Unemployed Homeowner Provision Survives Reform Bill Compromise

Originally posted on The REO Insider.

* New $3bn Foreclosure Prevention Program Added to Wall Street Reform Bill
* House eyes new assessment for $3 billion for unemployed
* Senate Passes FHA Reform in a Landslide
* Senate Passes Housing Bill, But Support Seen as Problematic
* Congress Agrees on Comprehensive Financial Reform Bill

Friday, June 25th, 2010, 2:14 pm

The sweeping financial regulatory reform bill agreed to this morning includes a provision sought by U.S. Rep. Chaka Fattah (D-PA) to help unemployed homeowners facing foreclosure.

A conference of House representatives and senators agreed early this morning on the financial reform bill after weeks of debate. It must still go to a full House and Senate vote but is expected to reach President Obama’s desk for a signature by July 4.

The provision provides $1bn to unemployed homeowners and is patterned after a program introduced by Fattah when he was a Pennsylvania state legislator. Pennsylvania's Homeowner's Emergency Mortgage Assistance Program (HEMAP) has provided $236m to tens of thousands of unemployed workers to stave off the foreclosure, according to Fattah’s office. Fattah had originally sought $3bn for the federal reform bill provision.

A spokesman in Fattah’s office said they are still awaiting final word from the House-Senate committee on how the provision would be funded. There were discussions last year about using untapped Troubled Asset and Relief Program (TARP) monies as the funding mechanism.

Under the program, qualified homeowners will be able to borrow up to $50,000 to assist them with their mortgage payments, provided that they have a reasonable prospect of resuming mortgage payments within 24 months.

"This funding will help so many Philadelphians and homeowners across the country who risk losing their homes after falling on hard times through no fault of their own,” said Philadelphia Mayor Michael A. Nutter in a prepared statement.

Prices Falling AGAIN

Did you ever notice how things have a way of balancing out? You know, things go down just as something else goes up. It’s always funny when it works out that way, but it really makes a lot of sense.
Take the latest news about home prices,for instance.
The tax credit for first time home buyers expired at the end of April. And wouldn’t you know it, the market saw a sudden sharp dip in home prices. It dropped almost $2,500 on average.

So it’s really interesting,
housing market prices down you lose one opportunity, you gain another. Sure they don’t quite balance out, but where do you think things will go from here? Are sellers going to have to come down even further?
Oh, and of course the leader in home price reductions? Florida! San Francisco also saw large reductions (actually the biggest in terms of dollars instead of percentage). So hopefully those areas will continue to enjoy a small recovery through the summer months.
Have you noticed any price changes in your area? You are the people out there, hitting the streets to find great deals. So I want to hear from you, get your feedback.

Have a great week.


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Obama Administration OKs $1.5bn Hardest-Hit Mortgage Relief Fund Plans

* Treasury Releases Additional $600m to Five New State Housing Finance Agencies
* State HFAs Submit Proposals to Spend $1.5bn Hardest Hit Fund
* State Housing Finance Agencies Uneven in Plans to Use $1.5bn Federal Fund
* Program could give Florida homeowners up to 18-month mortgage reprieve
* California Releases $699m Hardest Hit Fund Proposal

Wednesday, June 23rd, 2010, 9:47 am

The Obama Administration signed off on state plans to use $1.5bn in foreclosure-prevention funding for states hardest-hit by home price declines.

The states may now begin to use the federal funds to facilitate borrower aid programs, according to the Treasury Department.

The aid, granted through the Hardest Hit Fund announced in February, supports local initiatives to aid underwater mortgage borrowers in states where average housing prices declined 20% or more from peak levels. The states include Arizona, California, Florida, Michigan and Nevada.

"While we've made important progress stabilizing the housing market and keeping responsible families in their homes, the Obama Administration will continue to do everything it can to help those who are struggling the most during this difficult time," said Treasury assistant secretary for financial stability Herbert Allison, Jr., in a statement. "Today marks an important milestone for delivering relief to homeowners through the Hardest Hit Fund program."

The Housing Finance Agency (HFA) in each state submitted its proposals to the Treasury on April 16 after gathering public input to determine the unique challenges facing local mortgage borrowers. Treasury then reviewed the proposals to ensure compliance with the Emergency Economic Stabilization Act (EESA).

Arizona, which receives $125.1m, will pursue principal and interest rate reduction and term extension programs. The state will also aid the elimination of second liens where they prevent modification of first liens. The Arizona HFA will also grant financial aid to under-employed borrowers while they seek new employment.

California, which receives $699.6m, will pursue principal reductions with earned principal forgiveness programs. It will also use funds to address delinquent loan arrearages and, for unemployed borrowers, grant payment subsidies. The state HFA will also help borrowers who received a short sale or deed-in-lieu transition to stable housing.

Florida, which receives $418m, will pursue principal reduction or second lien extinguishment programs. It will also grant mortgage payment aid to un- and under-employed borrowers while they seek re-employment.

Michigan, which receives $154.5m, will pursue earned principal forgiveness for underwater borrowers. It will also aid with loan arrearages for borrowers who can sustain homeownership and who have undergone financial hardship. The state HFA will also subsidize mortgage payments for unemployed borrowers while they search for new employment.

Nevada, which receives $102.8m, will create a modification program using a combination of principal forgiveness and forbearance with the goal of reducing principal to a less than 115% loan-to-value ratio, and lowering payments to within 31% of a borrower's debt-to-income ratio. The state will also offer aid to reduce or eliminate second liens with earned forgiveness over a three-year term. Nevada will grant aid for appraisal and transaction fees and moving fees, as well as a legal allowance for up to three months, for borrowers and servicers that pursue short sales.

In March, the Administration announced a second round of Hardest Hit Fund aid totaling $600m for five additional states with high areas of concentrated unemployment: North Carolina, Ohio, Oregon, Rhode Island and South Carolina. These states already submitted proposals, which are currently being reviewed, Treasury said.


Bank of America Puts Short Sales Ahead of REO



Bank of America, one of the largest lenders in the U.S., has instituted a policy of liquidating as many assets saddled with defaulted loans as possible before repossession, said Matt Vernon, the short sale and REO executive at BofA.

Vernon took the position at BofA in February. He has since announced plans to add 1,000 employees to the short sale staff. BofA currently holds more than 477,000 loans eligible for the Home Affordable Modification Program (HAMP), and has provided more than 600,000 modifications through HAMP and its own programs.

But Vernon said BofA will continue to make the short sale push when he spoke on a panel at REO Expo, being held this week in Dallas.

"We're going to do everything possible to liquidate property prior to foreclosure," Vernon said. "REO will still be available, but we will do everything we can to do short sales." Vernon said the goal is to get as close to market value as possible, or even over market value. "Short sales is not an investment strategy to get homes on the cheap," he said.

He added that agents who want a part of that market need to make short sales a major part of their business strategy through 2010 and into 2011.

Not just agents, but other companies in the default space were listening as well. Danielle Washburn, assistant vice president at Lender Processing Services Asset Management Solutions said lenders are beginning to put more emphasis on short sales because of recent efforts from the current Administration.

The Treasury Department launched the Home Affordable Foreclosure Alternatives (HAFA) program in April to provide incentives to servicers to provide short sales and deeds-in-lieu of foreclosure.

"Because of programs like HAFA, the process is getting easier," Washburn said. "But they remain very complex. There are sometimes 10 decision makers with just one transaction, the lender, the buyer, the seller, mortgage insurer, investors and more. Just one of them can stop the whole deal."

Milton Shaw, senior vice president of LPS Asset Management Solutions, said modifications and short sales through HAMP or HAFA could just be delaying the inevitable foreclosure and REO process, and the real estate business is growing frustrated with the delays.

"There's just been an incredible amount of frustration," Shaw said.

Both Washburn and Shaw agreed that more short sales will be on the way as HAMP continues to underwhelm both the industry and the public. In implementing the push for short sales, Vernon said a lot has been learned from HAMP.

"We are learning from the past where we struggled mightily," Vernon said, "and from now as we still struggle. We need the best to execute these transactions."



Mortgage Applications Fall 6% on Weaker Refinance Interest: MBA


* Weekly Mortgage Applications on the Upswing
* Mortgage Applications Spike Ahead of Tax Credit Deadline
* Weekly Mortgage Applications Slide Again
* Plunge in Refinance Requests Pulls Mortgage Applications Down
* Weekly Applications Take Double-Digit Dip

Wednesday, June 23rd, 2010, 8:29 am

Applications for both purchase and refinance mortgages slipped, combined falling almost 6% in the week ending June 18, according to the Mortgage Bankers Association (MBA). Much of the decline was driven by waning refinance interest.

A separate survey found household activity in the mortgage application process actually increased slightly in the same week.

The MBA found that the volume of refinance mortgage applications fell 7.3% this week, bringing the refinance share of application activity down a percentage point to 73.8% this week, from 74.8% last week.

At the same time, applications for purchase mortgages fell 1.2%, driven by a 4.4% decrease in requests for government-insured loans through programs like the Federal Housing Administration (FHA).

All told, the total volume of applications fell 5.9% this week, MBA said.

The Mortgage Maxx index, which adjusts data to reflect the number of households applying for a mortgage, found 0.1% more households submitted applications than the week before. Maxx publisher Paul Descloux, in weekly commentary, noted the index could decline in coming weeks following the homebuyer tax credit expiration.

"Aggravated by truncated tax subsidies, mortgage originations fail to accelerate despite record low available rates," he said. "There is little visible on the economic horizon to stimulate housing and mortgagor demand remains extremely compromised… ."

How much House can you afford?

Ever wonder just how much house you could afford? Just as we face everyday changes in our personal lives, so does our financial information changes. Chances are your financial information has changed since you purchased the house you live in now. Maybe your house has increased in market value which could lead to a larger down payment. You may have had a change in income, savings, bonus, or other factor that would affect how much house you can afford.

Although this links to a web site, you are NOT required to enter any personal information. Nothing is stored, shared, or recorded when using this calculator. You enter in monthly income and expenses and it not only tells you how much house you can afford, it will also give you your maximum house payment figure. Click here to give it a try.

BofA Begins Principal Reduction on Delinquent, Underwater Mortgages

• BofA to Reduce Principal in HAMP Mortgage Modifications
• BofA to Focus on Sense of Urgency in Converting HAMP Mods
• BofA Provides Workouts for 100,000 Borrowers
• BofA Reaches 56,400 Permanent HAMP Mods
• BofA Completes 33,000 Permanent HAMP Mods

Wednesday, June 2nd, 2010, 10:46 am

Bank of America (BAC: 15.89 +2.98%) is starting to forgive principal when modifying underwater mortgages eligible for the National Homeownership Retention Program (NHRP).
BofA servicers will forgive principal for homeowners who owe "considerably more" on their mortgage than the current value of the home while being considered for the Home Affordable Modification Program (HAMP). BofA announced NHRP in March 2010.
The bank will attempt a principal reduction as the first step in the servicer waterfall to reach the 31% debt-to-income ratio target – the amount of the borrower monthly income that goes toward the mortgage. Loans eligible for the NHRP include subprime, pay-option adjustable rate mortgages (ARM) and prime-quality two-year hybrid ARMs originated by Countrywide before Jan. 1, 2009. The amount of principal owed must exceed the property value by 20%, and the loan must be delinquent by 60 or more days.
Through the five-year NHRP, BofA sets up an interest-free forbearance account for the amount of principal owed above the current value of the home. For instance, if the borrower owes $250,000 on a home worth $200,000 and qualifies for the program, BofA will set up a separate account of $50,000 that will sit alone without collecting interest while the borrower makes payments on the $200,000 at the current market interest rate. There are no required payments on the $50,000 non-interest bearing mortgage account.
For the first three years of the NHRP, BofA reduces the separate account – the $50,000 in the example above – by 20% each year if the borrower remains current. Meaning after three years, $30,000 would be forgiven in the example. If, by then, house prices have gone up and the borrower is once again at a 100% loan-to-value ratio, BofA will no longer reduce the principal. If the borrower remains above 100% LTV, BofA will continue reducing payments for an additional two years.
BofA will not reduce the principal on the non-interest bearing mortgage account if the sum of both mortgages achieves 100% LTV.
"We believe the loss [through NHRP] will be smaller compared to foreclosure," said Jack Schakett, credit loss mitigation executive for BofA Home Loans.
The Treasury Department announced a similar earned principal forgiveness program for HAMP that will go into effect later in the year. But it ends after three years, opposed to the five-year possibility offered by BofA. Schakett said about 80% of the borrowers in the NHRP will not need to receive principal forgiveness after three years.
Schakett added that of the BofA borrowers currently moving through the HAMP process, 45% had an LTV of more than 120%.
“Our tests have shown that many homeowners who are severely underwater on their mortgages will respond positively to a modification offer that includes reduction of their principal balance, increasing the rates of acceptance of HAMP trial modification offers, conversion to permanent modifications and long-term success of the homeowner,” Schakett said.
Schakett said the amount of borrowers who have strategically defaulted is more than they've ever experienced before. To meet the demand for modifications, BofA more than doubled its staff in the loss-mitigation department to reach out to these borrowers. The bank also opened the first of three "outreach" centers in Nevada, joining similar centers in California and Florida.
BofA pushed its total number of permanent modifications under HAMP to 56,400 in April, up from 32,900 in March, for a total of more than 600,000 modifications through all available programs since January 2008.

First Drop in California Foreclosures in 2010: ForeclosureRadar

Foreclosure filings in California dropped in April for the first time since the beginning of the year, according to ForeclosureRadar, which tracks the filings.

Notices of default dropped 16% from March, after rising 3.75% from February. Default notices also increased 41% from last year, reaching 27,832 in April. The notices of trustee sale declined 10% from March to 30,578 in April. The amount of properties heading back to the bank as REO dropped 5.5% from March but stayed 19% above levels seen last year.

But the inventory of properties in pre-foreclosure or scheduled for sale did not drop as much. Pre-foreclosure inventory includes properties that have received a notice of default but have not been scheduled for sale. Pre-foreclosures dropped 3.17% from March, while the properties scheduled for sale dropped 2.7%.

Foreclosure cancellations, however, continue to increase after passing REO levels in December 2009. Cancellations increased another 11% in April, a sign that foreclosure alternative programs such as the Home Affordable Modification Program (HAMP) and the Home Affordable Foreclosure Alternatives (HAFA) program could be making a dent in California.

“The steady rise in cancellations leads us to believe that loan modifications and short sales are gaining traction” said Sean O’Toole, founder and CEO of ForeclosureRadar.com. “I’d caution, however, that cancellations also occur due to filing errors and extended postponements, which require the notice of trustee sale to be re-filed. In fact, 14.6 percent of new notice of trustee filings in April were on previously canceled foreclosures.”

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