The index of leading indicators increased by 0.6 percent in July, the fourth consecutive increase of the index. The index is designed to predict economic activity in the next 3 to 6 months.

With the continued rise of the index, analysts contend that the recession is bottoming out and that economic growth will soon begin. The gross domestic product, which has declined for 4 consecutive quarters, will likely grow this third quarter, according to Ken Goldstein, top economist of the Conference Board.

Economists set the value of the index by evaluating employment data, stock prices, GDP, interest rates, consumer confidence and other major factors that affect economic trends.

Wells Fargo economic analyst Tim Quinlan contended that the downturn ended in June based on the principles being applied by the National Bureau of Economic Research. He explained that the bureau, which is the agency officially calling the start and end of economic conditions, has historically set the date of the end of recessions after consecutive months of increases in the major economic indicators.

Economist Goldstein added that even when the recession is officially ended, consumers and businesses will still feel the effects and will not feel that the downturn has ended.

Another economist, Jennifer Lee of BMO Capital Markets, said the country probably experienced economic growth early in the quarter when Cash for Clunkers program pushed auto sales to higher levels.

The board said that 6 of the 10 major economic indicators that consist the Conference Board index rose in July, including stock prices and employment figures.

Among the 10 indicators, the biggest increase occurred in interest rate spread. This refers to the difference between federal funds rates and returns on ten-year Treasury securities. Federal funds rates are the rates charged by banks for loans they provide to each other. If the interest spread is higher, it is a positive sign because it means investors have the capability to lend for longer periods.

The Federal Reserve has been trying to keep the federal funds rate at near zero to help stabilize the market.

The negative factors are unemployment, delinquencies and foreclosures. Based on a report from the Mortgage Bankers Association, over 13 percent of homeowners nationwide are in default or in foreclosure largely because of unemployment.

Indicators Rose in July despite Foreclosures for Sale is a post from: Foreclosure Homes Investing

According to industry analysts, optimistic underwriting had allowed investors who are backed with private equity, to purchase rental buildings at inflated prices under highly leveraged deals. Analysts said that in many cases, landlords have unrealistic expectations of increasing rents and about 70,000 rental units are facing the danger of foreclosures.

Industry analysts said that the current residential market situation is pressuring city government officials to look for ways to stem the tide of foreclosed apartment buildings that has been threatening neighborhoods in the city since the landlord abandonments in the 1970s.

Banking experts said that the problem facing many condominium landlords is a looming disaster, adding that it is not only the renters who are suffering but also the buildings which go into deterioration, as well as neighborhoods.

Market data showed that there are 3,200 units in several affordable housing complexes that are in some kind of foreclosure proceedings or have been foreclosed. An analysis by the Urban Homesteading Assistance Board showed that 11,100 properties are in danger of going into foreclosure.

The advocacy group pointed out several reasons why many rental buildings are in danger of foreclosure, including the high debt burden and depletion of reserves. Additionally, the group noted that about 55,000 units are overleveraged and in danger of foreclosures as their loans are nearing maturity.

Industry analysts said that the estimated debt burden on city properties reached $6 billion. However, it is not sure what portion of the total amount is backed by the income of rental buildings.

Among distressed properties in foreclosure are 10 buildings in Bronx consisting of 550 units purchased in 2007 by Milbank Real Estate.

Meanwhile, results of the Association for Neighborhood and Housing Development’s study showed that owners of 10 multifamily affordable houses in New York City are generating an average income of 55 centavos for each dollar of debt.

On the other hand, Deutsche Bank predicted that refinancing crisis in the commercial real estate market will peak to an unprecedented level by 2013 as mortgage loans taken out between 2005 and 2007 mature and will not qualify for refinancing.

Rent-Regulated Buildings May End Up as Foreclosed Condos is a post from: Foreclosure Homes Investing

It was the third consecutive yearly increase, as waves of repo houses for sale battered the housing market and led to a recession that caused business closures, job losses and increased consumer debts.

Bankrupty cases filed by businesses increased by 63 percent while bankruptcy cases filed by individuals increased by 34 percent.

Carey Ebert, head of the National Association of Consumer Bankruptcy Attorneys and partner at Texas-based Ebert Law Offices, said that the increase in bankruptcy filings reflects the overall condition of the U.S. economy. He added that bankruptcies increased during the past months even in areas that previously were doing well because of job losses and continued foreclosures.

According to the Administrative Office, the increase in filings occurred in all bankruptcy types. Filings for Chapter 7, the most common filing for individuals, increased by 47 percent. Filings for Chapter 11, the most common filing for businesses, increased by a staggering 91 percent.

In the second quarter of this year, bankruptcy filings increased to 381,000, a significant jump from the 330,000 filings in the first quarter and from the 301,000 filings in the last quarter of 2008.

Total bankruptcy filings in the second quarter marked the highest level reached in a quarter since 2005, the year new regulations took effect to make it more difficult for individuals and businesses to get court approval for bankruptcy.

The jump in bankruptcy filings could resurrect bankruptcy revamp proposals, including the proposal to authorize judges to modify the terms of home loans to make them more affordable. This particular proposal was rejected by senators earlier this year after the financial services industry used all its resources to force senators to defeat the proposal.

According to testimonies presented in Congress last month, the ratio of bankruptcy filings to judgeship has risen to 60 percent in the past few years. Congress is now studying a proposal made by the Judicial Conference of the U.S. to make permanent 22 temporary judgeships, add 13 permanent bankruptcy judgeships, and extend 2 temporary judgeships for 5 years.

Additionally, District Judge Barbara Lynn, chairman of the Judicial Conference Committee on the Administration of the Bankruptcy System, said that bankruptcy filings now are more complex than previous filings, such as those filed by Chrysler and Circuit City.

Bankruptcies Rose as Job Losses, Foreclosure for Sale Rose is a post from: Foreclosure Homes Investing

Liebowitz cited the finding by the Mortgage Bankers Association that 51 percent of all foreclosure home units had prime loans and not subprime loans as widely assumed. MBA also reported that the pace of foreclosure for prime loans increased by 488 percent, much higher than the pace of foreclosure for subprime loans, which is 200 percent.

According to MBA, the percentage data is based on mortgages that went into foreclosure since the last months of 2006 when mortgage defaults stepped up and put over 4.3 million houses into foreclosure home listings.

The other widely assumed cause of the foreclosure wave was lenders’ failure to screen borrowers. Liebowitz also argued against this assumption by citing his study of loan-level figures provided by McDash Analytics. He said that the data is the largest source of loan-level figures available as it covers over 30 million mortgages.

Liebowitz said he studied the equity positions of homeowners and compared the equity factor to other factors cited as foreclosure causes and found that negative equity was the major cause of foreclosures.

According to Liebowitz’s analysis of data in over 30 million mortgages in the last six months of 2008, a total of 285,305 of mortgages which went into foreclosure had negative equity. The next biggest factor was unemployment, which caused a total of 183,447 foreclosure home units.

Of houses owned by borrowers who made low down payments – less than 3 percent of loan value – a total of 130,014 went to foreclosure home listings.

The other large factor was low FICO score – 620 or lower – putting 148,697 homes into foreclosure listings.

Liebowitz also said that the adjustment of mortgage rates did not significantly increase foreclosure home listings because only 8 percent of mortgages which went into foreclosure increased by more than 4 percentage points.

Moreover, the economist said that the finding is significant especially for government officials crafting policies to solve the foreclosure problem.

Among his recommendations are the implementation of stricter underwriting standards and requirement for bigger down payments. He reiterated that borrowers with substantial down payments would have more motivation to prevent their homes from getting added to foreclosure home listings.

No Down Payment Led to Large Foreclosure Home Numbers is a post from: Foreclosure Homes Investing

Many borrowers chose option ARMs because they were given very low rates for the first months of the loans. Typically, they were given four monthly payment options to choose from: interest-only payment, pre-determined minimum payment, fully amortizing payment based on a 15-year term, and fully amortizing payment based on a 30-payment term.

But to attract more borrowers, lenders emphasized the interest-only payment and the minimum-payment options without warning the borrowers about the consequences of very low initial monthly payments.

What made the situation worse is that many borrowers upgraded their original home purchase plans to higher-priced and larger homes because of the low initial monthly payments. Many of them are saying now that they were made to believe that they could always refinance later to cover the rate adjustments to maintain their monthly payments to affordable levels.

Now, most of these borrowers fear the inevitable conversion of their dwellings into foreclosure homes. Based on mortgage data, more than one million option ARM loans are set to readjust to higher rates next year and in the following years.

The abruptness of the jump is illustrated by the estimate that a current monthly payment of $98 would readjust to a monthly payment of $3,500 in the next few years, causing another big wave of foreclosure homes.

Susan Wachter, a real estate finance professor at the Wharton School of the University of Pennsylvania, said option ARMs will push up the number of foreclosure homes and will undermine any recovery the housing market has achieved. She said many homeowners will either surrender their homes to the banks or just let them become foreclosure homes.

Based on mortgage finance data, the readjustment of ARMs will worsen the situation of financially troubled California. The state comprised around 58 percent of all ARMs taken out from 2004 to 2008. Around 75 percent of ARMs will readjust next year and in 2011, with August 2011 predicted as the peak readjustment month with around 54,000 home loans readjusting to higher rates.

For borrowers who made very low monthly payments and allowed unpaid balances to keep increasing their loan principal, they have to start now in finding effective interventions to prevent their houses from becoming foreclosure homes.

Over $750 Billion ARMs to Bring About More Foreclosure Homes is a post from: Foreclosure Homes Investing

This year, as 20 of the state’s 95 counties are undertaking home reappraisals, many homeowners have been asking the basis of their reappraisals. In counties like Loudon, Rhea, Bradley, Hamilton and Van Buren, homeowners are wondering why their residential properties are getting valuation increases by 30 percent or higher.

A homeowner in Spring City has claimed that the value of his property has increased by almost 79 percent. He argued that the valuation is perfect if he can sell it or refinance it at that price, but he could not. He is frustrated that the appraisers are ignoring the loss of home values all around because of the bargain prices of foreclosed homes.

But Julene Purser, property assessor of Rhea, insisted that the reappraisals were based on land sales in 2008, when land values stayed strong despite a significant decrease in sales.

Many homeowners are confused because all they hear are steep price home declines, bargain foreclosed homes, deterioration of home values, underwater loans, rejection of refinancing because of low valuations and walk-outs from mortgages because of low house values, and yet their houses are valued differently just to raise tax revenues.

In response to the taxpayers’ complaints, Tennessee officials explained that some counties in Tennessee did not experience the effects of foreclosed homes as severely as in other counties.

According to Tennessee tax assessment law, county legislative bodies must vote to use new tax rates when their counties are up for reappraisal. They must base their real estate tax rate adjustments on the certified tax rate table issued by the state.

David Sherrill, director of real estate assessments, explained that the tax rate table would make tax rate revenue neutral. He said that if residential property values increase, tax rates should decrease.

State official Kelsie Jones told homeowners that they are given 45 days to submit their appeals after they receive their reappraisal change notices from their counties.

A responsible resident of Van Buren County told county officials that he understands why home values should be adjusted and why revenue should be increased, but he explained that he cannot accept an increase of nearly 40 percent in just three years, especially in a recession year and in a time of thousands of bargain-priced foreclosed homes.

High Home Valuation in Tennessee despite Foreclosed Homes is a post from: Foreclosure Homes Investing

President Obama said that his administration will release its recommendations concerning Freddie Mac and Fannie Mae next year, after putting in place a better system to regulate the financial industry. The financial sector is largely blamed for the flood of repossessed houses that battered the housing market and ultimately the national economy.

The president said that the Department of Housing and Urban Development and the Treasury Department will gather proposals from the citizenry and other government departments concerning the future roles of Freddie Mac, Fannie Mae and the entire Federal Home Loan Bank system.

Although Freddie Mac and Fannie Mae incurred huge losses and had to be rescued with government funds last year, the two government-sponsored enterprises helped in containing the problem of large numbers of repossessed houses.

When Federal Reserve bought $500 billion mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae, mortgage rates started to drop to their lowest levels in many years, allowing many distressed homeowners to refinance their costly mortgage loans to prevent them from becoming repossessed houses.

The Fed’s program of buying securities to maintain mortgage rates at low levels was enlarged in March when the Fed increased its mortgages, which are backed by securities, acquisition to $1.25 trillion.

The president said that it needs to keep Fannie Mae and Freddie Mac under government control for a time because investors are not acquiring mortgages, which are backed by securities, that are not guaranteed by the two GSEs.

Ginnie Mae, on the other hand, has always been government owned. It was created to back mortgage-backed securities guaranteed by the Department of Veterans Affairs and the Federal Housing Administration.

Among the options being considered by the Obama administration for Freddie Mac and Fannie Mae is their return to their former status as private entities earning profits in the home ownership sector, liquidation of their assets, and conversion into corporations that will insure covered bonds.

The two GSEs are also being considered for operation similar to the public utility system, with the federal government controlling their profit margins and establishing guarantee limits.

Lastly, the GSEs are also being considered for incorporation into another agency, such as the HUD. Whichever of these options is chosen, analysts hope that they will still help contribute to the mitigation of the effects of the avalanche of repossessed houses.

Fannie, Freddie: Roles in Containing Repossessed Houses is a post from: Foreclosure Homes Investing

The country’s largest bank, Bank of America Corp., said that its default rate in May has soared to 12.5 percent, a significant increase from its 10.47 percent default rate in April. This rate represents consumer loans that the banking firm no longer expects to get paid.

Banking analysts said that Bank of America has soaring credit card delinquency rates because it had launched aggressive expansion efforts during the growth years and accepted many subprime borrowers, the same segment that had the most number of foreclosures in the first months of the housing crisis.

Meanwhile, American Express Co., the card issuer that comprises almost 25 percent of all credit card sales in the country, reported its default rate increased to 10.4 percent in May, compared to its 9.9 percent level in April.

American Express also reported that it holds large numbers of credit card accounts in Florida and California, which are among the states with the biggest numbers of foreclosures in May and in the previous months.

Citigroup, the largest provider of MasterCard credit cards, reported that its credit card chargeoffs increased in May to 10.5 percent from its 10.21 percent level in April.

Walter Todd, an executive at Greenwood Capital Associates, said that credit chargeoffs reached record levels in May across the credit card industry.

Based on the nation’s credit card history, credit card defaults typically follow increases in the unemployment rate. In May, the nationwide unemployment rate jumped to 9.4 percent, the highest level it has reached in 26 years. Economists expect the rate to reach 10 percent by December this year.

Banking analysts contend that if credit card defaults exceed the 10 percent level this year, consumer loan losses by banks could surpass $70 billion this year.

Financial analysts said that credit quality will continue to be a concern to the credit card industry as foreclosures and the unemployment rate continue to rise.

JPMorgan Chase, the second largest bank and biggest provider of Visa credit cards, reported that its default rate increased in May to 8.36 percent from its 8.07 percent level in April. The investment bank, however, remains the best performing credit card issuer in the country despite absorbing part of the effects of foreclosures.

More Credit Card Defaults in States Hit Hard by Foreclosures is a post from: Foreclosure Homes Investing

Federal Reserve officials believe they can reach more American homeowners if they present their public service ads in movie theaters, so they decided to commission a 30-second ad to warn moviegoers about the prevalence of fraudulent foreclosure prevention companies and other scammers.

Starting this weekend through April 17, the Fed ads will air in 18 theaters in 9 states with the largest numbers of foreclosure properties, namely California, Florida, Nevada, Arizona, Michigan, Ohio, Maryland, Georgia and Virginia.

The tagline of the Fed ads tells moviegoers to get help, and then it is followed by instructions to go to the web site of the Federal Reserve and read 5 tips to avoid foreclosure scams.

Other federal agencies have also been launching efforts to prevent distressed homeowners from approaching foreclosure properties scammers and then paying them upfront fees of several thousands.

The Federal Trade Commission has been working with Departments of Justice, Treasury and Housing and Urban Development to launch initiatives that would prevent shady foreclosure rescue companies from victimizing homeowners worried about their houses becoming foreclosure properties.

FTC said it has sent letters to 71 foreclosure rescue companies warning them about their deceptive operations and marketing schemes. FTC said it had reviewed the printed and online ads of these 71 companies and found them to be promising loan modifications seem too good to be true, such as giving 99 percent guarantees to prospective customers that their houses will never become foreclosure properties if they sign up for their services.

In 2008, the FTC also filed 11 legal actions against scammers who were the subjects of complaints by borrowers whose homes have been added to list of repo properties.

Similarly, U.S. Attorney General Eric Holder has also released a statement warning unscrupulous operators that the Department of Justice will pursue them and punish them if they worsen the situations of homeowners already battered by foreclosure properties.

Many state attorneys have also launched legal efforts to protect their constituents. In Illinois, Attorney General Lisa Madigan has sued two operations victimizing mortgage borrowers.

Distressed homeowners are advised to call 877-483-1515 or visit the HUD website www.hud.gov. The HUD service refers homeowners to HUD-certified counselors in their local communities that provide foreclosure prevention counseling services for free.

Warnings on Foreclosure Properties in Movie Theaters is a post from: Foreclosure Homes Investing

The company is blaming the increase in unemployment and house foreclosures rates on its losses and the decline of its revenue by about 44 percent or $593.1 million.

According to RealtyTrac, a company that collects and compiles foreclosure figures from more than 2,200 counties in the country, the nationwide foreclosed homes activity jumped by 6 percent in February of this year and 30 percent over the same month last year.

This increase in foreclosure rates occurred despite of moratoriums on foreclosed homes announced by several banks. And coupled with unemployment, home sales declined to a record level which affected home builders, particularly Lennar.

Despite the increase in February and March home sales experienced by Lennar, it still did not negate the fact that the company incurred $155.9 million loss during the first quarter.

Lennar Chief Executive Officer Stuart Miller said that the February and March sales increase may be a sign that the housing market is waking up.

However, taking into consideration the increase in foreclosed homes rate in February, Miller cautioned that it is still too early to tell whether the housing market is making a move towards recovery.

He added that the company is not expecting material improvement in the near future.

He pointed out that there may be indicators that the housing market is starting to stabilize, but it is too early to tell if they will become a trend.

The company’s new orders slipped by almost 28 percent while its completed home sales fell by 40 percent in the first quarter.

He cited rising unemployment and foreclosed homes rate, weakening consumer confidence and economic recession as factors contributing to the company’s poor sales performance.

On a positive note, the new home orders decline experienced by Lennar in the first quarter was smaller compared to the 46 percent drop it incurred in the last quarter of 2008.

Adjudged by the “Builder” magazine as the fourth largest home building company in 2008, Lennar has been trying to dispose its unsold homes. It is offering a fixed-rate mortgage of 3.6 percent on some of its unsold homes.

Home Builder Sales Hurt by Unemployment, Foreclosed Homes is a post from: Foreclosure Homes Investing