California AG Requests “Good-Faith Pause” on GSE Foreclosures

Insistent that principal reductions are the best line of defense in loss mitigation, California Attorney General Kamala Harris is calling on Fannie Mae and Freddie Mac to halt foreclosures in her state while the Federal Housing Finance Agency (FHFA) considers whether principal reductions are an appropriate strategy for the GSEs.

In a recent letter to FHFA Acting Director Edward DeMarco, Harris requested a “good-faith pause on foreclosure sales in California” while the FHFA continues to investigate the pros and cons of principal reductions.

California has been particularly hard hit by the housing crisis. About a half million homes in California have been foreclosed, and another half million are either in foreclosure or on the brink of foreclosure, according to Harris.

While the recent national settlement secured $12 billion for principal reductions and short sales, this will not help the 60 percent of California homeowners whose mortgages are owned by Fannie Mae or Freddie Mac.

DeMarco has expressed hesitation toward principal reductions and consistently insisted that he does not have the power to demand the GSEs employ the strategy.

However, he did recently share FHFA’s analysis of the method, which did not determine that “principal reduction never serves the long-term interest of the taxpayer when compared to foreclosure.” DeMarco maintained that forbearance ensures better returns for investors.

Harris urges DeMarco to pursue further analysis and in the meantime to suspend foreclosures in California so GSE borrowers “will have an opportunity to reduce the principal on their homes should your analysis find – as I believe it must – that principal reductions by those enterprises are in the best interest of homeowners and taxpayers,” according to her letter.

DSnews.com

Fannie Mae’s First Bulk Offering of REO-to-Rental Pilot Is Open for Bids

Fannie Mae has put a block of 2,490 REOs up for sale. It’s the first pilot transaction of the federal government’s Real-Estate Owned (REO) Initiative announced in August 2011, which aims to sell homes repossessed by government agencies to private investors for the purpose of turning the properties into rental units.

The properties are concentrated in the hard-hit metropolitan areas of Atlanta, Chicago, Las Vegas, Los Angeles, Phoenix, and parts of Florida. Nearly a quarter are located in L.A., 21 percent in Atlanta, and 15 percent in Southeast Florida.

Of the 2,490 single-family properties up for grabs, only 429 are vacant. The remainder are currently occupied by tenants, giving the winning bidder an established line of rental income already.

Only investors who have completed the pre-qualification process, as stipulated by the Federal Housing Finance Agency (FHFA) will be able to bid on the portfolio. Interested bidders must submit applications to demonstrate their financial capacity, experience, and specific plans for purchasing pools of Fannie Mae foreclosed properties with the requirement to rent the purchased properties for a specified number of years.

Any investors interested in the pilot program who have not prequalified may still do so by completing the appropriate forms available online through the FHFA REO Initiative page of the agency’s website.

Credit Suisse is Fannie Mae’s financial advisor on the pilot transaction and has issued a high-level prospectus on the assets up for sale. Investors who post a security deposit and sign a confidentiality agreement will be privy to more detailed information about the properties.

“This is another important milestone in our initiative designed to reduce taxpayer losses, stabilize neighborhoods and home values, shift to more private management of properties, and reduce the supply of REO properties in the marketplace,” said Edward DeMarco, FHFA’s acting director.

DSNews.com

Housing Fix: Minority Group Unveils $1.2 Billion Industry-Led Program

The National Association of Real Estate Brokers, Inc. (NAREB) announced the launch of a 25-city, $1.2 billion REO and foreclosure mitigation initiative called the Homeowner’s Assurance Program (HAP).

The program is designed to address the devastating effects of foreclosures on communities across America. HAP is a non-governmental, industry-led solution to the nation’s housing crisis.

NAREB was formed in 1947 by African American real estate professionals and is the oldest minority trade group in the United States. The organization has a vast network of industry professionals including: Realtists, brokers, sales agents, appraisers, mortgage brokers, and loan officers as well as practical experts in pre- and post-counseling, loss mitigation, foreclosure, property management, housing construction, and development.

NAREB and its professional network will serve as the “boots on the ground” for HAP, providing the agent infrastructure to manage, market, and dispose of nonperforming loans and REO assets acquired under the program. Targeted buyers include first-time homebuyers and others who are caught in the credit crunch and having trouble purchasing a home.

Private and Wall Street investors are providing the $1.2 billion in initial capital for the program roll-out in 25 markets. HAP’s deployment of capital to purchase, renovate, and sell REO properties will also generate jobs and income for real estate-related small businesses in the targeted markets.

A beta test is already taking place in the Atlanta metropolitan area. The official roll-out of the program will take place in Los Angeles, Houston, Miami, and Baltimore beginning in the second quarter of this year.

“The goal of HAP is to bring back the American Dream to millions of people throughout the nation,” said Julius Cartwright, president of NAREB.

“We’re seeing a wholesale eviction of families, and tens of thousands of vacant and blighted properties in cities that have been historically stable homeownership communities,” Cartwright said. “We have the experience, expertise, and tools to provide a ‘boots on the ground’ effort to identify and screen qualified buyers for these properties, and help sustain or rebuild impacted neighborhoods.”

The program will be spearheaded by a new national nonprofit organization bearing the same name, Homeowner’s Assurance Program LLC. Its board members will include representatives from minority real estate, education, and business communities. The principals of NAREB and SRP Development, one of the private investment companies directly involved in the project, will serve as the managing members of Homeowner’s Assurance Program LLC.

Also part of the initiative are MST Investment Advisory Services and 24 Asset Management Corporation, which have been selected as the platform managers to oversee all asset management activities for HAP, provide capital audit controls, and manage day-to-day operations.

SRP Development, MST Investment Advisory Services, and 24 Asset Management are all minority-owned companies.

HAP will seek to acquire properties from banks as well as government agencies, including HUD, the FDIC, and the government-run GSEs Fannie Mae and Freddie Mac.

“We welcome NAREB’s initiative,” commented Ed Jennings Jr., HUD southeast regional administrator.

HUD’s REOs are initially offered to owner-occupants. Following the priority period for these buyers, listings of unsold properties are opened up to investors.

“We are pleased to hear NAREB’s interest in buying HUD properties that have been on the market for more than four months, and their comprehensive approach of partnering with other entities to get them back into move-in condition,” Jennings said.

He also noted that HAP plans to use HUD-approved counselors to prepare buyers for homeownership.

NAREB announced the launch of HAP on Friday at its 65th Annual Mid-Winter Conference, which kicked off February 21 and runs through February 25.

DSNews.com

How NOT To Bid and Buy At Auction

With the increasing popularity of real estate auctions, we encourage potential buyers to do their homework prior to getting in the game. Auctions can be a fantastic way to get great deal if you know what you’re doing. Whether you are a Realtor®, an investor who has bought zillion of dollars in real estate or a first time home buyer, you still need to learn the rules and tricks. Here are some examples of how not to bid and buy at auction.

1. Do not bid without inspecting the property prior to the auction. A little description in a brochure that you just picked up at the auction is not called due diligence. Remember, if you’re the winning bidder you’ll be signing a non-contingent contract. In other words the property is yours no matter if your financing didn’t come through or the place needs repair. You bought your property AS-IS. Get ready for the closing.
2. Know the true value. Some auction brochures and ads can show the previously listed price. Well, that price could be the highest ever listed price, not necessarily the recent or most realistic one. Do your homework and go online. Many websites will provide you with recently closed listings of similar properties. Otherwise how are you supposed to know if you’re getting the deal of a lifetime?
3. Plan, strategize and win. So you found the property you’re dying to get, now what? Think of it as a battle. You most likely will have opponents (other bidders) in the room. Create a strategy, define your maximum bid, and do not let your emotions take over. This is a business not a race. There could be a chance that the property bid exceeded the market value and you should take a pass. There is always a new opportunity down the road.
4. Let others start the bidding. If no one bids it’s even better because the seller might be open to lower his reserve. I see people make offers lower than the reserve or minimum bid after the auction. Some sellers are determined to sell and may accept your offer.
5. Go auction hunting. Instead of looking for properties at auction that are plastered all over the radio, TV and billboards, try to find auctioneers with a smaller marketing budget. That way you’ll avoid the crowds and might get a better deal. Believe or not, smaller local newspapers are a great source to find these hidden gem auctions.
6. Avoid dual agency. Find your representation, it’s free. This one is very important. There are some auction companies that do not cooperate with Realtors®. In my opinion that is a huge disservice to the seller they’re representing because it limits the buying pool. Try to avoid these auctions because the auction Realtor® is representing the seller and even though dual agency (representing the buyer and seller in the same transaction) is legal in some states, your satisfaction as a buyer might not be their priority. Instead, use the Internet to find a Realtor® who knows auctions and who will exclusively represent you as buyer. This service costs you nothing, because your agent will get paid by the seller, and a real estate agent can be very resourceful with helping you find financing and helping you do the due diligence.
7. Watch out for “dummy bidders” and auctioneers that “pull” bids from walls. Sometimes auctioneers do that to raise bids so they reach the reserve price. It’s unfortunate that it happens. I’ve witnessed sellers accepting contracts under their set reserve price. My advice: make sure you’re bidding against real people. Look around.
8. Don’t forget about the buyer’s premium. Always read the auction terms and conditions. The amount of buyer’s premium should be listed there. Buyer’s premium is an additional fee on the top of the sales price that you’ll have to pay. Let’s say it is 5% of the winning sales price and you won a condo for $100,000.  Do the math. 5% of $100K = $5K. Therefore, your total price will be $105K (the $100K winning sales price plus the $5K buyer’s premium)

Joanna Buniak – realestateauctions.com

Freddie to adopt new way of valuing foreclosed properties

Freddie Mac will use a new method of valuing REO acquired this year.

The government-sponsored enterprise acquired 24,300 REO properties in the third quarter. It sold more than 25,000, and held an inventory of nearly 60,000 previously foreclosed homes.

“We’ve struggled with REO valuation,” said Tracy Mooney, senior vice president of single-family servicing at Freddie Mac, during the Mortgage Bankers Association servicing conference in Orlando, Fla.

Last year, the GSE tweaked its existing valuation model to the pricing characteristics of REO.

Under the new system, the Freddie team in Dallas and in McLean, Va., will measure the variances between the original broker priced opinion ordered for the property.

If the BPO comes in too low when compared to the model, Freddie will order an automated valuation or even a full-scale appraisal of the property until it is more in line with what the home should be worth, Mooney said.

“We’re doing this to minimize dysfunction in the market place, by hopefully eliminating broker-appraiser coercion, and the stigma of severely undervalued REO,” Mooney said.

Freddie put a pilot program in place in 2011 for 4,000 REO. Mooney said the GSE aims to apply the new valuation system to short sales by mid-2012.

“We think we’ve seen proven results from the pilot,” Mooney said.

Overdue Mortgages Number 6,082,000

New data from Lender Processing Services (LPS) shows that as of the end of January, there were 6,082,000 mortgages in the U.S. going unpaid. That tally includes loans that are 30 or more days delinquent and loans in foreclosure.

LPS’ mortgage performance statistics are derived from its loan-level database of nearly 40 million mortgage loans.

The national mortgage delinquency rate as of January month-end was 7.97 percent. LPS determines the delinquency rate as a measurement of all loans behind by at least one payment, excluding those already in the process of foreclosure.

The delinquency rate registered a decline, both for the month and the year, with January’s rate down 2.2 percent from December 2011 and down 10.5 percent from January 2011.

The total foreclosure inventory rate hit 4.15 percent last month – up 1.1 percent compared to December 2011, but down a slight 0.1 percent when comparing year-over-year numbers.

According to LPS’ report, there were 2,084,000 properties that were counted as part of the foreclosure inventory last month.

The number of properties with mortgages 30 or more days past due but not yet referred to a foreclosure attorney tallied 3,998,000. Of these, 1,772,000 had been delinquent for 90 days or longer.

LPS says Florida had the highest percentage of non-current mortgages last month, followed by Mississippi, Nevada, New Jersey, and Illinois.

Non-current totals combine foreclosures and delinquencies as a percent of all active loans in that state.

States with the lowest percentage of non-current loans in January included Montana, Alaska, Wyoming, South Dakota, and North Dakota.

DSNews.com

Chase donates 100 homes to military, wounded warriors

Mortgage lender Chase and nonprofit Operation Homefront will partner to place 100 wounded warriors, military members and veterans into Chase-owned homes.

Operation Homefront is a nonprofit that provides aid to active military, wounded warriors and veterans.

The new program — Homes on the Homefront — will provide transitional services for veterans and families chosen to receive the residences.

Chase, the lending unit of JPMorgan Chase ($38.46 -0.01%), is offering real estate from its banked-owned inventory to applicants who are either active duty service members, in the National Guard or in the reserves or honorably discharged veterans. Other qualifiers include the soldier’s status as someone who does not currently own a home. They also have to be financially capable of sustaining the residence past the initial transition period.

The homes are donated, providing the recipients a clean slate to start from. After the transition period, the owners will assume all other homeownership-related costs.

The program also considers surviving single spouses of soldiers killed-in-action and post-9/11 disabled veterans as potential recipients.

“This is an incredible gift from Chase to our men and women in uniform,” said Jim Knotts, president and CEO of Operation Homefront. “Chase’s imaginative, nationwide approach to providing quality homes to deserving service members and their families will make a huge difference in how these heroes can make that difficult transition and adjustment into productive civilian lives.”

Source: Housingwire.com

Treasury Increases Incentives for Principal Reductions

 

A recently released Supplemental Directive from Treasury increases incentives for second lien investors when loans receive principal reductions.

The increased incentives apply to permanent HAMP modifications with principal reductions through the government’s Principal Reduction Alternative (PRA) that have trial period plans starting March 1 or later.

The incentives are also available when second liens are completely or partially eliminated through the Second Lien Modification Program (2MP) on loans modified starting June 1.

For loans no more than six months delinquent over the previous 12 months, investors may receive $0.63 per

dollar of written down principal between 105 percent and 115 percent market-to-market loan-to-value ratios (MTMLTVs), or $0.45 per dollar of written down principal between 115 percent and 140 percent MTMLTV.

For loans that have been more than six months delinquent sometime in the previous 12 months, investors may receive $0.18 per dollar of written down principal, irrespective of MTMLTV ratio.

Regarding second liens modified through 2MP that have not been more than six months delinquent in the previous year, investors may receive $0.12 per dollar of unpaid principal balance eliminated on second liens.

While servicers may reduce principal below 105 percent MTMLTV, they will not receive incentives on the portion of principal reduction that brings the MTMLTV below 105 percent, according to Treasury.

Investors may also receive $0.12 per dollar of eliminated unpaid principal balance on second mortgage liens more than six months delinquent in the year prior to the “date of extinguishment,” Treasury stated in the directive.

“This guidance does not apply to mortgage loans that are owned or guaranteed by Fannie Mae or Freddie Mac, insured or guaranteed by the Veterans Administration or the Department of Agriculture’s Rural Housing Service or insured by the Federal Housing Administration,” the directive states.

DSNews.com

Bill to Speed Up Short Sale Process and Avoid Foreclosure

To avoid losing homes to foreclosure due to long response times for short sale transactions, three senators introduced legislation to speed up the short sale process.

Senators Lisa Murkowski (R-Arkansas), Scott Brown (R-Massachusetts), and Sherrod Brown (D-Ohio) proposed the bill addressing the issue of short sales timelines on February 17. A short sale is a real estate transaction where the homeowner sells the property for less than the unpaid balance with the lender’s approval.

“There are neighborhoods across the country full of empty homes and underwater owners that have legitimate offers, but unresponsive banks,” said Murkowski. “What we have here is a failure to communicate. Why don’t we make it easier for Americans trying to participate in the housing market, regardless of whether the answer is ‘yes,’ ‘no’ or ‘maybe?’”

The legislation, also known as the Prompt Notification of Short Sales Act, will require a written response from a lender no later than 75 days after receipt of the written request from the buyer.

The lender’s response to the buyer must specify acceptance, rejection, a counter offer, need for extension, and an estimation for when a decision will be reached. The servicer will be limited to one extension of no more than 21 days.

The bill will also allow the buyer to be awarded $1000, plus “reasonable” attorney fees if the Act is violated.

According to a release from Short Sale New England, short sale homes do not bring down neighboring home values like foreclosed homes do, and 83 percent of short sale buyers are satisfied with their purchase, according to a 2012 Home Ownership Satisfaction Survey conducted by HomeGain.

“The current short sale process can be time consuming and inefficient, and many would-be buyers end up walking away from a sale that could have saved a homeowner from foreclosure,” said Moe Veissi, president of the National Association of Realtors. “As the leading advocate for homeownership, realtors are supportive of any effort to improve the process for approving short sales.”

Equi-Trax released a survey last year on the issues real estate agents face when completing short sales. Guy Taylor, CEO at Equi-Trax, said 71.9 percent of respondents reported that a short sale can take four to nine months to complete, and they think that is simply too long.”

The survey also found that 18.2 percent of deals require less than three months to complete, with 10 percent requiring more than 10 months.

When agents in the survey were asked to how the short sale process can be improved, 57.6 percent said lenders should take less time to close transactions, 14 percent said borrowers should be better educated about short sales, and 40.4 percent said both of these changes are necessary to improve the process.

In April 2011, a similar bill was introduced by Reps. Tom Rooney (R-Florida) and Robert Andrews (D-New Jersey), but this version requested a response deadline of 45 days instead of 75 from lenders. The legislation never came up for debate before a House committee.

DSNews.com

College town’s rental cap fails logic test

During what is now the most challenging housing economy of our time, one college town is making it harder for homeowners to keep their homes, and for renters to find reasonable rates.

Winona, Minn., recently passed a “30% rule” that restricts the amount of homes on each block that can legally be rented out to 30%. Who gets to rent out their home and who does not comes on a first-come, first-served basis. Essentially, if a lot of rental properties happen to be on your block and you want to rent out your home, too bad. If you own a home on a block with few rental properties, and you want to rent out yours, then you’re in luck. Seems fair, right? 

I’ll leave out the obvious gaps in the constitutional logic of this bill (which is the subject of a lawsuit filed against the city by the Institute of Justice) in favor of talking about the risk this poses to the financial stability of the town’s residents.

Let’s be honest: plenty of residential neighborhoods, and their HOAs, tend to frown upon renting. The stigma of poorly kept lawns and code violations that tend to follow single-family residence rentals isn’t entirely false. And in normal times, restricting renting may go unnoticed. But these are not normal times. 

Right now, people trying to sell can’t and some must rent out their homes to hold onto their investment. Some who want to buy a home but can’t qualify for today’s strict underwriting may be forced to rent. So, at a time like this, restricting rentals is bad policy.  

When two colleges (St. Mary’s and Winona State University) are situated in a relatively small town — like they are in Winona — rental demand is high. With a cap on the number of homes available for rent, cheap rentals will be a thing of the past. Landlords will drive up prices to take advantage of an area in which rental properties are scarce but necessary, and students — or their parents — will bear the cost. 

And while those college students will be forced to pay higher prices, homeowners who want to rent out their property may really be out of luck. Renting is a way to pay the mortgage if you can’t sell.

I’m sure this law seemed like a good idea on face when the city council passed it, but I can’t imagine they put much thought into the problems it would cause. 

While I have hope that the Institute of Justice will win its case, a legal fix to this poorly constructed law could take years. In the meantime, the residents of the city who, like everyone else in this country, are struggling to make ends meet are losing out against an illogical and poorly timed policy. 

 

Source:  Jessica Huseman on 2/17/12 at 3:00pm housingwire