Archive for January, 2011
Washington is gearing up for its next epic policy debate: what to do about Fannie Mae and Freddie Mac.
Fannie and Freddie are the two mortgage behemoths that the federal government created decades ago, and then took over as the financial system unraveled in 2008. What policymakers decide will determine how high mortgage rates go in the future, how easy it will be to obtain a home loan, and whether the popular 30-year fixed-rate mortgage continues to exist.
No one wants to return to the situation that existed just before the financial crisis. Fannie and Freddie had evolved into odd combinations of public and private: profit-maximizing, shareholder-owned companies with unique charters and implicit – but never clearly spelled out – federal backing. Each could thus borrow more cheaply than other financial institutions could, and both used that advantage to earn rich profits investing in higher-yielding mortgages. Fannie and Freddie were also allowed to operate with very thin capital cushions to protect them if their investments went bad.
A look at news across HousingWire's weekend desk, with more coverage to come on bigger issues:
On Saturday, R.K. Arnold retired as president and chief executive of Mortgage Electronic Registration Systems. Paul Bognanno was named to serve as interim president and CEO until a replacement is found.
Arnold helped develop MERS, which is a registry of home ownership and other mortgage rights for more than half of all outstanding residential mortgages in the U.S. The company was founded in 1995 and is based in Reston, Va.
MERS is owned by the largest players in mortgage finance: Bank of America (BAC: 7.255 -0.62%), JPMorgan Chase (JPM: 37.40 -0.24%), Citigroup (C: 30.53 +0.49%), Wells Fargo (WFC: 29.36 +1.07%), as well as Fannie Mae and Freddie Mac.
Arnold joined MERS as senior vice president and general counsel in 1996 and was named president two years later. Bognanno had been chairman of Radian Guaranty, a private mortgage insurer based in Philadelphia.
On Tuesday, the Federal Open Market Committee convenes for another meeting and the Standard & Poor's/Case-Shiller home price index is released. The Fed will then announce its latest monetary policy decision Wednesday afternoon.
President Obama is set to deliver his State of the Union address Tuesday night. Several reports over the weekend said the administration's long-awaited proposal on the future of Fannie Mae and Freddie Mac won't come before the end of January, as expected.
The Wall Street Journal reported turnover within the White House staff and an inability to reach a consensus have hindered the administration's recommendation. As mandated under Dodd-Frank, the report on the government-sponsored enterprises from the Treasury Department was due to Congress by the end of January.
Reuters quoted an official saying "it would not be unreasonable for something this complex and this far-reaching to be pushed back a little bit." It now appears the administration will provide its plan for the GSEs by the middle of February.
HousingWire's February issue explores the coming changes to the GSEs, weighing all sides and delving deep into what market participants hope to see, expect will happen and plan to do once the changes take root.
Federal judges in Delaware are set to rule Monday on requests by two defunct subprime mortgage lenders to destroy thousands of boxes of documents, according to a Reuters report. The bankruptcy court judges will deliver rulings amid the whirlwind surrounding the foreclosure process continues.
In October, the nation's largest mortgage lenders suspended foreclosures after employees were found to be signing affidavits en masse without properly reviewing the documentation as required by law. The banks restarted the foreclosure process and Bank of America resumed selling foreclosure properties in most states that have a nonjudicial process.
Regulators closed four banks last week. The Federal Deposit Insurance Corp. estimates the total cost to its deposit insurance fund of about $454.9 million. Seven banks have failed so far in 2011 after nearly 300 institutions failed over the prior two years.
The Georgia Department of Banking and Finance closed Enterprise Banking Co. of McDonough, Ga., and the FDIC was appointed receiver. At Sept. 30, Enterprise Banking had $100.9 million in total assets and $95.5 million in total deposits. The FDIC created the Deposit Insurance National Bank of McDonough that will remain open until Friday to allow depositors access to their insured deposits and time to open accounts at other insured financial institutions.
The South Carolina State Board of Financial Institutions closed CommunitySouth Bank and Trust of Easley, S.C. The FDIC signed an agreement with CertusBank, a new unit of Blue Ridge Holdings Inc. of Charlotte, to assume all of the deposits and most of the assets of CommunitySouth. At Sept. 30, CommunitySouth Bank and Trust had about $440.6 million in total assets and $402.4 million in total deposits.
The North Carolina Office of Commissioner of Banks closed The Bank of Asheville, in Asheville, N.C. The FDIC signed an agreement with First Bank, Troy, N.C., to assume all of the deposits and essentially all the assets of the closed entity. The Bank of Asheville listed assets of $195.1 million and deposits of $188.3 million as of Sept. 30.
The Office of Thrift Supervision closed United Western Bank of Denver. First-Citizens Bank & Trust, Raleigh, N.C., agreed to assume all the deposits and nearly all the assets of the failed bank. United Western reported total assets of $2.05 billion with deposits of $1.65 billion as of Sept. 30.
Write to Jason Philyaw.
Safeguard Properties, in conjunction with default servicing industry veteran Brandon Kirkham, recently launched a new company that streamlines communication between mortgage servicers and code enforcement officers.
Compliance Connection, which is based in Plano, Texas, is an online network where servicers can connect directly with municipalities across the country to address code enforcement issues. Code violations are delivered electronically to involved parties, reducing the amount of time between when the notification is sent and when it is received.
Compliance Connection doubles as a workflow management platform, as it tracks every violation sent across the system.
Kirkham said Compliance Connection offers servicers a way to increase productivity while maintaining quality control. He is president of the company.
"Compliance Connections vastly improves the ability of servicers and municipalities to handle growing volumes of properties," Kirkham said. "It offers an easier, more efficient way to delivering code violations and manage the communication and workflow to abate them more quickly."
Safeguard Properties entered into a business partnership with the brand new firm. Safeguard is a property preservation company based in Valley View, Ohio. The firm employs 825 people, as well as has a network of more than 10,000 contractors nationwide.
Write to Christine Ricciardi.
Follow her on Twitter @HWnewbieCR.
Borrowers either never moved into or later vacated homes for at least 25 percent of U.S. mortgages that were described as being for “owner occupied” properties when bundled into securities, according to 1010data.
Misrepresentation of a mortgage’s intended use as a residence accounts for about half of the falsely labeled loans, with the rest reflecting borrowers that subsequently moved out, according to a study by the New York-based firm, which sells software used to analyze data. The mortgages were packaged into bonds without government backing from 2004 through 2008.
