Archive for May, 2011
Sales of bank-owned homes and properties in some stage of foreclosure accounted for 28% of all U.S. residential sales in quarter one, up from 27% in the fourth quarter, RealtyTrac said Thursday in its 1Q 2011 survey.
The foreclosure data firm added that the average sales price of properties in foreclosure fell 1.89%, hitting $168,321 during the same period.
The average sales price for properties in foreclosure also fell approximately 27% below prime properties, the report said.
During the quarter, third-parties acquired 158,434 U.S. bank-owned homes and properties in some stage of the foreclosure process, down 16% from the revised fourth-quarter figures and 36% from year-ago levels.
"While foreclosure sales continue to account for an unusually high percentage of all residential home sales, sales volume is well off the peak we saw in the first quarter of 2009, when nearly 350,000 foreclosure properties sold to third parties," said James Saccacio, chief executive officer of RealtyTrac.
"While this is probably helping to keep home prices relatively stable, it is also delaying the housing recovery. At the first quarter foreclosure sales pace, it would take exactly three years to clear the current inventory of 1.9 million properties already on the banks’ books, or in foreclosure."
According to the report, a total of 107,143 real estate owned residential properties sold to third parties in the first quarter, down 11% from the previous quarter and down nearly 30% from the first quarter of 2010.
REO sales accounted for nearly 19% of all sales in the first quarter, up from 17% of all sales in the previous quarter and up from 18% of all sales in the first quarter of 2010. REOs sold for a relatively-unchanged average discount of 35%.
A total of 51,291 pre-foreclosure properties sold to third parties in the first quarter, down nearly 26% from the previous quarter and down 45% from the first quarter of 2010.
Pre-foreclosure sales accounted for nearly 9% of all sales, down from 10% of all sales in the fourth quarter of 2010 and down from 11% of all sales in the first quarter of 2010.
Short sales sold for an average discount of 9%, down from an average discount of 13% in the fourth quarter and an average discount of 14% in the first quarter of 2010.
Write to Kerri Panchuk.
Tags: bank-owned sales, foreclosure, home sales, RealtyTrac
Posted in Servicing/Default, Slider, Top Stories | 2 Comments »
The investigation into robo-signing at mortgage servicing firms grew more intense Wednesday with attorneys general in California and Illinois issuing subpoenas to Lender Processing Services Inc. (LPS: 16.789 +1.44%).
Illinois Attorney General Lisa Madigan also subpoenaed National Title Clearing Inc.
The AGs' actions show LPS is once again in the line of fire as state regulators continue to probe mortgage servicing practices of firms handling foreclosures in the midst of a prolonged national housing downturn.
A spokesperson for LPS could not immediately comment on the allegations, saying the firm has yet to receive the subpoenas.
Nationwide Title Clearing also issued a statement saying it "has not yet been served a subpoena from the Illinois Attorney General and therefore cannot comment on the specifics at this time."
The Florida-based firm added that it intends to cooperate with the AG's office and "welcomes the opportunity to help clear up common misconceptions surrounding this issue and wishes to help the public gain a deeper understanding of normal mortgage industry documents and processes."
This is not the first time LPS has landed in state regulators' sights.
Michigan Attorney General Bill Schuette announced in late April his office would be investigating questionable mortgage documentation filed in his state's register of deeds offices. Documents tied to DocX, a subsidiary of Lender Processing Services, are at the center of that probe.
Illinois' Madigan said the latest subpoenas are part of a larger investigation into alleged fraudulent practices used by banks and other mortgage institutions. Both firms in her subpoena request make their money by providing clients with document preparation and loan management services.
Madigan is investigating allegations LPS and Nationwide Title Clearing engaged in the robo-signing of legal documents tied to foreclosure cases. Robo-signing refers to the mass signing of foreclosure affidavits with the signers having little or no knowledge of the information contained in the documents.
LPS offers servicing support to 80 financial institutions and handles approximately 30 million mortgages, according to the Illinois AG.
Meanwhile, the subpoena issued by California Attorney General Kamala Harris is limited to LPS and ties back to her agency's ongoing probe into the robo-signing of mortgage documents and other alleged practices that may have hurt borrowers facing foreclosure.
Warning that robo-signing is a "particularly dangerous" practice in nonjudicial foreclosure states like California, where the courts do not oversee the foreclosure process, Harris said the subpoena is needed to get to the bottom of some of the issues surrounding the state's mortgage mess.
The California AG subpoena asks for data back to Jan. 1, 2007.
Write to Kerri Panchuk.
Tags: California, foreclosure, Illinois, Illinois Attorney General Lisa Madigan, Lender Processing Services Inc., LPS, mortgage, mortgage servicing, National Title Clearing Inc., robo-sign, robo-signing
Posted in Servicing/Default, Top Stories | 2 Comments »
In a subcommittee hearing Wednesday the chief regulator for Fannie Mae and Freddie Mac punched holes in the latest seven reform bills sponsored by House Republicans.
After the Treasury Department released its white paper on the future of housing finance, Republicans on the House Financial Services Committee announced 15 bills regarding how to wind down Fannie and Freddie. Since conservatorship in 2008, the two companies have drawn roughly $164 billion from the Treasury.
Edward DeMarco, acting director of the Federal Housing Finance Agency, addressed drafts of the latest seven introduced in mid-May, pointing out redundancies in some and the potential dangers in others.
The first bill drafted by Rep. Don Manzullo (R-Ill.) would prevent the Treasury from lowering the 10% dividend payment the GSEs are required to make each quarter.
DeMarco said the bill is consistent with the current conservatorship agreements, and the GSEs have been making quarterly payments at this rate.
The mortgage finance giants "frequently have had to draw additional funds from Treasury in order to 'pay' the dividend to Treasury," according to DeMarco. He said fixing the rate at 10% would limit resolution options and would hurt the ability of the GSEs to build up reserves and exit conservatorship. However, when responding to questions during the hearing, DeMarco said the bill is consistent with what Fannie and Freddie are doing, and there is no plan to change the dividend.
DeMarco said the GSEs still face "a significant number of hurdles" before getting out of conservatorship even if the rate is reduced.
Another bill from Rep. Michael Fitzpatrick (R-Pa.) would cap any federal funds used for GSE bailouts at $200 billion plus any deficiency amounts the companies owe. DeMarco said the cap is already consistent with the conservatorship agreement.
A third bill introduced by Rep. Ed Royce (R-Calif.) would abolish the Affordable Housing Trust, but DeMarco said the GSEs have not contributed to the trust since entering conservatorship in 2008, and it would be inappropriate for them to do so.
Rep. Jason Chaffetz (R-Utah) sponsored one bill that would subject Fannie and Freddie to Freedom of Information Act requests. DeMarco reiterated these are still private companies working in conservatorship. The two companies, he claimed, would incur significant costs responding to such requests, including "significant litigation requests."
A bill sponsored by Rep. Robert Hurt (R-Va.) would require Fannie and Freddie to dispose of all "nonmission critical assets." DeMarco asked the lawmakers for regulatory discretion to preserve and conserve the GSE's assets to the FHFA's best judgment.
"Moreover, FHFA has already begun to fulfill the intent of Mr. Hurt’s draft bill regarding the sale of nonmission critical assets," DeMarco said.
A bill drafted by Rep. Randy Neugebauer (R-Texas) would prohibit taxpayer dollars from funding legal fees for former Fannie and Freddie employees.
DeMarco said the companies have a serious challenge attracting and retaining employees. Neugebauer's proposal would require the FHFA to establish a process for setting the standard of "reasonableness" for these fees. If an employee is subjected to these lawsuits, they could be rendered bankrupt by the escalating legal cost even if they are found innocent, DeMarco said.
"Further, the proposal would have to be prospective in nature to avoid undermining the status of current employees," he said. "The language currently would cover conduct occurring before the effective date of a regulation and that would make it retrospective in nature."
DeMarco plans to work with the lawmakers on the ongoing drafts and help them move toward a final resolution.
"I also recognize the critical and contemporaneous need to provide market participants with greater clarity and assurance about the ultimate role of the government in housing finance beyond the issues surrounding the enterprises," DeMarco said.
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Tags: DeMarco, Fannie Mae, FHFA, foreclosure, freddie mac, GSE, House, mortgage, Republicans
Posted in Secondary Market/Investors, Slider, Top Stories | 6 Comments »
Sidus Financial is discontinuing its wholesale lending and correspondent lending operations, according to a company memo obtained by HousingWire.
The Greenville, N.C.-based mortgage lender said the evolving mortgage market created challenges for the company and contributed to the decision to exit the wholesale and correspondent lending spaces.
As of Wednesday afternoon, Sidus Financial is no longer accepting new lock requests. Sidus Financial will stop accepting new mortgage applications June 3 and discontinue funding by July 1.
The firm plans to work closely with clients to ensure an orderly transition for customers with mortgage loans in pipeline, the memo said. Sidus will continue to accept applications and referrals for reverse mortgages, the company noted.
"The entire staff of Sidus Financial would like to offer our heartfelt thanks for your past support and business," Sidus told its wholesale and correspondent lending partners in the memo. "We wish you much success in all your future endeavors."
Sidus Financial is a wholly owned owned subsidiary of Yadkin Valley Financial Corp. (YAVY: 2.02 0.00%). Yadkin is the holding company for Yadkin Valley Bank and Trust Co.,a full-service community bank providing services in 38 branches throughout North and South Carolina. Sidus Financial has four offices on the East Coast.
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Tags: correspondent lending, Sidus Financial, wholesale lending, Yadkin Valley Bank and Trust Co., Yadkin Valley Financial Corp.
Posted in Origination/Lending, Top Stories | No Comments »
Existing-home sales in Miami rose 17.8% last month from a year earlier, making it the best April in five years, according to information released by DataQuick.
Sales of home and condos across the region fell 5% from March to 9,727.
In the condo market alone, sales jumped 28.5% over last year, with 5,113 condos sold.
"It was the highest number of condo resales for the month of April since 2005, when 6,332 condos resold," DataQuick said. "Condo resales made up a near-record 52.6% of total Miami-area home sales last month, compared with 48.2% a year earlier and a monthly average of 33.1% over the past decade."
New-home sales in Miami were a different story, with builders still battling against a weak economy and competition from distressed real estate.
In April, the market had 569 new home sales, up 1.6% from March and 4.4% from last year, but still the third-lowest on record for that month.
"Last month’s new-home sales made up just 5.8% of all transactions — close to an all-time low and far below the new-home market's decade-long average of 19% of total monthly sales," DataQuick said.
Write to: Kerri Panchuk.
Tags: DataQuick, existing home sales, Miami, new home sales
Posted in Secondary Market/Investors, Top Stories | No Comments »
Short sales increased rapidly over the last several quarters, but wherever there are home sales, there are home sales fraud.
Sales of properties on the verge of foreclosure tripled over the last two years and will increase another 25% this year, according to analysis from CoreLogic (CLGX: 14.56 +0.62%).
Analysts found one in every 52 short sales conducted in the first half of 2010 were "suspicious," meaning the lender may have incurred unnecessary losses from fraud. Over the first six months of last year, banks showed $150 million in losses from these suspicious transactions. By the end of 2011, banks could face $375 million in losses from short sale fraud, according to CoreLogic.
Short sales pose a suspicious risk in a variety of ways. One example occurs when the buyer flips the property for a 10% profit less than one month after the bank unloads it.
Analysts also found any property flipped less than three months after the transaction for at least a 20% profit as suspicious. Even at six months after the transaction, a short sale can be suspicious if the buyer flips the property for 40% more than the short sale price.
Flipped the same day
Analysts said not all of these transactions were fraudulent. Buyers, often investors, can quickly rehabilitate the property, which poses no significant risk to the bank. However, as CoreLogic analysts looked through hundreds of thousands of short sales, some were resold on the very same day.
Nearly one in six suspicious short sales are resold on the same day. On average, these transactions that were flipped within 24 hours showed a 34% profit between what the short sale went for and what the investor flipped the property for, CoreLogic said.
"This same day turnaround of a short sale can be achieved by what is known as a 'back-to-back' closing," analysts said.
In these deals, the investor has two separate contracts. One is the purchase contract with the lender. The other is a separate agreement the investor has with a third-party buyer. The two transactions are choreographed and presented to the title company on the same day with the short first executed, followed by the flip to the third-party buyer.
Overall, roughly 65% of the resales after the originally short sale transaction were deemed "suspicious" and caused direct and unnecessary losses to the bank.
Risk from certain states and buyers
States with the highest short sale volume showed the most suspicious activity. Roughly 34% of the suspicious short sales found in the first half of 2010 occurred in California, followed by 17% in Florida and almost 10% in Arizona. The rest of the country accounted for about 38% of all suspicious short sales.
Most of these occurred on properties that were sold to investment companies. Of the short sales conducted with investors, 28% were suspicious, compared to 1.9% for all short sales.
Craig Focardi, senior research director of consumer lending at The TowerGroup, said the study validates an industry perception related to limited liability company buyers in a short sale transaction.
"While they comprise only two percent of all buyers, they comprise more than 25% of buyers in suspicious short-sale transactions," Focardi said.
Mitigate the risk
CoreLogic provided some ways to mitigate the risk. Analysts recommended lenders review all short sale documentation, including any disclosures to resell the property at a higher price. They must ensure the short sale buyer is not aware of any other parties involved with the transaction, validate claims significant renovation was actually completed before the flip.
But most importantly, banks should apply the proper due diligence in order to understand the current market value of the property, analysts said.
"Identifying risk and monitoring distressed asset sale trends is absolutely essential for lenders to preempt potential losses," Focardi said.
Write to Jon Prior.
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Tags: banks, buyer, CoreLogic, flipping, foreclosure, investement, losses, short sale, The TowerGroup
Posted in Servicing/Default, Top Stories | 9 Comments »
The Mainstreet Organization of Realtors and the Realtor Association of NorthWest Chicagoland proposed a merger that, if approved, will create the fourth largest Realtors' association in the nation.
The two agencies combined have 16,000 members on the street, serving 185 communities in Cook County, DuPage County and Lake County, Ill. Members will vote on the proposed merger in July.
"This merger represents a great opportunity for a partnership between two of the strongest and most active Realtor associations in the nation," said RANWC President Bob Dohn.
The Mainstreet Organization of Realtors currently covers real estate activities in DuPage County, which includes most of the suburban areas west of Chicago. The merger would expand the entity's reach into the northern suburbs of the nation's third largest city. Operations for both will continue under the Mainstreet brand.
By combining the associations' resources, the Realtors expect to have an expanded government affairs program to better monitor municipalities and advocate for homeowners when it comes to issues related to taxes and housing regulation.
Write to: Kerri Panchuk.
Tags: housing, Realtors, Realtors Association of Northwest Chicagoland, The Mainstreet Organization of Realtors
Posted in Origination/Lending, Top Stories | 1 Comment »
Top members of the House Committee on Oversight and Government Reform may subpoena six major mortgage servicers under investigation for mishandled foreclosures.
The ranking member of the committee Rep. Elijah Cummings (D-Md.) sent a letter to chairman Rep. Darrell Issa (R-Calif.) Tuesday requesting Issa to issue the subpoenas. Cummings began his own investigation in February to examine if any wrongful foreclosures were completed after problems arose late last year.
Cummings said six of the servicers refused to comply and send him documents relating to the foreclosures and possibly inflated fees charged to homeowners. He said four of the targeted companies provided the committee with at least some information related to the document requests.
The six respondents are MetLife (MET: 34.77 +0.78%), PHH Mortgage (PHH: 11.672 +0.02%), SunTrust Bank (STI: 20.40 -0.49%), U.S. Bank (USB: 27.76 -0.11%), Wells Fargo (WFC: 29.34 +1.00%), and Bank of America (BAC: 7.2118 -1.21%). Cummings said in the letter five of these companies wrote back to him, refusing to comply. For example MetLife, he said, explained it would not provide the documents unless subject to a subpoena.
These and other mortgage servicers already signed settlements with federal regulators over foreclosure issues, and continue to negotiate terms from another investigation from the 50 state attorneys general.
In a statement sent to HousingWire Wednesday, Issa said the subpoena request from Cummings comes "as a bit of a surprise."
"Until last night, neither [Cummings] nor his staff had indicated that their investigation had stalled and felt that a subpoena from the chairman was necessary," according to the statement from Issa's office.
Issa asked Cummings for more information about the investigation before deciding on whether or not to issue the subpoenas.
"Foreclosure has been the subject of a full committee hearing this Congress and is an issue of clear bipartisan concern," according to Issa's statement.
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Tags: Bank of America, Congress, Cummings, foreclosure, foreclsoure, House, Issa, MetLife, modifcation, mortgage servicers, subpoena, SunTrust Banks, U.S. Bank, Wells Fargo
Posted in Servicing/Default, Top Stories | 5 Comments »
The Office of Comptroller of the Currency is reshaping assessment fee schedules for financial institutions to facilitate the transition of regulatory power to the agency from the Office of Thrift Supervision.
The OCC proposed a rule Wednesday to amend its internal assessment rules to include federal savings associations. Assessment fees, which are paid semi-annually to the OCC by the financial institutions it supervises, vary depending on the federal regulator.
On July 21, the OCC will absorb the supervisory duties of OTS as mandated under the Dodd-Frank Act. The OTS was Countrywide Financial Corp.'s regulator when the mortgage finance company went under in 2008.
To make the transition of these regulatory powers as smooth as possible, the OCC will provide just one assessment fee schedule for both national banks and federal savings associations. Thrift assessments normally due on July 31 would be deferred to September 30, according to the rule. Assessments would still be based on June data.
The OCC also plans to compute assessments under the schedules of both agencies for fees due in September and March 2012. Federal savings associations will pay the lesser of the two fees, the rule states.
Beginning with assessments charged in September 2012, the OCC will assess institution fees based on a single-fee schedule regardless of charter. Banks and thrifts will be subject to identical assessment methodologies, rates, fees, and payment due dates under the rule, the agency said Wednesday.
"While some federal savings associations would pay more under the OCC assessment rule, others would pay less. In fact, the thrift industry as a whole would have paid $18 million less in 2010 under the proposal," according to the OCC.
The proposed rule is being published in the Federal Register on Thursday and is open for comment until June 27.
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Tags: countrywide financial, Dodd-Frank Act, Office of Comptroller of the Currency, Office of Thrift Supervision
Posted in Origination/Lending, Top Stories | No Comments »
A litany of mortgage industry players spoke in Washington Wednesday about the challenges of doing business in the current housing market.
Additionally, they told the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity, new regulations are doing more to kill their line of work, than to preserve it.
Changes to the current Federal Housing Administration requirement of 3.5% down on home purchases, is a clear example of this well-meaning, yet misguided directive coming from inside the Beltway, they said.
"NAR strongly opposes increasing the downpayment for FHA," said National Association of Realtors President Ron Phipps. "The correlation between downpayment and loan performance is significantly less important than the linkage to strong underwriting, which FHA continues to have. FHA's foreclosure rate remains less than conventional mortgages, so we don't believe changes to the downpayments would do anything but disenfranchise many creditworthy homebuyers."
Mark Calabria, director of financial regulation studies at the Cato Institute, offered an opposing view, telling the congressmen FHA reserves have fallen to $3.5 billion $22 billion, and warning "further declines could easily erode the remaining reserves," requiring direct appropriations to cover claims, which would put taxpayers on the hook.
Calabria said to ensure the solvency of the agency and to save taxpayers from future bailouts, FHA reforms should require a 5% cash down-payment instead of the current 3.5% threshold.
He also believes the agency should only accept mortgages with reasonable debt-to-income ratios. Calabria said borrower eligibility should be limited to borrowers with incomes that do not exceed 115% of the median area income.
Michael Berman, chairman of the Mortgage Bankers Association, said Dodd Frank's proposed risk-retention rule, which requires issuers to keep a 5% stake in securities to provide a hedge against potential losses to investors, could have the opposite effect — keeping private capital on the sidelines.
The oddity is that Dodd-Frank requires Fannie Mae and Freddie Mac to shrink in order to allow private capital back into the mortgage finance market. But risk retention will likely equal a higher down payment as borrowers will also be expected to keep some skin the game.
Berman said current proposals define a qualified residential mortgage under the risk-retention rule as a loan with at least a 20% downpayment. One school of thought is that lenders will not wish to retain risk, without further assurance the homeowners will not walk away from their investments in another scenario of consistent home price declines.
Therefore, as regulators continue to shape the future of the FHA, lawmakers must address the provisions of Dodd-Frank that conflict with the Treasury Department's goal of bringing more private capital back into the market, according to the market participants that testified Wednesday.
"We support FHA’s role as a source of financing for first-time homebuyers and other underserved groups," Berman said. "However, because of the wide disparity between FHA’s down payment requirement of 3.5% and the QRM's requirement of 20%, MBA is concerned that the FHA programs will be over-utilized."
Berman said that end-result would conflict with the Obama administration's stated goal of moving to a market that is more privately funded.
Berman also warned lawmakers about plans to lower the maximum loan limits for Fannie Mae, Freddie Mac and the FHA. While these loan-limit levels stand at $417,000 for average homes and $729,750 for properties in high-cost areas, an extension to the maximum loan limit expires Sept. 30. Allowing the expiration would cause the loan limit ceiling to revert back to a maximum high of $625,500.
"MBA believes the higher limits should be maintained until the housing market stabilizes and the private market shows more signs that it has returned," Berman said. "We believe that careful consideration should be given as to whether the housing market is ready for a change in the loan limits."
He added that any extension of the loan limits should occur before Oct. 1, to prevent market disruptions.
Write to Kerri Panchuk.
Tags: Cato Institute, Fannie Mae, Federal Housing Agency, FHA, freddie mac, housing, Mortgage Bankers Association, NAR, National Association of Realtors, Obama administration, QRM, Treasury Department
Posted in Secondary Market/Investors, Slider, Top Stories | 8 Comments »
