Fannie Mae more likely to push for foreclosure if you are year behind payments

One year behind!  That's just amazing.

The records cover Fannie Mae's foreclosure decisions on more than 2,300 properties, a snapshot from among the millions of mortgages Fannie handles nationally. The documents show Fannie Mae has told banks to foreclose on some delinquent homeowners -- those more than a year behind -- even as the banks were trying to help borrowers save their houses, a violation of Fannie's own policy.

The Free Press also obtained internal records revealing that the taxpayer-supported mortgage giant has told banks that it expected them to sell off a fixed percentage of foreclosed homes. In one letter sent to banks around the country last year, a Fannie vice president made clear that Fannie expected 10%-12% of homes in foreclosure to proceed to sale.

And...

According to White, the Valparaiso professor, foreclosing on a home typically costs Fannie Mae far more than a successful loan modification. But, he and others say, Fannie is willing to absorb higher losses because it knows taxpayers -- not Fannie Mae -- will eventually reimburse the loss.

What this bank forgot is that if one borrower gets a modification, then all borrowers will want get a modification.  Which will be higher than losses due to foreclosure.

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25% of Citi's private mortgage modifications redefaulted

I know that HAMP has been a failure and there even been claims that trial modifications applicants were artificially approved, then later decline to meet some goal for the number modifications that was never realistic.  However, there has never been a good gage on the private modification side.   Although better than HAMP, 25% is horrible.  If you reach 50% is better just to cancel the program?  Also is this typical of all banks are just Citi.

Roughly 25% of the mortgage modifications Citigroup (C: 38.38 -1.64%) completed through its own private programs redefaulted over the past two years, the bank's Chief Financial Officer John Gerspach said Friday.

Over the past nine quarters, the bank converted $5.7 billion in a trial modification into permanent status. More than three-quarters of these went through the government's Home Affordable Modification Program. Redefault rates on these HAMP workouts totaled less than 15% (not true, notes by NOCBlog).

See why further in the article.

The Treasury Department launched HAMP in March 2009 and although it resulted in a fraction of the originally estimated 3 million to 4 million modifications, it provided a skeleton around which banks could design their own programs. At the same time, HAMP experiences redefault rates far less than these private initiatives

CalculatedRisk has a breakdown of the real HAMP default rate.

Article Here

Servicers write down principal on nearly 5,000 HAMP modifications

Banks have been very hesitant to reduce principal on mortgages when the borrower is behind on their payments. 1) Sometimes the bank is only the serivicer and doesn't have legal authority to do so.  2) Once one borrower gets a write down, then every one is going to want a mortgage reduction. 

Mortgage servicers included a principal writedown on 4,911 active workouts through the Home Affordable Modification Program since the fall of last year, the Treasury Department said Friday.

The Treasury launched HAMP in March 2009 to provide an incentive to servicers for the modification of loans on the verge of foreclosure. Through May, participating servicers started more than 731,000 permanent modifications and began 1.6 million trials. Servicers completed 32,000 permanent modifications in May, up 11% from the previous month.

In October, the Treasury launched the Principal Reduction Alternative, requiring servicers participating in HAMP to evaluate borrowers with a loan-to-value ratio of more than 115% for a principal writedown

It seems the only reason it part of the ever growing HAMP program.

Major servicers have been reluctant to write down principal without taxpayer dollars. Ally Financial (GJM: 23.78 -0.17%) and Bank of America (BAC: 11.06 +0.91%) agreed to principal reduction programs through state Hardest Hit Fund programs. Wells Fargo (WFC: 28.71 +2.32%) is in talks with the Arizona Department of Housing to do the same.

But representatives at these banks maintain the writedowns will only come on the mortgages they own and at the discretion of their investor.

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Keep Your Home California adds 12 mortgage servicers

I don't know too much about this program.  I also don't know how affective this program is.  There have been a lot of programs come and go.

are now 20 mortgage servicers that participate in the Keep Your Home California program, enacted in February.

The California Housing Finance Agency said Tuesday the number of servicers engaged in this program grew to 20 from eight four months ago. These 20 banks service about 80% of the mortgages held in California, the agency said.

"Increasing the number of participating servicers is critical because we need their partnership to assist families in California," said Claudia Cappio, executive director of CalHFA. "We are pleased that more servicers are joining this effort and encourage others to partner with us to aid families who would like to remain in their homes

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Foreclosure Aid on Chopping Block as Democratic Support Fades

I usually try to report only on laws that have past, not proposed legislation.   Because legislation can change or even be rejected.  However, this looks like this will past and it will have big impact on the mortgage industry.

While the attack on the program has been led by the chamber’s majority Republicans, 18 House Democrats said in a letter dated March 7 to Vice President Joe Biden that HAMP is flawed and abandons distressed homeowners to “abusive” mortgage servicers. They said foreclosure problems have grown too urgent to wait for a legal settlement being negotiated by regulators, the states and banks including Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM)

The letter, sent by a group led by Representative George Miller of California, demanded a meeting with Biden, who leads a White House task force on the middle class. The lawmakers asked for the meeting after what Miller called an “unsatisfactory” session last week with Treasury Secretary Timothy F. Geithner and Housing and Urban Development Secretary Shaun Donovan.

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HAMP and other housing programs may be cut from federal budget

With the federal government deep in debt, it's looking to divorce itself from the housing/lending industry and assume more a regulatory roll.

The Federal Housing Administration Refinance Program is also on the chopping block because of its less than impressive performance in the first two months it was implemented. The $8 billion program, designed to offer underwater borrowers a refinance, received only 35 applications between Sept. 7, 2010 and the end of October that same year, according to the HFSC.

The committee is aimed to discontinue NeighborWorks America, a government-charter, nonprofit corporation with a national network of affiliated organizations that focus on community reinvestment activities such as mediation counseling. The program, an allocated cost of $195 million, overlaps the functions of the Department of Housing and Urban Development and "are duplicative of existing HUD programs and can be consolidated," the oversight plan says.

Only HOPE IV will be replaced. The program uses funds to convert distressed or dangerous public housing developments into mixed-use housing and costs $200 million annually. The committee is proposing to replace it with Choice Neighborhoods, an existing program that serves the same function and costs $140 million less.

Among other programs the committee also wants to abolish are Rural Housing and Economic Development, which currently receives $25 million annually to provide grants to non-profit organizations for capacity home building in rural areas, and the Neighborhood Stabilization Program, which gives federal funds to states and local governments with high concentrations of foreclosed homes, subprime mortgage loans and delinquent home mortgages. Approximately $1 billion was allocated for NSP.

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Ten Arguments Against a Government Guarantee for Housing Finance

This is great.  There are two major ways the US guarantee's housing with 1) Purchasing mortgages through Fannie Mae and Freddie Mac 2) guaranteeing loans for low down payment purchases. 

There is a growing belief among mortgage investors, industry groups and some policymakers in Washington that some type of explicit government guarantees for mortgage lending will be necessary to undergird a new housing finance system in America. Yet whether by the sale of insurance on mortgage-backed securities or a public utility model replacing Fannie Mae and Freddie Mac with new government-sponsored enterprises, this would be a tragic mistake, repeating the errors of history, and putting taxpayers and the housing industry itself at risk. This policy summary offers ten arguments for why there should be no government role—explicit or implicit—in guaranteeing housing finance

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11 million borrowers endangered of losing their homes

It's simple you math, you have a 11 borrowers that can't afford their homes.  No matter if you give them loan mods they can't afford it and never could afford it under a 30-year fix rate mortgage.  However, their are some people that can't afford due to jobless. 

"When people make noises about housing getting better they point to the decline in nonperforming loans, but looking at nonperforming loans and re-performing loans together there's been no improvement," she said.

Of the roughly 3.4 million re-performing loans, 70% will eventually fail, she said. And the default rates aren't any better within non subprime loans, as all performing loans that were making payments for four years "are now defaulting at a very, very rapid rate."

"Equity matters, the combined loan-to-value is the single most important factor in default," Goodman said.

While the government's Home Affordable Modification Program, or HAMP, "has been very valuable because it provided a blueprint for more significant mods," the redefault rates remain high even with significant payment reduction.

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HAMP and other programs are completely failing

No surprise, I have reporting this since August.  Most mortgage modifications are now private.

The Treasury Department's acting assistant secretary for financial stability, Tim Massad, defended the administration's housing rescues in a conference call with reporters. While the administration hasn't achieved as many home loan modifications as originally expected, he said, the government has reached a "large percentage" of eligible homeowners.

The government's newer programs, he said, are just getting started. "It's a little too early to reach a conclusion," Mr. Massad said, noting that the Treasury has two more years before its housing programs end.

But Mr. Barofsky's report noted that newer mortgage assistance initiatives are off to a slow start. For example, a program launched by the Federal Housing Administration last September to assist borrowers who owe more on their home loans than their properties are worth has landed with a thud, the report said. As of the end of last year, only 15 homeowners had refinanced their mortgages through the FHA's "short refinance" program, it said.

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Hope Now: November mortgage modifications doubled foreclosure sales

This means that private loan modifications are beating government sponsored loan mods.

or November, Hope Now said mortgage servicers closed about 82,000 proprietary loan modifications while the Obama administration's Home Affordable Modification Program completed nearly 30,000. Hope Now said the number of modifications are currently outnumbering the number of foreclosure sales two to one. For the year to date, there have been about 482,700 HAMP permanent modifications and 1.17 million proprietary modifications, according to Hope Now.

At this point HAMP should really end.

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More people fell out of Obama mortgage-aid program

This has been no surprise.  Most homeowners that get a permenant modification can't afford it, so they drop out.  Then some of the drop out get private modifications from the bank.

The Treasury department said Wednesday that about 774,000 homeowners have dropped out as of last month. That's about 54 percent of the more than 1.4 million people who applied. And it's up from October, when approximately 756,000 had fallen out.

The program is intended to help those at risk of foreclosure by lowering their monthly payments. Borrowers start with lower payments on a trial basis. The program has struggled to convert them into permanent loan modifications.

Another 505,000 homeowners have secured lower payments permanently. That's about 35 percent of the number who enrolled on a trial basis, up slightly from October's reading.

Based on some data analysis the final drop out rate could be as high 85%!

Private Mortgage Modifications continue to surge over the HAMP Program

The HAMP program is a failure.  They only good loan mods have been the one issued directly from the bank.

Hope Now, a private sector mortgage alliance, said the mortgage industry has completed more than 1.54 million permanent loan modifications for homeowners from January through October, as foreclosure suspensions affected foreclosure sales and starts.

For October, mortgage servicers completed about 101,000 proprietary loan modifications and 24,000 Home Affordable Modification Program, or HAMP, modifications for an estimated total of 125,000.

"There were anomalies in the October data that affected 60-day plus delinquency, as well as foreclosure, metrics which we believe may be largely attributed to widespread foreclosure delays across the country," said Faith Schwartz, executive director of Hope Now.

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Bank of America accounts for nearly half of HAMP backlog

HAMP has been a big failure.  First, most homeowners that applied didn't qualify.  Second, the default rate was 75% of the homeowners that did qualify.  Most homeowners simply received private loan mods from thier banks and these also have a high rate of default.

The Treasury launched HAMP in March 2009. So far, the servicers participating in HAMP have started 519,648 permanent modifications and started roughly 1.4 million trials. A borrower is supposed to move out of a trial when it he or she has made three monthly payments under the new terms and has submitted all documentation.

Over the last six months, servicers have averaged 37,000 permanent modifications per month. But they have been on the decline over the past quarter, dropping 16% in September and falling 26% in August

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Election Outcome Will Shape Future for Housing

I will say the conservatives will probably push for the privatization of Freddie Mac and Fannie Mae, decrease role of FHA, and ending of the HAMP program.

"Before, money was made by Fannie, money was made by Freddie, money was made by banks, money was made by investors, money was made by brokers," says Gumbinger. "Now, people are just selling mortgages to Fannie and Freddie as quickly as they can before the rules change on them. They're saying [to the government], 'Until I know to what extent you're going to be in the game, I don't know if there's a game to play."

Here some more analysis.

But if financial-reform proceedings proved anything, it's that ideas that come from the president and regulators may help move the process along, but they don't write the law. There's little chance that Republicans will let Fannie and Freddie continue to exist in their current forms. There may be less of a chance that President Obama will sign into law anything similar to what his one-time presidential opponent, John McCain (R., Ariz.) proposed earlier this year.

"Obama seems resolute in pushing his agenda," says James Lothian, a finance professor at Fordham University. "Republicans will resist and many of the Democrats who survive what looks to be an out-and-out bloodbath will think twice about following the Obama party line."

So what will happen to the mortgage market? Right now it seems to be humming along just fine - at least in terms of new originations and refinancing. Banks have shored up their lax underwriting policies, leaving few loans that wouldn't fit into Fannie and Freddie's new-and-improved standards.

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HAMP becoming more irrelevant

This make you wonder if HAMP is really needed.  

Mortgage servicers modified 119,585 loans through private programs in September, more than four times the 27,840 done through the Treasury's Home Affordable Modification Program, according to the Hope Now alliance.

"While HAMP has provided a road map for other solutions, and is still the first line of defense for a delinquent homeowner, if the borrower is not eligible for a HAMP modification, a proprietary modification is able to fill the gap and offer a viable and sustainable solution to avoid foreclosure, enabling the borrower to stay in their home," said Faith Schwartz, senior adviser for Hope Now.

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Half of HAMP permanent mortgage mods will redefault

According to the Congressional Oversight Panel half the permanent mortgage modifications will redefault.

Since the HAMP launched in March 2009, servicers have completed 495,898 permanent modifications, and extended 1.6 million trials. So far, the Treasury has committed nearly $30 billion to the servicers for a program that was initially estimated to cost $50 billion.

This 495,898 is actually a low number, since over 1.3 million have applied to HAMP, but most got rejected.  The rate is now closer to 75% to 80% if you include rejected applications, trial modifications that were rejected, and redefaults on permanent mortgage mods.

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Obama foreclosure-relief plan fails to show gains

This number will go much higher.  There are many homeowners in the trial phase that are still defaulting.

The Treasury Department says about 729,000 homeowners who applied to have their mortgage payments lowered have been disqualified through September. That's about 53 percent of the nearly 1.4 million who enrolled in the program over the past year. And it's up from about 680,000 a month earlier.

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Lawsuits Reflect Widespread Frustration With Government's Mortgage Modification Program

More details coming out about the HAMP loan modification program.

Under HAMP, the Treasury Department gives mortgage servicers $1,000 incentive payments to reduce borrowers' monthly payments, mostly by cutting interest rates. If an eligible borrower makes his or her reduced payments for three or four months during a trial period, the modification is supposed to become permanent. Often, trials drag on for much longer.

"Rather than allocating adequate resources and working diligently to reduce the number of loans in danger of default by establishing permanent modifications, Bank of America has serially strung out, delayed and otherwise hindered the modification processes that it contractually undertook to facilitate when it accepted billions of dollars from the United States," says the complaint seeking class action filed in July by Teresa Follmer of Mesa, Ariz.

The the interaction between the bank and HAMP.

Bank of America argues that borrowers don't have standing to sue because they aren't parties to the Servicer Participation Agreement between the bank and the Treasury Department. In its motion to dismiss Follmer's suit, Bank of America notes that Treasury has made lots of changes to its "constantly evolving new federal program" and if a borrower is eligible, "the servicer is obligated to consider the borrower for a HAMP modification" -- not necessarily to grant it.

HuffPost reported last week that a Bank of America employee told Troy Taliancich, who has been in a HAMP trial for most of the year, that his modification had stalled because of Treasury's changing rules. "Right now, at this point, the government changed the process a little bit," the employee said. "We changed the procedure and you are one of the homeowners that fell into the middle of when the process changed.

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Unemployed? Get a federal loan to pay your mortgage

Question, what happens if they can't pay this new loan?

Troubled borrowers will be able to apply for the Emergency Homeowners Loan Program by the end of the year. They must be at least three months behind in their payments, but have a reasonable likelihood of being able to resume payments within two years. And they must have suffered at least a 15% drop in income, but have been able to afford their mortgage before their income loss.

Also, the property must be their principle residence and they cannot own a second home. And they must live in Puerto Rico or one of the 32 states not receiving federal assistance through the Hardest Hit Fund, which gave 17 states $4.1 billion to come up with programs to help the unemployed and underwater.

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Only 5.8% of failed HAMP loan modifications have made it to the market

This is another indication that shadow market is large.  Also with the ongoing paper mill story, a lot of foreclosures (estimated to be one million) will not be on the market in the near future.

Through August, the top-eight HAMP servicers have canceled more than 487,000 trials and rejected more than 628,000. When taken as a percentage short sales and DILs were granted on 5.8% of them.

Please Note: DIL - Deed in Lieu - The homeowner signs over a deed to the bank, sort of like giving the keys to the bank.

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