Loss Mitigation

The American Legal & Financial Network has released a best practices guide for title policy work as it relates to distressed properties. ALFN says the housing crisis has impacted the industry in a number of ways, and one area in particular that calls for attention is default title policy standards. Due to marketplace pressures, the organization warns that large pools of loans are being affected by the inability to properly close escrow after foreclosure, costing investor's time and exposing them to legal risks.

With the deadline for the Emergency Homeowners' Loan Program (EHLP) just a couple days away, HUD says it does not expect to meet the program's original goal of helping 30,000 homeowners, even after two deadline extensions. According to a HUD spokesperson, the main obstacle stems from the ""statutory requirements of the program and the statutory time limits."" The agency says approximately 75 percent of the applicants rejected did not meet the criteria of the program.

Even while interest rates continue to post record and near-record lows and affordability is relatively high, many consumers choose to rent rather than purchase homes. According to Freddie Mac's chief economist Frank Nothaft, financial worries among consumers are likely holding back home sales, which remain lackluster despite the most affordable home-buying market in decades. Nothaft says a boost in job and income growth would help instill confidence in consumers and in turn, stimulate the housing market.

The industry's shadows are shrinking, according to CoreLogic. Based on the analytics firm's calculations, the residential shadow inventory of unlisted REOs and soon-to-be REOs stood at 1.6 million units as of July 2011. CoreLogic says that tally represents a supply of five months and is down from 1.7 million units in April and 1.9 million units in July of 2010. The company says the decline is driven by a pace of new delinquencies that is slower than the disposition pace of distressed assets.

It will be a long road ahead for the 14 servicers who received consent orders from federal regulators earlier this year. Acting Comptroller of the Currency John Walsh says the servicers will spend the next year or more recompensing for past foreclosure errors. Servicers must hire independent consultants to audit cases from 2009 and 2010, set up dedicated websites and toll-free numbers, and launch massive mailing and advertising campaigns to reach borrowers who may have been affected.

Processing delays have taken their toll on first-time homebuyer interest in short sales, according to the latest HousingPulse Tracking Survey released Monday. First-time homebuyers were a part of 39.7 percent of the short sale transactions completed in August. That's the lowest percentage for this buyer segment ever recorded by the survey. The study found that the average time-on-market for short sales is 16.6 weeks, with the majority of that time spent waiting for approval.

According to the Federal Housing Finance Agency Office of Inspector General (FHFA-OIG), FHFA's examination process is not up to par. FHFA-OIG says it has identified shortfalls in the agency's examination coverage, particularly in the areas of real estate owned (REO) and default-related legal services. In fact, the inspector general says FHFA has not conducted an examination of the GSEs' management of their REO inventories, despite the surging number of foreclosures, since 2007.

A year after evidence of robo-signing related to the processing of home foreclosures surfaced, state attorneys general don't seem to be any closer to a consensus on what should and shouldn't be included in the settlement. In fact, dissension among states' lead counsels is growing. Attorneys general from Kentucky and Minnesota have now joined the faction questioning the thoroughness of the investigation. Of particular concern is liability related to securitizations and the use of MERS.

Illinois Governor Pat Quinn announced a program last week that he says will help approximately 15,000 homeowners threatened by foreclosure. The Illinois Hardest Hit program utilizes $345 million in federal funds to support families who are having trouble making their mortgage payments due to unemployment or underemployment. Eligible participants will receive up to $25,000 over 18 months as a 10-year loan to keep their mortgages current. The loan is forgiven over the last five years of the 10-year term and carries zero interest.

Brandy Sams has joined WFG National Title Insurance Company as the director of its default services division. Sams' career in the mortgage and real estate industries spans a period of more than 15 years. She worked most recently in the secondary market with Fannie Mae. She also held the position of title and escrow specialist for a national servicer and title and escrow manager with a California-based title company.