Archive for November 1st, 2013

FHFA Still Piloted by ‘Acting’ Head as Watts Vote Blocked

FHFA Still Piloted by ‘Acting’ Head as Watts Vote Blocked

10/31/2013 BY: TORY BARRINGER

Senate Republicans blocked a vote on the nomination of Rep. Mel Watt (D-North Carolina) to head up the Federal Housing Finance Agency (FHFA).

Watt’s nomination was stopped in a 56-42 vote to end the debate over his confirmation. Sixty votes were needed to invoke cloture and move forward.

Watt’s proponents say the former real estate lawyer would support stronger consumer protections and greater assistance for at-risk homeowners. Critics, though, say acting director Edward DeMarco has dutifully protected taxpayers, pursued policies that promote a healthy housing economy, and should get the nod for the director spot.

DeMarco has led the agency in an “acting” capacity since August 2009 following his appointment by President Obama when James B. Lockhart stepped down. Throughout his tenure, DeMarco has attracted criticism from Democrats and consumer advocates who say he hasn’t gone far enough to help distressed homeowners. One

of the bigger controversies surrounding DeMarco is his steadfast opposition to the use of principal forgiveness by the GSEs, which he believes would be too costly to taxpayers.

While he has said he would have to further investigate before making a move as FHFA director, Watt has in the past urged for principal reduction. (He asserted at a Senate Banking Committee hearing in June that he was advocating for his constituents in North Carolina at the time and not necessarily the country at large.)

The topic of principal forgiveness isn’t the only point where Watt and DeMarco diverge, however.

“A Watt-led FHFA would be a considerable departure from DeMarco’s tenure,” said FBR Capital Markets in an analysis released before the vote. “He would be less likely to lower the loan limits at Fannie and Freddie and would be unlikely to make aggressive changes to their multi-family lending programs. We believe that Congressman Watt could change the course of some of DeMarco’s strategic goals and could be more accommodative to lender concerns on clarity for representations and warranties.”

FBR also noted that Thursday’s failed vote could throw a wrench in Watt’s plans, with February 28, 2014, being the deadline for the congressman to file for re-election should his nomination not work out.

“Practically speaking, he would likely need to make a decision well before the deadline,” the firm said.

Should Watt take his name out of the hat, FBR has its eye on Sandra Thompson, who is currently FHFA’s deputy director of housing mission and goals, as the next potential nominee.

2013
11/01
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Economy
Homeowners
Housing FInance
Real Estate
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HAMP’s Redefault Rate at 27% and Likely to Rise

HAMP’s Redefault Rate at 27% and Likely to Rise

10/31/2013 BY: KRISTA FRANKS BROCK

 

Over the life of the government’s Home Affordable Modification Program (HAMP), 1.25 million homeowners have received permanent HAMP modifications, and 27 percent of those have later redefaulted on their loans, according to a quarterly report to Congress from the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP).

In its report released to lawmakers this week, SIGTARP berated Treasury for not heeding the office’s previous recommendations regarding HAMP, stressing that the inspector general expressed concern in April that “the number of homeowners who have redefaulted on HAMP permanent mortgage modifications is increasing at an alarming rate.”

About 184,000 homeowners (29 percent) who receivedHAMP modifications through TARP rather than through the GSEs have redefaulted, costing taxpayers $972 million in incentives paid to servicers and investors for those workouts, according to SIGTARP. Among borrowers participating in the GSEs’ HAMP programs, just under 154,000 (26 percent) have redefaulted (HAMP incentives on GSE loans are paid by the GSEs themselves). Additionally, about 10 percent of all active permanentHAMP modifications were one or two months delinquent as of the end of August.

“The longer a homeowner remains in HAMP, the more likely he or she is to redefault out of the program,”SIGTARP stated. The redefault rate among the oldestHAMP modifications is 48.3 percent, according to SIGTARP’s report.

Homeowners who fall three months behind on their modified payments redefault out of the program and fall “often into a less advantageous private sector modification or even worse, into foreclosure,” SIGTARP said.

About 32 percent receive another modification, often a proprietary one, and about 13 percent work out a short sale or deed-in-lieu of foreclosure with their servicer. About 22 percent of HAMP redefaulters enter foreclosure.

SIGTARP also reported the breakdown of redefaults by servicer, finding that three servicers account for almost 60 percent of HAMP redefaults: Ocwen Loan Servicing, JPMorgan Chase, and Wells Fargo. While these three servicers contributed the greatest number of HAMPdefaults, none of the three ranked highest in terms of the percentage of HAMP redefaults.

Among the eight largest servicers participating in the government program, Select Portfolio Servicing had the highest percentage of redefaults with 43 percent of its HAMP-modified loans falling behind on payments. Ocwen and Bank of America followed with 31 percent of their HAMP loans defaulting again. Twenty-five percent of Nationstar’s HAMP loans have redefaulted.

SIGTARP said in April that “Treasury still does not understand … the reason the permanent modifications inHAMP actually failed.”

The inspector general stated in the latest report to Congress, it was “a positive sign that following SIGTARP’s April 2013 recommendations that Treasury initially expressed its commitment to assessing and reducing redefault rates. . . . Following that, however, on July 22, 2013, Treasury posted a blog” defending the HAMP program and stating in the post, “mortgage modification programs include an inherent risk of homeowner default, given the difficult situations homeowners face when they seek assistance (like job loss).” In the same defensive posture, Treasury stressed “that not all will succeed” in the HAMP program.

For its part, SIGTARP said “HAMP is a program that has been plagued with servicer misconduct” and recommended Treasury “research and analyze whether and to what extent the conduct of HAMP mortgage servicers may contribute to homeowners redefaulting” in order to ensure homeowners in HAMP are getting sustainable relief from foreclosure. SIGTARP charges Treasury with establishing a benchmark for redefaults, measuring the program against that benchmark, and revealing the results to the public.

Treasury has responded that “it cannot establish a benchmark without SIGTARP’s guidance,” to whichSIGTARP responded, “it is up to Treasury to set performance standards for its own program and measure the participants’ performance.”

In its report to lawmakers, SIGTARP also revealed basic characteristics of HAMP modifications. The vast majority—95.9 percent—include an interest rate reduction. About 63.2 percent include a loan term extension, and 15.3 percent include principal forgiveness.

Treasury has extended the HAMP application period for two years until December 31, 2015.

2013
11/01
CATEGORY
Foreclosures
Homeowners
Mortgage
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Electronic Recording Goes for Quality

Electronic Recording Goes for Quality

10/31/2013 BY: GUEST CONTRIBUTOR: LATHA PARAMESWARAN

Even as the mortgage recording industry presses for universal adoption of electronic recording (eRecording), quality is beginning to overcome quantity as the measure of success.

Expanding the availability of eRecording across the country was the first priority in moving mortgage recordation into the e-commerce realm. But completing the goal of having all recording jurisdictions adopt the technological resources for eRecording still seems a long way off with only 1,022 of 3,600 jurisdictions adopters of the technology.

eRecording, however, is available to the majority of the population, so two goals stand out. The first is to continue the drive to make eRecording available in counties where it is not. In addition, there is the need to achieve the universal use of eRecording in all transactions.

That is not to underestimate all the hard work that the Property Records Industry Association (PRIA) and the lending industry have done in support of eRecording. PRIA and the lending industry have disseminated the message that eRecording saves time and increases the efficiency of the recording process relative to paper. The message has gone out far and wide.

PRIA has also campaigned against the myths which have held back the adoption of eRecording. Dispelling the beliefs by some that electronic documents are less secure than paper or that a recording jurisdiction should wait for

better technology has been central to PRIA’s educational campaigns. And reiterating this message needs to continue.

Accomplishing the quantitative goal of universal adoption of eRecording can be helped by focusing efforts on one key observable qualitative metric—the first-time acceptance rate. Let’s just call it the AC. For starters, we can say this is simply the ratio of submissions that do not need to be resubmitted divided by total submissions.

Every county should track the AC for eRecording versus paper for their top 10 submitters and publish the findings on their websites. The results will illustrate that eRecording speeds up processes since much of the physical work is done before the recorder gets the document. Counties prefer less rework and so do submitters.

Securing lien positions, which is highly time-sensitive, is of utmost importance for lenders. The AC statistic should make clear that one of the many ways to do this is by minimizing fee rejects. Fee rejects are the bane of the recorder and the submitter. When checks do not exactly cover recording costs it can set off a lengthy process of mailing and resubmission. Electronic submission is very effective at reducing this turn time. Counties are paid electronically (via ACH, escrow, or wire) once a document is recorded.

The AC can be an important aid for paper submitters evaluating the efficiency of their processes. It is in the interests of all parties, public and private, to provide objective measures of the recording process.

For non-recording jurisdictions, high ACs among eRecorders can provide a powerful incentive for adoption. For those who have eRecording available, the savings offered by expanding the number of eRecordings should be apparent.

Latha Parameswaran is VP of operations in the document management group for Indecomm Global Services, a provider of business process outsourcing, learning, and technology solutions. With more than 15 years’ experience in the mortgage industry, she is an active PRIA member and eRecording mentor.

2013
11/01
CATEGORY
Mortgage
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