Archive for September, 2009
After three and a half years of a negative stance on the future of housing, Michael Rehaut, an analyst at JPMorgan (JPM: 37.21 -0.75%), sees the housing market currently past its trough and driving toward recovery over the next 24 months.
During the downturn, supply rose and demand dropped as a variety of buyers left the market. Today, supply seems “more manageable” and demand is beginning to reemerge, according to the research.
With the market’s stabilization, Rehaut reported that builders will demonstrate growth, which has been a historical catalyst for recovery, and home prices will approach the end of the current period of decline.
While Rehaut said he is impressed by the current rally in homebuilder stocks, he reported that the surge is well below prior recoveries that followed a recession. The top six builders’ stock fell 86% from an '05 peak and gained 105% from the low in March, compared to the 55% and 66% losses during recessions in 1982 and 1990 and the respective rallies of 171% and 486%, according to the report.
But the currently rally will continue to surge upward and will even surpass the gains of those last two periods, the report noted.
Over the next 24 months, analysts do not expect housing starts to make a quick upturn toward historical averages while they are still 31% below Q308 levels, which is prior to the fall of Lehman Brothers and 60% beneath their 25-year average.
HousingWire reported that housing starts remain down 29.6% from August 2008, according to a study by the US Department of Housing and Urban Development (HUD). Despite the slowdown in completions, housing starts are approaching a bottom if they have not reached one already, according to Brad Hunter, the chief economist at Metrostudy.
The JPMorgan report indicates housing starts can see a “moderate recovery” as they have usually rebounded with GDP growth, which the economic team at JPMorgan expects to see through 2010.
Builders will first show order growth and share gains in Q409 of 4%, according to the report, followed by a wave throughout 2010 to 27% by the end of the year, driven by modest improvements in the pace of sales and community growth.
Write to Jon Prior.
Oxford, Miss.-based mortgage technology company FNC launched a new property valuation software system.
The Web-based Collateral Investigator product integrates three FNC analytics software products that users can access through a unified portal.
The software provides information on sales activity, information to identify foreclosures and flips, and localized neighborhood statistics for appraisers, application reviewers and underwriters, FNC said.
“Bringing these three products together is a critical move that we hope exploits what our products are capable of as well as making them more accessible to potential clients,” Collateral Investigator product manager Karen Mogridge said in a statement.
Write to Austin Kilgore.
Honolulu-based mortgage software developer PCLender.com will integrate its products with those of Mequon, Wis.-based mortgage software developer Mortgagebot through a referral alliance the two companies announced Monday.
The two companies’ products use Web-based technology to implement the services they provide. Because the products, known in the industry as “software-as-a-service,” are managed and accessed through the Internet, they are easily upgraded, the companies said.
Salt Lake City-based Mountain America Credit Union, an organization with a $2.8 billion-asset portfolio and 322,000 members with branches throughout the southwest, implemented the combined systems in its mortgage origination department.
“Our new alliance with PCLender enables even more banks and credit unions to gain easy access to mortgage point of sale technology that can make them more competitive — and more profitable,” said Mortgagebot chief marketing officer Dan Welbaum.
Write to Austin Kilgore.
Global commercial real estate service provider The Situs Companies is acquiring the special loan servicing business of Global Servicing Solutions Germany, a joint venture between Ocwen Financial (OCN: 13.96 +1.53%) and Merrill Lynch.
The acquisition is part of the company's move into the distressed loan servicing and debt advisory business. It brings Situs' total servicing and surveillance global platform to more than $19bn.
Situs acquires the business through its German affiliate. The acquired firm will be branded Situs Global Servicing and bears ratings from Standard & Poor's (S&P) and Fitch Ratings.
"Situs' commitment to put the service back into the loan servicing business allows us to focus on best of class customer service in a market that has been overwhelmed by mounting delinquencies, which have resulted in overall declining customer satisfaction," said Joe Kastrup, managing director and head of Situs European Servicing, in a statement on the acquisition.
Rising delinquencies affects not only customer satisfaction, but overall performance of the securitization vehicles backed by the commercial real estate loans.
On an industry-wide performance basis, S&P indicated in a report this week that the performance of European commercial mortgage-backed securities (CMBS) remains pressured along with a "soft" employment landscape, frozen credit and depressed capital values in the commercial real estate market.
European CMBS loan performance continued to reflect the effects of asset value and income deterioration as more loans became delinquent, breached covenants and moved into special servicing in August.
Write to Diana Golobay.
The Federal Housing Finance Agency’s (FHFA) monthly House Price Index increased 0.3% on a seasonally adjusted basis from June to July.
For the prior 12 months ending in July, US home prices fell 4.2% and the index is 10.5% below its April '07 peak. The FHFA said the July '09 index is approximately at the March '05 index value.
Regionally, the Pacific division — which includes Alaska, California, Hawaii, Oregon and Washington — experienced a 1.6% increase in monthly price changes, the most of any region. But for the last 12 months ending in July, the region experienced a 9% decrease, second only to the Mountain division, which saw a 9.8% decrease.
The Mountain region — Arizona, Colorado, Idaho, Nevada, New Mexico, Montana, Utah and Wyoming — experienced a 0.3% monthly increase in July, the first such increase since April.
The East South Central division (Alabama, Kentucky, Mississippi and Tennessee) experienced a 0.9% monthly decrease in prices, the biggest decline of any region. Prices in the area are down 1.7% over the 12-month period.
The only region to see an increase over the 12 months prior to July was West South Central (Arkansas, Louisiana, Oklahoma and Texas), which experienced a 0.1% increase. But the region saw prices slip 0.2% in July.
Write to Austin Kilgore.
[Update 1: Clarifies location of Campbell Communications]
A new study estimates the $8,000 first-time homebuyer federal tax credit resulted in 357,000 additional home sales so far in 2009.
The study, released by Campbell Surveys, a division of Washington, DC-based marketing and public relations firm Campbell Communications, conducted surveys of real estate agents and calculated the figure by comparing the rate of first-time buyers during the first two months of the year both before and after the tax credit was instituted.
The monthly rate of first-time buyers increased from 32% in January and February to 43% every other month of the year except July, when it was 42%.
Campbell Suveys then, based on the number of homes sold according to research from the National Association of Realtors (NAR) and the US Census Bureau, assigned the number of homes first time buyers purchased and the number of homes above the 32% threshold to arrive at the 357,000 figure.
In its own estimate, NAR said the credit brought 350,000 first-time homebuyers into the market. Moody’s Economy.com put the figure at 400,000 in its own study.
The tax credit is scheduled to expire on Nov. 30, but legislation introduced in the Senate would extend the credit for an additional six months.
Write to Austin Kilgore.
HousingWire sat down with Greg Dennis, vice president at MDA Lending Solutions, during the Five Star Default Servicing Conference and Expo in Fort Worth, Texas to talk about valuation practices for default servicers. He took a break from the conference in the leather chairs on the second floor of the Omni Hotel, above the fray of brokers, managers and marketers weaving networking webs and looking for stress relief to their distressed property problems.
The lending solutions of TransUnion.com, MindBox and DataQuick fall under MDA Lending Solutions’ umbrella of utilities for orginators, servicers and investors. Using that database, Dennis said that MDA applies their valuations to specific marketplaces across the country.
“It’s not just about understanding what a value is but where is it in the marketplace,” Dennis said.
Dennis was surprised by the energy of the US government to put in controls such as the Home Valuation Code of Conduct (HVCC), and he believes it’s a good thing that the industry is following suit, such as the Federal Housing Administration’s (FHA) recent release of new policies which will remain “consistent” with the Code.
“The controls have been put in play for a while. It’s been in regulations, but it just hasn’t been policed,” Dennis said. “It [HVCC] drives a more objective process.”
Despite the many industry players that believe HVCC hinders the process from moving at a speedier and unrestrained pace, Dennis indicated MDA has seen no significant difference in the speed of the appraisal process.
“We still have customers who are just as happy to receive an appraisal in seven days after HVCC as before HVCC,” Dennis said.
After the Code's introduction, Dennis said that MDA hasn’t seen a big change in the amount of time it takes to complete a valuation.
“It wasn’t like it took three days before and ten days now,” Dennis said.
The most effective businesses place their corporate policies above the platforms offered by MDA. This way, their valuations can be form-fitted to those rules, streamlining the process and shaving time away from adapting the results themselves, Dennis said.
The foreclosure crisis has and continues to streamline the old ways of originating and servicing mortgages, according to Dennis
“This event has forced a lot of servicers to shift toward a more proactive approach to their portfolios,” Dennis said. “We were getting fat and happy, and it’s tough to make such big changes in a short amount of time.”
Write to Jon Prior.
Former Fannie Mae (FNM: 0.00 N/A) executive vice president and chief business officer Robert Levin joins the board of directors at Pleaston, Calif.-based mortgage software developer Ellie Mae.
During his nearly 30-year career at Fannie Mae, Levin was responsible for overseeing and integrating the organization’s single-family mortgage business, mortgage portfolio business, mortgage-backed securities (MBS) business and housing and community development efforts.
Other positions he held at Fannie include chief financial officer, executive vice president of marketing, senior vice president of marketing and mortgage-backed securities, and senior vice president for corporate finance. He also sits on the board of trustees at Morehouse College.
“We’re fortunate to have attracted some of the best minds in the mortgage industry, and as we welcome Robert Levin to the board of directors, we look forward to the contributions that his industry knowledge, experience and foresight will bring,” Ellie Mae founder and CEO Sig Anderman said in a statement.
Write to Austin Kilgore.
Jacksonville, Fla.-based National Infusion Technology’s (NIT) executive vice president Jim Satterwhite is a 20-plus year veteran of the default servicing world. During his tenure at JP Morgan Chase, one of his key responsibilities was running the lender’s outreach services division.
Now Satterwhite’s on the tech side of the default servicing industry, overseeing operations for National Quick Sale, NIT’s Web-based short sale software. But that hasn’t stopped his philanthropic work.
He was the chair of the HOPE Now Alliance subcommittee on short sales, working in Washington DC to facilitate short sales when other loss mitigations efforts are unsuccessful. Three months ago, the firm launched the Home Equity Lease Program (HELP), a non-profit initiative that’s keeping distressed borrowers in their homes. Working with its servicer clients and a network of real estate investors, NIT contacts eligible distressed borrowers and in exchange for short selling their home to an investor, the investor then leases the property back to the former borrower. The investor makes a commitment to not sell the property for a certain period of time. In some cases, if a borrower’s financial situation improves, the investor will sell the property back.
In an exclusive sit-down with HousingWire during the Five Star Default Servicing Conference, Satterwhite said the program’s benefits are two-fold. For borrowers, it minimizes the disruption to families, avoids a foreclosure on their credit records and keeps a roof over their heads. Investors know they have a tenant with a greater stake in the home’s well-being and the program eliminates the time it takes to find a tenant when they purchase a property. Mortgage servicers look at delinquency cases as fitting in one of two categories, retention, which are resolved with loan modifications or payment plans, and non-retention — exit strategies like short sales and deeds-in-lieu of foreclosure. But the HELP initiative makes the non-retention strategy (short sale) a retention strategy by keeping people in their homes.
NIT’s National Quick Sale software helps real estate agents process short sales faster by streamlining the application process. The Web-based software has lender requirements in place and through automated quality control systems, lets agents know when a required document is missing via e-mail, phone call and text message.
Satterwhite said the biggest inaccurate or missing document in short sale applications in pay stubs. They’re usually not the most current or not included at all. National Quick Sale’s quality control mechanisms will red flag the application before it goes to the servicer to keep the application from being denied.
Write to Austin Kilgore.
Fitch Ratings updated its report on Mexican residential mortgage-backed securities (RMBS) based on performance data as of July 31.
Akin to the effect of unemployment on US RMBS performance, the economic slowdown and unemployment landscape in Mexico continues to affect RMBS, the ratings agency said. Despite the hardship, 70% of the more than 80 Mexican RMBS Fitch rates retains original ratings.
"While collateral performance has deteriorated, Fitch believes the capital structures for many of the transactions remain resilient," Fitch said in a statement.
Fitch downgraded 21 RMBS-related tranches and two bonds backed by RMBS so far during 2009. Four tranches remain on Fitch's rating watch negative. Fitch assigned rating outlooks to 71 Mexican RMBS tranches, 46 of which received a stable outlook and 25 of which received a negative outlook.
Certain factors affect the performance, including vintage, Fitch said. Older vintages outperform '07 and '08 vintages, for example.
Loan-to-value (LTV) is another major determiner of payment behavior, Fitch said, indicating loans with original LTV (OLTV) lower than 60% perform nearly four times better than those with OLTV greater than 80%. Those with 60% or lower OLTV experience a 1.59% delinquency rate 180 days plus past due, compared with a 6.22% delinquency rate among loans with OLTV greater than 80%.
Write to Diana Golobay.
