Friday, April 13, 2012

Fed official: End 'Too Big to Fail'

Another Federal Reserve official is speaking out against Too Big to Fail policies.

Esther George, president of the Kansas City Fed, believes regulators including the Federal Reserve did not fully take advantage of rules that could have helped them curb risky banking practices leading up to the financial crisis.

"During the recent crisis, we had a number of powers that might have been used on Too Big to Fail institutions, but were not employed to any notable extent," George said at the Levy Economics Institute's Hyman P. Minsky Conference in New York, Wednesday.

"The most critical issue in addressing Too Big to Fail concerns is having policymakers with the resolve to follow through," she added.

For example, regulators should have been enforcing rules that give banks only 180 days to clean up their act, if they're not well capitalized or well managed, she said.

That provision, from the Gramm-Leach-Bliley Act of 1999, gives the Fed the ability to force financial holding companies to divest or terminate financial activities, if it finds a bank is engaging in activities deemed not "safe and sound," and fails to enact changes within 180 days.

George also voiced her support for the Volcker Rule, which eliminates proprietary trading by banks and thrifts, and said she supports higher capital requirements phased in sooner rather than later.

Other regional Fed banks have also advocated for the end of the Too Big to Fail era. Last month, the Dallas Fed called for breaking up the nation's largest banks into smaller units.

Their report found that the five biggest American banks control 52% of all banking assets in the United States.

Source: Annalyn Censky CNNMoney

Court approves $26 billion foreclosure settlement

A federal judge approved the $26 billion settlement deal reached between the nation's five largest mortgage lenders and the attorneys general of 49 states and the District of Columbia over foreclosure processing abuses.

Judge Rosemary Collyer in the U.S. District Court for the District of Columbia approved consent judgments with Bank of America (BAC, Fortune 500), Citibank (C, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Wells Fargo (WFC, Fortune 500), and Ally Financial (the former GMAC) late Thursday.

The approval clears the way for the banks to compensate homeowners who may have been impacted by the so-called robo-signing scandal, in which bank employees signed hundreds of documents a day attesting to facts that they had little or no knowledge of.

Under the settlement, the banks committed at least $17 billion toward modifying mortgages for delinquent borrowers. The modifications will include large principal reductions of as much as $100,000 or more for roughly one million homeowners who are underwater on their mortgages and behind on payments.

Another $3 billion or more will go toward refinancing mortgages for borrowers who are current on their payments. This is supposed to help some 750,000 borrowers take advantage of historic low interest rates.

The banks will also pay $5 billion in fines to the states and the federal government, the only hard money involved in the deal. Out of that fund will come payments of $1,500 to $2,000 to homeowners who lost their homes to foreclosure. Those payments will total $1.5 billion, according to the consent agreement. Other funds will be paid to legal aid and homeowner advocacy organizations to help individuals facing foreclosure or experiencing servicer abuses.

The judge's approval capped more than a year of hard negotiations between the banks and the states attorneys general as well as the U.S. Department of Housing and Urban Development, said Amy Bonitatibus, a spokeswoman for Chase.

"The settlement includes far-reaching relief that will help many of our customers and complement our already extensive efforts to improve our borrower assistance efforts and servicing processes," she said.

As a result of the settlement, banks will get immunity from future claims by the state governments as long as they abide by the terms of the settlement, although homeowners may still pursue individual claims. The states can also press criminal charges, if they're merited.

Only one state attorney general, Oklahoma's E. Scott Pruitt, declined to participate in the agreement. The state reached a separate $18.6 million settlement with the five lenders in early February.

The banks have also agreed to adhere to a strict standard of foreclosure processing, one that does not allow for robo-signing and other abusive practices.

Now that the settlement has been approved, the banks are now free to identify and reach out to delinquent borrowers to offer them more affordable mortgage terms. Bank of America has already compiled a list of 200,000 potential beneficiaries of its principal reduction modifications.

Chase said it is currently reviewing anyone who applied for a mortgage modification to see if the borrower qualifies under the settlement.

"We have been taking calls from customers since March 1 for this program," said Mark Rodgers, a Citibank spokesman. "We have already moved a few hundred cases into the pipeline."

Wells Fargo began accepting applications on March 1, and will start to reach out to customers by mail in a matter of days, according to spokeswoman Vickee Adams.

Ally Financial didn't immediately return calls seeking comment.

When the settlement was first announced, it triggered a flow of both optimism and outrage among mortgage borrowers.

The terms of the settlement will only apply to certain borrowers who have mortgages held by the five major lenders. Borrowers who have a mortgage held by Fannie Mae (FNMA, Fortune 500) or Freddie Mac (FRE) -- roughly half the market -- are out of luck, however. Loans insured by the Federal Housing Administration are also ineligible.

For Hector Ibarra, who lives in the ground zero for foreclosures, Las Vegas, the news is a devastating. Ibarra owes $137,000 on his townhouse, which is now worth less than $40,000 in today's market, but because his mortgage is owned by Freddie Mac he doesn't qualify for a principal reduction or modification under the settlement deal.

Source: Les Christie @CNNMoney

Does mortgage principal reduction work?

The world will only have to wait a few more weeks to find out whether Fannie Mae and Freddie Mac will allow principal reductions on mortgages they back.

The Federal Housing Finance Agency will decide this month whether Fannie and Freddie should allow write downs on the balances of borrowers who owe more than their homes are worth, said Ed DeMarco, acting director for the agency.

Fannie and Freddie have been at the center of a tug-of-war over fixing the housing market. They have long resisted calls to write down the balances on the loans in their portfolio, saying it would be too costly for taxpayers.

But the pressure has been building, especially in the wake of the $26 billion mortgage settlement that will reduce principal for 1 million borrowers whose loans aren't backed by Fannie and Freddie.

The agency, which regulates the government-controlled companies, had decided against allowing principal reduction after internal studies showed that alternatives such as adjusting monthly payments or forbearing principal were more cost effective.

DeMarco has said his agency is charged with protecting taxpayers' interests, and principal reduction would amount to an expensive taxpayer bailout of troubled homeowners.

Since then, however, the Obama administration has sweetened the pot. It tripled the incentives it will pay to Fannie and Freddie for reducing principal under the Home Affordable Mortgage Program, or HAMP. This has prompted the agency and the companies to redo their analysis.

But will it even matter if Fannie and Freddie start allowing principal reduction?

How many are eligible?
Together, Fannie and Freddie have about 3 million loans that are seriously underwater, according to company filings. But three-quarters of these homeowners are current on their payments and may not qualify.

"These borrowers are demonstrating a continued willingness to meet their mortgage obligations," said DeMarco in a recent speech. "This should be recognized and encouraged, not dampened with incentives for people to not continue paying."

In the end, the number of eligible underwater Fannie and Freddie loans could range from a few hundred thousand up to 750,000, according to estimates. That's not that much considering there are 11 million underwater borrowers in the U.S., just over a quarter of whom are behind in their payments.

Is it effective?
"The scheme would still be a useful way to tackle the foreclosure problem," said Paul Diggle, property economist at Capital Economics. "And it certainly wouldn't do any harm to the housing recovery."

But experts still fear that allowing principal reduction will open a new wave of strategic defaults, where homeowners decide to stop paying their mortgages in order to benefit from modification programs. This so-called moral hazard has been one of the main concerns that has kept principal reductions at bay.

"Principal reduction will prevent more foreclosures for some borrowers who are delinquent," said Susan Wachter, real estate professor at the University of Pennsylvania's Wharton School. "But there is a potential for it to undermine borrowers' incentive to keep current on their mortgages."

How much will it cost?
Though part of that would be covered by the Obama administration, it's still ultimately taxpayer money whether it comes from HAMP or from the open line of bailouts Treasury provides to Fannie and Freddie.

Not everyone is convinced that the benefits are worth the price.

"The question is at what cost will it have an effect?" said Ted Gayer, co-director of economic studies at the Brookings Institution.

Source: Tami Luhby @CNNMoney

Housing: The one bailout America could really use

Laurie Goodman is an apolitical number cruncher who has spent most of her 28-year career out of the public view, studying the minutiae of mortgage-backed securities (MBS) for big investment banks. She's long been a star among Wall Street insiders, however. She holds the record for the most top rankings for fixed-in-come research from the trade bible Institutional Investor.

While Goodman concedes she underestimated the impact of the housing bubble's bursting early on, by mid-2007 she was warning investors to prepare for a deep downturn. She prepared herself as well

After her employer at the time, UBS, shut down its mortgage trading desk in 2008, she jumped to Amherst Securities, a small company that serves as an MBS broker-dealer for big investors. From there she's published research that has raised her profile and made her an oft-cited source by would-be housing reformers in both the private and public sectors. If she is underestimating the problems the housing market has now, we're all in trouble.

Goodman often pauses several seconds before speaking, choosing her words deliberately. So it is especially distressing to hear her warn of a potential housing "death spiral."

On top of the 2.5 million homes that have already fallen to foreclosure since the bubble burst, another 4.5 million mortgage holders have given up paying and are likely to lose their homes, she calculates.

Source: Kim Clark CNNMoney

Craziest tax deductions

Call it extreme communication. One taxpayer was so distrustful of technology that he wouldn't use a telephone or computer.

That posed a problem when it came to communicating with his business partner, who lived across town in Phoenix. So he came up with a plan: carrier pigeons.

The two now send messages to each other via the birds. And the technophobe thought it made sense to write off the pigeons, as well as their care, food and housing as a business expense.

Shauna Wekherlien, the CPA at Tax Goddess Business Services who prepared his return, said she asked him a lot of questions (like whether he has ever owned a computer) to establish whether he had ever used technology to communicate with people in the past.

He said he hadn't so she determined that the deduction was fair game, given that it was the only way he could reach his business partner

Source: CNNMoney

Don't overlook this $6,000 tax credit

Many of the people who could use a little extra money the most are missing out on a tax credit worth up to nearly $6,000.

Aimed at helping the working poor, the Earned Income Tax Credit lifts millions of Americans out of poverty each year, yet one in five taxpayers eligible for the credit doesn't end up claiming this extra windfall.

That's a big loss, because the credit is one of the largest the IRS provides. The Tax Policy Center has found that it is the second largest cash assistance program for low-income families in the country -- after the government's food stamp program, which doled out nearly $72 billion in benefits last year.

By claiming the EITC, nearly 27 million taxpayers received about $59.5 billion from the credit in 2011, with refunds averaging $2,240, according to the IRS.

These payments helped an estimated 6.3 million people escape poverty in 2010, according to the most recent data from the Center on Budget and Policy Priorities. About half of those people were children. The government defines the poverty threshold as having an annual income of under about $11,000 for an individual and about $22,000 for a family of four.

"For people earning minimum wage, having enough money to get by can be really problematic," said Michael Saltsman, a research fellow at the Employment Policy Institute. "This credit is not only reducing poverty, but stimulating employment, so there's definitely an increased effort on the part of the government to let people know it's out there."

How it works: Since the EITC is refundable, claiming it lowers the total amount of taxes owed and can result in a refund if the amount of the credit exceeds the tax liability. This essentially allows low-income earners to hold on to more of the money they earned during the year instead of forcing them to give it all back to the government in the form of taxes, said Saltsman.

To claim the credit, the taxpayer must have a job and their income must fall under certain thresholds. The credit amount increases with the number of children claimed as dependents. For the 2011 tax year, single filers earning $13,660 or less who have no children are eligible for credits of up to $464, while married filers with income of less than $49,078 and single filers reporting income of under $43,998 who have three or more qualifying children are eligible for credits of up to $5,751.

Source: Blake Ellis @CNNMoney

Bush tax cuts: The real endgame

Congress has a way of waiting to the very last minute to resolve big issues, so December is usually a busy month on Capitol Hill. This year will be no exception. But next year? Next year will be no exception on steroids.

This December, for example, lawmakers will have to decide, among other things, whether to extend the payroll tax cut, long-term unemployment benefits, the Medicare "doc fix," Alternative Minimum Tax relief and a bevy of business tax breaks.

But that list -- worth less than $1 trillion -- will pale in comparison to the $5 trillion of fiscal decisions likely to be left for a lame-duck Congress during the seven weeks between the Nov. 6 election and New Year's Eve.

The biggest items on the agenda? The expiration of the Bush tax cuts and the impending enactment of the automatic spending cuts that many want to replace.

Coloring these decisions, of course, will be two unpredictable factors: The state of the economy and who wins control of the House, the Senate and, of course, the White House.

And the decisions Congress makes this year about whether to extend various expiring provisions may add to 2012's end-of-year to-do list for lawmakers.

"[T]he amount of expiring policies and spending cuts set to take effect over the next few years is large [and] the risk from a political impasse is not only that Congress fails to enact long-term fiscal reforms, but also that it fails to extend current policies and in doing so adds to the drag on growth from fiscal policy," Goldman Sachs wrote in a research note.

Source: Jeanne Sahadi @CNNMoney

Deficits to decrease - but not for long

Federal deficits are expected to fall over the next few years but then start to climb, pushing the nation's accumulated debt to levels not seen since just after World War II, according to new estimates from the Congressional Budget Office released Tuesday.

A big driver of the deficits in the next decade is a series of costly tax and spending decisions that Congress is expected to make.

Those include making the Bush-era tax cuts permanent before they expire at the end of this year; permanently adjusting the Alternative Minimum Tax for inflation to protect the middle class from having to pay it; and permanently preventing a pay cut for Medicare doctors.

Another going assumption: Congress will not let $1.2 trillion in spending cuts mandated under law to take effect starting in 2013.

Under this so-called "alternative fiscal scenario," the CBO notes, deficits would average 5.4% of gross domestic product between 2013 and 2022. In the absence of those policy decisions -- that is, if lawmakers just adhered to current law -- the average would be just 1.5%.

Source: Jeanne Sahadi @CNNMoney

Washington's $5 trillion interest bill

Interest rates on U.S. bonds may be ridiculously low, but that doesn't mean the country's future interest payments on the national debt will be.

Uncle Sam will shell out more than $5 trillion in interest payments over the next decade, according to the latest projections from the Congressional Budget Office.

That's more than half of the projected $11 trillion increase in debt held by the public during that period. Those figures assume that a host of expensive policies such as the Bush-era tax cuts are extended.

Over the decade, more than 14% of all revenue the government is projected to collect will be sucked up by interest payments.

That's a lot of money that can't be used on the country's other priorities.

Indeed, between 2013 and 2022, estimated interest costs will be:

•higher than Medicaid spending;
•equal to half of Social Security spending;
•close to what is spent on all of defense.
And here's the thing -- the estimated interest costs assume a fairly steady and moderate increase in rates over the decade.

The CBO assumes that the yield on the 10-year Treasury will rise from an estimated 2.3% this year to 5% by the end of the decade; and the yield on the 3-month T-bill will increase from 0.1% to 3.8% during the same time.

Source: Jeanne Sahadi NEW YORK (CNNMoney)

When will the Fed hike interest rates?

Federal Reserve officials are more talkative than ever, making roughly 20 public appearances this week.

And while all the noise coming from "hawks" and "doves" could give you a case of Fed fatigue, there's one point both sides are hammering home: Forget the central bank's forecast for raising interest rates in 2014. At this point, anything could happen.

In its last policy statement, the Fed said it expected to keep interest rates at record lows "at least through late 2014." But not everyone on the voting committee agreed with that statement.

This week, several "hawks" -- members concerned about higher inflation -- have been speaking out again.

Narayana Kocherlakota, president of the Minneapolis Fed, gave two speeches this week, arguing for the Fed to pull back sooner rather than later.

He predicts the unemployment rate will continue to fall and inflation will start trending higher, making it the wrong time for the Fed to be pumping more money into the system

By Annalyn Censky @CNNMoney

Bernanke: Lack of oversight worsened crisis

The Federal Reserve needs to focus just as heavily on its regulatory role as its monetary policy operations, Chairman Ben Bernanke stressed Friday.

That's the lesson that the Fed chairman took away from the Great Recession. "Going forward, for the Federal Reserve as well as other central banks, the promotion of financial stability must be on an equal footing with the management of monetary policy as the most critical policy priorities," Bernanke said.

Speaking at a conference in New York, Bernanke focused largely on historical events leading up to the recent financial crisis and the central bank's response to it.

Source: Annalyn Censky CNNMoney

Strategic Default Here to Stay Despite Improvements, Risk Managers Say

With reports that around 20 percent of mortgages are underwater, about 46 percent of bank risk professionals surveyed by FICO expect to see the volume of strategic defaults in 2012 exceed 2011 levels.

“After five years of a brutal housing market, many people now view their homes more objectively and with less sentimentality,” said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. “Regardless of legal or ethical issues around strategic defaults, lenders must account for this risk when they evaluate mortgage applications in declining markets. Many homeowners who find themselves upside down on mortgages in the future are likely to consider strategic default as an acceptable exit strategy.”

Combined with concerns over strategic default are disconcerting results about consumer priorities. Only 29 percent of bankers said the current generation of homeowners considers their mortgage to be their most important credit obligation, while 49 percent said its not a priority.

Even with this discouraging data, 53 percent of survey respondents expect to see the housing market improve by the end of 2012, compared to 24 percent who said the market would deteriorate.

Also, 64.8 percent of respondents think mortgage delinquencies will decrease or stay the same, an 11.3 percent increase from the previous quarter.

“If job creation continues, banks will be more likely to embrace mortgage lending once again. A healthy job market is essential for improving the quality of mortgage applications and reducing default risk,” said Jennings.

Most respondents, 56 percent, expect demand for residential mortgage credit to exceed supply over the next six months. A similar majority, 53 percent, project demand for the supply of credit for mortgage refinancing surpass supply.

The survey included responses from 263 risk managers at banks throughout the U.S. in February 2012 and was a joint effort between FICO, provider of analytics and decision management technology, and the Professional Risk Managers’ International Association, a nonprofit that works to define and implement the best practices of risk management through education.

By: Esther Cho

Freddie Mac Reports 15-Year Rate Fell to New Low

Following a disappointing employment report, fixed rate averages fell for the third week in a row, with the 15-year fixed-rate hitting a new low, while the 30-year rate continues to fall further beneath 4 percent, according to Freddie Mac’s Primary Mortgage Market Survey.

The 30-year fixed-rate mortgage slipped to 3.88 percent (0.7 point) for the week ending April 12, down from last week when it stood at 3.98 percent and a decline from last year at this time when the 30-year average was 4.91 percent.

The 15-year rate dropped to 3.11 percent (0.7 point), hitting a record low from when it averaged 3.13 percent on March 8, 2012. Last week, the 15-year’s average was 3.21 percent and 4.13 percent a year ago during this time.

The 5-year ARM was also down, averaging 2.85 percent (0.7 point) this week, down from the week before when it averaged 2.86 percent and down a year ago when it was 3.78 percent.

The 1-year ARM rose slightly to 2.80 percent (0.6 point), up from 2.78 percent last week. The 1-year ARM averaged 3.25 percent a year ago at this time.

“Fixed mortgage rates eased for the third consecutive week following long-term Treasury bond yields lower after a weaker than expected employment report for March. Although the unemployment rate fell to the lowest reading since January 2009, the overall economy added just 120,000 new jobs in March, nearly half that of the market consensus forecast,” said Frank Nothaft, VP and chief economist for Freddie Mac.

Nothaft also noted reports from the recent April 11th Beige Book, which revealed hiring was steady, or showed a modest increase across many of its districts.

Bankrate also reported declines this week, with the 30-year fixed averaging 4.11 percent, down from 4.25 percent last week. The 15-year fixed ended at 3.32, a decline from last week’s 3.42 percent. The 5-year ARM fell to 3.03 percent compared to last week’s 3.15 percent.

Bankrate’s national weekly mortgage survey is based on data provided by the top 10 banks and thrifts in the top 10 markets.

By: Esther Cho

Attorney Fined More Than $50,000 for Frivolous MERS Lawsuits

A Minneapolis-based attorney has been sanctioned by a federal judge for filing one, in what appears to be a series of nearly 30 lawsuits based on what the court says are frivolous “show-me-the-note” defenses designed to thwart foreclosure proceedings in Minnesota – namely by calling into question the validity of MERS as mortgagee and authorized nominee of the noteholder.

U.S. District Court Judge Patrick J. Schiltz has ordered William B. Butler of Butler Liberty Law, LLC to personally pay $50,000 to the court and pay an additional undetermined amount of legal costs incurred by counsel for MERS and its co-defendants.

District Court Judge Schiltz also dismissed several lawsuits filed by Butler and has forwarded a copy of the court’s order to the Minnesota Lawyers Professional Responsibility Board for review.

In Welk, et al. v. GMAC, District Court Judge Schiltz found that attorney Butler had “made a cottage industry out of

filing frivolous show-me-the-note actions” despite the fact that “this argument has been rejected by the Minnesota Supreme Court, by the United States Court of Appeals for the Eighth Circuit, and by every federal judge sitting in Minnesota who has addressed the argument.”

As explained by the court, a “plaintiff bringing a show-me-the-note claim generally argues that, because the entity that holds her mortgage (say, MERS) is not the same entity that holds her note (say, U.S. Bank), the mortgage on her home or the foreclosure of that mortgage is invalid.”

District Court Judge Schiltz ruled that the sanction of $50,000 was justified due to “the extraordinarily egregious and brazen nature of Butler’s conduct” through his pleadings and harm done to his clients by “exploiting them financially” by earning fees “if multiplied by the number of cases he has brought, indicated he has earned tens (or even hundreds) of thousands of dollars marketing show-me-the-note cases over the Internet.”

“Federal Judge Patrick J. Schiltz set an example with his very strong warning to attorneys who take advantage of foreclosed borrowers and give plaintiffs false-hope when they chose to file baseless lawsuits against MERS,” commented Janis L. Smith, VP of corporate communications for MERS’ parent company Merscorp Holdings.

“Cleary, there is a steep price to be paid for lawyers who prey on consumers who are experiencing financial difficulty and waste the Court’s valuable time with unsupportable attacks on the MERS system.”

By: Carrie Bay

SIGTARP: Hardest Hit Spent 3% of Budget, Program Lacks Participants

As of December 31, 2011, the Hardest Hit Fund (HHF), which is meant to fund “innovative measures” to help families through the housing crises in hardest hit states, has spent just 3 percent of its budget since its February 2010 inception, a report published by a watchdog agency for taxpayers revealed Thursday.

More specifically, as of the end of 2011, HHF spent $217.4 million of the $7.6 billion available for the program, and has provided assistance to just 30,640 homeowners, which is about 7 percent of the 458,632 to 486,536 homeowners it is estimated to help over the life of the program, which ends in 2017.

The Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) released the report after reviewing the Treasury’s decision making related to HHF. SIGTARP was created to investigate the uses of TARP funds, which provided the dollars for HHF.

SIGTARP said in the report that the program has experienced significant delay in helping homeowners due to several factors, and named a lack of “comprehensive planning by Treasury” as one of the reasons for the delay, stating the department “rushed out the program.”

“Treasury’s decision to give one to two days’ notice to states and six to eight weeks to develop programs caught several states off guard,” the report stated.

Lack of participation by large servicers and Fannie Mae and Freddie Mac was the other reason cited for delays.

“Several states delayed HHF programs because the large mortgage servicers were not participating. Several [housing finance agencies] told SIGTARP that their primary challenge was the lack of servicer participation,” according to the report.

Also, about 78 percent of the help was for unemployment assistance.

Overall, Treasury approved HHF programs in five categories of assistance – principal reduction, second lien reduction, reinstatement through payment of past due amounts, unemployment, and transition assistance such as short sale, deed-in-lieu, or relocation assistance.

“Without significant change, while the Hardest Hit Fund may be able to reach unemployed homeowners as was originally intended, it is likely to be limited in addressing negative equity for homeowners who are underwater,” the report stated, referring to lack of participation from servicers and the GSEs.

“GSEs examined principal reduction in connection with HHF and concluded that principal reduction could increase moral hazard by incentivizing homeowners to become delinquent on their mortgages. Without GSE buy-in, large servicers generally would not agree to participate in HHF principal reduction, and transition assistance programs for those loans with the GSEs.,” the watchdog group reported.

SIGTARP stated that one large servicer told the agency that 80 percent of its portfolio is with the GSEs, and another large servicer said 60 to 80 percent of its servicing book is
GSE loans.

Originally announced as $1.5 billion program, HHF grew to 7.6 billion, and went from covering five states to 18 and the District of Columbia.

SIGTARP outline recommendations in the report, including setting meaningful and measurable performance goals including a minimum number of homes to be helped, setting milestones for the state housing finance agencies, publishing on a quarterly basis details such as the number of homeowners assisted, amounts drawn by states, dollars expended for assistance, among others recommendations.

By: Esther Cho

Thursday, April 12, 2012

RealtyTrac Reports Foreclosure Filings Down, Foreclosure Timelines Up

Foreclosure filings – default notices, scheduled auctions, and bank repossessions – were reported on 572,928 properties during the 2012 first quarter, down 2 percent from the previous quarter and down 16 percent from the first quarter of 2011, according to RealtyTrac’s U.S. Foreclosure Market report released Thursday.

For just March alone, foreclosure filings were reported on 198,853 properties, the lowest monthly total since July 2007.

“The low foreclosure numbers in the first quarter are not an indication that the massive reservoir of distressed properties built up over the past few years has somehow miraculously evaporated,” said Brandon Moore, CEO of RealtyTrac. “There are hairline cracks in the dam, evident in the sizable foreclosure activity increases in judicial foreclosure states over the past several months, along with an increase in foreclosure starts in many judicial and non-judicial states in March.”

The slowdown in foreclosure activity for non-judicial states, including the District of Columbia, was noted as the primary reason behind the lower number of filings.

With 329,854 foreclosure filings in non-judicial states during the quarter, non-judicial states saw an 8 percent drop from the previous quarter and a 28 percent decrease from the first quarter of 2011.

In addition, 20 non-judicial states registered year-over-year decreases in foreclosure activity, led by Arkansas, with a 79 percent drop, and Nevada, with a 62 percent drop. The drop is due to recent legislative changes or court cases for both states.

Other non-judicial states with significant year-over-year decreases in foreclosure activity included Washington (-55 percent), Arizona (-41 percent), Texas (-31 percent), and California (-21 percent).

Meanwhile, foreclosure activity in the 26 judicial states increased, accounting for 243,074 foreclosure filings during the quarter, an 8 percent increase from the previous quarter and a 10 percent hike from the first quarter of 2011 a year ago.

Judicial states actually posted some of the biggest year-over-year increases in foreclosure activity in the first quarter, including Indiana (+45 percent), Connecticut (+38 percent), Massachusetts (+26 percent), Florida (+26 percent), South Carolina (+26 percent), and Pennsylvania (+23 percent).

The time it took to complete the foreclosure process increased in the first quarter, averaging 370 days, up from 348 days in the previous quarter and the highest average number of days going back to the first quarter of 2007.

Some states did see a decrease, with California actually dropping to 320 days, down from 352 days in the previous quarter and the second straight quarterly decrease after 12 straight quarterly increases.

The average time to foreclose also declined in Colorado, Utah, Massachusetts, Nevada, Michigan and Maryland. Despite the decrease for Maryland, the state still takes 618 days to complete the foreclosure process.

The four states that took the longest to complete the foreclosure process were New York (1,056 days), New Jersey (966 days), Florida (861 days) and Illinois (628 days).

First-time foreclosure starts, which encompasses default notices or scheduled foreclosure auctions, depending on the state’s foreclosure process, increased 7 percent from February to March, the third straight monthly increase.

Foreclosure starts in March exceeded 100,000 for the first time since November 2011, although they were still down 11 percent from a year ago.

States with the biggest monthly increases in foreclosure starts included Nevada (+153 percent), Utah (+103 percent), New Jersey (+73 percent), Maryland (+53 percent), and North Carolina (+47 percent). Thirty-one states posted monthly increases in foreclosure starts in March.

Nevada, with the nation’s highest foreclosure rate, with one in every 95 housing units with a foreclosure filing in the first quarter, actually saw steep decreases in foreclosure activity, with a 26 percent drop in activity from the previous quarter and down 62 percent from the first quarter of 2011.

California ranked second for foreclosure rates, with with one in every 103 housing units with a foreclosure filing. Arizona (one in every 106) came in at number three, Georgia (one in 119) at number four, and Florida (one in 123) took the fifth spot.

California was number one for foreclosure activity totals, with 133,245 properties that had foreclosure filings in the first quarter. The state accounted for 23 percent of foreclosure activity during the quarter. Florida (73,344) was second, Illinois (37,660) held the third spot, Georgia (34,234) was number four, and Michigan (27,934) was at number five

By: Esther Cho

Home Ownership Makes Tax Time Less Taxing

With the April 17 tax deadline less than a week away, your clients still have time to take advantage of the valuable tax benefits home ownership affords. The National Association of REALTORS®' consumer site,, can help.

“Our government encourages home ownership because it benefits families, communities, and our nation’s economy; home ownership is an investment in our collective futures,” said NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami. “ helps home owners identify the benefits that will save them money today and plan ahead for future savings, as well.” provides tips and tools for home owners, and devotes an entire section of its site to tax incentives for the home. NAR members can check out A Home Owner’s Guide to Taxes to find helpful articles they can pass along to their clients, such as 10 Easy Mistakes Home Owners Make on their Taxes, 12 Tough Questions (and Answers) About Home Office Deductions, and 6 Deduction Traps and How to Avoid Them that provide consumers with a wealth of information to ensure they get the maximum return to which they’re entitled.

Tax benefits that encourage home ownership include the mortgage interest deduction, deductions for property taxes, and tax credits for energy-efficient remodeling projects and heating and cooling systems.

For more information on tax deductions and preparation as well as articles you can add to your blog or Web site, visit

Source: NAR

What to Do When a Home Lingers on the Market

While the supply of homes has decreased from a 8.6-month supply to a 6.4-month supply in the last year, some home owners are still seeing their home linger on the market.

When you can’t get a serious bite from a buyer, here are three interventions you might need to have with your clients.

Re-evaluate the price.
“In an overcrowded housing market, overpriced homes won’t get any showings,” Norman Block, a real estate agent in the Raleigh-Durham area of North Carolina, told Reuters News. For buyers who want to sell quickly, pricing the home lower than the market may help.

Make home improvements.
Sellers don’t have to spend a fortune on improvements, but maybe there’s a reason why buyers keep overlooking their home and items need to be addressed. Maybe some aesthetic finishes will help freshen up the home in buyers’ eyes, such as a fresh coat of paint, decluttering, new hardware on the front door, and tending to the yard.

"If everything is caulked up, and everything is sparkling and shining, the subconscious feeling is ‘wow this house has been taken care of,'" Block says.

Consider a rental situation.
For homes that just won’t sell, home owners might consider renting out the property or entering into a rent-to-buy option. Some home owners have opted to turn their home into a short-term rental if they need help paying their mortgage right away, or some real estate agents have helped arrange a rent-to-buy option. (Read More: Thought About Lease-to-Own Transactions?)

Source: “What if You Can’t Sell Your Home?” Reuters (April 9, 2012)

'Hardest Hit' Program Is Falling Short, Report Says

A “hardest hit” fund to help 18 states that were most battered in the mortgage crisis isn’t meeting its goals of helping underwater home owners, according to a report by the Special Inspector General for the Troubled Asset Relief Program (TARP).

Three percent of the $7.6 billion in the Hardest Hit Housing program has been used by the states since Dec. 31, 2011, but most of those funds so far have gone to help the unemployed and not underwater home owners, according to the report.

According to the report, more than 75 percent of the funds have gone toward shoring up states’ unemployment programs, such as by paying the mortgages of unemployed home owners. But the money was supposed to also be used for loan modifications and principal reductions to help underwater home owners as well, the report says.

The 18 states participating in the hardest hit program were selected due to having the highest number of home owners in negative equity and unemployed.

The Treasury department maintains the fund is serving its purpose. The program provides states the ability to “leverage their unique understanding of the conditions in their communities to create effective, locally-tailored programs," Timothy Massad, assistant secretary for financial stability, wrote in a letter to Romero about the fund.

Source: “Watchdog Blasts Housing Program for ‘Hardest Hit,’” CNNMoney (April 12, 2012)

Average Loan Amount Grows: Market Thaw?

The average amount of mortgages being approved by lenders has grown in the last three months from $215,000 to $235,000 — a possible sign of increased buyer and lender confidence, according to analysts at Capital Economics.

Besides the increase in average mortgage amounts, analysts also point to other positive signs shaping up in the housing market, including a 20 percent drop in the home inventory the last 18 months.

“It may be an early sign that buyer confidence is improving,” write Capital Economics analysts Paul Dales, Paul Diggle, and Amna Asaf in a new report.

The report notes that the months’ supply of for-sale homes has dropped to a level where sales can support current prices, according to Capital Economics. Still, the report warns about 3.9 million homes that are in shadow inventory.

Source: “Average Mortgage Amount Increases by $20,000,” HousingWire (April 11, 2012)

Foreclosures Recede to 2007 Levels

Foreclosure filings are continuing to fall, dropping 2 percent in the first quarter of this year compared to the previous quarter and are down 16 percent compared to the same time last year, RealtyTrac reports in its latest report.

Foreclosure filings include default notices, scheduled auctions, and bank repossessions.

Filings were at their lowest quarterly total since the fourth quarter of 2007. In the first quarter of this year, one in every 230 U.S. homes received a foreclosure filing, according to the report.

But analysts warn to take the progress in numbers with caution.

“The low foreclosure numbers in the first quarter are not an indication that the massive reservoir of distressed properties built up over the past few years has somehow miraculously evaporated,” says Brandon Moore, RealtyTrac CEO. “There are hairline cracks in the dam, evident in the sizable foreclosure activity increases in judicial foreclosure states over the past several months, along with an increase in foreclosure starts in many judicial and non-judicial states in March.

“The dam may not burst in the next 30 to 45 days, but it will eventually burst, and everyone downstream should be prepared for that to happen—both in terms of new foreclosure activity and new short sale activity.”

5 States Seeing the Biggest Increases

For the third straight month, foreclosure starts have increased, rising 7 percent from February to March. For the first time since November 2011, foreclosure starts surpassed the 100,000 mark, according to RealtyTrac. However, starts were still down 11 percent compared to March 2011.

Thirty-one states saw monthly increases in foreclosure starts last month. The five states posting the largest monthly increases in foreclosure starts are:

1. Nevada: Up 153%

2. Utah: Up 103%

3. New Jersey: Up 73%

4. Maryland: Up 53%

5. North Carolina: Up 47%

Source: RealtyTrac

Wednesday, April 11, 2012

Study: Foreclosures More Neglected in Minority Areas

Foreclosed homes in predominantly white neighborhoods tend to be better maintained than foreclosed homes in black and Latino neighborhoods, which were more likely to be found in disrepair and appear abandoned, finds a new study by the National Fair Housing Alliance.

The advocacy group inspected 1,000 foreclosed homes in nine major cities for the study. The advocacy group inspected the homes based on an assigned criteria rating, which included inspecting homes for damaged windows, graffiti, peeling paint, missing shutters or gutters, overgrown weeds, and other factors.

For example, agency inspectors found that foreclosed homes in minority neighborhoods were 82 percent more likely to have broken or boarded-up windows than homes in predominantly white neighborhoods.

"The proper maintenance and marketing of [foreclosed] properties is a key factor in the sale of homes to families rather than to investors," Shanna Smith, NFHA President and CEO, said on a recent conference call about the group’s findings.

The advocacy group alleges discrimination under the Fair Housing Act and says it plans to file complaints with federal housing authorities.

Source: “Banks Neglect Seized Homes in Minority Neighborhoods, Report Says,” (April 5, 2012)

BofA Announces Shortened Short Sale Process

Bank of America announced it is refining its short sale process to streamline its approval process and reduce the wait in accepting offers and making it to closing. The changes are expected to trim the bank’s decision time in half -- from 45 days or longer to 20 days, Inman News reports.

Starting April 14, the bank says it will permit its short sale specialists, using a third-party platform called Equator, to complete document collection, valuations, and underwriting at the same time, which is expected to help speed the process.

Bank of America also announced starting April 14 that real estate agents will be required to submit five documents in short sale transactions to be considered by the lender. These required documents include:

A purchase contract including Buyer’s Acknowledgment and Disclosure form
IRS Form 4506-T
Bank of America Short Sale Addendum
Bank of America Third-Party Authorization Form

Source: Bank of America and “Bank of America Streamlining Short-Sale Procedures,”” Inman News (April 10. 2012)

Buyer Urgency Improves, More See Now Good Time to Buy

More home buyers may jump off the sidelines this spring as they get more urgent about purchasing a home, fearing that home price and mortgage rate increases are on the horizon.

Housing surveys in recent weeks have shown that more Americans are seeing now a great time to purchase a home. In the most recent survey, 73 percent of Americans say now is a good time to buy, according to the latest Fannie Mae Housing Survey conducted in March. That’s up from 70 percent in February who said it was a great time to buy.

"Conditions are coming together to encourage people to want to buy homes," says Doug Duncan, Fannie Mae’s chief economist. "With an increasing share of consumers expecting higher mortgage rates and home prices over the next 12 months, some may feel that renting is becoming more costly and that home ownership is a more compelling housing choice."

Indeed, more buyer urgency is evident in the market. Thirty-three percent of those surveyed by Fannie say they expect home prices soon to increase, which is the highest percentage in a year. What’s more, nearly 40 percent say they expect mortgage rates to rise in the next year too, which is also up from previous surveys.

Coupled with that, 48 percent of Americans say they expect rents to continue to climb, and 44 percent say they expect their financial situation to improve in the next year.

Source: “More Americans Think It’s Time to Buy a Home,” MSN Real Estate (April 9, 2012)

Occupy Movement Refocuses on Foreclosure Protests

The Occupy Movement, a nationwide movement that has staged a series of protests across the country to rail against income inequality and financial sector corruption, is now refocusing its efforts on fighting foreclosures and evictions. The protesters have recently staged rallies, demonstrated at court appearances, and entered foreclosed homes and refused to leave, except by force.

More than 100 Occupy groups have formed foreclosure working groups or conducted a rally or home occupation, says Matt Browner Hamlin of, a national group that focuses on foreclosure protests.

The protesters claim to have had success in getting banks to modify loans of home owners who face foreclosure.

In Cincinnati, a group that calls itself “Occupy the Hood” protested in a hard-hit neighborhood riddled with foreclosures, shouting “Banks got bailed out, we got sold out!” The group says a plague of foreclosures in the working-class neighborhood of East Price Hill has led to home values dropping 41 percent since 2002.

Some view the Occupy Movement’s refocus on foreclosures as a way to try to gain more momentum for the group, which has reportedly been losing some of its steam in recent months.

"The Occupy movement seems to have lost some of its punch," Susan MacManus, a University of South Florida political science professor, told Reuters. "Focusing on an issue that affects the working class and leaves people feeling alienated is potentially a good strategy. If they can make it work."

Source: “In Foreclosures, Occupy Groups See a Unifying Cause,” Reuters (April 9, 2012)

Calif. Lawmakers Oppose REO Rental Program

About 20 California congressional lawmakers have joined forces to urge the Federal Housing Finance Agency to not conduct an REO pilot program in the state, arguing that it would harm the state’s housing recovery.

The lawmakers sent a letter to FHFA Acting Director Edward DeMarco saying such a program would increase the losses to taxpayers and the government-sponsored enterprises.

The FHFA launched an REO sales program in February, in an attempt to unload the high inventory of foreclosures held by Fannie Mae and Freddie Mac through bulk sales to investors. California holds the highest number of Fannie Mae’s REO inventory, with nearly a quarter of its REOs located in that state alone.

The California Association of REALTORS® applauded the lawmakers for speaking out against REO sales program. CAR has been a critic of the program, saying that housing inventory in the state is very low and demand is high. Such a program would do more harm than good, the association argues. According to CAR, REO homes have been attracting multiple offers and are closing in less than 60 days on average, and often above the list price. CAR officials argue a government intervention is not needed.

“Carrying out this plan in California would potentially further delay a housing recovery and ultimately result in greater losses for the taxpayer,” says CAR President LeFrancis Arnold.

Source: California Association of REALTORS®

Mortgage Statements to Get Consumer-Friendly Makeover

The Consumer Financial Protection Bureau announced it will be offering up new rules for mortgage servicers aimed at making monthly mortgage statements more transparent in disclosing fees or changes in a loan.

"For too long, mortgage servicers have not been held accountable to their customers, and the result has been profoundly punishing to home owners in distress," says Richard Cordray, director of the consumer bureau. "It's time to put the 'service' back in mortgage servicing."

Servicers will be required to provide more details in monthly mortgage statements. For example, the agency is considering a requirement that servicers offer a breakdown of mortgage payments by principal, interest, and fees in the statements. Also, servicers may soon be required to itemize fees and charges part of a loan and include warnings to consumers about possible late fees. The agency is also seeking a rule that statements must contain warnings about any future interest rate changes and penalty fees if a mortgage is paid off early.

The new rules are expected to take effect January 2013.

Source: “Consumer Bureau to Crack Down on Mortgage Servicers,” CNNMoney (April 10, 2012)

Housing Crunch Coming for Older Americans

By 2050, the population of Americans 65 and older will more than double and is expected to grow at a faster rate than any other age group, according to U.S. Census data. By that time, one in five Americans will be over the age of 65, and a new report says that growing population will likely face increasing difficulty in finding suitable housing to meet their needs.

The report from the Center for Housing Policy (“Housing an Aging Population — Are We Prepared?”) warns a severe housing cost burden is looming for the country as the older adult population soars.

Older adults are more likely than younger adults to spend more than half their income on housing, the study found. Home owners who are 65 and older are more likely than younger households to have their mortgages paid off, but other housing-related costs continue to bite into their more limited incomes. Property taxes, home maintenance, and utility costs continue to be a burden to even mortgage-free home owners, the study says.

“As the older population grows, meeting the housing needs of older adults is certain to become a significant challenge across the nation,” says Rodney Harrell, a policy adviser at AARP’s Public Policy Institute. “States and communities need to effectively respond by adopting policies that ensure adequate, affordable housing for people of all ages.”

The report calls for a variety of housing to meet the needs of older adults, including a growth in assisted-living residences, continuing care retirement communities, and congregate housing. The authors also urge for the availability of housing grants and loans to assist with modifying a current home so older adults can age-in-place as well as property tax abatement or housing voucher programs to help alleviate housing costs.

Source: “Growing Ranks of Older Adults Face Housing Crunch,” RISMedia (April 8, 2012)

City vs. Suburb: More Americans Rethink Where to Settle

More Americans are showing a preference for living closer into the city than the outer suburbs, according to newly released U.S. Census data. The annual rate of growth in American cities and surrounding urban areas recently surpassed exurbs for the first time in two decades.

Residential exurbs on the edge of metro areas once were a popular place for city dwellers to flock for bigger and more affordable housing options, but the trend is reversing.

“The heyday of exurbs may well be behind us,” Robert J. Shiller, a Yale University economist, told the Associated Press.

Rising gas prices are certainly one factor behind the shift, economists note, but demographic changes are also playing a part. More young singles are delaying marriage and having children, and thus find they don’t need the extra roominess the exurbs tend to offer in housing. Older populations are also showing greater preferences for living in walkable urban centers.

Many outer suburbs that had been experiencing booming growth just a few years ago are now seeing growth stall. In fact, 99 of the 100 fastest-growing exurbs and outer suburbs of 2006 experienced small or no growth at all in 2011, according to Census data. (Spotsylvania County, Va., south of the Washington, D.C., metro area, was the only exception.)

“The sting of this experience may very well put the damper on the long-held view among young families and new immigrants that building a home in the outer suburbs is a quick way to achieve the American dream,” William H. Frey, a Brookings Institution demographer, told the Associated Press.

Source: “An End to America’s Exurbia? For First Time, City, Urban Growth Outpaces that of Outer Suburbs,” Associated Press (April 6, 2012)

Did High Gas Prices Fuel the Housing Crisis?

“High gasoline prices provided the trigger that burst the [housing] bubble,” says JunJie Wu, an Oregon State economist and one of the authors of a new study that blames high gas prices as the main culprit for the housing crisis that started in 2007.

“The theory recognizes the role of subprime mortgages and lax lending practices as inflating the housing bubble,” Wu says, but adds that a spike in gas prices was the “trigger.”

The new study, conducted by economists at University of California, Berkeley, and Oregon State University, attempts to pinpoint the cause of the housing crisis. The researchers say that while the housing market is blamed on initiating the 2007 financial crisis, researchers have found little consensus on what actually caused the housing crisis in the first place.

The researchers offer rising gas prices as the main culprit, noting that oil prices more than doubled between late 2006 and 2008 to $4.15 per gallon.

“The real estate mantra is ‘location, location, location,’” Wu says. “If you find yourself in a location that is far from work and transportation costs rise suddenly, that location can lower the value of your house.”

The researchers note that mortgage default rates were highest in commuter areas. Also, they say that low-income households and suburban homes located away from business centers were the most vulnerable in the housing crunch.

So will the recent rises in gas prices slow the recovery? Yes, say the researchers, “especially for communities tied to high transportation costs,” Wu says.

Source: “Some Economists Say High Gas Prices Triggered Housing Crisis,” RISMedia (April 8, 2012)

Judge OKs $26B Foreclosure Settlement

A federal judge granted final approval to a landmark $26 billion settlement over foreclosure processing errors, clearing the way for the nation’s five largest lenders to begin unraveling aid to home owners. The settlement includes guidelines for banks in compensating home owners who may have been wrongfully foreclosed upon as well as mortgage modifications — including principal write-downs — of up to 1 million home owners.

The settlement was first announced more than a month ago but awaited a judge’s final approval. The settlement is between the nation’s five largest mortgage lenders and the attorneys general of 49 states and the District of Columbia. The five lenders part of the settlement are Bank of America, Citibank, JPMorgan Chase, Wells Fargo, and Ally Financial.

Here's a breakdown of how the settlement money will be allocated:

At least $17 billion will go toward modifying mortgages of delinquent borrowers. The modifications may include principal reductions to mortgages of up to $100,000 or more for 1 million home owners who are underwater or delinquent on their loans.
About $3.7 billion will go toward refinancing mortgages for home owners who are current on their payments. This aid is estimated to help about 750,000 home owners.
$5 billion will go toward banks’ paying fines to the states and federal government for the foreclosure errors. A portion of that will go to funding compensation to home owners who lost their homes to foreclosure due to errors. They stand to receive payments of $1,500 to $2,000.

The banks have also agreed to adopt stricter standards in processing foreclosures to avoid future errors.

As long as the banks abide by the terms of the settlement, they will have immunity from future claims by the state governments for wrongdoings in the processing of foreclosures.

Oklahoma is the only state that did not participate in the settlement agreement. In early February, the state reached a separate agreement with the nation’s five largest lenders for an $18.6 million settlement.

Watch this video to get more info on the mortgage settlement.

Source: “Court Approves $26 Billion Foreclosure Settlement,” CNNMoney (April 6, 2012)

Monday, April 9, 2012

10 U.S. real estate markets drawing international buyers

Affluent international buyers, attracted by fire-sale prices, are snapping up real estate in some U.S. markets. In a report released today, Inman News identifies 10 markets where public records indicate foreign buyers make up the biggest share of overall buyers.
Most of the markets are located in sunny Florida, though areas in Nevada, Arizona, New York and Hawaii are also on the list. The report highlights the economic and personal factors that drive foreign buyers to buy; their preferred property types; top countries of origin; how they find the real estate professionals they work with; why the selected markets appeal to them; and relevant demographic and housing-related characteristics for the markets, including share of foreign-born population, distressed property footprint, home-price trends, and vacancy rates.
Among the findings in this report, researched and written by Inman News reporter Andrea V. Brambila:
• Population levels in the markets range from about 600,000 in Lakeland-Winter Haven, Fla., to nearly 5.6 million in Miami-Fort Lauderdale-Pompano Beach, Fla.
• Seven out of 10 markets had foreign-born populations above the national rate of 13.1 percent in 2010. The Miami metro had the highest share born abroad, at 39.2 percent.
• In six of the 10 markets, area inhabitants who were foreign-born and moved from abroad accounted for a higher-than-average share of overall inhabitants who reported moving in the previous year in 2010. New York County (Manhattan) had the highest share: 7.7 percent of the people who moved in that county were both foreign-born and hailing from abroad.
• In seven out of 10 markets, the median sales price for an existing, single-family home was lower than the national median of $163,500 in fourth-quarter 2011. In eight out of 10 markets, the median sales price for a condo was lower than the national median of $160,800 for that same quarter.
• Condo prices fell on an annual basis in the fourth quarter in seven out of 10 markets. All seven saw their prices decline by more than the national rate of -1.7 percent.
• Seven of the 10 markets

• had a higher share of distressed sales in fourth-quarter 2011 than the national rate of 23.7 percent. Eight of the 10 markets had higher foreclosure activity rates in fourth-quarter 2011 compared to the national rate.
• Nine of the 10 markets, except for Honolulu, had higher vacancy rates in 2010 than the national rate of 13.1 percent. Cape Coral-Fort Myers, Fla., had the highest rate, at 37 percent.
Inman News

More Americans win mortgage loan modifications

The Treasury Department said on Friday that the number of active permanent mortgage loan modifications agreed to by banks rose 13,836 during February to 782,609 by the end of the month.
The modifications, which aim to lower monthly payments so that distressed home owners can avoid foreclosure, were made under the Home Affordable Mortgage Program, or HARP.
It offers incentives to mortgage servicers to rework loans and is one of multiple programs the Obama administration has initiated to try to take some of the pressure of the hard-hit housing sector that continues to be a drag on recovery.
Originally, HAMP was targeted to help 3 million to 4 million home owners but it has reached only a fraction of that number. It has been widely criticized by Republican lawmakers for not being effective but the administration said earlier this year that it was being extended for one year through 2013.
Source (Reporting By Glenn Somerville; Editing by Richard Chang)

New foreclosure wave to hit 'everyday' borrowers

Half a decade into the deepest U.S. housing crisis since the 1930s, many Americans are hoping the crisis is finally nearing its end.
House sales are picking up across most of the country, the plunge in prices is slowing and attempts by lenders to claim back properties from struggling borrowers dropped by more than a third in 2011, hitting a four-year low.
But a painful part two of the slump looks set to unfold: Many more U.S. home owners face the prospect of losing their homes this year as banks pick up the pace of foreclosures.
"We are right back where we were two years ago. I would put money on 2012 being a bigger year for foreclosures than 2010," said Mark Seifert, executive director of Empowering & Strengthening Ohio's People (ESOP), a counseling group with 10 offices in Ohio.
"Last year was an anomaly, and not in a good way," he said.
In 2011, the "robo-signing" scandal, in which foreclosure documents were signed without properly reviewing individual cases, prompted banks to hold back on new foreclosures pending a settlement.
Five major banks eventually struck that settlement with 49 U.S. states in February. Signs are growing the pace of foreclosures is picking up again, something housing experts predict will again weigh on home prices before any sustained recovery can occur.
Mortgage servicing provider Lender Processing Services reported in early March that U.S. foreclosure starts jumped 28 percent in January.
More conclusive national data is not yet available. But watchdog group, which helped uncover the "robo-signing" scandal, says it has turned up evidence of a large rise in new foreclosures between March 1 and 24 by three big banks in Palm Beach County in Florida, one of the states hit hardest by the housing crash
Although foreclosure starts were 50 percent or more lower than for the same period in 2010, those begun by Deutsche Bank were up 47 percent from 2011. Those of Wells Fargo's rose 68 percent and Bank of America's, including BAC Home Loans Servicing, jumped nearly seven-fold -- 251 starts versus 37 in the same period in 2011. Bank of America said it does not comment on data provided by other sources. Wells Fargo and Deutsche Bank did not comment.
Housing experts say localized warning signs of a new wave of foreclosure are likely to be replicated across much of the United States.
Online foreclosure marketplace RealtyTrac estimated that while foreclosures dropped slightly nationwide in February from January and from February 2011, they rose in 21 states and jumped sharply in cities like Tampa (64 percent), Chicago (43 percent) and Miami (53 percent).
RealtyTrac CEO Brandon Moore said the "numbers point to a gradually rising foreclosure tide as some of the barriers that have been holding back foreclosures are removed."
One big difference to the early years of the housing crisis, which was dominated by Americans saddled with the most toxic subprime products — with high interest rates where banks asked for no money down or no proof of income — is that today it's mostly Americans with ordinary mortgages whose ability to meet payment have been hit by the hard economic times.
"The subprime stuff is long gone," said Michael Redman, founder of "Now the folks being affected are hardworking, everyday Americans struggling because of the economy."
'Hard to catch up'
Until December 2010, Daniel Burns, 52, had spent his working life in the trucking industry as a long-haul driver and manager. When daily loads at the small family business where he worked tailed off, he lost his job.
Unable to cover his mortgage, Burns received a grant from a government fund using money repaid from the 2008 bank bailout. That grant is due to expire in early 2013 and Burns is holding out on hopeful comments from his former employer that he might get his job back if the economy recovers.
"If things don't pick up, I will be out on the street," he said, staring from his living room window at two abandoned houses over the road in the middle-class Cleveland suburb of Garfield Heights, the noise of traffic from a nearby Interstate highway filling the street.
Underscoring the uncertainty of his situation, Burns' cell phone rings and a pre-recorded message announces that his unemployment benefits are due to be cut off in April.
A bit further up the shore of Lake Erie, Cristal Fell, who works night shifts entering data for a trucking company in Toledo, has fallen behind on her mortgage a second time because her ex-husband lost his job and her overtime was cut.
"Once you get behind it's so hard to catch up," she said.
Fell, a mother of four, hopes the economy will gather enough speed to help her avoid any risk of losing her home. Her ex-husband has found a new job and she is getting more overtime, so she hopes she can catch up on her mortgage by the fall.
Burns and Fell are the new face of the U.S. housing crisis: Middle class, suburban or rural with a conventional 30-year fixed mortgage at a reasonable interest rate, but unemployed or underemployed. Although the national unemployment rate has fallen to 8.3 percent from its peak of 10 percent in October 2009, nearly 13 million Americans remain jobless, meaning many are struggling to keep up with their mortgage payments.
Real estate company Zillow Inc says more than one in four American homeowners were "under water" or owed more than their homes were worth in the fourth quarter of 2011. The crisis has wiped out some $7 trillion in U.S. household wealth

Nick Carey

Fed to banks: Rent out more foreclosures

The Federal Reserve took steps to encourage banks to turn more of their foreclosed homes into rental properties in new policy guidelines issued on Thursday that could help lessen the flood of distressed property sales that is depressing prices.
"Banking organizations should make good-faith efforts to dispose of foreclosured properties," the Fed said in a six-page policy statement.
But it said that given "extraordinary market conditions that currently prevail," renting out surrendered properties falls in line with its regulations.
Many at the Fed have argued that converting more single-family homes into rentals could curb declines in home prices that have fallen more than 30 percent from their peak in 2006.
The central bank issued a policy paper to Congress earlier this year and suggested lenders jump into the rental market as a way to reduce their losses on foreclosed properties, an approach that would also help shore up the housing market and meet the growing demand for rentals.
"The continued inflow of new real estate
owned properties to the market -- expected to be millions more over the coming years -- will continue to weigh on house prices for some time," the Fed statement said.
The Fed cautioned that banks must always consider the overall "costs, benefits, and risks of renting," and that full documentation of a rental strategy is needed.
Banks are allowed to rent out a foreclosed property "without having to demonstrate continuous active marketing of the property provided that suitable policies and procedures are followed."
Those banks using 50 or more properties as rentals need to document how they are meeting supervisory standards, the Fed said.
Despite the number of repossessed properties being rented, the central bank reminded lenders must comply with federal, state, and local statues, including keeping up with maintenance codes and landlord-tenant laws.
Banks must carefully balance the demands of rehabilitation and leasing, the Fed warned, and establish policies to ensure the properties stay under standard maintenance codes.
If banks use property managers or outside agents to manage the repossessed properties, the Fed said contracts and solid track record are necessary.

Margaret Chadbourn