Home Seizures Rise as Banks Adjust to Foreclosure Flow

Home Seizures Rise as Banks Adjust to Foreclosure Flow By Dan Levy - Dec 12, 2012 9:01 PM PT Home seizures in the U.S. rose 5.4 percent last month, the first annual gain in two years, as lenders seek to manage the flow of distressed properties without disrupting the housing recovery, according to RealtyTrac. Banks repossessed 59,134 homes, up from 56,124 from November 2011, the Irvine, California-based data firm said today in a report. The increase was the first since October 2010, when foreclosures slowed after allegations that lenders were using faulty practices to take property from delinquent homeowners. Seizures climbed 11 percent from the previous month. “Lenders have figured out how to play the foreclosure game in this new world where they’re getting a lot more scrutiny,” Daren Blomquist, RealtyTrac vice president, said in a telephone interview. “Everybody involved in the foreclosure industry has finally got a good handle on how to manage these properties to create a more managed and stable flow.” The five largest lenders in February agreed to a $25 billion settlement of the charges and have since been pursuing foreclosure alternatives such as short sales, where a property is sold for less than the amount owed. Repossessions since March have slowed to fewer than 60,000 a month, an “acceptable” level for servicers that previously had struggled to process a flood of distressed homes, Blomquist said. In the peak year of 2010, banks took back an average of 87,542 homes a month on the way to a record 1.05 million completed foreclosures, according to RealtyTrac. Lenders have adapted to state measures that slowed repossessions beyond delays caused by the U.S. mortgage probe, such as a Nevada law making harder to file initial default notices, and can now better predict the overhang of distressed homes, Blomquist said. The re-election of President Barack Obama also removed some uncertainty from the housing market, he said. “With the political environment less charged, I don’t think we’ll see another spate of laws holding lenders accountable, and there won’t be these bank-owned homes dragging down the market to the extent they have in the past,” Blomquist said. Default, auction and repossession notices were sent to 180,817 homes in November, down 19 percent from a year earlier and 26th straight month with an annual decline, RealtyTrac said in the report. One in every 728 households received a filing. Home seizures rose in 29 states and the District of Columbia, led by increases of 96 percent in Indiana, 88 percent in Arkansas and 87 percent in Missouri. Repossessions declined in 21 states, falling 64 percent in Nevada, 58 percent in Oregon and 49 percent in Massachusetts, RealtyTrac said. Florida had the highest foreclosure rate, one in 304 households, up 3 percent from the previous month and 20 percent from a year earlier. Nevada followed at one in 390, and Illinois was third at one in 392, according to RealtyTrac, which sells default data from more than 2,200 counties representing 90 percent of the U.S. population. To contact the reporter on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

Mortgage modification program expanded to investors, others

Proposed changes to the Home Affordable Modification program would make mortgage modifications available to owners or rental properties and others. (Justin Sullivan/Getty Images) By Mary Ellen Podmolik Tribune reporter 5:05 p.m. CST, January 27, 2012 The Obama administration on Friday announced it would significantly broaden the pool of consumers eligible for mortgage modifications by opening its program to owners of rental properties and homeowners burdened by medical and credit card bills and second mortgages. Under an expansion of the Home Affordable Modification Program, investors can seek mortgage loan modifications for rental properties, regardless of whether the home is occupied by a tenant or it is vacant but the owner plans to rent it. Previously, only owner-occupants were eligible for loan modifications under the government's plan, but officials said they decided to take this step because foreclosed rental properties were having a particularly detrimental effect on low- and moderate-income renters. "The whole purpose of HAMP is to try and prevent foreclosures," said Treasury Assistant Secretary Tim Massad in a conference call with reporters Friday afternoon. "We're expanding it to investor-owned properties for the same reason. If your neighbor is foreclosed on, whether they're an owner or a tenant, that affects you and all your neighbors. We're allowing them to get modifications. They still have to prove a hardship and go through a protocol that proves this is a good use of taxpayer money." Roughly 700,000 rental properties nationally may be eligible for loan modifications, he added. "They're finally recognizing that this is a part of the housing market that needs stabilization," said Geoff Smith, executive director of DePaul University's Institute for Housing Studies. "These small multifamily buildings make up a big part of the housing stock in Chicago so any effort to stabilize them would be helpful. But one of the reasons that HAMP didn't target rentals was at some level these are businesspeople and why would you want to incentive them for taking too much risk on an investment." Federal officials also said HAMP would begin evaluating borrowers who may face large medical, credit card or second lien payments but up to now have been ineligible for mortgage modifications because the debt-to-income ratio on their first mortgages was below 31 percent. HAMP, which was set to expire in December, now has been extended until Dec. 31. 2013. There will be no additional costs to taxpayers for the expanded program, officials said. It will be funded from the $29 billion already set aside mortgage modification efforts. Part of the administration's Making Home Affordable effort that was announced shortly after President Barack Obama took office, HAMP has been criticized as falling woefully short of its goal of helping 3 million to 4 million homeowners. Of the more than 1.7 million trial mortgage modifications begun under the program since its March 2010 start, only about 43 percent had resulted in permanent loan modifications through November. The government has withheld $131 million in servicer incentive payments from Bank of America and JPMorgan Chase for poor compliance with the program. Officials declined Friday to estimate how many additional homeowners would be helped as a result of the program changes. Also announced was a tripling of the financial incentives awarded to mortgage investors whose modifications include principal writedowns in cases where the homeowner owes significantly more on the mortgage than the value of the underlying property. The current rate of between 6 cents and 21 cents on the dollar will be increased to between 18 and 63 cents. Officials said they had already briefed mortgage servicers on the new incentive plan. Principal reduction incentives also will be offered to Fannie Mae and Freddie Mac if they use them in loan modifications on mortgages they own or insure. In a statement, the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, said it will study the new incentives but it previously concluded "that principal forgiveness did not provide benefits that were greater than principal forbearance." Writing down mortgage balances has been long-sought by consumers, who question why they continue to pay mortgages on properties when there is little chance of regaining any equity in the homes because of the housing crash. And while the administration advocated principal writedowns, there were rarely given and are no longer tracked in the government's monthly report on the HAMP program. In the Chicago area, prices are down some 30 percent since they peaked in September 2006. Homeowners "shouldn't have to sit and wait for the housing market to hit bottom" before finding some relief, said Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development. In his State of the Union speech Tuesday President Obama said he planned to seek legislation that would further widen home mortgage refinancing programs. Friday, officials said details of that proposal were forthcoming. Copyright © 2012, Chicago Tribune

A plan to ease mortgage refinancing

Oct 29th 2011 SOMETIMES the best stimulus is not the biggest, but the one that’s possible. While Barack Obama has been haranguing Congress, without success, to pass his $447 billion stimulus plan, a more modest effort paid off on October 24th when the Federal Housing Finance Agency (FHFA), the regulator of Fannie Mae and Freddie Mac, the two big mortgage-finance companies, made it easier for borrowers to lower the rates they pay on their mortgages. Mortgage rates are the lowest in a generation, triggering a rush by homeowners to retire higher-rate loans and take out new ones (see chart). But roughly a quarter of homeowners cannot refinance because their mortgages exceed the value of their homes. In early 2009 the administration introduced its Home Affordable Refinance Programme (HARP), allowing refinancing for “underwater borrowers” with no history of delinquency. Although Fannie and Freddie were taken over by the federal government in 2008, HARP would not expose the taxpayer to any more loss, since refinancing did not make the loan riskier. The programme has been a disappointment. Up to the end of August only 894,000 borrowers had refinanced mortgages through HARP, a far cry from the 4m-5m the administration had hoped for. The reasons are complex, but boil down to Fannie and Freddie trying to protect their profits by imposing onerous fees and conditions. That might seem perplexing, since the Treasury is covering their losses, but the FHFA had stood by its legal obligation to minimise losses to taxpayers. It has now relented. The previous maximum loan-to-value ratio of 125% has been eliminated. Fees imposed on high-risk borrowers of up to 2% of the mortgage amount have been reduced or eliminated, and applicants in many cases no longer need a new property appraisal. A big impediment to refinancing had been the banks who originate the mortgages and then sell them to Fannie and Freddie for inclusion in mortgage-backed securities. If a bank refinanced a loan that soon became delinquent, Fannie and Freddie would look for evidence that the bank had violated the representations and warranties it had made about the borrower and the property, and force it to buy the defective loan back. Now Fannie and Freddie will no longer generally require originators to make such representations and warranties. Critics question the programme’s potential to stimulate the economy, when the increased cashflow of borrowers will come at the expense of the investors who own the mortgages. But the owners are unlikely to reduce their spending by as much as the borrowers increase theirs, especially since Fannie, Freddie and the Federal Reserve are among the largest owners. Even so, the benefits will be modest. The FHFA reckons the number of beneficiaries could rise by about 1m. Assuming savings of $2,500 each, that makes just $2.5 billion in additional cash, barely noticeable in a $15 trillion economy. Nor will it do anything to stimulate house-buying. Other steps will be necessary to rejuvenate housing. Federal Reserve officials have hinted in recent days that they may resume large-scale purchases of mortgage-backed securities, paid for with newly printed money. That would push mortgage rates down further. Meanwhile, states are trying to negotiate a settlement with banks over flawed mortgage servicing and foreclosure practices. A deal would compel banks to help underwater homeowners avoid foreclosure. Until then, every little bit helps.http://media.economist.com/sites/default/files/imagecache/290-width/images/print-edition/20111029_USC856.gif

Mortgage Rates in U.S. Hold Near Record Lows

By Prashant Gopal - Oct 27, 2011 7:01 AM PT Mortgage rates in the U.S. were little changed, keeping borrowing costs close to the lowest level on record as the housing market stagnates. The average rate for a 30-year fixed loan declined to 4.10 percent in the week ended today from 4.11 percent, Freddie Mac said in a statement. The average 15-year rate held at 3.38 percent, according to the McLean, Virginia-based mortgage- finance company. Buyers have been slow to take advantage of a drop in borrowing costs that sent the 30-year rate to 3.94 percent this month, the lowest level in Freddie Mac records dating to 1971. Sales of previously owned homes, which make up more than 90 percent of the market, fell 3 percent to a 4.91 million annual rate in September, the National Association of Realtors said Oct. 20. The median price slid 3.5 percent from a year earlier. “At this stage, the problem with the housing market is not rates,” said Millan Mulraine, senior U.S. strategist at TD Securities in New York. “The problem is potential homebuyers continue to sit on the sidelines while waiting for more attractive entry points for prices, and credit conditions continue to be tight.” The Mortgage Bankers Association’s home-loan applications index rose 4.9 percent in the week ended Oct. 21 after plunging 15 percent in the previous period. The Washington-based group’s purchasing gauge rose 6.4 percent last week, and its refinancing index climbed 4.4 percent. New-home purchases increased 5.7 percent in September to a 313,000 annual pace, figures from the Commerce Department showed yesterday. The median price slumped 10 percent from September 2010, the biggest drop in more than two years. To contact the reporter on this story: Prashant Gopal in New York at pgopal2@bloomberg.net To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

Weekly Mortgage Applications

Fannie Mae, Freddic Mac

HUD