Capital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit.
The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago. Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters.
However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability. Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings. Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”
In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.
While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.
Additionally, Capital Economics says “any improvement in credit conditions won’t be significant enough to generation actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability.
DSNews.com
By: Krista Franks
Here's how homeowners can get their share of the $25-billion foreclosure settlement.
By Matt Stevens February 9, 2012, 12:17 p.m. Homeowners who were affected by the collapse of the housing market and a wave of foreclosure abuses may get a share of the $25-billion settlement announced Thursday morning.
The up to 2 million people who are struggling to make loan payments, owe more than their homes are worth or have already lost their homes could receive aid from the nation’s five largest mortgage servicers that settled with federal officials and 49 state attorneys general today.
Though it is unclear exactly how much money each homeowner might receive, officials have estimated that about $17 billion will go to current homeowners, to help reduce the principal they owe on their mortgages, while people who have already lost their homes can expect to receive checks for $1,500 to $2,000.
The National Mortgage Settlement has prepared some immediate answers for homeowners wondering how to get their share of the settlement:
Q: What is a mortgage servicer and how do I know who services my loan?
A: The company that you make your monthly payment to is your mortgage servicer. Your mortgage servicer may or may not be a lending institution and may or may not own your loan. Many of the loans administered by servicers are owned by third-party investors.
This settlement involves the nation’s five largest mortgage servicers and you may reach them at the Web sites and phone numbers below: Ally/GMAC: 800-766-4622 Bank of America: 877-488-7814 Citi: 866-272-4749 JPMorgan Chase: 866-372-6901 Wells Fargo: 800-288-3212 Loans owned by Fannie Mae or Freddie Mac are not impacted by this settlement. You may visit the following websites to learn if your loan is owned by either Fannie Mae or Freddie Mac: http://www.fanniemae.com/loanlookup http://www.freddiemac.com/mymortgage These sites will also include information about mortgage and foreclosure programs you may be eligible to access.
Q: How will I know whether this settlement affects my situation?
A: Only homeowners in the states who joined the settlement are eligible for benefits under this settlement. Borrowers from Oklahoma will not be eligible for any of the relief directly to homeowners because Oklahoma elected not to join the settlement.
WASHINGTON (CNNMoney) -- In the largest deal to date aimed at addressing the housing meltdown, federal and state officials on Thursday announced a $26 billion foreclosure settlement with five of the largest home lenders.
The deal settles potential state charges about allegations of improper foreclosures based on robosigning, seizures made without proper paperwork.
The settlement includes the Justice Department and the U.S. Department of Housing and Urban Development, as well as 49 state attorneys general -- all but Oklahoma.
"We are using this opportunity to fix a broken system," said U.S. Attorney General Eric Holder at the news conference announcing the settlement.
The settlement sets up a federal monitor to oversee the process and try to prevent roadblocks and red tape that tripped many homeowners seeking help in earlier programs designed to address the housing crisis.
President Obama said the settlement will "begin to turn the page on an era of wrecklessness that has left so much damage in its wake." "No action, no matter how meaningful, is going to by itself entirely heal the housing market," he said in separate remarks. "But this settlement is a start." Most of the relief will go to those who owe far more than their homes are worth, known as being underwater on the loans. That relief will come over the course of the next three years, with the banks having incentives to provide most of the relief in the next 12 months.
"This settlement is about homeowners, homeowners in distress," said Iowa Attorney General Tom Miller at the news conference with state and federal officials.
What the settlement means to you
Principal reduction: At least $17 billion will go to reducing the principal owed by homeowners who are both underwater and behind on their mortgages.
The agreement calls for principal reduction for as many as 1 million people. But it's unlikely the money will go that far, because many people need more than the $17,000 average reduction that would result if the money is split among 1 million homeowners.
At the same time, total principal reduction could go higher -- to as much as $34 billion -- since the agreement requires deeper principal reductions for the most troubled loans.
Refinancing: Officials say 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 now near record lows, they could receive substantial savings on their monthly payments.
The settlement sets aside $3 billion to account for the reduced interest payments the banks will receive after the refinancing.
Robosigning payments: About $1.5 billion of the settlement 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.
Accepting that payment does not preclude homeowners who lost their home in an improper foreclosure from suing the bank to recover damages, Donovan said.
Participating banks: The five mortgage servicers that are parties to the settlement -- Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500), Wells Fargo (WFC, Fortune 500) and Ally Financial -- will pay a total of $5 billion to the states and federal government. Some of that money will go to foreclosed homeowners and the rest to the states.
Federal officials say negotiations are underway to expand the settlement to nine other major servicers, which would raise the overall value of the settlement to $30 billion.
Related settlements: The deal spurred pacts between the authorities and banks in similar cases.
Oklahoma Attorney General Scott Pruitt announced a separate $18.6 million settlement that addressed homeowners whose homes were foreclosed through improper means, but did not provide help to those whose mortgages were underwater. He said he believes the broader agreement "overreached" the authority of both federal and state governments.
"We had concerns that what started as an effort to correct specific practices harmful to consumers, morphed into an attempt by President Obama to ... fundamentally restructure the mortgage industry in the United States," Pruitt said.
The Federal Reserve said it had reached an agreement with the five banks to pay $766.5 million in sanctions related to their servicing practices. And Loretta Lynch, the U.S. Attorney in Brooklyn, N.Y., announced a $1 billion settlement with Bank of America to resolve claims of underwriting and mortgage origination fraud by BofA and mortgage lender Countrywide Financial, which BofA bought in 2008.
The bigger foreclosure problem: The $26 billion deal announced Thursday is the second biggest settlement ever involving states. It trails only the $206 billion pact in 1998 with the tobacco industry.
And it dwarfs any settlements that major Wall Street firms have reached to resolve other allegations of misdeeds related to the financial markets meltdown and the Great Recession.
Still it only will help a faction of those homeowners who are struggling with mortgages. The relief would not be available to those homeowners whose mortgages have been sold to the government-sponsored mortgage guarantors Fannie Mae and Freddie Mac.
There are 1.5 million homeowners who are 90 days or more delinquent on their mortgages but not yet in foreclosure, according to the most recent estimate from the Mortgage Bankers Association. An additional 1.9 million are in the foreclosure process. And CoreLogic estimates that 11 million homeowners are underwater on their mortgages. Obama proposes new home refinancing plan.
The settlement does not preclude criminal prosecutions from being pursued. It also doesn't stop investigations into other allegations of misdoings, such as the process of bundling loans into mortgage-backed securities and selling them to investors.
"It wasn't the servicing practices that created the bubble nor caused the collapse," said Donovan. "It was the origination and the securitization of these horrendous products. We will be aggressive about going after those claims."
The deal is supposed to protect consumers when it comes to robosigning, and ensure that mortgage servicers agree to communicate better, avoid delays and give homeowners who are late on mortgage payments a fairer shake.
New York's participation had been shaky this week, because some of the banks involved in the multi-state deal had also been sued by Attorney General Eric Schneiderman last week. Those banks -- Bank of America, Wells Fargo and JPMorgan Chase -- had also asked for a legal pass from Schneiderman's lawsuit, which accuses them of deceptive foreclosure practices for relying on the Mortgage Electronic Registration System. On Tuesday, Schneiderman's office organized a media briefing to talk about the deal and then canceled it minutes before it was supposed to begin.
The big question throughout the negotiations was how much money would be available to help homeowners, which depended on how many states agreed to the deal. California's participation raises the total settlement value by several billion dollars. At least one consumer advocacy group, the Center for Responsible Lending, has said the deal -- while "no silver bullet" -- leaves room to hold banks accountable in other mortgage probes, said Kathleen Day, a spokeswoman for the nonprofit. But other left-leaning groups, including Move On and the New Bottom Line, are continuing to urge states to hold out for a big criminal investigation and a $300 billion settlement award. --CNN's Jessica Yellin contributed to this story. First Published: February 9, 2012: 10:07 AM ET
Capital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit.
The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago.
Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters.
However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.
Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.
Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”
In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.
While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.
Additionally, Capital Economics says “any improvement in credit conditions won’t be significant enough to generation actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability.
The Standard & Poor's/Case-Shiller index of 20 large U.S. cities
fell 1.3% in November from October as foreclosures continue to drag
down the housing market.
By Alejandro Lazo, Los Angeles Times
February 1, 2012
Three straight months of
home-price declines in the biggest U.S. cities showed that foreclosures
remain a significant drag on a housing market that is entering its fifth
year of deterioration.
Nineteen of the 20 metropolitan areas tracked by the Standard &
Poor's/Case-Shiller index fell in November — the second consecutive
month that every metro area other than Phoenix was down and the third
consecutive month that the overall index has declined. The index fell
1.3% from October to November and 3.7% from November 2010.
Home prices typically fall
during the winter, when investors looking for lower-priced homes make up
a larger share of the market. In addition, most home-buying is done in
the spring and summer. Nevertheless, economists viewed the continued
home-price weakness as a sign that any recovery this year would be
anemic.
"We have more house-price declines coming," said Mark Zandi, chief economist at Moody's
Analytics. "I'm more optimistic about improvement in sales and
construction figures, but I think prices will fall further this year,
largely because we still have to work through the mountain of foreclosed
properties."
Karl E. Case, a Wellesley College professor and co-creator of the index,
said the nation's housing market could be approaching a "rocky bottom,"
meaning the big drops in home values characteristic of earlier in the
crisis are perhaps over, but any improvements would come in fits and
starts. The huge percentage of American homeowners who owe more on their
properties than those homes are worth remains the biggest barrier to
recovery, Case said.
About 1 in 5 borrowers are underwater, according to the most recent data
from Santa Ana firm CoreLogic. That slice of the market is important
because these property owners will continue to enter the market and put
downward pressure on prices whenever demand for homes picks up, Case
said.
"There are still going to be problems getting people out of these
negative-equity positions," Case said. "We won't know the effect until
it's over; it could drag out."
The Case-Shiller index, created by economists Case and Robert J.
Shiller, is widely considered the most reliable read on home values. The
housing index compares the latest sales of detached houses with
previous sales and accounts for factors such as remodeling that might
affect a house's sale price over time.
U.S. home prices are back to their mid-2003 levels, according to the
20-city index. They are down 32.9% from their peak, in July 2006.
Values hit bottom in April 2009 during the depths of the financial
crisis and briefly dipped below that threshold in March. Prices began
gaining ground again last year as the spring and summer selling season
picked up.
With three consecutive months of decline, prices are again poised to dip
below that post-crisis low, with the 20-city index hovering only 0.6%
above the "double-dip" territory as defined by S&P/Case-Shiller.
"We will probably see some decline in nationwide prices, not a plunge,
but maybe 4%," said Dean Baker, co-director of the Center for Economic
and Policy Research. "There will be a lot of regional variation, but I
think the overall trend is still downward."
Atlanta continued to show the poorest price performance, posting a new
index low in November. That city was down 2.5% after dropping 5% in
October, 5.9% in September and 2.4% in August. Las Vegas, Seattle and Tampa, Fla., also all reached new lows in November.
In Los Angeles, prices were down 1% in November after falling 1.5% the
month before. Year over year, L.A. prices were down 5.4.%.The index does
not track prices in California's Central Valley or the Inland Empire,
where housing is still weak and the foreclosure rates of many cities are
among the nation's highest.
The share of distressed properties for sale in each area tracked by the
index appears to be playing a significant role in how those markets are
doing.
After being hit hard by foreclosures earlier in the crisis, Phoenix has
posted home-price gains in recent months as investors snapped up
low-priced properties and the job market showed some improvement.
Foreclosures in Phoenix accounted for 38.5% of all resale homes in
November, the lowest share of the market since May 2008, according to
San Diego real estate information firm DataQuick.
On the other end of the spectrum, Atlanta had the largest number of
foreclosed properties for sale by government-controlled mortgage giants Fannie Mae and Freddie Mac in November, Patrick Newport, U.S. economist for IHS Global Insight, noted Tuesday, citing a Federal Reserve white paper sent to Congress last month pushing for more urgent action on housing.
Given the continued malaise in housing, the Obama administration has
taken new measures to right the property market. Last week, the
government announced the expansion of its signature foreclosure relief
program, a new refinancing plan for borrowers and a new investigative
unit that will further probe the mortgage-related abuses that caused the
housing collapse.
News of the latest housing value declines came as consumer confidence in
the economy turned negative in January after improving in December,
according to the Conference Board's consumer confidence index. The index
had increased in December but fell 3.7 points.
