California Joins Other States in Suing S&P

California Joins Other States in Suing S&P
The Justice Department asked a judge to spurn efforts by Standard & Poor’s Ratings Services to move 17 state lawsuits against the firm for allegedly shoddy ratings into federal court.

In a 12-page court filing Friday, U.S. prosecutors asked a federal-court judge in Connecticut to rule that the cases should be decided in state courts.

“There is no necessary federal component to the state-law claims, and hence no basis for S&P’s assertion,” the Justice Department said in the filing.

The New York rating firm, a unit of McGraw-Hill Cos., MHP -0.64% is trying to “create a federal component where none exists,” U.S. prosecutors added in the filing.

Eighteen state attorneys general have filed suits in various state courts alleging that S&P violated state consumer-protection laws by misrepresenting its ratings as independent and objective.

S&P has repeatedly denied wrongdoing. The Wall Street Journal reported earlier this week that lawyers representing the rating firm are seeking to move the lawsuits to federal court and combine them into a single case.

Merging the cases into a single lawsuit in federal court could help S&P limit its legal exposure by streamlining the potential damage claims against the firm.

In recent court filings from Connecticut to Colorado, lawyers for S&P contend that 17 of the 18 state-court suits should be removed from those courts because rating firms are regulated under U.S. securities laws. A California case isn’t part of the dispute.

The Justice Department said Friday that a 2006 federal law doesn’t prevent states from filing lawsuits in state courts for alleged violations of state law. State attorneys general made similar arguments in court filings this week.

Friday’s filing was made in a U.S. District Court in Connecticut because Justice Department officials have worked closely with the state’s attorney general, who sued S&P for alleged violations of state consumer-protection laws and unfair trade practices.

It isn’t clear when the judge will decide the jurisdictional dispute. The ruling will apply narrowly to the Connecticut case but is likely to be weighed by other judges who must decide on similar requests by S&P in other states.

On Feb. 4, the Justice Department alleged in a civil suit that S&P issued fraudulent ratings before the financial crisis that triggered losses to federally insured banks and credit-unions. U.S. officials are seeking more than $5 billion in damages.

Some state attorneys general flanked U.S. Attorney General Eric Holder at a news conference in Washington the next day. Potential damages in the state lawsuits could exceed the total sought by the Justice Department.

S&P has said the U.S.’s claims are “simply not true” and reflect excerpts from email and other exchanges that were “cherry picked” by prosecutors. An S&P spokesman had no immediate comment Friday.

To view the original article, click here: http://online.wsj.com/article/SB10001424127887324000704578390730041030310.html

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Builders Step Up Construction Due to Rising Demand

Builders Step Up Construction Due to Rising Demand

DAILY REAL ESTATE NEWS | WEDNESDAY, APRIL 17, 2013
Homebuilders broke ground on homes in March at the fastest pace since June 2008, mostly fueled by a surge in apartment construction, the Commerce Department reports. Housing starts rose 7 percent in March from February, reaching the seasonally adjusted rate of 1.04 million.

Homebuilders have ramped up production as buyers rush to take advantage of continued housing affordability due to low mortgage rates.

The pace of homebuilding in March was nearly 46 percent higher compared to the same time last year.

Apartment construction led housing starts in March, soaring 31.1 percent, while single-family home construction dropped 4.8 percent.

The recent data “is a reflection of the solid demand that many areas are seeing for rental apartments as young people take that first step into the housing market, which is a very positive development," says Rick Judson, chairman of the National Association of Home Builders. "The numbers are also in keeping with our latest surveys that show single-family builders are experiencing some difficulties in keeping up with rising demand for new homes due to increasing construction costs and other factors."

Regionally, housing starts dropped 5.8 percent in the Northeast. However, the rest of the country showed strong gains, including a 10.9 percent increase in the South, 9.6 percent gain in the Midwest, and a 2.7 percent rise in the West.

Building permits -- a gauge for future home construction -- fell 3.9 percent in March, after having reached a five-year high in February.

Source: “U.S. Housing Starts Surpass 1 Million in March,” The Associated Press (April 16, 2013) and the National Association of Home Builders

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Are Home Prices Rising Too Fast?

Are Home Prices Rising Too Fast?

Some housing analysts are concerned that the sudden rise in home prices could make homes more unaffordable again if the price increases outpace income growth, The Wall Street Journal reports.

Average housing costs for home buyers who took out a mortgage were around 22.5 percent of average incomes, according to John Burns Real Estate Consulting. That is down from 38.5 percent in 2006, the peak of the housing bubble. The historical average is about 33 percent.

But with home prices rising in many markets and, in some, rising at a faster pace than income levels, will more people soon be priced out of the market?

Housing analysts say that, for now at least, lower mortgage rates are offsetting the higher prices of homes.

Borrowers have seen their purchasing power rise by around 33 percent over the past four years due to the low interest rates, The Wall Street Journal reports. For example, a borrower can make a $1,000 monthly mortgage payment and qualify for a $222,000 mortgage at today’s low interest rates, compared to 2008 when they’d likely qualify for $165,000 when mortgage rates were around 6.1 percent -- nearly double what they are today.

Borrowers are able to withstand home-price increases because of the low rates, not because household incomes are growing, The Wall Street Journal reports. If mortgage rates tick back up to the 6 percent or 8 percent range, homes may look overpriced relative to incomes, according to housing analysts.

Source: “Why Rising Interest Rates Could Eventually Curb Price Gains,” The Wall Street Journal (April 10, 2013)

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Foreclosures Returning to Pre-Bubble Levels

Foreclosures Returning to Pre-Bubble Levels

The number of homes lost to foreclosure is closing in on levels not seen since before the housing meltdown.

Foreclosure filings — including notices of default, scheduled auctions and bank repossessions — during the first quarter fell 23% from a year earlier, the lowest level since the second quarter of 2007.

Last month, banks repossessed just under 44,000 homes. In September 2010, repossessions topped 100,000 a month.

“We’re getting back to normal and will be there by next year,” said Daren Blomquist, vice president at RealtyTrac.

For the past couple of years, foreclosures have been on the decline as homeowners seek alternatives like short sales, in which they sell their home for less than what they owe and the bank agrees to forgive the difference.

The deals are preferred by the banks over foreclosures and have less of a negative impact on a consumer’s credit score. But now even the need to turn to short sales is waning.

Related: 5 best markets to buy a home

Government initiatives, like the Home Affordable Modification Program and Home Affordable Refinance Program, have helped millions of borrowers avoid foreclosure. And last spring, under a $25 billion settlement deal with state and federal officials, the nation’s largest mortgage lenders agreed to help struggling borrowers by lowering their mortgage rates, reducing their principal and other fixes.

Now, the landscape of foreclosures is starting to look a lot like it did in the pre-bust years, said Blomquist.

A larger percentage of the nation’s foreclosure activity is occurring in areas suffering from severe economic problems, such as “Rust Belt” cities like Rockford, Ill. and Chicago, not in the recently-developed, mid-to-upper class neighborhoods of California, Florida and Arizona that were hit hardest when the housing bubble burst, he said.

And many of the people who lose their homes now are dealing with a layoff or personal issue, such as a divorce, illness or death in the family, said Blomquist. During the housing bust, people were forced to default because of plunging home prices and unaffordable mortgage terms.

Related: Housing is back! Best moves for homebuyers

There are some states that are still struggling with a backlog of foreclosures like Florida, Illinois and Georgia, all states where courts oversee the foreclosure process. Florida had more than twice as many bank repossessions as any other state in March — nearly 7,600. Illinois, with more than 3,500, was second and Georgia, with 3,350, was third.

With prices expected to continue to rise — they were up more than 8% year-over-year in January — the number of short sales should continue to fall, and so should foreclosures, according to Blomquist.

To view the original article, click here: http://money.cnn.com/2013/04/11/real_estate/foreclosures/index.html

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