Monday Morning Cup of Coffee

A look at stories across HousingWire’s weekend desk…with more coverage to come on bigger issues: Regulators closed four banks, bringing the running 2010 total to 68 failed banks so far. The closures, located in Arizona, California, Florida and Minnesota, are expected to cost the Federal Deposit Insurance Corp. (FDIC) Deposit Insurance Fund (DIF) a total $213.7m. Last week, regulators shut down seven banks at a cost of more than $7.33bn. The California Department of Financial Institutions closed 1st Pacific Bank of California. City National Bank will purchase essentially all $335.8m in assets and will pay the FDIC a 1.62% premium to assume all $291.2m of deposits from the failed bank. The FDIC and City National Bank entered a loss-share transaction on $275.7m of the failed bank’s assets. The closure is expected to cost the DIF $87.7m. The Florida Office of Financial Regulation closed the Bank of Bonifay. First Federal Bank of Florida did not pay the FDIC a premium for all $230.2m of deposits and $78.1m of the failed bank’s $242.9m of assets. The failure is expected to cost the DIF $78.7m. The Arizona Department of Financial Institutions shut down Towne Bank of Arizona. Commerce Bank of Arizona will purchase essentially all $120.2m of assets and pay the FDIC a 0.3% premium to assume all $113.2m of deposits from the failed bank. The FDIC and Commerce Bank of Arizona entered a loss-share transaction on $80.1m of the failed bank’s assets. The closure is expected to cost the DIF $41.8m. The Minnesota Department of Commerce shut down Access Bank. PrinsBank will buy essentially all $32m of assets and will pay the FDIC a 0.02% premium to assume all $32m of deposits from the failed bank. The closure is expected to cost the DIF $5.5m. According to a JP Morgan (JPM) research note, while historical modifications result in re-default rates as high as 70%, Home Affordable Modification Program (HAMP) workouts could result in a much lower occurrence of re-defaults. Historically, modifications relied on the capitalization of arrears, and actually increased monthly payments for already struggling borrowers, researchers wrote. Other modifications cut monthly payments but failed to address negative equity and left underwater borrowers at risk of defaulting. The post-mod loan-to-value has hovered (LTV) around 130% for rate mods done in the past year. HAMP, however, addresses several of these problems, according to the JPM research.The program targets a 31% debt-to-income ratio and could reduce most borrowers’ LTV to 115. Although there is currently no historical data on HAMP re-defaults, the program’s structure should result in lower re-default rates going forward: Government-sponsored enterprise (GSE) Fannie Mae (FNM) on Friday reported a gross mortgage portfolio of more than $764.8bn in March, from just under $725.9bn in April. The GSE’s total book of business grew at an annualized growth rate of 13.3% in March, to $3.26trn. The jump in Fannie’s book of business arrived partly due to $40bn of loans purchased in March from mortgage-backed security (MBS) trusts that will not be reported as liquidated until the April report. Excluding these loan repurchases, Fannie said, the compound annual growth rate would have been only  2.3% this month. Fannie reported $36.8bn of MBS issuances in March, down from nearly $44bn in February. The seriously delinquent rate of Fannie’s single-family mortgages rose seven basis points (bps) to 5.59% in February. At the same time last year, the rate was 2.96%. The multifamily delinquency rate rose four bps to 0.73%. in February 2009, the multifamily delinquency rate was 0.32%. Fannie said in April it will continue to purchase mortgage loans secured by properties in flood-prone areas, despite a lapse in national flood insurance. Meanwhile, Congress is putting together several bills to revive the insurance program. House Financial Services Committee chairman Barney Frank (D-MA) introduced legislation that is the second piece of a two-pronged approach to assure continuity and stability in the National Flood Insurance Program (NFIP), according to an e-mailed statement. “The flood insurance program has lapsed twice this year,” said Rep. Maxine Waters (D-CA), chairwoman of the Subcommittee on Housing and Community Opportunity, in an e-mailed statement Friday. “For each day the program was inactive, up to 1,400 homebuyers seeking to buy homes in flood plains were unable to close on their homes. This program is too critical to our housing recovery to be allowed to lapse.” Waters previously introduced a NFIP reform bill, the Flood Insurance Reform Priorities Act of 2010 or House Resolution (HR) 5114. “Chairman Frank’s bill will make sure the flood insurance program continues through September, giving us that much longer to push through the five-year extension and essential program reforms that are included in my legislation,” Waters said. “With his bill and his support of my legislation, Chairman Frank is demonstrating this Committee’s commitment to stabilizing the flood insurance program.” Frank’s bill, the Stable Flood Insurance Authorization Act of 2010, would extend the NFIP’s authority to write and renew flood insurance polices from its current May 31 deadline through September 30, 2010. Write to Diana Golobay. Disclosure: the author holds no relevant investments.

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