Wells Fargo, Citigroup Halt Foreclosure Sales

Wells Fargo and Citigroup have temporarily halted foreclosure sales in several states, taking precautions after a federal regulator released new guidance on minimum standards for foreclosure sales.

The Office of the Comptroller of the Currency (OCC) recently released the new standards. The OCC’s directive mostly consists of 13 questions banks need to ask themselves before selling a home in foreclosure, such as whether the borrower is protected from foreclosure by bankruptcy or if the borrower is in an active loan modification plan.

JPMorgan had also mostly stopped its foreclosure sales after the OCC’s standards were released, but has since resumed sales.

Wells Fargo, the nation’s largest mortgage originator, has seen a dramatic drop in foreclosure sales while significantly decreasing the number of sales it’s processing. For example, foreclosure sales by Wells Fargo in California, Nevada, Arizona, Oregon, and Washington plummeted from 349 a day in April to less than 10 a day, according to Foreclosure Radar, a real estate monitoring firm based in California.

"Wells Fargo has temporarily postponed certain foreclosure sales while we study the revised guidance from the OCC," a Wells Fargo spokeswoman confirmed for American Banker. Citibank officials also confirmed the reason behind their halt in sales was to carefully review the new guidance.

"The OCC did not direct a slowdown or pausing," says OCC spokesman Bryan Hubbard. "However, if servicers are not certain they are meeting these standards, pausing foreclosures is a responsible and productive step."

Source: “Wells, Citi Halt Most Foreclosure Sales as OCC Ratchets Up Scrutiny,” American Banker (May 17, 2013)

We're Forever Seeing Bubbles

The recent jump in home prices (near record month-over-month and year-over-year increases reported for May by the National Association of Realtors) has led to speculation that the rapid surge in home prices could be the sign of a new housing bubble similar to the one that led to the Great Recession. Is it? The not-so-short answer is, not yet.

Through May the median price of an existing single-family home has risen by double-digits for seven of the last eight months (and in the eighth, the year-over-year increase was 9.4 percent). For comparison’s sake, note that in the run-up to the collapse in 2006, the median price of an existing single-family home rose by double-digits year-over-year for 11 straight months.

An increase in prices itself does not signal a bubble. An unsustainable increase, not supported by other data, however, would. In the run-up to the 2006 collapse, the higher prices—which had been trending up for four years—led to a sharp uptick in construction wholly unsupported by demographics.

Despite the fact we still theoretically have more potential sellers than buyers, which should drive prices down, the inventory of homes listed for sale has remained low. That low inventory, combined with low interest rates keeping affordability high, has driven prices up.

Many analysts contend the current prices are justified by low rates, which keep home affordable even as prices rise. This would suggest that as rates rise, prices will move in the opposite direction, a replay of the post-2006 economy. That’s not though what history tells us. If prices fall in response to higher rates, it would mean market behavior has changed, a phenomenon for which we may not be prepared.

For more...see We're-forever-seeing-bubbles-2013-06-21

Trulia: Asking Prices Accelerate in Least Affordable Housing Markets

Asking prices are rising at an especially fast pace in the least affordable housing markets, according to Trulia. 

Nationally, asking prices increased 9.5 percent year-over-year in May, but in the ten least affordable metros, asking prices spiked 16.3 percent during the same time period.

Trulia also found out of the 100 largest metros, 98 saw asking prices increase over the last year.
Among the least affordable markets, seven were in California. 

Honolulu was found to be the least affordable metro, where 74 percent of monthly household income is used to pay a mortgage. In San Francisco, households spend 55 percent of their monthly wages on their mortgage. 

In the 10 least affordable markets, households spent at least a third of their income towards their mortgage. 

The calculation assumed a 3.8 percent interest rate on a home that is 1800 square feet. 

Jed Kolko, Trulia’s chief economist, gave two reasons for why the gap in affordability matters.

For one, it leads to a migration out of less affordable markets.

“[M]ore people in expensive markets like California will look to relocate to cheaper markets like Texas when the time comes to buy,” he said.

For the full article, see trulia-asking-prices-accelerate-in-least-affordable-housing-markets-2013-06-07

Housing Pushes Economy’s Recovery

Fannie Mae’s Economic & Strategic Research Group has announced that the strengthening of the housing market is pushing the economy forward but the country’s growth has yet to reach its full potential. 

While we are currently experiencing a prolonged period of steady economic growth, it is expected that growth will remain below 2.0 percent for the first half of the year, with gradual strengthening in the second half of 2013 and into 2014.

The ongoing recovery in housing has contributed greatly to an economy moving in a positive direction, thanks to home prices, home sales, and homebuilding activity showing signs of long-term improvement. In fact, growth is expected to surpass 2.5 percent in 2014 due to improved conditions in the housing market.

For more info see fanniemae news/2013/