Matt Grohe CRS, GRI, ABR

If you're not familar with LPS, you should be. LPS stands for Lender Processing Services. This company according to its website "is the nation's leading provider of mortgage processing services, settlement services, mortgage performance analytics and default solutions." In other words, these folks are a go to source for information about loans and lending in America, and what their data shows is troubling indeed.

Here are just a few disconcerting facts from LPS's Mortgage Monitor for June: total mortgage delinquencies rose to 8.49% in May (a record), the year over year foreclosure increase as of May was 88.3%, Jumbo Prime, Option ARM , and Non-Agency conforming Prime loans continue to experience the highest defaults which have been accelerating the past six months, foreclosure starts in May 4.3% to the second highest level on record, and "almost no borrowes with credit scores below 620 are being awrded loans."

A few bright points were that: Iowa was one of the states with the lowest foreclosures starts, first payment defaults have fallen significantly, loan originations have been improving.

If what LPS says is true, continued deterioration in loans and rising foreclosures will keep a tight lid on home price appreciation in many markets across the US. This is bad news for sellers, but cause for optimism among sidelined buyers working on their credit who can expect to see deals continue for the near term.

We've heard a lot in the press about "signs" of a recovery and "signs" of a bottom in some arcane report or index. But from what LPS presents in its comprehensive review of US mortgages, the bloom will likely fall of the rose before the real recovery blosoms. But again, if you're a buyer in most parts of the country you can probably rest assured that there's still a deal out there for you.

The Home Valuation Code of Conduct,like most rules or codes, started with the best intentions. It identified that sometimes 3rd parties had too much influence on appraisals that affected the value and the lendor-investor's security, and by extention the wealth and stability of the nation and the world. The Code set out to fix these transgression and create an arms length environment in the selection of appraisers performance of appraisals.

Well, like with many rules and codes, the cure is sometimes worse than the illness. Now appraisals are just plain taking too long and seem to be slowing the recovery in housing that the world needs to prime the engine of recovery. NAR has identied that this is a problem and is working in Washington to rectify the situation.

Here's and excerpt of an email sent to NAR members by Charles McMillan 2009 NAR President:

"During the past two months, we have heard from many of you regarding problems with appraisals that are causing deals to be delayed or canceled altogether. I assure you that we on the NAR Leadership Team are experiencing the same problems in our businesses. In fact, VP & Liaison to Committees Steve Brown recently shared his experiences in Ohio on the Voices of Real Estate blog.
http://narblog1.realtors.org/mvtype/president/2009/06/all_is_not_quiet_on_the_midwes.html

Let me update you on what NAR is doing to resolve these problems quickly.

On Monday, June 29th, I will be in New York to meet with the Deputy Attorney General and his staff who worked directly on the Home Valuation Code of Conduct. I plan to share our concerns, as well as your stories, and ask for their assistance in resolving any problems related to the HVCC.

On Tuesday, June 30th, I will travel to Washington, D.C., to meet with the Director of the Federal Housing Finance Agency to discuss ways we can work with Fannie Mae, Freddie Mac and lenders to ensure that appraisals are accurate."

Let's all keep our fingers crossed and hope Charles enjoys some success with these intitiatives. We as agents are on the frontlines of this dilemma and see the impact the Code has wrought firsthand. I applaud the government for trying to rectify the problem of shoddy appraisals but if the solution is too severe then the goverment should take a fresh look at the ultimate aim and consider whether or not there's a better way to go about it.

As spring turns slowly to summer here the real estate market has begun to show some signs of an uptick. According to Des Moines Area Association of Realtors data as reported in the June 11th Des Moines Register article "Des Moines Home Sales Rise 21% in May" sales are springing back to life.

The 21% rise as reported in the headline refers to a 21% increase in May unit sales over April's abysmal performance. Sales still lagged last May by -4% according to DMAAR, but the sales prices leaped 23% from April, according to the data presented by the Register's Donnelle Eller.

The Register quoted Realtor board sources that attributed the strong showing to a combination of low interest rates and the $8,000 tax credit. I'd say it's a pretty safe bet that they're right about that as job losses and business closures have continued to mount locally, which would probably have pulled sales down without some historically significant occurrences such as those mentioned. Tax refunds in late April probably added a little spice to the mix as well, as there were some pretty good tax breaks in there for lots of folks last year.

One curious note from the article was, quoting: "Homes were on the market an average of 108 days last month, six days more than May 2008 and 13 more days than in April." Although more homes sold and values were higher, homes are staying on the market longer as evidenced by the data. So if you're a listing agent and you've got some listings that seem to be getting market worn, take heart, you are not alone.

Hopefully May's strong showing will portend a good summer of sales for the area, although March was a hectic month that led to a really soft April. Sustaining a trend has been something the market seems to have been unable to do very effectively for the past eighteen months. I think were all hoping around here that sales will finally start to gain momentum, but you'll have to forgive me however if I don't jump on the bandwagon just yet. I'm still out planting as many signs as I can and not resting on any laurels, real or preceived.

Once a year and for three days, bidders come from around the country to bid on delinquent tax debt of Polk County's citizens. I have never really been able to understand why our adjoining counties of Dallas, Warren, Jasper and Madison all by state law have to have their sales on the same days, as it seems like they could get more interest if they could choose a period other than that which Polk County sells theirs, but I'm sure there's wisdom behind such things.

According to The Des Moines Register's June 3rd article Homes on Overdue Tax List Lure Buyers to Des Moines, the number of parcels on the delinquent roll is up 890% from 672 last year to 5,984 this year. But that's OK according to our Treasurer, Mary Maloney, quoted in the piece, because that's "only 3.5% of all the county's tax collections." Maloney expects "a record tax sale."

I surmise then that the corollary is then a record number of real people are struggling to pay their taxes. These taxes, when sold to investors at the sale, generate 2% interest per month,(which can be bid down to 1% interest if there are multiple bidders) and interest accrues monthly. If the taxes aren't redeemed by the defaultor, the holder, who has to buy all subsequent taxes, can force a sale of the property which wipes out all other liens. Yikes! So what happens is that banks end up buying them in a lot of cases so their security doesn't get liquidated.

Once again, The Register points out that it's worse in Florida and California, which is likely small consolation for those facing default and 2% interest here in Polk County.

It's spring and real estate activity is picking up. From all the action one would think a lot more was going on, but the daily news reflects a different reality.

On Thursday May 28th the Des Moines Register reported in the article "Loan Troubles Smack Iowa Banks" that one third of Iowa's banks reported nonperforming loans exceeded 2 percent or more of their loan portfolios, a level not reached in more than 15 years. Apparently though we are faring better than the national average of 3.72% non performing loans. However, in the same article, Tom Gronstal Iowa's banking superintendent warned "I would expect to see further deterioration of loan performance," citing rising commercial loan defaults as the reason.

The same day NAR stats showed that Midwest home sales fell 10% in April 2009 as compared to the year before, as did median values. In comparison the local Des Moines Area Association of Realtors data showed Des Moines fared worse than the Midwest as a whole when it reported April stats that showed Des Moines unit sales fell 25% year on year and that the median home price slid 13% to $150,630.

A follow on story in Friday's Des Moines Register "Foreclosure rate in Iowa Rises as lost Jobs Take Toll" declared that the foreclosure rate has reached a one year high at 2.34 of all loans, as reported by the Mortgage Bankers Association. The article went on to report that although Iowa's foreclosure rate puts it in 30th place nationally, foreclosures having been rising since 2006 and that what started as a sub-prime loan problem has now blossomed into a crisis that is affecting prime borrowers who have faced job losses. The article gave a statistic claiming that 5% of all prime loans in the state were delinquent, though still trailing national prime defaults of 8.02%

On Friday I overheard two veteran, 20+ year, agents talking outside my office, the conversation went like this, "How's it goin?" "Busy" "yeah me too" "Closin anything?" "Not really, you?" "Yeah me neither, $%#&@* banks" "yeah" "It's like a I get to do all the work but I just don't get the paycheck" (laughter) "yeah exactly"

The past month has also brought a huge wave of personal bankruptcies and some high profile contractors, agents and home builders going under. This is anecdotal on my part but it seems that the bankruptcies have been getting larger and affecting traditionally wealthier homes in areas with higher median home values.

I feel very fortunate for the closings and I have coming, for having been able to work with some pre-approved buyers and for having a diverse bunch of well priced listings to offer. It's tough to read the bad news about so many people having a tough time of it. It affects us all through lost tax revenues, business closings, urban blight and general social malaise.

It makes me appreciate everything I've been blessed all that much more. A weekend trip just taken to Hannibal, MO with my wife and three children was long overdue. All this stuff my brokers, veteran agents and CRS instructors and others in the know have been saying for years about making sure I take enough time for myself and give enough time to my loved ones seems more and more sagacious with each passing day, and with each days newspaper on my doorstep.