cold oranges freeze frozen ice

The NAR is panicking. That should tell you what you need to know. As we’ve argued, there’s no silver lining for housing in the plan to freeze foreclosures.

Their full release below:

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Thousands of first-time and move-up buyers who hoped to make a foreclosed property their new home now face uncertainty, anxiety and possibly remorse as they worry that closing on their desired property could be in jeopardy.

For many, the dream of homeownership could turn into agony if their home purchase is indefinitely delayed by a moratorium on foreclosures declared by some banks, the National Association of Realtors® said today. The moratoriums are needed, banks say, to review all of the foreclosures in their portfolios to make sure they’re in compliance with the law and that titles are clear.

NAR warned that a prolonged review process would have a damaging impact on many communities and hinder the nation’s economic recovery.

“As the leading advocate for homeownership issues, we understand that many lenders need a time-out to review their actions to ensure that homeowners are not improperly foreclosed on and that the lenders are following regulations and state laws. After that, the foreclosure process must resume quickly to return stability to families, the housing market and the economy,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates, Tucson, Ariz.

Over the past few months NAR has met with officials of top banks to discuss market issues. NAR urged banking leaders to seek resolution quickly through loan modifications and the short-sale process rather than through foreclosure. “We stand ready to help lenders develop better short-sale procedures,” Golder said.

“There are valid foreclosures that should move ahead quickly, and we shouldn’t lump them in with mortgages that are suspect. That would cause deep problems in an already fragile market and throw many families into uncertainty,” Golder said.

Golder said that she is receiving reports from Realtors® that the moratorium is already creating some anxiety among purchasers as transactions are being delayed and that some foreclosure listings are being removed from the market.

Compounding the problem is that the requirements for foreclosure vary by state, and practices to meet these requirements vary by firm. NAR is working with regulators, such as the Federal Housing Finance Agency; and encouraging them to identify and quickly address process problems.

In a letter today to the U.S Treasury Department, the U.S Department of Housing and Urban Development, and the Federal Housing Finance Agency, NAR stated the hope that banks would complete their foreclosure review expeditiously to assure that the rights of borrowers are protected and remove doubt that buyers will receive clear title to their purchase.

“NAR has long urged the lending industry to take every feasible action to keep families in their homes with a loan modification and, if that is not possible, to give them a ‘graceful exit’ through a short sale. These options are far better than a foreclosure, and nothing has driven this point home more clearly than the questions being raised about foreclosures. Lenders should place additional resources into processing loan modifications and short sales,” NAR wrote.

A year ago, NAR instituted a special short sale training program for its Realtor® members to work more closely with banks in expediting mortgages at risk by resolving them through short sales and loan modifications. More than 51,000 Realtors® have been certified in the program.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

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Original source at: Money Game | http://feedproxy.google.com/~r/TheMoneyGame/~3/2vnwyON5wFg/still-wondering-if-the-foreclosure-freeze-will-hurt-the-housing-market-ask-the-nar-2010-10

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We continue our bedside reading series started last week with with a presentation of Didier Sornette’s terrific “Critical Market Crashes” with this week’s even more entertaining, introspective and troubling “Psychology, Financial Decision Making, and Financial Crises” by Tommy Gärling and colleagues of the Universrity of Gothenburg. The volatile nature of “product markets” has long troubled thinkers, theoreticians and philosophers alike who have struggled to explain why something which should on its face be efficient, be able to experience such demoralizing and turbulently violent events as May 6, Black Monday, and other historical crashes. Gärling proposes: “In product markets with full competition, prices represent the true value of the products offered. This does however not seem to hold in stock markets where stock prices, due to excessive trading, are more volatile than they should be if reflecting the true value of the stocks. Psychological explanations include cognitive biases such as overconfidence and overoptimism, risk aversion in the face of sure gains and risk taking and loss aversion in the face of possible losses, and influences of nominal representation (the money illusion) of stock prices. If no cognitive biases (strengthened by affective influences) existed or only some actors were susceptible to such biases, individual irrationality in stock markets would possibly be eliminated. This is however not what evidence indicates.”

What follows is a fascinating inquiry into the human mind and some of its hardwired traits, and an attempt to explain not only the shock and awe at seemingly irrational market reactions, but people’s seemingly pre-programmed biases and responses to various market-induced stimuli, as well as inherent bullish and bearish outlooks that have been known to erupt into outright confrontation and outright drunken bar (and trading desk) brawls on occasion. The paper also goes into an in depth analysis of bubble formation and how this may be borne out of the human mind more so than out of monetary or fiscal largesse.

The paper’s most relevant for the current situation observation has to do with the topic of integrity and trust:

A detrimental consequence of financial crises is the loss of trust in financial institutions. Seven determinants of trust (and regaining trust) in financial institutions are discernible: competence, stability, integrity, benevolence, transparency, value congruence, and reputation.

We suggest that all those who wonder why next week ICI will report the 22nd consecutive weekly outflow from funds familiarize themselves with the list above, as currently none of the gating conditions are met.

For all those with time limitations, the paper’s summary findings, especially when juxtaposed with the writing of Cognitive Dissonance, can best be captured by the following graphic:

For everybody else, this weekend’s recommended reading is below.

“Psychology, Financial Decision Making, and Financial Crises” (pdf)

 

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