Existing Home Sales Tumble Unexpectedly in May

[Gaspar]

More "Unexpected" stuff.
http://www.cnbc.com/id/37845591

[Townsend]

delays in processing mortgage applications hampered the closing of contracts benefiting from a popular homebuyer tax credit, an industry group said on Tuesday.

One of thousands of reasons that someone could be surprised.

"Surprise"...I love how it's used over and over again.  I guess the headline "home sales occurred just as predicted" or "jobless claims were no shocker" wouldn't really garner much attention.

Wow, I just can't believe the "they" can't see the economic future in the crystal ball they have.

I'd imagine it'd be tough to actually find someone who'd say they were surprised by it.  More like "It happens in our industry."

[Gaspar]

You're right.  We need to get better analysts.

One would think that when you see more companies laying off, and economic production numbers decreasing you would expect jobless claims to rise.

One would expect that when you see the above compiled with the failure of the mortgage bail-out program you might just expect home sales to drop.

I'm coming to the opinion that the headlines simply carry an apologetic tone.

[Townsend]

That's not really my point.

I want to know who is actually surprised by anything like this.

Not because they should've been able to tell...just who woke up, read the numbers, and exclaimed "holy whackadoodle, WTH happened there?"?

[Gaspar]

That's not really my point.

I want to know who is actually surprised by anything like this.

Not because they should've been able to tell...just who woke up, read the numbers, and exclaimed "holy whackadoodle, WTH happened there?"?

LOL!

[nathanm]

failure of the mortgage bail-out program you might just expect home sales to drop.

It's unfortunate that the banks are ignoring the law. The program might have worked better if someone had bothered to force them to do what they're supposed to be doing.

[Conan71]

It's unfortunate that the banks are ignoring the law. The program might have worked better if someone had bothered to force them to do what they're supposed to be doing.

Huh?? What are the banks not doing that they are supposed to?  It sounds like a number of borrowers aren't doing what they are supposed to.

"But analysts expect the majority will still wind up in foreclosure and that could slow the broader economic recovery.

A major reason so many have fallen out of the program is the Obama administration initially pressured banks to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out.

Many borrowers complained that the banks lost their documents. The industry said borrowers weren't sending back the necessary paperwork.

Carlos Woods, a 48-year-old power plant worker in Queens, N.Y., made nine payments during a trial phase but was kicked out of the program after Bank of America said he missed a $1,600 payment afterward. His lawyer said they can prove he made the payment.

Such mistakes happen "more frequently than not, unfortunately," said his lawyer, Sumani Lanka. "I think a lot of it is incompetence."

A spokesman for Bank of America declined to comment on Woods's case.

Treasury officials now require banks to collect two recent pay stubs at the start of the process. Borrowers have to give the Internal Revenue Service permission to provide their most recent tax returns to lenders.

Requiring homeowners to provide documentation of income has turned people away from enrolling in the program. Around 30,000 homeowners started the program in May. That's a sharp turnaround from last summer when more than 100,000 borrowers signed up each month.

As more people leave the program, a new wave of foreclosures could occur. If that happens, it could weaken the housing market and hold back the broader economic recovery.

Even after their loans are modified, many borrowers are simply stuck with too much debt -- from car loans to home equity loans to credit cards.

"The majority of these modifications aren't going to be successful," said Wayne Yamano, vice president of John Burns Real Estate Consulting, a research firm in Irvine, Calif. "Even after the permanent modification, you're still looking at a very high debt burden."

So far nearly 6,400 borrowers have dropped out after the loan modification was made permanent. Most of those borrowers likely defaulted on their modified loans, but a handful either refinanced or sold their homes."

http://finance.yahoo.com/news/Borrowers-exit-troubled-Obama-apf-887634101.html?x=0&sec=topStories&pos=3&asset=&ccode=

Risky loan programs which allowed people to borrow without proper income verification in the first place is, in a large part, what caused the home mortgage system to essentially collapse.

[nathanm]

Huh?? What are the banks not doing that they are supposed to?  It sounds like a number of borrowers aren't doing what they are supposed to.
...
Risky loan programs which allowed people to borrow without proper income verification in the first place is, in a large part, what caused the home mortgage system to essentially collapse.

Your quoted article discusses some of the problems I was referring to. They often refuse to accept people who are eligible, and apparently in at least the one case, claim people didn't make payments when they did.

They certainly should be verifying income, though. That's the whole point, to modify the loans so the banks and the homeowners both share the pain but the banks at least get something, most likely more than they would have gotten in a foreclosure sale and the homeowners get a payment they can afford based on their current income.

As far as I'm aware, though, banks have been requiring documentation of income from day one. There are several year old stories that describe that as being part of the process.

[Conan71]

Your quoted article discusses some of the problems I was referring to. They often refuse to accept people who are eligible, and apparently in at least the one case, claim people didn't make payments when they did.

They certainly should be verifying income, though. That's the whole point, to modify the loans so the banks and the homeowners both share the pain but the banks at least get something, most likely more than they would have gotten in a foreclosure sale and the homeowners get a payment they can afford based on their current income.

As far as I'm aware, though, banks have been requiring documentation of income from day one. There are several year old stories that describe that as being part of the process.

The only bank-created problem I'm reading there was mis-applying payments, that happens every day with every type of lending and bill payment, it's human error.  Banks aren't responsible for borrowers having too much debt load or actually failing to make their payments after re-structuring.

[Gaspar]

Many of the participants in the Obama mortgage bail-out failed to make their very first payment. 

When you tell people that it's not their fault, you tell them that it's not their responsibility. 

When you make that point to people who are irresponsible to begin with, what do you expect.

Reward failure and you will reap more failure.

[nathanm]

Many of the participants in the Obama mortgage bail-out failed to make their very first payment. 

Do you have a citation for that? And what do you mean by "many?"

Conan: I agree that the banks are not to blame for people failing to make a modified payment. They are partly to blame for people's overall debt load, however. They in many cases chose to loan money to people they should have known probably wouldn't be able to pay it back. That happened a lot with the subprime mortgage lenders, who also had a record of selling exotic mortgages to people who asked for a standard 5 year ARM or 30 year fixed. Yes, the borrowers are partly to blame for not paying close enough attention to the paperwork, but they do shove a lot of paperwork in your face at closing and there are enough people sitting around waiting on you that it feels awkward to review everything to make sure that what you're signing is what you agreed to in the first place. It's a little ridiculous that one should have to worry about people playing a little contract switcheroo.

[Gaspar]

Do you have a citation for that? And what do you mean by "many?"

Sure the Obama administration initially pressured banks to sign up borrowers without insisting first on proof of their income. Many were unemployed and never made a single payment under the program.  Some entered the program simply to delay foreclosure.

It was a NYT article from last year.  Let me see if I can find it. . .

One reason may be the same one that a lot of bad loans were made in the first place. Borrowers can declare their income, and the banks are willing to grant temporary modifications based on those figures, without any evidence to confirm them.

But to make a modification permanent, the banks have to see proof of income, and the borrower has to make three monthly payments of the new lower amount. In most cases, those requirements are not being met.

http://www.nytimes.com/2009/12/04/business/economy/04norris.html?pagewanted=1&_r=1

[nathanm]

Thanks.

[Gaspar]

New-home sales plunge 33%
Lowest level on record.

http://finance.yahoo.com/news/New-home-sales-plunge-33-pct-apf-1718773153.html?x=0&.v=1

[Cats Cats Cats]

Who would have thought that an expiring tax credit would mean that demand would decrease.