HAMP Changes: Treasury Increases Incentives for Principal Reduction

The Federal Housing Finance Agency announced on Friday that it was extending
the Home Affordable Modification Program (HAMP) for another year – through December
13, 2013 – and that Freddie Mac and Fannie Mae would continue as financial
agents for Treasury in implementing the changes it then announced.  The press release also said the two GSEs
would “extend their use of HAMP Tier 1 as the first modification option through
2013” and that they were already in alignment with HAMP Tier 2 and no further
changes were necessary.

However, the Treasury Department, which jointly
administers HAMP, simultaneously announced what appear to be some significant
changes in the program.  Perhaps Timothy G. Massad, Assistant Treasury Secretary
for Financial Stability, was merely providing the English translation of
the FHFA press release or perhaps there is a division in the ranks.  In either case, here is the information he
provided in his blog posting.
 

The Treasury Department intends to triple the incentives offered to
investors holding distressed loans to encourage them to participate in reducing
the principal for those loans.  Under the
new guidelines, Treasury will pay from 18 to 63 cents on the dollar to
investors, depending on the degree of change in the loan-to-value ratio of the
individual loans.

While principal reduction has always been
available for modifying proprietary loans under the HAMP program (it even has
its own acronym, PRA) it has not been widely used.  Of over 900,000 permanent modifications
completed since the program began, only 38,300 are classified as utilizing principal
reduction

As we have previously reported,
FHFA has resisted all suggestions that the GSEs also include principal reduction
in their tools for dealing with distressed loans where borrowers are upside
down in their mortgages.  According to
Massad, Treasury has notified FHFA that it will pay principal reduction incentives
to Fannie Mae or Freddie Mac as well if they allow servicers to forgive principal
in conjunction with a HAMP modification. 

In its press release FHFA said of the
Treasury proposal

“FHFA has
been asked to consider the newly available HAMP incentives for principal
reduction. FHFA recently released analysis concluding that principal
forgiveness did not provide benefits that were greater than principal
forbearance as a loss mitigation tool. FHFA’s assessment of the investor
incentives now being offered will follow its previous analysis, including
consideration of the eligible universe, operational costs to implement such
changes, and potential borrower incentive effects.”

Again,
according to Treasury, HAMP will be expanding its eligibility to reach a
broader pool of borrowers.  An additional
evaluation process is being implemented that will allow servicers to recognize that
some borrowers who can afford their first mortgage payments still struggle because
of other debt.  Some analyses of HAMP
have found that many borrowers could not qualify for a modification solely because
their housing expenses were already below the 31 percent ceiling allowed by
HAMP guidelines.  This ceiling will now
be flexible enough to include secondary debt such as medical expenses or second
liens in the evaluation ratio. 

Eligibility
will also be expanded to include properties that are tenant-occupied as well as
vacant properties that the owner intends to rent.  According to Massad, this will serve to
further stabilize communities with high levels of vacant and foreclosed
properties as well as expanding the rental pool as has been suggested by the
Federal Reserve and others.

…(read more)

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Distressed Property Sales, Discounts Steady in Third Quarter

Sales of distressed homes, those in some
stage of foreclosure or bank owned (REO), accounted to 20 percent of all U.S.
home sales during the third quarter of 2011
compared to 22 percent of sales in
the second quarter according to information released Thursday by
RealtyTrac.  One year earlier such
distressed sales represented 30 percent of the housing market.

There were 221,536 such distressed
property sales to third parties, 11 percent fewer than revised second quarter
figures and 5 percent fewer than in the third quarter of 2010.  Pre-foreclosure sales (generally referred to
as short sales) totaled 92,824 sales or 9 percent of all sales, down 9 percent
from the second quarter and nearly identical to the number one year earlier
when pre-foreclosure sales represented 12 percent of the market.  Sales of REO totaled 128,712 properties, down
13 percent quarter over quarter and 8 percent from the previous year.  REO sales made up 12 percent of all sales in
the quarter compared to 13 percent in Q2 and 18 percent of sales a year
earlier.

Prices for distressed homes averaged
$165,322, up one percent from Q2 but down 3 percent from one year earlier.  The average discount from the market price
for distressed properties was 34 percent, the same as in the second quarter of
2011.  The discount one year earlier
averaged 37 percent.  There were
substantial differences, however, between the prices for pre-foreclosure
properties which averaged $191,119, a discount of 24 percent below the average
market price, and REO.  The latter had an
average sales price of $146,437 in the third quarter, a discount of nearly 42
percent, unchanged from Q2 and down from 45 percent a year earlier.  In the second quarter the discount for pre-foreclosed
properties was 23 percent and was it 24 percent in the third quarter of
2011. 

In six states distressed properties
sales accounted for a larger share of the market than the 20 percent national
average.  The states were Nevada (57
percent), California (44 percent), Arizona (43 percent), Georgia (34 percent),
Colorado (26 percent) and Michigan (23 percent).

The states with the largest
discounts for distressed property sales were Missouri (56.5 percent) and Massachusetts
(51 percent.)

…(read more)

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Aniston and Theroux to Buy in Bel-Air

Pictometry
Jennifer Aniston and her boyfriend Justin Theroux are set to buy a home (shown here, center, with a red door) in Los Angeles’s Bel-Air neighborhood.

By Lauren A. E. Schuker and Candace Jackson

Actress Jennifer Aniston and her boyfriend Justin Theroux, an actor who also wrote the blockbuster films “Tropic Thunder” and “Iron Man 2,” are set to jointly purchase a home for roughly $22 million in Los Angeles’s Bel-Air neighborhood, according to a person familiar with the matter.

The 8,500-square-foot home, which is listed for $24.9 million, is owned by Robert Maguire, who founded real-estate company Maguire Properties Inc. Mr. Maguire first put the A. Quincy Jones-designed home on the market in 2008, but has taken it on and off several times since then. Last year, he re-listed the property for $29 million before reducing it.

The four-bedroom, seven-bathroom midcentury home has floor-to-ceiling glass windows and ocean views. It’s situated on 3 acres and includes a separate guest house, pool, and a vineyard.

Getty Images
Jennifer Aniston and Justin Theroux

The purchase comes about six months after Ms. Aniston, best known for her role as Rachel on the long-running sitcom “Friends,” sold her 1970 Hal Levitt-designed home in Beverly Hills for $36 million. She bought that property in 2006 for $13.5 million, according to public records.

Since they began dating last fall, Ms. Aniston and Mr. Theroux have split their time between New York, where Ms. Aniston bought a home last year, and Los Angeles, where she was renting. Ms. Aniston and Mr. Theroux both star in the upcoming comedy about a Manhattan couple who moves to a rural commune called “Wanderlust.” They met while shooting the film, which also stars actor Paul Rudd. It hits theaters next month.

Joyce Rey of Coldwell Banker Previews International has the listing.

Investor Cash Adding Downward Pressure on Home Prices

Cash buyers, principally investors, may
be putting downward pressure on home prices according to the Campbell/Inside
Mortgage Finance Housing Pulse Tracking Survey released Monday.  The survey found that investors with cash in
hand are able to offer something that homeowners dependent on mortgage
financing cannot, a guaranteed sale with a quick closing timeline.  This seems to offset the desirability of a
higher bid with a mortgage contingency.   

The
Housing Pulse survey found that the trade-off between price and speed is
particularly true with offers on distressed properties because the lenders and
servicers liquidating the properties generally prefer transactions that can
settle within 30 days.  The Campbell
report states, “While investor bids may not be the
first offers accepted, they often end up winning properties after other
homebuyers are eliminated because of mortgage approval or timeline problems.
Appraisals below the contracted price are a common reason for mortgage denials.
Most mortgage financing timelines are now in excess of 30 days.”

The
survey reports that 33.2 percent of home buyers in December were cash buyers,
up from 29.6 percent in December 2010. 
However, 74 percent of investors came to the table with cash.  This is especially striking as the survey
found that investors accounted for 22.8 percent of home purchases in December,
changed only slightly from 22.2 percent in November.  But, Campbell says, “Despite their relatively
small share among homebuyers, investors have an outsize effect on home prices because
their bids bring down market prices.”

Real estate agents responding to the
survey commented on the low bids they are seeing from investors.  Campbell quoted anecdotal information from a
few agents indicating they are seeing investor bids 10-20 percent below list
prices, but with quick closings.

The total share of distressed properties
in the housing market in December continued at a three-month moving average of
47.2 percent, the 24th consecutive month that the HousePulse
Distressed Property Index (DPI) was over 40 percent.

The Campbell/Inside Mortgage Finance
HousingPulse Tracking Survey involves approximately 2,500 real estate agents
nationwide each month and provides up-to-date intelligence on home sales and
mortgage usage patterns.

…(read more)

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Builder Confidence Index At 54 Month High

Home builder confidence rose in January
for the fourth consecutive month as builders saw more buyer traffic and
anticipated higher sales.  The National
Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) rose
four points to 25
in January to reach its highest level since June 2007.  Each of the three components of the HMI also
increased for the fourth month and the improved confidence was evident across
every region of the country.

The HMI is the result of a monthly
survey of NAHB has conducted for 20 years. 
The survey asks the Association’s home builder members their perceptions
of current single-family home sales and their expectations for such sales over
the next six months, each graded on a scale of “good,” “fair,” or “poor.”  The survey also asks builders to rate the
current traffic of prospective buyers as “high to very high,” “average,” or “low
to very low.”  Answers to each question
are used to calculate a component index and those comprise the composite
index.  For each index a number over 50
indicates more builders view conditions as good than as poor.

Each of the three component indices rose
three points in January.  The component
measuring current sales conditions is at 25 and the index measuring traffic of
prospective buyers is at 21, the highest point for each since June 2007; the
index reflecting expectations for the next six months rose to 29, the highest score
September 2009.

Bob Nielsen, NAHB chairman said of the
results, “This good news comes on the heels of several months of gains in
single-family housing starts and sales, and is yet another indication of the
gradual but steady improvement that is beginning to take hold in an increasing
number of housing markets nationwide. Policymakers must now take every
precaution to avoid derailing this nascent recovery.”

“Builders are seeing greater interest among potential buyers as employment
and consumer confidence slowly improve in a growing number of markets, and this
has helped to move the confidence gauge up from near-historic lows in the first
half of 2011,” noted NAHB Chief Economist David Crowe. “That said,
caution remains the word of the day as many builders continue to voice concerns
about potential clients being unable to qualify for an affordable mortgage,
appraisals coming through below construction cost, and the continuing flow of
foreclosed properties hitting the market.”

The HMI also posted gains in all four regions in January, including a
nine-point gain to 23 in the Northeast, a one-point gain to 24 in the Midwest,
a two-point gain to 27 in the South and a five-point gain to 21 in the West.

…(read more)

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