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Changes announced Friday to the administration’s Home Affordable Modification Program (HAMP) are expected to extend relief to a larger share of struggling homeowners as well as renters, according to federal officials.
One of the key adjustments to the program centers around principal reductions. HAMP currently includes an option for servicers to provide underwater homeowners who are struggling with their payments with a modification that includes a principal writedown.
To encourage investors to agree to principal reduction modifications, Treasury is tripling the incentives for such restructurings, paying from 18 to 63 cents on the dollar, depending on the degree of change in the loan-to-value (LTV) ratio.
The Federal Housing Finance Agency (FHFA) has prohibited Fannie Mae and Freddie Mac from employing HAMP’s principal reducing option for their borrowers. Treasury has notified FHFA that it will pay these same principal reduction incentives to Fannie and Freddie if they allow servicers to forgive principal in conjunction with a HAMP modification.
FHFA issued a statement in response noting that it recently released analysis concluding principal forgiveness does not offer any greater benefits than principal forbearance as a loss mitigation tool.
But the agency says it will reassess the investor incentives now being offered, taking into consideration the number of eligible loans, operational costs to implement such changes, and the potential effects of incentivizing borrowers to remain current.
Among the other changes announced, borrowers who are struggling because of debt beyond their mortgages, such as second liens and medical bills, will be eligible for an alternative program evaluation with more flexible debt-to-income criteria.
In addition, Treasury will expand eligibility to include investor properties that are currently occupied by a tenant as well as vacant properties slated for rental use.
Tim Massad, Treasury’s assistant secretary for financial stability says single-family homes serve an important function as affordable rental housing, and foreclosure of investor-owned homes has disproportionate negative effects on low- and moderate-income renters, as well as communities.
The deadline for HAMP will be extended for an additional year through December 31, 2013.
To date, HAMP has helped approximately 900,000 struggling homeowners permanently modify their mortgage loans, providing them with a median savings of more than $500 a month.
Massad says the administration is committed to a multi-pronged effort to support American homeowners and the housing market recovery.
In addition to foreclosure prevention initiatives such as HAMP, Massad says the federal government plans to focus on transitioning foreclosed properties into rental housing, making it possible for responsible homeowners to refinance, and providing hard-hit states with resources to develop targeted relief programs.
The Wall Street Journal
Five issues for housing in 2012
Just as in 2011, in 2012 many will be trying to figure out where housing is headed. While the housing market didn’t worsen in 2011, it also didn’t stabilize either. This year, the story will be about local markets. While many housing markets rose and fell together, they’re recovering at difference paces so talking about housing on a national level is not beneficial.
Making sense of the story
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In other news …
MSNBC
Increase in short sales give market a little breathing room
It’s a tarnished silver lining for people at risk of losing their houses and homeowners in neighborhoods blighted by bank-owned properties, but the robosigning scandal that slowed the foreclosure process to a crawl appears to have increased lender interest in short sales.
Read the full story
Los Angeles Times
Low mortgage rates likely to continue through 2012, experts say
The mortgage market told a sad story throughout 2011: Record low rates, but few people taking advantage of them to buy homes. The likely scenario in the new year, according to many analysts, is more of the same.
CNNMoney
FHA says: Flip that house
In an effort to help stabilize housing prices and unload some of the foreclosures that are flooding low-income communities, the Federal Housing Administration extended a waiver of its anti-flipping regulations through 2012.
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5-Minute Business Plan for 2012
Review this year’s results and set goals for next year.
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Sacramento Bee
State now allows smoking bans in multifamily housing
California landlords who have long had the right to restrict pets, noise, and even water beds in their units, can now prohibit smoking under a new law that took effect Sunday.
Read the full story
Reuters
First-time buyers lean on the bank of mom and dad
About a third of first time buyers in 2011 got either a gift (26 percent) or a loan (7 percent) from their families to help finance their home purchases, down slightly from 2010, but consistent with assistance levels seen during the last decade, according to data from the NATIONAL ASSOCIATION OF REALTORS®.
Read the full story
The New York Times
How low can rates go?
The Federal Reserve has committed to keep long-term interest rates low through next year, so a 30-year mortgage will be pegged about where it is now at least through spring, said Freddie Mac.
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Talking Points
There is a new California law that will protect homeowners while pursuing short sales by prohibiting first and secondary lien holders from going after sellers for money owed after the short sales close.
SB 458 reinforces protections offered by a previous law, SB 931, which only required the first lien holder in a short sale to accept an agreed-upon payment as the full payment of an outstanding loan balance.
This new law, which became effective immediately, now prohibits secondary lien holders from pursuing deficiencies after a short sale closes. By extending anti- deficiency protection to all existing loans on a home when a short sale occurs, homeowners are given the option to use a short sale as an alternative to foreclosure or bankruptcy.
Effective immediately for transactions closing escrow from this day forward, both senior and junior lienholders cannot require a borrower to owe or pay for a deficiency in a short sale. This law also prohibits any deficiency judgment to be requested or rendered for senior or junior liens after a short sale of one-to-four residential units. Any purported waiver of this rule shall be void and against public policy.
Real estate investors will outnumber traditional borrowers 3 to 1 during the next two years, a new survey says, helping clear millions of repossessed properties from banks’ books and pave the way for a recovery.
Currently, Fannie Mae requires a minimum of six months to elapse between the time a borrower purchases a home and subsequently applies for a cash-out refinance.
The Selling Guide has been updated to allow a cash-out refinance within six months of a purchase transaction when no financing was obtained for the purchase transaction.
There are of course all kinds of parameters, including maximum LTV (loan-to-value ratio), documentation, arms-length transaction and “all other cash-out refinance eligibility requirements and cash out pricing applied.” The mortgage cannot be larger than the value of the home, of course.
It is cheaper to buy a home than to rent one in 39 of the nation’s 50 largest cities, according to a quarterly report released today by real estate search and marketing site Trulia.
Trulia’s rent vs. buy index compared the median list price with the median rent on two-bedroom apartments, condominiums and townhomes listed on Trulia.com as of April 1, 2011, in the 50 most populous cities in the U.S. While 72 percent of the cities favored buying in the previous quarter’s report, 78 percent favored buying in this latest report.
“With home prices nearing a double dip and more foreclosures expected to flood the housing market over the next two years, the decision between renting and buying a home across most of the country has clearly moved in favor of buying,” said Ken Shuman, Trulia’s spokesperson, in a statement.
“As we head into the summer buying season, those looking to buy a home should be encouraged by improvements in the market and feel optimistic about their chances of finding an affordable home — much more so than in previous years.”
