Archive for December, 2011
The average price for a home sold in the Baltimore region in November rose almost 1 percent compared with a year earlier, but beleaguered sellers shouldn't cheer just yet.
The median price — another common measure — fell 2.5 percent compared with a year earlier, according to numbers released today by Metropolitan Regional Information Systems. The $222,250 median price is the midpoint, with half the sales pricier and half less expensive.
When Steve Linick first met senior managers at Fannie Mae and Freddie Mac early this year, he told them he would be no ordinary Washington regulator. His office has the power to make arrests, issue subpoenas and conduct searches, and some of his employees carry badges and guns.
He hasn't hesitated to deploy those resources as the inspector general of the mortgage-finance companies' regulator, the Federal Housing Financing Agency.
The too-big-to-fail mortgage servicing model may be beset with difficulties, yet despite fewer mortgage modifications and slower foreclosure timelines, some securities analysts prefer the big guys because they can still move the cash.
The reason for the preference is rooted in the structure of housing finance, where in the secondary markets, the buck stops at the mortgage servicer level. Literally.
Mortgage servicers will stop advancing payments to the bond investors if the interest from the borrower stop as well, typically when the loan is liquidated after foreclosure. Barclays Capital analysts said in a report released late Friday these "stop advances" vary significantly, but one thing is consistent: the rate is much lower at the bigger servicing shops.
Since the housing crisis struck in 2008, the larger firms such as Wells Fargo (WFC: 29.60 +1.89%), Bank of America (BAC: 7.29 -0.14%) and JPMorgan Chase (JPM: 37.21 -0.75%) stopped advances a fraction of the time compared to smaller firms. Analysts studied the findings on private-label subprime loans originated during the housing bubble and have been in nonperforming status for nearly two years (click on graph below to expand).
Larger firms have access to low-cost funding such as deposits or other loans that can fund the advances.
Smaller servicers rely on more complicated and more expensive advanced facilities and securitizations to fund the cash flow. More motivated to collect the advances, smaller servicers became more likely to grant a modification.
While residential mortgage-backed securities investors may prefer the larger servicers, regulators and the state attorneys general certainly do not.
A group of Attorneys General are nearing a settlement with the five largest firms over the recent robo-signing scandal, but others broke off to pursue their own investigations and file their own lawsuits.
Consent orders signed with the Office of Comptroller of the Currency and the Federal Reserve will result in months of look-back reviews to provide some undetermined fix for borrowers affected by the problems.
The Treasury Department noted recently that many of these larger firms have made improvements. It restored Home Affordable Modification Program payments to Wells Fargo in the second quarter and could reinstall them soon for BofA as well. Chase, the Treasury said, is in danger of losing HAMP payments permanently.
As improvements to the process were made, including the installation of single-point of contacts and crisper documentation procedures, BarCap analysts noted the progress BofA made in its backlog of long-delinquent loans. This past summer, BofA pushed 60-plus day delinquent loans through foreclosure faster than many other smaller firms.
As the new requirements from the AG settlements and other regulations begin to clarify, the speeds will pick-up, the analysts said, and the housing market can begin to clear more of the shadow inventory of distressed property and loans.
"All else equal, we continue to prefer deals serviced by large servicers over those serviced by small servicers, given larger servicers’ more consistent and predictable practices, lower stop advance rates, lower likelihood of servicing transfers and higher potential for rep and warranty settlement proceeds," the analysts said.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
A look at stories across HousingWire's weekend desk, with more coverage to come on bigger issues:
Senate Democrats and House Republicans proposed a plan to pay for the proposed payroll tax-cut extension. The plan boosts the "guarantee" fees that Fannie Mae and Freddie Mac charge lenders. The government-sponsored enterprises use the fees to cover defaults of loans they buy from lenders — loans that the GSEs securitize and then sell to investors.
However, some in the real estate industry oppose the plan. They say the mortgage borrowers may end up with higher interest rates once lenders inevitably pass the fees onto borrowers.
Last year, the fees averaged about 0.25% of the loan amount. The Senate proposal raises the fees by at least 0.125% over the next two years. The House proposal calls for an increase of 0.1% over the same period.
The proposal would send the fees to the Treasury Department, when right now the GSEs receive the fees.
The Mortgage Bankers Association, the National Association of Realtors, and the National Association of Homebuilders told lawmakers that redirecting revenue from Fannie and Freddie for purposes unrelated to the health of the housing finance system is counterproductive.
Reacting to the proposal, MBA CEO David Stevens Saturday tweeted, "payroll tax should not be paid for with GSE fees. That is a slippery slope."
The proposal would raise up to $38 billion in revenue over 10 years, according to budget projections.
After saying last week that former Speaker of the House Newt Gingrich should apologize for accepting money from Freddie Mac, Rep. Ron Paul, R-Texas, at Saturday's GOP debate challenged Gingrich over his work as a paid consultant for Freddie Mac from 1999 to 2008. By accepting more than $1.6 million from Freddie Mac, which was taken over by the U.S. government in 2008, Gingrich was effectively paid using taxpayer bailout money, Paul said.
"While (Gingrich) was earning a lot of money from Freddie Mac, I was fighting over a decade to try to explain to people where the housing bubble was coming from," Paul said.
Gingrich said he was never a spokesman for any agency nor did any lobbying for the agency.
"I offered strategic advice. I was in the private sector," Gingrich said. "When you're in the private sector and you have a company and you offer advice, you're allowed to charge money for it."
The following morning on Meet The Press, Paul called Freddie Mac's conservatorship a "deeply flawed system" and that the GSE is "about as close to the government as you can get."
Fannie and Freddie have cost taxpayers nearly $151 billion since being taken over by the government, according to The Wall Street Journal.
"To call that private is not exactly accurate," Paul said.
Paul said Gingrich legally doesn't have to return the money, but that it was "immoral" to take it in the first place.
Saturday's debate was the most watched GOP debate of the campaign season so far, hauling in 7.57 million viewers.
Student loans are becoming another hurdle for the housing market to overcome, according to John Burns Real Estate Consulting.
Faced with mounting student loan debt, poor job prospects and stagnant wages, an increasing amount of 25- to 34-year-olds, a prized demographic for the housing sector, have moved back in with their parents.
John Burns says student loan debt now totals $865 billion, which is greater than all credit card debt outstanding, as well as all other types of household debt except for mortgages. College graduates' debt averages $25,000. The debt load is so high, and the job outlook so bleak, the firm says, that student loan default rates have almost doubled. And with the economy little improved since 2009, default rates are bound to rise further.
Nearly 6 million 25- to 34-year-olds now live with mom and dad, up 26% from when the recession started in 2007, according to the firm. Today's 36.8% homeownership rate for 25- to 29-year-olds is at its lowest level since 1999, and homeownership for 30- to 34-year-olds is at its lowest rate in 17 years.
John Burns says the pent-up demand will ultimately provide a much-needed boost to the housing sector. However, the boost will be heavily skewed to the rental market as it will take longer than ever for young people to qualify for a mortgage, especially if more and more graduates are hit with credit blemishes from unpaid student debt.
Affordable housing and homeless advocates in Rhode Island joined Occupy Providence on Saturday to march and call for more funding and the passage of legislation to protect the homeless from discrimination and foreclosed homeowners from eviction.
The march of about 200 people ended with a rally on the steps of the state Capitol. Folks who are homeless and formerly homeless held signs declaring housing a human right.
The rally highlighted advocates' three legislative priorities ahead of the opening of the session in January: a dedicated funding source for affording housing programs, a homeless bill of rights and a right-to-rent law allowing foreclosed homeowners to rent back their properties rather than be evicted.
About 4,400 people in the state experienced homelessness at some point last year, according to the Rhode Island Coalition for the Homeless. Rhode Island has the highest rate of foreclosures in New England and one of the top rates in the country.
Lehman Brothers Holdings' bankruptcy estate is preparing to make a cash bid for a piece of Archstone it doesn't already own in a move designed to block Equity Residential, which is controlled by real-estate mogul Sam Zell, from grabbing the piece of the large apartment company.
Lehman's estate, which owns 47% of Archstone, is readying a $1.33 billion cash bid for another 26.5% of the company, which owns stakes in 77,000 apartments in major cities across the U.S. and in Germany. Lehman plans to file a bankruptcy-court motion this week asking a judge for permission to use the estate's cash to do the deal, one of these people said.
The Archstone deal is part of a massive effort by Lehman's estate to wind down assets and pay $65 billion to creditors. A judge approved Lehman's final wind-down plan last Tuesday after negotiating with creditors for three years.
The estate has about $20 billion to $30 billion in cash for creditors so far and could spend another three to five years unwinding remaining assets.
On Tuesday at 10 a.m., the Senate Banking Committee will vote on three nominations by President Barack Obama:
Carol Galante, for commissioner of the Federal Housing Administration. Galante is currently the acting FHA commissioner.
Maurice Jones, for deputy secretary of the Department of Housing and Urban Development. Jones has served as President and publisher of Pilot Media since 2008.
Thomas Hoenig, for vice chairman of the board of directors of the Federal Deposit Insurance Corp. Hoenig served as head of the Federal Reserve Bank of Kansas City from 1991 to Oct. 1, 2011 and is a critic of large banks.
For the second consecutive week, the FDIC and state regulators did not close any banks. 2011's total still stands at 90. Here is a week-by-week comparison of bank closures over the past four years:
Write to Justin T. Hilley.
Follow him on Twitter @JustinHilley.
Sheila Bair, the former Federal Deposit Insurance Corp. chairman, is a leading candidate among state officials to ensure banks comply with any settlement of a nationwide foreclosure probe, a person familiar with the matter said.
Bair, who led the agency from 2006 until stepping down this year, is supported by some state officials as a third-party monitor of any settlement with mortgage servicers, including Bank of America Corp., the person said. At least one bank in the talks, Citigroup Inc., opposes her selection, said the person, who didn’t want to be named because the talks are private.
