Defaults are way up for the year, with once red-hot Sun-Belt markets reporting the worst losses.
By Les Christie, CNNMoney.com staff writer
January 29 2008: 10:41 AM EST
NEW YORK (CNNMoney.com) -- The number of foreclosures soared in 2007, with 405,000 households losing their home, according to a report released Tuesday. That's up 51 percent from the 268,532 homes that were repossessed in 2006.
Total foreclosure filings soared 97% in December alone compared with December of 2006, according to RealtyTrac, an online seller of foreclosure properties. For the year, total filings - which include default notices, auction sale notices and bank repossessions - grew 75%.
More than 1 percent of all U.S. households were in some stage of foreclosure during 2007, up from 0.58 percent the year before.
"There are parts of the country where we're seeing many more bank repossessions," said Rick Sharga, a spokesman for RealtyTrac. "People are flat out losing their homes."
In California alone, nearly 66,000 people lost their homes last year. In Michigan, 47,000 families went through foreclosure. Also hard hit was Nevada, where 10,0000 people had their homes repossessed, a per-capita rate more than twice as high as California.
California had a total of 250,000 foreclosure filings, the highest number of of any state. Florida was second with more than 165,000 total filings.
Other hard-hit states include Michigan, which has been battered by job losses in the auto industry and had over 87,000 filings, Ohio, with more than 89,000 filings, and Colorado, with 39,000.
Nevada had 3.376 filings for every 100 households - a foreclosure rate of more than three times the national average, and the highest of any state.
Stimulus plan also sparks housing
According to Gail Burks, the CEO of the Nevada Fair Housing Center, a community advocacy group that aids home owners facing foreclosure, some communities in Las Vegas, Nevada's biggest city, have as many as 40 percent of homes in foreclosure.
"It's having a huge impact," she said. "Some zip codes here are recording 22 foreclosures a month."
The rise nationally has confounded some community advocates. "Last December, we thought the national numbers were bad, and now they're up almost 100 percent," said John Taylor, CEO of the National Community Reinvestment Coalition. "It just shows we need a comprehensive approach to solve the problem."
The increase in foreclosures has come about despite very low interest rates, as well as government, private enterprise and community advocate efforts to forestall the worst of the problems.
That's because sales are very slow in many housing markets and prices are down, leaving many troubled borrowers unable to sell in order to repay their mortgage debts.
Still, some states have avoided problems. Maine had just 286 properties with foreclosure filings on their records, Vermont had 29 and South Dakota just 24.
Saturday, February 2, 2008
Foreclosures spike - and will get much worse
Defaults are on the rise according to a new report, and the trend could last for years.
By Les Christie, CNNMoney.com staff writer
January 28 2008: 4:02 PM EST
NEW YORK (CNNMoney.com) -- The risk of foreclosure is on a rapid rise nationally, and could last for years.
A report released Monday by First American Core Logic rates foreclosure risk for 381 metropolitan areas, and found that the risk of foreclosure has jumped 22 percent from January 2007, and 9 percent from three months ago.
The risk scores are calculated based on economic factors such as job growth or loss, as well as incidences of fraud and other risks. Home price trends are especially important.
"Before, it was all about the economy. Now, price drops are overcoming economic conditions [in driving up foreclosures]," said Mark Fleming, Core Logic's chief economist.
The Core Logic report speculated that foreclosure risks may get a lot worse, and stay that way for a long time.
In the wake of recent speculation that the United States economy may be entering a recession - or is already in one - the report stressed that defaults continued rising for almost 2 years after the end of the last recession in 2001.
Based on that history, Core Logic expects that foreclosure risk will continue to increase over the next 18 months, at least.
Down in the valley
The price declines are hitting hardest in California, especially the Central Valley cities that had recorded outsized price gains during the boom. Of the 36 markets nationwide undergoing double-digit price declines, 22 are in California. And five off the top 10 large cities facing the highest risk of foreclosure over the next six months are also in California.
Bakersfield, Calif., was rated the highest risk market among the 100 largest metro areas. Home prices there are in steep decline, falling 16.9 percent during the past year, according to First American's Loan Performance division. Fleming pointed out that Bakersfield is a good example of a trend that is playing out in many markets.
Bakersfield acts like a satellite city for Los Angeles, where population density makes further housing development expensive. Supply of developable land in Los Angeles is scarce, which props up its prices, even in down years.
During the boom, home buyers priced out of L.A. purchased in far-flung markets like Bakersfield, where plentiful agricultural land was cheaply converted to housing. Many of the new residents continued to work in the Los Angeles area, a long but doable commute.
When demand slackened and prices slumped in Los Angeles, more people could afford to buy closer to the city, and demand dropped disproportionately in Bakersfield as well as in other nearby cities like Riverside and San Bernardino, sending prices plunging.
"Volatility in these places is high, especially on the down side," said Fleming.
And that goes a long way in explaining why foreclosures are on the rise in Bakersfield, Stockton, Calif. (number 2 on the Core Logic list), Fresno, Calif. (number 3) and Riverside-San Bernardino (number 6).
Monday, the government reported the steepest drop in new single-family home sales ever recorded. It was the first year on record that new home prices posted declines. That followed last week's announcement from the National Association of Realtors that home prices had recorded their first annual decline ever.
After price drops, many mortgage borrowers find themselves owing more on their mortgages than their homes are worth. It then becomes more difficult for them to maintain their house payments if they run into any problems, because they can't borrow against their home.
By Les Christie, CNNMoney.com staff writer
January 28 2008: 4:02 PM EST
NEW YORK (CNNMoney.com) -- The risk of foreclosure is on a rapid rise nationally, and could last for years.
A report released Monday by First American Core Logic rates foreclosure risk for 381 metropolitan areas, and found that the risk of foreclosure has jumped 22 percent from January 2007, and 9 percent from three months ago.
The risk scores are calculated based on economic factors such as job growth or loss, as well as incidences of fraud and other risks. Home price trends are especially important.
"Before, it was all about the economy. Now, price drops are overcoming economic conditions [in driving up foreclosures]," said Mark Fleming, Core Logic's chief economist.
The Core Logic report speculated that foreclosure risks may get a lot worse, and stay that way for a long time.
In the wake of recent speculation that the United States economy may be entering a recession - or is already in one - the report stressed that defaults continued rising for almost 2 years after the end of the last recession in 2001.
Based on that history, Core Logic expects that foreclosure risk will continue to increase over the next 18 months, at least.
Down in the valley
The price declines are hitting hardest in California, especially the Central Valley cities that had recorded outsized price gains during the boom. Of the 36 markets nationwide undergoing double-digit price declines, 22 are in California. And five off the top 10 large cities facing the highest risk of foreclosure over the next six months are also in California.
Bakersfield, Calif., was rated the highest risk market among the 100 largest metro areas. Home prices there are in steep decline, falling 16.9 percent during the past year, according to First American's Loan Performance division. Fleming pointed out that Bakersfield is a good example of a trend that is playing out in many markets.
Bakersfield acts like a satellite city for Los Angeles, where population density makes further housing development expensive. Supply of developable land in Los Angeles is scarce, which props up its prices, even in down years.
During the boom, home buyers priced out of L.A. purchased in far-flung markets like Bakersfield, where plentiful agricultural land was cheaply converted to housing. Many of the new residents continued to work in the Los Angeles area, a long but doable commute.
When demand slackened and prices slumped in Los Angeles, more people could afford to buy closer to the city, and demand dropped disproportionately in Bakersfield as well as in other nearby cities like Riverside and San Bernardino, sending prices plunging.
"Volatility in these places is high, especially on the down side," said Fleming.
And that goes a long way in explaining why foreclosures are on the rise in Bakersfield, Stockton, Calif. (number 2 on the Core Logic list), Fresno, Calif. (number 3) and Riverside-San Bernardino (number 6).
Monday, the government reported the steepest drop in new single-family home sales ever recorded. It was the first year on record that new home prices posted declines. That followed last week's announcement from the National Association of Realtors that home prices had recorded their first annual decline ever.
After price drops, many mortgage borrowers find themselves owing more on their mortgages than their homes are worth. It then becomes more difficult for them to maintain their house payments if they run into any problems, because they can't borrow against their home.
Regulator opposes stimulus plan's mortgage fix
Government agency takes stand against letting Freddie Mac and Fannie Mae buy higher-cost loans.
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Most middle class still can't buy a house
Home price drop is biggest ever
Foreclosures up 75% in 2007
NEW YORK (CNNMoney.com) -- A government agency with regulatory power over Freddie Mac and Fannie Mae opposes lifting the loan caps for the two agencies, part of the economic stimulus package announced Thursday.
One of the plan's proposals would temporarily raise loan limits for the two government sponsored enterprises (GSEs), which buy up pools of residential mortgages in the secondary market. That could kick start sluggish residential real estate markets in high cost areas that have suffered through the liquidity squeeze that started last summer.
The director of the Office of Federal Housing Enterprise Oversight (OFHEO), James Lockhart, came out in opposition to the measure, releasing a statement on Thursday saying, "We are very disappointed in the proposal to increase the conforming loan limit as we believe it is a mistake to do so in the absence of comprehensive GSE regulatory reform."
The agency is likely concerned that if Fannie and Freddie take on even more debt, their financial health of could be imperiled.
"No one should be shocked by OFHEO's opposition," said Jaret Seiberg, an analyst at the policy research firm Stanford Group. "Director Lockhart has been extremely consistent in his demand that any change in conforming-loan limits be paired with legislation creating a stronger regulator."
According to Seiberg, Lockhart believes OFHEO lacks sufficient power to police the two GSEs. He believes that Lockhart wants to see many of the provisions included in the GSE reform bill, which would give OFHEO more authority over the GSEs, enabling it to establish stricter standards for lending and capital management. The bill has been languishing in Congress for about a year.
On Friday, Senator Chris Dodd, D-Conn., who chairs the Senate Banking Committee, pledged a renewed effort to get that bill through the Senate. That should be easier now that he's off the presidential campaign trail. One industry insider, speaking on background, said that when Dodd was running for president, nothing moved out of committee
The GSEs were created to ensure liquidity in mortgage markets. Lifting the caps on the size of mortgages that the GSEs purchase in secondary markets would advance that mission, and enable more buyers to procure financing.
But, increasing the dollar value of loans the GSEs are permitted to buy -- possibly to as much as $729,000 in some high cost areas, up from a maximum of $417,000 -- also increases the risk the agencies take on.
Many of these new, larger loans would be issued in expensive California markets where home prices have been in free fall. Plunging home values add to default rates by robbing home owners of equity they can tap when they hit a rough patch.
If a substantial proportion of the new, high-value loans default, the GSEs could take huge hits, on top of already substantial losses over the past few years.
That's where OFHEO's opposition stems from; it's main goal in advocating GSE reform, according to a speech Lockhart made this past December, is to promote safety and soundness in the enterprises.
Already, the GSEs have shown themselves to be vulnerable. Just six weeks ago, Freddie CEO Richard Syron forecast losses of at least $5.5 billion over the next couple of years from bad loans -- but they have already amassed huge obligations.
According to OFHEO, Fannie and Freddie together have debt of more than $1.5 trillion, and have guaranteed mortgage backed securities of more than $3.3 trillion, a total debt of nearly $4.9 trillion.
And this debt isn't backed by a lot of cash. Both Fannie and Freddie have minimum capital requirements of just 3.25 percent of assets - considerably lower than the 4 percent required for private lenders - making the agencies, at least potentially, very vulnerable.
"OFHEO," said Mark Zandi, chief economist for Moody's Economy.com, "wants to make sure the GSEs are following sound procedures and have sufficient capital."
And, according to Zandi, OFHEO's position has long been backed by the administration - until recently. But the mortgage meltdown, the stock market slump, job weakness and a looming recession, have overrun that position. Easier mortgage financing became part of the stimulus package; at least for now.
"What's particularly interesting," said Seiberg, "is that the word is that we could have opposition from Senate Republicans to including the GSE provisions in the stimulus package."
According to him, a spokesman for Senator Richard Shelby (Ala.) has already come out against it, as has Senator Mel Martinez (Fla.).
"There's a lot of clear momentum to get the package done," said Seiberg, "but it's not a slam dunk getting the GSE provisions included."
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If you're qualified to receive a refund under the stimulus plan, start thinking of what to do with the extra cash.
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Special Reportfull coverage
New $20B subprime bailout on the table
Most middle class still can't buy a house
Home price drop is biggest ever
Foreclosures up 75% in 2007
NEW YORK (CNNMoney.com) -- A government agency with regulatory power over Freddie Mac and Fannie Mae opposes lifting the loan caps for the two agencies, part of the economic stimulus package announced Thursday.
One of the plan's proposals would temporarily raise loan limits for the two government sponsored enterprises (GSEs), which buy up pools of residential mortgages in the secondary market. That could kick start sluggish residential real estate markets in high cost areas that have suffered through the liquidity squeeze that started last summer.
The director of the Office of Federal Housing Enterprise Oversight (OFHEO), James Lockhart, came out in opposition to the measure, releasing a statement on Thursday saying, "We are very disappointed in the proposal to increase the conforming loan limit as we believe it is a mistake to do so in the absence of comprehensive GSE regulatory reform."
The agency is likely concerned that if Fannie and Freddie take on even more debt, their financial health of could be imperiled.
"No one should be shocked by OFHEO's opposition," said Jaret Seiberg, an analyst at the policy research firm Stanford Group. "Director Lockhart has been extremely consistent in his demand that any change in conforming-loan limits be paired with legislation creating a stronger regulator."
According to Seiberg, Lockhart believes OFHEO lacks sufficient power to police the two GSEs. He believes that Lockhart wants to see many of the provisions included in the GSE reform bill, which would give OFHEO more authority over the GSEs, enabling it to establish stricter standards for lending and capital management. The bill has been languishing in Congress for about a year.
On Friday, Senator Chris Dodd, D-Conn., who chairs the Senate Banking Committee, pledged a renewed effort to get that bill through the Senate. That should be easier now that he's off the presidential campaign trail. One industry insider, speaking on background, said that when Dodd was running for president, nothing moved out of committee
The GSEs were created to ensure liquidity in mortgage markets. Lifting the caps on the size of mortgages that the GSEs purchase in secondary markets would advance that mission, and enable more buyers to procure financing.
But, increasing the dollar value of loans the GSEs are permitted to buy -- possibly to as much as $729,000 in some high cost areas, up from a maximum of $417,000 -- also increases the risk the agencies take on.
Many of these new, larger loans would be issued in expensive California markets where home prices have been in free fall. Plunging home values add to default rates by robbing home owners of equity they can tap when they hit a rough patch.
If a substantial proportion of the new, high-value loans default, the GSEs could take huge hits, on top of already substantial losses over the past few years.
That's where OFHEO's opposition stems from; it's main goal in advocating GSE reform, according to a speech Lockhart made this past December, is to promote safety and soundness in the enterprises.
Already, the GSEs have shown themselves to be vulnerable. Just six weeks ago, Freddie CEO Richard Syron forecast losses of at least $5.5 billion over the next couple of years from bad loans -- but they have already amassed huge obligations.
According to OFHEO, Fannie and Freddie together have debt of more than $1.5 trillion, and have guaranteed mortgage backed securities of more than $3.3 trillion, a total debt of nearly $4.9 trillion.
And this debt isn't backed by a lot of cash. Both Fannie and Freddie have minimum capital requirements of just 3.25 percent of assets - considerably lower than the 4 percent required for private lenders - making the agencies, at least potentially, very vulnerable.
"OFHEO," said Mark Zandi, chief economist for Moody's Economy.com, "wants to make sure the GSEs are following sound procedures and have sufficient capital."
And, according to Zandi, OFHEO's position has long been backed by the administration - until recently. But the mortgage meltdown, the stock market slump, job weakness and a looming recession, have overrun that position. Easier mortgage financing became part of the stimulus package; at least for now.
"What's particularly interesting," said Seiberg, "is that the word is that we could have opposition from Senate Republicans to including the GSE provisions in the stimulus package."
According to him, a spokesman for Senator Richard Shelby (Ala.) has already come out against it, as has Senator Mel Martinez (Fla.).
"There's a lot of clear momentum to get the package done," said Seiberg, "but it's not a slam dunk getting the GSE provisions included."
Stimulus plan also sparks housing market
The measures would make mortgages easier to get and reduce borrowing costs -- especially in hard-hit, high-cost housing markets.
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January 25 2008: 12:37 PM EST
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Special Reportfull coverage
New $20B subprime bailout on the table
Most middle class still can't buy a house
Home price drop is biggest ever
Foreclosures up 75% in 2007
NEW YORK (CNNMoney.com) -- The economic stimulus plan announced Thursday by Congress and the Bush administration includes provisions that specifically address the mortgage crisis. It aims to make getting a mortgage easier and cheaper in high-cost markets, to facilitate refinancing and to prevent foreclosures.
The package proposes lifting the dollar amount of loans that are eligible for purchase by Freddie Mac (FRE, Fortune 500) and Fannie Mae (FNM) and that can be insured by the Federal Housing Administration (FHA). The cap limits for FHA loans, which offer protection to lenders against losses that result from defaults by borrowers, would be raised to $725,000 and would be permanent.
These government sponsored enterprises currently guarantee a secondary market for loans of less than $417,000, which makes lenders more willing to issue them. The stimulus package proposes raising that cap to $625,000 for twelve months in order to make it easier for buyers to get or refinance mortgages - especially in high-cost regions like California.
"It's about time," said Richard DeKaser, chief economist for banking giant National City Corp. "The idea has rattled around Congress for a year. Most analysts agree the market for "jumbo" loans [which exceed the cap limits] has been hurt by lender flight."
The increased cap should give a boost to some of the most sluggish markets in the nation, like Florida, where high home prices typically mean that mortgages exceed the $417,000 loan limits. When credit markets contracted last summer, jumbo loans over that amount became much harder to get and, as a result, home sales in pricey markets took a hit.
"This will have a big, immediate impact, especially in California where sales have been down most significantly," said Lawrence Yun, chief economist for the National Association of Realtors.
Homeowners with jumbo mortgages also pay higher interest rates because, with no guaranteed secondary market for the loans, lenders take on more risk, and charge borrowers more for doing so.
For instance, the interest rate difference between loans that fall within the cap limit and jumbo loans was more than 1 percent on Thursday -- 6.39 percent compared with 5.30 percent, according to Bankrate.com. On a $500,000 mortgage, the difference is about $350 a month.
Pain relief for mortgage fare-ups
"The 1 percent drop is a huge factor," said Yun. "In California, it could create a mini-boom."
Before the stimulus package was announced, analysts including Merrill Lynch had come out with dire forecasts for housing markets over the next couple of years.
But, said Mike Larson, a real estate analyst with Weiss Research. "[the raise in loan limits] could remove some of the inventory overhang and alter the buyer psychology a bit. Right now they're still waiting for prices to fall."
Yun added, "There's a lot of pent-up demand in the market. This will boost confidence among these potential buyers, and some of the people on the fence will start buying."
The National Association of Realtors recently projected that a higher loan limit, which the organization and other industry trade groups have been lobbying for, would boost home sales by nearly 350,000 a year.
It would also reduce the average period of time a home sits on the market by a month and a half, and lift prices by two or three percentage points.
Home price increases could help keep foreclosures in check by increasing a distressed owner's home equity, making it easier for them to refinance.
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January 25 2008: 12:37 PM EST
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Markets move on word of an economic stimulus plan accord on Capitol Hill.
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Current Mortgage Rates
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30 yr fixed mtg 5.47%
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Special Reportfull coverage
New $20B subprime bailout on the table
Most middle class still can't buy a house
Home price drop is biggest ever
Foreclosures up 75% in 2007
NEW YORK (CNNMoney.com) -- The economic stimulus plan announced Thursday by Congress and the Bush administration includes provisions that specifically address the mortgage crisis. It aims to make getting a mortgage easier and cheaper in high-cost markets, to facilitate refinancing and to prevent foreclosures.
The package proposes lifting the dollar amount of loans that are eligible for purchase by Freddie Mac (FRE, Fortune 500) and Fannie Mae (FNM) and that can be insured by the Federal Housing Administration (FHA). The cap limits for FHA loans, which offer protection to lenders against losses that result from defaults by borrowers, would be raised to $725,000 and would be permanent.
These government sponsored enterprises currently guarantee a secondary market for loans of less than $417,000, which makes lenders more willing to issue them. The stimulus package proposes raising that cap to $625,000 for twelve months in order to make it easier for buyers to get or refinance mortgages - especially in high-cost regions like California.
"It's about time," said Richard DeKaser, chief economist for banking giant National City Corp. "The idea has rattled around Congress for a year. Most analysts agree the market for "jumbo" loans [which exceed the cap limits] has been hurt by lender flight."
The increased cap should give a boost to some of the most sluggish markets in the nation, like Florida, where high home prices typically mean that mortgages exceed the $417,000 loan limits. When credit markets contracted last summer, jumbo loans over that amount became much harder to get and, as a result, home sales in pricey markets took a hit.
"This will have a big, immediate impact, especially in California where sales have been down most significantly," said Lawrence Yun, chief economist for the National Association of Realtors.
Homeowners with jumbo mortgages also pay higher interest rates because, with no guaranteed secondary market for the loans, lenders take on more risk, and charge borrowers more for doing so.
For instance, the interest rate difference between loans that fall within the cap limit and jumbo loans was more than 1 percent on Thursday -- 6.39 percent compared with 5.30 percent, according to Bankrate.com. On a $500,000 mortgage, the difference is about $350 a month.
Pain relief for mortgage fare-ups
"The 1 percent drop is a huge factor," said Yun. "In California, it could create a mini-boom."
Before the stimulus package was announced, analysts including Merrill Lynch had come out with dire forecasts for housing markets over the next couple of years.
But, said Mike Larson, a real estate analyst with Weiss Research. "[the raise in loan limits] could remove some of the inventory overhang and alter the buyer psychology a bit. Right now they're still waiting for prices to fall."
Yun added, "There's a lot of pent-up demand in the market. This will boost confidence among these potential buyers, and some of the people on the fence will start buying."
The National Association of Realtors recently projected that a higher loan limit, which the organization and other industry trade groups have been lobbying for, would boost home sales by nearly 350,000 a year.
It would also reduce the average period of time a home sits on the market by a month and a half, and lift prices by two or three percentage points.
Home price increases could help keep foreclosures in check by increasing a distressed owner's home equity, making it easier for them to refinance.
Del. mortgage help fund dwindling
Needs $720,000 through end of June
By LESLIE A. PAPPAS, The News Journal
Wendy Nurse would have lost her home without a $14,000 low-interest loan she got from the state of Delaware.
After the 47-year-old single mother from Newark was laid off from her hospital job in Philadelphia in June, she struggled to keep up with her $1,145 monthly mortgage payments, and was falling way behind by September.
When the Delaware Emergency Mortgage Assistance Program told her in December it would help her catch up on mortgage payments, "it really took a load off my shoulders," Nurse said.
But the state program that helps struggling homeowners facing foreclosure has run out of funds, recent data from the program show.
"In effect, we are out of money," said Matthew Heckles, legislative and policy adviser for the Delaware State Housing Authority. "We're right on the edge."
Technically, the Delaware Emergency Mortgage Assistance Program -- better known as DEMAP -- still has $69,360 left in the kitty until the end of the fiscal year '08, which ends June 30. But as of Friday, with 22 loan applications still in the pipeline and the average loan topping $12,500 (the maximum is $15,000), money is dwindling rapidly.
The money could run out in the next two weeks, said Anas Ben Addi, housing finance administrator for the Delaware State Housing Authority, which runs the DEMAP program.
Created to prevent foreclosures caused by sudden hardship, the DEMAP program is designed for homeowners who have fallen behind on their mortgages because of an unexpected illness, disability or disaster out of the individual's control. Homeowners who have no financial means to repay the loan once a mortgage resets would not qualify for DEMAP assistance.
Nurse met the qualifications for the DEMAP program when she applied in November. She had been in her home since 2001 on a 30-year fixed mortgage. Until she lost her job, she had kept up with mortgage payments. So when she fell behind, the DEMAP loan put her back on track. She is now working steadily and paying it off -- at $40 a month for the next 99 years.
"To me, it wasn't a bailout but just an opportunity for me to get back to where I was," Nurse said. "I didn't stop paying my mortgage because I went out and splurged. I didn't pay my mortgage because I lost my job. This could happen to any of us."
DEMAP started as a pilot program in fiscal 2007 with $229,000, and received $500,000 for fiscal year '08, which began in July. Since it began, it has helped 59 Delaware homeowners with a total of $704,304 in emergency loans.
"DEMAP was not meant for the adjustable-rate mortgages," said Gerry Kelly, Delaware's Deputy Bank Commissioner for Consumer Affairs. Kelly will be holding foreclosure prevention seminars today and Sunday to help borrowers who are struggling with adjustable-rate mortgages and may not qualify for the DEMAP program.
DEMAP says it needs $720,000 to finish out the fiscal year and asked for $1 million to keep the program going in fiscal '09. In her budget proposal last week, Gov. Ruth Ann Minner proposed $250,000.
Lt. Gov. John C. Carney Jr., head of the state's foreclosure task force, said he was "optimistic" the program would find the $720,000 it needs to get it through the end of June. The City of Wilmington has pledged $100,000 and New Castle County is expected to pitch in, Carney said.
"We're making some real progress," Carney said Friday. "I'm pretty confident that we'll be able to come close."
By LESLIE A. PAPPAS, The News Journal
Wendy Nurse would have lost her home without a $14,000 low-interest loan she got from the state of Delaware.
After the 47-year-old single mother from Newark was laid off from her hospital job in Philadelphia in June, she struggled to keep up with her $1,145 monthly mortgage payments, and was falling way behind by September.
When the Delaware Emergency Mortgage Assistance Program told her in December it would help her catch up on mortgage payments, "it really took a load off my shoulders," Nurse said.
But the state program that helps struggling homeowners facing foreclosure has run out of funds, recent data from the program show.
"In effect, we are out of money," said Matthew Heckles, legislative and policy adviser for the Delaware State Housing Authority. "We're right on the edge."
Technically, the Delaware Emergency Mortgage Assistance Program -- better known as DEMAP -- still has $69,360 left in the kitty until the end of the fiscal year '08, which ends June 30. But as of Friday, with 22 loan applications still in the pipeline and the average loan topping $12,500 (the maximum is $15,000), money is dwindling rapidly.
The money could run out in the next two weeks, said Anas Ben Addi, housing finance administrator for the Delaware State Housing Authority, which runs the DEMAP program.
Created to prevent foreclosures caused by sudden hardship, the DEMAP program is designed for homeowners who have fallen behind on their mortgages because of an unexpected illness, disability or disaster out of the individual's control. Homeowners who have no financial means to repay the loan once a mortgage resets would not qualify for DEMAP assistance.
Nurse met the qualifications for the DEMAP program when she applied in November. She had been in her home since 2001 on a 30-year fixed mortgage. Until she lost her job, she had kept up with mortgage payments. So when she fell behind, the DEMAP loan put her back on track. She is now working steadily and paying it off -- at $40 a month for the next 99 years.
"To me, it wasn't a bailout but just an opportunity for me to get back to where I was," Nurse said. "I didn't stop paying my mortgage because I went out and splurged. I didn't pay my mortgage because I lost my job. This could happen to any of us."
DEMAP started as a pilot program in fiscal 2007 with $229,000, and received $500,000 for fiscal year '08, which began in July. Since it began, it has helped 59 Delaware homeowners with a total of $704,304 in emergency loans.
"DEMAP was not meant for the adjustable-rate mortgages," said Gerry Kelly, Delaware's Deputy Bank Commissioner for Consumer Affairs. Kelly will be holding foreclosure prevention seminars today and Sunday to help borrowers who are struggling with adjustable-rate mortgages and may not qualify for the DEMAP program.
DEMAP says it needs $720,000 to finish out the fiscal year and asked for $1 million to keep the program going in fiscal '09. In her budget proposal last week, Gov. Ruth Ann Minner proposed $250,000.
Lt. Gov. John C. Carney Jr., head of the state's foreclosure task force, said he was "optimistic" the program would find the $720,000 it needs to get it through the end of June. The City of Wilmington has pledged $100,000 and New Castle County is expected to pitch in, Carney said.
"We're making some real progress," Carney said Friday. "I'm pretty confident that we'll be able to come close."
Friday, February 1, 2008
Policies Support Affordable Housing, Encourage Public/Private Partnership
MBA (2/1/2008 ) Palaparty, Vijay
The range of options to provide affordable rental housing and to promote homeownership requires even more state and local government involvement—especially to keep pace with growing demand.
“Public/private sector partnership is essential to promote affordable rental housing,” said Erika Poethig, associate director for housing at the John D. and Catherine T. MacAruther Foundation , speaking in a webcast sponsored by the National Housing Council . “A comprehensive approach is critical to help us reach our goal.”
In Cook County, Ill., for example, affordable rental housing supply has been depleting steadily as demand increases. For every two units built, one may be lost by the year 2020—a potential shortfall of 78,000 units. Causes impacting supply including condo conversions, demolition, expiring subsidies, gaps in funding, increase in energy costs and increase in property taxes.
The MacArthur Foundation drafted The Preservation Compact—a rental housing strategy for Cook County—with the goal to preserve 75,000 affordable rental housing units by 2020 and to accelerate overall housing preservation activity. Additionally, the Foundation launched the Window of Opportunity in 2003, a national initiative totaling $150 million to support affordable housing in both Cook County and New York City.
“Half of the $150 million will go to a mix of regional and housing developers, financing initiatives, research projects and in depth initiatives in affordable housing," Pethig said. "Additionally, $35 million will go towards state and local preservation awards. It’s a national cross-cutting effort to improve information about housing stock, policies in advanced preservation, technical assistance, evaluation and research,”
The Foundation has a goal of preserving 300,000 rental homes nationwide—about one-third of the homes that might be lost over the next decade.
In Cook County, preservation keystones include an interagency council consisting of a partnership between the Chicago Department of Housing, Illinois Housing Development Authority, HUD and the county government. The council meets monthly to coordinate activities such as identifying properties requiring preservation and developing systems to match sellers with developers who have an interest in affordable preservation.
The Foundation also developed a data clearinghouse to provide data on the supply of affordable housing. The Energy Savers Program promotes energy savings in affordable housing. Outreach efforts, both training and education, include offerings for tenants and communities with at-risk communities. The Rental Housing Alliance was established to offer legal and technical assistance to tenants in ongoing preservation transactions and to coordinate with other public agencies.
A preservation fund of up to $100 million will provide short to mid-term loans for new preservation buyers to quickly purchase and improve at-risk buildings. Additionally, the fund would provide smaller, low-cost loans and grants for long-term owners to maintain existing rental properties.
Lowered property taxes are also part of the compact, also endorsed in the webcast by the Massachusetts Housing Partnership. Tax reductions for owners who substantially improve or preserve housing is one way to promote growth in affordable housing supply. But so is taking advantage of the federal 4 percent tax credit.
Part of the federal Low-Income Housing Tax Credit program, four percent tax credits are available for qualified affordable housing projects with an allocation of private activity tax-exempt bondsy. In 2008, each state will get the greater of $262 million or $85 multiplied by the state's population in private activity tax-exempt bond cap to allocate.
“Four percent tax credits are often easier to get than nine percent credits,” Mark Curtiss, managing director of the Massachusetts Housing Partnership. “Having the added benefit of tax-exempt bond financing, meaning lower interest rates and the ability to support more debt, can work especially well for existing affordable properties that need some capital improvements.”
Affordable housing, however, isn’t the only option in private activity tax-exempt bonds—it competes with education, economic development, single-family homeownership and other programs for "volume cap" dollars. Additionally, allocations vary from state to state for multifamily housing.
“The challenge is how to demonstrate the importance of rental housing compared to all other noble uses of tax-exempt bonds,” Curtiss said. “You have to show how much more leverage you can get using tax-exempt bonds for multifamily housing.”
Curtiss called for increasing the volume cap for affordable housing by $100 million, which would raise an additional federal tax credit subsidy in Massachusetts by an additional $45 to $50 million. “Our goal is to advocate further increases up to 50 percent of the state’s volume cap over the next several years. This could allow us to build or renovate an additional 1,500 units per year,” he said. “However, four percent credits don’t work everywhere—you want to be sure you can use the entire volume cap your state allocates for multifamily bonds.”
In Vermont, the Champlain Housing Trust promotes affordable homeownership opportunities. Through its shared equity program, the Trust provides a downpayment grant which acts a silent second mortgage.
“As homes become more affordable over time in an appreciating market, the appreciation goes back into the homes,” said Emily Higgins, director of homeownership at Champlain Housing Trust. “Grants are in the 20 percent range and provide a substantial incentive for borrowers. The grants come from the Vermont Housing and Conservation Board, which receives profits from a program which channels 50 percent of the state’s property transfer tax into affordable housing and preservation work. If sales increase, affordable housing and more land becomes available.”
The Trust acquires new homes through new developments and also provides a buyer-driven option where homeowners could bring a home to the program and earn a grant—to later share appreciation with the Trust when the house is sold again. Additionally, the Trust works with conversions—creating homeowners out of tenatns in some cases.
“Our challenges are in defining a stewardship role and overseeing maintenance and how to negotiate repairs,” Higgins said. “Additionally keeping homeowners involved in education and events is also a challenge. Of course, delinquency, foreclosures and taxes pose big challenges as well.”
(Back To Top)
The range of options to provide affordable rental housing and to promote homeownership requires even more state and local government involvement—especially to keep pace with growing demand.
“Public/private sector partnership is essential to promote affordable rental housing,” said Erika Poethig, associate director for housing at the John D. and Catherine T. MacAruther Foundation , speaking in a webcast sponsored by the National Housing Council . “A comprehensive approach is critical to help us reach our goal.”
In Cook County, Ill., for example, affordable rental housing supply has been depleting steadily as demand increases. For every two units built, one may be lost by the year 2020—a potential shortfall of 78,000 units. Causes impacting supply including condo conversions, demolition, expiring subsidies, gaps in funding, increase in energy costs and increase in property taxes.
The MacArthur Foundation drafted The Preservation Compact—a rental housing strategy for Cook County—with the goal to preserve 75,000 affordable rental housing units by 2020 and to accelerate overall housing preservation activity. Additionally, the Foundation launched the Window of Opportunity in 2003, a national initiative totaling $150 million to support affordable housing in both Cook County and New York City.
“Half of the $150 million will go to a mix of regional and housing developers, financing initiatives, research projects and in depth initiatives in affordable housing," Pethig said. "Additionally, $35 million will go towards state and local preservation awards. It’s a national cross-cutting effort to improve information about housing stock, policies in advanced preservation, technical assistance, evaluation and research,”
The Foundation has a goal of preserving 300,000 rental homes nationwide—about one-third of the homes that might be lost over the next decade.
In Cook County, preservation keystones include an interagency council consisting of a partnership between the Chicago Department of Housing, Illinois Housing Development Authority, HUD and the county government. The council meets monthly to coordinate activities such as identifying properties requiring preservation and developing systems to match sellers with developers who have an interest in affordable preservation.
The Foundation also developed a data clearinghouse to provide data on the supply of affordable housing. The Energy Savers Program promotes energy savings in affordable housing. Outreach efforts, both training and education, include offerings for tenants and communities with at-risk communities. The Rental Housing Alliance was established to offer legal and technical assistance to tenants in ongoing preservation transactions and to coordinate with other public agencies.
A preservation fund of up to $100 million will provide short to mid-term loans for new preservation buyers to quickly purchase and improve at-risk buildings. Additionally, the fund would provide smaller, low-cost loans and grants for long-term owners to maintain existing rental properties.
Lowered property taxes are also part of the compact, also endorsed in the webcast by the Massachusetts Housing Partnership. Tax reductions for owners who substantially improve or preserve housing is one way to promote growth in affordable housing supply. But so is taking advantage of the federal 4 percent tax credit.
Part of the federal Low-Income Housing Tax Credit program, four percent tax credits are available for qualified affordable housing projects with an allocation of private activity tax-exempt bondsy. In 2008, each state will get the greater of $262 million or $85 multiplied by the state's population in private activity tax-exempt bond cap to allocate.
“Four percent tax credits are often easier to get than nine percent credits,” Mark Curtiss, managing director of the Massachusetts Housing Partnership. “Having the added benefit of tax-exempt bond financing, meaning lower interest rates and the ability to support more debt, can work especially well for existing affordable properties that need some capital improvements.”
Affordable housing, however, isn’t the only option in private activity tax-exempt bonds—it competes with education, economic development, single-family homeownership and other programs for "volume cap" dollars. Additionally, allocations vary from state to state for multifamily housing.
“The challenge is how to demonstrate the importance of rental housing compared to all other noble uses of tax-exempt bonds,” Curtiss said. “You have to show how much more leverage you can get using tax-exempt bonds for multifamily housing.”
Curtiss called for increasing the volume cap for affordable housing by $100 million, which would raise an additional federal tax credit subsidy in Massachusetts by an additional $45 to $50 million. “Our goal is to advocate further increases up to 50 percent of the state’s volume cap over the next several years. This could allow us to build or renovate an additional 1,500 units per year,” he said. “However, four percent credits don’t work everywhere—you want to be sure you can use the entire volume cap your state allocates for multifamily bonds.”
In Vermont, the Champlain Housing Trust promotes affordable homeownership opportunities. Through its shared equity program, the Trust provides a downpayment grant which acts a silent second mortgage.
“As homes become more affordable over time in an appreciating market, the appreciation goes back into the homes,” said Emily Higgins, director of homeownership at Champlain Housing Trust. “Grants are in the 20 percent range and provide a substantial incentive for borrowers. The grants come from the Vermont Housing and Conservation Board, which receives profits from a program which channels 50 percent of the state’s property transfer tax into affordable housing and preservation work. If sales increase, affordable housing and more land becomes available.”
The Trust acquires new homes through new developments and also provides a buyer-driven option where homeowners could bring a home to the program and earn a grant—to later share appreciation with the Trust when the house is sold again. Additionally, the Trust works with conversions—creating homeowners out of tenatns in some cases.
“Our challenges are in defining a stewardship role and overseeing maintenance and how to negotiate repairs,” Higgins said. “Additionally keeping homeowners involved in education and events is also a challenge. Of course, delinquency, foreclosures and taxes pose big challenges as well.”
(Back To Top)
FBI Director: Mortgage Fraud Substantial
Associated Press (02/01/08); Song, Jaymes
U.S. Federal Bureau of Investigation Director Robert Mueller says the agency is aggressively investigating allegations of mortgage and accounting fraud, insider trading and other unscrupulous practices at 14 as-of-yet unnamed companies that underwrite subprime mortgages or securitize them for sale to investors. He believes the investigations and the resulting prosecutions will be similar to those undertaken during the savings and loan crisis and recent corporate accounting fraud cases. An agency spokesman reports an increase in the number of open mortgage fraud cases to 1,210 today from 800 last year.
U.S. Federal Bureau of Investigation Director Robert Mueller says the agency is aggressively investigating allegations of mortgage and accounting fraud, insider trading and other unscrupulous practices at 14 as-of-yet unnamed companies that underwrite subprime mortgages or securitize them for sale to investors. He believes the investigations and the resulting prosecutions will be similar to those undertaken during the savings and loan crisis and recent corporate accounting fraud cases. An agency spokesman reports an increase in the number of open mortgage fraud cases to 1,210 today from 800 last year.
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