Expect to hear the term a lot: principal forgiveness. Forget helping a homeowner by letting him refinance, instead, just forgive some of the loan.
It’s a touchy subject for a lot of reasons. On the one hand, you kinda want to say, “Hey! If someone took out a mortgage he can’t afford, too bad! Why are the financially foolish getting a free gift!”
You’ve probably seen the news that the US unemployment rate is down yet again.* Even better, for the first time since 2006 there’s been an increase in the number of people employed in construction; about 46,000 new jobs were created in 2011 (20,000 in residential construction, 26,000 in non-residential).
This may not sound like a lot, but consider that for the past four years the construction industry has lost jobs every year — 2.2 million since 2005. So an increase, even a modest one, is very, very good news.
Echoing oh-so-many others who have pointed this out, Federal Reserve Board Governor Elizabeth Duke, speaking right here in Richmond, said that the pendulum of mortgage underwriting standards has swung too far in the other direction.
Now, she said, lenders are being too strict with their standards, and that’s slowing the housing recovery.
“Some of this tightening is appropriate, as mortgage lending standards were lax, at best, in the years before the peak in house prices,” she said. “However, the extraordinarily tight standards that currently prevail reflect, in part, new obstacles that inhibit lending even to creditworthy borrowers.”
Good news/bad news for mortgage delinquencies, according to Lender Processing Services. In the second half of 2011, the number of seriously delinquent homeowners (those 90 or more days behind) was essentially flat.
Good news: Serious delinquencies were 25 percent lower than at their peak in January 2010.
Bad news: The downward trend for delinquencies seems to have stopped.
As LPS put it in a statement, “[W]hile the situation is not getting markedly worse, it is not improving either,” and cautioned that there are still a lot of delinquencies coming down the pike.
Despite a 3.4% year-over-year decline in the pace of home sales in Virginia (November to November), long-term trends show only a modest decline in over the past year. There have been 75,578 home sales this year between January through November, as compared to 77,101 between January and November last year. This 1.9% decline in year-to-date figures despite the absence of a federal home buyer tax credit in 2011 is an indicator that Virginia’s housing market is slowly regaining strength.
According to a rather straightforward analysis by Rick Palacios of John Burns Real Estate Consulting, the massive amount of student debt held by America’s students and graduates — especially if they attended for-profit colleges or trade schools — will prevent many of them from buying a home for quite a while.
Check out the figures: American students owe about $865 billion — that’s more than the entire country’s credit card debt. (In fact, it’s more than every kind of debt other than mortgages.)
This TransUnion prediction of a decrease in delinquent mortgages is getting a lot of press, but no one seems to have done any kind of research to see if the company knows what it’s talking about.
Reads the AP story, “If the U.S. economy does not suffer more setbacks, the rate of mortgage holders behind on their payments should decline significantly by the end of next year, according to credit reporting agency TransUnion.”
On November 18, President Obama signed a bill re-establishing higher loan limits on FHA loans. Below are some of the particulars about what-qualifies-for-what, straight from HUD:
The chief economist for Freddie Mac says that the recent changes made by the Obama Administration to HARP — the Home Affordable Refinance Program — could result in an additional $200 billion to $300 billion in mortgages over the next two years.