Obama Administration Extends Making Home Affordable Program

U.S. Secretary of the Treasury Jack Lew announced today that Treasury is extending the Making Home Affordable Program for another two years. The new expiration date is now set for December 31, 2015.

The program offers help to homeowners through solutions including the Home Affordable Modification Program (HAMP), Home Affordable Foreclosure Alternatives (HAFA), and the Second Lien Modification Program.

As of March, an estimated 1.1 million struggling homeowners have received a permanent modification through HAMP.

The move aligns with the Federal Housing Finance Agency’s (FHFA) extension for the Home Affordable Refinance Program (HARP), which was first announced in April.

Survey Finds Younger Homeowners More Likely to Be Underwater

Younger Americans are more likely to have a home that is underwater, according to a survey from the FINRA Investor Education Foundation (FINRA Foundation).

Based on survey findings, 25 percent of Americans between 18 and 34 years of age said they have an underwater mortgage. On the other hand, 18 percent of adults aged 35 to 54 said they were underwater, while only 8 percent of individuals 55 or over were underwater.

On a national level, the FINRA Foundation found 14 percent of adults said they were underwater on their mortgage.

For the national online survey, over 25,500 adults participated during a four-month period in 2012.

The survey also reported more than half of Americans would not be prepared to cover living expenses if a financial emergency, such as a job loss or sickness, were to occur. Fifty-six percent said they do not have rainy-day savings to cover three months, which also means they could easily fall behind on their mortgage if they are homeowners and an emergency situation transpired.

According to the FINRA Foundation, younger Americans, or those who are 34 and under, are more likely to show signs of financial stress, including making late mortgage payments.

Individuals were also asked about their ability to save versus spend. The survey revealed 36 percent of Americans break even, while 41 percent spend less than their household income.

When study participants were asked five questions concerning financial literacy, the survey found 61 percent answered three or fewer questions correctly. The questions covered compound interest, inflation, principles relating to risk and diversification, the relationship between bond prices and interest rates, and the impact that a shorter term can have on total interest payments over the life of a mortgage.

“This survey reveals that many Americans continue to struggle to make ends meet, plan ahead and make sound financial decisions-and that financial literacy levels remain low, especially among our youngest workers. No matter how you slice and dice it, this rich, new dataset underscores the need for us to continue to explore innovative ways to build financial capability among consumers,” said FINRA Foundation Chairman Richard Ketchum.

On a state-by-state basis, the survey results showed residents of California, Massachusetts, and New Jersey are the most financially capable, while residents of Mississippi were found to be in the least financially capable state. Arkansas and Kentucky also ranked towards the bottom based on the measurements used in the survey.

Report: Short Sales Replacing Mods as New Norm

Among the available foreclosure prevention tools, short sales are becoming the weapon of choice for servicers while the use of loan modifications has slowed, data from Fitch Ratings revealed.

For example, among bank servicers, the percentage of resolutions in the loan modification category decreased to 26 percent in the last half of 2012 from 57 percent in the first half of 2010, according to Fitch’s latest quarterly index.

However, for nonbank servicers, loan modifications are ranged between 69 to 71 percent during the same time period.

Meanwhile, short sales showed significant increases over the last couple of years. In 2012, short sales represented 51 percent of resolutions for bank servicers, up from a low of 20 percent in 2010. For nonbank servicers, short sales grew to 16 percent in 2012, up from 11 percent in 2010.

“Loan modifications have fallen due partly to overall declines in mortgage delinquencies,” explained Diane Pendley, managing director at Fitch. “However, they may also have fallen out of favor since many modified loans have already failed and do not qualify for another modification.”

In instances where modifications are not possible, the rating agency explained servicers will look to a short sale, which allows servicers to save by avoiding the cost of dealing with a foreclosure.

Fitch also compared staffing levels for banks and nonbanks, noting a diverging trend. In late 2010, bank staffing levels expanded rapidly as banks worked to address the high level of defaults, but they are now reducing their staff as defaulted loans become resolved or transferred. Nonbank services though have shown a need to expand in response to their growing portfolios.

Banks also tend to higher more temporary employees, at 12 percent on average, compared to about 3.5 percent for nonbank servicers, according to the report.

In addition, the number of loans per employee is much higher for banks though the number has decreased significantly over the last two years from about 800 to about 500 in 2012. Nonbank servicers have kept their loan per employee numbers lower, averaging around 275.

Fitch also found nonbanks have shorter timelines when resolving 60-plus delinquencies. For nonbanks, it takes about 14 months to resolve loans through a repayment, modification, short sale or foreclosure, while banks take about 22 months to resolve a delinquency.

One reason for the difference could be the requirements for banks under the national mortgage settlement, as well as the difference in staffing levels, according to Fitch.

Though, Fitch anticipates the playing field may become more even in days ahead.

“[W]ith nonbank servicers coming under the regulatory control of the CFPB and a large portion of the banks’ defaulted or high risk product moving to their portfolios, nonbank servicers will be challenged to maintain this advantage,” the report stated

Survey: Distressed Sales Fall, Investors Increase Short Sale Activity

In April, the share of sales involving foreclosures and short sales maintained their downward path, falling to the lowest level since 2009, according to the Campbell/Inside Mortgage Finance HousingPulse Tracking survey.

Using a three-month moving average, the survey found distressed sales accounted for 33 percent of home purchases in April, a decrease from 35.6 percent in March and 43.6 percent in April 2012. The figure for April is the lowest level since the HousingPulse survey began accumulating data on such properties in 2009.

As expected, investor activity also slowed during the same time period. According to the survey, 21.6 percent of purchases were made by investors for the month, which is the lowest level recorded for investors since November.

Despite the overall decrease in distressed sales and investor activity, the survey reported short sale activity has gone up for investors, with investor short sale purchases up to 35.3 percent, an increase from 31.8 percent in March and 30.5 percent in April 2012.

Investors also appeared to be more focused on buying foreclosures that require repair work as they pursue properties to convert to rentals, HousingPulse reported. In April, 62.8 percent of damaged REOs were bought by investors, down from 63.9 percent in March, but up from 60.4 percent a year ago.

The survey, which includes about 2,000 real estate agents nationwide, also noted that based on feedback from agents, it seems hedge funds and Wall Street investors are very active in California, Florida, and Nevada, where they are competing with first-time homebuyers.

Report Finds 67% of Buyers Believe Market Has Shifted Toward Sellers

As sellers hold their grip on the market, buyers are starting to understand what it’s going to take to stay in the game, according to responses in Redfin’s second-quarter Real-Time Home-Buyer Report.

After speaking at length with the buyers, it was determined that although their understandable frustration concerning the low amount of inventory continues to rise, there is an equal elevation in their individuals awareness and recognition of the seller’s market, as well as an overall willingness to actually pay more out of pocket for purchasing real estate.

The report goes on to predict that the prices of property will only continue to escalate, yet likewise finds that the majority consensus of the concern when it comes to an overall stability in the nation’s economy are actually lessening as times goes on.

The following bullet points are the basic key findings in the report, and represent the majority sentiment and perspectives of homebuyers questioned:

The consensus that is emerging is that the present market is most definitely shifting into a seller’s market with statistics showing that a scant 31 percent of homebuyers actually are of the opinion that it is a good time to buy in their local areas, this finding down from the recent 40 percent.

Further supporting this sentiment is the 67 percent of interviewees that consider this a prime time to sell (up from a previous 48 percent).

Although the market is showing itself as a seller market, an astounding amount of homebuyers interviewed are revealing their increasing willingness to pay more as the prices continue to rise, most of this eagerness or accommodation appears to be a direct result of the staggering low inventory that has presented on the market this quarter.

One percentage that remained static within this quarterly report was the amount of homebuyers who are already preparing for continued pricing increases on the market. It would appear that 23 percent (just up from 22 percent last quarter) are acutely aware and ready for continued hikes.

In light of this belief, the rising prices in the market are not only becoming a topic of discussion, but are morphing into an increasingly common concern, with 48 percent of homebuyers polled presenting great anxiety on this issue.

The bottom line of Redfin’s findings points to a few, clear conclusions: homebuyers are frustrated with the low inventory availability on the market, they are growing weary of the increasingly cutthroat competition within the market, and they are unhappy with the current rate and pace at which the homes themselves are selling.

The data for Redfin’s analysis was extracted from interviews conducted with over 1,350 actual homebuyers from 22 metropolitan markets in the U.S, all having recently toured Redfin homes for sale.

Millions of Above-Water Borrowers Lack Enough Equity to Move

The number of homeowners underwater on their mortgages continued to fall in Q1, but millions still lack enough equity to afford to move, Zillow revealed in its first-quarter Negative Equity Report.

According to the report, the national negative equity rate was 25.4 percent in the last quarter compared to 27.5 percent at the end of 2012. That percentage represents slightly more than 13 million homeowners with a mortgage, Zillow said.

However, when including homeowners with less than 20 percent home equity, the “effective” negative equity rate climbs to 43.6 percent, or a total of 22.3 million homeowners.

In its report, Zillow explained that these homeowners likely can’t afford a down payment for a new home, tying them to their current homes and exacerbating the inventory shortage.

“Reaching positive equity, even barely, is an important milestone. But things like real estate agents’ fees and a down payment for the next home traditionally come out of the proceeds from the prior home’s sale,” said Zillow chief economist Dr. Stan Humphries. “Without enough equity, these costs will instead have to come out of a homeowner’s pocket, leaving many still stuck.

“Looking at the effective negative equity rate could explain why recent, healthy declines in the number of underwater borrowers haven’t yet translated into more homes for sale. The only cure is patience, as rising home values continue to build equity to the point where more homeowners can realistically sell,” he continued.

Among the 30 largest metro areas covered by Zillow, those with the highest effective negative equity rate are Las Vegas, Nevada (71.5 percent); Atlanta, Georgia (64.1 percent); and Riverside, California (59.7 percent).

For the first quarter of 2014, Zillow predicts the negative equity rate among all homeowners with a mortgage (but excluding those who are in low positive equity) will fall to 23.5 percent, lifting more than 1.4 million additional homeowners into positive territory.

Current homeowners leading home purchase activity

Housing PulseWhich homebuyer group is leading the recovering market nationally?  Despite buzz to the contrary, it is not investors.  New research suggests that first-time homebuyers and current homeowners are in fact the major players in this year’s marketplace.

The nationwide Campbell/Inside Mortgage Finance HousingPulse Tracking Survey data for March shows that current homeowners continue to dominate the overall home purchase market with a 42.2% national market share in March (based on a 90-day rolling average).  While that was down from the levels seen last fall, it was still up on a year-over-year basis.

Meanwhile, first-time homebuyers stepped up their buying activity, reaching an eight-month market share high of 36.1% in March, according to survey results.  Athough investors have been getting a lot of media attention recently in terms of driving – if not dominating – home purchase activity, their share of the national housing market was just 21.8% in March.  HousingPulse survey findings show the investor market share nationwide hovering between 19% and 23% for much of the past year.

If you look at just non-distressed properties — the largest segment of the housing market — the investor share was only 13.3% in March.  Current homeowners had a 50% market share and first-time homebuyers a 36.8 percent of the non-distressed housing market last month.  More information on the study.