Archive for August, 2011
There is a suggestion in mortgage finance that the Treasury Department will roll out a program for every borrower to refinance into a 4% mortgage.
In a research report, Amherst Securities explains that the chance of such a plan coming to fruition is small.
In fact, should such a program go through, the risk to Fannie Mae and Freddie Mac would actually increase, not decrease because of the chance the new loans will drag on the government-sponsored enterprises.
In such a case, "Freddie and Fannie would lose their rep and warrant rights on the old loans and would probably need to assume all the rep and warrant risk on these new mortgages," Amherst said in an email.
A potential solution to this problem would be for Fannie and Freddie to waive all reps and warrants on the new loan done under the government's Home Affordable Refinancing Program, or HARP, in exchange for a higher guarantee fee.
Further, refinancing would reduce the GSEs assets, the opposite of conservatorship, which is designed to conserve assets, Amherst notes.
A new program sanctioned by the administration on refinancings, should it happen, will likely come via HARP.
Even if there is no universal program, Amherst predicts changes will come to HARP, considering how far short the refinancing initiative fell in its original goals. Initially the Obama administration expected to make the program available to 4 million to 5 million homeowners. In fact, the number has actually been 810,084 through May.
Despite the doubts, Amherst believes such a program is possible.
"According to the originators we have talked to, an appraisal is necessary in a substantial number of cases, and adds to the “hassle factor” of the refi," they said. "Greater (or complete) reliance on the automated valuation models of Fannie and Freddie would eliminate this issue."
After appraisals, a new title search will add costs to the refi, but this expense can also likely be managed, for a price.
"Perhaps instead of a full title search, a more limited refi title search could be amended to the original title search," the report states. "Perhaps there is a better way to conduct title search, (where) one company handles all HARP refinance title searches at a reduced cost."
Write to Jacob Gaffney.
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Tags: amherst securities, appraisal, AVM, Fannie Mae, freddie mac, GSEs, HARP, mortgage, mortgages, originator, refinance, rep and warrant, reps and warranties, Treasury
Posted in Secondary Market/Investors, Top Stories | No Comments »
BNY Mellon (BK: 20.09 +0.45%) CEO Robert Kelly stepped down Wednesday, citing differences with the board of directors over how to manage the company.
BNY Mellon named Gerald Hassell, a board member and president of the investment giant, as Kelly's replacement.
"Gerald is ideally positioned to guide BNY Mellon through the next phase of its growth and to bring it to its full potential," said Wesley von Schack, lead director of BNY Mellon.
Kelly served as CEO of Mellon Financial Corp. before its merger with the Bank of New York Co. in 2007. He previously served as chief financial officer of Wachovia Bank.
"It has been an honor to serve BNY Mellon, its management team and its employees during the past four years," Kelly said. "We have navigated tremendously difficult markets and built one of the world’s premier financial institutions. I am confident that under Gerald’s leadership of the firm’s strong management team, BNY Mellon will continue to flourish going forward."
Hassell joined the company more than 30 years ago. He was named president and elected to the board of directors in 1998.
BNY Mellon pushed earnings higher in the second quarter after raising holding fees on its clients. However, legal and regulatory costs continued to mount, specifically around the $8.5 billion settlement with Bank of America (BAC: 7.215 -1.16%). BNY Mellon served as trustee for the securities, and according to several filings from investors and the New York attorney general, it allegedly entered into the agreement without proper consultation.
A bank spokesman said the differences between Kelly and the board did not stem from the BofA settlement.
About Kelly, von Schack said he played a key role in the merger and helped navigate the firm through the financial crisis. He added Hassell led nearly every division at the bank and holds long-standing relationships with investment management clients.
"I am pleased to accept these new roles and am excited about the strong growth prospects for our company," Hassell said.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: Bank of America, Bank of New York, BNY Mellon, Hassell, Kelly, MBS, Mellon Financial, mortgage, NY AG, securities
Posted in Secondary Market/Investors, Top Stories | No Comments »
The Securities and Exchange Commission could close the exemption status real estate investment trusts have from the Investment Company Act when pooling and selling mortgage-backed securities.
Passed in 1940, the Investment Company Act regulates how some investment firms are organized in order to minimize conflicts of interest in complex operations. But an exemption was given to companies engaged in the mortgage banking business.
Since this exemption was put in place, the SEC said "the mortgage markets have evolved and expanded, and the provision has been used by a wide variety of types of pooled vehicles and other companies unforeseen at the time of enactment."
These include certain MBS issuers and REITs.
REITs already enjoy certain tax breaks and other advantages. Redwood Trust (RWT: 11.55 -0.86%) is the only issuer of an private-label MBS since the financial crisis, and it has two more planned for 2011. Two Harbors, another REIT, is planning one as well.
The SEC said Wednesday it was concerned some companies were making judgments about their status under the Investment Company Act without enough guidance from the regulator. The SEC will solicit comments, data and ideas for how to test certain REITs and issuers for whether or not they should be forced to comply with the law.
The SEC also made another proposal related to REITs and ratings agencies.
In 1992, the SEC issued a rule that would provide another avenue of exclusion from the Investment Company Act. One of the conditions was that the company, again often times a REIT, had to be rated by a nationally recognized statistical ratings organization – or an NRSRO.
"In the aftermath of the recent financial crisis, the commission has engaged in various regulatory initiatives to address concerns raised by credit rating procedures and methodologies," the SEC said Wednesday.
It proposed another rule to eliminate the ratings agency condition. Instead, a company could undergo an independent review to protect investors from self-dealing and overreaching by insiders.
Ratings agencies recently came under investigation for their role in the collapse of the entire MBS industry. Many of these issuances were given AAA status despite being backed by subprime and other faulty loans.
"We want to assure that our regulatory approach is updated to reflect the current market environment while still meeting our investor protection goals," said SEC Chairman Mary Schapiro.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: Department of Justice, Investment Company Act, MBS, mortgage, mortgage-backed securities, NRSRO, rating agencies, redwood trust, REIT, REITS, SEC, subprime, Two Harbors
Posted in Secondary Market/Investors, Top Stories | 1 Comment »
MountainView Servicing Group will help sell a $485 million servicing portfolio of Fannie Mae mortgages.
Nearly all of the loans in the portfolio are fixed rate and primarily located in Illinois. The average delinquency rate on the portfolio is 2.21%. Interest rates average 4.67%, and the average FICO score is 761. The portfolio also carries an average 30-basis-point servicing fee.
A spokesman for MountainView said the portfolio is being sold by a private mortgage bank but did not specify which one. Bids will be taken until Sept. 7.
So far in 2011, MountainView has helped sell more than $800 million in Fannie Mae servicing portfolios. In April, the firm began marketing a $262 million portfolio. It also sold a $110 million portfolio in January.
It is also marketing a $45 million portfolio of Ginnie Mae servicing rights. All of these loans are fixed rate with more than 78% of the mortgages located in California. The seller of these loans will be taking bids through Sept. 7 as well.
MountainView is a financial services firm specializing in asset management and valuation, among other services. It is also a subsidiary of MountainView Capital Holdings, a financial advisory firm to banks, thrifts and credit unions.
Write to Jon Prior.
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Tags: delinquency, Fannie Mae, FICO, foreclosure, Ginnie Mae, interest rate, mortgages, MountainView Servicing Group
Posted in Servicing/Default, Slider, Top Stories | 1 Comment »
Foreclosure filings on commercial properties in Dallas-Fort Worth fell 2% to 2,494 postings in the first nine months of 2011, down from last year's high of 2,547, a data analytics firm said Wednesday.
The data released includes a nine-month period because the filing deadline has already passed for the upcoming foreclosure auctions to be held in September.
Foreclosure Listing Service, which tracks foreclosures in Dallas-Fort Worth, said parties looking to acquire distressed commercial properties are finding great deals with third-party buyers on average paying 75 cents on the dollar for foreclosed properties.
George Roddy, president of Foreclosure Listing Service, said 25% to 40% of all commercial foreclosures filed in DFW each month end up on the auction block.
Of those auctioned off, the majority — approximately 90% — are repossessed by lenders, while the remaining 10% go to third-party buyers.
“It’s funny, but many people don’t even realize you can purchase commercial properties at the foreclosure auctions," Roddy said in a statement. "But, I see some great deals at the auction. At the last auction, one buyer paid just 52 cents on the dollar for a small apartment complex in Dallas. The 11,000-square-foot complex was built in 1986 and has an assessed value of around $670,000, but the buyer only paid $345,000.”
While foreclosure posting activity continued to rise within the industrial, office and retail building sectors, foreclosure activity declined when looking at apartments, land and miscellaneous buildings, Roddy said.
Write to: Kerri Panchuk.
Tags: commercial foreclosures, commercial real estate, Dallas-Fort Worth, Foreclosure Listing Service, foreclosures, George Roddy
Posted in Servicing/Default, Top Stories | No Comments »
Court filings are piling up against Bank of America and The Bank of New York Mellon as more plaintiffs – including a group of homeowners – file motions in court to block the banks' $8.5 billion residential mortgage-backed securities settlement.
A group of four homeowners filed a complaint in a New York court, saying their mortgages are part of the 530 residential mortgage-securitization trusts that Bank of New York Mellon oversees.
As trustee, The Bank of New York Mellon entered into the controversial $8.5 billion settlement agreement with BofA on behalf of the trust. The homeowners allege in their complaint that the two banks – in their roles as trustee and seller of the underlying toxic loans– failed to properly service the mortgages.
The homeowners accuse The Bank Of New York Mellon, Countrywide, and its owner Bank of America, of contract breach, negligence, gross negligence and intentional tort.
Investment bank Goldman Sachs (GS: 109.87 +1.21%) also is challenging the $8.5 billion settlement between BofA and The Bank of New York Mellon.
The investment bank filed a notice of objection in court, saying "it does not have enough information to determine that all investors who are similarly situated will be treated equally under the terms of the settlement identified in the order."
Goldman said it would not object to a settlement that treats all investors equally.
Write to: Kerri Panchuk.
Tags: Bank of America, Goldman Sachs, mortgages, The Bank of New York Mellon, toxic loans
Posted in Secondary Market/Investors, Top Stories | 1 Comment »
Appraisers are somewhat confused about the looming Sept. 1 deadline for ensuring appraisal forms prepared for Fannie Mae and Freddie Mac are compliant with certain GSE standards.
Effective Sept. 1, the GSEs want the appraisal industry prepared to use Uniform Appraisal Dataset-compliant forms when submitting appraisal information.
On its website, Fannie Mae said parties that are not prepared for the change on Thursday should contact their appraisal managers to get help downloading UAD-compliant software from vendors.
Matt McHale, chief marketing officer at appraisal software firm Global DMS, said appraisers who are not ready for the deadline can still obtain software updates from Global DMS's website and from other appraisal vendors.
As of Wednesday, McHale said many appraisers are still confused about the Sept. 1 deadline because some have the erroneous belief that appraisers on Sept. 1 will have to deliver compliant forms in XML file format. McHale said XML files are not necessary at this time, although they will be part of the final program, which goes in effect in 2012. The XML file format deadline is Dec. 1.
Instead, McHale said the Sept. 1 deadline is there to ensure parties are prepared to deliver a UAD-compliant appraisal form in PDF format.
Earlier this week, appraisers became confused when the Federal Housing Administration pushed back its own deadline for implementing UAD guidelines. The agency postponed its compliance deadline to Jan. 1.
McHale said professionals in the industry were confused by FHA's announcement and mistakenly believed it affected the GSEs' Sept. 1 deadline.
"That caused a lot of confusion," he said. "Tomorrow is still the GSE's date (for ensuring UAD compliance), they are not moving it."
Valuation vendor DartAppraisal.com released a press release reassuring its clients that the firm has the technology and data structure "to guarantee that appraisal reports adhere to UAD regulations."
Lenders must deliver full UAD-compliant electronic appraisal report data beginning March 19, 2012, if an appraisal is required and loan delivery data must be provided in industry-standard ULDD format.
Write to: Kerri Panchuk.
Tags: appraisal, Fannie Mae, Federal Housing Administration, FHA, freddie mac, GSE, UAD, Uniform Appraisal Dataset
Posted in Origination/Lending, Top Stories | No Comments »
Mortgage modifications completed through private programs increased 11% in July, according to the Hope Now alliance of servicers, counselors and investors, but these workouts have proven less likely to last.
Roughly 56,000 mortgages made it through these private programs and into permanent status. Since 2007, servicers completed 4 million private modifications and roughly 763,000 permanent workouts through the government's Home Affordable Modification Program.
So far in 2011, private modifications are more than double those done through HAMP. Through July, roughly 422,000 workouts came through proprietary initiatives, compared to the 183,000 done through the Treasury's program as of June, according to Hope Now. The Treasury Department is expected to release its July numbers in the coming days, but it has averaged roughly between 30,000 and 35,000 permanent mods per month. If the trend holds in July, private programs would still outnumber HAMP more than 2-to-1.
"We are happy to see an increase in permanent proprietary loan modifications for the month of July," said Faith Schwartz, executive director for Hope Now.
She said more encouraging is an 11% drop in foreclosure starts in July and relatively flat 60-day delinquencies of 2.81 million, up just 2%. Some states are still feeling the slowdown from the ongoing robo-signing scandal and the subsequent pause on the foreclosure process. But Schwartz said the decrease is directly related to educating homeowners about their options when they get into trouble.
The Treasury has long said HAMP became the framework around which private lenders built their own programs. But the performance of government workouts differ from private ones.
According to a report released by the Office of the Comptroller of the Currency released earlier in the year, 10.6% of HAMP modifications completed in the first quarter of 2010 redefaulted within three months. That's comparable to the 11.6% for private mods completed in the same time.
But six months after the modification, 12.6% of HAMP mods had redefaulted, compared to 24.1% of the private workouts. After nine months, HAMP showed a 17.4% redefault rate, compared to a 31.9% rate for proprietary modifications.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: counselors, Faith Schwarz, foreclosure, HAMP, Home Affordable Modification Program, HOPE NOW, investors, loan modifications, mortgage, mortgage modifications, OCC, private, robo-signing, servicers, Treasury
Posted in Servicing/Default, Top Stories | 1 Comment »
Independent mortgage banks reported higher profits on mortgages originated in the second quarter, an industry trade group said Tuesday.
The Mortgage Bankers Association said in its second-quarter 2011 Mortgage Bankers Performance Report that profits on loans averaged $575 per mortgage in the second quarter, up from $346 per loan in the first quarter.
The average production volume per company also rose from $164 million in 1Q to $174 million in 2Q. Refinancings made up 36% of total loan originations in the period, compared to 50% in the first quarter. The MBA said its estimate for overall quarterly industry origination volume hit $290 billion, down from $302 billion in the first quarter.
The average loan balance held relatively steady at $197,039, up slightly from $196,456 in 1Q.
"Contrary to overall MBA industry data in which estimated production volume declined, the average firm in our study of independents and subsidiaries experienced volume growth," said Marina Walsh, MBA associate vice president of industry analysis. "The firms in our study were able to more quickly adjust to a purchase-focused mortgage market environment after a significantly refi-heavy fourth quarter of 2010."
The share of originations tied to the government grew to 41%, up from 37% in 1Q. Meanwhile, the average FICO scores fell to 729 in 2Q, compared to 733 in the first quarter and 737 in the fourth quarter of 2010.
Independent mortgage originators during the period saw their personnel expenses dip slightly to $3,561 per loan, compared to $3,640 in 1Q, while total production operating expenses fell to $5,644 per loan compared to $5,837 in 1Q.
About 70% of the originators posted pre-tax net financial profits in 2Q, which is up from 63% in 1Q.
Write to: Kerri Panchuk.
Tags: FICO, MBA, mortgage, Mortgage Bankers Association, originations, Refinancing, refinancings
Posted in Origination/Lending, Top Stories | No Comments »
Bank of America (BAC: 7.215 -1.16%) said Wednesday it will officially exit the correspondent mortgage lending business. The nation's largest bank said the preferred option would be an out-and-out sale of the platform, and outlined options should this fail to happen.
Either way, the bank wants out.
Rumors brewed in previous weeks of the move, and sources hinted to HousingWire of a deal earlier this week about the exit. On Wednesday, BofA settled the speculation and issued a statement confirming the reports.
"As part of our ongoing activities to align the Bank of America Home Loans business to the bank’s customer-driven strategy, we have made the decision to exit the correspondent mortgage lending division. We intend to sell the correspondent mortgage lending division or, if a suitable deal is not identified, we will consider other options, including winding down the correspondent lending business in an orderly manner," the bank said.
BofA added it would continue operating the correspondent business as usual until a deal or a decision is reached.
Correspondent lenders provide a mortgage to a borrower and then sell the loan to another institution, typically through a warehouse line of credit. They underwrite and approve their own loans, which gives them as much freedom as risk. The investor can remove the warehouse line and even force a correspondent lender to repurchase bad loans.
In the past year, BofA has been trimming down its mortgage operations business to a core. It exited the wholesale lending and reverse mortgage businesses and sold its Balboa insurance segment.
The bank is now in a sell-off mode to raise capital. It received a $5 billion injection from a massive stock sell to Warren Buffett and unloaded half of its holdings in China Construction Bank Corp. Now, it is looking to raise even more cash from its correspondent lending platform sell.
"We are strengthening our focus on serving the needs of the bank’s 58 million households and supporting growth across the franchise," BofA said.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: Bank of America, capital, correspondent lending, mortgage, sale, Warren Buffett
Posted in Origination/Lending, Top Stories | 5 Comments »
