Archive for April, 2009
The Treasury Department invested another $121.85m in 12 financial institutions through the Troubled Asset Relief Program (TARP) as another four firms returned some $570m by repurchasing stock from the government, according to the department.
The investments, made through the Capital Purchase Program (CPP), marked the latest in a series of efforts to bolster banks' capital and provide liquidity to the financial markets.
The only publicly-traded firm to participate in Friday's daily infusions, Mackinac Financial (MFNC: 5.00 0.00%), received $11m. Standard Bancshares received the largest capital injection of the day, $60m, while Business Bancshares and Peoples Bancorporation followed with $15m and $12.66m respectively. The smallest capital purchase of the day, $1.31m, went to Indiana Bank.
Three publicly-traded firms and one private firm on April 22 joined the growing number of banks that have repaid their CPP funds. First ULB repaid its $4.9m, Independent Bank (INDB: 28.00 +0.18%) repurchased its $78.16m in shares, FirstMerit (FMER: 15.84 +0.19%) repaid its $125m and TCF Financial (TCB: 10.43 -0.29%) gave back its $361.17m.
The treasury so far funded $198.89bn in total capital purchases and received $1.04bn in returned funds from 11 firms as of April 22 for an adjusted capital purchase total of $197.85bn. The CPP is just one of a number of TARP vehicles designed to stimulate financial markets.
The newest addition to the TARP family, the Home Affordable Modification Program, offers dollar incentives to servicers to modify mortgages of at-risk borrowers under the Obama Administration's Making Home Affordable plan. Two more servicers recently joined the growing list of participators.
The treasury granted up to $156m in servicer, lender/investor and borrower incentives to Green Tree Servicing and up to $195m to Carrington Mortgage Services, bringing the department's total commitment through the TARP to $14.27bn, according to the latest transaction report.
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.
Technology and consulting firm Wolters Kluwer will now offer on-site assistance to help institutions begin preparing for the Federal Reserve Board's new Regulation Z requirements, going into effect in October.
The changes will require institutions to comply with several Home Ownership and Equity Protection Act (HOEPA) requirements tied to a new class of mortgages the FRB identifies as "higher-priced."
"The sooner lenders can prepare themselves for these new requirements the better," says Kurt Sames, general manager of consumer compliance at Wolters Kluwer Financial Services. "In light of the current financial crisis, they can be certain regulators will intensify their scrutiny of compliance with these changes and other fair and anti-predatory lending requirements."
Wolters Kluwer says its Compliance Management professionals can be deployed on-site at institutions to help them revise policies and establish a systematic process for checking mortgage applications against the FRB's new higher-priced mortgage threshold. The company's regulatory experts can then help institutions update loan processing procedures to meet the FRB's higher-priced mortgage requirements — requirements such as verifying a borrower's ability to pay, limiting prepayment penalties and establishing escrow accounts.
Wolters Kluwer also announced Thursday that its Wiz Sentinel anti-predatory lending software will begin testing mortgages against the FRB's new higher-priced mortgage threshold when the Regulation Z revisions go into effect.
Wolters Kluwer Financial Services' Wiz Sentinel software belongs to the company's line of PCi compliance analytics solutions and can help institutions analyze loans to determine potential anti-predatory lending violations either in real-time at the point of sale or in batches for post-closing audits.
Write to Kelly Curran at kelly.curran@housingwire.com.
First time applications for state unemployment benefits in the week ending April 25 dropped 14,000 to a seasonally-adjusted 631,000, the Labor Department reports, indicating a slowing pace of job losses. However, this number changes on a state-by-state basis and people without jobs are finding it harder to get back into the workforce.
The total number of people who are still looking for work, and remain on benefits, increased 133,000 to a record-setting 6.27m. The insured unemployment rate for the week ending April 25 — the proportion of covered workers who are receiving benefits — reached 4.7%, marking its highest level since June of 1983. And the four week moving average of initial claims, which can smooth volatility in employment trends, turned upward, increasing 131,500 from the prior week to 6,076,000.
Despite the tentative signs that the pace of layoffs has slowed, Steven Wood, president of Insight Economics LLC, told Bloomberg News the figures still “suggest another sharp drop in employment and another big rise in the unemployment rate for April.”
The largest increases in initial claims were seen in California — where 8,535 people filed a claim — New York, Connecticut, Georgia and North Carolina. The largest decreases in claims were seen in Pennsylvania — where claims dropped 7,799 — Florida, Illinois, Ohio and Washington.
Write to Kelly Curran at kelly.curran@housingwire.com.
The mortgage industry modified 133,910 mortgages in March, according to the industry alliance HOPE NOW.
The data marks the second consecutive month of just under 134,000 recorded modifications, more than half of total workouts plans in March. Repayments accounted for another 115,000 workouts initiated.
“The lending industry is steadily working out solutions for homeowners and keeping as many as possible in their homes,” HOPE NOW executive director Faith Schwartz says in a statement.
Prime mortgages continued a growing trend in March. Prime mortgages accounted for 48% of all workouts in March, up from 44% in February, according to HOPE NOW's data.
The industry appears to be keeping abreast of the trend, as HOPE NOW's data show an influx of workout effort in the prime category. In March, there were more than four prime mortgage workouts to every one prime foreclosure — up from almost two prime workouts to each prime foreclosure in February — and more than five subprime mortgage workouts to every one one subprime foreclosure in the month.
Completed foreclosure sales dropped 40% from February, while repayment plans rose 4% and modifications remained unchanged at less than +0.1% over last month's figure. Total prime workout plans increased 11% from February, while the industry modified 4% more prime mortgages this month than last month.
Write to Diana Golobay at diana.golobay@housingwire.com.
The House Financial Services Committee approved legislation today that may potentially bring sweeping changes to the way the mortgage industry conducts business.
HR1728 or the Mortgage Reform and Anti-Predatory Lending Act, aims to curb forms of lending that have been a major factor in the highest home foreclosure rate in the nation in 25 years, the committee said in a statement.
"The bill would ensure that mortgage lenders make loans that benefit the consumer and prohibit them from steering borrowers into higher cost loans," the Committee says. "It would establish a simple standard for all home loans: institutions must ensure that borrowers can repay the loans they are sold."
The sponsor, Brad Miller (D-NC), and the committee called it a tougher version of the bill approved by the House in 2007 but never passed by the Senate. Among the current bill's loaded provisions approved by the Committee is a risk retention provision, holding creditors responsible, to some extent, for the loans they originate.
In testimony Thursday before the committee, the Mortgage Bankers Association (MBA) chairman David Kittle said a risk retention provision could make it impossible for many lenders to compete, among other faults.
But as the legislation stands, creditors would be required to retain an economic interest in a material portion — at least 5% — of the credit risk of each loan that the creditor transfers, sells, or conveys to a third party. Federal banking agencies would, however, have the authority to make exceptions to the bill’s risk retention provisions, including form and amount.
HR1728 would also ban yield spread premiums and other "abusive compensation structures" that create conflicts of interest, protect tenants who rent homes that go into foreclosure and encourage the market to revert back to originating fixed-rate, fully documented loans.
The House of Representatives is expected to consider HR 1728 as soon as next week.
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.
Statistics released by Freddie Mac show that in Q109 half of the borrowers who refinanced their mortgages lowered their annual interest rates by at least 20%. On a $200,000 loan, the average monthly payment lowered by $160.
According to economists at the firm, the monthly savings adds up to about $2.5bn in extra spending cash in the pockets of those homeowners to spend over the coming year.
“If this pace keeps up for the rest of 2009, that will provide homeowners about $10bn in mortgage-payment savings during the first year after refinance,” says Frank Nothaft, Freddie Mac vice president and chief economist.
“In recent weeks mortgage rates in our weekly survey have stayed below 4.9% for a 30-year fixed-rate mortgage and when combined with the new streamlined refinance programs available to borrowers whose loans are owned by Freddie Mac or Fannie Mae, we expect refinance activity to be very high in the near term,” he adds.
Nothaft feels programs such as these make it possible for borrowers with current loan-to-value ratios of up to 105% to qualify for a refinance whereas, traditionally, holders of such loans would be out of luck.
Freddie Mac reports that the median ratio of new-to-old mortgage rate was 0.8, the lowest ratio since the third quarter of 2003, and corresponds to a new interest rate; 1.25 percentage points below the old rate. In the fourth quarter of 2008 the ratio stood at 0.92.
The report also indicates that 58% of prime borrowers who refinanced a conventional, first-lien mortgage either kept the same principal balance or reduced it, up from a revised 45% in Q408. The share of refinance loans resulting in new loan amounts that were at least 5% higher than the paid-off first-lien mortgage balances fell to a five-year low of 42% in the first quarter; the Q408 cash-out share was revised down to 55%.
The methods used to gain this information are not without limitations. Freddie Mac admits the estimates come from a sample of properties funded with at least two successive loans and may not be indicative of other situations. Freddie Mac analysis also does not track the use of funds made available from these refinances.
After long-term mortgage rates surpassed short-term rates last week, all rates continued to drop in the week ending April 30, according to Freddie Mac's (FRE: 0.00 N/A) Primary Mortgage Market Survey released today.
30-year fixed-rate mortgages averaged 4.78% with an average 0.7 point, down from last week's 4.80% average, and matching the record low set the week of April 7, 2009.
This week's 15-year fixed-rate mortgage remains unchanged for the third week in a row, sitting at 4.48%. A year ago at this time, the 15-year FRM averaged a significantly higher 5.59%.
“Rates for fixed-rate mortgages hovered at record lows this week as ARM rates eased further,” says Frank Nothaft, Freddie Mac vice president and chief economist. “Mortgage rates for 30-year fixed rate mortgages, the most popular loan among homebuyers and families seeking to refinance, are more than 1.6 percentage points below the recent peak set at the end of October 2008. For a $200,000 loan, this means a monthly savings of almost $212 in mortgage payments or over $2,500 per year."
As for the easing ARM rates, Five-year Treasury-indexed ARMs averaged 4.80% this week — not surpassing the 30-year fixed rate, but equalling it nonetheless. Last week's average sat at a slightly higher 4.85%. One-year Treasury-indexed ARMs took a fall as well, from 4.82% last week to 4.77% this week.
“The housing market may be edging towards a bottom," says Nothaft. "Existing home sales stayed near its four-month average in March while new home sales were stronger than the market consensus. More importantly, the inventory of unsold new homes fell to the lowest number since January 2002."
Additionally, the S&P/Case-Shiller 20-city composite index did not show a record year-over-year decline in February for the first time since December 2006. And housing affordability hit record highs in the first quarter of this year, according to figures from the National Association of Realtors.
A separate rates survey conducted by Bankrate.com found mortgage rates remained nearly unchanged from last week's readings. Bankrate found the benchmark for 30-year, fixed-rate mortgages sat at 5.23%, while the benchmark 15-year fixed-rate slipped 3 basis points to 4.73%.
Write to Kelly Curran at kelly.curran@housingwire.com.
Mortgage industry technology provider Lender Processing Services (LPS: 16.78 +1.39%) posted $50m in net earnings for Q109 as default services business remained strong, according to its earnings statement.
The company's consolidated revenues rose almost 20% compared with the year-ago quarter, affected by the strong results at LPS' default services business. President and CEO Jeff Carbiener said the company's mortgage processing business posted a strong quarter, despite the decline in the loan facilitations services division.
Carbiener said LPS now expects to build on a strong first quarter and post second-quarter adjusted earnings from 66 to 68 cents per share. "For full year 2009, we now expect revenues to grow 13% to 15% compared to 2008," he added, "and adjusted earnings to come in at the higher end of the $2.64 to $2.74 per diluted share guidance."
The company on Wednesday released the April 2009 LPS Mortgage Monitor, an in-depth report of mortgage industry performance indicators as of March month end. Among the findings, LPS reports that the number of newly delinquent loans declined in March. On the other end of the spectrum, foreclosure inventories experienced the highest monthly increase in nearly three years.
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.
Continued mortgage delinquencies drove the $184.6m quarterly net loss — $1.49 per share — at MGIC Investment (MTG: 4.14 +6.98%), according to its earnings statement.
First-quarter losses of $757.9m erased the $435.2m in total revenue at the company.
Mortgage Guaranty Insurance, MGIC's principal subsidiary and a substantial private mortgage insurance provider, wrote $6.4bn in new insurance in the quarter, down almost 67% from the $19.1bn written in the year-ago period.
As of quarter-end, delinquent loans — excluding bulk loans — made up 10.6% of MGIC's insured portfolio, compared with 9.5% at year-end 2008. A weak economy, rising unemployment levels and lower home prices contributed to the volume of delinquencies this quarter and, as a result, the volume of claims filed by the lenders whose mortgages are insured by MGIC.
Chairman Curt Culver said the company holds more-than-adequate resources to pay insured claim obligations, but has discussed 'capital options' with the US Treasury Department.
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.
The pace of economic contraction slowed somewhat since March, the Federal Open Market Committee (FOMC) said after wrapping up a two-day meeting Wednesday. But the contraction continues, indicating the economy remains entrenched in the throes of recession.
US real gross domestic product (GDP) slid at an annual rate of 6.1% in Q109, slowing from its 6.3% fourth-quarter decline, but still exceeding economists' expectations by more than one full percentage point, the US Commerce Department said Wednesday in its advance estimates.
While the contraction of the US economy slowed in recent months, constriction is still in motion — a fact not lost on the FOMC.
Although the committee's outlook improved modestly since March, actual economic activity is likely to remain weak, the FOMC said. The committee's statement indicated no intentions to pull back on aggressive efforts to pour liquidity into financial markets, but the FOMC insisted inflation will remain subdued.
Household spending shows hints of stabilization but remains weak as businesses cut back on expenditures, cut wages and slash jobs, putting financial pressure on consumers, according to the FOMC's statement.
Real consumer spending slipped 0.2% in March after inching up the previous two months, the Commerce Department said today. At the same time, wages and salaries fell 0.5% in the month, suggesting US workers and employees tightened spending habits as income levels slide.
Write to Diana Golobay at diana.golobay@housingwire.com.
