Strategic defaults, if recent behavior by NAFCU is any indicator, are earning the ire of lenders.

Strategic defaults, a Chapter 11-esque move in which homeowners walk away from their property and stop paying their mortgage, are happening with increasing regularity in today’s housing market, and if current legislation is any indication, they are happening much to the chagrin of the financial sector.

According to a recent article by National Mortgage News, a House Financial Services subcommittee has recently begun review of a Federal Housing Administration (FHA) reform bill, and a number of trade groups are lobbying to add provisions to the bill that would discourage homeowners from strategically defaulting.

The inherent features of the bill deal with premiums and indemnification on FHA loans. Currently, no statutory requirement exists for the FHA to charge annual premiums on loans, and the bill would force the FHA to charge a minimum annual premium of 55 basis points, or bps. Annual premiums would be capped at 205 bps.

In addition, the bill would require the FHA to “review the cause of every loan,” as the article put it, that becomes 90-days delinquent within 24 months of its origination, as well as seek indemnification when “material violation” of the agency’s underwriting standards result in losses.

None of those provisions had attracted much attention, but a recently suggested amendment by the National Association of Federal Credit Unions (NAFCU) on strategic defaults may prove controversial.

The NAFCU amendment would increase the FHA’s lockout from three years to seven; so, when a homeowner defaults on a GSE loan, they would no longer be able to qualify for FHA financing three years after the initial default, but would have to wait for seven years, just like what Fannie Mae and Freddie Mac mandate in their regulations.

Becker contends that the amendment would “ensure the FHA is not propped up to be a safe haven for those who strategically default on previous mortgages,” according to the article.

As we reported last month, strategic defaults have become an increasingly attractive option for underwater borrowers. The logic goes like this: though they can still afford their mortgage, it makes little sense for the borrowers to continue paying for a home they will reap no profit from for, potentially, the next decade, given the 33 percent drop in home values since 2005; as a result of that realization, they strategically default, walking away from the property and refusing to pay their loans.

Though it seems an unorthodox strategy compared to loan modifications or refinancing, a recent survey by Paola Spienza and Luigi Zingales, two Chicagoland professors of finance, found that roughly three out of 10 mortgage defaults in 2010 were of the strategic bend, which was a 22 percent increase from 2009, and national movements have erupted in recent years urging homeowners to strategically default.

2012 is still young, so there is no data out yet on the progress of such movements or the current trends of strategic defaults, but it is safe to say, based on the efforts of the NAFCU, that it has lenders’ attention.

UPDATE: The bill in question passed the House subcommittee late on Wednesday, apparently without the lockout provision.

Nelly Macias

Nelly Macias is the newest member of the global luxury real estate brokerage, Zilbert International Realty team. Macias, who is a member of the National Association of Realtors, the Florida Association of Realtors and the Miami Association of Realtors, will be specializing in the sales and leasing of luxury condos and and homes in Miami Beach as part of the company’s effort to expand services throughout South Florida luxury communities.

She is fluent in English, French and Spanish, holds a bachelor’s in business administration from the University of Marseille in France, a diploma in advanced language translations from Georgetown University in Washington, and a graduate degree from the University of Cadiz in Spain.

Previously, Macias was a top-producing real estate sales associate for Live Realty Inc. where she specialized in high-end residential properties of Miami Beach and Downtown Miami. She has also worked for Advantage Real Estate Network and Miami Investment Real Estate.

Zilbert’s sales associates are recruited through a specialized invitation-only selection process. Founded in 2003 by Mark Zilbert, the company is a full-service premium real estate brokerage that works with clients around the world.

Consumer malaise may be a thing of the past, given the results of Fannie Mae's latest survey.

Fannie Mae yesterday released its National Housing Survey for January 2012, delivering data that confirms a slowly accumulating rise in consumer confidence and expectations.

Doug Duncan, the vice president and chief economist at Fannie Mae, said recent employment numbers, which were far better than initially expected, contributed to the survey’s optimistic findings.

“Consumer sentiment has continued to rebound to the level witnessed around a year ago since hitting a setback last summer,” Duncan said. “The strengthening employment picture from Feb. 3 provides encouragement that the improving trend in consumer confidence will continue and will at some point be reflected in a firming up of consumer spending.”

Regarding home prices, 28 percent of the 1,000 respondents that Fannie sampled expect their home values to increase (up from 26 percent in December), while 16 percent expect values to fall (down 2 percent from December) and 51 percent expect values will remain stagnant.

Only 8 percent of respondents felt that mortgage rates would go down in 2012, and an overwhelming 71 percent felt that it is still a good time to buy a home, which is the same amount from December. Only 10 percent felt it was a good time to sell a home.

The incorporation of rental units, though, produced some interesting results. 43 percent of respondents thought rental prices would go up, and 46 percent thought they would stay the same; regardless of the increases, though, 30 percent still said they would rent their next property, while 64 percent intended to buy.

In additional comments, Duncan said that consumer’s expectations of low rates may not reconcile with an improving job market.

“The Federal Reserve’s pledge to keep interest rates low beyond 2014, extending their prior time frame of mid-2013 announced in the summer, appears to have been reflected in the rising share of consumers expecting the rate to remain near record low levels for another year,” Duncan said. “At the same time, consumers expect home prices to rise over the next year, extending the streak of rising home price expectations to four months. If the employment market continues to strengthen, it is unlikely that the Fed will be able to keep its low interest pledge for long, and a more meaningful housing recovery may not be far behind if consumers are faced with the prospect of rising mortgage rates and home prices amid increased job security.”

The two bottoms of housing, normally independent, could come together in 2012 for a recovery.

“The housing bottom” is a term that gets thrown around quite often, normally in the context that once a bottom is reached, an inevitable (and long-awaited) housing recovery will quickly commence.

Over at Calculated Risk, the news is both positive and unorthodox – first, there are actually two housing bottoms, not one all-encompassing measure as is often reported; and second, both have indeed bottomed out and a recovery could be soon approaching.

“There have been some recent articles arguing the ‘housing bottom is nowhere in sight’,” wrote Bill McBride on the site. “That isn’t my view.”

The first housing bottom, McBride wrote, involves new home sales, housings starts and residential investment, and the second focuses squarely on pricing. Though the first bottom is more important, considering it ties more directly with jobs and the greater economy, the second bottom is more visible and, as a result, is more present on homeowners’ minds.

Though McBride wrote that the respective bottoms can occur “years apart,” it seems the two are coinciding in 2012.

“For new home sales and housing starts, it appears the bottom is in, and I expect an increase in both starts and sales in 2012,” he wrote.

Basing his projections on recent graphs, McBride points out that after falling dramatically from its peak in January 2006, housing starts bottomed in 2009 and have been running sideways the last two years. New home sales, correspondingly, followed a similar path, bottoming in 2010 and running sideways thereafter (the new home sales bottom was delayed by the first-time homebuyer tax credit).

And now, data increasingly suggests that prices are also nearing a bottom. Though home values are notoriously difficult to predict (and all the major housing indexes operated on a two-to-three month lag), McBride is pointing to March 2012 as the bottom for home values, with a couple years of sideways growth to follow, as has happened with the first housing bottom.

McBride cited three main reasons for his March date: first, recent price-to-rent ratios are nearing normalcy; second, the large decline in listed inventory means less downward pressure on house prices; and third, a number of government policies, from the new revisions of the Home Affordable Refinance Program to the mortgage settlement, will aid prices.

Such projections do not count microeconomic anomalies, such as areas rife with distressed properties, and a bottoming in home values does not necessarily imply an immediate rise in prices – but does it point to a definite light at the end of the tunnel? Have any of you observed similar trends and can see 2012 as a year of improvement? Do you agree or disagree with McBride?

Multifamily originations posted huge totals for the fourth quarter, yet further confirmation of the housing sector's ascent.

The fourth quarter of 2011 was a productive period for multifamily originations, which increased by 31 percent year-over-year according to the latest research by the Mortgage Bankers Association (MBA).

Pooled with other loan offerings, including industrial property loans, retail loans and health care loans, the entire commercial/multifamily lending sector was also up by 13 percent year-over-year, due in no small part to the huge uptick in multifamily activity.

Jamie Woodwell, the MBA’s vice president of commercial real estate research, said there was considerable demand among GSEs for multifamily originations.

“In the fourth quarter, multifamily originations for Fannie Mae and Freddie Mac hit a new all-time high,” Woodwell said. “While the CMBS market continued to be held back by broader capital markets uncertainty during the past year, others – like the GSEs, life companies and many bank portfolios – increased their appetite for commercial and multifamily loans.”

The last couple of months, nearly every statistic involving multifamily properties has involved large, double-digit increases. As we recently reported, according to the Commerce Department, multifamily completions were up in December by 51.5 percent from November and 47 percent from December 2010.

Even more promising, housing starts for multifamily units were up 60 percent in 2011, suggesting even more completions in the future, and, in a stat that directly ties in with originations, multifamily activity at the Architecture Billings Index, which charts the reported billings from architecture firms, was the highest among all sectors of construction.

How does housing score in the White House's latest release of data?

The Obama White House released its latest Housing Scorecard yesterday, and the report provides a sweeping view of many of the various components of the housing market, from sales, to refinancing to inventories.

Developed and released by the Department of Housing and Urban Development, the scorecard is intended to track the progresses of the President’s various housing initiatives.

On the sales spectrum, existing-home sales were up in December, though new home sales were down.  Inventories, however, continued to improve, declining from 3.2 million in the second quarter to 2.4 million in the fourth quarter; that drop was coupled with a fall in units held off the market, which fell from 3.9 million in the first quarter to 3.6 million in the fourth quarter. What remains to be seen, though, is if foreclosures – which have been stymied in recent months by backlogs and consumer complaints – will increase in 2012 and correct those inventory declines.

The scorecard also included some positive information about the Home Affordable Modification Program, an initiative that, despite initial goals of helping 4-5 million homeowners modify their loans, has been bogged down by numerous factors and has, thus far, only aided more than 909,000 homeowners.

Of those 909,000, though, the White House had good news. Eighty-four percent of those homeowners have received permanent modifications, after an average trial period of 3.5 months, and after six months in the program, more than 94 percent of those homeowners remained in their permanent modification.

Other findings of the scorecard included:

• Consumer expectations on home values, though low, remain above 2009 levels.
• While existing-home inventories continued to fall, the number of homes held off the market remained relatively high.
• Mortgage rates and housing affordability continue to follow an inverted relationship, with rates continuing to fall and affordability continuing to soar.
• Demand for Federal Housing Administration financing remains incredibly high, bordering on historic; after spending much of the 2000s with no more than 10 percent of the mortgage loan market, FHA financing lept to 45 percent of the market in 2010 and 35 percent in 2011.

PIctured are attendees Philip Spiegelman, Elizabeth Perez, Gina Blanco and Craig Studnicky.

Alongside the Women’s Council of Realtors, Related ISG principals Philip J. Spiegelman and Craig S. Studnicky presented the 2012 business resource meeting, which highlighted “Miami 2020: A Look At The Future of Downtown Miami.”

RelatedISG is an integrated luxury real estate sales and marketing firm representing properties throughout South Florida and Latin America. Miami’s most recognized developer, The Related Group, and experts in foreign sales, International Sales Group, combined to produce the widest reaching and connected international network. Spiegelman and Studnicky  discussed this year’s outlook as a preview to their Q1 2012 Miami Market Report.

Notable attendees included Related ISG principals Philip J. Spiegelman and Craig S. Studnicky, Gina Blanco, Woman’s Council of Realtors Miami Dade Chapter President, Martha Pomares, Maria Elena Arias, Elizabeth Perez, Frances Khawly, Vivian Macias, and Mia Marchand and Maria Nazur.

The NAHB debuted the IMI in September, and in each subsequent month, the index has improved.

The National Association of Home Builders/First American Improving Markets Index added 29 more metropolitan areas to its ever-expanding Improving Markets Index (IMI), a specially-crafted survey of the nation’s best-performing urban areas.

Now representing 36 states, the IMI has grown exponentially since its launch in September, with each release spotlighting more and more signs of an economic – and housing – recovery.

New entrants to the IMI included Boston, Detroit, Kansas City, Portland, Memphis, Salt Lake City and Miami, the latter city perhaps the most telling case of optimistic growth. Swamped with distressed homes, Miami’s market was on a free fall after the market crash in 2008, but, with a wave of foreign investment propping up the city’s housing sector, its economic prospects have been more than positive as of late.

NAHB Chairman Bob Nielsen said that it has been nothing but good news since the IMI launched.

“The number of improving housing markets has risen for six consecutive months, and 36 states now have at least one metropolitan area on the list,” Nielsen said. “This indicates that despite the many challenges that continue to drag on a housing recovery … improving conditions are slowly but surely spreading from one housing market to the next.”

Kurt Pfotenhauer, the vice chairman of First American Title Insurance Company, said the sheer size of the index is proof enough of a market turnaround.

“The fact that there are nearly 100 markets now on the improving list shows that the momentum is building for a housing recovery and that more buyers and sellers are starting to feel confident enough to return to the market,” he said.

Designed to track housing markets throughout the country that are showing signs of improving economic health, the index measures employment growth from the Bureau of Labor Statistics, house price appreciation from Freddie Mac and single-family housing permit growth from the U.S. Census Bureau in its assessments.

David Crowe, the NAHB’s chief economist, said that though some markets are still hurting, others are clearly on the mend.

“While many of the markets on the February IMI are far from fully recovered, the index points out where employment, home prices and housing production are no longer retreating and have held above their lowest recession troughs for six months or more,” Crowe said. “This is a sign that a large cross section of the country is starting to turn the corner as local economic conditions stabilize.”

A complete list of all 98 metropolitan areas currently on the IMI can be viewed here: www.nahb.org/imi.

Short sales, which have been criticized for being too difficult, may become more frequent with recent decisions by PMI Group.

The PMI Group, the embattled mortgage insurer, granted Fannie Mae mortgage servicers with short sale rights late last week, a measure that allows further access to the pre-foreclosure sales strategy.

Typically, a mortgage insurance company must approve short sales that occur with a guaranteed loan, but a HousingWire story reports that under PMI’s new rules, servicers can now complete short sales and deeds in lieu of foreclosure without its own, separate approval.

PMI is just the latest in mortgage insurers that have given Fannie such powers. Already, Genworth, MGIC, Republic Mortgage Insurance Co. and Radian Guaranty have loosened their own short sale regulations, loosening control over a sales strategy that, despite its usefulness, has been plagued with excess regulations and loopholes.

In the HousingWire piece, a spokesman for Fannie said that fluidity will be the key thing in short sales going forward.

“A Fannie spokesman said obtaining these agreements from the insurance companies is part of a broader effort to speed up the process and boost short sale completions,” the article stated. “The mortgage giant has also distributed its short-sale processing software to multiple listing services around the country.”

According to data from the Federal Housing Finance Agency, which regulates Fannie and its brother GSE, Freddie Mac, the two firms completed 28,000 short sales and 3,000 deeds in lieu of foreclosure in the fourth quarter, which was down from the 31,000 transactions in the third quarter.

Those numbers represent a substantial uptick from historical short sales data, which had always lagged behind REO sales in total volume. According to HousingWire, in the fourth quarter of 2008, the GSEs completed just 6,000 short sales and deeds in lieu.

Looser underwriting standards, long thought to be the missing piece to a housing recovery, may be approaching.

It’s no secret that underwriting standards at banks made an about-face following the market scares of 2008, and that some agents have experienced difficulties selling homes in the new lending environment.

A new development, though, would undoubtedly be the loosening of underwriting standards at those same banks, a break that many have pegged as the ultimate sign of a housing turnaround; and according to new data from the Federal Reserve, that reality may not be too far from the present day.

As written by Jessica Wilkie, a Realtor based in Washington, D.C., the latest quarterly survey by the Fed of is member banks showed a big relative shift in lending behavior from banks.

Of the 53 banks the Fed surveyed, none reported that they tightened their lending standards for prime borrowers, a finding that, given past responses, is especially pronounced. Specifically, 50 of the banks said that standards were “basically unchanged,” in the words of the survey, while the other three reported standards that were “eased somewhat.”

“Looser mortgage lending standards should mean more home loan approvals for buyers, and fewer contract cancellations,” Wilkie wrote. “This can spur the housing market forward.”

Of course, Wilkie also notes that, even with the fourth-quarter stagnation in underwriting, lending standards still remain historically high, especially in regards to household income, overall assets ans credit scores. Just from a year ago, the minimum credit score requirements, downpayment requirements, and maximum LTV ratios are all higher. The Fed’s fourth quarter survey could be a turning point in lending, but a higher number of banks reporting “eased” standards remains the ultimate tell-tale sign of an improved lending environment.

And, interestingly, while banks are easing lending for U.S. mortgages, they are tightening lending on the international scene. The Wall Street Journal reported last week that in response to European debt scares, loans to European counterparts have declined from Fed member banks.