Archive for November, 2009
Home sales rose in the six-county Southern California region in October, and while the median sales price was lower, it was by the smallest annual decline in two years, according to MDA DataQuick.
There were 22,132 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties during the month of October. Sales were up 2.8% both on a month-over-month and year-over-year basis. It’s the 16th consecutive month with year-over-year sales increases. The average change in sales volume between September and October is a 1% decline.
Last month was the busiest October since 2006, when 23,745 residences were sold. Since 1988, October sales have ranged from a low of 12,913 in October 2007 to a high of 37,642 in October 2003, MDA DataQuick said.
The firm said some of the deals that closed on September included short sales, which, had they been traditional transactions, would have closed in August or September.
The median price paid was $280,000 in the region, up 1.8% from $275,000 in September but down 6.7% from $300,000 in October 2008. It’s the smallest annual decline since September 2007, when the median decreased 4%. Orange County experienced a 3.9% annual gain in its overall median price last month.
Federal Housing Administration (FHA) mortgages accounted for 38.3% of all of the region’s purchase loans last month, compared with 32.5% last year and just 2% two years ago.
“The government is playing a huge role in stabilizing and, to some extent, reinvigorating the housing market,” said MDA DataQuick president John Walsh. “Its actions have triggered ultra-low mortgage rates, plentiful low-down-payment, FHA financing, an extended and expanded tax credit for home buyers, and programs and political pressure aimed at reducing foreclosures.”
Foreclosure resales accounted for 40.6% of all resales in October, up slightly from 40.4% in September.
Write to Austin Kilgore.
Embattled community group ACORN is fighting a Congressional move to block the organization from receiving federal funding with a lawsuit filed in US District Court against the United States.
The Center for Constitutional Rights filed the suit on behalf of ACORN — the Association of Community Organizers for Reform Now — and two of its affiliate groups. Other defendants include Treasury secretary Timothy Geithner and Office of Management and Budget director Peter Orszag.
In it, the lawsuit claims the continuing resolution that blocked ACORN and its subsidiaries from receiving federal funds is unconstitutional because it punitively targets the organization.
“This appropriation resolution is unprecedented. It does not appear that Congress has ever singled out a particular corporation or organization for a total statutory ban on all federal funding or contracts,” the suit says. “Moreover, the Continuing Resolution, as implemented by the Office of Management and Budget, sweeps broadly, denying without any hearing, not only ACORN, but any affiliated and “allied” organization, access to any federal grant or funds whatsoever.”
ACORN claims other sources of funding have been reduced as a result of the decision. In the case of its subsidiary ACORN Institute, the firm was forced to lay off 85% of its employees within a month of the resolution’s passage.
The group has faced immense pressure after an undercover video was released on the Internet showing a couple posing as a pimp and prostitute asking staff members of ACORN Housing how to obtain a mortgage to purchase a home to be used as a brothel.
ACORN Housing said the videos depicted the actions of rogue employees, who were later fired. After the video surfaced, ACORN began a public relations campaign, profiling employees and individuals who benefited from ACORN Housing’s counseling services.
Write to Austin Kilgore.
Mortgage loan delinquency rose for the 11th straight quarter in Q309, according to market research by credit bureau TransUnion.
Overall mortgage delinquency of 60 or more days reached a record 6.25% in TransUnion’s ongoing study of a random selection of 27m credit files from its national consumer database. The rate is up from 5.81% in Q209 and is expected by the credit bureau to come in just under 7% by year-end 2009.
Despite the rising trend, TransUnion saw a bit of positive news in that the rate of increasing delinquency narrowed in Q309, marking the third consecutive quarter of deceleration.
"While it continues to be a positive sign that the increase in mortgage borrower delinquency rates has slowed for three consecutive quarters, we have to keep things in perspective," said FJ Guarrera, vice president of TransUnion's financial services division. "Delinquency rates are rising and expected to peak at record levels."
Borrower delinquency rates were highest this quarter in Nevada (14.5%), while Florida followed at 13.3% delinquent, according to TransUnion. The lowest mortgage delinquency rates were in North Dakota (1.7%), South Dakota (2.3%) and Vermont (2.6%).
Guarrera added: "Until the housing market can consistently demonstrate several months of home value appreciation and the unemployment rate improves, mortgage delinquency will likely continue to rise."
TransUnion, one of the major US credit bureaus, conducts a survey of exactly 27m credit files from its total consumer base, or about one in every nine consumer files in its database of 250m consumer files each quarter, a spokesperson told HousingWire in June.
Write to Diana Golobay.
Salt Lake City-based private equity real estate investment SilverLeaf Financial acquired two commercial loans on properties in Ohio.
AmTrust Bank is the primary occupant of a 20,000 square foot office complex that backs the loan, which has a face value of $1.35m. The building is located in Shaker Heights, a suburban city of Cleveland.
The second loan has a face value of $8.9m and is backed by the 300,000 square foot Woodland Mall in Bowling Green, in northwestern Ohio. The mall sits on a 50-acre site. Its tenants include Sears, Famous Footwear, Cinemark, Dunham's Sports, and Elder-Beerman.
The two loans mark the 38th and 39th SilverLeaf acquired in 2009 and the company said it intends to acquire additional first lien commercial loans during Q409.
SilverLeaf also announced Chet Thomas joined the firm as senior analyst, heading the underwriting and due diligence department. He is responsible for reviewing commercial loans SilverLeaf is interested in acquiring.
“Chet brings with him knowledge in the real estate development sector and hands-on training in the loan processing field, I know he will be a great asset to our team,” said CEO Shane Baldwin.
Write to Austin Kilgore.
The Department of Justice (DOJ) is heading up a new, inter-agency task force to enforce investigation of financial fraud and financial crime.
The US Department of Housing and Urban Development (HUD), the US Treasury Department and the Securities and Exchange Commission (SEC) will join the DOJ's efforts by serving on a "steering committee." The task force will cooperate with state and local partners to investigate financial crimes and prosecute the perpetrators of crimes in the financial markets.
The task force, established by an Executive Order given by President Barack Obama, replaces another task force set up in 2002. It aims to combat mortgage, securities and corporate fraud, according to a HUD statement.
"It's not enough to prosecute fraud only after it's become widespread," said Treasury secretary Tim Geithner. "We can't wait for problems to peak before we respond."
Geithner added: "We're seeking comprehensive financial reform to create a more stable, safer financial system and stepping up our enforcement strategy. Doing so will help to stop emerging trends in financial fraud before they're able to cause extensive, system-wide damage to our economy."
The task force is composed of senior-level officials from a variety of departments and federal agencies, including the Treasury, SEC, DOJ, HUD and the departments of Commerce, Labor, Education and Homeland Security. The Commodity Futures Trading Commission (CFTC), the Federal Trade Commission (FTC) and the Federal Deposit Insurance Corp. (FDIC) also have officials on the task force — as do the Board of Governors of the Federal Reserve System, the Federal Housing Finance Agency (FHFA), the Office of Thrift Supervision (OTS) and Office of the Comptroller of the Currency (OCC), among others.
The crackdown on mortgage and other financial fraud has been expected for weeks, as HousingWire first reported in early October the chief of Housing and Civil Enforcement Section, Civil Rights Division at the DOJ, Steven Rosenbaum, hinted that his agency would begin ratcheting up compliance investigations in the short term. Another source confirmed to HousingWire at that time that the DoJ was recruiting around 50 civil rights attorneys in order to begin the offensive.
Write to Diana Golobay.
Earnings were down in Q309 at the country’s two largest home improvement chains, The Home Depot (HD: 44.87 -0.18%) and Lowe’s (LOW: 26.91 -0.15%) as homeowners and renters alike show reluctance to begin improvement projects amid continued financial stress and increasing joblessness.
Home Depot, the larger of the two chains, said it posted net earnings of $689m, or $0.41 per share, down 8% from $756m in Q308. Total sales at the 2,242-location store were down 8% year-over-year, and comparable store sales were down 6.9%.
“There is still a great deal of pressure in the housing and home improvement markets, though there are some positive signs of stabilization," said Home Depot chairman and CEO Frank Blake. “Our business continues to perform well in a difficult environment.”
Lowe’s reported net earnings of $344m, down 29.5% from $488m in Q308. Sales were down 3% from Q308 and comparable store sales declined 7.5% in the quarter. Lowe’s currently operates 1,699 stores, opening 12 new locations and closing one during the quarter.
“The broad-based pressures of the macro environment are clearly evident in our sales as consumers continue to delay large purchases until they feel better about the economic outlook,” said Lowe’s chairman and CEO Robert Niblock. “While consumer spending remained weak, we were pleased with our sequential improvement in comparable store sales from the second quarter and continued evidence of solid market share gains.”
Home Depot said it expects annual sales will be done 9%, while Lowe’s projects a 2% to 3% decline for the year.
Write to Austin Kilgore.
Denver-based mortgage software developer Mortgage Cadence added new features to its compliance support services software, the company announced.
The primary new feature is a “compliance modeling” compliance automation tool for the Mortgage Cadence Orchestrator platform.
“The past year has seen significant changes within the mortgage industry. The majority of these changes have pushed to the forefront the need for lenders to meet essential compliance requirements. The burden on lenders is dramatic as they seek to meet the demands of regulatory agencies, both federal and state,” said CEO Michael Detwiler.
Detwiler added the new tool will help lenders reduce errors and ensure origination documents are compliant with all pertinent legislation.
Write to Austin Kilgore.
CIT Group, a lender to small- and mid-sized businesses, posted a Q309 loss of $1.03bn, or $2.47 per share, as the company attempts to emerge from bankruptcy protection by the end of the year.
CIT filed for bankruptcy on November 1, resulting in “a virtual standstill in signing new business, client terminations/notice of terminations and a hold back of business of clients that have yet to technically terminate,” CIT said in a Securities and Exchange Commission (SEC) filing.
Q309’s losses compare to $301.1m loss in Q308. Year-to-date losses for the nine months ending September 30 were $2.99bn in 2009 and $493.9m in 2008.
Interest and fee income totaled $549.6m in the quarter, down nearly 36% from Q308. CIT paid less in interest expenses on long-term borrowing, but interest on deposits more than doubled. Total interest expenses declined 9% to $693.8m from Q308 to Q309.
CIT’s provision for credit losses was $701.8m in Q309, up substantially from $202.4m in Q308.
CIT's weak quarterly performance comes just weeks after the company announced the expansion of an existing $3bn senior secured credit facility. The new $4.5bn private capital infusion, from a diverse group of lenders, arrived after the company turned down an offer from private equity investor Carl Icahn to provide CIT with a new $4.5bn term loan.
Write to Austin Kilgore.
Bermuda-based bond insurer Assured Guaranty (AGO: 15.57 +2.43%) posted a net loss of $35m in Q309, compared to a net loss of $63.3m in Q308.
The narrowed losses came primarily due to a surge in new revenue from Assured Guaranty’s acquisition of Financial Security Assurance Holdings (FSAH), a deal that closed on July 1. Q309 marks the first quarter that FSAH results were included in the company’s quarterly financial report.
Operating income was $70.1m, up $44.1m from Q308, but was impacted by a $34.1m after-tax expense related to the FSAH acquisition.
The company also experienced $142.2m in losses incurred on credit derivative contracts, compared to $30m in Q308. The losses were primarily in US residential mortgage-backed securitizations (RMBS), and specifically those collateralized by Alt-A and option adjustable-rate mortgages (ARMs).
“Our operating earnings were positive, despite the losses on the U.S. residential mortgage-backed securities that we insured, demonstrating the enhanced earnings power of the combined companies,” said president and CEO Dominic Frederico.
Assured Guaranty’s US public finance unit generated $154.9m in new business, up 44% from Q308. Net investment income was $84.7m, up from $43.4m in Q308, primarily due to the FSAH acquisition. Last week, Moody’s Investors Services downgraded Assured Guaranty’s bond insurance unit. But Assured Guaranty said it is taking steps to prevent further downgrades.
“The FSAH acquisition has added significantly to our invested assets and future revenues,” Frederico said. “Based on Moody’s recently-announced ratings decision and consistent with our long-standing commitment to maintain the highest financial strength ratings possible, we intend to complete capital initiatives by year-end that include already negotiated external reinsurance, intercompany capital support and $300m of external capital.”
Write to Austin Kilgore.
The Federal Reserve Board on Monday issued an interim final rule amending Regulation Z.
The rule implements part of the Truth in Lending Act (TILA), which became effective in May and established, among other mortgage term disclosures, a new requirement for notifying borrowers of the sale or transfer of their loans no longer than 30 days after the transaction.
The rule (available to download here) provides guidance on how purchasers or assignees acquiring mortgage loans should go about complying with this section of the TILA. It also allows a 60-day grace period after the publication of the interim final rule to give affected parties time to comply.
Then, on Tuesday, eight federal regulatory agencies released a final model privacy notice form (available to download here) that aims to make it easier for consumers to understand how their information is collected and shared among financial institutions.
According to a statement from the Federal Deposit Insurance Corp. (FDIC), the Gramm-Leach-Bliley Act (GLB Act) requires institutions to notify consumers of their information-sharing practices and consumers' rights to limit or opt out of certain sharing processes.
The model form issued by the agencies was developed in response to consumer research and public comments. Institutions that uses the model form obtains "safe harbor" and is considered to satisfy disclosure requirements.
Despite the close release dates of the two, these announcements are essentially separate issues. And while they both aim to provide transparency in the financial system, they do nothing to alter the complexity of inherently complicated financial structures.
The Fed's interim final rule enforces a familiar practice within the servicing industry — informing borrowers when loans are bought or transferred for securitization. The FDIC's model privacy notice form discloses information-sharing procedures to the borrowers and even informs them of certain rights to opt out of those practices.
But nowhere do the two go in-hand to limit the reach of complex financial products and give borrowers the authority to opt out of the securitization process. The way the industry operates now, borrowers have no say over whether the loans securing their own personal property are pooled and bundled into structured finance products that aim to make long-term investors millions of dollars.
When proposed financial regulatory reform — including regulation of complex financial products — eventually makes its way through Congress, efforts by individual federal agencies to enforce various pieces of disclosure and transparency legislation might soon be superseded by a single reform bill.
Write to Diana Golobay.
Posted in Commentary, Servicing/Default | No Comments »