Albert Hakim's Blog

Jobless claims fell 6.6% last week

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Thu, 19 May 2011 10:12:55 -0700

Initial jobless claims decreased another 6.6% last week on top of a big decline the prior week, after reaching the highest level since August during the first week of May.

The Labor Department said the seasonally adjusted figure of actual initial claims for the week ended May 14 fell by 29,000 to 409,000. Initial claims for the prior week were 438,000, which was revised upward 4,000.

Analysts surveyed by Econoday expected 425,000 new jobless claims last week with a range of estimates between 410,000 and 440,000. A Briefing.com survey projected new claims of 400,000 for last week. Most economists believe weekly new claims lower than 400,000 indicate the economy is expanding and jobs growth is strengthening.

The four-week moving average, which is considered a less volatile indicator than weekly claims, rose by 1,250 to 439,000 from a slightly revised average of 437,750 the prior week. The seasonally adjusted insured unemployment rate for the week ended May 7 remained unchanged at 3%, according to the Labor Department.

The total number of people receiving some sort of federal unemployment benefits for the week ended April 30 fell to 7.94 million from 7.98 million the prior week

Investors kept April home sales afloat

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Thu, 19 May 2011 10:12:11 -0700

Home sales in April were unchanged from March as investors remained in the game with the expectation that prices bottomed out, according to the latest RE/MAX National Housing Report.

Last month, investors made up 25% of the market, sparking speculation buyers anticipate higher interest rates and home values in the future. During the same period, inventory levels fell as home prices rose 2.2% from March-the third increase this year.

"The market is holding its own in the absence of any artificial stimulus," said RE/MAX Chief Executive Margaret Kelly. "We're encouraged to see that home prices have been rising this year and we are hoping that this will motivate buyers who have been waiting for a bottom."

RE/MAX remains optimistic that homebuyers expecting a bottom will jump back into the market this summer.

Home sales in March rose by double-digits in nearly all U.S. metropolitan areas, which was an encouraging sign for the housing market as it enters spring buying season.

More borrowers default on second liens in April

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Thu, 19 May 2011 10:11:20 -0700

While default rates are down mostly so far this year, borrowers with second mortgages went against trend with their default rate rising in April for the first time in five months, according to data from Standard & Poor's and Experian.

The firms produce the S&P/Experian Consumer Credit Default Indices, which showed the default rate for second mortgages grew to 1.51% in April from 1.42% a month earlier.

At the same time, first mortgages experienced a decline in defaults, with that segment's default rate dropping to 2.16% from 2.33% between March and April.

"We had seen default rates fall across all major categories and most major cities during the prior six months, but given April's data that might be coming to end. The real question is whether April was temporary or are household balance sheets worsening?" said David Blitzer, managing director and chairman of the index committee for S&P Indices.

"In addition, there are some significant differences across credit types and MSAs. Bank card default rates went up in April, after having fallen each of the past 11 months; and the data indicate that the rate of default on credit cards is still 5.9%, more than twice any of the other loan classes," he said.

LPS claims foreclosure crackdown simply pushing revenue to second half of 2011

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Tue, 03 May 2011 10:16:27 -0700

Recent investigations and regulatory crackdowns on the mortgage servicing industry may only delay income at Lender Processing Services (LPS: 28.52 -0.24%) in the near-term, the company's CEO Jeff Carbiener said Friday.

The default servicing industry has been at the center of investigations from federal regulators and the 50 state attorneys general since late 2010. Employees at many of the targeted companies were found to be mishandling various stages of the foreclosure process.

The servicers, including LPS, signed consent orders with the Federal Reserve and the Office of the Comptroller of the Currency, agreeing to establish a new framework for how delinquent mortgages are treated.

LPS reported a 23% drop in income for the first quarter as foreclosure timelines lengthened and the pipeline of foreclosure processing fees tightened. But Carbiener said the loss of revenue will only be delayed until the inevitable work through of an inventory of 4.3 million delinquent loans picks up again.

"Default services reductions were due to significant weakness in first quarter foreclosure activity. Input from our larger customers confirms that the immediate focus is on tight timeliness, which will begin to increase through second half of the year," Carbiener said in a conference call with investors. "Lower market revenue is not being lost, just being shifted to future periods."

LPS faces a slew of lawsuits from an attorney alleging the company conducted an extensive and illegal fee-splitting operation. The Michigan AG launched a probe into still surfacing documentation problems, and a bankruptcy judge has issued sanctions against the firm.

But Carbiener said LPS is not involved in the continued negotiations between servicers and the broader 50 state AG investigation, and he said the company will continue to "aggressively address the legal challenges as they arrive."

In the meantime, LPS expects its default services department to see income drop 10% for 2011 to roughly $4.8 billion. But Carbiener expects to make that up in 2012.

Carbiener optimistically pointed to several factors. The average age of a loan in foreclosure is at 368 days. Loans that have made it through the process and into the inventory of foreclosures spent 528 days without a payment. Unemployment remains at high levels, and 20% of all properties remain underwater. Once the regulatory framework is in place, Carbiener said, the work can begin again.

"It is difficult to predict final outcome, but it will not have adverse impact on business or operations," Carbiener said. "We expect to gain market share and revenue at the back half of the year."

Older homebuyers tapping savings for down payments

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Tue, 03 May 2011 10:14:39 -0700

More and more of the nation's older homebuyers are using savings to put money down on new homes.

In 2007, 92% of Americans 55 or older who bought a home used money from a the sale of a previous home for the down payment on a new mortgage. In 2009, however, only 55% were able to take the same route when buying a home, according to a joint study conducted by the Housing Council of the National Association of Home Builders and the MetLife Mature Market Institute.

The organizations said previous studies showed most homebuyers in that age range depended on proceeds from a home sale to finance a new purchase.

The "Housing Trends Update for the 55+ Market" study explores recently released housing data from the Census Bureau's 2009 American Housing Survey on the 55-plus demographic.

Survey respondents reported the main reason they move is to be closer to friends or relatives. The design and look of the building where they were moving came in second.

A recent Fannie Mae survey showed that the demographics of home owners are changing, as the homeownership rate among young adults decreased 11% from January to December. The survey also showed people between the ages of 65 to 74 are 3.5 times more likely to own a home than a person under 25.

The MetLife/NAHB data confirmed the GSE claim, as it showed the homeownership rate among 55-plus adults has remained stable. According to the study, more than two-thirds of 55-plus households own a single-family residence, which is well above the rate of younger households. Additionally, 9% of the same demographic own a multifamily property.

Mortgage conference laying groundwork for 6 million potential homebuyers

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Tue, 03 May 2011 10:13:52 -0700

The mortgage finance industry is in a state of flux. One constant is the government-sponsored enterprises of Fannie Mae and Freddie Mac currently finance the vast majority of the nation's home purchases.

However, the GSEs will be shrinking in the future. And a panel at the Mortgage Bankers Association national secondary market conference and expo in New York strategized ways to deliver homeownership to the next wave of clients, in the absence of a centralized secondary mortgage market.

The future of mortgage lending belongs to the Echo Boomers, or the children of baby boomers, mortgage industry executives said Monday.

While this demographic cohort is roughly 80 million strong, many are staying on the sidelines for now, according to Lisa Zakrajsek, executive vice president of Wells Fargo (WFC: 29.331 +0.69%). For the most part, this population is more interested in renting. However, a notable portion will want to buy a home, one day.

"We did a deeper study of this demographic," she said. "This millenial population in the age range of 11 to 31 is an enormous population. There are 6 million more potential first-time homebuyers today than there were in 1977 and this population is still interested in buying property."

Despite the desire to buy a home, Zakrajsek said these people, also known as Millennials, are putting off acquiring a mortgage as the market continues to drag and the jobs situation remains shaky. But she believes the next generation of homebuyers will dive in head-first when the time is right.

Shawn Krause, executive vice president of Quicken Loans said these young buyers are expecting a lending industry that is more in line with their preferences. This means products need to be diverse and evolved, employing traditional methods, as well as online lending services and even social media outreach, according to Krause.

Half a million bad mortgages got better or foreclosed in first quarter

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Tue, 03 May 2011 10:12:47 -0700

Lender Processing Services (LPS: 28.555 -0.12%) said 500,000 ailing mortgage borrowers either came current on their payments or lost their home to foreclosure in the first quarter, according to a recent mortgage monitor from the Florida-based data provider.

Those mortgages are supported by "seasonal trends" that supported large increases in cure rates. However, the numbers also show the volume of foreclosures continues to rise with the inventory as of March 31 at 2.2 million, which 33% higher than the end of February and an all-time high.

Foreclosure sales rose significantly in March as well, "suggesting that the halt in activity due to various moratoria may be passing," according to LPS. "New problem loan rates are at a three-year low as fewer loans are going bad," but the pipeline is "still bloated with overhang at every level."

That overhang includes three times the number foreclosure starts as foreclosure sales. Overall foreclosures are down 19.4% from a year ago and foreclosure starts are up 8.2%. Delinquencies ended the first quarter 12% lower than the end of 2010.

The buying of houses is also being restricted by logistics. Origination activity dropped off early this year due to much stricter underwriting, the report states.

And the cautious origination strategy appears to be reasonable as recent vintages are performing exceptionally well.

More than 550 banks still owe the government???

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Thu, 28 Apr 2011 16:42:36 -0700

Roughly $146 billion in bank bailouts are not yet repaid to the Treasury Department as of the end of March, and the return on those investments remains "unknowable," according to the Special Inspector General for the Troubled Asset Relief Program.

More than 550 banks have not repaid their bailout, and unloading investments in the most troubled institutions such as American International Group (AIG: 31.80 +0.32%) and General Motors (GM: 31.91 +0.41%) remains elusive.

SIGTARP is the program's remaining watchdog after the Congressional Oversight Panel closed in April. The Congressional Budget Office continues to drop its estimate of TARP's eventual cost, lowering it to $19 billion in March. The Public-Private Investment Program, which buys up toxic mortgage-backed securities, earned $1.2 billion for the Treasury in the first quarter and is scheduled to last at least seven more years.

SIGTARP said in its quarterly report that TARP and its underlying initiatives still have years to go.

"TARP's financial outlook is improving, with more institutions repaying TARP and cost estimates continuing to decline," according to the report. "Nevertheless, it bears repeating that Treasury's ultimate return on its TARP investments depends on many variables that are largely unknowable at this time."

SIGTARP continued its critique of TARP's moral hazard cost and the underwhelming performance of its foreclosure prevention initiatives.

"Many institutions remain 'too big to fail.' Today, the biggest banks are bigger than ever. These banks continue to enjoy unwarranted advantages over their smaller competitors such as better access to capital and cheaper credit," SIGTARP reported.

As for the Home Affordable Modification Program, the Treasury's flagship initiative to assist homeowners by paying mortgage servicers for modifications, remains beset by fundamental problems, according to the report. Through February, servicers started more than 633,000 permanent modifications and look increasingly unlikely to hit the original goal of between 3 million and 4 million.

"Many of these problems relate to the structure of the program, which puts the ultimate decision to modify a mortgage in the hands of mortgage servicers, whose performance has been extraordinarily poor," SIGTARP said, adding consumer complaints to its hotline hasn't let up despite recent and upcoming changes from the Treasury.

TARP expired in October, but the public perception that the program is winding down is inaccurate. Billions of obligated funds can still be expended through 13 programs, including HAMP and PPIP. Of the obligated amount, $410.5 billion had been spent as of March, leaving $58.9 billion in five programs remaining, SIGTARP said.

"Congress understood that TARP might last for many years, and that oversight would be essential throughout TARP's existence," SIGTARP said. "In other words, SIGTARP will remain 'on watch' as long as TARP assets remain outstanding."

Nine indicted in $3 million Florida mortgage fraud scheme

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Thu, 28 Apr 2011 16:41:19 -0700

A federal court in South Florida charged nine people in three separate indictments for their alleged roles in a multimillion-dollar mortgage fraud scheme.

The scheme involves inflated mortgages tied to high-end properties sold in the Versailles development in Wellington, Fla.

The U.S. attorney's office indicted Carl Alexander, 45, of Parkland, Fla.; Carol Asbury, 59, an attorney from Lake Worth, Fla.; Patrick Brinson, 34, of Miami; David Lam, 42, of Parkland, Fla.; David Miller, 43, of Miramar, Fla.; Godfrey Myles, 42, a former professional football player from Miami; Michael Samuda, 38, an attorney from Weston, Fla.; Thomas Thelusma, 40, a firefighter from Miami; and Victoria Wilson, 30, a mortgage broker from Hollywood, Fla.

The U.S. Attorneys Office of the Southern District of Florida accused the nine defendants in three separate indictments of using a straw buyer to acquire single-family, luxury homes at inflated prices. As part of the scheme, the defendants allegedly gave different prices to the lender and straw-buyer, with the lender receiving a higher cost estimate on the mortgage.

"The difference between the real price and the inflated price was either made to appear as if it were a debt owed to business entities controlled by the defendants and their co-conspirators or was made to appear as profits to the seller," the attorney's office said in a statement released with the indictments Thursday. "The fraudulent loan proceeds were instead laundered through multiple accounts to conceal the source and distribution of the money and were ultimately used for the benefit of the defendants and their co-conspirators."

The charges were outlined in three separate indictments that accuse the defendants of devising schemes that led to more than $3 million in fraudulent loan proceeds. The defendants face various charges, including mortgage fraud, the making of false statements and conspiracy to commit mail and wire fraud. The charges carry sentences ranging between five and 20 years

Fannie, Freddie align servicing guidelines for delinquent mortgages

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Thu, 28 Apr 2011 16:40:11 -0700

The Federal Housing Finance Agency directed Fannie Mae and Freddie Mac Thursday to align their guidelines for servicing delinquent mortgages.

Previously, the government-sponsored enterprises maintained different requirements for how their mortgage servicers would treat these loans. But the FHFA forced an alignment to push servicers into engaging the borrower as soon as they become delinquent. The foreclosure process cannot begin if the borrower and servicer are working toward solving the delinquency in a good-faith effort, effectively prohibiting the practice of "dual tracking."

Under the new requirements, servicers must engage in a single track for considering foreclosure alternatives up to the 120th day of delinquency, according to the FHFA. Servicers must also perform a formal review of the case to confirm the borrower was considered before starting foreclosure. Even then, servicers are required to continue work with the homeowner on other alternatives.

Not only procedures, but incentives were aligned. Servicers for both GSEs will be rewarded and penalized the same under the new guidelines.

"FHFA's directive to align Enterprise policies for servicing delinquent mortgages should result in earlier servicer engagement to identify the best solution available for homeowners, given their individual circumstances," said FHFA Acting Director Edward DeMarco.

The FHFA said the updated framework will expedite borrower outreach, align modification terms and establish "a consistent schedule of performance-based incentive payments and penalties."

Fannie Mae CEO Michael Williams said the alignment is a major step toward an improved servicer process.

"This initiative will direct servicers to reach families earlier, communicate more frequently and clearly, and provide relief," Williams said. "Fannie Mae fully supports this Initiative, and we remain committed to stabilizing communities and building a stronger foundation for housing."

Freddie Mac CEO Ed Haldeman said the FHFA action will simplify the process for delinquent borrowers.

"Alignment of key servicing practices between our two companies will help servicers achieve these goals by enabling them to streamline their operations and more effectively target resources to distressed borrowers," Haldeman said in a statement. "For example, it will simplify the process for seeking help by giving borrowers one application to fill out and servicers one application to review for all Freddie Mac loan modifications and foreclosure alternatives."

Pay early, save on mortgage interest

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Thu, 14 Apr 2011 11:34:37 -0700

A frequently asked question is whether a mortgage borrower receives any benefit from paying before the due date. In most cases, the answer is "no," but there are a few exceptions. With simple-interest mortgages, including HELOCs (home equity lines of credit), it does pay to pay early and, under some circumstances, paying early in order to shift next year's interest into this year could reduce taxes.

The rules when payments are late: On a standard monthly payment mortgage, the payment is due on the first day of the month, and will be credited to the borrower on that day, regardless of when it is received. If the payment is received within the grace period, customarily the first 10 or 15 days, the borrower receives a free ride -- no interest accrual -- for those days.

If the payment is received after the grace period but within the month, the borrower is subject to a late charge. If the payment is not received until the following month, the borrower incurs a late charge and is reported to the credit bureaus as a 30-day delinquency, but the payment is credited as of the first day of the previous month.

When payments are early: Payments made before the due date are also credited as of that date. This gives the lender free use of the borrower's money for that period. The borrower who consistently pays two weeks early, for example, is in effect providing the lender with a two-week grace period comparable to that provided by the lender to borrowers who pay late. There is no benefit to the borrower.

Simple-interest mortgages are different: On simple-interest mortgages, interest accrues daily rather than monthly, which changes the rules significantly. As with standard mortgages, payments are due on the first day of the month and late fees are charged on payments received after the grace period.

On simple-interest mortgages, however, interest is due every day. This means that a borrower who pays one day late pays additional interest for that day, and the borrower who pays one day early saves a day's interest.

The bottom line is that a borrower who consistently pays two weeks early will save money on a simple-interest mortgage. That doesn't bother the lenders because they know that those are rare birds. Most borrowers pay late.

Borrowers don't get to choose between standard and simple-interest mortgages; I have never heard of it being offered as an option. Most have standard mortgages, and those with simple-interest mortgages typically didn't know what they were getting. Borrowers need to adapt their payment habits to the kind of mortgage that they have.

I should note that HELOCs are simple-interest, and most HELOC borrowers do understand that they accrue interest daily. It pays to pay early on a HELOC.

Making advance provision for future payment: Early payment should not be confused with making advance provision for future payments. When I took my family on an around-the-world tour some time ago, I left a set of checks with the loan servicer dated at monthly intervals. This assured that each payment would be made on time, but I was not giving the servicer the use of my money because only one check at a time became negotiable.

A potential tax benefit in paying early: In December, some borrowers who itemize their deductions make their payments for the early months of the following year. This shifts the interest deduction in those months from next year to this year. This can be especially advantageous if the borrower expects to be in a lower tax bracket, or expects the tax rate to be lower next year.

For this to work, however, you need the servicer to agree in advance to credit your account this year for the payments due next year. The end-of-year statement will then show the interest as having been paid this year.

Another key player exits reverse mortgage business

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Thu, 14 Apr 2011 11:33:32 -0700

It's curious how companies promote the launch of a new product or program but do little to inform consumers when it is no longer available. Financial Freedom Senior Funding Corporation was founded in 1996 in Irvine, Calif., and grew to be of the biggest players in the national reverse mortgage industry. It also became the reverse market leader for homeowners with higher-priced homes.

As of March 31, Financial Freedom will no longer be accepting reverse mortgage applications, becoming the third major reverse mortgage company to exit the business this year. Seattle Mortgage and Bank of America recently announced they were shutting their reverse operations, while Wells Fargo said it would halt its wholesale broker program. Financial Freedom intends to continue servicing the reverse mortgages it now holds, according to a company statement.

New compensation rules for loan salespeople is the most speculated reason for the stoppage, but lenders cite a "need to return to core business" as the prime mover. The bottom line is that seniors will have fewer places to look to pull money out of their homes without having to pay it back.

"After careful consideration, we have decided to exit the wholesale reverse mortgage origination business based on the regulatory environment and the desire to focus on the bank's core businesses," read a statement from Pasadena, Calif.-based OneWest Bank, the parent company of Financial Freedom. "The wholesale reverse mortgage origination channel represents the majority of Financial Freedom's origination business and is the only wholesale origination channel within OneWest.

"While we are exiting these origination channels, we remain committed to servicing our significant reverse mortgage loan portfolio. We will continue to place a strong emphasis on providing professional, quality service to our customers," the statement read.

A reverse mortgage historically has enabled senior homeowners to convert part of the equity in their homes into tax-free funds without having to sell the home, give up title, or take on a new monthly mortgage payment.

Reverse mortgages are available to individuals 62 or older who own their home. The maximum amount of funds received is based on age, current interest rates and a current home appraisal. Funds obtained from the reverse mortgage are considered tax-free.

Jumbo reverse mortgages first became available in 2000 when Financial Freedom introduced its Cash Account reverse mortgage. Since then, jumbo products brought to market by Seattle Mortgage, Bank of America, Senior Lending Network, Sun West Mortgage Co. and Bank of New York (now MetLife) and others were beginning to pick up momentum and a sliver of market share.

The credit crisis decimated the jumbo reverse market in 2008. Wall Street investors not only were shy about buying loans secured by real estate, but they were also opposed to acquiring jumbo packages.

Lehman Brothers, which filed for bankruptcy protection in September 2008, was the world's biggest supplier of jumbo reverse mortgage funds. Lehman, which purchased Financial Freedom in 2001, sold the company three years later to IndyMac for approximately $80 million in cash. OneWest Bank received Financial Freedom as part of the IndyMac acquisition in 2009.

One of the few jumbo reverse mortgages still available today is the Generation Plus Loan available through Atlanta-based Generation Mortgage. It targets owners over 62 with homes appraising between $500,000 and $6 million. Unlike the popular Home Equity Conversion Mortgage (HECM) offered by the U.S. Housing and Urban Development Department, the jumbo reverse mortgage requires no mortgage insurance but the interest rate on the program is higher.

A majority of seniors are better served by the HECM. Not only can customers receive the funds in a variety of ways (lump sum, monthly draw, line of credit, or a combination), but the interest rate on that fixed-rate product at press time was approximately 5.5 percent. The upfront mortgage insurance brings the actual rate closer to 6.75 percent.

Financial Freedom continued to offer HUD-insured HECMs the past few years under the OneWest umbrella. However, without a Wall Street investor supplying jumbo funds, the company never recovered the upper-end market niche. Now, it is out of reverse mortgages altogether.

Bank Bailouts in the Black, Watchdog Asks "And the Toxic Mortgages?"

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Tue, 05 Apr 2011 09:34:49 -0700

The bailout programs used to prop up the nation's banking system are now in the black. The U.S. Treasury announced this week that the investments it made in banks, beginning in 2008, to prevent the sector from folding under the weight of the financial crisis have now turned a profit.

Three more financial institutions repaid a combined total of $7.4 billion in Troubled Asset Relief Program (TARP) funds Wednesday. With these proceeds, taxpayers have now recovered $251 billion from TARP's bank programs through repayments, dividends, interest payments, and other income.

That exceeds the original investment Treasury made through those programs ($245 billion) by nearly $6 billion.

"While our overriding objective with TARP was to break the back of the financial crisis and save American jobs, the fact that our investment in banks has also delivered a significant profit for taxpayers is a welcome development," said Treasury Secretary Tim Geithner.

Treasury says the only outlay which it doesn't expect to be recovered is funds disbursed for foreclosure prevention programs.

One of Treasury's harshest critics, TARP Special Inspector General Neil Barofsky, cast his own dark cloud over the program's proclaimed success, even as his final day in office approached.

Barofsky officially stepped down from his post Wednesday. In an op-ed piece in the New York Times Tuesday, he wrote that while TARP has pushed Wall Street to profitability

again, it has done little to honor the promises made to Main Street.

Barofsky reminded readers of the original intent of TARP, the intent that was put to lawmakers when they voted on the controversial $700 billion program - to buy up toxic mortgages.

"Treasury promised that it would modify those mortgages to assist struggling homeowners. Indeed, the [legislation] expressly directs the department to do just that," Barofsky wrote.

But, "almost immediately," Barofsky said, "Treasury's plan for TARP shifted from the purchase of mortgages to the infusion of hundreds of billions of dollars into the nation's largest financial institutions, a shift that came with the express promise that it would restore lending.

"Treasury, however, provided the money to banks with no effective policy or effort to compel the extension of credit," He said. "There were no strings attached: no requirement or even incentive to increase lending to homebuyers, and...not even a request that banks report how they used TARP funds."

Barofsky continued, "Treasury's mismanagement of TARP and its disregard for TARP's Main Street goals...may have so damaged the credibility of the government as a whole that future policy makers may be politically unable to take the necessary steps to save the system the next time a crisis arises."

Treasury officials say they believe the bank bailouts will ultimately provide a lifetime profit of approximately $20 billion to taxpayers. And with the profit reaped from the banks, TARP as a whole - including foreclosure programs, support for AIG, and the auto industry bailout - will result "in little or no cost to taxpayers," Treasury said.

Critics of the program, though, aren't putting much faith in Treasury's claims. Rep. Patrick McHenry (R-North Carolina) is chairman of the House's oversight subcommittee on TARP and bailouts.

He told the New York Times, "The estimates have been consistently off and Treasury has consistently changed the metric for success. In the beginning, they weren't touting payback - they touted effectiveness. Now, they are touting payback but ignoring the moral hazard this program has created."

Completed Foreclosures Down by Nearly 50% Among Largest Servicers

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Tue, 05 Apr 2011 09:33:59 -0700

The nation's largest mortgage servicers foreclosed on 95,067 homes during the fourth quarter of 2010, a 49 percent drop from the number of completed foreclosures during the previous quarter, according to a new report from two regulatory agencies. The Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS), which oversee large national banks and thrifts and subsequently their mortgage servicing businesses, attributed the sharp decline in foreclosures to the fact that the largest mortgage servicers slowed foreclosure actions during the fourth quarter to review their processes and procedures after robo-signing practices were exposed. Newly initiated foreclosures also decreased but by a much smaller ratio. Foreclosure starts among the largest servicers totaled 352,318 during the last three months of 2010, a decline of 8 percent when compared to the previous quarter. Because new foreclosures outpaced completed foreclosures, the inventory of foreclosures in process increased by more than 7 percent to 1,290,253. According to the OCC-OTS report, that figure represents 3.9 percent of all serviced loans"New and completed foreclosures are likely to increase in upcoming quarters as moratoria are lifted and the large inventory of seriously delinquent loans and loans in process of foreclosure work through the system," the regulators warned. During the final three months of 2010, servicers initiated more than three times as many home retention actions as completed home forfeiture actions, according to the report. Servicers implemented 473,415 home retention actions (loan modifications, trial period plans, and shorter term payment plans), compared with 146,132 completed home forfeiture actions (completed foreclosures, short sales, and deed-in-lieu-of-foreclosure actions). Officials at the OCC and OTS note that the overall credit quality of first-lien mortgages serviced by large national banks and thrifts continues to improve. The regulators' fourth-quarter study showed that 87.6 percent of the 32.9 million loans serviced by the institutions under their supervision were current and performing at the end of last year. "While mortgage delinquency levels remained elevated, the overall quality of the portfolio of mortgages included in this report improved from the previous quarter," the regulators said. The percentage of mortgages that were seriously delinquent declined for the fourth consecutive quarter to 5.4 percent - the lowest level since the second quarter of 2009. The OCC-OTS report covers about 63 percent of all first-lien mortgages in the country, worth $5.7 trillion in outstanding balances.

Foreclosures jump 31% in third quarter

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Fri, 01 Apr 2011 10:24:05 -0700

Large banks and thrifts foreclosed on 382,000 homes in the third quarter, a 31.2% spike from the previous quarter, according to the Office of the Comptroller of the Currency.

Foreclosures increased 3.7% from a year ago, and more are coming. There are 1.2 million homes in the foreclosure process as of the end of the third quarter, up 4.5% from the previous quarter and an increase of 10.1% from a year ago.

The OCC, which oversees the largest banks and absorbs the Office of Thrift Supervision in 2011, said lenders have picked up the pace of foreclosures to get through their backlogs.

Still, 87.4% of the 33.3 million loans in the banks' portfolios were current and performing at the end of the quarter, which held unchanged from the previous quarter. While the amount of borrowers in 60-plus day delinquency dropped 6.4% from the previous quarter, mortgages between 30- and 60-days delinquent increased 4.3%.

But servicers reported more home retention actions than foreclosures in the third quarter. More than 470,000 borrowers received either a trial modification, permanent modification or shorter-term payment plans.

Of the modifications completed in the third quarter, 88% included a principal reduction to go with the interest-rate decrease, and more than 54% reduced monthly payments by at least 20%.

More recent modifications are performing better than earlier ones, too. For those completed in the fourth quarter of 2009, 20.2% were seriously delinquent after six months. For those made in the second quarter of 2009, 33.5% were seriously delinquent after the same amount of time.

Seriously delinquent mortgage volume hits two-year low

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Fri, 01 Apr 2011 10:22:47 -0700

The percentage of mortgages classified as seriously delinquent within the portfolios of large banks and thrifts fell in all four quarters of 2010, the Office of the Comptroller of Currency and the Office of Thrift Supervision said Thursday.

The percentage of seriously delinquent mortgages at Dec. 31 dropped to a level not seen since the second quarter of 2009. The report defines seriously delinquent mortgages as those 60 or more days delinquent or delinquent loans to bankrupt borrowers.

The federal agencies said 87.6% of the nearly 33 million loans surveyed were listed as current and performing at the end of the fourth quarter.

During the quarter, foreclosure activity declined as mortgage servicers slowed the default process to deal with regulatory issues surrounding foreclosure processes.

"Completed foreclosures decreased by nearly 50% to 95,067," the OCC and OTS report said. "Newly initiated foreclosures decreased by almost 8% to 352,318. Because new foreclosures outpaced completed foreclosures, the inventory of foreclosures in process increased by more than 7% to 1,290,253; that represented 3.9% of all serviced loans at the end of the fourth quarter."

Despite the foreclosure slowdown, the OCC and OTS expect foreclosure activity to increase in 2011 as moratoriums thaw, allowing a larger inventory of distressed loans to enter the foreclosure process.

In the fourth quarter, servicers launched three times as many loss mitigation procedures when compared to home forfeiture actions, the agencies said.

"Servicers implemented 473,415 home retention actions (loan modifications, trial period plans, and shorter term payment plans), compared with 146,132 completed home forfeiture actions (completed foreclosures, short sales, and deed-in-lieu-of-foreclosure actions)," the report said.

Every Agents Nightmare

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Thu, 31 Mar 2011 14:00:40 -0700

Ask any active agent what's going on this week in real estate and they'll tell you they are dealing with multiple offers and bidding wars. How is it possible that buyers are fighting over houses in a depressed real estate market which is characterized by excess inventory?

The answer is that there is actually a shortage of good, clean, salable homes on the market right now. The key word in the last sentence is "salable". Despite media reports that the number of foreclosures are up and there is a glut of homes on the market, inventories of all homes for sale in Michigan have steadily declined for several quarters. More importantly, the number of homes for sale by traditional sellers is even lower than the number required for a balanced market.

That is important because most active buyers today, other than speculators and investors, need to be able to negotiate a sales agreement that provides certainty. They need fixed closing and possession dates. They also need to know that when they are ready to close, the house will still be available to them. They also need assurance that the property will remain in the condition it was when they entered into the agreement to purchase until they take possession. None of the above is available to buyers of bank owned or other distressed properties.

The bottom line is that we are seeing increasing buyer demand against a smaller pool of salable properties. The buyers are there because they recognize that prices are at the bottom of the market. The sellers are not there for the same reason.

Although statistics across the market do not yet prove it, anecdotally there is strong evidence that prices have moved off the bottom. They certainly have for those houses that are being sold in multiple offer scenarios. Now all that is needed is for the appraisers to get the word

LPS Rolls Out Mass Loan Mod Solution

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Thu, 31 Mar 2011 13:51:33 -0700

Lender Processing Services, Inc. (LPS: 32.2212 +0.32%) said Wednesday morning that it's the latest mortgage industry services provider to roll out an end-to-end loan modification platform. Called RediMod, the new platform focuses on enabling mass loan modifications by automating loan eligibility and best-fit determinations for modification programs, and then combining loan-level and portfolio analytics with customizable customer contact strategies tailored to meet a servicer's specific requirements.

"Servicers are under increasing pressure to limit the number of defaulted loans and assist borrowers in their efforts to stay in their homes," said Dan Scheuble, co-chief operating officer of LPS and president of the company's mortgage processing services division. "RediMod provides a flexible and immediate solution that extends a servicer's current technology rather than replaces it, allowing for a very quick implementation."

While RediMod is intended to provide a complete solution to servicers, LPS said its new platform also has been developed in a modular fashion - allowing those with partial workout processes already in place to add capabilities as needed. The platform also is offered in conjunction with the company's strategic consulting services.

The company, while a well-known and strong player in the mortgage services space, isn't the first or the only large entrant into the loan modification space recently. But LPS' entrance now, in many ways, signals the importance being placed by servicers on finding ways to use technology to streamline loan modifications where possible; it's also an indicator of just how overwhelmed many servicers are by an influx of troubled loans they're having trouble managing.

LPS competitor the First American Corp. (FAF: 16.525 -0.27%), for example, also rolled out what it billed at the time as an "end-to-end, component-based" loss mitigation outsourcing solution in early August. Other industry service providers have waded into loss mitigation waters as of late, as well - including even formerly REO-centric tech firms - making loss mitigation outsourcing and technology perhaps the hottest area in the entire mortgage industry right now.

The idea of mass, and even proactive, loan modifications by servicers has been pushed with force by regulators in recent weeks, with Federal Deposit Insurance Corp. chairwoman Sheila Bair highlighting their use at IndyMac Federal Bank in an effort to lobby for further government intervention in managing troubled mortgage modifications. On Nov. 11, Federal Housing Finance Agency director James Lockhart unveiled a streamlined loan modification plan that sets core criteria for mass loan modification on loans owned or guaranteed by Fannie Mae [(FNM: 0.00 N/A) and Freddie Mac (FRE: 0.00 N/A).

In other words, there's a pretty big market right now for programs that can help servicers implement streamlined loan modifications.

New CoreLogic tool automates the decision-making in loan mods

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Thu, 31 Mar 2011 13:50:48 -0700

Analytics firm CoreLogic (CLGX: 18.65 +1.52%) rolled out IntelliMods Thursday, a new Web-based application that aims to expedite the loan modification decision-making process.

CoreLogic says the tool allows servicers to bypass manual loan modification calculations by submitting borrower profiles through IntelliMods, which is designed to determine a borrower's loan modification eligibility.

CoreLogic touts the tool as one that "allows clients to build unlimited sets of investor and servicer-specific cascades." The application can process a single loan or a batch of loans at the same time, CoreLogic said.

The tool takes into account government regulations and provisions related to loan modifications.

The application is rolling out at a time when government officials are pushing for more loan modifications nationwide.

"Although servicers offered more than 1.7 million HAMP (Home Affordable Modification Program) trial modifications in 2010, there are still millions of loans more than 90 days delinquent," said Scott Brinkley, senior vice president of outsourcing and technology solutions for CoreLogic. "As regulatory pressures and 'second look' reviews continue to increase, there is still a significant need to speed the loan modification process and an even greater need to provide audible, defensible decisioning."

Some 11.1 million residential properties, or 23.1% of all U.S. homes, were in negative equity at Dec. 31, up from 10.8 million, or 22.5%, the prior quarter, according to CoreLogic data.

Freddie Mac tells servicers not to foreclose in MERS name

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Thu, 31 Mar 2011 13:50:03 -0700

Freddie Mac told servicers managing its loans this week that they can no longer foreclose in the name of Mortgage Electronic Registration Systems.

The directive came in a bulletin issued Wednesday and takes effect April 1.

The bulletin from the government-sponsored enterprise also gives guidance in several other areas. Servicers now may postpone foreclosure sales handled by designated counsel as long as the newly scheduled foreclosure sale date is within Freddie Mac's foreclosure timeline. The bulletin also advises on changes to requirements on foreclosure and bankruptcy referrals, reimbursable expenses, and property preservation.

"We have updated the guide to eliminate the option for the foreclosure counsel or trustee to conduct a foreclosure in the name of MERS," the bulletin states. The directive is effective for mortgages registered with MERS that are referred to foreclosure on or after April 1, Freddie Mac said.

"Servicers must prepare an assignment of the security instrument from MERS to the servicer and instruct the foreclosure counsel or trustee to foreclose in the servicer's name and take title in Freddie Mac's name," the bulletin says.

"Servicers must record the prepared assignment where required by state law. State mandated recording fees are not reimbursable by Freddie Mac, are not considered part of the Freddie Mac allowable attorney fees and must not be billed to the borrower," the GSE said.

After June 1, servicers must perform an interior property inspection on abandoned properties, as per the bulletin. The inspection must occur upon confirmation the property has been abandoned; and within 30 days prior to a scheduled foreclosure sale, Freddie said.

Although the new interior property inspection requirements are not effective until June, servicers are being encouraged to begin them as soon as possible.

Republicans introduce eight bills to wind down Fannie and Freddie

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Thu, 31 Mar 2011 13:48:56 -0700

Republicans on the House Financial Services Committee unveiled their plans to reform the government-sponsored enterprises Fannie Mae and Freddie Mac Tuesday with eight bills aimed at ending taxpayer bailouts, adding transparency and reducing costs.

"Today marks the start of a process - a process to begin winding down Fannie Mae and Freddie Mac," said Rep. Scott Garrett (R-N.J.), who serves as chairman of a House Financial Services subcommittee.

"Beginning today, and over the course of the next few months, my colleagues and I on the Financial Services Committee will introduce multiple rounds of very specific, very targeted bills to end the bailouts, protect the taxpayers and get private capital off the sidelines."

Tuesday's proposed legislation is as follows:

The Equity in Government Compensation Act suspends the current compensation packages for all employees at Fannie Mae and Freddie Mac, and establishes a compensation system that is consistent with other senior executives in the federal government.

"The failures of Fannie Mae and Freddie Mac helped precipitate the deepest economic decline since World War II," the bill reads. It then lists all the financial bailouts the GSEs received from the government.

"The director shall suspend the compensation packages approved for 2011 for the executive officers of an enterprise," it continues.

Rep. Spencer Bachus (R-Ala.), chairman of the House Financial Services Committee, sponsored the bill.

The GSE Mission Improvement Act, introduced by Rep. Ed Royce (R-Cali.), aims to end all affordable housing goals set by Fannie Mae and Freddie Mac.

"The passage of legislation in the early '90s required the government-sponsored enterprises to devote a significant portion of their business to specific affordable housing goals," Royce said. "To meet these goals, the GSEs purchased more than $1 trillion in junk loans. These loans accounted for a large portion of the mortgage giants' losses - losses that were later loaded onto the backs of American taxpayers."

This bill would essentially repeal The Federal Housing Enterprises Financial Safety and Soundness Act of 1992.

The Fannie Mae and Freddie Mac Accountability and Transparency for Taxpayers Act, formally known H.R. 31, further regulates Fannie and Freddie by requiring the GSE Inspector General to report to Congress on a regular basis.

Reports will include the dollar amount of current liabilities with a detailed breakdown of potential risk level, a compensation breakdown for GSE executives including bonuses, details on GSE foreclosure mitigation efforts, mortgage fraud prevention activities, a description of investments and holdings and an analysis of capital levels and portfolio size of each agency, among other things.

The first reporting period would cover from the time Fannie Mae and Freddie Mac went into conservatorship until the bill is implemented. After that, reports would be done on a quarterly basis.

Rep. Judy Biggert (R-Ill.) introduced the act. She is chairman of a House Financial Services subcommittee.

Under the GSE Subsidy Elimination Act, the guarantee fee or g-fee would steadily increase over the course of two years in order to "to eliminate (Fannie and Freddie's) embedded subsidies" and "finally bring pricing parity between the private market and the GSEs," said Rep. Randy Neugebauer (R-Texas). He is the lead sponsor of this bill.

Rep. Jeb Hensarling (R-Texas), vice chairman of the House Financial Services Committee, is sponsoring a bill called the GSE Portfolio Risk Reduction Act, to cap the current portfolios of Fannie Mae and Freddie Mac and increase their annual attrition rate.

Hensarling's bill accelerates and formalizes the reductions in the size of the GSEs' portfolios by setting annual limits on the maximum size of each GSE's retained portfolio. In the first year, the GSEs would have their portfolios capped at no more than $700 billion, declining to $600 billion for year two, $475 billion for year three, $350 billion for year four, and finally $250 billion in year five.

Rep. David Schweikert (R-Ariz.), vice chairman of a House Financial Servicess subcommittee, is sponsoring the GSE Risk and Activities Limitation Act to prohibit Fannie Mae and Freddie Mac from engaging in any new activities or businesses.

"This bill will put restrictions on where GSEs can invest their money and thus protect American taxpayers from future failed bailouts, unsuccessful government programs, and wasteful spending," he said.

The GSE Debt Issuance Approval Act sponsored by Rep. Steve Pearce (R-N.M.) requires formal approval by the Treasury for any new debt issuance by the GSEs.

Rep. Scott Garrett (R-NJ), chairman of the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, is sponsoring the GSE Credit Risk Equitable Treatment Act of 2011 to prohibit the exemption of GSE securities from the risk-retention requirements of Dodd-Frank.

Fannie Mae and Freddie Mac will be held to the same standards as any other secondary mortgage market participants. Under Dodd-Frank, Fannie and Freddie could still be able to purchase a mortgage from a financial institution that falls outside of the qualified residential mortgage definition and issue asset-backed securities backed by non-QRM assets.

Garrett's bill would clarify that a GSE loan purchase or asset-backed security issuance would not affect the status of the underlying assets. If the GSEs purchase a non-QRM loan, all lender risk-retention requirements will still apply, and if the GSEs issue a non-QRM security, all securitization risk retention rules will still apply.

House votes to end HAMP

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Thu, 31 Mar 2011 13:48:17 -0700

The House of Representatives voted Tuesday 252-170 to terminate the Home Affordable Modification Program roughly two years early.

Rep. Patrick McHenry (R-N.C.) introduced H.R. 839 as part of a wide effort by Republicans to shut down programs designed by the Obama administration to aid borrowers and localities in the middle of a foreclosure crisis. The Treasury set aside $30 billion for HAMP but has spent roughly $1.2 billion so far.

The House already voted to cut the last $1 billion from the Neighborhood Stabilization Program, the yet-to-begin $1 billion Emergency Homeowner Loan Program from the Department of Housing and Urban Development and the recently started Federal Housing Administration Short Refi program.

But the Obama administration reiterated its threat to veto the HAMP-termination bill late Monday. And the Democratic-controlled Senate is unlikely to pass the legislation.

Servicers participating in HAMP have started 600,000 permanent modifications since the program launched in March 2009, but at its current pace the program will not reach the 3 million to 4 million originally estimated.

Rep. Spencer Bachus (R-Ala.) said HAMP has caused more harm than good, and that taxpayers should no longer fund bailouts for the banks through a program that promotes strategic default.

"We should not waste taxpayer dollars on failed government programs that do not work and actually make things worse for struggling homeowners," Bachus said. "These programs may have been well-intentioned, but they're doing more harm than good."

House Democrats sent a letter to Treasury Secretary Timothy Geithner Monday night outlining changes to HAMP they would like to see, most notably fines for underperforming servicers. On Tuesday, the Treasury said it would begin grading the top servicers in the program.

"I certainly believe that HAMP can be improved - and I call on the administration to make immediate improvements - but the legislation before us today makes no effort to strengthen this program," Rep. Elijah Cummings (D-Md.) said. "Instead, it simply abandons families on the brink of losing their homes, it harms investors, and it threatens our nation's entire economic recovery."

Acting Treasury Secretary Tim Massad denounced ending the program in a statement released Tuesday night.

"This program has helped hundreds of thousands of families across the country avoid foreclosure, and each month it continues to help tens of thousands of additional homeowners. Moreover, it has helped establish better standards for the mortgage industry that have resulted in millions more being able to stay in their homes," Massad said. "If we end this program now, we will simply make it harder to prevent unnecessary foreclosures and for our country to recover from this housing crisis."

Fannie Mae's gross mortgage portfolio drops 15.2% Is The End Near??

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Thu, 31 Mar 2011 13:47:25 -0700

Fannie Mae said its gross mortgage portfolio fell at a compound annualized rate of 15.2% in February, while the government-sponsored enterprise's entire book of business fell 0.7%.

The delinquency rate in Fannie's conventional single-family segment fell three basis points in January to 4.45%, while the multifamily serious-delinquency rate fell two basis points, hitting 0.69% in January, the most recent month on record.

Comparatively, Freddie Mac noted last week that the seriously delinquent rate of single-family mortgages fell to 3.78% in February, while the multifamily delinquency rate increased to 0.36% in February.

The decline in Fannie's mortgage portfolio is occurring as the future of the GSEs remains in limbo, with most of the Treasury's proposed reforms suggesting some type of winding down of Fannie and Freddie.

House Republicans this week introduced eight bills to expedite GSE reforms by stopping taxpayer bailouts, increasing transparency and focusing on expenses.

Jobless claims drop slightly for a third consecutive week

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Thu, 31 Mar 2011 13:39:04 -0700

The number of initial jobless claims filed by unemployed Americans fell to 388,000 in the week ending March 26, down from last week's upwardly revised figure of 394,000, the Labor Department said Thursday.

Jobless claims have declined for three consecutive weeks, and the Labor Department said the most-recent data reflects the annual revision to the weekly unemployment claims seasonal adjusted factors. The four-week moving average rose to 394,250 from the previous week's average of 391,000.

Analysts with Econoday projected claims of 380,000 for last week with a range of estimates between 370,000 and 385,000.

"The data include benchmark revisions including a sizable 12,000 upward revision to the prior week to 394,000. Following the revisions, the latest four-week average, at 394,250 for a 3,250 increase, doesn't show much change from the late February readings," Econoday said.

"The unemployment rate for insured workers is unchanged at 3%," Econoday said, adding "demand for risk is fading slightly in early reaction to this report, which may scale back bullish expectations for robust strength in tomorrow's monthly employment report."

Genworth Financial program saves $6.6 billion in mortgages from foreclosure

Albert Hakim, TEAM DETROIT (Re/Max Signature) — Thu, 31 Mar 2011 13:37:44 -0700

Mortgage insurer Genworth Financial (GNW: 13.34 -1.19%) saved billions of dollars worth of mortgages from foreclosure in 2010 by partnering with lenders and servicers to craft solutions for distressed borrowers, the company said.

The mortgage insurer saved $6.6 billion by finding modification plans for distressed loans. That's up from $2.6 billion in 2009, and an increase of 153%.

"Our foreclosure prevention efforts continue to relieve the burden for borrowers faced with difficult financial decisions," said Alan Goldberg, vice president of Homeowner Assistance for Genworth's U.S. mortgage insurance business. "We doubled the number of workouts from 2009 to nearly 40,000 workouts at the conclusion of 2010."

The states with the most workouts included California, $777 million in loan workouts; Florida, $627 million; Illinois, $436 million; New York, $374 million; Georgia, $333 million; Arizona, $321 million; New Jersey, $301 million; Texas, $277 million; North Carolina, $220 million; and Maryland, $212 million.

More than one-third of the workouts were handled through the government's Home Affordable Modification Program. The remaining loans were handled through loan modifications (36%), repayment plans (12%) and short sales (7%).