Archive for August, 2009
The Federal Reserve Board and Treasury Department got an early start on financial markets Monday, announcing extensions to a key liquidity program for commercial mortgage-backed securities (CMBS).
The regulators extended the deadline for the Term Asset-Backed Loan Facility (TALF) program eligible for legacy CMBS through March 31, 2010. The Fed extended the deadline for the TALF program targeting new issue CMBS through June 30, 2010 "because new CMBS deals can take a significant amount of time to arrange," according to a joint press release.
Fed and Treasury also extended the deadline for new issue asset-backed securities through March 31, 2010 and said they do not anticipate any further additions to the types of collateral eligible under TALF.
The TALF CMBS programs, which were set to expire Dec. 31, 2009, garnered vocal support from industry players that said longer timeframes were necessary for the facilities to have a lasting effect.
The Fed initiated the TALF program to stimulate lending by allowing private investors to purchase securities with a matching government investment. The reach of the program into CMBS aimed to aid price discovery and provide liquidity for the commercial mortgage market, which faces a credit crisis of its own.
The TALF facility set up for legacy CMBS received bids for nearly $670m in July, but the new-issue CMBS TALF facility experienced a slower start. Industry sources for weeks said there would be a growing emphasis on whether the Fed would extend the legacy and new issue CMBS-eligible TALF facilities into 2010.
Lisa Pendergast, a managing director at Jefferies & Co., told HousingWire last week it was likely the Fed would have to extend at least one of the programs, although she said the new issue program looked more promising.
“The challenge to the Federal Reserve,” Pendergast said, “is to try to stimulate the origination of commercial mortgages, keeping in mind the many challenges posed by the sector, including a lending environment in which credit fundamentals continue to deteriorate and the almost impossible task of efficiently hedging a pool of commercial mortgages during the aggregation stage prior to securitization.”
Write to Diana Golobay.
Troubles appear to be winding down to an end for Montgomery, Ala.-based Colonial Bank after it agreed to an order to cease and desist and then saw its mortgage warehouse lending facility come under close inspection by federal agents.
The Alabama State Banking Department on Friday closed Colonial Bank, which the Federal Deposit Insurance Corp. (FDIC) estimates will cost $2.8bn to its deposit insurance fund, HousingWire first covered this weekend.
Winston-Salem, N.C.-based Branch Bank and Trust (BBT: 26.95 -0.33%) assumes all of Colonial’s deposits and approximately $22bn of its’s $25bn in assets. BB&T also enters a loss-sharing agreement with the FDIC on $15bn of the assets.
"The past 18 months have been a very trying period in the financial services arena," said FDIC chairman Sheila Bair in a statement on the receivership. "Today, after protecting almost $300 billion in deposits since the current financial crisis began, the FDIC's guarantee is as certain as ever. Our industry funded reserves have covered all losses to date. In fact, losses from today's failures are lower than had been projected."
With the acquisition, BB&T adds 354 banking offices in Alabama, Florida, Georgia, Texas and Nevada. It marks the largest acquisition in BB&T's 137-year history and vaulted the firm to the eighth largest financial holding company in the US based on deposits. The firm said in a corporate statement the acquisition "comes with minimal asset risk to BB&T because of [the] loss sharing agreement with the FDIC."
BB&T said it would not assume any obligations of the holding company, Colonial BancGroup (CNB: 0.00 N/A). As a result, Fitch Ratings said it anticipates parent company Colonial BancGroup to file for bankruptcy. The ratings agency also conducted sweeping downgrades among Colonial BancGroup's and Colonial Bank's long- and short-term issuer default ratings to single-D from single-C, on news of the receivership.
The deal shelves BB&T's plans to sell 22 Texas branches and 22 Nevada branches. Company officials said a time frame for that sale would be announced at a later date.
The government-assisted deal also marks the end of a months-long failure, since regulators in July ordered a cease-and-desist on the capital, liquidity and loan loss allowance issues at Colonial BancGroup. The firm acknowledged loan losses in its portfolio were greater than estimated or expected, leading to a liquidity crisis that also affected the firm’s ability to raise additional capital and close on a pending agreement with investors led by now-suspended FHA lender Taylor, Bean & Whitaker Mortgage Corp. (TBW).
Then, in early August, Colonial Bank confirmed it was complying with an investigation of its mortgage warehouse lending facilities at the same time another investigation led to the US Department of Housing and Urban Development and Ginnie Mae suspending TBW.
Write to Diana Golobay.
Disclaimer: The author held no relevant investments when this story was published.
A look at the stories on HousingWire’s weekend desk…with more coverage to come on bigger issues:
Regulators shut down five banks Friday, including beleaguered Colonial Bank. So far, 77 banks have been shut down in 2009. The Federal Deposit Insurance Corporation (FDIC) estimates the latest closings will cost nearly $3.7bn.
The majority of those costs came from the Alabama State Banking Department’s closure of Montgomery, Ala.-based Colonial Bank, which the FDIC estimates will cost $2.8bn. Winston-Salem, N.C.-based Branch Bank and Trust (BBT: 26.95 -0.33%) assumes all of Colonial’s deposits and rebranded Colonial 346 branches as BB&T locations. BB&T will purchase approximately $22bn of Colonial’s $25bn in assets.
The Nevada Financial Institutions Division closed Las Vegas-based Community Bank of Nevada, at a cost of $781.5m to the FDIC insurance fund. The FDIC created the Deposit Insurance National Bank of Las Vegas so customers can transfer their deposits to other insured banks. Nevada State Bank will provide operational management of the FDIC bank, which will remain open for approximately 30 days. Any depositors who do not transfer their accounts in that time will receive the balance of their account in a mailed check.
The Office of the Comptroller of the Currency closed Gilbert, Ariz.-based Union Bank, National Association. It cost the FDIC $61m. The one Union Bank location reopened Monday as a branch of the Oklahoma City-based Midfirst Bank. Midfirst also agreed to purchase all deposits, except about $88 million in brokered deposits and $11m of Union Bank’s $124m in assets.
The Arizona Department of Financial Institutions closed Phoenix-based Community Bank of Arizona. It cost the FDIC $25.5m. Midfirst will rebrand the four Community Bank of Arizona locations as Midfirst branches. Midfirst assumes the bank’s $143.8m in deposits and $125.5m of $143.8m in its assets.
Pennsylvania’s Office of Thrift Supervision closed Dwelling House Savings and Loan Association at a cost of $6.8m to the FDIC. PNC Bank, National Association (PNC: 59.08 +0.31%) assumes $13.8m in deposits and $3m of the bank’s $13.4m in assets. Dwelling House Savings and Loan Association’s one branch reopened as a PNC Bank branch.
Researchers at Barclays Capital (BCS: 14.09 +1.15%) remain negative on agency mortgage-backed securities (MBS) as “valuations remain much too tight,” according to its “Securitized Products Weekly” report. The report also notes while the Making Home Affordable Modification Program “should help prevent foreclosures,” Fannie Mae’s (FNM: 0.00 N/A) serious delinquencies continued to rise in Q209. In commercial MBS, Barclays believes continuing declines in property values will encourage recent vintage borrowers to exercise their default option and selectively walk away from their non-recourse, CMBS debt.
Houston-based Litton Loan Servicing, Calasbasa, Calif.-based PennyMac Loan Services and Titusville, Penn.-based Servis One all signed on as HAMP servicers. The Treasury Department has allocated a $774.9m cap to Litton, $6.2m to PennyMac and $29.7m to Servis One. There are now 45 servicers participating in HAMP.
Grant Gondrezick, a former professional basketball player with the NBA’s Phoenix Suns and Los Angeles Clippers, pled guilty to conspiring to commit wire fraud, US attorney Tim Johnson’s office announced Friday.
According to a plea agreement submitted in US District Court, Gondrezick, 45, recruited straw buyers who were paid to provide false information to obtain loans worth more than the purchase price of the homes. The excess funds were supposed to pay for renovations Gondrezick’s remodeling company was to perform, but never did. Johnson’s office said Gondrezick received approximately $1.9m from the deals.
Gondrezick faces up to five years in prison, a fine of up to $250,000 and up to $1.9 million in restitution.
Co-defendants Tiffany Brooks, who worked as a loan processor, Dirk Minnifield, a real estate agent and former NBA player with the Houston Rockets, and Marc Williams, who worked with Brooks as a loan processor, are also charged in the case for their alleged involvement and are scheduled to go to trial in February 2010.
FDIC chair Shelia Bair believes Congress will not approve the Obama Administration’s plans to expand the Federal Reserve’s authority to regulate large financial institutions and give the proposed Consumer Financial Protection Agency enforcement powers over banks.
While Bair said she supports “90%” of Obama’s plan, including creating the consumer agency, she wants to see enforcement kept under the FDIC’s purview.
Giving the proposed agency enforcement powers would force banks to report to two enforcement groups, one focusing on bank stability and the other on consumer protection, but the two are “interrelated in a way that is very, very difficult to tease out," Bair told The Associated Press.
Write to Austin Kilgore.
The UK buy-to-let market showed the first signs of stabilizing in Q209 as arrears improved and the lending contraction began to slow, according to the Council of Mortgage Lenders (CML).
The number of buy-to-let loans slipped 4% from the previous quarter, as fewer active lenders have less money to lend.
"So long as properties have paying tenants, landlords now have much greater ability to service mortgage payments and we expect arrears to continue to fall as landlords are helped by lower interest rates," said CML senior policy adviser Rob Thomas.
Thomas added, "Whilst house price falls have limited the scope for some landlords to remortgage, there is no evidence that landlords are exiting the market in large numbers and some landlords have the opportunity to make acquisitions and take advantage of higher yields. But new lending to the buy-to-let market will continue to be constrained by the shortage of funding."
The UK market, like the US market, has seen credit risk among residential mortgages rise along with falling house prices, contracting credit and growing uncertainty in the economy. Delinquencies among buy-to-let mortgages rose in the last several years as a response.
But Q209 showed positive signs there, too, as delinquencies on UK buy-to-let mortgages backing residential mortgage-backed securities (RMBS) transactions appeared to be stabilizing, according to a report Friday from Standard & Poor's.
Total delinquencies in UK prime buy-to-let RMBS fell to 6.1% in Q209 from 6.2%, marking the first decline in two years, according to the ratings agencies. The stock of repossession and receiver of rent cases in both UK prime and nonconforming buy-to-let markets has also stabilized, S&P said, suggesting that lenders are appointing receivers of rent for longer periods.
Write to Diana Golobay.
The outcome of a pair of lawsuits playing out in US and UK courtrooms could have a ratings affect on structured finance transaction that have material derivative exposure to US-based counterparties, Fitch Ratings said.
The two related cases involve bankrupt Lehman Brothers and a dispute over subordinate swap termination payments to the rated noteholders of synthetic collateralized debt obligations (CDO).
“A final outcome favorable to the Lehman bankruptcy estate (Lehman) could have implications not only for synthetic CDOs, but for global [structured finance] transactions generally due to the widespread use of the subordination provisions within securitization structures,” Fitch said in a report Friday. "The ultimate outcome and timing for resolution of the court cases remains uncertain at this stage, thus any potential rating action is by no means inevitable or imminent"
Fitch added if Lehman does prevail in court, and no other counter-party risk mitigants are present in the transactions, it will cap the credit ratings of notes in synthetic structured finance transactions to the credit rating of the credit default swap counterparty where the counterparty may be subject to US bankruptcy proceedings.
Write to Austin Kilgore.
Moody's Investors Service has placed the servicer rating of mortgage lender Taylor, Bean & Whitaker on review for possible downgrade as the loss severity of its residential mortgage-backed securities (RMBS) looks to increase.
Taylor, Bean & Whitaker, which was suspended from Federal Housing Administration-insured originations last week, said at the time it planned to continue its servicing activities.
With Ginnie Mae having stepped in and placed Taylor, Bean & Whitaker's portfolio of Ginnie securities under the servicing responsibilities of Bank of America (BAC: 7.29 -0.14%), its remaining securities are facing increased scrutiny.
The stability of Taylor, Bean & Whitaker's servicing platform will influence the performance of its RMBS deals, Moody's said. The loss severity levels on Taylor, Bean & Whitaker's RMBS are likely to trend upward in the future, Moody's said in the first issue of ResiLandscape, a newsletter for investors.
The newsletter, which goes bi-weekly in September, also introduced Moody's new RMBS loss tracker, a snapshot of ultimate losses realized against expected future losses.
Write to Diana Golobay.
The US Department of Housing and Urban Development (HUD) on Thursday published a question-and-answer paper aimed at clarifying the Real Estate Settlement Procedures Act (RESPA) rule slated to take effect Jan. 1, 2010.
The new RESPA rules are geared toward greater transparency in the origination process for borrowers. They provide for use of the Good Faith Estimate (GFE) for borrowers to both shop around mortgages and enter the homeownership process with as great an understanding of the interest rates and settlement costs as possible.
"If we learned anything from the current crisis it's that it is hard for borrowers to make responsible decisions if they don't have all the necessary information," said commissioner David Stevens. "I believe these changes will take away much of the uncertainty borrowers have about the accuracy of disclosures."
Responses to the frequently asked questions (FAQs) document are mixed among industry sources, with the American Land Title Association (ALTA) issuing a statement Friday in support of the HUD guidance.
"We're pleased to see the answers and to see that HUD is providing clarification on questions from not only the title industry but also the lending and settlement communities," says Mary Schuster, an ALTA member.
But others say the questions fail to properly address all the concerns in the industry. Phillip Schulman, of K&L Gates — a law firm that practices in advising on private equity, hedge fund and consumer mortgage finance — says it seems "the FAQs merely restate the requirements and instructions in the final rule, rather than provide practical tips and answers for implementation."
For example, he notes the FAQs provide guidance on the completion of the “Escrow account information” by stating that a originator should check the box for "No" if the lender does not require an escrow account, and should check the box for "Yes" if the lender does require an escrow account. The answer seems clear, but Schulman says there is much more to it.
"Such a response," he writes in industry commentary, "assumes that the presence of an escrow account is a mere 'yes' or 'no' answer, and HUD does not drill down to answer the more pressing question: how does a lender complete the GFE when the answer is 'Yes, but only until you have paid the loan down to 80%' or 'no, unless you fail to pay your real estate taxes?'”
Write to Diana Golobay.
Walnut Creek, Calif.-based PMI Mortgage Insurance Co., (PMI: 0.00 N/A) redesigned its Homesafepmi.com Web site to better educate borrowers about foreclosure alternatives.
PMI said its new site provides information to promote sustained homeownership with information on foreclosure facts, alternatives to foreclosure, including Making Home Affordable programs, videos and articles, and tips for not falling victim to mortgage fraud.
“Today the site is even better organized and robust providing lender and non-profit contact information, timely articles and videos to keep borrowers informed of their options, and aware of fraudulent or unnecessary foreclosure avoidance schemes,” said Carla Gerardu-Low, a member of PMI’s homeownership preservation initiatives group, in a statement.
Write to Austin Kilgore.
Wilmington, Del.-based software developer Corporation Service Company launched its Bankruptcy Tracker program, which monitors court filings and notifies companies via e-mail when a debtor files for bankruptcy.
Corporation Service noted consumer bankruptcies recently reached the highest mark since the fall of 2005. In July alone, consumers filed 126,434 bankruptcies, representing a 34% increase over July of 2007 and an 8% increase over June’s filings. Corporation Service sends lenders e-mail alerts on bankruptcies filed against their debtors.
“When it comes to dealing with a debtor’s bankruptcy, any delay in responding can be costly. Too often, notices of bankruptcy are not routed to the correct person in time to properly respond,” CSC vice president Mark Rosser said in a statement.
“With this new service from CSC, financial institutions can receive prompt notice of relevant bankruptcy filings," Rosser added. "This advance notice enables them to respond to proof of claim filing and other deadlines, and to assertively monitor and protect their interests.”
Write to Austin Kilgore.
Clearwater, Fla.-based mortgage software developer eMASON announced Fannie Mae (FNM: 0.00 N/A) certified its Clarifire software for loan modifications.
Clarifire’s financial calculator and loss mitigation rules engine were already Fannie Mae-certified for the HomeSaver Advance program and pre-foreclosure sales, and the company said it hopes to have it approved for Making Home Affordable Modification Program (HAMP) later this August.
The Web-based software automates the process of importing loans in bulk and generating workout option reports with minimum qualifications and certified workout options, automatically determining workout delegation and submission qualifications, the company said.
Write to Austin Kilgore.
