February Housing Scorecard Details Fragility of Market

by devteam March 3rd, 2012 | Share

The February edition of the HousingrnScorecard was released by the Departments of Treasury and Housing and UrbanrnDevelopment (HUD) on Friday.  In what hasrnbecome a monthly litany, it said that “the housing market is strengtheningrnalthough the recovery remains fragile.”  </p

ThernScorecard is essentially a summary of data on housing and housing financernreleased by public and private sources over the previous month and/orrnquarter.  Most of the data such as newrnand existing home sales, permits and starts, mortgage originations, and variousrnhouse price evaluations have been previously covered by MND.  </p

Onernpiece of new information was data on the progress of the housing overhang.  Inventories of existing homes for sale haverncontinued to improve over the last two quarters, declining from 3.2 million inrnthe second quarter to 2.4 million in the fourth quarter.  Housing units held off the market haverndeclined modestly, from 3.9 million in the first quarter of 2011 to 3.6 millionrnin the fourth quarter.</p

The scorecard incorporates by referencernthe monthly report of the Making Home Affordable Program (MHA) through the endrnof December.  This includes informationrnon the universe of MHA programs including the Home Affordable ModificationrnProgram (HAMP), HOPE Now, and Second Lien Modifications and other initiatives.  This month it also includes results of the mostrnrecent quarterly mortgage servicer assessments.</p

For the first time since the FederalrnHousing Finance Agency began the servicer assessments in an attempt to makernHAMP more responsive and effective there were no servicers found to be in needrnof substantial improvement on any of a laundry list of metrics measuring theirrnperformance.  These evaluation measuresrninclude the rate of conversions from trial to permanent modifications, missingrnpaperwork, and data errors.  In previousrnquarters JPMorgan Chase and Bank of America were found to have deficienciesrnserious enough for HAMP to withhold incentives for their performance.  With the recent assessments, HAMP hasrnreleased those withheld funds.</p


Of the nine major servicers nowrnparticipating in HAMP (Litton’s portfolio has been assumed by Ocwen LoanrnServicing) seven were found to need moderate improvement* and the remainingrntwo, OneWest Bank and Select Portfolio Service, to need minor improvement.   </p

Assistant Treasury Secretary TimrnMassad said about the servicer assessments, “The Making Home Affordable Programrnhas established critical standards that have changed the mortgage industry forrnthe better, and the assessments have been a principal tool for measuring thatrnprogress. By shining the spotlight on key practices, we have prompted servicersrnto improve their implementation of the Making Home Affordable Program. rnHowever, there is still more work to be done to ensure that the industry treatsrnall borrowers properly.  The implementation of the broader standardsrnrequired by the settlement, [with servicers linked to 5 major lenders] togetherrnwith our continued compliance efforts, will help bring this about.”</p

Since the December HAMP report 16,759rnnew trial modifications have started for a total of 1,791,354 since Aprilrn2009.  On-going trials now number 76,343rnand there are 768,773 active permanent modifications.  Since the last report 17,992 trialrnmodifications were converted to permanent status.</p


Treasury has been putting a lot ofrnemphasis on principal reduction programs in the last few months.  HUD maintains that the principal balances of FanniernMae and Freddie Mac loans cannot be reduced, but extra incentives have beenrnoffered to servicers who reduce principal as part of the Principal ReductionrnAlternative (PRA) under HAMP.  There havernbeen 67,835 PRA trial modifications started and 47,114 that have becomernpermanent to date, 44,058 of which are still active.  The median principal reduction among thoserncurrent active modifications is $68,063.</p


Loans modified with a PRA feature had arnmedian loan-to-value (LTV) before modification of 159 percent and 115 percentrnpost modification.  All loans modifiedrnthrough HAMP had a median of 120 percent LTV before modification and 122rnpercent after.</p

Another HAMP program, Home AffordablernForeclosure Alternatives (HAFA) offers homeowners the option of exitingrnhomeownership through a short sale or deed-in-lieu of foreclosure.  To data almost 50,000 borrowers havernrequested this alternative and 31,426 have completed a HAFA transaction, allrnbut 850 of them through short sales.</p

*In addition to Chase and Bank ofrnAmerica servicers needing moderate improvement are American Home MortgagernServicing, CitiMortgage, GMAC, Ocwen, and Wells Fargo Bank

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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