Sometimes the hypocrisy is staggering: last winter, the Mortgage Bankers Association—the very body whose president attacked defaulters for betraying their families and their communities—got its creditors to let it do a short sale of its headquarters, dumping it for thirty-four million dollars less than the value of the building’s mortgage.
Loans considered always current or those with LTV ratios below 100% are shrinking in the jumbo space. In September 2011, these loans made up less than 35% of the jumbo universe, down from more than 50% in November 2009.
Read it all"Indeed, default rates among always- current borrowers have not come down as much as in the subprime sector, meaning that the pool of current borrowers has not strengthened as much over time," Moody's said.
"We find that the relaxation of borrowing constraints dominates early in the life of the mortgage," the authors state, "but default rates become larger than for principal-repayment mortgages late in the life of the mortgage due to the considerably higher probability of negative home equity."
Defaults tend to occur when a home enters a negative equity state, which is usually caused by several factors, including home price declines in a low inflation environment and large mortgage balances with little money down at the time of origination. However, after looking at mortgage default trends in other countries as well, Campbell and Cocco found that there is a variable lag time to when negative equity hits and the borrower stops making payments.
Read it allPutting little down at the time of origination greatly increases the probability of default, the report concluded, with that probability increasing even more for loans with LTV ratios in excess of 90%.
Clustered mostly in hard-hit cities and states, there are more than 4.5 million homes either owned by lenders or headed for foreclosure. In Miami, for example, there are about 200,000 shadow homes, dwarfing the 30,000 properties that are listed on the active market. Even as prices in Miami have shown signs of stability this year, an impending wave of foreclosures threatens to keep real estate values deflated.
"A lot of people don't understand how much inventory is set to come on line in the next 18 to 24 months," said Jack McCabe, the CEO of McCabe Research & Consulting in Deerfield Beach, Fla. "When you compare what the Realtors show as inventory to what's out there, you realize we have a long way to go."
A McClatchy Newspapers analysis of four years of foreclosure data and thousands of property records found record-high levels of shadow inventory in several housing markets across the nation.
And a fresh drop in home prices is likely to result.
Banks have stepped up the pace of home seizures after a year-long slowdown brought on by the "robo-signing" scandal in which banks were accused of seizing properties without a proper review of loan documents.
The number of foreclosure filings -- which include default notices, scheduled auctions and bank repossessions -- edged up 0.3 percent in the third quarter, reversing a trend of three straight quarterly declines, according to real estate data firm RealtyTrac.
RealtyTrac warns that as many as 1 million foreclosure actions that would have taken place this year will be pushed into 2012.
The firm also says they do no expect to see home price appreciation until the housing market works through the backlog of distressed assets, and the overall malaise in the sector could continue for the next three to four years.
"Banks are beginning to process foreclosures again after taking the time to get their paperwork in order. They've done the diligence they needed to do," said RealtyTrac chief executive James Saccacio. "Now there's this wave coming back in and more defaults are being processed."Read it all
Foreclosure starts rose 20% in August from the prior month to the highest level of the year and mortgages facing foreclosure are delinquent an average of 611 days, the highest level yet.
Lender Processing Services' (LPS: 13.03 -0.61%) mortgage monitor report for August showed foreclosure starts fell more than 12% from a year earlier, and the national delinquency rate is 8.13%, which is 2.5% lower than the prior month.
In late August, the Federal Deposit Insurance Corp. said the combined delinquency rate on mortgages held by major banks dropped to 6.68% in the second quarter, the lowest level since the third quarter of 2009.
Read it allFirst-time delinquencies accounted for nearly one-quarter of new delinquencies in August, according to LPS. And 23% of the nearly 46 million loans that were current at the end of August are at risk of foreclosure due to negative equity.
The Housing Department, which had to approve the applications for the Emergency Homeowners' Loan Program by Friday, expects that only 10,000 to 15,000 people will qualify. That's only a small sliver of the roughly 100,000 who applied.
"No one could have anticipated how difficult the statutory requirements make it to reach homeowners," said Lemar Wooley, a HUD spokesman.
Those who make the cut are expected to receive between $35,000 and $45,000 in aid, he said.
Read it allMany had high hopes for the loan program because it was targeting a segment of delinquent homeowners not being helped by other federal initiatives, such as mortgage modifications.
Popular strategies for helping distressed borrowers include mortgage modification and refinancing, to name a few. But at the largest mortgage player in the nation, Fannie Mae, there is one option that the government-sponsored enterprise has no plans to use.
Michael Williams, the CEO of Fannie Mae, tells HousingWire magazine that the firm will not ask mortgage servicers to reduce the principal on distressed loans.
Read it all"We do not do principal reduction," Williams said. "When we look at the toolset that we bring to the table, we really look at the interest rate, term and then forbearance of principal but not forgiveness of principal."
While proprietary loan modifications remained level from July to August, foreclosure starts increased 18 percent, rising from 185,000 in July to 218,000 in August.
Completed foreclosure sales also increased for the month, rising 5 percent from 65,000 to 68,000.
Read it allThe number of homeowners 60 or more days delinquent fell slightly from July to August, falling from 2.81 million to 2.80 million.
There is strong possibility that most of these FHA borrower will strategically default."Like the conventional universe, the 4.5% coupon has now moved completely into the 40bp refinancing window," said Scott Buchta, managing director at Sandler O'Neill. "Higher (mortgage insurance) fees and a lack of a HARP-like program may prevent some FHA borrowers from refinancing."
Roughly 10.4 million mortgages, or one in five outstanding home loans in the U.S., would likely default if Congress refuses to implement new policy changes to prevent and sell more foreclosures, according to analyst Laurie Goodman from Amherst Securities Group.
Read it allAt the end of the second quarter, more than 2.7 million long-delinquent loans, others in foreclosure and REO properties sat in the shadow inventory, more than double what it was in the first quarter of 2010 (Click to expand the chart below). With the market averaging roughly 90,000 loan liquidations per month, it would take 32 months, nearly three years, to move through the overhang.
More than 2 million California homeowners owed more than their homes were worth at the end of the second quarter, more than in any other U.S. state, according to Santa Ana-based data firm CoreLogic.
While that’s due in part to the state’s large population, California still had the fifth-highest proportion of “underwater” mortgages: 30.2% of all homes with mortgages, CoreLogic reported.
The next highest number of underwater loans was in Florida, which had 1.97 million loans that exceeded a home’s value.
Nationwide, 10.9 million U.S. homeowners — or 22.5% of all owners with a home loan — were under water in Q2, CoreLogic reported.
Read it allAnd in a new study, CoreLogic found that a greater proportion of underwater homeowners are unable to refinance their loans to take advantage of historically low mortgage rates. CoreLogic Chief Economist Mark Fleming said:
Bank of America Corp. (BAC), the largest U.S. mortgage servicer, failed to make a list of companies doing a satisfactory job of assisting homeowners struggling to pay their mortgage, according to Fannie Mae.
Of the 11 biggest servicers of Fannie Mae mortgages, Wells Fargo & Co. (WFC), Citigroup Inc. (C), Ally Financial Inc. and EverBank Financial Corp. are on track to receive satisfactory or better grades under a newly created customer service and foreclosure- prevention ratings system, the mortgage-finance company said in a statement. JPMorgan Chase & Co. (JPM), SunTrust Banks Inc. (STI), PHH Corp. (PHH), PNC Financial Services Group Inc. (PNC), OneWest Bank FSB and MetLife Inc. (MET) were the other companies that didn’t make the list.
Read it allLoan servicers interact with borrowers, collect mortgage payments and oversee foreclosures. More than 228,000 U.S. homeowners received foreclosure filings in August, the highest total since March, RealtyTrac Inc. reported today. Default notices rose 33 percent from July as lenders began to speed up processing of paperwork delayed by probes into documentation practices, the Irvine, California-based data service said.
Freddie Mac finalized requirements for a new modification option that will be made available to qualified borrowers on Oct. 1.
Mortgage servicers must evaluate borrowers deemed ineligible for the larger Home Affordable Modification Program for the new "Standard Modification" beginning in January. Trial period plans can begin in October. Through the new program the borrower's principal and interest payments drop at least 10%, according to Freddie.
Since March 2009, servicers granted roughly 791,000 permanent HAMP modifications and extended more than 1.6 million trials through the national program. But servicers canceled more than 763,000 trials because of redefault, not enough documentation or the borrower did not meet the requirements.
In order for a borrower to qualify for a standard modification, he or she must be at least 60 days delinquent. If they've missed fewer payments or are current, he or she must be an owner-occupant, in imminent default and provide a hardship document.
The borrower must have already been evaluated for HAMP within 12 months of the Standard Modification. Mortgages on homes without an owner-occupant can be eligible, even vacant homes that cannot be condemned
The loan-to-value ratio of the mortgage must also be greater than 80%.
Servicers will receive $1,600 for each modification completed before the loan slips into 120-day delinquency. They get $1,200 for a modified mortgage between 120- and 210-days behind. For standard modifications completed after 210 days of missed payments, the servicer gets $400 from Freddie.
Read it allThe standard modification program will fall under the joint servicing alignment initiative launched in April.
The foreclosure numbers are down very slightly year-over-year, but only because August 2010 was one of the highest foreclosure months on record, and of course was just before the "robo-signing" scandal was uncovered. Delays in processing have artificially lowered the foreclosure numbers over the past year, so this new surge is likely addressing loans that have been long delinquent, but unaddressed.
he question of course is, is this a one month catch-up purge or will it continue at high levels for a while? And if the latter, will other banks follow suit quickly? Because if other banks see Bank of America pushing more loans to foreclosure, which will inevitably means more properties heading out for sale, they may want to get in before that glut of properties pushes prices down even further.
Read it all"This proves once again that "credit" as measured by legal defaults and foreclosures is not necessarily about borrowers missing payments, rather about what the servicers chose to do about it," notes Hanson.
