Foreclosure

An independent study conducted by Promontory Financial Group concludes that significantly more insured mortgages have survived the housing crisis than loans with ""piggyback"" second mortgages, which has been the most prevalent alternative to the use of mortgage insurance for the past decade. The study examined almost 5.7 million mortgages originated between 2003 and 2007. Compared with insured, low downpayment mortgages, loans with piggyback second mortgages were almost 21 percent more likely to go into default.

In its own private negotiations with state attorneys general and officials at HUD and the U.S. Justice Department, Bank of America is reportedly bringing principal reductions to the bargaining table. BofA and four other mortgage servicers have been in discussions with state and federal officials to settle investigations into foreclosure practices involving faulty paperwork and illegal affidavits, but talks have stalled. To move things along, BofA has put forth its own proposal for principal write-downs in exchange for liability protections.

A Sacramento, California citizen has proposed an amendment to the California Constitution that would outlaw foreclosures. On claims that lending institutions have failed to provide a simple method of foreclosure prevention, David A. Benson's Foreclosure Modification Act would require lenders to provide principal reductions and interest rate reductions to help borrowers keep their homes. His proposal has already been cleared by the Secretary of State and now requires 807,615 signatures to make it onto the ballot.

The commercial mortgage-backed securities (CMBS) market had been abuzz with positive momentum and murmurings of recovery for the better part of this year, but Trepp says that has all but vanished within the past few weeks. The research firm reported Tuesday that its latest monthly CMBS delinquency reading surpassed the previous record. In July, the delinquency rate for U.S. commercial real estate loans in CMBS shot up 51 basis points to 9.88 percent, as spreads widened and a highly publicized new issue was pulled from the market.

At a Senate subcommittee hearing Tuesday, industry leaders voiced opinions on the creation of national mortgage servicing standards. While there was support for such a move on the grounds that it would protect homeowners and improve customer experience, witnesses expressed a variety of concerns, including the possibility of further complicating already complex standards from a variety of authorities; creating undue hardships for community banks; and negatively impacting responsible homeowners.

The House Financial Services Committee is considering a bill to ease the pressure that unsold inventories of vacant, foreclosed homes are putting on the housing market. The Neighborhood Preservation Act would authorize FDIC-member banks, Fannie Mae, and Freddie Mac to enter into five-year lease agreements to rent REO properties back to the foreclosed homeowner. News surfaced last month that the administration was considering such a policy for Fannie and Freddie, but a group of bipartisan U.S. representatives want to enact it with legislation.

Short-sale disputes were designated as the most significant legal issue facing real estate professionals, according to a recent study by the National Association of Realtors. Almost 55 percent of survey respondents listed short sales as the cause of ""a significant number of disputes."" REO-related issues also ranked high on the legal barometer. NAR conducts its ""legal scan"" study every two years, combining legal data and research with survey results from key industry participants.

The nation's housing crisis has forced unprecedented numbers of homeowners out of their homes, made for a difficult homebuying environment, and tainted many Americans' ideal of owning a home. These factors are taking their toll on homeownership in this country. The Census Bureau says homeownership in the United States has fallen to its lowest level in more than 13 years, slipping to 65.9 percent in the second quarter. The increase in the homeownership rate seen during the housing boom has been more than completely wiped out by the bust.

The Chicago City Council has passed a local statute that will make lenders liable for the upkeep of vacant homes even when the borrower still holds the title. The ordinance was approved unanimously by council members. It amends the definition of a ""property owner"" in the municipal code to include an entity who holds a mortgage on the property, which means lenders are liable for routine maintenance and repairs even prior to foreclosing and taking control of the title if the borrower abandons the home.

A recent report by the Lincoln Institute of Land Policy found that delinquency and foreclosure rates among owner-occupants living in homes in Community Land Trusts (CLT) were consistently lower than overall market numbers. While 1.3 percent of CLT homeowners were seriously delinquent at the end of 2010, 8.57 percent of homeowners nationwide were seriously delinquent. CLTs are a type of shared equity homeownership -- a resale-restricted housing model designed to help low- to moderate-income families achieve homeownership.