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Monthly Archives: December 2010
Shadow Inventory, Cooked Books; Spain’s 2011 Real Estate Funding Crisis
The economic problems in Spain seem so far away, so why should we be concerned? The world has discovered Spain and has found a major economic basket case. What if Spain is but a preview of what could happen here on the US, and more specifically here in Nevada?
This article describes Spain’s dire situation and says the party is about to end.
In Spain, huge projects are completely empty and bad debts mounts as the Spanish banks play extend-and-pretend with developers. That game is about to end.
Developer loans are coming due. Yet, there is no way for developers to make interest payments let alone pay any principal. When developers collapse in 2011, banks will be stuck with a vast amount of undeveloped land at overvalued prices as well as ghost towns so far outside of major towns that no one will live in them.
A flood of inventory awaits a dearth of buyers. Moreover, a huge amount of shadow-inventory is waiting on deck, hoping for better prices so the owners can bail. Unfortunately there is no one to bail to. Spain’s official unemployment rate is 20%, and it’s quite likely the real unemployment rate is higher.
Can you see any parallels with Reno, our unemployment rate, perhaps? I recognize that it is not quite 20%, officially, that is. Can you see any signs that things are about to change? The local media have stories that we are about to turn the corner. Who would you want to trust?
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HAMP Program Dismal Failure
HAMP (Home Affordable Modification Program) is a dismal failure. Is the AP finally beginning to realize it?
This article, published in the RGJ shows that more people are dropping out of the program than are continuing.
Even the Huffington Post agrees with ‘It’s Just A Scam And The Banks Are Getting Everything’.
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Real Estate Roundup
Here’s a roundup of recent real estate news.
Las Vegas Remains Nation’s Capital for Underwater Homes and Foreclosures. http://www.housingwire.com/2010/11/11/las-vegas-remains-nations-capital-for-underwater-homes-and-foreclosures.
This Explains Quantitative Easing. http://www.youtube.com/watch?v=PTUY16CkS-k
Home Prices in Half of Major Metropolitan areas Fall Following End of Tax Credit http://www.dsnews.com/articles/home-prices-fall-in-half-of-major-metros-on-post-credit-sales-declines-2010-11-12
RealtyTrac Doesn’t Expect Recovery Until 2014. http://www.reuters.com/article/idUSTRE6B656N20101207
B of A Will shift Jobs From Loan Origination to Mortgage Modifications http://www.dsnews.com/articles/bank-of-america-will-move-origination-jobs-to-modification-department-2010-12-09
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Too Big To Fail
FTC Issues Ruling on Mortgage Scams
The FTC recently issued a news release on Mortgage Assistance Relief Services, MARS, proclaiming:
FTC Issues Final Rule to Protect Struggling Homeowners from Mortgage Relief Scams
The ruling was a mere 54 pages published in the Federal Register and can be found here should you care to read the whole thing. Personally, I passed, thank you very much.
The news release explains the ruling and it does it in only one page.
In essence, it addressed the fact that there were some scammers taking advantage of peoples foreclosure plight.
It prohibits charging any advance fees until the homeowner is completely satisfied with the written offer of mortgage relief from the lender.
The mortgage relief companies must disclose that:
- they are not associated with the government, and their services have not been approved by the government or the consumer’s lender;
- the lender may not agree to change the consumer’s loan; and
- if companies tell consumers to stop paying their mortgage, they must also tell them that they could lose their home and damage their credit rating.
The rule prohibits the mortgage relief companies from making false or misleading claims.
But, perhaps the most interesting part is who the ruling does NOT apply to. The list includes attorneys and:
The Final Rule applies only to entities within the FTC’s jurisdiction under the Federal Trade Commission Act, which excludes, among others, banks, savings and loans, federal credit unions, common carriers, and entities engaged in the business of insurance.
See it here.
Hat Tip: Ron Ballard
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Zillow: U.S. Housing Value Dropped 1.7 Trillion in 2010
Zillow estimates that US housing values experienced substantial gains earlier in the year, they have dropped approximately $1.7 trillion this year. The drop is 63% greater that the $1.0 trillion drop in 2009. Zillow further estimates that US housing has lost more that $9 trillion since the peak in 2006. Some of the gains early in the year were due to the tax credit and are no longer available.
Even though this is the nationwide averages, some areas have fared better, or worse than other areas. For example, Boston and San Diego have seen a price increase this year. I do not have the statistics for Reno or Nevada at this time. Also different market segments tend to move at different times.
The Reno economy has been extremely hard hit. Jobs are scarce. No matter what the government would want you to believe. Foreclosures and short sales are pervasive. Many over-encumbered homeowners are simply walking away. The homeowners that would normally want to upgrade have little or no equity remaining and can’t move.
Zillow thinks that we will finally hit bottom sometime in 2011 and that it may take 3 to 5 years before we see normal appreciation again.
Read the rest here.
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Wells Fargo Sued: Claim They Induced Borrowers to Default
A class-action law suit has been filed against Wells Fargo and its servicing company, American Servicing Company. The lawsuit, filed in the United States District Court for the Northern District of California, alleges that Wells Fargo and ASC induced borrowers to default on their mortgages.
The borrowers claim they were told that if they were current on payments they would not be eligible for a loan modification.
They further claim that this allows Wells and ASC to charge higher fees and late charges.
Read more here.