My girlfriend thinks that I'm a stalker. Well, she's not exactly my girlfriend - yet.

On general mortgage conditions from an email, "Six years ago underwriting was 'anything goes' to 'nothing doing' now, which reflects banks attitudes that they are not willing to take the risks that they did prior to the housing crash and subsequent decline in economic growth. The private market for funding mortgages is broken and will take a long time to fix and the government is not helping by the talk that the FHA should tighten up when they are almost the only game in town. The FHA is under the microscope by Republicans as they want to raise the minimum down payment on FHA loans to 5% and drastically scale back the size of the federal mortgage insurance program. Is this what housing needs?"

The north Atlantic hurricane season began on June 1st, and lasts through Nov. 30. Per the U.S. Census Bureau nearly 37 million people in the US live in areas most threatened by Atlantic hurricanes: the coastal portion of states stretching from North Carolina to Texas. (Approximately 12%) of the nation's population live in these areas.) This compares to 14 million who lived in that hurricane path in 1960, a 163% increase.

More than three-fourths of housing counselors responding to a survey conducted by the Government Accountability Office said borrowers hold a "negative" or "very negative" experience with the Home Affordable Modification Program(HAMP)(The Gov't programs that where supposed to assist homeowners.

The GAO received 500 responses to its October 2010 survey of roughly 130 housing agencies regarding HAMP. Nearly 400 responded to the question about how the borrowers they worked with felt about the program. Only 9% of the counselors said borrowers had a "positive" experience, according to the GAO report released Thursday.

The Treasury Department expressed concern in the GAO report about the lag time between the survey and current HAMP performance, but admitted some of the problems counselors brought to light still linger.

Nearly of half of the counselors who wrote to the GAO said they were receiving "inconsistent or confusing information" when dealing with a different representative each time they called.

The Treasury established a rule in May requiring servicers to establish a single point of contact for borrowers working through HAMP and proprietary modification programs and foreclosure.

But other problems in the program persist.

Lengthy timelines

Nearly one-third of the counselors complained of the lengthy decisionmaking process. According to HAMP guidelines, mortgage servicers must notify borrowers if they have been approved for a trial modification within 30 days of receiving the complete HAMP application package.

More than 86% of the counselors said it usually took four months or longer. Almost half reported timelines longer than seven months.

Nearly three-fourths of the counselors said servicers lost documentation. The GAO adds that participating homeowners often report a lack of disclosure by the mortgage servicer on the HAMP process.

Miscalculations

When the GAO conducted the survey, roughly 974,000 borrowers had been denied a HAMP trial. That number has since risen to 1.3 million as of February.

The main reason why borrowers are rejected is because their mortgage payments already are less than 31% of their monthly income. More than half of the counselors said these borrowers were denied these modifications because servicers allegedly miscalculated the borrowers' gross monthly income.

Counselors said servicers miscalculated self-employment income, used the income of one or more nonborrowers – not a cosigner – in the calculation, and also included temporary income from unemployment or other benefit programs.

More than half of the counselors said servicers even miscalculated the usually straightforward annual incomes.

Solutions

The Treasury has made some changes since the survey was conducted. Along with the single-point-of-contact rule, officials established a new escalation program in February to give borrowers who were denied a modification a chance to contest the servicer's decision.

NAR chief economist Lawrence Yun blames banks for "holding onto huge cash reserves" as the primary reason for the latest plunge in housing. He also cites the weather, oil prices, a temporary soft patch, and everything but motherhood and apple pie.

Excess Reserve Nonsense

Banks lend when they think they have a good credit risk provided they are not capital impaired or concerned about capital impairment. That provision is critical.

Banks do not lend from reserves or even need reserves to lend. Loans come first, reserves second.

Please see Fictional Reserve Lending for a detailed discussion. Note: I wrote that piece in December 2009 so the charts are old. However, the concept about reserves and lending still applies.

Capital Impairment the Critical Problem

That banks are not lending is a sign of at least one of the following problems, and likely all three.

• Capital impairment
• Lack of good credit risks
• Lack of consumer demand

In spite of what the Fed or the FDIC may want you to believe, many banks are capital impaired. They hold massive amounts of garbage on their balance sheets (especially real estate and commercial real estate), at marked-to-fantasy prices, not marked-to-market prices.

The excess reserves Yun cites are a mirage.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
 

The economy continues to exhibit very little forward traction, and we are likely to start the summer with a bit of an economic swoon. Optimism about future growth still remains, but high food, energy and commodity prices have definitely trimmed forward momentum to a considerable degree. For whatever it has contributed to growth, the Federal Reserve's program of purchasing an additional $600 billion worth of Treasuries comes to a close by month's end, and that could exacerbate the slowness somewhat.
Mortgage rates, of course, love slow economic times, since that lessens both demand for credit and the potential for inflation. We do have an inflation problem, but it is not yet of the nature which causes overall price spirals; rather, we have the kind which acts like a tax on the economy, putting the brakes on economic growth -- and at a time when it is least welcome.

Auto sales, which had been slowly but steadily recovering over the past year posted a sizable drop in May. According to AutoData, just 11.8 million (annualized) new vehicles were sold in May, dropping sales back to year-ago levels. Of course, there are some supply interruptions due to both the Japan disaster and shipping concerns with regard to Mississippi river flooding, and a lack of strong sales incentives, but even allowing for those disruptions doesn't change the story to any great degree. Consumers are hurting, and it's often cheaper to fix the old car than to take on the commitment of a new payment each month. We remain a long way away from a normal sales market for new cards.
The increasingly weak economic outlook has driven mortgage rates to 2011 lows. While we remain about a third of a percentage point above our October 2010 rock-bottom levels, we should be nearing a place where refinancing opportunities start to show for an increasing number of homeowners. However, if home prices really are falling quickly again, it might be a good idea for them to move quickly while they still have some equity left. Given all the dreary economic data, it is very likely that mortgage rates will slide a bit more next week.

WHY MEN ARE NEVER DEPRESSED:

Men Are Just Happier People - what do you expect from such simple creatures? Your last name stays put. The garage is all yours. Wedding plans take care of themselves. Chocolate is just another snack. You can be President. You can never be pregnant. You can wear a white T-shirt to a water park. You can wear NO shirt to a water park. The world is your urinal. You never have to drive to another gas station restroom because this one is just too icky. You don't have to stop and think of which way to turn a nut on a bolt. Same work, more pay. Wrinkles add character. Wedding dress $5000. Tux rental-$100. People never stare at your chest when you're talking to them. New shoes don't cut, blister, or mangle your feet.

One mood all the time.

Phone conversations are over in 30 seconds flat. You know stuff about tanks. A five-day vacation requires only one suitcase. You can open all your own jars. You get extra credit for the slightest act of thoughtfulness. If someone forgets to invite you, he or she can still be your friend.

Your underwear is $8.95 for a three-pack. Three pairs of shoes are more than enough. You almost never have strap problems in public. You are unable to see wrinkles in your clothes. Everything on your face stays its original color. The same hairstyle lasts for years, maybe decades. You only have to shave your face and neck.

You can play with toys all your life. One wallet and one pair of shoes - one color for all seasons. You can wear shorts no matter how your legs look. You can 'do' your nails with a pocket knife. You have freedom of choice concerning growing a mustache.

You can do Christmas shopping for 25 relatives on December 24 in 25 minutes.

Car mechanics tell you the truth.