Commentary : Housing Wire

Does Angelo Mozilo belong in the Hall of Fame?

I don’t know if Angelo Mozilo knows the difference between a curve ball and a split-finger, but given that his 40-year reign as the head of Countrywide Financial is coming to an end, it seems appropriate to reflect on his career as well as his legacy. While the Mortgage Banker’s Association doesn’t have a Hall of Fame for lenders, two years ago, Mozilo would have been a shoe-in as a first-round inductee if such a distinction existed. By now, we all know the story: a Brooklyn-born son of a butcher who devoted his professional career to building the largest and most influential mortgage lending company in America. To those of us who’ve watched him operate over the years, it was hard not to feel a certain amount of envy. He always seemed to be one step ahead of the curve, instinctively... more»

June 27, 2008
3 Comments

Meet the New Sheriff, Same as the Old: MI Bounces Back As Seconds Fade

The second mortgage market hasn’t shut down, but it’s shrinking fast. Which means that, on the other end of the see-saw, mortgage insurers are back and dictating the credit terms for primary financing on about 80 percent of a house’s value. This is a sea change for housing finance that, so far, has gone mostly unnoticed. It also explains why, in May, both Fannie Mae (FNM: 7.04 +9.66%) and Freddie Mac (FRE: 5.10 +3.03%) could abruptly reverse the maximum financing “haircuts” that they had earlier adopted for transactions in declining housing markets last December. It’s this simple: when a mortgage exceeds 80 percent of a home’s value, the GSEs are required by charter to have credit support on the portion of the loan above 80 percent in the form of mortgage... more»

June 11, 2008
1 Comment

Primed for Trouble: Pace of Mortgage Distress Shifts to Prime Borrowers

While foreclosure activity hit an all-time record in the first quarter, according to statistics released Thursday morning by the Mortgage Bankers Association, a shift of the mortgage mess towards prime borrowers appears to be taking place as well — signaling that the credit crunch that began among those with less-than-perfect credit may now be marching onward towards borrowers usually deemed better credit risks. It shouldn’t surprise anyone at this point to learn that first quarter foreclosure activity was the highest since 1979, the first year MBA’s data on foreclosure activity is available. The percentage of loans in the foreclosure process was 2.47 percent at the end of the first quarter, the MBA said, an increase of 43 basis points from the fourth quarter of 2007 and 119... more»

June 5, 2008
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Sounds like reason to me

An op-ed published by former FDIC chairman William Isaac talks some sense into the current housing and credit crisis; and it’s a viewpoint that I think is being swallowed up by bellowing over Congress’ need to do something about troubled homeowners and rising foreclosures. On housing, some sanity: At the risk of being politically incorrect, I’m not sure why we are upset about a 20%-off sale in housing. After years of double-digit increases, housing prices in the city in which I live, Sarasota, Fla., jumped an astonishing 35% in 2005 – an unsustainable rate of increase that was pushing housing prices beyond the reach of far too many people. We really needed our housing markets to cool down quite substantially. Millions of people – particularly the young – will benefit... more»

May 22, 2008
2 Comments

Viewpoint: Finding Fraud, and What it Really Means for Loss Mitigation

Various state AGs and the Conference of State Bank Supervisors put out an update Tuesday to a study originally released in February that found that seven of 10 seriously delinquent loans “were not in any sort of work-out process.” The new report sings pretty much the same song — 70 percent of seriously delinquent subprime borrowers aren’t in any stage of loan workout or modification efforts — and essentially then takes servicers to task for failing to prevent what it calls “unnecessary foreclosures.” HW readers can feel free to read the full report if they like. It finds that two-thirds of loss mitigation efforts are taking more than 30 days to complete, and suggests too that states should look to uniformly lengthen foreclosure timelines. The crux of... more»

April 23, 2008
15 Comments

Viewpoint: Those Who Bury History Are Doomed to Repeat It

Ironies abound in the current mortgage mess/financial crisis. One of the most poignant, from my perspective – that’s one with over 20 years in MBS/ABS research — is the fact that, by abandoning the Great Depression as the worst-case benchmark and shifting to models based on contemporary mortgage performance, the ratings companies helped create the current house price crash and credit squeezes that are routinely compared to the Great Depression. So, for history buffs, I am going to quickly review the basis on which the ratings companies quantified credit support requirements for private issue MBS in the first ten or fifteen years of mortgage securitization. And for those who endure the walk down memory lane, I am going to also highlight a great little study by UBS structured products... more»

April 9, 2008
2 Comments

Viewpoint: Borrower Groups Push for Elimination of “Declining Market” Policies

After hammering lenders for making loans to minorities that many consumer advocates say should never have been made, now some industry groups are claiming that lenders aren’t lending enough to minorities living in the hardest-hit local housing markets. Saying that lender-enacted policies to limit lending activity in the hardest-hit housing markets is “disproportionately affecting minority borrowers,” three groups representing Asian, Black and Hispanic real estate professionals called Tuesday for the elimination of so-called “declining market” policies that place more stringent guidelines on mortgage underwriting in certain housing markets. The National Association of Hispanic Real Estate Professionals (NAHREP), the Asian Real Estate Association of America (AREAA)... more»

April 1, 2008
4 Comments

Viewpoint: IndyMac to Cease Reporting Raw Delinquency Statistics, but Why?

Calling so-called raw delinquency statistics “meaningless and misleading,” IndyMac chairman and CEO Mike Perry said late last week that the thrift — which lost $509 million in the fourth quarter and suspended its dividend amid increasing borrower delinquencies — would cease reporting them, as it looked to shift its reporting to so-called static-pool data. Perry said the company was “working feverishly” provide static-pool data to investors by the end of the second quarter, if not sooner, but would stop publishing raw data by product and channel, effective immediately. Some background may be in order: Static-pool reporting is the practice of benchmarking performance data against total production in some given “static pool,” whereas the raw deliquency... more»

March 26, 2008
3 Comments

Viewpoint: Did the Fannie and Freddie Appraisal Agreement Go Far Enough?

Over the last few weeks, I’ve had some time to go back and read the landmark agreement NY Attorney General Andrew Cuomo struck with Fannie Mae, Freddie Mac and OFHEO a few weeks ago. Designed to prevent brokers from ordering appraisals and lenders from having an ownership interest in an appraisal company, I’ll readily admit that I was one of the first to hail the move. Although it’s clearly an improvement over the current system, I still think it doesn’t fully address the systemic issues that have plagued this side of the industry. Mary Ellen Godin of the Record-Journal wrote an interesting story a few days ago (”Appraisers: Pressure to inflate inflates“): An appraiser who works for Robert Claremont was sent to a house in Stratford and the real estate agent wouldn’t let... more»

March 25, 2008
9 Comments

Viewpoint: The Impact of AU Technology on Subprime Lending

So how much did technology and more specifically, automated underwriting, factor into the current subprime crisis? In this former lender’s opinion, the impact was substantial. The widespread use of automated underwriting (AU) technology eventually brought subprime lending into the 21st century. Although systems were slow to develop, most lenders had some form of AU technology in place by 2004. The more robust systems used risk-based decision-making that went beyond basic underwriting guidelines. If a borrower’s compensating factors warranted a loan exception, the best systems could make that call. These AU systems also helped remove the guesswork. With AU approval, a broker had something more tangible to tell his borrower and his Realtor. Since lenders stood behind their systems, an approval... more»

March 21, 2008
6 Comments

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