Archive for November, 2011
The Mortgage Bankers Association, which is scheduled to release its national delinquency survey for the third quarter on Thursday, said it has seen some modest improvements in delinquencies this year but still expects significant housing challenges next year.
"At the end of the day, unemployment is a drag on the economy," said Steve O'Connor, senior vice president of public policy and industry relations at the MBA, on a conference call with reporters about Hope Now. Hope Now, an alliance of mortgage servicers, investors, counselors and insurers, reported reaching a 5 million milestone in loan modifications earlier in the day.
Although record low interest rates remain a silver lining, tight credit standards and some 11 million underwater homes will challenge a housing recovery, he said.
The MBA is working with others on national mortgage servicing standards, which O'Connor said will go a long way toward helping at-risk borrowers and stabilizing the housing market. In addition, it has publicly supported enhancements announced Tuesday to the government's Home Affordable Refinance Program allow more underwater borrowers to refinance mortgages held by Fannie Mae and Freddie Mac.
The association also has weighed in on the Federal Housing Finance Authority's recent "request of information" on how to dispose of its REO.
Its ideas include expanding finance options for local investors, including lifting the moratorium for investors in the Federal Housing Administration’s 203(k) rehabilitation program. It also supports a bulk REO sale program with safeguards to could include a mandatory hold period for investors or a profit-sharing agreement between the investor and the REO seller.
Write to Kerry Curry.
Follow her on Twitter @communicatorKLC.
Tags: delinquency, economy, Fannie Mae, Federal Housing Administration, Federal Housing Finance Authority, FHA, freddie mac, HARP, HOPE NOW, housing, MBA, mortgage, Mortgage Bankers Association, unemployment
Posted in Servicing/Default, Top Stories | No Comments »
Beazer Homes USA Inc. (BZH: 3.23 0.00%) narrowed its fiscal fourth-quarter loss on 23% more closings and 33% more new orders.
The homebuilder reported a loss of $43.2 million, or 58 cents a share, for the three months ended Sept. 30, compared to a loss of $59.5 million, or 81 cents a share in the year-ago period.
For the fiscal year ended Sept. 30, Beazer Homes reported a loss of $204.9 million, or $2.77 a share, compared to a loss of $34 million, or 57 cents a share, for its fiscal 2010. Annual revenue fell 25% to $742 million from $991.2 million a year ago.
Fourth-quarter revenue rose almost 25% to $334.9 million from $268.7 million. The company recorded 1,006 new orders during the fourth quarter, up 33% from a year earlier, while closing 1,376 homes during the three months, which was 23% higher than the year-ago fourth quarter.
Beazer Homes said the cancellation rate for the quarter rose to 34.2% from 33.2% last year.
"Our new home orders showed encouraging signs of improvement in the second half of fiscal 2011," said President and CEO Alan Merrill.
"While we acknowledge the many challenges facing the industry, we believe we have the people, the communities and the homes to allow us to generate increased new home orders and deliveries in fiscal 2012 as we pursue a deliberate climb back to profitability," he said.
Write to Jason Philyaw.
Follow him on Twitter: @jrphilyaw.
Tags: Beazer Homes USA Inc., earnings, homebuilder
Posted in Origination/Lending, Top Stories | No Comments »
United Guaranty, the mortgage insurance subsidiary of AIG (AIG: 25.0833 -0.23%), said Monday it refuses to accept all of the new HARP refinancing terms based on fears it will end up on the hook for fraudulently written or bad loans.
United Guaranty responded to HousingWire after Bloomberg News said the mortgage insurer refuses to provide blanket waivers on reps and warranties for mortgage lenders trying to get loans through the HARP process. Reps and warrants force originators to buy-back loans that were either poorly or fraudulently underwritten.
The appeal of HARP 2.0 is the fact it gives lenders the opportunity to move additional loans into refinancing without facing the risk of being forced to buy back bad loans.
United Guaranty says it supports HARP initiatives, but has concerns about waiving all reps and warrants.
"The mortgage insurance companies waving their reps and warranties are worried about upsetting their lender relationships," said Mark Herr, a spokesman for AIG. "We're worried about assuming someone else's fraud or negligence."
Herr added, "The real issue here is that some of the lenders with fraudulent or poorly documented or undocumented mortgages want to use the HARP program to relieve themselves of the risk tied to their bad lending decisions. They want us to surrender our legal protections against fraud."
"The GSEs rely on mortgage insurers to investigate loans for fraud and rely on these investigations to force lenders to repurchase fraudulent loans," he said. "Asking us to surrender our legal rights and not investigate loans for fraud means that the mortgage insurance companies, the GSEs and the tax payers would pay for their bad lending decisions. In effect, [it equates] a back door bailout on their bad mortgages."
On the other hand, Herr said the mortgage insurer is an advocate of HARP and remains committed to trying to get as many mortgages modified as possible.
“United Guaranty fully backs the HARP program and has been an industry leader in supporting it. In fact, due to high volumes of requests and the overall difficulty mortgage servicers have had in providing information, education and assistance – United Guaranty made the decision to dedicate resources toward helping borrowers in obtaining home retention programs," Herr wrote. "United Guaranty has insured approximately $3.4 billion in HARP loans since its inception in 2009, $1.3 billion in HARP loans in the first nine months of 2011 alone."
Write to Kerri Panchuk.
Tags: AIG, HARP, mortgage insurance, United Guaranty
Posted in Secondary Market/Investors, Top Stories | 1 Comment »
Global investors are taking a breather from troubles in the eurozone by turning to U.S. and emerging market equities, according to the Bank of America Merrill Lynch survey of fund managers for November.
The survey found investors have slightly increased exposure to equities since October's survey so that a net 5% of the panel is underweight equities this month, down from 7% in October.
The proportion of investors overweight U.S. equities rose sharply to a net 20% from a net 6% in October.
Despite more positive sentiment toward U.S. equities, a small majority of respondents expect the U.S. to receive another downgrade of its debt rating. Some 53% believe another downgrade could take place before the end of 2013 — with 36% predicting a lower rating in 2012.
On a similar note, researchers from the Federal Reserve Banks of San Francisco and Kansas City said the odds of a U.S. recession in 2012 are greater than 50% because of the European debt crisis.
Meanwhile, emerging markets are bouncing back after a weak October.
About 27% of investors are overweight stocks in emerging markets, up from a net 9% last month. The eurozone remains the least popular region, but the proportion of investors underweight eurozone equities ticked down one percentage point to 30%.
Michael Hartnett, chief global equities strategist at BofA Merrill Lynch research, said "investors are showing belief in emerging market growth and U.S. resilience, which is key to retaining positive global sentiment."
As the eurozone languishes, the proportion of Europeans forecasting regional recession has almost doubled. About 72% of European respondents to the BofAML survey believe the continent will experience a recession in the next 12 months, up from a 37% in October.
Still, fears of a global recession have eased. A net 31% of investors expect the world economy to avoid a recession, up from 25% last month, according to the survey.
"European growth concerns are more intense but sentiment looks to be close to rock bottom unless Europe’s problems spread to the rest of the world,” added Gary Baker, head of European equities strategy at BofAML.
Write to Justin T. Hilley.
Follow him on Twitter @JustinHilley.
Tags: BAC, Bank of America, Bank of America Merrill Lynch, BofA, BofAML, European debt crisis, eurozone, Federal Bank of Kansas City, Federal Bank of San Francisco, Merrill Lynch, recession
Posted in Secondary Market/Investors, Top Stories | 1 Comment »
Rebuilding Together, a nonprofit that tries to revitalize communities by fixing distressed properties, says Wells Fargo (WFC: 29.35 +1.03%) agreed to donate up to $1.2 million in real-estate owned properties and $600,000 to revitalize local neighborhoods hit by the challenging economy.
"Wells Fargo is proud to support Rebuilding Together's efforts to create affordable and sustainable housing for low-to-moderate income families," said Kimberly Jackson, executive director of the Wells Fargo Housing Foundation.
"We hope more companies and individuals will get involved with supporting Rebuilding Together's mission that brings resources to neighborhoods seeking ways to address economic challenges including ones with the housing market," Jackson said.
The nonprofit says Wells Fargo will donate eight REO properties located in Phoenix, Las Vegas and Denver.
"This donation from Wells Fargo will make an important difference toward addressing housing challenges in several communities," said Gary Officer, president and CEO of Rebuilding Together.
"While this is a substantial commitment from one of the largest mortgage and philanthropic companies in America, there are still substantial needs in many communities facing challenges that come with this housing crisis of epic proportions," he added.
Write to Kerri Panchuk.
Tags: Denver, distressed markets, Las Vegas, Phoenix, Rebuilding Together, sustainable housing, Wells Fargo
Posted in Secondary Market/Investors, Top Stories | No Comments »
The idea of establishing a new national mortgage registration system — or MERS 2.0 — is gaining some traction among servicing professionals, while others remain skeptical.
Mortgage Electronic Registration Systems is under fire from municipalities across the country that claim the widely used Reston, Va.-based electronic registry avoided paying county recording fees when transferring property deeds over the past decade.
Dave Worrall, president of RoundPoint Mortgage Servicing Corp., wants to see changes to the system, but not necessarily a new entity formed to track the changes in titles and deeds.
Sen. Bob Corker, R-Tenn., recently released a legislative proposal, saying he would like to create a mortgage registration system to streamline the national transfer of loans.
"I fully support some type of MERS solution," Worrall said. "MERS is a critical component of our business now. If for some reason MERS cannot continue providing the service that it does, we absolutely need an effective alternative. As long as it replaces the functionality that MERS provides to the servicing industry."
Losing a system that streamlines the servicing process would ultimately slow everything down, Worrall said, and "it would significantly increase the cost of servicing loans."
Worrall prefers a situation where "everybody works together to try and fix what's wrong with MERS and not introduce a new counter-party and a new set of rules" that servicers have to absorb.
"There is almost no way to make a uniform system for tracking ownership of mortgages and notes," said Richard Isacoff, a Massachusetts-based foreclosure defense attorney. "Further, differences between judicial foreclosure states and nonjudicial foreclosure states add some complications. Also, it has been shown, MERS doesn't work. The concept is great but application will require certain uniform laws in the states regarding real estate law. That will not happen in this century."
But Isacoff is challenging the idea that anything should or can replace MERS given the numerous legal complaints now surrounding the system.
"The privatization of any mortgage and note ownership system is giving license to avoid taxes and fees and ignores consumer protections. Except for being more efficient at what it does, how would any system, put in place with our laws as they currently stand, be any better than MERS?" Isacoff asked.
MERS, on the other hand, is looking forward to discussing the plan further. "We appreciate Senator Corker’s recognition of Mortgage Electronic Registration Systems as the model for a national mortgage registry," the company said in a statement. "His proposal brings an important perspective to the mortgage industry reform debate. Clearly there are many details to address, but we look forward to participating in discussion of the issues and working with all parties in the Senate, House, the Executive Branch and other stakeholders, as proposals are considered."
Write to Kerri Panchuk.
Tags: MERS, Mortgage Electronic Registration Systems, mortgage registration system, RoundPoint, RoundPoint Mortgage Servicing Corp., Servicing/Default
Posted in Secondary Market/Investors, Top Stories | 1 Comment »
The National Association of Realtors introduced Maurice Veissi as its 2012 president Monday.
Veissi has been a Realtor for four decades and owns an eponymous brokerage firm in Miami. He served the trade group as president-elect this year and first vice president in 2010.He served as president of the Florida Association of Realtors in 2002 and as a regional vice president of NAR in 2005.
NAR said Orange County, Calif., Realtor Gary Thomas is now president-elect. He previously served as vice president and liaison to government affairs.
Steve Brown from Dayton, Ohio, becomes first vice president and William J. Armstrong III, a Realtor from Damascus, Md., was named treasurer.
Other appointments include DJ Snapp as vice president and liaison to the committee and Scott Louser as vice president and liaison to government affairs.
Write to Kerri Panchuk.
Tags: NAR, National Association of Realtors, vice president and liaison to government affairs
Posted in Origination/Lending, Top Stories | No Comments »
Congress took another step toward extending the conforming loan limits for the Federal Housing Administration but not for Fannie Mae and Freddie Mac.
Members of a joint committee charged with approving a minibus spending bill released a revised package on the continuing resolution late Monday. According to the new language, which awaits a vote both the Senate and House, the maximum loan amount on FHA-insured mortgages would be reinstalled to post-crisis levels and extended through the end of 2013.
Congress elevated the limits in 2008 to allow FHA, Fannie Mae and Freddie Mac to insure and guarantee more loans when credit markets froze. On Oct. 1, the higher limits expired, reverting back to $625,500 from $729,750 in the most expensive neighborhoods.
The Senate voted Oct. 20 to reinstall the elevated limits in the minibus bill through an amendment filed by Sens. Johnny Isakson (R-Ga.) and Robert Menendez (D-N.J.).
Industry and consumer groups has been pushing Congress to reinstall the limits, claiming the market is still too fragile to be taken off government support.
FHA Acting Commissioner Carole Galante said Tuesday the expired limits as they stand should have little impact. These jumbo loans account for only 5% to 6% of the FHA portfolio. She also said reinstalling them wouldn't necessarily be a negative either since these are usually higher-credit borrowers.
However, the consequence of extending the limits for FHA but not Fannie and Freddie is simply unknown, she said.
"This is a situation that has never occurred before, where FHA would have the higher limits and Fannie and Freddie would not. It's hard for us to make any kind of prediction for how much of that business would come to the FHA without finding any other sort of alternatives," Galante said.
The Obama administration has supported allowing the limits to expire to begin the process of winding down the government's involvement in the mortgage market and allow private capital back in.
Redwood Trust (RWT: 11.555 -0.82%), the only investment firm to issue privately funded residential mortgage-backed securities since the crash, said in its third-quarter note to investors that it is already seeing the benefit of the loan-limit drop. Roughly 10% of the loans it acquired and plans to use in a future securitization would have otherwise gone to the GSEs, the company said.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: appropriations, commitee, conforming loan limit, Fannie Mae, FHA, freddie mac, Galante, GSE, House, mortgage, redwood trust, Senate
Posted in Origination/Lending, Top Stories | 2 Comments »
The House Financial Services Committee voted 52-4 Tuesday to suspend bonuses for top executives at Fannie Mae and Freddie Mac.
Rep. Spencer Bachus (R-Ala.) sponsored the Equity in Government Compensation Act, H.R. 1221, which aligns Fannie and Freddie salaries under the same guidelines at federal regulatory agencies. The bill does not make them federal employees.
The CEOs of Fannie and Freddie made a $900,000 base salary in 2010, and both received roughly $2.3 million in bonuses for performance, according to Securities and Exchange Commission filings earlier this year. The top 10 executives at the firm received a combined $13 million in performance bonuses.
Fannie and Freddie currently owe the Treasury Department $151.7 billion in dividend payments tied to their continued bailouts.
Under the Bachus bill the CEOs would have earned $218,978 in 2010.
Reps. John Campbell (R-Calif.), Luis Gutierrez (D-Ill.), Mel Watt (D-N.C.), and Stephen Lynch (D-Mass.) voted against the bill.
"The taxpayer-funded bailout of Fannie Mae and Freddie Mac is the biggest bailout in history," Bachus said. "Adding insult to injury, the top executives of these failed companies receive multi-million dollar pay packages, all courtesy of American taxpayers who are having a difficult time making ends meet these days."
FHFA Acting Director Edward DeMarco, approved more than $42 million in pay packages for the top 12 executives at the GSEs, according to Bachus.
DeMarco defended the pay structures before the Senate Banking Committee Tuesday. He said the executives responsible for the disintegrations are "long gone," and salaries — which are already down 40% — are necessary to retain talent.
Freddie CEO Charles "Ed" Haldeman said recently he would be stepping down within a year. He and Fannie CEO Michael Williams will appear before another House committee Wednesday.
"These lavish compensation packages and bonuses are unfair, unreasonable and unjust to the taxpayers whose assistance is the only thing keeping Fannie and Freddie afloat," Bachus said.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: Bachus, bonuses, DeMarco, executives, Fannie Mae, foreclosure, freddie mac, GSE, SEC, Securities and Exchange Commission, Treasury Department
Posted in Secondary Market/Investors, Top Stories | 5 Comments »
Efforts to find a solution to the government-sponsored enterprises continue to spin in circles. This is especially frustrating for Federal Housing Finance Agency Acting Director Ed DeMarco and the CEOs of Fannie Mae and Freddie Mac.
To date, the only meaningful change is the move to abolish bonuses for the chief executives.
Sadly, this will only make things worse, as there is no one willing to do the job necessary to run the nation's housing for $200,000 a year.
Furthermore, it puts the decisions of GSE executives more at the will of Congress and helps politicians tighten control and exert more influence over the day-to-day activities. It would be interesting to see what more the CEOs of Fannie and Freddie could do without the federal yoke on their necks.
Of course, there will be those willing to take the positions at any price, but the expectation of operations improving at the government-sponsored enterprises should not be increased on the back of lower income limits.
The last few years proved that the executives of the GSEs are restricted by board members who represent the best interests of the FHFA. The reasons behind Freddie CEO Ed Haldeman looming departure remains speculative, but I would argue it has more to do with the board not allowing him to work than with a pending cut in pay — even though the latter surely doesn't help.
And we don't have an idea yet who may replace Haldeman, just don't be surprised if you get what you pay for.
And as long as the FHFA remains conservator of Fannie and Freddie, the boards will continue to play it safe in other areas as well, presumably continuing to spend another few years doing little to bring real change.
One issue that is a continued sticking point is the use of principal write-downs. DeMarco, Haldeman and Mike Williams at Fannie are all steadfastly against principal write-downs. Their reasons chronicled extensively in the pages of HousingWire magazine.
To be clear, principal writedowns are not likely to happen while the GSEs are in conservatorship.
The issue I have is that blanket write-downs are seen on one side as a moral right (borrowers) and on the other as a moral hazard (lenders). It is as if there is no in between. And this is a wrong assumption.
Principal write-downs are, in fact, sadly a commonality in commercial real estate today. And this happens even in the commercial-mortgage backed securities space. No one likes them, certainly, but it remains a market reality.
The $105 million One Pacific Plaza loan, for example, saw a principal reduction to bring it close to the appraised value at $47.3 million, according to Barclays Capital (BCS: 14.01 +0.57%). This larger bankrupt CMBS pass-through that collateralized the property, the Towers at Bella Terra in Huntington Beach Calif., once contained hundreds of loans from a variety of locations and asset classes.
It, too, succumbed to many of the same issues the residential markets are seeing today: poor underwriting, underfinanced and overleveraged lenders and uncomfortably high loan-to-value ratios.
Bella Terra became unwanted, a cast off. As an option of last resort, with every avenue exhausted, the special servicer reduced the principal by more than half.
Many residential properties are also at a similar end of the line. The GSEs cannot consider principal reduction while in conservatorship.
In fact, Fannie and Freddie have to write-off a significant portion of the unpaid principal balance after foreclosure.
So that can be considered a form of principal reduction, just not to the benefit of the homeowner and leading to further potential investor recourse via the Treasury.
It's not a system for the $200,000 a year faint-of-heart.
No one wants Fannie and Freddie to remain GSEs. Especially those who work there.
However, recent decisions, mixed with political inaction in the areas that matter most, only seek to push Fannie and Freddie deeper into the federal billfold.
A clear decision needs to be made to finally let go of Fannie and Freddie.
Write to Jacob Gaffney.
Follow him on Twitter @jacobgaffney.
Tags: Barclays Capital, Bella Terra, CMBS, Fannie, Fannie Mae, Federal Housing Finance Agency, FHFA, Freddie, freddie mac, principal forgiveness, residential, Treasury
Posted in Commentary, Jacob Gaffney, Voices | No Comments »