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20 CONFUSION KILLS CONFIDENCE: BORROWERS UNDERESTIMATE HOME EQUITY Research done by Fannie Maeshows that although home prices continue to rise, many homeowners and borrowers alike continue to underestimate the amount of equity they have in their homes. According to a recent Redfin report from Steve Deggendorf of Fannie Mae, misinformed homeowners and borrowers may be less likely to refinance their mortgages, apply for home equity loans, or even buy new homes. Because housing prices have continued to rise since 2012, just as reductions in home prices pushed some homeowners underwater, the rising of home prices would be expected to reduce the number of underwater households as well as raise the number of households with substantial home equity. Even though this has proven to be the case according to research conducted by CoreLogic, Deggendorf shares that many consumers are not aware of this fact. Each month, Fannie Mae's National Housing Survey conducts interviews with homeowners about their thoughts and attitudes for owning and renting a home as well as home and rental price changes and the economy. What was found from this research in the recent month was despite continuing growth in housing prices, the percentage of homeowners who believed they were underwater has remained pretty consistent. is contradicts research conducted by CoreLogic which states that with the increase in home prices, the amount of homeowners underwater has decreased. When Fannie Mae asked homeowners to compare their total mortgage debt to the value of their home in December 2014, it was found that 23 percent of these homeowners believed that they were underwater. Research conducted in 2015 revealed this perception of homeowners believing themselves to be underwater increased to 24 percent. is vastly contrasts the estimate from CoreLogic which states that only an estimated 7 percent of homeowners were in fact underwater. "e idea is not to take on unnecessary mortgage debt or unsustainable behavior, but to be better informed to make major life decisions," states Deggendorf in his report. "What's more, reducing the gap between perceived and actual home equity has the potential to remove a barrier that may have hindered housing market activity in general and could create a virtuous cycle that is sorely needed in today's market." MORE MODIFICATIONS FOCUSING ON SUSTAINABILITY More mortgage modifications are focusing on the sustainability of a loan in addition to focusing on affordability, according to a recent report from the Office of the Comptroller of the Currency (OCC). e OCC's Q1 Mortgage Metrics report found that out of the 34,481 modifications completed by the seven largest banks during Q1 (Bank of America, Citibank, HSBC, JPMorgan Chase, PNC, U.S. Bank, and Wells Fargo), 91 percent of them were of the "combination modification" variety. Combination modifications include multiple actions that affect both the affordability and sustainability of a mortgage loan. Actions that may affect sustainability may include interest rate reduction and term extension, according to the OCC. e servicers completed an additional 2,681 modifications that received only a single action, the OCC reported. e total number of combination modifications during the first quarter came to 31, 450; out of those, 93 percent of them included capitalization or delinquent interest fees, according to OCC. Approximately 81 percent included an interest rate reduction or freeze while 88 percent featured a term extension. Finally, 8 percent of combination modifications included some amount of principal reduction, while 13 percent of them had some amount of principal deferred, according to OCC. Out of the total number of loan modifications completed during Q1, about 80 percent of them (30,028) reduced the pre-modification monthly payment of the loan. Servicers also reported that about 6,058 modifications that were completed during the third quarter of 2015 (which were at least six months old as of March 31, 2016) were either 60 days or more past due or in the process of foreclosure. Overall, the 58,921 new foreclosures initiated by servicers in Q1 was a 29 percent decline from a year earlier, and the percentage of mortgages that were current and performing rose from 94.2 percent at the end of Q1 2015 up to 94.9 percent at the end of Q1 2016, according to the OCC. e report covered approximately 21.1 million first-lien mortgage loans with $3.6 trillion in unpaid principal balances, and covered about 38 percent of all outstanding first- lien residential mortgage debt in the U.S. Seriously delinquent rate is at 2.8 percent making it the lowest level since October 2007, according to CoreLogic. KNOW THIS "The idea is not to take on unnecessary mortgage debt or unsustainable behavior, but to be better informed to make major life decisions."

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