Archive for September, 2009
Lending for home purchases in the UK in July increased 19% from last year’s level, the first monthly year-over-year increase in home lending since early 2007, the Council of Mortgage Lenders (CML) said Monday.
Loans were originated to purchase 56,000 homes worth £7.5bn (US$12.4bn) in July this year, up from 47,000 houses worth £7.1bn in July 2008.
The US market has seen an influx of first-time homebuyers thanks in part to an $8,000 federal tax credit. In the UK, where there is no such tax incentive, 20,400 first-time homebuyers purchased homes in July, up 18% from June 2009 and 22% from July 2008.
But the bigger push was from "home movers," or buyers that had already purchased a home in the past. There were 35,700 home movers in July, up 28% from June 2009 and up 17% from July 2008.
More than 75% of UK mortgages were fixed-rate loans, and the average rate was 4.7%.
“It's tempting to call the turn in the mortgage market at this point, and there is certainly concrete evidence that lending for house purchase is increasing,” said CML economist Paul Samter. “But there are still constraints affecting the lending industry's capacity to fund increased lending, as well as less consumer motivation to remortgage for the time being. The overall lending picture is likely to stay relatively subdued for some time, especially as the wider economy is far from robust as yet.”
Remortgaging, or mortgages originated to refinance loans, is still weak, the council said, and at £14.5bn, gross lending is grew for the second straight month in July, but was still down 42% than in July last year.
Write to Austin Kilgore.
Nearly 130 real estate owned (REO) homes in Washington DC, Maryland, Virginia and West Virginia will go on the auction block this weekend, and 14 of the auctions will occur at the property being sold, auctioneer Hudson & Marshall said.
Over 50 homes will be auctioned in DC alone. The homes that aren’t being auctioned on site will be sold at a series of auctions at various hotels in the region throughout the weekend. Six homes will be auctioned on Hudson & Marshall’s Web site. Prospective buyers can also make an offer on a home online before the auction.
The sellers will pay for the title insurance, and winning bidders are required to make a $2,500 deposit on any auction they win. Hudson and Marshall said REO properties typically sell at a 15 to 20% discount.
“Slowly, home sales have been picking up and buyers are responding to the historically low prices and jumping back into the market. With prices this low, there really has never been a better time to purchase a home, particularly foreclosed property because buyers get so much value for their money,” said Hudson & Marshall principal Dave Webb.
Write to Austin Kilgore.
Three new banks joined the Home Affordable Modification Program (HAMP), according to the transaction report for the Troubled Asset Relief Program (TARP).
HAMP provides cap incentives to servicers for the modification of delinquent loans or loans on the verge of default. The program adjusts the caps based on performance. Since the Obama Administration launched the program in March 2009, HousingWire reported that participating servicers offered more than 570,000 modifications and started more than 360,000 trial modifications.
US Bank National Association received $114m in cap incentives, according to the TARP report. Central Florida Educators Federal Credit Union and CUC Mortgage Corporation also signed agreements with the US Treasury Department, receiving caps of $1.25m and $4.35m respectively.
With the new additions, 53 HAMP servicers now receive $22.2bn in total cap incentives, up from $20.6bn in August.
Last week, a House committee held a hearing to determine if HAMP would reach its target of helping 3-4m homeowners and starting 500,000 modifications by Nov. 1, 2009. In his testimony, Michael Barr, the Treasury assistant secretary for financial institutions reported that HAMP was on track to reach 4m borrowers over the next three years.
Write to Jon Prior.
More than 100 Chicago-area houses, condos, townhouses and multi-family houses that have been recently foreclosed on will go up for auction Saturday, with some bids opening at $4,000, auctioneer Zetabid said. Buyers can also make an offer on any of the properties before the auction via the auctioneer’s Web site.
The auction will be conducted live at Chicago’s McCormick Place Convention Center, and prospective bidders can also participate over the Internet. Most of the homes are priced between $50,000 and $150,000, Zetabid said, and more than half are located in Chicago’s city limits. The remaining homes are in nearby suburbs.
“The Chicago market offers tremendous home-buying opportunities for both owner-occupants and investors,” said Zetabid chairman Bob Bellack. “Even with the recent increase in home sale activity, many properties are still selling as much as 50% below their price at the peak of the market.”
Zetabid is a venture between the Los Angeles Times Media Group, GoIndustry-DoveBid and CataList Homes.
Write to Austin Kilgore.
A look at the stories on HousingWire’s weekend desk…with more coverage to come on bigger issues:
Monday marks the year anniversary of the collapse of securities firm Lehman Brothers, an event widely considered the christening failure of the current crisis. The American Bankers Association, in light of the anniversary, launched a new page on its Web site dedicated to cataloging the event and providing outside resources for a comprehensive background of the year of crisis in the financial industry.
The crisis continued Friday as regulators shut down another three banks, bringing the running total to 92 failures so far in 2009. Friday's failures will cost the federal deposit insurance fund an estimated $2.02bn and puts more than $8bn of assets on the line for sale or disposition.
The Office of the Comptroller of the Currency shut down Corus Bank and named the Federal Deposit Insurance Corp. receiver. The FDIC entered a purchase and assumption agreement with MB Financial Bank, which assumes all $7bn of the bank's deposits at a 0.2% premium. It also assumes $3bn of Corus' $7bn in assets–mainly cash and marketable securities. The FDIC retains the remaining assets for disposition and plans to sell "substantially all" of them in a private placement transaction that should occur within 30 days of Corus' failure. All told, it will cost the FDIC's deposit insurance fund an estimated $1.7bn.
The Washington Department of Financial Institutions shut down Venture Bank. The FDIC entered an agreement with First-Citizens Bank & Trust Co., which assumes all $903m of the bank's deposits and approximately $874m of the bank's $970m of assets. The FDIC retains the remaining assets for later disposition and entered a loss-sharing agreement with First-Citizens on approximately $715m of the assets. The failure is estimated to cost the FDIC's insurance fund $298m.
The Minnesota Department of Commerce shut down Brickwell Community Bank. FDIC entered a purchase and assumption agreement with CorTrust Bank, which assumes all $63m of deposits at a 0.1% premium. It also purchases "essentially all" of the bank's $72m of assets; it entered a loss-sharing agreement with the FDIC on $65m of Brickwell's assets. The failure will cost the FDIC's deposit insurance fund an estimated $22m.
The FDIC, as part of its loss-sharing agreement with acquirers of failed banks, as of Friday is encouraging temporary reductions in mortgage payments — or "forbearance agreements" — for borrowers that are unemployed or underemployed. FDIC chairman Sheila Bair had this to say on the program:
"With more Americans suffering through unemployment or cuts in their paychecks, we believe it is crucial to offer a helping hand to avoid unnecessary and costly foreclosures. This is simply good business since foreclosure rarely benefits lenders and would cost the FDIC more money, not less. This is a win-win for the borrower, who can remain in his or her home while looking for a new job, and the acquiring institution, which continues to receive payments on the loan. Ultimately, by reducing losses under our loss-share agreements, this approach helps reduce losses to the FDIC as well."
The FDIC is encouraging temporary forbearance plans, in which the loan payment is reduced to an affordable level, for at least six months in cases where unemployment or underemployment are the primary reason for default. The losses associated with lower monthly payments would not be covered under the loss-sharing agreement, but the losses arising from long-term modifications or ultimate foreclosures or short sales are covered.
Two class-action law suits involving mortgage pass-through certificates are pending before the US southern district court of New York. The suits were filed on behalf of purchasers of mortgage pass-through certificates issued by Structured Asset Mortgage Investments II and Bear Stearns Asset-Backed Securities. The suits allege the use of misleading registration statements and other information between March 2006 and September 2007. The complaints claim registration statements included false information regarding underwriting standards, property appraisals, loan-to-value and debt-to-income ratios on underlying pools of mortgages.
"As a result of these misstatements and omissions, the Certificates were secured by assets that had a much greater risk profile than represented in the Registration Statement, and the Nationally Recognized Statistical Ratings Organizations (the 'NRSRO' or 'Ratings Agencies') assigned superior credit ratings to the Certificates as a result of defendants' failure to disclose the underwriting defects and appraisal manipulations," according to a statement by the office of Cohen Milstein Sellers & Toll.
Cohen Milstein represents the New Jersey Carpenters Health Fund in the case against Bear Stearns, while Couglin Stoia represents the Pension Trust Fund for Operating Engineers in the case against Structured Asset.
Write to Diana Golobay.
While the economic outlook is brighter than it was one year ago, Fannie Mae (FNM: 0.00 N/A) will continue its efforts to promote the housing market, and will expedite its help to warehouse lenders that provide funding to small lenders.
“We’re providing faster funding to lenders so that they get cash immediately after closing to continue funding loans,” Fannie Mae president and CEO Michael Williams said in a speech to the Exchequer Club this week.
Fannie Mae purchases loans from small lenders and packages them into mortgage-backed securities, but previously it could take a month or longer for the lender to get the funds from that sale. With Fannie providing the payment immediately, the lender can turn around and extend more loans to consumers faster.
Today Fannie, along with its government-sponsored enterprise brother Freddie Mac (FRE: 0.00 N/A), provide about 70% of the mortgage market’s total liquidity, with the Federal Housing Administration (FHA) providing an additional 20% and private institutions take care of the rest. That’s a big change from the peak of the housing boom, Williams said, when private institutions provided 60% of the liquidity and the GSEs and FHA providing a combined 40%.
During the past year, Fannie Mae has provided $700bn in market liquidity, helping 1m borrowers buy homes, 2m homeowners refinance their mortgages, and enabled lenders to construct or rehabilitate more than 460,000 rental housing units.
“I would say that the patient is out of intensive care – but still has a very long road ahead to a clean bill of health,” Williams said.
But there are still other challenges facing the housing market. Williams said one in 10 homeowners has missed at least one mortgage payment and one in 25 US homes is in foreclosure. Williams acknowledged it’s reasonable to expect an increase in foreclosures later this year as those suspended by the various moratoria resume and the backlog of foreclosures continues to be worked out.
“As more properties come onto the market, that’s going to make it harder for home prices and the market overall to recover completely,” he said.
While Fannie Mae and its servicer partners are trying to help homeowners avoid foreclosures, there are additional challenges. Servicers are increasing capacity to handle more modification requests, but William said only 29% of borrowers who received a Fannie Mae solicitation letter have responded.
In response, Fannie Mae is taking a more direct approach to reaching borrowers, mainly by holding regional workshops and events in some of the markets hit hardest by the housing crisis.
When modification isn’t an option, Williams said Fannie is making it easier to process short sales and deeds in lieu of foreclosure for distressed borrowers.
Treasury Department and housing officials are in the process of finalizing a federal incentive program that will encourage servicers to pursue short sales and deeds-in-lieu of foreclosure.
Write to Austin Kilgore.
A report from Amherst Securities Group indicates programs that support short sales could be the most effective loss mitigation approach, as they minimize loss severity.
Amherst researchers also said the Hope-for-Homeowners (H4H) program is a “powerful alternative” to the Home Affordable Modification Program (HAMP).
Amherst researchers point to H4H’s ability to mimic the impact of short sales, such as a one-time loss on the loan, which provides a softer loss severity than foreclosure sales.
“In all cases, the loss severity on the short sale is 15-20% less than on the foreclosure sale,” Amherst researchers reported.
Borrowers completing the H4H program become re-equified and refinanced into a new Federal Housing Administration-insured mortgage, while HAMP provides capped incentives to servicers to modify mortgages in danger of foreclosure. The US Treasury Department then adjusts the HAMP incentive caps based on the level of actual participation.
Plans for the “new and improved” H4H program could be released within the next two months, resolving enough issues to maximize the net present value of loans in bank portfolios but “unlikely” to be used for loans in private label securitizations, according to the report.
“This is a superior alternative to either the HAMP modification or foreclosure,” Amherst researchers reported.
Even though borrowers would make the same payment under the two programs, 31% of their income, Amherst expects higher success rates with H4H because the borrower is re-equified and re-underwritten to make sure he or she qualifies for the loan, and H4H extinguishes the second mortgage.
Servicers and investors agree that HAMP is particularly less useful to pay-option adjustable-rate mortgages (ARMs) borrowers because of the difficulty to reduce payments from their current levels. HAMP’s 40-year term extension doesn’t help many of the option ARM mortgages that are already at a 40-year term. Also, these borrowers have mortgages that are less affordable, on average, than any other product type, according to the report.
“Once the new H4H program is implemented, we expect portfolio lenders to make considerable use of the program,” Amherst researchers reported.
Treasury and housing officials are in the process of finalizing a federal incentive program that will encourage servicers to pursue short sales and deeds-in-lieu of foreclosure. Details may arrive within weeks, spurring servicer participation in short sales, according to Treasury sources.
Write to Jon Prior.
US real estate investment trusts’ (REITs) access to unsecured debt is slowly improving this year, particularly in recent months, Fitch Ratings said.
Fitch said 62% ($4.2bn) of the $6.7bn in unsecured bond issuance this year occurred after June 30 and that REITs raised $1.5bn in equity offerings in the same time period. So far this year, REITs have raised $14.4bn in equity issuance. Fitch noted, however, that bond issuance activity remains concentrated among only selected issuers.
Fitch said 10 companies executed 15 REIT unsecured bond transactions, 10 of which occurred after June 30.
Consolidated unsecured debt as a percentage of total debt decreased to 58.6% as of June 30, down from 65% as of March 31. Fitch said most REITs with investment-grade ratings have liquidity surpluses over the next two and a half years.
The improved access to capital is driven by general improvement in the financial markets and the ability of REIT management teams to quickly tap into capital markets.
The slight improvements are important to note, Fitch said, because of continued strains on the commercial mortgage-backed securities (CMBS) market and the reduction in secured lending from pension funds, insurance companies and other lenders. But where available, Fitch said these lenders are favoring REITs.
Write to Austin Kilgore.
Commercial mortgage-backed securities (CMBS) posted the sixth consecutive month of positive excess returns in August.
It marks the longest streak of such returns since December 2006, according to Barclays Capital’s monthly CMBS review. CMBS remains one of the best performing sectors across Barclays’ US aggregate index.
The August rally was heaviest in the first half of the month, but overall CMBS credit performance deteriorated at a steady pace. The rate of delinquency more than 30 days rose to a 4.76% as loss severity continued to rise across all sectors.
“The worst performing sector this month rotated back to multifamily, followed by hotel,” Barclays fixed income researchers said. “Vintage-wise, delinquency is led by recent vintage loans. Delinquencies appeared to be driven by lease rollovers and high levels of mezzanine debt.”
Year-to-date new issue supply of US CMBS remained low overall in August compared with year-ago levels.
The second legacy CMBS Term Asset-Backed Securities Loan Facility (TALF) funding received $2.3bn of bids, of which $2.1bn were accepted in the month. Barclays noted surprise that $2bn of bids were rejected, and suggested the disclosure of more extensive details on the acceptance/rejection process to ease investor uncertainty.
“For now, we retain our neutral stance on the basis but may look to turn positive if we approach key non-policy related technical support levels for potential re-REMIC creation,” researchers said. “We remain cautious on subordinate tranches.”
TALF may not do enough to relieve the commercial mortgage market, and a clearinghouse of lower tranches of CMBS is becoming necessary, according to Ross Prindle, managing director of the Real Estate Services practice at independent financial advisory and investment banking firm, Duff & Phelps.
Write to Diana Golobay.
An independent filmmaker posing as a pimp and an associate posing as a prostitute used undercover camera equipment to film ACORN Housing employees in Baltimore allegedly explaining how to obtain a mortgage to purchase a home to start a brothel, including lying to the Internal Revenue Service (IRS).
ACORN calls the entire incident a smear campaign, with the video being an unfair representation.
The video appears to show two ACORN Housing employees explaining how the “pimp” and “prostitute,” respectively played by filmmaker James O’Keefe and his associate, Hannah Giles, may falsify tax returns to satisfy lending requirements. When the duo tells the ACORN Housing employees they intend to bring underage girls from out of the country to staff the brothel, they are seen to encourage the pair to claim them as dependents and take child tax credits.
The video is available on YouTube and the Biggovernment.com blog and is viewable below.
ACORN Housing released a statement today denouncing the two employees, who have since been fired.
“While no transaction took place – no loan documents were signed or submitted, no bank loans were arranged, no new business was established – this is not how we behave,” the statement said.
The statement also said the video is misleading because the filmmakers attempted to execute their plan at five other ACORN Housing offices and were turned away and, in some cases, ACORN Housing employees notified police.
“It is part of a long-term plan to smear ACORN Housing for political reasons and provide entertainment in the process,” the statement said.
Write to Austin Kilgore.
Posted in Commentary | 2 Comments »