HOPE NOW releases latest data on loan mods, ARM resets

HOPE NOW’s latest data on loan mods, ARM resets
Lenders are speeding the pace at which they conduct workouts with troubled borrowers, but foreclosure sales are rising faster, according to the latest numbers from the HOPE NOW coalition of loan servicers. Based on the 163,649 foreclosure sales reported by HOPE NOW in April and May, foreclosure sales were on a pace to hit 245,473 for the second quarter, up 24 percent from 198,172 foreclosure sales in the first quarter. Based on the number of workouts in April and May, servicers were on track to complete 519,291 workouts in the second quarter, up 7.5 percent from the first quarter.

In engaging in workouts with troubled borrowers, HOPE NOW loan servicers are relying less on repayment plans, which some critics have said are a short-term fix, and increasing the number of loan modifications. Based on the numbers for April and May, HOPE NOW loan servicers were on track to put in place 202,003 loan modifications during the second quarter, up 18 percent from the previous quarter, and 302,287 repayment plans, down 3 percent from the first quarter.

HOPE NOW also announced the results of a separate survey of subprime adjustable-rate mortgages with rates resetting in 2008. The results, representing approximately 60 percent of subprime loans, showed 45 percent of the 718,000 loans scheduled to reset between January and May were paid in full because the homeowner refinanced the loan or sold their property. Another 5.3 percent were modified by lenders, and 0.5 percent of loans that were current at the date of reset entered the foreclosure process.

Paulson: Gov’t shouldn’t always come to rescue
Treasury Secretary Henry Paulson said today the Bush administration will continue a policy of seeking to avoid preventable foreclosures without impeding "necessary correction" in housing prices. As the housing market works through "past excesses," Paulson said, "U.S. foreclosures will remain elevated and we should not be surprised at continued reports of falling home prices. Our policy continues to be to work to avoid preventable foreclosures while not impeding the necessary correction because the sooner housing prices stabilize and more buyers return to the market the sooner housing will begin to contribute to economic growth."

Speaking in London, Paulson also said the financial regulatory system should be restructured to allow the government to intervene when events pose a risk to the entire system, without creating the expectation that the Fed will step in to prevent the failure of individual institutions. Paulson called the Fed’s decision to loan money to investment banks — after providing a $30 billion loan to facilitate the sale of Bear Stearns — an "extraordinary step" necessary to preserve the stability and of the financial system.

While it is clear that "Americans have come to expect the Federal Reserve to step in to avert events that pose unacceptable systemic risk," Paulson said, "it is imperative that market participants not have the expectation that lending from the Fed, or any other government support, is readily available" because they will take too many risks. While there is widespread belief that some institutions are "too big too fail," Paulson said "the real issue is not that an institution is too big or too interconnected to fail, but that it is too big or interconnected to liquidate quickly."

Although Paulson did not mention Fannie Mae and Freddie Mac by name, legislation now pending in the Senate would create a new, independent regulator of the government-chartered mortgage financers, which would have the power to place the companies in receivership if they became insolvent.

Mortgage loan applications jump 3.6 percent
Mortgage loan applications for the week ending June 27 were up 3.6 percent from a week ago on a seasonally adjusted basis, according to a weekly survey by the Mortgage Bankers Association. On an unadjusted basis, the MBA’s Market Composite Index, which measures mortgage application volume, was down 22.8 percent compared to a year ago.

Applications for refinance loans were up 4.7 percent from the previous week, while applications for purchase loans increased 2.8 percent on a seasonally adjusted basis. Applications for conventional loans were up 2.6 percent while the government purchase index (largely FHA) increased 3.4 percent. The refinance share of mortgage activity increased to 36.8 percent of total applications from 36.3 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged from last week at 8.5 percent of total applications.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.33 percent from 6.39 percent, with points decreasing to 1.09 from 1.12 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.9 percent from 5.95 percent, with points decreasing to 1.02 from 1.16 (including the origination fee) for 80 percent LTV loans. The average contract interest rate for one-year ARMs increased to 7.14 percent from 7.09 percent, with points decreasing to 0.31 from 1.59 (including the origination fee) for 80 percent LTV loans.

Residential construction spending falls
Spending on residential construction projects fell for the 14th straight month in May, to $378.86 billion, the U.S. Census Bureau reported this week — down about 27.3 percent compared to May 2007. Spending on private residential construction projects has fallen about 44 percent from its peak of $676.41 billion in March 2006. Total construction spending was $1.09 trillion in May 2008, down about 6 percent from May 2007 and down 0.4 percent compared to April 2008, according to the report.

Northern California real estate merger expands Sotheby’s network
Sotheby’s International Realty Affiliates LLC this week announced that Montclair Better Homes Realty in Oakland, Calif., has merged with People & Properties Sotheby’s International Realty, Calif., becoming the newest member of its luxury real estate network.

Montclair Better Homes Realty’s two offices in Oakland will now do business as East Bay Sotheby’s International Realty. The two People & Properties Sotheby’s International Realty offices in Danville, Calif., and one in Lafayette, Calif., will continue to operate under the People & Properties Sotheby’s International Realty name. The current Better Homes Danville office also will operate under the People & Properties Sotheby’s International Realty name.

Mark Attarha and Nahid Nassiri will serve as owners and brokers for all six offices, which will have a total of approximately 225 agents.

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