News

The Federal Housing Finance Agency (FHFA) filed a lawsuit in federal court Monday against the city of Chicago contesting a local ordinance that makes lenders liable for the upkeep of vacant homes before they take possession of the title. FHFA says the law encroaches upon its role as the sole supervisor of Fannie Mae and Freddie Mac, and could raise costs for homeowners in the city. Both GSEs have instructed servicers to keep a record of all registration, inspection, and maintenance expenses incurred to comply with the Chicago ordinance.

There's been much debate over the root causes of the housing meltdown that catapulted the nation into the worst financial crisis in 80 years. A new report from the Federal Reserve focuses on the sharp run-up and subsequent collapse in housing prices during the 2000s. It concludes that real estate investors who used mortgage credit to purchase multiple properties played a larger role in fueling the housing bubble than previously recognized, pushing prices up during the boom and then defaulting in large numbers when prices began to head south.

As the year comes to a close, details of the Middle Class Tax Cut and Job Creation Act are up in the air, and a few housing industry groups are speaking out about one aspect of the act. The Mortgage Bankers Association, the National Association of Home Builders, and the National Association of Realtors together composed a letter to Congress expressing concerns over a proposal to raise Fannie Mae and Freddie Mac's guarantee fees to help cover the cost of extending the payroll tax cut.

Lenders and investors should expect defaults on mortgage loans currently being originated to be 31 percent higher than for loans originated in the 1990s, according to a new report from University Financial Associates (UFA). As a point of comparison, UFA's index for the worst vintages of this cycle (2006-2008) carried a default risk of more than 125 percent above the 1990s baseline. UFA says with consumer balance sheets improving and mortgage rates at record lows, the stage is set for a recovery in the housing market.

Representatives from both Fannie Mae and Freddie Mac upheld the companies' practice of assessing penalties against servicers who fail to meet defined timelines for processing foreclosures. Speaking at a mortgage banking conference in Dallas last week, GSE execs stressed that clearly the best outcome for both Fannie and Freddie is to keep the borrower in their home, but when that's not possible, it's critical that servicers complete the foreclosure process in a timely manner to clear bad loans from the pipeline.

Rep. Ed Towns of New York has introduced a new bill to limit the period of time during which a bank can bring deficiency judgments against foreclosed borrowers. Currently, the window for a lender to pursue a deficiency judgment varies by state and can be anywhere from six months to six years. The Fairness in Foreclosure Act (H.R. 3566) would prohibit lenders from trying to collect deficiencies more than 12 months after foreclosure, except in states with shorter windows for deficiency judgments.

Las Vegas has enacted a city ordinance that holds lenders liable for the upkeep of vacant homes even if a default or foreclosure is pending and the borrower still holds the title. Lenders who fail to comply with the maintenance requirements for vacant properties prior to repossessing them could face misdemeanor criminal charges that carry a $1,000 fine and six months in jail. Las Vegas, considered the epicenter of the nation's housing crisis, has a foreclosure rate six times the national average.

The housing market may be stabilizing as house prices and REO saturation rates show little change on a quarterly and yearly basis, according to Clear Capital's most recent Home Data Index. Nationally, prices rose just 0.3 percent while the REO saturation rate was relatively unchanged at 24.6 percent over the most recent quarter, according to data through the end of November. Clear Capital measures housing data on a rolling quarter, which compares the most recent four months with the previous three.

Sen. Johnny Isakson of Georgia has thrown yet another idea into the mix for reforming the housing finance system. Isakson, himself a former real estate agent for 30 years, introduced legislation Thursday that would wean the secondary market off government support and pay taxpayers back for the bailout of Fannie Mae and Freddie Mac. Isakson's bill would replace Fannie and Freddie with a new, temporary government-backed program to securitize mortgages. This transitional program would be turned over to the private sector after 10 years.

Last month the Occupy Oakland movement announced its intention to occupy vacant properties. On Tuesday, Occupy Oakland was one of 25 local Occupy activist groups to observe a national 'Occupy Our Homes' day. Organizers say the movement is supported by thousands who will be standing up for their neighbors in a struggle ""against a system that places financial gain above the human need for shelter."" Occupy groups from Atlanta to Brooklyn to California made it clear that this is only the beginning of their fight against foreclosure.