According to Reuters, First American CoreLogic has announced their development of the largest National Fraud Data Repository. This revolutionary collection of records can assist clients, either businesses or individuals, with the ongoing battle against mortgage fraud, while continuing to improve and build the best performing anti-fraud programs available.

Here are some of the highlights of what their data base includes and offers:

1. 65% of annual loan applicants’ information which totals over 80 million.
2. The largest compilation of fraud data reports and records; this data is received from nearly 40 investors and lenders having applicant records from 2005 to date.
3. The only fraud data compilation of foreclosures, repurchase indicators, default, and charge-offs that is strong and accurate enough to establish exact scoring models of pattern-recognition.
4. 17 different lenders contribute daily updates on lien information and applications that are part of the Multi-lien Closing Alert Program of First America.
5. The mortgage industry’s most reliable collection of payoff, title, and lien release data which assists with targeting different methods of fraud for first and second liens.
6. Foreclosure records plus community and property fraud reports.
7. Exclusive third-party loan information from numerous retail branches, appraisers, account executives, brokers and loan officers.

First American CoreLogic’s Fraud Data Repository is being hailed by some experts as one of the most reliable analytical and scoring products available or ever established.

To say that the current state of the US housing market is a little shaky would be an understatement. The waves of recent mortgage statistics are at best conflicting and in many cases misleading as to the true nature of the property economy. Some experts are clinging to the fact that a recent boom in first time buyers being accepted for mortgages (in light of the $8000 tax credit) is a sign that the industry has turned a corner. Others, meanwhile, see the glimmer of hope as more of a mirage in a still arid housing landscape. Indeed, recent reports show that the Philadelphia Housing Market Index has fallen to its major support level of 225; Toll Brothers (a major US luxury home builder) has seen a 33% drop in order during the second quarter and mortgage lender Ameriquest is downsizing and laying off 3500 workers.

Wealthy Housing Opportunities

In the wake of this uncertain housing climate there has risen a sharp contrast between the poorest and the wealthiest people in the country. The current situation has provided a stark reminder of the money gap between the haves and the have-nots in America. Moreover, where one demographic sees opportunity the other sees long-term financial uncertainty. The old saying “one man’s trash is another man’s treasure” is particularly pertinent at the moment as the rich are seeing the drop in house prices as a chance to increase their portfolios. One of America’s most exclusive housing markets, the Hamptons, felt the bite of the recession more than most with the uptake on many multimillion dollar Long Island properties being extremely low. In recent months though, high-end real estate developers have seen a sharp rise in sales as the price of housing has fallen. Alan Schurman, a real estate developer, points out that those that can afford the million dollar price tags “made a decision that the market hit a point and was forming a bottom. Now they want to get in on the values that are out there.”

Luxury property prices have been slashed by around 20% in the area and this has attracted a glut of buyers back to the area keen to snap up a bargain ready for when the market begins to rejuvenate itself. This flood of multimillion dollar spending provides a striking juxtaposition to the financial difficulties facing many “average income” homes. Across the country the rate of foreclosures has risen and more and more homes are seeking the help of programs like the one in operation in Louisville, designed to be the final lifeline for those facing foreclosure. The number of people struggling to make their mortgage repayments has risen to over 13% and more than 4% of all borrowers are in foreclosure. The rising jobless figures are the major contributing factor to the situation, and while government incentives such as the $8000 tax refund are aiming to help the average buy, the problem is continuing to escalate.

The Great Divide

In times of financial crisis the wealth divide is always more prevalent, and while Middle America struggles to retain possession of its homes; the wealthy can’t wait to expand theirs. Nobody is clear just how much longer the current economic climate will last and for the average American the future isn’t looking like a bed of roses. Recent reports over whether the situation is improving or not is much like the discrepancy between those at the top and bottom of the housing chain; on the one hand someone is a winner but on the other, someone always ends up a loser.

Well last week we had good news – this week it looks like more bad news. A new study conducted by Fitch Ratings Ltd. and reported in the Wall Street Journal found that home owners who start to miss mortgage payments are not that likely to get caught up again.

The report looked at the “cure rate,” or the percentage of delinquent home loans that are brought current each month (The study did not include government-backed loans and loans not bundled into securities. This means only about 16 percent of all U.S. mortgages are represented in the report).

The numbers are bleak when compared on a historical scale, an indication that those predicting millions more foreclosures in the next couple years may be right. In July of this year the cure rate for delinquent prime loans fell to 6.6 percent. Compare that with an average of 45 percent during the period of 2000 to 2006. Yikes!  Subprime loans had a cure rate of 5.3 percent in July, a major decrease from the average of 19.4 percent in the six-year time frame.

Fitch blamed job loss as a major contributing factor to the collapsed rates. Yet one of the main differences in borrowers now as opposed to those in the past is that even many who can afford to make their payments are simply choosing not to, feeling that their underwater mortgages are not worth saving.

Unfortunately, in some cases they may be right. As the bloated housing markets of former real estate hot spots continue to correct themselves, home prices are often still moving downward, making a $500,000 mortgage on a home now worth roughly half that amount seem like a hopeless cause. Some homeowners make think, “Why keep paying this impossibly high mortgage, when I can go into foreclosure, rent and repair my credit for several years and then buy at reasonable market prices?”

And for those of us living in those places like California and Florida waiting to buy homes, as sad as foreclosure can be, each one helps to bring the home prices back down into an affordable range. Sorry to those unlucky enough to have bought or done cash-out refis during the housing bubble, but the rate of growth was never sustainable and a painful recovery was always going to be the end product.

Somehow foreclosures do not seem to be having the same terrible impact on the housing market as they have previously in this recession. Freddie Mac announced today that long term mortgage interest rates rose in the past week. The average rate on a 30-year fixed rate loan grew to 5.29 percent excluding points, up from 5.22 percent the previous week. Both 15-year FRM loan rates and one-year ARM rates also moved upward. Freddie Mac VP and chief economist Frank Nothaft said the increase was due to better than expected employment reports as well as rising home prices in 17 percent of the nation’s major metro areas.

Yet even as the housing and economic picture is starting to look rosier in many respects, in one particular aspect things are only getting worse. Foreclosure filings in July set a new record high with filings jumping up 7 percent from June and up 32 percent from the previous year, according to RealtyTrac Thursday.  That means one in every 355 American home-owning households received some sort of foreclosure notice last month.

“July marks the third time in the last five months where we’ve seen a new record set for foreclosure activity,” James J. Saccacio, RealtyTrac’s chief executive, said in a statement.

“Despite continued efforts by the federal government and state governments to patch together a safety net for distressed homeowners, we’re seeing significant growth in both the initial notices of default and in the bank repossessions.”

The current unemployment rate is 9.4 percent and could reach 10 percent in the coming year.
So where is the disconnect? Why are these growing foreclosures not affecting the markets the same way as they did in the previous months. Interest rate movement would suggest that everything is getting better in the housing market. Are these continued foreclosures not going to affect home prices anymore? How can the housing market recover when foreclosures continue to rise? Perhaps next week’s rate will reflect this latest report.

Just when we thought the housing market was on the way to recovery, Deutsche Bank comes out with a research survey saying that the number of underwater mortgages is going double over the next year and a half until 48 percent of all homeowners owe more than their home is worth.

Here’s what they found:

• 41 percent of prime conforming loans will be underwater by the first quarter of 2011. Only 16 percent were underwater by the end of the 2009 first quarter. They make up two-thirds of all U.S. mortgages.
• 46 percent of prime jumbo loans will be underwater, up from 29 percent in the first three months of 2009. Jumbo loans make up 13 percent of the total market share of loans and “the impact of this is significant given that these [jumbo] markets have the largest share of the total mortgage market outstanding,” the analysts said.
• 69 percent of subprime loans with be greater than the property value, up from 50 percent this past March.
• 89 percent of risky option adjustable-rate mortgages will be underwater in 2011, up from 77 percent.
• Home prices are expected to drop on average 14 percent from now to first quarter of 2011 in the 100 largest U.S. metro areas, for total average drop of 41.7 percent since the beginning of the housing crash.
• The top 5 hardest hit states are likely to be California, Florida, Arizona, Nevada, and Ohio.
  The major danger of this forecast coming true is that is will likely lead to millions more foreclosures, which could hold back a true housing market recovery.

And all this just when we were getting excited about home sales rising for several months, prices stabilizing, and housing inventory shrinking!

A recent study from the Boston College Center for Retirement Research shows that today more Americans than ever are carrying a mortgage into their retirement years. The research found that among those in the age 60 to 69 age group, 41 percent were still making mortgage payments. Interestingly, one out of two of those retired mortgage borrowers has enough in investments and savings to pay off the mortgage in full right now.

So why would they hold on to those monthly payments? The study suggests that many believe it is better to keep the home loan and the associated tax benefits in order to keep their wealth more liquid. While there are many people who obviously feel this is the smarter path, the research study concluded that investing in retirement years without having paid off the mortgage is essentially investing with borrowed money. I think that makes sense; if there was a financial emergency, the liquid funds and investments would be used up and there would be no money left to pay the mortgage. The home could be foreclosed on and the retirees could find themselves homeless.

For me it would truly be about peace of mind. I know that financially savvy individuals can use tax credits to their advantage as they deftly maneuver the stocks and bonds scene, but there is plenty of emotional relief that comes from having something as big as a house paid off in full. I am sure you can still make your money work really well for you even if you first pay off your mortgage and then go crazy with investing.

The study doesn’t really address the 20 percent of retired 60 to 69-year-olds that do not currently have the money to pay off their home loans. That is obviously a much more precarious situation. Social security is not usually enough to cover a mortgage payment in addition to living expenses. Will the next big foreclosure wave come in the next decade as seventy-somethings run out of money?

What are we to make of two new reports, one saying existing home sales were up again in June, the other saying foreclosure filings are continuing to pour in?

The National Association of Realtors reported today that sales of existing homes rose 3.6 percent to a seasonally adjusted annual rate of 4.89 million in June, up from 4.72 million in May. Sales were off only 0.2 percent from the June 2008 figures. Housing inventory fell 0.7 percent so that now there is a 9.4-month supply of homes on the market. The national median home price rose from May’s $173,000, to $181,800 in June, but the most recent price is still down 15.4 percent from last year.

And as Jon C. Ogg writes on the 24/7 Wall St blog

When you see the drop in prices, it is hard to get excited in general.  But there is hope as the level of distressed selling is getting to manageable levels.

Now we just have to hope that the shadow supply of houses that will come on the market or that have been foreclosed by banks that are not yet on the market (or being held off the market) is not as high as many fear.  There is also the notion to contend with that the gains are off of levels so low with such low prices that this good news just represents a scolding rather than a lashing.

The Wall Street Journal reported that according to foreclosure data tracker RealtyTrac, foreclosure filings rose again in June to 336,000. During the first half of this year there was one foreclosure filing for every 84 homes in the nation. Some estimates put the total number of foreclosures for this year as high as 3.0 million. Once all these homes get put out on the market, prices are sure to fall more as banks offer deep discounts on these unwanted properties.

A recent article on the Wall Street Journal blog makes a bold claim: predatory lenders and liar loans are not the main cause of the current foreclosure crisis – the prevalence of underwater mortgages is the biggest contributing factor. Stan Liebowitz, the author, asserts that even subprime mortgages, now almost a dirty word, were not the main problem.  He says:

“The focus on subprimes ignores the widely available industry facts (reported by the Mortgage Bankers Association) that 51% of all foreclosed homes had prime loans, not subprime, and that the foreclosure rate for prime loans grew by 488% compared to a growth rate of 200% for subprime foreclosures. (These percentages are based on the period since the steep ascent in foreclosures began — the third quarter of 2006 — during which more than 4.3 million homes went into foreclosure.)”

So, foreclosures are not on the rise because of low credit scores, upwardly adjusting mortgage rates, or all the loans made to people without documentation of their income. Why is simply owing more than your house is worth such a big problem?

“The important factor is whether or not the homeowner currently has or ever had an important financial stake in the house. Yet merely because an individual has a home with negative equity does not imply that he or she cannot make mortgage payments so much as it implies that the borrower is more willing to walk away from the loan.”

I don’ t think Mr. Liebowitz’ explanation is very complete. Borrowers are certainly more willing to walk away from their mortgages, but that doesn’t mean they will in the absence of other factors. So doesn’t it make sense that the other factors are important? If someone whose house is now worth half of the mortgage loan and they lose their job or their payments jump up, aren’t those really the things that caused the foreclosures? Being underwater just makes it easier for these borrowers to toss in the towel.

The median price of home sales in 20 of the nation’s major cities fell by an average of 0.6 percent in April, according to Standard & Poor’s Case-Shiller index, showing great improvement over March when they slid by 2.2 percent. Yet plenty of people are not so sure this is a sign of economic recovery on the whole.

As Steve Blitz writes on his economic markets blog:

“Recession definitely impacts home prices… But in each cycle, home prices recover before the economy does… Because the perception of recovery lags reality, this means that home prices begin to recover long before consumers believe the recession has ended and certainly before the unemployment rate starts to turn down… My forecast is for home prices to begin [to] move higher in the third quarter and to finish 2009 with prices about 11% below year-end 2008 levels.”

And home prices did start to rise in several of the tracked metro areas. Dallas, Denver, and Cleveland all experienced price gains of 1 percent or more from March.

But even S&P chairman David Blitzer is cautious about announcing this as a good sign.

“While one month’s data cannot determine if a turnaround has begun; it seems that some stabilization may be appearing in some of the regions. We are entering the seasonally strong period in the housing market, so it will take some time to determine if a recovery is really here,” he said.

Blitzer attributed the slowing of price declines to a rise in consumer confidence and rallies in the stock market.  So what’s it all mean? Now may be the best time to get off the fence and buy a home before prices continue to rise. Then again, these number can easily fluctuate based on unemployment and other factors, so maybe you can wait until you actually start seeing price gains in a majority of the metro areas.

Home builder confidence is up for the second straight month and those in the building industry are more than willing to say that indicates the bottoming out of the ailing housing market.

“The bottom line is there are good signs on the horizon,” said Jerry Howard, president and chief executive of the National Association of Home Builders. “It’s fair to say we could be closing in on the bottom, but we have a long road ahead of us.”

NAHB Chief Economist David Crowe seemed even more upbeat.

“The fact that the May [index] continued to tick up from April’s five-point increase provides confirming evidence that the improved confidence level was no fluke. This continued increase indicates that home builders feel we’re at or near the bottom of the market and that positive signs lie ahead for builders and potential home buyers, provided that builder access to production credit significantly improves.”

The NAHB/Wells Fargo housing market index increased by two points to 16 in May. This measure of builder confidence in the market is still near record lows and any score below 50 indicates negative sentiment about the market. So there are slightly fewer builders who feel badly about the state of things now than there were last month.

What’s interesting to me is how slight differences in these types of reports make such a big difference in the mood of the broader markets. National and global stock markets rose today after the NAHB announcement.

So if all the mortgage and housing markets are so hinged on public sentiment it seems like we should all just talk a little more rosily about our home loan and financial situations, right? Or was inflated optimism and over confidence what got us into the current mortgage mess in the first place? Hmm…