Tax clock is ticking for underwater homeowners

Ordinarily, if all or part of a home loan is forgiven by the lender, either in a short sale or foreclosure, the amount forgiven is taxable income.

However, Congress adopted the Mortgage Debt Relief Act of 2007 to save millions of underwater homeowners from this tax disaster.

Open this article from Inman News to see where you stand.

http://lowes.inman.com/newsletter/2012/09/04/news/200013

Phoenix, AZ Statiscal Data

Please take the time to visit my Webpage at www.denismarque.com .

I have added extensive statistical data on Sales, Listings, Days on Market, Foreclosures and many other items at "Market Statistics" on the webpage. You will find it to be encouraging if you are buying or selling in the Phoenix Metro marketplace.

As an aside, if you are concerned about keeping your current home, we do have several plans available to assist you including HAFA, HAMP, and HARP. Give us a call at 480-899-8844.

Denis

Why mortgage rates are rising

INMAN.COM

DAILY REAL ESTATE NEWS August 21, 2012

Why mortgage rates are rising Commentary: To foster recovery, something has to give, but what? By Lou Barnes Inman News® Share This Two things this week: Explain the sudden rise in Treasury and mortgage rates, and then provide a simple tool for understanding budget issues in the election. Nuthin' to it. In the last two weeks the 10-year T-note has run up from 1.45 percent to 1.85 percent, taking many mortgages from below 3.5 percent to above 3.75 percent. Explanations offered by sharpies: The economy has turned for the better, no longer sliding toward recession. Or because the Fed will not soon begin QE3, either because the economy is better, or because it won't do any good, or because of the election, or because of internal politics. Or rates have risen because Europe might save itself. Put all that eyewash in a bucket. Then dump the bucket. July's 0.8 percent upwobble in retail sales is not a "turn" -- not with the Philly and N.Y. Feds' indices sinking, not with the National Federation of Independent Business optimism index returning to recession threshold, not with eurozone gross domestic product (GDP) going negative, and not with China verging on distress. The Fed may not act now, but inflation is tipping again below the Fed's target, and a solid majority at the Fed does not want to risk deflation or a run-up in long-term rates. When there is no "fundamental" economic explanation, look to "technical" -- chart patterns reflecting the emotional condition of the herd. For nine months prior to April, the 10-year traded 2 percent (mortgages 4 percent to 4.25 percent). Then 10s fell in a straight line to 1.5 percent, wandered at 1.6 percent in June, and then spent July in the 1.4s. At yields like these, nobody makes money on the rate; you make money when bond prices rise (yields falling more). A month with no buyers to take prices higher, and a few in the herd begin to take profits, then many, and so prices will fall (rates rising) until low enough that they can rise again. Tens might go all the way back to 2 percent, might stop here, but rates are not going all the way back down until something ugly happens. From that complexity to something simple: the budget. (Note: In the long run, the yield on 10s and the budget are linked. Heh-heh.) Democrats say the Republicans are cruel, want to rob the poor to benefit the rich, and that Medicare and Social Security will be fine if rich people pay more taxes. Republicans say the nation is broke, Democrats will never stop spending and taxing, and besides, we've got ours. Each party offers to play a shell game with no pea. We have to pay money for all the social goodies, and yet have to pay a social cost if we cut the goodies. Today we borrow 41 cents of every dollar we spend, and we spend $80 billion each day. Something has to give, but what? Any time you hear a politician's pitch this fall, here's the pea to put under all the shells: What's the politician's proposal as a percent of GDP? Since World War II, federal spending has run about 20 percent of GDP, and revenue about 18 percent, a perpetual but modest deficit ... until the Great Recession. Spending is now 24 percent of GDP, and revenue 15 percent. The revenue decline is partly the result of the recession; reversal of the Bush tax cuts would not get revenue past 17 percent of GDP. That recession shortfall is the reason recovery is so desperately important. Rather worse, social-goody spending will take total spending over 30 percent of GDP in the next decade, health care doing 85 percent of the damage. Worse yet, our borrowing ability will be tapped out in a very few years. At the current pace ... two years. If that. Then markets will pull our plug. Many of my friends on the Left are soaked in European tax-rate propaganda, 35 percent to 50 percent of GDP, but are blind to nationalized healthcare, railroads and so on, all requiring higher taxes and spending, and with intractable deficits. Republicans envisage a dinky government, 18 percent of GDP, but are utterly dishonest about the social cost, and are resistant to deep cuts in defense. Democrats refuse to consider any upward limit on GDP, or a budget deficit smaller than 3 percent of GDP. The Bowles-Simpson "Co-Chairs Proposal" caps spending at 22 percent, eventually 21 percent, and raises revenue to 21 percent. Please read it. Mr. Politician, don't tell me what's wrong with the other guy's deal. Please do tell me what you want to do, and your GDP metric, and consequences. Then compromise. Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@pmglending.com. Contact Lou Barnes: Email Letter to the Editor Copyright 2012 Lou Barnes

August 3, 2012

Uncertainty to temper economic growth Panelists: Housing sustainability depends on private secondary market By Andrea V. Brambila Inman News® Share This SAN FRANCISCO -- While housing has been a bright spot for the economy lately, real estate professionals should not expect runaway growth anytime soon, according to panelists at today's Real Estate Connect conference in San Francisco. "I think the market we have today is going to be a market that is going to be somewhat sustained," said Joel Singer, executive vice president of the California Association of REALTORS®. "Time is important, if for no other reason than personal balance sheets get healed. There will be growth in the next couple of years, though it's obviously not going to be dynamic." Bill Emmons, assistant vice president and economist at the Federal Reserve Bank of St. Louis, emphasized that the economy as a whole was "not too broken to be fixed" but that the recovery is "just going to look a lot different than we're used to." "We're at a slower growth rate, so we're pretty much always on the verge of a slowdown or a recession. Something coming from Europe or domestic origins can knock us down," Emmons said. Housing will be one of the better sectors of the economy, Singer said, but he cautioned that the economy as a whole was at risk in the next six months. Calling the downturn "financially created," he said a revamp of the financial system was in order. "I think we have to be very, very concerned about the policy issues," Singer said. In particular, he noted that some 95 percent of mortgages originated are owned or guaranteed by the federal government. "We're the only first-world country with a nationalized housing market," said Amy Brandt, CEO of Vantium Capital. Patrick Stone, president and CEO of Williston Financial Group, said that uncertainty surrounding two controversial regulations -- the qualified mortgage (QM) and the qualified residential mortgage (QRM) -- is an impediment to the development of a private secondary mortgage market. QM would establish standards for borrowers' "ability to pay" the mortgages they seek, while QRM would establish certain baseline standards for safe underwriting and require lenders to retain a 5 percent minimum ongoing stake in any loans they originate that don't meet QRM requirements. The regulations are under the aegis of the Consumer Financial Protection Bureau (CFPB), which recently postponed action on both rules after protests from REALTORS®, builders, banks, unions and consumer groups. "Everything's on hold until we can get clarity (from) CFPB," Stone said. The bureau needs to define exactly how the regulations will work, the debt-to-income and loan-to-value ratios that will be allowed, and FICO score requirements, he added. "We are walking off the plank into some deep water. So until these things get resolved there will be no private secondary market," Stone said. Singer said he expects the transition to a bigger private secondary market will be "very choppy" and will "take a while." The presidential election, another source of uncertainty, is unlikely to bring about any meaningful change, he added. Uncertainty also surrounds financial markets worldwide, panelists said. The eurozone crisis "is a real and present danger" and could send "shock waves" through the global economy, Emmons said. "The Fed is worried about Europe," he added. World economies are now interdependent, Brandt said, and "I don't think our political systems and financial systems have adapted to that yet." Nonetheless, turmoil abroad has spurred a flight to the relative safety of U.S. Treasury bonds and mortgage-backed securities that fund most mortgage loans. That is "one of the reasons we're able have low mortgage rates," Emmons said. Real estate itself is now considered a safe bet for many investors, the panelists said, with some adding that they've put their own money into properties. "To me, hard assets are the place to be," Singer said. High affordability and low interest rates mean this is a "once in a generation opportunity in terms of real yields," he added. Citing Facebook's sinking stock price since its initial public offering, Brandt said investors are less confident about investing in businesses. "There has sort of been a fundamental disconnect in how we value companies. There are more investors saying, 'I don't know how to value this company, but I can buy this house.' So much of what drives the economy is people's perceptions," she said. For now, real estate is considered "safe," but "how long that persists is a big question," she added. Emmons cautioned that "we're going to have a lot of volatility (in the economy) for the next five years or so." He advised agents to "be aggressive, stay focused" and "don't be in a rush." While the Fed has made clear that it will keep interest rates low until at least 2014, Brandt questioned the sustainability of the current housing market rally after that point. "When the Fed starts to raise the rates, how do we sustain the current absorption rate? Without a private market, I think you're going to have a hard time" maintaining growth, she said. Both Brandt and Emmons anticipate home prices will remain flat in the next few years, partially because consumers are still in the process of unloading debt and partially because of coming changes expected to disrupt the financial system. Stone anticipates prices will rise, albeit slowly. On the jobs front, Stone struck an optimistic tone and said that U.S. exports, particularly of grain and petroleum products, are rising and the nation is set to become a net exporter of natural gas in a few years. The U.S. is "positioned to be a breadbasket and energy center," Stone said. Follow Real Estate Connect on Facebook, Twitter and LinkedIn: Contact Andrea V. Brambila: Facebook Twitter Email Letter to the Editor Copyright 2012 Inman News

Supply-and-demand thinking no longer applies

July 24, 2012

Recovery hinges on home prices Commentary: Supply-and-demand thinking no longer applies By Lou Barnes Inman News® Share This It is high summer, a scorcher, even mad dogs looking for shade. It's supposed to be a nothing-happening time. However, the anxious suspense in markets is as high and hot as the sun. Everyone knows that the U.S. economy has lost momentum. Federal Reserve Chair Ben Bernanke on Tuesday twice in one page used "decelerated," followed by "... the generally disappointing tone of recently incoming data." Everyone expects that the Fed will do something, but nobody knows what or when, possibly not the chairman. Bernanke vaguely mentioned use of the Fed's balance sheet -- "QE3" the shorthand for a third round of "quantitative easing" -- but no one outside the Fed can tell if action is held up by internal politics (resistance by the regional-Fed hardheads), or by doubts of QE effectiveness, or by desire to keep powder dry for something more troublesome than a slow patch. The primary purpose of QE has been to knock down long-term rates, but markets have already done that, the 10-year T-note to 1.46 percent, and mortgages to 3.5 percent (if someone answers the phone). The secondary purpose has been to encourage risk-taking by investors and lubricate lending, but credit is choked by regulation and post-Bubble over-reaction. Bernanke: "…Prospective homebuyers cannot obtain mortgages due to tight lending standards." In the Fed's most-recent meeting minutes, the only group agreement in 12 pages was the plaintive wish for new ideas to help the economy. The Fed should hold something in reserve to meet two contingencies: a failure to defer the fiscal cliff now five months away, and/or a euro collapse. The fiscal cliff is actually nearer by. We are only three months from election. President Obama has been unable to make a deal with the current Congress; whether he is re-elected or the lamest of ducks, Congress will remain the same until January. Europe is like watching the Liar on "Saturday Night Live." Day after day after day after day, leadership says everything is fine, going according to plan. Right. This week Finland's short-term sovereigns went to negative yield, and Spain's 10s rose to 7.2 percent. Marker: For the moment French debt is still receiving flight-to-quality cash, its five-year down to 0.86 percent. When markets realize that French banks, budget, economy and trade deficit are in sum no better shape than Italy, and French yields begin to rise ... On to something understandable: U.S. housing. For once, the National Association of REALTORS® has properly explained the drop in June sales of existing homes, down 5.4 percent from May, up 4.5 percent from June 2011. The primary reason: a scarcity of the cheapest distressed inventory, the darling of cash-paying investors. Listed inventory is down 24 percent versus last year. Does this pattern mean anything? For the economy, or housing in general? No. Not yet. Listed inventory is merely apparent supply. The shadow supply lies offshore like ocean swells not yet formed into waves. The most deeply distressed inventory, not yet seized in foreclosure, let alone listed, seems to be down from 4.5 million homes to 4 million but replenished by constant inflow of new delinquency in shaky-economy feedback. Some especially favored local markets -- like mine in Boulder, like Saudi Dakota, and San Francisco and any of the other IT paradises -- are doing remarkably well. The rest of the country ... how can the inventory/sales ratio fall so far and prices not rise? Because we still have at least 15 percent of homes underwater, most owners still making payments; many new sales merely recognizing the pre-existing loss, hardly encouraging to sellers or buyers. Supply-and-demand thinking by finance types when the "bubble" blew was wrong then, and still is. Prices crashed far below "clearing prices" and resulted in more sellers and fewer buyers; now it will take quite a while to work off immense but latent inventory. Media also focus on sales of new homes. Although rising a little, they are not particularly useful, except to the stock prices of builders. The gross domestic product (GDP) contribution of new construction even in good times is low single digit. For a better economy we need home prices to rise. That will repair household balance sheets, and every percentage point of home price gains will mean fewer homes underwater. And for that, as ever since 2007, we need credit. Supply vs. sales today is a statistical curiosity. Watch prices. Prices, prices, prices. Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@pmglending.com. Contact Lou Barnes: Email Letter to the Editor Copyright 2012 Lou Barnes

Rising home prices bring 700,000 homeowners above water

DAILY REAL ESTATE NEWS July 17, 2012

Rising home prices bring 700,000 homeowners above water CoreLogic: Negative equity concentrated among homes under $200,000 By Inman News Inman News® Share This Rising home prices helped more than 700,000 homeowners regain equity in their homes during first quarter, but 11.4 million borrowers still owed more on their mortgage than their homes were worth, according to the latest report from data aggregator CoreLogic. The number of U.S homeowners with negative equity declined by 6 percent in the first quarter compared to the fourth quarter, leaving 23.7 percent of all homes with mortgages underwater. That's down from 25.2 percent in the fourth quarter. When the 2.3 million borrowers with less than 5 percent equity, which CoreLogic calls "near-negative equity," are included, 28.5 percent of mortgaged homes were either underwater or nearly underwater in the first quarter, down from 30.1 percent. All told, negative equity nationwide totaled $691 billion in the first quarter, down from $742 billion the previous quarter. The decrease was largely due to home-price increases, CoreLogic said. "In the first quarter of 2012, rebounding home prices, a healthier balance of real estate supply and demand, and a slowing share of distressed sales activity helped to reduce the negative equity share," said Mark Fleming, chief economist for CoreLogic, in a statement. "This is a meaningful improvement that is driven by quickly improving outlooks in some of the hardest-hit markets. While the overall stagnating economic recovery will likely slow housing market recovery in the second half of this year, reducing the number of underwater households is an important step toward reducing future mortgage default risk." Some 1.9 million borrowers were only 5 percent upside down in the first quarter, meaning further price appreciation could move them into positive territory. Among states, Nevada had the highest share of mortgaged loans in negative equity (61 percent) followed by Florida (45 percent), Arizona (43 percent), Georgia (37 percent) and Michigan (35 percent), CoreLogic said. Negative equity is concentrated at the low end of the market, CoreLogic said. Among homes under $200,000, 31 percent were upside down, compared with 15.9 percent among homes worth more than $200,000. The majority of the underwater homeowners -- 6.9 million -- had only a first mortgage with no home equity loans, and owed an average of $212,000 on their mortgages with negative equity averaging $47,000. While 19 percent of these borrowers were underwater in the first quarter, the negative equity share among borrowers with both first liens and second liens was more than twice that, 39 percent. Those 4.5 million borrowers owed an average of $299,000 and were underwater by an average of $82,000. Starting with this report, CoreLogic revised the methodology it uses to calculate negative equity and has therefore revised its historical data for both the nation and states. Below are revised figures beginning with the third quarter of 2009. Revised National Negative Equity Time period Negative equity loan count (in millions) Negative equity share Q1 2012 11.4 23.7% Q4 2011 12.1 25.2% Q3 2011 11.4 24.1% Q2 2011 11.5 24.5% Q1 2011 11.5 24.7% Q4 2010 11.7 25.1% Q3 2010 11.4 24.5% Q2 2010 11.5 24.9% Q1 2010 11.9 25.6% Q4 2009 11.9 25.7% Q3 2009 11.1 24.3% Source: CoreLogic Contact Inman News: Email Letter to the Editor Copyright 2012 Inman News

Foreclosure inventory remains near all-time high

From Inman News of July 10, 2102

LPS: Most homes in foreclosure in judicial states delinquent for more than 2 years
By Inman News
Inman News®

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The number of U.S. homes in the foreclosure pipeline remained near an all-time high in May with judicial foreclosure states posting inventory levels more than twice that in non-judicial foreclosure states, according to a monthly report from loan data aggregator Lender Processing Services released today.

The nation's foreclosure inventory stood at 4.1 percent of all active mortgages in May. This includes all loans that have been referred to an attorney for foreclosure but have not yet finished the foreclosure process through sale.


Right-click graph to enlarge.
That percentage doesn't show the "stark contrast" in foreclosure inventories between states that handle foreclosures through the courts and those that don't, said Herb Blecher, LPS Applied Analytics senior vice president, in a statement.

"In the former, 6.5 percent of all loans are in some stage of foreclosure -- that's more than 2.5 times the rate in non-judicial states where only 2.5 percent of loans are currently in the foreclosure pipeline," Blecher said.

"Both these figures are significantly higher than the pre-crisis average of 0.5 percent, but it is worth noting that the average year-over-year decline in non-current loans for judicial states is less than one percent, whereas in non-judicial states, it's down 7.1 percent."

More than half, about 53 percent, of loans in foreclosure in judicial foreclosure states have been delinquent for more than two years, compared to just over 30 percent in non-judicial states, LPS said.

Serious delinquencies of 90 days or more, which are not included in foreclosure inventory, made up 3.2 percent of active mortgages in May. Overall, 7.2 percent of active mortgages were delinquent in May, down nearly 10 percent from May 2011.

Foreclosure starts rose 2.9 percent year over year in May, to 202,707. Foreclosure sales stood at 73,439 in May -- far below their September 2010 peak of 124,347. Starts outnumbered sales by almost 3 to 1, LPS said.

Florida, Mississippi, New Jersey, Nevada and Illinois posted the highest shares of non-current loans among states in May. Non-current loans include both delinquent loans and those in the foreclosure process.
Montana, Alaska, South Dakota, Wyoming and North Dakota posted the lowest shares of non-current loans.

As of April, new mortgage loan originations had increased 7.4 percent on an annual basis, to 510,127.

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Copyright 2012 Inman News