Commercial Markets

The baseball credo "hit 'em where they ain't" might be the best way to describe some bankers' unlikely advice that now is the time to wade into commercial real estate lending.

Like a batter aiming to hit the ball away from opponents, the contrarians argue, bankers should take note of the crowding field of players in the commercial and industrial market. That trend leaves CRE wide open for those that are able to lend — and willing to challenge conventional wisdom.

"There are only so many seats at the table for C&I lending," said John Tranter, the president and chief executive at Gulfstream Business Bank in Stuart, Fla.

Though 80% of its portfolio is commercial and industrial, Gulfstream is taking a serious look at commercial real estate, simply because it is one of the few Florida banks in a position to do so.

"If you are under the regulatory caps, you should be doing more CRE," Tranter said. "We're certainly looking at it. Your pricing power is going to be phenomenal."

Regulators are keeping a close eye on bank portfolios where commercial property loans make up more than 300% of total risk-based capital, excluding loans where the borrower owns the office or plant it occupies.

There is even more scrutiny of construction and land development loans, where regulators' concerns grow if a portfolio tops 100% of risk-based capital. Some banks are having to purge CRE credits from their books because of various regulatory orders.

Tim O'Brien, a managing partner at Sandler O'Neill & Partners LP, estimated that 20% to 40% of all U.S. banks are at or above those levels, creating opportunities for those who are below them.

"There is still room for CRE loans, including those involving investors" that buy properties, he said. "I am even hearing talk that some are making construction loans again."

Granted, there may not be overwhelming demand for CRE loans right now. Several observers said, however, that banks with the capital strength and willingness to do CRE loans can be selective in choosing their customers and control terms simply because of less competition. C&I, in contrast, is susceptible to competitive pricing and loosened credit standards, some said.

Tranter, whose $573.3 million-asset bank has long specialized in business lending, estimated that banks that shift to C&I from CRE are taking a 40% hit to their prospective earning assets as a result of the move — a harsh reduction in profit potential for banks still trying to recover from the financial crisis.

"The quality of CRE opportunities, rather than the quantity, is going to be robust," said Steven Sandler, the CEO of Crosswind Capital LLC, which buys distressed assets. "There is a slow and steady business."

D. Anthony Plath, a finance professor at the University of North Carolina at Charlotte, said regional and big banks would be the most likely beneficiaries, particularly those that have already left the Troubled Asset Relief Program and have small CRE concentrations. Bank of America Corp. and Citigroup Inc. stand out as possible leaders in CRE lending, he said.

BB&T Corp., despite having roughly a third of its loan book tied to CRE, is another possibility, given its capital strength.

Sandler said foreign banks such as Deutsche Bank AG and Barclays PLC are also in a position to capture CRE business. "The bulk of opportunity will go to larger institutions that have solid platforms and balance sheet strength."

A number of big players are scaling back, providing an entree for others.

Michael Neal, the chairman of GE Capital Services Inc., said last month that the General Electric Co. unit would halve its $80 billion CRE portfolio over time.

"When you talk about what we learned, one is that with small operations at a distance you can't earn very much," he said at a Sanford C. Bernstein conference in New York.

Still, he said commercial real estate market conditions "are largely through the free fall" and that he expects "better days ahead."

Commercial realty has its share of hits and misses when it comes to property types, experts warned. Tranter said it would be unwise to re-enter construction loans, particularly residential development. He said better opportunities await in shopping centers that have strong anchor tenants and, in the longer term, apartment communities.

Sandler said refinancing and loans for acquisitions "are going to be the hot spots" for CRE lending, while "new development is going to be very dormant for a while across all product types."

There are several obstacles that will constrain banks' push into CRE right now, observers said.

Sandler said that the market for commercial mortgage-backed securities, while improved from the lockdown in 2008, is "nowhere near" the volumes seen before things seized up. "There is still uncertainty in the CMBS market on how far losses will go," he said. "That's a block to robust trading, so I would characterize trading now as moderated and constrained."

Another issue is lingering uncertainty about real estate values in certain markets.

Tranter conceded that valuation issues in Florida remain a major consideration as he evaluates borrowers who would be "willing to pay anything" for a 70% loan-to-value loan. Construction and development "pricing is still unclear," he said, "as appraisals continue to come in below expectations."

Plath said that, while CRE deals could be possible in relatively strong markets like North Carolina, he doubted there would be much activity in states such as Florida and California, where valuations have not yet firmed. Banks that are willing to make loans now also have a chance to win over a client who could, over time, move over deposits and take advantage of fee-based services.

"If you have the right piece of property in the right market, it is a lot easier," Plath said. "If so, you can cherry pick a market."

Having Trouble Finding Those County and City Zoning Codes?

Try this link for the online Municode Library

Municode Online

Another Link That is Useful is Walmart Realty

Walmart Realty

Electric Cars:

By Steve Hargreaves, Senior writerJuly 15, 2010: 6:24 PM ET

NEW YORK (CNNMoney.com) -- President Obama is once again stumping for stimulus at one of his favorite spots: a plant that makes batteries for electric cars.

These plants have been a high profile piece of the controversial stimulus package, and Obama has visited at least four of them since stimulus was enacted. Dozens of projects dedicated to advanced batteries have received over $2 billion in federal funding as part of the administration's $800 billion-plus plan to revive the economy, create jobs, and push the manufacturing sector into the 21st century.

The plant, owned by the Korean company LGChem, will employ up to 300 people and produce batteries for the Chevy Volt and electric Ford Focus. "So when you buy one of these vehicles, the battery [will] be stamped 'Made in America' -- just like the car," said Obama.

But public scorn over Obama's spending has been running high, and domestic battery manufacturing faces serious challenges. Can it compete with imports from the more experienced Asian companies? And will people actually buy electric cars?

Batteries, made in the USA: In the short term, the industry's challenge is to not overproduce. As these plants come online questions remain over just how fast consumers will adopt the new technology.

But long term, analysts seem to think the U.S. battery business will be viable and that government support at this early stage is a good idea.

"In a world that's becoming more mobile and more electrified, the United States was late to the game," said Xavier Mosquet, a Detroit-based senior partner at the Boston Consulting Group. "A comeback in this industry is critical. Any investment is important."

Mosquet thinks batteries will ultimately be built in the United States, not imported from Asia. The real cost in batteries is the technology and materials - not the labor - which takes away some of the Asian advantage. Plus, they are heavy, making them expensive to ship.

Buying into electric cars: As for consumer demand, he said Boston Consulting research has shown that there's a small percentage of the population that's willing to buy electric cars for the environmental or geopolitical benefits, even if it means paying a bit more. Plus, he expects the cost of the batteries to come down 60% to 75% in the next five years, making these vehicles more attractive to cash strapped Americans.

Ten battery plants are either built or under construction in the country. If they all came online at full capacity in the next year or two, he said there could be an oversupply. But he said the plant's owners know this, and aren't planning on ramping up to full production until the demand is there.

Electric deliveries: Other analysts also said the demand in the consumer sector may be slow to take off, but once fleet vehicles are factored in, there shouldn't be an oversupply problem.

Besides price, one of the biggest concerns keeping consumers from buying an electric car is running out of juice in the middle of nowhere - a mind set in the industry knows as "range anxiety."

But fleet vehicles - think delivery trucks or taxis - are prime contenders for electric power. They tend to either operate the same route everyday or stay in a small geographic area and can be charged or have their batteries swapped out at fixed points.

"It's unclear if consumers will adopt electric vehicles," said Elaine Kwei, a clean tech analysts at the investment bank Jefferies & Co. "But people tend to overlook fleet vehicles. They are a perfect fit."

Jessie Pichel, head of clean tech research at Jefferies, added that the batteries could also be used to store power produced from renewable energy like wind and solar. Using energy from these sources as a major supplier in the electric grid - which requires a steady flow of power - has so far been a challenge, as the wind doesn't blow all the time and the sun doesn't shine at night.

"We believe very strongly that renewable energy can be a big employer," said Pichel. "And there's no reason the U.S. can't be a leader in this."

The skeptics: Not everyone thinks battery manufacturing will find a permanent home in the Untied States.

Asian countries - specifically Japan, South Korea and China - is where other battery powered items like like laptops, mobile phones and power tools are made, said Julius Pretterebner, a vehicles and alternative-fuels expert at IHS Cambridge Energy Research Associates.

As long as that big secondary market remains in Asia, so will car battery manufacturing.

"The future of transport is electric," said Pretterebner. "But unfortunately the products will come from Asia."  

We develop it, build it and then they move the plants overseas. Isn't that the American way.

Cap and Tax

Just a blog question?

Who actually thinks that if a cap and tax is passed that it would have any positive affect on the environment.

This tax if passed will be passed along with all the other proposed taxes to the middle income bracket of America.

Do you think that Congress or the President can talk about about any problem solving issues other than tax this or tax that. What about cutting spending?

Just a thought.

New Commercial Data from Realty Rates.com

http://www.realtyrates.com/commentaryg.html

http://www.realtyrates.com/matrixg.html

http://www.realtyrates.com/allg.html

Shadow Inventory

Regional variations in the shadow inventories of distressed U.S. mortgages could be an indicator of the direction home prices will take, according to a new report published by Standard & Poor’s Ratings Services.

The company’s analysts say differences in the backlog of distressed properties point to which markets will see home prices stabilize or even increase, and where additional declines may still be in store.

The volume of troubled residential properties has been growing in nearly every U.S. state since 2005, S&P said, and borrowers nationwide are now defaulting on their mortgages faster than existing defaults are being resolved through liquidation. These trends have given rise to a large “shadow inventory” of distressed properties.

S&P estimates that the shadow inventory backing just private-label residential mortgage-backed securities (RMBS) will take nearly three years to clear at the current resolution rate.

The ratings agency defines shadow inventory as properties that are 90 or more days delinquent, in foreclosure, or REO, but that haven’t yet hit the market. S&P concludes that the original principal balance of this inventory overhang amounts to roughly $480 billion, or 30 percent of the entire private-label, non-GSE market.

“Given this backlog, we believe that average home prices could fall again if demand doesn’t rise in step with the potential influx of supply,” said Diane Westerback, a credit analyst with S&P.

The report notes that although shadow inventories remain well above historical averages in most regions of the United States, inventory levels and trends among cities varies significantly.

Standard & Poor’s review of the 20 major metropolitan statistical areas (MSAs) included in the S&P/Case-Shiller Home Price Indices revealed that inventories appear to be falling from recent peaks in some areas while plateauing at historical highs or continuing to rise in others.

“For instance, we estimate that the shadow inventory in the New York City metro area will take the longest to clear – at 103 months – assuming the current liquidation rates,” Westerback explained.

“This is almost 3.5 times our estimate for the national average, at 34 months, and far exceeds the level for the Phoenix metro area, which has a projected 16 months of inventory to clear, the lowest of the 20 MSAs,” she said.

Standard & Poor’s analysis included all first-lien, prime, Alternative-A, and subprime mortgages that appear in non-agency RMBS transactions.

Updated Link to Georgia Tax Sites

http://gaassessors.com/

Some new counties have been added.

• Limits on the ability of mortgage lenders to penalize borrowers who pay off loans early.

• Stated-income loans would be effectively eliminated.

• Lenders would be required to obtain proof from borrowers that they can pay for their mortgages. Buyers would be required to provide tax returns, payroll receipts, or bank documents.

• Lenders and brokers will be prohibited from pushing borrowers to accept loans with higher interest rates or with risky features.

Total Foreclosures Fall, But REOs Rise
Foreclosure marketer RealtyTrac reported today that properties in all stages of foreclosure from default notices to auctions and repossessions were down 9 percent in April compared with March. They fell 2 percent compared with April 2009. Also, default notices were down 27 percent year over year.

RealtyTrac CEO James J. Saccacio predicted that foreclosures are plateauing, but won’t drop off dramatically any time soon. He pointed out that although default notices have dropped, repossessions are at a record level, indicating that banks are working through their backlogs.

Five states account for 52 percent of the total number of foreclosures: California, Florida, Michigan, Illinois, and Nevada. The states rounding out the top 10 are Arizona, Georgia, Texas, Ohio, and Virginia.

Source: RealtyTrac (05/13/2010)

Half of Owners Think Their Home Value Is Up
The confidence of U.S. home owners in the value of their homes increased in the first quarter, online home site Zillow says based on a survey it conducted.

About 50 percent of home owners surveyed by the Web site think their home's value declined in the past year, according to Zillow.com’s first quarter survey of home owner confidence. In contrast, Zillow thinks that 65 percent of U.S. homes actually declined in value based on its own calculations of value.

To the extent home owners are overconfident about the value of their home, Zillow says, they could feel encouraged to put their home on the market. If a lot of them did so and their home values aren't as high as they think they are, it could have the effect of pushing down prices, says Zillow’s Chief Economist Stan Humphries.

In its survey, Zillow found that 7 percent of home owners – or 5.3 million homes if the survey results were applied to all home owners – would be “very likely” to put their homes on the market in the next 12 months if they believed the market was improving. An additional 8 percent in the Zillow survey said they would be likely to list their homes, while another 14 percent would be somewhat likely.

Source: Zillow.com (05/20/2010)

Bank Failure List

 FDIC LIST

Foreclosure Activity Drops 2%: RealtyTrac

Bankrate: Mortgage Rates Rise for the Fourth Consecutive Week

The average conforming 30-year fixed mortgage increased this week to 5.24 percent, according to Bankrate.com's weekly national survey. The average 30-year fixed mortgage has an average of 0.45 discount and origination points.

The average 15-year fixed mortgage moved higher, to 4.62 percent while the larger jumbo 30-year fixed rate inched upward to 6.16 percent. Adjustable rate mortgages were mixed, with the average 1-year ARM falling to 5.10 percent and the 5-year ARM climbing to 4.70 percent.

Mortgage rates are lower than they were one year ago. This week last year, the average 30-year fixed mortgage rate was 5.64 percent, meaning a $200,000 loan would have carried a monthly payment of $1,153.21. With the average rate now 5.24 percent, the monthly payment for the same size loan would be $1,103.17, a savings of $50 per month for a homeowner refinancing now.

SURVEY RESULTS

30-year fixed: 5.24% -- up from 5.13% last week (avg. points: 0.45)

15-year fixed: 4.62% -- up from 4.53% last week (avg. points: 0.45)

5/1 ARM: 4.70% -- up from 4.60% last week (avg. points: 0.41)

Bankrate's national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.

For a full analysis of this week's move in mortgage rates, go to http://www.bankrate.com/mortgagerates

The survey is complemented by Bankrate's weekly forward-looking Rate Trend Index, in which a panel of mortgage experts predicts which way the rates are headed over the next 30 to 45 days. It's almost evenly split among those predicting a rise and those forecasting a fall. This week, almost half of the panelists believe mortgage rates will rise over the next 35 to 45 days. A little more than half think rates will fall. No one predicted that rates will remain relatively unchanged (plus or minus 2 basis points).

For the full mortgage Rate Trend Index, go to http://www.bankrate.com/RTI

To see mortgage rates in your area, go to http://www.bankrate.com/funnel/mortgages/

About Bankrate, Inc.

The Bankrate network of companies includes Bankrate.com, Interest.com, Mortgage-calc.com, Nationwide Card Services, Savingforcollege.com, Fee Disclosure, InsureMe CreditCardGuide.com and Bankaholic. Each of these businesses helps consumers to make informed decisions about their personal finance matters. The company's flagship brand, Bankrate.com is a destination site of personal finance channels, including banking, investing, taxes, debt management and college finance. Bankrate.com is the leading aggregator of rates and other information on more than 300 financial products, including mortgages, credit cards, new and used auto loans, money market accounts and CDs, checking and ATM fees, home equity loans and online banking fees. Bankrate.com reviews more than 4,800 financial institutions in 575 markets in 50 states. In 2008, Bankrate.com had nearly 72 million unique visitors. Bankrate.com provides financial applications and information to a network of more than 75 partners, including Yahoo! (NASDAQ:YHOO) , America Online (NYSE: AOL) , The Wall Street Journal and The New York Times (NYSE:NYT) . Bankrate.com's information is also distributed through more than 500 newspapers. Bankrate, Inc. was acquired by Apax Partners, one of the world's leading private equity investment group, in September 2009. Apax operates across the United States, Europe and Asia and has more than 30 years of investing experience. For more information on Apax, visit: www.Apax.com.

For more information contact:

Kayleen Yates

Senior Director, Corporate Communications

kyates@bankrate.com

GA to lag national recovery through 2011

Georgia’s economic recovery will lag behind the rest of the nation in 2010-2011, but the slow start will give way to more robust growth that will outpace the nation in the years ahead, according to Albert Niemi, dean of the Cox School of Business at Southern Methodist University.

Niemi, speaking Tuesday at the 17th annual Bank of North Georgia Economic Forecast 2010 at the Cobb Energy & Performing Arts Centre, said unemployment will not peak nationwide until April 2010, when it will crest at 10.5 percent, and remain above 10 percent until late fourth quarter next year.

The United States’ economy will grow by only 2.5 percent to 2.7 percent in 2010, he said.

“It is a jobless recovery,” Niemi said in an interview following the presentation.

Unfortunately for Georgia, the state will lag behind the recovery experienced by the rest of the nation. Georgia will underperform in jobs and economic growth through 2011.

Niemi, 67, the former dean of the Terry College of Business at the University of Georgia, said it is unprecedented in his lifetime for the Peach State to fall behind the nation in terms of economic growth.

“This is foreign territory,” he said.

Georgia maintains the fundamentals necessary for job and population growth, including relatively low costs of labor and land, a high quality of life and a global transportation hub in Hartsfield-Jackson Atlanta International Airport.

But the state’s manufacturing base is tied to construction, and both housing and commercial real estate development have fallen off a cliff and the state is choked with a glut of supply.

Housing starts in metro Atlanta that once exceeded 110,000 per year at their peak, have been cut by 80 percent.

Oversupply of housing, retail space and commercial office space will continue to weigh on Georgia until the excess supply has been filled. Cheap real estate will eventually become a plus for the region in attracting investment, but in the short term, it will continue to dog the region.

Long-term, Niemi said Georgia will add 1 million people through 2015, and overtake Michigan as the nation’s eighth-most populous state.

Niemi forecasts strong growth after 2012, and Georgia will become on of the nation’s Top Five or Six states in terms of economic growth through 2030.

Georgia is also favorably positioned for a return of a manufacturing base; one that is more diverse, as shown by the opening of the Kia Motors plant in West Point and the position of a manufacturing plant by NCR Corp.

Atlanta and Dallas, Tex., will be among the nation’s rising stars for the next two decades. Georgia, North Carolina, Texas and Utah will be among the fastest-growing states post-recession and through 2030.

Niemi's visit to Atlanta is part of a series of lectures, which will continue Dec. 2 at the Atlanta Athletic Club and Dec. 3 at Eagles Landing in Stockbridge.

Peachtree Center Athletic Club closing

Dec 1, 2009 - The Atlanta Business Chronicle

The Peachtree Center Athletic Club will close Dec. 31 after more than two decades in business, the club said in a message posted on its Web site.

In a letter posted Tuesday, the PCAC said it has “been experiencing significant challenges due to the aging facility and the current economic climate.”

The 72,000-square-foot facility, which is attached to the massive downtown office complex, becomes yet another victim of an economy that has hit businesses reliant upon discretionary dollars.

“It has recently become clear that the current operating model will no longer support the needs of the business,” the club said on its site.

PCAC is operated by Plus One Health Management.

In a letter to its members, the club said management has arranged for discount memberships at downtown locations of Resolution Fitness and Gold’s Gym.

Current Sales Stats

These were based on sale prices from $100,000 to $250,000 and located in Bartow, Floyd and Polk Counties from May 1,2009 to December 3, 2009.

GA construction jobs decline 18 percent

Georgia continued to shed construction jobs in October, according new analysis by the Associated General Contractors of America of government employment figures.

The Peach State had 161,800 construction jobs in October, compared with $197,300 in October 2008 and 161,400 in September 2009. Georgia ranked 43rd among the states for the 18 percent year-over-year loss.

Every state but one, North Dakota, lost construction jobs in October.

“A shockingly large portion of the construction industry’s workforce has simply evaporated,” said Ken Simonson, chief economist for the association.

He added that the national construction unemployment rate of 18.7 percent was the highest of any sector in October and the industry accounted for one-fifth of all job losses in the past year, even though construction only employs one out of 20 workers.

The five biggest percentage losses in construction employment over the year occurred in Nevada (26.9 percent, or 30,200 jobs), Arizona (24.2 percent, or 42,600 jobs), Tennessee (22.3 percent, or 29,300 jobs), Kentucky (20.8 percent, or 17,600 jobs) and Connecticut (19.3 percent or 12,500 jobs).

The largest monthly gains were a 4.6 percent rise in Michigan (5,400 jobs); 3.4 percent in Wisconsin (3,500 jobs), 3.3 percent in Indiana (4,000 jobs), 2.6 percent in West Virginia (900 jobs) and 2.3 percent in Rhode Island (400 jobs). The largest percentage losses for the month were a 3.7 percent decline in Mississippi (2,000 jobs), a 3.4 percent decline in North Carolina (6,600 jobs), a 2.9 percent decline in Idaho (1,100 jobs), a 2.8 percent decline in Colorado (3,700 jobs), and a 2.4 percent decline in Oregon (1,900 jobs).

“Because construction workers have carried the burden of the downturn’s job losses, the easiest way to cut unemployment and boost the economy is to get America building again,” said Stephen E. Sandherr, the association’s CEO, in a statement. “Increasing investments in highway, transit and infrastructure construction must be the core component to the ‘jobs’ bill that Washington officials are committing to pass soon.”

Wells Fargo CEO sees hope in Atlanta

Nov 20, 2009 - The Atlanta Business Chronicle

The CEO of Wells Fargo & Co. sees hope, and a little pain, in the Atlanta market as early signs point toward a long and slow economic recovery.

In a wide-ranging interview with Atlanta Business Chronicle, John Stumpf, the head boss of Wells Fargo (NYSE: WFC), and its merger partner, Wachovia Bank, talked about the state of commercial real estate, the bank’s plan for the Big Peach, when its Wachovia branches will switch from blue and green waves to Wells Fargo’s red and gold, and future bank regulation.

When Wells Fargo (NYSE: WFC) acquired Wachovia, Atlanta became a Top Three market for the San Francisco-based financial services and banking conglomerate. Stumpf, here for meetings with key corporate clients and top regional management, said the company is seeing some positives signs in the local economy.

A looming danger for Atlanta and much of the nation, is the bursting of the commercial real estate bubble. Signs of the fallout have begun, as office towers and retail centers have fallen into default and foreclosure

Atlanta’s Buckhead submarket has the highest office vacancy rate in the nation, and vacancies in Midtown and Buckhead are climbing to historic highs.

Stumpf said it is not yet clear how much pain the industry will suffer in commercial real estate.

Nearly 9 percent of commercial real estate loans held by banks nationwide were in delinquency during the second quarter, according to the Federal Reserve, double the same quarter last year. More than 16 percent of construction and development loans were delinquent.

Nearly $500 billion in commercial real estate loans will mature in each of the next few years.

“One reason you’re seeing less pain is because interest rates are so low,” Stumpf said. “The carrying costs of these properties are at record low levels. That being said, you can’t carry it forever if there’s no cash flow on these properties.”

Atlanta, Stumpf said, is not as challenged as Florida, particularly in things such as condo lending.

Wachovia appears to be picking up steam in its foreclosures of commercial properties, industry insiders say. Stumpf said he could not comment specifically about troubled projects in Atlanta, but he did admit that in general the Wachovia portfolio has steeper challenges than legacy Wells Fargo.

“On the Wells side, while like other banks, ours has taken bumps, but I think it’s the finest underwritten commercial loan portfolio in the country,” he said. “On the Wachovia side there was more risk in the portfolio, but at the time of the merger we wrote that down we took big substantial hits on that portfolio. So in many cases our losses are already behind us.”

Much of the pain to be felt will hinge of the recovery of the consumer, Stumpf said.

“At the end of the day, all commercial real estate has a consumer component to it. It serves the consumer one way or another, most businesses do,” he said.

Wachovia is the second largest bank in metro Atlanta and the state in terms of deposits behind rival SunTrust Banks Inc. (NYSE: STI).

“This is a big part of our company, we have some of our best leaders here, we have a big market share here,” Stumpf said. The company is in the process of hiring 200 bankers in the metro area.

Despite an overall decline of $1 billion in deposits in the metro area, the CEO said most were high-priced CDs that were allowed to expire.

“When you look at the transaction accounts, not hot money, we’re growing share here,” he said. “And that’s happening across the company.”

Wachovia has more than 280 branches in Georgia, and more than 500 ATMs that ultimately will be rebranded Wells Fargo. The bank isn’t in any hurry, and is focusing its rebranding on markets like California, Nevada and Texas where the banks competed head-to-head. Colorado has already seen its Wachovia branches converted to Wells Fargo.

“We can say this definitively, the name will change, it will be Wells Fargo, it will most likely happen in the next two years,” he said. “…I don’t know that we even know when Atlanta and greater Georgia will fit into all that.”

Stumpf, who became familiar with and “fell in love with” Atlanta during his time financing Spaghetti Junction, said he was impressed with the region’s resiliency.

“What’s impressed me about Atlanta, even though unemployment is higher than the national average and home prices have gone down more than the national average,” he said, “I wouldn’t bet against Atlanta. I’d bet with Atlanta all day long.”

Atlanta’s place as a logistics hub and its affordable real estate—made more affordable by the fallout of the real estate market—should continue to make it an attractive place to do business.

Stumpf cited First Data and Sony Ericsson’s respective recent decisions to relocate headquarters to the metro Atlanta as proof.

There are other signs of hope. Loan volume for October and November among mid-sized companies ($2 million to $25 million in revenues) was more than $50 million, more than the previous nine months combined.

“We’ve got our team marching double time looking for loans,” Stumpf said. “You hear from time to time that banks aren’t lending money, we’re lending all the money we can.”

Industry wide, loan demand is down as businesses retrench. Since the start of the credit crunch, some in business and in government have complained about the lack of bank liquidity, but bankers have generally been quick to counter that they are making loans to creditworthy borrowers, though standards have tightened.

“As an industry I think one of the biggest challenges will be not enough earning assets, not enough loans.”

Stumpf said the banks are one-third of the way into their three-year integration process. Wells Fargo expected $60 billion in losses over those three years as it came to grips with soured loans within the combined Wells Fargo-Wachovia portfolio. Much of that, about $41 billion, was realized in the first year, as planned.

“We’re still in same zip code with those numbers,” he said, adding that synergies from merged operations are being realized a faster clip than originally planned, and losses from legacy Wachovia’s risky option-arm Pick & Pay mortgage portfolio are actually not as steep as originally feared, despite deepening financial gloom.

“We’re on track, we’re on schedule and we’re under budget,” Stumpf said. I couldn’t be happier, I couldn’t be more excited.”

The bank’s mortgage origination business, he said, “is booming.” The company originates about one in four U.S. mortgages and services one in six.

Georgia is one of the nation’s leading centers of the foreclosure crisis, but Stumpf said the state has fared better than many areas, including Florida.

“On residential side, seeing signs, especially on the lower end, we’ve reached the bottom,” he said.

The bank has seen home prices rebound from the bottom in California, but losses are continuing in regions like the Sunshine State.

Wachovia and Wells Fargo have modified 400,000 home loans and refinanced 1.1 million loans Stumpf said. Overall, the mortgages on its balance sheet, he said, “have held up exceedingly well.”

In October, Wachovia played host to a mortgage modification event at the Georgia World Congress Center, and met with 2,600 borrowers in distress.

“What most people miss on real estate is people want to repay their bills,” he said. “Most people love their homes, they want to stay there but losses are higher today because of the job situation.”

Commercial Mortgage News

OAKLAND, CA-The total delinquency rate for commercial mortgages expanded 60 basis points in the third quarter to 4.7%, according to an early estimate by locally based Foresight Analytics. While final figures for the third quarter are not due out until late November, the real estate market analysis and forecasting specialist uses earnings reports and call report filings from many smaller banks to produce its quarterly estimates.

The commercial mortgage delinquency rate has been rising at an accelerated rate ever since Lehman Brothers’ collapse in September 2008 and the ensuing severe credit crunch and economic downturn. While more than double the commercial mortgage delinquency rate from the same year-earlier period, the 4.7% delinquency rate is still well below the 8% rate in the third quarter of 2001. However, given a weak economy, severely constrained credit availability and a high volume of commercial mortgages coming due during the next several years, Foresight Analytics principal Matthew Anderson calls the increasing delinquency rate "worrisome."

The delinquency rate for other commercial and industrial loans--loans to businesses typically unsecured and separate from commercial mortgage lending--rose 50 basis points in the third quarter to 4.2%. Anderson says the rate has been trending up by 50 basis points a quarter as the The lack of credit is most apparent in the C&I loan category," Anderson says. "We estimate a 6% decline in the volume of loans outstanding during Q3, following several quarters of contraction. The volume of loans outstanding has contracted by approximately 15% since peaking in Q3 2008."

The delinquency rate in construction lending, including both residential and commercial, jumped 190 basis points in the third quarter to 18.2%. The last recession's peak came in the first quarter of 2001 when construction loan delinquency hit 19.2%, according to AA.

"While for-sale residential construction loans [single family and condo] are by far the main source of problems, our estimates indicate that delinquency rates for other construction sectors, including apartments and commercial properties, are on the rise, too," Anderson says. "Worsening fundamentals and reduced liquidity in the commercial real estate sector will likely contribute to further rises in the delinquency rate."

Residential mortgage delinquencies rose 80 basis points in the third quarter to 11%. Aside from an approximately 200 basis point increase in the final three months of 2008, the delinquency rate has been rising by approximately 100 basis points per quarter since the first quarter of 2008. One year ago the rate was 6.4%.

"We have been expecting the rate of increase to slow, but clearly this has not yet occurred," Anderson says. Weak economy and reduced credit availability have put pressure on borrowers’ finances.

Source Loopnet

Market Commentary

RealtyRates.com Investor Survey Cap Rate Indices Increase For All Property Types During 2nd Quarter 2009

Consistent with a 42 basis point jump in Treasury rates to which most commercial mortgage interest rates are indexed, the RealtyRates.comTM Investor Survey Weighted Composite (Cap Rate) IndexTM increased 23 basis points, from 9.62% to 9.85% during the 2nd Quarter of 2009.

All 11 property sectors surveyed recorded quarter-over-quarter index increases with the greatest recorded by the Golf sector, up 27 basis points, followed by the Lodging sector, up 26 basis points.

The smallest increases were recorded by the Industrial and Mobile Home/RV Park/Campground sectors, both up 21 basis points from the previous quarter.

The deterioration in the commercial real estate market, as evidenced by the indicated increase in the Weighted Composite (Cap Rate) Index™ during the 2nd quarter, was further compounded by continuing declines in net operating income across virtually all markets, nationwide.

Press Releases

Ameris Bank, Moultrie, Georgia, Assumes All of the Deposits of American United Bank, Lawrenceville, Georgia

American United Bank, Lawrenceville, Georgia, was closed today by the Georgia Department of Banking & Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Ameris Bank, Moultrie, Georgia, to assume all of the deposits of American United Bank.

The sole branch of American United Bank will reopen on Monday as a branch of Ameris Bank. Depositors of American United Bank will automatically become depositors of Ameris Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers should continue to use their existing branch until they receive notice from Ameris Bank that it has completed systems changes to allow other Ameris Bank branches to process their accounts as well.

This evening and over the weekend, depositors of American United Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of August 11, 2009, American United Bank had total assets of $111 million and total deposits of approximately $101 million. Ameris Bank will pay the FDIC a premium of 1.02 percent to assume all of the deposits of American United Bank. In addition to assuming all of the deposits of the failed bank, Ameris Bank agreed to purchase essentially all of the assets.

The FDIC and Ameris Bank entered into a loss-share transaction on approximately $92 million of American United Bank's assets. Ameris Bank will share in the losses on the asset pools covered under the loss-share agreement. The loss-share arrangement is projected to maximize returns on the assets covered by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers. For more information on loss share, please visit: http://www.fdic.gov/bank/individual/failed/lossshare/index.html.

Customers who have questions about today's transaction can call the FDIC toll-free at 1-800-913-3058. The phone number will be operational this evening until 9:00 p.m., Eastern Daylight Time (EDT); on Saturday from 9:00 a.m. to 6:00 p.m., EDT; on Sunday from noon to 6:00 p.m., EDT; and thereafter from 8:00 a.m. to 8:00 p.m., EDT. Interested parties also can visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/americanunited.html.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $44 million. Ameris Bank's acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to alternatives. American United Bank is the 101st FDIC-insured institution to fail in the Nation this year, and the twentieth in Georgia. The last FDIC-insured institution closed in the state was Georgian Bank, Atlanta, on September 25, 2009.

On October 1, all appraisers who are currently approved to perform FHA appraisals and licensed, but not certified, will be removed from the FHA Appraiser Roster. HUD officials say that the Housing and Economic Recovery Act of 2008 forced this requirement upon them. Last October, HUD stopped taking applications by licensed, but not certified appraisers, wishing to be placed on the FHA roster.

“This is a statutory requirement that does not provide for grandfathering and cannot be waived by the FHA,” read an announcement from HUD on the subject. “However, appraisers that subsequently meet certification requirements may apply for reinstatement to the FHA appraiser roster.”

OFFICE SPACE

As in the case of most commercial real estate, the market for office space is still in a tailspin. According to Colliers International, a leading real estate information firm, office vacancies in the United States rose 1% to 15.45% in the second quarter of this year.

Office rents have continued to decline and are, on the average, over 10% below what they were at the beginning of the year.

Chris Moore, director of economic research at Colliers, expects this trend to continue for the rest of the year, as he said, “Firms have little appetite for expansion and instead remain focused on reducing costs and watching their bottom lines.”

FED EXTENDS TALF

The Federal Reserve Board and the U.S. Treasury Department have announced the extension of the Term Asset-Backed Loan Facility (TALF). Created in the wake of last year’s financial meltdown, this program was slated to end December 31.

“To promote the flow of credit to businesses and households and to facilitate the financing of commercial properties, the Federal Reserve and Treasury approved extending TALF loans against newly listed ABS (asset-backed securities) and legacy CMBS (commercial mortgage-backed securities) through March 31, 2010,” the Federal Reserve reported in a press release. “Because the new CMBS deals can take a significant amount of time to arrange, the Federal Reserve and Treasury approved TALF lending against newly issued CMBS through June 30, 2010. “

The Fed stated it did not expect to expand the variety of collateral eligible for this program, but that could change in the future. In fact, the TALF program could be extended further, according to the press release, which said, “The Board will continue to monitor financial conditions and will consider in the future whether unusual and exigent circumstances warrant a further extension of the TALF to help promote financial stability and economic growth.”

For those of you who have interest in the Health Reform Bill (HR3200) I have posted a link below to the last version of that bill on this site below. Best I can figure this bill cost about a Billion dollars a page. Seems to me we are in the wrong profession. We need to get into writing bills.

 http://thomas.loc.gov/cgi-bin/query/C?c111:./temp/~c111e5W6oV

Links to Actual Bill, Good reading congress hasn't read it but you might want to. The part I find interesting is the 57 + new federal agencies it creates. Now thats change you can believe in!

As far as other news>>>>>>>>>>> Latest FDIC News In Georgia

Press Releases

State Bank and Trust Company, Pinehurst, Georgia, Assumes All of the Deposits of the Six Bank Subsidiaries of Security Bank Corporation, Macon, Georgia

FOR IMMEDIATE RELEASE July 24, 2009

Media Contact: David Barr Office Phone: (202) 898-6992 Cell Phone: (703) 622-4790 Email: dbarr@fdic.gov

The six bank subsidiaries of Security Bank Corporation, Macon, Georgia, were closed today by the Georgia Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with State Bank and Trust Company, Pinehurst, Georgia, to assume all of the deposits of the six bank subsidiaries of Security Bank Corporation.

The six banks involved in today's transaction are: Security Bank of Bibb County, Macon, GA, with $1.2 billion in total assets and $1 billion in deposits; Security Bank of Houston County, Perry, GA, with $383 million in assets and $320 million in deposits; Security Bank of Jones County, Gray, GA, with $453 million in assets and $387 million in deposits; Security Bank of Gwinnett County, Suwanee, GA, with $322 million in assets and $292 million in deposits; Security Bank of North Metro, Woodstock, GA, with $224 million in assets and $212 million in deposits; and Security Bank of North Fulton, Alpharetta, GA, with $209 million in assets and $191 million in deposits.

The six banks had a total of 20 branches, which will reopen during normal business hours beginning tomorrow as branches of State Bank and Trust Company. Depositors of the six banks will automatically become depositors of State Bank and Trust Company. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers should continue to use their existing branches until State Bank and Trust Company can fully integrate the deposit records of the six failed banks.

Over the weekend, depositors of the six banks can access their money by writing checks or using ATM or debit cards. Checks drawn on the banks will continue to be processed. Loan customers should continue to make their payments as usual.

As of March 31, 2009, the six banks had total assets of $2.8 billion and total deposits of approximately $2.4 billion. In addition to assuming all of the deposits of the failed bank, State Bank and Trust Company will acquire $2.4 billion in assets. The FDIC will retain the remaining assets for later disposition.

The FDIC and State Bank and Trust Company entered into a loss-share transaction on approximately $1.7 billion of the six banks' assets. State Bank and Trust Company will share in the losses on the asset pools covered under the loss-share agreement. The loss-sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers.

Customers who have questions about today's transaction can contact the FDIC as follows:

Failed Bank	FDIC Toll-Free Phone Number	FDIC Website
Security Bank of Bibb County	1-800-822-0412	http://www.fdic.gov/bank/individual/failed/sb-bibb.html
Security Bank of Houston County	1-800-822-7182	http://www.fdic.gov/bank/individual/failed/sb-houston.html
Security Bank of Jones County	1-800-822-9247	http://www.fdic.gov/bank/individual/failed/sb-jones.html
Security Bank of Gwinnett County	1-800-822-1918	http://www.fdic.gov/bank/individual/failed/sb-gwinnett.html
Security Bank of North Metro	1-800-823-4939	http://www.fdic.gov/bank/individual/failed/sb-metro.html
Security Bank of North Fulton	1-800-823-3215	http://www.fdic.gov/bank/individual/failed/sb-fulton.html

The phone numbers will be operational this evening until 9:00 p.m., Eastern Daylight Time (EDT); on Saturday from 9:00 a.m. to 6:00 p.m., EDT; on Sunday from noon to 6:00 p.m., EDT; and thereafter from 8:00 a.m. to 8:00 p.m., EDT.

To assume all of the deposits and purchase assets from the FDIC as receiver, State Bank and Trust Company received a $300 million capital infusion from a group of 26 investors, led by Joseph Evans.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $807 million. State Bank and Trust Company's acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to alternatives. The failure of the six banks brings the nation's total number this year to 64, and the total for Georgia to 16. The last FDIC-insured institution to be closed in the state was First Piedmont Bank, Winder, on July 17, 2009.

 We are going to clean up the entire world by ourselves>

House Speaker Nancy Pelosi has put cap-and-trade legislation on a forced march through the House, and the bill may get a full vote as early as Friday. It looks as if the Democrats will have to destroy the discipline of economics to get it done.

Despite House Energy and Commerce Chairman Henry Waxman's many payoffs to Members, rural and Blue Dog Democrats remain wary of voting for a bill that will impose crushing costs on their home-district businesses and consumers. The leadership's solution to this problem is to simply claim the bill defies the laws of economics.

Their gambit got a boost this week, when the Congressional Budget Office did an analysis of what has come to be known as the Waxman-Markey bill. According to the CBO, the climate legislation would cost the average household only $175 a year by 2020. Edward Markey, Mr. Waxman's co-author, instantly set to crowing that the cost of upending the entire energy economy would be no more than a postage stamp a day for the average household. Amazing. A closer look at the CBO analysis finds that it contains so many caveats as to render it useless.

Associated Press

Henry Waxman

For starters, the CBO estimate is a one-year snapshot of taxes that will extend to infinity. Under a cap-and-trade system, government sets a cap on the total amount of carbon that can be emitted nationally; companies then buy or sell permits to emit CO2. The cap gets cranked down over time to reduce total carbon emissions.

To get support for his bill, Mr. Waxman was forced to water down the cap in early years to please rural Democrats, and then severely ratchet it up in later years to please liberal Democrats. The CBO's analysis looks solely at the year 2020, before most of the tough restrictions kick in. As the cap is tightened and companies are stripped of initial opportunities to "offset" their emissions, the price of permits will skyrocket beyond the CBO estimate of $28 per ton of carbon. The corporate costs of buying these expensive permits will be passed to consumers.

The biggest doozy in the CBO analysis was its extraordinary decision to look only at the day-to-day costs of operating a trading program, rather than the wider consequences energy restriction would have on the economy. The CBO acknowledges this in a footnote: "The resource cost does not indicate the potential decrease in gross domestic product (GDP) that could result from the cap."

The hit to GDP is the real threat in this bill. The whole point of cap and trade is to hike the price of electricity and gas so that Americans will use less. These higher prices will show up not just in electricity bills or at the gas station but in every manufactured good, from food to cars. Consumers will cut back on spending, which in turn will cut back on production, which results in fewer jobs created or higher unemployment. Some companies will instead move their operations overseas, with the same result.

When the Heritage Foundation did its analysis of Waxman-Markey, it broadly compared the economy with and without the carbon tax. Under this more comprehensive scenario, it found Waxman-Markey would cost the economy $161 billion in 2020, which is $1,870 for a family of four. As the bill's restrictions kick in, that number rises to $6,800 for a family of four by 2035.

Note also that the CBO analysis is an average for the country as a whole. It doesn't take into account the fact that certain regions and populations will be more severely hit than others -- manufacturing states more than service states; coal producing states more than states that rely on hydro or natural gas. Low-income Americans, who devote more of their disposable income to energy, have more to lose than high-income families.

Even as Democrats have promised that this cap-and-trade legislation won't pinch wallets, behind the scenes they've acknowledged the energy price tsunami that is coming. During the brief few days in which the bill was debated in the House Energy Committee, Republicans offered three amendments: one to suspend the program if gas hit $5 a gallon; one to suspend the program if electricity prices rose 10% over 2009; and one to suspend the program if unemployment rates hit 15%. Democrats defeated all of them.

The reality is that cost estimates for climate legislation are as unreliable as the models predicting climate change. What comes out of the computer is a function of what politicians type in. A better indicator might be what other countries are already experiencing. Britain's Taxpayer Alliance estimates the average family there is paying nearly $1,300 a year in green taxes for carbon-cutting programs in effect only a few years.

Americans should know that those Members who vote for this climate bill are voting for what is likely to be the biggest tax in American history. Even Democrats can't repeal that reality.

Printed in The Wall Street Journal, page A12

MGIC Investment Corporation announced on Thursday that it plans to reorganize its operations in response to widening losses from its core business.

MGIC and its subsidiary Mortgage Guaranty Insurance Corporation reported a net loss for the quarter ended June 30 of $339.8 million or $2.74 per diluted share. Losses during the same quarter of 2008 were $99.9 million or $0.81 a share.

The company's losses thus far in 2009 total $524.4 million compared to $134.4 million last year. On a diluted share basis the loss rose from $1.29 to $4.22.

MGIC is a leading issuer of Private Mortgage Insurance (PMI). These are policies written on individual residential mortgages when borrowers do not provide a 20 percent down payment. The policies are purchased by the home owner but insure the lender bank against loss.

Curt S. Culver, chairman and chief executive officer blamed MGIC's growing financial difficulties on mounting delinquencies and foreclosures of residential mortgages insured by the company due to the weakening economy, job losses, and falling home values but said that the company has adequate resources to cover its obligations on its current book of business.

Delinquent loans, including bulk loans increased to 14.97 percent of the companies' portfolio from 8.6 percent the year before.

Under the announced reorganization, MGIC plans to shift writing of new policies to another subsidiary, MGIC Indemnity Corporation and cease writing any new business within the parent company. To this end, MGIC has reached an agreement with the Wisconsin Commissioner of Insurance that will allow it to contribute up to $1 billion to MGIC Indemnity in two installments starting this month.

If MGIC must continue to write policies through the parent company it will need either additional capital or relief from capital requirements in 16 of the states in which it does business. To that end, the company has also had talks with the U.S. Department of the Treasury about a capital investment.

Even with the funds transfer agreement from the home state insurance commissioner, MGIC has a long way to go to effect the planned reorganization. Wisconsin authorities have not yet given permission for the subsidiary to actually write policies and similar permission must be obtained from each of the states. The indemnity company must also be approved as an eligible insurer by Freddie Mac and/or Fannie Mae.

The company stated, "We cannot predict whether these approvals will be obtained and if so on what conditions. If we cannot execute that plan we will need to re-evaluate these other options."

After the companies' financials were announced, Fitch Ratings downgraded its ratings for MGIC from "BBB" to "BBB-" and placed it on Ratings Watch Negative. The BBB- rating is the lowest investment ratings grade.

After an initial drop early in the day, the company's stock was trading near the close at $4.88, up $0.94 from Wednesday's close.

_________________________________________________________________

Mortgage rates took another step higher yesterday following a 3% rally in the stock market. Tame inflation and “not as bad” industrial production numbers have resparked the green shoots theory of a quick economic recovery. Market participants, not wanting to miss out on the rally, quickly sold their fixed income investments to move their money into the higher risk but higher return equity markets. In total, mortgage backed securities moved lower in price (as price moves lower, rates move higher) by 75 basis points which forced all lenders to reprice for the worse with some issuing a couple reprices as the losses snowballed into close. Losing much more was MBS’s closest relative, the benchmark 10 year note, which sold off and moved to a higher yield of 3.63. Just a few days ago, the 10 year note was trading under 3.30 in yield. After mortgage rates briefly touched 4.875% the other day, they have quickly turned and by day’s end yesterday par was sitting at 5.25%.

JP Morgan reported much better than expected earnings this morning. Analysts had expected a 5 cents per share earnings but they reported 2nd quarter earnings of 28 cents per share or $2.7 billion. After the much better than expected earnings from Goldman Sachs earlier this week, many anticipated similar results from JP Morgan which fueled the rally in equities.

The U.S. Department of Labor this morning released the weekly jobless claims for unemployment insurance report. This data set calculates the number of Americans who filed for first time unemployment benefits in the prior week. Today's report indicates that jobless claims fell from last week’s upwardly revised 569,000 to 522,000. Estimates from economists were for 535,000 first time claims. Continuing claims, which reports how many people continue to file due to lack of finding a new job, fell by 642,000 ? its largest amount in history ? from 6.883 million to 6.273 million. The Labor Department is warning that the better than expected numbers are being distorted by seasonal issues owing to the fact that layoffs in manufacturing happened earlier than usual.

The final report of the day comes from our friends at the Federal Reserve Bank of Philadelphia with the release of the Philly Fed Survey. This survey lets market participants know the strength of manufacturing around the Philadelphia region. Last month’s survey improved by a large margin moving from -22.6 to -2.2 which was the best reading since September of 2008 and far exceeded estimates. Readings below 0 indicate that business conditions are contracting while readings above 0 indicate expansion. Economists surveyed for this month’s survey were expecting a slight decline to -5.0. The survey in fact showed business conditions in the region contracting more than expected at a -7.5 read. Following the release, both MBS and treasuries moved to their best price of the day.

So far today, the fixed income sector is trying to rebound from the beating they took yesterday. Currently, the benchmark 10 year treasury note is rallying and is currently trading at a yield of 3.51 after closing yesterday at 3.63. MBS are moving higher in price as well and are currently recapturing over half of yesterday’s losses. Since MBS are moving higher, if you are currently floating continue to do so until later today. This will allow time for lenders to pass along the improvements, but things can change very quickly so we must remain defensive. You can check MBS prices by clicking over to Mortgage News Daily’s Mortgage Rates page.

Reports from fellow mortgage professionals are indicating that the par 30 year fixed rate conventional loan is in the 5.125% to 5.375% range for the best qualified consumers. If you are securing government financing, FHA or VA, expect your rate to be about .25% higher. The sell off yesterday in MBS should have resulted in higher mortgage rates this morning; however, there are two things helping rates. First, AQ informs me that most lenders locked in their pipelines in early July at the highs of MBS price which allows them to pass along pricing based on last week’s MBS price. Secondly, the move higher in interest rates last month has lessened the supply of mortgage applications for lenders to underwrite. How can a lender encourage more loan applications to be submitted? That’s right, offer better pricing.

_________________________________________________________________

By: Diana Olick
CNBC Real Estate Reporter

I hate to say I told you so, but on May 1st and again on June 1st, I told you about the potential negative ramifications of the Home Valuation Code of Conduct. Today the Realtors confirmed what I had been hearing all across the mortgage industry.

“In the past month, we have suddenly been bombarded with many stories of, at the last moment, transactions falling apart because appraisals are coming in unrealistically low,” said National Association of Realtors Chief Economist Lawrence Yun. “As a result it opens up a new round of negotiations between a buyer and a seller or in many cases the buyer just steps away.”

The HVCC went into effect at the beginning of May, an outgrowth of a lawsuit by New York State Attorney General Andrew Cuomo against Washington Mutual. Fannie Mae [FNM 0.64 0.02 (+3.23%) ] and Freddie Mac [FRE 0.71 0.06 (+9.23%) ] agreed not to buy any loans that didn’t comply with the code.

The HVCC forces a firewall between lenders/brokers and home appraisers. Gone are longstanding relationships between a local mortgage broker or lender and a local appraiser.

Now, lenders and brokers are forced to use appraisal management companies (ironically – or maybe not so ironically—many of which are owned by the big banks). These companies hire independent appraisers across the country and call on them to do the local appraisals.

Realtors say some of these appraisers are not only not local, they don’t even have access to the local MLS. They are doing appraisals using computer models, often incorporating distressed sales as comps, and often not even knowing that the home had extensive renovations or an addition. As a result, the appraisals are coming in far lower than the agreed-upon purchase price.

It is affecting new purchases as well as refinances.

“The new HVCC is certainly increasing processing times, raising costs for consumers, and in often cases bringing in valuations that don't appear to be correct as a result of lesser experienced appraisers from outside the area appraising properties at potentially lower valuations,” says Craig Strent of Bethesda, Maryland’s Apex Home Loans. “When that happens that throws the refinance or the purchase mortgage out of whack of course and creates fairly large problems for the financing, so we're seeing some really negative effects as a result of this HVCC.”

The point of the HVCC was to take fraud out of the appraisal process, and let’s face it, there was plenty of that. But they may be throwing out the baby with the bathwater here. Interestingly, after I discussed this on CNBC this morning (see video), we got a call from a Congressional office asking for the transcript of my report.

By: Diana Olick
CNBC Real Estate Reporter

With mortgage interest rates creeping higher again (and yes, I realize by historical standards, they’re still low, but as a housing stimulus they would need to be below 4 percent), a new idea is floating around industry associations and Capitol Hill. It’s another home buyer tax credit. The current $8000 credit for first time home buyers only expires November 30th. The new proposal is for a $15,000 tax credit for all home buyers.

A new bill from Sen. Johnny Isakson (R-GA), who used to be in the real estate business, would not only offer a bigger credit to a wider swath of potential home buyers, it would also removed the income caps ($75,000) that kept a lot of buyers out of the current credit.

It’s debatable just how much the first time home buyer tax credit juiced the spring housing market. It certainly didn’t hurt, but some say it wasn’t nearly enough, given its limitations. Even allowing borrowers to monetize the credit up front, which HUD recently announced, left a lot of earlier potential buyers out.

“Stimulating the housing market is one of the best ways Congress can help accelerate the recovery of our national economy,” said David Kittle, Chairman of the Mortgage Bankers Association in a press release. Obviously everyone, from the builders to the Realtors support the proposal.

“Due to expire at the end of November, the current $8,000 first-time home buyer tax credit has proved to be an effective policy targeted toward a specific demographic group that is showing tangible results,” chimes NAHB Chairman Joe Robson. “Enhancing this credit would help to stoke the economic engine at a key point in our recovery.”

The question is: At what cost? A letter to Sen. Isakson from the Joint Committee on Taxation provides a revenue estimate for Isakson’s bill, S.1230, the “Home Buyer Tax Credit Act of 2009.”

Assuming an enactment date of July 1, 2009, we estimate that your proposal would have the following effect on Federal fiscal year budget receipts:

I’m not arguing either way for the credit, I just think we should have our eyes wide open as this debate begins.

A new report shows foreclosure starts among the 30.4 million first-lien residential mortgages owned or guaranteed by Fannie Mae and Freddie Mac -- most of them prime loans -- jumped 63 percent during the first three months of the year, to 243,800.

The sharp increase in the number of homes entering the foreclosure process compared to the previous quarter outpaced the 20 percent increase in foreclosure prevention actions by Fannie and Freddie's 3,000 loan servicers. Those actions, including loan modifications, forbearance and repayment plans, and short sales, totaled 87,000.

Fannie Mae and Freddie Mac own or guarantee 56 percent of outstanding mortgages, and about 84 percent of them are considered prime loans. The 151,600 foreclosure starts on prime borrowers in the first quarter of 2009 represented a 260 percent increase from a year ago, while foreclosure starts on nonprime borrowers nearly doubled, to 92,200.

Completed foreclosure sales and third-party sales were also up 17 percent from the fourth quarter of 2008, to 41,800, despite a temporary suspension of foreclosure sales on owner-occupied properties in effect during parts of the quarter.

In announcing the release of the latest quarterly report on Fannie and Freddie's foreclosure prevention efforts, the Federal Housing Finance Agency emphasized a 57 percent increase in loan modifications from the fourth quarter of 2008 to the first quarter of 2009, to 37,300.

FHFA also noted that the Obama administration's Making Home Affordable loan modification and refinance programs were still in development in March, the final month covered in the report.

The percentage of loans 60 days or more past due, however, continued to climb, reaching 3.6 percent by the end of the first quarter, up from 3 percent the previous quarter and 1.5 percent a year ago. That compares with a 9.2 percent industry average, and 10.2 percent for loans backed by the Federal Housing Administration (FHA). The report said 9.7 percent of Fannie and Freddie's nonprime loans were delinquent by 60 days or more. And the delinquency rate of prime loans has more than doubled in the last year, reaching 2.5 percent.

By the end of March, 1.1 million loans owned or guaranteed by Fannie and Freddie were late by 60 days or more, a 19 percent increase from the end of 2008.

The performance of mortgages modified by the 3,000 loan servicers employed by Fannie Mae and Freddie Mac was also an area of concern. The percentage of loans current six months after modification fell from 43 percent to 37 percent.

FHFA expects that more recent loan modifications will perform better, since 83 percent of loans modifications completed in the first quarter of 2009 resulted in lower payments for borrowers, compared with 16 percent in the first quarter of 2008.

Fannie and Freddie's loan servicers also managed to boost the number of short sales by 31 percent from quarter to quarter and by 353 percent from a year ago. The number of short sales -- 8,054 -- represented less than one-tenth of foreclosure-prevention actions.

Last month, the Obama administration announced an expansion of the Making Home Affordable program to provide incentives for borrowers and loan servicers to engage in short sales and deeds-in-lieu of foreclosure.

During the past several months there has been quite a lot of confusion about what is and what is not true about the Home Valuation Code of Conduct. We as appraisers have been confused ourselves. Some of the past updates we have posted may have been incorrect based on the current clarifications published by the Appraisal Institute, Fannie Mae and others. Many lenders have established appraisal management companies for the purpose of complying with what was perceived as correct. I have attached below an article from the appraisal institute that outlines some of the myths and concerns hopefully to clarify what is true and what is not. I hope this will be of help in understanding the guidelines of the HVCC.    

© Home Valuation Code of Conduct

Myth: The HVCC requires lenders to use Appraisal Management Companies. Reality: Use of appraisal management companies is not required under the Home Valuation Code of Conduct (HVCC). Lenders may engage appraisers directly without the use of third parties. Myth: Mortgage sellers cannot achieve compliance without outsourcing the appraisal function. Reality: Sellers may achieve compliance by establishing meaningful risk management practices, including separation between risk management (appraisal) and loan production. The Code requires that loan production staff not be involved in ordering the appraisal. This separation is currently required under existing federal bank regulation. Myth: "Loan Correspondents" or "correspondent lenders" are the same as mortgage brokers and they too cannot order appraisals. Reality: Unlike mortgage brokers, loan correspondents fund loans in their own name and, therefore, have "skin in the game." They are allowed to order appraisals on loans sold to Fannie Mae and Freddie Mac like other sellers that fund loans in their own name or with their own funds. Mortgage brokers no longer will be able to engage real estate appraisers directly. Myth: Sellers cannot maintain the appraisal function internally (as an in-house operation), without loan production involvement. Reality: There are several ways in which sellers may staff appraisal functions internally without outsourcing the function to a third party, so long as they maintain separation between risk management functions and loan production staff. To achieve compliance the appraisal function should report to an individual or department outside of loan production. Some examples of eligible individuals or entities within institutions include, but are not limited to, the following:

Myth: Loan Production staff is prohibited from communicating with appraisers. Reality: Loan production staff may communicate with the appraisers, but they cannot be involved in selecting, retaining, recommending or influencing the selection of any appraiser for a particular appraisal assignment. Further, loan production staff cannot have any "substantive communications with an appraiser or appraisal management company relating to or having an impact on valuation, including ordering or managing an appraisal assignment." Myth: Outsourcing appraisal functions to an appraisal management company can reduce costs. Reality: Given the diversity in the size and structure of lending institutions, it is difficult to conclude that outsourcing necessarily will reduce costs. Lenders incur costs for appraisal risk management whether done in-house or outsourced. Lenders should consider all the costs of compliance, including the costs associated with ensuring appraiser competence and appraisal quality, before making a decision to outsource their risk management functions. Myth: Outsourcing appraisal management to a third party reduces lender risk.

Reality: Federal bank regulatory agencies have cautioned against reliance on third-party relationships by reaffirming that such relationships may significantly increase a bank’s risk profile, notably its strategic, reputation, compliance and transaction risks1. According to federal banking guidelines, "Increased risk most often arises from poor planning, oversight and control on the part of the bank and inferior performance or service on the part of the third party, and may result in legal costs or loss of business. To control these risks, management and the board must exercise appropriate due diligence prior to entering the third-party relationship and effective oversight and controls afterward." Myth: Use of third party vendors ensures the use of competent appraisers. Reality: Lenders traditionally have been responsible for ensuring the competency of the appraisers and reliability of the appraisals they use for credit decisions. However, the competency of an appraiser is not measured by scoring compliance with seller servicer guidelines. Processing appraisal orders is a separate function that does not specifically include a review of competency. The function of competency review is best performed by individuals with significant education in appraisal standards and theory.

Further, institutions should consider any potential reductions in quality that might result from outsourcing the appraisal function. To this point, federal bank regulatory agencies recently reminded institutions to consider an appraiser’s competency for any given appraisal assignment.2

Myth: The licensing of an appraiser ensures his or her competency. Reality: Licensing does not necessarily ensure the competency of an appraiser. The Fannie Mae and Freddie Mac Selling Guides require lenders to review the appraiser’s education and experience. Specifically, the Fannie Mae Selling Guides state:

"A lender must not assume—simply based on the fact that an appraiser is state-licensed or state-certified—that the appraiser is qualified and knowledgeable about a market area or is aware of the appropriate market data sources for the area and will be able to obtain access to them. If an appraiser is not knowledgeable about a particular location, is not experienced in appraising a particular type of property, or is not familiar with (or does not have access to) the appropriate data sources, a lender should not give the appraiser assignments in that market area or for that particular type of property."3 Myth: Professional appraisal designations cannot be used when evaluating the qualifications, education and experience of an appraiser. Reality: The Fannie Mae Selling Guides state that designations may be helpful in evaluating an appraiser's qualifications, particularly when the designation is from a nationally recognized organization. Specifically, the Fannie Mae Selling Guide states:

"Professional appraisal designations can be helpful to the lender in evaluating an appraiser’s qualifications, particularly when the designation is from a nationally recognized organization that has formal experience, education, and ethics requirements that are strongly administered. If the lender considers an appraisal designation in its evaluation, it should be familiar with the appraisal organization’s specific requirements to ensure that the designation is evaluated appropriately."4 Myth: "Comp checks" ? which are prohibited under the HVCC without an engaged appraisal assignment ? are the only way to determine if there is sufficient value in the collateral before proceeding with a loan application. Reality: Lenders often want to know if there is sufficient value in the collateral before proceeding with a loan application. To determine this in the past, lenders and brokers would request "comp checks" of the appraiser. The HVCC bars lenders from ordering "comp checks" without engaging an appraiser in an appraisal assignment. Lenders may engage appraisers in appraisal assignments that involve a scope of work that is significantly narrow. For example, the appraiser could provide an answer to the question "is the property worth at least $XX" or "is it within a certain range," rather than a single point value estimate? This still would be an appraisal; the appraiser would need to complete the necessary research and analysis to answer such a question, and would have to document that analysis properly. Alternatively, the appraiser could be engaged in a consulting assignment to provide raw data to the client to help with their analysis.

Final Note: The HVCC is intended to promote independence in the appraisal process and, thus, help ensure that appraisers and the appraisal process may be relied upon as part of sound underwriting for financial institutions.

Are the new appraisal rules hurting or helping the consumer?

Bad appraisals hurting sales and costing consumers

By Susan Taylor Martin, Times Senior Correspondent

Two years ago, Florida regulators permanently revoked the license of Clearwater appraiser Larry Holzer because he had approved a home appraisal that contained glaring errors:

It said the house was on an asphalt road when it was really on a dirt road.

It said the house had public water and sewer when in fact it had a well and septic tank.

It said the property was in an area 75 percent developed, not the actual 25 to 50 percent.

The license revocation barred Holzer from appraising property in Florida. But it hasn't kept him out of the appraisal business.

Last year, Holzer started Global Appraisal Solutions, one of a growing number of "appraisal management companies'' that hire appraisers to determine market values. Though the appraisers are licensed, the management companies are totally unregulated. And they are at the heart of a controversy over a new federal policy that critics say is costing borrowers more money and resulting in rushed, poor-quality appraisals that can thwart home sales as the market struggles to recover.

"The agents I talk to, a lot of us are bemoaning the fact that we're finally putting deals together only to have them blown apart by appraisals,'' says Lance Williams, a Tampa real estate agent. "That's discouraging, especially at a time when the government says it's here to help us.''

Fast and flawed

Although they've been around for years, appraisal management companies are profiting from efforts to prevent the kind of appraisal-related fraud that contributed to the real estate bust. In 2007, New York Attorney General Andrew Cuomo filed suit alleging that Washington Mutual had pressured appraisers to inflate home values so WaMu could make bigger loans.

The suit led to a Home Valuation Code of Conduct that took effect May 1. With some exceptions, it bars direct contact between appraisers and loan originators, meaning appraisals must now be arranged by a third party — typically, an appraisal management company.

Under the new code, the lender contacts a management company, which then hires the appraiser. The borrower pays the appraisal cost, which is divided between company and appraiser.

"The whole goal of the code is a laudable one — to prohibit pressure on appraisers to achieve a desired valuation,'' say Francois Gregoire, a St. Petersburg appraiser and former chairman of the Florida Real Estate Appraisal Board.

But Gregoire and others say the top priority of most management companies is maximizing their fees, not getting the best-quality appraisal. As a result, they often hire less experienced appraisers and require them to rush their reports.

"There's no way in the world I'm going to do work for a (management company) because I don't believe you can turn around an appraisal report in 24 or 48 hours even if you're intimately familiar with the market and do a credible job,'' Gregoire says. He has taken as long as 11 days to put together a report, which includes photographs, market analyses, and interviews with buyers and sellers.

Critics say appraisers hired by third-party companies often know little about the area where the property is located and come up with appraisals wildly out of whack. Some examples:

• Although there are many appraisers far closer, an appraiser from Crystal River went 50 miles to Tarpon Springs to value a unit in a new townhouse development where frequent "flipping'' suggested mortgage fraud. He appraised the unit at $1.2 million — nearly $800,000 more than what an identical unit had recently sold for.

• In another suspicious case, an appraiser sent by a management company from the Fort Lauderdale area all the way to Key Largo appraised a unit for $750,000. Other units were listed at no more than $299,000.

• At the other end of the spectrum, Wells Fargo bank recently agreed to take $290,000 for a house that originally cost $420,000 in a prime area north of Gandy Boulevard. But the appraiser, from Pasco County, set a value of just $245,000 by using "comparable'' sales from a less desirable area south of Gandy.

Wells Fargo agreed to sell at $245,000 "but mercifully that was a case where we could put a deal together because the bank just wanted to be done with it,'' said Williams, the Tampa agent. "But when you have a seller who is the primary owner of the property, that deal's probably not going to go through.''

By steering more work through third parties, the new code of conduct is also increasing costs to consumers because both the appraiser and the management company are getting paid. However, borrowers don't know that because the closing statement shows only the appraiser.

"I think the consumer needs to know that they're not paying Joni's Appraisal Service $500 for an appraisal but maybe $250, and that the rest is going to a management company,'' says Joni Herndon, current chairman of the real estate appraisal board. "It has to be a profitable business venture or they wouldn't be in it.

Improper pressure?

Critics say the problems with management companies are epitomized by firms like Global Appraisal Solutions and its founder, Holzer.

Holzer, 41, ran afoul of state regulators for inadequately supervising a trainee who had done a flawed appraisal in 2003 on a $250,000 Lake County house. Full of errors, the report didn't even have photos of the right house.

In an affidavit, Holzer said it was an isolated incident that occurred at a time he was "impaired'' because of treatment for depression following a divorce. Nonetheless, he surrendered his license, which was permanently revoked in 2007. The trainee and other employees under Holzer's supervision also lost their licenses.

A year later, Holzer started Global Appraisal Solutions. Touted on its Web site as "one of the most trusted providers of real estate valuations in the nation,'' it promises "guaranteed same-day inspections'' by certified appraisers with delivery of reports "within 24 hours.''

A veteran Illinois appraiser, Donald Martin, says he refused an assignment from Global Appraisal Solutions because he felt Holzer was pressuring him to come up with a certain valuation on a house — something the new code of conduct was specifically designed to prevent.

"They asked me to call them if the value wasn't going to be there,'' said Martin, who spoke with Holzer by phone. "In my opinion he is shopping for an appraiser that will make his client happy. It's because of appraisers like he was that we now have the code of conduct.''

In another recent instance, Global Appraisal Solutions e-mailed an appraiser in Colorado with this request: "We need you to take a look and see if an additional $5,000 in value is justified.''

Holzer says there is nothing improper about his business practices.

"The reality is that many appraisers are not competent, and many are undervaluing properties to the detriment of consumers,'' he says. "The job of the appraisal manager is to hold appraisers accountable.''

Holzer also says that problems in his background are irrelevant to his current work. He has a long arrest history that includes convictions for marijuana possession, harassing phone calls, obstructing an officer without violence and violating a domestic violence protection injunction.

"Because I had a successful appraisal company, the state of Florida wanted to crucify me,'' he says. "They see if you're successful at what you do and they crucify you.''

Neither federal regulators nor the New York Attorney General's Office returned calls seeking comment on whether the new code of conduct is working as intended. But a bill now before Congress would regulate Global Appraisal Solutions and similar companies — a move long overdue, critics say.

"I think it goes hand-in-hand with the regulation of appraisers and also the licensing of appraisers and Realtors,'' says Herndon of the state appraisal board. "These are third-party brokers of appraisal services, and consumers should know who they are.''

Susan Taylor Martin can be contacted at susan@sptimes.com.

From: Greg Shelley

06/10/2009

Lenders might want to try the Mercury Network it has links to Appraisers in the area of their subject property and you can view their websites for information about the appraiser you chose. This ordering method complies with the HVCC rules.

Click on this link to visit their site:

http://www.mercuryvmp.com/lender/

A personal note:

Due to the recent implementation of the Home Valuation Code of Conduct, there have been numerous so-called appraisal management services opening up their doors for business. By utilizing portals such as the Mercury Network, Appraisal Port and a few others that serve as a conduit between the appraiser and the lender you can save time and money for the borrower and receive a better quality report than using these new Appraisal Management companies that have no oversight by any regulatory agency. These companies pay the lowest fees in order to retain as much of the appraisal fee possible. The results are substandard appraisals, as the majority of good honest appraisers will not work for these low fees, as they know the scope of work required is not the same for every assignment they accept. I encourage each lender to try these aforementioned report ordering and delivery portals for their appraisal needs. I think you might like the results.