by Calculated Risk on 3/10/2010 12:10:00 PM

This is a follow up on the previous post on short sales and 2nd liens. (the previous post had excerpts from the NY Times, Short-Sale Program to Pay Homeowners to Sell at a Loss and WSJ Home-Saving Loans Afoot)

Just to be clear on what subordinate lien holders will receive under a HAFA short sales - from Treasury's HAFA program Short Sale Agreement:

Subordinate Liens. We will allow up to three percent (3%) of the unpaid principal balance of each subordinate lien in order of priority, not to exceed a total of $3,000, to be deducted from the gross sale proceeds to pay subordinate lien holders to release their liens. We require each subordinate lien holder to release you from personal liability for the loans in order for the sale to qualify for this program, but we do not take any responsibility for ensuring that the lien holders do not seek to enforce personal liability against you. Therefore, we recommend that you take steps to satisfy yourself that the subordinate lien holders release you from personal liability.

So on a $50,000 2nd lien, the holder of the lien will be offered up to $1,500 to sign off on the deal and release the borrower from personal liability. The HAFA program will reimburse the 1st lien holder one third of that amount, or up to $500.

Investor Reimbursement for Subordinate Lien Releases. The investor will be paid a maximum of $1,000 for allowing a total of up to $3,000 in short-sale proceeds to be distributed to subordinate lien holders, or for allowing payment of up to $3,000 to subordinate lien holders. This reimbursement will be earned on a one-for-three matching basis. For each three dollars an investor pays to secure release of a subordinate lien, the investor will be entitled to one dollar of reimbursement. To receive an incentive, subordinate lien holders must release their liens and waive all future claims against the borrower....

I expect that most 1st lien holders will be willing to pay this amount to the 2nd lien holder. But would a $50,000 2nd lien holder be willing to sign off for only $1,500?

It really depends on the financial situation of the borrower, and probably on the likelihood of personal bankruptcy. In most cases the 2nd lien holder can probably do much better by selling the lien to a collection agency.

Although I think the HAFA program will help with short sales (and deed-in-lieu transactions), this will not solve the 2nd lien problem. Foreclosure may still be the servicers' option of choice for borrowers with subordinate liens.

by Calculated Risk on 3/10/2010 10:00:00 AM

From the BLS: Regional and State Employment and Unemployment Summary

Thirty states and the District of Columbia recorded over-the-month unemployment rate increases, 9 states registered rate decreases, and 11 states had no rate change, the U.S. Bureau of Labor Statistics reported today. Over the year, jobless rates increased in all 50states and the District of Columbia.
...
Michigan again recorded the highest unemployment rate among the states, 14.3 percent in January. The states with the next highest rates were Nevada, 13.0 percent; Rhode Island, 12.7 percent; South Carolina, 12.6 percent; and California, 12.5 percent. North Dakota continued to register the lowest jobless rate, 4.2 percent in January, followed by Nebraska and South Dakota, 4.6 and 4.8 percent, respectively. The rates in California and South Carolina set new series highs, as did the rates in three other states: Florida (11.9 percent), Georgia (10.4 percent), and North Carolina (11.1 percent). The rate in the District of Columbia (12.0 percent) also set a new series high.
emphasis added

Click on graph for larger image in new window.

This graph shows the high and low unemployment rates for each state (and D.C.) since 1976. The red bar is the current unemployment rate (sorted by the current unemployment rate).

Fifteen states and D.C. now have double digit unemployment rates. New Jersey and Indiana are close.

Five states and D.C. set new series record highs: California, South Carolina, Florida, Georgia and North Carolina. Two other states tied series highs: Nevada and Rhode Island.

by Calculated Risk on 3/10/2010 07:25:00 AM

The MBA reports: Purchase Applications Increase in Latest MBA Weekly Survey

The Market Composite Index, a measure of mortgage loan application volume, increased 0.5 percent on a seasonally adjusted basis from one week earlier. ...

The Refinance Index decreased 1.5 percent the previous week and the seasonally adjusted Purchase Index increased 5.7 percent from one week earlier. ...

The refinance share of mortgage activity decreased to 67.2 percent of total applications from 69.1 percent the previous week. The refinance share is at its lowest level since it was 66.1 percent in October 2009. ...

The average contract interest rate for 30-year fixed-rate mortgages increased to 5.01 percent from 4.95 percent, with points decreasing to 0.82 from 0.99 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 1990.

Even with the increase in purchase applications this week, the 4 week average is still at the levels of 1997.

Also, with mortgage rates slightly above 5% again, refinance activity decreased last week.

by Calculated Risk on 3/09/2010 10:39:00 PM

From Shahien Nasiripour at the Huffington Post: Obama Foreclosure-Prevention Plan Lagging, New Data Shows

Only about a third of the homeowners who have successfully completed the trial period of the Obama administration's mortgage modification program have been offered permanent relief, according to new federal data obtained by the Huffington Post.

The conversion rate -- about 33 percent -- is woefully short of what the Treasury Department had forecast. ...

The new data was contained in a series of answers by Treasury Secretary Timothy Geithner to questions posed by Neiman and his colleagues on COP, including Harvard Law professor and bailout watchdog Elizabeth Warren.

"As of the end of January there were over 116,000 permanent modifications and over 67,000 permanent modifications pending final approval," Geithner wrote in his letter, which the panel received last week. "This group of approximately 180,000 permanent and pending permanent modifications represents about a third of the population of total modifications who have completed the trial modification and are at a point in the process where they are able to convert to permanent."

No real surprise - there is much more in the article including some interesting comments about a possible principal reduction program.

The HAMP report for February will probably be released late next week, and the numbers will be closely scrutinized.

by Calculated Risk on 3/09/2010 06:49:00 PM

A couple of articles about vacant or near vacant high rise condo towers in Florida ...

From the News-Press: Sole occupant of 32-story Fort Myers condo wants out (ht several)

Victor Vangelakos is the only buyer to take possession of his unit in the 32-story Tower 1 of the Oasis high-rise project in downtown Fort Myers.

Apparently the original plan was to build 5 towers with a total of 1,079 units. That is about 216 units per tower, and all but one unit are vacant in Tower 1. Tower 2 appears to have few lights on too.

And from the WSJ on the 850-unit Everglades project in Miami: BofA Lawyers Rebuked in Cabi Case

Only 109 or about 13% of the Everglades' 850 units have sold, according to CondoVultures.com. However, as of last month, the developer has rented about 260, or about 30%, of the units, in what it calls a "deferred purchase program."

That sounds like another 480 vacant units.

Many of these high rise condo towers are part of the "shadow inventory" because the units do not show up on either the new home sales or existing home sales reports (unless they are listed in the MLS). For some areas - like South Florida and Las Vegas - this is a significant part of the inventory.