Refinance Free Credit

While the financial press — including HW — and others in the industry have been focused on the new market for so-called conforming jumbos at Fannie Mae and Freddie Mac, none other than Ginnie Mae went ahead and published their first “FHA jumbo” pools on April 15. Industry insiders say that the FHA loans have been moving, while activity on higher-limit jumbos at either GSE has yet to register on anyone’s radar screen.

Under the Economic Stimulus Act of 2008, The Federal Housing Administration received a huge shot in the arm when it saw its lending limits boosted, along with those of Fannie Mae and Freddie Mac. All three are temporarily authorized to purchase mortgages up to $729,500 in certain high cost areas — and while activity thus far has been slow, FHA jumbos have clearly been the first to market as borrowers have flocked to the revitalized government-sponsored lending program.

Ginnie published its guidelines and multi-issuer pool types for the higher balance loans on March 6. The first pools under the new lending limits included three jumbo conforming 30-year fixed rate pools with an issue date of April 1 (pool prefix is JM, for jumbo), led by a $10.9 million issue offering a 5.5 percent coupon; according to eMBS, a provider of mortgage data and analytics, the pool’s collateral is 43 percent in California with average original loan (AOL) amount of $436,907.

Other pools include $3.4 million of a 6 percent coupon, 45 percent in New Jersey; and $2.8 million of a 6.5 percent coupon, 30 percent in Washington, DC.

Small activity compared to the dollar volume other issues, to be sure, but also proof that the market for jumbo conforming loans is beginning to finally move forward.

The FHA was — prior to the emergence of private-party subprime — the traditional vehicle for subprime lending and first-time homebuyers, established during the Depression era to help stabilize a faltering housing market. As the current housing crisis has rolled on, Bush administration officials and Congressional leaders alike have looked to revitalize the program.

That revitalization effort has paid dividends, and quickly. Ginnie Mae said last week that MBS issuance increased to nearly $15 billion during March — it’s highest issuance rate since November of 2003. For the first quarter, issuance totaled $39.1 billion, more than doubling year-ago volume.

“Ginnie Mae has seen a steady increase in our issuance since October of last year,” said Theodore B. Foster, senior vice president for MBS at Ginnie Mae. “As the mortgage credit market tightened, and the subprime mortgage market and the private label MBS market collapsed, investors began moving toward the safety and stability of Ginnie Mae MBS, just as borrowers began moving back to the security of government loans — particularly Federal Housing Administration loans.”

Ginnie Mae also securitizes loans from the Veteran’s Administration — one government program that, oddly enough, was left out of the Economic Stimulus bill. Congressional legislators have proposed an amendment that would see VA lending limits raised to match those of Fannie, Freddie and Ginnie.

After watching its mortgage insurance arm’s rating cut to A from AA- earlier this month, Radian Group Inc. (RDN: 5.20, +1.76%) said Monday that it will work to “restore profitability and a AA rating” to its MI business, Radian Guaranty Inc. The commitment comes after the insurer submitted its remediation plan to both Fannie Mae (FNM: 29.91, -2.19%) and Freddie Mac (FRE: 27.56, -1.36%) ahead of schedule, it said in a press statement.

“We have been maintaining a frequent and productive dialog with the GSEs about the market downturn and its impact on our business since last year,” said Dave Applegate, president of Radian Guaranty. “At our respective April 10 meetings with both GSEs, we presented detailed plans on the transformation of Radian Guaranty.”

Although neither GSE has publicly commented on Radian’s proposed plan, both GSEs have recently indicated that the information presented on April 10th meets their requirement for the submission of information as a result of a downgrade.

While details on the plan are not readily known, the company said that it expects its return to AA-rated status will take time, characterizing it as “a long-term endeavor” that will include regular progress reports to each of the GSEs.

The insurer has already begun scaling back key programs in an effort to prevent future losses, including eliminating all “stated asset” programs that allow a borrower to claim assets that aren’t verified prior to lending. It has also increased pricing in other programs.

News of Radian’s commitment to its MI business — as opposed to letting it run-off — sent shares slightly higher Monday, up 1.8 percent in mid-afternoon trading.

For more information, visit http://www.radian.biz.

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

First Horizon National Corp. (FHN: 11.715, +8.98%) said Monday morning that it will sell up to $600 million in common stock, and that it will shift dividend payments to stock as the Tennessee-based lender looks to shore up its cash position.

In a press statement, the bank gave no reason for the stock sale or the dividend cut, although the move comes on the heels of a 90 percent drop in quarterly profit and a 78 percent quarterly increase in non-performing assets.

The moves at First Horizon underscore the financial stress now being felt even by smaller financial firms, and mark a stark reversal in expansion for a bank that built its fortunes largely on the residential mortgage market.

First Horizon said that after its July dividend, it expects to pay future dividends in shares of common stock “for the foreseeable future” at a rate equivalent to $.20/share.

“The Board currently intends to reinstate a cash dividend at an appropriate and prudent level once earnings and other conditions improve sufficiently,” the company said in its press statement.

The bank began an aggressive national expansion around mortgages in the late 1990s, a strategy that led to strong profits during the boom years through 2005. As the housing downturn has gone on, First Horizon has been hit hard, with the banking saying in January that it would discontinue national home builder and commercial real estate lending via its First Horizon Construction Lending offices, and backing a plan to reduce its real estate exposure by $2 billion.

Since then, bank executives have talked openly about potentially even exiting the mortgage business altogether, although no known suitors for the company’s operations in this area are known to be in negotiations with the lender.

Shareholders clearly approved the bank’s move to bolster and preserve capital, with shares trading up nearly 7 percent at $11.46 in afternoon trading on the New York Stock Exchange.

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

Almost 503,000 prime and subprime homeowners were able to stay in their homes during the first quarter of 2008 because of loan workouts provided by mortgage servicers, according to a report released Monday morning by the HOPE NOW coalition.

Of 502,500 total loan workouts booked in the first quarter of 2008, the group said that approximately 323,000 were repayment plans and 179,500 were loan modifications; loan modifications represented roughly 44 percent of all subprime workouts, double the rate recorded in 2007, but were just 23 percent of prime workouts.

“I guess it’s almost better to be a troubled subprime borrower these days,” said one source, who suggested that political pressure to help subprime borrowers has not extended to prime borrowers. “There’s an easy reference point for someone categorized as subprime, whether right or wrong, which means that more effort and focus has gone into programs to help this group of borrowers,” she said.

The difference in workouts offered to prime and subprime borrowers is likely not due to a plan announced in December by the American Securitization Forum that would fast-track solutions for subprime ARM borrowers who could afford their starter rate, but could not afford the reset rate — resets have since become a minimal problem for borrowers, as rates have dipped significantly, essentially eliminating payment shock as a key problem for every class of borrower.

That sentiment is borne out in the data, as well. There were 431,171 subprime 2/28 and 3/27 loans scheduled to reset during the first quarter of 2008, according to HOPE NOW’s data; 14,418 were modified, while 203,000 of these loans — that’s 47 percent of scheduled resets — were paid in full via refinancing or a sale. Many of those prepayments might have been defaults in a different rate environment, industry experts that spoke with HW suggested.

A self-inflicted foreclosure surge?
While total workouts increased roughly 6 percent quarter over quarter — and servicers clearly have focused on more permanent loan modification activity — the increase was not nearly enough to keep pace with a 35 percent quarterly jump in foreclosure activity. The industry recorded a ratio of 2.4 workouts per foreclosure during the first quarter, below the 3.1:1 ratio recorded in Q4 and the 2.9:1 ratio recorded in Q3.

Some sources have suggested that an over-reliance on repayment plans earlier in the current cycle is now coming back to bite servicers and, potentially, investors. Borrowers that might have defaulted in Q3 or Q4 are finally seeing what was essentially an inevitable foreclosure take place in early 2008 instead.

“The pressure on many servicers is just enormous,” said one source, an MBS analyst who asked not to be named. “I’m sure the consumer side will latch onto these numbers as proof that servicers aren’t doing enough, when the real question ought to be: what percentage of these foreclosures were actually preventable, and were they prevented?”

“Mortgage servicers continue to focus on doing everything possible to help troubled homeowners avoid foreclosure,” said Faith Schwartz, executive director of HOPE NOW. “While there is still more work to be done, concrete progress is being made, and HOPE NOW members will continue their efforts and work to help as many borrowers as possible.”

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

New figures out today show that home vacancies are at an all time of 18.6 million. Market Watch has the details:

Putting further downward pressure on home prices, the number of vacant homes in the United States increased by 1 million over the past year to a record 18.6 million, according to government data released Monday.

The vacancy rate for homes usually occupied by the owners rose to a record 2.3 million homes from 2.2 million in the fourth quarter and about 1 million more than was typical before the housing bubble burst.

Analysts say the housing market won’t recover until the glut of vacant homes on the market can be worked down.

With underwriting guidelines continuing to tighten, unemployment up over 5% and housing prices tanking - this excess inventory only points to one direction for housing prices - and it ain’t up.

Continuing efforts to fast-track its acquisition of Calabasas, Calif.-based Countrywide Financial Corp. (CFC: 5.80, -0.68%), executives at Bank of America Corp. (BAC: 38.08, -0.57%) unveiled an aggressive mortgage aid plan Monday morning, ahead of scheduled testimony at the Federal Reserve in Los Angeles. The bank also confirmed its plans to mothball the Countrywide brand upon completion of the merger, and said that it will centralize its mortgage operations in Countrywide’s Calabasas-based headquarters.

The plan includes a commitment to workout $40 billion in troubled mortgage loans over the next two years, keeping at least 265,000 borrowers out of foreclosure, as well as a doubling of the bank’s commitment to community development lending, according to a press statement released Monday morning. Monday’s announcement comes on the heels of last week’s announcement that the bank would be pulling back on key lending programs once the merger is complete, in an effort to focus on high-quality mortgage originations.

“We believe the financial strength, security and stability of the combined company will allow us to enable people to buy homes and stay in homes, and to assist many of those affected by the current mortgage troubles,” said the bank’s top global consumer and small business banking exec Liam McGee during testimony.

Monday’s testimony also featured remarks from Rep. Maxine Waters (D-CA), as well as representatives from prominent community groups and public offices, including the office of the California Attorney General. The California Reinvestment Coalition sponsored testimony from witnesses with troubled mortgages who have said that the Calabasas-based lender hasn’t done enough to help them, and scheduled a demonstration outside of the Los Angeles Fed branch for after the hearing as well.

Critics have said that BofA needs to make a strong commitment to working with troubled borrowers and minority communities in the wake of the proposed acquisition, which would ostensibly create the nation’s largest mortgage banking operation.

“We will continue to work with distressed borrowers to match the customer’s repayment ability with the appropriate loss mitigation option, including loan modifications, forbearances, repayment plans, lower rates and principal reductions,” McGee said. “We will not assess new late charges for customers in foreclosure and we will waive certain other associated fees, when permitted.”

McGee said that Bank of America would invest $1.5 trillion in community reinvestment funds over the next ten years, an amount equal to double BofA’s previous community development goal. The bank also said it will invest an additional $2 billion over 10 years in housing-related philanthropy.

“This new goal raises the bar and is certain to enhance quality of life for millions of Americans in need,” McGee said.

Interestingly, Bank of America also touted a commitment to tenants of former owners in a foreclosure — saying that it had instituted a national policy of allowing tenants to remain in a subject property for up to 60 days after the completion of a foreclosure sale. BofA also runs an aggressive cash-for-keys program in which tenants vacating within 30 days post-foreclosure will receive $2,000 to help defray the cost of relocation.

Legal sources told HW that the plan was relatively aggressive, and a good response to increasing policital pressure tied to lease holders caught in a foreclosure.

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

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

Signaling that the worst of the housing mess isn’t yet behind us, the number of homeowner vacancies reached a new record high in the first three months of 2008, according to data released Monday morning by the U.S. Census Bureau. Homeowner vacancies crept up to 2.9 percent of total by the end of March, up slightly from the 2.8 percent rate recorded during the first and fourth quarters of last year.

Rental vacancies crept upward as well, rising to 10.1 percent from 9.6 percent one quarter earlier, and matching the rental vacancy rate recorded to start 2007 and 2005. A total of 18.6 million properties sat vacant in the first quarter, up one million from year-ago totals.

Rising inventory — which translates into increased homeowner vacancies — is a strong signal that housing has yet to balance itself out, according to most major housing experts; a growing inventory overhang is seen by many as the single largest hurdle to any recovery in the U.S. housing market.

Homeowner vacancies were concentrated most in principal cities, the Census Bureau said, at 4.3 percent; suburbs and areas outside MSAs reported homeowner vacancies of 2.5 and 2.3 percent. The Western region of the U.S. saw homeowner vacancies increase rather sharply, up to 3.2 percent from 2.6 percent one quarter earlier — bringing the West into a tie with Southern U.S. states for the most homeowner vacancies in the nation.

Despite increased vacancies, the homeownership rate increased slightly in the first quarter to a seasonally-adjusted 67.9 percent, up from the 67.7 percent recorded in the fourth quarter — but still off from the 68.5 percent recorded one year ago.

The Department of Housing and Urban Development last week said that it had waived certain federal affordable housing quotas at Fannie Mae (FNM: 29.45, -3.70%) and Freddie Mac (FRE: 26.69, -4.47%), after determining that market conditions had rendered the quotas “unattainable.”

Both GSEs had failed to meet prescribed affordable housing goals tied to their mortgage purchasing activity in 2007, and had warned HUD for months that they would be unlikely to do so; the Washington Post reported Friday that the decision comes as government officials are softening their stance to Fannie and Freddie in the wake of historic upheaval in the U.S. housing and mortgage credit markets.

The quotas in question were originally imposed in 2004, when HUD’s stance was decidedly different, and the agency was looking to ensure that each GSE was fulfilling its affordable housing mission. Both GSEs have an advantage in the market due to their quasi-government status, and are required to devote a certain percentage of their business to three affordable housing goals.

The 2004 HUD regulations established a set of subgoals tied to the total number of mortgages purchased by each GSE. In 2007, both Fannie and Freddie were to allocate 47 percent of their respective purchase activity to low and moderate income housing, 18 percent to so-called special affordable housing, and 33 percent to so-called underserved areas (a purchase can span multiple categories).

Both GSEs have criticized the subgoals in recent months, with the Post quoting Fannie CEO Richard Syron’s remarks last month:

“It is not good public policy to have mission goals that encourage [Freddie Mac and Fannie Mae] to put people in homes that they end up losing,” he told Wall Street analysts. “We have to do things that make sense and will help the economy of the United States,” not hurt it by pursuing “what could be unrealistic goals,” he said.

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

Is the real estate market thawing out? Not in the Golden State, according to a report released Friday by the California Association of Realtors — home sales decreased 24.5 percent during March in California compared with the same period a year ago, while the median price of an existing home fell 29 percent.

The culprit, realtors in the state say, is a frozen mortgage finance market that has led to a lack of available credit in the state’s once-burgeoning market for homes above the traditional $417,000 conforming lending limit.

“Sales continue to be impacted by problems in the real estate finance sector, which by some measures have eroded since the start of the year,” said C.A.R. President William E. Brown. “Sales in 2007 reached their peak last February; going forward, the year-to-year declines in sales should shrink.”

That sense of optimism is tied to high hopes for the so-called jumbo conforming loan market. Fannie Mae and Freddie Mac were authorized in February to begin purchasing loans up to $729,500 in certain high-cost California housing markets; although the market for these loans hasn’t yet begun flowing, experts expect recent pricing commitments by the GSEs to loosen things up in key markets within the state.

Closed escrow sales of existing, single-family detached homes in California totaled 318,830 in March at a seasonally adjusted annualized rate, according to the CAR. Statewide home resale activity decreased 24.5 percent from the revised, seasonally-adjusted 422,300 sales pace recorded in March 2007.

The median price of an existing, single-family detached home in California during March 2008 was $413,980, a 29 percent decrease from the $582,930 recorded one year ago, and 1.3 percent below February’s recorded median. Price declines were widespread, as well: joint data from the CAR and DataQuick Information systems found that only 4.9 percent, or 14 out of 283 cities and communities in the state, posted a price increase in March relative to year-ago pricing.

“Both tighter underwriting standards and the ongoing effects of the credit/liquidity crunch continue to constrain sales,” said CAR chief economist Leslie Appleton-Young. “Historically, mortgage rates on jumbo loans are 0.2 percent to 0.4 percent higher than those on conforming loans, but the spreads in recent weeks have been as large as 2 percentage points, reflecting an increase in the perceived risk associated with these loans.”

The slowing sales pace is forcing inventory to pile up, putting the state’s housing market further away from a potential recovery — most economic experts assess inventory as the most critical variable governing the health of a housing market. The CAR said that the inventory of existing, single-family detaches homes in the states rose to 11.6 months of supply during March, compared to 7.6 months of supply one year earlier.

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

Back when times were normal

Rewind a decade ago and we were accustomed to double digit interest rates on mortgages. Now a days people will cry FOUL if they were ever quoted a double digit rate on a mortgage.  Back then though it was completely normal.

There was no such thing for 100% financing (For the average home buyer) People were accustomed to SAVING up 20% to put down on the house.

Again, now a days you tell a future home buyer you ask the home buyer to put 20% down, they will laugh and will find another lender.

It was the NORMAL back then for that frame of mind.  It was an actual good frame of mind, to have 20% invested into your house, maybe not the double digit rate but if you had 20% invested in your home, you will be trying your hardest to keep your payments on time.