In September, Chase announced a review of 56,000 foreclosure cases in 23 states that require a judge to sign off on a foreclosure. The recent move expands the inspection to states that do not require judicial approval. Under the latest expansion, the foreclosure process will continue while documents are being examined, expected to take a few weeks. In the initial review, Chase requested that the courts not enter judgments until completion of the audit. Without a judgment from a court, those homes cannot be sold. The initial review was announced after the lender discovered that its employees may have signed affidavits on the basis of reviews done by other personnel.
In those 56,000 cases, JPMorgan Chase has asked its local foreclosure attorneys to communicate to courts, affected homeowners and their lawyers. The notification process is underway, a company spokesman said. Banks have come under increasing pressure from lawmakers in recent weeks to review foreclosures or to expand existing reviews. On Friday, Bank of America announced it was halting foreclosure sales in all 50 states as part of a widening investigation into flaws in the process. The bank said the foreclosure process on delinquent borrowers will continue, but it will not proceed to judgment or a foreclosure sale. Ally Financial, previously known as GMAC, the finance arm of General Motors, has said it is temporarily suspending evictions and post-foreclosure closings in states that require judicial review while it conducts a review of documents.
Job losses are worse than we thought
The government currently estimates that 2.2 million jobs were lost from April of 2009 through March of this year, a significant portion of the 7.8 million jobs lost since the start of 2008. But in a little-noticed note at the bottom of September's jobs report, the Labor Department said it now appears there were 366,000 additional jobs lost during the 12 months that ended in March, a revision that is not yet included in the official numbers. During the 12-month period that ended in March, that so-called birth-death adjustment added 336,000 jobs to overall total payrolls.
The birth death adjustment also resulted in an estimated 682,000 additional jobs in the six months since March, although unlike the widely-reported monthly job readings, that gain is not seasonally adjusted. Still it is significant, accounting for more then 40% of the job gains reported since the spring. "The birth-death model isn't working," said Robert Brusca of FAO Economics. "As businesses are having trouble getting credit, it's not surprising." "Around turning points, the revisions tend to be larger," said Lakshman Achuthan, managing director of Economic Cycle Research Institute. "At the bottom of the cycle, they tend to underestimate the job losses."
A U.S.-wide foreclosure moratorium would be "catastrophic"
The Securities Industry and Financial Markets Association said foreclosure processing mistakes should be fixed but warned against dramatic nationwide action. "It is imperative, however, that care be taken in addressing these issues to ensure that no unnecessary damage is done to an already weak housing market and, in turn, that there is no further negative impact on the economy," SIFMA Chief Executive Tim Ryan said in a statement. On Sunday, White House adviser David Axelrod said he was "not sure" about a national halt to foreclosures. Disclosures that some big mortgage processors filed affidavits without proper scrutiny in thousands of foreclosure cases has drawn anger from Congress and advocacy groups, with some prominent lawmakers calling for foreclosures to be halted in all 50 states. The health of the U.S. housing market is a key concern. Politicians are acutely aware of voter anxiety as the congressional election looms on Nov. 2 and regulators are under heavy press
ure to prevent a repeat of the 2007-2009 financial crisis that began when the U.S. housing bubble burst.
2010 deficit at $1.3 trillion
The Treasury Department will deliver the official deficit numbers later this month, but according to preliminary estimates released by the Congressional Budget Office, the federal government ran a deficit of nearly $1.3 trillion in the fiscal year that ended Sept. 30. According to CBO, the fiscal year 2010 deficit came in $125 billion below last year -- the worst on record since World War II. On the tax front, corporate revenue rose by $53 billion, or 39%, from 2009. Stronger corporate profits were the result of improved economic conditions and more generous rules for writing off business expenses. The Federal Reserve's investments in the housing market and other areas of the economy also paid off for Uncle Sam. Receipts from the Fed to the Treasury rose $42 billion, or 121%, over 2009.
Overall government spending fell. The costs of the Troubled Asset Relief Program, which just ended, and payments to mortgage giants Fannie Mae and Freddie Mac declined. The same is true for funds spent on federal deposit insurance. But other than that, the CBO reported, spending rose at a faster pace -- 9% -- than it has in awhile. Much of that increase was due to greater spending on the unemployed, on benefits for Medicare, Medicaid and Social Security and various provisions in the 2009 Recovery Act. The federal cost of benefits for the jobless alone rose by 34% as the economy continued to suffer high rates of unemployment. Interest payments on the debt also rose 13%.
Record number of foreclosures in Washington, Oregon
A record number of properties were foreclosed in Washington last month with 2,007, which is up 55.2% from year ago and 19% higher than August, according to Foreclosureradar. The company said just 7.3% of the foreclosures were sold to third-parties, with the rest going back to the bank and pushing REO inventory up nearly 11%. Foreclosure sales in September also rose in Oregon with an 18.5% jump to a record 967, which is almost 90% higher than the year earlier. Nevada's sales of foreclosures increased 39.2% last month from August. Meanwhile, the bank-owned, or REO, inventory in Arizona and California continues to increase, as fewer foreclosed homes are being purchased by investors. Foreclosureradar said the number of foreclosed properties acquired by third parties fell 15.6% in California last month. "Most foreclosure investors flip the properties they purchase after taking care of title, occupancy and repairs," the company said. "This process is taking 44.5% longer [in Cali
fornia] than it did a year ago, up from 95 days to 137." Arizona's REO inventory has climbed steadily for a year, rose 4.2% in September, and is now 68% higher than a year ago, according to Foreclosureradar.
The real estate data firm has been tracking foreclosure rates in California since March 2007, and recently began offering data for Arizona, Nevada, Oregon and Washington. Foreclosureradar said its analysts have yet to see any impact from the foreclosure moratorium in the states it tracks because they don't handle foreclosures through the courts. "We regularly see lenders make minor mistakes in foreclosure filings" founder and chief executive Sean O'Toole said. "But the reality is that far more homeowners are behind on their mortgage payments than are even in foreclosure. The clear problem in the housing market today is not foreclosures, but negative equity; and as long as the focus remains on the symptom rather than the disease we will see little progress towards real solutions and this crisis will drag on for years to come."
Small business optimism up
The National Federation of Independent Business (NFIB) said its optimism index edged up 0.2 points to 89.0 in September — the latest sign of sluggishness in the U.S. economic recovery. Boosting the index, the number of firms reporting increases in capital outlays in the last six months rose to 45 percent, up 1 percentage point from a month earlier but still near a 35-year low, the NFIB said. "The downturn may be officially over, but small business owners have for the most part seen no evidence of it," said William Dunkelberg, the group's chief economist. The U.S. recession ended in June 2009 but the recovery slowed dramatically in the second quarter. Investors bet the Federal Reserve will pump billions of new dollars into the economy soon to spur growth. The NFIB poll showed 16 percent of small businesses plan to cut jobs over the next three months, up from 13 percent in an August survey.
Now for our real estate education section...
Nixing the Fix?
On October 7th, President Obama announced his intent to veto the foreclosures document bill which could potentially help restore some semblance of balance to the current crisis involving the robo-signing scandal. Advocates of Obama's position claim it would lead to increased numbers of foreclosures and greater potential risk of banking abuse or irregularities in an already abusive system. Critics say the bill was urgently needed to curb the rising backlog of homes and prevent a complete meltdown of an already stressed system due to the foreclosure moratorium. Who is right and what are the stakes if Obama is wrong?
In a Nutshell
The law was originally proposed in April of 2005 by Rep Robert Alder of Alabama in order to allow states to recognize the authority of foreclosure documents from one state to another. It was currently revitalized in response to the robo-signing crisis. President Obama intends to use a pocket veto to nix the proposed fix.
More Than What Meets the Eye
The question of whether or not this is the correct course of action is exacerbated by President Obama's timing; according to political experts, a pocket veto can only be used when Congress is out of session however, the Senate is not yet adjourned. Critics point to the irony of using yet another "technical irregularity" as a proposed method of solving the original one.
Right or Wrong?
Setting the legal and technical issues aside for just a moment, the most urgent question is whether or not the proposed legislation would curb the tidal wave of documentation irregularities that have resulted in a near stand-still of foreclosures in half the nation. By signing the bill, President Obama would open the door for states to recognize the documentation from state to state and therefore help expedite the processing of an already huge backlog. Critics claim irregularities are prevalent and automatic approval would be less likely to recognize - much less correct - faulty processing and leave little room for appeal. Who are the winners and losers? It depends on who you ask or believe but unanticipated consequences are a very real threat including:
Distressed Homeowners - Despite the claim that the bill is intended to help homeowners, they may find little comfort in a more rigorous process given the already extended delays and moratorium on current foreclosures. Experts agree it is unlikely the technical difficulties are likely to result in any real changes to the default status of the homeowner but rather a more extensive process.
Banks and Investors - Investors are likely to react negatively to the news that an end to the real estate crisis isn't in sight and may actually grow worse. Once again, government intervention is skewing the "invisible hand" toward a direction that many disagree with. Banks, already reeling from the burden of bad loans and depressed portfolios, are likely to suffer extensive setbacks while attempting to process this new batch of butchered loan documents. Lenders may soon be required to mark down the value of bad assets resulting in insolvency for borderline banks.
HOA & County Government - Improper documentation has resulted in homeowners not having been removed from the tax rolls in many states, leaving them financially liable for property taxes yet unaware or unable to respond. HOA's are already suffering from a loss of income and likely to see even longer delays due to documentation issues. Empty homes are becoming a source of blight in many communities even before the impending moratorium. More empty houses are simply expected to worsen an already bad situation.
The Bottom Line: Short sales are an increasingly attractive alternative for desperate homeowners and banks alike. Rather than see this as a set-back, savvy short sale investors should learn to recognize the opportunity and move on it sooner rather than later!
In those 56,000 cases, JPMorgan Chase has asked its local foreclosure attorneys to communicate to courts, affected homeowners and their lawyers. The notification process is underway, a company spokesman said. Banks have come under increasing pressure from lawmakers in recent weeks to review foreclosures or to expand existing reviews. On Friday, Bank of America announced it was halting foreclosure sales in all 50 states as part of a widening investigation into flaws in the process. The bank said the foreclosure process on delinquent borrowers will continue, but it will not proceed to judgment or a foreclosure sale. Ally Financial, previously known as GMAC, the finance arm of General Motors, has said it is temporarily suspending evictions and post-foreclosure closings in states that require judicial review while it conducts a review of documents.
Job losses are worse than we thought
The government currently estimates that 2.2 million jobs were lost from April of 2009 through March of this year, a significant portion of the 7.8 million jobs lost since the start of 2008. But in a little-noticed note at the bottom of September's jobs report, the Labor Department said it now appears there were 366,000 additional jobs lost during the 12 months that ended in March, a revision that is not yet included in the official numbers. During the 12-month period that ended in March, that so-called birth-death adjustment added 336,000 jobs to overall total payrolls.
The birth death adjustment also resulted in an estimated 682,000 additional jobs in the six months since March, although unlike the widely-reported monthly job readings, that gain is not seasonally adjusted. Still it is significant, accounting for more then 40% of the job gains reported since the spring. "The birth-death model isn't working," said Robert Brusca of FAO Economics. "As businesses are having trouble getting credit, it's not surprising." "Around turning points, the revisions tend to be larger," said Lakshman Achuthan, managing director of Economic Cycle Research Institute. "At the bottom of the cycle, they tend to underestimate the job losses."
A U.S.-wide foreclosure moratorium would be "catastrophic"
The Securities Industry and Financial Markets Association said foreclosure processing mistakes should be fixed but warned against dramatic nationwide action. "It is imperative, however, that care be taken in addressing these issues to ensure that no unnecessary damage is done to an already weak housing market and, in turn, that there is no further negative impact on the economy," SIFMA Chief Executive Tim Ryan said in a statement. On Sunday, White House adviser David Axelrod said he was "not sure" about a national halt to foreclosures. Disclosures that some big mortgage processors filed affidavits without proper scrutiny in thousands of foreclosure cases has drawn anger from Congress and advocacy groups, with some prominent lawmakers calling for foreclosures to be halted in all 50 states. The health of the U.S. housing market is a key concern. Politicians are acutely aware of voter anxiety as the congressional election looms on Nov. 2 and regulators are under heavy press
ure to prevent a repeat of the 2007-2009 financial crisis that began when the U.S. housing bubble burst.
2010 deficit at $1.3 trillion
The Treasury Department will deliver the official deficit numbers later this month, but according to preliminary estimates released by the Congressional Budget Office, the federal government ran a deficit of nearly $1.3 trillion in the fiscal year that ended Sept. 30. According to CBO, the fiscal year 2010 deficit came in $125 billion below last year -- the worst on record since World War II. On the tax front, corporate revenue rose by $53 billion, or 39%, from 2009. Stronger corporate profits were the result of improved economic conditions and more generous rules for writing off business expenses. The Federal Reserve's investments in the housing market and other areas of the economy also paid off for Uncle Sam. Receipts from the Fed to the Treasury rose $42 billion, or 121%, over 2009.
Overall government spending fell. The costs of the Troubled Asset Relief Program, which just ended, and payments to mortgage giants Fannie Mae and Freddie Mac declined. The same is true for funds spent on federal deposit insurance. But other than that, the CBO reported, spending rose at a faster pace -- 9% -- than it has in awhile. Much of that increase was due to greater spending on the unemployed, on benefits for Medicare, Medicaid and Social Security and various provisions in the 2009 Recovery Act. The federal cost of benefits for the jobless alone rose by 34% as the economy continued to suffer high rates of unemployment. Interest payments on the debt also rose 13%.
Record number of foreclosures in Washington, Oregon
A record number of properties were foreclosed in Washington last month with 2,007, which is up 55.2% from year ago and 19% higher than August, according to Foreclosureradar. The company said just 7.3% of the foreclosures were sold to third-parties, with the rest going back to the bank and pushing REO inventory up nearly 11%. Foreclosure sales in September also rose in Oregon with an 18.5% jump to a record 967, which is almost 90% higher than the year earlier. Nevada's sales of foreclosures increased 39.2% last month from August. Meanwhile, the bank-owned, or REO, inventory in Arizona and California continues to increase, as fewer foreclosed homes are being purchased by investors. Foreclosureradar said the number of foreclosed properties acquired by third parties fell 15.6% in California last month. "Most foreclosure investors flip the properties they purchase after taking care of title, occupancy and repairs," the company said. "This process is taking 44.5% longer [in Cali
fornia] than it did a year ago, up from 95 days to 137." Arizona's REO inventory has climbed steadily for a year, rose 4.2% in September, and is now 68% higher than a year ago, according to Foreclosureradar.
The real estate data firm has been tracking foreclosure rates in California since March 2007, and recently began offering data for Arizona, Nevada, Oregon and Washington. Foreclosureradar said its analysts have yet to see any impact from the foreclosure moratorium in the states it tracks because they don't handle foreclosures through the courts. "We regularly see lenders make minor mistakes in foreclosure filings" founder and chief executive Sean O'Toole said. "But the reality is that far more homeowners are behind on their mortgage payments than are even in foreclosure. The clear problem in the housing market today is not foreclosures, but negative equity; and as long as the focus remains on the symptom rather than the disease we will see little progress towards real solutions and this crisis will drag on for years to come."
Small business optimism up
The National Federation of Independent Business (NFIB) said its optimism index edged up 0.2 points to 89.0 in September — the latest sign of sluggishness in the U.S. economic recovery. Boosting the index, the number of firms reporting increases in capital outlays in the last six months rose to 45 percent, up 1 percentage point from a month earlier but still near a 35-year low, the NFIB said. "The downturn may be officially over, but small business owners have for the most part seen no evidence of it," said William Dunkelberg, the group's chief economist. The U.S. recession ended in June 2009 but the recovery slowed dramatically in the second quarter. Investors bet the Federal Reserve will pump billions of new dollars into the economy soon to spur growth. The NFIB poll showed 16 percent of small businesses plan to cut jobs over the next three months, up from 13 percent in an August survey.
Now for our real estate education section...
Nixing the Fix?
On October 7th, President Obama announced his intent to veto the foreclosures document bill which could potentially help restore some semblance of balance to the current crisis involving the robo-signing scandal. Advocates of Obama's position claim it would lead to increased numbers of foreclosures and greater potential risk of banking abuse or irregularities in an already abusive system. Critics say the bill was urgently needed to curb the rising backlog of homes and prevent a complete meltdown of an already stressed system due to the foreclosure moratorium. Who is right and what are the stakes if Obama is wrong?
In a Nutshell
The law was originally proposed in April of 2005 by Rep Robert Alder of Alabama in order to allow states to recognize the authority of foreclosure documents from one state to another. It was currently revitalized in response to the robo-signing crisis. President Obama intends to use a pocket veto to nix the proposed fix.
More Than What Meets the Eye
The question of whether or not this is the correct course of action is exacerbated by President Obama's timing; according to political experts, a pocket veto can only be used when Congress is out of session however, the Senate is not yet adjourned. Critics point to the irony of using yet another "technical irregularity" as a proposed method of solving the original one.
Right or Wrong?
Setting the legal and technical issues aside for just a moment, the most urgent question is whether or not the proposed legislation would curb the tidal wave of documentation irregularities that have resulted in a near stand-still of foreclosures in half the nation. By signing the bill, President Obama would open the door for states to recognize the documentation from state to state and therefore help expedite the processing of an already huge backlog. Critics claim irregularities are prevalent and automatic approval would be less likely to recognize - much less correct - faulty processing and leave little room for appeal. Who are the winners and losers? It depends on who you ask or believe but unanticipated consequences are a very real threat including:
Distressed Homeowners - Despite the claim that the bill is intended to help homeowners, they may find little comfort in a more rigorous process given the already extended delays and moratorium on current foreclosures. Experts agree it is unlikely the technical difficulties are likely to result in any real changes to the default status of the homeowner but rather a more extensive process.
Banks and Investors - Investors are likely to react negatively to the news that an end to the real estate crisis isn't in sight and may actually grow worse. Once again, government intervention is skewing the "invisible hand" toward a direction that many disagree with. Banks, already reeling from the burden of bad loans and depressed portfolios, are likely to suffer extensive setbacks while attempting to process this new batch of butchered loan documents. Lenders may soon be required to mark down the value of bad assets resulting in insolvency for borderline banks.
HOA & County Government - Improper documentation has resulted in homeowners not having been removed from the tax rolls in many states, leaving them financially liable for property taxes yet unaware or unable to respond. HOA's are already suffering from a loss of income and likely to see even longer delays due to documentation issues. Empty homes are becoming a source of blight in many communities even before the impending moratorium. More empty houses are simply expected to worsen an already bad situation.
The Bottom Line: Short sales are an increasingly attractive alternative for desperate homeowners and banks alike. Rather than see this as a set-back, savvy short sale investors should learn to recognize the opportunity and move on it sooner rather than later!
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