Mortgage rates have risen to their highest levels in six months,
threatening to delay a housing turnaround by discouraging potential home
buyers.
The average rate on a 30-year, fixed-rate home loan climbed to 5.29%
for the week ended Thursday, Freddie Mac reported. That’s the highest
since December and up from 4.91% a week earlier.
In early and late April, the rate was at a record low: 4.78%.
“There’s a real risk interest rates could climb up beyond 6% or 6.5%,
which can immediately shut down the housing recovery and undermine the
national economy,” says Bernard Baumohl, chief global economist at the
Economic Outlook Group. “That’s the big battle to watch in the next
couple of months.”
Higher mortgage rates are already having an impact. Applications to
buy a home or refinance a mortgage tumbled 16% in the week ended May 29
compared with a week earlier, the Mortgage Bankers Association reported
this week. Refinancing activity fell 24%. The MBA’s purchase index rose
4.3%.
Refinancings’ share of mortgage activity dropped to 62.4% of total applications from 69.3% the previous week.
While the Federal Reserve is trying to hold down mortgage rates by
buying mortgage-backed securities and Treasury securities, other factors
are driving up rates.
Mortgage rates have been pushed up by recent increases in yields on
long-term Treasury securities, a benchmark for mortgage rates.
If interest rates rise more, that could make a purchase too expensive
for some buyers. Weakened demand would delay the reduction of a high
inventory of unsold homes, which is considered essential for the
market’s recovery.
Some economists say the fundamental building blocks of a housing
recovery are already in place and that rising interest rates will not
derail the process.
“(Higher interest rates) could slow down refinancing, but the housing
recovery is going to be one that takes time, and we’ll see setbacks on
the way,” says Michael Darda, chief economist at MKM Partners. “I don’t
think the housing market recovery is going to be derailed.”
Lawrence Yun, chief economist at the National Association of
Realtors, say rising interest rates often have a short-term effect of
driving more buyers into the market. Those buyers rush to buy so they
can lock in rates before they go still higher.
But that impact is short lived.
“Further rises will impact buyers. That’s a risk,” Yun says. “Mortgage rates have been the lifeblood of the market.”
By Stephanie Armour, USA TODAY
Tuesday, June 19, 2012
Tuesday, June 12, 2012
An Unmanageable Mortgage Clouds Everything
When families are tapped out financially and faced with the
uncertainty of not knowing how much longer they’ll be able to stay in
their home, the prospect of planning or having a positive outlook on the
future seems out of the question.
Many financially strapped homeowners feel frozen in action and it’s no wonder, but here’s the most important point that you need to know:
Even though millions of homes have been lost to foreclosure, you and those you care about absolutely do not need to add to that statistic.
More help is available now than ever before.
As a real estate professional who has earned the Certified Distressed Property Expert (CDPE) designation, I am adept at navigating among the full range of solutions for helping financially distressed homeowners to make a fresh start.
If you, or someone you care about is looking to get out from under the cloud of unmanageable mortgage contact me today for a confidential consultation!
Many financially strapped homeowners feel frozen in action and it’s no wonder, but here’s the most important point that you need to know:
Even though millions of homes have been lost to foreclosure, you and those you care about absolutely do not need to add to that statistic.
More help is available now than ever before.
As a real estate professional who has earned the Certified Distressed Property Expert (CDPE) designation, I am adept at navigating among the full range of solutions for helping financially distressed homeowners to make a fresh start.
If you, or someone you care about is looking to get out from under the cloud of unmanageable mortgage contact me today for a confidential consultation!
Thursday, June 7, 2012
SEC charges ex-Countrywide CEO Mozilo with fraud
Former Countrywide Financial CEO Angelo Mozilo and two other former
officials of the mortgage giant were charged with fraud by federal
regulators Thursday in the first government lawsuit against top
corporate executives for actions related to the financial crisis.
The Securities and Exchange Commission accused Mozilo, 70; former Countrywide CFO Eric Sieracki, 52; and David Sambol, 49, former president, of falsely leading investors to believe the mortgage giant had avoided subprime-lending mistakes, even as Countrywide issued “riskier and riskier” loans.
Those loans generated billions in profits for Countrywide, a major
player in the national subprime mortgage market that collapsed in 2007,
helping start a global financial meltdown. Bank of America (BAC) acquired Countrywide last year in a much-criticized deal.
Mozilo, a Countrywide co-founder renowned for his high salary and other corporate perks, was also charged with inside trading that allegedly produced profits of nearly $140 million on sales of the stock in the nation’s largest mortgage lender.
Defense lawyers denied any wrongdoing by the former executives and vowed to fight the Los Angeles federal civil court lawsuit that accused the three of failing to tell investors Countrywide was:
• Matching any mortgage offered in the marketplace, even risky loans offered by subprime specialists.
• Approving a high percentage of loans with risks above the firm’s “increasingly lax” guidelines.
• Defining “prime” loans as mortgages approved for borrowers whose credit scores were “well below” any definition of prime credit quality.
SEC enforcement director Robert Khuzami said evidence shows the three painted a cheerful “mirage” that falsely characterized Countrywide as operating under “prudent business practices and tightly controlled risk.”
“But the real Countrywide, which could only be seen from the inside, was one buckling under the weight of deteriorating mortgages, lax underwriting and an increasingly suspect business model,” Khuzami said.
As proof the executives knew of Countrywide’s increasingly risky financial condition, the SEC lawsuit cited a corporate e-mail in which Mozilo allegedly told Sambol the firm was “flying blind” on how some risky loans would perform amid rising unemployment and slowing home sales.
In a separate e-mail to Sambol, Sieracki and others, Mozilo allegedly wrote that subprime mortgages had been originated “through our channels with disregard for process (and) compliance with guidelines.”
The SEC charged that Mozilo, while aware of non-public red flags in the firm’s operations, established four stock sales plans, exercised more than 5.1 million Countrywide options and sold the underlying shares for nearly $140 million.
The SEC seeks unspecified fines against the three. It also seeks repayment of allegedly improper stock gains by Mozilo and Sambol, who allegedly got at least $40 million in profits.
Calling the charges “baseless,” Mozilo attorney David Siegel said Countrywide’s underwriting standards and loan portfolio “were well disclosed to and understood by the marketplace.” He described Mozilo’s stock sales as “entirely lawful.”
Sambol’s lawyer, Walter Brown, said the lawsuit “wholly disregards” Countrywide’s credit risk disclosures and media accounts about them.
Defense attorney Nicolas Morgan said Sieracki did nothing wrong and “lost money just like all other investors in Countrywide stock” when the financial crisis erupted with little warning.
By Kevin McCoy, USA TODAY
The Securities and Exchange Commission accused Mozilo, 70; former Countrywide CFO Eric Sieracki, 52; and David Sambol, 49, former president, of falsely leading investors to believe the mortgage giant had avoided subprime-lending mistakes, even as Countrywide issued “riskier and riskier” loans.
EXCERPTS: E-mails from Angelo Mozilo (pdf)
Mozilo, a Countrywide co-founder renowned for his high salary and other corporate perks, was also charged with inside trading that allegedly produced profits of nearly $140 million on sales of the stock in the nation’s largest mortgage lender.
Defense lawyers denied any wrongdoing by the former executives and vowed to fight the Los Angeles federal civil court lawsuit that accused the three of failing to tell investors Countrywide was:
• Matching any mortgage offered in the marketplace, even risky loans offered by subprime specialists.
• Approving a high percentage of loans with risks above the firm’s “increasingly lax” guidelines.
• Defining “prime” loans as mortgages approved for borrowers whose credit scores were “well below” any definition of prime credit quality.
SEC enforcement director Robert Khuzami said evidence shows the three painted a cheerful “mirage” that falsely characterized Countrywide as operating under “prudent business practices and tightly controlled risk.”
“But the real Countrywide, which could only be seen from the inside, was one buckling under the weight of deteriorating mortgages, lax underwriting and an increasingly suspect business model,” Khuzami said.
As proof the executives knew of Countrywide’s increasingly risky financial condition, the SEC lawsuit cited a corporate e-mail in which Mozilo allegedly told Sambol the firm was “flying blind” on how some risky loans would perform amid rising unemployment and slowing home sales.
In a separate e-mail to Sambol, Sieracki and others, Mozilo allegedly wrote that subprime mortgages had been originated “through our channels with disregard for process (and) compliance with guidelines.”
The SEC charged that Mozilo, while aware of non-public red flags in the firm’s operations, established four stock sales plans, exercised more than 5.1 million Countrywide options and sold the underlying shares for nearly $140 million.
The SEC seeks unspecified fines against the three. It also seeks repayment of allegedly improper stock gains by Mozilo and Sambol, who allegedly got at least $40 million in profits.
Calling the charges “baseless,” Mozilo attorney David Siegel said Countrywide’s underwriting standards and loan portfolio “were well disclosed to and understood by the marketplace.” He described Mozilo’s stock sales as “entirely lawful.”
Sambol’s lawyer, Walter Brown, said the lawsuit “wholly disregards” Countrywide’s credit risk disclosures and media accounts about them.
Defense attorney Nicolas Morgan said Sieracki did nothing wrong and “lost money just like all other investors in Countrywide stock” when the financial crisis erupted with little warning.
By Kevin McCoy, USA TODAY
Wednesday, June 6, 2012
Talking With … Michael Wolf: Buying land in a distressed, post-slump housing market isn’t easy
Michael Wolf, 41, has been vice president of land acquisition for
luxury-homebuilder Toll Brothers Inc. in central and eastern Florida
during both the boom and bust of the past eight years. With more than $1
billion in acquisition funds,
the Pennsylvania-based company is looking for land deals in Central
Florida and elsewhere. He spoke recently with Staff Writer Mary Shanklin.
CFB: Last year your company spent about $430 million on land across the U.S.; how much of that was in Florida?
Across Florida we have probably spent $120 million in the last 18 to 24 months. At the same time, the company overall spent about $650 million in that time.
CFB: Is Toll Brothers making more or fewer land purchases these days?
The answer is really twofold. We’re attempting to ramp up but, needless to say, in Central Florida that’s been challenging to do. While it’s been difficult to acquire ground, it’s not for lack of trying.
CFB: What’s been the greatest obstacle?
The difference between the asking price of the land and its actual value to a homebuyer. And, in many cases, it’s been the availability of quality lots in the locations that the homebuyer would be interested in.
CFB: What would it take for you to purchase property in Osceola, Lake or Volusia counties?
One thing we’ve had in mind for outskirts areas has been a focus on age-restricted or active-adult lifestyle communities, because they’re less dependent on quality schools and the availability of traffic concurrency.
CFB: Found anything like that?
We haven’t to date, but there are definitely properties we’re focusing on and we’re definitely talking to sellers about those properties. In some cases, they are still a few years out. And in other cases, we still need to conquer the difference between the the bid and the asking price.
CFB: How has your strategy evolved for the amount of acreage you should buy?
Honestly, it’s tough to qualify in terms of acreage. We expanded from roots in the single-family market to a willingness to do active-adult, to multifamily, to low-rise to mid-rise. So acreage isn’t a big determinant. We’ve been fortunate enough to have $1.14 billion, plus about $785 million in long-term credit. So we’re not really limited in the size and acreage of what we’re looking for, as long as the price and market makes sense. … Acreage isn’t as much of a concern as the minimum lot count. We’re typically looking for 50 to 80 lots, and now we’re looking more at property with a four- to six-year life cycle.
CFB: David Weekley has had success with its scattered-lot building program; could Toll Brothers go that route?
We’ve avoided that in the past. The management structure that we operate under is a project-management system that was developed by Bob Toll, our founder and executive chairman, and our purchases are really conducive to that business model.
CFB: What are some potential land mines for buying distress properties?
For one, it is the ability to convert those assets into a marketable community that will be desirable for homebuyers. And then, on the hard business side, it is the ability to ensure that, during the time it sat in distress, that the entitlements and land-use approvals have not lapsed. Many of those transactions occur in such a short time frame that there is always the concern that it’s been properly foreclosed and all the necessary due diligence has been explored. The bank wants to close in 60 days, and it may take 90 days to do a real due diligence.
From Orlando Sentinel November 2011
CFB: Is Toll Brothers making more or fewer land purchases these days?
The answer is really twofold. We’re attempting to ramp up but, needless to say, in Central Florida that’s been challenging to do. While it’s been difficult to acquire ground, it’s not for lack of trying.
CFB: What’s been the greatest obstacle?
The difference between the asking price of the land and its actual value to a homebuyer. And, in many cases, it’s been the availability of quality lots in the locations that the homebuyer would be interested in.
CFB: What would it take for you to purchase property in Osceola, Lake or Volusia counties?
One thing we’ve had in mind for outskirts areas has been a focus on age-restricted or active-adult lifestyle communities, because they’re less dependent on quality schools and the availability of traffic concurrency.
CFB: Found anything like that?
We haven’t to date, but there are definitely properties we’re focusing on and we’re definitely talking to sellers about those properties. In some cases, they are still a few years out. And in other cases, we still need to conquer the difference between the the bid and the asking price.
CFB: How has your strategy evolved for the amount of acreage you should buy?
Honestly, it’s tough to qualify in terms of acreage. We expanded from roots in the single-family market to a willingness to do active-adult, to multifamily, to low-rise to mid-rise. So acreage isn’t a big determinant. We’ve been fortunate enough to have $1.14 billion, plus about $785 million in long-term credit. So we’re not really limited in the size and acreage of what we’re looking for, as long as the price and market makes sense. … Acreage isn’t as much of a concern as the minimum lot count. We’re typically looking for 50 to 80 lots, and now we’re looking more at property with a four- to six-year life cycle.
CFB: David Weekley has had success with its scattered-lot building program; could Toll Brothers go that route?
We’ve avoided that in the past. The management structure that we operate under is a project-management system that was developed by Bob Toll, our founder and executive chairman, and our purchases are really conducive to that business model.
CFB: What are some potential land mines for buying distress properties?
For one, it is the ability to convert those assets into a marketable community that will be desirable for homebuyers. And then, on the hard business side, it is the ability to ensure that, during the time it sat in distress, that the entitlements and land-use approvals have not lapsed. Many of those transactions occur in such a short time frame that there is always the concern that it’s been properly foreclosed and all the necessary due diligence has been explored. The bank wants to close in 60 days, and it may take 90 days to do a real due diligence.
From Orlando Sentinel November 2011
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