Foreclosure Prevention Report 2012 by Fannie Mae & Freddie Mac: FHFA released the Foreclosure Prevention Report showing that Fannie Mae and Freddie Mac completed more than 134,000 foreclosure prevention actions in the third quarter of 2012, and the Minnesota Foreclosure Report shows strong and steady progress helping keeping families in their homes.
The FHFA Foreclosure Prevention Report for the third quarter of 2012, show that it is the second consecutive quarter, both Enterprises ended the quarter with positive net worth.
Permanent Principal Reduction Numbers Are Up
That brings the effort to help stop foreclosures to the total of foreclosure prevention actions to more than 2.5 million since the start of Conservatorships in 2008. The best news is that includes nearly 1.3 million actions that gained permanent principal reductions for homeowners. Fannie Mae and Freddie Mac say they have helped more than 2.1 million borrowers stay in their homes, according to their Foreclosure Prevention Report for 2012.
Permanent Principal Reductions Keep Families In Their Homes
Lenders, who have often resisted erasing mortgage debt, are now forgiving millions of dollars in home loans. The difference indicated in the Foreclosure Prevention Report has come from government incentives, political pressure, and a $25 billion settlement between five major lenders and 49 attorneys general. "Homeowners, feeling 'stuck' unable to sell their house before they can buy a new one, are effectively locked out of the housing market. Five years into the housing recession, they’re also more likely to consider the drastic move of walking away from their mortgage, adding to shadow inventory," says Jenna Thuening, owner of Home Destination.
A Short Sale Means The Borrower Moves Out Of Their Home
Short sales and deeds-in-lieu spare the homeowners from going through the foreclosure process. However, they still must leave their homes and that is traumatic for the homeowner, with really no one gaining. "The preferred outcome is to keep homeowners in their homes, if possible, with a permanent principal reduction. Housing and Urban Development (HUD) Secretary Shaun Donovan said his agency wants to encourage more principal write-downs to keep people in their homes, even when those loans are backed by Fannie Mae and Freddie Mac," according to a report in The Hill posted on March 4, 2012 titled Dems Raise Pressure on Fannie, Freddie Regulator to Write-down Mortgages. The Foreclosure Prevention Report for 2012 shows the dedicated efforts of Fannie Mae and Freddie Mac to that end.
Principal Reductions Benefit Homeowner And Lender
To help stabilize the housing market, proponents of principal reduction argue that both homeowners and lenders are better off avoiding those defaults. The recent National Mortgage Settlement between 49 states, several federal agencies and five large banks is hoping to promote the practice by providing those lenders with incentives to cut loan balances.
"There is increasing data available, we believe, that shows that… principal reduction can be good not only for homeowners and communities, but for investors as well. It can allow people to pay [their bills], stay in their homes and increase the value of those mortgages." ~ Housing and Urban Development (HUD) Secretary Shaun Donovan
Top Points In The Foreclosure Prevention Report:
Year-to-date, Fannie Mae and Freddie Mac have helped homeowners by facilitating approximately 411,000 foreclosure prevention actions.
Nearly 38,000 short sales and deeds-in-lieu of foreclosure were completed in Q3 of 2012, up 4 percent over Q2.
45 percent of struggling home borrowers who received loan modifications in the third quarter reduced their monthly payment by over 30 percent.
More than one-third of loan modifications completed in the third quarter included principal forbearance. NOTE: see explanation that principal forbearance is not the same as principal reduction.
The number of the Enterprises’ delinquent borrowers has declined 9 percent since the beginning of 2012.
REO inventory continued to decline as property dispositions outpaced property acquisitions during the third quarter. An REO (Real Estate Owned) is a property that goes back to the mortgage company after an unsuccessful foreclosure auction and are generally in poor condition.
Other Ways To Keep People In Their Homes
Edward DeMarco, head of the Federal Housing Finance Agency, reviewed the track record of the other tools the agency is using to keep people in their homes or minimize losses to taxpayers, who pick up the difference, when they can no longer manage to make their home payments. Those include cutting the interest rate, extend the term of the loan or offering principal “forbearance” – which postpones the repayment of a portion of a loan balance, but doesn’t permanently reduce it.
"Restoring the health of the housing market is a necessary part of a broader strategy for economic recovery. An unprecedented number of households have lost, or are on the verge of losing, their homes." ~ Federal Reserve Press Release January 4, 2012
Home Forfeiture Actions
Deeds-In-Lieu of Foreclosure
Home Retention Actions
Principal Forbearance Is Not The Same As Principal Reduction
Calculated Risk explains what this term 'principal forbearance' actually means. What the FDIC apparently means by 'principal forbearance' is not what most people think they mean by 'principal reduction'. However, with the principal, what the FDIC is doing is not forgiving principal but offering an interest-free forbearance of repayment of part of the principal. This means that the actual principal amount due and payable at maturity of the loan (or sale of the property) is the original unmodified principal amount, less any and all periodic principal payments the borrower makes until maturity or sale.
Foreclosed Homes And Future Property Values
For clarity, it is fair that homeowners seeking foreclosure help understand that "principal forbearance" does not mean principal "forgiveness." According to Calculated Risk, it works out that the effective interest rate on such loans is lower than the Freddie Mac survey rate, discounted for the stepping or not, because the contractual interest is not charged on the entire loan balance. "It certainly means that the investor is going to have to write down the forborne principal when the modification is done, since this falls under the accounting rules that make you write down a loan to the amount considered collectible, and it is clear that a loan in this much trouble, with property values where they are, probably is not going to pay you back 100% of principal. But if, in fact, property values recover in the future and the home sells for at least the total loan amount due, the investor will receive that forborne principal back as a recovery.
Upbeat Minnesota Foreclosed Homes Q3 Report
The report states, "There were 4,451 foreclosures in Minnesota in Q3 of 2012, down 10 percent from Q3 of 2011. Although Metro foreclosures (down 12%) saw a greater drop than Greater Minnesota (down 7%), the relative relief was widespread, with the top 10 counties in foreclosure seeing declines, year-over-year". Though declines in Minnesota home foreclosures reflect a statewide trend over 20011 - 2012,the number of foreclosed homes are still historically high, upwards of 300% greater than foreclosure totals in years prior to the housing crisis.
Highlights in the Minnesota Foreclosed Homes Q3 Report
Twin Cities foreclosed homes in 2011 Q3 totaled 2,969
Twin Cities foreclosed homes in 2011 Q3 totaled 2,615
Twin Cities foreclosed homes down 11.9%
31 counties reported more foreclosed homes and 58 counties showed fewer foreclosed homes
Download the Fannie Mae and Freddie Mac Foreclosure Prevention Report 2012
Download a Boston University's Regulatory Review of Fannie Mae and Freddie Mac's Future posted by a student.
Download the Minnesota Foreclosed Homes Update for Q3 2012
Download the Minnesota Foreclosed Homes Semi-Annual 2012 Report
Download the Treasury Announcement of the Wind Down Of Freddie Mae
Home Destination, a Minneapolis Certified Distressed Property Expert and professional Realtor with RE/MAX Results, helps homeowners determine if a short sale or foreclosure is better and to understand their local housing market. We are passionate about helping Twin City homeowners stay in their homes. Call 612-396-7832 and ask Jenna Thuening for help.
Jenna Thuening, a CDPE can help you determine your best opportunities to refinance your home.
Eden Prairie MN 55344
Jenna's home page: homedestination.com
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