Foreclosure

The number of foreclosure actions initiated in 2011 was down 38.7 percent compared to 2010, according to a new report from Lender Processing Services (LPS). The foreclosure inventory, on the other hand, remains near historic highs, at 4.11 percent. The numbers illustrate the impact of processing delays brought on by the robo-signing controversy, the impact of which remains strong in judicial states. LPS says half of all loans in foreclosure in judicial states have not made a payment in more than two years compared to 28 percent in non-judicial states.

The default servicing industry is in a state of transition, according to Larry B. Litton Jr., CEO of Selene Finance, and it's the smaller, more nimble servicing operations that will have the advantage in reacting quickly to the new rules and the changes that are in store. Litton says many of the bigger servicing shops are still set up to do what he considers commoditized types of processes and aren't able to adapt quickly to the regulatory changes coming down the line, while smaller special servicers are already built for single point of contact and to be highly responsive to consumers.

Changes announced Friday to the Home Affordable Modification Program (HAMP) are expected to extend relief to a larger share of struggling homeowners as well as renters. One of the key adjustments centers around principal reductions. To encourage investors to agree to the principal reducing modification currently available through HAMP, Treasury is tripling incentives for such restructurings, paying from 18 to 63 cents on the dollar, and extending this same incentive to Fannie Mae and Freddie Mac, who have previously opted not to participate in HAMP's principal writedown option.

With vacant and deteriorating properties taking a toll on communities throughout Ohio and Michigan, 16 congressmen from the two states are proposing large-scale demolition as a means of easing the burden of these problematic properties, and they've petitioned President Obama for federal funding. They say some homes in Ohio are selling for 8 percent of their appraised value as a result of neighboring vacancies, and they cite a demolition project in Flint, Michigan, that preserved $109 million in property values among the remaining inhabited homes.

Foreclosure homes sold for 34 percent less than the average price of a non-distressed home during the third quarter of 2011, according to new data released by RealtyTrac Thursday. The average sales price of homes in the process of foreclosure or bank-owned was $165,322 over the July-to-September period last year. RealtyTrac says third parties purchased a total of 221,536 residential properties classified as foreclosures or REO during the third quarter of 2011, representing just 20 percent of all residential sales during that timeframe.

Capital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit. The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago. Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes ""the clearest sign yet of an improvement in mortgage credit conditions.""

At the national level, the inventory of for-sale single-family homes dropped by 22.29 percent over the last year, according to new statistics released by Realtor.com. The site concludes that at the close of 2011, there were 1.89 million single-family homes on the market, down 6 percent from just one month prior. Realtor.com views the development as a positive sign the market is holding its own at the national level, but notes that the weight of foreclosures is keeping the market in a fragile state.

One of the keys to the housing market's recovery is managing and ultimately clearing out the inventory of distressed properties, according to DataQuick, a real estate data provider headquartered in San Diego, California. The company released its new RiskFinder Distress at the American Securitization Forum on Monday.

Settlement negotiations between state attorneys general and the top five servicers have dragged on for more than a year now throughout frequent reports that a settlement is close. Working out a deal that banks feel is fair and that attorneys general feel serves their states' residents has been challenging at best. However, with a settlement once again reportedly ""weeks away,"" it appears the proposal on the table is agreeable to more than just the five banks involved from day one. Both U.S. Bancorp and PNC may sign on, according to multiple reports.

The Federal Housing Finance Agency (FHFA) says as of June 30, 2011, Fannie Mae and Freddie Mac held nearly 3 million first lien mortgages in which the borrower owed more on the loan that the home was worth. FHFA estimates principal forgiveness for all of these mortgages would require funding of almost $100 billion to pay down the loans to the value of the homes securing them. Members of Congress have questioned FHFA's reasoning for excluding principal forgiveness from the menu of loss mitigation tools available to the GSEs.