Archive for October, 2009
JP Morgan Chase (JPM: 37.21 -0.75%) earned nearly $3.6bn in Q309, or $0.82 per share, up from more than $2.7bn in Q209 $527m in Q308.
According to analysts at the Royal Bank of Scotland, Wall Street expected JP Morgan to announce at $0.51 per share.
Bank-wide revenue was $28.8bn, a record year-to-date revenue for the banking giant. But JP Morgan said credit costs remain high, particularly in the consumer lending and card services loan portfolios, and it added $2bn to its consumer credit reserves, bringing its total credit reserves to $31.5bn, or 5.3% of total loans.
“While we are seeing some initial signs of consumer credit stability, we are not yet certain that this trend will continue,” JP Morgan Chase chairman and CEO Jamie Dimon said. “Despite this near-term uncertainty about the path of the economy, our strong capital position and underlying earnings power will enable us to continue to invest in our businesses, creating a lasting franchise for many years to come.”
JP Morgan Chase approved 262,000 new trial modifications between the Making Home Affordable Modification Program (HAMP) and its own modification program, resulting in lowered payments for 90% of borrowers with modified mortgages.
In the bank’s retail financial services (RFS) division, net income was $7m, down from $57m in Q208 and $15m from Q209, due to a decrease in mortgage origination revenue, an increase in the provision for credit losses, higher non interest expense and lower loan balances, JP Morgan said.
Subprime mortgage net charge-offs were $422m, compared with $273m in the prior year. Prime mortgage net charge-offs were $525m, compared with $177m in the prior year.
Write to Austin Kilgore.
First American CoreLogic launched a national fraud database to enhance the fraud detection abilities of its software and help clients combat mortgage fraud.
The National Fraud Database includes application and transaction data of more than 80m loan applications, representing 65% of all loan annual applications, aggregate fraud reports from 35 lenders and investors, with performance data history dating back to 2005.
It will be updated daily with application and lien information from 17 lenders within First American’s Multi-lien Closing Alert Program.
“The best scoring and analytic products stem from and rely upon robust data assets,” said Tim Grace, senior vice president of Fraud Analytics at First American CoreLogic.
“As the number of participants and reporting companies grow, it will make fraud risk more transparent and make it harder for perpetrators to carry out fraudulent activity,” he added.
Santa Ana, Calif.-based First American CoreLogic is the property and ownership information provider subsidiary of The First American Corporation (FAF: 14.98 +0.07%).
Write to Austin Kilgore.
Global DMS launched AppraisalTransfer.com, a no-cost online tool for lenders to securely electronically transfer and receive Home Valuation Code of Conduct (HVCC)-compliant appraisals.
Banks and correspondent lenders can reduce time and expense by eliminating the need to order additional appraisals for a property when a borrower chooses a different lender, the Lansdale, Pa.-based appraisal process management software developer said.
The mortgage broker pays the transfer fee, generally less than $25, and the site runs an automated review and automated valuation model of the appraisal to rank its overall quality.
“Lenders have always determined whether or not they accept transferred appraisals, but with the inception of HVCC, many lenders are now understandably concerned about the risk of accepting an appraisal that was completed without their oversight,” said Global DMS president Vladimir Bien-Aime. “AppraisalTransfer.com solves this issue by providing lenders a way to ensure the appraisals they didn’t oversee were ordered and completed according to HVCC guidelines.”
Write to Austin Kilgore.
Byte Software, a Kirkland, Wash.-based mortgage software developer, integrated the LoanSifter product and pricing engine into its BytePro loan origination software.
The LoanSifter tool includes a point-of-sale loan eligibility and pricing engine, lock desk and rate sheet generator. Byte Software is integrating the Banker Edition of LoanSifter and reduces data input and errors by loan originators.
“LoanSifter’s streamlined, easy-to-read format means originators don’t have to waste time searching through unnecessary numbers and suggestions to get the information they need,” said LoanSifter president Bruce Backer.
“Secondary managers and originators tell us that they are looking for ways to manage risk and efficiently secure more transactions. They understand that integration translates to increased control and immediate answers — two factors that can make the difference in growing your business in a challenging market,” he added.
Byte Software is a wholly-owned subsidiary of real estate settlement services and fraud prevention solutions provider CBCInnovis. LoanSifter provides the banking industry with tools to price, market and manage loans.
Write to Austin Kilgore.
StreetLinks National Appraisal Services, an Indianapolis-based real estate appraisal procurement and management company announced its services are compliant with upcoming requirements by the Federal Housing Administration (FHA) that aim to ensure appraisal independence.
The regulations are similar to those in place through the Home Valuation Code of Conduct (HVCC) for agency-purchased mortgages that were enacted to create a barrier between appraisers and loan originators, but apply to FHA-insured loans. The new FHA loan rules take effect Jan. 1, 2010.
“This will have a big impact on lenders, as did the HVCC agreement," said StreetLinks CEO Steve Haslam. "We've always believed an arms-length, independent process was the only avenue for accurate and unbiased valuations. Our people and processes are perfectly aligned for full compliance."
The FHA guidelines require geographic competency the payment of reasonable fees to appraisers. StreetLinks issued a guarantee of its services, backed by a $1m fund to pay the losses of dissatisfied customers.
Write to Austin Kilgore.
As the industry prepares for the upcoming changes to the Real Estate Settlement Procedures Act (RESPA), mortgage software developer Ellie Mae touted strong industry response to its software that can be configured to handle the new required forms and disclosures.
Ellie Mae announced more than 1,000 lenders implemented or upgraded their loan origination software to Encompass 360.
Encompass 360 is the latest version of the Pleasanton, Calif.-based Ellie Mae’s mortgage management software platform, which was launched in July.
The company said more than 15,000 individual loan origination employees so far used the software to process more than $20bn in mortgage applications.
Write to Austin Kilgore.
PCLender.com, a Web-based mortgage lending platform will use Mercury Network’s Vendor Management Platform (VMP) as its appraisal workflow and management software.
The Home Valuation Code of Conduct (HVCC)-compliant appraisal platform is now integrated into the PCLender.com loan origination software, which eliminates double entry of borrower data and provides regular updates of the appraisal assignment process.
“Mercury Network was the clear choice for our clients because it provides lenders the most flexibility to continue to use their local appraisers while implementing HVCC compliance,” said Lionel Urban, PCLender.com president and CEO. “We believe our implementation of Mercury Network will provide unique advantages for our users.”
Mecury Network is a subsidiary of a la mode, a developer of desktop, mobile and web tools for the real estate and mortgage industries. PCLender.com produces a suite of Web-based software-as-a-service applications for the mortgage industry.
Write to Austin Kilgore.
California Governor Arnold Schwarzenegger signed seven mortgage finance-related bills into state law Monday. The new laws aim to crack down on fraud, set requirements for loan documents and set restrictions on mortgage and reverse mortgage originators.
Senate Bill (SB) 36 regulates the licensing requirements for residential loan originators in compliance with the federal Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act.
SB 237 requires appraisal management companies (AMCs) and appraisers register with the Office of Real Estate Appraisers and subjects appraisers to the provisions of the Real Estate Appraisers’ Licensing and Certification Law.
SB 239 raises the crime of mortgage fraud from a misdemeanor to a felony and makes it easier for prosecutors to obtain fraudulent loan documents to investigate cases.
Assembly Bill (AB) 260 places restrictions on subprime loans and prohibits originators from "steering" borrowers, or encouraging borrowers to buy riskier loan products when they are eligible for affordable products. It also gives state regulatory agencies the authority to suspend or revoke the licenses of real estate lenders and mortgage brokers that violate the state’s lending laws.
AB 329 sets guidelines for reverse mortgages originated for elderly borrowers — those over 65 years old — requiring specific disclosures and offering counseling service referrals. Originators are also prohibited from selling other financial products to a reverse mortgage borrower.
AB 957 gives the buyers of foreclosed property the right to choose local escrow officers to complete transactions. It prohibits the seller of a residential property from requiring the buyer to use an escrow service company or purchase title insurance chosen by the seller.
AB 1160 requires originators to provide borrowers with a mortgage summary document translated in the language the contract was verbally negotiated.
“Fraudulent mortgage practices have become more prevalent as a result of the national foreclosure crisis that negatively impacted California’s housing market and economy,” Schwarzenegger said. “This legislation helps crack down on abusive lending practices by giving law enforcement the tools to effectively investigate mortgage fraud crimes and provides Californians with greater consumer protections to promote homeownership in a safe and accountable environment.”
Schwarzenegger also signed another bill, SB 291, Monday to give regulatory relief to mortgage insurers and greater discretion to regulators in the state.
Write to Austin Kilgore.
The Mortgage Bankers Association is pushing for more uniformity among its members in order to up the pace of mortgage modifications. According to MBA Chief Operating Officer John Courson, at a luncheon held at the institution's conference this week in San Diego, the use of short sales as a way to help struggling borrowers avoid foreclosure is not an entirely positive step for the industry.
"The [former owners] will still need a place to live," Courson said, adding that under government programs, such as the Home Affordable Modification Program, agencies such as Fannie Mae and Freddie Mac should forebear mortgage payments for up to 12 months in the case of borrower unemployment.
Courson is also critical of state mandates, such as in Nevada, where a mediator is required in order to do a modification. The MBA believe that using a third party, at this point in the recession, is only slowing down the rate of modifications perhaps to the detriment of the borrower.
The MBA is putting together a 'think tank' according to chief economist Jay Brinkmann in order to help deal with the shifting distressed borrower landscape., especially considering that most loan in default are 30-year fixed. For instance, there is no point in modifying a mortgage to a 31% debt-to-income ratio if the borrower is earning no income. Indeed, in a panel yesterday a Fannie Mae speaker noted that the agency is struggling to understand changing borrower instinct, such as in instances where a home owner prioritizes their first and even second credit card bills over their monthly mortgage payments.
Courson added that the majority of bad subprime loans "had been dealt with," though the majority of distressed borrowers still avoid contact with their servicers. These borrowers are at particular risk of fraudsters and scams that prey on troubled homeowners.
Write to Jacob Gaffney.
The majority — 60% — of remaining performing borrowers within '06- and '07-vintage residential mortgage-backed securities (RMBS) bear negative home equity, meaning they are underwater on their mortgages and owe more than their houses are worth.
This overwhelming presence of negative equity is hampering sustained improvement in RMBS performance, according to Fitch Ratings.
"[N]egative equity reduces a borrower's inventive to pay their mortgage and limits their options when faced with financial difficulties," said senior director Grant Bailey in a statement.
The rate of previously performing borrowers rolling into delinquency status showed "notable improvement" in the first half of 2009 and stabilized during the summer at an elevated level. The percentage of previously performing borrowers rolling into delinquency "increased modestly" in September, Fitch said.
The rating agency expects US unemployment to peak at 10.3% in the middle of next year, further pressuring current borrowers. House prices will ultimately decline another 10% over the next year.
"Home price figures in recent months were temporarily helped by the reduced share of distressed property liquidations due to foreclosure moratoriums and servicers' increased efforts to qualify borrowers for modifications," Fitch said. "However, the number of distressed borrowers has continued to grow."
The rating agency noted the number of non-agency borrowers 90 plus days delinquent reached 1.66m in September — the highest level on record.
"While increased modification efforts and an extension of the first time home buyer tax credit may help home prices, the ultimate increase in liquidations from the growing distressed inventory will likely cause a further price decline," Bailey said.
Industry sources discuss government intervention programs in the foreclosure issue facing the US and house price declines going into 2010 in the November issue of HousingWire.
Write to Diana Golobay.
