Refinance Free Credit

Insured U.S. commercial banks lost $9.97 billion trading cash and derivative instruments in the fourth quarter, down $12.3 billion from third quarter revenues of $2.3 billion, according to a report released Wednesday by the Office of the Comptroller of the Currency. For the full year, the OCC reported that banks recorded $5.5 billion in trading revenues, down $13.3 billion from the record of $18.8 billion in 2006.

The report provides insight into how the credit crunch affected a critical area of the banking industry. We’ll give HW readers one guess on the root of the fourth quarter losses.

Don’t think too hard.

“The large losses in the fourth quarter are the result of well-publicized write-downs on the super senior tranches of collateralized debt obligations backed by subprime residential mortgage securities,” said deputy comptroller for credit and market risk Kathryn Dick. “We expected to see an adverse effect on trading results given current turbulent conditions in the credit and capital markets, particularly in light of the deterioration in market liquidity.”

The report found that the notional amount of derivatives held by insured U.S. commercial banks decreased $8.0 trillion in the fourth quarter to $164 trillion, although that amount was still 25 percent higher than a year ago.

The OCC also reported that the net current credit exposure, the primary metric the OCC uses to measure credit risk in derivatives activities, had increased $57 billion, or 22 percent, during the quarter to $309 billion — 67 percent higher than at the end of 2006.

Derivatives contracts are concentrated in a small number of institutions, the OCC said. The largest five banks hold 97 percent of the total notional amount of derivatives, while the largest 25 banks hold nearly 100 percent.

For more information, visit http://www.occ.gov.

With a little help from FirstAmerican CoreLogic and Loan Performance, officials at the New York Federal Reserve Bank said Tuesday that they’ve rolled out a set of dynamic maps and data that illustrate subprime and alt-A mortgage loan conditions across the United States.

It’s actually a pretty neat little tool, although the data is far from real time: the most recent dataset when we visited the site for a look-see was from December 2007. Nonetheless, the tool provides a wealth of information on local housing markets with a simple click of your mouse.

<div class=”special_report” style=”float:right;width:225px;padding:5px;padding-left:15px;padding-bottom:0px;margin:15px;font-size:12px;text-align:left;”><strong>Related links:</strong>  <ul> <li><a href=”http://www.newyorkfed.org/mortgagemaps/” target=”_blank”>view the Mortgage Maps Web site</a></li> </ul> </div>

The maps, which are maintained by the Federal Reserve Bank of New York, will display regional variation in the condition of securitized, owner-occupied subprime, and alt-A mortgage loans — are intended in part to be used to assist in the identification of existing and potential foreclosure hotspots. The newly-available interactive data may assist community groups, Fed officials said, which can mobilize resources to bring financial counseling and other resources to at-risk homeowners. Officials also said that policymakers and local governments would benefit from the additional data.

The data shows a wealth of information by county and ZIP code, including:

<ul><li>Loans per 1,000 housing units</li>
<li>Loans in foreclosure per 1,000 housing units</li>
<li>Loans real estate owned (REO) per 1,000 housing units</li>
<li>Share of loans that are adjustable rate mortgages (ARMs)</li>
<li>Share of loans for which payments are current</li>
<li>Share of loans that are 90-plus days delinquent</li>
<li>Share of loans in foreclosure</li>
<li>Median combined loan-to-value ratio (LTV) at origination</li>
<li>Share of loans with low credit score (FICO) and high LTV at origination</li>
<li>Share of loans with low- or no documentation</li>
<li>Share of ARMs with initial reset in the next 12 months</li>
<li>Share of loans with a late payment in the past 12 months</li></ul>

Most servicers and investors like have the data on a subscription basis, but still, I doubt many have put in the time to develop such a cool visual interface to display it. 

The move by Federal officials to make the data available comes as public groups and local governments are demanding greater information from lenders on housing trends in various local markets. I’d expect this move can help quell some of the industry’s concern in this area, by providing a centralized source for local-level mortgage data.

.. ..Senators to be debating a bipartisan housing relief measure.. ..Senators agree to make deal on housing.. ..Senators agreed to cast partisan differences aside and put housing relief on the fast track.. ..pledged to work together to forge a housing solution.. ..the unprecedented role the Federal Reserve played by stepping into.. ..broader government action is needed to prevent a torrent of new foreclosures.. ..Senators set to debate housing crisis.. ..the different environment caused by last month's collapse of Bear Stearns.. ..the new pledge of cooperation was the latest sign of fast-growing consensus among Congress.. ..further collapse of the housing and residential mortgage markets.. ..rising foreclosures and freezing credit markets.. ..Senate leaders acted under pressure to help Main Street.. ..Republican and Democratic leaders agreed to come up with a bill to aid homeowners and the market.. ..Senator Dodd says the package will deal with the core issues in the housing market.. ..resignation of Alphonso Jackson, the Bush administration's secretary of Housing and Urban Development.. ..the government saved a Wall Street firm from bankruptcy.. ..Republicans were able to block the bill in February.. ..accusations that Mr. Jackson threatened to withdraw federal aid from the Philadelphia Housing Authority.. ..

[01]
http://www.westchesterrealestateblog.com/2008/04/a-bipartisan-so.html
[02]
http://www.wbir.com/news/national/story.aspx?storyid=56265&provider=rss
[03]
http://www.washingtonpost.com/wp-dyn/content/article/2008/04/01/AR2008040100156.html?nav=rss_business/industries
[04]
http://www.usnews.com/usnews/politics/bulletin/bulletin_080402.htm#p1
[05]
http://www.marketwatch.com/news/story/story.aspx?guid=%7BB10F71FA%2D6E16%2D4A32%2D9AED%2DA2DE74F9DF94%7D&siteid=rss
[06]
http://www.marketwatch.com/news/story/senate-may-vote-housing-aid/story.aspx?guid=%7BB10F71FA-6E16-4A32-9AED-A2DE74F9DF94%7D&dist=msr_4
[07]
http://www.businessweek.com/bwdaily/dnflash/content/apr2008/db2008042_470576.htm?campaign_id=rss_daily
[08]
http://www.pbs.org/nbr/site/onair/transcripts/080401b/
[09]
http://www.usnews.com/articles/news/politics/2008/03/31/senators-set-to-debate-housing-crisis.html
[10]
http://www.nytimes.com/2008/03/31/washington/31cnd-jackson.html?em&ex=1207195200&en=65429d13306b2931&ei=5087%0A

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Regular HW readers know that the reverse mortgage market has been booming as of late, for two distinct reasons: first, the greying of American baby-boomers continues, and for many, their home is their most significant asset as they head into retirment. But reverse mortgages have also been booming because so many former brokers and loan officers have figured out the demographics, and the implosion of the residential lending market has led to a mass exodus of sorts for many former brokers.

Has this been good for seniors, now facing near-daily marketing and sales messages suggesting that they take out a reverse mortgage? Interestingly, a survey released on Wednesday found that the number one reason borrowers take out a reverse mortgage is to pay for daily living expenses — only 3 percent say they used the funds from a reverse mortgage loan to take a vacation.

But with the growth the industry has seen thus far, those numbers should be seen as ominous, some sources have said.

“With reverse mortgages booming, if so many people are having to use these tools because they wouldn’t otherwise meet their everyday living expenses, just wait until the Boomers really arrive,” said one source, a money manager who asked not to be named. “This group has saved less than any generation before them.”

The survey, conducted by the Consumer Credit Counseling Service of Greater Atlanta, Inc., found that 19 percent of borrowers took out a reverse mortgage because their budgets were too tight; another 16 percent did so because they needed “more liquid assets” — whatever that means — while 15 percent used the funds to pay for home repair and maintenance. Another eight percent obtained a reverse mortgage to pay for dependents or medical bills.

A reverse mortgage is a loan that allows homeowners to convert the equity in their homes into tax-free income without having to sell the home, give up the title, or take on a new or additional monthly payment. Borrowers must be 62 years or older, and the loan “matures” when the borrower dies.

“We expect the demand for reverse mortgages to grow significantly as baby boomers reach retirement and need funds to meet daily expenses,” said Sue Hunt, manager of reverse mortgage counseling for CCCS. “It is important for homeowners to educate themselves about reverse mortgages. Credit counseling can help them understand how these loans work.”

What’s perhaps the most interesting trend, however, is one that has yet to play out: the market need for reverse mortgages is rising as housing prices are dropping precipitously in key housing markets — just as many Boomers are looking to retire, and right after many have already tapped the equity in their home to fund a high cost of living.

“There are alot of soon-to-be-retirees out there that could be in for a shock,” said one source, a reverse mortgage originator who asked not to be named. “Many are seeing the equity they’d need to qualify disappear by the month right now.”

Of course, that’s not true for all retired and near-retired homeowners, many of whom own their homes outright. But the trend of paying down a mortgage over time is also one that’s been changing with the Boomer crowd, say experts, who suggest that the run-up in housing prices convinced many to cash out of their home’s equity as recently as one year back.

Funny thing about the mortgage meltdown; despite it, the industry is finally embracing the promise of electronic mortgages, a technology movement that began during the boom but never really fully took off. Until now.

In the worst origination market in memory, the technology that was pushed as the future of mortgages a few years back appears as if it’s finally being adopted by some of the industry’s meaningful players.

Seattle-based DocuSign said Wednesday that it was selected as an approved electronic signature vendor for Wells Fargo, and will provide its service to major correspondent lenders working with the bank. DocuSign provides a on-demand platform for electronic signatures of key disclosure documents, including truth-in-lending notifications and 1003 applcations.

“We have enabled our correspondent customers to double their close rates and eliminate 80 percent of the cost from their expensive paper signature process,” said DocuSign CEO Matthew Schlitz.

Houston-based Encomia, which provides a complete suite of end-to-end e-mortgage solutions, was also among the vendors selected by Wells to manage electronic signatures, and characterized the move as the bank as a “first step” at Wells towards originating fully-electronic mortgages.

CEO Andrew Dubinsky said that while the arrangement certainly benefits originators using the Encomia platform, it also reflects a move by Wells Fargo towards greater adoption of electronic mortgages — and, mind you, this is taking place in the worst origination market in decades.

Electronic mortgages were initially touted as a game-changer in 2001, right before the housing boom. With the technology in its infancy at the time — and lenders making huge margins regardless of whether they managed the process electronically or not — the hype failed to match industry-wide adoption levels. Yet the implosion of the mortgage lending market has had a curious effect on those intent upon surviving it; tools that were once seen as an unneeded and complicated luxury are now increasingly being recast as a way to remain competitive in a quickly changing market.

Which means, paradoxically, that some origination technology vendors are doing better now than they did two years ago, according to some sources that spoke with HW.

“The technology is better, the cost structure is better, and right now it’s the sort of thing that makes sense for lenders,” said one source, who asked not to be named.

“We’d never have considered electronic signatures back in 2005,” said another source, a manager at a large retail banking operation. “But with the market being the way it is, I think people are realizing that there are efficiencies to be gained, and those efficiencies may make the difference between making money and losing it.”

National City is looking to sell itself as it struggles to remain viable in the face of mounting mortgage-related losses and a nose-diving stock price.  The company has vigorously tried to stave off the effects of souring loans apparently to little avail.  (h/t Don)  I wonder if they’ll get more than $2/share out the initial offer?  They’ll likely not get $10 as their stock price hovers around $9.90 at the time of this posting.

From the MSNBC story on National City looking to sell itself:

CLEVELAND - A day after National City Corp. said it was considering strategic options a report said the struggling bank, hurt by the worsening mortgage and housing market, could sell itself to another Cleveland-based bank.

The Wall Street Journal, citing people familiar with the matter, reported Wednesday that National City is considering an outright sale to KeyCorp. Analysts said a KeyCorp buyout might lead to large cost reductions.

 

Lehman Brothers analyst Jason Goldberg said other potential buyers include Wells Fargo & Co., JPMorgan Chase & Co. and PNC Financial Services Group Inc. He noted that the company has sold a few divisions in recent years, including its National Processing unit.

Gerard Cassidy of RBC said an outright sale is unlikely because of National City’s high exposure to risky loans. But a sale of some assets is likely, he wrote, and the company could try to find a way to get more money from a $1 billion stake in Visa Inc., although it cannot sell those shares outright.

Mortgage applications surprisingly tumbled last week despite relatively flat interest rates, with a widely-watched composite index of application activity falling 28.7 percent this week on a seasonally-adjusted basis.

The Mortgage Bankers Association’s Market Composite Index fell to 688.3 for the week ended March 28, down from 965.9 one week earlier, according to a statement released Wednesday morning by the group. Applications were 4.8 percent higher relative to year-ago activity.

The application index is calibrated to March 16, 1990; a reading of 688.3 means that application activity was roughly 6.8 times greater than when the index was first established.

Borrowers looked to refinance at a much slower pace this week relative to one week earlier, the MBA said, with refinance applications dropping 38.1 percent; purchase applications fell 11.8 percent, as well. Refinancing activity is largely driven by prevailing mortgage rates, which the MBA said were relatively flat during the past week; national rate surveys from both Freddie Mac and Bankrate.com are released tomorrow. Borrowers had applied to refinance in droves last week, with the refinancing index increasing more than 82 percent.

“There was sort of a backlog of borrowers just waiting to refinance after the wild rate ride we’ve been on,” said one broker that Housing Wire spoke to. “Now that rates are steady, and that backlog has been cleared, we’re not seeing as huge a surge in refinancing interest from borrowers.”

FHA applications — which have surged in recent weeks as well, thanks to efforts to revitalize the program — also posted their first weekly decline in over one month, falling 15.1 percent.

The refinance share of mortgage activity decreased to 53.4 percent of total applications from 62.0 percent the previous week, the MBA said.

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

So that’s comforting.  According to mortgage data made available by the federal reserve bank of New York 4 out of 5 homeowners in my zip code who secured their property with an Alt-A loan used stated income to qualify for their mortgage.  Actually it’s 83%.  And 72% of the loans are ARM loans. That is a jaw-dropping statistic, is it not???  Luckily only about 3% are due to reset in the next 12 months.  So we’ve got some time until the bottom drops out of my zip.

This is the problem people.  80% of folks in my typical, California zip code bought their home with stated income.  Max out the loan limits, offer modifications, expand FHA, make Fannie and Freddie buy more and leverage their capital.  Guess what?  It doesn’t matter!  Folks in these areas can’t afford their homes.  Unless you are planning on forgiving the mortgage debt you are not going to save folks from these exploding mortgages, period, end of story.

So, how many people stated their income in your zip? 

P.S. If you’re a mortgage originator this could be the ultimate farming tool.  Check out ARMs due to reset in the next 12 months.  Get farm packs from title in those zips with >75% reset rate and cross your fingers people have equity.  Free marketing advice - just like that.  You’re welcome.

Hat tip to Matt at Inman for the link.

Many lenders out there are tightening their grip on strict guidelines and restrictions, its hard to find the right "Niche" for borrowers nowadays.

As many have perceived with FHA as a strict loan and strict appraisal standards, FHA has made a lot of improvements over the last few years.

FHA is still going strong as my "Super Star Loan Program" and should not be forgotten.

I have had much success with the following just as a clarification on my FHA guideline.