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http://www.dsnews.com/articles/ibm-to-buy-wilshire-from-boa-jumping-into-mortgage-servicing-2009-10-05

Payment option adjustable rate mortgages are about to go through major resets, sending federal and state regulators scurrying to withstand a new wave of defaults and foreclosures.

The impending changes were a major topic of conversation when the state magistrates met with Obama administration officials to discuss strategies for combating mortgage fraud.

“Payment option ARMs are about to explode,” Iowa Attorney General Tom Miller told Reuters after that meeting.

The loans – which give borrowers the option of making small interest-only payments each month, leading to an increasing principal balance – have left many homeowners underwater in their mortgages. The problem is compounded when the loans reset, meaning monthly payments must rise to begin paying down the full balance. Introductory interest rates may also reset to higher levels.

All those factors can lead to a bevy of new troubled borrowers, experts say. In Arizona – one of the states hardest hit by the mortgage crisis – 128,000 option ARMs will reset in the next year, State Attorney General Terry Goddard told Reuters. The San Francisco-based mortgage consultant Loan Performance has estimated that 469,000 option ARMs were issued in the U.S. between 2000 and 2007, when most lenders halted the practice.

That means hundreds of thousands of borrowers will be on the hook for payments of 5 to 10 times more than the usual mortgage payment, obligations that will “threaten a much greater hit to the consumer than the subprimes,” Goddard said.

One researcher’s work shows how bad the option ARM effect could be on the economy. Joseph Mason, a banking professor at Louisiana State University, estimates that 75 percent of option ARM holders made minimum payments for as many as five years, failing to refinance or buy down principal balances.

“The only ones left in the product now are those who couldn’t afford something else when they got the loan,” Mr. Mason told the New York Times. “Now all they can likely afford is the minimum payment, so they’re just buying time in a dwelling until their reset date.”

Despite positive signs of a housing recovery – increasing home prices and sales in most markets nationwide – foreclosures have been continuing to rise, even before option ARMs became an area of concern. According to the data service RealtyTrac, one in every 357 homes in the U.S. had a foreclosure filing in August.

The option ARM “time bomb” threatens to deepen the foreclosure hole, adding to inventories of abandoned or unsold homes and squeezing the industry’s fragile valuation gains.

“It’s the other shoe,” Goddard said. “I can’t say it’s waiting to drop. It’s dropping now.”

Community banks across the country continue to fold under the pressures of the nation’s economic crisis, as soured loans stack up and drain small institutions’ balance sheets.

The doors on three more regional banks – in Illinois, Minnesota, and Washington – were closed Friday by state and federal regulators, bringing the total numberof failed FDIC-insured institutions for the year to 92. That number was 25 for all of 2008, and just three in 2007. Since the infamous demise of Wall Street’s Lehman Brothers one year ago, 107 banks have gone belly up.

Corus Bank in Chicago was closed Friday by the Office of the Comptroller of the Currency. The FDIC brokered a deal with MB Financial Bank, also in Chicago, to assume Corus Bank’s approximately $6.5 billion in non-brokered deposits and take over its 11 branches.

This marks MB Financial’s third FDIC-assisted bank takeover this year. According to Mitchell Feiger, MB’s president and CEO, Corus Bank’s “attractively situated” branches on the north side of Chicago will bolster MB’s presence in the city’s northern suburbs. Just one week earlier, MB Financial increased its footprint in Chicago’s Southside with the acquisition of InBank.

MB Financial also purchased approximately $3 billion of Corus Bank’s assets. MB said in a corporate statement that these newly acquired assets consisted of Corus’ investment grade securities, as well as local consumer and small business loans. MB was quick to point that it did not buy any of the failed bank’s commercial real estate loans or REOs related to Corus’ construction lending business. These loans have been retained by the FDIC, which plans to sell them in the next 30 days in a private placement transaction.

The FDIC estimates that Corus Bank’s failure will cost the agency $1.7 billion. Corus is the sixteenth institution to go under in Illinois this year.

Brickwell Community Bank in Woodbury, Minnesota, was shuttered by state regulators. CorTrust Bank of Mitchell, South Dakota agreed to reopen Brickwell’s solitary branch office, and purchase all of the failed bank’s $63 million in deposits and $72 million in total assets.

The FDIC and CorTrust entered into a loss-share transaction on approximately $65 million of Brickwell Community’s assets. The FDIC says Brickwell’s failure will cost its deposit insurance fund $22 million. Brickwell is the third Minnesota bank to fail so far this year.

Venture Bank in Lacy also became the third bank in Washington to go under in 2009, when it was shut down by state regulators on Friday. First-Citizens Bank & Trust Company of Raleigh, North Carolina, agreed to acquire Venture’s 18 branch locations.

First-Citizens Bank & Trust Company will also take over the failed institution’s $903 million in deposits and will purchase $874 million of Venture’s $970 million in assets. The FDIC and First-Citizens entered into a loss-share transaction on approximately $715 million of Venture Bank’s assets. The FDIC estimates that the Washington bank’s failure will cost its insurance fund $298 million.

Home prices and sales levels are rebounding. Mortgage rates are stabilizing. We’re in a housing recovery, right?

Not according to Wall Street’s prognosticating Queen of Darkness, banking analyst Meredith Whitney. The ubiquitous president and founder of Meredith Whitney Advisory Group LLC told CNBC Thursday that U.S. home prices would plummet again – as much as another 25 percent – as persistent unemployment problems deepen the foreclosure crisis.

“No bank underwrote a loan with 10 percent unemployment on the horizon,” Whitney said. “I think there is no doubt that home prices will go down dramatically from here, it’s just a question of when… If you look at the drivers for unemployment, I don’t see that reversing very soon.”

But analysts who specialize in housing say Whitney is more concerned with her dark reputation than the facts in this case. The next-most pessimistic predictor, Moody’s, only projects an average decline of 10 percent in home values before the economy’s recovery is complete.

“A 25% decline from here sounds very steep,” David Blitzer, chairman of the Standard & Poors/Case-Shiller housing-price index, told the Wall Street Journal. “To say that we’re only halfway through this sounds pessimistic.”

Whitney, who currently has only one “buy” recommendation out on a bank (Goldman Sachs), has made her reputation on pessimistic forecasts. In 2007, at the beginning of the downturn, she accurately predicted that Citigroup Inc. would have to cut its dividend to stay solid. It did, Citigroup’s CEO resigned, and Whitney cultivated a reputation as Wall Street’s fearless oracle.

Two weeks ago in a phone interview with Bloomberg Television, she predicted that the number of U.S. bank failures would jump 400 percent before the fallout of bad loans was finished. “There will be over 300 bank closures,” she said. “The small-business owner on Main Street continues to see liquidity come away.”

The Journal Thursday speculated that Whitney’s housing forecast might actually help bring about the opposite effect: “It might be welcome news for potential buyers looking for a bargain,” the paper said. If so, those bargain hunters could further stimulate new-purchase levels, restoring a pricing bottom and spurring growth.

That’s why, according to another Journal columnist, “Investors should take heed as the media trumpet Ms. Whitney’s latest proclamation.”

http://www.dsnews.com/articles/lps-report-foreclosure-pipeline-remains-clogged-2009-09-07

To understand this information better, please visit this link:

Buyer's Market or Seller's Market, and what difference does the amount of inventory make?

To understand this information better, please visit this link:

Buyer's Market or Seller's Market, and what difference does the amount of inventory make?

If you're a homeowner seeing property values plummet, look to the commercial real estate market for solace. It might tell you which areas will recover fastest--and which will likely remain weak.

The Urban Land Institute recently asked 700 real estate professionals to name the best (and worst) places to invest in commercial real estate in the coming year. Those surveyed included private developers, Realtors and Real Estate Investment Trust executives. Their answers also apply to the residential market, since the single-family-home sector typically follows the economy. As wages go up and there are more jobs, more people can buy homes, pushing prices up.

The best cities in which to invest are those that are considered gateways to international investment, have vital downtowns where people can forgo cars, and don't have a glut of condos or office space.

These traits landed Seattle the No. 1 spot on the list. No city scored above a 6.15 on a scale of one to nine (one being an abysmal place to invest and nine being excellent).

Seattle is "a diversified market, has a good base of business and is becoming a 24-hour city," says Stephen Blank, senior resident fellow, finance, of the Urban Land Institute. "It's going to be in a good position to come back."

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