by Jim the Realtor | Apr 6, 2011 | Bailout, Strategic Defaults |
From HW:
The California Housing Finance Agency said Wednesday it has expanded the eligibility requirements for several Keep Your Home California programs, allowing more distressed homeowners access to $2 billion in funds allotted for foreclosure prevention initiatives.
With the implementation of the changes, federal mortgage assistance of up to $3,000 per month is available to unemployed homeowners who are in danger of losing their properties. In addition, a program that provides funds for mortgage payments tied to financial hardship will offer up to $15,000 per household to reinstate mortgages in danger of foreclosure. Funds also will be provided for relocation expenses when homeowners determine that they cannot stay in their homes.
The Treasury Department approved the changes for the federally supported program. The initiatives impacted by the changes include the unemployment mortgage assistance program, the mortgage reinstatement assistance program and the transition assistance program. The programs now include mortgages originated after Jan. 1, 2009.
“California homeowners have welcomed the assistance provided by Keep Your Home California,” said Steven Spears, executive director of CalHFA. “In the two short months since the launch of these programs, we have collected information that has helped us identify areas of improvement to make the programs more effective, particularly given the continued high level of unemployment in California.“
Through the Dodd-Frank Act, HUD was cleared to establish the $1 billion Emergency Homeowner Loan Program. Through it, unemployed homeowners can receive a $50,000 interest-free loan to assist with their mortgage payments for up to 24 months.
by Jim the Realtor | Mar 30, 2011 | Bailout, Psycho-babble, Short Sales, Strategic Defaults |
From Alejandro Laso at the latimes.com:
Major banks may be forced to let severely delinquent homeowners sell their houses for less than the loan amounts owed as part of a broad settlement of federal and state investigations into botched foreclosure paperwork, according to government officials involved in the negotiations.
The requirement to allow so-called short sales would be in addition to forcing mortgage servicers to reduce the amount some homeowners owe on their loans, said two officials, who spoke on the condition of anonymity because negotiations are ongoing.
The goal of short sales would be twofold: provide a quicker and more economical way for banks to dispose of distressed real estate and to help stabilize the real estate market by clearing out a backlog of defaulted mortgages that are poised for foreclosure.
They would be used in situations in which borrowers were so underwater that the more costly and time-consuming process of foreclosure would seem to be the only option.
“Short sales just command a better premium than foreclosures,” said Glenn Kelman, chief executive for online brokerage Redfin. “It’s like day-old bagels. They never sell for the same price. If they sit there for a while, nobody wants them because houses just break down when they are left alone.”
Foreclosures continue to drive down housing values, with prices in 20 major U.S. cities down an average of 3.1% in January compared with the same month a year ago, according to new data from a Standard & Poor’s/Case-Shiller index. Prices in Los Angeles were down 1.8%.
The latest proposal is among those to be discussed when executives from the top five mortgage servicers meet Wednesday in Washington with state and federal officials working on a settlement that could range from $5 billion to $25 billion.
Short sales would help accelerate the turnover of homes from borrowers who are months behind on their mortgage payments, Kelman said.
Some sellers are not eager to complete a short sale because it would force them out of their home. And lenders can withhold approval of a short sale if they don’t like the price.
Banks often resist such sales because they are difficult to execute, particularly when multiple creditors and other parties are involved. In addition, short sales lock in losses for the lender that might be reduced if the sale is delayed until the market improves.
Requiring banks to allow short sales could fuel further opposition from some Republican attorneys general and members of Congress who already have criticized the broad scope of the proposed settlement.
Some House Republicans have derided possible payments of $20,000 to encourage distressed homeowners — dubbed by some as “cash for keys” — as a bailout for irresponsible behavior.
Seven Republican attorneys general recently wrote to Iowa Atty. Gen. Tom Miller, a Democrat who is leading the negotiations for the states, saying the proposals go beyond resolving damages from foreclosure paperwork problems. Those problems include robo-signing, the practice of bank employees’ signing sworn documents without reading or understanding them.
“I think it’s morphed into something that’s bigger and different than what we talked about in the beginning,” said Oklahoma Atty. Gen. E. Scott Pruitt, a Republican who organized the signing of one of the letters.
by Jim the Realtor | Mar 28, 2011 | Bailout, Principal Reductions |
From HW:
Bank of America will begin a new pilot program in the next few weeks, allowing some California homeowners to receive a principal writedown on their mortgage.
The program will be funded from the $699.6 million the California Housing Finance Agency received from Treasury Department’s Hardest Hit Fund last year. A spokesperson for the CalHFA said there is no set amount of loans BofA is targeting, but the bank will be soliciting eligible homeowners soon. CalHFA has not given BofA a limit to the funding “unless they blow us out of the water,” the spokesperson said.
CalHFA is in talks with other lenders and servicers, but they did confirm that Guild Mortgage Company will also participate in the program.
“We’re really excited to get the program going,” the CalHFA spokesperson said.
Rebecca Mairone, the new national mortgage outreach executive at BofA, said in an interview with HousingWire Monday that it would soon begin the California initiative as well as several other states that received Hardest Hit Funds.
Earlier in March, BofA announced it was sending letters to Arizona homeowners regarding possible principal writedowns under Hardest Hit Fund programs. Through that program, BofA said it was targeting 8,000 households.
Ally Financial agreed last week to participate in another principal-writedown program in Michigan, again using the Hardest Hit Fund.
by Jim the Realtor | Mar 24, 2011 | Bailout, Loan Mods, Strategic Defaults |
From HW:
Four Republican attorneys general participating in the investigation into mortgage servicing practices wrote a letter to Iowa AG Tom Miller stating that the proposed settlement is too strict.
Florida AG Pam Bondi, Texas AG Greg Abbott, Virginia AG Kenneth Cuccinelli and South Carolina AG Alan Wilson sent the letter Tuesday explaining among other claims that homeowners would strategically default on the mortgage in order to take advantage of the consumer-friendly terms.
The 50 state AG investigation came after the largest mortgage servicers were found last fall to be foreclosing on homeowners improperly through faulty affidavits. Lenders conducted reviews of their processes and have begun to correct the affidavits, but in February, Miller and several core offices participating in the investigation sent a proposal to the banks outlining a possible settlement.
The terms included an end to pursuing a foreclosure while borrower was being evaluated for a modification. Considering a borrower for a workout, including a principal reduction, would be mandatory before foreclosure as well, and a decision on modification must be made within 30 days of receiving documentation.
But not a consensus among the AGs has been elusive. The four signing the letter this week complained Miller and the other offices overstep their bounds.
“Because of the term sheet’s vague principal reduction standards, some homeowners may simply default on their loan and use the States’ agreement to obtain a principal reduction— whether or not they actually made an effort to maintain their mortgage,” according to the letter.
The four AGs go further, saying the terms do not address the nature of the investigation. Modification proposals would not remedy the violations banks made, and while they admit the terms, many of which they do agree with, act as a starting point, some proposals should be scaled back, according to the letter.
“In our view, the fifty-state working group has a unique opportunity to address the mortgage servicers’ legal and financial malfeasance on a national scale—but we are concerned that expanding beyond the scope of our already expansive charge may ultimately undermine the effectiveness of our law enforcement efforts,” the letter reads.
by Jim the Realtor | Mar 9, 2011 | Bailout, Loan Mods |
From propublica.org:
For the past year, we’ve been digging into the administration’s fumbling efforts. We’ve crunched a lot of numbers along the way, and now we’re sharing what we found – including loads of previously unreported data.
Using new Treasury Department figures, previously unreleased documents obtained through Freedom of Information Act requests, and new analyses of state and industry data, we have assembled the most detailed look yet at how the the mortgage industry and the government’s main effort, the Home Affordable Modification Program (HAMP), have failed homeowners. It provides crucial context to the ongoing government investigation into mortgage servicing practices, which might lead to reforms of how banks and servicers handle homeowner requests for modifications.
Here’s what we learned:
- Only a fraction of struggling homeowners are getting help.
- Mortgage servicers are only reaching a small fraction of struggling homeowners.
- The largest servicers, especially Bank of America, have left most struggling homeowners in limbo without either modifying or foreclosing.
- HAMP itself hasn’t made much difference: It hasn’t led to an increase in modifications.
- Just over one in five homeowners who applied for a HAMP mod have received a permanent modification.
- And in one quarter of rejections, mortgage servicers – notorious for losing documents – have cited missing documents as the reason.
- Here are your overall chances of getting a mod with each of the top servicers.
- Treasury claims servicers are improving, but its own data show otherwise.
- When servicers offer a mod, it’s generally more affordable than mods used to be.
- But instead of mods, servicers have recently been offering more repayment plans, which actually increase struggling homeowners’ payments.
- In the end, most government funds set aside to help homeowners are still unused.
The number of modifications each month has remained dramatically lower than the number of homeowners behind on their mortgages.
Although Treasury Department officials and mortgage servicers claim the industry has gotten better at handling modifications, the average rate of modifications in the past two years is not significantly different than the rate before HAMP launched.
The data for the total number of modifications provided by mortgage servicers comes from HOPE Now, an industry-headed coalition.
Ideally, servicers would be in contact with troubled borrowers, discussing possible alternatives to foreclosure. But servicers aren’t doing that with most homeowners at risk of foreclosure-and they haven’t improved much. Servicers generally have multiple alternatives to foreclosure, including modifications, short sales and deeds in lieu, all of which are generally better outcomes for both homeowners and investors.
“If you have names, addresses, and phone numbers for your customers, it seems like you ought to be able to do better than reaching one out of three,” said Mark Pearce, formerly North Carolina deputy commissioner of banks.
We did an analysis of Moody’s data on 300,000 subprime loans that had been more than three months behind in the last year or so. All had been packaged into mortgage-backed securities.
Moody’s reported that getting a modification takes several months at all of the servicers, though some were worse than others. The worst was JPMorgan Chase, where the average modification occurred 11 months after the borrower fell behind. At Ocwen, the fastest, it was seven months.
The vast majority of subprime delinquencies at Bank of America, the nation’s largest servicer, haven’t been resolved either way. About 41 percent of Bank of America’s loans in this analysis hadn’t even begun the foreclosure process, despite an average delinquency of 13 months. Another 27 percent of homeowners were in foreclosure but hadn’t yet lost their homes-the average delinquency there is two years.
About 1.3 million homeowners who have applied for a HAMP mod were denied without being placed in a trial, a three-month period that is supposed to give homeowners a chance to show they can afford the new payments.
Meanwhile, getting placed in a trial is just the beginning of a disappointing process for many homeowners: More than half of trials were canceled, most of the time despite the fact that the homeowner had made all of the payments. Trials have also frequently lasted far longer than the three months they are supposed to last. About six percent of those who’d applied were in a trial as of December.
by Jim the Realtor | Mar 4, 2011 | Bailout |
From cnbc.com:
WASHINGTON – The Treasury’s man in charge of the government’s $700 billion financial bailout program has two words for congressional overseers: It worked.
Testifying at the Congressional Oversight Panel’s final hearing on Friday, Treasury bailout chief Timothy Massad said the program “brought stability to the financial system and laid the foundation for economic recovery.”
The much-maligned Troubled Asset Relief Program is estimated to cost taxpayers $25 billion — a far cry from initial projections — and even some of the program’s harshest critics admit it helped pull markets “back from the abyss.”
“Today the panic of 2008 is a slowly fading memory, and the TARP played a role in turning the page on that grim chapter in American history,” said former Democratic Senator Ted Kaufman from Delaware, the chairman of the congressional panel.
Major Wall Street banks such as Bank of America Corp, Goldman Sachs Group Inc and Citigroup Inc have long repaid the government, and the Treasury Department has recapitalized American International Group Inc, although it still holds a 92 percent stake in the insurer.
But TARP also has many open sores, including the Obama administration’s housing rescue program.
The administration initially predicted the TARP-funded Home Affordable Modification program would help up to 4 million at-risk homeowners to avoid foreclosure. But in nearly two years of operation, the program has provided permanent loan modifications for only a little more than 600,000 homeowners.
The congressional panel estimated that HAMP will prevent fewer than 800,000 foreclosures in total.
“It is no wonder, then, that many Americans view the TARP as a program designed and executed for the benefit of Wall Street CEOs rather than Main Street homeowners,” said Kaufman.
by Jim the Realtor | Feb 28, 2011 | Bailout, Mortgage News |
From HW:
Thirteen of the 20 largest mortgage servicers participating in the Home Affordable Modification Program have begun principal write-downs, according to Laurie Maggiano, director of policy at the homeowner preservation office inside the Treasury Department.
While outlining changes to HAMP at the Mortgage Bankers Association servicing conference last week, Maggiano said several thousand modifications have had the principal written down by an average between $50,000 and $100,000. That number was confirmed by the Treasury late Friday.
The Treasury announced the initiative in March 2010. The Treasury said then that the write-downs would apply only to borrowers with 115% or higher loan-to-value (LTV) ratios. Servicers initially forbear some or all of the balance exceeding 100% of the home’s value, down to a 31% debt-to-income ratio. Then, the servicer forgives the forborne amount in three equal installments over three years, contingent on the borrower’s ability to remain current on payments.
A spokesperson for the Treasury told HousingWire that the program is still very new and that it will begin reporting on the write-downs in March.
“Additionally, each servicer has a plan in place for implementation of the program – so principal reduction is on those loans they have targeted in their portfolio,” the spokesperson said.
Despite an increase in existing home sales, analysts at FNC, said home prices continued to decline in December because so many of those sales were foreclosures.
“Driven in part by rising sales of distressed properties and higher foreclosure-sales discounts, home prices declined for the seventh straight month in December and suffered their largest one-month drop during the year,” according to FNC.
Of the 30 major metro areas tracked by FNC, 23 had price declines in December by an average of 2.2%.
FNC’s dim view of house prices is not theirs alone. CoreLogic Chief Economist Mark Fleming expects home prices to decline between 5% and 10% through 2011. Fleming added that stabilization should occur by the end of the year, but the damage has been extensive and the road to recovery will be a long one.
“The flooding may have finally stopped,” Fleming said. “But the living room is half underwater.”
by Jim the Realtor | Feb 25, 2011 | Bailout, Mortgage News |
From HW:
Any potential settlement U.S. regulators reach with large mortgage lenders and servicers to modify loans and pay $20 billion or so to help borrowers underwater on their mortgage will do little to help the already fragile market recover, according to Bank of America Merrill Lynch analysts.
Discussing details of the settlement first reported by The Wall Street Journal, mortgage-backed securities strategists Chris Flanagan, Vipul Jain and Timothy Isgro said the likelihood of a fine and principal reduction program is low. The Journal cited anonymous people familiar with the negotiations of the settlement, and said the nation’s largest banks have yet to receive any proposal.
“We believe that a $20 billion levy on banks to fund principal reduction would bring with it enormous costs that would far outweigh any potential benefits,” the analysts said.
Analysts at Keefe, Bruyette & Woods said the suggested amount of the settlement “seems high” and talks are in the early stages, so “it is too soon to draw significant conclusions” regarding companies that could be effected.
“We believe the most likely scenario would be a settlement where the servicers agree to a certain amount of money to provide principal writedown as part of mortgage modifications,” Bose George, Jade Rahmani and Ryan O’Steen said in a research note. The proposed $20 billion fine would do little to address the nation’s aggregate negative equity of $744 billion, as estimated by CoreLogic, according to BofAML.
The analysts think banks would tighten private credit availability if this proposed settlement or others come down, “which in turn could damage the housing recovery, and force the government to assume an even larger role in housing finance than its current 94% share.”
Admitting that quantifying negative-equity risk is “almost impossible,” Flanagan said BofAML thinks banks “would immediately recognize that they have to incorporate the risk of future levies into the pricing of mortgage credit.”
In short, mortgage lending could come to a complete halt. “In our view, this proposal would re-open the property question and create somewhat unquantifiable tail risk to the downside for home prices,” the analysts said.
“There is a simple way for banks to manage this tail risk: namely stopping mortgage lending, which clearly would be an unacceptable outcome,” BofAML analysts said.
by Jim the Realtor | Feb 24, 2011 | Bailout, Short Sales, Strategic Defaults |
From HW:
Servicers are moving toward a proactive approach in pursuing short sales as an alternative to foreclosure, servicers on a Mortgage Bankers Association panel said Wednesday.
A component and specialty servicer, meanwhile, predicted that short sales could increase 50% industrywide this year. Buffalo, N.Y.-based AMS Servicing told HousingWire that the projected increase is due largely to changes in the Obama administration’s Home Affordable Foreclosure Alternatives, or HAFA, program that opens up eligibility to a larger group of homeowners. AMS has determined through analysis of its 2010 short sale metrics that as many as 91% of previously ineligible borrowers might now be eligible for the HAFA short sale program.
“Power of denial is very sharp for someone losing their home,” said David Sunlin, senior vice president at Bank of America. Borrowers want to do the right thing, Sunlin said, and it’s important for servicers to guide the borrower through to the end, whether it’s a short sale or a deed in lieu.
“We need to get these short sales done in a timely fashion. A short sale today is a lot better than it was six months ago,” said Abel Fregoso, vice president and national field short sale manager for Wells Fargo.
The Treasury Department took action in December eliminating some rules it said have held back short sales through the HAFA program. HAFA no longer asks for income verification, unless the borrower is less than 60 days overdue on the mortgage. This means that borrowers who previously were deemed ineligible because their income was too high, may now qualify for a HAFA short sale, said Jim DePalma, executive vice president, default management at AMS Servicing, in an interview after the panel concluded.
David Sunlin said changes to the program are seen as positive by servicers. It works best, he said, when used pro-actively, by helping the borrower market the property instead of having the borrower come to the servicer with a buyer in hand.
Servicers on the panel said they expect the changes in HAFA to encourage more participation in the program.
But the incentive for borrowers to short sell their home can be challenging when it can take up to two years or more to complete a foreclosure. The ability to stay in the home without paying the mortgage may lessen the incentive to participate, panelists said.
As for deeds in lieu of foreclosure, Fannie Mae has looked at them with some sort of incentive at the end of it, such as a few months with reduced rent or no rent, said Beverly Wilbourn, vice president of preferred loss mitigation strategies for Fannie Mae. The key is to engage the borrower earlier and keep them engaged in order to avoid a foreclosure, she said.
“Offer them a way to transition from a very difficult financial circumstance,” she said. “Get to the homeowner and talk them through to life after this horrific situation.”
But, Wilbourn added, “You don’t want to go out and tell everyone to go do a short sale or do a deed in lieu.” The GSE wants to be sure that it is a viable option and the right alternative to foreclosure.
Short sales that have either second liens or mortgage insurance can be more challenging, said Leo Esposito, first vice president of loss mitigation and asset disposition services at ServiceLink, a unit of Fidelity National Financial. But that’s not to say they can’t be done, he said.
The seller may have to make a contribution or sign a note for a short sale with a second lien or with mortgage insurance for the sale to go through, said Wells’ Fregoso.
by Jim the Realtor | Feb 14, 2011 | Bailout, MERS
Hat tip to JimG for sending this along, from bloomberg.com:
Merscorp Inc., operator of the electronic-registration system that contains about half of all U.S. home mortgages, has no right to transfer the mortgages under its membership rules, a judge said.
U.S. Bankruptcy Judge Robert E. Grossman in Central Islip, New York, in a decision he said he knew would have a “significant impact,” wrote that the membership rules of the company’s Mortgage Electronic Registration Systems, or MERS, don’t make it an agent of the banks that own the mortgages.
“MERS’s theory that it can act as a ‘common agent’ for undisclosed principals is not supported by the law,” Grossman wrote in a Feb. 10 opinion. “MERS did not have authority, as ‘nominee’ or agent, to assign the mortgage absent a showing that it was given specific written directions by its principal.”
“An adverse ruling regarding MERS’s authority to assign mortgages or act on behalf of its member/lenders could have a significant impact on MERS and upon the lenders which do business with MERS throughout the United States,” Grossman wrote. “It is up to the legislative branch, if it chooses, to amend the current statutes to confer upon MERS the requisite authority to assign mortgages under its current business practices.”
“By MERS’s own account, the note in this case was transferred among its members, while the mortgage remained in MERS’s name,” Grossman wrote. “MERS admits that the very foundation of its business model as described herein requires that the note and mortgage travel on divergent paths.”
The judge said that the membership agreement wasn’t enough to assign the mortgage and that to do so the lender would have to give power of attorney or similar authority to MERS.
(more…)
The California Housing Finance Agency said Wednesday it has expanded the eligibility requirements for several Keep Your Home California programs, allowing more distressed homeowners access to $2 billion in funds allotted for foreclosure prevention initiatives.
