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“Keeping Current Matters in Today’s Market”The Real Data. The Real Message. The Right Delivery.
March 2010
Interest RatesInterest Rates
4.6
4.7
4.8
4.9
5
5.1
5.2
5.3
5.4
5.5
Mortgage Rates Mortgage Rates –– 30 year fixed30 year fixed
Source: Federal Reserve
6/25/2009 2/25/2010
Source: KCM 3/2010 Federal Reserve
Interest Rate Support
Source: KCM 3/2010 TARP Report to Congress 1/30/2010
“The Government has done more than simply support the
mortgage market, in many ways it has
become the mortgage market.”
Source: KCM 3/2010 Source SIFMA
Private Share
Government Share
"There is no question rates have been kept artificially low by the Fed's heavy buying. My opinion is that rates will go up a full percentage point initially, meaning that 30-year fixed conforming loans, now hovering around 5 percent, would hit 6 percent.”
Source: KCM 3/2010 Source: San Francisco Chronicle 2/15/2010
-Guy Cecala, publisher of Inside Mortgage Finance
Interest RatesInterest Rates
Source: KCM 3/2010 Source: San Francisco Chronicle 2/15/2010
-Christopher Thornberg, principal at Beacon Economics
"Clearly, when they stop printing all that money, it's going to be a shock to the system. I have to assume that when they pull back on it, it will cause a 100- to 200-basis-points rise to rates of 6 percent or 7 percent. When they start selling off the stuff they purchased, which by my guess would come early next year, that would cause another 100- to 150-basis-points rise."
Interest RatesInterest Rates
"Housing has been on government life support, and without it the crash would have been much more severe. This spring and summer as those policy efforts unwind, we most likely will see mortgage rates move higher and more house-price declines."
Source: KCM 3/2010 Source: San Francisco Chronicle 2/15/2010
- Mark Zandi, chief economist with Moody's Economy.com
Interest RatesInterest Rates
PricingPricing
Source: Tom Iacono 2/24/2010Source: KCM 3/2010
Source: Tom Iacono 2/26/2010Source: KCM 3/2010
Source: KCM 3/2010 Source: Calculated Risk 02/27/2010
Price must be compelling!Price must be compelling!
Percentage with a Price ReductionPercentage with a Price Reduction
20
21
22
23
24
25
26
27
June July Aug Sept Oct Nov Dec Jan Feb
Source: KCM 3/2010 Source: Trulia 2/2010
“The remaining correction in home values we'll see in the first half of this year is a function of market fundamentals, such as the increasing flow of foreclosures, high levels of inventory in the market and a probable decrease in demand as the impact of the tax credit wanes and mortgage rates rise. While the next few months are likely to bring further home value declines in most markets, we do expect to see a national bottom in home prices by the middle of this year. Thereafter, home values are likely to bounce along the bottom with real appreciation remaining negligible for some time."
Source: KCM 3/2010 Source: Zillow 2/2010
- Zillow Chief Economist Stan Humphries
PricesPrices
We believe that the recent improvement in house prices is a temporary reprieve … Prices will decline an additional 8% from the fourth quarter of last year to the bottom in the fourth quarter of this year.
- Moody‘s
Source: KCM 3/2010 Source: Moody’s ResiLandscape 2/11/2010
PricesPrices
"We have a boatload of homes that ultimately will find their way to a foreclosure sale, and that will put pressure on house prices. The more that distressed home sales rise, the more home prices get pushed down."
Source: KCM 3/2010 Source: San Francisco Chronicle 2/15/2010
Mark Zandi, Chief Economist with Moody's Economy.com
PricesPrices
Don’t Wait to Get It Sold!!Don’t Wait to Get It Sold!!
145
150
155
160
165
May'10 Aug'10 Nov'10 Feb'11 May'11 Aug'11 Nov'11 May'12 Nov'12 Nov'13 Nov'14
Case Shiller Future Prices
Source: Chicago Mercantile Exchange 03/01/10
May ‘11May ‘11
Projected Bottom
Today’s Price
Nov ‘13Nov ‘13
Source: KCM 3/2010
“But I still think the risk of continued weakening in house prices nationally is considerable…The potential for another wave of distressed property coming to market remains very high. While the government’s mortgage modification program may have slowed the number of foreclosed properties coming to market, its near complete failure is likely to result in a whole new wave of distressed activity down the road.”
Source: KCM 3/2010 Source: Housing Wire 2/09/2010
- Dave McCarthy, President and CEO Integrated Asset Services
PricesPrices
‘‘Short Sales’Short Sales’
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
Help Requested Plans Offered Trial Modifications
Permanent Modifications
Numbers According to HAMPNumbers According to HAMP
TARP Report to Congress 1/30/2010Source: KCM 3/2010
Source: KCM 3/2010 The New York Times 2/26/2010
DelinquenciesDelinquencies
Source: KCM 3/2010 Source: S&P 2/16/2010
0
2
4
6
8
10
12
14
16
18
20
Flor
ida
Nev
ada
Ariz
ona
Cali
forn
iaIl
linoi
s M
ichi
gan
New
Jers
eyN
ew Y
ork
Geo
rgia
Ohi
oIn
dian
aRh
ode
Isla
ndM
aryl
and
Mis
siss
ippi
Mai
neM
assa
chus
e…H
awai
iCo
nnec
ticut
Sout
h …Lo
uisi
ana
Wis
cons
inD
elaw
are
Uta
hId
aho
Tenn
esse
eKe
ntuc
kyM
inne
sota
Alab
ama
Penn
sylv
ania
Dis
tric
t of …
Nor
th …
New
…O
rego
nN
ew M
exic
oM
isso
uri
Was
hing
ton
Wes
t Vir
gini
aO
klah
oma
Texa
sCo
lora
doVi
rgin
iaIo
wa
Arka
nsas
Kans
as
Verm
ont
Neb
rask
aM
onta
naW
yom
ing
Sout
h D
akot
aAl
aska
Nor
th D
akot
a
Source: MBA 2009 4Q Delinquency ReportSource: KCM 3/2010
Foreclosure & Delinquency Rates by StateForeclosure & Delinquency Rates by State
% of Foreclosures
% of 90+ day Delinquencies
Source: KCM 3/2010 Source: Federal Reserve
Delinquency Rates by CountyDelinquency Rates by County
http://data.newyorkfed.org/creditconditions/
NegativeNegativeEquityEquity
Source: KCM 3/2010
Source: First American CoreLogic 2009 4thQ Negative Equity DataSource: KCM 3/2010
Negative Equity by StateNegative Equity by State
Data available for Louisiana, Maine, Mississippi, South Dakota, Vermont, West Virginia and Wyoming
Walking AwayWalking AwayThe New York Times:
“Mortgage holders do sign a promissory note, which is a promise to pay. But the contract explicitly details the penalty for nonpayment — surrender of the property…The borrower isn’t escaping the consequences; he is suffering them.”
The Wall Street Journal:
“Give serious thought to walking away from the debt…No, you shouldn’t feel bad about it, and you shouldn’t feel guilty…You need to be ruthless about your cash flow…The economy is fundamentally amoral…Whether we like it or not, walking away from debts is as American as apple pie.”
“If history repeats itself we will see a surge in the numbers over the next few months as lenders foreclose on delinquent loans where neither the existing loan modification programs or the new short sale and deed-in- lieu of foreclosure alternatives works.”
Source: KCM 3/2010 Source: Housing Wire 2/10/2010
- James Saccacio, CEO of RealtyTrac
ForeclosuresForeclosures
Return to the Market:
One benefit of a short sale is that consumers usually can buy another home in two to three years, rather than five to seven as is the case with a foreclosure.
Deficiency Judgment:
Most of the time, the lender will release the seller from any further obligation to repay the debt.
Source: New York Times 2/22/2010Source: KCM 3/2010
‘‘Short Sales’Short Sales’
HAFA creates financial incentives for borrowers, servicers, and investors to avoid a foreclosure by utilizing a short sale or a deed-in-lieu of foreclosure. According to Treasury, these options generally provide borrowers, investors, and communities with a better outcome than a typical foreclosure sale.
Source: KCM 3/2010 TARP Report to Congress 1/30/2010
‘‘Short Sales’Short Sales’
Source: KCM 3/2010 HAFA Guidelines
‘‘Short Sales’Short Sales’• Mortgage servicers have 10 days to accept or deny a short sale request. After a sale is completed, the borrower could be completely released from debt.
• Borrowers are eligible to receive a $1,500 moving allowance, if they sell their home through a short sale.
• Mortgage servicers will receive $1,000 for each completed short sale.
• Investors who hold first mortgages can get as much as $1,000 for allowing second lienholders to release their liens.
• Second lienholders can get only as much as $3,000 in proceeds from short sale to release their liens.
• The property must be the homeowner’s principal residence.
• The homeowner is delinquent on the mortgage or default looks likely.
• The loan was made before Jan. 1 this year and is less than $729,750
• The borrowers’ total monthly mortgage payment exceeds 31 percent of their before-tax income.
Federal Housing Finance Agency 1/29/10
Completed Short SalesCompleted Short Sales
Source: KCM 3/2010
10
12
14
16
18
20
Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10
Investor REOs
Move-in REOs
Short Sales
Source: KCM 3/2010 Source: Campbell Surveys 2/2010
Percentage of Distressed SalesPercentage of Distressed Sales
“This will be the year of the short sale.”
- Calculated Risk 2/15
Source: KCM 3/2010
“Everyone is touting 2010 as the year of the short sale. I would agree that it seems to be heading in that direction.
There are going to be hundreds of thousands of short sales.”
- Cary Sternberg is the president of Excellen REO.
Source: Housing Wire 2/12/2010Source: KCM 3/2010
“Treasury suggests servicers consider such factors as
severity of the loss, local market conditions, timing of the pending foreclosure, and borrower motivation and cooperation.”
Source: KCM 3/2010 TARP Report to Congress 1/30/2010
‘‘Short Sales’Short Sales’
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