Refinance Free Credit

I think it’s safe to say this is the week we all got comfortable with bond insurers — it seemed like every time HW published one story about something that was taking place at one insurer, something else took place at another. Or even at the same one. It felt sort of like herding a bunch of cats, to be honest.

At any rate, for all of the stories we did get to this week, there’s more out there; and as usual, I’ll offer up some commentary. Jump off wherever you’re most interested …

The results are in: Thanks to the more than 1,800 of you that took 5 minutes out of your day to take the 2008 HW reader survey. The survey is now closed unless you’ve received a personal invitation from me via email.

I’ve received some incredible feedback from readers — if anything, I’m probably more flattered than anything; I guess you don’t realize the impact you’re having until other people manage to let you know about it.

That being said, I did hear loud and clear what you wanted to see, and you have my commitment to striving to deliver in 2008. One of the new features this site will offer shortly, for example, is special reports covering specific issues of interest more in-depth; it’s a chance to hear other industry experts’ thoughts on key issues, and to learn what’s really taking place within a particular area of mortgage finance.

I say I’m flattered because so many of you seem to “get it” in terms of this site’s purpose; the survey comments bear it out loud and clear. HW exists to provide a unique spin on the concept of mortgage industry trade media, mixing traditional news with the free-form commentary that defines a blog. I do wish I had more good news to riff on quite often, but I also feel strongly that reporting on what’s really going on in this industry — especially right now — is more important than spinning something to make it more palatable.

And I think the readership growth here illustrates the value of such an approach.

When a negative is a positive: HW readers know that First American decided to spin off its title ops this past week; Fitch Ratings today said that it’s placed the title and info services giant on negative watch over concerns about losses in the company’s title biz.

The rating agency was clear in a press statement that the placement onto negative watch was related solely to the company’s title insurance business, and not to the company’s decision to split apart (or, implicitly, because of concern over its information services segment) — all of which makes First American’s move look increasingly smarter.

Declining markets: Rob Chrisman, in a post at Mortgage News Clips, points to a site that will undoubtedly keep you interested for hours:

http://decliningmarkets.gmacrescap.com/

I’m lucky enough to be in a “low risk” ZIP — others actually get graded out as if you were in a classroom. Don’t spend too long thinking about why this site would be put out there by ResCap and made publicly available.

More on ResCap: It seems appropos at this point to note some news coming out of GMAC Finance in the past day or so; ResCap isn’t in danger of risking a possible default this quarter, and will meet all of the financial covenants governing its credit lines for the fourth quarter.

Given that this was a company many suspected to be on the brink of disaster, I think the above ought to be characterized as good news.

Smoke and mirrors?: Is it possible that we’ve all been duped on the “BofA purchase of Countrywide?” Portfolio.com’s Felix Salmon covers a litany of reasons we probably should see the deal as a call option more than anything else — among them, the so-called “Material Adverse Effect” clause.

Salmon notes that it only covers Countrywide through the end of Q3 — Q4 is open season, as a result:

My feeling is that this clause is a “get out of jail free” card for BofA: if Ken Lewis changes his mind, he shouldn’t find it too hard to find a material adverse effect at some point in the past few months.

I’ve had some commentary on the proposed merger (”Five Things to Know About the Countrywide/BofA Deal,” Jan. 13) covered pretty extensively in the past week or so — by none other than Salmon, as well as Inman News and others — but perhaps that list should have been six items long.

Loss mit isn’t for real estate agents: Tanta at Calculated Risk — who has been oddly quiet the past few days — published a gem of a story and commentary to go with it earlier this week. Essentially, some real estate agents are trying to get deals closed on a short sale basis while a borrower is still performing; and apparently some are getting ticked off that they can’t just whisk on through into loss mitigation.

Worth the parting shot for this week’s roundup:

Is it the job of the Loss Mitigation Department to care about clearing your local RE market? No. Is it their job to care about keeping your buyer wiggling on the hook long enough to get papers signed? No. Is a short sale supposed to be a painless alternative to foreclosure for anyone involved? No. There are no painless alternatives. There shouldn’t be. There cannot be.

Have a great weekend, and see you next week.

Twelve of the twenty trading ABX indices hit new all time lows Friday. While the credit crunch has moved well outside of the subprime mortgages, the newest plunge in ABX closing prices suggests that the sector that started it all isn’t yet in the clear.

All series in the ABX are trending down irrespective of whether a new low was reached today or not; today’s news of a late downgrade at Ambac (do they ever come any other way?) isn’t likely to alleviate any of the downward pressure when trading resumes next week.

Much of the devaluation is centered on 2007 series indices, with 8 of the 10 available 2007 indices reaching record lows Friday; notable among the group was the drop in the AAA series, which tracks against the highest-rated, investment grade tranches. Both the 2007-1 AAA and 2007-2 AAA series hit new lows of 65.88 and 68.36, respectively — and even after a year of watching this, seeing AAA credits trade for sixty-some-odd cents on the dollar never ceases to be amazing.

For posterity’s sake, here’s the 2007-2 AAA pricing trend (click for larger image):

Are we resuming the race to zero here, all over again?

Update: The CMBX is having its own pity party as well; see Calculated Risk.

Market Comparison of December 2006 vs. December 2007 by Neighborhood

It is definitely winter. The high tomorrow is expected to be 18°. And although I would love to have a few assignments to help me reach my goal of 200, I can wait until the temp warms up a few more degrees.

Understandably there are few assignments this time of years. Most of our work is from mortgage brokers and they are not very active around Christmas or New Years. But soon people will be worried about paying Christmas bills or income taxes and refinancing will an option.

FHA is certainly more attractive to individuals wishing to refinance. But many people don’t understand the differences between FHA and Conventional financing. And they don’t need to. Mortgage brokers are more than willing to deal with the paperwork for the opportunity at their percentage. What I dislike most of all is when we appear for our routine appraisal inspection and the homeowner has not been informed of the guidelines for the loan they are applying for.

In many homeowners’ mind they have the amount they paid for the home plus the amount of renovations/improvements made plus a couple of thousand dollars for appreciation and they see no problem in their home appraising for this amount. The mortgage broker apparently doesn’t explain the process to the homeowner either. That is left up to the appraiser.

I show up and find a home which has been well maintained for the most part. But the bathroom ceiling is peeling. Or the kitchen ceiling is peeling. And to the homeowner there’s not a problem because they understand the ceiling is not peeling because of water damage. It’s because of previous water damage; the roof is now fixed; they just haven’t repaired that one spot. Or steam from the shower causes the ceiling to peel; the original paint was applied improperly. But I can’t take the homeowner’s word for it. If it was a conventional loan I would be able to place a statement in the report that the peeling paint on the ceiling was minor, make a cost adjustment for it and put in the homeowner’s statement, attributed to the homeowner, of course.

But this is FHA. And FHA does not like peeling paint. Not any kind of peeling paint. No matter when the home was built.

So I have to inform the mortgage broker it’s not going to work until the peeling ceiling has been repaired. And I have to make another appointment to take pictures of the ceiling after it has been repaired.

When I show up for the appointment the homeowner wants to know why her formula (the amount they paid for the home plus the amount of renovations/improvements made plus a couple of thousand dollars for appreciation) was more than the value I arrived at. Actually the value I arrived at was not more than the house originally appraised for two years ago. And she took the time to compare my appraisal report with the appraisal report from two years ago and noticed we used different neighborhoods. The appraisal report from two years ago went into a superior neighborhood, more than two miles, to locate comparables. Red Flag!

I tried to explain, without criticizing the other appraiser, that leaving a neighborhood to obtain a specific number was not acceptable. I even tried using school systems to explain the difference. But the homeowner’s mind was firmly set and I wasn’t about to change it. I really wanted to explain the appraiser who valued her home so highly was not doing her any favors and if I was seeking her approval and followed the same line of thought I would just be perpetuating a crime against her. And against the lending institution by misleading them into thinking if the home was foreclosed on today they would be able to sell it for more than they actually could reasonably expect. That’s if the underwriter let it go through.

And with the slow real estate market underwriters and review appraisers have much more time on their hands.

Memphis-based First Horizon National Corp. on Thursday posted a net loss of $248.6 million, or $1.97 per diluted share, for the fourth quarter as mortgage woes pulled at the bank’s bottom line.

Rising loan-loss reserves, a reduction in the value of mortgage servicing rights and charges stemming from an earnings enhancement plan all contributed to the loss, First Horizon said. The bank also reduced its dividend by 56 percent to 20 cents per share.

Loan loss reserves increased $107 million to $353 million during the fourth quarter, First Horizon said, as the bank bolstered itself for increased losses stemming from an extended downturn in the U.S. housing market. The bank provisioned $156 million during the quarter against net charge-off activity of $54.8 million — it’s worth noting that charge-offs jumped dramatically during the fourth quarter from $35.8 million in Q3.

Residential non-performing assets continued to increase as well, rising 26 percent in the fourth quarter and more than doubling NPA volume from one year earlier.

First Horizon saw the value of its servicing rights drop by more than 20 percent on a quarter-to-quarter basis to $1.16 billion, as the bank said its servicing assets reflected lower values “from observable market inputs.”

The drop in MSR valuation contrasts sharply with an earlier earnings report from JPMorgan, which had boosted the value of its servicing rights by nearly $500 million as the Wall Street firm estimated a significant drop in prepayment activity.

For more information, please visit http://www.fhnc.com.

Moody’s Investors Service yesterday placed MBIA Insurance Corp. and its affiliates on review for a possible downgrade, leading the world’s largest bond insurer to say Friday that it was surprised by the action.

The moves comes just after Fitch Ratings affirmed MBIA’s insurer ratings earlier this week.

MBIA CEO Gary Dunton said in a press statement that the firm had developed a plan to strengthen capital “in good faith reliance on Moody’s stated requirements.”

(Read about MBIA’s capital strengthening plan here.)

“We have been proactive in raising a substantial amount of new capital to support our Triple-A ratings,” he said. “We believe our capital plan meets or exceeds the requirements previously outlined by Moody’s and the other two major rating agencies.”

CFO Chuck Chaplin indicated that the insurer is committed to maintaining its AAA insurer rating.

Moody’s similarly placed Ambac Financial on review earlier in the week, which led the insurer to withdraw its plans to raise $1 billion in equity and shore up capital. Ambac subsequently saw its AAA insurer rating downgraded today by Fitch to AA, the first AAA bond insurer to ever have its rating downgraded.

Interest only mortgage loans are as their name implies loans where the payment is based only on the interest due for a given month. This type of loan has payments that are interest only for a specified period of time, typically five to ten years. At the end ...

President Bush today unveiled a plan to offer as much as $150 billion in economic incentives as part of a plan to avert recession the U.S. economy.

“Additonal action is needed,” Bush said. “To keep our economy growing and creating jobs, Congress and the administration need to work to enact an economic growth package as soon as possible.”

In a speech at the White House, the President said the package should total about 1 percent of GDP; Treasury Secretary Henry Paulson in a press briefing later clarified that number as being in the $140 to $150 billion range. Paulson also said that the adminstration expects the package to create roughly half a million jobs this year.

From the Assocated Press:

Economists said a reasonable range for tax cuts in the new package might be $500 to $1,000. Congressional aides said the White House plan is looking at rebates of up to $800 for individuals and $1,600 for married couples, but Paulson said the administration wants to be “intentionally not specific” in public to avoid poisoning the well with Congress.

The adminstration is targeting general economic measures here, although many believe the current economic woes are being brought on by problems in mortgage banking and housing. Paulson noted that while housing market is the “biggest issue we have in our economy … it needs to correct.”

“What we’re trying to do is to provide help to the rest of the economy … to help it better withstand and weather the effects that are coming about largely as a result of this decline in housing prices,” he said.

Bush alluded to the same approach. “In a vibrant economy, markets rise and decline,” he said. “Yet there are also times when swift and temporary actions can help ensure that inevitable market adjustments do not undermine the health of the broader economy.

“This is such a moment.”