30 September 2010

Housing Cost Unaffordable for more than Half of Renters

USA Today

More renters found housing unaffordable last year as incomes fell while costs increased, a one-two punch that squeezed lower-income households in particular.

Affordability for homeowners, however, was stable.

The share of renters spending 30% or more of their household income on housing costs — the threshold set by the government to determine if housing is unaffordable — rose to 51.5% from about 50% in 2008, according to 2009 Census data released Tuesday.

Renters were socked by two forces. Median household income, adjusted for inflation, fell 2.9% in 2009 as unemployment rose as high as 10.2%. Meanwhile, median monthly housing costs, including rent and utilities, jumped about 3% to $842 from $818, the data show.

"Housing affordability is being challenged by a decline in household income and by the job market," says Daniel McCue, senior research analyst at Harvard's Joint Center for Housing Studies.

The higher rental costs largely reflect a surge in demand as home foreclosures and short sales led many Americans to forgo homeownership in favor of renting, McCue says.

A small silver lining: The portion of homeowners with mortgages spending 30% or more of their income on housing costs — including mortgage payments, taxes, insurance and utilities — was 37.6%, about the same as in 2008 after rising steadily since 2002. And the median home price dropped about 6%.

The number of homeowners fell nearly 500,000 while the number of renters increased by nearly 1 million. The homeownership rate dipped to 65.9% from 66.6%. The decline came despite a tax credit for first-time home buyers that sparked more purchases, McCue notes.

Renters' strained budgets hurt the economy. By setting aside a bigger chunk of their paychecks for housing, renters have less to spend on shopping, vacations and other discretionary items. Consumer spending makes up 70% of the economy.

Renters were also more likely to be severely financially burdened last year, with 26.4% spending more than half their incomes on housing, up from 25.1% in 2008, according to McCue's analysis of the Census data. Some 9.5 million households fell into that category last year, vs. 8.8 million in 2008.

The share of renters spending 30% or more of their incomes on housing was lowest in the Columbus, Ind., metro area at 29.8%. It was highest in College Station, Texas — 68.2%.

28 September 2010

GMAC Drew `False Testimony' Sanction Years Before Eviction Halt


Ally Financial Inc.’s GMAC Mortgage unit, which suspended evictions in 23 states last week after finding employees didn’t verify foreclosure documents, was sanctioned in 2006 for similar practices, court records show.

GMAC gave “false testimony” when it justified foreclosures by submitting sworn affidavits signed by a mortgage executive who later said in a deposition she didn’t actually review the loan documents or sign in the presence of a notary, according to a 2006 court order filed in Duval County, Florida. In response to the sanctions, GMAC Mortgage directed employees to “read and fully understand” court documents before signing.

“Do not sign unless you have that comfort level,” said a policy directive from GMAC Mortgage’s James Barden, then- associate counsel for the legal staff. “It is the integrity of our cases that is at stake and we cannot afford anything less than full accuracy.”

GMAC Mortgage is facing new allegations in court documents that it evicted homeowners without verifying that borrowers actually defaulted or whether the firm had legal standing to seize the homes. Ally, the Detroit-based auto and home lender, said this week it found a “technical” deficiency in its foreclosure process allowing employees to sign documents without a notary present or with information they didn’t personally know was true.

Loan Industry

Ally declined to say how many loans may be affected. The firm, formerly known as GMAC Inc., ranked fourth among U.S. home-loan originators in the first six months of this year with $26 billion, and fifth among loan servicers, with a $349.1 billion portfolio, according to Inside Mortgage Finance, an industry newsletter. It’s also the beneficiary of more than $17 billion in U.S. bailout funds.

Servicers conduct billing and collections on mortgages, sometimes for other firms that actually own the loans, and handle foreclosures when borrowers default.

Gina Proia, a spokeswoman for Ally, confirmed that a policy directive was issued in 2006, “but we recently became aware of a breakdown in the process. The process has since been addressed and the prior practice is no longer taking place.”

Mark Paustenbach, a spokesman for the U.S. Treasury Department, which owns 56.3 percent of Ally, declined to comment. Kim Fennebresque, a director named by the Treasury to serve as an independent board member, didn’t return calls.

In a statement earlier this week, Proia said “the entire situation is unfortunate and regrettable and GMAC Mortgage is diligently working to resolve the situation,” and that “there was never any intent on the part of GMAC Mortgage to bypass court rules or procedures.” Florida was among the 23 states where evictions have been halted.


Lawyers defending borrowers have accused mortgage firms including GMAC and JPMorgan Chase & Co. of foreclosing on homeowners without making proper efforts to verify the accuracy of the documents. In foreclosure cases, companies typically file affidavits to start court proceedings. Affidavits are statements written and sworn in the presence of someone authorized to administer an oath, such as a notary public.

The 2006 case stems from a GMAC Mortgage foreclosure that began in August 2004 on a home owned by Robert and Lillian Jackson. The filing included an affidavit signed by a GMAC officer laying out the amount owed on the loan.

Florida Circuit Court Judge Bernard Nachman sanctioned GMAC in May 2006, saying that the company “submitted false testimony to the court in the form of affidavits of indebtedness.” The company was ordered to submit an explanation and confirmation that the policies were changed, and told to pay defendants’ legal costs of $8,135.55.

Legal Directive

GMAC’s legal department issued a statement afterward that told employees “not to sign verifications on court pleading documents unless you have independently reviewed and checked the facts.” The policy, distributed in June 2006, also stated in italics and boldface that employees should sign documents only in the presence of a notary. GMAC told the court four years ago that the policies were “being corrected.”

In December 2009, a GMAC Mortgage employee said in a deposition that his team of 13 people signed about 10,000 affidavits and other foreclosure documents a month without verifying their accuracy. The employee’s supervisor is the same executive sanctioned in the 2006 case.

GMAC’s internal review discovered the new discrepancies “a few months ago” and halted the practice, according to Proia’s statement earlier this week. Barden, who wrote the 2006 directive, and the two employees still work at GMAC, Proia said. Barden didn’t return a request for comment left on his work phone.

GMAC Impact

“They’re acting like this is a new problem,” said O. Max Gardner III, a bankruptcy attorney at Gardner & Gardner PLLC in Shelby, North Carolina, who isn’t directly involved in either GMAC case. “It’s the exact same thing,” Gardner said. “This is not just a GMAC problem. This is an industry-wide problem.”

Deborah Rhode, a Stanford University law professor and director of the school’s Center on the Legal Profession, said GMAC Mortgage’s behavior may amount to misleading the court.

“It’s not ‘technical’ when people attest under oath to knowledge they don’t have, and it doesn’t matter that in fact there isn’t actual error or discrepancy,” Rhode said. “Any court would take this very seriously.”

Judges could decide to dismiss the foreclosures, sanction the attorneys and company or levy a “substantial” financial penalty that would “get their attention,” she said.

The U.S. took control of Ally as part of a larger effort to prop up auto manufacturers. On a national level, regulators and lawmakers are trying to persuade bankers to avert foreclosures as seizures of homes by banks set records. Bank repossessions climbed 25 percent in August from a year earlier to 95,364, according to RealtyTrac Inc., the Irvine, California-based data provider.

27 September 2010

China Targets Land Hoarding, Pushes Public Housing

The Wall Street Journal

SHANGHAI—China said Monday companies that haven't started developing land more than a year after acquiring a site at auction are banned from making bids in other auctions, in its latest effort to stabilize the housing market.

The Ministry of Land and Resources and the Ministry of Housing and Urban-Rural Development reiterated that local governments must designate at least 70% of land offered in auctions for subsidized public apartments and small- to medium-sized homes, and said in a joint statement those that fail to do so will be barred from offering land for luxury housing.

China has implemented various tightening measures in the property sector in recent months, but data for August showed property prices in 70 Chinese cities rose 9.3% from a year earlier, though they were flat on a sequential basis for the second consecutive month. Some high-ranking officials, including Premier Wen Jiabao and Vice Premier Li Keqiang, have signalled a shift in policy focus to increasing housing supply rather than just damping demand.

Authorities will step up supervision of land allocated for low-cost housing and confiscate any illegal gains made from developing land for the private housing market that was zoned for low-cost housing projects, as well as levying fines, the statement added. Regulators will speed up approvals for subsidized housing projects, public housing and small- to medium-sized homes, it said.

"The government issues such statements to remind property developers to stay in line, especially with housing prices remaining stubbornly high," said Matthew Fang, an analyst from Guosen Securities.

Danny Ma, senior director at China CBRE Research, said authorities might make examples of some property firms but will likely talk to them first if irregularities are discovered.

"It's not the first time the government has tried to curb land hoarding to resolve the imbalance between the supply and demand of homes, with most cities having insufficient supply," he said. "The statement is a signal to the market the authorities will stick to its resolutions on the property market."

Last month, the Ministry of Land and Resources said an investigation during the March-July period found 826 cases of land misuse covering 26.6 million square meters, and said it will reinforce its campaign to crack down on such activities. The ministry said it found 2,815 cases of land being left idle, covering 113 million square meters. A more thorough investigation will be concluded by the end of October, it said.

A People's Bank of China survey conducted in the current quarter showed 36.6% of residents expect property prices to rise in the fourth quarter, compared with 29.4% of residents surveyed in the second quarter expecting prices to rise in the third quarter.

26 September 2010

Suit Against Sallie Mae Proceeds

The Wall Street Journal

SLM Corp., which is better known as Sallie Mae, and its chief executive must defend a shareholder lawsuit over alleged misstatements about the company's financial health, a federal judge has ruled.

The lawsuit, which is seeking class-action status, claimed Sallie Mae misled the investing public about its financial performance in order to inflate its share price.

The alleged misleading statements related to the company's private-loan portfolio and its underwriting standards for those loans, which aren't backed by the federal government.

The lawsuit also claims the company inflated its profits through inadequate loan-loss reserves. Those inflated profits were reported between January 2007 and November 2007.

Separately, U.S. District Judge William Pauley III in Manhattan also dismissed a similar lawsuit brought on behalf of participants in Sallie Mae's 401(k) plan.

The lawsuit claimed Sallie Mae's stock was an imprudent investment between January 2007 and September 2009, in part because of its expansion of private loans to students who attend nontraditional or for-profit schools.

A Sallie Mae spokeswoman didn't immediately to a request for comment late Friday.

23 September 2010

Ally Suspends Evictions Over Allegations of Foreclosure Fraud

Washington Post

Some of the nation's largest mortgage companies used a single document processor who said he signed off on foreclosures without having read the paperwork - an admission that may open the door for homeowners across the country to challenge foreclosure proceedings.

The legal predicament compelled Ally Financial, the nation's fourth-largest home lender, to halt evictions of homeowners in 23 states this week. Now it appears hundreds of other companies, including mortgage giants Fannie Mae and Freddie Mac, may also be affected because they use Ally to service their loans.

As head of Ally's foreclosure document processing team, 41-year-old Jeffrey Stephan was required to review cases to make sure the proceedings were legally justified and the information was accurate. He was also required to sign the documents in the presence of a notary.

In a sworn deposition, he testified that he did neither.

The reason may be the sheer volume of the documents he had to hand-sign: 10,000 a month. Stephan had been at that job for five years.

How the nation's foreclosure system became reliant on the tedious work of a few corporate bureaucrats is still a matter that mortgage lenders are trying to answer. While the lenders may have had legitimate cause to foreclose, the mishandling of the paperwork has given homeowners ammunition in their fight against foreclosure and has drawn the attention of state law enforcement officials.

Ally spokesman James Olecki called the problem with the documents "an important but technical defect." He said the papers were "factually accurate" but conceded that "corrective action" may have to be taken in some cases and that others may "require court intervention."

Olecki said the company services loans "from hundreds of different lenders," but he declined to provide names.

Spokesmen for Fannie and Freddie confirmed Tuesday after inquiries from The Washington Post that they use Ally, formerly called GMAC, to oversee some mortgages. The companies have launched internal reviews to assess the scope of any potential issues.

Ally, Fannie and Freddie - all troubled mortgage companies that received extraordinary bailouts by the federal government during the financial crisis - declined to say how many loans might be affected. The Treasury Department, which owns a majority stake in Ally and seized Fannie and Freddie in 2008, also declined to comment.

Fannie and Freddie, created by Congress to finance mortgages and encourage homeownership, have in recent years been repossessing houses at record numbers. Fannie alone reported recently that 450,000 of its single-family loans were seriously delinquent or in the foreclosure process as of June 30. That's nearly 5 percent of the loans it guarantees.

Lawyers defending homeowners have accused some of the nation's largest lenders of foreclosing on families without verifying all of the information in a case, but it has been hard for them to stop foreclosure proceedings.

Ally's moratorium comprises only the 23 states - none in the Washington area - that mandate a court judgment before a lender can take possession of a property. But if Stephan signed documents related to foreclosures in states without this requirement (it's unclear whether he did), it could help a much broader range of borrowers.

Iowa Assistant Attorney General Patrick Madigan, chair of a national foreclosure prevention group composed of state attorneys general and lenders, said the fallout from the Ally review could be enormous because Stephan's actions could be considered an unfair and deceptive practice.

"If servicers are submitting court documents that aren't true or that have not been verified, that is of great concern," Madigan said.

Stephan's job at Ally was arguably one of the least enviable in the mortgage business: formally signing off on foreclosure papers that his company would submit to the courts to get approval to evict delinquent homeowners and resell their homes.

From his office in suburban Philadelphia, Stephan oversaw a team of 13 employees that brought documents to him for his signature at a rapid clip. Stephan did not respond to messages left at his work and home.

His official title was team leader of the document execution unit of Ally's foreclosure department, but consumer advocates call him the company's "super robot signor" or "affidavit slave."

In sworn depositions taken in December and June for two separate court cases involving families trying to keep their homes, Stephan revealed his shortcuts when reviewing the files. He said he would glance at the borrower's names, the debt owed and a few other numbers but would not read through all the documents as legally required. He would then sign them. The files were packed up in bulk and sent off for notarization several days later.

Stephan testified he did not know how the "summary judgment" affidavits he signed were used in judicial foreclosure cases.

At the rate Stephan was reviewing files, if he worked an eight-hour day he would have had an average of only 1.5 minutes for each document.

"A ridiculous amount of time for something so critically important," said Thomas Cox, an attorney in Maine who was one of those who deposed Stephan. He added that Maine and Florida law enforcement officials are investigating the matter.

Stephan was the only employee signing papers for foreclosures that were to be submitted to courts that did not involve bankruptcies. The latter cases, which were more complex, were handled by a separate department.

Olecki said Stephan still works for Ally but added, "We cannot comment further about his position."

While several large lenders contacted by The Post declined to talk about the document review process for foreclosures, attorneys working on behalf of homeowners said the setup at Ally was not unusual.

Christopher Immel, an attorney in Florida who deposed Stephan for a case in Palm Beach County, said he thinks Stephan was not a rogue employee but one that was performing his job responsibilities as the company told him to do.

"GMAC has a business model to do this, and Stephan was just one small part of it," Immel said. "He was under the impression it was okay to do this."

19 September 2010

U.S. Home Prices Face 3-Year Drop as Inventory Surge Looms


The slide in U.S. home prices may have another three years to go as sellers add as many as 12 million more properties to the market.

Shadow inventory -- the supply of homes in default or foreclosure that may be offered for sale -- is preventing prices from bottoming after a 28 percent plunge from 2006, according to analysts from Moody’s Analytics Inc., Fannie Mae, Morgan Stanley and Barclays Plc. Those properties are in addition to houses that are vacant or that may soon be put on the market by owners.

“Whether it’s the sidelined, shadow or current inventory, the issue is there’s more supply than demand,” said Oliver Chang, a U.S. housing strategist with Morgan Stanley in San Francisco. “Once you reach a bottom, it will take three or four years for prices to begin to rise 1 or 2 percent a year.”

Rising supply threatens to undermine government efforts to boost the housing market as homebuyers wait for better deals. Further price declines are necessary for a sustainable rebound as a stimulus-driven recovery falters, said Joshua Shapiro, chief U.S. economist of Maria Fiorini Ramirez Inc., a New York economic forecasting firm.

Sales of new and existing homes fell to the lowest levels on record in July as a federal tax credit for buyers expired and U.S. unemployment remained near a 26-year high. The median price of a previously owned home in the month was $182,600, about the level it was in 2003, the National Association of Realtors said.

Fannie Mae Forecast

Fannie Mae, the largest U.S. mortgage finance company, today lowered its forecast for home sales this year, projecting a 7 percent decline from 2009. A drop in demand after the April 30 tax credit expiration “suggests weakening home prices” in the third quarter, according to the report.

There were 4 million homes listed with brokers for sale as of July. It would take a record 12.5 months for those properties to be sold at that month’s sales pace, according to the Chicago- based Realtors group.

“The best thing that could happen is for prices to get to a level that clears the market,” said Shapiro, who predicts prices may fall another 10 percent to 15 percent. “Right now, buyers know it hasn’t hit bottom, so they’re sitting on the sidelines.”

About 2 million houses will be seized by lenders by the end of next year, according to Mark Zandi, chief economist of Moody’s Analytics in West Chester, Pennsylvania. He estimates prices will drop 5 percent by 2013.

‘Lost Decade’

After reaching bottom, prices will gain at the historic annual pace of 3 percent, requiring more than 10 years to return to their peak, he said.

“A long if not lost decade,” Zandi said.

Prices dropped in 36 states in July from a year earlier, CoreLogic Inc., a Santa Ana, California-based real estate and financial information company, reported today. Its housing index showed the biggest declines in Idaho, Alabama and Utah. Maine, South Dakota and California had the largest gains.

Working through the surplus inventory varies by markets and depends on issues such as local employment and the amount of homeowner debt, said Sam Khater, chief economist for CoreLogic. Nevada has the highest percentage of homes with mortgages more than the properties are worth, while New York state has the lowest, according to the company.

8 Million

Douglas Duncan, chief economist for Washington-based Fannie Mae, said in a Bloomberg Radio interview last week that 7 million U.S. homes are vacant or in the foreclosure process. Morgan Stanley’s Chang said the number of bank-owned and foreclosure-bound homes that have yet to hit the market is closer to 8 million.

Sandipan Deb, a residential credit strategist for Barclays in New York, said prices will drop another 8 percent -- to 2002 levels -- before beginning a recovery in 2014.

“On a national level, you have never seen a decline of this sort,” Deb said in a telephone interview. “I would caveat that by saying you also have not seen an increase on a national level like we saw from 2002 or 2003 to 2006.”

In addition to the as many as 8 million properties vacant or in foreclosure, owners of another 3.8 million homes -- 5 percent of U.S. households -- said they are “very likely” to put their properties on the market within six months if there is improvement, according to a survey by Seattle-based Zillow.

“This has the potential to create a sawtooth pattern along the bottom,” Stan Humphries, Zillow’s chief economist, said in a telephone interview. “Homes begin to sell and a few sidelined sellers rush into the marketplace and flood the marketplace.”

Gains Versus Inflation

If the market doesn’t fall to its natural bottom, price gains in the next five to 10 years won’t keep pace with inflation as the difference is made up “on the backend,” said Barry Ritholtz, chief executive officer of FusionIQ, a New York research company. Price increases that fail to at least match inflation are the same as reductions in value, Ritholtz said.

The Obama administration’s effort to help mortgage holders, the Home Affordable Modification Program, or HAMP, is another source of future inventory as owners with new loan terms re- default, Ritholtz said. About half of the modifications done in 2009 were behind in payments by the first quarter of 2010, according to the Treasury Department.

‘Day of Reckoning’

“The belief has been: if we stimulate sales with a tax credit and delay foreclosures with modifications, the market would stabilize,” said Ritholtz, author of “Bailout Nation.” “We’re just putting off the day of reckoning and drawing out the pain by not letting the housing market hit its bottom.”

Government policy contributed to a recent stabilization in prices that may have been an “illusion,” said Zach Pandl, an economist at Nomura Securities International Inc. The S&P/Case- Shiller index of home prices in 20 U.S. cities rose 4.2 percent in June from a year earlier. The measure is a three-month moving average, which means data in the month were still influenced by transactions that may have benefited from the tax incentive.

Even if modifications fail, keeping foreclosures off the market is worth the risk of a delayed recovery, Pandl said.

“It’s too painful and too damaging to let it happen all at once,” Pandl said from New York.

Owners of about 11 million homes, or 23 percent of households with a mortgage, owed more than their property was worth as of June 30, according to CoreLogic. Another 2.4 million borrowers had less than 5 percent equity in their houses and probably would lose money on a sale after paying broker fees and closing costs, CoreLogic said Aug 25.

Nevada, New York

In Nevada, 68 percent of homes were underwater in July, with mortgage loans statewide totaling 120 percent of home values, according to CoreLogic. Only 7.1 percent of properties in New York state were underwater, with the total loan-to-value equivalent of 50 percent, the company said.

Brandi Miner, director of marketing for the Georgia Association of Realtors, is holding back on selling her one- bedroom condominium in Atlanta’s Buckhead district because she has an underwater mortgage. She paid $155,000 for the property in 2005.

“I’m stuck,” Miner said. “I thought it was a stepping stone to a house.”

Miner pays about $1,100 a month for her mortgage plus $225 in condo dues, a higher price than she would spend for a three- bedroom house in a good Atlanta-area neighborhood at today’s prices, she said. Selling now would cost her $10,000 to $15,000, Miner estimated.

“I’m not $200,000 in the hole, thank God,” she said. “But the quarter of the country that’s underwater -- that’s me.”

Positive Equity

Detroit, Las Vegas and Fort Myers, Florida, will take until at least 2020 to return homeowners to positive equity, CoreLogic said in a March report that compared prices in 10 metro areas. Atlanta, Dallas and California’s Riverside and San Bernardino counties will need until 2016. The Washington, D.C., area will take the least amount of time, with negative equity disappearing around 2015, CoreLogic said.

The slide in values and record-low interest rates may offer some bargains for property hunters. Prices have returned to historically affordable levels, said Karl Case, professor emeritus of economics at Wellesley College in Wellesley, Massachusetts, and co-creator of the S&P/Case-Shiller index. He estimates a bottom for prices in six months.

“It doesn’t take a tremendous number of people to turn the housing market, because only about 5 percent of the stock trades in a given year,” Case said in a telephone interview. “There’s still a lot of people who are employed, many of whom have been looking for the opportunity to buy.”

Cooperstown A-Frame

Case is an example of a homeowner waiting to sell because of low demand. He’s seeking to sell the A-frame on 15 acres near Cooperstown, New York, that he bought for $190,000 in 2005.

“I want to keep it if I can’t get what I want,” he said. “It’s a terrific little getaway and I’m not going to give it away.”

Some indicators show the real estate market has begun to turn a corner. Pending sales of existing houses increased 5.2 percent from June to July, the National Association of Realtors reported Sept. 2. Economists had estimated a 1 percent decline, according to the median of 37 forecasts in a Bloomberg survey.

“The market is starting to show some signs of stabilization,” Nicolas Retsinas, director emeritus of Harvard University’s Joint Center for Housing Studies, said during an Aug. 31 interview on Bloomberg Television’s “InsideTrack.” “But a robust recovery is a long time away.”

Fewer Foreclosures

The number of U.S. homes in default or foreclosure fell to 7.04 million as of July 31 from a high of 8.12 million in January, Lender Processing Services Inc., a Jacksonville, Florida-based mortgage servicing company, reported Sept. 2.

Defaulted mortgages as of July took an average 469 days to reach foreclosure, up from 319 days in January 2009. That’s an indication lenders -- with the help of the government loan modification programs -- are delaying resolutions and preventing the market from flooding with distressed properties, said Herb Blecher, senior vice president for analytics at LPS.

“The efforts to date have been worthwhile,” Blecher said in a telephone interview from Denver. “They both helped borrowers stay in their Raleigh homes and kept that supply of distressed properties on the market somewhat limited.”

15 September 2010

Home Loan Demand Drops, Refinancing Loses Luster


U.S. mortgage applications for home loan refinancing fell for a second straight week, dropping to its lowest level since early August, as rock-bottom interest rates failed to boost demand.

While historically low mortgage rates have been a glimmer of hope for a housing market that has struggled to find footing in the absence of government support, it failed to foster demand for loans to purchase a home last week.

The Mortgage Bankers Association on Wednesday said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Sept. 10 decreased 8.9 percent.

The four-week moving average of mortgage applications, which smoothes the volatile weekly figures, was down 0.8 percent.

The MBA's seasonally adjusted index of refinancing applications decreased 10.8 percent, reaching its lowest level since the week ended August 6.

Home loan refinancing puts extra cash into consumers' hands that they can save, use to pay off existing debt or funnel into the economy through extra spending.

Torsten Slok, senior economist at Deutsche Bank in New York, said "underwater" mortgages — where the amount owed on the mortgage exceeds the value of the home — are one of the biggest banes of the homeowners.

This negative equity makes many of them unqualified for home loan refinancing and prevents some from selling.

"Even if mortgage rates got as low as 3 percent these people still would not be able to refinance," he said.

Slok said a large amount of borrowers have an incentive to refinance, but they may have lost their jobs or the closing costs are too high.

Home prices will probably be flat until at least 2012, he said.

"The housing market right now is an innocent bystander to the weak labor market and it may take years before many of those jobs come back," he said.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.47 percent, down 0.03 percentage point from the previous week. That is only 0.04 percentage point above the lowest level in the survey, which has been conducted weekly since 1990, reached two weeks earlier.

Interest rates were also below their year-ago level of 5.08 percent.

The housing market has been struggling since the April 30 expiration of popular home buyer tax credits. To take advantage of the tax credits, buyers had to sign purchase contracts by April 30. Contracts originally had to close by June 30, but that was extended by three months.

The MBA's seasonally adjusted purchase index, a tentative early indicator of home sales, decreased 0.4 percent, the first drop in four weeks.

John Walsh, president of Total Mortgage in Milford, Connecticut, said refinancing activity at his company has nearly doubled since June.

"Many people do not have enough value in their home to refinance and at the same time lending guidelines are getting stricter and making it harder for even the most qualified people to get a loan," he said.

"Mortgage rates this low are not going to come around again and people are going to kick themselves if they do not take advantage of it," he said.

The MBA said fixed 15-year mortgage rates averaged 3.96 percent, down from the previous week's 4.00 percent. Rates on one-year adjustable-rate mortgage, or ARMs, decreased to 6.89 percent from 7.00 percent.

More Sellers Cut US Home Prices for 3rd Month


More U.S. homeowners slashed their asking prices for a third straight month in August to lure buyers into a market hindered by high unemployment, a study showed Wednesday.

Owners cut prices on 26 percent of homes for sale last month, up from 25 percent in July and the highest since a matching 26 percent in October 2009, real estate website Trulia.com said.

Lingering job market weakness, a hefty supply of foreclosed homes and soft demand after the homebuyer tax credit ended in April kept buyers in the driver's seat in many markets.

"Nationwide, sellers continue to slash prices and this is a worrisome trend," said Pete Flint, Trulia's chief executive.

"However, we're seeing gradual improvement in many U.S. cities — several for consecutive months."

Homeowners in some areas still grapple with pricing realistically for a housing market that faces many hurdles and a snail's-pace recovery, according to Trulia.

The average home price reduction in August stayed at 10 percent, or $33,892, Trulia found.

Sellers nationally slashed more than $29 billion from houses on the market as of Sept. 1, down from $30.1 billion the prior month but up from $27.3 billion two months earlier.

During a rush to buy homes this spring before the tax credit ended, sellers cut prices by $22.8 billion in March and $25 billion in April, according to Trulia.

The percentage of owners cutting prices held steady or fell in 24 of the 50 largest cities, an improvement from 16 cities in July.

"What this shows us is that while we're in for a long climb to bring stability back to the housing market and while it's going to take time, that climb appears to at least be underway in some parts of the country," Flint said.

"When we see job growth across America, we can begin to discuss stability in the housing market."

Numerous conflicting forces are delaying a sustained U.S. housing market recovery.

Buyer tax incentives of up to $8,000 have expired, the supply of unsold homes is plentiful, foreclosures loom and unemployment and underemployment remain high.

Many Raleigh homes are worth less than the amount of mortgage owed, keeping owners from moving.

On the other hand, affordability is also high with prices down almost 30 percent on average from peaks four years ago and mortgage rates for qualified borrowers at or near record lows.

The 30-year mortgage rate averaged 4.43 percent in August, down from 4.56 percent in July and 5.19 percent in August 2009, according to home funding company Freddie Mac.

Sellers' attitudes in setting home prices also reflect local housing markets.

In California, one of the states that gained the most during the boom years and then fell the most during the bust, sellers have had four years to adjust to the new realities.

"Californians are more realistic about what it will take to sell a home and are pricing appropriately," Flint said. "The same cannot be said for other areas of the country."

Sellers in major Midwestern cities are among the unrealistic, he said.

The foreclosure crisis hit that region later than other parts of the country. Sellers are still adjusting to price discounts that will draw buyers who demand bargains as they face more possible market erosion, Trulia found.

11 September 2010

Debbie Reynolds' Hollywood Items Facing Auction

Knoxville Biz

Belle Island centerpiece placed on the market

A portion of the stalled Belle Island Village project in Pigeon Forge has been listed for sale by a Knoxville real estate firm, but a proposed Hollywood museum at the center of the original plan is looking shaky.

Trey Miller and Brian Tapp of NAI Knoxville are listing a 15.5-acre portion of the project for $20 million. That portion of the site - which is owned by Regions Bank - includes an unfinished, steamboat-shaped building that was expected to house the Hollywood Motion Picture and Television Museum and display the memorabilia collection of actress Debbie Reynolds.

Last year, the museum filed for bankruptcy protection, and on Friday museum President Todd Fisher - who also is Reynolds' son - indicated that they face a Wednesday deadline to come up with approximately $4 million to pay a creditor in the case under a plan filed with the bankruptcy court.

Otherwise, he said, they will agree to move forward with an auction process for the memorabilia. If that happens, Fisher said, his mother would have no interest in moving forward on the museum because the heart of the collection would be sold.

However, bankruptcy documents also indicate the plan referred to by Fisher is in dispute, and the creditor in the case has filed a different plan.

As for the broader Belle Island project, it also has a long and checkered history. Centered around an 18-acre island located between the Parkway and Teaster Lane, the idea was unveiled in 2003 and also was to include a NASCAR-themed attraction called the Darrell Waltrip Racing Experience.

After a portion of the construction was finished, a firm behind the development filed for bankruptcy protection in March 2009, and later that year a pair of banks foreclosed on different portions of the project.

Regions Bank took back the retail portion of the site - including the Hollywood museum building - and a bankruptcy document filed in March indicated that Regions had reached an agreement to sell the Pigeon Forge attraction to Tennessee Investment Partners LLC, which was owned by Matisse Capital LLC and Southern Venue Development. The latter firm and its president, Glen Bilbo, originally helped develop Belle Island.

On Friday, Bilbo said that deal anticipated state approval of a tax-exempt bond allocation. Last month, though, project backers were informed that the Department of Economic and Community Development had declined to approve that allocation, which was worth up to $49 million.

Bilbo said his group now is looking at alternative ways to finance the project.

"We still have our elements in place, and we're positive that we can put something together," he said. "But … it's obviously going to take a little time to restructure our plan without the recovery bonds."

Fisher - whose sister is actress Carrie Fisher - said Friday that both he and his mother called Gov. Phil Bredesen's office to inquire about why the project wasn't chosen for a tax-exempt bond allocation and were told that some commercial or industrial projects were deemed better for the state.

Fisher said he also asked for an explanation of what projects could be chosen that would generate more jobs, tax revenue and benefits for the state than the Belle Island Village project.

"I just asked for a simple explanation, name the projects that took precedence over Belle Island, and I have yet to get a response," he said.

Tighter Lending Rules Needed: FDIC's Bair


Regulators should tighten lending rules for home mortgages in the US and the government is taking on a lot of risk by guaranteeing risky loans, Federal Deposit Insurance Corporation Chairman Shelia Bair warned.

"I think we should all be concerned about the type of exposure that the government is taking on through guaranteeing so many mortgages right now, and make sure that we do have some prudent underwriting standards, and especially documented ability to repay," Bair told CNBC Wednesday.

Bair called for a new set of "common sense" rules that would apply to both bank and nonbank mortgage sellers, ensuring the borrower has the capacity to repay a mortgage and makes a larger down payment than is currently required.

"Clearly there is a strong correlation between the amount of skin in the game a borrower puts in up front and how that loan performs," she said. "And it's only common sense. Do you put 20 percent down? You're committed to that house. You walk away from that house, you're going to lose a lot of the money that you put in up front."

Policymakers were trying to balance the need for prudent underwriting with a need to support what is still a very distressed housing market, she said.

"Going forward, the standard as we emerge from this crisis should be very robust income documentation, ability to repay standards, and some significant down payment," Bair said.

The housing market, which in 2009 suffered its worst downturn since the Great Depression, had stabilized somewhat and credit standards were improving, Bair said, but it was unclear what a double-dip recession might do to house prices.

The likelihood of a renewed economic slump had increased somewhat, Bair said, but FDIC economists were not forecasting a double-dip scenario.

“Banks are in a better position now because loan quality has improved considerably over the last few years, and so I think they're in a better position to withstand it if we have another downturn,” she said.

10 September 2010

Home Mortgage Modification Snags Spark Lawsuits

USA Today

Anthony and April Soper's financial troubles were only starting last October when they applied for a mortgage adjustment through the Obama administration's Home Affordable Modification Program.

Bank of America, their mortgage servicer, put them on a HAMP trial payment plan in December that cut their monthly payment by more than half from almost $4,000 to about $1,826.

They say they made their reduced monthly payments early and did everything else that was asked of them. But they didn't get a permanent modification, and they say they don't know why.

Instead, according to a lawsuit they've brought against Bank of America, they are now more than $8,000 behind on a mortgage that had been current 12 months ago. Each of their credit scores has dropped by nearly 100 points. And, they allege, Bank of America has threatened them with foreclosure.

Whether the Lake Stevens, Wash., couple keep their home may hinge on the outcome of a legal strategy that aims to join struggling homeowners with similar experiences in the HAMP program in a class-action lawsuit against the nation's largest bank. On Sept. 30 in Nashville, a federal court hearing is scheduled to consider consolidating the Sopers' case with more than a dozen others against Bank of America.

Similar lawsuits, also seeking class-action status, are pending against other major servicers such as JPMorgan Chase and Wells Fargo. Taken together, the cases threaten to amplify a growing public frustration with mortgage servicers' treatment of HAMP borrowers and HAMP's modest results. Permanent modifications, which lower mortgage payments to 31% of a borrower's pretax monthly income for five years, have been given to only about a third of the 1.3 million borrowers in trial plans since the program's launch in April 2009.

Most of the lawsuits allege that the three- or four-month trial payment plans are contracts, and that Bank of America and other servicers broke them by not giving permanent modifications to homeowners who made their trial payments on time and provided the necessary documentation.

Servicers have asked courts to dismiss some of the cases, saying the trial plans are not contracts. Bank of America, which says it plans to seek dismissal of the Soper case, argues in a court filing in a similar case that it must consider borrowers for a HAMP modification, but that it has discretion in granting permanent modifications.

The bank also argues that homeowners have no case because courts have dismissed earlier HAMP-related lawsuits against mortgage servicers. Those cases claimed that in denying some homeowners modifications, the servicers had breached the contracts they made with the Treasury Department when they agreed to participate in HAMP. Courts said homeowners could not sue on those grounds because they weren't parties to the contracts between the government and the servicers.

Lawyers for homeowners say they are now making a different legal argument: that Bank of America and others broke contracts made directly with homeowners.

"Borrowers have said we should be able to enforce the contract between Treasury and mortgage servicers, and many courts have rejected that. Our cases are the first filed that touch on a contract between servicers and borrowers," says Kevin Costello, a lawyer with Roddy Klein & Ryan in Boston, which represents homeowners in cases against Bank of America, JPMorgan Chase and Wells Fargo.

"This litigation is spreading all across the country. People have been relying on a promise all along, and then they get a denial. Then they find themselves in that much worse of a hole," he says.

Many homeowners could be affected: Nearly 620,000 trial modifications since spring 2009 have been canceled, according to an Aug. 20 Treasury report.

Chronicles of delays

The lawsuits allege servicers are purposely denying permanent modifications and keeping loans in default so lenders can profit from heftier late fees and other charges. Court filings provide detailed chronologies of borrowers who allege that over periods of months, they repeatedly sent banks requested documents that the banks said they didn't receive, made inquiries that went unanswered, and received promises of help that were later contradicted or denied by other representatives.

"Bank of America has serially strung out, delayed, and otherwise hindered the modification processes that it contractually undertook to facilitate when it accepted" billions of dollars in government bailout funds in 2008, the Sopers' complaint alleges.

By failing to live up to its obligations, according to the court filing, "Bank of America has left thousands of borrowers in a state of limbo — often worse off than they were before they sought a modification from Bank of America."

The Sopers' complaint alleges that Bank of America customer service representatives are instructed to mislead homeowners who call to inquire about loan modifications they've applied for. The complaint, citing information provided by unnamed former employees, says "representatives regularly inform homeowners that modification documents were not received on time or not received at all when, in fact, all documents have been received."

When homeowners are denied permanent modifications, even those who were current before going on reduced-payment trials are considered in default, and servicers tell them they must immediately pay the difference between their trial payments and their higher former payments to avoid foreclosure, according to the Sopers' complaint and others.

Borrowers' mortgage debt in default rises further the longer they stay in trial plans.

By making trial payments during and after the plan's scheduled end, the Sopers' complaint alleges, they "forgo other remedies that might be pursued to save their homes" such as restructuring their debt by filing for bankruptcy, or pursuing other ways to deal with their default, such as selling their homes.

Foreclosure proceedings have started against some borrowers while they were on trial plans, violating a Treasury directive, according to the lawsuits. Homeowners' credit scores have also been damaged when servicers cancel trial plans, then report the amounts in default to credit bureaus.

Some court filings claim bank employees have demanded upfront fees to start consideration of a modification — in violation of HAMP rules — or told homeowners to stop paying mortgages in order to start a trial modification. The Sopers' complaint alleges an unnamed homeowner was illegally asked to pay $1,400 upfront to Bank of America to be considered for a modification.

In another case, Alex Lam of New York alleges he was told he could only be considered for a HAMP trial modification if he stopped paying his mortgage for several months, according to a lawsuit filed in U.S. District Court in Brooklyn against JPMorgan. He skipped two months of payments in 2009 and says he was denied a permanent modification. JPMorgan declined to comment.

Homeowners' lawyers say there is no effective way to appeal mortgage servicers' decisions because Treasury has no ability to overturn a decision.

Watchdogs' criticisms

Government watchdogs, too, have raised similar criticisms about the HAMP program, as well as about servicers' performance and Treasury's oversight.

The Congressional Oversight Panel, which oversees the government fund that pays for HAMP, said in an April report it "is deeply concerned about the unacceptable quality of the denial and cancellation reasons, and strongly urges Treasury to take swift action."

A Government Accountability Office report in June found servicers were erroneously denying permanent modifications to some homeowners because servicers were inaccurately applying a formula used to determine if the value of modifying the mortgage was greater than the proceeds from foreclosing. The number of homeowners who had been wrongly denied could "range from a handful to thousands."

When errors have been found, Treasury says, it has made servicers go back and fix problems, and re-do their work as a check on their decision-making. It also says that 45% of those who started trials but were ineligible for permanent adjustments received an alternative modification through their servicer. Fewer than 2% have gone to foreclosure sale, according to Treasury.

Some homeowners say they've already lost their homes to foreclosure because a permanent HAMP modification was denied to them.

Jennifer Voltaire, 33, of Medford, Mass., alleges Wells Fargo approved her for a trial HAMP modification, which lowered her payments starting in December 2009, according to court filings in U.S. District Court in Massachusetts. Voltaire is a co-plaintiff in the case.

But after making regular payments, Voltaire was told in May that she was being taken out of the HAMP program and was $40,000 in default, the lawsuit alleges. After she protested, Wells Fargo agreed to reconsider her for a HAMP modification, according to the complaint, but in July, the bank took possession of the home.

"I was literally crying my eyes out," Voltaire says. "I put everything I have into this house, into getting my kids out of the projects. That's the part that really hurts. My kids could look at me like I failed."

Wells Fargo agreed not to sell her house pending further court action. Voltaire is still staying there and making her trial plan payments.

In its motion to dismiss the lawsuit brought by Voltaire and others, Wells Fargo said the plaintiffs have not adequately shown that their trial modifications were contracts to enter into permanent modifications. It says homeowners benefited from being able to make reduced monthly payments while staying in their homes.

Treasury Department officials say homeowners in HAMP trial plans are not promised permanent modifications.

But the Soper lawsuit and others quote language from some trial plan agreements that states: "If I am in compliance with this trial period plan and my representations ... continue to be true in all material respects, then the servicer will provide me with a Home Affordable Modification Agreement ... that would amend and supplement the mortgage on the property, and the note secured by the mortgage."

"They get a letter from the bank that says, 'If I comply, I'm entitled to a HAMP modification.' That's a contract. The bank has not performed under the contract," says Steve Berman, a lawyer with Hagens Berman Sobol and Shapiro in Seattle, who represents the Sopers and other homeowners in HAMP cases.

Evolving rules

The Obama administration's rapid launch of HAMP and its changing guidelines since then may have contributed to the program's administrative confusion. When HAMP began in 2009, servicers enrolled borrowers in trial modifications without verifying income or financial hardship. That brought immediate financial relief to more people, but ineligible homeowners were not weeded out until they completed trial plans. In June, the government began requiring participating servicers to verify applicants' income and financial hardship before starting trials. Treasury says that has improved the rate of conversions to permanent modifications.

"The HAMP program was an unprecedented response to an enormous crisis in this country's housing market. The administration needed to act quickly." says Phyllis Caldwell, Treasury's chief of the homeownership preservation office.

Meanwhile, the number of homeowners claiming improper denials of HAMP modifications is climbing.

One is Peter Salinas, 52, who struggled to pay his mortgage after the economy collapsed and his wife developed cancer. He appealed to his lender for help.

Salinas says he felt elated last year when he received a HAMP trial modification slashing $500 off his monthly payments. But later, he was told he made too much money to qualify for permanently reduced payments, he says. Wells Fargo threatened foreclosure if he didn't pay $9,000, the difference between his original mortgage and what he paid during the trial.

His servicer, Wells Fargo, declined to comment on his situation. Salinas is working with Gulfcoast Legal Services, a not-for-profit civil legal aid office, that says it is preparing a lawsuit against the lender.

"I was convinced I was doing everything right," says Salinas, a reporter for an automotive trade publication who lives near Bradenton, Fla. "I wasn't trying to walk away from this mortgage. It's just infuriating."

08 September 2010

Housing Woes Bring a New Cry: Let the Market Fall

NY Times

The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid.

Over the last 18 months, the administration has rolled out just about every program it could think of to prop up the ailing housing market, using tax credits, mortgage modification programs, low interest rates, government-backed loans and other assistance intended to keep values up and delinquent borrowers out of foreclosure. The goal was to stabilize the market until a resurgent economy created new households that demanded places to live.

As the economy again sputters and potential buyers flee — July housing sales sank 26 percent from July 2009 — there is a growing sense of exhaustion with government intervention. Some economists and analysts are now urging a dose of shock therapy that would greatly shift the benefits to future homeowners: Let the housing market crash.

When prices are lower, these experts argue, buyers will pour in, creating the elusive stability the government has spent billions upon billions trying to achieve.

“Housing needs to go back to reasonable levels,” said Anthony B. Sanders, a professor of real estate finance at George Mason University. “If we keep trying to stimulate the market, that’s the definition of insanity.”

The further the market descends, however, the more miserable one group — important both politically and economically — will be: the tens of millions of homeowners who have already seen their home values drop an average of 30 percent.

The poorer these owners feel, the less likely they will indulge in the sort of consumer spending the economy needs to recover. If they see an identical house down the street going for half what they owe, the temptation to default might be irresistible. That could make the market’s current malaise seem minor.

Caught in the middle is an administration that gambled on a recovery that is not happening.

“The administration made a bet that a rising economy would solve the housing problem and now they are out of chips,” said Howard Glaser, a former Clinton administration housing official with close ties to policy makers in the administration. “They are deeply worried and don’t really know what to do.”

That was clear last week, when the secretary of housing and urban development, Shaun Donovan, appeared to side with current homeowners, telling CNN the administration would “go everywhere we can” to make sure the slumping market recovers.

Mr. Donovan even opened the door to another housing tax credit like the one that expired last spring, which paid first-time buyers as much as $8,000 and buyers who were moving up $6,500. The cost to taxpayers was in the neighborhood of $30 billion, much of which went to people who would have bought anyway.

Administration press officers quickly backpedaled from Mr. Donovan’s comment, saying a revived credit was either highly unlikely or flat-out impossible. Mr. Donovan declined to be interviewed for this article. In a statement, a White House spokeswoman responded to questions about possible new stimulus measures by pointing to those already in the works.

“In the weeks ahead, we will focus on successfully getting off the ground programs we have recently announced,” the spokeswoman, Amy Brundage, said.

Among those initiatives are $3 billion to keep the unemployed from losing their homes and a refinancing program that will try to cut the mortgage balances of owners who owe more than their property is worth. A previous program with similar goals had limited success.

If last year’s tax credit was supposed to be a bridge over a rough patch, it ended with a glimpse of the abyss. The average home now takes more than a year to sell. Add in the homes that are foreclosed but not yet for sale and the total is greater still.

Builders are in even worse shape. Sales of new homes are lower than in the depths of the recession of the early 1980s, when mortgage rates were double what they are now, unemployment was pervasive and the gloom was at least as thick.

The deteriorating circumstances have given a new voice to the “do nothing” chorus, whose members think the era of trying to buy stability while hoping the market will catch fire — called “extend and pretend” or “delay and pray” — has run its course.

“We have had enough artificial support and need to let the free market do its thing,” said the housing analyst Ivy Zelman.

Michael L. Moskowitz, president of Equity Now, a direct mortgage lender that operates in New York and seven other states, also advocates letting the market fall. “Prices are still artificially high,” he said. “The government is discriminating against the renters who are able to buy at $200,000 but can’t at $250,000.”

A small decline in home prices might not make too much of a difference to a slack economy. But an unchecked drop of 10 percent or more might prove entirely discouraging to the millions of owners just hanging on, especially those who bought in the last few years under the impression that a turnaround had already begun.

The government is on the hook for many of these mortgages, another reason policy makers have been aggressively seeking stability. What helped support the market last year could now cause it to crumble.

Since 2006, the Federal Housing Administration has insured millions of low down payment loans. During the first two years, officials concede, the credit quality of the borrowers was too low.

With little at stake and a queasy economy, buyers bailed: nearly 12 percent were delinquent after a year. Last fall, F.H.A. cash reserves fell below the Congressionally mandated minimum, and the agency had to shore up its finances.

Government-backed loans in 2009 went to buyers with higher credit scores. Yet the percentage of first-year defaults was still 5 percent, according to data from the research firm CoreLogic.

“These are at-risk buyers,” said Sam Khater, a CoreLogic economist. “They have very little equity, and that’s the largest predictor of default.”

This is the risk policy makers face. “If home prices begin to fall again with any serious velocity, borrowers may stay away in such numbers that the market never recovers,” said Mr. Glaser, a consultant whose clients include the National Association of Realtors.

Those sorts of worries have a few people from the world of finance suggesting that the administration should do much more, not less.

William H. Gross, managing director at Pimco, a giant manager of bond funds, has proposed the government refinance at lower rates millions of mortgages it owns or insures. Such a bold action, Mr. Gross said in a recent speech, would “provide a crucial stimulus of $50 to $60 billion in consumption,” as well as increase housing prices.

The idea has gained little traction. Instead, there is a sense that, even with much more modest notions, government intervention is not the answer. The National Association of Realtors, the driving force behind the credit last year, is not calling for a new round of stimulus.

Some members of the National Association of Home Builders say a new credit of $25,000 would raise demand but their chances of getting this through Congress are nonexistent.

“Our members are saying that if we can’t get a very large tax credit — one that really brings people off the bench — why use our political capital at all?” said David Crowe, the chief economist for the home builders.

That might give the Obama administration permission to take the risk of doing nothing.

02 September 2010

Jobs Essential To Future Housing Market

Every Thursday the chief economist of the National Association of Realtors' reviews data he deems critical to the future housing and real state markets.

His focus is not about home prices or interest rates. What the economist finds highly important is a report reflecting new jobless claims. He views the country's employment situation as an essential factor to stabilizing the U.S. housing and real estate sectors.

"We need jobs; jobs (are) the key thing," said Lawerance Yun, the chief economist of nation's realty market. He lectured to the Economic Club of Traverse City on Friday as a guest speaker of the Traverse Area Association of Realtors.

Yun warned that an array of issues are influencing the current housing market. The challenges range from high foreclosure rates to strick lending and credit risk management practices to an over-abundance of unsold properties.

In a positive light, he also noted the country's housing market as well as overall economy is capable of a quick rebound if the job market improves. In addition, as more corporations start to invest in large sums of cash they have earned over the recession, the economic conditions can grow even stronger.

"We still have a very long way to get to full employment," said Yun, who projected up to five years before the country's jobless rates taper to pre-recession levels.

In his speech, Yun targeted the significant fall-off in the country's real estate sales in July but claimed it was not an unexpected turn of events. As the tax credit for federal homebuyers reached its expiration, interested investors flocked to their local home buyers agency to finalize purchases by late June. It wasn't unusual to see home sales drop the following month, he said.

"It's not a 'sky-is-falling' scenario," Yun said.

He projects a "pause" in sales that will continue into September but mentioned real estate sales in the fourth-quarter will be the underlying predictor of the future housing industry. If fourth-quarter real estate sales are consistent with the number in previous years, he expects the overall market for homes will continue to stabilize.

One Raleigh real estate agent, Ann Davis, who works exclusively for a buyer's only agency, has already seen improvements in sales as an emerging influx of families and individuals migrate to North Carolina for career opportunities.

"It is culmination of being in a location that is higher in demand as well as providing niche home buying services that your typical Raleigh real estate agency does not offer," Davis said. She is hopeful that sales will continue to thrive.

Yen warned listeners during his speech in Traverse City that if sales figures are measurably lower in the upcoming months, the country's economy may be headed for a "double-dip" recession.

"If the fourth quarter matches up with the prior fourth quarters, I think the worst is over," he said.

Yun pinpointed other areas of the country's economy in his talk. He touched on the spectrum of opinions regarding where the economy is headed, with some economists foreseeing risks of inflation as others are more worried about prices growing stagnant.

Positive signs do however exist in the housing market. Default rates on recent real estate and home sales have improved, and precise loan origination software has enabled lending practices to minimizing the instances in which interested buyers are purchasing homes that are far more expensive than they can afford. Such tools have also improved credit risk analysis efforts which also contribute to the financial mix of the housing market.

"I think we have to return to the old-fashioned American way ... stay within your budget," Yun said.

As for Ms. Davis and her Raleigh home buyers agency, her future sales figures will a solid source for nationwide projections. She is going to be the one to watch, for Ann is already at the forefront of the emerging real estate market trends.