Archive for September, 2011
The average interest rate on a 30-year, fixed-rate mortgage reached 4.01% for the week ending Sept. 29, the lowest ever recorded on the Freddie Mac survey.
The 15-year FRM also averaged a record low 3.28% for the week. The new lows come after the Federal Reserve announced it would buy $400 billion of long-term Treasury bonds and reinvest in agency mortgage-backed securities in order to keep borrowing costs down.
"Fixed mortgage rates fell to all-time record lows this week following the Federal Reserve's announcement," said Freddie Mac Chief Economist Frank Nothaft.
However, adjustable-rate mortgages were unchanged. The 5-year Treasury-indexed hybrid ARM averaged 3.02% with an average 0.6 point, the same as last week. The 1-year Treasury-indexed ARM averaged 2.83% with an average 0.6 point, up only 1 basis point from the prior week.
Nothaft pointed out several other indices were showing signs of improvements in the housing sector. The Federal Housing Finance Agency reported its home price index increased for the fourth-straight month in July. The Standard & Poor's/Case-Shiller HPI also increased that month.
But those were the result of the typical home-buying season. It remains to be seen whether or not the historically low rates from the Fed's action would prop up the market through a more challenging winter, especially when the previous rounds of quantitative easing failed to boost the economy to recovery.
The first signs appeared Thursday when the National Association of Realtors showed August pending home sales fell 1.2%.
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Follow him on Twitter @JonAPrior.
Tags: 30-year FRM, Federal Reserve, FHFA, freddie mac, FRM, home sales, house prices, MBS, mortgage rates, operation twist, S&P/Case-Shiller, Treasurys
Posted in Origination/Lending, Top Stories | 1 Comment »
The percentage of seriously delinquent mortgages serviced by the largest banks and thrifts in the second quarter increased for the first time since the end of 2009, according to the Office of the Comptroller of the Currency.
The regulator monitored 32.7 million loans with nearly $5.7 trillion of principal balances. Of those mortgages, 4.9%, or nearly 1.6 million, are more than 60-days delinquent or at least one month past due while in bankruptcy. That's up from 4.8% from the previous quarter and down from 6.1% a year earlier.
The peak occurred in the fourth quarter of 2009, when 7.1% of all mortgages were reported seriously delinquent.
The OCC said 1.3 million mortgages were in some stage of the foreclosure process in the second quarter, up 12.3% from last year.
The data are yet another sign the largest servicers are restarting the foreclosure process after putting a freeze to correct faulty affidavits. According to the OCC, servicers completed 121,202 foreclosures in the second quarter, up 1.2% from the previous period. Completed foreclosure prevention efforts such as modifications and short sales were two-and-a-half times larger.
Nearly every delinquency bucket showed an increase from the previous quarter with the largest growth in the 60- to-90-day segment, which rose 9.2%.
"The increase in early-stage delinquencies reflects seasonal effects as well as a sluggish economy and elevated unemployment," the OCC said in the report.
Meanwhile, the percentage of serviced mortgages current and performing dropped for the first time since the end of last year.
Roughly 88% of the mortgages were current, down 60 basis points from the previous month. Comparatively, 93.1% of all mortgages guaranteed by the government-sponsored enterprises were current and performing.
Some 5.5 million mortgages are between 30-days delinquent or in the foreclosure process.
"The large inventory of seriously delinquent mortgages and foreclosures in process continued to work its way through the collections and loss mitigation process—either through home retention actions such as modifications, or through foreclosures and short sales when home retention alternatives were not possible," the OCC said.
Write to Jon Prior.
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Tags: affidavits, delinquencies, foreclosure, GSEs, mortgage, OCC, Office of the Comptroller of the Currency, servicers
Posted in Servicing/Default, Top Stories | 2 Comments »
Stagflation is a risk central bank policymakers must guard against when evaluating new rounds of accommodative monetary policy, according to Charles Plosser, president of the Federal Reserve Bank of Philadelphia.
Nearly one year after the start of QE2, Plosser said it's time to look at inflationary risks.
"Monthly changes in inflation have moderated slightly from those seen earlier in the year when the prices of many commodities, including oil, were rising sharply," Plosser said. "However, measured on a year-over-year basis, both total inflation and core inflation continue to advance. I do anticipate that with many commodity prices now leveling off or falling, and inflation expectations relatively stable, inflation will moderate in the near term."
Plosser said while deflation was a concern when the Federal Reserve embarked on QE2 by purchasing $600 billion in long-term securities, the economic environment today is somewhat changed with inflation higher and unemployment stagnant around 9%.
"It is appropriate to ask what criteria we are using to justify further accommodation," Plosser told a gathering of businessmen outside Philadelphia. "In this environment, I think it is very important that we refrain from actions that risk fueling a steady rise in inflation or inflation expectations over the medium term."
He was one of three regional Fed chief who voted against the latest policy decision by the Federal Open Market Committee, and remains skeptical of "Operation Twist."
"I dissented from these decisions because I believe that they will do little to improve the near-term prospects for economic growth or employment and they do pose risks," Plosser said.
"Policy actions should never be considered free and should be evaluated based on the costs and benefits," he said. "Based on our experience with Operation Twist in the 1960s and with last year's QE2, the reduction in long-term rates is likely to be less than 20 basis points for the 10-year Treasury yield, which is currently only 2%."
He added, "The pass-through to the rates at which consumers and businesses actually borrow is likely to be much less. Thus, I am skeptical that this will do much to spur businesses to hire or consumers to spend, given the ongoing structural adjustments occurring in the economy and the uncertainties posed by the fiscal challenges both here and abroad."
Write to Kerri Panchuk.
Tags: Federal Open Market Committee, Federal Reserve, Federal Reserve Bank of Philadelphia, operation twist, QE2, QE3, stagflation, Treasury securities
Posted in Secondary Market/Investors, Top Stories | No Comments »
Pending home sales fell again in August as historically low interest rates and affordability do little to spur demand, according to the National Association of Realtors.
The large trade association, which has more than 1.1 million members, said its pending home sales index, which is based on contracts signed, decreased 1.2% to 88.6 for August from 89.7 for July. NAR said the index is 7.7% higher than 82.3 for the year-ago August.
"Broadly speaking, contract signing activity has been holding in a narrow range for many months," said NAR chief economist Lawrence Yun. And the "unnecessarily restrictive mortgage underwriting standards are attenuating the housing recovery and are a risk factor for the overall economy."
He said the housing market continues to underperform due to "pent-up demand in household formations."
"We continue to experience a pattern in which financially qualified homebuyers, willing to stay well within their means, are being denied credit — a factor in elevated levels of contract failures," according to Yun.
"We need to remove the road blocks to the housing recovery for people who are trying to take advantage of excellent affordability conditions," Yun said. "Unfortunately, some buyers also will face notably higher mortgage rates on jumbo loans because of a lack of competition in the banking industry."
NAR said the largest monthly decline was in the Northeast, which was significantly disrupted by Hurricane Irene at the end of August.
The pending home sales index for the Northeast fell 5.8% in August. The index for the Midwest slipped 3.7% and declined 2.4% in the West. Pending sales in the South rose 2.6% from the prior month. Sales are higher in each region of the country from a year earlier.
NAR expects 5 million existing home sales in 2011, a slight increase from last year.
Write to Jason Philyaw.
Follow him on Twitter: @jrphilyaw.
Tags: NAR, National Association of Realtors, pending home sales
Posted in Origination/Lending, Top Stories | 1 Comment »
Mortgage industry technology provider DocMagic is rolling out a new product that allows mortgage professionals to put their electronic signatures on any document or contract in .pdf file format.
DocMagic said it will not charge for use of the signature software, which produces signed documents that are "legally effective, valid and enforceable," the company said.
The solution – DocMagic Inc. – digitally seals the signed documents, while also auditing the document trail and sending e-mail notifications to parties associated with the document.
The Carson, Calif-based mortgage technology firm used its proprietary ClickSign technology to offer the service. Currently, mortgage origination documents are printed out, signed, and then scanned to capture signatures. The new DocMagic service bypasses the printing out part of that equation.
"We developed eSign to be used for any document purely as goodwill for the industry, and we did it for free to encourage greater adoption of electronic signatures," said Dominic Iannitti, president and CEO of DocMagic.
"I strongly believe that our offering will revolutionize the way documents are signed by creating a domino effect among companies using it," he added. "We are laying the foundation for other software vendors to follow suit and our aim is to reduce the need to rely on paper and help organizations go green.”
The movement towards this product will allow multiple parties to sign online, essentially quashing the need for documents to be continuously faxed or e-mailed for the purpose of obtaining signatures.
Write to Kerri Panchuk.
Tags: DocMagic Inc., electronic signatures, mortgage, mortgage technology
Posted in Origination/Lending, Top Stories | No Comments »
Real gross domestic product — which measures the output of goods and services produced in the economy — increased at an annual rate of 1.3% in the second quarter, according to the Commerce Department.
The latest reading is up from an earlier estimate of GDP growth of 1% for the three months ended June 30. In the first quarter, real GDP increased only 0.4%.
"The upward revision to second-quarter growth was mainly due to faster consumption growth of 0.7% compared with 0.4% previously," said Paul Dales, senior U.S. economist for Capital Economics.
"This was despite a downward revision to real disposable income growth, to 0.6% from 1%, meaning that households dipped further into their savings," according to Dales. "The contribution from net trade was also larger than previously thought, as export growth was stronger and import growth weaker."
The Commerce Department's Bureau of Economic Analysis said second-quarter real GDP growth reflected positive contributions from nonresidential fixed investment, personal consumption expenditures exports and federal government spending.
"We'll know more after the release of August's personal spending data (Friday), but it looks as though GDP growth may come in close to 2.5% in the third quarter," Dales said. "Indeed, the strength of capital goods shipments in August points to a decent rise in business investment in the quarter as a whole."
Still, Dales doesn't expect stronger GDP growth in the fourth quarter nor in 2012 with households still deleveraging.
"We expect GDP growth of just 1.5% next year, which won't be enough to reduce the unemployment rate," Dales said.
Write to Kerri Panchuk.
Tags: Bureau of Economic Analysis, Capital Economics, commerce department, GDP, Gross Domestic Product, real gross domestic product
Posted in Origination/Lending, Slider, Top Stories | No Comments »
The number of initial jobless claims fell 8.6% last week, dropping below 400,000 for the first time in months.
The Labor Department said the seasonally adjusted figure of actual initial claims for the week ended Sept. 24 decreased by 37,000 to 391,000 from 428,000 the previous week, which was revised upward 5,000.
Analysts surveyed by Econoday expected 420,000 new jobless claims last week with a range of estimates between 410,000 and 425,000. Most economists believe weekly jobless claims lower than 400,000 indicate the economy is expanding and jobs growth is strengthening.
The four-week moving average, which is considered a less volatile indicator than weekly claims, fell by 5,250 to 417,000 from the prior week's 422,250.
The seasonally adjusted insured unemployment rate for the week ended Sept. 17 stayed at 3%, according to the Labor Department.
The total number of people receiving some sort of federal unemployment benefits for the week ended Sept. 30 rose to 6.98 million from 6.89 million the prior week.
Write to Jason Philyaw.
Follow him on Twitter: @jrphilyaw.
Tags: jobless claims, labor department
Posted in Secondary Market/Investors, Top Stories | 1 Comment »
Federal Reserve Chairman Ben Bernanke delivered a speech Wednesday afternoon on emerging market economies, but it was his remarks about the state of the still-ailing U.S. economy in a Q&A after the speech that garnered the most attention.
Calling long-term unemployment a "national crisis," Bernanke called on the government and Congress to act to solve a problem the Fed can't fix with its historic low interest rates. Roughly 6.2 million Americans — or 45.1% of all unemployed — have been jobless for more than six months, according to government stats. That total sits at its highest since the Great Depression.
Bernanke called the numbers "unheard of," saying Americans "are losing the skills they had, they are losing their connections, their attachment to the labor force."
His remarks came after a speech in Cleveland in which Bernanke said the U.S. "would do well to re-learn some of the lessons from the experiences of the emerging market economies."
The Fed chairman also called on Congress to do more to help boost a U.S. housing market that remains, at best, in the doldrums. Bernanke said "strong housing policies to help the housing market recover" were needed to advance a tepid U.S. economy, along with a focus on jobs and solving budget imbalances.
More than 6.3 million U.S. homes are 30 days or more behind on mortgage payments or in foreclosure, according to mortgage services firm Lender Processing Services (LPS: 16.81 +1.57%). And while housing prices are improving month-over-month, prices remain well below year-ago levels — the most recent Standard & Poor's/Case-Shiller housing price index found prices down 4.1% in July across 20 of the nation's largest metropolitan areas.
Mortgage rates have touched historic lows in recent weeks, after the Fed introduced plans to buy $400 billion of Treasury bonds in an effort to lower long-term borrowing costs. The Fed also said it would invest reinvest principal payments from agency debt into additional agency mortgage-backed securities. But with jobs a looming concern, questions remain as to just how many borrowers will be able to take advantage of lower rates.
Eric Rosengren, president of the Federal Reserve Bank of Boston, hinted Wednesday in his own remarks at what sort of policy options might best for housing — arguing new policies were needed to allow underwater homeowners to refinance their loans.
"Clearly getting more money into the hands of homeowners who spend it could help to fuel GDP growth," he said. "This would reduce one of the impediments to a more significant effect from the monetary policy actions taken to date."
Write to Paul Jackson.
Follow him on Twitter @pjackson.
Tags: Ben Bernanke, Congress, Federal Reserve, Federal Reserve Bank of Boston, Lender Processing Services, LPS, Standard & Poor's/Case-Shiller
Posted in Secondary Market/Investors, Top Stories | 3 Comments »
The delinquent unpaid balance on commercial mortgage-backed securities monitored by the credit ratings agency Morningstar dropped 5.2% in August.
The company reviewed $730.6 billion in securities and found $58.9 billion in delinquencies, down from more than $62 billion the month before and the lowest total in more than one year. This $3.2 billion drop followed a $1.29 billion increase from June to July.
"More importantly, a decline has now been experienced in three of the previous four reporting periods," Morningstar said.
The majority of the troubled CMBS loans remain in the later stages of delinquency. According to Morningstar, roughly $49.9 billion of the delinquencies were in 90-plus day delinquency, foreclosure or REO.
Commercial real estate plagues most of the smaller bank failures. An improvement in troubled loans could mean easing exposures for these smaller firms.
But there is still plenty of room to go. According to Barclays Capital, early data for September showed a decline in the cure rate – or the percentage of loans moving from delinquency to current status to 3% from 6%.
"It is probably too early to talk about the formation of a new trend signaling that fewer problem loans are able to cure; however, we find these data useful and will continue to monitor this trend," BarCap said.
Morningstar also showed that while the delinquent unpaid balance on CMBS loans was down 4% from last year, it remains 26 times higher than the $2.2 billion low point in March 2007.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: bank failures, Barclays Capital, CMBS, data, delinquencies, foreclosure, Morningstar, REO
Posted in Servicing/Default, Top Stories | No Comments »
The Federal Housing Finance Agency proposed two mortgage servicing compensation models Tuesday, prompting the market to quickly react with a list of pros and cons.
Analysts Henry Coffey Jr. and Jason Weaver with Sterne Agee released a note evaluating the proposals.
The first would essentially reduce the bottom-line servicing fee on government-sponsored enterprise loans to 12.5 to 20 basis points from 25 bps while creating a reserve of three to five basis points of principal balance to fund "nonperforming servicing or what (the analysts) call special servicing," the Sterne Agee analysts said.
Steve Horne, CEO of Wingspan Portfolio Advisors, supports the FHFA initiative saying, "it’s a step in the right direction because there is clearly a misalignment of incentives and interests under the current compensation structure."
"I applaud the fact (the regulator) is saying special servicing should be independent of primary servicers. I appreciate the intent," Horne said.
Additionally, Horne said he has no problem with the idea of funding special servicing shops because they have the potential to pay for themselves through the increased value they bring to portfolios through their work.
Sterne Agee analysts said the second plan would pay a fix dollar amount for each loan serviced while also separating "the reps and warranties guarantee that was made by originator/servicers from the servicing contract."
As far as what's good and bad about the proposals, Sterne Agee analysts say lowering servicing fees upfront will reduce the amount of excess servicing that originators who sell mortgage servicing are required to fund, thereby enhancing the realizable cash gains that come with selling servicer retained mortgages.
Deutsche Bank (DB: 44.13 +1.68%) adds that Fannie Mae and Freddie Mac would get increased discretion to create incentives for good credit performance and impose penalties for fast prepayments.
"Market participants may worry that servicers will have reduced disincentives to solicit borrowers for refinance," said housing analyst Doug Bendt. "But FHFA plans to require the GSEs to monitor servicers and give them the option to impose fees on those with prepayment speeds much faster than their peers."
Furthermore, the Sterne Agee analysts said, "the creation of a reserve account or a set of special fees to pay for nonperforming servicing creates the funds to pay for the extra services and legitimizes the concept of a special servicer."
This should give banks an avenue and structure to fund the services provided by special servicers "without harming the profitability of the core, payments, processing business," according to the Sterne Agee analysis.
By bifurcating servicing, the analysts say regulators will unfreeze the market for servicing sales since many in the industry blame reps and warranty risks for freezing up the market.
"Under Basel III, banks could be required to allocate up to 17% of capital to MSRs. By potentially reducing/eliminating excess servicing and facilitating the more ready sale of MSRs, these proposals should be a positive for banks," the Sterne Agee team concluded. "The proposals should reduce the capital commitment required to originate mortgages, a positive for smaller, non-bank originators and by implication a negative for bank originators."
As far as claims that the deals will impact payment speed, the Stern Agee analysts speculated there won't be any negative impact on that front, saying the "driving force behind mortgage refinance is not servicers."
Overall, Horne with Wingspan said, "I think it's a good opportunity. It's consistent with a lot of trends. Special servicers have existed for years in the commercial space." Moving this set-up more into the residential space is just a natural step and a new truth, he said.
Write to Kerri Panchuk.
Tags: deutsche bank, Fannie Mae, Federal Housing Finance Agency, FHFA, freddie mac, GSE, mortgage servicing, Servicing/Default, Sterne Agee, Wingspan Portfolio Advisors
Posted in Servicing/Default, Slider, Top Stories | 1 Comment »
