International Real Estate: Real Estate in Croatia

Prices in some parts of the country are still off by as much as 25 percent from their 2007 peak.



Refinancing Apps Rise on Record Low Rates

Mortgage
rates broke another set of records during the week ended February 3,
establishing several new historic lows. 
In response, the seasonally adjusted Mortgage Bankers Association’s (MBA)
Market Composite Index, a measure of mortgage application volume, rose 7.5
percent and 8.7 percent on an unadjusted basis. 
  

The increases were
driven solely by refinancing which represented 80.5 percent of total applications for the week,
up from 80.0 percent the previous week. 
The Index measuring applications for refinancing increased 9.4 percent over
that of the week ended January 27 but the seasonally adjusted basis the
Purchase Index ticked up only 0.1 percent. The unadjusted Purchase Index was 6
percent higher than in the previous week and 4.1 percent lower than during the
same week in 2011. 

The four-week
moving averages for the seasonally adjusted Market and Purchase Indices were up 4.88 percent and 0.65 percent respectively and
the moving average for the Refinance Index rose 5.72 percent. 

Statistics for the
month of January indicate that investors played a slightly smaller part in the
purchase mortgage market than in December with the investor share of applications
for home purchase at 6.4 percent compared to 6.9 percent in December.  In
addition, the share of purchase mortgages for second homes increased to 5.9
percent in January from 5.4 percent in December.  The investor share of applications declined
in the West and East North Central regions. 

Purchase Index vs 30 Yr Fixed

Click Here to View the Purchase Applications Chart

Refinance Index vs 30 Yr Fixed

Click Here to View the Refinance Applications Chart

Both the average
contract interest rate and the effective rate for all types of mortgages with
loan-to-value ratios of 80 percent declined for the week and all fixed-rate
mortgages (FRM) reached new lows. 

  • Rates for 30-year FRM with onforming loan balances of $417,500
    or less
    decreased to 4.05 percent from 4.09 percent, with points increasing to 0.44 from 0.41 including the
    origination fee. 
  • Jumbo 30-year FRM, those with loan
    balances greater
    than $417,500,
    had averages
    rates of 4.29 percent with .43 point compared to 4.33
    percent with 0.41 point.
  • The rate for 30-year fixed-rate mortgages backed by the
    FHA decreased to 3.89 percent from 3.96 percent, with points increasing to 0.78
    from 0.61. 
  • Fifteen-year FRM had an average
    rate of 3.33 percent, down 3 basis points from the previous week and points decreased to
    0.37 from 0.41. 
  • The rate for 5/1 adjustable-rate mortgages (ARM) decreased to
    2.91 percent from 2.94 percent, with points increasing
    to 0.40 from 0.39. The ARM share of mortgage
    applications was up to 6.0 percent from 5.6
    percent the previous week.

MBA’s Weekly
Mortgage Applications Survey covers over 75 percent of all U.S. retail
residential mortgage applications, and has been conducted weekly since
1990.  Respondents include mortgage bankers, commercial banks and
thrifts.  Base period and value for all indexes is March 16, 1990=100.

…(read more)

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January Housing Scorecard Released by HUD, Treasury

The
Departments of Housing and Urban Development (HUD) and Treasury issued the
administration’s January Housing Scorecard on Monday.  The report is essentially a summary of
data on housing and housing finance released by public and private sources over
the previous month and/or quarter.  Most
of the data such as new and existing home sales, permits and starts, mortgage
originations, and various house price evaluations have been previously covered
by MND. 

The scorecard incorporates by reference
the monthly report of the Making Home Affordable Program (MHA) through the end
of December.  This includes information
on the universe of MHA programs including the Home Affordable Modification
Program (HAMP), HOPE Now, and Second Lien Modifications and other initiatives. 

Since the
HAMP program began in April 2009 1,774,595 homeowners have entered into trial
loan modifications, 20,074 since the November HAMP report.  About half of these homeowners, 933,327, have
completed the trials and converted to permanent modifications; 23,374
conversions took place during the current report period.  Just over three-quarters of a million of the permanent
modifications are still active.

While the
HAMP program dates to April 2009, it underwent substantial revisions to its
policies and procedures in June 2010, and many of the measures of its
performance are benchmarked at that time. 
Eight-four percent of homeowners who entered a trial modification after
that date have received a permanent modification with an average trial period
of 3.5 months compared to 43 percent who entered a trial prior to the changes.  As of December, 21,002 of the active trials
had been underway for six months or more; in May 2010, the month before the
changes took place, 190,000 trials were six months old or more.  In December every servicer except Ocwen was
above an 80 percent conversion rate.

HAMP
modifications with the largest reduction in mortgage payments continue to
demonstrate the lowest redefault rates.  At
18 months after modification all loans have a 90+ day default rate of 23
percent.  However, loans with a 20
percent or smaller reduction in loan payment are defaulting at the rate of 36.4
percent while loans with a 50 percent payment decrease or greater have a
default rate of 13.3 percent. 

The Home
Affordable Foreclosure Alternatives program offers incentives to homeowners who
wish to exit home ownership through a short sale or deed-in-lieu of
foreclosure.  Thus far 43,368 homeowners
have been accepted into the program and 27,665 transactions have been
completed, the vast majority through a short sale.  More than half of the completed transactions
(18,350) were on loans owned by private investors; 7,711 were portfolio loans
and 1,604 were GSE loans.

There has
been an emphasis in some quarters on reducing the principal balance of
distressed loans since the last HAMP report. 
Some members of Congress have asked for justification from the GSEs as
to why they were not participating in principal reductions and the Treasury
Department recently urged them to do so as well while tripling the incentives
it is paying to other investors to reduce principal.  The HAMP Principal Reduction Alternative
(PRA) has started trial modifications for 63,203 home owners and permanent
modifications for 42,753 of which 40,374 are still active.  The median principal amount reduced in these
modifications is $67,196, a median of 31.1 percent of the principal balance.

Each month
HAMP reports on selected servicer performance metrics.   Servicers
are expected to make Right Party Contact (RPC) with eligible homeowners and
then evaluate their eligibility for HAMP.  HAMP evaluated servicer outreach to 60 days
delinquent homeowners over the previous 12 months (November 2010-December 2011)
and found most services have made RPC at least 85 percent of the time; however
there is a wide range of performance results in terms of completed the evaluations.
 

Servicers
are also expected to identify and solicit homeowners in early stages of
delinquency and, effective October 1, 2011, a higher compensation structure was
put into effect to reward servicers who complete evaluations and place
homeowners in a trial modification within 120 days of first delinquency.  The table below shows the status of major
servicers relative to their eligibility for maximum incentives.

…(read more)

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Industrial and Multi-family Loans Drive Annual CRE Increase

The Mortgage Bankers Association
(MBA) reports that commercial and multifamily loan originations were down 7
percent in the fourth quarter of 2011 compared to the third quarter but were 13
percent higher than originations in the fourth quarter a year earlier.  The year-over year change was driven by
originations for both industrial and multifamily properties which increased 43
percent and 31 percent respectively from Q4 2010.  On the negative side, retail loans were down
8 percent, loans for healthcare properties fell 24 percent, office properties
were down 29 percent and hotel originations decreased 44 percent.

Quarter over quarter results were
mixed.  There was a 153 percent jump in
originations for health care properties; industrial loans were up 51 percent
and multifamily properties increased 29 percent.  Originations for healthcare properties fell 52
percent, office properties were down 39 percent, and retail property loans
decreased 24 percent.

Looking at lending by investor groups,
commercial bank portfolios were up by 122 percent compared to the fourth
quarter of 2010 and Freddie Mac and Fannie Mae (the GSEs) increased lending 17
percent.  Life insurance companies and
conduits for commercial mortgage backed securities (CMBS) decreased lending by
23 percent and 50 percent respectively.

 On a quarter-over-quarter basis only the GSEs
increased their loans, which rose 34 percent to an all time high.  Conduits for CMBS were down 26 percent, life
insurance companies decreased lending by 23 percent, and commercial bank
portfolios declined by 16 percent.  

“MBA’s Commercial/Multifamily
Mortgage Bankers Origination Index hit record levels for life insurance
companies in the second and third quarters of 2011,” said Jamie Woodwell,
MBA’s Vice President of Commercial Real Estate Research. “In the fourth
quarter, multifamily originations for Fannie Mae and Freddie Mac hit a new
all-time high. While the CMBS market continued to be held back by broader
capital markets uncertainty during the past year, others – like the GSEs, life
companies and many bank portfolios – increased their appetite for commercial
and multifamily loans.”

Commercial/Multi-family
Originations by Investor Types

Investor
Type

Origination Volume Index*

% Chg

Q4-Q4

Average Loan Size ($millions)

Q3 2011

Q4 2011

Q3 2011

Q4 2011

Conduits

42

31

-50

30.5

23.9

Commercial
Banks

169

143

122

11.8

7.8

Life
Insurance

282

216

-13

20.5

14.0

GSEs

176

236

17

13.8

14.3

Total

138

129

13

14,9

11.6

*2001 Ave. Quarter = 100

Commercial/Multi-family
Originations by Property Types

Investor
Type

Origination Volume Index*

% Chg

Q4-Q4

Average Loan Size ($millions)

Q3 2011

Q4 2011

Q3 2011

Q4 2011

Multi-family

140

181

31

13.2

13.5

Office

91

56

-29

19.1

11.7

Retail

222

169

-8

20.9

12.3

Industrial

142

214

43

12.4

16.2

Hotel

231

110

-44

39.0

20.1

Health
Care

91

229

-24

7.2

12.4

*2001 Ave. Quarter = 100

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Strategic Default: Inconceivable Assumptions Suddenly Conceivable

Until recently it
was generally believed that only a small fraction of Americans would
willingly choose to skip their monthly mortgage payment, aka “strategically default”, when they
found themselves stuck in a negative equity situation.

The logic driving this belief was based on the notion that borrowers wouldn’t want to damage their credit profile or deal with the social stigma surrounding a public foreclosure. The assumption that most underwater borrowers will
continue making their monthly payments (absent a life event) is factored into the
analytics of risk managers, buyers and sellers of mortgage related assets,
servicing managers, and regulators across the country.

What if this
assumption is wrong? Is that inconceivable?

It wasn’t long ago when conventional wisdom
convinced us that lenders would never make loans to borrowers that had
virtually zero likelihood of being able to pay the loans back. In a 2010 study conducted
by the Cato Institute,
it was estimated that there were over 27 million Alt-A and subprime loans in the
system by mid-2008. That’s approximately 50 percent of all loans in the market.  Remember when we thought home price would never fall on a national level? Never been done and won’t
ever happen, right? That assumption was shattered when home values nationally
dropped between 30-50% from their peak in 2006, wiping out roughly $7
trillion of home equity in the process.

Fannie Mae recently published it’s latest National Housing Survey
and exposed disturbing patterns and sentiments with American homeowners. For
example,  46% of borrowers are “stressed” about their underwater
mortgage, up from 11% in June 2010. That’s an alarming four-fold increase in
three quarters. That statistic becomes even more concerning when viewing the sheer number of borrowers faced with negative equity. At the end of 2010, which doesn’t include the home price declines seen in 2011, CoreLogic estimated that 11.1 million homes, or 23.1 percent of all homes with a mortgage, were underwater. Think about those two stats this way – every morning, 46% of the estimated 11.1 million underwater borrowers wake up and debate why they should
keep paying their monthly mortgage payment. Further weighing on borrowers is that  47% of borrowers surveyed reported higher household expenses than the year before…

From that perspective, it doesn’t seem inconceivable that our assumptions might be off base again. Is principal forgiveness the answer?

Probably not, and here’s why.
Remember how many folks HAMP was supposed to save by giving them new loan
terms? The number touted by the
administration was over 4 million. In reality, the number is likely to come in
around 500-750,000 permanent modifications. Imagine the scenario when a
government sponsored principal reduction program is announced. Out of the 11
million underwater borrowers – you’ll probably get three times as
many borrowers applying for relief. Maybe one tenth of them will actually
qualify and be granted a principal reduction. In the meantime, some 20+ million
applicants would have stopped making payments to “qualify” or be
considered for qualification. How many of them will be able to or even want to
get current again after they are turned down? 

Like it or not, we have got to find ways to stabilize home prices, reward responsible behavior among existing homeowners,
and encourage home buying. I don’t
see any ideas on the table that would accomplish any of these objectives…. and the effects are starting
to show up in data.

…(read more)

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