Home prices rise in July for third consecutive month: S&P/Case-Shiller

By Kerri Ann Panchuk

• September 25, 2012 • 8:10am

Both home price indices measured by Standard & Poor’s show home prices rising from June to July, according to the latestS&P/Case-Shiller report.

The 10-city composite index shows prices increasing 1.5% from June to July, while the 20-city composite index grew 1.6% during the same period.

This is the third consecutive month in which all 20 cities measured by the index and both composites saw prices rise over the prior month.

This would have been the fourth straight month with a rise in prices, but values fell in Detroit back in April, throwing those numbers off a bit.

The 10- and 20-city composite indices posted annual increases of 0.6% and 1.2%, respectively.

Meanwhile, individual cities such as Dallas and Washington, D.C., reported virtually no changes in their prices year-over-year, while Cleveland, Detroit and New York saw their annual prices decline.

Atlanta, an area hit hard by the foreclosure crisis, declined as well but saw its annual price decrease improve to -9.9% after nine months of double-digit declines. Yet, it is still the worst of the 20 cities followed by S&P.

“The news on home prices in this report confirm recent good news about housing,” said David Blitzer, chairman of the index committee at S&P Dow Jones Indices. “Single-family housing starts are well ahead of last year’s pace, existing home sales are up, the inventory of homes for sale is down and foreclosure activity is slowing. All in all, we are more optimistic about housing.”



Fewer Foreclosures in July as Servicers Seek Alternatives: CoreLogic

The number of completed foreclosures saw declines both monthly and yearly, according to the most recent foreclosure report from CoreLogic.

In July, 58,000 homes were lost to the foreclosure process compared to 69,000 in July 2011 and 62,000 the month before in June.

Mark Fleming, chief economist for CoreLogic, explained servicers are seeking options outside of foreclosure.

“Completed foreclosures were down again in July, this time by 16 percent versus a year ago, as servicers increasingly rely on alternatives to the foreclosure process, such as short sales and modifications,” said Fleming.

The percentage of homes with a mortgage sitting in foreclosure inventory also declined to 3.2 percent, or 1.3 million homes, down from 3.5 percent, or 1.5 million homes, in July 2011. Month-over-month, the figure was unchanged.

All mortgaged homes in any stage of the foreclosure process is counted as foreclosure inventory.

“The decline in completed foreclosures is yet another positive signal that the housing market is continuing on a progressive path of stabilization and recovery,” said Anand Nallathambi, president and CEO of CoreLogic.

Five states accounted for nearly half (48.1 percent) of all completed foreclosures over a one year period ending in July 2012. Those states were California (118,000), Florida (92,000), Michigan (61,000), Texas (57,000), and Georgia (54,000).

The states that foreclosed on the smallest number of properties over the same yearly period were South Dakota (32), District of Columbia (120), Hawaii (445), North Dakota (575), and Maine (608).

Among the largest metro areas tracked by CoreLogic, Atlanta-Sandy Springs-Marietta, Georgia topped the list with 36,346 completed foreclosures in a one-year period. Phoenix-Mesa-Glendale, Arizona ranked second with 32,722 completed foreclosures, followed by Riverside-San Bernardino-Ontario, California (23,670); Los Angeles-Long Beach-Glendale, California (19,599); and Chicago-Joliet-Naperville, Illinois (19,236).

The five states with the highest percentage of mortgaged homes in foreclosure inventory were Florida (11.2 percent), New Jersey (5.7 percent), New York (5.2 percent), Illinois (4.9 percent), and Nevada (4.7 percent).

The five states with the lowest percentage of mortgaged homes in foreclosure inventory were Wyoming (0.5 percent), Alaska (0.8 percent), North Dakota (0.8 percent), Nebraska (0.9 percent), and South Dakota (1.1 percent).

Two Florida metros had the highest percentage of mortgaged homes in foreclosure: Tampa-St. Petersburg-Clearwater (11.5 percent) and Orlando-Kissimmee-Sanford (11.3 percent).

New Short Sale Guidelines for GSEs Will Make Process Easier

Starting November 1, 2012, Fannie Mae and Freddie Mac will implement new short sale guidelines to make the approval process easier for eligible borrowers.

“These new guidelines demonstrate FHFA’s and Fannie Mae’s and Freddie Mac’s commitment to enhancing and streamlining processes to avoid foreclosure and stabilize communities,” said
FHFA Acting Director Edward J. DeMarco in a statement. “The new standard short sale program will also provide relief to those underwater borrowers who need to relocate more than 50 miles for a job.”

The changes are part of the FHFA’s Servicing Alignment Initiative and will require a streamlined approach with documents, leading to a reduction in documentation requirements. For example, borrowers who are 90 days or more delinquent and have a credit score lower than 620 will no longer be required to provide documentation for their hardship.

The GSEs will also waive their right to pursue deficiency judgments. Borrowers with sufficient income or assets can make cash contributions or sign promissory notes instead.

One major barrier that is also being addressed is the issue with second lien holders. To prevent second lien holders from stalling the short sale process, the GSEs will offer up to $6,000.

The new guidelines will also enable servicers to approve a short sale for borrowers who are not in default but face certain hardships including the death of a borrower or co-borrower, divorce or legal separation, illness or disability or a distant employment transfer.

In addition, all servicers will have the authority to approve and complete short sales that follow the requirements without first going to the GSEs for approval.

Provisions were also created for military personnel with Permanent Change of Station (PCS) orders. Servicemembers who are required to relocate will automatically be eligible for for short sales even if they are current. They also won’t be obligated to contribute funds to pay for the remaining deficiency.

“Short sales have become an increasingly important tool in preventing foreclosures and stabilizing communities,” said Leslie Peeler, SVP, National Servicing Organization, Fannie Mae. “We want to help as many homeowners avoid foreclosure as possible. It is vital that servicers, junior lien holders and mortgage insurers step up to the plate with us.”

Tracy Mooney, SVP of Single-Family Servicing and REO at Freddie Mac, said, “These changes will make it clear that Freddie Mac servicers have the authority to approve short sales for more borrowers facing the most frequently seen hardships. These changes will further empower the industry to minimize foreclosures and help Freddie Mac in its mission to minimize credit losses and fortify a national housing recovery.”

Fannie Mae will send the announcement for the new changes to servicers Wednesday. Freddie Mac sent their announcement Tuesday.

In April, the GSEs also announced they were setting requirements to have a decision on a short sale offer made within 30-60 days.

HOPE NOW Reports 385K Loan Mods in First Half of 2012

The first half of 2012 saw more than 385,000 permanent loan modifications for struggling homeowners, HOPE NOW reported Tuesday.

The voluntary, private sector alliance of mortgage professionals and non-profit counselors released its June 2012 data, showing that 385,468 homeowners received permanent loan modifications for the first half of the year. This statistic brings the total number of loan modifications completed since 2007 to 5.6 million.

The data revealed that during the first six months of 2012, 275,324 homeowners received proprietary loan modifications, while 110,144 received loan modifications completed underHAMP.

Proprietary modifications continued to show lower monthly principal and interest payments. Of the proprietary modifications completed in the first half of the year, 79 percent included reduced monthly principal and interest payments, and 90 percent had fixed interest rates of 5 years or more.

Proprietary mods that reduced principal and interest payments by more than 10 percent made up 72 percent of the total through June.

Delinquencies and foreclosures fell during the year’s first half, with serious delinquencies (60 or more days past due) dropping 10 percent from the first half of 2011.

Foreclosure starts totaled 1.06 million, a 15 percent drop from 1.3 million during the first half of 2011.

HOPE NOW executive director Faith Schwartz said the organization’s goal is to keep that momentum going into the future.

“HOPE NOW data for the first half of 2012 shows a continued trend of reduced late stage delinquencies year-over-year. However, efforts and resources have expanded to assist all at-risk homeowners in finding solutions to avoid foreclosure where possible,” Schwartz said.

Chase offers no doc refis, principal reduction

By Jon Prior

• August 6, 2012 • 4:45pm

JPMorgan Chase ($37.01 0%) went from fast-tracking foreclosures to rubber stamping and pre-approving some borrowers for refinances and even principal reduction.

The five largest mortgage servicers signed a $25 billion deal with federal prosecutors and 49 state attorneys general in March to settle foreclosure abuses and documentation problems in the past. Chase agreed to provide roughly $4.2 billion in relief to homeowners under the agreement, including principal write-downs, modifications and refinances for underwater borrowers.

Servicers receive more credit for granting the relief within one year, according to the terms of the settlement.

But since the foreclosure crisis first struck five years ago, borrowers have grown weary of the documentation black holes at the major banks. Many have spent hours in front of FAX machines, only to be asked for resubmissions or another piece of paperwork.

To provide relief more quickly under the settlement, Chase executives are addressing the borrower fatigue with a letter sent to borrowers notifying them that their loan was refinanced into a new mortgage with a lower interest rate. No documentation was needed. Chase owned the loan.

Borrowers receiving these letters saved an average of $300 per month on their payments, according to a statement from the bank sent to HousingWire.

Chase is sending different letters to other underwater borrowers. All that is required in order for a principal reduction on their loan is a signature sent back with the included self-addressed stamped envelope the bank provides.

Roughly half of the borrowers targeted by most major servicers for principal write-down consideration agree to the deal. But nearly all of the borrowers who received a letter from Chase, sent it back with a signature, according to the bank.

“Chase is taking a proactive approach to helping homeowners. We are automatically reducing interest rates for eligible customers who are current on their mortgage payment, saving them hundreds of dollars each month,” a Chase spokeswoman said. “For many individuals and families who are struggling with their mortgage, we are lowering their payments by sending them pre-qualified modification offers, which may include principal forgiveness.”

A spokeswoman for Joseph Smith, the monitor of the servicing settlement, declined to comment on the Chase letters.

Marietta Rodriguez, national director of homeownership and lending at NeighborWorks America, a nonprofit housing counseling group, said it’s understandable how fatigued borrowers have become.

“There is a lot of information on a lot of programs being messaged to borrowers right now. It takes a very sophisticated borrower to sort through all the news and solicitations to determine what they’re being offered and what is an appropriate next step,” Rodriguez said.

More servicers are using principal reduction for borrowers who owe more on their mortgage than their house is worth. Roughly 47% of all modifications provided in 2012 included a cut to principal, said Chase securities analysts in a report issued last week.

Executives at Ocwen Financial Corp. ($23.15 0.325%), the largest subprime lender in the country, said in a conference call with investors last week that two-thirds of its modifications now include a write-down.

Chase analysts said the average amount of principal forgiven on mortgages securitized into private-label bonds was $90,000 so far in 2012, up from $66,000 last year.

Not everyone is convinced on the method. The Federal Housing Finance Agency last week refused to allow such write-downs onFannie Mae and Freddie Mac loans.

Roy Oppenheim, a foreclosure defense attorney operating in Florida, said in an interview that the Chase letters do not surprise him. The foreclosure process in Florida is so costly, backlogged and uncertain that many banks are looking for “a less tortuous method.”

This includes even reducing principal and refinancing a risky underwater borrower when they can.

“There are even bigger problems that lie ahead if they go with the foreclosure,” Oppenheim said.



Reverse mortgages as popular as IRAs in 10 years: Sente Mortgage

By Justin T. Hilley

• July 23, 2012 • 5:21pm

Reverse mortgages will be as ubiquitous as individual retirement accounts in 10 years because many folks will have more money in the former than in the latter, says Scott Norman, vice president of Austin, Texas-based Sente Mortgage‘s reverse mortgage division.

Norman says the forces of supply & demand and education will serve as the engine for his prediction’s materialization that every extended family will have a member with a reverse mortgage.

“There’s still a great deal of education — for financial planners, certified public accountants, home health care professionals, real estate attorneys — that needs to be done,” Norman says. “We haven’t even scratched the surface yet.”

Reverse mortgages let borrowers convert a portion of their home equity into cash. However, unlike a traditional home equity loan or second mortgage, borrowers can hold off on repayment until they no longer live in the home, fail to meet the obligations of the mortgage or pass away.

The demographics point to a robust consumer base for the reverse mortgage industry.

The population of individuals 65 and up increased 15% to 40 million in 2010 from 35 million in 2000, according to the Department of Health and Human Services. It projects a 36% increase to 55 million in 2020. And by 2030, about 72.1 million older Americans, over twice their number in 2000, will exist — about 19% of the U.S. population.

Norman says Sente Mortgage views reverse mortgages as a product with unlimited upside, a natural financial planning option for aging Americans within the housing economy. He favors the Home Equity Conversion Mortgage Saver, a type of reverse mortgage offered by the Federal Housing Administration that requires drastically lower upfront fees — just .01% of the home value — than the HECM Standard, but reduces the amount of money available to the borrower.

“As the baby boomers continue to age and home values stabilize, the question is ‘How are they going to retire?’’ Norman says. “Pull up average 401(K), average savings amount, average debt. These seniors aren’t going to be able to retire at a fraction of what they’re living today. I don’t think I’m exaggerating.”

“I’m not saying a reverse mortgage is for everybody, but it is certainly an option that may be the most realistic for a majority of the seniors in the next five to ten years,” Norman says. “It’s safe, it’s cost efficient. The biggest complaint you have regarding reverse mortgages is not the product, but that it’s expensive to grow old in America.”

They’re also confusing, according to the Consumer Financial Protection Bureau, which released a report highlighting the risks for American consumers as they struggle to understand reverse mortgages.

“Reverse mortgages are complex and have the potential to become a much more pervasive product in the coming years as the baby boomer generation enters retirement,” said CFPB Director Richard Cordray.

The CFPB report found that while consumers are largely aware of reverse mortgages, few completely understand them. “Many consumers struggle to understand how their loan balance will rise and their home equity will fall over time with a reverse mortgage,” the reported stated. “Some borrowers do not understand that they need to continue to pay taxes and insurance with a reverse mortgage.”

Norman concedes that some of the bureau’s conclusions were “relatively accurate” and applauds the bureau for embarking on such a study. However, he scolds it for not consulting consumers while conducting the study and forming conclusions. The CFPB has yet to respond to inquiries about Norman’s claim.

According to the CFPB study, 70% of borrowers are taking out the full amount of proceeds as a lump sum rather than as an income stream or line of credit. “This raises concerns that consumers who take out all of their accessible home equity upfront will have fewer resources available later in life. They may not have the money to continue to pay taxes and insurance on their homes, which can put them at risk of losing their home,” the report stated.

As part of a public education campaign, the National Reverse Mortgage Lenders Association developed a newly redesign consumer website in June that provides comprehensive help and information on the entire process of obtaining a reverse mortgage. NRMLA is partnering with the federal government as part of the campaign.

Norman, meanwhile, doesn’t think the CFPB’s findings are wrong. He just doesn’t think they went far enough.

“Most of the seniors we deal with are smarter and wiser than we’ll be in the next 20 years,” Norman says. “These are smart people. They lived through World War II. We haven’t.”


California Homeowner Bill of Rights Signed Into Law

California Attorney General Kamala Harris announced Wednesday that Governor Edmund G. Brown signed two provisions of the much-debated Homeowner Bill of Rights into law.

The Homeowner Bill of Rights so far consists of a series of related bills containing provisions that prohibit certain practices by lenders that have been attributed to the state’s foreclosure crisis. Chief among the banned practices are robo-signing (signing of fraudulent mortgage documents without review) and dual-track foreclosure (starting foreclosure proceedings while the homeowner is in negotiations to save the home). The bill imposes civil penalties on perpetrators of these activities. In addition, it guarantees struggling homeowners a single point of contact at their lender who has knowledge of their loan and direct access to decision makers.

“Californians should not have to suffer the abusive tactics of those who would push foreclosure behind the back of an unsuspecting homeowner,” said Brown. “These new rules make the foreclosure process more transparent so that loan servicers cannot promise one thing while doing the exact opposite.”

The laws will go into effect at the start of 2013. Borrowers can access courts to enforce their rights under the legislation.

The Homeowner Bill of Rights also contains a number of bills currently outside of the conference committee process. These other bills enhance law enforcement responses to mortgage and foreclosure-related crime. In addition, some bills are designed to help communities fight neighborhood blight resulting from foreclosures and provide enhanced protection for tenants in foreclosed homes.

The bill, unveiled by Harris in February, builds upon reforms negotiated in the national mortgage settlement between leading lenders and 49 states. Harris secured up to $18 billion for California homeowners in the agreement, some of which was used to establish a Mortgage Fraud Strike Force intended to investigate crime and fraud associate with mortgages and foreclosures.

“The California Homeowner Bill of Rights will give struggling homeowners a fighting shot to keep their home,” said Harris. “This legislation will make the mortgage and foreclosure process more fair and transparent, which will benefit homeowners, their community, and the housing market as a whole.”


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