NEW YORK (CNNMoney) — The mortgage meltdown that began five years ago appears to be reversing course as the percentage of loans that fell into delinquency slowly returned to normal rates and fewer loans fell into foreclosure.
On a seasonally adjusted basis, 7.58% of mortgage borrowers were late on their loan payments during the last three months of 2011, according to the Mortgage Bankers Association. That was down 0.67 percentage points from 12 months earlier and 2.5 percentage points from the peak set in the first quarter of 2010.
“That’s a pretty substantial decline,” said Mike Fratantoni, the MBA’s Vice President for Single-Family Research and Policy. “We’re about halfway back from the peak.”
The improved mortgage performance reflected continued improvements on the jobs front and in the broader economy, according to Jay Brinkmann, chief economist at the MBA.
He also said the the 0.28 percentage-point decline in loans on which foreclosure actions were started during the fourth quarter is a good predictor of fewer future bank repossessions. During the quarter, foreclosure starts dropped to below 1%, a healthy decline from the 1.4% peak logged in the third quarter of 2009 and significantly closer to the long-term average of slightly under 0.5%, he said.
The delinquency numbers could have been even better except for forces that kept mortgages in the default process longer. As a result of the robo-signing scandal, banks taken greater pains to make sure their paperwork is in order. That has meant that many loans have gotten stuck in the foreclosure pipeline longer, boosting delinquency rates.
The delays have been especially long in states, like Florida and New York, where the courts are involved in the foreclosure process.
In such judicial foreclosure states, the percentage of loans stuck in foreclosure inventory is at 6.8% and growing. Meanwhile, in non-judicial states, only 2.8% of loans are stuck in the pipeline and that percentage is shrinking.
The $26 billion foreclosure settlement between major mortgage lenders and the U.S. Department of Housing and Urban Development and attorneys general from 49 states and the District of Columbia should bring greater clarity and speed to the foreclosure process.
That could reduce delinquency rates substantially, according to Fratantoni, and bring them even closer to long-term, historical rates.
One category that failed to show improvement during the quarter were delinquencies on mortgages insured by the Federal Housing Administration. The percentage of FHA loans that were past due rose to 12.36% from 12.09% a quarter earlier and from 12.27% 12 months earlier. Seriously delinquent FHA loans increased to 9.02% from 8.39% and 8.46%.
Brinkmann attributed the increase to the fact that a much larger percentage of the FHA’s loan portfolio has been issued during the past few years and those loans are now entering into the dangerous years for mortgages, the three or four years after issue when delinquency rates start to peak.
Just two years, 2008 and 2009, account for 53% of the seriously delinquent loans in the FHA’s portfolio. Brinkmann expects delinquency rates for loans issued during those years to continue to rise.
“The key question, though, is: What did the FHA plan for? and our understanding is that the delinquency rate is below what the FHA was expecting,” he said.
The government’s program to turn foreclosed Fannie Mae, Freddie Mac and Federal Housing Administration properties into rentals “is here to stay,” according to housing analysts at Morgan Stanley ($19.19 0%).
One of the greatest effects of it, the bank’s analysts say, is job creation, with the possibility of creating more than 1 million jobs in the hard-hit construction and real estate industries. The jobs could be created by private capital without the use of taxpayer dollars.
The program’s purpose is to clear the national backlog of distressed housing.
“On a macro level, (the REO rental program) could not have come at a better time,” the analysts say.
According to the Bureau of Labor Statistics, the economy lost 2.5 million housing-related jobs over the past five years. Of those, 2.16 million were in construction and 240,000 were in real estate.
Employment in construction increased by 21,000 in January, following a gain of 31,000 in the previous month.
Analysts estimate about eight million properties will be sold in some form of distressed sale over the next five years.
“Even if only half can be turned into rentals, which would represent only a 20% increase in the total number of single-family rental properties available today, that could result in the creation of one million one-time construction-oriented jobs plus a possible additional 800,000 in permanent jobs, mostly in some of the hardest-hit sectors and the hardest-hit economic areas of the country,” they say.
The 800,000 jobs would comprise the cottage industry for servicing REO rental units, from cleaning properties to collecting the rent.
The chart below shows Morgan Stanley’s full-time job-creation numbers per distressed property turned into rental by each category and for total jobs. The calculation is based on anecdotal labor-usage feedback the firm received from current single-family operators.
Capital Economicscalled the program to move REO properties to rentals the “best housing fix so far” and “possibly more significant” than President Brack Obama’s refinancing proposals announced late last month.
Support for a government-led program was the most popular disposition strategy among panelists at January’s American Securitization Forum.
But when Federal Reserve Chairman Ben Bernanke sent a letter in January to Congress proposing the REO rental program, it highlighted the deep political divide on how to repair housing.
Private investors, with the government’s support, are gearing up for what they perceived as a massive and long-term investment opportunity
“With the added benefit of the potential for significant private sector-led job creation, potentially in the hardest-hit sectors in the hardest-hit regions, we are increasingly confident that (the program) can have a positive impact on housing and the macro economy as a whole,” the analysts say.
Obama’s FY2013 budget proposal includes an extension of the Mortgage Forgiveness Debt Relief Act of 2007.
The Act ensures that homeowners who received principal reductions or other forms of debt forgiveness on their primary residences do not have to pay taxes on the amount forgiven.
Without the Mortgage Forgiveness Debt Relief Act, debt reduced through mortgage modifications or short sales qualifies as income to the borrower and is taxable. Under the act, up to $2 million in debt elimination can be tax-free.
In the Treasury’s Green Book, its summary explanation of the administration’s budget proposal, it calls for an extension of the tax break due to “the continued importance of facilitating home mortgage modifications.”
The administration is proposing an extension that would apply to any amounts forgiven before January 1, 2015.
At that point, the government would reassess the market and determine whether another extension is appropriate.
The Boise City-Nampa, Idaho, metro area led the nation with a 20.2 percent drop in its single-family existing-home median home price in fourth-quarter 2011 compared to the same quarter in 2010, the National Association of Realtors reported this week.
Metros with double-digit percentage-based price declines (Q4 2011 vs. Q4 2010)
Source: National Association of Realtors.
And 29 of 149 metros tracked in the quarterly price report experienced a double-digit percentage decline year over year in fourth-quarter 2011.
Three of 10 metros with the largest year-over-year price decline in the fourth quarter are in New Jersey, and one is in New York.
Metros with double-digit percentage-based price declines (Q4 2011 vs. Q3 2011)
Source: National Association of Realtors.
Bridgeport-Stamford-Norwalk, Conn., had the largest quarterly price decline, NAR reported, falling 20.6 percent from third-quarter 2011 to fourth-quarter 2011.
Illinois and New Jersey accounted for Seven of 10 metros with the highest quarterly percent-based price drops from third-quarter 2011 to fourth-quarter 2011, and 18 markets experienced double-digit percentage declines on a quarter-to-quarter basis.
NEW YORK (CNNMoney) — The nation’s five largest banks have finally struck a deal with 49states to settle charges of abusive and negligent foreclosure practices dating back to 2008.
Under a deal announced Thursday, the banks will commit $26 billion to helpunderwaterhomeowners and compensate those who lost their homes due to improper foreclosure practices.
The banks also agreed to change the way they handle and approve foreclosures.
A group of state attorneys general claimed that banks lost important paperwork, cut corners and enlisted robo-signers to attest to facts they had no knowledge of on hundreds of documents a day.
The settlement has been in the works for more than a year.
What did the mortgage lenders and loan servicers agree to do? The banks and servicers have committed at least $17 billion to reduce principal for borrowers who 1) owe far more than their homes are worth 2) are behind on payments.
The amount of principal reduction will average about $20,000 per borrower.
Another $3 billion will go toward refinancing mortgages for borrowers who are current on their payments. This will enable them to take advantage of the historic low interest rates currently available.
The banks will pay $5 billion directly to the states, the only hard money involved in the deal. Out of that fund will come payments of $1,500 to $2,000 to homeowners who lost their homes to foreclosure.Other funds will be paid to legal aid and homeowner advocacy organizations to help individuals facing foreclosure or experiencing servicer abuses.
Another $1 billion will be paid directly by Bank of America to the Federal Housing Administration to settle charges that its subsidiary, Countrywide Financial, defrauded the housing agency.
In addition, the banks agreed to eliminaterobo-signing altogether and to use proper and legal procedures when putting homeowners through the foreclosure process. They also agreed to end servicer abuses, like harassing delinquent borrowers for payments, and to include principal reductions more often in their mortgage modifications programs. (Mortgage deal could bring billions in relief)
Is my mortgage lender taking part in this settlement? Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Ally Financial (GJM)
are taking part in the settlement.
In addition, nine other unnamed loan servicers may join the settlement later, and that would bring its value to $30 billion.
The Federal Housing Finance Agency, which oversees the two government-sponsored mortgage giants, will not allow any balance reductions for loans insured by the companies under the settlement.
I lost my home to foreclosure; how do I know if I qualify for payment? If you were foreclosed on in the calendar years 2008 through 2011, you may be be eligible for a payment of up to $2,000. People who think they may qualify should notify their bank.
The exact amount of the payments will depend on how many people participate in this part of the settlement. They will share equally in a pool of $1.5 billion. The U.S. Department of Housing and Urban Development expects about 750,000 former homeowners to take part.
What should I do if I think I may qualify for a principal reduction or refinanced mortgage? Contact your lender/servicer and ask them to review your case.
If I take the money, what rights do I give up? Individual borrowers do not give up any right to sue.
As part of this deal, state attorneys general gave up the right to sue the mortgage servicers for foreclosure abuses arising out of the robo-signing scandal. However, they reserve the right to sue if they uncover improper acts when the loans were originated or when they were securitized.
When will the new rules and bank policies be put into place? Most of them have already become part of bank policies.
When will homeowners get paid? HUD said the settlement will be put before a court for approval within two weeks. It is unknown how long it will then take for a court to rule.
The relief for homeowners has to be completed within three years, but the state attorneys general and HUD want it to be front-loaded and completed within 12 months.
Would I have to pay taxes on the principal reductions or the pay-outs? If the principal is reduced in 2012,it will not be subject to income tax.
That’s because the Mortgage Debt Relief Act of 2007 allows taxpayers to exclude income from the discharge of debt on their principal residence. The act is scheduled to expire at the end of this year, however.
So if the act is not extended and the principal reduction occurs in 2013, borrowers may be on the hook to pay taxes on the settlement amount.
It’s not clear whether you would have to pay taxes on the $1,500 to $2,000 payout. The IRS declined to comment on the question.
Which state didn’t participate and what does it mean if you live in that state? Oklahoma was the only holdout of the 50 states. Instead, it announced its own settlement with the five banks Thursday.
Under its settlement, the banks agreed to pay $18.6 million in damages, part of which would compensate homeowners who were victims of unlawful and unfair mortgage practices, according to the Oklahoma attorney general’s office.
Homeowners who believe they may have been wrongly foreclosed upon should visit the Oklahoma attorney general’s website and fill out the paperwork for processing a claim.
Will the settlement make it harder to get a mortgage? The new rules and regulations the banks have agreed to under the settlement should have little impact on future mortgage borrowing since most of practices are already in place, said Keith Gumbinger of HSH Associates, a mortgage information provider.
Only $5 billion of the $26 billion settlement will be a direct cost to the banks. The remainder will be the cost of modifying mortgages. Many of those modifications may be in the best interests of the banks to make, however, since the alternative may be foreclosure, which can cost banks more than modifications.
Were you foreclosed on? Do you think the banks owe you money? Send your story and contact information to RealStories@turner.com and you could be featured in an upcoming article on CNNMoney.
Phoenix Arizona had a 75% drop in active foreclosures for sale in 2011. Down to just over 2000 homes from over 8000. This is largely due to the fast foreclosure process where a judge/court is not need. On the other hand, Florida takes over 3 years to foreclose on average hence Florida still have the highest foreclosure inventory in the USA.
NEW YORK (CNNMoney) — Slowly, but surely, the foreclosure crisis seems to be abating.
The number of homes in foreclosure shrunk by 130,000, or 8.4%, in 2011, according to a report from CoreLogic, an economic research firm.
These are homes owned by borrowers who had slipped far behind on payments, forcing lenders to put them into the foreclosure process. The homes remain foreclosure inventory until they’re sold — either at auction or in a short sale, which is when a home is sold for less than the mortgage value — or until homeowners are current again on payments.
There are dual reasons for the inventory drop, according to Mark Fleming, chief economist with CoreLogic.
“The pace at which properties are entering foreclosure is slowing,” he said. “And servicers nationwide stepped up the rate at which they were able to process distressed assets.”
In recent years, homes have entered foreclosure more slowly because lenders are carefully scrutinizing applicants; only very low-risk borrowers get loans. That, plus a gradual improvement in the economy, means fewer borrowers are getting into trouble.
Even borrowers in default are not going into the foreclosure process as quickly as they used to. They’re being held up by a variety of judicial and regulatory constraints, according to Fleming.
For one thing, the robo-signing issue, in which banks filed sloppy and sometimes improper paperwork, made lenders more cautious about getting their paperwork in order before beginning to process foreclosures.
Once the banks do put homes into foreclosure, they’re trying to speed them through it faster. One way they’ve done that is by encouraging short sales.
Another is that they’ve stepped up their foreclosure prevention efforts — often with the aid of numerous government programs such as Home Affordable Modification Program, which the government claims has helped a million Americans keep their homes.
Post-foreclosure
After foreclosures are completed and the homes are back in the hands of their lenders, the homes are being sold very quickly.
“This is the first time in a year that REO sales [those of bank-owned properties] have outpaced completed foreclosures,” said Fleming.
In December 2011, there were 103 sales of bank-owned homes for every 100 homes in foreclosure inventory. That was up considerably from November 2010, when there were only 94 REO sales for every 100 in the foreclosure process.
Florida has the dubious distinction of recording the highest foreclosure inventory in the nation in December, with more than 17% of homeowners seriously delinquent and nearly 12% of homes with mortgages in foreclosure inventory
The inventory in Florida is bloated because, as in more than half of all the states, most foreclosures have to go through the courts.
Courts have taken a much closer look at the cases coming before them, no longer taking the bank’s word for everything.. Consequently, it takes a longer time to schedule an auction, which keeps many homes trapped in the foreclosure pipeline.
A hard-hit state such as Nevada, which has had the highest incidence of delinquency in the nation but where most foreclosures do not go through he courts, posted a foreclosure inventory rate of less than half that of Florida
DEAR BENNY: We are getting ready to close on a home and there is a settlement fee of $685 for lender’s title insurance and $683 for owner’s title insurance. Must we pay both fees? –Phyllis
DEAR PHYLLIS: This is a question that has plagued homeowners for many years: “Why do I need to purchase owner’s title insurance, especially when I know that my seller has owned and lived in the house I am about to buy for more than 25 years?”
I am sympathetic to this issue, especially because many years ago I was successful in winning a class action on behalf of a couple who were required by their lender to purchase the owner’s coverage in addition to the lender’s title insurance.
First, you have to understand that if you want to get a mortgage from a commercial lender, you will have to obtain lender’s title insurance. However, in many states, the prevailing custom may require the seller — and not the buyer — to pick up this cost.
Additionally, many builders will agree to pick up the cost of the title insurance if you, as buyer, agree to use the builder’s preferred lender and the preferred settlement (escrow) attorney or company.
But owner’s insurance is (or should always be) optional.
Oversimplified, title insurance insures a homebuyer — and a mortgage lender — against loss resulting from title defects, whether these defects are known or unknown at the time of the sale or the refinance. In the language of the title industry, the insurance covers both “on record” and “off record” problems.
For example:
A person in bankruptcy who has no authority to sign the deed conveys property to a third party.
A grandson forges his grandmother’s name to a deed and conveys her property to a third party, or to himself.
A mortgage (deed of trust) is properly recorded on the land records, but there is no legal description identifying the property that is subject to the mortgage. As a result, creditors are not put on notice of the existence of this mortgage lien, and may make another loan, which will not have first-trust priority.
A deed (or other legal document) is improperly recorded with the wrong legal description.
The list, unfortunately, can go on and on. There are numerous instances where title to real estate has been found to be defective — either based on substantive grounds or technical, legal procedural reasons (such as improper indexing, misfiling or failure to comply with local recording requirements).
It should also be understood that title insurance is quite different from, say, your homeowners or auto insurance policy. With the latter, they cover future incidents — a fire in your home or an accident in your car.
But with title insurance, the coverage is limited to risks (defects) that are already in existence at the time the policy is issued.
Thus, when your seller purchased the house several years ago, his title insurance policy covered him — and his lender — for all risks (defects) that existed at time he took title; the policy did not cover future defects.
Several years have now passed. You and the seller believe that title is clear, subject only to any mortgage that will be paid off at settlement. However, are you really sure there are no title problems affecting title? Did a mechanic place a mechanic’s lien against the property?
Did a creditor obtain a judgment against the seller and have that judgment recorded? Did the home get sold at a tax sale, without the seller’s knowledge? Did someone forge the seller’s name to a deed and sell the property to a third party?
Or did someone accidentally place a lien against your property (Lot 657) when they really meant to place the lien on Lot 567?
Strange as it may sound, these things do happen. Your lender wants assurances that should you not be able to make the monthly mortgage payment, and the lender has to foreclose on your property, that you have clear title.
Your new lender probably trusts you, as it is willing to make you a loan. However, since you cannot categorically advise the lender that you have clear title, the lender will insist that you obtain a title insurance policy in favor of the lender.
Here is a real, factual situation:
Subject A sold property to B in 1982. In 1985, B sold to C, who then sold to D in 1996. B, C and D all obtained owner’s title insurance. In 1997, D’s neighbor sued D, claiming adverse possession o…… Link below to full article
Miami is #1, however when you consider that on average it takes 1000+ days to foreclose on a home in Florida compared to 165 days in Arizona plus the fact that foreclosure fillings are @ all time highs in FL compared to down 50% in Arizona, it becomes very easy to see that Arizona is the true #1.
After five years of a brutal post-bubble price correction, Phoenix is rising from the dead.
“We have jobs,” said Tanya Marchiol of Team Investments, a local real estate investing firm. “Not a lot of big markets like us that went through the bubble have so many jobs.”
The unemployment rate in the metro area fell to 7.7% in November, a 1.1 percentage point improvement from 2010 and better than the national rate of 8.2%.
Home sales have been picking up, thanks to rock-bottom foreclosure bargains. During the fourth quarter, homes sold 27% faster than they did during the same period in 2010, according to Realtor.com.
A four-bedroom, two-bath house in good condition is currently listed for under $80,000, a significant discount from the $200,000 or so it would have fetched during the 2006 peak, said Marchiol.
Even with sales volume and home prices solidifying, Phoenix buyers are not likely to become overnight real estate millionaires. Over the next five years, forecasting firm Fiserv expects local prices to rise at a steady but paltry 2.4% annual average rate.
Nearly 40.6 million passengers passed through Phoenix Sky Harbor International Airport in 2011, a 5 percent increase over 2010 and the highest traffic count since 2007.
Passenger traffic, however, is still not back to pre-recession levels.
Sky Harbor saw only a slight year-over-year increase in passenger traffic for December — 3.39 million persons for December 2011 versus 3.33 million travelers in December 2010 — according to the Phoenix Aviation Department.
But the Phoenix airport ended 2011 with just under 40.6 million passengers. That is up from 38.55 million passengers for 2010 and highest since recession and housing drop started at the end of 2007.
That year saw 42.2 million passenger in and out of Sky Harbor. That was before the recession, Wall Street bailout, the Senate Bill 1070 immigration boycotts and the wave of foreclosures and underwater home values.
Tempe-based US Airways Group Inc. (NYSE: LCC) is the largest airline in the Phoenix market with 1.66 million passengers. Southwest Airlines (NYSE: LUV) is next with 1 million passengers.
Total passenger traffic
2011: 40.59M
2010: 38.55M
2009: 37.82M
2008: 39.89M
2007: 42.18M
Top airlines in Phoenix (# of passengers)
US Airways: 1.66M
Southwest: 1M
Delta: 203K
American: 115K
Continental: 95K
United: 85K
Source: City of Phoenix
Mike Sunnucks writes about politics, law, airlines, sports business and the economy.
