Archive for March, 2010
[Update 1: clarifies Mark Calabria's statements.]
A watchdog over the bailout efforts of Troubled Asset Relief Program (TARP), along with a government watchdog and an affordable housing interest group, told a panel of House of Representative lawmakers the administration's mortgage modification plan lacks clarity and oversight.
In testimony to the House Committee on Oversight and Government Reform today, Special Inspector General for TARP (SIGTARP) Neil Barofsky remarked it will remain unclear how many permanent modifications are actually expected until the Treasury Department clarifies its goals for the Home Affordable Modification Program (HAMP). He called the Treasury’s failure to identify an actual goal for permanent modifications “unacceptable."
A year into the program, which originally aimed to aid 3-4m borrowers, servicers placed only 170,000 trial modifications into permanent status. Additionally, the pace of trial modifications starts leveled out in recent months, and the share of permanent modifications only recently started keeping pace:
The delay has been traced to a number of issues within HAMP, as outlined in SIGTARP's latest audit.
Barofsky said HAMP showed a lack of planning upfront — what he called a “ready, fire, aim” approach on the part of the Treasury — and indicated the constant changes in guidance and documentation requirements cause servicers to reset their systems. This causes delays in the process and jumbled paperwork.
“One of the servicers explained to us that they did in fact lose paperwork because they were so overwhelmed, because of the verbal modifications, because of the constant changes to their systems, that they hired a vendor and the vendor lost all the documents,” Barofsky said in the hearing.
Gene Dodaro, acting comptroller general at the Government Accountability Office (GAO), told the Committee the Treasury should pick up its efforts to move forward on its Second Lien Modification Program (2MP), Home Affordable Foreclosure Alternatives (HAFA) program and the $1.5bn Hardest Hit Fund. He also recommended the Treasury to follow-up on debt counseling for borrowers with high debt-to-income (DTI) ratios. He noted that, of the 170,000 permanent modifications, 1,473 have re-defaulted so far.
John Taylor, President and CEO, National Community Reinvestment Coalition urged mandatory compliance with HAMP and a larger focus on principal reduction. Taylor issued a statement yesterday supporting the move by Bank of America (BAC: 7.29 -0.14%) to reduce principal balances on loans that are underwater.
“Principal reduction is an important tool in making loans sustainable for many borrowers,” he said. “The rest of the industry should follow suit. And federal policy should reflect the growing consensus that principal reductions are required to stem the foreclosure crisis, not more half measures that push the problem down the road.”
He noted, for example, that HAMP’s provision for principal reduction is “hamstrung” by a lack of an explicit requirement mandating principal reduction.
He added in Wednesday's statement: “Lenders and servicers must be compelled to take more aggressive actions to prevent foreclosure. And the loans the federal government has the authority to mandate such reductions on loans held by Fannie Mae and Freddie Mac.”
Mark Calabria, director of financial regulation studies at the Cato Institute, told the House panel the Treasury should end programs focused on helping borrowers that are underwater and can’t refinance. Instead, he said, help should be given to families facing foreclosure.
Calabria estimated that, should the Treasury spend the total $75bn under the program and not increase the volume of permanent modifications substantially, the expenditure could work out to as much as $400,000 per permanently modified loan. He noted that’s “more than twice the median house price” and said, “it would be cheaper to buy them a house.”
Write to Diana Golobay.
PMI Group shares led a surge in mortgage and bond-insurer stocks Wednesday after the largest US mortgage lender unveiled the first plan to cut principal owed on underwater home loans.
PMI Group shares closed up 23%, adding to Tuesday's 16% gains. MBIA Inc. shares jumped 14%, MGIC Investment Corp. shares gained 6.4%, Radian Group rallied 22%, and Ambac Financial Group Inc. shares rose 9.2% to close at 80 cents a share.
The Financial Select Sector SPDR exchange-traded fund, which tracks financial stocks in the Standard & Poor's 500 Index, closed up a penny to $15.91. The largest percentage gainer in the S&P 500 was Genworth Financial Inc., which closed up 4.2% to a new 52-week high of $17.24.
As bond insurers rallied, other financial companies also saw gains. Notably, Bank of America Corp. shares closed Wednesday up 2.6% after the bank said that it made principal forgiveness a priority for certain subprime mortgages.
The owner of the Northwest's tallest building, the 76-story Columbia Center, missed a mortgage payment this month, providing fresh evidence of the troubles facing downtown Seattle office landlords.
Boston-based Beacon Capital Partners failed to make a scheduled payment of $1.65m on a $380m loan it took out when it bought the tower three years ago, according to a recent report by Wells Fargo Bank, which administers the debt.
The loan faces "imminent default due to cash flow issues,"says a note in the report.
A spokesman for Beacon, the Seattle area's largest office landlord, declined comment.
The US Treasury intends to unload its 27% stake in bailed-out bank Citigroup using a preset trading plan that will lock the government into a schedule for selling its shares, people with direct knowledge of the matter said.
The program, which may be announced next month, is similar to those used by executives to protect themselves against accusations of insider trading, said the people, who asked not to be identified because the process isn’t final. The Treasury would be able to issue instructions on how many shares to sell, when to sell them and at what price while eliminating concern that the sales are based on non-public information.
“What they are looking to do is to optimize taxpayer return while ensuring market stability,” said Stephen Myrow, a former Treasury official who is now managing director at ACG Analytics Inc., a Washington-based investment research firm.
A sale of the Treasury’s shares, which could be completed this year, would bring Citigroup a step closer to exiting the government’s Troubled Asset Relief Program. The firm had to get a $45bn infusion of taxpayer money in late 2008 as withering confidence in the bank almost triggered a deposit run.
The Dubai Government announced Thursday that it will support Dubai World and Nakheel “with significant financial resources”, according to a statement.
This will include a commitment to fund up to $9.5bn over the business plan period for both companies, according to the statement. The support will be allocated as $1.5bn for Dubai World and $8bn for Nakheel.
The support will be funded by the $5.7bn remaining from the loan which was previously made available from the Government of Abu Dhabi in addition to other “internal Dubai Government resources”, according to the statement.
The statement also said that “Dubai World and Nakheel will also present revised business plans, which take into account the current business environment and reflect the new direction being given to both companies.”
Frank Relihan, vice president and Jason Smith, vice president of NorthMarq Capital's Bethesda, MD office have arranged first mortgage financing of $5.92m for the Riverfront Apartments, a 356-unit multifamily complex located in Orlando, Florida.
Financing was based on a 10-year term with 2-years interest only followed by a 30-year amortization schedule and was arranged for a Southeast-based borrower by NorthMarq through its seller-servicer relationship with Freddie Mac.
According to Relihan, this transaction was a former tax credit / Florida Housing Bond deal that went into default that Northmarq's client bought out of foreclosure. The property was not fully stabilized (85% leased); however, Freddie was comfortable with the debt level and plan to spend $2,000 per unit in upgrades over the next 12 months.
"This was a complicated deal in a complicated market and Freddie saw the true value of a good sponsor and a realistic real estate loan," he said.
The so-called "bad banks" of Northern Rock (now NRAM) and Bradford and Bingley (B&B) plan to merge.
The move is designed to cut costs and bring greater efficiencies for the UK taxpayer, who owns both businesses.
They are set to be brought under one holding company with a single management team, although there is no firm timetable to complete the plan.
Bradford and Bingley and Northern Rock were split into "good" and "bad" parts in the aftermath of the banking crisis.
The change will not affect customers of the two businesses, who should carry on mortgage payments as normal.
