A staggering 14.41 percent of all residential mortgages were either delinquent or in some stage of foreclosure as of the end of the third quarter, according to the latest survey from the Mortgage Bankers Association.
The delinquency rate (at least one month behind) rose to 9.94 percent from 8.86 percent a quarter earlier, while the foreclosure rate climbed to 4.47 percent from 4.30 percent in the second quarter and 2.97 percent last year.
The combination of loans either in foreclosure or behind on payments was the highest ever recorded by the MBA.
“The percentages of loans 90 days or more past due, loans in foreclosure, and foreclosures started all set new record highs,” the MBA said.
“The percentage of loans 30 days past due is still below the record set in the second quarter of 1985.”
Stay tuned for that…
The MBA noted that the increases in both delinquency and foreclosure starts have been driven by prime fixed-rate loans and FHA loans, as opposed to subprime loans early on in the crisis, thanks to increasing levels of unemployment.
Interestingly, prime adjustable-rate mortgages (which include pay option arms) are now performing worse than subprime fixed-rate loans.
“The foreclosure rate on FHA loans also increased, despite having a large increase in the number of FHA-insured loans outstanding,” said Jay Brinkmann, MBA’s Chief Economist.
“The number of FHA loans outstanding has increased by about 1.1 million over the last year. This increase in the denominator depresses the delinquency and foreclosure percentages.”
Going forward, the MBA expects delinquency and foreclosure rates to get worse before they get better, especially with over four million loans late or in foreclosure (shadow inventory), exceeding the 3.9 million new and previously occupied homes currently for sale.
Mortgage Rates are Hot, Hot, Hot
Mortgage rates fell for a third consecutive week, pushing the 15-year fixed to its lowest point ever recorded, according to the latest survey from mortgage financier Freddie Mac.
The 15-year fixed slipped to a record low 4.32 percent from 4.40 percent, and now sits well below the 5.73 percent average seen this time last year.
The popular 30-year fixed also neared its record low, averaging 4.83 percent during the week ending November 19, down from 4.91 percent a week earlier and 6.04 percent a year ago.
It hasn’t been lower since falling to 4.78 percent back in early April of this year.
The five-year adjustable-rate mortgage fell 10 basis points to 4.25 percent, and is nowhere close to the 5.87 percent average of a year ago.
The one-year ARM got in on the fun as well, falling to 4.35 percent from 4.47 percent, and handily beating its year-ago average of 5.29 percent.
“Interest rate on 30-year fixed-rate mortgage loans fell for the third consecutive week to the lowest since the week ending May 21st, while 15-year fixed rates were the lowest since our records began in 1991,” said Frank Nothaft, Freddie Mac vice president and chief economist.
“Low fixed rates throughout the third quarter prompted an estimated $1.1 trillion in refinancing activity, saving homeowners about $10 billion in aggregate monthly payments over the first 12 months of their new loan.”
The interest rates quoted above are good for conforming loan amounts at a loan-to-value of 80 percent.
Keep in mind that other mortgage pricing adjustments may increase or decrease the actual interest rate you receive; and jumbo loans continue to price a percentage point or more higher than conforming loans.
Comptroller of the Currency John C. Dugan today called on regulators around the world to adopt minimum mortgage standards to address the ongoing mortgage crisis.
He noted that each country has its own “unique credit culture” and “different approaches to mortgage financing,” but that every country should establish a set of standards and periodically report on their performance.
In the United States, he believes three underwriting standards should be mandated, including verification of income and assets, meaningful down payments, and qualifying borrowers on the fully indexed interest rates tied to the mortgages they choose, not just the initial teaser rates.
That means no more stated income loans, no doc loans, no-money down mortgages, and other non-traditional home loans.
With regard to stated loans, he said, “Regulators should consider prohibiting this practice except in very, very limited circumstances where it clearly can be justified.”
And added that homeowners were much more likely to walk away from their mortgages if they had no skin in the game (amen).
Oh, and option arms should have no place in the new mortgage framework.
“We also should generally prohibit the lowering of monthly payments through so-called ‘negative amortization‘ mortgages, which have performed terribly,” Dugan added.
“These mortgages lowered initial monthly payments by allowing borrowers not to pay the full amount of interest due, with the unpaid interest added to the principal balance of the loan. Borrowers should not be allowed to dig deeper into debt with each monthly payment.”
These types of loans worked great when home prices were appreciating, but once home prices shifted direction, negative equity piled up quick.
Finally, Dugan noted that any new mortgage regulations should be applied to all loan providers to prevent any inequity in the space, meaning one group like mortgage brokers wouldn’t bear the brunt of all the changes.
(photo: woodleywonderworks)
I guess it’s official now; FHA lending is bad, bad news.
I mean, we’ve known for a while that FHA lending replaced subprime lending, with its no or low down payment and minimum credit score requirements.
And last week we saw the FHA’s capital ratio fall to just 0.53 percent, well below the Congressionally mandated two-percent minimum, thanks to its increased role in the home lending space and steadily rising defaults.
But when one of the nation’s largest home builders comes out and says something is crap, that’s when you know it’s bad, really, really bad.
Robert Toll, CEO of Toll Brothers, said today at a New York home builders conference that FHA lending could create another huge crisis in the mortgage industry, referring to it as “yesterday’s subprime.”
He also went as far as calling it a “definite train wreck,” noting that a “flag will go up in the next couple of months” for bail out money.
Of course, FHA boss Shaun Donovan said last week that the FHA has $31 billion in reserves to protect itself, representing 4.5 percent of total insurance in force.
And they’re working on policy changes to make it more difficult for unscrupulous lenders to originate bad loans.
But with 456,000 FHA loans in default, or 8.2 percent as of September, you have to wonder if we’ve got another huge bailout on our hands.
Especially when an interested party that likely relied on FHA lending to support its business is saying it’s all coming crashing down.
So much for the extension of the first-time home buyer tax credit…
Last week, applications to purchase a home hit their lowest point since November 1997 after falling for the sixth consecutive week, according to the latest survey from the Mortgage Bankers Association.
The latest weekly decline was 4.7 percent on a seasonally adjusted basis, accompanied by a 1.4 percent decrease in refinance applications.
The unadjusted purchase index was off 7.9 percent compared to one week earlier and 14.7 percent compared to the same week last year.
Overall, mortgage applications were off 2.5 percent on a seasonally adjusted basis (-3.3 percent unadjusted) for the week ending November 13 compared to one week earlier.
The refinance share of mortgage activity increased to 72.9 percent of total applications, up from 71.5 percent a week earlier; that’s the highest share since May 15.
Meanwhile, interest rates continued to trickle lower, with the 30-year fixed slipping to 4.83 percent from 4.90 percent, and the 15-year fixed averaging 4.32 percent, down a single basis point from a week earlier.
The one-year adjustable-rate mortgage decreased to 6.82 percent from 6.85 percent, but still greatly exceeds fixed-rate options, which explains why ARMs only accounted for 5.4 percent of total applications.
The MBA’s weekly survey covers more than half of retail, residential home loan applications, but does not factor out multiple or declined apps.
House Financial Services Committee chairman Barney Frank is reportedly floating a proposal that would use interest collected from TARP to fund a program for unemployed homeowners that are unable to pay their mortgages.
Frank said the plan would provide loans (presumably short term ones) to struggling homeowners until they were able to find another job, thereby reducing unnecessary foreclosures.
A lack of support for jobless homeowners has been cited as a weakness in the Making Home Affordable program, which has helped 650,000 borrowers get their hands on a loan modification since its inception earlier this year.
A recent report by a congressional oversight panel said the program wasn’t designed to address foreclosures caused by unemployment, which some claim is now the primary driver of default.
Of course, as the mortgage crisis has deepened, a number of other issues have been contributing to the surging foreclosure numbers, including home price declines and negative equity.
In fact, a report released back in April by the Boston Fed found that home price depreciation was a leading cause of mortgage default.
Yet the programs currently on offer fail to address those concerns and others, such as what to do with those who hold jumbo mortgages.
First-time home buyers grabbed the largest market share of home sales on record during the past year, according to a survey released by the National Association of Realtors.
First-timers accounted for 47 percent of all homes sales in the latest study, up from 41 percent last year; the previous high was 44 percent in 1991 (records go back to 1981).
“It’s interesting to note the last cyclical peak of first-time home buyers was during the last noteworthy economic downturn, with first-time buyers starting the chain reaction that led the nation out of recession,” said Paul Bishop, NAR vice president of research, in a statement.
The median age of first-time buyers was 30 and the median income was $61,600; the typical home was purchased for $156,000 this year, down from $165,000 in 2008.
A staggering 55 percent of first-time home buyers used an FHA loan to obtain financing for their new home, while another eight percent used a VA loan.
An overwhelming 96 percent chose a fixed-rate mortgage over an adjustable-rate mortgage option, and most plan on staying in the home for 10 years.
Of those who made a downpayment, 61 percent used savings, 22 percent received a gift from a friend of relative, six percent tapped into a 401(k), and six percent sold stocks or bonds.
The median downpayment of all home buyers was eight percent, while the number purchasing with no money down fell from 23 percent last year to 15 percent in the latest survey; 8 percent of buyers paid all cash.
The first-time home buyer tax credit was just extended from November 30 to April 30, 2010, much to the delight of real estate agents everywhere.
A bill was passed in the state of New York yesterday requiring that a 90-day pre-foreclosure notice currently sent out to homeowners holding subprime loans be expanded to all types of home loans.
The measure, Bill No. 46, introduced by Governor David A. Patterson, seeks to provide additional time for struggling homeowners facing foreclosure to find viable alternatives.
Lenders that serve a 90-day notice on a homeowner will also need to make a regulatory filing with the Banking Department within three days so that agency and the Division of Housing and Community Renewal can provide targeted assistance to those in need.
The bill also expands the scope of the early mandatory settlement conference to include borrowers with all types of home loans, not just subprime.
And establishes protections for tenants in foreclosed properties, by requiring that they receive written notification of change in ownership and be permitted to remain in the home for the remainder of the lease term or 90 days, whichever is longer.
Plaintiffs in foreclosure actions who obtain a judgment of foreclosure and sale will also need to maintain the properties, and brokers who perform distressed property consulting services will no longer be able to accept upfront fees.
“While the foreclosure crisis began with borrowers in inappropriate subprime or exotic mortgages, the recession has expanded the impact of this crisis to homeowners with loans that were originally affordable,” said Superintendent of Banks Richard H. Neiman, in a statement.
“This makes the expanded scope of this legislation so timely. In addition, with commercial and multifamily mortgages potentially at risk, the added protections for renters are critical to assist displaced families and to stabilize New York neighborhoods.”
There were 39,923 foreclosure filings in New York State during the first three quarters of 2009, an 11 percent decrease from the same period a year earlier; that compares to a 22 percent year-over-year increase nationally.
So maybe it’s working?
The Federal Reserve today approved an interim final rule that requires consumers to be notified in writing when their home loan changes hands.
The rule change, which became effective when the Helping Families Save Their Homes Act was enacted in May, requires that the purchaser or assignee who acquires a mortgage loan (either by sale or transfer) provide required disclosures to homeowners in writing within 30 days.
“For example, a covered person that acquires a mortgage loan on March 1 must mail or deliver the disclosures on or before March 31,” the Fed said in a statement.
A “covered person” includes any person or organization that acquires more than one existing mortgage loan in any 12-month period.
“However, if the covered person sells or assigns the loan to a third party on March 31 (or earlier), the covered person need not provide the disclosures, but subsequent purchasers would have to comply with the rule.”
The purpose here is to avoid sending out temporary ownership documentation that would likely just confuse the homeowner even more.
To allow time for necessary operational changes, the Fed said the new rule is optional for 60 days from the date of publication, though parties that acquire mortgage loans are still subject to the statute’s requirements.
In recent years, the originate-to-distribute model exploded in popularity, with most loans sold off to third parties on the secondary market quickly after funding.
The practice has caused a great deal of confusion for homeowners that often have no idea who actually owns their loan, especially when it comes time to apply for a loan modification.
(photo: johnmorgan)
Citi announced today that its recent loss mitigation efforts have helped Florida homeowners avoid foreclosure at nearly three times the rate seen a year ago.
A preliminary review of its third quarter data revealed that so-called “loss mitigation successes” in the Sunshine State outnumbered foreclosure by a ratio of nearly 16 to one.
That’s up from a ratio six to one in the third quarter of 2008, though the foreclosure avoidances likely include not-so-favorable short sales and deeds-in-lieu of foreclosure.
“Citi is very focused on keeping distressed borrowers in their homes and is committed to driving solutions that help them do so,” said Sanjiv Das, President and Chief Executive Officer of CitiMortgage.
Das noted that foreclosure prevention is a “paramount issue” for Citi, and that the company has “invested heavily” in staff, training, and technology since CEO Vikram Pandit came on board.
“We are pleased with our progress to date, but there is more to be done. Recent improvements in documentation requirements and increased borrower awareness are resulting in greater success for trial modifications and other solutions,” Das added.
Additionally, he encouraged struggling homeowners to get in touch with the bank, saying communication was the key to success, and counseling at Citi is free of charge.
As of October 31, CitiMortgage has begun trial loan modifications under the Home Affordable Mortgage Program for 40 percent of its eligible borrowers, putting it top among its peers.
Since 2007, the company has assisted roughly 715,000 homeowners across the country with nearly $79 billion in mortgage debt stay in their homes.
