Edward DeMarco is refusing to make moves that could actually speed up the housing recovery process in the US. The head of the FHFA (Federal Housing Fiance Agency) is believed to be a major key in solving the issues in America related to the continuing foreclosure crisis. His efforts could be important in stabilizing the housing market across the country by assisting millions of distressed homeowners in order to avoid foreclosure.

This is a very urgent need that needs to be addressed now, more than ever before. Our housing market is continuing to see “small glimmers of hope”, but still, the crisis exists. Statistics show that the current rates of mortgage delinquencies are decreasing, but at a very slow pace. And, even with the decreases, the amount of foreclosures is still about three times what they were before the housing market collapsed.

“Robo-Signing” Settlement

The new “robo-signing” settlement is supposed to bring relief to distressed homeowners hoping to save the homes from foreclosure. This agreement means that several of the large mortgage banks will be writing down the principle amounts owed on the mortgage loans of homeowners in trouble. This has been believed to be the best solution to the foreclosure crisis since the beginning. It was just a matter of getting the banks to agree to do it.

Many borrowers have upside down mortgages. This has been a major problem ever since the market crashed. Millions of US homeowners currently owe a substantial amount more on their mortgage loans than what their houses are worth. And, there’s no time frame as to when or even if they’ll ever be worth the amounts they owe. There is also a problem with unemployment and other issues related to the reduced incomes in these homes. The country’s recession is just making it too hard for these families to get back on track with their mortgage payments.

That’s why experts believe that it makes more sense to just make the mortgage principals more realistic. If not, banks will just continue to try to get payments from owners based on home values that are too far from realistic to make financial sense. But, by lowering the principal balances to realistic amounts that reflect the current values of the homes, millions of US homeowners can avoid foreclosure altogether. This helps families remain stable in their homes, allowing communities to avoid the disrupting nuisances caused by waves of foreclosures. This will also help to bring about a stabilization in the housing market, as well as the housing construction industry, which has also been suffering drastically through all of this.

California is Taking the Lead

The state officials in California have decided to be leaders and start moving forward with the new agreement. On May 7, 2012, the announced that a large amount of federal funds will be used to begin offering write-downs of principals owed on upside down home loans. So far, up to $100,000 has been designated to helping these California borrowers.

Even with these helpful steps, millions of homeowners are still underwater families in immediate need of assistance in order to save their homes from foreclosure. According to statistics, the largest amount of the distressed loans are insured by government-backed entities, such as Fannie Mae (FNMA) and Freddie Mac (FMCC). They are both managed by FHFA. DeMarco is the head of FHFA, who is currently refusing to allow Fannie Mae and Freddie Mac to get involved in the principal reduction programs.

These are all useful steps, but they still leave millions of underwater families without help. The biggest chunk of those troubled loans are backed by government-backed mortgage giants Fannie Mae and Freddie Mac, which are managed by DeMarco’s FHFA. And DeMarco has thus far refused to involve Fannie and Freddie in principal reduction.

This past April, DeMarco agreeing to speak at a symposium brought false hope. The symposium, which was took place on April 19, was an organized effort by The Greenlining Institute. It was all about focusing on ways of restoring and protecting homeownership dreams in America. This is the American Dream that seems to be slipping away from many current US homeowners, as well as those hoping to become homeowners in the future. The crowd was filled with housing advocates, groups, mortgage lenders and regulators who had been skeptical of FHFA and DeMarco. That’s why many feel that he should at least be given credit for agreeing to put his neck on the line and simply show up to speak.

DeMarco Just Isn’t Doing Enough

DeMarco voiced his concern about the upside down mortgage crisis. Although he didn’t officially agree to take part in the principal reduction agreement, he did promise that FHFA would have some concrete things to say about the efforts by the end of the month. That was in April.

However, by May 1, 2012, Los Angeles Times was reporting that there were two pieces of news that they found disturbing:

1. FHFA was reportedly still analyzing the principal reduction programs. They wouldn’t be commenting on the issue until they were done with their analysis, which no ETA available.
2. Internal documents existed that said that officials with Fannie Mae had been supporting the idea of principal reductions as far back as 2009. They believe the reductions would be a positive way of saving taxpayer dollars. But, because of “ ideological reasons”, the proposed pilot program was denied. These documents were obtained by Rep. John Tierney of Massachusetts and Rep. Elijah Cummings of Maryland, two US Congress members.

Many have commended DeMarco for making the effort to speak at the symposium, but this simply just isn’t enough. With millions of US families in desperate need of saving their homes from foreclosures, now is the time for the FHFA official to take action.

Just days ago, HUD issued a $56 million dollar funding award to 76 different tribal communities in the US. This grant will help them improve the conditions of their housing communities, while promoting development. This was done in the hope of improving their local economies by providing jobs through real estate construction projects. The program being awarded the grant is called the Indian Community Development Block Grant (ICDBG) Program. It’s purpose is to help develop more affordable housing that will be established for low-income to moderate-income families within the communities.

According the Shaun Donovan, the Housing and Urban Development Secretary, a large amount of time, effort and creativity has gone into the way these communities invest their public funds. They have been using their grants to create and maintain long-lasting housing solutions that provide for the needs of a countless amount of local families. Donovan says that he’s quite impressed with their efforts.

HUD Grants Intended Uses

The plan is for the receivers to use the grants for developing communities that will help bring life to the tribal areas as a whole. It will allow them to rehabilitate homes that are need of refurbishing and repairs, as well as build new property on land they already posses. It will also give them the cash flow needed to purchase more undeveloped land in order to support the construction of new houses. The funds aren’t intended just for building homes, but complete communities that are fully functional.

Construction will include creating quality roads, water systems and sewage facilities. Projects will include commercial and industrial property developments, as well as viable agricultural projects. This will help to stimulate the growth of the local economic system, as well as creating local jobs for community members. There will be community centers and health care facilities for long-term resources. It will also help to promote the growth of local businesses by funding the construction of local shopping centers, convenience and grocery stores, restaurants, gas stations, even manufacturing plants. Some specific examples of how the grants will improve the communities include the following:

• Caddo Nation, Oklahoma – Will receive a grant of $800,000 for building a community facility that will be used for elderly residents considered to be low income.
• Ho-Chunk Nation, Wisconsin – Their $600,000 grant will be devoted to the installation of solar photovoltaic panels that will be installed on low-income level homes. The single-family homes and rented apartment units will benefit from the decrease in energy usage, lowering their energy costs by about 24 percent. It will also help these homes to become green homes as they decrease emissions due to these new energy efficient measures.
• Cook Inlet Tribal Council, Alaska – This community’s $600,000 grant will be used in helping them build a seriously needed group home. It will provide housing for the large amount of native Alaskan homeless youth near the areas surrounding the Bartlett High School, as well as the Alaska Native Heritage Center. Providing these youths with a stable home environment will also help to increase their academic growth and stability.
• Chemehuevi Indian Tribe, California – They will receive a $604,998 grant. It will be used for upgrading the existing infrastructures located on the reservation. The grant will also allow the community to replace sections of their old, outdated sewer lines, some of which date all the way back to the 1950s.
• Seminole Nation, Oklahoma – It’s awarded $800,000 grant is intended for building a community health and wellness center. This center will serve a multitude of residents and purposes.
• Sac and Fox Tribe, Iowa – A $600,000 grant is being awarded to this community so they can build the Meskwaki Travel Center. It is set to include gas stations for cars and trucks, a truck stop, a washing and mechanics bay for diesel trucks, a convenience store, a sandwich store and a local bank branch. This project alone will help the community create eight new long-term job positions, while allowing them to retain 28 current help positions.
• ICDBG Program – This program has been around since 1977. It’s purpose is to help Indian tribal communities, as well as native Alaskan villages. It helps them meet their current and future community development needs. The organizations that compete for funding from this program include: recognized groups, bands, tribes and eligible nations.

HUD’s Home Investment Partnerships Program

The Housing and Urban Development’s HOME program is dedicated to providing grants to various US states and local communities. These grants are often provided with the help of local non-profit groups that partnership with HUD to provide funding for a wide variety of housing activities. Some of these include building, buying and sometimes rehabilitating affordable housing properties. These properties are used as rentals or sold to new homeowners who fall in the economic category of low-income families.

The New 2012 Households

After their four years away at college, most graduates used to swear off roommates forever. However, according to the US Census Bureau, roughly five million homes had three or more generations living under the same roof in 2010. In most cases, this was not necessarily by choice. This situation has always been much more common in other parts of the world. But, it has never been widely accepted by the aggressive real estate consumers in the post WW2 American age. Unemployment, at least in the broad spectrum, has been hovering around 18-20 percent since 2010. In many of these US households, the lack of stable income for the household members plays a big role in their reasons for living this way. If the funds were there, the younger adults would move out and the older adults would probably be in an retirement homes or their own apartments.

Multi-generational Statistics and the Future

Whether most people like it or not, multi-generational households are becoming so popular that builders are beginning to design homes to target this new growing market. For example, Toll Brothers decided to replace a portion of its family homes with guest suites and complex floor plans that used to be considered customized designing. These options are now turning into the mainstream in the real estate construction industry. Constructions companies are being directed to transform that second space in the two-car garage into a living area or guest room. Lennar, KB, and Pulte Group are three other homebuilders offering homes targeted for this growing demographic.

The Census Bureau report went on to show that what they term, “doubled-up households” have grown by leaps and bounds. These forms of households rose from 19.7 million during 2007, when the Great Recession began, to nearly 22 million by 2010. That’s a 10.7 percent increase, and this situation has only picked up speed in 2011 and 2012. Doubled-up households typically include one extra non-student adult that isn’t anyone’s spouse or life partner, but lives in the home anyway. In recent years, these “non-student” house guests in the 25-34 year old range, who are living at with parents and/or grandparents has seen a 25 percent increase.

Psychologically this is all new and disturbing to modern American families who have been conditioned to believe that all children leave the nest and purchase their own homes or apartments by the time they reach this age bracket. The self-help section of book stores, both print and digital, are increasingly offering tips and guides to make these types of living situations work. Household trouble becomes more prevalent in homes where men can’t find work, and young ambitious adults find themselves trapped without much access to financial freedom or independence.

It May Be Wise to Consider

Those that are doing and experiencing living in these households of multiple generations, now advise others to take the time to at least consider doing themselves. The majority of those who are experiencing aren’t necessarily living like this by force or necessity. They’ve taken the time to do their homework and have decided that it just makes more sense than spreading their incomes thin to live any other way. They’ve made their lists of pros and cons, which have been clearly written out, to weigh their options carefully.

Sometimes it’s a blessing, and sometimes it isn’t. For example, when young parents come into the mix, child care costs can be saved with the assistance of the non-working adults in the home. On the flip side, what if auntie or grandma may not want to babysit or be bothered with kids. There are plenty of grandparents who find themselves looking after their grandchildren when they were expecting to be out playing golf and traveling around the world, enjoying their golden years.

Multi-generational Real Estate Markets

The good news is that once the real estate market does rebound, and it will, as sure as the sun will rise, the multi-generational home and mindset won’t be so uncomfortable. A much larger portion of available homes will be have been developed to accommodate the multi-generational living situation. Homes within a home won’t be so hard to come by. And, because they’re not actually multifamily properties on paper, they won’t be subject to multifamily zoning laws and taxes. All kinds of features that would cost a hefty price in terms of private home improvement ventures will become normal additions to most homes on the market. Whether it’s smaller social spaces to make room for larger guest rooms, study areas that used to be elongated kitchens, or little spaces for shoe storage, the things that multi-generational families create on their own will become popular selling pitches in years to come.

Earlier this year, FHA announced a new rule that extended their “anti-flipping” rule waiver. This waiver, which is extended throughout 2012, allows buyers to flip homes financed under an FHA-insured mortgage. The hope was that this would help to encourage buyers and investors to buy more of these foreclosed homes. This, in turn, would help to get many of the REOs off of the banks inventory lists, while helping many distressed homeowners avoid foreclosure.

Now, the Federal Housing Finance Agency, which oversees both Fannie Mar (FNMA) and Freddie Mac (FRE), are joining in to help encourage house flipping. Their new rules are directly related to short sales, and speeding up the process. The new rules, if followed and enforced, will help stop many homes from going into foreclosure.

Lenders Response Times to Short Sale Offers

Everyone has been talking about short sales over the past few years. What are short sales? What are the benefits? What are the disadvantages? Who wins? Who losses? There is so much information out in the world about short sales that it can be overwhelming to try to understand it all. So, what’s the bottom line? In the end, a short sale can be the last resort to avoid foreclosure. When you look at it from this angle, everyone involves wins.

Homeowner Benefits

Distressed homeowners can turn to short sales to get out of their mortgage debt. A short sale buyer can purchase the property from them quickly. This allows them to avoid having a foreclosure placed on their credit report. It also gives them relief from making payments on a mortgage they can no longer afford.

Buyer Benefits

When a buyer is able to purchase a short sale, it’s almost always for less that what the owner owes on their current mortgage. This can make this a very lucrative deal for the buyer. They are also buying a property that is very close to being foreclosed on. So, the sale must take place quickly to avoid the foreclosure process from continuing, getting them into the house faster.

Mortgage Lender Benefits

In theory, lenders benefit from short sales because they can avoid the cost and time involved with foreclosing on the distressed homeowner. They also avoid having to go through the eviction process to physically remove them from the property once the foreclosure is complete. There’s also another major benefit for lenders. They don’t end up with another vacant property sitting on their REO list. These properties cost money because the lender is responsible for maintaining them, while they continue their efforts to market them and get them sold.

New Lender Requirements

In past years, mortgage lenders have been very slow to respond to short sale offers from even qualified buyers. For reasons no one can truly understand, they’ve allowed these homes to go into foreclosure, rather than approving the short sales to get the homes sold quickly. This alternative to foreclosure could have saved thousands of distressed homeowners from foreclosure had the banks moved fast enough.

Federal Housing Finance Agency’s new rules will now require that mortgage lenders must communicate with homeowners submitting short sale offers. This is in direct contrast to the old way of doing things where the lender just ignored the homeowner and continued on with the foreclosure. Now, mortgage lenders will be required to review the offer, and respond to it within 30 days of receipt. If for some reason, they are still reviewing it after 30 days, they must give the distressed homeowner a status report every week. They will also be required to make a final decision no later than 60 days after they receive the short sale offer. This new rule applies to all Fannie Mae and Freddie Mac homes. These new rules take effect June 1, 2012.

Today, the nonprofit group known as National Fair Housing Alliance filed a discrimination complaint against the mortgage lender, Wells Fargo. The complaint was filed with the US Department of Housing and Urban Development, better known as HUD. This complaint to the US government accused Wells Fargo & Co. of failing to maintain the upkeep of home that were foreclosed on in minority communities. They allowed the abandoned properties to become run down and turn into community eyesores. According to the complaint, foreclosed properties that were left vacant in predominantly white neighborhoods were not left in such a disgraceful manner. These vacant properties have been maintained in away that doesn’t make the communities look bad.

Complaint Details

According to the President of the National Fair Housing Alliance, Shanna Smith, the differences in the way Wells Fargo treated vacant foreclosures in these different geographical areas were obvious. In urban communities, they neglected simple things that could have been maintained. They didn’t perform any type of routine maintenance on the properties. They also made no effort to keep the properties secure, which is the main cause of vandalism when it comes to vacant homes. This neglect was noticed in both African-American and Latino communities “across the board”, Smith reports.

This isn’t something that the group just arbitrarily decided to complain about. The official complaint is based on years worth of investigations tracked by the non-profit group, who serves as an advocate for minority related housing issues. The investigations were performed in an effort to discover just how major lenders like Wells Fargo maintain and market REO properties in different real estate markets throughout the US.

In the National Fair Housing Alliance’s complaint filed with HUD, they that they completed and independent investigation on Wells Fargo owned foreclosures. They found that serious inequalities existed when it came to the way the lender maintained and marketed homes that were left vacant due to foreclosure. They came to this conclusion after comparing these practices with the way Wells Fargo maintains and markets vacant homes in non-urban communities.

Both the a spokesperson for the federal agency, HUD, and the spokesperson for the lender, Wells Fargo, declined to comment on the complaint or were simply unavailable for comment at press time.

The Study on Wells Fargo

The National Fair Housing Alliance investigation covered foreclosed homes in eight US cities, looking at about 218 of them, all owned by Wells Fargo. This eight cities were:

1. Atlanta, Georgia
2. Baltimore, Maryland
3. Dallas, Texas
4. Dayton, Ohio
5. Miami, Florida
6. Oakland, California
7. Philadelphia, Pennsylvania
8. Washington, D.C.

The survey included 149 homes that were in communities that were occupied by predominantly minority groups. Of these neighborhoods, 99 were most African-American areas, the other 50 were occupied be most white community members.

National Fair Housing Alliance used different statistics from the years of investigations to accuse Wells Fargo of discrimination due to taking better care of the non-urban communities. According to their statistics, 56 percent of the vacant foreclosures in the urban communities had large amounts of trash that was piling up on the premises. This was in contrast to the only 30 percent with the same problem in predominantly white communities.

In Smith’s statement, she says that she was completely surprised at the discriminatory findings of the report against Wells Fargo. But, she saw the problems first hand. Upon driving through many of these minority areas, she saw weeds overgrowing in front of foreclosures that didn’t even have for sale signs in front of them. According to her, many of the REOs look outright abandoned.

Earlier this month, National Fair Housing Alliance released a report on the subject. They blamed the entire banking industry for the discriminatory actions. They believe that these banks should be responsible for maintaining their foreclosed properties. The report gave actual details of how the banks were handling, or rather not handling” these properties, and how they put no effort into marketing them. This leaves these communities looking bad as the homes continue to deteriorate and look abandoned, with someone who may be interested in purchasing one having no idea who to call to get the ball rolling.

Bank of America, one of the leading mortgage lenders in the US, has announced a new pilot program called “Mortgage to Lease.” The program is expected to be an answer to distressed families being evicted after foreclosure. Under this program, about 1,000 foreclosure victims in Arizona, Nevada and New York will be selected to remain in their homes after foreclosure as renters.

BofA is doing this as a test program. If it’s successful, they may extend the invitations to other distressed homeowners with outstanding BofA mortgage loans. The sad part is that, currently, distressed homeowners can’t apply for this program. They must be selected by BofA.

The Selection Process

Here are some of the criteria that must be met for a chance to be selected for the initial pilot BofA Mortgage to Lease Program:

• Must be over 60 days delinquent on BofA mortgage loan.
• Must be upside down on their mortgage, meaning the current value of their home is much lower than what they currently owe on their mortgage.
• Can’t have any other outstanding liens against the property.
• Current income must be high enough to be able to afford fair market rent.

The Program Process

Once selected by BofA to participate in the program, if the homeowner agrees to participate, these are the basic steps of the program:

1. The homeowner transfers the property title to BofA.
2. BofA immediately forgives the outstanding mortgage balance, meaning no foreclosure will be placed on their credit report.
3. The homeowner is allowed to remain in possession of the home as a tenant for up to three years, renting it from the bank for current market rental rate or below.

What This Means for Homeowners

Bank of America will retain ownership of these homes only in the beginning. Eventually, the homes in this pilot program will be allowed to transition off into the ownership of qualified investors. They will also begin partnerships with local property management companies who will manage the renting of the properties.

In a statement, Ron Sturzenegger, a BofA banking executive stated:

“Our priority is designing a solution that helps our customer… If this evolves from a pilot into a more broadly based program, we also see potential benefits from helping to stabilize housing prices in the surrounding community and curtail neighborhood blight by keeping a portion of distressed properties off the market.”

Bank of America is only one of the five major mortgage lending banks to settle with the Federal government. They agreed to settle in a $26 billion dollar foreclosure deal in response to a class action lawsuit brought on y mortgage holders alleging improper foreclosure actions.

Although the purpose of the deal was to get billions of dollars reduced in the principal and refinanced amounts owed by homeowners who are upside down in their mortgages. These homeowners owe a substantial amount more on their mortgage balances than what their homes are currently worth. But, after careful consideration, both critics and homeowners now see that this deal won’t help most homeowners, if any at all.

BofA Offering Leases to Homeowners

Finally! Bank of America has come up with a creative way to at least slow down the foreclosure related evictions. Due to the current state of the economy, many people facing foreclosure have no other options but to let it take its course. But, that’s still no excuse for lenders to make these families homeless, while the homes they put so much love and hope into sit vacant. These vacant homes are a loss in so many ways. Eventually, most of them become victims of vandalism, theft, even squatters, who move into the vacant home and pay nothing to stay there.

When a bank decides to evict a family that’s been foreclosed on, they open themselves up to all of the risks above. They also decrease the value of the home because vacant homes can’t take care of themselves. They get taken over by rodents and bugs. They’re closed up, usually boarded up, which causes a musty smell that takes paint and new carpet to get rid of. The windows become weather beaten, because no ones opening them. The plumbing and pipes get rusty, because no ones using them. The electrical wiring gets destroyed by bored mice, while doors stark to squeak from never being opened.

There are no actual winners when foreclosure evictions take place. The evicted homeowners and their families are now displaced, possibly homeless for who knows how long. These people now have foreclosures on their credit reports, and eventually, evictions. So, whose going to rent to them? In the meantime, their kids are yanked from their schools. They not only lose their homes, but their friends and other connections to their communities. And, to top it off, now we have yet another boarded up home in the neighborhood. That doesn’t look very nice for the community.

April 1, 2012 will bring major changes for borrowers seeking FHA-insured mortgages. If you currently have credit disputes that are over $1,000, you will not qualify for these loans, according to the Federal Housing Administration, also known as FHA. This is a new rule that’s now be instated to ensure that borrowers pay off these outstanding debts before applying for an FHA-insured mortgage loan.

In the past, borrowers with open disputes were allowed to apply for these loans. The underwriter was given the discretion to determine whether these unpaid debts should have a negative impact on the loan being approved. But, as of April 1^st, the balance of the collection debts must be paid off or an approved payment arrangement must be documented. If a payment arrangement agreement exists between the borrower and the creditor, proof must be submitted to the FHA-approved lender before escrow will be allowed to close. The new payment arrangement will count towards the borrower’s debt-to-income ratio, with may also affect approval of the loan.

New Impacts on FHA-insured Loans

Many real estate experts expect this to have a negative impact on the mortgage business. 1/3 to 1/2 of FHA originated loans may be impacted in 2012 due to this new rule. This is because a large amount of borrowers have some open collection accounts. This includes borrowers in the 650 to 680 FICO score range. Even those with scores as high as 750 may have medical bills or college loans that are still outstanding and have been sent to collections.

People are finding this unfair because it hasn’t always been the norm to consider medical bills and college loans as “bad debts.” In the past, medical bills could be forgiven due to disputes arising from medical insurance issues. While college loans tend to go in and out of collections as graduates make payment arrangements based on their ability to find quality employment in their fields of study.

There are a couple of good exceptions to the new rule:

• Disputed debts that are over two years old are excluded from the new rule.
• Disputes arising from documented thefts and identity thefts are also excluded. This documentation must be provided to the lender and must include identity theft reports and filed police reports for fraudulent charges.

Some builders are reporting an expected 60 to 80 percent decline in FHA-insured mortgage approvals due to this new rule. This will have a severe impact on communities looking to these loans to help restore communities hard hit by the foreclosure crisis.

FHA Reasons for New Rule

According to a spokesperson for FHA, this new reason was added to help protect FHA’s emergency funds. The levels of these funds decreased about 1/5 of a percent last year, which is way below what Congress has mandated at two percent. Because of this, FHA is also increasing insurance premiums for borrowers starting on April 1^st. This is in hopes of boosting the fund by one billion dollars.

An evaluation of FHA loans showed that most borrowers who were delinquent on their FHA-insured mortgage payments, also had unpaid credit collections prior to getting their loans. FHA is hoping that the new rule will help to minimize their risks of these federal insured mortgage loans. Real estate experts are expecting this new rule, along with the increase in FHA insurance premiums, to send new borrowers swarming to Fannie Mae and Freddie Mac for mortgage loan assistance.