The number of insured mortgages in default reached a record high in November, according to data released Monday by the Mortgage Insurance Companies of America. The trade group, which represents most of the nation’s mortgage insurers, said that number of insured borrowers falling more than 60 days late on payments jumped to 61,033 last month — up from from 45,325 one year ago and 59,308 in October.
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The Federal Home Loan Bank of Indianapolis announced on Friday a new $100 million lending initiative, HomeRetain, to help FHLBI financial institution members assist families facing foreclosure.
In a press statement, the FHLBI said that HomeRetain will split available funds between members in Indiana and Michigan, and that funds may be used to modify or refinance mortgages for primary residences in any state in which a member does business.
“The increase in home foreclosures and mortgage delinquencies is having a significant effect on many households and neighborhoods,” said Milton Miller, President and CEO of the FHLBI. “Everyone loses when there’s a foreclosure – the homeowner, the lender, the community. We anticipate that HomeRetain can help resolve some of these situations without foreclosure.”
The HomeRetain program is similar to one offered by the Home Loan Bank of Cincinnati, and American Banker reports that the Indy FHLB expects its program will help up to 500 borrowers. No single member institution can borrow more than $15 million of the funds allocated for HomeRetain.
Mortgages financed with HomeRetain funds can be made to homeowners earning 115 percent or less of an area’s median income. Homeowners may not take any cash out of the modification or refinancing, and they must complete an approved homeowner counseling program, the bank said.
In an interveiw with American Banker, FHLBI CEO Milton Miller suggested the program targeted community banks, many of whom still own the mortgages they originated and could therefore more easily undertake modification efforts under the HomeRetain program.
The program runs through June, and Miller said the bank will reassess the program at that time to “see how it works in practice.”
Waterbury, Conn.-based Webster Bank NA said Friday that it will shutter both its wholesale and correspondent banking channels, as part of plans to “streamline and reorganize” its mortgage banking operations.
The Associated Press reported that the New England bank funded $3 billion in mortgage loans during 2006, and that it operated wholesale offices in Connecticut, Chicago, Phoenix and Seattle.
No information on the expected number of affected employees was provided, although the bank said a reduction in staff would take place by the end of February 2008. In spite of its exit from other origination channels, Webster said that it expects “continuing growth” in its retail mortgage banking activities.
Many banks have exited wholesale lending in 2007, under the perception that quality control in wholesale lending was problematic and led to a decline in the performance of brokered loans when compared to loans originated directly via the retail channel.
On the heels of its acquisition by Goldman Sachs, Fitch Ratings said last week that it has affirmed its servicer ratings on Litton Loan Servicing. The former C-BASS unit saw primary servicer ratings for subprime and HLTV products affirmed at ‘RPS1′; special servicer ratings affirmed at ‘RSS1′; and manufactured housing servicer ratings affirmed at ‘RPS2′.
As of June 30, 2007, Litton’s servicing portfolio consisted of more than 375,210 residential mortgage loans totaling more than $53.8 billion. In addition to MH loans, the portfolio included approximately 260,495 subprime loans totaling $46.4 billion and 89,360 HLTV loans totaling $4.3 billion. A portion of these loans (approximately 48,229 loans totaling $7.6 billion) are serviced for third parties and make up Litton’s special servicing portfolio.
In 2003, Litton began acquiring MH loans. The company’s portfolio started from 3,300 loans totaling approximately $204 million to an inventory now of 7,252 loans totaling more than $585 million as of June 2007. Delinquent MH loans are serviced separately by a high risk asset (HRA) group.
Fitch characterized the servicer as “efficient” in special servicing and “strong” in its primary servicing activities.
For more information, visit http://www.fitchratings.com.
Last week, I’d written about the potential problems that states and cities across the U.S. are likely to face as the mortgage-industry led housing slump persists — namely, that state legislators are likely to pump out more and more complex legislation governing mortgage banking activity, right at the precise moment property tax revenue takes a nose dive.
Today’s LA Times finds that this scenario is already taking place:
“We had predicted a slowdown — but not this much,” said Tim Nash, finance director for Greeley (population 90,000), a college town in a heavily agricultural region of north-central Colorado. Nash thought he was being prudent when he budgeted for 200 new housing starts in the city this year, down from 310 last year.
He wasn’t even close.
Instead of the $2.6 million that Nash expected in sales taxes on new construction, Greeley will collect $1.2 million. As a result, Greeley has left vacant 49 city positions, most of them building inspectors whose services are, abruptly, no longer in demand.
It’s a story that I expect we’ll see repeated throughout the country, although the LA Times reports that so far only 24 states have taken a hit to tax revenue due to the housing slump. The thing is, however, that the most affected states are also those states that saw the largest run-up in prices and are now ground zero for the mortgage crisis: places like California, Nevada and Arizona.
And as state legislators turn up the volume on reigning in industry practices, the problems that have surfaced in a place like Maryland seem more and more likely to crop up elsewhere, even in states with more well-developed legislation. After all, passing legislation is one thing; enforcing it is another.
Let’s start out with a basic fact: a whole bunch of people saw the mortgage meltdown coming. Many of these people, in fact, actually worked in the mortgage banking industry, and many were talking about it as far back as three years ago in earnest.
I’m not referring to every free-wheeling mortgage broker that every now and then had a fleeting thought that said it can’t be this easy or you mean I can qualify borrowers like this? I’m referring to the people that worked in default servicing, code named “special servicing” — a side of the mortgage banking industry that up until this year was a mere afterthought for almost anyone running a mortgage operation.
Having worked in that side of the business for years, and having interviewed people in loss mitigation all the way through to REO disposition, I can tell you that nearly every one of them knew this would end badly. And nearly every one of them has told me so.
It’s just that nobody really cared to listen to what the guys in foreclosure or REO thought about origination practices. And this morning’s Wall Street Journal sheds some light more than 20 million reasons why:
During the housing boom, the subprime industry succeeded at more than just writing mortgages. It also shot down efforts by some states to curtail risky lending to borrowers with spotty credit.
Ameriquest Mortgage Co., until recently one of the nation’s largest subprime lenders, was at the center of those battles. Working with a husband-and-wife team of Washington lobbyists, it handed out more than $20 million in political donations and played a big role in persuading legislators in New Jersey and Georgia to relax tough new laws. Those victories, in turn, helped blunt efforts by other states to crack down on reckless lending, critics of the industry contend.
I recall the Georgia mess well from back in 2001 and 2002, when there was actual talk that not just subprime lending — but all lending — might actually come to a halt in the state thanks to so-called “net tangible benefit” provisions in a Fair Lending Act. The WSJ tries to paint a sinister lobbying connection here, but I seem to recall the more public debate was about Federal versus state-led industry oversight. Lenders have long argued that negotiating a patchwork set of varying state laws isn’t good chi for a national mortgage lending operation, something that I’m sure had as much to do with persuading legislators as did any Rolling Stones tickets.
Speaking of Rolling Stones tickets, the story centers on the lobbying efforts of one Wright Andrews, who has seen his business collapse along with the major subprime lenders he once represented:
“I certainly was not aware of the degree to which many in the industry clearly failed to follow proper underwriting standards — the standards which they represented they were following to those of us who were lobbying,” Mr. Andrews says.
But he also faults the Federal Reserve for letting the industry get out of control.
“Personally, I think and have long felt the Fed should have done more early on,” he says. “But I don’t think anybody realized the level of problems that were going to come out in the last year or two. If you had said to me the industry was going to melt down, I would have said you were absolutely insane.”
I’m starting to see alot of “who knew?” responses from various industry participants in the press as of late, and I suppose that’s at least tangentally part of our nation’s 5th amendment rights. After all, I wouldn’t expect Mr. Andrews to admit to the WSJ that he knew it would end badly, but that there were bills to be paid in the meantime.
Nonetheless, it’s got to be a never-ending source of amusement for those industry insiders that did, in fact, know this was coming — because there are plenty of them out there, and most are now knee-deep in trying to manage the unbelievable mess created by the origination side of this business.
I’ve talked before about how 2011 might not even be the end. And with Bank Of America publicly predicting that increased awareness will lead to a further decline in prices, things should be interesting–especially the question: do we pray for ignorance?
I’ll start by saying that both Countrywide the brand, and Countrywide the business will close the year in existence. I’m not saying that BOA won’t buy them, but I’ll say that they’ll continue to exist. However, National City will be in grave danger, and it’s death will be imminent by the end of the year. I’d guess that US BANK is in some trouble too, because they seem to have an appetite for risk that nobody currently enjoys.
The Industry–as we know it–will survive, but Brokers will no longer have more product availability than banks–they will generally be restricted to Fannie/Freddie stuff and commercial stuff.
The most troubling thing that I can see going on right now is seeing the "used car" brokers "Get into the Game" with people like Interbay. Having main street businesses on the same lunatic 2/28 and 1/29 cycles that other folks are on is unsustainable, restrictive, and it will lead to Interbay holding a lot of commercial real estate, and another year of German cars for brokers. This will come to a head in 2012, and the heretofore unregulated commercial world will come under the radar of Mr. Frank, causing more new problems.
Now, as far as resolutions go: Fannie and Freddie must stop adding bad loans to the pile, and must have some sort of First time Home Buyer financial commitment that exceeds a security deposit and first months rent, or else the problem will get worse. With FHA still originating insane risks, it’s probably going to get bad anyway.
I’ll probably resume posting in a week or so. Have been pretty much media free for 2 weeks. I highly, highly recommend tuning out for a week or more. You can do it with some easy assumptions: Iraq sucks, we haven’t caught Osama, the mortgage crisis is getting worse, but Lawrence Yun is lying about it. Congress is trying to do something, but will get it wrong. That’s your news for the next 6 months, more or less.
Chris Johnson runs the Ten Day Team, which bails out Realtors that bit off on a crappy preapproval issued by a worthless mortgage broker.
The Mortgage Lender Implode-O-Meter announced today the settlement of the lawsuit filed against them by the Loan Center of California. This is great news for all bloggers who have sought to tell the truth while covering the mortgage industry implosion. When the lawsuit was first announced many bloggers (including myself) wondered aloud about the stability of blogging about real issues in a litigious environment. And while I always thought the suit was frivolous; this settlement is welcome news to all of us who have covered the mortgage morass.
Aaron over at the site makes a good point that it is still frightening that the suit was not thrown out under Anti-SLAPP legislation; but nonetheless the settlement brings to an end the tenuous stand-off between LCC and the leading site covering the mortgage implosion.
As is made clear by the costs we faced in the suit, providing a forum for whistleblowing and debate on critical contemporary issues remains a risky and expensive proposition. It is virtually “death upon challenge” for any individual or small-scale operation. It is thus unclear to us why anyone would ever get involved in such an enterprise if they truly understood the peril they were placing themselves in. We certainly would not have, if we knew then what we know now.
Congrats Aaron for settling without litigation and may you (and all of the other bloggers) continue to be protected in the coverage of the mortgage meltdown.