FHA Loan modification

Mortgage Industry Update: Rates, News & More

***Smart Financial Weekly Mortgage & Business Update January 29, 2010***

SHORT SALE/FORECLOSURE WARNING! N If you have done a short sale or foreclosure, are thinking about it or know someone who is consider the following. Banks have become increasingly aggressive in collection efforts against borrowers who do a short sale or foreclosure where a balance remains. The primary targets so far seem to be borrowers who did a strategic default (walked away from the home even though they could afford it). The banks are converting the secured debt to unsecured and then pursuing the borrower. According to the FDIC from January 2009 thru September 2009 banks collected $1.01 Billion or 48% more than the same period a year earlier. This is all bottom line profit folks! The banks are being very careful in the short sale agreements to preserve their rights. The good news is that Arizona and California have anti deficiency laws that protect the homeowner from collection activity but only on a primary residence. Given the huge number of dollars involved and the related risk if you are considering a short sale or foreclosure get the best advice you can.

 

Loan Modification Help: For homeowners with a Freddie Mac loan they can contact the City of Phoenix NHS office at (602) 258-1659 for assistance with their loan modification, debt counseling and other mortgage related matters. The service is new and it is free!

 

More Loan Modification: The Hope for Homeowners program is back in the news this week. Apparently the Treasury Department has finally figured out that lowering payments is fine but reducing loan balances is even better. Some 15 million homeowners are upside down in their homes and the concern is an increasing number of them may throw in the towel and move on. Yah think!

 

Interest Rates

At the Federal Reserve Board meeting this week the Board said it will maintain its position on rates for the foreseeable future. However, with respect to mortgage rates and its support of them since early last year which ends at the end of March, the Board said “it is prepared to modify those plans if necessary to support financial stability and economic growth”. Meanwhile retail rates hovered around 5% for most of the week. More and more analysts are suggesting that maybe we will not have the anticipated increase in rates and even if it happens it will not be as severe as previously thought.

 

 

When	Rate
This week	4.98
1 Month Ago	5.14
1 Year Ago	5.10
2 Years Ago	5.68

Note that actual market rates vary geographically and by lender, credit score and Loan to Value.

Source: Federal Reserve Statistical H.15.

 

Mortgage Industry Update

·         The Treasury Department is working to help clear up the backlog of about 450,000 loan modifications that are in the Trial period and moving them to Permanent status. The Department issued new guidelines this week that it says will help speed up the modification process. In a novel approach Treasury is going to require that borrowers provide all forms and documents up front! Previously they had given servicers the ability to decide how they wanted to get the information. The new rule is effective June 1. Many of the homeowners in the Trial period have completed the required payments and are simply waiting to be notified that their loan has been permanently modified but servicers are still chasing paperwork.

·         FHA has announced an update to its loan modification program by expanding it to include homeowners that are current or just 30 days delinquent (Mortgagee Letter 2010-004). A loan can be temporarily modified by verbal agreement with the servicer for up to 90 days or in writing for longer under the FHA-HAMP.

 

Good News

·         Fourth quarter 2009 GDP was 5.7% the highest since third quarter 2003. Forecast was for 4.6%. Note that without a sharp liquidation in inventory the number would have been 2.2%. For the full year 2009 GDP was down 2.4% the deepest annual decline since 1946.

·         The National Association of Business Economists survey showed 61% expect gain in 2010 GDP of 2% or more.

·         The University of Michigan Consumer Sentiment survey for January was 74.1 up from 72.5 in December and the highest since January 2008. Also, the Conference Board’s Consumer Sentiment Index increased to 55.9 in January from 53.6 in December. This was the highest number since September 2008.

·         The ISM Midwest Index of business activity rose to 61.5 in January from 57.4 in December.

·         The National Retail Federation forecast retail sales to grow 2.5% in 2010 compared to a decline of 2.5% in 2009.

·         Durable goods increased .2% in December but well below forecast of a 2.0% increase.

 

Statistics of Interest/Concern

·         The Congressional Budget Office (CBO) estimates that FY 2010 deficit will be $13.5 TRILLION and that a new jobs bill and war funding requests could push the number higher.

·         December existing home sales fell 16.7% in December the steepest monthly decline on record according to the NAR. For the year sales increased 4.9% while the average price fell 12.4% from 2008.

·         Case-Shiller reported that home prices declined by .2% in November the first decline in 7 months. This is an improvement from a year ago when prices declined by 5.8%. Phoenix prices in November were up 1.1%.

·         The Commerce Department reported new home sales were down 7.6% in December and finished 2009 down 22.9%.

 

Foreclosure Headlines

·         The Orange County Register (California) reports that foreclosures notices in December were 10,513 which is double the total from March of 2009.

 

Job Market Headlines

·         Initial weekly jobless claims fell 8,000 to 470,000 which were higher than the expected 450,000.

·         The four week moving average of initial weekly claims rose 9,500 to 456,250.

·         Continuing claims (measures only those on 26 week benefits) fell by 57,000 to 4.6 million however if you add in workers on extended benefits the total number of workers collecting benefits is 10.2 million!

·         According to Fortune magazine the 22 best companies to work for have 87,500 job openings to fill.

 

Commentary/Observations

The International Monetary Fund (IMF) said this week in its updated Global Financial Stability Report that the global financial system remains “fragile” and that banks need to increase their capital and emerging economies need to be concerned about asset bubbles.

 

Wednesday the Greek 10 year bond yield surged to 10 year high of 6.7% (our 10 year yield is 3.60%) and the World Stock Index declined for the sixth day. The concern is that sovereign debt will derail the world economic recovery.

 

Japan’s bond issuance may climb in FY 2011/2012 from an already record amount planned for FY 2011. The increase is to fund rising welfare costs and off-set declining tax revenue. S & P has said that unless Japan produces a credible plan to control its debt and grow the economy it faces a downgrade in its credit rating. This of course would increase the country’s cost to borrow only adding to the problem. Currently Japans debt is about 200% of its GDP but the good news is that because of its huge domestic savings it should be OK for a few years at best. After that the risk of default becomes very real says S & P. Does any of this sound somewhat familiar?

If you have any mortgage or related questions I can be reached at (602) 803-9660 or by e-mail at burt @gosfm.com.

 

 

 

  

 

 

 

 

FHA Loan modification

Mortgage Industry Update: Rates, News & More

***Smart Financial Weekly Mortgage Update July 31, 2009***

News Flash!!!!!

From a July 27^th story in the Arizona Republic………………….

An amendment to the state’s foreclosure law (SB 1271) now makes some homeowners in foreclosure liable for the difference between their mortgage and what the lender can get when reselling the home. The new law would affect any Arizona homeowner in foreclosure who has not lived in the home for six consecutive months. This would impact owners of second homes as well as investors. In addition the new law would allow lenders to garnish wages and go after assets. The law is effective September 30, 2009. To correct this action a new bill must be written. However, the Legislature is in special session and the Governor would have to amend the purpose of the session (initially called to deal with the state’s budget crisis). The Realtors Association has asked the Governor to amend the current session but if that doesn’t work the changes to the new law could not be considered until next year.

 

 

Interest Rates

Mortgage rates improved from Monday and by Friday were down about .25%. The Federal government sold a record $200 Billion plus in Notes, Bills and TIPS this week to help finance government spending. The good news is that the instruments were sold and that eased some concerns about our ability to raise money to fund our spending. The bad news is that we continue to spend at a record pace and at some point long term interest rates have to go up.

 

 

 

 

When	Rate
This Week	5.25
1 Month Ago	5.32
1 Year Ago	6.52
2 Years Ago	6.68

 

Note that actual market rates vary geographically and by lender, credit score and Loan to Value.

Source: Federal Reserve Statistical H.15.

 

Mortgage Industry Update

·         There is more discussion in D.C. today about increasing the home buyer’s tax credit to $15,000. The Senate originally approved it but the House reduced it to $8,000. The larger credit would be available to all home buyer’s not just first timers. Apparently the issue will be revisited when Congress gets back from its August recess.

·         HUD announced Thursday that FHA will offer a new FHA Home Affordable Modification Program (FHA-HAMP) about mid August. Details will be available shortly.

 

Good News

·         Second quarter GDP came in at -1.0% lower than forecast -1.5% and suggests economy may have bottomed. First quarter number was revised downward from -5.5% to -6.4%. Note that this is the first time since 1947 we have had four consecutive quarters with negative GDP. This both good news (GDP has improved significantly) and bad news (GDP is still negative).

·         New home sales were up 11% in June and builders have an 8.8 month supply.

·         Median sales price declined year over year by 11% in June according to the government.

·         Home prices were up in May from April by .5% the first monthly increase in 3 years according to Case-Shiller.

·         Home prices declined year over year by 17% in May according to Case-Shiller. The fourth consecutive month where the year over year decline has been less than the previous month.

 

Statistics of Interest/Concern

·         Durable goods fell 2.5% in June the biggest decline since January. Forecast was for .6% decline.

·         Consumer confidence index fell to 46.6 for July from 49.3 in June. A reading of 90 indicates economy is on solid footing.

·         Commercial real estate looks to be the next big challenge for banks as delinquencies accelerate upward as shown in the chart below.

 

 Foreclosure Headlines

·         According to some economists banks and other lenders may have more financial incentive to let borrowers lose their homes rather than do some kind of loan workout. The reason is that foreclosure can be more profitable they say. There are three groups of borrowers. First, those that get their loans modified who without the modification would not be able to make the regular payment (borrowers like myself who is in the final stages of loan modification). Second, those who get modified but are likely to default later (lenders may not want to help because postponing foreclosure can be costly). Three, delinquent borrowers who somehow can keep up their payments without a loan modification (lenders have little incentive to help these folks). So, what to do? Senior Treasury and HUD officials summoned major lender representatives to a meeting to discuss how to step up the pace of foreclosure relief. Apparently there was not much progress at the meeting. My advice continues to be the same and that is every homeowner should be calling their lender and requesting a loan modification or refinancing.

·         The House passed a Foreclosure Rental bill this week. The Neighborhood Preservation Act of 2009 HR-2529 allows banks to lease its REO’s for up to five years. The program is voluntary and the decision to rent is up to the bank or investor.

·         According to Realty Trac California, Arizona, Nevada and Florida had 35 of 50 highest foreclosures rates for metro areas with populations of 200,000 or more.

·         For the first half of 2009 there were 1.5 million properties getting default or auction notices. Nevada had the highest foreclosure rate while Arizona was ninth.

 

Job Market Headlines

·         In June 18 metro areas in the U.S. had jobless rates in excess of 15% according to the Labor Department.

·         Initial weekly jobless claims were up slightly to 584,000 compared to forecast of 575,000. The four week moving average was down for the fifth straight week.

·         Continuing jobless claims dipped to 6.2 million the lowest level since January of this year. The issue here is how many workers have exhausted their unemployment benefits because when benefits are lost the worker is no longer counted.

·         Worker pay grew for the last 12 months ending in June at 1.8% the lowest rate on record.

 

Commentary

This week Countrywide Financial (now part of Bank of America) will send about $7.5 Million to homeowners in Texas as part of a $345 Million settlement stemming from a settlement between it and the Texas Attorney General. The settlement is based on the State’s allegation that between January 1, 2004 and December 31, 2007 Countrywide encouraged “borrowers to sign loans they could not afford, not disclosing risky loan terms and writing loans for unqualified borrowers”. The balance of the money $335 Million is intended to modify loans for 30,000 Texans.

 

The United States government is now the largest shareholder of Citigroup with a 34% interest in the banking giant.

For more information on mortgages or related please contact me at (602) 803-9660 or by e-mail at burt@gosfm.com.