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Mar 18, 2010, 10:32 pm 

From James Hagerty at the WSJ writes about a Barclays Capital report: Supply of Foreclosed Homes on the Rise Again

Hagerty notes that the analysts at Barclays Capital estimate that various lenders held 645,800 REO (Real Estate Owned) in January, up 4.6% from 617,286 in December.

Also Barclays estimated the peak supply was in November 2008 at 845,000, and then declined through 2009. Barclays is projecting the supply will increase to 733,000 in April 2010, and then gradually decline.

The current supply is similar to the analysis from Tom Lawler that I posted yesterday. These number from Barclays are a little higher (Lawler noted he wasn’t including everything, but the pattern is the same).

As an aside, here is a video from Steven Russolillo at Dow Jones (posted at the WSJ): Financial Blogs Grow Up

Thanks!

Mar 18, 2010, 7:59 pm 

In a recent email to agents on March 16th, the California Association of Realtors (C.A.R.) points out that making undisclosed 2nd lien payments in a short sale transaction could be a crime and punishable by up to 30 years in prison.

The email points out that undisclosed payments might violate HUD’s RESPA (Real Estate Settlement Procedures Act) and laws against loan fraud.

In addition any agent participating in the scheme might be subject to disciplinary action and could have their license revoked.

Apparently the requests by 2nd lien holders are common. The C.A.R. reported: “Short sale agents have increasingly reported to C.A.R. about requests for agents and their clients to pay junior lienholders and others, often times outside of escrow.”

Although the email doesn’t address possible criminal activity of 2nd lienholders, it would appear the junior lienholders are soliciting a crime if they ask for a payments and suggest that the payment not be disclosed on the settlement documents. Properly disclosed payments to junior lienholders are perfectly fine and legal.

I doubt law enforcement will pursue individual homeowners, so probably the best way to end this practice is to report the requests for payments outside of escrow by 2nd lien holders (name of person and company holding the junior lien) to either HUD or the FBI.

This possible fraud was first reported by Eric Wolff at the North County Times: Wrinkle raises questions in home short sales, and by Diana Olick at CNBC: Big Banks Accused of Short Sale Fraud

Perhaps this version of short sale fraud is finally getting the attention it deserves …

Mar 18, 2010, 6:00 pm 

Cintas Profit Falls 32%

Mar 18, 2010, 3:28 pm 

Note: since the mix is changing, the median price is not useful. The repeat sales indexes – like FirstAmerican CoreLogic and Case-Shiller – have problems too, but they probably are better for actual price changes.

From DataQuick: Bay Area home sales down slightly from last year, median sale price rises

Bay Area home sales were subpar again in February, dipping below the year-ago level for the second straight month as some potential buyers worried about job security, some couldn’t get financing and others found a thin inventory of homes for sale. …

Last month’s sales fell 22.2 percent short of the February average of 6,413 sales since 1988, when DataQuick’s statistics begin.

February’s sales were the second-lowest for that month since 1995, behind the record-low 3,989 homes sold in February 2008. January and February this year are the only two months since August 2008 in which sales have fallen year-over-year.

“The sales and price data remain choppy, with more ups and downs and inconsistencies than we’d typically see. It’s partly the season – January and February are often atypical and don’t serve as good barometers. But it’s more than that. The market remains fundamentally off kilter. There’s still relatively little lending going on in the upper price ranges, and little adjustable-rate financing, which had been vital to the Bay Area. Investor and cash-only deals remain well above normal, as does the level of sales involving distressed property,” said John Walsh, MDA DataQuick president.

“Despite the widening stability seen in the housing market in recent months, the outlook remains murky,” he said. “Whether prices will firm, or remain firm, will depend largely on three factors: The market’s response as the government reduces its housing stimulus, the economy’s ability to gain traction, and the decisions that lenders and borrowers will make in countless distress cases. The key question is how much more distressed inventory is coming, and when.”

Foreclosure resales – homes that had been foreclosed on in the prior 12 months – rose to 36.6 percent of all homes resold last month, marking the fourth consecutive month in which foreclosure resales edged higher. Foreclosure resales peaked at 52 percent of resales in February 2009, then gradually fell and, in the fall, leveled off near 32 percent before starting to rise modestly.

… Federally-insured, low-down-payment FHA loans, a popular choice among first-time buyers, made up 26.9 percent of Bay Area purchase loans last month. That was up from 23.3 percent a year ago and 1.4 percent two years ago.

Last month absentee buyers – mostly investors – purchased 19.4 percent of all Bay Area homes sold, the same as in January and up from 18.4 percent a year ago. The monthly absentee buyer average over the past decade is 13.0 percent. Buyers who appeared to have paid all cash – meaning there was no corresponding purchase loan found in the public record – accounted for a record 27.1 percent of sales in February, up from 25.7 percent in January and 24.4 percent a year ago.

This is definitely a market “off kilter”. Almost 27% of the buyers used FHA insured loans, and another 27% paid cash (mostly investors). This is a long way from normal …

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