Bank of America To Offer Rentals As Foreclosure Alternative

BofA To Offer Rentals As Foreclosure Alternative

Bank of America says it has begun a pilot program offering some of its mortgage customers who are facing foreclosure a chance to stay in their homes by becoming renters instead of owners.
The "Mortgage to Lease" program, which was launched this week, will be available to fewer than 1,000 BofA customers selected by the bank in test markets in Arizona, Nevada and New York.
Participants will transfer their home's title to the bank, which will then forgive the outstanding mortgage debt. In exchange, they will be able to lease their home for up to three years at or below the rental market rate. The rent will be less than the participants' current mortgage payments and customers will not have to pay property taxes or homeowners insurance, the bank said.
"This pilot will help determine whether conversion from homeownership to rental is something our customers, the community and investors will support," Ron Sturzenegger, legacy asset servicing executive of Bank of America, said in a statement.
Among requirements to qualify for the program, homeowners must have a BofA loan, be behind at least 60 days on payments and be "underwater," owing more on their mortgages than their homes are worth.
The bank based in Charlotte, N.C., said it will at first own the homes, then sell them to investors. If the program is successful, it could be expanded to include real-estate investors who buy qualifying properties and keep the occupants on as tenants.
"If this evolves from a pilot into a more broadly based program, we also see potential benefits from helping to stabilize housing prices in the surrounding community and curtail neighborhood blight by keeping a portion of distressed properties off the market," Sturzenegger said.
Foreclosure tracking firm RealtyTrac says foreclosure activity has picked up in some states, as banks deal with a backlog of homes with mortgages that had gone unpaid yet remained in limbo due to delays stemming from foreclosure-abuse claims, according to
Nevada has the nation's highest foreclosure rate as of last month, with one in every 278 households in the state receiving a foreclosure-related filing, twice the national average, according to RealtyTrac. Arizona ranks third behind California, while New York has not been as hard hit, with one in every 4,604 households receiving a foreclosure-related filing.

Copyright © 2012, Los Angeles Times

March 23, 2012
 

Fannie, Freddie Consider Mortgage Write-Downs

by Chris Arnold

 

Joe Raedle/Getty Images A Fannie Mae/Freddie Mac mortgage services representative (left) helps a person register for mortgage help in Miami.

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March 23, 2012

The two most powerful entities in the housing market — Fannie Mae and Freddie Mac — could be on the verge of a significant change regarding foreclosures. NPR and ProPublica have learned that both firms have concluded that giving homeowners a big break on their mortgages would make good financial sense in many cases.
In these so-called principal write-downs, a portion of the loan is forgiven for someone who's having trouble paying. Many Democrats are pushing for this change. Most Republicans are against it. So far, a key federal regulator is blocking Fannie and Freddie from adopting the approach.
In recent days, financial executives at Fannie and Freddie have made presentations to their regulator saying that principal reduction for many homeowners would prevent larger losses and keep people in their homes.

The Principal Write-Down Debate

Read a statement to NPR from Federal Housing Finance Agency Acting Director Edward DeMarco about proposals to reduce mortgage principal:
"As I have stated previously, FHFA is considering HAMP incentives for principal reduction and we have been having discussions with the Enterprises [Fannie Mae and Freddie Mac] and Treasury regarding our analysis. FHFA's previously released analysis concluded that principal forgiveness did not provide benefits that were greater than principal forbearance as a loss mitigation tool. FHFA's assessment of the investor incentives now being offered will follow the previous evaluation, including consideration of the eligible universe, operational costs to implement such changes, and potential borrower incentive effects. As we complete the review, the public should understand that Fannie Mae and Freddie Mac continue to offer a broad array of assistance to troubled borrowers and have continued to implement HARP 2.0 to enhance refinancing opportunities for underwater borrowers. FHFA remains committed to its legal responsibilities as conservator to ensure assistance is offered to troubled borrowers while minimizing losses to taxpayers."

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Watch a video of the FHFA's DeMarco testifying before the Senate Banking Committee on Feb. 28.
Read a blog post by Mark Calabria, director of financial regulation studies at the libertarian Cato Institute, in support of the FHFA's DeMarco.
Read an online column by David Abromowitz, senior fellow at the liberal Center for American Progress, saying principal reduction is overdue.

This is a big development in a charged political issue. Some economists and many Democratic lawmakers see principal reduction as a powerful tool for helping the housing market.
A Game Changer?
"Principal reduction works," says Mark Zandi, chief economist of Moody's Analytics. "If someone gets a reduction in their principal amount, it gives them a powerful hook to really fight to try to hang on to the home and not go into foreclosure."
As Zandi explains, if someone is struggling to pay a $200,000 mortgage and their house is only worth $150,000, the owner might decide to walk away. But if the lender forgives $50,000 of the amount owed, that's a game changer.
Fannie and Freddie guarantee and control most of the home loans in the country. Zandi says that if Fannie and Freddie "fully committed to the idea of doing more principal reduction [modifications] that we would see several hundred thousand — 300,000 to 500,000 in principal reduction mods over the course of the next several years of Fannie and Freddie loans. And that would make a substantive difference."
That's 300,000 to 500,000 homeowners getting a big break on their mortgage. Zandi says that could do a lot to tip the housing market toward recovery — and thereby help the whole economy.
Other economists disagree. And Fannie and Freddie's regulator has so far refused to allow this approach. Ed DeMarco, the head of the Federal Housing Finance Agency, controls Fannie and Freddie following a giant federal bailout of the two companies. At a recent Senate hearing, DeMarco said he wants to prevent foreclosures.
"But we need to do so in a way that we are meeting our mandate to protect the taxpayers," he said.

A Conflict At Freddie Mac?

Your Money

Freddie Mac Betting Against Struggling Homeowners

Freddie Mac's Regulator 'Completely Puzzled' By Allegations Of Conflict Feb. 3, 2012

Senator Demands Answers from Freddie Mac's Regulator Feb. 3, 2012

Report Prompts Calls To End Freddie Mac's Conflict Of Interest Jan. 30, 2012

In other words, he needs to be a good steward of taxpayer money. Last month, DeMarco testified that Fannie and Freddie themselves told him that they didn't support principal reductions.
"Both companies have been reviewing principal forgiveness alternatives. Both have advised me that they do not believe it is in the best interest of the companies to do so," he said.
Flood Of Defaults Feared
But now Fannie and Freddie appear to be saying the opposite. In part that's because the Obama administration has recently tripled the incentives it offers to lenders who do these principal write-downs. So now, in many cases, if a lender writes off, say, $50,000 of principal, the government will reimburse half that — $25,000.
That's a lot of taxpayer money. Many Republican lawmakers don't like that. And some economists hope DeMarco stands his ground.
"I think DeMarco is absolutely right," says Anthony Sanders, a professor at George Mason University. He says that if Fannie and Freddie start forgiving big chunks of what many people owe on their mortgage, they risk triggering a huge wave of strategic defaults. That is, people who don't really need the help would default on purpose to try to get it.

Once you throw in principal reductions as a carrot, the level of disinformation from consumers will be legion. People will then pretend they have to go into default just to get the principal reduction.

- Anthony Sanders, a professor at George Mason University

"Once you throw in principal reductions as a carrot, the level of disinformation from consumers will be legion," Sanders says. "People will then pretend they have to go into default just to get the principal reduction."
Critics say that could result in a near cataclysmic mess. Hundreds of thousands of people could stop paying their mortgages. And they would flood their lenders with calls, stumbling over each other to try to get free money.
"That's going to take a lot of manpower to try to sort through these — who actually needs one and who just wants a principal write-down at taxpayer expense," Sanders says. "This could blossom into something really ugly."
Still, the private sector has already been doing many more principal write-downs — by one count, 15 percent of all recent loan modifications. And proponents say so far the sky isn't falling.
For his part, DeMarco told NPR in a statement that the FHFA is now considering these new incentives and whether they change his agency's prior analysis of principal reduction. He added, "Fannie Mae and Freddie Mac continue to offer a broad array of assistance to troubled borrowers."
Meanwhile, political pressure on DeMarco is building, at least from Democrats. More than 100 lawmakers have signed a letter asking him to reconsider and allow principal reduction.

NPR's Chris Arnold reported this story in partnership with Jesse Eisinger of ProPublica.

 

Home Where Michael Jackson Died Listed for Sale

Home Where Michael Jackson Died Listed for Sale in Los Angeles

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Date:March 21, 2012 | Author:Erika Riggs | Category:Eye Candy

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It was inevitable that the home where Michael Jackson met his untimely demise would eventually come up for sale. After all, it was listed previously without much success and now, once again, it has hit the Beverly Hills real estate market and is being listed for $23.9 million. Only this time, it carries a significant footnote in 
pop culture history as the place where the King of Pop died.
But even as images of Jackson’s chaotically messy bedroom from that fateful 2009 night linger, the reality now is that the multimillion-dollar mansion in the tony neighborhood of Beverly Hills has been cleaned up — destined for a new chapter with new owners.
The real question now, after so much drama (word is that Jackson’s mother ordered the queen-sized headboard to be removed from the auction), is how to market the home where the King of Pop died?
Given the headline-news-circumstances of Jackson’s death, and the stunning loss of an entertainment icon, marketing this property would be a Herculean task for any real estate broker. Unless, of course, the listing agent for the home where Jackson met his tragic end was a professional with a personal stake in not only maintaining the integrity of Jackson’s legacy, but representing the value of the home, too.

“I knew him and my wife [Kyle Richards] has been friends with Michael Jackson since she was 8-to-10 years old,” said Mauricio Umansky, the listing broker for the Holmby Hills mansion and co-founder of The Agency. “And I personally think there’s some great energy in the house and I see it as a major positive. I’m excited to be selling it.”

Umansky doesn’t dance around the subject of Jackson’s death in the home. He knows the pop-culture-changing bit of history will not only come up, but be a major storyline concerning the listing.
“It is what it is. There’s no need to hide it,” Umansky said. “Michael Jackson was an amazing human being — he changed music as we know it. Unfortunately, he passed away. It doesn’t take away from the house.”
Indeed, the grandeur is what drew Jackson to the 17,000-square foot French Chateau-style estate that was the creation of Hubert Guez, CEO of Hardy Designs, and his wife Roxanne Guez. In 2002, they hired L.A. designer Richard Landry to create a one-of-a-kind estate at 100 N. Carolwood Drive, Los Angeles, CA, which sits on over an acre in the prestigious Holmby Hills real estate market.
The 7-bedroom, 13-bathroom home is finished with high-end amenities such as a theater, wine cellar with tasting room, an elevator, 14 fireplaces, a spacious spa with gym and a large swimming pool. When construction was completed, it was designed to sell and priced at $38 million on the Beverly Hills real estate market. That’s when Jackson fell in love with the property.
“He loved the master bedroom and he loved the grounds,” said Umansky. “He was happy there.”
The home was leased for Jackson by concert promoter AEG Live from December 2008 up until his death in June 2009 for a reported $100,000 monthly rental. And it was here where Jackson was preparing for his comeback tour, “This is It” when he died of a drug overdose for which his personal physician, Conrad Murray, was later convicted of involuntary manslaughter.
The home was re-listed briefly in 2010 for $23.5 million, but the home has now been re-listed at a new price of $23.9 million. All contents relating to Jackson have been removed from the home, following the sale of most of Jackson’s personal items, furniture and collections during a December 2011 auction.
Umansky said he has no plans to stage the home.
“You have the chance to live in the same home that an icon lived in. If you look at Elizabeth Taylor’s home, it sold for more money because it was Elizabeth Taylor’s home,” explained Umansky. “It’s a beautiful home on a great piece of land.”
While curiosity about the property is bound to spike with news of its re-listing, there’s little chance that anyone except a pre-approved buyer will get a tour of the place. Set behind high walls, thick hedges and double gates, it’s not an easy place to spy on.  And Umansky said he will be screening all potential buyers for financial qualifications.
This is standard-operating procedure for any high-end property. However, in the case of this $23.9 million property in heart of one of Los Angeles’ most coveted neighborhoods, the fact that Michael Jackson’s final moments were spent here only further emphasizes the need for privacy — and the guiding hand of a close friend who knows how to sell a property that, for as long as it stands, will be part of the story of the King of Pop’s demise.

Houston Housing Jumps Again

Houston-area home sales rose for the eighth straight month in January, the Houston Association of Realtors reported today.
Realtors sold 3,049 homes during the month, a 9.2 percent increase over last January.
Activity has been improving as supply declines and demand for homes ticks up, property agents say.
Pending sales at the end of January totaled 3,164. That’s up 6 percent from last year and suggests another positive month of sales when the February figures are tallied.
Foreclosure sales also took a big turn up in January. Distressed property sales rose 22 percent, representing 27.8 percent of the transactions in January.
“The January report shows continued strength in the Houston housing market that we began seeing in the latter part of 2011, and it gives us cause for optimism as we look ahead to the traditionally active spring and summer buying months,” Wayne Stroman, the association’s chairman, said in a news release. “We have also seen more jobs being filled locally and you don’t typically experience a strong real estate market without healthy employment.”
Prices have remained relatively flat.
January’s single-family home median price — the figure at which half of the homes sold for more and half sold for less — rose inched up 0.9 percent year-over-year to $139,900.
The number of available properties, or active listings, at the end of January declined 15.1 percent from January 2011 to 42,067. The inventory of single-family homes dropped to its lowest level since December 2009 — 5.7 months, compared to 7.2 months one year earlier. That means it would take 5.7 months to sell all the single-family homes on the market based on sales activity over the past year.

Texas Officials Estimate Higher Property Values

(AP)  AUSTIN, Texas — Texas property values increased 1.3 percent statewide last year, the comptroller's office says, in another sign the economy is getting stronger.

The assessed value of all residential and commercial property across the state increased to $1.69 trillion in 2011, compared to the previous year's $1.67 trillion. In 2010, Texas suffered the first decline in statewide property values in 17 years, and state budget writers had anticipated another 1 percent decrease last year — but 2011 was more positive than expected, the Austin American-Statesman (http://bit.ly/wz66yK) reported Tuesday.

The assessed value is a key variable in school funding, which is based on a mix of local property taxes and state dollars. The difference will save the state perhaps $300 million to $400 million by reducing its obligation to school districts, according to Joe Wisnoski of Moak Casey & Associates, a school finance consulting firm.

Still, the increase is relatively insignificant in relation to Texas' overall two-year budget of $173.5 billion — and it won't necessarily be used to undo some of the $4 billion reduction in school aid that the Legislature enacted last year.

"It probably will make very, very little difference in the bottom line of school districts," Wisnoski told the Statesman.

But the increase in property values, combined with the state's collection of more tax revenue than previously expected, adds to the perception that Texas is climbing out of its budget hole.

"We're certainly above the trend line across the board, but it's still early," said Dale Craymer, president of the business-backed Texas Taxpayers and Research Association. "If current trends hold, we will be in relatively good shape."

Since the state's fiscal year began in September, sales tax revenue has come in about double the projected rate of growth.

Other key sources of revenue have performed exceedingly well, particularly the natural gas production tax, which is expected to be up 25 percent compared with the previous budget. Much of that money goes to the state's Rainy Day Fund, which is expected to have $7.3 billion available by the end of the two-year budget.

Texas Comptroller Susan Combs said in December that the state would have $1.6 billion more than previously expected in the 2012-13 budget.

But she also warned that legislators would likely have to tap the Rainy Day Fund when they convene again next year given that they left $4.3 billion in Medicaid obligations unpaid during last year's session.

Protest Deadline for Residential Homestead Properties has Changed

The state legislature has changed the protest deadline for residential homestead properties only. According to the House Bill #3496, homestead owners must file the notices of protest before May 1 or within 30 days after delivery of a notice of value.

$25 billion settlement reached with 5 largest mortgage lenders over foreclosure abuses

By Derek Kravitz, The Associated Press

WASHINGTON - A landmark $25 billion settlement with the nation's top mortgage lenders was hailed by government officials Thursday as long-overdue relief for victims of foreclosure abuses. But consumer advocates countered that far too few people will benefit.
The deal will reduce loans for only a fraction of those Americans who owe more than their homes are worth. It will also send checks to others who were improperly foreclosed upon. But the amounts are modest.
It's unclear how much the deal will help struggling homeowners keep their homes or benefit those who have already lost theirs.
About 11 million households are underwater, meaning they owe more than their homes are worth. The settlement would help 1 million of them.
"The total number of dollars is still small compared to the value of the mortgages that are underwater," said Richard Green, director of the University of Southern California's Lusk Center for Real Estate.
Federal and state officials announced that 49 states joined the settlement with five of the nation's biggest lenders. Oklahoma struck a separate deal with the five banks. Government officials are still negotiating with 14 other lenders to join.
The bulk of the money will go to California and Florida, two of the states hardest hit by the housing crisis and the ones with the most underwater homeowners. The two states stand to receive roughly 75 per cent of the settlement funds.
Of the five major lenders, Bank of America will pay the most to borrowers: nearly $8.6 billion. Wells Fargo will pay about $4.3 billion, JPMorgan Chase roughly $4.2 billion, Citigroup about $1.8 billion and Ally Financial $200 million. The banks will also pay state and federal governments about $5.5 billion.
The settlement ends a painful chapter of the financial crisis, when home values sank and millions edged toward foreclosure. Many companies processed foreclosures without verifying documents. Some employees signed papers they hadn't read or used fake signatures to speed foreclosures — an action known as robo-signing.
President Barack Obama praised the settlement, saying it will "speed relief to the hardest-hit homeowners, end some of the most abusive practices of the mortgage industry and begin to turn the page on an era of recklessness that has left so much damage in its wake."
The deal requires the banks to reduce loans for about 1 million households that are at risk of foreclosure. The lenders will also send $2,000 each to about 750,000 Americans who were improperly foreclosed upon from 2008 through 2011. The banks will have three years to fulfil terms of the deal.
The states have agreed not to pursue civil charges over the abuses covered by the settlement. Homeowners can still sue lenders on their own, and federal and state authorities can still pursue criminal charges.
The deal, reached after 16 months of contentious negotiations, is subject to approval by a federal judge. It's the biggest settlement involving a single industry since the $206 billion multistate tobacco deal in 1998.
But for the many people who lost their homes to foreclosure in the past two years, some of them improperly, a check for $2,000 is small consolation.
"Two thousand dollars won't cover my moving costs," said Brian Duncan, who was evicted from his Tempe, Ariz., home last April.
Iowa Attorney General Tom Miller, who led the 50-state talks, said the $2,000 checks represent the homeowners' best hope of being reimbursed for any amount. They would have had trouble winning settlements in court because of the time-consuming complexity of litigation, Miller said.
Mike Heid, president of Wells Fargo Home Mortgage, said the agreement "represents a very important step toward restoring confidence in mortgage servicing and stability in the housing market."
Mark Vitner, a senior economist at Wells Fargo Securities, said the settlement may help the housing market in the long run. That's because it lets banks proceed with millions of foreclosures that have been stalled. Many lenders had refrained from foreclosing on homes as they awaited the settlement.
"We've got a lot of issues to work our way through in the housing market," Vitner said. "What this settlement does is allow that process to get started."
For the banks, the settlement comes mainly as a relief. If each state had sued the lenders and won, the total settlements could have run into the hundreds of billions. And all the lenders have set aside adequate reserves.
"It's really a wash," said Paul Miller, bank analyst at FBR Capital Markets. "A billion dollars is nothing for these large trillion-dollar banks."
The bulk of the settlement will go toward reducing underwater mortgages and refinancing some of them. But the banks had realized they weren't going to collect the loans and had already written down their value, Miller noted.
The deal requires banks to make foreclosure their last resort. And they can't foreclose on a homeowner who is being considered for a loan modification.
Still, the federal government has a dubious track record of enforcing such rules. The Obama administration's signature foreclosure-prevention program has failed to help more than half of those who have applied to have their mortgage payments lowered permanently. Many have complained that the program is a bureaucratic nightmare.
Critics also note that the settlement will apply only to privately held mortgages and not to those owned by mortgage giants Fannie Mae and Freddie Mac. Banks own about half of all U.S. mortgages, or roughly 30 million loans. Fannie and Freddie own the other half.
The deal is "another sad example of Wall Street not being held accountable for fraud, perjury and crimes that created the greatest economic crisis since the Great Depression," said Dennis Kelleher, CEO of Better Markets, a group that advocates stricter financial regulation. "The math does not add up in a massive 'robo-signing' scandal that is nothing more than systemic criminal conduct."
The settlement also ends a separate investigation into Bank of America and Countrywide for inflating appraisals of loans from 2003 through most of 2009. Bank of America acquired Countrywide in 2008.