Refinance Free Credit

About a week ago (on my birthday no less) Countrywide sent out a list of Soft Markets (Countrywide Soft Markets PDF) across the country rated from 5 (the worst devaluation in property value) to 1 (less devaluation). They issued this list with changes made to lending criteria for new mortgage loans made in those areas of the country. Areas rated at 5 were seeing reductions in lending limits by 5% of the loan to value guidelines on first mortgages and 10% on second mortgage products (like home equity lines of credit).

One famous refrain of Realtors everywhere is that all real estate is local - which of course it is - but in general real estate has been across the board flat or declining regardless of your locality.

I recommend having a look at this soft market list if you are considering purchasing a home so that you can get more insight in to that particular area above and beyond the “all real estate is local” smokescreen bandied about by your hometown Realtor.

You can use this to get one lenders opinion on the state of affairs in your area. Of course not every lender agrees but listening to the number 1 or 2 lender in the country (depending on the quarter) probably has some merit. You can guarantee they have a ton more research and analytics backing up their claims to market strength than your neighborhood Realtor.

As the market changes and they republish this list we will repost and keep you up to date on your favorite local soft real estate markets.

Here’s a map of the data as done by FortiusOne and published over on Bloodhound on a post about redlining.

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National Mortgage News reported Monday morning that Concord, Calif.based First Collateral Services — Citigroup’s warehouse mortgage division — will either be sold or closed, making it the latest largest bank to flee from third-party originations amid a historic downturn in mortgage banking.

As of Monday morning, no notice regarding the company’s future was posted on First Collateral’s Web site, and no formal announcement was made by the company.

Citigroup, the nation’s fifth-largest loan originator, posted $151.9 billion in production during 2007. An unknown percentage of that amount was derived from warehouse funding, although it should be noted that Citi’s market presence during the past year has grown largely due to an increased focus on retail originations.

The nation’s largest financial institution has been stung badly during the mortgage crisis, most recenly posting a $9.8 billion loss for the fourth quarter, driven by more than $17 billion in subprime-related write-downs.

Numerous news sources are reporting this morning that the Philadelphia Housing Authority has sued HUD secretary Alphonso Jackson, saying the HUD chief is taking ‘retaliatory action’ against the city for failing to arrange a transfer of property to a friend and business associate.

From the WaPo:

The authority’s director, Carl Greene, contends in a court affidavit that Jackson called Philadelphia’s mayor in 2006 to demand the transfer to the developer, Kenny Gamble, a former soul-music songwriter who is a business friend of Jackson’s. Jackson’s aides followed up with “menacing” threats about the property and other housing programs in at least a dozen letters and phone calls over an 11-month period, Greene said in an interview.

Greene and his colleagues have alleged in the court filing that Philadelphia is now paying a severe price for disobeying a Bush Cabinet official. The Department of Housing and Urban Development recently vowed to strip the city’s housing authority of its ability to spend some federal funds, a move that the authority said could raise rents for most of its 84,000 low-income tenants and force the layoffs of 250 people.

HUD, for its part, is denying the allegations and put out a press statement on Monday morning saying that it was “no coincidence that this article appeared now, when efforts to resolve this discrimination case with the Philadelphia Housing Authority are coming to a head.”

“We stand by our efforts to help the low-income disabled citizens of Philadelphia get the housing that they need and deserve, and it would be unfair to those residents for this case to be tried in the press,” the department said.

A federal judge in Idaho has sanctioned Countrywide for violating the bankruptcy code, the Wall Street Journal reported over the weekend.

From the Journal:

Earlier this month, U.S. bankruptcy judge Jim Pappas ordered two subsidiaries of Countrywide and a business partner to pay $2,250 for failing to properly respond to borrowers’ requests for documents and failing to appear at court-authorized depositions in a case where Countrywide was alleged to have tried to foreclose on the borrowers’ home in violation of bankruptcy rules.

The nation’s largest servicer has been the subject of similar scrutiny in Florida, where the US Trustee subpoenaed Countrywide in November.

I’ve noted in the past that mortgage servicing — particularly in the area of so-called special servicing — is facing scrutiny unlike any time previous in the industry’s history. Which isn’t so much of a bad thing, as one that likely changes the game regarding industry practices.

Note that the above references not just Countrywide, but “a business partner.” That partner, in all likelihood, is either the outsourcer or the attorney that was managing the file; Countrywide, like many of the nation’s large servicing operations, outsources much of the actual work that gets done. In this case, it appears that whomever had the file wasn’t paying attention to a BK, or failed to note it in whatever software platform was being used at the time.

That’s the sort of industry practice that wil be changing; I’d suspect a few things to take place on the default management side, after speaking with a few executives in the area. One, you’ll likely see a movement away from broad-based outsourcing among servicers as both perceived and managed risk continue to increase; during the boom, nearly everything was a candidate for outsourcing, and often to firms that cared little about compliance and more about maximizing churn as quickly as possible. That’s not to say outsourcing won’t still exist.

“We’re moving quickly to require much more from our vendors — compliance audits, security audits, quality control — than we ever have before,” said one source, on the condition of anonymity. “Anyone who isn’t up to snuff isn’t getting business.”

Which speaks to the second change: because default management has long been the hidden underbelly of mortgage finance, just beneath the corporate radar, more than a few shady deals have been struck on the basis of personal relationships or a payola-style arrangement than you might see in other areas of mortgage finance.

That, too, will likely be changing as more senior corporate executives outside of default administration as well as state and federal regulators begin to take a closer look at how a servicer is managing foreclosures, bankruptcies and even REO sales.

The crisis in the subprime mortgage market has had little impact on availability, cost or policy conditions of directors and officers liability (D&O) and errors and omissions liability (E&O) policies, according to a survey of financial sector risk managers and CFOs by Advisen Ltd., a provider of information and analytics to the commercial insurance industry.

More than 90 percent of commercial banks, investment banks, mortgage lenders, real estate investment trusts and other companies in the financial services sector have renewed, or expect to renew, their D&O and E&O policies at the same or lower rates, Advisen said in a press statement Monday. This is despite more than $200 billion in writedowns reported to date from mortgage related investments and more than 175 lawsuits already filed against companies involved in the subprime mortgage market.

More writedowns – and more lawsuits – are anticipated in the coming months.

“We launched this survey when we didn’t detect a reaction to the subprime meltdown in the D&O and E&O insurance program data we routinely compile from insurance buyers and brokers,” said Dave Bradford, Advisen’s chief insurance industry analyst. “We felt there had to be more to the story, but the survey results confirm our initial observations – all is quiet on the D&O and E&O fronts.”

“Our informal discussions with brokers support the survey findings,” noted Tom Ruggieri, Advisen’s CEO. “Brokers tell us that they may have to work hard, but they are getting tough risks placed with no change in rates or policy conditions. Programs with less subprime exposure are seeing significant rate decreases and broader coverage.”

Something tells me actuaries might have alot in common with rating agencies; no insurer in the C&O/E&O space has had to pay out on any claims yet. Let’s see what happens to rates once a few paid claims come in.

Not every mortgage business is feeling the heat as part of the industry-wide downturn. Houston-based Oxford Funding — whose slogan (Profiting in a Mortgage Meltdown) earned the attention of Time’s Justin Fox last week — said Monday that it has launched a hedge fund to invest in discounted portfolios of residential and commercial mortgages.

According to a press statement, the fund will invest in performing, sub-performing and non-performing mortgages purchased on the secondary market “at substantial discounts to face value.”

Oxford has gotten some attention so far for delivering returns on its scratch-and-dent business, in spite of market difficulties that have wounded much larger operations, including C-BASS and Franklin Credit. (See previous coverage on scratch-and-dent here). Last week, the firm said it had realized 90 percent ROI on its own loan portfolio during 2007.

“The Fund gives Oxford Funding another vehicle and another opportunity to profit from disruptions in the current mortgage markets,” said Ron Redd, Oxford’s CEO. “There is presently so much opportunity in the market; we want to capitalize on as much as possible.”

For more information, visit http://www.oxfordfunding.com.

First impressions and observations from ASF 2008:

• Attendance remains strong, although it does appear off from last year; at the opening remarks, ASF executive director George Miller notes paid attendance of 6,000. Last year’s show ran just a smidge over 6,600. Here’s guessing the gap is due to (former) MBS analysts.
• Sanjeev Handa, head of global public markets at TIAA-CREF and ASF chairman, delivered a keynote that was well-balanced, and successfully avoided looking as if the secondary market was looking to blame primary market participants; he made it clear, however, that the ASF wants the markets to self-clear without legislation — “regulators should not stifle innovation,” he said. Handa also noted a clear “disclosure deficiency,” primarily relating to loan-level data in residential mortgage-backed securitizations. (I did say in an earlier that due diligence was hot, right?)
• Much of the opening remarks had a mea culpa feel to them, with most of the focus on “the importance of the securitization industry” and “what can be done to ensure a positive future.” Not too much chest-thumping on new records, emerging markets successes, as you would have expected in the past.
• It appears the ASF is against proposed cram-down legislation, which Handa alluded to as “changing the rules mid-game.” Couldn’t agree more.
• There are a good number of financial journalists here — I’ve met with a few, will be meeting with a few more. I’m surprised how many actually read the site, to be honest. It’s also worth noting that the ASF does a great job of press relations; the press are even invited to the industry-only dinner event Monday evening. Very little is off-limits.

I’ll post another update later in the day. David Berson from PMI, along with Calvin Schnure from Freddie Mac, are speaking on the U.S. housing market at a session today at 11:25am US PST.

In remarks focused almost entirely on mortgage lending at the 2008 American Securitization Forum Monday morning, Federal Reserve governor Randall Krozner said that “more must be done as the number of households facing resets increases.” Krozner in particular singled out mortgage servicers, who he said “must undertake the investment to overcome the capacity challenges and provide transparent and timely measures of results.”

The reason is a burgeoning pace of adjustable-rate resets among subprime borrowers, set to peak during 2008. From Krozner’s speech, an admision that EPDs are a big problem:

As of November, the most recent month for which data are available, about 20 percent of subprime adjustable-rate mortgages (ARMs) were ninety or more days delinquent, twice the level one year earlier. More than 171,000 foreclosures were started on these mortgages in the third quarter, up 36 percent from the previous quarter. The significance of the problems with subprime loan performance is evident in the unusually high rate of defaults within a few months of loan origination, known as early payment defaults. In November, nearly 7 percent of subprime ARMs originated in the previous six months were already ninety or more days delinquent, twice the rate of the year before and nearly four times the rate two years earlier.

As HW reported last week, a large percentage of these losses are being driven by so-called jingle mail, or borrowers walking away from their homes.

Krozner’s remarks centered on the Fed Board’s participation in the Financial Stability Forum, which recently proposed expanding the scope of the Home Ownership and Equity Protection Act (HOEPA) in an effort to reign in mortgage lending practices.

“First is a requirement that a lender maintain responsible underwriting practices that genuinely assess borrowers’ ability to repay,” Korzner said, in outlining the group’s core proposal. “This general requirement would be complemented by a specific requirement to verify borrowers’ income and assets.

“A third rule would require lenders to escrow property taxes and homeowners insurance to help borrowers meet these obligations.”

While the items in the Fed’s proposal in many ways echo subprime guidance issued late last June, Krozner said the proposal now under consideration is considerably broader in scope — in addition to applying to Alt-A loans, it would give some “teeth” to prior guidance:

It bears emphasis, however, that our proposed regulations would be more robust and comprehensive than the guidance. The regulations would apply to all mortgage lenders, including independent mortgage companies. Guidance, in contrast, does not ensure uniformity of coverage. Moreover, the regulations would be legally enforceable by supervisory and enforcement agencies. Just as important, the regulations, unlike the guidance, would be legally enforceable by consumers. Borrowers who brought timely actions could recover statutory damages for violations, above and beyond any actual damages they suffered.

Read the full text of Krozer’s speech here.

Continuing with my series on mortgage refinancing for the first time homebuyer I’ll pick up where I left off with mortgage terminology you need to know. If you missed part one you can catch up with Mortgage Refinancing for the First Time Homebuyer. Advanced Mortgage Terminology There are several terms related ...

The Real Estalker is reporting that supermarket magnate Ron Burkle has stepped in to buy his pal Michael Jackson a few more precious moments to help find new financing for his $23,000,000 loan on Neverland Ranch.

From Real Estalker:

As for the once beloved Neverland Ranch, well, Mister Friedman’s sources whispered to him that supermarket magnate Ron Burkle might have intervened and convinced the fine folks at Fortress (Mister Jackson’s eager to be paid creditor on the $23,000,000 loan secured by Neverland Ranch) to provide an extension which would allow Mister Jackson to scramble a while longer looking for someone, anyone, to step in and help him refinance the debt.

It must be nice to have friends in the right places; but I have to say if I were Fotress I’d give him some extra time too. Do I really want to deal with Neverland Ranch as REO? Who’s going to feed the animals? What a nightmare.

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