Wednesday, January 25th, 2012, 2:46 pm
Principal reductions on mortgages could prove helpful in reducing home loan delinquencies if they are structured correctly, Federal Reserve Chairman Ben Bernanke said Wednesday.
While Bernanke did not take a definite position on principal reductions and loan modifications, he told journalists at a press conference following the two-day meeting of the Federal Open Markets Committee that the central bank has a strong interest in the housing sector and mortgage finance.
"We did a white paper that looked at refinancing, principal reductions and mortgage finance," Bernanke said. "Our intent in that white paper was to provide the benefit of our analysis to the public and to those who intend to make policy."
He said Fed economists have varying views on whether principal reductions could actually help borrowers while stimulating the broader economy.
Still, there's a downside to principal writedowns with so many homeowners already in negative equity positions, Bernanke asserted.
"There is not one single program that is going to get everyone out of negative equity," he said. With that in mind, he said the ultimate policy question is "what will be the most cost-effective way to help the most people as possible."
Bernanke elaborated on the Fed's recent white paper on how to stimulate the housing market, saying the report was a Fed attempt to foster legislative policy.
"The Federal Reserve has a strong interest in the housing sector," Bernanke said. "The weakness of the housing sector is an important reason why the recovery today is not more robust."
Bernanke made those statements after the Fed announced plans to keep the federal funds rate low through 2014. The chairman also said the central bank has not ruled out additional accommodative policies, including an expansion of the its balance sheet if economic conditions warrant involvement in the future.
Write to Kerri Panchuk.
Wednesday, January 25, 2012
Bernanke discusses pros and cons of principal reductions
Wednesday, January 18, 2012
Thursday, January 5, 2012
Serious Delinquencies Decline, Foreclosure Rates Steady
By: Krista Franks 01/03/2012
Serious delinquencies are on the decline, while foreclosures have steadied at 5.5 percent, according to recent data from Foreclosure-Response.org, a joint venture of the Local Initiatives Support Corporation, the Urban Institute, and the Center for Housing Policy. Among the 100 largest metropolitan areas, serious delinquencies – those 90 days or more past due or in foreclosure – declined from 10.4 percent to 9.3 percent from its December 2009 peak to June 2011. The decline in serious delinquencies can be attributed to a decline in delinquent loans, according to Foreclosure-Response.org, which states delinquencies fell from 5.5 percent at the end of 2009 to 3.7 percent in mid-2011. Areas experiencing higher rates of serious delinquencies include Florida, California and some areas of New Jersey, the Great Lakes region, and the South. Areas with lower rates of serious delinquencies include Texas, the Central and Mountain Time zone regions, and some areas of the Pacific Northwest. Seventeen of the top 25 metros ranked for serious delinquencies and four of the top five are located in Florida. While serious delinquencies decline, foreclosures have “flat-lined,” according to Foreclosure-Response.org. The foreclosure rate has stayed at about 5.5 percent over the three quarters ending in June. The two metros experiencing the greatest decline in foreclosures are in California – Riverside (1.9 percent) and Stockton (1.7 percent). In contrast, metros in Florida, New York, and Illinois are seeing rising foreclosure rates. Tampa saw a 2.8 percent increase from December 2009 to June 2011, while Chicago saw a 2.3 percent increase, and New York saw a 2.1 percent increase. Foreclosure-Response.org notes that these three states are judicial states, which “can create a significant backlog of foreclosures.” “The foreclosure inventory that is building up is going to take an incredibly long time for lenders to clear,” said Urban Institute research associate Leah Hendey. “At the current pace of foreclosure sales, we are looking at a process that could take decades to complete.” “It is critical that the status of these properties be resolved quickly if we want to stabilize communities and housing markets,” Hendey continued. ©2012 DS News. All Rights Reserved.
Sunday, December 18, 2011
BofA reports $6.2 billion profit in 3Q
Mortgage servicers operating in New York state shouldn't charge borrowers when substituting new counsel in foreclosure cases previously handled by...
Saturday, December 17, 2011
Trulia economist: Government missed chance to repair housing
Wednesday, December 14th, 2011, 2:56 pm
The worst moment of the credit crisis came and went and with it Washington's political will to enact meaningful change to heal the suffering housing market and the financial condition of its homeowners, according to the chief economist at real estate data firm Trulia.
Jed Kolko said Wednesday that the housing market is in better shape now than in early 2009, but Americans are more pessimistic about what both the presidential administration and Congress can do to get back to normal, which, four years into the housing crisis, he and most economists say is years away.
Furthermore, the presidential election season won't be a catalyst.
"In election years, politicians don't take risks," Kolko said in response to HousingWire questioning. "Election years are more talk and less action. With the economy slowly recovering, inventories declining and prices no longer plummeting, the housing market is not in enough of a crisis to force political opponents together."
The summer's grueling debt ceiling debate that led to a Standard & Poor's August downgrade in the nation's credit ratings and the lack of results from the super committee in hashing out a plan to cut the federal budget impaired American confidence in Congress.
"Five years of the housing crisis has hardened Americans," Kolko said.
Recovery in the housing market depends on consumer confidence, and lowering defaults and foreclosures is key to rebuilding that confidence.
"Americans won’t believe our economy is improving until they see real proof," Kolko said. "As long as there are foreclosed homes and lingering for-sale signs in neighborhoods across the country, people are faced with constant, everyday reminders that the housing market is still struggling."
A new Trulia survey found that 57% of Democrats and 73% of Republicans believe housing will hurt President Barack Obama’s chance of reelection, and with the U.S. economy still struggling, 54% of Americans are not confident the president can stabilize the housing market in the next 12 months. This is a notable increase since Obama took office in 2009 when only 32% shared this sentiment.
The survey found that most Americans agree that fixing the economy should come before any housing policy. 78% of Republicans and 82% of Democrats said lowering unemployment is an extremely or very important public policy goal, followed by raising employment growth and reducing the federal budget deficit, which now stands at $1.3 trillion.
However, Kolko said some government housing policies will offer aid such as the recent expansion of HARP, which will lead to more refinancing, and the Federal Housing Finance Agency's proposal to put up government-owned home for sale or rent. But he added that most people aren't qualified to refinance under the new HARP and most vacant or foreclosed homes aren't owned by the government.
"These policies are not silver bullets for ending the housing crisis," he said. "I don't expect policy break-through proposals in 2012."
When asked about specific policies and proposals, the survey respondents called for efforts to help homeowners stay in their homes as opposed to helping people buy homes. Most Americans favored making it easier for homeowners to refinance, while only 46% wanted to raise the Fannie Mae and Freddie Mac conforming loan limit.
Kolko predicted "with 100% certainty that housing will remain a local game," saying that local markets will have their own trends in 2012.
"Often crisis give us the opportunity to overcome traditional political divisions and gives elected officials a chance to make sometimes heroic policy proposals that don't come outside of crisis," Kolko said. "But we've missed the opportunity for Congress and the administration to come together and make major change."
Write to Justin T. Hilley.
Follow him on Twitter @JustinHilley.
Thursday, December 15, 2011
Monday, December 12, 2011
Wednesday, December 7, 2011
Foreclosure Crisis Isn't Even Halfway Over: Study
By: Carrie Bay 12/05/2011
The foreclosure crisis has had a long and destructive run – five years and counting, with millions put out of their homes. According to the Center for Responsible Lending (CRL), we’re not even halfway through the devastation.The organization’s analysis of 27 million mortgage loans originated over a five-year period found that 6.4 percent of mortgages made between 2004 and 2008 have ended in foreclosure, and an additional 8.3 percent are at immediate, serious risk.The study also offers up evidence that foreclosure patterns are strongly linked with patterns of risky lending. According to CRL, foreclosure rates are consistently worse for borrowers who received high-risk loan products that were aggressively marketed before the housing crash, such as loans with prepayment penalties, hybrid adjustable-rate mortgages (ARMs), and option ARMs.Looking at the demographics of foreclosure casualties, CRL found that the majority of people affected by foreclosureshave been white families. However, borrowers of color are more than twice as likely to lose their home, the organization says.According to CRL, these higher rates reflect the fact that African Americans and Latinos were consistently more likely to receive high-risk loan products, even after accounting for income and credit status.African Americans and Latinos were much more likely to receive subprime loans with high interest rates and loans with features that are associated with higher foreclosures, CRL explained. The nonprofit group found that these disparities were evident even when comparing borrowers within the same credit score ranges, with the gap especially pronounced for borrowers with higher credit scores.“Our study provides further support for the key role played by loan products in driving foreclosures,” CRL said. “Specific populations that received higher-risk products-regardless of income and credit status-were more likely to lose their homes.”While some blame the subprime disaster on policies designed to expand access to mortgage credit, CRL says the facts undercut these claims.Instead, the group argues that dangerous products, aggressive marketing, and poor loan underwriting were major drivers of foreclosures in the subprime market. CRL credits the Dodd-Frank Act as the first vital step taken to strengthen mortgage protections by restricting the use of risky products and requiring lenders to consider each borrower’s ability to repay a loan.“These new rules will certainly have a positive effect on the success of future mortgages,” CRL said.©2011 DS News. All Rights Reserved.Tuesday, November 15, 2011
Fannie, Freddie CEOs agree to face Congress over bonuses
Monday, November 14th, 2011, 2:54 pm
Fannie Mae CEO Michael Williams and Freddie Mac CEO Charles "Ed" Haldeman agreed to face lawmakers Wednesday over bonuses they and their top executives were paid to manage the mortgage giants.
Last week, Rep. Darrell Issa (R-Calif.) organized a hearing over the issue and requested both CEOs make an appearance. A spokesman for Issa said Monday that both CEOs committed to testify at what should be a tense meeting.
In 2010, both Williams and Haldeman made a base salary of $900,000 to run the two companies that owe the Treasury Department $151.7 billion in dividend payments on their continued bailouts. But both men pulled in roughly $2.3 million in bonuses, according to filings with the Securities and Exchange Commission in February.
The combined top 10 executives at both companies made nearly $13 million in bonuses in 2010.
"If $900,000 base salary isn't enough to get someone qualified in that position, I don't know what is. You don't have to bonus them another $2.3 million — it just is too much especially when those two entities owe the American taxpayers so much money," Issa told CNBC last week.
The Senate Banking Committee Chairman Tim Johnson (D-S.D.) also called a hearing to be held Tuesday. Federal Housing Finance Agency Acting Director Edward DeMarco, who approved the bonuses, will testify at the Senate and would likely echo his earlier defense of the bonuses, calling them necessary to retain talent at the GSEs.
While the bonuses were disclosed nearly eight months ago, the outcry began after Politico ran a story on the payouts after Haldeman announced in October that he would step down. A group of 60 senators wrote a letter to DeMarco and Treasury Secretary Tim Geithner demanding changes to how the bonuses would be approved in the future.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
