Housing: Freddie loses *another* $6.7B in Q1, asks Treasury for another 10.6B…
unbeLIEVable.
Our previous posts on FAN FRED HAMP and the EPIC FAILURE of Team Obama to address housing here. HOLC dammit. The housing double dip is right on track.
Freddie Mac reported a $6.7bn Q110 net loss, widened from $6.5bn in the previous quarter.
The Federal Housing Finance Agency (FHFA), acting as Freddie’s conservator, requested $10.6bn in aid from the Treasury Department to cover the company’s $10.5bn net worth deficit. At the end of 2009, the company had a $4.4bn net worth…
Housing – Obama and Treasury to add principal writedowns to HAMP program & add plan for unemployed homeowners…
The principal writedowns are 3 years too late, they will be much larger now. So will losses to taxpayers. Here at MiM we have been following the housing collapse from the epicenter here in Phoenix, and Obama’s first pathetic sellout HAMP program ‘suggestions’ to the banks has gotten us less than 200,000 mods out of a pool of 5 million, with 50 billion earmarked while they extend and pretend and play head games with families in these homes.
The thing people still seem to be having trouble grasping is that we taxpayers are ALREADY on the hook for these defaults via FANNIE FREDDIE. So IMO it would have been far better to a, use TARP for its original purpose of buying up the bad MBS products, or b, encouraging principal writedowns a la the BofA/FDIC method of ensuring a 5 yr cash flow…
We are in the double dip of the housing recession and it will bring the economy down…again…
The White House will announce Friday an expansion of its foreclosure-prevention efforts to include reducing the mortgage loan balances for some distressed borrowers and giving temporary help to the unemployed, people familiar with the plans said.
In the latest overhaul of the year-old mortgage-loan modification program, these people said, the White House will announce plans to allow unemployed borrowers to receive sharply reduced payments—or a break from making any payments—for at least three months and up to six months. The revamp will also require banks to consider writing down loan balances as part of the formula for lowering monthly payments under the federal Home Affordable Modification Program, or HAMP.
In addition, the administration will introduce a program that uses the Federal Housing Administration to insure new loans for borrowers who are underwater, owing more than the current values of their homes.
Under that program, investors who reduce loan balances to 96.5% of the current property value would refinance borrowers into an FHA-backed loan. Investors would have to reduce first-lien mortgages by at least 10%. For properties that have second-lien mortgages, the program is designed to reduce the total mortgage debt to no more than 115% of the estimated property value. Banks that hold second-liens will be eligible for incentive payments if they write down those loans so borrowers can qualify….
Other Resources:
Making Home Affordable Treasury Program
e.Fannie Mae.com (servicer updates)
HUD- Department of Housing & Urban Devlopment
Fannie Mae mortgage customers call Fannie Mae at 1-800-7FANNIE
( 1-800-732-6643 1-800-732-6643) or www.fanniemae.com/homeaffordable
Freddie Mac mortgage customers call Freddie Mac at 1-800-FREDDIE ( 1-800-373-3343) or www.freddiemac.com/avoidforeclosure
VA mortgage customers (thank you for your service) vall VA Financial Counselors at 1-877-827-3702 or www.homeloans.va.gov
FHA -www.fha.gov
Hope Now Alliance (Hank Paulson’s Plan)
1-888-995-4673 or www.hopenow.com
Market Mover Tuesday: Housing data
Update: Sales of existing homes fall 0.6%, third month of declines. This data is PRIOR to the snowstorms, so dont believe anyone who spins it as weather related. That housing credit did just what clunkers did, it borrowed against future sales….
Key housing data points on sales coming in today (Feb home sales 10:00 am) and the critters on the Hill have decided to turn their ‘laser like focus’ to housing (Fannie Mae, Freddie Mac). And it only took them 5 years. Quick on the uptake these critters eh? Meanwhile it looks as though FAN and FRED have RADICALLY cut back on loan volume..which would be good if we were getting them out of the business, but we aren’t so what’s happening?
The government seized control of Fannie Mae // and Freddie Mac // massive companies that purchase home loans, package them into investments and guarantee them against default. The price tag has been huge—$126 billion and growing.Now comes the hard part: figuring out what to do next.
“They have a separate regulator and they are a structural problem that is very large and very difficult to deal with separately,” Paul Kanjorski, Chairman of the Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, told CNBC.
Well what does Team Obama plan for housing? (beyond the ‘extend and pretend’ BS where they string homeowners along on HAMP) Well they are voting PRESENT …AGAIN…real shockah there eh?
With the Obama administration largely mute on the issue, Congress will hold its first hearing Tuesday about how to restructure the mortgage system in the wake of the financial crisis.
…Since the government took over Fannie and Freddie, Obama officials have given few details on their long-term thinking, apart from saying that they want to delay a legislative proposal until next year. In the meantime, officials plan to seek public comment on a list of questions to be published next month….
So in this case, like every other, Obama lets Congress, specifically the House and Pelosi, lead the way. I guess that was the ‘signed, sealed, delivered’ deal he and Pelosi made when she selected him as our candidate . As usual the two parties are diametrically opposed:
Kanjorski said he was favoring some smaller Fannies and Freddies, with some government connection, so if they fail they will not bring the system down with them….
Rep. Spencher Bachus, ranking Republican on the committee, said in a subsequent CNBC interview that he would prefer government exit the industry entirely. “We need to phase it out over time,” he said. “America is about competition and innovation. The federal model simply is not the efficient model.”
So when will this CORE ECONOMIC ISSUE, be addressed?
…Working out a new system is likely to take years. For the time being, the market is still resting on three government pillars: Fannie, Freddie and the Federal Housing Administration.There has been plenty of talk in recent months about how to scale back reliance on those behemoths, which own or guarantee half of all mortgages….
Barney Frank is pushing Treasury for at least some kind of outline of their FAN FRED HOUSING plan. Gee maybe some of the critters realize they will not have a majority much less Chair of the Cmte, much longer….
Fannie Mae and Freddie Mac won’t be allowed to return to a precrisis structure that rewarded shareholders with big profits for years but ultimately saddled taxpayers with massive losses, Treasury Secretary Timothy Geithner will tell a congressional panel Tuesday.
The administration will outline broad principles for the future of the mortgage market at the hearing, including stronger consumer protections and explicit guarantees for any government backstop of mortgages.
“The housing-finance system cannot continue to operate as it has in the past,” Mr. Geithner says in prepared testimony. The administration won’t issue a detailed overhaul proposal until later this year.
The hearing comes as Congress turns up the pressure on the administration to discuss how it plans to rebuild the mortgage market, the recipient of massive government support since the credit crunch began more than two years ago.
“We need people to start focusing on it. Nobody was coming up doing the hard thinking,” said Rep. Barney Frank (D., Mass.), who said he called the hearing to accelerate debate on the future of Fannie and Freddie…
…Fannie and Freddie, together with the Federal Housing Administration, now back more than 9 in 10 home loans….
New Housing Aid from Team Obama: finally a move for underwater states!
Jeebus it took long enough! I remember when my Congress Critter’s staff LAUGHED at me when I suggested just this: that in the 4 states underwater the most they propose a program to help us here (I even used the 20% figure, it is also all over this blog in posts for the past year). And here is just such a program…finally. Let’s hope it can help some people and doesnt get gobbled up by any ACORN like entities..
Millions of homeowners are hanging by a moment like Lifehouse says…
President Barack Obama is expected to announce plans Friday to provide an additional $1.5 billion to a state-assistance program for homeowners worst hit by the downturn in U.S. housing values.
The program, which Mr. Obama will announce in Las Vegas, is for states where the average home value for all homeowners in the state has dropped more than 20% from its value at the height of the housing bubble. Under the formula, five states have home-price declines steep enough to qualify them: Nevada; California; Arizona; Michigan; and Florida…
...The money would be distributed by state and local housing finance agencies, or HFAs, in each state. The $1.5 billion would be allocated according to a formula based on home-price declines and unemployment.
HFAs could use the money in a variety of ways, including unemployed homeowner assistance, mortgage workouts or new home purchase assistance. But the Treasury Department, which would bankroll the program with unused money from the Troubled Asset Relief Program, must approve a state’s plans.
More from Politico:
…The program Obama will announce is intended to help address “urgent problems,” with the specific goal of helping people who are sitting in houses that are worth less than is owed on them, the first senior administration official said.
The five states that are eligible for the funds have all seen a more than 20 percent decline in housing prices, the official said. The official also said the money will not be divided equally among the states but rather allocated based on the state’s price decline and unemployment rate.
And unlike $23 billion that the Federal Reserve recently provided to state housing authorities, states receiving this money are not expected to pay it back, the official said.
More nothing on Housing: Treasury to announce minimal changes to Making Home Affordable program today, Bank of America signs on to second lien HAMP program…
Nothing on housing in SOTU despite the fact that we are about to fall off a cliff and bring the entire economy down in a double dip with collapsing prices (Obama did note the drop in home values but no plan for FAN FRED the biggest hit to taxpayers past, present and future..) Our previous posts on HAMP, FAN FRED, rising defaults and the 2MP Second Lien program here.
Sounds like ‘The Plan’ from the Administration is to waive documentation and force the initial group of trial mods to permanent status. Style over substance, again. How that helps address the imminent walkaways on 4 million more foreclosures no one can say….
The Treasury Department on Thursday plans to unveil changes designed to streamline burdensome paperwork required for its foreclosure relief plan, according to people briefed on the matter.
The tweaks to the problem-plagued program could help more borrowers complete loan modifications. But they are unlikely to placate critics who have been calling for far more dramatic changes.
Lenders will now be required to collect two pay stubs at the start of the process, and borrowers will have to give the Internal Revenue Service permission to provide their most recent tax returns at the same time, according to the people who declined to be identified because the details were not yet final….
OMG!! They are DENSE!! People who haven’t sent in the tax return release form yet likely have lied on their income!!! What are they wasting time on this crxp for when the problem has grown so enormous on shadow inventory and ARMS about to reset just as FED pulls out of QE?!
Here is one good thing, having receipt of HAMP applications ACKNOWLEDGED. Gee what a novel idea? Gawd this entire thing has been an exercise in delaying inventory build and nothing more…
…Participating mortgage companies must acknowledge they received a borrower’s application within 10 days and approve or deny the application within 30 days. After that, borrowers will still be required to make three months of trial payments before the modification becomes permanent.
What about addressing the rising UE and the roll over effect on foreclosures? STILL NOTHING TO ANNOUNCE. STILL.
..…Treasury officials are also working on a plan to give unemployed borrowers a break on payments — possibly for six months — but those details were not expected Thursday. A Treasury spokeswoman declined to comment.
With foreclosures at record-high levels, the Obama administration’s program to attack the crisis has been a disappointment. Only about 66,500 borrowers, or 7 percent of those who signed up, had completed the program as of December…
…The $75 billion program has been such a dud that some housing advocates say the Obama administration needs to rethink its entire approach.
There is some movement on a long awaited angle, the Second Lien program (2MP) finally got someone to sign up! Bank of America on board.
Bank of America Corp., the largest U.S. bank, agreed to modify some home-equity loans through the government’s Home Affordable Modification Program amid criticism from bond investors and consumer groups over the federal effort to limit foreclosures.Bank of America, which handles 14 million home loans including 3 million second-lien mortgages, is the first mortgage servicer to sign a contract committing it to the program, the Charlotte, North Carolina-based company said today in a statement. Chief Executive Officer Brian Moynihan made a “verbal commitment” to the program during a meeting with Treasury Secretary Timothy F. Geithner earlier this month, the bank said.
“For many homeowners facing severe financial difficulty, decreasing the payment on the first mortgage without a reduction in the payment on the second lien may not produce an affordable combined mortgage payment,” Barbara Desoer, president of Bank of America Home Loans, said in the statement…
And they continue to play head games with homeowners on whether or not they wll address the collapse in equity which is causing a negative feedback loop of walkaways. The damage is done, trying to prevent moral hazard of walkaways now is closing the door after the horses, cows, mice everyone has left the barn.
First they say, no plans for principal reduction, then 7 days later tell BusinessWeek there are plans for principal reduction:
Despite increasing pressure to take more aggressive steps to keep troubled borrowers in their homes, the Obama administration said Wednesday that it had no immediate plans to alter its foreclosure-prevention program by increasing its reliance on reducing loan balances.
The administration’s statement came as attorneys general and banking regulators in 14 states warned that policy makers needed to do more to stem the tide of foreclosures.
The Obama program, announced in February as a cornerstone of the administration’s efforts to stabilize the housing market, has been running into increasing criticism as delinquencies have mounted. The program has focused on reducing loan payments to affordable levels through interest-rate reductions and other changes in loan terms. But state officials and others say it needs to address falling home prices through principal reductions because many homes are now worth less than their mortgages.
“The failure to reduce principal jeopardizes the sustainability of loan modifications,” Mark Pearce, North Carolina’s deputy banking commissioner, said at a briefing for reporters….
Then 7 days later they are ‘working on it’, but still nothing but a bunch of noises on the walk aways:
The Obama administration’s $300 billion Hope for Homeowners program may be retooled to help the growing number of Americans who owe more than their properties are worth as current anti-foreclosure efforts fail to account for these “underwater” borrowers.The changes would be at least the third lease on life for the program, which began in October 2008 during the Bush administration and has so far helped just 96 of the 400,000 homeowners originally targeted.
The U.S. Federal Housing Administration is considering ways to make the program more effective, Commissioner David Stevens said in an interview. While he wasn’t specific about any changes, he said Hope for Homeowners could be expanded to more directly help borrowers with negative equity….
Meredith Whitney & Jamie Dimon on principal forbearance in the JPMorgan Chase earnings call PLUS Are JPMC, BofA, Citi taking kickbacks for second liens on short sales?! & HAMP/MHA assisted a whopping 7% of those eligible last year..
Update: Short Sale Kickback video added
In other great news, Diana Olick is breaking a HUGE story now on CNBC that the big servicers, JPMorgan Chase, Bank of America and Citi have demanded off-HUD, off ClosingStmt payments to release second liens they hold in short sales (against RESPA law).
Treasury told Diana they were unaware of this and will look into it. Good grief. and they wonder why the servicers dont want to do mods? THEY ARE GETTING KICKBACKS ON SHORT SALES! Plus they get an INCENTIVE PAYMENT to do short sales from Treasury (we the taxpayers) now. My Lord this is unreal.
Again this is the fault of the WH and Treasury. Treasury actually RAISED the cap on the ‘incentive fees’ the servicers can earn by doing their damn job as servicers today to 35 billion. Banks will do exactly what they can and no more. Sheila Bair at FDIC is the only one moving on principal forbearance, as usual she is ahead of the curve.
Plus the AP isn’t buying the BS spin anymore in its reporting of the much vaunted numbers Treasury is spinning today on their newly permanent mods (which they told the servicers to waive documentation for to achieve, the only thing the trial mods can be disqualified for now is ‘property’ disqualification, nice eh?):
The Obama administration’s mortgage relief plan provided help to only 7 percent of borrowers who signed up last year, another black mark for the struggling program.
Ouch that’ll leave a mark.
About 900,000 borrowers have enrolled in the $75 billion program since it launched in March, the Treasury Department said Friday. But as of last month, only about 66,500 homeowners had received permanent relief. Another 46,000 have been approved and should be finalized soon.The plan aims to make borrowers’ mortgages more affordable by reducing the mortgage interest rate to as low as 2 percent. They receive temporary modifications, which are supposed to become permanent after borrowers make three payments on time and complete necessary paperwork, including proof of income and a letter explaining the reason for their financial hardship.
The Treasury Department is pressing the 102 mortgage companies that are participating in the program to do a better job….
This is a great back and forth. I think we can confirm Treasury is doing exactly JACK SHXT about meaningful mods after hearing this discussion, so much for Obama being tough on those fat cats:
Here is an exchange between Meredith Whitney and Jamie Dimon on the JPMorgan conference call this morning (ht Brian):
Whitney: [W]e’re reaching a critical point in terms of all of the loan modification efforts and this is an industry question but then how it specifically affects your Company, given the fact that the industry feedback and statistics on the loan modification efforts are not good, so you question what’s the next initiative and the issue of principal forbearance. How much momentum do you think that has, can you comment on what stage we are in terms of obviously the extension ends [soon] with the last slug is over in February, so where do you think we are in terms of the government’s efforts to influence banks to do certain things?
Dimon: Well remember we do modifications of our own and we do the government modifications and I do think they’re kind of new, it was complex, and I think people will get better at it over time, Meredith. We have not thought of a better way to do it than loan by loan, which is does the person want to live there, can they afford to live there, and we really think that the payment, how much you’re paying is more important than principal. Even if you are going to do something on principal, to do it right you have to do it loan by loan and it effectively comes a similar kind of thing. The difficulty is the loan by loan part and we’ve asked the government and I think they tried to streamline a little bit to have programs because there’s too much paperwork involved in it so a lot of the reasons we’re not getting to final modifications half the time we don’t finish the paperwork, so they need the lower payments but they weren’t finishing the paperwork so we’re trying to get better at it, honestly, we rack our brains to figure out if there’s a better way to do it and you can do it more macro than loan by loan but once you start talking about macro, you’re going to get involved in a lot of issues about whether the people live there, whether they have the ability to pay, whether they were honest when they first told people how much their incomes were, so we’re working through it.
Whitney: Okay, do you get a sense that there’s something right behind HAMP, that there’s another solution for the government or is it more your efforts?
Dimon: We’re trying to do this, look, we’re trying to have ideas and they are trying to have ideas but if we had a brilliant one we would be very supportive of doing it. We want to do the right thing for the people.
Whitney: Okay, so a point of clarification on your answer, issue of principal forbearance is not something that people should be overly concerned about with respect to reserves and capital for the bank?
Dimon: No, I think if there’s a macro government force on something like that you could have a fairly significant effect on loan loss reserves and losses, etc.
Whitney: But is that a real, any momentum?
Dimon: Honestly Meredith you probably know as well as we do.
Whitney: I don’t know. I can’t help myself on that one.
Neither can we!
ginaswo
