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Lenders Pursue Mortgage Payoffs Long After Homeowners Default
BusinessWeek (01/28/10) Howley, Kathleen M.
Lenders increasingly are seeking to collect unpaid mortgage balances through deficiency judgments against borrowers who foreclosed or secured short sales. The FDIC reports a 48 percent surge in mortgage recoveries to a record $1.01 billion and a nearly twofold increase in home-equity loan recoveries to $392 million between January 2009 and September 2009 from a year earlier. Real estate attorneys say the main targets for deficiency judgments are borrowers who were current on their payments but abandoned the home because their loans were underwater.
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Default Driver?
American Banker (01/28/10) P. 6; Lepro, Sara; Berry, Kate
Borrowers with higher transportation costs are more likely to default on their home loans, according to a new study from the Natural Resources Defense Council. The study examines 40,000 mortgages in areas such as Jacksonville, Fla., Chicago and San Francisco alongside Census Bureau data on neighborhood conditions, income and car ownership. The environmentalist group suggests that lenders adjust underwriting policies to provide "better borrowing terms" to consumers who buy in areas with many transportation options.
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Federal Home Loan Sues Banks for $2B
New York Post (01/28/10)
The Federal Home Loan Bank of Seattle has sued Morgan Stanley, UBS, Barclays, Deutsche Bank and the Merrill Lynch and Countrywide units of Bank of America over certificates it purchased from them since 2005. The banks are accused of making misleading statements about the asset-backed securities and the credit quality of the mortgages that backed the certificates, as well as making misleading or untrue statements about the underwriting guidelines of the loan originators. The Seattle FHLB wants to recover more than the $2 billion it paid for the certificates.
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Mortgage Bulls Bid Fed Fond Farewell
Wall Street Journal (01/28/10) P. C1; Gongloff, Mark
While many fear that the end of the Federal Reserve's $1.25 trillion mortgage-buying spree will have dire ramifications for the U.S. housing market, a growing number of investors are confident that mortgage rates will not skyrocket when the central bank leaves the market in a couple of months. The optimism is grounded in the belief that the government will retain a major presence in the market, both via its mortgage-backed securities holdings and the generally held belief that it could step in again if the market stumbles. If this view is correct, the end of Fed purchases will have little to no effect on interest rates on mortgage-backed securities and will likely mean mortgage rates will stay fairly low.
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Sales of New Homes Fell 7.6 Percent in December
New York Times (01/28/10) P. B11
The Commerce Department reports that new home sales declined a surprising 7.6 percent in December to a seasonally adjusted annual rate of 342,000, closing the industry's weakest year ever. Economists had projected a pace of 370,000 for the month. The numbers were the weakest since March, despite newly expanded tax breaks to stimulate sales. The poor showing is likely to generate concern that the housing market turnaround will lose momentum when U.S. government support ends in the spring.
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