THE ECONOMY: Obama's housing scorecard

NEW YORK (CNNMoney) -- The housing market is gaining strength thanks in part to government programs aimed at helping struggling homeowners, the latest Obama Administration Housing Scorecard released Thursday found.

"The Obama Administration's efforts to speed housing recovery are showing clear signs of traction," said Erika Poethig, Acting Assistant Secretary for the Department of Housing and Urban Development (HUD) which releases the report in conjunction with the Department of the Treasury.

Home values are back to levels not seen since the beginning of the Obama administration and the number of homeowners who are underwater on their mortgage is down 11% since last year, the report said. In addition, more than half a million borrowers have had their loans refinanced through government efforts like the Home Affordable Refinance Program this year.

"It is clear that we're making progress. But with so many households still struggling to make ends meet, we have important work ahead," Poethig said.

Another boost to the housing market came last April, when the attorneys general of 49 states and the District of Columbia inked a $25 billion settlement deal with the nation's five largest banks over so-called robo-signing foreclosure abuses. That deal is expected to help another couple of million borrowers reduce their mortgage payments.

Since the administration started rolling out its programs in April 2009, more than 5.4 million borrowers have received aid, the Department of Housing and Urban Development (HUD) said.

Here's a rundown of the government's mortgage relief efforts and how they've fared:

Home Affordable Modification Program (HAMP)

Launch: March 2009

Borrowers affected: As of July 2012, there have been 1.9 million trial modifications started. More than 1 million have made the transition into permanent modifications. Some 235,000 of those have been canceled due to re-defaults or because borrowers sold their homes.

This program enables eligible borrowers to lower their first mortgage payments to more affordable and sustainable levels. Lenders receive incentives to reduce mortgage payments for at-risk borrowers; the target is 31% of income.

HAMP originally fell well short of estimates that it would lower mortgage payments for 3 to 4 million borrowers. And, many early workouts failed as borrowers soon re-defaulted on their loans.

Track record: HAMP's record has improved and re-default rates have declined, but they're still troubling. As of July, nearly 19% of all borrowers with HAMP modifications are at least two payments behind 12 months after their loans were modified.

HAMP modifications have slowed to a crawl lately, with just 17,000 permanent modifications started in July.

The modifications have led to a total of more than $14.4 billion in lowered borrowers' payments, according to the Treasury Department.

Home Affordable Refinance Program

Launch: March 2009

Participants: 1.5 million

This program helps borrowers who are current on their mortgage payments but are having a hard time refinancing their mortgage because they are underwater or owe more on their home than it is worth. The home must be underwater due to falling home prices and the mortgage must be backed by Fannie Mae or Freddie Mac.

Originally, HARP allowed homeowners to refinance if their loan balances were between 80% and 105% of the market value of their home. But after disappointing initial results, the rule was changed to include borrowers with loan-to-value ratios of up to 125%. Later, they removed that cap altogether.

Track record: The changes have helped make HARP one of the more successful government programs. The number of HARP refinancings has accelerated with more issued during the first seven months of the year than in all of 2011.

More than half the loans refinanced in June and July went to homeowners with loan-to-value ratios above 105%.

Second Lien Modification Program (2MP)

Launch: April 2009

Participation: 90,000 borrowers

The Second Lien Modification Program (or 2MP) provides assistance to homeowners who have second mortgages or home equity lines of credit in addition to their primary mortgages.

Many potential mortgage modifications have hit roadblocks because lenders of home equity loans and lines of credit refuse to cooperate. After all, the first mortgage holder typically gets paid first when an underwater mortgage gets modified and there's often nothing left for the

FORECLOSURES: Foreclosures Continue Decline but Inventory Clearing Slowly

CoreLogic reported this morning that completed foreclosures in August were 24 percent lower than one year earlier and also down from July. There were 57,000 foreclosures completed during August compared to 75,000 in August, 2011 and 58,000 the previous month.  August is the fourth consecutive month that completed foreclosures declined but there have now been approximately 3.8 million homes lost to the process since September 2008.

The national foreclosure inventory stands at approximately 1.3 million homes according o CoreLogic's National Foreclosure Report.  This is 3.2 percent of all mortgaged homes in the country.  These numbers are essentially unchanged from July.  In August 2011 there were 1.4 million or 3.4 percent of mortgaged homes in the inventory which indicates the number and share of homes in any stage of the foreclosure process.  

"The continuing downward trend in foreclosures and a gradual clearing of the shadow inventory are important signals that the recovery in housing is gaining traction," said Anand Nallathambi, president and CEO of CoreLogic. "The reduction in foreclosure volumes is to

THE ECONOMY: Mass. foreclosures drop 17% from 2011

July figures are year’s lowest as state economy, housing market improve

Fewer foreclosures were started and completed in July as the Massachusetts housing market and overall economy continued to slowly improve, according to data released Monday.

The number of foreclosure petitions — the first step in the seizure process — dropped to 1,198 in July, nearly 17 percent fewer than during the same period last year and the lowest monthly total recorded in 2012, according to the Warren Group, a Boston company that tracks local real estate.

Foreclosure deeds — which signal the completion of the process — fell to 648 in July, also a 17 percent drop compared with July 2011. That was the smallest number of foreclosures recorded in a month since May 2011.

The slowdown in home-takings comes as the state’s economy and housing market are doing better. The Massachusetts unemployment rate in July was 6.1 percent, a long way from its 2010 peak of 8.7 percent.


And home values in Massachusetts rose by nearly 6 percent between March and June, according to the S&P/Case-Shiller Home Price Indices.

‘Homeowners are making payments and working out defaults through short sales and loan modifications.’


Alan Clayton-Matthews, an economist at Northeastern University, said the newest foreclosure numbers are in line with other recent statistics.

“The economy has been fairly slowly but steadily improving. You would expect to see an effect in [mortgage] default rates,” Clayton-Matthews said.

A multistate settlement between major US banks and attorneys general that resulted in about $25 billion to help troubled homeowners nationwide also is helping to wind down the number of foreclosures in Massachusetts.

“Homeowners are making payments and working out defaults through short sales and loan modifications,’’ said Timothy M. Warren Jr., chief executive of Warren Group.

But despite the slowdown in foreclosure activity for July, home seizures in Massachusetts remain ahead of last year’s pace. In 2011, lenders sped up foreclosure efforts to rid their

FORECLOSURE: Points to consider when buying a foreclosed home

Rarely have foreclosed homes impacted the real estatemarket as they do currently. Unless you've been on another planet over the past decade, the real estate market hit an astoundingly high-ceiling 'market value' in the mid-2000's. This remarkable condition, where buyers could get mortgageswithout having to provide sufficient documentation that they could actually afford the home, contributed to the onslaught of foreclosures and short sales we have today.

Without entering a discussion as to how this could happen, people in the market for a home today have a great opportunity because of the abundance of foreclosures and reduced prices. But before embarking on the path to purchase a foreclosed home, consider the following:

1. Do your homework. Real estate websites often list foreclosed homes for sale. Trulia and Zillow are two familiar ones, but there are others. While areas like Sacramento, CA, Las Vegas, NV, Miami, and Atlanta are often cited as being hit the hardest with foreclosures, other areas have been affected as well. If your plans don't include moving to one of these regions where foreclosures are plentiful, search for foreclosures in places you plan to live. There are some in many neighborhoods in most every state.
2. Buyer beware. If you decide to pursue a foreclosure through an auction company, make certain you get a home inspection before submitting a bid. Most sales are final, and it's too late to discover the plumbing needs an overhaul, or the septic system is not working, after the fact. Even if you don't go the auction route, a home inspection is highly recommended.
3. Get an appraisal. Most home buyers need some kind of financing help, unless they are fortunate enough to have cash. Lenders require an appraisal on a home they expect to finance. Cash buyers are not hampered by such a requirement. Sometimes auction companies have had an appraisal done before the auction, so be sure to ask. They don't have to tell you what it is, but ask anyway. Having an appraisal is worth the few hundred dollars if you want validation as to what the home's value is. You can also check the tax record to see its assessed value, although these values are for tax purposes and have been at odds with current market conditions.
4. Consult a real estate agent. While websites may feature foreclosed homes for sale, real estate agents pay a fee to subscribe to a multiple listing service, providing a more comprehensive view of the market. They can quickly identify foreclosed homes in your areas of interest and help you with your research. If you find a property you would like to pursue, they can do a comparison of similar properties (CMA) to show you what properties have recently sold for. This provides an overview of what a 'reasonable' offer price might be. And the service is free, since agents are paid a commission by the seller, not the buyer in most cases.
5. Bottom line. Lenders are in the business of making money, or at least losing the least 

FORECLOSURES: Short Sales Boost 1st-Quarter Foreclosure Activity

Bank-owned homes and those in some stage of the foreclosure process saw their share of overall U.S. home sales grow to 26 percent in the first quarter.

The increase was driven by a spike in short sales, or homes that sell for less than what the owner owed on their mortgage, foreclosure listing firm RealtyTrac Inc. said Thursday.

Short sales make up the vast majority of homes sold while still in the foreclosure process. Those that aren't sold or auctioned off typically end up being repossessed by banks, what most people commonly think of as foreclosures.

In the first quarter, short sales grew 25 percent from a year earlier, hitting a three-year high. In contrast, bank-owned properties declined 15 percent versus the first three months of last year, the firm said.

The trend indicates a greater likelihood that home prices will continue to soften, as foreclosures and short sales typically sell at sharp discounts to other homes.

It also suggests a shift in the way lenders handle mortgages that have gone unpaid.

Lenders may be favoring short sales versus waiting for troubled loans to go through the foreclosure process to take back the homes securing the loan, said Daren Blomquist, a vice president at RealtyTrac.

"A short sale is a safer alternative to avoid any potential problems that they face because of the way they're processing foreclosures," Blomquist said.

Last year, mortgage lenders grappled with allegations that they had been processing foreclosures without verifying documents. The pace of foreclosures slowed sharply as the

DISTRESSED PROPERTIES: Survey: High Share of Distressed Properties Keeps Prices Down

Inventory is shrinking and traffic for homebuyers seems to be increasing, but according to the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, home prices were down in March. One reason for this, according to the survey, which includes about 2,500 real estate agents, is the high number of distressed properties on the market. 

Home prices for non-distressed properties in March dropped 5.7 percent from a year ago in March 2011. Prices for damaged REO properties also saw a 5.7 percent decline in prices, while move-in ready REO prices fell 2.5 percent during the same period. Short sales declined significantly, with prices falling 14.3 percent during the one-year period. 

According to a recent RealtyTrac report, the average price of a home sold via short sale in January 2012 was $174,120, down 10 percent from January 2011. This, RealtyTrac stated, shows that lenders are more willing to approve more aggressively priced short sales.

Driven by an increase in short sales, the total share of distressed properties in the housing market in March was 47.7 percent when using a three-month moving average, according to the HousingPulse Distressed Property Index (DPI). This marks the 25th consecutive month the index has hovered over the 40 percent mark.

With nearly half of the market being distressed, we’re a long way from a return to a normal market,” said Thomas Popik, research director at Campbell Surveys. “Agents responding to our survey say that homeowners with well-maintained properties in good locations are very reluctant to list at today’s prices. That’s why inventory is low-and also why forced REO and short sales are such a big proportion of the remaining market.”

Over the past six months, the proportion of short sale transactions in the housing market increased from 17.8 percent to 19.9 percent. 

The survey also found that traffic indexes for first-time homebuyers, current homeowners, and investors all showed substantial increases in March compared to the year before, with

INVESTING IN FORECLOSURES: It's harder for noninvestors to buy foreclosures

For the average homebuyer, a short sale might be the better way to go.

It's getting more difficult for noninvestors to buy foreclosures in some parts of the country, as lenders shift their strategies on how to deal with distressed inventory. 

 When homebuyers consider a foreclosure, they're usually looking at real-estate owned properties, in which the lender has taken back and is selling the property. But REO sales have been shrinking for a few reasons. 


 First, more properties are selling at auction, typically the first opportunity a lender has to sell the property, and where most buyers are investors. Buying a foreclosure at auction often requires full payment in cash, and the buyer often doesn't get the chance to inspect the property before buying it. Both are turnoffs for a homebuyer looking for a place to live. (Bing: How many foreclosures are there in your area?) 

 "Anecdotally, we're hearing from investors that the lenders are more aggressively pricing the opening bid at the auction to attract more bidders," said Daren Blomquist, vice president of RealtyTrac, an online foreclosure marketplace. In a more typical market, the lender sets the opening bid at what it's owed on the property, he said. Home affordability calculator Combined annual income $ Other monthly obligations $ Cash for down payment $ 


 Selling at a trustee's sale or sheriff's auction gets a property off the lender's books before it becomes an REO. Lately, many investors are willing to bid on the properties at auction, as many see opportunities in rehabbing foreclosures and renting them out or selling them. 


 Second, there have been more short-sale transactions, so more distressed properties are being saved from foreclosure, statistics show. A short sale occurs when a lender accepts less than what is owed on the mortgage as payoff from the homeowner. Read: How foreclosures affect buyers and sellers 


 "The longer the foreclosure timeline, the larger the severities for the lenders," said Sam Khater,

SHORT SALES: Short Sale Success: What is an Acceptable Hardship?

A short sale, in most instances, is a complex transaction. However, there are two very simplistic characteristics that every qualified short sale possesses:

1. The house must be valued at less than the homeowner owes on their mortgage debt obligation. In other words, the home must be “underwater”.
2. The homeowner must have a qualified hardship.

It is the second characteristic that we would like to touch upon in this blog post.

One question that we answer frequently is “My house is underwater. Is this an acceptable hardship?”  Unfortunately, the answer is always “No.”

The simple fact that a homeowners mortgage obligation is in excess of their house value is not an acceptable hardship. A Short Selling bank will entertain a short sale when and only when there is a hardship that will, now or in the future, affect the borrower’s ability to pay their mortgage.

The following is a list of acceptable hardships that may be used when submitting a short sale package:

• Mortgage Rate Adjustments
• Loss of Employment or Reduction in Wages
• Business Failure
• Medical Hardship
• Death in the Family
• Divorce/Separation
• Military Service
• Overwhelming Debt Obligations
• Job Relocation

As always, should you have questions as to the acceptability of a hardship scenario, you

MORTGAGE & FINANCE: Obama cuts refinance costs for some mortgages

NEW YORK (CNNMoney) -- Borrowers with some federally insured mortgages will be able to refinance into lower interest rate loans more easily and cheaply under a plan being unveiled Tuesday by the Obama administration.

At a news conference scheduled later in the day, President Obama was set to announce that the Federal Housing Administration will cut upfront fees for refinancing loans it already insures.

The new fees are for borrowers whose FHA loans were issued before June 1, 2009. An estimated 2 to 3 million borrowers could take advantage of the savings, which could reduce mortgage payments for the typical FHA borrower by about a thousand dollars a year, according to the administration.

Borrowers who refinance their existing FHA loans will pay an upfront insurance premium equal to 0.1% of the mortgage amount -- $100 for a $100,000 loan -- plus an annual fee of 0.55%.

The fees being announced for refinancing contrast sharply with the cost of obtaining a new FHA loan, according to Jaret Seiberg, an analyst with the Washington Research Group. A borrower making a 3.5% down payment on a home purchase as of April 1 will pay a 1.75% upfront fee and a 1.25% annual fee. Those purchase fees were raised barely a week ago to improve the FHA's capital reserve.

Has Obama's housing policy failed?

Still, lowering refinancing fees "should be broadly positive for housing and the economy by reducing foreclosures and freeing up income for consumers to spend on other goods and services," Seiberg said.

The new policy will also make it easier for the banks to refinance loans because it directs the FHA to not count these refinanced loans toward the lender's "compare ratio." That calculates the performances of

Nearly a quarter of working households in Massachusetts and across the United States spend more than half their income on housing, according to a study released yesterday by the Washington, D.C.-based Center for Housing Policy.

More than 231,000 Massachusetts households, or 24 percent of working families, suffered from a “severe housing cost burden’’ of spending more than 50 percent of their income on housing in 2010, up from 22 percent in 2009, according to the center, which based its analysis on recent census data.

Nationwide, the percentage of working households that spent more than half their income on housing grew to 23.6 percent in 2010, up from 22.8 percent in 2009, the study said.

The report emphasizes what many working people know firsthand: They are increasingly struggling to keep a roof over their heads and cover other expenses. The task is even harder for many tenants, who have seen rents rise despite the sluggish economy and high unemployment rate, the report said.

‘Homeowners have been hit hard by the housing crisis in more ways than just lost equity.’

Jeffrey Lubell Center for Housing Policy

“In Greater Boston we are seeing huge challenges in rents rising at the same time that incomes are stagnating,’’ said Sean Caron, director of public policy at the Boston-based affordable housing nonprofit, Citizens’ Housing and Planning Association. “Working people are struggling.’’

Housing specialists generally agree that people should not spend more than 30 percent of their household income on housing, Caron said. “The fact that one in four is spending more than 50 percent is troubling,’’ he said.

Indeed, homeowners in general are doing better than tenants. The report found that nearly 22 percent of working homeowners were paying more than 50 percent of their income toward housing while almost 26 percent of renters were doing so. The report defines working households as those who work at least 20 hours a week and earn no more than 120 percent of the area median income.

Even many homeowners have seen a decline in affordability because of a drop in incomes, said Jeffrey Lubell, executive director of the housing center. Incomes for working homeowners fell more steeply than incomes for working tenants, dropping about 5 percent between 2008 and 2010, the report said. Also many homeowners purchased their properties at higher prices and do not benefit from a drop in values.

“Homeowners have been hit hard by the housing crisis in more ways than just lost equity,’’ said Lubell. “Many working homeowners have been laid off or had their hours cut.’’

If there is good news to be found in the report it is that despite the relatively high cost of housing

(MONEY magazine) -- Laurie Goodman is an apolitical number cruncher who has spent most of her 28-year career out of the public view, studying the minutiae of mortgage-backed securities (MBS) for big investment banks. She's long been a star among Wall Street insiders, however. She holds the record for the most top rankings for fixed-in-come research from the trade bible Institutional Investor.

While Goodman concedes she underestimated the impact of the housing bubble's bursting early on, by mid-2007 she was warning investors to prepare for a deep downturn. She prepared herself as well.

After her employer at the time, UBS, shut down its mortgage trading desk in 2008, she jumped to Amherst Securities, a small company that serves as an MBS broker-dealer for big investors. From there she's published research that has raised her profile and made her an oft-cited source by would-be housing reformers in both the private and public sectors. If she is underestimating the problems the housing market has now, we're all in trouble.

Goodman often pauses several seconds before speaking, choosing her words deliberately. So it is especially distressing to hear her warn of a potential housing "death spiral."

On top of the 2.5 million homes that have already fallen to foreclosuresince the bubble burst, another 4.5 million mortgage holders have given up paying and are likely to lose their homes, she calculates.

'Shareholders of the world unite'

Millions more are underwater -- owing more than their home is worth -- and may give up if things don't improve soon. All told, Goodman warns that more than 10 million of the nation's 55 million mortgage holders could default by 2018. If home prices fall much more than the 6% or so she's projecting over the next 12 to 18 months, the picture worsens, as more foreclosures drive prices down further, in turn causing more sheriffs' sales.

Goodman's research into who defaults shows that many governmental and private efforts at saving borrowers -- and reducing investors' losses -- by modifying mortgages weren't helping because they only extended payments or reduced interest rates. They didn't fix the fundamental problem of unsupportable debt loads.

Bailout concerns mounting for federal housing agency

Goodman found that investors lose as much as 70% when the homes underlying their subprime MBS are foreclosed upon. Lenders that tried to rehabilitate delinquent borrowers by reducing

REAL ESTATE NEWS: O.J. Simpson faces foreclosure on Florida home

NEW YORK (CNNMoney) -- As if being in prison wasn't bad enough. O.J. Simpson's life has taken another sour turn: He's now facing foreclosure on his Kendall, Fla. home.
Simpson's mortgage lender, JP Morgan Chase (JPM, Fortune 500), initially filed its intention to foreclose on the former football star's four-bedroom, 4,000-square-foot home in September, according to court records from the Miami-Dade County Clerk's office.

Simpson's attorney, Leonardo Starke, filed a motion to dismiss the foreclosure filing in November. But, according to a person familiar with the matter, the bank is moving forward with its legal proceedings.


Starke did not return messages seeking comment.


Simpson, who is serving a prison sentence of up to 33 years for a 2007 armed robbery and kidnapping in Nevada, has not made a mortgage payment since 2010, according to the source.
Simpson paid $575,000 in 2000 for the house, getting a first and second mortgage to pay for it, according to public records. He refinanced both loans in 2003 with a $592,000 loan through Washington Mutual, the savings and loan that was later aquired by Chase.

Since the house now has an assessed worth of $478,401, according to county records, and he now owes more than $700,000, including penalties and fees, according to the source, Simpson might want to walk away from the home.


Simpson was acquitted of the 1994 murder of his wife Nicole Brown Simpson and her friend Ronald Goldman in 1995, but still owes some $33.5 million to the Goldman estate, a sum won in a civil judgment brought against Simpson by Fred Goldman, Ron's father.


Other than the motion to dismiss, Simpson does not seem to have taken any other steps to keep the home.


In Florida, lenders must offer borrowers in default the chance to save their homes

MARKET TRENDS: What Had the Biggest Impact on Housing in 2011?

The “government, the mortgage industry, and forces of nature all shook the housing market in 2011,” according to a recent Time magazine article, which highlights the key issues that had the greatest impact on the real estate market this year--and what’s expected to have a major impact in the new year as well. 

Here are a few of the issues that the Time magazine article by Jed Kolko, Trulia’s chief economist, notes as having some of the greatest impact: 

1. The robo-signing scandal

The issue: Banks were accused of approving numerous foreclosures without proper reviews when a robo-signing scandal first broke in October 2010, continuing well-into 2011. 

The fallout: Banks slowed their processing of foreclosures greatly in 2011, making sure to take extra precautions. Regulators and states are working on a settlement with banks over the scandal — one that could include reducing loan balances of current home owners, if approved. Once a settlement is in place, housing experts predict the pace of foreclosures to pick up in 2012. 

2. Natural disasters

The issue: A series of natural disasters wreaked havoc on real estate in 2011, from tornados, floods, and hurricanes. The National Flood Insurance Program was pushed into the spotlight, a

NEW YORK (TheStreet) -- Despite the apparent economic improvement, with the unemployment rate finally moving below 9% in November, millions will still face the possibility of losing their home through foreclosure in 2012.

While it's not a "magic bullet" that can discharge a first mortgage loan on your residence, filing for bankruptcy can buy you some time, force a mortgage lender or servicer to negotiate with you, and eliminate a significant portion of other unsecured debt, depending on your circumstances.

According to regulatory data provided by SNL Financial, the "big four" U.S. banks had huge amounts of one-to-four family residential loans on their balance sheets and serviced for others, for which the underlying homes were in the midst of the foreclosure process as of Sept. 30:

• Bank of America had $23.0 billion in residential mortgage loans on its balance sheet with homes in foreclosure, while loans serviced for others in foreclosure totaled a whopping $90.6 billion.
• for JPMorgan Chase , residential mortgage loans in foreclosure totaled $28.9 billion, while loans serviced for others in foreclosure totaled $54.7 billion.
• For Wells Fargo , one-to-four family mortgage loans on the balance sheet with collateral homes in some phase of foreclosure totaled $18.1 billion, while loans serviced for others in foreclosure totaled $37.7 billion.
• Citigroup reported $6.9 billion in residential mortgage loans in foreclosure on the balance sheet, and $10.3 billion serviced for others that were in foreclosure.

While President Obama's expansion of the Home Affordable Refinance Program , or HARP, will allow millions of borrowers with mortgage loans held by Fannie Mae and Freddie Mac to refinance their entire balances at today's low rates -- even if the borrowers owe significantly more than the homes are worth -- HARP is only available to borrowers who have been current on their loans over the past six months, and the Fannie/Freddie loans only represent about half of U.S. mortgages.

Filing for bankruptcy, of course, can't be taken lightly, and you will need the help of an attorney.

According to Geoff Walsh, a staff attorney with the National Consumer Law Center, "the first threshold question that people need to consider when they're looking at bankruptcy as an option for foreclosure is whether all of their major assets are covered by state exemption laws."

For example, in New York $100,000 in home equity is exempt if you go through bankruptcy. This means that if the difference between the market value of your home and the outstanding liens on your home is less than $100,000, you will emerge from bankruptcy still owning your home. If you have more than $100,000 in home equity, the bankruptcy trustee will sell the home, give you $100,000, and pay the rest to the mortgage lien holder.

This underlines the importance of hiring an attorney. "There are some people who can really be hurt if they file for bankruptcy without properly what the exemptions are," says Ward.

Chapter 7 Bankruptcy

According to Ward, a Chapter 7 filing "doesn't help if the lender has a lien on an asset," such as a house or a car, since the lien allows the lender to take back the collateral and the Chapter 7 filing "does not get rid of line or security interests."

A Chapter 7 filing is a liquidation bankruptcy, where the court-appointed trustee sells nonexempt

MORTGAGE & FINANCE: DeMarco says FHFA will not consider principal write-downs

While the Obama administration may be pondering the idea of helping underwater homeowners through principal write-downs, Federal Housing Finance Agency Director Edward DeMarco said there is no current consideration for principal write-downs on underwater home loans.

DeMarco told C-SPAN in an interview that the FHFA has already assisted borrowers through principal forbearance programs and loan modification tools that have helped borrowers reduce their monthly payments. He said the other balance the FHFA has to strike is making sure home aid efforts do not afflict taxpayers with additional losses since public funds hold up the quasi-federal housing agencies. He placed write-downs on principal in this camp and suggested the FHFA is not going in that direction.

"Principal forgiveness does not accomplish our conservator mandate," DeMarco said on CSPAN while speaking to reporters from Reuters and the Wall Street Journal. He added,"the borrower still has a responsibility and an obligation for the repayment of the loan."

DeMarco said the FHFA sees the next housing initiative being one that focuses on offloading GSE properties to investors who can buy the REO properties in bulk and turn them into rental properties.

To date, the FHFA has received 4,000 comments from interested parties who submitted feedback on the proposed REO bulk sales program.

"Now that we have the HARP announcement out, we are turning to this as the next priority," he said.

The FHFA said earlier this month that it would lowerbarriers to refinancing, allowing more

MORTGAGE & FINANCE: Coakley steps up probe into foreclosure fraud

Massachusetts Attorney General Martha Coakley is beefing up her investigation into foreclosure fraud, targeting a powerful lender-created company in Virginia that claims to be the official owner of tens of millions of mortgages nationwide.


Yesterday, Coakley said she will ask county registers to provide information to see if Mortgage Electronic Registration Systems Inc., known as MERS, is violating Massachusetts laws related to property seizures. She is concerned that MERS failed to pay government fees as well as “impaired the integrity’’ of the state recording system by failing to document loan transfers.


Coakley also said she would not agree to releasing MERS from any liability in talks between government regulators and large banks to settle allegations of sloppy and fraudulent mortgage-related practices. State and federal regulators launched the probe last year after some bank representatives, now known as “robosigners,’’ admitted to signing thousands of mortgage-related legal documents without accurately reviewing them.


“We want to be clear we are not prepared to give a release of liability on any broad scope of MERS issues,’’ she said. “We intend to complete the investigation.’’


Coakley joins a growing number of real estate attorneys, judges, and consumer advocates voicing concerns about MERS, a company created in the 1990s by major US lenders to reduce paperwork and save money.