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The Commerce Department reported Tuesday that housing starts rose a bit in September, helped by a rise in single-family home construction, but this bit of good news came with some bad news that applications for new home construction were down in the month.
According to the report, construction of new homes and apartments rose by 0.5% in the month, to an annualized rate of 590,000 units. While any growth for housing starts comes as good news in the current market, it is not as good as it appears at first glance, considering that analysts had been expecting to see the annualized rate increase to 610,000 units.
Also dampening the mood were indications that future construction may not be as strong as some would like. The report indicated that applications for new building permits actually fell in the month.
Since applications for building permits is a key factor to determining the future of the housing market, you would obviously want this reading to remain level at the worst, and in September new applications actually fell by 1.2%. That drop marks the biggest monthly decline since April, and will definitely give pause to people who have started to assume the housing market had hit bottom.
While it is true that the housing market has been slightly rebounding the past few months, there are still several factors that are weighing on the market. Unemployment remains high and is expected to break through 10% during the first quarter of next year, bank lending remains tight, and the current tax incentives for new home buyers is due to expire next month. Congress is considering extending the $8,000 incentive program, but if they do not decide to do so there is concern that sales will dip once more and send the housing market reeling once again.
The strongest part of the country last month was the South, where construction rose by 7%. The rest of the country was not so fortunate, with a drop of 5.5% in the Northeast, 1.8% in the Midwest, and 8.8% in the West.
Over the next few months, a lot will depend on whether Congress extends the current incentive program for new buyers. Even if you are not in the market for a new home, it may be in your best interest to hope for an extension. Housing experts have predicted that extending the incentive program by another year would add 350,000 much needed jobs to the economy and generate $11.6 billion in tax revenues. More jobs equal a stronger economy, and that is something we all would love to see.
What are your thoughts on the incentive program? Is it worth extending the program in order to keep the housing market on track and generate additional jobs? Or do you think it is time to pull back on the program and let the market take care of itself?
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Reader Comments (Page 1 of 1)
10-20-2009 @ 7:40PM
toytruckman said...
Extend the program. But if you are in or near foreclosure, you should possibly consult a real estate attorney using the following information.
BACKGROUND
Mortgage-backed securities (MBSs) are simply shares of a home loan sold to investors. They work like this: A bank lends a borrower the money to buy a house and collects monthly payments on the loan. This loan and a number of others -- perhaps hundreds -- are sold to a larger bank that packages the loans together into a mortgage-backed security. The larger bank then issues shares of this security, called tranches (French for "slices"), to investors who buy them and ultimately collect the dividends in the form of the monthly mortgage payments. These tranches can be further repackaged and sold again as other securities, called collateralized debt obligations (CDOs). Home loans in 2008 were so divided and spread across the financial spectrum, it was entirely possible a given homeowner could unwittingly own shares in his or her own mortgage.
Eventually, the most desirable, qualified customers dried up; they all had homes. So banks turned to customers they'd traditionally shunned -- subprime borrowers. These are borrowers with low credit ratings who pose a high risk of defaulting on their loan. But lenders of all stripes bent over backwards in the early 2000s to get this type of borrower into homes. The no-document loan was created, a type of loan for which the lender didn't ask for any information and the borrower didn't offer it. People who may have been unemployed as far as the lender knew received loans for hundreds of thousands of dollars. Why?
One answer is that, with the introduction of MBSs, lenders no longer assumed the risk of a loan default. They simply issued the loan and promptly sold it to others who ultimately took the risk if payments stopped. And since MBSs created early on were based on mortgages granted to the more dependable prime borrowers, the securities performed well. They performed so well that investors clamored for more. In response, lenders loosened their restrictions for mortgage applicants and borrowed heavily to create cash flow for loans in order to create more mortgages. Without mortgages, after all, there are no mortgage-backed securities.
MERS FORECLOSURES http://www.mersinc.org/Foreclosures/index.aspx
Mortgage Electronic Registration Systems, Inc. (“MERS”) is a proper party that can lawfully foreclose as the mortgagee and note-holder of a mortgage loan. MERS Membership Rule 8 provides required guidelines that must be followed when MERS is the foreclosing entity. Please click here to access the Rules of Membership, and reference the Rule 8 requirements.
In mortgage foreclosure cases, the plaintiff has standing as the holder of the note and the mortgage. When MERS forecloses, MERS is the mortgagee and it is the holder of the note because a MERS officer will be in possession of the original note endorsed in blank, which makes MERS a holder of the bearer paper. MERS will not foreclose unless the note is endorsed in blank and held by MERS.
The MERS Legal Primer provides a sampling of cases that address the standing of MERS to foreclose its mortgages. These cases are not meant to be an exhaustive list involving MERS but are merely to serve as a primer for the legal arguments.
THE QUESTION
As mortgages were packaged/bundled into mortgage back securities (MBS) and sold to investors and since these MBSs were bought by investors, with some mortgages being split and owned by several institutions or people (tranches), how can the homeowner/borrower know who actually owns their mortgage? If the homeowner /borrower does not know who actually owns their mortgage, then how does the foreclosure court know who actually owns the mortgage and CAN actually proceed with the foreclosure?
The real estate attorneys representing these possible foreclosed homeowners should request that the foreclosing institution show that they ACTUALLY own the mortgage and can bring foreclosure action to court and are not just the mortgage servicer.