Judicial States Will Lag Behind Recovery: Capital Economics

While the housing market is starting to show signs that it is strengthening, for some states, recovery still seems to be in the very distant future. According to a report from Capital Economics, one factor that will determine the speed of recovery for individual states is the type of foreclosure procedure used.

“While the national housing market is in the early stages of a recovery, many of the judicial foreclosure States which are struggling to clear their backlog of foreclosures will lag behind,” said Paul Diggle, author of the report and property economist for Capital Economics.

The Mortgage Bankers Association (MBA) categorizes 21 states as judicial and 29 as non-judicial. In a judicial state, lenders must go through the courts to pursue a foreclosure whereas in a non-judicial state, lenders can foreclose on a property without court approval.

Since lenders in judicial states have to go through the courts first, this leads to a lengthier process when pushing foreclosures through the pipeline, leading to a higher number of homes in foreclosure inventory.

The effect of the buildup of foreclosure inventory can lead to lower home prices for those states. Capital Economics pointed to FHFA data which revealed the differences in home prices between judicial and non-judicial states.

The research firm stated that based on numbers from FHFA’s fourth quarter home price index, in judicial states, prices decreased 0.3 percent quarter-over-quarter and dropped 2.3 percent year-over-year compared to non-judicial states, which posted a 0.3 percent quarterly increase and a yearly decrease of 1.6 percent.

“We think that differences in foreclosure procedures will continue to affect State-level house price trends, with non-judicial States outperforming. After all, as foreclosure pipelines are brought down to healthier levels in non-judicial, high burn-through States, supply conditions can more rapidly tighten to the point that they support price growth,” the report stated.

Whereas in judicial states, Capital Economics stated that “the trickle of foreclosures onto the market over a much longer period will continue to keep supply conditions relatively loose.”

MBA recently reported in its first quarter 2012 delinquency survey that foreclosure inventory in judicial states is 6.88 percent, while in non-judicial states, it’s only 2.77 percent.

In response to the data, Michael Fratantoni, MBA’s VP of research and economics, in a release said, “The problem continues to be the slow-moving judicial foreclosure systems in some of the largest states. While the rate of foreclosure starts is essentially the same in judicial and non-judicial foreclosure states, the percent of loans in the foreclosure process has reached another all-time high in the judicial states.”

Rob Pitingolo, research assistant with the Urban Institute, emphasized that it’s not the judicial process itself that is the problem, and explained in states such as Florida, the reason why there’s a backlog of foreclosures is because of a lack of resources.

Florida has re-hired retired judges to help the courts manage the high number of foreclosures.

Pitingolo added that the judicial process is designed to protect borrowers by preventing fraud and allowing more time for homeowners to work with their lenders.

Source: DSNews.com

Illinois Cook County Real Estate Tax Assessment Started – CONTEST THEM

In 2012 – The Cook County Assessor will reassess all property located in Chicago.

Assessments will be mailed one township at a time – Rogers Park & Lakeview township notices have been mailed – Lake is expected to be mailed shortly.

Many commercial assessments are increasing even though property values are on the decline.

UNLESS CONTESTED – the tax assessment will be good for three years.
* If property owner missed the opportunity to file with the Assessor – they still have a second opportunity when they open the letter  with The Cook County Board of Review

Appeal deadlines can be found on the Cook County Assessor website
www.cookcountyassessor.com
www.cookcountyboardofreview.com

www.cookcountytreasurer.com  – helpful for checking on status of tax payments, exemptions and overpayments
http://cookcountypropertyinfo.com/Pages/pin-search.aspx  – great site for tax research

Mortgage delinquency rate falls in first quarter

The delinquency rate for mortgages on residential properties of four units or less declined 18 basis points from the fourth quarter to 7.4% in the first quarter, the Mortgage Bankers Association said in its national delinquency survey.

That rate is down 92 basis points from year-ago levels.

“Mortgage delinquencies normally fall during the first quarter of the year, but the declines we saw were even greater than the normal seasonal adjustments would predict, so delinquencies are clearly continuing to improve,” said Michael Fratantoni, vice president of research and economics for the MBA.

“Newer delinquencies, loans one payment past due as of March 31, are down to the lowest level since the middle of 2007, indicating fewer new problems we will need to deal with in the future,” he added.

The percent of loans tied to a foreclosure action launched in the fourth quarter hit 0.96% in the most recent quarter, which is down 3 basis points from the previous quarter and 12 basis points from a year earlier.

By the end of the first quarter, the percentage of loans in the foreclosure process stood at 4.39%, up 1 basis point from the fourth quarter and down 13 basis points from 1Q of 2011.

The serious delinquency rate, or the percentage of loans 90 or more days past due or in foreclosure, hit 7.44% in the first quarter, down 29 basis points from the fourth quarter and 66 basis points from the first quarter of 2011.

The only states to experience increases in their serious delinquency rate were Maryland, Delaware, New Jersey and Washington.

BofA to pay homeowners more for short sales

Bank of America ($7.30 0%) launched a new short sale program that could pay distressed homeowners between $2,500 and $30,000 in relocation assistance.

Over the last two years, the bank completed roughly 200,000 short sales. For the first three months of this year, it completed 30,000. As new servicing requirements and corrections lengthened the foreclosure process over the last two years, short sales have taken a greater share of the market. In some areas, short sales have surpassed REO transactions as a percentage of the market.

The new program with BofA requires a borrower to work with the bank to obtain a preapproved sales price before submitting a purchase offer. To qualify for the program, a short sale offer must be submitted by the end of 2012 and close by Sept. 26, 2013.

BofA said short sales already started may be eligible.

“This program can help customers make a planned transition from ownership when home retention options have been exhausted or they have made a decision not to keep the home,” said Bob Hora, executive of home transition services for BofA.

The program will be offered for mortgages owned and serviced by the bank. The amount of relocation assistance provided will be determined on a case-by-case basis.

Source: Housingwire.com

Shadow Inventory: 46 Months to Clear Distressed Housing Supply

It will take 46 months to clear the market’s supply of distressed homes, or the shadow inventory, according to estimates from Standard & Poor’s Rating Services based on first-quarter 2012 data.

The agency’s latest estimate came in one month shy of the liquidation timeline determined in the fourth quarter of 2011.

While national residential mortgage liquidation rates appeared stable over the first three months of this year, these rates varied widely between local markets, which prevented any significant reduction in S&P’s months-to-clear estimate, the agency explained in its report.

Regional variations in how quickly servicers can clear the backlog of nonperforming loans are primarily due to differences in foreclosure procedures, judicial vs. non-judicial.

As of first-quarter 2012, S&P says its months-to-clear estimate in judicial states was almost 2.5x as long as non-judicial states.

S&P includes in the shadow inventory all outstanding properties on which the mortgage payments are 90 or more days delinquent, properties in foreclosure, and properties that are REO. The agency also includes 70 percent of the loans that became current, or “cured,” from 90-day delinquency within the past 12 months because S&P says these loans are more likely to re-default.

S&P’s calculation of the months to clear the shadow inventory is the ratio of the total volume of distressed loans to the six-month moving average of liquidations. Although S&P’s analysis of the shadow inventory uses only non-agency loan data, the agency’s analysts believe the months-to-clear is similarly high for the market as a whole.

The volume of these distressed U.S. non-agency residential mortgages—which excludes loans from government sponsored entities, such as Fannie Mae and Freddie Mac—remained extremely high at $354 billion in the first quarter, according to S&P. The agency does note, however, that the industry’s distress volume has declined in each quarter since mid-2010.

To put the shadows into perspective, S&P says this latest number, which is based on the original balances of the loans, represents slightly less than one-third of the outstanding non-agency residential mortgage-backed securities (RMBS) market in the United States.

The New York City metropolitan statistical area (MSA) has the highest months-to-clear in the nation, at 202 months.

S&P also reported that the U.S. monthly first default rate fell to 0.67 percent in March 2012, the lowest level since May 2007. The first default rate is the percentage of loans that became 90-plus-days delinquent in that month for the first time, as a percent of all loans that have never before been at least 90 days or more past due.

This means that properties are entering the shadow inventory at a slower rate. S&P says with this improvement, the speed at which servicers can liquidate or cure nonperforming loans will determine the size of the shadow inventory going forward.

Default rates have been falling since first-quarter 2009 and the average national liquidation rate has stabilized, according to S&P—both factors that bode well for getting a handle on the magnitude of the industry’s shadow inventory and its inevitable impact.

Source: DSNews.com

 

Robo-signing fractures REO inventory at GSEs

Fannie Mae and Freddie Mac are managing bifurcated REO inventories because of the robo-signing effect on different areas of the country.

The two mortgage giants owned more than 173,000 repossessed homes as of March 31, a 20% reduction from 218,000 held at the same point last year, according to their first quarter financial statements.

Combined, the GSEs sold more than 77,000 REO and acquired 71,500 homes through foreclosure.

But in the middle of 2010, mortgage servicers began freezing foreclosure proceedings in 23 states in which the foreclosure process runs through judicial courts. The servicers had to fix reams of paperwork signed en masse without proper signatures or notarizations. The practice led to consent orders with federal regulators and a $25 billion settlement with 49 state attorneys general.

But holding up the process took a toll on investors.

Most of the REO that Fannie holds is in California, but that is about to change.

Fannie holds 11,789 REO in the Golden State, which is a nonjudicial foreclosure state, according to its filing. That number is down from 21,800 as of the end of March last year, meaning it was allowed to sell off nearly 10,000 more properties than it took in.

In Florida, which is a judicial state and where robo-signing was a major problem, Fannie’s REO inventory declined only to 10,401 from 13,871 last year.

For Freddie, the bifurcation was more prominent.

Freddie reduced its inventory of REO in the West to 10,954 from 17,768 one year ago, according to its filing. Meanwhile REO held in the Southeast actually increased to only 13,983 properties from 13,838 last year.

Overall, Freddie reduced its inventory by just 9% over the year ending March 31. By comparison, Fannie was able to reduce its REO holdings by 25% over the same time. However, Fannie holds more than 114,000 properties, nearly twice as many REO as Freddie, leaving it more exposed to extended foreclosure timelines.

Foreclosures completed on Fannie Mae mortgages over the last 12 months spent an average 641 days in the system since the last mortgage payment made, up from 529 days for foreclosures completed in the 2011 calendar year and 479 days in 2010.

“Many servicers are also subject to consent orders by their regulators that require the servicers to correct foreclosure process deficiencies and improve their servicing and foreclosure practices,” Fannie disclosed in its filing. “This has resulted in extended foreclosure timelines and, therefore, additional holding costs for us, such as property taxes and insurance, repairs and maintenance, and valuation adjustments due to home price changes.”

Source: Housingwire.com

BofA to Offer Principal Writedowns to 200K Delinquent Borrowers

Bank of America began mailing out more than 200,000 letters this week targeting borrowers thought to be eligible for principal-reducing modifications under terms of the recent settlement the company and four other servicers reached with the federal government and 49 state attorneys general.

To be eligible, a homeowner must owe more on the mortgage than the property is worth today and must have been at least 60 days behind on payments on January 31, 2012.

In addition, the homeowner’s monthly housing costs must be more than 25 percent of gross household income, and the loan must be owned and serviced by Bank of America or serviced for another investor that has authorized the bank to grant principal writedowns.

Officials at Bank of America estimate average monthly savings of 30 percent for customers who qualify for the program.

The North Carolina-based lender said Tuesday that it has already extended about 5,000 trial modification offers involving principal reductions since March, with a potential total of more than $700 million in forgiven mortgage debt. Homeowners are required to make at least three timely trial payments before the modification can be made permanent.

“Building on home retention and payment assistance programs already in place, we are meeting our obligation to deliver this additional relief to our customers following the completion of the recent global mortgage settlement,” said Ron Sturzenegger, Bank of America’s executive over legacy asset servicing.

“To the extent principal reduction and other modification tools help us turn mortgages headed for possible foreclosure into long-term performing loans, it will be positive for homeowners, mortgage investors, and communities,” Sturzenegger added.

The first letters of Bank of America’s mail blitz should start landing in mailboxes this week with the majority of the 200,000-plus identified candidates receiving notice by the third quarter of this year.

Bank of America has committed to slashing $11 billion in mortgage debt for struggling homeowners as part of the settlement agreement reached. But with BofA expecting an average principal reduction of $150,000 for each borrower, crude estimates put the tab potentially as high as $28 billion to $30 billion if a large majority of those targeted respond to the company’s outreach efforts and satisfy the qualifying criteria.

Source: DSNews.com

Fannie, Freddie work to pay down principal in California

Fannie Mae and Freddie Mac signed on to participate in Keep Your Home California, a $2 billion foreclosure prevention program intended to make it easier for homeowners reduce prinicipal on their mortgages.

The move could provide a major boost to both the program and usage of the Treasury Department’s Hardest Hit Fund.

California officials dropped a requirement of Keep Your Home California that banks match taxpayers’ funds when homeowners receive mortgage reductions through the program.

“As announced last year, Fannie Mae and Freddie Mac may accept the pay down of mortgage principal funded through a HHF program provided other guide requirements are satisfied,” a Federal Housing Finance Agency spokesperson told HousingWire. “In response to this week’s announcement by the California HFA, the enterprises will work with the housing finance agency to apply its new program to enterprise loans.”

The FHFA stressed that the principal reduction is not a write down, something Acting Director Edward DeMarco is reluctant to do, but a payment of principal through the underutilized HHF grant dollars. In other words, Fannie and Freddie are not taking losses.

The special inspector general for the Troubled Asset Relief Program reported that just 3% of HHF’s $7.6 billion fund had been used as of Dec. 31. The Treasury Department meant for the program to provide modifications, short sales, unemployment assistance and principal reduction.

The Treasury Department originally announced HHF in February 2010 as a $1.5 billion program for five state housing finance agencies where home prices dropped 20%: Arizona, California, Florida, Michigan and Nevada. It soon grew through three additional rounds of funding to a $7.6 billion program going to 18 states and the District of Columbia.

The money was meant to develop programs and entice mortgage servicers to provide modifications, short sales, unemployment assistance and principal reduction. Treasury approved the first programs in June 2010 and initiatives in other states roughly three months later.

In April, Freddie Mac, in a letter to its servicers, said mortgage servicers must participate in Hardest Hit Fund transition assistance programs from 18 states and the District of Columbia through short sales and other foreclosure alternatives.

Over the life of the Hardest Hit Fund, which ends in 2017, the state housing finance agencies across the nation estimate helping 459,000 homeowners with some sort of relief.

Source: Housingwire.com

HAMP Activity Slides, HAFA Holds Steady

The government’s Home Affordable Modification Program (HAMP) continues to add borrowers to its roster each month, but the pace has slowed.

Data released Friday by Treasury and HUD shows 19,940 permanent HAMP mods were granted during the month of March. That’s down 10 percent from the 22,263 permanent mods completed in February and down 45 percent from 36,432 in March 2011.

Raphael Bostic, HUD assistant secretary, says fewer borrowers are falling behind on their mortgage these days. “We’re making important progress in providing relief to homeowners under the Obama administration’s programs,” Bostic said.

As of the end of March, there were 794,748 borrowers in active permanent HAMP modifications, and 76,218 of these also had payments reduced on a second lien or the lien extinguished entirely through the Second Lien Modification Program (2MP) of the government’s mortgage relief effort.

Bostic notes that in addition to HAMP modifications, homeowners are finding relief under the Home Affordable Refinance Program (HARP). Nearly half a million families have taken advantage of HARP, standing to save on average $2,500 a year, Bostic explained.

Though he described these efforts as providing “significant positive benefits,” Bostic followed that with an appeal to lawmakers to help improve program results. “[W]e are asking the Congress to approve the President’s refinancing proposal so that more homeowners can receive assistance,” he said.

While HAMP activity has slowed, other government-assisted foreclosure alternatives have held fairly steady. During March 2012, 4,486 homeowners received a short sale or deed-in-lieu of foreclosure through the Home Affordable Foreclosure Alternatives Program (HAFA).

There were 4,340 HAFA deals put in place the month before and 5,447 a year earlier in March 2011. To date, servicers have completed a total of 40,252 HAFA transactions.

Source: DSNews.com

Freddie Mac mortgage modifications down as fewer loans go delinquent

Mortgage servicers modified roughly 14,000 Freddie Mac-guaranteed home loans in the first quarter, less than half the 35,000 workouts one year ago as a new program begins.

Modifications dropped every quarter since the peak in the middle of 2010 at 50,000, according to the GSE earnings release Thursday.

Some of the decline in modifications is due to fewer loans entering serious delinquency and fewer borrowers eligible for HAMP. Freddie reported $72.8 billion serious delinquent loans in the first quarter, down from $82.1 billion in the same quarter last year.

But much of the decline is due to the launch of the Standard Modification, which became mandatory for servicers on Jan. 1 and has yet to age long enough to show results. The program, announcedin September, allows servicers to reduce monthly principal and interest payments by 10% for borrowers deemed ineligible for HAMP.

“The implementation of the non-HAMP standard modification also negatively impacted the number of completed modifications in the first quarter of 2012, as servicers have had to transition borrowers to the new modification initiative and borrowers now need to complete a trial period before receiving the final modification,” Freddie said in its first quarter financial filing.

The Federal Housing Finance Agency will determine whether Freddie and its sister company Fannie Mae can participate in principal reduction programs. FHFA Acting Director Edward DeMarco has shown analysis that supports forbearance programs instead, but even these kinds of actions have been on the decline over the past year (click the graph below to expand).

Still, those modifications being done are performing better afterward. Of the loans modified in the first quarter of 2010, roughly 68% were still current and performing two years later. That’s up from 56% of 2009 workouts still performing after the same amount of time, Freddie said in its earnings release.