Showing posts with label EAST MEADOW. Show all posts
Showing posts with label EAST MEADOW. Show all posts
Monday, February 27, 2012
Moody's Analytics Outlines Settlement Impact for Banks and Borrowers
After more than a year of intense negotiations, 49 state attorneys general and the nation’s five largest mortgage servicers reached a $25 billion settlement on February 9. While the agreement allotted specific amounts to go towards certain areas of relief for borrowers, including $10 million to write down principal on underwater mortgages, many are wondering how the decision between federal and state officials and the nation’s top servicers will impact the housing market.
Moody’s Analytics released a report with an analysis of the settlement’s expected impact on banks and borrowers.
Impact on banks
As for the servicers included in the settlement – Bank of America, Wells Fargo, J.P. Morgan and Citigroup, and Ally Financial – the report stated, “the settlement will have little to no financial effect on the banks and will remove some of the uncertainty surrounding mortgage servicing.”
More specifically, the report stated, “Bank of America, Wells Fargo, J.P. Morgan, and Citigroup have each publicly disclosed that the settlement will have little to no additional financial effect on the banks, outside of a modest reduction in interest income over the life of any modified loans.”
This is in part due to the fact that “existing litigation and loan-loss reserves mostly cover the related costs” for the banks.
The banks are still vulnerable to other lawsuits outside of the settlement from individuals or through a class action suit.
The settlement also includes new standards for how banks service loans and practice foreclosure proceedings, including a ban on robo-signing.
Impact on borrowers
The report projects that foreclosure timelines will be lengthened due to the requirement for servicers to review loans for principal forgiveness, causing a delay for servicers when referring loans to foreclosure. According to the report, Florida and California should be more significantly affected since they were awarded the highest proportion of funds from the settlement.
Borrowers will have greater protection since servicers and insurance providers will not be able to charge high premiums when force placing insurance and must instead charge commercially reasonably prices. A third-party review process will also be set in place offering more protection to borrowers since it will hold servicers accountable for meeting certain goals and deadlines.
The Mood Analytics stated that “the reviews will likely assess whether or not servicers are making reasonable and timely modification decisions on behalf of both borrowers and investors and are implementing the key operation provisions of the settlement.”
Out of the $25 billion, the settlement allocates $10 billion for principal reduction; $7 billion in relief for other types of support including forbearance and short sales; $3 billion for refinancing underwater homes; $1.5 billion for those wrongfully foreclosed on between 2008 and 2011; and $3.5 billion for state housing programs.
While the settlement proved to be a disappointment to some since it does not include Fannie Mae and Freddie Mac loans, Moody’s Analytics stated that the settlement is still significant.
“The number of distressed homeowners helped is modest in the context of the estimated 14.6 million underwater homeowners, a sore point for many critics of the settlement. Nonetheless, the number is significant,” stated Moody’s Analytics in the written report. “Keeping even half a million households out of foreclosure or a short sale would be enough to curb the flow of foreclosed, vacant properties into the market, and thus relieve downward pressure on house prices nationwide and allowing prices to stabilize this year.”
The Moody’s Analytics also expects to see Nevada, Arizona, California, Florida, Ohio, and Michigan to benefit the most since those states experienced the worse price declines and have the highest share of homes underwater.
Moody’s Analytics released a report with an analysis of the settlement’s expected impact on banks and borrowers.
Impact on banks
As for the servicers included in the settlement – Bank of America, Wells Fargo, J.P. Morgan and Citigroup, and Ally Financial – the report stated, “the settlement will have little to no financial effect on the banks and will remove some of the uncertainty surrounding mortgage servicing.”
More specifically, the report stated, “Bank of America, Wells Fargo, J.P. Morgan, and Citigroup have each publicly disclosed that the settlement will have little to no additional financial effect on the banks, outside of a modest reduction in interest income over the life of any modified loans.”
This is in part due to the fact that “existing litigation and loan-loss reserves mostly cover the related costs” for the banks.
The banks are still vulnerable to other lawsuits outside of the settlement from individuals or through a class action suit.
The settlement also includes new standards for how banks service loans and practice foreclosure proceedings, including a ban on robo-signing.
Impact on borrowers
The report projects that foreclosure timelines will be lengthened due to the requirement for servicers to review loans for principal forgiveness, causing a delay for servicers when referring loans to foreclosure. According to the report, Florida and California should be more significantly affected since they were awarded the highest proportion of funds from the settlement.
Borrowers will have greater protection since servicers and insurance providers will not be able to charge high premiums when force placing insurance and must instead charge commercially reasonably prices. A third-party review process will also be set in place offering more protection to borrowers since it will hold servicers accountable for meeting certain goals and deadlines.
The Mood Analytics stated that “the reviews will likely assess whether or not servicers are making reasonable and timely modification decisions on behalf of both borrowers and investors and are implementing the key operation provisions of the settlement.”
Out of the $25 billion, the settlement allocates $10 billion for principal reduction; $7 billion in relief for other types of support including forbearance and short sales; $3 billion for refinancing underwater homes; $1.5 billion for those wrongfully foreclosed on between 2008 and 2011; and $3.5 billion for state housing programs.
While the settlement proved to be a disappointment to some since it does not include Fannie Mae and Freddie Mac loans, Moody’s Analytics stated that the settlement is still significant.
“The number of distressed homeowners helped is modest in the context of the estimated 14.6 million underwater homeowners, a sore point for many critics of the settlement. Nonetheless, the number is significant,” stated Moody’s Analytics in the written report. “Keeping even half a million households out of foreclosure or a short sale would be enough to curb the flow of foreclosed, vacant properties into the market, and thus relieve downward pressure on house prices nationwide and allowing prices to stabilize this year.”
The Moody’s Analytics also expects to see Nevada, Arizona, California, Florida, Ohio, and Michigan to benefit the most since those states experienced the worse price declines and have the highest share of homes underwater.
Nearly 1 in 4 Households Use Over 1/2 of Income for Housing Costs
Even with falling home prices, a study from the Center for Housing Policy found that affordability is still becoming increasingly out of reach for homeowners and renters. According to the 2012 Housing Landscape report released by the Center, the share of working households paying more than half their income for housing between 2008 and 2010 went up from 21.8 percent to 23.6 percent.
Source: Center for Housing Policy
As home prices dropped between 2008 and 2010, working homeowners also dealt with shrinking paychecks. For working homeowners over the two-year period, incomes dropped twice as much as housing costs, according to the study.
Jeffrey Lubell, executive director of the Whington-based Center, said this was primarily due to a drop in average hours worked among moderate-income homeowners.
“The data show that homeowners have been hit hard by the housing crisis in more ways than just lost equity,” Lubell explained. “Many working homeowners have been laid off or had their hours cut.”
According to the study, the monthly median income for working homeowners’ fell from $43,570 in 2008 to $41,413 in 2010, which is about a 5 percent decrease. The median number of hours worked per week dropped from 50 to 48 between the two years, which partly explains the decrease in income.
For renters, the monthly median income fell 4 percent from $31,570 to $30,229 between the two years. Housing costs for renters also increased, up by 4 percent over the same period.
Laura Williams, author of the report, said rent rose because of increased demand for rental housing, which was partly encouraged by the housing market crises.
“More and more people are interested in renting,” Williams said. “Some prefer it because it allows them to be more mobile in a tough job market. Others are postponing purchasing a home or facing difficulties obtaining a mortgage. Given the long lead times involved in responding to increased demand with increased supply, the rental market has tightened somewhat and rents increased.”
The five states with highest share of working households with a severe housing cost burden in 2010 were California (34%), Florida (33%), New Jersey (32%), Hawaii (30%), and Nevada (29%).
The five metropolitan areas with the highest share of working households with a severe housing cost burden in 2010 were Miami-Fort Lauderdale-Pompano Beach, Florida (43%); Los Angeles-Long Beach-Santa Ana, California (38%); San Diego-Carlsbad-San Marcos, California (37%); Riverside-San Bernardino-Ontario, California (35%); and New York-Northern New Jersey-Long Island, New York-New Jersey-Pennsylvania (35%).
Source: Center for Housing Policy
As home prices dropped between 2008 and 2010, working homeowners also dealt with shrinking paychecks. For working homeowners over the two-year period, incomes dropped twice as much as housing costs, according to the study.
Jeffrey Lubell, executive director of the Whington-based Center, said this was primarily due to a drop in average hours worked among moderate-income homeowners.
“The data show that homeowners have been hit hard by the housing crisis in more ways than just lost equity,” Lubell explained. “Many working homeowners have been laid off or had their hours cut.”
According to the study, the monthly median income for working homeowners’ fell from $43,570 in 2008 to $41,413 in 2010, which is about a 5 percent decrease. The median number of hours worked per week dropped from 50 to 48 between the two years, which partly explains the decrease in income.
For renters, the monthly median income fell 4 percent from $31,570 to $30,229 between the two years. Housing costs for renters also increased, up by 4 percent over the same period.
Laura Williams, author of the report, said rent rose because of increased demand for rental housing, which was partly encouraged by the housing market crises.
“More and more people are interested in renting,” Williams said. “Some prefer it because it allows them to be more mobile in a tough job market. Others are postponing purchasing a home or facing difficulties obtaining a mortgage. Given the long lead times involved in responding to increased demand with increased supply, the rental market has tightened somewhat and rents increased.”
The five states with highest share of working households with a severe housing cost burden in 2010 were California (34%), Florida (33%), New Jersey (32%), Hawaii (30%), and Nevada (29%).
The five metropolitan areas with the highest share of working households with a severe housing cost burden in 2010 were Miami-Fort Lauderdale-Pompano Beach, Florida (43%); Los Angeles-Long Beach-Santa Ana, California (38%); San Diego-Carlsbad-San Marcos, California (37%); Riverside-San Bernardino-Ontario, California (35%); and New York-Northern New Jersey-Long Island, New York-New Jersey-Pennsylvania (35%).
Short Sales Bring 24% Greater Returns than Foreclosures
The real estate professionals at Massachusetts-based McGeough Lamacchia Realty have been proponents of short sales for quite some time, insisting that everyone comes out ahead when a short sale is achieved as opposed to a foreclosure. Now they’re sharing the facts that back up their claim.
On average a home sold through short sale brings a 24 percent greater return than a foreclosed property, according to recent findings from McGeough Lamacchia Realty.
“This means the banks are losing an average of $43,000 for every foreclosure sale compared to what they would have made in a short sale,” said a blog post on the company’s website.
The firm reviewed prices for short sale and foreclosure sale properties in 2010 and 2011 in Boston, Phoenix, Tuscon, Southern California, and Southwest Florida.
While banks often offer incentives to homeowners who pursue a short sale, “more needs to be done to promote short sales,” McGeough Lamacchia said.
Specifically, the firm points out that Fannie Mae and Freddie Mac are not offering the cash incentives for short sales that are now standard through the Home Affordable Foreclosure Alternatives program.
“Fannie Mae and Freddie Mac need to do more to promote short sales and make it easier for distressed homeowners to do a short sale and avoid foreclosure,” McGeough Lamacchia said in their blog post.
On average a home sold through short sale brings a 24 percent greater return than a foreclosed property, according to recent findings from McGeough Lamacchia Realty.
“This means the banks are losing an average of $43,000 for every foreclosure sale compared to what they would have made in a short sale,” said a blog post on the company’s website.
The firm reviewed prices for short sale and foreclosure sale properties in 2010 and 2011 in Boston, Phoenix, Tuscon, Southern California, and Southwest Florida.
While banks often offer incentives to homeowners who pursue a short sale, “more needs to be done to promote short sales,” McGeough Lamacchia said.
Specifically, the firm points out that Fannie Mae and Freddie Mac are not offering the cash incentives for short sales that are now standard through the Home Affordable Foreclosure Alternatives program.
“Fannie Mae and Freddie Mac need to do more to promote short sales and make it easier for distressed homeowners to do a short sale and avoid foreclosure,” McGeough Lamacchia said in their blog post.
Housing Fix: Minority Group Unveils $1.2 Billion Industry-Led Program
The National Association of Real Estate Brokers, Inc. (NAREB) announced the launch of a 25-city, $1.2 billion REO and foreclosure mitigation initiative called the Homeowner’s Assurance Program (HAP).
The program is designed to address the devastating effects of foreclosures on communities across America. HAP is a non-governmental, industry-led solution to the nation’s housing crisis.
NAREB was formed in 1947 by African American real estate professionals and is the oldest minority trade group in the United States. The organization has a vast network of industry professionals including: Realtists, sales agents, appraisers, mortgage brokers, and loan officers as well as practical experts in pre- and post-counseling, loss mitigation, foreclosure, property management, housing construction, and development.
NAREB and its professional network will serve as the “boots on the ground” for HAP, providing the agent infrastructure to manage, market, and dispose of nonperforming loans and REO assets acquired under the program. Targeted buyers include first-time homebuyers and others who are caught in the credit crunch and having trouble purchasing a home.
Private and Wall Street investors are providing the $1.2 billion in initial capital for the program roll-out in 25 markets. HAP’s deployment of capital to purchase, renovate, and sell REO properties will also generate jobs and income for real estate-related small businesses in the targeted markets.
A beta test is already taking place in the Atlanta metropolitan area. The official roll-out of the program in the second quarter of this year will expand HAP to the Los Angeles, Houston, Miami, and Baltimore markets.
“The goal of HAP is to bring back the American Dream to millions of people throughout the nation,” said Julius Cartwright, president of NAREB.
“We’re seeing a wholesale eviction of families, and tens of thousands of vacant and blighted properties in cities that have been historically stable homeownership communities,” Cartwright said. “We have the experience, expertise, and tools to provide a ‘boots on the ground’ effort to identify and screen qualified buyers for these properties, and help sustain or rebuild impacted neighborhoods.”
The program will be spearheaded by a new national nonprofit organization bearing the same name, Homeowner’s Assurance Program LLC. Its board members will include representatives from minority real estate, education, and business communities. The principals of NAREB and SRP Development, one of the private investment companies directly involved in the project, will serve as the managing members of Homeowner’s Assurance Program LLC.
Also part of the initiative are MST Investment Advisory Services and 24 Asset Management Corporation, which have been selected as the platform managers to oversee all asset management activities for HAP, provide capital audit controls, and manage day-to-day operations.
SRP Development, MST Investment Advisory Services, and 24 Asset Management are all minority-owned companies.
HAP will seek to acquire properties from banks as well as government agencies, including HUD, the FDIC, and the government-run GSEs Fannie Mae and Freddie Mac.
“We welcome NAREB’s initiative,” commented Ed Jennings Jr., HUD southeast regional administrator.
HUD’s REOs are initially offered to owner-occupants. Following the priority period for these buyers, listings of unsold properties are opened up to investors.
“We are pleased to hear NAREB’s interest in buying HUD properties that have been on the market for more than four months, and their comprehensive approach of partnering with other entities to get them back into move-in condition,” Jennings said.
He also noted that HAP plans to use HUD-approved counselors to prepare buyers for homeownership.
NAREB announced the launch of HAP on Friday at its 65th Annual Mid-Winter Conference, which kicked off February 21 and runs through February 25.
The program is designed to address the devastating effects of foreclosures on communities across America. HAP is a non-governmental, industry-led solution to the nation’s housing crisis.
NAREB was formed in 1947 by African American real estate professionals and is the oldest minority trade group in the United States. The organization has a vast network of industry professionals including: Realtists, sales agents, appraisers, mortgage brokers, and loan officers as well as practical experts in pre- and post-counseling, loss mitigation, foreclosure, property management, housing construction, and development.
NAREB and its professional network will serve as the “boots on the ground” for HAP, providing the agent infrastructure to manage, market, and dispose of nonperforming loans and REO assets acquired under the program. Targeted buyers include first-time homebuyers and others who are caught in the credit crunch and having trouble purchasing a home.
Private and Wall Street investors are providing the $1.2 billion in initial capital for the program roll-out in 25 markets. HAP’s deployment of capital to purchase, renovate, and sell REO properties will also generate jobs and income for real estate-related small businesses in the targeted markets.
A beta test is already taking place in the Atlanta metropolitan area. The official roll-out of the program in the second quarter of this year will expand HAP to the Los Angeles, Houston, Miami, and Baltimore markets.
“The goal of HAP is to bring back the American Dream to millions of people throughout the nation,” said Julius Cartwright, president of NAREB.
“We’re seeing a wholesale eviction of families, and tens of thousands of vacant and blighted properties in cities that have been historically stable homeownership communities,” Cartwright said. “We have the experience, expertise, and tools to provide a ‘boots on the ground’ effort to identify and screen qualified buyers for these properties, and help sustain or rebuild impacted neighborhoods.”
The program will be spearheaded by a new national nonprofit organization bearing the same name, Homeowner’s Assurance Program LLC. Its board members will include representatives from minority real estate, education, and business communities. The principals of NAREB and SRP Development, one of the private investment companies directly involved in the project, will serve as the managing members of Homeowner’s Assurance Program LLC.
Also part of the initiative are MST Investment Advisory Services and 24 Asset Management Corporation, which have been selected as the platform managers to oversee all asset management activities for HAP, provide capital audit controls, and manage day-to-day operations.
SRP Development, MST Investment Advisory Services, and 24 Asset Management are all minority-owned companies.
HAP will seek to acquire properties from banks as well as government agencies, including HUD, the FDIC, and the government-run GSEs Fannie Mae and Freddie Mac.
“We welcome NAREB’s initiative,” commented Ed Jennings Jr., HUD southeast regional administrator.
HUD’s REOs are initially offered to owner-occupants. Following the priority period for these buyers, listings of unsold properties are opened up to investors.
“We are pleased to hear NAREB’s interest in buying HUD properties that have been on the market for more than four months, and their comprehensive approach of partnering with other entities to get them back into move-in condition,” Jennings said.
He also noted that HAP plans to use HUD-approved counselors to prepare buyers for homeownership.
NAREB announced the launch of HAP on Friday at its 65th Annual Mid-Winter Conference, which kicked off February 21 and runs through February 25.
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