Archive for December, 2009
Mortgage rates remain low, but increased again this week in two weekly surveys.
Freddie Mac’s (FRE: 0.00 N/A) survey said the average rate for a 30-year fixed-rate mortgage (FRM) was 4.94% with an average 0.7 point for the week ending December 17, up from 4.81% last week. A year ago, the 30-year FRM was 5.19%.
Freddie Mac’s survey has put the rate for 30-year FRMs below 5% for the past seven weeks, creating a boost in refinance activity.
Bankrate.com put the 30-year FRM at 5.13% with an average 0.42 point for the same period, up from 5.04% in the previous week.
“Mortgage rates followed bond yields higher once again this week amid signs of an improving economy,” said Frank Nothaft, Freddie Mac vice president and chief economist. “On the consumer side, retail sales jumped 1.3% in November and consumer sentiment, as measured by the University of Michigan, rose above the market consensus forecast to the highest reading since September. Industrial production also showed large gains in November.
Freddie said the 15-year FRM averaged 4.38% with an average 0.6 point, up from last week when it was 4.32%. A year ago, it was 4.92%. Bankrate.com put the 15-year FRM rate at 4.53%.
The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.37% with an average 0.6 point this week, up from last week when it averaged 4.26%, Freddie said. The one-year Treasury-indexed ARM averaged 4.34% this week with an average 0.5 point, up from last week when it averaged 4.24%. Bankrate.com put the five-year ARM at 4.6%, up from 4.55% last week.
Write to Austin Kilgore.
The author held no relevant investments.
Total Mortgage Services said it expects to originate a company-record $750m in mortgages in 2009.
It’s a 67% increase from 2008’s level of $450m in originated loans for the Milford, Conn.-based lender, which originates mortgages in more than 20 states. Total Mortgage credits low interest rates for the boost in both purchase and refinance activity.
“2009 has been a very rewarding year for both Total Mortgage Services and our customers. Not only will we generate record origination volume and enhance our retail lending and operational infrastructure, we also delivered exceptional service and value to our customers who were able to take advantage of some of the lowest current mortgage rates in the industry offered by our company,” said Total Mortgage president of services John Walsh.
The company’s customers had an average FICO score of 763 and its mortgages had an average loan to value (LTV) of 66% and average amount of $309,000.
About 80% of the firm’s loans were eligible for purchase by the government-sponsored enterprises. Jumbo loans accounted for 15% of originations and Federal Housing Administration (FHA)-insured loans accounted for 5% of overall production.
Next year, the company said it plans to institute a number of new initiatives, including a the launch of a wholesale division, conversion to a “Full Eagle” Department of Housing and Urban Development (HUD) non-supervised lender, expanding operations to as many as 10 new states and implementing a new loan origination system and accounting software. The company set a goal of $1bn in originations.
“Our goal is to expand on a strategic and selective basis into attractive markets throughout the country,” Walsh said. “We believe by expanding our geographic footprint, entering the wholesale channel and receiving approval for a Full-Eagle, which will allow us to significantly increase our FHA origination volume, we will be well positioned for continued growth in 2010.”
Write to Austin Kilgore.
A new advocacy group is working to organize homeowners who may have properties built with defective Chinese drywall.
The Chinese Drywall Complaint Center is looking for homeowners in Florida, Louisiana, Alabama, Mississippi, Virginia, or Southeast Texas whose homes were built with the Knauf brand drywall, which the group claims was used by a number of large public builders as well as small private builders from 2001 to 2008.
“We are trying to help all victims of toxic Chinese drywall. Exposure to toxic Chinese drywall is hazardous to your health, as most homeowners in Florida, or Louisiana already know,” the group said in a statement. “If your subdivision or condominium project has Chinese drywall we want to hear from you.”
Knauf is a UK-based building supply company, but the group claims it sold imported Chinese drywall. The advocacy group said homeowners should check to see if their property was built with Knauf drywall by looking at the exposed back of drywall pieces from a home’s attic.
Representatives for the manufacturer didn't immediately respond to HousingWire's request for comment.
The US Consumer Products Safety Commission (CPSC) headed a multi-agency task force to determine whether the imported drywall was in fact the cause of pipe corrosion and toxic gases emissions and occupant health issues in affected homes.
More than 2,000 homeowners in 32 states contacted the CPSC with complaints of corrosion, or blackening, of indoor metals, such as electrical components and central air conditioning system evaporator coils and various health symptoms, including persistent cough, bloody and runny noses, headaches, difficulty breathing and irritated and itchy eyes and skin.
The advocacy group said the task force isn’t moving quickly enough to help homeowners.
“There are children involved in this largely ignored US environmental disaster, and the absolutely pathetic US Consumer Products Safety Commission is now saying their may be a link between health effects, and toxic Chinese drywall," the group said in its statement, adding "Ya think?”
Write to Austin Kilgore.
Ohio’s attorney general, Richard Cordray, filed suit against HomeEq Servicing for not meeting the demands of its mortgage holders.
HomeEq is the servicing arm of Barclays Capital. According to the lawsuit, Ohio borrowers with mortgages serviced by HomeEq have complained to the attorney general’s office about a lack of communication regarding their attempts at modifying their loans.
Under the Home Affordable Modification Program (HAMP), HomeEq has started 657 trial modifications of the 40,969 loans in its eligible portfolio, according to the latest report from the US Treasury Department. Through HAMP, the Treasury allocates capped incentives to servicers for the modification of loans on the verge of foreclosure. HomeEq currently has a potential cap of $552m. Of the 657 trials started, HomeEq has converted none into permanent modifications.
HomeEq did join the program in August, and the trial period lasts three months before becoming eligible for a permanent conversion. Many servicers have cited a lack of documentation at the beginning of trials, hoping to collect the necessary documents during the three months.
According to the lawsuit, consumers have complained to the attorney general’s office that HomeEq has lost documents, failed to respond to borrowers’ request for assistance and filed foreclosures on those still in loss mitigation negotiations. Some complained that HomeEq offered a repayment or forbearance plan by word and not in written form and they required borrowers to sign unfair loan modification provisions, according to the suit.
The attorney general asked that the court issue a permanent injunction against HomeEq for enforcing any provision in any agreement it has with borrowers that violates the Ohio Consumer Sale Practices Act.
In the lawsuit, the attorney general seeks reimbursement for all consumers damaged by HomeEq’s practices, and that the court fine HomeEq $25,000 for each violation of the Ohio Revised Code.
Write to Jon Prior.
Mortgage software firm Ellie Mae added another new product to its lineup this week with its acquisition of compliance software firm Mavent.
Pleasanton, Calif.-based Ellie Mae is the developer of the Encompass360 mortgage origination software and ePass, a product that connects third-party software to Encompass360, among other products.
Ellie Mae chief strategy officer Jonathan Corr said Encompass360 already has a number of compliance checks built into it, but said acquiring Mavent would help the software developer address predatory lending protection and changes to the myriad mortgage regulations on both the state and federal level.
“For folks to cost effectively maintain compliance and have control of their operations, it is becoming, from a people standpoint, prohibitively costly for that customer base,” Corr told HousingWire. “We saw a great opportunity to bring capability to our customer base to help them really address what’s happening now and what’s continuing to happen with all the regulatory changes.”
Mavent will continue to operate from its Irvine, Calif. facility as a subsidiary within the Ellie Mae structure. The automated compliance software company’s existing business relationships will stay in place, including a distribution agreement with mortgage compliance software and service provider QuestSoft, which offers Mavent’s software to about 1,500 mid-market companies.
Previously, Mavent was not available on ePass, and Corr said Ellie Mae’s plans for the acquisition includes an enhanced integration. As for now, the unit will retain its name, but Corr didn’t rule out a re-branding in the future.
“It will be integrated into our network, but it’ll be a very integrated offering as part of Encompass, built in through the workflow and compliance running as a natural extension of the process,” Corr said.
Corr said Ellie Mae believes integrated compliance within mortgage origination software is what customers will grow to expect from software developers. “It will be a greater value proposition for Encompass customers,” he said.
The acquisition is just the latest for Ellie Mae. In October 2008, Ellie Mae acquired Online Documents, Inc. from Stewart Lender Services. The assets it acquired in that deal have evolved into Ellie Mae Docs, which competes with 10 other document service providers on ePass and sparked a disagreement that led to a lawsuit between Ellie Mae and document provider DocMagic.
Third-party compliance automation software offerings available through ePass include Verisk Analytics’ Interthinx, Wolters Kluwer’s PCI and Compliancy, which will remain on ePass, Corr said.
“We’ve already talked to all these companies they know we’re adding a value-add service. Our intention is to maintain them as partners on the network,” he said. “It’s really no different than we still have 10 other doc providers on the ePass network, even though we have Ellie Mae Docs.”
Corr said the other compliance software companies have not expressed concerns about the new competition. Interthinx responded to HousingWire’s request for comment on the Mavent acquisition with a prepared statement.
“Interthinx has enjoyed a long and mutually beneficial relationship with Ellie Mae,” said Interthinx senior vice president Michael Zwerner. “We have no reason to believe that will change. We wish the company the best of luck with its new acquisition.”
Write to Austin Kilgore.
The Bank of America (BAC: 7.29 -0.14%) board of directors elected Brian Moynihan as CEO and president of the company. He will assume the office following the retirement of Kenneth Lewis on Dec. 31, 2009.
Currently the president of consumer and small business banking at the company, Moynihan joined FleetBoston Financial, a BofA predecessor, in 1993.
Outgoing CEO Lewis previously announced he will retire at the end of the year.
Moynihan said in a statement that BofA must remain flexible to meet consumers' needs in a changing financial environment.
"Before the crisis, we were the most efficient banking company with our business mix in the country, and we will see that as a target going forward," Moynihan said in a statement. "I believe we have the scale, capital, liquidity and diversity of income that all support safety and soundness."
He added: "What we need to do now is very simple. We need to execute."
BofA on Wednesday defended its efforts to convert trial Home Affordable Modification Program (HAMP) modifications into permanency. Jack Schakett, the credit loss mitigation strategies executive at BofA, said trial HAMP borrowers so far have not shown a "sense of urgency" to submit necessary documentation for conversion to permanent status — an issue he said will be a focus of BofA's loss mitigation team going forward.
Write to Diana Golobay.
The author holds no relevant investments.
The US housing market could be in for some serious trouble in 2010, but predictions of a second collapse are “exaggerated,” according to a report from Radar Logic, a real estate data and analytics company.
Housing values could significantly recover in the spring of 2010 as low prices attract a blend of owner-occupiers and investors. Heated bidding pushes up prices at foreclosure auctions, and the supply of new and existing homes is declining, according to the report.
Radar Logic’s 25-MSA RPX Composite, which measures housing prices, dropped 0.7% in October – the smallest decline since 2005 for that time period. It also remains 30% below its peak.
The threat to the budding growth is the shadow inventory of foreclosures. According to the report, delinquencies have reached their highest peak in decades and the most bearish observers believe the inventory will flood the market once the government programs end, boosting supply and decreasing home prices.
But Radar Logic analysts side with those like Rick Sharga of RealtyTrac in saying that banks will slowly burn through the shadow inventory, releasing them gradually onto the market.
“Thanks to federal bailout money and a general improvement in their financial health, banks have been relieved of the urgent need to liquidate their assets. As a result, lenders and government entities like Fannie Mae and the FDIC have been able to curtail sales to raise prices and avoid recording losses on properties,” according to the report.
If the government and the banks can effectively solve the puzzle of mitigating foreclosures, Radar Logic says that home values could even go up in 2010. Of course, before calling an end to the recession, everyone will keep an eye on unemployment. Many believe the rates will peak in the next two or three quarters and decline. Once that happens, according to the report, housing demand with strengthen even more.
“While we are not out of the woods yet, our view is that housing is showing signs of stability, markets are showing signs of rational behavior and everyone is starting to understand the fundamental problems that brought us here,” according to the report. “As such, we think the bears are overdoing it.”
Write to Jon Prior.
Chardan 2008 China Acquisition Corp. (CACA: 0.00 N/A) signed a definitive agreement to enter into a business combination with DAL Group, to create one of Florida’s largest mortgage processing services firms.
Chardan, a Beijing-based investment firm, will be sole owner of the business and operations of Default Servicing, Inc. (DSI) and Professional Title & Abstract Company of Florida (PTA) and the non-legal operations supporting the foreclosure and other legal proceedings handled by the Law Offices of David J. Stern, P.A. (DJS). Chardan will change its name to DJSP Enterprises and expects to continue to trade on the NASDAQ exchange under the symbols DJSP, DJSPU, and DJSPW.
The Florida company increased revenue from $40m in 2006 to $199m in 2008. It also had revenues of approximately $117m for the 6 months ended June 30 and an adjusted pro forma net income for that period of $22m. HousingWire sources claim the deal is worth $180m.
DJSP Enterprises will offer processing services for mortgages, mortgage defaults, title searches and abstracts, real estate owned (REO) properties, loan modifications, title insurance, loss mitigation, bankruptcy, related litigation and other services.
New York City-based investment bank Rodman & Renshaw provided merger and acquisition advisory services to Chardan for the deal.
Write to Austin Kilgore.
The Federal Reserve Board on Wednesday issued a Cease and Desist order against global financial services firm Credit Suisse.
The order requires Credit Suisse to improve its program to comply with US economic sanctions requirements on a global basis.
Credit Suisse's supervisor, the Swiss Financial Markets Supervisory Authority, agreed to assist the Fed in executing the order (available to download here).
The US Department of Treasury's Office of Foreign Assets Control (OFAC), along with the US Department of Justice and the New York County District Attorney's Office, separately announced a $536m settlement with Credit Suisse. The firm will pay $268m each to the US and to New York.
It marks the largest settlement in OFAC's history.
"Credit Suisse routed transactions through the United States surreptitiously, while knowing that those payments would be blocked or rejected if their true nature had been clear," said OFAC director Adam Szubin.
According to the Treasury, Credit Suisse used "elaborate procedures" to alter payments and conceal the involvement of sanctioned parties from the US banks involved in the transactions. In some cases, Treasury said, Credit Suisse even stripped the names of sanctioned parties from payment instructions and forwarded payment messages to US financial institutions that falsely identified Credit Suisse as the ordering institution.
"In its securities unit, Credit Suisse's London affiliate processed trades through Credit Suisse's US branch on behalf of a then-designated Libyan state-owned investment company and a Sudanese bank," Treasury said in a statement. "The London affiliate utilized code names to disguise the identities of the sanctioned entities and maintained sub-accounts in these code names in its omnibus accounts maintained in the United States."
It's not the first time this week Credit Suisse received negative press. The action by the Fed, Treasury and DOJ comes after MBIA Insurance Corp. filed a complaint against the firm, alleging Credit Suisse made "pervasive and material misrepresentations" about mortgage-backed securities MBIA insured.
MBIA said in the complaint filed Sunday that it made more than $296m in claim payments on the misrepresented transaction after the loans defaulted "at a remarkable rate." About $464m — or 51% — of the original loan balance underlying the transaction had to be charged off, MBIA said.
Write to Diana Golobay.
Two weeks after the Treasury reported Bank of America’s (BAC: 7.29 -0.14%) 98 permanent modifications eight months into the Home Affordable Modification Program (HAMP), BofA clarified the numbers.
According to the Treasury report, BofA has just over 1m HAMP-eligible loans in its estimated 60-plus day delinquency portfolio. Jack Schakett, the credit loss mitigation strategies executive at BofA, explained in a conference call that number is closer to 340,000.
The 1m figure, he said, is the total amount of loans that meet the basic criteria for the program. After speaking with customers and moving through that portfolio, BofA has crossed off borrowers who’ve vacated the home, are unemployed or have enough income to afford a payment – meaning their debt-to-income ratio is below 31%.
“Known customers not qualified goes to 600,000,” Schakett says. “As we go through the process of determining who isn’t eligible, we extrapolate that to the customers we haven’t talked to.”
So, Schakett argues, when looking at the more than 158,000 HAMP trials started under BofA, “it’s a better success rate.”
As far as volume, 98 permanent modifications is not “a better success rate” when compared to the 3,537 permanent modifications converted by Wells Fargo (WFC: 29.60 +1.89%), the 4,302 permanent mods converted by JPMorgan Chase (JPM: 37.21 -0.75%), and even the 271 converted by CitiMortgage.
Schakett is quick to agree and said BofA has not created the right amount of urgency in customers to return necessary documents.
“All of us have very few conversions. It’s simply the process itself. We clearly did not create the sense of urgency we would like in these customers to get these documents in. The other is focus. As we’ve shifted focus away from the start process, we are obviously focusing now on conversion,” Schakett said.
When the Treasury released its report, more than 16,000 borrowers with an active HAMP trial under BofA had no documentation into the bank. After a wave of phone calls and express mail notifications of incomplete documentation (NOIs), that number is down to 2,000. Currently, there are 10,000 BofA borrowers with all of their documentation and underwriting done and are in the final conversion stages, according to Schakett.
But Schakett said that 70% of the delinquent loans will not be eligible for HAMP, pointing out the importance of the bank’s own modification programs. In the past two years, he said, more than 630,000 borrowers received a modification – 25% of the industry total, according to Schakett.
He said the bank is pushing to keep as many borrowers from falling out of the program at the Dec. 31 deadline. Borrowers without full documentation by that deadline could be dropped by the program, Schakett said.
“We’re in a full court press to have all docs in,” Schakett said.
He added that numbers will be better in December and will rise again in January.
Write to Jon Prior.
