Obama’s mortgage plan in troubled waters

A new government report released Monday shows that more troubled homeowners have fallen out of trial mortgage modifications than have received long-term help The administration's signature housing-rescue plan, Home Affordable Modification Program, known as HAMP saw a surge of people leave the initiative in May. More than 152,000 have had their trial adjustments cancelled since the program started, mainly because they could not document their income or because they earned too much to qualify for assistance, officials said. Nearly 430,000 borrowers have had their trials cancelled -- more than one-third of the total started. Servicers place troubled borrowers in trial modifications for several months to verify their income and see whether they can make the lowered payments. More than 70% of those cancelled this month had been in trial for at least six months.

"The administration's housing policies, combined with actions of the Fed, have lowered mortgage interest rates, helped stabilize home prices and reduced the rate of foreclosures, repairing some of the damage caused by the financial crisis to the financial security of millions and millions of American families," said Treasury Secretary Tim Geithner. But a deeper look at the scorecard shows that dark clouds remain over the housing market. Completed foreclosures soared to 93,800 in May, up from 65,000 a year earlier, while delinquency rates for borrowers with the best credit history jumped a full point to 5.9% in the first quarter. Borrowers who owe more than their house is worth rose to 11.3 million in the first quarter, up from 10.2 million a year earlier. The number of vacant homes held off the market rose to 3.6 million in the first quarter, up from 3.5 million a year earlier. The number of mortgages refinanced in the first quarter fell to 1.17 million, from 1.31 million during the same period in 2009.

Drop in Home Sales

Is Drop in Home Sales Good News? Only if you want to thrive!

“For all of you out there who accuse me of perpetual bearishness, here's a twist: What if the drop in existing home sales in May is a good thing? Try to follow me on this: Everyone expected home sales to surge in May because this Realtor's survey is based on closings in May from contracts signed in March and April. The May and June numbers should reflect the surge from the now-expired home buyer tax credit. Well today's report showed a drop of 2.2 percent in existing home sales, leading us to believe that this last government stimulus really didn't do the trick. So what if it didn't? Last fall the tax credit really juiced the market, pulling demand forward, so that we saw a huge drop-off in the months following what we thought was the end of the credit, which was then of course extended and expanded.

So now we're not seeing the same juice, but the numbers aren't terrible either. Perhaps there was no big rush, so perhaps there will be no big drop-off. Here's what we do know: (a) First-time homebuyers accounted for 46% of sales in May (49% in April) (b) Investors accounted for 14% of sales in May (15% in April) (c) All cash accounted for 25% of sales in May (26% in April). So first time buyers actually fell in numbers, but investors and all cash (which are often investors) remained pretty steady. Investors, at least for distressed properties, are what we need right now to soak up all the excess inventory. Don't get me wrong, I'm pretty certain we're going to see a drop-off in sales. A lot of sellers probably got caught up in the idea that the stimulus would create lasting recovery, and so decided to jump in. Tomorrow we get the report on sales of new construction in May. That report is based on contracts signed in May, not closings, so it will give us an idea of just how bad the post credit hangover will be.”