State AGs, feds reach $25 billion mortgage settlement
Last Thursday, the nation’s five largest mortgage servicers agreed to a landmark $25 billion settlement with a coalition of state attorneys general and federal agencies. The settlement addresses past mortgage loan servicing, foreclosure abuses and fraud, provides substantial financial relief to borrowers harmed by bank fraud, and establishes significant new homeowner protections for the future.
The joint state-federal group announced the agreement with the nation’s five largest servicers: Bank of America Corporation, JPMorgan Chase & Co., Wells Fargo & Company, Citigroup, Inc., and Ally Financial, Inc. (formerly GMAC). Collectively, the five banks service nearly 60 percent of the nation’s mortgages.
Under the agreement, the five servicers agree to:
- Commit a minimum of $17 billion directly to borrowers through a series of national homeowner relief effort options, including principal reduction. Servicers will likely provide up to an estimated $32 billion in direct homeowner relief.
- Commit $3 billion to an underwater mortgage refinancing program.
- Pay $5 billion to the states and federal government ($4.25 billion to the states and $750 million to the federal government).
- Provide homeowners with comprehensive new protections from new mortgage loan servicing and foreclosure standards.
Additionally,
- An independent monitor will ensure mortgage servicer compliance.
- States can pursue civil claims outside of the agreement including securitization claims as well as criminal cases.
- Borrowers and investors can pursue individual, institutional or class action cases regardless of agreement.
Forecast: Drops in Home Values Less Severe in ‘12
The Wall Street Journal
It will be a year of not-as-bad numbers for home values.
Zillow’s home-value forecast released on Thursday predicts a drop of 3.7% this year, which only looks like an improvement when measured against the 4.7% drop in 2011. Some markets hammered by the housing bust, such as Phoenix, Los Angeles and Riverside, Calif., should bottom out for home values in 2012, according to Zillow, and might even see a slight increase in values.
But other markets, particularly Atlanta, Chicago, and Seattle, are projected to show significant further home-value declines on a year-over-year basis in December 2012. The forecast from the real-estate company covers the top 25 metro markets.
Zillow has compiled these interactive charts to show how the outlook breaks down by market. Of course, a forecast is just that, and unforeseen factors could change the housing market’s course.
While prices will drop, total home sales are expected to continue to pick up this year amid affordable prices and low mortgage rates, factors that draw in second-home buyers and investors. It also seems that, as we have written, a shrinking inventory of homes for sale might prove to be an advantage for sellers.
But finding bright spots in this housing market can seem like a futile effort since values have fallen, nationally, 24.2% from the peak and foreclosures remain a huge obstacle blocking any potential rebound. CoreLogic reported Wednesday that, in December, 1.4 million homes, or 3.4% of all homes with a mortgage, were in the foreclosure inventory.
Fannie Mae: Outlook for Home Prices Rises Again
By Mia Lamar The Wall Street Journal
The consumer outlook for U.S. home prices improved again in January, extending a recent upward trend in housing market sentiment, according to mortgage market firm Fannie Mae.
For its monthly reading, Fannie Mae said respondents in its January survey predicted home prices will rise by 1% over the next year, up from the 0.8% gain forecast in December.
Views on the direction of the U.S. economy also continued to improve. According to the respondents, 30% said they believe the U.S. economy is on the right track, up from 22% with that view in December. The percentage who said the economy is headed in the wrong direction fell to 63% of respondents, marking a 6 percentage point decline from the previous month.
Fannie Mae Chief Economist Doug Duncan pointed to a slowly improving U.S. job market as one cause for rising confidence in the long-battered housing market. ”The strengthening employment picture last Friday provides encouragement that the improving trend in consumer confidence will continue and will at some point be reflected in a firming up of consumer spending,” Duncan said.
A report last week from the U.S. Labor Department showed nonfarm payrolls grew 243,000 last month, the largest gain since April. The jobless rate fell from 8.5% to 8.3%, the lowest it has been since February 2009.
Fannie Mae’s January survey also found 44% of respondents expect their personal financial situation to improve over the next year, up from 40% with that view in December.
The survey is based upon a monthly poll of roughly 1,000 adults and has a margin of error of plus or minus 3.1%.
Mortgage deal could bring billions in relief
CNN Money
On Thursday, federal and state officials announced a $26 billion foreclosure settlement with five of the largest home lenders. California is expected to receive approximately $12 billion in principal write-downs, including through short sales, over the next three years, according to the state attorney general’s office.
Making sense of the story
- The deal settles potential state charges about allegations of improper foreclosures based on robo-signing, seizures made without proper paperwork.
- The settlement sets up a federal monitor to oversee the process and try to prevent the challenges that tripped up many homeowners seeking help in earlier programs designed to address the housing crisis.
- Most of the relief will go to those who are underwater on their homes. That relief will come over the course of the next three years, with banks having incentives to provide most of the relief in the next 12 months.
- At least $17 billion will go to reducing the principal owed by homeowners who are underwater and behind on their mortgages.
- Up to 750,000 other underwater homeowners who are current on their mortgages will be able to refinance their current loans at lower rates. They will not receive a reduction in principal, but with mortgage rates near record lows, they could receive substantial savings on their monthly payments.
- Approximately $1.5 billion will go to homeowners who had their homes foreclosed upon between Jan. 1, 2008 and Dec. 31, 2011, and who meet other criteria. They will receive up to $2,000 each.
- The five mortgage servicers that are parties to the settlement include Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, and Ally Financial (formerly GMAC).
Consumer home price expectations continue upward trend
Fannie Mae’s latest National Housing Survey shows that the majority of Americans continue to expect no change in mortgage rates over the next 12 months. However, their expectations for home prices have improved for the fourth month in a row, with respondents expecting prices to go up by 1 percent, on average, during the year.
Of the consumers surveyed, 44 percent expect their personal financial situation to improve, up from 40 percent a month ago, and 30 percent of Americans believe the economy is on the right track, up from 22 percent last month and up for the third straight month since November 2011.
Highlights of the monthly survey include:
Twenty-eight percent of respondents expect home prices to increase over the next 12 months (up 2 percentage points since last month), while 16 percent say they expect home prices to decline (down 2 percentage points since last month). Fifty-one percent say prices will stay the same.
Only 8 percent of Americans say that mortgage rates will go down in the next 12 months, down 2 percentage points from December.
The percentage of respondents who say it is a good time to buy stayed at 71 percent in January, while the percentage who say it is a good time to sell dropped by 1 percentage point to 10 percent.
