Archive for May, 2009
Amid an economy with record-high ongoing jobless claims, at least one mortgage company is hiring.
For those recently unemployed in the mortgage industry, it might be a good time to move to California.
Paramount Residential Mortgage Group (PRMG), a national retail and wholesale mortgage banker, increased its workforce by more than 50% so far in 2009. And that's just the half of it; PRMG is likely to continue expanding its California-based corporate workforce this year, company officials said in a media statement Wednesday.
Paramount recently relocated its headquarters to a 22,000 square foot facility in Corona, Calif. to accommodate the growth in business and staff.
"From so many different perspectives, this move represents a major step forward for PRMG," said CEO Paul Rozo. "We've had a great deal of success recently and our volume has grown at an impressive rate. I attribute this success to…our commitment to deliver quality loans that exceed the standards and expectations of today's unforgiving secondary market."
The move allows PRMG to centralize and scale operations, production, fulfillment, secondary marketing and interim servicing. The firm operates a total of 14 branches in seven states and plans to continue expanding its retail channel. The mortgage banker estimates it will fund more than $2.5bn in retail and wholesale lending this year.
Write to Diana Golobay.
Online mortgage lending software provider OpenClose plans to pair its LenderAssist loan origination software with CCMC's Bridgeware interface.
The new program streamlines the origination-to-servicing process and cuts down on errors associated with manual entry.
The partnership provides lenders with a streamlined data entry option that eliminates the need to manually re-enter loan information from origination into the servicing system.
"With the increase in home foreclosures and loan modifications, lenders need the most advanced technologies possible to respond to the increased need for accurate origination and refinance capabilities," said OpenClose's president of operations, J.P. Kelly, in a media statement. "The [Bridgeware] interface creates a new, efficient approach to processing loans, which in turn supplies our customers with the most effective means to serve their borrowers."
The first implementation of the partnership involves merging a segment of the Bridgeware interface — called ccmcBridge — with LenderAssist, enabling OpenClose users to book loans on the Jack Henry & Associates loan servicing platform.
"Now LenderAssist users have the option to easily and accurately service their own loans," said Dana Giesler, a CCMC executive.
Write to Diana Golobay.
The wait is over.
Stress test results reveal nine of the nation's 19 largest banks successfully endured the government's testing and will not require any additional capital, while the other 10 banks must boost capital levels by a collective total of $74.6bn, in order to comply with government standards, said the Federal Reserve this afternoon.
Bank of America (BAC: 7.29 -0.14%) stands the front-runner, requiring $33.9bn in fresh capital, followed by Wells Fargo (WFC: 29.60 +1.89%) who must raise $13.7bn in new capital.
GMAC (GJM: 22.57 0.00%) will require a capital buffer of 11.5bn, while Citigroup (C: 30.87 +1.61%), Inc. will need 5.5bn, Regions Financial (RF: 5.31 +2.71%) $2.5bn and SunTrust Banks $2.2bn. Morgan Stanley (MS: 18.56 +2.26%) and KeyCorp (KEY: 8.01 +1.65%) must each raise 1.8bn and Fifth Third Bancorp (FITB: 13.23 +1.15%) $1.1bn.
JPMorgan Chase & Co (JPM: 37.21 -0.75%), Goldman Sachs (GS: 111.77 +2.96%) and U.S. Bancorp (USB: 27.86 +0.25%) passed the government's examination, as did American Express (AXP: 49.85 -0.26%), BB&T (BBT: 26.95 -0.33%), Bank of New York Mellon (BK: 20.23 +1.15%), Capital One Financial (COF: 46.05 +0.96%), MetLife (MET: 35.52 +2.96%) and State Street (STT: 39.06 +0.72%).
Preliminary results delivered to banks last week and originally slated for public release on May 4, but the Federal Reserve postponed the results as executives reportedly debated preliminary findings and recovery plans with examiners.
Despite seemingly grim results, Treasury Secretary Tim Geithner promised the nation's banking system remains strong and long-awaited test results would be "reassuring."
Geithner also said he believes those banks which need to raise more capital will be able to do so privately.
The banks began undergoing tests in late February. Regulators required all US bank holding companies with year-end 08 assets exceeding $100bn to participate in the assessment. These 19 institutions collectively hold two-thirds of the assets and more than half the loans in the US banking system, according to the Fed. The government said in a statement Wednesday night that it had no intention of expanding the stress test beyond the 19 largest banks.
More than 150 examiners, supervisors and economists from the Fed, Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation studied banks’ potential performance under projected economic expectations and a more adverse outlook with a longer, more severe recession. The point: to determine the capital buffer needed to ensure the firms would remain appropriately capitalized at the end of 2010 if the economy proves weaker than expected.
What Now?
Banks that need more capital must submit a plan to the Treasury by June 8, and commit to raising the money or converting existing preferred capital into ordinary shares within six months.
In an unexpected announcement ahead of the Treasury's pre-scheduled release of the results, Wells Fargo said it will sell $6bn in new common stock to help raise the capital it needs to meet the government's requirements. Morgan Stanley followed, announcing it would sell $2bn in new common stock to help meet requirements, in addition to selling roughly $3bn of senior notes in a public offering that will not be guaranteed by the FDIC.
Write to Kelly Curran.
The House of Representatives today voted 300-114 in favor of HR 1728, the Mortgage Reform and Anti-Predatory Lending Act, which calls for tighter lending rules to promote affordable mortgages for borrowers with a reasonable ability to pay and who receive more transparent disclosures at the time of closing.
"Insisting on responsible borrowing and lending and ensuring that borrowers enter into mortgages they can repay or refinance will help families protect their most valuable asset — their home — and guard against another financial and housing market meltdown," responds speaker Nancy Pelosi (D-CA) to the announcement.
"This legislation represents a key piece in Congress' initial efforts to revamp the nation's financial regulations to restore integrity and common sense to our nation's economy," she adds.
Other provisions of the bill include the prohibition of "steering" borrowers into risky or unaffordable loans and the formation of a safe harbor for lenders that make full documentation loans often considered safer than other nontraditional loans.
60 House Republicans joined the 240 House Democrats voting for the bill, while three House Democrats voted against it.
Write to Diana Golobay.
The prices of homes on the market are climbing, as inventory levels are falling, offering hopes of a market on its way to recovery, according to recent housing reports.
The prices of properties listed for sale rose in 22 of 26 major markets during April, according to the Real-Time Housing Report, published by Altos Research and Real IQ. The Altos 10-City Composite Price Index increased by 2.2% during April and 3.3% during the most recent three month period, which Stephen Bedikian, partner and research director for Real IQ, contributes largely to the "powerful effect of seasonality."
Listing prices rose at the fastest rate in the California markets with San Jose up 3.7%, Los Angeles up 3.2% and San Diego up 2.8% in April. Prices in 18 markets are now showing three months of sequential listing price increases.
Asking prices fell at the fastest rate during April in Las Vegas, followed by Salt Lake City, down 3.8% and 2.6% respectively.
“We expect to see continued strength during the next few months of the spring selling season fueled by historically low mortgage rates," Bedikian says. "We won’t be able to call a bottoming of the market until we see stability continue into the seasonally weak fall and winter months.”
And and one of the most important questions is whether inventory growth will remain restrained — as it fell in 15 of 26 major markets in April, according to the report — or whether pent-up supply will come on to the market in succeeding months.
"There is no surer way to snuff out a recovery in housing prices than a flood of inventory that overwhelms demand," says Michael Simonsen, CEO of Altos Research.
A recent report by Zillow.com shows one-third of homeowners indicate they would like to put their home on the market if conditions improve, which presents some fear that shadow inventory will inundate the market. “By our calculations, this could translate into as many as 20 million homes that could seep into the market as prices stabilize, maintaining a constant stream of supply that far outpaces demand, thus keeping prices flat,” Zillow said in a press release.
During April, all markets except Portland, San Francisco and Salt Lake City still had a median days-on-market of 100 or more. By far, the market with the slowest rate of inventory turnover was again Miami, now at a median of 246 days-on-market — or more than eight months. Portland experienced the fastest rate of inventory turnover at a median of 82 days-on-market, followed by San Francisco at 96 days.
But pending home sales offer hope that sales will pick-up in the coming months. The National Association of Realtors' pending home sales index, a forward-looking indicator based on contracts signed in March, increased 3.2% in March, as it's Affordability Index sat at a record high.
Write to Kelly Curran.
Ocwen Financial (OCN: 13.96 +1.53%) posted a $15.1m profit — $0.24 per share — for Q109 despite a $4.6m net unrealized loss on loans held for sale, compared with a $5.3m profit in the year-ago period.
The gain comes after Ocwen lost a net $3.7m in Q408.
Income from operations of $42.3m represents a 5.4% gain over the year-ago quarter. Income from continuing operations before taxes was $23.3m, up from $8.4m in the year-ago quarter. Lowered operating and interest expenses drove the increased income, executives said in the earnings statement.
Ocwen chairman and CEO William Erbey said the company's unused borrowing capacity at quarter end rose 64% from December 31 to $438.7m. "Therefore, our focus has shifted to extending the term of our borrowings," he adds. "The inclusion of our servicer advances in [the Term Asset-Backed Loan Facility] has greatly increased the prospect of additional term financing."
The company's mortgage services segment experienced a 7.5% increase in revenue, to $18m this quarter compared with $16.8m in the year-ago quarter. New lines of business and higher order volumes existing businesses drove the increase, company executives said in the statement.
Ocwen completed 20,651 loan modifications through participation in the Home Affordable Modification Plan. In late April, Ocwen became the seventh servicer to receive Troubled Asset Relief Program (TARP) funds — $659m — as part of the modification incentive program.
Freddie Mac (FRE: 0.00 N/A) in February said it selected Ocwen as one of the initial servicers selected for a pilot third-party servicing program for Alt-A and other at-risk non-performing mortgages.
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.
Mortgage rates turned upward in the week ending May 7, according to Freddie Mac's (FRE: 0.00 N/A) Primary Mortgage Market Survey released today.
Thirty-year fixed-rate mortgages averaged 4.84% with an average 0.7 point, up from last week's 4.78% average, but far below 6.05%, the average recorded last year at this time.
After sitting stagnant at 4.80% for three consecutive weeks, the 15-year fixed-rate mortgage increased this week to 4.51%. A year ago at this time, the 15-year FRM averaged 5.60%.
“Mortgage rates rose slightly this week amid positive economic news that the economy may be approaching the bottom of the recession,” said Frank Nothaft, Freddie Mac vice president and chief economist. “In addition, the positive news was corroborated by Fed Chairman Bernanke when he stated that he expects economic activity to bottom out, then to turn up later this year. He also noted that the housing market is beginning to stabilize."
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) also rose this week, from 4.8% last week to 4.9%. And One-year Treasury-indexed arms were no exception to the climbing trend, increasing just slightly from 4.77% last week to 4.78% this week.
Signs of housing activity are beginning to emerge. Pending existing home sales rose for the second consecutive time in March and represented the first back-to-back monthly increase since March 2008. In its April 2009 Senior Loan Officer Opinion Survey, the Federal Reserve found the demand for prime mortgages rose for the first time since April 2007 when it first began collecting such detailed mortgage data.
A separate rates survey conducted by Bankrate.com also found mortgage rates increased. The Benchmark, 30-year fixed-rate mortgage rose 4 basis points to 5.27%, according to Bankrate, while the benchmark 15-year fied rate mortgage rose 5 basis points to 4.78%.
Write to Kelly Curran.
Federal Reserve chairman Ben Bernanke today called for consolidated supervision of both large banks and non-banks.
"The crisis has demonstrated that effective and timely risk management that is truly firmwide is vitally important for large financial institutions," he says. "To make sure that that happens, all systemically important financial firms — and not just those affiliated with a bank — should be subject to a robust framework for consolidated supervision."
Such a regulatory framework, Bernanke says, allows for the evaluation of banks' and non-banks' capacity for managing risk, as well as their ability to comply with laws and regulations. But restrictions in current law on the matter drive a disparity between supervisory models over banks and other non-banking institutions like insurance and securities subsidiaries. This problem, he says, requires attention from Congress to allow for one consolidated supervisor to address the sound practices of all parts of an organization.
His comments come the day after Federal Deposit Insurance Corp. (FDIC) chairwoman Sheila Bair asked a Senate committee on banking to consider a similar government regulatory framework to monitor global, systemic financial institutions considered “too big to fail.”
She suggested the Fed could play an important role as systemic risk regulator to monitor and regulate the activities of systemically important institutions. US Treasury Department, Federal Reserve Board, FDIC and Securities and Exchange Commission could also join together in a system-wide regulatory monitoring effort, a systemic risk council, she said.
Write to Diana Golobay.
In clearly polarized results, many major US banks either safely passed government-initiated stress tests or failed by billions of dollars, according to most recent reports filed by the Wall Street Journal.
Reports began Wednesday that Bank of America (BAC: 7.29 -0.14%) will need to raise $34bn in fresh capital. But that was just the beginning. Wells Fargo (WFC: 29.60 +1.89%) needs from $13bn to $15bn, GMAC (GMAC: 0.00 N/A) needs $11.5bn, Citigroup (C: 30.87 +1.61%) needs $5bn and Morgan Stanley (MS: 18.56 +2.26%) needs $1.5bn, sources told the WSJ.
Meanwhile, regulators found JP Morgan Chase (JPM: 37.21 -0.75%), Goldman Sachs (GS: 111.77 +2.96%), MetLife (MET: 35.52 +2.96%), American Express (AXP: 49.85 -0.26%), Bank of New York Mellon (BK: 20.23 +1.15%) and Capital One Financial (COF: 46.05 +0.96%) in possession of sufficient capital to weather more severe economic conditions.
Federal regulators plan to officially release stress test results today after market close, but that hasn't stopped industry sources from discussing the strength of banks concerned.
One of HousingWire's sources inside Bank of New York (BoNY) Mellon tells us major European banks have parked considerable reserves at its Canary Wharf operations in London. The source says large European banks are confident in leaving capital at BoNY Mellon, a stateside Troubled Asset Relief Program administrator and consequentially very likely to be "insured" with government capital, should any problems arise, without the public shame of asking for a capital infusion.
But even the banks designated as sufficiently capitalized under the stress tests carry some government aid on their books. Chase received $25bn through TARP, Goldman Sachs received $10bn, Cap One received $3.56bn and Am Express received $3.39bn and BoNY Mellon received $3bn. Most of those capital purchases occurred in the first month of TARP's operation, when regulators repeatedly assured taxpayers that only healthy banks could participate.
Plenty of the banks now facing capital needs also received TARP funds. Citigroup received $50bn including a loss guarantee, BofA received a total $45bn of TARP funds, while Wells Fargo received $25bn, Morgan Stanley received $10bn and GMAC received $5bn.
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.
First time claims for state unemployment benefits dropped 34,000 to a seasonally-adjusted 601,000 in the week ending May 2, marking the lowest level recorded since late January, the U.S. Labor Department said today.
"The evidence is growing that the recession may be bottoming out in the second quarter," wrote analysts at RDQ Economics in a research note. "Companies may have begun to slow the rate of layoffs, but there is no evidence here that the pace of hiring has picked up."
The total number of people who remained on the benefits roll in the reported week after collecting at least one week of aid increased 56,000 to 6.35m — hitting another record high. The ever-increasing number of ongoing claims accentuates the struggle Americans face in finding jobs amid an environment where companies are forced to cut costs time and time again.
The insured unemployment rate for the week — the proportion of covered workers who are receiving benefits — also rose, from 4.7% to 4.8%, the highest level seen since December 1982.
Nonetheless, the four week moving average of initial claims, which can smooth volatility in employment trends, continued to fall, dropping 14,750 to 623,500.
The largest increases in initial claims were seen in Michigan — where 9,998 people filed a claim, according to the department's most recent data — Massachusetts, Kentucky, North Carolina and New York. Analysts saw the largest decreases in initial claims in California — where claims dropped 10,833 — Georgia, South Carolina, Wisconsin and New Jersey.
Write to Kelly Curran.
