Archive for May, 2009
The National Association of Realtors (NAR) today called for expansion of the $8,000 first-time home buyer tax credit to include all home buyers at all income levels.
The push for a broadened tax credit comes after US Department of Housing and Urban Development secretary Shaun Donovan announced home buyers pursuing Federal Housing Administration-insured mortgages may soon use the tax credit as a down payment at the closing table.
An expanded tax credit, combined with HUD's initiative to make the credit available at the closing table for down payment purposes — called 'monetization' of the tax credit in the industry — would make federal assistance available to anyone pursuing a government-insured mortgage.
NAR, from its legislative summit this week, also urged Congress to make the '08 loan limit increase formula and loan limit caps permanent, and to "fortify" mortgage giants Fannie Mae (FNM: 0.00 N/A) and Freddie Mac (FRE: 0.00 N/A) to ensure the continued availability of capital for mortgage lenders.
"Housing is the engine of economic growth, and real estate is the road to economic recovery," says Charles McMillan, NAR president and Dallas-based broker, in a statement today. "With many of the country's current problems resting on a wobbly foundation of declining home prices, rampant foreclosures and increasing job loss, our members will be asking Congress to pass further legislation that moves the housing market forward."
Write to Diana Golobay.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.
Foreclosure filings on housing units across the US, including default notices, auction sale notices and bank repossessions, rose less than 1% from March to 342,038 and are up 32% from the year-ago period.
One in every 374 US housing units received a filing in April, the highest monthly rate seen by online foreclosure marketplace RealtyTrac, which has tracked defaults, auctions and bank-owned properties in 2,200 US cities since January '05.
“Much of this activity is at the initial stages of foreclosure – the default and auction stages – while bank repossessions, or REOs, were down on a monthly and annual basis to their lowest level since March 2008," RealtyTrac CEO James Saccacio says in a media statement today. "This suggests that many lenders and servicers are beginning foreclosure proceedings on delinquent loans that had been delayed by legislative and industry moratoria."
"It’s likely that we’ll see a corresponding spike in REOs as these loans move through the foreclosure process over the next few months,” Saccacio adds.
Nevada once again claimed the highest state foreclosure rate in the month with one in every 68 housing units in the state receiving a filing, or more than five times the national average. Meanwhile, a 37% increase in Florida's foreclosure activity from the previous month boosted the state's standing to second-highest with one in every 135 Florida housing units receiving a filing in April.
Foreclosure activity eased 10% in California, which posted the third-highest rate with a new filing on one in every 138 housing units in April. Arizona and Idaho filled out the top five highest rates, with a respective one in every 164 and one in every 255 housing units receiving a filing in the month.
Las Vegas alone posted the highest metro foreclosure rate, with filings reported on 14,073 properties — or one in every 56 Las Vegas housing units — in April. Despite a 20% decrease in filings from March, Las Vegas still saw a foreclosure rate nearly seven times the national average.
Areas hardest-hit with foreclosure auctions, although negatively associated with evicted borrowers and declining home prices — as so-called "distressed" sales traditionally fetch 20% less than non-foreclosures — also tend to show the first signs of recovery, National Association of Realtors economist Jed Smith tells HousingWire for the upcoming June magazine issue.
"We’ve seen some phenomenal strength in California, Arizona, Nevada and Florida recently, largely because prices in those markets got bid down to such a point that the first-time home buyer and probably many others have seen a real opportunity there…to come back into the market," he says.
HousingWire explores REO auctions, their effects on housing prices and their benefits to investors in the upcoming July magazine issue.
Write to Diana Golobay.
Total mortgage application volume fell 8.6% for the week ending May 8, after ticking up 2% a week before, according to a survey just released by the Mortgage Bankers Association (MBA). Refinance applications also decreased in the week as mortgage rates ticked upward, indicating weakened homeowner interest in refi opportunities.
The four-week moving average for all applications fell 5.1% from the previous week, suggesting continued seasonal weakness of raw application activity. The volume of applications for refinance fell 11.2% while the four-week moving average of refi activity slipped 6.5%. The refi share of total mortgage applications fell to 71.9% from 74.4% the previous week, according to the MBA survey.
"Refinancing demand has trended down from its mid-April peak, while purchase mortgage demand has increased modestly in recent weeks, even after accounting for normal seasonal increases this time of year," MBA analysts wrote in the survey.
The volume of purchase applications remained steady this week, rising 0.5% from a the previous week's 5% gain.
A separate survey, conducted by Mortgage Maxx LLC found that application activity adjusted for multiple applications from a single household rose 1.4% in the same week ending May 8 after posting a similar gain the previous week. Household activity in California alone, however, declined 6.8% after increasing 3% the week before, the study found.
The Mortgage Application Index — or MAX — publisher Paul Descloux, in his weekly commentary on the index, suggests weekly applications may have reached their full potential, especially in light of last week's uptick in mortgage rates, which have held near historic lows in recent weeks.
Descloux referenced the Bankrate.com weekly interest rate survey, which showed 30-year loans at 4.98%, up four bps for the week. "What the headlines don't tell is the increasing expenses for those precious basis points," he adds. "A good example is the super low refi pace for over-taxed New York mortgagors."
Visit www.mbaa.org and www.mortgagemaxx.us for further details.
Home buyers qualifying for Federal Housing Administration-insured mortgages may soon use the new first-time home buyer $8,000 tax credit as a down payment, US Department of Housing and Urban Development secretary Shaun Donovan said today.
The process of applying the tax credit toward down payment, called 'monetization' in the industry, allows for FHA-qualified borrowers to use the tax credit to obtain a government-insured mortgage.
Donovan's announcement came at a National Association of Realtors legislative summit this morning, although HUD's details on the initiative aren't scheduled for official release until next week. The initiative will allow FHA-approved lenders to monetize the tax credit through short-term bridge loans, letting borrowers access the funds at the closing table.
"We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment," Donovan said, according to NAR.
The tax credit arrived as part of the American Recovery and Reinvestment Act of 2009 for qualifying taxpayers that buy homes in 2009. The law states that qualifying home buyers may claim up to $8,000 — or $4,000 for married individuals filing separately — on either their 2008 or 2009 tax returns. Unlike the previous law — which required recipients of the tax credit to repay the funds over a number of years without interest — the new home buyer credit effective with the passage of the act does not have to be repaid.
Write to Diana Golobay.
Compliance software and service provider QuestSoft integrated its compliance platform with ProLender's loan management system for small- to mid-sized mortgage lenders. The access to compliance services ensures client lenders put resources toward the most legally sound mortgages possible.
The partnership provides ProLender's mortgage lending clients with multiple pre- and post-closing compliance reviews through QuestSoft's platform. The partnership should shorten turnaround time and delays related to non-compliance issues, as well as reduce errors associated with manual data entry. The system enables lenders to reduce the potential for buybacks by ensuring mortgages are made within regulatory standards.
"In this regulatory environment, lenders need to be able to trust in the fact that they are being provided with the most complete and accurate information available," said QuestSoft founder Leonard Ryan.
The company's compliance platform evaluates a file against a suite of compliance regulations and standards including the Home Mortgage Disclosure Act (HMDA), Community Reinvestment Act (CRA), as well as the Truth in Lending Act (TILA), federal, state and local consumer and predatory lending laws.
Write to Diana Golobay.
Federal Reserve Chairman Ben Bernanke on Monday defended the government's stress tests on the 19 largest US banking institutions, calling them an "important element" of broader efforts to ensure the nation's banking system could withstand a deeper downturn.
The Fed released late last week the results of the government's Supervisory Capital Assessment Program, which revealed 10 of the 19 institutions will require, collectively, equity of $185bn to ensure adequate capital cushions, should the economic scenario become more severe than expected. In such a case, without a buffer, additional losses at the 19 firms during 2009 and 2010 could total about $600bn, the government said.
Projecting credit losses in an uncertain economic environment is difficult, Bernanke said, but the "intensive, painstaking nature" of the process gives the Fed confidence in the test's results, and the public should take "considerable comfort" that the shortfalls of these banks have been identified, he said.
"It was an enlightening exercise that will improve the toolkit we use to help ensure the safety and soundness not just of individual firms, but of the financial system more broadly," Bernanke said at a conference in Jekyll Island, Ga.
Bernanke championed the assessment as one that can be used to improve the nation's supervisory processes, particularly by demonstrating the benefits of using cross-firm, cross-portfolio information and the simultaneous review of a number of major firms.
"This approach allowed a broader analysis of risks than is possible within the traditional supervisory focus on individual institutions," he said.
Bernanke also expressed his confidence in the American dollar, saying it will remain the lead in currency both for reserves and transactions in the foreseeable future. "The issue at hand is whether or not the dollar will retain its value, and I think it will. I think it will be strong," the nation's top central banker said.
Write to Kelly Curran.
Foreclosure notices across California dropped 18% in April while foreclosure sales rose, according to a monthly report released today by ForeclosureRadar, which tracks each foreclosure in the state and provides daily auction updates.
Sales at auction rose by 35% overall, with a record number of properties selling at an average 28% discount from the estimated market value.
Notices of Default — the first step in the foreclosure process — fell 18.2% from the previous month and dropped 1.1% from the same time last year, the report found. Notices of Trustee Sale, which set the auction date and time, declined 8.5% from the previous month.
Lenders took back 11,916 foreclosures representing $5.3bn in total loan value for which no third-party bid was received at auction. A substantial 99% of these represented first mortgages. ForeclosureRadar estimated potential losses by junior lenders in excess of $623m on 6,911 junior loans wiped out by foreclosure.
Foreclosures affect house prices across the nation. So-called “distressed” sales including foreclosures and short sales accounted for nearly half of all transactions tracked in Q109 by the National Association of Realtors (NAR). The heavy ratio of distressed sales, which traditionally fetch about 20% less than non-foreclosures, pulled down median home prices in most markets. Of the 152 metropolitan statistical areas (MSAs) tracked by NAR, 134 — or nearly 87% — reported lower median existing single-family home prices.
Write to Diana Golobay.
JP Morgan Chase (JPM: 37.21 -0.75%) recently reversed a decision to shutter its warehouse lending division entirely.
The bank said months ago it would close the warehouse unit purchased from Washington Mutual. “Chase bought WaMu’s warehouse lending business last spring,” a company spokesperson told HousingWire in February '08. “We decided it didn’t fit our long-term strategy."
That decision seems to have changed, as the same spokesperson tells HW in an interview today that Chase will keep the warehouse business, move it to the commercial banking segment and extend lines of credit to a "very select" group of customers.
The lender will continue to conduct warehouse business with a subset of the 10 customers associated with WaMu's unit, according to a report filed Monday by National Mortgage News.
The decision comes as many retail lenders have either cut back on their warehouse presence or retreated from the space. A Wells Fargo (WFC: 29.60 +1.89%) spokesperson recently told HW reports that it plans to launch a $4bn warehouse facility were accurate, signaling at least one major lender's intention to return to the space.
HousingWire looks in detail at the changing warehouse lending landscape in the upcoming June magazine issue.
Write to Diana Golobay.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.
So-called "distressed" sales including foreclosures and short sales accounted for nearly half of all transactions tracked in Q109 by the National Association of Realtors (NAR).
The heavy ratio of distressed sales, which traditionally fetch about 20% less than non-foreclosures, pulled down median home prices in most markets. Of the 152 metropolitan statistical areas (MSAs) tracked by NAR, 134 — or nearly 87% — reported lower median existing single-family home prices.
“In areas with the biggest price declines, we also see much higher levels of distressed sales which are distorting the data,” NAR chief economist Lawrence Yun says today in a statement.
“We are very much in a bifurcated market with sharp differences between foreclosures and short sales on one hand, and traditional homes on the other," he adds. "In many cases homes are selling below replacement construction costs, which speaks to great value in the current market.”
The median home price was $169,000 for the quarter, meaning half sold for more and half sold for less, 13.8% below the level seen in the year-ago period.
“Traditional homes in good condition have held their value much better, so owners shouldn’t be overly concerned about median prices," says Charles McMillan, NAR president and a Dallas-Fort Worth area broker. "Most sellers can expect a good return if they’ve been in their home for a normal period of homeownership and haven’t excessively tapped their equity."
First-time home buyers accounted for half of all home purchases in the quarter as affordability reached record highs, according to NAR. Existing home sales including single-family and condo came in at a seasonally adjusted annual rate of 4.59m units, down 3.2% from the 4.74m unit pace seen in Q408.
NAR saw data from 17 states indicating sales increases from the fourth quarter, which had not yet reflected the first-time home buyer tax credit, while six states saw sales higher than a year before.
Write to Diana Golobay.
Bank of America (BAC: 7.29 -0.14%) raises billions of dollars through the sale of a significant stake in an overseas commercial bank as part of an effort to raise nearly $40bn in fresh capital needed under federal regulators' projections of a more severe recession.
Booking at least $7bn through the deal barely touches the bottom line federal regulators said BofA needs to raise to be sufficiently capitalized in adverse economic circumstances. It does, however, put BofA on the path to shoring up capital reserves in the event that bad assets turn worse, portfolios sour and loan defaults soar, widening the bank's losses.
Unnamed sources told Bloomberg the bank stands to make $7.3bn through the sale of a 5.8% stake in China Construction Bank. The stake held a total value of $8.5bn as of market-close Monday, sources told the Wall Street Journal, although significant stakes often sell at a discount. The transaction marks the largest sale of shares in a China-based lender by an overseas investor.
The deal also has caused Wall Street firms to scramble for buyers among hedge funds and other institutions, the WSJ reported. Another source confirmed Singapore-based Temasek Holdings is in the running of potential buyers, although it considers the price too high and already owns 5.56% of the Chinese lender.
Sources told Bloomberg, however, that the purchase had already completed with Hopu Investment Management joining Temasek in buying 13.5bn shares from BofA.
Write to Diana Golobay.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.
