Lender Processing Services (LPS) has released new data detailing mortgage performance at November month-end. The most troubling statistic shows a nearly 3 percent month-over-month increase in the number of loans 30 or more days past due but not yet in foreclosure.
LPS says 8.15 percent of the nation’s mortgages fell into this category as of the end of November. That’s up from 7.93 percent at the end of October – a 2.7 percent increase – and is the first time in four months the company has reported a rise in the national delinquency rate.
On an annual basis, the stats pan out better, with November’s delinquency rate down 9.6 percent from a year earlier.
The monthly increase in the delinquency rate can be attributed to a buildup of seriously delinquent mortgages.
LPS says as of November, there were 1,809,000 properties on which mortgage payments were 90 or more days past due but the case had not yet been referred to foreclosure. The number of properties in this bucket stood at 1,759,000 in October.
In contrast, borrowers who were behind on their payments by 30-89 days declined to 2,279,000 in November, down from 2,329,000 in October.
According to LPS’ analysis, 4.16 percent of the nation’s mortgages were part of the foreclosure pre-sale inventory in November. That ratio is down 3.0 percent from October but up 2.0 percent from November 2010, and equates to 2,116,000 homes.
All in all, LPS says 6,260,000 borrowers were behind on their payments or in foreclosure as of the end of November, representing one in eight residential mortgages.
States with highest percentage of non-current loans – which combines foreclosures and delinquencies – include: Florida, Mississippi, Nevada, New Jersey, and Illinois.
Montana, South Dakota, Wyoming, Alaska, and North Dakota have the lowest percentage of non-current loans.
Three government agencies are combining efforts to address mortgage modification scams through a joint task force.
With the announcement of the task force, the participating agencies – the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), the Consumer Financial Protection Bureau (CFPB), and the Treasury Department — released a consumer fraud alert to warn homeowners of modification scams.
“The goal of our consumer fraud alert is to empower homeowners with the knowledge of how to recognize and avoid these scams,” said Christy Romero, deputy special inspector general for SIGTARP.
The agencies warn homeowners to beware of any company that requires advance charges to pursue loan modifications, offers money-back guarantees, or advises them to discontinue mortgage payments and/or contact with their servicer.
“Only your mortgage servicer has discretion to grant a loan modification,” the fraud alert emphasized.
The agencies stressed that applying for a modification through HAMP is free, and homeowners interested in pursuing a modification can call the Homeowner’s HOPE Hotline at 1.888.995.HOPE for more information and to make sure they receive help from a legitimate source.
“This new initiative builds on the work we have done with SIGTARP to date and other collaborative efforts throughout the federal government to educate homeowners about scams so they can protect themselves and their homes,” stated Tim Massad, Treasury assistant secretary for financial stability.
“Mortgage scams harm not only homeowners but legitimate businesses and the market as a whole,” said Richard Cordray, chief of enforcement for the CFPB.
Barclays Expects 'Triple-Dip' With Another 7% Drop in Home Prices
The analysts at Barclays Capital say a “triple-dip” in home prices will likely materialize by early next year.
The term “triple-dip” emerged in a Clear Capital report a couple of weeks ago, and Barclays says its analysis corroborates the idea.
The research firm warns that home prices will likely slip another 6 to 7 percent over the coming winter months. That would put median prices at a new low for this cycle, in fact about 3 percent below the double-dip measurement of last spring. Following the probable “triple-dip” in the first quarter of next year, Barclays says home prices will “rise very gradually.”
“While the likelihood of a negative tail scenario in housing has increased, the probability of a 15-20 percent decline from current levels is still low, in our view,” Barclays’ residential credit analysts said in their report. “Long-run home price measures suggest that prices are close to equilibrium,” they added.
Barclays notes that delays associated with foreclosures have, for the moment, prevented an overcorrection in home prices by limiting the amount of REO inventory on the market.
Still, REO inventory levels have remained elevated, and Barclays says close to 4 million homes are seriously delinquent or in foreclosure and will eventually need to be sold.
“We expect 90+ to foreclosure and foreclosure to REO roll rates to improve in the coming quarters. That said, the timelines of defaulting loans should continue to ramp up,” Barclays said.
As foreclosure to REO roll rates improve, the number of distressed homes placed on the market will increase. Barclays says although REO supply and demand are currently evenly matched, the glut of foreclosed homes in the pipeline should eventually cause REO supply to far exceed REO demand.
This supply-demand imbalance could remain well into 2013 and 2014, according to the research firm.
Barclays says price gains will be constrained by the amount of REO supply that will be placed on the market in the next few years. At the same time demand for these homes will be “highly dependent” on the state of the economy, the firm stressed.
Thirty-Year Mortgage Rate Falls Below 4%
The average rate for the conventional 30-year fixed mortgage has dropped below the 4 percent mark for the first time in history, according to numbers released Thursday by Freddie Mac.
The GSE’s market analysis also shows that the 15-year fixed rate – which has become a popular refinancing option among existing homeowners – fell to its lowest level on record for the sixth consecutive week.
Freddie Mac’s regular weekly survey of mortgage rates is based on data collected from about 125 lenders across the country.
The GSE puts the average rate for a 30-year fixed mortgage at 3.94 percent (0.8 point) for the week ending October 6, 2011. That’s down 7 basis points from its average of 4.01 percent last week. As a point of comparison, last year at this time, the 30-year rate was 4.27 percent.
The 15-year fixed-rate mortgage came in at 3.26 percent (0.8 point) this week, dropping 2 basis points from 3.28 percent last week. A year ago at this time, the 15-year rate was averaging 3.72 percent.
Frank Nothaft, Freddie Mac’s chief economist, attributed the decline in fixed mortgage rates to a sharp drop in 10-year Treasuries earlier in the week as concerns over a global recession grew.
Adjustable-rate mortgages (ARMs) were mixed this week in Freddie’s study. The 5-year ARM dropped from 3.02 percent to 2.96 percent (0.6 point), while the 1-year ARM rose from 2.83 percent to 2.95 percent (0.5 point).
At this time last year, the 5-year ARM was averaging 3.47 percent, and the 1-year ARM was 3.40 percent.
Nothaft tied the rise for 1-year ARMs to shorter-term Treasuries, noting that the Federal Reserve began replacing $400 billion in short-term Treasury securities with longer-term bonds this week.
Job Loss Could Put One in Three Out of Their Home
One in three Americans would be unable to make their mortgage or rent payment beyond one month if they lost their job, according to the results of a national survey taken in mid-September.
Despite being more affluent, the poll found that even those with higher annual household incomes indicate they are not guaranteed to make their next housing payment if they lost their source of income. Ten percent of survey respondents earning $100K or more a year say they would immediately miss a payment.
The survey was conducted on behalf of a financial consortium comprised of the Certified Financial Planner Board of Standards, Financial Planning Association, Foundation for Financial Planning, and the U.S. Conference of Mayors.
Sixty-one percent of those surveyed said if they were handed a pink slip, they would not be able to continue to make their mortgage or rent payment longer than five months. Job loss has become the primary driver of mortgage defaults. With the national unemployment rate holding above 9 percent for five straight months and not expected to drop by any significant measure in the foreseeable future, the state of the labor market is one of the biggest obstacles for struggling homeowners and their lenders.
A number of programs at both the national and state level have been launched to assist unemployed homeowners, but so far the expected results haven’t materialized.
HUD has told DSNews.com that it does not expect to meet the original goal set for the $1 billion Emergency Homeowners’ Loan Program (EHLP) of subsidizing 30,000 unemployed homeowners’ mortgage payments.
The New York Times reports that fewer than 15,000 borrowers are likely to receive EHLP assistance and more than half of the money allotted for the program will go unspent.
An analysis of government records by USA Today shows that a separate federal program which provides money to individual states to assist homeowners who’ve lost their jobs has been slow in ramping up. Through the Treasury’s Hardest Hit Fund, 18 states were awarded a total of $7.6 billion to develop their own localized programs to counter unemployment and falling home prices in the fight against foreclosure.
USA Today says only about 1 percent of this money has actually been distributed to distressed owners, 16 months after the program was launched.
The news agency found that as of June 30th, 17 states had used the federal funds to help about 7,500 homeowners.
USA Today noted that several states are just now getting their individual programs off the ground and dispersing the money to qualified applicants, and the states have until 2017 to use their allotted funds.
The average mortgage loan in foreclosure has been delinquent for 599 days, according to Lender Processing Services (LPS). That's a record for the company's regular monthly study on mortgage performance trends. As of the end of July, LPS counted 2.2 million loans that were in foreclosure and nearly 1.9 million that were over 90 days past due but had not yet started the foreclosure process. The company also found that 38 percent of July's foreclosure starts were repeat foreclosures.
The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 8.10%, a decrease of 50 basis points from last quarter, and a decrease of 144 basis points from the first quarter of last year. The combined percentage of loans in foreclosure or at least one payment past due was 12.31% on a non-seasonally adjusted basis, a 129 basis point decline from 13.60% last quarter.
On a seasonally adjusted basis, the overall delinquency rate increased for all but FHA loans, with the biggest increases coming in the subprime categories. The seasonally adjusted delinquency rate stood at 4.59% for prime fixed loans, 11.25% for prime ARM loans, 22.04% for subprime fixed loans, 26.31% for subprime ARM loans, 12.03% for FHA loans, and 6.93% for VA loans. The percentage of loans in foreclosure, also known as the foreclosure inventory rate, decreased 12 basis points overall to 4.52. The foreclosure inventory rate for prime fixed loans, which make up the largest portion of the survey (accounting for 63% of all loans outstanding), decreased eight basis points to 2.59%. The rate for prime ARM loans decreased 69 basis points from last quarter to 9.53%. Subprime fixed loans saw an increase of 67 basis points to 10.53%, which is a new record high in the survey. The rate for subprime ARM loans increased 26 basis points to 22.26%, while the rate for FHA loans increased five basis points to 3.35% and the rate for VA loans increased four basis points to 2.39%. The foreclosure starts rate decreased 16 basis points for prime fixed loans to 0.68%, 42 basis points for prime ARM loans to 2.38%, 19 basis points for subprime fixed to 2.56% and 57 basis points for subprime ARMs to 3.67%. The foreclosure starts rate also decreased nine basis points for FHA loans to 0.93% and 15 basis points for VA loans to 1.02%.
The non-seasonally adjusted foreclosure starts rate decreased one basis point for prime fixed loans, 33 basis points for prime ARM loans, eight basis points for subprime fixed loans, 65 basis points for subprime ARM loans, 53 basis points for FHA loans, and 16 basis points for VA loans.
Treasury Department Issues New Guidance for HAFA Short Sales
The U.S. Treasury Department has released updates to the policy guidelines for the Home Affordable Foreclosure Alternatives (HAFA) program, which provides additional options to homeowners who do not qualify for a federal modification and offers incentives to borrowers, servicers, and investors who utilize a short sale or deed-in-lieu to avoid foreclosure.
This timeframe for acknowledgement applies whether the request is in response to a notice sent by the servicer regarding HAFA as an option or is initiated by the borrower. The acknowledgment must include a description of the servicer’s HAFA evaluation process and a timeline for decision.
The timeline for a decision has been extended to no more than 45 calendar days from the date the borrower requests a short sale or DIL. Servicers must provide the borrower with a written approval, denial, or an alternative offer within 45 days of receiving a completed request form, along with a copy of the executed sales contract and supporting documentation regarding subordinate liens.
If the servicer is unable to respond within 45 calendar days, the servicer must send a written status notice to the borrower on or before the 45th calendar day, with written updates every 15 calendar days until a decision is provided. In addition, servicers now have the discretion to approve short sales to non-profit organizations with the stated purpose that the property will be rented or resold to the borrower – an option previously prohibited by the program’s “arm’s length” requirement.
Servicers must retain in the servicing system and/or mortgage file the evidence provided during the HAFA evaluation demonstrating that the organization was a nonprofit group. The directives outlined take effect June 1, 2011, however Treasury is encouraging servicers to begin implementing the changes immediately.
According to Treasury’s latest status report on its foreclosure prevention programs, as of the end of February, 4,488 homeowners had completed a short sale or DIL through HAFA. Another 10,177 homeowners have agreements in place with their servicers for HAFA transactions.
Lawmakers Demand Answers from Treasury on Proposed Settlement
More backlash from the 27-page proposed servicer settlement developed on Wednesday when five representatives from the House Financial Services Committee voiced their disapproval and concern in a letter to Treasury Secretary Timothy Geithner.
“If the terms of the draft settlement are implemented as proposed, the settlement would transform the mortgage servicing industry and fundamentally change the rules that have historically governed relationships among borrowers, servicers, and investors,” said the letter.
Additionally, the letter claims “the breadth and scope of the draft settlement proposal raise significant concerns about its effect on the financial system, as well as concerns that the administration and state agencies are attempting to legislate through litigation.”
The representatives believe the settlement is going above and beyond typical remedies imposed by federal banking regulators. Instead of asking for compensation for victims who were specifically harmed by misconduct of some sort, or demanding improvements in internal operations, the representatives say this settlement is attempting to revamp the whole system.
One specific issue the group has with the settlement is its mention of using Home Affordable Modification Program (HAMP) guidelines and procedures, because the House Financial Services Committee sent a bill to terminate HAMP to the House on Wednesday.
The group also points out that the House and Senate have both rejected efforts to enforce principal write-downs in the past.
In the list of questions, the five representatives ask, “What standards will govern the process by which servicers select which borrowers receive a principal write-down?”
And if write-downs are to be given to borrowers who fall behind on payments, “Will forcing servicers to fund principal reductions for underwater loans they service affect the incentive of mortgagors to stay current on their loans?” In the settlement, there is a mandate that monetary penalties be collected from servicers to support mortgage modifications and to fund programs used to help borrowers avoid foreclosure. The group asks, “What is the legal basis for using funds collected in an enforcement action to benefit parties who have not been harmed by the purported wrongdoing?” The group requests detailed answers to these and other questions by March 18.
The House Financial Services Committee voted Thursday to scrap two foreclosure relief programs – one that gives underwater homeowners a federal refinancing option, and a second that provides temporary mortgage assistance to unemployed homeowners.
The House committee was also planning to consider two separate bills to end the administration’s Home Affordable Modification Program (HAMP) and HUD’s Neighborhood Stabilization Program, but votes on these two have been pushed to next week, reportedly simply because of time constraints.
Rep. Spencer Bachus (R-Alabama) is chairman of the House Financial Services Committee and one of the main forces pushing the bills through.
Bachus said, “In an era of record-breaking deficits, it’s time to pull the plug on these programs that are actually doing more harm than good for struggling homeowners. These programs may have been well-intentioned but they’re not working. Congress needs to stop funding programs that don’t work with money we don’t have.”