California Home Mortgage

Last week the House Financial Services Subcommittee on Insurance, Housing
and Community Opportunity voted to eliminate two programs designed to mitigate
the impact of the housing meltdown.

Republicans on the Committee voted unanimously to shut down the
Emergency Homeowner’s
Loan Program (EHLP) and FHA’s Short-Refinance Option. EHLP is not scheduled to go into operation
until next month and the Short-Refi program got off to a slow start and has, as
yet assisted only a few homeowners but also has cost $0 in federal monies.

The next two housing recovery efforts on the chopping block: HAMP and the Neighborhood Stabilization Program. With the Committee scheduled to vote Wednesday
on the fate of both programs, supporters are beginning to fight back.

Last
week representatives of the Administration testified to the Committee as to the
importance of the Home Affordable Modification Program (HAMP), a joint program
operated by Departments of Treasury and Housing and Urban Development. While HAMP has been plagued with problems, at
last count it had moved 600,000 borrowers into permanent loan modifications while
another 126,000 are in the required three month trial modification period. The so-called HAMP Termination Act of
2011 would prohibit the Secretary of the Treasury from
providing any further assistance to the program but would allow assistance to
continue where a homeowner was in process with an offer to participate in the program.

…(read more)

According to the Wall Street Journal, the 50-state alliance of attorneys general who
are working with federal agencies to investigate and reform mortgage servicing
have sent their first list of demands to the nation’s leading banks.  The WSJ article, written by Nick Timiraos and Ruth Simon, claims the group sent a
27-page proposal to the banks last Thursday outlining a proposed code of
conduct for its servicing operations. The WSJ
appears not to have had access to the actual document and was relying on
“sources familiar with it.”  Shortly
before the article appeared the Association
of Mortgage Investors’ released a comment on the Attorneys General investigation,
urging Congress in particular to “respect the process.” 

According
to the WSJ, the letter was drafted by state attorneys general, the U.S. Department of Justice
and three other federal agencies and comes on the heels of separate enforcement
actions submitted by bank regulators. The document outlines a number of standards for
reforming mortgage servicing.

• Adopting formulas that would force banks to more
  regularly consider offering loan write-downs to underwater borrowers.
• Enforcing firm modification timelines for
  servicers to meet, including notifications to borrowers of actions on
  modification requests.
• Providing a single point of contact for
  borrowers over the course of the modification process.
• Requiring a freeze on foreclosures during
  modification considerations and providing methods for penalties and enforcement.
• Outlining steps for banks to verify the
  accuracy of amounts owned and placing limits on fees the banks can charge distressed
  borrowers.
• Adopting directives to improve tracking of
  mortgage notes and chain of title.
• Increasing supervision of foreclosing law firms
  and other third-party vendors.

…(read more)

Last
week Fannie Mae announced the Servicer Total Achievement and Rewards Program or
“STAR” which is intended to measure and evaluate the performance of servicer
actions in helping homeowners avoid foreclosure.  STAR’s initial component, the Servicer
Performance Scorecard, will provide regular snapshots and trends for key
performance indicators to help servicers effectively assess their own progress.  This week MND had the opportunity to obtain
more details from Leslie Peeler who heads up the program.  

Peeler
said that the scorecard measures how well servicers are fulfilling their
obligation to help distressed borrowers but places no further reporting burden
on the servicers.  Fannie Mae is
currently in the process of using the scorecard and 2010 data to show servicers
how well they met performance goals in this area over the past year. Going
forward, the scorecard information will be transmitted to servicers on a monthly
basis.

The
scorecard covers four performance categories:

…(read more)

Last
week Fannie Mae announced the Servicer Total Achievement and Rewards Program or
“STAR” which is intended to measure and evaluate the performance of servicer
actions in helping homeowners avoid foreclosure.  STAR’s initial component, the Servicer
Performance Scorecard, will provide regular snapshots and trends for key
performance indicators to help servicers effectively assess their own progress.  This week MND had the opportunity to obtain
more details from Leslie Peeler who heads up the program.  

Peeler
said that the scorecard measures how well servicers are fulfilling their
obligation to help distressed borrowers but places no further reporting burden
on the servicers.  Fannie Mae is
currently in the process of using the scorecard and 2010 data to show servicers
how well they met performance goals in this area over the past year. Going
forward, the scorecard information will be transmitted to servicers on a monthly
basis.

The
scorecard covers four performance categories:

…(read more)

The
Departments of Housing and Urban Development (HUD) and Treasury released their Monthly
Housing Scorecard for February on Wednesday afternoon. 

This monthly report is an attempt to
encapsulate the Obama Administration’s efforts to stabilize the housing market
and provide a snapshot of the status of that market.  It contains a round-up of information from
both public and private sources, most of which has already been reported
here on MND.  The Scorecard is issued simultaneous
with the release of the monthly report on the Making Home Affordable Program
(HAMP).

According
to the Scorecard, the housing market remains fragile as data through
January
paint a mixed picture of recovery.  On
the sales front there was a little good news as sales of existing homes
ticked
up to 446,700 in January compared to 435,000 in December.  New home
sales, however, dropped from 27,100
to 23,700.  The inventory of existing
homes fell by slightly less than 200 thousand to 3.38 million while the
supply
of new homes was almost flat at 188,000. 
There is a 7.6 month supply of existing homes compared to 8.2 months in
December and a 7.9 month supply of new homes as compared to 7.0 months. 
Over 3.6 million homes are currently vacant
and held off the market for a variety of reasons.  This is an increase
of 45,000 since December. MND wants to know what you think…RENT OR OWN?

In a sign of positive progress, delinquency rates were notably better in February. The
delinquency rate for prime loans was 4.8 percent in January compared to 6.7
percent in January 2010 and the subprime rate was 36.4 compared to 39.2.  FHA had a delinquency rate of 12.8 percent,
down from 15 percent a year earlier.   A
total of 4.2 million mortgages are delinquent nationally. 

Foreclosure
starts and completions remain below peak, however as lenders review
internal procedures related to foreclosure processing, many foreclosure
actions have been delayed. The decline is likely to be temporary as lenders eventually revise and resubmit foreclosure paperwork in the coming months.

…(read more)

Treasury Secretary Timothy F. Geithner told the
House Committee on Financial Services today that Congress must tackle reforming
Freddie Mac and Fannie Mae or the government sponsored enterprises (Enterprises)
will merely return to their old form.

Geithner’s prepared testimony before the
committee was based on the Obama Administration’s White Paper, released two weeks
ago, outlining its vision for reforming the housing finance market.  In that vision, the Treasury Secretary said the
government’s primary role will be limited to consumer protection and oversight,
targeted assistance for low-and moderate-income homeowners and renters; and a
targeted capacity to support market stability and crisis response. 

Geithner
said the Administration has laid out three potential options to structure government
support in a housing finance market where the private sector is the predominant
provider of credit and bearer of mortgage risk. 
In each, government support would be “transparent, explicit, and
limited,” and each would preserve FHA assistance and similar government
initiatives that assist targeted groups such as low- and moderate-income
families, farmers, and veterans.

Geithner said in his prepared remarks that he hopes comprehensive housing finance reform
legislation will pass a Congressional vote in the next two years. He added, “Failing to act would exacerbate
market uncertainty and risk leaving many of the flaws in the market that
brought us to this point in the first place unaddressed.”

Following
his testimony, committee members questioned Geithner about the costs involved
in these options.  The Secretary said
that costs to the consumer will be higher under any of the reforms but that
under the first reform they would be higher than under the second or third.  Each of
the longer-term reforms outlined will require action by Congress, the Secretary
said, but by providing a narrow set of options and key criteria by which they
should be judged, the Administration hopes to encourage an honest conversation
about the merits and drawbacks of each.

…(read more)

The National Association of Realtors today released the Pending Home Sales Index for January.

The Pending Home Sales
index measures housing contract activity. It is based on signed real
estate contracts for existing single-family homes, condos and co-ops. A
signed contract is not counted as a sale until the transaction closes.
Instead, when a seller accepts a sales contract on a property, it is
recorded into a Multiple Listing Service (MLS) as a “pending home sale.”
Once that transaction settles it becomes an Existing Home Sale.  The
majority of pending home sales become Existing Home Sales transactions,
typically one to two-months later.

Since pending home sales
measure actual existing-home sales, the PHSI provides an accurate and
reliable indicator of future home sales activity. Samples show that
about 80% of all pending home sales go to settlement within a 2-month
time-period (and a significant share of the rest close in month 3 and
month 4). Not all pending home sales go to closing though. A certain
percentage of properties that go under contract are cancelled (or
fallout) before ever going to settlement. This percentage has been on
the rise since early 2009.  An index of 100 is equal to the average
level of contract activity during 2001, the first year to be analyzed.

Here is the Reuter’s Quick Recap…

28Feb11 RTRS-U.S. JAN PENDING HOME SALES INDEX -2.8 PCT (CONSENSUS -2.2 PCT) TO 88.9 – REALTORS
28Feb11 RTRS-U.S. JAN PENDING HOME SALES -1.5 PCT FROM JAN 2010
28Feb11 RTRS-TABLE-U.S. Jan pending home sales fall 2.8 pct

Plain and Simple: -2.8%. Basically flat just above record lows
on a year over year basis. Remember: the purchase market slowed
considerably last winter.

“While home buyers over the past two years have been exceptionally
successful with historically low default rates, there is still an
elevated level of shadow inventory of distressed homes from past lending mistakes   that need to go through the system,” Yun said. “We should not expect the recovery to be in a straight upward path – it will zig-zag at times.”

(WHY POINT THE FINGER NAR? REALTORS PLAYED NO PART IN THE HOUSING CRISIS?)

…(read more)

Both
applications for FHA-guaranteed mortgages and FHA endorsements were lower in
January than in the previous month or in January 2010.  Lower demand was reflected across all subsets,
purchases, refinances and mortgages for first-time buyers.

Applications
for FHA mortgages totaled 103,991 in January compared to 112,500 in December
and 126,043 a year earlier.  The
year-over-year figure reflects a drop of 17.5 percent.  There were 55,417 applications for mortgages
to purchase homes and 41,178 to refinance. 
This was a 3.4 percent decrease in purchase applications since December and
a 21.6 percent change from January 2010. 
Applications to refinance were down 12.1 percent quarter-to-quarter and 16.9
percent over the longer period.

FHA took an average of 5,735 applications per day in
January.  The average processing time
from application to closing was 8.1 weeks, up from 7.6 in December but about the
same as a year earlier and 4.0 weeks from closing to endorsement, 1.3 week less
than a year ago.

Declining loan demand in January is no surprise
given the uptick in mortgage rates we witnessed. Rates are now off those
highs but loan production has yet to pickup.  We are curious to see how
the FHA’s decision to raise the annual mortgage insurance premium will
impact loan demand before the new fee structure goes into effect on April 18th.

Perhaps buyers will rush to beat the deadline?

…(read more)

Fannie
Mae has announced a new program to measure and evaluate the performance of its
servicers’ actions toward helping homeowners avoid foreclosure.  The Servicer Total Achievement and Rewards
Program or “STAR” is designed to directly link servicer performance
in assisting homeowners to the customer’s experience with that assistance. 

In a
speech to the Mortgage Bankers Association earlier this week, Edward J.
Demarco, acting director of the Federal Housing Finance Administration (FHFA) signaled
that such a program would be forthcoming. 
He told the audience attending a national servicers’ conference that
FHFA had established working groups with Fannie Mae and Freddie Mac, for which it
is conservator, to align servicing standards and establish rewards for
servicers for early engagement with borrowers. STAR seems to be the first
product from those working groups.

…(read more)

The uptrend in existing-home sales continues, with January sales rising
for the third consecutive month with a pace that is now above year-ago
levels, according to the National Association of REALTORS®.

Lawrence Yun, NAR chief economist, said the improvement is good but
could be better. “The uptrend in home sales is consistent with
improvements in the economy and jobs, which are helping boost consumer
confidence,” Yun said. “The extremely favorable housing affordability
conditions are a big factor, but buyers have been constrained by
unnecessarily tight credit. As a result, there are abnormally high
levels of all-cash purchases, along with rising investor activity.”

NAR President Ron Phipps, broker-president of Phipps Realty in Warwick,
R.I., said the median price is being dampened by unusual market factors.
“Unprecedented levels of all-cash purchases, primarily of distressed
homes sold at deep discounts, undoubtedly pulls the median price
downward,” Phipps said. “Given the levels of inventory we see today, we
believe that traditional homes in good condition have held their value.”

Distressed
homes edged up to a 37 percent market share in January from 36 percent
in December; it was 38 percent in January 2010.

All-cash sales rose to 32 percent in
January from 29 percent in December and 26 percent in January 2010. 
All-cash purchases are at the highest level since NAR started measuring
these purchases monthly in October 2008, when they accounted for 15
percent of the market. The average of all-cash deals was 20 percent in
2009, rising to 28 percent last year.

“Increases in all-cash transactions, the investor market share and
distressed home sales all go hand-in-hand. With tight credit standards,
it’s not surprising to see so much activity where cash is king and
investors are taking advantage of conditions to purchase undervalued
homes,” Yun said.

…(read more)