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Housing Crisis to End in 2012 as Banks Loosen Credit Standards   

Capital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit.

The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago.

Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters.

However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.

Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.

Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes the clearest sign yet of an improvement in mortgage credit conditions.

In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.

While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.

Additionally, Capital Economics says any improvement in credit conditions wont be significant enough to generation actual house price gains, and potential ramifications from the euro-zone pose a threat to future credit availability.

Administration Announces Changes


Administration Announces Changes to HAMP

The Obama administration has announced changes to its flagship foreclosure prevention initiative the Home Affordable Modification Program (HAMP). Among the changes, borrowers who are struggling because of debt beyond their mortgage will be eligible for a secondary evaluation with more flexible debt-to-income criteria, and eligibility will be extended to investor-owned homes that are used as rental properties. The administration is also giving principal reductions a bigger role within the program, tripling incentives for investors that agree to write down an underwater borrowers principal balance and offering these same incentives to the nations two biggest mortgage investors Fannie Mae and Freddie Mac.

Foreclosured Homeowners May Get a Chance to Review their Case


Nearly 4.5 million current and former U.S. homeowners will soon get a chance to have their foreclosure cases reviewed for mistakes and potential restitution.
Next month, the U.S. government expects the first wave of homeowners to receive its letters in the mail, informing them of their right to ask for a foreclosure review, says Office of the Comptroller spokesman Bryan Hubbard.

New rules would help underwater homeowners refinance

Last month, independent consultants hired by lenders also began combing industry data to look for mistakes in foreclosure cases handled by 14 of the nation's largest mortgage servicers: Bank of America, Citibank, JPMorgan Chase, Wells Fargo, Ally Financial, Aurora Bank, EverBank Financial, HSBC, MetLife, OneWest, PNC, Sovereign Bank, SunTrust Banks andU.S. Bancorp.

Reviews will take months to complete. The first consumers could see cases resolved this spring, according to deadlines imposed on the servicers.

Remedies will vary based on the degree of injury, said John Walsh, acting Comptroller of the Currency, in a speech last month.

The reviews cover homeowners in any stage of the foreclosure process on a primary home in 2009 or 2010. Anyone who meets that requirement and was a customer of one of the 14 servicers will get a review if they ask. The servicers include Bank of America, Citibank, JPMorgan Chase and Wells Fargo.

Restitution could be required for a broad range of issues, including if homeowners:

  • Paid impermissible fees or penalties.
  • Paid too much or had payments misapplied.
  • Were wrongly denied loan modifications.
  • Were wrongly foreclosed upon.

Source- USA Today

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For Every Two Homes for Sale, There's One in the Shadows

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