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….
James Lockhart (Dubyahs head of FHFA) of all people calls for principal reductions on CNBC this morning and Barney Frank D-MA said it will not happen..Through the Looking Glass…
James Lockhart, former head of the Federal Housing Agency, told CNBC Tuesday that he wants more generous mortgage modifications, including principal payment reductions.
…Although the latest Case-Shiller Index indicates the housing market has been improving for the last five months, there could be another spike in foreclosures, said Lockhart. While banks and investors have already marked down mortgages on their books, he said, that benefit has not yet been passed onto homeowners….
…“We still haven’t seen the falloff in foreclosures,” he said. “All the solutions have been on the income-side, and people’s balance sheets are suffering. It’s coming to the point where I think we really have to consider much more aggressive [loan modifications and] at looking at reducing principals.”
Lockhart also expects strategic defaults will start to occur more frequently. “You look at the bankruptcy numbers; the stigma is not there anymore,” he said….
Rep. Kucinich D-OH has called for an investigation into what looks to everyone like a backdoor TARP...
…Representative Dennis Kucinich, an Ohio Democrat who was an early opponent of Obama in the 2008 presidential race, thinks the move is backdoor way to help banks, and a congressional subcommittee he leads is investigating the Treasury’s decision to cover unlimited losses at the housing finance companies.
“This new authority must be used responsibly and for the benefit of American families,” Kucinich said. It “cannot be used simply to purchase toxic assets at inflated prices, thus transferring the losses to the U. S. taxpayers and acting as a backdoor TARP.”
That’s exactly what Treasury is doing, says Dean Baker, co-director of the Center for Economic Policy Research in Washington. “This looks like the original TARP,” Baker said, referring to $700 billion financial rescue fund, known officially as the Troubled Asset Relief Program.
Waxman and Issa also ‘concerned’
…Kucinich is not the only one on Capitol Hill up in arms. House Energy and Commerce Committee Chairman Henry Waxman, a California Democrat, said he doesn’t like the idea of a “blank check” for Fannie and Freddie.
And Darrell Issa, the top Republican on the House Oversight and Government Reform Committee, called it “a continuation of the bailout policies that have mortgaged away the future solvency of our country.”…
From the radical to the sublime, or the sublimely stupid. Are we in the Twilight Zone or what? I dunno anymore. If these yahoos cannot get the servicers to do meaningful mods, then at this point why the hell not pay people to leave their homes and pay servicers to do their fiduciary DUTY by allowing a short sale@@?!!@@ Off The Rails. And they think servicers will do MORE mods when they can get paid another fee to do short sales where they already make money?
What a clusterfxck this whole thing has been and continues to be. HOLC DAMMIT! We would have bought these houses ONCE. Now we are paying and paying and paying. When FAN FRED FHA have to write these loans down taxpayers will pay yet again for these same houses.
I mean talk about moral hazard. It is a moral hazard to buy the loans directly through HOLC once, when we own FAN FRED anyway, but it is not moral hazard to pay people to leave their homes and loans? And to keep interfering in the market so it does not correct? If we bought them, once, we would be done in one fell swoop. This endless tinkering is what leads to market uncertainty and lack of capital investment.
But by all means let’s BS around the sanctity of the contract. Who are they kidding? No contract has been protected since Chrysler bondholders got screwed and we all know it. We are paying for these losses ANYWAY as all these loans are now owned by FANNIE and FREDDIE and increasingly, FHA.
WE the taxpayers are ALREADY the damned owners. When the short sales go through WE the taxpayers will take the loss via FAN FRED and have to send them MORE money. Why not leave the people in their houses if we have to pay for losses anyway? But nooooo then the banks.servicers couldn’t get nice fees right? frakkers. sigh.
Under the plan, borrowers will receive $1,500 from the government if they sell their homes for less than the amount of their mortgages. Mortgage-servicing companies will also receive $1,000 for each completed short sale. The program is open to borrowers who may be eligible for the government’s loan-modification program, but don’t end up qualifying, or are delinquent on their modification, or request a short sale or deed-in-lieu transaction.
The short-sale program is the latest addition to the Obama administration’s $75 billion foreclosure-prevention plan, which includes incentives for mortgage companies and investors to rework troubled loans. The government first said in May that it would include short sales in the program, but it has taken months to finalize the details.
Under the new guidelines, second-mortgage holders can receive up to $3,000 of the sales proceeds in exchange for releasing their liens. Investors who hold the first mortgages, meanwhile, can collect up to $1,000 from the government for allowing such payments.
Borrowers who complete a short sale under the program must be “fully released” from future liability for the debt, according to the guidelines…
That ‘fully released’ is key. In recourse states homeowners are liable for the difference between the short sale and the loan balance on the mortgage. But this guideline will release people from that debt. Also the IRS has a nifty habit of coming after people for taxable income on that difference. However there is a loophole there…
The Internal Revenue Service counts debt forgiveness–the difference between the home’s sale price and the amount owed on the mortgage–as regular income, although there are exceptions for bankruptcy, insolvency, forgiven deductible mortgage interest and seller-financed debt. You also cannot deduct losses from price declines, or expenses you incur for real estate brokers, attorneys or others involved in the sale. Primary homeowners, however, get a break from being taxed on the shortfall, at least until December 31, 2012, thanks to the Mortgage Forgiveness Debt Relief Act of 2007…
Update 2: Details released, an epic fail IMO. It could not be more clear they are tinkering to try to make the December modifications data release look better. Obama was to the right of McCain on housing and his team’s total failure to get the job done reflects that. (a la HOLC, which would have been far cheaper and less ‘interventionary’ if you will).
Diana Olick has the scoop:
The new effort, called a “Modification Conversion Drive,” is a nationwide campaign to “help borrowers who are currently in the trial phase of their modified mortgages convert to permanent modifications,” the Treasury said.Treasury officials said of the 650,000 trial modifications now in place, roughly 375,000 are scheduled to convert to permanent modifications by the end of the year. This new program includes outreach tools, borrower resources and servicer accountability.
The drive will also include what Treasury called “servicer accountablilty” which will require top loan servicers to submit a schedule demonstrating their plans to reach a decision on each loan.
If they don’t meet performance obligations they could be fined, but there are no details yet on how high the fines could go. Servicers will be required to report to the Administration the status of each modification for additional transparency.
In turn, the Treasury is rolling out more web tools for borrowers, including links to documents, and reaching out to state and local community stakeholders to help with outreach.
Last month, the Congressional Oversight Panel for the TARP found less than 2,000 of the more than half million loan mods made since the program began in June had become permanent. The trial period has been extended to five months due to overwhelming paperwork.
The plan was purported to save 3 to 4 million homeowners from foreclosure. It is now estimated there are 7 million delinquent loans in the pipeline….
Update: This part of the WSJ piece today sums it up perfectly:
…Meanwhile, the number of borrowers falling behind on their loan payments continues to outpace the administration’s efforts to help them. Roughly 1.56 million loans that were current in March were at least 60 days past due in October, according to LPS Applied Analytics. That’s more than double the number of trial modifications….
Nothing to write ‘home’ about. They are STILL trying to work on the modifications that have already been in the trial period (before they are FORCED to release the FAILURE RATE!) And they are FAILING to address the real issue that is now in the housing pipeline, JOB LOSS:
The other shoe drops: Fannie Mae reports MASSIVE 3Q loss of $18.9 Billion and asks govt for another 15B bailout; Fannie Mae rolls out ‘Deed for Lease’ program renting foreclosed homes to owners…
Update: The other shoe just dropped. I am guessing FAN didn’t roll out this Deed for Lease program out of the goodness of their hearts, they turned around and announced a MASSIVE 3Q loss and need ANOTHER 15B from Treasury:
The latest particular does of lunacy and economic calamity coming out of the intellectual midgets at Fannie and the FHA should be sufficient to push the market well into 1,100 territory tomorrow. FNM’s loss for Q3 is $18.9 billion, up from $14.8 billion in Q2, a time when the market was up a good 15%: ever wonder who keeps on subsidizing those gain? That’s right – you. Credit-related expenses increased to $22 billion in Q3 from $18.8 billion in Q2. Oh, and Fannie now wants another $15 billion rescue from the Treasury (which is having some troubles with getting that pesky debt ceiling raised to one googol) so it can continue with its plan of keeping shadow inventory away from the market, rent foreclosed houses to their owners at staggeringly low rates, and continue the pretense that bank’s balance sheets are well capitalized. Seriously, is the twilight zone any more palatable if one just drinks the Kool Aid or takes some crazy pill? We are ready and willing for the plunge.From the just released results by bankrupt Fannie Mae:
WASHINGTON, DC – Fannie Mae (FNM/NYSE) reported a net loss of $18.9 billion in the third quarter of 2009, compared with a loss of $14.8 billion in the second quarter of 2009. Including $883 million of dividends on our senior preferred stock held by the U.S. Department of Treasury, the net loss attributable to common stockholders was $19.8 billion, or ($3.47) per diluted share, in the third quarter of 2009, compared with a loss of $15.2 billion, or ($2.67) per diluted share, in the second quarter of 2009. Third-quarter results were largely due to $22.0 billion of credit-related expenses, reflecting the continued build of the company’s combined loss reserves and fair value losses associated with the increasing number of loans that were acquired from mortgage-backed securities trusts in order to pursue loan modifications.
The loss resulted in a net worth deficit of $15.0 billion as of September 30, 2009, taking into account unrealized gains on available-for-sale securities during the third quarter. As a result, on November 4, 2009, the Acting Director of the Federal Housing Finance Agency (FHFA) submitted a request for $15.0 billion from Treasury on the company’s behalf. FHFA has requested that Treasury provide the funds on or prior to December 31, 2009…..
Update on status of Fannie Mae’s HAMP/Making Home Affordable applications (HousingWire) :
(…) Fannie said as of the end of Q309, it had 487,000 trial modifications in progress through the Making Home Affordable Modification Plan (HAMP) and it has met the Treasury Department’s goal of 500,000 modifications in process by November 1.
Total loan workouts for Q309 totaled 49,000, including 28,000 loan modifications, compared with 41,000 workouts, including 17,000 modifications, during Q209.
“Even though the volume of trial modifications that we have initiated on Fannie Mae loans under the Home Affordable Modification Program has been substantial, a low percentage of our trial modifications had converted into completed loan modifications as of September 30, 2009,” Fannie Mae said. “One reason is that activity under the program has been increasing over time, so that many loans have not had enough time to complete the trial modification period prior to September 30, 2009.”
Also on Thursday, Fannie announced a new program that will allow new deed-in-lieu program that allows the borrower to sign a lease to rent their home from Fannie Mae in exchange for the voluntary transfer of the property back to the lender….
Golden Slacks to make a profit?? Housing Update: All About Fannie Mae – Delinquency rate explodes, book of business now at $3.242 trillion
Golden Slacks update moved to end of post
Oh shxt! I feel like Butch Cassidy and the Sundance Kid looking at that hockey stick cliff of a chart on FANNIE default rates, can’t we just face the Bolivian Army instead?! Maybe they WILL surrender to us!
From DirectorBlue, courtesy of Tyler Durden @ ZeroHedge h/t Instapundit. And the ABSOLUTE LOONS in Congress think extending a homebuyer tax credit is the way to spend money in housing when FAN FRED defaults are rising this way? Good Gawd Almighty. The Tarp Congressional Oversight Panel agrees, the Treasury housing plan IS NOT WORKING.
The [Fannie Mae] “seriously delinquent” rate has gone parabolic, increasing by roughly 5% sequentially and just under 300% YoY [year-over-year]. As mere text will simply not do this metric justice, please enjoy this chart of the dataset from Blytic. It tells you all you need to know about the Fed’s containment of the housing problem
The August seriously delinquent single-family number comprised of a 2.87% non-credit enhanced delinquencies and a very bothersome 11.52%, consisting of credit enhanced loans… The deterioration of FNM’s book however did not stop it from increasing the size of its book [loans]. In September Fannie’s total book of business hit $3.242 trillion, up from $3.229 trillion in August and $3.079 trillion in the prior year…
…This trend should bother you, dear taxpayer, because it is your money on the hook here, which is not only massively mismanaged by Bernanke & Co., LLC, but which sees another $80 billion of free funding every month courtesy of the dollar printing press to onboard even more toxic garbage onto your balance sheet….
We have been covering the housing mess extensively, not least because we are in the middle of it here in Phoenix. We discussed the impending FHA bailout (which they still deny they need) here. Our coverage of the impending second collapse in housing courtesy of UBS’ think tank here. Some highlights:
Update: Diana Olick reviews the TARP watchdog report and concurs with MiM, esp note the number of principal reductions out of 500,000 loans, it flies in the face of the claims by Treasury and the Office of the Comptroller that lenders were reducing principal:
(…) they did get a look at some data I’ve been unable to find, and that is that under HAMP only five, yes five, modifications of the half million involved principal forgiveness. There’s your headline. Treasury officials issued a polite retort, admitting that “the housing crisis was never going to be fixed overnight,” and that “While HAMP is open to the unemployed, we continue to study further ways to help unemployed homeowners,” but still, of course, they defended the program.
This appears to date to be just a total ripoff. The banks get 42.5 BILLION to modify 2 MILLION mortgages? Are you frakkin kidding me? We could BUY the houses IN FULL and have how much left over?! What a ripoff. And the TARP Treasury Watchdog Panel agrees:
The Obama administration’s loan modification effort is ill-suited to tackle the causes of the foreclosure crisis, financial rescue watchdogs concluded in a new report.The foreclosure crisis has shifted from being driven by exploding subprime mortgages to defaults on prime mortgages, many of them caused by job losses, two of the three members of the Troubled Asset Relief Program’s Congressional Oversight Panel concluded.
Meanwhile, the Home Affordable Modification Program, or HAMP, wasn’t designed to address these problems, nor is it geared towards averting a looming wave of foreclosures caused by resetting option adjustable-rate mortgages, they wrote.
“It increasingly appears that HAMP is targeted at the housing crisis as it existed six months ago, rather than as it exists right now,” the report, released early Friday, concluded.
But as we noted the other day, Treasury just gave the HAMP a glowing status update, what does the TARP watchdog say about that?
“The foreclosure crisis began with home flippers, speculators, reach borrowers who purchased or refinanced properties with very little money down and non-traditional mortgage products, and homeowners who were sold subprime refinancings,” the watchdogs wrote.
“Increasingly, however, because of the severity of the recession, declines in home prices, and the persistence of job losses, foreclosures involve” families who paid sizeable down payments and took out conventional loans, they continued.
According to the report, Treasury estimates it will spend about $42.5 billion of the $50 billion of TARP funds devoted to foreclosure mitigation. That will support about 2 million to 2.6 million modifications, the report said.
The watchdogs found that HAMP loan modifications completed so far were achieved almost exclusively through interest rate reductions. “Principal forbearance was rare and principal forgiveness rarer still,” they wrote. Lenders deferred principal in just 261 cases and forgave principal in only five, the report said.