Archive for March, 2011
Many mortgage servicers are becoming overwhelmed by the growing number of loans going bad and in need of fixing.
So, in order to make tracking the larger volume easier, Wolters Kluwer Financial Services is launching a new software system to manage pre-foreclosure documentation in order to adequately manage "large spikes in foreclosure volumes with limited in-house resources," the firm said.
The Minneapolis-based firm said Tuesday its Pre-Foreclosure Manager will also allows servicers to reduce the risk of non-compliance with state and federal regulatory requirements as well as government lending program guidelines.
"It’s clear the number of home loans in foreclosure will continue to rise or at least remain steady for the foreseeable future," said Art Tyszka, director of mortgage document services at Wolters Kluwer. "Servicers will need to adopt robust compliance and fulfillment strategies to accommodate the large number of loans in default."
Servicers submit data for loans entering foreclosure to Wolters Kluwer, which then creates default notices compliant with state and federal regulatory requirements, as well as government lending program guidelines, the firm said. The documents are printed and mailed to borrowers by the firm.
The Pre-Foreclosure Manager uses a Web-based portal where mortgage servicers can access and review all notices and documents associated with a loan file. This structure enables servicers to track the generation, mailing and fulfillment of notices.
U.S. foreclosure inventory shot up in February and now outpaces foreclosure sales more than 30 to 1. According to Lender Processing Services' Mortgage Monitor, the current delinquency rate is 4.15%.
Write to Christine Ricciardi.
Follow her on Twitter @HWnewbieCR.
Tags: mortgage technology, Pre-Foreclosure Manager, Wolters Kluwer Financial Services
Posted in Servicing/Default, Top Stories | No Comments »
Federal regulators voted in favor of the initial mortgage risk-retention proposal Tuesday. Qualified residential mortgages exempt from the rule will require a 20% down payment.
Under the Dodd-Frank Act, federal regulators were required to write a rule clarifying which loans lenders and securitizers would have to retain 5% of the risk on after securitization. Regulators will take comments on the proposal (located here) over the next 60 days. Federal Deposit Insurance Corp. Chairman Sheila Bair said in a statement released after the vote Tuesday that she wanted to make sure the QRM exception loans were narrow.
"The QRM is the exception, not the rule, and as such, I believe should be narrowly drawn," Bair said. "Properly aligned economic incentives are the best check against lax underwriting."
According to the proposal, a QRM can only be written to a borrower who has never had a 60-day delinquency in his or her credit history.
Any loan insured or guaranteed by the U.S. government, including Fannie Mae, Freddie Mac and the Federal Housing Administration will be exempt from the risk retention rule, according to the proposal. Early indications showed these entities would would be exempt.
The QRM standards do not include a requirement for mortgage insurance, however, regulators will leave this provision open for comment. Specifically, they asked commentators to provide what type of eligibility standard should be in place for MI.
"The definition makes no allowance for increases in the (QRM loan-to-value ratio) where the difference is backed by private mortgage insurance, but the proposal requests comment on various alternatives in this area," said Acting Comptroller of the Currency John Walsh. "Private mortgage insurers with adequate financial resources might provide investor protection against losses, and applying conservative loan-by-loan underwriting criteria for mortgages would foster securitization of high-quality assets."
Regulators did make room for new servicing standards that require financial incentives for servicers to consider options other than foreclosure. The proposal also requires servicers to treat a QRM loan without regard to any particular tranche of investors, and it requires these companies to disclose any second-lien interests if they service the first lien. Servicers will be required to inform investors how a second-lien will be dealt with if the first-lien is restructured.
But Bair reiterated that the QRM should not dominate the market. However, she will hear comments on how a 20% down payment would affect low- and moderate-income borrowers.
"This does not mean that under the rule, all homebuyers would have to meet these high standards to qualify for a mortgage," Bair said. "On the contrary, I anticipate that QRMs will be a small slice of the market, with greater flexibility provided for loans securitized with risk retention or held in portfolio."
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: Dodd-Frank, FDIC, mortgage, QRM, regulators, risk retention
Posted in Origination/Lending, Top Stories | 26 Comments »
The Senate Committee on Banking, Housing & Urban Affairs is listening to options for replacing Fannie Mae and Freddie Mac, but it is not hearing a consensus.
The Treasury recently outlined in a white paper three options for bringing back the private label securitization market.
On Tuesday, expert speakers in front of the committee warned against rushing to push the private market too quickly. Everyone holds a different idea of what needs to be done to fix mortgage finance in the United States.
"Fannie Mae, Freddie Mac and the FHA account for more than 90% of the mortgages in the country," said Tim Johnson (D-S.D.), chairman of the Senate Committee on Banking, Housing & Urban Affairs. "Determining the proper level of government involvement in the mortgage market is just one of the questions before this committee, and it is one that we need to thoroughly and carefully examine."
Former economist for Freddie Mac, Arnold Kling, with the Mercatus Center Financial Markets Working Group at George Mason University, said "we should just say no" when it comes to government support of another solution.
"It would be naïve to think the private sector always gets things right. But even more naïve to think government could get it right. The government is captured by special interests," he said. Kling tried to back up his point by pointing out the presence of Mark Zandi, chief economist, Moody's Analytics and Michael Berman, chairman of the Mortgage Bankers Association. Both institutions would benefit from a government guarantee on mortgage-backed securitizations (one possible Treasury solution).
"Any scheme to bring a government guarantee is comparable to building a nuclear power plant on top of a fault line," Kling said. "Twenty percent down is the best guarantee."
Johnson reminded Kling to not attack other witnesses.
As for hedging the GSEs against future losses, Moody's Zandi recommends Fannie and Freddie be capitalized for 25% home price declines. In the past, the firm capitalized for 10% and that clearly wasn't enough, he said. He said he supports a hybrid system that will protect both taxpayers and investors. The downside, he said, is that mortgage rates will be higher, at least 100 basis points, after all of this.
Follow him on Twitter @JacobGaffney.
Tags: Fannie, FHA, Freddie, GSE reform, GSEs, housing finance reform, housing reform, MBS, Treasury
Posted in Secondary Market/Investors, Slider, Top Stories | No Comments »
The average national contract mortgage rate for the purchase of previously occupied homes by combined lenders hit 4.79% in February, up 0.8% from the previous month, the Federal Housing Finance Agency said Tuesday. That particular rate is commonly used as an index for adjustable-rate mortgages.
Meanwhile, the average interest rate on a 30-year, fixed-rate mortgage of $417,000 or less jumped 12 basis points to 4.97% in February on loans closed within the Feb. 22-28 time frame, FHFA said.
Since the interest rates are generally determined 30 to 45 days in advance of a loan's closing, the late February rates depict market conditions that prevailed in mid- to late-January.
In addition, the contract rate on all mortgage loans — fixed and adjustable — hit 4.80% in February, up 10 basis points from 4.70% in January.
In February, initial fees and charges made up 0.80% of the total loan balance, which is unchanged from January.
The average loan term on mortgages originated in February was 27.2 years, down slightly from 27.3 years the previous month.
In addition, the average loan-to-price ratio in February rose to 74.7%, up 1.3% from January. The average loan amount hit $216,900, compared to $202,400 in January.
Write to Kerri Panchuk.
Tags: FHFA, home prices, home values, mortgage rates, mortgages
Posted in Origination/Lending, Top Stories | 1 Comment »
Only two major metropolitan areas — San Diego and Washington D.C. — reported positive year-over-year home price gains in the latest Standard & Poor's S&P/Case-Shiller Home Price report for January.
In fact, average home prices across the U.S. fell back to summer of 2003 levels.
Even in the markets with positive gains, San Diego was up only a slight 0.1%, while Washington D.C. performed the best by recording a 3.6% home price growth rate in January. Eleven cities that posted index level home price lows in December experienced further drops in January.
Overall, U.S. home prices for the month of January fell 3.1% from year-ago levels, according to the S&P/Case-Shiller composite 20-city home price index — a barometer for national home prices.
Meanwhile, the 10-city composite index fell 2% year-over-year in January.
“These data confirm what we have seen with recent housing starts and sales reports. The housing market recession is not yet over, and none of the statistics are indicating any form of sustained recovery," said David Blitzer, chairman of the Index Committee at Standard & Poor's. "At most, we have seen all statistics bounce along their troughs; at worst, the feared double-dip recession may be materializing. A few months ago we defined a double-dip for home prices as seeing the 10- and 20-City Composites set new post-peak lows."
The report added that San Diego and Washington D.C. are the only two metros to have their annual rates remain positive throughout 2010. "Every other MSA has either moved back into or has always been in negative territory," the S&P/Case-Shiller report concluded.
Write to Kerri Panchuk.
Tags: home prices, S&P/Case-Shiller home price index
Posted in Secondary Market/Investors, Slider, Top Stories | 3 Comments »
News that U.S. pending home sales improved 2.1% between January and February is a positive for the housing market and for "'the underlying collateral performance of U.S. residential mortgage-backed securities," Standard & Poor's analyst Erkan Erturk said this week.
According to data from the National Association of Realtors, February home sales grew month-over-month by 2.1%, following a 9.6% decline in existing home sales the prior month and a 16.9% decline in new home sales.
Even still, the pending home sales index is 8.2% lower than year ago levels and 30% below peak market levels from 2005.
RMBS will benefit from the report since the February sales increase may suggest an additional rise in existing home sales for the month of March, S&P said.
Ratings on residential mortgage-backed securities have been rocky as of late, with Moody's Investors Service (MCO: 37.867 -0.51%) recently downgrading several additional batches of RMBS, including a group of Alt-A RMBS securities valued at $1.3 billion issued by 11 different entities.
Residential mortgage-backed securities face other risks aside from home sales, including an onslaught of legal cases filed against Mortgage Electronic Registration Systems, or MERS. The cases threaten to forestall the already extended foreclosure process, with parties objecting to MERS' legal standing when it comes to various legal proceedings, including foreclosures.
Write to Kerri Panchuk.
Tags: existing home sales, home sales, home values, National Association of Realtors, new home sales, residential mortgage-backed securities, RMBS, subprime
Posted in Secondary Market/Investors, Top Stories | No Comments »
Delinquencies on home loans declined in February as foreclosure inventory levels shot up, suggesting it will take more time to move distressed properties off the market, Lender Processing Services Inc. said in its February Mortgage Monitor.
The nation's foreclosure inventory levels are now about 30 times greater than the monthly foreclosure sales volume, LPS concluded. "Ultimately, these foreclosures will most likely reenter the market as REO properties, putting even more downward pressure on U.S. home sales," LPS said. The report on falling delinquencies confirms LPS reports from earlier this month.
Another significant shift occurred in February with data showing a 23% hike in Option ARM foreclosures in the past six months. Option ARM foreclosures now make up 18.8% of the foreclosure inventory, outpacing subprime foreclosures.
LPS added that deterioration continues in the non-agency prime segment, jumbo and non-agency prime loans.
On a positive note, LPS said modification efforts by banks are starting to pay off. Twenty-two percent of loans classified as being delinquent for 90 days or more are now listed as current.
Overall, the total U.S. loan delinquency rate stands at 8.8%, while the foreclosure inventory rate sits at 4.15%.
States with the most delinquent loans include Florida, Nevada, Mississippi, New Jersey and Georgia. States with the fewest non-current loans are Montana, Wyoming, Alaska, South Dakota and North Dakota.
Write to Kerri Panchuk.
Tags: ARM foreclosures, foreclosure, foreclosure inventory, Lender Processing Servicers, loan modifications, subprime foreclosures
Posted in Servicing/Default, Top Stories | 4 Comments »
Bank of America (BAC: 7.26 -0.55%) will begin a new pilot program in the next few weeks, allowing some California homeowners to receive a principal writedown on their mortgage.
The program will be funded from the $699.6 million the California Housing Finance Agency received from Treasury Department's Hardest Hit Fund last year. A spokesperson for the CalHFA said there is no set amount of loans BofA is targeting, but the bank will be soliciting eligible homeowners soon. CalHFA has not given BofA a limit to the funding "unless they blow us out of the water," the spokesperson said.
CalHFA is in talks with other lenders and servicers, but they did confirm that Guild Mortgage Company will also participate in the program.
"We're really excited to get the program going," the CalHFA spokesperson said.
Rebecca Mairone, the new national mortgage outreach executive at BofA, said in an interview with HousingWire Monday that it would soon begin the California initiative as well as several other states that received Hardest Hit Funds.
Earlier in March, BofA announced it was sending letters to Arizona homeowners regarding possible principal writedowns under Hardest Hit Fund programs. Through that program, BofA said it was targeting 8,000 households.
Ally Financial (GJM: 22.43 -0.62%) agreed last week to participate in another principal-writedown program in Michigan, again using the Hardest Hit Fund.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: Bank of America, California Housing Finance Agency, mortgage, principal writedown, Treasury
Posted in Servicing/Default, Top Stories | 7 Comments »
The implications of pending foreclosures greatly affect the most important issues facing any potential recovery in the U.S. economy, according to one industry analyst speaking at the Mortgage Bankers Association national technology conference in South Florida Monday.
Bob Simpson, president and chief executive of Investors Mortgage Asset Recovery Co., or IMARC, said the nation's gross domestic product and employment levels are just a few economic indicators impacted by the ongoing foreclosure fiasco. Simpson said the sand states – Arizona, California, Florida and Nevada – are truly the only states that matter when discussing foreclosures, adding that 70% of all foreclosures are located in 10 states.
"We are in a double dip and now heading back down," Simpson said. "And I think it's safe to say government policy affirmatively and actively hurt people by encouraging them to buy into a falling market."
Simpson highlighted the problems in Santa Ana, Calif., by showing the negative equity for homeowners in some stage of foreclosure within a 2.5-mile radius stands at roughly $294.8 million. In a 5-mile radius around Glendale, Ariz., there are more than 6,500 homes in various stages of foreclosure and the cumulative negative equity of the properties is more than $1.23 billion, according to Simpson, who admitted his survey isn't a double-blind scientific study but nonetheless evidence of a significant problem.
"I'm not sure policymakers understand how big the foreclosure problem is," he told the assembled mortgage lenders.
He found one property in Santa Ana, Calif., in the midst of a loan modification on a $536,000 mortgage with a monthly payment of $3,751, while there is a comparable home for rent two blocks away for $2,100 a month.
"It makes no sense to stay underwater when you can move two blocks away and go to the same school … go to the same dry cleaner," Simpson said. "If this was your child, what would you advise them to do?"
He told the mortgage professionals "the ultimate solution is in our own common sense."
"If you make $80,000, I'm glad you have a job, but you have no business owing someone $800,000," Simpson said. "You need to move. You need to find another place to live."
But who bears the loss?
Simpson said the financial institutions that made the loan, the investors that purchased the securitized loan and ultimately the federal government, which eventually means the taxpayer. He also encouraged lenders to take a more paternalistic approach.
"We've always said 'I'll tell you what your qualified for,' and we've learned if you offer money to people, they will take it," Simpson said.
But as the examples of Southern California and Arizona indicate, that's just no longer sustainable.
Write to Jason Philyaw.
Tags: foreclosures, IMARC, Investors Mortgage Asset Recovery Co., MBA, Mortgage Bankers Association, mortgage lending
Posted in Origination/Lending, Top Stories | 1 Comment »
Shaun Donovan, secretary for the U.S Department of Housing and Urban Development, said Monday the agency's 2012 budget will assist 5.5 million families, 86,000 more than last year.
In addition,the budget will double the number of new housing units, he said.
Donovan said this good news arrives in the midst of a tighter budgetary climate where "we've had to make difficult choices," including reductions in the funding of new housing units and projects.
He explained the budget also makes public housing authorities with excess reserves contribute $1 billion to help fully fund the Public Housing Operating Fund.
"As many of you know, we have seen operating reserves at housing authorities increase substantially over the last couple of years," Donovan said. "To be clear, our proposal would draw down excess reserves in a targeted way — not at every housing authority. At the same time our budget proposal recognizes that we all have a responsibility to manage to our budgets, it makes a strong commitment to doing more of what works and to stop doing what doesn’t."
Donovan said his agency also is aware of the need to respond to negative situations that surface in the press.
"In Philadelphia, once HUD learned of allegations of impropriety at the housing authority, we took swift action to restore credibility and protect tenants," Donovan said. "We’ve acted quickly elsewhere as well – in communities like New Orleans, where David Gilmore has made great progress reforming HANO under very difficult circumstances."
Donovan added, "Transparency about how we spend and track taxpayer dollars is a top priority. Let me be very clear: we have zero tolerance for fraud, waste and abuse. HUD is focused on protecting taxpayer dollars and ensuring that public housing tenants are receiving the quality housing and services they need."
Write to Kerri Panchuk.
Tags: fraud, HUD
Posted in Origination/Lending, Top Stories | 1 Comment »
