Archive for December, 2011
The Federal Reserve says annual stress tests, single-counterparty credit limits and risk-based capital and liquidity requirements are part of its long-term plan to ensure big banks do not pose a significant threat to the overall economy.
As part of duties relegated to it under Dodd-Frank, the Fed outlined the steps it would take to ensure it strengthens and supervises large financial institutions in a 173-page proposal released Tuesday.
The rules apply to all U.S. banks with consolidated assets of $50 billion or more and any other institution classified as a systemically important firm. Savings and loan companies will not be required to follow the guidelines, except for situations where they are forced to meet certain test requirements.
The measures proposed by the Fed include a rule that would require banks to develop annual capital plans, conduct stress tests and maintain the appropriate capital levels. It also would require a Tier-1 common risk-based capital ratio of greater than 5%.
The central bank said its risk-based capital and debt requirements would be rolled out in two phases. Firms would first have to develop their annual capital plans, conduct stress tests and maintain adequate capital levels. In the second phase, the Fed would issue a proposal to put a risk-based capital surcharge in place.
Banks would be forced to meet liquidity risk-management standards based on guidance issued back in 2010, the Fed said.
"These standards would require companies to conduct internal liquidity stress tests and set internal quantitative limits to manage liquidity risk," the Fed explained in the advisory. "In the second phase, the board would issue one or more proposals to implement quantitative liquidity requirements based on the Basel III liquidity rules."
Stress tests would have to be conducted annually using three different economic models.
The Fed's proposed plan would limit credit exposure at big banks to a single-counterparty as a percentage of the firm's regulatory capital. Their credit exposure would be subjected to a tighter limit.
Furthermore, the Fed proposed several scenarios in which automatic remediation measures would kick in. Triggers for remediation include certain capital levels, stress test results and weaknesses detected during the risk-management process.
The Fed is accepting comments on the proposal through March 31.
Write to: Kerri Panchuk.
Tags: big banks, Dodd-Frank, Federal Reserve Board, stress tests
Posted in Origination/Lending, Slider, Top Stories | No Comments »
Michigan Gov. Rick Snyder is expected to sign three bills to extend and reform the state's foreclosure mediation process through 2012, while changing some of the deadlines for homeowners and financial firms.
Attorney Michael Woods with Potestivo & Associates sent out an advisory, noting the Michigan House of Representatives approved three bills, which now await the governor's signature.
When enacted, HB 4542 and 4543 will extend the foreclosure mediation process through next year, while adding a new guideline that allows a borrower or housing counselor to contact a servicer's designee to schedule a pre-foreclosure mediation hearing.
In addition, the legislation extends the time period for a borrower or housing counselor to respond to a pre-foreclosure notice by three days, pushing the deadline to 30 days from 27.
Woods said after a borrower asks for mediation, "there continues to be a 90-day stay to the foreclosure process … borrowers are now required to return a completed financial package, if requested, no later than 60 days after the date of the mailed pre-foreclosure notice."
However, the Detroit-based law firm said if a financial package is not returned by the deadline, a bank can proceed with the foreclosure by advertising the filing without having to wait the full 90 days.
Pre-foreclosure notices mailed on or after Feb. 1 are now required to include the name, address, telephone number and email address of the designee that is responsible for scheduling and attending the mediation hearing.
Under the new guidelines, the notice should also clearly state the length of the redemption period if the property is expected to end up in a foreclosure sale, under which borrowers are liable for any damages that occur to the property during the redemption period.
The legislation also eliminates the one-time pre-foreclosure notice publication requirement. The legislature has made this publication requirement optional. HB 4543 also says it is a misdemeanor for anyone who is not a licensed attorney or approved housing counselor to represent borrowers in the mediation process.
Write to: Kerri Panchuk.
Tags: borrowers, foreclosure mediation process, foreclosures, mediation, Michigan, Michigan Gov., Michigan House of Representatives, mortgage servicing, Potestivo & Associates
Posted in Servicing/Default, Top Stories | No Comments »
House members voted 229-193 Tuesday to send a much ballyhooed payroll tax cut extension into a conference committee made up of members of both chambers of Congress.
Representatives aligned mostly along party lines with seven Republican members voting against the measure. Eleven members did not vote.
The committee will consider separate House and Senate versions of the bill, which extend the tax cut by a year and two months, respectively. Senate Majority Leader Harry Reid, D-Nev., said he would not call the Senate back into session to negotiate, according to C-SPAN.
The Senate version, passed 89-10 Saturday, amended the House bill to shorten the extension. The tax cut is set to expire Dec. 31.
Both versions contain a 10-basis-point increase on guarantee fees charged by Freddie Mac and Fannie Mae through 2021. The increase would offset about $35.7 billion in costs, according to the Congressional Budget Office.
Mortgage Bankers Association CEO David Stevens said the g-fee jump could cost the average borrower another $4,000 in fees over the life of a $200,000 loan.
President Obama, in a press briefing after the vote, urged House Republicans to reconsider the Senate version of the bill. He said legislators would come to an agreement on a tax cut bill, as long as it does not focus on "extraneous issues."
"Let's not play brinksmanship," Obama said. "This is not a game. This shouldn't be politics as usual."
Speaker of the House John Boehner, R-Ohio, said during a press conference "there's no reason we can't solve this in short order" and called for the Senate to return.
"The two-month extension will create more uncertainty for job creators in our country when millions of Americans are out of work," Boehner said. "We have done our job. All we need now is to resolve our differences."
Write to Andrew Scoggin.
Follow him on Twitter @ascoggin.
Tags: David Stevens, Fannie Mae, freddie mac, g-fees, guarantee fees, House of Representatives, Jay Carney, Mortgage Bankers Association, payroll tax cut, Senate
Posted in Origination/Lending, Top Stories | No Comments »
The housing market is ending 2011 on a high note with sales activity edging up in the fourth quarter, stronger employment data in November and economic growth of 2.5% projected for the three months ending Dec. 31, Fannie Mae said Tuesday.
The economy added 140,000 private-sector jobs last month and when mixed with strong auto sales, suggests a slight bounce in consumer confidence. Heading into 2012, Fannie says volatility in Europe will likely cause a few headwinds in the U.S. economy.
"It's important to recognize that we're ending 2011 on a stronger note than we've seen throughout the year. Unfortunately, however, our 2012 outlook is not as rosy as our forecast for the fourth quarter of 2011," said Fannie Mae Chief Economist Doug Duncan.
"Despite recent near-term improvement, the housing market will likely remain subdued next year — a reflection of the winter season, an expected slowdown in economic activity, and a potential increase in distressed sales," according to Duncan. "Moreover, we expect that the country's fiscal problems will be hotly debated over the coming year and will weigh on the market."
For the second and third quarters of 2011, wages and salary income edged lower nationwide, but consumer spending inched higher, suggesting more Americans are digging into savings accounts. During the same period, spending outpaced income and the nation's savings rate dropped from 4.8% in the second quarter to 3.8% in the third quarter.
Duncan, like other housing economists and analysts, sees a cloud of uncertainty hovering over the market in 2012. Most real estate economists say unknowns about future tax and housing policy are forcing analysts to adopt a wait-and-see approach to the 2012 economy.
Write to: Kerri Panchuk.
Tags: consumer confidence, consumer spending, distressed sales, Doug Duncan, economy, Fannie Mae, government-sponsored enterprises, GSE, housing market, salary, unemployment, wages
Posted in Origination/Lending, Top Stories | No Comments »
Americans increased their mortgage debt in November and default rates rose to 2.17%, according to the latest Standard & Poor's/Experian indices.
In October, the index showed a mortgage default rate of 2.08%. A year ago, the rate was 3.06%.
Second mortgage default rates decreased to 1.26% in November, down from 1.29% in October and 1.8% a year earlier.
All five major metropolitan statistical areas showed November mortgage default rate increases. Los Angeles saw the largest increase, jumping to 2.53% in November from 2.15% in October. The rate in Miami rose to 4.47% from 4.16%.
"These are two markets where we have seen some recent weakness in other housing statistics," said David Blitzer, managing director and chairman of the index committee for S&P Indices. "Again, while there may be some cause for concern if this upward trend continues. Other recent housing statistics point to the same relative weakness, so these statistics align with the overall current picture of the economy."
The default rate in Chicago climbed to 2.84% in November from 2.64% in October, while the rate in New York rose to 2.21% from 2.09%, according to the index. Default rates in Chicago, Los Angeles and New York have risen for at least three consecutive months. Dallas' default rate moved up slightly to 1.38% from 1.3%.
S&P and Experian monitor the default rates of consumers with auto loans, bankcards, first mortgages and second mortgage liens.
Write to Justin T. Hilley.
Follow him on Twitter @JustinHilley.
Tags: Chicago, Dallas, default rates, experian, first mortgage, Los Angeles, metropolitan statistical areas, mortgage debt, New York, S&P, second mortgage
Posted in Origination/Lending, Top Stories | No Comments »
[Update 1: Clarifies the Residential Mortgage Foreclosure Mediation is closed, not foreclosure mediation program.]
Florida Supreme Court Chief Justice Charles Canady terminated the state's residential mortgage foreclosure mediation program Monday.
The program was established in 2009 to manage the overwhelming number of cases in state courts. Borrowers were also given a chance to sit down with mortgage servicers in order to get a modification or some other alternative to foreclosure.
The results have been mixed. A backlog of 350,000 cases currently sits in circuit courts across the state, according to a working group assessment of the program released in October. A new surge of cases waits in 2012 as mortgage servicers finish correcting problems from the robo-signing scandal.
Servicers filed nearly 25,000 Florida foreclosures in November. One in 358 homes are somewhere in the process, the seventh highest rate in the country, according to RealtyTrac.
A study in February showed roughly 64% of borrowers left mediation without a deal from lenders. The Florida Supreme Court issued a new rule in December forcing servicers to send representatives with full authority to consider settlement offers.
The 20 state circuits enacted their own administrative orders for mediation programs. Jonathan Conant, the program manager for Florida's hard-hit 20th Judicial Circuit, suspects most will keep these orders in effect or will revise them soon. Some circuits are operating business as usual until a new plan in place. Others are exploring options "as long as there is no cost to the courts," Conant said.
In the second quarter, roughly 337 of the 1,426 borrowers in foreclosure elected mediation in the 20th Circuit, which includes Fort Myers, Naples and surrounding communities. Of these, 32% actually went through the program, and 17% received a written agreement from the servicer — less than 150 borrowers.
According to the working group evaluation, servicers resisted sending these representatives because banks had "economic incentives not to settle and to keep foreclosure cases in limbo to avoid the expenses that accompany homeownership."
"Factors which don't come out in the statistics but effect the outcome are the number of mediations in which a lender’s representative who appeared telephonically indicated that they either did not have the financial information necessary to determine what if any accommodation could be afforded to the borrower, or simply did not have the authority to do so," Conant said.
In these cases, the servicer or the attorney would insist on an impasse, he said.
"This was so even though the lender's or servicing agent's attorney had been provided with the documents requested and either failed to forward them on, or the lender rep on the phone had not reviewed the borrower's file adequately," Conant said.
The working group analyzed a sample of foreclosure cases in the state's 11th Circuit and found more than 78% of cases remained open up to two years after the mediation.
"The court has reviewed the reports on the program and determined it cannot justify continuation of the program," Canady wrote.
Cases already pending in mediation with remain in the program until the case is settled, but after Monday no new cases will be taken.
"Florida's economy will continue to be depressed as long as there are massive numbers of mortgages in default that have not been resolved by foreclosure," the working group said in its report.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: Florida, foreclosure, homes, mediation, modification, RealtyTrac, servicers, Supreme Court
Posted in Servicing/Default, Slider, Top Stories | 2 Comments »
Distressed properties continue to pressure national home prices even as buyer demand is growing in the nation housing marketplace, according to the latest Campbell/Inside Mortgage Finance HousingPulse tracking survey.
The report says in November homebuyer demand grew, and the average time spent on the market for real estate owned properties stands at just more than 10 weeks, its lowest level in 15 months.
Still, prices remain pressured by a glut of distressed homes. The average price for a short sale during the month was $209,200. Comparatively, move-in ready real estate owned properties sold for an average of $189,700 and damaged REOs sold for $98,600 on average, putting pressure on prices across the spectrum.
In November, distressed properties represented 46.1% of all home purchase transactions. For the past 23 months, the level of distressed properties has remained well above 40%, the Campbell survey reported.
Short sales, meanwhile, accounted for 17.6% of purchase transactions in November.
The Campbell/Inside Mortgage Finance Survey quoted one real estate agent saying the foreclosure short sale market is making it more difficult to appraise non-distressed properties.
"We could sell the homes for more but the appraisals are an issue since they are using short sales and foreclosures as comps," the agent quoted in the report said. "Given the multiple offers and the short time on the market, one would expect that prices would be on the increase; however, appraisal guidelines are holding it back."
Write to: Kerri Panchuk.
Tags: Campbell/Inside Mortgage Finance, distressed homes, homebuyer, HousingPulse Tracking Survey, real-estate owned, REOs, short sales
Posted in Secondary Market/Investors, Top Stories | No Comments »
U.S. District Court Judge William Dimitrouleas out of Ft. Lauderdale, Fla., issued a 41-month prison sentence to 42-year-old Louis Gendason for his participation in a reverse mortgage scheme.
Gendason, who lives in Delray Beach, Fla., also was ordered to pay $1.9 million in restitution. He was a Fort Lauderdale loan officer, who ended up involved in a scam to defraud mortgage firms and lenders by fabricating false reverse mortgage applications and pocketing the extra money.
Four people were involved in the elaborate $2.5 million Home Equity Conversion mortgage fraud scheme.
Gendason and another defendant were loan officers at 1st Continental Mortgage in Fort Lauderdale and Boca Raton, Fla. In their alleged roles, the defendants solicited seniors to refinance into reverse mortgages financed by Genworth Financial Inc. (GNW: 7.83 +0.38%).
To falsely qualify unqualified borrowers, the conspirators inflated property values and submitted them fraudulently to Genworth, which approved $2.5 million in reverse mortgages that were then insured by the Federal Housing Administration.
Another conspirator in her role as title agent and proprietor of Real Estate One Land Services Inc. closed the Genworth loans, but never paid off the borrowers existing mortgages. The conspirators received the proceeds from Genworth and attempted to hide the fraudulent loan closings by preparing a false HUD-1 settlement document. The proceeds were then dispersed among the scheme's participants.
Authorities said the conspirators launched a loan modification scam to try and hide the reverse mortgage deals from the homeowners' original lenders.
Other defendants include Marcos Echevarria, 29, of Palm Beach, Fla.; Kimberly Mackey, 47, of Pittsburgh; and John Incandela, 25, of Palm Beach, Fla. In November, the court issued prison sentences of 60 and 24 months, respectively, against Mackey and Echevarria.
Write to: Kerri Panchuk.
Tags: 1st Continental Mortgage, Federal Housing Administration, Florida, Genworth, Home Equity Conversion, homeowners, HUD-1, lenders, loan modification, loan officer, mortgage, Real Estate One Land Services Inc., refinance, reverse mortgage, reverse mortgage scheme
Posted in Origination/Lending, Top Stories | No Comments »
Nevada Attorney General Catherine Cortez Masto said her office indicted a California man this week for defrauding condo owners out of $1 million worth of insurance to cover claims from two fires.
The six-count indictment was filed against Massoud Aaron Yashouafar, who lives in Beverly Hills, Calif. Earlier in December, the Nevada and California attorneys general began a joint investigation designed to assist homeowners who have been harmed by alleged misconduct and fraud in the mortgage industry.
The AG's office says Yashouafar served as treasurer for the Paradise Spa board of directors and in that role collected two insurance checks covering damages from the fires. Instead of directing the funds to pay for repairs to the damaged condos, Yashouafar transferred the checks to an out of state bank account that listed him as the sole signator.
The Paradise Spa condo owners, meanwhile, ended up sitting on the damages and had to seek out other living arrangements while waiting for the repairs to their condos. Cortez Masto says in some cases, condo owners paid rent to Yashouafar, who owned other condos, while waiting for the repairs to be finalized.
Investigators discovered later that Yashouafar spent the insurance money on personal projects.
The indictment against Yashouafar includes several counts of embezzlement and theft of property by false pretenses.
Write to: Kerri Panchuk.
Tags: AG, California, Catherine Cortez Masto, condos, homeowners, indictment, insurance fraud, Nevada, Nevada Attorney General
Posted in Secondary Market/Investors, Top Stories | No Comments »
Housing starts shot higher by 9.3% in November, according to Commerce Department data, climbing to the highest level of the year.
On a seasonally adjusted basis, starts increased to 685,000 from 627,000 for October, which was revised downward 1,000. November housing starts are up 24.3% from 551,000 a year earlier.
Analysts polled by Econoday expected housing starts to come in at 636,000 for November with a range of estimates between 600,000 and 650,000.
In a joint release, the Census Bureau and Department of Housing and Urban Development said single-family starts rose 2.3% last month to a seasonally adjusted rate of 447,000 units, up from a revised 428,000 for October.
Starts dropped 22.5% in February, which was the largest monthly decline since March 1984, but picked up momentum throughout the summer. November's rate is the highest since April 2010.
Building permits in November climbed 5.7% to an annual rate of 681,000, up from a revised 644,000 for the prior month and nearly 21% higher than 564,000 a year earlier.
Write to Jason Philyaw.
Follow him on Twitter: @jrphilyaw.
Tags: census bureau, commerce department, Department of Housing and Urban Development, housing starts, HUD, single-family starts
Posted in Origination/Lending, Top Stories | 1 Comment »
