According to CoreLogic's latest National Foreclosure Report for February, foreclosure inventory and 90+ delinquency rates, there were approximately 65,000 completed foreclosures in February 2012. That is less than 66,000 properties in February 2011, and 71,000 in January 2012.
The number of completed foreclosures for the 12 months ending in February was 862,000. From the start of the financial crisis in September 2008, there have been approximately 3.4 million completed foreclosures.
Approximately 1.4 million homes, or 3.4 percent of all homes with a mortgage, were in the foreclosure inventory as of February 2012 compared to 1.5 million, or 3.6 percent, in February 2011 and 1.4 million, or 3.4 percent, in January 2012. Nationally, the number of borrowers in the foreclosure inventory decreased by 115,000, a decline of 7.6 percent, in February 2012 compared to February 2011.
"The pace of completed foreclosures is down slightly compared to January, running at an annualized pace of 670,000, but compares favorably to the pace of completed foreclosures in February a year ago. Even though the pace of completed foreclosures has slowed, the overall foreclosure inventory is decreasing because REO sales were up in February," said Mark Fleming, chief economist for CoreLogic. "With the spring buying season upon us, the inventory may decline further as the pace of distressed-asset sales rises along with the rest of the housing market."
"In February, more than 60 major markets saw a decrease in their foreclosure rates compared to a year ago," said Anand Nallathambi, president and CEO of CoreLogic. "This combined with faster REO-clearing rates, better employment news, and continued historically low interest rates are all positive signs of improvement in the housing economy."
The share of borrowers nationally that were 90 or more days late on their mortgage payment fell to 7.3 percent in February 2012 from 7.8 percent in February 2011, but inched up from 7.2 percent in January 2012. At the same time, the inventory of real estate owned (REO) assets held by servicers nationwide grew faster in February 2012 than the pace of REO sales, as measured by the distressed clearing ratio. The distressed clearing ratio is calculated by dividing the number of REO sales by the number of completed foreclosures; the higher the ratio, the faster the pace of REO sales relative to the pace of completed foreclosures. The distressed clearing ratio for February 2012 was 0.73, up from 0.66 in January 2012.
Report Highlights as of February 2012
•The five states with the largest number of completed foreclosures during the 12 months ending in February 2012 were: California (154,000), Florida (87,000), Michigan (64,000), Arizona (63,000) and Texas (58,000). These five states account for 49.4 percent of all completed foreclosures nationally.
•The percent of homeowners nationally who were more than 90 days late on their mortgage payments, including homes in foreclosure and REO, was 7.3 percent for February 2012 compared to 7.8 percent for February 2011, and 7.2 percent in January 2012.
•The five states with the highest foreclosure rates were: Florida (12.0 percent), New Jersey (6.6 percent), Illinois (5.4 percent), Nevada (5.0 percent) and New York (4.9 percent).
•The five states with the lowest foreclosure rates were: Wyoming (0.7 percent), Alaska (0.8 percent), North Dakota (0.8 percent), Nebraska (1.0 percent) and Montana (1.4 percent).
•Of the top 100 markets, measured by Core Based Statistical Areas (CBSAs) population, 33 are showing an increase in the year-over-year change in the number of foreclosures in February 2012, two less than in January 2012 when 35* of the top CBSAs were showing an increase in the year-over-year change in the number of foreclosures.
•Of the top 100 CBSAs, 61 have lower foreclosure rates than a year ago.
Friday, March 30, 2012
Saturday, March 10, 2012
Suzie Orman on Underwater Mortgages and Short sale
Tuesday, August 17, 2010 9:09 PM EDT
Interview: Suze Orman on underwater mortgages and personal finance
By Hao Li
Suze Orman is a personal finance guru in the United States. She is the host of The Suze Orman Show on CNBC and author of seven New York Times Best Sellers. Her website is www.suzeorman.com.
IBT speaks to Orman about the current economic situation for Americans and her opinion on options for people with underwater mortgages and seniors living on fixed income.
IBT: From the perspective of the American people, and as an advocate of the American people, what would you tell the government right now? What do Americans need from them at this point?
Suze Orman: I think more than what the people need from the government, at this point, this far into it, it's what the American people can do for themselves. It is obvious that the government cannot save them. It is obvious real estate, the stock market, and all those things are not going to save them.
It is obvious that regulation is trying to help them, but there is always a way around regulation when you're a major financial institution.
You have got to be involved with your money, you have to have an understanding of person finance, you have go to make sure that everything you're doing for you makes sense regardless of what someone else is telling you.
The past few years have been a vivid example of, “if you don't save yourself, nobody else will.” In terms of the government, it's obvious that jobs have to be created. It is absolutely unacceptable that you have this many people unemployed.
Something has to be done about all the mortgages that are underwater. I am a firm believer that many people who are underwater in the U.S. were not people who got loans they couldn't afford and were trying to scam the system. They were hardworking, good people.
But because of the lack of oversight of the banks, the mortgage companies, and Wall Street*, we had a severe recession, very close to a depression. Everybody cut back, they lost their jobs. They weren't able to pay their mortgages, their home values went down. It was really [through] no fault of their own. They were the victim of a corporate crime and no one is paying the dues on it except them. It's a travesty that no one is willing to help them.
IBT: What do you think regulators should do about underwater mortgages?
Suze Orman: This is a very difficult [situation] because it's very unfair [for] those people who have been paying their mortgages every single month, even if their mortgages are underwater. They have been very responsible and [some] of them get absolutely no help.
I really think we should have reset all mortgages, across the board, to current fair market values. It's absolutely nuts that some people bought homes and put a lot of money down, but now their mortgages are underwater.
I can give you an example of a $600,000 home in Tampa, Florida, and $120,000 was already put down. The house is now worth about $150,000. There is no help for this person because it's a rental property. But it was a legitimate purchase for them. But there was no help for them, and there was no choice for them, so they walked away and claimed bankruptcy. How sad is that! All for somebody to buy that house for $150,000, when they could have just let these people stay and reset the mortgage at $150,000. What's the difference!?**
IBT: Let's talk about personal finance scenarios. What should you do if your mortgage is underwater, and you're basically one broken refrigerator away from not being able to make your mortgage payment?
Suze Orman: In the U.S., the very first thing you should do is not touch a penny from a retirement account. Remember that money, especially in a 401-k plan, is absolutely protected from bankruptcy.
[Having said that], you should continue to pay the mortgage as long as you can, ethically. But if you honest-to-God cannot pay for it, then stop paying for it. Do not put the money on a credit card. Do not take it out of anything else that you have. Do not borrow it from somebody else. Stop paying for it!
At that point, you have the choice of foreclosure, deed in lieu of foreclosure, or a short sale. You should call up the financial institution that holds your mortgage, and if you really cannot afford the payments on this house, you should immediately put it up for a short sale. If a bank will not allow you to do a short sale, then foreclosure or deed in lieu of foreclosure are your options. If your banks still refuses to work with you on any level, then walk away.
IBT: If you're a senior citizen living on a fixed income, what would you recommend?
Suze Orman: Back in 2006, I started to tell everybody to buy municipal bonds. Many of the reporters [back then] made fun of me for getting out of the stock market and putting 99 percent of my [portfolio] in municipal bonds. This is back in 2006, 2007, and here we go, my bonds portfolio is absolutely skyrocketing at this point, especially since April of this year.
With that said, there are still wonderful municipal bonds that you can easily get a 4 percent tax-free return on.
IBT: So you're telling them to switch to municipal bonds right now?
Suze Orman: Well, if they have money in money market accounts, they should be looking at [investments that can generate] income. Income is the goal, not access to the principal***. It is my personal belief that interest rates will stay low for [a while]. Therefore, if you're a senior citizen and you need to pay your bills, you're not going to make it with a 1 percent or ½ percent interest rate [income that is also] taxable.
You can possibly take that money and get a 4 or 5 percent tax-free rate in a municipal bond. Also, you might want to look at individual stocks that pay you a good dividend yield. There are many of them out there, if you do not care about the ups and downs of your principal. If all you care about is being able to pay your bills with the income this money is generating for you, then high-dividend, secure dividend-paying stocks are a wonderful thing to look at.
If you need diversification, there is nothing wrong with looking at some of the high-yielding dividend paying Exchange Traded Funds (ETFs).
IBT: What other advice can you give regarding retirement from the expense side?
Suze Orman: Normally, your largest monthly payment is your mortgage payment. Many senior citizens still own a home. As you get older, once you know you're going to stay in a home for the rest of your life, pay off the mortgage!
It is your largest monthly expense. As time goes on, the tax deduction goes away. If you're still paying [sizable] monthly mortgages [as a senior], how much money are you going to need in your 401-k plan to generate, after taxes, [that amount]?
IBT: So people should reduce their fixed costs, or their financial obligations? Is that the general attitude?
Suze Orman: It's the general attitude as they are getting older and nearing retirement. When you are younger, [it's different]. Now is the time, the next year or two – I don't think you need to rush, I don't think it's going anywhere – but if you want to buy a piece of real estate, you can get a steal of a deal.
[If] you buy a property, your mortgage payment, your property taxes, as well as your insurance may be equal to or lower than what a rent payment is in your area! You would have a debt payment [if you buy a house], but that's okay. As you're younger, debt at these interest rates is something you can leverage to your good.
To read more Global Markets interviews, click here
Email Hao Li at hao.li@ibtimes.com
Click here to follow the IBTIMES Global Markets page on Facebook.
Click here to read recent articles by Hao Li.
*These three players are blamed for their role in causing the sub-prime mortgage crisis and the Great Recession. Banks and mortgage companies are blamed for their predatory lending practices and for originating massive amounts of subprime loans. Wall Street is blamed for bundling these questionable loans into securities and peddling them to greedy and/or naïve institutional investors like pension funds. Of course, other players, like reckless home buyers and ratings agencies, are also to blame for this mess.
**While the idea of resetting all mortgages to fair market value is somewhat radical, it does make sense on some level. The bankruptcy and foreclosure process is economically inefficient and costly for banks. For home-buyers, it undoubtedly takes an emotional and financial toll to be put out of their homes. Therefore, both parties should benefit from avoiding the foreclosure process. For the example Suze Orman mentioned, the home-buyers would essentially start at “zero” with a $150,000 mortgage. In other words, he would not just have to pay $30,000 more.
***As a reminder, she said access to the principal, not preservation. In other words, the investments should not lose the principal, but it might not make sense for seniors to keep their money in conveniently accessible savings or money market accounts and earn very little return.
Interview: Suze Orman on underwater mortgages and personal finance
By Hao Li
Suze Orman is a personal finance guru in the United States. She is the host of The Suze Orman Show on CNBC and author of seven New York Times Best Sellers. Her website is www.suzeorman.com.
IBT speaks to Orman about the current economic situation for Americans and her opinion on options for people with underwater mortgages and seniors living on fixed income.
IBT: From the perspective of the American people, and as an advocate of the American people, what would you tell the government right now? What do Americans need from them at this point?
Suze Orman: I think more than what the people need from the government, at this point, this far into it, it's what the American people can do for themselves. It is obvious that the government cannot save them. It is obvious real estate, the stock market, and all those things are not going to save them.
It is obvious that regulation is trying to help them, but there is always a way around regulation when you're a major financial institution.
You have got to be involved with your money, you have to have an understanding of person finance, you have go to make sure that everything you're doing for you makes sense regardless of what someone else is telling you.
The past few years have been a vivid example of, “if you don't save yourself, nobody else will.” In terms of the government, it's obvious that jobs have to be created. It is absolutely unacceptable that you have this many people unemployed.
Something has to be done about all the mortgages that are underwater. I am a firm believer that many people who are underwater in the U.S. were not people who got loans they couldn't afford and were trying to scam the system. They were hardworking, good people.
But because of the lack of oversight of the banks, the mortgage companies, and Wall Street*, we had a severe recession, very close to a depression. Everybody cut back, they lost their jobs. They weren't able to pay their mortgages, their home values went down. It was really [through] no fault of their own. They were the victim of a corporate crime and no one is paying the dues on it except them. It's a travesty that no one is willing to help them.
IBT: What do you think regulators should do about underwater mortgages?
Suze Orman: This is a very difficult [situation] because it's very unfair [for] those people who have been paying their mortgages every single month, even if their mortgages are underwater. They have been very responsible and [some] of them get absolutely no help.
I really think we should have reset all mortgages, across the board, to current fair market values. It's absolutely nuts that some people bought homes and put a lot of money down, but now their mortgages are underwater.
I can give you an example of a $600,000 home in Tampa, Florida, and $120,000 was already put down. The house is now worth about $150,000. There is no help for this person because it's a rental property. But it was a legitimate purchase for them. But there was no help for them, and there was no choice for them, so they walked away and claimed bankruptcy. How sad is that! All for somebody to buy that house for $150,000, when they could have just let these people stay and reset the mortgage at $150,000. What's the difference!?**
IBT: Let's talk about personal finance scenarios. What should you do if your mortgage is underwater, and you're basically one broken refrigerator away from not being able to make your mortgage payment?
Suze Orman: In the U.S., the very first thing you should do is not touch a penny from a retirement account. Remember that money, especially in a 401-k plan, is absolutely protected from bankruptcy.
[Having said that], you should continue to pay the mortgage as long as you can, ethically. But if you honest-to-God cannot pay for it, then stop paying for it. Do not put the money on a credit card. Do not take it out of anything else that you have. Do not borrow it from somebody else. Stop paying for it!
At that point, you have the choice of foreclosure, deed in lieu of foreclosure, or a short sale. You should call up the financial institution that holds your mortgage, and if you really cannot afford the payments on this house, you should immediately put it up for a short sale. If a bank will not allow you to do a short sale, then foreclosure or deed in lieu of foreclosure are your options. If your banks still refuses to work with you on any level, then walk away.
IBT: If you're a senior citizen living on a fixed income, what would you recommend?
Suze Orman: Back in 2006, I started to tell everybody to buy municipal bonds. Many of the reporters [back then] made fun of me for getting out of the stock market and putting 99 percent of my [portfolio] in municipal bonds. This is back in 2006, 2007, and here we go, my bonds portfolio is absolutely skyrocketing at this point, especially since April of this year.
With that said, there are still wonderful municipal bonds that you can easily get a 4 percent tax-free return on.
IBT: So you're telling them to switch to municipal bonds right now?
Suze Orman: Well, if they have money in money market accounts, they should be looking at [investments that can generate] income. Income is the goal, not access to the principal***. It is my personal belief that interest rates will stay low for [a while]. Therefore, if you're a senior citizen and you need to pay your bills, you're not going to make it with a 1 percent or ½ percent interest rate [income that is also] taxable.
You can possibly take that money and get a 4 or 5 percent tax-free rate in a municipal bond. Also, you might want to look at individual stocks that pay you a good dividend yield. There are many of them out there, if you do not care about the ups and downs of your principal. If all you care about is being able to pay your bills with the income this money is generating for you, then high-dividend, secure dividend-paying stocks are a wonderful thing to look at.
If you need diversification, there is nothing wrong with looking at some of the high-yielding dividend paying Exchange Traded Funds (ETFs).
IBT: What other advice can you give regarding retirement from the expense side?
Suze Orman: Normally, your largest monthly payment is your mortgage payment. Many senior citizens still own a home. As you get older, once you know you're going to stay in a home for the rest of your life, pay off the mortgage!
It is your largest monthly expense. As time goes on, the tax deduction goes away. If you're still paying [sizable] monthly mortgages [as a senior], how much money are you going to need in your 401-k plan to generate, after taxes, [that amount]?
IBT: So people should reduce their fixed costs, or their financial obligations? Is that the general attitude?
Suze Orman: It's the general attitude as they are getting older and nearing retirement. When you are younger, [it's different]. Now is the time, the next year or two – I don't think you need to rush, I don't think it's going anywhere – but if you want to buy a piece of real estate, you can get a steal of a deal.
[If] you buy a property, your mortgage payment, your property taxes, as well as your insurance may be equal to or lower than what a rent payment is in your area! You would have a debt payment [if you buy a house], but that's okay. As you're younger, debt at these interest rates is something you can leverage to your good.
To read more Global Markets interviews, click here
Email Hao Li at hao.li@ibtimes.com
Click here to follow the IBTIMES Global Markets page on Facebook.
Click here to read recent articles by Hao Li.
*These three players are blamed for their role in causing the sub-prime mortgage crisis and the Great Recession. Banks and mortgage companies are blamed for their predatory lending practices and for originating massive amounts of subprime loans. Wall Street is blamed for bundling these questionable loans into securities and peddling them to greedy and/or naïve institutional investors like pension funds. Of course, other players, like reckless home buyers and ratings agencies, are also to blame for this mess.
**While the idea of resetting all mortgages to fair market value is somewhat radical, it does make sense on some level. The bankruptcy and foreclosure process is economically inefficient and costly for banks. For home-buyers, it undoubtedly takes an emotional and financial toll to be put out of their homes. Therefore, both parties should benefit from avoiding the foreclosure process. For the example Suze Orman mentioned, the home-buyers would essentially start at “zero” with a $150,000 mortgage. In other words, he would not just have to pay $30,000 more.
***As a reminder, she said access to the principal, not preservation. In other words, the investments should not lose the principal, but it might not make sense for seniors to keep their money in conveniently accessible savings or money market accounts and earn very little return.
Wednesday, March 7, 2012
Friday, March 2, 2012
WSJ:Number of ‘Under Water’ Borrowers Rises
March 1, 2012, 4:18 PM ET.Number of ‘Under Water’ Borrowers Rises.
The number of U.S. homeowners owing more on their home loans than their properties are worth increased at the end of last year, highlighting a continuing source of weakness for the economy.
CoreLogic, a real estate data provider, said Thursday that 11.1 million, or 22.8%, of American households with a mortgage were “under water” at the end of last year. That was up from 10.7 million, or 22.1%, of properties in the third quarter of 2011.
In addition, fourth-quarter data showed that about 2.5 million borrowers had less than 5% equity in their homes, CoreLogic said.
The figures were the highest level of negative equity since the third quarter of 2009, when CoreLogic started reporting negative equity statistics using its current methodology.
Negative equity is closely linked with foreclosures, since homeowners without equity in their properties have trouble refinancing or selling their homes in the event they lose their job or need to relocate. As the Federal Reserve noted in a January paper, negative equity “constrains a homeowner’s ability to remedy financial difficulties.”
Nevada had the highest level of negative equity at the end of last year at 61% of all properties with a home loan. It was followed by Arizona (48%), Florida (44%), Michigan (35%) and Georgia (33%).
“Negative equity will take an extended period of time to improve, and if there is a hiccup in the economic recovery, it could mean a rise in foreclosures,” said Mark Fleming, chief economist with CoreLogic.
Of those “under water” borrowers, 6.7 million had no second mortgage. They owed 130% of their property’s value on average. The remaining 4.4 million had two loans. On average, they owed 138% of their property’s value.
The number of U.S. homeowners owing more on their home loans than their properties are worth increased at the end of last year, highlighting a continuing source of weakness for the economy.
CoreLogic, a real estate data provider, said Thursday that 11.1 million, or 22.8%, of American households with a mortgage were “under water” at the end of last year. That was up from 10.7 million, or 22.1%, of properties in the third quarter of 2011.
In addition, fourth-quarter data showed that about 2.5 million borrowers had less than 5% equity in their homes, CoreLogic said.
The figures were the highest level of negative equity since the third quarter of 2009, when CoreLogic started reporting negative equity statistics using its current methodology.
Negative equity is closely linked with foreclosures, since homeowners without equity in their properties have trouble refinancing or selling their homes in the event they lose their job or need to relocate. As the Federal Reserve noted in a January paper, negative equity “constrains a homeowner’s ability to remedy financial difficulties.”
Nevada had the highest level of negative equity at the end of last year at 61% of all properties with a home loan. It was followed by Arizona (48%), Florida (44%), Michigan (35%) and Georgia (33%).
“Negative equity will take an extended period of time to improve, and if there is a hiccup in the economic recovery, it could mean a rise in foreclosures,” said Mark Fleming, chief economist with CoreLogic.
Of those “under water” borrowers, 6.7 million had no second mortgage. They owed 130% of their property’s value on average. The remaining 4.4 million had two loans. On average, they owed 138% of their property’s value.
Sunday, February 26, 2012
Short sales are better than Foreclosures even for banks
23
Feb
2012 McGeough Lamacchia Realty Study Shows Short Sales Are Better for Banks Than ForeclosuresPosted in Short Sale News | 2 Comments
McGeough Lamacchia Realty compiled data from MLS for short sale and lender owned (foreclosure) homes sold in 2010 and 2011 in five major markets: Boston, Phoenix, Tucson, Southern California (Orange, Los Angeles, Riverside, and San Bernardino Counties), and Southwest Florida (Lee, Charlotte, Collier, and Hendry Counties).
The data shows that for the past two years, selling prices for short sale homes were considerably higher than prices for lender owned homes:
As you can see, the average short sale home sold for 24% more than a lender owned home in 2011. This means the banks are losing an average of $43,000 for every foreclosure sale compared to what they would have made in a short sale. And this does not include the cost of foreclosing and additional missed payments. There were more short sales and foreclosures in 2011 than in 2010, and we expect to see this increase in 2012.
Banks take in more revenue from short sales than from foreclosures so it’s not surprising many banks are offering cash incentives to distressed homeowners to move out of homes they can no longer afford. But more needs to be done to promote short sales. In 2009, the Obama Administration introduced the Making Homes Affordable Program for struggling homeowners, which included the HAFA Program that also provides homeowners with a cash incentive to do a short sale. The program has since been modified and has been a great success, however, Fannie Mae and Freddie Mac have not adopted the most recent updates.
Fannie Mae and Freddie Mac need to do more to promote short sales and make it easier for distressed homeowners to do a short sale and avoid foreclosure. An article in HousingWire last month reported that Fannie Mae and Freddie Mac actually charge servicers for taking too long to complete the foreclosure process. Bank of America, for instance, had to pay Fannie and Freddie $1.3 billion in foreclosure delay penalties in the first nine months of 2011. Instead of speeding up foreclosures, Fannie and Freddie should make doing a short sale easier.
* Orange, Los Angeles, Riverside and San Bernardino Counties, CA
** Lee, Charlotte, Collier, and Hendry Counties, FL. Total sales within + or -5% margin of error; however, the average selling prices are exact.
Feb
2012 McGeough Lamacchia Realty Study Shows Short Sales Are Better for Banks Than ForeclosuresPosted in Short Sale News | 2 Comments
McGeough Lamacchia Realty compiled data from MLS for short sale and lender owned (foreclosure) homes sold in 2010 and 2011 in five major markets: Boston, Phoenix, Tucson, Southern California (Orange, Los Angeles, Riverside, and San Bernardino Counties), and Southwest Florida (Lee, Charlotte, Collier, and Hendry Counties).
The data shows that for the past two years, selling prices for short sale homes were considerably higher than prices for lender owned homes:
As you can see, the average short sale home sold for 24% more than a lender owned home in 2011. This means the banks are losing an average of $43,000 for every foreclosure sale compared to what they would have made in a short sale. And this does not include the cost of foreclosing and additional missed payments. There were more short sales and foreclosures in 2011 than in 2010, and we expect to see this increase in 2012.
Banks take in more revenue from short sales than from foreclosures so it’s not surprising many banks are offering cash incentives to distressed homeowners to move out of homes they can no longer afford. But more needs to be done to promote short sales. In 2009, the Obama Administration introduced the Making Homes Affordable Program for struggling homeowners, which included the HAFA Program that also provides homeowners with a cash incentive to do a short sale. The program has since been modified and has been a great success, however, Fannie Mae and Freddie Mac have not adopted the most recent updates.
Fannie Mae and Freddie Mac need to do more to promote short sales and make it easier for distressed homeowners to do a short sale and avoid foreclosure. An article in HousingWire last month reported that Fannie Mae and Freddie Mac actually charge servicers for taking too long to complete the foreclosure process. Bank of America, for instance, had to pay Fannie and Freddie $1.3 billion in foreclosure delay penalties in the first nine months of 2011. Instead of speeding up foreclosures, Fannie and Freddie should make doing a short sale easier.
* Orange, Los Angeles, Riverside and San Bernardino Counties, CA
** Lee, Charlotte, Collier, and Hendry Counties, FL. Total sales within + or -5% margin of error; however, the average selling prices are exact.
Nearly 25 % of Households Use Over 1/2 of Income for Housing Costs
Nearly 1 in 4 Households Use Over 1/2 of Income for Housing Costs
By: Esther Cho 02/24/2012
Even with falling home prices, a study from the Center for Housing Policy found that affordability is still becoming increasingly out of reach for homeowners and renters. According to the 2012 Housing Landscape report released by the Center, the share of working households paying more than half their income for housing between 2008 and 2010 went up from 21.8 percent to 23.6 percent.Source: Center for Housing Policy
As home prices dropped between 2008 and 2010, working homeowners also dealt with shrinking paychecks. For working homeowners over the two-year period, incomes dropped twice as much as housing costs, according to the study.
Jeffrey Lubell, executive director of the Whington-based Center, said this was primarily due to a drop in average hours worked among moderate-income homeowners.
“The data show that homeowners have been hit hard by the housing crisis in more ways than just lost equity,” Lubell explained. “Many working homeowners have been laid off or had their hours cut.”
According to the study, the monthly median income for working homeowners’ fell from $43,570 in 2008 to $41,413 in 2010, which is about a 5 percent decrease. The median number of hours worked per week dropped from 50 to 48 between the two years, which partly explains the decrease in income.
For renters, the monthly median income fell 4 percent from $31,570 to $30,229 between the two years. Housing costs for renters also increased, up by 4 percent over the same period.
Laura Williams, author of the report, said rent rose because of increased demand for rental housing, which was partly encouraged by the housing market crises.
“More and more people are interested in renting,” Williams said. “Some prefer it because it allows them to be more mobile in a tough job market. Others are postponing purchasing a home or facing difficulties obtaining a mortgage. Given the long lead times involved in responding to increased demand with increased supply, the rental market has tightened somewhat and rents increased.”
The five states with highest share of working households with a severe housing cost burden in 2010 were California (34%), Florida (33%), New Jersey (32%), Hawaii (30%), and Nevada (29%).
The five metropolitan areas with the highest share of working households with a severe housing cost burden in 2010 were Miami-Fort Lauderdale-Pompano Beach, Florida (43%); Los Angeles-Long Beach-Santa Ana, California (38%); San Diego-Carlsbad-San Marcos, California (37%); Riverside-San Bernardino-Ontario, California (35%); and New York-Northern New Jersey-Long Island, New York-New Jersey-Pennsylvania (35%).
Moody Analytics Outlines 25Billion Settlement Impact
Moody's Analytics Outlines Settlement Impact for Banks and Borrowers
By: Esther Cho 02/24/2012
After more than a year of intense negotiations, 49 state attorneys general and the nation’s five largest mortgage servicers reached a $25 billion settlement on February 9. While the agreement allotted specific amounts to go towards certain areas of relief for borrowers, including $10 million to write down principal on underwater mortgages, many are wondering how the decision between federal and state officials and the nation’s top servicers will impact the housing market.
Moody’s Analytics released a report with an analysis of the settlement’s expected impact on banks and borrowers.
Impact on banks
As for the servicers included in the settlement – Bank of America, Wells Fargo, J.P. Morgan and Citigroup, and Ally Financial – the report stated, “the settlement will have little to no financial effect on the banks and will remove some of the uncertainty surrounding mortgage servicing.”
More specifically, the report stated, “Bank of America, Wells Fargo, J.P. Morgan, and Citigroup have each publicly disclosed that the settlement will have little to no additional financial effect on the banks, outside of a modest reduction in interest income over the life of any modified loans.”
This is in part due to the fact that “existing litigation and loan-loss reserves mostly cover the related costs” for the banks.
The banks are still vulnerable to other lawsuits outside of the settlement from individuals or through a class action suit.
The settlement also includes new standards for how banks service loans and practice foreclosure proceedings, including a ban on robo-signing.
Impact on borrowers
The report projects that foreclosure timelines will be lengthened due to the requirement for servicers to review loans for principal forgiveness, causing a delay for servicers when referring loans to foreclosure. According to the report, Florida and California should be more significantly affected since they were awarded the highest proportion of funds from the settlement.
Borrowers will have greater protection since servicers and insurance providers will not be able to charge high premiums when force placing insurance and must instead charge commercially reasonably prices. A third-party review process will also be set in place offering more protection to borrowers since it will hold servicers accountable for meeting certain goals and deadlines.
The Mood Analytics stated that “the reviews will likely assess whether or not servicers are making reasonable and timely modification decisions on behalf of both borrowers and investors and are implementing the key operation provisions of the settlement.”
Out of the $25 billion, the settlement allocates $10 billion for principal reduction; $7 billion in relief for other types of support including forbearance and short sales; $3 billion for refinancing underwater homes; $1.5 billion for those wrongfully foreclosed on between 2008 and 2011; and $3.5 billion for state housing programs.
While the settlement proved to be a disappointment to some since it does not include Fannie Mae and Freddie Mac loans, Moody’s Analytics stated that the settlement is still significant.
“The number of distressed homeowners helped is modest in the context of the estimated 14.6 million underwater homeowners, a sore point for many critics of the settlement. Nonetheless, the number is significant,” stated Moody’s Analytics in the written report. “Keeping even half a million households out of foreclosure or a short sale would be enough to curb the flow of foreclosed, vacant properties into the market, and thus relieve downward pressure on house prices nationwide and allowing prices to stabilize this year.”
The Moody’s Analytics also expects to see Nevada, Arizona, California, Florida, Ohio, and Michigan to benefit the most since those states experienced the worse price declines and have the highest share of homes underwater.
©2012 DS News. All Rights Reserved.
By: Esther Cho 02/24/2012
After more than a year of intense negotiations, 49 state attorneys general and the nation’s five largest mortgage servicers reached a $25 billion settlement on February 9. While the agreement allotted specific amounts to go towards certain areas of relief for borrowers, including $10 million to write down principal on underwater mortgages, many are wondering how the decision between federal and state officials and the nation’s top servicers will impact the housing market.
Moody’s Analytics released a report with an analysis of the settlement’s expected impact on banks and borrowers.
Impact on banks
As for the servicers included in the settlement – Bank of America, Wells Fargo, J.P. Morgan and Citigroup, and Ally Financial – the report stated, “the settlement will have little to no financial effect on the banks and will remove some of the uncertainty surrounding mortgage servicing.”
More specifically, the report stated, “Bank of America, Wells Fargo, J.P. Morgan, and Citigroup have each publicly disclosed that the settlement will have little to no additional financial effect on the banks, outside of a modest reduction in interest income over the life of any modified loans.”
This is in part due to the fact that “existing litigation and loan-loss reserves mostly cover the related costs” for the banks.
The banks are still vulnerable to other lawsuits outside of the settlement from individuals or through a class action suit.
The settlement also includes new standards for how banks service loans and practice foreclosure proceedings, including a ban on robo-signing.
Impact on borrowers
The report projects that foreclosure timelines will be lengthened due to the requirement for servicers to review loans for principal forgiveness, causing a delay for servicers when referring loans to foreclosure. According to the report, Florida and California should be more significantly affected since they were awarded the highest proportion of funds from the settlement.
Borrowers will have greater protection since servicers and insurance providers will not be able to charge high premiums when force placing insurance and must instead charge commercially reasonably prices. A third-party review process will also be set in place offering more protection to borrowers since it will hold servicers accountable for meeting certain goals and deadlines.
The Mood Analytics stated that “the reviews will likely assess whether or not servicers are making reasonable and timely modification decisions on behalf of both borrowers and investors and are implementing the key operation provisions of the settlement.”
Out of the $25 billion, the settlement allocates $10 billion for principal reduction; $7 billion in relief for other types of support including forbearance and short sales; $3 billion for refinancing underwater homes; $1.5 billion for those wrongfully foreclosed on between 2008 and 2011; and $3.5 billion for state housing programs.
While the settlement proved to be a disappointment to some since it does not include Fannie Mae and Freddie Mac loans, Moody’s Analytics stated that the settlement is still significant.
“The number of distressed homeowners helped is modest in the context of the estimated 14.6 million underwater homeowners, a sore point for many critics of the settlement. Nonetheless, the number is significant,” stated Moody’s Analytics in the written report. “Keeping even half a million households out of foreclosure or a short sale would be enough to curb the flow of foreclosed, vacant properties into the market, and thus relieve downward pressure on house prices nationwide and allowing prices to stabilize this year.”
The Moody’s Analytics also expects to see Nevada, Arizona, California, Florida, Ohio, and Michigan to benefit the most since those states experienced the worse price declines and have the highest share of homes underwater.
©2012 DS News. All Rights Reserved.
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