Nearly half (46 percent) of homeowners who received assistance with their mortgage in 2009 through the government’s Home Affordable Modification Program (HAMP) redefaulted on their mortgages, while 38 percent who received loan modifications in 2010 have done so, according to a report by the Office of the Special Inspector General for the Troubled Asset Relief Program.
According to Christy Romero, the special inspector general for the Troubled Asset Relief Program, the Treasury failed to analyze its own data to determine which borrowers were most at risk of losing their homes to foreclosure after receiving government support.
Homeowners in default on loans held by banks or investors can apply to their mortgage servicer to reduce their monthly payments. Under HAMP, investors, servicers and homeowners are all eligible to receive incentive payments to make the loan more affordable.
In all, just 865,100 homeowners were active in the HAMP program as of April. Of those, 10 percent have missed one or two payments but have not yet redefaulted. The overall redefault rate is 26 percent. More info
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Report: U.S. is not experiencing a housing bubble
CoreLogic this week released its July MarketPulse report in which CoreLogic Chief Economist Mark Fleming, Ph.D., and Deputy Chief Economist Sam Khater share their optimism about the ongoing recovery in the U.S. housing market.
Key findings in the July MarketPulse report include:
- According to CoreLogic the market is not experiencing a housing bubble, and the rise in mortgage rates will help to prevent one in the future.
- Housing affordability is near its height due to historically low interest rates and home prices.
- According to the housing affordability index, all but two states are affordable today, and most states are near their recent affordability high points.
- Cash sales peaked above 40 percent two years ago and are slowly receding.
- Cash sales are one of the drivers behind the rapid house price recovery.
More info>>> Click HERE to find out how much your home’s value has risen since last year.
The History of Rising Rates and Housing
With the sudden jump in mortgage rates, market spectators are wondering what the impact might be on the housing recovery.
After analyzing previous instances when mortgage rates increased significantly, Mark Palim, VP of Fannie Mae’s Economic and Strategic Research Group, determined history suggests rate increases won’t stop the current recovery. Instead, a rapid rise in rates is “more likely to contribute to a decrease in home purchase volume and an increase in the market share of adjustable-rate mortgages (ARMs).” Over the past 10 years, there have been two other instances when mortgage rates saw significant increases, according to Palim.
From October 1993 to December 1994, rates increased to 9.20 percent, and in October 1998 to May 2000, rates rose to 8.51 percent. When rates rose from 1993 to 1994, existing home sales fell after increasing, though the impact on home prices was more subdued. Home price appreciation did in fact slow, but annual gains were still in positive territory. The second time around from 1998 to 2000, the housing market reacted in a more “muted” way over the longer period of time. Home sales and home price appreciation “moved sideways” rather than reversing course, according to Palim. Meanwhile, the appetite for ARMs increased during both periods.
However, Palim does not expect this happen the market share for ARMs to increase substantially this time around.
“Given the limitations on ARMs under the recently promulgated Qualified Mortgage rule and the fact that rates on fixed-rate mortgages remain relatively low in historical terms, we may see a more muted increase in the ARM share of the market than in prior periods of rising rates,” he said.