Archive for August, 2011
The Justice Department is investigating whether Standard & Poor’s rated mortgage securities improperly leading up to the financial crisis.
The investigation began before Standard & Poor’s cut the United States’ AAA credit rating this month, but it is likely to add fuel to the political firestorm that has surrounded that action. Lawmakers and some administration officials have since questioned the agency’s secretive process, its credibility and the competence of its analysts, claiming to have found an error in its debt calculations.
An employee at the Securities and Exchange Commission has accused the regulatory agency of destroying at least 9,000 documents relating to inquiries of Wall Street banks and hedge funds.
Documents that were destroyed related to corporate giants including Goldman Sachs Group, Deutsche Bank, Lehman Brothers, Citigroup, Morgan Stanley, Wells Fargo, Bank of America, convicted fraud operator Bernard Madoff and hedge fund SAC Capital Advisors, according to a letter from the employee's attorney released Wednesday by Sen. Charles E. Grassley (R-Iowa).
Darcy Flynn, an attorney at the SEC, says the agency followed a policy of systematically destroying documents after closing what are known as "matters under inquiry," or MUIs, which are the agency's preliminary look into a potential violation of securities laws. In closing the matters under inquiry, the SEC decided not to proceed to a formal investigation.
The amount of time it would take for the housing market to move through properties lingering in the foreclosure system is finally improving.
Standard & Poor's analysts estimate it would take 47 months for the housing market to work through the shadow inventory, according to their second quarter research note. They revised that down from 52 months in the first quarter, the first decline since the middle of 2009.
At the end of last year, S&P said the market would need 44 months to move through the inventory and at the end of September 2010, analysts estimated it at 40 months.
S&P analyzed loan-level private-label residential mortgage-backed securities data from CoreLogic (CLGX: 14.55 +0.55%) to calculate its estimates. It defines the shadow inventory as a collection of properties in 90-day delinquency or worse, foreclosure and REO.
The unpaid principal balance on these properties remains high at $405 billion, but it is a 6.4% drop from the previous quarter and represents less than one-third of the outstanding private-label RMBS market.
"In conjunction with stable liquidation rates, we believe these are positive signs that the amount of time it will take to clear this 'shadow inventory' should continue to decline over the next year," analysts said.
Of the top-20 U.S. markets, the shadow inventory looms largest over New York. There, S&P said it would take 144 months to work through the glut of properties, but still down from 146 months in the previous quarter.
S&P analysts said even as the market is finally making gains on the overhang, servicers are still working through documentation problems, new regulations and tighter scrutiny. RealtyTrac recently estimated the delays kicked more than 1 million foreclosures to next year.
"The shadow inventory will continue to jeopardize the housing market's recovery until servicers are able to improve liquidation times," S&P said. "However, if and when that happens, an influx of homes will likely enter the market, increasing supply and driving prices down further."
Write to Jon Prior.
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In a Washington Post report this week, the Obama Administration was said to have decided to adopted a proposal to continue a major government presence in financing mortgages. The Treasury subsequently denied this report in a statement posted by Deputy Secretary Neal S. Wolin:
“The Obama Administration believes that the private sector – subject to strong oversight and consumer protection – should be the dominant provider of mortgage credit. That’s why, in each of the three options we outlined in our report to Congress, the government’s footprint in the housing finance market will shrink substantially. That’s why, in each of the options, any government support for housing finance will be targeted and limited. This will help ensure that taxpayers are protected and the private sector bears the burden for losses.”
Would that any of this were really true. Let’s go through this statement and pick out some of the more notable canards and omissions of fact. First and foremost is the idea that the private sector is willing to take a leading role in housing finance in the U.S.
A mobile tool allowing real estate agents to manage foreclosed properties on the go was introduced on Tuesday.
The app, called REOConnex, is designed to allow agents to search and view all their properties, store associated photos and details, and manage tasks related to the properties. It’s available in Apple's AppStore and was released by West Valley, Utah-based Green River Capital, a provider of asset management for real estate-owned properties and short sale and rental program management. The company has a database of about 15,000 agents.
Although processing problems prompted servicers to delay up to 1 million foreclosure actions this year, lenders still issued foreclosure filings on more than 1.1 million properties in the first half of 2011, according to data from RealtyTrac.
The high volume of distressed properties has created business opportunities for servicers able to handle REO inventory.
Green River is one of three contractors tapped by Freddie Mac to handle real estate owned properties through its HomeSteps real estate sales unit, which acquires distressed properties and sells them to homeowners and investors. The others are Vendor Resource Management and Atlas REO Services.
Freddie Mac’s REO inventory has surged over the past few years, peaking at about 75,000 in the third quarter of 2010. The company’s REO inventory fell to 60,618 properties at the end of the second quarter, down from 65,174 in the first quarter, as delays in the foreclosure process slowed the pace of acquisitions.
Write to Liz Enochs.
