By John Schoen | http://bottomline.msnbc.msn.com

“As the clock ticks down on year-long negotiations on a sweeping mortgage relief settlement, the architects of the joint state-federal plan believe it would be better for homeowners to get a partial deal than nothing at all, according to sources close to the talks.

Facing a Monday deadline, attorneys general in all 50 states weighed the terms of a proposed $25 billion settlement designed to force five big lenders to pick up the pace of rewriting mortgages for homeowners struggling to make their payments.

Several states, holding out for tougher terms, have threatened to derail the negotiations, which have included federal officials from the Departments of Justice, Treasury and Housing and Urban Development, along with the five biggest U.S. banks, including Bank of America, JP Mortgage Chase, Ally Financial (formerly GMAC), Citigroup, and Wells Fargo.

“This enables us to move forward into the very final stages of remaining work,” Miller said in a statement. “Federal and state officials, as well as representatives from the banks, continue to address matters that they must complete before finalizing any settlement.”

Miller’s office provided no additional details.

For months, the holdout states – including New York, California, Nevada, Delaware and Massachusetts – have cast doubt on whether a deal could be reached. New York Attorney General Eric Schneiderman, who was dismissed from a negotiating committee in August for allegedly trying to undermine the deal, on Friday filed suit against three of the banks challenging their use of a mortgage registry that is critical to their foreclosure efforts.”

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By Mark Puente, Times Staff Writer

“Only 60 Floridians have received cash from a Bank of America program that pays up to $20,000 to homeowners who sell distressed properties in a short sale.

The lender still expects thousands more in the Sunshine State to collect the money before the pilot program ends in August. Bank spokesman Richard Simon said it’s too early to judge the results.

“There are some encouraging signs in this early stage,” he said. “This is just the start of the process.”

Several Realtors and title agents around Tampa Bay said deals are in the pipeline, but none has finalized any of the sales.

Bonnie Fagoh, an agent with Century 21 Beggins Enterprises in Apollo Beach, is representing a seller who’ll collect $15,000 on Feb. 3. The seller listed the home in early December and quickly landed a cash buyer on the $160,000 deal.

“It was a very smooth process,” she said. “Everything is being worked out.”

Steve Capen of Keller Williams Realty in St. Petersburg gained 15 listings from the program, but none has closed yet. The bank hired a vendor to process all the paperwork submitted from home­owners and real estate agents. Capen fears the cash incentives could be reduced or disappear at closing because communication with the vendor is difficult.

“They rolled out this program, but nobody knows the guidelines,” he said.

Short sales are on the rise in the bay area, and real estate agents say some lenders have been closing the deals in 45 to 60 days instead of a year or longer.

Beth Cromwell, a short sale specialist at Hillsborough Title, cautioned that short sales are complicated and take several months to finalize. The firm is handling several Bank of America deals.”

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By Kenneth R. Harney | tampabay.com

“Mortgage insurance tax break evaporates

WASHINGTON — Though its demise drew little attention because of the partisan year-end brawl over the payroll tax cut extension in Congress, a key mortgage financing benefit disappeared at the end of 2011: The ability of large numbers of homebuyers and owners to write off the premiums they pay for mortgage insurance.

The loss of that tax deduction — plus mandatory new fees imposed by Congress on all new conventional and FHA loans — could effectively ratchet up the costs of homeownership this year.

The expiration of mortgage insurance deductibility will hit many low-down payment conventional loans originated since 2007, plus virtually all new mortgages closed this year where the down payment is less than 20 percent. Industry experts estimate a range into the millions of existing owners and new purchasers potentially affected by the deductibility termination. Borrowers using guaranteed veterans (VA) and rural housing loans, where down payments can drop to zero, also are affected.

The change took effect Jan. 1 along with the expiration of 58 other tax code benefits that Congress failed to renew, including credits for home energy improvements, credits for builders of energy-efficient new houses and deductions for state and local sales tax payments. Congress could still reauthorize all or some of the write-offs retroactively this year, but the current political atmosphere raises doubts about that happening.

The mortgage insurance premium deduction allows purchasers and refinancers who use private mortgage insurance or federal insurance or guarantees, and who itemize on their federal tax returns, to write off their premiums.”

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By Michael B. Sauter, 24/7 Wall St.

“How much residents of each state owe on their mortgages is an interesting statistic. For the most part, residents of the states with the highest average mortgage debt are not in trouble. While the average home price in these states dropped in value during the recession, the foreclosure rates in these states are among the lowest in the country. The reason: residents of these states can generally afford to lose and owe more money than their counterparts in other states. 24/7 Wall St. examined a recent report by Credit Karma to find the 10 states with the highest average mortgage debt.

Most of the states on our list have extremely high mortgage debt because of the size of their initial mortgages. States like Connecticut and Massachusetts, which have among the highest median home values in the U.S., also have among the highest mortgage debt. Hawaii, which has the second-highest average mortgage debt per person, has the highest median home value of $525,400.”

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By John W. Schoen, Senior Producer

“The ongoing wave of foreclosures continues to drag home prices lower.

Foreclosure-related properties, which made up roughly one in five home sales in the third quarter of  last year, sold for an average 34 percent less than homes that were not  “distressed sales,” according to the latest data from RealtyTrac, a housing data research firm.

Foreclosures accounted for a smaller share of total sales as banks already glutted with properties slowed the pace of new seizures until they could unload the houses they already owned. The share of distressed sales also slowed last year following a slowdown in new foreclosures after consumer complaints and lawsuits challenging seizures that resulted from “robo-signing” and other questionable document practices.

“The sooner the market gets more clarity about accepted foreclosure procedures, primarily through the long-promised settlement between multiple states attorneys general and major lenders, the sooner the market can more efficiently dispose of these distressed properties,” said Brandon Moore, chief executive officer of RealtyTrac.

Reforms of those procedures are part of a recently proposed, comprehensive settlement with lenders over abusive foreclosure practices. But the settlement, which is being touted as a program to save homes from the sheriff’s sale, could have the perverse effect of increasing the pace of foreclosures if it helps insulate bankers from potential lawsuits.

Even with the slowdown in home seizures and the legal complications often involved in buying those properties, foreclosure sales represent a historically high percentage of all sales, according to RealtyTrac. During the housing boom years of 2005 and 2006, less than 5 percent of all home sales were foreclosure-related. In the third quarter, the share reached 20 percent, down from 22 percent in the second quarter and 30 percent in the third quarter of 2010.

Those percentages are much higher in the states hardest hit by the housing collapse. In Nevada, foreclosure-related sales accounted for nearly 57 percent of all residential sales during the third quarter, the highest percentage of any state.  In California 44 percent of the sales were foreclosure related, followed by Arizona (43 percent), Georgia (34 percent), Colorado (26 percent) and Michigan (23 percent).

Some sellers and real estate agents have tried to draw a distinction between foreclosure-related truncations and “non-distressed” sales in determining the price of the next sale of a comparable home. But just as the latest sale of a share of stock determines the starting point for the next transaction, home buyers are using those distressed sales as a benchmark when making their bid.”

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By Michelle Conlin

“In July 2009, Roy and Sheila Bowers refinanced the mortgage on their suburban ranch home in Topeka, Kansas. The couple wanted to take advantage of the low interest rates that were all the rage at the time.

Roy, a truck driver, and Sheila, a former hotel housekeeping supervisor, knew their new loan from Wells Fargo would enable them to save $198.86 a month – a nice chunk to help with gas and groceries.

But what the Bowers never imagined was that their old loan, the one Wells Fargo told them was paid off, would resurrect itself, trashing their credit report, scotching their son’s student loans and throwing the whole family into foreclosure. All, they say, even though they didn’t miss a single mortgage payment.

The Bowers aren’t alone.

More and more, homeowners say that mortgages they thought were dead and buried are springing back to life, sometimes haunting them all the way into foreclosure.

“It’s the most egregious manifestation of an industry that’s seriously broken,” said Ira Rheingold, a lawyer who is the executive director of the National Association of Consumer Advocate.

Foreclosures keep pushing house prices lower

Diane Thompson, an attorney with the National Consumer Law Center, says she has defended hundreds of foreclosure cases, and in nearly all of them, the homeowner was not in default. “The record-keeping on the part of the mortgage servicers is not to be trusted.”

The problems grew from a lot of sloppy recordkeeping that began during the housing boom, when Wall Street built a quick-and-dirty back-office operation to process mortgages quickly so lenders could sell as many loans as possible. As the loans were later sold to investors, and then resold around the world, the back office system sidestepped crucial legal procedures.”

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By John W. Schoen, Senior Producer | http://bottomline.msnbc.msn.com

“In the Wild West of the ongoing mortgage mess, there’s a new sheriff in town. And he’s not handing “Get Out of Jail Free” cards in return for a $25 billion check.

The appointment of New York Attorney General Eric Schneiderman to head a special task force that will investigate mortgage fraud marks a turning point in a year-long effort to resolve a wave of legal challenges to abusive and illegal foreclosure practices.

After a year of talks aimed at a settlement with five big banks — Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial (formerly GMAC) — attorneys general in all 50 states this week have been poring over the 100-page draft of a proposed $25 billion deal requiring bankers to commit to modify problem loans that they have been slow to do. Under the proposed terms, the banks would also agree to follow strict foreclosure guidelines and procedures and contribute as much as $5 billion to foreclosure relief programs.

On Wednesday, President Barack Obama tapped Schneiderman to co-chair a joint federal-state task force to pursue criminal charges related to abusive mortgages and the bundling of those loans into investments. Some observers suggested the appointment was intended to blunt Schneiderman’s opposition to the multistate settlement.  Schneiderman has said he’s not about to let bankers off the hook.

“My concern … has always been to make sure that we’re not releasing claims that obviously now are even more important to me because I’m investigating them,” he told reporters Wednesday.

From the beginning of the settlement talks, the five big banks have been holding out for a blanket waiver of legal liability to protect them from future lawsuits or prosecution. The creation of Schneiderman’s task force makes that blanket waiver extremely unlikely. It may even collapse the deal, JP Morgan Chase Chief Executive Officer Jamie Dimon, told CNBC.

“My own read is (the creation of the new task force) has a pretty good chance of derailing it,” said Dimon.

The proposed settlement was also dealt a major blow Wednesday when California Attorney General Kamala D. Harris said its terms would limit her ability to bring civil charges against mortgage lenders that wrongfully foreclosed on homeowners.”

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By John W. Schoen, Senior Producer | http://bottomline.msnbc.msn.com

“Home prices have fallen by a third since 2006, creating tremendous bargains for home buyers. Mortgage rates are at rock-bottom lows, making houses more affordable than they have been in decades. Yet home sales last year fell to the lowest levels since the government began keeping records in 1963.

One big reason: mortgage bankers have gotten a lot choosier about approving loans, according to a report by Goldman Sachs economists Hui Shan and Jari Stehn. By some measures, they’re pickier than they were before the housing boom took off.

With anecdotal evidence showing that home mortgages are harder to get, the economists crunched Federal Reserve data to show just how much tighter lending standards have become. Using the results of the Fed’s survey of loan officers, the report found that lending standards rose sharply after the mortgage market collapsed and the financial system imploded in 2008. Since the recession ended in 2009, lenders haven’t eased their tight grip on mortgage money.

Part of the reason is that there’s less money available to lend. During the housing boom, as brokers produced a flood of new mortgages, Wall Street bankers churned out a torrent of mortgage-backed bonds for investors waiting to snap them up. That market has all but vanished; 90 percent of new mortgages written today are backed by the government.

The new mortgage pipeline also has slowed because it is clogged with paperwork. These days, you’ll have to fill out many more forms and produce a lot more documentation, on average, just to get your loan considered.

The percent of loans that required “full documentation” declined steadily from 2000 through 2006, hitting a low of less than 60 percent. Those “no-doc” loans were a big part of the reason mortgage bankers made the bad underwriting decisions that created the mortgage mess. Today, nearly 90 percent of mortgage applications require full documentation. That’s much higher than the pre-bubble level.”

Find the full story (& charts) here…

Unfortunately, that’s a big “if,” according to Paul Diggle, a housing economist at Capital Economics.

Much of the decision to buy a house still depends on your personal finances and preferences, your career or family life, or level of financial security.

But if you’re comparing just the cost of owning and renting, buying a house may soon be the better choice, according to Diggle.

Until recently, home ownership was no bargain compared to renting, according to his analysis.  A 33 percent drop fall in home prices, a plunge in mortgage rates and 15 percent rise in rents since the housing crash has evened the scales. Today, the median monthly mortgage payment of about $700 has fallen to about the level of a median monthly rent check. If mortgage rates keep falling and rents keep rising, the equation will tip even further toward owning.

But that analysis doesn’t include the total cost of owning versus renting. A full accounting includes  closing costs, maintenance, insurance and property taxes, tax savings from mortgage deductions, gains or losses from home equity, among other factors. Renters have to think about broker fees and future rent hikes. Both have to make assumptions about future trends in housing prices and rents.

When you take those factors into account — which Diggle has done with a homegrown “calculator” — someone who plans on staying put for seven years would come out ahead by about $9,000 if they bought a median-priced home rather than being a tenant in a median-priced rental. Diggle’s calculation assumes that rents keep rising by about 3 percent a year and that house prices stay flat in 2012 and 2013 and begin rising in 2014 at about 3 percent a year.

If house prices fall further, all bets are off, said Diggle. In that case, the renters come out ahead.”

Find the full article here…

“A proposed $25 billion settlement between five big banks, state attorneys general and the Obama administration may help resolve some of the thornier legal issues surrounding the mortgage mess that caused the housing market to collapse.

It will do relatively little to stop the ongoing wave of home foreclosures or revive the deeply depressed housing market, however.

Talks got underway more than a year ago after a series of private lawsuits focused national attention on an outbreak of “robo-signing” and other shoddy and fraudulent document processing practices by mortgage servicers foreclosing on homes. Most of the key issues that have sidelined past tentative agreements have been addressed, according to a source close to the talks who was not authorized to discuss the proposal.

But a final agreement could still be weeks away. Iowa Attorney General Tom Miller said Monday that some terms still have to be resolved. He made clear that the parties still have significant work ahead of them.

“We have not yet reached an agreement with the nation’s five largest servicers, and we won’t reach a settlement any time this week,” he said in a statement.

The deal would require banks to devote roughly $17 billion of the total settlement to various types of loan modifications for homeowners. Rather than paying that amount in cash, lenders would receive a series of credit toward that amount based on a complex formula that would assign different levels of credit to different types of modifications. Decisions about which loans to modify would be left to bankers.”

Find the full article here…