Real Estate Journal Online

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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Will the housing market still have hope if – even with low mortgage rates – mortgage applications for home loan refinancing remain down?

For the second straight week, mortgage applications for home loan refinancing declined. And this time, the numbers reached its lowest level since August. Historically, low mortgage rates equate to a boost in the housing market; now, though, it has failed to raise demand for loans to purchase homes.

Last Wednesday, the Mortgage Bankers Association revealed an 8.9% decrease in their seasonally adjusted index of mortgage applications for the week ending September 10; seasonally adjusted index of mortgage applications include both refinance and purchase loans. Even the 4-week moving average of mortgage applications that smoothens the erratic weekly figures is down by 0.8%. MBA’s seasonally adjusted index of refinancing applications also reached its lowest level since week ending August 6, with a decrease of 10.8%.

Home loan refinancing is supposed to be a viable option for homeowners, as It gives them extra cash to pay off existing debt, to save, or to buy. But, as New York’s Deutsche Bank senior economist Torsten Slok said, homeowners have been bothered by ‘underwater’ mortgages and therefore unable to refinance. There is a high possibility that those who are qualified to refinance lost their jobs.

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Analysts are predicting that the country may expect a huge wave of defaults soon. Recent report, though, reveals that this may not happen. Latter borrowers who had their mortgages modified are no longer having as much problems with payments as compared to their earlier counterparts.

The State Foreclosure Prevention Working Group, composed of 12 state attorneys generals and state banking regulators, has enumerated some troubling signs. In July, sales of previously-owned homes had its most intense drop in the last 15 years. And modifications, which were implemented to lower monthly payments and the number of foreclosed homes, are said to still be outnumbered by foreclosures.

The foreclosure crisis is now three years running but 63% of those homeowners who are at least two months behind their payments are not all too keen in participating in foreclosure prevention programs – whether by the government or private institutions. Homeowners not participating in foreclosure prevention programs is a matter of picking up the phone or responding to lenders calls. Bankers say that, in exchange of short-term pains for banks, lenders should start aggressively seeking homeowners who are already way behind their mortgage payments.

“Servicers must continue to perform meaningful outreach to those homeowners who are seriously delinquent and to perform modifications with significant principal reduction,” says Conference of State Bank Supervisors president/CEO Neil Milner.

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It seems like the Obama administration’s flagship program on mortgage-relief is failing. Those who were supposed to be helped by the program are falling out one-by-one. Nearly half of those enrolled have been kicked out.

The Treasury Department released a new report last Friday. It revealed that in July, around 630,000 homeowners – almost half of those who are enrolled – were cut loose from the programs. These homeowners were hoping that the program will help them have their monthly mortgage payments modified and lowered.

In the report, the Treasury Department suggests that more foreclosures are expected to happen in the latter part of 2010, hurting the supposedly recovering housing market. On the bright side, though, 32.3% - or 421,804 – of those who started with the program are now enjoying permanent loan modifications.

The banking industry says that the failure of the program can be blamed on borrowers who are not sending back paperwork. Borrowers, on the other hand, say that have been doing so but banks are just losing the documents.

Another reason for failing offered by the banks is that the administration urged them to sign up borrowers without checking any proof of income. The Obama officials came to the defense of the program, saying that they have never insisted on that kind of policy.

The administration also says that the program cannot be called a failure, with lenders now providing significant cuts to the monthly payments as compared to when the program was not yet launched. Even the largest mortgage companies are now offering alternatives to those homeowners who fell out of the program.

The Obama program, named Home Affordable Modification program, seeks to help those who are in the brink of foreclosure by lowering the monthly mortgage payments. Those who qualify for HAMP are granted interest rates as low as 2% for five years and longer repayment period.

Last year, President Barack Obama launched the Home Affordable Modification Program. Allocated a budget of $75 billion, the program is supposed to help three to four million homeowners stay away from foreclosure. Eighteen months after its launch, though, HAMP is being dubbed by analysts and economists as just ‘extend and pretend’.

Despite Department of Housing and Urban Development assistant secretary Raphael Bostic’s statement in a conference call that the housing crisis is slowly showing improvements, current figures show otherwise. More and more homes are being repossessed by banks and lenders. In July alone, 93,000 were taken over by lenders – nine percent more than June’s numbers.

RealtyTrac, a California-based data provider, started tracking home repossessions in 2005. The company has come to find out that July has the second highest monthly repossessions since tracking started. Ever since HAMP was launched, 300% more homes were repossessed.

With HAMP, participants are promised years of monthly payments. This is achieved through cutting down on mortgage interest rates and extending the mortgage life.

Last month, less than 17,000 homeowners were offered to participate temporarily in HAMP and have their monthly mortgage payments reduced. This is 86% less from last year’s HAMP participants. Of these, only 37,000 transitioned from trial plans to permanent mortgage modification.

July’s figures are the lowest since December of 2009 and are down 28% from June’s. The 100,000 that were bounced out of the program last month were bounced because they failed to provide documentation, fell behind the new reduced payments, or kicked out by mistake by mortgage servicers. The last reason is a common thing, says both homeowners and HAMP advocates; even government auditors say so.

As HAMP moves forward, the number of dropped homeowners is increasing. From June, the number increased 7% in July. Since March 1, an average of 108,000 is being kicked out monthly. Almost half of those who enrolled in HAMP since 2009 are now kicked out of the program.

Even with 422,000 homeowners enjoying the median monthly savings of $500 from HAMP, experts say that the program has only added more confusion and hurt to homeowners. As economists pointed out, HAMP does not prevent foreclosures; it only extends the time it takes for a house to be foreclosed and pretends that all’s well until that time comes. Hence the term “extend and pretend”.

Despite government efforts and HAMP in place, the housing crisis seems to be worsening. Analysts predict that not only will house prices continue dropping in the next four years, but it will also experience zero price appreciation.

HOUSTON, TX, — Richland Commercial Mortgage announced today the arrangement of a $4.5 million loan for the refinancing of Memorial Post Oak Centre, owned by MPO Centre Investors, Ltd. and located at 1110 North Post Oak Road in Houston. The 76,763-square-foot office-flex property is the corporate headquarters of The Richland Companies. Angie Steadman, President of Richland Commercial Mortgage, co-brokered the loan with Bill Haley of NorthMarq Capital’s Houston office through lender Symetra Life Insurance Company.

This follows closely on the heels of a $1.5 million refinance secured for Grassmere Business Center, LLC. in Nashville, Tennessee’s Grassmere Business Park, bringing Richland Commercial Mortgage’s closings over the last three years to more than $117 million. “In this market, refinancing can offer new opportunities for long term strategies,” says Steadman. “We fully seek to optimize terms for favorable growth for The Richland Companies as well as our clients,” she adds. Richland Commercial Mortgage offers a variety of commercial lending options for Richland properties as well as third-party partners.

About The Richland Companies
Recently named #19 in Houston Business Journal’s largest Houston Commercial Real Estate Property Owners, The Richland Companies is a privately owned real estate investment, management, brokerage, leasing, mortgage, and tenant representation firm that specializes in the acquisition and management of commercial real estate properties. The Richland Companies’ portfolio includes 30 properties in four states throughout the Southwestern United States, representing almost 2 million square feet of commercially owned retail, industrial, office, office-warehouse, and office flex space, with assets valued in excess of $250 million dollars. Headquartered in Houston, Texas with offices in Dallas and San Antonio, The Richland Companies is comprised of Richland Investments, Richland Brokerage, Richland Asset Management, Richland Commercial Mortgage, Richland Leasing, Richland Tenant Representation, Richland Property Management and Richland Land Development. For additional information on The Richland Companies, please visit http://www.richlandpremier.com.

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