( An article from Colin Robertson of TheTruthAboutMortgage.com dated May 11, 2015 )
Since being introduced back in 2009, both and the Home Affordable Modification Program (HAMP) and the Home Affordable Refinance Program (HARP) have helped millions either avoid foreclosure and/or save money on monthly mortgage payments.
Both programs have been deemed pretty successful, though the numbers did fall short of original projections (as everyone probably expected) despite several annual extensions. I think the original estimate was nine million.
HAMP Is Finished at the End of 2016
Since HAMP was launched in the spring of 2009, a total of about 1.5 million homeowners have received permanent loan modifications through the fourth quarter of 2014.
Nearly 2.3 million trial modifications were started but fewer than one million are permanent and still active either because of a positive outcome such as loan payoff or alternative modification, or because of something negative like a short sale or foreclosure.
This has resulted in aggregate savings of approximately $32.7 billion compared with prior unmodified mortgage obligations.
The goal of HAMP is to get the borrower’s front-end DTI ratio down to 31% by reducing the interest rate, extending the loan term, and potentially forgiving principal.
About 95% of HAMP loans received an interest rate reduction, though those are temporary and subject to rise.
Just over 60% of HAMP borrowers received a term extension and less than a third (30.3%) received principal forbearance.
HARP Probably Done After 2016
The Home Affordable Refinance Program (HARP) is a program that allows underwater borrowers with Fannie Mae- and Freddie Mac-backed mortgages to refinance to take advantage of lower interest rates.
It originally allowed borrowers to refinance with LTVs as high as 105%, but that number was later increased to 125% and eventually the cap was removed entirely for most types of loans.
Over the years there were pleas to expand the program and open it up to borrowers with non-agency mortgages (remember HARP 3), but those demands fell on deaf ears.
To date, roughly 3.3 million borrowers have taken advantage of the program, though the numbers have been waning lately. Around 10,000 borrowers are refinancing monthly via HARP nowadays.
This is not unexpected given the fact that most have already applied for assistance under the program or no longer need it thanks to rising home prices.
During FHFA director Mel Watt’s speech at the Greenlining Institute 22nd Annual Economic Summit last Friday, he spoke about both programs and revealed that HAMP would be finished after one final extension through the end of 2016.
Since March 2013, Fannie and Freddie have also offered a proprietary Streamlined Modification that requires less paperwork than HAMP, and this could serve as an ongoing loss mitigation solution for borrowers.
As far as HARP goes, he said “we anticipate that this will also be the final extension for HARP.”
Apparently some 600,000 plus borrowers could still benefit from HARP though they’ve yet to come forward for one reason or another.
Watt said the FHFA will use the next year and a half “to explore possible streamlined refinance solutions for future Enterprise loans,” so there might be some kind of permanent HARP solution for Fannie and Freddie loans that “might apply in a non-crisis environment.” ( End of Colin’s article.)
From Bob Phillips: Over the past couple of years, local house prices have risen substantially, which may help in two different ways. First, former underwater homeowners may now actually have some equity, hopefully allowing a little breathing room.
Second, owners having difficulty making their payments on a loan that has a high interest rate, may, in fact, be able to refinance now, where they couldn’t before, staying in their home with a lower payment, OR, they may now be able to sell their home without going through a short sale, getting themselves out from under a terrible loan that they’ve been living with, for years.
Even if the home is STILL underwater, solutions have become easier to accomplish, if you’re dealing with an agent who has both training and experience, in dealing with distressed loan situations. I, Bob Phillips, have both the training, and the experience, to help you sort out the many options you might have.
If you – or someone you know – is still having difficulty making their house payments, please consider calling me at (949) 887-5305, or shoot me an email to BobPhillipsRE@gmail.com.
By Colin Robertson of TheTruthAboutMortgage.com, 5/6/15
While foreclosures might sound like old news, there are still a ton of borrowers either behind on mortgage payments or in the process of foreclosure.
And it doesn’t appear as if the type of loan they took out was the problem. It’s just the fact that they took out their loan at exactly the wrong time.
And by that, I mean most borrowers facing foreclosure these days are underwater on their mortgages, and deeply underwater at that, possibly because they purchased homes at the height of the market.
That brings us to a new report from Black Knight Financial Services, which revealed that borrowers in negative equity positions accounted for 77% of all active foreclosures, per their latest Mortgage Monitor for the month of March.
So while some might just be having trouble with monthly payments because of a job loss or an illness, or simply because they took on too much mortgage, most are behind because their property values are in the red.
It might be conjecture to say that, but it’s clear there’s little incentive to keep paying an underwater mortgage, especially if it’s still underwater after all the recent home price gains.
Put simply, it makes sense that 29% of underwater borrowers are seriously delinquent on their mortgages.
Cheaper Homes 9X More Likely to Be Underwater
Black Knight also found that borrowers who own the bottom 20 percent of homes by price are nine times more likely to be underwater when compared to those in the top 20 percentile.
In other words, high-end homes have largely avoided the negative equity crisis that has plagued the rest of the market.
This could be a combination of higher down payments, more affluent borrowers, and better performance (rebounding) of higher-end homes.
Overall, their data show that slightly more than eight percent of all borrowers are currently underwater on their mortgages.
The good news is we’ve seen a near-30% decline in the negative equity rate from a year earlier.
The bad news is one of every three borrowers currently in the process foreclosure has a loan-to-value ratio of 150% or more.
For the record, Nevada and Florida continue to lead the country in terms of negative equity rates, with 16.4% and 15.1% of borrowers underwater, respectively.
And Florida and California have the highest number of underwater properties.
Mortgage Delinquencies See Largest Drop in Nine Years
The mortgage delinquency rate has also improved immensely, and though seasonal declines are typical in March, the 12.18% drop seen this year was the largest monthly decline in nearly a decade.
Additionally, declines have been witnessed in all stages of delinquency (30, 60, 90 and 120+ day lates).
In fact, 30-day delinquencies hit their lowest level in over 10 years. And for every 10,000 loans that were current at the end of February, just 73 missed a payment in March, the lowest current-to-30 day late roll rate in over 15 years.
Roll rates from 30-to-60 and 60-to-90 days delinquent also fell to their lowest levels in nine years, and loans that were previously delinquent are curing (becoming current again) at the highest clip since 2005.
So while underwater loans persist, new problem loans seem to be few and far between.
Separately, the MBA reported today that the delinquency rate for mortgage loans on one-to-four-unit residential properties fell to a seasonally adjusted rate of 5.54% as of the end of the first quarter.
This is the lowest recorded rate since the second quarter of 2007.
Meanwhile, just 2.22% of loans were in some stage of foreclosure, down from 2.65% a year earlier, the lowest foreclosure inventory rate since the fourth quarter of 2007.
So it looks as if things are nearly back to normal, though certain areas of the country continue to suffer disproportionately.
The scary part is that NAR thinks home prices are overvalued again, but if prices dip again negative equity-related problems could resurface. ( End of Colin’s article.)
From Bob Phillips: If you, or someone you know, is having difficulty making your mortgage payments, I, Bob Phillips, am both highly trained and well experienced in helping homeowners come up with solutions to such problems. Give me a call today, and let’s find a solution together. There is no charge for this assistance. Call now! Bob Phillips, 949-887-5305
FHFA Home Prices Up in February, Existing Home Sales Highest in 18 Months
The Federal Housing Finance Agency reported that home prices associated with mortgages owned or backed by Fannie Mae and Freddie Mac rose from a 5.10 percent increase in January to a seasonally adjusted annual rate of 5.40 percent in February.
The National Association of Realtors® reported that sales of previously owned homes rose to 5.19 million in March as compared to expectations of 5.08 million sales and February’s reading of 4.89 million sales of pre-owned homes.
March sales represented a 6.10 percent gain over February sales; this was the highest volume of existing home sales in 18 months. Lawrence Yun, chief economist for NAR, said that if strong sales of pre-owned homes continue, 2015 could be the best year for existing home sales in nearly a decade.
New Home Sales Lag in March
The Department of Commerce reported that new home sales fell from February’s reading of 543,000 new homes sold to 481,000 new homes sold in March. Analysts expected a March reading of 503,000 new homes sold. This was the slowest pace for new home sales since November, but year-over-year, sales of new homes were 19.40 percent higher year-over-year. The national median home price fell by 1.70 percent to $277,400 year-over-year.
Sales of new homes decreased by 33 percent in the Northeast and fell by 16 percent in the South. New home sales fell by three percent in the West and rose by six percent in the Midwest. At the current sales pace, there is a 5.3 month supply of new homes for sale as compared to a 4.6 month supply in February. Analysts said that stagnant wage growth contributed to fewer home sales.
Mortgage Rates Lower, Weekly Jobless Claims
According to Freddie Mac’s weekly survey of mortgage lenders, average mortgage rates fell across the board last week. The average rate for a 30-year fixed rate mortgage fell by two basis points to 3.67 percent. The rate for a 15-year fixed rate mortgage also dropped two basis points to an average of 2.92 percent; the average rate for a 5/1 adjustable rate mortgage was four basis points lower at 2.84 percent. Discount points for a 30 year mortgage fell to 0.60 percent; points for a 15-year mortgage were higher at 0.60 percent and average discount points for a 5/1 adjustable rate mortgage fell from 0.50 to 0.40 percent.
Weekly jobless claims came in at 295,000 new claims filed; analysts expected a reading of 288,000 new claims and the prior week’s reading was 294,000 new claims filed. Spring break holidays were blamed for higher jobless claims and March job growth hit its lowest in more than a year. Analysts caution against reading too much into weekly fluctuations and prefer to use the four-week rolling average to identify trends in unemployment claims.
This week’s housing related economic reports include Case-Shiller 10 and 20 City Housing Market Index reports, the customary post-meeting statement from the Fed’s Federal Open Market Committee (FOMC) and pending home sales data.
Last week’s economic news included the minutes from the most recent FOMC meeting, which indicated that the Fed’s monetary policymakers are eyeing a potential increase in the target federal funds rate, but don’t expect to do so immediately.
Members of the Federal Open Market Committee expressed concerns about lagging housing markets and noted that inflation has not yet achieved the Fed’s two percent goal. When the Fed decides to raise its target federal funds rate, which now stands at 0.00 to 0.25 percent, Interest rates and mortgage rates can be expected to rise as well.
Mortgage Rates Lower, Jobless Claims Rise
Freddie Mac reported that mortgage fell last week. The average rate for a 30-year fixed rate mortgage fell by four basis points to 3.66 percent; the average rate for a 15-year mortgage dropped by six basis points to 2.93 percent. The average rate for a 5/1 adjustable rate mortgage was nine basis points lower at 2.83 percent. Discount points were unchanged across the board at 0.60 percent for fixed rate mortgages and 0.50 percent for 5/1 adjustable rate mortgages.
New jobless claims rose to 281,000 against projections of 285,000 new claims and the prior week’s reading of 267,000 new claims. Analysts said that the Easter holiday week affected weekly jobless claims, and that the varied dates of the Easter holiday and spring break weeks for schools can impact weekly readings for new unemployment claims.
The four-week rolling average of jobless claims fell to its lowest reading since June 2000. The four-week rolling average is considered a more dependable source for identifying labor force trends, as it lacks the volatility associated with holidays and one-time events that can cause great variation in weekly readings for new jobless claims.
Next week’s scheduled economic reports include retail sales, retail sales not including the automotive sector, the Federal Reserve’s Beige Book report, which includes anecdotal reports of economic conditions reported to the Fed, and Housing Starts. The usual reports for weekly jobless claims and Freddie Mac’s mortgage rates survey will be released Thursday.
On Friday, the University of Michigan will release its Consumer Sentiment report, which provides indications of how American consumers view current economic conditions. While general in scope, consumer sentiment can suggest how consumers view buying homes.
A lack of positive sentiment about the economy in general and jobs in particular suggests that fewer Americans may be ready to buy homes. Increasing positive sentiment indicates less concern about economic conditions and could point to more Americans entering the housing market as the peak home- buying season gets underway.
Last week’s events included the National Association of Home Builder’s Housing Market Index, which fell to its lowest reading since last summer. Other news included reports on housing starts and building permits, the FOMC meeting statement and Fed Chair Janet Yellen’s press conference.
Home Builder Confidence Falls, Building Permits Rise
The NAHB Wells Fargo Housing Market Index fell by two points for a reading of 53 in March. The expected reading was 57. Analysts said that this proves that lower mortgage rates and steady job growth aren’t fueling housing markets as expected. NAHB chief economist David Crowe also cited supply chain issues such as a shortage of available lots, labor shortages and tight mortgage underwriting standards. Home builders remain optimistic that as labor markets continue to improve and more home buyers enter the market during the traditional spring and summer buying season, that builder confidence will also grow.
The Department of Commerce reported that building permits for February rose from January’s reading of 1.06 million to 1.09 million. This represents a 3.00 percent increase and was the highest reading since October. Permits fell for single family homes fell by 6.20 percent in February, but were 2.80 percent higher year-over-year. Single family permits account for 75 percent of building permits issued.
Housing starts fell dramatically due to bad weather. The Northeast saw housing starts fall by 56 percent due to extreme snowfall; Housing starts in the Midwest fell by 37 percent and the West saw housing starts decline by 18.20 percent in February. The South reported a 2.50 percent decrease in housing starts, but since nearly 50 percent of housing starts are in the South, this decline is more significant than it appears.
Fed Rates Hold Steady, Mortgage Rates Fall
The Federal Reserve noted in its post FOMC meeting statement that the Fed is in no hurry to raise rates. Citing ongoing concerns about low inflation and a sluggish housing market recovery, the Fed’s policymakers indicated that they don’t plan to rush on raising the target federal funds rate. In her press conference held after the FOMC statement, Fed Chair Janet Yellen reiterated the Fed’s intention to raise rates only when domestic and global economic developments warrant.
Mortgage rates fell according to Freddie Mac with the average rate for a 30-year fixed rate mortgage eight basis points lower at 3.78 percent. The average rate for a 15-year mortgage was four basis points lower at 3.06 percent; the average rate for a 5/1 adjustable rate mortgage was also four basis points lower at an average rate of 2.97 percent. Discount points were unchanged at an average of 0.60 percent for fixed rate mortgages and 0.50 percent for 5/1 adjustable rate mortgages.
This week’s housing-related news includes new and existing home sales, the FHFA home price index and FHFA’s home price index. Freddie Mac mortgage rates and weekly jobless claims will also be released as usual on Thursday.
Last week’s economic reports included Case-Shiller 10 and 20-City Home Price Index reports for November along with new and pending home sales for December. Freddie Mac reported on average mortgage rates and new jobless claims dipped unexpectedly. The details:
Case-Shiller: Home Price Growth Slower in November
Case-Shiller’s 20-City Home Price Index for November indicated that home prices continue to slow across the nation. Seasonally-adjusted annual home price growth slowed to 4.30 percent from October’s reading of 4.50 percent. Slowing momentum in year-over-year home price growth placed downward pressure on month-to-month readings. Several cities, including Atlanta, Georgia, Boston Massachusetts and Cleveland Ohio reported lower home prices in November as compared to October. Chicago, Illinois surprised analysts with a -1.10 percent drop in home price growth for November. Although mortgage rates have fallen in recent weeks, analysts cited tough mortgage approval standards, lower demand for homes and growing inventories of available homes as factors contributing to sluggish housing markets.
New and Pending Home Sales: Mixed Readings
New home sales jumped to a seasonally-adjusted annual reading of 481,000 sales in December against expectations of 455,000 sales and November’s revised reading of 431,000 new homes sold. The original reading for November was 438,000 new homes sold. New home sales were 8.80 percent higher in December year-over-year. The median price of new homes was $298,100 in December, which was an increase of 8.20 percent year-over-year.
Pending home sales reflected sluggish market conditions in December with pending sales lower by -3.70 percent as compared to November’s reading of +0.60 percent. This lull will likely impact completed sales as pending sales generally forecast completed sales within the next 60 days. The National Association of Realtors® said that home prices rose in some areas as supplies dwindled. Fewer homeowners list homes for sale during the fall and winter months than during spring and summer. Analysts also said that home sales trends rely on the willingness of homeowners to list their homes and move up. Although the economy continues to grow, homeowners can impact supplies of available homes if they wait to move up to larger homes.
Mortgage Rates Rise, New Jobless Claims Fall
Freddie Mac reported that average mortgage rates rose last week. The average rate for a 30-year fixed rate mortgage was three basis points higher at 3.66 percent; the average rate for 15-year mortgages rose by five basis points to 2.98 percent, and the average rate for a 5/1 adjustable rate mortgage was 2.86 percent. Discount points fell to 0.60 percent for 30-year mortgages and 0.50 percent for 15-year mortgages. Discount points were unchanged at0.40 percent for 5/1 adjustable rate mortgages.
New jobless claims fell to 265,000; this was lower than the expected reading of 296,000 new jobless claims and the prior week’s reading of 308,000 new jobless claims. Analysts said that the short work week likely contributed to the drop in weekly jobless claims, which was the largest drop in new jobless claims since November 2012. As labor markets improve, more consumers can afford to buy homes. January’s Consumer Confidence Index rose more than expected in January with a reading of 102.9 against expectations of 96.90 and December’s reading of 93.10.
This week’s scheduled reports include Construction Spending, Personal Income, Core Inflation, and several employment reports including ADP Payrolls, Non-Farm Payrolls and the national unemployment rate. Freddie Mac’s mortgage rates report and new unemployment claims will be released on Thursday as usual.