Archive for August, 2009
A state bill that took effect July 31 is changing how mortgage originators operate in Louisiana.
State lawmakers passed Louisiana Act 522 (HB 810) — or the Louisiana Secure and Fair Enforcement of Mortgage Licensing Act of 2009 — which requires loan originators, including lenders and brokers, to register with a state-approved licensing system. The act aims to increase transparency in originations and provide for more efficient regulation of originators.
The law requires both mortgage originators and certain loan processors to obtain a license to operate, although the language exempts certain parties including real estate investment trusts (REITs), any state or federal agency and depository institutions regulated by a federal banking agency. The law also makes certain requirements regarding education, examinations, renewals, advertisements and disclosures.
"[I]t is in the best interest of the citizens of the state to protect consumers in the most important financial investment most will make, the purchase of a home, by requiring the licensing and regulation of residential mortgage lenders, brokers, and originators," the law reads, in part.
The requirements are the latest wave of state compliance with the national trend of originator registration. They indicate greater regulation of Louisiana mortgage players, who face their own challenges working in a state still recovering from a different type of housing disaster in 2005.
Lenders originated $15.4bn of mortgages in the state in 2006, a 0.7% decline from 2005, the year Hurricane Katrina plunged New Orleans houses underwater with more than just negative equity. Originators closed $15bn of mortgages in 2007, a 2.6% drop from the previous year.
But originations declined across the US at the same time. Louisiana's originations compared with other states actually boosted its standing from the No. 30 ranked state in 2006 to No. 29 in 2007, according to the two most recent years of data from Inside Mortgage Finance, an industry publication.
Write to Diana Golobay.
HousingWire magazine looks in depth at a Louisiana market — New Orleans, four years after the devastating Katrina — in the August issue, which is still available here.
Default management and residential collateral valuation service provider Integrated Asset Services (IAS) on Tuesday unveiled Statebridge, a new company that will focus on investor-targeted servicing for the mortgage industry.
Statebridge provides risk-based servicing that aims to optimize investor performance through so-called "high-touch" servicing designed to maximize returns on both performing and non-performing loans.
"Statebridge is defining a new category, 'investor-focused servicing,' for the mortgage industry," said IAS president and CEO Dave McCarthy in a company statement. "In association with IAS' valuation and REO capabilities, Statebridge will… provide a 'one-stop shop' for mortgage servicing that is intensely focused on the needs of investors that have grown out of this new mortgage environment."
Write to Diana Golobay.
Moody's Investors Service sees hope in the UK residential mortgage-backed securities (RMBS) market as low interest rates fuel fewer possessions.
The news of low rates and possessions "bodes well" for the market, according to commentary out of Moody's Structured Finance. Moody's analyst Anthony Parry and economist Nitesh Shah point out in the research note that Q209 UK possession figures showed an unexpected 10% drop from the previous quarter.
The figures, reported by the UK Council of Mortgage Lenders (CML), indicated the low interest rate environment as a catalyst for low possessions. Moody's also noted the Bank of England in its latest quarterly inflation report "strongly suggested" interest rates would remain at historic lows for longer than expected.
But the commentary also warned against banking on continued low rates.
"In this environment of heightened uncertainty, where the impact of monetary loosening is not well understood, there is a risk that interest rates could increase suddenly," said Parry and Shah. "A small increase in interest rates might have a detrimental impact on the levels of possessions."
The CML on Friday noted a combination of factors helped keep mortgage arrears and possessions in check during Q209 despite the recession, indicating a combination of factors may be necessary to keep possessions low in the long-term.
"Most importantly, lenders are showing forbearance to borrowers where customers are trying to resolve their payment problems and have a realistic chance of doing so," the CML said. "Low interest rates are helping ensure that arrears grow less quickly, giving borrowers a better chance of getting back on track and lenders more scope to extend forbearance. And government schemes are providing some help for borrowers in difficulty by promoting early communication between borrowers, lenders and debt advisers."
Write to Diana Golobay.
Taylor, Bean & Whitaker Mortgage Corp. (TBW) late Friday told borrowers it will no longer accept online payments or automatic payment deductions on mortgages it still services.
In fact, Taylor, Bean & Whitaker has processed no automatic debit payments since August 4 and asked its borrowers to submit payments via direct mail.
The US Department of Housing and Urban Development several weeks ago suspended TBW from originating FHA loans on the grounds of "irresponsible lending practices." The company said in a media statement that it will continue operations "in a reduced capacity" until it transitions all its loans to new servicers.
“Regrettably, TBW will not be able to close or fund any mortgage loans currently pending in its pipeline,” the lender said in a statement on August 5. “TBW is cooperating with each of the agencies with respect to its servicing operations and expects to continue to service mortgage loans as it restructures its business in the wake of these events.”
Moody's Investors Service quickly placed TBW's servicer rating on review for possible downgrade as the loss severity of its residential mortgage-backed securities (RMBS) looks to increase. Servicing rights for TBW's Ginnie Mae portfolio, however, moved to Ginnie's master sub-servicer, Bank of America (BAC: 7.29 -0.14%).
TBW closed last year as the 14th largest mortgage servicer in the United States with $76.35bn in total servicing, wedged between MetLife Home Loans ($88bn) and BB&T Mortgage ($74bn) .
Write to Diana Golobay.
The Federal Housing Administration’s (FHA) new Making Home Affordable Modification Program (FHA-HAMP) will have a “marginal” impact on prepayment speeds of Ginnie Mae mortgage-backed securities (MBS), researchers at Barclays Capital wrote in its “Securitized Products Weekly" report.
Results from FHA-HAMP are not likely to affect speeds since Ginnie Mae has been more aggressive about buying out delinquent loans through HAMP than fellow government-sponsored enterprises Fannie Mae (FNM: 0.00 N/A) and Freddie Mac (FRE: 0.00 N/A), according to Barclays.
The analysts believe prepayments will “increase only very slightly” with the FHA-HAMP participation.
As HousingWire previously reported, FHA-HAMP mimics the HAMP already underway on mortgages owned or serviced by the GSEs. The biggest difference in the two programs is that FHA-HAMP, which became operational Saturday, allows for a forbearance of up to 30% of the unpaid principal, financed by an interest-free second-lien mortgage that is repaid as a balloon payment at the end of the original loan.
As delinquency rates continue to soar on Fannie and Freddie loans, Barclays expects prepayments to increase.
The rate of Fannie Mae mortgages 90 or more days delinquent increased from 3.15% to 3.94% between Q208 and Q209. The rate of Freddie Mac loans 90 days or more delinquent rose from 2.29% to 2.78% during the same period.
The Barclays analysts believe as these delinquencies are purchased out of pools in the course of modification or foreclosure, there could be a significant spike in overall prepayment over the next few quarters.
Citing the same delinquency data, analysts at Bank of America's (BAC: 7.29 -0.14%) Merrill Lynch unit said HAMP will be the dominant driver of delinquency-related prepays.
“We estimate that delinquent agency loans (60+ day delinquent loans) are being modified at a rate of 3.5%-4% per month currently,” the Merrill Lynch analysts wrote. “The rate of HAMP modifications could increase further because of the pressure on some big servicers and we could see around 6%-8% of delinquent agency loans being modified every month.”
Write to Austin Kilgore.
The week began with some good news in the secondary space, as reports circulated that foreign investors are warming up to US real estate-related assets.
Real Estate Investment Trust (REIT) UDR Inc. (UDR: 26.01 +0.39%) on Monday unveiled a joint venture with leading Islamic bank Kuwait Finance House (KFH), to invest up to $450m in high income multifamily properties.
The venture will target class-A assets at least seven years old and with a minimum $20m value. The partners will contribute $180m of equity with a 70% contribution by KFH and a 30% contribution by UDR for a holding period of up to seven years.
UDR president and CEO Tom Toomey said the company looks to expand its portfolio into high income markets during "opportunistic times." UDR owned 44,990 apartment homes and 1,916 homes under development as of August 1.
"This venture is a continuation of KFH group strategy that focuses on the real economy and we are optimistic that it will add value to all parties involved including our partners, clients, and shareholders especially since we are targeting an area of the market we are familiar with," said KFH CEO Mohammad Sulaiman Al-Omar in a UDR corporate statement. "KFH is keen on working with experienced partners such as UDR with the current focus being on income producing assets."
The announcement comes as reports emerged Monday that China Investment Corp (CIC) may invest up to $2bn in US mortgages through the government's Public-Private Investment Program (PPIP). The investment managers China Investment Corp is discussing the transaction with include BlackRock, Invesco, Marathon Asset Management, Trust Company of the West and Wellington Management Co., according to a report filed at Reuters.
Write to Diana Golobay.
Disclaimer: The author held no relevant investments when this story was published.
The Federal Reserve Bank of New York said Monday it "streamlined" the list of external investment managers in the agency mortgage-backed securities (MBS) purchase program from four to two.
The Fed shed investment managers Goldman Sachs Asset Management and Pacific Investment Management Co. (PIMCO) from the list.
It retained Wellington Management Co. for trading and settlement services and as a secondary provider of risk and analytics support. It also retained BlackRock Financial Management as the primary provider of risk and analytics support.
"These changes are not performance related," the Fed said in a media statement. "The New York Fed anticipated that it would make adjustments to its use of external investment managers as it gained more experience with the program. The agency MBS program has matured since it began in January, and the New York Fed has had time to further develop its internal analytical and operational expertise in this area."
The New York Fed said it retained JP Morgan Chase (JPM: 37.21 -0.75%) as the program's custodian. JP Morgan, tapped back in February, acts as overseer of the purchase activities of the firms.
The federal agency MBS purchase program aims to free up liquidity among mortgage originators and in turn aid the US housing market. It allows for the purchase of mortgage securitizations from government-sponsored enterprises Fannie Mae (FNM: 0.00 N/A), Freddie Mac (FRE: 0.00 N/A) and Ginnie Mae on the so-called "dollar roll" market, which stipulates the securities must be sold back at a later date.
Write to Diana Golobay.
Disclaimer: The author held no relevant investments when this story was published.
Fitch Ratings downgraded commercial mortgage-backed securities (CMBS) servicer ratings for Wells Fargo’s (WFC: 29.60 +1.89%) two bank units, Wells Fargo and Wachovia.
In the Wachovia division, the primary servicer rating was downgraded to 'CPS2' minus from 'CPS2' the master servicer rating to 'CMS3' plus from 'CMS2'; and the special servicer rating to 'CSS2' minus from 'CSS2.' Fitch removed all three from rating watch negative.
On the Wells Fargo bank unit, Fitch downgraded the special servicer rating to 'CSS3' plus from 'CSS2' and affirmed Wells Fargo's primary servicer rating at 'CPS2' plus and master servicer rating at 'CMS2.' All three were removed from rating watch negative status.
In a statement, Fitch said it downgraded Wells' special servicer ratings because of the new structure of the bank’s CMBS special servicing group.
“The current manager of the CMBS special servicing group lacks an appreciable level of CMBS or commercial real estate workout experience,” the Fitch statement said. “He reports directly to the head of commercial mortgage servicing at Wells Fargo who had no commercial real estate experience prior to joining the group earlier this year.”
Fitch added while Wachovia's specially serviced portfolio has few loans, they are “complicated and highly structured and the group is reliant upon limited, albeit highly skilled, resources to workout distressed assets.”
Write to Austin Kilgore.
Washington Trust Co., a Rhode Island bank and subsidiary of Washington Trust Bancorp, expanded the reach of its residential mortgage lending operations into Massachusetts.
Washington Trust adds its first Massachusetts office to 13 Rhode Island offices and three branches in Connecticut.
The new branch, located in Sharon, Mass., will be staffed by 10 specialists versed in fixed-rate, variable-rate, jumbo and reverse mortgages and construction loans. The Massachusetts Washington Trust Home Loan Center will also offer Federal Housing Administration-ensured and Department of Veterans Affairs-ensured mortgages as well as home equity lines of credit.
"This is a great time for Washington Trust to expand into the Greater Boston area with a residential mortgage office," said Stephen Bessette, executive vice president of retail lending, in a media statement. "The residential real estate market is showing signs of recovery and consumers are turning to community banks, like Washington Trust, for traditional mortgage options, trusted advice and personal service."
Write to Diana Golobay.
The rate of mortgage borrowers 60 or more days late increased for the 10th straight quarter and is at an all-time high of 5.81% in Q209, according to market research by credit bureau TransUnion.
The rate of delinquencies is up 11.3% from Q109's rate, according to TransUnion's study of a random selection of 27m credit files from its national consumer database. The increase is lower, however, than the 16% increase between Q408 and Q109.
Mortgage delinquencies are up 65% year over year, TransUnion added.
“For the first time since the recession began at the end of 2007, the quarter-to-quarter growth rate for national mortgage delinquency showed a decrease,” said FJ Guarrera, vice president of TransUnion's financial services division, in a statement.
Nevada (13.8%), Florida (12.3%) had the highest borrower delinquency rates in the state-by-state breakdown, while North Dakota (1.5%), South Dakota (2.1%) and Alaska (2.4%) had the lowest rates.
The average national mortgage debt per borrower declined 0.86% in Q209 to $193,811 from $195,500 in Q109, but is 0.59% higher than the Q209 average debt of $192,681 per borrower.
“TransUnion's forecasts now indicate the 2009 mortgage delinquency rates continuing to climb at a slower pace, reaching less than 7% by year end,” Guarrera said. “However, due to a continued downward trend in housing prices throughout the year as well as high unemployment levels, TransUnion does not see national delinquency rates beginning to fall until the first half of 2010.”
TransUnion, one of the major US credit bureaus, conducts a survey of exactly 27m credit files from its total consumer base, or about one in every nine consumer files in its database of 250m consumer files each quarter, a spokesperson told HousingWire in June.
Write to Austin Kilgore.
