The state of the housing market continues to improve though recovery remains “fragile,” according to the October Housing Scorecard released Friday by the Obama administration. Along with the scorecard, the administration released special instructions for those administering the Making Home Affordable Program in areas affected by Hurricane Sandy.
Signs of improvement include rising home prices, rising home sales, and ongoing efforts through the Making Home Affordable Program.
About 1.3 million previously underwater homeowners are now above water due to rising prices.
“As the October housing scorecard indicates, our housing market is continuing to show important signs of recovery – with the FHFA housing price index posting its largest annual gain in five years and new home sales at its fastest pace since April 2010,” said Erika Poethig, acting assistant secretary for policy development and research at the Department of Housing and Urban Development.
So far, the administration’s Making Home Affordable Program has helped almost 1.3 million homeowners. More than 1 million of these homeowners have received loan modifications through the Home Affordable Modification Program (HAMP).
Of those who start the program, about 86 percent have received permanent modifications over the past two years.
Additionally, the Federal Housing Administration has helped more than 1.5 million struggling homeowners through loss mitigation.
“To help families in the Northeast recover from the devastation caused by Hurricane Sandy, we are directing servicers to make special efforts to ensure that homeowners eligible for assistance through Making Home Affordable have the extra flexibility and relief they need,” said Tim Massad, assistant secretary for financial stability at the Treasury.
In areas directly impacted by Hurricane Sandy, servicers must offer at least three months forbearance to any homeowners eligible for Making Home Affordable who request forbearance.
If a homeowner receives help through Making Home Affordable or is in the application process for a program and misses one or more payments, services are directed not to “take any action that would adversely affect eligibility for the program unless there is contact with the homeowner.”
The Obama administration has announced changes to its flagship foreclosure prevention initiative – the Home Affordable Modification Program (HAMP). Among the changes, borrowers who are struggling because of debt beyond their mortgage will be eligible for a secondary evaluation with more flexible debt-to-income criteria, and eligibility will be extended to investor-owned homes that are used as rental properties.
The administration is also giving principal reductions a bigger role within the program, tripling incentives for investors that agree to write down an underwater borrower’s principal balance and offering these same incentives to the nation’s two biggest mortgage investors – Fannie Mae and Freddie Mac.
House Votes to Terminate Government's Mortgage Modification ProgramThe U.S. House of Representatives passed legislation Tuesday evening to end the administration’s flagship foreclosure prevention initiative, the Home Affordable Modification Program (HAMP).
The HAMP Termination Act (H.R. 839) passed the House in a 218 to 109 vote. Pundits are calling it a largely symbolic vote since the bill is not expected to win as much favor in the Senate, although Republican senators have already introduced their own bill to pull the plug on the federal mod program, which is identical to the House bill that passed. The White House had previously stated the president will veto any HAMP-ending legislation should it land on his desk. The Office of Management and Budget reiterated that threat Tuesday.
While HAMP has come under heavy fire for falling short of its original goal to put 3-4 million homeowners in modified loans, there are at least some lawmakers who believe the answer lies in revamping, not ending, the program. Late Monday, ahead of the House’s scheduled vote, a coalition of 50 Democratic legislators, including Reps. Barney Frank of Massachusetts and Maxine Waters of California, penned a letter to Treasury Secretary Timothy Geithner. In the letter, they sided with their Republican counterparts in describing HAMP’s results thus far as “disappointing,” but they urged Geithner to make the necessary changes to bring the program up to par.
Their recommendations mirror many of the servicing guidelines that state and federal officials are pushing as part of the highly publicized robo-signing settlement. Among them, ensuring borrowers have a single point of contact throughout the HAMP application and evaluation process, and suspending foreclosure actions while the borrower is being evaluated for the program.
The HAMP Termination Act is the fourth federal foreclosure mitigation program the House has voted to end. Earlier this month the chamber passed measure to end HUD’s Neighborhood Stabilization Program, FHA’s Short Refi Program for underwater borrowers, and the Emergency Mortgage Relief Program established to provide temporary bridge loans for unemployed homeowners.
The White House has vowed to veto all measures should they make it that far.
Committee Advances Bills to End Two More Foreclosure Aid Programs
The House Financial Services Committee voted Wednesday in favor of two bills that would terminate the administration’s flagship Home Affordable Modification Program (HAMP) and HUD’s Neighborhood Stabilization Program (NSP), which provides funding to local governments and nonprofits for the acquisition and redevelopment of foreclosed and abandoned homes.
With the committee’s stamp of approval, the HAMP Termination Act (H.R. 839) and the NSP Termination Act (H.R. 861) now move to the full House for consideration.
According to a statement from the committee, the legislation would prevent $29 billion in taxpayer funds from being spent to continue HAMP and rescind $1 billion in NSP grant money that has not yet been obligated.
“When you pull a dollar out of the economy and use it on an inefficient program, that’s a dollar that cannot be used in the private sector to create a job,” Committee Chairman Spencer Bachus (R-Alabama) said, according to details of the markup session provided by Peter Schroeder on The Hill’s finance and economy blog.
Both bills passed the committee on a party line vote, with the Republican majority banding together to push them through and the Democratic members voicing their opposition.
Rep. Maxine Waters (D-California), a senior member of the committee, said in a statement, “I feel as if Republicans are operating…completely removed from a housing crisis that brought the economy to its knees, left communities decimated, and eviscerated untold amounts of American wealth. A few Republicans even stated – repeatedly – that the housing crisis is over.” Waters added, “Today’s vote by committee Republicans to gut HAMP and NSP is a slap in the face to struggling homeowners and recovering communities throughout this country. It’s clear that they want to repeal these programs and not replace them with anything meaningful.”
As with the partisan vote of the committee, it’s projected that the bills could pass the full Republican-controlled House but they are expected to meet strong resistance if they progress to the Democratic-led Senate.
The House approved two rules Wednesday afternoon that clear the path for it to bring bills to the floor that the Financial Services Committee advanced last Thursday – the FHA Refinance Program Termination Act (H.R. 830) and the Emergency Mortgage Relief Program Termination Act (H.R. 836). The full House is expected to begin deliberation on these two bills Thursday or Friday.
The White House has threatened to veto the bills if they do land on the president’s desk.
The House Financial Services Committee voted Thursday to scrap two foreclosure relief programs – one that gives underwater homeowners a federal refinancing option, and a second that provides temporary mortgage assistance to unemployed homeowners.
The House committee was also planning to consider two separate bills to end the administration’s Home Affordable Modification Program (HAMP) and HUD’s Neighborhood Stabilization Program, but votes on these two have been pushed to next week, reportedly simply because of time constraints.
Rep. Spencer Bachus (R-Alabama) is chairman of the House Financial Services Committee and one of the main forces pushing the bills through.
Bachus said, “In an era of record-breaking deficits, it’s time to pull the plug on these programs that are actually doing more harm than good for struggling homeowners. These programs may have been well-intentioned but they’re not working. Congress needs to stop funding programs that don’t work with money we don’t have.”
Issa is the chairman of the Oversight and Government Reform Committee, and introduced the bill at the committee’s first hearing last week. Issa invited Neil Barofsky, the special inspector general of TARP, to speak at the meeting and give his opinion on HAMP.
In the meeting, Barofsky said the program’s failure “has had the most devastating consequences” for everyday borrowers.
“HAMP is a colossal failure,” said Rep. Jordan, who is chair of the Oversight subcommittee on Regulatory Affairs, Stimulus Oversight and Government Spending. He continued, “In many cases, it has hurt the very people it promised to help. It’s one more example of why government interference in the private sector doesn’t work and that’s why it should be repealed.”
There have been many recent reports circulating that HAMP is not working as well as intended. Barofsky recently released a report to Congress saying that the program “continues to fall dramatically short of any meaningful standard of success,” calling the number of permanent modifications that have resulted from the program – just over a half million – “anemic.”
The alliance of mortgage servicers, investors, non-profit counselors, and mortgage insurers that make up HOPE NOW have completed more than double that “anemic” number on their own, on Wednesday releasing a figure of 1.24 million proprietary loan modifications in 2010.
Barofsky’s report did not advocate repealing HAMP, rather he urged Congress to make necessary changes to the program in order to maximize its potential. But Rep. McHenry, who chairs the Oversight subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs, thinks enough is enough. “The number of homeowners kicked out of HAMP – and arguably left worse off by participating in the program– exceeds the number actually helped by hundreds of thousands,” he said. “Because the administration won’t listen to bipartisan calls to fix this program, the only option left is to end it.”
In addition, Barofsky says the billions of dollars that were used to bailout faltering financial institutions, such as Citibank, AIG and Bank of America, during the crisis set a dangerous precedent. "By effectively guaranteeing these institutions against failure, they encouraged future high-risk behavior by insulating the risk-takers who had profited so greatly in the run-up to the crisis from the consequences of failure," he wrote. "In many ways, TARP has thus helped mix the same toxic cocktail of implicit guarantees and distorted incentives that led to disastrous consequences." Barofsky also faults the Dodd-Frank bill, a law passed last year that enacted sweeping reforms of the nation's financial regulatory framework, for not being forceful enough to deal with too-big-to-fail banks.
"Unless and until institutions currently viewed as 'too big to fail' are either broken up so that they are no longer perceived to be a threat to the financial system, or a structure is put in place that gives adequate assurance to the market that they will be left to suffer the full consequences of their own recklessness, the prospect of more bailouts will continue to fuel more bad behavior with potentially disastrous results," he wrote.
The figures provided by the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) are based on information collected from nine institutions with the largest mortgage servicing portfolios among national banks and thrifts.
The reporting firms include: Bank of America, JPMorgan Chase, Citibank, HSBC, MetLife, PNC, U.S. Bank, Wells Fargo, and OneWest Bank (formerly IndyMac). The report covers about 64 percent of all first-lien mortgages in the country, worth $5.8 trillion in outstanding balances.
The regulators’ quarterly mortgage performance report shows that new foreclosures initiated by these institutions also rose during the July to September timeframe, before the robo-signing scandal broke. The number of foreclosure starts in Q3 increased to more than 382,000 – 31.2 percent more than in the previous quarter and 3.7 percent more than in the third quarter of 2009.
All in all, the reporting institutions counted 1.2 million foreclosures in process as of September 30, 2010, according to the report. That represents a record-high 3.6 percent of their combined servicing portfolios. “Completed foreclosures, which have risen for six consecutive quarters, are expected to continue rising as servicers and borrowers exhaust home retention options to assist borrowers with seriously delinquent mortgages,” regulators noted in the report.
Although foreclosure activity increased during the third quarter, the servicers reported almost twice as many home retention actions as completed home forfeiture actions. They implemented 470,321 home retention actions, including loan modifications, trial period plans, and shorter term payment plans. By comparison, there were 244,840 home forfeiture actions, which takes into account the 187,000 completed foreclosures, as well as approximately 56,200 short sales and 1,700 deeds-in-lieu of foreclosure.
Home forfeiture actions in Q3 were up 11 percent from the previous quarter, while home retention actions dropped by 17 percent, the regulators reported. According to the OCC and OTS, servicers modified 1,506,025 loans from the beginning of 2008 through the second quarter of 2010. At the end of the third quarter of 2010, 48 percent of these modifications remained current or were paid off, but the report notes that more recent modifications have been performing better than the earlier ones.
At six months after modification, 20.2 percent of the modifications made in the fourth quarter of 2009 were seriously delinquent compared with 33.5 percent of the modifications made during the second quarter of 2009, according to the regulators’ analysis.
They also pointed out that modifications under the federal government’s Home Affordable Modification Program (HAMP) are performing better than servicers’ proprietary modifications implemented during the same period.
At six months after modification, the re-default rate for HAMP modifications was about half that of other modifications. The regulators attribute the distinction to HAMP’s emphasis on repayment sustainability, namely guidelines that ensure monthly payments are reduced and are affordable relative to verified borrower income, as well as the completion of a successful trial payment period.
The lawsuit was filed in the United States District Court for the Northern District of California. The case alleges that ASC induced borrowers to default on their mortgages by telling them they would not be eligible for a loan modification if they were current on payments. Harwood Feffer claims ASC induced borrowers to default on their mortgages in order to charge penalty and fees associated with the late payments.
“As a loan servicer, ASC generates a significant portion of its revenue from fees, penalties, and interest collected on the non-performing loans it services,” said Harwood Feffer in a statement. The statement continued, “Consequently, it is in ASC’s financial interest to avoid, delay, and deny loan modifications and to pursue foreclosures because doing so will lead to increased revenue.” According to the Home Affordable Modification Program guidelines, a borrower who has not defaulted but is distressed and believed to be facing imminent default may be eligible for a loan modification if financial hardship can be demonstrated.
“By making loan default a prerequisite for modification, without regard to whether a borrower otherwise qualified for a modification due to financial hardship, ASC caused borrowers to unnecessarily suffer ruined credit and subjected them to significant fees, penalties and interest,” alleged Harwood Feffer. A spokesperson for Wells Fargo said he could not comment specifically on the lawsuit as it is currently under review, but said, “We believe, as we have from the beginning of this crisis, that it is in our customers’ and the country’s best interests to assist customers who can afford their homes – with some help – to remain in them. And, it is our goal to exhaust all options before moving a home to foreclosure sale.”
"Bank of America and Fidelity National Financial have reached an agreement confirming that Fidelity will provide title insurance on the sale of foreclosed properties," said B of A spokesman Dan Frahm.
Under the agreement, Fidelity will defend the new homeowner in court if a foreclosed owner challenges the title. B of A will cover the costs and, if necessary, any damages awarded to the previous owner.
"Bank of America and Fidelity National are taking this step to facilitate the continued availability of title insurance that is vital to the marketability of foreclosed properties," Frahm said.
The giant bank is seeking similar agreements with other title insurers.
American Land Title Association chief executive Kurt Pfotenhauer welcomed the B of A/Fidelity agreement.
“Title insurers are looking to lenders to provide appropriate indemnities," he said. ALTA also has approached the GSE regulator about title indemnifications.
"We will continue to work with federal and state regulators, Fannie Mae, Freddie Mac and lenders to bring certainty to the marketplace," Pfotenhauer said.