Friday, March 25, 2016

The Impact of HAMP on GSE-Backed Loans

The Impact of HAMP on GSE-Backed Loans

ModificationThe 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 A small share of them (1,427, or less than 1 percent) had withdrawn from their HAMP modification, according to FHFA.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.

3-24 HAMP graphBy 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.

The Best Markets for Investors Are. . .

The Best Markets for Investors Are. . .

market-studiesNew, 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.

Housing Advocates’ Applause of Trust Fund Contribution Comes With Caution

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."

Access to Credit Just Keeps Getting Tougher

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.

Dispelling Myths Around Millennials and Homeownership

Dispelling Myths Around Millennials and Homeownership

home-price-declineThe 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.”

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

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

underwater-fiveDemocratic 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 Juli├ín 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.

3-23 graph

Tuesday, March 22, 2016

HAMP: Managing Higher Payments After Resets

HAMP: Managing Higher Payments After Resets

mod-appThe Administration’s Home Affordable Modification Program (HAMP), which was created in February 2009 to provide relief for homeowners facing financial hardship by reducing monthly payments to affordable levels through lowered interest rates and modified loan terms, is nearing its conclusion.

With HAMP Tier 1, homeowners receive a modification that reduces their interest rate to as low as two-percent for the first five years and then gradually steps up no more than a one-percent a year until the market interest rate at the time of the modification is reached. The median payment reduction for a homeowner in HAMP is about $500 per month (about 36 percent). The typical HAMP homeowner will experience two to three step-ups; the nationwide median payment increase after the first step-up is $93, while the median payment increase after the final step-up is around $206.

According to Mark McArdle, Deputy Assistant Secretary of Financial Stability at the U.S. Department of Treasury, even with a step-up, homeowners in HAMP will have a lower monthly payment than before their modification. In addition, more than 90 percent of HAMP homeowners will step-up to a permanent interest rate at or below five-percent after their final interest rate step-up.

Through December 2015, approximately 287,000 homeowners who have completed a HAMP modification have experienced a step-up in their monthly mortgage payment, and the percentage of them that disqualify in the months following a step-up is less than or equal to one percent, according to Danielle Johnson-Kutch, Acting Chief of the Homeownership Preservation Office at Treasury.

“One of the benefits of HAMP is that we now have a data set that demonstrates that the rate can be significantly reduced to achieve payment reduction and then step-up as the borrower has recovered,” Johnson-Kutch said. “This early data suggests that homeowners are able to manage the step-up and it could be part of a modification structure on the go forward if it’s done in the moderate way that a HAMP step-up is done to gradually increase the payment.”
“One of the benefits of HAMP is that we now have a data set that demonstrates that the rate can be significantly reduced to achieve payment reduction and then step-up as the borrower has recovered.”
Danielle Johnson-Kutch, Department of Treasury
Treasury is monitoring the data closely and has created a three-pronged safety net to help borrowers should they struggle with a step-up to avoid re-defaulting. The prongs are one, requiring servicers to notify borrowers at two separate time points that a step-up is imminent (no less than 120 days from first rate increase and at least 60 days prior to first increase); the second is introducing post-modification counseling for borrowers who are at risk of re-default and have missed a payment; and the third is an enhanced suite of tools which include increased incentives for remaining current and improved HAMP Tier 2 modification options.

“The good news is we’ve been tracking the performance of HAMP loans fairly aggressively since the program started, and we have not seen, as of yet, a significant impact (of step-ups),” McArdle said, noting that there have been 18 separate monthly vintages of HAMP modifications that have increased after five years. Some have even reached their second step-up and Treasury has still not seen a significant impact. McArdle said Treasury has a toolkit in place that includes, among many other things, a way to track and handle HAMP step-ups to determine if the modifications are sustainable even after the program expires.

“One of the lasting legacies of HAMP is proving that modifications can work long-term. The performance of HAMP Tier 1 modifications after the benchmark of 24 months, overall 24 percent of those modifications that have aged 24 months have disqualified,” McArdle said. “For recent vintages, it’s as low as 17 percent. So basically, four out of five borrowers are performing after two years. Beforehand, the general perception of the industry was that modifications were always kicking the can down the road and that they weren’t sustainable. Now I think if you can provide payment relief, there’s enough evidence to show that a modification is a sustainable alternative.”

Barring Congressional action, HAMP will expire on December 30, 2016. To date, in slightly more than seven years, the program has helped 1.8 million families and completed 2.3 million homeowner assistance actions.

Danielle Johnson-Kutch will be a speaker at the upcoming 2016 Five Star Government Forum on March 31 in Washington, D.C.

Gap Between First-Time Buyer and Repeat Buyer Risk Continues to Widen

Gap Between First-Time Buyer and Repeat Buyer Risk Continues to Widen

housing-collapseAs Agency first-time buyer mortgages get riskier, the gap between fist-time buyer mortgage risk and repeat buyer mortgage risk continues to get wider, according to data released on Monday by the American Enterprise Institute (AEI)’s International Center on Housing Risk.

The Agency First-Time Buyer Mortgage Risk Index (FBMRI) rose year-over-year by 0.7 percentage points in February up to 15.7 percent, meaning that 15.7 percent of Agency mortgages would default if they experienced economic stress comparable to the 2007-08 financial crisis, according to AEI.

Meanwhile, the Agency FBMRI is now 5-3/4 percentage points higher than the mortgage risk index for repeat homebuyers, up 5 percentage points over-the-year, AEI reported. First-time homebuyers have been responsible for essentially all of the year-over-year increase in the composite National Mortgage Risk Index (NMRI) since early 2015, which is a further indicator that the gap is growing larger for risk on first-time buyer mortgages and repeat buyer mortgages.

3-21 AEI graph 2“The gap between first-time buyer and repeat buyer mortgage risk levels now stands at 5.79 percentage points compared to 5.03 and 4.85 percentage points in February 2015 and 2014 respectively,” said Ed Pinto, codirector of AEI’s International Center on Housing Risk. “Given the long running seller’s market, risk layering works to artificially push up prices, particularly for entry-level buyers; the result is a pernicious wealth transfer from the buyers to sellers of these homes.”

Risk layering is largely responsible for the widening of the gap between risk in first-time homebuyers and repeat homebuyers. In February 2016, 20 percent of first-time buyers had a combined LTV ratio of 95 percent of higher and 97 percent of them had a 30-year term. The combination of a low down payment and slow amortization means that barring substantial home price appreciation, this group of homeowners will have very little equity for many years.

Also, according to AEI, one-fifth of first-time buyers had a FICO score lower than 660, which is the traditional definition of subprime mortgages, and one-fourth of them had debt-to-income ratios of higher than the 43 percent set by the Qualified Mortgage rule. By comparison, repeat homebuyers had a much smaller share of buyers with CLTVs higher than 95 percent and a much smaller share of borrowers with FICO scores below 660.

In February 2016, the median first-time buyer with an Agency mortgage made a down payment of 3.5 percent, which calculates to about $8,600, and the median FICO score for first-time buyers with Agency mortgages was 707—only slightly below the median for all individuals in the U.S. with a FICO score (713).

“The typical first-time buyer these days has a relatively low credit score and puts little money down.” said Stephen Oliner, codirector of AEI’s International Center on Housing Risk.  “These facts make clear that mortgage credit isn't tight.”

3-21 AEI graph 1

FHFA: Debt Reduction is ‘Still Under Consideration’

FHFA: Debt Reduction is ‘Still Under Consideration’

Fannie-Freddie-logos-twoFHFA Director Mel Watt has been talking about mortgage debt reduction for underwater borrowers who have mortgages backed by Fannie Mae and Freddie Mac almost since he took over that position in January 2014.

Housing advocates and Democratic lawmakers have been pressuring Watt to offer some sort of principal mortgage reduction for underwater borrowers since Watt took office. Offering debt reduction to homeowners on GSE-backed loans would be highly controversial because taxpayers remain on the hook for Fannie Mae and Freddie Mac loans while the GSEs remain in conservatorship. More than two years into his tenure as FHFA Director, Watt has still not made a move or a policy change regarding principal forgiveness.

The Wall Street Journal reported on Monday, citing "people familiar with the matter," that FHFA had approved a plan to cut mortgage balances for thousands of eligible homeowners. When contacted by DS News, the FHFA did not confirm or deny whether there has been a new policy approved or whether or not principal forgiveness will be offered to homeowners; a spokesperson did, however, tell DS News that “The issue of debt reduction is still under consideration and we’re looking for a responsible solution.”

The FHFA decided not to offer principal forgiveness to homeowners under the direction of Watt's predecessor, Ed DeMarco, according to an announcement in July 2012, the FHFA's website said.

"FHFA announced that after extensive analysis of the revised Home Affordable Modification Program Principal Reduction Alternative, including the determination by the Treasury Department to begin using Troubled Asset Relief Program monies to make incentive payments to Fannie Mae and Freddie Mac, we concluded the anticipated benefits do not outweigh the costs and risks," FHFA said in the announcement. "We concluded the HAMP (Treasury's Home Affordable Modification Program) alternative program did not clearly increase foreclosure avoidance while reducing costs to taxpayers relative to the approaches currently in place."

Watt has been reluctant to offer principal forgiveness due to the risk it poses to taxpayers, despite pressure from lawmakers and housing advocates. Senator Elizabeth Warren (D-Massachusetts) in particular drilled the Director in a Senate Banking Committee hearing in November 2014. Watt told the committee at that time regarding principal forgiveness that "We have to do this in a way that is responsible, otherwise we just reduce principal for everybody across the board."

Distressed Homeowners Still Turning to Permanent Loan Modifications

Distressed Homeowners Still Turning to Permanent Loan Modifications

saving-homes-twoForeclosures are way down and many housing fundamentals are at pre-crisis levels. But for those borrowers still facing foreclosure or at risk of defaulting, permanent loan modification remains a popular option.

According to data released on Monday by HOPE NOW, a private sector alliance of mortgage servicers, investors, mortgage insurers and non-profit counselors, another 26,000 homeowners received permanent loan modifications during the month of January. That number includes modifications completed under both proprietary programs and the government’s Home Affordable Modification Program (HAMP), which is set to expire at the end of this year.

The total number of non-foreclosure solutions—which includes permanent loan modifications, short sales, deeds-in-lieu of foreclosure, and other workout plans—totaled approximately 102,000 for the month of January, according to HOPE NOW. This number was slightly more than three times the number of foreclosure sales completed during the month (33,000). Foreclosure sales, which typically see a seasonal decline in December due to holiday moratoriums, jumped by 35 percent over-the-month in January from 24,000 up to 33,000.

Serious delinquencies were also up over-the-month in January, from 1.62 million to 1.84 million (an increase of 14 percent), according to HOPE NOW. Foreclosure starts also jumped over-the-month by 6 percent, from 54,000 to 58,000.

“HOPE NOW members remain dedicated to helping those homeowners who are still in need of mortgage assistance,” said Eric Selk, Executive Director of HOPE NOW. “Our data indicates that the housing market is taking the necessary steps towards recovery. Although the foreclosure starts, sales and serious delinquency numbers increased in January, we usually see this trend in our historical data. Despite these jumps, over 102,000 homeowners received a home retention or non-foreclosure solution—a 4 percent increase from December. And although permanent modifications decreased in January, servicers continue to utilize other solutions such as repayment or retention plans to aid at-risk homeowners.”

Out of the permanent loan modifications completed in January, about 19,000 were completed through proprietary programs and 7,616 were completed through HAMP, according to HOPE NOW.

Investors Are Taking a Larger Share of the Existing-Home Sales Pie

Investors Are Taking a Larger Share of the Existing-Home Sales Pie

money-stepping-stonesA normalizing of the housing market in the last few years has meant a huge decline in distressed inventory available for sale—which has contributed to the low levels of existing homes for sale in recent months. Despite the lack of inventory, investors are becoming more involved in the market, according to data released by the National Association of Realtors (NAR) on Monday

The short supply of existing homes combined with price appreciation and slow wage growth has resulted in an over-the-month decline of 7.1 percent for the seasonally adjusted annual rate of existing-home sales in February, from 5.47 million down to 5.08 million, according to NAR’s February 2016 Existing-Home Sales Report. Over the year in February, existing-home sales were up by only 2.2 percent.

“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,” NAR Chief Economist Lawrence Yun said.

Investor activity in the existing-home sales market has been on the rise as of late. The share of investor-purchased homes rose from 17 percent in January to 18 percent in February, which was the highest investor share since April 2014. Approximately 64 of those investors paid cash for the homes they purchased in February.

“Now that there are fewer distressed homes available, it appears there's been a shift towards investors purchasing lower-priced homes and turning them into rentals.”
Lawrence Yun, NAR Chief Economist

As a further indicator that investor activity is increasing, the distressed sales share rose by 1 percentage point over-the-month in February up to 10 percent (7 percent foreclosures, 3 percent short sales), Investors were also able to purchase distressed inventory at much lower prices in February—the average discount for foreclosed homes during the month was 17 percent below market value, up 4 percentage points from January; for short sales, the average discount was 16 percent below market value, also up 4 percentage points over-the-month.

The increased investor activity may be preventing potential first-time buyers from entering the market, however. NAR reported that February’s first-time buyer share (30 percent) is down 2 percentage points over-the-month and is at its lowest level since November 2015. The 30 percent for February matched the first-time buyer share for all of 2015.

“Investor sales have trended surprisingly higher in recent months after falling to as low as 12 percent of sales in August 2015,” Yun said. “Now that there are fewer distressed homes available, it appears there's been a shift towards investors purchasing lower-priced homes and turning them into rentals. Already facing affordability issues, this competition at the entry-level market only adds to the roadblocks slowing first-time buyers.”

The homes that ARE on the market aren’t staying there long. The number of days an existing home stays on the market in February was 59 days, which was down from 64 days in January and 62 days in February 2015. About 35 percent of the homes sold in February were on the market for less than a month. Short sales were on the market for an average of 126 days; for foreclosures and non-distressed homes, the average number of days on the market was 57.

“With low supply this spring buying season, it's easy for buyers to get discouraged when their offer is rejected in favor of a higher bid,” said NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, Florida. “That's why it's important for buyers to stay patient and work with a realtor to develop a negotiation strategy that ensures success without overstretching their budget.”

Tuesday, March 15, 2016

HUD Measures Progress Toward Helping Struggling Homeowners

HUD Measures Progress Toward Helping Struggling Homeowners

Click here to view the entire HUD February scorecard.
HUD has helped millions of struggling homeowners avoid foreclosure and stay in their homes with the completion of more than 10.2 million modifications and other forms of assistance arrangements since April 2009 (as of January 2016), according to HUD’s February Scorecard released this week.

According to HUD, more than 2.5 million of these actions assisting homeowners have taken place through the Making Home Affordable (MHA) program, which was launched in February 2009 in response to the housing crisis. MHA is scheduled to end on December 31, 2016, and the Department of Treasury released its first set of guidelines to servicers for MHA termination earlier in March.

Nearly 1.6 million of those 2.5 million homeowner assistance actions were permanent loan modifications completed through the Home Affordable Modification Program (HAMP). The Federal Housing Administration (FHA) has completed more than 3.1 million loss mitigation and early delinquency interventions during that same period from April 2009 until January 2016.

HUD graph“These Administration programs continue to encourage improved standards and processes in the industry, with lenders offering families and individuals more than 4.6 million proprietary modifications through December,” said Katherine O’Regan, Assistant Secretary for the Office of Policy Development & Research at HUD. “Although there is good news overall, the Administration remains committed to helping more Americans realize their dream of home ownership through an improving economy and new programs that will provide greater access to credit.”

Citing data from the National Association of Realtors, HUD also reported that in January, existing homes rose to their second-highest pace since 2007, increasing by 0.4 percent up to a pace of about 5.47 million units annually—an 11 percent year-over-year increase. Existing-home sales have sold at a rate of more than 5 million annually for 10 of the last 11 months. Housing prices were up by 5.6 percent over the previous six months and are 1.2 percent above the peak reached in March 2007, according to data from the Federal Housing Finance Agency.

Click here to view the entire HUD February scorecard.

Monday, March 7, 2016

Delinquent Loans May Still Face Foreclosure After Exceeding Statutes of Limitations

Delinquent Loans May Still Face Foreclosure After Exceeding Statutes of Limitations

High-end estimates of loan-level delinquency timelines show that approximately 98,000 seriously delinquent mortgage loans may be facing some degree of exposure to foreclosure statutes of limitations in Florida, New Jersey, and New York—three of the states that were hit hardest by the foreclosure crisis, according to Black Knight Financial Services’ January 2016 Mortgage Monitor released Monday.

The courts are currently deliberating in those three states discussing the specifics of how the statues of limitations laws apply to foreclosures. In Florida, the foreclosure statute of limitations applies to mortgages that are five years or more overdue, while in New York and New Jersey, it applies to mortgages that are six or more years past due.

According to Black Knight, Florida has the largest volume of loans facing possible exposure to statutes of limitations with roughly 40,000, despite experiencing a 38 percent reduction over the past 12 months. For New York and New Jersey, the number of such loans is currently 35,000 and 22,000, respectively, after both experienced increases over the previous 12 months due to “limited resolution in severely delinquent loan populations” in both states, Black Knight reported.

3-4 BK“Without taking into account additional carrying costs and/or fees incurred by mortgage servicers, Black Knight estimates the current potential unpaid principal balance (UPB) risk exposure in these three states at approximately $30 billion, concentrated primarily in private-label securities,” Black Knight stated in the report. “As it stands today, roughly $1 out of every $10 of principal in private-label securitizations in these three states is tied to a mortgage that is more than five years delinquent in Florida or more than six years delinquent in New York and New Jersey.”

According to Black Knight, 37 percent of the loans that are more than five years delinquent in Florida are not actively involved in foreclosure, which depending on court rulings, potentially presents additional risk. For New York and New Jersey, the share of loans more than six year delinquent but not actively in foreclosure are 22 percent and 21 percent, respectively.

Click here to view the entire Black Knight January 2016 Mortgage Monitor.

Friday, March 4, 2016

Not Cold in the Winter: Here are the Hottest Markets for Single-Family Housing

Not Cold in the Winter: Here are the Hottest Markets for Single-Family Housing

house-sittingon-money1-300x198Using current and forecasted housing fundamentals, Ten-X (formerly reported in its Top Single-Family Housing Markets Report for Winter released on Thursday that the top five single-family housing markets in the country are Seattle, Fort Lauderdale, Orlando, Portland, and Las Vegas.
The markets that ranked high on the list featured the best combination of rising home prices, favorable affordability, and strong demand mixed with demographic and economic conditions that suggest strong housing demand for the future, according to Ten-X.
A surprise entry to the list of the country’s top five single-family housing markets was Las Vegas, which ranked 20th on Ten-X’s single-family market rankings issued on October 20 and made the leap up to 5th in the rankings released on Thursday. The top three markets on the latest list (Seattle, Fort Lauderdale, and Orlando) were unchanged from October while Portland moved up one place on the list from 5th to 4th.
“The fact that Las Vegas—ground zero during the foreclosure crisis—has climbed back to become one of the five hottest markets in the country tells you just how far we’ve come in terms of a housing recovery,” said Ten-X Chief Marketing Officer Rick Sharga. “Destination cities like Las Vegas, Fort Lauderdale, and Orlando are benefitting from low oil prices, which increase leisure and hospitality business, and in turn boosts employment and home prices. We expect the housing recovery to see some choppiness, but generally continue building on its current momentum.”

3-3 Ten-X tableThe Florida markets as well as Las Vegas are now experiencing increased demand in the housing market, driven by revitalized local economies and population growth. The tech sector continues to drive healthy economic and demographic growth in Seattle and Portland, while many housing fundamentals in these two markets have surpassed their pre-crisis peaks, according to Ten-X.
“The U.S. housing market recovery continues to be supported by underlying economic fundamentals, particularly the improved labor market,” said Ten-X Chief Economist Peter Muoio. “Though new regulatory procedures induced some volatility in late 2015, home sales continued at a healthy pace, and while a tight inventory of homes constrained improvement in sales, it has contributed to accelerated gains in home prices.”
Click here to view highlights from the top five markets as well as a list that ranks the top 50 single-family housing markets from across the country.