Loss Mitigation

After declining during the 2012 first quarter, the national mortgage delinquency rate is at its lowest level since the first quarter of 2009 and finally dropped after two consecutive quarterly increases. TransUnion reported Wednesday that the national delinquency rate, which includes borrowers 60 or more days past due, is 5.78 percent for the first quarter of 2012, a quarterly and yearly drop when the rates were 6.01 percent and 6.19 percent, respectively.

Solvency issues re-emerged for the Federal Housing Administration in a hearing convened Tuesday by the Senate Banking Committee, with HUD Secretary Shaun Donovan calling for lower loan-to-value thresholds and more servicer competition to expand refinance opportunities. The hearing quickly turned to servicer competition, which the HUD official said is lacking in part because of strict underwriting guidelines under Fannie Mae and Freddie Mac, inflating home prices and keeping refinance opportunities out of reach for many homeowners.

Due to one important adjustment, Fannie Mae and Freddie Mac might start accepting funds to be applied toward principal reduction in California. The Keep Your Home California program once required participants in its principal reduction program to match funds it provided towards reducing principal. Recently, housing finance agency officials from the state announced a decision to no longer require lenders to match the funds the program provides, the L.A. Times first reported.

Bank of America began mailing out more than 200,000 letters this week targeting borrowers thought to be eligible for principal-reducing modifications under terms of the settlement reached with the federal government and 49 state attorneys general. To be eligible, a homeowner must owe more on the mortgage than the property is worth today and must have been at least 60 days behind on payments on January 31, 2012. BofA estimates average monthly savings of 30 percent for qualifying customers.

IL Group, a provider of customized lender placed insurance products and services headquartered in Gulf Shores, Alabama, has counted Chicago-based Fay Financial as a client for three years. The company announced last week that Fay Financial will continue to leverage IL Group for customized lender-placed and forced-placed insurance products and services to streamline workflow, improve efficiencies, and maintain regulatory compliance. IL Group also announced the launch of a new company website to better reflect its strategic vision and support anticipated growth.

At 207,000 permanent loan modifications for homeowners from servicers for the first quarter of 2012, loan modifications decreased by 31 percent compared to a year ago this same quarter, according to data released by HOPE NOW. Of the total, approximately 147,000 were proprietary modifications and 60,225 were HAMP mods. Additionally, 72 percent, or 105,000, of the proprietary modifications had reduced principal and interest payments by more than 10 percent, and 77 percent of the mods included principal and interest payment reductions.

The government's Home Affordable Modification Program (HAMP) continues to add borrowers to its roster each month, but the pace has slowed. Data released Friday by Treasury and HUD shows the number of permanent HAMP mods granted during the month of March was down 10 percent from the month before and down 45 percent from March 2011. While HAMP activity has slowed, other government-assisted foreclosure alternatives in the form of short sales and deeds-in-lieu have held fairly steady.

The nation added 115,000 jobs in April, far below expectations and a drop from March’s revised payroll growth of 154,000, the Bureau of Labor Statistics reported Friday. The closely watched unemployment rate dipped again to 8.1 percent – its lowest level since January 2009 (7.8 percent) when President Obama took office – a function of a sharp drop in the nation’s labor force. Payroll gains for February and March were revised, adding 19,000 to the February numbers and 34,000 to March. The average workweek remained at 34.5 hours – still below the level when the recession began in December 2007 (34.6) and average hourly earnings improved by one cent. The number of people not in the labor force increased, as both the number of people employed and unemployed declined.

Freddie Mac reported net income of $577 million for the first quarter of 2012. That combined with $1.21 billion in unrealized gains on securities investments resulted in comprehensive income of $1.79 billion. The GSE's finances didn't sit in the black for very long, however. After a $1.8 billion dividend payment to its primary shareholder, the U.S. Treasury, Freddie's net worth was a deficit of $18 million. Looking at the GSE's loss mitigation numbers, short sales almost equaled the number of loan modifications during the first quarter.

During a CoreLogic economic webinar Thursday, the company's chief economist, Mark Fleming, Ph.D., was asked if the housing market has hit bottom and will it stick, as reports seem to be speculating. Apparently, the market was thought to have hit bottom twice before already. Fleming noted that this happened in 2010 when the home buyer tax credit was available and a second time in 2011 before the European debt crises, the Japanese earthquakes, and our own debt ceiling debate crushed consumer confidence.