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Wells Fargo Aims to 'Lift' Neighborhoods in Los Angeles, Atlanta

by Krista Franks

 

Bank Owned Foreclosure

Wells Fargo announced the launch of a new program, Neighborhood LIFT, which aims to bring reluctant buyers off the sidelines to help absorb excess inventory in two major cities.The bank established a goal of lending $10.5 billion to Los Angeles homebuyers and $1.3 billion to Atlanta buyers.

In addition, Wells Fargo designated $15 million to assisting homeowners with down payments in Los Angeles and $8 million in Atlanta.

The program starts in early February with two-day events that will bring important resources and information to prospective homebuyers.

Attendees will learn about down payment assistance and financing for homes and renovation projects.

The Los Angeles event will take place February 3rd and 4th, and the Atlanta event will take place February 10th and 11th.

Interested residents can register at NeighborhoodLift.com.

Wells Fargo chose to launch Neighborhood LIFT in Los Angeles and Atlanta because the two cities have been particularly hard-hit by the housing crisis, and both have high inventories of bank-owned properties.

 

 

Condo Buyers Frustrated in Hunt for FHA Mortgages Part 2

by Alex Ferreras and Chicago Source: By Mary Ellen Po

  FHA & Condos BThe FHA also looks at special assessments and pending litigation, two areas that can raise red flags.

Among the specifics that the FHA looks at is that a building is 50 percent owner occupied, that no more than 10 percent of units are owned by one investor or entity, that no more than 15 percent of the units are 30 days past due on their monthly assessments, and that at least 10 percent of the association budget be set aside for capital expenditures and deferred maintenance. But some of those rules also come with a little wiggle room.

“It’s really not that onerous,” said an FHA spokeswoman. “A lot of it is just basic information. We do have some that have been appropriately rejected because they are unstable.”

Financially, the 249-unit condo building at 1620 S. Michigan Ave. in Chicago is stable, said condo board President Jeanette Johnson. Nevertheless, she worries that the building won’t pass the test when its certification expires next month because of the high number of renters residing in units.

If the building doesn’t qualify, Johnson said, it’s likely the board would look to change its declarations and bylaws, itself a difficult and lengthy process, to gradually reduce the number of renters allowed in the building.

The Community Association Institute believes the FHA’s requirements are having a “chilling” effect on the market, and the trade group has asked for flexibility in the guidelines.

“When it comes to the condo market, that is the gateway to affordable housing, and FHA should play a critical role in that,” said Andrew Fortin, a vice president at the trade group.

The FHA hopes to publish its condo certification rules in the Federal Register this year for public comment. Among the areas that may be open to additional flexibility is the requirement that no single entity can own more than 10 percent of a building’s units, a spokeswoman said.

But in the meantime, associations continue to grapple with the rules.

“There are new, more onerous guidelines to comply with, and there are definitely challenges,” said Jason Will, national condominium sales manager for Wells Fargo Home Mortgage. “The smaller or self-managed homeowners association might not be aware of the guidelines changes until they have a buyer. You actually have a real transaction in jeopardy.”

Some associations are deciding that the effort and the expenses tied to the application process, which can run into the thousands of dollars, aren’t worth the payoff and are letting their certifications lapse. In some instances, that position reflects a bias against what are thought to be lower-caliber buyers who need the FHA’s backing.

“It’s the owners that are trying to sell their units versus the owners that want to live in their units,” said Jonathan Bierman, a property manager at Forth Group, a condo association management company.

Many in the housing industry say that position is short-sighted, given consumer demand for FHA-backed mortgages.

“In an economy where it’s difficult to sell your condo, (FHA approval) is almost imperative,” said Kerry Bartell, a Buffalo Grove, Ill., attorney who represents homeowners associations. But, she noted, “We have a lot of clients that say they want to do FHA certification, and we say, ‘Don’t spend the money, because you’re not going to make it.’ ”

“I’m anticipating that the board will try to do the recertification, but I don’t know if we’ll qualify,” she said. “We’ll need to evaluate that before we spend any money. It’s definitely on the radar screen.”

 

Condo Buyers Frustrated in Hunt for FHA Mortgages Part 1

by Alex Ferreras and Chicago Source: By Mary Ellen Po

FHA % Condos ABuying a condominium is getting trickier for anyone who wants to put down only 3.5 percent and have the government insure their mortgage.

The issue isn’t just the borrower’s financial wherewithal. It’s the buildings, and plenty of condos no longer get a thumbs-up from the Federal Housing Administration.

Since Feb. 1, 2010, condo buyers haven’t been able to secure unit-by-unit “spot” approval for FHA-backed mortgages if an entire building was not certified. Instead, the federal government set criteria to determine the financial viability of an entire building before deeming the project as FHA-approved, even if it had previously been certified. An approval lasts two years.

The number of rejected buildings is adding up, due to bad paperwork and bad balance sheets as an increasing number of condo associations struggle with rentals, short sales and foreclosures. It is jeopardizing the plans of condo sellers who rely on the FHA’s stamp of approval as a marketing tool and condo buyers who either want or need an FHA-approved building.

The effects of those rejected buildings are likely to linger, particularly if more stringent down payment requirements take effect for homebuyers, and could hamper any recovery of the housing market.

For the first nine months of 2011, the FHA’s share of the overall home purchase market was 37.4 percent nationally, but the share for condos would have been higher because FHA-insured loans are popular with condo purchasers, said Guy Cecala, CEO and publisher of Inside Mortgage Finance. “They have the most-used program out there,” he said.

Since Oct. 1, 38 percent of condominium communities that have gone through the certification process have been rejected by the FHA.

“It’s a critical year for buildings,” said David Hartwell, a Chicago attorney who represents condo and homeowner associations. “This is a whole new world that we live in now. I see more rejections than acceptances, and the reasons I see clients rejected aren’t quickly curable.”

For buyers like Kristy Fender, of Chicago, FHA certification is a must-have on her list, and not just because it lets Fender and her fiancé, Dan Harvey, make a smaller down payment on a home purchase. She also figures that in approving buildings the FHA is doing the due diligence that she would otherwise have to do.

But the process has been much more complicated than Fender imagined, and she’s wasted a fair amount of her time. During the past few months that she’s looked at units in Chicago’s South Loop, she’s incorrectly been told that a unit can get spot approval and has looked at units that were listed as FHA approved, only to find out the certification had expired. Her real estate agent, Bette Bleeker of Prudential Rubloff, wound up routinely checking property listings against the FHA’s website of approved buildings.

“It’s been very frustrating,” Fender said. “There’s a lot of wishy-washy information out there.”

Fender and Harvey now plan to make an offer on a South Loop condo, but the offer will be contingent on the association getting the building certified for FHA financing. Bleeker has spoken with the building’s management company.

“If sellers were aware of it, they would certainly be more proactive with their management companies and not let their certification lapse,” Bleeker said. “There’s a whole education curve that needs to be done here, at the buyer level and the seller level.”

Many times, particularly in smaller buildings, it is a real estate agent or lender that informs an association that its certification has expired.

In addition to not knowing about the process, a lack of knowledge of the rules and the many gray areas within them is compounding issues for condo buildings. So, too, is not submitting all the required documentation. Many buildings are denied simply for missing or incomplete paperwork, which has led to the creation of a cottage industry of companies and attorneys that help shepherd associations through the process.

“It seems like there’s always something additional that (the FHA) wants,” said Steve Stenger, president of Condo Approval Professionals LLC. “Once it expires, FHA lending stops. Lenders can’t get case numbers; the FHA won’t insure them. That whole section of financing dries up.” 

Loan Modifications Are on the Decline: Moody's

by Krista Franks

As robo-signing reviews reach completion, servicers are beginning to work through some of their foreclosure backlogs, according to a third-quarter report from Moody’s Investors Service. 

Moody’s reports that as servicers work through the bulk of their delinquencies, modifications are on the decline. Servicers are now turning to loss mitigation alternatives, including short sales and deeds in lieu, Moody’s says.

Moody’s calculated a decline in “total cure and cash flowing,” measuring successful loss mitigation efforts in the third quarter. The decline “resulted from servicers having worked through significant portions of their eligible 60-plus delinquencies,” according to Moody’s.

Citi, GMAC, and Chase experienced the greatest decreases in cures.

Among subprime loans, Ocwen posted the highest cure rate – 44 percent. The high cure rate at Ocwen is linked to high numbers of modifications relative to its peers.

Moody’s notes that the high cure rate includes “a significant number of re-modifications,” which occur when an initial modification fails.

Ocwen saw re-defaults among 54.5 percent of its subprime modifications, the highest rate among its peers.

Ocwen was followed by Bank of America with a 50.5 percent re-default rate on modifications of subprime loans.

BofA also posted the highest rate of re-defaults of ALT-Aloans (42.3 percent) and the second-highest re-default rate for jumbo loans (35 percent).

Consistent with its high re-default rate, Ocwen ranked highest for re-modifications of subprime loans. Ocwen’s re-modification rate for the third quarter was 24.8 percent. The second-highest re-modification rate was seen at Wells – 6.8 percent.

The high re-default and re-modification rates at Ocwen “calls into question Ocwen’s process in evaluating borrowers for a modification,” Moody’s states.

However, Moody’s also concedes, “not all of the first modifications were necessarily completed by Ocwen due to servicing acquisitions prior to the analysis period.”

Moody’s also reports foreclosure sale to REO liquidation timelines are little changed from the second to third quarter. However, Moody’s forecasts longer timelines throughout the year.

 

FHFA Says Principal Writedowns by GSEs Would Cost $100B

by Carrie Bay

The Federal Housing Finance Agency (FHFA) says as of June 30, 2011, Fannie Mae and Freddie Mac held nearly 3 million first lien mortgages in which the borrower owed more on the loan that the home was worth. 
Fannie Mae & Freddie Mac
FHFA estimates principal forgiveness for all of these mortgages would require funding of almost $100 billion to pay down the loans to the value of the homes securing them.

In response to a request from members of Congress, FHFAon Monday publicly disclosed the analysis that led the agency to exclude principal forgiveness from the menu of loss mitigation tools available to the GSEs.

Reps. Elijah E. Cummings (D-Maryland) and John F. Tierney (D-Massachusetts) have been pressing for a subpoena to be issued to obtain this data from FHFA in order to evaluate the agency’s reasoning for prohibiting principal reductions on Fannie and Freddie’s loans.

The lawmakers cited public statements by high-level officials at the Federal Reserve, championing principal forgiveness as a viable solution for heading off defaults and foreclosures, and they questioned FHFA’s determination that reducing principal balances would not serve the best interests of the GSEs, taxpayers, and the housing market at large.

Edward DeMarco, acting director of FHFA, responded with a lengthy letter, supplemented with data charts, equations, and the findings of three separate staff analyses prepared over the past year.

He said FHFA did not conclude that “principal reduction never serves the long-term interest of the taxpayer when compared to foreclosure,” as the congressmen alleged.

In considering principal forgiveness, FHFA compared taxpayer losses from principal forgiveness versus principal

forbearance, an alternate approach the GSEs currently use in which no interest is charged on a portion of the underwater amount.

In the event of a successful modification, FHFA determined that forbearance offers greater cash flows to the investor than forgiveness. The net result of the analysis is that forbearance achieves marginally lower losses for the taxpayer than forgiveness, although both forgiveness and forbearance reduce the borrower’s payment to the same affordable level, FHFA explained.

“Given that any money spent on this [principal forgiveness] endeavor would ultimately come from taxpayers and given that our analysis does not indicate a preservation of assets for Fannie Mae and Freddie Mac substantial enough to offset costs, an expenditure of this nature at this time would, in my judgment, require congressional action,” DeMarco stated in his letter to Cummings and Tierney.

The FHFA director also pointed out that nearly 80 percent of the GSEs’ underwater borrowers were current on their mortgages as of June 30, 2011. Even among those deeply underwater, with loan-to-value ratios (LTVs) above 115 percent, DeMarco says 74 percent were current on their payments.

“Being underwater does not imply that a borrower lacks the ability or the desire to make good on their financial obligation, nor does it relieve a household from that responsibility,” DeMarco stated matter-of-factly in his letter to lawmakers.

For delinquent and deeply underwater borrowers, Fannie Mae and Freddie Mac offer loan modifications that include principal forbearance to relieve some of the debt burden. DeMarco says these modifications reduce monthly payments to the same affordable rate that would be in place with forgiveness.

For underwater borrowers who remain current on their mortgage, DeMarco notes that the agency made several changes to the Home Affordable Refinance Program (HARP) last October to open it up to more borrowers, allowing them to take advantage of today’s lower rates and shorten their mortgage term in order to get back above water more quickly.

“While it is not in the best interests of taxpayers for FHFAto require the [GSEs] to offer principal forgiveness to highLTV borrowers, a principal forgiveness strategy might reduce losses for other loan holders,” DeMarco conceded.

 

 

 

Delinquency and Foreclosure Rates Down From a Year Ago: LPS

by Carrie Bay

As of the end of December, the company counted 6,167,000 borrowers behind on their mortgage payments, including those already in the process of foreclosure.

That tally is the culmination of a steady decline over the last year, with both the national delinquency rate and foreclosure rate down when compared to their December 2010 readings.

 Lender Processing Services (LPS) has provided the media with a sneak peek at the results of its mortgage performance data through 2011.

 Delinquencies were unchanged between the months of November and December, but declined 7.7 percent from December 2010. LPS puts the mortgage delinquency rate, including loans 30 or more days past due but not in foreclosure, at 8.15 percent.

Foreclosures declined by 1.3 percent from November to December and are 1.0 percent below the level reported at the end of 2010. By LPS’ calculations, the national foreclosure inventory rate is 4.11 percent.

Of the 6,167,000 mortgages going unpaid in the United States, LPS says 2,066,000 are in foreclosure. The remaining 4,101,000 haven’t made it that far down the pipeline, even though 1,792,000 are 90 or more days delinquent.

States with the highest percentage of non-current loans, combining delinquencies and foreclosures, included Florida, Mississippi, Nevada, New Jersey, and Illinois as of the end of December.

The lowest percentage of non-current loans can be found in Montana, Wyoming, South Dakota, Alaska, and North Dakota.


 

Displaying blog entries 1-6 of 6

 

 

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