Foreclosure

Despite new rules for short sales under the government's Home Affordable Foreclosure Alternatives (HAFA) program which went into effect on February 1, real estate agents responding to a survey said short sale transactions are still taking too long. A survey published recently by property valuations company Equi-Trax reveals the majority of short sales are taking four to nine months to complete, and Realtors say lenders are to blame, although some concede that borrowers need to be better educated about short sales.

The Federal Housing Finance Agency (FHFA) reports that home prices nationally dropped 0.8 percent in the fourth quarter of 2010 when compared to the previous three-month period. On a year-over-year basis, the agency's index is down 3.9 percent. It's the largest annual decline recorded since the third quarter of 2009. Home prices have come in below their year-ago levels for 13 consecutive quarters now. The ongoing depreciation is being attributed, in part, to an elevated number of distressed properties weighing heavy on surrounding home prices.

Research released this week by the senior research economist at the Federal Reserve Bank of Cleveland reveals homeownership is more sustainable for people who come to the table with down payments. The study examines the types of homeowner assistance that the government uses to promote homeownership -- generally down payment subsidies or interest rate subsidies -- and finds down payment subsidies are more helpful and less expensive.

Regulators and attorneys general say their investigations of servicing practices have uncovered critical deficiencies and shortcomings that have resulted in violations of foreclosure laws. They've made it clear that mortgage servicers will be required to make operational changes and will be hit with sanctions and penalties. It's been reported that the 14 servicers subject to the investigations will, as a group, face a hefty $20 billion in fines, but there is dissension even among the government agencies involved over the amount. Negotiations are ongoing.

Rep. Spencer Bachus, chairman of the House Financial Services Committee, announced this week that he has scheduled a subcommittee hearing and full committee markup of four bills that will terminate what he says are ""failed and ineffective housing foreclosure programs."" On the chopping block are the Home Affordable Modification Program (HAMP), HUD's Neighborhood Stabilization Program, the Federal Housing Administration (FHA) Short Refi Program, and the Emergency Homeowner Relief Fund passed under the Dodd-Frank Act.

Fannie Mae this week unveiled the Servicer Total Achievement and Rewards (STAR) program, which will measure and evaluate mortgage servicers' performance in supporting the housing recovery. The program will examine how the servicers help homeowners avoid foreclosure, and will feature incentives, awards, and an annual scorecard, as well as a monthly snapshot so servicers can track their progress. It will directly link servicer performance to the customer experience and the number of homeowners the servicer has helped.

Freddie Mac reported Thursday that it lost $113 million in the fourth quarter of 2010. The loss, compounded by the company's $1.6 billion quarterly dividend payment to Treasury for bailout money, left the GSE with a net worth deficit again. Freddie's regulator is requesting another draw from Treasury, this time to the tune of $500 million. The company's fourth-quarter shortfall was actually the smallest of 2010 and brings the GSE's losses for the full year to $14 billion.

RealtyTrac has released its year-end 2010 foreclosure sales report, which shows that foreclosure homes accounted for nearly 26 percent of all U.S. residential sales last year, down from 29 percent of all sales in 2009 but up from 23 percent in 2008. The report also shows that the average sales price of these foreclosure properties was more than 28 percent below the average sales price of properties not in the foreclosure process - up from a 27 percent average discount in 2009 and 22 percent in 2008.

As the housing market struggles to get back on its feet, one element holding it back is the prevalence of fraud that increases in times of trouble. In December the CoreLogic Fraud Index revealed fraud losses for 2010 were estimated to be $11 billion. In the past week, the FBI has reported several convictions for mortgage fraud schemes all over the country. The agency says scams involving false promises and fraudulent sales pitches will continue to be a major focus.

DecisionReady, a provider of default servicing compliance solutions, released a pre-foreclosure review module for the DecisionReady Compliance Suite on its cloud-based technology platform this week. Operating like a compliance quality control checklist, the pre-foreclosure review module enables servicers to ensure they meet the requirements for reviewing a delinquent mortgage loan.