Archive for December, 2009
Foreclosure filings in November dropped 8% from the previous month but remain 18% above levels seen a year ago, according to RealtyTrac’s foreclosure market report.
Along with holding an online marketplace of foreclosures, RealtyTrac provides a count of properties with at least one foreclosure filing in its database across more than 2,200 counties nationwide.
“November was the fourth straight month that US foreclosure activity has declined after hitting an all-time high for our report in July, and November foreclosure activity was at the lowest level we’ve seen since February,” said James Saccacio, chief executive officer of RealtyTrac.
In November, one in every 417 homes in the US received a foreclosure filing, which includes either default notices, scheduled foreclosure auction and bank repossessions. Default notices across the country fell 8% from the month before but climbed 22% from last year. Scheduled foreclosure auctions fell 12% from the previous month but grew 32% from 2008, according to the report.
Bank repossessions flattened from October and remained down from November 2008. That number could remain flat as long as the Treasury Department keeps pressure on servicers to modify loans through the Home Affordable Modification Program (HAMP) – despite some calling the program’s success into question.
“Loan modifications and other foreclosure prevention efforts, along with the recently extended and expanded homebuyer tax credit, are keeping a lid on the most visible symptoms of the nation’s ailing housing market — foreclosures and home value depreciation,” Saccacio said.
Nevada’s foreclosure rate continues to lead the country. In November, 9,295 homes received a foreclosure filing, translating to one in every 119 homes. It’s a 33% drop from the previous month and its second straight double-digit decrease. In Las Vegas, one in every 102 homes received a foreclosure filing, which is four times the national average. However, it has dropped out of the top 10 highest metro foreclosure rates with its 33% decrease from the previous month.
In Florida, one in every 165 homes received a foreclosure filing in November, overtaking the second spot from California, where one in every 180 homes received a filing. California posted a 13% decrease in foreclosure activity from the previous month, but it still posted the highest total of any state with 73,995 foreclosure filings in November, a 22% increase from last year.
For the second straight month, four states accounted for 52% of the nation’s foreclosure activity: California, Florida, Illinois and Michigan.
Write to Jon Prior.
[Update 1: Clarifies location of speech]
Elizabeth Duke, a governor on the board of the Federal Reserve System, speaking at the Community Stabilization Symposium in National Harbor, Md., said recent increases in foreclosures only “exacerbated a pre-existing vacancy problems” in certain cities.
“In the most devastated neighborhoods, some lenders do not even complete the foreclosure process or record the outcome of foreclosure sales because the cost of foreclosing exceeds the value of the property,” Duke said.
These “toxic titles,” she added, have placed a large number of properties in legal limbo. High rates of abandonment pushed many cities such as Flint, Mich. and Cleveland to pursue plans to “right size” by demolishing vacant properties and create land banks, Duke said.
High foreclosure rates have spread into once economically vibrant coastal cities with jobs and growing populations, she said.
“Vacant properties are creating a different kind of problem in some California markets. Indeed, as investors sense that home prices have bottomed out, they are approaching servicers with cash offers for the bulk purchase of properties,” Duke said. “In fact, community organizations in areas of California complain that investor interest has heated up to the point that qualified first-time homebuyers and local community organizations are being crowded out of the market.”
But there are some examples of investors making money while benefitting the community. Duke was introduced to Lone Star Investment Advisors, a private equity firm based in Dallas that invests in low-to moderate-income areas in Texas. Their private equity fund invests in Texas companies located in or willing to move to low-income areas, according to Duke.
“The fund's managers have focused on manufacturing and distribution companies that are valued at $20m and up and can create jobs in the state's lower-income communities,” she said. “Its double bottom-line approach to investments–making a profit while benefitting the community–makes it attractive to bankers with Community Reinvestment Act (CRA) obligations as well as other socially-minded investors.”
The Federal Reserve System will also provide assistance to neighborhood stabilization efforts. The Community Affairs staff, chaired by Duke, will provide data analysis and technical assistance to state and local governments trying to solve the foreclosure problem in their communities.
Duke said that the Federal Reserve banks of Cleveland, Richmond and Atlanta are collaborating on a series of capacity-building sessions for several communities in Appalachia to help them leverage federal Neighborhood Stabilization funds.
“In addition, we are studying the Neighborhood Stabilization Program and interviewing some 50 program grantees nationwide to learn about the early successes and challenges to this effort to restore health to communities with high foreclosure rates,” Duke said.
Write to Jon Prior.
The pace of buyouts in delinquent loans in Fannie Mae (FNM: 0.00 N/A) and Freddie Mac (FRE: 0.00 N/A) mortgage-backed securities portfolios (MBS) is set to boom in 2010 as new accountancy rules come into effect, changing the nature of securitization.
On New Year's Day, the two government-sponsored enterprises (GSEs) are adopting the Financial Accountancy Standards (FAS) 166 and 167 which will "remove a significant disincentive for buyouts," and that as a consequence "early 2010 high premium constant prepayment rates (CPRs) are likely to be elevated compared to the CPRs of recent months," according to market research released by securitization analysts at Deutsche Bank.
Fannie and Freddie buyouts through 2009 were relatively muted compared to Ginnie Mae. The new FAS 166 and 167 will mark a switch in capital constraint requirements, whereas these loans are typically marked down to 40% of face value. The new accountancy rules allow the agencies to place the loans on balance sheet at par instead.
Further, the buyouts remain in the GSEs best interest: "Selling MBS would also helps the GSEs comply with the requirement to shrink their portfolios by 10% in 2010," the analysts add. The consolidated balance sheet of the two agencies is around $4.5trn.
Write to Jacob Gaffney.
The Department of Housing and Urban Development’s (HUD) proposed changes to how Federal Housing Administration (FHA)-approved lenders operate have far-reaching consequences the department hasn’t fully considered, according to an analysis of the proposals by global law firm K&L Gates.
The proposal would eliminate the HUD regulation for correspondent lender approval and rely on FHA-approved direct lenders to ensure the correspondent firms they do business with are originating compliant loans. The proposal would also increase the net worth requirement for approved lenders ten-fold from $250,000 to $2.5m.
These changes would shift “the risks associated with FHA-insured loans from the department, and thus the American taxpayer, to FHA-approved mortgagees, which the department expressly characterized as the party that ‘bear[s] the greatest responsibility for the validity and eligibility of the loan for FHA insurance,’” said K&L Gates partner Phillip Schulman and associate Krista Cooley.
But there are many unanswered questions, the lawyers wrote. “The changes would subject FHA-approved mortgagees to penalties for any violation of HUD requirements committed in connection with an FHA-insured loan, whether committed by the FHA-approved lender or the un-approved loan correspondent, regardless of whether the sponsor knew or should have known of the violation.”
In addition, the lawyers wrote, “the proposed amendments would create significant changes to the current FHA approval structure, and FHA-approved mortgagees who pride themselves on maintaining sponsor/loan correspondent relationships with hundreds, or even thousands, of mortgage brokers may want to rethink taking on full responsibility and liability for the FHA-insured loans originated through these relationships.”
FHA hasn’t raised the net worth requirement since 1993, and raising it to $2.5m would bring it in line with the requirements for government-sponsored enterprise (GSE)- and Veterans Administration (VA)-approved lenders. FHA maintains 60% of FHA-approved lenders already have a net worth of $1m and the net worth increase will not restrict any currently FHA-approved mortgagee from the opportunity to participate in FHA programs.
To reach the new net worth requirements, HUD projects lenders would likely increase net worth largely by changing the title of existing assets from the individual holdings of a mortgagee’s owners to those of the institutions. But the lawyers argue “HUD provides no support for how the Department arrived at this conclusion and does not provide any discussion of economic or legal considerations that an FHA-approved entity’s ownership would make in determining whether such an asset transfer was in these entities’ best interests.”
The lawyers also question the impact to lenders who are unable to raise net worth by the three-year deadline and how it would change these businesses. Potentially, a previously approved FHA lender who can’t raise net worth could significantly influence the business structure, regulatory compliance requirements and revenue streams of FHA-approved entities.
Write to Austin Kilgore.
Bank of America (BAC: 7.29 -0.14%) last week priced the second new-issue commercial mortgage-backed security (CMBS) of 2009, according to industry commentary by Deutsche Bank Securities.
The $460m transaction, secured by 44 office and industrial properties in Florida, could not take advantage of the new-issue CMBS Term Asset-Backed Securities Loan Facility (TALF) because of the 7-year loan term, Deutsche Bank said.
The collateral pool contained non-standard components including cash flow from the leasing of fiber-optic cables, land and billboards along a 351-mile corridor running from Jacksonville to Miami.
"[W]e view the transaction as another important step toward the revival of the CMBS market," after another new issuance from Developers Diversified Realty (DDR: 14.08 -1.26%) started off new-issue CMBS TALF, Deutsche analysts said.
"The strong investor appetite for both new transactions is certainly encouraging."
The pricing of both new issuances offers "a glimmer of hope" that capital will be more available in 2010, according to Lisa Pendergast, a managing director at Jefferies & Co. and the Commercial Mortgage Securities Association's (CMSA) president-elect.
"These transactions provided potential issuers with real evidence that there is strong appetite for conservatively-underwritten, low-levered transactions, and thus more deals are sure to follow," she tells HousingWire for an upcoming magazine issue.
Write to Diana Golobay.
Rust belt markets showed resurgence in housing prices in the rolling quarter through November, according to Clear Capital’s Home Data Index (HDI) Market Report.
Prices in Detroit jumped 14.1% and Cleveland prices climbed 12.8% over the previous three months. For other areas, the summer boom has worn off, returning the lowest performing markets to negative quarterly results, according to the report.
The Midwest, where prices grew 2.3%, showed the highest price gain of the four regions. Prices increased 1.5% in the West, 1% in the South and 0.9% in the Northeast.
National price gains narrowed to 1.4%, which is less than half the 3.7% increase reported in the October and further below the 6.3% from September.
“The modest and improving yearly changes we’re seeing at the National and Regional levels show that many areas have sustained stable price levels for nearly all of 2009 after the dramatic fall off in prices in the preceding three years,” said Alex Villacorta, senior statistician, Clear Capital. “Yet, the continued rolling quarter declines experienced over the past two months have helped confirm that seasonal influences have returned.”
Villacorta said that many markets still show evidence of stabilization even with the potential increase in REO saturation rates, an indication of a price bottom.
“With the passing of the tax credit helping to strengthen the momentum through the winter, many buyers may find that this season is a good time to take advantage of record low prices,” Villacorta said.
According to the report, the uptick in the West region was particularly encouraging as it considers to see moderate price gains in its largest markets and areas highly saturated with real estate owned (REO) property.
“It was impressive to me that we managed to hang onto some of the gains over the summer even though we’re seeing a slow down as we go into the winter, especially in the West,” Sean McSweeney, director of product management data division at Clear Capital, told HousingWire. “Markets such as Los Angeles and Riverside are seeing 2 % and 3 % gains a quarter, which is pretty good considering the conditions are still a little less than ideal.”
McSweeney said that a recovery is still pending.
“I don’t think anyone is going to want to use that word until next spring or summer and are able to look at the effects of the housing credit and if it can pull us through the winter as well as the potential of new REOs. Certain markets have recovered, but the double-dip questions remain,” McSweeney said.
Write to Jon Prior.
Del Mar DataTrac (DMD), a San Diego-based mortgage lending automation services provider, added the compliance disclosure and closing document package services of Minneapolis-based Wolters Kluwer Financial Services to its loan origination software.
DMD users can now generate standard or customized state- and federally-compliant disclosures and closing documents from within the origination software, improving workflow and reducing the risk that all compliance requirements aren’t met in the mortgage process, the companies said.
“Partnering with Wolters Kluwer Financial Services allows DMD to give the hundreds of mortgage lenders, banks and credit unions that use DataTrac the benefit of accessing these accurate and up-to-date compliance documents without disrupting their lending work flow,” said DMD president Rob Katz.
Write to Austin Kilgore.
Mortgage application volume surged last week on increased borrower interest in refinance mortgages, which may have been triggered by the historically low interest rates experienced in the market, the Mortgage Bankers Association (MBA) said.
MBA’s market composite index of gross mortgage applications increased 8.5% on a seasonally adjusted basis for the week ending December 4. Last week’s results were adjusted to take into account the shortened holiday week.
MBA’s refinance index increased 11.1% from the previous week and refinance applications accounted for 74.4% of all applications, up from 72.1% in the previous week. MBA’s purchase index increased 4%. Government purchase applications experienced a 10% increase in volume, while conventional purchase applications declined 0.2%.
Adjustable-rate mortgage (ARM) applications accounted for 4.7% of application volume, down from 4.8% in the previous week.
Last week, multiple interest rate surveys hit record lows, and MBA said that may be the cause for the jump in application volume.
The Mortgage Maxx index of application volume that’s adjusted to reflect the number of households applying for mortgages decreased 4.9% in the week ending December 4, compared to the previous week. The index was also adjusted for the holiday week.
Mortgage Maxx projects its index will continue to decline through the balance of the year, due to less demand during the December holidays. Mortgage Maxx added the low rates should have a greater impact on application business.
“[T]he real problem here is that the Fed’s transfusions aren’t getting to the housing muscle. Rates this low in the past would have caused a refi and home-buying stampede,” the Mortgage Maxx report said. “This time, with average mortgagors trapped by dissolving equity and dismally lethargic housing, the efficacy of Dr. Ben [Bernanke] et al’s prescriptions remain wanting.”
Write to Austin Kilgore.
USA-Foreclosure.com will expand its coverage of foreclosure laws and processes to all 50 states and the District of Columbia.
Its Foreclosure Learning Center provides visitors with information on foreclosure laws and statutes while describing the timeline of the foreclosure process for each state in the Union, according to a release.
The coverage includes detailed description of the foreclosure posting requirements and highlights state statutes that interrupt the process.
Since 2005, USA-Foreclosure publishes a database of foreclosure listings usually in the West. For no fee, visitors can track foreclosures across the United States and receive notifications when properties are updated and overviews of state laws, processes and terminology.
Write to Jon Prior.
Dubai World’s troubles have hit the Big Apple.
Istithmar World Capital, the private equity arm of the Dubai government-controlled holding company, funded $282m in to build the posh W Hotel in Manhattan’s Union Square in 2006, paying $50m in cash and borrowing the remaining $232m. On Tuesday, the building sold at auction for $2m.
The winning bidder, according to The Wall Street Journal, was LEM Mezzanine, a private-equity fund affiliated with property-investment firm Lubert-Adler Partners.
But as a subordinate debt holder on the hotel, LEM Mezzanine didn’t have to pay cash for its winning bid, and could have bid up to $20m of its debt against the hotel without putting up any cash.
According to the WSJ, while there were few bidders, the scene at the auction was intense, and included multiple closed-door meetings between representatives from LEM, Istithmar and the auction company.
While LEM didn’t have to front any cash to gain control of the property, it will have to cure $97m in outstanding debt that supersedes its claim on the development. According to LEM’s Web site, the fund has more than $200m to invest to originate mezzanine loans and purchase existing senior and subordinate debt.
It’s good news for the market, as absent the LEM acquisition, CMBS investors would have likely been forced to wait six months, if not longer, to get paid by Istithmar. The deal comes with no government intervention, either, a sign that the market can still find a way to recovery.
Write to Austin Kilgore.
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