Saturday, March 27, 2010

Morning HAMP

by Calculated Risk on 3/27/2010 08:45:00 AM

Two articles and a favorable reaction from Laurie Goodman at Amherst ...

  • From Renae Merle at the WaPo: Second mortgages complicate efforts to help homeowners
    The Obama administration is about to ramp up its efforts to tackle second mortgages as part of an aggressive program announced by the White House on Friday to address foreclosures. ... Government officials have estimated that about 50 percent of troubled borrowers have a second mortgage. But a year after federal officials launched an initial program to lower payments on these second loans, not a single homeowner has been helped.
    ...
    Just a few banks hold most of the second liens, according to data from Inside Mortgage Finance. Of the more than $840 billion in home-equity lines and piggyback loans outstanding, Bank of America has about $147 billion of them, while Wells Fargo and J.P. Morgan Chase have $124 billion and $118 billion of the market, respectively. Citigroup has about $53 billion of these loans on its books.

    They have all signed up for the administration program announced last year, but none has taken action yet.
    Note: Merle is referring to the HAMP Second Lien Modification Program (2MP) to modify 2nd liens - and that program was updated yesterday too.

  • From David Streitfeld at the NY Times: A Bold U.S. Plan to Help Struggling Homeowners
    The new measures ... are aimed not only at the seven million households that are behind on their mortgages but, in a significant expansion of aid that proved immediately controversial, the 11 million that simply owe more on their homes than they are worth.
    ...
    The latest programs, together with foreclosure assistance efforts already in place, are aimed at helping as many as four million embattled owners keep their houses. But the measures, which will take as long as six months to put into practice, might easily fall victim to some of the conflicting interests that have bedeviled efforts to date. None of these programs have the force of law, and lenders have often seen no good reason to participate.

    To lubricate its efforts, the government plans to spread taxpayers’ money around liberally. ... All told, the new measures are expected to cost about $50 billion.
  • A few excerpts from Amherst Securities Laurie Goodman's analysis (no link): HAMP Enhancements: A Giant Step Forward
    Today’s Treasury announcement represents a huge step forward in efforts to address the housing crisis. We have argued repeatedly that the housing market has two deep underlying problems: (1) “housing overhang” (i.e. the number of loans that are already in delinquent status or in foreclosure, most of which have substantial negative equity) and (2) the large number of borrowers with negative equity who are still paying but who are destined to go delinquent. We have estimated the housing overhang at >7 million units. Add to that the borrowers with considerable negative equity who have not yet defaulted and we arrive at approximately 12 million borrowers
    conceivably facing foreclosure over the next few years.
    ...
    While there is no silver bullet to solving the housing crisis, we believe Treasury’s new program attacks the real problem: negative equity.
    ...
    The changes in the HAMP modification program, with principal reduction moved front and center, is a very important development. While the actual impact depends on the implementation details, we believe this will dramatically improve the success rate on mortgage modifications. This will, in turn, help cushion future home price depreciation, and limit further housing market deterioration.
    Although I'm not as optimistic as Goodman on the principal reduction program (as far as the number of homeowners who will be helped), these new program are a significant change. I've calling 2010 the "year of the short sale" and I think the HAFA short sale changes (like doubling the amount 2nd lien holders receive) will have an impact.