Archive for November, 2009
Bank of America (BA: 74.55 -1.01%) gave mortgage relief to 100,000 eligible homeowners with certain Countrywide subprime and option-adjustable-rate mortgages (ARM) under its National Homeownership Retention Program (NHRP).
BofA started the program 10 months ago. According to its most recent quarterly progress report, more than 31,000 customers received the assistance in Q309.
Between Dec. 1, 2008 when the bank launched the program, and Sept. 30, 2009 BofA offered mortgage modifications to 143,271 homeowners, according to the report.
In addition to offering loan modifications, the NHRP guidelines provide relocation assistance and foreclosure relief programs in 41 participating states. BofA provided more than $40m in relocation assistance to its customers and to tenants of eligible properties.
Under the Home Affordable Modification Program (HAMP), BofA started 136,994 trial modifications, the most of any participating servicer on a gross volume basis but 14% of its eligible portfolio.
Through HAMP, the US Treasury Department allocates capped incentives for the modification of loans on the verge of foreclosure. BofA received a potential capped incentive of $967m under HAMP and holds 990,628 eligible loans – the most of any participating servicer.
“Through this and other programs, Bank of America has provided relief through completed and trial modifications to more than 600,000 customers since the beginning of last year,” said Jack Schakett, credit loss mitigation strategies executive for Bank of America Home Loans.
Write to Jon Prior.
Year-over-year sales volume increased 4.2% in the nine-county San Francisco Bay Area and the region experienced its first year-over-year gain in median sales price in nearly two years in October, according to MDA DataQuick.
There were 7,933 new and resale homes and condos sold in October, up from 7,879 sold in September and up 4.2% from 7,613 in October 2008.
The median price paid rose to $390,000, up 6.8% from $365,000 in September and up 4% from $375,000 in October 2008. The last time this region experienced a year-over-year price increase was in November 2007, when it gained 1.5% over November 2006. The median price is at its highest point since it was $395,000 in July, but is 41.4% below the $665,000 peak reached in June and July of 2007.
MDA DataQuick said the improvements come as the distressed property inventory is drying up and properties sold for $500,000 or more took a greater share of sales activity.
“The regional price statistics mainly reflect the fading of the foreclosures and the uptick in high-end activity in recent months,” said MDA DataQuick president John Walsh. “Down at the neighborhood level, different things are happening depending on location, but the big picture is that prices in many areas appear to be bouncing along bottom. Whether that bottom is permanent is the subject of endless debate right now.”
Sales over $500,000 accounted for 36% of all October sales, up from 34.9% last year and this year’s low of 22.7% reached in January. Sales in the region’s higher-cost counties — Marin, San Francisco, Santa Clara and San Mateo — accounted for 42.2% of October sales, up from 35.3% a year ago.
Foreclosure resales accounted for 31.9% of all sales activity, down from 32.3% in September and 44% a year ago. It’s the lowest level of foreclosure sales since they were at 29.9% in June 2008.
Mortgages backed by the Federal Housing Administration (FHA) accounted for 25.9% of all purchases in October, up from 24.9% in September, 19% last year and less than 1% two years ago.
Write to Austin Kilgore.
Information services firm Experian formed an alliance with Standard & Poor's Fixed Income Risk Management Services (FIRMS) to provide consumer credit information for loan-level mortgage-backed securities (MBS) surveillance.
Experian will connect its consumer credit data with the residential MBS loan-level data feed product from FIRMS, an analytics and research unit separate from S&P's ratings business.
“Securitized loan investors need to be able to drill down to the foundation of each individual loan in their portfolios to gain a truly comprehensive picture of their risk exposures,” said David Goldstein, managing director at FIRMS. “Through our partnership with Experian, we will be able to provide investors with an amazing level of granularity on the fundamental risks in each loan and the ability to benchmark their portfolios against this data.”
An Experian spokesperson told HousingWire the alliance will increase transparency of RMBS and provide risk exposure data to give investors an idea of the propensity for default. The consumer credit data will not be individualized, but instead provided on an aggregated basis, according to the source.
“The goal of our collaboration is to provide investors with the transparency needed to value structured finance products and to make more informed buy and sell decisions,” said Ethan Klemperer, senior vice president and general manager at Experian Capital Markets. “Our partnership with Standard & Poor’s is a critical step in improving market efficiencies needed to restore liquidity and investor confidence.”
Write to Diana Golobay.
In 2008, lenders provided more than $88bn in new financing for multifamily properties, a 40% drop from 2007, according to a report from the Mortgage Bankers Association (MBA).
The top five multifamily lenders in 2008 were PNC Real Estate, Wachovia, Wells Fargo Bank, Capmark Financial Group and Deutsche Bank Commercial Real Estate, according to the report.
Multifamily volume was down in 2008, but Jamie Woodwell, the MBA’s vice president of commercial real estate research, said that there a broad market offered mortgages in the year.
“There is a core group of dedicated multifamily lenders that originated a large number of loans in 2008,” Woodwell said. "In addition, there is a broad group of smaller institutions that each originated a small number of loans, but collectively offered borrowers a wide range of options."
Woodwell added that 26% of lenders who made multifamily loans in 2008 made just one, and two-thirds made five or fewer.
Write to Jon Prior.
DR Horton (DHI: 14.39 +1.91%) posted a net loss of $231.9m, or $0.79 per share, for its fiscal Q409 that ended on Sept. 30, compared to a net loss of $799.9m or $2.53 per share, during the same quarter of fiscal year 2008.
Fiscal fourth quarter — or FQ409 — results were impacted by a $192.6m pre-tax charge for inventory impairments and write-offs of deposits and pre-acquisition costs related to land option contracts the Fort Worth-based builder is abandoning.
The 2009 fiscal year (FY2009) ended with a net loss of $545.3m, or $1.72 per share. The builder experienced a pre-tax charge to cost of sales of $407.7m. In FY2008, the company reported a net loss of $2.6bn, or $8.34 per share.
Homebuilding revenue for Q409 was $1bn and the company delivered 4,810 homes, compared to $1.8bn in homebuilding revenue and 6,961 one year ago. DR Horton delivered more than 16,703 homes in its FY2009, and homebuilding revenue for the year totaled $3.6bn, down from $6.5bn and 26,396 delivered homes for FY2008.
“Our net sales orders in the September quarter reflected a 26% increase compared to the prior year quarter. However, market conditions in the homebuilding industry are still challenging, characterized by rising foreclosures, high inventory levels of available homes, increasing unemployment, tight credit for homebuyers and weak consumer confidence,” board chairman Donald Horton said. “We have continued to adjust our business to the current homebuilding environment by reducing our owned lot position and completed specs, controlling costs and strengthening our balance sheet.”
Horton added: “We have generated positive cash flow from operations in each of the past thirteen quarters, and our unrestricted homebuilding cash balance was $1.9bn at September 30, 2009. Our net homebuilding debt to total capitalization was 36.3% at the end of the fiscal year, and we will continue to focus on maintaining our strong liquidity position and balance sheet.”
DR Horton had a sales backlog of homes under contract of 5,628 homes totaling $1.1bn on Sept. 30, compared to 5,297 homes worth $1.2bn one year ago. Net orders at the end of the quarter totaled 5,008, up from 3,977 one year ago. The cancellation rate was 27% in the quarter.
The firm repurchased $72m of outstanding notes for $72.4m during the quarter. For the year, the company repurchased a total of $380.3m in outstanding notes for $368m. The company will pay a cash dividend $0.0375 per share.
Write to Austin Kilgore.
The rate of existing home sales increased 10.1% in October, the National Association of Realtors (NAR) said.
The seasonally adjusted annual sales rate of existing homes — including single-family, town home, condominium and co-op dwellings — was 6.1m in October, up from a rate of 5.54m existing home sales in September. October’s rate is 23.5% above the rate of 4.94m in October 2008 and is at its highest rate since February 2007, when the rate was 6.55m.
NAR chief economist Lawrence Yun credited the increase to a last-minute push of first-time homebuyers trying to close a deal on a home before the credit was set to expire prior to an extension passed in November.
“Many buyers have been rushing to beat the deadline for the first-time buyer tax credit that was scheduled to expire at the end of this month, and similarly robust sales may be occurring in November,” he said. “With such a sale spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer.”
The nation’s inventory of existing homes decreased 3.7% to 3.57m, representing a seven-month supply of homes at the current pace. That’s a decline from an eight-month supply in September. Unsold inventory is down 14.9% from one year ago. The months supply of homes hasn’t been this low since February 2007, when it was at a seven-month supply. Distressed properties accounted for 30% of sales in October.
“The supply of homes on the market is now at the lowest level in over two-and-a half years — we’re getting closer to a general balance between buyers and sellers,” Yun said.
The national median existing-home price for all housing types was $173,100 in October, down 7.1% from October 2008. Low prices, along with historically low mortgage interest rates are fueling the increase in sales, Yun added, but he warned prices could increase in 2010.
“With the abnormal drop in home prices over the past few years, the price-to-income ratio has fallen below the historic trend line,” Yun said. “This is adding to the buying power of the typical family, with affordability conditions this year at the highest on record dating back to 1970, but prices are beginning to flatten and are poised to rise next year.”
The single-family segment of home sales increased 9.7%, while the condo and co-op segment was up 13.2%.
Existing sales in the Midwest increased 14.4%, leading all regions of the country in October, followed by increases in the South (12.7%), Northeast (11.6%) and the West (1.6%).
Write to Austin Kilgore.
Values of commercial real estate will continue to fall before a slight rebound and a gradual recovery, according to a new report from Moody’s Investor Service.
Commercial property values fell 42.9% from their peak in October 2007 and will remain stunted far longer than cash flows, according to the report. Analysts further predict that values will decline 45% to 55% from that peak in months ahead.
"We believe that valuations will rebound off the bottom and settle in for the longer term at levels 30%-40% below the market top as liquidity and investors return to the sector and property cash flows begin to recover," said Nick Levidy, Moody’s managing director.
Analysts at Moody’s see cash flows that back commercial mortgage-backed securities (CMBS) will recover slowly over the next several years. However, refinancing risk on CMBS will grow as maturities near on bonds issued during that 2007 peak.
Moody’s anticipates downgrades of up to three levels for many tranches of 2006 to 2008 vintage CMBS, but ratings on the most senior bonds should remain at current levels.
“Cash flows for properties with short-term lease structures, such as hotels and multifamily, will likely hit bottom in 2010 or early 2011,” said Levidy. "The bottom for office, retail and industrial properties will take longer to form.”
Specifically, demand in office buildings will continue to decline in anticipation of an increase in US unemployment into next year. Moody’s expects the market to reach bottom in 2011 when employment rates rise and tenants determine their need for space.
Analysts expect the vacancy rate for multifamily properties to peak within the next few months, and the rental rate growth will stall until 2011, hinging on unemployment like other markets.
Government programs to encourage home ownership, a recent decline in single family home prices and a large number of shadow rentals, which includes condominiums and single-family homes will harm the supply and demand cycle for multifamily housing, according to the report.
"Employment growth is fundamental, for example, to the office property market," Levidy said. "The health of the residential housing market is a key for the multifamily sector and retail properties are greatly dependent on rising consumer confidence."
Write to Jon Prior.
American International Group (AIG: 25.25 +0.44%) re-branded its asset management and investment advisory business to PineBridge Investments. The renaming of the business is part of a transition stage into an independent business.
PineBridge, headquartered in New York, will retain its global operations in 32 countries, specializing in alternative investments, listed equity and fixed income. The business will study risk across various regions, markets and asset classes. Member companies of PineBridge manage more than $88bn in assets as of June 30, 2009.
“The announcement of our new brand name is an exciting milestone, marking a significant point as we transition to being an independent business,” said CEO Win Neuger in a press statement. “We are building on an already strong foundation: our diverse investment capabilities and expertise, and an established culture of success. Now, combined with our new financial partner, we are even more effectively positioned to succeed in our markets, deliver results for our clients and grow our business."
Neuger added: "For our clients, employees and other stakeholders, our new brand will come to stand for partnership, excellence and innovation, and we look to the future with a great deal of enthusiasm and confidence.”
PineBridge said it expects to transition to the new name across global offices and products in coming weeks. The transition is scheduled to complete alongside the sale of the business by AIG.
Write to Diana Golobay.
Although demand should keep asset-backed securities (ABS) spreads tight into Q110, wider spreads in mortgage-backed securities (MBS) will follow the Federal Reserve's exit of a major MBS purchase program in 2010, according to bi-monthly commentary by global asset management firm Smith Breeden Associates.
Agency MBS performed strongly in October, as the Fed continued buying up MBS from Freddie Mac (FRE: 0.00 N/A), Fannie Mae (FNM: 0.00 N/A) and Ginnie Mae. Performance in the highest coupons lagged under concerns arising from increasing involuntary prepayment speeds.
"As usual, the largest buyer during the month of October was the Federal Reserve. Banks joined in the fray as buyers after having reduced agency MBS positions last quarter to take profits," wrote Timothy Cuneen, a principal at Smith Breeden, in the e-mailed commentary.
"It is likely that the banking community will continue to be net buyers of agency MBS," Cuneen added. "They are generally sitting on a lot of liquidity, and mortgages offer a liquid, low risk-weighting security with positive carry over their low cost of funds. On the other side, origination levels have come off significantly since this spring despite mortgage rates remaining low."
Despite some short-term positive signs for MBS, early 2010 will see spreads widen and rates increase as the Fed ends its agency MBS-purchasing program, according to Smith Breeden.
Another federal program is just beginning to pick up. Public-Private Investment Program (PPIP) managers began buying residential MBS this month after closing initial rounds of funding. Six PPIP managers raised $3.5bn in private capital, which combined with the equity and debt provided by the Treasury Department wields $14bn in aggregate buying power.
On the consumer ABS side, the Term Asset-Backed Securities Loan Facility (TALF) for newly issued commercial MBS is also just starting to pick up with requests for nearly $72.25m of federal loans to buy new-issue CMBS.
Issuance of TALF-eligible securities had fallen in recent months as issuers are able to issue new securities outside the program's help, according to Smith Breeden. TALF investors are exiting positions with "extraordinary gains" sometimes in excess of 50%, according to Jeffrey Wheeler, another principal at the firm.
Write to Diana Golobay.
A look at the stories on HousingWire’s weekend desk…with more coverage to come on bigger issues:
George Miller, the executive director of the American Securitization Forum (ASF) since 2004 will resign the position as of Dec. 16, 2009. At that time, the deputy executive director, Tom Deutsch will become acting executive director.
Participants in the US securitization market advocate their common interests on legal, regulatory and market practice issues on the ASF professional forum. ASF members span more than 330 firms.
The ASF board of directors expects to name a new, permanent executive director before the ASF 2010 industry conference held in Washington, D.C. from Jan. 31 through Feb. 3.
Ralph Daloisio, the chairman of the ASF board, said he was sorry to see George depart and wished him success in his new endeavors.
"George played an instrumental role in the formation and management of what has become an effective, credible and well-respected industry association. ASF will benefit from his leadership and management skills even after his departure, in the form of the strong organization and very capable staff team that remains," Daloisio said.
Miller said he had been honored and privileged to serve ASF since its inception.
"While I have decided to pursue other opportunities at this stage of my career, I firmly believe in the importance and value of securitization to our financial markets and broader economy, and intend to remain professionally connected to the business, albeit in a different capacity," Miller said.
Bank of America Merrilll Lynch Research Group hired Chris Flanagan as head of US mortgage and structured finance research. He will be responsible for developing its research products.
Flanagan joined from JPMorgan Chase where he was co-head of securitized products research.
"Chris adds formidable expertise to our U.S. Mortgage and Structured Finance Research franchise and we are delighted to have him on board,” said Michael Maras, head of BofA Merrill Lynch Global Credit Research. “His in-depth knowledge in all aspects of asset securitization, mortgages and modeling will enable us to significantly enhance our existing research capabilities and grow our range of innovative products and solutions."
The Florida Office of Financial Regulation closed the Commerce Bank of Southwest Florida with $76.7m in deposits and $79.7m in assets. They cost the Federal Deposit Insurance Corp.’s (FDIC) $23.6m.
Central Bank of Stillwater, Minn. entered into a loss-share transaction on roughly $61m of Commerce Bank’s assets. The closing marks the 124th closing of an FDIC-insured bank this year and the 12th in Florida.
The amount of servicers participating in the Home Affordable Modification Program (HAMP) reached 76 over the weekend.
Through HAMP, the US Treasury Department allocates capped incentives to participating servicers for the modification of loans on the verge of foreclosure.
Quantum Servicing Corporation, based in Tampa, Fla., will receive a potential cap incentive of $18.9m. Hillsdale County National Bank from Hillsdale, Mich. receives a potential cap of $1.6m. Los Alamos National Bank from Los Alamos, New Mexico, receives $700,000 in incentives and QLending of Coral Gables, Fla. receives $20,000 through HAMP.
Since its launch in March 2009, the Treasury has allocated $27.3bn in allocated funds.
UK property group British Land reported interim profits sank last year but underlying trends remain positive. Its CEO, Chris Grigg, described the first half of 2009 as a tale of two quarters and added “investors have returned to the market.”
In more good news from the UK market the CEO Land Securities, Francis Salway, said that the market cycle had turned and value trends had also moved from negative to positive. Land Securities is the largest Real Estate Investment Trust (REIT) in the UK with a commercial property portfolio of nearly £10bn ($16bn).
Media reports out of Japan indicate that a new bill passed the lower house of the country’s parliament, making lenders ease repayment terms for small companies and individuals.
Still needing to pass the upper house, the bill would require lenders to extend payment deadlines and for small companies and homeowners.
Write to Jon Prior.
