Seattle Short Sales: Extension of Mortgage Debt Relief Act 2014

Great news: Congress (Finally) pass a package of tax extensions approved by the U.S. House and Senate, and headed to the President’s desk for signature, includes important provisions that will help distressed homeowners and commercial property investors with transactions made during 2014. See original article here. 

The law will be extended through 2015. 

Why its important: 

Imagine losing a life savings in a underwater property....then you sell it and/or have it foreclosed...and get hit with a large tax bill from Uncle Sam. If it doesn't sound fair, its because it isn't. We applaud Congress for finally extending this law. 

For more information on your rights contact a Kirkland Real Estate Broker call us for a free consult. 

About us: 

Rylee Park Properties 

520 Kirkland Way, Ste 103

Kirkland, WA 98033

T: (206) 306-4034

Seattle Housing Continues to soften

NWMLS Report: 

Market continues to soften around Seattle according to recent stats put out by the NWMLS. 

We'll use the year over year since since those are typically better indicators than the monthly fluctuations (although the monthly indicators indicate similar issues). 

1. Listings are up 9.6% which creates a large supply of homes. 

2. Closed Sales are down 2.9% yoy. 

3. Months of supply are up 12.9%

4. Median price is up 5.9%, but we would expect that number to decrease as the items 1-3 will likely create a drag on the market in the coming months. 

....Time will tell. 

For more information on your rights contact a Kirkland Real Estate Broker, call us today at (206) 306-4034 or you can email us at scott@ryleepark.com 

Seattle Update: Mortgage Debt Forgivess Act

AP - A recent article on the status of the Mortgage Debt Relief Program.

Foreclosures have been dropping dramatically over the past year, but without help from Congress they could begin to rise again. In 2007, Congress passed a tax exemption for mortgage debt forgiveness. That exemption expired at the end of 2013 and has not been extended, as some predicted it would be.

The recent foreclosure crisis was one of the most dire episodes in U.S. housing history, but it could have been even worse had the banks not forgiven billions of dollars in mortgage debt. Much of that was mandated by legal settlements with the federal government and state attorneys general. Since 2007, banks have approved approximately 2.8 million short sales, according to Black Knight Financial Services. A short sale is when the home is sold for less than the amount of the mortgage.

There is support in Congress for an extension, as well as among state attorneys general and housing advocates. Several bills are being considered that could extend the tax relief through 2015 or 2016, but with the much broader move to overhaul the entire tax code, they appear to be getting lost in the shuffle.

It is difficult to put an exact number on principal reduction mortgage modifications, but they number in the millions as well. All together, billions of dollars were expunged on paper and not taxed as income, as they would have been prior to 2007. These foreclosure alternatives helped and continue to help bring down the number of homes being lost today.

Loans in the foreclosures process are down nearly 28 percent from a year ago, according to Black Knight, but the pipeline, while no longer growing, is still large. More than 3 million borrowers are behind on their mortgage payments, and 1.24 million are in the foreclosure process. Many of those delinquent borrowers could avoid foreclosure through a short sale or principal reduction loan modification.

Even banks and investors could get hurt if borrowers can no longer afford short sales. Short sales have helped to clear much of the distress from the housing market, especially in states where the foreclosure process requires a judge. Those states have huge backlogs of delinquent loans.

"With fewer short sales, you're going to see longer liquidation timelines, so you're going to see more full foreclosures and REOs [bank repossessions]," said Sean Nelson of Fitch Ratings. "With longer timelines, you have more costs associated with liquidation of the properties. More costs translates to lower recoveries for investors.

Weitz - this article is pretty self-explanatory, but we still continue to believe the law will be extended...someday. Without it, foreclosures and bankruptcies would increase dramatically and that is not good for anyone.


For more information, consider contacting a Kirkland Real Estate Broker.


Our Firm:

Rylee Park Properties
520 Kirkland Way, Ste 103
Kirkland, WA 98033


206.306.4034

Extension of the Mortgage Debt Relief Act

Weitz - A great piece in the Washington Post today. Rumor has it their is something in writing to extend the law, but Congress hasn't put it to a vote yet. We'll let you know as we hear anything.

There’s a tax break for struggling homeowners that Congress should not have let expire just before the new year. If it’s not extended, some people selling their homes could get big tax bills.

As the housing crisis in the middle of the last decade drove people into foreclosure, many borrowers were not aware that forgiven debt — including on mortgages — is considered income.

In 2007, Congress passed the Mortgage Forgiveness Debt Relief Act to help people who were down on their luck financially because of the loss of their homes.

The concern was well placed. If people couldn’t afford to keep their homes, sending them a large tax bill just seemed cruel.

The tax exemption played an important role as borrowers who were unable to refinance their mortgages ended up selling them through so-called short sales, in which the lender allows the borrower to accept a price that is less than the amount owed. Often, borrowers trying to get out from under a mortgage can negotiate to have the remaining balance forgiven.

The tax break was supposed to end in 2009. But it was extended twice through Dec. 31, because many people still needed help. It was a decent thing to do. Up to $2 million of forgiven debt qualified for the exclusion ($1 million if married filing separately).

In addition to foreclosures or short sales, debt reduced because of a mortgage restructuring also qualified for relief.

It might not make sense to have to pay taxes on forgiven debt because it isn’t money that was earned. You aren’t taxed on borrowed money because you have an obligation to repay it. However, money you borrow that is then canceled as a result of a foreclosure or short sale counts as income.

If the debt is forgiven, the lender is required to report the amount because you no longer have an obligation to repay the money. Let’s say someone owes $200,000 on a home but can sell it for only $125,000. The difference, $75,000, would be considered taxable income.

Critics argue that it’s time to move on. Allowing the tax break means less revenue for the federal government. Additionally, some taxpayers may be able to still get around owing taxes on forgiven debt if they qualify under what’s called the insolvency exclusion. You may not have to include forgiven debts as income if you can show that your total liabilities exceed your total assets.

Weitz - an exception to the tax is either by filing bankruptcy or insolvency (debts exceed assets), or even foreclosure in some states (including Washington). The reality is that we will push many more clients toward bankruptcy or foreclosure (rather than short sale) which won't be good for the economy.

Yet let’s get real here, folks. This is a tax break that needs to be restored — and immediately.

Yes, things are a lot better than in the depths of the housing crisis. In many areas, as housing prices increase, fewer owners are underwater, meaning they owe more than the home it worth.

However, the housing market still hasn’t fully recovered. Things are better, but not great. In November, the number of properties that received a foreclosure filing was 37 percent lower than in the same month a year before, according to RealtyTrac. But there are still a lot of people who may lose their homes.

More than 1.2 million properties are in some stage of foreclosure, RealtyTrac reports. And some states hardest hit by the housing crisis are still seeing high foreclosure rates. RealtyTrac’s November foreclosure report found that five states posted year-over-year increases in bank repossessions: Delaware (179 percent), Maryland (41 percent), Connecticut (9 percent), Maine (6 percent), and Iowa (2 percent).

Weitz - more than 1.2 Million homes in foreclosure status...that is still staggering...and why we don't think this real estate rally will persist.

In a letter to congressional leaders in support of an extension, the National Association of Attorneys General pointed out that an estimated 7.1 million homes with mortgages, or 14.5 percent nationally, are still in negative equity.

“We continue to believe that this relief is crucial to both the homeowners struggling to regain their financial footing and to the battered housing market whose recovery is slow and still uncertain,” the attorneys general said.

As part of JPMorgan Chase’s $13 billion settlement with the Justice Department and other federal and state partners stemming from misrepresentations about mortgages that were sold, the bank agreed to include consumer aid in the form of forgiveness of portions of people’s principals. Certainly borrowers who might get some of their mortgage debt forgiven as part of that settlement or others because of misconduct by financial institutions shouldn’t face a tax bill.

Extending the mortgage forgiveness tax break is the right thing to do.

Weitz - Agreed! Wake up, Congress! Lets extend this law. We bailed out the banks with real government money. All you are doing is adding insult to injury for folks who lose their primary residence.  

For more information contact a Kirkland Real Estate Broker. 

Seattle Housing Market- Regulation's future

Three Factors That Could Shape the Fate of Housing Overhaul

 At last month’s annual mortgage-industry trade show, most political and industry analysts agreed that there aren’t great odds that Congress will pass a bill addressing the future of Fannie Mae and Freddie Mac before 2014, let alone 2016.

Weitz - Congress CAN'T end Fannie or Freddie because they provide lending or guarantees for a majority of loans these days. Abolishing Fannie and Freddie would destroy the housing market and Congress knows it.

Several developments unfolding right now could make the next five or six months among the more consequential periods for housing-finance policy since the companies were taken over by the government five years ago. Here are three reasons why:

First, Fannie and Freddie are now reporting large profits. This could make it easier for the company’s defenders—who were silent when the firms were hemorrhaging cash during the bust—to more forcefully lobby in favor of less dramatic changes. By next February, when both companies report their fourth quarter earnings, both firms should be able to say that they’ve sent more in dividends to the U.S. Treasury than the amounts they were forced to borrow over the previous five years.

Rising profits could also trigger an important but obscure change in federal budgeting, where congressional accountants “score” the firms as revenue-generating entities. If that happens, Congress would either have to raise revenue or cut spending elsewhere as part of any overhaul.

Second, the Obama administration is moving ahead with plans to install a permanent director to the independent agency that oversees Fannie and Freddie, the Federal Housing Finance Agency. The director of the FHFA is an incredibly powerful job because it can stand in the shoes of the shareholders and board of directors of both companies, plotting long-term strategy and making day-to-day management decisions.

Third, the Senate Banking Committee is working in a bipartisan fashion towards constructing a comprehensive housing-finance overhaul bill that will address the future of Fannie and Freddie.

Bipartisan agreement is far from assured. It involves threading a needle between three general groups: the centrist supporters of the Corker-Warner bill, liberal Democrats who want to see a larger government role (particularly in affordable housing), and conservative Republicans who are wary of continued, heavy federal involvement in the mortgage market.

Whatever the committee produces will essentially mark the starting point for what, if anything, Congress is able to pass in 2015 or 2017. In other words, even if this is only the first inning, a number of key decisions could get made here that define the boundaries for the rest of the game.

House Republicans have advanced their own bill with no Democratic support, which should serve as one end point for any overhaul. How far the more-conservative House Republicans are willing to bend to support a greater federal role in housing could determine how soon a bill arrives on the president’s desk.

Lawmakers further out on the left, meanwhile, are likely to insist that this new system provides sufficient credit access to low- and moderate-income households. They’re wary of any market in which government guarantees mostly serve the borrowers that arguably need them the least. Among the key questions to unfold: what does the White House do if liberals decide that the centrist Senate bill doesn’t go far enough?

The upshot is that the next few months could show whether there’s any reasonable chance of getting legislation passed while Mr. Obama is in office, or whether these decisions will get kicked down the road beyond 2017. For 

Weitz - It will be interesting to watch, but our guess is much of this is classic congressional rhetoric that will not effectuate any materials changes for the indefinite future. Fannie and Freddie were a major reason why the market has recovered as they stepped in to fill the lending void when bank lending dried up. We simply don't see how that can be taken away and not lead a significant fall for Real Estate.

For more information contact a Kirkland Real Estate Broker. 

Seattle Real Estate Update

Tuesday's jobs report showed that construction employment is up strongly, but in many other ways, the report was bad for housing, according to a report by Trulia Chief Economist Jed Kolko.

 The reason: Young adults aren’t getting jobs, a factor that weighs on household formation — the single most important factor to long-term housing demand.

 About 75 percent of 25-to-34-year-olds were employed in September, about the same as September 2012 and closer to the depths of the recession than before the housing bubble started forming. Young people who don’t have a job are more likely to live with their parents and become “missing households” that aren’t renting or buying their own place.

That’s bad for the broader economy in all sorts of ways, such as lower spending on things such as furniture. These missing households are part of the reason why first-time homebuyers have been lagging in the housing recovery.

Weitz - this is an issue that will continue to linger over the economy. Most young graduates are entering the work force to find a very difficult job environment. I think 'under employment' is a huge problem as kids with degrees from great schools are being forced to work in jobs that do not utilize their education.

This coupled, with the huge increase in student loan debt over the past 10 years will be  a drag on the economy for years to come.

 The jobs report is just the latest piece of economic data to pour some cold water on this year’s housing recovery. Existing-home sales were down 1.9 percent in September from a month earlier, in part because of higher interest rates. The month-earlier pace was revised downward.

To be sure, housing is far better off than it was a year ago. The July/August sales pace was the best since 2009, and inventories, while up, remain low by historical standards.

 Still, it’s fair to say that housing has cooled off from the torrid pace seen in spring and summer. Online real-estate brokerage Redfin reported that its gauge of home bidding wars fell for the sixth month in a row in September.

Weitz - It will be interesting to see where the market goes from here. Based on inventory increasing, we anticipate that prices will lower, but much of it is interest rate driven and that is an unknown at the current time.

Contact us at Kirkland Real Estate Broker

Rylee Park Properties 

520 Kirkland Way, Ste 103

Kirkland, WA 98033

(206) 306-4034

Fannie, Freddie ease lending crunch during shutdown

Fannie Mae and Freddie Mac have relaxed rules that would have kept banks from approving mortgages during the government shutdown.

Typically, Fannie and Freddie require lenders to verify a borrower's income with the Internal Revenue Service before closing on a mortgage. But last week, some lenders reported that they could not approve the mortgages because the shutdown had severely curtailed the IRS's operations.

The government-backed mortgage giants have since said lenders could continue to issue new loans even without the IRS's confirmation.

Borrowers who apply for mortgages will still need to sign an income verification request with the IRS. But verification can wait until after the government shutdown ends, and lenders can use other means to verify a borrower's income.

Wells Fargo, the nation's biggest mortgage lender, had originally said all mortgage applications would have to wait until the shutdown ends. But now it is telling underwriters they can move mortgage applications through the pipeline without the completed IRS verification, said Tom Goyda, a spokesman for the bank.

Some banks, however, may be more cautious, according to David Stevens, president and CEO of the Mortgage Bankers Association. Stung by a flood of defaults after the housing bubble burst, lenders are especially wary of borrowers who claim earnings from self-employment or who supplement their wages with freelance work, consulting or other less-thoroughly documented income sources.

In cases like those, said Stevens, lenders may seek to verify the information on a borrower's 1040 by asking for a copy of their bank statement from the month they deposited their 2012 tax refund or copies of the check they sent to the IRS to pay their taxes.

A small percentage of lenders -- perhaps 10% or fewer -- may decide that lending without the IRS income verification is too risky, said Stevens. If a mortgage defaults, Fannie or Freddie could force the lender to shoulder the losses.

"There's less appetite for risk, after the fiscal crisis," said Stevens. And that could be enough to scare some lenders into waiting until the shutdown ends.

For more information on your rights in Real Estate, consider contacting a Kirkland Real Estate Broker.

Our Firm:

Rylee Park Properties
520 Kirkland Way, Ste 103
Kirkland, WA 98033
T: 206.306.4034

Rate increases continue to hamper Banks and the Market

Weitz - More evidence that the increase in interest rates is taking a negative toll on the RE market.

Bank executives have been hoping they could dull the pain of a plummeting mortgage-refinance market by shifting focus to loans for home purchases. So far, that isn't working out.

The Mortgage Bankers Association said Wednesday that mortgage applications dropped 13.5% in the week ended Sept. 6 from the previous week. The data, which include an adjustment for the Labor Day holiday, reflect a 20% drop in refinancing and a 3% decline in purchase loans.

"Demand is significantly down," said Glenn Kelman, chief executive of real-estate brokerage Redfin, which works in 22 U.S. markets. "Anybody who was going to buy a house this year tried to get it done in June or July because they saw the writing on the wall and worried about the rate increase."

Interest rates on 30-year fixed-rate mortgages rose to 4.80% from the prior week's 4.73% in the latest data from the mortgage bankers group. That is up from 3.60% at the end of April.

Weitz - As I've mentioned, that is a tremendous increase in a short period of time. Unless this trend changes, we'll see continued problems in the Seattle Real Estate market.

Refinancing has been a big casualty of the rate jump, starting with a sharp drop three months ago. Refinancings stand at the lowest level since June 2009 and are down 71% from a recent peak in May, the trade group said.

But recent data from the mortgage group show that demand for home-purchase loans also has softened, beginning in April. Purchase applications are still running 7% above their levels of a year ago but are less than expectations.

That bodes ill for lenders that have begun emphasizing loans for home purchases in hopes that it would help offset the refinancing slowdown.

To be sure, rising mortgage rates don't usually affect home purchases made in cash. Roughly one-third of all home purchases were made in cash in July, according to the National Association of Realtors.

Refinancing activity, meanwhile, is much more sensitive to rising rates than is purchase activity.

The MBA on Aug. 22 forecast that overall lending would shrink nearly 32% next year to $1.09 trillion, with a 60% decrease in refinancing but a 14% rise in home-purchase lending.

Still, the most expensive markets tend to get hit hardest when rates rise quickly.

Rising interest rates also mean house hunters might be forced to lower their sights in terms of what they can afford, resulting in smaller loans.

Weitz - Exactly, this is the problem.

Citigroup Inc., C -0.93% which scaled back its home-loan business after the financial crisis, is closing an office in Danville, Ill., that is dedicated to refinancings, a bank spokesman said Wednesday.

The New York lender had opened the office in the small eastern Illinois city "to handle the surge in demand for refinancing; however, due to the ongoing decline in refinance volumes, the excess capacity Danville provided is no longer needed," the firm said Wednesday. The bank notified its employees July 15.

The bank reported $17.2 billion in mortgage originations in the second quarter, down 4% from the previous quarter.

Citigroup is just one big bank o cut jobs in the mortgage business.

Wells Fargo & Co. has cut 3,000 jobs since July. Bank of America Corp. in late August told about 2,100 employees they were being let go due to a decline in refinancing activity. J.P. Morgan Chase JPM -1.92% & Co. is accelerating plans to cut as many as 15,000 jobs in its mortgage division by the end of 2014. The bank now expects to be roughly two-thirds of the way through with those reductions by the end of this year, a spokeswoman said.

All told, the Mortgage Bankers Association expects refinance volume to fall from $1.2 trillion in 2012 to less than $400 billion in 2014, which would be the lowest level for refinancing since 2000.

"What we're going through today is not a temporary, short-term anomaly," said David Stevens, the trade group's chief executive, at a banking conference in Raleigh, N.C., Tuesday. "This is a substantive change in the cycle of our industry."

A slew of lenders this week have warned investors to expect a significant drop in mortgage profits for the rest of the year.

"We're still making money out of it, but it's being really stressed," Kelly King, chief executive of regional bank BB&T Corp., BBT +0.03% said on Tuesday at a banking conference held by Barclays PLC.

BB&T, which is based in Winston-Salem, N.C., expects mortgage production to fall as much as 14% and revenue to drop as much as 28%.

For more information, contact a Kirkland Real Estate Broker. 

Our Firm:

Rylee Park Properties 

520 Kirkland Way, Ste 103

Kirkland, Wa 98033

(206) 306-4034

www.ryleepark.com/

United States Financial Industry - why nothing has changed

Weitz – A great opinion piece from the Wall Street Journal this morning. I will comment where appropriate.

Written by Alan Binder, a professor of Economics at Princeton and former Vice Chairman of the Federal Research.

Next Sunday marks the fifth anniversary of the fateful day that investment bank Lehman Brothers filed for bankruptcy, signaling the start of a frightening financial meltdown. It's a good time to ponder how the U.S. economy was nearly brought to ruin. But will we? Or are we already forgetting?

Consider the stark historical contrast between the 1930s and this decade:

Years of financial shenanigans in the 1920s, some illegal but many just immoral, conspired with a variety of other villains to bring on the Great Depression. Congress and President Roosevelt reacted strongly, virtually remaking the dysfunctional U.S. financial system, including establishing the Securities and Exchange Commission to protect investors, the Federal Deposit Insurance Corp. to protect bank depositors, and much else. The financial beast was comparatively tamed for almost 75 years.

Years of disgraceful financial shenanigans in the 2000s, some illegal but many just immoral, brought on the Great Recession with virtually no help from any co-conspirators. Congress and President Obama reacted comparatively weakly with the Dodd-Frank Act of 2010, which certainly did not seek to remake the U.S. financial system. I am a big supporter of Dodd-Frank, despite its timidity, because laws must be graded on a curve. Sadly, even this good-though-weak law now seems to be withering on the regulatory vine. Far from being tamed, the financial beast has gotten its mojo back—and is winning. The people have forgotten—and are losing.

Here are four examples. There are others.

1. Mortgages and securitization. Piles of unconscionably bad mortgages—underwritten by irresponsible bankers, permitted by somnolent regulators, and passed on like hot potatoes to investors via securitization—were a major contributor to the financial crisis.

One response in Dodd-Frank was a "risk retention" rule requiring issuers of asset-backed securities to retain at least 5% of the credit risk, rather than pass it all on to investors. The idea was that a little "skin in the game" would make Wall Street firms a bit more cautious about what they securitized.

But there was a catch. The 5% requirement does not apply to "qualified residential mortgages" (QRMs)—a term left to regulators to define, but intended to exempt safe, plain-vanilla mortgages with negligible default risk. Dodd-Frank does not ban mortgages that do not qualify as QRMs, nor even does it prevent such mortgages from being securitized. It only requires that lenders retain a tiny portion of the credit risk.

Weitz- what is the point?!...almost ALL of the loans securitized are for 'residential loans' that this makes this law virtually mute.

The law mandated that a specific rule be written within 270 days. More than 1,100 days have now passed, and the country is still waiting. 

Weitz - insert congress joke here.

Just days ago, the regulators issued yet another notice of proposed rulemaking, soliciting comments on (among many other things) two ways to define QRMs. The lighter-touch option would exempt almost 95% of all mortgages from the skin-in-the-game requirement. The "tougher" option would exempt almost 75%. Does anyone doubt which option will be favored by interested commentators? After that, what will be left of the Dodd-Frank requirement?

2. Derivatives. Disgracefully bad mortgages created a problem. But wild and woolly customized derivatives—totally unregulated due to the odious Commodity Futures Modernization Act of 2000—blew the problem up into a catastrophe. Derivatives based on mortgages were a principal source of the reckless leverage that backfired so badly during the crisis, imposing huge losses on investors and many financial firms. Dodd-Frank calls for greater standardization and more exchange-trading, which would create a safer and more transparent trading environment. Wonderful ideas. But the law exempts the vast majority of derivatives. Do you see a pattern here?

It gets worse. Gary Gensler, the chairman of the Commodity Futures Trading Commission, is one of the few real reformers. But he ran into a wall of resistance from the industry, from European regulators, and from some of his American colleagues when he tried to implement even the weak Dodd-Frank provisions for derivatives. And Mr. Gensler's days leading the CFTC look numbered.

3. Rating agencies. The credit-rating agencies also contributed mightily to the financial mess. These private, for-profit companies were presumed responsible for calling out hazards. Instead, they blessed financial junk with coveted triple-A ratings. Honest mistakes? Perhaps. But many critics have pointed out a flaw that cries out for fixing: The agencies are hired and paid by the very companies whose securities they rate.

Weitz - not just paid, but paid VERY well, and arguably, they are entirely dependent on the Banks for their survival. Its a very flawed system.

Unfortunately, Congress could not decide how to fix this flaw. So Dodd-Frank instructed the Government Accountability Office to study "providing incentives to credit rating agencies to improve the credit rating process" and report back within 18 months. The law also instructed the Securities and Exchange Commission to study "strengthening credit rating agency independence" and report back within three years. The GAO issued a report 18 months later, laying out a number of options; it has gathered dust ever since. And the SEC? Well, don't get me started. Amazingly, the rating agencies are still compensated as they were on the day Lehman Brothers crashed.

4. Proprietary trading. The Volcker rule, part of Dodd-Frank, bans proprietary trading by banks, to prevent them from gambling with FDIC-insured funds. President Obama embraced (and named) the rule very late in the legislative game, over the objections, according to multiple press reports, of his chief economic adviser at the time, Lawrence Summers.

The Volcker rule is not the only way to accomplish Paul Volcker's worthy objective. The United Kingdom and the European Union, for example, have proposed different means to the same end. But the Volcker rule is the law of the land here.

Sort of. In practice, the rule is hortatory until detailed regulations are written and promulgated. Dodd-Frank was signed into law in July 2010. The Volcker rule has been tied up ever since by internal bureaucratic squabbles and external pressure from the banking industry.

In sum, the Dodd-Frank Act is taking on water fast. What can be done to help Americans remember the horrors that led to its passage?

Here's one step. Mr. Obama will soon nominate a new chair of the Federal Reserve Board. The Fed chief is not a regulatory czar, but she or he is primus inter pares among the nation's financial regulators. The Fed's next chair can set a new, more determined tone going forward—or not. So it is vital that she or he be prepared to move bureaucratic mountains and fend off hordes of lobbyists opposing financial reform, not to bleed sympathy for Wall Street.

Weitz - obviously, these are just some of the many ineffective tools used to "regulate" the banks. The reality is that the 'Too-Big-To-Fail banks are bigger than ever with more power than ever. I find it repugnant. Its one thing to run a great business and grow to a large size (ie. Microsoft). If you recall, Microsoft faced incredible challenges from the Department of Justice as a monopoly. The banks, on the other hand, were effectively rewarded for their utter failure(s) via bailouts and other benefits that are too numerous to mention in this particular blog-post.

For more information on your rights against with your home loan, contact a Kirkland Real Estate Broker. 

Rylee Park Properties 

520 Kirkland Way, Ste 103

Kirkland, WA 98033

(206) 306-4034

Increase in interest rates begin to hurt market

AP - A rise in interest rates is slamming homeowners' demand for mortgages, prompting large and midsize banks to cut jobs and warn investors of declining profitability in the home-loan business.

SW- Exactly as we predicted…. See past article here.

Wells Fargo, the nation's largest mortgage company by loan value, on Monday told investors at a conference that it expects mortgage originations to drop nearly 30% in the third quarter to roughly $80 billion, down from $112 billion in the second quarter.

On Aug. 29, Bank of America Corp., notified about 2,100 employees that they were being let go largely due to a decline in refinancing activity, said a bank spokesman. Mortgage originations include loans for home purchases and refinancings.

Rates are rising on investor worries the Federal Reserve soon will take steps toward reducing an $85-billion-a-month bond-buying program designed to help stimulate the economy.

The average rate on a 30-year fixed-rate mortgage stood at 4.73% for the week ended Aug. 30, up from 3.60% at the end of April, according to the Mortgage Bankers Association.

SW- As discussed, that is a HUGE drop in purchasing power. For example, it would cost over $5000/ your more for a $500,000 mortgage.

All told, Mr. Miller expects lenders to originate $1.654 trillion of mortgages this year, down from $1.75 trillion in 2012. The decline is expected to bottom at $1.46 trillion in 2014 before rising again in 2015, according to FBR estimates.

The slowdown is the latest hurdle for the banking industry, which already is grappling with tepid loan demand from corporate borrowers and higher compliance costs as regulators crack down on a broad swath of banking practices.

The warnings come even though the U.S. housing market is posting its strongest year-over-year gains since the tail end of the real-estate boom in 2006. Many lenders had ramped up their mortgage businesses in the past two years to take advantage of a surge in refinancing activity that was spurred by historically low rates.

Ultimately, big banks should benefit as they will be able to raise interest rates on new loans. That will widen the gap between their cost of borrowing and the income they earn from lending. But that won't happen for several months, as banks work through pending applications and loans.

"We are bullish on the long term, but the short term is going to be rocky," said Mr. Miller.

San Francisco-based Wells Fargo, which financed nearly one in four U.S. mortgages in the second quarter, has already cut 3,000 jobs in the mortgage business since July. The reductions represent roughly 1% of the bank's total workforce.

At J.P. Morgan, mortgage originations are on pace to drop as much as 40% from the first half of 2013, said Marianne Lake, J.P. Morgan's chief financial officer, at the conference. She attributed the decline to a drop in refinancings. She said refinance applications are down more than 60% from the peak in May 2013.

Mortgage-banking income dropped 3% at Wells Fargo and 14% at J.P. Morgan in the second quarter from a year earlier. At Bank of America, the decline was 22% from the year-ago period.

The mortgage slump also is taking a toll on smaller lenders, some of which pumped up their home-loan business to help offset a slowdown in commercial lending.

The slowdown is perplexing to industry veterans like Gerald Lipkin, who has been chief executive of New Jersey lender Valley National Bancorp since 1989.

SW- As discussed, this is a very large issue that few are talking about. We believe it will take a toll in the RE Market, and is reflected with recent King County numbers with Inventory of properties for sale increasing and sales decreasing.

For more information, consider contacting a Kirkland Real Estate Broker. 

Rylee Park Properties 

520 Kirkland Way, Ste 103

Kirkland, WA 98033

(206) 306-4034

www.ryleepark.com

Nation & Seattle Housing Update

AP - A story from CNBC Realty Check discussing the drop in home sales for the month of July, 2013:



Overview:

1) Pending Home Sales Dropped 1.3% in July
2) Home Sales West Coast down 4.9%
3) Mortgage Rates increased to highest level since 2011
4) Jumbo borrowers could be effected by new regulations (Loans over $625,000) See definition of Jumbo Loan here.

Weitz:

What does this all mean for Home prices in Seattle?

Admittedly, I have been quiet on the blog due to 1) a lack of free time at the office; and 2) the real estate market hasn't been that interesting as of late. All the news has been positive, and as I've told everyone who will listen...this positive news is simply not warranted.

We believe the increase in prices is primarily due to two factors that are likely unsustainable:

1) Inventory of homes was extremely low by historical standards down to 3265 in March of 2013 (currently at 4602 for King County SFH)...that is a nearly 50% increase in inventory in just 6 months;

2) Interest Rates rates were historically lows (3.4% in May, 2012) but have since rose to nearly 4.5% (see Bankrate.com). That is a HUGE drop in purchase power for the average consumer According to mortgagerate.com, that increase would increase the payment for $500,000 30 year fixed mortgage from $2738 to $3074/ mo.

Accordingly, we are looking to see a decrease in sales and an increase in inventory and another fall in prices for the intermediate future. If you have questions for Seattle area Short Sale experts, please consider contacting a Seattle Short Sale Attorney.

Our Firm:

Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033 425.889.9300

weitzlawfirm.com

Defending Washington Judicial Foreclosures

Defending Washington Judicial Foreclosures:

Judicial foreclosure is the exclusive method of foreclosing a straight mortgage as well as, although infrequently utilized, an option to foreclose statutory deeds of trust and real estate contracts. 18 Wash. Prac., Real Estate § 19.1 (2d ed.). Judicial foreclosure is advantageous in cases involving a deed of trust when the beneficiary (Lender) is seeking a deficiency judgment; when the party in default has assets to collect from, judicial foreclosure allows for a deficiency judgment whereas non-judicial foreclosure does not.

Washington Judicial Foreclosure Process:

The process involves filing a lawsuit to obtain a court order to foreclose and is used when no power of sale is present in the mortgage or deed of trust or upon the election of the debt holding. After the court declares a foreclosure, the property will be auctioned off to the highest bidder.

Defensive tactics that can be applied during judicial foreclosure proceedings.

(1) challenging perfection of the chain of title, and

(2) challenging the validity of the beneficiary when that party is not the holder of the promissory note.

I. Chain of Title Defense:

One possible foreclosure defense tactic is to challenge the perfection of the chain of title. In order for there to be “perfection” of the chain of title, there must be an unbroken, continuous record of ownership of the promissory note from the time it is sold until the present.

Currently, there have been some issues with the relatively new model for the recordation of mortgage documents called the ‘Mortgage Electronic Registration System’ Inc. (MERS). MERS is a private electronic recording company that tracks the ownership of said notes and was intended to “reduce the costs, increase the efficiency, and facilitate the securitization of mortgages and thus increase liquidity.” Bain v. Metropolitan Mortg. Group, Inc., 175 Wn.2d 83, 285 P.3d 34. During the lifetime of the mortgage/deed of trust, MERS tracks ownership interests and that mortgage/deed can be transferred between several MERS members (e.g. “Fannie Mae” and “Freddie Mac”). Id at 95. Problems can arise with multiple transfers with maintaining a clear and consistent chain of title. As a result of multiple transfers, MERS is vulnerable to recording errors, and broken links in the chain can be identified, it can nullify the ability to make a claim on the property.

II. Challenging the validity of the beneficiary instigating foreclosure proceedings.

In Bain, the court held that, according to the Deed of Trust Act, only the party actually holding the promissory note may be considered a beneficiary. Bain at 89. Consequently, if MERS does not actually hold the note, which it most likely does not, it is not a lawful beneficiary. The court in Bain states that “obligation and mortgage cannot be split, meaning that the person who can foreclose the mortgage must be the one to whom the obligation is due.” Id. at 97 (quoting 18 Stoebuck; Weaver § 18.18, at 334). Simply put, the note and the deed must be together. Given that many deeds are securitized, it is very likely that the party seeking foreclosure is not in possession of the note and, therefore, legally unenforceable. Additionally, when a deed has been securitized, a defense tactic is to argue that “once a loan has been securitized, or converted to stock, it is no longer a loan and cannot be converted back into a loan. That means that your promissory note no longer exists, as such. And if that is true, then your mortgage or deed of trust is no longer securing anything.”

For more information on your rights in Foreclosure, please consider contacting a SeattleForeclosure Attorney.

Our Firm:

Weitz Law Firm, PLLC

520 Kirkland Way, Ste 103

Kirkland, WA 98033

425.889.9300

Email (Click here)