bubbleinfo.com

From Originator News:

Bank of America is working “very hard” on a short sale-to-lease program for distressed borrowers who don’t qualify for government-backed refinance programs.

But the much-maligned bank won’t move forward until it gains assurance from regulators that borrowers are being treated fairly.

As outlined late this week by B of A executive Ron Sturzenegger at the Urban Land Institute’s fall conference in Los Angeles, the bank would regain title to mortgaged properties under a short sale arrangement, and then lease the houses back to their occupants for three years for rents that approximate the average for their particular areas.

At the end of the 36-month lease, Sturzenegger said during a panel session on capital markets, the institution would re-sell the houses to renters who wanted to buy them back. He did not say what price buyers would have to pay to reclaim ownership from the bank.

Sturzenegger, who is managing director of legacy asset servicing at B of A, said investors are interested in the program, as are borrowers. But two obstacles still need to be overcome before the program becomes operational, he said: governmental clearance and finding someone with the ability to run it.

From msnbc.com:

The Federal Housing Finance Agency, which oversees mortgage finance sources Fannie Mae and Freddie Mac, said it was easing the terms of the two-year-old Home Affordable Refinance Program, which helps borrowers who have been making mortgage payments on time but have not been able to refinance as home values have dropped.

To help underwater borrowers, or those whose loans are worth more than their homes, FHFA said it will scrap a cap that prohibits any homeowners whose mortgage exceeds 125 percent of the property’s value from participating in HARP, which is targeted at loans backed by Fannie Mae and Freddie Mac.

“Our goal in pursuing these changes is to create refinancing opportunities for these borrowers, while reducing risk for Fannie Mae and Freddie Mac and bringing a measure of stability to housing markets,” FHFA’s acting director, Edward DeMarco, said in a statement.

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REO sales will peak when the banks decide to peak them.  From HW:

The sale of properties repossessed through foreclosure may not peak until 2013, keeping home prices from a meaningful recovery for some time, analysts estimated Monday.

Nearly half of the more than 552,000 REO properties liquidated in the first half of 2011 were held by private banks. In the years ahead, the government — including the Department of Housing and Urban Development, Fannie Mae and Freddie Mac — will begin taking a majority of the activity.

In 2013, REO sales could reach 1.48 million properties, according to estimates from Bank of America Merrill Lynch analysts, a 10% increase from projected amount in 2012.

“We do not expect to see anywhere near the downward pressure on home prices that we had back in 2008, since the expected percent changes in liquidation volumes are so much smaller,” BofAML analysts said. “But home prices are starting from a negative point, so the implication is that home prices will continue to decline as the foreclosures transition through the pipeline.”

Most of the projected increase will come as the government begins to unload its backlog. The government-sponsored enterprises and HUD, analysts estimate, will liquidate roughly 595,000 properties in 2013 alone.

Total REO liquidations wouldn’t drop below 1 million until 2015, according to BofAML.

The Obama administration began work last month developing new strategies for selling this mass of properties, which may involve renting more of them. The Federal Housing Finance Agency is also working on a way to refinance more underwater borrowers to entice them from walking away.

“I would essentially rent the house back to those who are living in them now,” said Susan Woodward, an economist with Sand Hill Econometrics. “I don’t think it makes a lot of sense to push 4 million people out of their homes when they’re victims of a slower economy they had nothing to do with.”

Other analysts were skeptical of anyone who could predict accurately what the GSEs or Washington would do, especially after the elections in 2012.

“Do they really think that the government under any administration would let 500,000 homes hit the mark and crash prices all over again, six years after the first crash?” said Scott Sambucci, chief analyst at Altos Research.

He said even if unemployment improved by a full percentage point or two — which he said would be a stretch — the market would still struggle to meet such a supply influx.

“It would crash the market, so no, it’ll never happen,” Sambucci said.

Daren Blomquist at RealtyTrac, which monitors foreclosure filings across the country, said the sale of REO is on track to reach 825,000 by the end of 2011.

“We do expect the REOs to pick back up in 2012 as lenders push through some of the foreclosures delayed by processing and paperwork issues,” Blomquist said, adding the inventory needed to be sold could reach well into the millions.

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They keep nibbling around the edges, let’s just throw them on the market and see what happens! From HW:

The federal government can get rid of the more than 280,000 foreclosed homes on its books without having to sell them at massive discounts, according to a coalition of companies proposing to manage the disposition process.

The key is to provide a form of insurance against home price declines, says the Coalition for Recovery of Real Estate, a consortium of firms that responded to a request for information issued by the Federal Housing Finance Agency, the Treasury Department and the Department of Housing and Urban Development seeking ideas on how best to dispose of the federal inventory of real estate owned properties. The government owns roughly half of the REO inventory in the U.S. through HUD, Fannie Mae and Freddie Mac.

High-level executives at FHFA have expressed interest in the proposal, and recently requested clarification on some details of the plan, said Howard Blum, a spokesman for the group.

“It is clear that current housing market economics are severely impaired by buyer fear, which leaves sellers with no real options other than to drastically reduce prices, thereby creating economic loss for the seller,” says the coalition in its confidential RFI response, a copy of which was provided to HousingWire.

That buyer fear, along with a lack of creative tools to adequately re-market REO property, is one of the two biggest issues with the current state of the housing market, the document says.

“CORRE believes that home price protection is a solution to both of these issues and central to the CORRE strategy,” says the group, which includes two nationwide real estate brokerages, a mortgage lender, a mortgage insurer, a major servicer of distressed loans and a large law firm.

That’s in addition to investment bank Gleacher & Co. Securities Inc., which would handle property-level analysis and administration, plus securitization, and EquityLock Solutions, a Greenwood, Colo.-based company that would provide the home price protection plans. Blum requested that other partners remain unidentified.

EquityLock, which has been in business for about three years, launched the HPP products earlier this year. The risk it takes on those contracts is sold to Equity Assurance, a wholly owned insurance subsidiary.

The HPP plans essentially insure home buyers against price declines by guaranteeing REO purchasers a refund of up to 20% of their purchase price if an FHFA index of area home prices declines between the time of purchase and an eventual resale.

The guarantee applies to properties held for a minimum of two years and resold up to 15 years later, and would be included on properties that were pooled and/or securitized.

The CORRE group proposes analyzing the government’s REO inventory to determine the best possible exit strategy for each property — including sales to owner-occupants, sales to investors, securitization of the REO assets, and demolition of severely dilapidated property.

Rentals could also be part of the mix. In extremely weak markets, “some of the REO properties will have to be sold to investors to place into rental stock until those markets recover with time,” says the proposal. “As a very last resort, the CORRE process would place these REO properties into rental or rent-to-own portfolios with no further recourse to the enterprises post-sale.”

The coalition says by eliminating the need for drastic price cuts and encouraging homeownership, its plan would liquidate the government’s REO portfolios in a cost-effective manner, lessen the potential use of taxpayer funds in disposing of those REOs and provide a potential future revenue stream for the government.

With the taxation of debt relief set to resume in 2013, we should see a mad rush of short-sellers trying to time their departure just right, in order to get max cheese, no tax.  Hat tip to SM for sending this along from the Sun:

Bank of America, the nation’s largest mortgage servicer, is offering Florida homeowners up to $20,000 to short sale their homes rather than letting them linger in foreclosure.

The limited-time offer has received little promotion from the Charlotte, N.C.-based bank, which sent emails to select Florida Realtors earlier this week outlining basic details of the plan.

Only homeowners whose short sales are submitted for approval to Bank of America before Nov. 30 will qualify. The homes must have no offers on them already and the closing must occur before Aug. 31, 2012.

Realtors said the Bank of America plan, which has a minimum payout amount of $5,000, is a genuine incentive to struggling homeowners who may otherwise fall into Florida’s foreclosure abyss.

“I think this is a positive sign that the bank is being creative to try and help homeowners and get things moving,” said Paul Baltrun, who works with real estate and mortgages at the Law Office of Paul A. Krasker in West Palm Beach. “With real estate attorneys handling these cases, you’re talking two, three, four years before there’s going to be a resolution in a foreclosure.”

Guy Cecala, chief executive officer and publisher of Inside Mortgage Finance, called the short sale payout a “bribe.”

“You can call it a relocation fee, but it’s basically a bribe to make sure the borrower leaves the house in good condition and in an orderly fashion,” Cecala said. “It makes good business sense considering you may have to put $20,000 into a foreclosed home to fix it up.”

Homeowners, especially ones who feel cheated by the bank, have been known to steal appliances and other fixtures, or damage the home.

“This might be the banks finally waking up that they can have someone in there with an incentive not to damage the property,” said Realtor Shannon Brink, with Re/Max Prestige Realty in West Palm Beach. “Isn’t it better to have someone taking care of the pool and keeping the air conditioner on?”

A spokesman for Bank of America said the program is being tested in Florida, and if successful, could be expanded to other states.

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From the latimes.com:

Delinquent borrowers who think they’ve been treated unfairly by their mortgage lenders and the companies that service their loans will soon have their day in court.

Well, not court, per se. But within the next few weeks, federal regulators will announce a new complaint procedure for borrowers who think they’ve been unjustly harmed by errors, misrepresentations or other deficiencies in the foreclosure process.

Under the process, which is being spearheaded by the Office of the Comptroller of the Currency, aggrieved borrowers whose primary residence was in any stage of the foreclosure process between January 2009 and December 2010 will be eligible to have their cases reviewed by an independent consultant.

The new complaint procedure isn’t universal. It covers just 14 servicing companies and banks, but they include some of the largest in the field — household names such as Bank of America, Wells Fargo, Citigroup and JPMorgan Chase. An estimated 4.5 million loans are in the pool.

“We are looking not just at those foreclosures that resulted in foreclosure sales, but at foreclosures that were pending at any point” during the two-year review period, acting Comptroller John Walsh said. In other words, a foreclosure action that might have been canceled for one reason or another. Or, given how long the process takes these days — a borrower in foreclosure has gone an average of 599 days since making a payment, according to Lender Processing Services — an action that could still be pending.

Either way, cases would be eligible for review by an independent consultant unaffiliated with the lender or servicer if the borrower thinks he’s been given the runaround, been given wrong information or not been afforded due process under the law.

The process is intended to fix what is wrong in the loan servicing arena. That includes the issue of so-called robo-signing, in which employees and sometimes machines signed off on foreclosure documents they hadn’t read or verified as accurate.

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We have heard that Fannie Mae is cutting back on their REO outsourcers.  From HW:

Treasury Secretary Timothy Geithner said the Obama administration is working on a plan to make it easier for Americans to refinance underwater mortgages and to turn REOs into rentals. The secretary said it’s likely the administration will move on this plan within the next few weeks.

Geithner made that assertion when quizzed by members of the House Financial Services Committee Thursday.

“We expect to move forward in the next couple of weeks with the Federal Housing Finance Agency to make it easier for Americans to refinance even if they are somewhat underwater,” Geithner told lawmakers. Geithner was short on details, but said some type of large plan to turn REOs into rentals is also on the table.

“We are trying to get this huge amount of vacant property on the market, and in the hands of people who can rent,” the Treasury secretary said.

The House Financial Committee’s Q&A with Geithner focused on housing at several key points.

One lawmaker pushed Geithner on why the white paper released by the Treasury on GSE reform in February had yet to make it into some type of final proposal.

Geithner assured lawmakers those discussions are ongoing and that the European debt crisis and other immediate fiscal concerns delayed the rollout of a final GSE reform plan, but assured the committee the Treasury continues to work on those proposals.

Geithner took heat from Democratic Congressman Luis Gutierrez (D-Ill.) who said he voted for the Home Affordable Modification Program, or HAMP, to help more homeowners stay in their properties, but ended up disappointed when only a slice of the $50 billion allocated for HAMP was spent to save distressed homeowners.

Geithner said the administration was prevented  from reaching a large segment of distressed borrowers because a large number  of  underwater mortgages are ineligible for HAMP due to excessive debt levels or the fact they are classified as jumbos or loans on second homes.

“We are still looking for ways to expand the reach of these programs,” Geithner said. He told lawmakers the administration wants to propose a plan where Congress would allocate more funds to the Department of Housing and Urban Development to send resources to communities weighed down by foreclosures.

Excerpted from this article in  ProPublica:

For HAMP’s first two years, the government offered very little public detail about its oversight efforts. It was virtually impossible for the public – or even Congress – to know how well the banks and mortgage servicers were complying with the government’s effort to prevent struggling homeowners from losing their homes. Those years were crucial, because that’s when the vast majority of homeowners eligible for a modification – about three million – were evaluated by servicers.

The documents obtained by ProPublica show auditors finding serious problems at a major servicer during that time. Instead of publicly revealing the findings, Treasury chose to privately request that GMAC fix the problems.

“For two years, they’ve known how abysmal servicers were performing and decided to do nothing,” said Neil Barofsky, the former special inspector general for the Troubled Asset Relief Program, better known as TARP or the bank bailout, which provided the money for HAMP.

“It demonstrates that if you have a set of rules for which compliance is completely voluntary and no meaningful consequences for those who violate them, having all the audits and reviews in the world are not going to make a bit of difference,” he continued. “It’s why the program has been a colossal failure.”

Treasury continued to release few details about its audits until this June, when it began publishing quarterly reports based on the audits’ results. The public report showed what Treasury called “substantial” problems at four of the ten largest servicers – Bank of America, JPMorgan Chase, Wells Fargo, and Ocwen – and Treasury for the first time withheld taxpayer subsidies from three of them.

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The Fed’s annoucement of buying longer-term treasuries is a nothing-burger for housing.  Any benefit of lower mortgage rates will be scooped up by the lenders, not us.  You might see an occasional high-3% offering, but is it even necessary? 

I don’t think so, buyers are happy with the prospects of 4% mortgage rates.

The Fed/Gov needs to address consumer confidence, and none of these multi-billion dollar T-sprees are going to change how people feel about buying a house. They should do something for the folks who pay their bills on-time, save money in spite of 0% interest, and allow politicians to live cushy livestyles.

What can they do?

1. Ramp up foreclosures.

Don’t just issue a few extra NODs, let’s get down to business.  Fannie/Freddie owns the most REOs, and the Fed/Gov pulls their strings.  Let’s blow out sxome real volume, and show America that the government is about doing what’s right, for a change.

I am a REO listing agent for Fannie Mae, and not much is coming my way.  This month I receives two more assignments, after a 6-week dry spell.  Another 2-bedroom house in City Heights that was in short-sale limbo with a buyer who would have paid more than I’ll get for it.  The other is a National City triplex clouded with title issues that will take months, if not years, to resolve.

The powers that be fear that more foreclosures would mean lower prices, why don’t they consider the disgust they are causing with buyers?  The erosion of consumer confidence in our leaders is more damaging to the real estate market than expediting the foreclosure process – because plenty of buyers are going to wait this out until the shenanigans are done (chime in if you are one of those!). 

The foreclosures are going to happen anyway, it’s just a matter of time – let’s have some market clearing and cause consumer to have more confidence in our leaders!

2.  Declare a specific exit strategy from the mortgage market. 

The Fed/Gov may not get out altogether, but whatever the policy is, put it on the table and let’s go.  Private lenders aren’y going to surface until there is a need.  There is no need if the government policy is to coddle the mortgage market.

3.  Make decisons

Make specific policy about 1) allowing foreigners with means to emigrate if they buy a house, 2) MID, 3) increase/decrease capital-gains tax, 4) putting the Tan Man in jail.

If people sensed that there was clarity and direction in government policy, they’d be more likely to take positive action.  With today’s psuedo-policy, people just want to put their dough in jars and bury it in the backyard.

The definition of leadership is ‘demonstrating the ability to lead’.  Now is the time.

Hat tip to Susie for sending this in from the nytimes.com:

The Obama administration is considering further actions to strengthen the housing market, but the bar is high: plans must help a broad swath of homeowners, stimulate the economy and cost next to nothing.

One proposal would allow millions of homeowners with government-backed mortgages to refinance them at today’s lower interest rates, about 4 percent, according to two people briefed on the administration’s discussions who asked not to be identified because they were not allowed to talk about the information.

A wave of refinancing could be a strong stimulus to the economy, because it would lower consumers’ mortgage bills right away and allow them to spend elsewhere. But such a sweeping change could face opposition from the regulator who oversees Fannie Mae and Freddie Mac, and from investors in government-backed mortgage bonds.

Administration officials said on Wednesday that they were weighing a range of proposals, including changes to its previous refinancing programs to increase the number of homeowners taking part. They are also working on a home rental program that would try to shore up housing prices by preventing hundreds of thousands of foreclosed homes from flooding the market. That program is further along — the administration requested ideas for execution from the private sector earlier this month.

But refinancing could have far greater breadth, saving homeowners, by one estimate, $85 billion a year. Despite record low interest rates, many homeowners have been unable to refinance their loans either because they owe more than their houses are now worth or because their credit is tarnished.  

Exactly how a refinancing plan might work is still under discussion. It is unclear, for example, whether people who are delinquent on their mortgages would be eligible or whether lenders would administer it. Federal officials have consistently overestimated the number of households that would be helped by their various housing assistance programs.

A working group of housing experts across several federal agencies could recommend one or both proposals, or come up with new ones. Or it might decide to do nothing.

Investors may suspect a plan is in the works. Fannie and Freddie mortgage bonds had been trading well above their face value because so few people were refinancing, keeping returns on the bonds high. But those bond prices dropped sharply this week.

Administration discussions about housing proposals have taken on added urgency this summer because the housing market is continuing to deteriorate. On Wednesday, the government said that prices of homes with government-backed mortgages fell 5.9 percent in the second quarter from a year earlier, the biggest decline since 2009. More than one in five homeowners with mortgages owe more than their homes are worth. Some analysts are now predicting waves of foreclosures and a continuing slide in home prices.

There is not much time to help the market before the 2012 election, and given Congressional resistance to other types of stimulus, housing may be the only economic fix in reach. Federal programs to assist homeowners have been regarded as ineffective so far, and they are complex.

Some economists say that with housing prices and interest rates at affordable levels, only fear is keeping consumers out of the market. Frank E. Nothaft, the chief economist at Freddie Mac, said the federal action could instill confidence.

“It almost seems to me you want to have some type of announcement or policy, program or something from the federal government that provides that clear signal that we are here supporting the housing market and this is indeed a good time to really consider buying,” Mr. Nothaft said.

The refinancing idea has been around since at least 2008, but proponents say the recent drop in interest rates to below 4 percent may breathe new life into the plan.

“This is the best stimulus out there because it doesn’t increase the deficit, it accomplishes monetary policy, and it reduces defaults in housing,”  said Christopher J. Mayer, an economist at the Columbia Business School. “So I think this is low-hanging fruit.” Mr. Mayer and a colleague, Glenn Hubbard,  who was chairman of the Council of Economic Advisers under President George W. Bush, proposed an early version of the plan.

The idea is appealing because it would not necessarily require Congressional action. It also would not tap any of the $45.6 billion in Troubled Asset Relief Funds that was set aside to help struggling homeowners. Only $22.9 billion of that pool has been spent or pledged so far, and fewer than 1.7 million loans have been modified under federal programs. But Andrea Risotto, a Treasury spokeswoman, said whatever was left would be used to reduce the federal deficit.

A broader criticism of a refinancing expansion is that it would not do enough to address the two main drivers of foreclosures: homes worth less than their mortgages, and a sudden loss of income, like unemployment. American homeowners currently owe some $700 billion more than their homes are worth.