Archive for August, 2010
Maryland regulators have failed to ensure taxpayers are refunded hundreds of thousands in illegal fees charged by crooked mortgage lenders, according to a state-sponsored audit.
The Maryland Office of the Commissioner of Financial Regulation identified more than $1.5 million in illegally charged fees during fiscal 2009, but in many cases, the agency never followed through to ensure borrowers were refunded, according to an audit by the state's independent Office of Legislative Audits.
The agency blamed much of its lack of oversight on the recession.
A look at stories across HousingWire’s weekend desk…with more coverage to come on bigger issues:
With July home sales coming in at a level not seen since 1985, the Obama administration is rolling out two new tools to help homeowners pay their mortgages. Speaking to CNN Sunday morning, Department of Housing and Urban Development secretary Shaun Donavan said officials plan to launch over the next few weeks a refinancing effort through the Federal Housing Administration and an emergency loan program to help unemployed homeowners.
Meanwhile, Wall Street's political contributions have swung back to the right again, as Washington has started looking to increase financial regulation. And The New York Times reports hedge-fund manager Paul Singer is just one reason why the tide has shifted.
About a quarter of all US homeowners who refinanced their mortgage during the first half of the year moved into 15-year fixed mortgages, The Wall Street Journal reported. For all of 2009, about 18.5% of refinacings became 15-year fixed and it may not behoove all homeowners to shorten a mortgage's length to secure a lower interest rate, according to the WSJ.
A former executive at Beazer Homes USA Inc. (BZH: 3.25 +0.62%) has been indicted on federal charges of accounting fraud and conspiring to commit securities fraud, the Atlanta Business Chronicle reported. The Department of Justice claims Michael T. Rand cooked Beazer's books for much of the past decade to meet earnings targets and mislead auditors.
Also, Barron's weighs in on the future of Fannie Mae and Freddie Mac, positing: "Why not shoot for the moon when managers knew that the taxpayer was on the hook for any losses?"
And for only the third time this year, the Federal Deposit Insurance Corp. didn't announce any bank closings on Friday. Through the first seven months of the year, 118 banks have failed, according to the FDIC.
Write to Jason Philyaw.
The Dow Jones Industrial Average pushed back through the psychologically relevant barrier of 10,000 Friday, as investors saw promise in remarks from Federal Reserve chairman Ben Bernanke.
The benchmark index of 30 blue chip stocks closed up 164.84 points, or 1.65%, Friday to 10,150.65 a day after finishing below five figures Thursday for the first time since early July at 9,985.81.
Friday morning, Bernanke said the Fed has more tools at its disposal to stimulate the economy, and the DJIA rose steadily thereafter.
The S&P 500 index climbed 17.32 points Friday to close at 1,064.54 and the Nasdaq Composite rose 34.27 points to 2,152.96.
The markets dipped below 10,000 after a string of disappointing housing and macroeconomic news this week, but lifted after slightly positive Q2 GDP results and the announcement by Fed chair Ben Bernanke that the government is committed to more economic stimulus if need be.
Write to Jason Philyaw.
Fannie Mae’s mortgage portfolio through July is up 4.1% from the year ago yet down somewhat from June, and the GSE issued nearly half the mortgage-backed securities during the month than in did last July.
Fannie ended July with gross holdings of nearly $812 billion. That figure stood at $770.4 billion last year and $817.8 billion in June.
The agency issued $42.7 billion of mortgage-backed securities during July, a nearly 48% decline from $79.7 billion a year earlier but up 6.4% from June. Fannie’s MBS issuances peaked in June 2009, when more than $130 billion was issued.
The serious delinquency rate in Fannie Mae’s portfolio fell to 4.99% in June, which is the latest month data is available, from 5.15% in May. For the year-ago July, the agency’s delinquency rate was 4.17%. The rate peaked at 5.59% in February and was as low as 3.42% in April 2009.
Earlier today, Fannie Mae sold $5 billion of two-year notes. The notes carry a coupon of 0.625% and yield 0.7%, maturing in Sept. 2012. The charts below provide details on the pricing:
"Fannie Mae and FHLB are taking advantage of better funding from callables as bullet LOAS widens due to renewed corporate issuance and calmer short LIBOR levels," said Jim Vogel of FTN Financial. "The gain can be as much as 10bp. The obvious result is that both need less funding from bullets and floaters. The superior funding stems primarily from the constant demand for new callables to replace those redeemed at close to a $100 billion monthly pace."
Barclays Capital, Goldman Sachs, and JPMorgan Chase lead the sale. The rest of the syndicate includes, Citigroup, Jefferies & Co., Loop Capital Markets, Mischler Financial Group, Morgan Stanley, and Vining Sparks.
Write to Jason Philyaw.
Federal Reserve chairman Ben Bernanke bluntly acknowledged that the U.S. economic recovery has lost considerable steam, but said the central bank has the necessary policy tools to support continued growth…Bernanke reiterated that the Fed would reinvest in Treasurys to maintain the size of its balance sheet, and added that the bank is prepared to provide additional "unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly."
The SEC's proposed revision of mutual fund fees has yet to be finalized, but analysts are already analyzing on how reform may affect some fund companies.
Case in point: Ticonderoga Securities LLC analysts Warren Gardiner and Douglas Sipkin dropped their price target for Legg Mason Inc., a firm that's in the throes of a turnaround effort.
There’s no question that, in the future market for non-agency securitizations, due diligence is going to take on greater importance. Three of the four rating agencies — S&P, Moody’s and Fitch – have published comprehensive guidelines for third party reviews before they rate future mortgage backed securities (MBS). The Securities and Exchange Commission (SEC) has also weighed in on this subject as part of its recommended changes to Reg. AB II.
The new guidelines go into great detail on what the agencies are expecting in terms of sampling, review scope, loan level review process, results reporting and the qualifications of due diligence firms. The results of the due diligence review will also be provided directly to the rating agency.
The agencies will also require due diligence firms to “attest” to their work, the way public company executives have to attest to their financial reporting. This signed documentation will indicate that the results accurately reflect the findings of the review and that there was no outside influence or coercion during the process.
Going forward, I think you’ll see more statistically validated random sampling, which may require larger sample sizes if exceptions appear or if data quality is weak. Historically, less than 5% of the loans in a securitization structure were subject to due diligence examination.
For the future, there will also be much greater emphasis placed on the qualifications and independence of due diligence firms working on securitizations. Due diligence firms will be required to demonstrate sufficient experience and that their information systems and infrastructure can be relied upon to produce satisfactory loan-level due diligence.
New recommendations for additional data disclosure coming out of the Securities and Exchange Commission (SEC) and the Asset Securitization Forum (ASF) will mean that investors in the future will see the volume of information they are receiving go from a trickle to a flood. The ASF Disclosure Package reporting format, for example, provides an extensive and standardized table of data points for investors to utilize in their investment decisions. Working with a credit risk manager will help investors make sense of this information and act on the insights provided.
My prediction: In the new securitization paradigm, surveillance will be a standard risk management tool for all deals.
Paul Bossidy is chief executive of Clayton Holdings LLC.
