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Reverses Coming Under Home Equity Pressure
November 24, 2009
Once booming, home equity conversion mortgages have begun a slowdown that could continue until home prices stabilize. In the year ended Sept. 30, mortgage lenders funded 114,692 reverse mortgages under the Federal Housing Administration's HECM program, an increase of 1,336% compared with 1999. Five years ago, just 43,000 reverse loans were written. Until a year ago, the reverse mortgage niche looked like a safe bet for mortgage bankers seeking a haven from the carnage in the industry. But now — with home prices still under pressure and fears of a double-dip recession growing — reverse mortgages no longer look like a safe bet.
NABE Expects a Boom in Housing Starts Next Year
November 24, 2009
Housing starts will increase by 36% next year and the housing sector will contribute to economic growth for the first time since 2005, according to the November survey by the National Association of Business Economics. The 48 professional forecasters see housing starts hitting 790,000 units in 2010, which is up from 580,000 in 2009. The economists also expect house prices will bottom out this year and rise 2% in 2010. "When asked what factors were driving the housing rebound, panelists identified low house prices and interest rates as the two most important factors," a summary of the survey results says. The economists are forecasting that the 10-year Treasury note will yield 4.2% by the end of 2010 and the unemployment rate will average 9.6% in the fourth quarter of 2010. The unemployment rate is expected to "remain stubbornly higher." However, hiring is expected to pick up soon. "Within the next few months, companies should be adding instead of cutting jobs," said NABE president Lynn Reaser.
Case-Shiller Index Points to Home Prices Firming Up
November 24, 2009
Home prices rose 0.3% in September, compared to 1.2% in August, according to the Standard & Poor's/Case-Shiller 20-city house price index, which posted its fourth consecutive monthly increase. Overall, the 20-city HPI is down 9.4% from a year ago but the declines are decelerating. In August, home prices were off 11.3% from a year ago. Values have improved since the spring, according to David Blitzer, chairman of S&P's index committee. "However, the gains in the most recent month are more modest than during the seasonally strong summer months," he said. IHS Global Insight economist Patrick Newport said prices are stabilizing across the country but he still expects another 5% decline. "We believe that prices have further to fall — about another 5% — because the foreclosure rate, which hit a record at the end of the third quarter, and the unemployment rate are still rising," he said.
FACL: ARMs and '05 — '08 Book Dominate Underwater Loans
November 24, 2009
Roughly 23% of consumers with a residential mortgage are now "underwater" on their loans — especially if they bought a home between 2005 and 2008 and used an ARM, according to new figures released by First American CoreLogic. In a new report FACL says 10.7 million mortgagors have negative equity which is heavily concentrated in five states: Arizona, California, Florida, Michigan, and Nevada. FACL recently changed the methodology by which it calculates negative equity, which resulted in the numbers actually looking better. (Previously, it assumed that all HELOCs were tapped to their full extent.) Nevada leads the nation in negative equity (65% of mortgagors underwater) with Oklahoma having the lowest rate, 6.1%.
Citigroup Reporting Higher Redefaults on Loan Mods
November 24, 2009
Citigroup is reporting a higher redefault rate on home loans it has modified and signs of heightened risk in its servicing portfolio. In a new report Citi said the redefault rate in the third quarter on its $746.8 billion servicing portfolio did not exceed 39% for loans modified between the second quarter of 2008 and the second quarter of 2009. That rate — the percentage of borrowers who become delinquent 60 or 90 days after modification — was higher than Citi's redefault rate in the second quarter, which did not exceed 29%. Still, Citi's third-quarter redefault rate was lower than the industry average of roughly 50% reported in September by the Office of the Comptroller of the Currency and the Office of Thrift Supervision. Sanjiv Das, the chief executive of Citi's mortgage unit, said in an interview that economic trends are working against industry and government efforts. "People are just not able to keep up with all their different kinds of debt, and they take what they can get from the bank in terms of modification, but after six months they go back to redefaulting," he said.
Freddie: Additional Losses on TBW May be 'Significant'
November 24, 2009
Freddie Mac says in a new public filing that not only does it have financial exposure of almost $1.1 billion due to the failure of Taylor, Bean & Whitaker but it faces additional losses on the company that "could be significant." The GSE is waiting to hear word from the Federal Deposit Insurance Corp. regarding a $595 million claim it filed with the agency regarding Colonial Bank of Alabama. Colonial, which failed in August, was TBW's largest warehouse provider and held servicing related "monies" tied to loans serviced by TBW for Freddie. The GSE, which is operating under a government conservatorship, had hit TBW with $500 million in loan buyback requests but now that the firm is liquidating it has to stand in line with other creditors. A spokesman for Freddie said the company is working with the FDIC regarding its $595 million Colonial claim. "We have to stand in line there too," he said.
PennyMac Chief Kurland Buying Shares
November 24, 2009
PennyMac Mortgage Investment Trust chief Stan Kurland is putting his money where his mouth is regarding the future of his publicly traded vulture fund, recently purchasing $429,000 worth of stock in the firm, according to trading records. Documents filed with the Securities and Exchange Commission show that Mr. Kurland bought $259,451 of PennyMac stock (15,000 shares) on November 11 and then the next day acquired 10,000 shares, paying $169,888. The CEO and chairman of the Calabasas-based company bought shares at prices ranging from $16.91 to $17.31. Since going public this summer, PennyMac's share price has ranged from $16.70 to $20. Stock analysts consider it a bullish sign when company insiders buy shares on the open market, which is what Mr. Kurland has done. For the period ending September 30, PennyMac, a REIT, lost $730,000.
Freddie Purchases Slow, a Sign of Production Slowing?
November 24, 2009
Freddie Mac purchased $32.1 billion in mortgages from its seller/servicers in October, its weakest acquisition month since January and a sign that originations are slowing in the primary market. According to the GSE's new monthly volume summary, purchases fell slightly from September, but rose 66% compared to October of last year, a month in which credit markets came to a halt and the nation's financial system was on the brink of collapse. Freddie also disclosed that its delinquencies rose yet again to a new record, 3.54% at the end of October, compared to 1.34% in the same period last year. Its delinquency number reflects loans that are 90 days or more past due but exclude loan modifications.
FDIC to Ramp Up Legacy Loan Sales
November 24, 2009
With its holdings of non-performing and performing mortgages beginning to swell, the Federal Deposit Insurance Corp. plans to hold more legacy loan auctions in the first-half of 2010. "We are continuing to develop the legacy sales program and gauging market interest in the program," said FDIC chairman Sheila Bair. The FDIC's board of directors is still working on several policy issues that need to be resolved, including eligibility requirements and how to prioritize institutions. FDIC has completed one legacy loan sale involving $1.3 billion of residential mortgages that belonged to the failed Franklin Bank in Houston. The winning bidder put up $64.2 million in cash to purchase a 50% equity stake in the pool and FDIC provided leverage financing for the purchase of the assets. But the Franklin sale involved a failed bank. FDIC wants open banks to use the 'Legacy' program to unload problem assets. "Cleansing balance sheets is absolutely necessary to strength the industry's capacity to lend to businesses and consumers," she said.
Existing Home Sales up 9.7% in October
November 23, 2009
Sales of single-family existing homes jumped 9.7% in October following an 8.7% jump in September, as first-time buyers rushed to take advantage of the $8,000 tax credit, according to the National Association of Realtors. NAR economist Lawrence Yun expects robust sales in November and a drop off in December. "With such a sales spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer," he said. The Realtors reported that sales of previously owned single-family homes jumped to a seasonally adjusted annual rate of 5.33 million in October from 4.86 million in September. The first-time buyer tax credit was due to expire at the end of November, but Congress extended it and created a new $6,500 tax credit for repeat and move-up buyers. The extension runs from Dec. 1 through April 30 and it gives buyers with a binding sales contract an extra 60 days to close. The median sales price of a single-family home in October was $173,100 in October, down 6.8% from a year ago. The Realtors noted that 30% of sales involved short sales and foreclosed properties. Meanwhile, inventories of unsold homes, including condominiums and coops, fell to a seven-month supply at the current sales pace. The supply of homes on the market is now at the lowest level in two and a half years, the NAR chief economist said.
