Overall Mortgage Performance Stable,
Delinquencies Remained Elevated in Third Quarter 2011

WASHINGTON — The performance of first-lien mortgages serviced by large national banks and federal savings association was stable, but delinquencies remained elevated during the third quarter of 2011, according to a report released today by the Office of the Comptroller of the Currency (OCC).
The quarterly OCC Mortgage Metrics Report showed delinquencies remained elevated but stable during the third quarter of 2011 but have declined from a year earlier. However, the number of new foreclosures increased by 21.1 percent during the quarter as servicers lifted voluntary moratoria implemented in late 2010 and exhausted alternatives to foreclosure for the large inventory of seriously delinquent mortgages working through the loss mitigation process. The increase in new foreclosures and the increase in average time required to complete foreclosures sales has resulted in the number of foreclosures in process increasing to 4.1 percent of the overall portfolio, or 1,327,077 loans, at the end of the third quarter of 2011.
At the end of the third quarter of 2011, 88 percent of the 32.4 million loans in the portfolio were current and performing, almost unchanged from the previous quarter. The percentages of mortgages that were 30-to-59 days delinquent and mortgages that were seriously delinquent (loans 60 or more days delinquent or delinquent mortgages to bankrupt borrowers) did not change from the previous quarter. However, both categories of delinquencies have declined from a year earlier.
Other key findings of the report included:
• On average, the modifications implemented in the third quarter of 2011 reduced borrowers’ monthly principal and interest payments by 24.4 percent, or $382. Modifications made under the Home Affordable Modification Program (HAMP) reduced payments by 35.1 percent on average, or $567.
• Modifications that reduced payments by 10 percent or more performed better than those that reduced payments by less. At the end of the third quarter of 2011, 58.8 percent of modifications made since the beginning of 2008 that reduced payments by 10 percent or more were current and performing, compared with 36.4 percent of modifications made during that time that reduced payments by less than 10 percent.
• Since the beginning of 2008, servicers have modified 2,258,026 mortgages through the end of the second quarter of 2011. At the end of the third quarter of 2011, 50.8 percent of those modifications remained current or had been paid off. Another 8.8 percent were 30-to-59 days delinquent, and 17.8 percent were seriously delinquent. Eleven percent were in the process of foreclosure and 5.8 percent had completed the foreclosure process.
The report covers about 62 percent of all first-lien mortgages in the United States, worth $5.6 trillion in outstanding balances. The complete report can be downloaded from the OCC Web site, www.occ.gov.
Related Link
OCC Mortgage Metrics Report for the Third Quarter of 2011

New Homestead Market Value Exclusion (HMVE) and Property Taxes
New Homestead Exclusion & Valuation Exclusion Disclosure
by Christine Berger, Vice President, Governmental Relations, MN Association of Realtors

MNAR has received a few questions from members about the new Homestead Market Value Exclusion (HMVE) that was created in the 2011 legislative session and if or how it relates to the Valuation Exclusion Disclosure on page five of the Sellers Property Disclosure Statement (SPDS).
The Valuation Exclusion Disclosure in the SPDS is required by Minnesota Statute § 273.11 subds. 16 and 18. The Valuation Exclusion deals with exclusions from market value due to home improvements made under the “This Old House” program, where the improvement was made before January 2, 2003. The exclusion in this instance does not transfer with the property and thus, needs to be disclosed.
The new HMVE is a recent change to how homestead property taxes are calculated. It replaces the Homestead Market Value Credit (HMVC). Under the old credit system, the credit lowered a homeowner’s property tax burden based on the value of their home. The state then reimbursed local governments for the lost amount of their levy (revenues) due to the credit. However, due to the state’s budget problems, it was rare that local governments were fully reimbursed by the state. Eliminating the credit and creating an exclusion removes the possibility of the state withholding funds and creates more stability for local governments.

The new program excludes a portion of the homeowner’s market value from the property tax calculation. The amount of value excluded is directly proportional to the credit the home received under the old law. The actual tax burden on homesteads could be lesser or greater depending upon the mix of properties in the taxing jurisdiction and the levy decisions made by local governments (for more information on the technical calculations, please see further below).

Therefore, the disclosure requirement in Minnesota Statute § 273.11 subds. 16 and 18 does not pertain to the new HMVE because the exclusion is determined every year as part of the homestead’s property tax calculation and is not directly connected to home improvements. Furthermore, the sole fact that a homestead has a HMVE does not mean that the property is subject to preferential property tax treatment. Other tax programs may apply to the property to give it preferential status.

Technical Calculations
Description: Under the old credit system, the credit amount would rapidly increase as a home value approached $76,000 with the maximum credit amount of $304. After $76,000 the credit would decrease until it was completely phased out with a home value of over $414,000. The new exclusion mimics this same scale as homes approaching $76,000 would have a rapidly increasing exclusion of value, with a home valued at $76,000 receiving a maximum exclusion of 40% of their home value from property tax calculations. The percentage then decreases and is phased out at homes valued over $414,000.

What if My Neighbor's Tree Falls on My House?
If your neighbor's tree falls on your home, your insurance should cover the repairs to your home and the removal of the tree. If your neighbor was negligent, your insurance company may go after him/her and/or their insurance company for re-imbursement.

If you believe your neighbor's tree is a hazard or diseased or dying, let him/her know before anything happens to the tree and then send him/her a letter so you have written documentation of the notification. In the event something bad happens, it can then be proven that he/she was notified of the potential hazard.

As mom always said, communication is key!

For more information, see the National Association of Realtor's HouseLogic.