Archive for August, 2011
The Federal Housing Administration endorsed $10.5 billion in multifamily rental housing loans during its fiscal 2011, a new record with still another month and a half to go.
The FHA fiscal year ends in October. So far, it endorsed nearly 1,100 multifamily loans, seven times the amount three years ago. For only the second time, loan activity surpassed $10 billion.
For the entire industry, commercial and multifamily originations doubled in the second quarter from last year, according to the Mortgage Bankers Association.
"FHA has never been more relevant in making sure the multifamily apartment marketplace continues to function even during these tough economic times," said Carol Galante, FHA’s acting commissioner. "While we're seeing record volume, we also recognize we have to accelerate the time it takes us to process these applications so we continue to meet this demand at the very time the market needs us the most."
The FHA published new guidelines to cut the amount of time required to approve loan applications.
According to the guidelines, the Department of Housing and Urban Development will take 45 days from when it receives a complete pre-application to when it issues a letter asking the lender to apply for a commitment. When HUD receives the commitment applications, it will take 60 days to approve.
Earlier in the year, the FHA began using new multifamily loan closing documents which hadn't been updated in 40 years.
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Tags: 2011, FHA, HUD, MBA, multifamily, October, originations, record
Posted in Origination/Lending, Slider, Top Stories | No Comments »
Freddie Mac recently began reaching out to real estate associations and fielded more calls on a rising rate of fraudulent short sales.
With foreclosure delays and procedural problems still weighing on a housing recovery, servicers boosted short sales to 25% of all liquidations by the middle of 2011, up from 8% two years ago.
Freddie completed 21,515 short sales in the first half, up 31% from the same period last year, according to its second-quarter financial filing. These transactions accounted for 14% of all completed workouts in 2010, up from 4% in 2000.
Shelley Poland, a vice president at Freddie, and Robert Hagberg, the associate director of fraud investigations, said in a blog post Monday the mortgage giant sees short sale fraud on the rise as well — especially when real estate agents fail to disclose other parties involved in the transaction, who will rig sales at a low price and hide better offers from Freddie and the distressed homeowner.
"Then, after the house is sold, the fraudster can flip it a few hours later for the better price and walk away with the profitable difference," the Freddie executives said. "By concealing the higher offer, short sale fraud worsens losses to home sellers, Freddie Mac, and taxpayers. It also throws another wrench into the housing recovery by undermining the trust and transparency at the core of any real estate transaction."
Short sales fraud is now the top priority for Hagberg's investigation unit. It began working with these real estate agents and law enforcement to detect suspicious activity before a deal closes. The unit also built an exclusionary list of companies and individuals who will can no longer do business with Freddie.
The unit soon began seeing trends. Some agents provide false offers on a property to discourage legitimate bids and ensure accomplices get the property for a planned low bid. Others manipulate the listing price to make the house seem more problematic than it is by inflating repair costs and obtaining an artificially low broker price opinion.
So-called "flopping" schemes are rising, allowing a fraudster to buy a short sale from Freddie or banks by using falsified title and loan documents, then selling the property to a legitimate buyer for a higher price sometimes in a matter of hours.
Others even skew the HUD-1 settlement statement, which itemizes fees, charges and other funds, to skim away proceeds from the short sale.
Freddie now requires all parties in a short sale to sign an affidavit, holding them liable if investigators find the transaction wasn't done at arms-length.
"There are many conscientious real estate professionals who want to do the right thing. We often receive calls in our servicing, quality control, fraud investigation, outreach, and HomeSteps divisions from real estate agents who know they've seen something inappropriate and won't look the other way," the executives said. "They understand that real estate fraud turns a shortsighted profit at the cost of the public's long-term confidence in homeownership and the housing industry."
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Tags: flipping, flopping, foreclosure, freddie mac, HUD-1, real estate agents, Realtors, sale, servicers, short sales
Posted in Servicing/Default, Top Stories | 2 Comments »
Economic indicators in Illinois and surrounding Midwestern states edged up in July as manufacturing and housing activity improved slightly in the region last month.
Still, the economy in the Fed's seventh district, which includes Iowa, Illinois, Indiana, Michigan and Wisconsin, continues to struggle with its activity index in the negative growth range, the Chicago Fed said Monday in the latest Chicago Fed National Activity Index.
The index improved somewhat reaching an index score of negative 0.06 in July, up from negative 0.38 in June.
When the index score hovers at zero, growth is normal, while a negative index score suggests growth remains below average. A positive index score indicates "above average" growth.
While housing activity edged up, the median home sales price in the state is still down 3.8% over last year, according to the Illinois Association of Realtors.
Home sales in Illinois rose 18.4% in July, with 9,708 homes sold in the state compared to 8,197 in July 2010, the association reported this past week.
While sales went up, the median statewide sales price declined 3.8%, hitting $153,000 in July, down from $159,000 a year ago.
The Chicago Fed noted some improvement in employment indicators and manufacturing last month, but overall the index still remains in the negative range.
Write to: Kerri Panchuk.
Tags: Chicago Fed, Chicago Federal Reserve, economic activity, Illinois Association of Realtors
Posted in Secondary Market/Investors, Top Stories | No Comments »
The delinquency rate on mortgages backing one-to-four family residential properties rose to 8.44% in the second quarter, up 12 basis points from the first quarter, but still 141 basis points below a year ago, the Mortgage Bankers Association said Monday.
As delinquencies rose, the number of homes in foreclosure declined in the second quarter, with the percentage of foreclosure starts on all outstanding loans hitting 0.96%, down 12 basis points from the first quarter and 15 basis points lower than a year earlier.
Of all loans outstanding, 4.43% were in foreclosure at the end of the second quarter, down 9 basis points from the first quarter and 14 basis points from a year ago.
Serious delinquencies, or loans more than 90 days past due, declined 25 basis points from the first quarter to 7.85% for the second quarter and 126 basis points from 2010 levels.
"While overall mortgage delinquencies increased only slightly between the first and second quarters of this year, it is clear that the downward trend we saw through most of 2010 has stopped," MBA Chief Economist Jay Brinkman said.
"Mortgage delinquencies are no longer improving and are now showing some signs of worsening. The good news is the continued decline in long-term delinquencies, those mortgages that are three payments or more past due. The bad news is that drop is offset by an increase in newly delinquent loans one payment past due," he said.
Brinkmann said the delinquency rate is driven by fluctuations in the labor market. The second quarter brought a new period of economic uncertainty, with weekly initial unemployment claims averaging 432,000 filings, up from 385,000 in the first quarter.
"Foreclosure start rates fell to their lowest level since the fourth quarter of 2007," Brinkmann said. "Foreclosure inventory rates also fell, to their lowest level since the third quarter of 2010.
"While some have argued that this drop in foreclosures is a temporary drop which does not reflect the problems yet to come, this does not appear to be the case, at least at the national level," he said. "There are still many problem loans that need to be resolved, but the idea that there is a growing backlog of loans being held back from foreclosure is simply not supported by these numbers."
Write to: Kerri Panchuk.
Tags: delinquencies, foreclosures, MBA, Mortgage Bankers Association
Posted in Origination/Lending, Secondary Market/Investors, Top Stories | 3 Comments »
[Update 1: Adds Santos comment.]
Business process outsourcing giant Accenture (ACN: 56.4999 -0.74%) plans to acquire residential and commercial mortgage processing services firm Zenta. The move will grow Accenture's ability to provide business streamlining services and customer operations to clients in the mortgage lending and servicing industries, as well as real estate investment trusts.
The move comes at a time when Zenta — a key provider of mortgage services to the nation's top banks — is playing in a market riddled with new mortgage finance regulations.
The parties did not disclose terms of the transaction.
As part of the deal, Accenture plans to launch Accenture Credit Services, a full service consulting, technology and BPO firm, that will support clients in the residential mortgage, commercial real estate, leasing and auto finance.
Accenture sees the move as a strategic response to the nation's heightened regulatory environment.
"The wave of regulations and a changing credit environment are redefining the competitive landscape of the mortgage industry," said Terry Moore, global managing director of Accenture Credit Services. "In the residential mortgage business, low customer satisfaction, rising fulfillment costs, and falling pull-through rates — coupled with slower refinancing and purchase activity — are undercutting profitability. On the servicing side, regulatory changes are forcing operational transformation."
Dallas-based Zenta, which will merge into Accenture along with its 3,700 employees, provides mortgage processing services to four of the nation's largest banks and has noticed the strain of heightened regulatory guidelines firsthand.
"The large lending institutions are getting hit with a triple whammy (in terms of regulations)," said Henry Santos, senior vice president of Zenta's residential mortgage services practice. "The first is Dodd-Frank."
Santos explained an influx of new regulations are "mandating and dictating how these firms perform work and the quality expectations" which in turn creates a challenge for these institutions as they try to figure out how to stay ahead and remain compliant, while also running lean enough to maintain the appropriate profit margins. Santos said the relationship allows Accenture and their leading edge human capital consulting team to come in and work with firms on the right outsourcing solutions.
Zenta is deeply entrenched in the mortgage finance and real estate space, as a provider of real estate accounting and capital market analytics to U.S. REITS and investment banks.
Write to: Kerri Panchuk.
Tags: Accenture, Accenture Credit Services, mortgage lending, Servicing/Default, Zenta
Posted in Secondary Market/Investors, Servicing/Default, Top Stories | 2 Comments »
The price of commercial property inched up in June, representing a firming up of the bottom as continued market turmoil and less lending keep any significant gains at bay, according to Moody's Investors Service.
The ratings agency said its commercial property price index increased 0.9% in June from the prior month.
Analysts said the 254 repeat-sale transactions in June were the highest non-year-end level in about three years. Tightening of 10-year Treasury yield "has largely offset widening loan spreads, helping maintain attractive financing costs and increasing transaction volume." Although dollar volume rose just 3.2%, indicating a larger amount of trading smaller properties, according to Moody's.
Distressed transactions accounted for 28.7% of all sales, higher than the two-year average of 25.9%.
"The broad middle portion of the commercial real estate market (neither trophy nor distressed) continues to perform well, helping sustain positive movement in the aggregate index," according to analysts. Three of the four Moody's property type indices showed prices gains in the second quarter led by office space with a 8.9% gain, industrial 2.5% and apartments 0.6%. The retail space index fell 0.3% for the second quarter.
Write to Jason Philyaw.
Tags: 10-year Treasury, commercial property prices, Moody's Investors Service
Posted in Origination/Lending, Top Stories | No Comments »
Investors are pulling back from the housing market as the flipping model loses speed on weak homebuyer demand, according to the latest Campbell/Inside Mortgage Finance survey.
The HousingPulse Tracking Survey showed demand for properties is low, forcing investors to rent out half the homes they acquire. With few investors satisfied with this model, July investor activity declined, making it the third consecutive monthly drop.
Investors accounted for 19.6% of home purchases last month, down from 23% in April and the lowest level in the 12 months.
Survey results showed the proportion of first-time buyers did rise to 36.9% last month from 35.4% in June. Campbell surveys concluded current homeowners are unlikely to acquire distressed properties, creating a situation where recovery still depends on investor activity.
"The inability of most investors to resell homes in the current housing environment has put a damper on their participation in the housing market this summer," according to Campbell.
Of the properties acquired by investors in July, 48% will be turned into rentals for now, according to the Campbell report. A year ago, only 28% of properties acquired by investors were kept as rentals.
Write to: Kerri Panchuk.
Tags: Campbell surveys, Campbell/Inside Mortgage Finance, flipped properties, HousingPulse Tracking Survey, investors, rentals
Posted in Origination/Lending, Secondary Market/Investors, Top Stories | 1 Comment »
A look at stories across HousingWire's weekend desk, with more coverage to come on bigger issues:
The elevated conforming loan limits for mortgages insured or guaranteed by the government expire in nearly one month and legislation to extend them is unlikely to make it far in the House of Representatives.
The Department of Housing and Urban Development alerted lenders to the new limits Friday, which will drop to $625,500 in the most expensive neighborhoods Oct. 1. The new prices will vary by county.
A source in the House pointed to a paper Republicans released in March 2010, detailing their plans for winding down Fannie Mae and Freddie Mac. One of the principles includes allowing the elevated conforming loan limits to expire come October. While committee leadership has not said they would ignore efforts to extend the limits, the source signaled a continued stance behind the principles in the paper.
HUD said the new rules would apply to loans applications received on or after Oct. 1, but some lenders already began applying the limits in August due to the process time it takes to approve borrowers for a new loan.
The Arizona Department of Insurance placed two mortgage insurance subsidiaries of The PMI Group (PMI: 0.00 N/A) under its supervision and prohibited the company from writing new commitments effective Friday.
PMI faces a possible delisting from the New York Stock Exchange because its stock price closed at less than $1 for 30 consecutive days. Under the order from the state of Arizona, PMI can issue new mortgage insurance through pending commitments until Sept. 16 but must cease making interest payments on $285 million in surplus notes the company issued.
PMI is also prohibited from entering into any new contracts, mergers, and acquisitions or from withdrawing any bank accounts. The state said the company must submit a plan within 60 days for rebuilding its financial condition.
The company said if the state chooses to appoint a receiver and begin liquidating the company, roughly $735 million of outstanding debt would become due. PMI said it would not have enough capital to meet those obligations. The company engaged Willis Capital Markets & Advisory and Evercore Partners as advisers to help find options.
"There can be no assurance that any of these potential alternatives will be successful," PMI said.
Standard & Poor's analysts do not expect national home sales to recover in the near future after dropping for the third time in four months.
Existing home sales fell 3.5% in July, the National Association of Realtors said last week, but S&P said even record-low mortgage rates can't improve the still-struggling housing market.
"Home prices and sales have been weak even though the average 30-year fixed mortgage rate has been near or below 5% since 2009, and the housing market has been a drag on the economy," S&P analyst Erkan Erturk said late Friday.
Some local markets are faring better, however. The Triangle Multiple Listing Service covering 16 counties in North Carolina said June pending home sales in Raleigh, Durham and Chapel Hill area increased 16% from one year ago.
Sales in the first six months of 2011 on the MLS averaged the same amount seen in 2001. Prices increased 3.3% from the previous month but remained 3% down from one year ago. The MLS said it currently has an 11.4 month supply of inventory, up more than 11% from last year.
Three banks closed over the weekend to go with the one shuttered Thursday, bringing the total number of failures to 68 for 2011. The Federal Deposit Insurance Fund estimates the closings last week to cost the DIF $374.8 million.
The Office of the Comptroller of the Currency closed Lydian Private Bank based in Palm Beach, Fla. Sabadell United Bank will assume all $1.24 billion in deposits and purchase essentially all $1.7 billion in assets.
The closing is expected to cost the DIF $293.2 million.
The OCC also closed First Southern National Bank of Statesboro, Ga. Heritage Bank will assume all $159.7 million in deposits and purchase essentially all $164.4 million in assets.
The closing will cost the DIF $39.6 million.
The Illinois Department of Financial and Professional Regulation closed First Choice Bank of Geneva, Ill. Inland Bank & Trust will assume all $137.2 million in deposits and purchase essentially all $141 million in assets.
The closing is estimated to cost $31 million.
Write to Jon Prior.
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Tags: bank closing, conforming loan limit, Fannie Mae, FDIC, FHA, freddie mac, home sales, HUD, insurance, mortgage, NAR, NYSE, OCC, PMI, Republicans, S&P
Posted in Origination/Lending, Top Stories | 3 Comments »
The Federal Housing Administration conforming loan limit on forward mortgages is set to drop in October but not so for reverse mortgages.
The Department of Housing and Urban Development will extend the $625,500 maximum loan amount for a reverse or Home Equity Conversion Mortgage through Dec. 31, 2011 according to a lender letter sent Friday.
HECMs allow the borrower, who must be at least 62 years old, to convert a portion of the equity in the home for cash. Lenders do not require repayment until the borrower no longer uses the home as a principal residence, often in the event of death.
The limit is 150% above the cap set by Freddie Mac. It is the maximum loan amount FHA will insure.
HUD sent the letter out Friday, alerting lenders to the pending drop for forward mortgages to $625,500 from $729,750 in the most expensive neighborhoods. In areas where 115% of the median house price exceeds the current conforming loan limit, it will go unchanged in October. Congress pushed the limits for FHA, Fannie Mae and Freddie Mac up in 2008 to keep the mortgage market liquid through the financial crisis.
One bill was introduced in the House of Representatives and another in the Senate to extend all of the conforming loan limits for another two years, though these bills have yet to reach committee.
The extended loan limits for reverse mortgages applies to all HECMs made in the U.S., including Hawaii, Alaska, Guam and the U.S. Virgin Islands.
Peter Bell, president of the National Reverse Mortgage Lenders Association said he hoped HUD and Congress would extend the higher loan limits beyond 2011.
"We're glad to see that HUD has taken this interim step," Bell said. "It helps eliminate uncertainty for seniors in the process of getting or contemplating a reverse mortgage and takes pressure off of counseling agencies with clients who want to be counseled in time to take advantage of current loan limits."
Write to Jon Prior.
Tags: conforming loan limit, Fannie Mae, FHA, freddie mac, HECM, HUD, mortgage, reverse mortgage
Posted in Origination/Lending, Top Stories | 1 Comment »
Two years ago, Caroline Reaves took the helm at property preservation and inspection firm Mortgage Contracting Services, setting the stage for her September debut as one of HousingWire magazine's Influential Women of the Housing Economy.
Reaves' story is featured in the upcoming September edition of HousingWire alongside dozens of other profiles featuring top women in the business. Click here for subscription information.
REAVES TAKES CENTER STAGE AT HOUSING'S TURNING POINT
Stepping into the CEO role during one of the busiest times in default servicing and housing takes the type of drive and determination that Reaves developed as a child growing up in a household where work ethic was central to the family's core values.
In today's real estate economy, Reaves' firm is setting itself apart by constantly looking for ways to help servicers preserve an influx of REO properties that need constant care and upkeep.
From her firm's headquarters in Plano, Texas, Reaves sat down with HousingWire (see video above) to shed some light on where MCS stands today, and where the firm is going.
Write to: Kerri Panchuk.
Associated video production by Matthew Torres.
Tags: Caroline Reaves, default servicing, MCS, Mortgage Contracting Services
Posted in Servicing/Default, Top Stories | 1 Comment »
