Archive for September, 2011
Federal Reserve Bank of New York President William Dudley defended the actions of monetary policy makers in a speech last week, saying Basel III requirements for big banks are necessary to ensure a too-big-to-fail institution does not disrupt the global financial markets.
"In the United States, I think we have made more progress in bolstering the resilience of our banking institutions than we have on the other tracks," he said. There are two elements to this. The first element is the increase in capital that has already occurred. The major U.S. banking institutions are much better capitalized today than they were in the fall of 2008."
"The second element is the international agreement to implement new Basel III capital standards. Not only will Basel III significantly raise the Tier I capital standard when it is fully implemented in 2019, but also raises the quality of capital by putting the emphasis on tangible common equity."
Dudley said the implementation of capital surcharges for systemically important financial institutions is needed to stave off bank failures that could derail the U.S. and broader international economy.
He called for increased disclosure from international banks operating in United States, as well, saying it's hard for American regulators to accurately gauge a foreign company's balance sheet.
"U.S. bank regulators do not have access to the consolidated global balance-sheet information of the foreign banks that operate in the United States (or vice versa for that matter)," he said. "Our examiners see data associated with the foreign firms' U.S. operations, but not how that fits in with their operations abroad."
"Let me emphasize the importance of the mission — to reform and better regulate the global financial system so it can perform its key financial intermediation function of funneling savings from investors to borrowers even under adverse circumstances. Clearly, the financial system we had in 2008 was woefully inadequate relative to this mission," Dudley said.
Write to Kerri Panchuk
Tags: Basel III, big banks, capital requirements, Federal Reserve Bank of New York
Posted in Secondary Market/Investors, Top Stories | No Comments »
As if expectations were not low enough for the special congressional committee charged with writing a deficit-reduction deal, they seem to be falling by the day as the two parties harden their positions on spending and taxes.
Last week began with contradictory markers from President Obama and Speaker John Boehner. Boehner reiterated that Republicans would oppose any tax increases, and then Obama, newly aggressive, warned that he would veto any measure that would trim Medicare benefits without also raising taxes on the wealthy.
Posted in Around the Web | No Comments »
A look at stories across HousingWire's weekend desk, with more coverage to come on bigger issues:
UBS Group (UBS: 14.00 +0.14%) CEO Oswald J. Grübel announced his resignation from the Swiss investment bank over the weekend.
Grübel took full responsibility for the recent rogue trading incident that cost the firm $2.3 billion. The board of directors appointed Sergio Ermotti as the interim Group CEO effective immediately.
"The board regrets Oswald Grübel's decision," said UBS Chairman Kaspar Villiger. "Oswald Grübel feels that it is his duty to assume responsibility for the recent unauthorized trading incident. It is testimony to his uncompromising principles and integrity."
As part of the announcement, the UBS board of directors said it would fully cooperate with the independent investigation and will accelerate the alignment of the investment bank with its wealth management businesses.
"In the future, the investment bank will be less complex, carry less risk and use less capital to produce reliable returns and contribute more optimally to UBS’s overall objectives," Villiger said.
Fannie Mae was given a report in 2005 detailing breakdowns in the foreclosure process but did not correct the problems, according to the Federal Housing Finance Agency Inspector General.
The FHFA IG released its report on Friday, finding the regulator lacked the staff to adequately monitor the government-sponsored enterprises. But it also found Fannie itself failed to head off signs of mishandled foreclosures that have sparked investigations, millions in costs and possibly billions in penalties since.
"In 2005, Fannie Mae hired an outside law firm to investigate a variety of allegations referred by one of its investors regarding purported foreclosure processing abuses and other matters," according to the FHFA IG.
The report continued, citing that in May 2006 the law firm issued a report finding certain law firms representing Fannie in foreclosure filed false documents in Florida. The report said the filings were unlawful, unauthorized by Fannie and advised the GSE to crack down on the attorneys.
"The report observed that Fannie Mae did not take steps to ensure the quality of its foreclosure attorneys’ conduct, the legal positions taken in the attorneys’ pleadings, or the manner in which the attorneys processed foreclosures on the Enterprise’s behalf," according to the FHFA IG.
Recent employment numbers eased concerns with Standard & Poor's analysts late Friday.
Jobless claims fell 2% for the week ended Sept. 17. S&P said the improvement combined with data from those receiving unemployment benefits through state-run programs was encouraging despite their recent volatility.
"Against a backdrop of healthier economic indicators such as retail sales, industrial production, and durable goods orders," S&P said. "U.S. unemployment insurance data may offer some additional hope that the U.S. could avoid recession."
Members of a White House initiative and the Department of Housing and Urban Development will hold a conference Tuesday to discuss access to fair housing opportunities for Asian Americans and Pacific Islanders.
An administration official said some affected remain silent on the potential discrimination they face when applying for a mortgage.
"The Act prohibits discrimination in housing, and is particularly important for AAPIs, whose population grew faster than any other group in this country over the last 10 years. One in five AAPIs face housing discrimination, but only one in a hundred fair housing complaints come from AAPIs," according to HUD.
Regulators closed two banks over the weekend, bringing the 2011 total to 73.
The Virginia State Corporation Commission closed the Bank of Commonwealth. North Carolina-based Southern Bank and Trust Company agreed to assume all $901.8 million in deposits and purchase $924.3 million of the $985.1 million in assets. The Federal Deposit Insurance Corp. will retain the rest.
The FDIC estimates the closing to cost the Deposit Insurance Fund $268.3 million.
The California Department of Financial Institutions closed Citizens Bank of Northern California. The Tri Counties Bank in Chico, Calif. agreed to assume all $253.1 million in deposits and purchase essentially all $288.8 million in assets.
The closing is estimated to cost the DIF $37.2 million.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: California, fair housing act, Fannie Mae, FDIC, FHFA, foreclosure, HUD, Monday Morning Cup of Coffee, robo-signing, S&P, UBS, unemployment bank closing, White House
Posted in Servicing/Default, Top Stories | No Comments »
Examining the extent of mishandled foreclosures at the largest mortgage servicers and fixing a broken system will take more than a year, according to Acting Comptroller of the Currency John Walsh.
Last fall, servicers were found to be signing foreclosure affidavits en masse and without a legal review of the loan files in a scandal that became known as robo-signing. Federal regulators and state attorneys general found oversight and procedural problems across the entire industry and forced 14 of the largest banks — firms that serviced 68% of the mortgages in the U.S. — to sign consent orders. The actions also included two firms that handled documents in foreclosure cases: Lender Processing Services (LPS: 16.82 +1.63%) and Mortgage Electronic Registration Systems.
They agreed to hire third parties to examine nearly 4.5 million foreclosure files for any potential financial harm and to establish new policies to properly evaluate borrowers for a slew of other options before proceeding with a foreclosure.
"Unfortunately, such a complex process will take another year and more to complete," Walsh said before the Institute for International Finance Friday. "I wish it could be completed more quickly, but it’s important that it be done correctly and in a way that assures fair treatment for homeowners who underwent foreclosure proceedings."
Some progress has already been made. Walsh said regulators will release details of the independent foreclosure reviews for each servicer "shortly." Top AGs involved in the separate investigation reportedly met with banks again Friday to make more progress on an agreement.
But contacting borrowers who may have been potentially harmed in the robo-signing debacle, those that went through foreclosure during 2009 and 2010, will be a challenge for Walsh and the other regulators.
Walsh reiterated that living up to the consent orders would be "complex and expensive" for the banks involved, including Bank of America (BAC: 7.22 -1.10%), Wells Fargo (WFC: 29.38 +1.14%), JPMorgan Chase (JPM: 37.265 -0.60%), Citigroup (C: 30.46 +0.26%) and others.
The OCC, the Federal Reserve, the newly formed Consumer Financial Protection Bureau, the Department of Housing and Urban Development, the Federal Housing Finance Agency and other rulemakers are at work crafting a new set of servicing standards, which could range from single-point-of-contact requirements to new fee structures.
"The challenges before us are substantial, but so are the steps we have taken in our enforcement orders," Walsh said. "I believe that we are on track to settle outstanding issues in a way that respects the needs of all who have truly suffered from flaws in the system and restores confidence in the system."
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: AGs, Bank of America, CFPB, Citigroup, Fed, Federal Reserve, FHFA, foreclosure, HUD, John Walsh, JPMorgan Chase, LPS, MERS, modification, OCC, reviews, robo-signing, servicer, settlement, Walsh, Wells Fargo
Posted in Servicing/Default, Top Stories | 1 Comment »
By Loren Picard and Matthew Ostrander
For those of you old enough to remember, the title of this piece is an adaptation of President Ronald Reagan’s Brandenburg Gate speech in West Berlin, Germany, in which he said “Mr. Gorbachev, tear down this wall!” The wall in question was the Berlin Wall. Here is an excerpt, compliments of Wikipedia:
“We welcome change and openness; for we believe that freedom and security go together, that the advance of human liberty can only strengthen the cause of world peace. There is one sign the Soviets can make that would be unmistakable, that would advance dramatically the cause of freedom and peace. General Secretary Gorbachev, if you seek peace, if you seek prosperity for the Soviet Union and Eastern Europe, if you seek liberalization, come here to this gate. Mr. Gorbachev, open this gate. Mr. Gorbachev, Mr. Gorbachev, tear down this wall!”
As the authors of this piece, we are making a similar call to arms with regard to nonagency residential mortgages. For too long, the nonagency market has been held hostage by the Wall Street/Ratings Agency Kleptocracy Complex. How long will people in the mortgage industry wait before the market is started up again? How many times do we have to hear girlie men (great phrase from a former California governor) bemoaning the “unsustainability” of the government’s role in the mortgage business? Last I checked, the government had nothing to do with the nonagency mortgage loan market. Everyday borrowers who want to borrow can’t find loans.
Let us start with the currently accepted wisdom that all significant mortgage securitizations have to go through Wall Street and one or more ratings agencies have to put their rubber stamp on the deal. Set aside for a moment the absurd and insidious deferential treatment the agencies receive via being encoded into investment policies from private to government investment funds.
Now focus on what is happening. We have a situation where Wall Street banks made billions of dollars bundling your mortgages into bonds and selling them at markups to unsuspecting investors. Add in the fact that the ratings agencies are not only culpable in the credit crisis but also continue to hold sway over the return of any viable market for nonagency investments.
Wall Street desperately needs to be in the center of any new nonagency market. They are under the gun from every angle and need the revenue that would come from the return of the market. The ratings agencies are doing what is rational. You would become super conservative, too, if you were made out to be a villain and the Securities and Exchange Commission is crawling through your cupboards looking for rotten analysis.
Step back for a moment. Close your eyes. Envision a market without Wall Street and the ratings agencies. I can hear the protestations: "Wall Street provides liquidity. Wall Street is efficient. The rating agencies only give opinions, not guarantees." That’s all well and good, but honestly, is the market so large that we need these players to actually do deals? There are just as many capable people working outside of Wall Street and the ratings agencies that can easily structure simple, transparent deals. It is not difficult to estimate losses, prepays and so forth. On the flip side, investors can and should do their own due diligence. Subordination levels can be negotiated instead of being handed down by the ratings agency gods.
The nonagency market is so small right now that it is conceivable that deals can be getting done without the overhead charges of Wall Street and the ratings agencies. Why not save the $1 million dollars in deal costs and the give-up in markup by Wall Street and seek out trusted partners and get something done? All markets start small. If deals start getting done, standards will solidify, tolerances will be established, and the ratings agencies will be playing catch up to what works in the market instead of trying to dictate what should work without regard to economics.
Unlike the Cold War, bad guys in the form of the former USSR, the tearing down of the wall preventing nonagency deals from getting done is now the work of the good guys — the mortgage companies who truly give borrowers choice when it comes to mortgage products. So, we implore you to rise up, network, call like- minded firms and start the revolution of tearing down the walls of the Kleptocracy.
Matthew Ostrander is co-founder and CEO of Parkside Lending LLC, in San Francisco, Calif.
Loren Picard is senior managing director of LMA Capital Inc. in Mill Valley, Calif., and an outside director on Parkside Lending’s board.
Tags: Brandenburg Gate, Kleptocracy, mortgage, mortgage banker, nonagency, ratings agencies, residential mortgages, Ronald Reagan, SEC, Securities and Exchange Commission, Wall Street
Posted in Open Season, Voices | No Comments »
The Standard & Poor's/Case-Shiller 20-city composite home price index, which will be released on Tuesday, likely rose 1.2% in July from the previous month, a Zillow Inc. (Z: 26.999 +1.42%) forecast showed.
The Case-Shiller, a key housing price index that covers 20 U.S. metropolitan areas, likely fell 4% in July from the year-ago period, Zillow said.
The S&P/Case-Shiller 10-city index is expected to show the same month-over-month increase compared to June, while also registering a decline of 3.4% from a year earlier.
"The market is full of conflicting signals right now with August consumer confidence down by 25%, July pending homes slipping, and the four-week moving average of mortgage applications also dipping," said Zillow Chief Economist Stan Humphries in a statement.
Humphries' expectations for the Case-Shiller index were initially much weaker, but were bolstered recently by two indicators.
The Zillow home value index, a key factor in its Case-Shiller forecast, rose 0.12% in July, and August home sales rose 7.7%, well ahead of expectations.
Still, uncertainty is plaguing the market and will exert a drag on housing, according to Humphries.
"I still believe that the continued fears about a Greek default, weak employment growth and low consumer confidence will ultimately translate into weaker housing performance in the back half of this year," he said. "Looking ahead, expect fading monthly momentum in Case-Shiller."
Write to Liz Enochs.
Tags: Case-Shiller, hoiusing prices, home price index, housing index, housing indices, real estate prices, S&P, s&p's, S&P/Case-Shiller home price index, Standard & Poor's, z, Zillow, Zillow Inc.
Posted in Secondary Market/Investors, Top Stories | No Comments »
The United States needs to shift its housing policy to recognize the rising number of Americans opting for rental housing and reduce incentives that prioritize homeownership, according to the National Multi Housing Council.
"We have a tremendous opportunity to create thriving and sustainable communities," said council President Doug Bibby in a presentation to the National Apartment Summit in Tysons Corner, Va., earlier this week. "But only if we change our thinking about rental housing and renters."
There is a growing disconnect between America's housing needs and current housing policy, he told the group.
“The U.S. is on the cusp of fundamental change in our housing dynamics as changing demographics and changing housing preferences drive more people away from the typical suburban house and toward the type of housing that rental housing offers,” Bibby said.
“Families with children made up more than half of households decades ago, but they made up only one-third of households in 2000, and by 2025, they will be closer to one-fifth,” he said.
More than 14% of U.S. households live in apartments, and in this decade, renters could make up more than half of all new households as their ranks swell by more than 7 million, according to the council, a research and lobbying group for the apartment industry.
Bibby argued housing policy should change to de-emphasize homeownership, an area where he said incentives "overwhelmingly benefit the wealthy and distort the economy by encouraging people to over-invest in housing."
Instead, federal, state, and local governments should encourage compact housing development near transportation and employment centers, and change zoning and land-use regulations to discourage urban sprawl.
If 60% of new growth were shifted to that kind of development, the nation could cut 85 million metric tons of carbon dioxide emissions annually and save more than $100 billion in infrastructure costs, according to Bibby.
Write to Liz Enochs.
Tags: apartments, doug bibby, homeownership incentives, homeownership trends, housing policy, land use, land use policy, multifamily, National Multi Housing Council, nmhc, rental housing, renters, sprawl
Posted in Secondary Market/Investors, Top Stories | 1 Comment »
The Mortgage Bankers Association asked lawmakers to reinstall funding cut from the Department of Housing and Urban Development counselor program earlier in the year.
Congress cut all $88 million in HUD nonprofit counseling funds appropriated for the department's fiscal 2012 as part of the federal budget negotiations. Earlier in September, HUD granted $10 million in counselor funds to nonprofits from money that wasn't spent the prior year.
On Wednesday, the Senate Appropriations Committee approved a bill to provide vital funding for the Federal Housing Administration multifamily programs and contains $125 million for housing counselor efforts. Of that $60 million would be restored for the HUD counselors.
The bill must merge with a sister package currently in the House.
William Kilmer, senior vice president of the MBA, wrote a letter to the two ranking members of the Senate Appropriations Committee seeking to reinstate the full $88 million.
"HUD housing counseling grant funds are critical to our efforts to assist homeowners facing foreclosure, help first-time homebuyers navigate the challenges of the purchase process and educate seniors — a traditionally high-risk group for financial fraud — considering reverse mortgages," Kilmer wrote.
Without the funding, HUD may be forced to layoff staff, cut services and raise prices for counseling. Last week, Deborah Holston, acting deputy assistant secretary for single-family housing at HUD, asked a House subcommittee to restore the funding. Some Republicans seemed eager to do so.
But approving renewed government spending will prove challenging. Late Thursday, the House voted for a bill that would keep the Federal Emergency Management Agency running while cutting roughly $1 billion elsewhere. The Senate voted down the bill Tuesday, citing the cuts included in the bill were too much.
The familiar impasse may lead to a government shut down next week.
Still, Kilmer said reinstalling the counseling funds should be a priority, especially for cash-strapped seniors, who would face having to pay counseling fees for reverse mortgages.
"The need for housing counseling has probably never been greater than during this recent economic downturn," Kilmer wrote.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: counseling, Department of Housing and Urban Development, Federal Emergency Management Agency, FEMA, FHA, foreclosure, government shutdown, House, housing, HUD, MBA, Mortgage Bankers Association, reverse mortgage, Senate, Senate Appropriations Committee
Posted in Servicing/Default, Slider, Top Stories | 1 Comment »
The news has been pretty grim lately for the housing market, but CreditSights notes a 3% rise in single-family housing permits in August that could be cause for a small sign of hope.
In its monthly housing monitor report, the independent research firm said housing "continues to hover on the sidelines with minor shifts up and down."
The firm doesn't expect meaningful upticks until the country sees improved employment, more consumer confidence and mortgage market changes.
Construction activity remains anemic with starts slipping 5% to a seasonably adjusted and annualized rate of 571,000 in August. The decline was driven by a 12% drop in multifamily units, but single-family home construction also slowed by one percentage point.
The rise in building permits — a forward-looking economic indicator — gives a glimmer of hope that more construction activity is on the way. Still, the big national homebuilders have been reticent to add to the housing stock with most stepping away from any aggressive building.
Lennar Corp. (LEN: 21.96 -0.77%) recently said weak demand coupled with tight lending puts the housing market in a holding pattern. KB Home (KBH: 9.7401 +0.41%) on Friday reported a wider third-quarter loss on fewer deliveries, but also noted orders are up.
In August, homebuyers closed on a seasonally adjusted annualized rate of 5.03 million homes. Existing homes sales rose 7.7% for the month. CreditSights said some home purchases may have been pulled forward as buyers seek to close purchases before flood insurance and conforming loan limits expire at the end of September.
Investors remain a key part of the market with 22% of transactions in August, and 29% of all transactions were cash deals that avoided the mortgage market altogether. Investors looking for good deals in the distressed market helped push the median price of homes down for the second consecutive month to $168,000, the CreditSights report said.
The firm predicts more housing price declines, but notes "the fact that sales were up at all is surprising against a back drop of extreme weakness in the financial markets during the month of August."
The cancellation rate jumped to 18% from 16% as appraisals coming in below the agreed selling price and mortgage qualification issues become typical.
Write to Kerry Curry.
Follow her on Twitter @communicatorKLC.
Tags: conforming loan limits, construction, consumer confidence, CreditSights, flood insurance, homebuilders, housing, housing market, investors, KB Home, Lennar, mortgage, multifamily, single family
Posted in Origination/Lending, Top Stories | 1 Comment »
Total mortgages purchased and securities issued by Freddie Mac reached $27.7 billion in August, up 33% from the previous month and the highest increase since September 2010.
Purchases and issuance rose to the highest level since February, according to the government-sponsored enterprise's monthly summary report released Friday. The increase in August offset the drop measured the previous month. The increased activity reflects a boost in home sales in the same month, according to the National Association of Realtors.
Freddie's guarantee book of business stayed essentially flat at $1.69 trillion in August after dropping below $1.7 trillion in July. It remains at the lowest level measured since October 2007.
The single-family serious delinquency rate of 90 days or more dropped to 3.49% in August. In July, it increased for the first time in 10 months. The August rate is the lowest since September 2009, and the rate hasn't been below 3% since July 2009.
Freddie continued to trim its mortgage-related investment portfolio in August, dropping it to $680 billion, down $3 billion from the prior month.
Under the conservatorship agreements established in September 2008, the Treasury Department capped this portfolio at $900 billion at the end of 2009 and scheduled it to be wound down by 10% each year, reaching $250 billion by 2018.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: August, book of business, conservatorship, delinquecy, delinquency, freddie mac, GSE, home sales, issuance, mortgages, NAR, National Association of Realtors, securities, Treasury Department
Posted in Secondary Market/Investors, Top Stories | No Comments »
