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Five mortgage servicers have provided over 300,000 borrowers with some form of mortgage relief as part of a settlement agreement, according to a report  from settlement monitor Joseph A. Smith, Jr.

Bank of America, Chase, Citi, Wells Fargo, and Ally reached a $25 billion mortgage settlement with state and federal officials in February 2012 over foreclosure practices. The agreement requires the banks to provide $20 billion in relief, but the servicers are not always credited on a dollar-for-dollar basis.

Thus, the gross amount of relief actually provided will be higher than what is credited.

As of September 30, 2012, banks reported they have provided $26.11 billion in actual consumer relief, which represents a value of $84,385 for each assisted borrower, according to the monitor.

“The relief the banks have reported is encouraging,” said Smith in a release. “But it is important to remember that no obligations will be met until I have reviewed, confirmed and credited them.”

The report explained some principal forgiveness on loans both owned and serviced by a servicer is credited on a dollar-for-dollar basis, but forbearance activities provide a credit of 5 cents for every dollar.

Smith added the information provided in the report “cannot be used to evaluate progress toward the banks’ $20 billion obligation” since it represents the gross amount.

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 Servicers Provide $26.1B in Mortgage

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In accordance with the Government Corporation Control Act as amended (31 U.S.C. 9105), the Office of Inspector General engaged the independent certified public accounting firms of CliftonLarsonAllen LLP (CLA) to audit the fiscal year 2012 and Clifton Gunderson LLP[1] to audit the fiscal year 2011 financial statements of the Federal Housing Administration (FHA). The contracts required that the audit be performed according to Generally Accepted Government Auditing Standards (GAGAS).

 In connection with the contract, we reviewed CLA’s report and related documentation and inquired of its representatives. Our review, as differentiated from an audit in accordance with U.S. GAGAS, was not intended to enable us to express, and we do not express, opinions on FHA’s financial statements or internal controls or conclusions on compliance with laws and regulations. CLA is responsible for the attached Independent Auditor’s Report dated November 9, 2012 and the conclusions expressed in the report. Our review disclosed no instances where CLA did not comply, in all material respects, with U.S. GAGAS.

 This report includes both the Independent Auditors’ Report and FHA’s principal financial statements. Under Federal Accounting Standards Advisory Board (FASAB) standards, a general-purpose federal financial report should include as required supplementary information (RSI) a section devoted to Management’s Discussion and Analysis (MD&A) of the financial statements and related information. The MD&A is not included with this report. FHA plans to separately publish an annual report for fiscal year 2012 that conforms to FASAB standards.

 The report contains one significant deficiency in FHA’s internal control and one reportable instance of non-compliance with laws and regulations. The report contains four new recommendations. Within 120 days of the report issue date, FHA is required to provide its final management decision which includes the corrective action plan for each recommendation. As part of the audit resolution process, we will record four new recommendation(s) in the Department’s Audit Resolution and Corrective Action Tracking system (ARCATS). We will also endeavor to work with FHA to reach a mutually acceptable management decision prior to the mandated deadline. The proposed management decision and corrective action plans will be reviewed and evaluated for OIG concurrence.

Find the report on our public site at:

https://www.hudoig.gov/reports/internalaudits.php

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The landscape of homeownership has undergone significant changes in recent years: The homeownership rate has declined, but so has the cost burden of owning a home. Both of these trends are most prevalent among young homeowners, according to a recent report from Fannie Mae.

The national homeownership rate has declined in each of the past four years, according to the most recent Census data, which extends through 2011. The 2011 homeownership rate of 64.6 is 2.6 percentage points lower than the 2007 rate.

The decline among those 25 to 44 years of age is more than twice the overall decline.

This shift, which Fannie Mae attributes to the Great Recession, comes after a decade of steady homeownership increases in which young households played a major role.

Despite the recent declines in homeownership, the cost burden of owning a home decreased in 2011 and has “fallen substantially for young owners during the last four years,” according to Fannie Mae.

When measuring housing cost burden, analysts often look for households paying more than 30 percent of their gross income in housing costs, which analysts define as rental or mortgage payments combined with utility spending.

In 2011, the percentage of homeowners who fell into this category decreased by about one percentage point. In contrast, the number of renters in this category grew.

The percentage of 25 to 44 year-old renters who paid more than 30 percent of their gross incomes on housing costs rose 4 percentage points between 2007 and 2011.

In the same time span, the percentage of homeowners of the same age who paid more than 30 percent of their incomes on housing costs declined by 5.8 percentage points.

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Homeownership Remains Low

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Based on the stronger performance of the consumer distress index, CredAbility said the “stage of strong holiday spending” may be set.

With a score below 70 indicating a state of financial distress, the distress index sat higher at 70.5 out of 100 in the third quarter. In the second quarter, the index was also above 70 at 71.3. For the first time since early 2008, the credit counseling agency says consumers have managed to stay out of financial distress for two consecutive quarters. A year ago, U.S. households scored 66.69.

The agency explained the ability of households to manage credit “wisely” helped consumers stay out of distress.

“For the first time in four years, the average U.S. household is able to spend during the holiday season without taking on new debt or creating a major financial problem,” EVP for CredAbility Mark Cole said in a release.

Five categories are considered when measuring consumer distress: employment, housing, credit, how families manage household budgets, and net worth.

Out of 77 large metros the index tracks, all but three posted higher scores year-over-year. The three all happened to be located in upstate New York: Buffalo-Niagara Falls, Albany, and Rochester.

CredAbility also found that out of the 30 largest metro areas, 17 were in a state of distress, while Baltimore and St. Louis managing to rise out of distress in Q3.

The most stressed out metros continued to be Orlando and Tampa-St. Petersburg, which scored 59.71 and 60.74, respectively.

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Households Stay Out of Financial Distress

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The percent of loans in foreclosure, or the foreclosure inventory rate, fell to the lowest level since the first quarter of 2009, according to the latest delinquency survey from the Mortgage Bankers Association (MBA).

On a non-seasonally adjusted basis, the foreclosure inventory rate in the third quarter was 4.07 percent, down 20 basis points from last quarter and 36 basis points from a year ago. MBA reported the quarterly decrease was the largest since the survey’s history.

“The level however, is still roughly four times the long-run average for this series as we continue to see back logs of loans in the foreclosure process in states with a judicial foreclosure system,” said Mike Fratantoni, MBA’s VP of research and economics, in a release.

MBA noted five states alone accounted for 51.7 percent of the nation’s share of foreclosure inventory: Florida (23.4 percent), California (8.3 percent), New York (7.2 percent), Illinois (6.5 percent) and New Jersey (6.3 percent).

On a seasonally adjusted basis, the national delinquency rate stood at 7.40 percent in the third quarter, according to the survey. The decrease is a quarterly and yearly decline of 18 and 59 basis points, respectively.

The non-seasonally adjusted rate, however, increased quarterly by 29 basis points to 7.64 percent. The MBAexplained  the a typical seasonal pattern is for the rate to increase from the second to third quarter.

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Threat of Shadow Inventory Fades