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Freddie Mac Offering Up to One Year Mortgage Forbearance to Unemployed Homeowners
By Michael Kraus on January 9, 2012

On Friday Freddie Mac announced that it is allowing mortgage servicers to provide unemployed borrowers with six months of mortgage forbearance without its approval, and an additional six month of forbearance with its approval. These changes are to take effect on February 1, 2012.

Prior to this point, Freddie Mac allowed servicers to grant three months of forbearance without approval, and six months of forbearance with approval. According to their press release, 10 percent of delinquencies on Freddie Mac mortgage were tied to unemployment (not to cast aspersions at Freddie Mac statistics, but doesn’t common sense tell us that number should be significantly higher?). Tracy Mooney, Senior Vice President of Single-Family Servicing and REO for Freddie Mac remarked:

“These expanded forbearance periods will provide families facing prolonged periods of unemployment with a greater measure of security by giving them more time to find new employment and resolve their delinquencies. We believe this will put more families back on track to successful long-term homeownership”.

If servicers actually opt to participate in this program, it is probably a good thing for those with Freddie Mac mortgages. It isn’t a long term fix for the housing market, but this measure will help some homeowners. For a second, I’d like to jump back to the figure I cited above about 10 percent of delinquencies being attributable to unemployment. If this is the case, to what are the other 90 percent of delinquencies due?

Certainly some delinquencies could be due to strategic default. Some others could be due to loss of income due to medical bills or divorce. Possibly other people didn’t lose their jobs but had their pay cut. Still, something seems very off with this statistic. And if the statistic is true, what is being done to address the other 90 percent of delinquencies? The mind boggles.

Category: Mortgage Rates
HUD Extends Filing Deadline for Emergency Homeowners’ Loan Program
By Michael Kraus on August 30, 2011

If you missed the filing date for the Emergency Homeowners’ Loan Program (EHLP), there is good news, because the date to file has been extended until September 15th. The original filing deadline was July 27th.

The EHLP is designed to help unemployed borrowers who lost their jobs as a result of the recession. It provides assistance of up to $50,000 or twenty-four months of mortgage payments (including past due payments).

Additional applications are being accepted for the following states: Alaska, Arkansas, Colorado, Hawaii, Iowa, Kansas, Louisiana, Maine, Massachusetts, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Mexico, New York, North Dakota, Oklahoma, South Dakota, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming, and the Commonwealth of Puerto Rico.

For additional information on how to apply, you can call HUD at 855-FIND-EHLP, or go to HUD’s website.

Category: Mortgage Rates
In A Reversal, More Homeowners Pay Credit Cards And Miss Mortgage Payments
By Michael Kling on March 31, 2011

In a departure from traditional behavior, more homeowners continue to pay their credit card bills while falling behind on mortgage payments.

Consumers typically paid their mortgages and missed credit card bills during financial troubles, but that pattern revered in the recent recession.
Experts thought payment behaviors would return to normal when the recession ended. Instead, the trend became even more widespread, finds a study by TransUnion, a company providing credit and information services.

“The latest data from our study show that the new payment hierarchy has persisted for longer than many industry experts initially believed, and provides evidence that consumers continue to adjust their payment behavior in response to their economic and personal financial environment,” said Sean Reardon, author of the study released yesterday.

The percentage of consumers current on their credit card payments and delinquent on their mortgages first surpassed the percentage of those current on their mortgages and delinquent on credit cards in the first quarter of 2008. Continue Reading…

Category: Housing Market
California Earmarks $2 Billion For Anti-Foreclosure Effort
By Michael Kling on March 9, 2011

The state of California is giving out nearly $2 billion through its “Keep Your Home California” initiative to help homeowners avoid foreclosure.

The program, offered through the California Housing Finance Agency, is open to low- and moderate-income homeowners. To be eligible, the property must be owner-occupied, and the current principal balance must be under $729,750. There’s another catch. Your mortgage servicer must agree to participate in the program. At least the CalHFA website has a clear description of eligibility requirements and income limits for counties and a list of participating services.

The funds are left over federal Troubled Asset Relief Program funds that the state must use or give back to the federal government. Other states, including Arizona, Oregon and Florida, have rolled out similar programs.

State officials have said the initiative might help over 100,000 homeowners including up to 25,000 with negative equity. Some may argue that even $2 billion is not enough to solve the problem. Others will probably object to using taxpayer money to help homeowners who have made bad financial decisions. Continue Reading…

Category: foreclosures
Mortgage Rates Will Reach 5.8 Percent By The End of 2011, MBA Predicts
By Michael Kling on March 4, 2011

Mortgage rates will climb to 5.8 percent by the end of 2011, predict analysts at the Mortgage Bankers Association.

Mortgage rates will then rise above 6 percent in 2012, write MBA’s Michael Fratantoni, vice president of research and economics, and Joel Kan, the trade group’s director of economic forecasting, in their Economic Commentary today.

Mortgage rates for the 30-year fixed-rate mortgage averaged 4.79 percent in January, down slightly from the previous month, but have increased since then and are currently around 5 percent, they note. Increasing rates will prompt mortgage refinance volume to fall. Overall mortgage lending volumes will decline, despite more purchase money mortgages, the researchers predict.

Continue Reading…

Category: Mortgage Rates
Protestors Storm Mortgage Banking Conference
By Michael Kling on February 1, 2011

About 100 chanting union protesters burst into a mortgage banking conference in Washington, DC, yesterday, briefly shutting it down and taking over the stage.

After unfurling a banner and chanting for about 10 minutes, they left peacefully, leaving attendees at the Mortgage Bankers Association’s servicing conference perplexed over why they were there and what they wanted.

The protestors were from the AFL-CIO, specifically the Sheet Metal Workers International Association and the International Union of Painters and Allied Trades. They were targeting Debra Still, CEO of PulteGroup Mortgage, who was attending the conference.

You’d think protestors at conference on mortgage servicing would be demanding more loan modifications or better terms for home loans, but PulteGroup is a home-building company.

PulteGroup received about $900 million in government funds through the Worker, Homeownership and Business Assistance Act of 2009. Saying they were demanding accountability, the union workers said they to find out what happened to the “taxpayer funds used to bailout PulteGroup.”

The government money was supposed to be used to create jobs, the AFL-CIO asserted in its press release. Instead, PulteGroup laid off people, reported spending $8 million on employee severances and related costs, and announced plans to cut 350 jobs and close a plant in Tolleson, AZ, according to the union. The company has yet to define how it’s using the money to create jobs. Continue Reading…

Category: General, Loan Modification
Is the Fed’s Monetary Policy Having a Positive Impact?
By Michael Kraus on January 17, 2011

Is the Federal Reserve pushing on a rope with its efforts to improve the economy through monetary policy? In a speech today in Santiago, Chile, Charles Plosser, President of the Philadelphia Federal Reserve Bank seemed to suggest that may be the case.

“I believe we have come to expect too much from monetary policy. Indeed, broadening its scope can actually diminish its effectiveness. When monetary policy over-reaches and fails to deliver desired, but unattainable, outcomes, its credibility is undermined.”

The Fed has a dual mandate from Congress to promote maximum employment and price stability, and monetary policy seems to be having a limited effect in helping the Fed achieve its goals.

Unemployment has been hovering around 9.5-10 percent for more than a year, and the more complete U-6 measure of unemployment has bounced from 16 to 17 percent for about the same period of time. It is certainly possible that unemployment would be worse without the Fed’s low interest rate policy and quantitative easing, although it is hard to say for sure. Inflation appears to be under control and there were even fears of deflation recently. Plosser says that dealing with unemployment, credit allocation, and asset bubbles is better done with fiscal policy than monetary policy:

“When the central bank is asked to implement policies more appropriately assigned to fiscal authorities, the independence of monetary policy from the political process is put at risk, which also undercuts the effectiveness of monetary policy.”

Plosser says that while monetary policy may some short-run stimulative effects, in the long run unemployment is determined by other factors, such as demographics, labor laws, and tax policies. I can’t say for sure if this is true, but it does not seem as though monetary policy is having any real impact on employment rates right now.

As to the independence of the Fed from the political process, Fed actions have come under increased scrutiny from the media and politicians over the last couple of years. Noted Fed-hater Ron Paul (who published a book “End the Fed”) is now in control of the committee that oversees the Fed. Many politicians and pundits oppose the Fed’s second round of quantitative easing (colloquially known as QE2) which was unveiled to considerable rancor. While it is a fair question whether the Fed was ever truly independent from the political process, it does seem to find itself increasingly entangled in partisan politics, which may hurt its effectiveness.

Plosser will become a voting member of the Federal Open Market Committee this year (members of the panel rotate on an annual basis). He is generally considered an inflation hawk, and has dissented from the Fed’s zero interest rate policy in the past for fears that low interest rates will cause inflation. He also expressed reservations about QE2 in the past. It will be interesting to see if his appointment to the FOMC alters policy at all.

Category: Mortgage Rates
Unemployment Up to 9.8% as Nonfarm Payroll Report Disappoints
By Michael Kraus on December 3, 2010

The National Bureau of Economic Research said in September that the recession ended in June 2009. This may be the case in some technical sense, but it sure doesn’t feel like it is over.

The uber-important nonfarm payroll employment report came out this morning, and the results were very disappointing. The economy only added 39,000 jobs in November, while the unemployment rate ticked up to 9.8 percent (the broader U-6 measure of unemployment was unchanged at 17 percent). Coming into the day, the expectation was that the economy would add somewhere between 75-100,000 jobs, and the median prediction was around 150,000 jobs added. The report is especially disappointing when you consider that the ADP payroll report that was released on Wednesday showed private employers added more than 90,000 jobs in November.

The labor force participation rate stayed at 64.5 percent. This is significantly below the normal rate of 66-67 percent that we see in a normal economy. This means that when we do start adding jobs in large numbers (hopefully), it will take a while for the unemployment rate to come down because there are a bunch of people that will likely rejoin the work force.

Continue Reading…

Category: Mortgage Rates
Jobless Claims Hit Lowest Point Since 2008
By Michael Kraus on November 24, 2010

For once I get to report some news that appears, at least on its face, to be good: last week jobless claims hit their lowest points since July of 2008.

A report released by the Department of Labor todays shows that jobless claims fell by 34,000 to 407,000 last week. This is better than the expected number of 435,000. The four week moving average for jobless claims fell by 7,500 to 436,000. This is the lowest point for the 4 week moving average since summer of 2008.

Unemployment is still very, very high (U-3 unemployment is at 9.6 percent and broader measures of unemployment are at 17.0 percent), and the current pace of job creation would not put a dent in these figures until sometime next decade given current rates of population growth. I also don’t know how much of this is indicative of seasonal hiring. That said, this is still a positive sign that the labor market may be picking up steam.

It is a fairly obvious statement, but the housing market simply will not improve until the excess supply of housing is absorbed, and that will not happen until the jobless situation improves. Hopefully that will happen sooner rather than later, and possibly we are seeing the beginnings of that trend right now.

Category: Mortgage Rates
The Fed Must Lower Mortgage Rates
By Michael Kling on November 19, 2010

Criticisms of the Federal Reserve’s plan to jump start the economy with its second quantitative easing are generally bogus. Lowering interest rates, especially mortgage rates, is the best way to decrease unemployment, and purchasing large amounts of Treasuries has best chance of doing that.

Critics say the Fed’s plan say it will cause inflation. Yet inflation, now at about half a percent is no where in sight. The opposite problem – deflation – is the current threat to the economy. The economy is in danger of falling into a troublesome cycle of falling prices. We could descend into something like Japan’s deflationary “lost decade” of financial stagnation.

If inflation did become a problem, which is unlikely, all the Fed has to do is increase its interest rate. That’s about as difficult as holding a meeting and taking a vote.

But the fact is that some inflation is preferable to our current state of unemployment at over 9 percent. Inflation of 3 percent, which now seems outrageously high, would be quite tolerable and better than what we have now.

Incredibly, Mike Pence, a Republican Congressman from Indiana, said he will introduce legislation to remove the Fed’s job of fighting unemployment. His argument is that the Fed should not try to fight high unemployment because it is still high.

Critics also maintain the plan won’t work — an argument which contradicts their assertion that it will be inflationary. Continue Reading…

Category: Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates