Will lenders freeze ARMs?

Good morning. A while back we posted on a speech in which the head of the FDIC encouraged lenders to freeze adjustable rate mortgages so that homebuyers won't have to worry about higher payments. That idea lives on: The New York Times editorial page, which we consider to be as influential as any left-of-center institution in America, this weekend strongly endorsed the little-noticed FDIC proposal:

After arguing the economy needs to be "rescued" from the mortgage crisis, the Times writes, "Fortunately, the Federal Deposit Insurance Corporation has come up with such a solution. It has made a compelling case for freezing the introductory rates, typically 7 percent or 8 percent, on the most default-prone adjustable-rate loans. To qualify, a borrower would need to live in the home, be current in monthly payments and not yet have faced an increase in the loan’s rate. The plan would remove up to 1.75 million people from the ranks of future defaulters."

The idea raises numerous questions, which we've posed before -- not the least of which is fairness. Why should lenders cut a break to borrowers who chose a risky mortgage? Leaving aside that question, we thought the Times editorial was newsworthy: The N.Y. Times is a "thought leader," particularly within the Democratic Party, which could soon control the White House and both houses of Congress.

Thoughts? Comments? E-mail story tips to lalandblog@yahoo.com.

Open House: Reseda

We snuck out to five Open Houses in Reseda today. Headline: Thin traffic. In those five homes, we saw exactly one possible buyer. Houses, notes, and local flavor:

6900 Jamieson Avenue (pictured). 3-bed, 2-bath, 1,785 SF, remodeled, reduced; was $550,000, now $525,000.

6921 Lindley Avenue. "You Better Act Fast," reads the flyer for this scruffy (no grass, Bud Light can in the back yard) bank foreclosure. 3 bed, 1 bath plus a 1 bed/1 bath "guest unit." Was $457,900, reduced to $379,900. Suggested financing in hand-out: 35-year fixed, 100%, (interest only) under CAlHFA first-time homebuyer program, works out to $2057/month.

6856 Zelzah Avenue. 3-bedroom, 1 bath, 1,017 SF, flyer reads, "Price negotiable just reduced from $585,000 to $500,000." We thought that was a big price cut for 2 1/2 months on the market, so we asked the agent sitting house, "Why the big reduction?"  His four-word response: "Foreclosure on the corner."

18101 Gault Street. This one will be a short sale if and when it happens. Listing reads, "Reduced again! Seller wants to see all offers." 4-bedroom, 2 bath, 1,712 SF on a busy street; Reduced from $470,000 to $420,000. Was in escrow, in a previous short sale, but fell out of escrow while the lender (Countrywide) considered whether to accept the short sale offer.

6920 Garden Grove Avenue. 4-bedroom, 2-bath, 1,756 SF, tidy, well-kept, carpeted, nice lawn. On the market for a month, listed at $519,000, but the agent says, "They have a little room."

Comments? Thoughts? Insights?

Stuck in the middle: Realtor blues

Good morning, Dennis Dixon.

The Los Angeles Times today explores the current plight of Realtors -- stuck in the middle between picky buyers and unrealistic sellers, and fed up with both breeds:

"ATTENTION, you picky buyers who think you have all the time in the world to house hunt before you ink an offer. (And this goes double for those of you who think that a listing price is just some silly number pulled from the air and that you can offer 30% less.) Listen up: Agents are mad as hell and aren't going to take you anymore."

Story says realty agents (we sometimes say "Realtors," knowing full well that only some agents are Realtors) are looking for flexible sellers and real buyers, and brushing off the rest. One guru is quoted as saying agents should skip repping buyers entirely, and spend their time looking for motivated sellers. Another agent, Valerie Van De Zilver, advises straight talk to unrealistic sellers: "Sometimes, I have to tell a client that he just isn't going to be able to meet his price goal in this market and that maybe he should think about holding off on his plans to sell."

Our take: That sounds like a nice enough brush-off, but we wonder if it is helpful. We've talked with agents who see it another way entirely: "The longer you sit on a price that's too high, the weaker the market will get, the lower your eventual selling price will be. Prices are falling; the smart time to sell is now, not later. Being stubborn -- or unrealistic -- will cost you money."

Your thoughts? Comments? Insights? E-mail story tips to lalandblog@yahoo.com.

Foreclosures and motivated sellers

A couple of follow-ups to yesterday's Dataquick report on California foreclosures:

--Motivated sellers. We've heard often that this downturn won't be as severe as the mid-'90s real estate bust because the California economy is fine, and thus there are few "motivated sellers" as desperate as the newly jobless aerospace workers who, according to economic legend, helped drive prices lower in the early and mid-'90s. Commenter Cal sets this one straight: The banks and lenders that find themselves owning foreclosed houses are as motivated as any seller as you will find, and there are more of these motivated sellers every day, and they are becoming a bigger and bigger part of the market:

(This from Cal):
--2006 Third Quarter, Notice of Trustee sale (NTS) as a percentage of sales reported by DQ for L.A. County in 3Q06: 1.93%

--2007 Third Quarter, Notice of Trustee sale (NTS) as a percentage of sales reported by DQ for L.A. County in 3Q07: 20.35%

--So 1 in 5 sales last quarter essentially have been replaced by more motivated sellers.

Trouble on the Westside? Writing in today's Los Angeles Times, Peter Hong quotes a Beverly Hills agent who predicts the foreclosure wave will eventually make its way west of the 405: "It's working its way to the Westside. The Westside is always last to get hit."  More: "In four Newport Beach-area ZIP codes, for example, there were 11 foreclosures in the third quarter, up from just three in the same period last year. There were seven foreclosures in Bel-Air, and none a year ago."

Your thoughts? Comments? E-mail story tips to lalandblog@yahoo.com
Photo Credit: AP

Tree of the week: Toyon

Good morning. This week's "tree of the week" comes with, at no extra cost, a few fire prevention tips from our tree-loving friend, Pieter Severynen.

About fires, Christmasberries and chaparral

Fire season will still be with us for a while. If you live close to wildlands, you will find excellent tips and references on making your outdoors fire resistant in a newly issued 2008 calendar and guidebook. Titled ‘Safe Landscapes’ and issued by the Los Angeles County UC Cooperative Extension, it is available here. That website also describes upcoming free workshops in Santa Clarita (Nov. 3) and Malibu (Nov. 17), where you may also learn about desirable and undesirable plants in fire-prone areas.

Toyon or Christmasberry – Heteromeles arbutifolia

Technically a shrub up to 10 feet by 10 feet, our native toyon, also known as California Holly, can be pruned into a very attractive single- or multi-trunk, small evergreen tree, 20 feet tall by 15 feet wide. The 2- to 4-inch-long leaves are thick, leathery, with pointed teeth. The bark is smooth and brown. Heads of small white flowers in summer are followed by abundant clusters of long lasting small bright red berries in fall or winter, beloved by birds and people alike and spectacular enough for this plant to supposedly give Hollywoodland its name. Drought resistant as any good native, in cultivation it actually looks better with occasional watering. Sometimes it is subject to fireblight, a bacterial disease.

Toyon is a prominent member of coastal sage scrub, chaparral (our most extensive natural plant community) and oak woodland. Chaparral is the unique and valuable shrub vegetation typical for the 5 areas in the world with a summer dry, rainy winter Mediterranean climate: California, Mediterranean basin, central Chile, South Africa Cape region, and Western and Southern Australia. The plants of each of those regions are different, but they share common leaf and lifestyle characteristics, including the ability to adapt to the occasional fire. Our region’s notorious fires occur naturally in chaparral and forest, but the explosion of urban growth in the wildlands has led to dramatically increased fire frequency and shortened intervals between fires, thus threatening native landscapes. We need more effective ways of protecting both our homes and our indigenous vegetation.

Thanks, Pieter
Comments? Insights? E-mail story tips to lalandblog@yahoo.com
E-mail Pieter: plseve@earthlink.net
Photo credit: bahiker.com   

Foreclosures, foreclosures

Headlines from today's DataQuick report on California foreclosures in the 3rd Quarter of '07:
--Notices of default spiked by 144% in LA from 3Q 06 to 3Q 07, a slightly slower rate of increase than the statewide rise of 167%.
--The rise in actual loss of homes to foreclosure is pretty much the same in LA (up 578% from 3Q 06 to 3Q 07) as it is statewide (605%).
--The foreclosure "hot spots" continues to be the Inland Empire and the Central Valley.
--Ominous trend: homeowners in default are much more likely to lose their homes than they were a year ago -- A year ago, only 19% of homeowners of homeowners in default were headed toward foreclosure; the rate is now estimated at 54%.

LATimes lede: 'Foreclosures statewide were at an all-time high for the three months ended Sept. 30, after shattering a record level the previous quarter, the La Jolla firm DataQuick Information Services said."

Reuters lede: Mortgage lenders launched more than 70,000 foreclosure proceedings in California in the third quarter, marking a record for the state, where many housing markets are slumping amid mortgage market turmoil, according to a report released on Friday.

Your thoughts? Comments? Insights? Email story tips to lalandblog@yahoo.com.

A $1.2 billion loss for Countrywide

News item from Reuters via CNBC: "Countrywide Financial posted a $1.2 billion third-quarter loss Friday as the housing market slumped, but its shares soared after the largest U.S. mortgage lender projected a return to profit this quarter as it slashes jobs and regains its footing."

More: "Shares of Countrywide

Countrywide Financial Corp CFC 15.02                      1.95                        +14.92%    NYSE

Quote  |  Chart  |  News  |  Profile  |  Add to Watchlist

rose $2.87, or 22 percent, to $15.94 in pre-market trading. Stock futures also moved higher."

Comments? Thoughts? E-mail story tips to lalandblog@yahoo.com.
Photo Credit: Los Angeles Times

B of A to quit wholesale lending

More trouble for mortgage brokers: Bank of America is quitting the wholesale lending business. This tonight from AP on a move the bank will officially announce tomorrow: "In addition to scaling back its investment banking operations, Bank of America Corp. is exiting the wholesale mortgage business and eliminating about 700 jobs, bank officials said Thursday."

More: "The nation's second-largest bank will stop offering home mortgages through brokers at the end of the year to focus on direct-to-consumer lending through its banking centers and loan officers. The move also eliminates the jobs in the bank's consumer real estate unit."

Thoughts? Comments? E-mail story tips to lalandblog@yahoo.com.

A puzzling poll question

Today's Los Angeles Times/Bloomberg poll on economic issues contains a couple of headlines: Most Americans (65%) believe a recession is likely in the next year, and a lot of Americans (45%) have no opinion on the way Fed Chairman Ben Bernanke is doing his job (we suspect a large portion of those don't know who he is, or what he does).

As for the housing crisis, we consider the poll a missed opportunity, and thus a disappointment. Asked, "What should be done to help alleviate the sub-prime mortgage problem?" respondents were given these options:
--Nothing, the government should stay out of it (28%)
--Government should help homeowners or tighten mortgage rules (40%)
--Prosecute firms that knowingly promoted unaffordable mortgages (15%)
--More than one of these things or all of them should be done (9%)
--Don't know (8%)

Our disappointment is this: One of the biggest sources of controversy surrounding this issue is whether the government should help people pay their mortgages. The pollsters, at some level, seem to understand this, and yet they have elicited no meaningful information on it -- lumping "help homeowners" in with "tighten mortgage rules" muddies the issue rather than clarifying it.

Your thoughts? Comments? Insights? E-mail story tips to lalandblog@yahoo.com.

Update: Surprise: A pop in new home sales

News item from Reuters via CNBC: "Sales of new single-family U.S. homes rose 4.8 percent in September but sales in August were revised down sharply, painting a mixed picture of the battered housing sector."

Update: This roundup of comment from economists at the Wall Street Journal contains a common theme -- one already epxressed by commenters here -- that these numbers are not particularly reliable or useful. Bear Stearns observes: "The size of the downward revisions to the prior two months’ home sales data and the failure of the Commerce Department to track cancellations makes this series of very limited usefulness in tracking trends in the housing market. As a result, we would not read anything into the small increase in new home sales reported for September. Most housing data suggest that the sector continued to contract in September."

More from Reuters: "New single-family home sales set an annual rate of 770,000 units in September, up from a downwardly revised rate of 735,000 in August, the Commerce Department said. Analysts had expected a 10,000 drop from the previously reported 780,000."

Sales in September were 23.3% below year-ago levels. Inventory of new houses for sale is now estimated at 523,000, or an 8.3 months' supply at current sales levels.

Inventory analysis: As with existing home sales yesterday, inventory is down slightly in absolute terms, but when expressed in terms of "months to sell," inventory is slightly higher.

               Total homes    Existing homes   Existing homes   New homes    New homes
Month      for sale            for sale                 months to sell      for sale            months to sell
Sept. 07 4.92 million     4.40 million           10.5 mo.              523,000            8.3 mo.
Aug 07    5.11 million     4.58 million           10.0 mo.              529,000            8.2 mo.
Aug 06    4.49 million     3.92 million           7.5 mo.                568,000            6.6 mo.
Aug 05    3.34 million     2.86 million           4.7 mo.                479,000            4.7 mo.
Aug 04    2.88 million     2.48 million           4.6 mo.                404,000            4.2 mo.
Sources: NAR (Existing homes), Commerce Dept. (New homes)

Comments? Insights? E-mail story tips to lalandblog@yahoo.com
Photo Credit: AP