News Archive

The administration released new numbers Friday on its principal foreclosure prevention initiative, the Home Affordable Modification Program (HAMP). Housing analysts and market observers say the results are disappointing at best.

The latest performance report showed that nearly half of the homeowners approved for trial modifications have fallen out of the program. As of the end of July, 616,839 HAMP trials have been cancelled, out of the 1,307,489 trials started since the program began.

Assistant Treasury Secretary Herb Allison says servicers have been working through a backlog of aged trials from when servicers were accepting borrowers into the program without verifying income and other critical requirements.

He said decisions on remaining aged trials – whether to convert to a permanent modification or drop the borrower from the program – will be made over the next couple of months. There are currently 255,934 HAMP trials classified as “active.”

Servicers have also canceled 12,640 permanent HAMP mods because the borrower has missed three or more consecutive monthly payments. Another 272 permanents have been closed because the borrower was able to pay off their loan.

According to data from the Massachusetts Institute of Technology (MIT), foreclosed homes make up about one in 12 houses with under $1 million left on the mortgage.

These foreclosures drive down home prices, and MIT gives two reasons for their depreciating effect – because foreclosed homes add to the housing supply and because the financial firms that acquire the houses want to unload them promptly.

However, since foreclosures often occur in economically struggling areas, it is hard to determine how much of the drop in a home’s value is due to its foreclosure, and how much can be blamed on the economy in general.

MIT economist Parag Pathak and two Harvard researchers, John Y. Campbell and Stefano Giglio, have completed a study to put a price tag on foreclosures.

Specifically, they’ve uncovered how much a foreclosure affects a home’s value, as opposed to a home going on the market because the owner has died or declared bankruptcy.

The three academia colleagues examined 1.8 million home sales in Massachusetts from 1987 to 2009. By looking in granular detail at real estate prices, they concluded that a foreclosure reduces the value of a house by 27 percent, on average.

Freddie Mac reported  that for the week ending August 12, 2010, interest rates for 30-year fixed-rate mortgages (FRM) averaged 4.44 percent (0.7 point). That’s a decline from the previous week's average of 4.49 percent. Last year at this time, the rate for a 30-year FRM came in at 5.29 percent.

Fifteen-year FRMs averaged 3.92 percent (0.6 point) this week in Freddie Mac’s study. Last week the average rate was 3.95 percent and a year ago it was 4.68 percent.

With mortgage interest rates at their lowest level in 50 years and home prices down significantly across the country, it would seem like now is the perfect time to buy a home or refinance one’s mortgage to cash in on some extra savings. But even with today’s extremely affordable conditions, mortgage activity has been somewhat muted.s.”

The chances of home prices falling further lessened in the first quarter of 2010 compared to the previous quarter, according to a new study from mortgage insurer the  PMI Group.

The company’s U.S. Market Risk Index, which assesses the probability (ranging from zero to 100) that the price of homes in a given metro area will be lower at the end of the next two years, declined to 51.9 from 53.8.

It was the third consecutive quarterly decrease in the overall reading, and PMI says it signals “continued improvement in the housing market.”

However, the company noted that there were less metropolitan statistical areas (MSAs) with lower risk scores compared with the previous quarter. The company explained that this anomaly reflects a drop in affordability and higher mortgage rates during the first quarter of 2010 compared with the end of 2009.

The Minneapolis-Saint Paul commercial real estate market is beginning to stabilize, reports NorthMarq, a Minneapolis-based company that provides a full range of services for commercial real estate owners, occupiers, and investors. The company’s mid-year “compass report” on the status of the Twin Cities market was released late July.

In spite downward trends still continuing in rental rates and vacancy rates continue to rise, residential land is beginning to trade as national homebuilders return to action.

“The consensus it that the commercial real estate market fundamentals haven’t quite yet hit bottom but will do so this year,” said Mike Ohmes, NorthMarq EVP of brokerage services. After rock bottom hits, he says, “A long, gradual recovery will begin late in the year or in early 2011.”

The report reveals data on various sectors of commercial real estate.

The office vacancy rate reached 19.9 during the first half of this year, only .03 percent higher than the rate recorded at the end of 2009. The rapidly slowing increase suggests the market is leveling out. Landlords are becoming increasingly willing to do whatever it takes to generate new tenants, meaning there will be continued downward pressure on rental rates, enticing national retailers like Bed, Bath and Beyond and value concepts like Goodwill to look to the area for expansion opportunities.

State housing finance agencies (HFAs) in North Carolina, Ohio, Oregon, Rhode Island, and South Carolina have been given the go ahead to use $600 million in federal funding for local foreclosure prevention programs.

These five states were designated as some of the nation’s “hardest-hit” housing markets because of high unemployment, local rates above 12 percent, and concentrated areas of severe economic distress.

The federal grants to assist struggling homeowners in these states are provided through the Obama administration’s Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets.

This is the second round of financing awarded through the Hardest Hit Fund. Five other states where property values spiked during the boom and nose-dived when the correction set in have already received and begun using $1.5 billion,  Arizona, California, Florida, Michigan, and Nevada.

The nation’s REO stock dropped 0.6 percent in May to 524,000 properties, according to analysis released by Barclays Capital. 

Additionally, the research firm estimates that housing’s shadow inventory,  which Barclays defines as the supply of homes that are 90 or more days delinquent or in the process of foreclosure, meaning they are nearing REO status, fell by 2.3 percent to 4.02 million properties.

Another study released by Clear Capital supports the assumption that indeed, there are fewer REOs influencing the market. The real estate valuation firm reports that REO saturation, the percentage of bank-owned homes sold as compared to all properties sold, keeps declining.

Data from Clear Capital shows that REO saturation fell 22.7 percent nationally during the May to July period. The company says that’s nearly 20 percentage points less than the REO saturation peak hit back in the first quarter of 2009.