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Number of Underwater Homes Continued Decline in 4Q

10.03.2016
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The number of U.S. mortgages that were underwater continued to improve in the fourth quarter, although there are still millions of properties in the category, according to RealtyTrac.

Seriously underwater homes represented 11.5% of all properties with a mortgage, as of Dec. 31, according to RealtyTrac’s U.S. Home Equity & Underwater Report. That was down from 12.7% of all properties at the end of the third quarter.

The total number of seriously underwater homes at the end of the fourth quarter was about 6.4 million.

While progress is being made, it will take more time to clear out the inventory of underwater homes, Daren Blomquist, vice president at RealtyTrac, said in a news release.

“It will likely be another five years at least before most of those remaining underwater properties move into positive equity territory,” Blomquist said.

The number of seriously underwater homes that […]

Why Wells Fargo Blinked in Its FHA Fight with the Government

8.03.2016
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The long arm of the government is tough to elude, even if you are the nation’s largest home lender.

Wells Fargo stunned the mortgage industry Wednesday by tentatively agreeing to pay $1.2 billion to resolve civil claims by the Justice Department and other federal agencies that it originated shoddy loans insured by the Federal Housing Administration.

The proposed settlement could prove a bellwether for other banks that have outstanding investigations of FHA loans including PNC Financial Services Group, Regions Financial and BB&T.

Wells had been the lone big bank holdout willing to go to trial as a potential test of the government’s pursuit of banks for violations of the False Claims Act. That Civil War-era law allows the government to collect triple damages for fraud against the government. The law also has been a lightning rod for banks, causing some to pull out of […]

Strategic Default: By the Numbers

10.02.2016
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The rate of home price recovery during the seven years that a foreclosure remains on a consumer’s credit report is one measure of whether borrowers who strategically defaulted made the right choice by walking away.

But the results vary, depending on when, where and in what price tier that borrowers defaulted.

After dropping more than 30% from the April 2006 peak, average national home prices are down by only about 7%, according to CoreLogic’s latest home price index data. Lower priced homes generally recovered less on average.

Zillow, which measures investment in a home compared to investment in the S&P 500 and renting in its Breakeven Horizon study, found that although most consumers who bought at the outset of the housing boom broke even twice, they currently have equity deficits.

“If you bought in 2005, you could be completely in the hole,” said Svenja Gudell, Zillow […]

Lenders Ready to Give Strategic Defaulters a Second Chance?

9.02.2016
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Remember strategic defaulters, those homeowners who walked away from their underwater mortgages even though they could still afford their loans?

They’re back; this time, as prospective borrowers.

After seven years of bad credit and a tight leasing market that has sent rents soaring, consumers who abandoned homeownership during the downturn are now eager to return.

Strategic defaulters are arguably among the riskiest of these so-called boomerang buyers, consumers who lost their homes during the Great Recession and are now ready to become borrowers again.

But at a time of renewed focus on purchase lending — amid concerns of refinance burnout and a shrinking originations market — lenders in search of new business have to take a strong look at giving these former borrowers a second chance.

Because of all this, the mortgage industry is considering whether walking away from a home is a risk that could recur, and if so […]

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