Tags: 90 days, fha, flipping, HUD, investors, reselling
FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period.
The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales.
The waiver will take effect on February 1, 2010 and is effective for one year.
Tags: chase, gmac, hamp, jpmorgan, loan modification, mortgage modification, wells fargo
Of the 1 million homeowners who have been offered three-month trial modifications under the Home Affordable Modification Program (HAMP), 31,382 have received a permanent modification, according to a report from the US Treasury Department.
Under HAMP, the Treasury allocates capped incentives to participating servicers for the modification of loans on the verge of foreclosure. Currently, 76 servicers participate in the program and could collect a potential of $27bn in capped incentives.
Servicers have started 759,058 trials since the program launched in March 2009, and 697,026 trials are currently active.
How many trials have converted to a permanent modification has been the subject many debates. The Treasury has recently pressed servicers to convert more trials and expects 375,000 permanent modifications by the end of the year.
GMAC Mortgage converted 7,111 trial modifications into permanency, the most of any servicer on a gross-volume basis. Active trials and permanent modifications accounted for 39% of GMAC’s eligible portfolio of 67,539 loans – the third highest percentage of all servicers.
JPMorgan Chase had the second highest amount with 4,302 permanent modifications. Active trials and permanent modifications made up 31% of the 448,815 eligible loans in its portfolio – sixth among servicers.
In third, on a gross volume basis, was Ocwen Financial Corp.’s 4,252 permanent modifications. Active and converted trials made up 15% of the 66,351 loans in its portfolio. According to the Treasury report, permanent modifications made up 77% of its active trials and 43% of the total amount of trials Ocwen started through November.
Saxon Mortgage Services led all servicers on a percentage basis by holding active trials and permanent modifications on 44% of the 80,309 eligible loans in its portfolio. However, Saxon has converted 42 trial modifications into permanency.
For the 233,924 eligible loans in CitiMortgage’s portfolio, 43% are either active trials or permanent modifications, the second highest by percentage. Of those, 271 are permanent modifications.
Bank of America has 98 permanent modifications. BofA holds more than 1m loans in its eligible portfolio, the most of any other participating servicer, and 15% of them are active trials or permanent modifications.
Wells Fargo converted 3,537 trials into a permanent status. It holds 334,949 loans in its eligible portfolio. Of those, 30% are in active trials or are permanent modifications.
Wednesday, Congress heard testimony on the health of the program the possibilities of its success. Key among the reasons for HAMP’s small amount of permanent modifications is a lack of documentation.
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Tags: foreclosures, las vegas, median house price
The volume of November home sales in Las Vegas trailed off 5.5% from October, but spiked 44% from the start of 2009, according a report from MDA DataQuick.
The information provider said the home sale surge comes from the usual factors: price declines, low mortgage rates and the federal tax credit for homebuyers.
Foreclosure resales continued to dominate the Vegas housing market but also continue to gradually decline, according to MDA DataQuick. In November, 64.2% of homes and condos in Las Vegas were foreclosure resales, down from 66.8% in October and 68.1% below levels seen in November 2008. In April 2009, foreclosure sales peaked, taking up 73.7% of the region’s sales activity, but that percentage has declined every month since — perhaps as lenders and servicers have held up foreclosure activity.
The 4,787 new and resale homes and condos was the highest number of sales for a Vegas November since 2006, when 5,803 homes sold. November marked the 15th consecutive month that sales increased from one year earlier.
The region’s median sales price continued to fall on a year-over-year basis — marking 31 consecutive months of declining prices — and by November, it stood 56.8% below its $312,000 peak, recorded in November 2006. This November, the median price paid for all new and resale houses reached $134,900, up 3.8% from October but down sharply 29% from $190,000 last year.
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Tags: fannie mae, foreclosures, freddie mac, home sales, mortgages
After mortgage giant Freddie Mac reported a 13% drop in mortgage purchases in November, Fannie Mae shows its book of business declined at an annualized rate of 6.7% in the same month, according to its monthly summary.
The performance of Fannie’s mortgages continue to deteriorate. The single-family serious delinquency rate climbed another 26 basis points (bps) to 4.98% in October, which is the most recent month of data. The multifamily delinquency rate dipped to 0.61% in October from 0.62% in the previous month.
The delinquency rate in both categories swelled from October 2008, when the single-family delinquency rate was 1.89% and 0.21% for multifamily loans.
Fannie reported $2.81bn in total mortgage-backed securities (MBS) and other guarantees at the end of November. The government-sponsored enterprise (GSE) issued $40.3m of MBS in November, a 2.7% drop from October. It’s total amount of issuance reached $752.4m in 2009 with one month to go.
Fannie’s gross mortgage portfolio declined at an annualized rate of 26.1% to $752.2m in November.
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Tags: default, foreclosure, loan modification, realtytrac
Foreclosure filings in November dropped 8% from the previous month but remain 18% above levels seen a year ago, according to RealtyTrac’s foreclosure market report.
“November was the fourth straight month that US foreclosure activity has declined after hitting an all-time high for our report in July, and November foreclosure activity was at the lowest level we’ve seen since February,” said James Saccacio, chief executive officer of RealtyTrac.
In November, one in every 417 homes in the US received a foreclosure filing, which includes either default notices, scheduled foreclosure auction and bank repossessions. Default notices across the country fell 8% from the month before but climbed 22% from last year. Scheduled foreclosure auctions fell 12% from the previous month but grew 32% from 2008, according to the report.
Bank repossessions flattened from October and remained down from November 2008. That number could remain flat as long as the Treasury Department keeps pressure on servicers to modify loans through the Home Affordable Modification Program (HAMP) – despite some calling the program’s success into question.
“Loan modifications and other foreclosure prevention efforts, along with the recently extended and expanded homebuyer tax credit, are keeping a lid on the most visible symptoms of the nation’s ailing housing market — foreclosures and home value depreciation,” Saccacio said.
Nevada’s foreclosure rate continues to lead the country. In November, 9,295 homes received a foreclosure filing, translating to one in every 119 homes. It’s a 33% drop from the previous month and its second straight double-digit decrease. In Las Vegas, one in every 102 homes received a foreclosure filing, which is four times the national average. However, it has dropped out of the top 10 highest metro foreclosure rates with its 33% decrease from the previous month.
In Florida, one in every 165 homes received a foreclosure filing in November, overtaking the second spot from California, where one in every 180 homes received a filing. California posted a 13% decrease in foreclosure activity from the previous month, but it still posted the highest total of any state with 73,995 foreclosure filings in November, a 22% increase from last year.
For the second straight month, four states accounted for 52% of the nation’s foreclosure activity: California, Florida, Illinois and Michigan.
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Tags: auction, dubai, manhattan
Dubai World’s troubles have hit the Big Apple.
Istithmar World Capital, the private equity arm of the Dubai government-controlled holding company, funded $282m to build the posh W Hotel in Manhattan’s Union Square in 2006, paying $50m in cash and borrowing the remaining $232m. On Tuesday, the building sold at auction for $2m.
The winning bidder, according to The Wall Street Journal, was LEM Mezzanine, a private-equity fund affiliated with property-investment firm Lubert-Adler Partners.
But as a subordinate debt holder on the hotel, LEM Mezzanine didn’t have to pay cash for its winning bid, and could have bid up to $20m of its debt against the hotel without putting up any cash.
According to the WSJ, while there were few bidders, the scene at the auction was intense, and included multiple closed-door meetings between representatives from LEM, Istithmar and the auction company.
While LEM didn’t have to front any cash to gain control of the property, it will have to cure $97m in outstanding debt that supersedes its claim on the development. According to LEM’s Web site, the fund has more than $200m to invest to originate mezzanine loans and purchase existing senior and subordinate debt.
It’s good news for the market, as absent the LEM acquisition, CMBS investors would have likely been forced to wait six months, if not longer, to get paid by Istithmar. The deal comes with no government intervention, either, a sign that the market can still find a way to recovery.
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Tags: default, foreclosure, loan modification, negative equity, strategic default
More than one quarter of mortgage defaults are strategic — when a borrower chooses to default because the property that secures the loan is worth less than the remaining balance of the mortgage, according to a white paper written by a trio of university scholars.
The decision to strategically default isn’t as simple as the borrower’s ability to make his mortgage payments or the extent of a home’s negative equity. There are moral and social considerations to take into account, Luigi Guiso, Paola Sapienza and Luigi Zingales wrote in “Moral and Social Constraints to Strategic Default on Mortgages.”
The report used an opinion survey to gauge consumer responses to a number of strategic default scenarios. The survey found no household would default if a borrower’s equity shortfall is less than 10% of the value of the house, but 17% of households would default, even if they can afford to pay their mortgage, when the equity shortfall reaches 50% of the value of their house.
But borrowers who said it was immoral to default were 77% less likely to declare their intention to do so, while people who know someone who defaulted are 82% more likely to declare their intention to do so, the study said.
The study cites Zillow.com research that said 22% of households are underwater in the mortgage. But one factor that the study found did not contribute to a borrower’s decision to strategically default is the number of other defaults in the borrower’s ZIP code, but the lessening of social stigmas toward default is a result of a contagion effect as increasingly more borrowers default across the country.
But social and moral factors are not the only considerations. “Assuming that a homeowner will default as soon as his home equity becomes negative is clearly wrong,” the study said. “Negative equity may be a necessary conditions to trigger default, but it is not a sufficient one.”
Instead, the study found, the likelihood of strategic default increases as the level of negative equity increases.
The study is the latest argument in what is becoming an increasingly more important issue to the mortgage industry. As in the white paper, Showalter believes borrowers strictly in a negative equity position are less likely to default.
He argues that borrowers that are more willing to stick with a mortgage are the ones who are most likely to benefit from a mortgage modification, while borrowers more likely to default will still carry that sentiment, even if the borrower receives a mortgage modification. Showalter said the results raise the question on the effectiveness of mortgage modifications.
The Questions are, “Should I let the bank take my house through Foreclosure?” or “Should I sell my house for less than I owe on it?”
What is Best for Me?
Tags: default, fdic, foreclosure, loan modification
Institutions that acquire failed banks taken over by the Federal Deposit Insurance Corp. (FDIC) may soon be required to cut principal off mortgages instead of simply forbearing a portion until a later day or lowering interest rates, according to comments a FDIC official made to Bloomberg this week.
The principal forgiveness might apply to as much as $45bn of mortgages from failed banks. Regulators so far in 2009 shut down 124 banks, costing the FDIC’s insurance fund billions of dollars and putting billions more in assets up for acquisition.
Institutions that participate in loss-sharing agreements with the FDIC on asset acquisitions may be forced to share a greater portion of losses related to the principal cuts.
“We’re looking now at whether we should provide some further loss-sharing for principal write-downs,” FDIC chairman Sheila Bair told Bloomberg. “Now you’re in a situation where even the good mortgages are going bad because people are losing their jobs. So you have other factors now driving mortgage distress.”
Bair added: “We’ll obviously lose by providing loss-share for principal write-downs.”
The lower foreclosure rate achieved through principal forgiveness might actually help the FDIC gain back some of the funds it would have to spend on the loss-sharing agreement.
Plans are not yet final, but the FDIC made a similar move in September when it urged loss-sharing institutions to temporarily forbear on a portion of mortgages, lowering payments for unemployed borrowers.
Tags: credit score, debt to income, fannie mae, fha, hamp, lenders, lending
As the Federal Housing Administration (FHA) considers raising the minimum credit score requirement for new borrowers to reduce risks to the single-family insurance fund, Fannie Mae has increased the minimum borrower credit score from 580 to 620.
Recently delivered loans with credit scores below 620 reached a level of serious delinquency at a rate approximately nine times higher than other acquisitions during the same period.
Fannie also reduced the allowable debt-to-income ratio to 45% when executing loss mitigation efforts under the Home Affordable Modification Program (HAMP). Under HAMP, the US Treasury Department provides allocated capped incentives to servicers for the modification of loans on the verge of foreclosure.
Tags: default, foreclosure, hamp, loan modification, short sales
The mortgage servicing industry completed 271,563 total loan workouts in October, according to Hope Now, the alliance of mortgage servicers, investors, insurers and non-profit counselors.
Workouts included 198,373 repayment plans and 73,190 modifications. At the same time, the industry completed 94,450 foreclosure sales and initiated another 222,107 foreclosure starts.
Total 316,557 foreclosure sales and starts outnumbered modifications more than 4 to 1 and repayment plans about 1.6 to 1. Hope Now attributes some of the slow-down in modifications to the Home Affordable Modification Program (HAMP) sponsored by the US Treasury Department.
Under HAMP, the Treasury allocates capped incentives to servicers for the modification of loans on the verge of foreclosure. Hope Now’s reported modifications have slowed as servicers began implementing HAMP, which requires a three month trial period to ensure borrower affordability of modified payments before a HAMP modification is considered permanent.
Despite the slow reporting of permanent HAMP modifications, the Treasury has said more than 650,000 trial modifications are underway, putting HAMP on track to reach a target 3m to 4m homeowners in three years.
Short sales might become more prevalent among servicers, now that Treasury will offer incentives through the Home Affordable Forelclosure Alternatives (HAFA) program. HAFA will complement HAMP by providing financial incentives to servicers, borrowers and investors that go forward with short sales or deeds-in-lieu of foreclosure, according to a Treasury announcement late Monday.
Currently, Hope Now only reports HAMP activity when trial mods become permanent, creating the appearance of a slow start to HAMP. It remains unclear how many trial mods have become permanent, although the Treasury said HAMP is on track to boast 375,000 permanent modifications by year-end.