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Archive for December, 2011

Florida Realtor groups clash over advertising ethics

Wednesday, December 21st, 2011

Two Florida Realtor associations are clashing in federal court over advertising measures used to attract new members.

The Realtor Association of Greater Fort Lauderdale filed suit against the Miami Association of Realtors in federal court this week, claiming MAR tried to lure members away from RAGFL using false and deceptive advertising as well as unfair competitive practices.

The Miami Association of Realtors denies all allegations and says it will vigorously defend itself in court.

MAR's CEO Teresa King Kinney summed up the complaint as a negative reaction to MAR's competitive stride in the marketplace after the organization grew from the merger of Realtor Association of Greater Miami and the Realtor Association of Miami-Dade County. Kinney told HousingWire the merger more than a year ago grew the firm's member ranks to 25,600.

"We strongly deny the allegations and will vigorously defend the lawsuit," Kinney and MAR wrote in a statement to members. "We are always accurate, ethical, and professional in all of our business practices, including our advertising and promotion. This lawsuit seems to be a reaction to healthy competition in the marketplace – and our association offering more and better services at lower costs – to the benefit of thousands of Realtors."

RAGFL claims in the suit it suffered financial losses in the wake of an advertising campaign launched by MAR to divert members from RAGFL to MAR.

The suit claims both groups compete for members in the same regions and that MAR launched a false advertising campaign that "expressly and impliedly made false and deceptive statements in ads regarding association membership and size; product pricing; and purported member savings for joining MAR versus RAGFL."

Both organizations are funded by dues paying members, putting RAGFL at a strategic disadvantage based on pricing and product claims made in local ads, the lawsuit contends.

RAGFL claims MAR advertisements made false representations that could encourage potential members to choose MAR over RAGFL.

One example, the suit says, is a MAR's postcard that allegedly suggests RAGFL charges members for one service, while MAR does not, and that RAFGL "requires members to pay $35 for education while MAR does not." In addition, RAGFL questioned the accuracy of a MAR's ad that suggested 700 RAGFL members transferred to MAR from RAGFL.

The MAR organization denies all the claims and says the merged organization is simply able to offer better services at lower costs as a result of its expansion. Kinney calls the suit disappointing and says the end result will be a situation where resources are diverted away from the associations' members.

MAR also defended its expanding membership, stating that "our membership numbers are accurate and verifiable with over 25,600 members, including more than 6,000 in Broward County."

Write to: Kerri Panchuk.

Tags: Miami Association of Realtors, Realtor Association of Greater Fort Lauderdale
Posted in Origination/Lending, Top Stories | No Comments »

California AG sues Fannie Mae, Freddie Mac

Wednesday, December 21st, 2011

[Update 1: Adds FHFA response]

California Attorney General Kamala Harris filed a lawsuit against Fannie Mae and Freddie Mac, saying the government-sponsored enterprises refused to respond to an investigative inquiry.

The lawsuits, filed Tuesday in state superior court in San Francisco, seek to force the GSEs to comply with a subpoena filed Nov. 15.

In the subpoena, Harris's office asked for information regarding GSE-owned foreclosed properties. The inquiry focused on public safety issues, including drug activity and hazardous materials at the properties, as well as securities fraud and wrongful foreclosure.

The Securities and Exchange Commission charged six former executives of the two GSEs with securities fraud Friday.

The Federal Housing Finance Agency, the regulator for the GSEs, declined to comment on the California lawsuit.

In a Dec. 9 letter to Harris's office submitted as evidence, outside counsel for the GSEs and the FHFA wrote that her office should withdraw any requests for information, and that no state AG has the authority to subpoena the GSEs.

"Congress has conferred exclusively on FHFA the authority to regulate the enterprises," wrote Asim Varma, an attorney with Arnold & Porter LLP.

Varma also wrote that the burden of the requests would be "nothing short of staggering" and hamper the operations of the GSEs.

Harris's office said GSEs remain private corporations, not government agencies, despite their placement into conservatorship.

Write to Andrew Scoggin.

Follow him on Twitter @ascoggin.

Tags: California Attorney General, Fannie Mae, foreclosure, freddie mac, government-sponsored enterprises, GSE, Kamala Harris
Posted in Servicing/Default, Slider, Top Stories | No Comments »

GSEs complete 25,000 mortgage modifications in October

Wednesday, December 21st, 2011

The Federal Housing Finance Agency said the delinquency rate of mortgages held by Fannie Mae and Freddie Mac was 4.5% at Oct. 31, flat with the end of the third quarter.

In a report to Congress, the conservator of the mortgage giants said the rate of home loans more than 60-days delinquent inched higher to 12.9% for mortgages with borrowers who had credit scores lower than 660 at close from 12.8% at Sept. 30. The rate of loans delinquent more than 60 days for mortgages with borrowers who had credit scores higher than 660 was 3.3%.

Fannie Mae completed 18,000 loan modifications in October while Freddie Mac closed on 7,000 mortgage modifications. Both levels are down 1,000 from the prior month.

The FHFA said the number of permanent modifications completed through the Treasury Department's Home Affordable Modification Program rose to 387,000 in October from 380,000 the month earlier. Trial modifications declined to 39,000 from 42,000.

After completing more than 575,000 mortgage modifications in 2010, the GSEs have closed about 275,000 this year.

"Reducing enterprise losses by preventing avoidable foreclosures through loan modification and mortgage refinances remains a top priority at FHFA," Peter Brereton, FHFA associate director for congressional affairs, said in his letter to Congress.

"We continue to explore ways to maximize assistance for homeowners and minimize preventable foreclosures" consistent with the Emergency Economic Stabilization Act of 2008, which is when Fannie and Freddie went into federal conservatorship.

The FHFA said refinance volume continued to grow in October as mortgage interest rates dropped to the lowest level in 40 years. More than 962,100 home loans have been refinanced through the federal Home Affordable Refinance Program since it began.

Earlier Wednesday, analysts at Barclays Capital (BCS: 14.09 +1.15%) said lenders are no longer required to determine a borrower's ability to repay a loan when underwriting mortgages for inclusion in Fannie Mae's HARP 2.0.

Write to Jason Philyaw.

Follow him on Twitter: @jrphilyaw.

Tags: 60-days delinquent, Congress, conservatorship, credit scores, delinquency, Federal Housing Finance Agency, freddie mac, HARP, Home Affordable Modification Program, mortgage modifications, mortgages
Posted in Origination/Lending, Secondary Market/Investors, Top Stories | No Comments »

Three questions for NAR

Wednesday, December 21st, 2011

The announcement by the National Association of Realtors to revalue home sales for the last four years set off some confusion in the industry.

NAR held a conference call in order to explain the reasoning and the impact behind the revamp.

HousingWire wondered how the revisions may impact the trade group's line of business. Furthermore, we wondered how its members, Realtors, may react. Could the changes lead to litigation?

Walt Molony, spokesman for NAR, responds:

HousingWire: Is NAR considering having a third-party auditor confirm its rebenchmarking?

Walt Molony: That’s exactly what we’re doing — the new benchmark process permits us to rebenchmark each year using the methodology discussed with various government agencies and outside housing economists, using the Census Bureau’s American Community Survey as the basis. In the future, the benchmark process may transition to using courthouse deed records instead of the ACS, but that data is insufficient to reliably use at present.

HW: Are there any plans to adjust Realtor memberships? Basically, NAR provided inaccurate numbers to its members for years, do you plan to compensate them in any way?

WM: The question misses the point. There is no change to individual Realtor business, local MLS data, etc. Most analysts are more concerned about the market trends based on movement in sales — the month-to-month percentage changes — as well as the inventory and price data. Keep in mind that while the sales volume was lower than projected using the old benchmark, so was unsold inventory. This means there is no change to the characterization of market conditions regarding supply and demand, or to home prices.

HW: Is NAR worried about any pending litigation from this rebenchmarking?

WM: Not at all. Government agencies that use and track the data, as well as the outside housing economists with whom we consulted, all understand the issues created in the absence of the decennial Census data previously used to benchmark sales. The new process means we will be able to benchmark annually and minimize any future divergence.

Write to Jacob Gaffney.

Follow him on Twitter @jacobgaffney.

Tags: census bureau, home sale revisions, home sales, NAR, National Association of Realtors
Posted in Commentary, In This Corner, Voices | No Comments »

Nonresidential construction spending up for first time since August

Wednesday, December 21st, 2011

The architecture billings index rose for the first time since August, possibly indicating the start of increased demand for design services in 2012, according to the American Institute of Architects.

The closely watched index provides a glimpse into the next nine to 12 months of nonresidential construction spending activity.

The November ABI score of 52 follows 49.4 in October and 46.9 for September. Any score above 50 indicates an increase in billings. The new projects inquiry index in November climbed to 65 from a reading of 57.3 in October.

"This is a heartening development for the design and construction industry that only a few years ago accounted for nearly 10% of overall gross domestic product but has fallen to slightly less than 6%," AIA Chief Economist Kermit Baker said.

"Hopefully, this uptick in billings is a sign that a recovery phase is in the works," he said. "However, given the volatility that we've seen nationally and internationally recently, we'll need to see several more months of positive readings before we'll have much confidence that the U.S. construction recession is ending."

Fitch Ratings predicts modest improvements in construction activity in 2012 along with a slowly expanding economy that should boost consumer confidence.

The South and Midwest saw an increase in construction billing activity in November, receiving scores of 54.4 and 50.9, according to the AIA. The Northeast and West experienced downturns with scores of 49.1 and 45.6.

The index for multifamily residential projects was 55.8 in November and 53.9 for commercial and industrial construction.

Write to Justin T. Hilley.

Follow him on Twitter @JustinHilley.

Tags: ABI, AIA, American Institute of Architects, Architecture Billings Index, construction, consumer confidence, Fitch Ratings, new project inquiry index, nonresidential construction spendin
Posted in Secondary Market/Investors, Top Stories | No Comments »

BofA close to settling Countrywide probe

Wednesday, December 21st, 2011

Bank of America Corp. (BAC) is close to settling a U.S. Justice Department probe into whether its Countrywide Financial Corp. unit violated fair-lending practices, said two people with knowledge of the discussions.

A deal may be announced as early as this week and will include money to compensate Countrywide customers, said the people, who declined to be identified because the talks were private. Charlotte, North Carolina-based Bank of America acquired subprime lender Countrywide in 2008, and with it billions of dollars in mortgage liabilities.

Posted in Around the Web | No Comments »

Former Fannie CEO Mudd takes leave of absence at Fortress

Wednesday, December 21st, 2011

Former Fannie Mae CEO Daniel Mudd, who faces fraud charges from the Securities and Exchange Commission, took a leave of absence from his current post at Fortress Investment Group. Mudd also stepped away from the investment firm's board.

Mudd, along with Enrico Dallavecchia, former chief risk officer at the government-sponsored enterprise, and Thomas Lund, former EVP of Fannie's single-family mortgage business, face charges of misrepresenting the company's exposure to volatile subprime mortgages prior to the 2008 mortgage market meltdown.

In addition, former Freddie Mac CEO and Chairman Richard Syron, Chief Business Officer Patricia Cook and the EVP for Freddie's single-family guarantee business, Donald J. Bisenius, were also charged by the federal regulator for misrepresenting the companies' holdings of subprime loans.

"I have requested a leave of absence from my position as chief executive officer to ensure that any time or attention I need to focus on matters outside of Fortress will not affect the business or operations of the company," Mudd said in a statement.

In Mudd's absence, Fortress has appointed Randal Nardone, principal and co-founder, as interim chief executive officer.

Fortress is a global investment manager with $43.6 billion in managed assets. It's also the parent of Lewisville, Texas-based Nationstar Mortgage.

"Fortress is very well-positioned today, and across our company, we remain single-mindedly focused on managing our investment funds and capitalizing on opportunities to create value for our investors," said Nardone. "We look forward to Dan's return in the hope that matters are resolved favorably and expeditiously."

Write to: Kerri Panchuk.

Tags: Daniel Mudd, Fannie Mae, Fortress Investment group, freddie mac, government-sponsored enterprise, GSE, mortgage, Nationstar, Richard Syron, Thomas Lund
Posted in Secondary Market/Investors, Top Stories | 1 Comment »

NAR reduces home sales index 14.3%

Wednesday, December 21st, 2011

The National Association of Realtors revised its existing home sales downward 14.3% in the period from 2007 to 2010, after the group said its data diverged from actual market conditions.

The trade group announced the revisions Wednesday in its monthly existing-sales report. November sales rose 4% from last month and 12.2% from a year ago. Jed Smith, the head of quantitative research at NAR said in a conference call that numbers in reference to supply and demand in the market are unchanged.

Lawrence Yun, NAR chief economist, said about half of the revisions came from a decline in for-sale-by-owner transactions. NAR said those sales dropped from 16% of the market in 2000 to 9% in 2010.

Multiple listings, geographic population shifts and house flipping also contributed to the revisions, Yun said.

NAR expected its revisions would have a "minor impact" on future GDP adjustments, well below 1% according to Jed Smith, a NAR researcher. He said the value added from existing home sales is significantly less than newly constructed homes.

The Bureau of Economic Analysis, which computes GDP, said it doesn't include existing home sales in the measure, but rather real estate services associated with the sale of the home.

Real estate relocation and title service Realogy said Wednesday that its operation will be uneffected by the news.

"Realogy's reported existing home sale transaction sides are unaffected by NAR's revisions to its methodology for determining national existing home sales and will not change," said Realogy chief financial officer Tony Hull. "This includes the 1.18 million transaction sides that we reported in 2010 as well as related revenue drivers reported in 2011 and in earlier periods."

John Burns Consulting contends that for years, the mortgage market believed NAR's numbers to be overstated. Zillow recently added it would not be changing any of its operations as a result.

The group initially said in a Dec. 13 media advisory that it was readjusting its existing home sales numbers. The group said the revisions, which it called a normal process, came after consultation with outside groups, including the Federal Reserve, the Department of Housing and Urban Development, Freddie Mac, Fannie Mae, CoreLogic (CLGX: 14.56 +0.62%).

CoreLogic said in February that NAR overstated its 2010 results by 15 to 20%. NAR dropped its annual 2010 total 14.6% from 4.91 million to 4.19 million.

Write to Andrew Scoggin.

Follow him on Twitter @ascoggin.

Tags: CoreLogic, Department of Housing and Urban Development, existing home sales, Fannie Mae, Federal Reserve, freddie mac, home sales, Lawrence Yun, NAR, National Association of Realtors
Posted in Origination/Lending, Slider, Top Stories | 3 Comments »

Illinois home sales rise 14.2% as buyers seek bargains

Wednesday, December 21st, 2011

November home sales in Illinois rose 14.2% from a year earlier — a sign that a recovery in the housing market is under way, the Illinois Association of Realtors said Wednesday.

Still, home prices took a big hit, according to the report.

According to IAR, Illinois home sales in November grew to 7,954 from 6,966 in November 2010 as buyers favored lower-priced properties. The median price in November was $128,500, down 11.4% from $145,000 a year earlier.

November's home sales are down 7% from October's total of 8,563, in what is a typical seasonal decline over the winter months.

IAR president Loretta Alonzo expects a steady uptick in home sales activity into 2012.

“As we move through the distressed properties, predominant in the Chicagoland market, and begin to see more positive reports on the jobs front, we will be looking for some stabilization in home prices to coincide with the rising home sales,” Alonzo said.

In the city of Chicago, November home sales climbed 20.4% to 1,377 from 1,144 homes sold a year earlier. Chicago's median home sale price in November was $160,000, down 12.3% when compared to November 2010 when it was $182,500.

In the nine-county Chicago metropolitan statistical area, home sales in November surged 20.7% to 5,453 from 4,518 in November 2010 as buyers favored lower-priced properties. The November median price in Chicago fell 14.3% to $150,000 from a year earlier when it was $175,000.

“Little by little, there is some accumulating evidence that there may be some measure of recovery in the housing market,” said Dr. Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory at the University of Illinois.

Housing inventory levels are declining and the pending home sales indices are high, he noted. The month’s supply of homes on the market is 10.3 and 10.4, respectively, for the state and the Chicago MSA.

Fifty-two percent of Illinois counties reporting (52 of 100) showed year-over-year home sales increases in November 2011 while 41% (41 of 100) showed year-over-year median price increases.

Write to Justin T. Hilley.

Folow him on Twitter @JustinHilley.

Tags: Chicago, distressed properties, home prices, home sales, IAR, Illinois Association of Realtors, median price, PMSA, Primary Metropolitan Statistical Area, Regional Economics Applications Laboratory, unemployment, University of Illinois
Posted in Secondary Market/Investors, Top Stories | No Comments »

Fannie nixes 'ability to pay' wall to HARP refinancing

Wednesday, December 21st, 2011

Lenders are no longer required to determine a borrower's ability to repay a loan when underwriting mortgages for inclusion in Fannie Mae's HARP 2.0 refinancing channel.

Barclays Capital made that conclusion in its securitized products research report Wednesday.

Barclays said Fannie Mae is adjusting its seller guidelines for HARP 2.0 after discovering the "borrower ability to pay clause" is preventing a large chunk of underwater mortgages from entering the program.

Under the changes, the ability-to-pay clause is no longer considered an underwriting requirement for Fannie's HARP 2.0 program. Instead, Fannie Mae now stipulates that no debt-to-income calculation is required for these refinancings as long as the borrower's payment does not increase by more than 20%, according to Barclays Capital.

Fannie Mae incorporated this change after lenders pushed back, saying the ability-to-pay clause is unclear and hinders more HARP refis due to the implied sense that lenders could end up on the hook for loans that default.

"Lenders argue that lack of clarity on what reasonable ability precisely means could expose lenders to indemnification liability in the event that the loan defaults," Barclays wrote. "Though the GSEs (government-sponsored enterprises) have indicated that this clause exists to ensure prudent underwriting judgment and efficient choice between HARP and HAMP, lenders view this as a significant risk."

Based on these changes, lenders can underwrite HARP mortgages by assessing the borrower's credit on the number of payments made. Lenders trying to refinance HARP through Fannie's underwriting procedures can now underwrite loans on payment history and a verbally verified income source.

"The removal of the subjective 'ability to pay' criteria could result in lenders becoming more comfortable with the potentially lower indemnification liabilities," Barclays wrote. "This could lower the threshold for refinancing loans and lead to a boost in refis."

While the removal of the clause could boost refinancings, Barclays says risks still remain in regards to mortgage insurance and second liens.

Write to: Kerri Panchuk.

Tags: Barclays Capital, Barclays Capital Securitized Products Research, Fannie Mae, GSE, HARP 2.0, lenders, loan defaults, mortgage, mortgage insurance, refinancings, underwater mortgages
Posted in Origination/Lending, Top Stories | 3 Comments »