May « 2011 « HousingWire

Archive for May, 2011

As lenders hold homes in foreclosure, sales are hurt

Monday, May 23rd, 2011

The nation’s biggest banks and mortgage lenders have steadily amassed real estate empires, acquiring a glut of foreclosed homes that threatens to deepen the housing slump and create a further drag on the economic recovery.

All told, they own more than 872,000 homes as a result of the groundswell in foreclosures, almost twice as many as when the financial crisis began in 2007, according to RealtyTrac, a real estate data provider. In addition, they are in the process of foreclosing on an additional one million homes and are poised to take possession of several million more in the years ahead.

Posted in Around the Web | 1 Comment »

Monday Morning Cup of Coffee

Monday, May 23rd, 2011

A look at stories across HousingWire's weekend desk, with more coverage to come on bigger issues:

Once again, Moody's Investors Service downgraded billions of dollars worth of residential mortgage-backed securities last week. The ratings agency updated its RMBS guidelines earlier this year.

Analysts took action on $1.08 billion of RMBS issued by Bear Stearns, downgrading the ratings of 65 tranches and confirming the ratings of 3 tranches. The collateral backing these loans consists of first-lien, fixed and adjustable rate "scratch and dent" residential mortgages.

Other RMBS scratch and dent ratings actions at Moody's this week included changes to a $902 million RMBS issued by various financial firms. Moody's said it downgraded the ratings of 85 tranches, upgraded the rating of 1 tranche and confirmed the ratings of 3 tranches from 29 separate RMBS deals.

Finally, Moody's changed its ratings on $159 million of scratch and dent RMBS from C-BASS. The firm downgraded the ratings of 9 tranches and confirmed the ratings on 5 tranches. Moody's said,

"The actions are a result of deteriorating performance of scratch and dent pools under stressed housing and macroeconomic conditions," analysts said.

Florida's rocket docket foreclosure courts, which were set up to push foreclosure cases through the court system, may have become a victim of state budget cuts, according to the Huffington Post.

The website reports Palm Beach County is already canceling cases, citing a lack of state funding. The infamous rocket docket generated controversy when it was implemented in the Sunshine state to work through a back log of 40,000 foreclosure cases. Consumer advocates, including attorneys with the ACLU, filed suit claiming the rocket docket ended up rushing through foreclosure cases without complying with all related foreclosure laws.

Utah residents facing foreclosure may now delay foreclosure proceedings if a loan modification is underway, the Salt Lake Tribune reports.

The newspaper said U.S. District Judge Dee Benson refused to dismiss a lawsuit brought by two residents from South Jordan, who asked the court to halt a foreclosure on their property while they negotiate a loan modification.

The decision lets the couple continue to work on their case protesting the actual foreclosure.

Fitch Ratings placed several classes from 25 franchise loan ABS transactions on negative rating watch. The watch was implemented after Fitch published its latest guidelines for rating franchise loan ABS.

Fitch said all franchise loan bonds in these ABS transactions that are rated 'Csf' or above will be placed on negative ratings watch and will be surveyed over the course of the next several months against new criteria for rating these securities. Fitch affirmed all outstanding ABS classes rated 'Dsf.'

Regulators closed three banks last week, bringing the number of failed banks in 2011 to 43. The Federal Deposit Insurance Corp. estimates the cost to the deposit insurance fund will be $445.7 million.

The Washington Department of Financial Institutions shuttered the doors of Summit Bank in Burlington, Wash. All deposits were transferred to Columbia State Bank in Tacoma, Wash.

In Georgia, regulators closed First Georgia Banking Co. in Franklin. All deposits have been transferred to CertusBank, and all First Georgia locations will reopen as CertusBank branches.

CertusBank also acquired the assets of Atlantic Southern Bank in Macon, Ga., which was closed by the Georgia Department of Banking and Finance.

Write to: Kerri Panchuk.

Tags: ABS, bank closings, C-BASS, FDIC, Fitch Ratings, foreclosure, foreclosure delay, Moody's Investors Service, residential mortgage-backed securities, RMBS, Rocket Docket, Summit Bank
Posted in Secondary Market/Investors, Top Stories | 3 Comments »

Mortgage servicers start 2,000 new HAFA transactions

Friday, May 20th, 2011

Servicers participating in the Home Affordable Foreclosure Alternatives program started another 2,089 short sales and deeds-in-lieu of foreclosure in March, according to Treasury Department data.

The Treasury launched HAFA in April 2010 to provide homeowners who fall out of the Home Affordable Modification Program another option. In nearly one year of operation, participating servicers have started 12,266 HAFA agreements and completed 5,447 transactions. In March alone, servicers completed more than 1,000 transactions.

Short sales have long been considered a headache for nearly every entity on the decision-making chain. The Treasury designed HAFA to provide a structure and timeline, one of the first structural guidelines for the process. Many private banks built private initiatives around HAFA.

More than 1.8 million loans have either failed to qualify for a HAMP trial or were canceled out of one by the 10 largest servicers because of a lack of documentation, didn't qualify or redefaulted under the new terms.

While more than one-third of these received an alternative modification, 388,000 had foreclosure started or completed on them, accounting for 21% of the canceled mods, according to Treasury data.

By contrast, servicers put nearly 120,000 of these failed or canceled HAMP trials into a short sale or deed-in-lieu, or roughly 6.6%.

Jordan Dorchuck, the executive vice president of American Home Mortgage Servicing sent a white paper to the Treasury Friday making the argument for more short sales and even principal reduction.

"From the MBS investor perspective, market prices of their securities already reflect large foreclosure losses. Short sales of mortgage loans should reduce those expected losses and achieve 'finality,' quickly," Dorchuck said in the paper.

Write to Jon Prior.

Follow him on Twitter @JonAPrior.

Tags: DIL, foreclosure, HAFA, HAMP, modification, short sale, Treasury Department
Posted in Servicing/Default, Top Stories | 2 Comments »

Fannie, Freddie mortgage bonds continue to outperform Treasurys

Friday, May 20th, 2011

Investors continue moving to government-sponsored mortgage-backed securities, foreign private-label MBS and covered bonds, seeking yield in a low supply environment, according to analysts at The Royal Bank of Scotland (RBS: 8.64 +0.35%).

Analysts expect "the richness in the front end" of MBS backed by Fannie Mae and Freddie Mac to continue with the relative value in the five-year, agency sector.

Agency spreads outperformed Treasurys and swaps this week on extremely weak demand and "sympathy with the low Treasury bill and discount note yields," according to RBS.

"This richness could continue as bill supply gets cuts into decreased Treasury funding needs, the Fed clearly on remains on hold per the minutes, and agency buyers scramble for paper into light issuance," analysts said.

Minutes from the latest Federal Open Market Committee meeting showed members of the central bank are ready to move away from expansionary monetary policies, but when remains unclear.

RBS analysts expect about $62 billion of callable redemption in June, dominated by maturities of five years or less. That level of redemption would be the heaviest period of the past eight months. Callable redemptions total about $41 billion so far in May.

"We recommend moving overweight mortgages and express our view in the Fannie 30-year 5% coupon," said Barclays Capital securitization analyst Ajay Rajadhyaksha. "We see a number of factors that suggest a more favorable supply/demand dynamic for agency MBS."

Analysts also said Canadian covered bond spreads tightened this week "into a more investor friendly regulatory framework and profit taking has emerged." Pending Canadian legislation would create a stronger market for covered bonds in the country and provide added security for investors, according to RBS.

Write to Jason Philyaw.

Tags: Fannie Mae, FOMC, freddie mac, MBS, RBS, The Royal Bank of Scotland, Treasurys
Posted in Secondary Market/Investors, Slider, Top Stories | 2 Comments »

Florida insurance firm asks for 27% hike in homeowner premiums

Friday, May 20th, 2011

Fidelity National Property and Casualty Insurance Co. asked Florida insurance regulators this week to allow the firm to raise its homeowners insurance rate by 27.6% to offset an influx of claims, according to Stephen Alexander, an actuary with the Florida Insurance Consumer Advocate’s office.

Alexander testified at the hearing, advocating for a lower rate increase.

A spokesperson for Fidelity National Property and Casualty was not immediately available for comment Friday afternoon.

However, Alexander, who proposed an alternative 12% rate hike, believes the state foreclosure crisis is partly to blame for the increasing level of claims, but Fidelity has not elaborated on the reason claims rose.

"We did not receive much background as to why their claims or the severity of their claims are increasing," Alexander said. "I think somebody needs to look at that. I have a high degree of confidence that this (the influx of foreclosures) is what is behind this, but to what extent I do not know."

The requested rate hike is still under review by state regulators.

Write to: Kerri Panchuk.

Tags: Fidelity National Property and Casualty Insurance Co., Florida Insurance Consumer Advocate, foreclosure, foreclosure crisis, insurance regulators
Posted in Servicing/Default, Top Stories | No Comments »

Hawaii law allows homeowners to convert foreclosures to judicial cases

Friday, May 20th, 2011

Hawaii Governor Neil Abercrombie recently signed a sweeping foreclosure bill into law that allows homeowners to move nonjudicial foreclosure actions into court as judicial proceedings.

It also enacts a face-to-face mediation program for homeowners facing foreclosure, ends dual tracking, requires mortgage servicers to be licensed and to maintain a physical presence in the state and reins in homeowners associations.

Senate Bill 651 is a comprehensive "extensively researched response" to the state's housing crisis, Abercrombie said, upon signing the bill earlier this month.

The law provides details on everything from the licensing of servicers to what constitutes proper foreclosure notice or an appropriate auction of property.

Conversion of nonjudicial cases to judicial

In one of its more unusual provisions, the bill allows owner-occupants to petition the court to have their nonjudicial foreclosure case converted to a judicial foreclosure case. This must occur within 30 days of the homeowner getting notice of foreclosure proceedings. The law requires the party commencing the foreclosure action to let owner-occupants know of their right to petition to move the nonjudicial proceeding into court.

The law also stipulates the state's new mediation program is open to homeowners electing the nonjudicial path and may not be open to those seeking a judicial proceeding unless ordered by a judge.

Lenders also have the right, under the law, to seek deficiency judgments if the case gets moved into court.

Face-to-face mediation

The Department of Commerce and Consumer Affairs will administer the mediation program, which will be self-funded via fees on both the homeowner and the lender. Owner-occupants and mortgagees are each charged $300 in a process that must wrap up within 60 days of the first scheduled meeting. The program will also be funded with a $100 fee on those who record a conveyance document on an owner-occupied property.

The mediation program will begin no later than Oct. 1 and continue until Sept. 30, 2014, according to the governor's office.

The bill mandates face-to-face mediation although that may be changed via agreements in writing if there is "good cause" as to why the parties cannot meet in person.

Mortgagees who fail to comply with the mediation requirements face fines of up to $1,500 payable to the homeowner.

Foreclosure actions are stayed during the mediation process.

S.B. 651 also prohibits any dual tracking — the common practice in which a loan modification is considered at the same time that a foreclosure proceeding is under way — if the homeowner is under consideration for another modification program such as the federal Home Affordable Modification Program, or HAMP.

If the parties don't come to an agreement during the mediation, the foreclosure may proceed "along the timeline as it existed on the date before the mortgagor elected dispute resolution, and may proceed as otherwise provided by law."

Limits placed on homeowners associations

The bill also provides property owners governed by a homeowners association or condominium association 60 days to cure HOA defaults after being notified of the default in person or by certified mail before a foreclosure action could commence.

It also instructs HOAs "not to reject a reasonable payment plan," described as at a minimum the current maintenance fee and some amount owed on the past due balance.

Write to Kerry Curry.

Follow her on Twitter @communicatorKLC.

Tags: Department of Commerce and Consumer Affairs, foreclosure, HAMP, Hawaii, HOA, homeowner, judicial foreclosure, Neil Abercrombie, nonjudicial foreclosure, Senate Bill 651
Posted in Servicing/Default, Top Stories | 2 Comments »

Glut of distressed properties in San Diego market

Friday, May 20th, 2011

Affordability is causing a bifurcation of homebuyers in San Diego, as prices continue to drop throughout the metropolitan area.

April home sales around the city fell 5% compared to the same month of 2010, according to Fidelity Pacific Real Estate, which released its monthly housing monitor Friday. Sales were up 2.8% from March. However, Fidelity Pacific said this change was much less than the average 7.5% gain usually seen between these two months.

Home sales were concentrated in two main sectors — homes priced below $200,000 and homes priced more than $1 million. Fidelity Pacific said a large number of first-time homebuyers and investors are flocking to the reduced-price homes, while other homebuyers are taking advantage of steep price cuts on luxury homes.

Fidelity Pacific said this type of affordability is a serious headwind to market recovery.

"Almost half of sales are homes priced under $300,000. Sales of homes over $400,000 are well below the 2007 sales peak," the company commented. "Homes under $500,000 make up three-fourths of sales, although they are only 60% of listings."

The median home price in San Diego last month was $321,750, according to DataQuick.

Distressed sales are notably dragging prices down, as 47% of sales in April fell into this category, according to Fidelity Pacific. Distressed properties make up 35% of all housing inventory in San Diego.

Fidelity Pacific expects the current downward sale and price trends to continue.

"We don’t expect any significant changes to the current trends for this year," the company said. "Wild cards are unemployment, mortgage rates, and government intervention."

Write to Christine Ricciardi.

Follow her on Twitter @HWnewbieCR.

Tags: Fidelity Pacific Real Estate
Posted in Origination/Lending, Top Stories | 2 Comments »

U.S. Bank settles with HUD over questionable mortgages

Friday, May 20th, 2011

U.S. Bank (USB: 27.77 -0.07%), the nation's eighth largest mortgage lender, agreed to pay the Department of Housing and Urban Development $1.2 million to settle questionable mortgage claims.

A 2006 audit by HUD's Office of Inspector General found U.S. Bank allegedly failed to meet Federal Housing Administration underwriting standards with 27 mortgages written between 2003 and 2004. HUD said it lost $465,000 in relation to these loans, though U.S. Bank did not admit any liability in the settlement.

The FHA prohibits the inclusion of overdue principal, interest and late charges on refinancings. But the audit found U.S. Bank refinanced loans that included these amounts. Other violations include U.S. Bank submitting defaulted loans for late FHA endorsement.

Another report issued by the HUD Inspector General in March raised concern over systemic problems with FHA underwriting and questioned the department's ability to recover up to $11 million in losses to the insurance fund.

"FHA’s underwriting and endorsement standards exist to protect its insurance fund and every family hoping to sustain homeownership,” said HUD General Counsel Helen Kanovsky. "We expect our lenders to uphold those standards and we will hold them accountable when they don't."

U.S. Bank did not immediately reply to a request for comment.

Write to Jon Prior.

Follow him on Twitter @JonAPrior.

Tags: claims, Federal Housing Administration, FHA, HUD, mortgage, U.S. Bank
Posted in Origination/Lending, Top Stories | No Comments »

Senate banking chair pushes back against Republican CFPB reforms

Friday, May 20th, 2011

Sen. Tim Johnson (D-S.D.), chairman of the Senate Banking Committee, said he will not take up Republican demands to "re-legislate" the Consumer Financial Protection Bureau before it has a chance to open.

A group of 44 Republican senators sent a letter to President Obama in May vowing not to vote for any nominee to lead the CFPB when it opens July 21 until structural changes are made. Republicans want to establish a committee instead of a director, along with putting in more oversight and veto ability over any rules the agency issues.

"Senate Republicans may want to use revisionist history, but the structure of the CFPB was developed with Republican ideas in bipartisan negotiations last year. However, they ultimately chose to walk away instead of supporting these important new protections for American consumers," Johnson said this week. "We should not re-legislate the bureau when it hasn’t even had a chance to start doing its job."

Sen. Richard Shelby (R-Ala.), leading Republican on the banking committee, was one of the leaders of the letter. In it, Republicans said regulators should be given the ability to prevent the CFPB from causing unnecessary bank failures with their burdensome rules.

Three bills reforming the CFPB cleared the House Financial Services Committee last week. Senate Democrats have said these and other House legislation to end foreclosure-prevention programs are essentially "dead on arrival."

"Republicans opposed a strong consumer watchdog from the start, and now they are at it again," Johnson said. "The truth is this bureau is already subject to greater checks and balances than any other financial regulator and this is just another attempt to delay and derail these critical new protections."

Write to Jon Prior.

Follow him on Twitter @JonAPrior.

Tags: CFPB, Democrats, foreclosure, Johnson, Republicans, Senate Banking Committe, Shelby
Posted in Servicing/Default, Top Stories | No Comments »

Sustained recovery in housing remains elusive: Fannie Mae

Friday, May 20th, 2011

The economy is expected to pick up speed after suffering through a volatile winter period, but a sustained recovery in the housing sector remains elusive as distressed home sales continue to dominant a large part of the sector's activity, Fannie Mae said in its May 2011 Economic Outlook report.

Single-family homebuilding activity was weak in the first quarter, while housing starts and new home sales remained flat at already depressed levels, suggesting a state of optimism in the housing sector of the economy is difficult to maintain.

The economy slowed dramatically in the first quarter, dipping to a growth rate of 1.8% from 3.1% in the final quarter of 2010. Despite that drop, Fannie Mae's long-term economic forecasts predict more than 3% growth in the next few years.

Fannie's Chief Economist Doug Duncan said despite low prices, low interest rates and improving job numbers, consumer attitudes have yet to rebound in a way that turns the tide.

"In spite of the positives surrounding the housing market, we see that consumers are still hesitant to take on a large financial obligation. Nevertheless, we do forecast some improvement in home sales over the course of 2011 compared to 2010," Duncan said.

Write to: Kerri Panchuk.

Tags: Doug Duncan, economic outlook, Fannie Mae, government-sponsored enterprises, GSE, homebuilding, housing, housing forecast
Posted in Servicing/Default, Top Stories | 1 Comment »