In this week’s Bo’s news clips:
- In booming Midland, a new class of homeless workers mass in camps where cars and trucks are parked among tents.
- Depending on which news agency you chose to believe, delinquent mortgage rates are slowly tampering-off — or about to dramatically rise. Conflicting reports from Reuters and the New York Times would suggest that rates have gotten better but are about to dramatically get worse. Reuters cites an impending rise in variable interest rates as mortgages hit the ten-year threshold and marginal mortgage holders default; the New York Times cites an improved economy with mortgage holders generally better off and able to service home loans.
For a pdf version of the full stories, plus contextual articles in social, environmental and legal areas, contact Bo McCarver at email@example.com.
Homeless population in Midland takes different shape: High housing costs create new problem — working homeless
By Rachael Gleason Midland News November 25, 2013
Just beyond the shadow of Midland’s downtown skyline is a homeless shelter as unique as the unofficial capital of the West Texas oil patch.
After all, how many shelters can claim parking issues? The Salvation Army can.
The South Baird Street emergency shelter offers food and lodging for Midland’s tired, poor and huddled masses. But outside, the parking lot is overflowing with vehicles, including — at one point in time — a silver Mercedes Benz.
“We have so many vehicles, we don’t know what to do with them,” said Tex Ellis, captain of the Salvation Army of Midland, in October.
There is some irony in that less than two months ago, the Midland City Council provided an incentive-laden deal with a local developer to help make the 50-plus-story Energy Tower a reality. A reason for the need for such a project, Midlanders heard over and over, was the parking that would be provided by the Energy Tower — arguably the most lavish commercial development between Midland and Arizona.
Insight: A new wave of U.S. mortgage trouble threatens
By Peter Rudegeair Reuters November 26, 2013
U.S. borrowers are increasingly missing payments on home equity lines of credit they took out during the housing bubble, a trend that could deal another blow to the country’s biggest banks.
The loans are a problem now because an increasing number are hitting their 10-year anniversary, at which point borrowers usually must start paying down the principal on the loans as well as the interest they had been paying all along.
More than $221 billion of these loans at the largest banks will hit this mark over the next four years, about 40 percent of the home equity lines of credit now outstanding.
For a typical consumer, that shift can translate to their monthly payment more than tripling, a particular burden for the subprime borrowers that often took out these loans. And payments will rise further when the Federal Reserve starts to hike rates, because the loans usually carry floating interest rates.
The number of borrowers missing payments around the 10-year point can double in their eleventh year, data from consumer credit agency Equifax shows. When the loans go bad, banks can lose an eye-popping 90 cents on the dollar, because a home equity line of credit is usually the second mortgage a borrower has. If the bank forecloses, most of the proceeds of the sale pay off the main mortgage, leaving little for the home equity lender.
Delinquency Rates on the Decline
By Lisa Prevost New York Times November 24, 2013
As the economy improves, the number of borrowers who are seriously behind on their mortgage payments continues to decline. The enhanced outlook is such that even those in delinquency are feeling more optimistic about their circumstances and homeownership in general.
The share of borrowers delinquent by 60 days or more is down in all 50 states compared with a year ago, according to an HYPERLINK “http://newsroom.transunion.com/press-releases/transunion-mortgage-delinquency-rate-drops-nearly-1066953″analysis of 52 million mortgages by TransUnion, a credit information service.
The national delinquency rate, 4.09 percent, is down from 5.33 percent at this time last year, according to TransUnion. That is still well above the 1.5 to 2 percent delinquency rate that was the norm in the 1990s, before the housing bubble. But it marks the seventh consecutive quarter of improvement, said Tim Martin, TransUnion’s group vice president for domestic housing.
The largest year-over-year declines were in California, Arizona and Nevada, where rates fell 32 to 38 percent.
“They were some of the states that had the biggest run-ups,” Mr. Martin said. “They’re seeing high percentage decreases because they got so high to begin with.”
Although an expected rise in interest rates may hamper some delinquent borrowers’ ability to resolve their financial problems, delinquencies will most likely continue to fall in coming months as the problematic older loans work their way out of the system, he said.
More Cities Consider Using Eminent Domain to Halt Foreclosures
By Shauka Dewan New York Times November 20, 2013
New cities are joining the effort to head off home foreclosures by using a twist on the power of eminent domain, despite threats of financial retaliation from Wall Street and Washington.
On Saturday, Mayor Wayne Smith of Irvington, N.J., will announce that his mostly working-class city is proceeding with a legal study of the plan. Irvington could try to head off legal action and repercussions through what are called “friendly condemnations,” in which incentives are used to persuade the owner to drop any objections, he said. “We figure if this program works it can help anywhere from 500 to 1,000 homes.”
This summer the similarly working-class city of Richmond, Calif., in a heavily industrial part of the San Francisco Bay Area, became the first to identify homes worth far less than their owners owe, and offer to buy not the houses themselves, but the mortgages. The city intends to reduce the debt on those mortgages, saying that will prevent foreclosure, blight and falling property values. If the owners of the mortgages — mostly banks and investors — balk, the letters said, the city could use eminent domain to condemn and buy them.
Home sales fall as prices rise
Reuters November 20, 2013
U.S. home resales fell in October to their lowest since June due to an inventory shortage and high property prices that have dampened buying power.
The National Association of Realtors said on Wednesday that sales of previously owned homes fell 3.2 percent last month to an annual rate of 5.12 million units.
Economists polled by Reuters had expected sales to drop to a 5.13 million unit pace in October.
At the same time, the median price rose 12.8 percent in October from a year ago to $199,500. It was the 11th straight month of double-digit gains, and up from last month.
October’s inventory was 2.13 million existing homes for sale, up just 0.9 percent from the year-earlier period, representing five months’ supply at the current pace.
The pace of annual sales growth decelerated to 6 percent in October, as tight credit conditions and high borrowing costs are impacting the housing market recovery.
US Home Permits Rise at 5-Year High on Apartments
Associated Press November 26, 2013
U.S. homebuilders planned to build apartments in October at the fastest pace in five years, a sign they expect a jump in rentals in coming months.
The Commerce Department says plans to build houses and apartments were approved at a seasonally adjusted annual rate of 1.034 million. That’s 6.2 percent higher than the September rate of 974,000 and the fastest since June 2008, just before the peak of the financial crisis.
Nearly all of the increase was for multi-family homes, a part of residential construction that can be volatile. Those permits rose 15.3 percent to a rate of 414,000.
Permits for single-family houses rose 0.8 percent to a rate of 620,000.
The government report did not include information on homes started. That was delayed again by last month’s government shutdown.
Where Does JPMorgan’s $13 Billion Go?
By Ben Protess and Jessica Silver-Greenberg New York Times November 22, 2013
They were some of the biggest losers in the 2008 financial crisis: Fannie Mae and Freddie Mac, federal taxpayers, state pension funds, credit unions and, of course, homeowners.
But their fortunes turned somewhat on Tuesday, when they ended up on the receiving end of JPMorgan Chase’s record $13 billion settlement. The deal, the largest payout a single company ever made in a government settlement, centered on the bank’s sale of troubled mortgage securities to investors in the run up to the crisis.
Of the $13 billion, the only fine in the case came from federal prosecutors in Sacramento, who extracted a $2 billion penalty. In case you missed their news conference, this was kind of a big deal, representing “the largest recovery ever in a case handled” by the office.
No, prosecutors cannot pocket the cash to purchase a life-size gold statue of Jamie Dimon. Instead, JPMorgan must wire the $2 billion to the Justice Department, which will then deposit the money into a fund at the United States Treasury.
The next chunk of cash, roughly $7 billion, will flow to a range of government authorities, some more obscure than others.
The biggest winner is the Federal Housing Finance Agency, which took control of Fannie Mae and Freddie Mac when the companies collapsed in 2008. JPMorgan agreed to make a “lump sum payment” of $4 billion “payable to Freddie Mac and Fannie Mae, divided between them,” according to the settlement agreement.
Nonprofit that flipped homes to investors faces scrutiny
By Matthew Goldstein and Emily Flitter Reuters November 24, 2013
A U.S. housing regulator has been investigating the activities of a small California not-for-profit that bought hundreds of foreclosed homes through a federally backed program intended to help local communities hurt by the housing bust, according to government documents reviewed by Reuters.
The U.S. Department of Housing and Urban Development’s Office of the Inspector General late last year began probing San Diego-based Heartland Coalition’s participation in the “First Look” program in Las Vegas and other U.S. cities, according to a redacted investigation report and a letter from the regulator in response to a Freedom of Information Act request.
The Inspector General’s spokeswoman, Marta Rivera Metelko, declined to say whether the investigation is still active. Reuters could not determine the specific focus of the probe.
According to the documents and a review of local property records in Las Vegas, the charity flipped a significant number of the homes to investors, generating millions of dollars in profits for those financing Heartland’s activities with relatively short-term loans.