30% of Buyers Denied, Give Up Getting Mortgage

Credit has gotten tighter, and more buyers are being left out or becoming so frustrated they’re giving up. More than 2 million people were turned down for mortgages last year, according to the Federal Financial Institutions Examination Council. About 30 percent of buyers are either denied a mortgage or drop out of the application process, the Mortgage Bankers Association estimates, with stringent lender requirements or incomplete applications most at blame. The New York Times notes some of the biggest reasons for rejection are buyers coming with insufficient income, bad credit (applicants with FICO scores below 620 are usually rejected, although some lenders are rejecting anyone below 660); and low appraisals. What’s more, lenders usually want a two-year history of income so applicants who have changed jobs recently may face hurdles. “It’s common to get turned down if you have a gap in employment history over the last two years,” Erin Lantz, the director of the Zillow Mortgage Marketplace, told The New York Times. Source: “Triggers for Rejection,” The New York Times (Oct. 6, 2011)

30-Year Mortgage Rates Drop Below 4%

For the first time ever, 30-year fixed-rate mortgages fell below 4 percent, Freddie Mac reported in its weekly mortgage market survey. In the last month mortgage rates have continued to set new weekly record lows, but the 30-year mortgages’ latest drop below 4 percent may be an important threshold for potential buyers. The 30-year mortgage is the most popular financing option of buyers. Mortgage rates are expected to stay well-below 5 percent through 2013, Fannie Mae economists are projecting. Home buyers taking out loans for purchase is expected to more than double in the next two years too, Inman News reports. Rates have continued to free-fall as concerns over a global recession grows, Frank Nothaft, Freddie Mac’s chief economist, said in a statement. Here’s a closer look at rates for the week ending Oct. 6. 30-year fixed-rate mortgages: averaged 3.94 percent this week, down from last week’s previous record low of 4.01 percent. A year ago at this time, the 30-year fixed-rate mortgage averaged 4.27 percent. 15-year fixed-rate mortgages: averaged 3.26 percent, another all-time low. This is the sixth-consecutive week the 15-year mortgage has posted new average record lows. Last week, 15-year rates averaged 3.28 percent. Last year at this time, 15-year rates averaged 3.72 percent. 5-year adjustable-rate mortgages: averaged 2.96 percent this week, dropping from last week’s 3.02 percent. A year ago, the 5-year ARM averaged 3.47 percent. 1-year ARMs: averaged 2.95 percent, the only mortgage rate to move up last week. Last week, the 1-year ARM averaged 2.83 percent. A year ago, the 1-year ARM averaged 3.40 percent. By Melissa Dittmann Tracey, REALTOR® Magazine Daily News

23 Housing Markets Show Big Improvement

Double the number of housing markets moved into the “improving” category this month compared to last month, according to the National Association of Home Builders/First American Improving Markets Index, which debuted last month. Twenty-three housing markets qualified as “improving” compared to 12 last month. Metro areas are considered “improving” if they show an improvement in housing permits, employment, and housing prices for at least six months. Texas cities appear the most frequently on the list. "Both the number and geographic diversity of improving housing markets expanded this month, with Iowa, Illinois, and South Carolina all newly represented by one entry or more on the list," Bob Nielsen, NAHB chairman, said in a statement. "This is further evidence that, despite the tough conditions that persist in many cities, pockets of improvement are emerging in local housing markets across the country." The following are the 23 markets labeled “improving” in October, according to NAHB’s index: Alexandria, La. Amarillo, Texas Anchorage, Alaska Bismarck, N.D. Casper, Wyo. Fairbanks, Ark. Fayetteville, N.C. Houma, La. Iowa City, Iowa Jonesboro, Ark. Kankakee, Ill. McAllen, Texas Midland, Texas New Orleans, La. Odessa, Texas Pine Bluff, Ark. Pittsburgh, Pa. Sherman, Texas Sumter, S.C. Waco, Texas Waterloo, Iowa Wichita Falls, Texas Winston-Salem, N.C. By Melissa Dittmann Tracey, REALTOR® Magazine Daily News

U.S. Economy Adds 103K Jobs in September

The nation’s unemployment rate held at 9.1 percent during the month of September, as employers added a net of 103,000 new jobs to their payrolls, according to figures released Friday by the U.S. Department of Labor. Since April, the rate has held in a narrow range from 9.0 to 9.2 percent. Government data shows that there are 14 million people out of work in the United States. The increase in employment last month partially reflected the return of about 45,000 telecommunications workers who had been on strike in August. Without that gain, the payroll increase would have fallen in line with analysts’ expectations. Most were forecasting new job growth to come in at about 60,000. The Labor Department’s report also painted a better picture of the employment situation for the previous two months. Officials revised August’s disappointing reading of no net job gain to reflect 57,000 new jobs during the month. July’s figures were also revised upward from 85,000 to 127,000 in job growth. President Obama spent the week traveling to strategic cities across the country promoting his American Jobs Act. Economists at Freddie Mac have said the president’s proposal could add as many as 1.3 million jobs to the economy, but his adversaries in Congress say they won’t sign on to the bill’s tax hike on the wealthy or to additional spending with the country’s debt level so high. Obama has been on the attack, calling out the bill’s naysayers by name in speeches before constituents in their hometowns. “I want an explanation as to why we shouldn’t be doing it, people really need help right now,” Obama said in a press conference Thursday morning. “[W]e’re not going to bring up the president’s bill in whole, because we don’t believe in raising taxes and in more stimulus spending. But we are going to take the parts that we agree on,” House Majority Leader Eric Cantor (R-Virginia) said on the House floor Thursday afternoon following Obama’s appeal. Of the 14 million people out of work, the Labor Department says nearly half have been unemployed for more than six months, and a third have been without a job for more than a year. Economists and housing analysts warn that job loss – long-term unemployment especially – is now the biggest driver of mortgage defaults. (Be sure to check out DSNews.com’s earlier coverage of housing programs in place to assist the unemployed and their results thus far.)

Thirty-Year Mortgage Rate Falls Below 4%

The average rate for the conventional 30-year fixed mortgage has dropped below the 4 percent mark for the first time in history, according to numbers released Thursday by Freddie Mac. The GSE’s market analysis also shows that the 15-year fixed rate – which has become a popular refinancing option among existing homeowners – fell to its lowest level on record for the sixth consecutive week. Freddie Mac’s regular weekly survey of mortgage rates is based on data collected from about 125 lenders across the country. The GSE puts the average rate for a 30-year fixed mortgage at 3.94 percent (0.8 point) for the week ending October 6, 2011. That’s down 7 basis points from its average of 4.01 percent last week. As a point of comparison, last year at this time, the 30-year rate was 4.27 percent. The 15-year fixed-rate mortgage came in at 3.26 percent (0.8 point) this week, dropping 2 basis points from 3.28 percent last week. A year ago at this time, the 15-year rate was averaging 3.72 percent. Frank Nothaft, Freddie Mac’s chief economist, attributed the decline in fixed mortgage rates to a sharp drop in 10-year Treasuries earlier in the week as concerns over a global recession grew. Adjustable-rate mortgages (ARMs) were mixed this week in Freddie’s study. The 5-year ARM dropped from 3.02 percent to 2.96 percent (0.6 point), while the 1-year ARM rose from 2.83 percent to 2.95 percent (0.5 point). At this time last year, the 5-year ARM was averaging 3.47 percent, and the 1-year ARM was 3.40 percent. Nothaft tied the rise for 1-year ARMs to shorter-term Treasuries, noting that the Federal Reserve began replacing $400 billion in short-term Treasury securities with longer-term bonds this week.

Price Declines Take a Bigger Piece of Prime Borrowers' Equity

The analysts at Fitch Ratings warn that before the housing market pulls out of this downturn, half of prime borrowers could find themselves underwater on their mortgage. Data released last month by CoreLogic shows that one in five of all residential mortgages in the U.S. is in a negative equity position. But segment out just those homeowners with prime mortgages, and Fitch says one in three currently owe more on their mortgage than the home is worth. Fitch took into account all prime borrowers in private-label residential mortgage-backed securities (RMBS). “The sputtering U.S. housing market will result in more prime borrowers being pushed further underwater on their mortgages,” Fitch said in a report released this week. Despite some recent modest gains, home prices have further to fall before any sustained recovery takes hold, according to Grant Bailey, a managing director at Fitch. “With home prices likely to decline another 10 percent, roughly half of prime borrowers will wind up underwater on their mortgage,” said Bailey. Looking at the entire mortgage borrower population, the analysts at Deloitte cite data from JPMorgan Chase which indicates that a further drop in housing prices of 5-10 percent – as expected by the end of 2011 – would increase the number of properties with negative equity to 15-20 million. CoreLogic’s latest assessment put the number of underwater borrowers at 10.9 million at the end of the second quarter of this year. On top of the unsettling negative equity positions of prime borrowers, Fitch’s study also revealed that over 12 percent of all prime borrowers are seriously delinquent on their mortgages. “Prime mortgage default rates will stay elevated as home prices fall further and unemployment remains high,” according to Bailey. Fitch has cited borrower equity as the pre-eminent driver of mortgage default performance in its new rating model. The combination of declining equity, rising delinquencies, the growing risk of payment shock, and the application of Fitch’s updated criteria led to further negative rating actions on prime RMBS transactions in the agency’s latest ratings review. Forty-two percent of prime RMBS ratings, primarily those already rated ‘B’ or below, were downgraded further by Fitch

Fed Governor Calls for Revised Incentives for Servicers

The current compensation structure for servicers provides misaligned incentives and needs revision so servicers’ incentives will align with borrowers and investors, stated Federal Reserve Governor Sarah Bloom Raskin addressing an audience at the Maryland State Bar Association Advanced Real Property Institute in Columbia Maryland Tuesday. “[I]t is imperative to reconsider the compensation structure so that servicers have adequate incentives to perform payment processing efficiently on performing mortgages, and to perform effective loss mitigation on delinquent loans,” Raskin stated. Raskin also believes investors need methods to allow them to monitor servicer performance. She noted that “house prices have fallen by nearly one-third since their peak in the first quarter of 2006, and total homeowners’ equity in the United States has shrunk by more than one-half-a loss of more than $7 trillion.” In addition, as of the second quarter of this year, 3 million families were paying above-market interest rates and are unable to refinance to today’s lower rates, and 4 percent of mortgages were undergoing foreclosure. Servicing delinquent loans is costly for servicers, who were not built to withstand such high rates of delinquencies. Generally, servicers receive one-fourth to one-half of the unpaid loan balance annually for servicing a loan. While this fee is more than enough to cover the cost of covering performing loans, it is far less than the cost of servicing a delinquent loan. “When mortgage delinquencies are high, mortgage servicing is not profitable, and servicers may feel extra pressure to cut costs as much as possible,” Raskin explained. “We need to consider our current array of mortgage contracts with a dispassionate eye and open mind,” Raskin stated.

Inspector General: FHFA Was Aware of Robo-Signing and Other Abuses

The Federal Housing Finance Agency (FHFA) had knowledge of such foreclosure procedural abuses as robo-signing and falsified documentation years before these infractions made front-page headlines and triggered industry-wide investigations, according to the agency’s own inspector general. The Federal Housing Finance Agency Office of Inspector General (FHFA-OIG) focused its investigation on Fannie Mae’s Retained Attorney Network, which was established by the GSE in 1997 to perform default-related legal services associated with foreclosure, bankruptcy, loss mitigation, eviction, and REO closings. According to the inspector general’s report released Tuesday, FHFA documented its receipt of consumer complaints citing “inappropriate foreclosure practices” involving Fannie Mae loans at least as early as August 2009. However, FHFA did not act on these reports until a full year later, when allegations of abuse by law firms within Fannie Mae’s attorney network – such as routinely filing false documents in court proceedings and robo-signing – surfaced in the media in August of 2010. “FHFA had not previously considered risks associated with foreclosure processing to be significant,” the inspector general said in his report. But according to the FHFA-OIG, there were clear warning signs even before the consumer complaints started coming in during 2009 that should have prompted the GSEs’ conservator to take action. The inspector general cites highly visible, mainstream news coverage that began to circulate as far back as 2008, in which allegations were raised about so-called “foreclosure mills” managing defaulted loans for the GSEs. One New York Times article, in particular, revealed that several courts had imposed “significant financial sanctions” against various firms in Fannie Mae’s Retained Attorney Network and in some cases, their clients, which included the GSE. These penalties stemmed from such abuses as unlawful evictions and inaccurate loan information, and dated back to 2006. In 2005 Fannie Mae hired an outside firm to investigate allegations regarding foreclosure processing. The report of the findings stated: “[F]oreclosure attorneys in Florida are routinely filing false pleadings and affidavits…. The practice could be occurring elsewhere. It is axiomatic that the practice is improper and should be stopped. Fannie Mae has not authorized this unlawful conduct.” The FHFA-OIG also pointed out that in June 2010, FHFA’s Office of Conservatorship Operations performed a two-day field visit to Florida and found that documentation problems were evident, and law firms were not devoting the time necessary to their cases due to Fannie Mae’s fee structure. As a result of the visit, FHFA staff developed a listing of actionable items to address the issues, but the inspector general says he “has found no evidence that action was taken” on any of the items advised. Beyond the specific red flags of consumer complaints, media reports, and public court filings in Florida, FHFA-OIG says the sheer nature of market conditions – including significant increases in foreclosures and the deterioration seen in the housing sector – should have led FHFA to recognize the heightened risk posed by foreclosure processing. FHFA commenced a special review of Fannie Mae’s Retained Attorney Network in late 2010. To date, FHFA has not released the results of its review. FHFA has repeatedly stressed that its primary obligation as conservator of Fannie Mae and Freddie Mac is to ensure the safety and soundness of the two GSEs, but according to FHFA-OIG, the federal overseer “lacks assurance that law firms with histories of performance deficiencies do not jeopardize the safety and soundness of the Enterprises.” FHFA’s inspector general has been churning out reports in recent weeks scrutinizing the agency’s oversight of the nation’s two largest mortgage companies and calling into question such core responsibilities as recovering taxpayer dollars from loan repurchases and evaluating the GSEs’ strategies for managing their growing REO inventories.

| -A A +A Shadow Inventory Continues to Weigh on Market

The nation has about 1.6 million homes that loom in shadow inventory, 22 percent lower than the peak in January 2010. Despite the decline, the shadow inventory is still dragging down home prices, housing experts say. Shadow inventory is when homes are either in foreclosure or repossessed by banks but have not yet hit the market. While CoreLogic recently reported the drop in the shadow inventory as a “positive sign for housing,” the number still remains high and is weighing on the market, housing experts say. The states with the largest shadow inventories are California, Florida, Illinois, Georgia, and Ohio, according to RealtyTrac. For example, California has nearly 270,000 homes in its shadow inventory. "It's absolutely an impediment," Dustin Hobbs, a spokesman for the California Mortgage Bankers Association, told the USA Today. "It's hanging over the market." The high numbers are blamed from a moratorium on foreclosures in 2009 by legislators as well as delays from lenders as they try to find a workout solution with home owners to keep them in their homes. According to Standard & Poor's, the national shadow inventory of homes--worth an estimated $405 billion--will take four years to clear. It’s a catch-22 for banks: If they clear the shadow inventory too quickly, the inventory will overwhelm the market and could drive prices down further. On the other hand, if they clear the shadow inventory too slowly, it will prolong the housing market recovery, the S&P report noted. Source: “Shadow Inventory Depresses Sale Prices,” USA Today (Oct. 4, 2011)

| -A A +A Millions of Loans May Face Foreclosure Reviews

About 4.5 million current and former home owners will be eligible to have their foreclosure cases reviewed, and banks will compensate them if mistakes are found, as part of a mandate by federal regulators to the nation’s banks. Borrowers eligible for the reviews must have been in some stage of foreclosure in 2009 or 2010. If the reviews uncover such things as banks’ miscalculating mortgage payments or applying impermissible fees of penalties, the borrower may be eligible for compensation from the banks, The Wall Street Journal reports. No foreclosures are expected to be overturned following reviews, however. "It's a substantial undertaking at great expense to the banks," Tim Rood, a partner at Collingwood Group, told The Wall Street Journal. A public outreach campaign in the coming weeks is expected to announce the third-party reviews and reach out to eligible borrowers through direct mail, a web site and toll-free number. Borrowers will need to request a review of their case. Federal regulators have ordered the banks to conduct the reviews following a “robo-signing” scandal that surfaced last fall, in which regulators uncovered lenders signing off on numerous foreclosures without proper reviews. “Robo-signing” caused judges to question the validity of banks’ foreclosure practices. Source: “Review of Foreclosure Mistakes Is Set,” The Wall Street Journal (Oct. 4, 2011)

Foreclosure Woes to Plague Industry for at Least Five Years: Survey

A new quarterly survey of bank risk professionals from FICO paints a decidedly pessimistic picture of housing’s future. The company describes its latest results as a reversal of the growing optimism seen in late 2010 and early 2011. The survey, conducted for FICO by the Professional Risk Managers’ International Association (PRMIA), shows that bankers expect delinquencies on consumer loans to rise, underwriting standards to become stricter, and the housing sector to continue struggling far into the future. Among the 188 risk managers surveyed, 73 percent believe mortgage defaults and foreclosures will remain elevated for at least five more years. Furthermore, 46 percent of respondents expect mortgage delinquencies to increase over the next six months, while only 15 percent anticipate a decline in mortgage delinquencies over the same period. The negative sentiment among banks’ risk professionals also extended to property values. When asked if housing prices nationally would climb back to 2007 levels before the year 2020, 49 percent of respondents said no. Just 21 percent said yes. “Housing has been an enormous drag on the economy for over three years as U.S. households lost trillions of dollars in equity,” said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. Data from the Federal Reserve shows that between 2005 and mid-2011, Americans lost $7 trillion in home equity. “While the housing sector will almost certainly gain strength during the next nine years, many bankers clearly believe prices will remain depressed for half a generation,” Jennings said. “This puts the devastation of the housing crash into perspective.”

Moody's: Refinancing Is Key to Housing Market Recovery

If all of Fannie Mae’s and Freddie Mac’s borrowers paying interest rates that are higher than the median rate were to refinance at 4 percent, the savings would total $63 billion, according to Moody’s. While such an option would not bring the total $63 billion in savings to fruition, Moody’s chief economist, Mark Zandi, says “even a fraction would be a big plus.” In a recent release, Zandi states, “Policymakers should consider taking additional steps to support the housing and mortgage markets.” He adds, “The most efficacious policy step that could make a meaningful difference quickly is to facilitate more mortgage refinancing.” The Obama administration enacted the Home Affordable Refinancing Program (HARP) in 2009 to facilitate refinancing for Fannie Mae and Freddie Mac borrowers paying above-market interest rates. However, after its original forecast of helping 4 million to 5 million homeowners, the program has facilitated 800,000 refinances. HARP’s major obstacle, according to Zandi, is the loan level price adjustments Fannie and Freddie impose with the refinance option. While loan level price adjustments are typical components of a refinance, “this standard practice is weakening HARP,” Zandi says. Also, because Fannie and Freddie bear the risk for these loans, a loan level price adjustment may not be necessary. Refinancing more loans through HARP would mean less interest income for Fannie and Freddie as well as investors. However, the GSEs and the taxpayers “would be made substantially whole” because increased refinances would translate to decreased defaults, according to Zandi.

New Foreclosure Actions Jump Nearly 20% in August

Data released by Lender Processing Services (LPS) Monday shows that foreclosure starts were up in August by 19.7 percent when compared to the previous month. However, LPS noted in its report that the 247,957 foreclosures initiated in August represents a 12.2 percent decline from a year earlier. At the same time, of the approximately 4 million loans that are either 90 or more days delinquent or in foreclosure, the number in the 90-plus day delinquency bucket – 2,148,179 – has contracted to levels not seen since 2008, according to LPS’ study. That’s not the only indicator of improvement LPS documented for problem loans. The company’s latest report also showed that, of loans that were current six months prior, 1.4 percent had become seriously delinquent by August. LPS says that percentage is less than half the rate seen in 2009, when the loan deterioration rate peaked at 2.9 percent. At the same time, “first-time” delinquencies – new problem loans that had never been delinquent before – accounted for approximately a quarter of all new delinquencies, another sign of an improving trend for problem loans, according to LPS. The company points out, however, that 23 percent of the nearly 46 million loans that were current as of the end of August were still at risk as a result of negative equity – a leading indicator of a borrower’s propensity to default. LPS’ analysis of mortgage performance data at August month-end showed an all-time high in the number of loans shifting from foreclosure back into delinquent status, suggesting that process reviews and potential loss mitigation activity are continuing. As a result, the company says foreclosure timelines continue to increase, with the average loan in foreclosure having been delinquent for a record 611 days. Average delinquencies in non-judicial states continue to be about six months shorter at the time of foreclosure sale when compared to their judicial counterparts, where LPS says backlogs continue to be extremely high.

Jobless Housing Aid Expected to Fall Short of Goal

A $1 billion federal program to help the jobless and medically ill avoid foreclosure by offering temporary mortgage assistance had too many stringent rules that made too many home owners ineligible to participate, housing counselors say. The Emergency Homeowners’ Loan Program, which wrapped up approving applications last Friday, is expected to only have spent half its allocated funds. The Housing Department says it expects about 10,000 to 15,000 people will have qualified — a small fraction of the about 100,000 who even applied. "The [HUD] guidelines were so restrictive that it knocked out a lot of otherwise eligible and worthy consumers," Lemar Wooley, a HUD spokesman, told CNNMoney. In the program, the government offered interest-free, forgivable loans to home owners who lost at least 15 percent of their income due to unemployment or a medical condition. Qualified home owners were eligible to receive up to $50,000 or 24 months of mortgage assistance. The program launched in late June, after several delays, and gave home owners six weeks to apply. The deadline was later extended to mid-September to give home owners more time. However, income and delinquency guideline barriers prevented many home owners from receiving assistance, housing counselors told CNNMoney. Also, some home owners were turned away because they were too far behind on their payments and some had lost their jobs more than a year ago. (HUD’s rules required delinquency to have occurred within the past 12 months.) Source: “Mortgage Help for Unemployed Disappears,” CNNMoney (Oct. 3, 2011)

Has the Housing Market Hit Bottom?

Rick Sharga, executive vice president with Carrington Mortgage Holdings, says the housing market is in a “catfish recovery,” with the market hitting bottom this year but prices mostly remaining flat until 2014. The looming shadow inventories of distressed properties are continuing to prevent prices from rebounding, he explains. Sharga, former senior vice president at RealtyTrac, says more than a million foreclosure actions failed to move forward this year due to delays, which will cause a delay in prices rebounding. Sharga made his comments during a talk at the Asian Real Estate Association of America conference last week in San Francisco. About 800,000 REOs remain on banks’ books, with three-quarters of those not yet listed for sale, Sharga says. What’s more, an additional 800,000 homes are in foreclosure, and 1.5 million loans are delinquent, HousingWire reports. Sharga says he expects monthly foreclosures to remain high through 2012, and REO inventories to stay elevated through 2013. Source: “Housing Market Hit Bottom: Former RealtyTrac Exec,” HousingWire (Sept. 30, 2011)

Appraisals Blamed for More Deals Falling Through

Appraisers are increasingly taking the heat for more transactions being canceled or delayed after more appraisals reportedly are coming through that don’t meet the contract price. In August, the National Association of REALTORS® reported that 18 percent of real estate professionals saw contracts fall through when lenders rejected loan applications or appraisals came in lower than expected. About 11 percent reported they had a contract canceled in the previous three months because of “low” appraisals. "When an appraisal comes in low, it puts doubt in the mind of the buyer as to the true value of that property," Richard Kassouf, the broker-owner of New Hope Realty in Brunswick, Ohio, told Cleveland.com. "And it gives them a crisis that they have to deal with, where they have to come up with more money for the down payment to allow that transaction to be completed. Or they have to negotiate the price down." Complaints from home owners filed nationwide about low appraisals are skyrocketing, according to states' commerce departments. But appraisers say it’s not their fault. They argue that many people just don’t realize how much home values have dropped since the housing boom. Plus, appraisals have become more challenging due to fewer sales available to use as comparables and the high number of foreclosures bringing down values. "Appraisers were blamed for the run-up of the market when prices were high, and now they're being blamed because prices are low," says Ken Chitester, a spokesman for the Appraisal Institute. "Both can't be true. Appraisers are doing the same thorough research and thoughtful analysis that they've always conducted. So, in short, don't shoot the messenger." Source: “In Rough Real Estate Market, Appraisers Feel Heat for Home Sales That Fall Apart or Lag Behind,” Associated Press Newswires (Oct. 2, 2011)

Incentives Attract Buyers, But Do They Close Deals?

Real estate professionals say incentives to sweeten a real estate deal are certainly good ways to generate buzz about a property, but the asking price is the real key to getting a home sold. Incentives to get home buyers’ attention have gotten lavish. Recent examples include a new BMW, season tickets to football games, a boat for waterfront properties, $3,000 gift cards at interior design studios, and even the home owners’ pet. "We're in a price war and a beauty contest," Tony Vehon, broker and owner of Weichert Realtors Lake Realty in Gold Canyon, Ariz., told Fox Business News. "Every home has to be priced right and look perfect. After that, a special incentive might drive traffic, especially if you offer something that grabs attention, something a little beyond the norm." Martha Thorn, a real estate pro with The Thorn Collection at Coldwell Banker Residential Brokerage in Tampa, Fla., told Fox Business News that one of her sellers for a home priced less than $200,000 tried to lure home buyers by offering up season tickets to the Tampa Bay Buccaneers’ football games. "The buyers were thrilled with the tickets, but that certainly wasn't the reason they bought the house," Thorn told Fox. "The most important thing is always the price." Price is still key, agrees Linda O'Koniewski, broker-owner of RE/MAX Heritage in Melrose, Mass. "An offer to pay condo fees for a year or so will definitely create some buzz, and at least get a buyer to take a second look at a property," O'Koniewski says. But she says sellers must realize that "no amount of marketing will make a dent if the price is not right. If you are not competitive on the price, you cannot sell your house." Source: “Do Home Sale Incentives Work?” Fox Business News (Sept. 30, 2011)

Fitch Upgrades Residential Credit Solutions' Servicer Ratings

Mortgage servicer Residential Credit Solutions (RCS) stands out from the crowd in today’s world of almost commonplace ratings downgrades and default servicing challenges. RCS was awarded two upgrades from Fitch Ratings Friday. The company’s residential primary servicer rating for subprime products was upgraded from ‘RPS3+’ to ‘RPS2-’ and its residential special servicing rating was bumped up from ‘RSS3+’ to ‘RSS2-’. Fitch said the rating actions reflect RCS’s “effective default capabilities and competitive performance metrics; focused, ‘high touch’ servicing approach; [and] effective foreclosure practices,” as well as the company’s strengthening financial condition. RCS operates its servicing platform from Fort Worth, Texas, with a servicing staff of 178 full-time employees. RCS also maintains a facility in Los Angeles for future growth. The company’s strategy remains focused on credit-sensitive and servicing-intensive residential mortgage assets. “Recent industry events and regulatory actions have brought attention to the need for more effective servicing of distressed portfolios,” said Dennis Stowe, RCS president and CEO. “RCS was purpose-built to focus on effective borrower outreach and communication,” Stowe added, “making significant investments in technology to ensure timely and consistent response to borrowers requesting assistance.” As of June 30, 2011, RCS’s servicing portfolio consisted of more than 29,200 loans totaling $4.8 billion. The company has doubled its portfolio over the last year. As recently as February 28, 2010, RCS serviced approximately 13,500 loans totaling $2.8 billion. “Everybody is worried about capacity in the industry,” Stowe commented, “and we’ve proven our ability to maintain our competitive performance even while growing our portfolio of distressed assets, both for our own investment and in servicing for others.” The current portfolio includes more than 17,100 subprime first and second lien mortgage loans. Approximately 70 percent of RCS’s portfolio is under special servicing arrangements. RCS’s loss mitigation department is staffed at approximately 150 loans per full-time employee. Once loans are referred to loss mitigation, they are assigned to individual agents for the life of the default. As Fitch explained, this approach helps to maximize loan-level knowledge, create accountability, and build rapport with the borrower in an effort to reach a resolution that avoids foreclosure. RCS utilizes a loss mitigation application it developed with a financial analytics technology firm. The application incorporates automated underwriting technology, investor-specific rules, and real-time credit bureau updates. Borrower financial data is automatically underwritten and processed against system rules for real-time workout recommendations and net present value (NPV) analysis for multiple loss mitigation programs simultaneously. “Fitch believes that RCS continues to maintain a capable servicing operation with the staff, procedures, controls, default management processes, and technology” to manage its portfolio in today’s high delinquency environment, the ratings agency said.

States Can Learn from New England's Foreclosure Prevention Programs

As delinquencies and impending foreclosures rose over the past several years, New England states responded with foreclosure prevention programs, generally falling into one of two categories: foreclosure mediation and financial assistance. Federal Reserve Bank of Boston’s New England Public Policy Center just released a report examining these state efforts and determining ways other states can learn from their examples. Five of the six New England states have their own mediation programs, and Massachusetts created a program allowing negotiation without a mediator. Mediation programs have the potential to help a broad range of homeowners because they do not impose credit or income requirements, as most financial assistance programs do, states policy analyst Robert Clifford in the report. Mediation programs vary greatly depending on state foreclosure laws. Of those who completed foreclosure mediation in Connecticut, 78.9 percent were able to evade foreclosure, according to the Fed report. In contrast, Maryland has only acquired a 10 percent participation rate in its mediation. Thus its effect is much less significant.The report points out that Connecticut is a judicial state, whereas Maryland is a non-judicial state. Additionally, Connecticut’s mediation program is automatic if the homeowner returns a form received with the foreclosure filing, whereas Maryland homeowners have to opt in to a mediation program on their own. “Many of Maryland’s challenges also reflect its opt-in approach, as well as a lack of early intervention,” the report states. The second type of foreclosure prevention, financial assistance, generally consists of a loan modification-specifically, reducing payments and interest rates while adding to the principal and term of the mortgage. Connecticut and Maine are the only New England states to offer financial assistance programs for borrowers facing foreclosure. Clifford says other states can learn from New England’s efforts to stem foreclosures. One of the most important elements of any foreclosure prevention program is early intervention. It is important to bring borrowers and servicers together early in the foreclosure process, Clifford says. Second, Clifford suggests maximizing participation by offering automatic enrollment in mediation programs and removing restrictive qualification requirements for financial assistance programs. States can leverage their judicial systems or housing finance authorities to administer programs. Clifford also recommends states track the success of their programs and determine any weaknesses to further develop programs and increase their reach. The Boston Fed report comes just after Florida Supreme Court Judge Charles T. Canaday ordered an assessment of the success of its mediation program. Canaday is also requiring recommendations for the management of pending foreclosures “if the mandate for managed mediation in these cases is eliminated.”

Job Loss Could Put One in Three Out of Their Home

One in three Americans would be unable to make their mortgage or rent payment beyond one month if they lost their job, according to the results of a national survey taken in mid-September. Despite being more affluent, the poll found that even those with higher annual household incomes indicate they are not guaranteed to make their next housing payment if they lost their source of income. Ten percent of survey respondents earning $100K or more a year say they would immediately miss a payment. The survey was conducted on behalf of a financial consortium comprised of the Certified Financial Planner Board of Standards, Financial Planning Association, Foundation for Financial Planning, and the U.S. Conference of Mayors. Sixty-one percent of those surveyed said if they were handed a pink slip, they would not be able to continue to make their mortgage or rent payment longer than five months. Job loss has become the primary driver of mortgage defaults. With the national unemployment rate holding above 9 percent for five straight months and not expected to drop by any significant measure in the foreseeable future, the state of the labor market is one of the biggest obstacles for struggling homeowners and their lenders. A number of programs at both the national and state level have been launched to assist unemployed homeowners, but so far the expected results haven’t materialized. HUD has told DSNews.com that it does not expect to meet the original goal set for the $1 billion Emergency Homeowners’ Loan Program (EHLP) of subsidizing 30,000 unemployed homeowners’ mortgage payments. The New York Times reports that fewer than 15,000 borrowers are likely to receive EHLP assistance and more than half of the money allotted for the program will go unspent. An analysis of government records by USA Today shows that a separate federal program which provides money to individual states to assist homeowners who’ve lost their jobs has been slow in ramping up. Through the Treasury’s Hardest Hit Fund, 18 states were awarded a total of $7.6 billion to develop their own localized programs to counter unemployment and falling home prices in the fight against foreclosure. USA Today says only about 1 percent of this money has actually been distributed to distressed homeowners, 16 months after the program was launched. The news agency found that as of June 30th, 17 states had used the federal funds to help about 7,500 homeowners. USA Today noted that several states are just now getting their individual programs off the ground and dispersing the money to qualified applicants. The states have until 2017 to use their allotted funds.