Home repossessions set to jump in 2012

By Jon Prior

Analysts expect between 900,000 and 1 million homes will move from delinquency into REO in 2012, back to levels seen before the robo-signing slowdown.
Servicers moved roughly 800,000 properties through the foreclosure process and into REO liquidation in 2011, according to RealtyTrac. After resolving affidavit problems late last year, banks began moving more properties through the process. JPMorgan Chase ($44.57 -0.13%) analysts expect repossessions to reach as high as 900,000 even with a wave of new alternatives to foreclosure.
"Several major policy changes in the last few months have sped up resolution of the pipeline. Of course, new delinquencies will ensure that full resolution will still take years, but the pace may be faster than we expected," analysts said.
Daren Blomquist, vice president of RealtyTrac, said that pace could return this year.
"For 2011 we hit 804,423, not quite the 825,000 we were on pace for because of a slowdown in November and December," Blomquist said in an interview. "We are expecting close to 1 million REOs in 2012 as some of the delayed foreclosures finally complete the process this year."
The pace began to pick up in January but is still down from 2011. Servicers repossessed 66,500 homes that month, up 8% from December but down 15% from one year ago.
Just because a property moves into REO doesn't mean it will be resold that year, either. For instance, Freddie Mac data shows the GSE had to wait an average of nearly 200 days to unload an REO. According to Blomquist, there were nearly 538,000 REO sales in 2011, roughly two-thirds of all homes repossessed that year.
About 2.6 million loans, or half of the total delinquency inventory, will be removed either through modification, short sale or a traditional repossession in 2012, Chase analysts said.

The AG settlement guidelines released Monday could result in 500,000 modifications, according to Chase.
The Treasury Department expanded the Home Affordable Modification Program in January to allow more borrowers to qualify and provide higher incentives for principal reduction. Analysts still expect the changes to result in relatively few additional modifications, roughly 140,000 added to the 220,000 permanent workouts under the program estimated this year.
If so, HAMP workouts may outnumber the 270,000 proprietary modifications, which have routinely outsized HAMP in the past.
Chase analysts also expect the Fannie Mae and Freddie Mac bulk REO sales and rental programs to reach as high as 100,000 properties. A pilot program began in February to sell just 2,500 Fannie-owned homes.
Roughly 500,000 short sales could occur in 2012, roughly one-third of all liquidations — which include the 900,000 expected repossessions and the new rental program as well.
jprior@housingwire.com

JPMorgan settles military veterans mortgage lawsuit for $45M

By Kerri Panchuk

JPMorgan Chase  ($44.57 -0.13%) agreed to pay the federal government $45 million to settle a lawsuit accusing big banks of charging military veterans excessive fees on government-backed loans, attorneys for the plaintiffs said Tuesday.
Two whistleblowers filed the original case against Wells Fargo Bank ($33.89 -0.18%), Bank of America ($9.80 0.56%), CitiMortgage ($36.69 0.42%), Suntrust Mortgage ($24.38 -0.11%), Washington Mutual Bank, PNC Bank, Countrywide Home Loans, Mortgage Investors Corp. and First Tennessee Bank.
JPMorgan Chase declined to comment, but said the settlement stipulates the agreement is not an admission of wrongdoing on the bank's part. The law firm of Butler, Wooten & Fryhofer represented the plaintiffs in the case and confirmed the settlement Tuesday.
To date, JPMorgan Chase is the only lender to settle.
The original lawsuit, which dates back to 2006, alleges the banks violated the federal False Claims Act and provisions of the Interest Rate Reduction Refinancing Loan Program by over-charging veterans on fees not allowed under the IRRRLP program. The IRRRLP refinancing program is available to homeowners with Veteran's Administration loans and allows them to refinance at lower rates.
The complaint claims the banks overcharged veterans on fees and then hid those details when applying to get insurance on those loans from the federal government. The plaintiffs claim taxpayer backing on the loans would not have been granted if the federal loan program had known about the excessive fees charged.
kpanchuk@housingwire.com

50 phone calls uncover flaws in FHFA principal reduction study

By Jon Prior

Federal Housing Finance Agency analysis used to prevent principal reduction on Fannie Mae and Freddie Mac loans was seriously flawed, according to one leading analyst.
"We have reviewed the study and have a number of very substantial objections," said Amherst Securities Senior Managing Director Laurie Goodman before a Senate subcommittee Thursday, who gathered additional data via telephone.
The FHFA used the report to determine a wide-scale principal reduction program would cost more than forbearance, while increasing the risk of strategic default among borrowers seeking relief.
This information was not provided in the analysis. Sen. Jeff Merkley, D-Ore., was perplexed and he asked her how she received more information on the principal reduction study than lawmakers in the Senate.
"I made about 50 phone calls. The info was not available in one place. We were unable to construct what was done in the study and made a bunch of phone calls to figure this out," Goodman said. "We were very persistent." Goodman called several sources within the FHFA.
Goodman added the report also did not differentiate loans based on mortgage insurance, another critical metric.
The mortgage insurer does not cover the amount forgiven, she explained. She gave an example. If a borrower holds a $100,000 mortgage on a house worth $75,000, the mortgage insurer would cover any loss down to $70,000. If the GSE reduces the loan amount down to $80,000 and the borrower redefaults – though redefault rates on principal reduction mods are roughly 25% – the GSE loses the $20,000 given up.
The insurer would then pay the GSE $10,000 – the difference between the new loan balance of $80,000 down to $70,000 covered – and the resulting REO is only sold for $70,000, the GSE still loses the $20,000 it gave up in principal reduction and the insurer is off the hook.
"The problem with principal reduction on loans with mortgage insurance is that Fannie and Freddie are essentially subsidizing the mortgage insurer," Goodman said. Gauging the benefits of reducing principal for borrowers without the insurance could swing the verdict, she said.
And roughly 32% of the GSE portfolio of seriously delinquent loans carry mortgage insurance, meaning more than two-thirds of troubled Fannie or Freddie borrowers could potentially stand a better chance of securing a principal reduction, Goodman said. But the study didn't dig that deep.
She found other problems as well.
The FHFA used state-level home prices, not indices on the metropolitan statistical level, allowing the analysis to pick up fewer borrowers in severe negative equity. Higher Home Affordable Modification Program incentives were not factored in – though the FHFA has said it was reconsidering the Treasury Department's new offer. And borrower characteristics at origination were used, not current information like FICO scores.
Still, Mark Calabria, director of financial regulation studies at the Cato Institute, doubted the government's ability to build a program that would allow Fannie and Freddie to consider principal reduction on specific, targeted amount of loans.
"I would not use 'specific' and 'targeted' to describe our previous foreclosure efforts," Calabria said.
John DiIorio, CEO of 1st Alliance Lending, which works with investors and banks to conduct principal reductions agreed with Goodman in that the FHFA study was flawed, but he doubted a government program would be streamlined enough to do any good.
"I don't think there is a one size fits all solution," DiIorio said.
But Goodman did call for allowing Fannie and Freddie to go through their portfolios and determine on a loan-by-loan basis if principal reduction was worth doing.
"We would urge the FHFA to re-run their results, using the new model which incorporates the triple incentives, correcting the technical flaws in their analysis, and breaking out loans with and without mortgage insurance separately," Goodman said in her written testimony. "We believe when this is done, it will be clear that forgiveness is the better solution for the bulk of the two-thirds of their book of business without mortgage insurance."
jprior@housingwire.com

Consumer sentiment lags as gas prices rise

• March 16, 2012 • 12:28pm

Higher gas prices and inflationary fears pushed consumer sentiment downward in a preliminary March report, according to the Thomson Reuters/University of Michigan Consumer Sentiment Index.

The report, which surveys 500 households on their financial conditions each month, said its index measuring consumer confidence slipped to 74.3 in mid-March from 75.3 in February. A score of 100 represents exceptionally high consumer sentiment benchmarked in 1966.

Analysts with Econoday blame the downward trajectory on rising gas prices and a general attitude among consumers of rising inflation.

"One-year inflation expectations surged seven-tenths during the first two weeks of this month to 4%, which is a very high reading for this report," Econoday analysts said. The research firm noted that higher gas prices reduce income levels, pushing overall confidence lower.

Capital Economics also said a falling index score shows "households are balking at higher gasoline prices."

"The drop reversed only a small part of the recent gains from August’s low of 55.8, but confidence is once again struggling to close in on the level of 80 that was common before the recession," the international research firm wrote. "The current conditions index actually rose, to 84.2 from 83.0, most probably due to the further improvement in the labour market."

The sentiment dip comes in the wake of significant job gains. The private sector added 216,000 jobs in February, according to Automatic Data Processing and Macroeconomic Advisers.

Mortgage Forgiveness Debt Relief Act Expires in 2012

The time is limited for homeowners who want to ensure they aren’t hit with a big tax bill because they had to walk away from a mortgage obligation.

At the height of the housing crisis, when foreclosures across the country began a troubling increase, Congress passed the Mortgage Forgiveness Debt Relief Act of 2007, designed to provide at least some consolation to folks who had lost their homes.
If you borrow money and the lender then cancels or forgives the debt, you generally have to include the canceled amount as income for tax purposes. As the IRS explains, you aren’t taxed on borrowed money because you have an obligation to repay it. However, if the debt is wiped out, the lender is then required to report the amount of canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.
You can imagine the frustration that many people had with this seemingly unfair tax rule. They had lost their homes and then discovered in a “you’ve-got-to-be-kidding-me” moment that they owed taxes on the forgiven debt.
That’s where the mortgage debt relief act comes in. It allows people to exclude income from the discharge of debt on their principal place of residence. In addition to foreclosure, debt reduced because of a mortgage restructuring also qualifies for relief under the new law.
The law says that only debt forgiven in calendar years 2007 through 2012 is eligible. Up to $2 million of forgiven debt qualifies for this exclusion ($1 million if married filing separately).
To get the relief, debt must have been used to buy, build or substantially improve a principal residence and be secured by that residence. So if you refinanced and took money out of the house to pay off credit card debt, you won’t receive the exclusion. Debt forgiven on second homes, rental property, business property, credit cards or car loans also does not qualify for the tax relief.

Top Ten Haunted Houses For Sale!!!

It’s that time of year—a time that many folks will be heading out to local haunted house attractions, looking to get their share of Halloween scares.

But for those looking for year-round spookiness, we have compiled a list of top 10 haunted houses for sale. That’s right—haunted homes that you can actually buy.

The top ten list by was derived spending many hours with paranormal experts, ghost tour guides and real estate agents across the U.S. to find the spookiest estates on the market.

There is one Ohio haunt on the list—at number nine sits the abandoned mansion once owned by boxer Mike Tyson. The house sits on a lot of more than 60 acres in rural Southington, Ohio. It was previously owned by Tyson, a former county commissioner, and currently imprisoned infomercial mogul Paul Monea. The property, once valued at more than $2 million, now sits vacant, priced at $1.3 million.

Other homes for sale include a haunted horse farm in Kentucky, the “Psycho” murder victim's home in Beverly Hills, an evil clown prefab in Texas, the “Ozzie” California home, a New Orleans haunted bed and breakfast and a Dean Martin ghost in Minnesota—all are for sale.

Here is the top ten list:

1. New Orleans: Haunted bed and breakfast
2. Kentucky: Haunted horse farm
3. Edina, Minnesota: Home of Dean Martin ghost
4. Olean, New York farm house
5. Beverly Hills, California: “Psycho” murder victim’s house
6. Mobile haunted Halloween house
7. Charlestown, West Virginia: John Brown hanging site
8. Los Angeles, California: Haunted $15 million mansion
9. Southington, Ohio: Former Mike Tyson mansion
10. Hollywood, California: Ozzie and Harriet home

Chase Giving Distressed Homeowners Short Sale Cash Incentives

Chase Home Mortgage is offering distressed homeowners a very large cash incentive for successfully completing the short sale of their home. Some of these distressed homeowners are receiving amounts of over $30,000.00 at the close of escrow.

The qualifications of this program is not entirely clear. And not all Chase loans will qualify. What is known is that the loan must be a Chase owned mortgage and not just a mortgage serviced by Chase. Distressed Chase mortgage homeowners should contact Chase or a licensed real estate agent to inquire of their qualification. This new incentive will be of great help to the millions of families facing the reality of losing their homes to foreclosure by providing funds to help them secure other housing and a chance to get their feet solidly on the ground once more.

If you are a distressed Chase mortgage homeowner, you can visit www.thegusmangroup.com to see if your mortgage qualifies.