Loss Mitigation

An alarming number of homeowners see strategic default as a viable option should their home continue to depreciate. Almost half - 47 percent - of homeowners participating in an online poll from Housing Predictor say they will walk away from their mortgage if falling home values persist. The number of borrowers open to strategic default has risen sharply since the company last surveyed public opinion on the issue. In October 2010, 36 percent of homeowners polled said they would throw in the towel should housing prices continue to drop.

The number of delinquent mortgages continued declining into February based on comparisons for both the prior month and year, according to data from Lender Processing Services (LPS). The delinquency rate, which consists of loans at least 30 or more days past due but not in foreclosure, dropped 5 percent on a month-over-month basis, and 14 percent compared to the same time last year in February. Overall, 5,846,000 properties were either 30 or more days delinquent or in foreclosure in February.

NeighborWorks America announced $73.8 million in awards for foreclosure counseling efforts this week, which followed HUD's recent revelation of $42 million to support housing counselors. This latest round of funding will go to 32 state agencies, 18 HUD-approved intermediaries, and 86 community-based NeighborWorks organizations to provide counseling to those facing foreclosure. About 190,000 homeowners are expected to receive help. NeighborWorks also expects to train more than 2,000 counselors with what is now the sixth round of its program funding.

In response to the need for in-depth portfolio analysis, DataQuick announced the introduction of PortfolioQ in a company release. The hosted solution provides equity lenders with an in-depth analysis of outstanding liens against the property to accurately calculate current equity position and related risk.

State and local governments across the nation responded to the foreclosure crisis by introducing a wave of new laws aimed at protecting homeowners. Unfortunately, according to Alfred M. Pollard, general counsel for the Federal Housing Finance Agency (FHFA), some of these laws are hurting more than helping as the housing market struggles toward recovery. Pollard, speaking before a House of Representatives committee this week, cited estimates that state governments have introduced 550 bills related to mortgage servicing since 2009.

Since the September 2008 conservatorship, Fannie Mae and Freddie Mac have completed nearly 1.1 million permanent loan modifications, according to the FHFA's latest foreclosure prevention report. Data from the Office of the Comptroller of the Currency show that in the two years ending in the third quarter of 2011, modifications on Fannie Mae and Freddie Mac loans accounted for 40 percent of all loan modifications. Overall, the GSEs have completed more than 2.1 million foreclosure prevention actions since being taken over by the federal government.

HUD Secretary Shaun Donovan announced Friday the distribution of $42 million in grants to 468 housing counseling agencies nationwide. In his announcement Friday, Donovan called housing counseling programs nothing less than indispensable. After national funding for housing counseling was cut last year, Donovan said, ""We fought hard to persuade Congress to restore funding for housing counseling in HUD's budget and now we're working to make these important resources available as quickly as possible.""

Katherine Porter, a professor at the University of California, Irvine School of Law was appointed as the California monitor to ensure compliance from the five largest servicers - Bank of America, JPMorgan, Wells Fargo, Citigroup, and Ally Financial - as stated in the $25 billion settlement, announced Attorney General Kamala D. Harris. Upon federal court approval of the settlement, Porter will verify if the lenders are meeting their obligations to California homeowners.

Details of the $25 billion settlement involving state and federal officials and the five largest servicers will change how liens are prioritized, and in turn, opponents say, will benefit banks but hurt investors. Typically, in cases involving delinquent loans, the second liens are written off before a first lien takes any losses. Under the settlement, first and second liens will share in the losses equally, with both getting written down proportionally instead of wiping out the second lien, which tends to yield a higher return since it includes a higher risk.

Appraisers, lenders, and investors appear to be routinely overestimating the values of homes prior to foreclosure, especially in the weakest housing markets, according to two economists with the Federal Reserve Bank of Cleveland. Their report suggests that more accurate pricing could speed the clearing of REO inventories, save lenders money by reducing the carrying costs associated with bank-owned homes, and bring greater stability to housing markets across the country.