Rochester starts cataloging vacant foreclosures

Upset that some banks are not taking a more proactive role in maintaining vacant foreclosed properties, the city of Rochester, N.Y., is cataloging foreclosures and empty properties to pressure banks to move quickly in their handling of distressed assets.

The Democrat and Chronicle, a local paper in Rochester, says many of the homes are in relatively stable condition, but the banks are taking too long to clean up or maintain the residences.

The paper asserts that Wells Fargo maintains the most active foreclosure filings on vacant properties in the city, while Bank of America has the most vacancies not being maintained.

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CoreLogic sees housing as bright spot in gloomy economy

The housing market is improving in the midst of economic uncertainty, CoreLogic ($23.35 0.02%) said in its August MarketPulse Report.

While housing data remained gloomy for years, CoreLogic believes the segment is seeing sparks of hope with REO sales dropping, inventory levels declining and the nation’s foreclosure inventory slowing.

The result of these conditions is a balancing of supply and demand, and the beginning of price stability—even price growth.

“The persistence of the foreclosure inventory, or more specifically the low likelihood of foreclosures to flood the market is beneficial to housing in the sense that it can successfully absorb the inventory without dramatic changes in price,” wrote Mark Fleming, CoreLogic’s chief economist and one of the report’s authors.

The pulse report shows home prices, including distressed sales, rising 2.5% year-over-year in June and 1.3% over the previous month.

The inventory of homes on the market also declined 20% from June 2011 while the average price for a listed home grew 7.5% over last year.

CoreLogic: Annual foreclosures drop 24%

The U.S. ended the month of June with 60,000 completed foreclosures, a 24% drop from year ago levels when 80,000 foreclosures were reported for the same month, according to a report from mortgage data analytics firm CoreLogic ($23.02 0.02%).

The steep drop puts completed foreclosures at a level not seen since 2007.

Santa Ana, Calif,-based CoreLogic says the drop in completed foreclosures is good news, but other issues in the housing market remain.

“The decline in the flow of completed foreclosures to pre-financial crisis levels is more welcome news pointing to an emerging housing market recovery,” said Anand Nallathambi, president and CEO of CoreLogic. “However, we believe even more can be done to reduce the inventory of foreclosures by decreasing the level of regulatory uncertainty and expanding alternatives to foreclosure.”

Mark Fleming, chief economist for CoreLogic, said, “While completed foreclosures and real-estate owned (REO) sales virtually offset each other over the past four months, producing static levels of foreclosure inventory for most of this year, they are beginning to diverge again. Over the last two months REO sales declined while completed foreclosures leveled out. So we could see foreclosure inventory rising going forward.”

About 1.4 million homes, or 3.4% of all homes with a mortgage, were in the nation’s foreclosure inventory for June. That is down from 1.5 million in June of 2011.

Reverse mortgages as popular as IRAs in 10 years

Reverse mortgages will be as ubiquitous as individual retirement accounts in 10 years because many folks will have more money in the former than in the latter, says Scott Norman, vice president of Austin, Texas-based Sente Mortgage‘s reverse mortgage division.

Norman says the forces of supply & demand and education will serve as the engine for his prediction’s materialization that every extended family will have a member with a reverse mortgage.

“There’s still a great deal of education — for financial planners, certified public accountants, home health care professionals, real estate attorneys — that needs to be done,” Norman says. “We haven’t even scratched the surface yet.”

Reverse mortgages let borrowers convert a portion of their home equity into cash. However, unlike a traditional home equity loan or second mortgage, borrowers can hold off on repayment until they no longer live in the home, fail to meet the obligations of the mortgage or pass away.

The demographics point to a robust consumer base for the reverse mortgage industry.

The population of individuals 65 and up increased 15% to 40 million in 2010 from 35 million in 2000, according to the Department of Health and Human Services. It projects a 36% increase to 55 million in 2020. And by 2030, about 72.1 million older Americans, over twice their number in 2000, will exist — about 19% of the U.S. population.

Norman says Sente Mortgage views reverse mortgages as a product with unlimited upside, a natural financial planning option for aging Americans within the housing economy. He favors the Home Equity Conversion Mortgage Saver, a type of reverse mortgage offered by the Federal Housing Administration that requires drastically lower upfront fees — just .01% of the home value — than the HECM Standard, but reduces the amount of money available to the borrower.

“As the baby boomers continue to age and home values stabilize, the question is ‘How are they going to retire?’’ Norman says. “Pull up average 401(K), average savings amount, average debt. These seniors aren’t going to be able to retire at a fraction of what they’re living today. I don’t think I’m exaggerating.”

“I’m not saying a reverse mortgage is for everybody, but it is certainly an option that may be the most realistic for a majority of the seniors in the next five to ten years,” Norman says. “It’s safe, it’s cost efficient. The biggest complaint you have regarding reverse mortgages is not the product, but that it’s expensive to grow old in America.”

They’re also confusing, according to the Consumer Financial Protection Bureau, which released a report highlighting the risks for American consumers as they struggle to understand reverse mortgages.

“Reverse mortgages are complex and have the potential to become a much more pervasive product in the coming years as the baby boomer generation enters retirement,” said CFPB Director Richard Cordray.

The CFPB report found that while consumers are largely aware of reverse mortgages, few completely understand them. “Many consumers struggle to understand how their loan balance will rise and their home equity will fall over time with a reverse mortgage,” the reported stated. “Some borrowers do not understand that they need to continue to pay taxes and insurance with a reverse mortgage.”

Norman concedes that some of the bureau’s conclusions were “relatively accurate” and applauds the bureau for embarking on such a study. However, he scolds it for not consulting consumers while conducting the study and forming conclusions. The CFPB has yet to respond to inquiries about Norman’s claim.

According to the CFPB study, 70% of borrowers are taking out the full amount of proceeds as a lump sum rather than as an income stream or line of credit. “This raises concerns that consumers who take out all of their accessible home equity upfront will have fewer resources available later in life. They may not have the money to continue to pay taxes and insurance on their homes, which can put them at risk of losing their home,” the report stated.

As part of a public education campaign, the National Reverse Mortgage Lenders Association developed a newly redesign consumer website in June that provides comprehensive help and information on the entire process of obtaining a reverse mortgage. NRMLA is partnering with the federal government as part of the campaign.

Norman, meanwhile, doesn’t think the CFPB’s findings are wrong. He just doesn’t think they went far enough.

“Most of the seniors we deal with are smarter and wiser than we’ll be in the next 20 years,” Norman says. “These are smart people. They lived through World War II. We haven’t.”



The Coalition to Prevent Lead Poisoning has announced the arrival of 1,600 new copies of Healthy Home: Environmental Health Hazards—a DVD that combines CPLP’s Lead Awareness for Parents and the Rochester Healthy Home Partnership’s Healthy Home.
This re-issue was funded entirely by a generous grant from the New York State Pollution Prevention Institute Community Grants Program. The NYP2I Community Grants Program provides support for projects that raise awareness and under-standing and lead to implementation of pollution prevention practices and/or behaviors at the local level with the goal of improving the health, environmental quality, and economic vitality of New York State communities.
Healthy Home is an innovative and engaging series of seven informational segments, 3-4 minutes in length, on air quality, asbestos, chemicals, housekeeping, lead, mold, and pests.
Told from the point of view of two mothers of lead-poisoned children, Lead Awareness for Parents is a 10-minute concise educational tool (viewable in English, Spanish, and American Sign Language) that provides immediate access to information about lead poisoning prevention, steps parents can take to reduce their family’s exposure to lead, and information about additional local and national resources.
Call (585) 224-3125 to request your free copies! You can find all of the DVD chapters on YouTube at

Analysis: In the U.S. housing market, recovery or Lost Decade?

(Reuters) – The worst U.S. housing crisis since the Great Depression has been declared over. But is it?

What some of Wall Street’s forecasts for a recovery may be underestimating are tectonic shifts in the U.S. economy that make the housing market a different place from a decade ago.

Record levels of student debt, 15 years of flat incomes and the fact that nearly half of homeowners are effectively stranded in their houses look likely to weigh on prices into the indefinite future.

Several housing experts have said the market is in danger of drifting for years. In a bleaker scenario, the fragile U.S. economic recovery could slip back into recession if Europe’s crisis deepens or the political impasse in Washington triggers a new budget crisis, putting the housing market at risk again.

“We’ve gone through half of a lost decade since the crisis started in 2007,” said Robert Shiller, co-founder of the Case-Shiller U.S. housing price index and an economics professor at Yale University.

The so-called Lost Decade in Japan occurred after the speculative bubble in the 1980s, when abnormally low interest rates fueled soaring property values. The ensuing crash has continued to afflict the Japanese economy ever since.

“It seems to me that a plausible forecast is, given our inability to do stimulus now, for Japan-like slow growth for the next five years in the economy. Therefore, if there is an increase in home prices, it’s modest,” said Shiller.

A Reuters poll published on Friday showed most economists think the U.S. housing market has now bottomed and prices should rise nearly 2 percent in 2013 after a flat 2012.


Consider the plight of college graduates, who go on to become the biggest group of first-time U.S. home buyers.

Many graduate into a climate of falling wages and soaring rents, members of the most indebted generation in history who owe an average $25,000 in student loans.

They elbow their way into a labor market so rough that the number of people with jobs is at a 30-year low, health and retirement benefits are shrinking and the young workers face a greater chance of losing their jobs than any generation before.

For Steve Blitz, chief economist at ITG Investment Research in New York, the housing market improvement has gotten as good as it can without more improvement in the labor market.

“I don’t see it worsening unless the economy goes back into a recession, but I think it’s more a case of stagnating,” Blitz said.

It is not just the employment picture that makes the prospect of a housing recovery so precarious.

Housing prices and income usually move in lock step. But real median household income is stuck at the same level as during the Clinton Administration in 1996 — at about $49,000.

That means the housing market will remain troubled for “an extended period of time,” according to Sam Khater, a senior economist at housing data company CoreLogic.

“It’s not about job growth. It’s about income growth,” says Khater.

Back in 1996, the median home price was around $80,000. When house prices soared to $200,000 in 2006 — the market peak — it was due to jumbo mortgages, not jumbo pay raises.

Banks lured consumers with low interest rates that later turned much more expensive and blew up monthly payments, eventually helping to cause the housing crash.

On the one hand, the housing implosion has created a bonanza for those buyers who can take advantage of it: U.S. real estate is now 36 percent cheaper than in 2006.

In nearly every city, it now costs less to own than to rent.

But many would-be homeowners cannot buy. Lenders have virtually locked them out of the market by denying them mortgages, according to statistics from the Federal Housing Administration and a recent Morgan Stanley research report.

In May, consumers able to close on a mortgage had, on average, a near-perfect credit score. They could afford a 19 percent down payment on their new home. And they were still on track to spend no more 24 percent of their income on their new house, according to the Ellie Mae Origination Insight Report.

“Most of the population can’t meet current mortgage underwriting standards,” says trade publication Inside Mortgage Finance founder Guy Cecala. “They’re getting eliminated before they even get to the door.”

Some believe this credit freeze is only going to worsen. Washington is considering new mortgage regulations that would shift more responsibility for bad loans away from taxpayers and investors and toward banks.

“If all these new rules that Washington is talking about are put into place, it would be even harder to get a mortgage,” said Brian Lindy, an analyst at Amherst Securities Group, which released a report in May entitled “The Coming Crisis in Credit Availability.”

Even for those who can afford to, buying a house can be a harrowing experience. After watching a nation crash and burn, plenty of people remain in shock. They are loath to take the risk anytime soon.

As research firm S&P Capital IQ’s Robert Kaiser said at a recent housing conference: “Consumer confidence simply hasn’t recovered enough to support the housing market.”


The housing market, as economists often like to point out, is a conveyor belt. A homeowner sells a house. The new buyer moves in, and the seller buys a better house. In time, that buyer in turn sells, and buys a better house.

Normally these so-called move-up buyers are the housing market’s biggest consumer group. They are what keep that conveyor belt moving.

Today the apparatus is broken.

That’s because about half of homeowners with mortgages simply can’t move.

Twenty-four percent owe more on their houses than they are worth. Another 25 percent are equity poor, meaning they have less than the 20 percent of equity required for a down payment to trade up to a new home, according to housing-data company CoreLogic.

Sean O’Toole, the CEO of foreclosure-data aggregator, estimates that it will take at least another decade, at the housing market’s current pace of growth, for homeowners who are underwater just to break even on their houses.

“We went from $4.5 trillion of mortgage debt in 2000 to $10.5 trillion of debt in 2008 — and we are still only down to $9.8 trillion,” says O’Toole.

“All those people with negative equity, they can’t sell. They are stuck in a prison of debt.”


The U.S. housing market is actually hundreds if not thousands of markets.

Cities such as New York and San Francisco have joined other world cities, like London and Hong Kong, to form a global housing market that aligns its fortunes with the wealthy elite.

Then there’s Stockton, the California city that filed for bankruptcy in June. A recent Rockefeller Institute of Government research report suggested it could turn into a ghost town with its lack of jobs and abundance of abandoned, foreclosed homes.

Still, there’s no doubt that in most places the housing market appears to have bottomed out and is now gathering strength.

The places that were hit hardest — like the warm states where baby boomers go to retire — are snapping back, and some states with strong income and job growth, like the natural gas haven of North Dakota, are solid.

“I don’t think it’s a head-fake, because when you look across all your price measures and construction measures on the starts side, you’re seeing broad-based indication of improvement,” says Beata Caranci, deputy chief economist at TD Bank Group in Toronto.

But even those who say the recovery is on are subdued. “We have to be a little bit cautious,” said Caranci. “It’s the beginning of a recovery.”

The Case-Shiller home price index, considered a bellwether of the U.S. housing markets, rose in May for the third consecutive month.

Those price hikes, however, reversed just a sliver of the wealth lost since the housing peak: $200 billion of the $6.7 trillion that has evaporated since 2006, according to a recent Bank of America report.

Some of the biggest jumps — such as the 10 percent year-over-year price gains in foreclosure-filled cities like Phoenix and Miami — were largely due to banks holding back inventory. That’s because of lingering legal problems from the so-called robo-signing foreclosure scandal as well as a reluctance to flood the market, according to CoreLogic’s Khater.

“Don’t let the volatility in prices fool you,” he said. “Yes, prices are increasing in some markets, but in the longer term it has to come back to incomes, and unless incomes are increasing, price increases are not sustainable.”

At this point in a typical cycle, executives at the homebuilding companies are usually the loudest members of the housing recovery pep squad. Yet the mood has been subdued in the most recent round of earnings conference calls with homebuilder executives.

In late June, Lennar, the third-largest homebuilder in the United States, reported a rise in new orders for the fifth straight quarter, helping to push share price to a year high in July.

Executives had foreseen that, after the housing crash, family members would start to live together as a way to save. Lennar started designing a new home that included a 600-square-foot apartment with its own entrance called the “Multi Gen Home.” It has been a hit.

Nonetheless, Lennar’s chief executive officer, Stuart A. Miller, told analysts in June that he was nervous about uttering the word recovery.

“I don’t think that there’s reason for exuberance right now — except for the fact that the beatings have stopped.”

Many employed veterans unable to afford typical mortgage

Veterans returning from service struggle to find jobs, but even those that do may have extreme difficulty affording a home in today’s market, according to a study by the Center for Housing Policy.

“In many housing markets, the jobs America’s servicemen and women may find waiting for them after deployment do not pay enough to afford the costs of buying a home, and in some markets and for some occupations, veterans cannot afford the costs of renting a modest rental home,” said report author Laura Williams.

The report, called “Paycheck to Paycheck 2012: Can veterans afford housing in your community?” looks at five of the jobs targeted by veterans’ training programs sponsored by the Department of Labor: carpenters, dental assistants, electricians, firefighters and truck drivers.

Of those jobs, only one — electricians — pays well enough to afford to pay a mortgage on a home at typical nationwide prices. But in the most expensive markets, including San Francisco, Honolulu and New York, even high-earning electricians could not afford the typical rent on a one-bedroom apartment.

Less than half of the 200 metro areas studied offered fair-market rent on a two-bedroom apartment affordable on a dental assistant’s salary, and less than a quarter of the metro areas studied allowed a dental assistant to afford the mortgage on a median-priced home.

“Veterans face a wide range of challenges after returning from deployment,” commented Jeffrey Lubell, executive director of the Center for Housing Policy. “There are many outstanding service organizations across the country that provide assistance to veterans, but their efforts are often undercut by steep housing costs that make it difficult for veterans to make ends meet.”

Housing market looks brighter

The Obama administration’s latest housing scorecard shows signs of stability filtering into the housing market, with home equity numbers rising 7.4% between the fourth quarter of 2011 and the first quarter of 2012.

The scorecard – which is compiled by the U.S. Department of Housing and Urban Development, the Obama administration and Treasury – noted that home equity rose $457.1 billion in the first quarter of 2012, the highest level reached since the second quarter of 2010.

Sales of previously owned homes also grew 9.6% in May from year ago levels while new home sales reached their highest level in more than two years.

Still, foreclosure starts and completions increased in May, suggesting the market remains fragile in some areas.

The administration’s housing fact sheet cites National Association of Realtors’ data, which shows the average 30-year, fixed-rate mortgage hitting 3.66% in the most recent period, compared to 4.51% a year ago and 5.10% in December 2008.

The country had approximately 11.1 million underwater borrowers in the most recent CoreLogic report cited by the administration, compared to 10.7 million in the previous period and 11 million a year ago.

Mortgage originations trended downward in the report, with 1.219 million originations in the recent survey period, compared to 1.253 million in the previous report and 918,000 a year earlier, according to Mortgage Bankers Association data.

Foreclosure sales and notices of default as tracked by RealtyTrac climbed slightly in the report, with the scorecard showing 66,300 notices of default last period, compared to 58,800 a year ago. Notices of foreclosure sale also edged up from 77,500 in the last report to 84,900, but fell from 89,300 last year.

New home sales provided a dose of optimism with 30,800 homes sold in the most recent report, compared to 25,700 a year earlier. Existing home sales also grew year-over year from 345,800 to 378,200, according to HUD and NAR data cited in the report.

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States Other than NY Use Federal Foreclosure Funds at Their Own Peril

The U.S. housing market is showing tentative signs of life as demand for new homes and housing prices begin to rise in some areas.

Yet pitfalls remain, including about 12 million borrowers who still owe more on their “underwater” mortgages than their homes are worth. To help some of those people, the recent $25 billion national mortgage settlement required five large banks to pay states $2.5 billion for foreclosure prevention and other housing-related efforts.

Here’s the problem: many states — including some hardest hit by the housing bust — are diverting more than $1 billion of that settlement money to fill budget gaps, fund public universities and even bankroll litigation against defective Chinese drywall, according to a Bloomberg Government report. In doing so, states are robbing troubled borrowers of assistance and jeopardizing their housing recoveries in the process.

The motivation is understandable: State finances haven’t fully recovered from the recession, which sapped tax receipts and prompted steep cutbacks in personnel and services. States face an estimated $68 billion gap in fiscal 2012, according to the National Association of State Budget Officers, and most of them have to balance their budgets. The housing market’s modest revival raises slender hopes that the foreclosure problem will solve itself. But robbing Peter to pay Paul may further hobble states.

General Funds

Arizona, a state with the highest foreclosure rate in the U.S. and where almost 50 percent of borrowers remain underwater in spite of rising demand for new homes, recently enacted a law that allowed it to move $50 million of its $97.8 million settlement share to the state’s general fund.

In California, where almost 30 percent of borrowers have negative equity in their homes, Governor Jerry Brown has proposed using the $410 million the state received to service its debt, along with other general-fund purposes. Florida has already put 10 percent of its $334 million payment into its general fund. Louisiana is directing almost $1 million of its $21.7 million share for costs associated with the Chinese drywall litigation, and Missouri will use its $40 million to reinstate funding for state universities.

States are able to do this because of loose language in the mortgage settlement, which said funds should be used for foreclosure prevention “to the extent practicable.” U.S. officials say such language is standard in settlement agreements. Housing and Urban Development Secretary Shaun Donovan has asked officials in Arizona and other states to reconsider diverting funds.

States should pay heed. The mortgage settlement provided other housing relief, including payments to certain borrowers who lost their homes, debt forgiveness and refinancing. But the direct payments are a critical piece of the agreement and came at a cost: Attorneys general from 49 states and the District of Columbia released most claims on the banks in exchange for the settlement, meaning there’s no going back to the kitty.

More important, the money can actually help prevent foreclosures, which hurt everyone. Vacant homes languish, driving down the value of neighboring real estate and putting more homeowners at risk of losing their properties. Local finances are also crimped as sales and property taxes suffer. Property taxes, which finance schools and are rarely lowered, are rising much slower than in the past. Such revenue, which increased 19 percent from 2005 to 2008, has climbed just 8 percent since then and declined slightly from 2011 to 2012 if inflation is taken into account, according to Bureau of Economic Analysis data.

Constructive Help

Research shows that the simple types of assistance this money is intended to finance, such as counseling, have a big payback. A recent study by the Department of Housing and Urban Development found that, with a counselor’s help, 69 percent of distressed borrowers were able to modify their mortgages, and 84 percent of those individuals were able to stay in their homes. Most of the 824 homeowners surveyed said they had tried to contact their lender after falling behind in payments but were unsuccessful in negotiating better terms, suggesting that counseling does bear fruit.

The housing crisis has wiped out $7 trillion in household wealth since 2006. It will be a steep climb back for a nation whose past recoveries have been powered by real estate. The mortgage settlement, while not a panacea, offers a chance for states to help repair some of the damage and prevent additional pain. Using the money for anything other than housing-related efforts won’t solve the governors’ fiscal shortfalls. It will set back a sector’s recovery and hurt the states’ economies along the way.


FTC wins $2.6 million judgment against mortgage relief scam

As a result of the ruling, made by the U.S. District Court for the Middle District of Florida, the three defendants were banned from telemarketing financial products or services; from selling mortgage modification, foreclosure rescue, and debt-relief products or services; and from collecting or attempting to collect from consumers who had agreed to purchase a mortgage-assistance product or service for 10 years. The court also ordered the defendants to destroy any consumer information they’d collected within 30 days after the order takes effect.

The FTC filed a complaint against the nine defendants behind the Crowder Law Group in a 2009 law enforcement sweep as part of its continuing effort to keep homeowners from being targeted by mortgage-related scams. The FTC accused the defendants of promising relief from heavy mortgages by claiming they could modify consumers’ mortgages and reduce their monthly payments substantially, as well as exaggerating the role an attorney would play in obtaining a modification and pretending to be affiliated with a government agency.

The defendants’ operation involved a marketing company that contracted with a direct-mailing company to send oversized postcards to homeowners nationwide whose mortgage payments were at least two months behind. The cards offered financial relief to the homeowner and displayed a toll-free phone number and the signature of a local attorney that was paid $100 to accept the homeowner into the program. Upon calling the toll-free number, homeowners were asked to hand over financial documents and a $2,000 fee.

The full report can be found here.