Archive for July, 2009
Beginning in August, Wolters Kluwer Financial Services will use several of its technology solutions to test mortgages against the Federal Reserve's new higher-priced mortgage thresholds that will take effect October 1.
The Federal Reserve's revisions to Regulation C were designed to reduce the regulatory burden on mortgage lenders, according to Wolters Kluwer. The revisions aimed to synchronize Regulation C's higher-priced mortgage thresholds with the Truth in Lending Act's and help improve the accuracy and usefulness of Home Mortgage Disclosure Act (HMDA) loan data, the firm said.
“Compliance with the Federal Reserve Board’s new Regulation C changes should be at the top of every lender’s mind right now,” said Kurt Sames, vice president and general manager of consumer compliance at Wolters Kluwer Financial Services. “By laying the ground work now to meet the requirements that take effect in just two months, they can be sure they’ll be prepared for the regulators’ next visit.”
The two technology offerings involved in the mortgage testing, CRA Wiz and Wiz Basic, aid in determining loan compliance with the Community Reinvestment act and HMDA either in real-time at the point of sale or in batches for post-closing audits.
Write to Diana Golobay.
Construction management firm TT Lender Solutions selected ISGN's The Construction Lender (TCL) software platform for its construction lending management services.
“Underperforming construction loans are becoming more prevalent in the industry, and lenders are realizing that they need a way to effectively manage this segment if they’re going to protect the overall health of their businesses,” says Reggie Swiney, president of the mortgage products at ISGN.
TT Lender Solutions, a third-party construction loan administrator and default management service provider, will use the software to keep up on commercial construction loan servicing. TCL will allow the firm to track and manage construction loans from acquisition through development and construction.
"Today's market presents a huge opportunity for us to help lenders analyze their current construction portfolios, profitably manage the completion of their unfinished projects and reduce losses on their non-performing loans," says Tim Landwehr, national sales manager for TT Lender Solutions.
Write to Diana Golobay.
JP Morgan Chase (JPM: 37.21 -0.75%) bucked a national trend of shaving head counts as it continues to participate in the federal government’s Home Affordable Modification Program (HAMP).
Since it began offering mortgage modifications through HAMP in April, Chase modified 138,000 loans currently in the program’s trial period and as of June said an additional 155,000 applications are in the review process.
To handle an increase in demand for loan refinancing and modifications, Chase brought on 250 temporary workers to its mortgage servicing center in Monroe, La.
The bank hired the employees under its “Chase Works” program, which employs workers on a temporary basis, but some may have the ability to transition to permanent employment, company spokesman Greg Hassell told HousingWire.
The 250 new employees join a staff of 900 at the servicing center. The bank employs an additional 750 at a nearby call center, as well as 200 other retail banking workers.
The new employees will perform document imaging and record management tasks to support the bank's modification and refinancing efforts.
Write to Austin Kilgore.
Disclaimer: The author held no relevant investments at the time of publication.
The Council of the European Union on Monday adopted new regulations imposing a legal framework on credit-rating agencies and introducing the requirement of 5% risk retention by originators.
A major directive within the new regulations tightens capital requirements for European banks. In an effort to improve the framework for securitization practices, the regulation requires originators to retain 5% of risk transferred or sold to investors. Trade groups Stateside remain categorically opposed to a 5% risk retention.
The European rules also strengthen supervision of cross-border banking groups, harmonize the classification of banks' Tier 1 capital funds with hybrid instruments, introduce rules on liquidity risk management and tighten the supervision of exposure to a single counterparty.
Another new regulation aims to ensure the credit-rating agencies (CRAs) avoid conflicts of interest or at least manage them properly, to improve the methodologies used by CRAs and the quality of their ratings and to increase transparency by setting disclosure obligations for CRAs.
The regulation provides for a legally-binding registration and surveillance system for CRAs intended for use in the regulatory process.
The news comes as spreads on UK residential mortgage-backed securities (RMBS) deals have tightened below 200 bps. Deals that already exist in Europe are trading at non-distressed levels, but the European secondary market hasn't seen new RMBS issuance for some time.
Sources HousingWire spoke to said third-party investor interest may be rising to a point where the issuance of a new RMBS in Europe is becoming more likely. Such regulation, however, is likely to dampen that mood. Nonetheless, spread levels — a barometer of the economics of structured finance — are tightening across most markets. In the securitization market, for example, non-syndicate trades is growing more bullish, with spreads dipping below the 200 basis point level regularly for specific deal.
Overall progress in financials remain contracted: The European push for covered bonds is dying down somewhat, sources tell us, after a rally ealrier this month. Furthermore, credit among UK banks remains restricted, despite government efforts to boost liquidity.
The Bank of England (BoE) Asset Purchase Facility Fund, which was set up to purchase private sector assets financed by Treasury bills in order to facilitate the flow of corporate credit. BoE purchased £84bn (US$138.56bn) of assets in Q209, according to data released Monday. Total purchases under the program are up to £99.09bn, including £15.09bn purchased in Q109.
Write to Diana Golobay.
The rate of new single-family homes sold in June increased a seasonally adjusted 11% from May 2009 while median prices slipped 6.9%.
According to estimates released by the US Census Bureau and the Department of Housing and Urban Development, new homes sold at a seasonally adjusted annual rate of 384,000 units. June's rate is 11% above May’s estimated rate of 346,000 units and is up 21.3% from the June 2008 estimate of 488,000.
The median price for homes sold in June was $206,200, down from $221,600 in May and from $230,900 in the year-ago month. At the same time, June's average sales price was $276,900, up slightly from $274,300 in May but well below the year-ago average of $298,600.
Nearly 28% of new homes sold in June were under construction at the time of sale, while construction had yet to begin on an additional 28%. The remaining homes sold in the month were already complete.
There were an estimated 281,000 new homes for sale at the end of June, an 8.8-month supply at the current rate.
Write to Austin Kilgore.
Mortgage Center and Mission Federal Credit Union both signed on to the list of now 34 mortgage servicers participating in the modification incentive program under the Troubled Asset Relief Program (TARP).
The Home Affordable Modification Program (HAMP) allocates TARP funds to servicers to use as interest rate reduction subsidies or to distribute to participating lender/investors or borrowers.
The US Treasury Department allocated a caps of $4.2m to Southfield, Mich.-based Mortgage Center and $860,000 to San Diego-based Mission Federal Credit Union, according to a TARP transaction report.
The two servicers followed American Home Mortgage Servicing, which also joined the program last week. The Treasury allocated a cap of $1.27bn to American Home under the program.
In total, the Treasury allocated $20bn in TARP funding caps to the 34 institutions but may adjust individual caps based on actual participation in the program.
The entire list of servicers participating in the program is available in the most recent TARP transaction report.
Write to Jon Prior.
Federal Reserve chairman Ben Bernanke defended the Fed's reaction to the financial crisis Sunday at a town hall-style meeting in Kansas City, Mo. Just under 200 people attended the meeting, which was taped by PBS for broadcast later this week.
Bernanke fielded questions on federal bailouts, monetary policy and the Fed's responses to systemic risk seen among financial institutions, which he likened to a toppling elephant at one point. He used strong language to describe his own reaction to having to bail out large financial institutions while small businesses suffer financial hardship.
"I’m as disgusted by it as you are," he said, according to the New York Times. "Nothing made me more angry than having to intervene, particularly in a few cases where companies took wild bets."
It has turned out that a few companies taking on too much risk in the kinds of loan products offered and the financial instruments formed with these loans at the core have come under criticism as components of so-called "systemic risk" in the financial system.
Bernanke alluded to the latest buzz word as he defended the Fed's policy decisions. "When the elephant falls down," he said, according to the Wall Street Journal, "all the grass gets crushed as well."
There was another elephant in the town hall, however — one quickly pointed out among media coverage of the event. Bernanke's four-year term expires in January, which may put into context the unusual town hall meeting and his defense of the Federal Reserve.
"I was not going to be the Federal Reserve chairman who presided over the second Great Depression," he said.
Bernanke is widely credited by economists like Nouriel Roubini as having averted a depression scenario through quick policy reactions and the lowering of the federal funds rate effectively to zero.
Bernanke cautioned against stimulating the economy into inflation, saying the risk of inflation remains "quite low" under the current federal funds rate, according to Bloomberg. He said he expects the US economy to grow at 1% annualized rate in H209, with unemployment exceeding 10% before declining.
Write to Diana Golobay.
Louisville, Ky.-based Conexxus released a new software product that automates the process of procuring documents in real-estate-owned (REO) transactions.
REO Optimizer collects property data like architectural and engineering reports, among other related documents, to expedite financial institutions’ sale of distressed assets. It also creates checklists for required documents for transactions, as well as provides Web-based indexing meant to ease the burden of searching records. The software can be used in commercial and residential REO transactions.
“Currently, institutions are working manually with checklists, paper files, and spreadsheets, which simply isn't practical with the volume of non-performing assets," Conexxus founder Jeff Reibel said in a statement. “Banks are now experiencing record increases in the nonperformance of development properties, requiring special expertise, knowledge and the gathering of unfamiliar documents.”
Write to Austin Kilgore.
Standard & Poor’s Fixed Income Risk Management Services, an analytics unit that helps investors research the financial instruments in their portfolios, launched a quarterly valuation benchmarking study for residential mortgage-backed securities (RMBS), according to a corporate release.
S&P will publish the third-quarter results summarizing marketplace consensus in October 2009. The agency said investors can use the tool to determine the value of their RMBS portfolios with greater transparency. Clear valuation benchmarks are based on the input of buy-side and sell-side players in the RMBS market, according to the release.
The study also tracks investor expectations on variables such as house price movements, which are used to value US prime and non-conforming RMBS.
Write to Jon Prior.
Regulators shut down seven banks on Friday, bringing the 2009 running total to 64 failures. The banks are estimated to cost the Federal Deposit Insurance Corp. (FDIC) a combined $812.6m.
The Georgia Department of Banking and Finance shut down the six bank subsidiaries of Security Bank Corp., costing the FDIC's insurance fund a combined estimated $807m. State Bank and Trust Co. assumes all $2.4bn of deposits of the six banks, whose 20 branches reopened Saturday as branches of State Bank and Trust. In addition to assuming all deposits, State Bank and Trust agreed to acquire $2.4bn of the banks' $2.8bn of assets.
The six banks involved were Security Bank of Bibb County, Security Bank of Houston County, Security Bank of Jones County, Security Bank of Gwinnett County, Security Bank of North Metro and Security Bank of North Fulton. State Bank and Trust had to receive $300m in capital infusions from 26 investors led by Joseph Evans in order to acquire the deposits and assets, the FDIC said.
The New York State Banking Department shut down Waterford Village Bank, costing the FDIC's insurance fund an estimated $5.6m. Evans Bank agreed to assume all of Waterford Village's $58m of deposits and to purchase "essentially all" of the bank's $61.4m of assets, entering a loss-sharing arrangement with the FDIC on $56m of these assets.
Standard & Poor's reviewed 663 residential mortgage-backed securities (RMBS) backed by Alt-A mortgages issued from 2005 through 2007. The ratings agency downgraded 6,198 classes from 611 of these transactions and affirmed ratings on 2,125 classes from these and 52 additional transactions. S&P removed from negative credit watch 4,166 ratings, 221 of which were affirmed while the rest were lowered. The ratings agency said the downgrades reflect its belief that credit enhancement for the affected classes will be insufficient to cover projected losses due to increased delinquencies and the housing market's current condition.
Fitch Ratings placed 238 bonds from 33 US commercial mortgage-backed securities (CMBS) transactions worth $9bn on Rating Watch Negative as part of its ongoing review of the CMBS portfolio. The ratings agency expects to resolve the watch negative during the next 90 days as it evaluates transactions issued from 2006 through 2008.
Property preservation and field services provider Safeguard Properties on Friday announced mortgage giant Fannie Mae is providing reimbursement to servicers that pay counseling fees on behalf of borrowers to support delinquency resolution through the HOPE NOW Alliance of counselors, servicers, investors and other mortgage market professionals who conduct outreach efforts to borrowers at risk for foreclosure. Fannie extended the time period for servicers to request this reimbursement, Safeguard said, and is revising the process for servicers that submit multiple reimbursement requests.
From Fannie's announcement on the HOPE NOW initiative:
Barclays Capital on Friday updated the running total of mortgage-backed securities purchased by the Federal Reserve from Fannie Mae, Freddie Mac and Ginnie Mae. The Federal Reserve purchased $21.125bn net in agency MBS over the past week, Barclays noted, bringing its total net purchases to $681.9bn.
Write to Diana Golobay.
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