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loan modifications: CNBC's Diana Olick on "Cure Rates" - 08/25/09 11:22 PM
On Monday CNBC's Diana Olick wrote a post about mortgage cure rates. For those of you who haven't read her stuff before, I recommend it. She is one of a very small minority of housing analysts who understand the comprehensiveness of the housing market.
A cure rate is a term used to represent the percentage of delinquent loans that are returned to "current" status each month.
In other words, for every 100 loans that are delinquent, how many of the owners will get caught up with the payment they have missed.
According to Fitch Ratings, Olick writes that from 2000-2006, 45% of loan delinquencies were … (4 comments)
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loan modifications: RealtyTrac: Foreclosure Filings Set New Record In July - 08/13/09 07:30 AM
According to RealtyTrac, foreclosure filings set a new record in July as they rose 7% from June and are up 32% year over year.
According to James J. Saccacio, RealtyTrac's chief executive, "July marks the third time in the last five months where we've seen a new record set for foreclosure activity".
In other words, despite calls of a housing bottom by CNBC's Jim Cramer and even the AP, the housing market is still deteriorating and home values are still eroding.
This escalation of foreclosure activity also brings into question the effectiveness and long-term sustainability of the Obama Administration's $75 billion loan modification … (4 comments)
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loan modifications: Bank of America Disappoints On Their Loan Modification Efforts - 08/09/09 08:32 AM
According to a recent CNBC article by Albert Bozzo, participation by banks in the governments$75 billion program to modify home loans has been off to a slower start than expected.
Interestingly, Wells Fargo and Bank of America, both of whom have had significant increases in their non-performing assets, are two of the most reluctant banks to modify loans.
Wells Fargo has extended loan modifications to just 12% of eligible borrowers.
Bank of America has extended loan modifications to just 13% of eligible borrowers. One would think because of the TARP money as well as billions in loan guarantees Bank of America has received from the government that their … (34 comments)
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loan modifications: Loan Modifications: Do Loan Servicers Want You To Default? - 08/04/09 08:40 AM
Peter S. Goodman wrote an article in the New York Times on July 30th making the case as to why loan servicers may be financially benefiting from homeowners defaulting on their loans which could explain the reluctance of these loan servicers to modify loans and make them more affordable.
Goodman writes, "Mortgage companies, some of which are affiliated with the nation's largest banks, are paid to manage pools of loans owned by investors. The companies typically collect a percentage of the value of the loans they service. They extract their share regardless of whether borrowers are current on their payments. Indeed, their percentage often increases … (8 comments)
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loan modifications: The Future of Real Estate: Zombie Homeowners - 03/29/09 02:12 PM
As home values continue to decline and government efforts continue to grow in order to keep families in their homes, the landscape of homeowners is beginning to look more and more like zombies.
According to wikipedia, the term zombie bank was originally coined by Edward Kane in 1987 and describes the phenomenon in which a, "financial institution with an economic net worth that is less than zero, but which continues to operate because its ability to repay its debts is shored up by implicit or explicit government credit support."
Translated into the housing market, the number of people that find themselves under water (owing … (5 comments)
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loan modifications: Investors Eligible For Refinancing Through Obama's Housing Plan - 03/16/09 05:20 PM
A couple of days ago I wrote a post about how Obama had drawn a line in the sand between investors and homeowners when it comes to housing and personal responsibility. Apparently that line has become blurred, and that's a good thing. Just because a person chose to make an investment in real estate, does not make them any less responsible than a person that bought a home they could not afford.
Now clearly there can be a debate as to whether or not the government should be offering these types of refinances for anybody, and I can think of a couple of … (1 comments)
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loan modifications: Foreclosures up 30% from last year - 03/15/09 02:25 PM
Realty Trac is reporting that foreclosures rose by 30% in February from one year ago, this despite individual bank loan modification efforts as well as broad based foreclosure moratoriums by Fannie and Freddie and several major banks.
This is a trend that is unlikely to change anytime soon, regardless of Obama's housing plan. The majority of the resets that are projected over the next three years are Options ARMs and Alt-A loans, both of which could have a tough time either being able to afford a new fixed rate principal and interest loan or being able to provide documentation and qualify for the new loan.
Additionally, according to an … (6 comments)
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loan modifications: A record 11.18% of mortgages at least 30 days late - 03/05/09 08:49 PM
According to the Mortgage Bankers Association and an article put out by Reuters, a record 11.18% of one to four unit residences were at least 30 days late on their mortgage payment.
And while some people, and I'm not one of them, may find some solace with Obama's $275 billion sweeping housing and mortgage plan, it is worth noting that despite previous loan modification efforts, nearly 60% of loans have re-defaulted within 8 months after having been modified, and that was before unemployment hit critical mass. Why would this plan be any more successful?
What we are going to see is that … (45 comments)
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loan modifications: The House approves the mortgage bankruptcy "cramdown" - 03/05/09 06:44 PM
It news that is not so surprising, according to a report by Reuters, the House of Representatives approved a piece of legislation that would allow bankruptcy judges to write down mortgage principle of primary residence loans.
The Senate, where I would expect this to meet significant resistance, will need to have their own vote before this provision would become law.
This is the "stick" in Obama's housing plan that will be used to leverage mortgage holders to modify loans that they otherwise would be reluctant to do.
The unintended consequences of this provision is that it would provide increased risk to the mortgage market, In other … (4 comments)
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loan modifications: Where is the bottom? - 02/20/09 10:52 AM
I think the question on every American's mind is, where is the bottom, when are property values going to stop falling?
Of course, there is no easy answer because all real estate is local, but the truth is, all local markets are exposed to a lot of the same headwinds like tight credit, job losses, weak consumer confidence, and foreclosures. Every market is up against these forces to some degree and as we are seeing, each of these forces is intertwined.
As Americans lose their homes to foreclosures, property values fall. As property values fall consumer confidence and consumption declines and credit contracts. … (1 comments)
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loan modifications: Obama's Housing Plan? - 02/18/09 03:42 PM
According to a Reuters report, the details of Obama's housing plan are to help 9 million homeowners at a cost of approximately $275 billion. Here is a link to the four page document. It is estimated that $75 billion will be spent in "subsidizing" mortgage payments while another $200 billion will be allocated to the Treasury to purchase preferred stock in both Fannie and Freddie, doubling their stake in each, which will presumably allow the government to modify a greater number of loans.
The big question however, is how is what Obama is proposing actually any different than from what has already been attempted on … (7 comments)
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loan modifications: Greenspan on housing - 02/17/09 11:27 PM
A reportby Reuters today quoted former Federal Reserve Chairman Alan Greenspan as saying that a housing recovery is a necessary condition for the end of the financial crisis.
I don't disagree with this. In fact I have written a book and nearly 200 blog posts to the same effect. It's the housing market, stupid.
Greenspan goes on to say that, "the prospect of stable home prices remains many months in the future."
I don't disagree with this either. In fact, depending on how effective or ineffective the government's effort is to stem foreclosures by "subsidizing" mortgage payments with $50 billion worth … (2 comments)
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loan modifications: The homeownership predicament - 02/16/09 03:26 PM
The problem with Congress' stimulus and bailout efforts to increase homeownership rates through a new $8,000 tax credit while at the same time attempting to maintain the dream of homeowenrship by subsidizing mortgage payments is that they are overlooking a big part of the housing market, the non-owner occupied market.
According to the U.S. Census Bureau, in the second quarter of 2008 only 58% of the housing units in the United States are owner occupied. In other words, approximately 42% of the homes in the United States are either held for investment, vacation, or are vacant. Assuming you own the home you are living in, take a look … (2 comments)
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loan modifications: Washington is Insane - 02/08/09 03:01 PM
I know what you're thinking, "thank you, captain obvious, tell me something I don't know".
But I'm not talking about O.J. Simpson insane, I'm talking about the other definition of insanity, the one that says, "doing the same thing and expecting different results" kind of insane.
Representative Darrell Isa of California was quoted by Matthew Benjamin in a Bloomberg.com article as saying, "They continue to assume that if you do something and it hasn't worked, you have to continue to do more of it" Isa went on to say, "That's the definition of insanity".
The first $350 billion of TARP capital injections didn't work? … (17 comments)
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loan modifications: Obama's "Sweeping" Effort To Prevent Foreclosures - 01/20/09 12:53 PM
I like the word "sweeping" because that is exactly what the result will be of any plan to prevent foreclosures in the absence of a complimentary plan to stimulate demand for real estate, regardless of whether Obama spends up to $100 billion on this objective as has been rumored. It will simply be sweeping the problem under the rug only to have to deal with it at a later date and in the process we will be spending billions of tax payer money. And no, lower mortgage rates are not the complimentary plan to stimulate demand for real estate.
However, stimulating investment … (10 comments)
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loan modifications: Sheila Bair's proposal is only half of the solution - 12/12/08 03:26 PM
For quite some time the FDIC's Sheila Bair has been the strongest proponent for loan modifications in Washington. While Paulson was busy throwing a life preserver to his former company, Goldman Sachs, Bair has been calling for life boats for the rest of the American homeowners.
And while recent data suggests that up to 60% of all loan modifications go into re-default after 8 months, tht still means that maybe 40% of the homeowners that need help are indeed getting it. Now, while I am not a fan of loan modifications as it does present a moral hazard, I also don't want to see … (2 comments)
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loan modifications: It's official, loan modifications are not the answer - 12/08/08 02:36 PM
According to an article published today by Reuters, loan modifications are not the answer - this is something that doesn't surprise me.
The article goes on to say: "The results, I confess, were somewhat surprising, and not in a good way, said John Dugan, head of the U.S. Office of the Comptroller of the Currency, in prepared remarks for a U.S. housing forum."
Here is what the report found:
After 3 months = 36% re-default rate
After 6 months = 53% re-default rate
After 8 months = 58% re-default rate
In other words, these loan modifications seem to be buying some … (2 comments)
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loan modifications: Five reasons why loan modifications are not the answer - 12/04/08 04:07 PM
Yes, I know I will get some negative feedback about this post, but I do want to make it clear that I am NOTa proponent of having millions of Americans lose theirhomes, I simply think there is a more cost effective and long term solution to keeping people in their homes.
First, what lenders are doing right now is not working. Loan modifications are not working. By most estimates, defaults on loan modifications are in the 33% range, some estimates show the default after a loan modification as being significantly higher. Now, that still means that it is possible that the majority of these homeowners are … (4 comments)
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loan modifications: Are loan modifications really the answer? - 11/28/08 03:53 PM
Maybe I am the one that doesn't get it. Maybe Iam the one that has swallowed my economic compass and Washington actually knows what they are doing.
Are loan modifications really the solution to this housing and economic crisis?
Is this really the answer to all of our ills - providing loan modifications and principal write downs for Americans that can no longer afford their payments or are under water on their mortgage?
Is this Hope For Homeowners plan indeed going to turn the housing market around and stimulate the economy?
Whenever I hear about these loan modification programs, and there were a couple of featured blogs on AR today … (3 comments)
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Mark MacKenzie
Phoenix,
AZ
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Mark MacKenzie Real Estate Planning
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