Archive for April, 2009
U.S. home prices rose a seasonally-adjusted 0.7% from January to February, the Federal Housing Finance Agency (FHFA) announced Wednesday in its monthly House Price Index. February's rate of increase slowed slightly from January’s downwardly revised 1% increase. For the 12 months ending in February, U.S. home prices fell 6.5%, plunging the U.S. index 9.5% below its April 2007 peak.
The Pacific census division — spanning Hawaii, Alaska, Washington, Oregon and California — posted the strongest geographic gain in home purchase price, rising 3.8% over January's data. The New England census division — covering Maine, New Hampshire, Vermont, Massachusetts, Rhode Island and Connecticut — saw the second-largest gain of 2.2% over January's purchase prices. One of only three census divisions to post a month-over-month decline, the East North Central region — including Michigan, Wisconsin, Illinois, Indiana and Ohio — saw the worst slip of -1.2% in February's home purchase prices.
U.S. houses sold in February at roughly the same average price as April 2005, FHFA found in its calculation of the index, using purchase prices of houses backing mortgages sold to or guaranteed by Fannie Mae (FNM: 0.00 N/A) or Freddie Mac (FRE: 0.00 N/A).
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 glimmer of hope seen last week, as initial jobless claims dropped 53,000, appears short-lived. First time applications for state unemployment benefits in the week ending April 18 jumped 27,000 to a seasonally-adjusted 640,000, the U.S. Labor Department said Thursday.
The total number of people who remained on the benefits roll in the reported week after collecting at least one week of aid, set yet another new record, gaining 93,000 to 6.14m — more than double the level a year ago — showing the on-going struggle the U.S. work force faces in finding jobs in an economy where companies are forced to cut costs time and time again, depleting jobs and potential job openings.
The insured unemployment rate for the week ending April 18 — the proportion of covered workers who are receiving benefits — rose again, from 4.5% to 4.6%, reaching its highest level since 1983.
“There is nothing suggesting at this point that payroll declines are going to abate,” Tom Porcelli, a senior economist at Castlestone Management Ltd. told Bloomberg News. “We could bounce along the bottom here for a while.”
Nonetheless, the four week moving average of initial claims, which can smooth any volatility in employment trends, continued to fall, dropping 4,250 to 646,750.
The largest increases in initial claims were seen in Florida — where 9,303 people filed a claim, according to the department's most recent data — Pennsylvania, California, Wisconsin and New York. The largest decrease in claims was seen in typically hard-hit Michigan — where claims dropped a whopping 12,566. North Carolina, Missouri, Kentucky and Oregon also experienced significant drops.
Write to Kelly Curran at kelly.curran@housingwire.com.
After a series of historic lows, the Architecture Billings Index (ABI) rose more than eight points in March. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to 12-month lag time between architecture billings and construction spending, suggesting the pace of construction activity will likely pick up in coming months.
The American Institute of Architects (AIA) reported Wednesday the March index reading was 43.7, up from the 35.3 mark in February, marking the first time since September 2008 that the index was above 40. But the score still indicates an overall decline in demand for design services, the AIA said, as the score must be above 50 to indicate an increase in billings. The new projects inquiry score, however, reached 56.6 in March.
“This news should be viewed with cautious optimism,” warns AIA chief economist Kermit Baker. “The fact that inquiries for new projects increased is encouraging, but it will likely be a few months before we see an improvement in overall billings. Architects continue to report a diversity of business conditions, but the majority is still seeing weak activity levels,” he said.
Regionally, the South posted the strongest index reading of 43.4, while the West saw the weakest billing activity at 36.1. The Northeast and Midwest recorded index marks of 41.8 and 37.5, respectively. If broken down by sector, the index revealed the strongest billing activity in the mixed practice sector, followed by institutional, multi-family residential, and lastly, the commercial and industrial sector.
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.
Spring buying season typically starts in February, and the resulting increase in demand traditionally causes prices to strengthen, and that's exactly what happened this February as transaction counts increased month-over-month in 22 of the nation's 25 metropolitan statistical areas (MSAs) tracked by Radar Logic. Home prices also improved in nine MSAs, compared to just six MSAs in February 2008.
"Seasonal strength in home sales was evident in February 2009," said RadarLogic in its RPX Monthly Housing Market Report released today. "Transactions increased…13 MSAs posted their largest month-over-month increases since 2006."
Sales in San Jose, Calif. saw the biggest year-over-year increase, climbing more than 43%, followed closely by Sacramento, and Los Angeles, Calif. In contrast, Charlotte, N.C. and Las Vegas, Nev. didn't fare so well, as their transaction counts posted the largest drops at 56.9% and 55.7%, respectively. But month-over-month data painted a rosier picture, as only Philadelphia and Milwaukee experienced a decline in home transactions.
In the closely watched California housing market, buyers appear to have returned in February, likely attracted by prices not seen since 2001 and 2002, the report said. On a year-over-year basis, the total transaction count across the five California metro areas tracked by Radar Logic increased a significant 35%.
In the five California MSAs, sales outside of foreclosure jumped dramatically in February and outpaced increases in motivated sales, according to the report. As a result, motivated sales decreased as a share of total sales, though motivated sales continued to account for more than 40% of sales in each of the MSAs. Historically, since 2007, motivated sales' share of total sales has increased in most months.
Some predict the recently lifted moratoriums will cause an influx of foreclosed inventory and send home prices falling nationwide. Many of the nation’s largest mortgage servicers, including JP Morgan Chase & Co. (JPM: 37.21 -0.75%), Wells Fargo & Co. (WFC: 29.60 +1.89%), Fannie Mae (FNM: 0.00 N/A) and Freddie Mac (FRE: 0.00 N/A), have recently lifted self-imposed moratoriums on foreclosures.
But Radar Logic says increasing the already large inventory of foreclosed homes "will not necessarily result in a reduction of prices from levels that are already attracting buyers in large numbers," as indicated by elevated motivated transaction counts.
"Packed auditoriums at foreclosure auctions indicate that price is not the limiting factor when it comes to selling distressed homes," Radar Logic said. Rather, logistical and political barriers coupled with tight credit markets may be creating a bottleneck in the market.
In fact, the company said the removal of moratoriums on foreclosures and sales of foreclosed homes could speed the process through which the market cleanses itself of distressed inventory, ultimately shortening the path to recovery.
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.
Cities in California, Florida, Nevada and Arizona accounted for the 26 highest foreclosure-filing rates in first-quarter 2009, according to RealtyTrac data tracking metro areas with a population of at least 200,000. However, experts warn that foreclosures going forward may not remain as concentrated.
Las Vegas posted the highest metro rate, with 4.48% of its housing units receiving a foreclosure filing during the quarter, which amounts to one in every 22 homes — more than seven times the national average. Merced, Calif., documented the second highest metro rate, with 4.21% of its housing units receiving a foreclosure filing — one in every 24 homes.
Other metro areas in the top 10 were the California cities of Stockton, Riverside-San Bernardino, Modesto, Bakersfield, and Vallejo-Fairfield, along with Phoenix and Port St. Lucie, Fla.
“The metro areas with the highest levels of foreclosure activity in the first quarter of 2009 paint a picture of concentrated problems in a relatively small number of hard hit areas,” said James J. Saccacio, chief executive officer of RealtyTrac.
Metros such as Burlington-South Beach Burlington, Vt., Lincoln, Neb., and Tuscaloosa, Ala., however, are faring comparatively, all posting foreclosure rates under .02%.
Other metros with low foreclosure rates include Utica-Rome, N.Y., Houma-Bayou Cane-Thibodaux, LA, Charleston, WV, Kennewick-Richland-Pasco, Wash., Lafayette, La., Longview, Texas and Asheville, N.C.
Saccacio said RealtyTrac expects many of the hardest-hit metro areas to experience high levels of foreclosure activity throughout 2009, but warned other markets would rise up the ranks as unemployment rates surge throughout the U.S.
Last week, RealtyTrac reported the number of U.S. properties that received a foreclosure filing jumped 24% in the first quarter from a year earlier, as foreclosure moratoriums were lifted.
Wells Fargo & Co. (WFC: 29.60 +1.89%), JPMorgan Chase & Co. (JPM: 37.21 -0.75%), Fannie Mae (FNM: 0.00 N/A) and Freddie Mac (FRE: 0.00 N/A) all said they have increased foreclosure activity in recent weeks as a result of timed-out moratoriums.
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.
Flagstar Bancorp, Inc. (FBC: 0.68 +3.03%), the holding company for Flagstar Bank FSB, on Tuesday reported a $67.4m — or 76 cents per share — Q109 net loss, narrowed from Q408's $218.5m net loss. Flagstar said it earned $144.6m before taxes and credit costs and touted its residential loan originations increased to $9.5bn from $5.4 bn last quarter.
"Credit costs continued to negatively impact earnings; however, there were a number of encouraging results and trends that developed during the quarter," CEO Mark Hammond said in the earnings statement. "Gain on loan sales was at an historic high and mortgage originations increased 76%, as compared to the fourth quarter 2008. Net interest margin improved and regulatory capital remained high relative to previous periods, although, delinquencies continued to rise, but at a decelerating rate."
Flagstar Bank, which on Jan. 30 received $266.66m from the Treasury Department through the Capital Purchase Program, said it remained well-capitalized for regulatory purposes, with capital ratios of 7.22% for Tier 1 capital and 13.58% for total risk-based capital. The bank's provision for loan losses decreased to $158.2m in the quarter, from $176.3m in Q408.
In its mortgage operations, gain on loan sales margins increased to 2.54% for Q109, compared with 0.29% in the previous quarter. Flagstar said the adoption of fair value method of accounting for the available-for-sale portfolio of residential mortgage loans originated after 2008 positively impacted the margin.
Flagstar retained $58.9bn in unpaid principal balances of loans held in its mortgage servicing rights portfolio as of March 31. Flagstar's non-performing assets, which include non-performing loans either 90 days or more past due, matured loans, real estate-owned and repurchased assets (excluding any FHA-insured assets) increased to $915.1m as of March 31.
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.
Mortgage software provider QuestSoft is revamping its partnership with compliance solver Mavent Inc. in response to the rapidly changing regulatory landscape specifically in the secondary market. The new product will be launched on one platform, the companies say.
The partnership, which was first announced in 2004, will continue to pair QuestSoft’s Compliance EAGLE with Mavent’s rules-based enterprise application as part of a comprehensive end-to-end compliance solution that identifies regulatory exceptions throughout the origination life cycle for improved loan quality.
The increased focus by secondary market investors on compliance has led to integration improvements, so correspondent sellers can now access extensive compliance reviews from QuestSoft and Mavent on one platform. Major investors, such as Fannie Mae and CitiMortgage, use Mavent’s engine.
"The current dislocation in the mortgage market, onslaught of stricter regulatory requirements and budgetary constraints makes an effective automated compliance solution more critical than ever before," said Louis Pizante, chief executive officer of Mavent.
"The key to making loans attractive to the secondary market and preventing loan buybacks is compliance," said Leonard Ryan, president of QuestSoft. "Lenders are working with a more concentrated staff, and they face an increased number of regulations, more stringent lending legislation and investors that request buybacks. In order to continue successful and prudent lending, they must turn to automated compliance, which gives investors the assurance that each loan meets every necessary requirement.”
Mavent and QuestSoft’s partnership eliminates the need for their customers to perform data re-entry and manual manipulation of information between different fields, allowing them to save time, improve workflow and allocate resources elsewhere within the organization, the companies said. The compliance suite provides up-to-the-second compliance with current federal, state and local regulations in effect at the time of the request, including pre-purchase and post-closing compliance checks as well as verification of pre-payment penalty collection.
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 Federal Reserve Board formed two new interest rates effective for loans extended under the Term Asset-Backed Securities Loan Facility (TALF), the Fed announced Tuesday.
The rates apply to certain loans, vintage 2009, secured by asset-backed securities (ABS) with average lives-to-maturity of less than two years. The Fed bases the new rates on one- and two-year London interbank offered (LIBOR) swap rates, which should better match the duration of underlying ABS collateral. The new rates are slated to take effect for the May TALF funding and apply to fixed-rate TALF loans secured by non-government-guaranteed ABS.
The interest rate for TALF loans secured by ABS with average lives-to-maturity of less than one year will be the one-year LIBOR swap rate +100bps, the Fed said. The interest rate for loans secured by ABS with average lives-to-maturity between one year and two years will be the two-year LIBOR swap rate +100bps. The current three-year LIBOR swap rate +100bps continues to apply to loans secured by ABS with average lives-to-maturity of two years or more.
TALF recently expanded to include new ABS categories, such as auto loans and credit cards, but regulators made no other major changes to the federal program since its inception.
The Fed and Treasury Department jointly launched TALF in early March, and the program has faced criticism since. One credit-rating agency went so far as to say regulators must re-vamp TALF for it to attract junior investors and encourage new issuance.
TALF, as it stands, is unlikely to meaningfully impact the currently tight credit markets, Moody’s Investor’s Service found in its recent report. The program will not "gain significant momentum" until the terms are widened to apply to other securities, and therefore the wider investor playground, including pre-2009 triple-A rated commercial mortgage-backed securities (CMBS) and residential mortgage-backed securities (RMBS). Currently TALF only covers triple-A consumer assets originated for securitization in 2009.
Write to Diana Golobay at diana.golobay@housingwire.com.
Wall Street bellwether Morgan Stanley (MS: 18.56 +2.26%) on Wednesday morning reported a Q1 2009 net loss of $190 million, or 57 cents a share, compared with year-earlier net income of $1.43 billion, or $1.26 a share. The loss missed consensus estimates from most analysts by a wide margin; according to a Thomson-Reuters poll, most had expected a 8 cents a share net loss.
Driving the loss were both souring real estate investments as well as an accounting quirk that saw improved spreads on the company's debt drive a $1.5bn mark to income. Read the full earnings statement.
The quarterly loss could have been much worse, too, had the financial giant been required to include Dec. 2008's results in its Q1 2009 earnings — much like Goldman Sachs (GS: 111.77 +2.96%), a switch to bank holding company status required a change to the company's reported fiscal year, making December an orphaned month as Morgan Stanley's fiscal year-end swapped from November to December.
December's net losses totalled a whopping $1.3bn, Morgan Stanley said — sort of convenient that Dec.'s totals didn't have to be included in the quarterly summary.
CEO John Mack said Morgan Stanley would have been profitable for the reported Q1 period, were it not for an improvement in the company's debt securities as investor concern over the firm's future ebbed. "Morgan Stanley would have been profitable this quarter if not for the dramatic improvement in our credit spreads — which is a significant positive development, but had a near-term negative impact on our revenues," he said in a press statement.
As concerned investors had bid up risk premiums on Morgan Stanley's own debt last year, the value of the company’s debt was similarly lowered; and such a drop in fair-value of the company’s liabilities is allowed to be booked as a gain to income under an accounting standard known as SFAS 157. Morgan Stanley had booked $1.4bn and $2.1bn in paper gains during its prior fiscal Q3 2008 and Q4 2008 periods, tied to such accounting treatments — gains that turned into a $1.5bn hit to income in the most recent quarter, as investor outlook on the Wall Street firm improved.
Besides the bond impact, Morgan Stanley's bottom line was hurt by $1bn in real estate-related losses, as well, the company said. It also absorbed a $300m hit tied to U.S. subprime mortgages, and another $200m on Alt-A and prime mortgages. In total, Morgan Stanley held $5.1bn in net residential mortgage exposure at the end of March, including $2.4bn in subprime ABS and $3.0bn in prime and Alt-A loans on its books. (Net exposure includes the effect of hedging activity.)
Morgan Stanley became the latest bank to cut its quarterly dividend, slashing its payout 80 percent in a bid to preserve roughly $1bn in capital.
Tangible common equity — a measure of how much of a bank's physical assets shareholders own — was at 4.3% at the end of Q1 2009, the bank said; prior year figures were not available, as Morgan Stanley only began reporting the TCE measure this quarter as part of requirements of operating under a bank holding company charter.
The company's financial supplement for Q1 2009 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.
Delinquencies and defaults are on the rise, due mainly to a handful of circumstances, including the backlog from recent foreclosure moratoria, a jump in unemployment and even a slight rise in marital spats, according to data released by the Federal Housing Finance Agency (FHFA) Tuesday.
Since late November, Fannie Mae (FNM: 0.00 N/A) and Freddie Mac (FRE: 0.00 N/A) suspended foreclosure sales and evictions on owner- occupied properties. The suspensions, which ended on March 31, 2009, allowed servicers additional time to work with borrowers in foreclosure who were eligible for the Streamlined Modification Program.
The impact of the suspensions caused completed foreclosure sales and third-party sales to decline 77% from the prior three-month average of 16,342 to 3,711 in December, and 79% to 3,391 in January, according to the FHFA's latest foreclosure prevention report.
At the same time, loans that were 60+ and 90+ days delinquent climbed. All loans 60+ days delinquent increased from 834,831 as of November 30 to 1,229,051 as of January 31, representing an increase of 47% over the period, the FHFA said. However, prime loans 60+ days delinquent increased by 69.6% while nonprime loans increased by a significantly lesser 23%.
The number of foreclosure sales as a percentage of delinquencies dropped. Loans for which a foreclosure or third party sale was completed as a percent of loans 60+ days delinquent fell from 2.43% in October to 1.79% in November, 0.40% in December and 0.28% in January.
The report, based on data from the GSEs' 30.6m residential mortgages, also assessed the top reasons for default. It found that defaults, as of the end of January, were not largely due to mortgages being untenable, but to what the industry calls the "standard Ds" — death, divorce, disability and didn't keep job.
34.1% of homeowners cited curtailment of income as the main cause of default, 19.8% reported excessive obligations, 8.1% said unemployment, 6.5% said illness and 3.5% cited marital difficulties, such as the loss of a spouse's wages.
In January 8,953 loan modifications were completed compared to 8,688 in December and the prior 3-month average of 7,926, the FHFA reported. This represents a 3 percent increase in loan modifications by Fannie Mae and Freddie Mac from December 2008 to January 2009. Of the modifications completed, 65.2% required an interest rate reduction and term extension, 19.5% a term extension only, and 5.3% an interest rate reduction only.
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.
