Archive for May, 2009
The South Carolina Supreme Court placed a temporary moratorium on thousands of foreclosure sales on properties guaranteed by Freddie Mac (FRE: 0.00 N/A), Fannie Mae (FNM: 0.00 N/A) or any other company that has signed on for the Obama Administration's Making Home Affordable modification plan.
The ruling marks the first statewide court-ordered foreclosure freeze and aims to allow servicers additional time to evaluate borrowers for eligibility in the program.
Fannie Mae initially requested the injunction, but chief justice Jean Toal issued an order placing a moratorium on properties backed by loans owned or guaranteed by both agencies and a variety of other servicers participating in the Administration's program, according to the Associated Press.
The moratorium is set to expire May 15.
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.
Amid a housing market where property values are still falling, Q109 left more than a fifth — 21.9% — of all American homeowners with negative equity, according to data released today by Zillow.com.
That's a significant jump from the 17.6% of all homeowners who sat underwater in the prior quarter.
At first quarter's end, home values posted a year-over-year decline of 14.2% says Zillow. After nine consecutive quarters of declines, eight regions – including the Modesto, CA, Stockton, CA and Fort Myers, FA regions – have now experienced median value declines of more than 50% since their peaks.
This potentially means a large handful of troubled homeowners will not qualify for the Obama administration's home refinancing program. In order to be eligible, a homeowner's mortgage must not exceed 105% of the current value of the home.
Nonetheless, slowing declines are an early sign of improvement, says Stan Humphries, Zillow vice president of data and analytics.
Several hard-hit markets in California, like Los Angeles, San Diego and Modesto, saw at least two consecutive quarters of smaller year-over-year declines in home values.
Meanwhile, potential sellers appear to be waiting on the sidelines until evidence of an improved housing market emerges. In a separate survey of homeowner sentiment, one-third of homeowners said they would be at least somewhat likely to put their homes on the market in the next 12 months if they saw signs of a recovering real estate market.
One-third of homeowners indicate they would like to put their home on the market if conditions improve, which presents some fear that a bottom in home values could be quite protracted, as shadow inventory makes its way into 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.
Chairman of the Federal Reserve, Ben Bernanke, offered a glimpse of hope yesterday saying the United States economy should begin a fragile recovery by the end of this year, which would seemingly boost activity within the housing market.
Write to Kelly Curran.
In a report filed by James Hagerty of the Wall Street Journal, an unnamed Securities and Exchange Commission spokesperson claims the SEC advised Freddie Mac (FRE: 0.00 N/A) on how to avoid coughing up $30bn in charges.
The fine would deal too great a blow to the earnings of the secondary market player, the WSJ reports, and so the SEC rendered a favorable accountancy ruling to prevent the fee against earnings.
Hagerty writes: "The company said [in its annual report in March] that the need to remove modified loans from mortgage-backed securities might mean that its guarantees on those loans were no longer eligible for an exception from derivative accounting under an accounting standard known as SFAS 133. If so, the company estimated in March, it might have to take a pretax charge against earnings of $30 billion as early as the second quarter of this year."
But what comes around goes around as it is believed that if Freddie would need to pay the charge, then it would request addition capital from the Treasury Department.
The US government took control of the firm in September 2008 and is insuring Freddie stays in business, despite collapsing home prices across the country, in an effort to keep defaulting borrowers out of foreclosure.
Write to Jacob Gaffney.
When G8 Capital placed its bid on a bulk real estate-owned (REO) portfolio of 182 residential properties across 27 states, it entered a close race to win. It failed initially.
G8 Capital had placed the second-highest bid on the bulk REO portfolio, which then went to the top bidder. But when the buyer eventually could not perform, G8's bid automatically became the winning offer by default on April 30 — that is, if the company could close by the end of the day to accommodate a month-end closing date.
G8 wired the funds within two hours of the call and became the portfolio's new owner the same day.
"Our most recent portfolio acquisition is another testimony of G8's ability…to help sellers quickly and efficiently move assets off their books," said president and CEO Evan Gentry in a statement. "We're poised to move just as quickly in the coming months as we anticipate a major wave of REOs being created by the recent expiration of national foreclosure moratoriums."
G8 Capital acquires distressed mortgage loan portfolios, performing and non-performing REOs, providing fair wholesale value on REO properties for secondary market, loss mitigation and asset managers looking to get the most out of their investments. Once acquired, G8 Capital works with borrowers to restructure or jointly create a work-out situation to allow homeowners to stay in their homes with more affordable payments.
Write to Diana Golobay at diana.golobay@housingwire.com.
Federal regulators found Bank of America (BAC: 7.29 -0.14%), one of the major US banks faced with a government-initiated stress test, is lacking capital on the order of $33.9bn, a bank executive told the New York Times.
Although executives said they consider the number larger than the bank actually needs, BofA has capital-raising alternatives to converting some of the $45bn in government capital through the Troubled Asset Relief Program (TARP) into common stock and consequentially giving the government partial ownership.
"We're not happy about it because it's still a big number," BofA's chief administrative officer, J. Steele Alphin, told the Times. "We think it should be a bit less at the end of the day."
Along with BofA, at least 18 other major US banks participated in the stress tests and at least one other, Citigroup (C: 30.87 +1.61%), is reported to need at least $10bn in fresh capital. Faced with capital needs, Citi has gotten a little creative.
The latest report out of the bank is a decision to speed up the process in closing the joint brokerage venture with Morgan Stanley. The venture will bring in a $5.8bn gain, which would demonstrate to federal regulators Citi's subsistence outside of additional government aid.
The companies originally announced the joint venture between Citi's Smith Barney and Morgan Stanley's US brokerage division, set to close in the third quarter, making the largest retail brokerage with over 20,000 brokers, $1.7trn in assets, $14.9bn in combined revenues and $2.8bn in combined pre-tax profit. Citi is now looking to book the $5.8bn gain by a closing date of June 1, unnamed Citi workers told Bloomberg.
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.
Total mortgage application volume inched up 2% for the week ending May 1, after diving 18.1% a week before, according to a survey just released by the Mortgage Bankers Association (MBA).
The four-week moving average fell 6% from the previous week, indicating continued seasonal weakness of raw application activity. The volume of applications for refinance inched up 1.2% while the four-week moving average of refi activity slipped 6.7%. The refi share of total mortgage applications fell to 74.4% from 75.3% the previous week, according to the MBA survey.
The volume of purchase applications seems to have stabilized this week, rising 5% from a week earlier, when it had slipped 0.6%. In the preceding two weeks, the rate of decline slowed for purchase applications, to -4.2% from -11.3% a week earlier. Conventional purchase application volume gained 5.5% and government purchase application volume — think FHA-insured loan applications, here — ticked up 4.4% for the week, according to the MBA.
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 1 after posting a 0.1% gain the previous week. Household activity in California alone rose 3% after increasing 0.2% the week before, the study found.
The Mortgage Application Index — or MAX — publisher Paul Descloux, in his weekly commentary on the index, says weekly applications struggle to move higher, even despite record low mortgage rates. "With benchmarks now under pressure as credit spread anxiety heals and funding realities ascend, mortgage rates have probably reached their low for this cycle," he writes. "This may be as good as it gets."
"One wild card remains in the seasonal pattern, if any, of [real estate-owned] sales," Descloux adds.
Real estate-owned (REO) sales, or foreclosure sales, have traditionally had a substantial effect on lowering home prices and enticing borrowers onto the homeowner market.
Visit www.mbaa.org and www.mortgagemaxx.us for further details.
Write to Diana Golobay at diana.golobay@housingwire.com.
With Accredited Home Lenders and Thornburg Mortgage both having filed for bankruptcy Friday, the scope of the industry's problems has become more apparent than ever.
Accredited once ranked as one of the largest subprime lenders and Thornburg specialized in high-balance, ultra-prime jumbo loans. The filings are further indication that the recession inhabits every corner of the lending industry. But neither comes as a major shock.
Lone Star Funds purchased Accredited after acquiring Bear Stearns' residential mortgage arm when the company broke apart last year. The purchases sparked questions at the time over Accredited’s future and Lone Star’s plans to integrate across two platforms with similar operations. A memo sent by Bear Res to its employees announcing the sale to Lone Star noted that the private equity firm intended to set up a separate entity, LSF5 Mortgage Operations, which would "operate as an independent origination and servicing business for its own account."
Lone Star indicated in the memo that it would only temporarily use Accredited’s existing channels to fund and service mortgages, until the permits were complete for LSF5. The future of Accredited in the face of the acquisition seems a moot point, now the company has filed for Chapter 11 bankruptcy protection.
Thornburg warned in April of the bankruptcy, as it struggled under the pressure of deteriorating market conditions and high operating leverage. The company found itself in violation of numerous covenants on various credit facilities with the likes of UBS AG (UBS: 14.05 +0.50%) and JP Morgan Chase (JPM: 37.21 -0.75%), and said that its creditors had agreed to forbear demanding payment under deficiency claims, but said that its various creditors would begin to seize collateral ahead of any bankruptcy filing by the company.
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.
Faced with criticism over its handling of various housing discrimination complaints, the US Department of Housing and Urban Development (HUD) on Monday swore in Helen Kanovsky, Peter Kovar and John Trasviña as the general counsel, assistant secretary for Congressional and intergovernmental affairs, and the assistant secretary for fair housing and equal opportunity, respectively.
"Each of them plays a critical role in our goal of building a dynamic, collaborative housing team that will better position HUD to help the nation overcome the tremendous housing challenges we currently face," HUD secretary Shaun Donovan said in a media statement.
Kanovsky previously held the positions of chief operating officer and general counsel of the AFL-CIO Housing Investment Trust. Kovar previously served as chief of staff for Congressman Barney Frank (D-Mass.), chairman of the House Financial Services Committee. As assistant secretary for fair housing and equal opportunity, Trasviña joins HUD after serving as president and general counsel for the Mexican American Legal Defense and Educational Fund (MALDEF) in Los Angeles, Calif.
"The principles of fair housing often have the greatest impact on our nation's children," Trasviña said. "If left ignored, the pain and shame of a parent whose family is denied an apartment or home because of race, religion, national origin or disability is felt by a child for a lifetime."
The three appointments, which the Senate unanimously confirmed on Friday, come as HUD faces increasing criticism over understaffed efforts to combat mortgage fraud and housing discrimination.
The same day as the unanimous confirmations, the National Fair Housing Alliance (NFHA) said Friday in its 2009 Fair Housing Trends Report that 93 private non-profit fair housing organizations processed almost twice as many cases of discrimination — made on the basis of race, color, national origin, religion, sex, familiar status and disability — last year as HUD, the US Justice Department, and 107 state and local government agencies combined.
“Fair housing advocates have been warning the federal government for a decade, to no avail, about the damage that abusive lending would bring,” said Shanna Smith, NFHA president and CEO. “For too long, HUD and the Justice Department have stood by while people and neighborhoods of color have been targeted for predatory loans and stripped of equity.”
NFHA may now have an advocate in fair housing and equal opportunity assistant secretary Trasviña. The US Senate last week voted 92-4 in favor of Senate bill 386, called the Fraud Enforcement and Recovery Act, which provides $490m over the next two fiscal years for mortgage fraud investigation by regulatory agencies like HUD.
The legislation allows $75m in fiscal year 2010 and $65m in fiscal year 2011 for the FBI to use its resources to go after suspected fraudsters. Furthermore, $50m goes to the US Attorneys’ office. Up to $40m in funding goes to the Justice Department, to be shared among the criminal, civil and tax divisions. The legislation also would provide $30m each fiscal year to HUD’s Inspector General for investigation of fraudulent and discriminatory cases like those reported by NFHA.
Write to Diana Golobay at diana.golobay@housingwire.com.
Fraud and risk analytic solutions provider BasePoint Analytics experienced "record growth" in their newly enhanced Income Verification Service, the company said today.
Since launching what BasePoint claims is the industry's first and only completely automated income verification service late last year, the company is increasing the volume of requests it handles each month by more than 100%. Income verification seems to be climbing the latter of importance for underwriters.
BasePoint's service allows lenders and servicers to prove income by validating the income directly from that borrower's IRS tax filings including the retrieval of borrower tax returns and W-2 transcripts. BasePoint says it released the service in response to the mortgage industry's desire to quickly and confidently verify a borrower's income through outside and independent means.
Most recently, BasePoint enhanced the service to allow direct integration with servicers' platforms to provide automated requests and returns. With this advanced automation, BasePoint says it signed up one of the largest servicers in the country with the solution.
The enhanced service can also provide transcripts to servicers and lenders up to four times faster than before. "Lenders no longer have to rely on manually faxing or filling out online forms to get income verification, rather they can query their systems to see which loans need it and then send the authorization and request directly to BasePoint's Server," the company said in a press release Tuesday. The automatic server operates 24/7 and queues new requests to the IRS in batches moments after they are received.
Write to Kelly Curran at kelly.curran@housingwire.com.
Support services provider, Foundation Source, launched today a new program for private charities to make unsecured, no-interest loans to individuals and families who are struggling to pay their mortgages.
The new Mortgage Assistance Program can provide immediate financial assistance to homeowners under the threat of foreclosure.
"The program taps into the generous spirit of the company's nearly 900 private foundation clients who have expressed a strong desire to extend the scope of their family philanthropy to include both traditional charities as well as individuals and families in need," read a press release on the program.
Foundation Source says the Mortgage Assistance Program provides assistance as no-interest loans, known as program-related investments, not outright grants. As such, funds will be repaid to the foundation and will then be available for other charitable purposes.
Under the program's guidelines, its loans count toward the foundation's annual five percent minimum distribution requirement in the year the loan funds are advanced. In future years, the minimum distribution requirement will be increased by the amount of the loan or loans repaid. The company says funds are paid directly to the financial institution holding the mortgage, either in a lump sum, in monthly payments or in a combination of the two. And loans are repaid in monthly installments for up to five years.
"Program-related investments are an invaluable tool that private foundations can employ to help out in tough economic times," wrote Rob Wexler and David Levitt, principals with Adler & Colvin. "Typically, program-related investment loans are made to organizations. This program is innovative because it enables foundations to make loans directly to benefit individuals in immediate need."
