Archive for August, 2011
Standard & Poor's President Deven Sharma is relinquishing his post less than a month after the ratings agency issued its monumental downgrade of the United States.
Sharma will stay on as an adviser working on the company's strategic portfolio review until the end of the year, S&P parent company The McGraw-Hill Cos. (MHP: 46.87 +0.04%) said in a press release Tuesday.
Douglas Peterson will replace Sharma, effective Sept. 12. Peterson is chief operating officer at Citigroup's (C: 30.44 +0.20%) Citibank unit.
Sharma's departure isn't related to the historic and unprecedented downgrade of the U.S. credit rating nor the ongoing Justice Department investigation into the firm, according to the Financial Times, which broke the news earlier Tuesday.
Sharma joined Standard & Poor's in 2006 as executive vice president of investment services and global sales. He was named president in 2007. Sharma first joined McGraw-Hill in 2002.
McGraw-Hill Chairman, President and CEO Harold McGraw III said "S&P is a stronger company," after Sharma's four years at the helm.
"As was announced at the end of last year, Standard & Poor's was split into two separate organizations — S&P, our credit ratings service, and McGraw-Hill Financial — to enable both organizations to serve investors and customers more effectively," McGraw said. "Deven assisted us with the creation of these two high-growth segments and was then ready for new challenges. Accordingly, we began a process to identify a new leader for S&P."
Write to Jason Philyaw.
Follow him on Twitter: @jrphilyaw
Tags: Citigroup, Financial Times, Justice Department, Standard & Poor's, The McGraw-Hill Cos., U.S. downgrade
Posted in Secondary Market/Investors, Top Stories | No Comments »
For Southwest Florida buyers, cash is king — and shows no signs of abandoning its throne.
At least three out of every five homes and condos in Southwest Florida are changing hands with no financing, something that would have seemed almost unthinkable during the boom years of easy credit.
Multiple Listing Service data show that particular ratio of cash buyers for the 12 months ended July 31 compares with just one out of six in 2006-07.
Posted in Around the Web | No Comments »
Former Ginnie Mae presidents Robert Couch and Joseph Murin said the future structure of Fannie Mae and Freddie Mac should be based on the agency they used to lead, according to a letter they sent to Republican lawmakers last week.
In the letter sent to Sen. Richard Shelby (R-Ala.), and Reps. Spencer Bachus (R-Ala.) and Scott Garrett (R-N.J.), the former Ginnie chiefs expressed concern over the health of the secondary mortgage market and its weight on the economic recovery.
"Any effort to replace Fannie Mae and Freddie Mac with a new framework must be designed to provide a steady flow of mortgage finance to consumers in all economic cycles while protecting taxpayers from undue risk," Couch and Murin wrote. "We believe the Ginnie Mae guarantee program provides an effective model to achieve these objectives."
Outside of fringe and sometimes duplicitous reforms, Congress has yet to take up meaningful legislation to revamp the future housing finance system. Even though the Obama administration submitted three options for winding down Fannie and Freddie in February, news reports surfaced last week that some within the administration may be opting to maintain a large government role.
The Treasury Department maintains its commitment to the original options.
Regardless, it grows increasingly unlikely that Congress will pass GSE reform before 2013, leaving plenty of time for proposed plans.
Couch and Murin said an ideal solution would be remove the federal government altogether but the current financial market could not fill the void and support long-held features of the housing finance system such as the 30-year, fixed-rate mortgage.
"Until financial markets settle down, federal credit backing is required," they write. "In the meantime, based upon our experience, we believe that it is possible to design a guarantee that sustains the long-term mortgage market while protecting taxpayers from undue risk."
All this they said can be borrowed from Ginnie Mae, which guarantees the timely payment on securities backed by Federal Housing Administration and Department of Veterans Affairs loans.
They suggested placing a guarantee only on securities backed by the safest loans. They said shareholders and credits in the private replacements of Fannie and Freddie should be wiped out before the guarantee is triggered.
The guarantee pricing would also be increased to protect against a possible 20% to 25% drop in home prices as opposed to what Fannie and Freddie charged, which covered a 10% decline.
In many areas, the housing downturn cut prices in half since 2007.
Couch and Murin suggested also including a "recoupment" provision requiring other firms to step in and repay taxpayers should catastrophe strike.
"Without properly protected private investors, we would not have a reliable market for long-term financing of mortgages," Couch and Murin write. "As the Ginnie Mae example continues to show, a limited federal guarantee would ensure a steady flow of mortgage finance and can be designed and priced to shield taxpayers from undue risk."
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: Congress, Department of Veterans' Affairs, Fannie Mae, Federal Housing Administration, finance, freddie mac, Ginnie Mae, GSE, housing, housing finance, housing reform, mortgage, president, Republicans, secondary market, secondary mortgage market
Posted in Secondary Market/Investors, Slider, Top Stories | 1 Comment »
Fannie Mae will not purchase or securitize any mortgage insured by a PMI Group (PMI: 0.00 N/A) subsidiary after Sept. 16, according to a notice sent Monday in response to the Arizona Department of Insurance action last week.
PMI's primary regulator, the Arizona insurance department, prohibited the company from writing any new business in any state Friday. However, pending commitments can be completed until Sept. 16.
The Fannie Mae action rejects any PMI-insured loan dated before May 19 and Sept. 16. Fannie said the eligibility window was intended to provide "a reasonable period for pipeline clearance." Any pool containing PMI-insured loans within this window must be issued on or before Dec. 1. Whole loans must have delivery dates on or before Dec. 30.
PMI is in trouble. It received a delisting warning from the New York Stock Exchange because its stock traded below $1 for 30 consecutive days. An analyst told HousingWire its previous market share will be "eaten up" by competitors because of the regulatory crackdowns.
However, a spokesman for the company said PMI is at work drafting options to repair its financial condition. PMI will alert investors as soon as regulators approve a plan.
In the second quarter, PMI reported a $134.8 million net loss, and even though that narrowed from one year ago, the company warned investors its policyholders' position was below the minimum level required by Arizona law and its risk-to-capital ratio exceeded the 25-to-1 threshold required by various other states. According to a financial filing earlier in the month, PMI said it exceeded this requirement in 16 states.
"The company has undergone significant changes since 2007," PMI said. "Weaker than expected job creation and U.S. home prices continue to negatively affect the company's financial condition and results of operations."
Write to Jon Prior.
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Tags: Arizona, Department of Insurance, Fannie Mae, foreclosure, insurance, mortgage, NYSE, PMI Insurance Group
Posted in Origination/Lending, Top Stories | 3 Comments »
Foreclosure postings in the Dallas-Fort Worth area fell in July-September period to their lowest level in 11 quarters, a new report says.
From July through Texas’ upcoming foreclosure auctions in September, 12,876 postings were filed on area homes, a 21% decline from the 16,229 postings recorded for the third quarter of last year, according to a report from Foreclosure Listing Service Inc.
Postings also declined on a year-to-date basis, according to FLS.
“For the first time in 11 years, year-to-date residential postings declined,” said George Roddy Sr., president of Foreclosure Listing Service. Through September, 42,380 postings have been filed threatening Dallas-area homes with foreclosure, a 12% decline from the 48,081 postings filed over the same period last year.
The report covers the four counties in the Dallas-Fort Worth metro area: Dallas, Tarrant, Collin and Denton. All four saw foreclosure postings drop from a year earlier to their lowest levels in two years or more.
Foreclosure postings increased for homes valued below $100,000, rising 7%, but dropped for all other price segments. Of the homes posted for foreclosure this year, 83% were priced under $200,000.
“The average Joe is still the one feeling the pains of this foreclosure crisis,” said Roddy.
So-called underwater postings, or those where homeowners owe more than their homes are worth, rose 34% to 11,807 so far this year from the same period a year earlier, to 11,807. They made up 28% of total residential foreclosure postings, up from 21% through September 2010 and 16% in the same period in 2009.
On the flip side, though, the surge in underwater postings provides a “tremendous opportunity” for investors, he said.
Write to Liz Enochs.
Tags: collin county, Dallas, denton county, foreclosure postings, foreclosures, Fort Worth, housing, tarrant county, Texas, troubled housing markets, underwater housing, underwater mortgages, upside down mortgages, upsidedown housing
Posted in Servicing/Default, Top Stories | 1 Comment »
Borrowers eager to take advantage of refinancing and origination incentives at Navy Federal Credit Union pushed the lender's mortgage application volume up 50% in the past ten days when comparing the period to the first part of the month.
The surge could drive the credit union's total mortgage originations for 2011 past $5 billion. Navy Fed currently has $46 billion in assets, and clients are current or former U.S. armed forces members.
Navy Fed rolled out a special incentive package in August, which allowed qualified borrowers to obtain a $2,500 credit on closing costs tied to purchase and refinance mortgages.
"The rate match offer guarantees members the lowest rate possible, if they find a lower rate for the same mortgage from another lender," Navy Fed said in a statement.
In addition to the closing cost credit, Navy Fed is promoting its credit union's rate lock special, which lets members obtain a one-time opportunity to obtain a lower mortgage rate even after it has been locked. The lender also offers 100% financing and special programs for first-time homebuyers.
"With mortgage rates again at historical lows, this is a market full of opportunity," said Jack Gaffney, executive vice president of lending at Navy Fed. "We are proud to offer our members extremely competitive rates. We've added these other specials to help our members take advantage of this unique market, knowing that this is one of the most important investments they will ever make."
Write to: Kerri Panchuk.
Tags: mortgage originations, Navy Federal Credit Union
Posted in Secondary Market/Investors, Servicing/Default, Top Stories | No Comments »
The lackluster housing market prompted Fitch Ratings to downgrade two ratings on homebuilder PulteGroup Inc. (PHM: 7.72 -1.03%) this week.
The firm also revised the Bloomfield Hills, Mich.-based company's outlook from stable to negative.
Fitch moved PulteGroup's issuer default and senior unsecured debt ratings from BB+ to BB on Monday, citing signs of a softening economy and subdued growth expectations in housing for the rest of 2011 and 2012. Any rating lower than BBB is considered noninvestment grade.
While home sales did pick up in the spring, Fitch noted the economic environment may only support a modest recovery in the next 18 months.
"Moreover, (Pulte's) underperformance relative to its peers in certain operational and financial categories penalizes the ratings and influences the outlook," Fitch analysts said.
Overall, the ratings agency said new and existing home sales, as well as housing starts, remained relatively weak in June and July.
"If the economy continues its currently lackluster advance and a relatively modest number of jobs are added, housing metrics should moderately decline this year, a more bearish forecast than earlier in the year," analysts said. "Fitch is projecting a modest improvement for housing off a very low bottom in 2012."
Still, analysts warned negative developments could further dampen the agency's forecast for a modest recovery.
In the first half, Pulte spent $640 million acquiring land and executing development activities. The company expects to spend $1.08 billion on land and development this year, up from $980 million in 2010.
PulteGroup recently reported a second-quarter loss of $55.4 million, or 15 cents a share, as it took significant organizational restructuring and debt repurchase charges for the quarter. That compares to income of $76 million, or 20 cents per share, for the year-ago second quarter.
PulteGroup's ratings downgrade puts it inline with other builders. In June, Fitch Ratings affirmed D.R. Horton's issuer default rating of BB, giving the builder a stable outlook.
Toll Brothers Inc.'s issuer default rating was affirmed at BBB- in June with a stable outlook.
Write to: Kerri Panchuk.
Tags: development, Fitch Ratings, PHM modest recovery, PulteGroup Inc.
Posted in Secondary Market/Investors, Top Stories | 2 Comments »
Fannie Mae stopped short of forecasting another double-dip recession for the U.S. economy Monday, but warned recent indicators show one could be nearing.
"Key factors, including revisions to gross domestic product data, have revealed that we have a bigger hole to dig out of, which explains the consumer angst over the lack of employment growth," Fannie Mae Chief Economist Doug Duncan said. "Moreover, European financial market and fiscal policy turmoil, coupled with the U.S. debt ceiling debate, have hit on consumer confidence, which is at recessionary levels."
Fannie expects economic growth to drop to 1.4% this year, down from a 3.1% growth last year. In 2012, Fannie doesn't expect the economy to grow at the rate measured in 2010.
Duncan said concerns over the mortgage market took a backseat to more macroeconomic factors in the minds of many consumers. In a survey conducted in July, Fannie found 70% of Americans believe the economy is on the wrong track, up from 60% the year before.
There is one exception: rentals. The rental vacancy rate — or the share of rental housing vacant for renting — dropped 50 basis points in the second quarter to 9.2%. It's the lowest rate in nine years.
The Obama administration wants to take advantage of the new demand, putting out a request for information in recent weeks for ideas to rent out previously foreclosed properties held by Fannie, Freddie Mac and the Department of Housing and Urban Development.
Still, Duncan echoed a Standard & Poor's analyst note over the weekend, when he said demand for buying new homes remains elusive.
"In turn, despite historically low interest rates, consumers are still saying they don’t see this as a good time to go out and borrow money to buy a house," Duncan said.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: Department of Housing and Urban Development, double-dip, economic growth, economy, Fannie Mae, foreclosure, freddie mac, GDP, home buying, housing, HUD, mortgage, obama, recession, rental, REO, Standard & Poor's
Posted in Origination/Lending, Top Stories | No Comments »
The PMI Group's (PMI: 0.00 N/A) market share "is going to be eaten up by competitors" in the aftermath of Arizona regulators placing the mortgage insurer under state supervision and curtailing the writing of new business, according to Rob Haines, insurance analyst with CreditSights.
The Arizona Department of Insurance, the primary regulator for PMI, instructed The PMI Group to cease issuing new mortgage insurance commitments in any state. The move was largely expected with the insurer warning investors earlier this month in filings with the Securities and Exchange Commission.
Based on the state's supervisory order, PMI can issue new mortgage insurance through pending commitments until Sept. 16, but must stop making interest payments on $285 million of surplus notes the company issued.
The company also cannot enter any new contracts, mergers, and acquisitions nor withdraw from any bank accounts. Arizona regulators said executives must submit a plan for rebuilding The PMI Group's financial condition within 60 days.
The next step, Haines said, is a potential regulatory seizure of the insurer.
"The regulatory seizure might not happen, but that depends on the company's success trying to execute some type of recapitalization," Haines said.
The company warned if Arizona appoints a receiver and begins liquidating the insurer, roughly $735 million of outstanding debt would become due. PMI said it doesn't have enough capital to meet those obligations. The company hired Willis Capital Markets & Advisory and Evercore Partners as advisers to help find options.
The PMI Group is still facing a difficult situation with other mortgage insurers not facing the same restrictions on new business — a key tool in any type of recapitalization plan.
"They are all facing the same headwinds, but they went into this storm in different conditions," Haines said when discussing all private mortgage insurers. He said the problem for The PMI Group is the firm does not "have the same capital resources that these other companies had" heading into the volatile period.
"The industry is still facing a lot of capital constraint," he pointed out. "The only company that I can think of that made money this past quarter was United Guaranty, which is a unit of AIG."
PMI's Friday announcement caps off a month of rocky news.
A volatile stock market and weak housing economy pushed the company's stock down as much as 50% earlier this month. PMI also received a warning of possible delisting from the New York Stock Exchange because its stock price closed at less than $1 for 30 consecutive trading days.
Fannie Mae and Freddie Mac had approved PMI Mortgage Assurance Co. to write mortgage insurance but due to the Arizona regulators' ruling, they are no longer accepting insurance policies from PMAC in any state.
Write to: Kerri Panchuk.
Tags: AIG, Arizona Department of Insurance, New York Stock Exchange, NYSE, recapitalization, Rob Haines, SEC, Securities and Exchange Commission, The PMI Group, United Guaranty
Posted in Secondary Market/Investors, Top Stories | 7 Comments »
The new director in charge of the legacy asset servicing at Bank of America (BAC: 7.215 -1.16%) isn't new to the banking giant.
Ron Sturzenegger joined BofA in 1998 as managing director of the real estate and lodging mergers and acquisitions department. In 2001, he moved to the head spot, where he was responsible for handling investment banking in real estate investment trusts, lodging and leisure, and homebuilding sectors.
The BofA Merrill Lynch real estate, gaming and lodging business has been rated No. 1 for the last three years and took the top ranking globally over the last year.
Before joining BofA, Sturzenegger was at Western Region Real Estate Investment Banking in 1995. Before that he headed up European real estate investment banking at Morgan Stanley (MS: 18.0738 -0.42%).
Now, the investment banker inherits one of the most daunting challenges in the industry: BofA's legacy mortgage portfolio.
When BofA opened the department in February, roughly $1 trillion worth of delinquent or discontinued mortgage products became a priority. Many of the loans transferred from Countrywide Financial Corp.
The department's original head, Terry Laughlin, said the bank would work through the delinquencies, investigations, representation and warranty claims and other mortgage-related issues within three years.
Laughlin left the department last week to become the chief risk officer of the Charlotte, N.C.-based banking giant.
BofA Chief Executive Brian Moynihan believes Sturzenegger can handle the challenge despite never holding an executive role at the top of a servicing shop. But, the BofA division is already rolling, and it seems Sturzenegger will just have to hold the course.
"Ron is a proven leader who brings deep credibility and expertise in real estate to the Legacy Asset Servicing team, and I welcome him to the management team," Moynihan said. "Ron benefits from the great momentum the Legacy Asset Servicing team has created in the past year, and I am confident he and the team will build on that as we put these issues behind us."
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: Bank of America, Countrywide Financial Corp., delinquencies, delinquent, foreclosure, legacy assets, Morgan Stanley, mortgage, Servicing/Default, Western Region Real Estate Investment Banking
Posted in Servicing/Default, Top Stories | No Comments »
