Archive for October, 2010
At the Mortgage Bankers Association annual convention this week in Atlanta, there remains a huge question mark of what exactly Dodd-Frank is meant to accomplish. Here's the rub: for all the act's good intentions, it appears to leave mortgage servicing in the same suspended state of self-policing that was prevalent in the boom and bust — years before the legislation's recent passage into law.
Actually, it's worse than that.
Mortgage servicers need to largely rely on self-policing, but face hugely restrictive – what I would say business-ending – penalties as a result of noncompliance.
In many parts of the industry, there are problems in this regard, most recently with the robo-signing 'scandal' not far from everyone's lips in Atlanta. There are many readers who write in to HousingWire who complain about our editorial approach to the debacle: that for what it's worth, the nation's corporate resolution authority enabled robosigning in the first place.
The state attorneys general will no doubt point to the mortgage servicing industry's inability to self-police as evidenced by robo-signing, but where is a change occurring on this front?
Appraisal management companies maintain several black lists that they "scrub up against," one appraiser told me at the MBA conference. For instance, if a certain appraiser is expected of theft, one AMC can notify the others of the suspicious activity.
For its part, the Dodd-Frank act did not expressly prohibit the use of in-house appraisers or AMCs, leaving it open to interpretation until a new rule replacing the Home Valuation Code of Conduct is drafted. Meanwhile, the Federal Reserve is implementing an interim rule until April 1, 2011.
Civil penalties for noncompliance are severe, running $10,000 per day for the first offense, $20,000 per day for each subsequent offense.
Operation Stolen Dreams, the largest crackdown on mortgage fraud the U.S. has seen, hasn't given new numbers since June when it paraded its 500 or so arrests. Then, $147 million in fraud was "recovered."
That seems like a drop in the bucket when it comes to stopping fraud.
Lenders and servicers alike are more likely to file a SAR (suspicious activity report) and write down fraud-related losses. It remains a crime with disproportionate numbers, a mismatch of perpetrators and money taken versus arrests and monies recovered. Angelo Mozilo, arguably a fraudster, walked away with no more than a slap on the wrist and no one seems especially troubled.
This is because the focus remains on the illiquid qualities of the equation, in this case, the home. The industry will always scrub against the collateral but sees no certain gains in putting potential fraudsters on watch lists.
"The nature of fraud is to follow the money," a fraud analyst at MBA said. "They just go somewhere else, keep moving along." In these cases, he said, the FBI has to pretty much set up some sort of sting to catch mortgage fraud at work. That's hardly an activity considered integral to a servicer's bottom line. Yet, secondary market investors seek assurances that mortgages are completely free of fraud. The mortgage servicing industry touts its technology to that effect, but can regrettably offer no such assurances.
And with financial reform unlikely to be changed meaningfully, even after November elections, the self-policing mortgage servicing industry will remain unable to keep track of most of the real criminals.
Jacob Gaffney is the editor of HousingWire.
Write to him.
CHICAGO — On almost every level, there's a housing crisis in this country. People can't sell, property values are falling, and renting is no picnic either. But, as WGN-TV's Micah Materre reports, a group of Chicago investors has $50 million, and a plan to save Chicago neighborhoods, one tenant at a time.
"This is the living room. Beautiful, comfortable living room where I sit and watch all my TV, " giggles Pangea tenant Trina Cross.
Trina cross is proud of her place; the bathroom with what she calls "the Patty Labelle lights; the eat-in kitchen; hardwood floors; and best of all?
…"the affordable rent?
Deutsche Bank said it faced less than $1 billion of claims over mortgage-related securities it helped arrange, amid signs of a growing backlash by clients seeking to recoup losses tied to the credit crisis. In a conference call Deutsche Bank's chief financial officer Stefan Krause said: "On mortgage repurchase claims we currently have approximately $780 million of pending mortgage repurchase demands."
The U.S. government's effort to help struggling homeowners is approaching a standstill, and the number of homeowners in ongoing mortgage modifications could start shrinking in several months if current trends continue, according to a ProPublica analysis of Treasury Department data.
A year and a half into the program, the number of homeowners defaulting on their modified loans has been fast approaching the number of new modifications.
Treasury 10-year notes dropped for a sixth day, the longest streak in two years, as a report showing new-home sales rose more than forecast added to speculation a Federal Reserve program to boost the economy may be gradual.
Thirty-year yields climbed for a second day while two-year yields were little changed amid speculation signs of growth will allow the Fed to buy fewer securities than some traders estimate in a tactic known as quantitative easing. Pacific Investment Management Co.’s Bill Gross said a renewal of asset purchases will likely signify the end of a 30-year bull market in bonds. The U.S. sold $35 billion of five-year notes today.
“There’s not a lot of upside to the Treasury market,” Sean Simko, who oversees $8 billion at SEI Investments Co. in Oaks, Pennsylvania, said before the auction. “The speculation trade of getting ahead of the Fed is starting to slow down.”
A majority of Americans now say they are worried about making their mortgage or rent payments, underscoring the extent of economic anxiety in the country heading into midterm elections.
A new Washington Post poll shows that concerns about housing payments have spiked since 2008 despite some improvements in the overall economy. In all, 53 percent said they are "very concerned" or "somewhat concerned" about having the money to make their monthly payment. Worries are the most intense among those with lower incomes and African Americans.
These concerns can be boiled down to one thing: jobs, said Karen Dynan, who worked as an economist for the Federal Reserve and on President George W. Bush's council of economic advisers.
New homes sales increased 6.6% in September to an annual rate of 307,000, but hit a 2010 low.
According to data released by the U.S. Census Bureau and the Department of Housing and Urban Development Wednesday, only 24,000 houses sold last month. Year-to-date, 257,000 new homes have been sold, down 11.7% from the same period in 2009.
New home sales are down 21.5% from September 2009 and at the lowest level they have been all decade.
Market inventory also fell to the lowest level seen year-to-date. As of September, there were 204,000 homes for sale, down 1% from August and down 19% from one year ago.
The average price of a home fell to $257,500 last month from $260,500 the month previous. September marked the second lowest average price of 2010. Only the July average price of $248,800 was lower. According to the survey, 38% of homes purchased in September were priced between $200,000 and $300,000 while 21% were priced above that.
More homes sold in the South than any other region of the U.S. — a total of 160,000 — followed by the West (64,000 homes ), the Mid-west (53,000) and the Northeast (30,000).
Write to Christine Ricciardi.
