September 2011 - DS News
Randall S. McHugh, VP at Bendett & McHugh, P.C., has been selected by his peers for inclusion in the 2012 edition of The Best Lawyers in America in the practice area of mortgage banking foreclosure law.
This marks the third straight year that McHugh has been honored with the designation. Selection to Best Lawyers is based on a rigorous peer-review survey comprising more than 3.9 million evaluations by fellow attorneys.
As VP at his firm, McHugh is responsible for the overall management of the firm and co-manages the bankruptcy
department. He has authored many default servicing-related articles and has been a contributing author of several publications.
McHugh started his legal career in 1988 in Waterbury, Connecticut, where his practice focused on commercial foreclosures, bankruptcy, and real estate law. In 1991, he joined Reiner, Reiner & Bendett P.C. (now Bendett & McHugh, P.C.) and co-managed the foreclosure and bankruptcy departments alongside Adam Bendett.
McHugh received his J.D. from the Dickinson School of Law.
Bendett & McHugh, P.C. offers representation to the mortgage servicing and lending industry. The firm’s default servicing practice is comprised of routine and litigated foreclosures, senior lien monitoring, title issues, foreclosure avoidance, bankruptcy, evictions, and REO sales.
The firm’s coverage area includes Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont. Bendett & McHugh is a Freddie Mac designated counsel and part of the Fannie Mae retained attorney network in Connecticut.
Wednesday, September 21, 2011
Past Due Mortgages = 6,397,000
September 2011 - DS News
New data from Lender Processing Services (LPS) shows the population of mortgages going unpaid in the U.S. contracted during the month of August.
LPS offered the media a sneak peak at several key mortgage performance statistics slated for public release later this month. The company’s analysts derive their findings from LPS’ loan-level database of nearly 40 million mortgage loans.
They say there were 6,397,000 home loans at least 30 days delinquent or in foreclosure as of the end of August. That’s down from 6,538,000 the month before.
LPS puts the delinquency rate of mortgages 30 or more days past due, but not yet in foreclosure at 8.13 percent.
The national delinquency rate dropped by 2.5 percent between July and August, and is down 11.8 percent from a year earlier.
The industry’s inventory of properties in the midst of foreclosure, on the other hand, rose by both measurements, and now stands at 4.11 percent of all outstanding mortgages.
The foreclosure presale inventory rate edged up by 0.1 percent month-over-month and 8.2 percent year-over-year.
Of the 6,397,000 past due mortgages at the end of August, LPS says 2,148,000 were winding their way through foreclosure channels.
That leaves 4,249,000 delinquent by 30 or more days, but not in foreclosure. Of these, 1,866,000 were overdue by 90 days or longer.
According to LPS’ August study, the states with highest percentage of non-current loans – which combines foreclosures and delinquencies – held onto their rankings from the previous month. These include: Florida, Mississippi, Nevada, New Jersey, and Illinois.
States with the lowest percentage of non-current loans include: Montana, Wyoming, Alaska, South Dakota, and North Dakota.
New data from Lender Processing Services (LPS) shows the population of mortgages going unpaid in the U.S. contracted during the month of August.
LPS offered the media a sneak peak at several key mortgage performance statistics slated for public release later this month. The company’s analysts derive their findings from LPS’ loan-level database of nearly 40 million mortgage loans.
They say there were 6,397,000 home loans at least 30 days delinquent or in foreclosure as of the end of August. That’s down from 6,538,000 the month before.
LPS puts the delinquency rate of mortgages 30 or more days past due, but not yet in foreclosure at 8.13 percent.
The national delinquency rate dropped by 2.5 percent between July and August, and is down 11.8 percent from a year earlier.
The industry’s inventory of properties in the midst of foreclosure, on the other hand, rose by both measurements, and now stands at 4.11 percent of all outstanding mortgages.
The foreclosure presale inventory rate edged up by 0.1 percent month-over-month and 8.2 percent year-over-year.
Of the 6,397,000 past due mortgages at the end of August, LPS says 2,148,000 were winding their way through foreclosure channels.
That leaves 4,249,000 delinquent by 30 or more days, but not in foreclosure. Of these, 1,866,000 were overdue by 90 days or longer.
According to LPS’ August study, the states with highest percentage of non-current loans – which combines foreclosures and delinquencies – held onto their rankings from the previous month. These include: Florida, Mississippi, Nevada, New Jersey, and Illinois.
States with the lowest percentage of non-current loans include: Montana, Wyoming, Alaska, South Dakota, and North Dakota.
Senate Holds Hearing on Foreclosure Glut
September 2011
At a Senate hearing titled, “New Ideas to Address the Glut of Foreclosed Properties,” witnesses discussed several possible options for dealing with foreclosed properties and spurring recovery in the housing market.
Witnesses shared varying opinions on the concept of Fannie Mae and Freddie Mac conducting bulk sales to investors.
Laurie F. Goodman, senior managing director at Amherst Securities, said long-term investors “are the only potential buyers of many distressed homes that are likely to hit the market over the next 5-6 years.”
“Investors need to be part of the solution,” she stated, adding that the purchase of REOs is a good business opportunity for investors as the rental market continues to grow.
When asked if individual families should be given the opportunity to purchase homes at the rate offered to investors prior to the bulk sales, Goodman said the plan would adversely affect the bulk sales.
Goodman said allowing “cherry-picking” would ultimately lower the value of the bulk sales.
Bob Nielson, chairman of the board of the National Association of Homebuilders advised the government to avoid “fire sales,” which would negatively affect prices in the overall market.
Goodman suggested that if there were several large bidders for a particular pool of properties, the pool might not need to be sold at a discount.
However, Stan Humphries, chief economist at Zillow, pointed out that past bulk purchases of FDIC inventory came at a 20 percent discount.
In his statement before the committee, Humphries warned not to “underestimate the market’s ability to fix itself.”
“This, in fact, is already happening,” he stated.
Another topic discussed was offering tax incentives for home buyers. However, Humphries pointed out that short-term tax credits—such as the homebuyer tax credit offered last year—generally do not have a long-term impact. He believes the tax credit simply “shifted demand around during the year.”
In addition, Humphries pointed out that it’s particularly difficult to create policies that effectively aid those in need without extending superfluous aid to others at an undue cost to taxpayers.
Humphries categorized homeowners into three categories: those who do not need help, those who are beyond help, and those who could benefit from a small amount of aid.
It is the third group that government policies target, but it is difficult not to spill over into the other two groups. Thus, the expense of government programs often exceeds their effect.
At a Senate hearing titled, “New Ideas to Address the Glut of Foreclosed Properties,” witnesses discussed several possible options for dealing with foreclosed properties and spurring recovery in the housing market.
Witnesses shared varying opinions on the concept of Fannie Mae and Freddie Mac conducting bulk sales to investors.
Laurie F. Goodman, senior managing director at Amherst Securities, said long-term investors “are the only potential buyers of many distressed homes that are likely to hit the market over the next 5-6 years.”
“Investors need to be part of the solution,” she stated, adding that the purchase of REOs is a good business opportunity for investors as the rental market continues to grow.
When asked if individual families should be given the opportunity to purchase homes at the rate offered to investors prior to the bulk sales, Goodman said the plan would adversely affect the bulk sales.
Goodman said allowing “cherry-picking” would ultimately lower the value of the bulk sales.
Bob Nielson, chairman of the board of the National Association of Homebuilders advised the government to avoid “fire sales,” which would negatively affect prices in the overall market.
Goodman suggested that if there were several large bidders for a particular pool of properties, the pool might not need to be sold at a discount.
However, Stan Humphries, chief economist at Zillow, pointed out that past bulk purchases of FDIC inventory came at a 20 percent discount.
In his statement before the committee, Humphries warned not to “underestimate the market’s ability to fix itself.”
“This, in fact, is already happening,” he stated.
Another topic discussed was offering tax incentives for home buyers. However, Humphries pointed out that short-term tax credits—such as the homebuyer tax credit offered last year—generally do not have a long-term impact. He believes the tax credit simply “shifted demand around during the year.”
In addition, Humphries pointed out that it’s particularly difficult to create policies that effectively aid those in need without extending superfluous aid to others at an undue cost to taxpayers.
Humphries categorized homeowners into three categories: those who do not need help, those who are beyond help, and those who could benefit from a small amount of aid.
It is the third group that government policies target, but it is difficult not to spill over into the other two groups. Thus, the expense of government programs often exceeds their effect.
OCC Requires Review of 4.5M Foreclosures
September 2011 - DS News
The Office of the Comptroller of the Currency (OCC) is calling for independent reviews of almost 4.5 million loans.
After reviewing 200 loans from each of 14 major servicers, regulators determined enforcement actions were necessary, but said the review was “not nearly enough to answer all questions,” according to John Walsh, acting Comptroller of the Currency.
The independent review of 4.5 million loans that faced foreclosure actions between January 2009 and December 2010 will identify borrowers who “suffered financial injury as a result of errors, misrepresentations, or other deficiencies in the foreclosure process,” Walsh said.
On Monday, Walsh also announced the implementation of a new transparent, easily accessible complaint process for borrowers who feel they faced financial harm due to improper foreclosure action. This new process will be enacted in the next several weeks.
Borrowers will be contacted through direct mailings, and they will have the opportunity to request an independent review online or by phone through one common Web site or one phone number.
The independent consultants conducting the reviews will use one uniform complaint form for all of the 14 servicers in order to simplify the process for borrowers.
In cases where financial harm is determined, servicers will be required to make “appropriate restitution.”
“Remediation plans are subject to OCC and Federal Reserve approval,” Walsh said.
Walsh also stated, “The nature and severity of any financial injury will be case specific, so remedies could vary substantially.”
In addition to addressing improper actions in the past, Walsh addressed the future of industry regulation.
“Federally chartered servicers handle two-thirds of the nation’s mortgage loans, and as you know, we are in the midst of implementing a set of enforcement actions that are among the most complex and most significant of any that the OCC has ever initiated,” he stated.
New regulations designed to bring accountability to the industry have been signed by each member of the board of directors at each of the 14 banks.
The new orders call for further oversight of third-party vendors as well as a single point of contact for borrowers and an end of dual tracking.
“I continue to believe that we will be able to harmonize the mortgage servicing requirements in our orders with those of other regulators if and when they are reached. In fact, I think it is absolutely essential that we do so,” Walsh said.
The Office of the Comptroller of the Currency (OCC) is calling for independent reviews of almost 4.5 million loans.
After reviewing 200 loans from each of 14 major servicers, regulators determined enforcement actions were necessary, but said the review was “not nearly enough to answer all questions,” according to John Walsh, acting Comptroller of the Currency.
The independent review of 4.5 million loans that faced foreclosure actions between January 2009 and December 2010 will identify borrowers who “suffered financial injury as a result of errors, misrepresentations, or other deficiencies in the foreclosure process,” Walsh said.
On Monday, Walsh also announced the implementation of a new transparent, easily accessible complaint process for borrowers who feel they faced financial harm due to improper foreclosure action. This new process will be enacted in the next several weeks.
Borrowers will be contacted through direct mailings, and they will have the opportunity to request an independent review online or by phone through one common Web site or one phone number.
The independent consultants conducting the reviews will use one uniform complaint form for all of the 14 servicers in order to simplify the process for borrowers.
In cases where financial harm is determined, servicers will be required to make “appropriate restitution.”
“Remediation plans are subject to OCC and Federal Reserve approval,” Walsh said.
Walsh also stated, “The nature and severity of any financial injury will be case specific, so remedies could vary substantially.”
In addition to addressing improper actions in the past, Walsh addressed the future of industry regulation.
“Federally chartered servicers handle two-thirds of the nation’s mortgage loans, and as you know, we are in the midst of implementing a set of enforcement actions that are among the most complex and most significant of any that the OCC has ever initiated,” he stated.
New regulations designed to bring accountability to the industry have been signed by each member of the board of directors at each of the 14 banks.
The new orders call for further oversight of third-party vendors as well as a single point of contact for borrowers and an end of dual tracking.
“I continue to believe that we will be able to harmonize the mortgage servicing requirements in our orders with those of other regulators if and when they are reached. In fact, I think it is absolutely essential that we do so,” Walsh said.
Study Links 'Lightly Regulated' Lending to Foreclosures, Unemployment
September 2011 - DS News
A recent study by Jihad C. Dagher and Ning Fu of the International Monetary Fund found a correlation between the increase in originations from “lightly regulated” non-bank lenders and the rise in foreclosures and unemployment.
The authors believe stricter regulation could have prevented the housing crisis.
The working paper titled, What Fuels the Boom Drives the Bust: Regulation and the Mortgage Crisis, states “We show that the lightly regulated non-bank mortgage originators contributed disproportionately to the recent boom-bust housing cycle.”
The authors assert that independent non-bank lending increased in nearly all counties across the United States during the boom years.
In 2003, independent lenders originated about 31 percent of loans. However, when the market grew between 2003 and 2007, independent lenders contributed to more than 60 percent of that growth and the ensuing decrease between 2005 and 2007, according to the paper.
Between 2003 and 2007, independent lenders grew at a rate 23 percent more than that of banks.
Dagher and Fu assert a correlation between increased participation by independent lenders and rising housing prices during the boom years and then foreclosures in the bust years.
“[T]he the market share of independents is a strong predictor of the early rise in foreclosures,” the authors state in the paper. They believe the market share of independents also predicts the contraction in credit, decrease in housing prices, and rise in unemployment.
According to Dagher and Fu, prior to the housing market crisis, banks functioned under much stricter regulation than independent, non-bank lenders.
The authors illustrate that the “relation between the pre-crisis market share of independents and the rise in foreclosure is more pronounced in less regulated states.”
“Overall our findings lend support to the view that more stringent regulation could have averted some of the volatility on the housing market during the recent boom-bust episode” state Dagher and Fu.
A recent study by Jihad C. Dagher and Ning Fu of the International Monetary Fund found a correlation between the increase in originations from “lightly regulated” non-bank lenders and the rise in foreclosures and unemployment.
The authors believe stricter regulation could have prevented the housing crisis.
The working paper titled, What Fuels the Boom Drives the Bust: Regulation and the Mortgage Crisis, states “We show that the lightly regulated non-bank mortgage originators contributed disproportionately to the recent boom-bust housing cycle.”
The authors assert that independent non-bank lending increased in nearly all counties across the United States during the boom years.
In 2003, independent lenders originated about 31 percent of loans. However, when the market grew between 2003 and 2007, independent lenders contributed to more than 60 percent of that growth and the ensuing decrease between 2005 and 2007, according to the paper.
Between 2003 and 2007, independent lenders grew at a rate 23 percent more than that of banks.
Dagher and Fu assert a correlation between increased participation by independent lenders and rising housing prices during the boom years and then foreclosures in the bust years.
“[T]he the market share of independents is a strong predictor of the early rise in foreclosures,” the authors state in the paper. They believe the market share of independents also predicts the contraction in credit, decrease in housing prices, and rise in unemployment.
According to Dagher and Fu, prior to the housing market crisis, banks functioned under much stricter regulation than independent, non-bank lenders.
The authors illustrate that the “relation between the pre-crisis market share of independents and the rise in foreclosure is more pronounced in less regulated states.”
“Overall our findings lend support to the view that more stringent regulation could have averted some of the volatility on the housing market during the recent boom-bust episode” state Dagher and Fu.
Thursday, September 15, 2011
Surge in Defaults Breaks Six-Month Run of Declining Foreclosure Stats
DS news - September 2011
The lingering effects of the foreclosure moratoriums enacted after evidence of improper foreclosure processing came to light appear to be fading. Data released by RealtyTrac Thursday shows the first rise in foreclosure filings since January, with all of the increase coming from new default notices.
The tracking company says filings – including default notices, scheduled auctions, and bank-repossessed REOs – rose 7 percent between July and August on the national stage. But with the steep declines seen over previous months, filings remain 33 percent below the level recorded in August 2010.
Default notices posted their biggest month-to-month increase since August of 2007, up 33 percent. The 78,880 new default notices filed last month represents a nine-month high, but is down 18 percent from a year earlier.
Default notices increased more than 40 percent on a month-over-month basis in several states, including New Jersey (42 percent), Indiana (46 percent), and California (55 percent).
James Saccacio, RealtyTrac’s CEO, says the big increase in new foreclosure actions is a sign lenders are pushing
foreclosures through and foreshadows more bank repossessions in the coming months.
Foreclosure auctions (NTS, NFS) were scheduled for 84,405 U.S. properties in August, a decrease of 1 percent from the previous month and a decrease of 43 percent from August 2010.
Despite the nationwide decrease, scheduled auctions were up substantially from the previous month in several states where the auction notice is the first public notice in the process, such as Oregon (19 percent), Arizona (20 percent), Georgia (22 percent), and Colorado (51 percent).
Lenders repossessed a total of 64,813 homes (REOs) in August, a 4 percent decrease from the previous month and a 32 percent decrease from a year earlier. The REO total in August marked a six-month low.
Five states accounted for more than half of the foreclosure activity in August. Leading the pack was California, where 59,383 properties had foreclosure filings during the month.
Florida posted the second highest state total with 23,569 filings, followed by Michigan (13,016), Illinois (12,493), and Georgia (11,743 properties).
RealtyTrac’s report shows that defaults surged in August in some of the hardest-hit local markets.
A 30 percent month-over-month increase in default notices helped Las Vegas maintain the nation’s highest foreclosure rate among large metropolitan areas.
Eight of the metros with top-10 foreclosure rates can be found in California. All but Stockton posted a double-digit monthly increase in default notices. The biggest jump was found in Visalia-Porterville, where new defaults climbed 97 percent from the previous month.
Closing out the metro top-10 list is Reno, Nevada. There, new defaults rose 23 percent in August.
The lingering effects of the foreclosure moratoriums enacted after evidence of improper foreclosure processing came to light appear to be fading. Data released by RealtyTrac Thursday shows the first rise in foreclosure filings since January, with all of the increase coming from new default notices.
The tracking company says filings – including default notices, scheduled auctions, and bank-repossessed REOs – rose 7 percent between July and August on the national stage. But with the steep declines seen over previous months, filings remain 33 percent below the level recorded in August 2010.
Default notices posted their biggest month-to-month increase since August of 2007, up 33 percent. The 78,880 new default notices filed last month represents a nine-month high, but is down 18 percent from a year earlier.
Default notices increased more than 40 percent on a month-over-month basis in several states, including New Jersey (42 percent), Indiana (46 percent), and California (55 percent).
James Saccacio, RealtyTrac’s CEO, says the big increase in new foreclosure actions is a sign lenders are pushing
foreclosures through and foreshadows more bank repossessions in the coming months.
Foreclosure auctions (NTS, NFS) were scheduled for 84,405 U.S. properties in August, a decrease of 1 percent from the previous month and a decrease of 43 percent from August 2010.
Despite the nationwide decrease, scheduled auctions were up substantially from the previous month in several states where the auction notice is the first public notice in the process, such as Oregon (19 percent), Arizona (20 percent), Georgia (22 percent), and Colorado (51 percent).
Lenders repossessed a total of 64,813 homes (REOs) in August, a 4 percent decrease from the previous month and a 32 percent decrease from a year earlier. The REO total in August marked a six-month low.
Five states accounted for more than half of the foreclosure activity in August. Leading the pack was California, where 59,383 properties had foreclosure filings during the month.
Florida posted the second highest state total with 23,569 filings, followed by Michigan (13,016), Illinois (12,493), and Georgia (11,743 properties).
RealtyTrac’s report shows that defaults surged in August in some of the hardest-hit local markets.
A 30 percent month-over-month increase in default notices helped Las Vegas maintain the nation’s highest foreclosure rate among large metropolitan areas.
Eight of the metros with top-10 foreclosure rates can be found in California. All but Stockton posted a double-digit monthly increase in default notices. The biggest jump was found in Visalia-Porterville, where new defaults climbed 97 percent from the previous month.
Closing out the metro top-10 list is Reno, Nevada. There, new defaults rose 23 percent in August.
Fannie Mae Finds Several Servicers Below Median Performance
DS News - September 2011
Several servicers remain below median performance level as of the first half of the year, as ranked by Fannie Mae’s Servicer Total Achievement and Rewards (STAR) Program
Fannie Mae announced the STAR Program in February to measure servicers’ success in providing sustainable solutions to distressed homeowners.
The mid-year results released Wednesday by the GSE indicate that four out of the 11 banks in Peer Group 1 are
on track to receive at least a three-STAR rating at the end of the year.
Banks are ranked on a five-STAR scale, with three STARs signifying median performance level relative to peers and five STARs signifying superior performance.
Servicers are split into three peer groups based on the number of Fannie Mae loans they service.
Those in Peer Group 1 who are on track to receive at least three STARs are GMAC Mortgage, LLC, Citi Mortgage, Inc., Everhome Mortgage, and Wells Fargo Bank.
In Peer Group 2, six of 10 servicers are on track for a median rating at year-end, including, Fifth Third Bank, The Huntington National Bank, HSBC Mortgage Corporation, Aurora Financial Group Inc., Regions Bank and Central Mortgage Company.
The results for Peer Group 3 have not yet been released and are expected in the next 30 days.
“We are committed to helping stabilize the housing market by requiring servicers to prevent foreclosure whenever possible,” said Leslie Peeler, Vice President for Servicer Portfolio Management, Fannie Mae.
Several servicers remain below median performance level as of the first half of the year, as ranked by Fannie Mae’s Servicer Total Achievement and Rewards (STAR) Program
Fannie Mae announced the STAR Program in February to measure servicers’ success in providing sustainable solutions to distressed homeowners.
The mid-year results released Wednesday by the GSE indicate that four out of the 11 banks in Peer Group 1 are
on track to receive at least a three-STAR rating at the end of the year.
Banks are ranked on a five-STAR scale, with three STARs signifying median performance level relative to peers and five STARs signifying superior performance.
Servicers are split into three peer groups based on the number of Fannie Mae loans they service.
Those in Peer Group 1 who are on track to receive at least three STARs are GMAC Mortgage, LLC, Citi Mortgage, Inc., Everhome Mortgage, and Wells Fargo Bank.
In Peer Group 2, six of 10 servicers are on track for a median rating at year-end, including, Fifth Third Bank, The Huntington National Bank, HSBC Mortgage Corporation, Aurora Financial Group Inc., Regions Bank and Central Mortgage Company.
The results for Peer Group 3 have not yet been released and are expected in the next 30 days.
“We are committed to helping stabilize the housing market by requiring servicers to prevent foreclosure whenever possible,” said Leslie Peeler, Vice President for Servicer Portfolio Management, Fannie Mae.
Technology May Eliminate Implementation Headaches for SPOC
September 2011
While servicers attempt to develop processes to implement the single point of contact (SPOC) requirement that is part of the Federal Housing Finance Agency’s Servicing Alignment Initiative, several technology companies have developed solutions to address the new regulation.
“We believe technology is the heart of the solution,” said Jane Mason of eMason, Inc., at a panel discussion at the Five Star Default Servicing Conference and Expo Tuesday.
eMason recently developed the Clairfire Community Portal, which allows servicers to implement SPOC with business process automation and centralized communication.
“What we’re talking about here is an industry that’s been asked to change the way they do business on a dime,” Mason said.
Mason said what she’s hearing from servicers is they don’t know how they’re going to implement such a substantial change so quickly.
However, she feels the regulation provides a distinct opportunity for all sectors of the industry to begin working together more closely and become more efficient.
Like eMason, Decision Ready and Barthel Consulting, LLC are developing technology to address SPOC. All three companies’ solutions allow all information on a particular borrower to be stored in one data system and be accessed from one page.
The new programs also have “smart business rules” that each servicer can customize. For example, the system can automatically order a new BPO every 30 days, or check to make sure the homeowner is not on active military duty.
Ravi Ramanathan, president and CEO of Decision Ready said servicers are being held to a new standard in foreclosure actions. They are no longer innocent until proven guilty, but guilty until proven innocent, he says.
“The burden of proof lies with the servicer for each foreclosure,” Ramanathan said at the SPOC panel Tuesday.
Therefore, servicers must be able to track each action or communication with a borrower as well as any policy changes.
While the SPOC is meant to ensure better communication with borrowers, there are some logistical challenges. If a particular SPOC is not available, Ramanathan said another person can access the comprehensive file and address the borrower’s needs.
On the other hand, Nancy Barthel of Barthel Consulting, LLC, the panel moderator, said her client is planning to keep only one individual involved in each loan, a sort of “hand-holding in a sense,” she said.
Mason said her clients are split on methodologies. However, “as we get more efficient, having the data there is going to eliminate the need to have a person, I think.” Having the comprehensive file means anyone who accesses the file would have the same information as the assigned SPOC.
“We’re being made to do what we should have been doing all along,” said panel attendee Kurt Bertelsen, group vice president of default operations at Suntrust Mortgage.
Bertelsen said a previous servicer he worked with contemplated implementing SPOCs eight years ago but didn’t because of the cost.
“One of the bad ramifications is a significant change in cost structure,” Bertelsen said. Servicers now need a staff of employees who can have meaningful conversations with borrowers about their options, while also remaining empathetic and calm when borrowers become upset and agitated, rather than simply someone to answer calls and take information from a borrower.
Bertelson believes the increased costs will be reflected in mortgage costs, thus affecting originations and the overall market.
“From a regulation perspective, I think they may have underestimated the cost of changing the industry on a dime, and we don’t even know if it will work,” Mason said, adding that the industry needs to keep communicating with regulators.
While servicers attempt to develop processes to implement the single point of contact (SPOC) requirement that is part of the Federal Housing Finance Agency’s Servicing Alignment Initiative, several technology companies have developed solutions to address the new regulation.
“We believe technology is the heart of the solution,” said Jane Mason of eMason, Inc., at a panel discussion at the Five Star Default Servicing Conference and Expo Tuesday.
eMason recently developed the Clairfire Community Portal, which allows servicers to implement SPOC with business process automation and centralized communication.
“What we’re talking about here is an industry that’s been asked to change the way they do business on a dime,” Mason said.
Mason said what she’s hearing from servicers is they don’t know how they’re going to implement such a substantial change so quickly.
However, she feels the regulation provides a distinct opportunity for all sectors of the industry to begin working together more closely and become more efficient.
Like eMason, Decision Ready and Barthel Consulting, LLC are developing technology to address SPOC. All three companies’ solutions allow all information on a particular borrower to be stored in one data system and be accessed from one page.
The new programs also have “smart business rules” that each servicer can customize. For example, the system can automatically order a new BPO every 30 days, or check to make sure the homeowner is not on active military duty.
Ravi Ramanathan, president and CEO of Decision Ready said servicers are being held to a new standard in foreclosure actions. They are no longer innocent until proven guilty, but guilty until proven innocent, he says.
“The burden of proof lies with the servicer for each foreclosure,” Ramanathan said at the SPOC panel Tuesday.
Therefore, servicers must be able to track each action or communication with a borrower as well as any policy changes.
While the SPOC is meant to ensure better communication with borrowers, there are some logistical challenges. If a particular SPOC is not available, Ramanathan said another person can access the comprehensive file and address the borrower’s needs.
On the other hand, Nancy Barthel of Barthel Consulting, LLC, the panel moderator, said her client is planning to keep only one individual involved in each loan, a sort of “hand-holding in a sense,” she said.
Mason said her clients are split on methodologies. However, “as we get more efficient, having the data there is going to eliminate the need to have a person, I think.” Having the comprehensive file means anyone who accesses the file would have the same information as the assigned SPOC.
“We’re being made to do what we should have been doing all along,” said panel attendee Kurt Bertelsen, group vice president of default operations at Suntrust Mortgage.
Bertelsen said a previous servicer he worked with contemplated implementing SPOCs eight years ago but didn’t because of the cost.
“One of the bad ramifications is a significant change in cost structure,” Bertelsen said. Servicers now need a staff of employees who can have meaningful conversations with borrowers about their options, while also remaining empathetic and calm when borrowers become upset and agitated, rather than simply someone to answer calls and take information from a borrower.
Bertelson believes the increased costs will be reflected in mortgage costs, thus affecting originations and the overall market.
“From a regulation perspective, I think they may have underestimated the cost of changing the industry on a dime, and we don’t even know if it will work,” Mason said, adding that the industry needs to keep communicating with regulators.
New Jersey Lifts Its Final Foreclosure Ban
DS News - September 2011
New Jersey’s Superior Court has lifted the last of six injunctions handed down late last year, giving Ally Financial and its GMAC Mortgage unit the go-ahead to resume foreclosure actions in the state.
Superior Court Judge Mary Jacobson issued an order this week stating that GMAC had demonstrated the “reliability of its processes” and is “permitted to resume prosecution of uncontested foreclosure proceedings.”
Beginning in late March, a court-appointed retired judge began conducting an extensive systemic review of GMAC’s procedures and practices related to the handling of foreclosures and defaulted loans.
The probe was ordered by the New Jersey Supreme Court and encompassed five other servicing shops in addition to Ally/GMAC. The companies were charged with proving to the courts that their foreclosure actions should not be suspended after robo-signing infractions came to light last fall.
Bank of America, Citibank, JPMorgan Chase, Wells Fargo, and OneWest Bank were given the green light to begin the regular order of processing foreclosures in the state last month.
The servicers were required to provide information proving chain-of-ownership and that they were authorized to foreclose on behalf of mortgagees other than themselves.
The companies were also asked to demonstrate they had sound record-keeping systems in place detailing payment history and loan status. Documentation was required showing steps that staff followed in executing affidavits, and each servicer had to detail their employee training programs for foreclosure processing.
Judge Jacobson is requiring all six servicers to submit to ongoing monitoring by the special master overseeing the procedural reviews to ensure their continued compliance with the state’s foreclosure statutes.
New Jersey’s Superior Court has lifted the last of six injunctions handed down late last year, giving Ally Financial and its GMAC Mortgage unit the go-ahead to resume foreclosure actions in the state.
Superior Court Judge Mary Jacobson issued an order this week stating that GMAC had demonstrated the “reliability of its processes” and is “permitted to resume prosecution of uncontested foreclosure proceedings.”
Beginning in late March, a court-appointed retired judge began conducting an extensive systemic review of GMAC’s procedures and practices related to the handling of foreclosures and defaulted loans.
The probe was ordered by the New Jersey Supreme Court and encompassed five other servicing shops in addition to Ally/GMAC. The companies were charged with proving to the courts that their foreclosure actions should not be suspended after robo-signing infractions came to light last fall.
Bank of America, Citibank, JPMorgan Chase, Wells Fargo, and OneWest Bank were given the green light to begin the regular order of processing foreclosures in the state last month.
The servicers were required to provide information proving chain-of-ownership and that they were authorized to foreclose on behalf of mortgagees other than themselves.
The companies were also asked to demonstrate they had sound record-keeping systems in place detailing payment history and loan status. Documentation was required showing steps that staff followed in executing affidavits, and each servicer had to detail their employee training programs for foreclosure processing.
Judge Jacobson is requiring all six servicers to submit to ongoing monitoring by the special master overseeing the procedural reviews to ensure their continued compliance with the state’s foreclosure statutes.
More Than One-Fifth of Mortgages Underwater: Report
DS News - September 2011
Nearly 10.9 million, or 22.5 percent, of all residential mortgages had negative equity at the end of the second quarter of the year, according to a report released Tuesday by the analytics firm CoreLogic.
The figure is actually a slight improvement from the 22.7 percent of all mortgages with negative equity in the first quarter of 2011.
An additional 2.4 million borrowers had less than 5 percent equity in the second quarter, according to the report, which also shows that nearly three-quarters of homeowners in negative equity situations are also paying higher, above-market interest on their mortgages.
The states that had the most inflated property values before the housing bubble burst, and Michigan, which continues to suffer from the fall off of the automotive and manufacturing industries, had the highest negative equity percentages.
Nevada held the top position in terms of negative equity with 60 percent of all of its mortgaged properties underwater, followed by Arizona (49 percent), Florida (45 percent), Michigan (36 percent), and California (30 percent).
Yet there are some signs that the worst could be over in those states. According to the report, the average negative equity share for the top five states declined from 41 percent to 38 percent during the past year.
Nevada had the largest decline over the last year, with its negative equity share dropping from 68 percent to 60 percent. The reason for the Nevada decline is the high number of foreclosures that led to lower numbers of remaining negative equity borrowers.
“High negative equity is holding back refinancing and sales activity and is a major impediment to the housing market recovery,” said Mark Fleming, chief economist with CoreLogic in releasing the data.
Fleming added, “The hardest hit markets have improved over the last year, primarily as a result of foreclosures. But nationally, the level of mortgage debt remains high relative to home prices.”
According to CoreLogic, 8 million borrowers with negative equity, or nearly 75 percent of all underwater borrowers, have above market rates.
Since the 2005 sales peak, non-distressed sales in ZIP codes with low negative equity have fallen 61 percent, compared to an 83 percent sales decline in high negative equity zip codes.
Nearly 10.9 million, or 22.5 percent, of all residential mortgages had negative equity at the end of the second quarter of the year, according to a report released Tuesday by the analytics firm CoreLogic.
The figure is actually a slight improvement from the 22.7 percent of all mortgages with negative equity in the first quarter of 2011.
An additional 2.4 million borrowers had less than 5 percent equity in the second quarter, according to the report, which also shows that nearly three-quarters of homeowners in negative equity situations are also paying higher, above-market interest on their mortgages.
The states that had the most inflated property values before the housing bubble burst, and Michigan, which continues to suffer from the fall off of the automotive and manufacturing industries, had the highest negative equity percentages.
Nevada held the top position in terms of negative equity with 60 percent of all of its mortgaged properties underwater, followed by Arizona (49 percent), Florida (45 percent), Michigan (36 percent), and California (30 percent).
Yet there are some signs that the worst could be over in those states. According to the report, the average negative equity share for the top five states declined from 41 percent to 38 percent during the past year.
Nevada had the largest decline over the last year, with its negative equity share dropping from 68 percent to 60 percent. The reason for the Nevada decline is the high number of foreclosures that led to lower numbers of remaining negative equity borrowers.
“High negative equity is holding back refinancing and sales activity and is a major impediment to the housing market recovery,” said Mark Fleming, chief economist with CoreLogic in releasing the data.
Fleming added, “The hardest hit markets have improved over the last year, primarily as a result of foreclosures. But nationally, the level of mortgage debt remains high relative to home prices.”
According to CoreLogic, 8 million borrowers with negative equity, or nearly 75 percent of all underwater borrowers, have above market rates.
Since the 2005 sales peak, non-distressed sales in ZIP codes with low negative equity have fallen 61 percent, compared to an 83 percent sales decline in high negative equity zip codes.
Fannie Mae Opens Sacramento Mortgage Help Center
DS News - September 2011
Fannie Mae last week opened a mortgage help center in Sacramento, California, to provide free education and counseling services to struggling local homeowners with Fannie Mae-owned mortgages.
The facility is Fannie Mae’s 10th mortgage help center across the country.
The GSE developed the center in partnership with NeighborWorks HomeOwnership Center Sacramento Region, which staffs the office, as well as with local community and elected officials and area mortgage servicers.
The center offers consultations in person or over the phone with experienced housing counselors who review mortgage loans and financing options and help borrowers apply for loan workouts and other foreclosure alternatives.
According to Fannie Mae, more than 60 percent of the people who have worked with the GSE’s mortgage help centers have been able to stay in their homes.
In addition to providing counseling and access to mortgage education and financial literacy resources, the center’s staff will help homeowners coordinate with their mortgage servicers to help facilitate response times. They will also seek to help combat local mortgage fraud and abuse.
Fannie Mae last week opened a mortgage help center in Sacramento, California, to provide free education and counseling services to struggling local homeowners with Fannie Mae-owned mortgages.
The facility is Fannie Mae’s 10th mortgage help center across the country.
The GSE developed the center in partnership with NeighborWorks HomeOwnership Center Sacramento Region, which staffs the office, as well as with local community and elected officials and area mortgage servicers.
The center offers consultations in person or over the phone with experienced housing counselors who review mortgage loans and financing options and help borrowers apply for loan workouts and other foreclosure alternatives.
According to Fannie Mae, more than 60 percent of the people who have worked with the GSE’s mortgage help centers have been able to stay in their homes.
In addition to providing counseling and access to mortgage education and financial literacy resources, the center’s staff will help homeowners coordinate with their mortgage servicers to help facilitate response times. They will also seek to help combat local mortgage fraud and abuse.
Mortgage default warnings surged in August
AP - September 2011
Banks have stepped up their actions against homeowners who have fallen behind on their mortgage payments, setting the stage for a fresh wave of foreclosures.
The number of U.S. homes that received an initial default notice -- the first step in the foreclosure process -- jumped 33 percent in August from July, foreclosure listing firm RealtyTrac Inc. said Thursday.
The increase represents a nine-month high and the biggest monthly gain in four years. The spike signals banks are starting to take swifter action against homeowners, nearly a year after processing issues led to a sharp slowdown in foreclosures.
"This is really the first time we've seen a significant increase in the number of new foreclosure actions," said Rick Sharga, a senior vice president at RealtyTrac. "It's still possible this is a blip, but I think it's much more likely we're seeing the beginning of a trend here."
Foreclosure activity began to slow last fall after problems surfaced with the way many lenders were handling foreclosure paperwork, namely shoddy mortgage paperwork comprising several shortcuts known collectively as robo-signing.
Many of the nation's largest banks reacted by temporarily ceasing all foreclosures, re-filing previously filed foreclosure cases and revisiting pending cases to prevent errors.
Other factors have also worked to stall the pace of new foreclosures this year. The process has been held up by court delays in states where judges play a role in the foreclosure process, a possible settlement of government probes into the industry's mortgage-lending practices, and lenders' reluctance to take back properties amid slowing home sales.
A pickup in foreclosure activity also means a potentially faster turnaround for the U.S. housing market. Experts say a revival isn't likely to occur as long as there remains a glut of potential foreclosures hovering over the market.
Foreclosures weigh down home values and create uncertainty among would-be homebuyers who fret over prospects that prices may further decline as more foreclosures hit the market. There are about 3.7 million more homes in some stage of foreclosure now than there would be in a normal housing market, according to Citi analyst Josh Levin.
"This bloated foreclosure pipeline now presents the greatest obstacle to a housing market recovery," Levin said in a client note this week.
Banks have been working through a backlog of properties that first entered the foreclosure process months, if not years ago. But the August increase in homes entering that process sets the stage for a host of new properties being targeted for foreclosure.
That's bad news for homeowners who may have grown accustomed to missing payments for several months without the threat of foreclosure bearing down on them. In states such as New York and Florida, for instance, processing delays have helped some homeowners stay in their homes for more than two years before banks got around to taking back their properties.
In all, 78,880 properties received a default notice in August. Despite the sharp increase from July, last month's total was still down 18 percent versus August last year and 44 percent below the peak set in April 2009, RealtyTrac said.
Some states, however, saw a much larger increase.
California saw a 55 percent increase in homes receiving a default notice last month, while in Indiana they climbed 46 percent. In New Jersey, where last month a judged ruled that four major banks could resume uncontested foreclosure actions in the state under court monitoring, homes receiving a default notice increased 42 percent.
Despite the increase in new defaults, the number of homes scheduled for auction and those repossessed by banks slowed in August.
Scheduled foreclosure auctions declined 1 percent from July and fell 43 percent from a year earlier, RealtyTrac said.
Auctions increased from July levels in several states, including Colorado, where they rose 51 percent, and Arizona, where they grew 20 percent.
Lenders repossessed 64,813 properties last month, a drop of 4 percent from July and down 32 percent from a year earlier. Home repossessions peaked September last year at 102,134.
Banks are now on track to repossess some 800,000 homes this year, down from more than 1 million last year, Sharga said.
The firm had originally anticipated some 1.2 million homes would be repossessed by lenders this year.
In all, 228,098 U.S. homes received a foreclosure-related notice last month, a 7 percent increase from July, but a nearly 33 percent decline from August last year. That translates to one in every 570 U.S. households, said RealtyTrac.
Nevada still leads the nation, with one in every 118 households receiving a foreclosure-related notice last month.
Rounding out the top 10 states with the highest foreclosure rate in August are California, Arizona, Georgia, Idaho, Michigan, Florida, Illinois, Colorado and Utah.
Banks have stepped up their actions against homeowners who have fallen behind on their mortgage payments, setting the stage for a fresh wave of foreclosures.
The number of U.S. homes that received an initial default notice -- the first step in the foreclosure process -- jumped 33 percent in August from July, foreclosure listing firm RealtyTrac Inc. said Thursday.
The increase represents a nine-month high and the biggest monthly gain in four years. The spike signals banks are starting to take swifter action against homeowners, nearly a year after processing issues led to a sharp slowdown in foreclosures.
"This is really the first time we've seen a significant increase in the number of new foreclosure actions," said Rick Sharga, a senior vice president at RealtyTrac. "It's still possible this is a blip, but I think it's much more likely we're seeing the beginning of a trend here."
Foreclosure activity began to slow last fall after problems surfaced with the way many lenders were handling foreclosure paperwork, namely shoddy mortgage paperwork comprising several shortcuts known collectively as robo-signing.
Many of the nation's largest banks reacted by temporarily ceasing all foreclosures, re-filing previously filed foreclosure cases and revisiting pending cases to prevent errors.
Other factors have also worked to stall the pace of new foreclosures this year. The process has been held up by court delays in states where judges play a role in the foreclosure process, a possible settlement of government probes into the industry's mortgage-lending practices, and lenders' reluctance to take back properties amid slowing home sales.
A pickup in foreclosure activity also means a potentially faster turnaround for the U.S. housing market. Experts say a revival isn't likely to occur as long as there remains a glut of potential foreclosures hovering over the market.
Foreclosures weigh down home values and create uncertainty among would-be homebuyers who fret over prospects that prices may further decline as more foreclosures hit the market. There are about 3.7 million more homes in some stage of foreclosure now than there would be in a normal housing market, according to Citi analyst Josh Levin.
"This bloated foreclosure pipeline now presents the greatest obstacle to a housing market recovery," Levin said in a client note this week.
Banks have been working through a backlog of properties that first entered the foreclosure process months, if not years ago. But the August increase in homes entering that process sets the stage for a host of new properties being targeted for foreclosure.
That's bad news for homeowners who may have grown accustomed to missing payments for several months without the threat of foreclosure bearing down on them. In states such as New York and Florida, for instance, processing delays have helped some homeowners stay in their homes for more than two years before banks got around to taking back their properties.
In all, 78,880 properties received a default notice in August. Despite the sharp increase from July, last month's total was still down 18 percent versus August last year and 44 percent below the peak set in April 2009, RealtyTrac said.
Some states, however, saw a much larger increase.
California saw a 55 percent increase in homes receiving a default notice last month, while in Indiana they climbed 46 percent. In New Jersey, where last month a judged ruled that four major banks could resume uncontested foreclosure actions in the state under court monitoring, homes receiving a default notice increased 42 percent.
Despite the increase in new defaults, the number of homes scheduled for auction and those repossessed by banks slowed in August.
Scheduled foreclosure auctions declined 1 percent from July and fell 43 percent from a year earlier, RealtyTrac said.
Auctions increased from July levels in several states, including Colorado, where they rose 51 percent, and Arizona, where they grew 20 percent.
Lenders repossessed 64,813 properties last month, a drop of 4 percent from July and down 32 percent from a year earlier. Home repossessions peaked September last year at 102,134.
Banks are now on track to repossess some 800,000 homes this year, down from more than 1 million last year, Sharga said.
The firm had originally anticipated some 1.2 million homes would be repossessed by lenders this year.
In all, 228,098 U.S. homes received a foreclosure-related notice last month, a 7 percent increase from July, but a nearly 33 percent decline from August last year. That translates to one in every 570 U.S. households, said RealtyTrac.
Nevada still leads the nation, with one in every 118 households receiving a foreclosure-related notice last month.
Rounding out the top 10 states with the highest foreclosure rate in August are California, Arizona, Georgia, Idaho, Michigan, Florida, Illinois, Colorado and Utah.
Monday, September 12, 2011
Federal Regulators Close First National Bank of Florida
DS News - September 12 2011
The Office of the Comptroller of the Currency (OCC) appointed the FDIC receiver of the First National Bank of Florida late Friday evening, making it the 71st FDIC-insured institution to go under this year.
The OCC said it acted after finding that the bank “had experienced substantial dissipation of assets and earnings due to unsafe or unsound practices.”
According to the federal regulator, the First National Bank of Florida was facing substantial losses that would have depleted its capital, with “no reasonable prospect” that would allow the bank to replenish its funds without federal assistance.
The First National Bank of Florida, headquartered in Milton, operated eight branch offices, with $280 million in deposits and $297 million in assets.
The FDIC entered into a purchase and assumption agreement with CharterBank out of West Point, Georgia, to assume all of the deposits of the First National Bank of Florida and purchase all of its assets.
The FDIC and CharterBank entered into a loss-share transaction on $216.3 million of the acquired assets. The Florida bank’s failure is expected to cost the FDIC’s deposit insurance fund $46.9 million.
The Office of the Comptroller of the Currency (OCC) appointed the FDIC receiver of the First National Bank of Florida late Friday evening, making it the 71st FDIC-insured institution to go under this year.
The OCC said it acted after finding that the bank “had experienced substantial dissipation of assets and earnings due to unsafe or unsound practices.”
According to the federal regulator, the First National Bank of Florida was facing substantial losses that would have depleted its capital, with “no reasonable prospect” that would allow the bank to replenish its funds without federal assistance.
The First National Bank of Florida, headquartered in Milton, operated eight branch offices, with $280 million in deposits and $297 million in assets.
The FDIC entered into a purchase and assumption agreement with CharterBank out of West Point, Georgia, to assume all of the deposits of the First National Bank of Florida and purchase all of its assets.
The FDIC and CharterBank entered into a loss-share transaction on $216.3 million of the acquired assets. The Florida bank’s failure is expected to cost the FDIC’s deposit insurance fund $46.9 million.
Thursday, September 8, 2011
Industry Calls for Less GSE Action, More Investor Protection
September 2011
At a hearing Wednesday, four witnesses voiced concerns about the government’s participation in the mortgage market as well as the lack of transparency between servicers and investors.
The hearing before the U.S. House of Representatives Financial Services Subcomittee on Capital Markets and Government Sponsored Enterprises was titled, “Facilitating Continued Investor Demand in the U.S. Mortgage Market Without a Government Guarantee.”
“The state of housing finance in the US, where government sponsored entities (GSEs) account for over 90 percent of all mortgage loans currently made, is problematic,” said Ajay Rajadhyaksha, managing director at Barclays Capital.
Martin S. Hughes, president and CEO of Redwood Trust, Inc., agrees and believes it is time for the government to begin backing out of the market.
Citing Inside Mortgage Finance, Hughes said the top 10 jumbo mortgage lenders originated $25 billion in loans in the first quarter of this year.
“Clearly, the nongovernment guaranteed origination segment of the private market is functioning well,” he stated.
Hughes conceded that the private securitization market is not performing well, and he believes part of the problem is that “the government is crowding out the private market through loan programs that make 90 percent of borrowers eligible for a below‐market‐rate government guaranteed mortgage loan.”
As a first step, he suggests allowing the temporary increase in the conforming loan limit to expire as scheduled at the end of September.
Hughes noted that new standards for underwriting and servicing loans and more protection for investors are also needed to boost the secondary market.
However, Hughes stresses that reforms necessary for the prime mortgage market are not the same as those needed in the subprime market.
“A new regulation designed to accomplish one objective can easily do great harm to fulfillment of the other objective, if applied to both,” Hughes said. “We see that happening with much of the Dodd-Frank rulemaking.”
Echoing Hughes’ call for investor protection and representing the Association of Mortgage Investors, Chris Katopis stated, “[M]ortgage investors face enormous challenges in the capital markets due to opacity, an asymmetry of information, poor underwriting, conflicts-of -interests by key parties in the securitization process, as well as, the inability to enforce rights arising under contracts, securities and other laws.”
One of Katopis’ suggestions is to require a “cooling off period” during which investors can analyze loans in asset-backed securities before committing to them.
“Typically, deals came to market so quickly that investors were forced to rely on rating agency pre-issuance circulars, termsheets or weighted average collateral data,” said Joshua Rosner, managing director at Graham Fisher & Co. “These tools have proven inadequate.”
Rosner suggests, “data on the specific underlying collateral in each pool should be made available for a reasonable period (not less than 5 days) before a deal is sold and brought to market.”
Rosner and Katopis also stress the importance of transparency and a standardization of information and language among servicers.
“Asymmetry of information between buyer and seller remains the standard,” Rosner stated. “In fact, through elimination of the Regulation Fair Disclosure exemption for rating agencies, Dodd Frank has resulted in a reduction in the information available to investors.”
At a hearing Wednesday, four witnesses voiced concerns about the government’s participation in the mortgage market as well as the lack of transparency between servicers and investors.
The hearing before the U.S. House of Representatives Financial Services Subcomittee on Capital Markets and Government Sponsored Enterprises was titled, “Facilitating Continued Investor Demand in the U.S. Mortgage Market Without a Government Guarantee.”
“The state of housing finance in the US, where government sponsored entities (GSEs) account for over 90 percent of all mortgage loans currently made, is problematic,” said Ajay Rajadhyaksha, managing director at Barclays Capital.
Martin S. Hughes, president and CEO of Redwood Trust, Inc., agrees and believes it is time for the government to begin backing out of the market.
Citing Inside Mortgage Finance, Hughes said the top 10 jumbo mortgage lenders originated $25 billion in loans in the first quarter of this year.
“Clearly, the nongovernment guaranteed origination segment of the private market is functioning well,” he stated.
Hughes conceded that the private securitization market is not performing well, and he believes part of the problem is that “the government is crowding out the private market through loan programs that make 90 percent of borrowers eligible for a below‐market‐rate government guaranteed mortgage loan.”
As a first step, he suggests allowing the temporary increase in the conforming loan limit to expire as scheduled at the end of September.
Hughes noted that new standards for underwriting and servicing loans and more protection for investors are also needed to boost the secondary market.
However, Hughes stresses that reforms necessary for the prime mortgage market are not the same as those needed in the subprime market.
“A new regulation designed to accomplish one objective can easily do great harm to fulfillment of the other objective, if applied to both,” Hughes said. “We see that happening with much of the Dodd-Frank rulemaking.”
Echoing Hughes’ call for investor protection and representing the Association of Mortgage Investors, Chris Katopis stated, “[M]ortgage investors face enormous challenges in the capital markets due to opacity, an asymmetry of information, poor underwriting, conflicts-of -interests by key parties in the securitization process, as well as, the inability to enforce rights arising under contracts, securities and other laws.”
One of Katopis’ suggestions is to require a “cooling off period” during which investors can analyze loans in asset-backed securities before committing to them.
“Typically, deals came to market so quickly that investors were forced to rely on rating agency pre-issuance circulars, termsheets or weighted average collateral data,” said Joshua Rosner, managing director at Graham Fisher & Co. “These tools have proven inadequate.”
Rosner suggests, “data on the specific underlying collateral in each pool should be made available for a reasonable period (not less than 5 days) before a deal is sold and brought to market.”
Rosner and Katopis also stress the importance of transparency and a standardization of information and language among servicers.
“Asymmetry of information between buyer and seller remains the standard,” Rosner stated. “In fact, through elimination of the Regulation Fair Disclosure exemption for rating agencies, Dodd Frank has resulted in a reduction in the information available to investors.”
Home Price Gains Expected to Wane: Clear Capital
September 2011 - DS News
The warm weather homebuying season has kept prices moving up, but Clear Capital says the rate of appreciation is already slowing and weak consumer confidence points to a stormy rest of the year.
The “company’s latest report shows that home prices rose 4.0 percent over the four-month period ending in August when compared to the previous three months – an assessment Clear Capital refers to as a rolling quarter.
The company notes, however, that the recent gains over the summer months have not been enough to recoup longer-term declines, with national home prices still 6.2 percent below last year’s levels.
Dr. Alex Villacorta, director of research and analytics at Clear Capital, points out that the short-term gains reported in recent months are coming off of the record lows of winter.
“With summer coming to a close and the price gains clearly starting to level off, the market is at a critical juncture as to whether it can avoid another significant downturn into the slower buying seasons of fall and winter,” Villacorta said.
According to Clear Capital, low consumer confidence and a continued high unemployment rate support the company’s projection of downward home price movement for the remainder of 2011.
“The latest readings on consumer confidence paint an ominous picture that at present, consumers are still not ready to risk jumping into the market despite very low mortgage rates and very affordable home prices,” Villacorta added.
Based on Clear Capital’s latest report, the Midwest region leads the nation with a seasonal quarterly home price gain of 7.3 percent, buoyed by solid improvement in Chicago and the Ohio markets in particular.
In the Northeast home prices rose 4.9 percent, and in the South quarterly appreciation came in at 3.5 percent.
Home prices in the Western region of the U.S. were up just 0.7 percent. Clear Capital says with economic uncertainty and significant distressed sales activity affecting the West, this small gain may potentially represent peak price growth in the region for the rest of 2011.
Home prices in all four regions came in well below their readings at this time last year, with the smallest annual dip in the Northeast at 2.0 percent.
Jacksonville, Florida replaced Detroit as the “lowest performing” major market, posting a -2.7 percent quarterly price change. Eleven of the 15 markets on the low end of the price performance spectrum reside in the western part of the country.
Cleveland’s rolling quarter price gains jumped to 19.2 percent based on data through August, pushing the market to the top of Clear Capital’s “highest performing” list. The company says Cleveland’s large gains reflect vast differences in its REO composition between the winter and the spring-summer homebuying seasons.
The warm weather homebuying season has kept prices moving up, but Clear Capital says the rate of appreciation is already slowing and weak consumer confidence points to a stormy rest of the year.
The “company’s latest report shows that home prices rose 4.0 percent over the four-month period ending in August when compared to the previous three months – an assessment Clear Capital refers to as a rolling quarter.
The company notes, however, that the recent gains over the summer months have not been enough to recoup longer-term declines, with national home prices still 6.2 percent below last year’s levels.
Dr. Alex Villacorta, director of research and analytics at Clear Capital, points out that the short-term gains reported in recent months are coming off of the record lows of winter.
“With summer coming to a close and the price gains clearly starting to level off, the market is at a critical juncture as to whether it can avoid another significant downturn into the slower buying seasons of fall and winter,” Villacorta said.
According to Clear Capital, low consumer confidence and a continued high unemployment rate support the company’s projection of downward home price movement for the remainder of 2011.
“The latest readings on consumer confidence paint an ominous picture that at present, consumers are still not ready to risk jumping into the market despite very low mortgage rates and very affordable home prices,” Villacorta added.
Based on Clear Capital’s latest report, the Midwest region leads the nation with a seasonal quarterly home price gain of 7.3 percent, buoyed by solid improvement in Chicago and the Ohio markets in particular.
In the Northeast home prices rose 4.9 percent, and in the South quarterly appreciation came in at 3.5 percent.
Home prices in the Western region of the U.S. were up just 0.7 percent. Clear Capital says with economic uncertainty and significant distressed sales activity affecting the West, this small gain may potentially represent peak price growth in the region for the rest of 2011.
Home prices in all four regions came in well below their readings at this time last year, with the smallest annual dip in the Northeast at 2.0 percent.
Jacksonville, Florida replaced Detroit as the “lowest performing” major market, posting a -2.7 percent quarterly price change. Eleven of the 15 markets on the low end of the price performance spectrum reside in the western part of the country.
Cleveland’s rolling quarter price gains jumped to 19.2 percent based on data through August, pushing the market to the top of Clear Capital’s “highest performing” list. The company says Cleveland’s large gains reflect vast differences in its REO composition between the winter and the spring-summer homebuying seasons.
Wednesday, September 7, 2011
Obama's Pick to Protect Consumers Testifies Before Senate
DS NEWS - September 2011
Richard Cordray has been hand-picked by President Obama to lead the new Consumer Financial Protection Bureau (CFPB). On Wednesday, Cordray stood before the U.S. Senate to make a case for lawmakers’ confirmation of his appointment.
On the heels of major lawsuits announced by the Federal Housing Finance Agency related to mortgage bonds sold to the GSEs, Cordray told senators that regulatory authority is his weapon of choice as opposed to litigation.
“I know from my own experience that lawsuits can be a very slow, wasteful, and needlessly acrimonious way to resolve a problem,” Cordray said in his testimony. “The supervisory tool, in particular, offers the prospect of resolving compliance issues more quickly and effectively without resorting to litigation.”
Cordray said the CFPB has a “bigger and more flexible toolbox” and legal action will be used “judiciously” when banks or nonbank credit institutions are evading consumer protection laws or seeking to gain an unfair advantage over their law-abiding competitors.
Cordray acknowledged that when he held the position of attorney general for the state of Ohio, his only viable option to address the problems that consumers face was to open an investigation that might lead to a lawsuit.
While Cordray stressed that he instituted a policy while serving as Ohio’s lead counsel which opened the lines of communication early in order to resolve issues without going to court, he and his office made countless headlines for their mortgage-related lawsuits.
Ohio was one of the first states to file suits against servicers over the robo-signing infractions uncovered last fall, when Cordray was attorney general.
“[W]e pursued those mortgage servicers who, despite strong warnings, repeatedly violated consumer protection laws,” he told senators.
Cordray also pursued many actions against foreclosure rescue companies that he says “were reaching into the pockets of desperate people in an effort to steal what little remained as they sought to keep their homes.”
The foreclosure crisis, especially formidable in Ohio, has been a hot button for Cordray for some time. During his time as a county treasurer, Cordray says he saw the foreclosure crisis “wreaking havoc” in many neighborhoods. He helped create a ‘Save Our Homes’ task force to bring together businesses, banks, nonprofits, and government, to work in collaboration to help borrowers avert foreclosure.
Later, when he became state treasurer, Cordray expanded the ‘Save Our Homes’ program into a statewide effort, co-chaired a task force to work with mortgage servicers, and helped start a foreclosure mediation program.
Cordray says his past experiences as a public servant have given him “a strong resolve to address [the] kinds of financial difficulties that confront our communities,” and he vowed to streamline regulations and disclosures such as those related to mortgage loans.
Cordray has been with the CFPB since December when he was tapped to build out the bureau’s enforcement team.
His confirmation as head of the agency faces opposition from Republican senators who are are pushing for the role of CFPB chief to be replaced by a five-member committee.
Richard Cordray has been hand-picked by President Obama to lead the new Consumer Financial Protection Bureau (CFPB). On Wednesday, Cordray stood before the U.S. Senate to make a case for lawmakers’ confirmation of his appointment.
On the heels of major lawsuits announced by the Federal Housing Finance Agency related to mortgage bonds sold to the GSEs, Cordray told senators that regulatory authority is his weapon of choice as opposed to litigation.
“I know from my own experience that lawsuits can be a very slow, wasteful, and needlessly acrimonious way to resolve a problem,” Cordray said in his testimony. “The supervisory tool, in particular, offers the prospect of resolving compliance issues more quickly and effectively without resorting to litigation.”
Cordray said the CFPB has a “bigger and more flexible toolbox” and legal action will be used “judiciously” when banks or nonbank credit institutions are evading consumer protection laws or seeking to gain an unfair advantage over their law-abiding competitors.
Cordray acknowledged that when he held the position of attorney general for the state of Ohio, his only viable option to address the problems that consumers face was to open an investigation that might lead to a lawsuit.
While Cordray stressed that he instituted a policy while serving as Ohio’s lead counsel which opened the lines of communication early in order to resolve issues without going to court, he and his office made countless headlines for their mortgage-related lawsuits.
Ohio was one of the first states to file suits against servicers over the robo-signing infractions uncovered last fall, when Cordray was attorney general.
“[W]e pursued those mortgage servicers who, despite strong warnings, repeatedly violated consumer protection laws,” he told senators.
Cordray also pursued many actions against foreclosure rescue companies that he says “were reaching into the pockets of desperate people in an effort to steal what little remained as they sought to keep their homes.”
The foreclosure crisis, especially formidable in Ohio, has been a hot button for Cordray for some time. During his time as a county treasurer, Cordray says he saw the foreclosure crisis “wreaking havoc” in many neighborhoods. He helped create a ‘Save Our Homes’ task force to bring together businesses, banks, nonprofits, and government, to work in collaboration to help borrowers avert foreclosure.
Later, when he became state treasurer, Cordray expanded the ‘Save Our Homes’ program into a statewide effort, co-chaired a task force to work with mortgage servicers, and helped start a foreclosure mediation program.
Cordray says his past experiences as a public servant have given him “a strong resolve to address [the] kinds of financial difficulties that confront our communities,” and he vowed to streamline regulations and disclosures such as those related to mortgage loans.
Cordray has been with the CFPB since December when he was tapped to build out the bureau’s enforcement team.
His confirmation as head of the agency faces opposition from Republican senators who are are pushing for the role of CFPB chief to be replaced by a five-member committee.
AG Settlement Will Not Release Banks From Securitization Liability
DS NEWS - September 2011
As state attorneys general and major U.S. banks continue to work toward a settlement, questions abound regarding the amount of legal liability the servicers should and will maintain after an agreement is signed.
The two groups have been working toward a settlement regarding robo-signing and other improper actions by the servicers since the beginning of the year.
According to a widely referenced article in the Financial Times Tuesday, one of the recent drafts of the settlement while “explicitly stat[ing] that the release does not include securitisation claims,” has “language is broad enough in that it could prevent state officials from bringing securitisation claims in the future should they sign up to the agreement.”
In the same article, the Financial Times reported, “State prosecutors have proposed effectively releasing the companies from legal liability for allegedly wrongful
securitisation practices, according to five people with direct knowledge of the discussions.”
However, Geoff Greenwood, a spokesperson for Iowa Attorney General Tom Miller told DSNews.com Tuesday, “We do not intend to release securitization.”
Miller is head of the executive committee of attorneys general working on the settlement and a key member of the negotiating committee.
Furthermore, in a response last week to New York officials’ concerns about the proceedings of the settlement after the removal of New York Attorney General Eric Schneiderman from the executive committee, Miller stated:
“While a final multistate case release has not been negotiated and the release is a work in progress, attorneys general on the Negotiating Committee are not preparing to, nor will they agree to, release the banks from all civil liability. We are also not preparing to, nor can we agree to, release the banks from any criminal liability.”
In other developments, HUD recently completed its investigation into robo-signing practices and has shared its findings with the attorneys general executive committee, according to American Banker.
“We have gathered information through state and federal sources, and we have a very clear picture of the extent of these practices,” Greenwood told DSNews.com, adding that information from all sources has been “very helpful.”
The negotiating committee and the banks will likely meet again later this week, but there is no clear indication yet as to when the groups will reach a final settlement.
As state attorneys general and major U.S. banks continue to work toward a settlement, questions abound regarding the amount of legal liability the servicers should and will maintain after an agreement is signed.
The two groups have been working toward a settlement regarding robo-signing and other improper actions by the servicers since the beginning of the year.
According to a widely referenced article in the Financial Times Tuesday, one of the recent drafts of the settlement while “explicitly stat[ing] that the release does not include securitisation claims,” has “language is broad enough in that it could prevent state officials from bringing securitisation claims in the future should they sign up to the agreement.”
In the same article, the Financial Times reported, “State prosecutors have proposed effectively releasing the companies from legal liability for allegedly wrongful
securitisation practices, according to five people with direct knowledge of the discussions.”
However, Geoff Greenwood, a spokesperson for Iowa Attorney General Tom Miller told DSNews.com Tuesday, “We do not intend to release securitization.”
Miller is head of the executive committee of attorneys general working on the settlement and a key member of the negotiating committee.
Furthermore, in a response last week to New York officials’ concerns about the proceedings of the settlement after the removal of New York Attorney General Eric Schneiderman from the executive committee, Miller stated:
“While a final multistate case release has not been negotiated and the release is a work in progress, attorneys general on the Negotiating Committee are not preparing to, nor will they agree to, release the banks from all civil liability. We are also not preparing to, nor can we agree to, release the banks from any criminal liability.”
In other developments, HUD recently completed its investigation into robo-signing practices and has shared its findings with the attorneys general executive committee, according to American Banker.
“We have gathered information through state and federal sources, and we have a very clear picture of the extent of these practices,” Greenwood told DSNews.com, adding that information from all sources has been “very helpful.”
The negotiating committee and the banks will likely meet again later this week, but there is no clear indication yet as to when the groups will reach a final settlement.
Subscribe to:
Posts (Atom)