Loss Mitigation

The drop in existing home sales reported by the National Association of Realtors (NAR) Thursday likely stemmed from a lack of distressed properties on the market, according to IHS Global Insight. In May, existing-home sales made a fall of 1.5 percent from the month before. The share of investor purchases also declined, which IHS economist Patrick Newport said is likely due to a drop in the number of distressed homes. According to the NAR report, investor purchases made up 17 percent of homes sales in May, down from 20 percent in April and 19 percent in May 2011.

The deadline to request a free, independent foreclosure review has been extended for another two months, and so far, nearly 200,000 people have requested a foreclosure review, the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board announced Thursday. The new deadline to request an independent foreclosure review is getting pushed back from July 31 to September 30, 2012. The review is for those who believe they have suffered financial harm as result of servicing errors during a foreclosure process between 2009 and 2010.

Under a new guideline, military members with Fannie Mae or Freddie Mac loans will now have an easier time with short sales. Federal Housing Finance Agency (FHFA) Acting Director Edward J. DeMarco announced in a release Thursday that military homeowners who receive Permanent Change of Station (PCS) orders can sell their homes via short sale without having to go into default first. Last year, Fannie Mae and Freddie Mac issued guidance to servicers to have PCS orders count as a hardship for military members seeking relief. The new policy takes an even greater step forward and will allow military members with PCS orders to sell a primary residence purchased on or before June 30, 2012 for less than the balance on their mortgages even when current on their payments.

Existing home sales dropped to 4.55 million in May while the median price of an existing home rose to $182,600, the National Association of Realtors reported Thursday. Distressed homes accounted for 25 percent of May sales (15 percent were foreclosures and 10 percent were short sales), down from 28 percent in April and 31 percent in May 2011, the NAR said. Foreclosures sold for an average discount of 19 percent below market value in May, while short sales were discounted 14 percent.

First time claims for unemployment insurance fell to 387,000 for the week ended June 16, from the prior week's 389,000, (revised from the originally reported 387,000) the Labor Department reported Thursday. Economists had expected the report would show 386,000 initial claims.

The recent softening of economic activity will not stop the country's housing market recovery, Capital Economics said in a report Wednesday. The US Housing Market Analyst for Q2 2012 speculated that modest recovery in the housing market will not only continue for the rest of the year, it will spread and cause an increase in house prices. With the modest upturn in home sales going on, Capital Economics revised its house price forecast to show gains of 2 percent in 2012 and 5 percent in 2013.

Optimism is good for the recovery, but too much optimism can lead us back on the path to the next housing bubble, said Trulia Chief Economist Jed Kolko during a conference call Wednesday. Although home prices are rising, renters might be overconfident, with 58 percent of respondents expecting home prices to return to peak in the next 10 years. In this case, Kolko said optimism is outpacing reality, and it is very unlikely that prices in those hardest hit markets will return to the peaks in the next 10 years. As for the rental market, Kolko said there is no danger of a bubble and if anything, we are in danger of the rental market becoming extremely tight in some markets.

Lender Processing Services, Inc. (LPS) offered a peak into mortgage performance in May 2012 and revealed a slight increase in the delinquency rate. The total delinquency rate, which includes all loans 30 days or more past due but not yet in foreclosure, was 7.20 percent, a 1.1 percent increase from the month before in April. Compared to May 2011, the delinquency rate is still down significantly by 9.6 percent. In April 2012, the delinquency rate increased slightly by 0.4 percent from the month before after 9 months of declines.

A California real estate agent pled guilty to conspiracy to commit real estate fraud after collecting short sale fees he was not entitled to, the California Department of Real Estate announced in a statement Monday. In October 2010, the DRE filed an action against Matthew Wayne Stewart and alleged that he received illegal profits in two short sale transactions in Placer and Nevada counties. Stewart was accused of requiring buyers in the two transactions to pay additional short sale negation fees that were hidden and not disclosed to the lenders or sellers.

Home prices and mortgage delinquencies appear to be stabilizing, but how well U.S. residential mortgage backed-securities (RMBS) issued before 2008 perform will depend on three key variables, according to a Standard and Poor's report. Those three variables are collateral performance, the effectiveness of structural protections, and the behavior of transaction parties such as servicers and bond trustees.