Author: Brian Honea December 15, 2014
The U.S. Senate and the House of Representatives have both unanimously voted to pass a bill that give military servicemembers who have recently returned from duty added protection from foreclosure, according to an announcement from Senator Sheldon Whitehouse (D-Rhode Island), who introduced the bill in May.
S.2404, also known as the Foreclosure Relief and Extension for Servicemembers Act of 2014, unanimously passed in the Senate on Thursday, December 11 and in the House on Friday, December 12, according to the announcement from Whitehouse.
The bill extends until January 2016 a provision that sets one year as the time a servicemember’s house is protected from foreclosure upon his or her return from active duty, if the mortgage was obtained before the servicemember was an active member of the military. The Commission on the National Guard and Reserves had submitted a report that prompted the foreclosure protection extension from 90 days to nine months in 2008. The period was extended to nine months as part of the Servicemembers’ Civil Relief Act (SCRA) in 2008 and lengthened further to one year in 2012 as part of a bill introduced by Whitehouse.
The one-year period was set to expire at the end of December and would have reverted back to its pre-2008 level of 90 days at the beginning of 2015. Whitehouse’s bill that he introduced back in May called for the permanent adoption of the one-year foreclosure protection period.
“After fighting for our country overseas, our troops shouldn’t have to fight to keep a roof over their heads when they return home,” Whitehouse said. “Servicemembers returning from active duty often need time to regain their financial footing, particularly those in the National Guard and Reserves who give up their full-time jobs to fight for our freedom. We should ultimately pass legislation to make this protection permanent, but I’m glad we were able to secure peace of mind for our veterans for one more year.”
The SCRA contains other protections for military members and their families from auto repossessions and other personal property while the servicemember is on active duty. Under the current law, servicemembers and their families cannot be evicted from housing due to nonpayment of rent that is less than $1,200 per month while the servicemember is on active duty..
Author: Brian Honea December 9, 2014
Fannie Mae and Freddie Mac announced on Tuesday a moratorium on evictions for single-family foreclosed homes for the holiday season.
The GSEs said evictions will not be enforced from December 17, 2014, until January 2, 2015, for single-family homes that have been foreclosed on, meaning that families living in those homes will be able to continue to live there during that two-week period. Both GSEs said that legal and administrative proceedings related to the eviction process may continue during that period even though the eviction itself will not be carried out.
“As in previous years, we believe it is important to extend the timeline of help for struggling borrowers during the holidays,” said Joy Cianci, SVP of Credit Portfolio Management for Fannie Mae. “If you are in trouble or facing foreclosure, reach out to Fannie Mae or your servicer today to get help. There are more options than ever before to avoid foreclosure. We want to help struggling borrowers whenever possible.”
Freddie Mac’s suspension of evictions will apply not just to foreclosed occupied single-family homes, but to 2-4 unit properties that have Freddie Mac owned or guaranteed mortgages, according to the announcement.
“Today’s announcement will bring some holiday relief to borrowers who went through foreclosure and were preparing to move,” said Chris Bowden, SVP of REO at Freddie Mac. “We strongly urge homeowners with financial challenges to start the new year by calling their mortgage servicer to explore one of the Freddie Mac workout options that have prevented over one million foreclosures since 2009.”
Fannie Mae has helped work out loan solutions for more than 1.6 million distressed homeowners to avoid foreclosure since 2009. For additional foreclosure prevention resources, homeowners can visit www.knowyouroptions.com. Freddie Mac has helped more than one million struggling homeowners avoid foreclosure during that same time period; more information can be found at Freddie Mac’s Mortgage.
We need to add a program for this program.
Government officials have announced extra incentives for borrowers under the Home Affordable Modification Program (HAMP).
Currently, homeowners who remain current following their modification are eligible to earn up to $5,000 over the first five years of their modified loan, which is applied in repayment of their outstanding principal balance. Under the revised guidelines announced Thursday, all homeowners in HAMP will now be eligible to earn $5,000 in the sixth year of their modification, reduceing their outstanding principal balance by as much as $10,000. Homeowners will also be offered an opportunity to re-amortize the reduced mortgage balance, which will have the effect of lowering their monthly payment.
“While the housing sector has strengthened in recent years, there are still many homeowners struggling to make their mortgage payments,” said Secretary of the Treasury Jacob Lew. “The changes we are announcing today offer meaningful incentives for borrowers to stay current in their modifications, increase their opportunity to build equity in their homes, and provide vital safety nets for those facing greater financial strains.”
Government officials estimate that approximately one million homeowners with HAMP loans are eligible for the additional $5,000 incentive. The changes appear aimed at motivating borrowers to stay current while also providing a cushion for borrowers due to see higher rates. The Treasury Department and Department of Housing and Urban Development (HUD ) established HAMP in 2009 in an effort to provide relief to homeowners facing financial hardship.
The administration also announced incentives for borrowers in the HAMP Tier 2 alternative program., which provides a low fixed interest rate for borrowers who did not qualify for a standard HAMP modification. Those borrowers can now pay a 50-basis point lower interest rate and are eligible for the $5,000 pay-for-performance incentive if they are in good standing at the end of their sixth year.
Additionally, the administration announced it has increased the amount of relocation assistance provided to homeowners to $10,000 to better reflect increased rents and the cost of moving in many parts of the country.
The payments would impact roughly 1 million borrowers who received reduced mortgage rates through the Home Affordable Modification Program during the Great Recession.
The discounted 2 percent mortgage rates are scheduled to rise by a percentage point for many of these borrowers entering the sixth year of the program. That would increase monthly payments for those who might still be struggling to find work or additional income.
“It’s about trying to prevent as many avoidable foreclosures as we can,” said Timothy Bowler, deputy assistant Treasury secretary for financial stability.
Read MoreSelf-employed? Good luck getting a mortgage
Mortgage rates on the modified loans will eventually rise to market levels.
This latest principal reduction would be in addition to the $5,000 in government payments made during the first five years of the loan modification. Because of the combined $10,000 in principal reduction, qualifying borrowers would have the option of adjusting their mortgage terms to pay on average $50 less a month. Otherwise, those borrowers could repay their mortgages ahead of schedule.
The HAMP program was launched in 2009 amid cratering home prices and fierce job cuts during the worst economic downturn since the 1930s. Obama administration officials initially pledged that HAMP could save as many as 4 million homeowners from foreclosure, but only 1.2 million were ultimately able to participate in the program established through the 2008 law creating the Troubled Asset Relief Program, or TARP.
More than 5.3 million homes were lost to foreclosure during the financial crisis, according to CoreLogic, a real estate data firm.
Watchdog outlines proposed foreclosure rules
The Consumer Financial Protection Bureau (CFPB) has proposed additional measures to ensure that homeowners and struggling borrowers are treated fairly by mortgage servicers. The proposal would require servicers to provide certain borrowers with foreclosure protections more than once over the life of the loan, to put in place additional servicing transfer protections and to take steps to protect borrowers from a wrongful foreclosure sale. The proposition would also help ensure that surviving family members and others who inherit or receive property have the same protections under the CFPB’s mortgage servicing rules as the original borrower. “The Consumer Bureau is committed to ensuring that homeowners and struggling borrowers are treated fairly by mortgage servicers and that no one is wrongly foreclosed upon,” said CFPB Director Richard Cordray. “Today’s proposal would give greater protections to mortgage borrowers.”
The current rules, which went into effect on Jan. 10, require mortgage servicers to maintain accurate records, give troubled borrowers direct and ongoing access to servicing personnel, promptly credit payments and correct errors on request, according to the CFPB.
Highlights from the CFPB’s proposal:
- Require servicers to provide certain borrowers with foreclosure protections more than once over the life of the loan: Currently, a mortgage servicer must give the borrower certain foreclosure protections, including the right to be evaluated under the CFPB’s requirements for options to avoid foreclosure, only once during the life of the loan. Under the proposed rule, servicers would have to give those protections again for borrowers who have brought their loans current at any time since the last loss mitigation application. CFPB said the change would help borrowers who obtain a permanent loan modification and later suffer an unrelated hardship— such as the loss of a job or the death of a family member— that could otherwise cause them to face foreclosure.
- Expand consumer protections to surviving family members and other homeowners: If a borrower dies, CFPB rules currently require that servicers promptly identify and communicate with family members, heirs, or other parties— known as “successors in interest”— who have a legal interest in the home. Today’s proposal would expand the circumstances in which consumers would be considered successors under the rules. The expanded circumstances include when a property is transferred after a divorce, legal separation, through a family trust, between spouses, from a parent to a child or when a joint tenant borrower dies.
- Require servicers to notify borrowers when loss mitigation applications are complete: When a borrower completes a loss mitigation application, key foreclosure protections take effect. If consumers do not know the status of their applications, they cannot know the status of their foreclosure protections, said the CFPB. The proposal would require servicers to notify borrowers promptly that the application is complete, so that borrowers know the status of the application and their protections.
- Protect struggling borrowers during servicing transfers: The proposition clarifies that generally a transferee servicer must comply with the loss mitigation requirements within the same timeframes that applied to the transferor servicer. If the borrower’s application was complete prior to the transfer, the new servicer generally must evaluate it within 30 days of when the prior servicer received it. For involuntary transfers, the proposal would give the new servicer at least 15 days after the transfer date to evaluate a complete application. If the new servicer needs more information in order to evaluate the application, the borrower would retain some foreclosure protections in the meantime.
- Clarify servicers’ obligations to avoid dual-tracking and wrongful foreclosures: The new rule would clarify what steps servicers and their foreclosure counsel must take to protect borrowers from a wrongful foreclosure sale. The regulator is suggesting that servicers who do not take reasonable steps to prevent the sale must dismiss a pending foreclosure action. The measures would aid servicers in complying with, and assist courts in applying, the dual-tracking prohibitions in foreclosure proceedings to prevent wrongful foreclosures.
- Clarify when a borrower becomes delinquent: The proposal would simplify that delinquency begins on the day a borrower fails to make a periodic payment. When a borrower misses a payment but later makes it up, if the servicer applies that payment to the oldest outstanding periodic payment, the date of delinquency advances. The proposal also would allow servicers the discretion, under certain circumstances, to consider a borrower as having made a timely payment even if the borrower’s payment falls short of a full payment by a small amount.
- Provide more information to borrowers in bankruptcy: The additional measures would require servicers to provide periodic statements to borrowers facing bankruptcy. Under the current rules, servicers do not have to provide certain disclosures to borrowers who have told the servicer to stop contacting them under the Fair Debt Collection Practices Act. With these changes, servicers would be required to provide written early intervention notices to let those borrowers know about loss mitigation options.
The number of foreclosure filings, which include default notices, scheduled auctions, and bank repossessions (REOs), increased by 15 percent from September to October, the largest month-over-month jump since the peak of foreclosure activity in March 2010, according to RealtyTrac‘s October 2014 U.S. Foreclosure Market Report released Thursday.
Foreclosure filings were reported for 123,109 U.S. residential properties in October, which despite the month-over-month increase, still represented an 8 percent decline in the number of foreclosure filings from October 2013. One in every 1,069 residential housing units in the U.S. had a foreclosure filing in October, according to RealtyTrac.
The month-over-month increase in foreclosure filings was driven largely by a spike in scheduled foreclosure auctions. Foreclosure auctions nationwide totaled 58,869 for October, the highest total for a single month since May 2013. The October number of foreclosure auctions was a 24 percent increase from September and a 7 percent jump up from October 2013, according to RealtyTrac.
“The October foreclosure numbers are not a complete surprise given that over the past three years there has been an average 8 percent monthly uptick in scheduled foreclosure auctions in October as banks try to get ahead of the usual holiday foreclosure moratoriums,” said Daren Blomquist, VP at RealtyTrac. “But the sheer magnitude of the increase this year demonstrates there is more than just a seasonal pattern at work. Distressed properties that have been in a holding pattern for years are finally being cleared for landing at the foreclosure auction.”
In judicial foreclosure states, where the foreclosure process has to pass through the courts, scheduled foreclosure auctions rose in October by 21 percent month-over-month and 3 percent year-over-year. In non-judicial foreclosure states, where foreclosures are not required to be processed through the courts, scheduled auctions surged upward in October by 27 percent month-over-month and 14 percent year-over-year, according to RealtyTrac.
The states that experienced the largest year-over-year increases in scheduled foreclosure auctions in October, according to RealtyTrac, were Oregon (399 percent), North Carolina (288 percent), New Jersey (118 percent), New York (89 percent), and Connecticut (60 percent).
In October, REO activity (lenders repossessing properties via foreclosure) increased by 22 percent from September, according to RealtyTrac. It was the largest month-over-month increase in REOs since June 2009. REOs were down 26 percent from October 2013, however. In all, lenders repossessed 27,914 U.S. residential properties in October, RealtyTrac reported.
REOs increased year-over-year in 16 states, led by Maryland (190 percent), Pennsylvania (25 percent), New Jersey (22 percent), Oregon (20 percent), and New York (18 percent).
“There is still strong demand from the large institutional investors at the foreclosure auction in some markets, but even in markets with decreasing demand at the foreclosure auction, banks can be confident in selling REO properties quickly and at a good price,” Blomquist said. “That’s because there is still strong demand from buyers, particularly in the lower price ranges, combined with a dearth of distressed homes listed for sale.”
Foreclosure starts totaled 56,452 in the U.S. in October, a month-over-month increase of 12 percent but a year-over-year decline of 4 percent, according to RealtyTrac. The month-over-month increase was the largest since August 2011..