mahermuhawieh , 22

WASHINGTON—State attorneys general stepped up pressure on banks to address allegations that mortgage companies violated state laws when processing foreclosures.

"What we're really trying to do is change a dysfunctional system," Iowa Attorney General Tom Miller told reporters Monday at a conference of attorneys general. "We're hopeful that we can reach a resolution that will be good for homeowners and good for the banks in the long run."

He said the negotiations between the government officials and the banks and could be completed in "a couple" of months, but declined to be more specific.

Source : online.wsj.com

Posted By Maher Muhawieh

After several weeks of sharp increases in mortgage rates to finish off 2010, the New Year has seen a drop in the rates of loans to finance a home.

Freddie Mac reported the average 30-year fixed-rate mortgage at 4.77 percent for the week ending Jan. 6. That's a slight decrease from 4.86 from the previous week. Rates for 15-year fixed-rate mortgages and adjustable-rate mortgages also fell.

Many homeowners rushed to refinance as 2010 began to wind down, and lock in a mortgage at these historically low levels. The housing industry has seen long-term mortgage rates rise to a seven-month high recently after hitting a record low 4.17 percent in November.

Since November, investors have shifted their financial portfolios, moving their money out of Treasuries and back into stocks, as signs point to an economy gaining traction, and fears of a double-dip recession fading away.

As more money pours into stocks, bond yields rise and mortgage rates increase, making the cost of financing a home increasingly more expensive. 

Ironically, low mortgage rates did not help the housing industry bounce back, as the recession, and fear of ending up on the unemployment line, kept buyers and sellers idle.
Even now, home sales may still be stuck in neutral as higher mortgage rates could dampen a return to a robust recovery.

According to Capital Economics, the number of borrowers applying for a mortgage in December was 10 percent less than the same month in 2009. Refinance activity has dropped off 44 percent since mortgage rates hit their lows. Even as the numbers of purchase applications have been increasing along with sales, last year's sales pace could be the worst in 13 years.

LendingTree Chief Economist Cameron Findlay says he expects more pressure on borrower rates to follow the direction of 10-year debt, which is headed higher. He says, "The wider spreads caused by portfolio rebalancing at the end of the year, added with today's debt market sell-off, makes it more likely borrowers will see higher mortgage rates."

While the news of an economy on the verge of a comeback is great news for job seekers, and everyone hoping to stay employed, the news of a stronger economy can be unnerving for those hoping their dream home remains affordable.

Via : www.realestate.com

Posted By Maher Muhawieh

For years commercial real estate has been billed as the next big train wreck. So why are some investors shouting all aboard?

A slowly recovering economy is part of it, though no one expects to make a quick killing on loans and securities tied to office buildings, hotels, shopping malls and the like. The bigger drivers of this rally are the low rates pushing investors to reach for yield by taking on more risk, and the wide open junk bond market that has allowed lots of companies once left for dead to refinance loans and trudge forth.

All aboard the CMBS express?

Those trends made commercial real estate debt and commercial mortgage-backed securities, or CMBS, among the top-performing asset classes this year. Buyers aren't banking on a repeat of the past year's mega-returns, which were driven by the sector's stubborn failure to collapse and by a surge in bond prices fueled both by liberal government buying and fear that the economy was turning Japanese.

But at a time when investors feel the powers that be are forcing them to take on more risk, some strong supply-and-demand factors appear to be on CMBS investors' side, at least if they keep their wits and stick to higher-quality deals.

"Commercial real estate is one of our favorite risk assets," said Christine Hurtsellers, chief investment officer for fixed income and proprietary investments at ING Investment Management. She said the firm has 10% of assets in whole commercial loans and is also overweight CMBS.

Greg Michaud, who is the head of real estate finance at ING, said CMBS values have been especially aided by loose Federal Reserve policy because they are priced against Treasury bonds, which until recently were trading at yields near longtime lows. The yearlong decline in Treasury yields helped to bring in CMBS spreads as well.

"If you can give it some time, employment will bounce back and then commercial real estate will start rising," said Michaud. "And you're getting paid enough that you can afford to wait for a bit, because it's not going to happen tomorrow."

No indeed. A recent Deutsche Bank report notes as "headwinds" the continued weakness of household balance sheets, the rising number of underwater mortgages, the lack of corporate pricing power and the unhappy fiscal outlook for all levels of government. So it's pretty windy out there. Add to that the recent back-up in bond yields, and you have a good, stiff breeze blowing in your face.

"Investors should be cognizant of the impact downside risks could have on their portfolio," Deutsche Bank analyst Harris Trifon counsels.

Even so, many investors are crossing their fingers and hoping for a low double-digit return in 2011, on the assumption spreads will further tighten. CMBS spreads have narrowed sharply over the past year in part because the worst case scenario widely discussed in mid-2009 failed to materialize, and more of the same is expected for 2011.

"A year or two ago these were priced for the second Depression and then some," said Arne Espe, vice president of fixed income research at USAA Investment Management in San Antonio. "We haven't seen the huge defaults a lot of people were expecting."

Bank of America analysts say the high-yield default rate should fall to 2% in 2011 from 13% or so at the worst of the 2008-2009 crisis. Meanwhile high-yield issuance could hit $300 billion, in line with this year's record performance.

Yet CMBS issuance remains deeply depressed, an artifact of the near total collapse of this market after the bust of 2007. New bond sales are expected to rise for the second straight year to a range of $40 billion to $50 billion, yet are likely to remain some 80% below the 2007 peak. As long as the bond market stays open, it appears there will be deals to be had.

No one can guarantee the slow moving commercial real estate recovery won't jump the track, obviously. Deutsche Bank's Trifon warned this month that while banks have managed to slash commercial real estate exposure by $150 billion over the past 15 months, the sector still poses "a systemic risk to the banking system if the economic recovery falters."

What's more, the flood of high-yield issuance creates the prospect of a refinancing cliff in coming years. Deutsche Bank points to $700 billion of high-yield refinancing obligations coming due this year, though it sees that sum as eminently manageable.

Less optimistically, Moody's warned in a recent report that while the wave of extend-and-pretend deals in high-yield land "has allowed many to avoid default and continue to ride out the halting economic recovery, it has built a towering debt obligation in the years ahead."

That doesn't sound healthy. Even so, some bond buyers say the deleveraging and property price declines of recent years make both commercial loans and CMBS a decent relative value at a time when value plays are few and far between.

"With low yields, people are sniffing around everywhere," said Espe, who helps run funds including the USAA Cornerstone (USCRX) fund, which invests up to a fifth of its money in real estate related plays. "There is some risk, but it is hard to stress super seniors enough to lose money."

And while it may seem like everyone and his brother is piling into high-yield this and mortgage-backed that, the lesson to skeptics from the past decade is that the market can stay irrational far, far longer than you can stay solvent.

"Yes, I'm worried about herding," said Espe. "But I think the move into these assets is just beginning to happen."

Via : finance.fortune.cnn.com

Posted By Maher Muhawieh

WASHINGTON — The number of foreclosed homes rose over the summer after fewer people at risk received assistance lowering their monthly mortgage payments, a new report shows.

About 470,000 homeowners received help either directly from banks or through government programs in the July-September quarter, according to a report released Wednesday by the Office of the Comptroller of the Currency and Office of Thrift Supervision. That's a 17 percent drop from the previous quarter and a decline of 32 percent from the same period last year.

At the same time, the number of completed foreclosures rose to nearly 245,000 in the third quarter, an 11.2 percent increase from the previous three months, the report said.

The report only covers the 64 percent of mortgages that are held by national banks and thrifts.

Mark Zandi, chief economist at Moody's Analytics, estimates that there will be 1.8 million foreclosed homes in the United States this year, and that the numbers will be even higher in 2011. Moody's estimates that foreclosures should peak next year at 2.1 million, Zandi said.

A spike in foreclosures is a major reason why home prices fell in 20 of the largest U.S. metropolitan areas in October from September — the first time that has happened since Feb. 2009.

Via : www.msnbc.msn.com

Posted By Maher Muhawieh