Owners who've seen a steep drop in their home's value shouldn't expect to get a break on their property taxes.
By Les Christie, CNNMoney.com staff writer
Last Updated: October 16, 2008: 2:48 PM ET
NEW YORK (CNNMoney.com) -- Housing prices have plummeted, but property tax bills probably won't budge.
This January, local tax authorities will begin to send out property assessments for 2009, telling homeowners what their property is valued at, and how much their tax bill is.
But many assessments won't reflect any of the steep home price declines that have been making headlines for the last year or so.
And even if property assessments do drop, property tax bills won't necessarily be any lower.
"I think you're going to see a lot more taxpayer protest this year," said Bruce Hahn, president of the American Homeowners foundation, a non-partisan consumer advocacy group.
A huge runup slows
Property taxes climbed relentlessly earlier this decade as home prices rose, according to Pete Sepp, spokesman for the National Taxpayers Union. This year Americans will pay more than $400 billion in property taxes, up about 25% from levels in 2004 and double what they paid ten years ago.
At best, says Sepp, those steep increases may start to level off.
Nevertheless, homeowners are already pressing assessors for lower tax assessments.
"For my first 25 years [as an assessor], nobody ever asked me to lower the assessment based on a home selling for less down the street. There are many such inquiries this year," said Ken Wilkinson, the tax assessor for Lee County Fla., which includes Cape Coral and Ft. Myers.
He estimates that 80% of county residents have seen the value of their homes decline. The median price of existing homes fell more than 25% in the 12 months ending June 30, according to the Housing Opportunity Index compiled by Wells Fargo (WFC, Fortune 500) for the National Association of Home Builders.
Home prices in Moreno Valley, Calif. a city of 187,000, have fallen by more than a third over the past two years, according to the same index. And that has many more homeowners clamoring for reassessments, according to Barry Foster, the city's economic development director.
But even if local prices are way down, taxpayers may not win a lower assessment, because there can be a big lag time between when the home sales used to calculate them take place and when the assessment is actually issued.
To calculate 2009 assessments, for example, assessors will use home sale prices from 2008 or even earlier, according to Sepp. Usually this works to taxpayers's advantage, since price increases take a while before they are fully reflected in assessments.
That's why it's typical for most homes to be under-valued, according to Bruce Hahn of the American Homeowners foundation. But that's also why many homeowners aren't likely to see their assessments shrink immediately.
Lower values, same bill
There's another reason why homeowners are unlikely to see any decrease in property tax bills. In some states, such as California, Washington State, Massachusetts and Idaho, taxes are based on the last resale price of the house. Even a home worth $500,000 in California may be taxed based on the sale price when it was bought 10 years earlier for $200,000.
"Because the assessment is based on acquisition value, it's difficult to get that re-evaluated," said Sepp.
That's why the market value of most homes in these states exceeds the assessed tax values. The owners with best case for a reassessment are the ones who bought at the top of the market and have seen their values drop by a third or more, like many of Moreno Valley's residents.
Even if citizens do receive a lower assessment - and this year Wilkinson expects to lower assessments for most taxpayers in Lee county, Fla., by 20% or more - their property tax bill may not shrink at all.
Tax collectors often raise tax rates to offset lower assessments to meet their budgets, which will be very strained this year. Assessments go down but rates go up so that the tax collections stay roughly the same.
"State and local governments depend very heavily on real estate taxes and they are reeling from a loss of revenues from sales taxes and other sources," said Bruce Hahn.
Once homeowners get their bills, they'll have several weeks to contest their assessments, according to Hahn.
He suggested they go online to real estate evaluation sites such as Zillow.com to determine how far property values have fallen in their communities. They can also cite comparable home sales for similar properties to make their cases.
"Some tax assessors have been very reasonable," said Hahn, "but others are under great pressure to keep revenues up."
Friday, October 17, 2008
Homebuilders: Confidence falls sharply
The National Association of Home Builders blames the financial crisis for the new low.
Last Updated: October 16, 2008: 2:18 PM ET
LOS ANGELES (AP) -- The business outlook among homebuilders plunged to an all-time low this month, as the U.S. financial crisis further sapped their confidence in a near-term housing market recovery, an industry trade association said Thursday.
The National Association of Home Builders/Wells Fargo housing market index, started in January 1985, tumbled three points to 14 in October. The index stood at 17 in September after registering a one-point increase in August.
Index readings higher than 50 indicate positive sentiment about the market. But the index has drifted below 50 since May 2006 and below 20 since April.
The Washington-based association said the latest builders' survey reflects its members reaction to the financial woes on Wall Street, rising unemployment and weakness in consumer confidence.
The group called on lawmakers to enact an economic stimulus package with incentives for homebuyers.
"The impacts of the record-breaking housing contraction have spilled over to other key sectors of the economy and weighed heavily on financial markets, and stabilizing housing is now the best chance we have to limit the severity of recession," NAHB Chief Economist David Seiders said.
Builders have been hurting from the combination of falling home prices, less demand for new and preowned homes, tighter lending standards and a torrent of foreclosed properties competing for buyers.
Major public builders such as D.R. Horton Inc. (DHI, Fortune 500), Lennar Corp. (LEN, Fortune 500), and Toll Brothers Inc. (TOL, Fortune 500), have seen their stocks hammered as housing woes have deepened.
A housing stimulus package signed into law by President Bush this summer failed to spark the kind of home buying spree many builders had hoped for. Some major builders have said the plan's temporary $7,500 tax credit for first-time home buyers was ill-conceived because it essentially worked out to a 15-year, interest-free loan.
Some builders also decried the cancellation this month of programs that let sellers channel down payment money to cash-strapped home buyers via charities. The programs were eliminated by Congress because homebuyers who used them had high default rates.
The latest index marks deepening pessimism among builders in just a few weeks. Last month, the trade association's president, Sandy Dunn, waxed far more optimistic, remarking that builders were sensing home sales were nearing a turning point.
At the time Seiders projected sales would likely stabilize by year-end.
Builders' October survey responses reflected a far less rosy outlook.
Their gauge of current sales conditions fell three points to 14, traffic by prospective buyers dropped two points to 12, and sales expectations over the next six months plunged nine points to 19, the NAHB said.
Declines in builder confidence were seen across the United States, with the biggest drops in the Northeast and South, where confidence declined by four points.
The index reflects a survey of 446 residential developers nationwide, tracking builders' perceptions of current market conditions and expectations for home sales over the next six months.
Shares of Fort Worth, Texas-based D.R. Horton fell 62 cents, or 8.5%, to $6.70 in morning trading Thursday.
Miami-based Lennar's shares were down 53 cents, or 6%, to $8.23, while shares of Toll Brothers were down $1, or 5.4%, to $17.62.
Last Updated: October 16, 2008: 2:18 PM ET
LOS ANGELES (AP) -- The business outlook among homebuilders plunged to an all-time low this month, as the U.S. financial crisis further sapped their confidence in a near-term housing market recovery, an industry trade association said Thursday.
The National Association of Home Builders/Wells Fargo housing market index, started in January 1985, tumbled three points to 14 in October. The index stood at 17 in September after registering a one-point increase in August.
Index readings higher than 50 indicate positive sentiment about the market. But the index has drifted below 50 since May 2006 and below 20 since April.
The Washington-based association said the latest builders' survey reflects its members reaction to the financial woes on Wall Street, rising unemployment and weakness in consumer confidence.
The group called on lawmakers to enact an economic stimulus package with incentives for homebuyers.
"The impacts of the record-breaking housing contraction have spilled over to other key sectors of the economy and weighed heavily on financial markets, and stabilizing housing is now the best chance we have to limit the severity of recession," NAHB Chief Economist David Seiders said.
Builders have been hurting from the combination of falling home prices, less demand for new and preowned homes, tighter lending standards and a torrent of foreclosed properties competing for buyers.
Major public builders such as D.R. Horton Inc. (DHI, Fortune 500), Lennar Corp. (LEN, Fortune 500), and Toll Brothers Inc. (TOL, Fortune 500), have seen their stocks hammered as housing woes have deepened.
A housing stimulus package signed into law by President Bush this summer failed to spark the kind of home buying spree many builders had hoped for. Some major builders have said the plan's temporary $7,500 tax credit for first-time home buyers was ill-conceived because it essentially worked out to a 15-year, interest-free loan.
Some builders also decried the cancellation this month of programs that let sellers channel down payment money to cash-strapped home buyers via charities. The programs were eliminated by Congress because homebuyers who used them had high default rates.
The latest index marks deepening pessimism among builders in just a few weeks. Last month, the trade association's president, Sandy Dunn, waxed far more optimistic, remarking that builders were sensing home sales were nearing a turning point.
At the time Seiders projected sales would likely stabilize by year-end.
Builders' October survey responses reflected a far less rosy outlook.
Their gauge of current sales conditions fell three points to 14, traffic by prospective buyers dropped two points to 12, and sales expectations over the next six months plunged nine points to 19, the NAHB said.
Declines in builder confidence were seen across the United States, with the biggest drops in the Northeast and South, where confidence declined by four points.
The index reflects a survey of 446 residential developers nationwide, tracking builders' perceptions of current market conditions and expectations for home sales over the next six months.
Shares of Fort Worth, Texas-based D.R. Horton fell 62 cents, or 8.5%, to $6.70 in morning trading Thursday.
Miami-based Lennar's shares were down 53 cents, or 6%, to $8.23, while shares of Toll Brothers were down $1, or 5.4%, to $17.62.
Mortgage rates spike - leap size tops '87
Rates saw the biggest weekly jump since 1987 - analysts predict 30-year fixed mortgage rates will climb higher, and pin the hike on government rescue efforts.
By Les Christie, CNNMoney.com staff writer
Last Updated: October 16, 2008: 6:22 PM ET
NEW YORK (CNNMoney.com) -- Low mortgage rates, the one bright spot in a devastated housing market, are on a rapid rise.
Freddie Mac reported Thursday that the average 30-year fixed-rate mortgage has hit 6.46% - up from 5.94% the week earlier. That represented the largest weekly increase since April 1987, when the 30-year rose 0.84 points.
Bankrate.com also charted the spike. The investment Web site reported that the average interest rate on a 30-year, fixed-rate mortgage jumped to 6.74% on Wednesday from 6.2% the Wednesday before.
Translation: A borrower with a $200,000 mortgage would pay about $1,225 a month at 6.2%, and $70 more, $1,295 at 6.74%.
Mike Larson, an analyst with Weiss Research who participates in Bankrate.com's weekly mortgage rate surveys, expects to see rates top 7% in the next six months, and then turn back down.
That would be quite a bit higher than rates have been, but it's no disaster.
Keith Gumbinger of HSH Associates, a publisher of mortgage information, attributes the rate increase to the massive federal bailout. To fund the rescue and the new government guarantees, Treasury must sell a raft of new Treasury bills to raise money.
"Who even has the cash to buy them all?" he said. "The Treasury has to offer higher interest rates to sell."
And mortgage rates tend to move in conjunction with those 10-year Treasury yields, which rose rapidly during the past week, up to more than 4% Wednesday from below 3.5% the week before.
The spread - the difference between Treasury yields and mortgage rates - also expanded a bit, according to Bankrate.com.
Unintended consequences
There may be another factor at work sending rates skyward, according to FTN Financial Group analyst, Jim Vogel.
The cost of financing mortgages will grow for the biggest buyers of mortgage debt, Freddie Mac (FRE, Fortune 500) and Fannie Mae (FNM, Fortune 500), thanks to the plan for the Federal Deposit Insurance Corp. to back the newly issued, unsecured debt of some banks.
By guaranteeing bank debt, the government is making that debt more attractive for investors, and consequently creating more competition for Fannie and Freddie when they look to sell their own securities. To compete for buyers, the mortgage giants will have to raise their own yields - and to pay for that they'll have to charge borrowers higher interest.
"In theory, I think that could be correct," said Mark Zandi, chief economist for Moody's Economy.com, who is also an adviser to John McCain's presidential campaign. "But in practice, whether it means that rates will rise is an open question. There's a strong demand for really safe assets these days and Fannie and Freddie bonds are just a step removed from Treasurys."
If there's enough demand for ultra-safe investments like Fannie and Freddie bonds, Zandi says, they may not have to boost their yields all that much to attract investors.
Zandi pointed out that the difference between Treasury yields and 30-year mortgage rates is very high right now, more than 2% compared with 1.5% normally. That's because investors fled to risk-free Treasurys when the markets panicked.
But eventually, he says, the government rescue may send mortgage rates down and narrow that spread. "If that helps bring down the general angst, than mortgage rates should fall," he said.
Gumbinger expects rates to stay higher for several more months, as financial markets and lending take some time to return to normal. But he doesn't see the current spike as the beginning of the end of affordable mortgages.
"Rates should probably settle back down," he said. "We should see an easing of credit availability and that should put downward pressure on rates."
By Les Christie, CNNMoney.com staff writer
Last Updated: October 16, 2008: 6:22 PM ET
NEW YORK (CNNMoney.com) -- Low mortgage rates, the one bright spot in a devastated housing market, are on a rapid rise.
Freddie Mac reported Thursday that the average 30-year fixed-rate mortgage has hit 6.46% - up from 5.94% the week earlier. That represented the largest weekly increase since April 1987, when the 30-year rose 0.84 points.
Bankrate.com also charted the spike. The investment Web site reported that the average interest rate on a 30-year, fixed-rate mortgage jumped to 6.74% on Wednesday from 6.2% the Wednesday before.
Translation: A borrower with a $200,000 mortgage would pay about $1,225 a month at 6.2%, and $70 more, $1,295 at 6.74%.
Mike Larson, an analyst with Weiss Research who participates in Bankrate.com's weekly mortgage rate surveys, expects to see rates top 7% in the next six months, and then turn back down.
That would be quite a bit higher than rates have been, but it's no disaster.
Keith Gumbinger of HSH Associates, a publisher of mortgage information, attributes the rate increase to the massive federal bailout. To fund the rescue and the new government guarantees, Treasury must sell a raft of new Treasury bills to raise money.
"Who even has the cash to buy them all?" he said. "The Treasury has to offer higher interest rates to sell."
And mortgage rates tend to move in conjunction with those 10-year Treasury yields, which rose rapidly during the past week, up to more than 4% Wednesday from below 3.5% the week before.
The spread - the difference between Treasury yields and mortgage rates - also expanded a bit, according to Bankrate.com.
Unintended consequences
There may be another factor at work sending rates skyward, according to FTN Financial Group analyst, Jim Vogel.
The cost of financing mortgages will grow for the biggest buyers of mortgage debt, Freddie Mac (FRE, Fortune 500) and Fannie Mae (FNM, Fortune 500), thanks to the plan for the Federal Deposit Insurance Corp. to back the newly issued, unsecured debt of some banks.
By guaranteeing bank debt, the government is making that debt more attractive for investors, and consequently creating more competition for Fannie and Freddie when they look to sell their own securities. To compete for buyers, the mortgage giants will have to raise their own yields - and to pay for that they'll have to charge borrowers higher interest.
"In theory, I think that could be correct," said Mark Zandi, chief economist for Moody's Economy.com, who is also an adviser to John McCain's presidential campaign. "But in practice, whether it means that rates will rise is an open question. There's a strong demand for really safe assets these days and Fannie and Freddie bonds are just a step removed from Treasurys."
If there's enough demand for ultra-safe investments like Fannie and Freddie bonds, Zandi says, they may not have to boost their yields all that much to attract investors.
Zandi pointed out that the difference between Treasury yields and 30-year mortgage rates is very high right now, more than 2% compared with 1.5% normally. That's because investors fled to risk-free Treasurys when the markets panicked.
But eventually, he says, the government rescue may send mortgage rates down and narrow that spread. "If that helps bring down the general angst, than mortgage rates should fall," he said.
Gumbinger expects rates to stay higher for several more months, as financial markets and lending take some time to return to normal. But he doesn't see the current spike as the beginning of the end of affordable mortgages.
"Rates should probably settle back down," he said. "We should see an easing of credit availability and that should put downward pressure on rates."
Commercial Briefs
MBA (10/13/2008 ) Murray, Michael
Centerline Capital Group, a New York-based commercial real estate investor, and ZAIS Group, a Red Bank, N.J.-based structured products manager, formed a new venture to pursue investments in the commercial mortgage-backed securities market. ZAIS Group spoke last summer with Centerline about co-investment opportunities. Both firms said attractive opportunities exist in the commercial real estate debt markets.
The new venture would allow Centerline to "deploy the capital necessary to realize the high-quality investment returns still available in the current marketplace,” said Mark Brown, senior managing director and head of CMBS and commercial products business group at Centerline Capital Group.
John Jardine, managing director at ZAIS Group, said the CMBS sector provides some of the best risk-adjusted returns in the commercial real estate investment market. “We believe the appropriate strategy is to focus on private, 144a securities, conduct a fundamental re-underwriting of every asset within a loan pool and leverage Centerline’s proprietary systems, exchanging real-time asset and market information with our servicing partner,” Jardine said.
Centerline Capital Group, a New York-based commercial real estate investor, and ZAIS Group, a Red Bank, N.J.-based structured products manager, formed a new venture to pursue investments in the commercial mortgage-backed securities market. ZAIS Group spoke last summer with Centerline about co-investment opportunities. Both firms said attractive opportunities exist in the commercial real estate debt markets.
The new venture would allow Centerline to "deploy the capital necessary to realize the high-quality investment returns still available in the current marketplace,” said Mark Brown, senior managing director and head of CMBS and commercial products business group at Centerline Capital Group.
John Jardine, managing director at ZAIS Group, said the CMBS sector provides some of the best risk-adjusted returns in the commercial real estate investment market. “We believe the appropriate strategy is to focus on private, 144a securities, conduct a fundamental re-underwriting of every asset within a loan pool and leverage Centerline’s proprietary systems, exchanging real-time asset and market information with our servicing partner,” Jardine said.
CMBS Delinquencies Consistently Rising
MBA (10/13/2008 ) Murray, Michael
Loan delinquencies in commercial mortgage-backed securities were up nearly 13 basis points after the first three quarters of this year to 0.52 percent—0.58 percent excluding defeasance loans, based on numbers from Citigroup Securities, New York.
CMBS delinquencies seem to be increasing each month as the credit crisis starts feeding into the general economy, said Darrell Wheeler, head of CMBS at Citigroup.
“The lack of new supply is also leading to a net run-off of outstanding balance, which would tend to raise the headline delinquency rate," Wheeler said. "However, the rate still remains low for now when compared to historical delinquency rates, and dramatically different from the high rates of the subprime residential market. If the economic slowdown is prolonged, we expect to see rising delinquency rates from these low levels, possibly to the 1 percent to 1.5 percent range in early 2009 and 2 percent to 3 percent sometime in 2010.”
However, Realpoint LLC, Horsham, Pa., said more than 35 percent of delinquent unpaid balances in CMBS through August came from transactions issued in 2005-2006 vintages, and more than 20 percent of all delinquencies were found in 2006 transactions.
With 13 percent total delinquency included in the 2007 vintage, more than 48 percent of CMBS delinquency in August came from 2005-2007 vintage transactions, Realpoint's research said.
Nearly 1.4 percent of 65,028 CMBS loans in Citigroup’s universe included delinquencies of 30, 60 and 90 days, one foreclosure and loans for special servicing. They accounted for more than $10 billion out of a total of more than $714.7 billion. Citigroup’s CMBS universe consists of publicly issued, fixed-rate CMBS conduit, fusion, lease-backed, large loan and seasoned loan transactions.
After five straight months of increases, Realpoint showed August’s delinquent unpaid balance for CMBS dropping slightly to $4.07 billion through from a trailing 12-month high of $4.203 billion through July. Special servicing exposure, however, increased to $6.88 billion in August from $6.45 billion in July for $10.95 billion in delinquencies and special servicing.
Total unpaid balance for all CMBS pools reviewed by Realpoint was $862.6 billion in August, down from $863.6 billion in July, with August's delinquency ratio at 0.47 percent, down slightly from 0.49 percent in July and 0.48 percent in June.
"What is more concerning, however, is that the delinquency percentage through August 2008 is up 18 basis points or 62 percent above the 0.29 percent reported one-year prior in August 2007. The increase in both delinquent unpaid balance and delinquency ratio over this time horizon reflect a slow but steady increase from historic lows through mid-2007," said Frank Innaurato, managing director at Realpoint.
CMBS delinquency by unpaid balance increased 29 percent from January’s $3.16 billion and up 84 percent from a six-year low of $2.21 billion in March.
“While both the 30-day and 60-day delinquent loan categories decreased, the distressed 90+-day, foreclosure and REO categories grew for the ninth straight month—up 43 percent since January 2008,” Innaurato said.
Delinquencies also increased in August along with $70.7 million in liquidations reported across 18 loans. Liquidation activity slowed after increases in June and July, due to slowdown from the current credit market climate.
“We expect that these high liquidations, however, are a clear response to increased loan workout and delinquency pressures being placed on special servicers, and may be a precursor to increased distressed asset money returning to the market,” Innaurato said.
Based on Realpoint’s numbers for August, highest loss severities in 2007 were found in industrial and healthcare collateral while multifamily collateral was highest by balance before liquidation. Citigroup showed multifamily as the only sector with current elevated delinquency rates at 1.6 percent in September.
“We recently wrote about the issues facing apartments under rent controls that were aggressively underwritten assuming conversion rates that have not materialized,” Wheeler said.
CMBS delinquencies in Michigan remained elevated at 2.50 percent as the domestic auto sector continued to struggle, but Tennessee and Georgia showed a spike in their rate during September as well, Citigroup said.
Texas, Florida and Michigan—the top three states ranked by delinquency exposure for the past 10 months through August—collectively accounted for 39 percent of CMBS delinquencies, based on Realpoint's research.
Loan delinquencies in commercial mortgage-backed securities were up nearly 13 basis points after the first three quarters of this year to 0.52 percent—0.58 percent excluding defeasance loans, based on numbers from Citigroup Securities, New York.
CMBS delinquencies seem to be increasing each month as the credit crisis starts feeding into the general economy, said Darrell Wheeler, head of CMBS at Citigroup.
“The lack of new supply is also leading to a net run-off of outstanding balance, which would tend to raise the headline delinquency rate," Wheeler said. "However, the rate still remains low for now when compared to historical delinquency rates, and dramatically different from the high rates of the subprime residential market. If the economic slowdown is prolonged, we expect to see rising delinquency rates from these low levels, possibly to the 1 percent to 1.5 percent range in early 2009 and 2 percent to 3 percent sometime in 2010.”
However, Realpoint LLC, Horsham, Pa., said more than 35 percent of delinquent unpaid balances in CMBS through August came from transactions issued in 2005-2006 vintages, and more than 20 percent of all delinquencies were found in 2006 transactions.
With 13 percent total delinquency included in the 2007 vintage, more than 48 percent of CMBS delinquency in August came from 2005-2007 vintage transactions, Realpoint's research said.
Nearly 1.4 percent of 65,028 CMBS loans in Citigroup’s universe included delinquencies of 30, 60 and 90 days, one foreclosure and loans for special servicing. They accounted for more than $10 billion out of a total of more than $714.7 billion. Citigroup’s CMBS universe consists of publicly issued, fixed-rate CMBS conduit, fusion, lease-backed, large loan and seasoned loan transactions.
After five straight months of increases, Realpoint showed August’s delinquent unpaid balance for CMBS dropping slightly to $4.07 billion through from a trailing 12-month high of $4.203 billion through July. Special servicing exposure, however, increased to $6.88 billion in August from $6.45 billion in July for $10.95 billion in delinquencies and special servicing.
Total unpaid balance for all CMBS pools reviewed by Realpoint was $862.6 billion in August, down from $863.6 billion in July, with August's delinquency ratio at 0.47 percent, down slightly from 0.49 percent in July and 0.48 percent in June.
"What is more concerning, however, is that the delinquency percentage through August 2008 is up 18 basis points or 62 percent above the 0.29 percent reported one-year prior in August 2007. The increase in both delinquent unpaid balance and delinquency ratio over this time horizon reflect a slow but steady increase from historic lows through mid-2007," said Frank Innaurato, managing director at Realpoint.
CMBS delinquency by unpaid balance increased 29 percent from January’s $3.16 billion and up 84 percent from a six-year low of $2.21 billion in March.
“While both the 30-day and 60-day delinquent loan categories decreased, the distressed 90+-day, foreclosure and REO categories grew for the ninth straight month—up 43 percent since January 2008,” Innaurato said.
Delinquencies also increased in August along with $70.7 million in liquidations reported across 18 loans. Liquidation activity slowed after increases in June and July, due to slowdown from the current credit market climate.
“We expect that these high liquidations, however, are a clear response to increased loan workout and delinquency pressures being placed on special servicers, and may be a precursor to increased distressed asset money returning to the market,” Innaurato said.
Based on Realpoint’s numbers for August, highest loss severities in 2007 were found in industrial and healthcare collateral while multifamily collateral was highest by balance before liquidation. Citigroup showed multifamily as the only sector with current elevated delinquency rates at 1.6 percent in September.
“We recently wrote about the issues facing apartments under rent controls that were aggressively underwritten assuming conversion rates that have not materialized,” Wheeler said.
CMBS delinquencies in Michigan remained elevated at 2.50 percent as the domestic auto sector continued to struggle, but Tennessee and Georgia showed a spike in their rate during September as well, Citigroup said.
Texas, Florida and Michigan—the top three states ranked by delinquency exposure for the past 10 months through August—collectively accounted for 39 percent of CMBS delinquencies, based on Realpoint's research.
Residential Briefs
MBA (10/13/2008 ) Palaparty, Vijay
Freddie Mac Suspends Foreclosures Hurricane in Ike Areas
Freddie Mac, McLean, Va., ordered servicers to suspend all foreclosure sales on properties with Freddie Mac-owned mortgages in federally declared disaster areas caused by Hurricane Ike in Texas and Louisiana. The suspension will extend from October 8 to December 31 and include mortgages that were in default prior to Hurricane Ike.
Servicers will be required, after the suspension ends, to consider individual circumstances in determining whether to extend additional foreclosure relief or to proceed with foreclosure. The announcement only applies to properties with Freddie Mac-owned mortgages in Texas or Louisiana counties, municipalities or parishes that were declared federal disaster areas and where federal aid in the form of individual assistance is available.
HUD Hosts Regional Housing Summits
HUD will host three regional housing summits across the country to help launch HUD's new Neighborhood Stabilization Program. It will invite state, city and county leaders to address the country's urgent and long-term housing issues including how to deal with abandoned foreclosed properties within their communities. The summits will take place on October 10 in Los Angeles; October 14 in Columbus, Ohio; and October 16 in Orlando.
Freddie Mac Suspends Foreclosures Hurricane in Ike Areas
Freddie Mac, McLean, Va., ordered servicers to suspend all foreclosure sales on properties with Freddie Mac-owned mortgages in federally declared disaster areas caused by Hurricane Ike in Texas and Louisiana. The suspension will extend from October 8 to December 31 and include mortgages that were in default prior to Hurricane Ike.
Servicers will be required, after the suspension ends, to consider individual circumstances in determining whether to extend additional foreclosure relief or to proceed with foreclosure. The announcement only applies to properties with Freddie Mac-owned mortgages in Texas or Louisiana counties, municipalities or parishes that were declared federal disaster areas and where federal aid in the form of individual assistance is available.
HUD Hosts Regional Housing Summits
HUD will host three regional housing summits across the country to help launch HUD's new Neighborhood Stabilization Program. It will invite state, city and county leaders to address the country's urgent and long-term housing issues including how to deal with abandoned foreclosed properties within their communities. The summits will take place on October 10 in Los Angeles; October 14 in Columbus, Ohio; and October 16 in Orlando.
Declining Economy Puts Brakes on Remodeling
MBA (10/13/2008 ) Palaparty, Vijay
Remodeling activity among homeowners declined 15 percent this year—mostly in areas where homeowners have less equity—according to a report from Remodelormove.com, Sunnyvale, Calif. Eighty-four percent of respondents said possibility of a recession affected their remodeling plans.
Homeowners reported an average of $190,000 in home equity and average home value of $390,000—up by $140,000 and $342,000 respectively. The report, 2008 Remodeling Sentiment Report, corresponded with the U.S. Remodeling Permit Activity Report, also from Remodelormove.com, which showed an increase in the average cost of a remodel in markets with most expensive homes and a decrease in regions with average- and below average-priced homes.
“Homeowners who choose to remodel their homes may find this a good time,” said Dan Fritschen, real estate author and principal researcher. “With new home construction at low levels, more materials and labor are available for remodeling than several years ago, resulting in shorter project schedules and often lower project costs.”
Eighty-one percent of respondents said they plan to start their home remodel this year nonetheless.
Decline in home equity line of credit originations could be one reason for the slowdown. Benchmark Consulting International, Atlanta reported a 26.4 percent decrease in HELOC originations between the first and second quarters among small/medium-sized lenders. Applications decreased 33.8 percent, though from a book-to-look perspective, borrowers' interest found renewal in the second quarter, with the rate rising by 5 percent to 49 percent from 44 percent in the first quarter.
“With tightening of credit standards, tougher underwriting guidelines and less direct marketing focus, it is understandable why applications are down so significantly,” said Brian King, senior vice president at BenchMark Consulting.
In July, Harvard University’s Joint Center for Housing Studies reported a decline at an annual rate of 11.1 percent in home improvement activity.
Nicolas Restinas, director of the Joint Center for Housing Studies said the slumping economy and struggling housing sector will drag spending on home improvements. “Households are reluctant to undertake major improvements in the context of falling prices,” he said.
McGraw-Hill Construction, New York, however, reported that building green is advantageous, even in a down market. Forty percent of builders reported that building green eases marketing; 16 percent said it is much easier.
“Green building has definitely reached its upper tipping point,” said Harvey Bernstein, vice president of industry analytics, alliances and strategic initiatives at McGraw-Hill Construction. “Builders can no longer ignore the market advantages of green building. Especially considering today’s market and current economic situation, builders need to differentiate themselves from their competitors and hold steady or prosper in the down economy. Green building gives builders opportunity to expand their market share and ride out this economic slump.”
In 2009, 21 percent of builders expect 90 percent of projects to be green and that 60 percent of homebuyers will pay more for green homes.
Remodeling activity among homeowners declined 15 percent this year—mostly in areas where homeowners have less equity—according to a report from Remodelormove.com, Sunnyvale, Calif. Eighty-four percent of respondents said possibility of a recession affected their remodeling plans.
Homeowners reported an average of $190,000 in home equity and average home value of $390,000—up by $140,000 and $342,000 respectively. The report, 2008 Remodeling Sentiment Report, corresponded with the U.S. Remodeling Permit Activity Report, also from Remodelormove.com, which showed an increase in the average cost of a remodel in markets with most expensive homes and a decrease in regions with average- and below average-priced homes.
“Homeowners who choose to remodel their homes may find this a good time,” said Dan Fritschen, real estate author and principal researcher. “With new home construction at low levels, more materials and labor are available for remodeling than several years ago, resulting in shorter project schedules and often lower project costs.”
Eighty-one percent of respondents said they plan to start their home remodel this year nonetheless.
Decline in home equity line of credit originations could be one reason for the slowdown. Benchmark Consulting International, Atlanta reported a 26.4 percent decrease in HELOC originations between the first and second quarters among small/medium-sized lenders. Applications decreased 33.8 percent, though from a book-to-look perspective, borrowers' interest found renewal in the second quarter, with the rate rising by 5 percent to 49 percent from 44 percent in the first quarter.
“With tightening of credit standards, tougher underwriting guidelines and less direct marketing focus, it is understandable why applications are down so significantly,” said Brian King, senior vice president at BenchMark Consulting.
In July, Harvard University’s Joint Center for Housing Studies reported a decline at an annual rate of 11.1 percent in home improvement activity.
Nicolas Restinas, director of the Joint Center for Housing Studies said the slumping economy and struggling housing sector will drag spending on home improvements. “Households are reluctant to undertake major improvements in the context of falling prices,” he said.
McGraw-Hill Construction, New York, however, reported that building green is advantageous, even in a down market. Forty percent of builders reported that building green eases marketing; 16 percent said it is much easier.
“Green building has definitely reached its upper tipping point,” said Harvey Bernstein, vice president of industry analytics, alliances and strategic initiatives at McGraw-Hill Construction. “Builders can no longer ignore the market advantages of green building. Especially considering today’s market and current economic situation, builders need to differentiate themselves from their competitors and hold steady or prosper in the down economy. Green building gives builders opportunity to expand their market share and ride out this economic slump.”
In 2009, 21 percent of builders expect 90 percent of projects to be green and that 60 percent of homebuyers will pay more for green homes.
Financial Turmoil Continues Unabated
MBA (10/13/2008 ) Velz, Orawin
Equity markets around the globe hemorrhaged as the problems in the financial system threatened to cause a global recession. Commodities (including energy and agriculture products) were in free fall over the fear that a worldwide recession will lead to flagging demand. Crude oil futures fell below $80 a barrel on Friday, the lowest in a year.
Another week brought more fiscal and monetary policy actions to tackle the financial crisis. On Tuesday, the Federal Reserve made an unprecedented move to alleviate the frozen commercial paper market, which has shrunk for the fourth consecutive week. The Fed announced creation of the Commercial Paper Funding Facility to backstop issuers of the short-term debt used by many businesses to meet daily needs. The special-purpose vehicle will purchase three-month unsecured and asset-backed commercial paper. This essentially enables the Fed to lend directly to businesses rather than to just financial institutions.
On Wednesday, as a part of a coordinated effort by major central banks around the globe, the Fed cut the federal funds rate by 50 basis points. The Fed cited weakening economic activity and intensified financial market turmoil as a motive of this inter-meeting rate cut. (The next Federal Open Market Committee meeting will be on October 28-29 and fed funds futures expected a further rate cut then).
In his speech on the same day, Treasury Secretary Henry Paulson Jr. suggested the possibility of injecting capital directly into financial institutions and, in effect, partially nationalizing those institutions. The Treasury maintained that the Emergency Economic Stabilization Act gave it the authority to provide capital in exchange for ownership stakes.
These actions failed to inspire investor confidence. Banks still did not trust each other and were reluctant to lend to one another, which resulted in rising borrowing costs for interbank lending. The London interbank offered rate continued to climb on Friday, with the three-month Libor rising to 4.82 percent—the highest since late December 2007.
Economic data were sparse last week. The first drop in August consumer credit outstanding in 10 years underscored households’ concerns about their finances and pointed to a retrenchment in consumer spending ahead. The trade deficit in goods and services narrowed in August but its improvement was not a result of strong overseas demand for U.S. products, as both exports and imports fell. One housing report offered some good news: pending home sales surged in August, fueled by pending sales (i.e., contract signing) of distressed properties in the West, suggesting existing home sales (closing) may rebound in the near term.
Stock markets extended their decline into an eighth day Friday. Investors continued to shift money into safe-haven assets, especially short-term Treasuries. The yield on the three-month Treasury bill plunged to 0.18 percent from 0.52 percent on Thursday. Longer-term Treasury yields did not benefit from a flight to quality and moved higher throughout the week. The yield on the 10-year Treasury note stayed around 3.87 percent mid-Friday afternoon, 38 basis points higher than the rate at the start of the week and 23 basis points higher than the rate on the previous Friday.
Housing and Mortgage Indicators:
The National Association of Realtors Pending Home Sales Index surged 7.4 percent to 93.4. The index was up 6.8 percent from last August, the first year-over-year increase since September 2005.
Pending home sales increased in every region of the country, led by an 18.4 percent increase in the West. The relatively stronger performance of existing home sales for the region partly reflects rising shares of foreclosed and distressed homes that were sold through the Multiple Listing Service. Attractive bargain prices have helped lure some buyers back into some local markets.
Pending home sales also rose strongly by 8.4 percent in the Northeast and rose modestly in the Midwest and the South by 3.6 percent and 2.4 percent, respectively.
The index is based on signed contracts for existing single-family homes, condos and co-ops. It is a leading indicator of NAR’s existing home sales, which are based on closings, as the signed contract for the purchase of a home generally precedes its closing by one to two months. The increase in June pending home sales suggests that existing home sales should increase in the near term.
Economic Indicators:
Total consumer credit outstanding fell $7.9 billion in August to $2.57 trillion—the largest decline in the level of consumer credit on record. The measurement of consumer credit does not include any loans secured by real estate. Revolving credit balances fell $600 million, while nonrevolving credit dropped $7.3 billion or 5.3 percent—the largest percentage decline since 1992, driven by a sharp drop in new vehicle sales.
The U.S. trade deficit narrowed to $59.1 billion in August from $61.3 billion in July. Exports decreased by 2.0 percent to $164.7 billion in August, while imports decreased by 2.4 percent to $223.9 billion.
Import prices declined 3.0 percent in September, the second consecutive decline and its largest since the 2003. Over the year, import prices were up 14.5 percent, decelerating from the 18.7 percent increase in August.
Prices for petroleum products declined 9.3 percent. Import prices excluding fuels fell 0.5 percent, the first month-to-month decline since February 2007.
Equity markets around the globe hemorrhaged as the problems in the financial system threatened to cause a global recession. Commodities (including energy and agriculture products) were in free fall over the fear that a worldwide recession will lead to flagging demand. Crude oil futures fell below $80 a barrel on Friday, the lowest in a year.
Another week brought more fiscal and monetary policy actions to tackle the financial crisis. On Tuesday, the Federal Reserve made an unprecedented move to alleviate the frozen commercial paper market, which has shrunk for the fourth consecutive week. The Fed announced creation of the Commercial Paper Funding Facility to backstop issuers of the short-term debt used by many businesses to meet daily needs. The special-purpose vehicle will purchase three-month unsecured and asset-backed commercial paper. This essentially enables the Fed to lend directly to businesses rather than to just financial institutions.
On Wednesday, as a part of a coordinated effort by major central banks around the globe, the Fed cut the federal funds rate by 50 basis points. The Fed cited weakening economic activity and intensified financial market turmoil as a motive of this inter-meeting rate cut. (The next Federal Open Market Committee meeting will be on October 28-29 and fed funds futures expected a further rate cut then).
In his speech on the same day, Treasury Secretary Henry Paulson Jr. suggested the possibility of injecting capital directly into financial institutions and, in effect, partially nationalizing those institutions. The Treasury maintained that the Emergency Economic Stabilization Act gave it the authority to provide capital in exchange for ownership stakes.
These actions failed to inspire investor confidence. Banks still did not trust each other and were reluctant to lend to one another, which resulted in rising borrowing costs for interbank lending. The London interbank offered rate continued to climb on Friday, with the three-month Libor rising to 4.82 percent—the highest since late December 2007.
Economic data were sparse last week. The first drop in August consumer credit outstanding in 10 years underscored households’ concerns about their finances and pointed to a retrenchment in consumer spending ahead. The trade deficit in goods and services narrowed in August but its improvement was not a result of strong overseas demand for U.S. products, as both exports and imports fell. One housing report offered some good news: pending home sales surged in August, fueled by pending sales (i.e., contract signing) of distressed properties in the West, suggesting existing home sales (closing) may rebound in the near term.
Stock markets extended their decline into an eighth day Friday. Investors continued to shift money into safe-haven assets, especially short-term Treasuries. The yield on the three-month Treasury bill plunged to 0.18 percent from 0.52 percent on Thursday. Longer-term Treasury yields did not benefit from a flight to quality and moved higher throughout the week. The yield on the 10-year Treasury note stayed around 3.87 percent mid-Friday afternoon, 38 basis points higher than the rate at the start of the week and 23 basis points higher than the rate on the previous Friday.
Housing and Mortgage Indicators:
The National Association of Realtors Pending Home Sales Index surged 7.4 percent to 93.4. The index was up 6.8 percent from last August, the first year-over-year increase since September 2005.
Pending home sales increased in every region of the country, led by an 18.4 percent increase in the West. The relatively stronger performance of existing home sales for the region partly reflects rising shares of foreclosed and distressed homes that were sold through the Multiple Listing Service. Attractive bargain prices have helped lure some buyers back into some local markets.
Pending home sales also rose strongly by 8.4 percent in the Northeast and rose modestly in the Midwest and the South by 3.6 percent and 2.4 percent, respectively.
The index is based on signed contracts for existing single-family homes, condos and co-ops. It is a leading indicator of NAR’s existing home sales, which are based on closings, as the signed contract for the purchase of a home generally precedes its closing by one to two months. The increase in June pending home sales suggests that existing home sales should increase in the near term.
Economic Indicators:
Total consumer credit outstanding fell $7.9 billion in August to $2.57 trillion—the largest decline in the level of consumer credit on record. The measurement of consumer credit does not include any loans secured by real estate. Revolving credit balances fell $600 million, while nonrevolving credit dropped $7.3 billion or 5.3 percent—the largest percentage decline since 1992, driven by a sharp drop in new vehicle sales.
The U.S. trade deficit narrowed to $59.1 billion in August from $61.3 billion in July. Exports decreased by 2.0 percent to $164.7 billion in August, while imports decreased by 2.4 percent to $223.9 billion.
Import prices declined 3.0 percent in September, the second consecutive decline and its largest since the 2003. Over the year, import prices were up 14.5 percent, decelerating from the 18.7 percent increase in August.
Prices for petroleum products declined 9.3 percent. Import prices excluding fuels fell 0.5 percent, the first month-to-month decline since February 2007.
GSEs Still a Good Thing, Ranieri Says
IDD Magazine (10/06/08); Rozens, Aleksandrs
Speaking before senior home builder executives at Harvard University's Joint Center for Housing Research on Oct. 2, Hyperion Partners Chairman Lewis Ranieri--an early pioneer of mortgage securitization--emphasized the importance of Fannie Mae and Freddie Mac in rebuilding the mortgage market. Ranieri said the structure of the agencies needs to be made "more responsible," however, and insisted that the agencies must maintain their government guarantee without the government assuming too much of their risk. He suggested a structure similar to the Federal Home Loan Bank system, in which lenders would purchase a stake in Fannie Mae and Freddie Mac while the government charges a fee to guarantee the securities. To bolster the mortgage market, Ranieri also recommended using covered bond structures, altering risk-based capital requirements on agency debt and beefing up regulation of the credit default swaps market.
Speaking before senior home builder executives at Harvard University's Joint Center for Housing Research on Oct. 2, Hyperion Partners Chairman Lewis Ranieri--an early pioneer of mortgage securitization--emphasized the importance of Fannie Mae and Freddie Mac in rebuilding the mortgage market. Ranieri said the structure of the agencies needs to be made "more responsible," however, and insisted that the agencies must maintain their government guarantee without the government assuming too much of their risk. He suggested a structure similar to the Federal Home Loan Bank system, in which lenders would purchase a stake in Fannie Mae and Freddie Mac while the government charges a fee to guarantee the securities. To bolster the mortgage market, Ranieri also recommended using covered bond structures, altering risk-based capital requirements on agency debt and beefing up regulation of the credit default swaps market.
Consumers' Credit Getting Not So Easy
Dallas Morning News (10/13/08)
More people were able to purchase homes as credit was expanded over the past three decades, but experts now believe it will become more difficult to borrow money for a prolonged period. The credit crunch means that prospective home buyers may no longer be able to purchase homes with interest-only loans or obtain loans that allow them to borrow more than the value of the property. Home buyers will need to make substantial payments and down payments, and they also may face higher interest rates; while borrowers across the board will find it more difficult to open a credit card and carry large balances. "This entire credit crunch is a wakeup call to anybody who was attempting to borrow their way to prosperity," says Greg McBride, senior analyst at Bankrate.com.
More people were able to purchase homes as credit was expanded over the past three decades, but experts now believe it will become more difficult to borrow money for a prolonged period. The credit crunch means that prospective home buyers may no longer be able to purchase homes with interest-only loans or obtain loans that allow them to borrow more than the value of the property. Home buyers will need to make substantial payments and down payments, and they also may face higher interest rates; while borrowers across the board will find it more difficult to open a credit card and carry large balances. "This entire credit crunch is a wakeup call to anybody who was attempting to borrow their way to prosperity," says Greg McBride, senior analyst at Bankrate.com.
5,000 Show Up at Foreclosure Showcase in Uniondale
New York Newsday (10/13/08); Amon, Michael
The New York Foreclosure Showcase drew a crowd of almost 5,000 to the Marriott Hotel and Conference Center in Uniondale on Oct. 12, when 35 foreclosed properties were put on the auction block. The current market has afforded "opportunities to buy that didn't exist before," says Todd Yovino of Island Advantage Realty, who organized the event. Bidders needed to arrive with a mortgage prequalification and a certified check for $10,000. On hand to speak with attendees were realtors specializing in foreclosures, real estate attorneys and home improvement specialists; and they also had access to seminars on mortgage prequalification and quick foreclosure sales.
The New York Foreclosure Showcase drew a crowd of almost 5,000 to the Marriott Hotel and Conference Center in Uniondale on Oct. 12, when 35 foreclosed properties were put on the auction block. The current market has afforded "opportunities to buy that didn't exist before," says Todd Yovino of Island Advantage Realty, who organized the event. Bidders needed to arrive with a mortgage prequalification and a certified check for $10,000. On hand to speak with attendees were realtors specializing in foreclosures, real estate attorneys and home improvement specialists; and they also had access to seminars on mortgage prequalification and quick foreclosure sales.
NAHB: Housing Jobs Key to State and Local Economic Recovery
RISMedia (10/13/08)
National Association of Home Builders Chairman Sandy Dunn urges state and local governments to consider innovative ideas to help shore up the slumping housing market. Dunn remarks, "While the federal government has stepped forward with a series of emergency actions to stabilize and restore confidence in the financial markets, it's now time for the same sort of innovative thinking at the local and state levels where public officials are grappling with budget shortfalls that are putting a squeeze on spending for everything from schools to public safety and other essential services." Such creative thinking could range from temporarily foregoing impact fees on new development to allowing higher density zoning to build more affordable housing. Dunn concludes that it is also vital that cities and counties extend existing zoning approvals while builders secure financing for new projects.
National Association of Home Builders Chairman Sandy Dunn urges state and local governments to consider innovative ideas to help shore up the slumping housing market. Dunn remarks, "While the federal government has stepped forward with a series of emergency actions to stabilize and restore confidence in the financial markets, it's now time for the same sort of innovative thinking at the local and state levels where public officials are grappling with budget shortfalls that are putting a squeeze on spending for everything from schools to public safety and other essential services." Such creative thinking could range from temporarily foregoing impact fees on new development to allowing higher density zoning to build more affordable housing. Dunn concludes that it is also vital that cities and counties extend existing zoning approvals while builders secure financing for new projects.
Paulson Speeds Consideration of Guarantees for U.S. Bank Debt
Bloomberg (10/13/08); Christie, Rebecca; Schmidt, Robert
U.S. Treasury Secretary Henry Paulson Jr. reportedly is fast-tracking a plan to guarantee debt issued by banks after a similar move was made by European policy makers over the weekend. Such a step would be part of a three-pronged strategy to free up credit markets that also calls for the government to buy shares in financial companies and invest in distressed assets under the $700 billion program recently approved by Capitol Hill lawmakers. In order to keep a level playing field for American lenders, the Treasury may also have to offer a backstop for U.S. banks' debt. At an emergency summit in Paris on Oct. 12, European leaders agreed to offer guarantees for new bank debt and committed to using taxpayer funds to bolster lenders' capital.
U.S. Treasury Secretary Henry Paulson Jr. reportedly is fast-tracking a plan to guarantee debt issued by banks after a similar move was made by European policy makers over the weekend. Such a step would be part of a three-pronged strategy to free up credit markets that also calls for the government to buy shares in financial companies and invest in distressed assets under the $700 billion program recently approved by Capitol Hill lawmakers. In order to keep a level playing field for American lenders, the Treasury may also have to offer a backstop for U.S. banks' debt. At an emergency summit in Paris on Oct. 12, European leaders agreed to offer guarantees for new bank debt and committed to using taxpayer funds to bolster lenders' capital.
Fannie Reaches Out to FHLBs
National Mortgage News (10/13/08) Vol. 33, No. 4, P. 15; Collins, Brian
Fannie Mae will purchase mortgages originated under the Federal Home Loan Bank of Chicago's Mortgage Partnership Finance program by its member banks. These MPF Xtra loans will not involve the program's trademark credit-risk sharing element once sold to the government-sponsored enterprise, however. Chicago FHLBank President Matt Feldman says the initiative "will make it easier for the majority of our members to continue to offer competitively priced fixed-rate mortgages to their customers in their communities." Fannie Mae will assume the member banks' interest rate risk, prepayment risk and credit risk, while the banks hang onto servicing rights and servicing fee revenues.
Fannie Mae will purchase mortgages originated under the Federal Home Loan Bank of Chicago's Mortgage Partnership Finance program by its member banks. These MPF Xtra loans will not involve the program's trademark credit-risk sharing element once sold to the government-sponsored enterprise, however. Chicago FHLBank President Matt Feldman says the initiative "will make it easier for the majority of our members to continue to offer competitively priced fixed-rate mortgages to their customers in their communities." Fannie Mae will assume the member banks' interest rate risk, prepayment risk and credit risk, while the banks hang onto servicing rights and servicing fee revenues.
Fannie, Freddie to Step Up Purchases of Troubled Mortgage Bonds
Bloomberg (10/13/08); Kopecki, Dawn
Insiders say Fannie Mae and Freddie Mac will begin buying $40 billion a month in underperforming mortgage bonds, including subprime, Alt-A and non-performing prime mortgage securities. The purchases are not tied to the U.S. Treasury's $700 billion Trouble Asset Relief Program. The mortgage finance companies have not turned a profit this year and already hold up to $210 billion of bad debt, but the Federal Housing Finance Agency says the Treasury might be able to purchase some of that debt. "The overall goal of the program will be to contribute greater stability and liquidity in the mortgage market, which should enhance consumers' access to mortgage financing and ultimately result in reduced mortgage interest rates," FHFA Director James Lockhart said in a statement in September.
Insiders say Fannie Mae and Freddie Mac will begin buying $40 billion a month in underperforming mortgage bonds, including subprime, Alt-A and non-performing prime mortgage securities. The purchases are not tied to the U.S. Treasury's $700 billion Trouble Asset Relief Program. The mortgage finance companies have not turned a profit this year and already hold up to $210 billion of bad debt, but the Federal Housing Finance Agency says the Treasury might be able to purchase some of that debt. "The overall goal of the program will be to contribute greater stability and liquidity in the mortgage market, which should enhance consumers' access to mortgage financing and ultimately result in reduced mortgage interest rates," FHFA Director James Lockhart said in a statement in September.
Take a bite out of closing costs
Hold the fees please. How to save if you're buying a new home or just refinancing.
BEND, Ore. (CNN/Money) - With mortgage rates still as low as they are, financing a house is dirt cheap these days, right?
Not if you pay a fortune in closing costs.
As anyone who has shopped around for a mortgage knows, it's extremely difficult to compare one lender's offering to with that of another lender because the up-front fees vary so much and are not guaranteed. Lenders and their venders can, and sometimes do, add or inflate fees in the eleventh hour of a transaction.
Click Here for the full article
BEND, Ore. (CNN/Money) - With mortgage rates still as low as they are, financing a house is dirt cheap these days, right?
Not if you pay a fortune in closing costs.
As anyone who has shopped around for a mortgage knows, it's extremely difficult to compare one lender's offering to with that of another lender because the up-front fees vary so much and are not guaranteed. Lenders and their venders can, and sometimes do, add or inflate fees in the eleventh hour of a transaction.
Click Here
Mortgage aid program launches
The $300B initiative will help borrowers who spend more than 31% of their income on mortgage payments.
WASHINGTON (AP) -- The government kicked off a program Wednesday that aims to prevent foreclosures by letting an estimated 400,000 troubled homeowners swap their mortgages for more affordable loans.
Lenders, rather than borrowers, will decide whether to participate in the program, which requires them to take a loss on the initial loan. The $300 billion, three-year program is designed to help borrowers who owe more on their loans than their homes are worth.
Click Here for the full article
WASHINGTON (AP) -- The government kicked off a program Wednesday that aims to prevent foreclosures by letting an estimated 400,000 troubled homeowners swap their mortgages for more affordable loans.
Lenders, rather than borrowers, will decide whether to participate in the program, which requires them to take a loss on the initial loan. The $300 billion, three-year program is designed to help borrowers who owe more on their loans than their homes are worth.
Click Here
Mortgage rates slip to 5.94%
NEW YORK (CNNMoney.com) -- Rates on 30-year mortgages fell from last week, while loan applications grew slightly in the face of turbulence in the banking and finance sectors.
Mortgage finance firm Freddie Mac (FRE, Fortune 500) reported Thursday that 30-year fixed-rate mortgages averaged 5.94% this week. That's down from 6.10% last week and well below 6.40%, where the rate stood a year ago.
"Longer-term mortgage rates fell for the first time in three weeks, roughly following bond market yields," said Frank Nothaft, Freddie Mac vice president and chief economist.
Click Here for the full article
Mortgage finance firm Freddie Mac (FRE, Fortune 500) reported Thursday that 30-year fixed-rate mortgages averaged 5.94% this week. That's down from 6.10% last week and well below 6.40%, where the rate stood a year ago.
"Longer-term mortgage rates fell for the first time in three weeks, roughly following bond market yields," said Frank Nothaft, Freddie Mac vice president and chief economist.
Click Here
Thursday, October 16, 2008
Economic Crisis Dims Manhattan Office Forecast
MBA (10/10/2008 ) Murray, Michael
Manhattan office vacancies could fluctuate negatively following Barclays Bank's acquisition of several Lehman Brothers business units, Bank of America's acquisition of Merrill Lynch, events at AIG and other economic issues.
In a New York office forecast report, Property and Portfolio Research, Boston, said Lehman's office space could remain occupied because of Barclay's acquisition. PPR reported that Lehman Brothers occupies nearly 3.4 million square feet of office space in the New York metro, including a one million square-foot building it owns at 745 Seventh Avenue, based on recent filings with the Securities and Exchange Commission.
"In the modified base case scenario, the addition of 3.4 million square feet of vacant space to the New York office market would exacerbate an already dismal demand picture for 2008, resulting in negative net absorption of 11.4 million square feet for the year," PPR said.
In an alternate “upside” scenario that assumes Lehman vacates only half of its office space [1.7 million square feet], PPR said vacancies could reach 12.4 percent in the third quarter. “In this case, the 'upside' would still result in a vacancy rate that is 220 basis points above year-ago levels, and rent projections would remain negative through 2009. But this scenario wouldn't count likely job losses in other financial firms and knock-on effects in the market."
Bank of America's acquisition of Merrill Lynch also leaves questions; PPR reported that New York "may again bear the brunt of any downsizing, and given that Merrill occupies nearly as much space [3.2 million square feet] in the metro as Lehman did, there could be much more pain on the way."
In a worst-case scenario of further economic troubles, PPR estimated job losses in financial activities at nearly 75,000—peak-to-trough—based on severe recessionary economic conditions, compared to nearly 40,000 cuts in the base case, or moderate recession, forecast.
"The health of the financial sector is highly correlated with the health of the overall New York economy, so heavy financial losses would carry through to other job sectors, bringing total metro unemployment close to 11 percent," PPR said. "These conditions would yield substantial negative net absorption—carrying into 2010—and a vacancy rate in the high teens, similar to levels reached in the early 1990s. Rent losses in this scenario would stretch on through 2011, with 2009 and 2010 as the worst years—contracting by 13 percent and 9 percent, respectively, and values would scale back by over 13 percent through 2009."
Manhattan office vacancies could fluctuate negatively following Barclays Bank's acquisition of several Lehman Brothers business units, Bank of America's acquisition of Merrill Lynch, events at AIG and other economic issues.
In a New York office forecast report, Property and Portfolio Research, Boston, said Lehman's office space could remain occupied because of Barclay's acquisition. PPR reported that Lehman Brothers occupies nearly 3.4 million square feet of office space in the New York metro, including a one million square-foot building it owns at 745 Seventh Avenue, based on recent filings with the Securities and Exchange Commission.
"In the modified base case scenario, the addition of 3.4 million square feet of vacant space to the New York office market would exacerbate an already dismal demand picture for 2008, resulting in negative net absorption of 11.4 million square feet for the year," PPR said.
In an alternate “upside” scenario that assumes Lehman vacates only half of its office space [1.7 million square feet], PPR said vacancies could reach 12.4 percent in the third quarter. “In this case, the 'upside' would still result in a vacancy rate that is 220 basis points above year-ago levels, and rent projections would remain negative through 2009. But this scenario wouldn't count likely job losses in other financial firms and knock-on effects in the market."
Bank of America's acquisition of Merrill Lynch also leaves questions; PPR reported that New York "may again bear the brunt of any downsizing, and given that Merrill occupies nearly as much space [3.2 million square feet] in the metro as Lehman did, there could be much more pain on the way."
In a worst-case scenario of further economic troubles, PPR estimated job losses in financial activities at nearly 75,000—peak-to-trough—based on severe recessionary economic conditions, compared to nearly 40,000 cuts in the base case, or moderate recession, forecast.
"The health of the financial sector is highly correlated with the health of the overall New York economy, so heavy financial losses would carry through to other job sectors, bringing total metro unemployment close to 11 percent," PPR said. "These conditions would yield substantial negative net absorption—carrying into 2010—and a vacancy rate in the high teens, similar to levels reached in the early 1990s. Rent losses in this scenario would stretch on through 2011, with 2009 and 2010 as the worst years—contracting by 13 percent and 9 percent, respectively, and values would scale back by over 13 percent through 2009."
MBA Conducting Member Survey
MBA (10/10/2008 ) Pardo, Sheryl
The Mortgage Bankers Association is conducting a brief survey about what MBA members value most in their membership.
“In a time of limited resources, we must ensure that MBA is focusing its efforts on [members] top priorities,” said MBA Chief Operating Officer John Courson. “Only by knowing what you value most can we ensure that MBA is best supporting your company during these turbulent times.”
The survey takes less than 15 minutes to complete. It asks questions about why members choose to belong to MBA; which products, services and issues are of most importance to members, and where MBA can improve.
The survey will be distributed this week; responses are due Oct. 15.
The Mortgage Bankers Association is conducting a brief survey about what MBA members value most in their membership.
“In a time of limited resources, we must ensure that MBA is focusing its efforts on [members] top priorities,” said MBA Chief Operating Officer John Courson. “Only by knowing what you value most can we ensure that MBA is best supporting your company during these turbulent times.”
The survey takes less than 15 minutes to complete. It asks questions about why members choose to belong to MBA; which products, services and issues are of most importance to members, and where MBA can improve.
The survey will be distributed this week; responses are due Oct. 15.
Future SaaS Development Invites Customers into Cloud
MBA (10/10/2008 ) Palaparty, Vijay
Software-as-a-service’s future will expand on customer/vendor partnerships, in which vendors provide programmable platforms that yield customized technology for customers.
The model presents opportunities for customers to guide their own development, while expanding vendor offerings.
“Future trends in SaaS include the ability to provide customer-driven software development,” said David Hultquist, vice president of marketing at Dorado Corp., San Mateo, Calif. “No software vendor can have everything but technology-wise, it will become a future need of SaaS. Customers will require classical benefits such as the ease of use in a monthly subscription format, but will also demand having benefits of customization.”
London-based web hosting provider Hostway said in a recent study that 72 percent of organizations believe virtualization will drive SaaS adoption. Furthermore, two-thirds of organizations reported plans to adopt SaaS within the next five years.
"SaaS reduces overall software license spending for larger companies, while helping smaller companies adopt enterprise-level software without the large upfront investment or the need to train staff to manage and monitor applications," Hostway said. A further 72 percent of companies are certain that SaaS will make their application usage more cost-effective because of reduction in software management costs, and the ability to eliminate buying too many or too few software licenses.
"Furthermore, around half of all organizations believe that it will enable smaller companies to use enterprise-level software without the need for large upfront investment, or having to train staff to manage and monitor these applications," said Neil Barton , director of Hostway. "Given these benefits, it is unsurprising that two-thirds of organizations are planning to adopt SaaS within five years."
Hultquist said benefits of SaaS include vendors' ability to better project revenue streams and business, helping companies realize cost benefits. He said the adaptability of SaaS can more appropriately respond to market fluctuations.
“Years ago we had to do a lot of education against a built-in bias among companies that said they require all technology to be in-house," Hultquist said. “That has changed quite a lot, and we’ve observed not completely universal but growing awareness of SaaS and its benefits. The overwhelming advantages of setting up and running quickly compensates for the lingering feeling that some companies want all software in their own control.”
To deal with such reservation, along with a slow business market, companies such as Dorado have revised their marketing strategies to acquire customers in a piecemeal approach.
“We are helping companies in a phased approach in which they can move part of the business to our technology and ramp up over time," Hultquist said. "They realize quicker ROI this way and can do that without having to take an entire year to make one great big decision. The ROI will demonstrate itself.”
From a data management perspective, Hultquist said SaaS vendors are better able to meet customer requests in both managing and securing data as well as running data and formatting it as requested. “Meeting the changing regulatory landscape is a good example of companies requesting data in different formats—even management reporting,” he said.
Software-as-a-service’s future will expand on customer/vendor partnerships, in which vendors provide programmable platforms that yield customized technology for customers.
The model presents opportunities for customers to guide their own development, while expanding vendor offerings.
“Future trends in SaaS include the ability to provide customer-driven software development,” said David Hultquist, vice president of marketing at Dorado Corp., San Mateo, Calif. “No software vendor can have everything but technology-wise, it will become a future need of SaaS. Customers will require classical benefits such as the ease of use in a monthly subscription format, but will also demand having benefits of customization.”
London-based web hosting provider Hostway said in a recent study that 72 percent of organizations believe virtualization will drive SaaS adoption. Furthermore, two-thirds of organizations reported plans to adopt SaaS within the next five years.
"SaaS reduces overall software license spending for larger companies, while helping smaller companies adopt enterprise-level software without the large upfront investment or the need to train staff to manage and monitor applications," Hostway said. A further 72 percent of companies are certain that SaaS will make their application usage more cost-effective because of reduction in software management costs, and the ability to eliminate buying too many or too few software licenses.
"Furthermore, around half of all organizations believe that it will enable smaller companies to use enterprise-level software without the need for large upfront investment, or having to train staff to manage and monitor these applications," said Neil Barton , director of Hostway. "Given these benefits, it is unsurprising that two-thirds of organizations are planning to adopt SaaS within five years."
Hultquist said benefits of SaaS include vendors' ability to better project revenue streams and business, helping companies realize cost benefits. He said the adaptability of SaaS can more appropriately respond to market fluctuations.
“Years ago we had to do a lot of education against a built-in bias among companies that said they require all technology to be in-house," Hultquist said. “That has changed quite a lot, and we’ve observed not completely universal but growing awareness of SaaS and its benefits. The overwhelming advantages of setting up and running quickly compensates for the lingering feeling that some companies want all software in their own control.”
To deal with such reservation, along with a slow business market, companies such as Dorado have revised their marketing strategies to acquire customers in a piecemeal approach.
“We are helping companies in a phased approach in which they can move part of the business to our technology and ramp up over time," Hultquist said. "They realize quicker ROI this way and can do that without having to take an entire year to make one great big decision. The ROI will demonstrate itself.”
From a data management perspective, Hultquist said SaaS vendors are better able to meet customer requests in both managing and securing data as well as running data and formatting it as requested. “Meeting the changing regulatory landscape is a good example of companies requesting data in different formats—even management reporting,” he said.
HUD Program to Buy Foreclosures
Miami Herald (10/10/08)
HUD's Neighborhood Stabilization Program providing state and local governments with a total of $4 billion to buy foreclosed and abandoned properties to curtail blight and bolster homeownership will be launched at an Oct. 16 summit in Orlando. The money will be distributed to areas devastated by the housing crisis, with Florida awarded $541 million. Under the plan, foreclosed homes could be transformed into affordable rentals or for-sale dwellings.
HUD's Neighborhood Stabilization Program providing state and local governments with a total of $4 billion to buy foreclosed and abandoned properties to curtail blight and bolster homeownership will be launched at an Oct. 16 summit in Orlando. The money will be distributed to areas devastated by the housing crisis, with Florida awarded $541 million. Under the plan, foreclosed homes could be transformed into affordable rentals or for-sale dwellings.
Foreclosure Sales Halted in Hurricane-Hit Areas
Washington Post (10/10/08) P. D4
Through Dec. 31, mortgage servicers may not proceed with foreclosure sales in areas of Texas and Louisiana classified as federal disaster areas due to Hurricane Ike. Freddie Mac says mortgages in default before the storm also are covered by the firm's mandate. Servicers will consider on a case-by-case basis whether to move forward with foreclosure or offer more relief once the moratorium ends.
Through Dec. 31, mortgage servicers may not proceed with foreclosure sales in areas of Texas and Louisiana classified as federal disaster areas due to Hurricane Ike. Freddie Mac says mortgages in default before the storm also are covered by the firm's mandate. Servicers will consider on a case-by-case basis whether to move forward with foreclosure or offer more relief once the moratorium ends.
Mixed Signals for Mortgage Giants
Washington Post (10/10/08) P. D2; Goldfarb, Zachary A.
Despite a June report that Fannie Mae and Freddie Mac had $9.4 billion and $2.7 billion more capital, respectively, than its regulator requires, the Federal Housing Finance Agency has deemed the companies undercapitalized due to the mortgage crisis and increasing concerns about safety and soundness. The agency indicates that intangible assets, such as tax credits, accounted for a substantial amount of the firms' capital and that capital is no longer an accurate gauge of financial health. University of California at Berkeley finance professor Dwight Jaffee says Fannie Mae and Freddie Mac were unable to generate capital by issuing new stock following comments made by Treasury Secretary Henry Paulson prior to their takeover that government intervention "would be sure to wipe out the shareholders." Jaffee says the government hopes the companies will help the housing market recover, noting that such a move "may involve taking more risks than they would ordinarily do and accepting a lower return on the assets than they normally do."
Despite a June report that Fannie Mae and Freddie Mac had $9.4 billion and $2.7 billion more capital, respectively, than its regulator requires, the Federal Housing Finance Agency has deemed the companies undercapitalized due to the mortgage crisis and increasing concerns about safety and soundness. The agency indicates that intangible assets, such as tax credits, accounted for a substantial amount of the firms' capital and that capital is no longer an accurate gauge of financial health. University of California at Berkeley finance professor Dwight Jaffee says Fannie Mae and Freddie Mac were unable to generate capital by issuing new stock following comments made by Treasury Secretary Henry Paulson prior to their takeover that government intervention "would be sure to wipe out the shareholders." Jaffee says the government hopes the companies will help the housing market recover, noting that such a move "may involve taking more risks than they would ordinarily do and accepting a lower return on the assets than they normally do."
Commercial Realty: Market Bright Spot
American Banker (10/10/08) P. 13; Berry, Kate
According to Advantus Capital Management Inc.'s third-quarter economic update, commercial real estate remains one of the stock market's better-performing sectors. The Minnesota-based investment adviser's relatively bullish view of commercial property was based on a 4.5-percent increase in the Dow Jones Wilshire Real Estate Securities Index, which outperformed the Standard & Poor's 500 Index in the third quarter this year. Advantus noted in its report that commercial real estate funding typically is long term, "insulating it from current stresses in short-term credit." Although the fundamentals of the commercial sector are currently "solid," a braking economy would likely put pressure on certain properties, like hotels, where income is not derived from leases and other longer-term instruments.
According to Advantus Capital Management Inc.'s third-quarter economic update, commercial real estate remains one of the stock market's better-performing sectors. The Minnesota-based investment adviser's relatively bullish view of commercial property was based on a 4.5-percent increase in the Dow Jones Wilshire Real Estate Securities Index, which outperformed the Standard & Poor's 500 Index in the third quarter this year. Advantus noted in its report that commercial real estate funding typically is long term, "insulating it from current stresses in short-term credit." Although the fundamentals of the commercial sector are currently "solid," a braking economy would likely put pressure on certain properties, like hotels, where income is not derived from leases and other longer-term instruments.
30-Year Mortgage Rates Fall to Under 6 Percent
Miami Herald (10/10/08)
Freddie Mac reports a drop in the 30-year fixed mortgage rate to 5.94 percent during the week ended Oct. 9, marking the first decrease in three weeks. The 15-year fixed rate slipped to 5.63 percent from 5.78 percent the previous week. Meanwhile, the five-year adjustable mortgage rate dropped a notch to 5.9 percent from 6 percent and the one-year ARM dipped slightly to 5.15 percent.
Freddie Mac reports a drop in the 30-year fixed mortgage rate to 5.94 percent during the week ended Oct. 9, marking the first decrease in three weeks. The 15-year fixed rate slipped to 5.63 percent from 5.78 percent the previous week. Meanwhile, the five-year adjustable mortgage rate dropped a notch to 5.9 percent from 6 percent and the one-year ARM dipped slightly to 5.15 percent.
Citigroup Ends Wachovia Bid; Wells Fargo Prevails
Chicago Tribune (10/10/08)
Wells Fargo will acquire the entire operations of Charlotte-based Wachovia, including a mortgage portfolio that is expected to generate $74 billion of write-downs and losses. "The opportunities the franchise brings to us over time more than compensates for those losses," Chairman Richard Kovacevich said after announcing the deal. San Francisco-based Wells Fargo submitted a bid of $15 billion for Wachovia after Citigroup sought to purchase part of its banking operations for $2.2 billion. Citigroup said it would not interfere with the Wells takeover but did indicate that it would sue for $60 billion in damages due to breach of contract.
Wells Fargo will acquire the entire operations of Charlotte-based Wachovia, including a mortgage portfolio that is expected to generate $74 billion of write-downs and losses. "The opportunities the franchise brings to us over time more than compensates for those losses," Chairman Richard Kovacevich said after announcing the deal. San Francisco-based Wells Fargo submitted a bid of $15 billion for Wachovia after Citigroup sought to purchase part of its banking operations for $2.2 billion. Citigroup said it would not interfere with the Wells takeover but did indicate that it would sue for $60 billion in damages due to breach of contract.
Treasury Weighs Investing In Banks
Washington Post (10/10/08) P. D1; Cho, David; Appelbaum, Binyamin; Montgomery, Lori
Hoping to boost confidence in the country's troubled financial system, the White House reportedly is putting the finishing touches on a plan that would allow the U.S. government to inject cash into banks in return for ownership interests. Under the $700 billion economic stabilization package that was passed by Capitol Hill lawmakers and signed into law by President Bush a week ago, senior Treasury officials believe they have the authority to take such stakes in banks. However, the Bush administration still has to work out a number of key issues--including when the plan would take effect and how many banks should be included. The Treasury Department will likely announce the plan by the end of October, if not sooner.
Hoping to boost confidence in the country's troubled financial system, the White House reportedly is putting the finishing touches on a plan that would allow the U.S. government to inject cash into banks in return for ownership interests. Under the $700 billion economic stabilization package that was passed by Capitol Hill lawmakers and signed into law by President Bush a week ago, senior Treasury officials believe they have the authority to take such stakes in banks. However, the Bush administration still has to work out a number of key issues--including when the plan would take effect and how many banks should be included. The Treasury Department will likely announce the plan by the end of October, if not sooner.
Candidates Step Up Battle Over Mortgage Crisis, Ailing Economy
Boston Globe (10/10/08); Rhee, Foon
Presidential candidate Sen. Barack Obama, D-Ill., directly criticized the mortgage plan of Sen. John McCain, R-Ariz., for the first time while campaigning on Oct. 9, saying his opponent's proposal would punish taxpayers and not the lenders that helped create the mortgage crisis. Obama said he prefers to crack down on predatory lenders, keep the government from paying more than it needs for mortgages and allow bankruptcy judges to rework loan terms. McCain wants to spend $300 billion to buy mortgages from struggling homeowners and refinance them into more affordable loans. The plan has attracted criticism from other corners because it would not require the financial institutions holding the original mortgages to cover some of the losses.
Presidential candidate Sen. Barack Obama, D-Ill., directly criticized the mortgage plan of Sen. John McCain, R-Ariz., for the first time while campaigning on Oct. 9, saying his opponent's proposal would punish taxpayers and not the lenders that helped create the mortgage crisis. Obama said he prefers to crack down on predatory lenders, keep the government from paying more than it needs for mortgages and allow bankruptcy judges to rework loan terms. McCain wants to spend $300 billion to buy mortgages from struggling homeowners and refinance them into more affordable loans. The plan has attracted criticism from other corners because it would not require the financial institutions holding the original mortgages to cover some of the losses.
Abroad, CMBS Performance Mixed
MBA (10/14/2008 ) Sorohan, Mike
The commercial mortgage-backed securities market might be stagnant in the U.S., but in Europe, markets show a broader mix in performance.
Moody’s Investors Service, New York, reports continental European office occupational markets that support CMBS have on average performed better than the U.K. markets in the past 12 months. The Moody’s Red-Yellow-Green Report found four of 17 continental European markets showed improved scores and three remained unchanged compared with year-end 2007, while six out of seven U.K. markets deteriorated.
The semi-annual update of Moody's report includes 24 major European office markets, including London, Paris, Barcelona and Munich.
"The apparent split between the U.K. and Europe is most likely a result of the greater exposure of the office occupiers in the U.K. to the credit-crunch, which has been most pronounced in the London City and London Docklands markets," said Jeroen Heijdeman, a Moody's analyst and co-author of the report.
Between mid-year 2007 and mid-year 2008, the weighted-average composite score for the European office markets covered by Moody's analysis decreased to 56 from 63, putting them solidly in the “yellow” market.
Moody’s said the downward movement in the composite score resulted mainly from negative reclassifications of six out of the 24 markets analyzed. The number of red markets increased to six from two over the 12-month period. In total, Moody’s reported six red markets, 10 yellow markets and eight green markets. London Docklands followed by London City showed the most significant market deterioration.
"It is noteworthy that all three London office sub-markets showed further signs of deterioration for the third consecutive time," said Oliver Moldenhauer, a Moody's assistant vice president and co-author of the report. "This is mainly due to a decline in projected take-up levels.”
The most improved occupational market conditions over the 12-month period was the Paris central business district, which at 83 has the highest score of any market.
The report highlights that a “continuation of the recent turmoil in the capital markets and the expected knock-on effects on the real economy will most likely result in further deterioration of the office occupational markets. Such events have so far only been included in the data set to a limited extend.”
The full report can be found on www.moodys.com.
The commercial mortgage-backed securities market might be stagnant in the U.S., but in Europe, markets show a broader mix in performance.
Moody’s Investors Service, New York, reports continental European office occupational markets that support CMBS have on average performed better than the U.K. markets in the past 12 months. The Moody’s Red-Yellow-Green Report found four of 17 continental European markets showed improved scores and three remained unchanged compared with year-end 2007, while six out of seven U.K. markets deteriorated.
The semi-annual update of Moody's report includes 24 major European office markets, including London, Paris, Barcelona and Munich.
"The apparent split between the U.K. and Europe is most likely a result of the greater exposure of the office occupiers in the U.K. to the credit-crunch, which has been most pronounced in the London City and London Docklands markets," said Jeroen Heijdeman, a Moody's analyst and co-author of the report.
Between mid-year 2007 and mid-year 2008, the weighted-average composite score for the European office markets covered by Moody's analysis decreased to 56 from 63, putting them solidly in the “yellow” market.
Moody’s said the downward movement in the composite score resulted mainly from negative reclassifications of six out of the 24 markets analyzed. The number of red markets increased to six from two over the 12-month period. In total, Moody’s reported six red markets, 10 yellow markets and eight green markets. London Docklands followed by London City showed the most significant market deterioration.
"It is noteworthy that all three London office sub-markets showed further signs of deterioration for the third consecutive time," said Oliver Moldenhauer, a Moody's assistant vice president and co-author of the report. "This is mainly due to a decline in projected take-up levels.”
The most improved occupational market conditions over the 12-month period was the Paris central business district, which at 83 has the highest score of any market.
The report highlights that a “continuation of the recent turmoil in the capital markets and the expected knock-on effects on the real economy will most likely result in further deterioration of the office occupational markets. Such events have so far only been included in the data set to a limited extend.”
The full report can be found on www.moodys.com.
Residential Briefs
MBA (10/14/2008 ) Palaparty, Vijay
PriceMyLoan Integrates Freddie Mac’s Loan Prospector
PriceMyLoan, Costa Mesa, Calif., released technology that incorporates Freddie Mac's Loan Prospector automated underwriting system. The integration allows originators to obtain decisions from LP from within the PML system.
PML is an automated eligibility and pricing tool that is used by mortgage lenders to provide loan decisions at point of sale. The LP integration provides a method for originators to submit credit report and loan data directly to Loan Prospector system from within PML. LP responses are brought back into PML and are used to generate product and pricing decisions for specific investor loan products.
Home America Mortgage Selects Advantage Systems
Home America Mortgage, Lawrenceville, Ga., a residential mortgage lender that offers financing to consumers throughout the Southeast and in Colorado, selected Accounting for Mortgage Bankers from Advantage Systems, Irvine, Calif.
AMB is an accounting system that was designed for mortgage bankers to provide loan-level detail of accounting transactions. The system provides general ledger, accounts payable and report writing capabilities. A web-based reporting module is also available for branch managers along with a module to calculate commissions, bonuses and overrides.
Salient Business Solutions Establishes U.S. Division
Salient Business Solutions, Gurgaon, India, a provider of business process outsourcing services, created a U.S.–based division, Salient Business Solutions USA Inc., New York. The U.S. division enables Salient to establish a U.S. presence and provide customers with a domestic origination and delivery team, as well as local accountability.
Salient provides BPO services to various vertical markets, including mortgage, healthcare, telecom expense management and financial services. On the mortgage side, Salient provides clients with loan processing services from loan opening to post-close review, as well as processing in reverse and FHA lending. In addition to its vertical market offerings, Salient offers horizontally focused services, including revenue cycle management, data management, finance and accounting, human resources services and information technology services.
Wolters Kluwer Releases Version 2.0 of ComplianceOne, Partners with DPS
Wolters Kluwer Financial Services, Minneapolis, released version 2.0 of ComplianceOne, a technology platform that gives financial institutions ability to manage regulatory and operational risk. Updates to ComplianceOne include integration with Wiz Sentri: RiskID and Secure Document Exchange.
Wolters Kluwer reached agreement with Document Processing Systems Inc., Novi, Mich., to transition DPS’ customers onto its Document Services Platform. DPS provides mortgage lenders and brokers with document preparation services through the company’s DIRECT-DOCS online technology platform. The company announced that it would exit the document preparation services business.
LenderLive Network, Mavent Expand Compliance Validation Services
LenderLive Network Inc., Denver, a business process outsourcing and technology provider for the financial industry, and Mavent Inc., Irvine, Calif., an automated regulatory compliance provider, expanded compliance validation services to all LenderLive clients. Integrating Mavent’s automated compliance into LenderLive’s point-of-sale system and back-office processes is designed to provide LenderLive’s clients with cost efficiencies and risk mitigation.
ValuFinders Survey Finds Varying Appraiser Ordering Processes
More appraisers use technology to fulfill appraisal orders according to a survey conducted by ValuFinders Inc., Culver City, Calif., a provider of valuation services to national lenders, brokers and government agencies. The survey also found limited use of appraisal management companies.
Fifty-eight percent of appraisers said they use e-mail as a primary delivery method of obtaining and delivering appraisal orders and 18 percent use an online service. Forty percent responded that only one-fourth of their clients employ an online ordering system while 32 percent said between one-half and three-fourths of their clients use them;
Fifty-six percent of appraisers surveyed use AMCs for one-fourth or less of their business and 52 percent do not foresee that percentage increasing in the future. Eighty-two percent said they would consider being part of an online network where they could receive appraisal orders.
PriceMyLoan Integrates Freddie Mac’s Loan Prospector
PriceMyLoan, Costa Mesa, Calif., released technology that incorporates Freddie Mac's Loan Prospector automated underwriting system. The integration allows originators to obtain decisions from LP from within the PML system.
PML is an automated eligibility and pricing tool that is used by mortgage lenders to provide loan decisions at point of sale. The LP integration provides a method for originators to submit credit report and loan data directly to Loan Prospector system from within PML. LP responses are brought back into PML and are used to generate product and pricing decisions for specific investor loan products.
Home America Mortgage Selects Advantage Systems
Home America Mortgage, Lawrenceville, Ga., a residential mortgage lender that offers financing to consumers throughout the Southeast and in Colorado, selected Accounting for Mortgage Bankers from Advantage Systems, Irvine, Calif.
AMB is an accounting system that was designed for mortgage bankers to provide loan-level detail of accounting transactions. The system provides general ledger, accounts payable and report writing capabilities. A web-based reporting module is also available for branch managers along with a module to calculate commissions, bonuses and overrides.
Salient Business Solutions Establishes U.S. Division
Salient Business Solutions, Gurgaon, India, a provider of business process outsourcing services, created a U.S.–based division, Salient Business Solutions USA Inc., New York. The U.S. division enables Salient to establish a U.S. presence and provide customers with a domestic origination and delivery team, as well as local accountability.
Salient provides BPO services to various vertical markets, including mortgage, healthcare, telecom expense management and financial services. On the mortgage side, Salient provides clients with loan processing services from loan opening to post-close review, as well as processing in reverse and FHA lending. In addition to its vertical market offerings, Salient offers horizontally focused services, including revenue cycle management, data management, finance and accounting, human resources services and information technology services.
Wolters Kluwer Releases Version 2.0 of ComplianceOne, Partners with DPS
Wolters Kluwer Financial Services, Minneapolis, released version 2.0 of ComplianceOne, a technology platform that gives financial institutions ability to manage regulatory and operational risk. Updates to ComplianceOne include integration with Wiz Sentri: RiskID and Secure Document Exchange.
Wolters Kluwer reached agreement with Document Processing Systems Inc., Novi, Mich., to transition DPS’ customers onto its Document Services Platform. DPS provides mortgage lenders and brokers with document preparation services through the company’s DIRECT-DOCS online technology platform. The company announced that it would exit the document preparation services business.
LenderLive Network, Mavent Expand Compliance Validation Services
LenderLive Network Inc., Denver, a business process outsourcing and technology provider for the financial industry, and Mavent Inc., Irvine, Calif., an automated regulatory compliance provider, expanded compliance validation services to all LenderLive clients. Integrating Mavent’s automated compliance into LenderLive’s point-of-sale system and back-office processes is designed to provide LenderLive’s clients with cost efficiencies and risk mitigation.
ValuFinders Survey Finds Varying Appraiser Ordering Processes
More appraisers use technology to fulfill appraisal orders according to a survey conducted by ValuFinders Inc., Culver City, Calif., a provider of valuation services to national lenders, brokers and government agencies. The survey also found limited use of appraisal management companies.
Fifty-eight percent of appraisers said they use e-mail as a primary delivery method of obtaining and delivering appraisal orders and 18 percent use an online service. Forty percent responded that only one-fourth of their clients employ an online ordering system while 32 percent said between one-half and three-fourths of their clients use them;
Fifty-six percent of appraisers surveyed use AMCs for one-fourth or less of their business and 52 percent do not foresee that percentage increasing in the future. Eighty-two percent said they would consider being part of an online network where they could receive appraisal orders.
Financial Fraud Incidents Average $463,100
MBA (10/14/2008 ) Palaparty, Vijay
Losses from financial fraud have cost businesses an average of $463,100 so far this year, according to the 2008 Computer Security Institute Crime & Security Survey.
Average total losses stemming from various types of computer security incidents, however, dropped to $288,618 per business in 2008 after rising to $345,505 last year—though still higher from $167,713 reported in 2006.
“There seems little question that several sweeping changes in the overall state of IT practices—coupled with equally broad changes in the habits of the criminal world—are making significant, hard-hitting attacks easier and more lucrative for their perpetrators,” said Robert Richardson, director of CSI, San Francisco. “On most days at most organizations, attacks are less imaginative than what’s currently theoretically possible—which, for the moment, is good news.”
The survey said dealing with loss of either proprietary information or loss of customer and employee confidential data averaged $241,000 and $268,000, respectively.
“Most attacks respondents see are relatively standard attacks like viruses and theft of mobile devices like laptop computers.” Richardson said. “Although the loss of a laptop computer may be quite expensive if it contains unencrypted confidential data, many laptops are lost that don’t cost more than replacement and associated administrative costs. Virus incidents cost organizations that reported financial loss data an average of only $40,141; hardly a threat to the viability of most organizations.”
Virus incidents, the most popular source of crime, occurred at 49 percent of respondents’ organizations, the survey said. Insider abuse of networks was second-most frequent, reported by 44 percent of organizations, followed by theft of laptops and other mobile devices, reported by 42 percent of organizations. Unauthorized access accounted for 29 percent.
The 2008 Verizon Business Data Breach Investigations Report reported financial services institutions face greater data breach risk from insiders than external or partner sources as well. The report also cited deceit and misuse as the most common forms of attack.
“Enterprises should assess their security strategies knowing that challenges differ significantly and that a one-size-fits-all approach is rarely effective,” said Peter Tippett, vice president of research and intelligence at Verizon Business Security Solutions, Basking Ridge, N.J., an authors of the report. “Good security does not lend itself to a cookie-cutter approach. Understanding what happens when a data breach occurs is critical to prevention.”
End-users were responsible for 53 percent of breaches in institutions while IT administrators accounted for 31 percent, the report said. Eight percent of breaches were instigated by agents or spies and an additional 8 percent were from anonymous sources.
In the CSI survey, 27 percent of respondents said they had detected at least one targeted attack—a malware attack—aimed exclusively at their organizations or at organizations with a small subset of the general business population.
Sixty-eight percent of organizations reported that they had, and 18 percent said they were developing, formal information security policy. Only 1 percent said they had no security policy.
By November 1, U.S. financial institutions and other creditors must be compliant with the Red Flag Rules of the U.S. Fair and Accurate Credit Transactions Act of 2003, a consumer information security compliance measure. The rules require lenders to develop and implement a written Identity Theft Prevention Program to prevent, detect and mitigate ID theft.
“While there are handfuls of spectacular crimes in a year, there are millions of [crimes on] enterprise networks that do not make headlines,” Richardson said. “Furthermore, we must draw a distinction between developing threats and actual successful attacks. There is cause for great concern regarding the sorts of attacks that become possible as we move to a more service-oriented web, but these are not threats that have seen widespread use yet.”
Losses from financial fraud have cost businesses an average of $463,100 so far this year, according to the 2008 Computer Security Institute Crime & Security Survey.
Average total losses stemming from various types of computer security incidents, however, dropped to $288,618 per business in 2008 after rising to $345,505 last year—though still higher from $167,713 reported in 2006.
“There seems little question that several sweeping changes in the overall state of IT practices—coupled with equally broad changes in the habits of the criminal world—are making significant, hard-hitting attacks easier and more lucrative for their perpetrators,” said Robert Richardson, director of CSI, San Francisco. “On most days at most organizations, attacks are less imaginative than what’s currently theoretically possible—which, for the moment, is good news.”
The survey said dealing with loss of either proprietary information or loss of customer and employee confidential data averaged $241,000 and $268,000, respectively.
“Most attacks respondents see are relatively standard attacks like viruses and theft of mobile devices like laptop computers.” Richardson said. “Although the loss of a laptop computer may be quite expensive if it contains unencrypted confidential data, many laptops are lost that don’t cost more than replacement and associated administrative costs. Virus incidents cost organizations that reported financial loss data an average of only $40,141; hardly a threat to the viability of most organizations.”
Virus incidents, the most popular source of crime, occurred at 49 percent of respondents’ organizations, the survey said. Insider abuse of networks was second-most frequent, reported by 44 percent of organizations, followed by theft of laptops and other mobile devices, reported by 42 percent of organizations. Unauthorized access accounted for 29 percent.
The 2008 Verizon Business Data Breach Investigations Report reported financial services institutions face greater data breach risk from insiders than external or partner sources as well. The report also cited deceit and misuse as the most common forms of attack.
“Enterprises should assess their security strategies knowing that challenges differ significantly and that a one-size-fits-all approach is rarely effective,” said Peter Tippett, vice president of research and intelligence at Verizon Business Security Solutions, Basking Ridge, N.J., an authors of the report. “Good security does not lend itself to a cookie-cutter approach. Understanding what happens when a data breach occurs is critical to prevention.”
End-users were responsible for 53 percent of breaches in institutions while IT administrators accounted for 31 percent, the report said. Eight percent of breaches were instigated by agents or spies and an additional 8 percent were from anonymous sources.
In the CSI survey, 27 percent of respondents said they had detected at least one targeted attack—a malware attack—aimed exclusively at their organizations or at organizations with a small subset of the general business population.
Sixty-eight percent of organizations reported that they had, and 18 percent said they were developing, formal information security policy. Only 1 percent said they had no security policy.
By November 1, U.S. financial institutions and other creditors must be compliant with the Red Flag Rules of the U.S. Fair and Accurate Credit Transactions Act of 2003, a consumer information security compliance measure. The rules require lenders to develop and implement a written Identity Theft Prevention Program to prevent, detect and mitigate ID theft.
“While there are handfuls of spectacular crimes in a year, there are millions of [crimes on] enterprise networks that do not make headlines,” Richardson said. “Furthermore, we must draw a distinction between developing threats and actual successful attacks. There is cause for great concern regarding the sorts of attacks that become possible as we move to a more service-oriented web, but these are not threats that have seen widespread use yet.”
Fed Clears Wells-Wachovia Deal
Investor's Business Daily (10/14/08) P. A2
The Federal Reserve has given its approval to Wells Fargo's acquisition of Wachovia for $11.7 billion, which Wells Fargo hopes to finalize by the end of the year. Wachovia shareholders need to give the deal the green light before it can proceed. Meanwhile, Citigroup say it has no plans to challenge the acquisition in court. However, the bank will seek damages totaling $60 billion for breach of contract, having bid $2.1 billion to purchase Wachovia's banking operations prior to the deal with Wells Fargo.
The Federal Reserve has given its approval to Wells Fargo's acquisition of Wachovia for $11.7 billion, which Wells Fargo hopes to finalize by the end of the year. Wachovia shareholders need to give the deal the green light before it can proceed. Meanwhile, Citigroup say it has no plans to challenge the acquisition in court. However, the bank will seek damages totaling $60 billion for breach of contract, having bid $2.1 billion to purchase Wachovia's banking operations prior to the deal with Wells Fargo.
Spanish Bank to Buy Rest of Sovereign
Washington Post (10/14/08) P. D4; Fredrix, Emily
Banco Santander will acquire the rest of Sovereign Bancorp of Philadelphia for $1.9 billion. The Spanish bank already has a 25-percent interest in the thrift. Mortgage delinquencies continue to rise at Sovereign, whose stock has lost nearly two-thirds of its value so far this year. Sovereign also reports that it lost $982 million in the period ended Sept. 30, compared with a profit of $58.2 million during the same period a year ago.
Banco Santander will acquire the rest of Sovereign Bancorp of Philadelphia for $1.9 billion. The Spanish bank already has a 25-percent interest in the thrift. Mortgage delinquencies continue to rise at Sovereign, whose stock has lost nearly two-thirds of its value so far this year. Sovereign also reports that it lost $982 million in the period ended Sept. 30, compared with a profit of $58.2 million during the same period a year ago.
Mortgage Lenders Slam Trust-Fund Plan
Courier-Post (N.J.) (10/14/08); Ryan, Lisa G.
New Jersey's full Assembly could vote later in the month on a bill that would create a $40 million trust fund to help keep borrowers with subprime mortgages in their homes. The measure would impose a $2,000 fee on lenders that foreclose on struggling subprime borrowers, provide emergency assistance loans to homeowners, give homeowners six months to renegotiate their loans and also use some of the money to purchase and convert foreclosed homes into affordable housing. "The process being suggested is too costly and too onerous, and it could stop businesses from lending in New Jersey," warns E. Robert Levy, executive director of the Mortgage Bankers Association of New Jersey. The state had more than 134,000 subprime mortgages as of June 30, and 32.5 percent were in foreclosure or close to it, according to the Mortgage Bankers Association National Delinquency Survey.
New Jersey's full Assembly could vote later in the month on a bill that would create a $40 million trust fund to help keep borrowers with subprime mortgages in their homes. The measure would impose a $2,000 fee on lenders that foreclose on struggling subprime borrowers, provide emergency assistance loans to homeowners, give homeowners six months to renegotiate their loans and also use some of the money to purchase and convert foreclosed homes into affordable housing. "The process being suggested is too costly and too onerous, and it could stop businesses from lending in New Jersey," warns E. Robert Levy, executive director of the Mortgage Bankers Association of New Jersey. The state had more than 134,000 subprime mortgages as of June 30, and 32.5 percent were in foreclosure or close to it, according to the Mortgage Bankers Association National Delinquency Survey.
Radian Offers Homeowner Help
Philadelphia Inquirer (10/14/08); Dickey, Rhonda
The Servicer Advocacy Group has been created by Radian Guaranty Inc. to help mortgage servicers in developing loss mitigation plans. The Philadelphia-based mortgage insurer also will assist servicers with loan workouts to keep struggling homeowners out of foreclosure.
The Servicer Advocacy Group has been created by Radian Guaranty Inc. to help mortgage servicers in developing loss mitigation plans. The Philadelphia-based mortgage insurer also will assist servicers with loan workouts to keep struggling homeowners out of foreclosure.
Worries Grow Over Commercial Real Estate
Investor's Business Daily (10/14/08) P. A1; Alva, Marilyn
Aggressive commercial property buyers who closed on highly leveraged deals at the top of the real estate market are having a tough time refinancing or selling now that debt payments have come due. At the same time, more and more tenants are either scaling back or vacating space altogether, property values are on the decline in many markets and refinancing remains a challenge now that spreads for bonds backed by commercial real estate are wider than ever. Manus Clancy, managing director of a New York-based firm that tracks commercial property markets, blames "pro-forma" underwriting practices for many of the current problems, adding, "Instead of lending on leases in place, people would lend on future rollover and future repositioning, and that has led to execution risks." Real Capital Analytics reports that sales volume in commercial real estate is down more than 70 percent from last year, as a growing number of properties changing hands are either distressed or in default.
Aggressive commercial property buyers who closed on highly leveraged deals at the top of the real estate market are having a tough time refinancing or selling now that debt payments have come due. At the same time, more and more tenants are either scaling back or vacating space altogether, property values are on the decline in many markets and refinancing remains a challenge now that spreads for bonds backed by commercial real estate are wider than ever. Manus Clancy, managing director of a New York-based firm that tracks commercial property markets, blames "pro-forma" underwriting practices for many of the current problems, adding, "Instead of lending on leases in place, people would lend on future rollover and future repositioning, and that has led to execution risks." Real Capital Analytics reports that sales volume in commercial real estate is down more than 70 percent from last year, as a growing number of properties changing hands are either distressed or in default.
Obama Proposes New Recovery Package
Los Angeles Times (10/14/08); Mehta, Seema; Hook, Janet
Democratic presidential nominee Barack Obama has called on Capitol Hill lawmakers and the White House to approve measures to put off home foreclosures, help businesses create jobs, allow families to access retirement savings and stabilize state and local government budgets. One of the central parts of Obama's new package is the fact that households facing foreclosure would get a 90-day reprieve if they were working with finance firms taking part in the $700 billion rescue package Congress passed in September and if they could prove they were making a good-faith effort to pay their mortgages each month. Some of Obama's proposals, such as the foreclosure moratorium, could be put into effect under existing law. Critics charge that the plan would have little impact on the underlying sources of instability in the world economy.
Democratic presidential nominee Barack Obama has called on Capitol Hill lawmakers and the White House to approve measures to put off home foreclosures, help businesses create jobs, allow families to access retirement savings and stabilize state and local government budgets. One of the central parts of Obama's new package is the fact that households facing foreclosure would get a 90-day reprieve if they were working with finance firms taking part in the $700 billion rescue package Congress passed in September and if they could prove they were making a good-faith effort to pay their mortgages each month. Some of Obama's proposals, such as the foreclosure moratorium, could be put into effect under existing law. Critics charge that the plan would have little impact on the underlying sources of instability in the world economy.
U.S. to Pump $250 Billion Directly Into Banks
Los Angeles Times (10/14/08); Reynolds, Maura
In response to increasing volatility in stock markets worldwide, the Bush administration will announce plans on Oct. 14 to pump $250 billion directly into nine major banks--including Citigroup Inc., Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp., Goldman Sachs Group Inc. and Morgan Stanley. Additionally, the plan will involve allowing the Federal Deposit Insurance Corp. to insure senior preferred bank debt, with both aspects of the plan aiming to recapitalize the banks and spur lending among them. The government would be given preferred nonvoting shares of the banks' stock, which ultimately would be sold at a profit. While the government still expects to purchase billions in troubled mortgage-backed securities, experts say that plan could take months to commence and likely will be pushed aside as the government focuses on the direct capital infusion.
In response to increasing volatility in stock markets worldwide, the Bush administration will announce plans on Oct. 14 to pump $250 billion directly into nine major banks--including Citigroup Inc., Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp., Goldman Sachs Group Inc. and Morgan Stanley. Additionally, the plan will involve allowing the Federal Deposit Insurance Corp. to insure senior preferred bank debt, with both aspects of the plan aiming to recapitalize the banks and spur lending among them. The government would be given preferred nonvoting shares of the banks' stock, which ultimately would be sold at a profit. While the government still expects to purchase billions in troubled mortgage-backed securities, experts say that plan could take months to commence and likely will be pushed aside as the government focuses on the direct capital infusion.
FDIC Expands Loan Servicer Coverage
American Banker (10/14/08) P. 3; Flitter, Emily
In response to concerns that it would reduce liquidity at banks, Fannie Mae has scrapped a rule change that would have forced troubled institutions to immediately turn in principal and interest payments to it instead of holding the funds in mortgage servicing accounts. However, in a move that has received support from the mortgage industry, the Federal Deposit Insurance Corp. will insure tax and insurance funds from mortgages on a pass-through basis, shifting the money to accounts in borrowers' names and insuring them up to $250,000. The coverage limit will return to $100,000 on Jan. 1, 2010.
In response to concerns that it would reduce liquidity at banks, Fannie Mae has scrapped a rule change that would have forced troubled institutions to immediately turn in principal and interest payments to it instead of holding the funds in mortgage servicing accounts. However, in a move that has received support from the mortgage industry, the Federal Deposit Insurance Corp. will insure tax and insurance funds from mortgages on a pass-through basis, shifting the money to accounts in borrowers' names and insuring them up to $250,000. The coverage limit will return to $100,000 on Jan. 1, 2010.
144 Mitchell St, Millsboro, DE 19966
Address:
MILLSBORO, DE 19966
MLS ID# 564109
$209,900
3 Bed, 2 Bath
1,475 Sq. Ft.
0.14 Acres
Single Family Property, County: SUSSEX, Approximately 0.14 acre(s), Year Built: 2003, Garage, Fireplace(s), Laundry room
To access this page directly, use http://www.realtor.com/realestate/millsboro-de-19966-1103931996/
Property Features
Single Family Property
Status: Active
County: SUSSEX
Year Built: 2003
3 total bedroom(s)
2 total bath(s)
2 total full bath(s)
Approximately 1475 sq. ft.
Style: Ranch
Laundry room
Fireplace(s)
Garage
Interior features: Cable TV avail., Carpet, Disposal, Eat-in kitchen, Fireplace(s), Laundry rm/area, Microwave, Range and oven, Vinyl flrs, Washer/dryer hookups
Exterior features: Clear lot, Porch, Public sewer srvc
Approximate lot is 62X100
Approximately 0.14 acre(s)
Lot size is less than 1/2 acre
School District: Indian River
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Presented By
MASSENGILL RON
Office: (302) 644-6880
Office: (302) 644-7963
Mobile: (302) 233-3105
Brokered By
BEACH TO BAY REAL ESTATE CENTER
Visit Our New Homes Showroom Covering All of Sussex County
broker: (302) 644-6880
Fax: (302) 644-6881
Toll Free: (866) 639-4287
MILLSBORO, DE 19966
MLS ID# 564109
$209,900
3 Bed, 2 Bath
1,475 Sq. Ft.
0.14 Acres
Single Family Property, County: SUSSEX, Approximately 0.14 acre(s), Year Built: 2003, Garage, Fireplace(s), Laundry room
To access this page directly, use http://www.realtor.com/realestate/millsboro-de-19966-1103931996/
Property Features
Single Family Property
Status: Active
County: SUSSEX
Year Built: 2003
3 total bedroom(s)
2 total bath(s)
2 total full bath(s)
Approximately 1475 sq. ft.
Style: Ranch
Laundry room
Fireplace(s)
Garage
Interior features: Cable TV avail., Carpet, Disposal, Eat-in kitchen, Fireplace(s), Laundry rm/area, Microwave, Range and oven, Vinyl flrs, Washer/dryer hookups
Exterior features: Clear lot, Porch, Public sewer srvc
Approximate lot is 62X100
Approximately 0.14 acre(s)
Lot size is less than 1/2 acre
School District: Indian River
Up LeftRightDown RecenterStreetCityStateCountryZoomInZoomOut2.5 miles2.5 miles© 2008 Microsoft Corporation © 2008 NAVTEQ © AND © 2008 Microsoft Corporation © 2008 NAVTEQ © AND
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Formatted for easy printing so you can take this with you. Remember to say you found it on REALTOR.com®.
This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. You must verify the information and bear all risk for inaccuracies.
Presented By
MASSENGILL RON
Office: (302) 644-6880
Office: (302) 644-7963
Mobile: (302) 233-3105
Brokered By
BEACH TO BAY REAL ESTATE CENTER
Visit Our New Homes Showroom Covering All of Sussex County
broker: (302) 644-6880
Fax: (302) 644-6881
Toll Free: (866) 639-4287
Lot 33 Finch Lane, Paynters Mill, Milton, DE 19968
Address:
MILTON, DE 19966
MLS ID# 564116
$84,900
Land Property, Subdivision: PINTAIL POINTE, County: SUSSEX
To access this page directly, use http://www.realtor.com/realestate/milton-de-19966-1103946825/
Property Features
Land Property
Status: Active
County: SUSSEX
Subdivision: PINTAIL POINTE
Approximate lot is 135X185
Topography: Clear
School District: Cape Henlopen
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Presented By
! ANDREW STATON
Sold 40% in RBYCC last year - 302-841-2127
Office: (302) 644-3133
Mobile: (302) 841-2127
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broker: (302) 644-6880
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MILTON, DE 19966
MLS ID# 564116
$84,900
Land Property, Subdivision: PINTAIL POINTE, County: SUSSEX
To access this page directly, use http://www.realtor.com/realestate/milton-de-19966-1103946825/
Property Features
Land Property
Status: Active
County: SUSSEX
Subdivision: PINTAIL POINTE
Approximate lot is 135X185
Topography: Clear
School District: Cape Henlopen
Formatted for easy printing so you can take this with you. Remember to say you found it on REALTOR.com®.
This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. You must verify the information and bear all risk for inaccuracies.
Presented By
! ANDREW STATON
Sold 40% in RBYCC last year - 302-841-2127
Office: (302) 644-3133
Mobile: (302) 841-2127
Brokered By
BEACH TO BAY REAL ESTATE CENTER
Visit Our New Homes Showroom Covering All of Sussex County
broker: (302) 644-6880
Fax: (302) 644-6881
Toll Free: (866) 639-4287
Friday, October 10, 2008
Home buyers balk amid Wall Street meltdown
As the financial crisis intensifies, the few home buyers that are out there are reconsidering a purchase.
By Les Christie, CNNMoney.com staff writer
October 10, 2008: 9:00 AM ET
NEW YORK (CNNMoney.com) -- The Dow has lost over 2,200 points in the last seven trading sessions - and that's giving the few home buyers that are out there right now reason to reconsider.
The National Association of Home Builders (NAHB) for instance has seen its contract cancellations spike recently to as high as 30%, compared with an average rate of about 20%. During the housing boom, as few as 5% of sales were cancelled.
"The events of the past couple of weeks have people's heads spinning," said Steve Melman, NAHB's director of economic surveys.
The National Association of Realtors (NAR) estimates that there are about 25% fewer people shopping for homes than there normally would be at this time of year. Potential buyers are worried about their jobs, their declining investments and falling housing prices, which is keeping them on the sidelines, according to spokesman Walter Molony
"You have to have a lot of confidence to make this kind of big-ticket purchase in the current environment," said Molony.
Real estate agent Bob Rose was helping one couple look for an investment property in battered Contre Costa County, hoping to find a bargain that they could sell in a few years.
Then, on September 29 the Dow dove nearly 800 points and the couple decided not to buy. "They told me they had lost about a quarter of their retirement portfolio," said Rose, and that they could no longer afford it.
Even some buyers who are already in contract are managing to pull out of sales amidst all the economic turmoil.
Deal or no deal
Two weeks ago, one Washington state couple, Sharif Tai and Gaby Ghafari, went into contract on a new $450,000, three bed, three bath, house in central Seattle. Soon afterwards, the stock market began its steep descent.
"It wasn't that we lost money [in the market] or that we were worried about our jobs," said Tai, a software developer in his mid-20s, "but we thought we could get a better deal, so we decided to wait."
The couple backed out of the deal by citing problems with the inspection, but they haven't given up on making a purchase.
"We're keeping our eyes out," said Tai. "We want to see how things shake out. If we see a great deal, we'll take it."
Other buyers are demanding sweeteners before they close a deal during such a rocky time. San Francisco agent Jim Holt had clients go into contract on September 29, on a $750,000 home in town. But by the end of the week the Dow had lost over 800 points and the buyer demanded a whopping $50,000 price cut.
"Buyers are seeing the [market implosion] as an opportunity to get concessions," said Holt. In the end, the seller only agreed to reduce the price by $5,000 - but that's better than nothing.
Other house hunters are managing to wring more concessions out of sellers even on top of existing discounts.
Rich Machado, an agent with the Smart Homebuyer Team in New Bedford Westport Mass., had already helped one buyer get a seller to take $9,000 off the price of a house listed for $229,000, and throw in $6,000 in closing costs, $1,800 for an electric upgrade and $400 for a home service contract.
The deal went into contract two weeks ago, but despite that impressive array of incentives, "the buyer is balking," said Machado. "He's asking for another $10,000 off the price."
The seller hasn't caved in yet - but with demand drying up, he may be forced to come around.
As the losses mount on Wall Street - the Dow lost 678 points on Thursday alone - things will undoubtedly become even more difficult for sellers.
"In the midst of such chaos, everyone is just shaking their heads," said NAHB's Melman."
By Les Christie, CNNMoney.com staff writer
October 10, 2008: 9:00 AM ET
NEW YORK (CNNMoney.com) -- The Dow has lost over 2,200 points in the last seven trading sessions - and that's giving the few home buyers that are out there right now reason to reconsider.
The National Association of Home Builders (NAHB) for instance has seen its contract cancellations spike recently to as high as 30%, compared with an average rate of about 20%. During the housing boom, as few as 5% of sales were cancelled.
"The events of the past couple of weeks have people's heads spinning," said Steve Melman, NAHB's director of economic surveys.
The National Association of Realtors (NAR) estimates that there are about 25% fewer people shopping for homes than there normally would be at this time of year. Potential buyers are worried about their jobs, their declining investments and falling housing prices, which is keeping them on the sidelines, according to spokesman Walter Molony
"You have to have a lot of confidence to make this kind of big-ticket purchase in the current environment," said Molony.
Real estate agent Bob Rose was helping one couple look for an investment property in battered Contre Costa County, hoping to find a bargain that they could sell in a few years.
Then, on September 29 the Dow dove nearly 800 points and the couple decided not to buy. "They told me they had lost about a quarter of their retirement portfolio," said Rose, and that they could no longer afford it.
Even some buyers who are already in contract are managing to pull out of sales amidst all the economic turmoil.
Deal or no deal
Two weeks ago, one Washington state couple, Sharif Tai and Gaby Ghafari, went into contract on a new $450,000, three bed, three bath, house in central Seattle. Soon afterwards, the stock market began its steep descent.
"It wasn't that we lost money [in the market] or that we were worried about our jobs," said Tai, a software developer in his mid-20s, "but we thought we could get a better deal, so we decided to wait."
The couple backed out of the deal by citing problems with the inspection, but they haven't given up on making a purchase.
"We're keeping our eyes out," said Tai. "We want to see how things shake out. If we see a great deal, we'll take it."
Other buyers are demanding sweeteners before they close a deal during such a rocky time. San Francisco agent Jim Holt had clients go into contract on September 29, on a $750,000 home in town. But by the end of the week the Dow had lost over 800 points and the buyer demanded a whopping $50,000 price cut.
"Buyers are seeing the [market implosion] as an opportunity to get concessions," said Holt. In the end, the seller only agreed to reduce the price by $5,000 - but that's better than nothing.
Other house hunters are managing to wring more concessions out of sellers even on top of existing discounts.
Rich Machado, an agent with the Smart Homebuyer Team in New Bedford Westport Mass., had already helped one buyer get a seller to take $9,000 off the price of a house listed for $229,000, and throw in $6,000 in closing costs, $1,800 for an electric upgrade and $400 for a home service contract.
The deal went into contract two weeks ago, but despite that impressive array of incentives, "the buyer is balking," said Machado. "He's asking for another $10,000 off the price."
The seller hasn't caved in yet - but with demand drying up, he may be forced to come around.
As the losses mount on Wall Street - the Dow lost 678 points on Thursday alone - things will undoubtedly become even more difficult for sellers.
"In the midst of such chaos, everyone is just shaking their heads," said NAHB's Melman."
BofA to slash mortgage payments
The foreclosure prevention program is the most aggressive initiative undertaken yet to help stem the housing crisis.
By Les Christie, CNNMoney.com staff writer
Last Updated: October 9, 2008: 5:28 PM ET
NEW YORK (CNNMoney.com) -- A plan announced today by Bank of America will be the most aggressive foreclosure prevention effort ever undertaken by a U.S. bank.
The program, scheduled to start in December, will be open to distressed borrowers who signed up with Countrywide Financial between January 1, 2004 and December 31, 2007. Countrywide was acquired by Bank of America (BAC, Fortune 500) in July.
It came in a legal settlement that the company entered into with the attorney general offices of 11 states, who had sued Countrywide over predatory lending practices, but the company stated that borrowers in all 50 states will be eligible to participate in the program.
"The Countrywide settlement is a watershed moment for loan modification programs," said Mark Pearce, North Carolina's Deputy Commissioner of Banks and a member of the State Foreclosure Prevention Working Group. "This is, by far, the best [program ever], even better than the FDIC program with IndyMac Bank."
As part of the initiative, Bank of America will cut monthly housing payments, including mortgage, property taxes and insurance, to no more than 34% of gross income. The move is expected to help keep as many as 400,000 troubled borrowers in their homes.
The program targets holders of subprime adjustable rate mortgage (ARMs), subprime fixed rate loans and option ARMs, but prime and Alt-A borrowers, who did not document their income, will be eligible as well.
No other foreclosure prevention effort has aimed to keep borrowers' house payments so low.
"[The program's] affordability is far better than any other program out there," said Rick Simon, spokesman for Bank of America.
By contrast, the much heralded foreclosure-prevention initiative announced in August by the FDIC for customers of IndyMac Bank, the subprime lender that the agency took over in July, said it will keep borrower payments to no more than 38% of gross income.
"This is the biggest mandatory modification of loans in U.S. history," said Jerry Brown, attorney general of California, the state with the largest number of borrowers who may benefit from the settlement. "Of course, we never saw such a big rip-off by any other company either."
According to Simon, the Countrywide program will proactively screen all of its borrowers for eligibility, and then contact them directly to offer loan workouts. No prepayment penalties or modification fees will apply. But the program can't help every Countrywide borrower. Some, because of illness, divorce, job loss and the like, simply won't be able to afford any reasonable mortgage payment.
Simon added that Bank of America is training personnel and putting systems into place that it hopes will enable staff to deal with a large number of mortgages all at once.
Cheaper than foreclosure
The new program comes with a price tag of $8.4 billion, but Simon says that it will cost much less than foreclosing on homes en masse.
As the credit crisis continues, more and more lenders and mortgage servicers are coming to grips with the fact that preventing a foreclosure is usually cheaper than going through the repossession process and then reselling the property in a declining market.
Depending on each borrower's circumstances, Bank of America might freeze or lower a loan's interest rate or even cut the principal loan balance. The bank said it will also participate in the government's Hope for Homeowners program, a provision of the housing rescue bill which went into effect Oct. 1 and makes FHA-insured loans available for delinquent borrowers.
The announcement of the program came on the heels of Friday's approval of the $700 billion Wall Street bailout, a measure which has been criticized for failing to address the foreclosure crisis head on.
The hope is that other lenders and servicers will follow Countrywide's lead.
"Now that we've gotten this with Countrywide, I would expect that we'll be talking with other major servicers to implement similar programs in the near future," said North Carolina Deputy Commissioner of Banks Mark Pearce, who worked on this settlement.
But he and other members of the the State Foreclosure Prevention Working Group have been pushing other lenders to do something this drastic for months, without much luck.
"So far, they have failed to show the leadership required to get it done," said Pearce. "I hope, having the market leader do this will spur the other servicers to greater action."
By Les Christie, CNNMoney.com staff writer
Last Updated: October 9, 2008: 5:28 PM ET
NEW YORK (CNNMoney.com) -- A plan announced today by Bank of America will be the most aggressive foreclosure prevention effort ever undertaken by a U.S. bank.
The program, scheduled to start in December, will be open to distressed borrowers who signed up with Countrywide Financial between January 1, 2004 and December 31, 2007. Countrywide was acquired by Bank of America (BAC, Fortune 500) in July.
It came in a legal settlement that the company entered into with the attorney general offices of 11 states, who had sued Countrywide over predatory lending practices, but the company stated that borrowers in all 50 states will be eligible to participate in the program.
"The Countrywide settlement is a watershed moment for loan modification programs," said Mark Pearce, North Carolina's Deputy Commissioner of Banks and a member of the State Foreclosure Prevention Working Group. "This is, by far, the best [program ever], even better than the FDIC program with IndyMac Bank."
As part of the initiative, Bank of America will cut monthly housing payments, including mortgage, property taxes and insurance, to no more than 34% of gross income. The move is expected to help keep as many as 400,000 troubled borrowers in their homes.
The program targets holders of subprime adjustable rate mortgage (ARMs), subprime fixed rate loans and option ARMs, but prime and Alt-A borrowers, who did not document their income, will be eligible as well.
No other foreclosure prevention effort has aimed to keep borrowers' house payments so low.
"[The program's] affordability is far better than any other program out there," said Rick Simon, spokesman for Bank of America.
By contrast, the much heralded foreclosure-prevention initiative announced in August by the FDIC for customers of IndyMac Bank, the subprime lender that the agency took over in July, said it will keep borrower payments to no more than 38% of gross income.
"This is the biggest mandatory modification of loans in U.S. history," said Jerry Brown, attorney general of California, the state with the largest number of borrowers who may benefit from the settlement. "Of course, we never saw such a big rip-off by any other company either."
According to Simon, the Countrywide program will proactively screen all of its borrowers for eligibility, and then contact them directly to offer loan workouts. No prepayment penalties or modification fees will apply. But the program can't help every Countrywide borrower. Some, because of illness, divorce, job loss and the like, simply won't be able to afford any reasonable mortgage payment.
Simon added that Bank of America is training personnel and putting systems into place that it hopes will enable staff to deal with a large number of mortgages all at once.
Cheaper than foreclosure
The new program comes with a price tag of $8.4 billion, but Simon says that it will cost much less than foreclosing on homes en masse.
As the credit crisis continues, more and more lenders and mortgage servicers are coming to grips with the fact that preventing a foreclosure is usually cheaper than going through the repossession process and then reselling the property in a declining market.
Depending on each borrower's circumstances, Bank of America might freeze or lower a loan's interest rate or even cut the principal loan balance. The bank said it will also participate in the government's Hope for Homeowners program, a provision of the housing rescue bill which went into effect Oct. 1 and makes FHA-insured loans available for delinquent borrowers.
The announcement of the program came on the heels of Friday's approval of the $700 billion Wall Street bailout, a measure which has been criticized for failing to address the foreclosure crisis head on.
The hope is that other lenders and servicers will follow Countrywide's lead.
"Now that we've gotten this with Countrywide, I would expect that we'll be talking with other major servicers to implement similar programs in the near future," said North Carolina Deputy Commissioner of Banks Mark Pearce, who worked on this settlement.
But he and other members of the the State Foreclosure Prevention Working Group have been pushing other lenders to do something this drastic for months, without much luck.
"So far, they have failed to show the leadership required to get it done," said Pearce. "I hope, having the market leader do this will spur the other servicers to greater action."
Mortgage rates slip to 5.94%
Rates on 30-year fixed mortgages were down for the first time in three weeks, as loan applications grew slightly.
By Lara Moscrip, CNNMoney.com contributing writer
October 9, 2008: 10:58 AM ET
NEW YORK (CNNMoney.com) -- Rates on 30-year mortgages fell from last week, while loan applications grew slightly in the face of turbulence in the banking and finance sectors.
Mortgage finance firm Freddie Mac (FRE, Fortune 500) reported Thursday that 30-year fixed-rate mortgages averaged 5.94% this week. That's down from 6.10% last week and well below 6.40%, where the rate stood a year ago.
"Longer-term mortgage rates fell for the first time in three weeks, roughly following bond market yields," said Frank Nothaft, Freddie Mac vice president and chief economist.
Meanwhile, mortgage applications for home purchases and refinancing grew slightly over the week ending Oct. 3, reversing a two-week decline, according to data from the Mortgage Bankers Association.
Rates on 15-year fixed-rate mortgages fell to 5.63%, from 5.78% last week. A year ago, that rate was 6.06%
The five-year adjustable-rate mortgage fell to 5.90%, down from last week at 6.00%. A year ago, the rate was 6.12%.
The rate on a one-year adjustable-rate mortgage increased slightly to 5.15%, compared to 5.12% last week. At this time last year, the rate was 5.73%.
In September, the government took control of the mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac with a rescue plan that could inject $200 billion into them to keep them afloat.
By Lara Moscrip, CNNMoney.com contributing writer
October 9, 2008: 10:58 AM ET
NEW YORK (CNNMoney.com) -- Rates on 30-year mortgages fell from last week, while loan applications grew slightly in the face of turbulence in the banking and finance sectors.
Mortgage finance firm Freddie Mac (FRE, Fortune 500) reported Thursday that 30-year fixed-rate mortgages averaged 5.94% this week. That's down from 6.10% last week and well below 6.40%, where the rate stood a year ago.
"Longer-term mortgage rates fell for the first time in three weeks, roughly following bond market yields," said Frank Nothaft, Freddie Mac vice president and chief economist.
Meanwhile, mortgage applications for home purchases and refinancing grew slightly over the week ending Oct. 3, reversing a two-week decline, according to data from the Mortgage Bankers Association.
Rates on 15-year fixed-rate mortgages fell to 5.63%, from 5.78% last week. A year ago, that rate was 6.06%
The five-year adjustable-rate mortgage fell to 5.90%, down from last week at 6.00%. A year ago, the rate was 6.12%.
The rate on a one-year adjustable-rate mortgage increased slightly to 5.15%, compared to 5.12% last week. At this time last year, the rate was 5.73%.
In September, the government took control of the mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac with a rescue plan that could inject $200 billion into them to keep them afloat.
Pending home sales show surprise rise
The National Association of Realtors says pending home sales increased 7.4% from July to August; highest since June 2007.
October 8, 2008: 10:40 AM ET
WASHINGTON (AP) -- The National Association of Realtors says pending home rose 7.4% from July to August, an unexpected piece of positive news for the battered U.S. housing market.
The group said Wednesday its seasonally adjusted index of pending sales for existing homes rose to 93.4 from an upwardly revised July reading of 87. The reading was the highest since June 2007.
Wall Street economists surveyed by Thomson/IFR had predicted the index would fall to 84.9.
The index, which sunk to a record low of 83 in March, stood at 85.8 in August 2007.
October 8, 2008: 10:40 AM ET
WASHINGTON (AP) -- The National Association of Realtors says pending home rose 7.4% from July to August, an unexpected piece of positive news for the battered U.S. housing market.
The group said Wednesday its seasonally adjusted index of pending sales for existing homes rose to 93.4 from an upwardly revised July reading of 87. The reading was the highest since June 2007.
Wall Street economists surveyed by Thomson/IFR had predicted the index would fall to 84.9.
The index, which sunk to a record low of 83 in March, stood at 85.8 in August 2007.
Housing rescue efforts slowed in August
Nearly 189,000 at risk borrowers got help during the month, according to Hope Now, down slightly from the number of homeowners helped in July.
By David Goldman, CNNMoney.com staff writer
Last Updated: October 2, 2008: 1:32 PM ET
NEW YORK (CNNMoney.com) -- Fewer troubled borrowers got help with their mortgages in August than in July, according to figures released Thursday.
Hope Now, the alliance of mortgage servicers, counselors, and investors assembled to combat foreclosures, said it helped 189,000 homeowners avert foreclosure in August, down 1.7% from the number of people helped in July.
"It's difficult to look at any one month and see a trend," said Faith Schwartz, executive director of Hope Now. "We're still outpacing the second quarter in total workouts."
The news comes as the government's plan to rescue the financial system returns to the House for a vote after it passed the Senate Wednesday night. The legislation would permit the Treasury to buy up $700 billion of bad assets - most of which are backed by mortgages - from banks in an effort to clean up their balance sheets so that they can resume lending.
But many experts and economists say that the U.S. credit crisis cannot be resolved until the housing market stabilizes, with foreclosures slowing and steep home price declines leveling off. But home prices are still declining; the Standard & Poor's/Case-Shiller 20-city housing index fell a record 16.3% in July from a year earlier.
"Hope Now is absolutely successful in that it is saving people from going into final foreclosure, and that won't change," said Schwartz. "But any further direction that helps homeowners offered by the government would be helpful," she added in reference to the bailout.
Different workouts
Hope Now said that nearly 79,000 at-risk mortgage borrowers had the terms of their loans permanently modified in August to make them more affordable, with lower interest rates, reduced principal or both.
Another 110,000 homeowners, about 58% of the total workouts, got repayment plans, which means that they'll have extra time to make up missed payments. That's down from the 112,000 who got repayment plans in July.
These workouts are generally considered to be less effective at helping homeowners because they don't reduce the borrowers' total monthly payments, and in fact often increase them.
But since the Hope Now program began, the organization has succeeded in increasing the proportion of loan modifications that make up the total number of loan workouts.
For instance, only 17% of total workouts were modifications in the third quarter of 2007, compared to 42% in the second quarter of 2008. The ratio has held steady at 42% in the past two months.
"We're trying to tackle the broader issue for people who have the desire and capability to stay in their homes," Schwartz said. "That's why we try to restructure their loans."
Hope Now says it has helped a total of 2.3 million homeowners since its program launched in July, 2007. The group also reported that foreclosure sales fell to 86,594 in August, down 5.9% from July.
But a different report from RealtyTrac, an online marketer of foreclosure properties, showed that the number of homes lost to foreclosure rose 18% to 91,000 in August.
Subprime loans
Hope Now also issued the results of a separate study on subprime loans, which most economists believe are at the root of the housing crisis.
The coalition said it helped modify 91,000, or 8.3%, of the 1.1 million subprime adjustable rate mortgages that are scheduled to reset between January and August 2008. More than three-quarters of the modifications were for five or more years.
About 13,200 of the loans scheduled to reset went into foreclosure, while another 449,000 of them were paid off in full when the borrower was able to refinance the loan or sell the house.
By David Goldman, CNNMoney.com staff writer
Last Updated: October 2, 2008: 1:32 PM ET
NEW YORK (CNNMoney.com) -- Fewer troubled borrowers got help with their mortgages in August than in July, according to figures released Thursday.
Hope Now, the alliance of mortgage servicers, counselors, and investors assembled to combat foreclosures, said it helped 189,000 homeowners avert foreclosure in August, down 1.7% from the number of people helped in July.
"It's difficult to look at any one month and see a trend," said Faith Schwartz, executive director of Hope Now. "We're still outpacing the second quarter in total workouts."
The news comes as the government's plan to rescue the financial system returns to the House for a vote after it passed the Senate Wednesday night. The legislation would permit the Treasury to buy up $700 billion of bad assets - most of which are backed by mortgages - from banks in an effort to clean up their balance sheets so that they can resume lending.
But many experts and economists say that the U.S. credit crisis cannot be resolved until the housing market stabilizes, with foreclosures slowing and steep home price declines leveling off. But home prices are still declining; the Standard & Poor's/Case-Shiller 20-city housing index fell a record 16.3% in July from a year earlier.
"Hope Now is absolutely successful in that it is saving people from going into final foreclosure, and that won't change," said Schwartz. "But any further direction that helps homeowners offered by the government would be helpful," she added in reference to the bailout.
Different workouts
Hope Now said that nearly 79,000 at-risk mortgage borrowers had the terms of their loans permanently modified in August to make them more affordable, with lower interest rates, reduced principal or both.
Another 110,000 homeowners, about 58% of the total workouts, got repayment plans, which means that they'll have extra time to make up missed payments. That's down from the 112,000 who got repayment plans in July.
These workouts are generally considered to be less effective at helping homeowners because they don't reduce the borrowers' total monthly payments, and in fact often increase them.
But since the Hope Now program began, the organization has succeeded in increasing the proportion of loan modifications that make up the total number of loan workouts.
For instance, only 17% of total workouts were modifications in the third quarter of 2007, compared to 42% in the second quarter of 2008. The ratio has held steady at 42% in the past two months.
"We're trying to tackle the broader issue for people who have the desire and capability to stay in their homes," Schwartz said. "That's why we try to restructure their loans."
Hope Now says it has helped a total of 2.3 million homeowners since its program launched in July, 2007. The group also reported that foreclosure sales fell to 86,594 in August, down 5.9% from July.
But a different report from RealtyTrac, an online marketer of foreclosure properties, showed that the number of homes lost to foreclosure rose 18% to 91,000 in August.
Subprime loans
Hope Now also issued the results of a separate study on subprime loans, which most economists believe are at the root of the housing crisis.
The coalition said it helped modify 91,000, or 8.3%, of the 1.1 million subprime adjustable rate mortgages that are scheduled to reset between January and August 2008. More than three-quarters of the modifications were for five or more years.
About 13,200 of the loans scheduled to reset went into foreclosure, while another 449,000 of them were paid off in full when the borrower was able to refinance the loan or sell the house.
Bailout: Little help for homeowners
If it does pass, the plan calls for the Treasury to work with loan servicers to stem the tide of foreclosures. But just how that will happen remains unclear.
By Tami Luhby, CNNMoney.com senior writer
Last Updated: September 29, 2008: 3:28 PM ET
NEW YORK (CNNMoney.com) -- The $700 billion bailout legislation now under consideration by Congress calls for the Treasury Secretary to implement a plan to stem foreclosures by working with servicers to modify loans.
But many housing experts question whether the bill will help struggling homeowners refinance into more affordable mortgages. They stress that the economy won't recover until the tide of foreclosures stops, and the million-plus foreclosed homes on the market find buyers.
"It's impossible to know whether it will help anybody but the banks stay open another week," said Mark Dotzour, chief economist at the Real Estate Center at Texas A&M University. "Until we see a plan to get people to buy those empty homes, we're just going to go from one band-aid to the next."
The legislation was unveiled Sunday, but voted down by the House on Monday. It's now up to lawmakers to revise the bill so it can garner approval from enough members to pass. The main objections were levied by House Republicans and are centered around the potential risk to taxpayers.
Since the credit crisis began a year ago, Democratic lawmakers and the Bush administration have tussled over how much to help borrowers who have fallen behind in their mortgage payments. Until now, efforts have focused on prodding lenders to work with distressed borrowers.
In Sunday's version of the bill, federal agencies holding mortgages and mortgage securities would be required to identify loans that could be modified without causing big losses for taxpayers. It calls for encouraging servicers to refinance loans through the Hope for Homeownership program, which begins Oct. 1 and allows borrowers who can't meet their current mortgage terms to refinance into more affordable, fixed-rate loans backed by the Federal Housing Administration.
However, exactly how the modifications would be done isn't totally clear.
Generally, when considering whether to modify a loan, servicers determine whether the borrower has the means to make payments on their loan, if the loan terms were changed slightly. At the same time, the servicer considers whether it would cost less for it to modify the loan instead of foreclose.
Often when a borrower is up-to-date on payments, but faces a big spike in rates, the modification may call for freezing interest rates at the introductory level. The workout could also reduce principal balance or stretch out the term of the loan, from 30 years to 40 years, for example.
In addition to the Treasury Department, agencies that would promote the modifications would include the Federal Reserve, Federal Deposit Insurance Corp., and the Federal Housing Finance Agency, which controls mortgage insurers Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500).
The bill also allows the Secretary to use loan guarantees and credit enhancements to avoid foreclosures, though on a press call Treasury officials declined to elaborate on these provisions. Loan guarantees generally refer to mortgages backed by a federal agency, such as the Federal Housing Administration, or by mortgage insurers Fannie Mae and Freddie Mac. Credit enhancements usually reduce the risk of mortgage securities or loans in case borrowers default.
Avoiding 'preventable foreclosures'
Servicers have been under pressure to modify loans since the mortgage meltdown began a year ago. However, they say the biggest roadblock to changing loan terms are the investors who hold the securities created from those mortgages.
"It's really not the servicers' decision," said John Harding, real estate finance professor at the University of Connecticut School of Business.
But, as the owner of a large number of mortgage securities, the federal government would have the power to modify more troubled loans, said Treasury officials. The government may also buy the mortgage loans themselves from banks, which it can then adjust more easily.
The government would try to avoid "preventable foreclosures" in a way that "makes sense for taxpayers," the officials said on a press call.
"We will have a lot of influence," they added.
But just how far the government will go to help homeowners remains in doubt. Treasury Secretary Henry Paulson said last week that the "vast majority" of foreclosures in this country are happening to people who took out loans they couldn't afford or who don't want to stay in their homes.
Will it help?
Some housing counselors said the legislation falls far short of helping troubled homeowners. One of the best ways to stop foreclosures would be to allow bankruptcy judges to change the terms of some mortgages to make them more affordable, a measure the banking industry strenuously opposed.
"There is nothing in the bailout that will mitigate widespread damage caused by foreclosures," said Michael Calhoun, president of the Center for Responsible Lending.
"The bill includes a vague provision that calls for the government to buy mortgages and securities and then try to modify them, but this will have very limited impact," he continued. "It doesn't stop the [foreclosure] epidemic that will continue to drag down property values for everyone."
The bill's failure in Congress pleased some community activists, who saw it as an opportunity to renegotiate the housing provisions in the bill. In addition to including the bankruptcy provision, housing groups would like to see stronger language in the legislation to help homeowners, said Bill Austin, director of Acorn Financial Justice Center. For instance, the Treasury Department could put a higher priority on buying securities that have underlying mortgages that need to be modified.
Still, even if some homeowners are helped, it's not going to quickly put the American economy back on its feet, said Shaun Bond, associate professor of real estate at University of Cincinnati's business school.
"The adjustment in the housing market will still be a long, drawn-out process," Bond said. "It will be several years before we see a return to normal conditions."
By Tami Luhby, CNNMoney.com senior writer
Last Updated: September 29, 2008: 3:28 PM ET
NEW YORK (CNNMoney.com) -- The $700 billion bailout legislation now under consideration by Congress calls for the Treasury Secretary to implement a plan to stem foreclosures by working with servicers to modify loans.
But many housing experts question whether the bill will help struggling homeowners refinance into more affordable mortgages. They stress that the economy won't recover until the tide of foreclosures stops, and the million-plus foreclosed homes on the market find buyers.
"It's impossible to know whether it will help anybody but the banks stay open another week," said Mark Dotzour, chief economist at the Real Estate Center at Texas A&M University. "Until we see a plan to get people to buy those empty homes, we're just going to go from one band-aid to the next."
The legislation was unveiled Sunday, but voted down by the House on Monday. It's now up to lawmakers to revise the bill so it can garner approval from enough members to pass. The main objections were levied by House Republicans and are centered around the potential risk to taxpayers.
Since the credit crisis began a year ago, Democratic lawmakers and the Bush administration have tussled over how much to help borrowers who have fallen behind in their mortgage payments. Until now, efforts have focused on prodding lenders to work with distressed borrowers.
In Sunday's version of the bill, federal agencies holding mortgages and mortgage securities would be required to identify loans that could be modified without causing big losses for taxpayers. It calls for encouraging servicers to refinance loans through the Hope for Homeownership program, which begins Oct. 1 and allows borrowers who can't meet their current mortgage terms to refinance into more affordable, fixed-rate loans backed by the Federal Housing Administration.
However, exactly how the modifications would be done isn't totally clear.
Generally, when considering whether to modify a loan, servicers determine whether the borrower has the means to make payments on their loan, if the loan terms were changed slightly. At the same time, the servicer considers whether it would cost less for it to modify the loan instead of foreclose.
Often when a borrower is up-to-date on payments, but faces a big spike in rates, the modification may call for freezing interest rates at the introductory level. The workout could also reduce principal balance or stretch out the term of the loan, from 30 years to 40 years, for example.
In addition to the Treasury Department, agencies that would promote the modifications would include the Federal Reserve, Federal Deposit Insurance Corp., and the Federal Housing Finance Agency, which controls mortgage insurers Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500).
The bill also allows the Secretary to use loan guarantees and credit enhancements to avoid foreclosures, though on a press call Treasury officials declined to elaborate on these provisions. Loan guarantees generally refer to mortgages backed by a federal agency, such as the Federal Housing Administration, or by mortgage insurers Fannie Mae and Freddie Mac. Credit enhancements usually reduce the risk of mortgage securities or loans in case borrowers default.
Avoiding 'preventable foreclosures'
Servicers have been under pressure to modify loans since the mortgage meltdown began a year ago. However, they say the biggest roadblock to changing loan terms are the investors who hold the securities created from those mortgages.
"It's really not the servicers' decision," said John Harding, real estate finance professor at the University of Connecticut School of Business.
But, as the owner of a large number of mortgage securities, the federal government would have the power to modify more troubled loans, said Treasury officials. The government may also buy the mortgage loans themselves from banks, which it can then adjust more easily.
The government would try to avoid "preventable foreclosures" in a way that "makes sense for taxpayers," the officials said on a press call.
"We will have a lot of influence," they added.
But just how far the government will go to help homeowners remains in doubt. Treasury Secretary Henry Paulson said last week that the "vast majority" of foreclosures in this country are happening to people who took out loans they couldn't afford or who don't want to stay in their homes.
Will it help?
Some housing counselors said the legislation falls far short of helping troubled homeowners. One of the best ways to stop foreclosures would be to allow bankruptcy judges to change the terms of some mortgages to make them more affordable, a measure the banking industry strenuously opposed.
"There is nothing in the bailout that will mitigate widespread damage caused by foreclosures," said Michael Calhoun, president of the Center for Responsible Lending.
"The bill includes a vague provision that calls for the government to buy mortgages and securities and then try to modify them, but this will have very limited impact," he continued. "It doesn't stop the [foreclosure] epidemic that will continue to drag down property values for everyone."
The bill's failure in Congress pleased some community activists, who saw it as an opportunity to renegotiate the housing provisions in the bill. In addition to including the bankruptcy provision, housing groups would like to see stronger language in the legislation to help homeowners, said Bill Austin, director of Acorn Financial Justice Center. For instance, the Treasury Department could put a higher priority on buying securities that have underlying mortgages that need to be modified.
Still, even if some homeowners are helped, it's not going to quickly put the American economy back on its feet, said Shaun Bond, associate professor of real estate at University of Cincinnati's business school.
"The adjustment in the housing market will still be a long, drawn-out process," Bond said. "It will be several years before we see a return to normal conditions."
Freddie, Fannie roll back fees
The mortgage finance giants will not increase fees to .5% from .25% on loans they purchase.
October 3, 2008: 12:14 PM ET
WASHINGTON (AP) -- Mortgage finance companies Fannie Mae and Freddie Mac, seized by the federal government last month, are rolling back fees imposed as they struggled to shore up their finances over the past year.
Freddie Mac (FRE, Fortune 500) said Friday it would not impose a fee increase scheduled to go into effect next month. The announcement followed a similar reversal by Fannie Mae (FNM, Fortune 500) Thursday night.
Freddie Mac, however, will raise fees next year for riskier loan products, including mortgages that allow interest-only payments for the first few years. Freddie also will require higher credit scores for "piggyback" loans that allow borrowers to make smaller down payments by taking out two mortgages.
Taken together, Freddie Mac said the changes would provide "some relief from the challenges in the current market environment," but added that it is following lending practices "that are prudent and largely applicable in all market conditions."
Both companies had announced plans to hike a fee on all loans purchased by the companies to 0.5% next month from 0.25%. For a $200,000 loan, that's a savings of $500.
The decision comes nearly a month after the companies, the largest buyer and backer of U.S. mortgages, were taken over by the government and saw their top executives ousted.
In recent months, Fannie and Freddie have hiked several fees for borrowers with blemished credit, while asking for bigger down payments. Real estate agents, mortgage brokers and homebuilders have all complained that the moves were stifling the housing market.
Fannie Mae Chief Executive Herb Allison said in a statement Thursday that the company is "evaluating all of our risk-management, underwriting guidelines, pricing and costs."
James Lockhart, director of the Federal Housing Finance Agency - which regulates Fannie and Freddie - said last month that any changes made by the companies should "reflect both safe and sound business strategy and attentiveness to the [companies'] mission."
October 3, 2008: 12:14 PM ET
WASHINGTON (AP) -- Mortgage finance companies Fannie Mae and Freddie Mac, seized by the federal government last month, are rolling back fees imposed as they struggled to shore up their finances over the past year.
Freddie Mac (FRE, Fortune 500) said Friday it would not impose a fee increase scheduled to go into effect next month. The announcement followed a similar reversal by Fannie Mae (FNM, Fortune 500) Thursday night.
Freddie Mac, however, will raise fees next year for riskier loan products, including mortgages that allow interest-only payments for the first few years. Freddie also will require higher credit scores for "piggyback" loans that allow borrowers to make smaller down payments by taking out two mortgages.
Taken together, Freddie Mac said the changes would provide "some relief from the challenges in the current market environment," but added that it is following lending practices "that are prudent and largely applicable in all market conditions."
Both companies had announced plans to hike a fee on all loans purchased by the companies to 0.5% next month from 0.25%. For a $200,000 loan, that's a savings of $500.
The decision comes nearly a month after the companies, the largest buyer and backer of U.S. mortgages, were taken over by the government and saw their top executives ousted.
In recent months, Fannie and Freddie have hiked several fees for borrowers with blemished credit, while asking for bigger down payments. Real estate agents, mortgage brokers and homebuilders have all complained that the moves were stifling the housing market.
Fannie Mae Chief Executive Herb Allison said in a statement Thursday that the company is "evaluating all of our risk-management, underwriting guidelines, pricing and costs."
James Lockhart, director of the Federal Housing Finance Agency - which regulates Fannie and Freddie - said last month that any changes made by the companies should "reflect both safe and sound business strategy and attentiveness to the [companies'] mission."
The other housing rescue starts today
The FHA's $300 billion Hope for Homeownership program is now open for business. But will banks be willing to sign up?
By Tami Luhby, CNNMoney.com senior writer
Last Updated: October 1, 2008: 6:35 PM ET
NEW YORK (CNNMoney.com) -- Amidst all the chaos surrounding the $700 billion Wall Street bailout plan, the federal government's other housing rescue program quietly opened for business Wednesday.
But will any mortgage servicers come knocking?
The Federal Housing Administration unveiled its $300 billion Hope for Homeowners program, which allows struggling borrowers to refinance into more affordable mortgages backed by the federal government. The legislation, which was signed into law in late July, was hotly debated for months on Capitol Hill with Democrats supporting it and Republicans opposed.
Before the so-called Wall Street bailout emerged, this FHA program was the federal government's answer to the mortgage crisis. It was seen as a primary means to stemming the foreclosure tide and stabilizing the housing market.
Even now, foreclosure prevention measures in the current bailout legislation call for the Treasury Secretary to modify more loans through the FHA program.
"For homeowners in trouble, this may be the help they need," said Steve Preston, secretary of the federal Department of Housing and Urban Development, which oversees FHA. "It is yet one more way that families may be helped to weather the current turbulence in the housing market."
Banks, however, didn't receive the program's details from the FHA until Wednesday, and say it will likely be weeks before they can offer it to their customers.
Even then, lenders probably won't rush to participate in the program, which is voluntary, since it requires them to take a pretty significant losses on the loan principal in most cases. Instead, banks have said that they'd prefer to use their own mortgage modification programs where they can better control the terms.
"We will continue to plow ahead with our own efforts to keep homeowners in their homes," said David Bradley, spokesman with Bank of America, which completed 15,750 loan modifications in August. "We've already been pretty aggressive in that regard."
Program details
Eligible borrowers must:
have taken out their mortgages on or before Jan. 1, 2008 and have made at least six payments.
be unable to afford their current loan, but did not intentionally miss payments.
have a debt-to-income ratio of at least 31%.
live in the house and not own other homes.
have provided accurate information on their loan documents and not been convicted of fraud in the past decade.
Under the program, borrowers will get:
a 30-year, fixed rate mortgage of up to $550,440.
a new appraisal and loan for no more than 90% of the home's value.
released from second mortgages and prepayment penalties.
But homeowners must pay a premium of 3% of the loan's value upfront, and 1.5% of the outstanding mortgage amount annually. Also, they must share any appreciation in the home's value with the FHA when they sell.
The law allows the FHA to insure up to $300 billion in new loans.
"This program can contribute meaningfully to stability in the housing market, while at the same time providing the appropriate safeguards and limitations to protect the interest of taxpayers," said Elizabeth Duke, Federal Reserve governor.
But HUD officials Wednesday backed away from the Congressional Budget Office's original estimate that the bill will help 400,000 troubled borrowers.
"It's very very difficult to really put a finger on it," Preston said.
Last resort
It's tough to forecast the program's success in part because banks have had a very lukewarm reaction to it. Four large servicers told lawmakers two weeks ago that they would use the program only as a last resort.
The problem is that the Hope for Homeowners program requires banks to reduce the loan's principal to 90% of a home's current appraised value, which is likely to be much less than the owner paid for it. Lenders prefer to freeze or cut interest rates so they can at least recover the original amount of the loan, said Tom Kelly, spokesman for JPMorgan Chase, which has worked with 110,000 customers to modify or rework their loans between January 2007 and July 2008.
"You lock in your loss," Kelly said, by reducing loan principal.
Banks might turn to Hope for Homeownership if they feel the loan is hopeless and just want to get rid of it, he continued.
Lenders also won't be pleased with the new home appraisals, which will show them just how underwater their borrowers are, said James Gaines, research economist at the Real Estate center at Texas A&M University.
He doesn't see a lot of lenders flocking to the program.
"It will help some people, but it won't be the universal panacea that people would like it to be," he said.
By Tami Luhby, CNNMoney.com senior writer
Last Updated: October 1, 2008: 6:35 PM ET
NEW YORK (CNNMoney.com) -- Amidst all the chaos surrounding the $700 billion Wall Street bailout plan, the federal government's other housing rescue program quietly opened for business Wednesday.
But will any mortgage servicers come knocking?
The Federal Housing Administration unveiled its $300 billion Hope for Homeowners program, which allows struggling borrowers to refinance into more affordable mortgages backed by the federal government. The legislation, which was signed into law in late July, was hotly debated for months on Capitol Hill with Democrats supporting it and Republicans opposed.
Before the so-called Wall Street bailout emerged, this FHA program was the federal government's answer to the mortgage crisis. It was seen as a primary means to stemming the foreclosure tide and stabilizing the housing market.
Even now, foreclosure prevention measures in the current bailout legislation call for the Treasury Secretary to modify more loans through the FHA program.
"For homeowners in trouble, this may be the help they need," said Steve Preston, secretary of the federal Department of Housing and Urban Development, which oversees FHA. "It is yet one more way that families may be helped to weather the current turbulence in the housing market."
Banks, however, didn't receive the program's details from the FHA until Wednesday, and say it will likely be weeks before they can offer it to their customers.
Even then, lenders probably won't rush to participate in the program, which is voluntary, since it requires them to take a pretty significant losses on the loan principal in most cases. Instead, banks have said that they'd prefer to use their own mortgage modification programs where they can better control the terms.
"We will continue to plow ahead with our own efforts to keep homeowners in their homes," said David Bradley, spokesman with Bank of America, which completed 15,750 loan modifications in August. "We've already been pretty aggressive in that regard."
Program details
Eligible borrowers must:
have taken out their mortgages on or before Jan. 1, 2008 and have made at least six payments.
be unable to afford their current loan, but did not intentionally miss payments.
have a debt-to-income ratio of at least 31%.
live in the house and not own other homes.
have provided accurate information on their loan documents and not been convicted of fraud in the past decade.
Under the program, borrowers will get:
a 30-year, fixed rate mortgage of up to $550,440.
a new appraisal and loan for no more than 90% of the home's value.
released from second mortgages and prepayment penalties.
But homeowners must pay a premium of 3% of the loan's value upfront, and 1.5% of the outstanding mortgage amount annually. Also, they must share any appreciation in the home's value with the FHA when they sell.
The law allows the FHA to insure up to $300 billion in new loans.
"This program can contribute meaningfully to stability in the housing market, while at the same time providing the appropriate safeguards and limitations to protect the interest of taxpayers," said Elizabeth Duke, Federal Reserve governor.
But HUD officials Wednesday backed away from the Congressional Budget Office's original estimate that the bill will help 400,000 troubled borrowers.
"It's very very difficult to really put a finger on it," Preston said.
Last resort
It's tough to forecast the program's success in part because banks have had a very lukewarm reaction to it. Four large servicers told lawmakers two weeks ago that they would use the program only as a last resort.
The problem is that the Hope for Homeowners program requires banks to reduce the loan's principal to 90% of a home's current appraised value, which is likely to be much less than the owner paid for it. Lenders prefer to freeze or cut interest rates so they can at least recover the original amount of the loan, said Tom Kelly, spokesman for JPMorgan Chase, which has worked with 110,000 customers to modify or rework their loans between January 2007 and July 2008.
"You lock in your loss," Kelly said, by reducing loan principal.
Banks might turn to Hope for Homeownership if they feel the loan is hopeless and just want to get rid of it, he continued.
Lenders also won't be pleased with the new home appraisals, which will show them just how underwater their borrowers are, said James Gaines, research economist at the Real Estate center at Texas A&M University.
He doesn't see a lot of lenders flocking to the program.
"It will help some people, but it won't be the universal panacea that people would like it to be," he said.
Record 16% drop in July home prices
July home prices plunge 16.3% in 12 months, according to the Standard & Poor's/Case-Shiller 20-city housing index.
Last Updated: September 30, 2008: 9:53 AM ET
NEW YORK (AP) -- A closely watched index released Tuesday showed home prices tumbling by the sharpest annual rate ever in July, but the rate of monthly declines is slowing.
The Standard & Poor's/Case-Shiller 20-city housing index fell a record 16.3% in July from a year earlier, the largest drop since its inception in 2000. The 10-city index plunged 17.5%, the biggest decline in its 21-year history.
No price gains
Prices in the 20-city index have plummeted nearly 20% since peaking in July 2006. The 10-city index has fallen more than 21% since its peak in June 2006.
No city in the Case-Shiller 20-city index saw annual price gains in July, the fourth straight month that has happened.
However, the pace of monthly declines is slowing, a possible silver lining. Between May and July, for example, home prices fell at a cumulative rate of 2.2% - less than half the cumulative rate experienced between February and April.
But there's "no evidence of a bottom," said David M. Blitzer, chairman of the index committee at S&P.
Trouble in Vegas
Las Vegas prices plunged the most at nearly 30%, with Phoenix diving 29% and Miami 28%. Prices in the seven cities in the Sunbelt all fell between 20% and 30% from a year ago.
Only seven cities showed positive or flat returns from June to July, down from nine that showed month-over-month gains in June. Atlanta, Boston, Dallas, Denver and Minneapolis all posted positive returns for three months or more.
Last Updated: September 30, 2008: 9:53 AM ET
NEW YORK (AP) -- A closely watched index released Tuesday showed home prices tumbling by the sharpest annual rate ever in July, but the rate of monthly declines is slowing.
The Standard & Poor's/Case-Shiller 20-city housing index fell a record 16.3% in July from a year earlier, the largest drop since its inception in 2000. The 10-city index plunged 17.5%, the biggest decline in its 21-year history.
No price gains
Prices in the 20-city index have plummeted nearly 20% since peaking in July 2006. The 10-city index has fallen more than 21% since its peak in June 2006.
No city in the Case-Shiller 20-city index saw annual price gains in July, the fourth straight month that has happened.
However, the pace of monthly declines is slowing, a possible silver lining. Between May and July, for example, home prices fell at a cumulative rate of 2.2% - less than half the cumulative rate experienced between February and April.
But there's "no evidence of a bottom," said David M. Blitzer, chairman of the index committee at S&P.
Trouble in Vegas
Las Vegas prices plunged the most at nearly 30%, with Phoenix diving 29% and Miami 28%. Prices in the seven cities in the Sunbelt all fell between 20% and 30% from a year ago.
Only seven cities showed positive or flat returns from June to July, down from nine that showed month-over-month gains in June. Atlanta, Boston, Dallas, Denver and Minneapolis all posted positive returns for three months or more.
Genworth soars on possible spin off
Mortgage insurer, struggling to regain footing in wake of AIG collapse, is mulling 'strategic alternatives' for its U.S. mortgage business.
September 30, 2008: 9:43 AM ET
RICHMOND, Va. (AP) -- Mortgage insurer Genworth Financial Inc. said Tuesday that it is considering various strategic alternatives for its U.S. mortgage-insurance business including a possible spin off, sending shares sharply higher in premarket activity.
"We have demonstrated that, in the current stressed U.S. housing environment, our U.S. Mortgage Insurance business continues to operate from a more sound financial position and lower risk profile than any other U.S. mortgage insurer," said Michael D. Fraizer, chairman and chief executive, in a statement.
"At the same time, progress in our international, wealth management, retirement, life and long-term care insurance businesses has been overshadowed by concerns about the future of U.S. mortgage insurance," he added.
Commercial paper
Genworth (GNW, Fortune 500) said it has reduced its commercial paper borrowings to $79 million, and maintains more than $800 million in cash and cash equivalents at the holding company.
The company also carries nearly $4 billion of cash and cash equivalents in its operating companies, and maintains substantial credit facilities, Genworth said.
Over the past couple of weeks, Genworth's stock has been hit hard by concerns about its mortgage exposure in the wake of the collapse of American International Group Inc.
Earlier this month, the government stepped in and provided AIG with a two-year $85 billion loan to help keep it in business. As one of the world's largest insurers, AIG teetered on the brink of bankruptcy as it looked for fresh cash to help shore up its balance sheet, which was facing a liquidity crunch amid the continued downturn in the credit markets.
Reinsurance business
Last week, Genworth management provided an update regarding its U.S. mortgage insurance business. The company is considering reinsurance transactions, asset transfers from outside the U.S. and joint ventures to boost capital, management said on a call with analysts.
Shares of Genworth spiked $1.49, or 30%, to $6.49 in premarket activity. The stock, which finished Monday's trading at $5, has ranged from $3.51 to $32.33 over the past year.
September 30, 2008: 9:43 AM ET
RICHMOND, Va. (AP) -- Mortgage insurer Genworth Financial Inc. said Tuesday that it is considering various strategic alternatives for its U.S. mortgage-insurance business including a possible spin off, sending shares sharply higher in premarket activity.
"We have demonstrated that, in the current stressed U.S. housing environment, our U.S. Mortgage Insurance business continues to operate from a more sound financial position and lower risk profile than any other U.S. mortgage insurer," said Michael D. Fraizer, chairman and chief executive, in a statement.
"At the same time, progress in our international, wealth management, retirement, life and long-term care insurance businesses has been overshadowed by concerns about the future of U.S. mortgage insurance," he added.
Commercial paper
Genworth (GNW, Fortune 500) said it has reduced its commercial paper borrowings to $79 million, and maintains more than $800 million in cash and cash equivalents at the holding company.
The company also carries nearly $4 billion of cash and cash equivalents in its operating companies, and maintains substantial credit facilities, Genworth said.
Over the past couple of weeks, Genworth's stock has been hit hard by concerns about its mortgage exposure in the wake of the collapse of American International Group Inc.
Earlier this month, the government stepped in and provided AIG with a two-year $85 billion loan to help keep it in business. As one of the world's largest insurers, AIG teetered on the brink of bankruptcy as it looked for fresh cash to help shore up its balance sheet, which was facing a liquidity crunch amid the continued downturn in the credit markets.
Reinsurance business
Last week, Genworth management provided an update regarding its U.S. mortgage insurance business. The company is considering reinsurance transactions, asset transfers from outside the U.S. and joint ventures to boost capital, management said on a call with analysts.
Shares of Genworth spiked $1.49, or 30%, to $6.49 in premarket activity. The stock, which finished Monday's trading at $5, has ranged from $3.51 to $32.33 over the past year.
Mortgage aid program launches
The $300B initiative will help borrowers who spend more than 31% of their income on mortgage payments.
Last Updated: October 1, 2008: 2:53 PM ET
WASHINGTON (AP) -- The government kicked off a program Wednesday that aims to prevent foreclosures by letting an estimated 400,000 troubled homeowners swap their mortgages for more affordable loans.
Lenders, rather than borrowers, will decide whether to participate in the program, which requires them to take a loss on the initial loan. The $300 billion, three-year program is designed to help borrowers who owe more on their loans than their homes are worth.
To qualify, borrowers must be spending more than 31% of their income on mortgage payments. Loans made this year are excluded, except for those completed on Jan 1. Borrowers must have made six months of payments on their loans.
"For homeowners in trouble, this may be the help that they need," Housing and Urban Development Secretary Steve Preston said Wednesday. Officials did not have an updated estimate of how many homeowners were likely to qualify, beyond the Congressional Budget Office's projection from earlier this year that 400,000 borrowers would participate.
The program, dubbed 'Hope for Homeowners,' was passed by Congress this summer as part of a massive housing bill. It is one of several government efforts to stem the mortgage crisis.
Critics, however, call the government's actions sluggish and inadequate. Earlier action to modify loans, they say, might have prevented a $700 billion financial industry bailout now being debated in Washington.
Executives from Citigroup (C, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Bank of America (BAC, Fortune 500) and Wells Fargo (WFC, Fortune 500) told lawmakers last month they have been hiring additional workers to put the new program in place.
Still, it is unclear whether the industry will embrace the plan fully. One concern is that investors in mortgage securities must take an immediate loss and can't recoup their lost money if home prices turn upward again.
Investors would rather modify loans in ways that maintain the ability to "share in future appreciation," JPMorgan Chase executive Marguerite Sheehan said in written testimony submitted to House lawmakers last month.
On Monday, a group of state banking and law enforcement officials released a report that said nearly 80% of borrowers with subprime loans were not on track for assistance to avoid foreclosure as of May.
The report by the State Foreclosure Prevention Working Group criticized the lending industry for making only small changes to loan terms and noted that about one in five loans that were modified over the past year became delinquent again.
"While banks and Wall Street firms continue to report record write-downs of mortgage loan portfolios and securities, the losses do not appear to be flowing down to homeowners in the form of sustainable loan modifications," Iowa Attorney General Tom Miller, a founder of the state effort, said in a statement.
Last Updated: October 1, 2008: 2:53 PM ET
WASHINGTON (AP) -- The government kicked off a program Wednesday that aims to prevent foreclosures by letting an estimated 400,000 troubled homeowners swap their mortgages for more affordable loans.
Lenders, rather than borrowers, will decide whether to participate in the program, which requires them to take a loss on the initial loan. The $300 billion, three-year program is designed to help borrowers who owe more on their loans than their homes are worth.
To qualify, borrowers must be spending more than 31% of their income on mortgage payments. Loans made this year are excluded, except for those completed on Jan 1. Borrowers must have made six months of payments on their loans.
"For homeowners in trouble, this may be the help that they need," Housing and Urban Development Secretary Steve Preston said Wednesday. Officials did not have an updated estimate of how many homeowners were likely to qualify, beyond the Congressional Budget Office's projection from earlier this year that 400,000 borrowers would participate.
The program, dubbed 'Hope for Homeowners,' was passed by Congress this summer as part of a massive housing bill. It is one of several government efforts to stem the mortgage crisis.
Critics, however, call the government's actions sluggish and inadequate. Earlier action to modify loans, they say, might have prevented a $700 billion financial industry bailout now being debated in Washington.
Executives from Citigroup (C, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Bank of America (BAC, Fortune 500) and Wells Fargo (WFC, Fortune 500) told lawmakers last month they have been hiring additional workers to put the new program in place.
Still, it is unclear whether the industry will embrace the plan fully. One concern is that investors in mortgage securities must take an immediate loss and can't recoup their lost money if home prices turn upward again.
Investors would rather modify loans in ways that maintain the ability to "share in future appreciation," JPMorgan Chase executive Marguerite Sheehan said in written testimony submitted to House lawmakers last month.
On Monday, a group of state banking and law enforcement officials released a report that said nearly 80% of borrowers with subprime loans were not on track for assistance to avoid foreclosure as of May.
The report by the State Foreclosure Prevention Working Group criticized the lending industry for making only small changes to loan terms and noted that about one in five loans that were modified over the past year became delinquent again.
"While banks and Wall Street firms continue to report record write-downs of mortgage loan portfolios and securities, the losses do not appear to be flowing down to homeowners in the form of sustainable loan modifications," Iowa Attorney General Tom Miller, a founder of the state effort, said in a statement.
Commercial Briefs
MBA (10/9/2008 ) Murray, Michael
Pennsylvania Real Estate Investment Trust obtained $40 million of additional funding under a previously announced unsecured term loan. New lenders to the term loan, led by Wells Fargo NA, San Francisco, include National City Bank, Harleysville National Bank and Trust Co., and Citicorp North America Inc., New York.
The term loan's total outstanding balance is $170 million. The REIT has swapped $130 million of the loan to an average fixed rate of 5.33 percent. The remaining $40 million bears interest at the stated term loan rate of LIBOR plus 2.5 percent.
Pennsylvania REIT also exercised a 14-month extension to the term of its $500 million senior unsecured credit facility. The new expiration date is in March 2010. The revolving credit facility bears interest at LIBOR plus 1.40 percent.
*****
Citizens Bank, Providence, R.I., and Bank of America, Charlotte, N.C., provided $80 million to STAG Capital Partners, Boston, to finance the company’s fourth realty investment fund acquisition, consisting of warehouse, flex, manufacturing and office building properties.
Citizens Bank served as the agent and Bank of America as the co-agent on the financing deal. STAG Capital Partners acquires and manages single-tenant, net leased real estate assets purchased through third-party transactions and corporate sale-leasebacks.
*****
Green Park Financial, Bethesda, Md., partnered with Bethesda-based J.S. Watkins Partners to purchase multifamily small loan pools from commercial banks and other financial institutions that cannot be sold to government sponsored enterprises in current markets because of size limitations.
J.S. Watkins would source transactions, and Green Park Financial would aggregate pools and sell them to Fannie Mae.
“There is inefficiency in secondary markets for small loan pools under $100 million,” said Howard Smith, COO of Green Park Financial, “We are launching this program with J.S. Watkins to provide smaller banks and institutions with capital and access that they would be challenged to find without a program like this.”
Pennsylvania Real Estate Investment Trust obtained $40 million of additional funding under a previously announced unsecured term loan. New lenders to the term loan, led by Wells Fargo NA, San Francisco, include National City Bank, Harleysville National Bank and Trust Co., and Citicorp North America Inc., New York.
The term loan's total outstanding balance is $170 million. The REIT has swapped $130 million of the loan to an average fixed rate of 5.33 percent. The remaining $40 million bears interest at the stated term loan rate of LIBOR plus 2.5 percent.
Pennsylvania REIT also exercised a 14-month extension to the term of its $500 million senior unsecured credit facility. The new expiration date is in March 2010. The revolving credit facility bears interest at LIBOR plus 1.40 percent.
*****
Citizens Bank, Providence, R.I., and Bank of America, Charlotte, N.C., provided $80 million to STAG Capital Partners, Boston, to finance the company’s fourth realty investment fund acquisition, consisting of warehouse, flex, manufacturing and office building properties.
Citizens Bank served as the agent and Bank of America as the co-agent on the financing deal. STAG Capital Partners acquires and manages single-tenant, net leased real estate assets purchased through third-party transactions and corporate sale-leasebacks.
*****
Green Park Financial, Bethesda, Md., partnered with Bethesda-based J.S. Watkins Partners to purchase multifamily small loan pools from commercial banks and other financial institutions that cannot be sold to government sponsored enterprises in current markets because of size limitations.
J.S. Watkins would source transactions, and Green Park Financial would aggregate pools and sell them to Fannie Mae.
“There is inefficiency in secondary markets for small loan pools under $100 million,” said Howard Smith, COO of Green Park Financial, “We are launching this program with J.S. Watkins to provide smaller banks and institutions with capital and access that they would be challenged to find without a program like this.”
Reverse Mortgages Emphasize Affordability, Liquidity
MBA (10/9/2008 ) Murray, Michael
In an uncertain credit market, reverse mortgages that feature no monthly payments provide an option that increases affordability and liquidity.
“There could be a lot of reverse mortgage business driven by losses people are taking in the stock market—they do not have enough investments to get dividends to live on—and they are taking other losses,” said Mark Helm, COO at Reverse Mortgage Solutions Inc., Spring, Texas. “And expenses—everything is going up. Retired persons are paying more money for everything from utilities to groceries. Vehicles such as 401(k)s are for long-term investment and, all of a sudden, 50 percent or more of its value is lost, what other vehicle is available to turn to other than equity in the home?”
A report last year from AARP International said only 1 percent of older households in the United States had a reverse mortgage, but the share of individuals ages 45 and older who heard of reverse mortgages increased from 51 percent in 1999 to 70 percent in 2007. The share of respondents who said they were willing to consider a reverse mortgage in the future, however, declined from 19 percent to 14 percent.
At the Mortgage Bankers Association’s recent Fall Reverse Mortgage Lending Conference, Ginnie Mae president Joseph Murin said the agency would like to increase FHA HECM securities, and he emphasized a REMIC product that would blend forward and reverse mortgages together.
“That’s an extended breath of life to the reverse [mortgages] because they could be attached to a REMIC that has both traditional forward mortgages in it and reverses in it,” Helm said. “It was a real positive message from HUD here and Ginnie Mae about the future of the HECM mortgage regardless of what is happening with the rest of the lending industry.”
An investor purchasing a forward and reverse mortgage on the same REMIC would benefit from an annuity growing, compounding interest, on the HECM and in retrieving payment from the forward mortgage. It would include two different mortgages from two different borrowers into one security in an attempt to increase interest from investors.
“It makes the cash stream and the investment stream work together,” Helm said.
Lenders participating in HECMs must be FHA-approved, which could likely include larger banks and credit unions. Helm said lenders processing an FHA-insured loan should be able to sell that product to a conduit instead of a Wall Street-funded or bank-funded product.
“Fannie [Mae] and Freddie [Mac] are both more willing to purchase this product than some products determined to be more risk,” Helm said.
Ken Austin, president of RMS, said certain residential market segments—California, Arizona, Michigan and Florida—continue to depreciate, but FHA HECM program is unlikely to be disrupted.
Austin said the new loan limits—$417,000—help open up the market more. Fannie Mae recently asserted that it is “business as usual” for reverse mortgages.
However, Helm noted that “credit across the board, even in our industry, is hurting right now. If you have a ‘mortgage’ in your name, it is hard to get credit lines, it is hard to find warehouse lines and it is hard to find people who want to buy mortgage servicing. We do believe that the viability of the reverse mortgage is going to break some cash out that has not been typically broken out and add to the economy. That is going to be helpful.”
Some barriers remain, some upfront: most borrowers face a $2,500 fee with the product as the result of government insurance. “That is what makes the product available, but that is also what makes it expensive,” Austin said.
“Everybody wants to think of this loan as a HELOC and even on the simplest HELOCs [borrowers] at least have to pay interest on those loans. This—they don’t have to pay a dime. They just have to pay taxes and insurance,” Helm said.
Kevin Gherardi, CIO at RMS, said the reverse mortgage industry had done a “full circle,” from FHA HECM to proprietary reverse mortgage products and back to basics—99.9 percent HECM product availability.
“In the beginning, there was really only one investor, which was Fannie Mae,” Gherardi said. “Over the years, Wall Street was wide open and they were purchasing reverse mortgages. Today, basically, we are back again full circle where investor opportunities for purchasing HECMs are back to Fannie.”
“That is why it is so important to have the technology available [for reverse mortgages],” Helm said. “These players who have been sitting on the sidelines can now take advantage of the market and the technology that is available.”
In an uncertain credit market, reverse mortgages that feature no monthly payments provide an option that increases affordability and liquidity.
“There could be a lot of reverse mortgage business driven by losses people are taking in the stock market—they do not have enough investments to get dividends to live on—and they are taking other losses,” said Mark Helm, COO at Reverse Mortgage Solutions Inc., Spring, Texas. “And expenses—everything is going up. Retired persons are paying more money for everything from utilities to groceries. Vehicles such as 401(k)s are for long-term investment and, all of a sudden, 50 percent or more of its value is lost, what other vehicle is available to turn to other than equity in the home?”
A report last year from AARP International said only 1 percent of older households in the United States had a reverse mortgage, but the share of individuals ages 45 and older who heard of reverse mortgages increased from 51 percent in 1999 to 70 percent in 2007. The share of respondents who said they were willing to consider a reverse mortgage in the future, however, declined from 19 percent to 14 percent.
At the Mortgage Bankers Association’s recent Fall Reverse Mortgage Lending Conference, Ginnie Mae president Joseph Murin said the agency would like to increase FHA HECM securities, and he emphasized a REMIC product that would blend forward and reverse mortgages together.
“That’s an extended breath of life to the reverse [mortgages] because they could be attached to a REMIC that has both traditional forward mortgages in it and reverses in it,” Helm said. “It was a real positive message from HUD here and Ginnie Mae about the future of the HECM mortgage regardless of what is happening with the rest of the lending industry.”
An investor purchasing a forward and reverse mortgage on the same REMIC would benefit from an annuity growing, compounding interest, on the HECM and in retrieving payment from the forward mortgage. It would include two different mortgages from two different borrowers into one security in an attempt to increase interest from investors.
“It makes the cash stream and the investment stream work together,” Helm said.
Lenders participating in HECMs must be FHA-approved, which could likely include larger banks and credit unions. Helm said lenders processing an FHA-insured loan should be able to sell that product to a conduit instead of a Wall Street-funded or bank-funded product.
“Fannie [Mae] and Freddie [Mac] are both more willing to purchase this product than some products determined to be more risk,” Helm said.
Ken Austin, president of RMS, said certain residential market segments—California, Arizona, Michigan and Florida—continue to depreciate, but FHA HECM program is unlikely to be disrupted.
Austin said the new loan limits—$417,000—help open up the market more. Fannie Mae recently asserted that it is “business as usual” for reverse mortgages.
However, Helm noted that “credit across the board, even in our industry, is hurting right now. If you have a ‘mortgage’ in your name, it is hard to get credit lines, it is hard to find warehouse lines and it is hard to find people who want to buy mortgage servicing. We do believe that the viability of the reverse mortgage is going to break some cash out that has not been typically broken out and add to the economy. That is going to be helpful.”
Some barriers remain, some upfront: most borrowers face a $2,500 fee with the product as the result of government insurance. “That is what makes the product available, but that is also what makes it expensive,” Austin said.
“Everybody wants to think of this loan as a HELOC and even on the simplest HELOCs [borrowers] at least have to pay interest on those loans. This—they don’t have to pay a dime. They just have to pay taxes and insurance,” Helm said.
Kevin Gherardi, CIO at RMS, said the reverse mortgage industry had done a “full circle,” from FHA HECM to proprietary reverse mortgage products and back to basics—99.9 percent HECM product availability.
“In the beginning, there was really only one investor, which was Fannie Mae,” Gherardi said. “Over the years, Wall Street was wide open and they were purchasing reverse mortgages. Today, basically, we are back again full circle where investor opportunities for purchasing HECMs are back to Fannie.”
“That is why it is so important to have the technology available [for reverse mortgages],” Helm said. “These players who have been sitting on the sidelines can now take advantage of the market and the technology that is available.”
Unstable Assets, Tight Credit Add to Global Economic Woes
MBA (10/9/2008 ) Sorohan, Mike; Murray, Michael
Despite a 50 basis point cut in the federal funds rate, as well as actions taken by nearly two dozen other central banks, global economies continued to suffer from widespread turbulence.
The U.S. stock market, rallying briefly following the Federal Open Market Committee announcement, continued their rollercoaster ride yesterday, finishing nearly 200 points lower than Tuesday. The Dow Jones Industrial Average has lost substantial value—exactly one year ago, the Dow Jones reached its highest level ever, topping 14,000; yesterday, the Dow Jones finished at 9,258.
Treasury Secretary Henry Paulson Jr. said yesterday that U.S. and global financial markets continue to be “severely strained.”
“A chain of events caused by the ongoing housing correction has reverberated through U.S. banks and financial institutions and has seriously impacted the underlying economy, reaching American households and businesses,” Paulson said. “A root cause of this situation is the housing correction and a lack of confidence in mortgage assets, as well as a lack of confidence in many of the financial institutions that hold these assets. Because of this widespread uncertainty, investors are hesitant to commit capital to financial institutions. Investor confidence is critical to restore liquidity and enhance the stability of our financial system.”
Part of the problem, said Scott Baret, partner of regulatory and capital markets at Deloitte & Touche LLP, New York, is the lock-up of the financial credit markets. Inability to stablize on balance-sheet values, inability to sell those assets and borrower difficulty finding financing contribute to instability, despite the efforts of the federal government.
"The reality is that all operating models, not only financial institutions but also commercial entities that have been instructed to operate in an environment where credit is normally available, right now—in the short-term, medium-term and long-term markets--it is not available," Baret said. "The fundamental reason credit is not available is that there is a mistrust between banks because of a lack of asset stabilization."
“The risk is going to be—is there enough capital there to support the cost of funds going forward from these sources of money,” said Mark Peterson, managing director at Black Rock, New York.
Baret said residential market ramifications on securitized products present a key for solving the economic crisis and until residential real estate stabilizes, the crisis will continue.
"The toga party that existed pre-2007 has ended—has gotten to where we are now—and the hangover is something that is over the economy right now, and the economic consequences are slowly rippling through,” Baret said.
While residential mortgage delinquencies and foreclosures impact the economy, Baret said they also provide a litmus test on asset stabilization because unstable assets exist in residential and institutional markets.
"We are where we are right now,” Baret said. “The question is—what comes next.”
Paulson said the federal government would continue to take action at stabilizing the markets. “This financial market turmoil is now directly affecting more families and businesses. When banks can not finance at reasonable levels, and can not or are not willing to lend, everyone in our economy who depends on credit suffers. The capital markets are the pipes through which money flows to finance student loans, car loans, home loans and small businesses' payroll and inventory. And uncertainty and a lack of confidence have clogged our basic financial plumbing. While our actions have been aimed at restoring financial markets and institutions, our purpose is to prevent financial market difficulties from further impacting businesses and families across the country.”
Despite a 50 basis point cut in the federal funds rate, as well as actions taken by nearly two dozen other central banks, global economies continued to suffer from widespread turbulence.
The U.S. stock market, rallying briefly following the Federal Open Market Committee announcement, continued their rollercoaster ride yesterday, finishing nearly 200 points lower than Tuesday. The Dow Jones Industrial Average has lost substantial value—exactly one year ago, the Dow Jones reached its highest level ever, topping 14,000; yesterday, the Dow Jones finished at 9,258.
Treasury Secretary Henry Paulson Jr. said yesterday that U.S. and global financial markets continue to be “severely strained.”
“A chain of events caused by the ongoing housing correction has reverberated through U.S. banks and financial institutions and has seriously impacted the underlying economy, reaching American households and businesses,” Paulson said. “A root cause of this situation is the housing correction and a lack of confidence in mortgage assets, as well as a lack of confidence in many of the financial institutions that hold these assets. Because of this widespread uncertainty, investors are hesitant to commit capital to financial institutions. Investor confidence is critical to restore liquidity and enhance the stability of our financial system.”
Part of the problem, said Scott Baret, partner of regulatory and capital markets at Deloitte & Touche LLP, New York, is the lock-up of the financial credit markets. Inability to stablize on balance-sheet values, inability to sell those assets and borrower difficulty finding financing contribute to instability, despite the efforts of the federal government.
"The reality is that all operating models, not only financial institutions but also commercial entities that have been instructed to operate in an environment where credit is normally available, right now—in the short-term, medium-term and long-term markets--it is not available," Baret said. "The fundamental reason credit is not available is that there is a mistrust between banks because of a lack of asset stabilization."
“The risk is going to be—is there enough capital there to support the cost of funds going forward from these sources of money,” said Mark Peterson, managing director at Black Rock, New York.
Baret said residential market ramifications on securitized products present a key for solving the economic crisis and until residential real estate stabilizes, the crisis will continue.
"The toga party that existed pre-2007 has ended—has gotten to where we are now—and the hangover is something that is over the economy right now, and the economic consequences are slowly rippling through,” Baret said.
While residential mortgage delinquencies and foreclosures impact the economy, Baret said they also provide a litmus test on asset stabilization because unstable assets exist in residential and institutional markets.
"We are where we are right now,” Baret said. “The question is—what comes next.”
Paulson said the federal government would continue to take action at stabilizing the markets. “This financial market turmoil is now directly affecting more families and businesses. When banks can not finance at reasonable levels, and can not or are not willing to lend, everyone in our economy who depends on credit suffers. The capital markets are the pipes through which money flows to finance student loans, car loans, home loans and small businesses' payroll and inventory. And uncertainty and a lack of confidence have clogged our basic financial plumbing. While our actions have been aimed at restoring financial markets and institutions, our purpose is to prevent financial market difficulties from further impacting businesses and families across the country.”
Pipeline: Homebuyer Angst
American Banker (10/09/08) P. 11; Colter, Allison Bisbey
A new poll from Trulia Inc., which runs a property search engine, suggests that the prospect of federal intervention in the housing and credit markets is not encouraging potential home buyers. The online survey of more than 1,500 adults, conducted by Harris Interactive, found that more than 70 percent of non-homeowners do not plan to cross over to ownership in the next year. Among persons aged 18 to 34--considered the prime ages for home purchases--44 percent cited cost as the reason they do not own a home right now, while 41 percent of those aged 35 to 44 said they are being deterred by concerns over qualifying for financing. Of the poll participants who already own a home, however, nearly half expressed confidence in their property as a long-term investment.
A new poll from Trulia Inc., which runs a property search engine, suggests that the prospect of federal intervention in the housing and credit markets is not encouraging potential home buyers. The online survey of more than 1,500 adults, conducted by Harris Interactive, found that more than 70 percent of non-homeowners do not plan to cross over to ownership in the next year. Among persons aged 18 to 34--considered the prime ages for home purchases--44 percent cited cost as the reason they do not own a home right now, while 41 percent of those aged 35 to 44 said they are being deterred by concerns over qualifying for financing. Of the poll participants who already own a home, however, nearly half expressed confidence in their property as a long-term investment.
California's Prop. 12 Would Provide Mortgage Funds for Veterans
Los Angeles Times (10/09/08); McGreevy, Patrick
On the November ballot, California voters will be asked to borrow $900 million to extend discounted mortgages for those who served in the armed forces. The proposition, which would allow about 3,600 veterans to purchase affordable housing, was put on the ballot by unanimous votes of the state Assembly and Senate and a signature from Gov. Arnold Schwarzenegger. Nearly $102 million remains from previous bonds--proceeds from which are tapped by the CalVet program to buy mobile homes, houses and farms that are resold to veterans--but demand for those funds is projected to increase as the war in Iraq winds down. A key selling point is that the new bonds are to be repaid by the veterans via their monthly mortgage payments.
On the November ballot, California voters will be asked to borrow $900 million to extend discounted mortgages for those who served in the armed forces. The proposition, which would allow about 3,600 veterans to purchase affordable housing, was put on the ballot by unanimous votes of the state Assembly and Senate and a signature from Gov. Arnold Schwarzenegger. Nearly $102 million remains from previous bonds--proceeds from which are tapped by the CalVet program to buy mobile homes, houses and farms that are resold to veterans--but demand for those funds is projected to increase as the war in Iraq winds down. A key selling point is that the new bonds are to be repaid by the veterans via their monthly mortgage payments.
Subprime Borrowers May Face New Hit Next Month
Trading Markets (10/09/08)
Subprime borrowers could be hit hard again in November when a new round of interest rate changes boosts their monthly mortgage payments to potentially unaffordable levels. The catalyst behind this phenomenon is a rising international interest rate called the London Interbank Offered Rate (Libor) that will determine how the rates reset on at least $24 billion in subprime loans next month. Fear among lenders has driven up the Libor in recent months and will affect approximately 121,000 U.S. subprime borrowers--13,400 in Florida alone--who will face payment resets for the first time next month. Analysts warn that this could mean as much as an additional 10-percent jump in the number of defaults among such borrowers.
Subprime borrowers could be hit hard again in November when a new round of interest rate changes boosts their monthly mortgage payments to potentially unaffordable levels. The catalyst behind this phenomenon is a rising international interest rate called the London Interbank Offered Rate (Libor) that will determine how the rates reset on at least $24 billion in subprime loans next month. Fear among lenders has driven up the Libor in recent months and will affect approximately 121,000 U.S. subprime borrowers--13,400 in Florida alone--who will face payment resets for the first time next month. Analysts warn that this could mean as much as an additional 10-percent jump in the number of defaults among such borrowers.
Freddie Mac Plans to Raise $4 Billion in Debt Sales
Washington Post (10/09/08) P. D4
Freddie Mac is preparing to sell $3 billion worth of two-year reference notes, which reach maturity on Nov. 23, 2010. The debt will be priced on Oct. 10. The mortgage financier also aims to raise an additional $1 billion through a second reopening of securities due Sept. 27, 2013.
Freddie Mac is preparing to sell $3 billion worth of two-year reference notes, which reach maturity on Nov. 23, 2010. The debt will be priced on Oct. 10. The mortgage financier also aims to raise an additional $1 billion through a second reopening of securities due Sept. 27, 2013.
Study: Housing Expenses Rose 65 Percent in Decade
New York Newsday (10/09/08)
Homeowners saw their yearly housing expenses increased by an average of $5,314--or nearly 65 percent--between 1996 and 2006, but their incomes rose only 36.3 percent, according to a new study from the Center for Housing Policy. "There are a lot of daily challenges that Americans are facing in meeting this full array of housing expenses and incomes just haven't risen as much to be able to allow people to afford it," says Maya Brennan, co-author of the study. A month ago, data from the U.S. Census revealed that nearly 15 percent of Americans with a mortgage were spending at least half of their income on their mortgage, property taxes and insurance. And nearly 38 percent of homeowners with mortgages were devoting at least 30 percent of their income to housing.
Homeowners saw their yearly housing expenses increased by an average of $5,314--or nearly 65 percent--between 1996 and 2006, but their incomes rose only 36.3 percent, according to a new study from the Center for Housing Policy. "There are a lot of daily challenges that Americans are facing in meeting this full array of housing expenses and incomes just haven't risen as much to be able to allow people to afford it," says Maya Brennan, co-author of the study. A month ago, data from the U.S. Census revealed that nearly 15 percent of Americans with a mortgage were spending at least half of their income on their mortgage, property taxes and insurance. And nearly 38 percent of homeowners with mortgages were devoting at least 30 percent of their income to housing.
Fed Rate Cut Impact to Take Awhile
Detroit Free Press (10/09/08); Hagenbaugh, Barbara; Kirchhoff, Sue
The Federal Reserve on Oct. 8 forced interest rates down to their lowest level in more than four years in an effort to stimulate lending and consumer spending. However, reducing the target for short-term rates a half percentage point to 1.5 percent is unlikely to impact rates on fixed- or adjustable-rate mortgages, depending how their rates are set, according to Greg McBride, senior analyst at Bankrate.com. He says homeowners will see lower rates on home equity lines of credit, but lenders have begun to freeze or reduce their credit lines. Some analysts believe the Fed will cut rates to 1 percent by the end of the year.
The Federal Reserve on Oct. 8 forced interest rates down to their lowest level in more than four years in an effort to stimulate lending and consumer spending. However, reducing the target for short-term rates a half percentage point to 1.5 percent is unlikely to impact rates on fixed- or adjustable-rate mortgages, depending how their rates are set, according to Greg McBride, senior analyst at Bankrate.com. He says homeowners will see lower rates on home equity lines of credit, but lenders have begun to freeze or reduce their credit lines. Some analysts believe the Fed will cut rates to 1 percent by the end of the year.
Mortgage Applications Edge Up
Investor's Business Daily (10/09/08) P. A2
Home-loan application volume bumped up 2.2 percent for the week ended Oct. 3, reports the Mortgage Bankers Association. The group's weekly index reflected a 3.2-percent gain in demand for purchase loans, with the Federal Housing Administration's share of the pie steadily increasing. Requests for refinancing, meanwhile, drifted up 0.9 percent.
Home-loan application volume bumped up 2.2 percent for the week ended Oct. 3, reports the Mortgage Bankers Association. The group's weekly index reflected a 3.2-percent gain in demand for purchase loans, with the Federal Housing Administration's share of the pie steadily increasing. Requests for refinancing, meanwhile, drifted up 0.9 percent.
Pending Sales of Homes Up 7.4 Percent, Highest in 13 Months
Toledo Blade (OH) (10/09/08)
The beleaguered housing market received a piece of sorely needed good news, as the National Association of Realtors reported an unexpected jump in pending home sales in August compared to July. The group's monthly index reading of 93.4--the highest number in more than a year--was up 7.4 percent from July and up 8.8 percent from August 2007. Pending sales, which refer to home contracts that have not yet closed, typically result in a sale one to two months later. The numbers were higher across the United States, with the West posting a gain of 18.4 percent, the Northeast settling 8.4 percent higher, the Midwest weighing in 3.6 percent higher and the South up 2.3 percent.
The beleaguered housing market received a piece of sorely needed good news, as the National Association of Realtors reported an unexpected jump in pending home sales in August compared to July. The group's monthly index reading of 93.4--the highest number in more than a year--was up 7.4 percent from July and up 8.8 percent from August 2007. Pending sales, which refer to home contracts that have not yet closed, typically result in a sale one to two months later. The numbers were higher across the United States, with the West posting a gain of 18.4 percent, the Northeast settling 8.4 percent higher, the Midwest weighing in 3.6 percent higher and the South up 2.3 percent.
Thursday, October 9, 2008
Pending Home Sales Soar 7.4% in August
Pending home sales unexpectedly soared by 7.4% in August, according to the National Association of Realtors (NAR) on Wednesday. The advance is the largest monthly gain in almost seven years, and follows a 2.7% decline in July and a 5.8% rebound in June.
The consensus was expecting a 1.3% decline in the month.
The index now stands at 93.4, up from the previous month's 87.0 reading.
"Home buyers in July were hampered by overly stringent lending criteria in the months before the government takeover of Fannie and Freddie," he said. "August shows some unleashing of pent-up demand before the credit crisis accelerated in September," said Lawrence Yun, chief economist at NAR.
He said home sales are improving due to the increased affordability of houses. "The improvement also reflects the drop in mortgage interest rates after the government takeover of Freddie Mac and Fannie Mae. It's unclear how much contract activity may be impacted by the credit disruptions on Wall Street, but we're hopeful most of the increase will translate into closed existing-home sales," he said.
Regional results for August were all positive. The Northeast posted an 8.4% increase following a 7.5% loss in July, while the West saw a whopping 18.64% advance following an 8.4% decrease.
The Midwest saw sales rise 3.6% after a 2.8% advance in July, and sales in the South were up 2.3% after a marginal 0.1% increase in July.
"What we're seeing is the momentum of people taking advantage of low home prices, with pending home sales up strongly in California, Nevada, Arizona, Florida, Rhode Island and the Washington, D.C., region," Yun said.
The NAR projects the 30-year fixed-rate mortgage rate to average 6.1% in Q4 and then trend up gradually to 6.6% by the end of 2009. The NAR also said the housing affordability index is likely to average 18 percentage points higher in 2008 than in 2007.
The Pending Home Sales Index looks at home sales that have been signed but not finalized, a process that takes another month or two. The value of the index lies in its ability to forecast existing home sales, which represent eight-tenths of the market.
By Patrick McGee and edited by Nancy Girgis
�CEP News Ltd. 2008
The consensus was expecting a 1.3% decline in the month.
The index now stands at 93.4, up from the previous month's 87.0 reading.
"Home buyers in July were hampered by overly stringent lending criteria in the months before the government takeover of Fannie and Freddie," he said. "August shows some unleashing of pent-up demand before the credit crisis accelerated in September," said Lawrence Yun, chief economist at NAR.
He said home sales are improving due to the increased affordability of houses. "The improvement also reflects the drop in mortgage interest rates after the government takeover of Freddie Mac and Fannie Mae. It's unclear how much contract activity may be impacted by the credit disruptions on Wall Street, but we're hopeful most of the increase will translate into closed existing-home sales," he said.
Regional results for August were all positive. The Northeast posted an 8.4% increase following a 7.5% loss in July, while the West saw a whopping 18.64% advance following an 8.4% decrease.
The Midwest saw sales rise 3.6% after a 2.8% advance in July, and sales in the South were up 2.3% after a marginal 0.1% increase in July.
"What we're seeing is the momentum of people taking advantage of low home prices, with pending home sales up strongly in California, Nevada, Arizona, Florida, Rhode Island and the Washington, D.C., region," Yun said.
The NAR projects the 30-year fixed-rate mortgage rate to average 6.1% in Q4 and then trend up gradually to 6.6% by the end of 2009. The NAR also said the housing affordability index is likely to average 18 percentage points higher in 2008 than in 2007.
The Pending Home Sales Index looks at home sales that have been signed but not finalized, a process that takes another month or two. The value of the index lies in its ability to forecast existing home sales, which represent eight-tenths of the market.
By Patrick McGee and edited by Nancy Girgis
�CEP News Ltd. 2008
Jobs Forecast for Autumn Decline
MBA (10/8/2008 ) Murray, Michael
Fewer job postings will likely lead to a drop in commercial real estate employment this fall and additional pain for the remainder of this year, according to a monthly research study conducted by New York-based Cornell Program in Real Estate and SelectLeaders.com.
Anthony LoPinto, CEO of Equinox Partners, a New York-based real estate industry search firm, and founder of Select Leaders, said prospects don't appear to improve until next year.
“While hiring trends are down somewhat, the worst is yet to come. We won’t hit bottom, until the jobs disappear,” LoPinto said.
David Funk, director of the Cornell University Program in Real Estate, said commercial real estate’s job market showed “surprising resilience” from negative news across all economic sectors during the first half of the year, but experienced a 46 percent decline in job postings since June.
The fall Select Leaders/Cornell Job Barometer showed strong job growth in commercial real estate until July, but managers now forecast steep cuts by the end of the year.
“The pace of the decline into August and September points to almost non-existent transaction activity and a shutdown of new development that is showing up in the lack of job postings,” Funk said.
David Jacobstein, senior advisor of real estate at Deloitte LLP, New York, said national job posting numbers fell dramatically from June to August—down 6 percent in New York—based on real estate finance-related job losses.
Cornell/Select Leaders research showed nearly 40 percent of all real estate jobs were in multifamily as real estate finance and homebuilding job losses were disproportionate in New York and California. With 43 percent of applicants looking for commercial real estate jobs in New York—74 resumes for each job posting—jobs in New York fell from 18 percent last year to 11 percent this year.
"The impact in New York City will get worse as a result of the bloodbath in September and beyond. Finance was very hard hit," Jacobstein said.
Job postings in real estate finance fell from 132 in May to 62 in August; Jacobstein said he expects further decline in the months ahead.
"Only 11 of the 62 postings were in New York, which is dramatic given that New York is the real estate finance capital of the world," Jacobstein noted. "Interestingly enough, the number of resumes submitted went down only marginally from 2007 to 2008, but a drop nonetheless."
New York, California , Texas and Illinois still held 68 percent of all national job postings and, in Texas, job postings increased from 8 percent to 10 percent of total national share.
Multifamily increased its job posting share from 6 percent to 19 percent while banking fell from 15 percent to 8 percent. By job function, the big winner was accounting/control and property management with 21 percent and 15 percent of job postings, respectively.
"This is not surprising given the times we are in," Jacobstein said. "In down markets, real estate companies emphasize expense control at the corporate and property levels. Job postings for development and acquisitions were down because of the lack of debt needed to fund new projects and to acquire assets."
The southern United States and Midwest provided most opportunities for jobs in accounting and controls, property management and leasing.
“The return to credit-based debt products with rigorous underwriting, based on conservative real estate fundamentals, low loan-to-value structures and the “R” word—recourse—requires a different breed of lender with deep real estate knowledge and credit skills,” LoPinto said. “Unless they can retool, many of the professionals who grew up in the high-flying debt capital markets era of the 90's will not find a home in the age of restructure.”
Jacobstein noted that “best of breed” firms would take advantage of market conditions to improve their standing—and workforce—after market conditions eventually return to a normal state.
“Hiring in a difficult environment is challenging,” Jacobstein said. “Although traditional wisdom would indicate that there should be more players to choose from, the truth is that many people seeking employment or thinking about changing jobs are prone to shy away from industries that are most impacted by the poorly performing economy.”
Funk said graduate students could look in other financial-related sectors as banking jobs drop, and experienced executives would also be in demand.
“The increasing need to squeeze every ounce of performance from commercial portfolios highlights the growing need for asset, portfolio and property managers with a deep range of real estate experience coupled with sophisticated financial skills,” Funk said.
LoPinto said middle management jobs were hit hardest with a minor impact on executive level jobs, but a deepening financial crisis would likely take a toll on the more senior ranks. He added that while job losses occur this year, opportunities could exist next year for some seasoned players.
“In general, there is a six-to-nine month lag between a fall in real estate market activity and resulting job layoffs and hiring freezes,” LoPinto said. “On the other hand, with billions of dollars of commercial real estate loans maturing over the next 12-36 months, there will be a growing demand for seasoned and proven talent that knows how to play the restructure game.”
Fewer job postings will likely lead to a drop in commercial real estate employment this fall and additional pain for the remainder of this year, according to a monthly research study conducted by New York-based Cornell Program in Real Estate and SelectLeaders.com.
Anthony LoPinto, CEO of Equinox Partners, a New York-based real estate industry search firm, and founder of Select Leaders, said prospects don't appear to improve until next year.
“While hiring trends are down somewhat, the worst is yet to come. We won’t hit bottom, until the jobs disappear,” LoPinto said.
David Funk, director of the Cornell University Program in Real Estate, said commercial real estate’s job market showed “surprising resilience” from negative news across all economic sectors during the first half of the year, but experienced a 46 percent decline in job postings since June.
The fall Select Leaders/Cornell Job Barometer showed strong job growth in commercial real estate until July, but managers now forecast steep cuts by the end of the year.
“The pace of the decline into August and September points to almost non-existent transaction activity and a shutdown of new development that is showing up in the lack of job postings,” Funk said.
David Jacobstein, senior advisor of real estate at Deloitte LLP, New York, said national job posting numbers fell dramatically from June to August—down 6 percent in New York—based on real estate finance-related job losses.
Cornell/Select Leaders research showed nearly 40 percent of all real estate jobs were in multifamily as real estate finance and homebuilding job losses were disproportionate in New York and California. With 43 percent of applicants looking for commercial real estate jobs in New York—74 resumes for each job posting—jobs in New York fell from 18 percent last year to 11 percent this year.
"The impact in New York City will get worse as a result of the bloodbath in September and beyond. Finance was very hard hit," Jacobstein said.
Job postings in real estate finance fell from 132 in May to 62 in August; Jacobstein said he expects further decline in the months ahead.
"Only 11 of the 62 postings were in New York, which is dramatic given that New York is the real estate finance capital of the world," Jacobstein noted. "Interestingly enough, the number of resumes submitted went down only marginally from 2007 to 2008, but a drop nonetheless."
New York, California , Texas and Illinois still held 68 percent of all national job postings and, in Texas, job postings increased from 8 percent to 10 percent of total national share.
Multifamily increased its job posting share from 6 percent to 19 percent while banking fell from 15 percent to 8 percent. By job function, the big winner was accounting/control and property management with 21 percent and 15 percent of job postings, respectively.
"This is not surprising given the times we are in," Jacobstein said. "In down markets, real estate companies emphasize expense control at the corporate and property levels. Job postings for development and acquisitions were down because of the lack of debt needed to fund new projects and to acquire assets."
The southern United States and Midwest provided most opportunities for jobs in accounting and controls, property management and leasing.
“The return to credit-based debt products with rigorous underwriting, based on conservative real estate fundamentals, low loan-to-value structures and the “R” word—recourse—requires a different breed of lender with deep real estate knowledge and credit skills,” LoPinto said. “Unless they can retool, many of the professionals who grew up in the high-flying debt capital markets era of the 90's will not find a home in the age of restructure.”
Jacobstein noted that “best of breed” firms would take advantage of market conditions to improve their standing—and workforce—after market conditions eventually return to a normal state.
“Hiring in a difficult environment is challenging,” Jacobstein said. “Although traditional wisdom would indicate that there should be more players to choose from, the truth is that many people seeking employment or thinking about changing jobs are prone to shy away from industries that are most impacted by the poorly performing economy.”
Funk said graduate students could look in other financial-related sectors as banking jobs drop, and experienced executives would also be in demand.
“The increasing need to squeeze every ounce of performance from commercial portfolios highlights the growing need for asset, portfolio and property managers with a deep range of real estate experience coupled with sophisticated financial skills,” Funk said.
LoPinto said middle management jobs were hit hardest with a minor impact on executive level jobs, but a deepening financial crisis would likely take a toll on the more senior ranks. He added that while job losses occur this year, opportunities could exist next year for some seasoned players.
“In general, there is a six-to-nine month lag between a fall in real estate market activity and resulting job layoffs and hiring freezes,” LoPinto said. “On the other hand, with billions of dollars of commercial real estate loans maturing over the next 12-36 months, there will be a growing demand for seasoned and proven talent that knows how to play the restructure game.”
Mortgage Applications Up Slightly In MBA Weekly Survey
MBA (10/8/2008 ) Kemp, Carolyn
Mortgage applications rose for the first time in three weeks as key interest rates fell back below 6 percent, the Mortgage Bankers Association reported in its Weekly Mortgage Applications Survey for the week ending October 3.
The Market Composite Index rose to 465.5, an increase of 2.2 percent on a seasonally adjusted basis from 455.4 one week earlier. On an unadjusted basis, the Index increased by 2.2 percent compared with the previous week and was down 28.6 percent compared with the same week one year earlier. The four-week moving average for the seasonally adjusted Market Index fell by 1.4 percent.
The seasonally adjusted Refinance Index increased by 0.9 percent to 1345.8 from the previous week. The four-week moving average rose by 1.8 percent. The refinance share of mortgage activity decreased to 43.4 percent of total applications from 44.0 percent the previous week.
The seasonally adjusted Purchase Index increased by 3.2 percent to 314.5 from one week earlier. The Conventional Purchase Index increased by 0.7 percent while the Government Purchase Index (largely FHA) increased by 9.9 percent. The four-week moving average fell by 4.1 percent. Data for government applications were revised from the first week of June through the last week of September. As a result, some historical series were revised.
The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.99 percent from 6.07 percent, with points decreasing to 1.09 from 1.12 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.71 percent from 5.82 percent, with points increasing to 1.16 from 1.11 (including the origination fee) for 80 percent LTV loans.
The average contract interest rate for one-year adjustable-rate mortgages remained unchanged at 6.60 percent, with points increasing to 0.37 from 0.33 (including the origination fee) for 80 percent LTV loans. The ARM share of activity decreased to 2.3 percent from 2.5 percent of total applications from the previous week.
The survey covers 50 percent of all U.S. retail residential mortgage originations and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.
Mortgage applications rose for the first time in three weeks as key interest rates fell back below 6 percent, the Mortgage Bankers Association reported in its Weekly Mortgage Applications Survey for the week ending October 3.
The Market Composite Index rose to 465.5, an increase of 2.2 percent on a seasonally adjusted basis from 455.4 one week earlier. On an unadjusted basis, the Index increased by 2.2 percent compared with the previous week and was down 28.6 percent compared with the same week one year earlier. The four-week moving average for the seasonally adjusted Market Index fell by 1.4 percent.
The seasonally adjusted Refinance Index increased by 0.9 percent to 1345.8 from the previous week. The four-week moving average rose by 1.8 percent. The refinance share of mortgage activity decreased to 43.4 percent of total applications from 44.0 percent the previous week.
The seasonally adjusted Purchase Index increased by 3.2 percent to 314.5 from one week earlier. The Conventional Purchase Index increased by 0.7 percent while the Government Purchase Index (largely FHA) increased by 9.9 percent. The four-week moving average fell by 4.1 percent. Data for government applications were revised from the first week of June through the last week of September. As a result, some historical series were revised.
The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.99 percent from 6.07 percent, with points decreasing to 1.09 from 1.12 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.71 percent from 5.82 percent, with points increasing to 1.16 from 1.11 (including the origination fee) for 80 percent LTV loans.
The average contract interest rate for one-year adjustable-rate mortgages remained unchanged at 6.60 percent, with points increasing to 0.37 from 0.33 (including the origination fee) for 80 percent LTV loans. The ARM share of activity decreased to 2.3 percent from 2.5 percent of total applications from the previous week.
The survey covers 50 percent of all U.S. retail residential mortgage originations and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.
Fed Cuts Funds Rate to 1.5 Percent
MBA (10/8/2008 ) Sorohan, Mike
The Federal Open Market Committee this morning, in concurrent action with other central banks worldwide, cut the federal funds rate by 50 basis points to 1.5 percent—a move that was widely anticipated by markets, although not necessarily before the FOMC’s next scheduled meeting Oct. 28-29.
In a joint statement, the Fed; Bank of Canada, the Bank of England; the European Central Bank; Sveriges Riksbank (Sweden); and the Swiss National Bank (with a statement of support from the Bank of Japan) announced reductions in policy interest rates.
The Central Banks’ statement (http://www.federalreserve.gov/newsevents/press/monetary/20081008a.htm), said “inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices. Inflation expectations are diminishing and remain anchored to price stability. The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability. Some easing of global monetary conditions is therefore warranted.”
The FOMC’s decision to lower its target for the federal funds rate to 1.5 percent came “in light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures.”
Despite previous actions by the Fed and other central banks, as well as legislative remedies approved by Congress in recent weeks, the U.S. and global markets continue to deteriorate, sparking fears of a worldwide recession. The Dow Jones Industrial Average fell by 5.1 percent yesterday; the 508-point drop marked the fifth consecutive decline. In October alone, the DJIA has fallen by more than 15 percent. Other key indicies, such as the Standard & Poor’s 500, have seen similar drops.
The crisis is hitting consumers as well; the Congressional Budget Office yesterday said that over the past 15 months, Americans’ retirement savings have taken a $2 trillion hit—a loss of value of nearly 20 percent.
“Incoming economic data suggest that the pace of economic activity has slowed markedly in recent months,” the FOMC said. “Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit. Inflation has been high, but the Committee believes that the decline in energy and other commodity prices and the weaker prospects for economic activity have reduced the upside risks to inflation.”
The FOMC policy action came by unanimous consent.
The Federal Open Market Committee this morning, in concurrent action with other central banks worldwide, cut the federal funds rate by 50 basis points to 1.5 percent—a move that was widely anticipated by markets, although not necessarily before the FOMC’s next scheduled meeting Oct. 28-29.
In a joint statement, the Fed; Bank of Canada, the Bank of England; the European Central Bank; Sveriges Riksbank (Sweden); and the Swiss National Bank (with a statement of support from the Bank of Japan) announced reductions in policy interest rates.
The Central Banks’ statement (http://www.federalreserve.gov/newsevents/press/monetary/20081008a.htm), said “inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices. Inflation expectations are diminishing and remain anchored to price stability. The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability. Some easing of global monetary conditions is therefore warranted.”
The FOMC’s decision to lower its target for the federal funds rate to 1.5 percent came “in light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures.”
Despite previous actions by the Fed and other central banks, as well as legislative remedies approved by Congress in recent weeks, the U.S. and global markets continue to deteriorate, sparking fears of a worldwide recession. The Dow Jones Industrial Average fell by 5.1 percent yesterday; the 508-point drop marked the fifth consecutive decline. In October alone, the DJIA has fallen by more than 15 percent. Other key indicies, such as the Standard & Poor’s 500, have seen similar drops.
The crisis is hitting consumers as well; the Congressional Budget Office yesterday said that over the past 15 months, Americans’ retirement savings have taken a $2 trillion hit—a loss of value of nearly 20 percent.
“Incoming economic data suggest that the pace of economic activity has slowed markedly in recent months,” the FOMC said. “Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit. Inflation has been high, but the Committee believes that the decline in energy and other commodity prices and the weaker prospects for economic activity have reduced the upside risks to inflation.”
The FOMC policy action came by unanimous consent.
Citi Shrinks U.S. Mortgage Broker Business--Report
Reuters (10/08/08); D'Souza, Savio
Citigroup is eliminating roughly 5 percent of jobs in its U.S. mortgage operations. In addition to cutting the 500 jobs, mostly sales and support positions, Citigroup says it will sever ties with 8,500 independent mortgage brokers but will continue to do business with 1,000 others. "This new model is dependent on doing business with the right brokers via a low-cost, high-touch approach," says Mark Rodgers, a company spokesman. Citigroup's remaining wholesale mortgage business will operate out of St. Louis and Dallas.
Citigroup is eliminating roughly 5 percent of jobs in its U.S. mortgage operations. In addition to cutting the 500 jobs, mostly sales and support positions, Citigroup says it will sever ties with 8,500 independent mortgage brokers but will continue to do business with 1,000 others. "This new model is dependent on doing business with the right brokers via a low-cost, high-touch approach," says Mark Rodgers, a company spokesman. Citigroup's remaining wholesale mortgage business will operate out of St. Louis and Dallas.
Plots & Ploys: Nobody's Home
Wall Street Journal (10/08/08) P. C12; Frangos, Alex
A new Reis Inc. study confirms that the U.S. apartment-vacancy rate in this year's July-through-September period climbed for the third consecutive quarter, settling at 6.1 percent. Vacancies are on the rise even as the Census Bureau reports that homeownership has fallen to a seasonally adjusted rate of 68.1 percent from its 2004 peak of 69.3 percent. Reis researchers attribute this to apartment fundamentals being so closely linked to job growth. Weak employment numbers traditionally have meant more and more families doubling up with relatives and adult children remaining at home instead of moving out on their own.
A new Reis Inc. study confirms that the U.S. apartment-vacancy rate in this year's July-through-September period climbed for the third consecutive quarter, settling at 6.1 percent. Vacancies are on the rise even as the Census Bureau reports that homeownership has fallen to a seasonally adjusted rate of 68.1 percent from its 2004 peak of 69.3 percent. Reis researchers attribute this to apartment fundamentals being so closely linked to job growth. Weak employment numbers traditionally have meant more and more families doubling up with relatives and adult children remaining at home instead of moving out on their own.
McCain Mortgage Plan Would Bail Out Homeowners
Los Angeles Times (10/08/08); Drogin, Bob; Reynolds, Maura
Sen. John McCain, R-Ariz., proposed during the Oct. 7 presidential debate to have the federal government spend $300 billion to help keep struggling borrowers in their homes. As part of the American Homeownership Resurgence Plan, the government would pay homeowners and mortgage lenders in full for their failing mortgages. The initiative would enable lenders to remove the bad mortgages from their balance sheets, and homeowners would be able to refinance into fixed-rate loans insured by the government. McCain said the plan is expensive, "but we all know, my friends, until we stabilize home values in America, we're never going to start turning around and creating jobs and fixing the economy."
Sen. John McCain, R-Ariz., proposed during the Oct. 7 presidential debate to have the federal government spend $300 billion to help keep struggling borrowers in their homes. As part of the American Homeownership Resurgence Plan, the government would pay homeowners and mortgage lenders in full for their failing mortgages. The initiative would enable lenders to remove the bad mortgages from their balance sheets, and homeowners would be able to refinance into fixed-rate loans insured by the government. McCain said the plan is expensive, "but we all know, my friends, until we stabilize home values in America, we're never going to start turning around and creating jobs and fixing the economy."
MBA Study Shows Mortgage Industry Production Profits Fell Again in 2007
RISMedia (10/08/08)
The Mortgage Bankers Association's 2008 Cost Study indicates an average loss of $560 per lender per loan in 2007, versus a $50-per-loan loss the prior year, while production operating expenses bumped up 7 percent to $3,663 per loan. The report also documents a drop in pre-tax net financial income per lender to $0.9 million on average from $6.4 million over the same time span, while net cost to originate rose to $2,655 from $2,476. Additionally, net warehousing income declined to $175 per loan from $245 per loan; and net marketing income decreased to $1,920 per loan from $2,180 per loan. Marina Walsh, MBA's associate vice president of research and economics, notes that the plunge in production profits is "a continuation of a downward trend that began in 2004."
The Mortgage Bankers Association's 2008 Cost Study indicates an average loss of $560 per lender per loan in 2007, versus a $50-per-loan loss the prior year, while production operating expenses bumped up 7 percent to $3,663 per loan. The report also documents a drop in pre-tax net financial income per lender to $0.9 million on average from $6.4 million over the same time span, while net cost to originate rose to $2,655 from $2,476. Additionally, net warehousing income declined to $175 per loan from $245 per loan; and net marketing income decreased to $1,920 per loan from $2,180 per loan. Marina Walsh, MBA's associate vice president of research and economics, notes that the plunge in production profits is "a continuation of a downward trend that began in 2004."
Fannie, FHLB of Chicago Have a Loan-Buying Deal
American Banker (10/08/08) P. 13; Berry, Kate
The Federal Home Loan Bank of Chicago launched its Mortgage Partnership Finance program more than 10 years ago to compete directly with Fannie Mae and Freddie Mac; but since the bank was forced to cease the purchase of 15- and 30-year mortgages from its members in July, it has had to assume the risk of holding such loans on its balance sheet. However, the FHLB's risks will be lowered due to a new partnership with Fannie Mae, which will purchase its mortgages. Federal Housing Finance Agency director James Lockhart says the arrangement will benefit Fannie Mae, as it "may find it more efficient to manage one relationship--with the FHLBank of Chicago--than to work with a number of smaller, individual institutions."
The Federal Home Loan Bank of Chicago launched its Mortgage Partnership Finance program more than 10 years ago to compete directly with Fannie Mae and Freddie Mac; but since the bank was forced to cease the purchase of 15- and 30-year mortgages from its members in July, it has had to assume the risk of holding such loans on its balance sheet. However, the FHLB's risks will be lowered due to a new partnership with Fannie Mae, which will purchase its mortgages. Federal Housing Finance Agency director James Lockhart says the arrangement will benefit Fannie Mae, as it "may find it more efficient to manage one relationship--with the FHLBank of Chicago--than to work with a number of smaller, individual institutions."
States Call for Adoption of Mortgage-Loan Help
Wall Street Journal (10/08/08) P. A5; Simon, Ruth
A letter to the nation's biggest subprime mortgage servicers signed by attorneys general in Arizona, California, Illinois, Iowa, Massachusetts, Michigan, New York, North Carolina, Ohio and Texas urge them to embrace a "comprehensive, streamlined and effective loan modification program" similar to the one announced recently by Bank of America. According to Illinois Attorney General Lisa Madigan, "If the largest lender in the country understands the value of this program for its mortgage customers and the overall economy, so should other lenders." The Bank of America program will focus on subprime adjustable-rate mortgages and option ARMs and could involve lowering the loan amount or interest rate and ensuring borrowers devote no more than 34 percent of their monthly earnings to mortgage payments. "Our first approach is to work with everybody. Later on, if it is necessary, we would consider litigation," says Iowa Attorney General Thomas Miller, who has been in contact with three large mortgage servicers so far.
A letter to the nation's biggest subprime mortgage servicers signed by attorneys general in Arizona, California, Illinois, Iowa, Massachusetts, Michigan, New York, North Carolina, Ohio and Texas urge them to embrace a "comprehensive, streamlined and effective loan modification program" similar to the one announced recently by Bank of America. According to Illinois Attorney General Lisa Madigan, "If the largest lender in the country understands the value of this program for its mortgage customers and the overall economy, so should other lenders." The Bank of America program will focus on subprime adjustable-rate mortgages and option ARMs and could involve lowering the loan amount or interest rate and ensuring borrowers devote no more than 34 percent of their monthly earnings to mortgage payments. "Our first approach is to work with everybody. Later on, if it is necessary, we would consider litigation," says Iowa Attorney General Thomas Miller, who has been in contact with three large mortgage servicers so far.
Housing Pain Gauge: Nearly 1 in 6 Owners 'Under Water'
Wall Street Journal (10/08/08) P. A5; Hagerty, James R.; Simon, Ruth
Moody's Economy.com says 16 percent of households--or about 12 million--owe more on their mortgages than their homes are worth, leading to concerns about higher default and foreclosure rates down the road and further declines in consumer spending. A report from Zillow.com indicates that 29 percent of homeowners who obtained loans during the last five years are under water, and the Mortgage Bankers Association reports a jump in mortgages 30 days or more past due to 9.16 percent in the second quarter from 6.52 percent during the same period in 2007. However, experts stress that 64 million homeowners have equity in their properties, and most homeowners continue to make timely mortgage payments. Of those homeowners with equity, 40 million have properties that are worth more than their mortgage balances; and 24 million have completely repaid their home loans.
Moody's Economy.com says 16 percent of households--or about 12 million--owe more on their mortgages than their homes are worth, leading to concerns about higher default and foreclosure rates down the road and further declines in consumer spending. A report from Zillow.com indicates that 29 percent of homeowners who obtained loans during the last five years are under water, and the Mortgage Bankers Association reports a jump in mortgages 30 days or more past due to 9.16 percent in the second quarter from 6.52 percent during the same period in 2007. However, experts stress that 64 million homeowners have equity in their properties, and most homeowners continue to make timely mortgage payments. Of those homeowners with equity, 40 million have properties that are worth more than their mortgage balances; and 24 million have completely repaid their home loans.
Job Growth, Funding Key Factors in CMBS Refinance
MBA (10/7/2008 ) Murray, Michael
Borrower access to capital and job growth rates raised concerns about delinquencies and refinance capabilities for commercial mortgage-backed securities.
“It is taking borrowers longer to find financing,” said Tricia Hall, managing director at Barclays Capital, New York, speaking in a CMSA quarterly webast. “We are in an ever changing landscape that is not something that I am going to pretend has stabilized at this point.”
Mark Peterson, director of Principal Real Estate Investors, Des Moines, said his firm remains “pleasantly surprised” at the ease of refinance during the first three quarters of the year, but it has other concerns.
“Our bigger concern is with the changing landscape in the last few weeks, especially at regional banks and institutional lending going forward now, is what kind of run rates do we expect as far as loans getting refinanced,” Peterson said.
Despite available funding sources, Peterson said he was concerned if borrowers could access those funds because the industry will need to refinance nearly $23 billion in CMBS in 2009.
“The one potential bright spot is that we have heard from different sources that there is money being put together in different fund formats to help fill the void that conduit lenders left behind,” Peterson said. “The spreads for those types of lenders are going to be much wider than what borrowers were used to during the conduit days. The risk is going to be if there is enough capital there to support the cost of funds going forward from these sources of money.”
Mark Warner, managing director at Black Rock, New York, said the next couple of months will rely not only on recently passed legislation—the Emergency Economic Stabilization Act of 2008—but job growth. He said CMBS now falls beyond “technicals” of deleveraging, lack of liquidity and losses of certain counterparties to national job losses and locations for aggregate demand.
The Bureau of Labor Statistics reported unemployment remained at 6.1 percent for August, but 159,000 jobs were lost. The Conference Board Employment Trends Index continued its decline in September, suggesting even more losses to come in the labor market. The index fell in September to 108.4, down 0.8 percent from the August revised figure of 109.3, and down nearly 10 percent from a year ago.
“If we only go from 6 percent unemployment to 7 percent, we will be far better off than if it starts to creep higher,” Warner said.
“There is no capital here available at 11 [percent] and 12 [percent] to refinance the balloon,” Peterson said. “The term risk is real here, but servicers are going to be more apt to work with borrowers, and lower supply in the market will help restrain vacancies and rents going down too far. To see defaults going to where the market is currently pricing, it seems like there are two or three steps you have to take before that actually occurs.”
Fitch Ratings, New York, said nearly half of all CMBS delinquent loan balances were from top five CMBS delinquent states, including Texas with a 16.5 percent rate, Florida and Michigan at 11 percent, Georgia at 5.3 percent and Ohio with 4.8 percent delinquencies.
“Just mathematically, [delinquencies] have to increase because there has been no new issuance this year,” said Susan Merrick, managing director at Fitch.
The Mortgage Bankers Association reported CMBS delinquencies 30 or more days delinquent or in REO were up to .53 percent after the first half of the year, up from .40 percent at the end of the first quarter, based on unpaid principal balance of loans.
Fitch showed CMBS delinquencies for 60 or more days up to .44 percent in August from .33 percent at the end of March.
“We will have a better estimate of the direction of the economy and the magnitude of the recession in the next couple of months to have a better idea about the magnitude in the rise of delinquencies," Merrick said. "You should anticipate tremendous increases in defaults just because of economic conditions. At the moment, overall, while we are not comfortable with tremendous uncertainty in the market, we do think that commercial real estate has performed very well and is not, at the moment, on the precipice of a tremendous decline in performance.”
Warner said CMBS remains healthy despite negative headlines and has until 2010-2011 for properties to grow into a refinancing size they would face at their balloon date.
“Delinquencies are certainly going to rise,” Warner said. “They are at a very low rate, and I am sure there will be negative press—delinquencies are going to triple and get back to where they were in 2002 or early 2003. It is still a very low absolute level even though the level will have gone up.”
Borrower access to capital and job growth rates raised concerns about delinquencies and refinance capabilities for commercial mortgage-backed securities.
“It is taking borrowers longer to find financing,” said Tricia Hall, managing director at Barclays Capital, New York, speaking in a CMSA quarterly webast. “We are in an ever changing landscape that is not something that I am going to pretend has stabilized at this point.”
Mark Peterson, director of Principal Real Estate Investors, Des Moines, said his firm remains “pleasantly surprised” at the ease of refinance during the first three quarters of the year, but it has other concerns.
“Our bigger concern is with the changing landscape in the last few weeks, especially at regional banks and institutional lending going forward now, is what kind of run rates do we expect as far as loans getting refinanced,” Peterson said.
Despite available funding sources, Peterson said he was concerned if borrowers could access those funds because the industry will need to refinance nearly $23 billion in CMBS in 2009.
“The one potential bright spot is that we have heard from different sources that there is money being put together in different fund formats to help fill the void that conduit lenders left behind,” Peterson said. “The spreads for those types of lenders are going to be much wider than what borrowers were used to during the conduit days. The risk is going to be if there is enough capital there to support the cost of funds going forward from these sources of money.”
Mark Warner, managing director at Black Rock, New York, said the next couple of months will rely not only on recently passed legislation—the Emergency Economic Stabilization Act of 2008—but job growth. He said CMBS now falls beyond “technicals” of deleveraging, lack of liquidity and losses of certain counterparties to national job losses and locations for aggregate demand.
The Bureau of Labor Statistics reported unemployment remained at 6.1 percent for August, but 159,000 jobs were lost. The Conference Board Employment Trends Index continued its decline in September, suggesting even more losses to come in the labor market. The index fell in September to 108.4, down 0.8 percent from the August revised figure of 109.3, and down nearly 10 percent from a year ago.
“If we only go from 6 percent unemployment to 7 percent, we will be far better off than if it starts to creep higher,” Warner said.
“There is no capital here available at 11 [percent] and 12 [percent] to refinance the balloon,” Peterson said. “The term risk is real here, but servicers are going to be more apt to work with borrowers, and lower supply in the market will help restrain vacancies and rents going down too far. To see defaults going to where the market is currently pricing, it seems like there are two or three steps you have to take before that actually occurs.”
Fitch Ratings, New York, said nearly half of all CMBS delinquent loan balances were from top five CMBS delinquent states, including Texas with a 16.5 percent rate, Florida and Michigan at 11 percent, Georgia at 5.3 percent and Ohio with 4.8 percent delinquencies.
“Just mathematically, [delinquencies] have to increase because there has been no new issuance this year,” said Susan Merrick, managing director at Fitch.
The Mortgage Bankers Association reported CMBS delinquencies 30 or more days delinquent or in REO were up to .53 percent after the first half of the year, up from .40 percent at the end of the first quarter, based on unpaid principal balance of loans.
Fitch showed CMBS delinquencies for 60 or more days up to .44 percent in August from .33 percent at the end of March.
“We will have a better estimate of the direction of the economy and the magnitude of the recession in the next couple of months to have a better idea about the magnitude in the rise of delinquencies," Merrick said. "You should anticipate tremendous increases in defaults just because of economic conditions. At the moment, overall, while we are not comfortable with tremendous uncertainty in the market, we do think that commercial real estate has performed very well and is not, at the moment, on the precipice of a tremendous decline in performance.”
Warner said CMBS remains healthy despite negative headlines and has until 2010-2011 for properties to grow into a refinancing size they would face at their balloon date.
“Delinquencies are certainly going to rise,” Warner said. “They are at a very low rate, and I am sure there will be negative press—delinquencies are going to triple and get back to where they were in 2002 or early 2003. It is still a very low absolute level even though the level will have gone up.”
Residential Briefs
MBA (10/7/2008 ) Palaparty, Vijay
OpenClose Expands Decision Assist
OpenClose, West Palm Beach, Fla., developers of web-based mortgage lending software, expanded its loan pricing engine and product suite, Decision Assist. The enhancement turns the pricing engine into four products targeted to mortgage professionals.
Decision Assist Broker is designed for individual users; Express targets small groups; Professional is available for mid-sized companies; and Enterprise meets decisioning needs of large companies. The Decision Assist product suite enables mortgage originators to identify the appropriate loan product for a borrower, speed funding and increase profit. With four products, the suite also allows Decision Assist to grow with loan volume.
Wingspan Portfolio Advisors Launches Servicing Business
Wingspan Portfolio Advisors LLC, Carrollton, Texas, a mortgage servicing company, launched to assist lenders and servicers who have seriously delinquent loans. The company, which applies a borrower-focused servicing methodology, seeks to mitigate losses and help borrowers achieve full payment status.
MortgageCadence Engages Law Firm for Legal Support, Guidance
Mortgage Cadence Inc., Denver, a provider of enterprising lending technology for the financial services industry, engaged Weiner Brodsky Sidman Kider PC, Washington, D.C., to provide insight and analysis on federal and state compliance and regulatory matters. The relationship strengthens Mortgage Cadence’s Finale, which offers technology for forward and reverse mortgage lending.
1st Metropolitan Mortgage Introduces BrightGreen Mortgage Program
1st Metropolitan Mortgage, Charlotte, N.C., a national mortgage originator, introduced its national BrightGreen Mortgage program. The program will give originators tools and support to produce mortgages in a more environmentally-friendly manner while aiming to save borrowers time and money. Participating branches nationwide will operate in greener, sustainable efforts.
Optimal Blue, AllRegs Announce Integrated Technology
Optimal Blue, Plano, Texas, developer of a web-based platform that couples decisioning technology with content management for the mortgage industry, has combined resources with AllRegs, Eagan, Minn., provider of information for the mortgage industry to provide integrated technology for loan officers.
Optimal Blue’s users of its product eligibility and pricing engine can access AllRegs LoanLibrary product, which features 2,600 products and 60 investors. Optimal Blue maintains, updates and delivers current mortgage product content accessed by its customers through its automated secondary marketing platform.
First Houston Changes Name to Envoy Mortgage
First Houston Mortgage, Houston, a mortgage-banking firm licensed in 20 states, changed its corporate name to Envoy Mortgage. As part of the company’s effort to rebrand itself from a regional company to a national lending organization, First Houston Mortgage’s leadership felt a name change would more appropriately reflect this corporate expansion.
RamQuest Announces Complete Closing Version 6.1.1
RamQuest Software Inc., Plano, Texas, developer of the Closing Market digital network, released version 6.1.1 of its technology for title and escrow production, Complete Closing Enterprise. Complete Closing Enterprise is the foundation for RamQuest's product suite and provides title companies with tools to manage the title insurance process including order processing, commitment policy, escrow accounting and HUD-1 generation.
RamQuest added Multiple Bank Account capability for title companies in the latest update. Multiple Bank Accounts gives title companies the ability to associate multiple banks accounts with a file. Complete Closing 6.1.1 also adds additional controls regulating designated access to documents published to the web.
Xenos Releases Enterprise Server
Xenos Group Inc., Toronto, launched Enterprise Server, electronic information infrastructure and management technology. The server provides business information architecture and flow through Streamlining Enterprise Information Supply Chains, eliminating redundancies in information storage in a variety of formats.
The server-based infrastructure technology delivers organizational control over resources for data and document transformation from a central location in the enterprise. Xenos ES consolidates disparate and/or legacy technologies, systems and data located across the enterprise and integrates with existing components of an organization’s information supply chains.
FNC Offers IntelliReal AVM Product
FNC Inc., Oxford, Miss., a technology company for mortgage compliance, entered into alliance with IntelliReal, Lakewood, Colo., adding the automated valuation model provider to its list of value-added services.
IntelliReal’s AVM includes multiple listing service data and coverage provides access to more than 77 million property records nationwide. The IntelliReal AVM will also be available to regional and community banks that use FNC’s Collateral Headquarters platform.
Zillow Publishes Professional Directory
Real estate web site Zillow.com, Seattle, published the Zillow Professional Directory, a free resource for real estate professionals to market their services to Zillow's visitors. The Zillow Professional Directory helps consumers interested in buying, selling or conducting home renovations, to find and connect with a local professional to fit their needs.
The Zillow Professional Directory includes the more than 150,000 real estate professionals who currently have an active profile on Zillow. The Directory is open to any professional who caters to local homeowners, buyers or sellers, including real estate agents, stagers, lenders, contractors, landscapers or architects. Consumers can then search for professionals by specialty, business name, city, zip code or neighborhood.
Andrew Davidson Offers Breakpoint Analysis
Andrew Davidson & Co., New York announced Breakpoint Analysis, a means to assess credit risk of mortgage bonds. AD&Co is a provider of models of borrower behavior and risk analytics for fixed income investors of mortgage- and asset-backed securities, and an advisor in the areas of risk management, valuation of MBS and mortgage derivatives.
Breakpoint Analysis provides an alternative to a credit rating of the asset as an up-to-date measure of credit risk. A Breakpoint Ratio is the ratio of the collateral losses required to cause the first dollar of a bond's principal write-down to the projected loss in the base case economic scenario. A grid of stress scenarios is defined and prepayments, defaults, losses and bond write-downs are generated for each of the scenarios using AD&Co's LoanDynamics Model.
OpenClose Expands Decision Assist
OpenClose, West Palm Beach, Fla., developers of web-based mortgage lending software, expanded its loan pricing engine and product suite, Decision Assist. The enhancement turns the pricing engine into four products targeted to mortgage professionals.
Decision Assist Broker is designed for individual users; Express targets small groups; Professional is available for mid-sized companies; and Enterprise meets decisioning needs of large companies. The Decision Assist product suite enables mortgage originators to identify the appropriate loan product for a borrower, speed funding and increase profit. With four products, the suite also allows Decision Assist to grow with loan volume.
Wingspan Portfolio Advisors Launches Servicing Business
Wingspan Portfolio Advisors LLC, Carrollton, Texas, a mortgage servicing company, launched to assist lenders and servicers who have seriously delinquent loans. The company, which applies a borrower-focused servicing methodology, seeks to mitigate losses and help borrowers achieve full payment status.
MortgageCadence Engages Law Firm for Legal Support, Guidance
Mortgage Cadence Inc., Denver, a provider of enterprising lending technology for the financial services industry, engaged Weiner Brodsky Sidman Kider PC, Washington, D.C., to provide insight and analysis on federal and state compliance and regulatory matters. The relationship strengthens Mortgage Cadence’s Finale, which offers technology for forward and reverse mortgage lending.
1st Metropolitan Mortgage Introduces BrightGreen Mortgage Program
1st Metropolitan Mortgage, Charlotte, N.C., a national mortgage originator, introduced its national BrightGreen Mortgage program. The program will give originators tools and support to produce mortgages in a more environmentally-friendly manner while aiming to save borrowers time and money. Participating branches nationwide will operate in greener, sustainable efforts.
Optimal Blue, AllRegs Announce Integrated Technology
Optimal Blue, Plano, Texas, developer of a web-based platform that couples decisioning technology with content management for the mortgage industry, has combined resources with AllRegs, Eagan, Minn., provider of information for the mortgage industry to provide integrated technology for loan officers.
Optimal Blue’s users of its product eligibility and pricing engine can access AllRegs LoanLibrary product, which features 2,600 products and 60 investors. Optimal Blue maintains, updates and delivers current mortgage product content accessed by its customers through its automated secondary marketing platform.
First Houston Changes Name to Envoy Mortgage
First Houston Mortgage, Houston, a mortgage-banking firm licensed in 20 states, changed its corporate name to Envoy Mortgage. As part of the company’s effort to rebrand itself from a regional company to a national lending organization, First Houston Mortgage’s leadership felt a name change would more appropriately reflect this corporate expansion.
RamQuest Announces Complete Closing Version 6.1.1
RamQuest Software Inc., Plano, Texas, developer of the Closing Market digital network, released version 6.1.1 of its technology for title and escrow production, Complete Closing Enterprise. Complete Closing Enterprise is the foundation for RamQuest's product suite and provides title companies with tools to manage the title insurance process including order processing, commitment policy, escrow accounting and HUD-1 generation.
RamQuest added Multiple Bank Account capability for title companies in the latest update. Multiple Bank Accounts gives title companies the ability to associate multiple banks accounts with a file. Complete Closing 6.1.1 also adds additional controls regulating designated access to documents published to the web.
Xenos Releases Enterprise Server
Xenos Group Inc., Toronto, launched Enterprise Server, electronic information infrastructure and management technology. The server provides business information architecture and flow through Streamlining Enterprise Information Supply Chains, eliminating redundancies in information storage in a variety of formats.
The server-based infrastructure technology delivers organizational control over resources for data and document transformation from a central location in the enterprise. Xenos ES consolidates disparate and/or legacy technologies, systems and data located across the enterprise and integrates with existing components of an organization’s information supply chains.
FNC Offers IntelliReal AVM Product
FNC Inc., Oxford, Miss., a technology company for mortgage compliance, entered into alliance with IntelliReal, Lakewood, Colo., adding the automated valuation model provider to its list of value-added services.
IntelliReal’s AVM includes multiple listing service data and coverage provides access to more than 77 million property records nationwide. The IntelliReal AVM will also be available to regional and community banks that use FNC’s Collateral Headquarters platform.
Zillow Publishes Professional Directory
Real estate web site Zillow.com, Seattle, published the Zillow Professional Directory, a free resource for real estate professionals to market their services to Zillow's visitors. The Zillow Professional Directory helps consumers interested in buying, selling or conducting home renovations, to find and connect with a local professional to fit their needs.
The Zillow Professional Directory includes the more than 150,000 real estate professionals who currently have an active profile on Zillow. The Directory is open to any professional who caters to local homeowners, buyers or sellers, including real estate agents, stagers, lenders, contractors, landscapers or architects. Consumers can then search for professionals by specialty, business name, city, zip code or neighborhood.
Andrew Davidson Offers Breakpoint Analysis
Andrew Davidson & Co., New York announced Breakpoint Analysis, a means to assess credit risk of mortgage bonds. AD&Co is a provider of models of borrower behavior and risk analytics for fixed income investors of mortgage- and asset-backed securities, and an advisor in the areas of risk management, valuation of MBS and mortgage derivatives.
Breakpoint Analysis provides an alternative to a credit rating of the asset as an up-to-date measure of credit risk. A Breakpoint Ratio is the ratio of the collateral losses required to cause the first dollar of a bond's principal write-down to the projected loss in the base case economic scenario. A grid of stress scenarios is defined and prepayments, defaults, losses and bond write-downs are generated for each of the scenarios using AD&Co's LoanDynamics Model.
Business Owners Pessimism Grows Despite Bill's Passage
MBA (10/7/2008 ) Palaparty, Vijay
U.S. business owners expressed concerns about credit availability, recession and energy prices in a recent survey from PNC Financial Services Group Inc., Pittsburgh, Pa. PNC said the pessimism reached a record high.
Twenty-nine percent of small business owners expressed doubt about their company’s prospects during the next six month, compared to 21 percent in the spring and 10 percent last fall. They also expressed concern over tighter credit availability; 25 percent, compared to 18 percent in the spring, said they find more difficulty in obtaining credit in the present. Conversely, 7 percent said they can access credit more easily now, down 7 percent from 14 percent reported in the spring.
The possibility of recession ranked second at 71 percent among businesses as having a negative effect on their company. Sixty-five percent shared similar concern in terms of the effects of inflation. Seventy-four respondents said the possibility of higher energy prices will have a negative effect on their company during the next six months.
MBA Chief Operating Officer John Courson , noting passage last week of H.R. 1424, the Emergency Economic Stabilization Act of 2008, said the ongoing credit crunch has severely impacted the ability of individuals and businesses to borrow, and has threatened to slow down the entire U.S. economy.
“This will enable financial institutions to offer credit so individuals can purchase homes and other items and businesses can continue to operate and grow,” Courson said.
“The U.S. economy is likely to remain weak through the middle of next year,” said Stuart Hoffman, chief economist for PNC. “Enactment of the economic stabilization plan will help stem more substantial deterioration of credit availability for small businesses as well as for larger businesses and consumers. This will help to prevent further weakening of important contributions to job growth and overall economic activity made by small businesses.”
Sandy Baruah, acting administrator of the U.S. Small Business Administration, said, in response to the economic stabilization plan, that America’s competitive advantage lies in its capacity to innovate but that without capital, ideas ream only as ideas. “Without capital, innovators and entrepreneurs many may not have the capital they need to do business,” he said. “Full functioning credit markets are critical to all of us—as business owners, as employees, as homeowners and as consumers.”
The National Small Business Association said the increase on federally-insured bank deposits to $250,000 from $100,000 will ease concerns of small business owners who regularly have in excess of $100,000 in their bank for operating costs.
Last month, the NSBA reported that 67 percent of small business owners said they have been impacted by the credit crunch. Furthermore, it found that 63 percent said they have been hit by worsening credit card terms and 32 percent said they suffered from tougher bank loan terms.
“To the extent that the plan reduces turmoil in the housing market, it will help the many small business owners who use a personal residence as collateral for business investments and don’t want to be in a position where the price of their home is less than their mortgage,” Baruah said. “If innovators and entrepreneurs are the engine of the economy, financing is the grease that allows the engine to run. The financial rescue plan is directed at the heart of our economy and the heart of Main Street. It will have a direct impact on the ability of small businesses to meet the challenges of innovation in the 21st century."
U.S. business owners expressed concerns about credit availability, recession and energy prices in a recent survey from PNC Financial Services Group Inc., Pittsburgh, Pa. PNC said the pessimism reached a record high.
Twenty-nine percent of small business owners expressed doubt about their company’s prospects during the next six month, compared to 21 percent in the spring and 10 percent last fall. They also expressed concern over tighter credit availability; 25 percent, compared to 18 percent in the spring, said they find more difficulty in obtaining credit in the present. Conversely, 7 percent said they can access credit more easily now, down 7 percent from 14 percent reported in the spring.
The possibility of recession ranked second at 71 percent among businesses as having a negative effect on their company. Sixty-five percent shared similar concern in terms of the effects of inflation. Seventy-four respondents said the possibility of higher energy prices will have a negative effect on their company during the next six months.
MBA Chief Operating Officer John Courson , noting passage last week of H.R. 1424, the Emergency Economic Stabilization Act of 2008, said the ongoing credit crunch has severely impacted the ability of individuals and businesses to borrow, and has threatened to slow down the entire U.S. economy.
“This will enable financial institutions to offer credit so individuals can purchase homes and other items and businesses can continue to operate and grow,” Courson said.
“The U.S. economy is likely to remain weak through the middle of next year,” said Stuart Hoffman, chief economist for PNC. “Enactment of the economic stabilization plan will help stem more substantial deterioration of credit availability for small businesses as well as for larger businesses and consumers. This will help to prevent further weakening of important contributions to job growth and overall economic activity made by small businesses.”
Sandy Baruah, acting administrator of the U.S. Small Business Administration, said, in response to the economic stabilization plan, that America’s competitive advantage lies in its capacity to innovate but that without capital, ideas ream only as ideas. “Without capital, innovators and entrepreneurs many may not have the capital they need to do business,” he said. “Full functioning credit markets are critical to all of us—as business owners, as employees, as homeowners and as consumers.”
The National Small Business Association said the increase on federally-insured bank deposits to $250,000 from $100,000 will ease concerns of small business owners who regularly have in excess of $100,000 in their bank for operating costs.
Last month, the NSBA reported that 67 percent of small business owners said they have been impacted by the credit crunch. Furthermore, it found that 63 percent said they have been hit by worsening credit card terms and 32 percent said they suffered from tougher bank loan terms.
“To the extent that the plan reduces turmoil in the housing market, it will help the many small business owners who use a personal residence as collateral for business investments and don’t want to be in a position where the price of their home is less than their mortgage,” Baruah said. “If innovators and entrepreneurs are the engine of the economy, financing is the grease that allows the engine to run. The financial rescue plan is directed at the heart of our economy and the heart of Main Street. It will have a direct impact on the ability of small businesses to meet the challenges of innovation in the 21st century."
MBA Study: Industry Profits Decline Again in 2007
MBA (10/7/2008 ) Kemp, Carolyn
Mortgage companies lost an average of $560 on every loan they originated last year, a drop from the $50 per loan they lost in 2006, according to the Mortgage Bankers Association's annual Cost Study.
While loan origination and ancillary fees grew on a per-loan basis, they did not keep pace with increases in production operating expenses, which grew by 7 percent to $3,663 per loan.
“Once again, the drop in gross production operating expenses did not keep pace with the drop in volume,” said Marina Walsh, MBA associate vice president of research and economics. “As a result, production profits declined in 2007, a continuation of a downward trend that began in 2004.”
MBA's 2008 Cost Study is based on 2007 data and is the 30th in an annual series of reports on the income and expenses associated with the origination and servicing of one- to four-unit residential mortgage loans by mortgage banking companies. The study is based on a sample of 180 mortgage banking companies that originate and service loans.
Study highlights include:
• Overall, the average firm in the Cost Study sample posted pre-tax net financial income of $0.9 million in 2007, compared to $6.4 million in 2006.
• On a per-loan basis, the “net cost to originate” was $2,655 in 2007 compared to $2,476 in 2006. The “net cost to originate” includes all origination operating costs and commissions minus all fee income, but excludes secondary marketing gains, capitalized servicing, servicing released premiums and warehouse interest spread.
• Retail sales productivity averaged 57 loans per loan officer in 2007, compared to 62 loans per loan officer in 2006.
• Net warehousing income, which represents the net interest spread between the mortgage rate on a loan and the interest rate paid on a warehouse line of credit, dropped to $175 per loan, from $245 per loan in 2006, due to higher interest expense on warehouse lines.
• Net marketing income, which includes the gain or loss on the sale of loans in the secondary market, pricing subsidies and overages, as well as capitalized servicing and servicing released premiums, averaged $1,920 per loan in 2007 from $2,180 per loan in 2006.
• Servicing financial profits per loan rebounded to $109 per loan in 2007 primarily because of higher per-loan servicing fees (driven by higher loan balances) and lower net losses associated with mortgage servicing rights and hedging.
• Servicer productivity, measured as the number of loans serviced per servicing employee, rose to 1,398 loans serviced per servicing employee in 2007, most likely resulting from increased use of outsourcing.
• The smaller servicers continued to struggle operationally, with direct costs to service that averaged more than three times higher than the largest servicers.
The data for this report was primarily derived from the Mortgage Bankers Financial Reporting Form (or "WebMB"), a multi-agency reporting form administered by MBA, Fannie Mae, Freddie Mac and Ginnie Mae.
Mortgage companies lost an average of $560 on every loan they originated last year, a drop from the $50 per loan they lost in 2006, according to the Mortgage Bankers Association's annual Cost Study.
While loan origination and ancillary fees grew on a per-loan basis, they did not keep pace with increases in production operating expenses, which grew by 7 percent to $3,663 per loan.
“Once again, the drop in gross production operating expenses did not keep pace with the drop in volume,” said Marina Walsh, MBA associate vice president of research and economics. “As a result, production profits declined in 2007, a continuation of a downward trend that began in 2004.”
MBA's 2008 Cost Study is based on 2007 data and is the 30th in an annual series of reports on the income and expenses associated with the origination and servicing of one- to four-unit residential mortgage loans by mortgage banking companies. The study is based on a sample of 180 mortgage banking companies that originate and service loans.
Study highlights include:
• Overall, the average firm in the Cost Study sample posted pre-tax net financial income of $0.9 million in 2007, compared to $6.4 million in 2006.
• On a per-loan basis, the “net cost to originate” was $2,655 in 2007 compared to $2,476 in 2006. The “net cost to originate” includes all origination operating costs and commissions minus all fee income, but excludes secondary marketing gains, capitalized servicing, servicing released premiums and warehouse interest spread.
• Retail sales productivity averaged 57 loans per loan officer in 2007, compared to 62 loans per loan officer in 2006.
• Net warehousing income, which represents the net interest spread between the mortgage rate on a loan and the interest rate paid on a warehouse line of credit, dropped to $175 per loan, from $245 per loan in 2006, due to higher interest expense on warehouse lines.
• Net marketing income, which includes the gain or loss on the sale of loans in the secondary market, pricing subsidies and overages, as well as capitalized servicing and servicing released premiums, averaged $1,920 per loan in 2007 from $2,180 per loan in 2006.
• Servicing financial profits per loan rebounded to $109 per loan in 2007 primarily because of higher per-loan servicing fees (driven by higher loan balances) and lower net losses associated with mortgage servicing rights and hedging.
• Servicer productivity, measured as the number of loans serviced per servicing employee, rose to 1,398 loans serviced per servicing employee in 2007, most likely resulting from increased use of outsourcing.
• The smaller servicers continued to struggle operationally, with direct costs to service that averaged more than three times higher than the largest servicers.
The data for this report was primarily derived from the Mortgage Bankers Financial Reporting Form (or "WebMB"), a multi-agency reporting form administered by MBA, Fannie Mae, Freddie Mac and Ginnie Mae.
Frank: Unregulated Lenders to Blame for Economic Mess
Providence Journal (RI) (10/07/08); Needham, Cynthia
At a speech at Brown University on Oct. 6, House Financial Services Committee Chairman Barney Frank, D-Mass., said unregulated lenders and lax credit standards, as well as the failure of House Republicans to beef up lending controls while they were in power, are responsible for the housing and credit crises. He stressed that Republicans cannot point fingers at the Community Reinvestment Act and efforts to increase affordable housing, as regulated lenders write loans under the program.
At a speech at Brown University on Oct. 6, House Financial Services Committee Chairman Barney Frank, D-Mass., said unregulated lenders and lax credit standards, as well as the failure of House Republicans to beef up lending controls while they were in power, are responsible for the housing and credit crises. He stressed that Republicans cannot point fingers at the Community Reinvestment Act and efforts to increase affordable housing, as regulated lenders write loans under the program.
Bank of America to Cut Dividend, Sell Stock
Winston-Salem Journal (NC) (10/07/08)
Bank of America reports that profit skidded 68 percent to $1.18 billion in the third quarter, and the absorption of Countrywide Financial is a key reason for its poor performance. In addition to reporting net income that was lower than analysts' estimates, the bank says it will cut its dividend in half to save $1.4 billion a quarter and sell $10 billion of stock to raise capital. CEO Kenneth Lewis says the current environment is the "most difficult time for financial institutions that I have experienced in my 39 years in banking." He adds that the bank is unlikely to loosen its underwriting standards anytime soon.
Bank of America reports that profit skidded 68 percent to $1.18 billion in the third quarter, and the absorption of Countrywide Financial is a key reason for its poor performance. In addition to reporting net income that was lower than analysts' estimates, the bank says it will cut its dividend in half to save $1.4 billion a quarter and sell $10 billion of stock to raise capital. CEO Kenneth Lewis says the current environment is the "most difficult time for financial institutions that I have experienced in my 39 years in banking." He adds that the bank is unlikely to loosen its underwriting standards anytime soon.
Fannie, Freddie Debt Valued as Low as 91.5 Percent
Washington Post (10/07/08) P. D4
The largest technical default in history will force credit-default-swap investors that sold protection on bonds backed by Fannie Mae and Freddie Mac debt to shell out upwards of 8.5 cents on the dollar for contract settlements. CreditFixings.com says Fannie Mae senior unsecured notes were valued at 91.5 percent of face value and subordinated debt at 99.9 percent of face value by J.P. Morgan Chase, Deutsche Bank and 11 other credit-swap dealers that auctioned the notes. Freddie Mac senior and subordinated notes were valued at 94 cents on the dollar and 98 cents, respectively.
The largest technical default in history will force credit-default-swap investors that sold protection on bonds backed by Fannie Mae and Freddie Mac debt to shell out upwards of 8.5 cents on the dollar for contract settlements. CreditFixings.com says Fannie Mae senior unsecured notes were valued at 91.5 percent of face value and subordinated debt at 99.9 percent of face value by J.P. Morgan Chase, Deutsche Bank and 11 other credit-swap dealers that auctioned the notes. Freddie Mac senior and subordinated notes were valued at 94 cents on the dollar and 98 cents, respectively.
California Officials Try to Avoid Second Housing Hit
Wall Street Journal (10/07/08) P. A8; Rundle, Rhonda L.
Officials in California's San Bernardino and Riverside counties are searching for ways to prevent the recently passed economic stabilization bill from taking the same toll on communities as the savings-and-loan crisis two decades ago, when distressed homes flooded the market, depressed prices and transformed owner-occupied neighborhoods into rental communities. In Moreno Valley, for instance, homes worth as much as $150,000 prior to the crisis plunged to $75,000 due to rising inventory. Rep. Gary Miller, R-Calif., has proposed a bill that would allow businesses and local governments to establish regional public-private partnerships to purchase distressed properties from the Treasury to maintain their value and prevent them from being snapped up by speculators. The Treasury would hold a stake in the properties, though it remains to be seen how the partnerships would be structured.
Officials in California's San Bernardino and Riverside counties are searching for ways to prevent the recently passed economic stabilization bill from taking the same toll on communities as the savings-and-loan crisis two decades ago, when distressed homes flooded the market, depressed prices and transformed owner-occupied neighborhoods into rental communities. In Moreno Valley, for instance, homes worth as much as $150,000 prior to the crisis plunged to $75,000 due to rising inventory. Rep. Gary Miller, R-Calif., has proposed a bill that would allow businesses and local governments to establish regional public-private partnerships to purchase distressed properties from the Treasury to maintain their value and prevent them from being snapped up by speculators. The Treasury would hold a stake in the properties, though it remains to be seen how the partnerships would be structured.
Assembly OKs Bill to Prevent Foreclosures
Asbury Park Press (NJ) (10/07/08)
New Jersey's Assembly Budget Committee has approved a bill that would create a $30 million fund to finance emergency home foreclosure prevention loans, pay for financial counseling services and buy and fix up foreclosed properties. The program would charge lenders and loan servicers $2,000 to initiate foreclosure proceedings on high-cost loans, and they would not be able to back-bill the fee to borrowers. Also, homeowners facing foreclosure would have six months to renegotiate the terms of their mortgage or line up new financing. E. Robert Levy, executive director of the Mortgage Bankers Association of New Jersey, warns that the New Jersey Home Ownership Preservation Act would make foreclosure more difficult and have the consequence of deterring lenders from making mortgages.
New Jersey's Assembly Budget Committee has approved a bill that would create a $30 million fund to finance emergency home foreclosure prevention loans, pay for financial counseling services and buy and fix up foreclosed properties. The program would charge lenders and loan servicers $2,000 to initiate foreclosure proceedings on high-cost loans, and they would not be able to back-bill the fee to borrowers. Also, homeowners facing foreclosure would have six months to renegotiate the terms of their mortgage or line up new financing. E. Robert Levy, executive director of the Mortgage Bankers Association of New Jersey, warns that the New Jersey Home Ownership Preservation Act would make foreclosure more difficult and have the consequence of deterring lenders from making mortgages.
Central Bank Would Buy Companies' Unsecured Debt
New York Times (10/07/08) P. A1; Andrews, Edmund L.; Grynbaum, Michael M.
Under a radical plan being discussed with the Treasury Department, the Federal Reserve would purchase large amounts of the unsecured commercial paper issued by banks, businesses and municipalities that companies depend on to finance their daily operations. Although the move would put more taxpayer funds at risk, some Fed officials believe taking such an aggressive stance as lending continues to evaporate is a necessary plan of attack. Still, purchasing commercial paper could open the central bank to conflicts of interest--mainly because it would be juggling the goals of protecting its investment portfolio with its traditional objectives of promoting low unemployment and stable prices. Former top Fed official Vincent Reinhart remarks, "The Federal Reserve really would become the buyer of last resort, trying to jump-start the commercial paper market by taking on credit risk."
Under a radical plan being discussed with the Treasury Department, the Federal Reserve would purchase large amounts of the unsecured commercial paper issued by banks, businesses and municipalities that companies depend on to finance their daily operations. Although the move would put more taxpayer funds at risk, some Fed officials believe taking such an aggressive stance as lending continues to evaporate is a necessary plan of attack. Still, purchasing commercial paper could open the central bank to conflicts of interest--mainly because it would be juggling the goals of protecting its investment portfolio with its traditional objectives of promoting low unemployment and stable prices. Former top Fed official Vincent Reinhart remarks, "The Federal Reserve really would become the buyer of last resort, trying to jump-start the commercial paper market by taking on credit risk."
102C Henlopen Station, Henlopen Station, Rehoboth Beach, DE 19971
Address:
REHOBOTH BEACH, DE 19971
MLS ID# 563940
$288,900
2 Bed, 2 Bath
1,000 Sq. Ft.
Condo/Townhome/Coop Property, County: SUSSEX, Year Built: 1985, Central air conditioning
To access this page directly, use http://www.realtor.com/realestate/rehoboth+beach-de-19971-1103741953/
Property Features
Condo/Townhome/Coop Property
Status: Active
County: SUSSEX
Year Built: 1985
2 total bedroom(s)
2 total bath(s)
2 total full bath(s)
Approximately 1000 sq. ft.
Central air conditioning
Interior features: Carpet, Clothes dryer, Clothes washer, Dishwasher, Disposal, Microwave, Range and oven, Vinyl flrs
Exterior features: Deck, Porch, Public sewer srvc
School District: Cape Henlopen
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Presented By
Donna Atsidis
I Sell Rehoboth Beach
Home Office: (302) 644-0117
Mobile: (302) 542-1787
Office: (302) 644-7965
Brokered By
BEACH TO BAY REAL ESTATE CENTER
Visit Our New Homes Showroom Covering All of Sussex County
broker: (302) 644-6880
Fax: (302) 644-6881
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Help
REHOBOTH BEACH, DE 19971
MLS ID# 563940
$288,900
2 Bed, 2 Bath
1,000 Sq. Ft.
Condo/Townhome/Coop Property, County: SUSSEX, Year Built: 1985, Central air conditioning
To access this page directly, use http://www.realtor.com/realestate/rehoboth+beach-de-19971-1103741953/
Property Features
Condo/Townhome/Coop Property
Status: Active
County: SUSSEX
Year Built: 1985
2 total bedroom(s)
2 total bath(s)
2 total full bath(s)
Approximately 1000 sq. ft.
Central air conditioning
Interior features: Carpet, Clothes dryer, Clothes washer, Dishwasher, Disposal, Microwave, Range and oven, Vinyl flrs
Exterior features: Deck, Porch, Public sewer srvc
School District: Cape Henlopen
Up LeftRightDown RecenterStreetCityStateCountryZoomInZoomOut1600 yds600 yds© 2008 Microsoft Corporation © 2008 NAVTEQ © AND © 2008 Microsoft Corporation © 2008 NAVTEQ © AND
2D3DRoadAerialBird's eyeLabelsSee this location in bird's eye view Virtual Earth 3D has finished updating
Formatted for easy printing so you can take this with you. Remember to say you found it on REALTOR.com®.
This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. You must verify the information and bear all risk for inaccuracies.
Presented By
Donna Atsidis
I Sell Rehoboth Beach
Home Office: (302) 644-0117
Mobile: (302) 542-1787
Office: (302) 644-7965
Brokered By
BEACH TO BAY REAL ESTATE CENTER
Visit Our New Homes Showroom Covering All of Sussex County
broker: (302) 644-6880
Fax: (302) 644-6881
Toll Free: (866) 639-4287
Help
New Institutional Models Follow Changes in Risk
MBA (10/6/2008 ) Murray, Michael
A new adminstration in January, $810 billion legislation and accelerated consolidation all add up to increased fiscal conservatism and reduced risks for a new model of financial institutions moving forward, based on analysis from Deloitte Consulting LLP, New York.
In the past month, Charlotte, N.C.-based Bank of America acquired Merrill Lynch, JPMorgan Chase, New York, acquired Washington Mutual Bank and Des Moines-based Wells Fargo or Citigroup, New York, will likely acquire Wachovia.
With a new administration in January, Deloitte said it expects current regulatory proposals to focus and coordinate a structure geared toward reducing levels of systemic risk. The $810 billion Emergency Economic Stability Act—at a minimum—could add liquidity to surviving financial institutions while taking “toxic” assets off of its balance sheets, Deloitte said.
“When you look at some of the banks and the concentration right now, the question comes up whether they are too big to fall,” said Scott Baret, partner in regulatory and capital markets at Deloitte. “The fundamentals should be high in that the risk management areas can no longer fail going forward.”
“This crisis is fundamentally redefining the structure of the industry, the nature of the industry and material change going forward,” said Adam Schneider, principal at Deloitte.
Schneider said active trading banks—name-brand, global, capital markets-focused financial institutions—rather than retail institutions would likely find substantial changes based on greater risk. He said the subprime market—an “originate and distribute” model of packaged loans sold for investment—would likely change based on lack of investor trust in the securitization market.
“We expect to see much more ‘originate and retain.’ Part of that is the consolidation of the industry—three institutions with about 10 percent of American financial deposits—can, in fact originate and hold those mortgages that they may have originated,” Schneider said. “We expect, on average, the balance is swinging in the other direction [with] much less distribution of products, much more originating and retaining them and a very significant premium on safety, a very significant premium on getting money back and a very significant premium on safe and sound lending practices.”
Schneider noted that securitization would survive, but it remains unclear as to levels of transparency and guarantees investment banking divisions—or firms that securitize mortgages—would provide to restore levels of trust for investors.
“Some of the changes in the regulatory regime, in the attention span of the regulators, have some things they are clearly trying to go do before the election, allows those issues to resolve faster than they would otherwise,” Schneider said. “We’ve seen other economies—Japan in the 1990s—take five or 10 years to work through issues of this magnitude.”
Based on Deloitte's analysis, a regulatory system would need to focus on systemic risk, market stability, business conduct and consumer protections with regulators that have “fundamental sets of market-based responsibilities as opposed to a panel of industry-based responsibilities.”
“There are many regulatory agencies and many regulations, but somehow this particular set of activities still managed to happen,” Schneider said. “The reform of the regulatory marketplace is likely to happen, and we believe there is going to be a lot of change in the new administration going forward.”
A new adminstration in January, $810 billion legislation and accelerated consolidation all add up to increased fiscal conservatism and reduced risks for a new model of financial institutions moving forward, based on analysis from Deloitte Consulting LLP, New York.
In the past month, Charlotte, N.C.-based Bank of America acquired Merrill Lynch, JPMorgan Chase, New York, acquired Washington Mutual Bank and Des Moines-based Wells Fargo or Citigroup, New York, will likely acquire Wachovia.
With a new administration in January, Deloitte said it expects current regulatory proposals to focus and coordinate a structure geared toward reducing levels of systemic risk. The $810 billion Emergency Economic Stability Act—at a minimum—could add liquidity to surviving financial institutions while taking “toxic” assets off of its balance sheets, Deloitte said.
“When you look at some of the banks and the concentration right now, the question comes up whether they are too big to fall,” said Scott Baret, partner in regulatory and capital markets at Deloitte. “The fundamentals should be high in that the risk management areas can no longer fail going forward.”
“This crisis is fundamentally redefining the structure of the industry, the nature of the industry and material change going forward,” said Adam Schneider, principal at Deloitte.
Schneider said active trading banks—name-brand, global, capital markets-focused financial institutions—rather than retail institutions would likely find substantial changes based on greater risk. He said the subprime market—an “originate and distribute” model of packaged loans sold for investment—would likely change based on lack of investor trust in the securitization market.
“We expect to see much more ‘originate and retain.’ Part of that is the consolidation of the industry—three institutions with about 10 percent of American financial deposits—can, in fact originate and hold those mortgages that they may have originated,” Schneider said. “We expect, on average, the balance is swinging in the other direction [with] much less distribution of products, much more originating and retaining them and a very significant premium on safety, a very significant premium on getting money back and a very significant premium on safe and sound lending practices.”
Schneider noted that securitization would survive, but it remains unclear as to levels of transparency and guarantees investment banking divisions—or firms that securitize mortgages—would provide to restore levels of trust for investors.
“Some of the changes in the regulatory regime, in the attention span of the regulators, have some things they are clearly trying to go do before the election, allows those issues to resolve faster than they would otherwise,” Schneider said. “We’ve seen other economies—Japan in the 1990s—take five or 10 years to work through issues of this magnitude.”
Based on Deloitte's analysis, a regulatory system would need to focus on systemic risk, market stability, business conduct and consumer protections with regulators that have “fundamental sets of market-based responsibilities as opposed to a panel of industry-based responsibilities.”
“There are many regulatory agencies and many regulations, but somehow this particular set of activities still managed to happen,” Schneider said. “The reform of the regulatory marketplace is likely to happen, and we believe there is going to be a lot of change in the new administration going forward.”
Technology M&A Offers Timely Growth Opportunity
MBA (10/6/2008 ) Palaparty, Vijay
Mergers and acquisitions better equip technology companies to stay current and offer market-relevant products and services, according to Jonathan Corr, chief strategy officer at Ellie Mae, Pleasanton, Calif. He says to maintain state-of-the-art, best-of-breed technology, companies can unify, even achieving more security and transparency.
“Strategic mergers and acquisitions make sense,” Corr said. “It means a form of permanent partnership. It takes a lot of work as an owner of a company to maintain technology, but when two companies coming together, there is more communication and ultimately more capabilities in terms of maintenance and even upgradability.”
Ellie Mae, a provider of software and services for the mortgage industry, recently acquired the assets of Online Documents Inc., Concord, Calif., a provider of compliant mortgage documents, from Stewart Lender Services Inc., Houston.
“During this market, some companies will contract while others will gain momentum and establish themselves…pursuing opportunities for growth,” Corr said.
Corr said mergers and acquisitions are strategic in that they allow maintenance of revenue during tougher economic periods as well. "It adds to internal infrastructure and also compliance and operations," Corr said.
From a marketing perspective, Corr acknowledged that existing customers vary from newly acquired customers for both companies. “Adding to the customer numbers is a nice part of mergers and acquisitions,” he said. “It’s not only about integrating personnel, but also new products and services and ultimately, customers.”
“Successful mergers and acquisitions should be transparent without too many changes in operations on the customer front,” Corr said. “It’s difficult to get customers to change because the acquiring company is new.”
Also from a customer perspective, Corr said customers have to believe that their technology partners will survive, and that mergers and acquisitions are an example of “investing in the future.” “The market affects their actions and their pocketbooks," Corr said. "They make decisions based on products and services that are better for them. They have to believe in the survival.”
In terms of rebranding, Corr said maintaining identity is also important for companies. “There is an existing set of customers and an existing product line—it’s a matter of furthering that relationship, between those new customers and new product lines,” he said. “Marketing is developing deeper relationships. Customers need to know and feel that they have all the benefits that they had in the original structure.”
“The most important thing in merging teams is to think of it exactly that way—they are teams," Corr said. "But there is fear, emotions and uncertainty. Have a clear vision and communicate that vision with the team.”
However, Corr said efficiencies and redundancies should be realized early in the process, and that the company should bring everyone together quickly.
Mergers and acquisitions better equip technology companies to stay current and offer market-relevant products and services, according to Jonathan Corr, chief strategy officer at Ellie Mae, Pleasanton, Calif. He says to maintain state-of-the-art, best-of-breed technology, companies can unify, even achieving more security and transparency.
“Strategic mergers and acquisitions make sense,” Corr said. “It means a form of permanent partnership. It takes a lot of work as an owner of a company to maintain technology, but when two companies coming together, there is more communication and ultimately more capabilities in terms of maintenance and even upgradability.”
Ellie Mae, a provider of software and services for the mortgage industry, recently acquired the assets of Online Documents Inc., Concord, Calif., a provider of compliant mortgage documents, from Stewart Lender Services Inc., Houston.
“During this market, some companies will contract while others will gain momentum and establish themselves…pursuing opportunities for growth,” Corr said.
Corr said mergers and acquisitions are strategic in that they allow maintenance of revenue during tougher economic periods as well. "It adds to internal infrastructure and also compliance and operations," Corr said.
From a marketing perspective, Corr acknowledged that existing customers vary from newly acquired customers for both companies. “Adding to the customer numbers is a nice part of mergers and acquisitions,” he said. “It’s not only about integrating personnel, but also new products and services and ultimately, customers.”
“Successful mergers and acquisitions should be transparent without too many changes in operations on the customer front,” Corr said. “It’s difficult to get customers to change because the acquiring company is new.”
Also from a customer perspective, Corr said customers have to believe that their technology partners will survive, and that mergers and acquisitions are an example of “investing in the future.” “The market affects their actions and their pocketbooks," Corr said. "They make decisions based on products and services that are better for them. They have to believe in the survival.”
In terms of rebranding, Corr said maintaining identity is also important for companies. “There is an existing set of customers and an existing product line—it’s a matter of furthering that relationship, between those new customers and new product lines,” he said. “Marketing is developing deeper relationships. Customers need to know and feel that they have all the benefits that they had in the original structure.”
“The most important thing in merging teams is to think of it exactly that way—they are teams," Corr said. "But there is fear, emotions and uncertainty. Have a clear vision and communicate that vision with the team.”
However, Corr said efficiencies and redundancies should be realized early in the process, and that the company should bring everyone together quickly.
Economic Data Take Turn for Worse Even Before Credit Markets Freeze
MBA (10/6/2008 ) Velz, Orawin
The labor market deteriorated further in September, with payroll losses of 159,000, more than double the loss in August and almost double the average monthly loss this year.
Since the beginning of the year, 760,000 jobs have been lost—an average of about 84,000 jobs per month. Job losses were widespread across industries, indicating that the housing downturn and the financial crisis have spilled over to the broad economy.
Other reports last week confirmed the view that economic growth slipped to an anemic pace in the third quarter. Real (inflation-adjusted) consumer spending was all but certain to decline in the third quarter as it was unchanged in August after declining 0.5 percent in July. Consumer spending likely turned out weak in September according to two early indicators of consumer spending released last week.
First, September auto sales reversed the August increase, slipping to the slowest pace since April 1992. Second, weekly chain store sales for the last week of September fell for the fourth consecutive week and the increase from a year ago was the smallest since early May, before tax rebates began to boost spending. The last time real consumer spending posted a quarterly decline was in the 1990-91 recession. Considering that consumer spending accounts for about 70 percent of the U.S. economy, negative economic growth in the third quarter cannot be ruled out.
Without the strength from consumers, the economy needs other sources of support to continue to expand. Unfortunately, several reports last week indicated that manufacturing activity, business investment, and nonresidential investment in structures weakened from the first half of the year. August’s factory orders posted the largest drop in two years. The component used as a proxy for future business investment in equipment and software dropped sharply, suggesting business investment will likely be a drag to economic growth in the second half of the year.
The Institute for Supply Management manufacturing survey showed that manufacturing activity contracted in September at the fastest pace since the 2001 recession, as support from trade appeared to be fading. While August private residential construction spending saw the first increase in over a year (although July’s data showed a sharp downward revision), private nonresidential construction spending dropped for the second consecutive month. The last economic report last week, the ISM nonmanufacturing survey, fared better than the ISM manufacturing survey but showed that the service industry was barely growing in September.
Finally, financial data last week showed that short-term business lending and borrowing effectively shut down as lenders are increasingly uncertain about the financial health of their clients and each other. The value of commercial paper—a vital source of short-term funding for daily operations at many companies—posted a record decline of $94.9 billion for the week ended Oct. 1. The impact of a freeze in the money markets will be widespread. If businesses have difficulties rolling commercial paper, it will affect the daily activities (e.g., payrolls, payments to suppliers) of the economy.
Another sign of increased financial stress was the continued increase in the Libor rate (the rate that banks charge each other). Interbank rates have soared as banks hoard cash to meet future funding needs and are unwilling to lend to each other on concern that more banks will collapse. The TED spread—the difference between the three-month Libor and three-month Treasury bill rate—rose to a record 386 basis points on Friday. The spread was 113 basis points a month ago and 240 basis points during the height of the previous financial market meltdown in mid-August 2007.
Stock markets as well as the Treasury market were extremely volatile in response to the events on Capitol Hill. The negative economic data also rattled investors, resulting in stock market declines on growth concerns. The yield on the 10-year Treasury note stayed around 3.62 percent mid-Friday afternoon, 23 basis points lower than the rate on the previous Friday. Despite the passage of the Emergency Economic Stabilization Act by Congress last week, fed funds futures fully expected that the Federal Open Market Committee will cut the federal funds rate by 50 basis points at its Oct. 28-29 meeting.
Housing and Mortgage Indicators:
Total construction spending was unchanged in August, following a 1.4 percent drop in July. A 0.8 percent increase in public construction spending offset a 0.3 percent decline in private construction spending.
Private residential construction spending was up 1.3 percent, the first increase since March 2007. Private nonresidential construction was down by 0.8 percent, the second consecutive monthly drop.
From a year ago, private residential construction spending has declined 28.4 percent. By contrast, private nonresidential construction spending was up 13.0 percent over the past year. Residential investment continued to be a drag on economic growth again in the third quarter. During the second quarter, residential investment subtracted 0.5 percentage points from gross domestic product, the smallest drag since the first quarter of 2006.
The Standard and Poor/Case-Shiller home price indices showed that home prices continued to decline in July in selected major cities. The year-over-year declines in the indices continued to set records, while the month-to-month declines in the indices accelerated, reversing the trend seen over the last few months.
The 10-metropolitan area composite index was down 17.5 percent in July from a year ago, the largest year-over-year decline since the inception of the series in 1987. The broader 20-metropolitan area composite index showed a year-over-year drop of 16.3 percent, also the sharpest decline in the history of the broader index since its inception in 2000.
A month-to-month comparison offered a disappointing picture of home price trends. Prior to the July report, price declines had been moderating since February. The 20-metropolitan area composite index dropped 0.9 percent in July, accelerating from a 0.5 percent drop in June. The month-to-month drop in the 10-metropolitan area composite index also accelerated to 1.1 percent in July, compared with a 0.6 percent drop in June.
All 20 metropolitan areas reported year-over-year home price drops, led by a 29.9 percent drop in Las Vegas and a 29.3 percent drop in Phoenix. Charlotte continued to post the smallest year-over-year decline of 1.8 percent. The 20 selected cities do not represent the overall picture of the nation’s housing market, however, with seven of the total coming from the four states experiencing the most significant home price drops in the nation: Arizona, California, Florida and Nevada. Prices in these seven cities have declined by at least 20 percent in July from July 2007.
Economic Indicators:
The Institute for Supply Management Manufacturing Index indicated that the contraction of manufacturing activity accelerated sharply in September, with the index dropping to 43.5 from 49.9 in August. This was the lowest reading since October 2001. A reading below 50 indicates a contraction in the manufacturing sector. The report may be overstating weakness. A strike at Boeing and hurricanes Ike and Gustav could have caused temporary disruption in production during the month.
The ISM manufacturing index is based on a survey of purchasing executives at roughly 300 industrial companies. It includes nine different sub-indices: new orders, production, employment, supplier deliveries, inventories, prices, new export orders, imports and backlog of orders.
New orders fell to 38.3 from the prior month’s reading of 48.3. The production index dropped to 40.8 from 52.1 in August. Weakness in manufacturing employment persisted, with the employment index declining 7.9 points to 41.8. New export orders declined 5.0 points to 52, the lowest reading this year. This suggested that support from trade, which has been critical for manufacturing activity in the face of declining domestic demand, is fading.
The only silver lining in the report was on the inflation front, with the prices that manufacturers paid for inputs dropping for the third consecutive month. The prices-paid index fell 23.5 points to 53.5. This was the largest month-to-month decline in the prices paid index since the inception of the series in 1948 and reflected the sharp decline in energy and other commodity prices—main raw materials used by manufacturers.
The Conference Board's Consumer Confidence Index rose 1.3 percentage points to 59.8 in September. This was the third consecutive increase. The survey results were taken before financial turmoil intensified and therefore did not capture all of the effects of the past week, according to The Conference Board.
The expectations component, based on respondents’ assessment of the outlook over the next six months, led the increase, rising to 60.5 from 54.1 in August. Consumers' appraisal of current conditions eroded further in September. The present conditions component fell to 58.8 from 65.0.
Consumer assessment of current labor market conditions deteriorated further. The share of consumers finding jobs plentiful fell to 12.2 percent—the smallest share in five years—from 13.5 percent. The share finding jobs hard to get increased rose to 32.8 percent in September from 31.7 percent in August.
Factory orders declined 4.0 percent in August, following a 0.7 percent increase in July, which was downwardly revised from a 1.3 percent increase. August’s drop in factory orders was the largest in nearly two years. The factory orders report included a downward revision of durable goods orders data released last week and contained new data on nondurable goods shipments.
Nondurable goods shipments fell 3.3 percent, also the largest drop in nearly two years and the first decline since February. The huge drop in nondurable goods shipments was led by petroleum shipments, which account for about 30 percent of the value of total nondurable goods shipments. The value of petroleum shipments fell 8.5 percent, reflecting the decline in the price of crude oil in August.
Durable goods orders fell 4.8 percent, a downward revision from a 4.5 percent drop in the advance estimate. The downward revision to durable goods orders was broad based, led by a downward revision in electrical equipment, appliances and components. Only computers and electronic products posted a small upward revision.
The downward revision in durable goods orders indicated that business investment spending outlook was even weaker than initially reported. Orders for nondefense capital goods excluding aircraft—a proxy for business investment in equipment and software in the coming quarters—fell by 2.4 percent in August, compared with the 2.0 percent decline reported last week.
The ISM Nonmanufacturing Index edged down to 50.2 in September from 50.6 in August. This is the second consecutive month that the index showed a reading above 50, indicating an expanding service sector.
Both the production and new orders indices increased moderately. However, the employment index fell for the second consecutive month and was near to the January low and reinforces the increase in job losses in the service sector. The export index rebound slightly from August, which posted a reading that matched its record low set in October 2001.
The survey offered an improving inflation picture, showing declining prices firms paid for raw material for a third consecutive month.
Payroll employment fell 159,000 in September, the ninth consecutive month of decline. The August figure was revised up, from a loss of 84,000 to 73,000, while the July figure was revised down, from 60,000 to 67,000.
Goods-producing industries lost 77,000 jobs in September, while private service industries lost 91,000 jobs, with losses spread across industries. Manufacturers cut 51,000 jobs, while builders cut 35,000 jobs. Government payrolls added 9,000 jobs.
Among service industries, the largest job losses were in retail (40,000), temp help (24,000), financial activities (17,000), leisure/hospitality (17,000) and transportation/warehousing (16,000). The only broad job categories that continued to expand are education/healthcare and mining.
Mortgage industry employment fell 6,000 jobs to 349,000 in August. (The Bureau of the Labor Statistics releases some detailed categories of employment with a one-month lag.) Since its peak in February 2006, the industry’s employment has declined by about 31 percent.
The unemployment rate, calculated from a survey of households, was unchanged at 6.1 percent. The labor force contracted by 121,000, while the number of unemployed workers increased by 101,000.
Earnings edged up 0.2 percent from August and 3.4 percent from last September. The index of aggregate weekly hours, a proxy of economic growth, declined by 0.5 percent, the largest monthly decline since April 2003, indicating a contracting economy.
The labor market deteriorated further in September, with payroll losses of 159,000, more than double the loss in August and almost double the average monthly loss this year.
Since the beginning of the year, 760,000 jobs have been lost—an average of about 84,000 jobs per month. Job losses were widespread across industries, indicating that the housing downturn and the financial crisis have spilled over to the broad economy.
Other reports last week confirmed the view that economic growth slipped to an anemic pace in the third quarter. Real (inflation-adjusted) consumer spending was all but certain to decline in the third quarter as it was unchanged in August after declining 0.5 percent in July. Consumer spending likely turned out weak in September according to two early indicators of consumer spending released last week.
First, September auto sales reversed the August increase, slipping to the slowest pace since April 1992. Second, weekly chain store sales for the last week of September fell for the fourth consecutive week and the increase from a year ago was the smallest since early May, before tax rebates began to boost spending. The last time real consumer spending posted a quarterly decline was in the 1990-91 recession. Considering that consumer spending accounts for about 70 percent of the U.S. economy, negative economic growth in the third quarter cannot be ruled out.
Without the strength from consumers, the economy needs other sources of support to continue to expand. Unfortunately, several reports last week indicated that manufacturing activity, business investment, and nonresidential investment in structures weakened from the first half of the year. August’s factory orders posted the largest drop in two years. The component used as a proxy for future business investment in equipment and software dropped sharply, suggesting business investment will likely be a drag to economic growth in the second half of the year.
The Institute for Supply Management manufacturing survey showed that manufacturing activity contracted in September at the fastest pace since the 2001 recession, as support from trade appeared to be fading. While August private residential construction spending saw the first increase in over a year (although July’s data showed a sharp downward revision), private nonresidential construction spending dropped for the second consecutive month. The last economic report last week, the ISM nonmanufacturing survey, fared better than the ISM manufacturing survey but showed that the service industry was barely growing in September.
Finally, financial data last week showed that short-term business lending and borrowing effectively shut down as lenders are increasingly uncertain about the financial health of their clients and each other. The value of commercial paper—a vital source of short-term funding for daily operations at many companies—posted a record decline of $94.9 billion for the week ended Oct. 1. The impact of a freeze in the money markets will be widespread. If businesses have difficulties rolling commercial paper, it will affect the daily activities (e.g., payrolls, payments to suppliers) of the economy.
Another sign of increased financial stress was the continued increase in the Libor rate (the rate that banks charge each other). Interbank rates have soared as banks hoard cash to meet future funding needs and are unwilling to lend to each other on concern that more banks will collapse. The TED spread—the difference between the three-month Libor and three-month Treasury bill rate—rose to a record 386 basis points on Friday. The spread was 113 basis points a month ago and 240 basis points during the height of the previous financial market meltdown in mid-August 2007.
Stock markets as well as the Treasury market were extremely volatile in response to the events on Capitol Hill. The negative economic data also rattled investors, resulting in stock market declines on growth concerns. The yield on the 10-year Treasury note stayed around 3.62 percent mid-Friday afternoon, 23 basis points lower than the rate on the previous Friday. Despite the passage of the Emergency Economic Stabilization Act by Congress last week, fed funds futures fully expected that the Federal Open Market Committee will cut the federal funds rate by 50 basis points at its Oct. 28-29 meeting.
Housing and Mortgage Indicators:
Total construction spending was unchanged in August, following a 1.4 percent drop in July. A 0.8 percent increase in public construction spending offset a 0.3 percent decline in private construction spending.
Private residential construction spending was up 1.3 percent, the first increase since March 2007. Private nonresidential construction was down by 0.8 percent, the second consecutive monthly drop.
From a year ago, private residential construction spending has declined 28.4 percent. By contrast, private nonresidential construction spending was up 13.0 percent over the past year. Residential investment continued to be a drag on economic growth again in the third quarter. During the second quarter, residential investment subtracted 0.5 percentage points from gross domestic product, the smallest drag since the first quarter of 2006.
The Standard and Poor/Case-Shiller home price indices showed that home prices continued to decline in July in selected major cities. The year-over-year declines in the indices continued to set records, while the month-to-month declines in the indices accelerated, reversing the trend seen over the last few months.
The 10-metropolitan area composite index was down 17.5 percent in July from a year ago, the largest year-over-year decline since the inception of the series in 1987. The broader 20-metropolitan area composite index showed a year-over-year drop of 16.3 percent, also the sharpest decline in the history of the broader index since its inception in 2000.
A month-to-month comparison offered a disappointing picture of home price trends. Prior to the July report, price declines had been moderating since February. The 20-metropolitan area composite index dropped 0.9 percent in July, accelerating from a 0.5 percent drop in June. The month-to-month drop in the 10-metropolitan area composite index also accelerated to 1.1 percent in July, compared with a 0.6 percent drop in June.
All 20 metropolitan areas reported year-over-year home price drops, led by a 29.9 percent drop in Las Vegas and a 29.3 percent drop in Phoenix. Charlotte continued to post the smallest year-over-year decline of 1.8 percent. The 20 selected cities do not represent the overall picture of the nation’s housing market, however, with seven of the total coming from the four states experiencing the most significant home price drops in the nation: Arizona, California, Florida and Nevada. Prices in these seven cities have declined by at least 20 percent in July from July 2007.
Economic Indicators:
The Institute for Supply Management Manufacturing Index indicated that the contraction of manufacturing activity accelerated sharply in September, with the index dropping to 43.5 from 49.9 in August. This was the lowest reading since October 2001. A reading below 50 indicates a contraction in the manufacturing sector. The report may be overstating weakness. A strike at Boeing and hurricanes Ike and Gustav could have caused temporary disruption in production during the month.
The ISM manufacturing index is based on a survey of purchasing executives at roughly 300 industrial companies. It includes nine different sub-indices: new orders, production, employment, supplier deliveries, inventories, prices, new export orders, imports and backlog of orders.
New orders fell to 38.3 from the prior month’s reading of 48.3. The production index dropped to 40.8 from 52.1 in August. Weakness in manufacturing employment persisted, with the employment index declining 7.9 points to 41.8. New export orders declined 5.0 points to 52, the lowest reading this year. This suggested that support from trade, which has been critical for manufacturing activity in the face of declining domestic demand, is fading.
The only silver lining in the report was on the inflation front, with the prices that manufacturers paid for inputs dropping for the third consecutive month. The prices-paid index fell 23.5 points to 53.5. This was the largest month-to-month decline in the prices paid index since the inception of the series in 1948 and reflected the sharp decline in energy and other commodity prices—main raw materials used by manufacturers.
The Conference Board's Consumer Confidence Index rose 1.3 percentage points to 59.8 in September. This was the third consecutive increase. The survey results were taken before financial turmoil intensified and therefore did not capture all of the effects of the past week, according to The Conference Board.
The expectations component, based on respondents’ assessment of the outlook over the next six months, led the increase, rising to 60.5 from 54.1 in August. Consumers' appraisal of current conditions eroded further in September. The present conditions component fell to 58.8 from 65.0.
Consumer assessment of current labor market conditions deteriorated further. The share of consumers finding jobs plentiful fell to 12.2 percent—the smallest share in five years—from 13.5 percent. The share finding jobs hard to get increased rose to 32.8 percent in September from 31.7 percent in August.
Factory orders declined 4.0 percent in August, following a 0.7 percent increase in July, which was downwardly revised from a 1.3 percent increase. August’s drop in factory orders was the largest in nearly two years. The factory orders report included a downward revision of durable goods orders data released last week and contained new data on nondurable goods shipments.
Nondurable goods shipments fell 3.3 percent, also the largest drop in nearly two years and the first decline since February. The huge drop in nondurable goods shipments was led by petroleum shipments, which account for about 30 percent of the value of total nondurable goods shipments. The value of petroleum shipments fell 8.5 percent, reflecting the decline in the price of crude oil in August.
Durable goods orders fell 4.8 percent, a downward revision from a 4.5 percent drop in the advance estimate. The downward revision to durable goods orders was broad based, led by a downward revision in electrical equipment, appliances and components. Only computers and electronic products posted a small upward revision.
The downward revision in durable goods orders indicated that business investment spending outlook was even weaker than initially reported. Orders for nondefense capital goods excluding aircraft—a proxy for business investment in equipment and software in the coming quarters—fell by 2.4 percent in August, compared with the 2.0 percent decline reported last week.
The ISM Nonmanufacturing Index edged down to 50.2 in September from 50.6 in August. This is the second consecutive month that the index showed a reading above 50, indicating an expanding service sector.
Both the production and new orders indices increased moderately. However, the employment index fell for the second consecutive month and was near to the January low and reinforces the increase in job losses in the service sector. The export index rebound slightly from August, which posted a reading that matched its record low set in October 2001.
The survey offered an improving inflation picture, showing declining prices firms paid for raw material for a third consecutive month.
Payroll employment fell 159,000 in September, the ninth consecutive month of decline. The August figure was revised up, from a loss of 84,000 to 73,000, while the July figure was revised down, from 60,000 to 67,000.
Goods-producing industries lost 77,000 jobs in September, while private service industries lost 91,000 jobs, with losses spread across industries. Manufacturers cut 51,000 jobs, while builders cut 35,000 jobs. Government payrolls added 9,000 jobs.
Among service industries, the largest job losses were in retail (40,000), temp help (24,000), financial activities (17,000), leisure/hospitality (17,000) and transportation/warehousing (16,000). The only broad job categories that continued to expand are education/healthcare and mining.
Mortgage industry employment fell 6,000 jobs to 349,000 in August. (The Bureau of the Labor Statistics releases some detailed categories of employment with a one-month lag.) Since its peak in February 2006, the industry’s employment has declined by about 31 percent.
The unemployment rate, calculated from a survey of households, was unchanged at 6.1 percent. The labor force contracted by 121,000, while the number of unemployed workers increased by 101,000.
Earnings edged up 0.2 percent from August and 3.4 percent from last September. The index of aggregate weekly hours, a proxy of economic growth, declined by 0.5 percent, the largest monthly decline since April 2003, indicating a contracting economy.
MBA Hails Passage of Economic Stabilization Package, Tax Extenders
MBA (10/6/2008 ) Mechem, John; Sorohan, Mike
The Mortgage Bankers Association commended the House of Representatives' passage Friday of H.R. 1424, the Emergency Economic Stabilization Act of 2008. The bill, which establishes a program at the Treasury Department to purchase distressed mortgage-related assets, also includes extension of several tax provisions that will help steady the American economy.
The bill passed the house by a 263-171 vote (a similar bill, with fewer tax provisions, failed last week by a 228-205 vote). The same bill passed the Senate on Oct. 1 by a 75-24 vote and went to President Bush, who immediately signed the bill into law.
"The ongoing credit crunch has severely impacted the ability of individuals and businesses of all sizes to borrow, and has threatened to slow down the entire U.S. economy," said MBA Chief Operating Officer John Courson. "We very much appreciate the hard work and long hours that congressional and Administration negotiators have put in over the past several weeks and look forward to the quick implementation of the program. This will enable financial institutions to offer credit so individuals can purchase homes and other items and businesses can continue to operate and grow."
The bill will allow Treasury to purchase up to $700 billion in distressed mortgage-related assets from financial institutions in an effort to increase liquidity and restart the seized credit markets. MBA officials noted that the true long-term cost of the program could be far less than $700 billion, as Treasury has the discretion to redeem or sell assets, sometimes at a profit, when the market recovers.
The bill also temporarily increases the amount of deposit insurance provided for individuals by the Federal Deposit Insurance Corp. and National Credit Union Administration to $250,000.
Other provisions extend a number of tax provisions set to expire, including:
• Deductibility of forgiven mortgage debt;
• $1,000 property tax deduction for non-itemizing couples;
• Deductions for energy-efficient commercial buildings;
• Allowance for expensing of brownfields environmental remediation costs;
• Accelerated cost recovery for qualified leasehold improvements.
"These tax provisions are important to residential, multifamily and commercial borrowers and lenders and will encourage expansion in the real estate sector which can be the engine to drive economic growth in this country," Courson said. "A number of them are items that MBA has fought for over a number of years and we are pleased that Congress passed them before they expired."
Leaders in Congress expressed relief that the bill had passed, following a rebellion in the House earlier last week that led to the failure of the first version. House leaders needed to change 12 votes to ensure passage; as it were, the additional financial incentives provided in the rewritten bill enticed more than enough House members to switch their votes, although some, such as Rep. Zach Wamp, R-Tenn., said they would “hold their noses” as they voted in favor of the bill.
Treasury Secretary Henry Paulson Jr., who led the Administration’s efforts to pass the bill, said he would “move rapidly” to implement the new authority.
“The broad authorities in this legislation, when combined with existing regulatory authorities and resources, gives us the ability to protect and recapitalize our financial system as we work through the stresses in our credit markets,” Paulson said. “Transparency throughout this process will be important, and I look forward to providing regular updates as we move ahead to implement this strategy.”
Federal Reserve Chairman Ben Bernanke also expressed relief in the bill’s passage, saying the legislation is a “critical step toward stabilizing our financial markets and ensuring an uninterrupted flow of credit to households and businesses.”
The Mortgage Bankers Association commended the House of Representatives' passage Friday of H.R. 1424, the Emergency Economic Stabilization Act of 2008. The bill, which establishes a program at the Treasury Department to purchase distressed mortgage-related assets, also includes extension of several tax provisions that will help steady the American economy.
The bill passed the house by a 263-171 vote (a similar bill, with fewer tax provisions, failed last week by a 228-205 vote). The same bill passed the Senate on Oct. 1 by a 75-24 vote and went to President Bush, who immediately signed the bill into law.
"The ongoing credit crunch has severely impacted the ability of individuals and businesses of all sizes to borrow, and has threatened to slow down the entire U.S. economy," said MBA Chief Operating Officer John Courson. "We very much appreciate the hard work and long hours that congressional and Administration negotiators have put in over the past several weeks and look forward to the quick implementation of the program. This will enable financial institutions to offer credit so individuals can purchase homes and other items and businesses can continue to operate and grow."
The bill will allow Treasury to purchase up to $700 billion in distressed mortgage-related assets from financial institutions in an effort to increase liquidity and restart the seized credit markets. MBA officials noted that the true long-term cost of the program could be far less than $700 billion, as Treasury has the discretion to redeem or sell assets, sometimes at a profit, when the market recovers.
The bill also temporarily increases the amount of deposit insurance provided for individuals by the Federal Deposit Insurance Corp. and National Credit Union Administration to $250,000.
Other provisions extend a number of tax provisions set to expire, including:
• Deductibility of forgiven mortgage debt;
• $1,000 property tax deduction for non-itemizing couples;
• Deductions for energy-efficient commercial buildings;
• Allowance for expensing of brownfields environmental remediation costs;
• Accelerated cost recovery for qualified leasehold improvements.
"These tax provisions are important to residential, multifamily and commercial borrowers and lenders and will encourage expansion in the real estate sector which can be the engine to drive economic growth in this country," Courson said. "A number of them are items that MBA has fought for over a number of years and we are pleased that Congress passed them before they expired."
Leaders in Congress expressed relief that the bill had passed, following a rebellion in the House earlier last week that led to the failure of the first version. House leaders needed to change 12 votes to ensure passage; as it were, the additional financial incentives provided in the rewritten bill enticed more than enough House members to switch their votes, although some, such as Rep. Zach Wamp, R-Tenn., said they would “hold their noses” as they voted in favor of the bill.
Treasury Secretary Henry Paulson Jr., who led the Administration’s efforts to pass the bill, said he would “move rapidly” to implement the new authority.
“The broad authorities in this legislation, when combined with existing regulatory authorities and resources, gives us the ability to protect and recapitalize our financial system as we work through the stresses in our credit markets,” Paulson said. “Transparency throughout this process will be important, and I look forward to providing regular updates as we move ahead to implement this strategy.”
Federal Reserve Chairman Ben Bernanke also expressed relief in the bill’s passage, saying the legislation is a “critical step toward stabilizing our financial markets and ensuring an uninterrupted flow of credit to households and businesses.”
Illegal Residents But Responsible Homeowners
Los Angeles Times (10/06/08); Gorman, Anna
The National Association of Hispanic Real Estate Professionals says mortgages given to illegal immigrants using taxpayer identification numbers had a 1.15-percent delinquency rate in 2006, versus a 3.5-percent rate for mortgages using Social Security numbers. Experts say illegal aliens are being hit hard by the economic downturn, yet they continue to make timely mortgage payments due to fixed mortgage rates, pre-purchase counseling, bigger down payments and "the promise of a better future," according to NAHREP President Tim Sandos. Acorn Housing's Bruce Dorpalen adds that immigrant homeowners tend to have extended families able to help in the event that the borrower becomes unemployed, and they also generally have extensive savings and their own businesses. However, taxpayer identification loans have declined due to the credit crisis, as even borrowers with traditional credit histories find it difficult to obtain financing.
The National Association of Hispanic Real Estate Professionals says mortgages given to illegal immigrants using taxpayer identification numbers had a 1.15-percent delinquency rate in 2006, versus a 3.5-percent rate for mortgages using Social Security numbers. Experts say illegal aliens are being hit hard by the economic downturn, yet they continue to make timely mortgage payments due to fixed mortgage rates, pre-purchase counseling, bigger down payments and "the promise of a better future," according to NAHREP President Tim Sandos. Acorn Housing's Bruce Dorpalen adds that immigrant homeowners tend to have extended families able to help in the event that the borrower becomes unemployed, and they also generally have extensive savings and their own businesses. However, taxpayer identification loans have declined due to the credit crisis, as even borrowers with traditional credit histories find it difficult to obtain financing.
HUD to Host National Housing Summit in Washington
RISMedia (10/06/08)
HUD's national Summit on Housing will be held during the week of Oct. 6, with banking and housing industry representatives, federal and state government officials and community leaders coming together to discuss short- and long-term housing needs. HUD Secretary Steve Preston says the summit is intended to "strengthen existing partnerships that will be critical to stabilizing our communities and mitigating the effects of foreclosure in the months ahead." Current HUD programs; best practices; and successful federal, state and local foreclosure prevention programs will be highlighted during the event.
HUD's national Summit on Housing will be held during the week of Oct. 6, with banking and housing industry representatives, federal and state government officials and community leaders coming together to discuss short- and long-term housing needs. HUD Secretary Steve Preston says the summit is intended to "strengthen existing partnerships that will be critical to stabilizing our communities and mitigating the effects of foreclosure in the months ahead." Current HUD programs; best practices; and successful federal, state and local foreclosure prevention programs will be highlighted during the event.
U.S. Apartment Vacancies Reach 6.1 Percent as Rent Growth Slows
Bloomberg (10/06/08); Green, Peter S.
Reis Inc. reports that the third-quarter vacancy rate for U.S. rental apartment communities climbed to 6.1 percent, while the average monthly asking rent increased 0.6 percent to $1,053--the 26th consecutive quarter that rents rose or did not budge. Vacancies are on the rise partly because of a lack of jobs for recent college graduates, a trend punctuated by the fact that the United States shed 159,000 jobs last month. Reis chief economist Sam Chandan notes, "Twenty- to 30-year-olds are about 70 percent renters ... [and] when they are not finding jobs, they are not renting either.'' Geographically, New York posted the highest average U.S. rent at $2,855 a month, followed by such markets as San Francisco at $1,827 and Boston at $1,660.
Reis Inc. reports that the third-quarter vacancy rate for U.S. rental apartment communities climbed to 6.1 percent, while the average monthly asking rent increased 0.6 percent to $1,053--the 26th consecutive quarter that rents rose or did not budge. Vacancies are on the rise partly because of a lack of jobs for recent college graduates, a trend punctuated by the fact that the United States shed 159,000 jobs last month. Reis chief economist Sam Chandan notes, "Twenty- to 30-year-olds are about 70 percent renters ... [and] when they are not finding jobs, they are not renting either.'' Geographically, New York posted the highest average U.S. rent at $2,855 a month, followed by such markets as San Francisco at $1,827 and Boston at $1,660.
Reverse Mortgage Lid Seen at $417K
American Banker (10/06/08) P. 11
The maximum loan amount for government-insured reverse mortgages could be raised to $417,000 on Nov. 1, with HUD hiking the limit significantly from the current range of $200,160 to $362,790. The National Reserve Mortgage Lenders Association and other groups, however, had hoped the ceiling would be lifted to $625,000, bringing it in line with the new conforming-loan limit. HUD also is restricting fees on Home Equity Conversion Mortgages--the FHA's reverse product--to no more than $6,000.
The maximum loan amount for government-insured reverse mortgages could be raised to $417,000 on Nov. 1, with HUD hiking the limit significantly from the current range of $200,160 to $362,790. The National Reserve Mortgage Lenders Association and other groups, however, had hoped the ceiling would be lifted to $625,000, bringing it in line with the new conforming-loan limit. HUD also is restricting fees on Home Equity Conversion Mortgages--the FHA's reverse product--to no more than $6,000.
1 Hurdle Down, Many More to Go for the Economy
USA Today (10/06/08); Lynch, David J.
Critics of the $700 billion plan to revive the U.S. financial system--signed into law by the president on Oct. 3--say it will not be enough to resolve a shortage of capital, among other problems banks are facing. Some top economists believe the government eventually will have to come up with other massive measures, such as closing down insolvent lenders and providing direct financial aid to individual homeowners to curb foreclosures. The Treasury Department will focus on purchasing mortgage-backed securities, with hopes that removing the troubled assets from the balance sheets of financial institutions will enable them to return to normal lending. The latest data show the economy continues to struggle, and many analysts are expecting the Federal Reserve to cut interest rates this month.
Critics of the $700 billion plan to revive the U.S. financial system--signed into law by the president on Oct. 3--say it will not be enough to resolve a shortage of capital, among other problems banks are facing. Some top economists believe the government eventually will have to come up with other massive measures, such as closing down insolvent lenders and providing direct financial aid to individual homeowners to curb foreclosures. The Treasury Department will focus on purchasing mortgage-backed securities, with hopes that removing the troubled assets from the balance sheets of financial institutions will enable them to return to normal lending. The latest data show the economy continues to struggle, and many analysts are expecting the Federal Reserve to cut interest rates this month.
Wachovia Confident Deal Will Go Ahead
Detroit Free Press (10/06/08); Lepro, Sara
Wachovia Corp. says it is proceeding with a deal to sell itself to Wells Fargo even after New York State Supreme Court Justice Charles Ramos issued an order temporarily blocking the $14.8 billion transaction. Citigroup accused Wells Fargo of trying to cut off its earlier $2.1 billion takeover bid for Wachovia's banking operations in a deal engineered with the help of the FDIC. In its request to Ramos, Citigroup invoked an exclusivity clause in its agreement that bars Wachovia from entering negotiations with other potential buyers. Because New York's Supreme Court is a trial-level court, the litigation among the three banks could go on for some time.
Wachovia Corp. says it is proceeding with a deal to sell itself to Wells Fargo even after New York State Supreme Court Justice Charles Ramos issued an order temporarily blocking the $14.8 billion transaction. Citigroup accused Wells Fargo of trying to cut off its earlier $2.1 billion takeover bid for Wachovia's banking operations in a deal engineered with the help of the FDIC. In its request to Ramos, Citigroup invoked an exclusivity clause in its agreement that bars Wachovia from entering negotiations with other potential buyers. Because New York's Supreme Court is a trial-level court, the litigation among the three banks could go on for some time.
Bank of America Settlement Worth Over $8 Billion
Wall Street Journal (10/06/08) P. A3; Simon, Ruth
The $8.6 billion-plus settlement by Bank of America Corp. to settle predatory lending claims tied to subprime adjustable-rate mortgages and option ARMs originated by Countrywide Financial Corp. before Dec. 31, 2007, is the nation's first mandatory loan modification program and likely will be the biggest predatory lending settlement ever. Bank of America will work with investors to modify loans under the federal Hope for Homeowners program, lower interest rates to make payments more affordable and lower loan balances to raise equity levels; payments will not top 34 percent of the borrower's monthly income. The settlement includes $150 million in foreclosure relief, meaning refunded closing costs and fees; $70 million to assist borrowers who lose their homes to "get on their feet and leave the mortgage premises in good condition;" and $220 million in assistance to borrowers in states that sign an agreement with the company--which likely will include Arizona, California, Connecticut, Florida, Illinois, Iowa, Michigan, North Carolina, Texas and Washington.
The $8.6 billion-plus settlement by Bank of America Corp. to settle predatory lending claims tied to subprime adjustable-rate mortgages and option ARMs originated by Countrywide Financial Corp. before Dec. 31, 2007, is the nation's first mandatory loan modification program and likely will be the biggest predatory lending settlement ever. Bank of America will work with investors to modify loans under the federal Hope for Homeowners program, lower interest rates to make payments more affordable and lower loan balances to raise equity levels; payments will not top 34 percent of the borrower's monthly income. The settlement includes $150 million in foreclosure relief, meaning refunded closing costs and fees; $70 million to assist borrowers who lose their homes to "get on their feet and leave the mortgage premises in good condition;" and $220 million in assistance to borrowers in states that sign an agreement with the company--which likely will include Arizona, California, Connecticut, Florida, Illinois, Iowa, Michigan, North Carolina, Texas and Washington.
Emergency Legislation Benefits Commercial Properties
MBA (10/3/2008 ) Murray, Michael
The Senate added tax provisions for energy-efficient properties and depreciation recovery extensions on brownfields and leasehold improvements Wednesday to H.R. 1424, the Emergency Economic Stabilization Act of 2008. The House votes on the bill today.
Key provisions:
• The supplemental tax provisions would extend tax deductions for energy-efficient commercial buildings five years, from December of this year to December 31, 2013.
• The bill provided extensions on Superfund payments for environmental remediation costs, including brownfields, paid or incurred after December 31, 2007 through December 31, 2009.
• If passed by the House, the bill would also extend 15-year “straight-line cost recovery” for depreciation of certain leasehold and restaurant improvements and 15-year straight-line cost recovery for certain improvements to retail space.
• The legislation would apply to restaurant properties in business after December 31, 2007 and extend to January 1, 2010. The bill defined restaurant property as “more than 50 percent of the building’s square footage devoted to preparation of, and seating for on-premises consumption of, prepared meals.”
However, restaurant businesses starting after December 31 this year—or improvements following this year—would not qualify for bonus depreciation.
For retail improvement properties, qualified properties would include businesses starting after December 31 of this year. “Qualified retail improvement property” would apply to any improvement to an interior portion of a building, which is nonresidential real property, if that portion was open to the general public and used in the retail trade or business of selling tangible personal property to the general public.
If the improvement was placed in service more than three years after the date the building was first placed in service, it would also apply for the bonus depreciation, the bill said.
Improvements not included in the depreciation bonus would include building enlargement, elevators or escalators, any structural component that would benefit “a common area or the internal structural framework of the building.”
The Senate added tax provisions for energy-efficient properties and depreciation recovery extensions on brownfields and leasehold improvements Wednesday to H.R. 1424, the Emergency Economic Stabilization Act of 2008. The House votes on the bill today.
Key provisions:
• The supplemental tax provisions would extend tax deductions for energy-efficient commercial buildings five years, from December of this year to December 31, 2013.
• The bill provided extensions on Superfund payments for environmental remediation costs, including brownfields, paid or incurred after December 31, 2007 through December 31, 2009.
• If passed by the House, the bill would also extend 15-year “straight-line cost recovery” for depreciation of certain leasehold and restaurant improvements and 15-year straight-line cost recovery for certain improvements to retail space.
• The legislation would apply to restaurant properties in business after December 31, 2007 and extend to January 1, 2010. The bill defined restaurant property as “more than 50 percent of the building’s square footage devoted to preparation of, and seating for on-premises consumption of, prepared meals.”
However, restaurant businesses starting after December 31 this year—or improvements following this year—would not qualify for bonus depreciation.
For retail improvement properties, qualified properties would include businesses starting after December 31 of this year. “Qualified retail improvement property” would apply to any improvement to an interior portion of a building, which is nonresidential real property, if that portion was open to the general public and used in the retail trade or business of selling tangible personal property to the general public.
If the improvement was placed in service more than three years after the date the building was first placed in service, it would also apply for the bonus depreciation, the bill said.
Improvements not included in the depreciation bonus would include building enlargement, elevators or escalators, any structural component that would benefit “a common area or the internal structural framework of the building.”
Insider Threats Continue to Attack Financial Services
MBA (10/3/2008 ) Palaparty, Vijay
Financial services institutions face greater data breach risk from insiders than external or partner sources, according to the 2008 Verizon Business Data Breach Investigations Report. The report also finds deceit and misuse as the most common forms of attack.
“Enterprises should assess their security strategies knowing that challenges differ significantly and that a one-size-fits-all approach is rarely effective,” said Peter Tippett, vice president of research and intelligence at Verizon Business Security Solutions, Basking Ridge, N.J., and one of the authors of the report. “Good security does not lend itself to a cookie cutter approach. Understanding what happens when a data breach occurs is critical to prevention.”
End-users were responsible for 53 percent of breaches in institutions while IT administrators accounted for 31 percent. Eight percent of breaches were instigated by agents or spies and an additional 8 percent were from anonymous sources.
Furthermore, external risks, though reported small in number among financial services institutions, were proportionately larger in North America, the report said. “This is in line with a trend among cases of more targeted, focused, multi-faceted attacks aimed at financial services institutions, especially in the United States,” it said.
Errors accounted for 45 percent of threats and attacks; deceit and misuse accounted for 42 percent and 32 percent of breaches, respectively. Hacking accounted for 26 percent of attacks and malcode accounted for 32 percent.
“In financial services institutions, hacking falls behind deceit and misuse,” Tippett said. “In general, we find a much more balanced set of tactics in use against financial firms, likely due to a more hardened security posture that makes them less vulnerable to automated attack tools.”
Web applications and physical access, which accounted for 41 percent and 35 percent of attack pathways, respectively, were most popular among attackers, the report said. In terms of difficulty of attacks, the report said financial services institutions seem more difficult to compromise. “Within other industries, preventing breaches would have required implementation of more advanced or costly controls,” it said. “Financial services firms take security very seriously and boast rather larger budgets and mature programs for managing information risk.”
Fifty-two percent of attacks were motivated by payment card data among financial services institutions. Personally identifiable information ranked second at 33 percent and authentication credentials were of interest to 27 percent of attackers. “Financial services institutions have a great deal of customer PII, particularly firms specializing in such services as data warehousing in addition to other data desirable to criminals for various reasons,” Tippett said.
“Authentication credentials, for instance, are sought after because they allow the prospect of increased privileges and access for subsequent illicit activities," Tippett said. "Criminals aren’t only interested in quick cash; compromises to intellectual property account for a substantial portion of breaches in the financial services industry.”
Fifty percent of data breaches were made aware to financial services companies through a third party. Thirty-three percent of breaches were made aware by an alert or notification by an employee, though insiders accounted for a majority of the breaches. Event monitoring or log analysis accounted for 8 percent of reporting.
Financial services institutions face greater data breach risk from insiders than external or partner sources, according to the 2008 Verizon Business Data Breach Investigations Report. The report also finds deceit and misuse as the most common forms of attack.
“Enterprises should assess their security strategies knowing that challenges differ significantly and that a one-size-fits-all approach is rarely effective,” said Peter Tippett, vice president of research and intelligence at Verizon Business Security Solutions, Basking Ridge, N.J., and one of the authors of the report. “Good security does not lend itself to a cookie cutter approach. Understanding what happens when a data breach occurs is critical to prevention.”
End-users were responsible for 53 percent of breaches in institutions while IT administrators accounted for 31 percent. Eight percent of breaches were instigated by agents or spies and an additional 8 percent were from anonymous sources.
Furthermore, external risks, though reported small in number among financial services institutions, were proportionately larger in North America, the report said. “This is in line with a trend among cases of more targeted, focused, multi-faceted attacks aimed at financial services institutions, especially in the United States,” it said.
Errors accounted for 45 percent of threats and attacks; deceit and misuse accounted for 42 percent and 32 percent of breaches, respectively. Hacking accounted for 26 percent of attacks and malcode accounted for 32 percent.
“In financial services institutions, hacking falls behind deceit and misuse,” Tippett said. “In general, we find a much more balanced set of tactics in use against financial firms, likely due to a more hardened security posture that makes them less vulnerable to automated attack tools.”
Web applications and physical access, which accounted for 41 percent and 35 percent of attack pathways, respectively, were most popular among attackers, the report said. In terms of difficulty of attacks, the report said financial services institutions seem more difficult to compromise. “Within other industries, preventing breaches would have required implementation of more advanced or costly controls,” it said. “Financial services firms take security very seriously and boast rather larger budgets and mature programs for managing information risk.”
Fifty-two percent of attacks were motivated by payment card data among financial services institutions. Personally identifiable information ranked second at 33 percent and authentication credentials were of interest to 27 percent of attackers. “Financial services institutions have a great deal of customer PII, particularly firms specializing in such services as data warehousing in addition to other data desirable to criminals for various reasons,” Tippett said.
“Authentication credentials, for instance, are sought after because they allow the prospect of increased privileges and access for subsequent illicit activities," Tippett said. "Criminals aren’t only interested in quick cash; compromises to intellectual property account for a substantial portion of breaches in the financial services industry.”
Fifty percent of data breaches were made aware to financial services companies through a third party. Thirty-three percent of breaches were made aware by an alert or notification by an employee, though insiders accounted for a majority of the breaches. Event monitoring or log analysis accounted for 8 percent of reporting.
Factory Orders Drop Sharply; Commercial Paper Posts Record Decline
MBA (10/3/2008 ) Velz, Orawin
New orders for manufactured goods declined by 4.0 percent in August, following a 0.7 percent increase in July, which was downwardly revised from a 1.3 percent increase.
August’s drop in factory orders was the largest in nearly two years. The factory orders report included a downward revision of durable goods orders data released last week and contained new data on nondurable goods shipments.
Nondurable goods shipments fell by 3.3 percent, also the largest drop in nearly two years and the first decline since February. The huge drop in nondurable goods shipments was led by petroleum shipments, which account for about 30 percent of the value of total nondurable goods shipments. The value of petroleum shipments fell 8.5 percent, reflecting the decline in the price of crude oil in August.
Durable goods orders fell by 4.8 percent, a downward revision from a 4.5 percent drop in the advance estimate. The downward revision to durable goods orders was broad based, led by a downward revision in electrical equipment, appliances and components. Only computers and electronic products posted a small upward revision.
The downward revision in durable goods orders indicated that business investment spending outlook was even weaker than initially reported. Orders for nondefense capital goods excluding aircraft—a proxy for business investment in equipment and software in the coming quarters—fell by 2.4 percent in August, compared to the 2.0 percent decline reported last week.
The factory orders report showing a sharp deterioration in manufacturing activity was consistent with the Institute for Supply Management manufacturing survey released on Wednesday. That survey indicated that manufacturing activity contracted in September at the fastest pace since the 2001 recession.
Financial stress is threatening corporate funding channels. The Federal Reserve reported yesterday that the U.S. commercial paper market contracted for a third consecutive week as business lending and borrowing effectively shut down. Commercial paper is a vital source of short-term funding (30 days to 45 days, on average) for daily operations at many companies.
For the week ended Oct. 1, the value of commercial paper outstanding was down by $94.9 billion from the previous week to $1.607 trillion. Financial paper accounted for about two-thirds of the decline, dropping $64.9 billion to a two-year low. The decline in total commercial paper outstanding in the latest week was the largest on record since the Fed began tracking the data in 2001, which brought the cumulative decline to $208 billion in the past three weeks.
Because of its short maturity and thus frequent rollovers, the decline in the commercial paper outstanding underscores the urgency for fixes to the financial crisis and supports the view that the Fed will likely lower interest rates when it meets Oct. 28-29. Fed funds futures placed about a 95 percent probability that the Federal Open Market Committee will cut the federal funds rate by 50 basis points at its October meeting. The odds were only about 35 percent on Wednesday.
Another sign of increased financial stress, despite the passage of the rescue bill in the Senate, was the continued increase in the Libor rate (or the rate that banks charge each other). Interbank rates have soared as banks hoard cash to meet future funding needs and are unwilling to lend each other on concern that more banks will collapse. The TED spread—the difference between the three-month Libor and three-month Treasury bill rate—rose to a record 3.61 percentage points by mid-Thursday afternoon.
New orders for manufactured goods declined by 4.0 percent in August, following a 0.7 percent increase in July, which was downwardly revised from a 1.3 percent increase.
August’s drop in factory orders was the largest in nearly two years. The factory orders report included a downward revision of durable goods orders data released last week and contained new data on nondurable goods shipments.
Nondurable goods shipments fell by 3.3 percent, also the largest drop in nearly two years and the first decline since February. The huge drop in nondurable goods shipments was led by petroleum shipments, which account for about 30 percent of the value of total nondurable goods shipments. The value of petroleum shipments fell 8.5 percent, reflecting the decline in the price of crude oil in August.
Durable goods orders fell by 4.8 percent, a downward revision from a 4.5 percent drop in the advance estimate. The downward revision to durable goods orders was broad based, led by a downward revision in electrical equipment, appliances and components. Only computers and electronic products posted a small upward revision.
The downward revision in durable goods orders indicated that business investment spending outlook was even weaker than initially reported. Orders for nondefense capital goods excluding aircraft—a proxy for business investment in equipment and software in the coming quarters—fell by 2.4 percent in August, compared to the 2.0 percent decline reported last week.
The factory orders report showing a sharp deterioration in manufacturing activity was consistent with the Institute for Supply Management manufacturing survey released on Wednesday. That survey indicated that manufacturing activity contracted in September at the fastest pace since the 2001 recession.
Financial stress is threatening corporate funding channels. The Federal Reserve reported yesterday that the U.S. commercial paper market contracted for a third consecutive week as business lending and borrowing effectively shut down. Commercial paper is a vital source of short-term funding (30 days to 45 days, on average) for daily operations at many companies.
For the week ended Oct. 1, the value of commercial paper outstanding was down by $94.9 billion from the previous week to $1.607 trillion. Financial paper accounted for about two-thirds of the decline, dropping $64.9 billion to a two-year low. The decline in total commercial paper outstanding in the latest week was the largest on record since the Fed began tracking the data in 2001, which brought the cumulative decline to $208 billion in the past three weeks.
Because of its short maturity and thus frequent rollovers, the decline in the commercial paper outstanding underscores the urgency for fixes to the financial crisis and supports the view that the Fed will likely lower interest rates when it meets Oct. 28-29. Fed funds futures placed about a 95 percent probability that the Federal Open Market Committee will cut the federal funds rate by 50 basis points at its October meeting. The odds were only about 35 percent on Wednesday.
Another sign of increased financial stress, despite the passage of the rescue bill in the Senate, was the continued increase in the Libor rate (or the rate that banks charge each other). Interbank rates have soared as banks hoard cash to meet future funding needs and are unwilling to lend each other on concern that more banks will collapse. The TED spread—the difference between the three-month Libor and three-month Treasury bill rate—rose to a record 3.61 percentage points by mid-Thursday afternoon.
WHEDA Suspends Lending
Milwaukee Journal Sentinel (10/02/08) ; Gores, Paul
The Wisconsin Housing and Economic Development Authority (WHEDA) has temporarily ceased issuing mortgages for single-family homes because of the troubles it is having in raising the necessary funds to make the loans. WHEDA spokeswoman Kate Venne notes, "We primarily operate with tax-exempt mortgage revenue bonds--that's what funds our mortgages--and right now, we can't raise capital." This marks the first time in the 30-year history of Wisconsin's affordable housing agency that it has suspended its mortgage lending program due to liquidity problems. In 2007, WHEDA--the lender of first choice for many first-time home buyers who qualify--issued $522 million in home loans.
The Wisconsin Housing and Economic Development Authority (WHEDA) has temporarily ceased issuing mortgages for single-family homes because of the troubles it is having in raising the necessary funds to make the loans. WHEDA spokeswoman Kate Venne notes, "We primarily operate with tax-exempt mortgage revenue bonds--that's what funds our mortgages--and right now, we can't raise capital." This marks the first time in the 30-year history of Wisconsin's affordable housing agency that it has suspended its mortgage lending program due to liquidity problems. In 2007, WHEDA--the lender of first choice for many first-time home buyers who qualify--issued $522 million in home loans.
2.3 Million Foreclosures Prevented in Past 14 Months by Mortgage Industry
MarketWatch (10/02/08)
According to HOPE NOW, the ongoing efforts of the organization and the mortgage industry have resulted in the prevention of approximately 2.3 million foreclosures over the past 14 months. In August alone, mortgage servicers finalized more than 189,000 mortgage workouts, which included both changes to existing mortgages and repayment plans. Some 53 percent of homeowners with subprime loans who were granted workouts by mortgage servicers obtained modifications. According to HOPE NOW executive director Faith Schwartz, "Without HOPE NOW, the current mortgage and financial crises would be more serious and harder to turn around. We will continue to work hard to help homeowners and stabilize communities."
According to HOPE NOW, the ongoing efforts of the organization and the mortgage industry have resulted in the prevention of approximately 2.3 million foreclosures over the past 14 months. In August alone, mortgage servicers finalized more than 189,000 mortgage workouts, which included both changes to existing mortgages and repayment plans. Some 53 percent of homeowners with subprime loans who were granted workouts by mortgage servicers obtained modifications. According to HOPE NOW executive director Faith Schwartz, "Without HOPE NOW, the current mortgage and financial crises would be more serious and harder to turn around. We will continue to work hard to help homeowners and stabilize communities."
MBIA Suit Claims Fraud at Countrywide
American Banker (10/03/08) P. 5
MBIA Insurance Corp. has filed suit against Countrywide Financial Corp. accusing the lender of engaging in fraud that cost MBIA $459 million in policy claims on mortgage bonds it guarantees and boosted its exposure by hundreds of millions of dollars. The suit alleges that Countrywide "deliberately abandoned its own guidelines to drive-up revenues from increased origination fees, securitization fees, and servicing fees--no matter the cost to borrowers, investors or guarantors like MBIA." Another bond insurer, Ambac Financial Group Inc., said in the second quarter that more than 1,800 loans examined by consultants showed evidence of "substantiated breaches of representation and warranties."
MBIA Insurance Corp. has filed suit against Countrywide Financial Corp. accusing the lender of engaging in fraud that cost MBIA $459 million in policy claims on mortgage bonds it guarantees and boosted its exposure by hundreds of millions of dollars. The suit alleges that Countrywide "deliberately abandoned its own guidelines to drive-up revenues from increased origination fees, securitization fees, and servicing fees--no matter the cost to borrowers, investors or guarantors like MBIA." Another bond insurer, Ambac Financial Group Inc., said in the second quarter that more than 1,800 loans examined by consultants showed evidence of "substantiated breaches of representation and warranties."
Office Space Is Emptying Out
Wall Street Journal (10/03/08) P. A2; Frangos, Alex
Reis Inc. reports that rents on U.S. office properties--including landlord concessions and discounts--were flat in this year's third quarter, the worst result for office-property owners since commercial real estate started to pull out of a prolonged slump near the end of 2004. The office market in suburban areas and smaller cities has been on the decline throughout the year; and now such previously immune, large metropolitan areas as San Francisco and Boston are experiencing vacancy-rate increases. Of the 79 markets that Reis tracks, vacancy rates increased in 66 and rents declined or were flat in 40. For the third consecutive quarter, businesses emptied more space than they took nationwide. In total, approximately 18 million square feet of space were vacated--the most since the first quarter of 2002.
Reis Inc. reports that rents on U.S. office properties--including landlord concessions and discounts--were flat in this year's third quarter, the worst result for office-property owners since commercial real estate started to pull out of a prolonged slump near the end of 2004. The office market in suburban areas and smaller cities has been on the decline throughout the year; and now such previously immune, large metropolitan areas as San Francisco and Boston are experiencing vacancy-rate increases. Of the 79 markets that Reis tracks, vacancy rates increased in 66 and rents declined or were flat in 40. For the third consecutive quarter, businesses emptied more space than they took nationwide. In total, approximately 18 million square feet of space were vacated--the most since the first quarter of 2002.
Long-Term Mortgage Rates Barely Move This Week
Realty Times (10/03/08)
Freddie Mac reports a small rise in the 30-year fixed mortgage rate to 6.10 percent during the week ended Oct. 2 from 6.09 percent the prior week. The 15-year fixed mortgage rate nudged up to 5.78 percent from 5.77 percent. However, the five-year adjustable mortgage rate slipped to 6.00 percent from 6.02 percent; and the one-year ARM dropped to 5.12 percent from 5.16 percent. The report shows that the 30- and 15-year mortgage rates are down substantially from the same time in 2007, when they averaged 6.37 percent and 6.03 percent, respectively.
Freddie Mac reports a small rise in the 30-year fixed mortgage rate to 6.10 percent during the week ended Oct. 2 from 6.09 percent the prior week. The 15-year fixed mortgage rate nudged up to 5.78 percent from 5.77 percent. However, the five-year adjustable mortgage rate slipped to 6.00 percent from 6.02 percent; and the one-year ARM dropped to 5.12 percent from 5.16 percent. The report shows that the 30- and 15-year mortgage rates are down substantially from the same time in 2007, when they averaged 6.37 percent and 6.03 percent, respectively.
Fannie Mae Cancels Fee Hike for New Mortgages
Los Angeles Times (10/03/08)
Fannie Mae had planned to hike its adverse market delivery charge for new mortgages to 0.5 percent of the loan amount starting on Nov. 1, but the company announced that the fee will hold steady at 0.25 percent. The housing downturn and resulting mortgage losses prompted Fannie Mae to institute the charge in late 2007. Fannie Mae CEO Herbert Allison Jr. says the decision was the result of an assessment of the company's "risk management, underwriting guidelines, pricing and costs."
Fannie Mae had planned to hike its adverse market delivery charge for new mortgages to 0.5 percent of the loan amount starting on Nov. 1, but the company announced that the fee will hold steady at 0.25 percent. The housing downturn and resulting mortgage losses prompted Fannie Mae to institute the charge in late 2007. Fannie Mae CEO Herbert Allison Jr. says the decision was the result of an assessment of the company's "risk management, underwriting guidelines, pricing and costs."
Can FHA Shoulder Loan Burden?
Chicago Tribune (10/03/08); Harney, Kenneth R.
Mortgage industry, home building and real estate experts are expressing concern over whether the Federal Housing Administration will be able to handle a rapid increase in loan volume during a tightened credit market. The FHA has become the primary source of mortgage financing for borrowers who do not have at least 20 percent to put down on a home purchase, as new loan volume has tripled over the past 12 months. Also, the government has charged the agency with refinancing the loans of struggling borrowers to help keep them from losing their homes to foreclosure. According to Steve O'Connor, senior vice president of the Mortgage Bankers Association: "You just can't expect to fit that amount down the same size pipe—you've got to expand the size of the pipe" by funding additional staff and upgraded technology at the FHA.
Mortgage industry, home building and real estate experts are expressing concern over whether the Federal Housing Administration will be able to handle a rapid increase in loan volume during a tightened credit market. The FHA has become the primary source of mortgage financing for borrowers who do not have at least 20 percent to put down on a home purchase, as new loan volume has tripled over the past 12 months. Also, the government has charged the agency with refinancing the loans of struggling borrowers to help keep them from losing their homes to foreclosure. According to Steve O'Connor, senior vice president of the Mortgage Bankers Association: "You just can't expect to fit that amount down the same size pipe—you've got to expand the size of the pipe" by funding additional staff and upgraded technology at the FHA.
Wachovia: Wells In, Citi Out
CNNMoney (10/03/08); Ellis, David
In a deal being perceived as more favorable both to Wachovia and to federal regulators, the troubled company has agreed to merge with Wells Fargo. Wachovia had a deal in the works to sell its banking operations to Citigroup for $2.2 billion; but the new, estimated $15 billion all-stock offer would fold all of Wachovia's businesses into Wells Fargo. Moreover, unlike the Citi proposal, the merger with Wells Fargo will not involve any financial assistance from the Federal Deposit Insurance Corp.
In a deal being perceived as more favorable both to Wachovia and to federal regulators, the troubled company has agreed to merge with Wells Fargo. Wachovia had a deal in the works to sell its banking operations to Citigroup for $2.2 billion; but the new, estimated $15 billion all-stock offer would fold all of Wachovia's businesses into Wells Fargo. Moreover, unlike the Citi proposal, the merger with Wells Fargo will not involve any financial assistance from the Federal Deposit Insurance Corp.
Financial Industry Bailout Gains Support in House
New York Newsday (10/03/08)
The House is expected to vote on the economic stabilization bill on Oct. 3, and congressional leaders believe they now have enough votes to approve the plan to revive the U.S. financial system. Rep. Roy Blount, R-Mo., the top vote counter for his party, predicts that the House will pass the package. President George Bush and congressional leaders have continued to lobby for the support of spending billions of dollars to buy bad mortgage-related securities from troubled financial institutions, as a way to ease the credit crisis. The Senate made some changes to the $700 billion measure and passed its version of the bill on Oct. 1.
The House is expected to vote on the economic stabilization bill on Oct. 3, and congressional leaders believe they now have enough votes to approve the plan to revive the U.S. financial system. Rep. Roy Blount, R-Mo., the top vote counter for his party, predicts that the House will pass the package. President George Bush and congressional leaders have continued to lobby for the support of spending billions of dollars to buy bad mortgage-related securities from troubled financial institutions, as a way to ease the credit crisis. The Senate made some changes to the $700 billion measure and passed its version of the bill on Oct. 1.
Thursday, October 2, 2008
Genworth soars on possible spin off
Mortgage insurer, struggling to regain footing in wake of AIG collapse, is mulling 'strategic alternatives' for its U.S. mortgage business.
September 30, 2008: 9:43 AM ET
RICHMOND, Va. (AP) -- Mortgage insurer Genworth Financial Inc. said Tuesday that it is considering various strategic alternatives for its U.S. mortgage-insurance business including a possible spin off, sending shares sharply higher in premarket activity.
"We have demonstrated that, in the current stressed U.S. housing environment, our U.S. Mortgage Insurance business continues to operate from a more sound financial position and lower risk profile than any other U.S. mortgage insurer," said Michael D. Fraizer, chairman and chief executive, in a statement.
"At the same time, progress in our international, wealth management, retirement, life and long-term care insurance businesses has been overshadowed by concerns about the future of U.S. mortgage insurance," he added.
Commercial paper
Genworth (GNW, Fortune 500) said it has reduced its commercial paper borrowings to $79 million, and maintains more than $800 million in cash and cash equivalents at the holding company.
The company also carries nearly $4 billion of cash and cash equivalents in its operating companies, and maintains substantial credit facilities, Genworth said.
Over the past couple of weeks, Genworth's stock has been hit hard by concerns about its mortgage exposure in the wake of the collapse of American International Group Inc.
Earlier this month, the government stepped in and provided AIG with a two-year $85 billion loan to help keep it in business. As one of the world's largest insurers, AIG teetered on the brink of bankruptcy as it looked for fresh cash to help shore up its balance sheet, which was facing a liquidity crunch amid the continued downturn in the credit markets.
Reinsurance business
Last week, Genworth management provided an update regarding its U.S. mortgage insurance business. The company is considering reinsurance transactions, asset transfers from outside the U.S. and joint ventures to boost capital, management said on a call with analysts.
Shares of Genworth spiked $1.49, or 30%, to $6.49 in premarket activity. The stock, which finished Monday's trading at $5, has ranged from $3.51 to $32.33 over the past year.
September 30, 2008: 9:43 AM ET
RICHMOND, Va. (AP) -- Mortgage insurer Genworth Financial Inc. said Tuesday that it is considering various strategic alternatives for its U.S. mortgage-insurance business including a possible spin off, sending shares sharply higher in premarket activity.
"We have demonstrated that, in the current stressed U.S. housing environment, our U.S. Mortgage Insurance business continues to operate from a more sound financial position and lower risk profile than any other U.S. mortgage insurer," said Michael D. Fraizer, chairman and chief executive, in a statement.
"At the same time, progress in our international, wealth management, retirement, life and long-term care insurance businesses has been overshadowed by concerns about the future of U.S. mortgage insurance," he added.
Commercial paper
Genworth (GNW, Fortune 500) said it has reduced its commercial paper borrowings to $79 million, and maintains more than $800 million in cash and cash equivalents at the holding company.
The company also carries nearly $4 billion of cash and cash equivalents in its operating companies, and maintains substantial credit facilities, Genworth said.
Over the past couple of weeks, Genworth's stock has been hit hard by concerns about its mortgage exposure in the wake of the collapse of American International Group Inc.
Earlier this month, the government stepped in and provided AIG with a two-year $85 billion loan to help keep it in business. As one of the world's largest insurers, AIG teetered on the brink of bankruptcy as it looked for fresh cash to help shore up its balance sheet, which was facing a liquidity crunch amid the continued downturn in the credit markets.
Reinsurance business
Last week, Genworth management provided an update regarding its U.S. mortgage insurance business. The company is considering reinsurance transactions, asset transfers from outside the U.S. and joint ventures to boost capital, management said on a call with analysts.
Shares of Genworth spiked $1.49, or 30%, to $6.49 in premarket activity. The stock, which finished Monday's trading at $5, has ranged from $3.51 to $32.33 over the past year.
MBA 2007 Lender Market Share Report
MBA (10/2/2008 ) Kan, Joel
The Mortgage Bankers Association’s 2007 Lender Market Share report ranks lenders nationally and at the metropolitan area or state levels. The report ranks lenders by dollar volume and details the number and dollar volume of mortgage originations, providing overall, purchase and refinance originations.
The report said Countrywide FC originated more than $195.1 billion in single-family loans in 2007, representing 9.8 percent of the 2007 U.S. mortgage market ($2 trillion) based on dollar volume. Rounding out the top 5 originators in 2007 were Wells Fargo ($166.7 billion, 8.3 percent), Bank of America ($136.6 billion, 6.8 percent), JP Morgan Chase ($93.1 billion, 4.7 percent) and Washington Mutual ($92.2 billion, 4.6 percent).
To view the top 30 lenders in the nation, click http://www.mortgagebankers.org/files/Research/MarketData/NDS/3050_20.pdf.
The Lender Market Share reports are based on mortgage lending transactions at more than 8,600 financial institutions covered by the Home Mortgage Disclosure Act in metropolitan statistical areas throughout the nation. HMDA data provide the most comprehensive source of mortgage originations information.
To view the report list and download an order form, visit http://www.mortgagebankers.org/ResearchandForecasts/ProductsandSurveys/
DataOnDemandServiceProductList.htm.
The Mortgage Bankers Association’s 2007 Lender Market Share report ranks lenders nationally and at the metropolitan area or state levels. The report ranks lenders by dollar volume and details the number and dollar volume of mortgage originations, providing overall, purchase and refinance originations.
The report said Countrywide FC originated more than $195.1 billion in single-family loans in 2007, representing 9.8 percent of the 2007 U.S. mortgage market ($2 trillion) based on dollar volume. Rounding out the top 5 originators in 2007 were Wells Fargo ($166.7 billion, 8.3 percent), Bank of America ($136.6 billion, 6.8 percent), JP Morgan Chase ($93.1 billion, 4.7 percent) and Washington Mutual ($92.2 billion, 4.6 percent).
To view the top 30 lenders in the nation, click http://www.mortgagebankers.org/files/Research/MarketData/NDS/3050_20.pdf.
The Lender Market Share reports are based on mortgage lending transactions at more than 8,600 financial institutions covered by the Home Mortgage Disclosure Act in metropolitan statistical areas throughout the nation. HMDA data provide the most comprehensive source of mortgage originations information.
To view the report list and download an order form, visit http://www.mortgagebankers.org/ResearchandForecasts/ProductsandSurveys/
DataOnDemandServiceProductList.htm.
'Volatile Relationship' Between Security, Innovation
MBA (10/2/2008 ) Palaparty, Vijay
A volatile relationship exists between information security and business innovation, according to research from RSA, the security division of EMC, Bedford, Mass.
Eighty percent of organizations worldwide reported that they have backed away from innovation opportunities because of information security concerns—though acknowledging innovation is critical for competition.
"The inextricable link between security and innovation is clear, but organizations are still struggling with how to strike the right balance between driving new innovations to market and instituting effective IT security practices," said Art Coviello, president of RSA. "Security has long been a global business issue for today's senior management teams. There has never been a better time for companies to make cultural, philosophical and technological shifts required to better align their security and business innovation strategies."
Richard Johnston, president of Acris Solutions, Laguna Hills, Calif., said in the mortgage industry, growing issues of data security and needed corrective responses are being pushed out into the future due to turmoil in the market.
“The need to share borrower information across technology platforms to further reduce the time to fund a loan is the driving force for IT initiatives yet we see obstacles that hinder that evolution from occurring,” Johnston said.
The research also found that 80 percent of CEOs believe security teams formally hold responsibility and accountability for contributions to business growth. But only 44 percent of security leaders reported being measured on their contributions to innovation, suggesting lack of alignment between C-level management and security professionals.
Only 21 percent of respondents said their organizations have successfully made the transition to an approach that aligns business and security, rather than impeding innovation.
"Today's businesses cannot grow in the absence of a healthy environment for the realization of new innovations," said Chris Christiansen, vice president at IDC, Framingham, Mass., which conducted the research. "In spite of some good progress, the relationship between innovation and security is still very strained. The reality is that innovation and security don't need to be competing priorities; they are in fact complementary. Organizations that demand early IT involvement in business innovation efforts and lay out explicit business innovation metrics for their security teams have a much better chance of advancing their overall organizational goals."
“Rules are now, or will be, mandated, yet many companies struggle in their execution for various reasons but mostly from the lack of C-level endorsement and backing,” Johnston said. “Roadblocks occur with elements of technology deployment in the mortgage industry. When the risk/reward equation is applied, most cannot get past the cost elements yet all seem to desire the ultimate end results. We have to find a better way to quantify the results to justify the time and money needed to bring them to fruition, even in these trying times.”
A report from the Security for Business Innovation Council, Mastering the Risk/Reward Equation: Optimizing Information Risks to Maximize Business Innovation Rewards, said legacy methods of evaluating information risk do not work today. It said security focus should move from solely mitigating risk to maximizing business reward as well.
"Ultimately, the biggest risk any company faces isn't that a particular piece of information is compromised or a particular platform is disabled, it's that the company will fail to meet customer expectations," said Bill Boni, corporate vice president of information security and protection at Motorola, Schaumburg, Ill. "To achieve business advantage, companies must take calculated risks and rely on security measures that allow them to be both adaptive and responsive."
The report recommended that organizations change by moving their security team’s focus from information security to information risk management; use a cross-organization approach to understand risk appetite; build a risk assumption model; and create a process for making risk/reward calculations for new business initiatives across the organization.
A volatile relationship exists between information security and business innovation, according to research from RSA, the security division of EMC, Bedford, Mass.
Eighty percent of organizations worldwide reported that they have backed away from innovation opportunities because of information security concerns—though acknowledging innovation is critical for competition.
"The inextricable link between security and innovation is clear, but organizations are still struggling with how to strike the right balance between driving new innovations to market and instituting effective IT security practices," said Art Coviello, president of RSA. "Security has long been a global business issue for today's senior management teams. There has never been a better time for companies to make cultural, philosophical and technological shifts required to better align their security and business innovation strategies."
Richard Johnston, president of Acris Solutions, Laguna Hills, Calif., said in the mortgage industry, growing issues of data security and needed corrective responses are being pushed out into the future due to turmoil in the market.
“The need to share borrower information across technology platforms to further reduce the time to fund a loan is the driving force for IT initiatives yet we see obstacles that hinder that evolution from occurring,” Johnston said.
The research also found that 80 percent of CEOs believe security teams formally hold responsibility and accountability for contributions to business growth. But only 44 percent of security leaders reported being measured on their contributions to innovation, suggesting lack of alignment between C-level management and security professionals.
Only 21 percent of respondents said their organizations have successfully made the transition to an approach that aligns business and security, rather than impeding innovation.
"Today's businesses cannot grow in the absence of a healthy environment for the realization of new innovations," said Chris Christiansen, vice president at IDC, Framingham, Mass., which conducted the research. "In spite of some good progress, the relationship between innovation and security is still very strained. The reality is that innovation and security don't need to be competing priorities; they are in fact complementary. Organizations that demand early IT involvement in business innovation efforts and lay out explicit business innovation metrics for their security teams have a much better chance of advancing their overall organizational goals."
“Rules are now, or will be, mandated, yet many companies struggle in their execution for various reasons but mostly from the lack of C-level endorsement and backing,” Johnston said. “Roadblocks occur with elements of technology deployment in the mortgage industry. When the risk/reward equation is applied, most cannot get past the cost elements yet all seem to desire the ultimate end results. We have to find a better way to quantify the results to justify the time and money needed to bring them to fruition, even in these trying times.”
A report from the Security for Business Innovation Council, Mastering the Risk/Reward Equation: Optimizing Information Risks to Maximize Business Innovation Rewards, said legacy methods of evaluating information risk do not work today. It said security focus should move from solely mitigating risk to maximizing business reward as well.
"Ultimately, the biggest risk any company faces isn't that a particular piece of information is compromised or a particular platform is disabled, it's that the company will fail to meet customer expectations," said Bill Boni, corporate vice president of information security and protection at Motorola, Schaumburg, Ill. "To achieve business advantage, companies must take calculated risks and rely on security measures that allow them to be both adaptive and responsive."
The report recommended that organizations change by moving their security team’s focus from information security to information risk management; use a cross-organization approach to understand risk appetite; build a risk assumption model; and create a process for making risk/reward calculations for new business initiatives across the organization.
New HOPE NOW Data Says 2.3 Million Foreclosures Prevented
MBA (10/2/2008 ) Stokes, Aleis
The HOPE NOW Alliance this morning said its latest data show that its efforts have enabled 2.3 million homeowners avoid foreclosure over the past 14 months.
HOPE NOW, a private sector alliance of mortgage servicers, counselors and investors of which the Mortgage Bankers Association is a founding member, said in August alone mortgage servicers helped homeowners avoid foreclosure by completing more than 189,000 mortgage workouts.
“Without HOPE NOW, the current mortgage and financial crises would be more serious and harder to turn around,” said HOPE NOW Executive Director Faith Schwartz. “We will continue to work hard to help homeowners and stabilize communities.”
Workouts include both modifications to the terms of existing mortgages and repayment plans. Barring a life event such as a job loss, death or illness, all workouts are intended to enable a homeowner to remain in that home as long as he or she wishes to do so.
The HOPE NOW report estimates that on an industry-wide basis:
● Mortgage servicers have helped 2.26 million homeowners avoid foreclosure since July 2007.
● Mortgage servicers provided loan workouts for approximately 189,000 borrowers in August. Approximately 110,000 homeowners received repayment plans; 79,000 received loan modifications.
● Nearly 53 percent of homeowners with subprime loans who received workouts through mortgage servicers received modifications.
A summary table of the results is attached and can be found at http://www.hopenow.com/media/press_release.php.
HOPE NOW also announced today the results of a separate survey of subprime adjustable-rate mortgages with rates resetting in 2008. The results, reported by nine companies representin
The HOPE NOW Alliance this morning said its latest data show that its efforts have enabled 2.3 million homeowners avoid foreclosure over the past 14 months.
HOPE NOW, a private sector alliance of mortgage servicers, counselors and investors of which the Mortgage Bankers Association is a founding member, said in August alone mortgage servicers helped homeowners avoid foreclosure by completing more than 189,000 mortgage workouts.
“Without HOPE NOW, the current mortgage and financial crises would be more serious and harder to turn around,” said HOPE NOW Executive Director Faith Schwartz. “We will continue to work hard to help homeowners and stabilize communities.”
Workouts include both modifications to the terms of existing mortgages and repayment plans. Barring a life event such as a job loss, death or illness, all workouts are intended to enable a homeowner to remain in that home as long as he or she wishes to do so.
The HOPE NOW report estimates that on an industry-wide basis:
● Mortgage servicers have helped 2.26 million homeowners avoid foreclosure since July 2007.
● Mortgage servicers provided loan workouts for approximately 189,000 borrowers in August. Approximately 110,000 homeowners received repayment plans; 79,000 received loan modifications.
● Nearly 53 percent of homeowners with subprime loans who received workouts through mortgage servicers received modifications.
A summary table of the results is attached and can be found at http://www.hopenow.com/media/press_release.php.
HOPE NOW also announced today the results of a separate survey of subprime adjustable-rate mortgages with rates resetting in 2008. The results, reported by nine companies representin