Freddie Mac Servicers Provide Assistance to Over 1M Borrowers in 2012

Over the last year, Freddie Mac servicers have helped over one million borrowers remain in their homes through available programs.

The total includes 687,000 borrowers who refinanced in 2012, of which 434,000 were borrowers who refinanced under the Home Affordable Refinance Program (HARP).

Last year, 70,000 delinquent borrowers with Freddie Mac loans received a modification through the Home Affordable Modification Program (HAMP) and the Standard Modification, the McLean, Virginia-based GSEreported.

Another 46,000 borrowers received temporary relief through forbearance, reinstatement, and repayment plans in 2012. Adding to this are 11,000 borrowers who found similar relief in the first quarter of this year.

For borrowers who could not keep their homes, Freddie Mac reported 53,000 were able to make an exit through a short sale or deed-in-lieu of foreclosure in 2012, with another 14,000 who have sought similar options so far this year.

What’s Happening Beyond ‘Recovery’ Headlines?

Industry indicators such as rising prices, increases in construction, and declines in the number of underwater homeowners tell a story of a broad housing recovery, butHarvard’s Joint Center for Housing Studies (JCHS) sheds light on a less popular story in a report released Wednesday.

“With rising home prices helping to revive household balance sheets and expanding residential construction adding to job growth, the housing sector is finally providing a much needed boost to the economy,” says Eric S. Belsky, managing director of JCHS.

“But long-term vacancies are at elevated levels in a number of places, millions of owners are still struggling to make their mortgage payments, and credit conditions for homebuyers remain extremely tight. It will take time for these problems to subside,” he said.

Homeownership is down, and consumer spending on housing as a portion of income is up.

Thirty-seven percent of households were spending more

than 30 percent of their pre-tax income on housing in 2011, according to the Center’s report.

Furthermore, 17.9 percent of the nation’s households were spending more than 50 percent of their pre-tax incomes on housing. These households, which the Center considers “severely burdened,” have increased 49 percent since 2001.

Market conditions are pushing more households into rentals, even those in categories that used to maintain high homeownership rates, such as couples with children, high-income households, and white households, the report states.

“For each 10-year age group between 25 and 54, the share of households owning homes is now at its lowest point since recordkeeping began in 1976,” the Center states.

Additionally, while foreclosures and delinquencies are declining, they remain at historically elevated levels.

The delinquency rate fell from its peak of 10.1 percent in the first quarter of 2010 to 7.3 percent in the first quarter of this year.

“Still, more than 1.4 million homes were in foreclosure, representing 3.6 percent of all mortgages in service,” the report states, adding that this equates to more than four times the average rate between 1974 and 1999.

Amid this still-bleak environment, the federal budget sequestration will reduce rental housing assistance.

“Given the profoundly positive impact that decent and affordable housing can have on the lives of individuals, families, and entire communities, efforts to address these urgent concerns as well as longstanding housing affordability challenges should be among the nation’s highest priorities,” Belsky said.

Commentary: We’re Forever Seeing Bubbles

The recent jump in home prices (near record month-over-month and year-over-year increases reported for May by the National Association of Realtors) has led to speculation that the rapid surge in home prices could be the sign of a new housing bubble similar to the one that led to the Great Recession.
Is it? The not-so-short answer is, not yet.

Indeed, through May the median price of an existing single-family home has risen by double-digits for seven of the last eight months (and in the eighth, the year-over-year increase was 9.4 percent). For comparison’s sake, note that in the run-up to the collapse in 2006, the median price of an existing single-family home rose by double-digits year-over-year for 11 straight months.
An increase in prices itself does not signal a bubble. An unsustainable increase, not supported by other data, however, would. In the run-up to the 2006 collapse, the higher prices—which had been trending up for four years—led to a sharp uptick in construction wholly unsupported by demographics. Baby boomers were aging, transforming home buyers into sellers, and there weren’t sufficient numbers of “echo boomers” to replace them.
Nonetheless, in the last 12 months, the year-over-year increase in single-family starts has averaged about 26 percent, four times the average year-over-year increase in the 12 months just prior to the bubble bursting in 2006. When housing prices fell when the bubble burst, the construction jobs they supported disappeared along with hundreds of thousands of others as housing wealth vanished, seemingly overnight.
Even though the demographics haven’t changed—the 55-plus population is growing faster than the 25-34 population—builders in the last 12 months have completed 31 percent more single-family homes than they sold. Prior to the housing peak, completions were about 26 percent more than sales, adding to inventories and further depressing home prices.
While the “gap” between completions and sales was wider before the 2006 collapse than today, it has been expanding rapidly, growing in eight of the last 12 months.
So, what happened to the overall economy when the housing bubble burst? As prices and values dropped, so did consumer spending, a function of the “wealth effect.” According to some estimates, the decrease in home values reduced consumer spending by upwards of $400 billion and GDP by about 2.5 percent. That jobs fell as well only made a bad situation worse.
The slowdown in housing prices beginning in 2006 came just as baby boomers—born between 1946 and 1964—were approaching retirement, a time when they might be looking to use their homes as a retirement nest egg, finding themselves with more house than they needed. About a year later, employment began to sag along with wages and salaries, so there were fewer people with less money to spend on buying a home.
Despite the fact we still theoretically have more potential sellers than buyers, which should drive prices down, the inventory of homes listed for sale has remained low. That low inventory, combined with low interest rates keeping affordability high, has driven prices up.
That doesn’t necessarily mean a bubble unless sales increase with the higher prices, and they have even with regulatory changes in the wake of the housing collapse designed to stop banks from making loans borrowers could not afford. Just how effective those changes have been though is still open to question. According to the Federal Reserve’s most recent Senior Loan Officers Opinion Survey, mortgage demand is climbing and more banks are easing lending standards.
Those factors combine to drive prices still higher a cycle which, if incomes fail to keep pace, could inexorably lead to a bursting bubble.
Perhaps more significant than the question of whether we’re in or headed to a bubble and are we prepared for it to burst is what happens if prices again suddenly and dramatically collapse?
Many analysts contend the current prices are justified by low rates, which keep home affordable even as prices rise. This would suggest that as rates rise, prices will move in the opposite direction, a replay of the post-2006 economy. That’s not though what history tells us. If prices fall in response to higher rates, it would mean market behavior has changed, a phenomenon for which we may not be prepared.

HOPE NOW Reports 70K Mods in April, 59K Foreclosure Sales

Nearly 70,000 homeowners received permanent loan modifications in April, while foreclosure sales stood at 59,000 for the month, according to data from HOPE NOW, an alliance of mortgage servicers, investors, mortgage insurers, and nonprofit counselors.

Of the 70,000 modifications, about 58,000 were proprietary, or private, loan modifications, while about 12,000 were through the government’s Home Affordable Modification Program (HAMP), HOPE NOW reported. In March, servicers provided over 88,000 modifications for homeowners.
Since 2007, a total of 6.39 million homeowners have received permanent modifications.
Completed short sales reached 27,000 in April—a slight adjustment from 28,000 in March. This brings the industry total for short sales since 2009 to 1.26 million.
When combining loan modifications and short sales, HOPE NOW reported over 7.6 million foreclosure prevention solutions have been applied since 2007.
Meanwhile, foreclosure sales showed an increase from March to April, rising 14 percent to 59,000.
Foreclosure starts were little changed at 115,000 in April compared to 116,000 in March.
“HOPE NOW is proud of the efforts its members have made on behalf of the nation’s homeowners. While there is still work to be done in the housing market, significant progress has been made via loan modifications, short sales and other solutions,” said Eric Selk, executive director of HOPE NOW, in a statement.
HOPE NOW also announced upcoming face-to-face events it will be hosting this summer in Columbia, South Carolina; Birmingham Alabama; San Antonio, Texas; and San Bernardino, California.