HAMP | Mortgage Rates & Trends: Mortgage Blog

Mortgage Rates & Trends: Mortgage Blog

View the lowest rates we have to offer.

Read our RSS Feed Policy

Top New York State Regulator Urging Revamping National Mortgage Lending Rules
By Michael Kling on November 11, 2010

Richard Neiman, New York State Banking Chief

A top New York State banking regulator is pushing to overhaul federal mortgage lending regulations to help mortgage borrowers.

Richard Neiman, superintendent of banks for the New York state, wants to update the

Community Reinvestment Act which rates banks on how well they serve their mortgage borrowers and their communities. Find mortgage loan options.

Current CRA ratings don’t offer meaningful ratings or comparisons between banks, said Neiman, speaking at the CRA and Fair Lending conference in Las Vegas. “Year after year, 85 to 90% of banks receive a ‘Satisfactory’ rating,” said the banking chief, according to his prepared remarks posted on the state banking department website.

Ratings should be more precise, should include a low and high satisfactory ratings, and should include more factors, such as if banks offer safe and affordable lending products.

Ratings should also take into account banks’ safety and soundness, or how likely they are to survive a financial crisis.

Banks, he said, should also be encouraged to expand into underserved areas and rural areas.

The CRA does not cover non-banks, but federal regulators considering changing the CRA to cover more types of lenders, Neiman said.

Neiman, who is on the TARP Congressional Oversight Panel, also wants to create a national database on mortgage performance data for both banks and non-bank mortgage lenders. Lenders like mortgage bankers, who do not offer banking services like checking and savings accounts, are considered non-bank lenders.

A comprehensive database will provide better information on how many loan modifications different mortgage lenders and servicers are doing and will help offer a way out of “this mortgage mess,” Neiman said. Learn how to avoid foreclosure.

Knowing how many foreclosures lenders and their loan servicers are preventing is difficult to determine because they have own loan modification efforts in addition to the government’s Home Affordable Modification Program. That kind of database would show any racial or geographic differences in lenders’ decisions to modify loans or foreclose.

Different databases now collect and report loan modification information but they all have their drawbacks. “There is a real consensus forming,” he said, “and the next step is to move from these provisional approaches.”

Total Mortgage Services now has its State of New York Mortgage Banker License from the State of New York Banking Department to offer mortgage loans in the state.

Total Mortgage offers some of the lowest mortgage rates in New York State.

Category: foreclosures, Loan Modification, Mortgage Regulations
Many Freddie Mac HAMP Modifications End Up in Foreclosure
By Michael Kraus on November 4, 2010

I am hopeful* that one of these days I will be able to write a story about the stunning success of a government sponsored mortgage modification program. Today is not that day.

*Hopeful is probably not the right word. I see precious little evidence that our elected officials can or will pass any sort of useful legislation to forestall foreclosures unless they fall backwards into it.

I have hammered on government mortgage modification programs in this space over the last several months. I believe they have been expensive, poorly-designed, and largely ineffectual. The Home Affordable Modification Program (HAMP) is the most prominent of these programs and thus receives the most criticism.

I am not the only one who is down on HAMP. The Special Inspector General for the Troubled Asset Relief Fund (SIGTARP), Neil Barofsky, released his quarterly report on TARP for Congress at the end of October, and he blasted HAMP for falling “woefully short” of its goal of preserving homeownership. He also accused HAMP of offering “little more than false hope” for many borrowers.

Following on the heels of SIGTARP’s criticism of HAMP, The Congressional Oversight Panel released a report further damning the program, saying: “To date fewer than half a million homeowners have received permanent mortgage modifications through Treasury’s program, and as many as half of these borrowers will ultimately redefault and lose their homes”.

Continue Reading…

Category: Mortgage Rates
Proprietary Mortgage Modifications Outpacing HAMP
By Michael Kling on October 28, 2010

Banks are doing far more mortgage modifications through their own proprietary loan modification programs than the government’s Home Affordable Modification Program (HAMP).

For instance, Bank of America said it modified over 12,700 mortgages through its own programs last month, compared to 3,700 mortgage modifications done through HAMP.

Bank of America completed over 600,000 modifications through its own programs compared to 79,859 HARP modifications through August since the program started in early 2009. How to avoid defaulting.

Although HAMP has led to about 496,000 permanent mortgage modifications, it’s been criticized for falling far short of its goal of helping three or four million homeowners. Plus, many homeowners with modified mortgages end up defaulting anyway. Senator Ted Kaufman, chairman of the Congressional Oversight Committee, said almost half will end up redefaulting.

Mortgage servicers completed 27,840 permanent HAMP modifications in September, a 16.5 percent decrease from August.

On the other hand, almost 3.7 million home loans have gone through proprietary modifications since 2007 when the housing crisis began, including 150,000 in August, according to Hope Now, private sector alliance. About 91 percent of the modifications in August involved reductions in monthly principal and interest.

Many homeowners who are eligible for HAMP may qualify for a Bank of America program, said Rebecca Mairone, default servicing executive of Bank of America Home Loans.

Fewer borrowers are being helped by HAMP because they must now submit their full documentation before modifying the loan, she said. Previously, the bank allowed borrowers to state their before offering trail modifications, then followed up with full documentation later.

The problem with loan mods

“Unfortunately, with the slow economic recovery and continued high rates of unemployment and underemployment,” Mairone said, “some customers are having difficulty sustaining even reduced payments, and we are and will be working with many of them toward a smooth and dignified transition to alternative housing arrangements in the coming months.”

If borrowers don’t qualify for any modification program, the bank will consider a short sale or a deed in lieu of foreclosure in which the bank offers cash in exchange for the deed.

Category: Loan Modification
Congressional Oversight Committee Critical of HAMP Failures
2 By Michael Kraus on October 27, 2010

Earlier this week, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), released a quarterly report on TARP to congress. The report was highly critical of TARP, and the Home Affordable Modification Program (HAMP) in particular. The report said that the program has fallen “woefully short” of its goal of “preserving homeownership”. They also said that the program offers “little more than false hope” to many borrowers.

If this report is not damning enough, Senator Ted Kaufman, the Chairman of the Congressional Oversight Panel said today that almost half of the permanent mortgage modifications completed by HAMP will end up redefaulting. So far HAMP has achieved about 496,000 permanent loan mods, far short of the stated goal of helping 3 to 4 million homeowners modify their mortgages.

Kaufman commented:

“At the time, our economy was on track to experience more than eight million foreclosures, so the goal was always modest compared to the boldness shown in rescuing AIG, Fannie Mae, Freddie Mac, Bank of America, Citigroup, and the auto companies. Yet now, two years later, we can see that even this modest goal will not be met. To date fewer than half a million homeowners have received permanent mortgage modifications through Treasury’s program, and as many as half of these borrowers will ultimately redefault and lost their homes.”

Kaufman also criticized the goals of the program and the way the goal posts keep getting moved:

“A goal of offering three to four million [temporary as compared to permanent] modifications is hardly a goal at all. It divorces the program’s measurement of success from its ultimate aim: to keep homeowners in their homes. In many ways, it is like a major league batter pledging to swing at every pitch. What matters is not how often you swing the bat, but how often you reach the bases.”

There is a lot more testimony that you can check out here. It is increasingly clear that HAMP is failing those it was designed to help.

Category: Mortgage Rates
SIGTARP: HAMP Fails to Preserve Homeownership, Offers “False Hope”
1 By Michael Kraus on October 26, 2010

This morning, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) released its quarterly report to congress. The report is incredibly blunt and candid about the failures of TARP (which are myriad). Neil Barofsky, the inspector general, blasted TARP for being opaque, misleading, and lacking goals, among other things. There was a lot to say (the report runs 338 pages), but I would like to focus on what SIGTARP had to say about the Home Affordable Modification Program (HAMP). If you have time, though, I highly recommend reading through the report. The allegations about TARP and AIG are particularly damning.

Lets start with this choice quote:

“The most specific of TARP’s Main Street goals, “preserving homeownership,” has so far fallen woefully short, with TARP’s portion of the Administration’s mortgage modification program yielding only 207,000 (out of a total of 467,000) ongoing permanent modifications since TARP’s inception, a number that stands in stark contrast to the 5.5 million homes receiving foreclosure filings and more than 1.7 million homes that have been lost to foreclosure since January 2009.”

SIGTARP does not mince words. Here’s another good one:

Continue Reading…

Category: Mortgage Rates
What to Do When 30 Percent of Americans’ FICO Scores Preclude Them From Getting a Mortgage?
1 By Michael Kraus on September 28, 2010

Oh magic 8-ball, what don't you know?

If you read anything I write here regularly (and traffic numbers indicate you probably don’t), you will have read this a million times, but I will say it once more: the biggest issue facing the housing market today is the incredibly large supply of houses on the market and the massive amount of shadow inventory that will eventually make its way to the market. The housing sector will not heal until these houses are absorbed. The trouble is there is an extraordinary lack of demand right now. Current economic conditions are unfavorable for household formation, making it harder to absorb these excess homes.

Now there is an additional hurdle to a housing recovery. According to information from Zillow, relayed through a Housingwire.com article by Christine Ricciardi, nearly 30% of people have credit scores that disqualify them from getting a mortgage. This is going to make it a hell of a lot harder to get rid of all the houses. The Zillow report shows that nearly 30 percent of Americans have a credit score below 620, which is considered a baseline score to qualify for a mortgage (depending upon the lender and other factors, of course). This shouldn’t really come as a surprise, as unemployment has been running around 10 percent for some time now. People cannot pay their bills and maintain their credit if they have no income.

Not only are these people going to be precluded from buying a new house in the near future (barring some sort of massive shift in the way underwriting is done), but they will not be able to refinance their old mortgage, missing out of thousands of dollars worth of savings due to record low mortgage rates.

I’m not sure what the solution to this problem is. I don’t know if there should be some sort of credit amnesty or fast-track credit repair for those who have been hurt by the recession. I don’t know if we need a new system of underwriting that relies less on FICO than other metrics. What I do know is it is going to be difficult to sell all these homes that are sitting around if 30 percent of the marketplace is excluded from getting a mortgage right off the bat.

Do you have any sort of solution to this problem? What is your idea? Let me know in the comments section below.

Category: Mortgage Rates
400,000 Short Sales Could Occur in U.S. in 2010
2 By Michael Kraus on September 27, 2010

There was an excellent article in this Sunday’s Washington Post by Dina ElBoghdady and Dan Keating about the rapid growth of short sales in 2010. A short sale occurs when a lender allows an underwater homeowner to sell their house for less money than they owe on the mortgage. I highly recommend reading the article which contains plenty of good information.

According to the article, short sales have tripled since 2008. Fannie Mae has allowed three times as many short sales in 2010 than it allowed in 2007 and 2008 combined. We are currently on pace to see 400,000 short sales this year. The increase in short sales can be attributed to a variety of factors (and obviously the bad economy), but chief among them is the failure of loan modification programs such as HAMP and HARP.

Short sales have a variety of benefits for both lenders and borrowers. For borrowers, short sales are less harmful to credit scores than foreclosures are. For lenders short sales are less costly than foreclosures.

Continue Reading…

Category: Mortgage Rates
Should Home Prices Be Allowed to Bottom Out?
By Michael Kraus on September 7, 2010

Since the collapse of the housing bubble about three years ago, the federal government has enacted a variety of strategies aimed at supporting home values. First there was the first time homebuyer and repeat homebuyer tax credits, which have cost taxpayers $16.2 billion thusfar. The tax credits succeeded in goosing demand for homes in the short term, but since their expiration, home sales have collapsed. There is strong evidence that home prices have resumed falling in the absence of government support, brining into question the effectiveness of the program.

Several programs were enacted that would focus on mortgage modification, principal reduction, or short sales, such as Home Afforadble Modification Program (HAMP), Home Affordable Refinance Program (HARP), Home Affordable Foreclosure Alternatives (HAFA), and the new FHA Short Refi Program (which begins today). These programs have met with varying degrees of success, but given the state of the housing market right now, we can surmise none have been a panacaea for the problems we face.

Housing sales have plummeted since the expiration of the first time homebuyer tax credit at the end of April (existing home sales just hit their lowest point in 14 years). Presently, there is a 12.5 month supply of homes on the market (a normal market has 6 months supply). These conditions, along with a weak labor market, will likely lead to further declines in home value.

Continue Reading…

Category: Mortgage Rates
HAMP Redefault Rate Higher Than Initially Reported
By Michael Kraus on July 28, 2010

The plane has crashed into the mountain!

Recently the government issued a report to let us know how mortgages that were modified by the Home Affordable Modification Program (HAMP) were performing. This may shock you, but it turns out the information they gave us was not entirely accurate.

When the report came out, it claimed that about 6 percent of HAMP borrowers were 60 days or more delinquent on their mortgages six months after they were modified. For many analysts, this number did not pass the smell test because it did not jibe with some older numbers from previous reports: in March 2010, the delinquency rate after six months was 7.7 percent. During the last quarter of 2009, the rate was 11.3 percent.

After many commentators declared shenanigans on the report, it was discovered there were discrepancies in the way delinquent homeowners were being classified which lead to some error in the numbers. The Treasury Department is blaming the mistake on Fannie Mae, which runs HAMP.

The Treasury Department issued the following statement:

“Since the Making Home Affordable report was posted on July 20th, Fannie Mae, which administers the program, has reported to Treasury an issue in its implementation of the delinquency statistic methodology used to report performance of permanent modifications. Fannie Mae is now revising the data, and Treasury has retained a third-party consultant to provide additional review and validation. Upon completion of that independent review, a revised table will be provided.”

As of right now, no updated re-default figures have been released.

HAMP was originally supposed to provide mortgage relief for 3 to 4 million borrowers. 1.3 million borrowers have been enrolled in the program. Approximately 530,000 borrowers have left the program, and 390,000 have received permanent modifications. The remainder are waiting for modification. So more people have left the program than have had their mortgages modified.

The Office of Management and Budget projects that HAMP will cost $49 billion. The Congressional Budget Office estimates that HAMP will cost $22 billion. The discrepancy between the two is apparently due to different economic projections. Either way, HAMP is costing a lot of money, and has been extremely ineffective.

According to economists at Fitch Ratings, 75 percent of HAMP modifications will eventually re-default. Barclay’s is slightly more optimistic, they believe that only 60 percent will re-default.

At what point do we pull the plug on this disaster? Let us know in the comments section below.

Category: Mortgage Rates
More Assistance Coming For Unemployed Homeowners
By Michael Kraus on July 26, 2010

Just replace "bank failure" with "declining equity".

“Cessation of work is not accompanied by cessation of expenses”

-Cato the Elder

Information continues to trickle out about a new program designed to help the unemployed keep their homes. The Home Affordable Unemployment Program (HAUP) is a new program from the federal government (the same people that brought you HAMP!).

We are still awaiting word on exactly how the funds will be disbursed, but the HUD program will start by October 1st. At least $1 billion is in the legislation for redeveloping distressed property. Another of the main thrusts of the program is to allow unemployed homeowners who are current on their mortgage to get a forbearance for at least three months. During the forbearance, monthly mortgage payments would be reduced or eliminated entirely.

The plan is based on a similar Pennsylvania program that effectively does the same thing. The program has been going strong since 1983, so it may prove to be viable on a larger scale.

Loss of income due to unemployment is (unsurprisingly) the chief reason for foreclosures. Unemployment continues to run close to 10%, and broader measures of unemployment are running close to 17%, so barring an unforseen turnaround, the foreclosure problem will likely be with us for some time.

Thus far, other government programs meant to reduce foreclosures have met with limited success. The Home Affordable Modification Program (HAMP) has had more borrowers withdraw from it than have had their mortgages modified by it, and re-default rates are very high. Again, this is unsurprising as those that have been out of work long term and don’t have much money are unlikely to be able pay even a modified mortgage.

Many who could save money by refinancing into all-time low mortgage rates have been unable to do so, either because of credit reasons or because their home lost value and they do not have enough equity to qualify for refinancing.

I will post more as more details about the program emerge.

Category: Mortgage Rates