Archive for August, 2009
First American National Default Title Services will provide national foreclosure title products to Fannie Mae (FNM: 0.00 N/A) in an effort to decrease the cost of foreclosure.
The streamlined cost efficiencies will make it easier for servicers to tackle the increasing flow of default mortgages and where possible help homeowners reinstate their loans and retain their homes.
The pre-foreclosure title report meshes with Fannie's pricing limits on title costs for its foreclosure counsel. The report, a title search product, uses a network of local abstractors, title data, a team of underwriters and experts to assist lenders, servicers and investors in wrangling foreclosure costs in multiple states, according to a corporate release.
“We have worked diligently to do our part to provide cost-effective solutions to our lender, mortgage servicer and investor clients,” says Wes Mee, president of First American National Default Title Services Division. "We are looking forward to being an additional resource to Fannie Mae and their mortgage servicer partners."
To combat the fluctuating standards used from state to state, designers versed the title report with the nuances of state and county requirements.
Write to Jon Prior.
Philadelphia-based mortgage insurer Radian Group (RDN: 2.66 +2.70%) earned $231.9m ($2.82 per share) in Q209, up from a loss of $392.5m in Q208.
Mortgage insurance claims of $167.7m were lower than projections. However, Radian said it expects to pay between $275 and $300m in claims during Q309.
Radian said government programs to stem foreclosures are helping Radian’s bottom line.
“While there are positive signs in today's economy, we remain aware of the challenges and uncertainties Radian continues to face in the near term, and the condition of the U.S. housing market,” Radian CEO S. A. Ibrahim said in a statement. “Our primary focus is on increasing our capital strength and financial flexibility, continuing to write high-quality new business, and positioning Radian for growth and success when markets recover.”
Radian said it has improved the quality of the loans it insures. It wrote $5.5bn in new insurance in Q209, 99.9% of which are prime credit quality and 98.4% with a FICO score of 680 or greater. In addition 99.5% are fixed-rate mortgages and 73% had loan-to-value ratios of 90% or less.
Write to Austin Kilgore.
West Palm Beach, Fla.-based Ocwen Financial Corporation (OCN: 13.96 +1.53%) earned $17.8m ($0.26 per share) in Q209, an improvement over a loss of $2.7m in Q208.
Revenue growth and cost reduction of Ocwen Solutions, the firm’s mortgage services and financial services and technology products division led to a nearly 200% surge in profits. New revenue was earned from expanded geographical reach and new default servicing products.
The mortgage servicer said the company’s turnaround came even though modifications from the Home Affordable Modification Program (HAMP) declined servicing and subservicing fees $8.1m. Ocwen also spent $2.3m to execute the spin-off of its Altisource mortgage portfolio division.
Per HAMP guidelines, all pending mortgage modifications were reviewed for eligibility in the program, creating 61% decline in completed modifications from Q208. Ocwen has extended more than 2,600 HAMP-based modification offers since April.
As HAMP is further implemented, Ocwen expects its modification volume to return.
“We have been exceptionally busy this quarter as we re-focus our efforts on growing our servicing business,” said Ocwen chairman and CEO William Erbey. “With our solid liquidity position and excess financing capacity, we are well positioned to grow through acquisitions of servicing portfolios.”
Write to Austin Kilgore.
The multifamily and health care sectors of real estate investment trusts (REIT) are expected to perform slightly better than their other commercial real estate sector counterparts.
But the overall outlook of REITs remains negative, according to Fitch Ratings’ REIT midyear outlook report.
As foreclosures increase, so have the number of tenants out of necessity populating the country’s multifamily housing units, Fitch said. However, the report notes that many tenants are living with roommates to cut expenses, tempering apartment occupation rates.
Multifamily REITs are also enjoying steady access to capital from Fannie Mae (FNM: 0.00 N/A) and Freddie Mac (FRE: 0.00 N/A), proceeds used to repay and reorganize debt.
The nursing homes, assisted living communities and other facilities that make up the health care REIT sector are seeing rents increase but occupancy declining. Seniors that would typically sell their home before moving into a facility are putting off that decision until the residential market thaws.
But, Fitch noted, the US population is aging, and it expects the health care sector to perform well in the long term.
Both sectors were rated stable, while office, retail and industrial were all given a negative outlook rating in the report.
Corporate bankruptcies and the rising rate of unemployment will drive office space vacancy rates to historic levels and recent gains in rent will be lost, Fitch said.
A bright side to the office downturn is that new supply of office space has been relatively low. Unlike the office space downturn of the early 1990s, which saw a significant overbuilding of new office buildings, the lack of financing has kept new construction down, which will help the sector recover faster when demand returns.
New industrial space delivery is declining in 2009 after a boom in new supply in 2008. However, slower international trade will also push vacancies up.
The bankruptcies of a number of large retail chains and depressed consumer spending have increased retail vacancies in malls and strip centers. Stores that are still in business are reducing their locations and many are expecting rent concessions as neighboring tenants close down and retail centers become less active.
Write to Austin Kilgore.
[Update 2: adds Lockhart's statement on his resignation, Williams' statement on DeMarco's appointment.]
Federal Housing Finance Agency director James Lockhart said Thursday he will leave his post as head of the agency.
HousingWire's sources at a major regulator late Wednesday confirmed Lockhart would soon resign. In a statement issued hours later, Lockhart said Ed DeMarco will step into the role of acting director. DeMarco takes on the responsibility after serving the past year as chief operating officer and senior deputy director for housing mission and goals at FHFA.
"This has been one of the most challenging and rewarding assignments of my career and I am very pleased with the work we have been able to accomplish through a very difficult period," Lockhart said. "As the housing market is starting to stabilize and the housing GSEs are strongly supporting the mortgage markets and other financial institutions, it is time for me to move on to the next chapter."
At the FHFA, Lockhart regulated mortgage finance giants Freddie Mac (FRE: 0.00 N/A) and Fannie Mae (FNM: 0.00 N/A). He took the role more than a year ago when the Housing and Economic Recovery Act set up the FHFA.
Fannie's CEO, Michael Williams, issued a statement Thursday thanking Lockhart for his support during Williams' recent transition to the role of Fannie CEO.
"I congratulate Ed DeMarco on his appointment as the Acting Director of FHFA and look forward to working closely with him in the days ahead," Williams said. "Director DeMarco was instrumental in helping to develop and oversee Fannie Mae's participation in the [Making Home Affordable] program, and I look forward to his leadership as we continue to implement initiatives supporting foreclosure prevention and sustainable homeownership."
Fannie and Freddie may soon face issues of their own, as Moody's Investors Service recently said the US government may begin to wind down their business within 18 months. Analysts at the rating agency pointed to quarterly losses at the government-sponsored enterprises ever since late 2007 to indicate a far less costly alternative would be for the government to resolve their business.
Write to Diana Golobay.
Jonathan Corr is Chief Strategy Officer for Ellie Mae, an award-winning provider of innovative software and services for the mortgage industry. He is an expert in loan origination technologies, paperless mortgages and marketing automation solutions.
In this edition of In This Corner, Jonathan discusses a new software developed by Ellie Mae and how bankers use technology in today's financial climate.
HW: What is new with Ellie Mae?
Jonathan: "We just launched Encompass360, a new mortgage management solution that was in development for over two years. This is our biggest announcement in five years. We think Encompass360 is going to change the way the industry looks at mortgage management technologies."
HW: Is Encompass360 just the next version of Encompass?
Jonathan: "No. Encompass360 is not just another release of Encompass. It’s a completely new mortgage solution. Over two years of testing, research and design have gone into creating Encompass360. It was designed to revolutionize the way that companies manage the mortgage process."
HW: What makes Encompass360 so different?
Jonathan: "First of all, the industry has never before had the level of visibility, transparency and access that Encompass360 provides. Users can access literally any aspect of the mortgage chain, exactly the way they want to access it, in moments. Everything—every action, every document, every detail—can be seen and accounted for with one to three clicks. Secondly, the mortgage industry is a data-driven business. Not being aware or able to see through every part of the mortgage process can create critical vulnerabilities to a mortgage company’s business, sooner or later. Encompass360 is the industry’s only solution that addresses that issue head on.
"These days, words like transparency, visibility and access have become buzzwords, so it’s easy to overlook their value. What Encompass360 does, is to take a seemingly endless amount of critical details for every single loan in a lender’s system, and package those details in a way where the information becomes immediately usable. Users can actually drill down, accessing the specifics of any loan at any stage in the process, with just one to three clicks. Management gets better oversight and the ability to locate any issues, and originators and processors get fewer mistakes and faster turn times.
"Also, as one of our beta testers said, Encompass360 is the first solution to address the uniqueness of the mortgage industry. The system takes into account that our workflow process is tied to documentation, that every piece of information must be backed up and verified by actual documentation. Encompass360 enforces document accountability and 'auditability' at every step of the way."
HW: How are bankers using technology differently these days?
Jonathan: "We’ve seen a massive acceleration in the use of EDM—electronic document management. In fact, we have seen a 400 percent increase in the amount of loan files that are using some form of EDM in Encompass over the last 12 months. There are a few reasons behind this. Our industry went from primarily stated income loans to fully documented loans, and now companies have to find ways to manage all of that documentation. There’s also the issue of getting disclosures out within allotted time frames, and accommodating adjustments like those in RESPA, the HUD-1, GFE and TIL. Bankers know it simply makes sense to bring technology into these processes, not only for the efficiency it brings, but also to ensure the entire enterprise stays current with the latest changes.
"Bankers are also using technology for issues like fraud prevention and compliance. They need seamless and direct access to those service providers, which help them to protect their interests, and provide faster turn times and higher quality customer service.
"The mortgage industry is merely a reflection of what’s going on with technology in a global sense. The entire world is using technology to better manage their lives, personally as well as professionally. During the boom, it wasn’t as important to ensure a lean operating process. These days, mortgage bankers are more focused on using technologies that help them better leverage their warehouse lines, prevent buybacks, secure better pricing, and transact loans faster."
HW: The new Encompass360 is a software upgrade. Therefore what were the sort of issues users had with the previous versions that are now 'solved'?
Jonathan: "Encompass360 is not a software upgrade, but it is a solution-based technology. Our users have been really pleased with previous Encompass versions. But until now, the mortgage industry didn’t have a system that was specifically designed to address the fact that the industry’s workflow process is based on disparate sources of documentation. That’s an issue that’s solved with Encompass360.
"There’s also the issue of visibility and 'actionability', which has been a major issue for the industry. It’s one thing to see information. It’s another to be able to act quickly on that information, real-time. Encompass360 is the only solution that combines broad visibility with drill down 'actionability', all in one to three clicks.
"Finally, there’s the issue of electronic document management (EDM). Encompass360 has the most elevated EDM capabilities on the market. There’s no need for an outside EDM solution. Encompass360 has native electronic documents built into the system."
HW: How does it stand up to other products in the space? In other words, what really sets Encompass360 apart?
Jonathan: "We sincerely believe that Encompass360 is in a new category by itself, and simply does more, with higher ease and efficiency than any other solution currently on the market. Users get faster, deeper visibility and access, while still getting the information they need, right up front. No other solution can claim the same total user experience in the way we provide it.
"The bottom line is that Encompass360 functions more like a 'partner' than other technologies. It seeks out opportunities for better business processes and relays that information to the user. It’s really like having a team of experts working at the speed of light, exactly the way you want them to. 'The devil is in the details,' as they say. Encompass360 is the only solution that allows companies to view and access those details almost instantaneously, while enabling the user to configure and personalize their experience.
"I know it seems like a lot to claim, so we encourage people to check out the system. Seeing is believing. We believe Encompass360 gives the user a full, complete and unprecedented view of their world, and we’re very proud to bring it to the marketplace."
The struggling retail and hotel sectors have hit commercial mortgage-backed securities (CMBS) performance, and loans collateralized by office space may be the next to take a hit.
Of the largest mortgages transferred to special servicers — firms that handle loans that are delinquent or on the verge of non-performance — four are collateralized by retail developments, according to a Fitch Ratings report issued Wednesday.
The largest of those loans is a $206.8m loan secured by the 556,835-square-foot Woodbridge Center in Woodbridge, New Jersey. Distressed shopping mall owner General Growth Properties is the debtor of the loan, and the real estate investment trust is trying to reorganize under Chapter 11 bankruptcy protection.
Other loans in Fitch’s list of top 10 largest delinquent loans are backed by malls in Iowa and California, as well as one loan for two malls, one in Georgia; the other in North Carolina.
Hotels and resorts in Phoenix, Atlantic City, N.J. and Las Vegas are also on the list, as well as multifamily housing portfolios in Texas and the southeast US and a collection of senior citizen health care facilities.
The loans in the lists come from Fitch’s portfolio of 470 US CMBS with an unpaid principal balance of $471bn. Fitch said 18% of the portfolio — 5,561 loans totaling $75.5 billion — contain mortgages it lists as loans of concern. Most of those, 11%, were originated in 2006 and 2007.
Loans on four office complexes worth a combined nearly $2bn, two each in Los Angeles and New York City, are on Fitch’s watch list of 10 “loans of concern.” These loans haven’t been assigned to special servicers yet, but the ratings agency believes they are in danger of doing so.
A third list in the report details the best performing specialty-serviced loans. Four loans for multifamily developments, including one loan for a group of 14 apartments across six states, are on the list, as well as a mixed-use development outside Dallas and two groups of economy hotel locations spread across the US.
Write to Austin Kilgore.
The Securities Industry and Financial Markets Association (SIFMA) on Tuesday brought on former Congressman and investment banker Kenneth Bentsen Jr. as executive vice president of public policy and advocacy.
Bentsen will head up SIFMA's Washington, DC office, bringing years of experience in the market and most recently his three years of serving as president and COO at the Equipment Leasing and Finance Association. Bentsen previously served as a managing director at Public Strategies and also as a member of the US House of Representatives from Texas.
He will take responsibility for SIFMA's legal, governmental and legislative affairs and advocacy initiatives when he begins in September.
“With his breadth of financial experience in both the private and public sector, Ken understands our members' public policy goals and business interest and will help drive our efforts to play a proactive, constructive role in the ongoing regulatory reform debate,” said SIFMA president and CEO Timothy Ryan in a statement on the appointment.
Write to Diana Golobay.
One in five people cite avoiding foreclosure as the main reason for choosing bankruptcy, according to the Consumer Credit Counseling Service (CCCS) of Greater Atlanta.
In June, the national nonprofit financial counseling agency found that 21.6% of the 16,744 people who received counseling filed for bankruptcy to keep their home. That figure remained above 20% since April.
“Our research shows that tens of thousands of Americans are turning to bankruptcy to avoid foreclosure," said Suzanne Boas, president of CCCS of Greater Atlanta, in a corporate release.
Anyone seeking to file for bankruptcy must receive credit counseling. CCCS of Atlanta accounts for nearly 20% of pre-filing counseling sessions nationally and is on track to counsel more than 200,000 individuals this year.
Filing for Chapter 13 bankruptcy protects homeowners from foreclosure as long as they keep up with their monthly mortgage payments.
In continued legislative assistance to distressed homeowners, a bill that allows bankruptcy judges to modify mortgage terms and cram down some of the principal on a loan lingers in Senate committees, according to reports from Housing Wire.
Write to Jon Prior.
Two of the country’s largest home-building corporations lost millions in Q209 and said challenges remain amid low buyer demand for new homes.
Bloomfield Hills, Mich.-based Pulte Homes (PHM: 7.79 -0.13%) lost $189.5m ($0.74 per share), an even greater loss than the $158.4m Pulte reported in Q208.
The country’s largest builder, Fort Worth-based DR Horton (DHI: 14.39 +1.91%), lost $142.3m ($0.45 per share) in the quarter. That’s an improvement over Q208’s loss of just under $400m.
“Market conditions in the homebuilding industry are still challenging, characterized by rising foreclosures, high inventory levels of available homes, increasing unemployment, tight credit for homebuyers and weak consumer confidence,” DR Horton board chairman Donald Horton said in a statement.
Horton and Pulte both reported decreased orders for new homes of 7.5% and 34.5%, respectively. Pulte reported selling 54% fewer homes (2,500) at a decreased average selling price $261,000, while Horton sold 45% fewer homes in Q209 (4,240) than in Q208.
Dallas-based Centex Corporation (CTX: 0.00 N/A) — a builder currently negotiating its $1.3bn takeover by Pulte — stayed in the black thanks to a $410m tax credit that helped the company earn $85m in Q209.
Write to Austin Kilgore.
