Archive for September, 2011
California default notices spiked 55% in August, and the number may keep rising in the coming months as mortgage servicers shake off the robo-signing freeze, according to RealtyTrac Senior Vice President Rick Sharga.
In August, servicers filed 28,961 default notices in California, the first stage of the foreclosure process in the state, RealtyTrac showed. Another filing tracker ForeclosureRadar found a similar boost in foreclosure starts along the West Coast and said Bank of America (BAC: 7.215 -1.16%) led all major banks with a 116% jump in August alone.
"The industry has not yet returned to normal or necessary foreclosure activity levels, but progress is certainly being made," a BofA spokesperson said.
In an interview with HousingWire, Sharga said gave some idea on where that "necessary" level might be.
"It wouldn't be a stretch to say that we might see NODs in the range of 30,000 per month in California for a few months, but it's difficult to predict that they'd get anywhere near the record levels we saw back in 2009," Sharga said.
From January 2010 through September 2010, California NODs averaged 28,000 per month. That dropped to 26,000 per month for the rest of 2010 after the robo-signing scandal broke in October, when servicers were found to be signing affidavits en masse and without a proper review of the loan files.
The slowdown continued into the early part of this year, with the NOD average dropping to 22,000 for the first seven months of 2011.
These filings peaked in March 2009 at 58,858 and averaged roughly 42,000 per month that year, the highest average since RealtyTrac began reporting the numbers, Sharga said.
A restarted foreclosure process means prices in California are set for possibly more drops, but the effect will not be seen immediately, according to Michael Simonsen, co-founder and CEO of the data analytics firm Altos Research.
"The price implications for the foreclosure spike are further down the road," Simonsen said. "August prices did indeed lose their steam from the first half of the year, but it's largely seasonal."
Analysts expect house prices nationally to double-dip in the winter ahead and finally hit bottom in the spring of next year. JPMorgan Chase (JPM: 37.28 -0.56%) analysts long said the fall could be as much as 5%.
According to the California Association of Realtors, the median home price in the state reached its highest level this year in August to $297,060, though it is still down 7.4% from the year before. Prices could face other challenges such as the expiration of the conforming loan limits in October and the ongoing deficit struggle, CAR said.
With the foreclosure timelines pushed to historic lengths, Simonsen said these properties will begin reaching an already bloated inventory during the height of the selling season of 2012.
"Look for the price impact of newly initiated foreclosures to be seen in the spring of next year, as they add to the spring inventory," Simonsen said.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: Altos Research, Bank of America, California, CAR, default, ForeclosureRadar, foreclosures, home prices, NOD, RealtyTrac, robo-signing, servicers
Posted in Servicing/Default, Slider, Top Stories | 1 Comment »
The Federal Housing Finance Agency is considering changes to the Home Affordable Refinancing Program, but Acting Director Edward DeMarco said any moves would be made to help borrowers already eligible.
The White House is reportedly working on a major plan to allow some of the 11 million borrowers who owe more on their mortgages than their homes are worth to refinance. Analysts and economists have said in research notes and before Congress that the most likely route would be a revamp of HARP.
The program launched in March 2009. Current Fannie Mae and Freddie Mac borrowers with loan-to-value ratios between 80% and 125% could qualify for a refinanced rate set — not by the government-sponsored enterprises — but by the mortgage originator.
To date, more than 838,000 borrowers have moved through the program, well short of the 4 million to 5 million originally estimated.
"HARP is not a mass refinancing program," DeMarco said at the American Mortgage Conference in North Carolina Monday. "It was designed to address a particular segment of borrowers with loans guaranteed by the enterprises."
But answering calls for changes to the program, DeMarco said the conservator was considering it. On the table, he said, are eliminating loan-level price adjustments, representation and warranty claims, valuation requirements and the movement of insurance through the refi and to the new mortgage.
"FHFA is carefully reviewing the mechanics of the HARP program to identify possible enhancements that would reduce barriers for borrowers already otherwise eligible to refinance using HARP," DeMarco said. "If there are frictions associated with the origination of HARP loans that can be eased while still achieving the program’s intent of assisting borrowers and reducing credit risk for the enterprises, we will seek to do so."
DeMarco said the FHFA may also change the HARP ceiling of 125% LTV.
Analysts said waiving rep and warranty claims is unlikely and any changes to HARP would have a minimal impact as lower mortgages rates may not translate directly into avoided defaults as the Congressional Budget Office assumes. Others such as Mark Zandi, chief economist at Moody's Analytics, said program changes would reduce monthly payments for consumers, who might put those savings back into the economy.
Regardless, DeMarco expects changing how underwater borrowers refinance to remain troublesome for some time.
"There are several challenging issues to work through here and the outcome of this review is uncertain," DeMarco said.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: American Mortgage Conference, CBO, DeMarco, Edward DeMarco, Fannie Mae, Federal Housing Finance Agency, FHFA, foreclosure, freddie mac, HARP, Home Affordable Refinancing Program, LTV, Mark Zandi, mass refi, mortgage, negative equity, refinance, representation and warranty, underwater, White House
Posted in Secondary Market/Investors, Top Stories | 8 Comments »
The National Flood Insurance Program expires in 11 days.
The program is $18 billion in debt yet supported by industry professionals who say flooding from Hurricane Irene once again exemplifies the need for Congress to extend the program. As it stands now, the program, which provides affordable flood insurance to homeowners living in certain at-risk areas, is set to expire Sept. 30.
The Senate Banking Committee green lighted its own version of a bill to extend the presence of national flood insurance for another few years, while the House passed a bill earlier this year reauthorizing the program for another five years.
The program has received some push back from lawmakers who believe it subsidizes risky home building and construction and is already burdened by debt.
Smarter Safer, a coalition focused on dealing with national catastrophes, sent a note to Senate Majority Leader Harry Reid (D-Nev.).
"While we believe the bill could be strengthened, the Banking Committee has taken a needed step to reforming the nation's flood insurance program and Smarter Safer joins a range of stakeholder groups in applauding this legislation."
In the summer, the American Land Title Association urged Congress to ensure flood insurance is still available in the near future.
"Without affordable coverage, homeowners will be unable to protect their largest investment leaving taxpayers on the hook for reconstruction costs," said Kurt Pfotenhauer, CEO of the trade group. "More than 5.6 million American families depend on the NFIP as their only source of protection against economic devastation of a flood. By providing this affordable protection, the NFIP guides future development decisions and facilitates real estate transactions and our economy.”
Write to: Kerri Panchuk.
Tags: flood insurance, National Flood Insurance Program, SmarterSafer.org
Posted in Secondary Market/Investors, Top Stories | 1 Comment »
The threat of another economic downturn is stalling a housing recovery, Fannie Mae said in a report Monday.
The economy remains in a fragile state and is highly susceptible to additional shocks that could further erode economic growth, according to a study provided by the government-sponsored enterprise's Economics & Mortgage Market Analysis group.
Fannie pointed to a stubborn unemployment rate that's expected to remain above 9% throughout 2012, making individuals more likely to become renters than homeowners.
"The weakening economic backdrop, a persistently high unemployment rate, and fear of a double-dip recession are casting a shadow over the housing market," Fannie Mae Chief Economist Doug Duncan said. "In turn, respondents to the Fannie Mae National Housing Survey indicate a continued shift of sentiment toward renting and away from ownership, at least in the near term."
"In the second quarter, 26% of Americans were worried about their job stability. When combined with the 9% of unemployed households, you have more than one-third of the potential workforce worried about their employment status. This is hardly a strong support for housing demand," he said.
Duncan's latest statement comes as Fannie Mae economists predict slugglish GDP growth of less than 2% throughout 2012.
Existing-home sales fell in July along with single-family construction spending, while multifamily construction spending began to rise after attracting the attention of large investors, Duncan said.
Write to: Kerri Panchuk.
Tags: double-dip recession, Doug Duncan, economic downturn, economy, existing home sales, Fannie Mae, GSE, homeowners, housing, housing market, mortgage, renters, unemployment
Posted in Origination/Lending, Top Stories | No Comments »
Homebuilder optimism remains limited, despite historically low mortgage interest rates as demand just isn't there, according to the latest National Association of Home Builders index.
The NAHB and Wells Fargo (WFC: 29.39 +1.17%) survey builders to gauge perceptions of the new, single-family home market for the next six months. A score higher than 50 indicates more builders view the market as good than poor.
The index slid to 14 for September from a revised reading of 15 for August. The index has stayed within 13 to 17 for 12 months.
NAHB Chairman Bob Nielsen said "very little has changed in terms of housing market conditions so far this year."
"Builders continue to confront the same challenges in accessing construction credit, obtaining accurate appraisal values for new homes, and competing against foreclosed properties that they have seen for some time," according to Nielsen.
He said the downgrade of America's debt by Standard & Poor's and congressional gridlock on the budget deficit hurt homebuilder and consumer confidence in recent weeks.
Earlier Monday, Lennar Corp. (LEN: 21.97 -0.72%) said its third-quarter earnings fell 31% from a year earlier on 2.9% fewer homes delivered. The Miami-based homebuilder said third-quarter orders increased 11% to 2,914 homes.
David Crowe, chief economist for the NAHB, said the extended, low, narrow range of the trade group's index "reflects builders' awareness that many consumers are simply unwilling or unable to move forward with a home purchase in today's uncertain economic climate."
"While some bright spots are beginning to emerge in about a dozen select metro areas, the broader picture remains fairly bleak due to the weak economy and job market," Crowe said.
The part of the NAHB survey that gauges expectations of sales over the next six months fell two points to 17, while the component that tracks prospective buyers declined two points to 11.
The component gauging current sales conditions fell one point to a reading of 14 for September.
Write to Jason Philyaw.
Follow him on Twitter: @jrphilyaw
Tags: consumer confidence, downgrade, homebuilder, Lennar Corp., NAHB, Standard & Poor's
Posted in Origination/Lending, Top Stories | 1 Comment »
Homebuilder Lennar Corp. (LEN: 21.97 -0.72%) posted a $20.7 million profit , or 11 cents per share, during the third quarter, down 31% from $30 million, or 16 cents per share, in the year-ago period, but the quarter had a silver lining with an increase in new home orders.
Lennar said its third quarter is the sixth consecutive quarter to record a profit.
During the period, the company's gross margin on home sales stood at 21.1%, while its cancellation rate hit 20%. The company's backlog of homes rose to 2,519 residences, up 16% from a year ago, while deliveries dropped 3% from last year to 2,865 homes. New orders grew 11% from the year-ago quarter to 2,914 homes.
CEO Stuart Miller said he noticed encouraging signs with demand for home purchases slowly returning to the market as home prices and interest rates remain at all-time lows.
Still, Stuart noted that "demand is tight and tightening lending standards, high unemployment and low overall consumer confidence" are weighing down home sales.
At the end of 3Q, Miami-based Lennar Corp. had $800.3 million in cash on hand, while its debt to capital ratio hit 46.6%.
The company's stock rose almost 3% Monday morning, trading at $14.34 per share.
Write to: Kerri Panchuk.
Tags: earnings, home deliveries, home sales, homebuilder, Lennar Corp., Miami, new home orders, third quarter
Posted in Origination/Lending, Top Stories | 4 Comments »
Two California appellate courts upheld foreclosures initiated by the Mortgage Electronic Registration Systems this past week.
Merscorp Inc., the parent company of MERS, said the 2nd District Appellate Court in California ruled in Calvo v. HSBC that an absence of an assignment of deed of trust from MERS to HSBC is irrelevant.
The court ruled the statute cited by plaintiffs to prove an improper foreclosure applies only to mortgages, not deeds of trust, and other state laws give MERS authority to foreclose.
The 4th District Appellate Court in California also rejected a claim in Robinson v. Countrywide that MERS did not have the right to foreclose on property. The judge cited another state victory, Gomes v. Countrywide opinion agreeing "with the Gomes court that the statutory scheme … does not provide for a preemptive suit challenging standing."
"MERS' legal standing as mortgagee, or agent of the note holder, gives MERS the authority under California law to take action on behalf of the owner of the note," said Janis Smith, MERS vice president of corporate communications.
Write to: Kerri Panchuk.
Tags: California, foreclosures, MERS, Mortgage Electronic Registration System
Posted in Servicing/Default, Top Stories | 1 Comment »
A look at stories across HousingWire's weekend desk, with more coverage to come on bigger issues:
Any new mortgage refinancing plan designed by the government is likely to be limited in scope and not as large as originally anticipated, Barclays Capital analysts said.
Barclays does not forecast a blanket extension of the federal Home Affordable Refinance Program, but analysts said there "could be a limited extension to loans that are above the 80 loan-to-value ratio as a result of declining home prices."
At this point, Barclays analysts believe a limited expansion of HARP would only have a moderate effect on prepayments for recent vintage mortgage classes.
The representation and warranties issue is dominating discussions over the proposed refinance program. The main advantage for banks under an expanded refinance program would be the institutions' ability to avoid the risks of having to buy back loans.
"A full-blown waiver of rep and warranty risk is unlikely," Barclays analysts wrote. "However, a more limited program remains probable." The firm says rep and warranty risk may be waived when dealing with borrowers who have clean payment histories and who through home price depreciation jump to 80 LTV.
"We do not foresee a blanket extension of the HARP program to loans originated after the June 2009 cut-off," Barclays concluded.
The Federal Reserve will hold the first of three hearings on the merger of Capital One (COF: 45.77 +0.35%) and ING Direct USA on Tuesday.
The hearing will focus on concerns raised about the merger creating a too-big-to-fail type situation that challenges regulators and the market. The banks together will form the fifth largest U.S. bank by deposits.
The Fed is accepting open comments on the proposed merger through Oct. 12. The board plans to weigh several factors to ensure the new banking entity formed by the transaction does not disrupt the financial markets.
UBS upped its estimate of losses experienced at the hands of a rouge trader to $2.3 billion.
The global investment bank said it discovered unauthorized trading within its global synthetic equity business in London last week, resulting in a $2 billion-plus loss.
The 31-year-old trader has since been charged with fraud, the bank said. "We have now covered the risk resulting from the unauthorized trading, and the equities business is again operating normally within its previously defined risk limits," UBS said.
The trader created the losses when conducting unauthorized speculative trading in various S&P 500, DAX and EuroStoxx index futures over the past three months. Moody's Investors Service announced Friday it was placing several UBS equity linked notes on review for a possible downgrade.
A new book by Ron Suskind alleges Treasury Secretary Timothy Geithner undermined the orders of President Obama by ignoring a 2009 presidential order to dissolve Citigroup, The Hill reported this week.
Citi was one of the financial institutions that required a government lifeline to transition post-financial crisis. The report is included in Suskind's new book, "Confidence Men."
Write to: Kerri Panchuk.
Tags: Capital One, EuroStoxx, Federal Reserve, HARP, Home Affordable Refinance Program, ING Direct USA, LTV, Moody's Investors Service, President Obama, rep and warranty risk, rouge trader, S&P 500, Treasury Secretary, UBS, Xetra DAX
Posted in Secondary Market/Investors, Top Stories | 2 Comments »
The partners at the law firm of Quinn Emanuel Urquhart & Sullivan concluded a few years ago, before the financial crisis, that there was simply too much competition for representing major banks.
So they decided to find some elbow room. The Los Angeles-based company would get out of the business of representing big banks and accounting firms and gear the work toward companies suing those institutions.
“There weren’t many, if any, prestigious law firms who were willing to be adverse to these global financial firms,” said William Urquhart, a partner at Quinn Emanuel.
Posted in Around the Web | No Comments »
Action taken by the Senate may save one of the most important economic reports in the nation from the chopping block.
The 2012 economic census, which was at risk of being eliminated after the House of Representatives sliced the Census Bureau's funding 25% two months ago, could be retained after the U.S. Senate Committee on Appropriations voted for a smaller funding cut and specifically voiced its support for the report.
The Senate body voted to slim the Census Bureau's fiscal 2012 funding by 18%, to $943 million, from $1.15 billion in fiscal 2011.
"The Committee strongly supports the Economic Census, and directs the Bureau to preserve funding when considering reductions," said the report from the committee on its vote. "Any programmatic decreases should first focus on reductions to periodic censuses and agency-wide administrative cost savings."
"Is that good news!" exclaimed Maurine Haver, chair of the National Association for Business Economics 's statistics committee and president of Haver Analytics, on hearing that language. The organization has been lobbying for the preservation of the economic census, which Haver calls "the foundation of our economic statistical system."
"It's really a relief to me that the Senate has actually recognized that," she added. "We've been talking to them and writing letters to make sure the importance of the economic census is being made clear. That phrase suggests to me that we did get through."
The Economic Census, published every five years, provides detailed data that covers most of the U.S. economy, from the national to the local level. Industry reports include statistics such as the number of businesses, employment, payroll, capital expenditures, cost of supplies, value of shipments and receipts.
"There really is no more important economic program than the economic census except perhaps for the payroll employment data," said Haver, who was receptive to the Senate committee's suggestion that other reports could be mothballed to keep the economic census going.
The census is an exhaustive report that attempts to gather data from every employer in the nation. Medium-sized and large firms are asked to report multiple data variables to the Census Bureau, while data on small firms is gathered from the administrative records of other federal agencies. Because it's so extensive, it is much more expensive to produce than other economic data series gathered by government agencies, which typically rely on surveys that go out to a smaller sampling of firms.
It's still unclear whether the Senate's smaller budget cut will leave the bureau enough financial wiggle room to continue producing the report, which costs $124 million, according to figures from NABE.
Write to Liz Enochs.
Tags: census bureau, economic census, jobs, mortgage industry, NABE, national bureau for business economics, real estate
Posted in Secondary Market/Investors, Top Stories | No Comments »
