Thirty-Year Fixed Mortgage Rate Drops to 4%

Novemner 2011

Mortgage interest rates dropped sharply this week as investors rushed to U.S. Treasury bonds amid concerns over the European debt crisis.

Data released by Freddie Mac Thursday puts the average rate for a 30-year fixed mortgage at 4.00 percent (0.7 point) for the week ending November 3rd. That marks its second lowest reading since hitting an all-time low of 3.94 percent in early October.The 30-year rate fell 10 basis points from 4.10 percent last week. Last year at this time, it was averaging 4.24 percent. The GSE’s regular weekly survey averages rate data from 125 lenders across the country. This week, the 15-year fixed-rate mortgage came in at 3.31 percent (0.7 point). It fell almost as much, down from 3.38 percent last week. A year ago at this time, the 15-year fixed rate was 3.63 percent. Adjustable-rate mortgages (ARMs) declined as well this week. The 5-year ARM dropped from 3.08 percent last week to 2.96 percent (0.6 point). The 1-year ARM slipped from 2.90 percent to 2.88 percent (0.6 point).“Market concerns over the European debt market drew investors to U.S. Treasury securities, lowering bond yields and mortgage rates,” explained Frank Nothaft, Freddie Mac’s chief economist. “Meanwhile, on the home front, the U.S. economy continued its gradual recovery.”Nothaft pointed to stats from the Bureau of Economic Analysis, which showed the economy grew 2.5 percent in the third quarter, the strongest pace in a year, as consumers stepped up spending. Consumer sentiment, as measured by the Thomson Reuters/University of Michigan index, rose for the second month in a row in October. Nothaft notes that last month’s reading was the highest since July.

CoreLogic Records Second Consecutive Decline in Home Prices

November 2011

CoreLogic released its latest market analysis of residential property values Monday. The company’s index shows U.S. home prices fell another 1.1 percent between August and September.

It marks the second consecutive monthly decline recorded by CoreLogic and signals price depreciation is deepening. The company’s previous report documented a 0.4 percent drop in national home prices between July and August.Paul Diggle, property economist with the research firm Capital Economics, says the “acceleration in the rate at which the CoreLogic house price index is falling reflects the slowing in the pace of job creation and wider economic growth earlier this year.”Diggle adds that “prices may well fall further in the closing months of the year and, despite housing appearing very undervalued, prices probably won’t rise for several years.”CoreLogic’s September reading puts home prices 4.1 percent below their year-ago level. That follows a decline of 4.4 percent in August 2011 compared to August 2010. Those figures include distressed sales – REO and short sale transactions. If you take the distress factor out of the equation, home prices are still on a downward trajectory, but not as far off the mark. Excluding distressed sales, year-over-year prices declined by 1.1 percent in September when compared to a year earlier, according to CoreLogic.“Even with low interest rates, demand for houses remains muted. Home sales are down in September and the inventory of homes for sale remains elevated,” commented Mark Fleming, chief economist for CoreLogic. Fleming says home prices are adjusting to correct for the supply-demand imbalance, and as a result, he expects declines to continue through the winter. “Distressed sales remain a significant share of homes that do sell and are driving home prices overall,” Fleming added.According to CoreLogic’s latest report, the five states with the highest home price appreciation in September included: West Virginia (+7.0 percent), Wyoming (+3.8 percent), South Dakota (+3.6 percent), Maine (+3.5 percent), and North Dakota (+3.1 percent).The five states with the greatest depreciation were: Nevada (-12.4 percent), Illinois (-9.2 percent), Arizona (-9.0 percent), Minnesota (-8.3 percent), and Georgia (-7.2 percent).

Ten Field Service Approaches to Protect the Value of REO Properties

November 2011

Everything feels “stuck.” The unemployment rate hovers above 9 percent. The stock market languishes. Consumer confidence remains low. Businesses remain cautious about investing. And government at every level seems to be in gridlock.

Similarly, the inertia in the housing market continues. The National Association of Realtors reported that nearly 4 million homes were for sale nationally at the end of July, more than a nine-month supply at the current rate of sales. According to RealtyTrac, an additional 800,000 bank-owned REO properties are on the market, and another 800,000 properties are in some stage of foreclosure.When you add estimates that the loans on 3.5 million more homes are seriously delinquent and up to one-third of all homeowners owe more on their homes than they are valued at, we shouldn’t expect a housing recovery any time soon.Certainly, efforts are underway to help stabilize the market, and that is positive news. Federal housing agencies recently solicited ideas from the private sector to dispose of nearly a quarter-million properties in U.S. government possession as a result of foreclosures on government-backed mortgages. Servicers remain vigilant in efforts to help keep distressed homeowners in their homes. When that is not possible, they are working with municipalities and land banks to restore surplus properties to homeownership or repurpose them for community use. Effective solutions to revive the market will take time. Meanwhile, upholding the condition, value, and ultimately the marketability of REO properties; protecting surrounding properties; and minimizing REO portfolio losses will continue to pose a significant challenge for servicers and investors. Field service companies are critical partners in helping the mortgage industry address this challenge. Here are 10 ways to do that:1. Break through silosProtecting the condition and value of REO properties actually begins in pre-sale. However, the organizational structure of many servicing shops separates the pre-sale and REO functions. As a result, the communications gap between the two can create delays in the foreclosure process. Field service companies can align their internal processes to break through these silos. By coordinating pre-sale and REO activities on behalf of their servicing clients, field service companies can help facilitate faster and higher value sales and reduce maintenance costs.2. Focus on qualityHigh property volumes are no excuse to skimp on quality. In fact, it is the reason why focusing on quality is more important than ever. Mistakes waste time and money, and they ruin property values. Field servicers have a responsibility to support their services with a comprehensive and continuous quality assurance program that touches every department, function, and service line across the field servicing spectrum. Investing in an independent, cross-functional quality program allows a field service company to collect, track, and evaluate data, and take actions to improve outcomes and address problems before they impact customers.3. Build strong vendor networksVendors are the lifeblood of the field service industry to inspect, maintain, and repair properties on behalf of servicers and investors. As the field service industry has grown more specialized, vendor certification has become essential to assure that vendors are properly trained and qualified for the services they perform. Providing vendors with access to the latest technologies to utilize in the field is critical to help them work more safely and efficiently. Providing contractors with secure, remote access to current property information allows them to verify a property’s status and access other information to help minimize field errors. 4. Connect servicers and municipalitiesHelping servicers to minimize code violations is crucial to protect their reputations, protect properties, and avoid costly fines. By offering a centralized portal that allows servicers and municipalities to connect directly with one another to post, manage, and monitor all code issues, field servicers provide an invaluable service. Additionally, field service companies play a key role in building relationships with code enforcement departments on behalf of mortgage servicers by providing education, assistance, and resources to help code officials do their jobs more effectively. 5. Optimize rehab investmentsServicers must strike a delicate balance to improve and repair REO properties to maximize both marketability and return on investment. Field service companies can take the headache out of this process by delivering a comprehensive, streamlined approach to help servicers evaluate the REO properties in their portfolios and make informed decisions utilizing information collected in the system, and without the need to make extra trips to the property. Other important components include flat-rate pricing that locks in costs and eliminates the need for a competitive bidding process, and quality guarantees to assure that work is performed correctly and to the highest standards. 6. Manage and reduce utility costsManaging payments, transfers, and other aspects of utilities at REO properties is one of the biggest challenges for portfolio managers. A comprehensive utility management solution saves time and money and reduces the administrative burden for servicers and investors. A centralized system offers a one-stop source to manage the transfer of all utilities, negotiate lower rates and weed out hidden costs, perform utility invoice audits, process payments, and provide advanced utility reporting to project and manage future utility expenditures. Additionally, negotiated utility discounts may be passed along to new home buyers, enhancing the marketability of REO properties. 7. Manage tenant occupancyTitle VII of the federal government’s Helping Families Save Their Homes Act allows tenants in foreclosed homes secured by government-backed mortgages to maintain possession for the duration of any legal, written lease agreement. In cases where no lease exists or the tenant’s occupancy is month-to-month, the tenant is entitled to 90 days’ notice of eviction. During this tenancy period, the servicer or investor must act as the property landlord to maintain the property to code, perform services required under the lease, and address property emergencies. Field service companies play an important role in maintaining tenant-occupied properties for their clients and responding to the urgent needs of tenants. By offering a 24-hour phone number and utilizing their extensive vendor networks to perform routine maintenance services and respond to emergencies, field service companies reduce the risks and management burdens of servicers and investors who suddenly find themselves serving as landlords. 8. Address HOA challengesIncreasing numbers of REO properties are within condominium or homeowners associations (HOAs). The challenges facing these properties are significant. Associations are unsure of where to send demands for payments of fees or threats of liens. Neighboring homeowners are burdened with the maintenance costs until the property moves through foreclosure and either the lender or a new owner assumes responsibility. Remaining homeowners often are forced to pay higher dues to compensate for uncollected dues. If the HOA fails to maintain a vacant property, it can negatively affect the value of surrounding properties and turn off prospective buyers. Field service companies can effectively address these challenges on behalf of servicers and investors. They can initiate contact with HOAs to assure that dues are paid, the property does not incur liens, and that maintenance issues are addressed. Field servicers also can monitor dues and fees to assure that servicers and investors do not incur “junk” fees and other inappropriate charges.9. Identify alternative disposition strategiesIn today’s overstocked housing market, the reality is that not all REO properties will sell through traditional channels. Especially with low-value, high-risk properties, servicers need alternative strategies to remove these properties from their balance sheets in a responsible way. Field service companies can be partners in helping to identify these opportunities in communities across the country and reduce the financial burden and reputational risk for servicers. Whether the opportunities are large-scale bulk transactions or transfers to land banks, land trusts, or neighborhood development agencies, responsible disposition strategies can relieve servicers of carrying costs, liabilities, and liens, and provide a reasonable alternative to charge-offs. From a community perspective, such strategies can reduce blight and protect the integrity and value of surrounding properties and neighborhoods. 10. Utilize more effective productsTwo of the most challenging and dangerous issues with vacant properties are break-ins and unsecured pools. Several new products have been introduced to keep properties more secure, in most cases costing little more than their traditional counterparts, and paying for themselves in effectiveness. Three examples that field service companies should consider include: 1) A new heat-treated lock that inserts into a door’s deadbolt hole and fastens to the door jam with heavy-duty screws. This lock replaces a hasp-and-padlock system and costs only slightly more, yet it vastly improves security because it can’t be easily kicked or broken to give intruders quick access to a vacant property; 2) A new polycarbonate window covering that replaces plywood boards and looks like a normal window. It is secured in a similar fashion as bolt-boarded plywood covering and vastly improves the appearance of vacant properties, making them less likely targets for vandalism and more aesthetically appealing to surrounding neighbors;3) A new mesh pool cover that keeps pools safer, costs about the same and installs more quickly than traditional boards and covers. With a break-strength of 4,000 pounds, the mesh material keeps debris from falling into the pool, prevents water from collecting on the surface of the covering, and minimizes mosquito infestations.No one knows for sure when our nation’s stalled economy will pick up, or when prospective buyers will regain their confidence in homeownership. We only know that a recovery will come eventually, as it always does. Until the housing market recovers, field service companies are vital partners with servicers and investors to uphold the condition, value, and marketability of REO properties and reduce the risk of portfolio losses. Ultimately, our collective goal is to protect the nation’s housing stock – on behalf of our clients, in the interests of communities across the country, and for the benefit of prospective buyers and their families who aspire to homeownership. Alan Jaffa is CEO of Safeguard Properties, the largest privately held mortgage field service company in the United States. Kathy Cogan serves as the company’s assistant VP of account management in the REO service line.

Hudson & Marshall to Auction Over 100 HUD REOs This Saturday

November 2011

Hudson & Marshall has once again been selected to partner with HUD to auction over 100 foreclosed homes located in Nevada and Arizona. The auction will take place this Saturday, November 5th at the JW Marriott in Las Vegas

With interest rates at historic lows and a surplus of inventory, Hudson & Marshall says there has never been a better time for owner occupants or investors to buy.“We are excited to be able to once again work with HUD to assist the agency in its efforts to provide quality affordable homes to all,” said Dave Webb, principal for Hudson & Marshall. There will be two separate buying opportunities November 5th. The first auction scheduled at 11:00 a.m. is for owner occupants only and will feature approximately 70 properties in the Las Vegas area. Buyers must certify that they have not purchased a HUD-owned property within the past two years as an owner occupant, and acknowledge they will occupy theproperty as a primary residence for at least 12 months. Qualified buyers may receive special Federal Housing Administration (FHA) $100 down homebuyer financing and up to 3 percent in closing costs paid by HUD. The second auction at 3:00 p.m. is open to all bidders and will feature approximately 40 properties in Arizona and Nevada. There will be no limitation on the number of homes a buyer can purchase and the buyer is not required to occupy the property. “Purchasing homes through the auction process often allows buyers to grab properties at discounted prices compared to homes purchased through the traditional method,” Webb noted.All properties auctioned by Hudson & Marshall are sold “as-is” and buyers should inspect properties before placing any bids. These are reserve auctions where the seller has the right to accept, reject, or counter any bid. However, Hudson & Marshall says in past auctions it’s conducted, the majority of offers have been accepted.HUD will pay a 3 percent ($1,250 minimum) selling agent commission to qualified brokers who are registered with HUD. Hudson & Marshall has sold over 80,000 REO homes for sellers in the past 10 years. The company says its accelerated sales process enables the company to swiftly and efficiently sell large volumes of property in a way that minimizes expenses for sellers and maximizes return. Over the past five years alone, Hudson & Marshall’s total sales have topped $3.5 billion and the company anticipates selling another 15,000 homes in 2011.

Home Price Growth Has Dissipated With the Summer Heat: Clear Capital

November 2011

Temperatures are falling, and so are home prices in most local markets. Clear Capital says it’s expecting another long winter as the housing industry tries to cope with the downward forces of weak demand, record-low consumer confidence, and distressed inventory.

Quarterly home price gains through October retreated to near-flat levels with only 0.6 percent growth at the national level, compared to the 3.5 percent quarterly increase reported by Clear Capital in September.The California-based valuation company says the seasonal gains seen during the stronger spring and summer months have not been enough to push year-over-year home prices into the black. Clear Capital’s October index reading puts national home prices 2.8 percent below a year ago. It marks the 13th consecutive month that annual price changes have fallen on the minus side of the data chart. “October home price gains have leveled out, confirming what our data has pointed to over the last several months,” said Dr. Alex Villacorta, director of research and analytics at Clear Capital. “Short term gains have been nearly eliminated while longer term performancemeasures point to mostly negative territory through the turn of the year.”Across the nation, local markets experienced a general downward trend in October as the highest performing markets posted softer gains and the lowest performing markets experienced stronger declines.The West is showing continued weakness and Clear Capital says it is the first region to dip into negative territory coming off the summer months, posting a loss of 1.0 percent quarter-over-quarter in October, compared to a 0.3 percent quarterly increase the month before. On an annual basis, the West is also posting the largest decline, with home prices down 5.5 percent. The Midwest checked in with solid quarterly growth of 2.6 percent last month, but when compared to the previous month’s growth of 7.2 percent, Clear Capital says it’s clear the strong Midwestern markets are also starting to feel that oncoming winter chill. Looking at individual metro areas, Clear Capital’s data show Cleveland, Ohio, was the highest quarter-over-quarter performer last month with a 6.2 percent price increase, while Las Vegas, Nevada, was the lowest performing market with a 3.4 percent decrease.Price differentials between high-performing and low-performing markets can largely be attributed to the number of distressed properties changing hands. As a whole, the REO saturation rate – calculated as the percentage of bank-owned homes sold as compared to all properties sold – for the highest performing markets is less than 23 percent, according to Clear Capital. It averages 30 percent for the lowest performing counterparts.Some lowest performing markets are dealing with REO saturation rates close to the 50 percent mark, including Las Vegas (49%) and Detroit (47%).

Foreclosure Starts Rise as Servicers Process Backlog of Delinquent Loans

November 2011

Foreclosure starts among private-label residential mortgage-backed securities (RMBS) have been rising toward historic averages over the past six months, which will lead to an influx of distressed properties bringing downward pressure to the housing market, according to recent RMBS Performance Metrics from Fitch Ratings.

According to Fitch, foreclosure start rates for severely delinquent RMBS loans have stayed above 10 percent since September — a rate they have not reached since November 2009 — and have been working their way toward their 14 percent average between 2000 and 2010. “Rising foreclosure start rates are likely a sign that servicers are playing catch-up on actions that have been delayed over the past year,” states Diane Pendley, managing director of Fitch Ratings.In fact, the rise in foreclosure starts has occurred most heavily among severely delinquent loans. Foreclosure starts among loans that have been delinquent for six months or more have almost doubled in the past five months. In contrast, foreclosure starts among loans three months to six months delinquent have increased by 25 percent over the past five months. The foreclosure process is averaging about eight months in non-judicial states and 15 months in judicial states, according to Fitch.Despite foreclosure starts being on the rise, foreclosure completions in judicial states hover near their historic lows. Fitch attributes this to “servicers’ continued loss mitigation efforts, a backlog in court foreclosure filings, and weak demand in the housing market.” About a year after deficiencies in the foreclosure process were brought to light, Pendley says, “Mortgage servicers now generally feel they have implemented the corrective actions that they determined were needed.” “With corrective actions now in place, servicers now need to process a significant backlog of problem loans as well as implement other process changes in parallel,” she continues. The effects of rising foreclosure starts as servicers work their way through the backlog of distressed loans may not be evident for more than a year, according to Fitch.

Default Risk Growing Among Jumbo Borrowers, Stabilizing for Subprime

November 2011

Private investors in residential mortgage-backed securities (RMBS) comprised of jumbo mortgage loans are dealing with a greater risk of strategic defaults, according to Moody’s Investors Service.

The company’s analysts base this assumption on the fact that jumbo RMBS have large populations of current borrowers with high loan-to-value (LTV) ratios.Moody’s took a closer look at outstanding mortgage loans backing 2005-2008 vintage transactions across the subprime and jumbo sectors. Analysts stratified the loans based on their delinquency status, and for current loans, their LTV, in order to gauge the extent to which loans that are now current may eventually default.Although it has by far the fewest delinquencies among outstanding loans, the jumbo sector has the potential for the highest volatility in losses going forward, Moody’s concluded. “This is because it features a high number of current borrowers that are underwater on their mortgages and aremore susceptible to default if the housing market does not turn around,” the agency explained.According to Moody’s the subprime sector faces the lowest potential for future performance deterioration because more of its weaker borrowers are already delinquent or have defaulted, leaving less room for losses to increase substantially.The company’s RMBS data show that defaults among always-current subprime borrowers have declined substantially since the beginning of 2010, indicating that the remaining borrowers are getting progressively stronger.The jumbo sector, on the other hand, still faces the potential for a large increase in defaults. Unlike in the subprime sector, the stronger borrowers are the ones that have already left the jumbo pools rather than the ones that remain, Moody’s explained. Over 80 percent of jumbo loans are still current, but more than half of those borrowers are underwater on their mortgages and that proportion has risen significantly over the past few years, according to Moody’s report. Since home prices have been fairly stable in 2011, Moody’s says the increasing proportion of underwater jumbo borrowers likely reflects the ability of the stronger borrowers to refinance and exit the mortgage pools. Moody’s notes that default rates among always-current borrowers have not come down in the jumbo sector as much as in the subprime sector, meaning the pool of current borrowers has not strengthened as much over time.

Trepp: Slow Decline in Delinquencies Suggests Prolonged Recovery

November 2011

Recording a slight decrease in delinquencies in its preliminary third quarter estimate, Trepp predicts full market recovery will not occur for years. Residential mortgage delinquencies fell 0.3 percent in the third quarter to 12 percent, according to Trepp’s preliminary data. This is down 1.1 percent from last year. Serious delinquencies in residential mortgages also declined in the third quarter to 5 percent.

“The slow rate of improvement reflects the high volume of foreclosures and weak price trends that still plague the market,” Trepp states in its preliminary report. Commercial delinquencies also fell by 0.3 percent in the third quarter – falling from 4.9 percent to 4.6 percent. “The improvement during the third quarter is more modest than in the second quarter, suggesting that lenders’ efforts to shed nonperforming assets slowed in response to the weaker economy in the third quarter,” Trepp states. Construction loan and commercial and industrial loan delinquencies fell during the third quarter. Construction loan delinquencies, as estimated by Trepp’s preliminary data, stood at 15.6 percent for the quarter. Commercial and industrial loan delinquencies fell from 2.2 percent to 1.9 percent in the third quarter. This is the first time the rate has fallen below 2 percent since the end of 2008. Final third-quarter data will be available toward the end of the month. Trepp’s early estimates are based on earnings reports and call reports from several smaller banks.

Occupied Oakland Promotes Occupying Vacant Properties

November 2011

The Occupy Oakland group is starting a new wave of occupations. They intend to occupy vacant properties.

The Occupy Oakland group announced on Twitter earlier this week that its general assembly “just passed a proposal to encourage the occupation of bank-owned/foreclosed and abandoned properties across #Oakland.” On Wednesday, a group of Occupy Oakland members took a first step in this direction by entering a vacant building formerly used by the Traveler’s Aid Society. The group “hoped to use the national spotlight on Oakland to encourage other occupations in colder, more northern climates to consider claiming spaces and moving indoors in order to resist the repressive force of the weather,” states a blog post on the Occupy Everything! Blog. “None of this should be that surprising, in any case, as talk of such an action has percolated through the movement for months now, and the GA [General Assembly] recently voted to support such occupations materially and otherwise,” states the blog post. This is not the first time the idea of occupying or squatting in foreclosed and vacant properties has been endorsed. In fact, the group, Homes Not Jails of San Francisco, has promoted the use of vacant properties by the homeless since 1992. The group recently partnered with Occupy San Francisco to convert several vacant properties into homeless shelters, according to the Huffington Post.Rep. Marcy Kaptur (D-Ohio) has been telling homeowners facing foreclosure not to leave their homes since 2009. “I say to the American people, you be squatters in your homes. Don’t you leave,” she said in a February 2009 press release.If squatting in foreclosed and vacant properties becomes a widespread trend, “it would definitely slow down the market,” says Melva Wagner, owner of Sellstate Island Properties in Florida, and government relations representative for the National Association of Women REO Brokerages (NAWRB). “The recovery market is already slowed down because of tenants in properties,” she adds. “Each state has their own guidelines for squatters,” she says, so the process of evicting squatters and preparing homes for sale would vary throughout the country. As for the Occupy Oakland action Wednesday – the evening ended in violence and about 100 arrests. Protestors broke windows and set fires, according to the Wall Street Journal.On Thursday, Occupy Oakland said in a public statement they do support the occupation of vacant buildings but “Occupy Oakland does not advocate violence and has no interest in supporting actions that endanger the community and possibilities that it has worked to build,” according to the Journal.

CredAbility Announces National Hispanic Outreach Initiative for 2012

November 2011

CredAbility has announced the launch of its 2012 “Reconstruye tu Futuro” campaign, which will leverage grassroots efforts, social media networks, and traditional media communication to reach those in the Hispanic community who are at risk of foreclosure.

CredAbility is a nonprofit credit counseling agency headquartered in Atlanta, Georgia, serving clients in all 50 states plus the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands.With more than 50 million Hispanics in the United States and a downturn economy, CredAbility says Latino individuals and families have been more deeply impacted than other minority populations. By leveraging key financial tools, CredAbility aims to help Latino individuals, families, and communities recapture their American Dream. “When reports show that 1 million Latinos have already lost their homes or are in danger of losing their homes, it is our responsibility to ensure that we reach this community in need,” said Phil Baldwin, CredAbility’s president and CEO. “Because we offer a bilingual website and bilingual counselors available 24/7, we can serve those looking for financial experts who can speak the same language and can empathize with their experiences,” Baldwin added.CredAbility counseled nearly 73,000 Hispanics in 2010. The agency’s national initiative aims to extend that reach by creating connections utilizing such vehicles as a new Spanish-language CredAbility Facebook page, as well as educational events and online courses, live chats, and podcasts in Spanish.“Our 2012 focus will be to assist those in financial crisis help renew and rebuild their financial dreams, cultivate savvy Hispanic consumers, and educate today’s youth who will be instrumental in the stability of this country’s future,” said Marisa Salcines, CredAbility’s director of Hispanic external affairs. In the last four years, CredAbility has helped over 1.4 million individuals facing such financial crises as bankruptcy, foreclosure, and mounting credit card debt. Of these, more than 250,000 were Hispanics located all over the country.

Government Issues Housing Data, Says There's 'Much More Work to Do'

November 2011

Treasury has released a new progress report on its Making Home Affordable initiative, covering all the “H” acronyms – HAMP, HARP, and HAFA.

Since the program started in April 2009, 857,000 homeowners have received permanent loan restructurings under the Home Affordable Modification Program (HAMP), and 894,000 have refinanced their mortgages through the Home Affordable Refinance Program (HARP). Home Affordable Foreclosure Alternatives (HAFA) transactions tally just under 19,000. The grand total of homeowners who’ve received assistance through the government’s “H” programs: 1,777,000.HUD Assistant Secretary Raphael Bostic says “we saw a continued fall in mortgage defaults” last month due in part to foreclosure prevention programs reaching more borrowers upstream in the process. But Bostic is quick to add, “We have much more work to do.” Treasury’s latest report shows HAMP trials started during the month of September held steady from the previous month at 26,000, while permanent mods increased by nearly 50 percent to 40,100. Treasury says HAMP continues to exhibit lower delinquency and redefault rates than other modifications, with just 10 percent behind on their payments by 60 days or more after six months in the program.Homeowners in active permanent HAMP modifications save a median of $526 per month –more than one-third of the median before-modification payment, according to Treasury. To data, homeowners in permanent HAMP modifications have saved an estimated $8.8 billion in monthly mortgage payments. Treasury says there are now just 974,095 delinquent borrowers eligible for HAMP assistance.Treasury also highlighted other foreclosure prevention efforts in its report. The Federal Housing Administration’s (FHA) loss mitigation interventions totaled 39,000 in September. Servicers’ proprietary mods, which Treasury listed under the HOPE NOW banner came to 55,800 for the month. This report is the first to include a data breakdown on HARP. During the month of September, 28,900 homeowners with Fannie Mae- and Freddie Mac-backed loans refinanced through the program at lower interest rates. Short sales continue to claim the lion’s share of HAFA transactions. Servicers completed 2,512 HAFA short sales in September and 91 HAFA deeds-in-lieu.

Knowing a Defaulter Depresses Economic Outlook

November 2011

Those who know someone who has defaulted on a mortgage are more likely to have a pessimistic outlook on the economy, according to Fannie Mae’s third quarter National Housing Survey. However, knowing a defaulter does not seem to cloud their view of homeownership.

Ninety-two percent of owners who know someone who defaulted on a mortgage and 89 percent of owners who do not know a defaulter agree that owning a home makes more sense than renting. The rate of owners who believe buying a home is a safe investment is only a few percentage points higher for those who do not know a defaulter as those who do know a defaulter. Sixty-seven percent of owners who know a defaulter and 70 percent of those who do not now a defaulter believe a home is a safe investment. When the same question was posed to renters, 52 percent of both groups responded that a home is a safe investment. However, when considering the state of the economy, those who know a defaulter are more likely to have a negative outlook. For example, 80 percent of owners who know a defaulter believe the economy is on the wrong track, whereas 74 percent of owners who do not know a defaulter share this view. Among renters, 74 percent of those who know a defaulter believe the economy is on the wrong track, and 70 percent of those who do not know a defaulter believe the economy is on the wrong track. Nine percent of homeowners who know a defaulter say they are stressed about their ability to make debt payments, while 4 percent of owners who do not know a defaulter worry about their ability to make payments. Among all survey respondents, 36 percent expect their financial status to improve in the next year. Also, despite the fact that 77 percent of respondents are unlikely to buy a home in the next 12 months, 68 percent believe now is a good time to buy a home. “At the macro level, we see that economic activity picked up in the third quarter, thanks to a sizable rebound in consumer spending on services. However, the hike appears to have come out of consumers’ savings, as disposable income fell during the quarter,” said Doug Duncan, vice president and chief economist at Fannie Mae. “The improvement in consumer spending has not spilled over into big-ticket items such as housing, as consumers’ concerns over their finances and dissatisfaction about the direction of the economy remains elevated,” Douncan continued.

Freddie Mac Requests $6B More in Taxpayer Aid

November 2011

The nation’s second largest mortgage company is asking the U.S. Treasury for another $6 billion in capital support after posting its largest quarterly loss in over a year.

Freddie Mac said Thursday that it recorded a net loss of $4.4 billion for the quarter ended September 30, 2011, compared to a net loss of $2.1 billion over the previous three-month period and $2.5 billion for the third quarter of 2010.The McLean, Virginia-based GSE explained that while its latest earnings results reflect net interest income of $4.6 billion, the company shouldered a $4.8 billion loss on derivatives and a $3.6 billion provision for credit losses. Freddie Mac’s CEO Charles E. Haldeman, Jr. pointed out that hundreds of thousands of borrowers refinanced into lower mortgage rates or shorter mortgage terms in the third quarter. Long-term interest rates declined by approximately 125 basis points in the third quarter, compared to a decrease of about 30 basis points in the second quarter. “[T]he borrowers we helped to refinance will save an average of $2,500 in interest payments during the next year,” Haldeman said. While the savings bode well for homeowners and should help to ensure those who were struggling to make their payments will remain current, it means less money coming in for the GSE, resulting in higher loss severity rates and thus the recorded increase in Freddie Mac’s provision for credit losses.Such losses will likely grow over the coming quarters with the administration’s retooling of the Home Affordable Refinance Program (HARP), which is expected to allow another 1 million borrowers with loans backed by Freddie Mac and sibling Fannie Mae to take out new mortgages at today’s rock-bottom rates. The GSEs’ are expected to issue guidance about the HARP changes to their mortgage servicers by November 15.Freddie Mac says the increase in its third-quarter credit loss provision was also driven lower expectations for mortgage insurance recoveries, as a result of the deteriorating financial condition of certain mortgage insurers used by the company. Freddie’s $4.4 billion loss in the third quarter combined with the $1.6 billion dividend payment it made to Treasury for past bailout money left the GSE with a $6 billion net worth deficit as of the end of September. To eliminate this deficit, the Federal Housing Finance Agency (FHFA), as conservator, is submitting a draw request to Treasury for the same amount.The company’s Q3 draw is the largest quarterly request since the first quarter of 2010, and brings the cumulative amount of Freddie Mac’s taxpayer-supported bailout to $72.2 billion. The GSE has returned $14.9 billion to Treasury in the form of cash dividends.Freddie Mac’s single-family serious delinquency rate was 3.51 percent as of the end of September, nearly unchanged from 3.50 percent at mid-year, but the company says its rate remains “substantially below industry benchmarks.” The GSE also stressed that new single-family business acquired after 2008 continues to demonstrate stronger credit quality.Freddie Mac says it helped approximately 48,000 struggling borrowers avoid foreclosure in the third quarter, finding home retention solutions – including loan modifications, repayment plans, and forbearance agreements – for three out of every four. The GSE completed 11,744 short sale and deed-in-lieu transactions over the three-month period.Freddie carried $127.9 billion in non-performing assets as of the end of September, including single-family and multifamily loans that have undergone a troubled debt restructuring, are seriously delinquent, in foreclosure, and REO. That figure represents 6.6 percent of the company’s total mortgage portfolio. The GSE’s REO operations expense skyrocketed to $221 million in the third quarter, compared to $27 million for the second quarter. REO operations expense primarily consists of costs incurred to maintain foreclosed properties, valuation adjustments on properties, disposition gains or losses, and recoveries from credit enhancements, such as mortgage insurance. Freddie Mac says the increase in REO operations expense last quarter was primarily driven by higher REO holding period write-downs as fair values declined during the third quarter, as well as a reduction in projected recoveries on mortgage insurance.