Monday Morning Cup of Coffee takes a look at news coming across HousingWire’s weekend desk, with more coverage to come on bigger issues.
Later Friday, Ocwen Financial Corp. (OCN) topped off its very bad week by announcing that it will hire outside accountants and pay $2.5 million to the state of California to end the state's bid to suspend the company's license. State regulators said Ocwen had failed for the last year to provide them with loan-file information for their examination.
From the LA Times:
“The Department is committed to supporting a fair and secure financial services marketplace for all California consumers,” Jan Lynn Owen, the commissioner for business oversight, said in a statement. “This settlement allows us to move forward and ensure that Ocwen is meeting its obligations under the law.”
Ocwen's take was a little different.
“This allows us to get down to the business of doing our job for consumers and determining if Ocwen has followed the law,” said Owen’s spokesman, Tom Dresslar. “We’re pleased this frustrating skirmish over what should have been a routine matter is finally resolved.”
But the settlement only covers the company's failure to provide files, not any wrongdoing that those files may contain. And judging from the tsunami of bad news battering Ocwen lately, anything is possible.
Earlier on Friday, HousingWire also reported that some of the country’s biggest mortgage bond investors, including BlackRock, MetLife, and Pimco, will sue Ocwen, saying that the company failed to properly collect payments on $82 billion of home loans.
The group of investors sent a notice of non-performance to Ocwen and the trustees for 119 residential mortgage-backed securities trusts, stating that a lengthy investigation and analysis by “independent, highly qualified experts” determined that “Ocwen has failed to perform, in material respects, its contractual obligations as servicer and/or master servicer.”
The group outlined a number of serious problems in Ocwen's performance, including engaging in "wholly improper" loan modifications, failure to comply with applicable consumer protection laws, and failure to account for and remit accurately to the trusts cash flows from, and amounts realized on, trust-owned mortgages.
But Ocwen's Friday woes didn't end there. Even earlier in the day, hedge fund BlueMountain Capital Management sent notices of default to Ocwen and Home Loan Servicing Solutions, saying that Ocwen’s regulatory troubles have caused an “irrefutable” default on notes the hedge fund holds in connection with the HLSS Servicer Advance Receivables Trust.
From HousingWire's coverage:
BlueMountatin Capital also stated in a letter addressed to Home Loan Servicing Solutions, Ocwen Loan Servicing, HLSS Servicer Advance Receivables Trust, and Deutsche Bank National Trust Company that Ocwen’s servicing issues caused a default on “certain residential mortgage-backed securities collateralized by loans serviced by Ocwen Loan Servicing” that BlueMountain Capital owns.
“The facts establishing these events of default are irrefutable,” BlueMountain added in the letter. “BlueMountain also has directed the trustees of certain of the RMBS Certificates to investigate and/or take action with respect to Ocwen Loan Servicing.”
BlueMountain Capital also disclosed that it holds a short position in, and put options on, the common stock of Ocwen and holds a short position in, and put options on, the common stock of Home Loan Servicing Solutions, as well.
Ocwen's stock took a nosedive on the news of that short position, ending the day down 17% at $6.35. The news of the settlement with California came after market close, so it will be interesting to see what action the stock sees on Monday.
Need the whole Ocwen backstory? Read our roundup of all of Ocwen's troubles in 2014, "Here's what Ocwen did wrong," published back in December.
The European Central Bank dove headfirst into the empty pool that is quantitative easing last week, and while an honest assessment of how bad it will be for Europe is as likely as getting an honest assessment from the Federal Reserve of how bad QE was for the U.S. economy, it could be good for American homeowners.
“We view the ECB's big QE announcement as positive for US households,” said Chris Flanagan, MBS/ABS Strategist for Bank of America/Merrill Lynch. “We already thought the probability was high that a new low in mortgage rates would be seen in 2015, and we think the ECB move simply increases that probability. In our view, this is an unequivocal positive for the US household sector. We also see QE as generally supportive of asset prices and think U.S. real estate prices, for both residential and commercial, have upside potential from more QE, even if the QE comes from overseas.”
Flanagan says securitized products benefit on numerous levels from the ECB move, and he continues to recommend adding exposure down-in-credit within the various sub-sectors.
“We see spread tightening potential. In agency MBS, we maintain an underweight view as we think the market continues to underestimate the risk of a sizable refinancing wave in 2015. We like adding sustainable duration within the market, in CMOs, as we think it will become increasingly valuable in the months ahead,” Flanagan says. “Down-in-coupon in pass-throughs is preferred over the belly of the coupon stack in particular, but increased supply resulting from lower mortgage rates should result in underperformance versus comparable duration treasuries.”
Could domes made with concrete and a giant balloon revolutionize the housing industry?
After all, when built properly, these domes have the potential to provide living space that withstands fires and earthquakes, starting at $3,500.
The answer to the question is, theoretically, yes.
The problem is man is not a rational animal, and doubly so when it comes to housing.
Think about it. Homes today are built using the same basic architecture and framing techniques that were old-fashioned back when the germ theory of disease and sterilization was considered a crazy fringe idea.
If cars were built with the efficiency of homes, Ford Motor Company would ship all the parts to your house and then send in teams of laborers to build it in your driveway.
Still, it’s a cool idea and maybe it will be adopted for affordable housing or something. Take a look.
The "Binishell" was conceived and pioneered by Dante Bini in the 1960's, and is currently being taken to the next level by his son, architect Nicoló Bini.
The concept is much like inflating a balloon, covered in papier-mâché, except in place of the papier it uses concrete with a wood & metal support structure. A giant, inflatable membrane is covered with the support structure, concrete is added and it is inflated until the concrete can dry and harden in position. Binishells range in size from a single room to domes 120 feet in diameter.
While Dante's father was interested in pushing the technology further and making the domes bigger (in some cases to disaster), Dante has decided to go smaller, making them cheaper and easier to build.
Read the whole thing here.
On Tuesday we’ll see the S&P Case Shiller home price index for November.
The S&P/Case-Shiller 20-city home price index for October (both adjusted and unadjusted) came in soft as expected for the year-ago figure, at plus 4.5%, down 3 tenths from September.
This is the lowest rate since October 2012 and follows a full year of low double-digit gains through much of 2013 and into April this year. But the month-to-month adjusted reading was positive, showing a very strong 0.8% adjusted gain led by continued strength in Atlanta and including big gains for San Francisco, Tampa and Denver.
Tuesday will also give us the new home sales readings for December.
New home sales for November came in below low-end expectations, down 1.6% in to an annual sales rate of 438,000, versus expectations for 460,000.
Supply data were stable with 213,000 new homes on the market versus 210,000 in October. Supply relative to sales was up slightly, to 5.8 months from 5.7 and 5.5 months in the prior two months.
Thursday will see the report on pending home sales for December from the National Association of Realtors.
The pending home sales index picked up steam in November, to 104.8 from a revised 104.0 in October for a better-than-expected gain of 0.8%. The regional breakdown showed only narrow differences in the month with small gains in the Northeast, South, and West and a small decline in the Midwest.
The National Association of Realtors developed the pending home sales index as a leading indicator of housing activity. Specifically, it is a leading indicator of existing home sales, not new home sales. A pending sale is one in which a contract was signed, but not yet closed. It usually takes four to six weeks to close a contracted sale.
The FDIC reported one bank closed the week ending Jan. 23, Highland Community Bank of Chicago.
Highland Community Bank held approximately $54.7 million in total assets and $53.5 million in total deposits. In addition to assuming all of the deposits of the failed bank, United Fidelity Bank, agreed to purchase essentially all of the assets.
The FDIC estimates that the cost to the Deposit Insurance Fund will be $5.8 million.