[Bloomberg Law] Five More Years Of High Foreclosure Rates

Posted by Jonathan J. Miller -Thursday, June 30, 2011, 4:27 PM
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Had a nice discussion with Lee Pacchia, Esq, at Bloomberg Law about the state of housing right now. Always fun. (Gotta love YouTube’s auto freeze frame of me with my eyes shut – what does it infer?)

NYT/CBS News Poll: 89% Believe Home Ownership is Important Part of American Dream

Posted by Jonathan J. Miller -Wednesday, June 29, 2011, 9:22 PM
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[NY Times]

Housing industry advocates couldn’t have scripted this any better. A down-on-its-luck, beaten-up fundamental US economic sector got its own very unique stimulus program today that came in the form of a credible poll that covered consumer views on homeownership.

This New York Times article and NYT/CBS News Poll results will be linked to by the hundreds of thousands and read by millions of homeowners, want to be homeowners and real estate professionals for the next few years providing the long neglected alternate view of actual real estate consumer sentiment, which shows very favorable results towards homeownership but with trepidation about the risk.

[NY Times]

New York Times article: Despite Fears, Owning Home Retains Allure, Poll Shows

The NYT news alert I received summarized the key findings quite succinctly:

• Owning a house remains central to Americans’ sense of well-being, even as many doubt their home is a good investment in after a punishing recession.
• Nearly nine in 10 Americans say homeownership is an important part of the American dream, according to the latest New York Times/CBS News poll. And they are keen on making sure it stays that way, for themselves and everyone else.
• Support for helping people in financial distress over housing is higher than support for helping those without a job for many months.

View polling results document (housing portion starts on page 14, question 31)

In my view, the rising anti-homeownership mantra was best illustrated by Time Magazine’s 9/11/2010 cover story: The Case Against Homeownership.

The part that was left out or not understood was that the institution of homeownership has been baked into our culture since the 1920’s. The recent crisis was NOT about homeownership. It was really about the financial mechanism to mortgage it, the loss of regulatory oversight and blending of the investment and commercial banking worlds.

One side bar to the poll was similar to the “not in my backyard” argument concerning consumer culpability for some aspect of the systemic breakdown of the financial system and the shift of blame towards the banks.

Amid the swirl of recent disclosures about banks following improper and illegal procedures in pursuing foreclosures, 42 percent blame lenders, while 29 percent blame regulators.

and

When the question was asked in early 2008, as the crisis was still building, the numbers were reversed, with 40 percent blaming regulators and 28 percent blaming lenders.

yet

Only a handful of respondents at either moment blamed the borrowers themselves for taking loans they could not afford.

[S&P] June (aka January) Case Shiller Shows Prices Up, Down

Posted by Jonathan J. Miller -Tuesday, June 28, 2011, 11:01 AM
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Its the end of the month and time for an S&P/Case Shiller Home Price Indices release.

Never any sleight meant to Bob, whom I personally admire, in my CS rants but toward the way the index is used and perceived. My Case Shiller report aversion has been well documented.

Consistent with the Case Shiller release confusion and lack of context, the June release of the February, March, April average closing price of December, January, February contracts show two things:

CNN/Money: Home prices rise, snapping 8-month drop streak

They seasonally adjust so the fact that this really reflects January activity and that tends to see an uptick was therefore not a factor. This shows how useless the index is. The declines through December (their May release) reflect the tax-credit aftermath where the market was artificially depressed after being artificially inflated in early 2010.

Washington DC continues to be the strongest of the 20 cities covered, but MRIS/RBI & moi reported the like time frame in early February (just about 6 months ago).

Bloomberg: Home Prices in 20 U.S. Cities Fell 4% in April]

Emphasis was placed on the year over year comparison, which ordinarily I’d agree with but since early 2010 house market was artificially pushed higher by the federal home buyer tax credit, it really isn’t.

The headline really should say closed housing prices in February, March, April in 20 U.S. Cities Fell 4%.

Here’s some sage insight in the piece:

“Home prices are still easing but the declines are not dramatic any more,” said Harm Bandholz, chief U.S. economist at Unicredit Group in New York, who correctly predicted the year- over-year drop. While month to month changes show “prices have basically bottomed and are moving sideways,” he said “we’re a long way away from significant increases in house prices.”

Two approaches to the same release and both are correct for different reasons and because of the 6 month data lag, we have no better understanding of the state of housing this month.

[AMC Factory] The Good Appraiser Bait And Switch Technique

Posted by Jonathan J. Miller -Tuesday, June 28, 2011, 12:01 AM
12 Comments

actual AMC (car) factory

AMC Factory For a year and a half, our firm tangled with the bureaucracy of Landsafe, the poster child for the appraisal management company (AMC) industry. While not all AMC’s are bad, their relationship to the mortgage process is fundamentally flawed. The estimation of market value of mortgage collateral to enable lenders to make informed decisions has been commoditized to the point where most mortgage appraisals are generally not worth the paper they are written on. This series is from an appraiser’s perspective, about a profession left to die by the side of the road.

The Good Appraiser AMC Bait And Switch Technique

I believe that there are generally 1-3 good appraisal firms in most markets. A “best and all the rest” list. (Blowhard hyperbole warning: I consider our firm to be one of the “good” firms in our market.)

The proliferation of AMCs used by lenders has exploded since HVCC came to be in May 2009.

AMC’s continue to fight their poor reputation for quality – they generally only require state licensing, inconsistent reviews of sample reports, agreement to fees that are half market rate, 24-48 hour turn times irregardless regardless of valuation difficulties, etc. In order to combat this AMCs use the following marketing technique:

• Call an appraiser who has a “good” reputation and invite them to be on your panel (approved list)
• Promise them they will be paid their regular fees, not 50% as is common; promise to ease up on typical 24 hour turn time requirements and be more realistic about how long the assignment will take to be done correctly.
• The “good” appraiser decides to join the panel and their name appears on the list to be touted to lenders who are being marketed by the AMC and are familiar with “good” local appraisers on the list.

• The AMC never uses the “good appraiser” for actual appraisals (or perhaps use them one time to say they did).

  More after the jump…

New York Has Higher Mortgage Denial Rate Than “Sand” States

Posted by Jonathan J. Miller -Monday, June 27, 2011, 10:43 PM
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[click to open article]

This weekend there was a great article in the WSJ: Tighter Lending Crimps Housing.

Pundits continue to fret about “double dip” and mortgage application turn downs are rising. This article was chock full of great quotes:

In all, the nation’s 10 largest mortgage lenders denied 26.8% of loan applications in 2010, an increase from 23.5% in 2009, according to an analysis by The Wall Street Journal of mortgage data filed with banking regulators.

Fannie and Freddie, in particular, “are behaving like a hurricane insurance company that won’t write any policies within 200 miles of an ocean.”

Usually lenders ease lending standards about a year into an economic recovery. Not this time.

Why?

• the legacy of bad lending continues REO volume is expected to remain high
• unemployment is not improving at a meaningful pace, if at all
• lenders do not want to lend as they enjoy the spread from the Fed and demand AAA AAAA loan quality
• consumer confidence, in terms of real estate, well, it, uh, stinks (ie Case Shiller’s monthly report)

Credit remains the achilles’ heel of housing.

Even more amazing is that New York had a higher denial rate than the FDIC “sand states”, markets characterized by rampant speculative activity. Why is New York getting a raw deal?

• New York State 34.8%

• Florida 32.2%

• California 23.6%
• Arizona 27.4%
• Nevada 29.2%

[In The Media] PBS Nightly Business Report 6-22-11

Posted by Jonathan J. Miller -Thursday, June 23, 2011, 10:09 PM
4 Comments

Watch the full episode. See more Nightly Business Report.

My segment begins at the 9:15 mark.

I spoke with Erika Miller (no relation but we went to the same junior high and high school!) does a solid segment on housing market’s shadow inventory (properties that are not listed for sale yet), triggered by the CoreLogic report.

RealtyTrac reports much more in the foreclosure process. CoreLogic’s takeaway is that shadow is declining but it will take 5-10 before those levels return to normal – moving in the right direction but there is a long way to go. This is also consistent with what RealtyTrac has been saying.

Exactly.

[Three Cents Worth #171 NY] Terraces Get You Outside The Box

Posted by Jonathan J. Miller -Thursday, June 23, 2011, 9:24 PM
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It’s time to share my Three Cents Worth on Curbed NY, at the intersection of neighborhood and real estate in the capitol of the world.

When Curbed came up with the Great Outdoors Week theme, I saw a rare opportunity to use a trite expression in the title. As much as many of us love vertical living, the drawback is the limited access to the great outdoors without jumping in an elevator or walking down several flights of stairs, going through the lobby, crossing the street, jumping on the subway, all the while holding a beach chair, a battery powered blender full of pina colada mix, sun screen and a good book.

Three Cents Worth: Terraces Get You Outside The Box

[Click to expand and read full post on Curbed DC]

Curbed DC Three Cents Worth Archive

Curbed NY Three Cents Worth Archive

[AMC Factory] Only Healthy Appraisers Need Apply, The Pledge

Posted by Jonathan J. Miller -Tuesday, June 21, 2011, 3:38 PM
2 Comments

actual AMC (car) factory

AMC Factory For a year and a half, our firm tangled with the bureaucracy of Landsafe, the poster child for the appraisal management company (AMC) industry. While not all AMC’s are bad, their relationship to the mortgage process is fundamentally flawed. The estimation of market value of mortgage collateral to enable lenders to make informed decisions has been commoditized to the point where most mortgage appraisals are generally not worth the paper they are written on. This series is from an appraiser’s perspective, about a profession left to die by the side of the road.

A little background on Countrywide, creator of Landsafe: About a year and a half ago, we were approached a final time to provide appraisal services for Landsafe, one of the largest AMC’s in the US. Landsafe was founded in 1996 by Countrywide, one of the US largest mortgage lenders accounting for 20% of all lending at their peak. By forming an AMC, Landsafe was better able to control the appraisal process to handle more volume including selling mortgage paper to Wall Street for packaging into a number of exotic financial mortgage instruments.

Countrywide ran into financial trouble in 2007 along with other lenders like American Home Mortgage as the housing market began to collapse.

Think ‘Friends of Angelo’ VIP program, Subprime Lending, Bailouts, Hurricane Katrina, AG Lawsuits.” Among appraisers, Landsafe developed the same reputation over time that Countrywide developed and it wasn’t favorable – they were seen as a factory – only interested in cranking out reports at high volume. Like other financial institutions, the quality function had far less political clout than the sales function which is the basis for Landsafe’s poor reputation in the appraisal industry. I had at least a have dozen meetings with Landsafe senior executives and appraisers in my office to ask us to join them because the appraisal quality they oversaw was so poor. Nothing ever happened.

By 2008 when Countrywide was purchased by Bank of America, it’s name was so toxic it was changed to Bank of America Home Loans. I remember giving a speech at an awards luncheon and the event sponsor was a Bank of America Home Loans rep. When he announced they were no longer known as Countrywide, the audience of real estate agents broke out in spontaneous applause. It was an amazing moment. It remains a mystery why the Landsafe name wasn’t changed at the same time.

The Pledge
One other point and then I’ll get to my story:

In September 2007, after months of negative publicity and the announcement of a reduction of 20% of its workforce, Countrywide launched a public relations campaign aimed at demoralized employees. Employees were expected to sign a pledge to “demonstrate their commitment to our efforts” and “to tell the Countrywide story to all”. Those who signed the pledge received a green rubber Protect Our House wristband.

Landsafe has continued the tradition, requiring their appraisers to sign various draconian documents to pledge their allegiance. Of course the appraiser has the option not to do business with them, but they represent a huge percentage of mortgage appraisal volume. A new generation of appraiser has quickly replaced the more experienced appraiser. Thus the industry is now dominated by an army of form fillers.

Ok, finally – here is this week’s post:

More after the jump…

My Life Story, One Appraisal At A Time

Posted by Jonathan J. Miller -Monday, June 20, 2011, 4:27 PM
1 Comment

Roland Li wrote a nice profile of moi in the current issue of Brokers Weekly. They’ve done a nice job moving the publication online.

Check it out: Jonathan Miller tells it like it is

[CFR] Not Slowest Economic Recovery, Yet Housing Is – So Deal With It

Posted by Jonathan J. Miller -Monday, June 20, 2011, 10:52 AM
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The Council on Foreign Relations published their quarterly update from the Center for Geoeconomic Studies, always a good resource, called: The Economic Recovery in Historical Context. The charts look at various metrics since the end of each recession. FYI, the recession was dubbed “over” in June 2009.

GDP is growing, but below the average post-war pace but not slower than the 1980-81 double dip.

Housing continues to fall – it is well below both the average and low end of the post-war range. Of course that’s because housing/credit was the cause of the crash itself.

It’s hard to see the economy moving forward appreciably until housing improves or at least it’s being more consistent with historic norms during an economic recovery. I like these graphics because they provide tangible perspective to the state of the economy and housing.