Refinance Free Credit

Interthinx, Inc., a provider of proven risk mitigation, mortgage fraud prevention, and regulatory compliance tools for the mortgage industry, said Tuesday that it had rolled out a new service to actively review and score third-party originators.

Based on proprietary loan data and weighted “alerts” within the Interthinx scoring system, the company’s Broker Risk Score provides lenders with the ability to incorporate a “score” into their evaluations of potential and current business partners. The company said it maintains data on historical broker performance aggregated from the millions of loans within the Interthinx inventory.

“Broker Risk Score calculates risk based on the number of loans identified for a broker origination company, the percentage of loan reviews identified as high risk transactions, and the weighted alerts within the reviews that are assigned a value,” said Stacey Louie, senior vice president of product development and engineering for Interthinx.

“The combined values are used to determine whether the broker origination company represents a low, medium or high risk for the approving lender.”

Third party brokers have been blamed by many as a driving force behind the current mortgage mess, with industry critics pointing to compensation schemes that incentivized brokers to commit fraud, led them to attempt to manipulate a borrower’s application to gain approval from a lender’s automated underwriting system, and had many pushing borrowers into loans they could not afford.

“The FBI has stated that 80 percent of all reported fraud losses involve collaboration or collusion by industry insiders,” continued Mike Zwerner, senior vice president of business development and marketing for Interthinx.

“There has never been a more crucial time in this contracted market to carefully review third party entities. The improved business profitability that results from the ability to evaluate potential third-party risk before accepting loans will add a newly restored confidence in approval processes. These are benefits that should not only be welcomed by lenders, but aggressively sought after.”

Interthinx said that its broker scoring module is available for no additional charge within the company’s third party review product.

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

In a wide-ranging report looking the global credit crisis triggered by trouble in the mortgage market here in the United States, the International Monetary Fund warned Tuesday that the crisis has yet to play out. The IMF’s latest Global Financial Stability Report for April pegged losses at an astronomical total, as well:

U.S. housing prices and rising delinquencies on mortgage payments could lead to aggregate losses related to the residential mortgage market and related securities of about $565 billion, including the expected deterioration of prime loans. Adding other categories of loans originated and securities issued in the United States related to commercial real estate, the consumer credit market, and corporations increases aggregate potential losses to about $945 billion.

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“Financial markets remain under considerable stress because of a combination of three factors,” said Jaime Caruana, head of the IMF’s monetary and capital markets department. “First, the balance sheets of financial institutions have weakened; second, the deleveraging process continues and asset prices continue to fall; and, finally, the macroeconomic environment is more challenging because of the weakening global growth,” he added.

Credit deterioration, which was first evident in the U.S. subprime mortgage market, is now showing up in higher-quality residential mortgages, U.S. commercial real estate, and the corporate debt markets, according to the GFSR. These concerns are further exacerbated by a drop in valuations of structured credit products and a dramatic drying up of market liquidity, the report said.

The graphs to the left provide a look at delinquency data for subprime, Alt-A, and prime mortgages. It’s worth noting that even performance of prime loans in the 2007 vintage is mirroring what’s already being seen in both the Alt-A and subprime categories.

The IMF cited “worrying macroeconomic feedback effects” as its primary concern, where uncertainty leads banks and consumers to pull back, further exacerbating uncertainty — and so the loop continues. It also noted that current market problems are not limited merely to liquidity, something a recent viewpoint feature on Housing Wire explored in the wake of Bear Stearns’ historic collapse.

“It is now clear that the current turmoil is more than simply a liquidity event, reflecting deep-seated balance sheet fragilities, which means its effects are likely to be broader, deeper, and more protracted,” the study’s authors wrote.

Tuesday's bond market has opened up slightly as investors await today's news. The stock markets are showing early losses with the Dow down 20 points and the Nasdaq down 8 points. The bond market is currently up 5/32, which should improve this morning's mortgage rates slightly.

Today's only relevant news comes this afternoon when the minutes from the last FOMC meeting will be released at 2:00 PM. Market participants are interested in how divided the Fed is towards rate cuts and possible future moves. The minutes give us insight to their current thought process and individual Fed member opinions. Any surprises could cause afternoon volatility in the markets later today and possible changes in mortgage pricing.

The first piece of monthly data is February's Goods and Service Trade Balance report Thursday morning. This data gives us the size of the U.S. trade deficit, but unless it varies greatly from forecasts, it likely will not cause much movement in mortgage rates.

There is a 10 year Treasury Inflation Protected Security (TIPS) sale Thursday also. We could see some weakness in bonds ahead of the sale as investing firms sell current holdings to prepare for it. This weakness is usually only temporary if the sales are met with a decent demand. The results of the sale will be posted at 1:00 PM ET. If the demand from investors was strong, the bond market could rally during afternoon trading, leading to lower mortgage rates. If the sales were met with a poor demand, the afternoon weakness may cause upward revisions to mortgage pricing Thursday afternoon.

In the meantime, watch for this afternoon's Fed minutes. I suspect they may remind us of the Fed's concerns about inflation. This could lead to afternoon selling and possibly upward revisions to mortgage rates. Accordingly, I am extending the lock recommendation to include short-term periods also.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

The number of borrower contracting to buy an existing home in February hit new lows, as the U.S. housing crisis continues to exert pressure on the economy and mortgage industry.

According to statistics released Tuesday by the National Association of Realtors, an index of pending home sales fell 1.9 percent in February to 84.6, and was 24.9 percent lower than one year ago. The February results represent the worst reading since the realtor-led trade group began keeping records in 2001, and come after a revised increase of 0.3 percent during January.

The 1.9 percent drop was sharply greater than the 1 percent economists had been expected, Bloomberg News reported.

NAR chief economist Lawrence Yun characterized February’s numbers as a slip in a housing market he expects to rebound in the second half of 2008. “The slip in pending home sales implies we’re not out of the woods yet, though an era of successive deep sales declines appears to be over,” he said.

The realtor group has become more bullish on existing home sales in recent months, while it continues to adjust downward its expectations for new home sales. Yun said Tuesday that existing homes should register 5.39 million for all of 2008, up slightly from last month’s annual forecast of 5.38 million; in 2009, the realtors now see a 5.74 million pace, compared to the 5.6 million pace that was forecast in March.

New homes are now expected to register just 576,000 in 2008 and 602,000 in 2009, the NAR said. Last month, it had expected 590,000 new home sales this year and 633,000 during 2009.

Bloomberg, notably, did not quote Yun at all in its coverage of the realtors’ numbers; the economist has been widely panned by industry and media critics alike recently for allegedly pandering to NAR member interests. Instead, Bloomberg was more content to feature the sentiments of an economist at Lehman:

“Looking for a bottom in housing is a little premature,” Drew Matus, senior economist at Lehman Brothers Holdings Inc. in New York, said in a Bloomberg Television interview. “Prices are likely to come down and we expect that to continue for some time.”

The rumors are true.

Washington Mutual, Inc. (WM: 11.73, -10.80%) confirmed Tuesday morning that it would raise $7 billion via a direct placement of securities with an investor group led by an affiliate of TPG Capital; that number is $2 billion greater than the $5 billion that had been reported earlier by the Wall Street Journal, ahead of the deal’s formal announcement.

Under the terms of the deal, TPG will serve as anchor by purchasing $2 billion in newly-issued WaMu securities. Other investors were not named.

WaMu shares were off more than 10 percent in morning trading on the NYSE.

“We’re very pleased that TPG and these major investors have expressed their confidence in WaMu’s underlying value and its growth potential,” said WaMu chairman and CEO Kerry Killinger. “This substantial new capital — along with the other steps we are announcing today — will position us for a return to profitability as these elevated credit costs subside.”

As expected, TPG will gain a seat on the company’s board. Founding partner of the private equity giant, David Bonderman, will join the 11-member group. In addition, Larry Kellner, chairman and chief executive officer of Continental Airlines and former executive vice president and chief financial officer of American Savings Bank, will become a board observer at TPG’s request, WaMu said.

Scaling back on mortgages
As HW reported Monday evening, the deal with TPG includes provisions that will see the Seattle-based lender substantially scale back its footprint in residential mortgage origination. In addition to a complete exit out of wholesale lending, the bank will also close its free-standing loan origination offices as it looks to refocus entirely on bank retail origination activity.

The company did not provide details on the number of employees affected by the move, although it said it expects the closures to take effect before the end of the second quarter.

WaMu said poor performance in its mortgage portfolio would likely drive a net loss of approximately $1.1 billion, or $1.40 per diluted share, for the first quarter. It expects to record a provision for loan losses for the quarter of approximately $3.5 billion and expected first quarter net charge-offs of approximately $1.4 billion, it said.

The estimated first quarter loss would come on top of a $1.84 billion loss reported for the fourth quarter.

The bank’s portfolio includes $57 billion in option ARM mortgages; so-called negative amortization loans have been a fast-increasing source of losses for lenders as housing prices have fallen in key markets throughout the United States and put millions of borrowers in the position of owing more on their mortgage than their home is worth.

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

For most people looking at buying their first home, saving their money for the down payment is often a difficult challenge. Coming up with 5%-20% of the home’s value can be a stretch and some people have to save their money for years in advance just to come up with it. It doesn’t have to take you long though, considering many lenders no longer require large down payments and some may even allow you to put zero down. However, keep in mind that it’s almost always better to have a larger down payment on your home. The bigger the down payment, the less you’ll have to pay later with added interest and the more likely you can avoid paying for the dreaded mortgage insurance. By saving for a large down payment, you may also be able to get a more expensive home or overcome a poor credit history. If you’re really having trouble coming up with your down payment, ask lenders in your area about first time buyer programs that can help you get the home you want.

Saving for Your Down Payment

If you want to put a significant down payment toward your mortgage, here are some tips to start saving for it:

• The first thing you should do is outline a plan for how large of a mortgage you want and how much of a down payment it will require. Now you can start to financially map out what it will take to get there.
• Start your saving immediately! Yes, that does mean making some sacrifices, such as waiting on that new high-definition TV or putting off your vacation this summer.
• Be careful not to over extend yourself. One of the problems that some new home buyers run in to while saving for their mortgage is actually accumulating credit card debt. Saving for your down payment is important but be realistic in your approach.
• Find something you can cut out of your budget each month. There’s a lot of things we waste our money on, for instance, can you live without those premium cable channels until you get your home? How about reducing your cell phone plan or cancelling magazine subscriptions?
• Finally, make sure your down payment is ready to go at least sixty days before your apply for your mortgage.
  Title: Down Payment

Related Down Payment Links

• The Down Payment Hurdle
• Mortgage Down Payment Comparison Calculator

Troubled banking outfit Fremont General (FMT: 0.4411, -8.10%) said Tuesday that the New York Stock Exchange was likely to delist the company’s common stock over a failure to maintain a high enough stock price. Stocks that trade below one dollar for 30 consecutive days are deemed to fail the so-called “quantitative continued listed standard” established by the Exchange.

The stock closed Monday at 48 cents, and has traded below the $1 benchmark since the beginning of March.

The troubled lender has seen its stock plummet more than 90 percent during the past year, after the bank nearly collapsed as the subprime mess first began; the Brea, Calif.-based operation maintains $8.8 billion in assets and 22 branches in California.

Fremont’s latest round of troubles began in late February, saying that write-downs and loss reserve charges had eroded its capital base; since that time, it has defaulted on loan purchase contracts worth $3.15 billion and delayed an interest payment on $169 million in debt. The FDIC stepped in during late March and ordered the troubled lender to capitalize or sell itself within 60 days.

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

Columbia Bancorp (CBBO: 13.71, -14.26%), the financial holding company for community banking outfit Columbia River Bank, warned Tuesday that it will likely miss analyst expectations for first quarter earnings, as credit quality in the bank’s residential construction portfolio continues to worsen.

Analaysts had been expects earnings per share of $.35 for the first quarter; the banks said it would likely post earnings in $.11 to $.13 range.

The warning at Columbia comes after Comptroller of the Currency John C. Dugan recently suggested that regulators were growing concerned with community banks’ exposure to commercial real estate during an extended downturn in U.S. real estate.

“The combination of these conditions is putting considerable stress on one particular category of commercial real estate lending: residential construction and development,” Dugan said in a speech before a meeting of the Florida Bankers Association in early February.

“Credit quality indicators in our residential construction portfolio continue to experience an increased risk profile since year-end,” the bank said in a press statement. Columbia said it expected to record a loan loss provision of between $3.0 and $3.2 million for the quarter, and that it expected non-performing assets to total approximately $12 million.

“While we may face further challenges due to the weakening real estate market, we are closely monitoring and evaluating all significant loans in our portfolio,” explained Columbia Bancorp President and CEO, Roger Christensen. “We will continue to actively manage our credit risk and exposure while we wait for the stabilization of the real estate market.”

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

As the distressed asset market — particularly for mortgages — heats up, perhaps the single largest question is one of value. What are these assets really worth?

SuperDerivatives, a provider of risk management, revaluation and online options trading solutions, is aiming to answer at least one part of that question. The company said Tuesday that it will begin providing the liquidation price (or so-called “exit price”) of all derivatives held within clients’ portfolios. Liquidation prices for the time of calculation, or for any retroactive dates, will be supplied as part of SuperDerivatives’ independent Portfolio Revaluation service, the company said in a press statement Tuesday.

The enhanced offering addresses an obvious market need: valuing portfolios that might be liquidated, and providing a fair value disclosure for investors that foresee a liquidation event. The demand for liquidation price-based valuations has been amplified during the recent financial crisis, as well as by specific regulatory requirements such as FAS 157.

SuperDerivatives said it will use its benchmark model for bid and ask prices to calculate the liquidation price for all types of financial portfolios, including those that contain illiquid OTC derivatives

Under the terms of FAS 157, firms are required to define the exit price of all instruments to calculate fair market value or “…the price that would be received to sell an asset or paid to transfer a liability.” Additionally, during times of distressed market conditions, the exit price is usually the only price that matters to the portfolio manager looking to redistribute risk exposures.

“The recent market turmoil has highlighted the need for accurate, independent valuation,” said Dani Weigert, head of revaluation services at SuperDerivatives. “Determining the liquidation price of derivatives, necessary for both regulatory compliance and to instil confidence in the investing community, can only be achieved with a combination of sophisticated modelling techniques and market data expertise.”

“Today’s financial crisis has proven that none of the available models, or ‘standard analytics’ can be used for universally calculating the fair value of options.”

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

Analysts at Lehman Brothers (LEH: 44.658, +0.13%) on Tuesday upgraded both Fannie Mae (FNM: 30.321, +1.58%) and Freddie Mac (FRE: 26.755, +0.58%), moving both GSEs to “overweight” from a previous rating of “equal weight” on an expected recovery in revenue growth. The upgrades were originally reported by MarketWatch.

The news service reported that Lehman analysts met with each company and felt that the GSEs have “reached an important inflection point.” From the report:

The upgrades reflect political standing, ability to deploy capital and high-return investment options which have all improved “significantly” in recent weeks … “Prior to that the stocks should gradually outperform on steady market share gains and high returns on new business, which is sustainable while credit costs escalate.”