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New homs sales rose 11.1 percent in March according to data released by the Census Bureau yesterday. But the 300,000 sales were nearly 22 percent lower than the 384,00 new homes sold in March of last year. One key factor to consider while looking at new homes sales in this economic climate is the availability of less expensive existing homes, including foreclosed homes. Calculated Risk shares the below graph. Note the growth of the "Distressing Gap"--the difference between existing home sales and new home sales--over the last two years. Calculated Risk provides more analysis (with graphs) of the new home sales data here and here .

The Congressional Oversight Panel has once again concluded that a Treasury Department is coming up short of expectations. This time it is Home Affordable Modification Program (HAMP) , Treasury's foreclosure prevention program. COP raised concerns earlier this year that Treasury was not doing enough to stave off a foreclosure crisis, and now it seems HAMP has made too little an impact to satisfy members of the panel. From COP's December report: In some regards, the program‟s failure to make a dent in the foreclosure crisis may seem surprising. HAMP‟s premise was straightforward: Because the foreclosure process allows lenders to recover only a small fraction of the value of a mortgage loan, lenders should generally prefer to avoid foreclosure by voluntarily reducing a borrower‟s monthly payments to affordable levels. Through HAMP, Treasury attempted to sweeten this deal by offering incentive payments to all parties to a mortgage loan modification. Yet despite the apparent strength of HAMP‟s economic logic, the program has failed to help the vast majority of homeowners facing foreclosure. A major reason is that mortgages are, in practice, far more complicated than a one-to-one relationship between borrower and lender. In particular, banks typically hire loan servicers to handle the day-to-day management of a mortgage loan, and the servicer‟s interests may at times sharply conflict with those of lenders and borrowers. For example, although lenders suffer significant losses in foreclosures, servicers can turn a substantial profit from foreclosure-related fees. As such, it may be in the servicer‟s interest to move a delinquent loan to foreclosure as soon as possible. HAMP attempted to correct this market distortion by offering incentive payments to loan servicers, but the effort appears to have fallen short, in part because servicers were not required to participate. Another major obstacle is that many borrowers have second mortgages from lenders who may stand to profit by blocking the modification of a first mortgage. For these reasons among many others HAMP‟s straightforward plan to encourage modifications has proven ineffective in practice. Here's COP chair, Sen. Ted Kaufman , discussing the report: Read the full report here .

The Congressional Oversight Panel has released its November report. This month the panel explores the potential impact of "mortgage irregularities" and "foreclosure mitigation" on the mortgage market and the economy. The panel took a close look at some of the foreclosure practices of banks, especialy the practice of "robo-signing" foreclosure related affidavits. From the release: If documentation problems prove to be pervasive and throw into doubt the ownership of pooled mortgages, the consequences could be severe. Borrowers may be unable to determine whether they are sending their monthly payments to the right people. Judges may block any effort to foreclose, even in cases where borrowers have failed to make regular payments. Multiple banks may attempt to foreclose upon the same property. Borrowers who have already suffered foreclosure may seek to regain title to their homes and force any new owners to move out. Would-be buyers and sellers could find themselves in limbo, unable to know with any certainty whether they can safely buy or sell a home. Further wide-scale disruptions in the housing market, if they arose, could cause significant harm to financial institutions. For example, if a Wall Street bank were to discover that, due to shoddily executed paperwork, it still owns millions of defaulted mortgages that it thought it sold off years ago, it could face billions of dollars in unexpected losses. To put in perspective the potential problem, the mortgage-backed securities market totals approximately $7.6 trillion, so irregularities that affect even a small percentage of this market could have dramatic effects on bank balance sheets - potentially posing risks to the very financial stability that the Troubled Asset Relief Program was designed to protect. The Panel urges Treasury and bank regulators to undertake new "stress tests" to gauge the ability of major financial institutions to cope with a potential documentation-related crisis. COP chair Sen. Ted Kaufman discusses the report in this video: Read the full report here.

Members of the Congressional Oversight Panel --tasked by Congress to provide oversight of the Treasury Department's actions in managing the Troubled Assets Relief Program (TARP)--"applaud" what they see as Treasury's improved response to the foreclosure crisis, but say that "even now Treasury’s programs are not keeping pace with the foreclosure crisis." Here's an excerpt from COP's latest monthly report: Despite Treasury’s efforts, foreclosures have continued at a rapid pace. In total, 2.8 million homeowners received a foreclosure notice in 2009. Each foreclosure has imposed costs not only on borrowers and lenders but also indirectly on neighboring homeowners, cities and towns, and the broader economy. These foreclosures have driven down home prices, trapping even more borrowers in a home that is worth less than what they owe. In fact, nearly one in four homeowners with a mortgage is presently underwater. Although housing prices have begun to stabilize in many regions, home values in several metropolitan areas, such as Las Vegas and Miami, continue to fall sharply. Treasury’s response continues to lag well behind the pace of the crisis. As of February 2010, only 168,708 homeowners have received final, five-year loan modifications – a small fraction of the 6 million borrowers who are presently 60+ days delinquent on their loans. For every borrower who avoided foreclosure through HAMP last year, another 10 families lost their homes. It now seems clear that Treasury’s programs, even when they are fully operational, will not reach the overwhelming majority of homeowners in trouble. Treasury’s stated goal is for HAMP (Home Affordable Modification Program) to offer loan modifications to 3 to 4 million borrowers, but only some of these offers will result in temporary modifications, and only some of those modifications will convert to final, five-year status. Even among borrowers who receive five-year modifications, some will eventually fall behind on their payments and once again face foreclosure. In the final reckoning, the goal itself seems small in comparison to the magnitude of the problem. COP Chair Elizabeth Warren introduces the April report in this video: Read the full report here .

The National Association of Realtors is celebrating some good numbers out today: Existing-home sales – including single-family, townhomes, condominiums and co-ops – surged 10.1 percent to a seasonally adjusted annual rate 1 of 6.10 million units in October from a downwardly revised pace of 5.54 million in September, and are 23.5 percent above the 4.94 million-unit level in October 2008. Sales activity is at the highest pace since February 2007 when it hit 6.55 million. Lawrence Yun , NAR chief economist, was surprised at the size of the gain. “Many buyers have been rushing to beat the deadline for the first-time buyer tax credit that was scheduled to expire at the end of this month, and similarly robust sales may be occurring in November,” he said. “With such a sale spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer.” Read the full release here . Meanwhile, the Morgage Bankers Association focuses on a different set of housing market statistics from last quarter: The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 9.64 percent of all loans outstanding as of the end of the third quarter of 2009, up 40 basis points from the second quarter of 2009, and up 265 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate increased 108 basis points from 8.86 percent in the second quarter of 2009 to 9.94 percent this quarter. And MBA Chief Economist Jay Brinkmann says the news is only going to get worse in those regions of the country hardest hit so far, like Arizona, California, Florida, and Nevada: First, it is unlikely the employment picture will get better until sometime next year and even then jobs will increase at a very slow pace. Perhaps more importantly, there is no reason to expect that when the economy begins to add more jobs, those jobs will be in areas with the biggest excess housing inventory and the highest delinquency rates. Second, the number of loans 90 days or more past due or in foreclosure is now a little over 4 million as compared with 3.9 million new and previously occupied homes currently for sale, although there is likely some overlap between the two numbers. The ultimate resolution of these seriously delinquent loans will put added pressure on the hardest hit sections of the country. Read the MBA's release here .

The Congressional Oversight Panel addressed the problem of foreclosures in its March report , and is now revisiting the issue in its October report. Since March, the Treasury Department has initiated the Making Home Affordable (MHA) program. And COP has concerns over the scope, scale, and permanence of the MHA's programs: While Treasury must consider programmatic changes to meet these challenges, so too must it adapt and improve the existing programs in several key ways. Given the issues facing MHA, Treasury must be fully transparent about the effectiveness of its programs, as well as the manner in which they operate. Although Treasury‟s data collection has improved significantly since the Panel‟s March report, it should be expanded, and the information should be made public. Treasury should release its Net Present Value (NPV) model, which is used to determine a homeowner‟s eligibility for HAMP. The new denial codes should be implemented to provide borrowers with a specific reason for denying a modification and a clear path for appeal. Denial information should also be aggregated and reported to the public. Here is COP chair Elizabeth Warren discussing the October report: You can read the full report here . And a dissenting view from COP member Rep. Jeb Hensarling (R-TX) here .

The delinquency rate on home loans for single family and multifamily houses (not including houses with more than four units) is at an all-time high, according to the Mortgage Bankers Association. The MBA's National Delinquency Survey now shows a delinquency rate for the second quarter of 2009 of 8.86%. The delinquency rate does not include homes that have been foreclosed or are somewhere in the foreclosure process. Including those homes would push the rate up to 13.16%--"the highest ever recorded in the MBA delinquency survey" (which dates back to 1972). This data might give some weight to what David Karsbøl --chief economist of the online investment bank Saxo Bank --said on CNBC this morning. Skip past all the market watching talk to 2:45, where Karsbøl says that any stock market rally "doesn't make any sense," because a "tsunami of foreclosures is coming,": Karsbøl backs his points with largely anecdotal evidence, suggesting that Americans are so angry about the bailouts and neighbors sitting in homes and not paying their mortgages that more and more people will do so. It is hard not to expect many more foreclosures are coming, given the high rate of people who are behind on their payments. But do people really make major financial decisions (like whether to skip out on a loan) based upon a neighbor's behavior? Meanwhile, CitiGroup is adding to 1400 more employees to help modify delinquent loans as part of the Obama Administration's efforts to stem the tide of foreclosures.