-
Obama Housing Rescue: Hardly Any Permanent Fixes
Tweet Share on Facebook December 11, 2009 Comment (8)While the Obama administration is temporarily reducing mortgage payments for a growing number of troubled borrowers, it has failed to find permanent fixes for all but a precious few. A little more than 4 percent—or 31,382—of the more than 728,000 modifications underway through November have advanced from the program's trial period to the permanent phase. News of the dismal conversion rate comes shortly after the administration announced new efforts to pressure mortgage servicers to do more to keep struggling borrowers in their homes. "Our focus now is on working with servicers, borrowers, and organizations to get as many of those eligible homeowners as possible into permanent modifications," Phyllis Caldwell, who heads Treasury's Homeownership Preservation Office, said in a statement. Here are four things you need to know about the development:
[Check out Obama's Loan Modification Plan: 7 Things You Need to Know.]
1. Trial period: The Obama administration announced its $75 billion antiforeclosure initiative in February. Under the terms of the modification program, the government offers cash incentives to lenders and servicers to bring borrowers' monthly payments down to more affordable levels. But before borrowers can land a permanent modification, they must make payments in an initial, three-month trial period. Additional paperwork is also required to convert a trial modification into a permanent one. Although the administration had extended only 387,000 trial modifications through August, the figure jumped to nearly 700,000 by the end of November. But getting those borrowers into permanent modifications has been tricky.
-
Obama Housing Rescue Whiffs on 'Underwater' Headaches
Tweet Share on Facebook December 8, 2009 Comment (4)The Treasury Department proudly reported last month that it had extended more than 650,000 trial loan modifications through the end of October, putting it on track to hit its goal of reducing monthly payments for as many as 4 million struggling homeowners. Now the bad news: More than 1 in 4 borrowers who received a modified loan are already behind on payments, the Washington Post reported Saturday. What's behind this high redefault rate? With the unemployment rate at 10 percent, the rickety labor market is certainly one factor. But the epidemic of negative equity—which can tempt homeowners to simply walk away from their properties—is playing a key role as well. Here are four things you need to know about the development.
[See 10 Things to Know About Getting a Mortgage in 2010.]
1. One in four: The historic plunge in home values has dragged an alarming number of borrowers underwater, which means they owe more on their home loan than their property is worth. With home prices having dropped roughly 29 percent from their 2006 peaks, nearly 1 in every 4 American homes—or 10.7 million—was underwater in the third quarter, according to real estate information firm First American CoreLogic. And while the housing market has shown recent signs of stability, analysts project an increase in foreclosures to push home prices down even more. If that's the case, the number of underwater homeowners could rise still higher.
-
Home Buyer Discounts Keep Shrinking
Tweet Share on Facebook December 4, 2009 Comment (37)As the market shows signs of stabilizing, buyers are continuing to lose leverage in home price negotiations, according to new data from real estate company Zillow. Home buyers squeezed a median of 2.7 percent off listing prices in October, or $5,741. That's down from 2.9 percent the previous month and 4.6 percent in January. Here is a look at the markets where buyers are landing the largest discounts:
-
3 Mortgages Get Worse For Each 1 that Improves
Tweet Share on Facebook December 3, 2009 Comment (1)One of the big headaches the Obama administration faces in rescuing troubled homeowners is that the size of the problem doesn't seem to stop growing. Even as some struggling borrowers find ways to make mortgage payments again, a great deal more fall further behind. Lender Processing Services' November 2009 Mortgage Monitor Report provides two visuals to illustrate this trend. First, the six-month average deterioration ratio shows that for every mortgage that improves in status three others get worse. Although it declined from the all-time high reached last month, the ratio remains elevated and indicates that the "shadow inventory" of foreclosed homes will continue to sandbag a housing recovery for some time.
From Lender Processing Services:
-
What the FHA's New Criteria Mean for Housing
Tweet Share on Facebook December 2, 2009 Comment (20)After the real estate crash decimated the mortgage market, a tiny government agency has assumed an outsize role in the housing recovery. In 2006, the Federal Housing Administration—which insures home loans against default—backed just 3 percent of new home-purchase mortgages. But today, the agency insures nearly 3 out of every 10 new home loans. That's because while banks have raised their lending standards, credit requirements for FHA-backed loans have remained fairly liberal. But after a recent actuarial study concluded that the housing swoon has dragged the agency's reserves below its congressionally mandated level, the FHA is facing mounting political pressure to increase borrower requirements as well.
[Check out Why Foreclosures Rise Even as the Economy Expands.]
Shaun Donovan, secretary of housing and urban development, responded to such criticism yesterday by outlining a series of steps the agency plans to take to make sure its loans are available and safe. "We want to ensure that we are able to continue to support the housing market in the short term and provide access to homeownership over the long term, while minimizing the risk to the American taxpayer," Donovan told a congressional committee in written testimony. Here are five things you need to know about the development.
