Archive for May, 2011
When eyeing the results of a recent consumer survey, Fannie Mae's Chief Economist Doug Duncan noticed America is at a strange crossroads: One where home affordability is extremely high because of an influx of inventory, but buyer demand remains low.
So what's keeping homebuyers out of the market?
While visiting HousingWire's REthink Symposium, Duncan revealed some of Fannie's latest findings, which you can read about here.
The quick version is this: The American dream is alive and well, but it remains 'just a dream' for many families.
Duncan found only 33% of Americans believe the economy is currently on the right track, and their home-buying desires are still dampened by uncertainty over jobs and the overall economy.
In addition, 44% of those surveyed said household expenses are higher than they were 12 months ago.
Duncan, like several other economists and real estate professionals attending the REthink Symposium, is closely eyeing changes in the 18-to-34 demographic, which is the group most likely to be the next first-time homebuyers.
Duncan sat down with HousingWire to give us this video update on home prices and the overall state of housing.
Write to: Kerri Panchuk.
Tags: chief economist, Doug Duncan, Fannie Mae, foreclosures, housing inventories
Posted in Secondary Market/Investors, Top Stories | 1 Comment »
When mortgage servicers signed consent orders with the Office of the Comptroller of the Currency and the Federal Reserve, these companies were required to hire outside firms to conduct "look back" evaluations of questionable foreclosure practices.
But these reviews will not be made public, according to an OCC spokesman.
Major servicing arms at Bank of America (BAC: 7.2282 -0.98%), JPMorgan Chase (JPM: 37.29 -0.53%), Wells Fargo (WFC: 29.37 +1.10%), Citigroup (C: 30.43 +0.16%), Ally Financial (GJM: 22.43 -0.62%) and others agreed to the enforcement actions taken in April as a result of mishandled foreclosures still being corrected.
Servicers have to put in place new operations, add staff, establish a single-point of contact for borrowers and end the practice of pursuing a foreclosure while evaluating a possible modification.
The banks were also required to hire third-party firms to review foreclosure proceedings between Jan. 1, 2009 and Dec. 31, 2010. The reviews will be done to identify borrowers who suffered financial harm because of faulty foreclosure practices. The OCC and Fed will approve which companies conduct the reviews.
Federal Deposit Insurance Corp. Chairman Sheila Bair said in a Senate committee hearing this week that these reviews will be a major issue. The investigation conducted by the OCC and the Fed included a review of 2,800 case files between Jan. 1, 2009 and Dec. 31, 2010.
But the additional "look back" reviews could provide more meaningful details over the scope of the problems, and she told Congress it was vital for regulators to choose wisely.
"These independent companies may have other business with them and may want to conduct future business with them, so I think this is a huge issue," Bair said.
The OCC spokesman said the agency has a number of control points in the process.
"We will approve the third-party reviewer, and the action plan. We will also review and approve the 'look back' results and related actions to ensure compliance with the consent orders," the spokesman said, "however the results of individual look back reviews are supervisory materials that are not releasable."
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: Ally Financial, Bank of America, banks, borrowers, Citi, consent orders, FDIC, Fed, JPMorgan Chase, lenders, OCC, Sheila Bair, Wells Fargo
Posted in Servicing/Default, Top Stories | 5 Comments »
Two Registers of Deeds asked Iowa Attorney General Tom Miller Friday to postpone a settlement with the nation's largest mortgage servicers until the cost damage to land records is better understood.
John O'Brien, Register of Deeds of Southern Essex County in Massachusetts, and Jeff Thigpen, Register of Deeds of Guilford County in North Carolina, wrote a letter to the attorney general, stressing the need to appropriately settle terms with servicers based on the amount of damaged practices such as robo-signing caused.
"We need to take a long hard look at the damage that these banks have caused, not only to our economy but also to people's chains of title," O'Brien commented. "There can be no settlement for pennies on the dollar."
Attorney General Miller, who was not available for comment Friday, is leading an investigation by all 50 state attorneys general into the servicing practices that lead to the housing crisis. According to reports this week, a second and less stringent draft of the settlement has been circulating throughout the industry. Miller is maintaining this effort outside the consent orders between the Office of the Comptroller of the Currency, the Federal Reserve, the Office of Thrift Supervision and 14 major servicers.
The OCC reported Friday that it will not make independent reviews required under the consent orders available to the public.
O'Brien believes Mortgage Electronic Registration Systems is to blame for much mortgage fraud surrounding the housing crisis because of "their failure to record documents in the local registry of deeds in order avoid paying billions of dollars in recording fees."
MERS claims O'Brien's statement are unfounded, and attested that all MERS mortgages are recorded in the public land records.
"MERS members pay recording fees when the mortgage is recorded," Janis Smith of MERS said. "The use of MERS is in compliance with the purpose and intent of the state recording acts."
Along with their initial request, O'Brien and Thigpen sent a follow up request to Miller asking for representation and access to settlement talks.
"Why the Registers of Deeds have not been involved in these negotiations is puzzling" according to O'Brien and Thigpen. "We need to bring our knowledge of the land recordation system and consumer's problematic chain of title issues to the table."
Write to Christine Ricciardi.
Follow her on Twitter @HWnewbieCR.
Tags: Federal Reserve, Iowa Attorney General Tom Miller, Jeff Thigpen, John O'Brien, Mortgage Electronic Registration Systems, Office of the Comptroller of the Currency, Office of Thrift Supervision
Posted in Servicing/Default, Top Stories | 7 Comments »
A group of 15 housing trade groups representing both consumers and market players sent a letter to federal regulators Friday requesting a delay to the recent risk-retention rule by more than one month.
Regulators proposed the rule in March, requiring lenders to maintain 5% of the risk on loans issued into securities. The exception, known as the qualified residential mortgage, would exempt lenders from holding "skin in the game," but only when certain requirements are met such as a 20% downpayment from the borrower.
The comment period ends on the proposal June 10, but the trade groups asked for an extension to no earlier than July 22.
"While we recognize that Dodd-Frank requires a final Risk Retention rule within 270 days, the proposal was not issued until nearly all of that time elapsed," the letter reads. "Under the circumstances, the public’s opportunity to respond should not suffer."
The letter was signed by the Mortgage Bankers Association, the American Bankers Association, the Center for Responsible Lending, the National Association of Realtors, the National Association of Home Builders and others.
These groups have been pushing regulators and lawmakers to ease the requirements under the rules since they were proposed.
"Any time you get the mortgage bankers, the mortgage insurers, the Center for Responsible Lending and Congressional Black Caucus to agree on something, maybe this committee should pay a little bit of attention," said Rep. Jeb Hensarling (R-Texas) during a committee hearing in April.
The groups maintained that the rules would further constrict the mortgage market and could possibly shut out otherwise credit-worthy borrowers during a time of lingering fragility in the market.
But speaking before a House subcommittee hearing this week, Janneke Ratcliffe, executive director of the UNC Center for Community Capital, said the private-label market needs more transparency along with a broader risk-retention rule to ensure private capital returns.
In the decade preceding the crisis, a study Ratcliffe conducted found borrowers had access to prime, fixed-rate loans they could afford to pay under affordable housing programs. They experienced low default rates and built up meaningful equity.
"These findings underscore that risk-retention should apply to product and process factors that increase risk, not to characteristics of the borrowers," Ratcliffe said. "That said, overall, the risk retention provisions will certainly improve accountability."
Recent rules from the Federal Reserve propose requirements for a qualified mortgage, or a QM. Under this proposal, lenders are required to determine a borrower's ability to repay a loan before it is written. The overload of rules, the groups say, requires an extension in order to give them more time.
"To prevent undue regulatory burden, both the QM and QRM should be consistent; indeed, Dodd-Frank requires that the QRM not be broader than the QM," according to the letter. "Accordingly, issues under both rules should be considered and addressed together by the public."
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: ABA, Fed, MBA, mortgage, NAHB, NAR, QM, QRM, risk retention
Posted in Origination/Lending, Top Stories | 4 Comments »
The Securities and Exchange Commission charged a New York investment adviser with various securities violations, alleging he fraudulently sold securities in an upstate real estate investment fund.
The federal regulator claims Lloyd Barriger assured investors his Gaffken & Barriger Fund was safe and able to generate a return of at least 8% per year.
The SEC said the fund performance was significantly less, and Barriger defrauded investors in Campus Capital Corp. by raising money from that firm to help the struggling G&B fund without disclosing the funds would be used for that purpose.
"In the midst of the credit crisis, Barriger chose to lie about the solvency and liquidity of his fund rather than admit the somber truth of a collapsing business," said George Canellos, director of the SEC's New York office. "He continued to solicit new investor funds based on the same misrepresentations up until the day before the fund collapsed."
The SEC said Friday in a complaint filed in federal court the G&B fund raised $20 million over 10 years, including about $12 million from Campus Capital. Barriger froze the fund in 2008, but the SEC said he steered its assets by having the fund pay cash distributions to investors who requested returns.
The regulator claims Barriger allowed Campus Capital to inject $2.5 million into the fund one year when it was in distress. This information, however, was not disclosed to Campus Capital.
Write to: Kerri Panchuk.
Tags: Campus Capital Corp., Gaffken & Barriger Fund, SEC, Securities and Exchange Commission
Posted in Secondary Market/Investors, Top Stories | No Comments »
Pulte Homes (PHM: 7.73 -0.90%) said Friday a class-action lawsuit accusing affiliated homebuilder Centex Corp. of crashing neighborhood home values by selling properties to unqualified home buyers is without merit.
Unlike most foreclosure cases, this one is not filed by a homeowner facing foreclosure, but by a homeowner who says an influx of foreclosures in the neighborhood killed his property's value. The plaintiff recently filed an appeal after the suit was dismissed.
The suit is against Centex, a homebuilding firm acquired by PulteGroup in 2009. Prior to that, Centex operated its own mortgage-lending business, which it phased out prior to the sale of the company.
Sylvester Maya from San Bernandino, Calif., filed suit claiming Centex targeted low-income purchasers and sold them homes in his neighborhood, inflating prices. Maya and the other class-action plaintiffs allege Centex's practice led to high foreclosure rates, which, in turn, caused neighboring property values to decline.
Two U.S. District Court judges in California have already dismissed the case, a Pulte spokeswoman said Friday. The suit is now at the 9th Circuit Court of Appeals, where justices heard oral arguments Monday.
Court records show the case was thrown out by the lower courts because judges found the plaintiffs' lacked standing to bring suit. The lower courts found the plaintiff's injury "was not concrete nor particularized." In addition, the district courts said an upswing in foreclosures is not necessarily a factor that has a long-term impact on home prices.
"The judges ruled that it would be impossible for plaintiffs to prove the decreased home prices were caused by the acts of homebuilders rather than a multitude of other factors that affect the housing market such as the collapse of financial institutions, rising unemployment and changes in the credit market," Pulte said in a statement.
The District Court for the Central District of California said in court records the "plaintiffs' harm is not fairly traceable to defendants alleged conduct." That court further concluded the plaintiffs "do not have standing to sue for paying an inflated purchase price for their houses or for a subsequent reduction in value of their houses."
Write to: Kerri Panchuk.
Tags: Centex, foreclosure, homeowner, Ninth Circuit Court of Appeals, Pulte Homes, PulteGroup, unqualified home buyers
Posted in Origination/Lending, Top Stories | No Comments »
Boston Properties (BXP: 103.79 +0.11%) and CB Richard Ellis (CBG: 19.15 +0.74%) top the list of real estate investment trusts expected to perform well over the next 12 months, according to Barclays Capital (BCS: 13.99 +0.43%).
Analysts at the investment banking firm mentioned Boston Properties, an office REIT, as a hot pick due to its strong balance sheets. In Friday's report, Barclays said Boston Properties should benefit from the changing landscape in the office property market because of its geography and low leveraging.
"Looking ahead, BXP has 1.9 million square feet of leases, 4.9% of total square footage, scheduled to expire during the remainder of 2011," Barclays analysts said. "While recent leasing volumes indicate a level of activity sufficient to meet these expirations, management identified three specific vacancies that are expected to weigh on 2011 results."
Slow rent growth is the most important risk concerning Boston Properties, Barclays said, which may cause the stock price to miss Barclays' target of $110. But analysts still expect a 7.7% return on investment over the next 12 months.
CB Richard Ellis, the world's largest commercial real estate firm, is a top pick for Barclays because of the company's opportunity for even more growth. In February, CB Richard Ellis purchased three real estate investment management business from Dutch insurance company ING Group. Barclays said the acquisition, part of a $940 million deal, will expand CB Richard Ellis' growth over the next several years.
"CBG is highly leveraged due to increasing transaction volumes and pricing, particularly in the Americas," Barclays said. The purchase helped reduce ING's presence in the American market.
Barclays anticipates CB Richard Ellis stock to hit $32 by next May.
Rounding out Barclays' list of REIT stocks projected to outperform the sector in the coming year are Camden Property Trust (CPT: 64.23 +0.08%) and Digital Realty Trust (DLR: 69.50 -0.13%). Camden holds properties across the South and Southwest, which were hit hard by the housing crisis. However, construction is expected to continue for several years in much of that part of the country, Barclays said. Analysts target price for this firm is $65.
Digital Realty Trust's track record as a data acquirer, redeveloper and operator is sufficient for Barclays to rank the firm as a top pick. The target price for Digital Realty is $67, about 10% higher than were the stock is currently trading.
These are not the stocks with the highest implied returns based on price targets, the firm noted. "Rather they are the stocks we think most likely to outperform on a risk-adjusted basis," Barclays said.
Write to Christine Ricciardi.
Follow her on Twitter @HWnewbieCR.
Tags: Barclays Capital, Boston Properties, Camden Property Trust, CB Richard Ellis, Digital Realty Trust, ING REIM
Posted in Secondary Market/Investors, Top Stories | No Comments »
Republicans in the House of Representatives unveiled seven more bills Friday to reform the government-sponsored enterprises for a total of 15 since March.
Rep. Scott Garrett (R-N.J.) is chairman of the GSE subcommittee and leads the GOP effort to wind down Fannie Mae and Freddie Mac. He said Friday the second round of new bills continues the work of ending bailouts for these companies and ushering private capital into the mortgage market. Republicans introduced eight bills at the end of March.
"We can no longer afford to sit back and allow the ongoing bailout of these failed institutions to continue," Garrett said. "While special interest groups and the guardians of the status quo may not want to admit it, Fannie and Freddie’s days are numbered. It’s not a matter of if, but when – the quicker we begin the process of dismantling them the better off we’ll be."
Two other House lawmakers introduced a bipartisan GSE reform bill this week that would wind-down Fannie and Freddie over five years and provide a government backstop for securities issued by five replacement companies funded by private dollars.
A spokesman for Rep. Don Manzullo (R-Ill.) said the latest Republican bills are "discussion drafts" and have not been formerly introduced.
Manzullo sponsored a bill to prevent the Treasury from lowering the 10% dividend payment Fannie and Freddie are required to make. Both companies have so far pulled $164 billion from the Treasury since entering conservatorship in 2008.
Rep. Jason Chaffetz (R-Utah) sponsored another bill that would subject Fannie and Freddie to Freedom of Information Act requests. Because the GSEs were originally chartered by the federal government, they were not part of the federal government, and were exempt from FOIA. Now that they're in conservatorship, Chaffetz maintains they are now part of the government.
Rep. Robert Hurt (R-Va.) will propose a bill requiring Fannie and Freddie to dispose of all "nonmission critical assets," which includes patents and data.
Rep. Michael Fitzpatrick (R-Pa.) sponsored a bill setting a total dollar cap on the amount of money to be used in the Fannie and Freddie bailout.
"American taxpayers have already spent too much on Fannie and Freddie,” said Fitzpatrick. "While stability needs to be maintained at these organizations, they must also be put on clear notice that they cannot continue to charge their bad investment decisions on our national credit card."
Rep. Steve Stivers (R-Ohio) will propose a bill ensuring that replicas of the GSEs would not be created to replace Fannie and Freddie in the future housing finance system. The bill amends a section in the Housing and Economic Recovery Act that allows a new company to be created if either GSE goes into receivership.
Rep. Randy Neugebauer (R-Texas) sponsored a bill to prohibit taxpayers from funding legal fees for former Fannie and Freddie employees. Neugebauer led an investigation into what executives were charging the GSEs to cover legal expenses after the crisis. Roughly $162 million has been spent defending Fannie, Freddie and former executives there in a variety of lawsuits.
Rep. Ed Royce (R-Calif.) will propose a bill that would abolish the Affordable Housing Trust Fund, which provides resources throughout the country to affordable housing to low- to middle-income families.
"Building on the momentum and success of the first round of bills, we are introducing these seven bills to continue with our efforts to end the bailout, protect taxpayers and get private capital off the sidelines," Garrett said. "These seven bills were carefully designed to tie the hands of Fannie and Freddie so that they are no longer a drag on the American taxpayers, a threat to our economic security, and an impediment to private market growth and development."
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: Don Manzullo, Ed Royce, Fannie Mae, freddie mac, GSE, housing reform, Jason Chaffetz, Michael Fitzpatrick, mortgage, Randy Neugebauer, Robert Hurt, Scott Garrett, Steve Stivers
Posted in Secondary Market/Investors, Top Stories | 16 Comments »
Comparing income inequality across Census Bureau data bureau may result in conclusion that are not, in fact, representative of the American population by and large, a new research note states.
This is because of the large shifts in household wealth, particularly during times of recession. In harder times, people's job status can change more often and shift household wealth levels. This leads to larger swaths of the population frequently sliding between data sets, according to one Federal Reserve official.
Thomas Garrett, assistant vice president and economist at the Federal Reserve Bank of St. Louis, said household incomes vary, making comparisons tough, if they "incorrectly assume" each quintile, equal to one-fifth of the population, contains the same households over time.
"Comparing income quintiles from different years is a proverbial apples-to-oranges comparison because the households compared are at different stages in their earnings profile," Garrett said.
Garrett said nearly 58% of households in the lowest income quintile in 1996 moved higher by 2005, and almost half of the households in the second-lowest quintile moved to a higher quintile over the same period.
Conversely, more than 57% of the wealthiest 1% of households in 1996 fell out of that category by 2005, while more than 45% of the wealthiest 5% slid further down the scale, as well.
"Income mobility muddies the picture of income inequality derived from a simple comparison of income quintiles from different years," Garrett said.
Write to Jason Philyaw.
Tags: census bureau, Federal Reserve, Federal Reserve Bank of St. Louis, income inequality
Posted in Secondary Market/Investors, Top Stories | No Comments »
Sen. Olympia Snow (R-Maine) and Sen. Jeff Merkley (D-Ore.) introduced legislation Thursday establishing federal standards for mortgage servicers.
S.967, or the Regulation of Mortgage Servicing Act, would require servicers to create a single-point of contact for borrowers and end the dual-tracking of pursuing foreclosure and loan modification simultaneously. The bill also requires third-party review of servicers' actions before foreclosure.
Both Snowe and Merkley said their offices have been overwhelmed with calls from borrowers confused and frustrated with the process.
Regulators began pursuit of a national and uniform servicing standard in February after servicers came under investigation for faulty foreclosure practices. Mortgage Bankers Association CEO David Stevens said Thursday a uniform standard is crucial for the industry overloaded with varying requirements across the country and from several businesses.
"It is critical that we restore confidence in the relationship between homeowners and the loan servicing industry and remove confusing barriers to mortgage modifications," Snowe said.
The bill isn't alone. In April, Rep. Elijah Cummings (D-Md.) introduced a bill requiring more disclosure from servicers while establishing mediation programs across the country. It's a companion bill to one introduced in the Senate.
Sen. Sherrod Brown (D-Ohio) introduced a bill in April, as well, attempting to improve standards for staffing and casework at servicing companies and explicitly requiring servicers to work with homeowners to achieve a modification resolution before foreclosure.
Merkley said the latest bill he and Snowe introduced would be a significant crackdown.
"This legislation will put these bad practices to an end," Merkley said.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: bill, Congress, foreclosure, MBA, Merkley, regulators, Senate, Servicing/Default, Snowe, standard
Posted in Servicing/Default, Top Stories | 9 Comments »
