Ventura County Loan Modification HELP!! Will HAMP Borrowers Absorb Higher Payments When Mods Reset?..or Default #ChrisBJohnsonRealtor

By Chris B Johnson Realtor, Ventura County Short Sale,
The clock is ticking...Approximately half a million homeowners who received a mortgage loan modification in 2010 through the government's Home Affordable Modification Program, commonly known as HAMP, are due to reset in 2015 – and those homeowners will be facing slowly increasing monthly mortgage payments.

HARP or Conventional Re-Fi

Will these homeowners be able to handle the payment increases, or will there be a massive wave of re-defaults?
The U.S Department of Treasury and Department of Housing and Urban Development (HUD) launched HAMP in 2009 as part of its Making Home Affordable initiative to provide relief for homeowners facing financial hardship by reducing monthly payments to affordable levels through lowered interest rates and modified loan terms. The goal of the modifications was to reduce monthly payments to about 31 percent of the homeowner's income. According to Mark McArdle, Chief Homeownership Preservation Officer at Treasury, HAMP has saved distressed homeowners an average of about $547 per month (about 39 percent) on mortgage payments by lowering their interest rate in many cases to 2 percent.

Thinking about a loan modification? Our Ventura county Loan Modification kit has the instructions you will need to get a loan modification approved with your bank. Click here to request a copy.

There are some who are not sold on the effectiveness of HAMP. One of those is Bankrate.com Chief Financial Analyst Greg McBride, who said in 2009 that homeowners receiving a modification through HAMP were simply "kicking the can down the road" and now that we are in 2015, "we're at the end of the road" because of all the HAMP mods due to reset this year. Furthermore, he said he thinks many homeowners will be "shocked" to find out that "permanent didn't really mean permanent" and instead meant five years.

"What happens is that payment starts to normalize – that 2 percent increases by 1 percentage point per year," McBride said. "So what's going to happen is these homeowners are going to see their mortgage payments go up this year, next year, and in many cases, the year after that. That's where the potential problem is. Household incomes have been stagnant and many homeowners don't have the additional room in their budget to absorb higher payments. Even if they can absorb the first payment increase, the cumulative increase of payments in subsequent years could prove problematic."
Just how problematic will the interest payment increases be? That remains to be seen, but even without the interest increases, re-default rates on HAMP mods have hovered around 40 percent for mods with a 2010 vintage.

As of the end of Q3 2014, the latest data available, HAMP has helped about 1.4 million distressed homeowners receive permanent loan modifications.  Of the approximately 60,000 permanent modifications completed in 2009, the first year of HAMP, about 42 percent of those modifications were 90 or more days delinquent 42 months after the modification became permanent. Of the nearly 511,000 HAMP modifications with a vintage of 2010, that percentage was about the same for those with a 2009 vintage – about 41 percent. That is double the percentage of overall 90-day delinquency rate of all HAMP mods completed through the second quarter of 2013, which is 20 percent.
Treasury has been considering the possibility of re-defaults on HAMP mods and has ways of helping those borrowers for years.

"In addition, we are looking at whether financial counseling for borrowers at the beginning of a modification can be effective in reducing re-default risk," McArdle wrote in 2013. "While re-default remains an unfortunate outcome for some borrowers, clearly without HAMP, national foreclosures rates would have been much higher and many borrowers would not have received the assistance they needed. HAMP continues to be the strongest available program for mortgage modifications. Receiving assistance through HAMP gives homeowners a valuable opportunity to strengthen their financial footing and stay in their homes."

McArdle said that only a small percentage of borrowers who re-default on HAMP mods actually go into foreclosure. Many who re-default are later able to find solutions to avoid foreclosure.
"Of those homeowners who have not been able to keep up with their modified payments under HAMP, the majority have received other forms of assistance or reinstated or paid off their mortgage loans," McArdle wrote. "HAMP requires servicers to reach out to any homeowner who falls behind on a modification to review all other assistance options, before the servicer starts foreclosure proceedings."

Many Ventura County Homes Appreciated by over 26% In The Last 2 Years.  If you’re thinking of selling, yours may have now have enough equity to sell without being “Short”. Pricing your home correctly the FIRST TIME is more important than ever! If you want an accurate idea of what your home is worth Click Here:

You may now have enough EQUITY in your home to sell WITHOUT having to be “short”. If you are thinking about a short sale I can help you get an accurate value for your home and get back on your feet.

If you would like periodic updates on what is going on in Your Neighborhood or the Ventura County Real Estate Market, Click on the Links!

McArdle is scheduled to be a panelist on the "Modifying Modifcation" panel at the upcoming Five Star Government Forum in Washington, D.C. on March 18. This panel will assess HAMP and its effect on stabilizing the housing market and assisting distressed homeowners.

With regard to the possibility of re-default, McArdle said Treasury is ready.

"Treasury will maintain its oversight of participating servicers," McArdle said in a note to servicers last March. "We will monitor the interest rate resets to ensure that if signs of homeowner distress arise, servicers are ready and able to help by providing loss mitigation options and alternatives to foreclosures."

McBride said although there will be HAMP re-defaults, it will likely not trigger a housing bust similar to the one the country experienced seven years ago.

"The numbers aren't that big relative to what we saw during the housing bust and it's spread out over a period of several years, so it's not coming all at once," McBride said.

Chris B Johnson, REALTOR®.                       Your Moorpark Neighborhood Specialists

Moorpark Home Market Trends               Moorpark Condo-TownHome Market Trends

Thousand Oaks Home Market Trends    Thousand Oaks Condo-TownHome Market Trends

Simi Valley Home Market Trends            Simi Valley Condo-TownHome Market Trends

WestLake Home Market Trends               WestLake Condo-TownHome Market Trends

Camarillo Home Market Trends              Camarillo Condo-TownHome Market Trends

Oxnard Home Market Trends                    Oxnard Condo-TownHome Market Trends

CAR Real Estate Market Forecast 2015  Luxury Home Specialist

PluseEconomic Forecast                               Inflation                              Good To Know

HARP or Conventional Re-Fi

Simi Valley Short Sale, 4 Reasons You Should Sell Your Home Right Now

By Chris B Johnson Realtor,  

Simi Valley Short Sale, 

Moorpark Short Sale  

Ventura County Short Sale, 

Thousand Oaks Short Sale,

Many Ventura County Homes Appreciated by over 26% In The Last 2 Years.  If you’re thinking of selling, yours may have now have enough equity to sell without being “Short”. Pricing your home correctly the FIRST TIME is more important than ever! If you want an accurate idea of what your home is worth Click Here:

You may now have enough EQUITY in your home to sell WITHOUT having to be “short”. If you are thinking about a short sale I can help you get an accurate value for your home and get back on your feet.

If you would like periodic updates on what is going on in Your Neighborhood or the Ventura County Real Estate Market, Click on the Links!

Thanks for reading this, 

Chris B Johnson. 

Chris B Johnson is a Realtor with Berkshire Hathaway HomeServices . 

Phone: 805-208-0823. 

email cjohnson@BHHScalhomes.com.

Certified HAFA Specialist   Certified Distressed Property Expert   Certified Short Sale Negotiator  

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Short Sale VS Foreclosure                                    Loan Mod-Active Status Review

Is It Too Late For A Short Sale?                 The Truth About Loan Modification Approvals

Thousand Oaks Real Estate Market Update       Simi Valley Real Estate Market Update

Moorpark Market Real Estate Update                               Westlake Village Real Estate Market Update

Camarillo Real Estate Market Update

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The Return Of The Housing Market

Home Affordable Foreclosure Alternatives (HAFA)

Home Affordable Modification Program (HAMP)
Home Affordable Refinance Program (HARP)

Second Lien Modification Program (2MP)

Simi Valley Short Sale Specialist, 30 years of summer, followed by 30 years of winter.

By Chris B Johnson Realtor,  

The 10-year Treasury note is at 2.08% in January 2015. This is up from a cyclical low of around 1.5% in mid-2012. Interest rates rise and fall in a cycle, and the current rising trend is the beginning of two or three decades of rising interest rates. This will dampen home price increases, as buyer purchasing power is continually reduced.

Simi Valley Short Sale, Moorpark Short Sale  

Ventura County Short Sale,

Thousand Oaks Short Sale

Bond market cycles

The average monthly 10-Year Treasury Note (T-Note) yield since 1900 is shown on the chart above. As demonstrated, interest rates on the 10-Year T-Note have shown an overall decline since 1980, following a rise from lows last reached in 1941.

We can now see that 1940-1950 marked the beginning of what has become a 60-year rates cycle: approximately 30 years of rising rates, followed by 30 years of falling rates. This roughly mirrors the 60-year period prior to 1950, in which interest rates peaked in 1921.

Looking forward to the next 60-year rate cycle, first tuesday expects another slow upward run in rates for 20-30 years, and then a reversal into rate declines as occurred following 1980.

The interest rate on the 10-Year T-Note dropped as low as 1.47%  in early June 2012 as the euro, the renminbi, and the Brazilian real all weakened against the U.S. dollar. These lows were extreme and are evidence of international monetary stress.

Mortgage rates have historically moved in tandem with the 10-year T-note at a 1.4% spread. However, this 1.4% spread has been  elevated – at around 1.5-1.7% – since 2012. This indicates that despite the historically low mortgage rates experienced in these past couple years, homebuyers are overpaying for loans.

As we head into 2015, 10-year T-notes have dropped slightly but continue their long rise. The upcoming period of rising rates is likely to last for quite a long time – two or three decades.

The last three cycles in bond market rates have been extremely regular, points out Chris Watling of Longview Economics. A 27-year downtrend in rates (1922-1949), followed by a 32-year uptrend (1949-1982) and another 31-year downtrend lasting to the present. While the regularity of this pattern of 30-year passages should be considered coincidental (they very easily might have been forty years, or twenty), precedent establishes that bond market rate changes are much slower and more gradual than, say, changes in the stock market.

Related article:
Current market rates

Interest rates and asset pricing

In previous interest rate cycles, rates rose for approximately thirty years, peaking in 1921 and again in 1979 after rising from essentially zero in the late 1940s, following the recovery from the Great Depression.

In 1947, at the end of World War II, interest rates on the 10-year T-Note were near zero, much as they are today. Then, from 1947 to1979, rates moved steadily upward.

1947 is a key year for other reasons as well: it marked the end of a recession, and a long-awaited return to prosperity after the Great Depression of the late-1930s. If this interest rate pattern holds true, as first tuesday believes it will, we now find ourselves at the beginning of a reversal in the real estate market comparable in type, if not in intensity, to the turnaround after 1947.

During the resulting half cycle of rising interest rates from 1949 to 1982, the wealth of investors increased even as interest rates rose, housing construction was very strong and employment and prosperity increased as well. The American Dream of jobs, cars and homes for all was in full bloom during this period. We expect to experience similar conditions during the two or three decades, into the mid 2030s – once we get out of this extended recovery period (this time, hopefully without the stimulus of a war effort).

For the housing market, however, rising interest rates, even static interest rates, mean that there will be no short-term profits to be had from any increase in pricing.  The notorious “Greenspan Put,” which we have grown accustomed to seeing after every drop in interest rates, will not and cannot be repeated to artificially generate profits in any asset market – commodities, stocks, bonds or real estate.

Mortgage rates are inextricably tied to bond market rates, and every increase in bond and mortgage rates means a decrease in a homebuyer’s purchasing power – the amount they can borrow based on repayment at 31% of income – and an increase in the earnings of the rentier class. Thus, a buyer will experience a decrease in the amount they can pay for a home.

Less money borrowed by homebuyers means less price received by sellers for their properties.  Of course, this annual decrease in purchasing power is fully offset in actual (nominal) dollar terms by the Fed’s monetary policy, which maintains annual inflation around 2%. This inflation is the driving force increasing wages from year to year.

As in the period of rising bond and mortgage rates from 1949-1982, prices will be held down, rising only in response to consumer inflation as permitted by the Fed and any “price appreciation” at the property’s location (appreciation occurs solely due to demographics, as demand for real estate within an area increases with a rise in the area’s population density or an increase in the income of that population beyond the rate of inflation). [For more in price evaluation, see thefirst tuesday Income Property Brokerage (IPB) suite of forms]

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Using the yield spread to forecast recessions and recoveries

Interest rates in the modern day

The Fed ceased its final round of quantitative easing (QE3) in October 2014, promising to keep the short-term interest rate low (around 0.25%) until the economy improves sufficiently. They will likely raise interest rates by the end of 2015, or perhaps in early 2016. The 30-year FRM rate will increase in anticipation of the Fed’s increase of the short-term rate, the beginning of the next 20-30 years of rising mortgage rates.

When rates rise, agents will quickly learn to cope with an unfamiliar set of investment and pricing challenges (including different income multiplier/capitalization rates, long-term holding periods before profits can be taken, and Due-On Sale clause assumptions).

The key lesson to remember in those upcoming years will be that real estate is most properly priced and held for its inherent rental value. Those who buy property for speculative gain, not rental income, will see as little success in gains from a flip as those who invested in the real estate market from 1950 to 1980, when mortgage rates moved slowly, steadily upward until they exceeded 18%.

The next peak in rates, whether or not they reach past heights, will likely take another 30 years to arrive.  But this cycle’s days of steadily decreasing interest rates, accompanied by steadily falling rents, producing ever increasing prices and profits (and §1031 hysteria) have run their course to the bitter end.

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California tiered home pricing

Loosen the noose on urban density

In the last two decades, it was possible to purchase a parcel of real estate, vacant or improved, and take a profit, much greater than the rate of consumer inflation, merely by holding that parcel for a short period of time. This is no longer an option. Prices may rise in narrowly defined locations enjoying a population density explosion, but most will be dampened by constantly rising interest rates which will keep prices from rising faster than the rate of core inflation.

The negative pricing effects of increasing interest rates can be at least in part counterbalanced by improved zoning. If property prices rise beyond the rate of inflation, local governments will have to permit density to increase to accommodate those who are attracted to the area or suffer the consequences of an asset inflation bubble. Smart investors will look to purchase property in urban centers which have already begun to establish themselves as the most desirable abodes for the next generation of homeowners and tenants.

In the long run, investors in real estate will need to increase their wealth, not by flipping their properties for profit, but by generating rental income over the course of long-term ownership. Income property will be bought to be operated and managed for an annual net operating income, capitalizing at the rate proper going forward.

In boom times, property owners were accustomed to capitalization rates (cap rates) of 6% or less. For upcoming years, 10% may be more normal. Prudent property selection, careful research, forward looking capitalization rates and a long-term commitment to real estate ownership will be the keys to success in the new paradigm.

About The Author

ft Editorial Staff

is the writing staff comprised of legal editor Fred Crane, In-House Broker Consultant Fernando Nunez and writer-editors Connor P. Wallmark, Giang Hoang-Burdette, Carrie B. Reyes, Matthew Taylor and Sarah Kolvas, and graphic designer Mary LaRochelle.

Simi Valley Short Sale Specialists, What are the Past and Future Trends in Buyers Purchasing Power?

By Chris B Johnson Realtor,  

Mortgage rates last peaked in 1982 at an average rate of 17% on a 30-year FRM.  These rates generally declined for the next 30 years, bottoming in 2012 at just over 3.3%. At this time, the interest rate on the 10-year Treasury note (which lenders use to set their mortgage rates) was near zero. The last time it was this low was just after World War II, which ended the Great Depression and a prior interest rate cycle — roughly 30 years up and 30 years down.

We are now in the upswing of the cycle, as interest rates on Treasury notes and mortgages are expected to rise for the next two to three decades. Further, as in the period of rising mortgage rates from 1949-1982, prices will feel downward pressure due to the decrease in buyer purchasing power — unless wages increase to offset increasing mortgage rate results. In a very broad sense, price increases over the next few decades will be limited to the rate of consumer inflation, around 2%-3% a year.

Of course, prices will fluctuate above and below the inflation rate from year to year based on changes in local demographics, jobs, zoning and construction.

Chris B Johnson, REALTOR®.                       Your Moorpark Neighborhood Specialists

Moorpark Home Market Trends               Moorpark Condo-TownHome Market Trends

Thousand Oaks Home Market Trends    Thousand Oaks Condo-TownHome Market Trends

Simi Valley Home Market Trends            Simi Valley Condo-TownHome Market Trends

WestLake Home Market Trends               WestLake Condo-TownHome Market Trends

Camarillo Home Market Trends               Camarillo Condo-TownHome Market Trends

Oxnard Home Market Trends                    Oxnard Condo-TownHome Market Trends

CAR Real Estate Market Forecast 2015  Luxury Home Specialist

PluseEconomic Forecast                               Inflation                              Good To Know

Simi Valley Short Sale Specialist,What is the connection between buyer purchasing power and home prices?

By Chris B Johnson Realtor, 

Simi Valley Home Market Trends         
   
Simi Valley Condo-TownHome Market Trends

Buyer purchasing power is the driving force behind real estate pricing, as each homebuyer in need of a mortgage has a maximum price they qualify to pay to purchase property. This maximum price depends on:

• the buyer’s down payment; and
• the mortgage funds they qualify to borrow from a lender.

When buyer purchasing power falls, home prices are sure to follow. When purchasing power rises, the outlook for future price increases is good.

History tells us that home prices begin to rise about six months after buyer purchasing power rises. Home prices begin to fall 9-12 months after buyer purchasing power begins to fall in a sustained manner. The delay for falling home prices is due to the sticky price phenomenon, in which sellers initially refuse to adjust their prices to reflect today’s fair market value (FMV).

Other factors that influence these pricing trends include:

• speculator over-activity (as in 2012-2013), which artificially boosts home prices even when buyer purchasing power declines;
• adjustable rate mortgage (ARM) usage, which provides additional funding and temporarily delays decreases in pricing due to depressed buyer purchasing power;
• the personal savings rate, which addresses down payment amounts and thus mortgage insurance;
• construction and zoning, which tempers home pricing in desirable areas;
• population density and income growth, which influences home sales volume and price movement; and
• economic shocks, which cause end user homebuyers to exit the market and investors to swoop in.

Moorpark Home Market Trends               Moorpark Condo-TownHome Market Trends

Thousand Oaks Home Market Trends    Thousand Oaks Condo-TownHome Market Trends

WestLake Home Market Trends               WestLake Condo-TownHome Market Trends

Camarillo Home Market Trends               Camarillo Condo-TownHome Market Trends             

Oxnard Home Market Trends                  Oxnard Condo-TownHome Market Trends

CAR Real Estate Market Forecast 2015                       Luxury Home Specialist

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