Archive for May, 2010
Beginning June 1, mortgage lenders are likely to order a second full credit screening immediately before closing.
The last-minute credit report will be designed to find out whether a borrower has obtained — or even shopped for — new debt between the date of your loan application and the closing. If a borrower has made applications for credit of any type — for furnishings and appliances for the new house, a car, landscaping, a home equity line, a new credit card — the closing could be put on hold pending additional research by the lender.
Knauf Plasterboard Tianjin, one of the companies tangled in litigation over defective Chinese-made drywall, said it has reached a settlement with builder Beazer Homes USA, an indication that Knauf is moving quickly to settle claims before lawsuits go to court.
Atlanta-based Beazer didn't respond to request for comment. But Kerry Miller, a partner at New Orleans law firm Frilot, which represents Knauf, confirmed that a settlement had been reached. Miller said Knauf, known as KPT, is in talks with between six and 10 other builders that had used its Chinese-made wallboard.
The number of loans made to home buyers rose by 25% between February and March, to 45,000.
And borrowing by first-time buyers rebounded faster than that by existing home owners, the CML said.
But it warned that mortgage rationing might continue for many years unless the new government helped lenders raise finance.
Property prices in centrally located areas in Dubai may be reaching a “floor” after values dropped by 45%, Bank of America Merrill Lynch said.
“We see an emerging floor for prime assets, particularly in the retail sector, which has the smallest supply pipeline,” Dubai-based analysts including Karthik Sankaran and Abdelrali El Jattari wrote in a note to investors today. Growth in retail, trade and tourism should resume, helping the real-estate industry, the analysts said.
Last week Shaun Donovan, who runs the Department of Housing and Urban Development, said that it might make sense to modify the mortgage interest tax deduction. Sacrilege! Giving people a tax break for buying a house is one of the great middle class subsidies. Donovan knew he was on shaky ground when he said it, and did plenty to hedge.
A look at stories across HousingWire’s weekend desk…with more coverage to come on bigger issues:
Regulators shuttered four banks on Friday, located in Georgia, Illinois, Michigan and Missouri. The closures are expected to cost the Federal Deposit Insurance Corp. (FDIC) Deposit Insurance Fund (DIF) $301.5m. They bring the running 2010 total to 72 banks closed so far this year. By the same week last year, only 33 banks had been shut down.
The Illinois Department of Financial Professional Regulation Division of Banking shut down Midwest Bank and Trust Company. Firstmerit Bank will assume essentially all $3.17bn of assets and will pay the FDIC a 0.4% premium to acquire all $2.42bn of the failed bank's deposits. Firstmerit and the FDIC entered a loss-share transaction on $2.27bn of the failed bank's assets. The closure is expected to cost the DIF $216.4m.
The Georgia Department of Banking and Finance closed Satilla Community Bank. Ameris Bank will purchase essentially all $135.7m of assets and will pay the FDIC a 0.19% premium to assume all $134m of deposits from the failed bank. Ameris Bank and the FDIC entered a loss-share transaction on $101m of the failed bank's assets. The closure is expected to cost the DIF $31.1m.
The Missouri Division of Finance shut down Southwest Community Bank. Simmons First National Bank assumes essentially all $96.6m of assets, and will pay a 0.5% premium to the FDIC to buy all $102.5m of the failed bank's deposits. The closure is expected to cost the DIF $29m.
The Michigan Office of Financial and Insurance Regulation closed New Liberty Bank. Bank of Ann Arbor agreed to buy essentially all $109.1m of assets and all $101.8m of deposits from the failed bank. Bank of Ann Arbor and the FDIC entered a loss-share transaction on $95.2m of the failed bank's assets. The closure is expected to cost the DIF $25m.
Other financial regulators are picking up on enforcement actions. According to the latest report from NERA Economic Consulting on analysis of trends in Securities and Exchange Commission (SEC) enforcement action settlements, the SEC settled with 345 defendants in the first half of fiscal year (FY) 2010 (October 2009 through March 2010). This compares with 328 defendants in the second half of FY 2009 and with 290 defendants in the first half of FY 2009.
The SEC settled two subprime-related cases for more than $100m in the first half of FY 2010, the NERA report finds. State Street Bank and Trust Company's $314m SEC settlement ranks as the largest in the first half of FY 2010, and the seventh-largest settlement overall since the passage of the Sarbanes-Oxley Act, according to the report.
"What remains to be seen is whether these cases, along with the recent action against Goldman Sachs (GS: 111.77 +2.96%), are the beginning of a new wave of subprime-related SEC settlements," the authors wrote in a summary of the report.
Some developing nations are for the first time "unbundling" their mortgage markets and creating markets for mortgage security trading, according to commentary by Brigitte Posch, an executive vice president and portfolio manager at PIMCO.
The commentary piece — called Safety in Separation: How Unbundling Emerging Mortgage Markets Benefits Borrowers, Lenders, and MBS Investors — notes that developing markets matured significantly over the past several decades, though not to the sophistication or size of the US.
Many developing countries maintain "bundled" residential mortgage markets, where one institution still performs the origination, servicing and funding. As developing countries decided to "unbundle" their mortgage lending, the secondary mortgage market begins to open up, according to the report (download here).
This unbundling process aids lenders and borrowers alike, Posch writes. Additionally, some countries learn that a bundled market is not necessarily synonymous with a safer market.
"When the crisis hit, those emerging nations that had their mortgages originated at adjustable or inflation-linked rates, or even denominated in hard currency, saw their interest rates, inflation, and, in some cases, foreign-exchange skyrocket," Posch says. "This created a huge payment shock to borrowers, since their wages did not keep up with the resulting payment increases, and several institutions suffered large losses on loans."
The act of unbundling those markets allows institutions to pass along risks — like interest-rate and credit risk — to the end mortgage holders. According to the commentary, these institutions can then promote growth of their products by creating economies of scale and efficient labor division. The challenge, however, is putting in place a strong regulatory framework to facilitate the unbundling process.
Average asking prices on properties for sale in the United Kingdom rose in May (illustrated below) to £237,134 (US$344,537), up 0.7% from April and 4.3% from the same time last year. UK property Web site Rightmove today noted a surge of new sellers just before the recent election to the highest weekly figure since June 2008. Unsold inventory, however, continues to climb.
“We observed last month that rising prices and more properties coming to market would be unhappy bedfellows in the long-term," said Rightmove commercial director Miles Shipside. "This month we are seeing signs that the relationship is under increasing stress. Sellers are starting to reduce their pricing expectations to court the fewer buyers who are able to proceed, though the number of buyers who can purchase is too low to bring volume back to the housing market.”
The return of sellers is depressing prices in London, where the average asking price fell to £420,203 in May, down 0.4% from April. London asking prices remain 5.7% above the same time last year, however. The number of new sellers in London is 97% above year-ago levels.
“This flush of new competition has forced fresh sellers to tone down their asking price demands," Shipside said. "Spring is the traditional time of year for more sellers to come to market, and they were seemingly undeterred by the impending election."
Write to Diana Golobay.
Disclosure: the author holds no relevant investment positions.
Canadian Economy to Outperform US in Next 5 Years – Despite challenges created by an exceptionally strong Canadian dollar, Canada has the lowest level of sovereign debt and the highest GDP growth rate in the G7 — a pattern that appears likely to persist for some time. Having avoided the worst of the global financial crisis, the country now enjoys a number of distinct competitive advantages, says Oxford Analytica in this guest post. – has strengths and risks
This and more at the highly-recommended Mortgage News Clips.
"U.S. Treasurys are perhaps not the risk-free assets they once were," said Michael Hasenstab, who manages the Templeton Global Bond Fund. Countries that didn't have the massive amounts of leverage and indebtedness before the recession "are coming out of this a lot quicker and without the overhang and inhibitors the U.S. is experiencing."
Standard & Poor’s cut to junk the ratings on certain securities, backed by U.S. mortgage bonds, that it granted AAA grades when they were created last year by Credit Suisse Group, Jefferies Group Inc. and Royal Bank of Scotland Group Plc.
The reductions were among downgrades to 308 classes of so- called re-remics, or re-securitizations, created from 2005 through 2009, the New York-based ratings company said today in a statement. About $150 million of the debt issued last year, as recently as July, with top rankings were lowered below investment grades, according to data compiled by Bloomberg.
