Friday, May 31, 2013

Treasury Department Extends Mortgage Relief, Refinancing Program

The White House announced that it is extending the Making Home Affordable Program, a refinancing program that has helped home owners lower their monthly mortgage payments and obtain loan modifications. The program, originally set to expire at the end of this year, has been extended two years until Dec. 31, 2015.

The Making Home Affordable Program encompasses the Home Affordable Modification Program (HAMP), among other consumer protections.

More than 1.1 million home owners have received permanent loan modifications on their mortgages through HAMP as of March 2013. The median savings of borrowers who have participated in HAMP is $546 a month -- or 38 percent of their previous payment, according to the Treasury Department.

The program encourages lenders to lower monthly mortgage payments of struggling home owners by either reducing the interest rate on the loan or forgiving some of the principal.

“The housing market is gaining steam, but many home owners are still struggling,” said Jacob J. Lew, the Treasury secretary. “Extending the program for two years will benefit many additional families, while maintaining clear standards and accountability for an important part of the mortgage industry.”

The mortgage program was introduced by President Obama in early 2009. Banks and other lenders were slow to participate in the program, however. The government has since tweaked the program to allow more borrowers to qualify for it, after spending only $5.2 billion through March of the $29.9 billion allocated for HAMP.

Source: U.S. Department of Treasury and “Federal Program for Distressed Home Owners Is Extended,” The New York Times (May 30, 2013

Thursday, May 30, 2013

Short Sales Losing Favor With Lenders?

Lenders may be less inclined to approve short sales due to rising home prices, according to a new report by RealtyTrac.

During the first quarter, short sales posted a 35 percent drop compared to year-ago levels.

"The decrease in short sales was a bit of surprise given that 11 million home owners nationwide still owe more on their homes than they're worth," says Daren Blomquist, spokesman for RealtyTrac.

"Rising home prices are taking away the incentive for short sales on the part of both home owners and lenders."

Foreclosure prices are on the rise, increasing 28 percent in the first quarter. The banks may be realizing they won’t necessarily lose a lot more money by letting a home go into foreclosure instead, Blomquist says.

However, foreclosure sales have been plummeting too, reaching their lowest levels since early 2008. Foreclosure sales made up 21 percent of the total market during the first quarter, which is down from 25 percent one year ago, according to RealtyTrac.

Foreclosure sales peaked in early 2009, when they made up 45 percent of all homes sold nationally.

Still, foreclosures are making up the biggest bulk of sales in certain states, such as Georgia (where 35 percent of sales were foreclosures in the first quarter), Illinois (32 percent), and California (30 percent), according to RealtyTrac.

Source: “Foreclosure sales fall to lowest level since 2008,” CNNMoney (May 30, 2013)

Some Home Owners Chip Away at Mortgage With Credit Card

Wells Fargo’s credit card, the Home Rebate card, has allowed its customers to pay down $50 million in mortgage balances since the card’s debut in 2007.

Every purchase a customer makes with the card counts toward a rebate credited to the principal of the borrower’s Wells Fargo mortgage.

Over a 30-year time period, the card has the potential to help chip away at a home owner’s mortgage balance by reducing the mortgage interest they owe by potentially “thousands of dollars” as well as lowering the number of payments required, Wells Fargo officials say.

As a recent HousingWire article reports: “Wells Fargo claims a cardholder with a $150,000 mortgage who spends $1,500 a month on the Home Rebate Card could shorten their payment schedule by more than a year.”

Source: “Credit Card Allows Borrowers to Simultaneously Pay off a Mortgage, Daily Bills,” HousingWire (May 29, 2013)

Friday, May 24, 2013

Short Sales Routinely Show In Credit Reports As Foreclosures


May 17, 2013, 8:20 p.m.
WASHINGTON — Are large numbers of homeowners who have negotiated short sales with lenders at risk because of a startling omission in the American credit system? Do their credit reports and scores indicate that they were foreclosed upon, rather than having negotiated a mutually agreeable resolution with their lender?

The answer appears to be yes, and recently two federal agencies — the Federal Trade Commission and the Consumer Financial Protection Bureau — were asked to investigate why. The reality is this: The credit reporting system now in place does not have a separate code that distinguishes a short sale from a foreclosure. Yet there are crucial differences between the two.

In a short sale, the bank approves the sale of the house to a new buyer at a mutually acceptable price. Any unpaid remaining loan balance not covered by the sale proceeds may then be either partially or fully forgiven. The bank is an active participant throughout the process, negotiating for a higher price and higher repayment of principal from the original borrower.

In a foreclosure, the bank is essentially left holding the bag. The owners walk away at some point or live in the property rent-free until they're evicted. Frequently there is damage to the house left by the departing owners, sometimes extensive. There is little or no cooperation between them and the bank.
Both transactions are serious, negative credit events for the borrower. After all, the mortgage wasn't fully repaid. But the financial losses generated by a foreclosure typically are more severe for the lender than by a short sale.

Not only are there extended periods of nonpayment by the borrower but there are also substantial property management expenses, renovation costs, local property taxes and insurance while the house is being readied for resale. In some parts of the country, the average time to complete a foreclosure has exceeded two years.

The nation's major sources of mortgage financing — Fannie Mae, Freddie Mac and the Federal Housing Administration — all recognize the differences between short sales and foreclosures in their underwriting policies regarding new mortgages. Fannie Mae generally won't approve a new mortgage application by borrowers with a foreclosure on their credit report for up to seven years, but will consider lending to people who were involved in short sales, and who otherwise qualify in terms of recent credit behavior and available down payment, in as little as two years.

But if short sales routinely show up in credit reports coded as foreclosures, borrowers who might be able to qualify for a new mortgage two or three years after a short sale find themselves shut out of the market. George Albright, who completed a short sale on his home in New Port Richey, Fla., in 2010, has been trying for months to get through the hoops for a Fannie Mae conventional mortgage.

According to his mortgage broker, Pam Marron, Albright has a solid 720 FICO credit score, 20% down payment cash and more than adequate monthly income and reserves for a new home. But he keeps getting rejected because his credit report indicates a foreclosure, not a short sale.

That's not unusual, Marron said, since there is no specific code to identify short sales. In a highly automated and strict underwriting environment, lenders go by the codes, according to Marron, harming creditworthy applicants like Albright.

"I did my time," Albright said. "I'm ready to move on," but because of the inadequacy of current credit reporting practices "I'm still paying more for rent than I'd be paying on a new mortgage."

After a Capitol Hill hearing May 7 on credit reporting issues, Sen. Bill Nelson (D-Fla.) sent requests to both the FTC and the CFPB to investigate what he called the "disturbing practice" of misidentifying short sales, and to "penalize responsible parties in the mortgage- and credit-reporting industries, if they don't fix this coding problem within 90 days."

Nelson said real estate industry data indicate that there have been 2.2 million short sales nationwide during the last several years. Consumers who opted for a short-sale route rather than a more costly foreclosure are now being blocked from "reentry into the housing market," he said, thereby "stifling economic recovery for all homeowners."

Officials of the main trade group for the credit reporting industry, the Consumer Data Industry Assn., were not available for comment on Nelson's short-sales complaint to the federal agencies.

kenharney@earthlink.net.
Distributed by Washington Post Writers Group.

Tuesday, May 14, 2013

Freddie Releases New Loan Program Early

Daily Real Estate News | Tuesday, May 14, 2013

Mortgage giant Freddie Mac announced that it will make a new streamlined loan modification program for delinquent borrowers available now, instead of holding off the launch date to July 1 as originally planned.

Mortgage servicers will be able to offer a streamlined modification to borrowers who are at least 90 days late on their Freddie-owned or guaranteed mortgage. Borrowers cannot be more than 720 days delinquent on their loan, however, to qualify. Also, the loan must be at least a year old.

The new program will waive any document requirements for borrowers to receive the modification. The borrowers' modification becomes permanent after he or she makes three on-time payments during a three-month trial period.

"Today, Freddie Mac is giving a green light to its mortgage servicers to speed up financial relief for potentially thousands of families with delinquent mortgages across the nation," Freddie Mac said in a statement. “Freddie Mac is focused on adding momentum to the housing recovery by giving distressed borrowers more options to avoid foreclosure."

Source: “Freddie Mac speeds up availability of streamlined loan mods,” HousingWire (May 13, 2013)