Delinquency Rate Reaches Lowest Level Since 2009: TransUnion

05/09/2012 By: Esther Cho 

After declining during the 2012 first quarter, the national mortgage delinquency rate is at its lowest level since the first quarter of 2009 and finally dropped after two consecutive quarterly increases. TransUnion reported Wednesday that the national delinquency rate, which includes borrowers 60 or more days past due, is 5.78 percent for the first quarter of 2012, a quarterly and yearly drop when the rates were 6.01 percent and 6.19 percent, respectively.

“To see that quarter over quarter, and year over year, more homeowners were able to make their mortgage payments is certainly welcome news,” said Tim Martin, group VP of U.S. Housing in TransUnion’s financial services business unit.
Martin also added that while we are still about three-times above the pre-recession norm, we should begin to see consistent improvements each quarter.
As for individual states, Florida (13.87 percent) took the lead for the highest delinquency rate, followed by hard-hit state Nevada (11.16 percent), then New Jersey (8.31 percent) and Maryland (7.11 percent).

States with the lowest delinquency rates were North Dakota (1.51 percent), South Dakota (2.11 percent), Nebraska (2.31 percent), and Wyoming (2.43 percent).
The three states that saw the greatest year-over-year increases in their rates were Vermont, which saw its rate go up by about 15 percent to 3.31 percent, followed by New Jersey and Arkansas, which saw smaller declines under 10 percent.
The three states that saw the greatest yearly declines in their mortgage delinquency rate were Arizona, which dropped its rate by about 25 percent to 6.86 percent, followed by Wyoming, which had a 23 percent reduction to 2.43 percent, and California, which fell to 6.66 percent after cutting its rate by 22 percent.
For metropolitan areas, 73 percent saw decreases in their mortgage rates in the first quarter of 2012 compared to the previous two quarters, when only 36 percent of metro areas saw a drop in their delinquency rate.
TransUnion predicts this will be a continuing trend and expects mortgage delinquency rates to fall further downward in 2012.
“We have seen increased traction of refinance activity related to HARP 2.0, a program that makes it easier for homeowners with negative equity in their home to refinance,” said Martin. “Going forward, as these homeowners take advantage of the historic low mortgage interest rates, and perhaps lower their monthly payment in the process, it may have some positive impact on the overall delinquency rate starting later this year.”
TransUnion’s forecast is based on various economic assumptions and is subject to change if there are unanticipated shocks to the economy.

HUD Secretary Wants to Break Through Refinancing Barriers

05/08/2012 By: Ryan Schuette 

Solvency issues re-emerged for the Federal Housing Administration (FHA) in a hearing convened Tuesday by the Senate Banking Committee, with HUD Secretary Shaun Donovan calling for lower loan-to-value thresholds and more servicer competition to expand refinance opportunities.

The hearing follows a bill by Sens. Barbara Boxer (D-California) and Robert Menendez (D-New Jersey) to roll back refinancing barriers for homeowners with GSE-held mortgages and featured the legislation prominently as lawmakers discussed solutions to the housing crisis.
Donovan praised the bill and identified three barriers to refinance opportunities for a broader swath of homeowners, including lower fees, streamlined underwriting practices, and manual appraisals for borrowers even in communities with few recent home sales.
The hearing quickly turned to servicer competition, which the HUD official said is lacking in part because of strict underwriting guidelines under Fannie Mae and Freddie Mac, inflating home prices and keeping refinance opportunities out of reach for many homeowners.

“Servicers who don’t service that loan are being discouraged from competing to refinance those loans,” he told lawmakers, citing a “number of changes” that legislators and regulators could make to remove barriers to homeowners.
He faulted existing loan representations and warranties for discouraging servicers from allowing borrowers to refinance at historically low interest rates.
“Frankly, we think it doesn’t make a lot of common sense that a homeowner who actually has more equity in their home is a lower-risk borrower… [than] homeowners who may be underwater on their homes,” he said. “It’s a question of fairness to make sure refinancing is available across the board.”
Sen. Richard Shelby (R-Alabama), a frequent critic of the FHA’s failure to stay above its 2 percent capital ratio buffer, reiterated concerns about the overcommitted housing agency in his opening remarks and later in questions during the hearing.
“Do you share my overall concern about the solvency of FHA?” he asked Donovan.
The HUD official answered by highlighting recent “substantial premium increases,” as well as a new rule on lender indemnification that he billed as a measure to protect the FHA’s cash-strapped Mutual Mortgage Insurance Fund.
“I do think we’re taking series of a number of broad steps to protect the fund,” he said.
The FHA remains a political hotspot for the housing industry, with a recent paper by Joseph Gyourko, a professor at the University of Pennsylvania, claiming last fall that it would need anywhere from $50 billion to $100 billion in Treasury draws, if trends persist.

Fannie Mae: Confidence in Economy and Home Values Increasing

05/07/2012 By: Esther Cho

Both the expectation for home prices and the percentage of those who think the U.S. economy is on the right path reached record highs in Fannie Mae’s April 2012 National Housing Survey.

Americans continue to expect home prices to go up, with the projection averaging 1.3 percent over the next 12 months, the highest value recorded.
At 71 percent, a high percentage of Americans still say it is a good time to buy while the percentage who said it is a good time to sell was 15 percent, a 1 point increase from March.
“Overall, consumer views of housing market conditions have become more supportive of home purchases, and sustained healthy hiring is required to help realize these improved expectations,” said Doug Duncan, Fannie Mae chief economist.

Duncan also mentioned the recent figures on employment in April, which showed a decline in job growth.
“Friday’s report of a second consecutive setback in job creation supports the view that the housing recovery will remain uneven this year,” said Duncan.
The expectation for average rental prices decreased slightly to 3.6 percent; in March, respondents expected rent to go up by 4.1 percent over the next 12 months.
If respondents were to move, 32 percent said say they would rent while 64 percent said they would buy. The percentage of those who said they would rent increased 2 points and reached the highest level since November 2011.
The percentage of Americans who believe the economy is on the right track rose to 37 percent, a 2 point increase from the previous month and the highest level in the survey’s two-year history. Still, an even greater 56 percent believe the economy is moving in the wrong direction.
Also, 23 percent of Americans reported their household income is significantly higher than it was a year ago, while 36 percent said their household expenses are significantly higher since the same time period. Both categories rose 2 percentage points compared to March.
The percentage of those who think their financial situation will decline was unchanged from the previous two months at 12 percent, the lowest value recorded in over a year.
The Fannie Mae survey polled a nationally representative sample of 1,000 respondents aged 18 and older between April 4, 2011 and April 27, 2012.

HAMP Activity Slides, HAFA Holds Steady

05/07/2012 By: Carrie Bay 

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

Freddie Mac: Fixed-Rate Averages Hit Record-Low Numbers

05/03/2012 By: Esther Cho 

Homebuyer affordability is even greater now with the fixed mortgage rates slipping to new record lows, according to Freddie Mac’s Primary Mortgage Market Survey.

The 30-year fixed averaged 3.84 percent (0.8 point) for the week ending May 3, down from the previous record low of 3.87 percent on February 9, 2012. Last week, the 30-year fixed-rate was 3.88 percent, and last year at this time, it averaged 4.71 percent.
The 15-year fixed mortgage averaged 3.07 percent (0.7 point), also below its all-time record low when it was 3.11 percent April 12 of this year. Last week, the 15-year averaged 3.12 percent, and a year ago, it was 3.89 percent.
The 5-year ARM was unchanged from last week’s average of 2.85 percent (0.7 point). A year ago, the 5-year ARM was 3.47 percent.

The 1-year ARM also reached a new record low at 2.70 percent (0.6 point). Last week, the 1-year ARM was 2.74 percent and averaged 3.14 percent a year ago.
“Signs of slowing economic growth and inflation remaining subdued allowed yields on Treasury bonds to ease somewhat and brought most mortgage rates to new all-time record lows this week,” said Frank Nothaft, VP and chief economist for Freddie Mac.
One sign of a slowing economy Nothaft mentioned was real Gross Domestic Product, in which he explained rose at an annualized rate of 2.2 percent in the first quarter of this year, a drop from the previous quarter of 3 percent and below the market consensus forecast of 2.5 percent.
Bankrate.com’s weekly national survey aligned with trends seen in Freddie’s survey by also reporting declines and record low numbers.
The 30-year fixed mortgage slipped to 4.05 percent, a drop from last week’s 4.09 percent.
The 15-year fell to 3.25 percent, a record low and decline compared to last week’s average of 3.28 percent.
Adjustable mortgage rates were mixed, with the average 3-year ARM moving upward to 3.07 percent, while the 5-year ARM tied with February’s record low of 3.02 percent.
Bankrate’s survey includes data provided by the top 10 banks and thrifts in the top 10 markets.

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Principal Reduction: A Matter of Analysis or Ideology for DeMarco?

05/02/2012 By: Esther Cho 

Based on documents Reps. Elijah Cummings (D-Maryland.) and John Tierney (D-Massachusetts) received, FHFA Acting Director Edward DeMarco’s reason for not allowing principal reduction appears to be based on ideology, not analysis, according to a May 1 letter they wrote to the director.

The letter states beginning in 2009, Fannie Mae officials worked with Citibank to develop a “shared equity” principal reduction pilot program that was “suddenly suspended” in July 2010, which prompted Citibank officials to ask what changed at the “11th hour.”
In the letter, the representatives stated that on February 8, a former Fannie Mae employee informed them the pilot program on principal reduction was terminated by officials who were “philosophically opposed to writing down principal balances.”
“Fannie Mae officials strongly supported the concept of principal reduction and fully evaluated its risks and benefits as they obtained the necessary internal approvals to finalize the program,” the letter stated.
One of the benefits Fannie Mae officials determined from their analysis is that implementation of the program would cost about $1.7 million, while benefits could exceed $410 million, according to the letter.
Another conclusion from Fannie Mae cited in the letter is that underwater borrowers will perform better on a modification that provides equity, and re-default rates on loans with principal reduction are far below rates on loans with other modifications.

The representatives also stated that the wide range of internal documents show that “Fannie Mae officials conducted detailed, substantive analyses and concluded years ago that principal reduction programs have enormous potential to save U.S. taxpayers significant amounts of money.”
DeMarco has cited taxpayer losses as one of the reasons for not allowing principal reduction, and FHFA’s estimate is principal reduction will cost taxpayers $100 billion, in addition to the $180 billion rescuing the GSEs has cost already.
The representatives said they obtained some of documents directly from FHFA, and others from an independent source, who provided documents labeled “confidential,” “proprietary,” and “internal.”
In response to the letter, DeMarco wrote his own addressing the claims, in which he stated, “I wish to convey my disappointment with this letter, the failure to contact FHFA to address your concerns, and the release of selective elements of the proprietary and confidential materials you received.”
With his May 1 letter, DeMarco attached an agency letter released April 12, 2012, that was an earlier response to the representatives regarding FHFA’s analysis of principal forgiveness.
In the April letter, authored by General Counsel Alfred M. Pollard, it was explained that the pilot program in question on principal reduction, among others, “ended due to complex operational issues involving system changes, accounting considerations and the interest level of Fannie Mae’s partners.”
As for the motive behind DeMarco’s decision on principal reduction, the acting director said FHFA makes decisions based on the analysis of facts.
“The fact that FHFA continues to consider principal forgiveness alternatives, including recent HAMP program changes initiated by the Treasury Department, belies any ideological tilt on our part, but rather a strict analytical-based approach to gathering and evaluating data to determine what options best fit within the legal constraints that fall upon this agency as conservator for the Enterprises,” he said in Tuesday’s letter

REO Prices Increase, Fair Market Prices Drop, Home Values Stabilizing

04/30/2012 By: Esther Cho 

According to data from Clear Capital, over the last year, REO prices have increased 5.5 percent, while fair market prices dropped 2.9 percent. The real estate data provider explained that demand for REOs is most likely causing the increase in prices and named Carrington Holding Company, Amherst Securities Group, and Waypoint Financial as examples of investors purchasing single-family REOs with the purpose of converting them into rental properties.

“There has been quite a bit of buzz in the housing industry surrounding turning REOs into rentals. Our data suggests early activity from these programs could be starting to take effect, with national REO-only home price gains on a price per square foot basis vastly outpacing fair market prices on a national level,” said Dr. Alex Villacorta, director of research and analytics at Clear Capital.
According to data from the Census Bureau, rental vacancy rates have also seen a steep decline, with the rate at 8.8 percent in the 2012 first quarter, a significant decline from the 2010 first quarter, when the vacancy rate was 10.6 percent.
Villacorta also added that if investor interest continues to expand the REO-to-rental programs over the next several months, this could lead to a significant impact on the market in terms of increasing home values.
REO saturation, or the portion of REO sales relative to total sales, increased on a quarterly basis in April for the third straight month. Nationally, REO saturation increased quarterly from 25.3 percent in December 2011 to 27.9 percent in April 2012.
The Midwest regions saw the greatest quarterly increase of REO saturation, increasing to 37.1 percent in April compared to 31.1 percent in December.

In the West, REO saturation increased from 31 percent to 33.3 percent during the same quarterly period, and in the South, saturation increased from 24.2 percent to 25.3 percent. In the Northeast, REO saturation remained low compared to other regions; the region posted a quarterly increase from 8.4 percent to 10.2 percent.
Presenting further evidence that the housing market may be stabilizing, Clear Capital released its Home Data Index (HDI), which showed that overall, home prices fell 0.2 percent on a quarterly basis, and 1 percent year-over-year.
The data gathered was good through April 2012, and the HDI includes both fair market and REO transactions.
Based on regions, the Midwest was the only one that posted quarter-over-quarter losses, declining 2.7 percent. The West (+0.5 percent), Northeast (+0.2 percent), and South (+0.6 percent) all posted small quarterly gains. Year-over-year, all regions posted loses except for the Northeast, which saw a 0.7 percent increase.
Compared to the March 2012 report, the West and South posted improvements, decreasing their year-over-year losses by 1.4 and 0.3 percentage points, respectively.
The Midwest was the only region not following the positive trend and posted a yearly loss of 0.2 percent compared to the previous month’s report.
As for metro areas, hard hit market Phoenix posted the greatest quarterly price gains and yearly increases at 8.4 and 12.5 percent, respectively.
Miami posted the second highest quarter-over-quarter increase at 4.6 percent, closely followed by Tampa (+4.4 percent); Richmond, Virginia (+4.4 percent); and Washington, D.C. (3.6 percent).
On a yearly basis, Orlando posted a 9.8 percent increase, while Miami saw a 9.1 percent gain.
Milwaukee saw the greatest quarterly drop in prices, decreasing 12.5 percent. Columbus had the second greatest quarterly drop at -7.5 percent, followed by Birmingham, Alabama (-6.1 percent), Memphis (-5.4 percent), and Detroit (-4.2 percent).
Year-over-year, prices in Birmingham, Alabama fell 13 percent, Memphis 11.4 percent, Milwaukee 9.4 percent, Philadelphia 8.3 percent, and Columbia 6.2 percent.