Archive for July, 2011
Mortgage rates slipped across all product types following weaker job gains and an increase in the unemployment rate, according to the Freddie Mac market survey.
The 30-year fixed-rate mortgage averaged 4.51% with an average 0.7 point for the week ending July 14, down 9 basis points from the week before. One year ago, the rate was 4.57%.
The 15-year FRM averaged 3.65% with an average 0.6 point, down 10 bps from the previous week. One year ago, the rate reached above 4%.
The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.29% with an average 0.6 point, down slightly from 3.3% last week. One year ago it was at 3.85%. The 1-year Treasury-indexed ARM averaged 2.95% with an average 0.5 point, a decrease of 6 bps from last week.
Last week, the Labor Department showed only 18,000 jobs were created in June, and the unemployment rate climbed to 9.2%.
"Long-term bond yields and mortgage rates fell this week following a weak employment report," said Freddie Mac Chief Economist Frank Nothaft. "In addition, employee wages stagnated. These factors may lead to less consumer spending, which in turn, reduces the threat of inflation in the near term."
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Tags: 30-year FRM, economy, freddie mac, jobs, mortgage, rates, unemployment
Posted in Origination/Lending, Top Stories | 1 Comment »
Twenty-five percent of all U.S. banks do not meet the minimum risk-based 8% Tier 1 capital requirement, according to a two-year stress test completed by financial risk management firm Invictus Group.
The result is a situation where the firm says one-fifth of U.S. banks would be undercapitalized on a post-stress test basis in times of emergency. The states of Arizona, Florida and Maryland have the most risk with more than 50% of banks at risk, Invictus said. When looking at lending assets at banks, one third of all assets are within banks that are considered undercapitalized.
The tests shows 1,983 out of 7,695 banks would be challenged capital-wise in times of stress.
Arizona banks performed the worst with 53% of the state's banks undercapitalized, while Illinois has the largest number of assets — about $100 billion — residing on the balance sheets of undercapitalized banks.
Invictus has been working with regulators on the study and plans to provide the data to regulators, bank boards and executives.
Write to Kerri Panchuk.
Tags: bank stress tests, banks, capital requirement, Invictus Group, tier-one capital requirement
Posted in Origination/Lending, Top Stories | 2 Comments »
Initial jobless claims decreased again last week, but remained higher than 400,000 for the 14th straight week.
The Labor Department said the seasonally adjusted figure of actual initial claims for the week ended July 9 fell by 22,000 to 405,000 from an upwardly revised 427,000 the previous week.
Analysts surveyed by Econoday expected 405,000 new jobless claims last week with a range of estimates between 395,000 and 415,000.A MarketWatch survey produced an estimate of 420,000 claims for last week.
Most economists believe weekly jobless claims lower than 400,000 indicate the economy is expanding and jobs growth is strengthening.
The four-week moving average, which is considered a less volatile indicator than weekly claims, declined by 3,750 to 423,250 from an upwardly revised 427,000 the prior week.
The seasonally adjusted insured unemployment rate for the week ended July 2 stayed 3% the prior week, according to the Labor Department.
The total number of people receiving some sort of federal unemployment benefits for the week ended June 25 rose to 7.48 million from 7.46 million the prior week.
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Tags: jobless claims, labor department, unemployment
Posted in Secondary Market/Investors, Top Stories | No Comments »
JPMorgan Chase & Co. (JPM: 37.265 -0.60%) posted a second-quarter profit of $5.4 billion, or $1.27 a share, as the banking giant continues to record charge-offs from its mortgage portfolio.
That profit is up from income of $4.8 billion, or $1.09 per share, from last year. Revenue rose 7% from a year earlier to $27.4 billion led by gains in investment banking.
"With respect to our mortgage portfolio, delinquency and net charge-off trends improved modestly compared with the prior quarter, however, net charge-offs remained high, and we expect credit losses to remain elevated," said Chairman and CEO Jamie Dimon.
For the three months ended June 30, the company wrote down $1 billion in pretax charges to cover the estimated costs from foreclosure-related matters and another $1.3 billion to cover litigation reserves for mostly mortgage-related concerns.
Dimon said in a statement the bank has been working hard to fix problems in its mortgage portfolio, but added "it will take some time to resolve these issues and it is possible we will occur additional costs along the way."
JPMorgan expects quarterly charge-offs of about $1.2 billion from its home lending operations and repurchase losses of $1.2 billion on an annualized rate for the rest of 2011.
"This is not a bad quarter by any means, but it does beg the question going forward with respect to expenses," said Christopher Whalen of Institutional Risk Analytics. "The efficiency ratio of 63% is up five points from (a year earlier) and is likely to go higher during the balance of 2011. If there is no real growth on the loan line, then JPM must make the number on investment banking and principal transactions."
Institutional Risk Analytics downgraded its outlook on JPMorgan to negative, citing concerns about exposures to residential mortgage-backed securities and home equity lines of credit.
Write to Kerri Panchuk.
Tags: bank earning, delinquencies, Institutional Risk Analytics, JPMorgan Chase & Co., mortgages
Posted in Origination/Lending, Top Stories | No Comments »
Processing problems at the major mortgage servicers pushed up to 1 million foreclosure actions that should have taken place in 2011 into 2012 and beyond, according to RealtyTrac.
Lenders issued a foreclosure filing on more than 1.1 million properties in the first half 2011, down 29% from the same period one year ago. More than 608,000 properties received a filing in the second quarter, down 32% from the same period last year. And foreclosures in June were down 29% from one year ago, the ninth straight month of yearly declines.
"It would be nice to report that foreclosure activity is dropping as a result of improvements in the economy or the housing market," said RealtyTrac CEO James Saccacio. "Unfortunately, with unemployment rates inching back up, consumer confidence weak and home sales and prices continuing to languish, this doesn’t appear to be the case."
Major servicers froze the foreclosure process late last year and are still in the middle of correcting mishandled documents. The servicers became the focal point of investigations from the 50 state attorneys general and have been forced into compliance with consent orders from regulators.
Month-to-month, the process seems to be showing signs of life. In May, foreclosure activity spiked across certain states. And in June, foreclosure filings across the country increased 4% from the month before.
But viewed on a quarterly or larger scale, the process continues to drag. The properties that completed the foreclosure process in the second quarter spent 318 days in the system on average, up from a revised 298 days in the first quarter and 277 days in the second quarter of 2010.
REO properties that sold in the second quarter spent 178 days on the market from the time they were foreclosed, an uptick from 176 days in the first quarter and 164 days one year ago. In New York, REO properties took an average of 309 days to sell.
"Processing and procedural delays are pushing foreclosures further and further out," Saccaccio said. "This casts an ominous shadow over the housing market, where recovery is unlikely to happen until the current and forthcoming inventory of distressed properties can be whittled down to a manageable number."
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Tags: AGs, delays, foreclosure, mortgage, RealtyTrac, regulators, REO, servicers
Posted in Servicing/Default, Slider, Top Stories | 16 Comments »
Bank of America (BAC: 7.21 -1.23%) and JPMorgan Chase (JPM: 37.265 -0.60%) made a change to how they resell their inventory of foreclosed homes late last year, which could bring more business to minority-owned real estate firms.
In late 2010, both banks shrank the maximum radius a real estate agent could operate from a previously foreclosed property, or REO. Before bank balance sheets became flooded with delinquent properties, it was not uncommon for banks to allow an in-network broker more than 20 miles away to sell a property.
Now in order for an REO broker to receive an assignment to resell a BofA REO, the broker must now be based within 15 miles of the property. For Chase, the radius dropped to five miles.
"We believe this helps ensure that agents are able to provide good service and better reflects the neighborhoods where the properties are located," a BofA spokesperson said.
The median foreclosure rate from January 2007 to June 2008 was roughly 8.4% in low-income minority neighborhoods, compared to 6.3% in low-income white neighborhoods, according to the Department of Housing and Urban Development.
Yet minority-owned brokerages have long been shut out of the REO business even as these abandoned properties sat unattended in their own backyard.
Gary Acosta, the chairman for New Vista Asset Management and co-founder of the National Association of Hispanic Real Estate Professionals said in his experience, working more with real estate agents from these neighborhoods has resulted in more owner occupants buying these properties and at a faster rate.
"I think there is a real desire to list these properties with brokers who know these neighborhoods and speak the language," Acosta told HousingWire. "We can sell more to owner occupants and keep more of the wealth in these communities."
Rep. Maxine Waters (D-Calif.) introduced an amendment to a bill in April that would require the Federal Housing Finance Agency Inspector General to report on how Fannie Mae and Freddie Mac select REO vendors and recommend how to improve the process.
Waters specifically wants the new reporting to ensure that qualified REO listing agents and vendors have the opportunity to compete for contracts and assignments for properties in their area. The amendment was withdrawn in April to revise certain language.
Neither bank could give immediate numbers on how many new brokers their asset managers have employed since the rule change.
Acosta said these banks could still do more, including putting how many REO properties are sold to owner occupants on asset manager and broker scorecards.
"I think services should take it one step further. I think they need to follow through by actually measuring the outcomes that are desired are actually being fulfilled," Acosta said.
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Tags: Bank of America, foreclosure, HUD, JPMorgan Chase, minority, NAHREP, New Vista Asset Management, property, REO
Posted in Servicing/Default, Slider, Top Stories | 3 Comments »
Moody's Investors Service placed the triple-A bond rating of the U.S. government on review for possible downgrade.
The credit ratings agency also placed on review for possible downgrade the triple-A ratings of financial institutions directly linked to the U.S. government, namely the government-sponsored enterprises Fannie Mae and Freddie Mac. The bonds the GSEs issue, however, will not be impacted by any downgrade as Moody's does not rate those securities.
"However, we have rated about $12 billion of U.S. Resecuritizations backed by residential mortgage-backed securities (RMBS) transactions that have exposure to these entities," said Moody's.
"More than half of the exposure ($6.4 billion) is directly linked because these securities have an implicit guarantee from the GSEs. As a result, the ratings of these securities will move in lock-step with the U.S. government’s rating and have been placed on review for possible downgrade," it said.
Approximately $5.5 billion of triple-A rated RMBS securities are also linked to the U.S. government rating because they benefit from insurance provided by the HUD or the VA.
On June 2, Moody's announced that a rating review would be likely in mid July barring progress in negotiations to raise the debt limit, Moody's said in a statement. Until then, "there is a small but rising risk of a short-lived default."
The downgrade, likely to double-A, would also apply to the Federal Home Loan Banks, and the Federal Farm Credit Banks.
"To retain a stable outlook, such an agreement (on the debt ceiling) should include a deficit trajectory that leads to stabilization and then decline in the ratios of federal government debt to GDP and debt to revenue beginning within the next few years," the report said.
Structured finance securities that hold government-linked debt as their primary collateral have also been placed on review for downgrade, Moody's report states.
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Tags: debt ceiling, Fannie Mae, freddie mac, Moody's
Posted in Secondary Market/Investors, Top Stories | 2 Comments »
It is looking more likely new mortgage servicing requirements from federal regulators will be merged with the separate settlement under development by the 50 state attorneys general.
Servicers signed consent orders with the Office of the Comptroller of the Currency, the Federal Reserve and the Office of Thrift Supervision in April, agreeing to submit action plans, detailing how they will boost staff and comply with new requirements. These include establishing a single-point of contact and prohibiting foreclosures while a loan is being evaluated for a modification among others.
Many mortgage servicers suspended the foreclosure process to correct mishandled documentation in the fall of 2010, prompting an investigation by these regulators, the Justice Department and the 50 state AGs.
In June, OCC gave the banks a 30-day extension to submit their plans at the request of the DOJ.
"The national bank mortgage servicers have now submitted action plans, pursuant to the extended deadlines, which will undergo a period of review by the OCC," according to a spokesman at the agency.
"The OCC may require changes to the plans, and negotiations involving DOJ and other federal and state authorities are highly relevant to their content," the spokesman added. "It continues to be our goal to synchronize details of the plans ultimately approved by the OCC with the product of those negotiations to produce a consistent set of servicing requirements."
A spokesman for Iowa AG Tom Miller, the lead investigator from the states, said in the end, their office hopes to coordinate their settlement with the OCC action plans.
The OCC will not release the action plans. The agency's chief counsel Julie Williams said during a hearing before Congress last week that regulators will release results of a "look back" review of how widespread the foreclosure problems became. Individual bank names will not be released, however.
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Tags: AGs, Fed, foreclosure, mortgage, OCC, OTS, servicers
Posted in Servicing/Default, Top Stories | 4 Comments »
The White House budget office advised lawmakers not to push forward with a bill that would reduce funding levels for the Consumer Financial Protection Bureau and terminate the Home Affordable Modification Program.
Obama's budget team released an advisory, saying the White House is opposed to several sections of House Bill 2434, which attempts to establish 2012 funding levels for government financial agencies.
"If the President is presented with a bill that undermines either the Affordable Care Act or the Dodd-Frank Wall Street Reform and Consumer Protection Act through funding limits or other restrictions, or reverses current policies on Cuba, his senior advisers would recommend a veto," the Office of Management and Budget warned.
The President's budget team says the bill, in its current form, would kill HAMP, ending the program's ability to help struggling homeowners into loan modifications, while placing overly strict limits on the Consumer Financial Protection Bureau's budget.
HR 2434 says "during fiscal year 2012, the board of governors of the Federal Reserve may not transfer more than $200 million to the Bureau of Consumer Financial Protection." In the past, the Fed has said the bureau needs about $500 million in funding.
The President's budget office issued a hard line of attack on H.R. 2434 saying the administration "opposes the alteration of the CFPB's mandatory funding structure as authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act, which would compromise the Bureau's independence."
The bureau goes live July 21, becoming the top cop of the mortgage finance and consumer financial products space.
The President's office says the proposed bill would limit the bureau's expenditures undercutting "the agencies statutory responsibility to oversee consumer financial products."
Write to Kerri Panchuk.
Tags: Consumer Financial Protection Bureau, Federal Reserve, HAMP, Home Affordable Modification Program, obama, President Obama, White House
Posted in Origination/Lending, Top Stories | 1 Comment »
Professor Elizabeth Warren, known as the driving force behind the Consumer Financial Protection Bureau, has another date with Congress Thursday.
Warren's meeting with the House Committee on Oversight and Government Reform left tongues wagging since her last date with Congress turned into an ill-fated affair, with one lawmaker accusing the Harvard Professor of lying to Congress about her role in the development of a massive settlement with mortgage servicers.
The good news is today's meeting was called by Rep. Darrell Issa (R-Calif.), who seems to be approaching today's Q&A session with a lighter touch and a more inquisitive tone in which he hopes to learn more about the CFPB itself.
Issa told Fox Business News he wants to know more about the agency's inner-workings and what Warren's role will be if she ends up serving as director. While other names of potential directors have been thrown around the House, including the name of CFPB employee Raj Date, the agency remains director-less a week before its launch. Perhaps, a good question would be: Who is going to run the agency, given its launch date is July 21?
While Warren was accused by lawmakers of lying about her involvement in the mortgage servicing settlement during her last testimony in front of Congress, Issa told Fox Business that line of questioning is unlikely to surface in today's CFPB discussions.
Issa said he's more concerned about the entity itself since it lacks Congressional oversight and "has the ability to bully banks."
Warren released her talking points yesterday, which suggests she is ready and willing to jump back into the hot seat.
Warren's prepared testimony is relatively staid, with the professor offering Congress an outline of the steps the CFPB has taken, thus far, to create prototype mortgage disclosure forms and prepare for the bureau's July 21 launch.
The real question is what will happen when the prepared testimony ends, and the 'question and answer' session with lawmakers begins? We're still waiting for that moment to begin.
Stay tuned for Elizabeth Warren goes to Congress—part Deux. Actually as Prof. Warren points out in her own talking points this will be her third appearance before a Congressional panel.
Write to Kerri Panchuk.
Tags: CFPB, Consumer Financial Protection Bureau, Elizabeth Warren, House Committee on Oversight and Government Reform
Posted in Commentary | No Comments »