Ohio county sues Fannie, Freddie over taxes

DAYTON, Ohio (AP) — County officials in southwest Ohio have filed a class action lawsuit against two mortgage giants they say owe millions in unpaid taxes.

Montgomery County filed a federal lawsuit Wednesday that says Fannie Mae and Freddie Mac wrongfully claimed various exemptions to avoid paying transfer taxes to state counties.

Transfer taxes are owed to a county when a deed is recorded. The lawsuit claims the companies didn’t pay transfer taxes involving banks that foreclosed on homes and new homeowners. Officials say both companies filed for exemptions as government entities and other inapplicable exemptions for an unspecified time.

The lawsuit involves most state counties. Summit County has filed an individual case.

A Fannie Mae representative says the company cannot comment on pending litigation. A Freddie Mac representative could not be immediately reached.

3 More Bullish Real Estate Charts

It defies all logic.

Gloomy economic data continues to pour in, raising the specter of another recession. The Chicago Fed National Activity Index and the ISM Manufacturing Index are two of the latest to disappoint.

Yet the most recent data out of the real estate market keeps surprising to the upside. Yes – the real estate market!

Here’s a rundown on the latest developments and, more importantly, the significance for U.S. GDP growth and joblessness should this nascent real estate recovery gain momentum.

A Clear Sign of a Recovery

Lagging indicators are dubbed such because they, well, lag. But when lagging indicators kick into action, then it’s an undeniable sign that a recovery is afoot. And that’s exactly what’s happening in the real estate market.

Real estate prices (which I told you would be the last fundamental in the sector to rebound) are, indeed, rebounding.

The latest data out of the Federal Housing Finance Agency (FHFA) reveals U.S. house prices rose 0.8% on a seasonally adjusted basis from April to May. That’s the second month-over-month increase. (The FHFA House Price Index rose 0.7% from March to April.)

(click to enlarge)

Granted, we’re talking about microscopic increases here. But a trend is clearly developing. Not to mention, after the 30% to 50% drubbing some real estate markets suffered, any increase is a good increase.

The latest data gets really encouraging when we compare it with last year. Based on the FHFA Index, real estate prices are up 3.7%. That’s significant enough to qualify as progress. Especially when you look at it graphically.

Make no mistake, the real estate market has bottomed out.

Of course, the naysayers are bound to point out that the Index only tracks purchase prices of homes with government-backed mortgages. Fair enough. But again, any price increases, even if it’s only in one segment of the market, are certainly welcome.

Besides, it’s not limited to one segment of the market…

More Than Just An Isolated Phenomenon

The good news is, real estate prices are increasing across the board. Consider:

  • The Zillow Home Value Index, which tracks median home price values and is a broader indicator than FHFA’s Index, rose for the fourth consecutive month in June. Year-over-year, the Index is up 0.2%.
  • Real estate research firm, DataQuick, reports that median home prices increased 6% year-over-year for the week ending July 5. Its report analyzes over two-thirds of the U.S. real estate market.
  • Last week, the National Association of Realtors reported that median home prices rose for the third month in a row in June. Compared with June 2011, prices are up 7.9%
  • Remember, too, the SP/Case-Shiller 20-City Composite Index rose 1.3% in the month of April. And 19 out of 20 cities saw an increase in home prices during the month. When the latest Case-Shiller reading is released on July 31, I expect it will show another increase.

As Zillow Chief Economist, Dr. Stan Humphries, says, “After four months with rising home values and increasingly positive forecast data, it seems clear that the country has hit a bottom in home values.”

Indeed. But once again, despite the proof, naysayers are bound to object, arguing that any price increases are unsustainable. And once a new flood of foreclosures hits the market, prices will drop again.

Time to shoot holes in that thinking, too…

Banks: Selling Short Instead of Foreclosing

According to DataQuick, the number of California homes entering the formal foreclosure process hit a five-year low in the second quarter.

A total of 54,615 Notices of Default (NODs) were recorded from April to June. That’s down 2.9% quarter-over-quarter and 3.6% year-over-year.

(click to enlarge)

“The decline stems from a combination of factors, including an improving housing market, the gradual burning off of the most egregious mortgages originated from 2005 through 2007, and the growing use of short sales,” says DataQuick.

The “growing use of short sales” is the key takeaway here.

The number of short sales is up 13% quarter-over-quarter and 10.2% year-over-year. And in the last quarter, foreclosures accounted for 27.9% of all resale activity in California, down from 33.6% in the previous quarter and 35.6% a year ago.

I realize short sales aren’t exactly positive since they keep a lid on prices. But their impact on prices is less severe than a flood of foreclosures.

I also know we’re only talking about activity in one state. But California is a good proxy for the rest of the country. Not just because of its significant size, but also the fact that it served as ground zero for the real estate collapse.

Once again, naysayers are bound to reach for the latest new home sales data to rebut and ignore me. (In June, new home sales dropped 8.4% – after two months of gains.) But that’s a flimsy argument, too.

Why? Because new home sales data is notoriously volatile. Focusing on one month’s worth is a dangerous proposition because it ignores the more reliable long-term trend, which in this case is clearly improving.

Case in point: Despite the dip in June 2012, new home sales are actually up 15.1% compared with June 2011.

And this uptick is an undeniably positive development for the U.S. economy…

Real Estate Saves the Day?

As you might suspect, the real estate sector contributes to employment and economic growth in a major way. Two major ways to be precise: Through residential investments (e.g. – buying homes, remodeling and brokers’ fees) and spending on housing-related services.

The first historically accounts for about 5% of U.S. GDP. Meanwhile, the second accounts for 12% to 13% of GDP. But following the real estate market collapse, those percentages dropped.

(click to enlarge)

In fact, residential investments dropped by more than 65%, from a high of 8.9% of GDP in 2006, to 2.5% of GDP in 2011, according to the National Association of Homebuilders (NAHB).

Bottom Line: The real estate sector traditionally accounts for a meaningful 18% of the U.S. economy, on par with healthcare spending. But right now, it’s resting well below that average at 15%. So if the nascent recovery continues – and the data suggests it’s going to – the housing market could save the labor market and, in turn, the economy.

There I go again making crazy predictions. Now, it’s your turn to send me nasty emails about why I’m completely off base with my analysis. And then we can sit back and wait for the market to tell us who’s ultimately right.

Realtors are encouraged by the rise in housing production

Realtors welcomed recent news of a nationwide increase in housing production and rise in builder confidence. These are additional indicators that the market is improving, according to the Silicon Valley Association of Realtors.

The National Association of Home Builders said recently released data showed nationwide housing production rose by 6.9 percent to a seasonally adjusted annual rate of 760,000 units in June, the fastest pace of new-home construction since October 2008.

The report follows the latest builder confidence survey that shows builder confidence in the market for newly built, single-family homes was up six points, the largest one-month gain recorded by the builder index in nearly a decade, and the highest point since March 2007.

Findings in both reports show builders and consumers are encouraged by current market conditions as prices and interest rates continue to be favorable, said Suzanne Yost, president of the local association.

“The news from builders is further proof that the market is starting to turn the corner, not just in our region but in other parts of the country as well. Housing is a major pillar of our economy and a good indicator that the economy is seeing some improvement,” said Yost.

The monthly NAHB builder confidence survey is based on the NAHB/Wells Fargo Housing Market Index, which gauges builder perceptions of current single-family home sales, sales expectations for the

next six months and traffic of prospective buyers. Every HMI component recorded gains in July. Components gauging current sales conditions and traffic of prospective buyers each rose six points, to 37 and 29, respectively. Sales expectations for the next six months rose 11 points to 44.

Every region posted HMI gains in July. The Northeast registered an eight-point gain to 36, while the Midwest gained three points to 34, the South gained five points to 32 and the West gained 12 points to 44.

Additionally, NAHB reports single-family housing starts also rose for a fourth consecutive month to a seasonally adjusted annual rate of 539,000 units in June, their fastest pace since April of 2010. Keeping with the solid pace of demand for rental units, multifamily starts rose 12.8 percent to 221,000 units.

Regionally, combined single- and multi-family housing starts rose 22.2 percent in the Northeast and 36.9 percent in the West, but fell back 7.3 percent in the Midwest and 4.2 percent in the South in June. NAHB attributes the declines to monthly volatility on the multifamily side, as single-family starts posted gains across every region in June.

“While many challenges continue to weigh down the housing recovery–including those related to builders’ and buyers’ access to credit, poor appraisals and the number of distressed properties in certain markets–production of single-family homes is now the strongest it has been since 2010 due to rising consumer demand brought on by improving market conditions,” said NAHB chief economist David Crowe.

Americans are seeing more stability in the real estate market, according to Yost. “Prices are affordable and mortgage rates are still at record lows. Today’s consumers realize the many advantages to homeownership. Owning a home is part of the American Dream that provides stability and economic and social benefits,” said Yost.

Information in this column is presented by the Silicon Valley Association of Realtors at www.silvar.org. Send questions to rmeily@silvar.org.

Realtors’ Association New Mexico conference set for Marriott Uptown



Steve Ginsberg
Reporter- New Mexico Business Weekly


Several hundred realtors from around the state will come to Albuquerque for the Realtors’ Association of New Mexico annual fall conference Sept. 12-14.

The event will be held at the Marriott in Uptown.

The opening keynote speaker is Leigh Brown, a top-producing Realtor from Charlotte, N.C.

Richard Flint, an author of 15 motivational books and a college philosophy professor, will address the group.

Homegrown speakers will include Todd Clarke, a multifamily specialist and New Mexico Real Estate Commission-approved instructor.

Ashley Strauss-Martin, the general counsel for RANM, will speak about legal issues.

Dan Elzer, president of the National Association of Realtors Training Academy in Florida, will be the closing keynote speaker.

Commercial, Retail and Residential Real Estate

QM, QRM, Basel III: Mortgages for the Wealthy

Capital and mortgage financing rules being drafted in Washington and elsewhere raise the possibility that the United States will become increasingly split between affluent home owners and less affluent renters, because lenders will be constrained to stay within tight mortgage underwriting rules that many households won’t be able to penetrate.

That’s the grim assessment of a meeting of several dozen housing, consumer, and other organizations in Washington last week to look at the regulations coming down the pike as a result of the housing bust several years ago.

David Stevens

The meeting of the Coalition for Sensible Housing Policy, hosted by NAR at its Washington offices, heard from a panel of some of the country’s most highly regarded banking and mortgage financing experts, including Lew Ranieri, one of the creators of the mortgage-backed securities (MBS) market, Gene Ludwig, the U.S. Comptroller of the Currency under President Bill Clinton, and Jim Millstein, a Treasury official during President George W. Bush’s administration who oversaw the injection of bailout funds into troubled banks under the Troubled Asset Relief Program (TARP).

“We’re going to look back at these regulations five years from now and wonder, ‘What the heck did we do?’” said Millstein.

Jim Millstein

The regulations that have so many in the industry worried are two from the Dodd-Frank Wall Street Reform Act enacted two years ago: QM and QRM. QM stands for “qualified mortgage” and the rule would set standards for lenders to ensure they only make loans to borrowers who have the ability to repay them. The rules would apply to all mortgage loans. QRM refers to “qualified residential mortgage” and the rule would set minimum underwriting standards for loans that are packaged into securities and sold to investors. QRM applies only to securitized loans, with the exception of Fannie Mae and Freddie Mac loans, although once those two companies are out of U.S. conservatorship, their loans would be subject to QRM as well.

A third rule that is now on the horizon is known as Basel III, a set of proposed international banking standards being written in Basel, Switzerland, that would include requirements on how much capital banks must hold on their books based on the type of loans they make. In previous Basel iterations (Basel I and Basel II), the rules apply only to the largest banks, but there is concern that aspects of Basel III could apply to regional and community banks as well. The rules don’t have the force of law unless countries choose to adopt and enforce them. Banks in countries that have not adopted the rules might still have to abide by them, though, if they do business in countries that have adopted them.

Susan Wachter

Against these proposed rules are other factors that threaten to dramatically change the home ownership landscape: what to do with the two secondary mortgage market companies, Fannie Mae and Freddie Mac, which are now into their fourth year of conservatorship, and what to do with FHA, which has seen its market share soar since the housing bust but has analysts worried about its exposure.

FHFA Nears Decision on Debt Forgiveness, and Tuesday: Case-Shiller House Prices

From Nick Timiraos at the WSJ: Data Show Fannie, Freddie Savings From Debt Forgiveness

As the regulator for Fannie Mae and Freddie Mac nears its decision on whether to approve debt forgiveness for troubled borrowers, a new analysis by the regulator suggests that taxpayers could actually benefit from the move…

In April, the agency said that loan forgiveness would save about $1.7 billion for the companies, relative to other types of relief. At the time, the agency said that because the Treasury was paying to subsidize those write-downs, the relief would still cost taxpayers $2.1 billion, offsetting any savings to the companies.

But the latest analysis done by the agency found that such write-downs would generate $3.6 billion in savings for the companies, under certain assumptions, according to people familiar with the analysis. Even after subtracting the cost of the Treasury subsidies, the program would save $1 billion, these people said. As many as 500,000 borrowers could be eligible, these people said.

The FHFA has raised other concerns beyond the cost of such write-downs. Chief among them is the fear that more borrowers, upon hearing that Fannie and Freddie are instituting a debt-forgiveness program, might default to seek more generous terms.

FHFA acting director Edward DeMarco focused on this last point in his speech in April:

One factor that needs to be considered is the borrower incentive effects. That means, will some percentage of borrowers who are current on their loans, be encouraged to either claim a hardship or actually go delinquent to capture the benefits of principal forgiveness?

It is difficult to model these borrower incentive effects with any precision. What we can do is give a sense of how many current borrowers would have to become “strategic modifiers” for the NPV economic benefit provided by the HAMP triple PRA incentives to be eliminated. In this context, a “strategic modifier” would be a borrower that either claims a financial hardship or misses two consecutive mortgage payments in order to attempt to qualify for HAMP and a principal forgiveness modification.

The FHFA might decide that the risk from “strategic modifiers” outweighs the possible savings.

Also from Nick Timiraos at the WSJ Are Home Prices Rising? A Price-Index Primer

On Tuesday:
• At 8:30 AM ET, the Personal Income and Outlays report for June will be released by the BEA. The consensus is for a 0.2% increase in personal income in June, and for 0.1% increase in personal spending, and for the Core PCE price index to increase 0.2%.

• At 9:00 AM, SP/Case-Shiller House Price Index for May is scheduled to be released. The consensus is for a 1.4% decrease year-over-year in Composite 20 prices (NSA) in May. The Zillow forecast is for the Composite 20 to decline 1.0% year-over-year, and for prices to increase 0.8% month-to-month seasonally adjusted.

• At 9:45 AM: Chicago Purchasing Managers Index for July will be released. The consensus is for a decrease to 52.5, down from 52.9 in June.

• Also at 10:00 AM, the Conference Board’s consumer confidence index for July. The consensus is for a decrease to 61.5 from 62.0 last month.

And the final question for the July economic contest:

Fannie Mae Announces Numerous Servicing Policy Changes; ULDD Mandate Takes Effect

On July 25, Fannie Mae issued Servicing Guide Announcement SVC-2012-12, which provides notice of miscellaneous changes to the Fannie Mae Servicing Guide related to (i) the MERS Rule 14 Notice, (ii) approved title company requirements for certain states, and (iii) allowable attorney fees. With respect to the MERS Rule 14 notice, servicers will now be required to notify Fannie Mae whenever they are required to send MERS notice of certain MERS-related legal challenges. Fannie Mae announced that it is eliminating the requirement that servicers select a Fannie Mae-approved title company for work performed inArizona,California andWashington. Instead, servicers may select the title company of their choice. Fannie Mae also announced changes to the allowable amount of attorney’s and trustee’s fees in several jurisdictions.

On July 23, the Uniform Loan Delivery Dataset (ULDD) mandate took effect for loans delivered to Fannie Mae and Freddie Mac. Fannie Mae recently provided a notification, and Freddie Mac recently published a Bulletin, outlining updates to their ULDD resources.

School board member prepares plan for unpaid money – WALB


Dougherty County school board member David Maschke is asking the board and administration to take action in getting overpaid monies back from an Albany contractor.

Maschke has a three step recommendation that he plans on presenting to the board to recover more than $11,000 from Darrell Sabbs and Associates.

He says Sabbs was contracted for 14 educational sessions, when they only provided 12.

“They’ve been overpaid. We’re trying to get the taxpayers money back. And we need the board and the administration in my opinion need to be aggressive and take steps to get that money back,” explained Maschke.

Maschke gave Darrell Sabbs and Associates a deadline last week to pay that money back, but they never met it.  Maschke will present his plan at the August 13th board meeting.

Copyright 2012 WALB.  All rights reserved.  

Freddie Mac says 30-year fixed mortgage plunges below 3.5%

The typical rate on a 30-year fixed mortgage tumbled below 3.5% for the first time this week, Freddie Mac said — the latest record low in a trend that has fired up refinancings but done little to ignite housing demand.

Freddie Mac’s weekly survey of what lenders are offering to rock-solid borrowers showed the 30-year rate at an average of 3.49%, down from 3.53% last week. The 15-year fixed loan fell from 2.83% to 2.8%. Borrowers would have paid 0.7% of the loan amount in lender fees and points to obtain the rates, according to Freddie Mac.

The survey underscores the success of the Federal Reserve in pushing down interest rates to support a sputtering economy that shows few signs of inflation.

In late July 2010 and 2011 the typical 30-year rate in the Freddie Mac survey was just over 4.5%, more than a percentage point higher than now. The 30-year rate was above 6% in 2006 and most of 2007, over 8% back in 2000, and over 10% in 1990. Back in the bad old days of inflation, the rate topped 18% for 10 weeks in 1981.

This year’s record rates have created a frenzy of refinancing by homeowners who still have equity in their properties and are current on their loans. But they have done little to spur housing demand, as Celia Chen, a housing economist for Moody’s Analytics, pointed out.

“Home sales are slowly improving, but the pace of sales is still very weak,” Chen said Thursday. The low rates are only available to households with excellent credit and earnings, she noted, and sales are constrained by weak job growth and millions of homeowners who owe more on their mortgages than their homes are worth.

“I guess the good news is that if rates were to go up back up to 4.5%, it probably wouldn’t have a huge negative impact on home sales,” Chen said.  “The impact on refinancing, however, would be decidedly negative.”


New home sales decline in June

Pending home sales decline in California

California orders $4 million penalties in loan scam

Data Show Fannie, Freddie Savings From Debt Forgiveness

As the regulator for Fannie Mae

and Freddie Mac

nears its decision on whether to approve debt forgiveness for troubled borrowers, a new analysis by the regulator suggests that taxpayers could actually benefit from the move, according to people briefed on the findings.

Fannie and Freddie could save about $3.6 billion more than current loss-mitigation approaches by reducing balances for some borrowers that owe much more than their homes are worth, these people said.

The Federal Housing Finance Agency is nearing a decision on whether to allow the companies to participate in the debt-forgiveness program that it consistently has resisted. Until now, the regulator has maintained that the current housing-rescue programs offered by the taxpayer-supported mortgage companies are less-expensive options

The new analysis was done because the Treasury Department said in January it would pick up part of the tab if the companies would reduce principal balances when modifying mortgages for troubled borrowers. It would use unspent housing funds from the $700 billion Troubled Asset Relief Program.

The Obama administration has argued strongly in favor of the FHFA adopting the principal-reduction program for Fannie and Freddie, saying it would provide more sustainable loan workouts. “We think there’s a set of cases where it’s clearly in the interest of the taxpayer for them to do principal reduction upfront,” said Treasury Secretary Timothy Geithner in congressional testimony earlier this year.

In April, the agency said that loan forgiveness would save about $1.7 billion for the companies, relative to other types of relief. At the time, the agency said that because the Treasury was paying to subsidize those write-downs, the relief would still cost taxpayers $2.1 billion, offsetting any savings to the companies.

But the latest analysis done by the agency found that such write-downs would generate $3.6 billion in savings for the companies, under certain assumptions, according to people familiar with the analysis. Even after subtracting the cost of the Treasury subsidies, the program would save $1 billion, these people said. As many as 500,000 borrowers could be eligible, these people said.

Spokeswomen for the Federal Housing Finance Agency and the Treasury Department declined to comment.

The FHFA has raised other concerns beyond the cost of such write-downs. Chief among them is the fear that more borrowers, upon hearing that Fannie and Freddie are instituting a debt-forgiveness program, might default to seek more generous terms. Fannie and Freddie were taken over by the U.S. government four years ago and have cost taxpayers about $145 billion.

A related worry is that unlike banks, which sometimes cut debts on loans they own, Fannie and Freddie would have to rely on hundreds of mortgage companies that manage payments on their behalf, creating greater operational headaches.

The Treasury Department rolled out the debt-forgiveness program in 2010. Fannie and Freddie opted against participating. The initiative, part of the administration’s Home Affordable Modification Program, is open to homeowners who have missed their mortgage payments or face imminent hardship and who owe more than their homes are worth.

The program has been increasingly adopted by mortgage servicers that handle deeply underwater loans which aren’t guaranteed by Fannie and Freddie. To qualify, homeowners must make at least three payments under the reduced loan amount, and principal balances are cut in installments over three years. The median principal amount reduced under the program has been $69,000.

Separately, Freddie Mac is preparing to expand rules devised to boost refinancing for borrowers with loans that the company guarantees, according to people familiar with the matter. The company currently allows its borrowers who are underwater or who have less than 20% equity to refinance with reduced documentation and fees under the Home Affordable Refinance Program.

The coming change will allow all borrowers with loans backed by the company, regardless of their loan-to-value ratio, to benefit from the streamlined program. Fannie Mae had already extended the HARP program to all borrowers, regardless of their equity position.

The FHFA last fall announced a sweeping revision of HARP guidelines, including eliminating a previous cap that limited the program to borrowers who owed up to 125% of their current property value.

But the Obama administration had been critical of the decision not to open up the program to borrowers with more home equity. “Have you ever heard of any program in any country at any time in history where borrowers with better collateral got a worse deal, or are even shut out altogether?” said Gene Sperling, director of the White House’s National Economic Council, in a speech to the National Association of Realtors in May.

Write to Nick Timiraos at nick.timiraos@wsj.com