It seems that following developments in the mortgage and housing industries is like riding an old wooden rollercoaster. There are dramatic spikes followed by steep climbs, and just when you think the ride is over, the structure creaks and the car lurches forward for another lap. Midway through the last week of June, the news seems to be following that same trend.
First, the Wall Street Journal reported that pending home sales rose in the month of May. Based on numbers released by the National Association of Realtors, the “seasonally adjusted index for pending sales of existing homes increased 8.2% on a monthly basis to a reading of 88.8″ and it is “the strongest monthly gain since last November.” Add to this the fact that the May 2011 rate is 13.4% above that of the same time one year ago, and you have some very promising news.
It is hoped that with the rise of pending sales, the median home price will stabilize and then increase. However, economists and industry experts are receiving the good news with caution as “the housing market is a troublesome part of the economy.” The one remaining threat is the large number of foreclosures and the still yet-to-be-resolved processing crisis.
This brings us to the first dip in the day’s news; but, in the grand scheme of things, it is a small one.
In another boost to the mortgage industry and the overall housing market, Reuters shows that the number of new foreclosures fell and the number of mortgages where borrowers were current on payments rose. In the first quarter of this year, “88.6% of U.S. mortgages were current, up from 87.6% in the previous quarter. New foreclosures fell 11.3% to 312,404 from the previous quarter.” With this good news comes more caution because of the number of foreclosures remaining on lenders’ books and their legal ability to clear those books.
Adding to legal worries is the news (as a result of closer examination of foreclosure procedures and documents) of a sizeable increase in reports of mortgage fraud. According to the Associated Press, via the Washington Post, “the Financial Crimes Enforcement Network [FinCEN] said Tuesday that it received 25,485 tips about possible mortgage fraud in the first three months of the year, up 31% from the 19,420 that it received in the same period a year ago.” If these reports of fraud are found to be legitimate, banks will be forced to buy back the loans as part of an agreement made to protect insurers such as Fannie Mae and Freddie Mac. Experts are again looking at this situation with caution, especially since adding loans back onto lenders’ books could do more to stall a recovery and further suppress home prices.
As the news continues that sales are up, foreclosures are down, fraud may be up, and lenders and regulators are still sorting out the mess of the “foreclosure meltdown,” so does the wild ride for industry professionals and observers, alike. Continue to hold on tightly.