Archive for August, 2009
Wolters Kluwer Financial Services acquired a substantial portion of Austin-based Stormwater Research Group, which provides flood compliance solutions to the mortgage banking industry.
Wolters Kluwer will expand its presence in the flood determination aspect of mortgage lending with its acquisition of Stormwater, which provides both basic and life-of-loan flood determination services.
Stormwater's operations, combined with Wolters Kluwer's PCi line of flood solutions, will provide lenders with regulatory compliant flood determinations and will help lenders and servicers ensure flood insurance is maintained throughout the loan's life.
The partnership — the terms of which are not being publicly released — also provides Stormwater's customers with access to Wolters Kluwer's online database of flood determinations.
Write to Diana Golobay.
Fitch Ratings affirmed ratings of PHH Corporation (PHH: 11.73 +0.51%), reflecting the mortgage operations’ improved financial flexibility.
In addition to mortgage operations, PHH also runs a vehicle management business segment.
Fitch kept the long-term Issuer Default Rating (IDR) at double-B-positive and the short-term IDR at B, according to a corporate release. Fitch pointed to the recent improvement of the ABS markets for the commercial fleet asset class, as well as rational pricing and higher mortgage volume as positive trends toward profitability.
The action affects approximately PHH’s $1.69bn in debt, but Fitch highlighted PHH’s ability to issue $3.5bn of notes under the Term Asset-Backed Liquidity Facility (TALF) securities as a “key element” in the recovery of its profile, according to the release.
For the second quarter of 2009, PHH reported $8.93bn in assets.
The recent improvements in the mortgage segment appears sustainable, and the company has adequate liquidity and funding through the first half of 2010, according to Fitch.
Write to Jon Prior.
A slower cure rate among delinquent loans erased improvements in the number of loans rolling into delinquency status among US residential mortgage-backed securities (RMBS), according to Fitch Ratings.
Cure rates decrease as fewer delinquent loans return to current payment status each months. The prime cure rate slipped from an average 45% during '00-'06 to 6.6% today. Alt-A cure rates dropped to 4.3% from an average 30.2% and subprime cure rates fell to 5.% from an average 19.4%.
"Recent stability of loans becoming delinquent do not take into account the drastic decrease in delinquency cure rates experienced in the prime sector since the peak of the housing market," said managing director Roelof Slump in a corporate statement.
"Whereas prime had previously been distinct for its relatively high level of delinquency recoveries," Slump added, "by this measure prime is no longer significantly outperforming other sectors."
More borrowers sink underwater on their homes as prices deteriorate, largely driving the declines in cure rates. Areas like California and Florida that have seen a steeper decline in prices as a result have a higher presence in the delinquency categories. California and Florida represent 49% of the remaining outstanding balance of currently performing prime loans, according to Fitch, although the states also make up 62% of the non-current category and are "under-represented" in the cured loan category.
Fitch sees credit scores as playing a significant role in the cure rate behavior. On average, current prime loans bore credit scores at origination up to 25 points higher than those on delinquent prime loans.
"As income and employment stress has spread, weaker prime borrowers become more likely to become delinquent in their loan payments and are less likely to become current again," Slump said.
Write to Diana Golobay.
The Florida Office of Financial Regulation (OFR) on Friday issued an order to Taylor, Bean & Whitaker Mortgage Corp. (TBW) to cease and desist processing foreclosures and charging late payment fees.
The order comes on the heels of a first cease-and-desist order issued August 7. OFR said TBW did not comply with some provisions of the first order, including a requirement to attempt to obtain funding or move loans out of its pipeline, and a request to provide relevant financial information for the assessment of its financial condition.
OFR said it also found that Taylor, Bean & Whitaker used a single bank account for all its operations — a violation of Florida statutes — also depositing operating funds and custodial funds into this account and paying employees from it. Taylor, Bean & Whitaker claimed the the accounting of different funds was done internally, but OFR said the intermingling of funds "represents a serious risk to Florida consumers."
TBW's two attempts to secure accounts at other financial institutions were denied, and OFR said TBW's outside counsel on Friday indicated the company's imminent bankruptcy.
In light of Taylor, Bean & Whitaker's continued financial distress and failure to follow the initial cease and desist, OFR issued the order to cease foreclosure proceedings currently conducting or contemplating. OFR also ordered TBW not to charge late fees to Florida consumers on payments received after July 15 and not report any Florida consumers to a credit bureau for any payment made from August 1 through 60 days following the date of the order.
OFR's order (which can be downloaded here) sets up a time line to unwind servicing rights of 34,922 private portfolio loans on other servicers within 60 days of the order. It also calls for TBW to provide daily reports on serviced loans and promptly forward payment checks to new servicers.
TBW for weeks experienced some delay processing payments from borrowers, and HousingWire received a handful of e-mails from concerned customers that wondered why their automatic debit payments had not cleared and asked whether they would be considered delinquent if TBW did not process them on time.
The company on August 14 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.
Write to Diana Golobay.
[Update 1: Adds ebank closure]
A look at the stories on HousingWire’s weekend desk…with more coverage to come on bigger issues:
Regulators shut down four banks Friday, bringing the total number of banks shut down in 2009 to 81. The Federal Deposit Insurance Corporation (FDIC) estimates the latest closing will cost more nearly $3.5bn.
The Office of Thrift Supervision shut down Austin, Texas-based Guaranty Bank, at a cost of $3bn to the FDIC insurance fund.
Birmingham-based BBVA Compass(BBV: 0.00 N/A), which is owned by the second largest bank in Spain, will take over Guaranty’s 103 branches in Texas and 59 branches in California.
The Alabama State Banking Department closed the Birmingham, Ala.-based CapitalSouth Bank at a cost of $151m to the FDIC insurance fund. Lafayette, La.-based IBERIABANK (IBKC: 52.54 -0.11%) will assume all but $3.6m of CapitalSouth’s $546 million in deposits and $589m of $617m of its assets. The 10 CapitalSouth branches will reopen as IBERIABANK locations today.
The Georgia Department of Banking and Finance closed Newnan, Ga.-based First Coweta Bank at a cost of $48m to the FDIC insurance fund. Zebulon, Ga.-based United Bank will pay the FDIC a premium of 1.01% to assume all of First Coweta’s deposits and will purchase $155m of $167m of the failed bank’s assets. United will reopen the four First Coweta branches as United locations.
The Office of Thrift Supervision closed the Atlanta-based ebank, at a cost of $63m. St. Cloud, Minn.-based Stearns Bank, National Association will assume all of ebank’s $130m in deposits and $111m of $143m in assets and will reopen the one ebank branch as a Stearns Bank location.
The US banking industry continues to face challenges, according to Institutional Risk Analytics’ (IRA) preliminary Bank Stress Index for Q209.
The IRA Bank Stress Index continues to climb and was 6.87 in Q209, up 23% from Q109’s index of 5.57. The rate of change is lower than it was between Q408 and Q109, but remains at record levels.
The stress index is calculated using FDIC data. An index of 1 represents the level of bank stress in 1995.
The foreclosure crisis isn’t just hurting people’s pocketbooks; it’s also affecting their health. Nearly half of the distressed homeowners in a University of Pennsylvania School of Medicine study reported symptoms of depression and 37% met screening criteria for major depression. The research, published in the American Journal of Public Health, also showed many distressed homeowners can’t afford prescription drugs and are skipping meals.
“The foreclosure crisis is also a health crisis,” lead author Craig E. Pollack said in a statement. “We need to do more to ensure that if people lose their homes, they don’t also lose their health.”
The study was based on 250 distressed homeowners in the Philadelphia area.
The owners of an upscale Minnesota shopping center that opened four years ago defaulted on $78.5m in debt and a sheriff’s sale will be held on Oct. 1.
The Woodbury Lakes mall, in Woodbury, east of St. Paul, has seen a number of tenants vacate the property, including Linens n' Things, Boston's Restaurant, Salsarita's, Z Gallerie and Starbucks, Twincities.com reported.
When it opened, Woodbury Lakes mall was billed a “lifestyle center” with more pedestrian space and upscale shops than a typical mall. It was seen as an alternative to the Twin Cities’ larger tourist-driven Mall of America.
The mall’s foreclosure comes as consumers continue to curb spending, creating increased stressed on the commercial real estate market.
California's unemployment rate is 11.9%, the highest ever in the state, according to the US Labor Department.
The department reported 87,000 Californians lost their jobs in July, increasing the unemployment rate from 11.6% in June. Last year, Californian unemployment was 7.3%.
As HousingWire has previously reported, there is evidence to suggest a link between unemployment and housing prices that could hurt California’s housing recovery further.
Write to Austin Kilgore.
BBVA Compass tonight announced the acquisition of the entire banking operations of Guaranty Bank, based in Austin, Texas.
The new entity will not only create the 15th largest commercial bank in the United States, but also the fourth largest in Texas.
BBVA Compass is a subsidiary of Banco Bilbao Vizcaya Argentaria (BBVA) a bank headquartered in Northern Spain. BBVA is the second largest bank in the country, followed by Banco Santander, which is also the largest bank in Europe.
Both banks are aggressively expanding during the recession, both in the Americas as well as the Euro area.
According to the Federal Deposit Insurance Corporation (FDIC) announcement on the deal, the agreement is a loss-share transaction on approximately $11bn of Guaranty Bank's assets; BBVA Compass will share in the losses on the asset pools covered under the loss-share agreement. The loss-sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector.
The FDIC will bear 80% of the first $2.3bn of losses and 95% of the losses above that threshold.
“We would like to welcome Guaranty’s 300,000 customers to the BBVA Compass family,” said Manolo Sánchez, President and CEO of BBVA Compass, who added the full transition should be complete by early 2010, in an effort to calm affected clients.
"They can rest assured knowing that they are now part of a larger organization that is considered one of the safest banks in the world,” he added.
BBVA Compass was advised in the transaction by J.P. Morgan Securities and Cleary Gottlieb Steen & Hamilton.
Guaranty Bank had total assets of approximately $13bn and total deposits of approximately $12bn. In addition to assuming all of the deposits of the failed bank, BBVA Compass agreed to purchase $12bn of the failed bank's assets.
Guaranty Bank had 103 branches in Texas and 59 branches in California. The new enterprise is worth $49bn in deposits and operations additionally in Alabama, Arizona, Florida, Colorado and New Mexico.
Write to Jacob Gaffney.
Barclays Capital expects high losses on collateral backing most most non-agency securitizations including jumbo, Alt-A, and option adjustable-rate mortgages.
For example, the firm expects more than 70% losses on '07 vintage subprime pools, and 15-30% on most jumbo pools. But as this has already been priced into the market, Barclays said double-digit yields in select non-agency areas remains possible.
"This is not to say that there are no risks in owning non-agencies at current levels," Barclays researchers said in a report Friday. "As we have maintained over the past few weeks, there is little upside from fundamental credit performance for non-agencies. Overall default expectations remain fairly high."
Barclays noted, however, that the loss-adjusted unleveraged yields in non-agencies remain much higher than for other comparable securities. Unleveraged yields on non-agencies range from 6-8% among Reverse REMIC to 20-25% among mezzanine triple-As, while unleveraged yields on other securities range from 1.5-4.5% among consumer asset-backed securities to 9-11% among agency mortgage-backed securities.
Risk premium has been shrinking as real money investors looking for the high yields edged into the space in the recent weeks. Barclays also expects significant demand from PPIP managers. Ratings-related risk has become minimal, Barclays noted, as few securities remain triple-A rated.
"Along with these factors, we believe that the strong Re-REMIC bid will also provide some support to non-agency prices in the near term," Barclays said.
Write to Diana Golobay.
[Update 1: Includes statements by FHA commissioner David Stevens]
The Federal Housing Administration (FHA) insured 197,613 mortgages worth $37bn in July, including $18.4bn for purchase mortgages and $15.6bn for refinance transactions.
The FHA, which insures lenders against loss in the event of borrower default, reported more than 108,000 mortgages were endorsed, or insured, in the second half of July, an increase of 11.4% from the first half of the month.
More than 55% — almost 60,000 mortgages —were for purchases, and almost 79% of those were with first-time homebuyers, FHA reported.
About 40% (43,000 mortgages) of the insured mortgages were refinance cases and the remaining 5% (5,074) were Home Equity Conversion Mortgages (HECMs), or reverse mortgage.
For all insured mortgages during the two-week period, the average FICO score was 670. The average purchase FICO was 695; the average refinance FICO was 662.
The FHA received 237,450 applications from potential mortgagors in July. The estimated seasonally adjusted annual rate for applications was 2,643,200.
In light of the growing volume of interest in the FHA program, a bill signed on August 7 expanded the program's endorsement authority to $400bn for fiscal year 2009 to meet projected demand.
"Given our expectation that FHA loan volumes will continue to be high until the credit crisis passes, we just received authorization by Congress for the authority to endorse up to $400bn for FHA insurance and are asking the same for next year," said FHA commissioner David Stevens n a mid-August speech. "We expect that increased authority will allow HUD to endorse approximately 2.25m mortgages in the next fiscal year."
Write to Austin Kilgore.
It's the mantra among regulators and echoed by Federal Reserve chairman Ben Bernanke on Friday: The recession — pushed along by rising unemployment levels, plunging home values and growing delinquencies — would be much worse had governmental bodies not stepped up to intervene.
As the financial markets recover, new system-wide oversight of liquidity among financial institutions must be enacted to ensure recovery remains on track and to avoid future systemic events, Bernanke told a group at the Federal Reserve Bank of Kansas City's annual economic symposium in Jackson Hole, Wyo.
“Unlike in the 1930s, when policy was largely passive and political divisions made international economic and financial cooperation difficult, during the past year monetary, fiscal, and financial policies around the world have been aggressive and complementary,” Bernanke said. “Without these speedy and forceful actions, last October's panic would likely have continued to intensify, more major financial firms would have failed, and the entire global financial system would have been at serious risk.”
In his speech, Bernanke retraced the key events of the past year. He recounted as signs that trouble was looming continued to mount during the summer of 2008, market participants did not listen.
“There was little to suggest that market participants saw the financial situation as about to take a sharp turn for the worse,” he said. “As of this time last year, market participants evidently believed it improbable that significant additional monetary policy stimulus would be needed in the United States.”
Noting that the recession made a global impact, Bernanke praised the efforts of foreign governments to help the financial industry.
“This strong and unprecedented international policy response proved broadly effective,” Bernanke said. “Critically, it averted the imminent collapse of the global financial system…however, although the intensity of the crisis moderated and the risk of systemic collapse declined in the wake of the policy response, financial conditions remained highly stressed.”
Moving forward, Bernanke said both the Basel Committee on Banking Supervision and the US bank regulatory agencies will push for stronger liquidity risk management at financial institutions, including enhancing guidelines that take into account the large-scale risk that inadequate liquidity planning has on the entire financial system.
Write to Austin Kilgore.
Barclays Capital this week saw commercial mortgage-backed securities (CMBS)-eligible Term Asset-Backed Loan Facility (TALF) demand outstrip supply. And TALF has a long way to go, as new issuance remains low on "anemic" lending.
CMBS spreads pushed wider this week in the midst of the second legacy TALF facility, which brought in $2.3bn of bids. The Federal Reserve received no bids for new issuance CMBS in this week's facility.
Barclays estimated 2005 vintage last cash flow triple-As — a highly TALF-eligible product — widened around 30bps this week despite the 340% gain in bids from the previous facility CMBS TALF facility. Investors fueled selling pressure as they looked to book profits or shed exposure, according to Barclays' securitization research report Friday.
Barclays estimates there were $4.1bn of TALF-eligible bid lists since the July facility, which led to bloated dealer inventories and larger hedging demand. It expects bids on CMBS TALF facilities to increase in future subscription dates, although demand so far has failed to absorb the surge in selling pressure.
Although the Fed recently extended the deadlines of both the legacy and new issue CMBS-eligible TALF programs through March 31, 2010, from December 31, commercial real estate lending remained "anemic" on tighter underwriting standards and falling appraisal values.
"[N]ew issue TALF would lend support to the refinancing of maturing loans and hopefully restart the CMBS market," Barclays said in the research report. "The deterioration of fundamentals, coupled with aggressive underwriting of recent vintage loans, will still prove to be a difficult hurdle to overcome, especially given the magnitude of the decline in property values."
New appraisals reinforce the picture of deteriorating commercial property value, with an average decline in valuation of 49% since the previous appraisal on all sectors of commercial real estate, Barclays said. The multi-family (apartment housing) sector showed a 46% decline since the previous valuation while office properties slipped 51% and hotel properties fell 56%.
Write to Diana Golobay.
