Oct
24
Study | EMERGING PUBLIC HEALTH CRISIS LINKED TO MORTGAGE DEFAULT AND FORECLOSURE
EMERGING PUBLIC HEALTH CRISIS LINKED TO MORTGAGE DEFAULT AND FORECLOSURE University of Maryland School of Medicine researchers find mortgage default associated with substantially increased risk of depression Baltimore, MD – Oct. 20, 2011. Researchers warn of a looming health crisis in the wake of rising mortgage delinquencies and home foreclosures. The study, released today … Read more
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Jun
18
Jumbo Mortgage Delinquencies Are 50% Above Average And Rising
Here’s Why Jumbo Mortgage Delinquencies Are 50% Above Average And Rising Today, June 18, 2010, 5 hours ago | Michael David White
A quiet revolution has hit wealthy neighborhoods: financial failure.
The 90-day delinquency rate on home loans worth over a million dollars hit a high in February at 13.3 percent, much higher than the overall rate of 8.6 percent.
Financial failure on large-balance mortgages and high-end properties is 50 percent higher than the national average – and the national average delinquency-rate is at record highs (High-end Homeowners Falling Into Foreclosure Trap. 5/8/2010. CNBC). Given that cure rates are approximately zero percent at 90-days of delinquency (and I mean that literally), one of eight borrowers in expensive homes is dead-and-gone. This is not a trickle. This is a flood of “product” – houses that owners or banks must sell.
Current listings will not entirely reflect this dire payment-history picture. The higher the value of the property, the more likely it is to be sold off grid. So when the bank owns a house, or when the bank is near to taking the keys, you don’t end it all with a scene of furniture in the front yard.
“Lenders are far more likely to go the short sale route” for high-end properties, said Andrew LePage, an analyst at real estate research firm DataQuick. “There’s a lot more money at stake, and maintenance can be high if a foreclosure just sits there.”
Foreclosures of homes worth over $1 million reached a high in February 2010, the last month data is available, when 4,169 homes were somewhere in the foreclosure process. It’s greater than double the level of a year ago.
Twelve percent of million-dollar sales (37 sales of 295) in the Chicago-area were distressed sales between January and April of this year, and I am confident in saying that stress plays a significant role in expensive markets all across the country – based upon the pay history with 13.3 percent of million dollar loans at 90-days past due.
The same ratio-of-distress stood at only four percent in the beginning of 2009. The stress factor in sales has tripled this year.
While inventory for-sale may not yet fully reflect the delinquencies, foreclosures prove distress at the high-end. Thirty percent of foreclosures are homes in the top tier of local home values. They make up almost twice the proportion of foreclosures as they did three years ago, according to Stan Humphries, Chief Economist for Zillow.
Realtors and sellers of expensive homes are fighting a few new battles unique to our current time and place.
New appraisal companies, paid for production and speed, are churning out prices which make no distinction between a sale in distress and a normal sale. The bias in appraisal values has swung from high to low (Appraisers and Foreclosure Sales Bring Havoc to Housing Markets. Nov 2009. Foreclosure News Report.).
Before it was weird to have a distressed sale and that sale price wouldn’t be used as a comparable sale. Now it is normal to have a distressed sale and the appraiser will pre-judge the lower sale as better because he won’t be accused of high-balling the price. Today’s baksheesh is yesterday’s stale baklava.
The typically-priced homes (not high-end) also benefit from an encyclopedia of federal intervention in the conforming mortgage market (Conforming loans are less than $417,000.). Unlimited funds are available for smaller new mortgages. They are funded by the Treasury which is spending without restraint. The increased distress in expensive home prices and jumbo mortgages derives in part from the stricter standards required by private lenders for new mortgages in a higher-risk mortgage category.
Let’s not forget too that distress in expensive markets is part of a radical fall in property prices nationwide. Values have undergone a 120-year-severity bubble-and-bust. Thirty percent of high values have disappeared over the last four years. Does anybody still say a home will never lose its value? Only people whose thoughts have been recorded, but who are no longer speaking: The dead speak this way when they talk about Jack and the Bean Stalk and ever-higher property values.
The “normals” market has also stabilized more because delinquent-mortgage borrowers may turn to modification programs to catch up. Buyers in general are also less ambitious today and more frightened of taking on big debts. The new higher priority is to have a home and mortgage which you can afford.
“We’re in a ‘trade-down’ environment for the first time since the 1930s,” says Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley (High-End Homes Frozen Out of Budding Housing Rebound. 8/3/09. WSJ.).
High-salary white-collar workers are not immune to job loss.
Investment banking bonuses may have changed from cash to stock that must be held for several years. Wealthier homeowners may have a pay-option or interest-only loan which is underwater and whose liberal terms are not available in a refinance even if there was equity in the house (Jumbo Mortgage Delinquencies Soar as High-End Home Inventory Builds. 1/13/10. Daily Finance.)
JP Morgan reported rising inventory for-sale over $750,000 at the beginning of the year and projected recovery is not in the cards this year and not in the cards next year but only in the year after that (2012). They also predict peak-to-trough declines greater than 60% in the high end. They estimated damage in a market-wide assessment at 40%.
Many wealthy property owners operated under the assumption that high-end properties do better at holding their value or never lose value, but there’s good reason to believe the opposite is true, and I will tackle that subject in a later post.
To summarize, serious jumbo mortgage delinquencies are 50 percent higher than the overall market. The number of distressed sales in that category has tripled in the last year in the Chicago area; and that trend toward distress is probably true far and wide. It has to be given what we know of the mortgage-delinquency trend. Thirty percent of all foreclosures are top-tier properties and that is a doubling of the rate when compared to three years ago. Our current zeitgeist is a trade-down environment with low-ball appraisals. Government subsidies do not cover most mortgages in expensive-property markets. And values are projected to fall 60 percent for expensive properties from peak to broken-bubble bottom.
One other thing Mrs. Lincoln: Do you think you will come and see this play again?
Filed under: foreclosure
Jun
18
Jumbo Mortgage Delinquencies Are 50% Above Average And Rising
Here’s Why Jumbo Mortgage Delinquencies Are 50% Above Average And Rising Today, June 18, 2010, 5 hours ago | Michael David White
A quiet revolution has hit wealthy neighborhoods: financial failure.
The 90-day delinquency rate on home loans worth over a million dollars hit a high in February at 13.3 percent, much higher than the overall rate of 8.6 percent.
Financial failure on large-balance mortgages and high-end properties is 50 percent higher than the national average – and the national average delinquency-rate is at record highs (High-end Homeowners Falling Into Foreclosure Trap. 5/8/2010. CNBC). Given that cure rates are approximately zero percent at 90-days of delinquency (and I mean that literally), one of eight borrowers in expensive homes is dead-and-gone. This is not a trickle. This is a flood of “product” – houses that owners or banks must sell.
Current listings will not entirely reflect this dire payment-history picture. The higher the value of the property, the more likely it is to be sold off grid. So when the bank owns a house, or when the bank is near to taking the keys, you don’t end it all with a scene of furniture in the front yard.
“Lenders are far more likely to go the short sale route” for high-end properties, said Andrew LePage, an analyst at real estate research firm DataQuick. “There’s a lot more money at stake, and maintenance can be high if a foreclosure just sits there.”
Foreclosures of homes worth over $1 million reached a high in February 2010, the last month data is available, when 4,169 homes were somewhere in the foreclosure process. It’s greater than double the level of a year ago.
Twelve percent of million-dollar sales (37 sales of 295) in the Chicago-area were distressed sales between January and April of this year, and I am confident in saying that stress plays a significant role in expensive markets all across the country – based upon the pay history with 13.3 percent of million dollar loans at 90-days past due.
The same ratio-of-distress stood at only four percent in the beginning of 2009. The stress factor in sales has tripled this year.
While inventory for-sale may not yet fully reflect the delinquencies, foreclosures prove distress at the high-end. Thirty percent of foreclosures are homes in the top tier of local home values. They make up almost twice the proportion of foreclosures as they did three years ago, according to Stan Humphries, Chief Economist for Zillow.
Realtors and sellers of expensive homes are fighting a few new battles unique to our current time and place.
New appraisal companies, paid for production and speed, are churning out prices which make no distinction between a sale in distress and a normal sale. The bias in appraisal values has swung from high to low (Appraisers and Foreclosure Sales Bring Havoc to Housing Markets. Nov 2009. Foreclosure News Report.).
Before it was weird to have a distressed sale and that sale price wouldn’t be used as a comparable sale. Now it is normal to have a distressed sale and the appraiser will pre-judge the lower sale as better because he won’t be accused of high-balling the price. Today’s baksheesh is yesterday’s stale baklava.
The typically-priced homes (not high-end) also benefit from an encyclopedia of federal intervention in the conforming mortgage market (Conforming loans are less than $417,000.). Unlimited funds are available for smaller new mortgages. They are funded by the Treasury which is spending without restraint. The increased distress in expensive home prices and jumbo mortgages derives in part from the stricter standards required by private lenders for new mortgages in a higher-risk mortgage category.
Let’s not forget too that distress in expensive markets is part of a radical fall in property prices nationwide. Values have undergone a 120-year-severity bubble-and-bust. Thirty percent of high values have disappeared over the last four years. Does anybody still say a home will never lose its value? Only people whose thoughts have been recorded, but who are no longer speaking: The dead speak this way when they talk about Jack and the Bean Stalk and ever-higher property values.
The “normals” market has also stabilized more because delinquent-mortgage borrowers may turn to modification programs to catch up. Buyers in general are also less ambitious today and more frightened of taking on big debts. The new higher priority is to have a home and mortgage which you can afford.
“We’re in a ‘trade-down’ environment for the first time since the 1930s,” says Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley (High-End Homes Frozen Out of Budding Housing Rebound. 8/3/09. WSJ.).
High-salary white-collar workers are not immune to job loss.
Investment banking bonuses may have changed from cash to stock that must be held for several years. Wealthier homeowners may have a pay-option or interest-only loan which is underwater and whose liberal terms are not available in a refinance even if there was equity in the house (Jumbo Mortgage Delinquencies Soar as High-End Home Inventory Builds. 1/13/10. Daily Finance.)
JP Morgan reported rising inventory for-sale over $750,000 at the beginning of the year and projected recovery is not in the cards this year and not in the cards next year but only in the year after that (2012). They also predict peak-to-trough declines greater than 60% in the high end. They estimated damage in a market-wide assessment at 40%.
Many wealthy property owners operated under the assumption that high-end properties do better at holding their value or never lose value, but there’s good reason to believe the opposite is true, and I will tackle that subject in a later post.
To summarize, serious jumbo mortgage delinquencies are 50 percent higher than the overall market. The number of distressed sales in that category has tripled in the last year in the Chicago area; and that trend toward distress is probably true far and wide. It has to be given what we know of the mortgage-delinquency trend. Thirty percent of all foreclosures are top-tier properties and that is a doubling of the rate when compared to three years ago. Our current zeitgeist is a trade-down environment with low-ball appraisals. Government subsidies do not cover most mortgages in expensive-property markets. And values are projected to fall 60 percent for expensive properties from peak to broken-bubble bottom.
One other thing Mrs. Lincoln: Do you think you will come and see this play again?
Filed under: foreclosure
May
19
Mortgage delinquencies surge to a record
The mortgage crisis is dragging on the economic recovery as more homeowners fall behind on their payments.
Foreclosure – Mortgage – Business – Real estate – United States
Mar
06
Foreclosures now are just ‘tip of the iceberg’
Foreclosures now are just ‘tip of the iceberg’
March 1st, 2010, 7:36 am · 108 Comments · posted by Marilyn Kalfus, real estate reporter
Despite some reports that suggest the housing crisis may be hitting bottom, foreclosures so far represent the “tip of the iceberg,” real estate analyst, investor and lender Bruce Norris says.
Norris told hundreds of investors attending a seminar he held in Costa Mesa this past weekend that numbers indicating the appearance of firming home prices and fewer foreclosure auctions are “illusions.”
Government repayment and loan modification programs make foreclosure numbers appear lower for now, but are delaying the inevitable inability or disinclination of homeowners in trouble to hang on to property that has dropped in value by hundreds of thousands of dollars, he says.
Meanwhile, he says, redefaults on loan modifications are “sabotaging” government efforts.
Mortgage delinquencies will continue “skyrocketing,” he says, because:
- “The resets of the Option-Arm loans will cause a larger number of foreclosures than the subprime loans.
- “Resets are part of the problem, but a bigger concern is the owners who owe more on their home than it’s worth.
- “Commercial loans and credit card losses will soon add to the problem.”
- Unemployment is a signifcant factor. He says: “I think we will fall back into recession by the end of 2010, and the unemployment rate and underemployment rate will be about 20% in 2011.”
- Owners are finding it more and more acceptable not to make their house payments. The mindset, according to Norris: ” ‘I see my next door neighbor has stopped making his payment, and he just bought a camper.’ You can see that coming. We haven’t really been through the biggest part of the problem.”
Filed under: foreclosure
Nov
19
Mortgage delinquencies hit record high
A rising proportion of fixed-rate home loans made to people with good credit are sinking into foreclosure, adding to concerns about the strength of the economic recovery.
Mortgage – Foreclosure – Business – United States – Financial Services
Sep
22
Mortgage delinquencies at a record high
High U.S. unemployment keeps pushing up the rate of mortgage delinquencies, which could in turn drive personal bankruptcies and home foreclosures.
Aug
20
Mortgage Delinquencies Still Rising says MBA – More Americans Underwater
I have a lot of conversations with people about our economy, foreclosures and such… from clients to friends in business to attorneys. Everyone who’s asked me what I foresee coming I’ve told them that 2010 will be a very tough year and they better prepare now. We aren’t done yet folks… and the policies of the Obama Administration and our collective disaster we call Congress, are going to make things even worse – and very well will extend the recession quite painfully. I have told people to expect another wave of foreclosures. As long as you have no job creation and more job loss happening every day, this cycle won’t stop. It’s as simple as that.
And with that, I bring you fresh news…
Delinquencies Are Still Climbing and Threatening More Foreclosures on the Horizon, MBA Says
08/20/2009 By: Carrie Bay
More than nine percent of all mortgages in the United States are now delinquent, according to figures released Thursday by the Mortgage Bankers Association (MBA).
The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to 9.24 percent of all loans outstanding at the end of the second quarter, MBA reported. The new number breaks the record set in the first quarter of this year, when 9.12 percent of the nation’s homeowners were behind on their mortgage payments.
Important to note is that the biggest jump in delinquencies last quarter came from prime fixed-rate mortgages. These seemingly low-risk loans also accounted for one in three of the nation’s foreclosure starts in Q2. A year ago they were only one in five.
Like prime, Federal Housing Administration loans are generally thought to be “safe,” but foreclosure starts among government-insured mortgages jumped to 9.1 percent last quarter – a record-high for the agency.
The states of California, Florida, Arizona, and Nevada continue to drag down the national numbers. These four had 44 percent of all the nation’s new foreclosures in Q2. Rhode Island, Georgia, and Michigan also posted foreclosure start rates above the national average. All
other states in the country fell below the national benchmark, and roughly half even saw their new foreclosure numbers decline.
But then, there’s the not-so-sunny Sunshine State. Florida has cemented itself as the worst state in the union for mortgage performance. Twelve percent of all mortgages there were somewhere in the process of foreclosure at the end of June, and another 5 percent were more than 90 days past due and about to cross that threshold. Based on MBA’s numbers, Florida has the highest foreclosure and delinquency rates in the country, and MBA’s chief economist, Jay Brinkmann, says he doesn’t expect to see a turnaround in Florida’s housing market for a long, long time.
Some fortunate regional markets are faring better and offsetting Florida’s bad numbers because the nation’s total foreclosure starts during the second quarter actually dropped slightly. Foreclosure actions were initiated on 1.36 percent of the nation’s outstanding mortgages, compared to 1.35 percent during the first three months of the year, MBA reported.
Despite the leveling off of foreclosure starts, the fact that loans 90 or more days past due continues to climb in all categories suggests an overhang of foreclosure activity and engorged inventories of repossessed homes may be looming in the coming months.
So, when is the foreclosure problem going to crest? Brinkmann, points out that unemployment is currently the primary driver behind missed mortgage payments.
The number of jobless Americans is forecast to peak in mid-2010, and Brinkmann says he expects delinquencies to top out at about the same time. But because of the lag time associated with foreclosure proceedings, he doesn’t see a break in the upward trend of foreclosures until six months later, at the close of next year.
Aug
17
Bankruptcy Judges & DOJ Rip Mortgage Companies
Below is another story about Servicer abuses… At least some judges see the issues and are not allowing personal viewpoints or prejudices to cloud their assessment of how terrible the situation is for a homeowner in mortgage hardship or distress.
The servicers are also the main players in the massive foreclosure fraud that is occurring around this country.
One would think that at some point, the legal system is going to stop the train of abuses justice suffers because of the systemic fraud that is committed by servicers trying to foreclose on homes they have no financial stake in.
Bankruptcy Judges & DOJ Rip Mortgage Companies
by Karen Weise, ProPublica
“Systemic abuse.” “Extraordinary incompetence.” “Reckless.” In a growing body of legal cases, judges and the Justice Department are breaking from legal jargon to starkly chastise mortgage companies.
As mortgage delinquencies rise, more and more homeowners are learning the central role that mortgage servicers play in their lives. The legal cases show that role can be distressing. Judges have found that major mortgages servicers regularly mess up basic accounting, improperly credit payments and charge unwarranted fees. They’ve “not done a very good job of keeping the records,” said Judge Samuel Bufford of California.
Mortgage servicers — typically either bank subsidiaries or independent companies — handle the day-to-day work with homeowners, ranging from collecting monthly payments to determining when to modify or foreclose. Problems with servicing often, but not always, occur once homeowners start having trouble making payments.
Complaints to the government about mortgage servicers have soared in recent years. They’ve risen from 31 percent of the complaints that the Department of Housing and Urban Development received in 2006 to 78 percent in 2008, according to HUD spokesman Lemar Wooley.
Problems Exposed in Bankruptcies
Many homeowners in bankruptcy have legal representation and must settle claims with servicers. As a result, the process has revealed and documented a slew of servicer problems.
In many rulings, judges have shown frustration and even outrage. They’ve ruled that servicers have attempted to collect unjustified fees, charged homeowners for unnecessary insurance, failed to properly credit homeowners’ payments and failed to provide evidence to back up fee requests. In most cases, judges demand that servicers fix the problems and unwind the unjustified fees; sometimes, judges award damages and attorneys’ fees. In one extraordinary case, a judge issued $750,000 in emotional and punitive damages. (We’ve compiled five sample cases and rulings for you to see here.)
Take the case of Donald and Phyllis Moffitt of Arkansas. In June 2008, bankruptcy Judge Audrey Evans issued a restraining order against America’s Servicing Company, a division of Wells Fargo, saying it must stop attempting to collect payments that the Moffitts did not owe. In a 41-page ruling (PDF), the judge wrote:
“The evidence supports the premise that ASC’s servicing procedures, as exemplified by the Moffitts’ account, are not organized to assure accuracy and accountability. … ASC misapplied these payments, failed to record the correct information even though Mrs. Moffitt constantly called and talked to ASC’s agents, failed to follow her written instructions, failed to communicate with the Moffitts, sent mortgage statements that were incomprehensible and frightening, began collection calls, and engaged in a litany of mismanagement of the Moffitts’ loan.”
Wells Fargo did not respond to a call for comment.
A 2007 study looked at a majority of Chapter 13 bankruptcy filings in 2006 and found that in 70 percent of the cases studied, mortgage companies claimed homeowners owed an average of $6,309 more on their loans than homeowners believed.
Problems with servicing are not limited to families filing for bankruptcy, Katherine Porter, an author of the study and an associate professor at the University of Iowa’s law school, testified before Congress last year. She said servicers commonly foreclose when they do not have the legal right to do so, impose unwarranted or illegal fees, and miscalculate how much families owe.
In several instances, judges have taken broad action to address persistent problems with a servicer. This May, Judge Elizabeth Magner in Louisiana said her review of multiple cases involving Ocwen Loan Servicing had shown the servicer regularly acted in “bad faith.” The judge said Ocwen had charged improper fees and attempted to collect bankruptcy-related fees after the court closed a case. In one of the cases, Ocwen took 10 months to provide a full accounting of fees.
The judge wrote that Ocwen’s “systematic abuse” required more than monetary sanctions, which had not stopped the behavior in the past, so Magner issued an order (PDF) forcing Ocwen to follow specific accounting procedures. (We’ve noted before that Ocwen’s servicing procedures have raised eyebrows in the past). Ocwen’s general counsel, Paul Koches, said the company disagrees with the ruling and is pursuing an appeal in U.S. District Court.
Justice Department Takes Action
The Justice Department’s United States Trustee Program is a watchdog over the bankruptcy process. Its 21 regional offices oversee more than 1,300 private trustees who mediate between debtors and creditors in individual bankruptcy cases.
The Trustee Program’s annual report said combating servicer abuse (PDF) was a top priority last year. The program initiated 68 actions (PDF) against what it calls “systemic abuse” by mortgage servicers, including 25 large servicers such as Countrywide, HSBC and JPMorgan Chase, according to public documents (PDF) and speeches (PDF). The Trustee Program has sued Countrywide in at least six states.
Countrywide, now owned by Bank of America, is the largest participant in the federal Making Home Affordable program to modify troubled mortgages. A recent analysis by the Associated Press found that at least 30 of the 38 mortgage companies that have signed up for the program have been sued over their servicing practices.
In response to one U.S. trustee’s suit in Ohio, Judge Marilyn Shea-Stonum ruled in May (PDF) that Countrywide had charged fees with “no factual basis” and wrote: “Countrywide’s system is reckless. It appears to me designed to allow each actor in the process to act with indifference to the truth, and to rely solely on the limited information made available at each step. … [The errors in this case] evidence Countrywide’s disregard for diligence and accuracy.”
The judge is currently determining monetary and other sanctions. Countrywide spokeswoman Shirley Norton said, “We are reviewing the ruling and considering our options.”
Private trustees have sued servicers as well. Debra Miller, a private trustee in Indiana, has been active in litigation where servicers haven’t complied with federal regulations. Typically, she said, private trustees try to obtain settlements that are more about changing practices than monetary compensation. “Our job is to force mortgage companies to improve their systems,” she said.
Both the Justice Department and private trustees have stepped in to fill what they see as a regulatory void covering mortgage servicers, according to Andrea Celli, a private trustee in upstate New York.
Future Oversight Under Debate
Currently, a hodgepodge of agencies oversees mortgage servicing. HUD, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Trade Commission and the Federal Reserve all have partial authority.
Concern over mortgage servicing was part of the early discussions about the proposed new Consumer Financial Protection Agency, according to Eric Stein, the Treasury Department’s deputy assistant secretary for consumer protection. The CFPA, as proposed by the Obama administration, would be the primary watchdog for servicer abuses.
Servicers are resisting the new consumer agency. Paul Leonard, a lobbyist for the Financial Services Roundtable, said his organization’s members believe that there should be better coordination among regulators and that existing agencies can handle the responsibility.
Tara Twomey, a lecturer at Standford Law School who co-authored the large study of bankruptcy cases, says that more regulation would help, but it would only be a “Band-Aid.” “The more fundamental problem is one of market structure,” she said. “Borrowers don’t get to choose their servicer.”
