An increasing number of underwater homeowners are voluntarily opting to walk away from their home loans, a practice known as “strategic default,” according to CNN.

A recent survey by Fannie Mae found that while only about 27 percent of homeowners would even consider walking away, that’s up from 15 percent last year, and Jon Maddux, CEO of YouWalkAway.com, a company which advises people on the process, reports 10 percent more clients this year.

The profile of a typical strategic defaulter is not what you’d expect, said Peter Ticktin, a Florida attorney, whose firm is dealing with 3,000 foreclosure cases. “Because they borrowed money and stopped paying their loans, you would think they’re deadbeats — but it’s not like that.” [more]

The financial landscape is taking a heavy toll on consumer confidence — particularly when it comes to buying a home, according to a report from research website FindLaw.com. Almost two-thirds of U.S. residents say they’re less likely to buy a home in the near future because of the economic climate, while only 8 percent of Americans say that they’re more likely to buy a home due to the current financial situation. Stephanie Rahifs, an editor with FindLaw.com, said that the low mortgage rates haven’t proven enough to move buyers into the market. “Stricter lending requirements are often making it more difficult for many people to obtain mortgages. High unemployment rates are raising concerns about housing appreciation, affordability and foreclosures,” Rahifs said. “These factors are causing many people to shy away from the idea of buying a house.” Lower-income families, in particular, are moving out of the housing market, the report shows, with those whose annual income is less than $50,000 much more likely to say they are less inclined to buy a home. TRD

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So-called distressed debt “vultures” have been circling troubled mortgage-holders in the post-housing bubble era — and, in some cases, saving them, according to the Wall Street Journal. Investment funds, like Selene Residential Mortgage Opportunity, run by famed mortgage-bond trader Lewis Ranieri, are often more nimble than large financial institutions, experts say, allowing them to buy up troubled home loans and cut deals with the mortgage-holders. With banks eager to unload tenuous mortgages in the shaky market, Ranieri said he’s able to acquire the loans for far less than the remaining balance due, giving him more flexibility to work with troubled homeowners. “Every case is individual,” Ranieri said. “There’s no template.” [WSJ]

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After showing virtually no momentum earlier this month, U.S. mortgage activity perked up during the week ending Aug. 13, according to the Mortgage Bankers Association, following a decline in mortgage rates. The weekly mortgage application index climbed 13 percent from the previous week, spurred by a significant uptick in refinancings, the report shows. Refis increased 17 percent on the MBA’s index, while mortgage purchases dropped 3.4 percent. The recent drop in fixed mortgage rates likely influenced this activity, experts have suggested — last week Freddie Mac reported that the average 30-year mortgage fixed rate had plummeted to 4.44 percent, while the 15-year rate hit a record low of around 3.92. TRD

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As the residential sales market shows a summer slow-down, the rate of loan applications is also showing some sluggishness nationwide. Mortgage activity remained relatively flat through the week ending Aug. 6, according to the Mortgage Bankers Association’s weekly mortgage application survey. Total loan application volume increased .6 percent week-over-week on a seasonally adjusted basis, while the refinance index and the purchase index showed increases of .6 percent and .3 percent, respectively, during the same time period. The average interest rate on a 30-year fixed-rate mortgage also stayed flat week-over-week, declining just .03 percent to 4.57 percent. TRD

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With tougher mortgage underwriting rules a virtual certainty under
Congress’ new financial reform legislation, lenders have begun
confronting still another vexing issue: Can homebuyers who have high
credit scores really be trusted not to pull the plug — strategically
default — [more]

President Barack Obama’s foreclosure prevention program took a major hit in April, when more than 122,000 homeowners had their trial modifications cancelled, according to CNNMoney. This latest crop of failed trial mortgage modifications brings the tally to 277,640 since Obama’s plan was launched about a year ago. So far, just 68,000 troubled borrowers were able to transition out of the trial program to a permanent modification. Many of the modification attempts failed because borrowers either could not make the required loan payments or did not turn in proper paperwork, according to administration officials. [CNNMoney]

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While the first-time homebuyer tax credit program is set to expire April 30, it could end up affecting housing statistics for weeks to come. That’s because homebuyers have until June to close on properties if they sign contracts by next Friday. The program, extended from last fall, offers $8,000 to first-time buyers and $6,500 to repeat buyers. The credit could result in a continued, artificial rise in the rate of mortgage application filings, which showed a 13.6 percent uptick for the week ending April 16 according to seasonally adjusted week-over-week data released today from the Mortgage Bankers Association. The average 30-year mortgage rate, meanwhile, dipped to 5.07 percent from 5.17 percent, according to the MBA’s report. [more]

The rate of mortgage application filings dropped 11 percent on a seasonally-adjusted basis during the week ending April 2, according to the Mortgage Bankers Association. This overall drop in the MBA’s mortgage loan application volume index was due in part to the dramatic 16.9 percent decrease in refinance applications, as the 30-year fixed mortgage interest rate hit 5.04 percent, its highest level since August 2009. The rate of purchases for new mortgages, meanwhile, remained relatively the same week-over-week. Refinancings accounted for about 58.7 percent of total mortgage applications during the week, down from their 63.2 percent share the week earlier. TRD

Mayor Michael Bloomberg and Jonathan Mintz, commissioner of the New York City Department of Consumer Affairs, have partnered with NeighborWorks America to unveil a citywide loan scam alert system. The program aims to educate distressed homeowners, thereby reducing the number of those victimized by predatory scam artists. The city is urging distressed homeowners to call 311 for accurate information on how to modify a loan. “We have made great strides to protect New Yorkers from fraud and prevent foreclosures but far too many residents in New York City are still at risk of losing their homes thanks to scam artists who make big promises and then do little or nothing to help,” Bloomberg said today. TRD