Foreclosure

Markets across the country are in full-fledged correction mode. That combined with the prevalence of foreclosures has analysts at the research firm Capital Economics convinced that the double dip in home prices will continue throughout this year. In fact, they say the structural factors that are constraining demand, such as higher down payment requirements, probably mean that prices won't rise consistently until 2014. Capital Economics expects up to three million foreclosed homes to make their way to the market over the next few years.

Unemployment has pushed many homeowners to the brink of foreclosure. Housing analysts have become especially vocal about the effect of extended periods of joblessness on mortgage performance. The average duration of unemployment was 40 weeks in May. On Monday, HUD and NeighborWorks announced the roll-out of the Emergency Homeowners' Loan Program (EHLP) to 27 states and Puerto Rico, extending over $800 million to assist homeowners at risk of foreclosure because of a reduction in income.

Litigation related to mortgage servicing surged during the first quarter, after last fall's robo-signing issues raised questions about servicers' procedures and garnered widespread attention from mainstream media. Mortgage servicing litigation increased 88 percent over the first three months of this year, according to industry data released Monday. Investor-related litigation, however, eased, as did actions related to loan modification disputes.

A New York appellate court has ruled against Mortgage Electronic Registration Systems, Inc. (MERS), increasing speculation about the role that possible re-foreclosures may play in a still-brittle market. It's the latest in a series of suits involving MERS, which was designed to allow the industry to fluidly and inexpensively transfer millions of mortgages from note-holding banks and institutions via an electronic system. MERS' own proposed rule prohibiting banks from foreclosing in its name - a central part of the controversy - remains in the works.

The American Bankers Association has sent a letter to key lawmakers in the Senate, urging them to reject foreclosure legislation proposed by Sens. Jeff Merkley and Olympia Snowe. Their bill, tagged the Regulation of Mortgage Servicing Act, has been introduced as an amendment to a larger economic development bill being considered. It mandates an independent, third-party case review prior to foreclosure, among other things, and the bankers group says it would prolong the market correction by slowing down legitimate foreclosures.

Mortgage insurer PMI has announced the launch of a new program to identify mortgage servicers who score high marks for keeping borrowers in their homes. These companies will benefit from certain advantages when doing business with PMI. The company has identified certain servicing best practices that play a central role in maximizing home retention and achieving positive results for borrowers, communities, and mortgage investors, alike, and PMI says servicers who follow these practices should be recognized.

Commerce Velocity, a member of the Fidelity National Financial family of companies, recently released its Loss Mitigation Borrower Portal. The portal supports the federal requirement instituted by regulators under the consent orders issued to servicers in April for communicating with borrowers via a single point-of-contact (SPOC). It also provides borrowers with a place to review the status of a loan, upload financial documents.

Experts blame the massive inventory of existing homes on the market for hindering the housing sector's recovery. The overhang has been inflated by large volumes of foreclosures, and it's expected to grow with millions more coming down the pipeline. One economist says it will take 6.5 million new household formations to absorb the excess inventory. He expects it will take five years to achieve that goal and emerge from the self-defeating cycle of oversupply pushing prices down, the negative equity triggering defaults, and in turn, further increasing the oversupply.

Michigan Attorney General Bill Schuette issued criminal investigative subpoenas this week against several third-party firms that provide support to national mortgage servicers. The move is part of the Office of the Attorney General's investigation into questionable mortgage documentation filed with the state's Register of Deeds offices during the current foreclosure crisis. The primary target is the firm DocX. Three other firms affiliated with DocX have also been subpoenaed.

The U.S. Conference of Mayors and Wells Fargo Home Mortgage have joined forces to create a national alliance focused on foreclosure prevention, property disposition, homeownership promotion, and community development. The three-year initiative will address housing issues with strategies and outreach initiatives involving mayors and their constituents. With the challenges facing the nation, the parties say it is important that the private and public sectors work together on options that address cities' individual needs.