Refinance Free Credit

The head of Goldman Sachs Group Inc.’s (GS: 191.96, +1.87%) mortgage department unexpectedly quit on Friday, according to a report in the Wall Street Journal. Dan Sparks, who has been in the driver’s seat at the Wall Street firm for roughly a year and a half but at Goldman for nearly 20 years, allegedly is “looking to do something different,” the WSJ said, citing an unnamed source.

Sparks oversaw a department that grew from one of the smallest at Goldman to one that plays more prominently in the company’s revenue mix than it ever had before. Along with two key traders, Sparks helped Goldman bet against subprime MBS before the market for subprime paper literally imploded; one of the traders, Josh Birnbaum, recently left Goldman to launch his own mortgage-focused hedge fund.

In particular, he orchestrated the purchase of Litton Loan Servicing LP from out of the wreckage of now-liquidating Credit-Based Asset Servicing and Securitization for an alleged $500 million — a price that, we’re told, was a steal.

Industry insiders told HW at the time that Litton was the “crown jewel” of the C-BASS operation, and one of the best distressed mortgage servicers in the nation. Given where the market for residential mortgages now sits, Litton’s value is likely well above its purchase prices, sources suggested.

Sparks is likely to be replaced by two people form within the firm, the Journal reported: Justin Gmelich, currently head of U.S. credit trading, and Thomas Cornacchia, currently head of credit sales.

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

Wells Fargo Home Mortgage, the first major bank to shutter its subprime wholesale arm in July of last year, is tip-toeing back into nonprime wholesale via FHA-insured loans, American Banker reported Friday. Like many other major lenders, Wells now sees loans insured by the Federal Housing Administration as a viable alternative to the private-party subprime market that has all but withered up during the recent market turmoil.

“FHA is the new subprime,” said one source that spoke with HW, but asked not to be named. “Only difference is that the risk now sits with the U.S. government instead of private capital markets.”

While Wells may be getting back into the nonprime wholesale game by reinventing the channel around FHA originations, the bank isn’t content with existing HUD guidelines and is requiring tighter guidelines than those prescribed by the FHA currently.

Borrowers must have a minimum FICO of 580 for most loans it buys from correspondents, and said it will not consider “nontraditional credit histories” in evaluating loans, according to the American Banker report. FHASecure loans — designed as a refinance option for troubled subprime borrowers whose credit in many cases is damaged below the 580 FICO floor — are not subject to the new limitations.

The news of Wells’ return to nonprime wholesale, even in a limited form, should come as welcome news for at least some brokers; a number of major lenders, including Bank of America Corp. (BAC: 38.36, +1.29%) and Washington Mutual (WM: 12.50, +2.80%), have shuttered their third party channels as they look to refocus mortgage operations on retail originations. The fate of Countrywide’s substantial wholesale platform, as well, is still up in the air pending acquisition by BofA later this year; neither company has yet commented publicly on the fate of third-party originations at Countrywide once the merger is complete.

Application activity for FHA loans has surged in 2008 as the Bush administration and Congress look to the Depression-era agency to bolster a housing market that is badly sagging. Recently-passed Congressional legislation has boosted FHA lending limits in key high-cost areas to has high as $729,500, and proposals currently being debated on Capitol Hill would seem set to further expand the government-insured housing program.

The House Financial Services Committee this week took up formal debate on H.R. 5830, the FHA Housing Stabilization and Homeowner Retention Act, a bill that would allocate $300 billion in Federal funds to the housing agency for refinancing of distressed mortgages.

A key vote on the proposal is expected sometime next week, with the White House already suggesting its opposition to the bill.

Disclosure: The author held a long position in CFC, and no other positions in firms mentioned in this story, when it was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

Fidelity National Information Services, Inc. (FIS: 36.347, -5.42%) said late Thursday that earnings rose 18 percent in Q1 as revenue in core business segments posted strong gains. Fidelity National said that it earned $70.5 million in the first quarter, or $.36/share, compared to $59.5 million, or $.31/share, in the year-ago period.

“While FIS achieved solid revenue growth in the first quarter, earnings came in at the low end of our guidance, primarily due to lower-than-expected software and professional services revenue,” said William Foley, executive chairman for FIS. Foley said the company had updated its earnings guidance to reflect “challenges faced by the financial services industry,” lowering the range of expected revenue growth for the year.

The company now expects revenue growth of 13 to 16 percent for 2008, compared to previous guidance of 14 to 16 percent. Shares were off roughly 6.6 percent in mid-afternoon trading Friday, as a result.

Fidelity National’s two key operating segments posted revenue gains over one year earlier, despite a drop in revenue tied to its ubiquitous MSP servicing platform. The company’s transaction processing services group — which includes solutions for online banking, payment processing, and core financial transaction management — saw revenue jump from $656.0 million to $826.8 million, although bottom-line margins were compressed by a decline in higher-margin software license sales and a drop in professional services revenue.

The company’s lender processing services segment — the part of Fidelity National that most in the mortgage industry think of when they refer to “Fidelity” — posted a 12.6 percent increase in revenue, generating $464.1 million in the first quarter. The company attributed top-line growth to its default management and appraisal services; in both segments, Fidelity National holds dominant market share.

Fidelity National is in the process of spinning off its lender processing services segment, which it said Thursday it expects to complete by the middle of 2008.

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

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

As the House Financial Services Committee begins work this week on a $300 billion proposal that would expand the Federal Housing Administration’s authority to purchase and refinance troubled mortgages, battle lines are emerging between White House leaders and Congressional Democrats over the proposal.

Committee Chairman Barney Frank (D-MA) has pushed for the proposal, and reiterated his stance Thursday, suggesting that should lawmakers fail to pass new housing legislation, the U.S. recession will be worse than most expect.

His warnings came on the heels of a White House letter earlier in the week from Deputy Secretary of Housing and Urban Development Roy A. Bernardi that called the proposed bill a bailout for irresponsible borrowers. Numerous media outlets reported on the letter Friday, in which Bernardi conveyed the Bush administration’s stance that the FHA’s current scope is more than enough to address the needs of a troubled housing market.

The Washington Post carried Frank’s reaction to the letter:

[Frank] had hoped that the White House would support the plan. The administration has twice expanded FHA’s role in addressing the housing crisis and recently announced that it would urge lenders to forgive some debt. But yesterday’s letter, Frank said, initially struck him as a “veto threat.”

“I thought we were moving together. Now I don’t know where we are,” Frank said.

Part of Frank’s confusion is likely rooted in the fact that the current administration’s hard line against the bill isn’t broadly supported by key Republicans in Congress or at the Treasury, according to sources that spoke with Housing Wire.

In an interview with Reuters Thursday, U.S. Treasury Secretary Henry Paulson suggested that the administration was behind the bill, saying “We are behind the objectives. We like some parts of it better than others and we have not issued a veto threat.”

That tone didn’t sit well with deputy White House spokesman Tony Fratto, who said Friday that Paulson’s remarks weren’t indicative of the administration’s stance towards the proposal.

Rep. Spencer Bacchus (R-AL) also reiterated party opposition to the FHA reform bill in his opening remarks Thursday as the House panel began debate on the measure.

“I am unable to support the Chairman’s new legislation, because I believe it will unfairly benefit a few homeowners at the expense of millions of careful borrowers and renters,” he said. “In so doing, it will require American taxpayers to assume risks incurred imprudently by mortgage lenders and now-over-extended borrowers during the run-up in housing prices earlier this decade.”

The House panel did pass two other housing measures earlier this week. A panel vote on the FHA reform proposal is expected next week.

Credit is the yardstick to judge an individual’s ability to repay a loan. All lenders, while extending money, would check your credit report to make sure that the money lent today would come back in future.

Your credit determines the amount of loan you can get and the rate of interest applicable for you. Greater credit means lower risk.

Now what if you need to buy a car and your credit is not in a good stand? Would you wait for your credit to become good or is there any other way to get bad credit auto loans?

Yes there are. Subprime Lenders and Hard Money Lenders would always offer you refinance auto loans; however, the rate of interest may be higher than what is charged by conventional lenders.

Some tags that make your credit report ugly are:

• Bankruptcy
• Account under Collection
• Foreclosure
• Late Payments

These bad credit marks won’t deter you get cheap auto loans any more. With a decent job you can get your car financed any time. However, you may need to pay a higher rate for this.

And always do some research about the lender before purchasing the loan. Deal with a reputed auto loan company and read the terms and conditions carefully before signing the contract. Ask as many questions as you can and make sure you understand the policy very well.

As MBS and related losses continue to pile up at commercial and investment banks, a senior official with the Securities and Exchange Commission told Reuters on Thursday that the government agency may need to issue guidance on so-called “fair value accounting” methods.

In a nutshell, the problem lies with so-called Level 3 assets — the hardest to value, mostly illiquid securities that have been at the heart of much of the financial market’s credit crunching — which a growing number of industry participants have said are nearly impossible to price properly given current market conditions.

Via Reuters, remarks made by SEC commissioner Paul Atkins:

“If you have no value for something because there are no market values to be reflected, then you have to ask whether or not that is truly reflective of what the asset is worth,” Atkins told Reuters in an interview.

“I think we need to come out with guidance to help people deal with that situation,” he said.

The meaning of “that situation” that Atkins refers to depends on who you ask.

Housing Wire’s various sources in the secondary and primary mortgage markets have suggested alternatively that banks either aren’t marking their assets down enough, while still others suggest that current values on the books are too aggressive and don’t reflect the true value of an asset.

This list of Level 3 assets in the current market is a long one, and includes private jumbo and Alt-A bonds, subprime paper as well as other structured products, such as ABS CDOs and CLOs — as the credit crunch rolls on, other assets may yet be thrown into the Level 3 fire, HW’s sources said.

Confusion over valuation notwithstanding, Atkins’ remarks seemed likely to surprise key market participants, many of whom earlier had said they did not expect the SEC to signal that it was willing to offer guidance on the subject.

The SEC does not yet have a timetable set for when it expects to issue guidance on fair value methods, Reuters reported.

Countrywide Financial Corp. (CFC: 5.70, -1.38%) said Friday morning that it had partnered with San Diego-based New Vista Asset Management to help dispose of the growing number of REO properties on its books. The partnership was touted by both companies as a way to help build minority homeownership and establish sustainable neighborhoods amidst the ongoing U.S. housing crisis.

New Vista is an REO outsourcing operation that itself is a partnership between Philadelphia-based ETCREO, a full-service REO outsourcer, and the heads of the Asian Real Estate Association of America and the National Association of Hispanic Real Estate Professionals. Relative to other REO management operations — and there are many — New Vista has positioned itself strongly around building sustainable minority homeownership, moreso than speed of disposition.

It’s a strategy that appears to be paying dividends for New Vista as the housing mess has grown, and lenders, including Countrywide, have come under increasing pressure from community and equal housing groups — beyond the Countrywide partnership announced Friday, the company also has a similar partnership agreement in place with Fannie Mae as well.

Of course, it’s worth noting that New Vista’s strategy — while certainly well-timed — has also helped put many minority and first-time homebuyers into properties.

The partnership between Countrywide and New Vista essentially amounts to an agreement to use New Vista’s broker network to list and sell REO properties — Bailey said that the lender is using New Vista in key local markets where REO volume tends to be heaviest: San Diego, Sacramento, Los Angeles, Las Vegas, Dallas, Fort Worth, Houston, San Antonio and Atlanta.

It’s unclear if New Vista has an exclusive contract with Countrywide that will see its own broker network receiving all REO listing referrals from the nation’s largest servicer in these key markets, or if another arrangement is in place. A call to Countrywide for clarification was not immediately returned.

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

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

It was a relatively slow week for the mortgage REIT sector, as most mREITs aren’t reporting first quarter earnings for another week and a half.

FBR Group (FBR: 0.00, N/A) was one of the few chiming in, however, swinging to a first-quarter profit on the reversal of $73 million in pre-bankruptcy losses for First NLC Financial Services, FBR’s former subprime mortgage origination subsidiary. The company is continuing its return to a core strategy of managing a portfolio of agency-backed hybrid ARMs, while utilizing its NOLs to shield itself from taxable income. FBR said it was seeing haircuts on repo financing remaining stable at about 5 percent for its agency-backed portfolio, and also said that it expected to return to a cash operating profit by the end of the third quarter.

Dividend developments
Dividend declarations did provide a bit of noise for the week, despite the dearth of earnings announcements. JER Investors Trust (JRT: 7.66, -1.03%), which sold a number of assets during the first quarter to raise cash, sliced its dividend by a third, from $0.45/share to $0.30/share.

Meanwhile, New York Mortgage Trust reinstated its common stock dividend at $0.06/share, despite significant tax loss carryforwards and a fire sale of assets during the first quarter. Which means, of course, that either NYMT is betting on a big pickup during the second half of 2008 — or the dividend is just a carrot for the PIPE investors who bought into NYMT for four bucks a share just two months ago.

NorthStar Realty Finance (NRF: 10.31, +1.18%) maintained its existing payout, $0.36/share.

Mergers and Acquisitions
CBRE Realty Finance (CBF: 3.83, +0.79%) and Arbor Realty Trust (ABR: 17.40, 0.00%) ended their long-standing catfight with the disclosure of a 12-month standstill agreement. Arbor agreed to drop its proxy contest and agreed to vote in favor of CBRE’s Board nominees, in exchange for the right to bid on CBF should it choose to sell itself within the next 12 months. Not much in it for Arbor, but then the $8/share they bid for CBF last fall isn’t looking so hot right now, either.

Looking ahead, earnings season heats up next week, with reports from Capstead Mortgage (CMO), iStar Financial (SFI), and Arbor Realty Trust.

Editor’s note: Patrick Harden is a Certified Public Accountant with three years of experience in auditing publicly-traded real estate investment trusts. For the past two years, he has been involved in the mortgage finance industry as a member of the financial reporting group at a publicly-traded mortgage bank. His column covering mortgage REITs runs every Friday.

Disclosure: The author was long shares of CMO and NRF at the time of this writing.

California-based option ARM specialist FirstFed Financial Corp. (FED: 16.15, +9.94%) said Friday that a huge increase to loan loss allowances will lead the lender into the red when it reports first quarter earnings next Wednesday.

The bank said its total provision for loan losses for Q1 will likely be between $140 million and $160 million, resulting in an after-tax operating loss of between $65 million and $75 million, or $4.75 to $5.50 per share. FirstFed reported earnings of 8.4 million, or $.61 per share, for the fourth quarter of 2007.

“Substantially all of the increased provision for loan losses during the first quarter of 2008 relates to the bank’s single family portfolio,” FirstFed said in a press statement. The bank said it expects to charge-off roughly $28 million in single-family mortgages during the first quarter.

The jump in reserves for expected losses likely won’t come as a surprise for regular Housing Wire readers — we’d noted FirstFed’s woeful lack of loss reserves during the bank’s most recent fourth quarter earnings, and suggested then that the bank would likely need to dramatically increase reserves in the first quarter.

Credit quality continues to slide
Not surprisingly, delinquencies at FirstFed are strongly centered in NINA (no income/no assets), SISA (stated income/stated assets) and SIVA (stated income/verified assets) mortgages — more than 85 percent of $667 million worth of delinquent and nonaccual loans fell into one of these categories during the first quarter.

Delinquencies (30- 89 days in arrears) and non-accrual loans (90+ days in arrears, also commonly called severe delinquencies) continued their amazing ascent at the bank during Q1. FirstFed said that non-accruals rose to $387.7 million by the end of March, an amazing jump of 115 percent in just one quarter. Delinquencies also rose from $236.7 million in Q4 to $273.2 million in the first quarter, a jump of 15 percent quarter-over-quarter.

REO is also seeing a jump, reflecting trending at other larger lenders within the state — FirstFed said that it started the quarter with 74 properties, and sold 53 of them. Problem is, inflow totaled 143 properties, leaving the California bank with 164 REO on its books to end the quarter.

Despite mounting losses, FirstFed said it expects core capital and risk-based capital to remain well over levels considered well-capitalized by regulators — news that boosted the bank’s stock nearly 13 percent in early trading Friday morning.

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

A Blown Mortgage reader sent me a copy of a report published in 2004-2005 titled America’s Home Forecast: The Next Decade for Housing and Mortgage Finance (pdf) that portends the continued growth of the US housing market between 2004-2013 at an annualized rate of 5-6% depending on supply/demand issues. This report is a great read to remind us of all the BS that got thrown our way as we approached the crest of the bubble.

We should have known better when we take a closer look at the authors of the report:

Published by the Homeownership Alliance
Written By:
David Berson - Chief Economist, Fannie Mae
David Lereah - Chief Economist, National Association of Realtors®
Paul Merski - Chief Economist, Independent Community Bankers of America
Frank Nothaft - Chief Economist, Freddie Mac
David Seiders - Chief Economist, National Association of Home Builders

See any pumpers on that list?

Out of the 64-pages of bubblicious BS this below is my favorite segment:

No sign of a national home price bubble
There has not been a single year over the past half century in which the national average home
value has declined in the U.S. (see Figure 18). This is a period that has included periods of both
severe recession and high mortgage rates, or both (as occurred during 1981-1982 when the
unemployment rate exceeded 10 percent and mortgage rates reached 18 percent). In fact, the last
sustained drop in national average home values occurred during the Great Depression, when the
unemployment rate hit 25 percent. With the national unemployment rate below 6 percent,
mortgage rates low and economic growth improving, the likelihood of a decline in home prices
at the national level is quite remote.

Figure 18
U.S. Home Prices Have Grown Every Year Since 1950
Annual Growth in Nominal Home Values

What do you think - how did we think that the roller-coaster would keep going up?