Fannie Mae to Hault Evictions in Foreclosures

(December 15, 2008 - Reuters)

NEW YORK -- Fannie Mae said on Monday it will allow tenants to remain in their homes and avoid eviction even if the building's landlord goes into foreclosure.

Fannie Mae, the government-controlled U.S. mortgage finance company, said it now plans to sign new leases with rent-paying tenants living in the single- and multi-family foreclosed dwellings owned by the company.

The leases are likely to be short-term as Fannie Mae continues to market the properties for sale.

Foreclosures are at an all-time high and many economists, as well as the Mortgage Bankers Association, expect them to mount along with unemployment.

As of the end of September, Fannie Mae owned about 67,500 properties in foreclosure, according to Brian Faith, Fannie Mae spokesman. Up to 4,000 tenants are living in foreclosed dwellings owned by the company, he said.

The company previously said it would not evict tenants during the year-end holiday season.

Despite that pledge, Fannie Mae came under pressure from a legal-aid group that threatened to sue over recent evictions in Connecticut, the Wall Street Journal reported in its electronic edition on Sunday.

The company also would ensure that its holiday moratorium on new evictions was being followed until the new policy becomes effective in January.

"For tenants who would prefer not to enter into a lease, we will continue to offer monetary support for the transition to a new residence as an alternative option," Faith said in a separate statement.

The company's tenant eviction and foreclosure sale suspension is in place until January 9. It estimates 7,000 to 10,000 families have been able to stay in their homes because of this policy.

Freddie Mac, the second largest U.S. home funding company that also came under government control in September, is working on similar options that it expects to start rolling out in January, according to company spokesman Brad German.  Reuters.com

FDIC plan expands efforts on foreclosures

(November 13th, 2008 - The Denver Post)

WASHINGTON — Officials at the Federal Deposit Insurance Corp. on Thursday detailed a plan to prevent 1.5 million foreclosures in the next year by offering financial incentives to companies that agree to sharply reduce monthly payments on mortgage loans.

The proposal, which has the support of leading congressional Democrats, would considerably expand the scope and force of efforts to stem foreclosures. Agency officials estimated the cost to the government at $22.4 billion.

FDIC Chairman Sheila Bair continues to face opposition within the Bush administration. Treasury Secretary Henry Paulson said Wednesday that he opposed funding the plan from the government's $700 billion rescue fund. But proponents increasingly view the Bush administration as a roadblock with an expiration date.

The FDIC proposal, which is to be announced today, goes further toward helping borrowers than existing modification efforts. And, the initiative is designed to be less expensive for mortgage companies because the government will pick up part of the tab. The Washington Post

Lenders Help More Homeowners Avoid Foreclosure

The deep economic crisis has more lenders willing to change mortgages or repayment schedules for homeowners at risk of default, to stem their potential losses from foreclosures.

More than 3 million U.S. homeowners have received — or are expected to receive — more affordable loans through ongoing programs initiated over the last 15 months. But even outside the formal programs, says David Kittle, chairman-elect of the Mortgage Bankers Association, lenders are more willing now than a few months ago to agree to changes in monthly payments. In some areas that have a high number of subprime loans or foreclosures, he says, some lenders are even going door-to-door to contact homeowners.

"There's really no reluctance anymore," Kittle said. "Lenders lose $40,000 to $50,000 on every loan that goes into foreclosure."

Kathleen Day of consumer advocate Center for Responsible Lending says even with banks more willing to make modifications, additional help is needed. She also said door-to-door contact with late borrowers may be little more than a public relations ploy.

Some lenders had been reluctant to do loan work-outs because they may hold a large number of risky loans, and modifications carry their own costs to banks. Others simply lacked the staffing or internal programs for systematic loan reviews.

Signs of the shift:
• Mortgage servicers have modified existing mortgages or agreed to easier repayment plans, allowing 2.26 million homeowners to avoid foreclosure since July 2007, according to Hope Now, a private sector alliance of mortgage servicers, counselors and investors.
• As many as 400,000 homeowners may avoid foreclosure over the next three years under a program that started Oct. 1 through the Federal Housing Administration. The program, authorized by Congress in July, allows qualifying homeowners to refinance loans into a 30-year, fixed rate. The mortgage must have originated on or before Jan. 1, 2008.
•Nearly 400,000 homeowners will be able to get more affordable loans under an agreement this month by Bank of America with a number of state attorneys general to modify mortgages originated by Countrywide Financial, now owned by the bank.
Despite banks' forbearance, foreclosure filings are rising, according to the most recent reports. Foreclosure activity increased 12% in August from July and 27% from August 2007, according to industry watcher RealtyTrac. Last year saw 2.2 million foreclosure filings.

Foreclosures Seen Weighing on Home Prices

Source (MarketWatch by: John Spencer)

A government report Monday showed that new-home sales posted a modest rebound in September, but some Wall Street analysts are bracing for more price deterioration in the housing market as a result of escalating foreclosures.

Fox-Pitt Kelton housing analyst Robert Stevenson on Monday increased his forecast for home-price declines, saying foreclosures are driving down pricing faster than he had expected.

"Our original expectation that home prices had another 15% to fall appears far too conservative," Stevenson wrote in a report to clients.

His base-case assumption is now an additional decline in the range of 20% to 25%.

"In a bear-case scenario where unemployment exceeds 9%, we believe prices could instead drop 30% to 35%," he added.  Home prices are already off about 20% nationally from the peak, so the bearish forecast represents a 44% to 48% peak-to-trough drop, Stevenson said.

Although 2008 was a record year for mortgages going into foreclosure, next year could be even worse if job losses mount, some economists say. See related story.

Home-builder stocks traded lower last week after two of the industry's largest names, Pulte Homes Inc. (PHM:

pulte homes inc com

CTX 8.80, +0.02, +0.2%) is scheduled to announce quarterly results Tuesday. Builders continue to report weak earnings in the face of lower sales and prices, rising inventory levels and tighter lending standards for mortgages.

Other firms reporting this week include Meritage Homes Corp. (MTH:

meritage homes corp com

News, chart, profile, more

 Last: 13.29+0.70+5.54%
3:42pm 10/27/2008

MDC 28.06, +0.15, +0.5%) .

The companies could face more trouble if they are forced to renegotiate debt covenants with their bankers, analysts say. Many builders have been booking huge write-downs on land and inventory, putting further pressure on their balance sheets.

An exchange-traded fund tracking the sector, iShares DJ U.S. Home Construction (ITB:

ITB 10.21, -0.14, -1.3%) , is down 40% so far this year.

"In the first two weeks of October, the global credit crisis kicked into high gear, which served to decrease homebuyer confidence significantly," said David Urani, Wall Street Strategies analyst, in a recent note.

However, builder stocks could get a lift this week if the Federal Reserve again slashes short-term interest rates.

The Commerce Department on Monday estimated sales of new homes rose about 3% in September. See full story. 

John Spence is a reporter for MarketWatch in Boston.