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From Banking and Finance Law Daily, September 16, 2013

August housing scorecard shows progress across key housing market indicators

By Katalina M. Bianco, J.D.

The Treasury Department and U.S. Department of Urban Housing and Development (HUD) have released the August 2013 housing scorecard, a comprehensive monthly report on the U.S. housing market. This latest report indicates progress across key housing indicators—home prices, purchases of new homes, and sales of existing homes. Despite the continued progress in the market, however, the Obama administration cautions that overall recovery remains “fragile.”

"With the number of underwater homeowners decreasing by more than 40%, it is clear that we are moving in the right direction,” said HUD Deputy Assistant Secretary for Economic Affairs Kurt Usowski. “As we regain stability in our housing markets, it is important to remember that we still have a long way to go in making sure that our housing finance system is strong for future generations."

Key data. Key data on the housing market reflected in the August scorecard include:

  • strong annual gains in home prices continued;
  • the number of underwater homeowners has fallen by 42 percent since the beginning of 2012 - from 12.1 million to 7.1 million as of the second quarter of 2013; and
  • during the second quarter of 2013, Neighborhood Stabilization Program (NSP) grantees report cumulative completions of newly constructed or rehabilitated housing units under NSP topped 25,000 units, while direct assistance to homeowners reached the 10,000 mark.

Mortgage modifications. The August scorecard reports that more than 1.2 million homeowners have received a permanent mortgage modification through the Home Affordable Modification Program (HAMP) as of July 2013.

Treasury Assistant Secretary for Financial Stability Tim Massad said “The standards set by the Making Home Affordable program have changed the mortgage servicing industry, as have our quarterly assessments of servicer performance.” He noted that “While there has been significant progress, there is still more improvement needed in servicer behavior.”

The August scorecard reflects that homeowners have reduced their first lien mortgage payments by a median of approximately $547 each month—nearly 40 percent of their median before-modification payment—saving a total estimated $21.6 billion to date in monthly mortgage payments.

Homeowners currently in HAMP permanent modifications with some form of principal reduction have been granted an estimated $11.1 billion in principal reduction, according to the report. Of all non-government sponsored enterprises loans eligible for principal reduction entering HAMP in July, 73 percent included a principal reduction feature.

The scorecard also indicates that:

  • nearly 200,000 homeowners exited their homes through a short sale or deed-in-lieu of foreclosure with assistance from the Home Affordable Foreclosure Alternatives Program; and
  • more than 115,000 second lien modifications have been completed to date through the Second Lien Modification Program.

Servicer assessments. The scorecard indicates for the second quarter of 2013, all mortgage servicers were determined to need moderate improvement. However, the assessment also determined that servicers have continued to focus attention on areas identified in previous program reviews and, as a result, have shown improvement in program implementation.

In addition, servicers have improved in accurately calculating homeowners’ income, which is used to determine eligibility and modified payment amount in the program. The average income calculation error rate for the second quarter of 2013 was less than 2 percent.

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