Languishing Home Improvement Market ‘Poised’ for Rebound: Study

After experiencing a downturn, spending on home improvement may finally register an increase in 2012, with the market appearing to be “poised for a solid rebound,” according to a recent report from the Harvard Joint Center for Housing Studies.

The Joint Center estimates spending on home improvement rose 9 percent in 2012 after falling in previous years. The Joint Center found spending on home improvement and repairs reached $275 billion in 2011, which represents a 4 percent decline from 2009 and about a 16 percent decline from the 2007 market peak.

The report explained the surge in foreclosures and short sales and the high share of underwater homeowners left many borrowers with little incentive to improve or maintain their property conditions.

However, those factors, as well as the growing interest in environmental sustainability, “are now driving a rebound in the home improvement industry,” according to the report.

The study also noted the number of “inadequate” homes has risen, increasing 7 percent between 2007 and 2011 to 2.4 million units. A home is categorized as inadequate if it lacks a complete kitchen or bathroom facilities or running water, and shows other signs of disrepair, according to the report.

“As the broader economy recovers and housing markets tighten, however, some of these inadequate homes will likely be renovated to provide affordable housing opportunities,” the report stated.

In 2011, institutional sellers made improvements to about a third of their foreclosed properties before sale and spent about $6,500 per unit, leading to a market expenditure of about $1.7 billion. Homeowners spent about $11,100 on distressed properties during the same time period, contributing a total of $4.2 billion to market expenditures. Investors spent more on each unit, about $15,600, while contributing about $3.9 billion to market spending. Overall, home improvement expenditures for distressed properties reached about $9.8 billion in 2011.

Aside from improvements to distressed homes, the movement toward “green” improvements, such as increasing energy efficiency, is contributing positively to home improvement spending. The report also noted growth in the population of those 65 and over has potential to lead to a strong demand to retrofit existing homes in the 2020s and beyond.


B of A offers 30,000 borrowers $4.75 billion in principal reductions

By Kerri Ann Panchuk

• November 14, 2012 • 11:36am

Bank of America ($9.14 -0.19%) approved 30,000 mortgage customers for principal reductions on first-lien mortgages with a total value of $4.75 billion as part of its consumer-relief mandate under the national mortgage servicing settlement program.

Bank of America executives participated on a teleconferenced update to the settlement.

They said that, through September, BofA completed or approved $15.8 billion in mortgage debt relief for 164,000 homeowners.

The progress report comes the same day that four other banks are expected to release their compliance updates with the national mortgage servicing settlement. The $20 bilion-plus settlement, which was reached between the big banks, state attorneys general and the federal government, outlines consumer-relief mandates and servicing requirements for the nation’s largest mortgage servicers.

BofA said in addition to $4.75 billion in principal reductions, the company has extended $230 million in pre-settlement forebearance.

And to date, 45,000 homeowners with mortgages serviced or owned by BofA have received $2.5 billion in relief through programs offering extinguishment of home equity loans and lines of credit.

Another 62,000 BofA customers were greenlighted for short-sales or deeds-in-lieu of foreclosure offering another $7.4 billion in relief on unpaid principal balances.

By Oct. 31, 23,000 homeowners had been offered assistance via interest rate reductions, with most of that activity occurring in just the past month.

Through September, about 1,000 rate reductions were completed with interest-rate aid totaling $250 million in unpaid principal balances.

BofA notes that when evaluating the gross amount of forgiveness activity, the relief is not always calculated dollar-for-dollar, so the aid amount is often higher than what is credited.

Servicers Increase Mods and Short Sales in Q3: HOPE NOW

In the third quarter of this year, servicers increased the pace at which they completed proprietary modifications and short sales,HOPE NOW data revealed Monday.

In Q3 2012, proprietary modifications, or non-government mods, stood at 186,057 compared to 161,764 in Q3 2011, representing a 15 percent annual gain, according to the alliance.

Quarter-over-quarter, proprietary mods were up 41 percent compared to Q2 2012, when there were 131,556 completed mods.

In addition to the 186,057 proprietary mods in Q3, mortgage servicers also completed 33,276 mods through the Home Affordable Modification Program (HAMP), bringing the quarterly total for completed mods to 219,333. HOPE NOWnoted HAMP figures for September have not yet been reported.

When including all modifications, year-to-date, 604,301 homeowners have received permanent loan mods in 2012.

In Q3, short sales, another solution to prevent foreclosures, totaled 110,153, up 16 percent from Q3 in 2011 when there were 94,560 completed short sales.

Quarter-over-quarter, short sales were up 3 percent. However, completed short sales were actually down month-over-month by 13 percent in September.

While mods and short sales were up in Q3 2012, foreclosure starts were down, falling to 503,995 compared to 597,447 in Q3 2011, representing a 16 percent decline.

Foreclosure sales saw a slight 1 percent decline in Q3, dropping to 197,937 compared to 199,383 a year ago.

In a statement, Faith Schwartz, executive director of HOPENOW said, “The combination of loan modifications and short sales solutions completed by mortgage servicers, in the third quarter of the year, totals over 329,000. That compares to approximately 198,000 foreclosure sales during the same time period.”

Sixty-plus delinquencies also fell in Q3 2012, numbering 2.45 million, down 12 percent from the same quarter last year.

For just the month of September, HOPE NOW also provided data on characteristics of proprietary loan modifications. Among the 60,595 completed proprietary loan mods in September, 87 percent included reduced principal and interest on monthly payments. In addition, 76 percent of those mods had reduced principal and interest payments exceeding 10 percent.

Since 2007, the servicers have completed 5.82 million permanent loan modifications. Of those loan mods, 4,739,109 were proprietary and 1,076,747 were completed under HAMP.

HOPE NOW—an alliance of mortgage servicers, investors, mortgage insurers, and non-profit counselors—offers a free hotline for struggling homeowners at 888.995.HOPE.


HARP on Track to Reach 1M Borrowers This Year

Nearly 99,000 homeowners refinanced their mortgages in August through the Home Affordable Refinance Program (HARP), according to a new report released by the Federal Housing Finance Agency (FHFA) Tuesday.

The federal government’s HARP initiative, which is applicable for borrowers with loans owned by Fannie Mae or Freddie Mac, has put 618,217 homeowners into new mortgages with lower interest rates since the beginning of this year, when a broader group of borrowers were made eligible for the program.

According to FHFA, HARP is on target to reach a million borrowers in 2012. The agency attributes the continued

high volume of HARP refinances to record-low mortgage rates and program enhancements that included the elimination of its maximum loan-to-value (LTV) ratio limit.

Fannie Mae and Freddie Mac loans refinanced through HARPaccounted for nearly one-quarter of all refinances in August, 24 percent to be exact. In states hard-hit by the housing downturn–-Nevada, Arizona, and Florida–-HARP refinances represented nearly half or more of total refis during the month.

HARP refinances for borrowers with LTV ratios greater than 105 percent accounted for more than 70 percent of HARP volume in Nevada, Arizona, and Florida and more than 60 percent of theHARP refinances in Idaho and California. Nationwide, LTVratios above 105 percent characterized more than half of newHARP loans made in August.

FHFA also noted in its report that nearly 18 percent of HARPrefinances for underwater borrowers were for shorter-term 15- and 20-year mortgages in August. By reducing their mortgage terms, these borrowers will be able to build equity faster.

Since the program’s inception in 2009, FHFA reports, Fannie Mae and Freddie Mac have financed more than 1.6 million loans through HARP.


Shortage of California homes up for sale

By Kathleen Pender


For the first time in about five years, I got a call from a real estate agent Friday asking me if I was interested in selling my home.

Matt Hoffman of San Mateo says he has had two real estate people come by his home in the past month asking if he wanted to sell because if he did, they had buyers interested. “I said thanks but basically no,” says Hoffman.

After years of having too many homes and not enough buyers, agents in California now have the opposite problem – too many buyers and not enough homes for sale. Hence the cold calls from agents trying to unearth inventory.

The California Association of Realtors reported Monday that its statewide inventory of unsold homes index for existing, single-family detached homes fell to 3.2 months in August from 3.5 months in July and 5.2 months in August 2011. (The latter two numbers have been revised from previous reports.)

The index reflects the number of months needed to sell the supply of homes on the market at the current sales rate. A six- to seven-month supply is considered normal. When the number goes higher, inventory is plentiful and it’s considered a buyer’s market. When the number goes lower, the advantage goes to the seller.

Prices rise

Declining inventory helps explain why the statewide median price of an existing, single-family detached home rose to $343,820 in August, up 3 percent from July and up 15.5 percent from August 2011.

The inventory shortage “is all over the state,” says Leslie Appleton-Young, the association’s chief economist. But it’s especially severe in the Bay Area, where there wasn’t a bulge in construction during the housing bubble, there isn’t a lot of developable land and the economy is the strongest in the state, she adds.

In the Bay Area, the index was at 2.7 months in August versus 4.5 months a year ago. The lowest inventory level in the Bay Area was 0.9 month in December 2004 and the long-run average from 1992 to the present is 4.7 months, lower than the statewide long-run average of 6.5 months, Appleton-Young says.

Even the Inland Empire, scene of tremendous overbuilding, has seen a shortage develop – the region’s unsold homes index was 3.3 months in August compared with 4.5 months a year ago.

“There is no question there is a shortage of homes for sale even in places like Stockton, which not long ago had years of inventory,” says Sean O’Toole, chief executive of “Prices became very attractive in those (hard-hit) areas and provided a great return for investors and a great opportunity for first-time buyers. That inventory went away very quickly as people realized a bargain was to be had. There are not so many bargains at this point.”

Not flipping

Unlike investors who five or six years ago were buying distressed properties to flip for a quick profit, investors today “are coming in because rental yields are providing a nice rate of return,” says Lawrence Yun, chief economist with the National Association of Relators.

That means those homes probably won’t be coming on the market anytime soon.

Nationwide, the glut of homes has also evaporated. In July, there was a 6.4-month supply of homes compared with 9.3 months in July 2011. The current number is right around long-term average, but Yun says there are “acute shortages” in places such as California, Arizona Nevada and parts of Florida.

So what has become of the so-called shadow inventory of foreclosed or distressed properties that banks have supposedly been keeping off the market and could unleash at any time, causing another leg down in the housing market?

O’Toole says the shadow inventory is like a funnel. “It starts with people being underwater, some of them stop making payments, some of those end up in foreclosure.” The homes that end up in foreclosure eventually end up on the market.

“What we have seen since September 2008 is that the rate of foreclosure is slowing faster than the number of people who are delinquent and certainly faster than the number of people underwater.” In other words, the spout is getting clogged, with fewer foreclosed homes going up for sale.

Foreclosures fade

The reasons, he says, include federal regulations that allow and encourage banks to hang onto foreclosed properties longer combined with state regulations designed to slow down the foreclosure process on behalf of homeowners.

“Then you get this political climate that is antiforeclosure,” O’Toole says. “What it means for the housing market is we are not seeing a wave of foreclosures and we are not going to see a wave of foreclosures,” O’Toole says.

Many underwater

Also choking supply is the fact that so many homeowners are underwater – or owe more than their homes are worth – and unable to sell without taking a loss.

CoreLogic recently reported that the percentage of homes with mortgages underwater dipped slightly to 22.3 percent at the end of the second quarter from 23.7 percent at the end of the first quarter.

As prices rise, more homes will float above water, but it’s going to take time. Meanwhile, there are still a lot of homes that are not likely to come onto the market.

At some point, the balance will tip, but it’s hard to predict when. When banks decide prices are high enough, they will start unloading houses they have been sitting on, says Jed Kolko, chief economist with real estate website Trulia. “For developers, when prices have been stable and rising for long enough, they will want to start building. We are seeing some rebound in construction,” Kolko says.

In some parts of the country, such as San Jose, “It is back up to normal for the local market,” he adds. In other parts, such as Sacramento, “It is still way below normal.”

Kathleen Pender is a San Francisco Chronicle columnist. Net Worth runs Tuesdays, Thursdays and Sundays. E-mail: Blogging at Twitter: @kathpender

Read more:

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.

Obama Administration Continues Pushing for Mods in Mixed Market 07/06/2012

Once again, data compiled in the Obama administration’sHousing Scorecard pointed to both signs of promise and reasons for concern. The May scorecard was jointly released by the administration and Treasury Department Friday and provides an overview of the health of the housing market based on data pulled from the public and private sectors.

According to the scorecard, one positive indicator for housing was the 7.4 percent rise in home equity to $457.1 billion in the first quarter of 2012. The increase boasts the highest gain since the second quarter of 2010.
Also, the National Association of Realtors reported sales for existing homes posted a 9.6 percent yearly increase in May compared to a year ago. May’s level also marked a 2-year high.

On the downside, the impact of serious delinquencies and underwater mortgages continues to strain the housing market. After months of declines, RealtyTrac reported foreclosure starts increased monthly and yearly at 12 and 16 percent, respectively, in May. Completed foreclosures also increased 7 percent month-over-month, but were still down 18 percent from May 2011. These increases in foreclosure starts and completions in May serve as a reminder that the housing market is still in a fragile state.

With the scorecard, the administration also released the Making Home Affordable report which details progress on government foreclosure prevention actions.

Through the administration’s Making Home Affordable Program, nearly 1.2 million homeowner assistance actions have taken place, including more than 1 million HAMP mods, according to the report.

The average savings for homeowners who received a HAMPmod was about $536 on their monthly mortgage payment as of May. About 86 percent of homeowners who entered the program in the last 22 months received a permanent modification with an average trial period of 3.5 months.

About 70 percent of non-GSE borrowers who received a HAMPmod also had their principal reduced. The number of homeowners who received a HAMP Principal Reduction Alternative (PRA) totaled about 83,000, and on average, they have seen a median principal reduction of $68,267.

The Second Lien Modification Program (2MP) helped approximately 84,000 borrowers who were able to save a median of $159 per month on their second mortgage. Interestingly, over 50 percent of 2MP homeowners reside in three states – California (36 percent), Florida (9 percent) and New York (6 percent).

Nearly 51,000 homeowners avoided foreclosure through a short sale or deed-in-lieu through the Home Affordable Foreclosure Alternatives Program (HAFA).

One popular administration program is the Home Affordable Refinance Program (HARP). So far, HUD Acting Assistant Secretary Erika Poethig said almost half a million families have taken advantage of the program, and refinanced families save an average of $2,500 per year.

While the efforts have been well-received, the administration would like to see the program further enhanced to reach more underwater borrowers.

“But with so many homeowners still underwater on their mortgages and struggling to move into more sustainable loans, we have much more work ahead,” said Poethig. “That is why we are asking the Congress to approve the President’s refinancing proposal so that more homeowners can receive assistance.”

%d bloggers like this: