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Home Loan Delinquency Rates Rise Based on Foreclosures

Home-loan delinquency rates in the US reached 10% in December, up from the record-high 9.97% in November [1], according to Lender Processing Services (LPS [2]: 38.85 -0.05%), which provides data on mortgage performance.

Accounting for foreclosures in the pipeline, the total non-current rate stands at 13.3%, according to the data in the LPS database. When extrapolated for the entire mortgage industry, 7.2m mortgage loans are behind on their payments. Earlier in January, Fitch Ratings reported the delinquency rate among prime jumbo residential mortgage-backed securities (RMBS) almost tripled to 9.2% [1]in December 2009.

For the amount of loans current at the end of 2008, 4.64% fell into serious delinquency. That means that of the loans current as of Dec. 31, 2008, 2.3m fell into serious delinquency by December 2009.

However, the 2009 vintage loans are performing better than any of the prior five years and improve as more origination months are added into the pool of loans. More restrictive underwriting guidelines drive the improvements, but liquidity “is still not available where it is needed most,” according to the report.

States with the most non-current loans are: Florida, Nevada, Mississippi, Arizona, Georgia, California, Indiana, Michigan, Illinois and Ohio.

States with the fewest are: North Dakota, South Dakota, Alaska, Wyoming, Montana, Nebraska, Vermont, Colorado, Oregon and Washington.

[1] the record-high 9.97% in November: http://www.housingwire.com/2010/01/11/more-than-13-of-mortgages-delinquent-or-foreclosed-in-november-lps/

[2] LPS: http://finance.yahoo.com/q/ks?s=LPS

Massachusetts Foreclosures Rise in 2009, Overall

The number of foreclosures initiated in Massachusetts jumped 28.1 percent in 2009 to 27,928 from 21,804 in 2008 but was 5.5 percent below the level in 2007, according to the latest report from The Warren Group, publisher of Banker & Tradesman.

The number of completed foreclosures, meanwhile, declined 25.4 percent to 9,269 last year from 12,430 in 2008 but was still 21.1 percent ahead of the 7,653 foreclosures recorded two years earlier.

“The good news is that not as many homeowners lost their homes to foreclosure in 2009 as they did the prior year. The bad news is that more people faced foreclosure, as they struggled with unemployment and other economic hardships,” said Timothy M. Warren Jr., CEO of The Warren Group. “Efforts to modify mortgage loans and a Massachusetts Land Court decision which forced some lenders to hold back on recording foreclosure deeds or to restart them after proper mortgage assignments have been made helped to temper foreclosure activity last year.”

Foreclosure petitions — the first step in the foreclosure process in Massachusetts — reached 2,060 in December, a 6.4 percent increase from 1,937 in November and 26.8 percent higher than the 1,625 petitions filed in December 2008. The number of foreclosure petitions exceeded 2,000 for most months in 2009, falling below that number only in January and November.

In December, there were 857 foreclosure deeds, a 22 percent jump from November’s 702 deeds but an 8.4 percent drop from the 936 deeds recorded in December 2008. Foreclosure deeds represent completed foreclosures. Foreclosure deeds fluctuated throughout the year, peaking at 978 in January.

The Warren Group also tracked slightly more auction announcements in 2009. A total of 19,441 auction announcements were tracked in 2009, a 0.9 percent increase from 19,270 in 2008. Auction announcements in December totaled 1,931, a 13.3 percent drop from 2,226 in November but a 60.1 percent jump from 1,206 during the same month in 2008.

Arizona Four Seasons Resort and Golf Club Facing Foreclosure

A 400-acre luxury resort that hosts the annual Byron Nelson Championship golf tournament is facing foreclosure.

U.S. Bank has posted the Four Seasons Resort and Club in suburban Dallas, with its more than 400-room hotel and spa, for a Feb. 2 auction. The bank is seeking payment on a $183 million note with Los Angeles-based BentleyForbes.

The real estate investment company did not immediately respond Thursday to a request for comment from The Associated Press.

Four Seasons general manager Michael Newcombe says the owner has been in talks with lenders on ways to restructure debt. He says the posting will not affect the property’s daily operations.

This year’s Byron Nelson Championship is scheduled for May 20-23.

$13.6 million Coming to Boston in Foreclosure Aid

Boston will get $13.6 million in the second round of Neighborhood Stabilization Program funding to assist the city’s foreclosure prevention and reclamation efforts.

The grant will allow the Department of Neighborhood Development to support redevelopment of up to 275 foreclosed homes in Dorchester, East Boston, Roxbury, Hyde Park and Mattapan.

Buyers of foreclosed properties in those neighborhoods may be eligible for low-interest loans or grants of up to $50,000 for purchase and renovation costs.

“This award accelerates our ability to impact the foreclosure challenges that were facing,” said Mayor Thomas M. Menino in a statement. “We’re making important progress, but our neighborhoods are still in danger.”

Boston was one of 482 applicants requesting over $15 billion from the U.S. Department of Housing and Urban Development in foreclosure funding. Since passage of the American Recovery and Reinvestment Act, the city has received nearly $280 million in formula and competitive grants as well as bond allocations.

The NSP initiative was created as part of the Housing and Economic Recovery Act of 2008, designed to boost local economies through the provision of resources to purchase and rehab foreclosed homes. Boston received $4.23 million in 2009 during the first funding round, and later received a matching grant from the state. The latest award brings Boston’s total federal foreclosure funding to more than $21 million.

The campaign seeks to allow Boston’s neighborhoods to recover from the nationwide foreclosure crisis through targeted programs that support existing homeowners while adding new buyers to the market, among other things. Under the umbrella of this initiative, DND has overseen the direct acquisition of 33 units of housing, and is in the process of negotiating the purchase of more than 100 others from banks.

Boston’s Rich Suburbs See Foreclosure Increases

Massachusetts Real Estate Foreclosure Update

The number of foreclosures initiated in Massachusetts during the month of November fell below 2,000 for the first time since January, according to a new report by The Warren Group, publisher of Banker & Tradesman. Still, petitions to foreclose, which mark the start of the foreclosure process, remain at a relatively high level and were 45 percent higher than last November.

1 Million Homes Foreclosed in the US During 3rd Quarter 2009

Troubled home loans continued to mount in the nation’s banks in the third quarter as even once-solid borrowers increasingly fell behind on their mortgage payments.

For the first quarter ever, the number of homes in foreclosure with mortgages serviced by U.S. national banks and savings and loans topped the 1-million mark, according to figures released Monday by the Office of Thrift Supervision and the Office of the Comptroller of the Currency.

The percentage of prime borrowers whose loans were 60 or more days past due doubled from the July-to-September period a year earlier. And more than half of all homeowners whose payments had been lowered through modification plans defaulted again.

The report, which covers about 34 million loans, or about 65% of all U.S. mortgages, underscores the obstacles to strengthening the nation’s rickety housing market. Stubborn unemployment is making it tough for millions of homeowners to pay their debts. In addition, many people whose monthly installments have been lowered still are unable to keep up with their payments.

Of the mortgages serviced by national banks and thrifts, only 87.2% were current and performing. It was the sixth straight quarter that the quality of those home loan portfolios had slipped.

“Mortgage performance continued to decline as a result of continuing adverse economic conditions including rising unemployment and loss in home values,” the report said.

Seriously delinquent mortgages — loans 60 or more days past due and loans to delinquent borrowers who have filed for bankruptcy — rose to 6.2% of the servicing portfolio. That’s a 16.7% increase over the second quarter and a 73.8% increase from a year earlier, the report said.

Of those seriously delinquent loans, the number of homes in the foreclosure process reached 1.09 million, about 3.2% of all the loans surveyed.

The report highlighted some troubling trends as the housing market continues to struggle despite increasing sales and prices in many areas. Difficulties increased for holders of prime mortgages, with the percentage of those loans that were 60 days or more past due increasing to 3.2%, up almost 20% from the second quarter and more than double the rate of a year earlier.

In addition, holders of mortgages whose payments had been lowered through government or private modification plans re-defaulted at high rates. More than half of all homeowners with modified loans fell 60 days or more behind in their payments within six months of the modification taking place.

But Bruce Krueger, a mortgage analyst for the Office of the Comptroller of the Currency, noted that homeowners with more-recent modifications were doing better at keeping up with their new payments, reflecting a push by the Obama administration to get mortgage servicers to come up with better plans.

About 35% of homeowners who received modifications in the third quarter of 2008 fell 60 days or more behind on their payments within three months of the modification, the report said. That figure decreased to about 19% of homeowners who received a modification in the second quarter of this year.

Still, the report’s data could add pressure on Congress to give financially strapped homeowners additional help by allowing judges to lower mortgage principle as part of bankruptcy, said Jaret Seiberg, a financial policy analyst with Concept Capital’s Washington Research Group.

“While the re-default rate seems to be getting better, it’s still very high and it’s high enough to continue causing a political problem for the industry,” he said.

Mortgage modifications increased in the third quarter as the Obama administration pushed servicers to participate in its Making Home Affordable modification program. The report said servicers modified 680,000 loans through that program or their own efforts. Overall, mortgage servicers started almost twice as many modifications as new foreclosures.

Oddly, the increased attempt to keep people in their homes with lower payments contributed to the rise in the number of homes in the foreclosure process. The pace of homes beginning foreclosure proceedings remained about the same in the third quarter as it was earlier this year. But fewer of those proceedings were finished, as mortgage servicers worked with homeowners to modify some of those loans.

Monday’s report comes on the heels of a private report last week that said there were 1.7 million homes headed for the market because of foreclosures or delinquency. That backlog of “shadow inventory” increased 55% in the year that ended Sept. 30, said the report by First American CoreLogic, a Santa Ana research firm.

The Obama administration has been trying to reduce foreclosures through its mortgage modification program, but reported this month that few of the three-month trial modifications were being made permanent. Of the more than 700,000 trial modifications offered by mortgage servicers, just 31,382 had been made permanent as of Nov. 30. Administration officials have increased pressure on mortgage servicers to improve that figure.

Nantucket, MA, Concord, MA, Weston, MA, and Winchester, MA Foreclosures are Increasing 3X, or 4X

The state’s foreclosure crisis, which has largely battered lower cost cities like Worcester, Springfield, and Lynn, is slowly creeping into the state’s tonier towns, reflecting a tough financial year for even some of Massachusetts’ wealthiest residents.

Affluent towns including Nantucket, Concord, Weston, and Winchester, saw triple or quadruple digit percent increases in foreclosure deeds during the first 11 months of the year, according to data released yesterday by Warren Group, a private company that tracks real estate data.

The numbers are tiny to be sure – 19 homes in Nantucket and six in Concord – a problem dwarfed by the hundreds of homes lost to foreclosure in cities like Springfield, Worcester, and Brockton. However, the increasing problem in costlier towns presents evidence that the battered economy and an 8.8 percent unemployment rate is leaving no community untouched, many housing experts agree.

“The wealthier communities are experiencing maybe for the first time the hardship that low-income and minority communities have been feeling for many years,’’ said Bruce Marks, chief executive of the Neighborhood Assistance Corp. of America, a nonprofit advocacy organization based in Jamaica Plain.

Statewide, the number of foreclosure deeds, which represent a completed foreclosure, dropped 26.8 percent to 8,409 between January and November compared with the same time last year, according to Warren Group. But petitions, the first step in a foreclosure process, increased 28.2 percent this year to 25,868 – a sign that the foreclosure crisis has yet to ebb.

Many communities that were hardest hit by foreclosures over the last several years saw the problem slow in 2009. For example, in Worcester the number of foreclosure deeds fell to 445 between January and November, a 36.8 percent drop compared with the same time last year. Dorchester, the Boston neighborhood most plagued by streets of boarded-up and abandoned buildings, saw foreclosure deeds fall 40.5 percent to 352 this year.

Dean Baker, codirector of the Center for Economic and Policy Research in Washington, D.C., said that poorer neighborhoods most affected by the subprime market and predatory lending probably have seen the worst wave of the foreclosure crisis, which occurred in 2007 and 2008. Most vulnerable homeowners already have lost their homes. In wealthier neighborhoods, residents are now being affected by the economy and housing price declines that can wipe out all their equity, he said.

“You have record high rates of unemployment for people with college degrees,’’ Baker said.

In Nantucket, where median home prices hover at about $1.25 million, 19 homes were lost to foreclosure during the first 11 months of the year, up 1,800 percent from the one recorded foreclosure in 2008, according to Warren Group. Foreclosure petitions also jumped to 75, a 102.7 percent increased compared with the same period in 2008.

Weston, where median home prices reach $1.2 million, saw a rise in foreclosure deeds between January and November of this year to six compared with two during the same time last year. Seventeen homeowners went into foreclosure this year, representing a 41 percent increase from the year before, according to Warren data.

Virginia Pratt, a foreclosure prevention counselor at the nonprofit, Jamaica Plain-based Ecumenical Social Action Committee, said she gets more calls from distressed homeowners in the suburbs. She said many with incomes of about $150,000 talk about losing their jobs or having a health complication that limits their income. They no longer can access credit to help them through lean times and aren’t able to cut costs enough.

“The lower income doesn’t support the higher income lifestyle,’’ she said. “It’s people being stuck.’’

Comments on Obama Administration New Foreclosure Short Sale Rules

Homeowners struggling to stave off foreclosure too often encounter stonewalling from banks and other lenders when trying to do short sales.

It ranks as one of the most tragic elements of the current foreclosure crisis.

I’ve heard my share of stories on this blog from homeowners who complain they have been strung along for months or longer, unable to get an answer back from their bank in time to close a proposed short sale.

Even more maddening, the banks are likely to take a bigger hit in the end foreclosing on the home or condo and then letting it fall into disrepair as it sits empty on the market.

Enter the Obama Administration, which has issued new rules it contends will help speed along short sales and help prevent needless foreclosures.

There are clearly some helpful elements in the Treasury Department’s proposal. Overall, it attempts to bring some order to what too often appears to be a nebulous process, establishing timetables and formal documents.

But there are some troubling aspects as well that leave me wondering whether this is a real effort to help or just an industry approved public relations gimmick. (For a different take on the new rules, check out Richard D. Vetstein’s post.)

Frankly, I’m skeptical

For starters, there appears to be a reliance on trying to use little bribes to get mortgage companies to comply, rather than the big stick of regulation.

Mortgage companies can get $1,000 for administrative costs, which seems strikingly similar to the Obama Administration’s efforts to use modest cash incentives to prod lenders to head off foreclosures by modifying loans.

Of course, that $75 billion initiative has been a dismal failure. Just check the foreclosure rates – they are soaring.

The new program is also voluntary for lenders who hold a second mortgage on a home – half of all homeowners in default fall into this category.

These lenders can stand to make up to $3,000 for agreeing to bow out – not much incentive for the holder of a $100,000 to $200,000 loan.

Of course, there’s a small carrot for homeowners here as well – they get $1,500 to pay for moving expenses.

Thanks Uncle Sam.

But the icing on the cake? The new rules won’t kick in until April 5th.

I am sure that’s just what the banking and mortgage industry lobbyists ordered up.

No need to rush things here, let’s just take our sweet old time.

But that’s not much help for homeowners on the edge of losing it all.

Comments on the Home Affordable Foreclosure Alternatives Program | Short Sales in Boston

Attorney Richard D. Vetstein commented on the Home Affordable Foreclosure Alternatives Program.

The Obama administration on Monday set long-awaited guidance on a plan for mortgage companies to speed up short sales of homes and other loan modification alternatives to stem the rising tide of foreclosures. The Home Affordable Foreclosure Alternatives Program provides financial incentives and simplifies the procedures for completing short sales, a growing practice in which a lender agrees to accept the sale price of a home to pay off a mortgage even if the price falls short of the amount owed. The announcement can be found here.

The new federal guidelines address barriers that have often sidelined short sales by setting limits on the time it takes a bank to approve an offer, freeing borrowers from debt and capping claims of subordinate lenders. New financial incentives for completing short sales or similar “deed-in-lieu” transactions — in which the deed is simply transferred to the lender — include a $1,000 payment to servicers, and a maximum of $1,000 to go to investors who sign off on payments to subordinate lien holders, the Treasury said. Borrowers would also receive $1,500 in relocation expenses.

While a short sale may be preferable to a foreclosure, they have been frustrating for borrowers, buyers and Realtors, because they are often hung up by lengthy negotiations with multiple lien holders and mortgage insurance companies. Realtors have complained that sales fall through as lenders bicker over the sales price, what they should receive from the proceeds, and whether the borrower will be held accountable for the debt in the future.

Under the new rules, mortgage servicers have 10 days to approve or disapprove a request for short sale, and when done the transaction must fully release the borrower from the debt. The rules also prohibits mortgage servicing companies from reducing real estate commissions on the sale, a practice that has dissuaded many agents from taking short sale listings.

Ostensibly, the federal guidelines apply only to banks and lenders subject to federal banking oversight. That means big boys Bank of America, JP Morgan Chase and Wells Fargo, but not necessarily local and state chartered banks who remain free to be as unreasonable as they want in short sale transactions.

This will help, but by how much remains to be seen.

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