Archive for February, 2009
Existing single-family home prices in 20 major metropolitan statistical areas (MSAs) across the country were down an average 18.5 percent in December 2008 from one year earlier, according to the 20-city composite index released Tuesday by Standard & Poor's. The S&P/Case-Shiller Home Price Index saw another series of record declines, including a fourth-quarter decline of 18.2 percent from the previous year period, the largest quarterly figure "in the series' 21-year history," according to S&P analysts.
“The broad downturn in the residential real estate market continues,” said index chairman David Blitzer. "There are very few, if any, pockets of turnaround that one can see in the data. Most of the nation appears to remain on a downward path, with all of the 20 metro areas reporting annual declines, and eight of those MSAs now with negative rates exceeding 20 percent."
The December data showed slight improvement in the annualized rates of decline seen in Boston, Denver, Los Angeles, San Diego and Washington D.C. The Sunbelt continued to house the worst performing cities in terms of year-over-year declines: Phoenix was down 34 percent, Las Vegas was down 33 percent while San Francisco fell 31.2 percent. Denver, Dallas, Cleveland and Boston reported the smallest annual declines of 4 percent, 4.3 percent, 6.1 percent and 7 percent, respectively.
An overwhelming 18 of the 20 MSAs studied showed double-digit declines from their peak prices, according to the data. Half the MSAs posted declines greater than 20 percent; four of these showed declines in excess of 40 percent. Dallas is down 8.6 percent from its June 2007 peak, while Phoenix is down 45.5 percent from its June 2006 peak. Overall, S&P reported that the data seen in December show that national home prices have crept back to similar levels seen in the third quarter 2003.
"If one looks in detail at the annual return data, it can be seen that 13 of the 20 MSAs and the two composites have been reporting consecutive record declines since December 2007," Blitzer said. "The monthly data follows a similar trend, with all of the metro areas reporting at least four consecutive months of negative returns.”
Read a media statement regarding the indices.
Write to Diana Golobay at diana.golobay@housingwire.com.
The Federal Reserve should buy long-term Treasury securities, said President of the Dallas Federal Reserve, Richard Fisher, on Monday.
"I assure you the Federal Reserve has not abandoned the wisdom of Milton Friedman or Walter Bagehot or any of the other established patron saints of central banking," Fisher said in a speech at Harvard University. "But these are complex, trying times…we are the nation's central bank and we are duty bound to apply every tool we can to clean up the mess that has soiled the face of the financial system…"
Fisher said buying longer-term Treasurys is not necessarily a "sharp departure" from previous practices, as the Fed will often buy longer-term securities to maintain a well-balanced portfolio. "That said, in my opinion, we certainly shouldn't try to peg long-term rates. Past efforts to do so soon have led to costly credit-market distortions and inevitably ended in tears."
He also cautioned the Federal Reserve should be careful to avoid any perception that it stands ready to monetize exploding federal deficits, because such a perception could "undermine confidence in our independence and raise serious doubts about our commitment to long-term price stability." The fed must also make sure its actions are the "absolute minimum" needed, Fisher said.
Buying Treasuries is a hot topic within the Federal Reserve — an idea that Fed members are split over. It has seemed that Fed Chief Ben Bernanke supports the idea in theory, but according to a Market Watch report, many believe the Fed is actively backing away from the idea in practice. Critics have said if the central bank purchases Treasurys, it would incur serious damage to the market for Treasurys.
Write to Kelly Curran at kelly.curran@housingwire.com.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
The American Recovery and Reinvestment Act (ARRA), which was signed into law last Tuesday, increased the maximum conforming loan limit for mortgages originated in 2009, said the Federal Housing Finance Agency Monday. The increase affects 250 counties across the United States. For these areas (see list here), Fannie Mae (FNM: 0.00 N/A) and Freddie Mac (FRE: 0.00 N/A) loan limits will return to their late-2008 levels, which were up to $729,750 for one-unit properties in the United States. Loan limits in other areas will not be changed by the legislation.
Conforming loan limits for 2009 were originally announced in late 2008 and had been calculated under terms set forth in the Housing and Economic Recovery Act of 2008 (HERA), passed in July. So as of Jan. 1, Fannie Mae and Freddie Mac were no longer able to purchase or guarantee mortgage loans above the $625,500 conforming limit. Until now, of course.
The new ARRA legislation stipulates that, for loans originated in 2009, the loan limit is to be the higher of the 2008 limits and those originally calculated for 2009 under HERA. Where the 2008 and 2009 limits differ, the 2008 limits tend to be higher and thus, in most cases, loan limits are reverting back to last year’s levels. For the relatively few counties where 2009 limits actually increased — 43 counties in Virginia, North Carolina, and California — the new limits will remain at the higher level, according to the FHFA.
Under the terms of the new legislation, the Director of FHFA is given the authority to increase loan limits levels for “sub-areas." Given the implementation difficulties associated with establishing multiple limits for any given county, FHFA’s Director currently has no plans to use this discretion, according to the FHFA.
The legislation's loan limits apply to all loans originated in 2009. For loans purchased in 2009 that were originated from July 1, 2007 through December 31, 2008, the same limits will apply, the FHFA said. For loans purchased in 2009, but originated before July 1, 2007, the limits previously announced by FHFA on November 7, 2009 and updated in December will apply. For example, a $700,000 mortgage originated in 2006 would not be eligible for purchase this year, even if the applicable local limit under ARRA is $729,750.
Write to Kelly Curran at kelly.curran@housingwire.com.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
The Federal Reserve Bank of New York on Thursday announced another $19.87 billion in agency mortgage-backed security purchases for the week ending Feb. 18, bringing the total amount of purchases since Jan. 5 to $134.83 billion. The Fed purchased $7.92 billion from Freddie Mac (FRE: 0.00 N/A), $10.95 billion from Fannie Mae (FNM: 0.00 N/A) and $1 billion from Ginnie Mae, making the week ending Feb. 18 the single slowest week in Ginnie purchases, with the week ending Feb. 11 coming in at a close second of $1.4 billion. The Fed has so far purchased $65.8 billion from Freddie, $56 billion from Fannie and $13 from Ginnie.
In the week ending Feb. 18, the Fed purchased $850 million in agency coupons with 15-year maturities. The rest of the weekly purchases occurred in coupons with 30-year maturities. Of the Fed’s total purchases so far, approximately 94 percent have been purchases of agency coupons with 30-year maturities. About 5 percent have been purchases of coupons with 15-year maturities, and just under 1 percent has consisted of purchases of coupons with other maturities — 20- and 40-year maturities, for example.
The Federal Reserve in early February announced it had selected JP Morgan Chase & Co. (JPM: 37.21 -0.75%) as custodian for the program, which began on Jan. 5 and will purchase up to $500 billion in MBS that are backed by government-sponsored entities, in an effort to maintain liquidity in a vital section of the U.S. mortgage market. The Fed has also said it may soon begin modifying mortgages it owns within the assets it owns.
Write to Diana Golobay at diana.golobay@housingwire.com.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
In the wake of falling home prices, Nationwide housing affordability surged at year-end 2008 to its highest level in at least five years, according to the National Association of Home Builders /Wells Fargo & Co. (WFC: 29.60 +1.89%) Housing Opportunity Index, released Thursday.
The HOI indicated that 62.4 percent of all new and existing homes that were sold in the final quarter of 2008 were affordable to families earning the national median income of $61,500, up considerably from the 56.1 percent of homes that were affordable to such families in the previous quarter and the 46.6 percent of homes that were affordable to them at the end of 2007.
“Falling home prices and very favorable mortgage rates both contributed to the housing affordability gains we saw in the fourth quarter of 2008,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. “However, at the same time, worsening economic conditions, historically low consumer confidence and uncertainty about future home prices kept many qualified buyers on the sidelines."
The most affordable major housing market in the country during the fourth quarter was once again Indianapolis, Ind., which has now topped the affordability list 14 consecutive times, according to NAHB. There, just over 93 percent of all homes sold in the fourth quarter of 2008 were affordable to households earning the area’s median family income of $65,100.
According to the Index, the most affordable cities and their median prices are:
1. Indianapolis, Ind., $103,000
2. Warren, Mich. $125,000
3. Youngstown, Ohio, $73,000
4. Detroit, Mich., $90,000
5. Grand Rapids, Mich. $102,000
6. Syracuse, N.Y., $88,000
7. Dayton, Ohio, $90,000
8. Akron, Ohio, $90,000
9. Cleveland, Ohio, $100,000
10. Scranton, Pa., $85,000
The nation’s least affordable major housing market in the fourth quarter, according to HOI, was again New York-White Plains-Wayne, N.Y.-N.J., where just under 14 percent of all homes sold during the period were affordable to those earning the median income of $63,000. This was the metro area’s third consecutive appearance at the bottom of the list. Other major metros near the bottom of the chart included San Francisco, Calif.; Nassau-Suffolk, N.Y.; Los Angeles-Long Beach-Glendale, Calif.; and Miami, Fla.
Write to Kelly Curran at kelly.curran@housingwire.com.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
One day after assuring investors that it did not intend to nationalize certain key banks — and despite remarks from key lawmakers suggesting otherwise — the U.S. government is instead looking to take a massive 40 percent stake in troubled Citigroup, Inc. (C: 30.87 +1.61%), the Wall Street Journal reported Sunday evening.
The government investment would involve converting preferred shares into common shares, according to various published reports; the Journal cites Citigroup insiders in suggesting that the bank hopes the taxpayer share is closer to 25 percent, should such an intervention take place. The same sources suggested that Citigroup had proposed the plan to its regulators, the news service reported.
On Friday, White House Press Secretary Robert Gibbs said that the Obama administration did not intend to nationalize all or even some of the U.S. banking system. "This administration continues to strongly believe that a privately held banking system is the correct way to go, ensuring that they are regulated sufficiently by this government," Gibbs said. "That's been our belief for quite some time."
In a joint statement released by key regulators Monday, the government sought to clarify that it is looking for banks to raise private capital first. "The U.S. government stands firmly behind the banking system during this period of financial strain to ensure it will be able to perform its key function of providing credit to households and businesses," the statement read in part.
"[I]nstitutions will have an opportunity to turn first to private sources of capital. Otherwise, the temporary capital buffer will be made available from the government."
While much of the press has been breathlessly painting the proposed move as a step towards nationalization, investors clearly have voted otherwise with their pocketbooks, and analysts have strongly suggested any such speculation is unfounded. Shares in Citigroup jumped more than 10 percent in early trading Monday on the news, while Bank of America Corp. (BAC: 7.29 -0.14%) rose more than 7 percent. Both banks had tanked in trading on Friday on investor fears.
"Not only is 'nationalization' just ahead of socialism in the dictionary, but it is political suicide," said one source, a senior vice president at a bank that asked not to be named in this story. "The problems are the loans, not the organizational structure or the ownership structure of the financial institutions holding them."
The same source suggested instead that the proposal from Citigroup represented more of a "muddle through" approach to the ongoing financial crisis.
Analyst Mark Hanson with The Field Check Group echoed similar logic in a note to clients Monday, saying that the potential move by regulators and the government would be "far from" a move towards nationalization. "If the new way of dealing with banks is to clear up all preferreds — both government and non-government — then this resolution that can be copied across banks is a clear positive to the alternatives."
Jim Vogel, head of agency debt research at FTN Financial in Memphis, Tenn., suggested Monday that the joint statement from bank regulators may portend a pending expansion of the Federal Deposit Insurance Corp.'s extremely successful Temporary Liquidity Guarantee Program.
"Moving out to 5-year maturities from date of issuance seems reasonable as does the removal of the funding ties to either debt rollover or any new asset acquisitions," he said. He also expects the FDIC to extend the program's issuance deadline beyond its current expiration date four months from now. "If nothing else, the program is going to add significant dollars to the FDIC insurance fund with the likelihood of claims against TLG debt remaining a remote outcome at this stage."
"The people who are talking about nationalization all mean something different. Or don't know what they mean," said an ABS/MBS analyst that asked to remain anonymous. "And if the government is pushed to take over Citi and BofA and start liquidating the naughty bits we might as well shutter the windows, bar the door and sit with our guns in our lap."
Write to Paul Jackson at paul.jackson@housingwire.com.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
Of the prime, conforming adjustable-rate mortgage (ARM) borrowers that refinanced in the fourth quarter of 2008, 97 percent refinanced into a new conforming fixed-rate mortgage (FRM), up from a revised 85 percent in the third quarter, according to data released Monday by Freddie Mac (FRE: 0.00 N/A). The quarterly refinance report, which looks at a sample of properties on which Freddie has funded at least two successive loans, also found that 99.7 percent of borrowers who had a FRM refinanced into another long-term FRM, up from a revised 97 percent in the third quarter.
“The very low interest rates for fixed-rate loans compared with ARM rates in the fourth quarter, combined with worries that rates may rise in the future when the economic recession ends, enticed refinancing borrowers to seek the security of long-term fixed-rate mortgages,” said Freddie vice president and chief economist Frank Nothaft. “When borrowers can lock in a rate of 5 percent or less for 15 years or longer, it’s hard to find a reason not to take it."
Only 3 percent of borrowers that initially held a hybrid ARM refinanced back into that product in the fourth quarter, down from 15 percent in the previous quarter, according to Freddie's data. The exodus from hybrid ARMs in the fourth quarter suggests borrowers were enticed away from the product, although Freddie officials acknowledged in a media statement regarding the report that hybrid ARMs were more popular overall in 2008 among borrowers that initially held such loans than they were in 2007. Seventeen percent of hybrid ARM borrowers refinanced back into hybrid ARMs in 2008, up from 14 percent in 2007.
“During much of the fourth quarter, initial interest rates on hybrid ARM loans were close to or above interest rates on 15-year and 30-year fixed-rate mortgages," Nothaft said. "In that pricing environment, fixed-rate loans appear very attractive to borrowers. As a consequence, nearly all borrowers who refinanced chose a fixed-rate loan.”
Write to Diana Golobay at diana.golobay@housingwire.com.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
AllRegs has provided members of the National Association of Mortgage Brokers with fully-sponsored access to federal compliance and pending legislation inside of the AllRegs Information Service, AllRegs Online.
"Now more than ever, it is vital for our membership to keep up with changing federal legislation on Capitol Hill that directly impacts their business," said Roy DeLoach, NAMB's chief executive officer.
AllRegs Federal Compliance will provide NAMB members with the ability to search, review and learn from all Federal Compliance regulations inside of AllRegs Online, a component of the AllRegs flagship Single-Family Lending Package. In addition, they will also have access to federal pending legislation, according to the company's press release. Members will be able to search all federal laws related to the mortgage industry — RESPA, TILA, HMDA, HOEPA and HERA — and will have access to federal analysis and commentary.
"Mortgage brokers and originators play a vital role in the mortgage lending industry and they rely on knowing the latest federal regulations to effectively do their business," said Dan Thoms, AllRegs senior vice president. "With the ability to search the laws online, drill down into those regulations, and receive weekly updates via email, NAMB members will be able to keep up with rapidly changing federal compliance laws." www.allregs.com www.namb.org
PriceMyLoan and Del Mar DataTrac Integrate
PriceMyLoan, a provider of automated underwriting and loan pricing technology, announced last week a partnership with Del Mar DataTrac to deliver an integrated solution for mortgage bankers. The integration combines PriceMyLoan's advanced loan decisioning with Del Mar DataTrac's mortgage banking and secondary marketing functions to deliver a more powerful and efficient workflow, according to a joint press release.
"Our partnership delivers the type of value that mortgage bankers need right now," said Gigi Campbell, national sales director at PriceMyLoan. "They want effective technology tools that work together in a way that improves their processes without increasing costs."
As a point-of-sale tool, PriceMyLoan enables originators to qualify borrowers, price loans and submit rate lock requests directly to lenders, the companies said. Borrower and loan information is either manually typed in or uploaded from other sources such as loan origination systems and credit report providers.
The key for the integration is to ensure that a comprehensive set of data — including 1003 data, complete credit report data, rate lock information, status dates and other loan parameters — accurately transfers into the platform in order to minimize errors and not impede the workflow process, according to a press statement. The interface also works bi-directionally by transferring data from DataTrac back into PriceMyLoan to provide originators with timely updates on the status of their loans. www.pricemyloan.com www.delmardb.com
MDA Launches Automated Portfolio Review Tool
Wilmington, Del.-based MDA Lending Solutions, a provider of advanced information solutions to the mortgage industry, announced Thursday the launch of ARTAdvisor from MDA MindBox. The platform provides risk management from early risk detection through loss mitigation by automating the review, analysis and management of any size portfolio.
ARTAdvisor combines comprehensive credit analysis with collateral analysis to identify risky loans, said MDA in a press release, and to propose optimal resolutions ranging from government sponsored programs to lender-specific loan modifications. The platform uses a customizable rules engine to review any number of loans based on the organization’s own standards for quality and performance.
“With the constantly evolving governmental programs aimed at troubled mortgage loans, organizations are in need of ways to handle the risks and maximize the opportunities these programs create,” said Bill Richer, president of MDA MindBox.
ARTAdvisor identifies unseen or emerging points of risk, analyzes data from multiple sources to show trends in performance, identifies secondary market opportunities and accelerates loss mitigation strategies at the individual loan level and the portfolio level. It can also be implemented at the point-of-sale, pre-qualification or loan application stage to identify risk upfront, enhancing pricing and decisioning. www.mdasolutions.com
Servicing Web-based System to Improve Client Efficiency
McDonald Computer Corp., a provider of automated servicing technology, announced last week the integration of enhanced servicing capabilities on its Web/T.I.M.E. system. Users will now have more control over the accessibility of loan information and the ability to log on to the system from virtually anywhere in the world using a secure Virtual Private Network server.
Web/T.I.M.E is a Web-based mortgage loan servicing system offered in a service bureau environment. The technology is a fully integrated, on-line, real-time mortgage loan investor servicing system and has the ability to process all loan product types, said McDonald Computer Corp. Used in conjunction with myloaninfo, a Web-based mortgage servicing customer service application, Web/T.I.M.E. enables clients to offer their customers the ability to view loan information in real time.
McDonald Computer Corp.’s Web/T.I.M.E. system also has a reverse mortgage servicing component and has the ability to service default loans. www.mcdonaldcomputer.com www.myloaninfo.com
Solutions to Support Credit Union's Growth
Harland Financial Solutions announced Friday that Charter Oak Federal Credit Union recently implemented its Touche Analyzer MCIF and Advisory Services consulting solutions.
The $600 million asset-sized credit union headquartered in Groton, Conn., selected Touche Analyzer in part to help achieve its membership and share of wallet objectives, the company said.
In addition to using Touche Analyzer in that pursuit, Charter Oak purchased Advisory Services consulting solutions that will provide an analysis of such activities as branch potential relative to each location's market and the credit union's best opportunities for cross-selling more products to its existing members. The analysis, which will result in specific strategies, as well as actionable tactical recommendations from Harland Financial Solutions' consultants, will afford the credit union a set of prioritized projects to be implemented using Touche Analyzer.
"Once the consulting analyses are complete, we expect a concise set of strategic plans and actions that Charter Oak can use in the years ahead to support our objectives and continued success," said Laurie Cormier, assistant vice president of marketing at Charter Oak. www.harlandfinancialsolutions.com
Write to Kelly Curran at kelly.curran@housingwire.com.
Editor’s note: Tech Roundup runs every Monday, and offers a look into the various technology that makes the entire mortgage market work — whether origination or default, through to secondary market operations. If you’ve got a tech bit that we should know about, email the reporter above.
Silverton, Ore.-based Silver Falls Bank was shut down Friday by the Oregon Department of Consumer and Business Services, which appointed the Federal Deposit Insurance Corporation as receiver — marking the 14th bank failure this year. The FDIC then entered into a purchase and assumption agreement with Citizens Bank, out of Corvallis, Ore., to assume all of the deposits of Silver Falls Bank.
The three branches of Silver Falls Bank reopened on Monday as branches of Citizens Bank, according to the FDIC. Depositors of Silver Falls Bank will automatically become depositors of Citizens Bank. As of February 9, 2009, Silver Falls Bank had total assets of approximately $131.4 million and total deposits of $116.3 million. Citizens Bank did not pay a premium to acquire the deposits of Silver Falls Bank.
In addition to acquiring all of the failed banks deposits, including those from brokers, Citizens Bank agreed to purchase approximately $13 million in assets comprised of cash, cash equivalents, securities, overdraft loans, and deposit secured loans. The FDIC will retain any remaining assets for later disposition.
The FDIC estimates that the cost to the Deposit Insurance Fund will be $50 million. The Citizens Bank acquisition of all the deposits of Silver Falls Bank was the "least costly" resolution for the FDIC's Deposit Insurance Fund compared to alternatives, the FDIC said.
Silver Falls Bank is the 39th bank to sail since the beginning of the credit crisis.The last bank to fail in Oregon was Pinnacle Bank, Beaverton, on February 13, 2009.
Write to Kelly Curran at kelly.curran@housingwire.com.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
(Update 3: adds most recent call report data; updates Talley's most recent position at Security Savings; adds statement from the bank regarding OTS exam)
The Office of Thrift Supervision has set up camp in a small Kansas bank with ties to the former Bush administration, as part of an effort to examine the bank's mortgage books and accounting practices, according various sources working inside the bank and at the Office of Thrift Supervision, the bank's regulator.
The OTS began its examination of Olathe, Kan.-based Security Savings Bank, near Kansas City, last week sources said. Steve Johnson, the bank's chief banking officer, told HousingWire the exam by the OTS was regular and routine, in a statement. "The OTS generally visits and reviews financial institutions for safety and soundness as well as regulatory compliance approximately every 12 to 18 months and last commenced such an examination of Security Savings Bank as of June 2007," he said.
According to recent call reports, the bank’s assets have shrunk to $649.5 million from $827 million the year before, and it will book a third consecutive loss at $1.54 million dollars the 4th quarter of 2008. The bank is also below an OTS-mandated risk-based capital level of 11.5 percent for the third quarter in a row, according to sources who have knowledge of the bank's operations.
An OTS spokesperson said he would not comment on any ongoing reviews, citing OTS policy.
This Wednesday, Security Savings began a series of layoffs, including removing head of Treasury services Mike Talley. It's unclear what the circumstances for Talley's removal were, but the bank has seen a veritable revolving door of senior leadership in the past two years.
Security Savings chairman Don Bell has been at the center of plenty of controversy regarding the methods of his business dealings. His real estate dealings have drawn considerable scrutiny as far back as 2005. On Thursday, the Kansas City Star reported that Chicago-based GEM VP Lending LLC will sell 15 Bell-owned Value Place hotels, all of which are characterized by the lender as "above-average performing." News of a million dollar lawsuit for investor fraud against Bell by a former friend and investor Mathew Mabe broke this past fall, as well, and little has been reported on the outcome of the case in the last two months. According to the lead attorney representing Mabe, the suit has not been settled and is still ongoing.
Part of the suit against the bank's chairman involves a land deal Bell did with Carl Herbster, the pastor of Tri-City Ministries in Independence, Missouri. For years, questions have been mounting among banking staff and investors as to ties Bell may have with local Kansas Republican politicians, as well as John Ashcroft, former attorney general during the Bush administration; Herbster has close ties with Ashcroft.
Teri Buhl is an investigative journalist covering Wall Street who has written for the New York Post Sunday Business and Trader Monthly. Contact her at teribuhl@yahoo.com.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
