BofA developing foreclosure rental programs to deal with distressed properties

But private banks own $50.4 billion worth of REO properties, too, according to the Federal Deposit Insurance Corp., and millions of these homes are sitting vacant.

Sturzenegger described how their idea would work.

"We and Fannie Mae are looking at programs where you can capture somebody before the REO process and offer a deed-for-lease. We would go to the customer and say, 'We'll do a short sale. Will you be interested in leasing your property back? We're still going to sell the property. You will no longer be the owner. But you can be a tenant now in that same property and save you from moving on,'" he said.

I don't think it will be that easy.  A bank is not going on the top of the tenant like a real landlord.  In addition, if the tenant cause $20,000 damage to the place and value of the home continues to decrease isn't the bank losing even more money. 1) If the sell the home in 3 years, but it's not worth as much and tenants have done damage. 2) The can sell the non performing asset and invest the money in a performing asset that's collecting a good return.  However, if the Fed has given the banks $7.7 trillion in shadow loans in the last 3 years, so there isn't really need by the bank to find performing assets, they had cheap loans with the Federal Reserve .

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Average Apartment Rents for some OC Cities: Register

Cities are ranked by apt. rents

City	Avg. Rent	% Ch
Newport Beach	$1,987	3.9%
Irvine	$1,882	6.3%
Aliso Viejo	$1,613	1.1%
Costa Mesa	$1,586	4.3%
Orange	$1,584	1.0%
Laguna Niguel	$1,578	5.1%
Tustin	$1,502	4.5%
Lake Forest	$1,468	3.3%
Huntington Beach	$1,444	2.5%
Mission Viejo	$1,431	0.4%
Rancho Santa Margarita	$1,423	2.4%
Santa Ana	$1,410	8.8%
Placentia	$1,406	-0.7%
Brea	$1,401	5.6%
Fountain Valley	$1,373	4.7%
Cypress	$1,339	-2.0%
Fullerton	$1,319	3.8%
Garden Grove	$1,310	2.1%
Westminster	$1,310	2.1%
Anaheim	$1,305	4.2%
La Habra	$1,274	3.5%
Buena Park	$1,265	2.5%
Stanton	$1,236	7.0%

Renter-ship has become a bit more attractive

Even with brokers saying this is the best affordable market in years....

The U.S. homeownership rate fell about 1.5% over the past year, according to Freddie Mac's report.

Hessam Nadij, managing director of research and advisory services for Marcus & Millichap, said in the August issue of HousingWire magazine that “apartments, which are considered part of the commercial real estate sector, are well ahead of retail, office properties and industrial properties in the recovery because of the release of pent up demand.”

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Market reports point to housing desolation

Moody's Investors Service lowered its near-term outlook for housing and the broader economy this week. Home sales and starts are now hitting a bottom, while home prices will continue to sink until early 2012, said Celia Chen, senior director at Moody's Analytics in a research note.

"As 2011 began, the recovery appeared healthy and ready to turn into a self-sustaining expansion. Job growth was strong, unemployment was falling, and income and consumer spending were accelerating," Chen said. "Today, the economy is struggling to avoid another recession."

And look at this little nugget.

Of the bankers surveyed by analysts at the consumer credit firm FICO and the Professional Risk Managers International Association more than half do not expect home prices to climb back to 2007 levels before 2020.

"Have we finally hit rock bottom? That’s hard to say, but according to our survey, it’ll be quite some time before prices fully recover. The fact is that the market needs help to clear the backlog of distressed properties," researchers said. "We are in no man’s land right now."

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Morgan Stanley finds investors highly receptive to bulk REO sales idea

Government is soliciting ideas to depose of foreclosed homes.

Analysts with the investment bank released an update to this strategy — which is known as the REBUILD proposal — estimating there are currently 6 million properties in REO, foreclosure or more than 90 days past due.

In its latest update, Morgan Stanley addressed some concerns raised about the proposal, namely that it would not be free-market based with the government-sponsored enterprises becoming landlords and growing their balance sheets. Or the idea that it would be unregulated, giving investors purchasing power at rock-bottom prices without ensuring they have a concern for rehabilitation or neighborhood property values.

And...

"We believe the best solution lies somewhere in the middle, and instead of focusing on what we don’t want, we think it’s better to focus on what we do want, and figure out a way to reach those goals," analysts at Morgan Stanley said.

"In this case, we believe that the goal should be effective ownership and management of rental properties, while retaining some upside for taxpayers if everything works out and home prices recover," according to Morgan Stanley.

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The Housing Market is Shrinking

There is statistic this report that household sizes are growing.  Meaning that more people are moving in together and that's decreasing the demand for housing.  Is it temporary?  It's hard to tell, but the economy is bad, so it might be awhile before household size shrinks.

Households had been getting smaller over the past decades, despite population growth. That was great for housing, because it meant more demand. "A one tenth of a percent increase in people per household would wipe out three years worth of population- and immigration-driven household growth," according to Green Street Advisors. That appears where we're headed.

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Cheaper to rent than to buy condo in L.A.

Especially, if you add the HOA fees to your mortgage, property taxes, and most lenders now require a condo insurance.

Despite the steep drop in housing prices, it still makes sense for many Angelenos to rent rather than buy, according to an analysis by real estate website Trulia.

Trulia calculated a ratio that compared the median list price of two-bedroom condos with the median rental cost of similarly sized apartments.

It’s cheaper to buy in cities with ratios of 15 to 1 or less, and cheaper to rent in cities with ratios of 21 to 1 or more, according to Trulia. It’s generally cheaper to rent in cities with 16-1 to 20-1 ratios, although in some situations it could make financial sense to buy. In Los Angeles, the ratio was 19 to 1.

More of the bubble waiting to pop.

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Fannie Mae survey shows more Americans consider renting

I also know of some people that have lost their home in 2009 and have rented and now have a saving built up for the next dip.

About 70% of Americans interviewed for Fannie Mae's July consumer survey said they are growing more pessimistic about the direction of the economy and they expect home prices to fall even further.

Some 23% of respondents to the national poll believe the economy is moving in the right direction.

"The impact of recent financial market volatility on household wealth has been a setback to consumer confidence, which we're seeing in our survey results and in Americans' continued restraint in their willingness to take on additional financial commitments," said Doug Duncan, vice president and chief economist of Fannie Mae.

Only 11% of respondents said it's a good time to sell a home, while most of those surveyed expect home prices to decline from a year ago.

More Americans plan to rent in the future, even though they anticipate rental prices to increase over the next 12 months. The number of Americans who said they will buy their next home went down 5 percentage points, while rentals are up 3 points.

Personal finance also remains a sour spot with only 35% of respondents expecting finances to get better, down from 40% of respondents in April.

Link Here

Fannie, Freddie pressured to rent more foreclosures

I know of two people that are renting from the Bank.  Question when did bank go into the Real Estate Investment business?

Sen. Jack Reed (D-R.I.) sent a letter to the chief regulator of Fannie Mae and Freddie Mac, urging the two companies to convert their repossessed properties into rental units and pool them for sales to investors.

Fannie Mae repossessed 53,697 properties through foreclosure in the second quarter, roughly flat from the previous quarter. While that is down from more than 68,800 repossessions one year ago, Fannie said the total was artificially depressed due to extended delays in the foreclosure process.

These delays will continue to push expenses up and delinquency rates elevated for a company that has already pulled more than $104 billion in bailouts from the Treasury Department and reported another $5 billion in losses for the quarter.

"Moreover, Fannie Mae believes these changes in the foreclosure environment will delay the recovery of the housing market because it will take longer to clear the housing market’s supply of distressed homes, which typically sell at a discount to nondistressed homes and, therefore, negatively affect overall home prices," the company said in its financial report released Friday.

In his letter to Federal Housing Finance Agency Acting Director Edward DeMarco, Reed said the government-sponsored enterprises could install a major rental program that could milk at least some revenue out of properties otherwise sitting vacant.

In Rhode Island, alone, Reed wrote, the average monthly rent for a two-bedroom apartment increased 54% since 2000.

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Government Considers Ways to Rent Foreclosed Homes .

I know of two people that were renting then the bank foreclosed on the home they were renting.  The landlord was not paying the mortgage.  The lender then approached the tenants if they wanted to continue to rent from the lender.  Long-term shallow inventory.

The Obama administration is examining ways to pull foreclosed properties off the market and rent them to help stabilize the housing market, according to people familiar with the matter.

While the plans may not advance beyond the concept phase, they are under serious consideration by senior administration officials because rents are rising even as home prices in many hard-hit markets continue to fall due to high foreclosure levels.

Trimming the glut of unsold foreclosed homes on the market is "worth looking at," said Federal Reserve Chairman Ben Bernanke in testimony to Congress last week.

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More Americans to exit home ownership

Morgan Stanley completed and demographic study.

During the housing bubble, homeownership rates increased from 66% to 69%, an all-time high. Today, that number is just below 65%, according to Morgan Stanley researchers Oliver Chang, James Egan and Vishwanath Tirupattur.

The analysts expect this will decline further to 59.7%, driving multifamily vacancies down and rents up. The researchers derived this estimate by taking the number of delinquent homeowners likely to be foreclosed, and moving them into the rental category.

And the outlook

"GSE reform, Dodd-Frank securitization rules, mortgage interest deduction reform, continued home price declines and a long workout period for distressed homes, will likely make it harder to buy an owner-occupied home," the Morgan Stanley report states.

"As such, we believe that the U.S. will become a Rentership Society, in which the homeownership rate will keep falling, the home rentership rate will conversely rise, and the rental market will dominate the investment landscape in housing for years to come," according to the analysts.

They made clear the interpretation of their results are not necessarily equal to a negative outlook. They point to improvement to the multifamily sector as an example. However, performance of single-family dwellings, often owned by one landlord, are more difficult to project.

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Why The Drop In Foreclosures Is Not Good News

According to this delay it's due to the nearly 1 year old foreclosure-gate or robo-signing scandal.

As many as 1 million forecloses that should have taken place in 2011 will be pushed back to 2012, or perhaps even later, according to the experts at RealtyTrac. “This casts an ominous shadow over the housing market, where recovery is unlikely to happen until …  the inventory of distressed properties can be whittled down to a manageable number,” said James Saccacio, chief executive officer of RealtyTrac. Some 1.17 million homes or one in 111 had at least one foreclosure filing in the first half of this year.

Foreclosure filings during the second quarter decreased 32 percent from the second quarter of 2010. In June, fillings dropped 29 percent from 2010, marking the ninth straight month where foreclosure activity decreased on a year-over-year basis.

In January, RealtyTrac had forecast up to 3.2 million foreclosure filings for 2011. Now, due to the processing delays, total filings for the year will be around 2 million, compared with 2.9 million in 2010, according to Rick Sharga, senior vice president at RealtyTrac

Again the long-term prediction...

Some experts say they don’t expect a real turnaround in housing until there is a significant increase in job creation and income. June’s jobs report showed a paltry gain of 18,000 jobs, while the unemployment rate inched up to 9.2 percent

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Home price spikes are seasonal, not a recovery

In fact, these seasonal increases were less than 1% on the Case-Shiller Index.  

Researchers with Capital Economics say no one should interpret recent home price increases to anything but a temporary uptick caused by better weather and seasonal factors.

A new report from Altos Research earlier this week showed the median national home price for all 26 markets studied by the firm at $450,358 in June, compared to $444,273 in May.

In addition, the latest Standard & Poor's/Case-Shiller 10-city composite went up 0.8% in April when compared to March, while the 20-city index grew 0.7%.

With the debt ceiling in play and phase out or elimination of the mortgage interest tax deduction AND decrease in confirming loan limits expect further pressure on home prices.

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Americans expect falling home prices and higher rental rates: Fannie Mae

Rentals rates are determine by supply and demand.  Currently the job situation is so bad I don't see a huge demand in rents.

The average consumer expects home prices to decline by at least 0.5% in the next 12 months, according to a new monthly consumer survey from Fannie Mae.

That forecast reverses the trend from May when most consumers interviewed by the government-sponsored enterprise said they expect at least a slight home price increase in the next year

And the rental rates....

The survey underscores some of the trends taking hold in the housing market, with most Americans expecting a 3.9% rise in rental prices as fewer consumers take the homeownership route. About 44% of the 1,000 Americans interviewed expect rental prices to rise, compared to 39% last year

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Rental prices rise 6.7% as Americans sour on homeownership

Please Note: This is website I'm not too familiar and haven't explored that much.  Is rent increasing your area?

Prices on rental properties grew 6.7% in June as more Americans chose low-risk rentals over homeownership, a new report from housing search engine HotPads.com said Thursday.

The agency, which compared June prices to last year, attributes the rental-price surge to pent-up demand among first-time renters and larger families who can no longer afford homeownership or who lack faith in the stability of home prices.

San Francisco-based HotPads.com reached this conclusion by studying the median listing price of 500,000 rentals located in major metropolitan areas.

I've try to compare HotPads to rentometer.  Rentometer seem to have more conservative pricing.

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California to suffer housing shift, UCLA forecasters say

Please Note: UCLA has been very wrong in the past.  That's why they don't reprint their past prognostications.

The state's population is also skewing younger, meaning there will be more demand for urban rental units and less demand for suburban cul-de-sacs, according to the quarterly economic forecast released Wednesday by UCLA's Anderson School of Business.

"The incremental demand for housing is moving more into multifamily housing," said Jerry Nickelsburg, senior economist with the forecast. "Many of the younger generation have been buffeted by the boom and bust in the housing market, and see value in living closer to work."

That's bad news for the state economy, however, for two reasons. One is that construction of multifamily homes requires less labor than construction of single-family homes. Second, areas such as the Inland Empire and Central Valley that were hit hardest by the housing bust won't get a construction boom to help pull them out of the economic doldrums.

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Squatter Nation: 5 years with no mortgage payment

You ask yourself why isn't the lend foreclosing on the house.

Charles and Jill Segal have not made a mortgage payment in nearly five years -- but they continue to live in their five-bedroom West Palm Beach, Fla. home.

Lynn, from St. Petersburg, Fla., has been living without paying for three years.

In Thousand Oaks, Calif., an actor has missed 30 payments, and still, he has not lost his home.

They're not alone.

Some 4.2 million mortgage borrowers are either seriously delinquent or have had their cases referred to lawyers to pursue foreclosure auctions, according to LPS Applied Analytics. Of those, two-thirds have made no payments at all for at least a year, and nearly one-third have gone more than two years.

These cases can go on and on. Nationwide, it takes an average of 565 days to foreclose on borrowers in default from their first missed payments to the final auction. In New York, the average is 800 days and in Florida, where the "robo-signing" issue is particularly combative, it's 807.

This long defaults will pressure on housing prices for the next several years.

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Watch for strategic defaulters, economists suggest after studying Countrywide data

Homeowners at least two-months delinquent on their mortgage may be more apt to strategically default if offered a mortgage modification despite the damage to their credit.

A new report sponsored by the National Bureau of Economic Research studied the mortgage modification program Countrywide Financial Corp. started after settling federal deceptive-lending charges in 2008.

Researchers found Countrywide's relative delinquency rate rose 13% a month immediately after the modification program was announced.

Christopher Mayer, senior vice dean and professor of real estate at the Columbia Business School in New York, led the research of the NBER working paper. Fellow Columbia professors Edward Morrison and Tomasz Piskorski, and graduate student Arpit Gupta are co-authors.

They said the design of mortgage modification programs must account for strategic behavior by the homeowner to achieve any level of success.

"The borrowers whose estimated default rates increased the most in response to the program were those who appear to have been the least likely to default otherwise, including those with substantial liquidity available through credit cards and relatively low combined loan-to-value ratios," the economists wrote in the paper. "Additionally, bounded rationality or moral considerations may decrease a borrower's ability or willingness to behave strategically."

More than 5 million homeowners lost their homes to foreclosure over the past three years. The Columbia economists estimate another 11 million borrowers — about 25% of all homes with a mortgage — face possible foreclosure because they're under water, or owe more than the home is worth.

Regulators have implored mortgage lenders and servicers to modify home loans through lower interest rates and principal reductions. But programs, such as the Home Affordable Modification Program, haven't fared well in stemming foreclosures or defaults.
The Columbia economists found extending benefits to mortgagors two months in arrears "could induce homeowners to default in order to obtain modifications benefits even though they would not have defaulted otherwise."

The economists advise lenders vet homeowners on the verge of losing their home more thoroughly before beginning a modification program.

Still, a more stringent audit of the property and the owner is time-consuming and "may fail to extend benefits to homeowners before they enter foreclosure or decide to exit their homes, and could thereby lead to higher costs for borrowers and lenders."

Earlier Monday, the Treasury Department released a free calculator online that gives borrowers an estimate on whether they qualify for HAMP.
And last week, JPMorgan Chase (JPM: 42.6499 -1.11%) analysts said the trend of borrowers choosing to default on their mortgage when they otherwise might have been able to afford payments is on the decline

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Consumers peg housing market recovery at 2014 or later: Trulia/RealtyTrac survey

I've even seen some studies state we won't surpass the previous housing peak in 2007 until 2029 or so. 

The housing market won't recover until 2014 or later, according to 54% of the people surveyed in a joint Trulia/RealtyTrac consumer housing sentiment survey.

Some 40% of renters surveyed said they have no plans to ever buy a home.

In a survey conducted six months ago, 42% of respondents expected the market would turn around by 2012 or had already turned around. Now, only 23% continue to think this will happen.

The housing sector's continued pain comes from the large overhang of foreclosures on the market, as well as the slow economic recovery, said Peter Flint, CEO of Trulia and Rick Sharga, senior vice president with RealtyTrac, during a conference call with reporters Wednesday.

"I expect the rest of 2011 to continue to be volatile," Flint said, adding he doesn't expect any noticeable improvement for about 18 months.

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‘Squatter Rent’ May Boost Spending as U.S. Mortgage Holders Bail

Banks are now taking longer to foreclose on a home due to the issues with foreclosure-gate and robo signing.

“We didn’t pay it for about 24 months,” said White, who quit her job as a beautician during that period after becoming pregnant with her first child and experiencing medical complications. “What we had, we could put towards food and the truck payments and insurance and health things I was dealing with.”

Millions of Americans have more money to spend since they fell delinquent on their mortgages amid the worst housing collapse since the Great Depression. They are staying in their homes for free about a year and a half on average, buying time to restructure their finances and providing an unexpected support for consumer spending, which makes up about 70 percent of the economy.

So-called “squatter’s rent,” or the increase to income from withheld mortgage payments, will be an estimated $50 billion this year, according to Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. The extra cash could represent a boost to spending that’s equal to about half the estimated savings generated by cuts to payroll withholding in December’s bipartisan tax plan.

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