Real Estate Journal Online

People are trying to buy and sell houses in New Orleans, LA, but they are finding themselves under a technologically induced real estate freeze. A computer crash in late October has effectively rendered all real estate records in the Orleans parish inaccessible, making it impossible for buyers to receive title insurance and clear title[1]. The cause of the crash is unclear, but its ramifications are crystal. Since a 30-year check is done on every property in the area before it is sold to determine if “the property is burdened with any liens, lawsuits, court judgements or other legal impediments to a sale,” the market cannot remain active with all of this data locked away. Although a group of “knowledgeable real estate professionals” has come forward to volunteer to catalog and index the data manually, reported Jackie Clarkson, a city councilwoman, “We are nowhere near coming to a final conclusion” because without an order from the Governor of the state, the Clerk of Court “cannot accept the liability of volunteer workers.”

Until the information is once again accessible, the real estate market in the area will remain at a standstill since mortgage companies and title insurance companies will not allow deals to move forward that are not certified free and clear. Clarkson warns that any more delay could “devastate not only the local real estate market but the overall local and state economy.” Indeed, there have already been some unexpected ramifications in addition to the expected problems encountered by homeowners and home-buyers who are unable to move forward in their transactions. For example, construction on a planned LSU teaching hospital has been delayed indefinitely, preventing an influx of jobs into the area.

At this time, while hard drives have been partially restored and recovered, a full recovery has been projected, over the past few weeks, for “one week, turned into two weeks, which turned into a date near the Mardi Gras season, which has now turned into an indefinite amount of time,” reported the New Orleans Metropolitan Association of Realtors (NOMAR), adding, “This by far is unacceptable”[2].

“We know not enough is being done because…you can’t buy a house in the Orleans Parish,” complained Joe Ory, president of NOMAR. “That’s a pretty serious problem.”

[1] http://www.nola.com/politics/index.ssf/2010/11/progress_reported_in_solving_n.html
[2]http://www.fox8live.com/news/local/story/mortgage-computer-crash-realtor-meeting/q9r04O-Qg0uZZcSQGBBmzw.cspx

Here’s more proof that even though the economy is starting to show signs of growth, it still has a long way to go: residential construction continues to reflect a downward movement and building permits increase only by a minimal. The drop can be greatly attributed to multi-family starts and the movement in the West.

The Commerce Department released a report on Wednesday showing figures for housing starts and building permits grants for the month of October. The month reflected an 11.7% fall to an annual rate of 519,000 – more than what is expected. The fall is in comparison to the revised September estimate of 588,000. The annual rate is expected by economists to slip from the 610,000 originally reported in the previous month to 600,000. ING’s chief international economist Rob Carnell, however, says the overall figures may seem to reflect a bad result but reality shows that the decline is more centered on the erratic nature of the multi-family sector.

In October, multi-family housing starts fell by 47.5% to an annual rate of 74,000. This is a huge number as compared to single-family starts’ decline of 1.1% to an annual rate of 436,000.

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The heat is on, as mortgage servicers make an appearance in a Congressional hearing on foreclosure procedures this week. And banks and other mortgage servicers, who rarely place the blame of failed loan modifications on investors, are now singing to a different tune. A top mortgage official in a major mortgage servicer opts to highlight the role of investors in failed loan modifications.

Wall Street investors, says Bank of America’s top mortgage official Barbara Desoer, are at fault in the ballooning number of homeowners losing their properties. She says, “Bank of America is constrained by our duties to investors. Many investors limit Bank of America’s discretion to take certain actions.”

These words, which will reflect her testimony in the day’s hearing, are not new to homeowners. Homeowners have heard different versions of it but the gist is that they are unable to acquire loan modifications because of restrictions set by investors in contracts with servicers. BofA and other banks reveal that the contracts they sign with investors more often than not blocks them from making modifications – and if they’re not blocked from doing so, there are many limitations.

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It is indeed time to sort out the mess brought about by sloppy paperwork regarding foreclosure procedures. With homeowners filing lawsuits left and right plus state attorneys general combining efforts to investigate on the matter, banks are really under hot water. They face further heat as they are set to make appearances in twin hearings in Congress this week.

Congress hearings on foreclosure practices are set for Tuesday and Thursday this week and are expected to renew pressure on banks to come up with ways of keeping borrowers in their homes. Executives of major mortgage lenders – like Bank of America and JPMorgan Chase – will make an appearance in the Congress hearing, the first ever since the fiasco on sloppy foreclosure paperwork hit the newsstands in September.

The foreclosure paperwork mess is centered in accusations of banks hiring robo-signers to sign off on hundreds of foreclosure documents every day. This has caused outrage among the public – and they had a right to be angry as these same banks received taxpayer aid during the financial crisis, amounting to billions of dollars. And the issue has since been used as further evidence that mortgage modification is a better option than evicting homeowners.

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Even the world’s fastest-growing economy has its fair share of problems in the current shaky global economic growth. With a series of events threatening to raise asset bubbles and accelerate inflation, China has implemented tighter measures – especially for the property market.

State-run China Real Estate Business reports that the Asian country’s four biggest banks have frozen new loans to property developers. Allotted loan targets for some(like Agricultural Bank of China Ltd., Bank of China Ltd., China Construction Bank Corp., and Industrial & Commercial Bank of China Ltd.), after all, have already been met this year. New loans approvals have ceased since the month of October ended. Aside from that, the cease seems to be have been brought about by the slow rise in property prices – October has seen the slowest pace in ten months.

To limit the risk of asset bubbles, China implemented expanded measures such as raising interest rates. The new local currency lending for last month was at 587.7 billion yuan ($89 billion) – way above the median forecast of 450 billion yuan.

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There have been too many news regarding errors on foreclosures and the paperwork that accompanies it. Given that homeowners on default have the option for loan modification, it is a wonder why banks do not just go that route. An attorney with the National Consumer Law Center gives the reason behind this.

National Consumer Law Center’s Diane Thompson explained why banks and servicers would rather foreclose than modify loans even if it’s being predicted that soon foreclosures will outnumber loan modifications by approximately two million foreclosures to 1.7 million modifications. According to her, those who service loans – does the paperwork, sends out bills, and collects monthly mortgage payments – actually earn more for foreclosing homes rather than modifying loans.

Investors do pay for routine work like collecting and passing mortgage payments. This is a small percentage though, comparing to how much servicers will get for foreclosing on homes. With foreclosures, servicers keep the late fees collected and all the other fees associated with foreclosure. But if a servicer fails to grant a modification, there are no penalties given.

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Sometimes, when people try too hard to save money they end up spending more – it has even become a comic relief as it became a theme in some comic strips. But it becomes unfunny when it seems to cheat the nation of millions of dollars in funds. This is exactly what’s happening right now, if Americans are to believe the different lawsuits filed against the mortgage servicers’ loan processing company.

The Mortgage Electronic Registry System (MERS) is a private company formed by banks in 1997 as an alternative to paperwork. Owned by big mortgage companies like Bank of America, Citigroup, GMAC, JPMorgan Chase, and Wells Fargo, MERS uses an electronic system in tracking changes in home ownership. Currently, it has registered 3 of 5 loans on the market – this totals 65 million loans.

Prior to MERS, banks would have to pay the county land recording office a small fee every time a mortgage was sold. It was a minimal fee at $30 or so but it became too much for the banks when, during the 1990s boom, they pooled millions of mortgages into securities. Since this led to larger and larger tabs, MERS was created as a way around the fees.

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With recent reports of foreclosure fraud and predictions of home prices and sales going down, it is enough to make one fearful for the housing market and the economy in general. However, some news can be exaggerated and thus instill unnecessary fear in people’s minds. The facts show, however, that there really is not much to fear as the housing market does seem to finally be picking up.

The National Association of Realtors released in a New Orleans conference the results of a survey done on people who purchased a house from summer 2009 to middle of 2010. The survey, which only included those who intended to stay in their homes and not investors, yielded pretty positive results.

Though home buyers prove to be more conservative in their choices and even opt to stay in their homes longer, most American consumers still consider a home purchase as a smart financial move. Half of those surveyed even admit that purchasing a home just might be better than investing in stocks. But they are, admittedly, more cautious as median price remains low as well as median home size purchased.

NAR research vice president Paul Bishop explains, “Not surprising, the median price is down a little bit and so is the median size of homes purchased. Eighty-five percent of homeowners say their purchase of a home is still a good finance investment, and nearly half think the investment is better than stocks.”

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The rental market has reportedly hit its ground and is now starting to stabilize and even improve. Nationally, numbers are showing a great improvement both for rentals and vacancy rates. In Santa Clarita Valley, though, figures reflect a still weak economy – but the improvement, no matter how small, is always seen as a positive thing.

This year’s third quarter has reflected a 1% increase in Santa Clarita’s average rent for apartments, says apartment search and market research website RentJungle.com. The average rent was up by $21 and now sits at $1,482. Though majority of cities had increases of 2 to 5% and Santa Clarita’s look very minimal, rent Jungle CEO Jon Pastor says that 1% is still a welcome thing.

“The Santa Clarita market looks like it has turned the corner. Second quarter rents remained flat, so the third quarter’s increase of 1 percent is encouraging,” says Pastor.

Analyzing over one million apartment ads monthly, Rent Jungle reported that Santa Clarita’s one-bedroom apartments yielded an average $1,125 rental, while two-bedroom apartments are at $1,445. Santa Clarita’s economic development division, which releases a monthly economic report, issued in August the average Santa Clarita rent at $1,438. Whereas Rent Jungle reports a lower rental rate for Santa Clarita versus the local average, EDD says otherwise.

For EDD, the 2009 and 2010 rental averages are very comparable, with only a dollar variance. The October numbers, though, show an upward trend in Santa Clarita’s average rental. The trend is now up to $1,526.

Pastor further predicts, “We are seeing some encouraging signs in the overall national rental market for the second quarter in a row. Rent increased in the second quarter, making this past period the second continuous quarter of increases.”

Both for the national and local markets, one-bedroom apartment rent saw an increase. Nationwide, the rents shot up to 7%. The local market, on the other hand, had a promising 3% increase.

Two-bedroom apartments, however, show differing results. Whereas nationally demand is up 5%, locally it plummeted by 4%.

The residential real estate market did not benefit much from the record low interest rates as home sales and prices continue to decline. The commercial real estate and exchange traded funds, though, have done well this year all thanks to the improved credit market. This has led exchange traded funds to come up with a game plan that heavily relies on the real estate market.

The weak labor market has continually dragged the housing side of the real estate market – but this has not greatly affected commercial real estate values, which in fact has started to stabilize. Even the insignificant increases in consumer spending and consumer sentiment were not enough to weigh down commercial real estate values.

Reports have shown that rental prices are no longer going downhill. Even vacancy rate for retail malls, office buildings, and even apartment buildings remain low. Some say this can be attributed to the improved credit markets.

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