The number of seriously delinquent mortgage loans, which are those that are more than 90 days past due or in foreclosure, dropped nationwide by 21 percent year-over-year in September, according to CoreLogic’s September 2014 National Foreclosure Report released on Wednesday.
While the number of seriously delinquent mortgages continues to decline, CoreLogic’s chief deputy economist, Sam Khater, said that the rate of decline has slowed; every month from October 2013 to July 2014, serious delinquencies declined nationwide by at least 25 percent with a high of 25.9 percent in June 2014, according to CoreLogic.
The total number of seriously delinquent mortgages in the U.S. in September was 1.6 million, a decline of 1.4 percent from August, according to CoreLogic. September marked the 10th consecutive month in which serious delinquencies totaled less than two million; there has not been a month with more than two million serious delinquencies reported since November 2013.
In September, serious delinquent mortgages accounted for 4.2 percent of all mortgages in the U.S., a slight decline from 4.3 percent in August, according to CoreLogic. New Jersey was the state with the highest serious delinquency rate, at 9.2 percent. Florida was second at 8.6 percent, and New York was third at 7.4 percent. All three are judicial foreclosure states, meaning the foreclosure process must pass through the courts to be completed. Among non-judicial states, the highest serious delinquency rate was posted by Nevada at 5.7 percent. Rhode Island and Mississippi tied for the second highest serious delinquency rate among non-judicial states with 5.6 percent each, CoreLogic reported.
The metro area with the highest serious delinquency rate, according to CoreLogic, was Tampa-St. Petersburg-Clearwater, Florida, at 9.7 percent. Orlando-Kissimmee-Sanford, Florida, was second with 8.4 percent, and New York-Jersey City-White Plains, New York-New Jersey was third at 7.4 percent, according to CoreLogic.
A California judge dismissed a $16.2 million verdict a jury awarded to a California homeowner in July after the homeowner sued mortgage servicer PHH Mortgage to stop foreclosure proceedings on his home.
Yuba County Superior Court Judge Stephen Berrier said in his ruling that there was no “substantial evidence” to support homeowner Phillip Linza’s claims of negligence, intentional misrepresentation, interference, and infliction of emotional distress on the part of PHH. Linza had been awarded $15.7 million in punitive damages and more than $500,000 in compensatory damages in July after a 17-day jury trial.
Berrier ruled that Linza was not entitled to compensatory or punitive damages, but the judge did not dismiss the homeowner’s claims of breach of contract and good faith, which came to nearly $160,000. The judge acknowledged in his ruling that PHH made “inconsistent demands for payment arguably repudiating the modification contract,” and that aside from threatening Linza with foreclosure, the company “refused to return his many calls or to apologize for or correct its errors, refused to enter into a new agreement and even ridiculed his plight.” Despite this, the judge said there was no evidence to support Linza’s claims that PHH was negligent or guilty of fraud.
“The trial court has confirmed our belief that the previous verdict was not supported by the facts presented in this case or by applicable law,” PHH spokesperson Dico Akseraylian said in a prepared statement. “We take our responsibilities to borrowers seriously and remain committed to meeting all of our obligations as a servicer.”
Linza, who is from Plumas Lake, California, had entered into a loan modification contact with third-party servicer PHH in 2010 to reduce his monthly mortgage payment on the Sacramento-area home he bought four years earlier. Linza claims PHH kept raising the amount of his monthly payment, and when efforts to resolve the discrepancies were not successful, Linza refused to pay. PHH then began foreclosure proceedings on Linza’s home in 2012, and he sued to block the procedure.
Despite the judge’s dismissal of punitive and compensatory damages, Linza’s attorney, Stephen Foondos of United Law Center, was pleased with the outcome and that Linza was awarded $160,000.
“This is the first case of its kind,” Foondos said. “California homeowners in general need to look at this as an absolute victory. This sets a precedent for homeowners, and many of them have much worse cases than Mr. Linza. He wasn’t foreclosed on, and many of them have been foreclosed on. This is a wonderful victory for homeowners who might look at this $160,000 verdict as something that is attainable to them.”
Foondos said he plans to appeal the dismissal of the compensatory and punitive damages because he believes the judge committed an “abuse of discretion” by “taking it out of the jury’s hands and mischaracterizing testimony” heard in the court. One of the main points of the case revolves around defining exactly what “severe” is, Foondos said.
“He’s teed this up as high as possible for us to hit and we’re going to slam it down the fairway,” Foondos said.
Consumer confidence bounced back in October, thanks to a sharp rebound in Americans’ outlook for the economy.
The Conference Board’s Consumer Confidence Index, which fell to a revised reading of 89 in September, surged back up to 94.5 in the group’s latest report.
The recovery came mostly from a spike in the consumer expectations component, which jumped nearly nine points to 95, the Conference Board reported. The Present Situation Index, meanwhile, edged up to 93.7 from 93 in September.
“A more favorable assessment of the current job market and business conditions contributed to the improvement in consumers’ view of the present situation,” said Lynn Franco, director of economic indicators at the Conference Board. “Looking ahead, consumers have regained confidence in the short-term outlook for the economy and labor market, and are more optimistic about their future earnings potential.”
At the moment, Americans’ view of business conditions are mixed, with increases in both the number saying the business environment is currently good and those saying conditions are bad. On the jobs front, attitudes are slightly more positive: The share of consumers saying jobs are plentiful ticked up to 16.5 percent, while those saying jobs are hard to get fell marginally to 29.1 percent.
For the months ahead, 16.8 percent of respondents anticipate the economy will add more jobs, up from 16 percent in September. Nearly 14 percent expect fewer jobs compared to almost 17 percent in the last survey.
Also promising: 17.7 percent of consumers expect their incomes to rise, up from 16.9 percent, while fewer expect their incomes to fall.
While this month’s rebound in sentiment is a promising sign, economists Mark Vitner and Michael Wolf at Wells Fargo cautioned not to read too much into the increase, pointing out that few Americans are making plans for major purchases anytime soon.
“The share of consumers planning to buy a home held steady at 5.1 percent, which is lower than the 5.5 percent reported a year ago,” they said in a note. “Plans to buy a car or a home should be somewhat sensitive to interest rates, which fell over the survey period and made headlines as banks saw a rise in inquiries regarding refinancing.
“Given the drop in rates, the relative weakness in these two indicators does not spell a strong rebound for either sector in the months ahead.”
Ocwen Financial, the nation’s top non-bank mortgage servicer, announced Thursday that the company has taken a $100 million charge for a potential settlement regarding claims that Ocwen sent backdated foreclosure notices to thousands of borrowers.
New York’s Financial Services Superintendent, Benjamin Lawsky, sent a letter to Ocwen on October 21 stating that an investigation of Ocwen’s servicing practices revealed that the company sent backdated notices of foreclosure to about 7,000 borrowers after the payment deadline had passed. Lawsky’s office just concluded a year-long investigation after the backdated foreclosure issue was first brought to light.
In a conference call with analysts on Thursday, Ocwen executive chairman William Erbey left open the possibility that legal costs could drive the $100 million amount higher.
“We reached a point where we were far enough (along) in discussions with the regulator, that our best estimate of the exposure was $100 million at the end of the (third) quarter,” Erbey said. “We’re trying to be clear that they could be materially different, but we really don’t know.”
Ocwen initially blamed the backdated letters on computer errors; the company said that about 70 percent of the borrowers who received the backdated foreclosure letters received loan modifications and that less than 5 percent of them actually went to foreclosure.
The backdated foreclosure letters are not the only problem facing Ocwen, however. According to CFPB’s consumer complaint database, Ocwen has been the subject of more than 13,500 mortgage loan-related complaints from consumers since the Bureau began fielding complaints nearly three years ago. Consumers logged a higher number of mortgage-loan related complaints with CFPB for only two institutions, Bank of America and Wells Fargo. More than 123,000 of the 305,000 consumer complaints in the CFPB complaint database were related to mortgages, making that the category with the highest number of complaints.
“I want to emphasize that Ocwen takes great efforts to keep borrowers in their homes and to avoid foreclosures,” Erbey said in a release. “Ocwen recently reached a significant milestone by making its 500,000th loan modification, including 290,000 HAMP (Home Affordable Modification) modifications. Ocwen is the leader in foreclosure prevention with 44 percent more HAMP modifications than any other servicer. We work very hard to keep borrowers in their homes and that is why we take the concerns raised by the New York Department of Financial Services so seriously. We have numerous compensating controls in place which we believe should have prevented borrower harm. Nonetheless, Ocwen is proactively creating a process whereby any borrower, who believes they received a misdated letter, and were harmed as a result, will have the opportunity to receive a complete file review to resolve any issues caused by the misdating.”
Analysts believe that Ocwen’s regulatory challenges will prevent the company from purchasing $39 billion in mortgage servicing rights from Wells Fargo, one of the nation’s largest bank mortgage servicers.
Meanwhile, Ocwen announced a third-quarter net loss of $73.5 million, or 58 cents per share in its Q3 financial statement released Thursday.
The announcement of the $100 million charge came two days after the Consumer Financial Protection Bureau (CFPB) issued a statement saying that some mortgage servicers had violated the new servicing rules that went into effect in January 2014. One of the violations CFPB examiners found most often was failure on the part of the servicer to convert trial loan modifications into permanent loan modifications.
The nation’s economy continued to grow at a brisk clip in the third quarter, slowing down from the prior period but still beating forecasts.
Gross domestic product (GDP) in the United States increased at an annualized rate of 3.5 percent last quarter, according to an advance estimate from the Bureau of Economic Analysis (BEA). Economists surveyed by Econoday anticipated a growth rate of 3.0 percent.
The third quarter’s economic advance compares to an annualized 4.6 percent growth rate in the second quarter and a contraction of 2.1 percent in the first quarter.
According to BEA, the increase in real GDP last quarter largely stemmed from contributions from consumer spending, exports, nonresidential fixed investment, and government spending at all levels. Except for federal government spending—which picked up significantly—growth decelerated across all of those categories, resulting in the lower overall rate of expansion compared to Q2.
The GDP report comes a day after the Federal Reserve announced plans to close down its stimulative bond-buying program, signaling increased confidence in the economy’s progression.
Whatever progress the Fed thinks the country has made, consumers might not be feeling as confident. According to Thursday’s report, consumer spending increased 1.8 percent in the third quarter, dropping from a pace of 2.5 percent in Q2. Meanwhile, personal income rose $152.9 billion, down from $223 billion as wage and salary growth slowed.
Thursday’s report from BEA is the first of three the agency will release on third-quarter GDP. The next estimate, based on more complete data than what is available now, is scheduled for November 25.
Government-Sponsored Enterprises Fannie Mae and Freddie Mac have jointly announced that David M. Applegate will be the first CEO of Common Securitization Solutions (CSS), which was created by the GSEs to operate a new secondary mortgage market infrastructure, Common Securitization Platform (CSP).
In addition to naming the new CEO, both GSEs appointed two executives to the CSS Board of Managers. The two GSEs also signed governance and operating agreements for CSS.
Applegate has more than 20 years of mortgage banking experience, having previously been an executive with GMAC Mortgage and GMAC Bank during his 17-year tenure with General Motors Acceptance Corporation. While with GMAC Mortgage, Applegate assembled an executive team that helped transform the company into an industry leader.
Immediately prior to coming to CSS, Applegate was the president, CEO, and director of Dallas, Texas-based mortgage servicer and lender Homeward Residential, Inc., a worldwide company with assets of $4.5 billion and a workforce of 3,000. He has also managed a financial consulting practice and served as president of Radian Guaranty, Inc., a mortgage insurer.
“I am delighted that CSS will have a leader of such stature and quality. David Applegate will help ensure that CSS forms a sound foundation on which to rebuild the infrastructure of the country’s secondary mortgage market and launch a single security,” said Jerry Weiss, Freddie Mac EVP and chief administrative officer. “Freddie Mac is pleased to be playing a leading role in this important project.”
CSS was created for the purpose of operating the CSP and is jointly owned by Fannie Mae and Freddie Mac. Considered to be a milestone in the Federal Housing Finance Agency’s (FHFA) goal of building a new secondary market infrastructure, CSP’s purpose is to replace certain elements of the GSE’s proprietary system with regards to securitizing mortgages and performing back-office and administrative functions. FHFA Director Mel Watt said in a speech earlier this year that the development of the CSP is one of the most important goals for the GSEs going forward.
“CSS is poised to take the next steps in building a future securitization infrastructure,” said Andrew Bon Salle, Fannie Mae EVP of Single-Family Underwriting, Pricing and Capital Markets. “David Applegate is a respected leader in the industry who will bring deep expertise in mortgage finance to CSS. Fannie Mae looks forward to working with CSS, Freddie Mac and the Federal Housing Finance Agency to lay the foundation for a strong housing finance system for the future.”
The four new members of the CSS Board of Managers are: David Lowman, Freddie Mac’s EVP of single-family business; Jerry Weiss, Freddie Mac’s EVP and chief administrative officer; Terry Edwards, Fannie Mae’s VP and COO; and Rick Sorkin, Fannie Mae’s SVP of single-family pricing strategy and structured transactions.
”Today, Fannie Mae and Freddie Mac (the Enterprises) announced several important steps in the multiyear process of developing the Common Securitization Platform, which will create a shared securitization infrastructure for both Enterprises,” FHFA Director Mel Watt said in a prepared statement. “As detailed in our 2014 Strategic Plan for the Conservatorships, one of our goals is to build a new securitization infrastructure to meet the current securitization needs of the Enterprises that could be adaptable for other users in the future. The Enterprises announced David Applegate as Chief Executive Officer for Common Securitization Solutions, LLC. David has the skills and experience needed at this important juncture in the development of the CSP to move it to launch.
”Fannie Mae and Freddie Mac, which jointly own CSS, also announced a revised governance structure and operating agreements. The new Board of Managers structure – with two representatives from each company – enhances the ability to support the Enterprises’ securitization functions. FHFA remains committed to achieving a seamless CSP launch, and I am confident the steps announced today, combined with ongoing input from stakeholders, will help ensure success.””
As the U.S. homeownership rate continues to dwell near its lowest level in two decades, a new study from Zillow suggests more than five million additional households are waiting in the wings to step into the market as the economic recovery trudges forward.
According to a report released on Monday, an estimated 32 percent of adults living in the United States were living with roommates or other adult family members in 2012. That compares to just 25.4 percent as recently at 2000. With that rise, Zillow says the median household size has climbed to 1.83 adults from 1.75 in 2000.
A major part of that decline comes from stagnating wages, which came to a median $29,000 in doubled-up households in 2012. On average, Zillow says doubled-up adults make about 76 percent of the median income of people living without roommates, making it more difficult for those Americans to save up money for initial housing costs.
In all, the country has lost an estimated 5.4 million potential households to the “doubling up” phenomenon, many of which are now waiting for the economy to get a point where they can strike out on their own.
“The rise in doubled-up households is a troubling sign of the times and starkly illustrates one of the prime drivers behind weak home sales these days,” Zillow Chief Economist Dr. Stan Humphries said. “But there is a silver lining behind this data. Like a coiled spring, all of these doubled-up households represent tremendous potential energy for the market.”
Once the nation does get to a point where would-be homeowners are able to clear the economic hurdles to homeownership, Humphries predicts demand could bounce back so much that household growth could outpace population growth.
With that added demand, homebuilders will have incentive to construct more homes, helping to boost the nation’s slowly improving stock of for-sale homes.
“There is no magic bullet, but continued home affordability, an increasing supply of both for-rent and for-sale homes and the potential for incomes to grow more quickly as the economy recovers will all help the market to realize this potential,” Humphries said.
According to Zillow’s data, the greatest potential lies in markets where rental costs have far outpaced home price growth throughout the housing recovery of the last few years, particularly in some of the largest markets in California and Florida.
For example, in California’s Riverside metro, where the number of doubled-up adults has surged from 31.7 percent in 2000 to 44.7 percent in 2012, Zillow estimates there would be 12.6 percent more households under normal economic conditions.
Also high on the list of markets with potential is Miami, which Zillow says lost more than 230,000 households—11.3 percent more than there currently are in the area—as adults moved in together.