Obama Administration Inconsistent On Mortgage Servicers
Earlier this week, Obama administration officials sharply criticized the mortgage servicing industry. However, just one day after Geithner and other officials had called for a revamp of the current system, Cindy Gertz the director of operations at the Treasury Department’s Homeownership Preservation Office, said tremendous progress has been made on the part of those same servicers. Although, Gertz, acknowledged that the process is not complete, she referred to the Making Home Affordable (MHA) program as having made great strides, even though only about 500,000 permanent loan modifications have been implemented as a result of that program.
Housing Regulators Plan New Fee System
U.S. housing regulators plan to impose a new fee system and standards for mortgage servicers by mid 2012. The Federal Housing Finance Agency instructed Fannie Mae and Freddie Mac to work with the Department of Housing and Urban Development in order to find ways to improve mortgage servicing for borrowers. They proposed imposing a service based fee structure for poorly performing loans in place of the flat rate added onto the borrower’s interest rate that is currently in use. In addition, the FDIC, Treasury and other agencies are expected to issue a proposed risk retention rule by next month requiring lenders to assume some of the financial burden of risky loans.
San Joaquin County 8th in AP Economic Stress Index
Ten of the twenty most economically stressed counties in the nation are in California according to the Associated Press. San Joaquin ranks eighth followed by Stanislaus and Merced respectively. High foreclosure rates and continued unemployment contributed to the San Joaquin ranking. The ranking is based on statistics for the months of September and October.
Bank of America Restarting Foreclosures
Bank of America has restarted 16,000 foreclosures but it is still unknown if judges will be satisfied with their assessment of the pending files. Other banks such as Wells Fargo and Chase have also attempted to restart their foreclosures. The approach focuses primarily on vacant and rental homes in a few states including California. The courts should have an answer in the beginning of the new year.
Fannie Mae Announces New Loan Requirements
As of December 13th, Fannie Mae will allow buyers to use gifts and grants from nonprofit groups for their minimum 5% down payment. However since most lenders require a down payment of 10% or more, borrowers will still need to come up with the remaining balance. Fannie Mae will also impose tougher guidelines regarding debt-to-income ratios which will drop from 55% to 45%. They also announced that people with foreclosures will need to wait 7 years instead of 4 to obtain a Fannie Mae loan.
California October Foreclosures are Down
RealtyTrac, has reported that 66,475 properties foreclosed in California this October. That is down nearly 12% from September and 22% from last October. However even with the drop in overall reported foreclosures, Modesto and Stockton still remain in the top 5 cities nationwide for foreclosures. Although this downward trend has been consistent over the past many months, it is likely to slow down over the winter which is a traditionally slow time for real estate sales.
Oakdale Vandals and Squatters - Examples of Central Valley Problem
Over the last year, the city of Oakdale’s police department has received 164 calls related to disturbances at vacant properties. Many of those calls were to report vandals or squatters but other common violations include trespassing, theft and drug dealing. This problem is not unique to Oakdale, it is prevalent throughout the entire central valley real estate market wherever there are areas of concentrated vacant homes. These can be abandoned homes or halted development tracts. In an effort to help keep the local property values the best they can be it is important to be vigilant about reporting all suspicious activity. Otherwise if left alone, neighborhoods can quickly slip into obvious distress which can turn away potential homebuyers and drive down home prices.
Central Valley Foreclosure Rates Down From Last August
CoreLogic reported that Stockton foreclosures rate was 4.41% this August, down from last year’s rate of 5.41%.
Stockton’s mortgage delinquency rate also decreased with 14.87% at 90 days or more delinquent down from 15.72% a year ago. This is all good news, but Stockton still struggles with a rate higher than the national foreclosure rate average of 3.20%.
Home Sales Up in US but Down in CA - Lenders Partially to Blame
National home sales were up 10% this September according to the National Association of Realtors. Some factors contributing to this growth are low mortgage rates and high affordability, home prices are averaging 22% less of where they were five years ago. Affordability has been influenced by the weakness in home buying activity. September’s home sales are still down 19.1 % from the same period last year and demand for homes has decreased since the homebuyer tax credit expired last April.
However, California hasn’t experienced this national upswing in sales and the downward trend continues to be a problem. Buyers already have concerns about foreclosure reversals and lenders have already limited the number investors due to putting limits on how many properties they can purchase. Wouldn’t it be better to have a strong buyer with 25% down than a high risk FHA buyer at 3.5% down? This perpetuates the problem only causing more defaults. To make matters worse, many lenders are increasing their demands for short sale purchase prices, often demanding prices tens of thousands of dollars over the prevailing local assessed value. This is not only a disturbing trend to short sale homeowners and homebuyers but to the local communities affected. When lenders demand unreasonable prices in a weak market they discourage what few buyers there are, allowing properties, often vacant, to sit for months or even years. It is these types of practices that encourage the increase of city violations, HOA penalty fees, theft, vandalism and vagrant squatters, resulting in a further decrease in local property values.
HUD Secretary - Foreclosure Problems Aren’t Systemic
In the Federal Task Force meeting on Wednesday, the Secretary of Housing and Urban Development, Shaun Donovan said they have been aware of violations with certain servicers for some time and they will “take actions”. However, he stopped shy of identifying any systemic problems instead citing isolated non specific problems. More details could become available when the FHA probe is completed in about nine weeks. The Federal Task Force investigation has now shifted to determining whether there was “criminal intent to take a home” “robo-signing” or fraud. Any mortgage servicers found guilty of these actions could face hefty fines or lose their ability to work with the Federal Housing Administration at a minimum. It is still too early to tell which lenders may face charges and what effect any such charges would have on the lending industry as a whole.
