The following is a real estate news roundup:
Fitch: Three ‘specters’ stalk home builders
The spring selling season was a bust, and the housing downturn is spreading to other sectors of the economy, analysts at Fitch Ratings said. In a report focused on home builders and new-home sales, Fitch projects further slippage in starts and new-home sales, thanks to three "specters": poor buyer psychology, falling prices and excessive inventories. Fitch analysts expect improvements in affordability will largely be offset by tightened credit standards. The market for subprime loans — which accounted for 20 percent of loans in 2005 — is "essentially non-existent." Only a limited number of alt-A loans that have the characteristics of prime loans are being originated (alt-A loans accounted for 13.4 percent of originations in 2006). "The highly visible problems in the housing finance system and steadily decreasing prices are contributing to a wait-and-see attitude among prospective home buyers and reducing builder confidence in the single-family housing market," Fitch analysts said.
The most challenging issue for housing, both new and existing, may be excess inventory, the report said, with a 10.6-month supply of new housing and 11.2 months of existing homes (Fitch analysts say 5.5 to six months of supply represents equilibrium in supply and demand). The single-family rental vacancy rate is near record levels, possibly because investors are biding their time before putting single-family homes back on the for-sale market. Fitch has lowered its ratings on most of the public home builders, and the ratings outlook for all companies but NVR Inc. is negative. Fitch lowered its issuer default ratings of Beazer Homes USA Inc., Centex Corp., D.R. Horton Inc., Lennar Corp., Meritage Homes Corp., Pulte Homes Inc. and M/I Homes.
Mortgage applications up 10.9 percent
An index measuring mortgage loan application volume increased by more than 10 percent for the week ending June 6, with an even bigger boost in purchase loan applications, the Mortgage Bankers Association said.
The Market Composite Index, a measure of mortgage loan application volume, was 557.1 — up 10.9 on a seasonally adjusted basis from the previous week. The Refinance Index increased 8.4 percent from the previous week, and the Purchase Index was up 12.8 percent. The Conventional Purchase Index increased 11 percent while the Government Purchase Index (largely FHA-backed loans) increased 17 percent.
The refinance share of mortgage activity decreased to 39.8 percent of total applications from 40.6 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 10.3 from 8.7 percent of total applications from the previous week.
The average contract interest rate for 30-year fixed-rate mortgages increased to 6.24 percent from 6.17 percent, with points increasing to 1.12 from 1.06 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The average contract interest rate for 15-year fixed-rate mortgages increased to 5.78 percent from 5.7 percent, with points increasing to 1.12 from 1.06 (including the origination fee) for 80 percent LTV loans. The average contract interest rate for one-year ARMs increased to 6.87 percent from 6.8 percent, with points decreasing to 1.42 from 1.44 (including the origination fee) for 80 percent LTV loans
Prosecutors: Real estate ‘Ponzi scheme’ nets $75 million
The former president and founder of NJ Affordable Homes Corp. has been charged in a "classic Ponzi scheme" that allegedly defrauded investors and mortgage lenders of $75 million. Wayne Puff, 60, of Old Bridge, N.J., solicited more than $120 million from hundreds of investors from New Jersey and throughout the United States, prosecutors said. In an initial scheme that began in 1998, investors were told they were financing the purchase and renovation of residential properties for resale, and that their investments were secured through mortgage liens on the properties. In many cases the mortgages were "essentially worthless" because the property appraisals "grossly inflated the value of the property," prosecutors said. Instead of using the money solely to buy and renovate properties, Puff diverted new investor monies to pay old investors, and embezzled more than $1 million for his own personal benefit, prosecutors said. In a second scheme that began in late 2003, Puff allegedly convinced investors to allow NJAH to use their credit information and purchase properties in their names. Instead of renovating the properties — often purchased using false appraisals and other loan documents — Puff is accused of using the proceeds to pay investors in the first program.
Puff is charged by the U.S. Attorney, District of New Jersey, with one count of wire fraud and one count of obstruction of justice, and faces a maximum term of imprisonment of 20 years and a fine of $250,000 for each count if convicted. Six other people from New Jersey have pleaded guilty to conspiring with Puff in the scheme: former NJAH account manager Lucesita Santiago, 38, of Woodbridge; former NJAH loan processors John Kurzel, 57, of New Brunswick and Katrina Arrington, 36, of Hillside; appraisers Michael Meehan, 48, of Belmar and William Page, 48, of Old Bridge; and appraisal coordinator John Morris, 62, of Fort Lee.
ForeclosureRadar.com reports increase in investor purchases at auction
ForeclosureRadar.com, a Web site that tracks California homes in a foreclosure process, reported that properties subject to notices of default — the first step in a foreclosure process in California — dropped 2.5 percent in May compared to the previous month, with a total of 43,011 new filings.
Sales of foreclosure properties at public auctions grew 11.8 percent in May, with 25,523 properties sold at auction, with about 97 percent of those foreclosure properties returned to the lender.
Even so, the number of properties purchased by third parties at public auctions grew 34.6 percent in May.
Lenders discounted 86 percent of all foreclosures taken to sale at auction, with an average discount of 28 percent, ForeclosureRadar reported. Foreclosure sales at auction were up 41 percent in San Benito County, 39 percent in Sonoma County and 34 percent in Madera County in May compared to April.
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