Archive for February, 2011
The Treasury's plan to wind down Fannie Mae and Freddie Mac could result in a downsized title insurance market and confusion over what best practices are applicable when passing title, professionals in the title insurance industry say.
"If there are fewer lenders, there are fewer players to be had (in title insurance)," said Justin Ailes, director of government affairs at the American Land Title Association.
Ailes' association pushed back at the Treasury's report, which proposed three ways the government could wind down Fannie and Freddie, thereby handing the majority of the mortgage finance market to the private sector.
"I think it's important to underscore the intent of the plan is to make sure that fewer people are able to purchase a home," Ailes said Monday.
Ailes also believes a loss of GSE power in the marketplace will mean the loss of an objective model that the title insurance industry copies when handling property titles.
"The GSEs provide the marketplace with clarity on how the title insurance should be applied to a property," Ailes said. "It's not clear who will take over that role."
David Baxter, a title insurance attorney in Dallas, said if someone had a 30-year home loan and that loan was sold to Fannie Mae before the GSE left the marketplace, there could be concerns over tracking the chain of title.
"There would have to be a process to determine who owns a loan," Baxter said, although he believes the Treasury will find a way. "There is always that question (of who owns the title) in foreclosure. It would be more confusing if Fannie and Freddie disappeared."
Ailes, meanwhile, is less concerned about the passage of the property title itself and more concerned about what the changes will do to the title insurance industry as a whole and to homebuyers.
"These types of standards (set by the GSEs for passing title insurance and buying properties) allow investors to be able to purchase these investments with certainty," Ailes said. He fears no longer having public GSEs to serve as models for handling title insurance, appraisals and other homebuyer issues will create confusion, and he's not sure what entity would take on that role.
Write to Kerri Panchuk.
Tags: American Land Title Association, Fannie Mae, freddie mac, GSE reform, title insurance
Posted in Origination/Lending, Top Stories | 1 Comment »
Freddie Mac plans to offer $861 million of pass-through certificates backed by 44 recently originated multifamily mortgages with a seven-year term.
Morgan Stanley (MS: 18.10 -0.28%) and JPMorgan Securities (JPM: 37.38 -0.29%) will lead the underwriting syndicate for the deal, which is set to come to market this week and settle around March 9.
"We are very pleased to offer our first '700-series' of K Certificates, which are comprised entirely of multifamily mortgages with an original maturity of seven years," said David Brickman, vice president of multifamily commercial mortgage-backed securities capital markets for Freddie Mac. "Because of the strong growth in our multifamily mortgage purchases, we can now tailor securities that segregate our collateral by maturity and provide tighter principal windows to better meet the specific needs of investors."
Freddie Mac said the certificates provide investors with stable cash flows, structured credit enhancement and the government guarantee.
Included in the Treasury Department's recommendations on reforming the government-sponsored enterprises was a potential increase of 25 basis point in the cost of the government guarantee for Federal Housing Administration borrowers.
Brickman said the government-sponsored enterprise hopes to issue more K certificate securities backed by specific collateral such as five- and 10-year multifamily mortgages.
The CRE Finance Council plans to issue its own white paper soon to provide regulators and policy wonks its thoughts on multifamily housing and the rest of commercial real estate.
"CREFC is working with policymakers to achieve a balanced approach that reduces taxpayer exposure while promoting a stable, counter-cyclical, and affordable source of capital for affordable and market-rate rental multifamily housing," the council said Monday.
"Our highest priority is to ensure that policies provide certainty and confidence and lead to the promotion of private lending and investing that is absolutely critical to a broader recovery in commercial real estate," said Lisa Pendergast, president of the CRE Finance Council.
Write to Jason Philyaw.
Tags: CRE Finance Council, freddie mac, JPMorgan Securities, K certificates, Morgan Stanley, multifamily mortgages
Posted in Secondary Market/Investors, Top Stories | 4 Comments »
Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, said that he plans to resign come March 30, and "pursue other opportunities."
Barofsky was nominated by President George W. Bush and confirmed by the Senate in late 2008 to serve as head of the Office of the Special Inspector General of TARP. Both SIGTARP and TARP were created by the Emergency Economic Stabilization Act of 2008.
SIGTARP was designed to fulfill three main goals: to build a robust law enforcement agency to catch and deter individuals who sought to profit criminally from TARP; to ensure transparency to taxpayers in the operation of TARP; and to provide effective oversight of the government's decision-making process to minimize instances of waste, fraud and abuse.
"I believe that SIGTARP has met each of these goals," Barofsky said in his letter of resignation to President Obama. "With my initial goals met and with these particular accomplishments in mind, and after more than 10 years in continuous government service, I believe that it is the right time for me to step down and pursue other opportunities."
Rep. Darrell Issa (R-Calif.) commended Barofsky on his work as special inspector general, and said it is essential his successor pick up right where he left off.
"The passage of TARP signaled a pivotal moment at a time of great uncertainty and no one has been more dedicated to protecting the American people’s tax-dollars from waste, fraud and abuse than Neil Barofsky," Issa said in a statement. "It is imperative that whoever is nominated by the President to serve as the next SIGTARP demonstrates the same type of vigilance, courage and commitment to transparency that Neil Barofsky brought to this job every day."
In a recent interview with The Wall Street Journal, Barofsky said it will be difficult for him to walk away from his current position. However, he commented that he is excited to take the lessons he's learned through his tenure with SIGTARP and apply them to other areas of business.
"We provide an agreed-upon set of facts. That's the greatest public service," Barofsky told the WSJ. "You can succeed in this town, and it goes against conventional wisdom, by never spinning. There's a thirst and a need for it."
Write to Christine Ricciardi.
Follow her on Twitter @HWnewbieCR.
Tags: Neil Barofsky, SIGTARP, TARP, Troubled Asset Relief Program
Posted in Servicing/Default, Top Stories | 1 Comment »
President Obama's 2012 budget proposes an across-the-board 30% cut to itemized deductions for high-income taxpayers. This includes the mortgage interest tax deduction.
Currently, interest on a mortgage taken out to buy or improve a home can be fully deducted if the amount of the loan is less than $1 million for married couples and $500,000 for singles. Home equity loans taken out for anything else is limited to $100,000 for couples and $50,000 for singles.
In December, a commission appointed by President Obama to reform the tax code and reduce the nearly $14 trillion in U.S. deficit submitted a proposal to lower the cap on the mortgage interest tax deduction for purchase loans from $1 million to $500,000.
Obama's budget did not specifically name the mortgage interest tax deduction. But he does propose cuts "across-the-board." These cuts will pay for a three-year fix to the alternative minimum tax (AMT), which the president said in his budget has driven the country deeper into deficit year after year in order to prevent this tax from hurting too many middle-class families.
A spokesperson for the office of management and budget said the proposal caps the value of itemized deductions at the 28% tax bracket.
"For too long, we have tolerated a tax system that’s a complex, inefficient and loophole-riddled mess," Obama said in the budget.
The National Association of Realtors, the biggest advocate for the mortgage interest tax deduction, voiced concerns when the commission first brought up the proposal in December.
"The tax deductibility of interest paid on mortgages is a powerful incentive for homeownership and has been one of the simplest provisions in the federal tax code for more than 80 years," said NAR President Ron Phipps at the time.
NAR did not immediately have a statement on this latest proposal from the administration, but a spokesman said they will when they obtain more information.
Write to Jon Prior.
Follow him on Twitter: @JonAPrior
Tags: budget, mortgage, mortgage intrest tax deduction, National Association of Realtors, obama
Posted in Origination/Lending, Top Stories | 5 Comments »
Mortgage interest rates will remain low throughout 2011 as the U.S. economy continues to deal with mixed unemployment news and a moderate recovery, Freddie Mac said in its February 2011 economic outlook report released Monday.
Researchers at the government-sponsored enterprise say 30-year, fixed-rate mortgages are likely to remain in the low-to-mid 5% range throughout the rest of the year, which is low when compared to historic benchmarks.
The report concluded that homebuyer affordability is still at a record high due to monthly payments tied to lower mortgage rates, but mixed labor market reports are keeping the recovery tepid at best.
"Our outlook anticipates that hiring will gradually improve and the unemployment rate will trend down, albeit with an occasional uptick," Freddie Mac's report concluded.
However, the report added that "the most widely followed labor market report, the January monthly employment report, sent confusing signals." Freddie Mac said, "Job growth was well below expectations, at just 36,000, but the unemployment rate fell nearly half a percentage point, to 9%." Initial jobless claims fell about 8.6% last week coming in below most analysts' estimates and dropping to the lowest level since the summer of 2008.
Last month, Freddie Mac Chief Economist Frank Nothaft said home sales may not improve as much as expected in 2011 because of rising mortgage rates, but he still estimated a 10% increase from last year as housing and the overall economy pushes through to recovery.
Researchers at the GSE said bad weather in January may have caused hiring figures to stall.
Either way, Freddie Mac expects interest rates to move higher during 2011, but not high enough to dampen the historic period of affordability homebuyers are now experiencing.
Write to Kerri Panchuk.
Tags: freddie mac, mortgage rates
Posted in Origination/Lending, Top Stories | 15 Comments »
Fannie Mae and Freddie Mac will cost taxpayers $73 billion through 2021, nearly half of what they've pulled from the Treasury Department so far, according to President Obama's 2012 budget released Monday.
So far, the government-sponsored enterprises have pulled $131 billion in financial support from the Treasury Department. Its estimate of the ultimate cost net of expected dividends is less than the Federal Housing Finance Agency estimated in October 2010, when it said the two could cost between $221 billion in a best-case scenario and $363 billion if the economy recedes again through 2013.
Banking analysts at Credit Suisse estimated a $321 billion price tag for the bailout of Fannie and Freddie.
The Treasury Department released a white paper Friday outlining options for how to wind down Fannie and Freddie. Obama's budget proposes "to gradually reduce the investment portfolios and size and amount of loans guaranteed by Fannie Mae and Freddie Mac and ending the conservatorship of these companies."
Fannie Mae's current mortgage portfolio stood at $788.7 billion in December, the latest month of data. It's up 2% from a year before. It peaked in May 2010 at $813.6 billion and has fallen every month since.
Freddie Mac's investment mortgage portfolio was at $696.8 billion in December, actually down 7% from a year ago. It has decreased every month since April 2010.
"The administration will work with the Congress to pursue reform of the system that best fulfills these principles while engaging a wide range of stakeholders," Obama said in the budget.
Write to Jon Prior.
Follow him on Twitter: @JonAPrior
Tags: budget, Fannie Mae, FHFA, freddie mac, obama, taxpayer, Treasury, white paper
Posted in Secondary Market/Investors, Top Stories | 4 Comments »
Foreclosure filings and completed foreclosures will reach record levels this year, after lenders exhaust alternatives such as mortgage modifications, according to DBRS.
Analysts expect increased losses to residential mortgage-backed securities, as a result, because large inventories of foreclosed homes will be sold at deep discounts. The ratings agency also expects the federal government to continue calling for large-scale loan modifications in 2011. This will now affect loans such as option adjustable-rate mortgages because most of the delinquent subprime mortgages have already been modified.
DBRS projects delinquency trends to continue climbing this year, as negative home equity persists, home prices remain down, unemployment stays high, and many borrowers have trouble refinancing due to tightened underwriting standards.
Analysts said the number of REO properties could double over the next 12 months to 4 million from 2 million, and it will take at least one to two years to sell those homes, further hindering recovery. DBRS said servicers may turn to short sales and some government programs more often this year to sell these distressed properties.
Analysts pointed to the "first look" program the Department of Housing and Urban Development rolled out in September as one option. The program gives local nonprofits or borrowers a chance to bid on a house at a 1% discount of the appraised value before investors.
More regulatory reform will come to mortgage servicers in 2011, analysts said, "as the industry tries to recover from the revelations that were brought about over the last few months including robo-signing foreclosure affidavits, wrongfully foreclosing on military families and the inability of servicers to prove in court that they owned the mortgage loans."
Servicing fees are likely to increase because lenders and servicers need to find ways to pay for additional staff and increased litigation costs, while compensating borrowers for errors, according to DBRS.
Write to Jason Philyaw.
Tags: DBRS, foreclosures, mortgage lending
Posted in Servicing/Default, Slider | 6 Comments »
Four days after the Treasury Department released its plans for revamping the housing market, the White House is proposing a budget that will cut the federal deficit from making up roughly 10% of the overall economy to 3% of the economy in a decade, according to Jack Lew, director of the White House's Office of Management and Budget.
Lew said in a White House video Sunday that the financial downturn combined with federal tax and spending policies created a federal deficit that the White House hopes to reduce by half in the next three years.
"The challenge is we need to get to a place that is sustainable," Lew said.
Lew told CNN Monday morning "it's a tough budget" that includes $1.1 trillion in cuts. One of the cuts will be to the federal Low-Income Home Energy Assistance Program, which assists low-income families by covering a portion of their household energy expenses.
Lew said while the cuts are tough, programs such as the Low-Income Home Energy Assistance plan were implemented when energy prices were dramatically high, an issue that he says has subsided in recent years.
Write to Kerri Panchuk.
Tags: Barack Obama, federal deficit, White House Office Of Management and Budget
Posted in Origination/Lending, Top Stories | 1 Comment »
Federal Reserve Governor Sarah Bloom Raskin said Friday the residential mortgage market will not rebound until loan servicing practices at large financial institutions are improved.
Speaking at the 2011 Midwinter Housing Finance Conference in Utah, Raskin said, "Late last year, the federal banking agencies began a targeted review of loan servicing practices at large financial institutions that had significant market concentrations in mortgage servicing. The preliminary results from this review indicate that widespread weaknesses exist in the servicing industry."
Raskin said deficiencies in how loans are serviced are impairing the mortgage markets and diminishing "overall accountability to homeowners," based on the findings of the report.
She said the first step is to work with troubled borrowers, making sure each distressed loan is carefully considered for a loss mitigation procedure. "We need to make certain that foreclosures take place only when there is no option available that would be preferable to both the borrower and the investor," Raskin said.
As for loans that do not qualify for modifications under the Treasury Deaprtment's Home Affordable Mortgage Program, Raskin said servicers should consider proprietary modifications, short sales and deeds-in-lieu-of-foreclosure to help end some of the bleeding in the anemic housing market.
"These actions will have a far-reaching positive impact: A lower inventory of distressed properties for sale results in higher house prices, which leads to a healthier pace of recovery in the housing market and the broader economy," she said.
At the same time, Raskin recognized a shift towards servicing-focused business models will be difficult for large financial institutions that have run their servicing divisions on lean budgets.
"I'm sure this has been said, but I'll say it again because I have seen little to no evidence of improvement in the operational performance of servicers since the onset of the crisis in 2007: Until these operational problems are addressed once and for all, the foreclosure crisis will continue and the housing sector will languish," Raskin concluded.
In November, Raskin said the problems in the servicing industry started upon the switch from being an "originate-to-hold" system to an "originate-to-distribute" system.
Write to Kerri Panchuk.
Tags: Federal Reserve Governor Sarah Bloom Raskin, mortgage servicers
Posted in Servicing/Default, Top Stories | 5 Comments »
A look at HousingWire's weekend desk, with more coverage to come on bigger issues:
The mortgage finance industry was apt to share opinions about the U.S. Treasury's white paper that came out Feb. 11. The paper focused on the restructuring of the government-sponsored enterprises, Fannie Mae and Freddie Mac, and their eventual wind down out of the mortgage market. The Treasury proposed three different options to reform the GSEs.
Amherst Securities Group said plans laid out in the white paper are not enough to make a substantial difference. According to a recent report, the firm believes the paper's release is a "non-event for the mortgage market." The Treasury failing to layout explicit guidelines and recommendations to wind down Fannie and Freddie's predominance in the mortgage marketplace, Amherst said, proves how difficult a task it's going to be.
"We do not believe this proposal will significantly affect the refinance ability of the bulk of the conventional MBS market," Amherst said, adding that the net effect would be to make some of the jumbo product less refinanceable. "It should be a mild positive for the MBS basis, both because GSE supply will be marginally lower and because some uncertainty has been removed."
According to Amherst, increasing the guarantee fee marginally decreases refinance ability. Additionally the firm said reducing the conforming loan limit and phasing in a 10% down payment on loans would decrease GSE issuance by about 10%.
"This is clearly not enough to 'wind down Freddie and Fannie,'" Amherst said.
Wells Fargo Home Mortgage in St. Louis closed down the bank's Home Affordable Refinance Program unit, resulting in more than 200 employee layoffs. According to an article by iStockAnalyst, most of the employees were short-term workers.
The layoffs did not affect Wells Fargo Advisors.
The National Foundation for Credit Counseling appointed Denis Russell as chief financial officer over the weekend. He comes to the organization from an 11-year tenure at American Podiatric Medical Association, where he served at director of finance and chief financial officer.
In his new position, Russell is responsible for the NFCC's financial operations including in the accounting, auditing, strategic planning, information technology and human resources divisions.
"The NFCC is fortunate to have someone of Denis’ caliber bring his expertise to the organization,” said Susan Keating, president and CEO of the NFCC. “Denis’ experience, talent and commitment made him the obvious choice for the critical position of CFO."
Regulators closed four banks over the weekend, for a total of 18 bank failures so far in 2011. The Federal Deposit Insurance Corp. estimates the total cost to its deposit insurance fund from last week's failed banks at about $144.9 million.
The Florida Office of Financial Regulation closed Sunshine State Community Bank of Port Orange, Fla., and the FDIC was appointed receiver. Premier American Bank of Miami agreed to assume all the deposits of the failed institution. As of Dec. 31, the branches of Sunshine State Community Bank had about $125.5 million in total assets and $116.7 million in total deposits.
The Michigan Office of Financial and Insurance Regulation closed Peoples State Bank of Hamtramck, Mich., and the FDIC was appointed receiver. First Michigan Bank of Troy, Mich., agreed to assume 85% of the deposits of the failed institution. As of Dec. 31, the branches of Peoples State Bank had about $390.5 million in total assets and $389.9 million in total deposits.
The Wisconsin Department of Financial Institutions closed Badger State Bank of Cassville, Wis., and the FDIC was appointed receiver. Royal Bank of Elroy, Wis., agreed to assume all the deposits of the failed institution. As of Dec. 31, the branches of Badger State Bank had about $83.8 million in total assets and $78.5 million in total deposits.
The Office of the Comptroller of the Currency closed Canyon National Bank of Palm Springs, Calif., and the FDIC was appointed receiver. Pacific Premier Bank of Costa Mesa, Calif., agreed to assume all the deposits of the failed institution. As of Dec. 31, the branches of Canyon National Bank had about $210.9 million in total assets and $205.3 million in total deposits.
The largest nonbank lender in Canada will begin using Long Beach, Calif.-based Applied Business Software's product, The Mortgage Office, to manage its commercial loan portfolio. Romspen Investment Corp. currently manages $500 million in commercial collateral.
Write to Christine Ricciardi.
Follow her on Twitter @HWnewbieCR.
Tags: Amherst Securities Group, Applied Business Software Inc., Fannie Mae Freddie Mac, FDIC, Monday Morning Cup of Coffee, Romspen Investment Corp., Wells Fargo
Posted in Origination/Lending, Top Stories | 2 Comments »
