Archive for April, 2009
Retreat Capital Management, Inc., a third party arbitration services company, will partner with Ellie Mae, a software and services provider, to offer mortgage modification services to over 120,000 mortgage professionals who use the Encompass Mortgage Management Solution.
"In this market, lenders are in dire need of loss mitigation and foreclosure prevention services, but unfortunately, there’s such an influx of activity that they don’t always have the time to develop a workable solution on their own," says Arvin Wijay, CEO of Retreat Capital Management. "By collaborating with Ellie Mae, Retreat Capital is enabling a great number of financial services institutions to access loss mitigation solutions quickly, easily and economically."
Retreat Capital Management says it handles the entire mortgage modification process for its client lenders, from initial analysis to closing and MIS reporting.
The company uses an advanced rules-based loss mitigation technology platform that interfaces with the lender’s servicing system. Once a mortgage is submitted, the technology matches that loan against all available loss mitigation options to determine the most suitable solution. At that point, one of Retreat Capital’s experienced negotiation specialists contacts the borrower to present the available options. Once a resolution is reached, Retreat Capital handles all of the required paperwork and closing activities.
"As the foreclosure crisis continues to undermine the American economy, lenders and borrowers alike are in desperate need of a solution," adds Wijay. "Now more than ever, it’s important for lenders to communicate with borrowers."
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.
Servicers are facing difficult decisions in 2009 concerning a combination of regulatory strangleholds and an ever-struggling borrower base. But, panelists at the Texas Mortgage Bankers Association’s 5th annual Loan Servicing Conference say foreclosure should remain the last option.
“Four or five years ago, most servicers didn’t know Fannie Mae and Freddie Mac from Farmer Brown,” remarks one speaker to HousingWire, asking to remain anonymous. “Give me curtailence, give me forbearance, but never use the F-word (foreclosure). Keep people in homes, and soft sell the refinancing.”
Indeed, advice is flowing in the halls of the Frisco Embassy Suites, and the buzz of optimism is filling any empty space as servicers proffer a collective consciousness that their businesses may finally be moving out of purgatory and into something resembling progress. A swath of initiatives to freeze foreclosures ended recently, and servicers recently implemented a series of new guidelines from the Obama administration to modify and/or refinance mortgages for certain borrowers.
While no participant will speak publically (the event is officially closed to the press), the need to share information and increase transparency is taking priority here. One afternoon panel focused on maximizing insurance recovery when damage is inflicted upon bank-owned properties. Another focused on advice regarding how to best manage the process of loss mitigation by including refi fees into loan modification documents, so that borrowers can repay any fees over the life of the loan, instead of in a shorter timeframe.
One servicer used the Q&A portion of a panel to brag that her company, which manages around 3,500 mortgages, had developed its own strategy – a hybrid of government aid and grass-roots customer service – to keep defaults below 3%.
“Below 3%?” the speaker asked in response. “I want to work for you.”
Another panelist stressed the importance of creating a timeline of events on every property: take photographs and log the condition of the house, send contractors regularly to “eye-ball” any damage done to the home.
“After all, properly insuring properties helps lower servicer risk,” said a panelist, to which audience members nodded with appreciation. The TMBA conference concludes today.
Write to Jacob Gaffney at jacob.gaffney@housingwire.com.
Several Federal Reserve Bank districts saw signs of economic stabilization as the pace of deterioration began to ease in five of the 12 — or more than 40% of all — districts, the Fed said Thursday in the Beige Book, a regular publication released eight times annually. Reports from the various districts also traced some stabilization in the housing markets with "better-than-expected" sales in some areas offsetting the falling home prices and construction reported widely.
"Housing markets remained depressed overall, but there were some signs that conditions may be stabilizing," the Fed said. "Many districts said factors such as homebuyer tax credits, low mortgage rates, and more affordable prices led to a rising number of potential buyers."
The Richmond, Atlanta, Minneapolis, Kansas City, and San Francisco districts reported modest pickups in sales, with Atlanta and Kansas City even experiencing a downturn in unsold inventory. New home construction, however, continued to fall as unsold inventories remained elevated in most areas. Although home purchases remained weak overall, "low mortgage rates were fueling refinancing activity, according to the report.
"Outlooks for the housing sector were generally more optimistic than in earlier surveys, with respondents hopeful that increased buyer interest would lead to better sales," the Fed said. "In particular, the New York, Richmond, and Kansas City districts noted an increase in residential real estate loans. Additionally, residential refinancing activity remained brisk, although the loan process was taking longer due to more stringent appraisals and underwriting standards."
Many districts saw continued deterioration in loan quality and increased delinquencies in all loan categories. Commercial real estate "weakened further" as districts continued to report job cuts and wage and hiring freezes, with only scattered reports of hiring. "Wage and salary pressures eased as labor markets weakened in all districts," the Fed said.
Consumer spending remained weak overall, although several districts reported either slightly higher sales or slightly moderated sales declines compared with the previous report. New car sales remained "feeble" overall, with auto dealers continuing to struggle with the sluggish demand.
Write to Diana Golobay at diana.golobay@housingwire.com.
After a slight rise last week, most mortgage rates receded in the week ending April 16, with the exception of One-Year ARMs, according to Freddie Mac's (FRE: 0.00 N/A) Primary Mortgage Market Survey released today. 30-year fixed-rate mortgages averaged 4.82% with an average 0.6 point, down from last week's 4.87% average, and far below the average last year at this time — 5.88%.
This week's 15-year fixed-rate mortgage hit an all-time low, averaging 4.48%, compared to 4.54% last week and 5.4% a year ago at this time, Freddie Mac said. Five-year Treasury-indexed ARMs also plunged to a record low, posting the lowest reading since Freddie Mac began tracking ARMs in January 2005. Sitting at 4.88% this week, 15-year rates were below last week's 4.93% average and well below the year-ago average of 5.48%.
One-year Treasury-indexed ARMs were the exception to the falling trend, averaging 4.91% this week with an average 0.7 point, up from last week's 4.83% average. At this time last year, the 1-year ARM averaged 5.10 percent.
“The housing industry is starting to exhibit some positive signs, albeit scarce and too early to tell how permanent," says Frank Nothaft, Freddie Mac vice president and chief economist.
In its April 15th regional economic report, the Federal Reserve reported that better-than-expected buyer traffic led to a scattered pickup in home sales in a number of its Districts over the 6-week period ending on April 6th. Factors such as homebuyer tax credits, low mortgage rates, and more affordable prices were cited as leading to more potential buyers.
"This may have added to the rise in homebuilder confidence in April, which rose to the highest level in six months, according to the National Association of Home Builders," Nothaft says.
A separate rates survey conducted by Bankrate.com also found mortgage rates eased slightly this week. According to Bankrate, the benchmark 30-year fixed-rate fell 2 basis points to 5.18%, while the benchmark 15-year fixed-rate fell 3 basis points to 4.72%.
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.
Foreclosure filings — including default notices, auction sale notices and bank repossessions — rose 9% in Q109 from Q408 and 24% on a year-over-year basis from Q108, according to the U.S. Foreclosure Market Report released today by RealtyTrac.
California, Florida, Arizona, Nevada and Illinois accounted for 60% of the nation's total foreclosure activity volume in Q109, RealtyTrac found. The raw volume of foreclosure activity per state seems less important in light of the rate of properties with foreclosure filings to those without. On a national scale, one in every 159 U.S. housing units received a foreclosure filing during the quarter. Nevada and California boasted the highest foreclosure filing rates. One in every 27 Nevada housing units and one in every 54 California housing units received a foreclosure filing in the quarter, according to the report.
There were plenty of states, however, with rates more than six times lower than the national rate. Vermont boasted the lowest rate of the quarter, with one in every 14,830 housing units receiving a foreclosure filing. RealtyTrac designated Vermont one of 10 states with a rate of more than 1,000 homes for every one foreclosure filing. Of the nine other states — including Kentucky, Mississippi, Montana, Nebraska, New Mexico, North and South Dakota and Wyoming — South Dakota boasted the second-lowest filing rate, with one foreclosure filing in every 3,721 homes in the quarter.
March alone posted record highs in foreclosure activity, with 341,180 properties receiving foreclosure filings, a 17% increase from February and 46% year-over-year increase from March '08. The report marks the "highest monthly and quarterly totals" recorded since RealtyTrac began reporting in '05.
“In the month of March we saw a record level of foreclosure activity — the number of households that received a foreclosure filing was more than 12 percent higher than the next highest month on record," CEO James Saccacio said in a press statement. "Since much of this activity was in new foreclosure actions, it suggests that many lenders and servicers were holding off on executing foreclosures due to industry moratoria and legislative delays.”
These delays, rather than current foreclosure prevention programs, likely drove decreased real estate-owned activity, and therefore "it’s very likely that we’ll see the number of REOs increase again now that most of the moratoria have been lifted," Saccacio said. Housing demand, especially for bank-owned properties seen as bargains, appears to be on the rise, "but it’s unlikely that this increased demand will be enough to offset the growing number of foreclosures in the pipeline, accelerated by rising unemployment rates.”
Write to Diana Golobay at diana.golobay@housingwire.com.
Citing a backbreaking caseload of foreclosures, the court serving the nation's second-most populous county has decided to postpone most foreclosures until September, while it attempts to work through tens of thousands of existing filings. Cook County, Illinois is home to Chicago and surrounding areas — and is also traditionally a foreclosure hotspot.
Last year, the county saw 43,876 mortgage foreclosure filings at the Cook County Circuit Court, a number the court said it expects to rise to more than 63,000 cases pending by the end of this year. As a result, the court says it has assigned 11 additional judges to manage foreclosure hearings, while allocating 6 additional courtrooms to cover rising volumes of filings. Eleven additional law clerks and four additional secretaries have been hired to assist those judges managing foreclosure cases, according to a general administrative order issued April 1 and reviewed by HousingWire.
Despite the additions, the court has been unable to manage an influx of foreclosures — a cautionary tale that sources in the banking industry say is playing out in other jurisdictions across the nation, as well. In Cook County, each foreclosure judge with a full foreclosure calendar is assigned roughly 4,800 mortgage foreclosure cases. The volume "has made it difficult" for the court to manage all the cases, it said.
"In order for the Court to concentrate its resources on resolving the older pending mortgage foreclosure cases on the docket, it is necessary to defer the scheduling of Judgments of Foreclosure and Sale, with the exception of Consent Foreclosures, and to defer the scheduling of Orders Approving Sale in cases filed in 2009," the consent order reads.
Under the administrative order from Presiding Judge Dorothy Kirie Kinnaird, most foreclosure cases filed this year in Cook County will be suspended until the end of August, while the court schedules a series of hearings on all foreclosures filed prior to 2009 that remain unresolved. The only exception to this rule that will allow a foreclosure to proceed is any case where a property has been verified as both vacant and abandoned, according to the administrative order.
The court said it will begin scheduling a series of so-called "calendar calls" on existing foreclosure cases during the months of July and August, during which time all foreclosures will be paused in order to allow judges to focus on prioritizing an existing caseload.
The challenges being faced in Cook County mirror the challenges being faced in numerous courtrooms, particularly in hard-hit California and Florida. Attorneys in both states suggested to HousingWire that case delays can run well into the months in most cases, in certain jurisdictions.
One attorney warned that the problem might be set to get worse, as Congress looks to pass legislation that would allow so-called "cramdowns" of mortgage debt during a Chapter 13 bankruptcy filing. "If they think the caseload is bad now," he said, "what are they going to do when borrowers flood the system with BKs, looking for a loan mod? Who will be able to manage that?"
According to 2007 U.S. Census Bureau estimates, Cook County has 5,285,107 residents, which is larger than the populations of 29 individual U.S. states, the combined populations of the six smallest U.S. states, and home to 43.3% of Illinois residents.
Write to Paul Jackson at paul.jackson@housingwire.com.
After surging 22 percent in February, housing starts dipped 10.8% in March to a seasonally-adjusted annual rate of 510,000, according to government data released this morning, blasting hopes that stability had begun to return to the housing market.
Housing starts in March sat 48.4% below the March 2008 rate and mark the second lowest rate since the 1940s. "It's disappointing. Half a million in starts is real low," Kurt Karl, chief U.S. economist at Swiss Re told Reuters. But he believes things are hitting the floor and are likely to turnaround over the next few months.
The pace of single-family housing starts in March, which excludes apartment buildings, was actually unchanged from February's revised figure of 358,000 the Commerce Department said, meaning there was a significant tumble in apartment construction during the month of March — ironically, apartment construction was the driving force for housing starts last month, increasing a whopping 82%.
In terms of construction volume in March, the South fared the best comparatively speaking, as the region started construction on 268,000 total housing units and 191,000 single-family homes, but its month-over-month pace for all housing starts still plunged 16.8%. The Northeast experienced the slowest pace in volume, starting just 67,000 housing units and 47,000 single-family homes; although, single-family homes in the Northeast saw the biggest month-over-month increase, climbing 30.6% from February to March.
Building permits, which are less volatile than construction starts, hit record lows, falling 9% in March to a seasonally-adjusted annual pace of 513,000, which is well below most analysts predictions. Permits for single-family homes fell 7.4% to 361,000, the second-lowest on record.
On the upside, builder confidence in the market for newly built, single-family homes rose five points in April to its highest level since October 2008, according to the latest National Association of Home Builders sentiment index. Every component of the index reflected the boost in sentiment, with the biggest gains recorded for sales expectations over the next six months.
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.
A glimpse of hope for the nation's labor market: First-time applications for state unemployment benefits dropped 53,000 to a seasonally-adjusted 610,000 in the week ending April 11, the Labor Department said today, marking the lowest level of first-time claims in nearly three months.
Still, the total number of people who remained on benefits roll in the reported week after collecting at least one week of aid, set another new record, gaining 172,000 to 6.02 million — highlighting the on-going struggles of finding a job in the current economy, where companies continue to cut costs, depleting jobs and potential job openings.
The insured unemployment rate for the reported week — the proportion of covered workers who are receiving benefits — climbed to 4.4%, the highest level since January of 1993.
Nonetheless, the four week moving average of initial claims, which typically smooths any volatility in employment trends, fell by 8,500 to 651,000 — the lowest since March 21.
“There’s a real possibility this could be a turning point,” said James O’Sullivan, senior economist at UBS Securities LLC, according to Bloomberg. “We’ve seen some fading of weakness in consumer spending. The logical next step would be some fading of weakness in the labor market.”
The largest increases in initial claims were seen in Michigan — where 5,408 people filed a claim in the week ending April 4 — Missouri, Texas, New Jersey and Pennsylvania. The largest decreases were seen in California — where initial claims dropped 4,708 — Ohio, Alabama, Florida and Wisconsin.
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.
The volume of modifications completed by government-sponsored entities (GSEs) Fannie Mae (FNM: 0.00 N/A) and Freddie Mac (FRE: 0.00 N/A) rose 76 percent from Q308 to Q408, according to the quarterly Foreclosure Prevention Report issued Wednesday by the Federal Housing Finance Agency (FHFA). The agencies modified nearly 24,000 loans during the fourth quarter, according to the FHFA's report, which studies the 30.7m first lien residential mortgages serviced on behalf of both GSEs as of year-end '08.
Prime mortgages made up 84% of the total combined portfolios, with the remainder qualifying as "nonprime." At the end of November, 83.9% of the combined portfolios was considered prime; 83.8% was considered prime as of Oct. 31, 2008. The rate of serious delinquencies — those mortgages 90-or-more-days delinquent — among the agencies increased from 0.85% at year-end '07 to 2.14% at year-end '08, according to the FHFA's report.
The foreclosure sale suspension — implemented in late November 2008 and eventually extended to January 31– held some 12,631 loans in the credit portfolio that otherwise would have faced foreclosure. The retention of these properties in the portfolios caused a swell in the "seriously delinquent" bucket and reduced the volume of foreclosures by 27 percent in the quarter, the report found.
Loss mitigation efforts among the delinquent loans varied in Q408, from modifications (34% of loss mit action) to completed payment plans (19%), and from short sales (8.9%) to deeds in lieu of foreclosure (0.8%). The overall loss mitigation performance ratio — or the percentage of mortgages likely to foreclose that entered some form of loss mitigation instead — increased to 65.7% in Q408 from 55% in Q308. The ratio was 54.2% among prime loans (from 45.1% in Q3) and 75.3% among non-prime loans (from 64.7% in Q3).
The spiking ratios of loss mitigation and modifications among seriously delinquent loans held by the GSEs, in concert with comments from FHFA's director James Lockhart, indicate the FHFA's faith in the loan modification system. Lockhart said Wednesday that a servicer "safe harbor" is not needed to process bulk loan mods; quite a change from legislation marinating on Capitol Hill that looks to give servicers just such immunity from investors, according to an interview with Dow Jones.
"Obviously the investors don't want [the safe harbor] done, and so my view is that we can work within the present system and get a lot of loan modifications done," he said, according to the news service. Investor confidence and consumer awareness are the main obstacles in the path to increased modifications, while Lockhart said servicers "have more leeway than they're using at the moment" to conduct modifications.
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.
Throughout the credit crisis, one bank has avoided reporting even one quarterly loss. On Thursday, JP Morgan Chase & Co. (JPM: 37.21 -0.75%) kept its perfect streak intact, reporting $2.14bn, or $.40/share, in net earnings for the first quarter. The total was off 10% from one year earlier, but better than most analysts had expected.
The firm benefited from an expanding deposit base, thanks to its acquisition of Washington Mutual, and a jump in mortgage refinancing activity, it said. Growth on the top line, helped by record revenues in investment banking operations, helped to offset $10bn in credit costs. With borrowing costs at historic lows, JPMorgan — much like Goldman Sachs (GS: 111.77 +2.96%) earlier this week — saw revenues soar in fixed-income trading activity, to $4.9bn.
The bank's results seem likely to bolster investor hopes that low interest rates and a return of mortgage lending activity can help banks offset a rising tide of loan losses that appear to be spreading across all categories.
That surging loss experience certainly applies to mortgage exposure at JPMorgan. The company's retail and consumer lending division, the majority of its mortgage-related operations, saw credit costs soar to to $3.9bn, up from $857m one year ago and $301m one quarter earlier.
Prime mortgages continue to sour, with 30-day delinquencies continuing to increase during the quarter among the $65.4bn in prime mortgages held on the firm's books. Net charge-offs among prime mortgages rose to $312m during Q12009, up from $195m just one quarter earlier; non-performing prime mortgages reached $2.6bn for the quarter, up sharply from $860m one year earlier. JP Morgan said it expects losses on its prime mortgage portfolio could be as high as $500m over the "next several quarters."
The picture isn't much better for $111.7bn in owned home equity loans and lines of credit at JPMorgan, with net charge-offs in the home equity portfolio rising a whopping 42% in just one quarter to $1.1bn. Non-performing loans rose to $1.6bn by the end of the quarter from $1.4bn one quarter earlier, with JPM warning that losses in the home equity portfolio could be as high as $1.4bn per quarter for the foreseeable future.
Subprime mortgages contributed $364m in net charge-offs during the quarter, as well; JPMorgan reported holding $14.6bn in subprime mortgages at the end of period, down from $15.3bn one quarter earlier.
But the real credit costs tied to mortgages here could be much higher than JPMorgan is reporting — it's important to note that all of the bank's reported mortgage holdings and statistics exclude purchased credit-impaired loans acquired as part of the WaMu deal. Meaning that it's impossible to know the full extent of mortgage problems at JPM, a problem we've started to see at large banks that have made significant acquisitions of large mortgage platforms.
While credit costs continue to mount, originations of new mortgages rose 34% quarter over quarter to $37.7bn on a refi surge; originations during Q12009, however, remain 20% below year ago levels. Home equity originations continued to fall as banks have shied away from the product, falling 87% to $878 million.
CEO Jamie Dimon has been blunt about his desire to repay $25bn in government funds the bank received via the Troubled Asset Relief Program, and reiterated that stance in a conference call with analysts Thursday morning, calling TARP funding a "scarlet letter."
Full earnings information is available here.
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.
