Foreclosures are falling quickly as more borrowers keep up with their mortgage payments and banks complete more loan modifications or approve short sales to avoid foreclosures on their books.
For the first time since 2008, the number of borrowers who are behind on their payments or in foreclosure dropped below 5 million, according to a new report reflecting March data by Lender Processing Services.
The number of mortgages in foreclosure dropped to below 1.69 million in March, which marks the lowest level in nearly four years and a drop of nearly 20 percent compared to one year ago.
About 3.4 percent of all U.S. mortgages were in foreclosure by the end of March, which is a decrease from 4.2 percent a year ago, Lender Processing Services reports.
In March, about 6.6 percent of all borrowers were in some stage of delinquency, excluding those in foreclosure. That percentage is down by 3 percent from a year ago, but is still high by historical standards. Prior to the housing crisis, about 5 percent of all borrowers were delinquent on their mortgages and 1 percent of loans were in foreclosure, LPS reports.
On Wednesday, a so-called “Homeowner Bill of Rights” moved a step closer to passing, with housing advocates claiming the bill would help people stave off foreclosures. The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) opposes provisions in this measure which will allow anyone to stop the foreclosure process by filing a lawsuit, merited or not.
C.A.R. agrees that careful and balanced reforms to the foreclosure process are necessary. However, C.A.R. opposes AB 278 because it will further delay the housing recovery by inviting bad-faith lawsuits and defaults, making it difficult for even well-qualified borrowers to obtain financing.
The legislation would ban the practice of dual-tracking, in which a bank continues foreclosure proceedings while a homeowner is seeking a loan modification; require banks to provide a single of point – either a person or a team – for struggling borrowers; and give borrowers the right to sue their lenders for “significant, material” violations of the new law.
The bills also require lenders to give a clean explanation when they reject borrowers for a loan modification, to verify mortgage documents before a foreclosure, and to provide copies to borrowers upon request. Lenders can be fined up to $7,500 per loan for filing and recording unverified documents. The bills’ provisions apply to first-lien mortgages for owner-occupants.
For more information about C.A.R.’s opposition to AB 278 and to learn how to take action, visit this website
On Thursday, federal and state officials announced a $26 billion foreclosure settlement with five of the largest home lenders. California is expected to receive approximately $12 billion in principal write-downs, including through short sales, over the next three years, according to the state attorney general‘s office.
The deal settles potential state charges about allegations of improper foreclosures based on robo-signing, seizures made without proper paperwork.
The settlement sets up a federal monitor to oversee the process and try to prevent the challenges that tripped up many homeowners seeking help in earlier programs designed to address the housing crisis.
Most of the relief will go to those who are underwater on their homes. That relief will come over the course of the next three years, with banks having incentives to provide most of the relief in the next 12 months.
At least $17 billion will go to reducing the principal owed by homeowners who are underwater and behind on their mortgages.
Up to 750,000 other underwater homeowners who are current on their mortgages will be able to refinance their current loans at lower rates. They will not receive a reduction in principal, but with mortgage rates near record lows, they could receive substantial savings on their monthly payments.
Approximately $1.5 billion will go to homeowners who had their homes foreclosed upon between Jan. 1, 2008 and Dec. 31, 2011, and who meet other criteria. They will receive up to $2,000 each.
New York Times
Closing costs can increase the price of a home by as much as $10,000, sometimes more. Borrowers who are “cash-poor” can ask for assistance, or talk to their lender about a lender credit toward closing costs.
Some lenders advertise that if borrowers agree to accept a mortgage interest rate from a quarter to a full percentage point higher than they would ordinarily qualify for, they can receive credit toward their closing costs.
These mortgages are sometimes called no-closing-cost loans, though the term is misleading. The credit usually covers only fees charged by the mortgage broker or bank, like the loan origination fee, the underwriting expense, and the appraisal. That generally leaves title insurance, mortgage-recording taxes, insurance, and escrowed taxes to cover.The amount of credit depends on total closing costs and other loan details. Generally, for every one-eighth of a point increase in interest rate, borrowers receive a credit worth half a percentage point of the principal amount.
While these mortgages can be helpful to some, borrowers should carefully review all the details. There are pluses and minuses to these loan types. A downside is the higher rate and monthly payment remain in place through the life of the loan.
Doing a side-by-side comparison of loans with and without the credit can be helpful.
President Obama announced Monday a plan to ease eligibility rules for home owners who want to refinance to take advantage of ultra-low mortgage rates and lower their mortgage payments. The administration hopes that by broadening its requirements for the Home Affordable Program that about 1 million home owners will now be able to qualify.
Here are more details about the newly announced changes to the program:
What is HARP?
It’s a program started in 2009 that allows home owners to refinance their mortgages at lower rates without having to meet the typical requirement of having at least 20 percent of equity in their home to do so. Under current guidelines, many underwater borrowers have been ineligible for the program because their home values had to be no more than 25 percent below what they owed their lender. Also, some home owners were unable to afford the closing costs and appraisal fees to participate.
What’s changing?
Many of the extra fees to participate in the program have been waived, and home owners’ eligibility won’t be contingent on how far their home’s value has fallen.
Who’s eligible?
Home owners with loans backed by Fannie Mae or Freddie Mac can participate. (Home owners can visit: freddiemac.com/mymortgage or fanniemae.com/loanlookup to determine if their mortgage is owned by either).
Home owners must be current on their mortgage.
When will it take effect?
The changes could take effect by Dec. 1. HARP also is being extended through 2013 to allow more home owners the opportunity to qualify.
How successful will this be?
The administration hopes that by home owners being able to lower their monthly mortgage payments (with an average annual savings of $2,500 expected), they’ll be more likely to stay current on their mortgage and avoid foreclosure. Also, the administration hopes that it will then free up household money to start spending more on other things, which could provide an overall boost to the economy. However, the administration says it realizes that aiding the housing market requires much more than a refinancing plan.
“This is only one piece of a broader strategy to help the housing market,” says Housing Secretary Shaun Donovan. Donovan also notes federal efforts to help home owners who are delinquent on their mortgages and the unemployed.
Even with continuing foreclosures, how many are started and just hang there? I know of several people who have been in their home for six months to a year and the banks have not finished the foreclosure proceedings. The market is flooded with foreclosures, so maybe they are hanging back on some of them. Here’s a related article:
“Foreclosure sales continue to drop, but foreclosure inventories remain high in many markets across the country. By the end of May, the number of mortgages that were 90 or more days delinquent, combined with the foreclosure inventory, outpaced foreclosure sales by 50:1, Lender Processing Services Inc. reports.
The biggest drop in foreclosure sales occurred in East Coast states. For example, foreclosure sales plummeted 96 percent in Washington, D.C., 80 percent in Maryland, and 79 percent in New York, according to Lender Processing Services’ monthly mortgage monitor report.
Mortgages that are 90 days or more delinquent, combined with the foreclosure inventory, totaled more than 4 million in May. Foreclosure sales at the end of May totaled 78,676.
The average time a home owner spends in foreclosure continues to get longer. More than 33 percent of home owners in foreclosure have not made a mortgage payment in more than two years.”
How screwed up are the banks? They foreclose on a home that has no mortgage! So the attorney for the couple forecloses on the bank (really a sheriffs sale). Great!
Between “robosigning” where banks make up false mortgage notes, to not doing mortgage modifications, the banks continue the drive this country into the ground. Of course, none of the banks CEO’s responsible for this mess have gone to jail. Where do you think you and I would be if we forged mortgages?
For all your real estate needs, call or email:
John J. O’Dell Realtor®
Real Estate Broker
O’Dell Realty
9530) 263-1091 jodell@nevadacounty.com
Borrowers who can afford higher mortgage payments, and who meet lenders’ stricter loan guidelines, often opt to replace their 30-year mortgages with shorter term loans at near-record low rates.
The latest Freddie Mac quarterly survey of homeowners who refinanced found that more than one in three borrowers who refinanced from a 30-year fixed-rate loan opted to replace it with 15-year or 20-year mortgages at near-record low rates.
Homeowners considering refinancing into a shorter-term mortgage must have the income or financial reserves sufficient to pay the extra money each month.
Borrowers not only need to have the income or financial reserves, they also have to qualify for a refinance, have the credit score needed, and the home appraisal to support it.
For some low-cost refi programs, lenders want to see at least 25 percent equity in the house. Higher FICO credit score requirements by Fannie Mae and Freddie Mac are another impediment, as both companies reserve their best rates for borrows with FICO scores of 740 or higher.
The United States has filed a civil mortgage fraud lawsuit against Deutsche Bank AG and its wholly owned subsidiary, MortgageIT Inc. The government’s complaint seeks damages and civil penalties under the False Claims Act for repeated false certifications made to the U.S.
According to the government’s complaint filed May 3, 2011 in Manhattan federal court: Between 1999 and 2009, MortgageIT was an approved direct endorsement lender, and endorsed more than 39,000 mortgages for FHA insurance, totaling more than $5 billion in underlying principal obligations. These mortgages were highly marketable for resale to investors because they were insured by the full faith and credit of the United States. MortgageIT and Deutsche Bank, which acquired MortgageIT in January 2007, made substantial profits through the resale of these endorsed FHA-insured mortgages.
Stated in the complaint, MortgageIT repeatedly made false certifications to HUD to obtain approval of mortgages that MortgageIT underwriters wrongfully endorsed for FHA insurance. These mortgages were not eligible for FHA insurance under HUD rules. Notwithstanding the mortgages’ ineligibility, underwriters at MortgageIT endorsed the mortgages by falsely certifying that they had conducted the due diligence required by HUD rules when, in fact, they had not. By endorsing ineligible mortgages and falsely certifying compliance with HUD rules, MortgageIT wrongfully obtained approval of these ineligible mortgages for FHA insurance, thereby putting millions of FHA dollars at risk.
To date, the Federal Housing Administration (FHA) has paid insurance claims on more than 3,100 mortgages, totaling $386 million, for mortgages endorsed by MortgageIT. Total claims against Deutsche Bank AG could cost well over $1.15 billion dollars.
The government’s complaint seeks treble damages and penalties under the False Claims Act for the insurance claims already paid by HUD for mortgages wrongfully endorsed by MortgageIT through the false statements of Deutsche Bank and MortgageIT. In addition, the United States seeks compensatory and punitive damages under the common law theories of breach of fiduciary duty, gross negligence, negligence and indemnification for the insurance claims that HUD expects to pay in the future for mortgages wrongfully endorsed by MortgageIT as a result of Deutsche Bank’s and MortgageIT’s false statements
My take on this is, it’s about time the banks paid for the mess that they have gotten us into. Like I’ve said many times, its not the mortgage brokers or the real estate agents who set the lending standards, it was the banks. I’ve talked to many people who were in the lending side of the banks. They were told to just make the loan, we don’t care if they can pay it back. What do you think?
On Tuesday, U.S. bank regulators submitted a proposal that would require lenders to originate mortgages with at least a 20 percent down payment if they want to repackage the loan to sell to other investors without keeping some of the risk on their books. The bank regulators say this would create strong incentives for responsible lending and borrowing.
The Federal Deposit Insurance Corp. board and the Federal Reserve agreed to seek public comment on the proposal. However, the rule is expected to have little near-term effect because loans sold to Fannie Mae, Freddie Mac and FHA and VA loans would be exempt. The U.S. government currently backs nearly 90 percent of home mortgages.
The CALIFORNIA ASSOCIATION OF REALTORS® and the NATIONAL ASSOCIATION OF REALTORS® oppose the proposal because the 20 percent down payment requirement is too high and would make it difficult for many people to purchase homes, causing further deceleration in the housing market. Strong evidence shows that responsible lending standards and ensuring a borrower’s ability to repay have the greatest impact on reducing lender risk.
“We need to strike a balance between reducing investor risk and providing affordable mortgage credit,” said NAR President Ron Phipps. “Better underwriting and credit quality standards have greatly reduced risk. Adding unnecessarily high minimum down payment requirements will only exclude hundreds of thousands of buyers from home ownership, despite their creditworthiness and proven ability to afford the monthly payment, because of the dramatic increase in the wealth required to purchase a home.”
Saving the necessary down payment has always been the principal obstacle to buyers seeking to purchase their first home. Proposals requiring high down payments will only drive more borrowers to FHA, increase costs for borrowers by raising interest rates and fees, and effectively price many eligible borrowers out of the housing market,” added Phipps.