Posts Tagged ‘President Obama’

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US Foreclosures Up 24 Percent In 1st Quarter 2009

April 17, 2009

foreclosure-03The number of American households threatened with losing their homes grew 24 percent in the first three months of this year and is poised to rise further as major lenders restart foreclosures after a temporary break, according to data released Thursday, April 16th, 2009.

The big unknown for the coming months, however, is President Barack Obama’s plan to help up to 9 million borrowers avoid foreclosure through refinanced mortgages or modified loans. The Obama administration expects its plans to make a big dent in the foreclosure crisis. But it remains to be seen whether the lending industry will fully embrace it, despite $75 billion in incentive payments.

The faltering economy is causing the housing crisis to spread. Nationwide, nearly 804,000 homes received at least one foreclosure-related notice from January through March, up from about 650,000 in the same time period a year earlier, according to RealtyTrac Inc., a foreclosure listing firm. During the quarter, Ohio was the state with the seventh highest number of homes seeing foreclosure activity with about 31,600 receiving at least one filing, up 1 percent from a year earlier.

In March, more than 340,000 properties were affected nationwide, up 17 percent from February and 46 percent from a year earlier. Ohio had 12,600 homes receiving foreclosure notices during the month, 12 percent more than during March 2008. Foreclosures “came back with a vengeance” last month and are likely to keep rising. Nearly 191,000 properties completed the foreclosure process and were repossessed by banks in the quarter. While the number was down 13 percent from the fourth quarter of last year, it is expected to rise through the summer and then possibly taper off.

Fannie Mae and Freddie Mac, the big mortgage finance companies, together with many banks had temporarily halted foreclosures in advance of Obama’s plan. Now armed with the details about which borrowers can qualify, the mortgage industry has begun foreclosing on ineligible borrowers. The Treasury Department has signed contracts with six big loan servicing companies — including Citgroup, Wells Fargo and JPMorgan Chase. Many have already started processing loans as part of the government’s “Making Home Affordable” plan.

In the coming months, there are still likely to be increased foreclosures, especially from vacant houses, second homes and those owned by speculators. None of those properties will qualify for a loan modification. However, overall foreclosures could start to decrease this summer. But even industry executives who emphatically support the plan emphasize that its success isn’t guaranteed. Plus, the lending industry has been swamped by the unprecedented wave of calls from distressed borrowers.

In RealtyTrac’s report, Nevada, Arizona, California and Florida had the nation’s top foreclosure rates. In Nevada, one in every 27 homes received a foreclosure filing, while the number was one in every 54 in Arizona. Rounding out the top 10 were Illinois, Michigan, Georgia, Idaho, Utah and Oregon.

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Obama Loan Modification Plan Launches

April 17, 2009

obama2The Obama administration’s loan modification program is finally underway. First participants in the Treasury Department’s program to help homeowners avoid foreclosure include some of the nation’s largest banks.

The Treasury Department announced Wednesday the first six participants to sign up for President Obama’s plan. They include three of the nation’s largest banks: JPMorgan Chase (JPM, Fortune 500), which will get up to $3.6 billion in subsidy and incentive payments; Wells Fargo (WFC, Fortune 500), $2.9 billion; and Citigroup (C, Fortune 500), $2 billion. The others are GMAC Mortgage, $633 million; Saxon Mortgage Services, $407 million; and Select Portfolio Servicing, $376 million.

Additional loan servicers will be added to the list over time, a Treasury spokesman said.

Several major servicers, including JPMorgan Chase and Wells Fargo, said they began modifying loans under the government initiative earlier this month. CitiMortgage signed up for the program on Monday and will start processing applications soon. Wells Fargo said in a statement that they view this modification program as yet another incremental opportunity for thousands of homeowners to preserve and maintain the dream of homeownership.

Distressed homeowners and housing counselors have been eagerly awaiting the program’s launch since Obama first announced it on Feb. 18. However, it took weeks for the government to clarify the terms and for the financial institutions to update their systems and start accepting applications, frustrating many of those in trouble.

Billed as helping up to 9 million borrowers stay in their homes, the two-part plan calls for servicers to reduce monthly payments to no more than 31% of eligible borrowers’ pre-tax income or to refinance eligible mortgages even if the homeowner has little or no equity. The government is allocating $75 billion to subsidize part of payment reduction, as well as provide thousands of dollars in incentives for servicers and borrowers to participate.

The Treasury Department said Wednesday it is capping the payments to servicers to allow more companies to participate. It is allocating $50 billion to the program, with Fannie Mae (FNM, Fortune 500), Freddie Mac (FRE, Fortune 500) and the Department of Housing and Urban Development providing the rest.

The modification plan calls for the servicer to reduce interest rates so that the monthly obligation is no more than 38% of a borrower’s pre-tax income, and then the government would kick in money to bring payments down to 31% of income. Servicers can also reduce the loan balance to achieve these affordability levels. The government will share in the cost, up to the amount the servicer would have received if it had reduced the interest rates.

Only loans where the cost of the foreclosure would be higher than the cost of modification would qualify. Also, Treasury will not provide subsidies to reduce rates to levels below 2%.

In addition to subsidizing the interest rates, servicers will use the Treasury funding to pay for incentives for themselves, homeowners and investors. The program gives servicers $1,000 for each modification and another $1,000 a year for three years if the borrower stays current. It will also give $500 to servicers and $1,500 to mortgage holders if they modify at-risk loans before the borrower falls behind.

Homeowners, meanwhile, will get up to $1,000 a year for five years if they keep up with payments. The funds will be used to reduce their loan principals.

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U.S. Home Foreclosure Notices Hit 274,000 In January 2009

March 13, 2009

The number of Americans on the verge of losing their homes fell in January but was still up from the same month a year ago. The numbers would have been higher if not for efforts to stall the foreclosure process.

Across the U.S., more than 274,000 homes received at least one foreclosure-related notice last month. That was down 10 per cent from December, but still 18 per cent higher than a year ago, according to RealtyTrac Inc., an Irvine, Calif.-based foreclosure listing service.

Contributing to the monthly drop was a decision by government-controlled mortgage finance companies Fannie Mae and Freddie Mac to suspend foreclosure sales during the winter holidays. As well, Florida Gov. Charlie Crist brokered a deal in which lenders in that state agreed to a 45-day halt to new foreclosure petitions.

But those efforts may not have much effect in the long run.

“If you don’t do anything to get to the core problem, all you’re doing is extending the housing downturn,” said Rick Sharga, RealtyTrac’s vice-president for marketing. “It’s only a good idea if there’s a corresponding program that dramatically restructures hundreds of thousands of loans.”

Meanwhile, a federal regulator on Wednesday urged more than 800 thrift institutions to suspend all foreclosures while President Barack Obama’s top economic officials develop plans to keep borrowers in their homes.

The Obama administration plans to spend $50 billion to combat foreclosures of owner-occupied, middle-class homes, but is divulging few details. An announcement of the administration’s housing plans is expected in the coming weeks.

Testifying before House lawmakers on Wednesday, Treasury Secretary Timothy Geithner said the government would provide incentives to “try to induce economically sensible restructuring of mortgages,” but offered no specifics.

2 million foreclosures in last year
More than two million American homeowners faced foreclosure proceedings last year, and that number could soar as high as 10 million in the coming years, according to a report last month by Credit Suisse, depending on the severity of the recession.

The RealtyTrac report said nearly 67,000 properties were repossessed by lenders in January as the worst recession in decades, falling home values and stricter lending standards continue to sap the U.S. real estate market. That was up from more than 45,000 repossessed properties in January 2008, but down from 79,000 in December.

Geithner and Shaun Donovan, the new secretary of the Department of Housing and Urban Development, met with officials from housing and other nonprofit groups, top bank executives and industry lobbyists Wednesday to hear proposals for how the new programs to fight foreclosures should be structured.

After the meeting, John Taylor, chief executive of the National Community Reinvestment Coalition, a consumer group in Washington, said he was optimistic the new administration would agree to use government dollars to buy up mortgages and remove them from complex mortgage-linked securities and restructuring them at more affordable levels.

He said support from government and industry officials for that idea was a “giant step forward” compared with opposition to such an approach by the Bush administration.

The Obama administration is also expected to back a push in Congress — opposed by the mortgage industry — to let bankruptcy judges alter the terms of primary home loans. Earlier this week, Obama said it “makes no sense” that judges are not allowed to do so. The mortgage industry argues that this prohibition allows lenders to charge lower rates.

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Government May Subsidize Loan Modifications

February 26, 2009

capitol-hillIn an effort to boost loan workouts and their related effectiveness, a plan is reportedly in the works to give mortgage lenders a subsidy if they cut mortgage rates for troubled borrowers, according to the Washington Post.

The Obama Administration is apparently mulling over a proposal that would provide greater incentives for lenders to offer loan workouts to more borrowers in need, not just those close to foreclosure.

Under one possible scenario, the government would share the cost of lowering an at-risk borrower’s interest rate, which may promote the use of loan modifications as a loss mitigation tool instead of less effective repayment plans.

“For example, consider a homeowner with a $200,000 mortgage and a 9 percent interest rate who now pays about $1,700 a month, including taxes and insurance. Lowering the interest rate to 5 percent would reduce the payments to about $1,160. The government and industry would each chip in to cover the difference, about $540,” the Post reported.

The program will likely be financed with the $50 billion in Troubled Asset Relief Program (TARP) funds set aside for homeowner relief.

It’s unclear how such a program would be carried out, though sources close to the plan believe Fannie Mae and Freddie Mac will have some involvement.

Homeowners looking for such aid may be subject to an affordability test, as well as an appraisal of their home to qualify.

Of course, some critics have already argued that many homeowners are simply beyond help, and don’t belong in a mortgage.

Others question why we should subsidize mortgage lenders to do what’s in their best interest to begin with, as a loan modification is often cheaper than foreclosing.

Regardless, most seemed optimistic by the notion of the plan, which was evident in a late rally on Wall Street.

But with re-default rates expected to be in the range of 60-70 percent, it’s hard to get too excited about the initiative, especially with the giant pool of underwater borrowers left to deal with.

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Obama Promises To Lower Mortgage Costs

February 4, 2009

obama21On Saturday, January 31st, President Barack Obama promised America that he would lower mortgage costs as part of the financial rescue package. The exact terms and methods of how he is going to do this has not been disclosed, but in the near future, the entire rescue plan will be released to the public. Many analysts feel that President Obama will ask for even more than the $700 billion to bail out America.  Some predict a number as large as $4 trillion. What exactly does this mean to you?

Well, this is great news to the average American citizen who is struggling in this economy. President Obama recently condemned the executive bonuses that were being distributed to the major players on Wall Street. Like many of us, he feels that individuals should be compensated based on their performance. With many of these financial institutes losing over 75% of their value, these CEOs cannot be performing well as leaders.

Mr. Obama stated that the proposal will assist the housing crisis which will support credit markets so banks will start lending again. This will greatly benefit small business, car buyers, college students, and real estate markets. Thank you President Obama; hopefully this will work sooner rather than later.