In a related story, the national government is looking at changes to the loan modification process. Story here.

And there’s more:

Sigh.

Listen at the audio link or read the article at NPR.org.

I had not heard locally of a backlog, but I suppose homes that are short sales that are still awaiting lender approval could be affected.

More info at CNBC.

From the New York Times comes:

More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave. This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.

Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

The full article at the New York Times.

First, the Federal Reserve will discontinue its purchase of mortgage-backed securities, which has artificially kept mortgage rates down. Then, the homebuyer tax credits will expire at mid-year, leaving the housing market to fend for itself.

How will it do?

The New York Times hit that subject today, and while Portland is no Elkhart, Indiana, I do worry about the second half of the year here.

…it is uncertain whether the government can really pull back without sending housing markets into another tailspin. “A rise in rates would kill us all by itself,” Ms. Swartley (Elkhart Realtor) said.

The Obama administration has offered few ideas about reforming the housing market. Proposals for the future of Fannie Mae and Freddie Mac, the mortgage holding companies taken over by the government at the height of the crisis, were supposed to be introduced with the president’s budget this month. They were not.

The government programs, however crucial, are distorting the market. The tax credit produced sales last fall, but some lenders here say it has troubling implications.

Troubling, indeed. Read the full NYT article here.

Photo by pfala, used under Creative Commons license.

Here’s a 4-minute video showing why (some) banks aren’t really interested in HARP refinances or modification:

Click here to view the embedded video.

Hat tip to Ralph Olson at Pacific West Appraisal.

In a move to minimize its own insolvency and avoid a bailout, the FHA is refining its lending guidelines and raising fees to borrowers.

In changes expected to occur in the first half of 2010, FHA-insured loans will require:

• Up-front mortgage insurance premiums to be 2.25% (up from 1.75% currently).
• Minimum FICO credit score of 580. Lower credit scores will require a 10% downpayment.
• Sellers limiting credits toward buyer’s closing costs and prepaid expenses to 3% (currently 6%).

From USA Today:

The changes, aimed at strengthening the FHA‘s reserves in the face of rising foreclosures, shouldn’t hurt too many borrowers, officials say.

“We don’t expect this to have a significant impact on the housing market,” says FHA Commissioner David Stevens, adding that “the moves are designed to get the reserves back up.”

The FHA is playing a greater role in the mortgage market, insuring about 30% of new loans, up from 3% in 2007. Growing defaults have cut its reserves below the level mandated by Congress, leading to fears that it might need a taxpayer bailout.

The rule had been in place to reduce the practice of speculators flipping properties for quick profit, but large inventories of foreclosures prompted the administration to suspend the rule in hopes of accelerating the sale of vacant properties.

“As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers,” said Donovan. “FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization.”

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

The ruling will be in effect for one year. I don’t know if the ruling will have a significant effect on the Portland market in particular. Full text of the HUD announcement here.

[Photo courtesy of Lazurite, published under Creative Commons license.]

Q&A: Advice for navigating the housing downturn

Columnist Ryan Frank touches on a number of consumer questions regarding the housing market. And, scroll to the bottom of this story for more on how current home buyers are faring in the current environment.

Is PDX housing hitting a false bottom?

Ryan Frank follows up his article with a sundry rundown of housing information resources.

Modifying loans creates credit mess, not relief

Brent Hunsberger of The Oregonian’s money beat shares the perils of a couple local consumers seeking loan modifications, when proactively solicited by the lender. Caveat emptor.