Tag Archives: Lenders & Servicers


Capital Economics Expects Recovery to Continue Even with Higher Rates

By: Esther Cho, DSnews.com

Even with recent reports of rising mortgage rates and falling home prices, Capital Economics stated it still expects the housing recovery to be underway. The research firm cites two reasons in a report on why mortgage rates won’t threaten recovery: rates can only rise so far when tighter monetary policy is still years away, and homes will still be affordable even if mortgage rates were to rise back to normal levels. Last week ending March 15, Freddie Mac reported the 30-year fixed rate at 3.92 percent, an increase from the 3.88 percent reported the prior week, but still below 4 percent for 15 consecutive weeks.

“We doubt that higher mortgage rates will derail a housing recovery that in the last six months has seen total home sales rise by 13 percent and the NAHB homebuilder activity index more than double to 28,” the research firm stated.

In addition to those recent reports, home prices are still dropping, with data from Zillow showing prices declined 4.6 percent from January 2011 to January 2012. “Also, the fall in house prices over the last five years has been so large that even more normal mortgage rates would leave housing looking very affordable. And with housing appearing undervalued relative to disposable incomes per capita, valuations are also very favorable,” Capital Economics stated.

An economic outlook report from Fannie Mae echoed a similar sentiment about the direction of the housing market in a report Monday and stated, “GDP revisions for the fourth quarter of 2011 indicated a stronger underlying pace of demand with higher consumer spending and business investment.” After four months of private sector payroll growth, the GSE named employment growth as an important factor in housing recovery.

Even with declining home prices, Capital Economics explained it can take up to six months for changes in demand and supply to have their full impact on house prices because even with attractive asking prices, it can still take a few months to find a buyer and another month or so before the contract is closed.


Past Due Mortgages = 6,298,000

There were 6,298,000 mortgages going unpaid in the United States as of the end of October, according to Lender Processing Services (LPS).

It’s a daunting number, but the data show that it’s actually been on a fairly steady decline for nearly two years now.
At the start of 2011, the total number of non-current mortgages in the U.S. stood at 6,870,000. In January 2010, it was 8,118,000.

LPS’ more recent reports show the industry is slowly but surely chipping away at the number each and every month – the result of both loss mitigation workouts and removing loans that cannot be resolved from the inventory through foreclosure.

At September month-end, the tally of non-current mortgages was 6,373,000. It was 6,397,000 at the end of August and 6,538,000 at the end of July.

LPS’ data indicates mortgage delinquencies are declining while the nation’s foreclosure inventory is growing.
Of the 6,298,000 loans past due at the end of October, 2,329,000 were behind on their payments by 30-89 days and 1,759,000 were 90 or more days delinquent but not yet referred to foreclosure.

Combined, these tallies represent 7.93 percent of the nation’s outstanding mortgages that are delinquent but not in foreclosure. The October delinquency rate is down 2.0 percent from the previous month and is 14.6 percent lower than the rate recorded in October 2010.

The foreclosure inventory rate, on the other hand, is up by both measures. LPS says 4.29 percent of the nation’s mortgages are winding their way through the foreclosure process, a month-over-month increase of 2.5 percent and a year-over-year increase of 9.4 percent.

By LPS’ calculations, there were 2,210,000 residential mortgage loans in foreclosure at October month-end.
States with highest percentage of non-current loans – which combines foreclosures and delinquencies – include: Florida, Mississippi, Nevada, New Jersey, and Illinois.

Montana, Wyoming, South Dakota, Alaska, and North Dakota have the lowest percentage of non-current loans.

This article is from DSnews.com.


Freddie Mac's Winter REO Sales Promo Pays Extra to Selling Agents

Freddie Mac has announced the launch of a nationwide winter sales promotion to move its inventory of foreclosed homes and put them back into the hands of responsible homeowners purchasing a primary residence.

HomeSteps, the GSE’s REO sales division, will pay selling agents a $1,000 bonus for offers received on Freddie Mac-owned homes in select locations.

Initial offers must be received between November 15, 2011 and January 31, 2012 with escrow closed on or before March 15, 2012. The offer is valid only on HomeSteps homes sold to owner-occupant buyers.

Selling agent bonuses will be offered on HomeSteps sales in the District of Columbia and the following 28 states: Colorado, Connecticut, Delaware, Iowa, Idaho, Illinois, Indiana, Massachusetts, Maryland, Maine, Michigan, Minnesota, Montana, North Dakota, Nebraska, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, South Dakota, Utah, Virginia, Vermont, Wisconsin, West Virginia, and Wyoming.

The GSE is also extending additional incentives to its owner-occupant buyers. Throughout the winter sales promotion, HomeSteps will pay up to 3 percent of the final sales price towards the buyer’s closing costs.
Some HomeSteps homes are also eligible for a two-year Home Protect limited warranty that covers electrical, plumbing, air conditioning, heating, and other major systems and appliances. Home Protect also provides discounts of up to 30 percent on appliance purchases.

Freddie Mac held 59,596 single-family REO homes as of the end of September. According to the company, its HomeSteps properties accounted for about 4.4 percent of the nation’s inventory of foreclosed homes as of September 30, 2011.
The GSE says the pace of REO acquisitions remains slow due to continued delays in the foreclosure process – delays the company expects will continue into 2012. Freddie Mac acquired 24,385 REO homes through foreclosure during the third quarter of this year.

Currently, the GSE is selling more homes than it’s taking in. REO sales totaled 25,387 over the third quarter period.
Seventy-percent percent of HomeSteps homes are purchased by buyers intending to live in the homes as owner-occupants. Freddie Mac says its REOs sell for an average of 94 percent of the estimated market price.

This article is from DSnews.com.


Mortgage-Related Jobs Are on the Rise: Report

The third quarter of 2011 saw a net increase of 2,738 mortgage-related jobs, according to recent industry data. This increase is the first recorded in five quarters.

The recent increase in refinances – encouraged by remarkably low interest rates – sparked a demand for loan originators and processors, while continuing high levels of delinquencies and foreclosures bolstered the need for servicing staff.

The third quarter saw 2,502 layoffs countered by 5,240 hirings, according to the Third-Quarter 2011 Mortgage Employment Index released by MortgageDaily.com.

The 2,738 gain compares to a net loss of 464 jobs in the previous quarter and a loss of 936 jobs a year ago.
JPMorgan Chase was a major source of the rise in hirings in the third quarter with 3,314 hirings of its own.
MetLife added 351 jobs, and CashCall Mortgage added 230.

Wells Fargo (-686), CoreLogic (-600), and Bank of America (-364) all lost jobs during the quarter.
California-based CoreLogic anticipates about 1,000 layoffs during the second half of 2011, according to MortgageDaily.com.

With an increase of 699 mortgage-related jobs, Texas posted the largest increase, and according to the index, “[t]he Dallas area has become a Mecca for mortgage servicers.”

Iowa, on the other hand, saw a decrease of 159 positions, largely due to Wells Fargo’s downsizing.
So far, the fourth quarter is seeing more hirings than layoffs.

This article is from DSnews.com.


Economist: ARMs Not as Risky as Some Think

Long-term, fixed-rate mortgages are often seen as a “safe” loan product, but one Federal Reserve economist says adjustable-rate mortgages (ARMs) are not as risky as some perceive them to be and did not play a major role in the recent housing crisis. To those who believe payment shocks caused by ARMs were a major player in the foreclosure crisis, Paul Willen, senior economist at the Federal Reserve Bank of Boston, says, “The data refute that theory.” Willen shared his views before the Senate Banking Committee at a hearing titled “Housing Finance Reform: Continuation of the 30-year Fixed-rate Mortgage.”

In a survey of 2.6 million foreclosures, Willen found mortgage payments at the time of foreclosure were the same or lower than the initial payment for 88 percent of the mortgages.

Those with ARMs “were almost as likely to have seen a payment reduction as a payment increase” says Willen because interest rates in any recession – including the recent one – fall rather than rise. Only 12 percent of foreclosed borrowers experienced payment shock, according to Willen. More than half of borrowers whose homes were foreclosed – 60 percent – had fixed-rate mortgages. Willen points to falling prices combined with life events, rather than payment shock, as the major proponent of the foreclosure crisis.

When borrowers have positive equity, it makes more financial sense for them to sell their property than default on their mortgage when they encounter a negative life event such as job loss, divorce, or illness. However, when prices fall and borrowers have negative equity, disruptive life events are much more likely to lead to foreclosure, Willen says in his testimony.

“It does turn out that fixed-rate mortgages default less often than adjustable-rate mortgages, but that fact reflects the selection of borrowers into fixed-rate products, not any characteristics of the mortgages themselves,” Willen says. He suggests that some ARM borrowers enter their mortgages without intending to stay in the homes long-term. When these borrowers’ home values fall, they are more likely to default, according to Willen.

Article is from DSnews.com.


Big Four Set to Participate in HARP 2.0

The industry’s four largest mortgage servicers all say they will be taking part in the revamped Home Affordable Refinance Program (HARP).

Bank of America, Chase, Citigroup, and Wells Fargo have each expressed their support of the program and the changes that will allow more underwater homeowners to refinance at today’s lower interest rates.
Government officials expect the program’s revisions – particularly the GSEs’ waiver on representations and warranties – to increase competition for mortgage refinancing.

An executive with JPMorgan Chase told the company’s investors this week that HARP 2.0 will facilitate “cross-servicing refinancing” because with the rep and warranty waiver, the new lender is not required to assume responsibility for underwriting deficiencies that may have occurred with the original loan.

Chase explains that HARP may be used to replace an adjustable-rate or interest-only loan with a standard fixed interest rate loan, and typically reduces the borrower’s monthly payment.

Frank Bisignano, CEO of mortgage banking at Chase, estimates that with the new HARP guidelines, thousands of Chase customers could lower their mortgage payments by an average of $2,500 a year.

Citi said in an emailed statement that it “supports the program and expects to participate.”
Wells Fargo, likewise, said in a statement that it “welcomes the addition of the new HARP features.”
Veronica Clemons, a spokesperson for Wells Fargo Home Mortgage, says the company is waiting for specific guidelines and requirements from Fannie Mae and Freddie Mac in order to put the changes into practice.

She adds that once the company’s mortgage servicing team has the guidelines in hand, “it will take us some time – depending on the complexity of the guidelines – to make the necessary systems changes to begin offering the new enhancements to our customers.”

The GSEs’ regulator, the Federal Housing Finance Agency (FHFA), says Fannie and Freddie plan to issue guidance with operational details about the HARP changes by November 15th.

“Since industry participation in HARP is not mandatory, implementation schedules will vary as individual lenders, mortgage insurers, and other market participants modify their processes,” FHFA said.

Bank of America says it will participate in the enhanced Home Affordable Refinance Program announced by the administration, and it expects the new guidelines and eligibility criteria to go into effect after December 1st.
“Despite ongoing economic challenges, nearly 90 percent of our customers remain current on their mortgage,” BofA spokesperson Rick Simon said. “HARP helps these homeowners who remain current on their mortgage with options to lower their monthly payment when, otherwise, conventional funding options are limited.”

The GSEs have removed the 125 percent loan-to-value (LTV) cap under the program. Now any borrower with an LTV ratio above 80 percent is eligible for a HARP refinance, as long as the loan was sold to Fannie or Freddie prior to May 31, 2009, and the borrower is not delinquent on their payments.

Since HARP was launched in 2009, nearly 900,000 loans have been refinanced through the program. Government officials estimate that an additional 1 million homeowners will receive assistance under the new guidelines.
In its announcement of the program changes, FHFA encouraged borrowers to “contact their existing lender or any other mortgage lender offering HARP refinances.”

Article from DSnews.com.


Administration Announces Refinance Program for Underwater Borrowers

It’s official. The Federal Housing Finance Agency (FHFA) unveiled a new, revamped government mortgage refinancing program Monday.

The initiative involves a series of rule changes to the Home Affordable Refinance Program (HARP) to allow more underwater homeowners to reduce their mortgage debt by taking advantage of today’s rock-bottom interest rates.
Mortgages backed by Fannie Mae and Freddie Mac, and originally sold to the GSEs on or before May 31, 2009 are eligible for the program.

Under the revised HARP guidelines, the 125 percent loan-to-value (LTV) ceiling has been eliminated. Previously, only borrowers who owed up to 25 percent more than their home was worth could participate in HARP. That limitation has now been removed. The program will continue to be available to borrowers with LTV ratios above 80 percent.

The new program enhancements address several other key aspects of HARP that industry participants say have restricted its impact, including eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers, as well as allowing mortgage insurers to automatically transfer coverage from the original loan to the new loan.

In addition, Fannie Mae and Freddie Mac have done away with the requirement for a new property appraisal where there is a reliable AVM (automated valuation model) estimate already provided by the GSEs, and they’ve agreed to waive certain representations and warranties on loans refinanced through the program.

Not only are loans eligible for HARP considered “seasoned loans,” but a refinance helps borrowers strengthen their household finances, reducing the risk they pose to the GSEs. Thus, FHFA feels reps and warranties are not necessary for some of these loans.

With Monday’s announcement, the end date for HARP has been extended from June 30, 2012 to December 31, 2013.
The GSEs will release program instructions to lenders by the middle of next month, and FHFA expects some lenders will be ready to accept applications by December 1.

Since HARP was rolled out in early 2009, approximately 1 million homeowners have refinanced their mortgage loans through the program. FHFA estimates that with the revised guidelines, another 1 million will be able to take advantage of the program.

To qualify, borrowers must be current on their mortgage payments, but government officials believe by opening HARP up to more homeowners with higher thresholds of negative equity, it will help to prevent foreclosures by erasing the primary motivation behind strategic defaults.

Economists at the University of Chicago Booth School of Business estimate that roughly 35 percent of mortgage defaults are strategic. Numerous industry studies have found that homeowners who owe significantly more than their home is worth are more likely to throw in the towel and walk away from their mortgage debt even if they have the ability to continue making their payments.

“We anticipate that the package of improvements being made to HARP will reduce the Enterprises credit risk, bring greater stability to mortgage markets, and reduce foreclosure risks,” FHFA stated in its announcement Monday.
Fannie Mae and Freddie Mac also released statements in response to the announcement.

Michael J. Williams, Fannie Mae’s president and CEO, called the program a “welcome development.”
“By removing some of the impediments to refinance, lenders can more easily participate in the program allowing more eligible homeowners to take advantage of the low interest rates,” Williams stated.

Charles E. Haldeman, Jr., CEO of Freddie Mac said, “These changes mark another step on the road to recovery for the nation’s housing market.”

Article is from DSnews.com.


Execs of TARP-Supported Bank Charged with Hiding Millions in Losses

A federal grand jury in San Francisco has indicted two former bank executives of the now-defunct United Commercial Bank for misrepresenting loan losses to federal agencies as the bank took money from taxpayers through the Troubled Asset Relief Program (TARP). Specifically, the charges include conspiracy to commit securities fraud, securities fraud, falsifying corporate books and records, and lying to auditors.

United Commercial Bank was headquartered in San Francisco, with branch offices throughout the United States as well as in China and Taiwan. Its holding company, UCBH Holdings, Inc., was publicly traded on NASDAQ.

The defendants charged are Ebrahim Shabudin, who served as United Commercial Bank’s chief credit officer and chief operating officer from September 2008 through April 2009, and Thomas Yu, the bank’s manager of credit risk and portfolio management from June 2008 through June 2009.

The indictment, which was unsealed Tuesday, charges that between 2004 and 2007, the bank’s loan portfolio increased from approximately $4.4 billion to more than $8 billion.

By September 2008, the bank’s loan portfolio faced growing losses. In November 2008, the bank received approximately $298 million from TARP.

The indictment alleges that beginning in September 2008, Shabudin and Yu, along with others, used fraudulent accounting maneuvers and techniques to hide the bank’s true financial condition from the U.S. Department of Treasury, investors, depositors, regulators, and the bank’s independent auditor.

“Shabudin and Yu are the first senior executives of a TARP bank charged in connection with a scheme to defraud investors, which included the Treasury, and by extension the American taxpayer, Christy L. Romero, acting Special Inspector General for the Troubled Asset Relief Program (SIGTARP) said in a statement.

Romero continued, “The bank failed and all of the $298 million in TARP funds are lost. SIGTARP will tirelessly work with its law enforcement partners to root out fraud at TARP banks.”

After the bank failed in November 2009, the FDIC became the receiver and, to date, has paid out approximately $397 million as a result of the seizure. The indictment estimates total losses to the FDIC will be approximately $2.5 billion, and further alleges that none of the TARP funds have been repaid. United Commercial Bank was the first TARP recipient bank to fail.

Shabudin was arrested Saturday. Yu surrendered in court Tuesday morning. Both defendants made their initial appearances in federal court in San Francisco Tuesday and were released on $500,000 secured bonds. The defendants’ next scheduled appearance is on October 20, 2011.

The Securities and Exchange Commission (SEC) filed separate civil charges Tuesday accusing Shabudin, Yu, and United Commercial Bank’s former CEO Thomas Wu of misleading investors about the bank’s mounting loan losses.

The SEC’s complaint alleges that the three executives deliberately concealed losses from auditors, causing the bank’s public holding company UCBH Holdings Inc. to understate 2008 operating losses by at least $65 million, or approximately 50 percent.

The SEC says Wu “was considered a rising star in the banking industry,” sitting at the helm of the first U.S. bank to acquire a bank in the People’s Republic of China, but by 2009, Wu found himself at the helm of a bank on the brink of failure.

“Today’s charges reflect an all too familiar pattern – corporate executives once seen as rising stars embrace deception to avoid losses and conceal negative news, with investors and the FDIC insurance fund left to pick up the pieces. But accountability for these executives begins today,” said Robert Khuzami, director of the SEC’s enforcement division.

Article is from DSnews.com.


Congressmen Propose Using Retirement Funds to Pay Mortgages

Two Georgia congressmen are proposing a bill they believe will help some homeowners keep up with their mortgage payments and avoid foreclosure. Sen. Johnny Isakson (R-Georgia) and Rep. Tom Graves (R-Georgia) introduced the Hardship Outlays to protect Mortgagee Equity (HOME) Act, which would amend the Internal Revenue Code of 1986 “to provide penalty free distributions from certain retirement plans for mortgage payments with respect to a principal residence and to modify the rules governing hardship distributions,” states the bill.

“Many Americans who have been responsible enough to save for retirement in the past now find themselves out of work,” Graves states. “Unfortunately, under current tax law these men and women cannot withdraw retirement funds to pay for their homes without paying a ten percent penalty to the IRS – often resulting in late payments, oreclosures, and at a minimum punishing a taxpayer who has saved responsibly in the past.”

Under the HOME Act, individuals may withdraw up to $50,000 or half of their 401(k) account – whichever is smaller – for the express purpose of making mortgage payments on their principal residence.

If the funds are used for mortgage payments within 120 days of withdrawal, the individual will not face penalties.
Deferred income tax, however, would not be waived for these withdrawals under the proposed bill.

“This legislation will simply place taxpayers who have saved responsibly on the same level as those who have not, all the while reducing foreclosures, eliminating red tape, and accomplishing a goal that all Members of Congress can support – keeping Americans in their homes,” Graves states.

“I am delighted to join Congressman Graves in introducing the HOME Act today,” Isakson stated. “This bill will help Americans who risk foreclosure use their own resources to make their mortgage payment on time without being penalized by the federal government.”

He continued: “I firmly believe that economic recovery in this country will not occur until the housing market bounces back.”

“To that end, this legislation will help strengthen the American housing market because it will lead to a reduction in foreclosures and in turn will help stabilize home values,” Isakson concluded.

Article is from DSnews.com.