Last week I wrote about a surge in California Notices of Default,
AP
Foreclosed California home
which are the first step in the foreclosure process; the rise in NOD’s means the pipeline is filling once again with potential foreclosures. Then today the Wall Street Journalreported essentially the same thing, citing an increase of foreclosure activity at big banks like J.P. Morgan Chaseand Wells Fargo, as well as Fannie Maeand Freddie Mac.
It should come as no surprise to anyone, given that the banks, Fannie and Freddie and several states had foreclosure moratoria that recently expired. Everyone was waiting to see the Obama plan for troubled loans, and once the Making Homes Affordable plan was set in motion, the moratoria were mostly lifted.
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Of course it begs the question, how exactly are those Obamamods doing?
So I sent an email over to HUD Secretary Shaun Donovan’s office, and just moments ago got the following response:
“The foreclosure moratoria helped to prevent some foreclosures as a short-term remedy to a long-term problem. Since we announced the guidelines for the President’s housing plan, we have seen an 88 percent increase in refinance applications, which could save American families an average of $1,600 to $2,000 per year and help many save their homes from foreclosure. The largest banks have also formalized their commitments to implement the Obama modification plan and have already begun modifying loans. They have all committed not to foreclose on any one unless the household has been given a real opportunity to qualify for a modification. Hundreds of thousands of Americans have already applied for refinancing and loan modifications under the President’s plan. We are confident that banks and servicers will move as quickly as possible to modify these loans to avert additional foreclosures in the coming months.” - HUD Secretary Shaun Donovan
I appreciate the quick response. Yes, we know the refis are underway. The President made a big deal about that last week. But the mods are obviously trickier, and the administration probably doesn't know yet if they're really going to work as planned.
I also gave a call over to Bank of America this morning, which sent me a press release last week touting its refi activity and adding:
Bank of America is in the process of implementing the Treasury Department’s “Home Affordable Modification” program for Bank of America and Countrywide customers. In the next two weeks, the company expects to begin offering trial modifications under the plan.
BofA spokesman Rick Simon was kind enough to call back and said that they are still using a foreclosure moratorium for borrowers with whom they’re working on a modification. When I hammered him about how many borrowers were actually eligible for the modifications, he said it was really too soon to tell, but added, “a lot of people think this plan covers more than it covers.”
He talked about how some borrowers have either abandoned properties, won’t provide needed documents, or can’t afford a modification at any payment rate. “This program, as with anything we do in modification, is based on the desire of the homeowner to retain the property and the financial wherewithal to retain the property.”
On top of that, an op-ed in the American Banker by mortgage guru Howard Glaser, suggests yet another problem with Obamamods:
Today this is the servicer's dilemma: With little experience and know-how on conducting loan workouts on a mass scale, no amount of financial incentives alone will help them execute the Obama plan in the time required to backstop the economy. Without the right tools and retraining, servicers are doomed to toil away unproductively. There is a real possibility that the mortgage industry, and the administration, will be overwhelmed by the sheer load.
No question the industry is trying, but I don’t think anyone should be surprised that foreclosures will continue to compound, pushing already bloated housing inventories higher and already crushed home prices lower.
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