By: Reuters
U.S. foreclosure activity for May ebbed from April's record, but mortgages still failed at a staggering pace as President Barack Obama's rescue programs had not had time to fully take root, RealtyTrac said on Thursday.
Foreclosure filings dipped 6 percent in the month but increased 18 percent from May 2008, marking the third highest month on record.
"There were almost one million foreclosure filings in a three-month period, and that's simply unprecedented," Rick Sharga, senior vice president at RealtyTrac in Irvine, California, said in an interview.
Temporary freezes on foreclosure activity ended in March. Failures of many seriously delinquent loans that were put on hold during those moratoria have been thrust back into the foreclosure cycle.
One in every 398 households with loans got a foreclosure filing in May. Filings, which include notices of default and auctions, were reported on 321,480 properties last month.
Stemming foreclosures is seen critical to bolstering home prices, consumer confidence and the recessionary U.S. economy.
Bank repossessions, known as real-estate owned or REOs, rose in May and should spike in coming months because the moratoria ended, RealtyTrac said.
Obama Plan Needs Time
The administration's plans to ease loan modifications and refinancing were detailed in early March and haven't been implemented long enough to derail foreclosures.
The hurdles are high. Unemployment reached a nearly 26-year peak in May and mortgage rates have leaped a percentage point from their spring lows to more than 5-1/2 percent.
"One of the cures to this problem is enough buying activity to eat up the inventory of distressed properties," Sharga said. "If mortgage rates go up to where people decide to wait out the market again, that's just going to add to the inventory numbers and put more downward pricing pressure on all homes."
RealtyTrac forecasts about 4 million foreclosure filings will be made this year on about 3.1 million households with loans. Last year, there was a record 3.1 million filings on about 2.4 million households.
In a more typical year, Sharga said there would be around 800,000 filings on 550,000 households.
"When you have a glut of inventory and downward pricing pressure that does tend to push properties into foreclosure," said Sharga.
States where sales and prices soared most in the five-year housing boom earlier this decade remained the hardest hit.
Nevada stayed at the top of the foreclosure rate rankings by state, with one in every 64 housing units getting a foreclosure filing. California, Florida and Arizona, Michigan, Georgia, Colorado, Idaho and Ohio were the other states with the highest foreclosure rates.
Ten states, led by California, accounted for almost 77 percent of total number of foreclosure actions in May.
"We need to give the administration's programs a little bit of time to gain traction," Sharga said. "If unemployment continues to worsen, all bets are off on foreclosure rates."
Brokers say rates on fixed-rate mortgages in Orange County jumped above 5% today, as investors see the economic downturn easing and worries turn to inflation. Higher rates could postpone a housing recovery, brokers say.
However, brokers expect the Federal Reserve to buy more mortgage bonds and Treasuries to try and muscle rates back below 5%.
Keith Webb, of Associated Mortgage Professionals in Fullerton CA, said rates on a fixed loan up to the prior conforming limit of $417,000 are as high as 5.25%, up from less than 5% last week. Consumers can pay a one-point fee and get 4.875%, he said.
Webb said, “The worst part about this is that we're finally seeing the housing market show signs of recovery; if this rise in rates were to continue, it would stop the recovery dead in it's tracks."
But he expects the Federal Reserve to increase purchases of mortgage bonds and Treasuries to push down yields, which have climbed over the past few days.
On March 18, the Fed said it would increase its planned purchases of Fannie and Freddie’s mortgage bonds by $750 billion, to as much as $1.25 trillion, and also buy Treasuries. The yield on a 10-year Treasury fell to under 2.6% in March but has rebounded to 3.7% today.
Paul Miller, a partner with Laurus Mortgage in Fullerton CA, said earlier today rates jumped to 5% and then climbed again to 5.375%. He continued to see lenders adjusting their rate demands higher.
"I don't think I can remember a day where pricing had changed for the worse this drastically."
Here's to hoping the one thing that the government is doing correctly to stimulate the housing market doesn't stop, and they quickly realize that we need additional sources of downward pressure on interest rates.
(05/20/09)
I was talking to a good realtor partner of mine, Hal Schlegel of Re/Max Metro in Anaheim Ca, and we were discussing the current housing inventory for sale. Hal called this lack of saleable (saleable, excluding short sales) inventory a sort of real estate "micro market." This term refers to certain parts of the country that are not subject to weather patterns that others face, and the phrase "It's always sunny in Philadelphia" most closely relates to what I'm talking about.
Hal mentioned the inventory in a certain part of Anaheim, Ca, was showing that there were only 24 active listings in this particular zip code. This is drastically low compared to the 140+ listings available and active this time last year. What a difference!!
We attribute this lack of inventory to a couple different factors, and I personally believe that the main factor is affordability. Affordability has risen from the most notoriously quoted 11% in 2005 (by the Orange County Register) to 48% in the fourth quarter of 2008! (by the California Association of Realtors).
A second factor as to the lack of inventory is attributed to the current interest rate environment- a buyer looking for a primary residence and loan amount up to $417,000 can find an interest rate ranging from 4.5% to 4.875% on a 30 year fixed mortgage. Certain criteria must be met (740+ FICO score, primary residence, full documentation) to obtain these rates, but for the most part this is where the market is at. Think about this; if you were looking at purchasing a home 6-8 months ago, and your budget was $300,000 at an average interest rate of 6.375%, you could now be searching for a home that is $375,000 with little difference in payment!
The two reasons mentioned above are why homes are currently flying off the shelves, and why buyers are seizing the opportunity to own. If you've been on the fence, this may be the time to act.
For more information, call Neil @ 714-719-6744.
Fannie Mae has introduced "Desktop Underwriter (DU) Refi Plus", a new program designed to streamline the refinance process for potentially millions of Americans. Fannie Mae has made it easier for homeowners seeking lower monthly payments. The updated criteria includes reduce FICO scores, reduced income documentation, and in some cases, will waive the need for an appraisal.
Fannie Mae allows homeowners to refinance up to 105% of the current value of their home and will approve borrowers with lower than acceptable credit scores. The reduced documentation requirement results in borrowers submitting a reduced income documentation, rather than the typical "FULL DOCUMENTATION" typically required.
The objective of the DU Refi Plus program is to help borrowers by reducing their overall monthly mortgage payment and keep them in their homes. Lenders are encouraged to reduce a borrower's monthly principal and interest payments and provide a more permanent product.
The most important criteria to note would be that only loans currently owned by Fannie Mae qualify for the DU Refi Plus program. Loans can be serviced by other lenders, however you must check with your lender or visit:
http://loanlookup.fanniemae.com/loanlookup/
to find out if your home loan is owned by Fannie Mae.
Fed to buy up to $300B long-term Treasury bonds
WASHINGTON (AP) -- The Federal Reserve announced Wednesday it will spend up to $300 billion over the next six months to buy long-term government bonds, a new step aimed at lifting the country out of recession by lowering rates on mortgages and other consumer debt.
At the same time, the Fed left a key short-term bank lending rate at a record low of between zero and 0.25 percent. Economists predict the Fed will hold the rate in that zone for the rest of this year and for most -- if not all -- of next year.
Fed purchases should boost Treasury prices and drive down their rates. That would ripple through and lower rates on other kinds of debt. The last time the Fed set out to influence long-term interest rates was during the 1960s.
The Fed also said it will buy more mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac to help that battered market. The central bank will buy an additional $750 billion, bringing its total purchases of these securities to $1.25 trillion. It also will boost its purchase of Fannie and Freddie debt to $200 billion.
"This is not only going to keep mortgage rates low for a long period of time," said Greg McBride, a senior financial analyst at Bankrate.com. "The mere announcement may produce a honeymoon effect and bring mortgage rates down to even lower levels in the coming days."
In addition, the Fed said a $1 trillion program to jump-start consumer and small business lending could be expanded to include other financial assets.
The program -- which is rolling out this week -- currently is focused on spurring lending for autos, education, credit cards and loans for business equipment. The government already has announced an expansion to include commercial real-estate assets. Any broadening of the program would be beyond that area.
The Fed's action is keeping Wall Street's big rally alive. After being down earlier in the day, the Dow Jones industrial average added about 30 points in afternoon trading, and broader indicators also rose.
Fed Chairman Ben Bernanke and his colleagues are taking the new steps as the economy sinks deeper into recession.
Since the Fed last met in late January, "the economy continues to contract," the policymakers observed.
"Job losses, declining equity and housing wealth and tight credit conditions have weighed on consumer sentiment and spending," they said.
Businesses, meanwhile, are facing weaker sales prospects and credit troubles have them cutting inventories. Problems overseas have crimped demand for U.S. exports, dealing domestic companies another blow, the Fed said.
Across the Atlantic, the Bank of England last week began buying government bonds from financial institutions as it turned to other ways to help revive Britain's moribund economy. The Bank of England, like the Fed, already had lowered its key interest rate to a record low of 0.5 percent.
Finance leaders from top economies have discussed coordinating actions from their governments and central banks to provide a more potent punch against the global financial crisis.
Still, the Fed hoped its actions, the government's banking rescue effort, and President Barack Obama's $787 billion stimulus of increased government spending and tax cuts eventually will help revive the economy.
"Although the near-term economic outlook is weak, the committee anticipates that policy actions .... will contribute to a gradual resumption of sustainable economic growth," the Fed said.
Obama has urged Americans to be patient, saying it will take time for his revival programs to work.
Bernanke has repeatedly said that stabilizing the nation's financial system is key to turning around the economy. If that can be done, then the recession might end this year, setting the stage for a recovery next year, he said.
But even in this best-case scenario, the nation's unemployment rate -- now at quarter-century peak of 8.1 percent -- will keep climbing. Some economists think it will hit 10 percent by the end of this year.
The recession that began in December 2007 already has snatched a net total of 4.4 million jobs and has left 12.5 million searching for work.
And the economy is still sinking. It contracted at 6.2 percent in the final three months of 2008, also the worst showing in a quarter-century. Analysts believe the economy in the current January-March quarter is contracting at a pace between 5.5 and 6 percent or more. They expect the economy also will continue to contract in the April-June quarter.
AP Real Estate Writer Alan Zibel contributed to this report.
The following are key excerpts from the federal government's Q&A about the new program that the Obama administration says should cut mortgage bills for up to 9 million Americans who are having troubling making their monthly payments.
The program could provide some borrowers mortgages with interest rates as low as 2 percent and there are also incentives that may pay down principal in some cases.
There are two programs -- Home Affordable Refinance and Home Affordable Modification. Read on for the details:
I'm current on my mortgage. Will the Home Affordable Refinance help me?
Eligible borrowers who are current on their mortgages but have been unable to take advantage of today's lower interest rates because their homes have decreased in value, may now have the opportunity to refinance into a 30 or 15 year, fixed rate loan. Through the Home Affordable Refinance program, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they own or that they placed in mortgage backed securities.
How do I know if I am eligible?
You may be eligible if you:
•Are the owner occupant of a one to four unit home.
•The loan on your home is owned or controlled by Fannie Mae or Freddie Mac (Don't know? See below),
•You are current on your mortgage payments (current means that you haven't been more than 30-days late on your mortgage payment in the last 12 months.)
•You believe that the amount you owe on your first mortgage is about the same or slightly less than the current value of your house, and
•You have a stable income sufficient to support the new mortgage payments.
How do I know if my loan is owned or has been securitized by Fannie Mae or Freddie Mac?
You should call your mortgage servicer or lender (the organization to whom you make your monthly mortgage payments) and ask about the program.
Both Fannie Mae and Freddie Mac have established toll-free telephone numbers and web submission processes to make this data available. Borrowers will provide or enter information to determine if either agency owns or securitized the loan. This information is not a guarantee of eligibility for the refinance program, as other qualifying criteria must also be met.
•For Fannie Mae: 1-800-7FANNIE (8am to 8pm EST) or www.resource_center@fanniemae.com
•For Freddie Mac 1-800-FREDDIE (8am to 8pm EST) or www.freddiemac.com/avoidforeclosure/
Who is my "loan servicer? Is that the same as my lender or investor?
Your loan servicer is the financial institution that collects your monthly mortgage payments and has responsibility for the management and accounting of your loan. Your servicer may also be your lender, which means they own your loan, however, many loans are owned by groups of investors, such as pension funds or individuals who buy mutual funds. These loans are managed by banks and other firms that specialize in servicing loans. If you have questions about your loan or you are behind on your payments you should call your loan servicer at the number on your payment coupon or monthly mortgage statement.
I owe more than my property is worth. Do I still qualify to refinance under the Making Home Affordable Program?
Eligible loans will include those where the first mortgage will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less you may qualify. The current value of your property will be determined after you apply to refinance.
I have both a first and a second mortgage. Do I still qualify to refinance under Making Home Affordable?
As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible for a Home Affordable Refinance. Your eligibility will depend, in part, on agreement by the lender that has your second mortgage to remain in a second position, and on your ability to meet the new payment terms on the first mortgage.
Will refinancing lower my payments?
The objective of the Home Affordable Refinance is to provide creditworthy borrowers who have shown a commitment to paying their mortgage, the opportunity to get into a safe fixed rate mortgage with payments that are affordable today and sustainable for the life of the loan. Borrowers whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments. Borrowers who are paying interest only, or who have a low introductory rate that will increase in the future, may not see their current payment go down if they refinance to a fixed rate and avoid future mortgage payment increases. These borrowers, however, could save a great deal over the life of the loan. When you submit a loan application, your lender will give you a "Good Faith Estimate" that includes your new interest rate, mortgage payment and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.
What are the interest rate and other terms of this refinance offer?
The objective of the Home Affordable Refinance is to provide borrowers with a safe loan program with a fixed, affordable payment. All loans refinanced under the plan will have a 30 or 15 year term with a fixed interest rate. The rate will be based on market rates in effect at the time of the refinance and any associated points and fees quoted by the lender. Interest rates may vary across lenders and over time as market rates adjust. The refinanced loans will have no prepayment penalties or balloon notes.
Will refinancing reduce the amount that I owe on my loan?
No. The objective of the Home Affordable Refinance is to help borrowers get into safer, more affordable fixed rate loans. Refinancing will not reduce the principal amount you owe to the first mortgage holder or any other debt you owe. However, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.
Can I get cash out to pay other debts?
No. Only transaction costs, such as the cost of an appraisal or title report may be included in the refinanced amount.
How do I apply for a Home Affordable Refinance?
You should call your mortgage servicer or lender and ask about the Home Affordable Refinance application process. The number is on your monthly mortgage bill or coupon book. Please be patient. Lenders and servicers first received the detailed program requirements and it may take time before they are ready to accept applications. In the meantime, it will help your lender and speed up the application process if you gather some information and documents before you call.
What documentation will I need?
It will help your lender if you gather some information and documents before you call. You will need:
•Information about the monthly gross (before tax) income of your household, including recent pay stubs if you receive them or documentation of income you receive from other sources.
•Your most recent income tax return.
•Information about any second mortgage on the house.
•Account balances and minimum monthly payments due on all of your credit cards.
•Account balances and monthly payments on all your other debts such as student loans and car loans.
I am delinquent on my mortgage. Will I qualify for a Home Affordable Refinance?
No. Borrowers who are currently delinquent on their mortgage will not qualify. You should contact your servicer to see if a Home Affordable Modification is an option for you.
Can Making Home Affordable help me if my loan is not owned or securitized by Fannie Mae or Freddie Mac?
Yes. Making Home Affordable offers help to borrowers who are already behind on their mortgage payments or who are struggling to keep their loans current. By providing mortgage servicers with financial incentives to modify existing first mortgages, the Treasury hopes to help as many as 3 to 4 million homeowners avoid foreclosure regardless of who owns or services the mortgage.
How do I know if I qualify for a Home Affordable Modification?
To apply for a Home Affordable Modification, you must:
•Be an owner-occupant in a one to four unit property, and have
•An unpaid principal balance that is equal to or less than $729,750 (for one unit properties and higher for two to four unit properties (consult your servicer),
•A loan that was originated before January 1, 2009,
•A mortgage payment (including taxes, insurance, and home owners association dues) that is more than 31% of your gross (pre-tax)monthly income and
•Have a mortgage payment that is no longer affordable, perhaps because of a significant change in income or expenses.
If you answered YES to all of these questions, you are eligible to apply for a Home Affordable Modification. Only your servicer will be able to tell you if you qualify.
Do I need to be behind on my mortgage payments to be eligible for a Home Affordable Modification?
No. Responsible borrowers who are struggling to remain current on their mortgage payments are eligible if they are at risk of imminent default, for example, because they have had or will soon have a significant increase in their mortgage payment that they cannot afford. If you have had or anticipate a significant increase in your mortgage payment or have had a significant reduction in income, contact your servicer. If you meet the minimum eligibility criteria for a Home Affordable Modification, your servicer is required to evaluate your loan to see if you are at risk of imminent default.
I have missed some mortgage payments am I eligible?
If you answered yes to the questions above, have missed two or more mortgage payments and your servicer is participating in the Making Home Affordable Program, your servicer must evaluate your loan to determine if you qualify for a modification.
I have a second mortgage. Am I still eligible?
Yes, but only the first mortgage is eligible for a modification.
How do I know if my servicer is participating? Are all servicers required to participate?
Servicer participation in the program is voluntary. However, the government is offering substantial incentives to servicers and investors, and it is expected that most major servicers will participate. Participating servicers will sign a contract with Treasury's financial agent, through which they agree to review every potentially eligible borrower who calls or writes asking to be considered for the program.
As contracts are signed, a list of participating servicers will be available on the Internet at www.FinancialStability.gov. Participation will be mandatory for any servicer that accepts future funding from the Treasury's Financial Stability Program.
What will my servicer do to determine if I qualify?
Your servicer will:
•Determine that your loan meets the minimum eligibility criteria (owner occupied, originated before January 1, 2009, UPB equal to or less than $729,750). If yes:
•Obtain sufficient income information to determine if your monthly mortgage payment is more than 31% (approximately 1/3) of your gross or pre-tax monthly income. (Your servicer may initially accept verbal information about your income, but eventually you will need to provide proof of income in the form of tax returns and pay stubs). If yes:
•Add past due charges (interest, taxes, insurance and costs that your lender paid to other parties on your behalf — but not late fees, those must be waived) to the loan balance.
•Determine how much of an interest rate reduction will be required to get your mortgage payment down to a point where it is about 31% of your gross monthly income.
•Apply a test to determine if the cost of the modification (including the government's incentive payments) is less costly for the investor than a foreclosure. If yes:
•Put you on a trial modification for three months at the new interest rate and payment.
•If you successfully make the payments and are current at the end of the trial period, your servicer will execute a permanent modification agreement that will lower your interest rate to a fixed rate for five years.
•The modification payment will also include a monthly amount to be set aside (escrowed) to pay taxes and insurance when they become due. This escrow is required even if your prior loan was not escrowed.
What happens after five years?
If the modified interest rate is below the market rate, the modified rate will be fixed for a minimum of five years as specified in your modification agreement. Beginning in year six, the rate may increase no more than one percentage point per year until it reaches the rate cap indicated in your modification agreement. The cap is equal to the prevailing market interest rate on the date the modification is finalized as published by Freddie Mac based on a survey of its customers. This cap means that your rate can never be higher than the market rate on the day your loan was modified. If the modified rate is at or above the prevailing market rate, the modified rate will be fixed for the life of the loan.
How low can my interest rate go?
Treasury is providing incentives to your investor to write the interest down as low as 2%, if necessary to get to a payment that you can afford based on your income.
What happens if that is not enough to get to an affordable payment?
If a 2% interest rate is does not result in a payment that is affordable (31% of your gross monthly income), your servicer will:
•First try to extend your payment term. At the servicer's option your payments could be extended out to 40 years.
•If that is still not sufficient your servicer will defer repayment on a portion of the amount you owe until a later time. This is called a principal forbearance.
•A portion of the debt could be also be forgiven. This is optional on the part of the investor. There is no requirement for principal forgiveness.
Could I end up with a balloon payment?
Yes. If your servicer determines that a principal forbearance is required to get your monthly payment to an affordable level, the amount of the forbearance. Say for example this was $20,000, would be subtracted from the amount used to calculate your monthly mortgage payment, but you would still owe the money. You would have a $20,000 balloon payment that had no interest and was not due until you paid off your loan, refinanced or sold your house.
How much will a modification cost me?
There is no cost to borrowers for a Home Affordable Modification. Your servicer will not ask you for money. If there are costs associated with the modification, such as payment of back taxes, your servicer will add those costs on to the amount you owe. Your servicer will also forgive any late fees.
If you would like assistance from a HUD-approved housing counseling agency or are referred to a counselor as a condition of the modification, you will not be charged a counseling fee. Borrowers should beware of any organization that attempts to charge a fee for housing counseling or modification of a delinquent loan, especially if they require a fee in advance.
Is housing counseling required under this program?
Borrowers, especially delinquent borrowers are strongly encouraged to contact a HUD-approved housing counselor to help them understand all of their financial options and to create a workable budget plan. These services are free. However, housing counseling is only required for borrowers whose total monthly debts are very high in relation their incomes, and it is voluntary for others.
When you apply for a Home Affordable Modification, your servicer will analyze your monthly debts, including the amount you will owe on the new mortgage payment after it is modified, as well as payments on a second mortgage, car loans, credit cards or child support. If the sum of all of these recurring monthly expenses is equal to or more than 55% of your gross monthly income, you must agree to participate in housing counseling provided by a HUD-approved housing counselor as a condition of getting the modification.
I heard the government was providing a financial incentive to borrowers. Is that true?
Yes. Borrowers who make timely payments on their modified loans will receive success incentives. For every month you make a payment on time, Treasury will pay an incentive that reduces the principal balance on your loan. Over five years the total principal reduction could add up to $5,000. This contribution by the Treasury will help you build equity faster.
I do not live in the house that secures the mortgage I'd like to modify. Is this mortgage eligible for a Home Affordable Modification?
No. For example, if you own a house that you use as a vacation home or that you rent out to tenants, the mortgage on that house is not eligible. If you used to live in the home but you moved out, the mortgage is not eligible. Only the mortgage on your primary residence is eligible. The mortgage servicer will check to see if the dwelling is your primary residence.
I have a mortgage on a duplex. I live in one unit and rent the other. Will I still be eligible?
Yes. Mortgages on two, three and four unit properties are eligible as long as you live in one unit as your primary residence.
I have two mortgages. Will a Making Home Affordable Modification reduce the payments on both?
Only the first mortgage is eligible for a modification.
I owe more than my house is worth. Will a Home Affordable Modification reduce what I owe?
The primary objective of the Making Home Affordable Program is to help borrowers avoid foreclosure by modifying troubled loans to achieve a payment the borrower can afford. Investors may, but are not required to, offer principal reductions. However, it is more likely that your servicer will use interest rate reductions in order to make your payment affordable.
I have an FHA loan. Can it be modified under the making Home Affordable Program? Are all loans eligible?
Most conventional loans including prime, subprime, adjustable, loans owned by Fannie Mae, Freddie Mac, private lenders and most loans in mortgage backed securities are eligible for a Home Affordable Modification. The Administration is working with the Congress to enact legislation that will allow FHA, VA and USDA to offer modifications consistent with Making Home Affordable in the near future. Currently loans insured or guaranteed by these agencies are being modified under other programs that also enable borrowers to retain homeownership.
What should I do if my servicer tells me that the "investor" is not participating in Making Home Affordable?
As contracts with servicers and investors are signed, the list of participants will be posted at www.financialstability.gov. Borrowers should first check there to see if their servicer is listed. If so, you should call your servicer back and ask to speak to a supervisor or you may contact a HUD-approved housing counselor for assistance. If your servicer is not participating in the program, you should ask your servicer or a housing counselor about other workout options that may be available.
I'm already working with my servicer or a housing counselor on a loan workout.
You should ask your servicer or counselor to explain the benefits of all available foreclosure prevention or payment reduction options. A Home Affordable Modification is one of many valuable tools available to your servicer. Other options may be more appropriate for your situation.
How do I apply for a modification under the Homeowner Affordability and Stability Plan?
If you meet the general eligibility criteria for the program, you should gather the financial documentation that your servicer will need to determine if you qualify. Once you have this information, you should call your mortgage servicer and ask to be considered for a Home Affordable Modification. The number is on your monthly mortgage bill or coupon book.
If your loan is current, please be patient. Treasury just published detailed program requirements on March 4, 2009 and it will take some time before servicers are fully operational. However, the Treasury has encouraged servicers to immediately begin reviewing the eligibility of delinquent borrowers that are at the greatest risk of foreclosure.
If you would like to speak to a housing counselor you can call 1-888-995-HOPE (4673). HUD-approved housing counselors can help you evaluate your income and expenses and understand your options. This counseling is FREE.
If you have already missed one or more mortgage payments and have not yet spoken to your servicer call them immediately.
What information and documents will I need?
It will help your servicer and speed processing of your application if you gather the some information and documents before you call. You will need:
•Information about the monthly gross income of your household, including recent pay stubs if you receive them or documentation of income you receive from other sources.
•Information about your assets
•Information about any second mortgage on your house.
•A letter describing the circumstances that caused your income to be reduced or expenses to be increased (job loss, divorce, illness, etc.).
My loan is scheduled for foreclosure soon. What should I do?
Many servicers have made a commitment to postpone foreclosure sales on all mortgages that meet the minimum eligibility criteria for a Home Affordable Modification until those loans can be fully evaluated.
However, borrowers whose loans have been scheduled for foreclosure or any borrower that has missed one or more mortgage payments and has not yet spoken to their servicer, should contact the servicer immediately. Borrowers may also contact a HUD-approved housing counselor by calling 1-888-995-HOPE (4673).
"It is imperative that we continue to move with speed to help make housing more affordable and help arrest the damaging spiral in our housing markets," Treasury Secretary Timothy Geithner said in a statement.
The administration, launching what it calls the "Making Home Affordable" initiative, said that borrowers will have to provide their most recent tax return and two pay stubs, as well as an "affidavit of financial hardship" to qualify for the $75 billion loan modification program, which runs through 2012.
Borrowers are only allowed to have their loans modified once, and the program only applies for loans made on Jan. 1 2009 or earlier. Up to 4 million borrowers are expected to qualify. Mortgages for single-family properties that are worth more than $729,750 are excluded.
Separately, up to 5 million borrowers who have mortgages held by government controlled mortgage finance giants Fannie Mae and Freddie Mac should be eligible to refinance through June 2010.
Meanwhile action to put in place another part of Obama's housing plan is expected soon on Capitol Hill.
House Democrats, under pressure from a group of moderates in their ranks and the banking lobby, agreed Tuesday to narrow legislation that gives bankruptcy judges the power to force lenders to lower the mortgage interest rate or principal balance.
Under the terms of the agreement, judges would have to consider whether a homeowner had been offered a reasonable deal by the bank to rework his or her home loan before seeking help in bankruptcy court. Borrowers also would have a responsibility to prove that they tried to modify their mortgages.
The compromise legislation was expected to come to a vote in the House as early as Thursday.
http://www.FinancialStability.gov.
By STEVEN R. HURST – 2 days ago
WASHINGTON (AP) — President Barack Obama promotes his economic agenda this week with trips outside Washington to sign the $787 billion stimulus package and to tackle the home mortgage foreclosure crisis.
As he struggles to lift the country out of its worst economic downturn since the Great Depression of the 1930s, Obama termed passage of the stimulus measure a "major milestone on our road to recovery." Of perhaps equal importance will be his effort to reverse the collapsing housing market that triggered the financial crisis.
The stimulus package, which passed with no GOP support in the House and the minimum three Republican votes in the Senate, aims to save or create as many as 3.5 million jobs through massive government investment while boosting consumer spending through modest tax cuts.
The mortgage plan is intended as a counteroffensive against the housing collapse that has seen millions of people default on loans and lose their homes. Lending froze as banks and investment houses realized they were holding trillions of dollars in bad assets.
Under an emergency $700 billion program passed late last year, the Bush administration used half to forestall a financial collapse. But the flow of credit did not ease and use of the money was criticized because it was poorly administered and overseen.
Obama is now working to leverage the second portion of the bailout money into a program that could result in $2 trillion in government and private sector cash infusions to help banks and investment houses clear away "toxic" holdings and thereby spur lending.
Obama's senior White House adviser said Sunday that people soon will see positive effects of the stimulus plan. Speaking on "Fox News Sunday," David Axelrod said signs that the stimulus program is working will be obvious as work begins on infrastructure and other programs.
Yet, Axelrod warned, it's going to take time for the effects to register in employment statistics and the economy is likely to get even worse before it begins to rebound. White House spokesman Robert Gibbs agreed that the economy hasn't bottomed out yet. But he predicted the stimulus will put the country on the road to recovery.
Gibbs also said Obama will continue "unprecedented" outreach to Republicans, whose opposition to the stimulus measure has found them with dismal poll numbers among Americans suffering under the recession.
Sen. John McCain, nevertheless, said Obama failed to include Republicans in writing the big economic stimulus bill. The Arizona Republican said the stimulus spending will create what he calls "generational theft" — huge federal deficits for years to come.
McCain, who lost the presidential race to Obama, said Obama the president is backtracking on promises of bipartisanship and was off to a bad start. "Let's start over now and sit down together," said McCain, who appeared with Gibbs on CNN's "State of the Union."
By signing the stimulus bill into law Tuesday in Denver and detailing his mortgage rescue proposal the next day in Phoenix, Obama is continuing to take his message directly to the public. Both actions show he is trying to sidestep the partisanship still gripping Washington despite his efforts to soften the Republican opposition.
Government action to shore up the economy and improve the housing climate probably will send mortgage rates to 4.5 percent, Bill Gross, co-CEO at the Pimco bond fund, said Monday.
"I think at some point we're going to see a 4.5 percent mortgage rate and the 10-year Treasury rate capped at some level," he said. "When the Fed comes in to buy Treasurys that will be a big day."
Looking ahead at the government initiatives he expects to see in an announcement Tuesday, Gross said the government likely will inject more capital into needy banks only. He also said the government will expand the Term Asset-Backed Securities Loan Facility, or TALF, which aims to free up the ABS market.
That in turn would make commercial mortgage-backed securities an attractive investment, said Gross, head of the world's largest bond fund.
At the same time, he warned against government over-reaching that would lead to the nationalization of some of the nation's biggest banks, a move that would wipe out shareholder equity.
"We need a clear plan tomorrow that moves away from nationalization, and private capital will come in," Gross said.
Overall, Gross praised the way the Federal Reserve has taken substantial measures to stem the financial crisis.
"They've spent $2 trillion of their balance sheet and taken some risk in terms of assets," he said. "I think they've done an excellent job so far in terms of shock and awe."
To understand what will cause the recession to end, we must understand what caused the recession. There were many causes, but the most visible culprit was an uncontrolled real estate boom. First it was the sub-prime crisis halting the boom. The government indicated that real estate would weather the crisis. Well, the real estate market did not weather the crisis. Then the government said the economy could weather the real estate crisis. As we pointed out in The Real Estate Report 12 months ago, as the real estate market goes, so does the economy. The housing industry directly or indirectly employs about one-fifth of Americans, depending upon how the numbers are counted. You can't have a weak link in a chain which is that significant of a segment of the overall chain. Now the recession has spread across the globe because of the importance of our economy.
So, when will the recession end? The end of the weak real estate market will bring the end of the recession. Of course, it is likely that you will then ask us, when will the real estate market become strong again? Here we would suggest you look at the cost of ownership vs. the cost of renting. At the height of the boom, the cost of owning was significantly higher than the cost of renting--though some of these costs were masked by easy lending standards and innovative products. Now housing prices are going down and so are rates. There are already areas of the country that are reporting that owning is becoming cheaper than renting--especially after taxes are taken into consideration. When we reach this point in the majority of the country, the price of housing will stabilize. And when prices stabilize, banks will be more willing to lend. This cycle will lead us out of the morass. When will that happen? We wish we had a crystal ball, however, we do know that the lower rates go, the more quickly the date is likely to arrive.
The Markets
Mortgages continued their assault on record lows as they dropped for the 11th week in a row. Freddie Mac announced that for the week ending January 15, 30-year fixed rates averaged 4.96%, down from 5.01% the week before. The average for 15-year fixed rose slightly to 4.65%. Adjustables fell as well with the average for one-year adjustables decreasing to 4.89% and five-year adjustables falling sharply to 5.25%. A year ago 30-year fixed rates were at 5.69%. "Rates for 30-year fixed rate mortgages fell for the 11th straight week to another record low, due in part to the slowing economy and government actions," said Frank Nothaft, Freddie Mac vice president and chief economist. "So far, both the U.S. Treasury Department and the Federal Reserve have added over $100 billion in liquidity to the mortgage market since September 2008, which put downward pressure on rates for fixed-rate mortgages. The Federal Reserve may add up to an additional $570 billion more this year, based on its November 25, 2008 announcement, to further shore up mortgage lending and keep rates low. In December, the unemployment rate rose to 7.2 percent, the highest since January 1993, and the economy lost 2.6 million jobs over 2008, the largest annual drop since 1945. That brought down yields on Treasury securities."
Home | Neil's Two Cents
Copyright © 2010 Laurus MortgagePortions Copyright © 2010 a la mode, inc.Another XSite by a la mode, inc. | Admin Login| Terms of Use| Site Map
