Treasury’s data shows that the longer a homeowner remains in HAMP, the more likely he or she is to redefault out of the program. As of March 31, 2013, the oldest HAMP permanent modifications, from the third and fourth quarter of 2009, are redefaulting at a rate of 46.1 percent and 39.1 percent. HAMP permanent modifications from 2010 also had high redefault rates, ranging from 28.9 percent to 37.6 percent.

The report directs Treasury to study why these modifications are failing and to come up with some kind of early warning system in order to help borrowers.

(Read More: Despite Rising Demand, Some Builders Slow Production)

“Redefaulted HAMP modifications often inflict great harm on already struggling homeowners when any amounts previously modified suddenly come due,” according to the report.

One of the architects of HAMP, Michael Barr, former Assistant Secretary for Financial Institutions at the U.S. Treasury, is not surprised at the numbers.

“The redefault rates are still below current industry averages, and below the conservative case we used in program design, which was the then-existing rate of 50 percent,” said Barr.

Troubles with HAMP are not new. Initially it did not offer principal reduction on loan modifications, and so far, under a revised HAMP, just 82,813 borrowers received any principal reduction. Banks doing their own loan modifications have wiped away far more mortgage principal, a strategy that has proven far better results. The nation’s five largest banks were required to write down some principal under the National Mortgage Servicing Settlement signed in early 2012, after the so-called “robo-signing” foreclosure paperwork scandal.

The Treasury need not look far for HAMP’s shortfalls.

(Read More: Mortgage Mods Doomed by Back End Debt)

Back in May of 2012, bank representatives complained that the back end debt-to-income ratios (DTI), (which include all debts upon which a borrower pays) for HAMP modifications were far too high. That is, borrowers were paying far too much of their incomes on debt, and the numbers were only rising.

At the time, mortgage analyst Mark Hanson said, “A 64.3 percent DTI is so far out of scope with the pre-bubble years safe-and-sound 36 percent total DTI — and even typical bubble-years full-doc DTI’s of 50 percent — it is absolutely irresponsible. Servicers are pushing the envelope with respect to getting people to qualify.”

Today Hanson is the least surprised of anyone at the failure of HAMP modifications. “Because if you look at them structurally — sky-high DTI, LTV [loan to value] and low credit score — they make legacy Subprime loans look sane.”

Hanson predicts that these bad modifications will come back to bite the banks and the economy.

(Read More: With Home Listings Low, Spec Building Is Back)

“People read headlines that ‘foreclosures are at 2005 levels’ and cheer. I say the high-risk distressed loans and foreclosures are still out there. They have just been called something different by banks and the government and kicked down the road a few years,” says Hanson.

862,000 homeowners are currently in permanent HAMP modifications; 312,000 have defaulted on permanent modifications. In the next two years, many HAMP modifications will re-set to higher interest rates, and that could produce more defaults.

Banks have been doing more modifications on their own, with these proprietary fixes up 55 percent in the fourth quarter of 2012 from the previous year, according to a recent report from the Office of the Comptroller of the Currency. Meanwhile HAMP modifications are down 31 percent for the same period.

Given delays in the foreclosure process in several states, and the risky quality of these early HAMP modifications as well as other proprietary modifications done without principal reduction, it is safe to say foreclosures may rise for a time next year before finally falling back to normal levels in the next three to four years.

As home prices rise, more borrowers will come out from underwater on their mortgages, and that will reduce the risk of new defaults, but the pipeline of distress is still long and far from lean.

Article source: http://www.cnbc.com/id/100674924

March 20, 2013 — Fentura Financial, Inc. reported net income for the three months ended December 31, 2012 of $453,000, compared to the $406,000 operating loss reported for the fourth quarter of 2011.

Article source: http://www.prweb.com/releases/dirkkinley/climbsf/prweb10549284.htm

“One cautionary note is that the 90 day delinquency rate increased by 8 basis points, reversing a fairly steady pattern of decline and the largest increase in this rate in three years,” notes the MBA’s chief economist Jay Brinkmann.

(Read More: Why Sequestration Will Hit Housing on Several Fronts)

These so-called “seriously delinquent” loans are being processed more quickly now that new foreclosure rules are in place and will therefore be sold back to banks or investors in the next few months. Those sales would therefore be shown as loans coming out from underwater because they would cease to exist.

Another important factor in looking at negative equity, as with everything else in real estate, is location:

“Among the nation’s 30 largest metro areas, those with the highest number of homeowners freed from negative equity last year were Phoenix (135,099 homeowners freed in 2012); Los Angeles (72,936 homeowners freed in 2012); Miami-Fort Lauderdale (70,484 homeowners freed in 2012); Dallas-Fort Worth (59,461 homeowners freed in 2012); and Riverside, Calif. (58,417 homeowners freed in 2012),” notes the Zillow report.

(Read More: Taking The Real Estate Recovery Local)

The highest volume of underwater borrowers were in the most distressed states, where the foreclosure rates are high and where investors are pursuing short sales fervently. It is therefore incorrect to make the assumption that all of the “newly freed” borrowers are either still in their homes with newfound equity or sold at any kind of profit. Of course this also means that negative equity may cure faster than anticipated, since it is so highly concentrated in certain hot investor markets.

The return of home equity is good news for the greater economy, as it makes borrowers feel better about their own personal wealth and therefore more apt to spend. It could also prompt more borrowers to sell their homes. Unfortunately that will not do much to ease the severe inventory shortage of homes for sale, as most sellers will be buyers as well. There are currently just 1.74 million homes for sale, the lowest since December of 1999.

(Read More: Fewer Borrowers Are Behind on Mortgages, but for How Long?)

Article source: http://www.cnbc.com/id/100480500

Renter household formation remains at the strongest level in decades. Roughly 1.32 million new renter households were formed in the past year (including owner conversions), while the number of owner-occupied households declined by 175,000. Resident turnover and move-outs to homeownership remain near historic lows for most operators. Incoming leasing traffic is more than offsetting move-outs while paying higher rates.

The home ownership rate declined yet again in the fourth quarter of 2012, according to a new report from the U.S. Census today. It now stands at 65.4 percent, down from 66 percent a year ago and from a high of 69.2 percent in 2004. If you include the 5.3 million borrowers who are delinquent on their mortgages or in the foreclosure process, per Lender Processing Services, the real home ownership rate is even lower.

“The fact that the housing recovery is being driven principally by investor demand means that the slight decline in the homeownership rate in the fourth quarter is unlikely to be the last,” notes Paul Diggle of Capital Economics.

(Read More: World’s Most Expensive City to Rent Is…)

There is also a tremendous amount of pent-up demand for the rental market, as nearly 23 million young adults, male and female, under age 35 (31 percent of the cohort) are currently classified as ‘living at home’ with parents, according to Raymond James’ analysis. As job growth improves, they will move to rental apartments; the homeownership rate for this group is only 34 percent.

(Read More: Rentals Chip Away at Home Builder Gains)

Investors are also concerned about a 49 percent jump in multi-family construction permits from a year ago, but those permits are still running well below normal levels, and every year about 150,000 units are removed from housing stock for various reasons, like age and damage.

Suffice it to say that the apartment sector and the multi-family REITs will likely see a surprise to the upside in 2013. Rents will still rise, despite housing affordability and growth in the single family market.

(Read More: Real-Estate Tips from a Mega-Broker to the Stars)

Article source: http://www.cnbc.com/id/100416547

The Bay Area saw home prices climb across the region in 2012, driven by tech growth and a recovering national economy.

Median prices for single-family detached homes were up in all but eight of 107 communities in the Bay Area for the fourth quarter, according to new numbers from the real estate data firm DataQuick.

Prices in Oakland were up 35 percent, while prices in San Francisco rose 21.2 percent.

Read more at the Wall Street Journal.

Article source: http://www.bizjournals.com/sanfrancisco/morning_call/2013/01/bay-area-home-prices-up-in-q4-2012.html

Renter household formation remains at the strongest level in decades. Roughly 1.32 million new renter households were formed in the past year (including owner conversions), while the number of owner-occupied households declined by 175,000. Resident turnover and move-outs to homeownership remain near historic lows for most operators. Incoming leasing traffic is more than offsetting move-outs while paying higher rates.

The home ownership rate declined yet again in the fourth quarter of 2012, according to a new report from the U.S. Census today. It now stands at 65.4 percent, down from 66 percent a year ago and from a high of 69.2 percent in 2004. If you include the 5.3 million borrowers who are delinquent on their mortgages or in the foreclosure process, per Lender Processing Services, the real home ownership rate is even lower.

“The fact that the housing recovery is being driven principally by investor demand means that the slight decline in the homeownership rate in the fourth quarter is unlikely to be the last,” notes Paul Diggle of Capital Economics.

(Read More: World’s Most Expensive City to Rent Is…)

There is also a tremendous amount of pent-up demand for the rental market, as nearly 23 million young adults, male and female, under age 35 (31 percent of the cohort) are currently classified as ‘living at home’ with parents, according to Raymond James’ analysis. As job growth improves, they will move to rental apartments; the homeownership rate for this group is only 34 percent.

(Read More: Rentals Chip Away at Home Builder Gains)

Investors are also concerned about a 49 percent jump in multi-family construction permits from a year ago, but those permits are still running well below normal levels, and every year about 150,000 units are removed from housing stock for various reasons, like age and damage.

Suffice it to say that the apartment sector and the multi-family REITs will likely see a surprise to the upside in 2013. Rents will still rise, despite housing affordability and growth in the single family market.

(Read More: Real-Estate Tips from a Mega-Broker to the Stars)

Article source: http://www.cnbc.com/id/100416547

The report from San Diego’s DataQuick highlights how the foreclosure crisis appears to be subsiding after running rampant for five years.

“For more than a year, the general trend has been down” for legal filings that indicate mortgage distress, said DataQuick analyst Andrew LePage.

There are several reasons that foreclosure activity is trending down. As home values have risen over the past year, fewer homeowners are underwater, which means they can more easily refinance or sell their homes if they have trouble keeping up with their mortgage.

Financial hardship is also diminishing. “The other big factors are the pickup in the economy and the improvements in job growth that keep people from getting in trouble in the first place,” LePage said.

On top of that, various new laws and legal settlements between banks and the government encourage lenders to pursue alternatives to foreclosure, such as loan modifications and short sales (selling for less than is owed on the mortgage).

While LePage noted that the effects of the law and settlements are hard to measure, the net impact is fewer foreclosures.

Most subprimes gone

Moreover, the bulk of risky subprime loans have already gone through foreclosure. Mortgages issued from 2008 “were safer and saner,” LePage said, meaning they are unlikely to have the sharp payment spikes of teaser-rate subprimes.

For the fourth quarter, DataQuick reported that 5,399 households in the Bay Area received default notices, the first step in the foreclosure process. That was down 46.1 percent from the same quarter of 2011. About half of default notices become foreclosures.

Although lenders can file notices of default once borrowers are three months behind, DataQuick said that Californians receiving the notices were a median of eight months in arrears on their primary mortgages.

Statewide, notices of default were down 37.9 percent in the quarter, to 38,212.

Trustee deeds, the final step of foreclosure, were issued for 2,765 Bay Area homes in the fourth quarter. That was down 42.8 percent from the same quarter of 2011.

Statewide, trustee deeds were down 32.4 percent, to 21,127 in the fourth quarter.

Looking at the full year also showed declines. The Bay Area had 30,046 default notices in 2012, down 30.7 percent from 2011. The nine-county region had 1,907 trustee deeds in 2012, a 41.2 percent decline from 2011.

While the numbers are the lowest in six years, many homeowners still struggle to keep their houses.

Oakland’s Peggy Hart, 61, for instance, said income from her day care business took a big hit a few years ago. Three years ago, when she first applied for a loan modification, bank representatives told her to stop paying her mortgage and she complied, she said. Wells Fargo gave her a loan modification early on, but the payments were still too high and she was unable to keep up, she said.

Changes are tough

Now her business and her income have rebounded, but her efforts to get a loan modification have been frustrating and unsuccessful, she said.

“I’m able to pay, I want to pay my mortgage,” she said. “I told (Wells) on the phone, ‘Please let this happen for me.’ “

Hart lives with her two sons, granddaughter and a baby great-grandson in the house, where they also run the day care. She owes about $200,000 on the house, which various real estate sites estimate is worth at least $390,000.

“Wells Fargo continues to work with borrowers on mortgage modifications and other options that may help them remain in their homes and avoid foreclosure when possible,” the bank said in a statement. “We have been working with Ms. Hart for over three years to identify an option that would allow her to retain this home. We were able to provide her with some temporary assistance in September 2009 while we continued to look at home retention options.”

Both foreclosures and notices of default remain more common in lower-cost areas, DataQuick said.

Over the past five years, 1.1 million of California’s 8.7 million houses and condos received a foreclosure notice, it said. Of those, 780,000 were actually lost to foreclosure. The others were either sold or the payments were made current.

At the courthouse auction where the final step of foreclosure takes place, about 42 percent of properties in the fourth quarter were purchased by investors, DataQuick said. That was up from 31.2 percent a year earlier.

Fewer foreclosures

Fewer people in the Bay Area and California lost homes to foreclosure in the fourth quarter compared with a year earlier; and fewer received notices that they were behind in payments. For the full year, both notices of default (the first step in the foreclosure process) and trustee deeds (the final step of foreclosure) were down compared with 2011.

Notices of Default

Houses and condos, fourth quarter

Trustee deeds recorded

Houses and condos, fourth quarter

Sources: DataQuick, DQNews.com

Carolyn Said is a San Francisco Chronicle staff writer. E-mail: csaid@sfchronicle.com

Article source: http://www.sfgate.com/realestate/article/Foreclosures-drop-in-Bay-Area-California-4218858.php

The median price in the luxury market, however, was $4,440,150, up 7 percent from a year ago, according to Douglas Elliman. The luxury market represents the upper 10 percent of all co-op and condo sales.

“The year-end jump in sales was a function of proactive tax management by property owners. Although it wasn’t clear what form the tax hikes related to housing would take, it was assumed that 2013 would be higher than 2012,” noted Jonathan Miller, CEO of Miller Samuel, which provides the Elliman report data. (Read More: Million Dollar Winter Wonderland Homes.)

Prices in Manhattan are still about 6 to 7 percent off their pre-recession highs, but low supply will likely narrow that gap in 2013. Strong demand from foreign, all-cash buyers is also boosting prices, especially in the condo market. Gains, however, may slip in the current quarter, as so much demand was pulled forward.

Article source: http://www.cnbc.com/id/100351956