Despite some of the positive news in housing markets, the rate of mortgage foreclosures is on a sharp incline. In fourth quarter 2009 Texas' foreclosure rate reached its highest point—2 percent—in the past three decades. (Figure 1).
The rate of seriously delinquent mortgage loans in Texas rose across all loan types. Subprime adjustable-rate mortgages (ARMs) and subprime fixed-rate mortgages (FRMs) performed particularly poorly. (Figure 2). But homeowners with prime loans—the majority of outstanding mortgage loans—also are hurting. Unemployment, resets of high-cost loans, home value declines and other factors contribute to these delinquencies.
Following is a list of resources that help address the foreclosure problem.
Foreclosure Resource Center
The Dallas Fed's Foreclosure Resource Center is continually updated. It provides a listing of local and national events, news, resources and information about foreclosure prevention for consumers, financial institutions, community development professionals and neighborhood groups.
Examples of recent announcements posted on the Foreclosure Resource Center are:
- Citi is offering distressed homeowners a relatively graceful exit from homeownership in exchange for the deed to their properties.
- NeighborWorks America's national campaign to help homeowners protect themselves against loan modification scams, find assistance and report illegal activity.
- A link to the Federal Reserve Bank of New York's webpage "U.S. Credit Conditions," which has interactive maps and data on auto loans, bank cards, mortgages and students loans.
- Fannie Mae's new Deed-for-Lease program can provide a graceful exit for borrowers who cannot afford mortgage payments on their home but can afford to rent the home at market rates.
Foreclosure Prevention and Mitigation
Throughout the Eleventh District of the Federal Reserve System there are a number of foreclosure prevention and mitigation resources, discussions and recent developments.
- Foreclosure Prevention Workshop Attended by Hundreds in Houston
In collaboration with the national HOPE Now Alliance, the Greater Houston Foreclosure Prevention Task Force organized and hosted a foreclosure prevention workshop for consumers on Feb. 20, 2010, at Lakewood Church in Houston. Approximately 900 households attended the event. Staff from ten local HUD-approved nonprofit housing counseling agencies assisted borrowers with information on the Making Home Affordable program and other foreclosure alternatives. Loss mitigation staff from 14 lending institutions met with borrowers to expedite a decision on their modification request. In addition, the Greater Houston Foreclosure Prevention Task Force recruited approximately 45 volunteers to assist at the event.
- Texas and Houston Economic and Housing Outlook for 2010 and Beyond
On Feb. 12, the Federal Reserve Bank of Dallas, Houston Branch, hosted the "Texas and Houston Economic and Housing Outlook for 2010 and Beyond," a forum attended by over 150 professionals, including members of the Greater Houston Foreclosure Prevention Task Force, area financial institutions, nonprofit housing counselors, real estate professionals and others.
U.S. Rep. Al Green greeted the audience and commended the local task force for providing valuable foreclosure prevention information to consumers in the Houston area. Green also provided information on work in process at the federal level to make the Making Home Affordable program more effective. City of Houston Councilmember Jolanda Jones also welcomed the audience and expressed her appreciation of the work of the task force. Jones suggested using foreclosure rescue scam warning ads on local cable access television. Roberta Nordstrum from the Texas attorney general's office presented information on foreclosure rescue scams and the work that the attorney general is doing to raise awareness of and prosecute these crimes.
Dr. James Gaines, research economist with the Real Estate Center at Texas A&M University, provided an overview on the local and state economy and outlook for real estate. Gaines' presentation showed the Texas economy facing some major hurdles in 2010 with state, local and school district budget shortfalls, continued tightening of credit, and uncertainty stemming from pending changes in laws, regulations and taxes. Gaines says the future for Texas is still bright because the state is poised for a 21st century population boom.
As an example, he described the Texas Urban Triangle, the 58,410 square miles between Dallas–Fort Worth, Houston and San Antonio that is expected to see a 120 percent increase in population by the year 2040. To illustrate this population increase, Dr. Gaines said it would be like adding another 12-county Dallas–Fort Worth metropolitan area, another 10-county Houston metro area, another eight-county San Antonio metro area, plus another Corpus Christi. The resulting population and economic growth prospects, along with low-cost available labor, pro-growth attitude and affordable land, housing and overall cost of living, will eventually offset the pain of the current recession.
- SAFE Act: What It Is and Who It Affects in Texas
The effect of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the "SAFE Act") on nonprofit housing counselors has become an issue of interest to Texas Foreclosure Prevention Task Force members.
The SAFE Act was signed into legislation as part of the Housing and Economic Recovery Act of 2008 and requires that each state establish a loan originator licensing program. The licensing program must include requirements that loan originators take an education course, pass a test and undergo civil, criminal and financial background checks to become licensed. If the state has a licensing system already in place, as Texas does, it has until Dec. 31, 2010, to bring its system in line with SAFE Act requirements.
In December 2009, HUD published proposed rules for state compliance with the SAFE Act. In addition to establishing HUD's responsibilities under the SAFE Act with the proposed rule, HUD solicited comments through March 5 on the proposed clarifications. Comments were submitted electronically via Regulations.gov; comments posted to date can be viewed at that site.
In Texas, the SAFE Act is implemented by the Texas Department of Savings and Mortgage Lending (Texas SML). The Texas Foreclosure Prevention Task Force has maintained close communications with its members and with the Texas SML regarding the impact of SAFE Act licensing requirements on nonprofit HUD-approved housing counselors. Texas SML Commissioner Douglas Foster has now provided a clarification to the licensing requirements, which exempts HUD-approved housing counselors who do not originate mortgage products from the SAFE Act's requirement to obtain a mortgage license. For more information, see "Who does not need this license?" on the Texas SML Auxiliary Mortgage Loan Activity Company License description at the Nationwide Mortgage Licensing System Resource Center.
- Fannie Mae and Freddie Mac to Purchase Delinquent Loans
Fannie Mae and Freddie Mac reported in February that they will buy substantially all of their single-family mortgage loans that are 120 days or more delinquent. Freddie Mac will buy all of these loans at one time, while Fannie Mae will buy them in stages. Both companies will hold their respective loans in their mortgage investment portfolios. Purchasing these troubled loans will reduce their costs because the interest on these debts is less expensive than their continued payments to investors. At the same time, investors will get the principal back on these loans sooner than they otherwise would have. For details, see "Fannie Mae to Purchase Delinquent Loans from Single-Family MBS Trusts" and "Freddie Mac to Purchase Substantial Number of Seriously Delinquent Loans From PC Securities".
- Renter's Rights and Responsibilities
What can renters do when their landlords foreclose on their properties? Renters' rights and responsibilities are outlined in the resources listed below.
—Elizabeth Sobel Blum and Julie Gunter
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