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More from HW:

The FHFA set off a firestorm of discussion in 2011 when it announced an REO-bulk sales initiative that aims to repair the hardest-hit housing markets by selling off bulk assets to investors who have the ability to turn those properties into rentals.

The FHFA, as conservator for the government-sponsored enterprises, says investors can now enter the pre-qualification process to establish whether they have the financial ability and property-management capacity to bid on transactions during the initial pilot phase of the program.   

“This is an important step toward increasing private investment in foreclosed properties to maximize value and stabilize communities,” said FHFA acting director Edward DeMarco. “I am grateful for the collaborative effort by the many stakeholders including investors, nonprofit organizations, and state and local government officials, who have worked together on this Initiative.”

Investors who qualify will be able to purchase pools of foreclosed properties for the purpose of turning those homes into rentals.

The pre-qualification process will identify which investors have the expertise to manage the properties and the financial capacity to deal with the homes for a long period of time. Investors who participate have to sign agreements, promising to keep certain aspects of the deals confidential.

Investors who want to pre-qualify, can click here for information.

Thank you taxpayers!  From HW:

The Treasury Department will triple payments to mortgage investors for reducing borrower principal through an expanded Home Affordable Modification Program announced Friday.

Officials announced several critical changes to HAMP, including an enrollment extension to Dec. 31, 2013, from its original expiration date at the end of this year.

The Treasury will also require servicers to factor in second liens and other obligations in the debt-to-income ratio calculation. Previously, if a borrower’s first-lien mortgage monthly payment was below 31% of the income, the borrower was deemed ineligible. Factoring other debts to the DTI evaluation will expand the pool of borrowers who could receive the assistance.

To combat blight, officials said they would also expand HAMP to investors who are renting properties to tenants.

Since HAMP launched in March 2010, more than 900,000 permanent modifications have been conducted. The Treasury originally estimated the program to reach between 3 million to 4 million borrowers. As of Dec. 1, less than 1 million were estimated to be eligible for the program under past rules.

Of the modifications already given, roughly 36,400 resulted in reduced principal as of Dec. 1. The Treasury paid between six and 21 cents to the investors for each dollar forgiven under HAMP, but that will grow to between 18 and 63 cents, under the rule changes.

In a conference call Friday, Treasury Assistant Secretary Tim Massad would not estimate how many borrowers would be eligible after the changes, but he did say mortgage servicers were signaled some expansion, even for principal reduction.

“We have previewed the changes with the servicers,” Massad said. “We got a very positive initial reaction.”

Department of Housing and Urban Development Secretary Shaun Donovan said in the conference call Friday that the Treasury would make these payments to Fannie Mae and Freddie Mac if they participate in the principal reduction program.  To date, the GSEs have not committed to such a program.

Both GSEs owe the Treasury $151 billion in bailouts, and their regulator the Federal Housing Finance Agency said a wide-scale principal reduction program would cost Fannie and Freddie $100 billion.

Of the $29.9 billion allocated for HAMP and other housing programs, the Treasury has spent only $2.3 billion. The Treasury still owes another $9 billion to $10 billion for the modifications already done, Massad said.

Donovan renewed calls for servicers to ramp up principal reductions, and reiterated that they would be a main tool in crackdowns stemming from the ongoing foreclosure settlement talks and the securitization investigations launched this week.

“These changes aren’t going to solve all the problems in the housing market, but they shouldn’t have to wait for the market to hit bottom before getting some relief,” Donovan said.

CR outlined on his show how the Fannie/Freddie HAPR refinances will escalate in March when they change to automated underwriting, and loosen the guidelines by not requiring appraisals or income verifications.  See more details here:

http://www.bubbleinfo.com/2012/01/11/harp-no-income-refis-in-march/

In the State of the Union address last night, President Obama said he will send to Congress a proposal to expand the refinancing to loans carried by private lenders.  An excerpt from the nytimes.com:

The new plan would require Congressional approval, a difficult hurdle for any legislation in the current polarized environment. Still, some Republicans have expressed support for expanding the availability of refinancing, and White House officials insisted that the plan was not an act of theater.

“I’m sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates,” Mr. Obama said Tuesday night in his State of the Union address. “No more red tape.  No more runaround from the banks.”

Administration officials said they would release the full proposal in the near future.

The new program will be directed at people whose mortgage debts exceed the value of their homes, according to a senior administration official who spoke on the condition of anonymity because the details have not yet been finalized. The official estimated that the program could benefit two million to three million homeowners who have loans that are not guaranteed by the government, and that the program’s cost would not exceed $10 billion.

The proposal is the latest in a long series of largely unsuccessful efforts by the administration to bolster the housing market. Like most of its predecessors, the plan is focused not on borrowers facing foreclosure but on those who have been able to keep making the payments on their homes. Reducing housing payments for those borrowers will allow them to spend more money on other things. It also could help to stabilize housing prices by encouraging them to stay in their homes.

They haven’t rolled out the details yet, let along convince Congress that they should add 2-3 million more refinances of private loans to the 1 million projected to be helped by HARP.

But if they did, the last sentence is the key – it will bring fewer homes to market, which may or may not ‘stabilize housing prices’. 

What his program will do is stagnate the market further, because there will be fewer distressed sales selling for retail price or less (which would stimulate sales!).  Instead, the housing inventory will be dominated by equity sellers who insist on listing their homes for retail-plus prices, and holding out. 

This additional program will force buyers to contend with lowly-motivated sellers – the ones who will sell, if they get their price.  Will buyers be willing to pay more?

All of these guys are big talkers…..From HW:

Democrats on the House oversight committee are pushing to subpoena the Federal Housing Finance Agency to obtain an analysis looking at what effects principal reductions would have on Fannie Mae and Freddie Mac.

FHFA Acting Director Edward DeMarco has long defended the agency’s policy of keeping Fannie and Freddie mortgage servicers from writing down principal. Allowing such an option would only forge more losses for the government-sponsored enterprises who already owe the Treasury Department roughly $151 billion in bailouts, he and both CEOs at Fannie and Freddie concluded.

However, both CEOs are on their way out, and other Democrats in Congress have pushed the White House to replace DeMarco as well.

Mortgage servicers primarily use principal reduction for loans held on portfolio or for private investors. And it has been used sparingly. In the third quarter of 2011, servicers cut principal on 10,722 modifications, roughly 7.8% of all workouts during the period, according to the Office of the Comptroller of the Currency. Roughly 4 million Fannie and Freddie loans are currently underwater, meaning the property is worth less than the loan on the home.

In a November committee hearing, DeMarco said he would provide the lawmakers documents and analysis used for determining the principal reduction policy.

“We have been through the analytics of the underwater borrowers at Fannie and Freddie, and looked at the foreclosure alternative programs that are available, and we have concluded that the use of principal reduction within the context of a loan modification is not going to be the least-cost approach for the taxpayer,” he said at the time.

Read the rest of this entry »

Thanks to everyone who participated in the blog talk radio show last night with Bill McBride!

Based on the responses here and at CR, people enjoyed hearing from Bill, and are encouraging him to do more – hopefully we can do it again.

Here is the link to the two hours:

http://my.blogtalkradio.com/jim-the-realtor/2012/01/11/bill-mcbride-of-calculated-risk

I will have the transcript of the show hopefully by tomorrow for those who prefer to read – we covered many topics!

Bill brought up the HARP refinancing of underwater mortgages, and how they are going to automated underwriting in March.  This means that the Fannie/Freddie loans over 80% LTV (though appraisals aren’t required) can be refinanced at today’s rates – with no qualifying.

The GovFed guys think this program will help another million people stay in their homes.  We speculated that if it was easy (or at least easier) to get a loan mod, more people would do it, and stay in their home. 

With 8-10 million foreclosures expected, if they could solve a million here, and a million there, and not have to foreclose…for now…could that be enough relief to calm the markets?

The new enhanced Home Affordable Refinance Program guidelines were released on November 15, 2011, and with this December 20th update they stated that no income ratios will be required for qualified borrowers (on page 7).  It appears that they will rely primarily on credit histories.

However, these are guidelines, and the lenders will come up with their own interpretation. 

Fannie Mae and Freddie Mac buy loans, they do not fund loans. Therefore, we must be reminded that these guidelines must now be met up with originators such as BofA, Wells Fargo, Chase, Citi, etc. who will then in turn create their own internal guidelines, based on their interpretation of what Fannie and Freddie have put out. In addition, the lenders may have their own comfort level, company philosophy or other internal reasons for making the program more attractive, or less.

Key components of the new HARP:

1. The original mortgage must have been sold to Fannie or Freddie prior to April 1, 2009.
2. It appears they are looking for scores at 620 and higher.
3. The new guidelines are permitting one 30-day delinquency within the previous 12 months on the mortgage being refinanced provided the Delinquency was not within the previous six months.
4. There are no LTV restrictions for fixed-rate mortgages with terms up to 30 years, including those with terms of 15 years.
5. Any borrower with an LTV ratio below 80% is not eligible for HARP.
6. The GSEs provided specifics on which liabilities would be lifted and noted that the rep and warranty adjustment is one of the most important components of the new program in order to create competition.  The lender will not be responsible for any of the representations and warranties associated with the original loan. As long as the new loan has no fraud associated with it, for the most part the new lender is off the hook as far as buy backs are concerned. This is a major point and will cause additional refinances.
7. The lender is not required to make any representation or warranty as to value, marketability, or condition of the subject property unless they obtain a new appraisal. It should mean that the lender would rather NOT order an appraisal. They will likely order one in the event they believe that the subject property may have challenges that are not being fully disclosed.
8. They are removing the requirement that the occupancy of the Mortgage being refinanced and the occupancy of the Relief Refinance Mortgage be the same
9. The GSEs are also removing the requirement that the borrower (on the new loan) meet the standard waiting period following a bankruptcy or foreclosure. The requirement that the original loan must have met the bankruptcy and foreclosure policies in effect at the time the loan was originated is also being removed.

https://www.efanniemae.com/sf/mha/mharefi/pdf/refinancefaqs.pdf

http://www.freddiemac.com/sell/guide/bulletins/pdf/bll1122.pdf
https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2011/sel1112.pdf1.

You may look up to see if Fannie Mae owns your mortgage by clicking here; http://www.fanniemae.com/loanlookup/ and click here to see if your loan is owned by Freddie Mac; https://ww3.freddiemac.com/corporate/

From cnnmoney.com (seen at CR):

NEW YORK (CNNMoney) — Delinquent borrowers facing foreclosure are learning that they can stay in their homes for years, as long as they’re willing to put up a fight.

Among the tactics: Challenging the bank’s actions, waiting to file paperwork right up until the deadline, requesting the lender dig up original paperwork or, in some extreme cases, declaring bankruptcy.

Nationwide, the average time it takes to process a foreclosure — from the first missed payment to the final foreclosure auction — has climbed to 674 days from 253 days just four years ago, according to LPS Applied Analytics.

It takes much longer than that in Florida, where the process averages 1,027 days, nearly 3 years. In D.C., foreclosure averages 1,053 days and delinquent borrowers in New York often stay in their homes for an average of 906 days.

Because California is a trustee-sale state, the delays are shorter – only 11 months on average:

And while some borrowers are looking for ways to make good with lenders and get their homes back, many aren’t paying a dime. Nearly 40% of homeowners in default have not made a payment in at least two years, according to LPS.

Many of these homeowners are staying in their homes based on a technicality. There is rarely any dispute over whether or not they have stopped paying their mortgage, said David Dunn, a partner at law firm Hogan Lovells in New York, who represents banks and other financial institutions in foreclosure cases.

“In my experience, they never say, ‘I’m not delinquent’ or ‘I want to pay my bill but I’m confused over who to send it to,’ or ‘Oh my God, you mean I didn’t pay my mortgage?’ They’re not in technical default. They’re in default because they’re not paying,” he said.

Read the rest of this entry »

Does anybody know someone who got a principal reduction? From HW:

A borrower is more likely to get a principal reduction than a short sale or deed-in-lieu of foreclosure under the Home Affordable Modification Program.

The Home Affordable Foreclosure Alternatives program launched in April 2010 to give borrowers who are eligible for HAMP a chance at a short sale or DIL. Participating servicers completed about 20,700 of these deals as of October, with less than 600 of them deeds-in-lieu, according to Treasury Department data.

The principal reduction alternative, or PRA, began in October 2010 and only for mortgages not guaranteed by Fannie Mae or Freddie Mac. But in six fewer months, servicers started 33,376 modifications by writing down principal.

The effect of the reduction is eye catching. The Treasury released characteristics of HAMP modifications last week. The median loan-to-value ratio on modifications that went through principal reduction was 158%. After the workout was complete, the borrower held an LTV of 115%, meaning he or she owed 15% more on the mortgage than the home was worth rather than being 58% underwater.

The average amount reduced is more than $65,000 or 31% of the unpaid principal balance.

Through PRA, the Treasury pays investors for every dollar of principal forgiven on a sliding scale depending on how far underwater the borrower is.

HAMP enters its final year next month, and it has been criticized at nearly every turn since it launched in March 2009. It will not reach the 3 million to 4 million originally predicted. After redefaults are factored in, roughly 800,000 homeowners will avoid foreclosure thanks to HAMP, according to the Congressional Oversight Panel.

Read the rest of this entry »

From HW:

Bank of America is looking at a new program to rent a home back to the borrower after foreclosure.

“There are programs that we are quite interested in,” said Ron Sturzenegger, who leads the bank’s legacy asset servicing division, in an interview with HousingWire. “We are talking with investors that would come in and buy these houses and would lease them back to who would now be the now tenant.”

In February, BofA formed the division to handle the servicing for delinquent mortgages, loans no longer being written, and to sort out outstanding representation and warranty claims. Currently, more than 35,000 employees at the bank are sorting through 1.1 million loans 60 days delinquent or worse, according to its third-quarter financial statement.

The Federal Housing Finance Agency is working on an REO rental program for Fannie Mae and Freddie Mac. It received more than 4,000 ideas on how to do it.

But private banks own $50.4 billion worth of REO properties, too, according to the Federal Deposit Insurance Corp., and millions of these homes are sitting vacant.

Sturzenegger described how their idea would work.

“We are looking at programs where you can capture somebody before the REO process and offer a deed-for-lease. We would go to the customer and say, ‘We’ll do a short sale. Will you be interested in leasing your property back? We’re still going to sell the property. You will no longer be the owner. But you can be a tenant now in that same property and save you from moving on,’” he said.

Sturzenegger stressed the bank would still sell the REO as before in areas where there is a market for them and they can still get reasonable bids. But some areas are so saturated with inventory, there isn’t enough investor or homebuyer demand and properties can sit for years uninhabited.

Rick Sharga, the executive vice president at Carrington Mortgage Holdings, said in an interview that many firms, including Carrington are preparing to participate.

“We already have the infrastructure and assets in place to participate effectively,” he said. “Everyone is waiting on final direction from the FHFA.”

Sturzenegger stressed the private program at BofA is in its infancy.

“It’s in the very early stages,” he said.

From HW:

California expanded its $2 billion program to help homeowners avoid foreclosure to those with second homes as well.

The California Housing Finance Agency established the four Keep Your Home programs using money from the Treasury Department’s $7.6 billion Hardest Hit Fund. Before, borrowers were restricted from modifications, unemployment funds, relocation assistance and even principal reductions if they had a second home.

Officials eliminated the exclusion, because they said many homeowners are co-signers on a second home or are underwater on their first property.

Other changes to the programs include allowing borrowers to take advantage of principal reduction offers even if they completed a cash-out refinance in the past, which many Californians did during the boom.

CalHFA also increased the amount of unemployment assistance qualified borrowers would receive and how long they could get it. Out-of-work homeowners can receive up to $3,000 in mortgage and tax assistance per month for up to nine months, an increase from six months before the change.

Borrowers can also get $20,000 through a reinstatement program to use for past-due mortgage payments, up from $15,000.

“This expanded eligibility will allow more families to qualify and receive greater assistance,” said Claudia Cappio, Executive Director of the California Housing Finance Agency.

In order to qualify for these programs, the borrower’s servicer must participate. CalHFA said nearly 50 mortgage servicers now participate in at least one of the four. But only 11 servicers participate in the principal reduction program that requires the bank to match each dollar the agency removes from the loan.

While Bank of America joined the California principal reduction program in July, Fannie Mae and Freddie Mac loans are still excluded.

The California Attorney General Kamala Harris recently called on both companies to provide principal reduction to her constituents.

From the latimes.com:

Remember the federal tax credit programs offering $7,500 and later $8,000 to first-time home buyers? The credits were designed to deliver a jolt to the reeling housing industry, and they did: More than 4 million people applied for and have received nearly $30 billion worth of credits.

Most went to people who legitimately qualified for the credits, according to the Internal Revenue Service, the federal agency that administers them. But a series of audits by the Treasury’s inspector general for tax administration has documented foul-ups by the IRS, including credits granted to prison inmates and dead people, fraud schemes involving claimants who never bought a house and even credits for alleged home purchases by teenagers and children as young as 3 years old.

But far more commonplace, according to auditors, were shortcomings by the IRS in distinguishing between taxpayers who were supposed to repay their credits over a 15-year period — as required under the original $7,500 program in 2008 — and people for whom there was no such requirement under later versions of the program allowing credits up to $8,000.

The IRS also had trouble determining whether recipients of the non-repayable credits might have violated rules by selling their homes before the three years of required residency and earning a profit on the sale.

Now a new audit has turned up still more home buyer tax credit problems. According to the inspector general, the IRS has been sending “incorrect” notices to thousands of taxpayers that either inform them that they owe no repayments on their credits when they actually do, or demand repayments from recipients who legally owe nothing.

The latest audit found that 61,427 homeowners were sent erroneous notices, including in part:

• 27,728 who bought homes in 2009 under the non-repayable program but were told to send in payments.
• 12,495 who received the 2008 version of the credit, which was essentially an interest-free loan, but were told no repayments are due.
• 832 dead people who were asked for repayments on their credits despite the fact that the law waives any repayment requirements for deceased taxpayers.

An additional 18,220 owners who were supposed to receive notices of repayments due on their credits never were sent them. The audit also found that an outside vendor hired by the IRS to help identify credit recipients who may have sold their homes early used faulty data that led to 53,558 taxpayers receiving notices erroneously demanding repayments.

A key contributor to the IRS’ early snafus was that the original version of the credit rules required essentially no documentation of home purchases. J. Russell George, Treasury’s inspector general for tax administration, told a congressional hearing this year that “we estimate that at least $485 million of the more than $513 million of potentially erroneous claims we identified were issued with no IRS scrutiny, such as an examination or steps to validate the claim. These erroneous credits might have been denied if documentation requirements were in place.”

IRS plans for the upcoming tax filing season include a shift to a Web-based tool that will help people determine whether they have a repayment requirement.

In the meantime, if you’re one of the estimated million-plus taxpayers in this category, watch for the revised IRS notification approach. And if you get an official demand for a credit repayment that you know is wrong, don’t sweat it. You are probably not alone. Talk to a tax advisor to get it straightened out.