More than Half of Foreclosures Triggered by Job Loss: NeighborWorks

BY: CARRIE BAY 5/28/2010 DSNEWS

According to a study released Friday by NeighborWorks America, 58 percent of homeowners who’ve received assistance through its national foreclosure counseling program reported the primary reason they were facing foreclosure was reduced or lost income.

NeighborWorks was created by Congress in 1991 as a nonprofit organization to support local communities in providing its citizens with access to homeownership and affordable rental housing. In January 2008, with the foreclosure crisis raging, Congress implemented theNational Foreclosure Mitigation Counseling (NFMC) Program and made NeighborWorks the administrator.

The organization says that over the course of the NFMCprogram, the percentage of homeowners who’ve cited wage cuts or unemployment as the primary reason they were facing foreclosure has steadily increased.

In November 2009, 54 percent of NFMC-counseled borrowers reported reduced or lost income as the main reason for default. Six months earlier in June 2009, it was 49 percent; in February 2009, 45 percent; and in October 2008, 41 percent.

These steady increases parallel the nation’s unemployment rate, which until the November 2009 employment report, had marched upward since October 2008.

“With unemployment numbers not likely to dip below nine percent in 2010, our report proves what many already believed to be true. Unemployment and reduced income are having a devastating effect on our nation’s homeowners,” said Ken Wade, CEO of NeighborWorks America.

The administration recently announced changes to its Making Home Affordable program to provide assistance to unemployed homeowners by temporarily reducing or suspending mortgage payments for a minimum of three months. The initiative becomes effective July 1, 2010.

The federal government has also awarded additional funding to states where unemployment is high to support localized mortgage relief programs for homeowners who are out of work.

Lawmakers too are on a push to help homeowners who’ve lost their jobs. Congress’ financial reform package includes a measure that uses $3 billion from the Troubled Asset Relief Program (TARP) fund to make loans of up to $50,000 to unemployed homeowners to be used to make their mortgage payments for up to 24 months while they are looking for a new job.

Wade said, “While Congress and state governments have stepped up and extended unemployment benefits to help families survive this tough economic climate, it’s time for mortgage servicers and investors to make meaningful accommodations for homeowners facing foreclosure. If they don’t, we’ll see even more empty houses and devastated neighborhoods in our communities.”

NeighborWorks also noted in its report that 62 percent of all NFMC clients held a fixed-rate mortgage, and 49 percent were paying on a fixed-rate mortgage with an interest rate below 8 percent.

Nearly one million families have received foreclosure counseling as a result of NFMC Program funding. According to NeighborWorks, NFMC clients are 60 percent more likely to avoid foreclosure than homeowners who do not receive foreclosure counseling.

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Lenders Repurchase $3 Billion in Mortgages from GSEs in Q1: DSNEWS

BY: CARRIE BAY DSNEWS.com

With home loans going bad at a still-staggering pace and losses mounting for the GSEs, the nation’s two largest mortgage financiers are pursuing several avenues to recover money, including returning poorly underwritten loans to lenders. During the first three months of this year,Fannie Mae and Freddie Mae required lenders to buy back $3.1 billion in mortgages they’d sold to the two firms.

Lenders repurchased approximately $1.8 billion in loans from Fannie in Q1, measured by unpaid principal balance, according to a recent filing by the GSE with the Securities and Exchange Commission (SEC). During the same period last year, Fannie forced lenders to buy back $1.1 billion in bad loans.

“We conduct reviews of delinquent loans and, when we discover loans that do not meet our underwriting and eligibility requirements, we make demands for lenders to repurchase these loans or compensate us for losses sustained on the loans, as well as requests for repurchase or compensation for loans for which the mortgage insurer rescinds coverage,” Fannie wrote in the regulatory filing.

Freddie Mac sent $1.3 billion in faulty home mortgages back to the loan sellers during the January to March period, the GSE said in its Q1 SEC filing. That compares to repurchases of $789 million during the first quarter of 2009.

“We are exposed to institutional credit risk arising from the potential insolvency or non-performance by our mortgage seller/servicers, including non-performance of their repurchase obligations arising from breaches of the representations and warranties made to us for loans they underwrote and sold to us,” Freddie Mac explained in the regulatory document.

Freddie says some of its seller/servicers failed to perform their repurchase obligations due to lack of financial capacity, and many of the larger seller/servicers have not completed their buybacks “in a timely manner.”

“As of March 31, 2010 and December 31, 2009, we had outstanding repurchase requests to our seller/servicers with respect to loans with an unpaid principal balance of approximately $4.8 billion and $3.8 billion, respectively,” the GSE said.

As of the end of March, approximately 34 percent of Freddie’s outstanding purchase requests were more than 90 days past due.

“Our credit losses may increase to the extent our seller/servicers do not fully perform their repurchase obligations,” Freddie Mac wrote in the filing. “Enforcing repurchase obligations with lender customers who have the financial capacity to perform those obligations could also negatively impact our relationships with such customers and ability to retain market share.”

According to regulatory filings made by the GSEs earlier in the year, the two companies are expecting to return as much as $21 billion in home mortgages to banks in 2010. The nation’s four largest lenders – Bank of America, Citigroup, Wells Fargo, and JPMorgan Chase – are the largest sellers of home loans to Fannie and Freddie and will likely take the biggest hits.

A recent report from Bloomberg noted that these banks sell mortgages to the GSEs at full value, which means they must buy them back at full value. But the news agency says at least one bank, JPMorgan Chase, says most of the loans repurchased must be immediately written down, sometimes by as much as 50 percent.

Glenn Beck on The Goldman Sachs Connection

So what does this ‘FRAUD” mean and the AIG bailout they received?