Archive for June, 2009
For many US homeowners, a house represents their greatest asset and largest investment.
For one visitor to RealtyBid.com, however, that asset is about to become the cheapest investment. Try 0% LTV.
That's the premise behind a new house-a-month giveaway, "The House Game," an online trivia game that enters participants in the running to win a post-foreclosure house, whether or not they answered the trivia questions correctly.
RealtyBid, an online real estate auctioneer, recently partnered with media technology provider ValCom to promote the giveaway as part of its ongoing auctions of real estate-owned (REO) houses at "rock-bottom prices."
“Each month through RealtyBid.com, ValCom will be auctioning dozens of post-foreclosure homes at unbelievable prices to home buyers and investors around the country," said RealtyBid CEO Tony Isbell. "These will be absolute, no-reserve auctions; all properties with bids will be sold. ‘The House Game’ is really symbolic of what we will be doing each month with ValCom—giving away houses!”
The first seven-day auction of post-foreclosure properties began Saturday and runs through June 27 at 8 p.m. EST. "The House Game" winner is randomly selected on June 28 to win a two-bedroom house in Florida.
Write to Diana Golobay.
Officials selected JVI Appraisal Division to participate in the Jacksonville, Fla. Neighborhood Stabilization Program (NSP), which allocates grant funds for state and local governments to purchase and redevelop abandoned or foreclosed properties in areas hard hit by delinquency and foreclosure.
In its role in the Jacksonville NSP, JVI will provide appraisals to help estimate the value of the properties both before and after refurbishment.
“JVI is proud to be participating in a program that can play such an important role in rebuilding neighborhoods within Jacksonville," says JVI president and founder Ron Nation in a media statement today.
"To have been selected for this program," he adds, "is quite an honor and an opportunity to help do our part in addressing the current housing crisis.”
NSP finds its roots in the Housing and Economic Recovery Act of 2008, which appropriates $3.92bn of grant funds for the refurbishment program. WIth NSP funds, local governments can either redevelop foreclosed properties that otherwise pose risk for abandonment and blight in local communities, or demolish neglected structures to maintain safe neighborhoods and free up land for further development.
Write to Diana Golobay.
A plan said to be in the works at the Federal Reserve to bring sweeping changes to the broad repurchase markets may involve the formation of a federal clearing bank to take the place of banks like Bank of New York Mellon (BK: 20.23 +1.15%) and JPMorgan Chase (JPM: 37.21 -0.75%).
Repurchase markets — or repo markets — involve a borrower putting up collateral in return for short-term loans from large investment managers. The transactions literally occur overnight, meaning the lender repurchases the funds the next morning.
Problems arose, however, as borrowers put up increasing amounts of asset- and mortgage-backed securities as collateral. When the underlying value of the assets decline, valuating the security as collateral becomes something of a gamble. As a result, many depository clearing banks tend to withdraw from the repo market and the risk involved.
A Fed clearing bank, on the other hand, would act as a facilitator between borrowers and lenders in these overnight loan transactions. It would also put taxpayer funds on the line instead of the traditional shareholder interest risked by banks.
Federal Reserve officials are slated to discus reforms to the system with its players next month with the goal of establishing a new repo system by October, unnamed sources told the Financial Times.
One of HousingWire's sources inside a major investment management firm says some voluntary overhaul efforts are already in the primary stages due to all the asset-backed securities offered as collateral. "The government is planning a revamp just because it has ended up with so much ABS paper as collateral," says the source. "It is probably surprised and a little overwhelmed by how much ABS its finally ended up saddled with, triple-A or not."
Any efforts to overhaul the system on a federal level, despite individual efforts to counter the buildup of ABS collateral, would signal a deeper reach of the administration into the financial sector. The Fed's efforts to facilitate balance within assets and liabilities in the system would come as the administration's latest attempt in a series of steps to increase its presence in the US banking and financial system.
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.
Owners and buyers of foreclosed homes in Connecticut may soon face a stringent registration process, if a bill passed in the state Senate and House gains traction.
State Senate bill 951, an Act Concerning Neighborhood Protection, seems primarily concerned with neighborhood blight, as it allows local municipalities to enforce repair or maintenance of properties obtained through foreclosure and considered real-estate owned (REO) or purchased through foreclosure sales.
The bill doesn't take the place of any ordinances adopted by local municipalities to prevent housing blight, to promote the maintenance of safe and sanitary housing and to provide for the "abatement of nuisances," according to a bill summary. Instead, it's designed as a tool for local governing bodies to track the ownership of foreclosed homes and, when necessary, to take enforcement action.
If an owner does not register with the local municipality where the foreclosed home is located, the alternative — registering with the Mortgage Electronic Registration System (MERS) — is required. In either situation, proper contact information must be provided to better facilitate the communication and potential enforcement action between the municipality and the property owner.
Under the provisions of the bill, the municipality must first issue a notice of violation to owners regarding the repair or maintenance of the property before taking enforcement actions within its rights under the relevant statute or ordinance.
The House also passed the bill and then transmitted it to the Secretary of State late last week. If it becomes law, the bill would have sweeping effects on the way REO and foreclosure sale homes are managed.
The state shows a relatively stable housing market, with only one in every 1,301 Connecticut housing units receiving a foreclosure filing in May, a fraction of the US rate (on in every 398 houses), according to RealtyTrac.
Regardless of the low rate of houses moving into the foreclosure process, foreclosed homes pose attractive prospects to investors looking to buy distressed properties at discount as well as to owner occupants looking to buy a fixer-upper. Without the proper maintenance, however, a foreclosed home represents neighborhood blight and depreciation, and that's where the state bill comes in.
HousingWire looks into the blight issue extensively in an upcoming magazine feature on REO and foreclosure auctions. To read about some auctioneers' neighborhood stabilization efforts, subscribe here.
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 giant Freddie Mac (FRE: 0.00 N/A) late last week announced it settled the offering Series K-003 Structured Pass-Through Certificates, or K Certificates.
The offered certificates consist of multifamily mortgage-backed securities composed of mortgages originated through Freddie's Capital Markets Execution. The dealer managers in the transactions, led by Deutsche Bank Securities, offered the certificates to a number of investors including money managers, life insurance companies and pension funds.
The transactions should provide liquidity and affordability, according to a company statement.
"The successful completion of this transaction demonstrates Freddie Mac's unwavering commitment to find new and innovative ways to provide critically-needed liquidity and stability to the country's multifamily housing finance market," said Mike May, senior vice president of multifamily at Freddie. "We're pleased with the positive response from investors and customers to our multifamily securitization efforts. Investor response to the offering was strong and all classes of K Certificates were oversubscribed."
But investors in the pass-through securities and even the multifamily market aren't the only things benefitting from the settled offering. The government-sponsored enterprise itself stands to gain from the settled transaction.
"This transaction offered the global capital markets structured securities backed by Freddie Mac multifamily mortgages," May adds, "and enabled us to reduce our dependence on our balance sheet, redeploy our capital and prudently manage our risk."
Freddie's settled offerings come at a time when poor performance of multifamily mortgages, along with a continued difficulty in the retail property market, has led to a record 2.07% delinquency rate among commercial mortgage-backed securities, according to data released in mid June by Fitch Ratings.
The ratings agency said declining performance, particularly in oversupplied markets, as well as in secondary and tertiary markets, pushed the multifamily delinquency rate to 4.55%, the highest of all property types. Multifamily properties are highly susceptible to default in CMBS during the current economic downturn, according to the rating agency.
Overall multifamily delinquency rate aside, Freddie's multifamily pass-throughs are hot, if the investor response is any indication.
Research released late last week by Bank of America Merrill Lynch, which probed relative value trends in the agency passthrough market, seems to put the investor hype in perspective. Merrill Lynch noted the 30-year coupon stack appears as fairly priced as it has "in a long time," while fixed income strategists looking into 15-year coupons favored 5.0s, which "continue to look quite rich versus other coupons."
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 giant Freddie Mac (FRE: 0.00 N/A) plans to buy back €4.28bn (US$5.92bn) of its euro Reference Notes securities through the tender offers that closed Friday at 12 p.m. EST.
The four securities in question bear combined principal amounts outstanding of €8.13bn of reference notes due within five years.
The government-sponsored enterprise said today the tendered securities must be delivered to one of the dealer managers, Goldman Sachs International, Barclays Bank or Deutsche Bank by the settlement date on Thursday. Freddie first made the offers on June 15.
Freddie several weeks ago bought back $18.04bn of its securities in attempt to reduce the GSE’s effective short-term debt and move toward larger, longer-term deals with lower rates.
“We’re buying back these contractually maturing securities, and over time we’ll be issuing longer maturities,” said Mohit Sudhakar, senior director of debt portfolio management, according to recent media reports. “It’s just a simple liability management trade.”
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 upturn in global investor sentiment withstood the recent large sell-off in bonds, according to the Merrill Lynch Survey of Fund Managers conducted for June and released this week.
A net 62% of respondents said the world economy will likely improve in the next 12 months, 5% more than in May. Just 7% of the panel said the world will go through recession in 2010, down sharply from 38% in May and 70% in April.
Responding investors express confidence in equity markets as well as the global economic recovery, despite their fears the sell-off would damage sentiment. The yield on 10-year US Treasuries rose to 3.85% from 3.09% between the May and June surveys.
“Investors are currently ruling out the prospect of the much-feared double-dip recession, and have shrugged off the weakness in bonds,” said Michael Hartnett, Banc of America Securities-Merrill Lynch chief global equity strategist.
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.
REDC rang in the summer heat last weekend with a 462 foreclosed home auction in Phoenix. The firm, operating under the recently acquired Auction.com domain name, auctioned $31m in homes from June 13 through June 14.
“We’re extremely pleased with the success of the foreclosed home auctions we’ve held this year for our banking and lending clients,” says REDC/Auction.com CEO Jeff Frieden.
The busy weekend pushed REDC's share of real estate-owned (REO) auctions so far in 2009 to more than 17,000 foreclosed homes at 110 live auctions for a total sales price of $1.2bn.
The company auctioned 32,799 foreclosed homes in 2008 for a total purchase price of $3.4bn. It also conducts online REO auctions as part of its effort to fetch market prices for foreclosed homes as well as get occupants back into the properties.
HousingWire takes an in-depth look at REO auctions and their effect on the mortgage industry as well as local communities in the upcoming July magazine issue.
Write to Diana Golobay.
Total mortgage originations may top $2.59trn this year, largely due to refinance volume, which will account for some 72% of the total origination market, according to projections within The PMI Group's monthly housing and mortgage market review.
Origination should slip in 2010 as the refinance boom eventually wears off, falling more in line with the "modest" economic recovery expected after the second half of this year. Any growth in the broader economy in 2009 will likely be muted by continued unemployment highs.
PMI upwardly adjusted GDP growth projection but edged down outlook on overall economy in late 2010, due to higher interest rates. The firm now projects a year-over-year 1.3% drop in real GDP by the end of the fourth quarter 2009 and a recovery to 1.9% real GDP growth by the end of 2010.
At least one market — the housing market — already appears to have reached bottom. The one indicator behaving otherwise, multifamily construction, seems to lag behind with non-residential woes around financing and overcapacity.
"Increasingly, the data suggest that the bottom of housing activity occurred in January – although gains since then have been small," PMI said in the report.
For example, PMI noted foreclosure sales drove the home sale market in April although new home sales remained static in the month.
The company said higher mortgage rates seen lately, although bad for the overall housing market, might drive near-term sales due to consumer anticipation that rates will continue to increase. Long-term mortgage rates have risen despite the unchanged Fed policy — keeping the federal funds rate between zero and 0.25%.
A recent rise in Treasury rates either could mean problem for economic rebound if inflation expectations are at the helm, or it could be a natural byproduct of the market moving toward more normal metrics. The problem, according to the PMI Group, is that the Fed and other policy makers cannot tell for sure what the cause is.
"Ultimately the Fed will have to tighten monetary policy and the federal government will have to reign in deficit spending -– but is that time now? Given that the economy is still in recession, the answer is that policy will need to be expansionary for a while longer," PMI says in the report. "But providing financial markets with a believable “exit strategy” from the current policy stance could be important in calming markets and ensuring that rising rates don’t short circuit the recovery."
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.
A look at the stories on HousingWire’s weekend desk… with more coverage to come on bigger issues.
Bank regulators name the Federal Deposit Insurance Corp. (FDIC) receiver of three failed banks, bringing the running total of bank failures in 2009 to 40. The three receiverships are estimated to cost the FDIC's deposit insurance fund a combined $363.2m.
The North Carolina Office of Commissioner of Banks shuts down Cooperative Bank, putting its $970m of assets and $774m of deposits on the line for sale or dispossession. Troy, N.C.-based First Bank takes on all its non-brokered deposits and $852m of its assets, although Cooperative's failure is estimated to cost the insurance fund $217m.
The Georgia Department of Banking and Finance shuts down Southern Community Bank, putting its $377m of assets and $307m in deposits on the line for sale or dispossession. United Community Bank takes on all its deposits as well as $364m of its assets, although Southern Community's failure is estimated to cost the insurance fund $114m.
The Office of the Comptroller of the Currency shuts down First National Bank of Anthony, putting its $156.9m of assets and $142.5m of deposits on the line for sale or dispossession. Bank of Kansas takes on all its deposits and $130.5m of its assets, although First National's failure is estimated to cost the FDIC's insurance fund $32.2m.
The US Senate confirms Fannie Mae veteran Herbert Allison Jr. to serve as the Treasury Department's assistant secretary for financial stability. In this role, Allison will oversee the development of Treasury procedures and policies around financial market stability, namely the Troubled Asset Relief Program. His credentials, according to a Treasury press release, speak to his executive experience in the financial industry:
Fitch Ratings announces its rescheduled performance update seminar on UK commercial mortgage-backed securities (CMBS), now to be held Tuesday, June 23, nearly two weeks after its previous scheduled date of June 11. A rough commercial mortgage environment in the UK marks the main reason for the seminar, according to a company statement:
Moody's Investors Servicesays performances of RMBS markets in Korea, Hong Kong and Taiwan are mixed in the wake of the global economic downturn and financial crisis.
Marie Lam, a Moody's senior credit officer, author of pertaining research and based in Hong Kong remarks:
Write to Diana Golobay.
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