Too Big to Fail Banks and the financial consolidation that created them are hot topics. A famous chart from Mother Jones shows that the big four banks (Citi, JP Morgan Chase, Bank of America, and Wells Fargo) got that way by swallowing up 33 other large banks since 1990. The chart does not reflect many of the smaller local and regional banks that were already in the bellies of the regional banks that disappeared.
Both independently and because of this mortgage lending was also contracting rapidly. Fannie Mae's Economic & Strategic Research Group says that the share of the mortgage market held by the top ten originators doubled, from just below 40 percent in 1998 to nearly 80 percent by 2010. But recently that trend reversed. In one of its regular Housing Insights reports the group says that over the last three years "the market has experienced significant deconsolidation as top lender share retreated to slightly more than 60 percent in the first half of 2013. Market deconsolidation was driven largely by the withdrawal of large lenders, with only 5 of the top 20 single-family mortgage originators in 2006 remaining active in the market today."...(read more)
Smaller metropolitan areas appear to be leading the country in a return to normal levels of economic and housing activity the National Association of Home Builders (NAHB) said today. The associations Leading Markets Index, product in conjunction with First American Title Insurance, shows 54 metropolitan areas are currently operating above the LMI's baseline level and NBHA says "most of them" are what are considered small markets. The index's nationwide score of .86 indicates that, based on current permits, prices and employment data, the nationwide market is running at 86 percent of normal economic and housing activity.
NAHB tracks 350 metro areas for its index which replaces the older Improving Markets list. The index uses the same data bases as Improving Markets; employment information from the Bureau of Labor Statistics, home prices provided by Freddie Mac, but shifts the focus from identifying markets that have recently begun to recover to identifying areas that are approaching and exceeding previous normal levels of economic and housing activity....(read more)
David H. Stevens, president & CEO of the Mortgage Bankers Association (MBA), said today that independently owned and operated mortgage bankers are the building blocks of MBA membership. Stevens, speaking to MBA's second annual Independent Mortgage Bankers (IMB) Conference, said that nearly 55 percent of the association's regular residential membership is comprised of independent mortgage banks and the strong growth of community lenders "provides our industry and our organization the opportunity to expand...to thrive...to survive."
MBA is the only trade association representing the full spectrum of companies who finance housing in the U.S., Stevens said, and it is working daily to ensure a business and regulatory atmosphere that allows independent mortgage bankers to make a profit and grow.
He spoke of some of the outreach MBA has done with IMB including hiring specialists in their area of concern and developing a presidential advisory group consisting entirely of IMBs. These efforts have resulted in MBA hearing what members want such as testing of all loan officers under the SAFE Act regardless of company size or structure. That is now official MBA policy, he said, and MBA aggressively pushes it with the Consumer Financial Protection Bureau (CFPB) and other regulators....(read more)
Mortgage profits took a big hit in the third quarter of 2013, dropping by more than half of that reported in the second quarter. The Mortgage Bankers Association (MBA) said independent mortgage banks and mortgage subsidiaries of chartered banks reported an average of $743 per loan profit in the third quarter compared to $1,528 for each loan originated in the second quarter. The average production income fell from 75 basis points to 38, marking the fourth consecutive quarter that productions profits have declined.
"Third-quarter profits were reduced by half because of several factors: per-loan production expenses that reached study-highs, declining production volume and reduced secondary marketing income," said Marina Walsh, MBA's Associate Vice President of Industry Analysis. "Historically, mortgage bankers have struggled to control fixed costs and right-size in a declining market, and the increasing costs of compliance and quality control only exacerbate an already difficult situation."...(read more)
Several of the banks involved in the February 2012 $25 billion settlement with state and federal government agencies "still have additional work to do in their efforts to fully comply" with its terms, Joseph A. Smith, Jr., the settlement's monitor said today, "and to regain their customers' trust."
Smith released the results of compliance tests given to the banks during the first and second quarters of 2013 as part of five compliance reports he filed with the U.S. District Court. There were a total of 7 failures noted in the report, five of which were repeat infractions.
"My team and I tested the banks' compliance with the National Mortgage Settlement's original 29 metrics for the first half of this year," said Smith. "My testing confirmed six fails in the first quarter of 2013 and one in the second quarter of 2013. The banks are all taking action to address the failures through detailed corrective action plans....(read more)
While the numbers are small - less than 200 homes - the incidence of foreclosure among ultra-high end homes has skyrocketed recently, even as the rate for more mundane homes has plunged. RealtyTrac said today that foreclosure activity on homes valued at $5 million or more has jumped by 61 percent since October 2012 while the overall rate of filings has dropped 23 percent so far this year.
The 200 or so very expensive homes that have received a foreclosure notice this year pales in comparison to the total of 1.2 million homes in less rarified price ranges that have also received notices, but as RealtyTrac points out, each of these homes represents a much bigger potential loss to the lender than do median priced homes....(read more)
The U.S. Census Bureau and the Department of Housing and Urban Development released their joint report on new home sales in September and October. The regular September report was not issued in October due to the government shutdown. The data is included in the October report in revised form.
New home sales in October were at a seasonally adjusted annual rate of 444,000, up 25.4 percent from the revised September rate of 354,000 units (August sales were at a rate of 379,000), the biggest monthly advance since May 1980. The original September estimate was not provided. October sales were 21.6 percent higher than the 365,000 pace of sales in October 2014....(read more)
It was a short week and one in which most Americans focused on food and families so the plunging number of mortgage applications filed during the week ended November 29 was not a surprise. The Mortgage Bankers Association (MBA) reported a 12.8 percent decline in its Market Composite Index, a measure of application volume, on a seasonally adjusted basis compared to the previous week. There was also an adjustment to the numbers to account for the Thanksgiving holiday. On an unadjusted basis applications fell 40 percent from the week ended November 22.
The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conventional loan balances of $417,000 or less increased to......(read more)
CoreLogic said today that month-over-month increases in home prices slowed to fractional numbers in October even as year-over-year increases continued for the 20th consecutive month. The company's Home Price Index (HPI) which includes both equity and distressed sales was up 0.2 percent from September to October and was 12.5 percent higher than one year earlier.
Increases in the HPI peaked in April when prices rose 2.68 percent on a month-over-month basis. The increases have slowed every month since. The increase from July to August was 0.67 percent and from August to September 0.5 percent.
CoreLogic's HPI which excludes distressed sales increased by 0.4 percent in October and by 11.0 percent compared to October 2012. Distressed sales include short sales and sales of lender-owned (REO) property...(read more)
Fannie Mae and Freddie Mac have completed a major overhaul of their master policy requirements for private mortgage insurance the Federal Housing Finance Agency (FHFA) announced today. The changes meet one of FHFA's 2013 Conservatorship Scorecard goals for the two government sponsored enterprises (GSEs), aligning their individual policy requirements. The changes are the first made to the master policies in many years FHFA said
Private mortgage insurance is required of borrowers who provide less than a 20 percent downpayment on a home purchase. While the premiums are paid by the borrower, the insurance covers losses for the lender or the loan's owner should the homeowner default on payments. Mortgage insurance master policies specify the terms of business interaction between seller-servicers and mortgage insurers. FHFA said the GSEs have worked with the mortgage insurance industry to identify and fix gaps in the existing master policies and the new policies will, among other things, facilitate timely and consistent claims processing....(read more)
The Census Bureau released a combined report on the Value of Construction Put in Place for both September and October on Monday. A full September report was not issued either now or when scheduled in October because of the government shutdown.
Total construction activity for September was at a seasonally adjusted annual rate of $901.2 billion compared to $903.8 billion in August, a -0.3 percent change. Residential construction value, which came almost totally from the private sector, was $334.49 billion compared to $329.66 billion in August.
Total construction spending in October was at a seasonally adjusted annual rate of $908.45 billion, an increase of 0.8 percent from September and 5.3 percent higher than one year earlier. Residential construction was at a rate of $332.89 billion, down 0.5 percent from September but 17.4 percent higher than in October 2012....(read more)
Bank of America has settled another claim for loans it either originated during the housing boom or acquired through its purchase of another lender. The latest in the series of settlements was announced today by Freddie Mac and will cost the Bank $404 million less a credit of $13 million for loan repurchases already made and other accounting adjustments.
Under terms of the recent agreement, Freddie Mac will release Bank of America from certain existing and future purchase obligations for approximately 716,000 loans purchased by Freddie Mac. The loans were mainly originated between 2000 and 2009. The money compensates Freddie Mac for certain past losses and potential future losses relating to denials, rescissions, and cancellations of mortgage insurance....(read more)
The Federal Housing Finance Agency (FHFA) recently released its 2013 Conservatorship Scorecard detailing the progress made by the government sponsored agencies (GSEs) Freddie Mac and Fannie Mae in meeting the strategic goals set for them so far this year under FHFA's 2012 Strategic Plan. The plan sets forth three principal goals for the current phase of the GSE conservatorship:
1. Build a new infrastructure for the secondary mortgage market;
2. Gradually contract the Enterprises' dominant presence in the marketplace while simplifying and shrinking their operations; and
3. Maintain foreclosure prevention activities and credit availability for new and refinanced mortgages.
Reduction of the governments risk in the single-family mortgage credit market requires giving investors greater certainty and confidence in the rules, policies, data, and disclosures used in mortgage securitization. In order to build a new infrastructure for single-family mortgage securitization the GSEs need to develop a model Contractual and Disclosure Framework (CDF) that will help foster that certainty and confidence.
The GSEs made significant progress toward achieving interim goals in developing that framework. A joint GSE team has analyzed and compared certain policies and practices relating to fully guaranteed mortgage-backed securities (MBS) while noting comparable practices in the private-label market. By year-end 2013 the team will recommend ways to align the GSEs' policies and practices in each area. The team has focused on identifying best practices for non-guaranteed MBS, including those partially guaranteed by the GSEs and has begun a review and analysis of differences in the GSEs' Master Trust Agreements....(read more)
RealtyTrac reports that the nature of distressed property sales is evolving. In its most recent report on market and distressed sales, the company noted that changing economics are increasing the reliance on more traditional third party purchases at foreclosure auctions rather than the lender/borrower negotiated sale at less than the outstanding loan balance.
RealtyTrac has adopted a new methodology for accounting for short sales with the distressed and market rate sales report released Monday. The company now applies a calculation to take into account the true loan balance secured by a home at the time of the sale, and additionally separating out of the short sale classification properties that sell at a public foreclosure auction short of the loan balance. It is also including a new category of distressed sale in the report: third-party foreclosure auction sales, which represent sales at the public foreclosure auction to third parties other than the foreclosing lender.
Sales in the new category of auction sales to a third party represented 2.5 percent of sales compared to 2.8 percent in September and nearly twice the 1.3 percent share a year earlier. Significant numbers of these auction sales occurred in Orlando and Jacksonville, Florida, each at 8.6 percent and Columbia, South Carolina at 8.1 percent....(read more)
We have 28 business days until QM is the law of the land, and even after this commentary discussed the CFPB’s policy there still seems to be a small amount of confusion out there about affiliate fees, and the 3% threshold. Paul Mondor did acknowledge that he and other Bureau representatives had voiced policies in the past, and he made a point of indicating that this was the Bureau’s definitive position despite those past, contrary statements. For example, a policy was verbally stated during the MBA Regulatory Compliance Conference last month. Mr. Mondor was a presenter at that conference and repeatedly stated that all fees paid to an affiliate must be counted in the 3% points and fees calculation, regardless of the amount retained by the affiliate. This was, per the CFPB, is incorrect, as what was stated by David Silberman at the MBA’s committee meeting.
Those individuals, and the CFPB, have disavowed those past statements specifically, and want the industry to know it. Last week the commentary noted a conversation, also had last week, with Managing Counsel Paul Mondor regarding affiliate fees and the 3% points and fees calculation for QM loans. The policy is indeed: “just the portion of the fees that is paid to the affiliate and kept by the affiliate is counted in the 3% points and fees calculation.”...(read more)