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Late Pays on UK Nonconforming MBS Seen as Stable in Month
March 15, 2010
Weighted average delinquencies in nonconforming United Kingdom mortgage-backed securities were stable in January, according to Moody's Investors Service. Weighted average delinquencies during the month were 19.3%. This is stable in the short-term and compared to June 2009's high of 21%. "In total, the performance of the UK nonconforming transactions has stabilized in recent months. However, the delinquency levels remain very high, and the prepayment rates remain low," says Georgij Ludmirskij, a Moody's senior associate.
Fitch: U.S. CREL CDOs Get Delinquency Reprieve
March 15, 2010
The level of U.S. commercial real estate loan delinquencies in collateralized debt obligations has decreased slightly, according to Fitch Ratings. The CREL CDO delinquency rate in January dropped to 12.5% from 13% as a result of asset managers extending loans and disposing of troubled assets, according to Fitch. But Fitch continues to forecast an increase in delinquencies that will reach 25% by the end of the year. "The credit characteristics of many restructured loans remains questionable," said Fitch senior director Karen Trebach. Fitch's statistics reflect its CREL CDO delinquency index, which includes loans and assets that are 60 days or more delinquent, matured balloon loans and the current month's repurchased assets.
CMBS Special Servicers Put a Dent in Their Massive Workload
March 15, 2010
It was a productive year for special servicers in 2009, but there's a lot more where that came from, according to a new Fitch Ratings report. Special servicers resolved $8.7 billion in distressed loans last year, or 50% more than the previous year, but there is $74 billion still left in special servicing, Fitch said. In addition, "Recoveries on loans with losses are down markedly compared to prior years," said Fitch managing director Stephanie Petosa.
It Looks As if Problem Loans Aren't Getting Any Younger
March 15, 2010
The average age of newly delinquent loans is higher today than in 2007, according to a recent Lender Processing Services report. LPS recently pegged the average age of newly delinquent loans at 46 months, compared to an average of 27 months back in January 2007. The 346,000 borrowers who were delinquent for the first time in January of this year represented 40% of all newly delinquent loans seen during that month, according to LPS.
One Third of FHA's Streamlined Refis Could Be Underwater
March 15, 2010
One third of the streamlined refinanced loans that the Federal Housing Administration insured in 2009 are probably underwater, according to a New York University economics professor. Professor Andrew Caplin and his colleagues at the National Bureau of Economic Research estimate that 33.4% of the 330,000 FHA loans refinanced through the streamlined process during the first nine months of 2009 started out with negative equity. The professor told a congressional panel that the federal mortgage insurance agency and its auditors are underestimating the number of FHA underwater mortgages and the default risk of those loans. FHA doesn't require new appraisals when an existing FHA loan is refinanced, provided borrowers are current on their payments. FHA simply records the value of the property on a streamlined refinancing at the original purchase price, which ignores any decline in home values. In addition, the auditors treat streamlined refinancings as new loans instead of loan modifications. "Misclassification of streamlined refinances not only compromises the [FHA] loss model, but also results in underestimation of underwater mortgages," the professor testified. The NBER economists used the Federal Housing Finance Agency housing price index to estimate the number of underwater loans. "With all other house price indexes, the proportion in negative equity is even higher," Mr. Caplin told the House Financial Services housing subcommittee.
HAMP Mods Finally Gathering Steam
March 15, 2010
The pace of permanent Home Affordable Mortgage Program loan modifications is now averaging roughly 50,000 a month with the cumbersome government program finally getting its legs. The Treasury Department reported that mortgage servicers completed 54,900 permanent HAMP modifications in February, up from 49,400 the previous month. To date, the Home Affordable Mortgage program has helped 170,200 homeowners secure a permanent modification that reduces the monthly payment on a first mortgage to 31% of income. Another 835,200 borrowers are in HAMP payment trials where their monthly mortgage payment is reduced by more than $500. The Obama administration's signature loan modification program was rolled out one year ago with the first 5,000 permanent modifications completed in October. Housing advocates are critical of the slow start. However, the program is still undergoing changes to simplify and streamline the process, allowing struggling homeowners to move through the three-month payment trials and receive a permanent modification. In addition, Treasury is trying to get banks to modify their second liens. "While we still have some improvements to go, we are making significant progress in terms of home affordable modifications," said HUD secretary Shaun Donovan. As the pace of HAMP modification finally picks up, the monthly activity report is showing more fallout. Treasury reported that 1,473 permanent modifications have been cancelled as of February 28, up from 1,005 in January. In addition, nearly 88,700 borrowers have dropped out of the payment trials, including 28,200 in the month of February.
AmTrust's $20 Billion Servicing Package Hits Market
March 15, 2010
Milestone Merchant Partners is now officially offering for sale a $20 billion package of residential servicing rights on behalf of the Federal Deposit Insurance Corp. The offering has been rumored for several weeks. The receivables once belonged to AmTrust Bank of Cleveland, which failed late last year. A Milestone official told National Mortgage News that the offering process has now "officially" commenced. At press time no other details were available. The AmTrust portfolio is the largest bulk offering of servicing rights to hit the market this year. Flagstar Bancorp, Troy, Mich., is currently in the market with a $10 billion offering of servicing rights, but to date has declined to talk about the package. In other AmTrust news, Barclays Capital is getting ready to solicit bids for a $2 billion portfolio of loans from AmTrust, according to Asset Securitization Report, a sister publication to NMN.
Morgan Keegan to Offer Farmer Mac Products to Clients
March 12, 2010
Morgan Keegan & Co., Memphis, Tenn., will market Farmer Mac loan programs designed specifically for its bank clients which hold agricultural loans in their portfolios. The primary program to be offered under this agreement is Farmer Mac's Long-Term Standby Purchase Commitment, which shifts the credit risk on loan pools from the bank to the government-sponsored enterprise. Michael Gerber, president of Farmer Mac, said the LTSPC program is designed to give banks that lend on agricultural properties "a reasonable price option to improve a major indicator of their financial health and to help restore their ability to grow their balance sheets." Loans in the LTSPC program are expected to receive favorable capital treatment, freeing up the bank's capital to be used for other purposes.
Fitch Bearish on Title Industry in 2010
March 12, 2010
Fitch Ratings, Chicago, believes that the title industry's 2010 revenue decline could range between 10% and 15%, based on the projected fall-off in mortgage origination volume. This level of title revenue deterioration would lead to further pressure on profit margins; three out of the four national title groups were profitable in 2009, and the fourth, Stewart, was profitable in the fourth quarter. But any item that affects profitability will likely lead to further expense initiatives by title underwriters, said the Fitch report, written by Douglas Pawlowski, title sector head and senior director. The report noted the two largest national title companies, Fidelity and First American, reported underwriting results that were markedly better than the competition, Stewart and Old Republic. Because they had better operating margins, Fidelity and First American are in a better position to report profits for 2010, the report said. Right now, Fitch has the title industry on "negative" outlook status. To improve it to "stable," there needs to be evidence of title insurers being able to generate sustainable profits and margins nearer to historical averages. This, Fitch continued, will foster improved capitalization from retained earnings. Mr. Pawlowski added "given expectations for a significant decline in title revenue in 2010, an underwriter that does not demonstrate an ability to modify expenses to match revenues or has insufficient surplus to cushion against another downturn in profitability will be at greater risk for a downgrade in the near term."
FDIC Prices Second Note Offering
March 12, 2010
The Federal Deposit Insurance Corp. sold $1.37 billion of structured guaranteed notes backed by residential and construction loan assets from Corus Bank. It follows its debut offering from last week. Sources familiar with the deal said the offering was priced into strong demand, according to a report in Structured Finance News, an affiliate of National Mortgage News. The sale included $150 million of 1.62-year notes that priced at 18 basis points over Eurodollar swap futures; $850 million of 2.62-year notes that priced at 21 basis points over interest rate swaps; and $377.35 million of 3.62-year notes that priced at a spread of 24 basis points over swaps, market sources said. Barclays Capital was sole underwriter for the offering, which was the same for last week's deal. The sale follows last week's sale of FDIC's $1.8 billion securitization backed by option ARM mortgages that also priced via underwriter Barclays Capital. That deal was divided into a $1.33 billion floating-rate transaction and a $480 million fixed-rate deal. The transaction saw its floating rate portion priced 10 points tighter than the initial price guidance of 65 basis points over one-month Libor and a portion of the fixed rate tranche priced five to 10 points tighter than the initial price guidance of 90 to 95 basis points over i-swaps. The two deals are part of the total $3.85 billion of securitizations that the FDIC is selling to investors that are guaranteed by the government. All of the deals are backed by residential mortgage loans and construction loan assets from failed banks that the FDIC took over.
