340 billion in purchases. But Mark Zandi, Chief Economist at Moody's Analytics, disagrees, saying, "The passage of the tax cut deal significantly improves the economy's prospects in 2011 and reduces the need for any additional QE."  Add it all up, and 42% of survey participants give Fed Chairman Ben Bernanke a "B" grade and 26% give him an "A."