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East Nashville neighborhood bounces back

Drug deals, prostitution stings and dilapidated houses were once the norm for one East Nashville neighborhood.

Concerns about crime resonated from almost every corner in the McFerrin Park neighborhood.

Residents watched code violations and criminal activity consume their middle class community, once filled with historic houses and well-manicured lawns.

This neighborhood that many counted out is seeing a revival. Residents have organized and become watchdogs, doing their part to deter crime by reporting illegal activity to police.

Metro agencies have invested millions of dollars for the area’s improvement. Vacant lots are no longer dumping sites. Drug dealers and prostitutes have moved out of the area once known as North Edgefield.

A local developer plans to revive the old Roxy Theater, at 827 Meridian St., to feature independent films and add a music studio.

The socio-economic makeup of the neighborhood is also changing, as gentrification settles into the once predominately African-American community.

“The community is in a winning position now, and we believe we have gained an edge over the drug dealers,” said Mike Servais, who grew up in the McFerrin Park area and works for Nashville’s Salvation Army in the same neighborhood.

“We have to made a statement that this community’s long-term history and future have everything to do with positive cultural progress, and not with drug dealing and prostitution.

The latest on a long list of enhancement projects is a foreclosed property at 704 Meridian St. under revitalization by the Nashville Area Habitat for Humanity.

The late 19th century Victorian house was threatened by demolition last November because of fire damage. The Metropolitan Development Agency acquired the property and worked with the Metro Historical Commission to donate the structure to Habitat.
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“It’s an awesome thing they are coming into out neighborhood and fixing up this foreclosed home,” said Michele Bennett, president of the McFerrin Park Neighborhood Association. “A lot of the residents didn’t want to see the house torn down and wanted to maintain.

“It provides affordable housing and creates a balance for the gentrification that is taking place in our neighborhood.”

About 40 percent of the work on the modest 1,900-square-foot home is complete, and many area residents are volunteering to pitch in on the construction.

“The idea that a bunch of us are putting this home back in its original form and modifying the interior will enrich the neighborhood,” Servais said. “It’s a step up for the area.”

Providing affordable housing has always been Habitat’s goal, and it’s expanding with a new initiative. ReConstruct, as the program is called, is designed to help revitalize neighborhoods by restoring dilapidated homes and making needed improvements to others.

The rehab of the Meridian Avenue house is a first for the Nashville-based agency, whose officials say they will also continue building new construction homes.

“We are keeping with our same mission, but vacant land will eventually run out,” said Eric Helm, director of Habitat’s ReConstruct program. “We want to target inner-city development, because if we don’t, Nashville starts to go down hill. We come in and remodel these houses, and it helps preserve the affordable housing stock.”

Metro Historical, Historic Nashville Inc., Tennessee Preservation Trust, and The Center for Historic Preservation at Middle Tennessee State University have all partnered with Habitat on this local preservation project.

Helm is working with these agencies to locate other historic structures that might be worth saving. Another house in McFerrin Park is being considered for a rehab, along with a home in the Edgehill community.

“These (historic) buildings are a test to our cities growth and character,” said Tim Walker, executive director of the Historical Commission. “McFerrin Park and nearby Cleveland Park are both neighborhoods in transition but have lost some of their historic fabric.

“The Habitat project keeps the historical character in place, while finding new homes for people.”

But for McFerrin Park neighbors, it’s just another step toward rebuilding their community.

“We all can play a part in making the neighborhood better by taking ownership and responsibility,” Bennett said. “This project shows that East Nashville has a lot to offer, and people are drawn to that.

“We have always been a jewel in the rough, and people are now starting to recognize who we are.”

Short Sale/Foreclosure!

The Fine Living Group of Nashville now has a certified short-sale and foreclosure specialist. Please contact us if you are buying/selling; we would love to share our knowledge and expertise with YOU!

4 Options to Stop the Spread of Negative Home Equity

RISMEDIA, March 23, 2010—(MCT)—With home prices expected to keep falling in many parts of the country, experts said finding a fix for the underwater crisis will be difficult. Banks can’t afford to bail out homeowners without another bailout from the government. Even if federal help comes—either for the homeowner directly or for banks—taxpayers ultimately will be on the hook for the debt. Do nothing, and homeowners and communities continue to suffer.

One economist said it all boils down to one thing: sharing the pain. “At the end of the day, someone has to pay for this problem—either the lender, the homeowner or the public pays,” said Mark Zandi, chief economist for Moody’s Economy.com. “It is really about divvying up the cost, and that is very difficult politically to do.”

The Obama administration said last month it would allocate $1.5 billion to five states to create programs that target unemployed homeowners struggling to avoid foreclosure, as well as people underwater on their mortgages. The programs would also focus on helping people with second mortgages modify their loans.

Here’s a look at some other options and what experts say about them:

Principal reductions
One way to solve the negative equity problem is to simply get rid of it. That would require banks to modify loans—and write down the principal owed to reflect a home’s value on the current market. Proponents of this solution argue that it is more costly to continue the cycle of foreclosures. But lenders would face large losses if they wrote down large portions of their loans.

Zandi said some lenders are doing this when it makes sense. Under the Obama administration home loan modification program, lenders can write down or defer principal if the borrower’s debt-to-income ratio is greater than 31%. Principal write-downs typically are being done when the homeowner wants to stay in the house and the lender doesn’t think it can sell the house to recoup what is owed.

He also predicts lenders will engage in more short sales, where they write down the difference between what is owed on the mortgage and what a buyer is willing to pay, to avoid costly foreclosures.

Julia Gordon, senior policy counsel for the nonprofit Center for Responsible Lending, agrees that principal reduction is one of the better ways to start healing the housing market.

But it gets complicated when there are second mortgages or lines of credit, common when economic pressures left little equity in some people’s homes. She said there is often a conflict of interest when the mortgage, or first lien, is held by one lender and the second is held by a different one. Lenders often don’t want to approve reducing principal on the first lien unless the second lien holder also takes a hit. “If the second liens disappear, that would clear servicers to do more principal reductions,” she said.

Rick Sharga, senior vice president of RealtyTrac Inc., an Irvine, Calif.-based foreclosure website, said he doubts that banks will write down principal in large numbers. “Many are in a capital position where they can’t afford to do that,” Sharga said. “The glimmer of hope is we figure 2010 will be the peak of foreclosure activity.”

RealtyTrac expects 3.5 million properties nationally to receive a foreclosure filing this year, up from 2.8 million last year.

Stabilize home prices
Gail Madziar, spokeswoman for the Michigan Bankers Association, said some banks are even leasing homes they foreclosed on back to the original owners to help stabilize home prices and neighborhoods.

Another way to stabilize prices is to control the release of distressed inventory onto the market. Banks have been doing this in recent months to slow the erosion of home prices and minimize the losses they record on their books.

Help for unemployed workers
The Mortgage Bankers Association announced recently that it was considering a program to help qualified borrowers who have lost their jobs so they can stay in their homes while they seek new employment.

The forbearance program would have loan servicers reducing the borrower’s mortgage payment for up to nine months. The payment would be reduced to an affordable level based on household income.

John Courson, president and CEO of the association, said that the average U.S. worker is unemployed for up to seven months and that is a long time for a homeowner to stay current on the mortgage with such a large drop in income.

“Further, borrowers with such a precipitous drop in income can’t qualify for most loan modification programs, so we are looking for ways to allow those borrowers to keep their homes while they look for another job,” he said.

The association has asked the government to add this tool to the Home Affordable Modification Program to help the swelling ranks of unemployed people.

Gordon of the Center for Responsible Lending said another solution might be to provide a low-cost loan fund like one in Pennsylvania that unemployed homeowners can tap into to pay their mortgages. The Homeowners’ Emergency Mortgage Assistance Program was created in 1983 to prevent homelessness in Pennsylvania by offering loans of up to $60,000 for 24 months. In times of high unemployment, the loans extend to three years.

Freeze foreclosures
Michigan state Sen. Hansen Clarke, a Democrat who sponsored 90-day foreclosure moratorium legislation that took effect last July, said he thinks judges should be given the power to temporarily suspend foreclosures for up to two years. “Look at all the people who have had to walk away from their houses. I get so angry when I see these neighborhoods, because action could have been taken,” Clarke said.

Gordon said a temporary suspension could be helpful if servicers use that time to evaluate the homeowner for a loan modification. Now, the foreclosure process and evaluation process generally are happening at the same time, sending mixed messages to homeowners.

Tim Ross, president of Royal Oak, Mich.-based Ross Mortgage, said that more mortgage loan servicers are eager to keep people in their homes these days and that could go a long way to solving the negative equity problem.

On top of that, new household formation, which occurs when young adults leave home to set up their own places or when people get married or divorced, continues to create demand for new homes. And with new home building at a standstill, demand driven from household formation should absorb what’s in the market, he said.

“Despite the fact that we have outmigration, there are fundamentals in place that will ultimately rescue us,” Ross said.

Poll Shows Strong Support for Government Housing Initiatives

RISMEDIA, March 5, 2010—Americans remain strongly committed to federal support for home buyers, according to a recent survey of U.S. households.

Roughly 68% of those polled said the government should continue to support housing, and 65% believe the government should be doing more to keep families from losing their homes to foreclosure.

The poll included both home owners and renters and was conducted for the National Association of Home Builders (NAHB) by RT Strategies, a non-partisan public opinion polling firm based in Washington, D.C. RT Strategies interviewed a representative sample of 1,000 adults nationwide by telephone using live interviewers on January 29-31, 2010. The sample included 170 interviews with respondents from cell-phone-only households.

Among those polled, some key groups said the government should continue to play a vital role in maintaining a healthy housing market. For example, 78% of all potential home buyers, including 81% of renters intending to buy a home in the near future, said the government should continue to support housing.

Roughly 65% of home owners said the government also needs to do more to keep families from losing their homes. Support for more foreclosure protection was not confined merely to current home owners. Among renters, 84% said the government needs to do more to helped strapped borrowers. This issue is particularly important to women, with 71% supporting greater foreclosure protection, compared to 58% of men.

Keeping families in their homes is also particularly important to first-time home buyers, as 78% of young adults under age 30 support greater foreclosure protection. And 69% of adults who are 30 to 44, the prime age range for move-up buyers, said they support more foreclosure protection.

Overall, roughly two-in-three respondents said they own their home. Among renters, about two-in-three intend to buy a home in the near future. In addition, 15% of current home owners intend to buy a home in the near future.

The poll asked respondents for their views regarding the Worker, Homeownership and Business Assistance Act of 2009 that extended a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence. The legislation, which was signed into law by President Obama in November 2009, also authorized a tax credit of up to $6,500 for qualified repeat home buyers. Overall, 8% of those surveyed said they intend to take advantage of this credit, while another 24% who might have been interested in using the tax credit said they cannot afford to purchase a home at this time. Of the 33% of respondents who said they are planning to buy a home (both renters and current home owners), roughly 17% said they intend to use the tax credit.

Financial concerns continue to be the greatest barrier to growth in the housing market. Among renters nationwide who aspire to own their own home, 39% simply don’t have the money to buy a home at this time, and another 20% said the primary obstacle is that they feel they cannot qualify for a loan. Larger economic issues also play a role, as 18% of those surveyed said that job security is the greatest obstacle they face in trying to buy a home.

Weakness in the housing market itself may be blocking some home owners who would like to buy a new home, as 29% of current home owners said their greatest obstacle to purchasing another home is their inability to sell their current home. Beyond that, among current homeowners who aspire to buy a new home, 7% feel trapped by a mortgage that exceeds the value of their current home, 14% fear that the value of a new home might fall after they make the investment, and 13% say home prices are too high to allow them to buy a new home at this time.

Even amid a housing market downturn, 40% of respondents said their home is their most valuable investment, twice the number who cite any other single investment–401k accounts, savings accounts and CDs, stocks and bonds, or mutual funds–as their leading family investment.

U.S. Foreclosure Activity Decreases 2% in February 2010

RISMEDIA, March 11, 2010—RealtyTrac, a leading online marketplace for foreclosure properties, released its February 2010 U.S. Foreclosure Market Report, which shows foreclosure filings—default notices, scheduled auctions and bank repossessions—were reported on 308,524 U.S. properties during the month, a decrease of 2% from the previous month but still 6% above the level reported in February 2009. The report also shows one in every 418 U.S. housing units received a foreclosure filing in February.

“The 6% year-over-year increase we saw in February was the smallest annual increase we’ve seen since January 2006, when we began calculating year-over-year increases, but it still marked the 50th consecutive month of year-over-year increases in foreclosure activity,” said James J. Saccacio, chief executive officer of RealtyTrac. “This leveling of the foreclosure trend is not necessarily evidence that fewer homeowners are in distress and at risk for foreclosure, but rather that foreclosure prevention programs, legislation and other processing delays are in effect capping monthly foreclosure activity—albeit at a historically high level that will likely continue for an extended period.

“In addition, severe winter weather appears to have temporarily slowed the processing of foreclosure records in some Northeastern and Mid-Atlantic states.”

Foreclosure activity by type
Default notices (Notices of Default and Lis Pendens) were reported on a total of 106,208 U.S. properties during the month, an increase of 3% from the previous month but down 3% from February 2009. Default notices were down 25% from their peak of more than 142,000 in April 2009 but were still more than three times the number they were four years ago in February 2006.

Foreclosure auctions (Notices of Trustee’s Sale and Notices of Sheriff’s Sales) were scheduled for the first time on a total of 123,633 U.S. properties, a decrease of 1% from the previous month but still 16% higher than the level reported in February 2009. Scheduled auctions were down 14% from their peak of more than 144,000 in August 2009 but were also about three times higher than the number reported in February 2006.

Bank repossessions (REOs) were reported on a total of 78,683 U.S. properties during the month, a 10% decrease from the previous month but an increase of 6% from February 2009. Bank repossessions were down nearly 15% from their peak of more than 92,000 in December 2009 but were at nearly twice the level reported in February 2006.

Nevada, Arizona, Florida post top state foreclosure rates
Nevada foreclosure activity decreased nearly 7% from the previous month and was down 30% from February 2009, but the state’s foreclosure rate continued to rank highest in the nation for the 38th month in a row. One in every 102 Nevada housing units received a foreclosure filing during the month—more than four times the national average.

Arizona and Florida documented nearly identical foreclosure rates, with one in every 163 housing units receiving a foreclosure filing in both states. Despite a nearly 21% decrease in foreclosure activity from the previous month, Arizona’s rate was statistically slightly higher than Florida’s rate and ranked second highest among the states.

California’s foreclosure rate ranked fourth highest among the states, with one in every 195 housing units receiving a foreclosure filing during the month, and Michigan’s foreclosure rate ranked fifth highest among the states, with one in every 226 housing units receiving a foreclosure filing.

Other states with foreclosure rates among the nation’s 10 highest were Utah (one in every 275 housing units), Idaho (one in 296), Illinois (one in 305), Georgia (one in 331) and Maryland (one in 407).

Six states account for more than 60% of national total
The six states with the most foreclosure activity accounted for 61% of the national total in February. California led the way, with 68,562 properties receiving a foreclosure filing during the month—down nearly 5% from the previous month and down 15% from February 2009.

Foreclosure activity in Florida increased nearly 15% from the previous month and was up more than 16% from February 2009. The state continued to post the nation’s second highest total, with 54,032 properties received a foreclosure filing during the month.

Increasing foreclosure activity boosted Michigan’s total to third highest among the states. A total of 20,028 Michigan properties received a foreclosure filing during the month—up nearly 14% from the previous month and up 59% from February 2009.

With 17,312 properties receiving a foreclosure filing, Illinois posted the fourth highest total, followed by Arizona, with 16,718 properties receiving a foreclosure filing, and Texas, with 12,638 properties receiving a foreclosure filing in February.

Other states with totals among the 10 highest in the country were Georgia (12,177), Ohio (11,286), Nevada (11,035), and Maryland (5,732).

Divergent trends in metro areas with top 10 foreclosure rates
Metro areas in the Sun Belt states of Nevada, Florida, California and Arizona continued to dominate the top 10 highest foreclosure rates among metropolitan areas with a population of 200,000 or more, but activity trends in these areas varied considerably.

The Las Vegas metro area documented the highest metro foreclosure rate, with one in every 90 housing units receiving a foreclosure filing during the month, despite a 9% decrease in foreclosure activity from the previous month.

Six of the other metro areas in the top 10—all in California or Arizona—also reported decreasing foreclosure activity from the previous month. The biggest monthly decrease among the top 10 was in the Phoenix metro area, where foreclosure activity dropped nearly 18%.

In contrast, the two Florida metro areas in the top 10 both posted substantial monthly increases in foreclosure activity. The Cape Coral-Fort Myers metro area saw a 31% increase in foreclosure activity from the previous month, giving it the second highest metro foreclosure rate—one in every 92 housing units receiving a foreclosure filing. An increase of nearly 66% in foreclosure activity from the previous month helped boost the foreclosure rate in Port St. Lucie to sixth highest.

Real Relief for Upside Down Home Owners

RISMEDIA, March 9, 2010—Forget loan modifications, short sales, and “jingle mail”! If you are one of an estimated 50 to 60 million homeowners whose mortgage is part of a securitized pool, the law is on your side and everyday more and more people are deciding to exercise their rights with regard to the documents they signed.

There is much more contained within those documents and pooling and servicing agreements that govern the pools than just the borrowers promise to pay. And, there are laws that must be adhered to by the lender of the money.

As it turns out, virtually all of the securitized private label loans were part of a massive and ongoing fraud upon both the borrower and the investor. And, the fraud continues as the pretender lenders force more defaults, stop making payments to the pools, collect on the credit default swaps, and top it all off by seizing the underlying assets (only if they can make additional money on them) and keeping any proceeds for themselves.

What borrowers and investors agreed to and what they actually got are at odds, and these discrepancies raise serious legal issues including, but not limited to, Truth In Lending Violations, Real Estate Settlement Procedures Act Violations, Fraud, Bait and Switch, illegal kickbacks involving the borrower, and out right fraud and conversion upon the investor.

In the cases of loans such as a 2/28, pick-a-pay and option arm, their very existence is prima facie evidence of predatory lending and fraud upon the investors.

Nor are we talking about a small amount of money or a technicality. We are talking about a complex system of deceit by financial intermediaries that can turn a single modest home loan into millions of dollars in profit for them.

The Worse the Loan the More They Can Make

Suppose a buyer actually qualifies for a $300,000 fully amortized, fixed rate loan at 5%.

But, right at the end of the process the underwriter calls the loan officer and says something like this;

“We’ve just had a change to our underwriting guidelines and we aren’t going to fund the loan.”

This is really funny because the loan is already funded. Now, it’s time to kick up the profits. Of course, the loan officer’s emotions run the full range from disbelief to anger to fear. “Why?” She pleads.

Underwriter: “His ratios. He needs a lower monthly payment. Resubmit in our new super-duper, magical flex loan with the built in implosion feature.”

Now, before we run out and lynch a bunch of loan officers, this is what they were given to work with and trained to do. They were as indoctrinated into this as if they had drunk the cool aid. If it makes you feel better, they got pushed into these loans too. I get a lot of email from loan originators and real estate agents who often feel embarrassed about their choices, but back then we didn’t know that it was just a giant Ponzi scheme.

The loan product is determined by an underwriter. The perception is that the only purpose for underwriting is to determine the credit worthiness of the borrower and the value of the security. But, the underwriting process actually yields far more valuable information. It also reveals the borrower’s default probability and numerous details about their behavior. Knowledge of the borrower’s behavior combined with negative features in the loan allowed insiders to project when the loan would default.

Armed with this information, the underwriter is able to “tweak” the loan to increase the Yield Spread Premium and the Service Release Premium, as well as, increase the likelihood of collecting on the credit default swaps. That is the process of putting you into the most profitable loan possible. And, it is where the real predatory lending takes place.

Back to our borrower. By bumping our highly qualified borrower from 5% to 8%, they only increase the likelihood of default; they are able to extract an enormous undisclosed Service Release Premium and a Yield Spread Premium. The Yield Spread Premium is supposed to be disclosed, but often isn’t.

The Service Release Premium is where the real money is, and it’s hidden. The investor provides $480,000 to the financial intermediary in exchange for a five percent annual return of $24,000 plus a guaranteed return of principal.

The financial intermediary only loans our borrower $300,000, but when the rate adjusts to 8%, the investor has his $24,000 annual income, the financial intermediary pockets a $180,000 Service Release Premium, makes up the initial shortfall in the pool payments and buys credit default swaps.

So this is where we really are.

They are not banks. They call themselves banks, but they aren’t banks.

They did not lend you any money. They loaned you someone else’s money.

You don’t owe them any money. Maybe you owe a pension fund or something, maybe not.

You may not owe anyone any money. If the investors recouped their losses from TARP funds, you no longer owe them anything.

They may owe you money. If you were the victim of predatory lending, your damages could be into the hundreds of thousands of dollars, plus legal expenses

They may have no legal right to foreclose on you.

You have a legal right under the terms of your loan agreement and common law to raise the above issues with the true holder of the original note you signed.

Why? Because securitized loans presented an opportunity to commit fraud on both the true lender by skimming, and the borrower by convincing him he should accept a far more expensive loan than the one for which he qualified.

The financial intermediary wrote the pooling and servicing agreements and the credit default swaps. The terms of the pooling and servicing agreement allow the financial intermediary to stop making payments on all loans in the pool and keep the revenue stream from the performing loans when a default occurs within the pool. It also allows the financial intermediary to collect on the credit default swap on the entire pool which is multiples of the loan value of the entire pool.

The game was rigged, but they overlooked one little thing; The Uniform Commercial Code, Chapter 3, 47-3110. The Uniform Commercial Code is replicated in virtually every state, and this section governs who may enforce a note.

Look at this a different way. Suppose you wanted to pay off your loan, but you wanted to be absolutely certain that the money would go to the rightful party so that you would not be subject to someone showing up later claiming you never paid off your note. You have a legal right to know who that party is.

If they cannot satisfy this provision of the UCC, they cannot proceed to foreclose. If you wanted to take the fight to them and see if they can produce the note, this is the law you need to pursue.

Long-Term Rates Rise to Over 5% for First Time in Three Weeks

RISMEDIA, February 27, 2010—Freddie Mac recently released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 5.05% with an average 0.7 point for the week ending February 25, 2010, up from last week when it averaged 4.93%. Last year at this time, the 30-year FRM averaged 5.07%.

The 15-year FRM this week averaged 4.40% with an average 0.7 point, up from last week when it averaged 4.33%. A year ago at this time, the 15-year FRM averaged 4.68%.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.16% this week, with an average 0.6 point, up from last week when it averaged 4.12%. A year ago, the 5-year ARM averaged 5.06%.

The 1-year Treasury-indexed ARM averaged 4.15% this week with an average 0.6 point, down from last week when it averaged 4.23%. At this time last year, the 1-year ARM averaged 4.81%.

“Interest rates for 30-year fixed mortgages followed long-term bond yields higher and rose above 5% this week amid a mixed set of economic data reports” said Frank Nothaft, Freddie Mac vice president and chief economist. “For instance, the January producer price index jumped well above the market consensus, but the consumer price index remained subdued and consumer confidence declined to the lowest level since April 2009, according to the Conference Board.

“There were also varying reports as to the current state of the housing market. The S&P/Case-Shiller national home price index rose for the third consecutive quarter in the fourth quarter, albeit at a slower rate, and the 20-city composite index showed an increase in December 2009 for the seventh month in a row; six metropolitan areas experienced positive year-over-year growth, compared to four in November. New home sales, however, unexpectedly slowed in January to the smallest pace since records began in 1963, and the supply of homes at the current sales rate rose to 9.1 months, the most since May 2009.”

Economic Recovery to Continue at Moderate Pace

RISMEDIA, February 25, 2010—(MCT)—Federal Reserve Chairman Ben Bernanke told Congress recently that he expected the U.S. economic recovery to continue at a moderate pace, but he expressed concerns about weakness in residential and commercial construction as well as the “quite weak” labor situation that has lifted chronic unemployment to very high levels.

“Of particular concern, because of its long-term implications for workers’ skills and wages, is the increasing incidence of long-term unemployment,” Bernanke said in prepared remarks as he delivered the Fed chairman’s semiannual report to the House Financial Services Committee. He noted that more than 40% of the unemployed workers have been jobless for six months or more, nearly double the share of a year ago.

Bernanke, in addressing Congress for the first time since his reappointment to a second four-year term as chairman last month, said the U.S. economy had expanded at an annual rate of about 4% in the second half of last year, with big help from temporary factors related to business inventory levels and stimulative fiscal and monetary policies. “A sustained recovery will depend on continued growth in private-sector final demand for goods and services,” he said.

With the early economic recovery and inflation remaining subdued, Bernanke reiterated that central bank policymakers expected to keep short-term interest rates at near zero for an “extended period,” which most analysts view as at least several months.

Bernanke also said again that the Fed had the tools to gradually siphon out of the economy the billions of dollars in emergency aid that the central bank pumped out to keep the economy from plunging into a depression. The so-called exit strategy is crucial, in both economic and political terms. If the Fed pulls back too fast, it could stifle recovery. If it moves too slowly, an outbreak of inflation could wreak havoc at home and damage confidence abroad.

Lawmakers questioning Bernanke were focused on jobs and the record federal deficits that are becoming a major political challenge for Bernanke and for the Obama administration. In statements before Bernanke’s testimony, Democratic members blamed the previous, Republican administration for the unemployment troubles and the bank bailouts that have fanned public ire at Bernanke and the political establishment.

Pressed by lawmakers, Bernanke said that the current pace of federal deficits was unsustainable and that the Obama administration’s economic stimulus plan—which Republican opponents have criticized as ineffective—had created jobs, though he didn’t cite any figures.

Short Sale Buyers Face Difficulty Closing Deals Quickly

RISMEDIA, February 19, 2010—(MCT)—Rachel Nacion-Ograyensek and her husband are getting nervous. The house that the two apartment dwellers want to buy—the one with the double oven, pool and tiled patio—may slip away from them.

It’s on the market as a short sale, so the owner can’t act until the mortgage holder approves the discount price. But the Altamonte Springs, Fla. couple insists on buying their first home in time to take advantage of the federal government’s home buyer tax credit, which now expires April 30, 2010.

“The house is our dream house—it’s perfect for us,” Nacion-Ograyensek said. “We are trying to get in on the tax credit, but it’s done in April, and it’s already February. We’ve gotten to the point where we’re passively looking for other houses, but none are quite right.”

Under pressure from the real estate industry, Congress extended and expanded the tax credit last fall. It was to have ended November 30, 2009 and benefit only buyers who had not purchased a home in the past three years. Like the original, the latest version is worth as much as $8,000, but it gives both first-time buyers and qualified existing homeowners until April 30 to secure a contract on a home, and until June 30 to close the deal.

Though real estate agents and homebuilders hope the measure boosts sales, as the previous version was credited with doing, some fear that buyer’s intent on getting a short sale bargain will not make the new deadlines.

In the Orlando area, 67% of Realtors’ existing-home sales in December 2009 were distressed sales—and about half of those were short sales, known for taking at least three months to complete. Even buyers who nail down a contract with the seller by the April 30 deadline can’t be sure the purchase will close within the required two months. “That’s where you get into that riverboat-gambling mentality,” said Jim Ruddy, the longtime real estate agent representing Nacion-Ograyensek and her husband. “Is it worth gambling that $8,000?” At this point in the tax credit countdown, buyers interested in purchasing a short sale must decide whether they are really committed to that property—enough that they would still want to purchase it if they miss the June 30 tax credit deadline, Ruddy said.

Nacion-Ograyensek said she and her husband recently revisited the short sale house in Altamonte Springs and decided it was worth the gamble. The kitchen is ideal for cooking, and the backyard is large enough if they have children or adopt a dog. They have decided to stick with their plan; still, each day that passes makes them more anxious.

In hopes of capturing tax credit-motivated buyers who aren’t focused on distressed properties, Florida’s real estate agents have scheduled an unprecedented statewide open house of properties listed for sale. The event, organized by the Florida Association of Realtors, is set for April 10-11—just two weeks before the tax credit deadline.

Kathleen McIver-Gallagher, chairman of the Orlando Regional Realtor Association, said buyers intent on getting the tax credit should be concerned if they are trying to purchase a short sale through lenders known for slow responses to short sale offers.

As the April tax credit deadline nears, buyers will probably become more interested in homes other than distressed sales, McIver-Gallagher said. “There are plenty of regular homes out there,” she added.

Compounding the delays are new reporting rules that lenders must now follow. Nate Morris, vice president of Thomas Mortgage and Financial Services, said the new requirements involve good faith estimates and HUD closing documents. “It certainly could further complicate things,” said Morris, a board member of the Mortgage Bankers Association of Florida. “I don’t see this working out till the middle of the year. Everyone in the mortgage business talks about it on a daily basis.”

Tennessee foreclosure rate ranks No. 26

Residential foreclosures in Tennessee jumped 6.8 percent in January, and the state ranked No. 26 for its overall foreclosure rate.

There were a total of 3,911 foreclosure filings in the Volunteer State in January, an increase of 6.8 percent compared to January 2009 but a decrease of 17.8 percent compared to the previous month, according to RealtyTrac Inc.’s U.S. Foreclosure Market Report.

One in every 705 Tennessee homes received some type of foreclosure filing — default notices, scheduled auctions and bank repossessions — during the month. That ratio is lower than the national average of one in every 409 U.S. homes receiving a filing in January.

Nationally, foreclosure filings fell 9.7 percent from the previous month, but rose 15 percent compared to January 2009.

“January foreclosure numbers are exhibiting a pattern very similar to a year ago: a double-digit percentage jump in December foreclosure activity followed by a 10 percent drop in January,” said James J. Saccacio, chief executive officer of RealtyTrac, in a statement. “If history repeats itself we will see a surge in the numbers over the next few months as lenders foreclose on delinquent loans where neither the existing loan modification programs nor the new short sale and deed-in-lieu of foreclosure alternatives works.”

Topping the list with the highest foreclosure rates are Nevada, Arizona, California and Florida.

Mississippi ranked No. 45 and Arkansas No. 20.

Realtors® Partner with National Community Stabilization Trust to Revitalize Neighborhoods Wracked by Foreclosures

The National Association of Realtors® has joined forces with the National Community Stabilization Trust to help rebuild American communities devastated by the foreclosure crisis.

The collaboration will bring Realtors and the more than 1,400 state and local Realtor® associations into a side-by-side relationship with leading national nonprofits, as well as with state and local leaders, to develop comprehensive and targeted plans to rebuild communities. The partnership was made possible by the new federal Neighborhood Stabilization Program, which provides $6 billion to reclaim neighborhoods wracked by high levels of foreclosed and abandoned property, property disinvestment, extremely low prices and low resident confidence.

“Realtors® build communities and have the market expertise and property transaction tools to help local housing organizations understand local market conditions and how to put foreclosed houses back into the hands of stable homeowners,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz. “Working in this partnership with NCST gives Realtors® a seat at the community table to perform a leadership role in restoring vitality to communities across this great nation.”

“Neighborhoods across America have been decimated by high concentrations of abandoned and foreclosed homes. To reverse neighborhood decline, we need the Realtor® community working hand in hand with other housing providers,” said Craig Nickerson, president of NCST. “This ambitious new campaign will harness the unique abilities of Realtors® to remarket newly renovated homes and to rebrand the tarnished image of hard-hit neighborhoods.”

Through a nationwide network of state and local associations, Realtors® have been engaged in foreclosure prevention efforts since early 2009 as part of the NAR’s Foreclosure Prevention & Response Program.

“The outstanding leadership of many state and local Realtor® associations over the past year to become active participants in community problem-solving has proven that Realtors® are a valuable local community partner,” said Golder.

She cited strong efforts by the leadership in the Chicago Association of Realtors®, the North Metro Realtors® (Minn.) Association and the Realtor® Association of Great Fort Lauderdale (Fla.) as examples of Realtors® working through NSP to revitalize neighborhoods.

While NAR and the NCST will be working nationwide on this new initiative, a focus will be placed on enhancing capacity in states experiencing the highest levels of foreclosure and abandonment.

Beginning January 27, NAR will initiate contact with targeted state associations, based on severity of foreclosure problems. In addition, NAR will provide in-depth training and education materials developed and provided by NCST on www.realtor.org/foreclosure.

The National Community Stabilization Trust is a nonprofit organization that facilitates the transfer of foreclosed and abandoned properties from financial institutions nationwide to local housing organizations, and provides access to financing in order to promote productive property reuse and neighborhood stability. In collaboration with state and local governments, the Stabilization Trust builds local capacity to effectively acquire, manage, rehab and sell foreclosed property to ensure homeownership and rental housing are available to low- and moderate-income families. Visit www.stabilizationtrust.com to learn more about the National Community Stabilization Trust.

Luxury home sales rebound

Luxury homebuilder Rogan Allen hadn't sold a home in more than a year, until last November rolled around, and he sold three in two months.

Of course, it helped that he had lowered the prices.

One home, a five-bedroom Green Hills mansion with 360-degree views and 14-foot ceilings, was snapped up by Kings of Leon bassist Jared Followill for $1.85 million. That's about 20 percent less than the property was priced at just seven months earlier.

Two married Vanderbilt University medical doctors bought another upscale home for $1.52 million, more than $300,000 off the list price.

Reduced prices and sweeter returns on Wall Street for many investors may be melting a nearly frozen market for higher-priced homes, real estate agents say.

Fourth quarter 2009 saw the first year-over-year increase in home sales in the Nashville area for property priced above $750,000, according to an analysis by appraiser Richard Exton of Manier & Exton.

Sales of those higher-priced homes rose 29 percent to 89 homes in October-December, roughly the same percentage increase as the overall market experienced. Luxury homes are not a huge part of the overall real estate market, however.

Homes that sell for more than $750,000 make up less than 3 percent of total sales. Yet an increase could be a sign that more than just first-time home buyers are starting to get interested in buying homes again.

"I'm not going to say we're healed," said Allen, who celebrated his series of sales with a vacation to the Florida Keys last week. "I think everyone was looking for someone to stamp the economy OK, to say we're not going down the tubes in every single area. I feel like our government is moving things along in well-enough shape that people have some confidence."

The Dow Jones industrial average is up about 30 percent compared with this time last year, an important psychological marker for consumers who buy luxury homes. The still-lackluster jobs market — and its 10.3 percent unemployment rate in Tennessee — may not be that big of a concern to people who buy $1 million houses, real estate agents added.

It would be silly to say people who buy expensive houses aren't affected by the economy; they are. Many of them own businesses," said John Brittle Jr., an agent with Village Real Estate Services, who has sold five homes for more than $500,000 this year in Nashville, primarily in the Green Hills and Belmont neighborhoods. "But they might be more careful or they might want to sell their existing homes first," he said.


They also want a bargain. Foreclosures and strapped homeowners are affecting prices for high-priced homes just as they are for the less-opulent properties.

Prices pushed down

One buyer refused to look at any homes for sale that weren't foreclosures or on their way to foreclosure, said Steve Fridrich, the president and chief executive officer of Fridrich & Clark Realty.

He eventually sold the man a foreclosed $1.69 million home in Green Hills in July for $200,000 less than the financial institution, Pinnacle National Bank, had paid for it in October 2008.

"What's driving the market now is bank-owned property, short sales, foreclosures. … All of those are must-sell properties and you see the most price adjustment there," Fridrich said.

He still sees a lot of inventory in the high-end market. In some price ranges, it would take years to sell off all the homes at the current sales rate, he said.

"Our weak market will remain weak for awhile," Fridrich said.

"Real estate isn't something that just bounces back in six months, especially in the high end."