Government

There's been much debate over the root causes of the housing meltdown that catapulted the nation into the worst financial crisis in 80 years. A new report from the Federal Reserve focuses on the sharp run-up and subsequent collapse in housing prices during the 2000s. It concludes that real estate investors who used mortgage credit to purchase multiple properties played a larger role in fueling the housing bubble than previously recognized, pushing prices up during the boom and then defaulting in large numbers when prices began to head south.

As the year comes to a close, details of the Middle Class Tax Cut and Job Creation Act are up in the air, and a few housing industry groups are speaking out about one aspect of the act. The Mortgage Bankers Association, the National Association of Home Builders, and the National Association of Realtors together composed a letter to Congress expressing concerns over a proposal to raise Fannie Mae and Freddie Mac's guarantee fees to help cover the cost of extending the payroll tax cut.

Representatives from both Fannie Mae and Freddie Mac upheld the companies' practice of assessing penalties against servicers who fail to meet defined timelines for processing foreclosures. Speaking at a mortgage banking conference in Dallas last week, GSE execs stressed that clearly the best outcome for both Fannie and Freddie is to keep the borrower in their home, but when that's not possible, it's critical that servicers complete the foreclosure process in a timely manner to clear bad loans from the pipeline.

Rep. Ed Towns of New York has introduced a new bill to limit the period of time during which a bank can bring deficiency judgments against foreclosed borrowers. Currently, the window for a lender to pursue a deficiency judgment varies by state and can be anywhere from six months to six years. The Fairness in Foreclosure Act (H.R. 3566) would prohibit lenders from trying to collect deficiencies more than 12 months after foreclosure, except in states with shorter windows for deficiency judgments.

Las Vegas has enacted a city ordinance that holds lenders liable for the upkeep of vacant homes even if a default or foreclosure is pending and the borrower still holds the title. Lenders who fail to comply with the maintenance requirements for vacant properties prior to repossessing them could face misdemeanor criminal charges that carry a $1,000 fine and six months in jail. Las Vegas, considered the epicenter of the nation's housing crisis, has a foreclosure rate six times the national average.

Sen. Johnny Isakson of Georgia has thrown yet another idea into the mix for reforming the housing finance system. Isakson, himself a former real estate agent for 30 years, introduced legislation Thursday that would wean the secondary market off government support and pay taxpayers back for the bailout of Fannie Mae and Freddie Mac. Isakson's bill would replace Fannie and Freddie with a new, temporary government-backed program to securitize mortgages. This transitional program would be turned over to the private sector after 10 years.

About 885,000 borrowers have received permanent loan modifications so far this year, according to October data from HOPE NOW. The voluntary alliance of mortgage industry participants announced last month that the industry had completed 5 million modifications since 2007. October saw almost 80,000 proprietary and HAMP modifications. Sixty-plus day delinquencies declined 6 percent between September and October, and foreclosure sales fell 5 percent. Foreclosure starts, however, rose by 7 percent.

The Consumer Financial Protection Bureau (CFPB) is still headless. Senators had scheduled a confirmation vote Thursday for Richard Cordray - President Obama's pick to lead the newly formed watchdog agency. Republicans, though, blocked the process before lawmakers could even get to a final vote. Without a director, the CFPB does not have full authority to supervise non-bank mortgage lenders and debt collectors. President Obama told reporters that he is not giving up on putting Cordray in the top CFPB post.

Lender Processing Services (LPS) has added additional functionality to its MSP loan servicing platform that the company says will help servicers better track and manage loans belonging to military service members. LPS' Military Service Relief (MSR) workstation adds 30 fields to MSP to allow servicers to identify and process loans protected under the Servicemembers Civil Relief Act (SCRA), while providing stop-gap measures to guard against foreclosing on military personnel.

Servicers for Fannie Mae and Freddie Mac have completed almost 2 million foreclosure prevention actions for the two companies since they went into conservatorship in 2008, according to the Federal Housing Finance Agency's (FHFA) third-quarter report released Wednesday. More than half of these actions have been loan modifications, and of the remainder, about 676,500 have kept homeowners in their homes. About 269,700 were short sales or deeds-in-lieu of foreclosure.