Archive for November, 2011
Freddie Mac will force parties involved in a short sale to sign affidavits making them liable for their negligent or intentional misrepresentations in the deal, an effort to be sure it's an arms-length transaction, according to guidance released Friday.
The new affidavit will go into effect Jan. 1, but Freddie is asking servicers to implement the change immediately to fight fraud. However this, and other changes, are meant to expedite the process of getting borrowers in default relocated.
In August, the government-sponsored enterprise alerted real estate agents to the rise in shady short sale deals. The main concern is flopping. There is a growing trend of real estate agents on the buy-side of the deal failing to disclose other bids on the property, rigging the sale at a lower price.
The fraudsters can then flip it, sometimes the same day, and pocket the difference.
In the third quarter, Freddie completed 11,744 short sales and deeds-in-lieu of foreclosure, according to its financial statement. It completed nearly 33,500 of these two foreclosure alternatives in all of 2011.
CoreLogic (CLGX: 14.56 +0.62%) noted an increase in property fraud in 2011 tied specifically to flopping.
"With this change, you will have more information to identify potential mortgage fraud and a clearer understanding of the intent of all parties involved in the real estate transaction," Freddie said in the guidance to mortgage servicers.
The guidance put out Friday also trimmed other rules to help servicers speed up the loss-mitigation process.
The GSE also required all amounts paid in the transaction, including anything going to the borrower, be documented fully in the HUD-1 Settlement Statement.
Freddie eliminated the requirement that borrowers more than 120 days delinquent have to list their home for sale before becoming eligible for a deed-in-lieu.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: affidavit, CoreLogic, deed in lieu, foreclosure, fraud, freddie mac, modification, mortgage, short sale
Posted in Servicing/Default, Top Stories | 1 Comment »
One day after Congress compromised to raise the conforming loan limits for the Federal Housing Administration but not for Fannie Mae and Freddie Mac, at least one lawmaker said he wasn't giving up, yet.
Rep. Gary Ackerman, D-N.Y., said Friday after President Obama signed the minibus spending bill, that he would continue to press for restoring the higher limits for Fannie and Freddie as well.
"Although it will be an uphill battle, I will continue to push the legislation I introduced in July with Rep. John Campbell that would extend the mortgage limits for Fannie Mae and Freddie Mac for two additional years," Ackerman said. "We will also continue to identify other legislative vehicles to which we can attach the measure."
On Oct. 1, the conforming loan limits for FHA and the government-sponsored enterprises dropped to $625,500 from $729,750 in the most expensive neighborhoods – where Congress raised it to when credit markets froze in 2008.
Ackerman's vow seems like a distant possibility given the margin of victory in the House, 298-121, and the Senate, 70-30.
Industry trade organizations and a group of 131 lawmakers, who sent a letter to congressional leaders earlier in the month urging a restoration of the higher limits, claim the housing market is still too fragile to be taken off of government support.
But even FHA Acting Commissioner Carole Galante warned against the move.
Still, Ackerman said he no longer wants to piecemeal assistance to housing, highlighting other programs that promised much but may ultimately fall short including the Home Affordable Modification Program and the Home Affordable Refinance Program revamp.
"The restoration of the FHA loan limits, but not the Fannie and Freddie limits, is not even close to the shot in the arm that the housing market is dire need of right now," Ackerman said.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: Ackerman, conforming loan limit, Congress, Fannie Mae, FHA, foreclosure, freddie mac, governmrnt, mortgage, obama
Posted in Origination/Lending, Top Stories | 1 Comment »
Fitch Ratings expects commercial property performance to stabilize slowly and ultimately improve slightly from 2010 and going into next year.
Analysts compared net operating income by region and found economic recovery in some areas of the country is emerging faster than others. The overall net operating income for 2010 fell 1% from 2009, but declined at a slower rate than the 5% decline in 2009 from the prior year.
Fitch said office properties in the Southeast, hotels in the Far West and retail and multifamily properties in the Rocky Mountain region performed better over the past 12 months than in 2010.
Fitch Ratings analyzed financials of the 22,534 commercial properties that secure its current $257.7 billion fixed-rate, commercial mortgage-backed securities portfolio.
Hotel properties, especially in Texas, Florida, and Georgia, experienced a 20% drop in net operating income between 2008 and 2010, according to analysts. But hotels were also the first property type to show improved performance and NOI rose in 2010 from the year before in Florida, Ohio and California.
Analysts said Florida, which had a 34% decline from 2008 to 2010, experienced a 7% growth from 2009 to last year "indicative of a quicker recovery and the return of leisure travel."
The performance of retail properties declined modestly from 2008 through 2010 with a 3% drop in net operating income, according to analysts. Multifamily properties experienced the least volatility in declines, with overall drops in NOI of less than 1% in most regions.
Write to Jason Philyaw.
Follow him on Twitter: @jrphilyaw.
Tags: CMBS, commercial mortgage-backed securities, commercial property, Fitch Ratings, hotels, multifamily properties, retail properties
Posted in Secondary Market/Investors, Top Stories | No Comments »
A fair housing case headed to the Supreme Court could have direct and indirect impacts on mortgage lending and regulatory enforcement.
The nation's highest court will decide whether plaintiffs suing under the Fair Housing Act may bring disparate impact claims and, if so, what the proper test for such claims would be.
The act prohibits housing discrimination on the basis of race, color, religion, sex, familial status or national origin. In Magner v. Gallagher, a group of rental property owners in St. Paul, Minn., sued the city and several officials, over aggressive code enforcement.
In 2002, St. Paul got tough on problem rental properties, doing sweeps for housing code violations and requiring code compliance certification on the properties. The city allegedly forced rental owners to make expensive renovations. The enforcement resulted in increased maintenance costs, condemnations and some forced selling of properties, the landlords alleged. They claim the city violated the Fair Housing Act through its get-tough enforcement, which ultimately reduced availability of affordable housing in the city and negatively impacted lower-income and minority residents.
The trial judge dismissed the case on summary judgment, citing insufficient evidence of disparate impact. On appeal, the 8th Circuit Court reversed the case in respect to disparate impact while upholding other parts of the trial court's summary judgment.
The Supreme Court agreed to decide two questions: whether disparate impact claims may be brought under the Fair Housing Act and, if so, what is the appropriate legal test for analyzing such claims.
"Both of these issues could have a significant impact on fair lending litigation at the private and governmental levels," Philadelphia-based law firm Ballard Spahr wrote in a note to clients Friday.
The Department of Housing and Urban Development published a proposed rule in the Federal Register under the Fair Housing Act on Nov. 16 to establish uniform standards for determining when a housing practice with a discriminatory effect violates the act. It's not clear whether the HUD proposed rule was conceived before the Supreme Court granted a hearing on the Magner case.
"The viability of disparate impact claims under the Fair Housing Act is an issue that could affect mortgage lenders both directly and indirectly," Ballard Spahr said.
"From a direct standpoint, it is not uncommon for fair lending litigation brought against mortgage lenders to be brought in part under the Fair Housing Act. If the Supreme Court holds that disparate impact claims cannot be pursued, it will take away one of the legal avenues that private and governmental litigants could use in such cases. But, more broadly, if the Supreme Court holds that disparate impact claims are not actionable under the Fair Housing Act … and disagrees with HUD’s interpretation of the statute, it would carry serious implications for disparate impact claims under the Equal Credit Opportunity Act."
The ECOA and the FHA do not explicitly permit disparate impact claims, but there is a long-standing administrative interpretation that allows them, the law firm said.
"Even if the Supreme Court upholds the availability of disparate impact as a theory for relief under the Fair Housing Act, it will have the opportunity to definitively set forth the applicable analytical model for proving such claims, and to provide guidance to lower courts on the type of evidentiary showing that a plaintiff must make in order to pursue a disparate impact claim," Ballard Spahr said.
Regulatory issues are also at play.
The Consumer Financial Protection Bureau incorporated disparate treatment and disparate impact testing into its mortgage servicing examination procedures. The Supreme Court’s decision in Magner may remove disparate impact analysis from the picture, or may change how the CFPB looks at testing for disparate impact.
"The Supreme Court’s decision," Ballard Spahr said, "will definitely be one for lenders to watch very carefully."
Write to Kerry Curry.
Follow her on Twitter @communicatorKLC.
Tags: Ballard Spahr, CFPB, code enforcement, Consumer Financial Protection Bureau, Department of Housing and Urban Development, ECOA, Equal Credit Opportunity Act, fair housing, fair housing act, FHA, housing discrimination, HUD, Magner v. Gallagher, mortgage lending, mortgage servicing, rental, St. Paul, U.S. Supreme Court
Posted in Origination/Lending, Top Stories | 1 Comment »
More than 30% of the nearly 282,000 modifications completed on Federal Housing Administration mortgages in 2010 redefaulted within a year, according to an independent study sent to Congress this week.
It's not great news, but it is down from last year's statistics.
Modifications made in 2009 remain the worst performing since the financial crisis struck in 2007. Nearly 39% of the 180,700 FHA modifications completed that year redefaulted within 12 months.
FHA loans do not go through the wider Home Affordable Modification Program, but have their own FHA-HAMP option, which combines principal deferment, among others.
The FHA put in new tools in 2011 including longer forbearance timelines for unemployed borrowers.
Public programs, while they reach fewer borrowers than the private ones, have consistently performed better. The Office of the Comptroller of the Currency reported in October that 34% of the 129,000 permanent mods completed in the first quarter of 2010 redefaulted within one year, compared to 19.4% of the 100,200 HAMP workouts completed in the same period.
Still, public programs are funded through taxpayer dollars. The Treasury Department has obligated $29 billion through HAMP.
Foreclosure starts on FHA-insured mortgages dropped to less than 10,000 in September 2011 from nearly 28,000 at the peak in March 2010. But that has been due to the continued robo-signing freeze servicers put on in October 2010 to fix faulty affidavits and other practices.
"That, in turn, produced a decrease in claim payments during FY 2011," according to the report. "The final resolution of these open cases is still unknown."
Ron D'Vari, CEO of the financial advisory firm NewOak Capital in New York, said housing cures will come by adding more jobs.
"The ultimate cure will come with fixing the job market which most effects those less prepared to deal with a sustained unemployment. ," D'Vari said. "In many cases these borrowers are better off with renting and having a more flexible arrangement so they can migrate to where jobs are."
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: FHA, foreclosure, modification, mortgage, OCC, redefault, Treasury
Posted in Servicing/Default, Top Stories | 1 Comment »
The improving but still vulnerable economy looks more likely to avoid recession but may only push home sales slightly higher in 2012, Fannie Mae economists said Friday.
The group added that by the end of 2011, home sales will have shown little improvement from 2010.
According to the National Association of Realtors, existing home sales December 2010 closed at an annualized rate of 5.28 million units.
In the third quarter of 2011, the rate had dropped to 4.8 million, but NAR said it was still a 17% increase from the previous three months. Home prices also showed recent pickup at the end of the summer but remain below last year's levels. Housing permits increased in October as well, pushing risk of another economic downturn aside.
Still, Fannie Mae Chief Economist Doug Duncan doesn't expect the uptick to be sustainable.
"Consumer sentiment is in a holding pattern at depressed levels. In turn, the likelihood of positive developments in the housing market remains a concern," Duncan said.
The Mortgage Bankers Association forecasted new mortgage originations would fall to $900 billion in 2012, revised from an earlier estimate of $1.2 trillion. Fears of recession in Europe and still uncertain housing actions in Washington could weigh on any growth seen in the overall U.S. economy, the MBA said.
"Any sustained growth will depend on a pickup in employment and consumer confidence and spending," Duncan said. "Unfortunately, a recent increase in consumer spending occurred despite the biggest drop in real personal disposable income since the third quarter of 2009, which resulted in a full percentage point decline in the saving rate in the third quarter."
The decline, he said, doesn't bode well for growth in consumer spending next year.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: 2012, economist, Fannie Mae, home sales, MBA, NAR, originations
Posted in Origination/Lending, Top Stories | 1 Comment »
A sharp pick-up in housing permits caused an October rebound of The Conference Board leading economic index, suggesting the risk of an economic downturn has diminished, according to the board's economists.
The index rose 0.9% in October to 117.4, following a 0.1% increase in September, and a 0.3% gain in August. The index is scaled to a score of 100 in 2004.
"Improving consumer expectations, stock markets, and labor market indicators also contributed to this month’s gain in the LEI as did the continuing positive contributions from the interest rate spread," said Ataman Ozyildirim, economist at The Conference Board. "The coincident economic index also rose somewhat, led by higher industrial production and employment."
The coincident economic index for the U.S. increased 0.2% in October to 103.5, following no change in September and August. The lagging economic index increased 0.6% in October to 110.9, following a 0.1% increase in September, and a 0.2% increase in August.
"The LEI is pointing to continued growth this winter, possibly even gaining a little momentum by spring," said Ken Goldstein, another economist at the board. "The lack of confidence has been the biggest obstacle in generating forward momentum, domestically or globally. As long as it lasts, there is a glimmer of hope."
The composite economic indexes are key elements in a system designed to signal peaks and troughs in the business cycle. The leading, coincident, and lagging economic indexes are constructed to summarize and reveal common turning point patterns in economic data.
Write to Justin T. Hilley.
Follow him on Twitter @JustinHilley.
Tags: Business Cycle, CEI, Coincident Economic Index, economic downturn, LAG, Lagging Economic Index, Leading Economic Index, LEI, recesssion, The Conference Board
Posted in Secondary Market/Investors, Top Stories | 1 Comment »
President Obama signed into law a government spending bill Friday morning effectively reinstalling higher conforming loan limits for the Federal Housing Administration through the end of 2013.
The House passed the minibus spending bill 298-121 Thursday afternoon, and the Senate approved it 70-30 Thursday night.
Effective Friday, FHA can insure loans up to $729,750 from $625,500 in the most expensive neighborhoods. In 2008, Congress elevated the limits for the FHA, Fannie Mae and Freddie Mac, but expired Oct. 1.
The Senate approved an amendment to the bill earlier in the month that would have reinstalled the limits for Fannie and Freddie as well. But a joint appropriations committee cut the government-sponsored enterprises out, leaving the FHA in.
By signing the bill, the Obama administration back-tracked somewhat from a white paper put out in February. The paper put forth three options for the housing finance system, precluded by the expiration of the higher conforming loan limits in order to begin ushering private capital back to the market.
FHA Acting Commissioner Carole Galante warned senators Thursday that the government should be looking to shrink the FHA market share.
"We maintain that it is appropriate to take a step back on the loan limits," Galante said.
Rep. John Campbell, R-Calif., made the case on the House floor Thursday to reinstall the limits for Fannie and Freddie as well, citing concerns that the housing market is not healthy enough to be taken off the government lifeline.
"Even now, private lenders remain incredibly risk-averse, hesitating to provide long-term, fixed-rate mortgages to the vast majority of the market," Campbell said. "Until Congress decides how to move forward with broad reform to fix our broken housing finance system, we should not dismantle the few remaining support systems that are preventing the housing industry from collapsing further."
Sen. Bob Corker, R-Tenn., shook his head Thursday, clearly frustrated at the decision his colleagues made.
"The white paper and a bill are two very different things," Corker said. "I am absolutely so discouraged at Congress in lacking the courage to deal with this issue that we all know needs to be dealt with."
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: California, Campbell, conforming loan limit, Fannie Mae, FHA, foreclosure, freddie mac, Galante, higher, mortgage, obama
Posted in Origination/Lending, Slider, Top Stories | 5 Comments »
The North Carolina division of real estate firm Coldwell Banker equipped its more than 600 agents with iPads.
The agents of Coldwell Banker Howard Perry and Walston will use the new tech to connect with customers, in presentations, and for virtual property walk-throughs, among other functions.
Don Walston, founder and executive chairman of the firm, said in a Tuesday release that the new tech is also meant to transition "from nine physical offices into 600 virtual offices."
"Because social media plays a significant part in today's credibility, incorporating the iPad was an obvious decision in allowing agents to remain consistently connected to consumers," Walston said.
JPMorgan Chase (JPM: 37.24 -0.67%) launched a similar program in December, giving iPads to each investment banker in the company. That came after the launch of a research app for the Apple tablet.
The Coldwell Banker division also announced a partnership with ZipRealty. The online search company will provide a sales channel and, surprise, a new mobile app.
Write to Andrew Scoggin.
Follow him on Twitter @ascoggin.
Tags: app, Apple, Coldwell Banker, Coldwell Banker Howard Perry and Walston, iPad, JPMorgan, JPMorgan Chase, tablet, ZipRealty
Posted in Origination/Lending, Top Stories | No Comments »
The recent clash between the Federal Housing Finance Agency, Fannie Mae and Freddie Mac and the House Financial Services Committee highlighted precisely why the government can't fix the government-sponsored enterprises.
The purpose of the hearing was meant to question Fannie CEO Michael Williams and Freddie CEO Charles 'Ed' Haldeman on the justification of their compensation. However, committee members pummeled FHFA Acting Director Ed DeMarco. This is despite his income being roughly 20 to 40 times less than either CEO.
The committee even put together a chart meant to show how inflated the salaries are considered to be:
It's a fair point that the GSEs should be led by public servants, not private executives. DeMarco is a fine example of a public servant willing to take a beating and still return to his thankless job the next day.
The mere fact committee members are calling the CEOs of Fannie and Freddie to a hearing and not even aggressively questioning either shows a lack of investigative thought and a total lack of political willpower to reform the nation's housing.
If you do, in fact, think the two CEOs are somehow ripping off America, and completely disregard the relative improvements at the GSEs, then take them to task.
But despite the popularity of hating on the social class inequities Fannie and Freddie played a part in, the politicos refused to "eat the rich."
I've talked to both CEOs. They can take it. They are smart men with answers. But they aren't going to speak ahead of their boss. They did not become CEOs through a failure to listen and, as the hearing showed, perfectly capable of watching politicians squander a great opportunity to learn more about how to fix housing.
Instead, it looked like the politicians would rather repeatedly attack the long-suffering public servant.
That is, quite simply, playing it safe. Direct questioning toward a distinct federal official is easier than trying to make the CEOs of trillion-dollar companies sweat.
Nothing important came out of this meeting. And as for bonuses paid to the executives of the GSEs, HousingWire has been covering it for months.
The recent attention changes nothing.
And it shows why the government can't fix Fannie or Freddie.
Write to Jacob Gaffney.
Follow him on Twitter @jacobgaffney.
Tags: Fannie Mae, FHFA, freddie mac, House Financial Services Committee, MBS, mortgage, secondary
Posted in Commentary, Jacob Gaffney, Voices | 1 Comment »