Archive for June, 2009
Mortgage companies and financial institutions are currently faced with increasing volumes of refinance inquiries, creating the need for solutions that quickly and effectively respond to that heavy demand.
Technology provider Convergys Corporation made available today its new Loan Modification Solutions.
Convergys says the solution responds to heavy demand by leveraging live agent assistance and self-service automation, outbound communications and analytics, encouraging loan retention and new lending.
It "gives mortgage providers a single source for the tools they need to meet their primary objective – increasing retention by proactively managing the experience…" says Andrea Ayers, president of customer management for Convergys.
Financial services institutions, mortgage companies, and government organizations can tailor the solutions for their specific business needs and timelines in order to avoid costly one-off customizations, the company says. "The ability to tailor the solution eliminates the need to commit to an end-to-end system."
Write to Kelly Curran.
Former Countrywide Financial CEO Angelo Mozilo and two other company executives face civil fraud charges today.
The case, by the Securities and Exchange Commission (SEC), alleges Mozilo profited $140m from insider trading. The SEC charges Mozilo with "deliberately misleading investors about the significant credit risks being taken in efforts to build and maintain the company's market share" — along with former COO David Sambol and former CFO Eric Sieracki.
"This is the tale of two companies," said Robert Khuzami, director of the SEC's division of enforcement, in a statement announcing the charges.
"Countrywide portrayed itself as underwriting mainly prime quality mortgages using high underwriting standards," he continues. "But concealed from shareholders was the true Countrywide, an increasingly reckless lender assuming greater and greater risk. Angelo Mozilo privately described one Countrywide product as 'toxic,' and said another's performance was so uncertain that Countrywide was 'flying blind.'"
Sambol's attorney, Walter Brown — a partner at Orrick, Herrington & Sutcliffe — issued a response to the charges moments ago in which he says the SEC has no substantial case against Sambol.
"The SEC wrongly asserts that Countrywide's disclosures to its investors regarding its lending criteria should have been more extensive, and that Mr. Sambol is somehow responsible for insufficient disclosure," Brown says. "The SEC thus wholly disregards Countrywide's detailed credit risk disclosures…and that Countrywide's investors, bondholders, rating agencies, and the financial industry were all well aware that mortgage lending practices were liberalized at Countrywide and almost all other financial institutions during the relevant time period."
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.
As the Obama administration plans to propose a comprehensive financial regulation overhaul as early as June 17, according to a report filed at Thomson Reuters, secondary market players are stepping forward with their own proposals.
The new chairman of the Commodity Futures Trading Commission, Gary Gensler, testified today before a Senate committee and asks for restrictions, fees and regulations on large banks and financial institutions that participate in the derivatives market. His requests come as part of the administration's sweeping regulatory reform.
Gensler calls for a comprehensive regulatory framework to govern over-the-counter (OTC) derivative dealers and markets, lower systemic risks, promote transparency and efficiency of markets, prevent fraud and manipulation and protect the public from improper marketing practices. He also asks for requirements for capital reserves and collateral, which provide a backstop to default-related loss. His proposal imposes expenses on derivatives dealers that might end up limiting the profit they make.
"The current financial crisis has taught us that the derivatives trading activities of a single firm can threaten the entire financial system and that all such firms should be subject to robust federal regulation," he says, according to prepared remarks.
But at least one securitization trade group has its own ideas of how to increase transparency within the industry without massive government regulation. The Securities Industry and Financial Markets Association's (SIFMA) asset management division this week issued a letter to the Federal Reserve Bank of New York outlining a framework for OTC derivatives risk management and market structure.
The association, likely concerned for the way heavy OTC derivative regulation may impact the securitization industry, recommended reducing systemic risk in the OTC derivatives market without controlling the market. Credit default swaps — an OTC product meant ensure payoffs to buyers when the underlying bond defaults and a credit enhancement tool commonly used in American securitizations — may pose potential long-lasting and widespread damage. When Lehman Brothers failed, massive defaults on loans held in securitizations put bondholder payoffs in jeopardy.
SIFMA recommended segregating customer collateral from portability of accounts in the event of counter-party default and updating industry governance to be more inclusive of buy-side participants, among other solutions.
Regulators this week also consider ways to manage the government-sponsored mortgage giants from conservatorship even beyond the current crisis. Federal Housing Finance Agency (FHFA) director James Lockhart suggested in testimony Wednesday that the government-sponsored enterprises (GSEs) face one of three fates in terms of ownership going forward: government agencies, government-sponsored entities or fully private firms.
"Recent experience has taught us that traditional prudential supervision may be insufficient to prevent the buildup of risks that threaten overall financial stability," Lockhart said. "FHFA therefore supports a shift to broaden supervisory activities to include the monitoring of systemic risk and the development of regulatory policies that focus on systemic stability."
"Such policies," he added, "often termed 'macroprudential,' include efforts to dampen credit cycles by making capital and other regulatory requirements more countercyclical."
Banking industry players are speaking up on behalf of the GSEs' ability to operate without substantial government regulation.
Representatives from the Mortgage Bankers Association, the National Association of Realtors and the National Association of Home Builders on Wednesday testified to a House Financial Services subcommittee on the future of the GSEs. The industry groups acknowledged at least some government control is required going forward, although they called for limited government in the GSEs.
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.
The US Treasury is setting up nearly $135m in Recovery Act funds for Iowa, Maine, New Hampshire, Rhode Island and Washington. The money is meant to go towards creating jobs in the states and developing a more affordable housing market for residents. The states, in turn, will swap tax credits for the aid.
Iowa has been granted $72m; Rhode island, $36m; Washington, $11m; New Hampshire, $10m and Maine, $4m.
Under the agreement, these states are exchanging a portion of their unused low-income housing tax credits (LIHTCs) for direct cash assistance, some of which will then go to contractors to build housing this demographic can afford.
"LIHTC projects around the nation have experienced financial problems getting to the finish line but these critical funds will provide a much-needed final push to get people home," the Treasury said in a press statement.
The funds announced today are part of an initiative that will eventually provide more than $3bn from the Recovery Act to put people to work building affordable housing across the nation — simultaneously creating jobs and low-cost housing. The Treasury says it will work with state housing agencies, in effort to jump start the development or renovation of this housing.
The funds announced today are the second round in a series of awards based on a rolling application process.
The Treasury's announcement came within hours of the Labor Department's jobless claims report. First-time claims for benefits actually dropped, but continuing and first-time claims remain at relatively high levels.
The four-week average of the continuing claims, which smoothes out distortions in the week-to-week data, rose by 88,750 to 6.69 million, a record-high level. The four-week average of first-time claims rose 4,000 to 631,250.
Iowa — which will receive $72m from the Treasury — reported the second highest increase in initial claims, the Labor Department said, with 2,312 people filing a claim.
Write to Kelly Curran.
Delinquency rates on commercial and multifamily mortgages held by the five largest investor groups are now at levels higher than those seen following the 2001 recession, the Mortgage Bankers Association said this week.
The increase is attributed to the weakening economy and continued credit crisis.
Between Q408 and Q109, the number of loans at least thirty days delinquent held in CMBS rose 0.68 percentage points to 1.85%, according to the MBA's Commerical/Multifamily Delinquency Report.
The 60+ day delinquency rate on multifamily loans held or insured by Fannie Mae (FNM: 0.00 N/A) climbed to .12%, while the 90+ day delinquency rate on Freddie Mac's (FRE: 0.00 N/A) multifamily loans rose to .09%.
Leading the sector in delinquent loans are banks and thrifts, which posted a collective 2.28% delinquency rate on loans at least 90 days delinquent.
Commercial properties aren't the only ones plagued by the current economy, as Credit-reporter provider TransUnion.com said this week the number of borrowers at least two months behind on their mortgages jumped for the ninth consecutive quarter, hitting 5.22%.
Write to Kelly Curran.
For the second consecutive week, mortgage rates rose, driven by an increase in bond yields, according to Freddie Mac's (FRE: 0.00 N/A) Primary Mortgage Market Survey.
Thirty-year fixed-rate mortgages increased to an average 5.29% with an average 0.7 point in the week ending June 4, marking the highest rate recorded since the week ending December 11, 2008.
The 15-year fixed-rate mortgage averaged 4.79%, up from last week's 4.53% average, but well below the 5.65% average a year ago at this time.
One-year Treasury-indexed ARMs climbed from 4.69% last week to 4.85% this week, while Five-year ARMs also jumped, from 4.82% to 4.85%.
"Rates are substantially higher than they were a couple weeks ago, when many would-be borrowers were floating instead of locking," said Bankrate.com's Holden Lewis. "They were gambling that mortgage rates would decline further or stay the same. They Lost."
Bankrate.com conducts its own rates survey each week. This week, Bankrate found benchmark 30-year fixed-rate mortgage rose 20 basis points to 5.65%, while the 15-year fixed-rate mortgage rose 20 basis points to 5.06%.
Write to Kelly Curran.
As California eyes sweeping statewide mortgage lending reform legislation, California attorney general Edmund Brown Jr. this week began cracking down on fraudulent activity on another end of the mortgage process–default and foreclosure.
Brown issued a directive requiring that "foreclosure consultants" claiming to offer relief for troubled borrowers register with his office and make themselves liable for up to $100,000 in potential damages by July 1 in order to receive a certificate to lawfully operate in the state.
Any consultants who violate state law in failing to register may face jail time up to one year and fines up to $25,000, according to a statement from Brown's office. Additionally, a court may order restitution to victims from proceeds from the consultant's $100,000 bond.
"California is awash with con artists who prey on vulnerable families facing foreclosure," Brown said. "By forcing foreclosure consultants to submit detailed information to my office and post a $100,000 bond, this registry will help bring long-overdue transparency to this shadowy world."
The announcement marks the latest effort to crack down on fraudulent and costly foreclosure prevention scams. Brown's office alone has seen scam artists charging huge up-front costs and directing future payments to personal accounts rather than to borrowers' lenders.
The registry of the consultants' names, contact information and documentation of contracts offered to consumers is geared to keep consultants honest and help Brown's office track suspicious operations.
Write to Diana Golobay.
Mortgage lenders seemed to hesitate in 2008 as the full extent of the credit crisis continued to unwind on their balance sheets.
The value of residential mortgages held by banks in 2008 fell 6% as credit standards tightened and demand for new loans weakened across the industry, according to a Federal Reserve report filed this week.
Lending in other mortgage categories remained subdued, while loans on home equity lines of credit expanded. Commercial real estate lending grew 7%, down slightly from the previous year, while banks' borrowing from the Federal Home Loan Bank system grew a net 3%.
Losses on banks' books increased 2% in the year, while commercial banks touted a 12.8% risk-based capital ratio at year-end, compared with 12.5% at the end of the third quarter. Delinquencies continued to mount throughout the year, bringing lenders to tighten standards.
The Fed report's preparers — Morten Bech and Tara Rice of the Federal Reserve Board's monetary affairs division — said that, in response to the pressures on financial institutions and the associated uncertainty about their financial condition, banks and investors pulled back from risk-taking even further in the fall. As lending and investing standards contracted, conditions across most financial markets deteriorated sharply, illustrating the interconnected workings of the financial industry.
"As house prices continued to decline," Bech and Rice wrote, "the performance of mortgage-related assets deteriorated further, and, with the onset of recession, credit problems spread to other asset classes and to a wider range of financial institutions."
Read the report on commercial banks in 2008 here.
Write to Diana Golobay.
The Legacy Loans Program (LLP), a big part of the Public-Private Investment Program designed to attract private capital to buy up toxic — or so-called “legacy” — loans faced its share of doubts as regulators shuffle programs to find the right balance between investment programs.
On the heels of questions late last week over whether the LLP would be shuttered entirely, the Federal Deposit Insurance Corp. (FDIC) today acknowledged a previously planned pilot sale of assets by open banks will be postponed.
The program itself, however, will continue despite the setback.
"Banks have been able to raise capital without having to sell bad assets through the LLP, which reflects renewed investor confidence in our banking system," says FDIC chairwoman Sheila Bair in a media statement today. "As a consequence, banks and their supervisors will take additional time to assess the magnitude and timing of troubled assets sales as part of our larger efforts to strengthen the banking sector."
FDIC will test the funding mechanism — modeled after that used by the Resolution Trust Corp., which operated from the late 80s to early 90s — set forth by the LLP in the sale of receivership assets during the summer. The FDIC plans to solicit bids for the receivership asset sale in July.
"The FDIC will continue its work on the LLP and will be prepared to offer it in the future as an important tool to cleanse bank balance sheets and bolster their ability to support the credit needs of the economy," Bair adds.
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.
Party?
HousingWire loves parties!
And here's why:
It's a gloomy state of affairs across the pond, with news that the Global ABS 2009 conference held earlier this week at the Hilton London Metropole was distinctly party-free.
A shame, since this annual meeting used to be more about the evening than the day seminars. Held last year in Cannes (also a bummer) the conference is not even attempting, at this point, to chase the glory days of year's past, when the Global ABS kicked off in Barcelona. The best party in 2007 was the Bear Stearns' gig on the beach! Talk about going out with a bang!
So we are pleased that on Sunday, June 7, the 2009 “Swingin’ on a Star” benefit for the Five Acres charity in Southern California is being co-sponsored by national real estate valuation company PCV Murcor. Five Acres is a service that helps families at risk by looking after kids in domestic danger and offering in-home care, among other things, and its good to see those in our line of work taking up such a good cause.
The event also honors Robert Floe for his exemplary service on behalf of children and families. Floe is on the board for Five Acres. He is a big proponent of corporate responsibility and actively encourages companies to get more involved in communities in need. Way to go Robert!
Even more important, the event will transform the One Colorado Courtyard in Pasadena into a Marrakesh Bazaar, complete with food, visual stimuli and, wait for it, smooth jazz. HousingWire loves parties.
In addition to PCV Murcor, other sponsors for the charity events include Planning Company Associates and Floe Financial Partners, both of Pasadena.
Money well spent, we say.
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