Archive for November, 2009
Mortgage pricing software developer Mortech is moving forward with its plans to provide technology to a new mortgage-pricing feature on Google (GOOG: 579.98 +2.09%).
The “Adwords Comparison Ads” device is a test product Google is developing. The targeted ad product can be adapted for a variety of search terms, but currently is in limited release to certain users and is only available to a limited number of advertisers in the mortgage/refinance space.
In a post on Google’s official blog, the search giant explains how the ad device works when a user enters the term mortgage in its search engine.
“Comparison Ads improves the ad experience on Google.com by letting users specify exactly what they are looking for and helping them quickly compare relevant offers side by side,” Google wrote on its blog. “Users searching for ‘mortgage’ on Google.com may see a promotion from Comparison Ads prompting them to select the type of loan they are looking for and to compare various rates.”
A user who clicks the ad is sent to a second page. The user can then enter the principal of the mortgage, borrower credit rating, down payment and information on the location of a prospective property and the search provides additional real-time price quotes for a number of mortgage products provided by different lenders.
HousingWire has learned this search device was developed through a partnership with Mortech — the same partnership that resulted in a lawsuit (which was later settled) from LendingTree.com earlier this year.
Mortech officials declined to comment on its relationship with Google, but the partnership is only one of a number of partnerships Mortech is developing to implement its real-time mortgage pricing software into other online services.
One such arrangement will implement Mortech searches with the real estate Web pages of a major newspaper corporation that has as many as 70 newspapers.
Mortech president Don Kracl told HousingWire the newspaper company is one of a dozen firms with a real estate-oriented Internet presence that are implementing the company’s pricing services.
“Prices change so rapidly in the mortgage industry, so we’re working on some applications that take the instant pricing ability that we already have and tying that together with real estate listings, multiple listings, for sale by owner and MLS Web sites,” Kracl said.
The landscape for real estate Internet is changing, Kracl said. With more consumers using Internet tools to search for anything from camcorders to homes or mortgages, Kracl said, consumers are savvier and want more from their home buying Internet experience.
“Somewhere around 80% of all real estate transactions begin on the Internet. But consumers go there and there’s so much bad information on the Web and it’s a bait and switch mentality, so they get frustrated and end up going to the brick and mortar across the street,” Kracl said.
“Consumers are pretty smart characters and they’re starting to figure out that the low rate on a lot of these displays is not who’s getting most of the traffic,” he added. “People realize if it’s too good to be true, it probably is, they get it. If somebody’s rates are a half percentage point lower than everybody else, people know something’s up.”
The newspaper relationship is appealing to Mortech because many newspapers already have an extensive real estate Web presence, but don’t offer Internet-based avenues for initiating the mortgage origination process. Kracl believes Mortech’s technology can fill that gap.
“The tie-in with newspapers that’s so appealing to us, if you go look at their realty classified ads, most of them do a nice job with them. They’re viewed by a lot of people, they’re dynamic, they’re well presented. We think we can tie into that with the real-time responses to their audience,” he said.
While Mortech is expanding its presence with other companies, it’s also still providing technology for the online loan aggregator’s mortgage search engines. Now that the lawsuit’s been resolved, Kracl described his company’s relationship with LendingTree as “business as usual,” and one that will continue to grow.
Write to Austin Kilgore.
The federal bank and thrift regulatory agencies issued a final rule that mortgage loans modified under the Home Affordable Modification Program (HAMP) retain the risk weight appropriate to the loan before modification.
Under HAMP, the US Treasury Department allocates funds to participating servicers for the modification of loans on the verge of foreclosure.
The final rule (available to download here) clarifies loans currently in the HAMP three-month trial period before reaching permanency qualify for the risk-based capital treatment.
Under the agencies’ general risk-based capital rules, loans that are fully secured by first liens and meet certain criteria are risk-weighted at 50%, referring to how much a risk a bank takes on and ultimately how much it could get back if the loan defaults.
After comments from banking organizations, the agencies modified the rule to specify that a mortgage originally risk weighted at 50% and has either entered a HAMP trial or even reached a permanent modification will keep the 50% risk weight.
And past due and nonaccrual loans that receive a 100% risk weight can return to a 50% risk weight if the borrower demonstrates he or she can make the new payments over a "sustained period of time." However, the agencies have not established the specific time frame because of varying borrower characteristics.
Write to Jon Prior.
Innovative Real Estate Investment Services (IRIS) Value, a valuation services provider, released an update to its Web-based software system.
The software automates the enforcement of compliance rules during the broker price opinion (BPO) submission process and provides an automated BPO system.
“The system automation significantly increases quality while also reducing our operating costs. These savings are passed directly to our clients through pricing,” said operations manager Jeff Miller.
IRIS Value is a privately held company based in Sarasota, Fla.
Write to Austin Kilgore.
The Federal Deposit Insurance Corp.'s (FDIC) board of directors voted Thursday to require insured institutions to prepay quarterly insurance assessments for slightly more than three years.
FDIC expects to collect around $45bn in prepaid assessments, which will strengthen the cash position of the Deposit Insurance Fund at a time when weekly bank failures take substantial hits on the fund.
Institutions must prepay their estimated risk-based assessments for Q409 through Q412 along with the assessment for Q309, FDIC said in a financial institution letter. This prepayment, due December 30, will not immediately affect bank earnings, FDIC said, as the industry's liquid reserve balances totaled more than $1.3trn as of June 30.
"I am pleased, but not surprised, by the industry's willingness to step up to the task of rebuilding and strengthening the cash reserves of the fund," said FDIC chairman Sheila Bair. "In September, I expressed confidence that the industry was up to this challenge and the industry has not disappointed."
The FDIC first proposed the rule in late September to require the prepayments. Since that time, the FDIC received various comments on the proposal.
Bair added: "The comment letters we received over this past month made clear that the FDIC and the industry are of the same mind: we will do whatever it takes to maintain the public's confidence in insured institutions and we remain committed to maintaining the independence of the Deposit Insurance Fund through direct industry funding."
Write to Diana Golobay.
The downturn in the financial markets has led to the broad-based slashing of credit default ratings for many assets. But some of these investments have the potential to continue to generate cash flow now and in the future.
To guide investors on the prospect of a distressed asset’s recovery, Fitch Ratings has a “Recovery Rating,” (RR) to complement its traditional rating system. Fitch uses a scale of one to six for its recovery rates for all bonds rated at triple-C or below or more than 21,000 US RMBS.
Former investment-grade residential mortgage-backed securitizations (RMBS) with the same downgraded credit default rating may have different likelihoods of recovering. While distressed, the principal and interest recoveries on some assets can be substantial, Fitch said.
Write to Austin Kilgore.
[Update 1: Adds information provided by FHFA]
Ed Kelley still comes to work in the same Washington DC building in the same office as he did when he was the independent inspector general (IG) of the Federal Housing Finance Board (FHFB).
But with the dissolution of the FHFB and the creation of the Federal Housing Finance Agency (FHFA), his ability to audit the new entity is severely limited. The long simmering issue boiled over publicly earlier this week, when the Huffington Post first broke the story of Kelley's predicament, alleging that the FHFA itself had fired its own inspector general.
When the FHFB was dissolved on July 30, 2009 and the FHFA was established in its place, the former FHFB employees were automatically given similar positions at the same grade and pay level at the new agency.
One position that wasn’t filled however, was Kelley’s job as inspector general. By law, inspectors general are appointed by the president and confirmed by the US Senate. So while Kelley technically works for the FHFA, it’s as the associate director for internal audit, reporting to the office of FHFA acting director Edward DeMarco, not as head of an independent auditing authority to oversee the operations of the government-sponsored enterprises (GSE), and the 12 Federal Home Loan Banks.
Inspector general offices are empowered to conduct criminal investigations and provide protection to whistleblowers.
“Independence is the core difference between the two offices. An internal audit office reports to management of the agency and are accountable to management,” Kelley told HousingWire. “An inspector general reports to Congress and president and to the head of the agency. That dual reporting requirement and transparency is what provides the basis for the independence of the IG’s operations.”
In a statement, the FHFA said it sought the guidance of the Department of Justice and its own Office of Legal Counsel (OLC) on whether Kelley, as inspector general of FHFB, could serve as interim inspector general. The two legal teams said the agency could not appoint its own inspector general, a decision Kelley doesn’t necessarily agree with.
“My authority with the FHFB is gone, that agency’s abolished, and under the OLC’s opinion, we never had authority in this new agency to operate, even though for a number of months, we were going back and forth on the legal opinions,” Kelley said. “I have my view and OLC offered their view that we all have to live with.”
FHFA officials said the director and inspector general are the only presidentially-appointed positions within the agency, but referred questions regarding the timeline for appointing an inspector general to the White House. The White House press office did not immediately respond to HousingWire’s request for comment.
Kelley said he believes Congress intended for FHFA to have an independent inspector general from day one, but the “statute which created this agency did not get it done.”
“That was Congress’ intent, but the law is the law,” Kelley said. “Being someone who, over the years, has had responsibility for holding accountable to their compliance, the law and regulations, I’d be the last one to say if the law doesn’t allow it, we should still do it.”
In a recent Senate Banking Committee hearing, DeMarco faced questions from Sen. Jim Bunning (R-Ky) on his agency’s lack of an inspector general.
“I'd like to be very clear I want an inspector general. I would like it, and I would like it now, because I in fact believe, Senator, that inspector generals can be very important elements of the functioning of a federal regulatory agency,” DeMarco told the committee, adding he has communicated with the Obama administration on when an inspector general would be appointed, “multiple times.”
Write to Austin Kilgore.
The Federal Deposit Insurance Corp. (FDIC) on Thursday approved an interim rule providing a "safe harbor" for the transfer of assets related to certain types of asset-backed securities (ABS) from insured depositary institutions.
The transitional safe harbor applies to all securitizations issued before March 31, 2010, shielding the assets from seizure by the FDIC in instances where the insured depositary institutions fail.
The resolution clears some uncertainty regarding the treatment of transferred assets under pending accountancy rule changes for off-balance sheet securitizations, according to Fitch Ratings.
Fitch indicated it can now assign ratings to these assets higher than those placed on the originating entity, thanks to the interim rule.
The rule grandfathers existing transactions and those issued before March 31, 2010, if the transactions would be compliant with the existing securitization rule and would qualify as a Generally Acceptable Accounting Principals (GAAP) sale for reporting periods before Nov. 15, 2009, Fitch said.
"Fitch believes the Interim Rule effectively addresses a key concern that results from existing transactions losing GAAP sale status following implementation of the new accounting rules," Fitch said in a statement Thursday. "Prior to today's clarification, the comfort previously provided by the FDIC — that it would not seek to recover financial assets transferred in connection with a securitization or participation — had been jeopardized by SFAS 166 as one of the preconditions of the Securitization Rule was that the transfer qualify as a sale under GAAP provisions."
The American Securitization Forum (ASF) also issued a statement supporting the securitization rule extension.
“ASF welcomes the FDIC Board’s unanimous action this morning to extend application of the FDIC’s securitization rule to provide needed certainty to existing securitizations as well as those issued over the next few months," ASF said Thursday. "The application of this rule had been cast in doubt by accounting standards changes that will take effect for reporting periods after November 15th, 2009."
ASF adds: "Today's action by the FDIC Board will resolve this uncertainty and will allow bank securitizations of credit card and auto loans to resume, which in turn will make additional credit available to consumers at a critical time for the American economy.”
Write to Diana Golobay.
The temporary increased maximum loan limits originally set to expire at the end of the year will remain in place through 2010, according to the Federal Housing Finance Agency (FHFA).
The limits for conforming jumbo loans eligible for purchase by the government-sponsored enterprises (GSEs) was set at $417,000 for single-family homes by the Economic Stimulus Act of 2008 (ESA) and the Housing and Economic Recovery Act of 2008 (HERA), but were set to expire at the end of 2009.
Loan limits for two-, three-, and four-unit properties in 2010 will also remain unchanged from 2009 levels — $533,850, $645,300, and $801,950, respectively, FHFA said — as well as higher loan limits set for high cost areas, along with certain statutorily designated locations, including Alaska, Hawaii, Guam and the U.S. Virgin Islands.
Write to Austin Kilgore.
Wolters Kluwer Financial Services released a new network to consolidate current financial laws, regulations and commentary on one research platform.
The Compliance Resource Network, now available to US financial institutions provides rulebooks, laws and regulations covering securities, fund management, banking, commodities and derivatives.
The network also includes global jurisdictions. Users can access rules and regulations from the US, UK, Canada, Australia and news from Asia and the European Union.
"Firms that previously only needed to be aware of the laws and regulations in one country are now responsible for making sure they are meeting requirements of jurisdictions around the globe," said Mark Coronna, executive vice president for securities and insurance at Wolters Kluwer Financial Services.
Write to Jon Prior.
Housingwire recently reported that the unemployment rate crossed the 10% barrier, and readers pointed out that the figure wasn’t high enough by some measurements.
In most reports unemployment statistics come from the U-3 numbers calculated by the Bureau of Labor Statistics. Often missing from these reports is the U-6 unemployment curve, which measures the amount of workers who are underemployed. The U-6 number hit 17.5% in October.
However, folks in Pembroke, Ill. don’t care about the U-6 figure. The unemployment rate in Pembroke reached 46% in October, according to media reports.
It’s a small town of about 3,000 people, and the number should fall. High school graduates are leaving. Burned-down houses are ignored. The only businesses are gas stations, and one just recently closed. There is no police department.
Help could be on the way for Pembroke, though, when the town applied for millions of dollars in federal grants to build low-income housing.
People in Pembroke would like to use the U-6 number, too.
Write to Jon Prior.
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