Friday, March 26, 2010

Mortgage delinquencies rise to nearly 14 percent | Reuters

  • According to the US Treasury Department. Delinquent Mortgages are Substantially Up, especially for prime loans, but somehow newly initiated foreclosures dropped during the fourth quarter of 2009.

    tags: foreclosures, delinquencies

    • The percentage of current and performing mortgages fell to 86.4 percent at the end of the fourth quarter of 2009
    • down 0.9 percent from the previous three months
    • down 3.9 percent from a year earlier.
    • 21.1 percent jump in mortgages 90 or more days past due
    • 4.7 percent of all mortgages
    • The increase in seriously delinquent mortgages was most pronounced among prime borrowers
    • The jump in seriously delinquent mortgages is likely to lead to a rise in foreclosure actions
    • mortgages accounted for 68 percent of all home loans within the portfolio
    • Home forfeiture actions -- foreclosure sales, short sales, and deed-in-lieu-of-foreclosure actions -- increased by 8.6 percent from the previous quarter to 163,224. That is up 44.5 percent from a year earlier.
    • newly initiated foreclosures, however, dropped by 15.4 percent from the previous quarter
    • up 19.0 percent from a year earlier

Posted from Diigo. The rest of my favorite links are here.

Government Moves to Assist Underwater Homeowners

  • The government is trying to encourage lenders to reduce principal amounts owed for borrowers who are "underwater." Personally, I think this is a mistake. It is giving free rides to people who used their home equity as piggy banks and can still actually afford their homes. Government needs to stop spending tax payer money rewarding the irresponsible. Here are a few notes from an article about it in the New York Times:

    tags: foreclosures, administration, underwater

    • New initiatives to help troubled homeowners, potentially refinancing millions of them into fresh government-backed mortgages with lower payments.
    • Temporarily reduce the payments of borrowers who are unemployed.
    • Encourage lenders to write down the value of loans held by borrowers in modification programs to make their mortgages more affordable.
    • The new initiatives could well spur protests among those who have kept up their payments and are not in trouble
    • White House briefing, officials emphasized that no new taxpayer money would be used for the programs. Instead, funds to provide incentives for loan servicers to participate would be drawn from the $50 billion allotted to housing in the Troubled Asset Relief Program.
    • The administration’s earlier efforts to stem foreclosures have largely been directed at borrowers who were experiencing financial hardship. But the biggest new initiative, which is also likely to be the most controversial, will involve the government, through the Federal Housing Administration, refinancing loans for borrowers who simply owe more than their houses are worth.
    • About 11 million households, or a fifth of those with mortgages, are in this position, known as being underwater. Some of these borrowers refinanced their houses during the boom and took cash out, leaving them vulnerable when prices declined. Others simply had the misfortune to buy at the peak.
    • If successful, however, the plan could pose a different type of problem: it could put taxpayers at increased risk. If many additional borrowers move into F.H.A. loans, a renewed downturn in the housing market could send that government agency into the red.
    • The new initiatives will expand the government’s current mortgage modification plan, announced a year ago with great fanfare. It has resulted in fewer than 200,000 people getting permanent new loans. As many as seven million borrowers are seriously delinquent on their loans and at risk of foreclosure.
    • fewer people are beginning default, the number of borrowers who are seriously distressed is rising. In the fourth quarter, the number of households at least 90 days past due on their mortgages swelled by 270,000
    • The government is seeking to persuade people to stay in their homes by aligning the mortgage debt with the asset value, which is the only viable path to real housing stability

Thursday, March 25, 2010

Nearly Half of Home Purchases Are Distressed Properties: Survey

  • Wow. This is pretty astounding. 17% of all US home sales are of Short Sales, 14.4% are Damaged REO homes, and 16.6% are move in ready foreclosures.

    tags: foreclosures, reos, short, sales

    • There are three major types of distressed properties: damaged REO, move-in ready REO, and short sales. During the period from November to February, sales in all three categories rose, according to Campbell Surveys. Damaged REO grew from 12.3 percent to 14.4 percent; move-in ready REO grew from 12.6 percent to 16.6 percent, and short sales grew from 12.4 percent to 17.1 percent.
    • Last month distressed properties – those involving homes acquired as part of a foreclosure or pre-foreclosure sale – accounted for 48.1 percent of the home purchase transactions
    • As more distressed properties have come onto the market, Campbell Surveys reports that home prices are again showing signs of weakness. Average home prices for all four categories of properties – damaged REO, move-in ready REO, short sales, and non-distressed – declined from January to February in the latest survey.

Utah Home Sales don't count for nearly this many foreclosures, especially Real Estate Cache Valley.

Foreclosure Inventory Is Increasing

  • Foreclosure inventory held by banks is up, but less than it was in November of 2008.This means that more foreclosures will be for sale in the near future.

    tags: foreclosures

    • The inventory of foreclosed homes that banks are sitting on is rising, threatening to push home prices down further in some parts of the country.

      Analysts at Barclays Capital estimated that banks and mortgage investors held about 645,800 foreclosed homes in January, up 4.6 percent from December. That is down significantly from the peak of 845,000 in November 2008.

Posted from Diigo. The rest of my favorite links are here.

Wednesday, March 24, 2010

Bank of America to Offer Principal Reduction to Underwater Borrowers

  • Bank of American will be losing a fortune in this new loan modification effort to reduce foreclosure by reducing principal amounts owed. But, the losses will likely be less than actually foreclosing. I think this is a pretty good idea, it's just sad that such huge sums of money have to be used just to keep people in their homes.

    tags: mortgage, reduction, underwater, loan modification

    • Bank of America has announced it will make principal forgiveness– ahead of an interest rate reduction – the initial consideration toward modifying certain subprime, Pay-Option and prime two-year hybrid mortgages qualifying for its National Homeownership Retention Program (NHRP). An interest rate reduction and other steps would then be considered, if additional savings are necessary to reach the 31 percent debt to income targeted payment.

      Under the plan BOA will forgive up to 30 percent of the mortgage loan balance in two stages, but with a quid pro quo from the homeowner.  The bank will offer an interest-free forbearance of up to 30 percent of the principal balance for five years.  If the homeowner stays current on mortgage payments for the period of time, then the amount will be forgiven.  On paper, at least, that forgiveness will allow the homeowner to return his loan to an LTV of 100 percent.

      Barbara Desoer, president of Bank of America Home Loans says, "Bank of America has found that many homeowners who owe considerably more on their mortgages than their homes are worth are reluctant to accept a solution that addresses only the amount of the payment without an accompanying reduction in the balance due on the loan."

Monday, March 22, 2010

Credit scores can drop after getting loan help.

  • Government Sponsored Loan Modification Help can still hurt FICO credit scores. Applying for these programs sends a signal to the major credit bureaus, that the homeowner is having difficulties making payments. This in turn has an adverse effect on credit scores.

    tags: credit, scores

    • For borrowers who are making their payments on time but are on the verge of default, the Obama administration's loan modification program can reduce their credit score as much as 100 points.
    • the impact is far less severe than a foreclosure, where borrowers typically find their credit is in tatters for years. That's due to the cumulative impact of many months of missed payments and the foreclosure itself, which drags down a homeowner's' credit by 150 points or more on a scale of 300 to 850.

      To enroll in the Obama administration's $75 billion "Making Home Affordable" program, borrowers enter a trial period in which they make at least three payments. But some are finding out that their credit score takes a dive during this trial phase. It happens once their mortgage company notifies the three big credit bureaus -- Experian, Equifax and TransUnion.

      For delinquent borrowers, the damage was done when they fell behind on their loans.

      But for homeowners who are having financial troubles but managing to pay their bills, a request for a loan modification is the first sign of difficulty. And that means a sharp drop in the borrower's credit score.

      The credit rating industry defends the practice. People who sign up for loan modifications would not be asking for help unless they were having severe money troubles, said Norm Magnuson, spokesman for the Consumer Data Industry Association, a trade group in Washington that represents the credit bureaus.


Personally, I don't think there is anything wrong with lowering credit scores. In essence, these people receiving government assistance were unable to repay the amount they borrowed. It doesn't matter that their home is now worth less than they thought, they have proved unable to keep their financial commitments. That is exactly what credit bureaus are trying to track, how responsible borrowers are and how likely they are to meet their financial obligations.

Monday, March 15, 2010

Loan Mod Conversion Rate Improves in February. True Success Depends on Job Creation

  • The government foreclosure prevention programs are seeing more success in the Making Home Affordable Program.

  • The sad thing is that the success rate is really low, and a large part of this is because many of the troubled borrowers just don't have income sufficient to make any kind of house payment, let alone house payments on loans they can't afford.

    tags: loan, modification

    • The Making Home Affordable Program (HAMP), a joint effort by the Departments of the Treasury and Housing and Urban Development to prevent foreclosures, is reporting that 168,708  homeowners have now graduated from the HAMP trial modification program and have active permanent modifications by the end of February. This works out to a 12.4 percent conversion rate, a modest improvement from January when the permanent modification conversion rate was 9.2 percent.

      The program, which began last spring, has now enrolled 1,094,064 borrowers in modifications which lower mortgage payments to a maximum of 31 percent of monthly income.  1,354,350 invitations to participate in the program have been extended to distressed homeowners.  This is 34 to 45 percent of the goal of 3 to 4 million set for the end of 2012.  At present 835,194 loans are in some phase of the trial period, a number which includes the pending permanent modifications. To date 88,663 trial modifications and 1,499 permanent modifications have been cancelled.   The report does not give any reasons for the cancellations. In addition, 91,843 borrowers had successfully completed the three month trial period and permanent modifications were awaiting borrower acceptance.


Friday, March 12, 2010

Short-Sale Program Will Pay Homeowners to Sell at a Loss - NYTimes.com

  • Here are some details from a new plan to help reduce foreclosures, by encouraging people to use Short Sales. This program gives money to mortgage lenders, in effort to encourage them to approve more short sales, and to delinquent homeowners to "assist" them in relocation.

    tags: short, sales, foreclosures

    • This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.
    • Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.
    • Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

While I do think that streamlining the short sale process is something that is much needed, I don't think that the $1,000 incentives to banks will make that much of a difference. I don't think that the return on investment, our future investment as American Tax Payers, will be worth the cost.

The $1,500 incentive for people who are selling their homes as short sales is just ridiculous. In most cases, these home owners haven't made a housing payment in months, sometimes years. Their poor decisions and actions have already cost the banks and American Tax Payers thousands and thousands of dollars. Why should they be rewarded for being irresponsible?

For credit reasons, home owners in distress are much better off short selling their home, rather than letting it foreclose. If the bank will approve the short sale, the sale of their homes at a reasonable near market value park, that should be incentive enough to get out and move on.