by Jim the Realtor | Dec 12, 2011 | Bailout, Market Conditions |
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.
by Jim the Realtor | Nov 10, 2011 | Bailout |
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.
by Jim the Realtor | Nov 6, 2011 | Bailout, Fraud |
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.
by Jim the Realtor | Oct 31, 2011 | Bailout, Mortgage News, Psycho-babble |
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.
by Jim the Realtor | Oct 24, 2011 | Bailout |
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.
(more…)
by Jim the Realtor | Oct 18, 2011 | Bailout, Foreclosures/REOs, Psycho-babble, REO Inventory, REOs Coming to Market |
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.
(more…)
by Jim the Realtor | Oct 12, 2011 | Bailout, Ideas/Solutions |
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.
by Jim the Realtor | Oct 10, 2011 | Bailout, Short Sales |
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.
(more…)
by Jim the Realtor | Oct 9, 2011 | Bailout, Market Conditions, Mortgage News |
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.
(more…)
by Jim the Realtor | Oct 7, 2011 | Bailout, REO Counts |
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.
“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.”
