Agenda 21 and Sustainable Development

Apartment Rents Set to Rise, Fueling Inflation: NAR

November 29, 2010

AFP — US apartment rents are expected to climb next year as the economy recovers from recession, a rise that may fuel inflation, a real-estate industry group said Monday. Multifamily real estate will star in an overall modest improvement in commercial property markets in 2011, the National Association of Realtors said in an outlook report.

NAR said ailing commercial real-estate markets -- office, industrial, retail and rental housing -- were flattening out after a steep plunge amid the worst recession in decades. Lawrence Yun, NAR chief economist, predicted a rise in demand, as the economy slowly recovers from the downturn that officially ended in June 2009.

The number of people setting up a new home has plummeted amid high unemployment and plunging home values after a housing bubble collapsed more than three years ago.

"Multifamily housing is the one commercial sector that has held on relatively well in the past year, and can expect the best performance in 2011," he said.

Yun predicted apartment rents could rise by one to two percent in 2011, after having fallen in 2009 and showing no growth this year.

"This rent rise therefore could start to force up broader consumer prices as well," he said.

The cost of rent or mortgages is the biggest component in the government's consumer price index, accounting for 32 percent of its total weight, he noted.

Multifamily vacancy rates were forecast to decline from 6.4 percent in the current quarter to 5.8 percent in the fourth quarter of 2011.

Consumer price inflation has remained subdued in recent months despite a rise in energy prices, while the core inflation has trended lower, the Federal Reserve noted last week in the minutes of its last policy-setting meeting.

The central bank used weak inflation as a key justification for its controversial plan to buy an extra 600 billion dollars in Treasury bonds to juice the flagging recovery. Critics, including several participants in the November 2-3 Federal Open Market Committee meeting, have said the plan risks spurring inflation.

NAR said the outlook for the office and industrial markets had improved, with modestly declining vacancy rates expected in 2011, while the retail sector would essentially hold steady.

Vacancy rates stuck in double digits, nevertheless, signal rents would remain under severe pressure.

"High vacancy rates imply falling rents," Yun said.

New $1.1 Billion Henderson Fund Targets U.S. Apartments

By Reuters
September 17, 2010

Henderson Global Investors has launched a new $1.1 billion fund targeting the U.S. apartment market, saying it was the best-placed property sector for rent growth and occupancy over the next five years.

CASA V is the fifth in Henderson's CASA Partners U.S. Multi-Family Housing series of funds, which use low-cost, tax-exempt bond financing, Henderson said on Friday.

The fund manager is targeting an initial equity raise of $100 million by end-2010, and a total of $400 million. It will target properties with 200-plus units in suburban and urban areas with strong economic trends.

"Apartments are anticipated to have the most favorable occupancy and rent growth conditions of all asset classes," Henderson said in a statement, adding it was the best-placed property sector over the next five years.

It believes newly acquired, unleveraged apartments can offer net total returns of 7-9 percent over a five-year horizon, adding it expects tax-exempt bond financing to provide the lowest-cost means of financing apartment investments.

"For tax-exempt bond financed apartment properties, total return expectations are for annual returns of 11-13 percent (net) over the next five years," it said in a statement.

"Apartments have historically proven less volatile than other property sectors, and core apartments are likely to offer attractive total returns with a strong income component."

The Incentive to Foreclose Rather than Modify Homeowners’ Mortgages

If you want to destroy the middle class, destroy the value of their major assets: their retirement accounts and their home equity. Americans have recently lost over $2 trillion in their retirement portfolios and $2 trillion in the value of their homes.

October 25, 2010

FireDogLake.com - Fannie Mae seems to be as eager to foreclose on homeowners as the banks. But Fannie-Mae may be willing to take a three-month detour in "trial" modifications, as opposed to "permanent" modifications, before putting pressure on its servicers to resume the foreclosure process. Reason: each trial modification (of at least three months) results in bonuses to Fannie.

Fannie and Freddie Mac, as holders of more than 50% of all mortgages, and as virtually nationalized bankrupt entities, were supposedly designated to be the chief vehicles and examples of modifying mortgages (by reducing both principal and interest payments), so that more people can remain in their homes rather than face foreclosure.

To date they’ve failed in their supposed mandate. According to a report by the Congressional Oversight Committee:

Oversight Committee findings

The panel’s report says the government’s mortgage modification program has three key problems:

• The kinds of mortgages that will make up growing numbers of foreclosures exceed the program’s eligibility requirements.


• With a goal of modifying only 25,000 to 30,000 loans a week, fewer than half of the predicted foreclosures would be avoided. One in eight homes are currently in foreclosure or default and 250,000 additional foreclosures are initiated monthly.


• Many modifications so far are still in a three-month trial period. As of Sept. 1, only 1,711 homeowners had received permanent modifications under the federal program. And after five years, many will see higher payments.

"The result for many homeowners could be that foreclosure is delayed, not avoided," the report says.

In spite of its dismal record on mortgage-loan modifications, Fannie cracks the whip on foreclosures:

Fannie Mae says it will begin fining loan servicers who take too long to complete foreclosures once it’s been determined that delinquent borrowers don’t qualify for a loan modification or other alternatives like short sales.

As indicated in the Oversights Committee report, the overwhelming number of loan modifications have been "trial" modifications, rather than "permanent" modifications.

Why have so few mortgages been permanently modified, nineteen months after HAMP was initiated?

HAMP started in March, 2009

Fannie Mae instructed companies that service loans it guarantees to allow modifications to borrowers who made payments during a trial period but did not meet all income document requirements under the initial terms.

On March 18, Fannie Mae issued Lender Letter 2010-04 instructing servicers how to resolve active trial modifications under the Home Affordable Modification Program (HAMP)…

Among the possible reasons: a) Some homeowners are not going to be able to finance their mortgages under any circumstances; b) The terms of HAMP and HAMP alternatives are still too onerous for many homeowners (particularly those that are "underwater"), and should be loosened up to allow more homeowners to qualify; c) Fannie-Mae doesn’t really have any incentive to go beyond the three-month trial period and aim for permanent modification, since it receives government bonuses (from Treasury)immediately after enrolling a homeowner in the trial program.

These incentives/bonuses were implicated as a main reason for the dearth of pemanent modifications by a Fannie Mae whistleblower:

Fannie-Mae, like the banks, are looking out for their short-term gain, rather than the interests of homeowners

Caroline Herron, a former Fannie vice president who returned to the mortgage giant in 2009 as a high-level consultant, claims that the homeowner-relief effort was marred by delays, missteps and executives preoccupied with their institution’s short-term financial interests.

“It appeared that Fannie Mae officers were focused on maximizing incentive payments available to Fannie Mae under various federal programs – even if this meant wasting taxpayer money and delaying the implementation of high-priority Treasury programs,” she claims in the lawsuit.

One issue inside Fannie was its push to put as many borrowers as possible into short-term trial modifications, at the expense, Herron maintains, of getting qualified borrowers into permanent modifications.

Herron charges that Fannie Mae continued in headlong pursuit of “trial mods” even though it knew many had little chance of becoming permanent. As late as September 2009, barely 1 percent of trial modifications had converted to permanent modifications by the end of their three-month trial, a Congressional oversight panel found. Nevertheless, Fannie preferred doing trials, Herron alleges, because it was eligible to receive incentive payments from the Treasury Department for trial modifications it booked before the end of 2009.

As of February 2010, 83 percent of the 1 million active modifications being handled by HAMP were trials rather than permanent arrangements. Barofsky, the special inspector general, criticized HAMP’s focus on trial modifications in a recent report.

“If HAMP ends up being a foreclosure mitigation program that merely delays foreclosures rather than preventing them, the program will be of questionable value, particularly in light of the huge investment of taxpayer funds,” Barofsky wrote. “A program that helps borrowers permanently avoid foreclosure is preferable (and far less wasteful of taxpayer dollars) to one that merely kicks the proverbial foreclosure can down the road.”

If Herron is to be believed, then we have Fannie-Mae having an incentive for short-term modifications, up to three months; but then pushing their servicers to foreclose as quickly as possible, in order to stem their losses and recoup whatever then can from foreclosure.

(And, not surprisingly, we have the big banks rooting for Fannie from the sidelines, because the banks still have no desire to reduce the principle on mortgages that they hold, rather than interest rates, since the big banks are for all practical purposes insolvent, and sitting on a mountain of bad debt. The same applies for the banks as servicers of mortgage-backed securities that have dubious or no paperwork indicating who is the current holder of the loan note/mortgage. And since the banks’ reluctant strategy of loan modification have proven that it’s not mitigating homeowners’ inability to pay their monthly mortgages, the banks, as servicers themselves, have their own incentives to the fees collected for foreclosing on as many houses as possible.)

All in all, a continuing and growing disaster for millions of Americans panicked and stressed-out at the prospect of being kicked out of their homes.



See: Foreclosure vs. the Short Sale

Congress Will Try – By Secret Vote – to Retroactively Legalize Foreclosure Fraud and Forgery By the Big Banks

What makes HR 3808 all the more outrageous is that both the Congress and the Senate passed this bill WITHOUT a record of how individual legislators voted (check out HR 3808 on Govtrack). They did not disclose their positions on the bill, because they obviously knew the public would explode in anger, rewriting laws after the fact, in order to help banks cover up their continual mistakes. - How Did This Pass?, Reader's Comment, New York Times Blog, October 8, 2010

November 17, 2010

Washington’s Blog - As I’ve previously noted, forgery of mortgage documents is systematic and widespread. See this, this, this, this and this.

Yves Smith pointed out last month that congressional bill H.R. 3808 is an attempt to paper over rampant criminality by the big banks regarding forged mortgage documents:

We are seeing more recognition of the consequences of this [widespread problem] , which in more polite company might be called, “My dog ate your mortgage.”

***One sighting (hat tip 4ClosureFraud) is the effort by the Ohio Secretary of State to enlist support against a proposed measure to allow for electronic notarizations. The Secretary hints strongly that this measure being put forward is directly related to the revelation of affidavit improprieties, which further suggests that the banks might regard this as a remedy for this particular, um, lapse:

H.R. 3808 is known as the “Interstate Recognition of Notarizations Act.” It passed the House under a suspension of the rules in April 2010. It requires federal and state courts to recognize any notarization that is lawful in the state where the notary is licensed. Now, in one day, it passed in the Senate.

When I learned of it last Thursday, it sounded innocuous to me, but then I started looking at the timing of the bill. GMAC, owned by Ally, had just suspended its foreclosure actions in 23 states, including Ohio. I had already referred Chase Home Finance, LLC, on August 23, 2010, to the U.S. Department of Justice, asking it to review and investigate Chase’s document notarization practices in home foreclosures (18,000 documents per month were being notarized by 8 people, along with other irregularities). I license notaries in the State of Ohio. Even though I don’t have the power under state law to investigate or prosecute, I couldn’t stand idly by without acting. That’s why I’m asking you to email or call the President at 202-456-1111 to ask him not to sign the bill.

Last Wednesday, the day before I announced the DOJ referral, JPMorgan Chase announced it was having third party counsel review its document procedures for foreclosures. Just two days before, the U.S. Senate had rushed through H.R. 3808. Something didn’t seem right. Since then others agree with me.

Yves here. This development reveals how this battle is likely to play out. Now that judges in some states are starting to take these dubious, potentially fraudulent measures seriously, the next line of attack is to get the more bought and paid for Federal government to intercede on behalf of the banks. As the e-mail by the Ohio Secretary shows, this is a state versus Federal rights issue. And the problem is that these solutions will be depicted as “efficient,” just as securitizations and other “innovations” were.

And while efficiency in theory is a good thing, it must always be kept secondary to the overall integrity of the system, otherwise, you run the risk of breakdown. Using dubious arguments to overturn well settled law to get the banking industry out of a monster mess it created is a Faustian bargain. It makes it abundantly clear what is really at stake here, which is the rule of law. Banks that were quick to defend unjustifiable pay deals by invoking “sanctity of contract” have no inhibition about ignoring their own contracts to pad their bottom line, and ultimately, the wallets of top executives.

Rather than deal with the considerable consequences of these abuses, the banks are prepared to bulldoze well settled state laws to give them an easy way out. And I’m not basing my view on this story alone; I had a conversation yesterday with a Congressional staffer who matter-of-factly said (but with little understanding of the underlying issues) that Congress would intervene on behalf of the industry, via its authority over national banks.

The result is that we institutionalize kleptocracy while keeping largely gutted forms of due process as theater. The powers that be hope that the broad public will remain unaware of what is really at work.