Report: Complaints Not Handled Properly by Freddie Mac Servicers

A new report from a government watchdog accusedFreddie Mac, its servicers, and the Federal Housing Finance Agency (FHFA) of not meeting requirements when handling and resolving escalated consumer complaints.

According to a report from the FHFA Office of Inspector General (OIG), Freddie Mac and eight of its largest servicers, which service 70 percent of the GSE’s mortgages, received over 34,000 complaints that became escalated cases during a 14-month time period ending November 30, 2012.

Escalated cases include foreclosure actions in violation of the GSEs’ guidelines; allegations of fraudulent servicing practices; complaints that the borrower did not receive proper evaluation or was inappropriately denied a foreclosure alternative; threats of litigation; and violations of the GSEs’ policy timeframes for borrower outreach, evaluation, or time permitted for a response, according to the report.

After tracking the escalated cases, FHFA OIG found a failure to implement the Servicing Alignment Initiative (SAI) and Servicing Guide requirements for escalated consumer complaints among Freddie Mac servicers.

For example, seven out of the eight Freddie Mac servicers did not resolve all escalated cases within the 30-day requirement, and some servicers did not correctly categorize the nature of the escalated cases.

Four servicers–Bank of America, CitiMortgage, Provident, and Wells Fargo—failed to report any escalated cases during the 14-month time period to Freddie Mac even though they handled more than 20,000 cases.

When the banks were contacted, the servicers “indicated that they would begin reporting to Freddie Mac,” theFHFA OIG report stated.
Furthermore, Freddie Mac data showed that 98 percent of its servicers, or 1,179 out of 1,207, did not report any escalated cases as of December 2012.

“This strongly suggests that many other servicers handled escalated cases but did not comply with the reporting requirements,” the report stated.

Of the four large servicers that did not report escalated cases, one servicer said it was not aware of the requirement and another said the GSE had not requested the information during an onsite examination.

Among the eight largest servicers, 26,196 escalated cases were handled during the 14-month time period, of which 25,528 were resolved. About 21 percent of those cases, or 5,371, exceeded the 30-day time frame.

Branch Banking & Trust Corporation (BB&T), however, managed to resolve all of its escalated cases within 30 days.

FHFA OIG also found issues with how escalated cases were categorized when resolved. When categorizing escalated cases, servicers are required to use 13 resolution categories.

However, one servicer used 61 different categories when identifying resolutions. Overall, about 8 percent of the 25,528 resolved cases lacked a required resolution category.

The report also determined Freddie Mac did not adequately address servicer compliance in handling escalated cases. The GSE did not implement procedures for testing servicer compliance and has not established penalties, such as fines, for servicers who fail to report escalated cases, according to the report.

When examining Freddie Mac’s implementation of the SAI,FHFA failed to identify noncompliance with consumer complaint requirements, FHFA OIG stated. The FHFAexamination team also did not conduct its own testing of servicer compliance, and instead relied solely on the GSE’s onsite operation review reports, which did not mention problems with servicer reporting, the report stated.

In response to its findings, FHFA OIG provided several recommendations for Freddie Mac and FHFA to enhance their oversight.


Home Values Climb for 16th Straight Month in February: Zillow

Home values maintained their upward trajectory in February after climbing for the 16th straight month, according to Zillow’s monthly Home Value Index.

The index registered a national value of $158,100 last month, which represents a slight 0.1 percent increase from January and a 5.8 percent jump from February 2012, Zillow reported. The yearly gain is the second largest increase since August 2006. In January, the year-over-year gain was 6 percent.

At the same time, all 30 of the largest metros tracked by the online real estate marketplace saw monthly and yearly price growth.

“The housing market recovery has continued to gain momentum over the past several months and looks firmly entrenched as we enter the 2013 spring home shopping season,” said Zillow chief economist Dr. Stan Humphries.

“Rising home values will free many more homeowners from negative equity, allowing some of them to list their homes for sale which, in turn, will ease supply constraints. Burgeoning new construction will also help bring more supply into the marketplace. As more supply comes on line, home value appreciation rates will moderate and stabilize, marking the final transition from a recovering market to a healthy and sustainable market,” he added.

Of the 30 largest markets, the five markets that saw the biggest year-over-year increase were Phoenix (+22.9 percent), San Francisco (+18.6 percent), Las Vegas (+18.1 percent), San Jose (+17.1 percent) and Sacramento, Calif. (+15.3 percent).

Out of the 352 metros Zillow tracks, 73 saw prices decline from a year ago.

According to Zillow’s forecast, annual price gains should slow to a rate of 3.2 percent over a 12-month period ending in February 2014. This rate represents a decrease from the 5.6 percent annual rate of appreciation seen last year, but the rate is closer to historic norms of 3 percent to 5 percent, Zillow explained.

The Seattle-based company also noted a slight increase in national rents, which recorded a value of $1,282, up 0.1 percent from January and up 4.5 percent from February 2012.

The number of homes lost to foreclosure stayed on its downward path, with February seeing 5.25 homes foreclosed on out of every 10,000 homes, down 2.5 homes from a year ago.

Foreclosure sales, which were mixed, accounted for 13.71 percent of sales last month, up 1.2 percentage points from January, but still down 3.5 percentage points year-over-year, Zillow reported.

Ally Agrees to Sell Remaining Servicing Rights to Quicken for $280M

Ally Bank has reached an agreement with Quicken Loansto sell the last of its remaining mortgage servicing rights (MSRs) portfolio, both companies announced.

The portfolio is comprised of mortgage loans “that are largely expected to be refinanced post-closing, based on interest rates that are above current market levels, and have an unpaid principal balance (UPD) of approximately $34 billion as of Jan. 31, 2013,” according to a release from Ally.

The purchase price is estimated to be approximately $280 million. The transaction is expected to close in the second quarter and is subject to approval by Fannie Mae and Freddie Mac.

Earlier in the month, Ally announced another agreementto sell approximately $90 billion UPB of MSR to Ocwen.

The two agreements close the book on the bulk of Ally’s mortgage activities.

Following the bankruptcy of Residential Capital in 2012, the bank announced it was exploring options to exit the mortgage business and has engaged with companies to sell its operations and servicing rights.

“This agreement marks a key milestone for Ally and, upon successful completion of the MSR transactions, Ally Bank will have exited all the non-strategic mortgage activities,” said Barbara Yastine, present and CEO of Ally Bank. “Going forward, the Bank’s full focus and resources will be centered on its leading direct banking franchise and advancing its customer-centric deposit activities, as well as continuing to grow its key role in Ally’s auto finance operation.”

Ally has announced in the past it will continue to originate “a modest level of high-quality residential jumbo mortgages for its own portfolio through correspondents and wholesale brokers.”

At the same time, the acquisition will add to Detroit-based Quicken’s growing servicing presence. In the last year, the company has built up a $90 billion mortgage servicing portfolio, making it the 17th largest servicer in the United States, according to a release. With the addition of Ally’s portfolio, the company expects to break into the ranks of the top 10 servicers by mid-2013.

“We have not been bashful in making the market aware of our interest in acquiring servicing rights,” said QuickenCEO Bill Emerson. “This transaction with Ally Bank allows us to purchase a well performing pool of loans, and will help grow our servicing footprint. This servicing pool will also create a large opportunity for Quicken Loans to refinance a substantial amount of these clients into significantly lower monthly payments.”


Existing-Home Sales Up in February; Inventory Rises from Prior Month

Existing-home sales rose 0.8 percent in February to a seasonally adjusted annual rate of 4.98 million, theNational Association of Realtors reported (NAR) Thursday. Economists had expected the sales pace to climb to 5.01 million from January’s originally reported 4.92 million. January sales were revised up to 4.94 million.

The median price of an existing single-family home rose to $173,600 in February as the median price in January was revised down to $170,600.

The inventory of homes for sale rose for the first time since last July, up 9.6 percent to 1,940,000. At the reported sales pace, that represents a 4.7-month supply of homes for sale, up from the 4.3-month supply reported for January.

The month-over-month increase in sales was the eighth in the last 12 months. February sales were 10.2 percent ahead of the pace one year ago.

The report on existing-home sales tracked NAR’s Pending Home Sales Index (PHSI) which fell in December to its lowest level since June. The PHSI, however, bounced back in January to its highest level since April 2010.

Weak prices continue to contribute to the reluctance of homeowners to list their homes. The median price of an existing single-family home averaged $176,500 over the last six months, down from $180,000 in the previous six months (which included the summer months, typically a stronger sales period). Listed inventory, according to theNAR, is 19.2 percent below a year ago, when there was a 6.4-month supply.

Sales continue to be plagued by weak inventory. The inventory of homes for sale has averaged 2,189,000 for the last 12 months, down from 2,832,000 for the previous 12 months.

Though the February median price was up 11.6 percent from a year ago, the median price of an existing single-family home has fallen for five of the last eight months. The median price is down 24.6 percent from the July 2006 peak of $230,300 and is off 8.1 percent from the 2012 peak of $188,800 in June.

Distressed homes—foreclosures and short sales—accounted for 25 percent of February sales, up from 23 percent in January but down from 34 percent in February 2012. Fifteen percent of February sales were foreclosures, and 10 percent were short sales compared with January, when 14 percent of sales were foreclosures and nine percent were short sales. Foreclosures sold for an average discount of 18 percent below market value in February, while short sales were discounted 15 percent. In January, foreclosures sold for an average discount of 20 percent, while short sales were discounted 12 percent.

Unlike the government report on new home sales which tracks contracts, the NAR report is based on closings, which means this report (though labeled “February”) actually reflects economic conditions in December, when contracts were signed amidst uncertainty that “fiscal cliff” negotiations would affect the mortgage interest tax deductions and other homeownership incentives.

The median time on market for all homes was 74 days in February, 24 percent below 97 days in February 2012, the NAR said. Short sales were on the market for a median of 101 days, while foreclosures typically sold in 52 days and non-distressed homes took 77 days. One out of three homes sold in February was on the market for less than a month.

First-time buyers, according to the NAR, accounted for 30 percent of purchases in February, unchanged from January; they were 32 percent in February 2012.

Regionally, existing-home sales in the Northeast fell 3.1 percent to an annual rate of 630,000 in February, 8.6 percent above February 2012. The median price in the Northeast was $238,800, 7.6 percent above a year ago and up 5.6 percent from January.

Existing-home sales in the Midwest slipped 1.7 percent in February to a pace of 1.14 million, 12.9 percent above a year ago. The median price in the Midwest was $129,900, up 7.7 percent from February 2012 but down 1.1 percent from January.

In the South, existing-home sales increased 2.6 percent to 2.01 million in February, 14.9 percent above February 2012. The median price in the South was $150,500, up 9.3 percent from a year ago and up 2.0 percent from January.

Existing-home sales in the West rose 2.6 percent to 1.2 million in February, 1.7 percent above a year ago. The median price in the West rose to $237,700, 22.7 percent above February 2012, but off 0.4 percent from January.

Report: Impact of Investors on REO Inventory Uneven Across Markets

REO inventory declined at an accelerated pace in 2012 as investor activity intensified, but the impact of the reduction has been uneven across markets, according to an analysis from CoreLogic.

In the data provider’s March MarketPulse report, economist Sam Khater explained markets in the Midwest and Northeast are still struggling with REO inventory, while the South and Southwest are seeing “massive” declines.

According to CoreLogic, the five markets that have experienced the biggest declines are Phoenix, Las Vegas, Oakland, Riverside, and Sacramento.

The decline suggests an increase in investment activity from both individual and institutional investors, with different contributions from the investor types. The report categorized entities that purchased five or more properties a year using the same name as institutional investors.

According to CoreLogic, individual investors reached a trough of about 10,000 monthly purchases in 2009, and eventually grew their transactions to more than 50,000 units by late fall 2012. Individual investor activity has also contributed to declines in California markets such as San Diego, Oakland, and Riverside.

On the other hand, cities such as Atlanta, Las Vegas, and Phoenix have seen a high share of institutional investors and a rapid rise in institutional activity. In Phoenix, the share of institutional investors increased from 16 percent in 2011 to 26 percent in 2012. Without coincidence, those three markets also had the largest percentage of declines in REOs in 2012, the report stated.

As individual and institutional investors scooped up REOinventory, prices for REOs also increased in the targeted markets. Out of the 16 markets tracked by CoreLogic, Phoenix saw the biggest increase after prices rose 37 percent over a one-year period, followed by a 30 percent increase in Las Vegas.

In the Midwest, however, REOs are elevated, with cities such as Minneapolis and Chicago seeing less interest from individual and institutional investors, the report noted.

Industry Experts Predict Price Growth into 2017

If projections hold out, home values will rise 22 percent cumulatively by the end of 2017, according to Zillow’sfirst-quarter Home Price Expectations Survey.

For its report, Zillow and Pulsenomics surveyed a nationwide panel of 118 economists, real estate experts, and investment and market strategists to get their thoughts on future home values and housing market policies.

On average, the panel forecasts price growth of 4.6 percent in 2013 and 4.2 percent in 2014. More moderate growth is expected after that, with annual appreciation rates between 3.6 percent and 3.8 percent for 2015, 2016, and 2017, leading to an average 4.1 percent growth annually for the next five years.

According to Zillow, this is the first time the predicted average annual growth rate for the next five years has surpassed pre-bubble levels since the survey was created.

“The panel is quite bullish on home prices near-term, considering a pre-bubble average appreciation rate of 3.6 percent per year,” said Dr. Stan Humphries, chief economist at Zillow. “That said, their expectations are a bit shy of the home value gains of 5.5 percent that we saw in 2012, implying some moderation in the pace of gains.”

“The panel expectations are consistent with continued strong home value growth this year fueled by tighter-than-normal inventory of for-sale homes and robust demand attributable to high affordability and a stronger general economy,” he added.

The most optimistic quartile of panelists predicted a 6.1 percent increase in home values this year, on average, while the most pessimistic predicted an average increase of 3 percent. Expectations for cumulative growth projections ranged from 34.2 percent among the most optimistic panelists to 11.7 percent among the most pessimistic, on average.

The panel also responded to questions on GSE wind-down and refinance options for underwater borrowers.

The majority of panelists—59 percent—said they believe a “reasonable and appropriate” timeframe for winding down Fannie Mae and Freddie Mac is within the next five years. Thirteen percent suggested a timeframe within the next two years, while on the opposite end of the spectrum, 10 percent said a period of more than 10 years is the most sensible.

In addition, the majority of panelists expressed support for proposals that would allow certain underwater borrowers to refinance; one such proposal is the Responsible Homeowner Refinancing Act of 2012, sponsored by Sens. Barbara Boxer (D-California) and Robert Menendez (D-New Jersey).

“More than four of every five supports of these refinancing proposals said they believe that borrowers who have demonstrated an ability to make their payments in recent years would pose little or no incremental risk to taxpayers if they refinanced. Two-thirds of supports said they believe that the lower monthly payments would create a significant stimulus for the economy,” said Pulsenomics founder Terry Loebs.

“But the 41 percent of panel respondents who do not support these plans also hold strong views. More than two-thirds of them said they believe that rewriting loan contracts is bad policy in general, and that lowered monthly payments for borrowers ultimately translate into taxpayer and investor losses,” Loebs continued.

Attorneys General Demand New Leader for FHFA

 A coalition of nine state attorneys general is petitioning the national government to replace Federal Housing Finance Agency (FHFA) Acting Director Edward DeMarco. The coalition charged DeMarco with positioning Fannie Mae and Freddie Mac as a “direct impediment to our economic recovery” and called for his replacement in a joint letter to the president, the Senate majority leader, and the Senate minority leader Friday.

“The time has come for the President and Congress to work together to install a new, permanent leader at FHFA that will be a partner, not an impediment, in the national effort to comprehensively address the foreclosure crisis,” said New York Attorney General Eric T. Schneiderman, one of the coalition members.

The attorneys’ general complaint stems from DeMarco’s refusal to allow the GSEs to engage in principal reductions for struggling and underwater homeowners.

The issue of principal reductions has led to a contentious and lengthy debate between DeMarco and other government

officials, with DeMarco remaining firm in his stance that principal reductions are not in the best interest of the GSEs.

The attorneys general argued that principal forgiveness is beneficial to homeowners, financial institutions, and the economy overall. They pointed out that this strategy is a key part of last year’s National Mortgage Settlement and assert that the FHFA’s aversion to the practice “is inconsistent with its combined goal of asset preservation and foreclosure prevention.”

The attorneys general suggested a portfolio of $200,000 loans that are performing is “far more profitable” than a portfolio of $250,000 non-performing loans.

DeMarco’s insistence that principal forgiveness does not support the goal of asset preservation “is not supported by reality,” the attorneys general stated in their letter.

The coalition includes Schneiderman, one of the leaders of last year’s National Mortgage Settlement, along with Massachussetts Attorney General Martha Coakley and California Attorney General Kamala D. Harris, who have also been outspoken about the foreclosure crisis.

Attorneys general from Delaware, Illinois, Maryland, Nevada, Oregon, and Washington also participated in the coalition and signed Friday’s letter.

“We believe that until new, permanent leadership is named to FHFA, [the GSEs] will continue to stand as a roadblock to comprehensively addressing the foreclosure crisis,” the letter stated in its closing line.

The letter is one of several pleas to install new FHFAleadership. Just last month, 45 members of the House of Representatives sent a letter to the president, urging for DeMarco to be replaced.