Archive for December, 2009
Milwaukee, Wis.-based software as a service (SAAS) provider Mortgagebot said it’s experienced an increase in demand for its online mortgage origination software and integrated point of sale (POS) platform from community banks and credit unions.
The developer said it has more than 900 bank and credit union clients and its new POS platform allows customers to initiate and complete the mortgage origination process via the Internet, through a branch or call center, and by loan officers.
“For years our clients have been almost evenly split between financial institutions with under $500m in assets and those with over $500m,” said Mortgagebot president and CEO Scott Happ. “But through October 2009, we’ve seen a 33% increase in new clients with less than $500m in assets.”
Small lenders and credit unions are experiencing an increase in mortgage business. To handle the increase, the firms are implementing new technologies to minimize the need for more staff.
Happ said from January through September 2009, application volumes increased year-over-year by 105% at banks with assets under $99m. Banks with assets between $100m to $249m increased 84%, and by 72% for banks with $250m to $499m in assets, an average increase of 87%.
Louisiana Federal Credit Union (LFCU) of LaPlace, La. is one such financial institution that’s experienced a surge in mortgage origination volume. From 2004 to 2009, LFCU tripled its annual mortgage volume, while the Louisiana credit union industry had an average 60% increase in mortgage business. The credit union’s mortgage supervisor, Linda Boe, said she did not have to hire additional staff because of its use of Mortgagebot software systems.
“Lenders who are looking to grow their mortgage business need to look at online application technology,” Boe said.
Write to Austin Kilgore.
The Southern California market continues to recover, as new home sales increased year-over-year, prices increased and foreclosure resales took a smaller share of the market in November, MDA DataQuick said.
There were a total of 19,181 new and resale homes sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That’s down 13.3% from October’s 22,132, but up 14.7% from 16,720 sold in November 2008, the San Diego-based company said. It’ the 17th straight month of year-over-year increases for the market.
November sales were boosted by an unexpected increase new homes. There were 2,039 new homes sold, the highest number of any month in 2009, and 25.5% higher than the new home sales total of 1,625 in November 2008. MDA DataQuick said the improved new home sales numbers were impacted in part by the creation of the existing homebuyer tax credit, as well as the extension of the first-time homebuyer tax credit, low interest rates and the availability of government-backed mortgages.
Foreclosure resales accounted for 39.1% of November existing home sales in the region. That’s the lowest rate since May 2008, when foreclosures accounted for 39.1% and below the market peak of 56.7% in February 2009.
“This market is still really lopsided. Foreclosures and short sales are huge factors. There’s still not a lot of discretionary buying and selling outside the more affordable markets,” said MDA DataQuick president John Walsh.
“Anybody who can sit tight is doing just that. The market won’t fully rebalance itself until financing becomes available for the higher price ranges,” he added.
The median sale price for the region was $285,000, up 1.8% from $280,000 in October and even with November 2008. It’s the first month since September 2007 to not experience a year-over-year decline, but down from the market’s early 2007 peak median of $505,000.
Mortgages over $417,000 accounted for 15% of all home purchases, a steady share that’s held since June. Adjustable-rate mortgages (ARMs) accounted for 4.1% of mortgages in November. That’s down significantly from the peak of the housing sector, when ARMs accounted for 47% of mortgages from 2000 to 2005. On the opposite side of the spectrum, Federal Housing Administration (FHA)-backed mortgages accounted for 38.1% of November mortgages, even with October and up from 34.5% a year ago. Just two years ago, FHA loans accounted for only 2.5% of purchase mortgages.
Write to Austin Kilgore.
Foreclosure cancellations in California climbed 40% in November, according to a monthly report from ForeclosureRadar.com, which tracks foreclosures in California.
Analysts adjusted the numbers to account for November’s four fewer filing days. Average daily foreclosure filings declined only 1%. Notice of trustee sales declined 13.4%, and the amount of real estate owned (REO) property increased 2.4%. Sales to third parties increased 8% on a daily average basis.
But the most significant number was the 40% increase in daily average cancellations.
“We’ve been waiting to see some impact from the Home Affordable Modification Program [HAMP],” says Sean O’Toole, founder and CEO of ForeclosureRadar.com. “The 40% increase in cancellations this month is likely just the beginning of what we expect will be a wave of cancellations under this program.”
Under HAMP, the US Treasury Department allocates capped incentives to servicers for the modification of loans on the verge of foreclosure. The Obama Administration recently put pressure on servicers to convert more trials into permanent modifications. According to the most recent number from the Treasury, the 88 servicers have permanently modified 31,382 mortgages of the active 728,408 trials.
Properties remain in foreclosure through the three-month trial and are canceled only after a permanent modification.
“The simple reality is that homeowners are continuing to enter foreclosure faster than they are coming out. This will likely continue until we see meaningful progress on loan modifications, or the often predicted ‘foreclosure wave’ finally occurs,” according to the report.
Write to Jon Prior.
In yet another study of builder confidence and sector outlook this week, the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) declined as continued weakness in the economy and job markets has builders concerned about the activity of potential buyers.
The December index of builder perceptions of current single-family home sales and sales expectations for the next six months declined one point from the previous to 16, its lowest point since June of this year.
Builders rate the current and projected sales as “good,” “fair” or “poor.” Builders also rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” The results are calculated into a numerical score where any number over 50 indicates that more builders view sales conditions as good than poor.
“As we anticipated, this is shaping up to be a bumpy recovery period for the housing market,” said NAHB chief economist David Crowe. “While some families may be just starting to factor the expanded tax credit into their potential home buying plans, many are hesitating because of the poor economy. At the same time, tight lending conditions for both consumers and home builders continue to pose considerable obstacles on the road to a sustained housing and economic recovery.”
The component index for current sales condition was also down one point to 16. The six-month sales projections index was down two points to 26. The index for gauging traffic of prospective buyers held steady for the third consecutive month at 13.
Regionally, the Northeast composite index increased three points to 23, the West experienced a one point gain to 19. The South held steady at 17 and the Midwest declined two points to 12.
“From an affordability standpoint, rarely has there been a better time in history to purchase a home, thanks to record low interest rates, attractive prices, and of course the recent extension and expansion of the home buyer tax credit,” said Tulsa, Okla. home builder and NAHB chairman Joe Robson. “However, builders are not seeing the full impact of these conditions on buyer demand, partly because awareness of the latest incentives is still building, and partly because of concerns about job security and other economic woes.”
Write to Austin Kilgore.
The board of directors at the Federal Deposit Insurance Corp. on Wednesday finalized a new capital rule that addresses industry concerns raised by Financial Accounting Standards (FAS) 166 and 167. FAS 166 and 167, which take effect in January, will require financial institutions to bring certain securitized assets onto balance sheets.
The industry for months has said these accounting changes will adversely affect institutions' ability to securitize, as risk-based capital requirements would force these firms to allocate a substantial amount of capital essentially overnight. In her monthly Kitchen Sink column for the January issue of HousingWire magazine, Linda Lowell gives a review of regulatory issues raised by 166 and 167 and other unforeseen consequences of the rule change.
In it, Lowell comments: "The proposed rule also would expand regulators’ authority to require banks to include in risk based capital (RBC), commensurate with the actual risk relationship, the assets of SPEs and VIEs that they sponsored but do not have to consolidate under GAAP."
"Clearly regulators are certain that FAS 167 might not return a securitization to its sponsor’s balance sheet," Lowell adds. "They also recognized that future securitizations could specifically be designed to evade consolidation." The FDIC answered the industry's calls for capital relief Wednesday with the final rule, which provides an optional delay and phase-in for up to one year for the effect on risk-based capital and the allowance for lease and loan losses related to assets affected by FAS 166 and 167.
Lowell notes that proposed RBC rules asked for industry feedback on the possibility of capital relief in the form of phasing in the requirements. Given the magnitude of potential new capital needed, commenters requested a six month moratorium on application of the rule followed by a three-year phase in period.
"I believe this rule moves in the right direction and will reduce the likelihood of a recurrence of some of the problems we have experienced in the financial and securitization markets," said FDIC chairman Sheila Bair in a statement.
"The capital relief we are offering banks for the transition period should ease the impact of this accounting change on banks' regulatory capital requirements, and enable banks to maintain consumer lending and credit availability as they adjust their business practices to the new accounting rules." The final rule — designed to "better align regulatory capital requirements with the actual risks of certain exposures" — also eliminates the risk-based capital exemption for asset-backed commercial paper assets, the FDIC said in a statement. FDIC said the transitional relief does not apply to the leverage ratio or to assets in conduits to which a bank provides implicit support.
The final rule comes after the FDIC on Tuesday approved an advance notice of proposed rule-making regarding safe harbor protection of institutions' assets being transferred for securitization.
Write to Diana Golobay.
Mortgage applications increased slightly last week, according to the Mortgage Bankers Association (MBA).
The MBA’s market composite index, a measure of gross mortgage application volume, increased 0.3% on a seasonally adjusted basis for the week ending December 11, compared to the previous week. The group’s refinance index was up 0.9%, while the purchase index decreased 0.1%.
Mortgage Maxx’s survey that’s adjusted to reflect the number of households applying for mortgages decreased 3% for the week ending December 11.
“As the year-end holidays quickly approach, the MAX will continue to move lower until at least January,” Mortgage Maxx said.
Refinance mortgages took a 75.2% share of total applications, the MBA said, up from 74.4% the previous week. It’s the highest refinance share since April 24 of this year. Adjustable-rate mortgages (ARMs) took a 4.1% share of activity, down from 4.7% in the previous week and the lowest share since mid-June 2009.
Write to Austin Kilgore.
Housing starts increased again this month, jumping 8.9% to a seasonally adjusted rate of 574,000 in November, according to the Department of Housing and Urban Development (HUD) and the Census Bureau.
The increase from October’s revised rate of 527,000 to November’s results follows a 10.6% jump between September to October. However, the rate is 12.4% below the November 2008 rate of 655,000.
Single-family housing starts in November increased 2.1% from October to a rate of 482,000. The start rate for buildings with five or more units was 83,000.
The rate of completed housing units increased 8.7% from October’s revised seasonally adjusted rate of 745,000 to 810,000 in November, but are down 25.3% from the November 2008 rate of 1,084,000. Single-family completions remained level in October at a rate of 524,000, while the completion rate for buildings with five or more units was 270,000.
The rate of building permits issued increased 6% from October to a seasonally adjusted rate of 584,000. The rate is down 7.3% from the November 2008 rate of 630,000. Single-family building permits increased 5.3% to a rate of 473,000 from October. The permit rate for buildings with five or more units was 86,000.
Write to Austin Kilgore.
Australia's Westpac Banking Corp. this week issued A$1bn (US$899.9m) of prime residential mortgage-backed securities (RMBS).
Moody's Investors Service assigned a triple-A provisional rating to the A$920m of Class A notes.
"This deal is one of a number launched in the Australian RMBS market in recent weeks and comes without the support from the Australian Office of Financial Management (AOFM)," said Ilya Serov, Moody's lead analyst on the transaction. "It also marks the return of one of the four major Australian banks to the securitization market, further underlining improving confidence by both issuers and investors."
The pool backing the transaction is almost three years seasoned, which Moody's said helps mitigate the risk of early payment default. The weighted average loan-to-value ratio is 58.28%, and all loans originated with full income verification, Moody's said.
Unlike most Australian RMBS transactions — where mortgage insurance supports the underlying pools — only a small portion of the current pool underlying the Westpac deal is insured, Moody's said.
Write to Diana Golobay.
The Department of Housing and Urban Development (HUD) proposed minimum standards for state compliance with the Secure and Fair Enforcement (SAFE) Mortgage Licensing Act of 2008.
The rule (download here) addresses the criteria to determine whether a state’s system for licensing and registering loan originators complies with the law. It also addresses HUD’s enforcement authority including the department’s power to issues summons for information on loan originators, establish systems in states with non-compliant programs and the ability to conduct cease-and-desist proceedings against anyone operating under a HUD-established system who violates the act. HUD is soliciting comments for 60 days on its proposal.
“By introducing nationwide standards of uniform licensing for loan originators, the SAFE Act is taking an important step in returning integrity and accountability to the residential mortgage loan market,” said Federal Housing Administration (FHA) Commissioner David Stevens. “Implementation of this act is a critical addition to our system of regulatory protections that will benefit both consumers and financial institutions.”
The SAFE Act legislation was included in the Housing and Economic Recovery Act of 2008 and is designed to enhance consumer protection and reduce fraud, HUD said. A compliant state program must require originators to take an education course, pass a test, and undergo civil, criminal and financial background checks. All states must have originators licensed by July 31, 2010.
Write to Austin Kilgore.
The Federal Deposit Insurance Corp. (FDIC) approved an advanced notice of proposed rule-making regarding safe harbor protection of failed institutions' assets being transferred for securitization.
The new rule-making comes after a move in mid-November to grandfather securitization or participations in process through March 31, 2010 through a transitional safe harbor. Under this safe harbor, assets being transferred for securitization cannot be seized by the FDIC if the issuing firm fails or is taken over in receivership.
"The misalignment of incentives in securitizations has contributed to massive losses to insured institutions, to the [deposit insurance fund] DIF, and to our financial system," said FDIC chairman Sheila Bair. "Fostering a sustainable securitization market that emphasizes transparency, loan quality, risk retention, and appropriate incentives and authorities for restructuring troubled loans will restore investor confidence and help banks diversify their funding sources while managing interest rate risk for longer dated assets."
Bair added: "The sample regulatory text for conditions to a FDIC safe harbor would, I believe, go far towards correcting the weaknesses in securitization that contributed to the crisis and is very consistent with the direction of legislation in the House and Senate."
With Financial Accounting Standards (FAS) 166 and 167 taking effect Jan. 1, 2010, most securitizations will not meet off-balance-sheet standards for sale treatment, the FDIC said in a statement Tuesday.
In a statement on the FDIC's advance notice of proposed rule-making on securitizations, Comptroller of the Currency John Dugan said the suggested 5% credit risk retention would make sales treatment more difficult to achieve under FAS 166 and 167, with capital and credit constriction implications.
He indicated that limiting securitization transactions to no more than six credit tranches could inhibit the flexibility of issuers to meet differing cash flow needs of various investors. He also said it might restrict investor interest if this structure is not deemed as liquid as competing alternatives.
Dugan said the suggested requirement that all residential mortgages in a securitization comply with all regulatory standards as well as supervisory guidance in effect at the time of origination would complicate the assessment of the loans for qualification.
He asked: "How would compliance with this standard be evaluated? And what if a very minor portion of a securitization did not qualify?"
In an interview Monday with the Institutional Risk Analyst (IRA), Michael Krimminger, special advisor for policy to the chairman of the FDIC, said the advance notice of proposed rule-making will set new requirements on future securitizations established after March 31st.
"The conditions we will be proposing to our Board focus on residential mortgage backed securitizations because we have seen the clearest evidence of the problems created by the misalignment of incentives in that asset class," he said. "These conditions focus on key issues that investors, banks and many others have been asking about — greater transparency, simpler capital structures, clearer terms defining the roles and responsibilities of parties to the transaction, strengthened standards for loss mitigation, and risk retention."
Krimminger added: "Fundamentally, what we are hearing is that investors will not return to RMBS, particularly, without greater transparency throughout the deal and about the securitized assets. That is also crucial to safer securitization for banks and the DIF."
The IRA's interview with Krimminger will appear in an upcoming issue of HousingWire, due to hit mailboxes in January.
Write to Diana Golobay.
