Foreclosure

A new industry report shows 69 percent of all homes in foreclosure are underwater, and nearly half are deeply underwater, meaning the borrower owes at least 25 percent more on the mortgage than the home is currently worth. Those numbers may sound pretty big, but negative equity has been steadily declining, giving millions of homeowners a lifeline to avoid foreclosure should they encounter a trigger event.

The performance of first-lien mortgages serviced by large national and federal savings banks continued to improve in the third quarter of 2013, reports the Office of the Comptroller of the Currency. The regulator's latest report indicates strengthening economic conditions, mortgage servicing transfers, home retention efforts, and home forfeiture actions are all contributing to improved performance of banks' residential mortgage assets.

Under the Consumer Financial Protection Bureau's new rules, servicers will have to provide very detailed and accurate information to borrowers about each aspect of their loans and any foreclosure procedures that may occur, according to Richard Koch, SVP at Morningstar Credit Ratings. Koch believes the new regulations will provide opportunity for some, but hardships for others because of the increased burden of time and expense necessary for compliance.

The HOPE NOW Alliance announced an estimated 50,000 homeowners received permanent, affordable loan modifications from mortgage servicers during October. This total includes mods completed under both proprietary programs and the government's Home Affordable Modification Program (HAMP). Short sales also served as an effective foreclosure aversion tool, with 19,000 completed during the month.

The housing market recovery is entering a new phase, according to the analysts at Capital Economics. They say the rapid bounce in home prices seen this year, which was driven by investors and tight supply conditions, will soon start to moderate, and the next stage of the recovery will be characterized by strengthening activity among owner-occupants and mortgage-dependent buyers, as well as a much more moderate pace of house price inflation.

As the year closes, the Federal Housing Finance Agency is celebrating a critical milestone. The GSEs' conservator announced that Fannie Mae and Freddie Mac have completed more than 3 million foreclosure prevention actions since the start of their conservatorship in September 2008. Another 2.9 million mortgages have been refinanced at today's lower interest rates, providing borrowers with significant savings.

The veterans of this business can remember when REOs ran in the neighborhood of 150,000 a year, delinquency rates were just around 4 percent, and you only needed a credit score of 620 to qualify for a prime mortgage loan. But the housing finance industry, and default servicing especially, has changed. In the cover story of it's September issue, DS News looks at the many factors--from a slew of new regulatory mandates to an altered public perception of debt obligations--that have altered the business into something far from customary.

The fizzle of 2012's refinance boom and the publishing of new regulatory guidelines took their toll on origination numbers, but it was a decidedly different story for mortgage servicing rights (MSR) deals. DSNews.com takes a look back at some of the biggest wheelers and dealers in the MSR world over the past year, including Nationstar, Ocwen, Walter Investment Management Corp., and Two Harbors, among others.

Many economists and market observers have suggested the market is poised for continued growth as the recovery enters its third year, and there are positive elements in play that provide some reasons for optimism. Recent loan vintages continue to perform at levels better than historical norms, which has allowed the industry to work through its backlog of distressed assets; foreclosure activity is declining; and housing starts have begun to rise.

With fewer properties entering the foreclosure process and more delinquent borrowers avoiding foreclosure, the number of foreclosed single-family homes held by lenders and government agencies has rapidly declined. In the April issue of DS News magazine, contributing writer Keith Button explored the many market drivers taking their toll on the once-strong stock of bank-owned homes.