Archive for October, 2009
The Obama Administration announced a new initiative to encourage low mortgage rates and expand resources for low- and middle-income borrowers to purchase or rent affordable housing by promoting lending by state and local housing finance agencies (HFAs).
The HFA Initiative consists of two programs — the New Issue Bond Program (NIBP) and the Temporary Credit and Liquidity Program (TCLP).
“This initiative is critical to helping working families maintain access to affordable rental housing and homeownership in tough economic times,” said Treasury secretary Tim Geithner. “Through the years, many low and moderate income Americans have been well served by state and local HFAs, but the housing downturn has hit these organizations too."
Geithner added: "Through this initiative, the Administration aims to help HFAs jumpstart new lending to borrowers who might not otherwise be served and to better support the financing costs of their current programs – key components in stabilizing the housing market overall.”
The NIBP will provide temporary financing for HFAs to issue new mortgage revenue bonds, according to a joint statement by the US Treasury, the Department of Housing and Urban Development (HUD) and the Federal Housing Finance Agency (FHFA). The Treasury — under authority granted by the Housing and Economic Recovery Act of 2008 (HERA) — will purchase Fannie Mae (FNM: 0.00 N/A) and Freddie Mac (FRE: 0.00 N/A) securities backed by the bonds.
The NIBP will support “several hundred thousand” new mortgages to first-time homebuyers, as well as refinancing for “at-risk, but responsible and performing borrowers” and funding for the development of “tens of thousands” of new rental housing units, according to the release.
In the TCLP, Fannie and Freddie will provide replacement credit and liquidity facilities available to HFAs to reduce the costs of maintaining existing HFA financing. The program aims to relieve financial strains on the HFAs, and the Treasury — again under HERA authority — will “backstop” the facilities by purchasing an interest in them.
Local HFAs are already applauding the initiative as a way to encourage consumer demand for housing.
“Combined with our state-funded down payment assistance, qualified first time homebuyers will be able to take advantage of historically low sales prices on homes in Florida,” said Steve Auger, executive director of the Florida Housing Finance Corporation. “The addition of these new, qualified homebuyers will help reduce the huge inventory of homes that are on the market due to the foreclosure crisis and help to stabilize declining home values throughout the state.”
HFAs will pay a fee to participate in both programs, meant to cover the expected costs to the Treasury and taxpayer, and the fee for the TCLP will increase over time to encourage HFAs to find private alternatives as quickly as possible. In addition, HFAs that issue bonds under the NIBP will be required to prove they can issue bonds to private investors as well, by selling shorter-term bonds in an amount equal to 40% of the HFA’s total bond proceeds. The NIBP will supply the remaining 60% of bond proceeds.
The initiative is designed to be temporary and to encourage HFA growth and housing market recovery. Each program will be sized based on demand, and the HFAs are required to submit proposals to participate in the two programs.
HFAs are entities created by state law that provide assistance for affordable housing. According to federal data, HFAs have helped finance more than 3m affordable rental homes and more than 3m borrowers obtain mortgages, as well as provide housing counseling to prospective borrowers.
Write to Austin Kilgore.
National average home prices rose 6% from August to September, driven by an increase in real estate owned (REO) sales prices and transaction counts, according to a monthly real estate market survey conducted by Campbell Surveys.
Increased demand REO property increased in September. The average price of distressed REO property was $124,500 in September, up from $106,700 in August. Combined with move-in ready REO, distressed properties accounted for 31% of purchase transactions during the month.
The increase comes after a 1% decline experienced between July and August and was fueled by a 16% increase in home purchase transactions month-over-month, according to the survey.
“Our survey statistics are indicating a mini-boom in the housing market,” said Thomas Popik, the survey’s research director. “There’s a confluence of positive factors: historically low interest rates, high demand from first-time homebuyers before the expiration of the tax credit at the end of November, increased affordability, lower inventories of foreclosed properties, and a perception among homebuyers and real estate agents that the market has turned.”
Prices of non-distressed properties remained nearly level, up slightly to $268,200 in September from $267,900 in August. Non-distressed sales accounted for 55% of home purchases. Short sales took a 14% share of the transaction pool.
First-time homebuyers accounted for 42% of home purchase transactions in September, and real estate agents surveyed reported that first time homebuyer traffic was up, while existing homeowner and investor traffic was down. The majority of first-time homebuyers in September purchased move-in ready REO, according to the survey.
The results are based on a national survey of more than 1,500 real estate agents and changes in price and transaction rates are recorded by individual agent’s reported activity.
Write to Austin Kilgore.
While housing start projections for 2009 are down 37.9% from the same period of 2008, research firm Metrostudy expects steady increases in construction starts next year.
Metrostudy expects a total 562,000 housing starts for 2009, down 37.9% from 2008. That includes 438,000 single-family starts, which are down 30% from 622,000 in 2008.
Housing starts increased over the summer, in part due to an increase in demand created by the first-time homebuyer tax credit and a decline in speculative home inventory, said Brad Hunter, Metrostudy’s chief economist and national director of consulting. But, he added, banks are cutting off builder lines of credit, and in some markets, prices are too low for builders to turn a profit.
“We believe that some of the recent gains in housing starts could be given back during the third and fourth quarters of this year if the current tax credits are not extended,” Hunter said. “That said, the forecast for 2010 is for steady increases in starts.”
Metrostudy also reported that homebuilders’ sales and traffic are up, and “traffic quality,” the measure of shoppers touring builder models who actually purchase a new home is also improving, and some builders are experiencing their best sales paces in more than two years.
But the threat of a new glut of foreclosed homes entering the market poses a serious risk for builders, Metrostudy warned, as a wave of properties at distressed prices could impact new home sales.
Metrostudy’s data is compiled from 256 counties in 82 metropolitan statistical areas (MSAs). The US Department of Commerce is expected to release its own housing starts data Tuesday. Hunter expects that data to show an increase in September starts for single-family homes, but a decline in multifamily starts.
Write to Austin Kilgore.
The Financial Services Authority (FSA) on Monday proposed significant changes to the types of mortgage products sold in the UK and the way UK mortgage lenders conduct business in a housing market that shows signs of recovery as average prices increase.
The FSA's proposals, part of a push for "a more intrusive and interventionist style of regulation," were published in a 118-page discussion paper on its mortgage market review (available to download here), which identified forms of irresponsible lending practices and high-risk products.
“The mortgage market has seen extraordinary upheaval over the last 18 months and whilst it has worked well for the vast majority of borrowers, some have suffered great financial distress," said FSA managing director of supervision Jon Pain. "We recognize that we need to bring about a step change in regulation and we need to act now to address the issues we have identified."
The FSA is looking to ban "self-cert" mortgages — similar to stated-income mortgages in the US — by requiring verification of borrower income, according to a statement. The proposals also include imposing mortgage affordability tests and making lenders responsible to asses a consumer's ability to pay.
FSA proposed banning the sale of products that carry "toxic combinations" of characteristics that put borrowers at risk. It also seeks to ban arrears charges in cases where a borrower is already repaying.
The proposals include requiring all mortgage advisers to be "personally accountable" to FSA, as well as extending FHA's scope to include buy-to-let and all loans secured by a house.
The FSA's proposals come at a time when the UK housing market continues to post strong recovery.
UK property database Rightmove saw a 2.8% monthly increase in average house price in October — the largest October rise in six years — and a 0.2% year-on-year gain in average price. Buyer sentiment is improving along with average prices, leading to a shortage of available properties in London, where residential property is scarce to begin with.
"London generally leads the country out of property recessions, as underlying demand remains strong in the capital city," said Rightmove commercial director Miles Shipside in a statement. "Agents report a frenzied market in the best locations with supply at a premium, and buyers competing hard."
Three of London's top five performing boroughs experienced double-digit monthly gains in average price, from 11.4% to 12.6%.
Four of the bottom five performers posted monthly gains ranging from 1.9% to 4.6%. The poorest performing borough, City of Westminster representing central London, posted the only negative monthly change, falling 1% from September's average price.
Write to Diana Golobay.
Federally backed mortgages account for 59% of new home sales transactions with 96.5% to 100% loan-to-value (LTV) so far in 2009, according to the latest John Burns Real Estate Consulting homebuilder survey.
The availability of Federal Housing Administration (FHA), Veterans Administration (VA) and US Department of Agriculture (USDA) residential mortgage financing programs has been critical to the new home market this year, the firm said.
Northern California builders reported the highest use of FHA financing, while Southern Florida builders reported the highest percentage of cash purchases. Southern California builders reported the largest use of jumbo mortgages, but stricter underwriting and higher prices for jumbo loans has constrained sales of move-up homes, said John Burns vice president Jody Kahn.
Nationally, the average unsold, finished inventory per community decreased nationally to 2.7 homes from 3.7 in September, due in part to the sale of speculative homes started in the summer. Southern California, the Northwest and Southern Florida all experienced declines in new home inventory.
The Northeast, Southeast and Northwest regions reported increased starts ranging from 8% to 9%. Southern Florida reported the largest increase in October housing starts. The Midwest, and Southern and Northern Florida all saw declines in starts.
But average net sales per community also declined from 2 to 1.6 homes, on par with levels in June and July 2008. Lower home prices and mortgage rates, along with the first-time homebuyer tax credit are boosting new home sales, but some builders reported losing business to competitors due to a lack of entry-level inventory available to close by the Nov. 30 expiration of the tax credit.
“The good news for builders is that there seems to be momentum behind the effort to extend the federal tax credit and that the FHA is going to become more conservative, but not significantly curtail operations,” said CEO John Burns. “Political winds can change quickly though, so stay tuned.”
More than 260 home building industry executives from public and private companies, representing insight on 86 metropolitan statistical areas (MSAs) and 1,741 communities participated in the October survey.
Write to Austin Kilgore.
The US Department of Housing and Urban Development (HUD) addressed a letter to Federal Housing Administration (FHA)-approved lenders updating claim filings and delinquency reporting requirements for the Home Affordable Modification Program (HAMP).
Through HAMP, the US Treasury Department allocates capped incentives to servicers for the modification of distressed loans. According to the latest progress report from the Treasury, servicers participating in HAMP reached 500,000 trial modifications in progress.
Under the new guidelines for FHA's HAMP, lenders may immediately begin using updated status codes for FHA’s single-family default monitoring system (SFDMS), according to HUD's letter. But lenders must begin reporting the updated status codes in January 2010.
Under the updated Code 39, FHA lenders must report borrowers that have been approved for a HAMP trial payment plan. Code 41 dictates that lenders report borrowers, who have successfully completed the HAMP trial process and have rolled over into the completion stage of the modification.
But some analysts and researchers raised concerns on HAMP’s role in the recovery. The Congressional Oversight Panel (COP), which reviews and reports on actions taken by the US Treasury Department, questioned the permanence of HAMP and whether or not it was designed for the amount of eligible loans servicers are currently trying to modify.
Write to Jon Prior.
Branch Banking and Trust Corp. (BBT: 26.95 -0.33%) earned $157m, or $0.23 per share, during Q309, down from $362m in Q308 despite stronger mortgage banking revenue.
Net income for the year through Q3 is down, $683m in 2009 compared to $1.2bn in 2008.
Nonperforming assets as a percentage of total assets increased from 2.19% at the end of Q209 to 2.48% at Q309’s end. But annualized net charge-offs were down from 1.81% of total assets in Q209 to 1.71% during Q309.
Mortgage banking revenue was $144m in Q309, an increase of 73.5% from Q308. The bank said low interest rates are driving increased mortgage originations, which totaled $6.9bn during the quarter.
Noninterest expenses increased $315m (31.3%) in Q309 compared to Q308, including a $96m in additional foreclosed property expenses. BB&T said the costs are part of the bank’s strategy to limit costs associated with the foreclosure crisis.
BB&T’s provision for credit losses increased from $345m in Q308 to $709m in Q309 and exceeded net charge-offs by $263m. The increase in credit losses was credited to the continued deterioration in housing-related credits, the bank said, specifically in Atlanta, Florida and metro Washington, D.C.
During the quarter, BB&T assumed all of the deposits and acquired certain assets and other liabilities of failed Colonial Bank and in doing so, increased its banking franchise, specifically in Florida and Alabama. The takeover also helped boost the bank’s average loans and leases held for investment by $5.7bn, or 6% of the total $100.3bn. However, the average mortgage loans held for investment declined $1.8 billion, or 10.2%, as the bank said it sold more conforming loans in the secondary market.
Also during the quarter, BB&T issued 38.5m shares of common stock at $26 per share, leading to net proceeds of $963m. The bank said the offering was made to further strengthen BB&T's capital levels after the Colonial Bank acquisition.
Write to Austin Kilgore.
A look at the stories on HousingWire’s weekend desk…with more coverage to come on bigger issues:
The California Department of Financial Institutions closed Bakersfield, Calif.-based San Joaquin Bank and appointed the Federal Deposit Insurance Corp. (FDIC) receiver. Ontario, Calif.-based Citizens Business Bank will assume all deposits of the failed bank. The five San Joaquin Bank branches will reopen Monday as Citizens Business Bank branches.
As of September 29, San Joaquin Bank had total assets of $775m and total deposits of approximately $631m. Citizens Business Bank agreed to purchase “essentially” all of the bank’s assets and entered into a loss-share transaction with the FDIC for approximately $683m of San Joaquin Bank's assets and did not pay a premium for the deposits.
The FDIC estimates the bank’s failure will cost the Deposit Insurance Fund (DIF) $103m. San Joaquin Bank is the 99th bank closed this year.
Democratic state senators in Michigan introduced legislation that, if passed, would require additional lender disclosures and attempt to stop “foreclosure consultant” scams.
The package of bills would require lenders to notify borrowers when a mortgage is sold to a third-party and post foreclosure and loan modification criteria on the Internet. The legislation would also establish “basic qualifications and regulations” for foreclosure assistance providers to deter fraud.
“Reducing foreclosures is one way we can combat blight and the crumbling of Michigan’s once-thriving neighborhoods and stabilize property values and municipal revenues,” said Sen. Glenn Anderson. “There are still too many instances in which a person’s mortgage can get sold right out from under them and they may have no way of knowing who actually owns the rights to their home. That’s wrong and our legislation will fix it.”
A July law created a 90-day moratorium on foreclosures in the state earlier this year and Democrats said the new legislation would protect consumers and open up lines of communication with lenders.
“Trying to avoid a foreclosure can be one of the most agonizing and complicated experiences and we must do everything in our power to protect consumers from scam artists and instead arm them with helpful and relevant information,” said Sen. Gretchen Whitmer. “In doing so, we can help stop foreclosure before it starts and keep families in their homes.”
Federal prosecutors filed charges against a group of 41 real estate professionals, including six lawyers, seven loan officers, three mortgage brokers, an accountant, and a residential property appraiser that prosecutors said fraudulently obtain more than $64m in loans connected to more than 100 residential properties in New York state.
The investigation, “Operation Bad Deeds,” was a joint effort of the Federal Bureau of Investigation (FBI), the Secret Service, the New York State Banking Department, the Department of Housing and Urban Development (HUD) and other law enforcement entities.
The alleged scheme involved the fraudsters targeting distressed borrowers and convincing them to sell their properties or transfer the deeds and fraudulently obtained loans by falsifying mortgage applications and later flipping the houses.
McMonigle Financial, the private real estate investment lender unit of the California-based real estate firm McMonigle Group, launched an investment fund for short-term jumbo bridge loans and super-jumbo construction products with anticipated returns delivering in excess of 15% annually, the company announced.
Fund managers Rod Colombi, Jeff Arnold, and Pete Bender are in the process of raising $150m for the McMonigle Financial Group Fund I that will fund loans to “high net worth individuals in need of private money financing.”
“The jumbo lending market is in desperate need of liquidity,” said group president John McMonigle. “There are plenty of high net worth, high credit quality borrowers who are denied financing due to a lack of traditional income verification. Our goal is to provide these credit-worthy borrowers with viable financing solutions.”
The firm is raising $75m for a second fund, MFG Secured Income Fund I, that returned a more than 10% return during its first month, the company said.
Both investment funds will finance newly originated transactions via a wholesale lending platform.
The office of Idaho attorney general Lawrence Wasden, in coordination with the Idaho Department of Finance, released two digital handbooks for consumers, one on foreclosure prevention foreclosure scams and the second on tips for buying a home.
The 60-page foreclosure handbook explains the foreclosure process in Idaho, explains current state, federal and lender loss mitigation programs, as well as explains common foreclosure scams.
The 45-page home buying handbook provides a guide for consumers, with information on obtaining a mortgage, disclosure information and legal safeguards, as well as information on mortgage fraud.
“These manuals are designed to help Idahoans facing foreclosure in these difficult economic times as well as assist Idahoans interested in purchasing a home avoid the pitfalls that contributed to the housing crisis,” Wasden said. “The information in these handbooks will be extremely useful to people in either of those situations.”
Write to Austin Kilgore.
Researchers at Barclays Capital (BarCap) expect the October facility date for a government loan program to receive an uptick of requests over the last subscription date.
The October 21 Term Asset-Backed Securities Loan Facility (TALF) for commercial mortgage-backed securities (CMBS) will likely see an increase in subscription volume over last month, BarCap said in a research report Friday.
Bid list activity of $4.8bn since the last CMBS-eligible TALF subscription date points to a likely increase in subscription volume over last month. Of this activity, $2.6bn — or 55% — is TALF-eligible, BarCap researchers said.
"This is the highest percentage of TALF-able bid list activity yet," researchers wrote. "We expect an uptick in loan requests versus last month’s $1.4bn; our preliminary estimate is for around $2bn in TALF loans requests in October."
The Federal Reserve 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 legacy CMBS aimed to aid price discovery and provide liquidity for the commercial mortgage market, which faces a credit crisis of its own.
Write to Diana Golobay.
MGIC Investment Corp. (MTG: 4.14 +6.98%) posted a $517.8m net loss in Q309, compared to losses of $115.4m in Q308 and $184.6m in Q209.
The net loss for the first nine months of 2009 was more than $1bn, compared to a net loss of $250m during the same period of 2008.
The firm reported total losses of $971m in Q309, up from $788.3m during Q308, “primarily due to an increase in delinquencies,” the firm said.
New insurance written in Q309 was $4.6bn, compared to $9.7bn in Q308, but that does not include $450m in insurance written for loans refinanced in the Making Home Affordable Refinance Program (HARP), due to these transactions being treated as a modification of the coverage on existing insurance in force, MGIC said.
The company continues to face challenges as it attempts to work out a deal to begin writing new insurance through its MGIC Indemnity Corp. (MIC) subsidiary. The Milwaukee-based company must meet regulatory capital requirements of the Wisconsin Office of the Commissioner of Insurance.
The company said this week Fannie Mae (FNM: 0.00 N/A) approved MIC as an approved mortgage insurer in some jurisdictions and anticipates reaching a deal with Freddie Mac (FRE: 0.00 N/A) in the near future.
Once the Freddie Mac deal is reached, MGIC believes the Wisconsin Commissioner of Insurance will issue a decision on the reactivation of MIC.
Mortgage Guaranty Insurance Corp., MGIC Investment’s primary subsidiary, writes private mortgage insurance for more tan 3,300 lenders and currently covers 1.4m mortgages.
Write to Austin Kilgore.
