Pakistan Property & Real Estate News

Where home prices are headed next

Six trade groups representing lenders said parts of the Senate housing bill are too restrictive and will expose lenders to lawsuits.

June 17, 2008: 6:08 PM EDT

WASHINGTON (AP) -- Mortgage industry and business groups are urging lawmakers to drop pieces of a housing bill they say would be too restrictive on lenders.

Six trade groups on Tuesday told lawmakers shepherding a comprehensive package of housing legislation through Congress that the bill would impose too-strict standards on lenders, requiring them to determine what kind of loan is best for each borrower.

That standard will expose lenders to potential lawsuits, and force them "to reduce the number and type of products to consumers," according to a letter written by the Mortgage Bankers Association, U.S. Chamber of Commerce and other groups to Sens. Christopher Dodd, D-Conn., and Richard Shelby, R-Ala., the two senior members of the Senate Banking Committee.

The letter also criticized a portion of the bill that creates a nationwide licensing system for mortgage brokers and loan officers.

The groups say federal regulators should oversee the system, rather than the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, which have been putting together a national licensing system since 2004.

The industry groups expressed support for more prominent pieces of the housing package, including a new program under which the government will help refinance around 400,000 new loans for struggling homeowners, and tighter regulation of government-sponsored mortgage finance companies Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500).

The bill also changes the limit on the size of loans that can be purchased by Fannie and Freddie to $625,000, up from their traditional limit of $417,000. The limit has temporarily been raised to as high as $729,750 in expensive parts of the country as a result of the economic stimulus package signed by President Bush in February.

The banking panel passed an earlier version of the bill last month, and the full Senate was expected to vote on it as soon as this week.

Dodd said in a statement that the bill "takes important steps toward restoring safety and stability to the housing markets."

A Dodd spokeswoman wasn't immediately able to comment on the industry's criticism. A Shelby spokesman declined to comment.

Also signing the letter were the American Financial Services Association, the Consumer Bankers Association, the Consumer Mortgage Coalition and the Financial Services Roundtable.

Equity in Americans’ homes falls to historic low

Drops to 46.2 percent in first quarter — level not seen since end of WWII

NEW YORK - The equity Americans have in their most important asset — their homes — has dropped to its lowest level since the end of World War II.

Homeowners’ portion of equity slipped to 46.2 percent in the first quarter from a revised 47.5 percent in the previous quarter. That was the fifth quarter in a row below the 50 percent mark, the Federal Reserve said Thursday.

The total dollar value of equity also fell for the fourth straight quarter to $9.12 trillion from $9.52 trillion in the fourth quarter, while Americans’ total mortgage debt rose to $10.6 trillion from $10.53 trillion.

A homeowner’s equity is the market value of a property minus the mortgage debt. And homeowners’ percentage of equity has declined steadily even as home values surged during the housing boom due to a jump in cash-out refinancing, home equity loans and an increase in 100 percent financing.

Experts expect equity to decline further as falling home prices erode the value of Americans’ largest asset, dragging more homeowners “upside down” on their mortgages.

At the end of March, nearly 8.5 million homeowners had negative or no equity in their homes, representing more than 16 percent of all homeowners with a mortgage, according to Moody’s Economy.com Chief Economist Mark Zandi. By June 2009, he estimates that will increase to 12.2 million, or almost one out of every four homeowners with a mortgage.

But to put that number in perspective, one out of every three homeowners own their properties free and clear, with no mortgage at all.

Still, Zandi said, “For most, their home is their key asset. If they have no equity in their home, likely their net worth is negative too. Their entire balance sheet will be underwater.”

The report also showed that Americans’ total net worth dropped to $55.97 trillion in the first quarter from $57.67 trillion. Zandi expects prices to fall 24 percent from peak to trough. Last week, Standard & Poor’s/Case-Shiller said its national home price index fell about 14 percent in the first quarter compared with a year earlier, the lowest since its inception in 1988.

Prices nationwide are at levels not seen since the third quarter of 2004.

Homeowners with no or negative equity are more likely to fall behind on their mortgage payments or, in frustration, mail the keys to the lender and walk away from their mortgages, a phenomenon more lenders are seeing. This will only increase foreclosures, which have been surging the last two years, and further exacerbate the housing downturn.

LDA initiates land audit of approved housing societies

LAHORE - The Lahore Development Authority (LDA) has initiated land audit of all the approved housing schemes after finding massive irregularities including sale of plots allocated for educational institutions, hospitals, parks and graveyards. The authority has also launched an 'action plan' to identify illegal housing schemes in the City.

The LDA has approved more than 200 housing schemes including two new housing schemes recently launched at Raiwind Road and Ferozepur Road. It is learnt that around 350 illegal housing schemes have sprung up during the last five years. Most of them are located in Nishtar Town and Shalimar Town. The metropolitan planning wing of LDA has already notified a list of 116 private housing schemes that had been launched without getting approval from the competent authority as well as fulfilling other requirements. The LDA town municipal squad will publish the list of all illegal housing societies in newspapers and will fine societies violating the Private Housing Schemes Regulation Act 2005. The authority had advised people to avoid entering into any sale and purchase of plots in these housing schemes.

LDA Director General Arfan Ali has formed a special team consisting of LDA officials from the metropolitan planning, town planning and revenue sections to conduct land audit of the schemes. The team will present its preliminary report within two weeks. The LDA will also launch a website to keep the people informed about genuine and bogus housing schemes and societies. Sources revealed the director general launched both the initiatives after receiving complaints that development work in a few housing schemes approved by the LDA was not being carried out according to the schedule.

He had also received complaints that the plots reserved for public use including for parks, hospitals, schools and graveyards were being used for commercial and residential purposes. He was also informed that a number of plots of two new housing schemes reserved for public use were being sold out in connivance with the LDA officials, the sources added.

Insiders disclosed the DG showed great concern over said irregularities in the first scheme being established on 25,000 kanals on the left side of Lahore-Raiwind Road and the second scheme spanned over Ferozepur Road over an area of 200,000 kanals, which was almost eight times bigger than the Johar Town Housing Scheme. Both the schemes consisting of 210,000 plots would have 36 per cent of three-marla plots for people with low income.

The sources said that some portion of land for colleges for boys and girls covering an area of over 100 kanals, and two 100-bedded hospitals and two community centres had been encroached or sold out illegally. The DG has directed the team to complete its inquiry on priority basis and present it to him.

LDA official seeking anonymity said that the people involved in land grabbing and selling of plots for public use are well connected and resourceful. They enjoy the support of all those who can come to their rescue. He said that police help them to get the physical possession of the property, revenue officers help them in getting the forged documents, lawyers help them in retaining the legal possession of property and political support to control the administrative machinery to their advantage.

He said that in the presence of the Illegal Dispossession Act, 2005 and remedies under the Specific Relief Act, 1877 it is a shame that the most of the genuine owners and buyers of property had to lose their property to these land grabbers.