Rentals getting tough to find, Wendy Culverwell, Business Journal


Portland’s rental market technically is not “red hot,” but figures released Thursday morning by the Metro Multifamily Housing Association suggest it’s getting close.

• Vacancy rates dropped below 4.5 percent in every submarket of the city.

• Income is rising for the first time, though offset by rising insurance, utility and taxes.

• Investors are solidly interested in the area’s multifamily properties, but their interest is not blistering.

The city’s vacancy rate dropped to 3.8 percent in a spring survey of 735 properties representing 49,011 rental units. The association’s bi-annual survey is one of the city’s leading indicators of the health of the apartment market.

The spring survey shows the vacancy rate dropped five percentage points since last fall, when the association reported a four percent vacancy rate in its survey of 546 properties representing 35,091 units.

Average rents climbed to 94 cents per square foot, up 4 percent from last fall’s 90 cents rate.

It’s not surprising Portland’s already-tight rental market is getting tighter. Economic indicators suggest the economy is rebounding and adding jobs, a key factor that drives apartment rentals.

Oregon is posting solid economic returns on almost ever measure, said Amy Vander Vliet, Portland area economist for the state. Residential housing permits climbed slightly while unemployment claims fell and employers reported an increase in temporary hiring, which economist see as a precursor to formation of permanent jobs. Consumer confidence is up, and businesses are ordering more capital goods, which is good news for a state that depends on business spending.

“Our companies make stuff that other companies want to buy,” Vander Vliet told a crowd of apartment owners, managers and brokers. On the down side, she said it will be several years before Oregon recovers the 120,000 jobs that have disappeared since the recession began. Economists expect the state to add 22,000 jobs this year.

Kelly Cassidy, vice president and loan officer for Q10 National Mortgage Co., said lenders are increasingly interested in financing multifamily projects. Fannie Mae, Freddie Mac and the U.S. Department of Housing and Urban Development were the only lenders for the past few years; now, insurance companies, banks and conduit lenders are eager to buy multifamily debt.

“It’s been a while since we’ve been able to say that,” he said.

The vacancy rate in key submarkets:

• Downtown Portland 3.9 percent

• Northwest Portland 4.5 percent

• Inner and Central Southeast 4.0 percent

• Southwest Portland 3.7 percent

• Clackamas 3.4 percent

• Lake Oswego/West Linn 3.6 percent

• Milwaukie 4.4 percent

• Aloha 3.1 percent

• Beaverton 3.3 percent

• Hillsboro 3.1 percent

• Tigard/Tualatin 3.8 percent

• West Vancouver 3.8 percent

• East Vancouver 3.3 percent

• Troutdale/Fairview/Wood Village/Gresham 4.4 percent

Read more: Rentals getting tough to find | Portland Business Journal

Report Reveals Racial Disparities in Mortgage Lending, Posted in Financial News, Mortgage Rates, Refinance


Funds used for refinancing home mortgages were less available in the minority sections of major U.S. cities than in predominantly white areas after the recent housing crash, according to a new study released on Thursday. The study, compiled by a coalition of nonprofit groups across the country, revealed that refinancing in minority areas has decreased since the recession.

Mortgage Refinancing Drops 17 Percent in Minority Areas

The report, titled “Paying More for the American Dream V,” took a look at seven metropolitan areas–Boston, Charlotte, Chicago, Cleveland, Los Angeles, New York City and Rochester, N.Y.–to explore conventional mortgage refinancing.

The study, compiled by groups like California Reinvestment, the Woodstock Institute in Chicago and the Ohio Fair Lending Coalition, revealed the following:

  • Refinancing in minority areas decreased by an average of 17 percent in 2009 compared with the year prior.
  • Refinancing in white areas jumped by 129 percent.
  • Lenders “were more than twice as likely” to deny applications for refinancing by borrowers living in minority communities than in majority white neighborhoods.

The report also found that minority borrowers were more likely to obtain a high-risk subprime mortgage loan than white borrowers, even if their credit was good.

Lenders Urged to Invest More in Low-Income Communities

Because of the inconsistency the study’s authors found in lending practices, they are concerned that there are ongoing racial disparities in mortgage lending as a whole.

Adam Rust, Director of Research at the Community Reinvestment Association of North Carolina, noted in statement “Lenders are loosening up credit in predominantly white neighborhoods, while continuing to deprive communities of color of vital refinancing needed to aid in their economic recovery.”

To aid the issue, the authors are urging lenders to make changes, including:

  • Investing more in low-income communities
  • Improving disclosure requirements to protect unwary borrowers

They noted that it is subprime loans that contributed largely to the housing market crash because not only were they given to those with poor credit, but income was never checked to confirm that borrowers could repay the balance.

With foreclosures expected to flow heavily in the months to come and home sales still struggling, the authors believe that expanding fair lending opportunities to all who qualify could help repair the housing industry. It’s for this reason they think changes to lending practices should be a top priority for financial institutions.

Strategic Defaults Revisited: This Could Get Very Ugly, by Keith Jurow, Minyanville.com


In an article posted on Minyanville last September — Strategic Defaults Threaten All Major US Housing Markets — I discussed the growing threat that so-called “strategic defaults” posed to major metros which had experienced a housing bubble. With home prices showing renewed weakness again, now is a good time to revisit this important issue.

What Is Meant By Strategic Default?

According to Wikipedia, a strategic default is “the decision by a borrower to stop making payments (i.e., default) on a debt despite having the financial ability to make the payments.” This definition has become the commonly accepted view.

I define a strategic defaulter to be any borrower who goes from never having missed a payment directly into a 90-day default. A good graph which I will discuss shortly illustrates my definition.

Who Walks Away from Their Mortgage?

When home prices were rising rapidly during the bubble years of 2003-2006, it was almost inconceivable that a homeowner would voluntarily stop making payments on the mortgage and lapse into default while having the financial means to remain current on the loan.

Then something happened which changed everything. Prices in most bubble metros leveled off in early 2006 before starting to decline. With certain exceptions, home prices have been falling quite steadily since then around the country. In recent memory, this was something totally new and it has radically altered how most homeowners view their house.

In those major metros where prices soared the most during the housing bubble, homeowners who have strategically defaulted share three essential assumptions: 

  • The value of their home would not recover to their original purchase price for quite a few years.
  • They could rent a house similar to theirs for considerably less than what they were paying on the mortgage.
  • They could sock away tens of thousands of dollars by stopping mortgage payments before the lender finally got around to foreclosing.

Put yourself into the mind and shoes of an underwater homeowner who held these three assumptions. Can you see how the temptation to default might be difficult to resist?

Who Does Not Walk Away?

Most underwater homeowners continue to pay their mortgage. An article posted online in early February by USA Today discusses the dilemma faced by underwater homeowners in Merced, California, a city which has suffered one of the steepest collapses in home prices since their bubble burst in 2006.

The author cites the situation of one couple who had bought their home in 2006 for $241,000. They doubted it would bring more than $140,000 today. The husband considered the idea of looking for a better job in another state. But that meant selling the house for a huge loss or giving the house back to the bank and walking away. They refused to do that. The reason was simple in their mind. They made an agreement when they took out the mortgage.

The same explanation was given by another couple in their 50s who owe $375,000 on their loan and believe it would not sell for more than $150,000. They both work and can afford the mortgage payment. They are very attached to their home and feel a moral obligation to pay the mortgage. Yet they know that many others have walked away. Because they refuse to bail out of their loan, they concede that they are stuck and described their situation as a “bitter pill.”

Two Key Studies Show that Strategic Defaults Continue to Grow

Last year, two important studies were published which have tried to get a handle on strategic defaults. First came an April report by three Morgan Stanley analysts entitled “Understanding Strategic Defaults.”

The study analyzed 6.5 million anonymous credit reports from TransUnion’s enormous database while focusing on first lien mortgages taken out between 2004 and 2007.

The authors found that loans originated in 2007 had a significantly higher percentage of strategic defaults than those originated in 2004. The following chart clearly shows this difference.

chart

Why are the 2007 borrowers strategically defaulting much more often than the 2004 borrowers? Prices were rising rapidly in 2004 whereas they were falling in nearly all markets by 2007. So the 2007 loans were considerably more underwater than the 2004 loans.

Note also that the strategic default rate rises very sharply at higher Vantage credit scores. (Vantage scoring was developed jointly by the three credit reporting agencies and now competes with FICO scoring.)

Another chart shows us that even for loans originated in 2007, the strategic default percentage climbs with higher credit scores.

chart

Notice in this chart that although the percentage of all loans which defaulted declines as the Vantage score rises, the percentage of defaults which are strategic actually rises.

A safe conclusion to draw from these two charts is that homeowners with high credit scores have less to lose by walking away from their mortgage. The provider of these credit scores, VantageScore Solutions, has reported that the credit score of a homeowner who defaults and ends up in foreclosure falls by an average of 21%. This is probably acceptable for a borrower who can pocket perhaps $40,000 to $60,000 or more by stopping the mortgage payment.

Why Do Homeowners Strategically Default?

Is there a decisive factor that causes a strategic default? To answer this, we need to turn to the other recent study.

Last May, a very significant analysis of strategic defaults was published by the Federal Reserve Board. Entitled “The Depth of Negative Equity and Mortgage Default Decisions,” it was extremely focused in scope. The authors examined 133,000 non-prime first lien purchase mortgages originated in 2006 for single-family properties in the four bubble states where prices collapsed the most — California, Florida, Nevada, and Arizona. All of the mortgages provided 100% financing with no down payment.

By September 2009, an astounding 80% of all these homeowners had defaulted. Half of these defaults occurred less than 18 months from the origination date. During that time, prices had dropped by roughly 20%. By September 2009 when the study’s observation period ended, median prices had fallen by roughly another 20%.

This study really zeroes in on the impact which negative equity has on the decision to walk away from the mortgage. Take a look at this first chart which shows strategic default percentages at different stages of being underwater.

chart
Source: 2010 FRB study

Notice that the percentage of defaults which are strategic rises steadily as negative equity increases. For example, with FICO scores between 660 and 720, roughly 45% of defaults are strategic when the mortgage amount is 50% more than the value of the home. When the loan is 70% more than the house’s value, 60% of the defaults were strategic.

This last chart focuses on the impact which negative equity has on strategic defaults based upon whether or not the homeowner missed any mortgage payments prior to defaulting.

chart
Source: 2010 FRB study

This chart shows what I consider to be the best measure of strategic defaulters. It separates defaulting homeowners by whether or not they missed any mortgage payments prior to defaulting. As I see it, a homeowner who suddenly goes from never missing a mortgage payment to defaulting has made a conscious decision to default.

The chart reveals that when the mortgage exceeds the home value by 60%, roughly 55% of the defaults are considered to be strategic. For those strategic defaulters who are this far underwater, the benefits of stopping the mortgage payment outweigh the drawbacks (or “costs” as the authors portray it) enough to overcome whatever reservations they might have about walking away.

Where Do We Go From Here?

The implications of this FRB report are really grim. Keep in mind that 80% of the 133,000 no-down-payment loans examined had gone into default within three years. Clearly, homeowners with no skin in the game have little incentive to continue paying the loan when the property goes further and further underwater.

While the bulk of the zero-down-payment first liens originated in 2006 have already gone into default, there are millions of 80/20 piggy-back loans originated in 2004-2006 which have not.

We know from reports issued by LoanPerformance that roughly 33% of all the Alt A loans securitized in 2004-2006 were 80/20 no-down-payment deals. Also, more than 20% of all the subprime loans in these mortgage-backed security pools had no down payments.

Here is the most ominous statistic of them all. In my article on the looming home equity line of credit (HELOC) disaster posted here in early September (Home Equity Lines of Credit: The Next Looming Disaster?), I pointed out that there were roughly 13 million HELOCs outstanding. This HELOC madness was concentrated in California where more than 2.3 million were originated in 2005-2006 alone.

How many of these homes with HELOCs are underwater today? Roughly 98% of them, and maybe more. Equifax reported that in July 2009, the average HELOC balance nationwide for homeowners with prime first mortgages was nearly $125,000. Yet the studies which discuss how many homeowners are underwater have examined only first liens. It’s very difficult to get good data about second liens on a property.

So if you’ve read that roughly 25% of all homes with a mortgage are now underwater, forget that number. If you include all second liens, It could easily be 50%. This means that in many of those major metros that have experienced the worst price collapse, more than 50% of all mortgaged properties may be seriously underwater.

The Florida Collapse: Is This Where We Are Heading?

Nowhere is the impact of the collapse in home prices more evident than in Florida. The three counties with the highest percentage of first liens either seriously delinquent or in pre-foreclosure (default) are all located in Florida. According to CoreLogic, the worst county is Miami-Dade with an incredible 25% of all mortgages in serious distress and headed for either foreclosure or short sale.

An article posted on the Huffington Post in mid-January 2011 describes the Florida “mortgage meltdown” in grim detail. Written by Floridian Mark Sunshine, it begins by pointing out that 50% of all the residential mortgages currently sitting in private, non-GSE mortgage-backed securities (MBS) were more than 60 days delinquent — either seriously delinquent, in default, bankruptcy, or already foreclosed by the bank. I checked his source — the American Securitization Forum — and the percentage was correct.

The author then goes on to discuss a strategic default situation among his friends in Florida. One of them had purchased a condo in early 2007 for $300,000. By mid-2010, it had plunged in value to less than $100,000 and he decided to stop paying the mortgage. When he expressed his concerns about the possible consequences to his buddies — including an attorney, an accountant, and a doctor — all expressed the same advice to him. They told him to walk away from the mortgage, save his money, and prepare to move to a rental unit. To them, it seemed like a no-brainer.

The author was a little surprised that no one thought there was anything wrong with strategically defaulting. The attorney actually suggested that the defaulter file for bankruptcy to prevent the bank from going after a deficiency judgment for the remaining loan balance after the repossessed property was sold.

The conclusion expressed by the author has far-reaching implications. As he saw it, “More and more Floridians who pay their mortgage feel like chumps compared to defaulters; they turn over their disposable income to the bank and know it will take most of their lifetimes to recover.”

As prices slide to new lows in metro after metro, will this attitude toward defaulting spread from Florida to more and more of the nation? A May 2010 Money Magazine survey asked readers if they would ever consider walking away from their mortgage. The results were sobering indeed:

  • Never: 42%
  • Only if I had to: 38%
  • Yes: 16%
  • Already have: 4%

In late January of this year, a report on strategic defaults issued by the Nevada Association of Realtors seemed to confirm the findings of the two studies I’ve discussed. The telephone survey interviewed 1,000 Nevada homeowners. One question asked was this: “Some homeowners in Nevada have chosen to undergo a ‘strategic default’ and stop making mortgage payments despite having the ability to make the payments. Some refer to this as ‘walking away from a mortgage.’ Would you describe your current or recent situation as a ‘strategic default?’”

Of those surveyed, 23% said they would classify their own situation as a strategic default. Many of those surveyed said that trusted confidants had advised them that strategic default was their best option. One typical response was that the loan “was so upside down it would never have been okay.”

What seems fairly clear from this Nevada survey and the two reports I’ve reviewed is that as home values continue to decline and loan-to-value (LTV) ratios rise, the number of homeowners choosing to walk away from their mortgage obligation will relentlessly grow. That means growing trouble for nearly all major housing markets around the country.

This post originally appeared at Minyanville.

Read more: http://www.businessinsider.com/strategic-defaults-revisited-it-could-get-very-ugly-2011-4#ixzz1KnI0npxu

Real Estate Buyers: Protect Us From Ourselves, by Tara-Nicholle Nelson, Inman.com


Over the last seven weeks we’ve taken a tour through the psyche of real estate consumers — a group that includes each of us, really, who pays for a place to live.

We have explored how the various investor desires, motivations and values illuminated in Meir Statman’s new business classic-to-be, “What Investors Really Want: Discover What Drives Investor Behavior and Make Smarter Financial Decisions,” play out in our real-life real estate decisions.

We’ve seen that just as stock market investors want to win and not lose, want status, and exercise the highly fallible — though sometimes useful — form of psychological bookkeeping known as mental accounting, so do buyers, sellers, homeowners and sometimes even renters.

For the most part, we’ve explored the substance of what we want, rather than the process of how we want it. But there are real desires we, the human race, have when it comes to the “how” around our financial decisions, real estate and otherwise; Statman calls some of them out when he declares that investors really “want education, advice and protection.”

Statman compiles meaty evidentiary proof of this declaration from facts like:

  • the massive investor interest in culling investment information from the Internet;
  • the fact that financial literacy is a prerequisite for achieving the prosperity most of us crave;
  • the cyclical ebb and flow of cravings for the government’s protection of us — largely from ourselves — via regulation of how deeply we can leverage our own interests and how much advantage can be taken by financial predators; and
  • the vast desire investors have for financial advice, including the paid advice of professional advisers, but especially the free sort they trade with each other on personal finance blogs and Internet forums.

The world of real estate has not only gone through these same trends, but I submit that the pudding in which lives the proof that consumers want information and education, advice and protection is thicker when it comes to real estate than in virtually any other sector.

To wit: the evolution of real estate on the Web. Once upon a time, homebuyers had to consult an agent, who had to consult a paper book that was delivered only to agents, just to find out which homes were for sale, their prices and other details.

In response to an ever-escalating consumer clamor for this information, multiple sites now make every detail about a home — from whether or not it’s for sale; to its price; to its number of bedrooms, bathrooms and square feet; to when it was last sold and for how much; to what it’s supposedly worth — available to anyone, anytime, anywhere, all in a couple of clicks.

Anyone can see a ground-level street view of the vast majority of homes in America, what people think of the neighborhood, even whether a home’s owners are behind on their mortgage or have received a foreclosure notice: click, click, click.

Wanna see pics of Nicolas Cage‘s house? Click here. Heard a “Real Housewife” was in foreclosure and just need to know? Click. Their gilt Rococoed, leopard-printed, McMansioned domestic world is your virtual, visual oyster (for better or for worse).

And virtually all the same sites that have made this information available in response to popular demand also feed consumer cravings for education and advice.

Most offer basic briefings on various real estate issues; virtually all of them offer education/advice hybrids by offering connections to real estate brokers and agents and discussion communities in which anyone can ask a question and get a first, second and 44th opinion from local agents not-so-covertly vying for (a) the asker’s business, and/or (b) the opportunity to exhibit local knowledge and professional expertise — not just to the asker, but to prospective clients searching for them or the subject matter on the Web in perpetuity.

(And, lest I forget, those who ask their urgent real estate questions on these communities will frequently get an answer or so from another consumer — usually a cranky, anonymous one whose advice generally runs along one of three veins: (a) agents and mortgage brokers suck, (b) homeownership sucks, and/or (c) the government sucks. Not so nuanced, and not so helpful, but a clear case in point that some consumers not only want advice — they also want to give it.)

Even offline, it’s not at all bizarre for today’s home sellers to interview three or four prospective listing agents to gather advice and opinions, and every buyer’s broker has heard a client recount the real estate advice they have been given by their hairdresser, veterinarian, barista or ob-gyn.

Education, information, advice — consumer cravings for these are clear — but protection is a little more complicated. In “What Investors Really Want,” Statman writes: “Our desire for paternalistic protection from ourselves and others increases when we experience the sad consequences of our own behavior or the behavior of others.”

It is on this topic that Statman makes one of only a handful of “What Investors Really Want” references to real estate, making the hindsight observation that regulation limiting homeowners’ ability to leverage their own homes might have made sense, given the woeful consequences of overleveraging (i.e., the foreclosure crisis which is currently at four years and running).

Translation: We don’t want the government to limit our ability to mortgage our homes when values are skyrocketing, because we want to be able to max out the house we can buy for the money.

But when those adjustable-rate mortgages (ARMs) start adjusting, our maxed-out neighbors start walking away and the resulting foreclosures cause property values to plummet, while our craving for government protection from predatory lenders, liar’s loans and confusing boilerplate loan docs takes a steep uptick.

Do real estate consumers crave information, education and advice just as much — maybe even more — than traded-asset investors? Absolutely. And just like stock investors, housing consumers also want government protection from lenders, mortgage brokers, agents and themselves, after their own decisions have spanked them with the consequences of a largely unregulated mortgage market. What remains to be seen is how long the desire for protection will last.

I suspect it will last as long as home values are low and rates of foreclosure and negative equity are high. But I hope that the lessons from this national tragedy — massive losses in wealth, jobs and families’ homes and health — including the need for more intense mortgage market regulation, do not disappear when property values start to make a comeback.

Tara-Nicholle Nelson is author of “The Savvy Woman’s Homebuying Handbook” and “Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions.” Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

Oregon Foreclosures: The Mess That MERS Made, by Phil Querin, Q-Law.com


For the past several years in Oregon, foreclosures have been processed fraudulently and in violation of Oregon’s trust deed law. Banks, servicers, title companies and licensed foreclosure trustees, were all aware of the problem for years, but no one did anything about it. This was not a minor error or simple oversight – it was a patent disregard for the laws of Oregon.

Oregon’s Trust Deed Foreclosure Law. It is widely known that during the credit/housing boom, lenders frequently sold their loans between one another. When the ownership of a loan is transferred, it is necessary to execute, in recordable form, an “Assignment of Trust Deed.” ORS 86.735(1) governs what must occur before a trust deed may be foreclosed in Oregon; all such assignments must be placed on the public record. This is not a new law and it is not significantly different from the laws of many other states. Oregon’s law has been on the books for decades.

ORS 86.735(1) is not complicated or confusing. It simply means that after the original lender makes a loan and takes back a trust deed (which is immediately recorded), all subsequent assignments of that loan must be recorded before the foreclosure is formally commenced. In this manner, one can see from the public record, the “chain of title” of the loan, and thereby know with certainty, that the lender filing the foreclosure actually has the legal right to do so. It protects the consumer and assures the reliability of Oregon land titles.

The MERS Solution. In the 1990s, MERS came into existence. Its avowed purpose was to replace the time honored system of public recording for mortgage and trust deed transfers, with an electronic registry which its members would voluntarily use when a loan was transferred. This registry is for use only by MERS members, all of whom are in the lending industry. The immediate effect of MERS was that lenders stopped publicly recording their mortgage and trust deed assignments. This deprived local governments of millions of dollars in recording fees, and took the business of the sale of loans “underground.” A more detailed discussion of MERS’ business model is posted here.

Although the numbers vary, it is believed that MERS comprises approximately 60% of the national lending industry. Until recently, it had no employees. MERS was not born from any state statute or national enabling legislation. It was the brainchild of its owners, Mortgage Bankers Association, Fannie Mae, Freddie Mac, Bank of America, Nationwide, HSBC, American Land Title Association, and Wells Fargo, among others.

How MERS Has Contributed To Oregon’s Mortgage Mess. In an effort to give MERS the appearance of authority, its rules clarify that it will act solely as a “Nominee” for each of its members – doing only what its member instructs, but in its own name and not the name of the member. The “Nominee” is, as some Oregon federal judges have correctly observed, nothing more than “a strawman.”

When the foreclosure crisis hit, lenders realized that they needed some way to get the trust deed into current bank’s hands to initiate the process. Since MERS’ existence was virtual, and with no real employees, whenever it came time to assign a mortgage or trust deed, a MERS “Assistant Vice President” or “Assistant Secretary” would execute the assignment on behalf of MERS in their “official” capacity. But since MERS has no such officers, it simply created mass “Corporate Resolutions”, appointing one or more low level member bank employees to “robo-sign” thousands of bogus assignments.

It is important to note that these MERS “officers” only made one assignment – i.e. from the original lender whose name appeared on the public record when the loan was first made, to the foreclosing lender. In Oregon, this means that ORS 86.735(1) requiring the recording all of the intervening assignments, was intentionally ignored. Hence, there was never a “chain of title” on the public record disclosing the intervening assignments of the loan. As a result, in Oregon, no one – including the homeowner – knows if the bank foreclosing a loan even has a legal right to do so.

And there is reason to believe many of the banks did not have the legal right to foreclose. In every Oregon foreclosure I have witnessed during the last twelve months, where the loan was securitized into a REMIC, there is substantial doubt that the foreclosing bank, acting as the “trustee” of the securitized loan pool, actually had any right to foreclose. This is due to the strict tax, accounting, and trust laws governing the REMIC securitization process.

The short explanation is that if the paperwork was actually transferred into a loan pool between, say 2005 – 2008, there would be no need for an assignment to that trustee today – the loan would have already been in the pool and the trustee already had the right to foreclose; but if the loan was not transferred into the pool back then – when it should have been, it cannot be legally assigned out to that trustee today. Although it is not always easy to locate, the Pooling and Servicing Agreement, or “PSA,” governing the REMIC will contain a “Cut-Off Date.” That date is the deadline for the sponsor of the REMIC to identify the pool’s notes and trust deeds (or mortgages) in the trust. After that time [subject to limited exceptions – which do not include the transfer of nonperforming loans into the trust – PCQ], no new loans may be added. For example, if the REMIC was created in early 2006, the Cut-Off Date is likely to also be in 2006. This would mean that a bank, acting in the capacity of a trustee for a certain REMIC today, would not have the legal right to foreclose, if that trustee only recently received the trust deed assignment. The REMIC had been closed years earlier.

This is fraudulent. Yet it was so widespread, that foreclosures routinely adopted this “single assignment” model, and it became an assembly line business for MERS and its member banks. The assignment documents were typically prepared in advance by foreclosure mill attorneys and foreclosure trustee companies, uploaded into cyberspace to a servicer or foreclosure processing company, and signed, en masse, by robo-signers. Then the assignments were shipped over to notaries, who never actually witnessed the MERS “officer” sign an document. Once completed, the original assignment document was sent via overnight mail to the foreclosure trustee to record and begin the foreclosure. In many instances, the foreclosure trustee, (a) acting as a MERS “officer” would sign the assignment document transferring ownership of the loan to a lender, then (b) he or she would sign another document appointing their company as the Successor Trustee, then (c) that same person would also sign the Notice of Default, which commenced the foreclosure. No conflict of interest there…. It is this “need for speed” that epitomizes the MERS business model.

The result has been predictable – today there is evidence of fraudulent foreclosure paperwork on a massive scale. Forgeries are rampant. Notarization laws are flaunted. Until recently, the banks and MERS have gotten away with this scheme. The lending, servicing and title industries have simply taken a “don’t ask, don’t tell” approach to foreclosures in Oregon and elsewhere.

However, in 2010, Oregon and several other states said “enough.” In Oregon for example, there were at least three federal district court and bankruptcy court cases that struck down foreclosures due to the use of the MERS strawman model, and also based upon the flagrant violation of ORS 86.735(1). The most notable of these cases is the February 7, 2011 published opinion of Hon. Frank R. Alley III, Chief Bankruptcy Judge in Donald McCoy III v. BNC Mortgage, et al. Judge Alley held, in part, that: “…the powers accorded to MERS by the Lender [whose name appears in the Trust Deed] – with the Borrower’s consent – cannot exceed the powers of the beneficiary. The beneficiary’s right to require a non-judicial sale is limited by ORS 86.735. A non-judicial sale may take place only if any assignment by [the Lender whose name appears in the Trust Deed] has been recorded.” [Parentheticals mine. PCQ]

Judge Alley concluded that a failure to follow the successive recording requirement of ORS 86.735(1) meant that the foreclosure was void. It is important to note that in McCoy, as in most rulings against MERS lenders, the courts have not held that the banks may not prosecute their foreclosures – merely that before doing so, they must record all intervening assignments, so there is no question as to the foreclosing bank’s standing.

MERS is now engaged, through surrogates and one or more lobbyists, to introduce a bill in the Oregon legislature. It is a bold effort to legislatively overturn Judge Alley’s ruling, as well as similar adverse rulings by Oregon federal court judges, King, Hogan, and Perris.

MERS, its member banks, and the foreclosure industry, including its foreclosure mill attorneys, have never had justification for ignoring Oregon’s foreclosure law. Nor have they offered any justification. Instead, they have threatened that if ORS 86.735(1) and other homeowner protections in our foreclosure statutes are not amended to give MERS the right to continue acting as a strawman, and to avoid recording all successive assignments, the Oregon housing and foreclosure crisis will continue longer than necessary. Metaphorically speaking, having been caught with their hand in the cookie jar, MERS now asks the Oregon Legislature to legalize cookie theft.

Oregon Consumers Need To Be Protected. MERS’ proposed legislative solution does nothing to protect homeowners. Rather, it is aimed at legalizing patently fraudulent conduct, in the name of “helping” Oregon homeowners get through the foreclosure crisis faster. Thanks, but no thanks. The title and lending industry are concerned that if a law is not immediately passed giving MERS its way, foreclosures will come to a halt and commerce will suffer. The banks have even threatened to file judicial foreclosures against homeowners, to somehow avoid the recording of assignments law. This is a complete ruse. Here’s why:

Lenders cannot avoid their paperwork problems in Oregon by going into court. As we have seen in Oregon’s federal court cases, the banks are still unwilling to produce the necessary documents to prove they have standing to foreclose. If a bank does not have the legal documentation minimally necessary to establish its right to foreclose non-judicially, why would it go into court and shine a bright light on its own fraudulent paperwork? The outcome will be the same – as we have seen in judicial foreclosure states such as Florida, where they now require the banks’ attorneys to certify to the truthfulness of their pleadings and paperwork.
Lenders will not go into court for fear of further alienating an already alienated public. [Note the recent MERS Announcement to it’s members, tightening is rules due to concern over its “…reputation, legal and compliance risk….” – PCQ]
The banks know that with the high court filing fees and lawyers, it will be much more costly for them to foreclose judicially in court. While they do not seem concerned about their high executive bonuses, when it comes to the cost of foreclosures, they’ll pinch a penny ’til it screams.
In any event, there is little reason to fear judicial foreclosures clogging court dockets. With proper documentation, the process can be relatively fast (3+ months), since the cases could be disposed of on summary judgment. If judicial foreclosure cases became too numerous, the local courts can create expedited protocols and assign certain judges to speed them through – as done in other states. Lastly, many foreclosures are already being filed judicially, especially on commercial properties. To date, there has been no hue and cry that it is overwhelming the court systems.
The lenders’ complaints that foreclosures are slowing Oregon’s housing recovery are not necessarily verified by the stats. Oregon’s Regional Multiple Listing Service (“RMLS™”) shows that January 2009 housing inventory (i.e. dividing active listings by closed sales) was 19.2 months; January 2010 was 12.6 months; January 2011 was 11.3 months. February 2009 was 16.6 months, February 2010 was 12.9 months; and February 2011 was 10.9 months. March 2010 showed housing inventory at 7.8 months (down from 12.0 months in 2009), and there is no reason we cannot expect even better numbers when this month is over.

These numbers suggest that housing inventory is gradually being reduced year over year. Although it is true that housing prices continue to decline, that is more likely the result of lenders fire-selling their own REO inventory, than anything else. I say this because of many anecdotal reports of lenders refusing short sales at prices higher than they ultimately sold following foreclosure. Perhaps lender logic is different than human logic….

In an online article in Mortgage News Daily [a lender resource site – just look at their advertising – PCQ], it was reported:

The cost of a foreclosure, it turns out, is pretty staggering and we wonder why lenders and the investors they represent aren’t jumping at a solution, any solution, that would allow them to avoid going to foreclosure whenever possible.***According the Joint Economic Committee of Congress, the average foreclosure costs were $77,935 while preventing a foreclosure runs $3,300.

Overall, foreclosure is a lose-lose proposition for all concerned – except perhaps the companies servicing and foreclosing the loans [Point of Interest: Bank of America owns BAC Servicing and ReconTrust, and is making millions from the business of servicing and foreclosing the loans it made to its own borrowers. A sterling example of vertical integration in a down market… PCQ]

The only good solution is a non-foreclosure solution. Lenders already have ultimate control over the outcome for every loan in default. In those cases where modifications are viable, they should do so on an expedited basis. [Point of Interest: Go to the following CoreLogic site here , where in 2010 they touted their new analytics program that is designed to enhance lender decision making on modifications, short sales, and deeds-in-lieu. One has to believe that if such programs exist and banks stopped losing borrowers’ paperwork, they could actually have a decision back fairly quickly – rather than the 14-month horror stories we hear about. – PCQ]

Although it is doubtful that the industry can and will – anytime soon – create a fast and fair process to reduce principal balances, that is certainly a fair solution. It is fair to the homeowner in need, and actually fair to the bank, since the cost of foreclosure, including taxes, insurance, commissions, and other carrying costs, are significantly more than the short term pain of a write down. [If the banks need a little accounting sleight-of-hand from the FASB, there’s no reason they couldn’t put some pressure on, as they did with the mark-to-market rules. -PCQ]

Another, more likely and quicker solution, is to establish a fast-track short sale process. This should not be complicated if the banks stopped “losing paperwork” and focused on turning short sales into 45-60 day closings, consistent with the timing for equity sales. It has been lender delays that have stigmatized short sales, so only hungry investors, and buyers with the patience of Job, participate. This can change if banks begin expediting their short sale processing.

With both the modification and short sale alternatives, lenders do not receive the property back into their already bloated REO departments; and there is the added advantage that the banks do not have to risk a judicial slapdown, when using their fraudulently prepared Assignments of Trust Deed. In short, it is a “win-win” solution for lender and borrower.

Conclusion. The MERS business model was based upon the concept that “It is better to seek forgiveness than permission.” The problems they created were done with their eyes wide open in a brazen act of “might makes right” hubris. After having created these problems, they are now seeking to legislatively overturn the rulings of several of Oregon’s highly regarded federal judges. These decisions have affirmed the rule of law. To do otherwise – that is to sanctify MERS’ illegal conduct by eviscerating statues designed to protect homeowners, would be a travesty.

MERS, the banks, and the title industry own this problem, and they should own the solution. Whatever the outcome, it must be fair, and should not be borne on the backs of Oregon’s already struggling homeowners.

King Farmers Market Set to Open May 1 (via King Neighborhood Association)


King Farmers Market Set to Open May 1 From Portland Farmers Market: King Market kicks off its third season on Sunday, May 1. The market will be open Sundays from 10 a.m. to 2 p.m., near the intersection of NE 7th Avenue and Wygant Street, in the parking lot adjacent to King School Park. This market will be open until Sunday, October 30, 2011. New King Market vendors for 2011 include: • Eatin' Alive, a bicycle-powered mobile vending station that believes in harnessing raw energy in bo … Read More

via King Neighborhood Association

Mortgage Apps Rise as FHA Loan Demand Surges, Thetruthaboutmortgage.com


Mortgage application volume increased 5.3 percent on a seasonally adjusted basis during the week ending April 15 as government mortgage demand surged, the Mortgage Bankers Association reported today.

The refinance index increased a meager 2.7 percent from the previous week, but purchase money mortgages jumped 10.0 percent, mostly due to a 17.6 percent spike in FHA loan lending.

“Purchase application volume jumped last week largely due to another sharp increase in applications for government loans. Borrowers were likely motivated to apply for loans before the scheduled increase in FHA insurance premiums,” said Michael Fratantoni, MBA’s Vice President of Research and Economics, in a release.

Refinance activity increased somewhat, as rates dropped to their lowest level in a month towards the end of the week.”

That pushed the refinance share of mortgage activity to 58.5 percent of total applications from 60.3 percent a week earlier.

So it looks as if purchases will eclipse refinances in the near future, which is good news for the flagging housing market.

Meanwhile, the popular 30-year fixed-rate mortgage dipped to 4.83 percent from 4.98 percent, keeping the hope of refinancing alive for more borrowers.

The 15-year fixed averaged 4.07 percent, down from 4.17 percent a week earlier, meaning mortgage rates are still very, very low historically.

That alone could bring more buyers to the signing table this summer.

Proposed QRM Rule Released, 20% Down Payment Required, by Michael Kraus, Totalmortgage.com


New proposed risk-retention rules, required as part of the Dodd-Frank financial reform were released today by the FDIC, according to a report from Fox News.

The new regulations would require mortgage originators to retain capital reserves equal to 5% of all but the safest mortgages. The mortgages that are exempt from the risk retention guidelines are termed “qualified residential mortgages” or QRMs. In order to qualify as a QRM, there must be a down payment of at least 20%. Additionally, anyone who has ever had a 60 day delinquency in their credit history will not qualify for a QRM. FHA loans will be exempt from the QRM rules, and Fannie Mae and Freddie Mac mortgages may also be exempt so long as these agencies are in government conservatorship.

As we’ve discussed in the past, there could be a number of side effects for borrowers, among them increased mortgage rates for anyone who doesn’t qualify for a QRM. Another one of the side effects could be that the FHA Mortgage Share could increase significantly as these loans are exempt from the QRM rule.

Sheila Bair, Chairman of the FDIC, spoke at an FDIC board meeting today and addressed the proposed rule. She said:

“In thinking about the impact of this proposed rule, we need to keep in mind the following facts:
First, the QRM requirements will not define the entire mortgage market, but only that segment that is exempt from risk retention. Lenders can – and will – find ways to provide credit on more flexible terms, but only if they then comply with the risk retention rules.
Second, what matters to underserved borrowers is not just the volume of credit that is available, but also the quality of that credit. More than half of the subprime loans made in 2006 and 2007 that were securitized ended up in default, which hurt both borrowers and investors and triggered the financial crisis. By aligning the interests of borrowers, securitizers and investors, our new rules will help to avoid these outcomes and keep default rates at much lower levels. They will also help avoid another securitization-fed housing bubble which made home prices unaffordable for many LMI borrowers.
Finally, the private securitization market, which created more than $1 trillion in mortgage credit annually in its peak years of 2005 and 2006, has virtually ceased to exist in the wake of the crisis. Issuance in 2009 and 2010 was just 5 percent of peak levels. This market needs strong rules that assure investors that the process is not rigged against them. The intent of this rulemaking is not to kill private mortgage securitization – the financial crisis has already done that. Our intent is to restore sound practices in lending, securitization and loan servicing, and bring this market back better than before.”
The majority of homeowners with mortgages in this country would be unable to refinance into a QRM due to a lack of home equity. Additionally, the vast number of people who have gone through foreclosure or have even been two months delinquent would be unable to get a QRM. All of these people will likely pay increased mortgage rates if they were to refinance or get a new mortgage. I totally understand the reasoning behind the QRM. It also strikes me as being a classic case of closing the barn door after the horse has escaped. What are your thoughts on the proposed rule? Let me know in the comments section below.

QRM Rule Could Cause FHA Mortgage Share to Skyrocket, by Michael Kraus , Totalmortgage.com


Recently I’ve spent a good deal of time discussing upcoming changes to risk-retention rules regarding mortgage origination that could potentially increase the cost of mortgages for a great many people.

Under the Dodd-Frank regulatory reform, loan originators will be required to retain capital reserves equal to five percent of all but the safest mortgage loans. The safe loans that will be exempt from this risk retention are called “qualified residential mortgages” (QRMs). The definition for a QRM is expected to be released in the next couple of weeks, but the expectation is that in order to be a QRM, a mortgage loan will need a 20% downpayment. This means that those that do not have a down payment of this size will be subject to increased mortgage rates to make up for the risk retention on the part of the lender. The Treasury, the Federal Reserve, the FDIC, the FHA, and other regulatory and governmental agencies are responsible for defining a QRM.

The rule is intended to ensure that lenders have “skin in the game”. In the past, some mortgage originators would make risky loans, and in turn bundle them into mortgage backed securities and sell them to investors, effectively passing all the risk to another party. These practices were partially to blame for the meltdown of the housing market. Theoretically, the QRM rule would end these risky lending practices.

There is an exception to the QRM rule, and that is that loans issued or guaranteed through government agencies (not Fannie Mae or Freddie Mac) are to be exempt from the rule. See section 941 of Dodd-Frank, specifically (ii):

‘‘(G) provide for—‘‘(i) a total or partial exemption of any securitization, as may be appropriate in the public interest and for the protection of investors;

‘‘(ii) a total or partial exemption for the securitization of an asset issued or guaranteed by the United States, or an agency of the United States, as the Federal banking agencies and the Commission jointly determine appropriate in the public interest and for the protection of investors, except that, for purposes of this clause, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation are not agencies of the United States;

‘‘(iii) a total or partial exemption for any assetbacked security that is a security issued or guaranteed by any State of the United States, or by any political subdivision of a State or territory, or by any public instrumentality of a State or territory that is exempt from the registration requirements of the Securities Act of 1933 by reason of section 3(a)(2) of that Act (15 U.S.C. 77c(a)(2)), or a security defined as a qualified scholarship funding bond in section 150(d)(2) of the Internal Revenue Code of 1986, as may be appropriate in the public interest and for the protection of investors; and

‘‘(iv) the allocation of risk retention obligations between a securitizer and an originator in the case of a securitizer that purchases assets from an originator, as the Federal banking agencies and the Commission jointly determine appropriate.

As FHA mortgages would be exempt from QRM, it is very easy to imagine a situation where FHA loan volume greatly increases as a result of the rule change. The FHA only requires a down payment of 3.5%, but I can easily picture those with less than 20 percent down opting for an FHA mortgage in order to avoid higher mortgage rates resulting from the risk-retention requirements (obviously it will depend on whether or not the increased rates cost more or less than the FHA’s up front mortgage insurance premiums, which remains to be seen).

In any case, this could put the FHA in a tough spot, as it is already undercapitalized, and was never really intended to do the volume of loans that it is doing presently. The VA and USDA could also see increased loan volume, but the increase wouldn’t be as great as with the FHA, as these loans are restricted to a smaller group of people.

RealtyTrac: Foreclosure Activity at Lowest Level in Three Years, by Carrie Bay, DSNEWS.com


RealtyTrac says processing delays have reduced foreclosure activity to its lowest level since the first quarter of 2008.

New data released by the tracking firm shows that foreclosure filings were reported on 681,153 properties during the first three months of this year. That represents a 15 percent decline from the previous quarter and a 27 percent drop from a year ago.

Commenting on the latest numbers, James J. Saccacio, RealtyTrac’s CEO, said despite the recent plunge in foreclosure activity, the nation’s housing market continued to languish in the first quarter.

“Weak demand, declining home prices and the lack of credit availability are weighing heavily on the market, which is still facing the dual threat of a looming shadow inventory of distressed properties and the probability that foreclosure activity will begin to increase again as lenders and servicers gradually work their way through the backlog of thousands of foreclosures that have been delayed due to improperly processed paperwork,” Saccacio said.

A total of 197,112 U.S. properties received default notices for the first time in the January to March period, a 17 percent decrease from the previous quarter and a 35 percent decrease from the first quarter of 2010.

Foreclosure auctions were scheduled for the first time on 268,995 homes. That’s down 19 percent from the previous quarter and 27 percent from the first quarter of last year.

Lenders completed foreclosure actions on 215,046 homes last quarter, a 6 percent drop from the fourth quarter of 2010 and a 17 percent decrease from the first quarter of last year. However, in states where the non-judicial foreclosure process is primarily used, RealtyTrac says bank repossessions (REOs) increased 9 percent from the previous quarter.

Illustrating the extent to which processing delays pressed foreclosure activity to artificially low levels, RealtyTrac says states where a judicial foreclosure process is used accounted for some of the biggest quarterly and annual decreases in the first quarter.

Florida foreclosure activity decreased 47 percent from the previous quarter and was down 62 percent from the first quarter of 2010, although the state still posted the nation’s eighth highest foreclosure rate with one in every 152 housing units receiving a filing in Q1.

First quarter foreclosure activity in Massachusetts fell 46 percent from the previous quarter and was down 62 percent from a year ago. The state’s foreclosure rate – one in every 549 housing units with a foreclosure filing – ranked No. 38 among the states.

New Jersey’s first quarter foreclosure rate of one in every 401 housing units with a filing ranked No. 34 among the states, thanks in part to a 43 percent decrease in foreclosure activity from the previous quarter and a 44 percent decline from the first quarter of 2010.

Connecticut’s first quarter foreclosure activity dropped 39 percent from the fourth quarter of 2010 and was down 65 percent from a year earlier. Pennsylvania posted a 35 percent decline from the previous quarter and a 29 percent drop from the same period last year.

Looking at the nationwide data for March, RealtyTrac’s report indicates that activity is already beginning to pick up some. Foreclosure filings were reported on 239,795 U.S. properties last month, up 7 percent from February. Both default notices and REOs increased in March compared to the previous month; scheduled auctions was the only stat to post a monthly decline.

 

Portland Disparity Study Delivers Mixed Results, by Wendy Culverwell, Portland Business Journal


Portland earned mixed marks on a report grading its efforts to include firms owned by women and minorities in its public works projects.

The widely anticipated “disparity study” by Denver-based BBC Research and Consulting landed at city offices last week. Federal court rulings prohibit government agencies from establishing goals for disadvantaged businesses unless they first conduct “disparity” studies to determine if a gap exists. Portland’s last disparity study was released in 1995.

BBC evaluated approximately 9,000 contracts issued or sponsored by the city and the Portland Development Commission between 2004 and 2009. The study cost $1 million, with $350,000 from the PDC and $650,000 from the city.

According to the report, Portland successfully used women- and minority-owned firms for both construction and professional services. BBC reported no disparities in any of the four primary categories.

The PDC, meanwhile, passed in three categories and failed in five. The report found that the PDC made good use of disadvantaged firms on projects it owned in 2004 to 2009, but generally failed to promote such firms on projects it sponsored by contributing funds but not oversight.

The development commission anticipated that its “sponsored” projects would be a weakness one year ago when it changed its contracting policy to require any partner to meet its diversity goal if it uses PDC money on a construction project.

The development commission won passing marks in the use of woman-owned construction firms and use of minority- and woman-owned “personal services” firms, which are generally architectural and engineering related. It failed in the use of minority-owned construction firms, use of minority-owned personal services firms and use of woman-owned personal services firms.

Results of the report will guide the city and development commission’s efforts to include traditionally disadvantaged firms in its public works projects.

A copy of the report is available for view or comment on the city’s website.

Read more: Portland disparity study delivers mixed results | Portland Business Journal

 

New Rules for Home-Loan Brokers, by Amy Hoak, WSJ.com


New rules governing how mortgage loan officers are paid for their work in originating home loans are meant to protect consumers and make it clearer how the mortgage professional is making money off the loan.

But some in the industry say the rules are creating new problems.

The Federal Reserve’s rules are aimed at limiting predatory lending. They prohibit loan officers from being compensated based on the loan’s terms and conditions other than the loan amount. For example, a loan officer can’t earn a higher commission for selling a mortgage with a 5.25% rate versus a 5% rate, says Tom Meyer, chief executive of J.I. Kislak Mortgage, a mortgage lender based in Miami Lakes, Fla.

Mortgage brokers and loan officers are prohibited from “steering” people into mortgages based on the compensation they’d receive. Another element effectively creates a rule on who pays a mortgage broker: Either the lender pays the broker directly or the consumer does — but both can’t pay for the services.

With the new rules, “consumers shouldn’t have to worry about brokers putting their own financial interest in front of the consumer’s,” says Kathleen Keest, senior policy counsel for the Center for Responsible Lending, a nonprofit consumer advocacy group. Unlike some in the industry, she says she doesn’t think the rules will increase borrowers’ mortgage costs.

Some in the industry also claim that the rules’ nuances put mortgage brokers at a competitive disadvantage — giving them less flexibility on compensation than large banking institutions — and it will ultimately usher more business to larger banks.

It’s a matter that held up the implementation of the new rules, which were supposed to go into effect April 1. The U.S. Court of Appeals issued an emergency stay at the last minute, in response to requests from industry trade groups. But after additional review, the rules went into effect April 5.

“I like the idea of a level playing field. I like the intent of structuring what is realistic for a loan officer to make,” says Lisa Schreiber, executive vice president of wholesale lending at TMS Funding, based in Milford, Conn. But some elements of the new rules, she says, could end up costing consumers more. A wholesale mortgage operation provides underwriting decisions and makes funding available to mortgage brokers.

One example of how consumers might be affected: A broker will lose some flexibility in altering his or her compensation, if it’s being dictated by the lender, Ms. Schreiber says.

“Say for whatever reason — maybe you were having a hard time getting documentation and you had to wait — the loan took longer than expected. There may be costs associated with that extra time. That was usually taken care of by the broker — that broker has been able to reduce his or her compensation,” Ms. Schreiber says. “With the new regulation, you as a consumer will have to pay for any fees. The broker will legally not be able to help you pay.”

Consumer advocacy groups, however, say these rules were needed to help protect consumers from unscrupulous loan officers unfairly trying to profit from mortgage loans, Ms. Keest says. It’s a practice that played a role in the mortgage mess that rocked the country, according to the Center for Responsible Lending.

“The new rules should mean that [the mortgage process is] more competitive, more transparent and should mean, overall, that it won’t be more costly for the simple reason that more transparency and lack of conflict of interest should mean it’s less costly,” Ms. Keest says.

Cameron Findlay, chief economist for LendingTree, an online marketplace that connects consumers with lenders, says compensation issues didn’t create the mortgage crisis.

“The crisis was created not by the origination of loans but the creation of loan types and securitization and sale of those structures to investors. Compensation was fuel on the fire, but did not create the fire,” he says.

Consumers in the market for a loan need to be extra vigilant about comparison shopping in the weeks ahead — making sure that what they’re being quoted and offered is competitive, Mr. Meyer says.

“In the short term, [the rules are] going to be so novel and so uncertain there may be a short-term cost to the borrowers,” he says. “I expect this is going to be a fluid environment in the next couple of months, with confusion about what is permissible and what is not.”

But this isn’t the only change the mortgage industry faces in the near future.

A proposal presented by federal regulators in March laid out a way to require banks to retain more “skin in the game,” or financial capital, when packaging and selling mortgage loans — a move to prevent some of the lending problems that arose and led to a meltdown in the credit markets. Also this year, there was a proposal on the future of Freddie Mac and Fannie Mae, the two government-sponsored enterprises currently under government conservatorship.

Both proposals, if and when they come to pass, may affect consumers, industry experts say. And one result may be that mortgages get more expensive.

Write to Amy Hoak at amy.hoak@dowjones.com

SBA opens 504 refinancing to more firms, by Kent Hoover, Portland Business Journal


The U.S. Small Business Administration will allow more businesses to refinance their commercial real mortgages through its 504 loan program.

The SBA initially restricted this new refinancing option to small businesses that faced balloon payments on their mortgages before Dec. 31, 2012. Beginning April 6, it will open the 504 refinancing option to businesses with balloon payments due after that date.

“With the collapse of the real estate bubble, many small business owners have found themselves unable to refinance as a result of inflated real estate values at the time they took out their mortgage,” SBA Administrator Karen Mills said. “SBA’s temporary 504 refinancing program was first made available to those small businesses with the most immediate need. Today’s step opens this critical assistance to more small businesses, giving them the opportunity to restructure their debt and free up capital that will be essential to keeping their doors open and also their future ability to grow and create jobs.”

The Small Business Jobs Act, which was enacted last September, allowed the 504 program to be used to refinance existing loans on owner-occupied commercial real estate through September 2012. To be eligible for refinancing, the mortgage must be at least two years old, and the business must be current on their payments for the past 12 months. Borrowers can refinance up to 90 percent of the current appraised property value or 100 percent of the outstanding mortgage, whichever is lower.

The SBA’s 504 loans are used to finance fixed assets, primarily real estate. Typically, a 504 project includes a first mortgage from a private-second lender that covers 50 percent of the cost, an SBA-guaranteed second mortgage from a certified development company that covers 40 percent of the cost, and 10 percent equity from the small business borrower.

Read more: SBA opens 504 refinancing to more firms | Portland Business Journal

Oregon economy climbs higher, by Suzanne Stevens, Portland Business Journal


Oregon‘s economy showed continued growth in February, led by employment services payrolls, strong U.S. consumer sentiment and an increase in the interest rate spread.

The University of Oregon Index of Economic Indicators rose 0.7 percent to 91.3 in February from January. The index has a benchmark of 100 set in 1997.

While unemployment claims edged up, they remain well below 2010 levels and overall labor market trends are strong. Employment services payrolls, largely temporary employment, were up 3.2 percent and non-farm payrolls were also up, adding about 9,800 new jobs last month. Since October, the Oregon economy has added about 5,900 jobs each month.

Other Oregon data reflected in the UO Index include:

Initial unemployment claims rose slightly to 8,551 in February, up from 8,487 in January.
Residential permits inched up to 629 from 627.
U.S. consumer confidence rose to 73.1 from 71.2.
New manufacturing orders for non-defense, non-aircraft capital goods dipped to 39,402 from 39,728.
The interest rate spread between for 10-year treasury bonds and the federal funds rate widened to 3.42 from 3.22, a signal of investor confidence in the U.S. economy.
The index has continued to climb since October 2010, when it was 88.9.

Read more: Oregon economy climbs higher | Portland Business Journal

OregonRealEstateWanted.com A Sucess Story for Buyers, by Fred Stewart, Stewart Group Realty Inc.


I think the success of the OregonRealEstateWanted.com site is due to the massive amount people that are involved in the Oregon Real Estate market right now. The difference between their involvement today compared to 5 years ago is there are more people looking to sell real estate than there are looking to buy. Buyers have so many opportunities to consider that it is sometimes difficult for them to settle on exactly the right property to fit within their dreams and goals. Sellers have a problem making sure their property is exposed to buyers that could be a good fit for their opportunity. There is just so much to look at that often times their buyer has chosen something else before they even had a chance to consider their property.

The issue might be how opportunities are presented to buyers and where they come from. In some cases the best way for an opportunity to be identified is after the seller has had a chance to learn what the buyer is looking for and if they see a fit with the real estate they are selling. Only then does the seller reach out to the buyer to explore any advantage in developing a deal. In this context the buyer is looking at properties from a wide range of areas with in the market. As real estate brokers and private property owners alike may present opportunities. In some cases deals have been developed on properties that were not formally on the market.
The next steps for OregonRealEstateWanted.com are to list people looking to lease or rent commercial and residential real estate. The plan is to start listing people that are looking for lease hold or month to month rental relationships on the site by June 1st., 2011..

If you are looking to buy real estate fin the Oregon market to live in or as an investment. Contact Fred Stewart of Stewart Group Realty for a private one on one consultation and possible listing on the site. All information shared with Mr. Stewart is confidential and there is no charge unless the real estate you are looking for is found.

Oregon Real Estate Wanted.com
http://oregonrealestatewanted.com

Fred Stewart
Stewart Group Realty Inc.
info@sgrealty.us
503-289-4970