Refinance Free Credit

Prices of properties listed for-sale fell in 15 of 22 major markets during February, with prices falling 0.4 percent between January and February, according to a new report released earlier this week.

Listing prices in Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco and Washington, DC have fallen by 1.6 percent in the past three months, according to the Real-Time Housing Market Report, jointly published by Altos Research and Real IQ.

Asking prices fell at the fastest rate in San Diego, down 3.0% during February and 5.2% for the most
recent three-month period. Prices also fell by more than two percent in the Detroit, Los Angeles and Las
Vegas markets during February. Prices increased in Chicago, Charlotte, New York, Dallas, Phoenix and
Houston during February and were flat in Seattle.

“We are seeing some stability in asking prices as a result of seasonal reductions in inventory during the
past winter months,” said Stephen Bedikian, partner and research director for Real IQ. “Unfortunately, we
also saw an increase in listed property inventories this month which is atypical this early in the year. Only
a sustained reduction in inventory will arrest the market’s fall nationally.”

For-sale listed property inventories increased in 19 of 22 markets during February. The Altos 10-City
Composite showed an increase of 2.5% for the month. Property inventories declined in only three
markets: Chicago, Indianapolis and San Francisco.

The report also found that time-on-market remained high. Miami and Detroit experienced the longest
time-on-market spans with an average days-on-market of 146 and Minneapolis was close behind at 145 in
February. Seventeen of 22 markets had an average days-on-market of over 100. Denver led all markets
with the fastest rate of inventory turnover at an average of 77 days-on-market, followed by Dallas at 79
days.

“Inventory growth combined with the recent rise in mortgage rates and reported job losses does not bode
well for future price stability,” said Michael Simonsen, CEO and co-founder of Altos Research. “We
expect housing price declines to resume in earnest during the next several months.”

For more information, visit http://www.altosresearch.com and http://www.realiq.com.

There aren’t many areas of the mortgage origination business that are booming, but one area — reverse mortgages — has seen high growth despite the industry downturn. And it’s now an area that financial experts are growing increasingly concerned about.

The Financial Industry Regulatory Authority, known as FINRA, sounded a warning siren on reverse mortgages Thursday, issuing an investor alert urging homeowners over the age of 60 to weigh all of their options before tapping into their home’s equity.

The securities industry regulator cautioned that reverse mortgages – which it said “are being aggressively marketed as an easy, cost-free way for retirees to finance lifestyles or to pay for risky investments” – can jeopardize the financial futures of unwary seniors.

“Reverse mortgages are an extremely costly way to fund an investment,” said FINRA CEO Mary L. Schapiro.

“Homeowners need to consider all the risks and explore all of their options before taking out a loan that may prematurely deplete their home equity, which is often a homeowner’s most valuable asset and most precious source of retirement security.”

It’s a characterization that John Yedinak, president of Terme Mortgage in Illinois, a reverse mortgage originator, sees as inaccurate.

“Reverse mortgages are very safe,” he said. “They allow a senior to eliminate their mortgage payment, and depending how much equity they have in the property, receive a lump sum, monthly, or tenure payment.”

But Yedinak, who runs a popular blog covering the reverse mortgage industry, did say that he’s growing increasingly concerned about some industry practices, including selling reverse mortgages with products like deferred annuities, which he characterized as “very dangerous.”

“It has been all over the press lately and our industry needs to find out how we can stop that from happening,” he said. “It sounds like the government will step in to help combat this problem but it needs to happen sooner rather than later.”

To read the full FINRA alert, click here.

In widely-anticipated remarks delivered today, U.S. Treasury Secretary Henry Paulson discussed a newly-released report by the President’s Working Group on Financial Markets that makes broad recommendations for policy and legislative action in the months ahead.

The group — which includes the Treasury, the Fed, FTC and SEC — had been tasked by the President with analyzing current market turmoil and putting recommendations in place to prevent such a scenario from playing out again.

Securitization, in general, garnered most of Paulson’s and the group’s focus.

“There is no single, simple solution to the problems that have emerged from the mortgage securitization process, yet we have determined that market participants’ behavior must change,” he said.

The working group called for uniform national licensing standards for mortgage brokers, and new standards of disclosure for borrowers, while also forcefully recommending that rating agencies differentiate corporate and municiapal structured finance products.

Paulson said the group will form a private-sector committee to work toward implementation of a new set of standards for the rating agencies, and threatened strong and potentially restrictive oversight by Federal regulators if market participants — Standard & Poor’s, Moody’s Investors Service and Fitch Ratings — can’t drum up a solution.

He also said the Treasury and SEC will look to implement new rules for issuers in securitization trusts, ensuring due diligence up front and forcing more thorough disclosures.

“Issuers of mortgage-backed securities will disclose the level and scope of due diligence performed on underlying assets, disclose more granular information regarding underlying credits,” Paulson said. “And, if issuers have shopped for ratings, disclose the what and why of that as well.”

“No silver bullet exists to prevent past excesses from recurring,” he said. “But I believe today’s recommendations put us on the path towards more transparent, better-functioning, and better-managed markets.”

Many of the remarks echo statements by Paulson and other administration officials in recent months, but represent a crystallization of how Federal regulators now intend to pursue industry reform as the financial markets continue to reel from a historic meltdown in the mortgage industry.

Florida and Nevada were the nation’s hotspots for mortgage fraud in 2007, with the Sunshine State maintaining its top rank for the second year in a row.

According to data jointly released Thursday by the Mortgage Bankers Association and the Mortgage Asset Research Institute, LLC, Nevada climed into the second spot last year after ranking sixth for fraud one year earlier.

“The current market conditions, compounded by mortgage fraud, are having a detrimental impact on our entire national economy,” said David Kittle, CMB, Chairman-Elect of the MBA.

“The MARI report provides critical insight for those in the real estate finance industry to better understand the factors contributing to these circumstances so that our communities and member companies are protected.”

Michigan, California, Utah, Georgia, Virginia, Illinois, New York and Minnesota rounded out the nation’s top-ten most fraudulent statewide mortgage markets, according to the report. Colorado showed the greatest improvement from prior years’ rankings, dropping out of the top ten for the first time in five years.

Not surprisingly, the study found that most common forms of fraud involved employment history and claimed income. And fraud has become more apparent in the so-called “bubble states” as borrowers no longer can hide behind massive price appreciation.

“As we began to notice last year, the stagnant and/or declining real estate markets in Florida, Nevada and California have resulted in easier identification of mortgage fraud. Borrowers unable to re-sell their property, end up becoming delinquent on their loans, unmasking the misrepresentation,” according to the report.

And 2008 isn’t likely to be much better; if anything, deteriorating conditions in the housing market seem likely to only further put the issue of mortgage fraud on the front burner for lenders, servicers and investors.

“Because fraud is persistent, it is imperative for the mortgage industry to collaborate in its efforts to combat mortgage fraud against lenders,” said Merle D. Sharick, ChoicePoint Vice President and MARI’s National Manager of Business Development.

For more information, visit http://www.mortgagebankers.org.

Ocwen Financial Corporation, one of the nation’s larger subprime servicers, said Wednesday that a bid led by the company’s CEO to take it private had failed. Chief William Erbey had originally sought to take the servicer private in mid-January amid speculation that the stand-alone servicer was facing mounting losses over increasing operating costs.

In a press statement, the company said it had been unable to agree to terms with a syndicate led by Erbey, Oaktree Capital Management, L.P. and Angelo, Gordon & Co., L.P. to acquire all of the outstanding shares of the Company for $7.00 per share in cash.

The company said a special committee will “continue to consider possible strategic opportunities,” but did not specify what opportunities were under consideration. Such language is usually reserved for use when a company is looking to sell itself.

Calls to the company were not immediately returned.

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

Disclosure: The author owned no positions in OCN when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

Countrywide Financial Corp. reported Thursday that credit quality in its substantial servicing portfolio continued to deteriorate last month, with the volume of foreclosures more than doubling at the nation’s largest independent mortgage lender.

Foreclosures reached 1.64 percent of unpaid principal balance, up from .80 percent one year earlier. Delinquencies reached 7.44 percent of UPB during February, Countrywide said, up from 4.48 percent one year ago — but down slightly from the 7.47 percent reported during January.

Funding activity, servicing portfolio record growth
Despite being bitting by rising foreclosures, mortgage loan fundings for the month of February 2008 were $26 billion, up 17 percent from January 2008. Applications fell, however, with reported average daily mortgage loan application activity at just $1.9 billion during February, compared to $2.6 billion for January; a drop in applications often signals lower funding levels in future months.

Wholesale fundings remain off dramatically compared to year-ago levels. The company has funded just 27,417 units via the wholesale channel thus far in 2008, compared to 66,983 units one year earlier. A drop in correspondent funding, however, was even more pronounced: just 91,487 units have been funded year-to-date via the channel, compared to 153,608 one year earlier. Correspondent lending, once Countrywide’s largest channel by unit volume, is now lagging behind retail lending.

Despite changes in origination volume and practices, Countrywide’s servicing portfolio continued to post strong growth, rising 1.6 billion between January and February, the company said. The portfolio now stands at an eye-popping $1.48 trillion - among the nation’s largest, along with Wells Fargo & Co.

Countrywide’s monthly reports are also likely to be no more; the company said that it will no longer release monthly operational data, moving to a quarterly reporting schedule for future reports.

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

Disclosure: The author owned shares of CFC when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

Carlyle Capital Corp., a listed mortgage bond fund that has seen its investments in agency-backed mortgage securities sour, said Thursday that it could not reach an agreement with its lenders over more than $400 million in margin calls. The failed discussions likely signal the end of the road for the highly-leveraged fund, which found itself caught when prices of Fannie Mae and Freddie Mac-backed MBS tanked starting last week.

In a press statement, the company said that it “expects that its lenders will promptly take possession of substantially all” of the company’s remaining assets.” Carlyle had first warned of problems last week.

Carlyle Capital’s portfolio consists entirely of U.S. government agency AAA-rated residential mortgage-backed securities — but it had leveraged $670 million in equity to finance its $21.7 billion portfolio, it said. That high leverage left the fund exposed, and likely fatally so, when spreads on agency MBS reached their highest levels in two decades earlier last week.

“Negotiations deteriorated late on March 12 when, among other things, the pricing service utilized by certain lenders reported a drop in the value of the RMBS collateral that is expected to result in additional margin calls tomorrow of approximately $97.5 million,” the fund said.

The company said lenders’ terms for lending have changed “substantially,” making successful refinancing impossible.

The failure at Carlyle could also signal further pressure for an already-stressed RMBS market, according to sources that spoke with Housing Wire Thursday morning.

“We’re talking about lenders siezing more than $20 billion in assets, which are probably going to be sold in a market where there are already more sellers than buyers,” said one source, who asked not to be named. “Unless the Fed earmarked 10 percent of its liquidity plan for Carlyle’s lenders, which is doubtful, this failure is likely to further widen some already wide spreads.”

The Federal Reserve announced plans to pump $200 billion into the financial markets earlier this week, lending against agency MBS, among other structured securities. The plan led stocks on a historic one-day rally, but enthusiasm appears to have dampened since that time — the Dow Jones Industrial Average was down sharply to open trading on Thursday, off 1.57 percent in morning trading.

Carlyle Capital Corp., a listed mortgage bond fund that has seen its investments in agency-backed mortgage securities sour, said Thursday that it could not reach an agreement with its lenders over more than $400 million in margin calls. The failed discussions likely signal the end of the road for the highly-leveraged fund, which found itself caught when prices of Fannie Mae and Freddie Mac-backed MBS tanked starting last week.

In a press statement, the company said that it “expects that its lenders will promptly take possession of substantially all” of the company’s remaining assets.” Carlyle had first warned of problems last week.

Carlyle Capital’s portfolio consists entirely of U.S. government agency AAA-rated residential mortgage-backed securities — but it had leveraged $670 million in equity to finance its $21.7 billion portfolio, it said. That high leverage left the fund fatally exposed when spreads on agency MBS reached their highest levels in two decades earlier last week.

“Negotiations deteriorated late on March 12 when, among other things, the pricing service utilized by certain lenders reported a drop in the value of the RMBS collateral that is expected to result in additional margin calls tomorrow of approximately $97.5 million,” the fund said.

The company said lenders’ terms for lending have changed “substantially,” making successful refinancing impossible.

The failure at Carlyle could also signal further pressure for an already-stressed RMBS market, according to sources that spoke with Housing Wire Thursday morning.

“We’re talking about lenders siezing more than $20 billion in assets, which are probably going to be sold in a market where there are already more sellers than buyers,” said one source, who asked not to be named. “Unless the Fed earmarked 10 percent of its liquidity plan for Carlyle’s lenders, which is doubtful, this failure is likely to further widen soem pretty wide spreads.”

The Federal Reserve announced plans to pump $200 billion into the financial markets earlier this week, lending against agency MBS, among other structured securities. The plan led stocks on a historic one-day rally, but enthusiasm appears to have dampened since that time — the Dow Jones Industrial Average was down sharply to open trading on Thursday, down 1.57 percent in morning trading.

In the latest proof that the U.S. housing market continues to face what many believe to be long-term problems, the number of foreclosures continues to rise — despite recent efforts that have seen loan workouts reach more than one million troubled borrowers.

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U.S. foreclosures rose nearly 60 percent year-over-year during February, according to foreclosure listing service RealtyTrac. In a monthly report released Thursday, the firm said that foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 223,651 properties nationwide during the month, a drop of 4 percent from January.

RealtyTrac CEO James Saccacio said the monthly drop was likely a seasonal effect.

“The 4 percent monthly decrease this February was similar to the 6 percent monthly decrease we saw in February 2007,” he said. “However, the year-over-year increase of 60 percent this February was significantly higher than the 19 percent year-over-year increase in February 2007, indicating we have still not reached the peak of foreclosure activity in this cycle.”

So-called “bubble states” dominate the foreclosure landscape. Nevada continued to document the nation’s highest foreclosure rate, with one in every 165 households receiving a foreclosure filing during February — more than three times the national average. Foreclosure filings were reported on a total of 6,167 Nevada properties during the month, up 1 percent from the previous month and up 68 percent from February 2007.

California registered the second-highest rate, with one in every 242 households receiving a foreclosure filing during the month, while Florida registered the nation’s third-highest February foreclosure rate. Both states documented foreclosure rates that were more than twice the national average, RealtyTrac said.

California continued to post the most foreclosures, as well. Foreclosure filings were reported on a total of 53,629 California properties in February, the most of any state despite a 6 percent decrease from the previous month. The state’s foreclosure activity was still up 131 percent from February 2007, signaling that trouble in the Golden State’s housing market has not yet abated.

Market experts have suggested that foreclosures are likely to remain elevated, despite progress made on numerous fronts to reach out and help troubled borrowers.

“We think the cycle will definitely continue through this year, and probably into next year,” said RealtyTrac vice president Rick Sharga.

“We have to play out alot of the subprime adjustable loans that are still in the system. We have a peak reset period in May and June and we’ll have to see how quickly and how completely those loans go into default.”

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

ING suspended all stated income loans effective today. Hat tip reader Dan for the news. Interesting to note that the bank claims that performance of the loan isn’t the issue; rather the perception of a problem by the investors of the product. With no transparency and the inability of investors to figure out which way is up right now it’s no wonder their backing away - even from product that may have inherent benefits.

It will take a long time for investor confidence to return after the binge of fraud and lack of underwriting standards. I believe we’ll continue to see more of this from big lenders.

“Stated Income” Suspended

We are suspending our Stated Income program effective for loans received today (03-12-08) after 10:00 am ET (7:00 am PT). Income must be verified on all loans received after this time.

Be assured that the performance of our Stated Income loans thus far has been excellent – much better than any group of loans we measure against, including Fannie Mae and Freddie Mac.

We are suspending our Stated Income program at this time, however, because there is a perception in the market that Stated Income loans are risky and could affect our portfolio. We hope that in the near future we will be able to offer you a Stated Income program again.