Loss Mitigation

A foreclosure prevention agency found that the pending expiration of the Mortgage Debt Relief Act of 200 is prompting struggling homeowners to strategically default on their loan. YouWalkAway.com conducted a national survey and found 34 percent of respondents indicated that the act, which is set to expire December 31, 2012, contributed to their decision to walk away sooner rather than later from their property. The Mortgage Debt Relief Act releases homeowners from the obligation of paying taxes on mortgage debt forgiven from a short sale, foreclosure or modification.

Connecticut attorney general George Jepsen announced Friday that programs of benefits resulting from a $25 billion mortgage foreclosure servicing settlement are moving forward in the state. Out of Connecticut's $190 million share of the settlement funds, an estimated $119 million is going into loan modifications. The banks have also agreed to provide $36 million in refinancing to Connecticut borrowers whose homes are worth less than their mortgages. Furthermore, they agreed to provide cash payments of about $1,500 to an estimated 7,500 borrowers in the state who experienced loan servicing abuses and lost their homes to foreclosure between the start of 2008 and the end of 2011.

The Case Shiller Home Price Indexes fell for the seventh straight month in March. The drop in the broader 20-city index was barely noticeable - down to 134.10 from 134.14 in February - while the 10-city index fell to 146.61 from 146.74. Year-over-year, the 10-city index was down 2.8 percent and the 20-city index off 2.6 percent, improving from February. The national Case Shiller Index, reported quarterly, was down 2.0 percent in the first quarter and down 1.9 percent from the first quarter of 2011. All three composites posted the lowest levels since mid-2006 when the housing crises began.

While seeming to recover, the housing market is still undoubtedly fragile, and there are millions of underwater borrowers who continue to struggle with making payments. While HARP proposes to address these concerns, the program has been limited in its ability to reach the masses. Through the Responsible Homeowner Refinancing Act of 2012 introduced by Democratic Sens. Bob Menendez (D-New Jersey) and Barbara Boxer (D-California), a new HARP 3.0 would break down barriers preventing millions more from refinancing. During a hearing on Thursday before a senate subcommittee, industry experts and leaders offered testimony on how the proposed legislation could impact the economy.

First time claims for unemployment insurance dipped to 370,000 for the week ended May 19 from the previous week's upwardly revised reading of 372,000 the Labor Department reported Thursday. Economists had expected the report would show 371,000 initial claims.

About 15.7 million U.S. homeowners were underwater in the first quarter of 2012, according Zillow's Negative Equity Report released Thursday. Yet, most underwater homeowners are current on their mortgages, with nine in 10 continuing to make their payments on time. Also, just 10.1 percent of underwater homeowners are more than 90 days delinquent, Zillow reported.

Through the $25 billion robo-signing settlement between federal and state officials and the five largest banks - Bank of America, Citi, J.P. Morgan Chase, Wells Fargo, and Ally - $10 billion was set aside for principal reductions. According Fitch Ratings, the funds set aside for writing down principal will have little impact on private label residential mortgage-backed securities (RMBS). Fitch stated that the private label result of principal reduction through the settlement will likely reach only 10 percent of underwater borrowers. Overall, Fitch estimates there is about $203 billion in negative equity for private-label RMBS.

Lender Processing Services (LPS) provided a peak into month-end data for mortgage performance in April 2012, and reported after 9 months of declines, mortgage delinquencies increased. The total delinquency rate for loans 30 days or more past due but not in foreclosure was 7.12 percent, a 0.4 percent month-over-month increase. Compared to a year ago, the delinquency rate was down by 10.6 percent.

Just days after Bank of America officially announced its nationwide program offering up to $30,000 in relocation assistance for short sales, a Massachusetts-based real estate company revealed in a blog that one of its clients was approved to receive $10,000. In order to be eligible for the relocation assistance, BofA stated that the short sale must be initiated by the end of this year and close by September 26, 2013. Also, the amount offered is determined on a case-by-case basis, with variables such as the value of the home and amount owed factored into the equation.

First time claims were unchanged at 370,000 for the week ended May 12 after the number of initial claims filed for the previous week was revised upward, the Labor Department reported Thursday. Economists had expected initial claims would decrease to 365,000. The Labor Department had initially reported 367,000 claims filed for the week ended May 5. The revision turned that report to an increase of 2,000 from a previously reported decline of 1,000. Continuing claims - reported on a one week lag - increased 18,000 to 3,265,000 after the preceding week's report was bumped up to 3,247,000 from an originally reported 3,269,000, coincidentally another 18,000 increase from the original report.