DS News - U.S. Bank

34 IMPROVING FHA FORECLOSURE PROCESSES A brief released by the Urban Institute explores ways to improve Federal Housing Administration (FHA) foreclosure timelines and conveyance processes so as to drive down costs and make things more efficient. e brief is the third in a series produced by the Mortgage Servicing Collaborative (MSC), convened by the Housing Finance Policy Center at the Urban Institute. is latest brief delves into the costs associated with servicing non-performing FHA loans, including the expenses related to both foreclosures and conveyance of the properties to HUD. e brief hinges on two notions: 1) discovering whether servicing non-performing FHA loans is more expensive than servicing non-performing GSE loans, and 2) discovering whether the FHA's current foreclosure and conveyance processes create extra expenses. e study found that, indeed, foreclosing on FHA loans is "orders of magnitude more expensive than servicing loans backed by the GSEs"—three times as expensive, in fact, on average, as reported by servicers. e brief targets two major causes for these increased expenses: 1) "an inflexible foreclosure timeline and penalty system that does not improve outcomes," and 2) "a property conveyance process that slows down resolution, which causes properties to remain vacant longer, which can adversely affect neighborhoods and increase maintenance and repair costs." One of the primary drivers of these costs is the "interim penalties associated with failure to meet the FHA's milestones in the foreclosure timelines," according to data from MSC servicer members. According to the Urban brief 's data analyzed for 2015 and 2016 FHA claims, "43 percent of insurance claims received an interest curtailment penalty because of missed first legal action or reasonable diligence milestones." As the Urban brief points out, the GSEs " use milestones to track progress toward foreclosure, but missing a milestone in and of itself does not trigger a penalty." e brief also found the FHA fees themselves to be "onerous". According to the data, "the average first legal interest curtailment for loans that missed this deadline was $5,360 per loan, roughly 3 percent of an average FHA loan amount of $175,000." Urban's research also found high penalties when it came to conveyance. According to cited MSC servicer data, "the average per loan property preservation cost for FHA properties that were conveyed was $8,819, compared with $2,113 for nonconveyance routes." For conveyance liquidations, surveyed servicers reported an average property preservation loss of $4,179. is works out to " a loss rate of 47 percent on the $8,819 in expenses." Urban's brief recommends that the FHA change its foreclosure timelines to enact penalties and timelines that are more closely aligned with actual delays in the process. ey suggest these changes could be enacted through a simple administrative rule change. ey also recommend expanding the availability of conveyance alternatives and exploring other possibilities to improve the process. THE BEST AND WORST STATES FOR PROPERTY TAXES According to the U.S. Census Bureau, the average American household spends $2,197 on property taxes for their homes each year. at's no small chunk of change for many households, so property taxes are inevitably a factor when homebuyers are trying to decide where to buy, or where to move. WalletHub recently examined all 50 states and the District of Columbia to determine which states were best and worst when it comes to property taxes. e good news is, you'll get plenty of sun and beaches along with the money you save in Hawaii, which ranks as the state with the lowest effective tax rate at 0.27 percent. However, the state's median home value of $538,400 might offset that a bit, even for potential homebuyers keen to leave the mainland. For a median-priced home in Hawaii, the annual taxes would amount to $1,459. Next on the list is Alabama, with a median home price of $128,500 and an effective property tax rate of 0.43 percent, meaning the owner of a median-priced Alabama home would pay $550 in taxes. Rounding out the five states with lowest property tax rates are Louisiana (0.51 percent effective property tax), Delaware (0.55 percent), and, surprisingly, the District of Columbia. Like Hawaii, D.C. has a high median home value at $506,100, but a low effective property tax rate at only 0.56 percent. What about the other end of the scale? New Jersey takes home the trophy for highest effective property tax rate at 2.40 percent. Jersey homeowners with a median-priced home worth $316,400 would be paying $7,601 in annual property taxes. Coming in second is Illinois, with a 2.32 percent effective property tax rate, which works out to $4,058 in taxes on a median- priced home worth $174,800. e rest of the five states with highest effective property tax rates are New Hampshire (2.19 percent), Connecticut (2.02 percent), and Wisconsin (1.95 percent). of mortgages were in some stage of delinquency during December 2017. Source: CoreLogic's Loan Performance Insights Report, released in March 2018 STAT INSIGHT 5.3%

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