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INSPECTOR GENERAL REPORTS 26% OF HAMP BORROWERS REDEFAULTED Upon closer examination, At the end of 2009, the share the Home Affordable stood at 1 percent and has since Modification Program 26 percent as of April. Taxpayers have risen to likelihood of falling (HAMP) has not helped The as many borrowers as it out of the program also seems lost $815M in may seem, according to a to increase over time. TARP Funds report from the Office of the For example, among oldest Special Inspector General HAMP modifications, the used for 163,811 redefault rate was 46 percent. for the Troubled Asset Relief Program (SIGTARP). loans modified in 2010, modifications that For redefault rate averaged 38 HAMP, a government the loan modification program percent. redefaulted. created to prevent foreclosures, On the other hand, has provided about 1.2 million homeowners who received modifications to distressed modifications in early 2013 borrowers since its inception in 2009. Of those have a redefault rate of less than 1 percent. borrowers, 306,538 fell behind on their payments The report also found states with a smaller by three months, which means in actuality, numbers of HAMP borrowers tended to 865,100 are still actively in the program, the have higher redefault rates. Mississippi, which taxpayer watchdog agency revealed. Borrowers has provided just more than 4,500 HAMP who miss three consecutive payments become modifications, has a redefault rate of 35 percent, the disqualified from the program. highest out of any other state. Alabama was close Of the redefaulters, 22 percent have entered behind with a default rate of 33 percent, followed into the foreclosure process. by Tennessee, Delaware, Louisiana, and Missouri, SIGTARP also found the percentage where the rate was 32 percent for each state. of modified homeowners who end up as Based on region, Western states averaged redefaulters has steadily increased over time. the lowest default rate of 21 percent and had the EXPERTS PREDICT PRICE INCREASES WILL SLOW TO 4.4% IN 2014 Home values are on track to rise to more than $167,000 by the end of 2013, according to economists and real estate experts surveyed by Zillow and Pulsenomics. Zillow reports survey respondents predicted median home values to hit $167,490 by the time this year comes to a close, which would represent a gain of 6.7 percent over 2012. The forecast is a significant jump from the 5.4 percent annual increase expected by those surveyed in the previous quarter's poll. Based on current expectations for home value appreciation over the next five years, respondents on average predicted home values could approach new record highs by the end of 2017. That said, many predicted appreciation rates will slow. According to Zillow, survey respondents said they expect appreciation rates to moderate to roughly 4.4 percent in 2014, slipping gradually each year to a rate of 3.4 percent in 2017. Cumulatively, home values are projected to rise approximately 23.7 percent over the next four years. 50 "Short-term expectations for home value appreciation through the end of this year are consistent with a nationwide housing market recovery that is both strengthening and widening, but still coping with high levels of negative equity, high demand, and low inventory," said Zillow senior economist Dr. Svenja Gudell. "Combined, these factors will continue putting upward pressure on home values for the next few months." However, Gudell continued, "the days are numbered for these kinds of market dynamics, as investors begin to pull out of some markets, mortgage interest rates rise, and more inventory becomes available." On the subject of interest rates, many respondents weren't especially concerned, even with rates posting their largest threemonth gain since 2003. Among those who expressed an opinion, 88 percent said they don't think the current rate environment poses a threat to the housing market recovery; of that group, 61 percent said interest rates would highest number of permanent modifications as a group. According to the report, modified homeowners most likely to fall behind on payments received the smallest monthly payment reductions; are underwater on their mortgage; had subprime credit scores when modified; and have high debt burdens. HAMP redefaults not only impact homeowners and affected communities, but they also cost taxpayers, according to the report. SIGTARP stated taxpayers have lost a total of $815 million in TARP funds that were used to pay incentives for 163,811 modifications that redefaulted. "Homeowners who receive a HAMP permanent modification but end up losing their home to foreclosure or fall out of the TARP program are not being helped to keep their homes as TARP intended, and taxpayers lose the positive impact these funds were to provide for the individual family and the community at large," the report explained. To improve the program, SIGTARP offered several recommendations , which Treasury agreed to implement. Recommendations include conduct further research into the causes of redefault; require servicers to develop and use an "early warning system" to actively reach out to homeowners who may be at risk of redefaulting; and provide help and information to homeowners who have redefaulted, the report stated. have to rise to at least 6 percent to create a significant threat. "Six percent is the minimum mortgage rate threshold that the most number of panelists view as a potential show-stopper for the recovery," said Pulsenomics founder Terry Loebs. "However, nobody should dismiss the implications for the housing market of the less popular view—held by 38 percent of our experts—that we are already flirting with a reversal of fortunes at or within about 100 basis points of prevailing mortgage rate levels." STAT INSIGHT $192 Billion Mark-to-market loss on the Federal Reserve's asset holdings, caused by bond yields' spike since the first quarter. Source: Scott Minerd, Global CIO, Guggenheim Partners

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