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Overdue Mortgages Number 6,082,000

by Carrie Bay

New data from Lender Processing Services (LPS) shows that as of the end of January, there were 6,082,000 mortgages in the U.S. going unpaid. That tally includes loans that are 30 or more days delinquent and loans in foreclosure.

LPS’ mortgage performance statistics are derived from its loan-level database of nearly 40 million mortgage loans.

The national mortgage delinquency rate as of January month-end was 7.97 percent. LPS determines the delinquency rate as a measurement of all loans behind by at least one payment, excluding those already in the process of foreclosure.

The delinquency rate registered a decline, both for the month and the year, with January’s rate down 2.2 percent from December 2011 and down 10.5 percent from January 2011.

The total foreclosure inventory rate hit 4.15 percent last month – up 1.1 percent compared to December 2011, but down a slight 0.1 percent when comparing year-over-year numbers.

According to LPS’ report, there were 2,084,000 properties that were counted as part of the foreclosure inventory last month.

The number of properties with mortgages 30 or more days past due but not yet referred to a foreclosure attorney tallied 3,998,000. Of these, 1,772,000 had been delinquent for 90 days or longer.

LPS says Florida had the highest percentage of non-current mortgages last month, followed by Mississippi, Nevada, New Jersey, and Illinois.

Non-current totals combine foreclosures and delinquencies as a percent of all active loans in that state.

States with the lowest percentage of non-current loans in January included Montana, Alaska, Wyoming, South Dakota, and North Dakota.

 

California Short Sales Reach Highest Level in 3 Years

by Esther Cho

Pending homes sales in California were higher for January compared to the previous month and year, and short sales rose to the highest level in three years, according to the California Association of Realtors (C.A.R.).

Based on signed contracts, C.A.R.‘s Pending Home Sales Index (PHSI) climbed from a revised 91 in December to 102.4 in

January and was also up from last year when the PHSIwas 93.1 in January 2011. Pending home sales are indicators of future home sale activities, providing information on where the market might be heading.

Of all distressed properties sold in California, 23.8 percent were short sales, the highest level in three years since C.A.R. has kept record. Previous month’s data was at 22.2 percent and also 22.2 percent a year ago.

The share of REO sales were higher in January as well at 25.9 percent compared to the previous month of December, which stood at 24.6 percent. A year ago the numbers were higher at 30.8 percent.

Overall, the share of distressed property types that sold went up to 50.1 percent in January, an increase from 47.3 percent in the previous month, but a decrease from 53.5 percent a year ago in January 2011.

Non-distressed sales made up 49.9 percent of home sales in January, a decrease from the previous month, which stood at 52.7, but up from 46.5 percent last year.

 

Treasury Increases Incentives for Principal Reductions

by Krista Franks Brock

A recently released Supplemental Directive from Treasury increases incentives for second lien investors when loans receive principal reductions.

The increased incentives apply to permanent HAMPmodifications with principal reductions through the government’s Principal Reduction Alternative (PRA) that have trial period plans starting March 1 or later.

The incentives are also available when second liens are completely or partially eliminated through the Second Lien Modification Program (2MP) on loans modified starting June 1.

For loans no more than six months delinquent over the previous 12 months, investors may receive $0.63 per

dollar of written down principal between 105 percent and 115 percent market-to-market loan-to-value ratios (MTMLTVs), or $0.45 per dollar of written down principal between 115 percent and 140 percent MTMLTV.

For loans that have been more than six months delinquent sometime in the previous 12 months, investors may receive $0.18 per dollar of written down principal, irrespective of MTMLTV ratio.

Regarding second liens modified through 2MP that have not been more than six months delinquent in the previous year, investors may receive $0.12 per dollar of unpaid principal balance eliminated on second liens.

While servicers may reduce principal below 105 percentMTMLTV, they will not receive incentives on the portion of principal reduction that brings the MTMLTV below 105 percent, according to Treasury.

Investors may also receive $0.12 per dollar of eliminated unpaid principal balance on second mortgage liens more than six months delinquent in the year prior to the “date of extinguishment,” Treasury stated in the directive.

“This guidance does not apply to mortgage loans that are owned or guaranteed by Fannie Mae or Freddie Mac, insured or guaranteed by the Veterans Administration or the Department of Agriculture’s Rural Housing Service or insured by the Federal Housing Administration,” the directive states.

 

To avoid losing homes to foreclosure due to long response times for short sale transactions, three senators introduced legislation to speed up the short sale process.

Senators Lisa Murkowski (R-Alaska), Scott Brown (R-Massachusetts), and Sherrod Brown (D-Ohio) proposed the bill addressing the issue of short sales timelines on February 17. A short sale is a real estate transaction where the homeowner sells the property for less than the unpaid balance with the lender’s approval.

“There are neighborhoods across the country full of empty homes and underwater owners that have legitimate offers, but unresponsive banks,” said Murkowski. “What we have here is a failure to communicate. Why don’t we make it easier for Americans trying to participate in the housing market, regardless of whether the answer is ‘yes,’ ‘no’ or ‘maybe?’”

The legislation, also known as the Prompt Notification of Short Sale Act, will require a written response from a lender no later than 75 days after receipt of the written request from the buyer.

The lender’s response to the buyer must specify acceptance, rejection, a counter offer, need for extension, and an estimation for when a decision will be reached. The servicer

will be limited to one extension of no more than 21 days.

The bill will also allow the buyer to be awarded $1000, plus “reasonable” attorney fees if the Act is violated.

According to a release from Short Sale New England, short sale homes do not bring down neighboring home values like foreclosed homes do, and 83 percent of short sale buyers are satisfied with their purchase, according to a 2012 Home Ownership Satisfaction Survey conducted by HomeGain.

“The current short sale process can be time consuming and inefficient, and many would-be buyers end up walking away from a sale that could have saved a homeowner from foreclosure,” said Moe Veissi, president of the National Association of Realtors. “As the leading advocate for homeownership, realtors are supportive of any effort to improve the process for approving short sales.”

Equi-Trax released a survey last year on the issues real estate agents face when completing short sales. Guy Taylor, CEO at Equi-Trax, said 71.9 percent of respondents reported that a short sale can take four to nine months to complete, and they think that is simply too long.”

The survey also found that 18.2 percent of deals require less than three months to complete, with 10 percent requiring more than 10 months.

When agents in the survey were asked to how the short sale process can be improved, 57.6 percent said lenders should take less time to close transactions, 14 percent said borrowers should be better educated about short sales, and 40.4 percent said both of these changes are necessary to improve the process.

In April 2011, a similar bill was introduced by Reps. Tom Rooney (R-Florida) and Robert Andrews (D-New Jersey), but this version requested a response deadline of 45 days instead of 75 from lenders. The legislation never came up for debate before a House committee.

 

AG Settlement Brings Relief to Military Members

by Krista Franks

The settlement reached last week between federal and state officials and the nation’s five largest servicers includes specific provisions for U.S. military members wrongfully harmed by their mortgage servicer.

Four of the five banks participating in the settlement – JPMorgan Chase, Wells Fargo, Citigroup, and Ally – will review foreclosures of military members since January 2006, identifying instances of violation of the Service members Civil Relief Act, according to the Department of Justice (DOJ).

The reviews will be conducted under the observance of the DOJ’s Civil Rights Division.

Wells Fargo, Citigroup, and Ally agreed to compensate service members a minimum of $116,785 in instances of wrongful foreclosure. They will also reimburse the service members for lost equity.

In instances of wrongful foreclosure, JPMorgan Chase will allow service members to return to their homes and eliminate any debt on the homeowner’s record, or the service member will be paid the full value of his or her home at the time of sale.

These stipulations are part of a previous settlement JPMorgan Chase reached regarding wrongful foreclosures of military members.

Additionally, Citigroup, Wells Fargo, and Ally will compensate military members whose interest rates are above 6 percent and have been wrongfully denied refinancing to lower rates.

JPMorgan Chase has already done so as part of its previous settlement.

All relief provided to service members through the provisions stated in the settlement are in addition to the $25 billion the banks will pay in penalties and borrower relief.

“The men and women who serve our nation in the armed forces deserve, at the very least, to know that we will protect their rights while they are serving our country,” said Thomas E. Perez, assistant attorney general for theDOJ Civil Rights Division.

“We appreciate that Wells Fargo, JP Morgan Chase, Citigroup and Ally agreed, through this settlement, to compensate servicemembers whose rights were violated,” Perez stated.

Bank of America, the fifth bank in the national settlement, worked out a $20 million settlement with the DOJ in May 2011 regarding some instances of wrongful foreclosure on military members.

The federal and multi-state settlement does not require BofA to review military foreclosures or interest rates, according to the DOJ.

“I urge financial institutions to pay heed to these provisions and ensure that our men and women in uniform have better options than accepting foreclosure or leaving their families behind when they go to their next multi-year assignment,” said Holly Petraeus, assistant director for the Consumer Financial Protection Bureau’s Office of Service member Affairs in a press briefing Friday.

“I hope this agreement will help bring peace of mind to military families who have been struggling with housing-related challenges, and I will continue to advocate for strong consumer-protection measures for service members, veterans, and their families,” Petraeus added.

 

7 little-known Social Security benefits

by ByJennie L. Phipps • Bankrate.com

That FICA guy won't be your buddy

 

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In the first season of "Friends," Rachel Green looks at her first paycheck as a waitress and asks, "Who's this FICA guy, and why is he getting all my money?"

That's one hard lesson about Social Security. Another is that when it's time to claim, you can't depend on the Social Security Administration to be your personal adviser.

In an effort to save time and cut costs, Social Security employees generally don't give case-specific advice. So that means you are on your own to make the most important financial decision of a lifetime. You have to read the rules and do the research yourself.

William Meyer, whose website, Social Security Solutions, gives Social Security advice for a fee, says you also can't depend on Social Security to follow instructions you give them electronically. If you have a request that is not the most common choice, you'll need to go to the Social Security office and make the request in person, he says.

Read on to brush up on Social Security benefits that are not commonly known.

Myriad ways to claim the goodies
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There are many ways a married couple can decide to take their Social Security benefits, according to Alicia Munnell, director of the Center for Retirement Research at Boston College. You can't ask Social Security to list them all, so what's the right choice?

Munnell says it's hard to beat waiting until you're 70 to begin benefits because the monthly payment is 76 percent higher than it would be if you had started to take benefits at 62 and 32 percent higher than it would be if you claimed at age 66.

Betting against death
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On the other hand, some people advocate drawing Social Security benefits at the first opportunity.

Doug Carey, who founded the financial planning software firm WealthTrace, says Social Security doesn't see itself as an odds maker, but it does require you to bet on your longevity. He offers this chart as proof. It graphs the break-even point for a person who earned the inflation-adjusted equivalent of $70,000 per year for 35 years. If this person waits until 70 to claim Social Security and lives until at least age 90, he'll accumulate almost $162,000 more in benefits than he would if he had claimed at 62. But there's a possibility of losing the bet and getting nothing.

Retired law professor and Social Security expert Merton Bernstein says the longevity bet odds are bad, so claim early. "You never know when the bell will ring. I subscribe to the Woody Allen principal: 'Take the money and run.'"

Source: Doug Carey/WealthTrace

A reward for delaying divorce
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If you're not happy in your marriage after nine and a half years, hold off before hiring a divorce attorney.

"Stay married for at least 10 years," says San Francisco-based Bank of America personal banker Raphael Gilbert.

Why? That's what it takes to stake a claim to your ex-spouse's Social Security benefits. If you terminate the marriage after nine years and 11 months, you're out of luck.

If you make it for 10 years, you can collect a Social Security benefit based on up to half of your ex's earnings or on the basis of your own earnings -- whichever is higher.

Bigger reward if ex has 'departed'
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And we have another dirty little secret for you. If you haven't remarried, chances are your ex-spouse is worth more to you dead than alive -- especially if he or she was a high earner. Once an ex-spouse passes away, you'll be treated just like a widow or widower. If you are at least 60, you'll be able to collect your late-spouse's benefit and allow your own benefit to grow unclaimed until you reach age 70, when you can switch if your own is higher, according to Carol Thomas, who worked for the Social Security Administration for 28 years and answers questions about Social Security at RetirementCommunity.com.

Assuming your ex will dwell on Planet Earth to a ripe old age, the longer your ex-spouse delays claiming Social Security, the better it is for you. So, if you get a chance, encourage your ex to work until age 70. Then, when it's all over, you'll get to claim half of his or her maximum Social Security. Or once you and your ex-spouse reach full retirement age -- usually 66 -- you can claim half your ex's benefit and let your own grow untouched until you're 70, says Thomas. Consider it payback.

More flexibility for widows and widowers
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Social Security does a good job of explaining widow and widower benefits, but Dan Keady, director of financial planning for TIAA-CREF Financial Services, says it doesn't clearly spell out a key difference between widow/widower benefits and spousal benefits. A widow/widower can begin benefits based on his or her own earnings record and later switch to survivors benefits or begin with survivors benefits and later switch to benefits based on his or her own record -- even if the surviving spouse is filing before full retirement age. You can't do that with spousal benefits.

In other words, a widow can begin drawing a survivor benefit on her late husband's Social Security when she is as young as 60, but only at a reduced rate. Then she can choose to leave her own Social Security alone, allowing it to grow in value until her full retirement age -- or even age 70. This works for widowers, too.

SSDI Step 1: Hire help
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When you apply for disability insurance, Social Security doesn't tell you that your first step ought to be hire a lawyer or other expert adviser. Allsup, a private firm that advises people about how to get SSDI, says Social Security doesn't even make it clear that an applicant can have representation from the very beginning of the application process. As a result, lots of people don't get help until they've been initially denied, and that slows down the process unnecessarily, according to Allsup spokeswoman Mary Jung.

Jung also warns SSDI applicants to be accurate and precise on the application. Small mistakes can make a big difference. Minimizing how much exertion was required to perform the person's job is a common mistake that frequently results in denial of a claim.

35 years is the magic number
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The Social Security website offers an explanation of how your benefits are calculated, but it's a little hard to follow. You can find a simpler explanation at myretirementpaycheck.org, a website sponsored by the National Endowment for Financial Education.

Your Social Security payment is figured using a complex calculation based on a 35-year average of your covered wages. Each year's wages are adjusted for inflation before being averaged. If you worked longer than 35 years, the government will use the highest 35 years. If you worked for less than 35 years, they'll average in zeros for the years you are lacking. You don't have to be a math genius to figure out the impact of that -- it drags down your average. If you can avoid zeros by working a couple of years longer, you'll increase your Social Security payment.

 

Foreclosures for Sale: 34% Off

by Carrie Bay

Foreclosure homes sold for 34 percent less than the average price of a non-distressed home during the third quarter of 2011, according to new data released byRealtyTrac Thursday.

The average sales price of homes in the process of foreclosure or bank-owned was $165,322 over the July-to-September period last year.

RealtyTrac says third parties purchased a total of 221,536 residential properties classified as foreclosures or REOduring the third quarter of 2011, representing just 20 percent of all residential sales during that timeframe.

The third-quarter share of distressed sales activity is down from 22 percent in the second quarter and down from 30 percent of all sales in the third quarter of 2010. At that time, a year earlier, the discount on a home in foreclosure or REO was averaging 37 percent.

“While foreclosures continue to represent an excellent bargain-buying opportunity for many buyers and investors, foreclosure sales accounted for a smaller share of the total market in the third quarter,” commented Brandon Moore, RealtyTrac’s CEO.

Moore says he’s not too surprised by the numbers, given the ambiguity surrounding foreclosure procedures — and

the ripple effect that has on sales of foreclosed properties that might have been improperly processed.

“The sooner the market gets more clarity about accepted foreclosure procedures, primarily through the long-promised settlement between multiple states attorneys general and major lenders, the sooner the market can more efficiently dispose of these distressed properties,” according to Moore.

Even with the hurdles to selling foreclosures, distressed sales continue to represent a historically high percentage of all sales, Moore explained. He points to 2005 and 2006, when foreclosure sales accounted for less than 5 percent of all sales nationwide.

According to RealtyTrac’s analysis, a total of 92,824 pre-foreclosure homes – typically short sales – sold to third parties in the third quarter of last year.

Pre-foreclosures had an average sales price nationwide of $191,119, a discount of 24 percent below the average sales price of homes not in foreclosure. These properties took an average of 318 days to sell after receiving an initial foreclosure notice.

Pre-foreclosure sales increased sharply on an annual basis in Michigan (up 68 percent), North Carolina (up 44 percent), Ohio (up 43 percent) and Georgia (up 35 percent). RealtyTrac reports that pre-foreclosure sales outnumbered REO sales in several states in the third quarter, including Colorado, Florida, New Jersey, and New York.

A total of 128,712 bank-owned REOs sold to third parties in the third quarter, according to RealtyTrac’s report. They carried an average sales price of $146,437 – 42 percent below non-foreclosure prices – and had an average time-on-market of 193 days after being foreclosed.

Nevada, California, and Arizona posted the nation’s highest percentage of foreclosure sales during the third quarter.

 

President Obama on Wednesday outlined his proposal to allow millions more homeowners to cash in on today’s historically low mortgage rates. 

Speaking at a community center in Falls Church, Virginia, the president issued a call to Congress to pass legislation to establish a streamlined refinancing program through the Federal Housing Administration (FHA) that would be open to all non-GSE borrowers with non-jumbo loans who have been keeping up with their mortgage payments.

The administration estimates the program could provide as many as 3.5 million borrowers with the opportunity to reduce their mortgage debt and would cost between $5 and $10 billion.

The cost of the new refi program would not add a dime to the national deficit, Obama said, as it would be paid for by imposing fees on financial institutions with more than $50 billion in assets.

This Financial Crisis Responsibility Fee has not yet been approved by lawmakers on Capitol Hill. The president has tried to push this same big-bank-tax through the channels twice before, in early 2011 and early 2010, but was unsuccessful.

The idea met with strong opposition from lawmakers and industry trade groups, who threatened to take legal action had the Financial Crisis Responsibility Fee passed.

Under the president’s proposal, any borrower with a mortgage that is not currently guaranteed by Fannie Mae or Freddie Mac can qualify for a refinancing through FHAif they:

  • have been current on their payments for the past six months and have not missed more than one payment in the six months prior
  • have a FICO score of at least 580
  • have a loan that meets FHA conforming loan limits for their area
  • are refinancing the mortgage on their principal residence

Borrowers will apply through a streamlined process which Obama says is designed to make it simpler and less expensive for both borrowers and lenders to refinance.

Borrowers will not be required to submit a new appraisal or tax return. To determine a borrower’s eligibility, a lender need only confirm that the borrower is employed.

Those who are not employed may still be eligible if they meet the other requirements and present limited credit risk. However, lenders will need to perform a full underwriting of these borrowers to determine whether they are a good fit for the program.

The president outlined additional steps to reduce program costs, including establishing loan-to-value (LTV) limits for qualifying loans. Obama says his administration will work with Congress to establish risk-mitigation measures which could include requiring lenders interested in refinancing deeply underwater loans (e.g. greater than 140 LTV) to write down the balance of these loans before they qualify.

Obama also proposed creating a separate FHA insurance fund designated for the new streamlined refinancing program. He says this will help FHA better track and manage the risk involved and ensure the program has no effect on the agency’s Mutual Mortgage Insurance (MMI) fund – the principal insurance account that covers default claims on all single-family and reverse mortgages.

In addition, Obama says his administration has worked with the Federal Housing Finance Agency (FHFA) to streamline Fannie and Freddie’s refinancing program for non-delinquent borrowers. With the latest expansion of the Home Affordable Refinance Program (HARP), the GSEs have eliminated LTV restrictions, lowered their refinancing fees, and reduced borrowers’ closing costs.

Obama is now calling on Congress to enact additional changes that he says will save taxpayers money by reducing the number of defaults on GSE loans.

“We believe these steps are within the existing authority of the FHFA. However, to date, the GSEs have not acted, so the administration is calling on Congress to do what is in the taxpayer’s interest,” according to a statement issued by the White House.

The president wants Congress to eliminate appraisal costs for all borrowers participating in HARP by directing the GSE’s to use mark-to-market accounting or another alternative to manual appraisals on loans for which theLTV cannot be determined with the GSE’s automated valuation model (AVM).

The president’s legislative plan would also require the GSEs to implement the same streamlined underwriting for new servicers as they do for current servicers underHARP, in hopes of increasing competition between banks for borrowers’ business.

A key component of President Obama’s refi plan centers on giving borrowers the opportunity to rebuild equity in their homes. All underwater homeowners who decide to participate in either HARP or the FHA refinancing program will have a choice: they can take the benefit of the reduced interest rate in the form of lower monthly payments, or they can apply that savings to rebuilding equity in their homes by opting for a shorter loan term.

To encourage borrowers to go the rebuilding equity route, Obama is proposing the legislation provide for the GSEs and FHA to cover closing costs when the borrower agrees to refinance into a loan with a term of 20 years or less, with monthly payments roughly equal to what they’ve been paying.

Obama says this option would shave an average of $3,000 off each homeowner’s refinancing costs and would give the majority of underwater borrowers the chance to get back above water within five years or less.

The Agriculture Department, which supports mortgage financing for rural families through the USDA program, is also streamlining its process for refinancing to align with the plan outlined by Obama.

FHA is making similar changes to its existing refi program available to borrowers whose original loan is FHA-insured. To alleviate lenders’ concerns about refinancing without a full underwrite of the new loan, FHA will not include these loans in its assessments of lender performance.

Obama admitted that the administration’s past efforts to counter the effects of the housing crisis haven’t produced the results that were initially promised.

“I’ll be honest, the programs we’ve put forward didn’t work at the scale we’d hoped,” Obama told the crowd in Virginia. “Not as many people have taken advantage of it as we wanted.

“[N]o program or policy will solve all the problems in a multitrillion-dollar housing market,” Obama continued. “What this plan will do is help millions of responsible homeowners who make their payments on time but find themselves trapped under falling home values or wrapped up in red tape.”

Obama closed with an appeal to Congress to act, to pass his plan, and to help more families keep their homes.

 

Displaying blog entries 1-8 of 8

 

 

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