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Some lenders may be more willing to reduce the mortgage principal than grant a short sale for borrowers under the Home Affordable Modification Program (HAMP). The principal reduction can mean big savings for home owners too — the average amount reduced on a principal reduction is more than $65,000, or 31 percent of the unpaid balance on the mortgage, according to new Treasury Department data.
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Mortgage rates continued to be near record lows this week, keeping housing at affordable levels for most households.
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Sixty-two percent of Americans say that purchasing a home is a good investment over the next 10 years, according to the Mortgage Index Study conducted on behalf of Bank of America.
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In many recent cases, new homes are being appraised for less than the cost of construction, according to the National Association of Home Builders. Builders are blaming flawed appraisals for holding back the housing market’s recovery.
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Low appraisals have been blamed for continuing to hamper the real estate market. So Kirchmeyer & Associates is debuting an appraisal warranty insurance program to its appraisal management services to protect lenders and investors against faulty appraisals.
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New-home sales for single-family homes rose 1.3 percent in October, marking the best pace for new-home sales activity since this May, the U.S. Commerce Department reports.
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The monthly cost of owning a home is more affordable now than in the past 15 years, and is less expensive than renting in numerous cities, according to The Wall Street Journal’s third-quarter survey.
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More than 20 lawmakers in the House of Representatives this week called on Fannie Mae and Freddie Mac to reduce the mortgage principal of borrowers who owe more on their home than it is currently worth.

The Federal Housing Finance Agency, which regulates Fannie and Freddie, has been refusing to take such a drastic move, citing concerns that writing down principal balances may create a “moral hazard” and prompt other borrowers to stop making loan payments on time.

But the Democrat lawmakers argue that such action would reduce the risk of defaults for about 20 percent of Fannie and Freddie’s mortgages.

“We strongly urge that you reconsider your refusal to allow principal reductions to achieve better-performing [loan] modifications and avoid the extreme losses of unnecessary foreclosures,” the Democrat lawmakers wrote in a letter to the FHFA.

Source: “U.S. House Democrats Press for Mortgage Write-Downs,” Reuters News (Nov. 22, 2011)

In the third quarter, the number of U.S. home owners who owe more than their homes are currently worth continued to rise, according to new housing data by Zillow Inc.
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Foreclosure starts are reversing course and are back on the rise, which is expected to continue to put downward pressure on home prices, a new report released Monday from Fitch Ratings says. With a jump in the inventory of distressed homes, Fitch predicts home prices to dive another 10 percent nationally before stabilizing.
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