Bank of America Corp., the biggest U.S. lender, extended a freeze on foreclosures to all 50 states as concern spread among federal and local officials that homes are being seized based on false data.

“We just want to clear the air,” Bank of America Chief Executive Officer Brian T. Moynihan said today in a speech to the National Press Club in Washington.

Bank of America, JPMorgan Chase & Co. and Ally Financial Inc. already froze foreclosures in 23 states where courts supervise home seizures amid allegations that employees used unverified or false data to speed the process. Bank of America’s new policy extends its moratorium to the entire nation, and the announcement spurred more demands from public officials and community groups for other banks to follow suit.

“All mortgage providers should follow the example of Bank of America and review their practices to ensure that they are not unfairly targeting homeowners in Nevada and across the nation,” Senate Majority Leader Harry Reid, a Democrat from Nevada, said today in a statement.

PNC Financial Services Group Inc. halted sales of foreclosed homes for a month to review documents in its mortgage servicing procedures, according to an Oct. 4 memo the Pittsburgh-based bank sent to lawyers handling the lender’s foreclosures.

Bank of America fell 13 cents, or 1 percent, to $13.18 at 4 p.m. in New York Stock Exchange composite trading. The shares have lost 12 percent this year.

States Investigating

“We will stop foreclosure sales until our assessment has been satisfactorily completed,” the Charlotte, North Carolina- based company said today in a statement. “Our ongoing assessment shows the basis for foreclosure decisions is accurate.”

At least seven states are investigating claims that home lenders and loan servicers took shortcuts to speed foreclosures. Attorneys general in Ohio and Connecticut have said some of the practices used by banks to take away homes may amount to fraud. Acting Comptroller of the Currency John Walsh last week asked the nation’s seven biggest lenders to review foreclosures for defective documents, spokesman Bryan Hubbard said.

“Bank of America has done the right thing by stopping foreclosures in all 50 states,” North Carolina Attorney General Roy Cooper said today in a statement. “Other banks that have questionable procedures should do the same while the investigation continues.”

President Barack Obama’s administration didn’t pressure the bank to enact the freeze, Moynihan said.

Record Foreclosures

Lenders took possession of a record 95,364 homes in August and issued foreclosure filings to 338,836 homeowners, or one of every 381 U.S. households, according to RealtyTrac Inc., an Irvine, California-based data vendor.

Wells Fargo spokeswoman Vickee Adams said the lender is still processing foreclosures and referred to a statement the bank put out earlier this week, saying “our affidavit procedures and daily auditing demonstrate that our foreclosure affidavits are accurate.”

Thomas Kelly, a spokesman for New York-based JPMorgan, and Gina Proia, spokeswoman for Detroit-based Ally, declined to comment.

“Bank of America has made the right choice given the circumstances of this scandal,” said Kevin Stein, associate director of the California Reinvestment Coalition in San Francisco. “The primary concern for all of these banks should be to figure out where they are handling foreclosures illegally before they erroneously and unfairly take another family’s home.”

bloomberg.com

Congress has extended the limits for jumbo mortgages through 2011 providing some much needed stability for the United States housing market. The rates allow geographic increases of the traditional max rate for Freddie Mac and Fannie Mae loans up to $729,750 in the highest priced markets.

Since private equity loans have all but dried up in the capital crunch, the need for government backed loans has been very important for the real estate industry. If Freddie Mac and Fannie Mae will not buy the loans then the private market will need to. And since the cost of capital is so high, jumbo loan borrowers are paying a significantly higher interest rate

Now with the new limits proposed by Congress, buyers can qualify for the reduced mortgage rates, as low as the mid 4 percent  rate for highly qualified borrowers and only need to put 3.5 percent down on an FHA loan. Otherwise these same buyers will need to put 10–20 percent down and pay a 6–8 percent mortgage rate for the same home in the private market.

Now comes the conundrum for free market folks like myself. I do not want the level of government involvement in the real estate industry to occur. But if it does have to occur, the playing field needs to be level for the market to work. All in or not at all, but let’s try to keep the market growing for all involved.

realestatebloggers.com

The drop in the latest pending home sales index got a lot of press attention, but that blip downward shouldn’t be your guide on what to expect for real estate in 2010.

The 16 percent decline in November pending sales from October’s unusually high index was due almost entirely to buyers’ behavior confronting what they thought was an expiring tax credit.

In October the pending sales index went off the charts. Buyers were scrambling to sign contracts before the $8,000 credit program expired at the end of the month.

In November, buyer behavior was just the opposite. When Congress extended the credit through next April 30, the pressure was off. Nobody needed to rush to sign contracts.

Not surprisingly, the November index hit the skids.

Meanwhile, even November’s pending sales number was a solid 16 percent above November 2008. That suggests that even without the extra incentive provided by the credit, the home sale market is gaining strength for its own fundamental reasons: huge pent-up demand, low prices and great financing.

But keep this in mind: Those fundamentals are dynamic – and buyers and sellers need to stay on top of them as they change in the weeks ahead.

For example, as we’ve noted before here at Realty Times, with the economy climbing slowly out of recession, and the Federal Reserve expected to throttle back on its mortgage securities purchases , interest rates are now trending upwards.

Last week’s thirty year average fixed rate for new mortgages hit 5.2 percent, according to the Mortgage Bankers Association. That’s still very low by historical standards, but it’s up nearly a quarter of a percentage point just since mid December.

Fifteen year fixed rates averaged 4.6 percent — a rise of one third of a point in the past few weeks.

Home prices are also beginning to trend upward in key markets, according to the latest Case-Shiller home price index. In San Francisco and Minneapolis, the index is up by about 15 percent since the low point earlier in 2009, according to an analysis by Bespoke Investment Group.

The same analysis found the Case-Shiller index up 8.3 percent from last year’s low point to the latest month in metropolitan Washington DC, 7.6 percent in San Diego, 7.2 percent in Denver, 6.9 percent in Chicago and Phoenix, 6.8 percent in Dallas and 6.1 percent in Boston.

With reports of fewer layoffs plus significant new gains in manufacturing outplut and retail sales don’t be surprised to see prices-and mortgage rates — continue to rise in the months ahead.

Realtytimes.com

Savvy investors are always the first to jump in a potentially profitable housing market and a new survey indicates things are heating up.

More than 12 percent of homebuyers today plan to purchase a home as an investment, compared to less than half, only 5.6 percent, just seven months ago, according to a recent Move.com Homeownership Survey.

Foreclosure buyers account for 25.3 percent of consumers interested in purchasing a home and 42 percent of potential foreclosure buyers regard their purchases as investments, while 57.6 percent plan to live in the foreclosed home themselves.

“This latest Homeownership Survey validates what many had hoped to see in the housing markets — affordable prices and ample inventories are restoring the appeal of real estate to investors while providing opportunities for first time home buyers to enter the market,” said Move, Inc.’s chief revenue officer, Errol Samuelson.

Interest rates below 5 percent for much of the year and low home prices, which may be at or near market bottom, are also bringing investors back to the fold.

The new and improved home-buyer tax credit, no longer just for first time home buyers, can also be a boost for those taking the practical approach to investing by buying their own home first.

The survey of 1,004 consumers, conducted from October 16 to 18 this year, found:

• Foreclosure buyers are confident they will profit from discounted purchase prices, as well as healthy appreciation rates over the next five years.

• Most foreclosure buyers, 58.2 percent, expect to pay 20 percent or less than market price for a foreclosure, while 38.5 percent expect a 25 percent or greater discount.

• Expectations are high — 73 percent expect their properties to appreciate ten percent or more in five years, 28 percent expect their purchases to appreciate 20 percent or more.

Given the current market of flat and falling home prices, that may sound like high hopes, but RealtyTrac.com explains that lenders want to unload overhead-heavy inventories of repossessed and foreclosed home.

That forces lenders to list their homes below market and offer properties at a discount, giving the buyer some built in equity.

• Foreclosure buyers intend to convert their foreclosures into rentals (13.2 percent), fix them up for re-sale (11.3 percent), or house a family member until the home can be sold at a profit (17.4 percent).

In some markets, especially resort and vacation rental markets, where rents are higher, conditions bode well for investors who want to enjoy positive cash flow as they wait for equity to build.

“If you find a well priced property located in a healthy rental market and are able to manage and monitor the property and maintain a positive cash flow from the onset for a unit used strictly for income purposes, rather than being held with the expectation of price appreciation, this could be a good time to become a landlord,” said Nancy Osborne, chief operating officer of Erate.com, a Santa Clara, CA-based financial information publisher and interest rate tracker.
Broderick Perkins