Originally, the Governor vetoed the first anti-deficiency judgement law, SB 1178, which had been passed by both the Senate and Assembly of California. But rather than arm-wrestle, they submitted SB 931, both houses passed it, and the governor signed it on October 1st.
From the California Association of Realtors:
SB 931 (Ducheny) Short sales and anti-deficiency
Existing law allows a mortgage lender to demand the right to a “deficiency” judgment for the balance due on a note as part of the lender’s negotiations in connection with a short sale. SB 931 requires the first lien holder to accept the agreed upon short sale payment as full payment for the outstanding balance of the loan. The bill does not apply this deficiency protection to junior notes secured by the real property. Lenders do not oppose SB 931 as it would ONLY prohibit a deficiency on a first mortgage note secured by real property when the property is sold in a short sale.
C.A.R. supports SB 931 as it does provide deficiency protections for homeowners; however, because this bill does not apply these protections to junior notes, or to foreclosures, C.A.R. believes that it does not go far enough.
SB 931 applies to short sales only, and those that close after January 1, 2011, where SB 1178 had also included the first mortgages that were foreclosed. There is no homeowner protection from the second-mortgage holders obtaining a deficiency judgement in SB 931. Owner-occupancy is not mentioned.
SB 931 also includes this anti-fraud verbiage:
The bill would specify that those provisions would not limit the ability of the holder of the first deed of trust or first mortgage to seek damages and use existing rights and remedies against the trustor or mortgagor or any 3rd party for fraud or waste if the trustor or mortgagor commits either fraud with respect to the sale of, or waste with respect to, the real property that secures that deed of trust or mortgage.
WASHINGTON – A bill that homeowners advocates warn will make it more difficult to challenge improper foreclosure attempts by big mortgage processors is awaiting President Barack Obama’s signature after it quietly zoomed through the Senate last week.
The bill, passed without public debate in a way thateven surprised its main sponsor, Republican Representative Robert Aderholt, requires courts to accept as valid document notarizations made out of state, making it harder to challenge the authenticity of foreclosure and other legal documents.
The timing raised eyebrows, coming during a rising furor over improper affidavits and other filings in foreclosure actions by large mortgage processors such as GMAC, JPMorgan and Bank of America.
Questions about improper notarizations have figured prominently in challenges to the validity of these court documents, and led to widespread halts of foreclosure proceedings.
The legislation could protect bank and mortgage processors from liability for false or improperly prepared documents. The White House said it is reviewing the legislation.
“It is troubling to me and curious that it passed so quietly,” Thomas Cox, a Maine lawyer representing homeowners contesting foreclosures, told Reuters in an interview.
In spite of Bloomberg’s insistence to include several ads with their videos, this interview of our hero (and friend of the blog), James Grant, is worth a look:
Bank of America Merrill Lynch analysts believe the federal government should begin investing in distressed real estate directly through a second round of the Public-Private Investment Program to reduce the shadow inventory of properties.
The original PPIP was a coordinated effort between the Treasury Department, the Federal Reserve System and theFederal Deposit Insurance Corp. to hold real estate assets off bank balance sheets in order to free up credit lines. Through July, the government has invested in more than $22.4 billion in the PPIP.
But while BofA Merrill Lynch analysts called the program a success for driving up the value of residential and commercial mortgage-backed securities, they said PPIP 2.0 would be critical to reduce homeownership rates, the amount of delinquent and foreclosed homes in the shadow inventory, and increase the value of real property.
Homeownership rates dropped to 66.9% in the second quarter, according to the Census Bureau. BofA Merrill Lynch analysts said the adjustment to a more natural 62% to 64% rate is under way. Converting another 3 to 4 million homeowners to renters would be required to get there.
At $200,000 a property, it would cost between $600 billion and $800 billion to make that reduction.
Initial targets for the program would be the 5.5 million delinquent borrowers. “Despite all modification efforts directed at this group, we think it is probably only a matter of time before these many homeowners are no longer homeowners,” according to the report.
They are going to keep throwing everything at the wall, until something sticks. FromHW:
In the wake of reform enacted to promote homeownership, analysts at theCenter for Economic and Policy Research are saying that ownership may not be the smartest option.
In a report released today, The Gains from Right to Rent in 2010, the CEPR suggests that giving homeowners the right to rent their house at a fair market price could be a game changer in the nation’s foreclosure crisis.
The report dissects the benefits of a drafted bill, H.R. 5028, also known as The Right to Rent. Under the legislation, homeowners entering the foreclosure process would be able to occupy their homes for up to five years, while paying rent to a lender. Rent would be based on fair market price as determined by an independent appraiser and adjusted annually.
“This would give homeowners an important degree of security, since they could not simply be thrown out on the streets,” wrote Dean Baker and Hye Jin Rho, co-director of and research assistant at CEPR. “This policy should also benefit neighborhoods in the most hard-hit areas, since they would not have large numbers of vacant homes following foreclosures.”
The CEPR report, which compares the costs of owning a home and renting in 16 major metropolitan statistical areas around the U.S., found that homeowners would see substantial reductions in costs by becoming renters if they rented in a bubble-inflated market. Savings are much less, however, if the market was not affected by the housing bubble.
For example, in the Los Angeles MSA, homeowners would save $1,586 per month by becoming a tenant. The median home price in 2006 and 2007 was $608,600. Based on that number, CEPR found the monthly cost of ownership as $3,128 versus $1,420 to rent.
New York/New Jersey, Sacramento, San Diego and San Francisco savings are all over $1,000.
Hat tip to SM for sending in this from CNNMoney.com:
Nearly half of all Americans who claimed the first-time homebuyer tax credit on their 2009 tax returns will have to repay the government.
According to a report from the Inspector General for Tax Administration, released to the public Thursday, about 950,000 of the nearly 1.8 million Americans who claimed the tax credit on their 2009 tax returns will have to return the money.
The confusion comes because homebuyers were eligible for two different credits, depending on when their homes were purchased.
Those who bought properties during 2008 were to deduct, dollar for dollar, up to 10% of the home’s purchase price or $7,500, whichever was less. The catch: The money was a no-interest loan that had to be repaid within 15 years.
Had they waited to buy until 2009, they could have gotten a much sweeter deal. Congress extended the credit and made it a refund rather than a loan.
Hat tip to SM for sending this along, from the nytimes.com:
The Obama administration on Tuesday will launch its most ambitious effort at reducing mortgage balances for homeowners who owe more than their homes are worth.
Officials say between 500,000 and 1.5 million so-called underwater loans could be modified through the program, the first initiative to target homeowners who are current on their mortgage payments but are at risk of default because they have no equity in their homes. Some experts are warning, however, that the same knots that tied up prior initiatives could do so again.
Under the new “short refinance” program, banks and other creditors that write down mortgages to less than the value of the property can essentially hand off the reduced loan to the government. The process involves refinancing borrowers into loans backed by the Federal Housing Administration.
While the program puts taxpayers at risk—officials estimate one in five loans in the program could default—the government has set aside $14 billion previously earmarked for housing aid from the Troubled Asset Relief Program to cover losses.
The new program, which was announced in March, is starting as the housing market shows signs of renewed trouble and as the Obama administration’s signature Home Affordable Modification Program, or HAMP, falls short of its goals of helping three million homeowners. Half of the 1.3 million borrowers that enrolled in temporary loan modifications have fallen out of HAMP because they didn’t qualify. Only one-third has received permanent modifications.
The initiative also comes as mortgage rates fall to their lowest levels in more than 50 years. Average rates on 30-year fixed-rate loans dropped to 4.43% last week, down from 4.55% during the previous week, according to a survey published Wednesday by the Mortgage Bankers Association.
Analysts say that the program is most likely to succeed on loans that banks already own in their portfolios. It could also provide investors with a vehicle for getting rid of loans that have been modified and are current again. “It’s going to be a ‘take out’ for modified loans,” said Laurie Goodman, a senior managing director at mortgage-bond trader Amherst Securities Group LP in New York.
The program must resolve a stubborn problem that has hindered every other modification program: how to deal with second mortgages. The program says second liens must be reduced so that the total mortgage debt is less than 115% of the home’s current value. The government will make partial payments for banks to reduce those loans, but banks have been very reluctant to write down seconds that are current.
Investors that hold first mortgages are leery of writing down their loans without extinguishing the second because junior-liens are in a first-loss position. On a loan that has a second behind it and is heavily upside-down, “do I take the write-down and effectively pay off the second? I don’t think so. That second is worthless,” said Vincent Fiorillo, portfolio manager at Doubleline Capital, a Los Angeles-based fixed-income manager.
He said the program could work for loans without seconds, though he says it’s possible many borrowers will still have too much debt to qualify for an FHA-backed loan.
The total bill for the homebuyer tax credit so far, as reported by the Internal Revenue Service, stands at $23.5 billion.
About $16.2 billion of that is for the $8,000 (Recovery Act) and $6,500 (Assistance Act) grants shelled out to first and second-time homebuyers, respectively. The other $7.3 billion is for interest-free loans through the Housing Act provision. Americans who qualified for these loans will begin repaying them next tax season, which starts in January.
The numbers are based on IRS filings through July 3.
The Government Accountability Office estimates that with all of the first-time homebuyer tax credits, the total revenue loss to the federal government will be about $22 billion.
California, being the most populous state with nearly 37 million residents, received the largest chunk of the money — $814 million, the GAO said in a letter yesterday to John Lewis (D-Ga.), chairman of the oversight subcommittee of the House Ways and Means Committee.
Chris Bowden, vice president of the Freddie Mac HomeSteps department, which manages the government sponsored enterprises’ (GSE) REO inventory, said stabilizing neighborhoods will depend on getting first-time homebuyers to buy REO.
In a features perspectives published Tuesday on the Freddie website, Bowden said Freddie’s inventory of REO has tripled over the past two years to more than 62,000 properties. The weight of these properties has had a “significant impact” on home prices in these communities, but selling to owner-occupants can reverse the damage and restore neighborhoods.
“Currently, more than two-thirds of our REO sales are to owner-occupants. Most of our marketing and sales strategies are geared toward attracting owner-occupants, and include incentives for both the real estate agents and prospective homebuyers,” Bowden writes.
The Freddie Mac SmartBuy sales promotion offers owner-occupant buyers a two-year home warranty and closing-cost assistance when they buy a HomeSteps REO. Bowden wrote that its partnership with nonprofit organizations and the federal Neighborhood Stabilization Program (NSP) is putting on auctions targeting first-time homebuyers. In the first one, 200 owner-occupants bought homes in Las Vegas and in Riverside and San Bernardino counties in California. Another 72 owner-occupant buyers purchased homes in the second auction in Phoenix.
In some ZIP Codes, HomeSteps offers REO homes for sale to these owner-occupants through nonprofits before the property is listed for sale on the multiple listing service (MLS).
But owner-occupants are attracted to properties that have been repaired and restored since the foreclosure. Freddie’s “Good Neighbor” property preservation policies require that the home is “secured, preserved and cleaned” within three business days of the property is deemed vacant. Neighboring properties receive door hangers containing contact information for any interested homebuyers or for someone concerned about the REO in their community.
Approximately 50 percent of the homes that Freddie Mac acquires have occupants – either owners or tenants. In March 2009, they introduced the Freddie Mac Rental Initiative to offer qualified former owner-occupants and tenants month-to-month leases for homes where they live that are now owned by Freddie Mac.
Here is the list of the 338 Freddie-owned properties in SD County – most are somewhat inferior:
The Obama administration plans to set up an emergency loan program for the unemployed and a government refinancing effort in the next few weeks to help homeowners pay their mortgages after home sales dropped in July, Housing and Urban Development Secretary Shaun Donovan said.
“The July numbers were worse than we expected, worse than the general market expected, and we are concerned,” Donovan said on CNN’s “State of the Union” program. “That’s why we are taking additional steps to move forward.” The administration will begin a Federal Housing Authority refinancing effort to help borrowers who are struggling to pay their home mortgages, and will start an emergency homeowners’ loan program for unemployed borrowers so they can stay in their homes, Donovan said.
“We’re going to continue to make sure folks have access to home ownership,” he said.
Sales of U.S. new homes unexpectedly dropped in July to the lowest level on record, signaling that even with cheaper prices and reduced borrowing costs the housing market is retreating. Purchases fell 12 percent from June to an annual pace of 276,000, the weakest since the data began in 1963.
U.S. home prices fell 1.6 percent in the second quarter from a year earlier as record foreclosures added to the inventory of properties for sale. The annual drop followed a 3.2 percent decline in the first quarter, the Federal Housing Finance Agency said last week in a report.
Donovan said on CNN today that it is too soon to say whether the administration’s $8,000 first-time homebuyer credit tax credit, which expired April 30, will be revived. “All I can tell you is that we are watching very carefully,” Donovan said. “We’re going to be focused like a laser on where the housing market is moving going forward, and we are going to go everywhere we can to make sure this market stabilizes and recovers.”
Reviving the tax credit would “help enormously” in the effort to fight foreclosures and revive the economy, Florida Governor Charlie Crist said on the same CNN program. Florida has the third highest home foreclosure rate in the country, with one in every 171 Florida housing units receiving a foreclosure filing this year.
(EDIT: 1 out of 171? Or 170 out of 171 didn’t get a foreclosure notice this year? That sounds pretty healthy to me!)
Originally, the Governor vetoed the first anti-deficiency judgement law, SB 1178, which had been passed by both the Senate and Assembly of California. But rather than arm-wrestle, they submitted SB 931, both houses passed it, and the governor signed it on October 1st.
