Archive for October, 2009
Nigel Brazier joins Acqura Loan Services, a Plano, Texas-based specialty servicing and loss mitigation service provider, as president of the company.
Brazier brings 25 years experience in financial, risk, operations and business development and will lead the firm’s growth objectives. He joins Acqura from Fannie Mae’s (FNM: 0.00 N/A) National Servicing Organization, where he served as managing director.
He has also served as senior vice president of business development at Select Portfolio Servicing as well as various positions at GE Capital Mortgage Services for 18 years.
Brazier holds a bachelor’s degree in accounting and a master’s degree in finance from Miami University.
Write to Austin Kilgore.
The US speculative-grade default rate swelled in Q309 as the economy continued to work its way through recession, unemployment remained high and loan performance remained weak, but analysts expect a sharp decline by this time next year, according to a report from Moody’s Investment Services.
Moody’s analysts project the default rate of issuers reached 12.9% in Q309 on varying types of loan collateral from mortgages to automobiles. The quarterly US default rate rose from 11.5% in the previous quarter and spiked from 3.2% at this time last year, according to the report.
But analysts expect US speculative-grade issuers to peak at a 13.5% default rate in Q409 before falling sharply to 4.4% by the end of the Q310.
“Moody's baseline model forecast for sharply declining default rates over the next year assumes a sustained modest economic recovery with the US unemployment rate reaching a peak of 10.5% in 2010," said Moody's director of corporate default research, Kenneth Emery.
Emery added that the forecast remains consistent with previous credit cycles when default rates fell to the historical average of 5% 12-to-18 months after its peaks in 1991 and 2002.
The global speculative-grade default rate hit 12% in Q309, a jump from 10.6% in the previous quarter. Last year, the global default rate held at 2.8%, according to the report. European default rates climbed to 9.3% in the third quarter from 6.4% in Q209 and an increase from 0.7% last year, according to the report.
Write to Jon Prior.
Foxcode Real Estate, a Miami-based asset manager specializing in private real estate investment funds, announced its plans to raise $50m for a new fund that will invest in multifamily commercial real estate.
Robert Willis, Fred Dupuy, Sean Quinn and Phil Cicio will manage the fund. The group’s experience ranges from real estate restructuring and financing matters, including assessment, acquisition, development, management, operations, and exit strategies, the company said.
The fund will acquire cash-flowing properties at below market values, to produce high current income for investors, and realize capital appreciation for investors through appreciation of underlying properties. The fund managers anticipate initially investing in Florida, Massachusetts and other eastern US markets.
“Our fund structure offers a risk mitigation strategy that enables investors to own a smaller piece of a larger portfolio of properties,” said Foxcode president Robert Willis. “Big picture fundamentals are the perfect storm for our Fund — prices, interest rates, inflation, and rental demographics.”
Write to Austin Kilgore.
Plaza Home Mortgage entered into an exclusive partnership with StreetLinks National Appraisal Services.
Plaza Home Mortgage is a San Diego-based national mortgage banker. StreetLinks is an Indianapolis-based appraisal management company (AMC).
StreetLinks will provide compliant and warranted valuation products to Plaza's wholesale operations, beginning October 12.
As HousingWire previously reported, StreetLinks announced an initiative to ensure the geographic competence and proximity of its appraisals with a $1m “performance guarantee.”
Write to Austin Kilgore.
Buyers paid a median of 3% below the last listing price for properties in August. While that amounts to $6,525 in savings for homebuyers, it’s less than the median 3.3% — $7,018 — buyers paid below asking price in July, according to the latest Zillow Real Estate Market Report.
Sellers are continuing to cut prices on unsold homes. Sellers of nearly 25% of all properties listed on Zillow.com reduced their asking price at least once, with a median reduction of 6.6% off the original listing price.
Buyers paid the most off listing price in the Vero Beach, Fla. metropolitan statistical area (MSA) with a median 8.9% — $20,974 — off the last listing price. Buyers in the Naples, Fla. MSA paid 8% less than list price.
But in two California markets, the El Centro and Stockton MSAs, buyers paid a median 2.2% ($2,479) and 1.3% ($2,515) respectively above listing price.
"Tighter supply in some markets is translating into less of a discount off listing price,” said Zillow chief economist Stan Humphries. “Unfortunately, the brisk spring and summer home shopping season is drawing to a close now, and with foreclosures on the rise again, inventory levels will likely head back up in the coming months, leading buyers' negotiating power to regain the ground it lost in August.”
John Burns Real Estate Consulting also indicated Wednesday the volume of inventory in the foreclosure pipeline “will certainly drive home prices down even further when they are sold.”
Write to Austin Kilgore.
Senate lawmakers continue to hear industry and regulator concerns this week over the future of the mortgage finance market and possible reform to both agency and private-label securitization industries.
The Senate Committee on Banking, Housing and Urban Affairs at a hearing Thursday considered a key issue, the role of government in supporting housing finance through post-conservatorship mortgage giants Fannie Mae (FNM: 0.00 N/A) and Freddie Mac (FRE: 0.00 N/A).
The consensus among lawmakers varied during the hearing, from committee chairman Christopher Dodd (D-Conn.) urging an extension of higher loan limits in a forthcoming US Department of Housing and Urban Development (HUD) appropriations bill to Sen. Bob Corker (R-Tenn.) calling to do away with the government-sponsored enterprises (GSEs) entirely and return to private sector support of the securitization market.
Despite the government's positive impact through supporting the GSEs so far, government intervention should be limited in the future as private capital returns to housing finance, Federal Housing Finance Agency (FHFA) acting director Edward DeMarco told the committee.
FHFA conservatorship of the GSEs helped reduce the risk by limiting mortgage activity to more prudent standards of credit quality among borrowers, he said. The industry can be maintained outside of government intervention, DeMarco added, but it requires structures that foster competition, freedom of exit and entry. The industry must return to traditional underwriting, and investors want to see risk distributed appropriately.
Despite the intervention of the FHFA, he indicated the GSEs still face losses and poor performance of mortgages.
"I am concerned about the continued increase in serious delinquency rates" of US mortgages, including among prime mortgages, DeMarco said.
Despite these rising delinquency rates, the servicing system within private-label securitization creates "thorny barriers" to modification, Patricia McCoy, a law professor at the University of Connecticut School of Law, told a Senate subcommittee on securities and investments Wednesday.
McCoy urged lawmakers to facilitate modification of loans within securitizations by altering tax laws. For example, she suggested taxing securitized trusts unless the trusts provide for "ironclad" incentives for loan workouts.
Any reforms pursued by lawmakers should not, however, stifle sound securitization practices, said George Miller, executive director of the American Securitization Forum (ASF). He indicated accounting standard changes and capital rules may render it "prohibitively expensive" to securitize, and instead reccomended improbing the basic infrastructure of the system.
Loan-level data enhancements would make risk more transparent and encourage accurate ratings, Miller told lawmakers. He added that a mortgage loan that fails to meet underwriting criteria should be removed from securitization to be returned to the banks much like a consumer would return a defective product to a store. This would ensure originators retain a "meaningful and economic" stake in the quality of loans sold for securitization.
Other witnesses at the hearing spoke more forcefully about the proposed 5% credit risk retention by securitizers.
Andrew Davidson, president of risk analytics provider Andrew Davidson Co., said there are "superior alternatives" to the Administration's recommended 5% retention. He recommended establishing a certificate of obligation coupled with penalties to ensure soundness of securitizations, as well as licensing and bonding mortgage brokers and lenders.
Christopher Hoeffel, executive committee member of the Commercial Mortgage Securities Association (CMSA), said that while keeping "skin in the game" is important to ensuring the quality of securitizations, a 5% risk retention may hamper the securitization market.
He also said he was concerned sweeping regulatory reform of the securitization industry in the wake of the subprime mortgage implosion may apply a "one-size-fits-all" treatment to the commercial mortgage-backed securities (CMBS) market. Hoeffel indicated he does not oppose reforms, but urged lawmakers to tailor reforms to address the needs of various asset classes.
Write to Diana Golobay.
Interest rates for 15-year fixed-rate mortgages (FRMs) and five-year adjustable-rate mortgages (ARMs) are at the lowest levels in the history of Freddie Mac’s (FRE: 0.00 N/A) weekly mortgage rate survey.
The 15-year FRM interest rate was 4.33% with an average 0.7 point, Freddie said. That’s down from 4.36% one week ago and 5.63% one year ago. It’s the lowest average rate for the 15-year FRM since Freddie Mac started tracking the product in 1991.
Bankrate.com’s index, which tracks large US banks and thrifts, put the 15-year FRM rate at 4.6%, down 4bps.
The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.35% with an average 0.5 point, Freddie said, down from last week’s average of 4.42%. It’s the lowest average rate Freddie has recorded since it began tracking the product in 2005. A year ago, the five-year ARM averaged 5.90%.
Bankrate.com put the five-year ARM average rate at 4.66%, down 3bps from the week prior.
Long-term mortgage interest rates were also down this week in the two national surveys.
The 30-year FRM averaged 4.87% with an average 0.7 point for the week ending Oct. 8, according to Freddie Mac’s weekly survey. That’s down from last week’s rate of 4.94% and last year’s rate of 5.94%. It’s the lowest the Freddie Mac survey has been since the week ending May 21, 2009, when the rate was 4.82%.
“Compared to a year ago, consumers could shave almost $134 off their monthly mortgage payments on a 30-year fixed-rate loan for $200,000 by refinancing,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Such low rates are spurring mortgage demand.”
Bankrate.com’s mortgage index had the 30-year FRM at 5.22% with a 0.34 point, down 3bps from 5.25% one-week prior, marking the sixth straight week of declines. One year ago, the index was 6.2%; four weeks ago, it was 5.4%.
Write to Austin Kilgore.
Triad Guaranty, a mortgage insurer, reached an agreement to sell its information technology and operating platform to Essent Guaranty, a new mortgage insurer that provides capital to the housing finance system.
For $30m, Essent acquires all of Triad’s proprietary mortgage insurance software and a substantial amount of the supporting hardware, along with other assets. The first $15m is fixed, and the additional half adjusts on Essent’s ability to write a minimum amount of insurance in the future, according to the release.
Triad will still hold obligation for the risks insured under its current contracts, and some information technology and operations employees expect to join Essent, according to the release.
The agreement includes Essent continuing to provide information systems maintenance and services to Triad, which will still directly manage loss mitigation and claims during its run-off. Loss management, quality assurance and corporate personnel will be retained.
"While preserving our control over loss mitigation and claims processing to protect our policyholders during run-off, Triad stakeholders benefit from the proceeds generated by the sale of the platform and reduced costs to service our run-off book of business going forward,” says Ken Jones, president and CEO of Triad.
Mark Casale, the president and CEO of Essent adds: “The acquisition of Triad's operating platform is the next major step in the formation of Essent's mortgage insurance business, which is being created to support qualified borrowers who can afford a home, but may not have the funds for a large down payment.”
Write to Jon Prior.
Representatives of the real estate agent and land title industries testified in Congress that an extension of the $8,000 first-time homebuyer tax credit is the best tool for US housing markets to recover.
American Land Title Association (ALTA) president Mike Pryor called for not only the extension of the deadline to the credit, but also an effort to remove the income restrictions and the requirement that buyers be a first-time home purchaser.
“Incentives like low interest rates and a limited, first-time homebuyer tax credit ensure that revenue and employment losses are not as bad as they could be. Congress should take simple, common sense steps to remove barriers to growth in the title industry and prevent additional barriers from being created,” Pryor told the House Small Business Committee.
Representatives from the National Association of Realtors (NAR) also testified at the hearing. NAR regional vice president and NY broker Joseph Canfora testified that according to association data, 355,000 to 400,000 purchases were attributed directly to the credit.
“The more robust the credit and the greater its duration, the greater the chance that the housing market can perform its traditional role of helping the economy move out of a recession,” Canfora said.
Canfora also said that the tax credit helped reduce housing inventory. Noting that a balanced market typically has a six- to seven-month supply of homes. In February, when the credit was enacted, the US market had a 9.1-month inventory, Canfora said. In August, the inventory was at an 8.2-month supply.
National Association of Home Builders (NAHB) chairman Joe Robson, a builder in Tulsa, Okla., told the committee extending the tax credit would help alleviate the over supply of homes and create more demand for builders, providing a boost to the sector.
"We estimate that this would increase home purchases by 383,000 in the next year and help mitigate the foreclosure crisis by whittling down inventory at all levels of the housing market, setting the stage for a full recovery," said Robson. "This stimulus alone would create nearly 350,000 jobs over the coming year, which is exactly what the economy needs right now."
Robson added builders are losing sales because appraisals are being deflated by distressed property sales used to evaluate regional comparable sales.
“Any prospective buyer would recognize the differences in the value between a well-kept home and a distressed property that is damaged or not properly maintained. The same should be true of an appraiser,” Robson said.
As HousingWire previously reported, a survey conducted by Harris Interactive on behalf of Zillow.com showed nearly one-third of prospective first-time homebuyers said an extension of the tax credit would have “no influence” on their decision to purchase a home in 2010.
Write to Austin Kilgore.
As new housing finance regulations take effect and even more are set for the beginning of 2010, a number of questions have arisen on the impact to Federal Housing Administration (FHA)-insured loans.
A bill that calls for an increase to the down payment requirement for FHA loans from 3.5% to 5% would also prohibit borrowers from including closing costs in the principal of the mortgage.
But, is this provision actually a practice already in place?
Many originators have told HousingWire they’ve operated for the last year under a directive from the Department and Housing and Urban Development (HUD) prohibiting the practice.
According to Department of Housing and Urban Development Mortgagee Letter 2008-23, dated Sept. 5, 2008, the Housing and Economic Recovery Act of 2008 amended the National Housing Act to eliminate “down payment simplification” — the variable loan-to-value (LTV) limits that were based on the combination of the property value and the average closing costs of the state where the property is located — federal housing commissioner Brian Montgomery wrote.
“Closing costs may not be used to help meet the minimum 3.5% down payment requirement. Closing costs are not considered in the mortgage amount/down payment calculation for purchase money mortgages,” Montgomery wrote.
A spokesperson for the bill’s author, Rep. Scott Garrett (R-NJ), said the changes brought by the Housing and Economic Recovery Act of 2008 prohibits certain sources of funds for closing costs (like seller-funded closing costs), not stop the financing of closing costs into FHA loans. The new bill would insert language that would codify the prohibition, the spokesperson said.
But Garrett’s bill amends language in a different subsection than the section changed by the Housing and Economic Recovery Act of 2008, and it is unclear how the legislation would clear up what lenders are telling HousingWire is a confusing situation.
While Garrett’s proposal is still a bill and not law, changes to the Truth in Lending Act (TILA) that put restrictions on prepayment penalties and require escrow accounts on higher-priced loans, among other things, went into effect this month.
In a panel discussion on the TILA changes at the CRA & Fair Lending Colloquium in New Orleans this week, the topic of prepayment penalties came up and a panelist brought up the question that if FHA interest penalties can be considered prepayment penalties, is FHA is in violation of TILA? The panel didn’t resolve the question, further highlighting the confusion felt by the industry.
Write to Austin Kilgore.
