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.

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

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

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

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

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

So the ruling may put a new dynamic in play in the foreclosure mess: If the lender can’t come forward with proof of ownership, and judges don’t look kindly on that, then borrowers may have a stronger hand to play in court and, apparently, may even be able to stay in their homes mortgage-free.

The reason that notes have gone missing is the huge mass of mortgage securitizations that occurred during the housing boom. Securitizations allowed for large pools of bank loans to be bundled and sold to legions of investors, but some of the nuts and bolts of the mortgage game — notes, for example — were never adequately tracked or recorded during the boom. In some cases, that means nobody truly knows who owns what.

To be sure, many legal hurdles mean that the initial outcome of the White Plains case may not be repeated elsewhere. Nevertheless, the ruling — by a federal judge, no less — is bound to bring a smile to anyone who has been subjected to rough treatment by a lender. Methinks a few of those people still exist.

More important, the case is an alert to lenders that dubious proof-of-ownership tactics may no longer be accepted practice. They may even be viewed as a fraud on the court.

The United States Trustee, a division of the Justice Department charged with monitoring the nation’s bankruptcy courts, has also taken an interest in the White Plains case. Its representative has attended hearings in the matter, and it has registered with the court as an interested party.

THE case involves a borrower, who declined to be named, living in a home with her daughter and son-in-law. According to court documents, the borrower bought the house in 2001 with a mortgage from Wells Fargo; four and a half years later she refinanced with Mortgage World Bankers Inc.

She fell behind in her payments, and David B. Shaev, a consumer bankruptcy lawyer in Manhattan, filed a Chapter 13 bankruptcy plan on her behalf in late February in an effort to save her home from foreclosure.

A proof of claim to the debt was filed in March by PHH, a company based in Mount Laurel, N.J. The $461,263 that PHH said was owed included $33,545 in arrears.

Mr. Shaev said that when he filed the case, he had simply hoped to persuade PHH to modify his client’s loan. But after months of what he described as foot-dragging by PHH and its lawyers, he asked for proof of PHH’s standing in the case.

“If you want to take someone’s house away, you’d better make sure you have the right to do it,” Mr. Shaev said in an interview last week.

In answer, Mr. Shaev received a letter stating that PHH was the servicer of the loan but that the holder of the note was U.S. Bank, as trustee of a securitization pool. But U.S. Bank was not a party to the action.

Mr. Shaev then asked for proof that U.S. Bank was indeed the holder of the note. All that was provided, however, was an affidavit from Tracy Johnson, a vice president at PHH Mortgage, saying that PHH was the servicer and U.S. Bank the holder.

Among the filings supplied to support Ms. Johnson’s assertion was a copy of the assignment of the mortgage. But this, too, was signed by Ms. Johnson, only this time she was identified as an assistant vice president of MERS, the Mortgage Electronic Registration System. This bank-owned registry eliminates the need to record changes in property ownership in local land records.

Another problem was that the document showed the note was assigned on March 26, 2009, well after the bankruptcy had been filed.

Mr. Shaev’s questions about ownership also led to an admission by PHH that, along the way, it had levied an improper $450 foreclosure fee on the borrower and had overcharged interest by an unstated amount.

John DiCaro, a lawyer representing PHH at the hearing, was in the uncomfortable position of having to explain why there was no documentation of an assignment to U.S. Bank. He did not return a phone call seeking comment last week. Ms. Johnson, who couldn’t be reached for comment, did not attend the hearing.

According to a transcript of the Sept. 29 hearing, Mr. DiCaro said: “In the secondary market, there are many cases where assignment of mortgages, assignment of notes, don’t happen at the time they should. It was standard operating procedure for many years.”

Judge Drain rejected that argument, concluding that what had been presented to the court just did not add up. “I think that I have a more than 50 percent doubt that if the debtor paid this claim, it would be paying the wrong person,” he said. “That’s the problem. And that’s because the claimant has not shown an assignment of a mortgage.”

Mr. Shaev said he was shocked when the judge expunged the mortgage debt.

“We are in uncharted territory,” he said. “Right now I am in bankruptcy court with a house that has no discernible debt on it, yet I have a client with a signed mortgage. We cannot in theory just go out and sell this house because the title company won’t give a clear title on it.”

Among the next steps Mr. Shaev said he would take is to file an amended plan or sue to try to get clear title to the property.

Late last week, PHH appealed the judge’s ruling. But Mr. DiCaro and PHH are in something of a bind. Either they will return to court with a clear claim on the property — including all the transfers and sales that are necessary in the securitization process — or they won’t be able to produce that documentation. If they do produce it, they will then have to explain why they didn’t produce it before.

Source :  Gretchen Morgenson – If Lenders say the dog ate your Mortgage – NYTIMES

One of the greatest effects of it, the bank’s analysts say, is job creation, with the possibility of creating more than 1 million jobs in the hard-hit construction and real estate industries. The jobs could be created by private capital without the use of taxpayer dollars.

The program’s purpose is to clear the national backlog of distressed housing.

“On a macro level, (the REO rental program) could not have come at a better time,” the analysts say.

According to the Bureau of Labor Statistics, the economy lost million 2.5 million housing-related jobs over the past five years. Of those, 2.16 million were in construction and 240,000 were in real estate.

Employment in construction increased by 21,000 in January, following a gain of 31,000 in the previous month.

Analysts estimate about eight million properties will be sold in some form of distressed sale over the next five years.

“Even if only half can be turned into rentals, which would represent only a 20% increase in the total number of single-family rental properties available today, that could result in the creation of one million one-time construction-oriented jobs plus a possible additional 800,000 in permanent jobs, mostly in some of the hardest-hit sectors and the hardest-hit economic areas of the country,” they say.

The 800,000 jobs would comprise the cottage industry for servicing REO rental units, from cleaning properties to collecting the rent.

The chart below shows Morgan Stanley’s full-time job-creation numbers per distressed property turned into rental by each category and for total jobs. The calculation is based on anecdotal labor-usage feedback the firm received from current single-family operators.

Capital Economics called the program to move REO properties to rentals the “best housing fix so far” and “possibly more significant” than President Brack Obama’s refinancing proposals announced late last month.

Support for a government-led program was the most popular disposition strategy among panelists at January’s American Securitization Forum.

But when Federal Reserve Chairman Ben Bernanke sent a letter in January to Congress proposing the REO rental program, it highlighted the deep political divide on how to repair housing.

Private investors, with the government’s support, are gearing up for what they perceived as a massive and long-term investment opportunity

“With the added benefit of the potential for significant private sector-led job creation, potentially in the hardest-hit sectors in the hardest-hit regions, we are increasingly confident that (the program) can have a positive impact on housing and the macro economy as a whole,” the analysts say.

Source:  Housingwire.com

The Federal Reserve and the Office of the Comptroller of the Currency (OCC) announced Wednesday that the deadline has been pushed out by three months to give consumers more time to file for a case assessment if they believe they suffered financial injury as a result of errors in foreclosure actions in 2009 or 2010. The original deadline was April 30.

The independent foreclosure reviews, as mandated and enforced by the federal regulatory agencies, only apply to the mortgage servicers and their subsidiaries that were subject to the enforcement actions handed down by the OCC and Fed on April 13th of last year.

Participating servicers include:

• America’s Servicing Company
• Aurora Loan Services
• BAC Home Loans Servicing
• Bank of America
• Beneficial
• Chase
• Citibank
• CitiFinancial
• CitiMortgage
• Countrywide
• EMC
• Everbank/Everhome Mortgage Company
• Financial Freedom
• GMAC Mortgage
• HFC
• HSBC
• IndyMac Mortgage Services
• MetLife Bank
• National City Mortgage
• PNC Mortgage
• Sovereign Bank
• U.S. Bank
• Wachovia Mortgage
• Washington Mutual
• Wells Fargo
• Wilshire Credit Corporation

Borrowers are eligible for a foreclosure review if their loan is serviced by one of the participating companies above, the mortgage loan was subject to foreclosure between January 1, 2009 and December 31, 2010, and the property securing the mortgage was the borrower’s primary residence.

There are no costs associated with the foreclosure reviews. These case evaluations performed by independent third parties began in November. Eligible borrowers should have received a letter by the end of 2011 detailing the process.

Source:  DSNews.com

At the end of January, most metro areas saw prices stabilizing, even picking up in some of the hardest hit areas like Miami and Las Vegas, according to Altos Research.

The average home price in Miami was $465,068, up more than 7% from the previous three months. In Vegas, where prices were cut by more than half during the downturn, prices increased 2% over the same period, cresting more than $140,000.

Inventory is also declining in these cities.

“In many markets, tight inventory of quality properties is another contributing factor keeping a floor on home prices this spring,” Altos said.

In the 20 metro areas the company covers, inventory declined more than 14% from November to January.

Vegas, especially, was making progress. The city held fewer than 11,000 properties in its inventory at the end of last month, down more than 38% from November levels.

Declining inventories do not necessarily stem from higher home sales these days but may rather be a product of fewer REO hitting the market. Completed foreclosures in Nevada dropped 26% to 6,328 in 2011 from nearly 8,000 the year before, according to RealtyTrac.

From November to December alone, inventory declined in Vegas by 27%, a change Altos called “staggering.”

With mortgage servicers putting the AG settlement behind them in January, the process may be rebooted soon, pushing inventories higher by the end of the year.

Source: Housingwire.com