HUD Wants Housing Counseling Funds Back

The Department of Housing and Urban Development is asking Congress to restore funding for its housing counseling program, which it says is “important to the recovery and stability of our housing markets.”
The program faced major cuts in April. Congress slashed $88 million in HUD nonprofit counseling funds for 2011.
"This cut jeopardizes the vital consumer protections housing counselors provide nationwide, and restoration of these funds is important to the recovery and stability of our housing markets," Deborah Holston, HUD’s acting deputy assistant secretary for single family housing, told a House subcommittee Wednesday.
About half of the clients in the counseling program in 2009 and 2010 sought foreclosure prevention assistance. HUD points to research such as from the Government Accountability Office that found counseling resulted in fewer defaults. Also, borrowers who received National Foreclosure Mitigation Counseling program funds before a loan modification had a 53 percent better chance of bringing their mortgage up-to-date.
"This program has far-reaching effects throughout our economy, and the services it supports will continue to be vital to the ongoing recovery," Holston told the subcommittee.
Source: “HUD Asks Congress to Restore Housing Counselor Funding,” HousingWire (Sept. 14, 2011)

Mortgage Applications on the Rise Last Week

Mortgage applications increased 6.3 percent last week compared to one week earlier, as more borrowers took advantage of record-reaching low interest rates.
For the week ending Sept. 9, the purchase index — a gauge for future home buying — increased on a seasonally adjusted basis by 7 percent compared to one week earlier, the Mortgage Bankers Association reported in its weekly mortgage application survey. However, the purchase index is 7.2 percent lower from the same week one year ago.
Meanwhile, the refinance index increased 6 percent from the previous week, ending three consecutive weekly decreases in activity. Still, it is 23.5 percent lower than the same week a year ago.
By REALTOR® Magazine Daily News

| -A A +A NAR: Increased Lending, Short Sales Will Reduce REOs

Improving access to affordable mortgage financing for qualified home buyers and investors and committing additional resources to loan modifications and short sales will help reduce current and future inventories of real estate owned (REO) properties held by government agencies, according to the National Association of REALTORS®. In a letter sent today to the U.S. Department of Housing and Urban Development, the Federal Housing Finance Agency, and the U.S. Department of the Treasury, NAR responded to the agencies’ recent request for input and offered its recommendations for selling REO properties held by Fannie Mae, Freddie Mac and the Federal Housing Administration. In its letter, NAR urged the agencies to create an advisory board as they explore new options for selling foreclosed properties to ensure that efficiently disposing of agency REO properties will minimize taxpayer losses and reduce the negative effects that distressed properties have on local real estate markets. “As the leading advocate for housing issues, REALTORS®know that foreclosures affect families, communities, the housing market and our nation’s economy,” said NAR President Ron Phipps. “We believe the government has an opportunity to minimize the impact of distressed properties on local markets by expanding financing opportunities, bolstering loan modifications and short sales efforts, and enhancing the efficient disposition of REO properties. This will help stabilize home prices and neighborhoods and help support the broader economic recovery.” Phipps said that the lack of available and affordable mortgage financing is hurting REO sales and the entire housing market, and urged increased consumer and investor lending. While NAR supports strong underwriting standards, the lack of private capital in the mortgage market, unduly tight underwriting standards, and increasing fees have discouraged many potential home buyers from applying for mortgages. NAR believes ensuring mortgage availability for qualified home buyers and investors will help absorb the excess REO inventory. To prevent further REO inventory increases, NAR also recommended that the agencies take more aggressive steps to modify loans and, when a family is absolutely unable keep their home, to quickly approve reasonable short sale offers that allow families to avoid foreclosure. Phipps said that while federal programs have been put into place to help keep families in their homes, many of these have fallen short of expectations, and advocated that those resources be applied toward modifying loans and expediting short sales, which are typically less costly than foreclosure. “Loan modifications keep families in their home and reduce defaults, while short sales keep homes occupied, helping stabilize neighborhoods and home values,” Phipps said. “Expanding resources and ensuring the use of already allocated funds for pre-foreclosure efforts is the best opportunity to reduce taxpayer costs and creates more positive outcomes for homeowners and their communities.” NAR’s letter also outlined concerns about proposals to pool large volumes of REO properties for bulk sales. While these types of transactions may help quickly alleviate high REO inventories, taxpayers would be required to accept larger losses than are necessary. Phipps said that efforts should be made to incentivize individual versus bulk sales, except in small geographic areas that meet certain criteria, since selling in bulk to large national investors puts a large section of the housing market into the hands of fewer market participants and puts individual home buyers and sellers at a disadvantage. He also said the success of any bulk sale programs should be determined by the stabilizing effect the program has on a locale and whether it maximizes value to taxpayers. Maximizing the recovery on the agencies’ assets will depend on how property valuations are determined and that those valuations are accurate, appropriate, and reflective of market conditions, such as the valuations available through the Realtors Property Resource™, an NAR subsidiary. NAR is also concerned about proposals that include lease-to-own elements. Phipps said that agency policies should first be focused on keeping families in their homes through loan modifications or short sales if that’s a better option, and that the agencies should not expedite foreclosures so that those properties could be included in a lease-to-own program. He added that any lease-to-own programs should not be administered by the government, but instead should include the participation of local investors or nonprofits that can manage the specialized needs and challenges of the local market. “REALTORS® welcome the agencies’ desire to receive input and ideas to help address their REO inventory. We look forward to serving on any advisory board and working together with agency staff, real estate professionals, property managers, and others with extensive real estate industry experience to develop sound strategies and solutions to ongoing REO issues,” said Phipps. Source: NAR

Defaults Soar 33%, Biggest Monthly Gain in 4 Years

A new wave of foreclosures hit in August, as banks picked up the pace in taking action against home owners who have fallen behind on their mortgage payments, RealtyTrac Inc. reported Thursday. The number of U.S. homes that receiving an initial default notice rose 33 percent in August from July. That increase represents the biggest monthly gain in four years, according to RealtyTrac. "This is really the first time we've seen a significant increase in the number of new foreclosure actions," says Rick Sharga, a senior vice president at RealtyTrac. "It's still possible this is a blip, but I think it's much more likely we're seeing the beginning of a trend here." The uptick in foreclosure activity follows after months of a slowdown in foreclosures, which started last fall, with banks reviewing foreclosure policies and paperwork after facing lawsuits and criticism over how they processed foreclosures. Some banks even temporarily halted their foreclosures as they more carefully reviewed pending cases. The slowdown was also blamed on court delays in some states. But some housing experts say the increase in foreclosure activity actually could be good for the housing market. A faster turnaround in foreclosures could help clear the glut of shadow inventory hovering over the market, which many say has caused home values to plummet. The “bloated foreclosure pipeline now presents the greatest obstacle to a housing market recovery," said Josh Levin, a Citi analyst. About 3.7 million more homes are in some stage of foreclosure than in a normal housing market, Levin said. Banks are on track to repossess about 800,000 homes this year — down from more than 1 million last year, Sharga said. Overall, 228,098 U.S. homes — or one in every 570 U.S. households — received a foreclosure-related notice in August, a 7 percent increase from July. However, that represents a 33 percent decline from August 2010. Source: “Report: Mortgage Default Warnings Spiked in August, Signaling Potential New Foreclosure Wave,” Associated Press (Sept. 15, 2011)

Freddie Offers New Loan Mod Option

Freddie Mac borrowers ineligible for participation in the Home Affordable Modification Program or previously in default on a HAMP or other loan workout will be able to take advantage of a new option that reduces mortgage principle and monthly payments by at least 10 percent each.

Under a Standard Modification, loans will have the interest rate set at 5 percent and the amortization period extended to 40 years from the time of the workout; lenders will receive cash incentives of up to $1,600 per home owner approved.

The Standard Modification replaces Freddie Mac's Debt Coverage Ratio loan modification, which is now being referred to as a Classic Modification.

Source: "Freddie Offers New Loan Mod Option," NASDAQ (09/13/11)

Poverty Level Rises to Highest Level Since 1993

More Americans are living in poverty: The number of Americans living in poverty rose to 15.1 percent, its highest level since 1993, the Census Bureau reported Tuesday.

Median household income has fallen 7 percent since 2000 (adjusting for inflation) to $49,445 — its lowest since 1996.

The largest drops in incomes were from young professionals and minorities. The median income for black households dropped 3.2 percent to $32,068.

“It’s about joblessness,” Timothy Smeeding, director of the Institute for the Research of Poverty at the University of Wisconsin, told USA Today. “Young [people] don’t have work, and poverty would be even higher if so many 25- to 34-year-olds weren’t living at home with their parents.”

Indeed, the number of households “doubling up” grew from 19.7 million in 2007 to 21.8 million in the spring of 2011, according to Trudi Renwick, the Census Bureau’s chief of poverty statistics.

Meanwhile, the only age group to prosper in the last decade: Americans aged 65 and older. Adjusted for inflation, their household income increased 7.5 percent over the decade, according to U.S. Census data.

Source: “Poverty at 15.1%; Its Highest Level Since 1993,” USA Today (Sept. 13, 2011)

Underwater Borrowers Hold Back Sales

Declines in home values have pushed a high number of home owners to be “underwater,” in which borrowers owe more on their properties than they are current worth, and it’s hampering home sales, according to new data by CoreLogic.

About 10.9 million, or 22.5 percent, of all residential properties with a mortgage were in negative equity at the end of the second quarter, down slightly from 22.7 percent in the first quarter, CoreLogic reports. What’s more, about 2.4 million borrowers had less than 5 percent equity, which CoreLogic refers to as “near-negative equity,” in the second quarter.

Since the peak in home sales in 2005, nondistressed sales in ZIP codes with low negative equity have dropped 61 percent, compared to an 83 percent sales decline in high negative equity ZIP codes.

“The typical seasonal changes in sales volume in high negative equity ZIP codes is very muted, which indicates that nondistressed sales are being heavily impacted by the high levels of negative equity in their neighborhood, even if sellers have equity,” according to CoreLogic’s report.

“High negative equity is holding back refinancing and sales activity and is a major impediment to the housing market recovery,” says Mark Fleming, chief economist with CoreLogic. “The hardest hit markets have improved over the last year, primarily as a result of foreclosures. But nationally, the level of mortgage debt remains high relative to home prices.”

States With the Highest Number of Underwater Borrowers

1. Nevada: 60 percent of all properties with a mortgage were considered underwater

2. Arizona: 49%

3. Florida: 45%

4. Michigan: 36%

5. California: 30%

By REALTOR® Magazine Daily News

Green Mortgages Allow More Options for Upgrades

With the growth of green building the last decade, green lending has emerged to help finance those often costly “green” upgrades.

Dave Porter, with PorterWorks in Stanton, Wash., who provides continuing education courses on green lending to those in the real estate industry, says there are several basic types of green mortgages, which most of the public still isn’t very aware about. For example, energy-efficient mortgages (EEMs) are “used to finance the construction of a home that would meet green standards or to buy one that’s newly built.” An energy improvement mortgage (EIM), on the other hand, is used to buy and fix up a house that needs green improvements, like insulation or new windows.

The loans are available through mortgage programs by Fannie Mae, the Federal Housing Administration, Veterans Affairs, and the Department of Agriculture.

“They have slight differences in requirements, but basically they allow you to finance the home, plus the energy-conserving improvements, without having to qualify for the additional cost of the improvements,” Porter told the Chicago Tribune.

Source: “Market Ripe for Green Loans,” Chicago Tribune (Sept. 9, 2011)

Downsizing Trend Shows Signs of Reversing

New-home sizes had shown signs of shrinking since the housing crisis and recession. However, Americans are still showing signs of living large.

A new-home built in 2010 averaged 2,392 square feet — still more than 650 square feet larger than in 1980, according to U.S. Census Bureau data. While square footage in new homes have dropped slightly since 2007 (when it as 2,521 square feet), new-home sizes are still bigger than what they were from three decades ago. In 1980, new homes were, on average, 1,740 square feet.

With the extra square footage nowadays, home owners are adding more rooms. For example, in 1980, more than 25 percent of all new homes had 1.5 bathrooms or less. In 2010, only 8 percent of homes had 1.5 or fewer bathrooms, while the overwhelmingly majority had a lot more.

Source: “The Way We Live Now is Bigger,” LifeInc.com (Sept. 8, 2011)

Is Depression Holding Back Household Spending?

Households have tightened up spending and are behaving in a way as if the economy was even worse than it actually is, say economists.

Economic growth continues to fall short of expectations and Federal Reserve Chairman Ben Bernanke, speaking at a luncheon in Minneapolis on Thursday, suggested that it may partially be because the public is depressed.

Americans are facing high levels of unemployment, slow gains in wages for the employed, falling home prices, and debt burdens. However, “even taking into account the many financial pressures they face, households seem exceptionally cautious,” Bernanke said at the luncheon.

While the economy has grown slowly this year, consumer confidence remains low. In fact, the latest consumer sentiment readings are near all-time lows, which were last seen in late 2008 during the financial crisis, John Williams, the president of the Federal Reserve Bank of San Francisco, recently told the Seattle Rotary Club. “People are on edge waiting for the other shoe to drop.”

Source: “Fed Chief Describes Consumers as Too Bleak,” The New York Times (Sept. 8, 2011)

The “Great Recession” has ended, officially.

The “Great Recession” has ended, officially.

At least, that's the word from the private, nonprofit research organization that calls the beginnings and endings of recessions, the National Bureau of Economic Research.

The NBER said Monday that the recession which began in December 2007 ended in June 2009, which marked the beginning of an expansion. The announcement rules out the possibility of a so-called “double-dip” recession, because any new downturn would be seen as a brand new recession.

Story: Obama: Much more work needed to fix the economy

President Barack Obama said that even though the NBER officially named an end to the recession, the economy has a long way to go and much work to be done to become healthy again. "Something that took ten years to create is going to take a little more time to solve," Obama said at a town-hall-style meeting shown live on CNBC.

The NBER said it chose the June 2009 date based on examination of data including gross domestic product, employment and personal income.

"The recession lasted 18 months, which makes it the longest of any recession since World War II. Previously the longest postwar recessions were those of 1973-75 and 1981-82, both of which lasted 16 months," theNBER added in a press release on its website.

Just because the recession ended 15 months ago, it doesn't mean that the economy is healthy, the NBER asserted. "Economic activity is typically below normal in the early stages of an expansion, and it sometimes remains so well into the expansion," the NBER said.

Readers, are you jumping back into the job hunt?

1. More must-see stories
   1. 

      AP
      Style Catch-22

      Your Career: Women can’t catch a break when it comes to what they wear in the workplace. Full story

   2. Life Inc.: Adding God as a work reference
   3. New-age butchers aim at foodies, locavores
   4. ConsumerMan: The new tune at Ticketmaster

In April, the NBER declined to call the end of the recession, and some of its members said at the time they were concerned the economy could dip back into negative territory. In Monday's announcement, the NBER said any fresh downturn would mark a new recession, not a continuation of the one that began in December 2007.

"The basis for this decision was the length and strength of the recovery to date," the NBER said.

U.S. officials have been struggling to find a way to speed up a sluggish recovery that has left unemployment at a painfully high 9.6 percent. The U.S. Federal Reserve's policy-setting committee meets on Tuesday and is widely expect to discuss whether additional measures are warranted to bolster the economy.

The NBER normally takes its time in declaring a recession has started or ended.

For instance, the NBER announced in December 2008 that the recession had actually started one year earlier, in December 2007.

Similarly, it declared in July 2003 that the 2001 recession was over. It actually ended 20 months earlier, in November 2001.

Its determination is of interest to economic historians — and political leaders. Recessions that occur on their watch pose political risks.