Senate Approves Higher Conforming Loan Limit

To the chagrin of some industry participants and the elation of others, the Senate voted in favor of an amendment that would reinstate the heightened conforming loan limits for mortgage loans backed by Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA). The amendment, introduced by Sens. Johnny Isakson (R-Georgia) and Bob Menendez (D-New Jersey), passed late Thursday with a 60 to 38 vote. The conforming loan limit was previously increased on a temporary basis to $729,750, but the rate expired September 30 and returned to its original rate of $625,500. If the House also approves, the conforming loan limit will rise again to $729,750 and remain there through 2013. Representatives from the National Association of Home Builders and RE/MAX spoke out in their support of the Senate’s decision. “The National Association of Home Builders [NAHB] commends the Senate for approving” the amendment, stated Bob Nielson, chairman of the NAHB. “Restoring the higher loan limits for the housing government sponsored enterprise and the FHA will provide home owners and home buyers with safe and affordable financing while providing a much-needed boost to housing markets all around the country,” Nielson added. Nielson believes allowing the conforming loan limit to return to its original rate would “reduce housing demand, and place downward pressure on home prices in major markets,” which will “exacerbate the current housing downturn, trigger more foreclosures, impede job growth and endanger the fragile economic recovery.” RE/MAX chairman and co-founder Dave Liniger issued a statement Friday in response to the Senate’s vote, saying “Raising the loan limits was the right thing to do in 2008, and it would be a big mistake to burden the market at this point with lower limits. Housing is still fragile, and if the higher loan limits aren’t extended we risk losing momentum we’ve worked hard to build over the past three years.” However, with the GSEs guaranteeing about 90 percent of all residential mortgages, others in the industry feel the government is crowding out the private market, and extending the inflated conforming loan limit will prolong this trend. At a Senate subcommittee hearing in September, Martin S. Hughes, president and CEO of Redwood Trust, urged Congress not to extend the heightened conforming loan limit. “[T]he government is crowding out private securitizations, by maintaining an abnormally high conforming loan limit and by subsidizing the guarantee fees that the GSEs charge issuers,” Hughes stated.

After 3-Year Low, California Foreclosure Filings Rise Again

Having fallen to its lowest level in three years, California’s rate of foreclosure filings rose up to come back in line with recent rates, according to the latest information from DataQuick. At the same time, the share of properties at foreclosure auctions purchased by investors or other non-lender, non-government entities is growing. The rate was 29.7 percent for the third quarter, up from 28.3 percent last quarter and 22.7 percent one year ago. Foreclosure filings in the state rose 25.9 percent in the third quarter, while posting an annual decline of 14.4 percent. In total 71,275 foreclosure filings were filed on 70,554 homes in California in the third quarter. Most foreclosures involve loans originated between 2005 and 2007, according to DataQuick. The highest concentration of default notices took place in lower-cost neighborhoods. ZIP codes with a median sales price of $800,000 posted a 12.1 percent rise in notices of default filings as opposed to the statewide increase of 25.9 percent. In these ZIP codes, there were 2.8 foreclosure filings per 1,000 homes, while in ZIP codes where median sales price stands at $200,000, there were 11 foreclosure filings per 1,000 homes. The average homeowner who received a notice of default filing during the third quarter was eight months delinquent. DataQuick measured the median amount a homeowner facing foreclosure owed on a median mortgage to be $19,198 on a $331,333 loan. This is a 17 percent increase from the previous quarter and a 27 percent increase from the third quarter of last year. The counties that experienced the least amount of foreclosure filings were Marin, San Francisco, and San Mateo counties, while the counties experiencing the highest incidence of foreclosure filings were Sacramento, Madera, and Stanislaus counties. While foreclosure filings rose for the quarter, the rate of homes lost to foreclosure during the quarter declined by 8.4 percent. The total number of homes lost to foreclosure was 38,895. The is down 14.3 percent from last year. Homes that did foreclose in the third quarter took about 9.9 months from the notice of default to the final foreclosure. This rate is almost identical to the previous quarter’s timeline of 10 months but up from last year’s 8.7 months. Sales of foreclosed homes made up 34.2 percent of all home resales in California. This is down from 35.6 percent last quarter and 35.5 percent last year. Short sales, on the other hand, increased from last quarter, up from 17.4 percent to 17.8 percent. The third-quarter rate is also higher than the rate recorded in the third quarter of 2010 – 17.3 percent. “The way it looks right now, it’s reasonable to expect default filings to run at a somewhat higher level than we saw earlier this year,” said John Walsh, president of DataQuick. “Obviously, some lenders and loan servicers have begun to plow through their backlogs of delinquent loans more aggressively.”

Industry's Past-Due Mortgages Continue to Drop

How many homeowners in the United States are behind on their mortgage payments? It’s 6,373,000, according to Lender Processing Services (LPS). The number is staggering, but it’s actually on the decline, down from 6,397,000 as of the end of August, and 6,538,000 at the end of July. LPS offered the media an advance look at the high-level numbers from its mortgage performance report due out later this month. The company’s data, which is derived from its loan-level database of nearly 40 million mortgage loans, provides evidence that servicers are pushing those loans that have been languishing in non-payment status through the pipeline at a faster pace. At September month-end, the national mortgage delinquency rate – which includes loans 30 or more days past due, but not in foreclosure – stood at 8.09 percent. That’s down 0.5 percent from the previous month and 12.7 percent from a year earlier. At the same time, the foreclosure inventory rate – which LPS calculates as loans that have been referred to an attorney but have not yet reached the final stage of foreclosure sale – rose to 4.18 percent in September, up 1.7 percent from August and up 8.9 percent from September of last year. The same trend of a declining delinquency rate and rising foreclosure rate was reported last month as well. Of the 6,373,000 mortgage going unpaid in the United States, LPS says approximately 2,172,000 are part of the foreclosure pre-sale inventory. The remaining 4,202,000 are 30-plus days delinquent but not yet in foreclosure. Of these, 1,844,000 are past due by 90 days or more. According to LPS’ September study, the five states with highest percentage of non-current loans – which combines foreclosures and delinquencies – have held onto their rankings for three consecutive months. These include: Florida, Mississippi, Nevada, New Jersey, and Illinois. States with the lowest percentage of non-current loans include: Montana, Alaska, Wyoming, South Dakota, and North Dakota.

HUD Offers REO Homes for $100 Down in Select States

HUD has approved a program aimed at putting foreclosed homes back into the hands of owner-occupant buyers. In select states, from now into October of next year, buyers need a down payment of only $100 to purchase a HUD-owned REO home. The buyer must be an owner-occupant, utilizing financing insured by the Federal Housing Administration (FHA). Standard FHA underwriting guidelines apply, and the sale must be for the full amount of the current list price. The $100 down payment incentive program has been approved for two of HUD’s four national regions – the regions managed by the Denver Homeownership Center and the Atlanta Homeownership Center. HUD homes in the states listed, as well as the Caribbean are currently eligible for the program. Denver Homeownership Center’s Jurisdiction: Arkansas Colorado Iowa Kansas Louisiana Missouri Minnesota Montana Nebraska New Mexico North Dakota Oklahoma South Dakota Texas Wisconsin Wyoming Utah Atlanta Homeownership Center’s Jurisdiction: Alabama Florida Georgia Kentucky Illinois Indiana Mississippi North Carolina South Carolina Tennessee Caribbean HUD’s $100 down payment incentive program can also be applied to an FHA 203k loan, which can be used to fund repairs and renovations on the home. The 203k program allows buyers to finance both the mortgage and additional money for rehabilitation needs with a single government-insured loan. Matt Martin, CEO of Matt Martin Real Estate Management (MMREM), says this is one of the most exciting features of the new incentive program and should drive a lot of exposure to FHA’s 203k offering. MMREM is under contract with HUD to assist with disposition sales of its repossessed homes. MMREM handles properties throughout 16 states, or about a third of HUD’s REO portfolio. With an FHA 203k loan, “buyers can find a property that needs some TLC, fix it up however they want to, and finance the whole thing for $100,” Martin explained. “MMREM is excited to work with this recent initiative, in a way that it supports putting HUD homes back into the hands of homeowners,” Martin said. In addition to $100 down instead of FHA’s typical 3.5 percent down payment, HUD says it will also cover up to 3 percent of the closing costs in most cases.

Study: Better to Live Near Vacant Home Than Foreclosure

Living near an occupied property in foreclosure can bring down home prices nearly twice as much than just living next door to a vacant home, according to a new study by the Federal Reserve Bank of Cleveland, which analyzed sales data of nearly 10,000 homes in the Cleveland area. "The impacts of homes with multiple indicators of distress are larger than the impacts of homes that are only vacant, delinquent, or recently foreclosed," the researchers found. Some findings from the study: Homes within 500 feet of at least one vacancy sold 0.8 percent lower. Occupied home that had recently entered the foreclosure process lowered the sales price of nearby homes by 1.8 percent. Sales within 500 feet of a home where a delinquent borrower abandoned the home saw, on average, a 3.1 percent drop to home values. The largest drop was from homes that were tax delinquent, vacant, and foreclosed: Home sales prices within 500 feet were found to be 9.6 percent lower. Source: “Study Finds Foreclosures Harm Home Prices More Than Vacancies,” HousingWire (Oct. 20, 2011)

Homeownership Rate Second-Highest on Record

The homeownership rate is at its second-highest level on record, only behind the record high set in 2000, according to the U.S. Census Bureau, which began collecting home ownership data in 1890. By region, the homeownership rate is: Midwest: 69.2 percent South: 66.7 Northeast: 62.2 West: 60.5 Nearly every metro area had more home owners than renters in 2010. The metro areas with the highest homeownership rates were in Michigan and Florida. Monroe, Mich., had the highest percentage of owner-occupied units at 79.8 percent, followed by Punta Gorda, Fla., at 79.7 percent. While the national homeownership rate remained high, the decrease in the rate from 2000 to 2010 by 1.1 percent — to 65.1 percent overall — is the largest decrease since the 1930 to 1940 period, the Census Bureau reported. States With Highest Housing Inventory Meanwhile, housing inventory soared 13.6 percent to 15.8 million units from 2000 to 2010, growing the fastest in the South and West. The states with the largest percentage increase in housing units were: Nevada: 41.9 percent Arizona: 29.9 Utah: 27.5 Idaho: 26.5 Georgia: 24.6 Florida: 23.1 North Carolina: 22.8 Colorado: 22.4 Texas: 22.3 South Carolina: 21.9 Source: U.S. Census 2010 and “Homeownership Near Record,” Investors.com (Oct. 20, 2011)

Obama Expected to Unveil Housing Aid

President Barack Obama is expected to announce Monday new policies to help struggling home owners, including a move that would allow borrowers to refinance their mortgage at current low rates no matter how much their home values have dropped. The announcements are expected to unveil looser terms to qualify for the Home Affordable Refinance Program (HARP), which helps borrowers up-to-date on their mortgage payments refinance, despite a drop in their home values. The Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, also is expected to end a cap that excluded home owners from HARP who had mortgages that were higher than 125 percent of the home’s value. Many borrowers who are underwater on their properties have been unable to refinance their mortgage since they do not have enough equity in their properties. The administration’s plan is expected to eliminate “appraisals and extensive underwriting requirements for most borrowers” who are up-to-date on their mortgage and want to refinance at a lower rate, The Wall Street Journal reports. Obama is also expected to announce a reduction in Fannie Mae and Freddie Mac loan fees and a waiving of fees for borrowers looking to refinance their mortgages into shorter terms. Lenders could start refinancing, following the new policies, as early as Dec. 1. However, mortgages that are more than the current loan-to-value limit may have to wait until early next year, according to media reports. Housing experts believe that allowing underwater home owners to refinance at the current low rates will allow home owners to shave hundreds from their monthly mortgage bills and possibly help avoid foreclosures and free up more household cash to spur economic recovery in other areas. Source: “WSJ: Home Lending Revamp Planned,” The Wall Street Journal (Oct. 24, 2011) [log-in required] and “Obama to Unveil Housing Plan on Campaign Swing West,” Reuters News (Oct. 24, 2011)