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Posts Tagged ‘Federal Housing Finance Agency’

Short Sales Surpass Foreclosures

April 18, 2012 Leave a comment

For the first time, the number of short sales has surpassed foreclosures according to Lender Processing Services Inc. (LPS).Specifically, short sales outnumbered foreclosures in states with some of the largest shares of homes facing foreclosure, including California.

LPS reports that as of January 2012, short sales accounted for 23.9 of home purchases, compared with 19.7 percent for sales of foreclosed homes. This in comparison to January 2011 data that shows only 16.3 percent of transactions were short sales and 24.9 percent involved foreclosures.

According to Bloomberg, short sale transactions typically fetch a higher price for banks than sales of homes that have gone through foreclosure which is major reason why banks have become more agreeable to selling houses for less than the amount owed on their mortgages

This rise in short sales is likely a result of several new government initiatives.

For example, the Federal Housing Finance Agency ordered loan servicers to respond to all short-sale offers within 30 days, and approve or reject them within 60 days – an effort to short the process that can typically take months longer.

Additionally, banks including Wells Fargo & Co. (WFC) and JPMorgan Chase & Co. (JPM) have started providing incentives for homeowners to short sell in an effort to avoid foreclosure.

If you are interested in learning more about short sales check out this blog post for 5 Things You Should Know About Short Sales.

Principal Reductions: A Cure to the Crisis?

April 12, 2012 Leave a comment

After much debate, Fannie Mae and Freddie Mac will decide by the end of this month whether they will allow principal reductions on mortgages they back.

Fannie and Freddie have resisted calls to write down the balances on the loans in their portfolio, saying it would be too costly for taxpayers as the mortgage giants are government-controlled companies, regulated by The Federal Housing Finance Agency.

At the core of the debate is Ed DeMarco, acting director for the agency, who has said principal reductions would amount to an expensive taxpayer bailout of troubled homeowners. According to CNNMoney.com, the agency had originally decided against allowing principal reductions after internal studies showed that alternatives such as adjusting monthly payments or forbearing principal were more cost effective.

The Obama administration, however, has tripled the incentives it will pay to Fannie and Freddie for reducing principal under the Home Affordable Mortgage Program, or HAMP and has forced the agency to reconsider.

As reported on CNNMoney.com, Fannie and Freddie have about 3 million loans that are seriously underwater, according to company filings. But three-quarters of these homeowners are current on their payments and may not qualify.

The number of eligible underwater Fannie and Freddie loans could range from a few hundred thousand up to 750,000, according to estimates – a fraction of the total 11 million underwater borrowers in the U.S.

However, there is still debate on if this will fix the housing crisis.

While some economists state that this could be helpful in aiding the crisis, some experts still fear that allowing principal reduction will open a new wave of strategic defaults, where homeowners decide to stop paying their mortgages in order to benefit from modification programs.

Plus, at the end of the day, taxpayers will still be paying for principal reductions – whether taxpayer money comes from HAMP or from the open line of bailouts Treasury provides to Fannie and Freddie.

Fannie wants you to be a landlord

Fannie Mae wants to offer nearly 2,500 distressed properties to investors in bulk to rent them out. The offer will be available in the eight hardest-hit locations including Atlanta, Phoenix, Las Vegas, Los Angeles/Riverside, and three Florida regions, and will include all types of housing units, from single-family homes to co-op apartment buildings. The offer stipulates that investors will need to purchase all of the homes that are for sale in a given metro area. In Atlanta, that’s as many as 572, while in Chicago it’s 99.

Edward J. DeMarco, the acting director of the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae, hopes this initiative will reduce taxpayer losses and stabilize neighborhoods and home values by shifting vacant foreclosure homes to more private management of properties.

In fact, real estate consultant John Burns told CNN Monday that he expects the sales to help bolster the housing market. By taking these distressed properties off the market, it will prevent them from further weighing on home prices in surrounding neighborhoods, said Burns. It will also add to the rental property inventory, which should help offset recent rent hikes.

CNN Monday reports that investors interested in purchasing these homes will have to meet strict guidelines: Investors will need to post security deposits in order to bid on the properties and must prove that they are financially stable. They must also have property management experience and have strong ties to the local community, such as a history of working with local development organizations.

Buyers will be required to continue to rent out the properties to current tenants for as long as their leases last. Investors will also be required to rent the properties out for a specified number of years. The exact number of years has yet to be disclosed.

Harris Requesting Principal Reductions From Fannie and Freddie

February 29, 2012 Leave a comment

While exact details of the multi-billion dollar state settlement to help struggling homeowners are expected out this week, Fannie and Freddie have come under increasing pressure to grant principal reductions, especially since loans backed by the mortgage giants (roughly half of all mortgage loans) are not eligible for relief under the recent state settlement.

And Attorney General Kamala Harris is adding to the pressure.

The New York Times reports that Harris asked Edward J. DeMarco, the regulator who controls Fannie and Freddie, to suspend foreclosures until the Federal Housing Finance Agency, completes a promised review of its policy forbidding debt reduction for delinquent homeowners who owe more than their home is worth.

In a letter, which was sent on Friday and disclosed on Monday, she requests “a thorough, transparent analysis of whether principal reduction is in the best interest of struggling homeowners as well as taxpayers.”

Harris and others including, Massachusetts AG Martha Coakley and other high-profile politicians and housing analysts, argue that principal reduction is the surest way to prevent foreclosure. Yet DeMarco has a differing opinion stating that it would cost tax-payers too much.

From the New York Times:

“Proponents of debt forgiveness note that roughly one out of five Americans owes more on a home than it is worth, and that negative equity totals almost $700 billion. Reducing some of that debt will save families’ homes and save lenders money, they say, by reducing the number of foreclosures. In California, banks agreed to give $12 billion in debt reduction under the settlement, and the architects of the settlement hope that will pry open the spigot of debt reduction, which banks have been reluctant to do on a large scale.

For his part, Mr. DeMarco has said that while debt forgiveness would save taxpayers money in the long run by preventing foreclosures, it would not save as much as another type of loan modification called forbearance. With forbearance, a portion of the debt is suspended until the end of the mortgage term or until the house is sold. The homeowner’s payments are reduced but he does not regain an ownership stake in the home.

A recent letter to Mr. DeMarco from two Democratic members of the House Committee on Oversight and Government Reform took issue with his reasoning. It said that using the Federal Housing Finance Agency’s own analysis, principal reduction of Fannie Mae loans would save taxpayers more money than forbearance. It also questioned the assumptions underlying the agency’s calculations.”

The problem with Fannie and Freddie

January 17, 2012 Leave a comment

Fannie Mae CEO Michael Williams announced last week that he plans to resign. This follows the news from late last year that Freddie Mac CEO Ed Haldeman was also planning to leave. Former Fannie CEO Daniel Mudd and former Freddie CEO Richard Syron have each been charged with fraud by the Securities and Exchange Commission. So what’s with the revolving door?

Since the federal government seized control of the two mortgage agencies, not much has changed in the way they operate, contrary to efforts such as the Dodd-Frank Wall Street Reform Act that became law in 2010.

According to CNN Money, the biggest problem is that the full government control of Fannie and Freddie makes the agencies convenient legislative tools for members on both sides of the aisle. So what’s the solution? CNN Money’s Paul La Monica proposes that they need to be weaned off the government dole. Instead of having FHFA be their master, the free market should take that job. He argues “What incentive is there for a bright, capable CEO to come work for Fannie or Freddie as long as the government is the ultimate boss?”

La Monica states that while the government continues to run Fannie and Freddie, no permanent solution will be created to fix them, contributing to a revolving door for CEOs and other executives at each.

Williams, who took over as president and CEO in 2009, will continue as CEO until Fannie Mae’s board names a successor.

HARP Calculator

November 30, 2011 Leave a comment

Earlier this month, the federal government announced its changes to the Home Affordable Program. However, there are still many hoops to jump through and its difficult to tell which of the requirements you meet. Real estate website, Zillow.com, is making it easier to check those requirements to see if you are eligible for the updated Home Affordable Modification Program.

To use the Zillow.com Calculator, you’ll need some basic information, like the amount of your mortgage and the date you took out the loan. You’ll also need to know if the loan is backed by Freddie Mac or Fannie Mae, which the tool can also help you figure out too.

Let us know if you’ve used it and if it helps you!