Increased Inventory Slows Home Value Growth

Increased Inventory Slows Home Value Growth

In a report released by Zillow, national home values rose just .2 percent in January from December. Inventory rose in 22 of the nation’s 35 largest metros, and helped slow down the rising value of homes.

Year-over-year, home values rose 6.3 percent in January, down from previous gains of 7.1 percent in August, 2013. Home values are expected to rise another 3.4 percent in the next 12 months.

The Zillow Home Value Index, which according to the report, “measures the median estimated home value for a given geographic area on a given day and includes the value of all single-family residences, condominiums and cooperatives,” notes that January’s figure of $169,600 is the smallest monthly increase since May, 2012.

Although inventory remains tight, the number of homes listed for sale on Zillow rose 11.1 percent annually in January.

States that were hit the hardest from the housing recession showed some of the largest increases in home inventory; cites like Las Vegas (up 42.8 percent), Phoenix (up 30.5 percent) and Sacramento (up 26 percent) all showed large gains.

Home appreciation slowed in January for these metros, as more available homes allowed buyers to stay away from bidding wars that drove up home prices.

Last year, a smaller inventory of homes contributed to a rise in home values, but increased inventory is having a moderating effect. Dr. Stan Humphries, Zillow chief economist, said that the increased supply is available because “more sellers are free to list their homes after being released from negative equity, builders continue to ramp up construction and many homeowners decide to list their homes and capitalize on recent gains.”

The outlook for January, 2014 to January, 2015, is expected to rise another 3.4 percent to $175,301, according to the Zillow Home Value Forecast.

Large metro areas expected to show the most appreciation over the next year include Riverside (13.3 percent), Orlando (10.3 percent), and Sacramento (9 percent).


Expansion of California’s Anti-Deficiency Laws Means More Litigation For Creditors

Expansion of California’s Anti-Deficiency Laws Means More Litigation For Creditors

Turning a narrow consumer shield into a potentially broad sword, this summer California expanded its anti-deficiency judgment laws to prohibit not only the judicial pursuit of mortgage deficiency balances, but also to declare that post-foreclosure deficiencies can be neither “owed” nor “collected.”

In doing so, the California Legislature may have created a potentially significant compliance headache and increased litigation risks for a wide range of financial service companies – from mortgage servicers and debt collection agencies to credit reporting agencies and those relying on credit reports.

In their prior 70 years of existence, California Civil Code Sections 580b and 580d (the “anti-deficiency judgment statutes”) struck a careful balance between providing lien holders with the remedy of a non-judicial foreclosure, in exchange for giving up their right to sue borrowers in court for the unpaid balance between the amount of the mortgage and the amount of the foreclosure, i.e., to obtain a “deficiency judgment.”

Section 580d, the statute applicable to mortgage loans, stated that “no judgment shall be rendered for any deficiency” upon a secured note after it has been sold. In conformance with that carefully limited scope, for decades California courts have held that deficiencies arising from non-judicial disclosures, while not collectible through the courts, remained due and owing.

In addition, it has been held that because the anti-deficiency statute does not extinguish the debt itself, creditors were permitted under the Fair Credit Reporting Act and the California state analogue to report the existence of the deficiencies to credit reporting agencies.

The amendments were introduced in the California State Legislature in early 2013 with little fanfare or explanation. By late spring, the legislative commentary contended that the amendments were intended to prevent creditors and debt collectors from contacting borrowers seeking repayment of the deficiency balance through non-judicial means. Cal. Bill Analysis, S.B. 426 Sen. (April 23, 2013).

It was further stated that inclusion of the term “owed” was also intended to prevent a creditor from continuing to report a loan as delinquent after foreclosure by eliminating the underlying debt itself.

To date, these amendments have gone relatively unnoticed by the financial services industry and the media, other than to remark on the potentially adverse tax implications for defaulting borrowers.

But that will not last for long.

In light of these amendments, businesses should review their debt collection, credit reporting, and other policies and practices with respect to California foreclosures. Plaintiffs likely will read the amendments broadly and argue that attempts to negotiate the collection of outstanding deficiencies, or to report such balances to credit reporting agencies, violate various federal and California laws and give rise to significant statutory and common-law damages.

Given what appears to be extensive involvement by the plaintiffs’ bar in lobbying for the amendments, as well as previously unsuccessful class-action litigation targeting such practices, a wave of litigation should be expected for those creditors who do not modify their practices to conform with the new requirements.

Credit Default Rates Decrease in January

Credit Default Rates Decrease in January

In a report released Tuesday by S&P Dow Jones Indices and Experian, data from the S&P/Experian Consumer Credit Default Indices revealed a decline in default rates during the month of January.

The Indices are a comprehensive measure of changes in consumer credit defaults. The Indices are calculated based on data extracted from Experian’s consumer credit database.

The national composite rate in January, 2014, was 1.34 percent, down marginally from the December rate of 1.35 percent.

“The severe weather conditions afflicting the country impacted economic activity,” said David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Dow Jones Indices.

The default rate for first mortgages was 1.26 percent, slightly down from 1.27 percent in the previous month. The default rate for second mortgages  was posted at .72 percent for January, down .76 percent from December.

The report noted, “Overall economic activity is still subpar. Against this background, consumer default rates have stabilized at levels similar to those seen before the financial crisis.” and NAHREP Partner to Advance Homeownership and NAHREP Partner to Advance Homeownership and the National Association of Hispanic Real Estate Professionals (NAHREP) are joining forces to advance sustainable Hispanic homeownership.

Hispanic homebuyers are the largest segment of new homebuyers nationwide.

“As a national leader in the sale of homes in all stages of the foreclosure process, has an extensive portfolio of properties that greatly expands buyers’ purchasing power. We want agents and buyers in Hispanic communities to be aware of these opportunities and have a level of comfort with the auction process,” said CEO and co-founder, Jeff Frieden.

The partnership will support educational campaigns that target residential brokers and buyers. Additionally, NAHREP will offer advice on accessing opportunities available through, and serve as a referral service that connects buyers and agents to homes available on

“Access to affordable housing stock is a primary barrier to Hispanic homeownership and the presence of large institutional investors in key markets has made the issue more challenging. As continues to reinvent the way real estate is transacted, it’s key that Hispanic agents and buyers understand the process and know how to participate,” said NAHREP CEO, Gary Acosta. “This partnership will help NAHREP support potential Hispanic homebuyers by educating them on the thousands of ownership opportunities exclusively available through”

The partnership agreement between and NAHREP also includes extensive joint marketing plans.

January Storms Push Home Sales Down

January Storms Push Home Sales Down

Winter storms in many parts of the country caused delays in appraisals and closings, leading January home sales to plummet 26.9 percent over the month, according to the RE/MAX National Housing Report for January. Meanwhile, tight inventory continues to drive up home prices, and homes continue to fly off the market rather quickly.

While home sales were down nearly 27 percent over the month, they were down 7.1 percent from January last year, according to the RE/MAX report, which includes data from 52 metros across the nation.

“We usually expect to see fewer home sales in the winter months, but January experienced particularly severe storms in large parts of the country, which disrupted appraisals, inspections and closings,” said Margaret Kelly, CEO of RE/MAX.

She added, however, that “the real story for home sales in 2014 will begin to unfold in the coming spring and summer months.”

The median home price declined over the month – falling 6.3 percent to $173,475. However, January’s median price continued a 24-month trend of year-over-year increases, rising 11.6 percent since January 2013. Forty-five of the 52 markets observed reported year-over-year home price gains in January.

The year-over-year rise in home prices is a reflection of the tight inventory that has persisted into this year, according to RE/MAX. As of January, the market holds 5.3 months’ supply of homes, which is lower than the inventory reported a month ago and a year ago.

A few markets are experiencing inventories far below the national average. RE/MAX found the lowest inventories in Denver, Colorado (1.1 month); San Francisco, California (1.4 months); Los Angeles, California (2.5 months); Boston, Massachusetts (2.7 months); San Diego, California (2.7 months); Houston, Texas (2.7 months); and Seattle, Washington (2.7 months).

Metros with the greatest yearly home price gains in January include: Detroit, Michigan (35.2 percent); Atlanta, Georgia (28.6 percent); Las Vegas, Nevada (23.5 percent); San Francisco, California (22.3 percent); Los Angeles, California (20.2 percent); and Miami, Florida (18.7 percent).

For homes sold in January, the average number of days on market was 75. “The low Days on Market average is associated with continued high demand and a reduced inventory of homes for sale,” according to RE/MAX.

Wells Fargo May Loosen Credit Requirements

Wells Fargo May Loosen Credit Requirements

According to a report by Reuters, Wells Fargo is looking to re-enter the subprime mortgage market by lowering its standards of acceptable credit scores for borrowers. Wells Fargo is the largest U.S. mortgage lender, and a move back into subprime mortgages may signal a sizable shift in the mortgage lending environment.

Wells Fargo is interested in customers with credit scores as low as 600, notes the report. Its prior limit was 640, often regarded as the limit between mortgages that are considered prime and subprime. Credit scores range from 300 to 850.

Other large banks, however, seem reticent to follow Wells Fargo’s lead, remaining cautious about any return to the subprime market. Lenders are wary of subprime mortgages, due in large part to the passage of the 2010 Dodd-Frank Law. If mortgage borrowers don’t meet the law’s eight criteria to qualify for a mortgage and later default on a loan, a borrower can sue the lender and argue the loan should have never been made.

Lenders venturing back into the high-risk loans market are even using a subtle marketing trick to assuage fear and spur demand—subprime loans become “another chance mortgages” or “alternative mortgages,” shedding the stigmatized “subprime” label.

Incentivized by rising mortgage rates, lenders have plenty of reasons to target borrowers with lower credit scores. Rising rates are expected to reduce U.S. lending by 36 percent in 2014, according to the Mortgage Bankers Associations (MBA) forecast, due to a large drop in refinancings.

Wells Fargo is looking to lend to borrowers with weaker credit, but only under the condition the mortgages can be guaranteed by the Federal Housing Administration (FHA). Since the loans would be backed by the government, Wells Fargo can package them to sell to investors as bonds.

Subprime mortgages were at the center of the financial crisis, but many lenders believe that with proper controls the risky business ventures can be properly contained and generate profit.

Bank of America to Cut More Mortgage Jobs

Bank of America to Cut More Mortgage Jobs

Bank of America, the second-largest U.S. lender, is cutting 450 mortgage jobs from its West Coast offices. The lending giant is reducing staff after new loan production fell short of internal forecasts.

In a report by Bloomberg, affected employees were told Wednesday that workers involved in processing home loans would be let go. California locations that will lose workers include an office in Concord; an office in Pasadena will be shutdown entirely.

Terminations are effective immediately, and employees will receive salaries for 2 months and be eligible for severance pay, said sources familiar with the proceedings.

“These notifications have been ongoing and reflect our previously announced efforts to reduce our size, resolve legacy issues and simplify our company,” said Dan Frahm, a spokesman for Bank of America. The lender is still hiring in non-mortgage areas, and some employees will find jobs in other parts of the firm, he said.

This is the fourth time in a year that Bank of America has reduced personnel amid reduced demand for home loans. The firm cut 3,000 employees involved in making home loans in the last quarter of 2013. Other offices closed this year include Las Vegas, Nevada and St. Charles, Missouri.

Retail originations sank 49 percent to $11.6 billion in the fourth quarter, said CFO Bruce Thompson on January, 15.

Bank of America employed about 242,000 people as of December 31, 2013.