New FHA Changes Streamline Loss Mitigation Protocols

The Federal Housing Administration (FHA)  released a Mortgagee Letter containing new procedures to strengthen the process mortgage servicers use to help struggling families avoid foreclosure and remain in their homes, according to an announcement from The Federal Housing Administration (FHA). The release says FHA is streamlining its loss mitigation protocols that servicers must use when evaluating and deploying ‘home retention options,’ foreclosure alternatives that allow delinquent borrowers to retain their home.  The release also says that mortgagees must implement the policies set forth in the Mortgagee Letter no later than December 1, 2016.

The release notes that FHA’s revised procedures streamlines the process servicers use to engage borrowers, particularly when evaluating them for the FHA-Home Affordable Modification Program (FHA-HAMP).  It states that these changes will decrease the number of steps a servicer and borrower need to follow in order to resolve a delinquency and enter into a loss mitigation home retention product.  In addition, it also says that FHA is eliminating particular obstacles that will allow servicers greater flexibility for evaluating an unemployed borrower’s financial condition and special forbearance agreements.

Specifically, FHA reports that they will:

• Require servicers to convert successful 3-month trial modifications into permanent modifications within 60 days instead of the average four-to-six months.
• Allow borrowers with three missed mortgage payments to qualify for a partial claim to bring their arrearages current versus the previous four-month minimum.
• End the traditional stand-alone Loan Modification option so borrowers can access the FHA-HAMP option, with its greater payment relief, sooner.
• Eliminate the minimum 12-month delinquency term to qualify for FHA’s special forbearance option. This will allow servicers extend this option to unemployed households sooner in their delinquency.

FHA’s Loss Mitigation Program was created in 1996 to reduce the economic impact to the Mutual Mortgage Insurance Fund, and subsequently has resulted in options available to Mortgagees in order to aid borrowers in avoiding foreclosure, when possible. The FHA states that the evolution of their loss mitigation guidance has also led to improved consumer engagement, the streamlining of FHA’s PreForeclosure Sale option, and a new loan modification by which Mortgagees provide borrowers with a more sustainable monthly mortgage payment.

Additionally, HAMP was created in 2009, at the height of the economic crisis. The FHA shares that these efforts combined with those of other federal regulators (U.S. Department of Veteran Affairs, U.S. Department of Treasury, etc.) have helped stabilize the nation’s housing market as well as demonstrate that a mortgage modification is an effective loss mitigation home retention option.

Fannie Mae’s Mortgage Portfolio Wind Down Continues

Fannie Mae’s gross mortgage portfolio resumed its contraction in February following a rare month of expansion in January, according to the GSE’s Monthly Volume Summary for February 2016 released on Wednesday.

The portfolio contracted at an annual rate of 27.8 percent in February, which translated to a month-over-month decline of more than $11 billion down to a value of about $337.2 billion by the end of the month.

In January, Fannie Mae’s gross mortgage portfolio experienced a rare expansion, increasing at an annual rate of 5 percent. With February’s contraction, the portfolio has now contracted in all but four months out of the last 67 months (since June 2010). The four months in which the portfolio expanded were January 2016, March 2015, January 2015, and December 2012. At the beginning of that stretch in June 2010, the amount of unpaid principal balance (UPB) of the loans in the portfolio was $818 billion.

According to a report from Urban Institute released last week which examined the GSE portfolio wind down under the FHFA’s conservatorship, the fact that Fannie Mae’s portfolio expanded in January “should not be an issue as the GSEs are reasonably close to the year-end 2016 portfolio goal. Relative to January 2015, Fannie Mae contracted by 16.4 percent, and Freddie Mac by 14.2 percent. They are shrinking their less liquid assets (mortgage loans and non-agency MBS) at close to the same pace that they are shrinking their entire portfolios.”

Fannie Mae’s gross mortgage portfolio contracted at an annualized rate of 16.5 percent for the full year of 2015 and is back on that pace for 2016 following February’s contraction. For the first two months of 2016, the portfolio has contracted at an annualized rate of 13 percent and the aggregate UPB of the portfolio at the end of February ($337.2 billion) was below the 2016 cap of $339.3 billion.

Fannie Mae's total book of business, which includes the gross mortgage portfolio plus total Fannie Mae mortgage-backed securities and other guarantees minus Fannie Mae MBS in the portfolio, increased at a compound annualized rate of 0.4 percent in February up to a value of about $3.098 trillion, according to Fannie Mae.

The serious delinquency rate on single-family loans backed by Fannie Mae declined by three basis points from January to February, from 1.55 percent down to 1.52 percent, its lowest level since July 2008. The number of loan modifications completed by Fannie Mae was nearly unchanged from January to February at 6,592 (compared to 6,599). For 2014, the monthly average of loan mods completed was 10,235. For 2015, the monthly average declined to 7,851.

Click here to view Fannie Mae’s entire February 2016 Monthly Volume Summary.

http://www.dsnews.com/news/03-30-2016/fannie-maes-mortgage-portfolio-wind-down-continues

Banks’ Share of the Servicing Universe is Shrinking

The number of first-lien mortgage loans serviced by eight national banks, which comprise about 41 percent of all outstanding residential mortgages in the country, has declined every quarter since Q4 2013, according to the OCC Mortgage Metrics Report for the fourth quarter of 2015 released Wednesday.

As of the end of Q4 2015, those eight national banks (alphabetically)—Bank of America, JPMorgan Chase, CIT Bank (formerly OneWest), Citibank, HSBC, PNC, U.S. Bank, and Wells Fargo)—were servicing approximately 21.47 million first-lien residential mortgage loans nationwide. This number represented a decline of more than one million from the year-ago quarter (23.1 million for the end of Q4 2014) and nearly three and a half million from two years earlier (24.9 million for the end of Q4 2013). The number of first-lien loans serviced by the banks has now declined every quarter for eight straight quarters.

The aggregate outstanding balance of those first-lien loans serviced by the eight banks as of the end of Q4 2015 was $3.67 trillion and has also declined every quarter for eight straight quarters. At the end of Q4 2013, the aggregate balance was $4.2 trillion.

The good news for the servicers is that more of the first-lien mortgages that remain in their portfolios are performing. According to the OCC, 94.1 percent of the loans in the portfolio were current and performing as of the end of Q4, nearly a full percentage point higher than the year-ago quarter (93.2 percent as of the end of Q4 2014).

The foreclosure metrics were also down in Q4. Servicers at the eight banks initiated 63,387 new foreclosures during the quarter, which is a decline of 16 percent year-over-year. The number of home forfeiture actions, which include short sales, deeds-in-lieu of foreclosure, or foreclosure sales, was down by 23 percent year-over-year in Q4 (down to 38,112).

According to the OCC, servicers at the banks completed 35,118 modifications during Q4, and 92 percent of those were “combination modifications”—or modifications that included multiple actions that affect the affordability and sustainability of the loan. Also, out of those 35,118 modifications, 87 percent of them reduced the loan’s pre-modification monthly payment.

Click here to view the OCC’s complete report.

http://www.dsnews.com/news/03-30-2016/banks-share-of-the-servicing-universe-is-shrinking

Dodd-Frank Suffers a Setback With MetLife Decision

A federal judge has issued an order to remove the designation of nonbank systemically important financial institution (SIFI) from MetLife Insurance which was imposed by the federal government more than a year ago.

U.S. District Judge Rosemary M. Collyer in the U.S. District Court for the District of Columbia issued the order to remove the nonbank SIFI tag from MetLife. The global insurance provider was originally designated as a nonbank SIFI by the Financial Stability Oversight Council (FSOC) in December 2014 under the authority granted to the council by Dodd-Frank.

The court's removal of the SIFI tag from MetLife is a victory for opponents of the Dodd-Frank Act who claim that the controversial Wall Street reform legislation enables “Too Big to Fail.” The FSOC, like the Consumer Financial Protection Bureau, was created out of the Dodd-Frank Act. While supporters of Dodd-Frank claim that the legislation put an end to the taxpayer-funded bailouts for institutions deemed “Too Big to Fail,” its opponents claim that the law actually codifies “Too Big to Fail” by giving the FSOC the authority to designate certain institutions as “systemically important.”

According to reports, other nonbanks to receive the SIFI designation were American International Group (AIG), Prudential Financial, and General Electric. MetLife was the first institution to challenge the SIFI designation.

“Of all of the Council’s activities, none generates more controversy than its designation of non-bank financial institutions as ‘systemically important financial institutions,’ or SIFIs. Designation anoints institutions as Too Big to Fail, meaning today’s SIFI designations are tomorrow’s taxpayer-funded bailouts,” said Rep. Jeb Hensarling (R-Texas), Chairman of the House Financial Services Committee, during a hearing in December.

MetLife has fought to have the SIFI designation removed since it was named such. The company sued the FSOC in the U.S. District Court for the District of Columbia in January 2015 to have the designation removed because as a nonbank SIFI, MetLife was subject to heightened regulation which the company said increases compliance costs, which in turn increases costs to consumers without any added safety benefit for the financial system. The company even set up a portion of its website devoted to providing a “central point for information related to the judicial review of FSOC's designation.”

In mid-May, the U.S. Department of Justice made a non-public motion to have MetLife's suit against the FSOC dismissed. MetLife filed a motion for summary judgment with the U.S. District Court in the District of Columbia on June 16. Later in June, the National Association of Insurance Commissioners (NAIC), the American Council of Life Insurers (ACLI), the Academic Experts in Financial Regulation (AEFR), and the U.S. Chamber of Commerce all filed briefs backing MetLife’s attempt to have the SIFI tag removed.

http://www.dsnews.com/news/03-30-2016/dodd-frank-suffers-a-setback-with-metlife-decision

What Factors are Holding Back Housing?

Existing-home sales have suffered in recent months due to the continuous imbalance of extremely low inventory levels and rapid home price appreciation, and industry experts believe that this trend will not end anytime soon.

Ten-X's Residential Real Estate Nowcast expects existing-home sales to perform better in March with a 4.8 percent increase from the previous month and a 2.6 percent year-over-year increase. The company projects that sales will fall between seasonally adjusted annual rates of 5.15 and 5.55 million, with a targeted number of 5.32 million.

“Though U.S. home sales have seen significant volatility in recent months due to external factors, sales remain at a high overall level,” said Peter Muoio, Ten-X Chief Economist. “The housing market stands on solid ground despite global economic volatility and weaker U.S. GDP growth, with the firmer labor market and enhanced household budgets from low oil providing a boost to consumer confidence.”

Rick Sharga, Ten-X's EVP, does not believe that existing-home sales will normalize anytime soon with inventory shortages prevalent in the market.

“Both January and February home sales were slightly better than a year ago, and our Nowcast predicts that March will continue that trend," Sharga said. “But inventory levels remain low, and home price appreciation continues to outpace wage growth. These factors suggest that, even with mortgage rates near their historic lows, a return to more ‘normal’ levels of home sales is still off in the distance.”

The National Association of Realtors (NAR) reported that existing-home sales fell in February 2016 after reaching the highest annual rate in six months in January. The report found that existing-home sales decreased 7.1 percent to a seasonally adjusted annual rate of 5.08 million in February from 5.47 million in January. However, the report noted that despite last month's large decline, sales remain 2.2 percent higher than a year ago.

The existing-home sales report from NAR for January 2016, showed that lenders are well on the path to recovery from TRID delays.  The report found that existing-home sales increased 0.4 percent to a seasonally adjusted annual rate of 5.47 million in January from a downwardly revised 5.45 million in December. Existing sales are now 11.0 percent higher than a year ago, the highest annual rate in six months and the largest year-over-year gain since 16.3 percent July 2013.

"The overall demand for buying is still solid entering the busy spring season, but home prices and rents outpacing wages and anxiety about the health of the economy are holding back a segment of would-be buyers," said Lawrence Yun, NAR Chief Economist.

The decline in existing-home sales in February did not slow down home price appreciation. According to the NAR, the median existing-home price in February was $210,800, up 4.4 percent from last February's median price of $201,900. This marks the 48th consecutive month of year-over-year gains. Home prices fell within Ten-X's range of $209,607 to $231,671 predicted in last month’s Nowcast. Now, Ten-X expects that sales prices for existing homes will fall between $209,207 and $231,229 for March with a targeted price of $220,218, representing 4.5 percent month-over-month and year-over-year gains.

http://www.dsnews.com/news/03-29-2016/what-factors-are-holding-back-housing

Digging Deeper Into the Declining Homeownership Rate

While many housing fundamentals have been nearing their pre-recession levels for months or even years in some cases, the nationwide homeownership rate sank to a 48-year low of 63.4 percent in the second quarter of 2015.

By the end of the year in 2015, the homeownership rate had clawed its way back up to 63.8 percent, but the full year of 2015 still represented the 11^th consecutive year of decline since hitting an all-time peak of 69 percent in 2004.

Why does the homeownership remain low while other housing fundamentals continue to improve? An analysis from the Federal Reserve Bank of St. Louis titled “If Housing Markets Are Recovering, Why is the Homeownership Rate Still Falling?” provides some of the answers. According to one explanation, the sharp increase in homeownership during the 10-year period prior to 2004 played a role.

“Perhaps this period represented an unsustainable shift of many financially weaker families out of rental housing into homeownership, which subsequently reversed with the bursting of the housing bubble and the onset of the Great Recession,” said Bill Emmons, Assistant VP and Economist with the St. Louis Fed.

From 1968 until the late 1990s, the homeownership rate fluctuated between 63 and 66 percent over the three decades, which is likely the range to expect in the future, according to Emmons.

“Evidence supporting the return-to-normal hypothesis includes greater-than-average declines since 2004 in the homeownership rates of younger, less-educated and nonwhite families—precisely the financially weaker groups that moved into homeownership most rapidly during the housing boom,” Emmons said.

Still another explanation is that homeowership today is not as attractive as it has been in past decades because of fluctuations in home values, the tightened standards for obtaining a mortgage loan, and the fact that many millennials consider the prospect of being “tied down” to a house and the obligations that come with it less attractive than previous generations.

While it is possible the homeownership rate could decline further and even dip below 60 percent under the “retreat-from-homeownership interpretation of recent experience,” it is still too early to determine if the homeownership rate is on the path to “normalization” or if is in the midst of retreating, Emmons said, but one thing is certain—that the homeowership rate is not likely to approach its peak of 69 percent in the near future.

http://www.dsnews.com/news/03-28-2016/digging-deeper-into-the-declining-homeownership-rate

Crisis No Longer Haunts Bank of America

With the release of the company’s Q1 2016 earnings statement right around the corner, Bank of America CEO Brian Moynihan said in hisletter to shareholders in the 2015 Annual Report that the bank is “no longer clouded over by heavy mortgage and crisis-related litigation and operating costs.”

Crisis-related litigation plagued Bank of America in 2014. The bank reached a settlement with the Department of Justice in August of that year for $16.65 billion over the sales of toxic mortgage-backed securities in the run-up to the financial crisis; litigation costs and other expenses related to that settlement took a big chunk out of the bank’s 2014 net income. The $16.65 billion settlement remains a record for a settlement between the Department of Justice and a single company over matters related to the 2008 financial crisis (it was eclipsed only by British Petroleum’s $20.8 settlement with the DOJ in October 2015 over the Gulf oil spill).

“This progress is the result of continued strong business performance, no longer clouded over by heavy mortgage and crisis-related litigation and operating costs,” Moynihan said. “Over the past several years, we’ve followed a strategy to simplify the company, rebuild our capital and liquidity, invest in our company and our capabilities, and pursue a straightforward model focused on responsible growth.”

For the full year of 2015, Bank of America more than tripled its net income from the previous year ($15.9 billion compared to $4.8 billion). The bank’s earnings for 2015 were the highest since the pre-crisis year of 2006 (net income of $21.1 billion).

“Other general operating expense decreased $16.0 billion primarily due to a decrease of $15.2 billion in litigation expense which was primarily related to previously disclosed legacy mortgage-related matters and other litigation charges in 2014,” the shareholder letter said.

Moynihan’s announcement follows what was largely a positive second half of 2015 for Bank of America. In November, independent monitor Eric Green reported that the bank was well ahead of schedule to pay off the $7 billion in consumer relief required by the August 2014 RMBS settlement. In December, the Federal Reserve approved the bank’s resubmitted capital planafter spending approximately $100 million to “get the process right for resubmission,” Moynihan said. Nine months earlier, the Fed announced that Bank of America must submit a revised capital plan due to certain weaknesses in the Charlotte, North Carolina-based bank’s capital planning process the Fed located in its annual Comprehensive Capital Analysis and Review (CCAR) conducted in early March 2015.

Bank of American’s earnings statement for the first quarter of 2016 will be released on Thursday, April 14.

Click here to view the entire 2015 Annual Report for Bank of America.

http://www.dsnews.com/news/03-28-2016/crisis-no-longer-haunts-bank-of-america

Fannie Mae, Freddie Mac Exceed Risk-Sharing Goals

Fannie Mae and Freddie Mac began their risk-sharing initiatives in 2013 as a way to transfer risk from taxpayers to private investors while the Enterprises remain in conservatorship of the FHFA. Since then, the GSEs have transferred a substantial portion of the credit risk for mortgages totaling hundreds of billions of dollars in unpaid principal balance (UPB).

According to a Urban Institute’s Monthly Chartbook for March 2016, titled “Housing Finance at a Glance,” Fannie Mae and Freddie Mac exceeded their credit risk transfer goals for 2015 which called for them to lay off at least $150 billion and $120 billion, respectively, for two types of transactions. Fannie Mae laid off $187 billion in back-end credit risk on reinsurers during 2015, while Freddie Mac laid off $210 billion.

Since 2013, Fannie Mae has transferred a portion of the credit risk on more than $590 billion in single-family mortgages through all of its risk-transfer programs, which include the Connecticut Avenue Securities (CAS) series and its Credit Insurance Risk Transfer (CIRT) series. The latest transaction under the CAS series was announced last week and priced at $1.03 billion; it was the 11^th CAS deal since the program began nearly three years ago. The next CAS transaction is planned for mid-April.

“We’re seeing a positive response from investors, who see strong fundamentals in mortgage credit risk and Fannie Mae mortgage credit risk in particular. The CAS program provides investors with consistent opportunities to benefit from Fannie Mae’s innovative and industry-leading credit risk management approach while gaining exposure to the U.S. housing market,” said Laurel Davis, VP of credit risk transfer, Fannie Mae. “One of our primary areas of focus is to continue to work to expand the investor base, and with this deal we continued to see new investors come into the program.”

“One of our primary areas of focus is to continue to work to expand the investor base, and with this deal we continued to see new investors come into the program.”

Laurel Davis, Fannie Mae

Freddie Mac’s risk-sharing initiatives include the Structured Agency Credit Risk (STACR) series and the Agency Credit Insurance Structure (ACIS) program. Through its credit risk transfer initiatives, Freddie Mac has transferred a substantial portion of credit risk for more than $422 billion in UPB on single-family mortgages. The Enterprise’s investor base has grown to more than 190 unique investors (including reinsurers).

The latest ACIS transaction was announced on Friday, March 25. The latest ACIS transaction provides credit loss protection up to a combined maximum limit of approximately $336 million of losses on single-family loans and transfers much of the remaining credit risk associated with the second STACR debt issuance this year. Through 16 ACIS transactions since the program began in 2013, Freddie Mac has placed approximately $4.3 billion in insurance coverage.

"We are very pleased about the continued partnership Freddie Mac has developed with the reinsurance market. This market has proved to be a durable partner for credit risk transfer," said Kevin Palmer, SVP of Single-Family credit risk transfer for Freddie Mac.

According to Urban Institute, the new 2016 scorecard for the GSEs expresses the goal of targeting 90 percent of newly acquired loans for transfer. The report stated that Fannie Mae's issuance under the CAS series now cover 18.38 percent of its outstanding single-family guarantees; Freddie Mac's issuances under the STACR program cover 27.54 percent of its outstanding single-family guarantees, according to Urban Institute.

Click here to view the Urban Institute’s Chartbook for March.

http://www.dsnews.com/news/03-28-2016/fannie-mae-freddie-mac-exceed-risk-sharing-goals

Why Are Fewer Consumers Complaining About Mortgages?

Newfound optimism in the housing market from both lenders and borrowers is causing mortgage-related complaints to subside as customer satisfaction improves and financial institutions alter the way they do business.

For the first time since the Consumer Financial Protection Bureau (CFPB) began accepting complaints from consumers about financial products shortly after opening its doors in July 2011, mortgage-related issues are no longer the most unsatisfactory product on the list.

The mortgage market is the largest consumer financial marketplace in the country with more than $10 trillion in total value. The CFPB enacted new mortgage rules in 2014 to ensure strong consumer protections and also ensure that lenders offered affordable mortgages to consumers.

According to the CFPB's Monthly Complaint Report, mortgage complaints now total 218,407 and 4,529 of these occurred in February, up 6 percent from last month.

Beating mortgage complaints this month were debt collection issues. According to the data, debt complaints total 219,229 and 7,360 of these happened in February, which makes this sector the new most-complained about product in the Bureau's report.

Debt collection, mortgage, and credit reporting complaints continue to be the top three most-complained-about consumer financial products and services,  representing about 69 percent of complaints submitted in February 2016.

As of March 1, 2016, the CFPB has handled approximately 834,405 complaints, including approximately 22,800 complaints in February 2016, the report said.

One plausible explanation behind the silenced mortgage complaints is the optimism surrounding borrowers and lenders, according to recent reports.

Mortgage lenders remain optimistic and unbothered by the news surrounding the dismal, but improving, state of the U.S. economy.

A recent survey of 200 mortgage lending professionals from Lenders One showed that lenders are exuding confidence in the real estate market. In addition, lenders say that millennials, Hispanics, and boomerang buyers will lead the expected gains in business.

According to the survey, 62 percent of lenders surveyed said that they expect mortgage purchase production to increase by an average of 11 percent in 2016. Another 87 percent indicated that the mortgage purchase market will be extremely active.

“The strong confidence levels we’re seeing among lenders highlight the continued bounce back from one of the most challenging real estate and lending environments in U.S. history,” said Lenders One Interim CEO Dan Goldman. “In an environment where lenders can once again focus on business growth initiatives, it will be more important than ever for mortgage professionals to have access to the tools and ongoing training they need to capitalize on these emerging trends.”

The American Enterprise Institute (AEI) International Center on Housing Risk found that the share and volume of first-time homebuyers rose significantly in February 2016 compared to a year earlier.

According to AEI's First-Time Buyer Mortgage Share Index (FBMSI) released Monday, first-time buyers accounted for 56.7 percent of primary owner-occupied home purchase mortgages with a government guarantee in February 2016. This number is up from 55.9 percent last February and up from January's share of 56.1 percent.

"The first-time buyer share has been trending higher on a year-over-year basis, pushed up by improvements in the labor market, riskier mortgage lending, and continuing low mortgage rates," the report stated.

“On a year-over-year basis, the first-time buyer share increased in February, reflecting a continuation of strong first-time buyer participation,” said Edward Pinto, Codirector of the American Enterprise Institute’s International Center on Housing Risk.  “The current housing market, particularly at the entry-level, is exhibiting strong, leverage-fueled demand, which in combination with shortness of supply, will continue to drive home prices up faster than incomes and inflation.”

http://www.dsnews.com/news/03-30-2016/why-are-fewer-consumers-complaining-about-mortgages

The Impact of HAMP on GSE-Backed Loans

The government’s Home Affordable Modification Program (HAMP) is scheduled to expire at the end of this year. Launched in February 2009, the program was originally set to expire at the end of 2013 but has been extended twice.

In seven years, HAMP has completed 2.3 million homeowner assistance actions for 1.8 million families. How many of those homeowner assistance actions were completed on loans backed by Fannie Mae and Freddie Mac, and what percentage of them are still active?

According to FHFA’s foreclosure prevention report for the fourth quarter of 2015 released on Thursday, from April 2009 until the end of Q4 2015, approximately 1.086 million homeowners with GSE-backed loans were granted HAMP trial mods. Out of those, 650,024 received permanent modifications.

Of the slightly more than 650,000 permanent HAMP mods started on GSE-backed loans over the last seven years, 388,640 of them (about 60 percent) were active as of the end of the fourth quarter in 2015, according to FHFA. Approximately 210,000 of them (32 percent) had defaulted, and about 50,000 (8 percent) had paid their loans off in full. A small share of them (1,427, or less than 1 percent) had withdrawn from their HAMP modification, according to FHFA.

As of the end of the fourth quarter, a total of 3,758 homeowners were in a trial HAMP modification period, according to FHFA.

By comparison, a total of 1.153 million homeowners received modifications on GSE-backed loans through the GSEs’ proprietary modification programs from April 2009 until the end of Q4 2015, including the 27,299 completed during Q4. Non-HAMP modifications accounted for 91 percent of all the permanent modifications completed on GSE-backed loans during the fourth quarter. The numbers reported by FHFA showed that GSE-backed loans modified through HAMP had consistently performed better throughout the last seven years than those that have received non-HAMP modifications.

The GSEs completed 47,769 foreclosure prevention solutions during Q4, bringing the total of distressed homeowners helped through a foreclosure prevention action to 3.643 million since the start of the conservatorships in September 2008. More than three million of those foreclosure prevention actions have been home retention solutions. By comparison, there were 25,096 foreclosure sales completed during the fourth quarter, approximately half the number of foreclosure prevention actions completed during the same time.

A decline in foreclosures over the last four years has also meant a decline in the number of foreclosure prevention actions, which have dropped from 541,000 in 2012 to 448,000 in 2013 to 307,000 in 2014 to 232,000 in 2015.

At a time when many housing fundamentals are normalizing or returning to pre-crisis levels, Treasury officially began winding down MHA in early March when it issued its first set of guidelines to servicers for MHA program termination in the form of Supplemental Directive (SD) 16-02.

Click here to view the entire foreclosure prevention report for Q4 2015.

http://www.dsnews.com/news/03-24-2016/the-impact-of-hamp-on-gse-backed-loans

The Best Markets for Investors Are. . .

New, healthy housing markets are emerging in the midst of further improvement of the real estate market overall. Which markets present the most opportunity for investors?

Nationwide's Health of Housing Markets Report for the first quarter of 2016 showed that its leading index of healthy housing markets (LIHHM) is in a healthy zone which suggests that the housing market is a sustainable condition.

According to the report, the current value for the national index is 105.4, the lowest level in two years, where a value over 100 suggests that the national housing market is healthy, with a low chance of a downturn.

Household formations, which had been above the long-term trend for the past year, fell sharply in the fourth quarter—lowering the main demographic housing demand factor in the national LIHHM," Nationwide said in the report, "Regionally, the LIHHM performance rankings show that the vast majority of metro areas across the country are healthy, indicating that few regional housing markets are vulnerable to a housing downturn—but the outlook for sustainable housing activity in local markets with strong ties to the energy sector continues to deteriorate as low oil prices persist."

According to the data, the top 10 healthiest MSAs are located in Dayton, Ohio; Yakima, Washington; Cleveland-Elyria, Ohio; Saginaw, Michigan; and Syracuse. New York; Trenton. New Jersey; Niles-Benton Harbor, Michigan; Memphis, Tennessee-Mississippi-Arkansas; Lansing-East Lansing, Michigan; and Columbus, Ohio.

Nationwide also reported that demographics are expected to "turn positive again for housing demand soon, in spite of a surprising decline in household growth at the end of 2015."

"Trends in household growth are a key determinant of housing demand at the national and local levels. Household formations tend to accelerate as employment and income conditions improve, supporting further growth for both rental and owner-occupied units," the report stated. "The balance between housing supply and demand is an important driver of healthy trends in house price growth and housing affordability."

Nationwide found that data shows household growth will impact the overall housing market health in the following ways:

• Above-average growth in the housing boom: Following a drop-off in 2002-03 in response to the 2001 recession and accompanying the “jobless recovery,” average household growth was stronger than the long-term median of 1.2 million per year. Positive economic growth, strong job gains, and double-digit house price gains led to a surge in household formations during the housing boom—helping to create imbalances in the housing market.
• Bust recession and tepid recovery: Bust, recession, and tepid recovery: Weak household growth following the Great Recession (well Weak household growth following the Great Recession (well-below the long-term median) was indicative of still strained labor market conditions for many potential homebuyers, particularly those from the millennial generation.
• Recent growth and looking ahead: Beginning in the fourth quarter of 2014, the cumulative boost from stronger job growth over the prior two years, particularly for the 25-34 age cohort, and the pent-up demand to form households resulted in a sizable jump in national household formations. The recent economic, jobs and wage data do not support the surprising 2015 Q4 decline. Consequently, we expect LIHHM household formations to accelerate again soon, boosting housing demand and pushing up the LIHHM.

Click here to view the full report.


http://www.dsnews.com/news/03-24-2016/the-best-markets-for-investors-are

Housing Advocates’ Applause of Trust Fund Contribution Comes With Caution

Last week, Fannie Mae and Freddie Mac announced they would be contributing $186 million to the National Housing Trust Fund (NHTF) in order to provide for funding for construction of affordable rental housing for low-income families.

It is the GSEs’ first contribution to the NHTF after more than a seven-year suspension. The contributions which were originally intended to start when the NHTF was created in 2008 but suspended when the Fannie Mae and Freddie Mac were taken into conservatorship by the Federal Housing Finance Agency (FHFA). FHFA Director Mel Watt announced in December 2014 that he was lifting the temporary suspension of GSE contributions to the Housing Trust Fund.

The contribution drew heavy criticism from Republican lawmakers because of perceived risk to taxpayers while the GSEs remain in conservatorship. Rep. Jeb Hensarling (R-Texas) Chairman of the House Financial Services Committee, said the move “sows the seeds for the next housing crisis.” Rep. Ed Royce (R-California), a senior member of the House Financial Services Committee, stated that "We must stop the egregious siphoning of money from the GSEs to this housing slush fund.” Royce introduced the Pay Back the Taxpayers Act of 2015 in January 2015, proposing that no funds from Fannie and Freddie can be used to fund the national Housing Trust Fund while the GSEs are in conservatorship or receivership.

While Republican opposition to the contribution of GSE funds to the NHTF, housing advocates and civil rights groups that have been calling on FHFA and Congress to strengthen the lending market and homeownership rates, particularly among African Americans, Hispanics, and low-income communities, were equally passionate about it in the other direction, offering widespread praise for the move.

“Allowing Fannie Mae and Freddie Mac to contribute to the National Housing Trust Fund is another significant measure taken by FHFA Director Mel Watt to shore up the commitments made to communities of color that expand affordable and sustainable housing finance,” Wade Henderson, President and CEO of The Leadership Conference on Civil and Human Rights. “The strengthening of this fund will help provide revenue to build, preserve, and rehabilitate housing for people with the lowest incomes. A portion of the Trust Fund may also be used for homeownership activities for people with very low incomes, beginning what we hope is another of many steps to open homeownership to millions of more Americans. We thank Director Watt for his continued leadership on this issue.”

“Making a payment to the National Housing Trust Fund is a huge step to re-engage Fannie Mae and Freddie Mac in the low- and moderate-income housing market,” said Doug Ryan, Director, Affordable Homeownership, Corporation for Enterprise Development (CFED). “Another needed step is to build a capital buffer so the Enterprises can effectively, and for the long-term, fund homeownership for LMI communities and communities of color through Duty to Serve, Affordable Housing Goals and other programs and initiatives.”

“Dithering on this issue jeopardizes the future of homeownership for millions who continue to seek economic stability, including African-American, Latino, and low-income communities.”

Wade Henderson, Leadership Conference on Civil and Human Rights

According to Brent Wilkes, National Executive Director, League of United Latin American Citizens (LULAC): “Fannie Mae and Freddie Mac’s first payment to the National Housing Trust Fund is a long overdue step in the right direction that will help them fulfill their duties to provide services for underserved families in need of affordable housing and in pursuit of homeownership. We commend Director Watt for taking this bold step in the face of congressional inaction on housing reform. Latino families continue to fight their way back to the peak of homeownership rates prior to the housing collapse. We cannot afford to abandon those programs that will help restore the financial stability of these communities.”

At the same time, however, those praising the GSEs’ contribution to the Housing Trust Fund were wary of the risk it poses to taxpayers.

“However, we remain concerned about continued inaction on housing reform. Director Watt’s comments that the unending conservatorship of Fannie Mae and Freddie Mac poses a danger to the taxpayer—which should have served as a wake-up call for our leaders—are a positive step in encouraging a change to the status quo,” Henderson said. “The current arrangement, which will reduce Fannie Mae and Freddie Mac’s capital to zero at the end of 2017, will ultimately leave taxpayers on the hook for another bailout should the GSEs falter again. Building a capital buffer is the next logical step in rectifying a situation that has long been ignored, to the detriment of the American people.”

Henderson continued, “Dithering on this issue jeopardizes the future of homeownership for millions who continue to seek economic stability, including African-American, Latino, and low-income communities. This is why we encourage Director Watt to operate within his authority and take action to allow for the building of a capital buffer against future losses. This would allow the GSEs to better fulfill their mandates and help more Americans achieve the pinnacle of the American Dream: homeownership.

According to Wilkes, “We strongly urge Director Watt to go one step further by acting within FHFA’s purview and allow Fannie and Freddie to rebuild sufficient capital that would allow them to continue executing their commitment to underserved families, while protecting our taxpayers should the GSEs falter."


http://www.dsnews.com/news/03-24-2016/housing-advocates-applause-of-trust-fund-contribution-comes-with-caution

Access to Credit Just Keeps Getting Tougher

Consumers are looking for more access to credit but are having a slightly tougher time getting it compared to six months ago, the Federal Reserve Bank of New York announced Wednesday.

The New York Fed’s latest SCE Credit Access Survey, which looks at consumers' experiences and expectations regarding credit demand and credit access, showed higher overall credit application rates in February than last October, while at the same time showing marginally higher rejection rates for credit cards and less interest in mortgage applications. While respondents reported being more optimistic about credit card and auto loan applications being approved, they were more pessimistic about getting mortgage approvals.

According to the survey, credit application rates overall increased from 41.7 to 43 percent in February, a level not seen since the summer of 2014. The rise, New York Fed reported, was driven by a notable increase in the application rate of respondents under age 40, which rose from 49 percent in October to 55 percent last month.

Over the last 12 months, the survey found, 34 percent of respondents applied for and were granted credit, compared to 33.4 percent in October. At the same time 9 percent applied and were rejected, compared to 8.3 percent in October. However, the share of respondents who felt too discouraged to apply, despite needing credit, dropped a full percent, from 6.8 percent in October to 5.8 percent in February, the lowest since the start of the Credit Access Survey in 2013.

Rejection rates rose for credit card applications but declined for all other types of credit applications, especially for home loans. Those, according to the survey, fell from 18 to 6 percent, while mortgage refinancing applications fell from 13 to 10 percent) between October and February. Both were at their lowest values since October of 2013.

The overall rejection rate per applicant for all types of credit increased from 20 percent in October to 21 percent last month, while the rejection rate per application increased from 28 to 29 percent during the same period. New York Fed attributed the uptick mainly to the pool of 40-and-under applicants, for whom rejections jumped from 21 percent in October to 27 percent in February.

Lastly, while New York Fed found that the likelihood of applying for a credit card or auto loan over the next 12 months is up compared to their October levels, the likelihood of applying for a home-based loan and a mortgage refinance is down, despite that the likelihood of being rejected is for credit cards, auto loans, and mortgage refinance applications is lower. It is, however, higher for mortgage applications.

http://www.dsnews.com/news/03-23-2016/access-to-credit-just-keeps-getting-tougher

Dispelling Myths Around Millennials and Homeownership

The millennial generation has been dubbed the generation that is not interested in purchasing a home, whether it be due to renting, living with their parents, or because they are saddled with student loan debt. On the surface, it would appear that millennials are not interested in becoming homeowners.

According to an analysis from NerdWallet, the idea that millennials do not want to be homeowners is false, and in fact, the majority of this generation would prefer owning over renting, but they are holding off on homeownership because of real and perceived difficulties in affording it.

According to the report, millennials total 66 million individuals and 24 million independent households and the median age for first-time homebuyers has remained virtually unchanged for the past 40 years.

In addition, two-thirds of millennials haven’t reached that homebuying age of 31, and 22 percent are under 25 years old. Millennials are renting for an average of six years before buying, compared with an average of five years for renters in 1980. Millennials are expected to form 20 million new households by 2025.

“There’s a strong indication that millennials do want to become homeowners, which is quite different from what we’ve heard,” says Chris Ling, Mortgage Manager at NerdWallet. “While overall homeownership has declined, millennials do see the long-term value in owning a home.”

According to NerdWallet, millennials stated that the biggest obstacles to getting a mortgage are:

1. Insufficient credit score or history
2. Affording the down payment or closing costs
3. Insufficient income for monthly payments
4. Too much existing debt

NerdWallet found that many millennials are unaware of down-payment options to help them obtain a mortgage loan.

“Many millennials believe they are unable to afford homes, when really many of them are unaware of the different financing options that exist — particularly those that allow for a down payment of 6 percent or less,” Ling says.

Another reason that millennials are staying away from homeownership is student loan debt, the data found.

“With student debt on the rise, there’s been a lot of speculation about whether the cost of a college degree hurts an individual's ability to buy a home,” Ling explained. “From what we’ve seen, getting a four-year degree or higher is actually positively associated with homeownership — even when accounting for debt.”

NerdWallet found that barriers to homeownership may be not be as high as many millennials perceive them to be. "Although factors like low savings or a poor credit score might seem insurmountable, there’s a variety of resources available to help younger Americans buy their first homes," the report said.

“Millennials—and first-time homebuyers in general—should never just assume they can’t afford a home. The first step to owning a home is knowing how you can finance it, so you should always research your options,” Ling noted. “Buying a home may be more of a possibility than you realize.”

http://www.dsnews.com/news/03-23-2016/dispelling-myths-around-millennials-and-homeownership

Non-Profit Gets in on Freddie Mac’s Delinquent Loan Sale

Democratic lawmakers and housing advocates have been calling for the GSEs to sell non-performing loans (NPLs) to non-profits and Community Development Financial Institutions, and on Wednesday, they partially got their wish.

Freddie Mac announced as part of a $1.4 billion NPL sale that the winning bidder in two of the pools was Community Loan Fund of New Jersey, Inc. Of the 6,816 deeply delinquent loans sold as part of the auction, 296 of them were included in the two pools sold to the non-profit. According to Freddie Mac, the first pool consisted of 113 loans in Miami, Florida, that were an average of 57 months delinquent, with $27 million in unpaid principal balance (UPB). The second pool consisted of 183 loans in Tampa, Florida, that were an average of 51 months delinquent, with $37.6 million in UPB.

Those two pools were sold as Extended Timeline Pool Offerings (EXPOs), which are smaller, geographically-concentrated pools of loans that target participation from smaller investors, including non-profits, minority- and women-owned businesses, neighborhood advocacy funds, and private investors who are active in the NPL market, according to Freddie Mac.

The transaction consisted of seven pools total: the two EXPOs and five Standard Pool Offerings (SPOs). The winning bidders in the SPO auctions were LSF9 Mortgage Holdings for three of the pools and Rushmore Loan Management Services for two of the pools. The loans in the seven pools combined were an average of four years delinquent.

In March 2015, Freddie Mac’s regulator, FHFA, announced enhanced guidelines for NPL sales by the GSEs aimed at achieving better outcomes for borrowers. Bidders must identify their servicing partners and must complete a questionnaire demonstrating a record of successful loss mitigation. Servicers must apply a “waterfall of resolution tactics” before resorting to foreclosure. Given the deeply delinquent status of the loans, many of them have already been evaluated for are in various stages of loss mitigation. According to Freddie Mac, 34 percent of the aggregate pool balance of loans were previously modified and then became delinquent.

In early March 2016, a group of 45 members of the House of Representatives led by Mike Capuano (D-Massachusetts) wrote a letter to HUD Secretary Julián Castro and FHFA Director Mel Watt suggesting improvements to the agency NPL sales programs, including disqualifying “bad actors” from the process and making the programs more transparent. Democratic lawmakers and housing advocates have complained that private investors, to which a majority of the agency NPLs are sold, are more concerned with making a buck than they are with achieving the best outcomes for borrowers and neighborhoods.

Earlier this week, Republican lawmakers Rep. Jeb Hensarling (R-Texas), Chairman of the House Financial Services Committee, and Sen. Richard Shelby (R-Alabama), Chairman of the Senate Banking Committee, wrote a letter to Castro and Watt urging them to reject calls to change the agency NPL sales programs, saying that any changes may pose a threat to taxpayers.

http://www.dsnews.com/news/03-23-2016/non-profit-gets-in-on-freddie-macs-delinquent-loan-sale