Shadow Inventory Raises 10 Percent,

The so-called shadow inventory of residential property increased 10 percent year-over-year, according to a report released today by CoreLogic.

As of August, there were 2.1 million units, representing eights month of supply, of shadow inventory, up from 1.9 million units, or five months of a supply, a year ago.

“With visible inventory remaining flat at 4.2 million units, the change in shadow inventory increased the total supply of unsold inventory by 3 percent,” the company said in a release.

CoreLogic estimates its shadow inventory, sometimes referred to as pending supply, by adding up properties that are seriously delinquent (90 days or more behind in mortgage payments), inforeclosure, or owned by mortgage lenders but not currently listed on multiple listing services (MLSs).

These properties typically don’t show up in official numbers released by the Census Bureau and other outlets, meaning housing supply is worse than it looks.

And the visible months’ supply increased to 15 months in August, up from 11 months a year earlier due to the decline in sales volume during the past few months (expiration of homebuyer tax credit).

Now the total visible and shadow inventory stands at 6.3 million units, up from 6.1 million a year ago.

As a result, the total months’ supply of unsold homes was 23 months in August, up from 17 months a year ago.

Typically, a reading of six to seven months supply is considered normal, meaning current inventory is roughly three times the norm.

Translation: Continued downward pressure on home prices.



State AGs And Banks Prepare Fraudclosure Settlement, Bailout Number Two For BofA Imminent,

CNBC’s Diana Olick reports that the investigation into the biggest financial fraud in recent history is about to be shelved: the reason, state AGs are nearing a settlement with banks, which will slap a few wrists, will see banks put some lunch money in a settlement fund, will result in some principal reductions, and everything will be well again, as banker bonuses surpass 2009 levels (as noted previously). Retroactively in perpetuity. In other news, state sponsored fraud in America is alive and well.

Update: don’t spend that bonus money on the January edition Perfect 10s just yet. In what seems to be a day of relentless newsflow, we have just learned via Charlie Gasparino and Fox Biz, that Phil Angelides is launching his own probe into the mortgage market. Then again, all this means is that BofA will need to spend a few million extra dollars to bribe the key people in this latest development, and then everything shall be well again.

Add Phil Angelides to the growing list of regulators investigating whether banks committed fraud in the $6.4 trillion mortgage-bond market, the FOX Business Network has learned.

The Financial Crisis Inquiry Commission, which Angelides chairs, has begun investigating whether mortgages packaged into bonds and now held by investors including government agencies like Fannie Mae and Freddie Mac were done so improperly, thus calling into question the legality of trillions of dollars of debt, according to people with direct knowledge of the matter.

The inner workings of the mortgage-backed securities market have come under intense scrutiny in recent months following revelations that big banks may have committed fraud by hiring so-called robo-signers to approve foreclosure applications on tens of thousands of mortgages. At issue: Whether the robo-signers properly approved foreclosures and whether people forced from their homes received due process.

The latest twist in the robo-signer controversy involves whether improper foreclosures and banks failing to follow proper legal procedures will call into question the mortgage bonds themselves. Many of the foreclosed mortgages aren’t held by banks, but have been placed in bonds held by investors. The money thus is returned to an investor holding the bond.

But if the foreclosure has been done by a robo-signer, or if the banks creating the bond did so improperly, as a recent congressional study suggested, then the bonds themselves could be declared illegal. That could pose big problems for the banks that created the mortgages and sold the bonds, like Bank of America (BAC: 11.94 ,-0.16 ,-1.32%) and JPMorgan (JPM: 39.58 ,-0.47 ,-1.17%) because it would allow investors to “put”, or force the banks to buy back, the underlying mortgages.

And here is Diana Olick’s disclosure:

While sources say there is no universal solution to shoddy foreclosure practices at some of the nation’s largest mortgage banks/servicers, the three largest, BofA, JPM and Wells Fargo, may be agreeing to the same solution.

First, banks would pay into a fund used to compensate borrowers who have claims after their home has been sold in foreclosure. The borrowers would have to prove they were wronged in the process, and the attorney’s general would allocate the funds. In other words, the AGs would be the administrators. The amount of said fund is still undetermined, and likely still in negotiation. Each bank could settle on its own amount, or there could be a joint agreement.

Secondly, the banks would do away with the dual track of modifications and foreclosures. That means that only after all options of modification are exhausted can a bank begin foreclosure proceedings. Many borrowers currently complain that they are in the midst of the modification process when they get a notice of foreclosure sale. The drawback to eliminating the dual track is even greater extended timelines to foreclosure for borrowers. As it is, borrowers on average can be in their homes for a year and a half without making mortgage payments before eviction.

Finally, there would be some kind of agreement to third party mediation for review of all the cases in the first part of the agreement where borrowers are seeking compensation from the AG fund.

There has also been talk of principal write down as part of settlements, perhaps with some banks and not others. “It’s been on the table,” says one source.


Nearly 40 Percent of Purchase Mortgages in 2010 FHA Loans,

FHA loans were used to close 38 percent of all home purchase mortgages, including 60 percent of all African-American and Hispanic home purchases, during the nine-month period ending in June 2010.

The FHA’s single-family insurance program also accounted for nine percent of all refinanceloans during that time period.

And recently originated loans actually boosted the FHA’s capital resources by $1.5 billion since last year to $33.3 billion, their highest level ever.

Unfortunately, loans originated prior to 2009 continue to be the downfall of the FHA, namely so-called “seller-financed down payment assistance loans,” which have already chalked $6.6 billion in losses.

They’re ultimately expected to cost the FHA $13.6 billion, which is why they were eventually banned.

In fact, without these loans, the FHA’s capital ratio would have remained above the congressionally mandated two percent threshold.

Now the FHA’s capital ratio is around .50 percent, and is expected to near two percent in 2014 and finally exceed the statutory requirement in 2015.

Recent Changes Should Save the FHA

That’s due in part to recent changes made at the FHA, including the introduction of a minimum credit score (500) and higher insurance premiums.

Over the past year, the FHA insured $319 billion in single-family mortgages for 1.75 million households, including 882,000 first-time homebuyers.

Additionally, it helped 450,000 borrowers avoid foreclosure through loss mitigation actions, and provided refinance loans to 556,000 borrowers, savings households an average of $140 a month on mortgage payments.

An FHA loan allows borrowers to put down as little as 3.5 percent to obtain financing, making it a popular choice for prospective homeowners these days.

FHA Lending Volume Since 2000

fha volume


How Do You Keep Homeowners In Their Home When They Are Already Gone?,

Half million dollar house in Salinas, Californ...

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Once more Congress is trying to legislate the un-legislatable [It’s not a word, but it ought to be.] They want to force lenders to keep borrowers in homes: [Thanks L!]

WASHINGTON/CHARLOTTE, North Carolina (Reuters) – Banks under fire over their foreclosure practices face twin hearings in Congress this week, at which they will come under renewed pressure to find ways to keep borrowers in their homes.

The hearings on Tuesday and Thursday will include the first appearances by executives from major lenders like Bank of America and JPMorgan Chase since the furor over sloppy foreclosure paperwork erupted in September.

Banks are accused of having used “robo-signers” to sign hundreds of foreclosure documents a day, a fiasco that has reignited public anger with banks that received billions of dollars in taxpayer aid during the financial crisis.

Lenders will be pressed on whether the paperwork problems are further evidence that modifying loans is a better alternative to eviction.

Foreclosure should be the last option and we need to examine barriers to mortgage modifications,” Democratic Senator Tim Johnson, expected to lead the Banking Committee next year, said in an emailed response to Reuters.

Here’s a couple of barriers that Congress needs to consider:

1.  Many foreclosures are investor owned.  These homes do not qualify for loan mods.  Many of them were purchased at the peak, or close to it.  In many cases the owners are unable to find renters, or cannot find renters willing to pay enough to cover the mortgage.  A recent study showed that 33% of foreclosures are on investor owned properties, so that takes a lot of foreclosures out of the loan mod pool.

2. Many homeowners in foreclosure pick up and leave.  Unemployment is now the leading cause of foreclosures.  Even with assistance to pay the mortgage, people often find themselves unable to pay their other expenses.  We know that household formation is down, but I’m unaware of any studies showing how many former homeowners are now living with friends or relatives because they can’t afford to keep the utilities paid.  L has told me that the vast majority of the foreclosures he sees are empty by the time the banks get them, and I’m certain that his experience is not unique.  We don’t know if these folks have downsized, moved in with relatives or are renting a comparable place for less, but for whatever reason, many folks are just picking up and leaving.  They aren’t interested in mods, or feel they don’t qualify.

The loan mod programs have been a disaster, and could certainly be better managed.  However, Congress can legislate all it wants, but it’s unlikely that any loan mod program will make a significant dent in the foreclosure problem.  Too many of these homeowners can’t be saved with a loan mod.  So here’s the question for Congress: How do you keep homeowners in their homes when they are already gone?


Ginnie Mae Gives FHA Short Refis The Green Light,

Ginnie Mae has announced that it will allow issuers to pool Federal Housing Administration (FHA) short-refinance loans in Ginnie Mae single-family fixed-rate or adjustable-rate mortgage pools.

The loans must meet the criteria for certain FHA Automated Data Processing codes, which Ginnie Mae outlines in its Nov. 8 memorandum.

The short-refi program, which the FHA rolled out in September, is aimed at borrowers who are underwater but current on their mortgages. To Vicki Bott, the FHA’s director of single-family programs, the short refi’s ability to be sold into a typical Ginnie Mae pool represents one of the program’s improvements over the agency’s previous efforts to help borrowers regain equity in their homes, such as Hope for Homeowners.

“We do believe a short-refi is more simplistic and from a secondary market standpoint,” Bott told Servicing Management. “They’re TBA-eligible, and so the pricing to the consumer should be lower.”

HUD’s PowerSaver Program to Offer Financing for Energy-Saving Home Improvements,

Seal of the United States Department of Housin...

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U.S. Vice President Joe Biden and U.S. Department of Housing & Urban Development (HUD) Secretary Shaun Donovan have announced a new pilot program that will offer creditworthy borrowers low-cost loans to make energy-saving improvements to their homes. Backed by the Federal Housing Administration (FHA), these new FHA PowerSaver loans will offer homeowners up to $25,000 to make energy-efficient improvements of their choice, including the installation of insulation, duct sealing, doors and windows, HVAC systems, water heaters, solar panels, and geothermal systems.

HUD and FHA developed PowerSaver as part of the Recovery Through Retrofit initiative launched in May 2009 by Vice President Biden’s Middle Class Task Force to develop federal actions that would expand green job opportunities in the United States and boost energy savings by improving home energy efficiency. The announcement is part of an 18-month-long interagency effort facilitated by White House Council on Environmental Quality with the Office of the Vice President, 11 departments and agencies and six White House offices.

“The initiatives announced today are putting the Recovery Through Retrofit report’s recommendations into action—giving American families the tools they need to invest in home energy upgrades,” said Vice President Biden. “Together, these programs will grow the home retrofit industry and help middle class families save money and energy.”

More homeowners are interested in making their homes energy efficient, according to industry forecasts. Yet options are still limited for financing home energy improvements, especially for the many homeowners who are unable to take out a home equity loan or access an affordable consumer loan. HUD today published a notice seeking the participation of a limited number of mortgage lenders in the two-year pilot program slated to begin in early 2011.

“HUD and FHA are committed to lowering the cost and expanding the availability of affordable financing for home energy retrofits,” said Secretary Donovan. “PowerSaver will help more homeowners afford common sense, cost saving improvements to their homes, and will create jobs for contractors, installers and energy auditors across the country.”

Lenders will be selected to participate in the PowerSaver pilot based on their capacity and commitment to provide affordable home energy improvement financing. Lenders will be required to serve communities that have already taken affirmative steps to expand home energy improvements. HUD will help lenders identify such markets—which exist in many suburban, rural and urban areas across the country.

“PowerSaver provides lenders with a new product option to serve a potentially growing market,” said David H. Stevens, FHA Commissioner. “We believe there are a number of lenders who will be interested in working with us to help save energy and money for homeowners, while creating jobs and cutting greenhouse gas emissions.”

PowerSaver loans will be backed by the FHA—but with significant “skin in the game” from private lenders. FHA mortgage insurance will cover up to 90 percent of the loan amount in the event of default. Lenders will retain the remaining risk on each loan, incentivizing responsible underwriting and lending standards. FHA will provide streamlined insurance claims payment procedures on PowerSaver loans. In addition, lenders may be eligible for incentive grant payments from FHA to enhance benefits to borrowers, such as lowering interest rates.


“Home energy retrofits are good investments that save families money,” said Ginnie Mae President Ted Tozer. “As the financing arm of HUD, we are proud to support this important home-improvement segment of the housing market and look forward to working with lenders and FHA to develop appropriate secondary market options.”

PowerSaver has been carefully designed to meet a need in the marketplace for borrowers who have the ability and motivation to take on modest additional debt to realize the savings over time from a home energy improvement. PowerSaver loans are only available to borrowers with good credit, manageable overall debt and at least some equity in their home (maximum 100% combined loan to value).

For more information, visit


Fannie Mae and Freddie Mac Continue to Amass Foreclosed Properties -Now valued at $24 Billion,

Who owns all of those homes that have been foreclosed on from 2008 to the fall of 2010? As a taxpayer- You do.

Taxpayers fund mortgage lenders Fannie Mae and Freddie Mac. Last year at this time the two lenders possessed around 120,000 homes mortgaged through various lending banks. These banks sold the mortgages to Fannie Mae and Freddie Mac who in turn bundled them as securities and sold them to investors. These federal lenders guarantee the payment of the mortgages they sell. When the homeowners stop making monthly payments, Freddie and Fannie are on the hook for the remainder of the unpaid mortgage.

The 120,000 homes grew to 240,000 in default by September 30, 2010. The value in these homes are now at $24 billion. 1 in 4 mortgaged homes are now in the hands of Freddie and Fannie based on a RealtyTrac report. 1 in 2 mortgages in the US are owned or guaranteed by one of the two federal lenders.

Fannie Mae and Freddie Mac are backed by The U.S. Treasury through the purchase of shares of preferred stock. To date $148 billion has been invested in them. As a dividend the Treasury has received $17 billion in two years. When liquidity becomes a problem they return to the Treasury for more money. Fannie Mae and Freddie Mac have both requested more funding from the Treasury during October. It is projected that eventually the foreclosure total could rise from 142 billion to $259 billion by December 2013, according to the Federal Housing Finance Agency.