FHFA Moves Forward With Principal Reduction Modification Program

The Federal Housing Finance Agency (FHFA) is moving ahead with a controversial plan to write-down the mortgages of about 33,000 severely delinquent, “underwater” borrowers who never recovered from the effects of the Great Recession that began in 2008.

The new Principal Reduction Modification program is a one-time offering for borrowers whose loans are owned or guaranteed by Fannie Mae or Freddie Mac and who meet specific eligibility criteria, the FHFA says in a release.

The modification will be available to owner-occupant borrowers who are 90 days or more delinquent as of March 1; whose mortgages have an outstanding unpaid principal balance of $250,000 or less; and whose mark-to-market loan-to-value (MTMLTV) ratios exceed 115%, among other criteria.

Servicers must solicit borrowers eligible for a Principal Reduction Modification no later than Oct. 15.

The FHFA has also approved further enhancements to its requirements for Freddie Mac and Fannie Mae’s sales of nonperforming loans. Now, buyers of these loans must evaluate borrowers whose MTMLTV ratio exceeds 115% for modifications that include principal reduction and/or arrearage forgiveness. In addition, buyers are now forbidden from unilaterally releasing liens and “walking away” from vacant properties owned by these borrowers. In addition, buyers must establish more specific proprietary loan modification standards.

“[The] FHFA has a difficult challenge in trying to help underwater homeowners in some of the markets that are still struggling, as they need to balance the moral hazard risk, identify loans that do not add risk to the [government-sponsored enterprises] or the communities involved and focus on borrowers that will have the best chance to stay current,” says David Stevens, president and CEO of the Mortgage Bankers Association, in a statement. “[The] FHFA’s program design attempts to mitigate some of these concerns, and the result is a narrow focus on lower loan balance and severely delinquent mortgages.”

In a statement, Americans for Financial Reform (AFR) applauds the program but says it should be broader in scope.

“Principal reduction on underwater mortgages has been a priority for AFR and many of our members, and we have long urged [the] FHFA to adopt this position,” the organization says. “Allowing Freddie and Fannie to reduce the principal owed by underwater homeowners to prevent unnecessary, costly foreclosures - as some private investors have been doing for years - is a positive step.

“The research [the] FHFA itself cites suggests, however, that more homeowners and communities should be included; why not, for example, include underwater properties with loan to value ratios below 115 percent? More unnecessary foreclosures could also have been avoided had [the] FHFA moved in this direction sooner,” the organization says.

“Although the reach of this program is too limited, it sets an important precedent for [the] FHFA to use more of the available tools to mitigate the losses on underwater mortgages to benefit homeowners and the enterprises alike,” AFR adds. “The requirement that buyers of distressed mortgages from Fannie and Freddie consider all homeowners for principal reduction is also a very welcome step, as are the additional requirements that buyers not walk away from vacant properties. It is important that there be adequate resources devoted to ensuring compliance with these and other requirements. [The] FHFA should also provide timely and detailed public reports on compliance and on the outcomes of the sales. In addition, [the] FHFA should continue to implement additional mechanisms to ensure that communities and homeowners are helped and not harmed by distressed-asset sales.”


Completed Foreclosures Decreased 13.9% In February

There were about 34,000 completed foreclosures nationwide in February - a decrease of 13.9% compared with about 39,000 in January and a decrease of 23.9% compared with February 2015, according to CoreLogic’s National Foreclosure Report.

What’s more, completed foreclosures were down 71.3% compared with the peak of 117,776 in September 2010.

States with the highest numbers of completed foreclosures for the 12 months ended in February were Florida (72,000), Michigan (49,000), Texas (29,000), California (25,000) and Ohio (23,000). These five states accounted for almost half of all completed foreclosures nationally.

States with the lowest numbers of completed foreclosures included the District of Columbia (113), North Dakota (312), Wyoming (574), West Virginia (627) and Alaska (682).

As of the end of February, the foreclosure inventory included approximately 434,000, or 1.1%, of all homes with a mortgage compared with 571,000 homes, or 1.5%, in February 2015. That’s a year-over-year decrease of 23.9%.

About 1.3 million mortgages, or 3.2% of all properties with a mortgage, were in serious delinquency (90 days or more past due, including loans in foreclosure or real estate owned) - a decrease of 19.9% compared with February 2015.

It was the lowest serious delinquency rate since November 2007, CoreLogic reports.

“Job creation averaged 207,000 during the first two months of 2016, and incomes grew over the past year,” says Frank Nothaft, chief economist for CoreLogic. “More income and improved household finances have helped bring serious delinquency rates down in nearly every state. However, serious delinquency rates increased in North Dakota and West Virginia - two states affected by price declines for the energy fuel each produces.”

“Home price gains have clearly been a driving force in building positive equity for homeowners,” adds Anand Nallathambi, president and CEO of CoreLogic. “Longer term, we anticipate a better balance of supply with demand in many markets, which will help sustain healthy and affordable home values into the future.”


RealtyTrac: Foreclosure Starts, Scheduled Auctions Jumped In March

Foreclosure starts increased 21% in March compared with February but decreased 11% compared with March 2015, according to estimates recently released by RealtyTrac.

Foreclosure starts increased in 20 states, year over year, including Connecticut (up 169%), Arizona (up 125%), Delaware (up 78%), Iowa (up 64%) and Massachusetts (up 51%), according to the firm’s monthly U.S. Foreclosure Market Report.

Scheduled foreclosure auctions - which are an indication of completed foreclosures - also increased in March. They were up 25% compared with February but down 15% compared with March 2015.

In the non-judicial states, scheduled foreclosure auctions increased 18% compared with February, while in the judicial states, they increased 17%.

Year over year, scheduled foreclosure auctions increased in 23 states, including Massachusetts (up 211%), New York (up 92%), Pennsylvania (up 49%), Maryland (up 43%) and South Carolina (up 37%).

RealtyTrac’s report also looks at total foreclosure activity - including default notices, scheduled auctions and bank repossessions - for March and for the first quarter.

Nationwide, foreclosure filings were reported on 289,116 U.S. properties in the first quarter - a decrease of 4% compared with the fourth quarter of 2015 and a decrease of 8% compared with the first quarter of 2015.

It was the lowest quarterly total since the fourth quarter of 2006 - a more than nine-year low, RealtyTrac says.

What’s more, foreclosure activity was below pre-recession levels in 78 out of 216 metropolitan statistical areas - or 36% of all U.S. housing markets.

“Despite a seasonal bump higher in March, foreclosure activity in most markets continues to trend lower and back toward more healthy, stable levels,” says Daren Blomquist, senior vice president of RealtyTrac, in a statement. “More than one-third of the 216 local markets we analyzed were below their pre-recession foreclosure activity averages in the first quarter, and we would expect a growing number of markets to move below that milestone the rest of this year - while the number of markets with a lingering low-grade fever of foreclosure activity continues to shrink.”

Blomquist characterizes the seasonal bump as “typical.”

“February is, of course, a shorter month, and banks often ramp up foreclosure filings in March to take advantage of the spring selling season - which should prove particularly favorable to banks this year, given low inventory levels of homes for sale and continued strong demand from buyers regaining confidence in the housing market,” he explains.

Still, the number of properties with foreclosure filings in the first quarter was 4% higher than the pre-recession quarterly average.

As foreclosure volume recedes to pre-crisis levels, state foreclosure pipelines are clearing out more rapidly - and the average time to foreclose is decreasing. According to RealtyTrac’s data, properties foreclosed on during the first quarter of this year were in the foreclosure process an average of 625 days, down 1% from 629 days in the previous quarter but still up 1% from 620 days in the first quarter of 2015.

The 1% quarter-over-quarter decrease was the second consecutive quarterly decrease nationwide.

There were six states with average times to foreclose of more than 1,000 days in the first quarter, including New Jersey (1,234 days); Hawaii (1,110 days); New York (1,061 days); Utah (1,059 days); Florida (1,018 days); and Connecticut (1,007 days).

States with the shortest average times to foreclose in the first quarter were Virginia (195 days), Mississippi (261 days), Wyoming (268 days), Tennessee (269 days) and Texas (272 days).


Foreclosure Prevention Actions Continued To Decrease In Q4

Mortgage servicers working on behalf of government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac completed 47,769 foreclosure prevention actions in the fourth quarter of 2015 - up from 34,966 in the third quarter, according to the fourth quarter foreclosure prevention report from the Federal Housing Finance Agency (FHFA).

That brought the total number of foreclosure prevention actions since the start of the conservatorships in September 2008 to more than 3.6 million. About 1.9 million of those were permanent loan modifications.

These foreclosure prevention actions have helped more than 3.0 million borrowers stay in their homes, the FHFA says in the report.

As of the end of the fourth quarter, about 515,420 loans, or about 3% of the loans serviced by the GSE-approved servicers, were 60-plus days delinquent - the lowest number since the first quarter of 2008.

The serious delinquency rate (90 days or more past due) fell below 1.5% at the end of the fourth quarter, continuing a steady decline from a peak of 4.93% in the first quarter of 2010.

Fannie Mae and Freddie Mac completed a total of 232,066 foreclosure prevention actions in 2015, including 196,815 home retention actions and 35,251 non-foreclosure home forfeiture actions.


Leisha Delgado Is VP Of Client Development At assure360

Leisha Delgado has joined Carrollton, Texas-based assure360, a provider of technology and outsourcing solutions for the default servicing industry, as vice president of client development.

Prior to joining assure360, Delgado was a relationship manager at Clarifire, where she worked with new clients to deliver workflow solutions to better fit their business operational needs. She also was a project manager at Nationwide Title Clearing and served as a senior retention manager for Sprint Nextel, a Fortune 40 company.

In her new role, Delgado is responsible for business development, driving growth opportunities and generating sales throughout the organization while strengthening existing client relationships.


Treasury Allocates Final $1 Billion For Hardest Hit States

The U.S. Department of the Treasury has allocated a final $1 billion in funds for the Hardest Hit Fund (HHF), which was established in 2010 to aid the states that were hardest hit by the housing crisis to rebuild their blighted neighborhoods.

The funds will be distributed among 13 of the 19 states participating in the program, with Michigan receiving the most, at about $188 million.

The funds are allocated through a competitive application process. In order to qualify for funds in this phase, state housing finance agencies (HFAs) were required to submit detailed applications that demonstrated an ongoing need for additional funding to prevent foreclosures and stabilize housing markets and lay out a reasonable plan of action to address those needs and fully utilize the funds by Dec. 31, 2020, the Treasury says in a press release.

“Today’s announcement continues Treasury’s commitment to provide relief to struggling homeowners and help stabilize neighborhoods in hard hit areas,” says Mark McArdle, Treasury deputy assistant secretary for financial stability. “While the housing market continues to recover, we know some homeowners and areas are still experiencing the damaging effects of the housing crisis. With this additional funding, states will be equipped to continue their great work in getting critical resources to those most in need.”

This is the second phase of the $2 billion in additional funding authorized by Congress under the Consolidated Appropriations Act. The first phase, which was announced in February, allocated $1 billion among 18 of the 19 participating HHF states using a formula based on state population and the HFA’s to-date utilization of its existing HHF allocation.

In order to qualify for the first round of funding, states must have already used more than 50% of their previous HHF allocations. However, with this latest round of funding, states are allowed to still have more than 50% of their previous funding still in place.

According to the Treasury, there were several states that participated in the first round of funding but that did not apply for the second round, including Alabama, Arizona, Florida, Nevada and South Carolina.


FHFA Moves Forward With Principal Reduction Modification Program




































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