Archive for July, 2009
Lender Processing Services (LPS: 16.78 +1.39%) launched HAMP functionality for its LPS Desktop, according to a corporate release.
LPS Desktop Loss Mitigation is a Web-based tool that can adapt to and manage any loss activity volume. It also enables loan servicers to automate its loan modification process, including loan assignment, queuing and delivery of optimized workout options, document generation and online document execution, according to the release.
With the new function, loan files are automatically assigned and sent to servicer work queues and is configurable by client, investor, portfolio and loan type.
LPS provides technology, services, data and analytics to the mortgage and real estate industries.
Write to Jon Prior.
The House Appropriations Committee approved an extension to the increased loan limit for conforming mortgages in the 162-page 2010 Transportation, Housing and Urban Development Appropriations Bill late last week.
The previous $417,000 limit was temporarily increased to $729,750 for mortgage buyers Fannie Mae (FNM: 0.00 N/A) and Freddie Mac (FRE: 0.00 N/A) and mortgage insurer the Federal Housing Administration (FHA), as part of the nearly $800bn American Recovery and Reinvestment Act of 2009 that President Obama signed in February.
But that temporary increase is set to expire at the end of the year unless Congress extends it. The committee’s bill would provide that extension until September 2010, the end of the 2010 fiscal year.
The bill calls for the FHA to insure $400bn in single-family loans, as well as provides Ginnie Mae the authority to guarantee up to $500bn in mortgage-backed securities.
The $123.1bn appropriations bill, if approved, would also provide billions of dollars in housing assistance to “vulnerable populations,” including veterans, the elderly, the disabled and people with AIDS.
The bill also includes transportation items, including funding for highway infrastructure, airport modernization and high-speed rail systems.
Write to Austin Kilgore.
Mortgage giant Freddie Mac (FRE: 0.00 N/A) named finance industry veteran Charles Haldeman Jr. as CEO and board of directors member more than four months after its former CEO, David Moffett, resigned.
Freddie had placed John Koskinen into an interim CEO role in March after Moffett's resignation, but Koskinen now returns to position as chairman of the board as Haldeman takes the reins.
"He has a wealth of experience in finance and an impressive record of successfully leading companies through challenging transformations," Koskinen said in a corporate statement Tuesday. "His commitment to our mission and his reputation for integrity and the highest professional standards will serve Freddie Mac well as it emerges from this challenging economic environment and continues to play a leading role in preserving homeownership for America's families."
Haldeman brings a breadth of financial services experience to his post at Freddie. In 2003 he became president and CEO of Putnam Investment Management and for the last year served as chairman. Haldeman also served as chairman and CEO at Delaware Investments. He is currently chairman of the board of trustees of Dartmouth College.
"Throughout his career, Ed has demonstrated the ability to resolve significant regulatory issues and establish strong operational and risk controls, skills that will translate well to the current needs at Freddie Mac," said James Lockhart, director of the Federal Housing Finance Agency, in a statement shortly after Freddie's announcement.
Write to Diana Golobay.
Disclosure: The author held no relevant investment positions when this story was published.
US and international efforts to stem the recession are starting to take hold and the pace of economic decline seems to have slowed, but foreclosures and unemployment won’t peak until the second half of 2009 (H209), according to Federal Reserve chairman Ben Bernanke.
Continued measures, like a extremely low federal funds rate, will be needed to get the economy back on track, Bernanke told the House Financial Services Committee on Tuesday.
“The [Federal Open Market Committee] anticipates that economic conditions are likely to warrant maintaining the federal funds rate at exceptionally low levels for an extended period,” Bernanke said, according to prepared testimony.
But keeping the federal funds rate low isn’t the only tool the Federal Reserve has at its disposal to improve the economy without letting inflation get out of hand.
Bernanke told the committee that Congress’ decision last fall to let the Fed pay interest on balances held at the Fed by depository institutions will help leverage the impact of the low federal funds rate and other short-term market interest rates because banks will not loan money at interest rates much lower than what they could get keeping their money safe with the Fed.
“We are confident that we have the tools to raise interest rates when that becomes necessary to achieve our objectives of maximum employment and price stability,” Bernanke said.
Bernanke said the Fed’s credit extensions to banks and other financial institutions have declined from $1.5trn at the end of 2008 to less than $600bn now.
Bernanke also addressed the need for improved supervision and regulation of the financial sector, calling for “comprehensive reform,” including stronger capital and liquidity standards for financial firms, consolidating oversight and enhancing protection for consumers.
The chairman also called for a new mechanism to quickly deal with financially troubled nonbank institutions without disrupting the rest of the financial system. Bernanke called for this enhanced bankruptcy or resolution regime to be modeled after the current system used for depository institutions. Such a regime could have been used during the crises American International Group (AIG: 25.25 +0.44%) and Bear Stearns faced last year, he said.
While the Fed and other government entities continue to help in the economic recovery, Bernanke warned other challenges lie ahead for the nation’s fiscal sustainability, namely the pending retirement of the baby-boom generation and the continued increases in the costs of Medicare and Medicaid.
“Prompt attention to questions of fiscal sustainability is particularly critical,” Bernanke said. “Addressing the country's fiscal problems will require difficult choices, but postponing those choices will only make them more difficult.”
Write to Austin Kilgore.
The UK housing and mortgage market continues to show signs of healing, but borrowers have not seized the advantage of low interest rates, according to a report from the Council of Mortgage Lenders (CML).
The housing market across the pond seems to mirror that in the states, increasingly as the financial crisis felt so keenly in the US housing market and broader economy becomes a global ailment.
The turnover rate among UK home sales climbed from low levels at the start of the year, and the fall of housing prices leveled out from a sharp decline. According to the CML report, some indices climbed into positive territory for the first time since mid-2007 as estate agents expect prices to rise by the end of the year.
But the first quarter economic growth estimates fell 2.4% quarter-on-quarter, the sharpest such drop in thirty years. The revised estimate severely contradicted earlier forecasts due to firms slashing inventory, but because of reduction limits, this will become a positive factor in the quarters ahead, according to the lending report.
Overall mortgage lending volumes produced £12.3bn (US $20.23bn) for June, up from the previous month but still weak for the season. Lower remortgaging offset the slight uptick in activity as borrowers handcuffed by equity constraints find it difficult to refinance — not unlike US borrowers finding themselves underwater after home prices declined.
For the three months ending in May, unemployment in the UK climbed to 2.38m or 7.6% – the highest since January 1997, according to the CML report.
Seasonal factors might explain the increase in housing market activity, which is weak by historical standards, the Council sees hope for the future.
“While it seems likely that the difficult labour market conditions, negative equity, deposit constraints for first-time buyers and restricted funding for lenders will limit how much further activity will increase, the outlook is certainly brighter than a few months ago,” the report reads.
This month, the European Commission proposed tighter risk assessments and higher capital reserves among UK banks in order restrict the risk on complex re-securitisations.
Write to Jon Prior.
CIT Group (CIT: 38.02 +0.05%) confirmed late Monday a group of the company's major bondholders agreed to lend it $3bn to continue its lending operations to small- and medium-sized businesses that depend on it to make payroll and meet other operational expenses.
Of the loan facility, which matures in 2.5 years, $2bn was made accessible Monday with an additional $1bn expected to be committed and available within 10 days of the announcement.
The loan facility means CIT is better positioned to continue extending credit to some commercial businesses that otherwise might face financial hardship, which would likely be felt in the retail market and commercial mortgage space.
CIT also said it plans to initiate a sweeping restructuring of its liabilities to bolster liquidity and strengthen its capital position. In the first step of this plan, CIT opened a cash tender offer for some outstanding senior notes due Aug. 17, 2009. CIT offered holders of these notes $825 for each $1,000 principal amount of notes tendered on or before July 31, 2009.
“We are pleased that CIT is in a position to continue to serve our valued small business and middle market customers,” said chairman and CEO Jeffrey Peek in a corporate statement. “We appreciate the loyalty of our customers and the support we have received from numerous industry associations, particularly over the past few weeks."
In recent weeks, CIT struggled with financial hardship and credit-rating fallout after it learned it would not receive a second federal bailout on top of the $2.3bn capital injection from the $700 of federal bailout funds. The news that bondholders came to CIT's rescue arrives on the heels of rumors circulated among media outlets that the company faced imminent bankruptcy.
Write to Diana Golobay.
Disclosure: The author held no relevant investment positions when this story was published.
Loan origination software provider MortgageDashboard had a busy weekend after suddenly having to close its doors on Wednesday after its line of credit was cut.
On Friday, Catalizador Private Equity Group made an emergency cash infusion, earning a majority interest in the company and allowing MortgageDashboard to keep its doors open, according to chief technology officer — formerly CEO before the Catalizador ownership — Jorge Sauri.
After a hectic weekend of negotiations on the new leadership structure, MortgageDashboard reopened Monday under Catalizador ownership. The company is debt-free, Sauri says, and faces a "promising" future with Catalizador's investment commitment.
Things looked choppy on Wednesday when Sauri circulated a notification to clients that the company would shut down immediately, leaving seven business days for clients to retrieve loan files. Sauri tells HousingWire that MortgageDashboard was never in jeopardy, however, and that the notice was misprinted and should have read 30 days — until August 21st.
But it seems a moot point, now that Catalizador stepped in and is "eager to continue funding the development of the software code" of MortgageDashboard's Web-based loan origination software, according to a company press release announcing Catalizador's intervening cash infusion.
Write to Diana Golobay.
The rate of home price declines in markets across the US appears to be slowing.
National home prices slipped 9.2% in May from a year earlier — the smallest year-over year decline recorded in 2009 and the lowest since December 2007 — according to an index calculated by First American CoreLogic.
May's national decline showed 50 bps of improvement over April's downwardly adjusted 9.7% rate.
The rate of national declines for single-family homes peaked at 11.9% in January and has since improved by more than 2.5 percentage points through May, with early data for June indicating "further improvements" to be seen.
Broken down geographically, however, the declines don't seem so optimistic, as First American CoreLogic reported 41 states experienced price declines, and 16 had double-digit declines. Nevada scored the worst yearly performance, with prices falling 26.4%. Florida followed closely with a 25.5% decline.
California's 19.8% annual decline showed improvement from recent indices, and is well below the state's 30.3% peak in August 2008. New York showed a 3.14% annual price gain, while West Virginia gained 3.03% — potentially due in part reporting lags in these states that led to low transaction counts studied by First American CoreLogic. Eight other states posted price gains, ranging from 0.08% in Indiana and Missouri to 1.81% in South Dakota.
“Although there has been some improvement in the national HPI, collateral risk will continue to be the main driver of the housing market for the remainder of 2009,” said Mark Fleming, chief economist for First American CoreLogic. “Until home prices and the economy stabilize, mortgage performance will continue to worsen and home sales activity will remain flat nationally through 2010.”
May's index also noted a divergence between single-family detached versus attached properties, which include condos and townhomes. These attached properties experienced average price declines of 12% from a year ago, compared with a 9.2% decline seen among detached homes. The gap, according to First American CoreLogic, indicates a weak condo market and tighter underwriting guidelines after the faster run-up in prices for these properties during the housing bubble.
Write to Diana Golobay.
Florida homeowners saddled with homes built with defective drywall from China received mortgage abatements from lenders wary of adding the defective and potentially dangerous homes to their inventories.
Florida lawyer Mike Ryan represents 160 home owners who live in eight south Florida residential communities developed by WCI Communities. He said he negotiated 90-day abatements — or mortgage payment suspensions — with his clients’ lenders. Most of his clients have moved out of their homes and could not afford their mortgages now that they are forced to pay for temporary housing.
Ryan said he already has obtained mortgage abatements from a variety of lenders, including Wells Fargo, Bank of America, Countrywide, Wachovia, HSBC, Citi Mortgage and SunTrust for his clients.
That was in April, and Ryan said many banks are extending the abatements to six months.
According to multiple published reports, the defective Chinese-made drywall emits sulfur gas when exposed to moisture and allegedly corrodes copper wiring, causing electrical problems and may be linked to a various health problems experienced by homeowners and their families.
The imported drywall made its way into American homes during the building boom in the early-to-mid 2000s and when demand for materials went up after Hurricane Katrina.
Ryan said lenders understood it was in their best interest to give his clients some leeway on their mortgages while the problem was resolved, instead of foreclosing on the homes.
“The last thing these mortgage lenders would want is to have these homes put into foreclosure and eventually added into their inventory because then they would truly have a toxic asset,” Ryan said.
He added lenders are also faced with the possibility that additional homes already in their real-estate-owned inventories could have been built with Chinese drywall.
Ryan’s next task is recovering damages from WCI, which entered into bankruptcy protection nearly a year ago.
Under a restructuring proposal WCI submitted in bankruptcy court, WCI plans to exit Chapter 11 protection by Q309, with various debtors holding equity stakes in the reorganized builder.
Ryan said that plan includes a trust for his clients that would help pay for the damages, as well as provide a 3% equity stake. In addition, the homeowners would have the ability to file claims against WCI in court.
In a January Securities and Exchange Commission filing, WCI admitted it used the Chinese drywall in some homes built and sold before it filed for bankruptcy protection in August 2008. In the filing, WCI said it was investigating the claims and established an $11m reserve to fund air conditioner coil replacements, “which may or may not be related to the Chinese drywall.”
Ryan said it will be difficult for his clients to see any of that money because their homes’ warranties have all expired.
“These homeowners are in a terrible situation. We need to consider every possible avenue for recovery and every potential solution to this catastrophe,” Ryan said in a release.
Ryan is a partner at the Ft. Lauderdale, Fla.-based Krupnick Campbell Malone Buser Slama Hancock Liberman and McKee law firm.
Write to Austin Kilgore.
The Watergate Hotel, a Washington, DC landmark brought to international prominence by the 1972 burglary of the Democratic National Committee headquarters — which ultimately led to the resignation of President Richard Nixon — is on the auction block.
Owner Monument Realty defaulted on its loan for the building, and a 30-day city notice of foreclosure that expired Thursday lists a $40m outstanding balance.
The Watergate Hotel has seen better days. It’s been closed since 2004, and while Monument fought with neighbors over its original plans to convert the building into luxury co-ops — a fight Monument ultimately lost, leaving the firm resigned to redevelop the site as a hotel —partner and equity investor Lehman Brothers went bankrupt, and the recession hit, putting the project in turmoil.
Now, auction firm Alex Cooper is accepting bids for the 12-story, 251-room building. The winning bidder will be required to make a $1m down payment.
The auction comes after failed negotiations between Monument and lender PB Capital.
The auction of such a high-profile piece of commercial property could be a defining moment in what some see as the next phase of the recession. Market observers have their sights set on the commercial real estate market over concerns that it could face similar difficulties as the housing market.
What does it say about the state of commercial real estate when the owner of the famed Watergate Hotel, whose name and infamy gave rise to major political scandals getting the “–gate” suffix applied to it — Bill Clinton’s Whitewatergate, George W. Bush’s Lawyergate, the 1970s Koreagate, just to name a few — can’t refinance its outstanding debt?
In his appearance before the House Financial Services Committee Tuesday, Fed Chair Ben Bernanke fielded questions on the state of the commercial real estate market, and unfortunately, the chair couldn’t provide many definitive answers.
Clearly, this issue will linger as the country navigates through economic recovery.
Write to Austin Kilgore.
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