Archive for December, 2009
One month after the American Securitization Forum (ASF), a trade group representing the interests of the securitization industry, called for more transparency on status changes in underlying residential mortgage-backed securities (RMBS) collateral, industry players are responding.
Clayton Holdings already updated its systems to incorporate the ASF's Loan Identification Number Code (LINC) system next year, which allows collateral to be tracked, but bond-level reporting represents another aspect of much needed transparency for the securitization market, especially in RMBS.
However, one insider tells HousingWire, that the need for bond level reporting has never been greater: "The percentage of fixed rates changes over time in any given portfolio, and we need to know not just how collateral performs but how it changes."
Indeed, Principia Partners, a provider of software to manage and administrate structured finance portfolios, announced today that it successfully enhanced its structured finance platform (SFP) to analyze and report on bond-level information for RMBS and other structured credit asset classes.
This move is largely in support of the market standards being proposed by the ASF and the European Securitization Forum (ESF).
According to Principia, the new interface includes a standard set of bond issuance data descriptors that enables investors to map trustee data directly into their systems. Within SFP, tranches can be evaluated in the context of the original securitization or across all the deals being managed in a portfolio. The platform also allows this data to be analyzed alongside collateral pool performance data from any given source. Organizations can set limits, flag deals and monitor triggers that have been established within the indenture of a securitization, to track and maintain compliance over time.
Write to Jacob Gaffney.
The author holds no relevant investments.
Troy, Mich.-based Flagstar Bank named mortgage fulfillment outsource services Denver-based Titan Lenders a preferred provider for its broker-to-banker initiatives at its wholesale lending business, Flagstar Wholesale Lending.
“Flagstar continues to demonstrate industry leadership by offering quality brokers the opportunity to become correspondent lenders with the benefit of a warehouse line facility and a professional mortgage fulfillment operation that is familiar with the electronic closings and notes for quick turn time on the lines,” said Titan Lenders founder and CEO Mary Kladde.
The Flagstar subsidiary offers correspondent lenders who meet specific underwriting criteria a warehouse facility and purchasing facility to support their adoption of electronic closings and notes. Titan’s Cerberyx is a file flow management and electronic compliance safety check software.
“Flagstar’s broker-to-banker programs attract high quality, prolific mortgage businesses that want to serve borrowers as correspondent mortgage bankers, with the many advantages that entails,” said Greg Lutin, executive vice president, national sales manager for Flagstar Bank. “Selecting Titan as a mortgage fulfillment services provider for these programs will help ensure the consistent delivery of quality closed electronic loan files by Flagstar’s new correspondent lenders.”
Write to Austin Kilgore.
Bridger Commercial Funding will resume making new loans into the commercial real estate (CRE) space for the purpose of funding commercial mortgage-backed securities (CMBS). However, terms are tight, even though the new program is underwritten by Federal Reserve's Term Asset-Backed Securities Loan Facility (TALF).
The new platform, called STAR, is designed to allow triple-A CMBS investors to access bailout financing, as long as portfolios are deemed diverse enough to be hedged from occupancy risks (the minimum rate is 85%). According to the loan parameters, transactions must be "higher-quality stabilized properties in strong markets, that require refinancing or acquisition debt."
Property types include multifamily, office, retail, industrial, manufactured housing communities and self storage, with an amoritization rate between 25 to 30 years. Loan amounts can generally range from $2m to $10m (though the max caps at $20m) over three to five years, fixed somewhere between 7.9% to 8.5%, with a two-year lockout on prepayments.
"Recent activity in the CMBS market is signaling that the credit logjam plaguing commercial real estate lending for the past two years is starting to break," said Bridger executive vice president Peter Grabell in a statement. "CMBS bond yields have fallen throughout the year, to the point where newly originated CMBS loans are becoming a viable financing option once again for borrowers."
Since 1998, Bridger provided more than $5bn in capital markets-based commercial real estate financing for banks and related clients. To expand its capital markets capabilities in support of the new CMBS program, Bridger has added the former Whitegate Advisors team to the Bridger platform. Edward Dale, Julian Vulliez and David Weiss will work out of the firm's New York office.
Write to Jacob Gaffney.
The author holds no relevant investments.
Federal Way, Wash.-based forest products company Weyerhaeuser (WY: 20.47 -0.73%) announced plans to convert into a real estate investment trust (REIT).
The company, which manages 22m acres of forests with offices or operations in 10 countries, said the conversion will include all the company’s divisions — timberlands, wood products, cellulose fibers and real estate.
The Weyerhaeuser board declined to specify a precise date for the conversion, adding the timing is influenced by economic conditions, tax policy changes and dividend payouts required under REIT legislation. In 2008, Weyerhaeuser had earnings of $8bn, and is projecting earnings and profits to total just under $6bn in 2010.
REITs typically specialize in construction development — office space, healthcare, multifamily and the like. While it’s uncommon, it’s certainly not unprecedented for a forestry firm to operate as a REIT. Weyerhaeuser will join the ranks of other wood product companies Plum Creek (PCL: 40.47 +0.27%), Potlatch (PCH: 33.07 -1.28%) and Rayonier (RYN: 45.76 -1.12%), which are all forest product REITs.
The company said it will likely pay a dividend in connection to the conversion, primarily in stock, which will require shareholder approval at the firm’s annual meeting in April.
Citigroup (C: 30.87 +1.61%) analysts updated ratings on a number of REITs. The sector enters next year “with a backdrop that could support current elevated REIT valuations over the next year,” Citi analysts wrote, but added REITs face long-term risks. Residential, healthcare and self-storage REITs will perform better than retail and office REITs.
Analysts upgraded the following REITs to buy from hold:
Codgell Spencer (CSA: 4.23 0.00%)
Kilroy Realty (KRC: 41.84 +0.29%)
Kite Realty (KRG: 4.97 +0.61%)
Public Storage (PSA: 137.52 +0.64%)
UDR (UDR: 26.01 +0.39%)
Weingarten Realty (WRI: 24.91 -0.24%)
PS Business Parks (PSB: 62.14 +0.13%) was upgraded to hold from sell.
The analysts also downgraded to sell from hold:
Highwoods Properties (HIW: 33.39 +0.69%)
Kimco Realty (KIM: 18.36 -1.87%)
Corporate Office Properties (OFC: 24.05 +1.39%)
Write to Austin Kilgore.
The author holds no relevant investments.
Houston-based Stavis, Margolis Advisory Services, an estate planner for retirees is changing its name to BBVA Wealth Solutions.
And while the name change is new, the ownership is not: BBVA Compass acquired the registered investment advisory firm in 2005.
Rick Terry, BBVA Wealth Solutions chief executive officer says: "It is important for our clients to know that we have the financial strength of a worldwide company behind us, enabling us to offer local expertise coupled with global capabilities."
While BBVA Compass is a Sunbelt-based financial institution, the BBVA Group (BBVA: 9.10 +0.66%) is actually headquartered in Northern Spain. Its American commercial retail banking branches are primarily located in Texas, as well as Arizona, California, Florida and a handful of other states.
In 3Q09, BBVA earned €4.2 billion in net attributable profit and boosted its core capital to 8%.
Write to Jacob Gaffney.
The author holds no relevant investments.
Fewer homebuyers are likely to consider purchasing a foreclosed property in the future, according to a survey conducted by the online real estate companies Trulia.com and RealtyTrac.
Conducted in early November, 43% of US adults indicate they are at least somewhat likely to consider purchasing a foreclosed home, a drop from 55% in the same survey conducted in May. However, real estate investors, current homeowners looking to “trade up” and renters showed strong interest.
According to the survey, 23% of adults are at least somewhat likely to purchase a second home or an investment property. Of those, 92% are interested in the foreclosure market. Those looking to “trade up” make up 24% of homeowners and of those 88% are looking at foreclosures.
They could be spurred by the expansion of the homebuyer tax credit that extends a new $6,500 credit to current homeowners looking to move into a larger home. HousingWire will explore this "trade up" demand in an upcoming magazine issue.
According to the survey, renters show the strongest interest in buying foreclosed properties as 57% are somewhat likely to make a purchase in the future. Of younger renters, aged 18-34, 61% are interested in foreclosures, and 65% of renters between the ages of 35-44 showed interest as well.
The survey showed that consumers expect a good return on their investment in foreclosed homes. Almost two-thirds, 65%, of adults expect a discount of 30% or more when buying a foreclosure. In the Northeast, 43% of respondents expect a 50% discount or higher.
But as 95% of adults are willing to invest money in a foreclosed property, many cited hidden costs as the worst aspect of buying one. Of those surveyed, 81% saw a negative stigma with foreclosure purchases, a jump from 69% when the survey was conducted in May.
“The most active and qualified buyers in today’s market are highly interested in foreclosures, which is not surprising given the discount that often comes with a foreclosure purchase,” said Rick Sharga, senior vice president of RealtyTrac. “It is somewhat surprising that consumers cite hidden costs as the biggest negative aspect to buying a foreclosed home because most bank-owned foreclosure sales include the same title protections and other safeguards that are in place for non-foreclosure sales.”
Half who saw a negative stigma with purchasing a foreclosure noted the risky process of purchasing a foreclosed home, and 35% pointed out that the home would lose value.
Pete Flint, Trulia.com’s CEO and co-founder, said in a conference call Tuesday that housing prices will continue to fall another 5-to-10% as sales volumes flatten out. In 2010, he anticipates a double-dip in the economy and another downturn in 2010 as government incentives disappear, the shadow inventory of foreclosures hits the market and interest rates start to reach 6%.
Rick Sharga, senior vice president of RealtyTrac, said that a broader recovery is in store as the shadow inventory will be a very “gradual, measured” trickle into the market. He expects that the amount of homes receiving a foreclosure notice will reach 3.2m and possibly 4m in 2010.
Numbers in 2011 would only be “marginally better,” Sharga said, and the market should see an improved foreclosure rate on a month-to-month basis at the end of 2012. He added that the shadow inventory of foreclosures should be moved through the market by 2013.
Write to Jon Prior.
Susan Staley joins Atlanta-based default processing services provider Prommis Solutions as vice president of loss mitigation. In her new role, she will be responsible for the oversight of the loss mitigation outsourcing operation including the development of new products and services and strategic initiatives within the loss mitigation department.
Staley spent more than 25 years at Fannie Mae (FNM: 0.00 N/A), where she led the development of servicing pilots to establish new loss mitigation policies and procedures and managed internal loss mitigation efforts and operations, Prommis Solutions said.
Her work resulted in a patent issued to Fannie in July for a method and system for evaluating loan workout scenarios. Most recently, Staley was a Fannie real estate owned (REO) asset manager at Chrisley Asset Management.
She also received the Dale P. Riordan Award for the development of the Distressed Assets Reporting and Tracking System (DARTS).
Prommis Solutions offers default processing services, loss mitigation, REO closing and other mortgage-related services to mortgage servicers, investors, insurers and law firms.
Write to Austin Kilgore.
Wells Fargo & Co. (WFC: 29.60 +1.89%) has priced a $10.65bn offering of 426m shares of common stock at $25 per share.
The underwriters — led by Wells Fargo Securities and Goldman Sachs & Co. — have a 30-day option to purchase up to an additional 63.9m shares of common stock to cover over-allotments. The closing is expected on or about Dec. 18, 2009, according to a statement.
The capital raise is part of Wells' plans to repay the $25bn of funds the Treasury Department invested through the Troubled Asset Relief Program (TARP).
Under the terms of the repayment agreement, Wells will also raise $1.35bn through the issuance of common stock to Wells Fargo benefit plans and in lieu of a portion of '09 incentive cash and other compensation to employees. Wells also will increase equity by $1.5bn through asset sales.
Wells said on Monday it expects a 6.2% common equity ratio after the TARP repayment.
“Over the last decade Wells Fargo maintained capital ratios above peer levels, one of the main reasons we have been able to continue to profitably grow our company – including three consecutive quarters of record profits this year – despite the credit crisis of the last two years," said chief financial officer Howard Atkins in a press statement. "Excluding the impact of TARP funds, stockholders’ equity at Sept. 30, 2009 was up $50bn from a year ago and including today’s announced capital actions, $63bn on a pro forma basis."
Wells joins a wave of financial firms to recently repay or plan to repay TARP. With the latest firm to announce repayment, Citigroup (C: 30.87 +1.61%), the administration expected to recoup 60% of the loaned funds distributed, with interest, President Barack Obama said Monday.
Write to Diana Golobay.
The four-year-long decline in the housing market appears to have bottomed out in mid-2009 and industry players are more optimistic about their prospects for next year.
Fitch Ratings said pending home sales, existing home sales, single-family housing starts and single-family new home sales are showing general improvement after bottoming out earlier this year. The same holds true for new home inventories, home pricing and consumer and builder sentiment.
While Fitch maintains a negative outlook for US homebuilding in 2010, the John Burns Real Estate Consulting (JBREC) monthly builder survey showed optimism among 264 home building industry executives from public and private companies. The belief that builders will have increased community count, better orders and slightly higher prices has 57% of respondents planning for more revenue in 2010 than in 2009.
According to the John Burns survey, average net sales per community declined to 1.4 nationally from 1.6 in the November survey. The average unsold, finished inventory per community increased to 3.3 units, up from a recent low of 2.8 units. JBREC said the increase in inventory may be a buildup for spring.
Fitch said it raised its forecast for housing starts and new home sales, but noted that expansion will be slow at first. “The continuation and expansion of the national housing credit should partially help offset expected seasonal declines during the winter months through the spring of 2010,” said Fitch managing director and lead US homebuilding analyst Robert Curran. “The federal government's continuing efforts to moderate foreclosures may also show some success in 2010.”
Concurrently, John Burns’ survey shows buyers are less urgent to purchase now that the homebuyer tax credit has been extended into next spring. Builders believe demand will pick up when the new deadline gets closer. “At this point, it's clear that the extension and expansion of the tax credit weren't enough to drive demand through the seasonally slow time of the year,” said JBREC vice president Jody Kahn.
Builders go into next year with enhanced cash flow, Fitch said, funded by recent debt offerings, large land sales, tax refunds, and public equity offerings.
“Recently passed legislation that extends the net operating losses (NOL) carryback to offset taxable profits from the previous five years will result in meaningful tax refunds for most public homebuilders early in 2010 further enhancing liquidity and tangible net worth,” Fitch said.
Write to Austin Kilgore.
The mortgage giants Fannie Mae (FNM: 0.00 N/A) and Freddie Mac (FRE: 0.00 N/A) released new guidelines for their servicers modifying mortgages under the Home Affordable Modification Program (HAMP).
Under HAMP, the US Treasury Department allocates capped incentives to participating servicers for the modification of loans on the verge of foreclosure. According to the latest reports, 88 servicers have offered 1m trials and converted 30,000 of them into permanent modifications.
Through November, servicers for the government-sponsored enterprises (GSEs) have offered 33,021 trials for the 262,842 eligible loans in their portfolio, and 6,291 of those have been converted into permanent modifications, according to the latest Treasury report.
Effective Jan. 1, 2010, servicers for Fannie Mae can only evaluate a mortgage for HAMP after certain events occur, according to the new guidelines. The borrower must submit a written request for consideration that includes current borrower income and a reason for default or explanation of hardship, at a minimum. A borrower can also verbally provide sufficient financial information to the servicer to complete a net present value analysis.
Servicers must send a written notice to every borrower evaluated for HAMP without a trial period plan, permanent modification or at the risk of losing HAMP eligibility because of missing documentation. At a recent committee hearing, Congress heard testimony on why so few trial modifications have been converted into permanent status. The answer was often a lack of documentation, as servicers place borrowers in a trial plan and collect the information over the course of that trial.
According to Fannie Mae guidelines, its servicers must include a list of all financial documents needed to complete the HAMP evaluation and a deadline in its "Notice of Incomplete Information." The notice must be sent no earlier than 30 days after the date of the borrower’s first written request. All other notices must be sent no later than 10 days after the servicer determines the borrower is ineligible for HAMP.
Effective immediately, a borrower facing imminent default is allowed to provide signed federal income tax returns to the servicer, but there remains no requirement.
Freddie Mac’s new guidelines revise some HAMP documentation, sets Jan. 1, 2010 as the deadline for servicers to begin sending timely notifications to borrowers who are not eligible for HAMP, and provides servicers more options for obtaining a net-present value for borrowers from the Treasury.
In addition, the guidelines increase the capitalization threshold from $20,000 to $50,000 when determining whether title insurance is required. The change applies to all modifications including HAMP.
Write to Jon Prior.
