DS News

93 » VISIT US ONLINE @ DSNEWS.COM HIGH HOME SALES DOESN'T EQUAL GREATER AFFORDABILITY By all accounts, recent good economic news combined with solid demand and low mortgage rates have all resulted in single- family home sales reaching levels not seen since before the crisis. Homes are selling at a higher rate—but are they more affordable? An analysis of 27 metro areas conducted by HSH.com on the salary one would need to afford the principal, interest, and taxes on a median-priced home in their market revealed that only three of those 27 metros were more affordable in the second quarter compared to the first (all were in Florida: Tampa, Orlando, and Miami). ough mortgage rates fell from Q1 to Q2 in all 27 metro areas in the analysis—but several of the metros saw notable price gains. In Cleveland, the median home price spiked by 24 percent over-the-quarter, in Chicago the increase was 18 percent, and Pittsburgh and Cincinnati each saw the median home price rise by 17 percent. e median price of a home in San Francisco is now $885,600 after experiencing a 15 percent increase from Q1 to Q2. "Steadily improving local job markets and mortgage rates teetering close to all-time lows brought buyers out in force in many large and middle-tier cities," said Lawrence Yun, NAR chief economist. "However, with homebuilding activity still failing to keep up with demand and not enough current homeowners putting their home up for sale, prices continued their strong ascent—and in many markets at a rate well above income growth." e home price gains seen in the second quarter were even more surprising given the fact that in the first quarter, home prices increased by more than one percent in only six metros. Nonetheless, it's too soon to tell if the price increases experienced in Q2 are a trend or an an0maly, the analysis stated. Even with the substantial Q2 price increases, Pittsburgh, Cleveland, and Cincinnati still ranked first through third, respectively, out of the 27 metros in terms of annual salary needed to afford a median-priced home. In Pittsburgh, the salary needed was $32,390; Cleveland, $34,433; and Cincinnati, $37,179. e three least affordable metros were all located in California: San Francisco was first, where a salary of $161,947 was needed to afford a median-priced home, followed by San Diego ($109.440) and Los Angeles ($92,901). WHAT WILL LOAN MODIFICATIONS LOOK LIKE AFTER HAMP? During the Great Recession millions of homeowners went through the foreclosure process or the process of modifying their mortgages, either directly through banks or with the help of federal programs like the Home Affordable Modification Program (HAMP). Additionally, some homeowners saw the value of their homes plummet, leaving them underwater. But according to CoreLogic, since the crisis, foreclosures have slowed, and the total number of underwater homes has dropped by half from 11.6 million in 2011 to 4.3 million last year. A recent report from Credit.com, though notes this is not to say the housing market is out of the water, or that consumers who have trouble paying their mortgages don't need help navigating the process. Solutions span forbearance and modifications to home- disposition options, and each of these is complicated. "e foreclosure prevention programs established by Treasury, HUD and FHFA in response to the financial crisis have transformed the way in which the mortgage servicing industry has interacted with and assisted struggling homeowners," Mark McArdle, Deputy Assistant Secretary for the Office of Financial Stability. "While MHA and other crisis-era homeowner assistance programs are ending, their impact will endure. Servicers and investors will need to leverage new or existing loss mitigation programs, but they should build on the best practices and guiding principles that have led to positive outcomes for all parties." e Consumer Financial Protection Bureau issued non-binding guidelines for mortgage services when dealing with at-risk homeowners. is comes right around the time that HAMP is coming to an end thus the Bureau refers to the guidelines as instructions for "Life After HAMP." "We aim to help consumers avoid foreclosures, which upset their personal and financial lives," CFPB Director Richard Cordray said in a press release. "e modification program was put in place to provide alternatives to foreclosure. Our principles will serve as helpful guardrails for servicers, investors and regulators to consider as we continue to protect consumers who are struggling to pay their mortgages." e report from Credit.com states that the CFPB believes consumers are on more solid footing today than they were before the recession. It notes that these new rules make future mass defaults less likely. However, the report notes that the Bureau states, "there is ample opportunity for consumer harm if loss mitigation programs evolve without incorporating key learnings from the crisis." e report says the CFPB identified four overriding principals that financial institutions should follow when dealing with at-risk homeowners including affordability, accessibility, sustainability, and transparency. Credit.com says the Bureau cites the main goal of the guidelines to preventing "avoidable foreclosures." The number of states who posted a double-digit decline in foreclosures, year-over- year. Source: CoreLogic STAT INSIGHT 47

• Cover