Thursday, November 17, 2011

Gov't Announces More Refinancing Program Details

This week, the federal government released more details about its revamped Home Affordable Refinance Program, which sets out to allow more home owners to refinance their mortgage and take advantage of ultra-low rates. The program is geared to those who are current on their mortgage but may be underwater, owing more on their homes than they are currently worth.

Here are some more details about the changes coming to HARP:

Borrowers must be current on their loan and have no delinquencies in the last six months. A borrower can be 30 days late, however, on one payment in months seven to 12 of the past year. Borrowers much have 20 percent or less of equity in their homes to participate.
Loans must be owned or guaranteed by Fannie Mae or Freddie Mac before May 31, 2009. Borrowers can see if Fannie Mae or Freddie Mac backs their mortgage by visiting or
The revamped HARP program will begin Dec. 1, 2011, and run until Dec. 31, 2013. Participating in the program is voluntary for lenders.

Source: “Mortgage-Refinancing Program Undergoes Changes,” Chicago Tribune (Nov. 16, 2011)

Housing Picture Expected to Brighten in 2012

Better times are ahead for the real estate market in the new year, according to several forecasts and recent surveys.

Fiserv, a financial information services firm, predicts that 95 percent of the 384 metro areas it tracks will see prices rise in 2012.

Many surveys and economists are forecasting a very modest increase for the housing market in the new year, but after several years of dropping prices and rising foreclosures, even the slightest increase would signal a glimmer of hope for the market. In a survey by MacroMarkets of 100 economists and real estate professionals, respondents reported home values will likely rise slightly at 0.25 percent in the new year.

The real estate market still faces a large backlog of foreclosures that it must work through in many markets. As such, price gains through 2015 will likely just be around 1.1 percent, according to the survey. However, this is a reversal after a forecast of 2.8 percent decline in median home values for this year.

Foreclosures continue to weigh on many markets and are preventing home values from stabilizing, economists say.

"The water is very deep in the living room, but it's no longer getting deeper and is starting to recede,” says Mark Fleming, CoreLogic's chief economist.

Low interest rates on mortgages mixed with more affordable housing for families in the median income range are expected help the market in its rebound in 2012, economists say.

Source: “A Smaller House Will Make a Big Difference,” Money Magazine (Nov. 14, 2011)

Freddie Mac's Winter REO Sales Promo Pays Extra to Selling Agents

Freddie Mac has announced the launch of a nationwide winter sales promotion to move its inventory of foreclosed homes and put them back into the hands of responsible homeowners purchasing a primary residence.

HomeSteps, the GSE’s REO sales division, will pay selling agents a $1,000 bonus for offers received on Freddie Mac-owned homes in select locations.
Initial offers must be received between November 15, 2011 and January 31, 2012 with escrow closed on or before March 15, 2012. The offer is valid only on HomeSteps homes sold to owner-occupant buyers.
Selling agent bonuses will be offered on HomeSteps sales in the District of Columbia and the following 28 states: Colorado, Connecticut, Delaware, Iowa, Idaho, Illinois, Indiana, Massachusetts, Maryland, Maine, Michigan, Minnesota, Montana, North Dakota, Nebraska, New
Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, South Dakota, Utah, Virginia, Vermont, Wisconsin, West Virginia, and Wyoming.
The GSE is also extending additional incentives to its owner-occupant buyers. Throughout the winter sales promotion, HomeSteps will pay up to 3 percent of the final sales price towards the buyer’s closing costs.
Some HomeSteps homes are also eligible for a two-year Home Protect limited warranty that covers electrical, plumbing, air conditioning, heating, and other major systems and appliances. Home Protect also provides discounts of up to 30 percent on appliance purchases.
Freddie Mac held 59,596 single-family REO homes as of the end of September. According to the company, its HomeSteps properties accounted for about 4.4 percent of the nation’s inventory of foreclosed homes as of September 30, 2011.
The GSE says the pace of REO acquisitions remains slow due to continued delays in the foreclosure process – delays the company expects will continue into 2012. Freddie Mac acquired 24,385 REO homes through foreclosure during the third quarter of this year.
Currently, the GSE is selling more homes than it’s taking in. REO sales totaled 25,387 over the third quarter period.
Seventy-percent percent of HomeSteps homes are purchased by buyers intending to live in the homes as owner-occupants. Freddie Mac says its REOs sell for an average of 94 percent of the estimated market price

CRE Pricing Recovery Continues With September Rebound

Commercial real estate prices resumed their steady if modest rise in September following a pause the previous month, helping lift the CoStar National Composite Index to a nearly 1% gain in pricing for the third quarter of 2011 over the previous three months.

Two main factors, the ongoing decline in distressed sales activity and the recovery in pricing of retail and multifamily sales -- drove the 0.9% increase for the quarter and the modest 0.4% bump, according to the latest release of the CoStar Commercial Repeat Sale Index (CCRSI).

CoStar counted 825 sales pairs for September, 682 general property purchases and 143 investment grade deals, in slightly lower transaction activity from the previous month. By comparison, only 385 transactions were recorded in January 2009, the bottom of the last downturn, and the September figure is within the historical range of the real estate boom period from 2004 to 2008.

Total deal dollar volume declined slightly in September by 1.2% from its six-month average, chiefly reflected in the general property index, which fell 5.9%, while investment grade volume remained at about par with its six-month average.

Distress sales accounted for 25% of repeat-sale transactions in September and have declined steadily as a percentage of total sales from a peak of 35.4% in March 2011. While distress sales have drifted down over the past six months, the overall level remains high, suggesting that distress continues to be a significant factor in CRE pricing

Wednesday, November 16, 2011

House Committee Votes to Suspend Bonus Pay for GSE Execs

The House Financial Services Committee voted in favor of a bill Tuesday that would prohibit Fannie Mae and Freddie Mac from paying out future bonuses and suspend the 2011 compensation packages that have been approved by their regulator.

The Equity in Government Compensation Act (H.R. 1221) passed the committee by a vote of 52 to 4. It now moves to the full House for consideration.
Earlier this month, it was disclosed in public filings that the Federal Housing Finance Agency (FHFA) and Treasury had signed off on $5.6 million in compensation for Fannie Mae’s top executive and $5.4 million for Freddie Mac’s.
According to a statement from the House Financial Services Committee, under the approved bill, the chief executives at the GSEs could only have earned $218,978 this year. The measure would align compensation for executives and employees at Fannie Mae and Freddie Mac with the pay practices at federal financial regulatory agencies.
Rep. Spencer Bachus (R-Alabama), chairman of the House Financial Services Committee, is the author of the bill. He called taxpayers’ support of the GSEs “the biggest bailout
in history,” and the executives’ compensation and bonuses “unfair, unreasonable, and unjust to the taxpayers whose assistance is the only thing keeping Fannie and Freddie afloat.”
On the other side of Capitol Hill the very same day the House committee passed its measure, the Senate Banking Committee held an oversight hearing on FHFA, and executive pay at the GSEs was one of the main topics of conversation.
Edward DeMarco, acting director of FHFA, was the star witness, and he used the spotlight to defend his decision to sign off on the multi-million dollar bonus packages.
“Others may believe that this sort of talent is easily and quickly hired at compensation far below that of competing private firms, but I do not,” DeMarco told lawmakers.
“This is a question of judgment,” he went on to say, “judgment exercised by balancing the need to limit compensation as much as possible while ensuring stable and continuous operations at the enterprises in support of the nation’s housing finance system.”
As DeMarco’s testimony continued, he pointed the finger instead at members of Congress.
“The best way to address concerns with executive compensation is action by Congress to reform the housing finance system and dissolve the conservatorships,” DeMarco said.
The Senate is also expected to take up a bill addressing GSE pay. Sens. Jay Rockefeller (D-West Virginia) and John McCain (R-Arizona) announced last week that they intend to propose a measure prohibiting Fannie Mae and Freddie Mac executives from receiving future multi-million dollar bonuses as long as the government-backed mortgage companies remain in federal conservatorship

Industry Completes 5M Loan Mods Since 2007

HOPE NOW announced a major milestone Tuesday-the completion of 5 million mortgage loan modifications since the group began tracking modifications in 2007.

HOPE NOW is a voluntary alliance of private sector servicers, investors, insurers, and nonprofit counselors.
“When HOPE NOW started reporting data at the end of 2007, loan modifications were barely measurable,” said HOPE NOW executive director Faith Schwartz in a press release Tuesday. “Homeowners either paid their mortgages or forfeited their homes.”
She continued, “However, over the past four years the housing crisis has taught us to re-think helping distressed homeowners through an unprecedented level of collaboration, funding, manpower and expanded resources.”
According to HOPE NOW’s third quarter data, the industry completed 4.97 million permanent modifications since 2007, and since then, the industry has brought the number past 5 million.
More than 4.11 million of these modifications were completed through private-sector programs, while 856,974 were completed through the government’s Home Affordable Modification Program (HAMP).
While Schwartz and members of the alliance noted the significant milestone in a conference call Tuesday after-
noon, their accomplishments were tempered by the fact that the housing market remains weak and millions of homeowners still struggle to pay their mortgages.
“We know that much more needs to be done,” Schwartz said during the conference call.
Steve Bartlett, CEO of the Financial Services Roundtable, echoed her sentiment, saying, “We’re not declaring victory today.” Still he called the milestone “quite significant,” especially considering fewer than 20 percent of all modified loans redefault.
Colleen Hernandez, president and CEO of the Homeownership Preservation Foundation also spoke on the conference call. She called the 5 million mark a “halfway point,” adding that “we cannot lose site of the current situation.”
According to HOPE NOW’s third quarter data, loan modifications completed in the quarter totaled 256,000. About 162,000 of these were proprietary modifications, while 93,903 were completed through HAMP.
Eighty-two percent of all proprietary modifications left borrowers with reduced principal and interest payments.
Almost the same percentage – 81 percent – were fixed-rate modifications with initial fixed periods of five years or more.
Also, 66 percent of proprietary modifications included principal and interest payment reductions of at least 10 percent.
HOPE NOW reported some positive findings in the market in its third quarter report, including an 11 percent decline in delinquencies from the same quarter last year.
Foreclosure starts also declined over the year, falling 15 percent to 600,000 in the third quarter of this year.
Foreclosure sales saw an even greater decline , falling 36 percent from the third quarter of 2010 to the third quarter of 2011. Total foreclosure sales for the recent quarter were 200,000, according to HOPE NOW.

FHA Reserves Sink Further Below Legal Limit Amid Talk of Bailout

An annual audit of the Federal Housing Administration’s (FHA) books has concluded there is a 50-50 chance the government mortgage insurer will need a bailout from taxpayers within the next 12 months.

HUD released a report to Congress Tuesday on FHA’s 2011 fiscal year, which ended September 30. It shows the agency’s cash reserves have fallen to $2.6 billion, down from $4.7 billion at the end of FY 2010.
The decline has pushed FHA’s capital reserve ratio further below the legal limit mandated by Congress. It has deteriorated to 0.24 percent. By federal statute, FHA’s capital reserve ratio should be at a minimum of 2 percent. It was 0.50 percent as of last September.
The capital reserve ratio measures FHA’s cash on hand relative to the number of all outstanding mortgages insured by the federal agency. It’s intended to gauge the amount of cash reserves held by the agency beyond what’s needed to cover projected losses from loan defaults.
FHA’s capital reserve ratio has come in below the congressional requirement of 2 percent for three years now. This latest reading of 0.24 percent is the lowest in the agency’s 77-year history.
HUD’s report on the agency’s deteriorating bottom line comes just as lawmakers are advancing a bill that would
reinstate higher conforming loan limits for FHA, and most suspect would increase market share for the agency.
An amendment has been approved as part of a broader federal funding bill which would raise FHA loan limits to as much as $729,750 in high-cost markets through 2013. These higher loan limits expired for FHA, as well as the GSEs, on September 30. The bill, which is scheduled for a vote by both congressional chambers later this week, would restore the higher loan limits for FHA, but not for Fannie Mae and Freddie Mac.
As the housing crisis set in and traditional credit lines began to dry up, FHA stepped in. The agency’s market share has jumped from less than 5 percent during the pre-crisis boom to more than 30 percent today. FHA’s active single-family portfolio now stands at more than $1 trillion.
But the same market conditions that have buoyed the agency’s prominence have contributed to large losses, with high levels of loan defaults, declining home prices, and delayed claim resolutions due to lengthening foreclosure timelines.
FHA is the only government agency that is completely self-funded. Although it currently operates at no cost to taxpayers, there is an implicit guarantee that U.S. taxpayers will come to the agency’s aid if needed.
According to FHA’s independent auditors, the principal risk confronting FHA’s balance sheet is a continued decline in home prices into 2012 and even into 2013, which would bring down the value of the current portfolio.
Using scenario projections from Moody’s Analytics, the auditors note that should home prices fall by another 9 percent next year, FHA would need $13 billion from taxpayers to replenish its coffers.
On the other hand, should home prices begin to recover in 2012, with robust growth beginning in 2013, FHA’s would be able to bring its capital reserve ratio above the 2 percent threshold by 2014, all on its own.

Fannie and Freddie Detail New HARP Guidelines

Fannie Mae and Freddie Mac have released highly anticipated guidelines for the revised Home Affordable Refinance Program (HARP).

Both GSEs have posted details of the program modifications and procedural changes on their respective business sites for mortgage servicers to follow (Fannie’s, Freddie’s).
Among the key program revisions, the GSEs have eliminated or raised the loan-to-value (LTV) cap, and relaxed representation and warranty stipulations – changes that officials expect to at least double the number of homeowners with a HARP-refinanced mortgage. Since the program was launched in 2009, just under 900,000 borrowers have participated.
Negative equity typically excludes a homeowner from refinancing through traditional channels. Removing previous LTV ceilings will allow homeowners who are severely underwater due to plummeting property values to take out new loans at today’s lower interest rates. There are, however, some LTV conditions depending on loan type.
There are no LTV restrictions for fixed-rate mortgages with terms up to 30 years, including those with terms of 15 years.
For fixed-rate loans with terms between 30 and 40 years, LTV is limited to 105 percent. Likewise, a 105 percent LTV cap has been placed on adjustable-rate mortgages (ARMs) with initial fixed periods of five years or more and terms up to 40 years.
Any borrower with an LTV ratio below 80 percent is not eligible for HARP.
As previously announced, across the board, the original mortgage must have been sold to Fannie or Freddie prior to April 1, 2009.
In the October notice announcing their intent to modify HARP to increase participation, the GSEs said they would “waive certain representations and warranties” on loans refinanced through the program. Analysts said at the time
that depending on what exceptions would be made, such a move could spark increased competition among lenders to refinance borrowers through HARP.
In Tuesday’s guidance, the GSEs provided specifics on which liabilities would be lifted and noted that the rep and warranty adjustment is one of the most important components of the new program.
The lender will not be responsible for any of the representations and warranties associated with the original loan.
The lender is also relieved of the standard underwriting representations and warranties with respect to the new mortgage loan as long as the data in the case file is complete and program instructions are followed for collecting information on income, employment, assets, and fieldwork.
The lender is not required to make any representation or warranty as to value, marketability, or condition of the subject property unless they obtain a new appraisal.
Lenders will, however, be held accountable for any fraudulent activities.
Administration officials are hoping that eliminating the risk associated with reps and warranties – whether transferred from the original loan or on the new loan – will spark healthy competition among lenders to help homeowners get into the program. And Fannie and Freddie are making it easier for the competition to flourish.
The GSEs are modifying their policies to allow lenders to solicit borrowers with Fannie- and Freddie-owned mortgages for a refinance. The only condition is that the lender “simultaneously applies the same advertising and solicitation activities” to borrowers of both GSEs, and for loans both owned or securitized by the GSEs.
In the new guidelines, the GSEs detail specific language that must be included in any borrower solicitation material.
Regarding program eligibility as it relates to delinquencies, the borrower must not have been behind on their payments at all within the most recent six-month period, and had no more than one 30-day delinquency within the last year.
The GSEs are also removing the requirement that the borrower (on the new loan) meet the standard waiting period following a bankruptcy or foreclosure. The requirement that the original loan must have met the bankruptcy and foreclosure policies in effect at the time the loan was originated is also being removed.
The new HARP program has been extended through December 31, 2013.