Phoenix/Scottsdale Real Estate

Fannie Mae HomePath Update: On January 28^th Fannie Mae announced 3.5% seller assistance to cover closing costs on Fannie Mae’s HomePath properties. The program is good for HomePath purchases that close by May 1, 2010.  For more information go to www.homepath.com.

Jobs Report Headlines: The jobs report for January showed a loss of 20,000 compared to forecast of a 15,000 gain. The unemployment rate was 9.7% (aka U-3) down from 10.0%. However, among other important data in the report were in 2009 the economy lost 4.8 million jobs or 600,000 more than previously thought, 8.4 million jobs have been lost since the recession began in December 2007 or 1.4 million more than previously thought and the under employed number (aka U-6) declined from 17.3% to 16.5%. Note the unemployment rate (U-3) only reports those who are receiving benefits for 26 weeks. As we know many are on extended unemployment benefits or are working part time but looking for full time work (U-6). These people are what makes the under employed number so big and perhaps a better measure of the real unemployment rate.

Interest Rates

One impact from our large national budget is that the government has to sell Treasury notes and bonds to fund the spending. If the number of buyers goes down (say China is not interested or buys less than expected) then the rate of return has to increase to attract buyers which results in increased rates. Speaking of rates the President of the Boston Federal Reserve has said that he believes that when the Fed stops buying MBS mortgage rates could increase to almost 6% pretty quickly.

The Australian Central Bank in a surprising move kept its key lending rate at 3.75% (ours is zero to .25%), the ECB kept its key rate at 1.00% and the Bank of England followed suit by keeping its key rate at .5%. The Australian bank said in its statement that it wanted to see how the three previous increases were working before taking any further action. It also said that if the economy continues to improve it was likely that further increases would be needed.

For the week retail mortgage rates moved lower to 5.00% or slightly lower as the stock market experienced a sharp decline late in the week. The decline was driven by worldwide concerns about sovereign debt that could slow down or stop the economic recovery. Finally, along those lines, the Congress approved increasing our national debt limit to a staggering $14.294 TRILLION.

Note that actual market rates vary geographically and by lender, credit score and Loan to Value.

Source: Federal Reserve Statistical H.15.

Mortgage Industry Update

·         In the new national budget the President proposes to increase FHA’s annual mortgage insurance premium from the current .55% to at least .90%. This rate is applied to the loan amount and is then paid monthly with the mortgage payment. If Congress agrees to the increase then the Up Front Mortgage Insurance Premium (paid up front and included in the loan amount) would be reduced from the previously proposed increase of 2.25% down to 1.00%.

Good News

·         In the fourth quarter 2009 non-farm productivity rose 6.2% the quickest pace in six years and above forecast of 6.0% according to the Labor Department.

·         The ISM Manufacturing Index increased to 58.4 in January from 54.9 in December.

·         Construction spending fell 1.2% in December to the lowest level since 2003. For all of 2009 spending was down a record 12.4%.

·         Pending home sales were up 1.0% in December and up 10.9% for all of 2009 compared to 2008.

Statistics of Interest/Concern

·         Consumer spending rose .2% in December slightly below forecast. For all of 2009 spending was down .4% the sharpest decline since 1938.

·         In December defaults by small and medium size businesses on loans, leases and lines of credit fell for the first time in two years according to PayNet. However, moderate delinquency while declining from 4.26% in November to 4.22% in December was still more than double what it would be in more normal times.

·         Consumers borrowed less for a record 11^th consecutive month in December according to the Federal Reserve.

Foreclosure Headlines

·         New research suggests that when a home value falls below 75% of what the homeowner owes they start seriously considering walking away (Strategic Default). For the third quarter 2009 it was estimated that 4.5 million homeowners were at or below the 75% threshold. Data released last week suggested that the latest number could be as high as 5.1 million homes or 10% of all homes in the U.S. with mortgages. It has also been estimated that in 2008 588,000 or 17% of mortgage defaults were homeowners who were capable of making the payment on their mortgage but simply decided to walk away. Finally, according to First American Core Logic it would cost about $745 Billion to restore upside down homeowners to breakeven on debt to value or roughly what the 2008 Economic Stimulus package cost.

·         According to Tom  Farley, CEO of the Arizona Association of Realtors while Arizona’s anti deficiency laws protect a large number of property owners in foreclosure there is no statute that provides this protection to any property owner in case of a short sale. The bottom line is short sellers need to seek advice of legal counsel.

Job Market Headlines

·         Initial weekly jobless claims were up by 8,000 to 480,000 higher than forecast of 455,000.

·         The four week moving average for weekly jobless claims was up by 11,750 to 468,750.

·         Continuing claims were 4.6 million up 2,000 from the previous week.

·         Challenger, Gray & Christmas reported planned layoffs in January increased to 71,482 from December’s 45,094. The January number is much better than a year ago when reported layoffs reached 271,749.

Commentary/Observations

The big question these days for the housing industry is what is going to happen to Fannie Mae and Freddie Mac? Will they or should they become official agencies or departments of the government? The Congressional Budget Office (CBO) says yes. It estimates that it will cost $291 Billion to bail them out and at least another $99 Billion over the next decade. The Administration has not made a decision yet but is showing only what cash it injects into the two entities which so far is $112 Billion. The agencies have a combined $3.9 TRILLION of debt. Interestingly enough Fannie and Freddie got their start in the late 1930’s as government agencies but in 1968 President Johnson privatized them to keep their debt off the books as the cost of the Vietnam War increased.

The FHA continues to struggle as it reported 90 day plus delinquency was at 9.1% in December up from 6.5% just a year earlier. In addition, loans in foreclosure were up 26% from a year ago. It projects that it will have to pay claims on one in four of its 2007 loans which is the highest rate in three decades. Also it expects to lose $10.5 Billion from those popular down payment assistance programs. All the news is not bad however as buyer credit quality has increased. The average credit score in the two years prior to 2009 was 630 but in 2009 the average increased to 690. The increase in scores is due in part to many lenders who do FHA loans increasing their minimum scores.

S & P believes that U.S. banks will lose $800 Billion between 2008 and 2010 and estimates banks are only one third of the way through mortgage losses in their portfolio’s. They also said that they see no big bank ($100 Billion in assets) failure this year. In a related story Market Watch said that the big banks (Chase, Bank of America & Wells Fargo) may have to repurchase up to $10 Billion in bad loans from investors and Fannie Mae and Freddie Mac.

SHORT SALE/FORECLOSURE WARNING! N If you have done a short sale or foreclosure, are thinking about it or know someone who is consider the following. Banks have become increasingly aggressive in collection efforts against borrowers who do a short sale or foreclosure where a balance remains. The primary targets so far seem to be borrowers who did a strategic default (walked away from the home even though they could afford it). The banks are converting the secured debt to unsecured and then pursuing the borrower. According to the FDIC from January 2009 thru September 2009 banks collected $1.01 Billion or 48% more than the same period a year earlier. This is all bottom line profit folks! The banks are being very careful in the short sale agreements to preserve their rights. The good news is that Arizona and California have anti deficiency laws that protect the homeowner from collection activity but only on a primary residence. Given the huge number of dollars involved and the related risk if you are considering a short sale or foreclosure get the best advice you can.

Loan Modification Help: For homeowners with a Freddie Mac loan they can contact the City of Phoenix NHS office at (602) 258-1659 for assistance with their loan modification, debt counseling and other mortgage related matters. The service is new and it is free!

More Loan Modification: The Hope for Homeowners program is back in the news this week. Apparently the Treasury Department has finally figured out that lowering payments is fine but reducing loan balances is even better. Some 15 million homeowners are upside down in their homes and the concern is an increasing number of them may throw in the towel and move on. Yah think!

Interest Rates

At the Federal Reserve Board meeting this week the Board said it will maintain its position on rates for the foreseeable future. However, with respect to mortgage rates and its support of them since early last year which ends at the end of March, the Board said “it is prepared to modify those plans if necessary to support financial stability and economic growth”. Meanwhile retail rates hovered around 5% for most of the week. More and more analysts are suggesting that maybe we will not have the anticipated increase in rates and even if it happens it will not be as severe as previously thought.

Note that actual market rates vary geographically and by lender, credit score and Loan to Value.

Source: Federal Reserve Statistical H.15.

Mortgage Industry Update

·         The Treasury Department is working to help clear up the backlog of about 450,000 loan modifications that are in the Trial period and moving them to Permanent status. The Department issued new guidelines this week that it says will help speed up the modification process. In a novel approach Treasury is going to require that borrowers provide all forms and documents up front! Previously they had given servicers the ability to decide how they wanted to get the information. The new rule is effective June 1. Many of the homeowners in the Trial period have completed the required payments and are simply waiting to be notified that their loan has been permanently modified but servicers are still chasing paperwork.

·         FHA has announced an update to its loan modification program by expanding it to include homeowners that are current or just 30 days delinquent (Mortgagee Letter 2010-004). A loan can be temporarily modified by verbal agreement with the servicer for up to 90 days or in writing for longer under the FHA-HAMP.

Good News

·         Fourth quarter 2009 GDP was 5.7% the highest since third quarter 2003. Forecast was for 4.6%. Note that without a sharp liquidation in inventory the number would have been 2.2%. For the full year 2009 GDP was down 2.4% the deepest annual decline since 1946.

·         The National Association of Business Economists survey showed 61% expect gain in 2010 GDP of 2% or more.

·         The University of Michigan Consumer Sentiment survey for January was 74.1 up from 72.5 in December and the highest since January 2008. Also, the Conference Board’s Consumer Sentiment Index increased to 55.9 in January from 53.6 in December. This was the highest number since September 2008.

·         The ISM Midwest Index of business activity rose to 61.5 in January from 57.4 in December.

·         The National Retail Federation forecast retail sales to grow 2.5% in 2010 compared to a decline of 2.5% in 2009.

·         Durable goods increased .2% in December but well below forecast of a 2.0% increase.

Statistics of Interest/Concern

·         The Congressional Budget Office (CBO) estimates that FY 2010 deficit will be $13.5 TRILLION and that a new jobs bill and war funding requests could push the number higher.

·         December existing home sales fell 16.7% in December the steepest monthly decline on record according to the NAR. For the year sales increased 4.9% while the average price fell 12.4% from 2008.

·         Case-Shiller reported that home prices declined by .2% in November the first decline in 7 months. This is an improvement from a year ago when prices declined by 5.8%. Phoenix prices in November were up 1.1%.

·         The Commerce Department reported new home sales were down 7.6% in December and finished 2009 down 22.9%.

Foreclosure Headlines

·         The Orange County Register (California) reports that foreclosures notices in December were 10,513 which is double the total from March of 2009.

Job Market Headlines

·         Initial weekly jobless claims fell 8,000 to 470,000 which were higher than the expected 450,000.

·         The four week moving average of initial weekly claims rose 9,500 to 456,250.

·         Continuing claims (measures only those on 26 week benefits) fell by 57,000 to 4.6 million however if you add in workers on extended benefits the total number of workers collecting benefits is 10.2 million!

·         According to Fortune magazine the 22 best companies to work for have 87,500 job openings to fill.

Commentary/Observations

The International Monetary Fund (IMF) said this week in its updated Global Financial Stability Report that the global financial system remains “fragile” and that banks need to increase their capital and emerging economies need to be concerned about asset bubbles.

Wednesday the Greek 10 year bond yield surged to 10 year high of 6.7% (our 10 year yield is 3.60%) and the World Stock Index declined for the sixth day. The concern is that sovereign debt will derail the world economic recovery.

Japan’s bond issuance may climb in FY 2011/2012 from an already record amount planned for FY 2011. The increase is to fund rising welfare costs and off-set declining tax revenue. S & P has said that unless Japan produces a credible plan to control its debt and grow the economy it faces a downgrade in its credit rating. This of course would increase the country’s cost to borrow only adding to the problem. Currently Japans debt is about 200% of its GDP but the good news is that because of its huge domestic savings it should be OK for a few years at best. After that the risk of default becomes very real says S & P. Does any of this sound somewhat familiar?

FHA Update Number 1: Changes: This week FHA announced the much anticipated changes to its lending policies. The changes include an increase in up front mortgage insurance from 1.75% to 2.25% of the loan amount, establishment of a minimum credit score of 580 for 3.5% down payment and requiring a 10% down for scores less than 580 and reducing the Seller Contributions from 6% to 3%. See Mortgage Update section below for more details.

FHA Update Number 2: Anti flipping rule waived: FHA has announced a new policy effective February 1, 2010 that temporarily waives its previous 90 day anti flipping rule. The new policy applies to HUD owned, bank owned and privately owned properties and will no longer require a 90 day waiting period from change of ownership before a buyer can use FHA financing. There are certain conditions that apply for the property to be eligible for the waiver. The new transaction must be an arm’s length one and there cannot be any identity of interest between the buyer, seller or any other parties to the transaction. In addition, if the new sales price exceeds the sellers acquisition cost by more than 20% the increase in value must be documented by the lender. Further, a property inspection may be required by the lender to strengthen the case for the excessive value. Finally, no pattern of previous flipping such as multiple sales in the past twelve months can exist.

Interest Rates

The PMI Group Housing & Mortgage Market Review has forecast that rates will gradually rise and average 6% by the end of 2010. Tuesday both India and the UK said they expect higher inflation in their countries and for the world economy as a whole. Typically as inflation heats up rates increase as well. Besides inflation rates usually increase as the economy grows and there is a more positive outlook for the economy. Offsetting the inflation news was the sharp decline in stocks this week which helped keep rates low. Retail rates for the week remained in the low 5% range and within a narrow range.

Note that actual market rates vary geographically and by lender, credit score and Loan to Value.

Source: Federal Reserve Statistical H.15.

Mortgage Industry Update

·         As mentioned above FHA has introduced some changes to its lending policies. Note that the increase in up front mortgage insurance will be effective April 5, 2010 and the credit score/down payment and Seller Contribution changes will be effective this summer. FHA took these steps because its share of the market has grown from 3% to over 35% with the resulting adverse impact on its reserves which have fallen to .53% well below the minimum of 2.00% required by Congress. Thru third quarter 2009 FHA delinquency was at 14.36% compared to 9.64% for all loans. Note that FHA is expected to ask Congress for authority to increase the annual mortgage insurance premium which if granted will result in the lowering of the up-front mortgage insurance payment. Typically a borrower pays a one-time up-front fee for mortgage insurance plus an annual insurance premium that is paid with the monthly payment.

·         Loan modification update: The Treasury says that thru December 2009 there had been 66,465 permanent modifications up from 31,382 in November. There are another 46,056 homeowners whose permanent modifications are pending. In the same report Treasury noted that the best performing lenders were Citi, GMAC, Saxon and Chase while the worst performing were Bank of America, Litton, American home Mortgage Servicing and Wachovia.

Good News

·         The Producer Price Index (PPI) rose for the third straight month in December by .2%. the annual rate in 2009 was an increase of 4.4% in line with forecasts.

·         New housing permits increased by 10.9% in December to 653,000 the highest number since October 2008 yet for all of 2009 permits were down 36.9%.

·         The Philly Fed report of manufacturing expanded in January for the fifth consecutive month although declining slightly from December.

·         The Conference Board’s Index of Leading Economic Indicators rose for the ninth straight months suggesting a strong first half of 2010.

Statistics of Interest/Concern

·         The Financial Times reports that 260 publically traded companies defaulted on their corporate bonds in 2009 the most ever recorded.

·         The U.S. government collected $219 billion in revenue in December 2009 but had to pay out $311 billion. December was the 15^th consecutive month in which a deficit was record a national record.

·         New housing starts fell 4% in December to an annual rate of 557,000 the forecast was for 580,000.

·         U.S. home builder sentiment fell to 15 in January down from 16 the previous month and the lowest level since June 2009.

Foreclosure Headlines

·         First American Core Logic LLP says that about 12% of loans over $1,000,000 are late which is three times what it was a year ago.

·         According to an ASU report lenders foreclosed on 41,000 single family detached homes in Arizona in 2009 the most in any year on record.

·         Moody’s has revised its loss projections for jumbo loans originated between 2005 and 2008 saying it now expects higher delinquencies which will increase through 2010.

Job Market Headlines

·         Initial weekly jobless claims increased to 482,000 from 446,000 the previous week.

·         Four week moving average for initial jobless claims was 448,250 up 7500 from previous week.

·         Continuing claims came in at 4.599 million down 18,000 from previous week.

·         43 states had an increase in the jobless rate in December according to the Labor Department. This was an increase over 36 states in November.

Commentary/Observations

The Treasury Department has been unable to get any lenders holding home equity debt (second mortgages) to participate in a program announced eight months ago. The lenders hold just over one TRILLION dollars in debt which may be nearly worthless. These second lien holders are not working toward solving the housing crisis according to the government. Frequently they delay or effectively cancel short sales and can be an additional hurdle in loan modification. It has been estimated that some of the big banks carry their second liens at more than $150 billion above the real value.

First time home buyer tax credit SNAFU: Homeowners who closed on their purchases before November 6, 2009 file IRS Form 5405 to get the credit. However, so far the IRS has not issued a form for claims after November 6 when the tax credit extension became effective. A new form was expected in early January. It also looks like a buyer will now have to provide “proof” of the purchase and e-file will not be accepted. As always check with your tax professional for the latest details on getting the tax credit.

Interest Rates

So far we have not seen signs of the much anticipated increase in mortgage rates as retail rates remain in the low 5% range. Yes that is higher than the high 4% of recent times but still extraordinary by historical standards. We don’t want to be perceived as crying wolf on rates but folks trust in the markets rates are going to increase and fairly soon.

Note that actual market rates vary geographically and by lender, credit score and Loan to Value.

Source: Federal Reserve Statistical H.15.

Mortgage Industry Update

·         The Federal Housing Finance Agency (FHFA) reports that Fannie Mae and Freddie Mac delinquency for third quarter came in at 7.6% and that 1.6 million homeowners were 60 day’s or more behind on their mortgages.

·         More Fannie Mae and Freddie Mac: One expert estimates that they could lose a combined $448 billion which is about 10% of value of their book of loans. Since September 2008 when the government took them over we have injected $112 billion which means the budget could take a $336 billion hit in the next few years.

·         OK, last Fannie Mae and Freddie Mac: In July 2008 Barney Frank said they were fundamentally sound and “in good shape going forward”. In September the government seized control and committed $200 billion to cover future mortgage defaults. Then in February 2009 the government increased their support to a combined $400 billion. Last month with little publicity the government announced “unlimited” support for these two organizations thru 2012.

Good News

·         The Bloomberg Professional Global Conference Index forecasts an increase in the 10 year note rate in the next six months and is optimistic on global recovery for the sixth consecutive month.

·         Consumer Price Index (CPI) for December was up .1% less than forecast increase of up .2% but lower than last November’s increase of .4%. Note that 2008 CPI was up .1% and 2009 was up 2.7%.

·         Industrial output was up .6% for December which was in line with forecast.

·         University of Michigan Consumer Sentiment Index came in at 72.8 up slightly from 72.5 in December.

Statistics of Interest/Concern

·         Rating service Fitch reported that Commercial Mortgage Backed Securities (CMBS) delinquency for 2009 finished at 4.71%. Fitch predicts that CMBS delinquency could go as high as 12% by 2012 as a large amount of loans come due with little hope of refinancing if credit is not more readily available.

·         The Agriculture Department reports that 38 million people or one in eight received food stamps in October the most recent month data was available. This was an increase of 746,000 from the previous month the ninth record month in a row and the highest percentage ever recorded.

·        KB Home posted its first quarterly profit since 2007 due to a tax gain of $191.7 million.

·        The Commerce Department reported that December retail sales declined .3% forecast was for increase of .5%.

Foreclosure Headlines

·         Several sources are estimating foreclosures in 2010 could be between 3 and 3.5 million exceeding 2009’s 2.8 million.

·         Lender Processing Services LLP reports that delinquency on mortgages hit 13.2% or one out of every seven or so homeowners is in one form of delinquency or the other.

·         Fitch says that 88% of Option Arms originated between 2004 and 2007 are going to adjust between now and 2012. Most if not all will carry increased payments and loan balances they said. Further, as rates increase the problem will only get worse.

·         The delinquency (60 days or more late) on jumbo loans hit 9.2% in December an increase of 300% from December 2008.

·         Realty Trac reports that even though there were 2.8 million foreclosure notices in 2009 only 871,000 homes were actually repossessed.

Job Market Headlines

·         Initial weekly jobless claims rose by 14,000 to 444,000 forecast was for 436,000.

·         Four week moving average for weekly jobless claims fell to 440,750 from 449,750 the lowest level since fall of 2008.

·         Continuing claims came in at 4.596 million down 211,000 from previous week.

NOTE: The weekly and continuing claims data was “seasonally adjusted” without this adjustment initial claims would have been 156,000 more and continuing claims 504,000 more. It seems the government does not include the new unemployment benefits extension program in the data.

·         The National Federation of Independent Business (NFIB) said that that small business optimism declined for the second consecutive month to 88. The NFIB also said that capital spending by small business rose to 18 barely above the 35 year record low.

·         Global Insight says that a potential new wave of regulations and increased taxes may keep businesses from hiring. The Chamber of Commerce and NFIB both agree.

Commentary/Observations

The Committee on the Fiscal Future of the U.S. co chaired by the former head of the Congressional Budget Office (CBO) has said that if we do not raise taxes and/or reduce government spending to curb our debt we risk a “crippling dollar crisis”. Our national debt as percentage of GDP is above 40% and in 20 years could exceed 100% for the first time since the end of WW2.

States continue to struggle with budget problems. A report from State University in New York for third quarter 2009 showed 2009 state tax collections have had the sharpest decline in 46 years. At least 30 states have raised taxes an estimated $112 billion according to the Pew Center.

China increased the reserve requirement on its banks as a way to cool their fast growing economy as a credit boom threatens to create asset bubbles and introduce inflation.

Something New! We decided to start the New Year by upgrading this publications name to be more in line with what we are trying to accomplish. So, please note our new name is Smart Financial Weekly Mortgage & Business Update. I hope you like it! Finally, there is a lot of jobs news below and as we have said before our view is jobs are the key to recovery not only for housing but also the economy as a whole.

Interest Rates

We start off the year with mortgage rates stable from 2009. The good news continues but as we have said before there are forces at play that will mean higher rates in the near term. Most observers believe that the Federal Reserve’s support of rates will end in late March as they have said recently. This will almost certainly mean an uptick in rates. However, a minority of observers think that if it is clear the housing market is not getting better the Fed may make a move to help. In the meantime you may want to watch the ten year Treasury yield as mortgage rates typically move with it. You can see it at www.cnnmoney.com/markets/bonds and you may want to add the link to your favorites. Note that the 10 year Treasury yield increased 1.62% in 2009 from 2.22% to 3.84% which was the highest yearly increase since 1999. The yield finished this week at just over 3.80%. Finally, Freddie Mac has reportedly said it believes that mortgage rates could be as high as 7%+ in the last half of 2010. I hope they are wrong!

Note that actual market rates vary geographically and by lender, credit score and Loan to Value.

Source: Federal Reserve Statistical H.15.

Mortgage Industry Update

·         According to MSN Money the administration is set to announce changes to FHA lending in late January that include an increase in the down payment, increase in the minimum credit score, increase in the mortgage insurance premium along with how it is paid and a reduction in what sellers can pay toward closing costs.

Good News

·         The American Bankers Association (ABA) said late this week that delinquency in seven categories declined in the third quarter. Only home equity loans and mobile home loans increased and they increased to a record 4.3%. The ABA defines delinquency as 30 days or more. Also, home mortgages were not included in the report and are treated separately.

·         ISM Manufacturing Index for December was the highest in four years rising to 55.9 from November’s 53.6.

·         SBA (Small Business Administration) lending increased 37% in the fourth quarter from the previous year.

·         The Commerce Department said that factory orders increased 1.1% in November which was much better than the forecast of .5%.

·         ISM Services Index increased to 50.1 in December from 48.7 in November forecast was for 53. Anything over 50 suggests expansion.

Statistics of Interest/Concern

·         Pay Net reported severe delinquency (180 days late or more) on business lending to small and mid-sized businesses rose in November for the 22^nd consecutive month. These are loans, leases and lines of credit to run businesses.

·         Pending home sales declined 16% in November much more than expected.

·         Vacancies for strip malls hit an 18 year high in the fourth quarter at 10.6% and regional malls vacancy rates were at the highest level in 10 years.

·         Business bankruptcies rose in 2009 to 89,402 up from 2008 64,584 according to Jupiter eSources LLC.

·         According to the Federal Reserve consumer borrowing declined by $17.5 billion in November much more than the forecast of $5 billion. November was the 10^th consecutive monthly decline in consumer borrowing and the decline is the lowest in decades.

Foreclosure Headlines

·         Economy.com estimates 2.4 million homeowners will lose their homes to foreclosure in 2010.

·         Silicon Valley is experiencing the biggest office glut since the dot com bust 5 years ago with more than 43 million square feet of commercial space vacant at the end of the third quarter according to CB Richard Ellis Group LLC. It is expected that foreclosures on commercial property will double in 2010.

·         Commercial real estate loan losses pose the biggest threat to banks in 2010 said U.S. bank examiners. The losses will be “quite high by historic standards” and “hundreds of banks will fail” said Eugene Ludwig former head of the OCC. Most of the banks will be regional and local banks that made commercial and real estate loans in the last few years.

·         The Office of the Comptroller of the Currency (OCC) reported on December 21^st that prime mortgages 60 days or more delinquent more than doubled to 838,000 in the third quarter 2009 from the year before.

Job Market Headlines

·         The Department of Labor reported 85,000 jobs lost in December compared to forecast for no gains or losses. The unemployment rate came in at 10% in line with forecast. For 2009 4.2 million jobs were lost. After the 2001 recession which lasted several months job losses continued for two years and resulted in 1.1 million job losses. The current recession started in late 2007 and ended in the third quarter of 2009.

·         More December jobs data shows the November jobs loss number revised to PLUS 4,000 the first increase since December 2007. However, more distressing data shows 661,000 left the work force. These “discouraged workers” as defined by the Department of Labor have not looked for work in four weeks. In addition, the number of unemployed, discouraged workers and those working part time but looking for full time work was 17.3%. Finally, in the methodology used by the government is something called the “household survey” and it showed 589,000 jobs lost in December.

·         Initial weekly jobless claims were 434,000 up only 1,000 from previous week for a 16 month low.

·         Four week moving average for weekly jobless claims was 450,250 down 10,250 from previous week.

·         Continuing jobless claims were 4.80 million down 179,000 from previous week. The peak for continuing claims was in June 2009 when they hit 6.9 million. Note that the number of emergency claims those for more than 26 weeks increased from 4.91 million to 5.1 million.

·         The number of U.S. cities with unemployment rates above 15% increased in November to 17 up from October’s 15.

·         Outplacement firm Challenger, Gray & Christmas Inc. reported 45,094 job cuts in December the lowest since December 2007.

Commentary/Observations

One definition of “shadow inventory” of homes has three elements. First, homes not listed for sale but likely to hit the market within a year (Arm re-sets on interest only loans and Option Arm’s for example). Second, bank owned homes that have not yet been listed. Third, homeowners who are waiting to sell but only at a price they feel good about. It is unclear how many homes this represents but some estimates have the number at 7 million. In estimating the shadow inventory first American Core Logic is assuming 68% of homeowners 90 days or more delinquent are “cured”. Cure means their default is fixed by either a short sale or loan modification for example. Many think the 68% is too high and as that percentage goes down the number of foreclosures goes up.

Thursday Lennar the third largest home builder released its fourth quarter earnings which showed a profit of $36 million. The problem is that the profit was driven by a $353 million tax gain. They and other companies (mostly home builders, auto industries and financial firms) will benefit from a change in how corporate losses are treated. The new change was part of the legislation extending the first time home buyers tax credit. This new change allows companies to apply losses in 2008 and 2009 to income earned in the previous five years up to 2007. The old law required the losses be applied to two years. Because of this tax benefit Lennar will get a $320 million tax refund this year. The National Bureau of Economic Research estimates that the total cost of the tax credit will be $53 billion.

During the week the yield curve steepened to its highest level since 1990 suggesting chances of a recession by the end of the year are slim and that the economy is expected to grow. The steepness of the yield curve is measured by the difference between the yields on the two year Treasury note compared to the ten year note.

Editors Note: At the beginning of 2009 my goal with this update was to give you a glimpse of some of the factors that influence the mortgage and housing industry’s and let you draw your own conclusions. Hopefully that goal has been achieved and you are better informed than you were when we started. As 2009 comes to a close I thought it appropriate to look at what may be in store for us 2010. Finally, I want to thank those of you who have given me an opportunity to assist you or your clients in any mortgage or related matter. I truly appreciate the opportunity!

Interest Rates

The Federal Reserve has been supporting the mortgage market for some months now and that effort is slowly coming to an end. The question is what happens when the Fed support ends? In a normal world private investors would step up and buy the Mortgage Backed Securities (MBS) but that had not been happening so enter the Fed. What is likely is that to attract investors the returns (yields) will have to be higher to allow for the risk these private investors will be taking. This risk allowance means higher rates. If private investors don’t participate that leaves the government and FHA as the only games in town. Neither of these options is especially attractive or sustainable and may be politically challenging.

Moody’s has recently expressed concern over our huge debt which could put pressure on rates unless a “credible plan is put in place to address our debt issues”. A well known Morgan Stanley analyst has said that the 10 year Treasury yield could go as high as 5.50% in 2010 (the yield was 3.84 at the end of 2009) which could push mortgage rates to north of 7%! Finally, the chart below shows that since early 2004 we have generally had mortgage rates at or below 6%.

TIP: If you want to watch an index that is a good indicator of the trend in mortgage rates watch the 10 year Treasury Yield. You can find it at www.cnnmoney.com/markets/bonds and save it to your favorites for reference.

2010 OUTLOOK: Look for mortgage rates to approach 6% and perhaps higher depending on market conditions.

Note that actual market rates vary geographically and by lender, credit score and Loan to Value.

Source: Federal Reserve Statistical H.15.

Mortgage Industry

Towards the end of the year a number of changes in both conventional and FHA loans were published or proposed. For conventional loans Fannie Mae announced it was raising the minimum credit score from 580 to 620 (previously if you put 20% down or more and had 580 to 619 score Fannie Mae would accept the loan) and lowering the minimum debt ratio from 55 to 50 with compensating factors or 45 without. It also looks like the timeframes for eligibility following a bankruptcy or foreclosure will be increased as well.

Recently Fannie Mae and Freddie Mac went to the Treasury Department to get their limits raised on future government support. Turns out that they got what amounts to unlimited support for the future. Reason for this is that if they had waited until January 1, 2010 or later Congress would have to approve increasing the limits. In addition, new accounting rules go into effect in January that would have required Fannie and Freddie to carry an additional $1.5 TRILLION in debt on their balance sheet (they are currently servicing this debt). This additional debt would have required them to raise more capital and that would have been near impossible. Of course, the other option would have been to get the money from the Treasury.

FHA has gone on record that it will announce changes in January and hinted at what they might be. I am sure at least in part these changes are to address FHA’s growing delinquency problem which currently has one in six buyers delinquent or in foreclosure. In all likelihood the minimum score will be increased (something many lenders are already doing), the maximum debt ratio will be lowered, credit history flexibility will be reduced and perhaps even an increase in down payment to 5% (although unlikely). FHA has also recently revised its condo guidelines and now requires projects not approved in the last two years to be “re-certified”. Finally, there is some concern for FHA as it has seen both its volume and share of the market increase significantly (in previous years market share was less than 5% today it’s about 30%) while its reserves have shrunk to well below the statutory minimum.

In 2009 the mortgage industry saw the introduction of much more regulation of how it conducts its business. In May it was the Home Valuation Code of Conduct (HVCC), in July it was the Mortgage Information Disclosure Act (MIDA) and in January it will be the latest revision to the Real Estate Settlement and Procedures Act (RESPA) and the new Good Faith Estimate (GFE). The RESPA changes have been described as the most sweeping since the 1970’s. These regulations and more to come are likely to make the borrower interaction with the loan originator more challenging for both parties.

TIP:  A proper and complete pre qualification of will be even more important than in past years. Plus educate yourself on the new regulations as they will impact you and your clients.

2010 OUTLOOK:

Conventional and FHA loans will continue to see qualifying standards become more restrictive and as rates increase affordability will decrease as well. Of course if home prices remain at current levels or decline then the affordability factor will be influenced less. Jumbo loans, VA and specialty loan products (the Rural loan for example) may not change much in the coming year although jumbo pricing will increase and the qualifying standards will remain tight. Look for more regulation to increase the complexity of the loan process and expect delivery (service) to be impacted. Finally, do not expect the first time home buyer tax credit to much of an impact on housing in 2010 and it is unlikely it will be extended again.

Good News

There are a number of factors pointing to an improvement in the overall economy including consumer and business confidence is improving; retail sales are up slightly; durable goods, industrial production and non-farm productivity are all improving and household wealth in the third quarter grew for the second consecutive quarter. In addition the decline in home valuation is slowing and existing home sales seem to be improving. GDP forecasts for next year generally predict modest growth. Employers appear to be more optimistic about hiring full time workers in 2010.

2010 OUTLOOK:

I hope the forecasts for GDP are on target or low as the best way to get people back working again is for the economy to grow. However, we could experience a double dip effect and lose most if not all of the ground we have made up. Since housing is what got us in the current crisis it will be housing that gets the economy back on track. Of course, that means keeping people in homes and getting people back to work.

Statistics of Interest/Concern

·         New home sales were down 11% in December, there were only 430,000 new homes sold in 2009 the lowest since 1982 and the number of new homes for sale was the lowest since 1971. No wonder builder sentiment declined in December.

·         Third quarter GDP was revised downward to a final 2.2%. Fourth quarter estimates range from 4 to 4.5%.

·         Lender Processing Services reported that the combined delinquency and foreclosure rate for all loans thru October was 12.6%.

·         Mortgage Bankers Association said this week that MBS (Mortgage Backed Securities) delinquency (30 days or more late) reached 4.06% in the third quarter.

·         The FDIC said that on loans held by them the 90 day or more delinquency rate was 3.43% in the third quarter up by .51% from the second quarter.

·         According to Real Estate Econometrics LLP unpaid loans on commercial property were 3.4% at the end of the third quarter and could go as high as 5.3% in two years. Of the 35 biggest regional lenders that got TARP money commercial construction loans are 37% of the group’s total loans outstanding.

·         The Commerce Department said that consumer spending was flat in October and it revised its September numbers from up .8% to down 1.6%.

·         Producer Price Index rose 2.4% from December 2008 to December 2009.

·         In the third quarter banks had to repurchase $7.1 billion in defaulted single family home loans this compared to $1.9 billion in the second quarter. Most of the repurchases were by Bank of America and Chase.

·         FDIC head Shelia Baer says bank failures will peak in 2010.

Foreclosure

The economy suffered a record 3.9 foreclosures in 2009 following 2008 number of 3.2 million. In addition millions of homeowners are upside down in their homes. Many more are close to being upside down. Deutsche Bank estimates that 1 in 5 homeowners owe more than their home is worth. As shown above mortgage delinquencies are very high and clearly more foreclosures are coming. Worse yet millions of interest only Adjustable Rate Mortgages (ARM’s) and Option Arm loans will be re-setting in 2010 and 2011. These loans will add to the foreclosure inventory at some point. The number of personal bankruptcy’s in 2009 will be double that of 2007 or about 1.4 million. Add it all up and it seems to me that we will be dealing with foreclosures and their consequences for some time to come.

So far, the solution to the problem has included HAMP (loan modification); HAFA (new foreclosure program); Deed for Lease program (homeowner leases home from Fannie Mae instead of foreclosing); First Look Initiative (new helps buyers compete with investors on REO purchases); HOPE NOW; NACA and a variety of other organizations trying to help homeowners avoid foreclosure. At this point most observers agree that all of this has had only a modest impact on the problem. Some homeowners have taken it upon themselves and simply walked away from their homes even though they can make their payment (this is called a Strategic Default). These homeowners simply determined that because they owe way more than the home is worth it is financially better for them to walk rather than wait many years for any equity. One solution to this problem is for lenders to reduce loan balances to current market value. Shelia Baer head of the FDIC has proposed this for certain lenders that they insure. In addition, some analysts think that with Fannie Mae and Freddie Mac getting an unlimited line of credit from the Treasury loan balance reductions may be coming and forced on lenders under certain circumstances. If so it will be costly but it is about time in my view.

2010 OUTLOOK:

Unless the various program mentioned above start to make a real difference I don’t see much improvement in the foreclosure situation. However, if we do get an aggressive loan balance reduction program in place and operational in the early part of the year it could make a difference.  

Jobs

The year ended with the unemployment rate at 10.0%. For the last week of the year initial weekly jobless claims came in at 432,000 down 22,000 from the previous week a level not seen since July 2006 and the 17^th consecutive weekly decline.  The four week moving average was also down as well. Continuing claims were down 57,000 to 4.9 million. At year’s end there were 4.7 million workers getting unemployment benefits. CareerBuilders.com reported that in its survey 20% of employers plan on hiring full time employees in 2010. In December the House passed a $155 billion jobs creation program that the Senate will consider in early 2010. Among other things the bill provides for up to an additional unemployment benefit extension of 26 weeks. There is no question in my mind that jobs are the key to recovery. So far it does not look like the stimulus package passed earlier this year has made much of a difference in creating or saving jobs.

2010 OUTLOOK: My view and hope is that by mid-year unemployment moderates and the full impact of the stimulus and other government actions start to pay off.

Commentary/Observations

A lot of ground has been covered so far and I hope you are still with me as we face perhaps one of the most important years since WWII ended. There are still some “wild cards” out there that could influence the recovery and our economy for years to come. Perhaps the biggest wild card is what impact will our enormous debt have on recovery?  Recently Congress raised the national debt ceiling to $12.394 TRILLION from just over $12 TRILLION. The states collectively have a massive budget deficit led by California’s $21 Billion deficit. Moody’s has expressed concern that if we don’t get our financial house in order soon our triple A rating could be gone. The European Commission said just this week that after two years of bank system issues and recession the Euro Zone could enter 2010 with a “full blown debt crisis”. At least half of the Zone’s 16 countries public finances are at risk for becoming “unsustainable”. Something has to be done about all of this debt and soon!

Our banking industry is another wild card as it is struggling with historic mortgage, credit card and commercial real estate delinquency. How much of this delinquency turns into foreclosures and loan losses is anybody’s guess. What is clear is that the losses are coming and it is just a matter of when and how big they will be. A partial solution to the housing crisis is to force banks to reduce loan balances but that will just add to their losses. Of course the government could step in and provide some funding but that will just add to our debt and the deficit. Not exactly a good set of choices.

The government wild card may be the most interesting. While Washington has instituted many programs to help deal with the housing and financial system crisis so far these programs appear to have mixed results at best. With a mid-term election coming this fall it will be interesting to see how the key players act.

Another wild card is that at least one well respected bond strategist has suggested that the Bond market bubble will burst and it will be sooner rather than later perhaps even in 2010. His reasoning is the steepening of the yield curve (the difference between the two year and 10 year Treasury yield). Such an event would cause rates to accelerate upward quickly. Tempering this observation is a Market Watch survey of the 18 primary bond dealers which found that most expect the 10 year Treasury yield to be about 3.76% until mid year and finish the year at 4.16%. The reality is that there are too many factors at play and no one knows for certain except that rates will increase in 2010.

Lastly, the risk of inflation is very real. A recent survey by the Conference Board revealed that many consumers believe prices will increase more than 5% in 2010. In addition gold has always been a historic hedge against inflation and it set a record price in 2009. An interesting trend comes from Google by way of Web Search who said that the number of web searches for the word “hyper inflation” increased dramatically in 2009. With all of the government spending and money in the system it seems likely that we will see inflation at some point in the next year or two.

Well, there it is all 2,700 or so words! For those of you who have made it this far, congratulations and thanks. I hope we have given you something to think about. We live in challenging times and one of the best tools to survival is information. Lastly, I want to wish all of you a very Happy New Year and hope that 2010 brings you all of the success you seek!

Reminder: If you or anyone you know is interested in getting FREE assistance with a loan modification please let me know or have them contact me.

Interest Rates

Retail mortgage rates maintained their sub 5% position for the week. In a statement after its meeting this week the Federal Reserve made it a point to reiterate that its MBS program (to support keeping mortgage rates low) will end as scheduled on March 31, 2010. There had been some chatter in the market that the Fed would extend the program and that does not seem to be the case. This came after Moody’s comments on Monday saying the sovereign debt risk is rising globally and especially in the U.S. They predicted long term rates will increase globally in 2010 and may increase more rapidly than expected. Moody’s added that the U.S. will have to put in place a “credible plan to address the problems of large debt”. Absent a strong policy response the U.S. triple A credit rating will be under threat in two to three years. So, gentle reader, as we have said for many weeks now the specter of increasing rates looms large on the horizon.

Note that actual market rates vary geographically and by lender, credit score and Loan to Value.

Source: Federal Reserve Statistical H.15.

Mortgage Industry Update

·         Bloomberg reported this week that Fannie Mae and Freddie Mac are in discussions with the Treasury Department to increase their $400 billion lifeline before the end of the year. Between the two they represent the largest sources of mortgage financing in the country. They have used $111 billion of the $400 billion in less than a year.

Good News

·         Conference Board index of leading economic indicators was up .9% in November above forecast of .7%.

·         Industrial production rose .8% in November after being flat in October.

·         Housing starts rose 8.9% in November the biggest increase in six months according to the Commerce Department.

Statistics of Interest/Concern

·         FDIC head Shelia Baer said that in 2010 bank failures will peak.

·         The Consumer Price Index (CPI) rose .4% in November after a .3% increase in October the Labor Department said.

·         Producer Price Index (PPI) rose 1.8% in November up from an increase of .3% in October. Forecast was for increase of .8%. Note that the Labor Department said the year over year increase was 2.4%.

·         The New York Empire State index of business conditions fell 2.55 in November.

·         Capital One at 9.6% and Discovery at 8.98% reported charge off’s on credit cards rose in November. A charge off is debt that the creditor does not believe can be collected. Both reported 60 day plus delinquency near 6%.

·         The National Association of Home Builders sentiment index declined slightly in November. The decline was mostly due to concerns about the weak job market.

Foreclosure Headlines

·         In testimony before the House Financial Services Committee Laurie Goodman veteran MBS analyst and Senior Managing Director of Amherst Securities said that her analysis led her to conclude that negative equity was the biggest driver in foreclosures and that employment was a catalyst. Her research further caused her to conclude that reducing loan balances would be a more effective way to reduce foreclosures than reducing monthly payments.

Job Market Headlines

·         The House approved a $155 billion job creation bill this week that the Senate is expected to consider shortly after the New Year begins. Among its provisions is an extension of unemployment benefits for an additional six months. In a separate but related action the House attached an extension of two months unemployment benefits to a mandatory military spending bill.

·         Weekly initial jobless claims were 480,000 up 7,000 from the previous week and above forecast of 465,000.

·         The four week moving average came in at 467,500 down 5250 from previous week.

·         Continuing jobless claims were up slightly to 5,186 million.

·         The Labor Department reported that in November more states had a decline in the unemployment rate than had an increase. Compared to October’s data which showed 29 states had an increase the November data is an improvement.

Commentary/Observations

Moody’s Delinquency Tracker of Commercial Mortgages (CMBS) reports that in November delinquency was 4.47% up .46% from October and that the total of delinquent loans was about $30 billion. This is considerably higher than the December 2008 total of $6.7 billion. Four states had delinquency above 10% one was Michigan another was…………………..Arizona.

According to a USA Today analysis of federal salary data the number of federal employees making $100,000 per year increased from 14% to 19% in the recession’s first 18 months. Also in the period from December 2007 until June 2009 the number of Defense Department employees making $150,000 per year increased from 1,868 to 10,100. But wait there is more. At the Department of Transportation only one person was making $170,000 or more in late 2007, but in mid 2009 that number had increased to 1,690. Finally, the average federal employee salary BEFORE overtime is now $71,206.

The Washington Post reported late this week that Citigroup will not have to pay billions in taxes as part of their deal to repay the TARP money we provided to keep them from being broken up or worse.

Important Update: A new program from the government for Short Sales and Deed-in-Lieu of Foreclosure was announced recently. The program is called the Home Affordable Foreclosure Alternatives Program (HAFA) and is part of the Home Affordable Modification Program (HAMP). The program provides financial incentives to servicers and homeowners who utilize a Short Sale or Deed-in-Lieu to avoid foreclosure. If you would like a copy of the November 30, 2009 Directive with program details please let me know.

Interest Rates

Retail mortgage rates closed the week about .25% higher than what we started the week with. Could this be the beginning of a more regular uptick in rates? Conventional wisdom has it that the rates will move higher but the move up will be bumpy. Stay tuned.

Note that actual market rates vary geographically and by lender, credit score and Loan to Value.

Source: Federal Reserve Statistical H.15.

Mortgage Industry Update

·         An amendment to HR 4173, the Wall Street Reform and Consumer Protection Act, allows bankruptcy judges to modify mortgages. There are a number of big time sponsors for this amendment, which could light a fire under banks to move the loan modification process along more quickly. In the past, the banking lobby has been able to get similar legislation defeated.

·         A new Hope Now Alliance website lets HUD approved counseling agencies in certain markets submit loan modification applications on behalf of certain distressed borrowers. The program is called Hope Loan Port and GMAC, Chase, Sun Trust, PNC and Saxon Mortgage are part of the pilot program. In a related note, Chase Bank says that it has been more successful with its own internal loan modification process than with the Making Home Affordable program. It said that 31% of homeowners offered Trial Modifications under the government plan never sent in a single payment.

·         GMAC announced underwriting changes for buying a home after foreclosure. The timeframe is 5 years with a minimum down payment of 10% and minimum credit score of 680. The minimum timeframe from Chapter 7 bankruptcy is 4 years and Chapter 13 bankruptcy is 2 or 4 years depending on the disposition.

·         Last week one of our sources, AmTrust Bank, was taken over by the FDIC, then quietly but quickly acquired by New York Community Bancorp. So far this year 130 banks have failed compared to 25 in all of 2008.

Good News

·         U.S, households wealth rose $2.7 Trillion in the third quarter the second quarterly increase in a row according to the Federal Reserve.

·         Zillow says homeowners will lose about $500 billion in value this year, a big improvement from 2008 when $3.6 Trillion was lost.

·         The Business Roundtable said its CEO Economic Outlook Index moved strongly positive to 71.5 from 44.9 in the third quarter.

·         Freddie Mac said that its Home Price Index increased .9% in the third quarter following a 2.0% increase in the second quarter.

·         The Commerce Department reported that wholesale inventory increased by .3% in October the first increase in more than a year. The forecast was for decline of .5%.

·         Retail sales were up 1.3% in November much higher than the forecast of .6%.

·         University of Michigan consumer sentiment index for November increased to 73.4 from 67.4 in October the forecast was for 68.8.

Statistics of Interest/Concern

·         Lender Processing Services reported that the combined delinquency and foreclosure rate for all loans thru October was 12.6%.

·         Mortgage Bankers Association said this week that MBS (Mortgage Backed Securities) delinquency (30 days or more late) reached 4.06% in the third quarter.

·         The FDIC said that on loans held by them the 90 day or more delinquency rate was 3.43% in the third quarter up by .51% from the second quarter.

·         According to Real Estate Econometrics LLP, unpaid loans on commercial property were 3.4% at the end of the third quarter and could go as high as 5.3% in two years. Of the 35 biggest regional lenders that got TARP money, commercial construction loans are 37% of the group’s total loans outstanding.

·         U.S. consumer spending fell by $3.5 billion in October according to the Federal Reserve. The decline was the ninth consecutive monthly decline.

·         A Bloomberg national poll revealed that Americans have become gloomier about the direction of the nation than three months ago.

Foreclosure Headlines

·         Foreclosure filings fell 8% in November to 306,627 (ninth consecutive month of 300,000+ filings) according to RealtyTrac. However, this was the fourth consecutive monthly decline in filings. RealtyTrac said they thought the decline was “artificially induced” due to mediation programs that likely postponed the inevitable. Nevada again led the nation with one filing per 119 households Arizona came in at one per 186 households. RealtyTrac said further it estimates a record 3.9 million foreclosures in 2009.

·         According to a study by Experian, 18% of foreclosures are “Strategic Defaults”. A Strategic Default is when a homeowner who is current on all of their debt but is upside down in their home walks away.

·         The Treasury Department reported that thru November 30^th Permanent Loan Modifications had increased to 30,650 from 2711 on September 1 this out of 697,026 homeowners in Trial Modification.

·         This week Standard and Poor’s said that MBS (Mortgage Backed Securities) performance continued to deteriorate in October which they think means more foreclosures in the future.

·         The U.S. Court reported that in fiscal year 2009 bankruptcy filings were up over 100% from 2007.

Job Market Headlines

·         Initial weekly jobless claims increased by 17,000 to 474,000 while forecast was for 455,000.

·         Four week moving average of weekly claims was 473,750, down slightly from previous week.

·         Continuing jobless claims came in at 5.157 million, down 303,000 from previous week.

·         The Labor Department reported that job openings in the second quarter were down 26% from a year ago and that layoffs were up slightly in October.

Commentary/Observations

Dr. Jay Butler of ASU said in November that previously foreclosed property accounted for 41% of the traditional sales. So I guess the question is are we just churning foreclosed property, and if so, what does that say about the housing recovery in Arizona?

In the November 4^th minutes of the Federal Reserve’s last meeting, ten members believe it will be 5 to 6 years before the economy returns to growth, employment and inflation levels consistent with the Boards objectives.

In New York, a new foreclosure tactic has been noticed. It seems that second mortgage holders are selling the debt to collection firms who are able to freeze bank accounts and/or garnish wages in their efforts to collect.