Friday, March 9, 2012

5 Housing Markets Showing Price Appreciation

While home prices are starting to show more signs of stabilizing, some states are already seeing prices start to climb. The states with the highest price appreciation in January, according to new data released by CoreLogic, are:

South Dakota: prices rose 5.7%
North Dakota: up 4%
West Virginia: up 4%
Montana: up 3.6%
Michigan: up 3%

Not all states fared as well for the month, however. According to CoreLogic’s report, overall home prices in January, which includes distressed sales, dropped 3.1 percent compared to a year earlier.

"Although home price declines are slowly improving and not far from the bottom, home prices are down to nearly the same levels as 10 years ago," said Mark Fleming, chief economist for CoreLogic.

The states that saw the biggest price depreciation in January was Illinois, where home prices were down 8.7 percent for the month.

Source: “Home Prices at Levels of 10 Years Ago: CoreLogic,” HousingWire (March 7, 2012)

Foreclosure Backlogs Starting to Clear, Report Says

Foreclosure starts rose 28 percent while foreclosure sales soared 29 percent in January compared to the previous month, according to the latest Lender Processing Services’ January Mortgage Monitor report.

The rise in foreclosures in January is a sign that foreclosure backlogs are beginning to clear, which is considered a positive, necessary step in the real estate market’s recovery, housing experts say. Lenders slowed processing foreclosures in 2010 when a robo-signing scandal surfaced, resulting in a backlog of foreclosures that prevented home prices from making a full recovery, experts say.

"It is a definite shift in that direction," an LPS spokeswoman said about the spike in foreclosures sales and starts in January. "We could be seeing the beginning of something, and we should most certainly be keeping our eyes on this over the next few months."

RealtyTrac, another company that tracks foreclosure data, reported that foreclosure filings in January rose 3 percent.

"We continue to see signs on a local and regional level that the frozen-up foreclosure process is beginning to thaw," Brandon Moore, CEO of RealtyTrac, had said about his company’s report.

According to LPS, the states with the highest number of seriously delinquent mortgages in January are: Nevada, Florida, Mississippi, Arizona, and Georgia.

Source: “Foreclosure Starts and Sales Spiked in January, Report Says,” AOL Real Estate (March 6, 2012) and “Repeat Foreclosures Hit an All-time High in January,” HousingWire (March 6, 2012)

Housing Affordability Soars to Record High

Low mortgage rates and falling home values have brought housing within reach to more families than ever before, according to the latest National Association of REALTORS® housing affordability index.

Housing affordability in January reached its highest level since NAR began tracking it in 1970. The index -- which tracks median home price, median family income, and the average mortgage rate -- reached 206.1 in January.

"This is the first time the housing affordability index has broken the 200 mark, meaning the typical family has roughly double the income needed to purchase a median-priced home," says Moe Veissi, 2012 NAR president. "For buyers who can qualify for a mortgage, now is a very good time to become a home owner."

An index of 100 means that median-income household has exactly enough income to qualify for the purchase of a median-priced existing single-family home, also accounting for a 20 percent down payment and 25 percent of gross income devoted to the mortgage principle and interest payments.

NAR projects that affordability will remain high for the remainder of the year.

"Housing inventory levels have declined to a point where conditions are becoming much more balanced in much of the country," Veissi said. "If access to credit improves, we could see a much more meaningful increase in home sales and broader stabilization in home prices with modest gains in areas with stronger job growth."

Source: National Association of REALTORS®

Troubled-Home Ordinances on the Rise

| -A A +A 'Rehab' Loans Surge in Popularity to Fix Up Properties

More borrowers are exploring financing options to cover the costs of rehabbing properties they buy. “Rehab” loans are surging in popularity, according to a New York Times article.

“We’re seeing an explosive growth in these loans,” says Ed Brehm with Prospect Mortgage, one of the country’s largest processors of 203(k) loans. The spike in demand is from the higher number of bank-owned properties as well as borrowers who can no longer get home equity loans, he says.

A survey in January from the National Association of REALTORS® found that 35 percent of the homes on the market are either short sales or foreclosures, and of those properties, 37 percent were considered “below” or “well below” average condition. The poor condition may have been from homes left abandoned or damaged from disgruntled home owners who were forced to leave.

The Federal Housing Administration’s 203(k) is particularly seeing an increase in interest among home purchasers. The loan covers the cost of buying the home but also for renovating it, and is paid back like a regular mortgage. The loan can be used for rehabbing the structure of the home to adding new floors and appliances.

Fannie Mae also offers rehab financial assistance as part of its HomePath lending program.

Source: “‘Rehab’ Loans to the Rescue,” The New York Times (March 1, 2012)

Home Prices Stabilize Despite Increase in REOs

An increase in distressed properties on the market is no longer chipping away at overall home prices, an “unusual and encouraging” sign, a new report suggests.

In fact, the report found that in the top 15 metro areas REOs dramatically increased in February, but those areas still showed average gains or mostly stable home prices compared to the previous month, a new report by Clear Capital shows. Distressed properties typically are known to put downward pressure on nearby home prices.

Alex Villacorta, director of research and analytics at Clear Capital, says improvements in the job market, an uptick in consumer confidence, and an increase in activity among investors making cash purchases may be helping to pull home prices up and “could be in play with the resiliency we’re seeing in prices against increasing REO this month.”

Overall, national home prices dropped 1.9 percent year-over-year, which is the smallest margin drop in 10 months, according to Clear Capital’s March housing report.

“Home prices across the nation saw light levels of depreciation in February, consistent with the trend we have seen over the last several months,” Villacorta noted. “However, the Northeast, Midwest, and West improved performance against last month’s quarterly declines in light of increases in REO saturation, which is unusual and encouraging.”

With the uptick in REO activity, however, “we’ll be keeping a very close eye on the effects of the attorneys general settlement with servicers, as it could dramatically change the flow of REO properties moving through the foreclosure process and significantly impact values in the near future," Villacorta said.

Source: Clear Capital and “Home Price Declines Resilient Against REO Saturation: Clear Capital,” HousingWire (March 5, 2012)

The Most Ethnically Diverse Metro?

Houston surpasses other metros in the country in one measure of ethnic diversity, a report from Rice University shows in analyzing census data from 1990, 2000, and 2010.

In Houston, the Latino population grew to one-fifth — or 20.8 percent — of the metro’s total population in 1990 and to 35.5 percent in 2010, according to the study. The Anglo population, on the other hand, decreased during that time frame, now making up 39.7 percent of Houston metro residents.

The report says that Latinos will eventually be the majority race in the area, overtaking Anglos.

“Houston is one of a handful of what is known as majority-minority cities, where Anglos represent less than 50 percent of the population,” Jennifer Bratter, co-author of the report, said in a statement.

Source: “Houston Surpasses New York and Los Angeles as the ‘Most Diverse in Nation,’” Huffington Post (March 2012)

Tuesday, March 6, 2012

Brookstreet CEO Ordered to Pay $10 Million Penalty in SEC Case

By: Esther Cho 03/05/2012

Former CEO of Brookstreet Securities Corp. was ordered by a federal judge to pay a maximum $10 million for securities fraud, the Securities and Exchange Commission (SEC) announced Friday in a statement.

The SEC charged Stanley C. Brooks and Brookstreet in December 2009 with fraud due to the sale of risky mortgage-backed securities to customers who were not looking to purchase risky investments. The more than thousand customers who bought the risky Collateralized Mortgage Obligations through Brookstreet included seniors and retirees.

In addition to investor losses, the fraudulent sales also led to the firm’s collapse.

“Brooks’ aggressive promotion and sale of risky mortgage products to seniors and other risk-averse investors deserves the maximum penalty possible, and that is what he got,” said Robert Khuzami, director of the SEC’s Division of Enforcement. “Those who direct such exploitative practices from the boardroom will be held personally accountable and face severe consequences for their egregious actions.”

A judge in federal court ruled in favor of the SEC on February 23, finding Brookstreet and Brooks liable for violating Section 10(b) of the Securities Exchange Act of 1934, as well as Rule 10b-5. A final judgment was entered March 2 in which the financial penalty was announced. Brooks was also ordered to pay $110,713.31 in disgorgement and prejudgment interest in addition to the $10 million.

The SEC is awaiting another court decision for a Brookstreet-related enforcement action filed in federal court in Florida. For this case, the SEC charged 10 former Brookstreet registered representatives with making misrepresentations to investors in the purchases and sales of risky CMOs. While two representatives settled the charges, the SEC tried the case against the remaining eight representatives in October 2011.

Foreclosure Sales Outpace Modifications for January

By: Esther Cho 03/05/2012

During January, 73,767 homeowners received permanent loan modifications from mortgage servicers, according to modification data released by HOPE NOW, a voluntary, private sector alliance of mortgage servicers, investors, mortgage insurers and non-profit counselors.

While the January numbers are a decrease compared to the previous two months, it was a record-breaking month for foreclosure sales.

For the first time since October 2009, foreclosure sales, which reached 78,734, outpaced loan modifications.

About 79,061 loans received modifications in December 2011, and 83,825 were modified in the previous month of November.

For foreclosure sales, the numbers were up compared to previous months, with 69,616 foreclosure sales in December and 70,626 in November.

Of the approximately 74,000 who received modifications, about 56,000 were non-government proprietary modifications and 17,992 were through the government’s Home Affordable Modification Program (HAMP), as reported by US Treasury Department.

Loan modifications with reduced principal and interest payments years or more, afor approximately 67 percent, or 37,547, of 5all proprietary modifications, down from the previous month’s figures at 82 percent, or 45,407.

Fixed-rate modifications, or those with an initial fixed period of 5 years or more, accounted for about 89 percent, or 49,845, of all proprietary modifications, up from the previous month, which stood at 81 percent, or 45,034.

“HOPE NOW and its members have charged full speed into 2012 in the ongoing collaborative efforts to assist at-risk homeowners,” said Faith Schwartz, executive director of HOPE NOW in a statement. “Loan modifications continue at a steady pace and proprietary mods continue to show real signs of sustainability and affordability for homeowners. This is important to note, as these characteristics are vital to housing market recovery.”

Credit Trends Among U.S. Consumers Point to End of Housing Downturn

By: Carrie Bay 03/05/2012

Consumer credit data suggests spending will increase and the housing market will begin to emerge from its slump this year, according to Equifax and Moody’s Analytics.

Statistical analysis applied by, a joint product of Equifax and Moody’s, to new performance data for consumer credit supports the forecast issued by the credit bureau and ratings agency.

Both companies note that as key market data align with pre-recession totals, consumers should anticipate steady economic growth for major credit sectors.

Looking across the full spectrum of consumer credit, Equifax and Moody’s found that delinquency rates for auto, bankcard, and consumer finance are back to pre-

recession levels. These sectors are expected to contribute to the U.S. economy’s nascent recovery.

The home mortgage lending sector continues to see the highest percentage of delinquencies, the companies’ report notes, even with outstanding mortgage balances (including first liens and home equity lines and loans) having declined by $1 trillion since 2008 and continuing to drop.

Even so, mortgage rates are at all-time lows, with refinance activity at high levels and offsetting diminished demand for new loan originations, according to Equifax and Moody’s.

The companies also note that tighter lending guidelines are reflected in loans made to the prime risk segment (those borrowers with an Equifax score of 700 or above). Consumers that fit the bill of a prime risk now account for more than 80 percent of all new mortgage originations.

“After spending recent years in the financial doldrums, U.S. consumers are poised to make a comeback in 2012,” according to Amy Crews Cutts, chief economist for Equifax.

She says the most promising indicators are showing up in consumer spending and the auto financing sector, but even the housing market is exhibiting incremental progress that points to increased traction in the coming months.

Price Declines Slow, But REOs on the Rise

By: Krista Franks Brock 03/05/2012

Last month, year-over-year home price declines were at their lowest level since April 2011, but REO saturation levels rose in three of four regions, according to Clear Capital’s latest Home Data Index.

Whether this REO increase is an anomaly or the beginning of a new wave of REOs as banks pick up the pace now that they’ve reached a settlement with the state attorneys general is yet to be determined.

“With this uptick in REO activity, we’ll be keeping a very close eye on the effects of the Attorneys General settlement with servicers, as it could dramatically change the flow of REO properties moving through the foreclosure process and significant impact values in the near future,” said Dr. Alex Villacorta, director of research and analytics at Clear Capital.

Nationally, home prices fell 1.9 percent year-over-year, according to Clear Capital. The West and Midwest experienced the greatest declines, 3.2 percent and 4.3 percent, respectively.

The South experienced a smaller decline of 0.8 percent, while the Northeast was the only region where prices rose year-over-year in February, posting a gain of 0.5 percent.

Prices changed at a slower rate on a quarterly basis in February, though all four regions posted declines for this period.

As with the year-over-year change, the Midwest and West posted the greatest declines, 1.8 percent and 0.4 percent, respectively.

The South followed with a 0.2 percent decline, and the Northeast recorded the smallest price drop, 0.1 percent for the quarter.

REO saturation increased 0.2 percent nationwide for the rolling quarter ending in February, according to Clear Capital.

With the exception of the South, every region experienced and increase in REO saturation over the quarter.

REO saturation increased most in the Midwest (2.1 percent), where price decline was also greatest.

The Northeast followed with a 1 percent increase, though the region still posted the smallest REO saturation rate 8.8 percent in comparison to a national average of 25.8 percent.

The West posted a 0.8 percent rise in REO saturation, and the South was the only region to post a decline in REO saturation, falling 0.6 percent for the quarter.

REO saturation was greatest in the Midwest (32.2 percent), followed closely by the West (32.1 percent) and then the South (23.7 percent).

Clear Capital notes that “[w]ith the exception of this quarter, REO saturation declined over the last year, providing evidence to suggest banks might have put the brakes on processing foreclosures as they waited for further clarity on regulatory guidelines, and in particular, the Attorneys General settlement with servicers.”

“The good news is the improvements in the job market, stronger consumer confidence, and the heightened activity of investors – often with cash – in the lower price tiers. These effects put upward pressure on prices, and could be in play with the resiliency we’re seeing in prices against increasing REO this month,” Villacorta said.

The top performing market for the quarter was Providence, Rhode Island — New Bedford, Massachusetts — Fall River, Massachusetts. Prices rose 7.3 percent in the area.

The Cleveland area was the lowest performing market for the quarter, experiencing a price decline of 9.4 percent for the quarter.

Landlord Tries to Evict Renters by Bulldozing Them Out

An Idaho landlord pleaded guilty to a misdemeanor of disturbing the peace for an incident stemming from 2010 when he drove a tractor into a home he owns while the renters he was trying to evict were inside.

Paul Fagerlie Finman said the family who was renting the home were anti-government extremists who had threatened his life and he wanted them to leave. The renters reportedly had been trying to negotiate rent with Finman, but they say he had been uncooperative.

When the renters didn’t leave the property by a certain date, Finman drove his tractor into the home, according to police reports.

At the time the tractor came tearing through the home, renter Alexander Duncan Campbell was not home but his wife and children were. They allege that Finman continued to pursue them on the tractor even after they had fled. No one was injured.

Finman, who had recently acquired the property prior to the incident, reportedly had intentions to bulldoze the property and that’s why he wanted the tenants to leave.

"He decided that driving the tractor through the house was a quicker process," Shane Greenbank, Bonner County chief deputy prosecutor, told AOL Real Estate.

In another twist to the case, Campbell, the renter, is allegedly wanted on charges of illegal possession of a concealed weapon, and the family’s whereabouts are unknown.

Finman, 56, was originally charged with three counts of aggravated assault following the incident. With the family missing to testify against Finman, the prosecution agreed to a settlement, reducing the charges against to Finman to one count of a misdemeanor.

Source: “Landlord Wrecks Occupied Home, Pleads Guilty to Misdemeanor,” AOL Real Estate (March 1, 2012) and “Assault Case Is Resolved,” Bonner County Daily Bee (Feb. 28, 2012)

Applications for FHA-Backed Mortgages Rise

Applications for FHA-backed mortgages rose in January to 126,835, up 14.9 percent from December and up 22 percent from January 2011, according to the latest Single-Family Outlook report from the FHA.

Applications to refinance a current loan increased to 59,493, a gain of 26.3 percent from December and of 44.5 percent from January of last year; and applications to purchase a home jumped to 61,547, up 7.5 percent from December and up 11.1 percent from January 2011.

The number of seriously delinquent loans insured by the agency rose to 22,762, 3.2 percent higher than in December; and the rate was 9.8 percent in January, up from 9.6 percent in December and up from 8.9 percent in January of last year.

Source: "FHA Applications Jump 15 Percent in January, Delinquencies Keep Climbing," (03/05/12)

3 Mistakes That Put You at Increased Risk Online

Smartphone and social media users are increasingly prime targets for identity theft.

Americans feel too invincible when they’re online and they don’t want to be inconvenienced with extra safety features, Adam Levin, chairman of identity management and data risk management services provider Identity Theft 911, told

“People, if given a choice, tend to choose convenience over security,” he adds. “If a Web site takes a little longer to load because it’s more secure, people will use a different one because they don’t want to stick around.” recently highlighted some of the most common mistakes Americans make that put them at more of risk of becoming victims of identity theft. Here are a few mistakes to avoid:

--Don’t include your entire birthday on your social networking pages. Thieves can use such seemingly harmless information to steal your identity. Don’t include your entire birthday--like the month, day and year--but just the month and day.

--Not locking your smartphone. Be sure to screen lock your phone so that if you misplace it or have it out of reach for a moment, someone else can’t instantly gain access to all of your information. When you screen lock your phone, you’ll then have to input a few numbers or swipe a pattern whenever you want to use your phone but you’ll have added protection in keeping it secure.

--Forgetting to change your e-mail password. Your e-mail contains a lot of private information about you. When you change passwords to other programs you use, you often receive a password confirmation of your change to your e-mail, which just opens everything up you do to would-be thieves. Change your e-mail password frequently so that you keep your account secure.

Source: “6 Simple Online Security Mistakes You’re Probably Already Making,” Forbes (March 1, 2012)

More Home Owners Stay-Put in Foreclosure

More lenders are allowing home owners in default to stay-put in their homes longer--and even negotiating special arrangements with them, such as the lender paying the home insurance if the home owner pays the utility costs, The New York Times reports.

Why the postponement? Banks don’t want the cost of maintaining more homes on their books. Many municipalities are forcing banks to better maintain foreclosed homes, which has been adding to the costs.

By the end of January, more than 644,458 homes were under bank ownership. What’s more, about 710,725 are in the foreclosure process, awaiting to add to that number, according to data by RealtyTrac.

“Under normal circumstances, the banks would be able to cover the cost of maintenance, upkeep, and property taxes by just reselling the property, but these are desperate times, and banks are resorting to somewhat desperate measures in some cases,” Daren Blomquist, a vice president at RealtyTrac, told The New York Times. “It is more of a factor now because property values have come down and will not cover all these costs when the banks resell the property, if they can resell the property.”

In 2007, the average time it took to complete a foreclosure was four months. By the end of 2011, that has stretched to a year. In some states the slowdown is even more pronounced, such as in Florida where defaulting home owners often stay put for more than two years, or in New York in which foreclosures in 2007 once took 263 days to complete and in 2011 now average 1,019 days.

Source: “Lenders Increasingly Allow Foreclosed to Stay,” The New York Times (March 4, 2012)

Investors Buy Up Homes in Bulk

Investors aren’t just wanting one home, they may want a dozen.

“As the greatest real estate fire sale in the history of the United States rages on, the bulk buy is the dead hot deal of the moment,” Reuters News reports. “In some of the most foreclosure-ravaged parts of the country, it is almost as if the housing market has become the new big box store, with investors wiping out whole shelves at a time.”

Investors are look to cash in by snagging homes at rock-bottom prices and then renting them out. In many cases, they’re starting to make a profit instantly and are seeing higher returns than other investments nowadays.

"They aren't just buying one rental property. This is a frenzy. They are loading up," Kyra Pych, a real estate professional in Oak Park, Illinois, told Reuters. In Pych’s market, investors are being drawn to condos that were once selling for $180,000 during the housing boom that are now going for $13,500.

In Detroit, investors are snagging bungalows as low as $500 each.

Billionaire investor Warren Buffett recently told CNBC that he would like to “buy up a couple hundred thousand” single-family homes, adding that it is a "very attractive asset class now."

Source: “Investors Buying homes by the Dozen,” Reuters News (March 2, 2012)

When Will the Housing Supply Normalize?

The housing supply is expected to normalize in two to four years, Barclays Capital projects, assuming that household formation rates increase to 1.1 million and construction remains slightly above 2011 levels.

Household formation--which is a reflection of population growth and housing affordability--has drastically dropped since 2007, reaching about 300,000 to 500,000 per year. Historically, the rate is about 1.25 million.

Home prices will likely see a 1 percent appreciation this year (that’s after falling 3 to 4 percent through March), Barclays Capital estimates. It is also projecting a 1 percent price appreciation in 2013, followed by 2 percent to 3 percent appreciation levels.

But to reach those goals, the housing supply needs to continue to shrink first.

"We think this will be achievable only if household formation exceeds net construction for a sustained period," Barclays says.

Source: “Barclays: Housing Supply Could Normalize in 2014,” HousingWire (March 2, 2012)

Fitch Expects Residential Loans to Continue Causing Losses for Banks

By: Esther Cho 03/02/2012

Despite recent reports of modest improvement in the health of the housing economy, Fitch expects the real estate sector to continue to depress the performance of banks, according to Fitch Ratings.

Residential real estate is the largest exposure for banks since they make up $2.5 trillion, or roughly one-third of total loans, according to the agency. Home equity represents about 30 percent of this amount, with 1-4 family first lien mortgages making up the balance.

“Most of these loans are on bank balance sheets and are concentrated at the largest institutions,” the Fitch report stated. “As a majority of them are subordinated, performance remains very much leveraged to further home price declines and potential principal reduction initiatives.”

Based on Fitch Rating’s Sustainable Home Price (SHP) model, home prices may continue to decline by 8 to 10 percent over the next several years. According to a recent Case-Shiller report, home prices hit new lows at the end of 2011.

With the decrease in home prices, Fitch believes the declines will continue to pressure homeowners and increase both the likelihood of default and loss severity.

While mortgage delinquency rates showed some recent strides compared to their 2010 peak, the numbers are still elevated compared to levels before the crises. Modifications have also become subdued, but Fitch said in the report that modifications may pick up in 2012 as HAMP 2.0 becomes adopted since the new version removes buyback risks for lenders and aims to qualify more underwater borrowers.

Based on Fitch’s base and stress scenarios, the agency also said that the 20 largest banks can incur losses in excess of $80 billion on home equity and 1-4 family portfolios over the next three years. This estimate represents a loss rate of 5.1 percent on aggregate loans of $1.6 trillion, compared with a loss rate of 8.4 percent since 2008.

Overall, Fitch said in the report that many banks have resolved the most problematic areas of their residential portfolios, which means additional losses are likely to be more moderate compared to previous losses. Still, Fitch said the housing market is likely to remain pressured, and some banks will continue to feel earnings, and possibly capital, pressures as a result.

FBI Reports High Number of Mortgage Fraud Cases in Recent Years

By: Esther Cho 03/02/2012

While mortgage originations are at their lowest level since 2001, investigations for mortgage fraud have shot up in recent years. As of December 31, 2011, the FBI reported 2,590 pending mortgage fraud investigations with 71 percent involving losses of more than $1 million.


In 2007, there were 1,199 pending fraud causes, with a peak of 3,129 in 2010, according to an FBI financial crimes report. With increased levels of foreclosures and delinquencies over the past few years, mortgage fraud schemes targeting distressed homeowners as victims have surged as well.

In addition to mortgage fraud cases, mortgage fraud suspicious activity reports (SARs) saw a significant increase, with 46,717 reports in 2007, and 93,508 in 2011.

Through the year 2011, FBI mortgage fraud investigations led to 1,220 informations and indictments and 1,089 convictions. The uncovering of mortgage fraud cases brought $1.38 billion in restitutions; $116.3 million in fines; seizures valued at $15.7 million; and $7.33 million in forfeitures, according to the FBI report.

States with significant mortgage fraud problems in 2010 were Florida, New York, California, New Jersey, Maryland, Michigan, Virginia, Ohio, Colorado, and Illinois, according to Mortgage Asset Research Institute.

The FBI advises homeowners to be aware of offers which claim to save borrowers in distress and also advises against paying advances fees for promised services in return.

One type of mortgage fraud scheme involves scammers claiming they can negotiate loan modification terms on behalf of the borrowers with the lender while demanding large fees up front for the service they are purporting to offer.

Treasury Reinstates HAMP Incentives as Servicers Show Improvement

By: Carrie Bay 03/02/2012

The Treasury Department says servicers participating in the Home Affordable Modification Program (HAMP) are getting better at evaluating homeowners for the program, including noticeable improvement in assessing borrower income to determine program eligibility and calculate the amount of their modified payments.

Treasury reported Friday that during the fourth quarter of 2011, seven of the largest participating servicers were found to be in need of “moderate improvement” and two servicers were found to need only “minor improvement” with respect to the specific performance metrics tested. No servicer was found in need of substantial improvement last quarter.

OneWest Bank and Select Portfolio Servicing performed at the highest level, needing only minor improvement. The seven servicers deemed to need moderate improvement include: America Home Mortgage Servicing, Bank of America, CitiMortgage, GMAC Mortgage, JPMorgan Chase, Ocwen, and Wells Fargo.

HAMP performance reviews evaluate servicers based on three categories: identifying and contacting homeowners; homeowner evaluation and assistance; and program reporting, management, and governance.

Treasury singled out JPMorgan and BofA in its latest report, noting that both servicers had improved their practices over the last quarter. Treasury had been withholding HAMP incentive payments from the two companies because prior servicer assessments found them to be in need of “substantial improvement.”

Bank of America was found to have remedied essentially all areas previously identified as needing improvement and continued to demonstrate improved processes generally, Treasury said.

JPMorgan Chase showed marked progress in remedying a number of outstanding issues from previous quarters, according to the report, including improving the speed at which it processes eligible homeowners for permanent HAMP modifications and strengthening its internal quality assurance processes around the program.

Treasury said it agreed to release withheld incentives for past deficiencies as part of the $25 billion federal-state mortgage servicing settlement announced last month, but officials stress that they retain the right to withhold incentives in the future should the results of HAMP compliance reviews warrant such remedial action.

As of the end of January, participating servicers had granted 951,319 permanent HAMP modifications to distressed borrowers. There are an additional 76,343 HAMP trials currently in active status.

DeMarco Stands Firm as Principal Reduction Debate Wages On

By: Krista Franks Brock 03/02/2012

The principal reduction debate wages on with the Federal Housing Finance Agency (FHFA) standing firm in its resolve that the strategy is not in the best interest of the GSEs while facing criticism and questioning from lawmakers.

At a Senate Banking Committee hearing last week, HUD Secretary Shaun Donovan announced that Treasury will now offer the GSEs incentives for administering principal reductions.

Having recently increased the incentives offered to banks for administering principal reductions, Treasury now aims to “ensure consistency throughout the HAMP program” by making sure GSE borrowers have the same options as non-GSE borrowers.

At the same hearing, FHFA Acting Director Edward DeMarco faced questioning regarding his reluctance toward principal forgiveness at Fannie May and Freddie Mac.

“Both companies have been reviewing principal forgiveness alternatives. Both advised me they do not believe that it is in the best interest of the companies to do so,” he told lawmakers.

However, he did agree with lawmakers that “foreclosure is the worst possible outcome in almost all instances. It is the most costly. It is the most devastating to the family. It is the most devastating to the neighborhood and surrounding community, and we have a responsibility to make all prudent actions to find a remedy to a troubled borrower short of foreclosure because of these costs.”

DeMarco maintained that principal reduction is just one of four tools for preventing foreclosure. The other three include reducing the interest rate, extending the loan term, and forbearance.

“What FHFA has found consistently in its analysis is that the first three of those tools work better than the fourth one with regard to our fundamental mandate of preserving and conserving,” DeMarco said.

DeMarco also pointed out that while the GSEs together guarantee 60 percent of mortgages, their loans make up just 29 percent of seriously delinquent loans.

In addition, while they make up a minority of serious delinquencies, GSE loans make up about half of permanent HAMP modifications.

Regardless of their success through forbearance and other alternatives, Senator Robert Menendez (D-New Jersey) pointed out that banks are turning to principal forgiveness for 20 percent of their modifications.

As banks are equally as motivated as the GSEs to bring in the highest returns, Menendez wonders why the discrepancy in approach

Mortgage Rates Drop Closer to All-Time Lows

After rising last week following positive housing indicators, mortgage rates fell back near all-time lows once again this week, Freddie Mac reports in its weekly mortgage market survey.

"Fixed mortgage rates bottomed out in January and February of this year, which is helping spur the housing market,” said Frank Nothaft, Freddie Mac’s chief economist.

This week, the National Association of REALTORS® reported that pending home sales increased in January, reaching its strongest pace since April 2010. The Federal Reserve also noted that real estate activity in the residential sector increased modestly in most of the districts it tracks and that home sales increased.

Here’s a closer look at rates for the week ending March 1, 2012:

•30-year fixed-rate mortgages: averaged 3.90 percent, with an average 0.8 point, dropping from last week’s 3.95 percent average. A year ago at this time, 30-year rates averaged 4.87 percent.
•15-year fixed-rate mortgages: averaged 3.17 percent, with an average 0.8 point, dropping from 3.19 percent last week. Last year, 15-year rates averaged 4.15 percent.
•5-year adjustable-rate mortgages: averaged 2.83 percent, with an average 0.7 point, rising from last week’s 2.80 percent average. Last year, 5-year ARMs averaged 3.72 percent.
•1-year ARMs: averaged 2.72 percent, with an average 0.6 point, this week, dropping slightly from last week’s 2.73 percent average. A year ago, 1-year ARMs averaged 3.23 percent.
Source: Freddie Mac

Number of Underwater Home Owners Grows

Nearly 23 percent of home owners owe more on their houses than they are currently worth, according to new data from the last three months of 2011 released by CoreLogic.

More specifically, the number of underwater home owners rose slightly from 22.1 percent in mid-2011 to 22.8 percent by the end of last year.

"When they're upside down, borrowers may be current on their payments but they're more vulnerable to economic storms — like job losses — that could tip them over into default," says Sam Khater, senior economist at CoreLogic.

About 8 percent of underwater home owners have already lagged on their mortgage payments.

Source: “Underwater Borrowers Are on the Rise,” CNNMoney (March 1, 2012)

NAR: REO Rental Programs Largely Unnecessary

Housing markets are complex and varied, and a government pilot program to turn bank-owned properties into rentals could be disruptive and counterproductive in some markets, according to the National Association of REALTORS®.

NAR urges the Federal Housing Finance Agency (FHFA) to proceed cautiously with its Real Estate-Owned (REO) Initiative pilot program to sell homes repossessed by government agencies to private investors to convert into rental units.

“REALTORS® support efforts to reduce the high inventories of foreclosures, but all real estate is local and we are concerned that REO-to-rental programs are not necessary in some areas and could even hinder the recovery,” NAR President Moe Veissi said. “In many communities REOs are already moving well through the normal processes, so we urge caution when proceeding with a rental program.”

According to a recent NAR analysis, while the overall visible inventory of foreclosures has been trending down across the country, there is a noticeable difference in foreclosure inventories in states that require judicial proceedings to foreclose on a property versus inventories in states that do not require the court’s intervention. Foreclosure inventories in judicial states are currently 2.5 times higher than non-judicial states. In addition, the disposition of foreclosure inventories is considerably faster in non-judicial states, where foreclosure sales rates are four times higher than in judicial states.

“Inventories of condos and single-family homes for sale continuously fell last year, suggesting that there is no significant oversupply of visible foreclosure inventory in the market,” NAR Chief Economist Lawrence Yun said. “Even the shadow inventories of distressed homes have fallen, though they remain elevated and are an ongoing concern. The government REO-to-rental plan could work in areas where buyers are not quickly absorbing the shadow inventory.”

To prevent further increases in foreclosure inventory, NAR has repeatedly called for improved lending to creditworthy home buyers and have urged lenders to make more loan modifications, mortgage refinancings, and short sales, which will help stabilize struggling housing markets.

“While REO-to-rental programs could be successful in a few communities, we believe that doing more to ensure mortgage availability for qualified home buyers and investors could be even more beneficial in helping absorb excess foreclosure inventories across the country,” Veissi said.

NAR urges that a national advisory board be created to ensure that current and future REO-to-rental pilot programs truly benefit the local community, minimize taxpayer losses and stabilize home values, and suggests substantial participation of local market experts, especially licensed real estate professionals, who have unparalleled knowledge of local market conditions.

Source: NAR