Low 2011 Mortgage Rates Won't Stop 2012 Foreclosure Wave

NEW YORK (TheStreet) -- Mortgage rates remained amazingly low for 2011, but that won't stop a coming wave of foreclosures in 2012.

Mortgage rates finished near all-time historic lows in 2011. Freddie Mac(FMCC.OB) on Thursday released the results of its Primary Mortgage Market Survey. The 30-year fixed rate mortgage rate ended 2011 with an average 3.95% for the week ending Dec.29, 2011, up from the previous week's rate of 3.91 % but significantly lower than the 4.86% averaged in the year-ago period.

The 15-year fixed-rate mortgage averaged 3.24%, up from 3.21%, but lower than the 4.20% averaged a year earlier.

Looking ahead, Freddie Mac economist Frank Nothaft expects mortgage rates to remain very low at least through mid-2012, as the Federal Reserve has indicated that it will keep the federal funds rate near zero till as late as mid-2013.

He does expect housing prices to bottom in the later part of 2012. " Low mortgage rates and existing house prices could lead to a bump-up in sales by 3 to 5 percent in 2012 over the 2011 level," he wrote in his commentary. "While encouraging, sales volume is still low, given the strong current affordability of housing. And ample distressed sales and sluggish home-buying demand will continue to keep prices soft in many markets: We expect U.S. house-price indexes to move lower before bottoming out in 2012, with modest appreciation forestalled until 2013."

With rents climbing and housing affordability remaining at its best level in years, some economists are predicting that buyers who have stayed on the sidelines will return to the market in 2012. Hedge funds are beginning to bet on a recovery in the housing market, the Wall Street Journal reported on Thursday.

Recent housing data has sent confusing signals about the direction of the housing market. The S&P Case-Shiller Housing Price Index showed home values in the 20-city composite falling 3.4% in October on a year-on-year basis and 1.2% over September.

Meanwhile, pending home sales, a forward looking indicator of existing home-sales activity showed signs of improvement, increasing 7.3% on a monthly basis to 100.1 in November, its highest level in 19 months.

Still, the biggest overhang for the housing market remains the significant foreclosure inventory that is yet to be cleared from the market as well as "shadow" inventory- properties that will ultimately wind up in foreclosure.

One in every 579 housing units received a foreclosure filing in November 2011, according to RealtyTrac. Overall foreclosure activity dropped 3% in November from the previous month, but a new wave of foreclosures could be coming in 2012.

"Despite a seasonal slowdown similar to what we've seen in each of the past four years, November's numbers suggest a new set of incoming foreclosure waves, many of which may roll into the market as REOs or short sales sometime early next year," said James Saccacio, co-founder of RealtyTrac, in a news release.

Bank of America(BAC_),JPMorgan Chase(JPM_) and Wells Fargo(WFC_) together account for more than 60% of the first mortgages in the country.

The three are among the big mortgage servicers that have been in year-long negotiations with federal regulators and the state attorneys general to reach a settlement over alleged improper foreclosure practices including robo-signing.

The robo-signing controversy and the ongoing negotiations have stalled the foreclosure process for banks. However, analysts maintain that banks need to clear their foreclosure inventory soon for housing values to fully correct and then make a stable recovery.

Bank of America has the most troubled mortgage portfolio. Real estate owned and repossessed assets amounted to over $2.6 billion in the first 9 months of 2011.

--Written by Shanthi Bharatwaj in New York

Foreclosure counseling doubles the chance of mortgage modification

Foreclosure counseling doubles the chance of mortgage modification


Monday, December 19th, 2011, 10:17 am
Borrowers who received foreclosure counseling through a national program were twice as likely to receive a modification, according to a study released Monday.

The Urban Institute evaluated roughly 800,000 homeowners who took help from the National Foreclosure Mitigation Counseling program from January 2008 through December 2009. NeighborWorks America administers the program with federal funds.

The counselors are approved by the Department of Housing and Urban Development. They work on homeowner budgets and guide borrowers through the various options provided by the mortgage servicer to avoid foreclosure.

Those who went through the program were at least 67% more likely to remain current within nine months of receiving a modification, according to the study. Borrowers who went through the program had their payment reduced by an average of $176 per month.

Congress slashed funding for HUD housing counseling programs earlier in the year. The administration and the mortgage industry called for lawmakers to restore the money because of the more than 5 million homeowners who are at least 30 days delinquent, according to Lender Processing Services (LPS: 14.46 +1.12%).

In November, Washington restored some of the money, and HUD was allowed to grant $40 million to counselors.

Eileen Fitzgerald, CEO of NeighborWorks America, said the program and others like it help homeowners and servicers alike by reducing redefaults.

"In short, the personalized work nonprofit housing counselors do to help homeowners improve their overall financial situation had the greatest effect on a homeowner not falling behind again on their mortgages in the future," Fitzgerald said.

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Foreclosure Crisis Sparks a Script

Foreclosure Crisis Sparks a Script

Posted Dec 14, 2011 at 09:35 AM By Dennis Rodkin

Stephanie Walker lost a home to foreclosure, but in the aftermath, she found her voice. She has blogged about it and put out an e-book about it. And on Sunday, a group of actors at Victory Gardens Theater performed a staged reading of American Home, her play about it.

The play, which won a Blue Ink Award earlier this year from American Blues Theater, intertwines the personal stories behind three home foreclosures. At the same time, it looks at the larger causes and effects of the wave of foreclosures that has swept the country.

“There doesn’t seem anywhere one can go to nest without being owned by her nest,” says one character late in the play. She’s echoing a sentiment that is quite common now, not only among the foreclosed but also among the many people whose underwater mortgages are hampering their ability to move to a new house or to spend money. On Tuesday, Zillow reported that Chicago-area home values in October were down 10.4 percent from a year before, more than twice the national average. The more prices drop, the more people feel owned by their nests.


In American Home, a young couple buys a Los Angeles dream house they can just barely afford, then lose their income stream and ultimately their house. An older woman unwittingly drains all the equity out of the home she and her late husband moved into decades before the home-value boom. And a preacher who helps her moderate-income congregants take out unsupportable mortgages sees them collapse under the debt. Also tossed into the mix are a publicity-hungry woman who chains herself to the home she can no longer afford and a pair of news anchors who function as a Greek chorus, praising, probing, and ridiculing various people caught up in foreclosure.

While none of the homeowners comes out looking like a hero, it’s worth noting that the character whose tale is closest to Walker’s own is the one she depicts as the most self-indulgent and prone to denial and budgetary cluelessness. In other words, it’s not a lament about having been victimized. Walker is clear-eyed about the foreclosure she and her husband, Bob, went through. In September, she blogged that being candid about their past helped the couple land an apartment back here in her native Chicago when their credit was shot.

Sunday’s staged reading was part of the development process that American Blues is putting Walker’s script through. Eight actors read the script for an audience of about 30 (they borrowed the auditorium from a production of It’s a Wonderful Life, another tale that revolves around a financial crisis). Afterward, Walker took notes on what members of the audience thought could be strengthened. American Blues may go on to produce a full-fledged production, but if not, Walker wants to pursue getting her play produced by another company.

One person in Sunday’s audience brought up an intriguing point about Walker’s timing: Not only does her play end before you see clearly how postforeclosure life turns out, but the play itself appears while the country is in the midst of its own unresolved housing dilemma. Earlier this month, a Bank of America analyst noted that six million U.S. homes have undergone foreclosure since 2007, and she forecast that as many as eight million more may go through the process in the next four years. What’s more, said the analyst, 2013 may turn out to be the worst year yet in foreclosures. So even though Walker has completed a two-act script, we may be a long way from the end of the real-life drama.

Federal reserve report: Home flipping drove housing bubble in Nevada, California, other states

http://www.washingtonpost.com/business/markets/federal-reserve-report-home-flipping-drove-housing-bubble-in-nevada-california-other-states/2011/12/12/gIQA1W8HqO_story.html

LAS VEGAS — A new federal report shows that speculative real estate investors played a larger role than originally thought in driving the housing bubble that led to record foreclosures and sent economies plummeting in Nevada, California, Arizona, Florida and other states.

Researchers with the Federal Reserve Bank of New York found that investors who used low-down-payment, subprime credit to purchase multiple residential properties helped inflate home prices and are largely to blame for the recession. The researchers said their findings focused on an “undocumented” dimension of the housing market crisis that had been previously overlooked as officials focused on how to contain the financial crisis, not what caused it.

More than a third of all U.S. home mortgages granted in 2006 went to people who already owned at least one house, according to the report. In Arizona, California, Florida and Nevada, where average home prices more than doubled from 2000 to 2006, investors made up nearly half of all mortgage-backed purchases during the housing bubble. Buyers owning three or more properties represented the fastest-growing segment of homeowners during that time.

“This may have allowed the bubble to inflate further, which caused millions of owner-occupants to pay more if they wanted to buy a home for their family,” the researchers noted.

Investors defaulted in large numbers after home values began to drop in 2006. They accounted for more than 25 percent of seriously delinquent mortgage balances nationwide, and more than a third in Arizona, California, Florida, and Nevada from 2007 to 2009.

As a result, millions of homeowners saw their home values decline so that they were worth less than the original purchase price. Foreclosures skyrocketed as people couldn’t or refused to pay their underwater mortgages. Residential construction also languished, putting hundreds of construction workers in the hardest-hit states out of work.

The report concludes that lenders and regulators must limit speculative borrowing to avoid future housing busts. For example, in China, government officials are now requiring higher down-payments and mortgage rates on investment homes, according to the report.

In Nevada, which has the nation’s highest foreclosure rate, the housing market remains weak, with home prices continuing to fall in the Las Vegas area, where most of the state lives.

Home prices were down 7.3 percent in November compared to a year before, according to the Greater Las Vegas Association of Realtors. That means the median price dropped from $134,900 to $125,000 in one year. More than half of all home sales were purchased with cash.

Paul Bell, president of the real estate association, said amateur investors were behind the soaring home values seen during the first half of the last decade, but noted those buyers were simply taking advantage of how easy it was to buy homes at the time because of questionable lending practices and government pressure on banks to promote home ownership.

“There was blame to go around for everybody,” Bell said.

The market has now shifted so that cash investors are helping Las Vegas recover by buying multiple vacant homes, fixing them up and selling them, Bell said.

“If we did not have the serious investors in the market ... we would have many neighborhoods in a very run-down condition,” he said.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Government says Chase needs improvement in foreclosure program

Government says JPMorgan Chase needs improvement in foreclosure program

http://www.washingtonpost.com/business/industries/summary-box-government-says-jpmorgan-chase-needs-improvement-in-foreclosure-program/2011/12/07/gIQAjd3OdO_story.html


NOT DOING ENOUGH: JPMorgan Chase & Co., one of the nation’s largest mortgage lenders, is not doing enough to help Americans avoid foreclosure as part of the government’s signature foreclosure-prevention program, the Obama administration said Wednesday.

BAD MARKS: The lender has been cited for rejecting people who were eligible for mortgage modifications three separate times since June. JPMorgan said in a statement that it was “disappointed with our rating.”


OFF THE LIST: The government first criticized four lenders in June, including Bank of America Corp., Wells Fargo & Co. and Ocwen Loan Servicing. Those three companies were removed from a list of companies needing “substantial improvement” in September and December.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Snoopy House Foreclosure: Charlie Brown Christmas Moves To City Hall

http://www.huffingtonpost.com/2011/12/08/jim-jordan-snoopy-house_n_1134999.html#s528693

Snoopy House Foreclosure: Charlie Brown Christmas Moves To City Hall

When Jim Jordan found out that his house in Costa Mesa was being foreclosed upon, he was so depressed that he struggled to get out of bed. Jordan, the owner of a general contracting business, said, "I'm the guy who says, 'Suck it up and just go to work. But I just couldn't do it.'"

It wasn't losing the house that was getting Jordan down, as he explained to The Huffington Post. "It was about letting all those people down at Christmas time. Every time I thought it, I would break into tears. My heart was just broken."

As the Daily Pilot reports, Jordan has for the last 44 years elaborately decked out his front lawn at Christmas-time with Charlie Brown and Snoopy decorations, complete with Lucy in a counseling booth, Linus beneath the tree and others of the "Peanuts" crew ice skating around an artificial pond. The holiday scene, which over the years has come to include hot apple cider, carolers, music by horn players and photos with Santa, attracts thousands of guests each year, with an estimated 80,000 visitors last year.

Jordan told HuffPost that he and a few "elves," including a man who has been working with Jordan for 30 years, perfect the decorations year-round. "Some say it's a calling, some say it's a curse. Either way, it's a love and passion."

Weeks after Jordan received notice of foreclosure on his house from Wells Fargo, the city of Costa Mesa began to receive calls from community members who want to save the "Snoopy House." Bill Lobdell, communications director for the city, told HuffPost, "Everyone was despondent about it."

That's when the city's planning commissioner called Jordan and offered to host the Snoopy decorations at City Hall. Jordan, in his cheerful and humorous way, recalled, "I was really moved. I told him, 'My heart leaps for joy, and my back is aching ... It's a lot of work!'"

What came next touched Jordan further: As Lobdell told HuffPost, volunteers, including entire sports teams from neighboring schools and other community groups, have signed up to assist in transporting and setting up the elaborate Snoopy scene. The set-up will take place Friday through Monday, and the scene will be open to the public on Tuesday, Dec. 13, at 5:30 p.m.


There is a "Save the Snoopy House" Facebook page and Twitter account. In addition to donating time to set up the decorations, community members have been donating money to help Jordan in his lawsuit against Wells Fargo to save his house.

As Occupy Wall Street moves to fight foreclosures, one person has occupied the Snoopy House and set up a tent on the house's front lawn, the Daily Pilot reports. And the nearby Santa Ana Chick-fil-A has offered to display the Peanuts gallery in front of its restaurant.

Jordan said it has been a humbling experience for him to receive so much community support. He explained that, just as Charlie Brown's meaning of Christmas is to "give back," his Snoopy scene was his way of giving back. "Families come who cannot afford to have their picture taken with Santa at the mall ... and sometimes who cannot afford gifts at all," he said.

Looking back over the years, he recalled a young girl who, when the other children were asking for expensive toys, asked Santa for a new pair of socks. "We had someone run down to the drug store. Santa Claus found her and pulled brand new socks out of his sack. Her eyes lit up and she was as excited as can be."

Another memory was of a father crying as his son explored the Snoopy scene with excitement. When Jordan asked the father what was wrong, he said it was the first time his son had spoken since his mother died weeks before. Yet another heart-warmer was a mother who, after her husband left the family, came with her two sons every night to play by the decorations. To this day, Jordan says, the family tells him it was their favorite Christmas.

Reflecting on the community support he's received, Jordan said, "It has gone a long way to start to heal my broken heart."

The mayor of Costa Mesa, Gary Monahan, told HuffPost, "There will be a Christmas display after all, Charlie Brown."

To donate to Jordan's effort to save his house, send contributions to Snoopy House Trust, PO 2852, Costa Mesa, CA 92628.

To assist in the set up at Costa Mesa City Hall this Friday through Monday, call Sylvia Chalmers at (714) 754-5099.

Effect of short sale on credit scores

Effect of short sale on credit scores

Benny Kass
Housing Counsel
December 2, 2011

Q: What impact will a short sale have on my credit rating? Will it be better for me to let the property go to foreclosure?

A: That's a tough question because, to my knowledge, the various credit rating agencies have different approaches to determining ratings. More significantly, once you start falling behind on your monthly mortgage payments, your credit rating is already falling, so its difficult to separate the bad credit from the impact of a short sale.

One of the most prominent credit reporting companies that mortgage lenders rely on is Fair Isaac Corp., or FICO. In March, under the heading "Research looks at how mortgage delinquencies affect scores," FICO presented an interesting study on delinquencies and credit scores. To summarize:

There is no significant difference in score impact between a short sale, deed-in-lieu or foreclosure.

In general, the higher your score before you have financial problems, the longer it will take to fully recover.

While a score may begin to improve in the short run, it could take approximately seven to 10 years to fully recover, assuming you are current with all other debt obligations.

The full study is reported at bankinganalyticsblog.fico.com.

Q: My stepmother has Alzheimer's disease after suffering a stroke about a year ago. She is 89 years old. She lives in Arizona, and I live in New York. My father passed away nine years ago at 83. Before the stroke, my stepmother told me in a letter that when she passed away she gave instructions to her daughter on her will that the property was to be divided three ways: myself and her two daughters.

Since my stepmother's stroke, my stepsister has moved into the house with her grown son to care for her mother. My stepsister mentioned a while ago that her son would like to buy the house, but when I asked her about it several times since that conversation she doesn't answer me. The oldest sister passed away several years ago so it's just the two of us.

I feel uneasy about this situation. Where do I stand legally? I have always had a good relationship with my stepsisters and stepmother, I haven't visited them since my father passed, but I keep in touch either by phone or email. That was my father's house too. Should I be worried? Or am I making a big thing out of nothing?

A: No, you are not making a big deal out of this, but I can see from the tone of your letter that you are concerned.

First, I have to repeat what I have been telling clients for years: Children cannot — and should not — control how their parents will dispose of their real estate, their jewels or their money. Clearly, children can make sure their parents have current and updated last wills and testaments, but the substance of those documents is in the sole discretion of the maker of the will.

Having said that, I am not sure what you can do until your stepmother dies. She has had a stroke and I suspect that she is not currently capable of discussing this with you — or anyone else for that matter.

You indicated that your stepsister is named as the executor (personal representative) of the will. Accordingly, you will have to wait.

Once your stepmother dies, you should retain a lawyer in the state where probate will take place. If the will that your stepsister files with the court is different from what your stepmother told you, you have the right to try to challenge the validity of that document. However, your stepmother also has the right to change her mind.

benny@inman.com

Major Banks Face New Foreclosure Lawsuit

http://www.nytimes.com/2011/12/02/business/major-banks-face-new-foreclosure-suit.html

In a suit against the nation’s five largest mortgage lenders, Martha Coakley, the Massachusetts attorney general, contends that the banks used unfair and deceptive business practices.
By GRETCHEN MORGENSON
Published: December 1, 2011


Citing extensive abuses of troubled borrowers across Massachusetts, the state’s attorney general sued the nation’s five largest mortgage lenders on Thursday, seeking relief for consumers hurt by what she called unfair and deceptive business practices.

In addition to creating a new and significant legal headache for the banks named in the suit — Bank of America, JPMorgan Chase, Citigroup, Wells Fargo and GMAC Mortgage — the Massachusetts action diminishes the likelihood of a comprehensive settlement between the banks and federal and state officials to resolve foreclosure improprieties.

Also named as a defendant in the Massachusetts suit was the electronic mortgage registry known as MERS, an entity set up by lenders to speed property transfers by circumventing local land recording officials.

The attorney general, Martha Coakley, and her investigators contend that the banks improperly foreclosed on troubled borrowers by relying on fraudulent legal documentation or by failing to provide homeowners with loan modifications after promising to do so. The suit also contends that the banks’ use of MERS “corrupted” the state’s public land recording system by not registering legal transfers properly.

“There is no question that the deceptive and unlawful conduct by Wall Street and the large banks played a central role in this crisis through predatory lending and securitization of those loans,” Ms. Coakley said at a news conference announcing the lawsuit. “The banks may think they are too big to fail or too big to care about the impact of their actions, but we believe they are not too big to have to obey the law.”

Ms. Coakley has been among the most aggressive state regulators in her pursuit of financial institutions involved in the credit crisis. In addition to her inquiry into foreclosure improprieties in Massachusetts, she has also conducted far-reaching investigations into predatory lending and securitization abuses.

Since 2009, Ms. Coakley has extracted more than $600 million in restitution and penalties from lawsuits against mortgage originators like Option One and Fremont Investment and Loan and Wall Street firms like Goldman Sachs and Morgan Stanley, which bundled loans into mortgage securities.

Officials at all of the banks issued statements saying they would fight the suit. Most of them also indicated dismay that Massachusetts had taken action during negotiations to reach a settlement over the types of practices highlighted in the case.

“We are disappointed that Massachusetts would take this action now,” said Tom Kelly, a Chase spokesman, “when negotiations are ongoing with the attorneys general and the federal government on a broader settlement that could bring immediate relief to Massachusetts borrowers rather than years of contested legal proceedings.”

Lawrence Grayson, a Bank of America spokesman, said: “We continue to believe that collaborative resolution rather than continued litigation will most quickly heal the housing market and help drive economic recovery.”

And Vickee Adams of Wells Fargo said, “Regrettably, the action announced in Massachusetts today will do little to help Massachusetts homeowners or the recovery of the housing economy in the Commonwealth.”

But as Ms. Coakley made clear during the news conference, her office had come to view as unacceptable the negotiating stance taken by the banks in the protracted settlement talks.

“When those negotiations began over a year ago, I was hopeful that we would be able to reach a strong and effective solution,” she said. “It is over a year later and I believe the banks have failed to offer meaningful relief to homeowners.”

Delaware, Nevada and New York have also objected to the direction the settlement negotiations were taking.

Kurt Eggert, a professor at Chapman University School of Law in California who is an expert in mortgages and securitization, said the Massachusetts lawsuit was a significant step because it opened the banks’ practices to far greater scrutiny than they had been subject to.

“So far the servicers have escaped any real review or punishment for their bad practices because federal regulators have by and large given them a pass on whether they followed the law in foreclosures,” Mr. Eggert said. “This lawsuit argues that they haven’t followed the law and that they can’t just fix all their problems after the fact.”

Among the misconduct cited in the Massachusetts complaint were 14 cases of foreclosures by institutions that had not shown proof that they had the legal right to seize the underlying properties when they did so. All the banks also deceived troubled borrowers, the complaint said, about the loan modification process. For example, some banks incorrectly advised borrowers that they would receive priority treatment if they were more than 90 days delinquent on their loans. Other borrowers were misled when told that they must be more than two months’ delinquent to receive a loan modification, it said.

Although Mr. Eggert said that the banks were likely to argue that a state like Massachusetts had no right to bring such a case against federally regulated institutions, he said that the Dodd-Frank legislation restricted the ability of federal authorities to bar states from acting in such cases.

“If the state can go forward and do real discovery, it will be the first time that anyone has really dug into the servicers’ files to see what they have done,” he added. “The feds conducted an investigation where they looked at very few files, and here the state could demand to see a lot.”