Who coulda knowed?

let us take a look

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Defaults Rise in Loan Modification Program

The number of homeowners who defaulted on their mortgages even after securing cheaper terms through the government’s modification program nearly doubled in March, continuing a trend that could undermine the entire program.

Data released Wednesday by theTreasury Department and the Housing and Urban Development Departmentshowed that 2,879 modified loans had been ended since the program’s inception in the fall, up from 1,499 in February and 1,005 in January.

The Treasury Department said it could not explain the growing number of what it called cancellations, almost all of which were apparently prompted by the borrower’s being unable to make the new payment. A scant number — 37 — were because the loan had been paid off, presumably because the borrower sold the house.

About seven million households are behind on their mortgage payments.

http://www.nytimes.com/2010/04/15/business/15mortgages.html?src=me

Mortgage Rates Jump

Let us take a look:

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April 8 (Bloomberg) -- U.S. mortgage rates jumped to the highest level in almost eight months, increasing borrowing costs for buyers and signaling a threat to the housing market’s recovery as government efforts to spur demand end.

Rates for 30-year fixed loans rose to 5.21 percent for the week ended today from 5.08 percent, mortgage finance company Freddie Mac said in a statement. That’s the highest rate since the week ended Aug. 13. The average 15-year rate was 4.52 percent, according to the McLean, Virginia-based company.

Loan rates are climbing from record lows last year as the economy shows signs of strengthening and after the Federal Reserve completed a program of buying about $1.25 trillion of securities backed by U.S. residential mortgages. Rising borrowing rates and the expiration of homebuyer tax credits this month may reduce demand for homes......................

............................Homes for Sale

The number of existing homes for sale jumped 9.5 percent in February, data from the National Association of Realtors show. Government tax credits for first-time home buyers and some current owners expire April 30.

The Fed’s program of buying mortgage-backed securities, which ended last week, helped reduce rates to a record low of 4.71 percent in December. The average 30-year rate over the past decade is 6.2 percent, with a high of 8.64 percent in May 2000, Freddie Mac data show.

The government bond purchases from Fannie Mae, Freddie Mac and Ginnie Mae, agencies that buy home loans from lenders and package them into securities, brought down yields and allowed lenders to reduce mortgage rates while still selling the bonds at a profit.

The Mortgage Bankers Association’s index of mortgage applications fell 11 percent in the week ended April 2. The portion of refinancings dropped 17 percent. Applications to purchase a home increased 0.2 percent.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aX9YxHf.MpN8&pos=4

1/2 Commercial RE Mortgages Underwater by 2011

....................Nationwide, at least $1.4 trillion in commercial real estate debt is expected to roll over during the next three years. Warren said that half of commercial real estate mortgages will be underwater by the beginning of 2011. A fifth of residential mortgages are underwater now, she said...................

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The new round of financial pain, which some had anticipated but hoped to avoid, now seems all but certain. "There's been an enormous bubble in commercial real estate, and it has to come down," saidElizabeth Warren, chairman of the Congressional Oversight Panel, the watchdog created by Congress to monitor the financial bailout. "There will be significant bankruptcies among developers and significant failures among community banks."

Unlike the largest banks, such as Citigroup and Wachovia, that got into so much trouble early on, the community banks in general fared better in the residential mortgage crisis. But their turn is coming: Not only did community banks issue a higher proportion of commercial loans, but they also have held on to them rather than sell them to other investors.

Nearly 3,000 community banks -- 40 percent of the banking system -- have a high proportion of commercial real estate loans relative to their capital, said Warren, whose committee issued a report on commercial real estate last week. "Every dollar they lose in commercial real estate is a dollar they can't use for small businesses," she said. Individuals -- who saw their home values drop in the residential mortgage crisis -- would not feel that kind of loss, but, Warren said, a large-scale failure would "throw sand into the gears of economic recovery."

http://www.washingtonpost.com/wp-dyn/content/article/2010/02/18/AR2010021805904.html?sid=ST2010021806024

Mortgage Motification not delivering results.

Let's take a look:

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Why Mortgage Modification Isn't Working

The loan adjustment success rate is just 1%.

Last year more than two million Americans lost their homes to foreclosure. This year that number is expected to be even higher.

Foreclosure takes a huge toll on homeowners and their families, and sends shock waves throughout the economy. Yet since the start of the recession in 2007, more than five million homes have been taken back by lenders. The Center for Responsible Lending estimates that as many as 13 million more homes could fall into foreclosure over the next five years.

To combat the foreclosure epidemic, the Obama administration created the Home Affordable Modification Program (HAMP) last February. As part of this program, the Treasury Department plans to spend up to $75 billion in financing mortgage "modifications" for struggling homeowners.

The modification process changes the terms of the mortgage with the aim of making it more affordable, typically by reducing a borrower's interest rate, lowering his monthly payment, or waiving or reducing past charges. Unfortunately, HAMP has had less than stellar results.

Since the program began, more than three million homeowners have become eligible for assistance. In turn, mortgage servicers have reached out to these borrowers, initiating the modification process. Roughly 760,000 homeowners have received loan modifications on a trial basis. But just 31,000 modifications have been made permanent.

That's a success rate of just 1%. This means that up to 99% of eligible homeowners struggling with their mortgage payments have been unable thus far to modify their loans.

http://online.wsj.com/article/SB10001424052748704541004575011420045962424.html?mod=googlenews_wsj

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Loan Modification Pitfalls

Let us take a look

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U.S. Loan Effort is Seen Adding to Housing Woes

The Obama administration’s $75 billion program to protect homeowners from foreclosure has been widely pronounced a disappointment, and some economists and real estate experts now contend it has done more harm than good..............

....................desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting dollars they could have saved in preparation for moving to cheaper rental residences. Some borrowers have seen their credit tarnished while falsely assuming that loan modifications involved no negative reports to credit agencies.

http://www.nytimes.com/2010/01/02/business/economy/02modify.html?scp=2&sq=mortgage&st=cse

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Cram Down legislation Fails!

...even a broken clock is right twice a day. Let's take a look.

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Mortgage ‘Cram-Down’ Amendment Fails in U.S. House

Dec. 11 (Bloomberg) -- The U.S. House rejected a mortgage “cram-down” amendment that would have given federal judges the power to lengthen mortgage terms, cut interest rates and reduce loan balances for homeowners in bankruptcy court.

Lawmakers voted 241-188 today against the amendment, which was to be part of broader legislation reining in excessive risk taking on Wall Street. All but four of the Republicans who voted opposed the amendment, pulling with them 71 Democrats to defeat the measure.

The cram-down provision was identical to legislation that passed the House in March and then failed in the Senate amid opposition from the banking industry. Banks and broker-dealers told House leaders in a Dec. 8 letter that the legislation would increase bankruptcy filings, lead to abuses of the court system and undermine efforts to stabilize the housing market.

Lenders are “gratified that the House saw fit to vote down the bankruptcy cram-down amendment that would have further increased costs for borrowers,” the Washington-based Mortgage Bankers Association, the industry’s largest trade group, said in a statement today.

Representative Dan Lungren, a California Republican, said the amendment would increase mortgage insurance premiums for borrowers “and deny help to those we seek to help.”

“This is a prime example of good intentions creating bad policy,” he said before the vote.

http://www.bloomberg.com/apps/news?pid=20601087&sid=azB6PD4NAPSs&pos=3

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Mortgage relief slow!

The second time is the charm? lets take a look?

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New Push on Mortgage Relief

In the latest move to bolster its $75 billion foreclosure-prevention plan, the Obama administration on Monday will outline new efforts designed to increase the number of borrowers who receive mortgage relief.

The Treasury Department on Monday will announce plans to appoint officials to monitor the actions of the largest mortgage servicing companies on a daily basis. It also will announce it is requiring mortgage companies to develop and report to the administration their plans to increase the number of completed modifications, a Treasury spokeswoman said.

While more than 650,000 borrowers have been given trial mortgage modifications under the plan, few borrowers have received permanent modifications. Many borrowers complain that it is difficult to get a permanent fix even once they have made trial payments; some have been required to send in duplicate paperwork or even ended up further behind on their mortgage payments.

http://online.wsj.com/article/SB125952206832568569.html?mod=WSJ_hps_LEFTWhatsNews

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Foreclosures broaden up the chain

Foreclosures hitting more people with good credit

WASHINGTON — The foreclosure crisis likely will persist well into next year as high unemployment pushes more people out of homes, pulls down housing prices and raises concerns about the broader economic recovery.

The latest evidence was a report Thursday that a rising proportion of fixed-rate home loans made to people with good credit are sinking into foreclosure. That's a shift from last year, when riskier subprime loans drove the housing crisis.

The report from the Mortgage Bankers Association also found that 14 percent of homeowners with a mortgage were either behind on payments or in foreclosure at the end of September. It was a record-high figure for the ninth straight quarter.

The data suggest the housing market and the broader recovery will remain under pressure from the surge in home-loan defaults, especially as unemployment keeps rising. Lost jobs are the main reason homeowners are falling behind on their mortgages.

http://www.google.com/hostednews/ap/article/ALeqM5jYpmPSg0IbaMEFonSzy5g-fIAR0gD9C2RBJO0

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Oregon Homeowners have new rights!

Oregon homeowners facing foreclosure have new rights

Lenders required to meet with borrowers about loan modifications
(Salem) — Today a new law takes effect that strengthens the rights of Oregon homeowners who face foreclosure to help more families stay in their home during this difficult economic climate.
Senate Bill 628, passed by the 2009 Oregon Legislature, requires lenders to meet with borrowers facing foreclosure – either in person or by phone – and evaluate whether they qualify for a loan modification. A loan modification could help borrowers lower their monthly payments and keep their home.

―Oregonians are confronting a number of challenges during this economic downturn, including a growing number of families at risk of losing their home through foreclosure,‖ said Governor Kulongoski. ―By requiring lenders to meet with homeowners, this law provides Oregonians another avenue to avoid foreclosure and stay in the home they worked so hard to attain.

Starting today, foreclosure notices that are sent to homeowners who are late on their mortgage payments include new information about how to meet with their lender and how to request a loan modification. If the borrower requests it, lenders must meet with the borrower and evaluate the borrower for a loan modification before foreclosing on the home. The meeting can be by phone, and it must be with a person who has or can get authority to modify the loan.

Mortgage Relief?

Let us take a look at an article about the Making Homes Affordable program.......

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"I am writing again to express my frustration that foreclosure filings continue to outpace loan modifications,'' Merkley wrote. "I believe that the Making Home Affordable program has more potential to help troubled homeowners.''

And today, Merkley pressed a Treasury official during a Senate hearing.

"To date ... we have spent, out the door, $288 billion to the banks, $76 billion to the auto industry, and ... $270,000 according to (the independent General Accountability Office) for our homeowners,'' Merkley told Assistant Treasury Secretary Herbert M. Allison.

Allison said the agency is improving and that the start-up problems have been addressed.

http://www.oregonlive.com/politics/index.ssf/2009/09/merkley_demands_answers_on_mor.html

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My comment:

Apparently, the banks and wallstreet have been bailed out while mainstreet has been left behind. My question is: Suppose the homeowner 'affordable' plan had been utilized to a greater degree? Might this only paper over a problem? Delay it? My guess is, for the most part, yes.

In other words, if you can't afford the house wouldn't it be better to cut your losses and adjust your expenses below your income now? Plans like this, with a price tag in the billions, while probably well intentioned don't work out for the benefit of many.