Archive for August, 2011
Housing starts fell 1.5% in July, according to Commerce Department data, reverting back to declines after a huge gain in June.
On a seasonally adjusted basis, starts decreased to 604,000 from 613,000 for June, which was revised downward 16,000. July starts were up about 10% from 550,000 a year earlier.
Analysts polled by Econoday projected housing starts to come in at 600,000 with a range of estimates between 574,000 and 635,000.
In a joint release, the Census Bureau and Department of Housing and Urban Development said single-family starts fell 5% in July to a seasonally adjusted rate of 425,000 units, down from a revised 447,000 for June.
July's decline continues the wide gyrations seen in housing starts this year and follows a 14.6% gain the prior month, which was the largest increase since January. After the gain in the first month of 2011, starts dropped 22.5% in February, which was the largest monthly decline since March 1984.
Building permits in July fell 3.2% to an annual rate of 597,000 from a revised 617,000 for the prior month. Permits for new homes in July were about 3.8% higher than a year earlier.
Write to Jason Philyaw.
Follow him on Twitter: @jrphilyaw
Tags: census bureau, commerce department, Department of Housing and Urban Development, housing starts
Posted in Origination/Lending, Top Stories | 2 Comments »
Investors should consider buying bonds backed by Federal Housing Administration and Veterans Administration re-performing deals, says a report released Friday by the investment banking arm of Barclays Capital.
Re-performing loans are those on which borrowers missed some payments but then resumed paying on time.
“Senior bonds from FHA-VA re-performer deals provide a very stable yield profile even in dire economic scenarios and look very attractive with leverage,” said analysts Sandeep Bordia, Jasraj Vaidya, Dennis Lee and Aaron Haan. Since re-performers are less likely to succeed in refinancing, the duration risk is more hedged, they said.
The report estimated the size of that market at $18.4 billion, with roughly 60% in agency residential mortgage-backed securities, and the rest concentrated among a few other issuers: Lehman Brothers Holdings, Goldman Sachs, Countrywide and UBS.
Because the FHA and VA imposed strict underwriting standards, default rates on loans they guaranteed are typically much lower than on other subprime loans, even those where borrowers have missed some payments, says Barclays Capital.
And the government guarantees, which cover much, though not all, of investor losses, make bonds backed by FHA and VA loans a good bet, says the report.
It estimates that senior bonds backed by FHA and VA re-performing loans can deliver yields of 6% to 8%. Using leverage, investors may be able to magnify their returns to anywhere from 15% to 30%, Barclays analysts calculated after analyzing two different leverage scenarios.
"Further home price depreciation and/or a double-dip recession may increase defaults and severities on these pools," concluded the report. "However, we believe that even in a draconian scenario, in which defaults or severities triple, yields should hold up relatively well."
Write to Liz Enochs.
Tags: Barclays, Barclays Capital, Countrywide Financial Corp., Federal Housing Administration, FHA, mortgage-backed securities, residential mortgage-backed securities, RMBS, The Goldman Sachs Group Inc., UBS AG, VA, veterans admLehman Brothers Holdings Inc.
Posted in Secondary Market/Investors, Top Stories | 1 Comment »
Impac Mortgage Holdings (IMH: 2.70 +1.50%), a title, REO and loss mitigation provider, expanded into the mortgage lending space in the first half of 2011 and boosted loan production in the second quarter.
Impac invested $2 million into a new infrastructure and opened new regional offices along the Pacific Northwest and Gulf Coast.
The company said it is focusing on originating mortgages for Fannie Mae, Freddie Mac and the Federal Housing Administration and also intends to build a servicing portfolio of similar loans as well. Currently, these three entities guarantee or insure 95% of the mortgage market.
During the first six months of 2011, the new Impac offices originated roughly $282.4 million in agency loans, with $226.3 million written in the second quarter alone.
The company also expanded its warehouse funding capacity an additional $25 million to $102.5 million total by the end of the second quarter.
With all the investments, Impac still reported net earnings of $361,000 or four cents per share, down from $3.3 million in the second quarter of 2010.
Loss mitigation, title and REO fees were down for Impac at $14.3 million in the second quarter, from $15.5 million last year.
"Through the remainder of 2011, the company will continue to focus on expanding the residential mortgage lending operations profitability, increasing volumes through retail and wholesale channels, and selling loans to Ginnie Mae, Freddie Mac and Fannie Mae thereby expanding the servicing portfolio," said Impac CEO Joseph Tomkinson.
"As the real estate market continues to struggle, the company seeks to expand its high margin portfolio loss mitigation and real estate services to third parties," he added.
Write to Jon Prior.
Follow him on Twitter @JonAPrior
Tags: earnings, foreclosure, Impac Mortgage Holdings, mortgage, Origination/Lending, real estate, REO, second quarter, title
Posted in Origination/Lending, Top Stories | No Comments »
The top-50 banks stocked up mortgage-backed securities guaranteed by the government and cash during the second quarter as new home loan originations remained suppressed.
According to the National Information Center's aggregated financial statements, the largest banks added roughly $9 billion in agency MBS in the second quarter. Non-agency, or privately funded, MBS declined $300 million.
Banks grew their cash or cash-equivalent holdings by $225 billion to more than $3 trillion in the second quarter. Meanwhile credit, at least for mortgages, remained constrained.
"On the loan front, although residential lending remained tepid, it showed some improvement from the previous quarter," Barclays Capital analysts said after reviewing the report.
Holdings of one-to-four family home loans climbed $1.4 billion at the top banks to more than $1.16 trillion.
Third quarter agency MBS holdings will be watched closely as the market adjusts to the downgrade of the U.S. debt and consequentially Fannie Mae and Freddie Mac. Some in the market are already expecting agency MBS to remain in demand after the default.
The Securities Industry and Financial Markets Association said last week following the downgrade that agency MBS showed tightening spreads and even grew in demand among real estate investment trusts. In a time of such volatility in other markets, U.S. debt was still considered a safe bet to many investors, analysts said.
Write to Jon Prior.
Follow him on Twitter @JonAPrior
Tags: Barclays Capital, Fannie Mae, freddie mac, MBS, National Information Center, trillion
Posted in Secondary Market/Investors, Slider, Top Stories | 1 Comment »
Ellie Mae (ELLI: 5.61 -0.53%) purchased Del Mar Datatrac for $25.2 million cash, as it continues using proceeds from its initial public offering to expand.
The company said Del Mar's origination software is used by more than 200 mortgage lenders, who are expected to fund about 500,000 home loans this year.
Jonathan Corr, Ellie Mae chief strategy officer, said the acquisition boosts the company's loan volume in 2011 to 1.5 million from 1 million projected earlier.
Pleasanton, Calif.-based Ellie Mae said the acquisition may add up to 20,000 new users to its network, and the the customer base of the combined company has the potential to originate about 30% of all residential mortgages in the country this year. Ellie Mae, which went public in April, previously expected adjusted income of $4.4 million to $5.4 million or 21 cents to 26 cents a share.
"Del Mar's roster of customers includes some of the biggest and most respected lenders in the country. With this acquisition nearly a third of all residential mortgages originated in the United States will be able to flow through Ellie Mae's systems," according to Sig Anderman, CEO and president of Ellie Mae.
Del Mar President Rob Katz said it takes significant resources to meet client demands for loan quality, compliance and efficiency in today's mortgage market.
"Bigger is indeed better," Katz said. "As our industry has evolved over the past several years, with independent mortgage bankers, banks and credit unions gaining greater market share, and with more demands being placed on them by regulators and investors, technology vendors have been called upon to provide ever more sophisticated solutions to address those challenges."
Corr said the down market provided Ellie Mae with an opportune time to use the currency from its IPO to add more users to its network while adding other products and services.
Katz will stay on as executive vice president, product strategy and Jeb Spencer, chairman of Del Mar, joined Ellie Mae’s board. Del Mar will remain based in San Diego.
Ellie Mae expects significant integration costs and lower revenue from the acquisition due to purchase accounting rules. Consequently, the company lowered its adjusted net income estimate for 2011 to between $1.2 million and $2.2 million or 6 cents to 11 cents a share.
Write to Jason Philyaw.
Follow him at Twitter: @jrphilyaw
Tags: Del Mar DataTrac, Ellie Mae, IPO
Posted in Origination/Lending, Top Stories | 4 Comments »
Home sales in Southern California fell 11.9% in July as the job market continued to slow, forcing potential buyers out of the market, DataQuick said Monday.
The La Jolla, Calif.-based real estate data firm noted 18,090 new and existing home sales in Southern California last month, down from 20,532 in June.
The data includes sales from the counties of Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange.
Sales fell 4.5% from July of last year in the southern part of the Golden State, making it the smallest year-over-year decline in the region in 13 years.
Part of the downturn is tied to a severe drop off in the market for home valued at $500,000 and higher.
"The latest sales figures look a bit worse than they really are, given this July was a fairly short month, but they still suggest some potential homebuyers got spooked," said DataQuick president John Walsh. "Reports on the economy became increasingly downbeat and, no doubt, some people fretted over the possibility the country would default on its obligations."
Walsh points out last month's sales were not much worse compared the year earlier when the homebuyer tax credit first expired.
The median home sale price in Southern California fell a 0.7% in July, dropping to $283,000 to $285,000. Meanwhile, year-over-year, the median price fell 4.1% from $295,000 a year ago.
To date, the median is 14.6% higher than the trough mark of $247,000 in April of 2009, but it's still under the peak median of $505,000 in the middle of 2007.
Last month, home sales fell in every price level, with high-end sales experiencing the deepest slide with the number of home sales dropping 20.5% in the $800,000-and-above price level.
Write to: Kerri Panchuk.
Tags: DataQuick, home sales, housing downturn, median home price, Southern California
Posted in Origination/Lending, Top Stories | No Comments »
Borrowers refinancing mortgages in the second quarter of 2011 overwhelmingly chose fixed-rate mortgages, with 95% taking that route, Freddie Mac said Monday.
Homeowners went with the fixed-rate mortgage whether they had a fixed-rate loan before or an adjustable-rate contract, Freddie Mac concluded in its Quarterly Product Transition Report.
In addition to selecting fixed-rate contracts, more refinancing borrowers shortened their loan terms, with 37% choosing a 15- or 20-year loan, the highest rate to select these alternatives in 8 years.
55% of refi borrowers who previously had a hybrid ARM selected a fixed-rate loan during the second quarter.
Overall, the share deciding to refinance from hybrid ARM-to-hybrid ARM reached its highest level in seven years.
"Fixed mortgage rates averaged 4.65% for 30-year loans and 3.84% for 15-year product during the second quarter in Freddie Mac's Primary Mortgage Market Survey, well below long-term averages," said Frank Nothaft, Freddie Mac's vice president and chief economist.
He added, "The Bureau of Economic Analysis has estimated the average coupon on single-family loans was about 5.3 percent during the second quarter of 2011. It's no wonder we continue to see strong refinance activity into fixed-rate loans."
Write to: Kerri Panchuk.
Tags: 30-year, 30-year fixed, adjustable-rate mortgages, ARMs, freddie mac, FRM, government-sponsored enterprises, GSEs, hybrid ARMs
Posted in Origination/Lending, Top Stories | 1 Comment »
Pembrook Capital Realty, a commercial real estate investment trust, hopes to raise $100 million through an initial public offering, according to filings the company made Friday with the Securities and Exchange Commission.
Deutsche Bank (DB: 44.14 +1.71%) is lead underwriter on the transaction, timing of which has yet to be finalized.
Pembrook Capital Realty expects to trade on the New York Stock Exchange under the ticker symbol PRC.
The five-year old company recorded $13 million in revenue for the 12 months ended March 31.
Write to: Kerri Panchuk.
Tags: deutsche bank, IPO, New York Stock Exchange, Pembrook Capital Realty, REIT, Renaissance Capital, Securities and Exchange Commission
Posted in Secondary Market/Investors, Top Stories | No Comments »
Fitch Ratings finalized how it will determine predicted losses a residential mortgage-backed security may experience.
The ratings agency said Monday at the core of the changes will be how analysts determine the effect of declining borrower equity and falling home prices on the losses seen on the mortgage. Fitch also said the changes will help it blend loan-level characteristics with larger economic factors when projecting how an RMBS offering would perform.
"In short, credit protection will increase materially during housing booms accompanied by 'unsustainable home prices,'" Fitch said. "Conversely, credit protection will decrease as 'bubbles deflate' and risk in the housing market neutralizes."
Fitch initially introduced the new method in February and provided a few tweaks since. It has established a two-step stress test to gauge losses on a RMBS issue when home prices are first reduced to sustainable values and then subjected again to further declines.
The ratings agency combined the sustainable market value with the original loan-to-value ratio of the loan to form what it calls an sLTV, "the most predictive variable of borrower default," Fitch said.
Fitch will apply the enhances modeling to both new and existing RMBS deals.
Write to Jon Prior.
Follow him on Twitter @JonAPrior
Tags: default, Fitch, Fitch Ratings, losses, LTV, mortgage, RMBS
Posted in Secondary Market/Investors, Top Stories | No Comments »
The headline to this article does not contain a syntax error; Morningstar Credit Ratings is going to put together a new risk assessment service for its clients.
Morningstar announced the initiative in an email Monday. The new risk assessment will monitor the potential boom in CMBS 2.0 operating advisors.
CMBS 2.0 refers to newly structured commercial mortgage-backed securities. CMBS 2.0 differs from pre-bust CMBS deals in that there are more loans pooled and less perceived operational risk.
Further, CMBS 2.0 is likely to adopt a European style of specialty servicing: the implementation of operating advisors, who arbitrarily monitor special servicing of CMBS 2.0 deals in the event of loan delinquencies.
In pre-bust CMBS, there was a perceived conflict of interest between first-loss bond holders and senior-rated investors. The latter became suspected of motivating timely liquidations as they would receive compensation first in such an event.
Risk retention could help balance this potential problem, but proposed rules would place this risk with the so-called B-piece buyer, also the first-loss bond holder.
These deals will likely require operating advisors to review asset-level decisions to hedge against investor conflicts.
"Therefore, it is our intention to offer Operation Risk Assessments of Operating Advisors once the regulatory proposals are finalized and established," Morningstar said in the note to clients.
The credit ratings agency said its focus on monitoring risks for bond investors can also help establish operational standards, such as this, for the CMBS 2.0 markets.
"We believe it is important for all participants in the industry to have a clear sense of the baseline qualifications and expectations for entrants to adequately fill this newly evolving role in CMBS transactions," Morningstar said.
Write to Jacob Gaffney.
Follow him on Twitter @jacobgaffney.
Tags: CMBS 2.0, Morningstar, operating advisors
Posted in Secondary Market/Investors, Top Stories | No Comments »
