Lenders are allowing more short sales by financially strapped homeowners and a few people are even getting cash to complete the sale.

Short sales have been increasing for months, but the financial incentives — which Realtors say are random and infrequent — are a newer wrinkle.

Examples:

•JPMorgan Chase went national with short-sale incentive offers last year, paying up to $35,000 in some cases.

•Bank of America is testing incentives from $5,000 to $25,000 in Florida to see if they should be expanded to more states. The Florida program began last fall, spokesman Richard Simon says.

•Wells Fargo‘s incentive offers range from less than $3,000 to $20,000, spokesman James Hines says.

Short sales, even with incentive payments to borrowers, can save lenders money compared with the expenses involved in completing foreclosures.

In states such as Florida where foreclosures go through the courts, 50% of loans in foreclosure are more than two years past due, says a January report by mortgage tracker LPS Applied Analytics.

“It’s a lot cheaper to shell out $10,000 or $20,000 to someone than it is to go through a long foreclosure,” says Jim Gillespie, chief executive of Coldwell Banker.

Banks are more willing to do short sales now than in the past, Gillespie says. Cash incentives appear to be “limited but increasing” in number, he adds.

“When a loan modification isn’t possible, a short sale may be a better and faster solution” than foreclosure, says JPMorgan Chase spokesman Thomas Kelly.

The lenders won’t say how often they extend such incentives.

“If you have two similar sellers, one might get it and another may not,” says Colleen Badagliacco of Altera Real Estate in San Jose. “It’s very random.”

Typically, short sale incentives are more common for loans in states where foreclosures take more time, Hines says.

In November, short sales accounted for more than 9% of single family home sales and were up 32% from the year before, according to CoreLogic.

Market researcher Dataquick also shows short sales increasing from January 2011 through last month throughout California and in Phoenix, Miami and Seattle.

The federal government-run foreclosure prevention program also offers short sale incentives, at least $3,000 for sellers, but far more short sales are being done outside the government program.

Through December, just 26,901 short sales had been completed through the Home Affordable Foreclosure Alternative (HAFA) program.

In contrast, BofA, the largest servicer of home loans, did 107,000 short sales last year. That was up from 92,000 in 2010, which was double the 2009 volume, it says.

“The trend is up,” says Moody’s Investors Service analyst William Fricke.

By Krista Franks

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

The analytic 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.

Here’s what’s happening and what it means to home loan rates:

What is happening and why? To put it bluntly, the passage of the payroll tax cut extension is being funded via a mandate to Fannie Mae and Freddie Mac (the nation’s largest providers of mortgage money) to increase their guarantee fees or “g-fee’s” by at least 10 basis points on the rate. So rather than giving a par rate of 4.00%, for example, the par rate is now increased by at least 10 basis points, or approximately 4.10%. But home loan rates are priced and offered in .125% increments, so this will most likely impact consumers by .125% in rate. Whether you agree or not on the politics behind this cost being passed along to folks who are taking out mortgages, the Congressional Budget Office recently estimated that the increase will ultimately pay for about $35.7 Billion of the cost of the payroll tax extension.

What exactly is this “g-fee”? The guarantee fee or “g-fee” is an amount charged by mortgage-backed securities (MBS) providers, like Freddie Mac and Fannie Mae, to help protect against credit-related losses in the overall mortgage portfolio. In other words, it acts a lot like insurance and helps lower the overall risk…which means home loans can be offered at terrific interest rates to borrowers that have good – but not perfect – credit.

What exactly is the impact of the rate increase? For example, for a $200,000 home loan, the increased g-fee (assuming a .125% increase in rate) would equate to $250 more per year in interest, or $7,500 more over 30 years. Someone buying or refinancing a home can certainly choose to buy down the cost with cash up front – but most people probably won’t do this.

Who will this impact? The change will impact all new borrowers of Fannie Mae and Freddie Mac loans. The bill will also impact Federal Housing Administration (FHA) loans by increasing the annual mortgage insurance premium that borrowers pay by one-tenth of a percent.

When will it start? Officially, the increase to guarantee fees will begin on April 1, 2012. However, the increase is already starting to be seen in rate sheets right now, since home loans being originated now will likely not be closed, pooled and securitized until April…and therefore will need the increased g-fee priced in earlier.

How long will this be in effect? The increase will be effective through October 1, 2021.

The bottom line is that the g-fees will be going up…and this will impact homebuyers looking to obtain a home loan through Fannie Mae, Freddie Mac and FHA.

Information provided by Mary Lance of Director’s Home Mortgage.  

Hope Now is an alliance of mortgage servicers, investors, nonprofit counselors, and others aimed at helping home owners who are struggling with their mortgage. 

The alliance recently met for a two-day conference in Washington, D.C., to brainstorm how to specifically address housing aid for military families. “The current housing crisis has created a separate set of challenges for home owners in the military,” John Dalton, president of the Housing Policy Council, said during the meeting.

A group of judges, attorneys, state housing agencies, and others created documents with contact information that finance managers and military attorneys can use when assisting military families who are at risk of foreclosure. 

Hope Now also plans to sponsor outreach events at four military bases early this year, offering more assistance to military families struggling to make their mortgage payments. 

Source: Hope Now

WASHINGTON (CNNMoney.com) — States have until late Monday to agree to the latest draft deal aimed at relieving homeowners struggling with mortgages bigger than their home’s value.

That means federal officials and states attorneys general could be days away from announcing a deal with some of the nation’s largest banks that could yield $20 billion to $25 billion for those homeowners.

Indeed, the states have been given until close of the business day Monday to agree to the deal, said Geoff Greenwood, a spokesman for Iowa Attorney General Tom Miller, who has been leading negotiations.

Obama proposes new home refinancing plan

Under the latest draft, about 1 million U.S. homeowners who are “underwater” on their mortgages — with principal exceeding the home’s value — could be eligible for as much as $20,000 in relief of principal owed, Donovan has said.

In return, mortgage servicers in states that agree to the deal would get immunity from future state servicing and originating claims — although homeowners could pursue claims against banks and states could still pursue criminal investigations, according to reports.

Driving the deal originally were allegations that mortgage servicers cut corners and enlisted robo-signers that improperly foreclosed on homeowners. However, the deal under negotiation now wouldn’t be able to return houses to those who have already been foreclosed on, according to reports.

What the deal would do is ensure that mortgage servicers agree to communicate better, avoid delays and give homeowners who are late on mortgage payments a fairer shake.

The big question is how much money would be available to help homeowners, but that depends on how many states agree to the deal. If all 50 states sign on, the mortgage servicing settlement has the potential to offer the largest housing relief program available to ordinary Americans since the financial crisis began.

However, attorneys general from California and Delaware have said the deal, as drafted last week, wasn’t good enough for their states. Spokesmen for those officials said Thursday they had nothing new to add.

Jason Miller, a spokesman for Attorney General Beau Biden of Delaware, said Biden would talk more about his decision when settlement terms are made public. (Biden is the son of Vice President Joseph Biden)

New York Attorney General Eric Schneiderman has been tight-lipped about his participation when asked. A call to his office wasn’t returned.

Generally, the attorneys general have said they’re worried they if they agree to the deal it would cripple their own investigations into mortgage cases.

But Donovan said last month that the releases from future lawsuits under consideration for banks in the draft deal are “narrow enough” to allow for a new federal probe to investigate mortgage securities fraud.

At least one consumer advocacy group, the Center for Responsible Lending, has said the deal — while “no silver bullet” — leaves room to hold banks accountable in other mortgage probes, said Kathleen Day, a spokeswoman for the nonprofit.

The negotiations are between federal agencies, including the U.S. Department of Justice and the U.S. Department of Housing and Urban Development, as well as the state attorneys general and the five largest mortgage servicers:Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Ally Financial (GJM). A few other regional banks that service mortgages are reportedly considering signing on as well.

The big banks aren’t as keen to sign off on a multi-state deal that doesn’t include immunity from mortgage servicing claims from California’s and New York’s attorneys general, said a source familiar with the deals.

And left-leaning groups, including Move On and the New Bottom Line, are continuing to urge states to hold out for a big criminal investigation and a $300 billion settlement award. 

by Floyd Norris

How many jobs did the American economy add in January?

The Labor Department estimated on Friday that the economy gained 243,000 jobs.

The department also estimated that the economy lost 2,689,000 jobs in the month.

The difference in the two numbers is in seasonal adjustment. Employment always falls in January, as temporary Christmas jobs end. So the government applies seasonal adjustment factors in an effort to discern the real trend of the economy apart from seasonal fluctuations. The actual survey showed the big loss in jobs. The seasonal adjustments produced the reported gain of 243,000 jobs.

A reason to doubt the number is that there has been a tendency in this cycle for the seasonal factors to overstate moves, in both directions. Labor mobility is down, as fewer workers quit to seek better jobs and employers both hire and fire fewer people than they used to do. If the seasonal adjustment was too large, then the gain should be smaller.

But there are plenty of signs that gains are real. Consider the annual change in nonfarm payrolls. Seasonal factors should have no effect there. Over the last 12 months, the economy added nearly two million jobs, more than in any similar period since early 2007. These numbers do make it appear that the economy is gaining momentum, even if the January gain does turn out to be overstated.

For the 12 months, here are some of the changes.

Total +1.5%

Private Sector +2.1%
Construction +2.1%
Manufacturing +2.0%
Information Services -1.7%
Financial Activities +0.3%
Professional and Business Services +3.5%
Education and Health Services +2.1%
Leisure and Hospitality +2.7%

Government -1.2%
Federal government -1.5%
State governments -1.4%
Local governments -1.1%

Imagine that. A recovery in which the private sector grows and the government shrinks. Even construction jobs are finally going up.

There are still significant risks, largely from Europe. But it is beginning to look as if the economy will be better come fall than many expected it to be.

The question, though, is how long will prospective buyers enjoy such low rates? Even with these rates, sales are still sluggish, with the market flooded with family homes and investment properties. Doug Duncan, chief economist for Fannie Mae, suggests that “low and declining interest rates may cause homebuyers to hesitate: They may expect them to fall even further.

On the other hand, rising rates, which often accompany an improving economy, can give potential homebuyers a reason to act-before rates and prices become less affordable.” Potential buyers sitting on the fence waiting for the rates to go lower may be getting their reason to act: a recent action by Congress may be pushing those rates higher shortly.

According to CNNMoney, “to pay for the extension of payroll tax cuts, Congress mandated an increase in fees for Fannie Mae and Freddie Mac loans. That could mean an increase in upfront costs for borrowers of about half a point, starting April 1. The new fee would add $500 for every $100,000 in principal.” Instead of an additional upfront fee, “borrowers could pay the fee as a higher interest rate, [adding] an additional one-eighth of a point to their rate,” according to Keith Gumbinger of HSH Associates.

That amount might seem inconsequential, but when added to a $250,000 mortgage, the mortgagee could be paying approximately $225 more per year.

Housing inventory slid to 1.89 million homes in December – down 6 percent from the previous month and 22.3 percent from the prior year, according to Realtor.com. In the 145 markets tracked by Realtor.com, only Springfield, Ill., registered a year-over-year increase. Inventories plunged 49.7 percent in Miami, 49.1 percent in Phoenix, and 46.6 percent in Bakersfield, Calif.

Meanwhile, the national median price edged up 5 percent year-over-year. Asking prices – the amount sellers include on a Realtor.com listing – climbed 32.5 percent in Miami, 21.7 percent in Naples, 21.5 percent in Fort Myers-Cape Coral, and 19.4 percent in Punta Gorda, according to Realtor.com.

However, asking prices were down 11 percent in Detroit, 10 percent in Chicago, 7.6 percent in Las Vegas, and 7 percent in Sacramento.

Andrea Szlavik of Prudential Fox and Roach in Collegeville states that “with a market filled with desirable listings, interest rates at historic lows, and a threat of rising rates, prospective buyers would benefit from getting off the fence and jumping into the present day ‘buyers’ market.’”

The economy will grow at an 2.2% annual rate the first half of 2012 after an estimated 3.1% gain in fourth-quarter gross domestic product, according to the median forecast of the 48 economists surveyed. The government reports on fourth-quarter GDP Friday.

The biggest reason for slower growth is that a late-2011 bounce back from the effects of the Japanese earthquake last March won’t last, according to Diane Swonk, chief economist at Mesirow Financial. Slower growth will help keep unemployment at 8.4% or higher through year’s end, economists predict.

• INTERACTIVE: USA TODAY survey results

• INTERACTIVE: USA TODAY/IHS forecast

“The little improvement we saw was partly catch-up; the retail recovery at Christmas was more hype than reality,” Swonk says. “Consumer confidence is still at recession levels, just not at depression levels.”

The good news:

•The risk of another U.S. recession is falling. The median estimate of USA TODAY’s panel call it only a 22% probability in the next 12 months.

•Europe’s financial crisis will shave only a quarter of a percentage point from this year’s U.S. growth, the economists said.

•More than 90% of the economists think home prices have either already bottomed out or will by the end of this year.

•The Federal Reserve won’t raise interest rates until the second half of 2013, half the experts says. Nearly as many say it will be 2014 or later.

The not-so-good news:

•Job growth will slow to a monthly pace of 144,000 new jobs early this year, after an estimated rise of 165,000 a month in the fourth quarter, the panel predicted. In fact, the economy produced an average of 137,000 new jobs a month in the fourth quarter, driven by December’s better-than-expected gain of 200,000 new jobs..

•Employment won’t return to what’s considered a healthy level until 2014 or later, the economists unanimously agreed.

The expected slowing of growth has Wall Street betting that the Federal Reserve will do more to rekindle the economy, possibly as soon as this week’s policymaking meeting of the Fed’s Open Market Committee Tuesday and Wednesday. It might decide to pump as much as $1 trillion into the economy by buying mortgage-backed bonds from banks and institutions, Miller Tabak & Co. economic strategist Andrew Wilkinson says.

“The Fed is underwhelmed by the recovery,” he says. “They see the recovery hampered by the housing market, which is not going away anytime soon, and it’s causing employment gains to be lightweight.”

On Monday, a new economic forecast predicted that while U.S. economy should make some modest growth strides this year, it likely won’t be quite enough to significantly reduce the number of jobless Americans looking for work.

About two-thirds of the economists who participated in the latest National Association for Business Economics survey expect GDP to grow above a 2% annual rate this year, according to the Los Angeles-based group’s outlook released Monday.

The latest forecast is in line with one issued by the group in November that called for the economy to grow 2.4% in 2012.

By Tim Mullaney, and Barbara Hansen

Contributing: The Associated Press

CoreLogic’s chief economist Mark Fleming says housing statistics and the duration of the downturn to date indicate 2012 may be the year the housing market begins to turn the corner.

In the first release of CoreLogic’s new MarketPulse newsletter Wednesday, Fleming explained his rationale for such an assessment.

He notes that housing is an industry with long business cycles. Regional housing recessions have typically taken anywhere from three to five years to find their bottom, and Fleming says the national housing recession has behaved similarly in that it has bounced along a bottom for the past two years.

Fleming points out that housing affordability is rising dramatically due to a combination of home price deflation and rock-bottom mortgage rates. In fact, he says, after adjusting for inflation, this has been a “lost decade” for housing as prices are the same as at the beginning of the millennium.

“The time is right in 2012 for prices to begin growing again,” Fleming said, “and housing affordability will put a floor under any further significant declines.”

Fleming says he will be watching the spring and summer buying season closely for positive signs of demand.

NEW YORK (CNNMoney) — The IRS is giving taxpayers two extra days to get their taxes turned in this year.

While Tax Day typically falls on April 15, the IRS announced Wednesday that it is pushing back this year’s filing deadline to Tuesday, April 17.

The IRS will also begin accepting returns submitted online through the agency’s e-filing system — which the IRS says is the fastest, most accurate filing option for taxpayers — on January 17.

If you are requesting an extension, you have until Oct. 15 to file your 2011 tax return, the agency said.

The IRS said it expects to receive more than 144 million individual tax returns this year, with the majority projected to be submitted by the new April 17 deadline.