Melbourne, Australia - Millions of Aussies may be experiencing mortgage stress, but ‘mortgage apathy’ is the latest trend on the block, according to new research from leading national insurer AAMI.

Young renters in capital city areas are increasingly dropping out of the race to get a foot on the property ladder, with 8% fewer saying they feel the pressure to buy a house than there were in 2010. Over one third of young city renters that say they’re happy renting with no plans to buy a property. A double‐whammy of high housing prices and global uncertainty around property prices could be to blame for the rise of ‘mortgage apathy’, with younger city renters preferring to hold tight, rather than make what is likely to be the biggest financial decision of their life.

Newspoll Market & Social Research conducted an independent internet survey of 3,121 Australians, 18 years of age and older, across all states and territories in 2012 including 184 renters aged 18‐24 years in ACT, Sydney, Melbourne, Brisbane, Perth and Adelaide. Collected data has been weighted in line with current Australian Bureau of Statistics or ABS population demographics to ensure any extrapolation of results is representative of age sex and area.

Newspoll Market & Social Research also conducted an independent internet survey of 2,812 Australians, 18 years of age and older, across all states and territories in 2010 including 284 renters aged 18‐24 years in ACT, Sydney, Melbourne, Brisbane, Perth and Adelaide. Collected data has been weighted in line with current ABS population demographics to ensure any extrapolation of results is representative of age sex and area.

The key findings

31% of city renters aged 18 to 24 report feeling pressure to get a mortgage, compared to 39% in 2010.

35% of city renters aged 18 to 24 say they are happy renting with no plans to get a mortgage, compared to 29% in 2010.

While Australians are typically achieving life’s milestones like getting married, having children and buying a house later in life, this is not enough to account for such a dramatic rise in “Mortgage Apathy”, according to Reuben Aitchison, Corporate Affairs Manager for AAMI.

“Twenty or thirty years ago average house prices in Australia were three to four times the average salary, whereas today we are looking at a multiple of seven times. Saving for a deposit is increasingly out of reach for young people today, and if they are going to get a foot on the property ladder they want to wait till they know they are investing at just the right time.

“We know that people who own their own home tend to take a greater sense of responsibility for their dwelling. But this is a new trend and we will watch with interest to see how longer‐term renting affects the way tenants treat their dwellings and therefore the effect on risks faced in and around the home.”

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On Friday, February 9, administration officials stood alongside state attorneys general to announce a $25 billion mortgage settlement. It was reminiscent of a big announcement by administration officials three Februarys ago involving an even bigger number: $50 billion. That money was supposed to go to the administration’s signature mortgage modification program, which eventually became HAMP.

Three years later, HAMP (the Home Affordable Modification Program) is widely considered a failure. That failure provides key context to  Friday’s announcement.

According to the state attorneys general and the administration, a major selling point of the new settlement is that it won’t repeat HAMP’s mistakes. This deal, they say, is different.

“If people are eligible for a loan modification, the banks won’t screw up those decisions anymore,” said Iowa Attorney General Tom Miller.

North Carolina Attorney General Roy Cooper made a rather pointed reference to HAMP: “I think strong, court-ordered enforcement with teeth distinguish this deal from those earlier efforts to help homeowners.”

As we’ve reported extensively over the past several years, homeowners seeking to avoid foreclosure by gaining a loan modification have often been frustrated by banks’ errors and delays. In the worst cases, the banks’ shoddy mortgage servicing has led to wrongful foreclosures. The errors have sometimes continued even after homeowners got an elusive modification.

When HAMP was launched, it came with the promise that mortgage servicers would have to abide by clear rules. The handbook laying out these rules now approaches 200 pages. But as we’ve detailed, enforcement of those rules has been lacking.

According to the state attorneys general, the settlement directly addresses that. The five big servicers 2014 Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial (formerly GMAC) 2014  that will sign on to the not-quite-finalized deal have agreed to follow a raft of new rules. Some of these rules, like how quickly a bank must respond to a homeowner’s completed modification application, come straight from HAMP.

What’s different this time, they say, is that there are clear consequences for rule-breaking. But plenty of questions remain, and only time will tell if the latest promises of mortgage-servicer accountability will be kept.

“The big picture is that these new rules are only good if servicers follow them,” said Alys Cohen of the National Consumer Law Center. “Enforcement will really matter.”

As critics like Firedoglake blogger David Dayen have pointed out, the new system relies to some extent on “self-assessments” by the banks to identify violations of the new rules. But Miller, the Iowa attorney general, notes that consumers will be able to complain to their state’s attorney general, who will make sure their complaints are heard.

The settlement does create a “monitor” who will have the power to impose penalties. The administration says a bank could be fined up to $1 million per violation and up to $5 million for repeat violations. But the details released so far don’t show how violations will be applied or counted. (If thousands of homeowners, for instance, have been wrongly denied modifications, will that be counted as one violation or thousands?)

HAMP came with no penalties for participating mortgage servicers that broke the rules. It was only in the past several months that the Treasury Department decided to address servicer noncompliance 2014 by temporarily withholding the program’s subsidy payments. (As for the millions of dollars in incentives that Bank of America, JPMorgan Chase and the other servicers were paid over the previous years, they get to keep that.)

The settlement is not only supposed to have more sticks than HAMP, it’s also a chance for the administration to breathe life back into the old program. Treasury recently made major revisions to HAMP to allow more homeowners to qualify for modifications.

“The extension and expansion of HAMP are designed to be complementary to the settlement,” said Treasury spokeswoman Andrea Risotto.

For instance, the program was set to end at the end of 2012 but now will accept new homeowners until the end of 2013. (The banks will operate under the umbrella of the settlement through 2014 or so.) In addition, Treasury has broadened some of the criteria to make it easier to qualify.

Some of the millions of homeowners who were rejected might be eligible for a second shot. Hundreds of thousands of homeowners were originally granted “trial modifications” through the program in 2009 and early 2010, only to be denied permanent modifications many months (and sometimes more than a year) later.

Most of those homeowners started those trials by just giving their income information over the phone. They’ll be eligible to reapply, according to the proposed rules. One of the recent changes to HAMP could reduce the cost of the settlement for banks 2014 and leave taxpayers footing a chunk of the bill.

As part of Friday”s deal, the five banks agreed to reduce billions in mortgage debt for homeowners in danger of foreclosure. Most of those principal reductions 2014 about 85 percent according to Housing and Urban Development Secretary Shaun Donovan 2014 will likely be for loans that the banks hold on their own books.

HAMP also has long offered investors incentives to encourage principal reductions. For loans owned by banks, the money goes right to them. In January, Treasury tripled those incentives. In cases in which a loan qualifies for HAMP, the government will now pay investors, often the banks themselves, up to roughly two-thirds the cost of a principal reduction.

The banks have agreed to perform at least $10 billion worth of principal reductions as part of the settlement. Because it’s unclear how many of the principal reduction modifications will be done through HAMP, it’s impossible to say how much of that will be covered by the government subsidies.

So far, about 40,000 HAMP modifications have been done through HAMP’s principal reduction program at a median reduction of $67,196, meaning that roughly $2.7 billion in principal has been reduced. If the banks find HAMP more attractive because of the increased incentives, that amount might increase sharply, and HAMP could experience something of a renaissance.

by Paul Kiel, ProPublica, Feb. 10, 2012, 10:55 a.m.

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Slowly, but surely, the tide has been turning in favor of sterling over the past few months, with the euro now significantly weaker against the pound than it has been for many months. In fact, the last time sterling was at its current level of approximately EUR1.20 to the pound was in the summer of 2010 and, before that, in December 2008.

While the UK economy is not yet showing any significant signs of recovery, it seems the weakness which has affected sterling may finally have bottomed out, with currency markets now punishing the euro, which has weakened against both sterling and the U.S. dollar.

For the UK buyer who has been searching for a new home in France, this is significant. The effect of the exchange rate changes over the past few months has been to effectively reduce property prices by around 10 percent, according to Offshoreonline.org. Add to this the aggressive pricing by developers in areas of the Cote D’Azur, such as Nice and Cannes, and the scene is set for UK buyers to at last be able to take advantage of what has been one of France’s stronger property sectors.

Exchange rate movements are important for buyers from the UK. Put simply, around six months ago, one pound sterling would have bought EUR1.10, but now for the same pound sterling, the UK buyer can expect to receive over EUR1.20. The net effect is to make any purchase of euros around 10 percent cheaper, saving GBP 20,000 on a GBP 200,000 house purchase, for example.

Buyers looking at high end new launches, such as Parc Eugenie in Cannes, should immediately see an enhancement to any rental returns, as with lower upfront purchase cost, the real yield they can expect will rise accordingly.

Commenting on the improved outlook for UK buyers in France, Offshoreonline.org managing director, Tim Harvey, said, “Exchange rates are a vital part of the mix for most UK buyers operating in France, but now it seems the tide may be moving slowly in favor of the UK buyer, with the weakening euro opening up some very attractive options for UK buyers.

With mortgage rates available from 3.45 percent, we have noticed a slow, but steady, increase in enquiries since before Christmas which has continued into the New Year.”

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As many gear up to the prospect of a tough 2012, three in four Britons (75%) have made financial resolutions for the New Year, according to financial planning website rplan.co.uk.

With one in seven adults (14%) saying his household is GBP500 or more a month worse off in 2011 than it was three years ago, rplan.co.uk asked a GB representative sample of 2,077 adults which financial resolutions they were planning for 1st January.

Of those that planned financial resolutions:

- More than one in two adults (56%) said they planned to cut back on their spending. Women were more prone to this than men (59% to 50%).

- More than one in three people (37%) wanted to try to save more money each month whilst 36% said a key resolution was to cut down their debts. The research showed an attitude-divide between the young and old with the under 35s top financial resolution focusing on saving, whereas the over 35s top priority was to cut back spending and to reduce debt.

Top 10 financial resolutions for 2012:

Resolution                                                                                Percentage

Cut back on my spending                                                         56%

Save more money each month                                                               37%

Reduce my debts                                                                                       36%

Look for a better paid job to boost my income                                      19%

Ensure I have the best insurance cover available                               12%

Cut down what I spend on insurance                                                    12%

Shop around financial providers so I pay less in charges                 11%

Start/take more action with my pension                                                 9%

Take more control over my investment decisions                                8%

Change my bank account                                                                                6%

- Financial plans that didn’t make the top 10 included: paying off my

mortgage (3%), supporting elderly parents financially (3%), moving house (2%) and

taking out life and income protection insurance (3%)

Andy Creak, Managing Director at rplan.co.uk , commented: “The last year has presented most adults with a near-impossible juggling act, many trying to make cut-backs on a shrinking disposable income, whilst also trying to put money away to support the needs of family members.

At rplan.co.uk, we have put tools in place to help people work out in real terms how much various plans, such as getting through university, may cost and we encourage everyone to take a close look at the costs and charges involved in the financial products they hold, as this is an area where meaningful savings can often be made.”

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