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… ."