Archive for June, 2011
Demand for architectural design fell to a new yearly low in May. The Architecture Billings Index, which indicates construction volume, decreased slightly to 47.2 last month from 47.6 in April, according to American Institute of Architects data released Thursday.
The benchmark for the index is 50. Anything above that indicates an increase in architectural billings and anything below indicates a decrease. The AIA surveys a panel of member firms monthly, asking if billings increased, decreased or stayed the same. The national association then weighs the responses for the index.
April was the first month in 2011 the index swung below 50.
The continued decline in demand for architectural services is igniting pessimism among industry experts. Kermit Baker, chief economist at AIA, said it will be very difficult for the construction sector to return to normal and increase jobs until the overall economy improves.
"Whatever positive momentum there had been seen in late 2010 and earlier this year has disappeared," Baker said. "There is no denying that the prolonged credit freeze from lenders for financing commercial projects is the No. 1 challenge to a recovery for the design and construction industry."
The new projects inquiry index also experienced a sharp drop in May, falling to 52.6 from 55 a month prior, according to AIA.
The regional buildings index was highest in the Northeast at 51.2, followed by the Midwest at 51.1, the South at 48.3, and the West at 47.7. The index was the highest in the multifamily residential sector (53.9) followed by the commercial-industrial sector (49.1), the institutional sector (46.5) and the mixed-practice sector (44.9). Those figures are unchanged from the previous month.
Write to Christine Ricciardi.
Tags: AIA, American Institute of Architects, architecture, Architecture Billings Index, construction, design, economy, multifamily
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The Office of the Comptroller of the Currency is defending Acting Comptroller John Walsh from attacks levied by senators who claim Walsh gave a speech criticizing new capital requirements for banks.
In response, the OCC released a statement, suggesting the senators took Walsh's speech out of context.
"The speech delivered by the Acting Comptroller Walsh did not urge a reduction in capital," a spokesman for the OCC said. "In the speech, Mr. Walsh supported increased capital requirements and has said so on record. The speech urged caution about the cumulative effect of many new requirements and about going too far to a point where restrictions inhibit banks from meeting the credit needs of citizens, communities and businesses which are central to a vibrant economy."
What the debate really shows is the line of demarcation separating regulation from too-much-regulation is about to become a steamy topic in the power corridors of Washington, D.C.
The controversy began when Democratic Sen. Jeff Merkley, (D-Ore.), asked President Obama to appoint a new Comptroller of the Currency on the grounds that John Walsh gave a speech arguing in Merkley's words "for (the) minimal capital standards and lax regulation that brought down our entire economy in 2008."
But according to the OCC, the speech Walsh gave to a London crowd this week tells a different story.
In one excerpt from the actual speech, Walsh says, "Specifically, I want to urge due caution regarding the cumulative effects of all the contemplated changes. I might have titled these remarks: Beware the pendulum."
Walsh goes on to say, "I should start by making it very clear that I support strong capital and strong liquidity for banks, and enhanced supervision of systemically important institutions."
After making his case for capital requirements, Walsh warned against excessive regulation, suggesting that new rules should consider "the critical role of banks in promoting strong and sustainable economic growth."
Write to: Kerri Panchuk.
Tags: banks, capital requirements, Jeff Merkley, John Walsh, OCC, Office of the Comptroller of the Currency
Posted in Secondary Market/Investors, Top Stories | No Comments »
With the conforming loan limits expected to drop in October, the California Association of Realtors warned of the impending harm to homeowners, while the only private-label securitizer left notified investors of more opportunities.
The conforming loan limit determines the maximum mortgage amount the Federal Housing Administration, Fannie Mae and Freddie Mac can buy or guarantee. Without congressional action, the limit will drop to $625,500 from $729,950 for the majority of counties nationwide on Oct. 1.
These three agencies currently fund 95% of the mortgage market, and housing finance reformers point to lowering this limit as a first step to usher in private capital.
However, according to CAR, more than 30,000 Californian homeowners will face higher down payments, higher mortgage rates and stricter loan qualification requirements when the limits drop.
The $104,450 decrease in most counties will not be felt in some California counties. In fact, it will be steeper.
CAR analyzed the effect of dropping the limit across several specific counties in California. In Monterey County, for instance, the government-sponsored enterprise limit will drop a total of $246,750, followed by a $151,250 drop in San Diego, and $141,550 in Sonoma County.
The FHA conforming loan limit will fall $201,450 in Merced County and $164,650 in Riverside.
"By reducing the conforming loan limit, thousands of California homebuyers will be shut out of homeownership," CAR President Beth Peerce said. "The higher mortgage loan limits are critical to providing liquidity in today’s housing market and are essential to our housing recovery. We urge Congress to maintain the current limits and make them permanent to provide homeowners and homebuyers with affordable financing and help stabilize local housing markets."
Redwood Trust (RWT: 11.5519 -0.84%), a real estate investment trust based in California and the only firm to issue a residential mortgage-backed security since the financial collapse in 2008, said the conforming loan limit decrease could drop more loans into its grasp. Redwood already plans to issue two more RMBS by the end of the year.
If annual residential mortgage originations return to $1.5 trillion and jumbo loans — which served as the collateral in its RMBS deals — account for 20% of that, originations of jumbo loans could reach $300 billion, Redwood said in its first quarter report to investors.
"With GSE reform, the portion of the mortgage market that could potentially be available to Redwood could be substantially larger if the conforming loan limits are reduced (as the Obama administration has indicated it intended to do) during the reform transition period, and perhaps still larger if, as part of GSE reform, the concept of conforming limits is eliminated," Redwood said.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: California Association of Realtors, CAR, conforming loan limit, Fannie Mae, FHA, freddie mac, GSE, mortgage, mortgage rates, redwood trust, RMBS, securities
Posted in Origination/Lending, Top Stories | 6 Comments »
The Consumer Financial Protection Bureau identified several types of nonbank firms that could eventually be classified as larger participants in the consumer financial markets, allowing the CFBP to supervise the companies at a later date.
The consumer agency is seeking comment after suggesting the potential targets of nonbank oversight include debt collectors, consumer reporting agencies, consumer credit and activities, money transmitting providers, check-cashing agencies, prepaid card providers and debt relief services.
In a public notice released Thursday, the CFPB said it has not made any definitive decisions, but the agency is asking the public and financial services industry to give input on what nonbank financial firms should be subjected to possible CFPB supervision. The goal is to create a threshold of who will be included, the CFPB said.
The agency said it is trying to flesh out the larger participant rule from the Dodd-Frank Act, which said the CFPB should identify what kinds of nonbank firms will be pulled under the CFPB's supervisory umbrella to protect consumers.
The larger participant guidelines "will not impose substantive consumer protection requirements," the CFPB said. "Instead, the rule will enable the CFPB to begin a supervision program for larger participants in certain markets."
Until passage of the Dodd-Frank Act in 2010, federal oversight of financial firms was limited to banks, thrifts and credit unions, the CFPB said.
Dodd-Frank changed that by authorizing the CFPB to examine nonbank mortgage companies, payday lenders and private education lenders as well as larger participants in the consumer financial markets. Before moving forward with an oversight program, the CFPB said it first needs to define what types of agencies will fit the definition of "a larger participant of a market for other consumer financial products or services."
Once the public comment period ends , the CFPB will be responsible for drafting a rule that identifies the larger participants. The deadline for the rule is July 21, 2012 — one year after the CFPB officially opens its doors.
"Consumers deserve the peace of mind that financial companies — both banks and nonbanks — are following the rules," said Elizabeth Warren, special adviser to the secretary of the Treasury on the CFPB. "The CFPB will be able to examine companies that have never been subject to federal oversight to ensure that no one is gaining an unfair advantage by breaking the law. This will ultimately create fair competition, better product offerings, and more transparent markets for consumers."
Write to: Kerri Panchuk.
Tags: CFPB, check cashing, Consumer Financial Protection Agency, consumer protection, consumer reporting agencies, consumers, debt collectors, debt relief, Dodd-Frank, Elizabeth Warren, larger participants, mortgage, nonbank
Posted in Origination/Lending, Top Stories | 2 Comments »
Venture Bank, based in Bloomington, Minn., launched a new mortgage department this month.
The mid-sized bank, with more than $256 million in assets, will write residential mortgages and group-home products. Legal entities take out group-home loans to provide housing for clients in need of medical care.
Venture Bank Vice President Colleen Karst expects the new department to write roughly $15 million in new loans over the quarter. She said they have approval from two outside investors and verbal approval from Fannie Mae.
Minnesota home prices fell 9% in May from one year ago to a median sales price of $139,000, according to the Minnesota Association of Realtors. Sales for the month fell 16% over the same period. But Karst said opportunities remain.
"There's definitely an opportunity just to serve the existing customer base," Karst said.
The bank will use the XetusOne Loan Management System to process new mortgages. Venture can use the software to manage the loan through origination, subordination and even modification if needed.
"We have some loans outside the box that very few institutions can offer," Karst said. "These products have particular needs and XetusOne can easily accommodate them."
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: Fannie Mae, group home, loan processing, Minnesota, modification, mortgage, Venture Bank, XetusOne
Posted in Origination/Lending, Top Stories | 1 Comment »
Roughly 40% of the 48 banks surveyed by the Office of Comptroller of the Currency tightened underwriting standards for mortgages written in the last year.
The survey covered $4.2 trillion in loans, including small business loans, residential and commercial mortgages, credit cards and others that banks wrote in the 12 months ending Feb. 28. The OCC said, overall, banks began to ease underwriting standards.
"In certain products, banks are once again easing standards in response to competition, an improvement in credit market liquidity, and a desire for more market share," the OCC said.
Not so for mortgages. The OCC examiners looked at collateral requirements, pricing and debt service requirements. Of the 48 banks surveyed, only four showed they were easing standards for real estate loans. More than half kept their standards unchanged.
For conventional home-equity loans, 36% of the banks offering this product tightened their standards. More lenders continued to decline home equity lending to borrowers with high loan-to-value ratios. Only two of the six banks reporting on these riskier products still offer them. One plans to stop the business in the next 12 months.
"Examiners report that underwriting standards remain conservative in response to poor portfolio performance resulting from more liberal underwriting standards in previous years, particularly 2005 through 2007 originations, and continuing economic weakness," the OCC said.
Commentators at the American Securitization Forum annual meeting in Washington, D.C., this week said private-label secondary markets fund much of the consumer loans today – except for mortgages.
Existing home sales plummeted again in May, dropping 15% from one year ago, according to the National Association of Realtors. The trade group's Chief Economist Lawrence Yun blamed the still struggling housing market on the bank's unwillingness to lend.
"Even with recent economic softness, this is a disappointing performance with home sales being held back by overly restrictive loan underwriting standards," Yun said. "There’s been a pendulum swing from very loose standards which led to the housing boom to unnecessarily restrictive practices as an overreaction to the housing correction — this overreaction is clearly holding back the recovery."
Regulatory issues remain unresolved, including upcoming risk-retention rules, servicing standards, and the fate of the government-sponsored enterprises. Until then, liquidity will have a hard time flowing into the market and underwriting standards will remain tight to mitigate the risk.
"The greatest credit risk in banks is the ongoing impact of real estate values due to the significant volume of commercial real estate, residential real estate, and home equity loans in national banks’ portfolios," the OCC said. "Banks with significant credit card portfolios have experienced significant credit risk due to the impact of the weak economy and high unemployment rate."
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: ASF, banks, GSE, home equiyt, LTV, mortgage, NAR, OCC, risk retention, Servicing/Default, underwriting
Posted in Origination/Lending, Slider, Top Stories | 5 Comments »
Sales of new single-family homes fell 2.1% in May to 319,000 units from a revised figure of 326,000 units the previous month.
The May rate is 13.5% above 281,000 a year earlier, the Census Bureau and Department of Housing and Urban Development concluded in their latest report. New homes sales rose the two prior months after reaching the lowest level ever in February.
Analysts with Econoday said May sales figures are not as bad as previously forecasted, adding "supply in terms of months dipped slightly to 6.2 months from 6.3 in April and 6.9 in March." A survey by Econoday produced a consensus estimate of 305,000 new homes sales for May with a range of estimates from 288,000 to 345,000.
"Bumping along the very bottom is a good description for the new home sales market and for the residential market in general, which, of course, is bad news for homebuilders, construction workers and Realtors but may be good news for bargain-hunting buyers who are creditworthy or cash rich," Econoday analysts said Thursday.
Econoday reported a positive development when it comes to home prices, concluding that "low supply is a plus for prices which may be firming up." Its analysts said the median home price is now up 2.6%, reaching a level of $222,600.
Write to: Kerri Panchuk.
Tags: Department of Housing and Urban Development, econoday, new home sales, U.S. Census Bureau
Posted in Origination/Lending, Secondary Market/Investors, Top Stories | 1 Comment »
Mortgage rates remained mostly unchanged this past week, with the 30-year, fixed-rate mortgage remaining 4.5% for a second week.
Even still, disappointing economic news kept rates well below 5% and significantly lower than the 6% mark that defined more stable economic times. The U.S. has not seen mortgage rates higher than 6% since late 2008.
Freddie Mac said the 15-year, fixed-rate mortgage rose to 3.69% this past week from 3.67% a week earlier, but down from 4.13% a year earlier.
In addition, the five-year, Treasury-indexed hybrid adjustable-rate mortgage averaged 3.25%, down from 3.27% a week earlier and the 5-year ARM averaged 3.84%. The one-year, Treasury-indexed ARM hit 2.99% this past week, up from 2.97% a week earlier.
Bankrate said the traditional 30-year mortgage fell to 4.66% from 4.71% the prior week. Meanwhile, the 15-year, fixed-rate home loan slipped to 3.83% from 3.86%, and the Jumbo 30-year, fixed-rate mortgage edged up to 5.23%. Adjustable-rate mortgages were also mixed with the average five-year ARM falling to 3.36% and the seven-year ARM growing to 3.65%.
"Disappointing economic news, such as continued weak housing numbers, and ongoing nervousness about Greece led government bond yields and mortgage rates lower," Bankrate said. "Mortgage rates are closely related to yields on long-term government debt. Although Fed Chairman Ben Bernanke confirmed that bond purchases known as QE2 will end as scheduled this month, long-term interest rates remain at ultra-low levels due to the economic softness and overseas debt concerns."
Write to: Kerri Panchuk.
Tags: 15-year fixed-rate mortgage, 30-year, 30-year fixed-rate mortgage, Bankrate, Bernanke, Federal Reserve, freddie mac, FRM, mortgage rates
Posted in Origination/Lending, Top Stories | No Comments »
Initial jobless claims rose 2% last week, topping most estimates and remaining higher than 400,000 for the 11th straight week.
The Labor Department said the seasonally adjusted figure of actual initial claims for the week ended June 18 increased to 429,000 from 420,000 the previous week, which was revised upward by 6,000 claims.
Analysts surveyed by Econoday expected 415,000 new jobless claims last week with a range of estimates between 410,000 and 425,000. A Bloomberg News survey produced a median estimate of 415,000 new filings last week.
Most economists believe weekly claims lower than 400,000 indicate the economy is expanding and jobs growth is strengthening.
On Wednesday, the Federal Reserve said conditions in the labor market are deteriorating further from already depressed levels. Chairman Ben Bernanke continues to label the slowdown in jobs as temporary, and the central bank expects unemployment to drop to 7.5% by the end of 2013. The rate has lingered around 9% since hitting 9.8% in November.
The four-week moving average, which is considered a less volatile indicator than weekly claims, of 426,250 for last week remained flat with the prior week's revised figure, and the seasonally adjusted insured unemployment rate for the week ended June 11 also remained flat with the week before at 2.9%, according to the Labor Department.
The total number of people receiving some sort of federal unemployment benefits for the week ended June 4 rose to about 7.54 million from 7.4 million the prior week.
Write to Jason Philyaw.
Tags: jobless claims, labor department, unemployment
Posted in Secondary Market/Investors, Top Stories | No Comments »
The House Financial Services Committee voted 44-7 in favor of a bill to establish a regulatory framework for a U.S. covered bond market.
Rep. Scott Garrett (R-N.J.) and Rep. Carolyn Maloney (D-N.Y.) introduced the United States Covered Bond Act of 2011 in March. Analysts said the bipartisan bill stands a good chance of reaching President Obama's desk.
The bill would allow a U.S. covered bond market to pool residential and commercial mortgages into debt securities. Unlike the European system, however, the bill would include auto loans, credit cards, student loans and government-guaranteed small business loans.
Issuers of covered bonds are on the hook against losses. Payment to investors is via swap agreements and are meant to cover the scheduled payments should the issuer become insolvent or there is a discrepancy in timing, where the interest being paid on the loans does not align with payments due to investors.
A third party trustee represents covered bondholders. Adding these layers of additional recourse, as it compares to securitization, makes it pricier by comparison.
"They have worked well in Europe since the 1700's, and they would be another form of getting longer term liquidity into the credit market, reducing refinancing risk, and generating less expensive and more available credit for borrowers of all kinds," Maloney said during a committee hearing Wednesday. "This will not solve all of our problems but could be another tool we could work with to help our economy and help our financing of credit markets and housing."
The housing and mortgage industry supported the bill, including the National Association of Realtors, the Mortgage Bankers Association and the Securities Industry and Financial Markets Association.
The committee passed an amendment introduced by Rep. John Campbell (R-Calif.). According to the amendment, regulators will set a maximum amount of outstanding covered bonds as a percentage of an issuer's total assets. The issuer's regulator will then review that cap for possible adjustments every quarter.
"The number 4% has been thrown around," Campbell said.
The committee denied two amendments introduced by Rep. Barney Frank (D-Mass.) that would grant the Federal Deposit Insurance Corp. powers to establish a covered bond oversight program and veto power for any program submitted by an eligible issuer. Frank said the FDIC raised concerns the covered bond program would put the still recovering deposit insurance fund at risk.
"The FDIC has concerns not with the concept but with the extent to which the FDIC will be protected," Frank said.
Garrett said such oversight would subject investors to prepayment risks he said do not belong in the definition of a working covered bond market. Lawmakers continued work to determine to what extent the FDIC would play in the new system.
"Neither of us want to see the FDIC as a government backstop," Garrett said.
"If the government is going to provide a guarantee let's make it clear and explicit not some backdoor method," Campbell added.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: covered bonds, Federal Deposit Insurance Corp., Garrett, House Committee, House Financial Services Committee, housing, Maloney, mortgage, Washington
Posted in Secondary Market/Investors, Slider, Top Stories | 6 Comments »
