Media Advisory 4/10/08

Thursday, 10 April 2008

Lenders swamped by foreclosures let homeowners stay

Banks swamped by a tidal wave of foreclosures increasingly may be looking the other way and letting homeowners remain in their homes, according to some sources. Banks say they are allowing homeowners more time to work out financial issues and potentially save their homes by avoiding foreclosure. But some observers have expressed concerns that delaying the foreclosure process may only extend the agony for homeowners and prolong the housing market slowdown.

MAKING SENSE OF THE STORY FOR CONSUMERS

3.6 percent of borrowers were at least 90 days late on their payments in December – the highest percentage in more than five years, reported the Mortgage Bankers Association. Even so, it’s important to remember that 96.4 percent of borrowers were on time with their mortgage payments. And new foreclosures accounted for only 0.83 percent of all home mortgages in the fourth quarter of 2007, up from 0.54 percent in 2006.
Lenders took an average of 61 days to foreclose on a property last year, compared with only 37 days the prior year. State laws determine the length of time it takes for a bank to foreclose: For example, in Georgia, it’s as little as 30 days and 35 days in Nevada. In Maine, it takes up to a year while it can take as long as 19 months in New York. In California, it usually takes a minimum of 120 days to complete an uncontested judicial foreclosure, but the timeframe can be significantly increased, for example, if the borrower contests the action or files for bankruptcy, according to Foreclosure.com.
Banks sometimes let homeowners or renters stay put during a foreclosure to avoid legal fees and property maintenance and other costs, and to limit potential damage to the property that might occur if it was vacant for months on end.
Banks also are slower to move on foreclosures because they are short-staffed and inundated with foreclosure paperwork.

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Reuters

February pending home sales index drops to record lows

Pending sales of existing homes were weaker than expected in February and 21.4 percent below last year at this time, the NATIONAL ASSOCIATION of REALTORS® (NAR) reported Tuesday. The NAR Pending Home Sales Index measures pending sales contracts and is seen as a barometer of future home sales activity. However, the Index rose 2.1 percent for the month in the West.

MAKING SENSE OF THE STORY FOR CONSUMERS

The Index fell 1.9 percent from 86.2 in January to 84.6 in February, the lowest level since NAR began publishing the Index in 2001. Economists had expected a drop of 0.7 percent.
Despite the decline, NAR expects home sales to remain flat before picking up during the latter half of the year, when increases in loan limits for jumbo mortgages are expected to help improve liquidity.
By region, the Index in the West, which includes California, rose 2.1 percent.

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San Francisco Chronicle

Lenders retreat as housing market plummets

The national housing market decline and resulting financial institution write-downs are beginning to hit home in the form of tighter credit, even for highly qualified borrowers with solid-gold credentials. As lenders clamp down on new borrowers and cap existing home equity credit lines in an effort to limit future exposure, everyone from car dealers to landscape architects feels the effects.

MAKING SENSE OF THE STORY FOR CONSUMERS

Credit fuels economic growth by providing the means for people to purchase goods and services. By 2004, Americans had borrowed more than $180 billion based on their home equity, plowing record amounts of cash back into the economy with the resulting purchases.
In particular, lenders are cutting back on loans and lines of credit backed by real estate assets or raising interest rates and qualifying criteria. By year-end 2007, home equity lending plunged to only $26 billion, according to the Federal Reserve.
According to economists, other factors also are at play. Slowing wage growth, rising prices for staples, falling stock portfolios and the cost of servicing existing debt all are causing consumers to rethink their spending habits.

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The New York Times

White House offers new housing plan

The Bush Administration yesterday announced a plan to provide housing market relief by loosening criteria for new mortgages insured by the federal government. On Tuesday, support for a Senate bill that aims to stabilize home sales through tax breaks and other aid to homeowners lost momentum as the White House threatened to veto it if passed. In the House, meanwhile, Democrats and Republicans debated various approaches to relieving the housing crisis.

MAKING SENSE OF THE STORY FOR CONSUMERS

The White House said Tuesday it is opposed to legislation that “will likely do more harm than good by bailing out lenders and speculators and passing the costs to other Americans who play by the rules and honor their mortgage debt obligations.”
Potential House provisions include money for local governments to purchase foreclosed properties and bonds to fund refinancing programs. Representatives also will weigh a proposal to create a property tax deduction for those who do not itemize deductions on their tax return and legislation aimed at helping homeowners and first-time buyers by offering up to $7,500 as a refundable credit, similar to a loan, that would be repaid over 15 years.
The Bush-sponsored FHA plan, dubbed “FHA Secure,” would help as many as 100,000 additional homeowners this year. Under the proposal, FHA insurance pricing would be more flexible and based on a consumer’s financial history. Rules would be relaxed to allow consumers who have had up to two late payments within the last year to qualify for a new federally insured loan at the current 97 percent of value maximum. Applicants with up to three months of delinquent payments would qualify for a 90 percent loan.

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In Other News…

CNBC