Fate of Foreclosure Programs Heads to a Vote
Republicans on the House Financial Services Committee said they will push for a vote next Thursday on bills that would end four government programs that are aimed at helping prevent foreclosures.

Among the programs on the chopping block include the Home Affordable Modification program, which was created to help struggling home owners reduce mortgage payments by offering lower interest rates and longer repayment times. The Treasury Department recently acknowledged that HAMP will fall short of meeting its original goal of preventing 3 to 4 million foreclosures; it’s expected to complete 700,000 to 800,000 loan modifications.

Other smaller programs at risk are aimed at refinancing loans, helping unemployed home owners, and aiding state and local governments in buying foreclosed properties in order to sell or rent them.

Committee chairman Rep. Spencer Bachus, R-Ala., says the foreclosure prevention programs haven’t had much impact and, in some cases, actually are doing more harm than good in helping struggling home owners.

The Obama administration argues that killing the programs will hurt home owners.

“The administration remains committed to reaching eligible home owners to give them every opportunity to avoid foreclosure and will continue working to make our programs as effective as possible,” said an Obama administration spokesperson.

Source: “House Committee to Vote on Bills Ending Obama Foreclosure Programs,” Dow Jones (Feb. 24, 2011); “Obama Admin. Says Committed to Helping Homeowners,” Reuters News (Feb. 24, 2011); and “House Committee to Write Bill Ending Embattled Program for Preventing Home Foreclosures,” Associated Press (Feb. 24, 2011)

30-Year Rates Back Below 5%
Mortgage rates were on the decline this week, a welcome sign for potential home buyers or those looking to refinance.

The 30-year fixed rate mortgage averaged 4.95 percent this week, down from 5 percent the week prior, according to Freddie Mac’s weekly mortgage market survey. Last year at this time, 30-year rates averaged 5.05 percent.

The 15-year, fixed-rate mortgage also dropped for the week, averaging 4.22 percent, down from last week’s 4.27 percent. The 5-year adjustable-rate mortgage dropped slightly to 3.8 percent, compared to 3.87 percent the previous week.

“Low mortgage rates and home prices are sustaining affordability in the housing market,” says Frank Nothaft, Freddie Mac’s chief economist. The National Association of REALTORS® reported earlier this week that existing home sales rose for the third consecutive month in January and were at the strongest pace in eight months.

Source: “30-Year Fixed-Rate Mortgage Eases Just Below 5 Percent,” Freddie Mac (Feb. 24, 2011)

Foreclosure Process Gets Longer
Banks and mortgage servicers are taking more time to foreclose on defaulting home owners–a process that can take up to 2 years now, USA Today reports.

A backlog in foreclosures has occurred within a number of the nation’s banks, triggered by the large number of home owners defaulting on loans, a lengthy review process for loan modifications, and recent lawsuits that have accused banks of improperly filing foreclosure documents .

Meanwhile, defaulting home owners are being allowed to stay in their homes longer. In December 2010, the average borrower in foreclosure went 507 days without making a mortgage payment, according to LPS Applied Analytics. (Prior to the housing crash, the norm was considered 250 days in default.)

Diane Pendley, managing director of Fitch Ratings, estimates that delinquent borrowers stay in their homes an average of 19 to 20 months before they’re evicted. She expects that average to grow to 22 to 23 months by the end of the year–the longest on record.

The delays in the foreclosure process are expected to lead to less inventory of foreclosed homes for sale and higher prices for these homes, in some markets, experts note. However, the longer wait also means foreclosures could weigh on the real estate market much longer, they say.

Source: “Home Loans in Default Drag On,” USA Today (Feb. 21, 2011)

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30-Year Rates Drop Slightly, But Still 5%
The 30-year fixed rate mortgage averaged 5 percent this week, after breaking the 5 percent mark last week for the first time in nearly a year, according to the Freddie Mac weekly mortgage market survey. Last week, the 30-year mortgage rate averaged 5.05 percent.

“Fixed mortgage rates eased slightly this week and continue to be very affordable,” says Frank Nothaft, Freddie Mac chief economist. “Prior to 2009, interest rates for 30-year fixed rate mortgages had never been at 5 percent since our survey began in April 1971. In both 1981 and 1982, the rates were over three times as high as they are today. … The housing market is struggling to regain traction despite still historically low rates.”

Here’s how other rates fared for the week:

• 15-year fixed-rate mortgage averaged 4.27 percent, down from last week’s 4.29 percent.
• 5-year adjustable-rate mortgage averaged 3.87 percent, down from last week’s 3.92 percent.
• 1-year adjustable-rate mortgage averaged 3.39 percent, up slightly from last week’s 3.35 percent.

Source: “30-Year Fixed-Rate Mortgage Drops to 5 Percent,” Freddie Mac (Feb. 17, 2011)

30-Year Rates Drop Slightly, But Still 5%
The 30-year fixed rate mortgage averaged 5 percent this week, after breaking the 5 percent mark last week for the first time in nearly a year, according to the Freddie Mac weekly mortgage market survey. Last week, the 30-year mortgage rate averaged 5.05 percent.

“Fixed mortgage rates eased slightly this week and continue to be very affordable,” says Frank Nothaft, Freddie Mac chief economist. “Prior to 2009, interest rates for 30-year fixed rate mortgages had never been at 5 percent since our survey began in April 1971. In both 1981 and 1982, the rates were over three times as high as they are today. … The housing market is struggling to regain traction despite still historically low rates.”

Here’s how other rates fared for the week:

• 15-year fixed-rate mortgage averaged 4.27 percent, down from last week’s 4.29 percent.
• 5-year adjustable-rate mortgage averaged 3.87 percent, down from last week’s 3.92 percent.
• 1-year adjustable-rate mortgage averaged 3.39 percent, up slightly from last week’s 3.35 percent.

Source: “30-Year Fixed-Rate Mortgage Drops to 5 Percent,” Freddie Mac (Feb. 17, 2011)

Obama Budget Seeks Cap on Itemized Deductions
President Obama is targeting the tax deduction for mortgage interest payments and charitable contributions made among high-income earners.

The proposed budget cuts call for taxpayers in the 33 percent and 35 percent tax brackets to be limited in deducting charitable contributions and mortgage interest payments at the 28 percent rate. The deduction would affect households with taxable income of $250,000 or more. The White House says the move would bring in $321 billion within 10 years.

“NAR will remain vigilant in opposing any plan that modifies or excludes the deductibility of mortgage interest,” National Association of REALTORS® President Ron Phipps has said in opposing any MID cuts. (Get the latest news on MID and NAR’s stance at REALTOR.org.)

Other real estate industry and nonprofit sectors are also joining in the resistance, arguing that capping the deduction will hurt an already battered housing market even more.

“This is an attack on the middle class,” says Jerry Howard, chief executive of the National Association of Home Builders.

At a time when charities continue to struggle with a drop in donations, limiting the charitable deduction will likely cut large donations for the arts, environment, education and other sectors even more, says Tim Delaney, head of the National Council of Nonprofits, a network of charities.

In the past, the Obama administration and several tax deficit commissions have unsuccessfully called for limiting or eliminating MID. MID costs the Treasury Department an estimated $131 billion a year.

Source: “Slash Mortgage Deductions for the Rich? Fat Chance,” CNNMoney.com (Feb. 15, 2011)

30-Year Rates Return to 5% Levels
The 30-year fixed-rate mortgage inched above 5 percent this week, rising to its highest level since the last week in April 2010, and continuing its steady climb upward the last few weeks.

The 30-year rate averaged 5.05 percent this week, up from 4.81 percent the week prior, according to Freddie Mac’s weekly mortgage market survey. Last year at this time, 30-year rates averaged 4.97 percent.

Here’s how other rates fared for the week:

▪ 15-year fixed rates: averaging 4.29 percent this week, up from 4.08 percent last week.
▪ 5-year, adjustable-rate mortgage: averaging 3.92 percent this week, up slightly from 3.69 last week.
▪ 1-year, adjustable-rate mortgage: averaging 3.35 percent, up from 3.26 percent last week.

“Long-term bond yields jumped on positive economic data reports, which placed upward pressure on mortgage rates this week,” says Frank Nothaft, Freddie Mac’s chief economist.

Meanwhile, earlier this week, the Mortgage Bankers Association announced a drop in the number of people applying for a mortgage as rates continued to rise.

MBA’s overall mortgage application index dropped 5.5 percent from last week. The refinance index fell 7.7 purchase from last week, and refis made up two-thirds of the mortgage activity last week–the lowest share since May 2010.

Source: “30-Year Fixed-Rate Mortgage Rates Rise to 5.05 Percent, Highest Level Since April 2010,” Freddie Mac (Feb. 10, 2011)and “Fewer People Applied for a Mortgage Last Week as Rates Increased on Better Economic Data,” Associated Press (Feb. 9, 2011)

You can talk all you want of renewed interest in housing, slowly increasing sales and supposed stabilization in prices, but the elephant in the room is slowly growing, and banks, Fannie, Freddie and the government know it. I’m talking about foreclosures.

Getty Images Home in foreclosure.

Economist Mark Zandi, often quoted by lawmakers on both sides of the aisle, told the Senate Budget Committee this morning that while he’s “optimistic” with regard to the economy’s prospects, “At the top of my list of concerns, at least in the near term (6 to 12 months), is the ongoing problem in the housing market and the foreclosure crisis.”

REO inventory is rising, he proved through some slides. Four million seriously delinquent loans, out of 50 million first mortgage loans, “so that’s a lot.” And while he noted that the problems appear to have peaked, there are still over 600,000 properties in REO, which will only put more pressure on prices when they come to market.

Zandi called modification efforts “inadequate,” despite the 1.5 to 2 million modifications a year.  “In the context of all the problems that we’ve got, it’s still quite small,” he noted.  Zandi’s biggest concern is that 14 million homeowners, according to his calculations, are underwater (owe more on their mortgages than their homes are worth), and 4 million of those are underwater by more than 50 percent. “That’s deeply underwater,” he elaborated.

Real Estate Is ‘as Affordable as it Gets’
Now is a good time to buy real estate, according to data from Moody’s Analytics. Home affordability has returned to pre-housing bubble levels or even fallen below the average in many U.S. markets.

In fact, housing affordability by the end of September had returned to or fallen below the average reached between 1989-2003 in 47 of the 74 housing markets that Moody Analytics tracked.

In September 2010, the ratio of home prices to annual household income had fallen to 1.6–below the historical average of 1.9 between 1989 and 2003. The ratio peaked in 2005 at 2.3.

“Based on incomes, this is as affordable as it gets,” says Mark Zandi, chief economist at Moody’s Analytics. “If you can get a loan, these are pretty good times to buy.”

Some of the most undervalued markets include Cleveland, Detroit, Las Vegas, Atlanta, and Phoenix.

But those cities also are facing high rates of foreclosures and more borrowers defaulting on their mortgages that could decrease values further in those cities before they start to improve, Zandi says.

In Phoenix, for example, “it’s become cheaper to buy than to rent,” Jon Mirmelli, a real estate investor in Scottsdale, Ariz., who rents out foreclosed homes, told The Wall Street Journal. “But the question is: can you qualify for a loan?”