Tag Archives: Foreclosure Prevention

In a speech to the National Council of State Housing Agencies on Monday, a Treasury official named a number of measures to address challenges in the housing market, and stressed one solution that has not been applied by Fannie Mae and Freddie Mac: principal reduction. Mary Miller, under secretary for domestic finance, says given the large percentage of outstanding mortgages that are currently backed by Fannie or Freddie, it is important that the GSEs participate in the principal reduction alternative of the Home Affordable Modification Program.

With the number of short sales increasing and even outnumbering REO sales in certain states, experts are speculating short sales might become key to preventing an even greater swelling of foreclosed properties on the market. Compared to a year ago in January 2012, pre-foreclosure sales, which are typically short sales, increased 33 percent, according to a RealtyTrac report released Thursday. Short sales even outpaced bank-owned REO sales in 12 states, including Utah, California, Arizona, Florida, Indiana, Colorado, New York and New Jersey.

While the term foreclosure victim generally brings to mind images of struggling homeowners, one report released by First Focus addressed the impact of foreclosures on an overlooked segment: children. Julia B. Isaacs of the Brookings Institution authored the report, which revealed five years into the housing crises, 2.3 million children have lost their homes to foreclosure, and 3 million more are at serious risk of losing their homes in the future. In addition, approximately 3 million children were evicted, or may face eviction, from rental properties.

California Attorney General Kamala Harris announced Tuesday that seven bills in the California Homeowner Bill of Rights passed out of legislative committees. Harris, who first introduced the bills in February, is pushing for permanent reform in her state since the $25 billion national mortgage settlement expands the course of three years. AB 2314 and SB 1472, which aim to fight neighborhood blight and increase fines against owners of blighted properties from $1,000 per day to $5,000, passed the assembly and senate judiciary committees.

Beginning June 15, real estate agents working with distressed homeowners whose loans are backed by Fannie Mae and Freddie Mac should expect to receive a decision on a short sale offer within 30-60 days. The GSEs issued new guidelines Tuesday that aim to bring greater transparency to the short sale process and expedite decisions related to these pre-foreclosure sales. Fannie and Freddie plan to use the new short sale timelines to evaluate servicer compliance with their Servicing Alignment Initiative.

Based on a metric devised by Moody’s Analytics, GMAC, SLS, and American Home performed better compared to other subprime servicers in terms of cash collected relative to losses on delinquent loans. This was mainly due to shorter liquidation timelines that resulted in lower loss severities on liquidated or foreclosed properties, according to an article in Moody's ResiLandscape. GMAC's high metric is due primarily to shorter liquidation timelines and because the servicer maximizes cash flow on modified loans by keeping the re-default rates in line with the industry average even though it offers relatively low levels of relief in terms of principal and interest.

In response to mortgage servicing rules the Consumer Financial Protection announced it may propose, Fitch Ratings issued a statement and said it believes mortgage servicers will incur increased operational, compliance, and reporting expenses if the rules take effect. To create more transparency, the CFPB said it is considering rules which require clear monthly mortgage statements, a warning before interest rates adjust, options to avoid ""force-placed"" insurance, and early information to keep customers out of foreclosure.

Eleven state attorneys general sent a letter to Edward DeMarco, Acting Director of the FHFA, urging him to allow Fannie Mae and Freddie Mac to move forward with principal reductions. Headlined by Massachusetts Attorney General Martha Coakley, the letter doubled down on the FHFA to ""preserve assets and prevent unnecessary foreclosures by implementing loan modifications that include principal write-downs."" State attorneys general said that new reductions ""should consider all of a borrower's debts, not just the monthly mortgage debt, be uniform, transparent, and publicly disclosed.""

While arguments continue to be made that Fannie Mae and Freddie Mac should apply principal reductions to keep underwater borrowers from going into foreclosure, Edward DeMarco, FHFA acting director, still has plenty of ammo to defend his highly criticized stance. During a speech at the Brookings Institution Tuesday, DeMarco, despite revealing figures that showed the GSEs could potentially save $1.7 billion through the application of principal reduction, still cited reasons to be wary of the proposed foreclosure prevention solution.

The Consumer Financial Protection Bureau (CFPB) is looking to propose mortgage servicing rules to keep borrowers from costly surprises and prevent servicers from giving customers the runaround. Lack of transparency and lack of accountability are the two issues motivating the new rules, and to create more transparency, the CFPB is proposing clear monthly mortgage statements, a warning before interest rates adjust, options to avoid force-placed insurance, and early information to keep customers out of foreclosure.