Martin Crutsinger
USA Today

WASHINGTON — Sales of existing homes edged up slightly in May, although median home prices continued to fall.

The National Association of Realtors said Thursday that sales of existing single-family homes and condominiums rose 2% to a 4.99 million annual rate last month.

It was only the second sales increase in the past 10 months, but it was not viewed as a sustained rebound. Many economists believe prices will have to fall further before the housing industry can mount a sustained recovery.

The median price of an existing home sold in May dropped to $208,600, down 6.3% from a year go. That was the fifth biggest year-over-year price decline in records that go back to 1999. At the median, half of homes sold for more, half sold for less.

The strength in sales reflected gains in all parts of the country except the South, where sales dropped 0.5%. Sales were up 5.5% in the Midwest, 4.6% in the Northeast and 2% in the West.

 

Paul Bishop, senior economist for the Realtors, said for the past few months sales have been rebounding in parts of the country that had been hardest-hit by the housing bust, while sales have weakened in some areas that formerly had been immune from the downturn.

Distressed areas now seeing sales gains included Sacramento, the San Fernando Valley and Monterey in California; Sarasota, Fla.; and Battle Creek, Mich.

The inventory of unsold homes dropped 1.4% to 4.49 million units, which represents a 10.8-month supply at the May sales pace, down from an 11.2-month supply in April. That’s still about double the inventory level that existed during the five-year housing boom.

“Stabilization in home prices can only occur with buyers returning to the market, so we are encouraged by rising home sales, particularly in distressed markets,” said Lawrence Yun, the Realtors’ chief economist.

However, rising mortgage foreclosures are dumping even more homes onto the already glutted housing market.

Many economists predict sales will keep falling through the summer and prices will not start to rebound until the spring next year.

Kevin McCoy
USA Today

Beset by financial problems in 2002, Eunice Anderson fell months behind in the mortgage payments on her four-bedroom ranch in Redford Township, Mich., near Detroit.

Anderson, 48, a medical insurance auditor, says she was unable to refinance or negotiate a relief plan with her lender, Countrywide Financial. Facing foreclosure, she filed a Chapter 13 bankruptcy petition that let her keep her home while she paid more than $11,000 in debt.

She emerged from bankruptcy three years later with a court-filed certification that she had paid in full. But weeks later, Countrywide notified Anderson she still owed more than $10,000 in late payments and other fees, and threatened to foreclose.

“I thought when I came out of bankruptcy, I was paid up and current,” says Anderson, who felt her only option was to seek bankruptcy protection for a second time. “I think it’s kind of unfair.”

She’s now a plaintiff in a federal lawsuit that seeks class-action status and alleges that Countrywide, the nation’s largest home lender, disregarded bankruptcy-court rules by billing for unwarranted fees.

The case, being fought amid what the Mortgage Bankers Association says is the highest level of foreclosures since 1979, is among scores of lawsuits accusing the lightly regulated companies that collect mortgage payments of violating borrowers’ rights, a USA TODAY review of court and government records shows.

The lawsuits typically include allegations that mortgage-servicing firms mishandle borrower payments, triggering unwarranted late charges or defaults; bill homeowners for more than they owe; charge for unneeded and expensive property insurance; and disregard bankruptcy-court rules.

Countrywide, whose shareholders on Wednesday approved an expected July takeover by Bank of America, is a prominent defendant in some of the litigation. The attorneys general of Illinois and California sued the company Wednesday for alleged deceptive practices, including mortgage-servicing abuses. But cases across the nation also focus on other mortgage-servicing firms, including some owned by major investment banks.

“We see huge numbers of problems with this industry,” says Tara Twomey, an attorney for the National Consumer Law Center, which represents low-income clients.

Countrywide and other mortgage servicers reject any notion that their practices have been improper. “Reports alleging that mortgage servicers are systematically charging excessive fees and using the bankruptcy process to push borrowers into foreclosure, or abusing the process more generally, are inaccurate,” Steve Bailey, Countrywide’s loan administration chief, wrote in testimony submitted at a May congressional hearing.

But homeowners nationwide say the firms have violated housing laws, bankruptcy rules or both:

•In a Pennsylvania bankruptcy case similar to Anderson‘s, Judge Thomas Agresti in May dismissed a proposed settlement of a case that included allegations Countrywide used fabricated letters in its bid to foreclose on the home of Sharon Hill in Monroeville, Pa. The letters contained purported notifications of increases in Hill’s mortgage payments during the bankruptcy process. But Countrywide never sent them to Hill, court records show. They were “misrepresented as bona fide payment-change letters,” a bankruptcy trustee alleged in a June 9 court filing.

Agresti called that a sign “something is not right in Denmark.”

•In New Hampshire, Michael Dillon, a handyman and former freelance stage technician, won a 2005 state court decision upholding his allegations that Fairbanks Capital improperly tried to foreclose on his Manchester home.

Judge Gillian Abramson issued a contempt ruling after concluding Fairbanks had “created a predatory scheme of penalties,” in part by billing him for fees for which Dillon “did not receive any notice.” The ruling ordered the firm to give Dillon a chance to reinstate the mortgage “without penalties.” The litigation is continuing.

•In Louisiana, a bankruptcy-court review of accounting by Wells Fargo Home Mortgage found the firm’s servicing arm collected nearly $25,000 more from Michael Jones than he owed on his Mandeville home. Judge Elizabeth Magner ordered a refund and told Wells Fargo to pay more than $67,000 in sanctions and damages. The firm has appealed.

•And in Illinois, a lawsuit that consolidated 18 cases from 10 states accuses Ocwen Financial  of engaging in a “nationwide scheme of illegal, unfair, unlawful and deceptive business practices” involving improper fees, costs and other charges. The case is in settlement negotiations, court records show.

Separately, EMC Mortgage and its former parent, Bear Stearns, notified investors in March that the Federal Trade Commission staff believes the firms “have violated certain federal consumer protection statutes” with their mortgage-servicing practices. JPMorgan Chase (JPM) acquired the servicing firm in May with its purchase of Bear Stearns. EMC said it expects negotiations to avoid a federal lawsuit.

This month, the firm also agreed to settle a federal lawsuit filed by Excel and Annie Ward, said Kenneth Mayfield, the lawyer for the Mississippi homeowners. They accused EMC of failing to refund more than $4,100 they were owed from an insurance settlement.

Along with the EMC investigation, the FTC is assessing whether other mortgage servicers and lenders “are making deceptive claims,” agency Chairman William Kovacic wrote in a June 4 letter to Sen. Chuck Schumer, D-N.Y.

‘Abuse’ of bankruptcy process

The FTC action comes five years after it reached a $40 million settlement with Fairbanks Capital to resolve allegations the company failed to post borrowers’ mortgage payments on time, charged unauthorized fees and used dishonest or abusive debt-collection practices.

Fairbanks subsequently changed its name to Select Portfolio Servicing. The renamed company, now owned by Credit Suisse, has been the subject of similar complaints to the FTC since the settlement.

The Executive Office for U.S. Trustees, the Justice Department agency that oversees bankruptcy cases, has intervened or filed actions in 16 cases involving Countrywide, GMAC Mortgage Loans, NovaStar Mortgage or Washington Mutual Bank. The cases were filed in eight states.

Similar action could come in more than 30 other cases, agency director Clifford White said at the congressional hearing.

He said most of the cases involve people who fell behind on their mortgages and filed for Chapter 13 bankruptcy protection, a process designed to help debtors repay what they owe over months or years.

“Countrywide’s failure to ensure the accuracy of its claims and pleadings has resulted in an abuse of the bankruptcy process,” U.S. Trustee Donald Walton alleged in a Georgia bankruptcy-court complaint filed in February.

The action accuses the firm of “engaging in bad faith conduct” in the bankruptcy of John and Robin Atchley by accepting payments made on the couple’s behalf even though they “had already paid Countrywide’s claim in full.” The complaint said Countrywide’s alleged actions were “not an isolated incident.” The firm moved to dismiss the case in May.

In a similar conclusion, a November research study by Katherine Porter, a University of Iowa law professor, found mortgage and servicing companies “frequently do not comply with applicable law.”

Fees charged to borrowers “are often poorly identified, making it impossible to verify if such charges are legally permissible or accurate,” concluded the report, which analyzed 1,700 recent Chapter 13 bankruptcy cases. Struggling homeowners who have avoided bankruptcy may have it worse, Porter concluded, because they lack bankruptcy-court safeguards.

“I am also concerned that … the practices of these companies may not be limited to bankruptcy cases,” said Sen. Russell Feingold, D-Wis., at the May hearing.

Incentives to overcharge?

A generation ago, home buyers often got a mortgage from a local bank, which serviced the mortgage by sending monthly statements, collecting payments and assessing penalties for late or missed payments.

Today, however, home borrowers may get mortgages through a bank, a mortgage corporation, a mortgage broker or a financial institution. The original lender frequently sells the loan. And mortgages often are packaged into Wall Street securities backed by the income from borrower repayments.

The mortgage-servicing function also has changed. Servicing companies, some owned by mortgage firms or investment banks, handle the monthly notices, collections and late-fee assessments and other penalties. They also manage foreclosures when borrowers default.

Mortgage servicers typically receive fees ranging from 0.25% to 1.375% of the note’s principal for each loan, Porter found. The servicers also keep part or all of late charges and other default fees, her analysis showed.

That gives mortgage servicers “a financial incentive to impose additional fees on consumers,” a process that could result in foreclosures, Porter concluded.

Countrywide President David Sambol stressed the importance of servicing fees in the company’s third-quarter earnings conference call last year.

Referring to the increased operating costs caused by mortgage delinquencies, Sambol said those expenses “tend to be fully offset by increases in ancillary income in our servicing operation, greater fee income from items like late charges” and from “our businesses involved in foreclosure trustee and default title services and property inspection services.”

As Sambol addressed Wall Street analysts, Countrywide reported $764 million in operating earnings from mortgage servicing, up from $518 million for the third quarter in 2006. The earnings have since declined amid lower interest rates and faster mortgage prepayments, Countrywide says.

Borrower grievances about mortgage servicing account for about one-third of all mortgage-related complaints received by the U.S. Department of Housing and Urban Development. HUD has received more than 1,000 mortgage-servicing complaints during the last five years.

FTC records contain similar consumer complaints about alleged abuses.

For example, a November 2006 complaint states Select Portfolio Servicing notified one homeowner she was four payments behind, an allegation the woman, whose name was redacted from the complaint, said was untrue.

She also alleged in the FTC complaint that the servicing company placed insurance on her property “when she had insurance already.”

Some recent court rulings have sided with homeowners who accused servicers of abuses.

In a March 5 opinion, Bankruptcy Court Judge Jeff Bohm criticized Countrywide and a law firm representing the mortgage giant for filing a motion that misrepresented the payment history of Texas homeowner William Parsley. Responding to court questions about the error, Countrywide’s lawyers withdrew the motion. But the firm gave no assurance Parsley wouldn’t be billed for related legal costs, court records show.

“What kind of culture promotes payment histories that are so confusing to the vast majority of persons, including attorneys and judges — not to mention borrowers — that it becomes necessary for legal assistants to ‘simplify’ them, leading to more errors and confusion?” Bohm asked.

The judge urged Countrywide to “re-evaluate its policies and procedures” to ensure that it doesn’t “undermine the integrity of the bankruptcy-court system.”

‘My last resort’

The ruling addressed the same issue raised by Eunice Anderson.

She bought her home in 1999 for $129,000, put 5% of the purchase price down and got a Countrywide mortgage for the balance. Her monthly payment, including taxes and insurance, totaled $1,205, Anderson says.

Her grandmother’s death and unexpected family expenses landed her in financial trouble in 2002. Unable to work out a solution with Countrywide, Anderson filed a Chapter 13 petition.

“Bankruptcy was my last resort. I was pretty stressed out,” she says.

Through the court, she worked out a financial plan expected to cover the missed payments and penalties she owed Countrywide while simultaneously paying current mortgage bills.

The court confirmed the plan in January 2003. And, in January 2006, the bankruptcy trustee reported that Anderson had paid more than $11,700 in pre-bankruptcy mortgage and related debt and $46,287 for mortgage bills after the bankruptcy petition.

Anderson was discharged from bankruptcy in April 2006. Soon afterward, Countrywide notified her she still owed nearly $11,743 in mortgage payments, escrow bills and other fees, court records show.

Anderson‘s attorneys allege in court filings that Countrywide misapplied payments she made during the bankruptcy proceeding and assessed “fictitious charges” not included in the repayment plan approved by the court.

Countrywide, in a June 3 court filing, said the loan charges challenged by Anderson were included in the claim the company submitted in her bankruptcy case. The company argued that because she did not challenge the charges during the bankruptcy court’s confirmation proceedings, her claim should be dismissed.

In a similar case in Kansas involving EverHome Mortgage, Bankruptcy Court Judge Robert Berger ruled in May that the company violated the rights of borrowers Willie and Valerie Payne by not advising them of nearly $13,000 in costs and fees that allegedly accumulated during a bankruptcy proceeding. He ordered EverHome to pay $2,500 in punitive damages.

“When a lender silently accepts payments for over three years without notifying the borrower the payments are insufficient, when the borrower believes his taxes and insurance are being paid by his monthly payments to his lender, and when the borrower has no reason to know the lender is advancing taxes and insurance and thereby increasing borrower’s indebtedness, the lender waives his right to recover the advances from the borrower,” Berger wrote.

EverHome appealed the ruling, arguing that it was “contrary to the totality of evidence.”

Berger denied the appeal on June 6.

Anderson hopes for a similar outcome in her battle.

“The only thing I look forward to is coming out of the bankruptcy and not being faced with another nightmare,” she says. “It’s frustrating, but I work through it.”

THE USA‘S LARGEST MORTGAGE-SERVICING COMPANIES |

 

Company	Mortgages serviced1 (in billions)	% change from 2006 to 2007	Market share
Countrywide Financial	$1,476.2	14%	16.0%
Wells Fargo	$1,473.2	10%	16.0%
CitiMortgage	$799.8	53%	8.7%
Chase Home Finance	$775.9	15%	8.4%
Washington Mutual	$623.4	-12%	6.8%
Bank of America	$516.9	23%	5.6%
Residential Capital (GMAC)	$453.3	-3%	4.9%
IndyMac Bancorp	$198.2	27%	2.2%
Wachovia	$193.1	10%	2.1%
National City Mortgage	$187.5	10%	2.0%
PHH Mortgage	$163.1	2%	1.8%
SunTrust Mortgage	$149.9	15%	1.6%
U.S. Bank Home Mortgage	$117.5	18%	1.3%
Aurora Loan Services	$114.0	23%	1.2%
First Horizon Home Loans	$111.3	9%	1.2%
EMC Mortgage	$89.1	24%	1.0%
Dovenmuehle Mortgage2	$70.5	7%	0.8%
HSBC Mortgage	$66.3	2%	0.7%
Branch Banking & Trust (BB&T)	$65.6	10%	0.7%
Morgan Stanley	$65.0	42%	0.7%
Note: Includes subservicing contracts; 1 — as of Dec. 31; 2 — estimate
Source: National Mortgage News

 

Ozzie Jurock
Sun

Oh my. Oh my. The market is turning. The market is crashing, the depression is coming, terrible things will befall us. That is the content of some email I am receiving. And…yes the market is turning, yes pre-sales and the whole new condo market has stalled, yes listings are higher and sales are down 28 per cent.

Percentages matter not. So, the sales volume is off by 28 per cent. So what? The key in any market – good or bad – is to get your property placed into the 72 per cent which sell now. There is no good nor bad market, only a good or bad deal you personally make. All good marketing efforts begin life as a sound, basic plan and then evolve to fit the particular property and situation. Cut from whole cloth and then tailor-made, such a plan will incorporate innovative new ideas and “rearrange” old ones.

Here then, are a few of these ideas:

1. Most important: Interview and select a quality Realtor, from two or three recommended ones. Have them make a market evaluation – in writing – and an action plan on how best to market your property. Go see all the comparables used in the evaluation. Pick the Realtor whose comparables and action plan makes the most sense to you. Get somebody who knows your neighborhood intimately and who’s enthusiastic about your home. That also means someone other agents want to work with; someone who’s too abrasive or who isn’t trustworthy won’t help your cause. Insist on weekly contact….even if there is ‘nothing happening’. BE the squeaky wheel.

2. Ensure your home is listed on the Multiple Listing Service. The more exposure, the better. Make sure your home is on the agent’s tour/agents open house asap. Make sure you are on mls.ca and the Realtor’s website.

3. Price your home right. Yes, we all need and want the best price, as in the highest price, for our abode. But be realistic. Ask yourself: “If I were the buyer, would I pay the price I am asking for this place?” Real Estate is cyclical and we are at the end of this cycle. If you want to sell…price it just below the competition, not what you ‘could have gotten last year’.

3. Create a “Benefit and Feature” sheet for your home. List every good point, every benefit that your property and your neighborhood enjoys. Create a “Pick-Up” Box and augment the realtor’s “For Sale” sign with it. Like an open-topped container filled with the above mentioned feature sheets for pick up.

4. Stage your home! Have a professional come in and help. Stand in the doorway to find each room’s focal point, and use furniture placement to highlight that. The back of your sofa shouldn’t block the view of the fireplace, for example. Remove any extraneous pieces of furniture. “Re-position” them into another room…or into storage altogether. A wingback chair that’s crowding the family room might help create a nice reading nook in the master bedroom.

5. Declutter and then declutter again. Depersonalize and neutralize. The first items that should go in those packing boxes: family photos, collections and just about anything else that says “you.” Show the home from its best possible side. Have people see how they would feel if they owned the home. Developers have show suites and show homes for a reason.

6. First impressions do count. Fix up your home but do it with “resale” in mind: take care of the eye-catching areas and don’t waste the effort (and money) on the rest. Fix the porch or entrance, that wobbly front step or squeaky door. Repaint the front door, bathrooms and kitchen. Use general (but modern) neutral colors only. Again, don’t spend a fortune on the remodeling; you won’t get your money back. If any remodeling is done – spend it all in the kitchen and baths. Clean like a fiend. Q-Tip clean!

7. Get rid of the junk. A bright Place is a Happy Place. Clean up the basement areas. Ditto for the stairwells and closets. If you’ve got too much junk and other indispensable basement stuff piled up, have it stored off-site during the selling period. (It’s inexpensive.)

8. Sell the sizzle. Rather than building a suite in the basement, paint the (clean) basement floor and paint the lines of where a bath, an extra bedroom could potentially go. Let the buyer’s imagination do the rest. Add lights along the walkway, put big brass house numbers up and a brass mail box on your door. Kick up the curb appeal. Garden gnomes are a no-no. Front landscaping is what the buyer sees first.

9. Have a note on the for sale sign: Call this Number 000-000-0000 for a taped message for price and features of this home. The answering-machine ad lets you list all of the features of your home before stating the price. In turn, offer people who leave their name and number a reason to do so. You’ll mail them interior shots of your place or arrange a private showing or something similar. State the date of the next open house.

10. Be with it. Use craigslist.com…or insist that your realtor uses craigslist.com to market your property. It is the most used bulletin board in the world. Two of our Action Group members used craigslist.com to market four condos they owned in Calgary and had not sold in two months. Craigslist.com found buyers in 48 hours. Also be on any local Internet board available. Most are free. People today surf! It also might attract that foreign buyer.

(For 11 more things to do go to www.jurock.com – 21 ways to make your home sell faster.)

Always remember: This is YOUR house we’re discussing. You have the right to demand an attentive, professional, upbeat realtor, a person who creates a solid, comprehensive action plan (in writing) and does so in a measurable way (number of showings, numbers of interested buyers, etc.).

A good realtor keeps you informed all the way. A poor realtor won’t. Look around you and ask for the best possible result… but be realistic. Don’t demand the impossible. You also have the right to expect that this professional will sell your home as quickly as possible, for the best price in the given market conditions and with the minimum amount of inconvenience.

The realtor has the right to ask you for your help: clean up the yard and space, tie up the dog and hide the dirty laundry (please!).

Insist that your realtor be focused. But be equally as focused. There is no such thing as accidental success. It’s always earned and always comes with a price. The price of doing the work of being prepared with a good measurable plan of action is nothing as compared to the maximum price you get for your home.

Finally, to all of you kind people that write to me about the market… Don’t worry about the market, worry about your sale or purchase. The best deals are made in tougher markets. As a seller – make sure your property is worked professionally…and it will sell. As a buyer – we have said it before -…be smart but don’t buy under any circumstances without a ‘subject to the sale of my current house’ clause. You may be stuck with two houses for a while and the pressure will hurt.

Ozzie Jurock F.R.I.

Jurock’s Real Estate Insider

web: www.jurock.com

email: [email protected]

© The Vancouver Sun 2008

Sun

The average rental apartment vacancy rate in Canada‘s 35 major centres decreased slightly to 2.6 per cent in April 2008, from 2.8 per cent in April 2007, according to the spring Rental Market Survey2 released this month by Canada Mortgage and Housing Corporation (CMHC).

“The Canadian economy remains very supportive of strong demand for both ownership and rental housing thanks to solid job creation and healthy income gains,” said Bob Dugan, Chief Economist at CMHC’s Market Analysis Centre. “High levels of immigration and the increasing gap between the cost of home ownership and renting continue to drive rental demand in 2008. These factors have put downward pressure on vacancy rates over the past year.”

The results of CMHC’s spring survey reveal that the major centres with the lowest vacancy rates in April 2008 were Victoria (0.3 per cent), Kelowna (0.3 per cent), Greater Sudbury (0.7 per cent), Vancouver (0.9 per cent), and Saskatoon (0.9 per cent). A unit is considered vacant if, at the time of the survey, it is physically unoccupied and ready for immediate rental. In other words, a new tenant can sign a lease for a vacant unit and move in immediately. All major centres in B.C. except for Abbotsford, posted a vacancy rate below one per cent due to rising migration to B.C. and relatively high home ownership costs that have resulted in increased rental demand. Provincially, vacancy rates were lowest among the western provinces, especially Manitoba (1.0 per cent), Saskatchewan (1.2 per cent), and B.C. (1.1 per cent). This is largely due to the migration of workers from Central and Atlantic Canada, who settle in rental housing upon their arrival in the western provinces. As for Alberta, both Edmonton and Calgary have seen increases in the vacancy rate, mainly due to reduced migration into the province and increased supply of non-traditional forms of rental accommodations such as rented condominiums and basement apartments.

At the other end of the spectrum, the major urban centres with the highest vacancy rates were Windsor (13.2 per cent), Moncton (5.5 per cent), and Hamilton (4.7 per cent).

The highest average monthly rents for two-bedroom apartments in Canada‘s major centres were in Calgary ($1,096), Toronto ($1,075), Vancouver ($1,071), and Edmonton ($1,000). Of all the major centres, these four were the only ones with average rents at or above $1,000. The lowest average monthly rents for two-bedroom apartments were in Saguenay ($497), and Trois-Rivières ($501).

Year-over-year comparison of rents can be slightly misleading because rents in newly-built structures tend to be higher than in existing buildings. Therefore, CMHC provides an analysis of rents that excludes new structures, resulting in a better indication of actual rent increases paid by tenants. Overall, the average rent for two-bedroom apartments in existing structures across Canada‘s 35 major centres increased by 3.6 per cent between April 2007 and April 2008. While the average rent for two-bedroom apartments in existing structures increased in all major centres, rent increases were particularly strong in Saskatoon (21.3 per cent), Edmonton (13.7 per cent), Regina (10.4 per cent), and Abbotsford (9.1 per cent). When these four centres are excluded, the average rent increase in existing structures in the remaining 30 centres was only 2.3 per cent.

CMHC’s spring Rental Market Survey found that the average rental apartment availability rate in Canada‘s 35 major centres was 4.9 per cent in April 2008 down from 5.4 per cent in April 2007. A rental unit is considered available if the unit is vacant (and ready for immediate rental), or if the existing tenant has given or received notice to move and a new tenant has not signed a lease. Availability rates were highest in Windsor (15.6 per cent), Hamilton (8.1 per cent) and Moncton (6.4 per cent), while the lowest rates were in Kelowna (1.3 per cent), Vancouver (1.3 per cent) and Winnipeg (1.5 per cent).

© The Vancouver Sun 2008