The Consumer Financial Protection Bureau (CFPB) released a report Thursday showing that although reverse mortgages are meant to help borrowers in retirement, they are in fact causing problems for many who don’t fully understand them.

A reverse mortgage is a type of home loan that lets older homeowners access the equity they have built up on their homes and defer loan payment until they sell the home, move out, or pass away. The original purpose of reverse mortgages was to allow these homeowners to convert home equity into an income stream or line or credit to use in retirement. Borrowers were largely expected to age in place with their loans, living in their current homes until they passed or needed skilled care.

Reverse mortgages require no monthly mortgage payments, but borrowers must still pay property taxes and homeowner’s insurance. The report showed that nearly 10 percent of reverse mortgage borrowers are at risk of foreclosure because they failed to pay those costs.

“Reverse mortgages are complex and have the potential to become a much more pervasive product in the coming years as the baby boomer generation enters retirement,” said CFPB director Richard Cordray. “With one in ten reverse mortgages already in default, it is important that consumers understand what they are signing up for and that it is the right product for them.”

Source: DSNews.com

Blue Sky Capital tracked area properties and found that loans funded with Option Arm, which is a type of adjustable rate mortgage, and Alt-A are about see higher interest rates.

The Home Affordable Foreclosure Alternatives (HAFA) Program provides additional options to avoid costly foreclosures and offers incentives to borrowers, servicers and investors who utilize a short sale or deed-in-lieu (DIL) to avoid foreclosures. HAFA alternatives are available to all HAMP-eligible borrowers who: 1) do not qualify for a Trial Period Plan; 2) do not successfully complete a Trial Period Plan; 3) miss at least two consecutive payment during a HAMP modification; or, 4) request a short sale or DIL.

In a short sale, the servicer allows the borrower to list and sell the mortgaged property with the understanding that the net proceeds from the sale may be less than the total amount due on the first mortgage. Generally, if the borrower makes a good faith effort to sell the property but is not successful, a servicer may consider a DIL. With a DIL, the borrower voluntarily transfers ownership of the property to the servicer – provided the title is free and clear of mortgages, liens and encumbrances. With either the HAFA short sale or DIL, the servicer may not require a cash contribution or promissory note from the borrower and must forfeit the ability to pursue a deficiency judgment against the borrower.

HAFA simplifies and streamlines the short sale and DIL process by providing a standard process flow, minimum performance timeframes and standard documentation.

The guidelines for HAFA are detailed further in the documents listed below.

• Borrower Documents

Starting June 15, the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, will require both agencies to give short-sale buyers a final decision within 60 days. (In a short sale, a lender agrees to accept less than the balance on a mortgage.)

Fannie and Freddie must also respond to initial requests for a short sale within 30 days of receiving the buyer’s submission.

“Short sales are huge right now,” said Peter Spino, the foreclosure services manager for Community Housing Innovators in White Plains, N.Y., a housing counselor certified by the Department of Housing and Urban Development. Distressed homeowners often prefer them to a foreclosure, he noted.

Expedited sales as a result of the new directive will benefit the entire housing market, said Michael McHugh, the president and chief executive of Continental Home Loans and the president of the Empire State Mortgage Bankers Association, a trade group. They could also remove some risks for buyers — many of whom previously had to wait months for a decision and then ended up not getting the house they wanted.

In March, the most recent month for which data were available, short sales represented more than 14 percent of existing home sales, according to CoreLogic, a data analytics company, compared with 12 percent for all of 2011 and about 10 percent in 2010. And as the number of short sales has risen, foreclosures have fallen. Completed foreclosures represented 25.3 percent of home sales in March, versus 34.9 percent in all of 2011 and 42.7 percent in all of 2010.

Lenders favor short sales because they are less costly and more efficient than foreclosures. Yet the homeowners, trying to exit as gracefully as possible, never know how long the process will take or how badly their credit will be hurt.

Although short sales have a reputation for being easier on credit scores than foreclosures, “that’s a fairly common misperception,” said Rod Griffin, the director of consumer and public education at Experian, one of the major credit bureaus. If there is a difference in impact, he said, it is slight. Both short sales and foreclosures remain on the credit report for seven years — but foreclosures don’t appear until the legal paperwork is filed, and that could take months, Mr. Griffin said.

The effect was measured in an analysis by VantageScore, a provider of credit scores used by lenders. The higher the credit rating a consumer has, the more points he or she would lose in a short sale.

If consumers started with, say, an 830 score, they would most likely lose 100 to 110 points from a short sale, 120 to 130 points from a foreclosure. But a homeowner with a 625 score, who is behind on his mortgage and some credit card payments, would lose 15 to 25 points from a short sale and 10 to 20 points from a foreclosure, the VantageScore analysis shows.

One major downside to a short sale has been the length of time it takes to process the transaction. “I have done short sales in 60 days, and I’ve also had them take a year,” said Peter J. Goodman, a real estate lawyer in Brooklyn. He typically tells clients to expect them to take 90 to 120 days.

Short sales today are being completed faster than they were a couple of years ago, Mr. McHugh said. About one-fourth of his mortgage business comes from short sales; five years ago it was almost zero.

Speeding up the short-sale process could be especially worthwhile in states like New York, where judicial foreclosures can take a year or longer. “There should be a significant improvement in the turnaround,” he said.

By VICKIE ELMER

Published: May 24, 2012

Bank of America is offering to pay delinquent homeowners up to $30,000 if they sell their homes through short sale to avoid foreclosure.

The homeowners must start the short sale process by the end of this year and close the deal by Sept. 26, 2013, to be eligible for the incentive. The amount of assistance “will be determined on a case-by-case basis using a calculation that includes the value of the home, amount owed and other considerations,” the bank says. The incentive starts at $2,500.

For now, the program is only available to borrowers who have mortgages that are owned and serviced by Bank of America.

To qualify for the incentive, “the seller must work proactively with the bank to obtain a preapproved sales price prior to submitting a purchase offer to the bank,” according to statement by the bank.

Other large lenders, such as Chase and CitiMortgage, offer similar incentives on short sales.

It’s good to see that banks finally get it. My sources tell me that lenders have been much more willing to accept short sale offers.  Some are still taking long to process them but not as long as they used to. I’ve heard of short sales closing in less than 90 days, which is a big improvement compared to when lenders took a year to even reply to a short sale offer.

When banks allow borrowers to sell their homes for less than what is owed, they lose money. But they lose less than they would have lost if they had allowed the homes to go through foreclosure. Homeowners facing foreclosure benefit because a short sale isn’t as bad for their credit as a foreclosure.

Market Watch is also optimistic and commented on the short sale state of affairs: “Fitch expects the increase in short sales to continue because of the potential benefits afforded to both lenders and borrowers. Some borrowers may prefer short sale because, though they cannot stay in the property, they often walk away with cash incentives from lenders and healthier credit reports unmarred by foreclosure. For lenders, short sales provide a more efficient and cheaper alternative to the increasingly lengthy and costly foreclosure process”.

CNN Money explained that banks get about 20% less for a foreclosed home. Foreclosure can take years to unload, during which expenses, like property taxes, insurance and other expenses, mount up.

JP Morgan has projected that over 500,000 short sales will be done this year. The NECN article shows that short sales are here to stay for some time. According to the Mortgage Bankers Association, there are nearly 3.5 million homeowners delinquent on their mortgages by at least one month, including 1.5 million who are 90 days or more behind on paying their mortgage. 12.5 million Homeowners still owe more on their mortgage than their home is worth.

The NAR research indicates that the number of short sale in the United States will increase by 9.2% in 2012. For the first time short sales surpassed the foreclosure deals. Jonathon Weiser, a vice president in the applied analytics division of Lender Processing Services, said: “It is a fairly recent phenomenon that short sales have been increasing. Short sales should be the dominant way of disposing of assets in distress”. Mr. Weiner also said that lenders are catching up to short sales after being slow to provide the staffing and incentives necessary to complete the deals.

Wells Fargo and JP Morgan began last year giving cash inducements as high as $30,000 to selected homeowners who agreed to a short sale as a way of speeding up the process. Bank of America paid $19.9 million in the first two months of this year for 22,534 homeowners to relocate.

Ira Rheingold, of the National Association of Consumer Advocates, said that Las Vegas Short Sales are mostly a good thing. Bloomberg News reported that data from mortgage tracker Lender Processing Services show short sales surpassed foreclosures. According to the indications and real estate market trends, the short sale process is better than the devastating process of foreclosure.

Heller’s new bill is mostly an effort make all mortgage service providers subject to the same policies being implemented next month by federal lenders Fannie Mae and Freddie Mac.

The bill—like the policy that applies to federal lenders—stops short of forcing lenders to let more underwater homeowners complete short sales. Rather, it would prevent lenders from leaving underwater homeowners hanging for more than a month as they consider whether to approve a short sale.

“Home buyers, sellers and real estate agents have long observed that banks have been slow to approve home short sales,” Heller said Wednesday. “Delays can cause cancelled contracts and homeowners being forced into foreclosures. Though short sale is seen as a far better outcome than foreclosure finding ways to improve this process and make this process more efficient has been very very difficult.”

Heller’s bill would require mortgage servicers to respond to short sale purchase offers within 30 days and issue a final decision within 60 days — the same timeline as Fannie and Freddie must adhere to starting in June

By most casual estimates, it now takes between three and nine months to complete a short sale. According to an April report from the mortgage finance experts at RealtyTrac, the average time it takes from the start of the foreclosure process to when a sale is completed is 10.5 months—up from four months in 2007. Plus, only about a quarter of short sales ever actually go through.

Whether the changes in Heller’s bill could improve those statistic isn’t clear. But short sales are already on the rise.

RealtyTrac has identified a coming short sale tsunami in 2012, as more banks agree to start foreclosure proceedings — and favor the short sale option.

In Southern Nevada, short sales made up about 28 percent of all sales this January — a jump of about 38 percent over what it was a year before.

By Karoun Demirjan

Las Vegas Sun

The loan repurchase will be completed by the end of May, Freddie said.

Analysts at Barclays Capital noted the affected pools were mostly issued in 2010 and 2011, and originated entirely by Bank of America ($6.98 0%). The buyouts are for a variety of mortgage products such as 30-year, 15-year mortgages as well as ARMs. “Freddie Mac had mentioned a change in its rep and warranty sampling methodology in its latest Q1 filing,” wrote the analysts in a note to clients. “We suspect these rep and warranty buyouts may be related to its new sampling system.”

Data released by Freddie Mac shows prepayments on loans packed into mortgage-backed securities declined in April after rising in February and March, according to analytics firm Keefe, Bruyette & Woods ($15.41 0%).

Analysts expected additional refinancing opportunities from the government’s enhanced Home Affordable Refinance Program, or HARP 2.0, to increase prepayments within MBS securities in early 2012.

Full details on the pools affected by the buyouts were not released, but Freddie provided a list of pools for which the share of balance to be bought-out exceeds 5%. The pools represent an outstanding balance of $1.3 billion.

It is unclear if this is an isolated issue or a process that will be revisited at regular intervals. Also unclear is the motivations behind the buyouts. They do raise questions, however.

If these are representation and warranty repurchases on post HARP loans originated under a fairly tight underwriting regime, Barclays said, they will generate concerns around buyouts on newly originated loans.

And though this round appears to be entirely targeted at BofA-issued pools, it is unclear if other originators are being targeted.

“We hesitate to opine on valuations absent further clarification on these issues. However, this development is likely to raise policy-related buyout fears,” Barclays analysts wrote.

That rate is down 92 basis points from year-ago levels.

“Mortgage delinquencies normally fall during the first quarter of the year, but the declines we saw were even greater than the normal seasonal adjustments would predict, so delinquencies are clearly continuing to improve,” said Michael Fratantoni, vice president of research and economics for the MBA.

“Newer delinquencies, loans one payment past due as of March 31, are down to the lowest level since the middle of 2007, indicating fewer new problems we will need to deal with in the future,” he added.

The percent of loans tied to a foreclosure action launched in the fourth quarter hit 0.96% in the most recent quarter, which is down 3 basis points from the previous quarter and 12 basis points from a year earlier.

By the end of the first quarter, the percentage of loans in the foreclosure process stood at 4.39%, up 1 basis point from the fourth quarter and down 13 basis points from 1Q of 2011.

The serious delinquency rate, or the percentage of loans 90 or more days past due or in foreclosure, hit 7.44% in the first quarter, down 29 basis points from the fourth quarter and 66 basis points from the first quarter of 2011.

The only states to experience increases in their serious delinquency rate were Maryland, Delaware, New Jersey and Washington.

Over the last two years, the bank completed roughly 200,000 short sales. For the first three months of this year, it completed 30,000. As new servicing requirements and corrections lengthened the foreclosure process over the last two years, short sales have taken a greater share of the market. In some areas, short sales have surpassed REO transactions as a percentage of the market.

The new program with BofA requires a borrower to work with the bank to obtain a preapproved sales price before submitting a purchase offer. To qualify for the program, a short sale offer must be submitted by the end of 2012 and close by Sept. 26, 2013.

BofA said short sales already started may be eligible.

“This program can help customers make a planned transition from ownership when home retention options have been exhausted or they have made a decision not to keep the home,” said Bob Hora, executive of home transition services for BofA.

The program will be offered for mortgages owned and serviced by the bank. The amount of relocation assistance provided will be determined on a case-by-case basis.

Source: Housingwire.com

It will take 46 months to clear the market’s supply of distressed homes, or the shadow inventory, according to estimates from Standard & Poor’s Rating Services based on first-quarter 2012 data.

The agency’s latest estimate came in one month shy of the liquidation timeline determined in the fourth quarter of 2011.

While national residential mortgage liquidation rates appeared stable over the first three months of this year, these rates varied widely between local markets, which prevented any significant reduction in S&P’s months-to-clear estimate, the agency explained in its report.

Regional variations in how quickly servicers can clear the backlog of nonperforming loans are primarily due to differences in foreclosure procedures, judicial vs. non-judicial.

As of first-quarter 2012, S&P says its months-to-clear estimate in judicial states was almost 2.5x as long as non-judicial states.

S&P includes in the shadow inventory all outstanding properties on which the mortgage payments are 90 or more days delinquent, properties in foreclosure, and properties that are REO. The agency also includes 70 percent of the loans that became current, or “cured,” from 90-day delinquency within the past 12 months because S&P says these loans are more likely to re-default.

The move could provide a major boost to both the program and usage of the Treasury Department’s Hardest Hit Fund.

California officials dropped a requirement of Keep Your Home California that banks match taxpayers’ funds when homeowners receive mortgage reductions through the program.

“As announced last year, Fannie Mae and Freddie Mac may accept the pay down of mortgage principal funded through a HHF program provided other guide requirements are satisfied,” a Federal Housing Finance Agency spokesperson told HousingWire. “In response to this week’s announcement by the California HFA, the enterprises will work with the housing finance agency to apply its new program to enterprise loans.”

The FHFA stressed that the principal reduction is not a write down, something Acting Director Edward DeMarco is reluctant to do, but a payment of principal through the underutilized HHF grant dollars. In other words, Fannie and Freddie are not taking losses.

The special inspector general for the Troubled Asset Relief Program reported that just 3% of HHF’s $7.6 billion fund had been used as of Dec. 31. The Treasury Department meant for the program to provide modifications, short sales, unemployment assistance and principal reduction.

The Treasury Department originally announced HHF in February 2010 as a $1.5 billion program for five state housing finance agencies where home prices dropped 20%: Arizona, California, Florida, Michigan and Nevada. It soon grew through three additional rounds of funding to a $7.6 billion program going to 18 states and the District of Columbia.

The money was meant to develop programs and entice mortgage servicers to provide modifications, short sales, unemployment assistance and principal reduction. Treasury approved the first programs in June 2010 and initiatives in other states roughly three months later.

In April, Freddie Mac, in a letter to its servicers, said mortgage servicers must participate in Hardest Hit Fund transition assistance programs from 18 states and the District of Columbia through short sales and other foreclosure alternatives.

Over the life of the Hardest Hit Fund, which ends in 2017, the state housing finance agencies across the nation estimate helping 459,000 homeowners with some sort of relief.

Source: Housingwire.com

The government’s Home Affordable Modification Program (HAMP) continues to add borrowers to its roster each month, but the pace has slowed.

Data released Friday by Treasury and HUD shows 19,940 permanent HAMP mods were granted during the month of March. That’s down 10 percent from the 22,263 permanent mods completed in February and down 45 percent from 36,432 in March 2011.

Raphael Bostic, HUD assistant secretary, says fewer borrowers are falling behind on their mortgage these days. “We’re making important progress in providing relief to homeowners under the Obama administration’s programs,” Bostic said.

Smith stepped down from his post as the North Carolina banking commissioner in February to oversee the state attorneys general settlement for alleged foreclosure abuses and mishandled mortgage and title documentation.

The 49 state AGs and federal prosecutors filed the agreement with Bank of America ($8.21 0%), JPMorgan Chase ($43.28 0%), Wells Fargo ($33.07 0%), Citigroup ($33.42 0%) and Ally Financial in March.

“I left the position of the commissioner of banks with the assumption that the settlement would be filed soon after. As you know, it wasn’t, but candidly, that was a bit of a blessing because it gave me a chance to prepare, which was very beneficial,” Smith said in an interview with HousingWire Tuesday.

Smith hired his second full-time staffer, who should begin next week. The banks will fund his $3.75 million interim budget for the period ending June 30, and he will submit a longer-term budget in July.

Since taking the spot, Smith set up a nonprofit corporation to handle administrative duties for the monitoring office. He also retained a few law firms and two accounting firms to prep him. He expects to hire more workers soon, but most of the work in monitoring the settlement will be done by a small staff retained from accounting, auditing and forensics companies.

Smith sent out a request for qualifications to nearly 40 firms, from which he will select one to primarily handle the approval of servicer working plans under the settlement.

“I expect to have a primary professional firm chosen by the end of May, and we’ll finalize final work plans for each of the banks in accordance with the schedule, which will have to be done by Independence Day, July 4,” Smith said.

Along with relief to be provided, the servicers must set up internal teams to monitor their compliance with a set of new standards. The rules govern how the servicers handle everything from signing affidavits to short sales. A certain percentage of loans must meet these standards, otherwise the servicer could face future fines if corrections aren’t made.

Smith’s office will conduct quarterly reviews of the findings, but it will still be a full six months before the phase-in process is complete.

“Monitoring the impact of the plans starts at the end of the six months,” Smith said. “We’ll see some pretty some pretty good response soon after that, but we’ll see.”

Smith met with three of the five servicers so far and will meet with a fourth this week. A meeting with the fifth servicer will take place in May, he said.

“The big piece of infrastructure work plans is what they will do internally to monitor their own performance and what I will do to review their work and what I need to confirm it and to test it,” Smith said.

For an in-depth interview with Smith and what to expect from him as the settlement enforcer, subscribe to HousingWire magazine.

Source: Housingwire.com

In short sale deals, the sale price of the home is less than what the seller owes. Often, the bank that holds the mortgage takes so long to approve the sale that the deal falls through. But in recent months, the pace of short sales has increased, a trend that should gain momentum, according to RealtyTrac.

In January, short sales rose 33% compared with 12 months earlier, the company reported.

During the month, 32 states saw year-over-year percentage increases in short sales. Even more encouraging, short sale deals outnumbered foreclosures in 12 states, including some of the hardest hit like California, Arizona and Florida.

January’s numbers look to be just the beginning. “[W]e believe 2012 could be a record year for short sales,” said Daren Blomquist, vice president at RealtyTrac.

Banks are showing signs of being more open and willing to approve the deals — even if it means accepting less money. The average sales price for a short sale was $174,120 in January, down 4% from December and 10% year-over-year.

Typically, banks get about 20% less for a foreclosed home. Foreclosure can also take years to unload, during which expenses, like property taxes, insurance and other expenses, mount up.

Short sale process to speed up. One of the biggest roadblocks for short sales has been the time it takes to get deals approved. That time shrunk slightly during the first quarter — to 306 days from 308 days the previous quarter — but many deals still fall through because the buyer eventually walks away.

However, that could all change come June 1 when a set of new rules are put in place that will require lenders to make a decision about short sale requests within 60 days.

Earlier this week, the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae (FNMA, Fortune 500) and Freddie Mac (FRE), announced the new guidelines, which will also require lenders to review and respond to short sale requests within 30 days and provide weekly status updates to the borrower if the offer is still under review after that time.

Also helping to speed things along is the government’s Home Affordable Foreclosure Alternative program, which launched in late 2009, according to Charlie Engel, a spokesman for RealtyTrac,

The program pays incentives to those who sell their home in a short sale rather than let it fall into foreclosure. 

The number of U.S. home short sales surpassed foreclosure deals for the first time as banks became more agreeable to selling houses for less than the amount owed on their mortgages, according to Lender Processing Services Inc. (LPS)

Short sales accounted for 23.9 percent of home purchases in January, the most recent month available, compared with 19.7 percent for sales of foreclosed homes, data compiled by the Jacksonville, Florida-based company show. A year earlier, 16.3 percent of transactions were short sales and 24.9 percent involved foreclosures.

“It’s a fairly recent phenomenon that short sales have been increasing,” Jonathon Weiner, a vice president in the applied analytics division of Lender Processing Services, said in a telephone interview. “Short sales should be the dominant way of disposing of assets” in distress, he said.

Lenders are catching up to short sales after being slow to provide the staffing and incentives necessary to complete the deals, Weiner said. The transactions typically fetch a higher price for banks than sales of homes that have gone through foreclosure. In January, foreclosed homes sold for an average of 29 percent less than comparable non-distressed properties, compared with a 23 percent discount for short sales, according to Lender Processing Services. The gap has narrowed as short sales become more common, Weiner said.

The growing percentage of short sales, which don’t require going through the drawn-out foreclosure process, is a sign that the U.S. is making progress in working through its inventory of distressed properties, Weiner said. The increase in short sales also may help values find a floor quicker.

“Our baseline scenario is that home prices will hit a bottom at the end of this year,” he said.

Cash Incentives

Banks including Wells Fargo & Co. (WFC) and JPMorgan Chase & Co. (JPM)  last year began giving cash inducements as high as $35,000 to selected homeowners who agreed to a short sale as a way of speeding up the process.

Bank of America Corp. paid $19.9 million in the first two months of this year for 22,534 homeowners to relocate after short sales and deeds in lieu of foreclosure, when borrowers agree to return the property deed in exchange for debt forgiveness, the Charlotte, North Carolina-based company said March 16. Its short sales rose 31 percent in January and February from a year earlier.

Banks have struggled to reduce losses from delinquent mortgages. Almost 4.4 percent of homes with loans had received a notice of foreclosure sale at the end of 2011, the 11th consecutive quarter the rate has been higher than 4 percent, according to the Mortgage Bankers Association.

Falling Foreclosures

Foreclosure filings, including notices of defaults and bank repossessions, fell 16 percent in the first quarter from a year earlier after lenders under legal scrutiny slowed actions against delinquent homeowners, RealtyTrac Inc. reported April 12.

Lender Processing Services, a 2008 spinoff from title- insurance company Fidelity National Financial Inc. (FNF), counts short sales by tallying mortgage and property transfer documents filed with county recorders, Weiner said.

Other reports haven’t shown the same magnitude of short- sale growth. The National Association of Realtors reported that 13 percent of transactions were short sales and 22 percent were foreclosures in January. In February, short sales increased to 14 percent and foreclosure-related transactions declined to 20 percent, the group said March 21.

Showing an ‘Uptick’

The Realtors collect their data from transactions on the Multiple Listing Service, a database of homes on the market, and a survey of about 3,000 members, said Walter Molony, a spokesman for the association.

“The February data is showing a bit of an uptick,” he said in an e-mail from Washington. “We’re hearing the process is going a bit more smoothly now, so that comes as no surprise.”

The U.S. Department of Housing and Urban Development reported a preliminary 19,600 short sales in January, compared with the Lender Processing Services tally of 48,721. An April 6 HUD report showed that the number of short sales rose 4.3 percent from a year earlier as the number of real estate owned, or REO, sales — another name for foreclosure sales — fell 39 percent.

Before agreeing to accept a loss on a short sale, lenders usually require homeowners to show evidence of hardship, such as inability to afford their mortgage payments or the need to relocate for a job, said Weiner of Lender Processing Services.

The consent order requires Morgan Stanley to hire an independent consultant to review foreclosure proceedings initiated by Saxon that occurred between 2009 and 2010.

Morgan Stanley completed its sale of Saxon April 2, 2012, to Ocwen Financial and is no longer in the servicing business. In October 2011, Morgan Stanley first announced the sale of Saxon to Ocwen for base purchase price of $59.3 million.

The purpose of the review is to compensate borrowers who suffered from a wrongful foreclosure or other forms of misconduct as a result of the foreclosure process. The Fed stated that “monetary sanctions are appropriate” and that it plans to announce what those penalties will be in the cases.

According to the Fed, Saxon was ranked the 34th largest residential servicer and serviced a portfolio of more than 225,000 residential loans. The Fed stated Saxon initiated at least 60,313 foreclosure actions from January 1, 2009 to December 31, 2010.

In April 2011, the Office of the Comptroller of the Currency ordered 14 servicers to hire an independent consultant to review foreclosure cases to see if borrowers suffered financial harm due to servicing errors and other forms of misconduct.

In another separate case, federal officials and 49 state attorneys general reached a $25 billion agreement with the five largest servicers – Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial – over robo-signing and other servicing issues in February of this year.

The Mortgage Debt Relief Act of 2007 applies to debt forgiven from 2007 to 2012. Up to $2 million of a married couple’s forgiven debt is eligible for the exclusion ($1 million if married filing separately), which does not apply if the discharge is due to any reason not related to a decline in the home’s value or the taxpayer’s financial condition.

To extend the provision beyond its Dec. 31 expiration date, U.S. Reps. Jim McDermott, D-Wash., Shelley Berkley, D-Nev., and John Larson, D-Conn., introduced the Homeowners Tax Fairness Act to, as they put it, “protect homeowners and servicemembers who were wrongly foreclosed on and entitled to relief under the historic national mortgage settlement from additional tax burdens.”

The legislation extends the exclusion for the three-year period anticipated by the $25 billion foreclosure settlement agreement.

If the 2007 law expires, homeowners and servicemen who receive settlement payments and mortgage debt forgiveness for wrongful foreclosure after 2012 will be subject to federal income tax.

In an attempt to get mortgage servicers to act quickly, the foreclosure settlement allows servicers credit for more principal reduction than is actually provided under the settlement over the next 12 months. The nation’s top five servicers are committed to achieving $10 billion in principal reduction credits under the agreement.

The agreement also requires servicers to meet 75% of $20 billion in relief within two years. That includes write-downs, modifications, short sales, forbearance and other actions.

The three lawmakers expect the bill to impact 1.7 million homeowners across the U.S., including 68,000 in Nevada, who are eligible to take part in this settlement.

The bill also extends the deduction for mortgage insurance for three years and excludes cash payments for wrongful foreclosure from income as well as payments to servicemembers wrongfully foreclosed on or overcharged mortgage interest in violation of the Servicemembers Civil Relief Act.

The federal government announced in February that major banks will reimburse military servicemembers for any wrongful foreclosures done in the past five years. JPMorgan Chase ($45.67 0%), Wells Fargo ($33.94 0%), Citigroup ($36.51 0%), and Ally Financial will resolve Servicemembers Civil Relief Act claims in connection to the wider foreclosure settlement.

“We need to protect homeowners and servicemembers who have already been the victims of fraud or unfair foreclosure practices from also being hit with a new tax bill resulting from this mortgage settlement,” Berkley said.

“This legislation will prevent homeowners in Nevada and nationwide who receive refinancing help, principal reductions or direct payments under this settlement from having to literally pay for the fraud and deception committed by banks and members of the mortgage industry,” she said.

Source: Housingwire.com

“A lack of inventory in the bank-owned (REO) and short sale market was a contributing factor to the decline in share of distressed sales in February,” said C.A.R. President LeFrancis Arnold. “In fact, REO inventory declined 24 percent in February from the previous year, while short sale inventory dropped 17 percent during the same period.”

The share of distressed properties that sold statewide decreased to 48.9 percent in February, down from January’s 50.1 percent and from 55.2 percent a year ago in February 2011.

When looking at the types of distressed properties sold statewide, short sales were down in February at 23 percent compared to 23.8 percent in January, but still up from last February’s share of 22.9 percent.

The share of REO sales also made a slight downturn in February and stood at 25.2 percent, a drop compared to January’s 25.9 percent and down from the 31.9 percent reported last year in February.

After seeing a two-month decline, equity sales increased in February, making up 51.1 percent of home sales in February. Equity sales made up 49.9 and 44.8 percent of all sales in January 2012 and February 2011, respectively.

Based on signed contracts, C.A.R.‘s Pending Home Sales Index (PHSI) went up from a revised 102.3 in January to 127.8 in February. The index also was up from the 111.8 index recorded February 2011, the 10th month in a row pending sales were higher than the previous year. Pending home sales are forward-looking indicators of future home sales activity and provide information on the future direction of the market.

DSNews.com

Speaking at the National Association of Hispanic Real Estate Professionals policy conference in Washington, D.C., the Donovan said no one has been hit harder by the financial crisis than the Hispanic community.

From 2005 to 2009, median wealth dropped 66% among Hispanics and 53% among blacks, compared to 16% from whites, according to Pew Research Center analysis of Census Bureau data.

Median home equity held by Hispanics dropped to $49,145 in 2009 from nearly $100,000 four years prior. Pew said it was caused by the share of Hispanics making up populations in California, Florida, Nevada and Arizona — the states hardest hit by the downturn.

“That’s an absolute tragedy. Completely unacceptable,” said Donovan, mentioning that one-third of Hispanics owe more on their mortgages than what their homes are worth.

Donovan touted the government’s efforts to “push harder, keep making progress and knock down barriers” in boosting the housing industry.

He cited the Home Affordable Refinance Program’s ability to increase refinancing in the aforementioned sand states.

The Mortgage Bankers Association reported Wednesday that monthly refinance applications in February grew 49% in Florida, 61% in Arizona and 71% in Nevada. Refinances in the rest of the country were generally flat or even down.

Donovan praised HUD’s Neighborhood Stabilization Program, saying its success depends heavily on commercial revitalization in communities that suffer from foreclosures and abandonment.

Although the wealth of Hispanic communities vastly shrunk during the financial crisis, their purchasing power remained resilient.

Latinos saw purchasing power more than double over the past decade, compared to a 52% increase for the country as a whole, a sign of their continued growth in influence on the economy and housing market. The measure is expected to increase another 48% for Latinos to $1.6 trillion by 2016, according to NAHREP.

Homeownership rates among Latinos fell to 46.9% in 2011 from 47.3% in 2001, a milder decline than the overall U.S. drop to 66.1% from 67.8%.

“Block by block, neighborhood by neighborhood,” Donovan told the NAHREP members, referring to how Hispanics and the nation as a whole will return to economic prosperity.

NAHREP is a 20,000-member real estate trade association with 50 affiliate chapters in 48 states.

Source: Housingwire.com

While distressed sales are keeping the shadow inventory from growing, the quantity on record is not yet decreasing. In fact, today’s shadow inventory mirrors that recorded in January 2009, though there have been 3 million distressed sales since that date.

The total 1.6 million properties CoreLogic considers to be part of the shadow inventory makes for a six-month supply of homes for the market.

The total is lower than the 1.8 million CoreLogic counted in January 2011.

However, CoreLogic estimates the current shadow inventory is about half the current visible inventory.

Furthermore, “Almost half of the shadow inventory is not yet in the foreclosure process,” said Mark Fleming, chief economist for CoreLogic.

The total shadow inventory includes 400,000 REOs, 410,000 properties already in foreclosure, and 800,000 seriously delinquent loans.

A few hard-hit states are home to a disproportionate percentage of the industry’s shadow inventory. More than one-third of the shadow inventory is in California, Florida, and Illinois. Add to this the shadows lurking in New York, Texas, and New Jersey, and you have half of the total shadow inventory plaguing the market.

However, “In some hard-hit markets the demand for REO and distressed property is now outstripping supply, said Anand Nallathambi, CoreLogic’s president and CEO. “As we move into what is traditionally the peak selling season for real estate, servicers will certainly be watching closely to see if now is the time to move more inventory out of the shadows.”

CoreLogic reported that loans between $100,000 and $125,000 make up the highest concentration of the shadow inventory, but loans less than $75,000 are starting to make up an increasing portion of the shadow. In fact the amount of loans in this category that have dimmed into the shadows increased 3 percent from last year.

Source: DSNews.com

Pollard, speaking before a House of Representatives committee Monday, cited estimates that state governments have introduced 550 bills related to mortgage servicing since 2009.

Pollard also referenced a recent study from the National Bureau of Economic Research, which found that state laws aimed at foreclosure prevention more often delay foreclosures than prevent them.

Some of the types of state laws causing unnecessary delays to the foreclosure process and costs to servicers and investors, according to the FHFA, include laws requiring mediation programs, laws that add priority liens to mortgages, and vacant property ordinances and fees.

For example, Washington D.C. enacted a mediation program to help homeowners avoid foreclosure. However, Pollard points out, “If a homeowner was considered for modifications or short sale, the value of the mediation, including its costs, is questionable as to any different outcome.”
The program is said to extend foreclosure timelines up to 132 days, according to Pollard.

The National Bureau of Economic Research found that most borrowers who achieve resolution through loss mitigation do so in the first 60 to 90 days of falling delinquent. Therefore, extending the foreclosure timeline is not an effective method of preventing foreclosure.

Furthermore, delaying foreclosure “simply add[s] to the cost for neighborhoods and communities and losses to lenders and investors,” Pollard stated.

“Simply permitting homeowners to stay in their homes for five or six hundred days or longer while not paying their mortgages, costs neighborhoods, costs lenders and, ultimately, costs taxpayers and future borrowers,” Pollard stated.

Source: DSNews.com

Prices declined 3.1 percent in January 2012 compared to a year ago in January 2011 and by 1 percent compared to the previous month of December 2011, according to the index.

But, when excluding distressed sales, year-over-year prices declined by 0.9 percent, and a month-over-month gain of 0.7 percent was seen for January. Distressed sales include short sales and REO transactions.

In response to this data, Capital Economics stated in a report that there is reason to believe the tide is turning.

“Over the past year, the visible inventory has dropped by 20 percent and, over the last six months, home sales have risen by 13 percent,” said Capital Economics.

Even with the expectation that this downward trend is soon to change, Capital Economics does not expect significant house price gains.

“With the robosigning settlement likely to kick-start the foreclosure process and structural factors still constraining demand, it’s more likely that over the next two years prices will remain broadly stable,” the research firm said.

Lender Processing Servicers (LPS) also released an HPI report, but with a focus on December 2011.

Since December 2008, the LPS report states that prices have fallen more slowly at an average annual rate of 4.4 percent.

The LPS HPI national average home price for December 2011 reached a price level not seen since September 2002, and the decline marks the sixth consecutive month of price decreases.

Home prices averaged at $197,000 for December 2011, compared to $226,000 in December 2008, according to the LPS report. In the previous month of November, prices averaged at $199,000.

“Despite the broad picture of home price declines following the bubble, prices have not been consistently declining for all MSAs in the country. About one-fifth (89) of all the MSAs that LPS covers has seen average home prices increase since December 2008,” said Raj Dosaj, VP of LPS Applied Analytics. “Unfortunately, the MSAs that have seen price increases since December 2008 are generally relatively small; Boston and Pittsburgh are exceptions.”

Examples of MSAs that saw increases in average home prices since December 2008 were: Springfield, Massachusetts; Albany, New York; Brownsville, Texas; and Hot Springs, Arkansas, according to LPS data.

CoreLogic’s report included state rankings based on appreciation values.

The five states with the highest appreciation including distressed sales were South Dakota (+5.7 percent), North Dakota (+4.0 percent), West Virginia (+4.0 percent), Montana (+3.6 percent), and Michigan (+3.0 percent).

The five states with the greatest depreciation including distressed sales were Illinois (-8.7 percent), Nevada (-8.0 percent), Delaware (-7.9 percent), Alabama (-7.7 percent), and Georgia (-7.5 percent).

The five states with the highest appreciation minus distressed sales were South Dakota (+6.4 percent), Montana (+5.9 percent), North Dakota (+3.8 percent), Alaska (+3.7 percent), and Indiana (+2.7 percent).

The five states with the greatest depreciation minus distressed sales were Nevada (-6.7 percent), Delaware (-5.5 percent), Minnesota (-4.1 percent), New Jersey (-3.5 percent), and Georgia (-3.3 percent).

Source: DSNews.com