Archive for July, 2009
National real estate investment banking advisor Carlton announced today the finalization of a sale of residential and commercial loans the firm arranged for an unnamed bank seller.
The loans, classed as both sub-prime and non-performing, went for $100m in what is turning out to be a busy time for Carlton. In the last 18 months, Carlton marketed and sold more than $1.5bn worth of loans.
According to data released by the company, the commercial loans sold included assets secured by partially built office/retail, industrial, restaurant, parking lot and commercial land development properties in several states, including some on the west coast.
Many of the assets traded at prices above 70% of unpaid principal balance.
The nonperforming residential 1-4 family portfolio was comprised of west coast assets and the entire portfolio traded at just above 50% of unpaid principal balance.
Increases in housing starts and home sales seem to indicate to Fitch Ratings' analysts that the housing market has or is soon to bottom out, according to a 189-page report issued Wednesday.
Fitch notes, however, that recovery from this housing bust won’t be like others seen since the 1960s.
“The first year of a recovery tends to reflect a sharp upward thrust in demand,” the report said. “However, following an untypical expansion and then untypical correction, Fitch anticipates that the early stages of this recovery may be more muted than the average.”
Key to the recovery, Fitch wrote, is the return of normalized housing starts and increased consumer confidence.
Builder confidence is on the rise, Fitch said, as Q109 builder cancellation rates were lower than in Q408, and are approaching “normal” levels. New home inventories are also declining.
For consumers — and particularly for potential second-home and trade-up buyers — there is substantial fear that now is not the right time to buy.
“The expectation or fear is that home prices are vulnerable to further declines and buying now would be a mistake,” the Fitch report said.
The cautious optimism in Fitch’s report echoes a Moody’s report issued Monday, which took a similarly conservative view of recent improvements, noting every positive contributing factor to housing recover seen thus far has an offsetting negative consequence.
Both reports agree on their belief that the Obama Administration’s foreclosure prevention efforts are not as fruitful as they could be. Moody’s said the Making Home Affordable initiative has not had a meaningful impact.
“The president’s initiative to keep people in their homes through mortgage refinancing and modification is clearly not working up to its potential,” Fitch said in its report.
Write to Austin Kilgore.
Foreclosed real estate auctioneer REDC tapped Fannie Mae (FNM: 0.00 N/A) veteran Chip Hidinger to head up its new default solutions division as senior vice president.
Hidinger brings more than 16 years of default industry experience including a post at Fannie, where he managed a substantial portion of a servicing portfolio there and all active servicers. He also helped pioneer paperless modifications and the servicing lender initiatives that brought the Home Saver Advance program to the industry.
“Chip has tremendous experience, knowledge and leadership in the default industry, specifically in loss mitigation and real estate,” says Jason Allnutt, president of REDC Default Solutions. “We were impressed with his ability to deliver solutions and performance in challenging environments and his professional approach to problem solving is second to none."
Allnutt adds: "He will be taking his experience at Fannie and other mortgage servicing environments and creating a unique short sale program that will mitigate losses for our clients.”
Write to Diana Golobay.
The American Securitization Forum (ASF), a group affiliated with the Securities Industry and Financial Markets Association (SIFMA), issued a request for comment on new policies it plans to put on the industry.
The policies address risk mitigation and disclosure by mortgage originators.
ASF released the final version of disclosure packages that issuers will provide prior to sale of private-label residential mortgage-backed securities (RMBS). The disclosure packages will be updated on a monthly basis by RMBS servicers to ensure up-to-date information on RMBS performance in concert with inherent risk.
The industry has seen rising complaints that originators and lenders did not adequately manage risk in the loans they made that were later sold into residential mortgage-backed securities (RMBS) transaction, ASF notes. When the loans went south, so too did the transactions. But because the loans were securitized, the loss must be absorbed by investors, while the lenders initially responsible for the quality of the underlying collateral took no hit.
The ASF said it receives complaints that the usual means of disclosing origination risks by the originator at the time of sale to the investor for securitization do not properly provide means for returning "defective" loans to the originator. The proposed guidelines may not solve the underlying issue, but they aim to make risk inherent in RMBs more apparent, imposing greater disclosure of risk in mortgages at the time of sale for securitization.
"By increasing data and standardizing available information, institutional investors will be able to better distinguish pools of high quality loans from lesser quality pools," ASF said in a statement on the proposed rules. "The resulting differentiation will produce greater market discipline, as market forces will serve to reward originators who deliver higher quality packages of mortgage and consumer loans, while penalizing those who do not."
ASF adds: "By giving owners of outstanding RMBS and potential purchasers of outstanding RMBS more expansive and robust information on the performance of the loans in existing pools, this new transparency should appreciably aid moving distressed assets from troubled institutions to purchasers better able to bear the credit risk of those assets."
Write to Diana Golobay.
David Stevens was sworn in as assistant secretary for housing and Federal Housing Administration (FHA) commissioner at the US Department of Housing and Urban Development (HUD) Wednesday.
Stevens, who was confirmed by the Senate on July 10, previously served as president and chief operating officer of the Chantilly, Va.-based real estate and mortgage group of businesses, Long & Foster Companies.
In his role as FHA commissioner, Stevens will oversee the administration’s mortgage insurance portfolio of 4.8m single-family loans and 13,000 multifamily projects worth $600bn, as well as HUD's multifamily subsidized housing program.
“David Stevens is an innovator in the housing industry and he is the right person to lead FHA as it continues to help hundreds of thousands of families finance their homes with lower rates and better terms,” HUD secretary Shaun Donovan said in a statement. “David's knowledge in real estate, housing and the mortgage industry will help us overcome the current challenges we face, he will implement changes that protect FHA and will enhance its risk management capabilities to protect its future viability.”
Stevens takes the helm at the FHA as the administration’s role as insurer and its portfolio of insured loans has swelled on the heels of the housing bubble implosion. He will also oversee HUD’s regulation efforts via the Real Estate Settlement Procedures Act (RESPA), which was strengthened late last year. The act's new regulations will take effect January 1, 2010.
“I welcome the challenge and I am grateful for the opportunity to work with secretary Donovan in carrying out the Obama Administration's housing vision,” Stevens said in the statement. “HUD has a vitally important job to do in helping those affected by the housing crisis and I am honored to have been chosen to help lead this national effort to help families and individuals through these troubled times.”
In addition to his work at Long & Foster, Stevens has held executive positions at Wells Fargo Home Mortgage, and Freddie Mac. After graduating from the University of Colorado at Boulder, Stevens began his career with a 16-year stint at World Savings Bank.
Write to Austin Kilgore.
Fannie Mae (FNM: 0.00 N/A) and Freddie Mac’s (FRE: 0.00 N/A) completed mortgage modifications fell 12% in April 2009 on the conclusion of the Federal Housing Finance Agency’s (FHFA) Streamlined Modification Program and the launch of the Home Affordable Modification Program (HAMP).
According to the FHFA's April Foreclosure Prevention Report, loan modifications peaked to a 12-month high in March, with the two GSEs completing 15,703 modifications. That number fell to 13,787 in April.
Modifications done through the HAMP are considered complete after a three-month trial period that evaluates the borrower’s ability and willingness to make timely payments. Therefore, whatever HAMP modifications were initiated in April will be counted in July’s report.
Despite the decline, loan modifications accounted for 48% of all GSE foreclosure prevention efforts, up from 47% in March. Of those modifications, 75% included both interest rate reductions and term extensions, up from 73% in March.
Modifications, along with other methods like short sales, deeds in lieu of foreclosure, forbearance and other repayment plans, combined for a total 28,812 foreclosure prevention actions and brought the four-month tally of actions taken by the GSEs to 115,403.
Delinquencies, however, were also on the rise. Approximately 71,700 loans became 60 or more days delinquent in April. That 7% increase in 60-plus-days delinquencies brought the total number of past due loans to 1.2m.
One bright note for homeowners is the 3% decline in foreclosure starts during April, as servicers prepared to determine distressed homeowners’ eligibility for loan modification through the HAMP.
There were 85,938 foreclosure starts in April, down from March’s 12-month peak of 88,491, but April’s figure was still higher than every other month in the past year.
With the implementation of the HAMP, modifications should rebound from their April decline. Foreclosures are also expected to continue their decline, as servicers are required by HAMP guidelines to consider foreclosure alternatives like short sales and deeds in lieu when a borrower is ineligible for the program.
Write to Austin Kilgore.
Days after mortgage giant Freddie Mac (FRE: 0.00 N/A) updated its guidelines relating to appraisals, risk management and property valuation service provider Veros Real Estate Solutions integrated full compliance into its risk-management platform.
Among the "best practices" being implemented throughout the industry on Freddie's reccomendations is a strong push for lenders to use automated valuation models (AMVs), which bear a track record of accurate fraud detection and objective appraisal measurement, according to Veros.
The company said the use of its Freddie-compliant AMV ensures the value of the property is supported and the risk of default is significantly minimized.
"A key benefit of VeroSELECT relating to the recent Guide update is the ability to pull individual AVMs, or to build, run and audit proprietary or third-party AVM cascades and compare them to appraisals ordered through the valuation management system from any number of providers," said Veros president and CEO Darius Bozorgi in a company statement.
"Users can order single property transactions or large volume bulk or batch orders and even manage multiple AVMs, preference tables and refined rules," he added. "These features ultimately enable faster, properly supported and more accurate valuation risk decisions."
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.
SunTrust Mortgage integrated banking technology provider Metavante's (MV: 0.00 N/A) origination platform into its retail and third-party mortgage operations.
SunTrust — the Richmond-based subsidiary of SunTrust Banks — added the platform to allow retail loan officers, origination call centers, correspondent lenders and mortgage brokers access to eligibility and pricing data on SunTrust's mortgage products.
The technology allows SunTrust to offer risk-adjusted pricing and provides the lender with Federal Housing Administration/Veteran's Administration lending capabilities.
"With Metavante's origination platform we have an enhanced ability to implement and adhere to investor guidelines and risk-based pricing," says SunTrust president Sterling Edmunds in a press release. "We are intensely focused on credit quality and the overall quality of each loan file itself, especially since the mortgage lending process has become increasingly more complex."
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.
Total mortgage loan application volume rose 4.3% for the week ending July 10, according to a Mortgage Bankers Association weekly survey.
The index is down 2.7% on an unadjusted basis from the same week a year earlier.
Refinancing applications increased 17.7% this week from the previous week and accounted for 54.9% of the total loan application volume, a jump from 48.4% a week ago.
The MBA, which also weekly surveys of mortgage rates, saw decreases across the board. The average rates for 30–year fixed mortgages fell to 5.05% from 5.34% a week ago, and the average 15-year fixed mortgage rates dipped to 4.59% from 4.83% the previous week.
The amount of loan applications per household fell 1.8% for the week ending July 10, according to a weekly survey by Mortgage Maxx, which adjusts raw application data to count multiple applications from within a single household as one participant in the application process.
“Despite mortgage rates being able to remain within sight of their recent lows, mortgage activity remains mired some thirty percent below its spring high,” Mortgage Maxx reported.
The report added that with the upward trajectory of foreclosures and unemployment rates, “organic housing turnover is at its perennial plateau.”
Write to Jon Prior.
The Department of Housing and Urban Development (HUD) secretary could be required to conduct an ongoing review of new mortgages that become 60 or more days delinquent within the first 90 days of origination if a Federal Housing Administration (FHA) reform bill introduced last week is passed.
The 21 Century FHA Housing Act of 2009 — HR 3146 — aims to reform HUD and FHA processes to root out lenders with high incidences of delinquencies.
The bill's authors also note the substantial presence of warehouse lending in mortgage originations — which provides short-term lines of credit to non-depository lenders to fund mortgage loans that are eventually sold on the secondary market to Fannie Mae (FNM: 0.00 N/A), Freddie Mac (FRE: 0.00 N/A) and Ginnie Mae.
As much as 40% of all US mortgages and 55% of FHA loans are originated through warehouse lines of credit, the bill's authors found.
But warehouse lending has been in decline, falling as much as 90% since 2006 to a range of $20bn to $25bn and leaving a crucial funding gap of potentially hundreds of billions of dollars, the bill says.
"[U]nless Federal regulators promptly address the issue, borrowers seeking to take advantage of today's low interest rates will face rising costs and reduced credit access, which could undermine the housing market recovery," the Act reads, in part.
The bill calls on HUD, the US Treasury Department and the Federal Housing Finance Agency to provide financial support and assistance through recent economic recovery legislation to support the flow of credit and lending by warehouse lenders to mortgage lenders.
It also calls for the addition of 90 new HUD employees to conduct FHA process reviews on behalf of the secretary.
The bill was introduced by New Jersey Democrat John Adler, and cosponsored by Connecticut Democrat James Himes and Republicans Chris Lee of New York and Leonard Lance of New Jersey. It awaits action in the House Financial Services Committee.
Write to Austin Kilgore.
Diana Golobay contributed to this report.
