Refinance Free Credit

A new report released late Tuesday shows that the number of troubled borrowers in California continued to mount during March — if anything, the stats show that the foreclosure crisis is accelerating and suggests that the normalization of the state’s real estate market is still far from complete.

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In particular, Notices of Trustee Sale — usually issued three months after a borrower receives a Notice of Default, and notification of an imminent forced sale of the property back to the bank — jumped nearly 50 percent in March to 27,571 filings. ForeclosureRadar, a foreclosure property information service, said the number of NTS filings represented an all time record.

Notices of Default rose 14.3 percent during March as well, ForeclosureRadar reported, indicating that new borrowers are finding themselves at foreclosure’s doorstep.

Many of those on the front lines of managing defaults in California said that they’d seen a decrease in activity during the month — and that sentiment was likely due to a dip in the number of foreclosure sales at auction in March, which fell 6.5 percent to 15,833 (still a large number, on its own).

“Unfortunately, the foreclosure crisis in California is still deepening,” said Sean O’Toole, founder of ForeclosureRadar. “The record jump in defaults last December are just now showing up in early April foreclosure sales, and the new record level of defaults this month won’t begin to appear at auction until July.”

When the properties finally do make it to auction, it’s likely they’ll end up in the bank’s lap as REO rather than being bought by investors. O’Toole said that 97.7 percent of the properties sold at foreclosure in the state are headed back to the lender, despite attempted discounts averaging 21 percent of loan value.

Discount strategies varied, with some lenders offering even deeper discounts on their properties, depending on where the properties were located — to no avail. Wilshire Credit Corp. was by far the most aggressive in the state, bidding on properties at an average of 43.1 below original loan value during the month, according to the ForeclosureRadar report. World Savings and Downey Savings and Loan — two well-known option ARM specialists — also got aggressive with discounts, offering 32.8 and 30.4 percent off of loan value, respectively.

“We see the housing pain in California continuing through the end of this year, as the market shakes off the effects of the credit mess and rampant overbuilding,” O’Toole said.

“As devastating as this may be, we do think that the end result – greater housing affordability for the average Californian, using conventional loan products – will benefit consumers and the housing industry alike.”

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

JPMorgan Chase & Co. (JPM: 44.96, +6.74%) said Wednesday that 2008 first-quarter net income fell to $2.4 billion, or $.68/share, compared to $4.8 billion, $1.34/share, one year earlier. Driving the drop in income were sizeable mortgage-related losses, including $1.1 billion in loan loss provisions tied to JPMorgan’s home equity portfolio, and another $2.6 billion in write-downs tied mostly to mortgages spanning all credit classes and underwriting programs.

The message from banks like JPMorgan and Wells Fargo (WFC: 29.01, +4.31%), both of whom reported earnings Wednesday, seems to be that consumer credit is increasingly in trouble, although JPMorgan did meet analyst expectations for earnings — leading to a requisite bump in share price, fueled also by remarks made on a conference call by CEO Jamie Dimon.

JPMorgan’s investment banking operations posted a loss of $87 billion for the quarter as revenues fell more than 50 percent from one year earlier. The firm provisioned $618 million for future credit losses, up dramatically from the $200 million charged in similar provisions just one quarter earlier as JPMorgan transfered $4.9 billion of leveraged lending commitments into its portfolio from a prior classification as held-for-sale.

Loss provisions in investment banking, however, paled in comparison to the provisions booked in the company’s retail financial servicing segement (which includes mortgage banking). A whopping $2.5 billion was set aside for future credit losses, the vast majority of which JPMorgan said was tied to expected losses in home equity loans held in its portfolio. Home equity charge-offs accelerated dramatically as well, reaching $447 million in Q1, compared to $68 million in the year-ago period.

Despite the losses, and somewhat paradoxically, JPMorgan said its Chase banking unit generated a 10 percent increase in average home equity loans during the quarter. For a product that’s bleeding so much money on the back end, you’ve got to be surprised to see the firm actively increase its exposure to the earnings drain.

Overall originations were up as well, JPMorgan said, with quarterly production reaching $47.1 billion, up 30 percent from year-ago levels. The company’s servicing portfolio continued to expand as well, reaching $627.1 billion, up 15 percent.

JPMorgan made headlines a few weeks ago by agreeing to acquire Bear Stearns in a historic bail-out move orchestrated by officials as the Federal Reserve and the Treasury Dept. CEO Jamie Dimon indicated to analysts on a conference call Wednesday that the acquisition was moving ahead as planned, although company execs said later that it was “too early” to estimate the number of jobs that will be lost due to the takeover.

Dimon also suggested — as with Morgan Stanley CEO John Mack and others — that the end of the current credit crisis is in sight. From Bloomberg:

Dimon .. said on a conference call … that the credit-market crisis is more than halfway finished as financial firms reduce leverage, and may be as much as 80 percent over.

“That side is working itself out,” Dimon said. “That doesn’t mean the recession won’t get worse or better.”

Dimon also said that real estate in the U.S. was “getting worse,” and pegged housing price declines nationally in 2008 at 9 percent, an estimate that puts him somewhere between the Pollyanna-ish National Association of Realtors (1.4 percent price decline) and PMI Group (PMI: 5.22, +3.16%) chief economist David Berson, who predicted a 20 percent peak-to-trough price decline last week.

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

The U.S. economy is facing a tough road ahead, according to the details provided in the latest report from the Federal Reserve — and signals of a potential recovery in the housing market aren’t yet being seen, according to the report.

Prices are rising, consumer spending has petered itself out, and asset quality continues to deteriorate among key financial institutions, according to the Fed’s Beige Book. Housing in particular was singled out as “anemic” in the report, although the Fed did note that “there were few signs on any quickening in the pace of deterioration.” That last sentiment may allow Fed officials to focus greater attention on inflation when considering the next potential rate cut, sources suggested to Housing Wire on Wednesday.

“Housing looks bad in all 12 regions, no question, but the message appears as if it might be that it no longer is spiraling out of control,” said one source, who asked not to be named. “Given that prices appear to be facing widespread increases across nearly every core category, I’d expect Bernanke and crew look to hammer away on that front.”

The Beige Book is a collection of reports from the Fed’s 12 regional banks, used to ground monetary policy decisions by Ben Bernanke and other members of the Fed’s board. Expectations currently have pegged the Fed to cut its core interest rate by 25 basis points at its next meeting, on April 29 and 30.

On real estate, the outlook was admittedly dim:

Ongoing weakness in housing markets, in general, was reported in almost all Districts. Sales activity was generally reported to be declining in the Boston, New York, Philadelphia, Atlanta, St. Louis, Minneapolis, Dallas and San Francisco Districts, while Kansas City and Chicago noted slack demand and excess inventories. On the other hand, the Cleveland District saw some pickup in activity, while Richmond and Atlanta reported some pockets of improvement; Boston, Atlanta, and Chicago cited some recent pickup in traffic or buyer inquiries. New residential construction was reported to have remained at depressed levels, and none of the Districts reported any pickup since the last report.

The Fed also reported that credit quality has continued to deteriorate. “Widespread tightening in credit standards was reported,” the report said, “especially on residential and commercial real estate loans.”

A widely-watched measure of mortgage application activity rose 2.5 percent last week, driven almost entirely by an increase in refinancing interest from borrowers as mortgage rates continued to settle downward. The MBA’s Market Composite Index registered 743.7 for the week ended April 11, up from 725.6 one week earlier.

The application index is calibrated to March 16, 1990; a reading of 743.7 means that application activity was roughly 7.4 times greater than when the index was first established.

Application activity diverged pretty sharply, however, between applications and refinancing — refinances jumped 5.2 percent, the MBA reported, while purchase application activity fell 0.8 percent. For HW readers’ backgound, it’s worth noting that most economists place more emphasis on purchase activity as an indicator of economic health; the idea is that purchases are a more direct indicator of the health of a housing market than refinancings are, which can be motivated by a number of different factors.

FHA application activity remained strong as well, rising 3.5 percent as borrowers find that the revitalized housing agency is one of the few still lending at higher loan-to-value ratios.

Refinance share of overall mortgage activity increased to 53.5 percent of total applications, the MBA said, from 52.2 percent the previous week; ARM-share of activity decreased to 6.0 from 6.5 percent of total applications from the previous week, reflecting consumer’s strong preference for fixed-rate product.

I remember during the boom years, BTW, when ARM share was regularly more than a quarter of all loan applications.

Wells Fargo & Co. (WFC: 28.56, +2.70%) saw its first quarter profit fall less than analysts had expected, it said on Wednesday morning, with the bank earning $2.0 billion, or $.60/share, compared to earnings of $2.24 billion one year ago. Bloomberg reported that analysts had pegged the bank’s earnings at 57 cents per share ahead of the report.

The earnings come despite deteriorating asset quality, thanks to the ongoing residential mortgage mess: net charge-offs as a percentage of average total loans in the first quarter reached 1.60 percent, up from 1.28 percent one quarter earlier, while non-performing loans reached 0.84 percent of all loans, an increase of 20 percent within just one quarter.

Nonetheless, the company’s results certainly didn’t seem fazed by any of it.

“Despite a weakening economy, the continued downturn in housing and expected higher charge-offs, this was a remarkably strong quarter of growth for our company – very impressive growth in loans at wider spreads, a 9 percent increase in core deposits, double-digit revenue growth once again exceeding expense growth, and increases in both our capital and liquidity levels,” said president and CEO John Stumpf.

Junior lien losses soar
Home equity loans at Wells Fargo have been recently targeted by analysts, who have said the bank’s exposure in this area could become its Achilles heel. Not surprisingly, more than half of the bank’s increase in credit losses from one quarter earlier were due to residential junior liens — net charge-offs reached $438 million in Q1, versus $277 million at the end of last year.

First liens also proved problematic, although on a lesser scale in absolute dollar terms. Charge-offs on residential 1-4 first mortgages more than doubled within one quarter, reaching $75 million in Q1 compared to $34 million just one quarter earlier. While the losses here are smaller in relative terms, the significant jump within one quarter should provide some pause if the economy continues to sputter, as most economists now expect.

Looking at non-performing assets, the bank reported that residential mortgages contributed $542 million of the company’s $1.6 billion worth of loans 90 days or more past due and still accruing by the end of the first quarter (this total doesn’t include GSE guaranteed loans, for obvious reasons). That’s an increase of 11.2 percent in NPAs within one quarter; residential mortgage NPAs are up 143 percent versus year-ago levels.

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

The New York Stock Exchange said earlier this week that it would delist Fremont General Corp. (FMT: 0.20, -25.93%) from trading on the exchange prior to the opening of trading on Thursday. The company’s common stock and its Trust Originated Preferred Securities are both set for removal, according to a press statement by NYSE Regulation Inc.

The delisting comes as Fremont’s common stock has been trading below the $1.00 floor set by the NYSE for more than 30 consecutive days. Beyond the pricing issues, the NYSE said that other factors led to the decision to delist, including the FDIC’s categorization of the bank as “undercapitalized,” as well as Fremont’s recent announcement that it would be selling substantially all of its banking assets to CapitalSource TRS Inc.

The move is the latest hurdle for the troubled lender, which has not yet filed its 2007 annual report with the Securities and Exchange Commission, and has had to defer interest on two obligations in connection with attempts to restructure outstanding debt.

In a press statement released Wednesday, Fremont said it will begin trading its stock on Pink Sheets, effective Thursday. Its symbol has not yet been announced, as of when this story was published.

Disclosure: The author held 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.

Not that it should surprise any industry participant — but if you needed proof on just how dead the private-party issuance side of the mortgage business really is, consider that just $7.7 billion in mortgages were securitized by private conduits in Q1 2008. And only eight firms were involved in new issues.

The statistics, reported Wednesday by Inside Mortgage Finance, paint a stark contrast to the 40 firms that pumped out more than $240 billion just one year earlier. The only assets moving even a little bit, according to the publication, are traditional jumbos (meaning not subprime, and not what would traditionally be considered Alt-A).

We’re hearing from our sources that a few bankers and lenders are hoping to restart their engines later this year, but at this point, it seems like that sort of talk may be more an expression of hope than an outline for business execution.

Single family housing starts continued to fall in March, according to data released Wednesday morning by the Commerce Department, as builders continued to pull back on key building activities amidst ongoing economic problems tied to the the U.S. housing and mortgage markets.

Total housing starts fell nearly 12 percent to a seasonally adjusted annual rate of 947,000 units for the month, while single-family starts fell 5.7 percent to a rate of 680,000 units. Single-family starts are at their lowest level since January 1991, although completions remained elevated at a 1.2 million seasonally-adjusted annual rate in March; experts — including the eponymous author of the Calculated Risk blog — expect completions to slow significantly in the month ahead as a result of fewer and fewer starts, taking construction employment with it.

The National Association of Home Builders zeroed in exclusively on the lower starts numbers, which some think may now be low enough to begin reducing an enormous inventory overhang in the general U.S. housing market.

“Builders are dramatically limiting starts of new homes in an environment of weak sales and heavy supply, ratcheting down production of single-family units to its slowest pace in 17 years,” said NAHB president Sandy Dunn, who also continued to beat the drum for federal housing reform.

“The Senate has done a fine job already in moving forward with beneficial legislation, and we applaud its efforts to this point,” she said. “We urge the House to do the same thing and quickly advance a bill that can be reconciled with the Senate’s version and promptly sent to the President’s desk.”

NAHB economist David Seiders noted that builders continue to report prospective buyers visiting models, but that few are willing or able to commit to a purchase.

“It stands to reason that incentives such as a temporary home buyer tax credit and improvements to the housing finance system would help boost consumer confidence in the market and have a significant stimulative effect that could arrest housing’s heavy drag on economic growth,” he said.

Either that, or it could be that many prospective buyers don’t represent a good credit risk, said some sources that spoke with Housing Wire — remember, much of the growth in housing over the past few years has been fueled by borrowers on the margin.

“Our pursuit of constant growth is what drove us into questionable credit markets,” said one source, who asked not to be named. “I’m not sure where new these new droves of buyers that keep being touted are supposed to come from, given that.”

Regionally, housing starts were down across the board in March, with an 8.5 percent decline registered in the Northeast, a 21.4 percent decline in the Midwest, a 12.6 percent decline in the South and a 5.7 percent decline in the West. Permit issuance was mixed by region, with gains of 3.8 percent and 0.4 percent registered for the Northeast and South, respectively, and declines of 10.6 percent and 20 percent registered for the Midwest and West, respectively.

Are you less than convinced by all those amazing debt consolidation stories out there - the ones where someone seems to magically eliminate all of their debt in just a few months? They usually sound a little too good to be true, and that’s because they usually are. However, there is another, more reliable way to consolidate your debt through the help of 125% home equity loan. Created in the mid 1990’s, the 125% home equity loan was the first mortgage that allowed home owners to borrow more than 100% of their home’s equity. The 125% home equity loan has become an option for debt consolidation because it can significantly reduce your monthly payments and free up extra cash. Read on to find out exactly what you need to know about 125% home equity loans.

What You Need to Know About the 125% Home Equity Loan?

• With a 125% home equity loan, you’ll be able to borrow more than what you’re home is actually worth, as opposed to just simply refinancing. This is regardless of how much equity you have in your home.
• It’s important to try and get a fixed interest rate or secure interest rate, as it will play a major factor in whether or not you actually get a lower monthly payments. It’s estimated that paying off a fixed rate interest loan over paying off credit card debt can save you three times as much over time.
• If you’ve had a foreclosure in the past or have a damaged credit score, you may find getting a fixed interest rate very difficult. However, you can still save a significant amount of money with an adjustable rate loan. You may have to search for a lender that can help you, but it could be well worth your time.
• As with any major financial decision, you should discuss your plans with a financial advisor before even thinking about getting a 125% home equity loan. Every type of loan has its strengths and weaknesses; you just want to make sure it’s the best fit for your financial situation.

Related:

• 125% Loans
• <a href="
  http://ezinearticles.com/?125%25-Home-Equity-Loans---Danger-of-Borrowing-More-Than-Homes-Equity&id=159040" target="_blank">125% Home Equity Loans - Danger of Borrowing More Than Home’s Equity

A new study released Wednesday found that one in 33 homeowners nationally is projected to become a foreclosure statistic over the course of the next two years, underscoring the widespread impact the U.S. housing downturn will have on local housing markets throughout the nation.

In some states — particularly former booming housing markets — the outlook is especially grim; for instance, nearly one in 11 homeowners in Nevada is projected to be in foreclosure and one in 18 Arizona homeowners may face the same circumstance over the next two years, according to the study.

The report, a joint effort between the Pew Center on the States and Pew’s Health and Human Services Program, found that price declines are likely to affect more than just the millions stuck in foreclosure — an additional 40 million neighboring homeowners may see their property values and their municipalities’ tax bases drop by as much as $356 billion over the next two years alone.

HW readers have known for some time that foreclosures affect neighborhoods, and local cities, but the Pew study is one of the few that has set out to quantify the expected impact. And the numbers are huge, as any industry participant would expect.

“Stronger standards from federal policy makers could have helped avert this crisis,” said Shelley A. Hearne, Managing Director of Pew’s Health and Human Services Program.

“Future legislation must consider ways to strengthen standards to prevent more troubling loans from being made. Let’s make certain federal laws build upon, rather than preempt, the strong and smart state efforts already underway and ensure that states retain flexibility to respond to local circumstances.”

Of course, I take strong issue with a characterization all state-led efforts either “smart” or “strong” in many cases — Maryland, I’m looking at you — and I also have a problem with the suggestion that says patchwork state-led laws should set precedent over a national, Federally-defined standard. Lenders for years have rightfully complained that navigating a patchwork set of state laws on lending only increases costs to consumers to obtain a mortgage. And, right now, I don’t think that’s the sort of higher-cost precedent anyone ought to be encouraging.

The Pew report singled out California, however, as a particular laggard in reigning in industry practices; it’s an interesing jab at a state many consider to be ground zero for both the housing boom and the resulting bust. One in 20 homeowners in the Golden State will go into foreclosure over the next two years, according to the study.

The study’s authors contend that as of the end of 2007, California had done little to help to financially distressed homeowners, joining Arizona, Florida and Utah in the slow-to-respond category.

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