http://www.utahlowrates.com - 5 Refinance Mistakes most people make! Stop shopping for a mortgage until you watch this video by mortgage expert Greg Castagno of Salt Lake City.
Runaway gas and food prices are the most visible signs of inflation storming back in to the American economy. The scepter of high inflation will certainly limit the Fed’s ability to stave of recession with further rate cuts. As prices go up workers demand more money to keep up with the cost of living which is like pouring gas on an open inflation fire. If the Fed is seen as too weak in controlling inflation consumers begin to expect it which drives this upward-spiral psychology.
From Bloomberg on the phenomenon:
The Fed’s concern: that inflation worries cause workers to demand bigger pay increases to make up for the loss of buying power, setting the stage for a wage-price spiral reminiscent of the late 1970s. Dallas Fed President Richard Fisher made clear this week that policy makers were determined to prevent that from happening.
Inflation expectations for the year ahead as measured by the Conference Board rose to 7.7 percent in May from 6.8 percent in April.
“Consumers’ inflation expectations, fueled by increasing prices at the pump, are now at an all-time high and are likely to rise further in the months ahead,” said Lynn Franco, director of the board’s Consumer Research Center in New York.
http://www.chadaldridgeloans.com - 5 Refinance Mistakes most people make and how you can avoid them!Stop shopping for a North Carolina Refinance until you watch this video by mortgage expert Chad Aldridge.
Adjustable Rate Mortgage-holders rejoice, LIBOR not being redefined … for now. Housing Wire covered earlier how changes to the LIBOR could radically impact home mortgage payments for folks with loans whose interest rates are tied to the index. You can all breathe a sigh of relief for the meantime, until the BBA gets around to overhauling the biggest sham of an index that side of the Atlantic.
From Bloomberg on the no news is good news for homeowners:
he British Bankers’ Association failed to change the way the London interbank offered rate is set after investors and strategists said the measure has become unreliable as a gauge of borrowing costs.
The BBA, an unregulated trade group, has been under pressure to overhaul the 24-year-old system after the Bank for International Settlements said in a March report some members understated their rates to avoid being perceived as having difficulty raising financing.
“The committee will be strengthening the oversight of BBA Libor,” the London-based organization said in an e-mailed statement today. “The details will be published in due course.” The composition of the bank panels that contribute rates were left unchanged, it said.
The BBA’s statement fell short of expectations for changes to Libor that ranged from altering the member banks from which rates are gathered to adding an extra rate survey each day to reflect trading in U.S. hours.
“The BBA didn’t do anything; they don’t want to shake the boat,” said Stan Jonas, who trades interest-rate derivatives at Axiom Management Partners LLC in New York. “Any change that they make will damage the interest of their members, and the banks are the members.”
Banks routinely misstated borrowing costs to the BBA to avoid the perception they faced difficulty raising funds as credit markets seized up, turning Libor into “a lie,” according to Tim Bond, head of asset allocation at Barclays Capital, a unit of Barclays Plc
HOPE NOW, the well-known alliance of mortgage servicers, counselors, and investors pulled together by Treasury officials last year, said Friday morning that mortgage servicers provided loan workouts to approximately 183,000 homeowners in April 2008, up 23,000 from the total recorded in March — the highest monthly amount since the program was begun in July 2007. Since July 2007, nearly 1.6 million troubled homeowners have been extended loan modifications and repayment plans, the group said in a press statement.
“These numbers clearly demonstrate that HOPE NOW is succeeding at helping homeowners avoid foreclosure and stay in their homes,” said HOPE NOW executive director Faith Schwartz.
Estimates from the group show that approximately 106,000 of the prime and subprime loan workouts conducted by mortgage servicers in April were repayment plans, while approximately 77,000 were loan modifications. The current pace set in April would translate into just over 548,000 loan workouts in the second quarter; that total would be well above the 502,520 recorded during Q1.
Like most housing news these days, however, the good news comes with requisite ominous; HOPE NOW also reported 80,926 foreclosures in April, a total that would translate into 242,778 if extrapolated through the second quarter. That total would be an 18 percent jump in foreclosures during the quarter — meaning that while more borrowers are getting help, more borrowers are troubled in total as well.
To normalize comparisons, it’s worthwhile to look at total workouts against foreclosure activity.
In 2007’s third quarter that ratio stood at 2.95, meaning that for every 3 borrowers helped, one lost their home. By Q4, that ratio had risen to 3.13 — good news. In the first quarter of this year, the workout:foreclosure ratio fell to 2.44 despite an increase in workouts, suggesting servicers were having trouble keeping up with an influx of troubled borrowers.
April’s ratio? 2.26 borrowers in workout per foreclosure, the worst reading yet.
Last week’s Investor’s Business Daily painted a pretty rough picture of everyone’s favorite industry whipping post Countrywide Financial Corp., after getting wind of a servicing policy that requires some delinquent borrowers to pay 30 percent of arrearages before the lender will begin discussing loan modification options — fees that the reporter, Kathleen Doler, called “a steep entrance fee.”
From the story, an indictment:
They said Countrywide is requiring homeowners to pay 30% of the amount they are in arrears on payments, plus 30% of accrued late fees and 30% of attorney fees already incurred in the foreclosure process.
The payment doesn’t guarantee a loan modification, they said. It is only the price some consumers must pay to begin discussions with Countrywide, based in Calabasas, Calif.
The policy seems to go against Countrywide’s advertising and public statements about its efforts to help troubled borrowers stay in their homes. It comes amid a major drive by Congress and the Bush administration to steady the housing market and help homeowners avoid foreclosure.
It’s not a blanket policy, as Doler notes, but some borrowers are seeing this policy while others are not. And, of course, Doler finds a few consumer advocates more than willing to demonize the policy, and Countrywide as well. Not hard to do these days.
For its part, Countrywide told IBD that the policy was intended to be a good-faith demonstration, and suggested that the 30 percent policy is only applicable to borrowers staring down a scheduled foreclosure auction (emphasis added):
“It is Countrywide’s fiduciary duty to our investors to ensure that borrowers seeking workouts have the wherewithal to stay in their home,” the statement said. “For those who have not contacted the company and are seriously delinquent, the company views a 30% payment as good faith towards a modification and a demonstration of the borrower’s ability to resume and make payments in the future.”
Which is another way of saying that this policy likely doesn’t even enter into the equation with a one month delinquent borrower. Probably not even a 3 month delinquency. (It probably would behoove Countrywide’s press folks to learn the value of actually communicating with the press, but that’s a story for another day.)
Allow us to paraphrase what we think the nicely-worded press statement really says: look, if we’ve tried and wasted our resources trying to contact a borrower anywhere from the past 8 to 12 months and they don’t bother to return any of our calls, read any of their mail, or answer the door when we send a countless loss mit specialists out there, you’ll have to forgive us for calling bullshit when they decide to call asking for a loan mod the day before the foreclosure sale.
That’s what we’d suspect the policy really is, although we can’t be sure, since Countrywide has decided to play coy with the press on this.
I’m sure, given Countrywide’s recent track history in the servicing arena, that some borrowers have been assigned the 30 percent fee erroneously; I’m also pretty sure that many borrowers can’t negotiate Countrywide’s maze of a loss mitigation department fast enough to formally request a loan modification before their account gets flagged for the 30 percent requirement. And that’s a real problem — problem enough even to suggest that the up-front loan mod fee should be rescinded.
But that’s a very different argument than simply suggesting that the policy is inherently wrong to begin with, and that Countrywide’s policies “change with the wind” — an allegation made by one Glenn Neely of American Mortgage Resolution Advocates LLC in the story. (I tried to find the company on the Web, but apparently they have no Web site.)
Loan modifications are costly, and can be time consuming — if you’ve ever worked in servicing for a meaningful period of time, you learn pretty quickly that the borrowers who go AWOL until right before the foreclosure sale, or right before an eviction, aren’t usually the ones interested in keeping their home and negotiating in good faith. It may not be pretty to say, but it’s absolutely true, and it happens all the time.
Beyond that, by deciding to hide from the servicer for months on end, fees and arrearages have been piling up — totals that must be paid by the servicer and/or borrower regardless of whether the loan is restructured or not. Which means qualifying for a viable loan modification is that much harder to do, even if the borrower isn’t playing games; after all, isn’t the entire point here for servicers to invest their limited resources in preventing avoidable foreclosures?
If so, I’d argue that such a policy — unpopular as it may seem — could be helping Countrywide do just that; and borrowers making good-faith and early efforts to work with their servicer on a solution should be thanking their lucky stars that it exists.
Note: the author is long on CFC.
The ever-widening net of the U.S. housing crunch was cast a little bit wider Thursday evening by Boston Fed president Eric Rosengren, who said that continued weakness in housing likely would strain many of the nation’s smaller banks. Community banks have so far weathered the credit storm better than their larger counterparts, thanks in part to an aversion to both subprime and securitized mortgage lending.
But that strength may yet turn into an unexpected weakness, Rosengren said in remarks yesterday at the an economic conference in New England.
“Should the unemployment rate rise and housing prices continue to fall,” he said, “financial stresses caused by the housing correction could well spread beyond the large banks involved in complex securitizations, and the smaller banks with sizeable portfolios of construction loans, to a larger set of financial institutions.”
Some smaller banks with sizeable exposure to residential construction lending, considered a component of commercial real estate lending, have already begun to experience troubles; the Boston Fed president’s remarks suggest that even those without such exposure may soon feel the pangs of housing’s crunch.
Such an outcome may be more devastating for small banks than their larger counterparts, he suggessted.
“Problems could expand beyond securitized assets to have an impact on the nonsecuritized assets held by smaller banking institutions,” Rosengren said. “It is possible that these institutions may not be able to tap additional capital quite as easily as larger institutions, and if so they may be forced to constrain other lending to address any losses.”
While Rosengren didn’t suggest that smaller banks were facing an increased risk of failure due to housing’s continued fallout, he did say that “the duration of today’s situation may be longer than some are anticipating.”
A widely-read story late last week by MarketWatch’s Alistair Barr noted that many on Wall Street — and those at the Federal Deposit Insurance Corp. — now expect to see a rash of bank failures in late 2008 and into 2009, although some question still exists as to whether the size and scope of the expected coming banking mess will rival that seen in the 1980s savings & loan debacle.
That same story caused quite an industry stir by suggesting that Pasadena, Calif.-based IndyMac Bancorp (IMB: 1.83, +3.39%) was one such bank in “dire straits” and potentially facing bankruptcy, allegations that led to a detailed and clearly flustered response from press representatives at the former Alt-A powerhouse.
“Safety and soundness remains our highest priority at Indymac Bank during these challenging times, and we remain in a solid overall financial position,” IndyMac communications director Grove Nichols said on the company’s corporate blog.
Earlier in the week, FDIC chairman Sheila Bair sounded the alarm on an increasingly shaky outlook for many banks nationwide.
Disclosure: The author held no positions IMB when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
One large unidentified lender changed how it reports defaulted mortgages during April, pushing the number of primary insurance defaults to a record high for the month and underscoring the somewhat fragile nature of reporting on borrower defaults.
According to the Mortgage Insurance Companies of America on Friday, “a major lender’s change to its methodology for recording delinquencies” led to a dramatic increase in reported defaults, to 73,880 in April versus 58,131 in March. The jump essentially makes it impossible to know whether defaults actually did increase or decrease relative to April’s statistics; MICA did not release statistics summarizing the impact of the reporting change on overall reported defaults.
MICA press representative Jeff Lubar told Housing Wire Friday that the change involved a lender adopting MICA’s own reporting standards, rather than the lender’s switch from the so-called OTS to MBA reporting methodology. The OTS and MBA delinquency reporting methods are among the most common standards used for reporting delinquencies, and can lead to vastly different reporting numbers; most prime lenders/servicers use the OTS method, while the MBA method has been standard for some time among subprime lenders/servicers.
“The lender in question was using 90-days and then conformed to our method,” Lubar said. MICA considers 60 day delinquencies as defaults, he said.
The group did not comment on the identity of the lender/servicer, or why a lender changing their reporting would impact how insurers report on delinquencies to the trade group. Ostensibly, an insurer would know how many loans are 60 versus 90 days delinquent from any number of lenders whose loans it has insured, HW’s sources said — unless a lender was completely miscoding its loans altogether, which would be a much more sinister outcome than MICA suggested publicly in its press statement.
Cures fall, again - or do they?
Cures were similarly affected by the reporting change, MICA said, although it is similarly unclear how a change in reporting defaults would impact reporting of cures.
“Either a loan is modified, reperforming, in a repayment plan, or it isn’t,” said one source, who asked not to be named. “It’s not clear how that would flow through to recorded defaults, unless a lender completely changed how it accounts for its servicing pipeline.”
The trade group reported that 39,584 loans were cured during the month — a steep 21.7 percent drop from March’s 50,585 cures in March. The total number of cures for April was up slightly from 34,347 in cures recorded one year earlier, although the industry’s reported $855.7 billion of primary insurance in force in April was well above the $696.5 billion in force during April of last year, as well.
“While the change in reporting methodology by a major lender has resulted in an increase in reported delinquencies, it is important to note that this is a one-time adjustment,” said Suzanne Hutchinson, executive vice president of MICA. “Overall, the market is returning to fundamentals.
“The year-over-year increase of 11.7 percent in new insurance written reflects that return to quality in the marketplace.”
Mortgage insurers have seen volume return to their business despite tightening underwriting standards, as lenders and investors have shunned second lien originations — primarily of the so-called “piggyback” variety — that had previously siphoned off much of the MI’s core business pipeline.
For more information, visit http://www.housingwire.com.
Market Watch has the inevitable story of inflation now completely wiping out any gains that consumer’s have seen in income. Inevitable, why? Because the interest rate cuts and massive influx of capital in to the system have set inflation loose. Gas prices are increasing geometrically, food prices are up, and there was even a heart-rending story of school lunch prices going up 25% in the bay area.
More on inflation from Market Watch:
Inflation erased all the gains in disposable personal income in April, while consumer spending was flat after adjusting for higher prices, the Commerce Department estimated Friday. Personal incomes, consumer spending and consumer prices all increased 0.2% in April, the government said in a report that suggests the economy weakened further in the second quarter of the year even as the first tax-rebate checks began arriving. Employee compensation dropped 0.1% in nominal terms, the first decline in a year.
(Update 1: Adds confirmation from Lone Star)
As JPMorgan Chase & Co. (JPM: 43.12, -1.03%) formally brings Bear Stearns Cos. into the fold on Friday, one key aspect of the former Wall Street giant won’t be crossing over — Bear Stearns Residential Mortgage Corporation, commonly known as Bear Res.
An internal memo obtained Friday morning by Housing Wire, dated May 30, said that an affiliate of $13.3 billion private equity firm Lone Star Funds, LSF5 Mortgage Operations, LLC, had acquired the Bear Stearns’ wholesale and correspondent lending operation. Lone Star already has a mortgage footprint, having purchased subprime lender Accredited Home Lenders, Inc. in October of last year, in a deal worth an estimated $296 million.
Lone Star spokesman Ed Trissel confirmed the contents of the memo Friday morning, saying that Lone Star had “acquired certain operating assets and rights to certain operating assets of Bear Stearns Residential Mortgage Corporation.”
The memo said that “the majority of the former employees of Bear Res will be offered employment by LSF5 Mortgage Operations, LLC, or … affiliated entities such as Accredited Home Lenders.” Employees may be leased to Accredited, as well.
The memo notes that LSF5 is in the process of applying for the permits “needed to operate as an independent origination and servicing business for its own account,” and that all Bear Res applications will be originated and funded through Accredited until the permit process is complete.
It’s unclear if the Lone Star purchase also includes Lewisville, Texas-based EMC Mortgage Corp., the captive servicing arm associated with Bear Stearns.
The move by Lone Star certainly will raise eyebrows among those in the industry — not only because it appears to be setting up Bear Res separately from Accredited’s own operation, but also because it appears to be building a separate captive servicing platform as well.
Disclosure: The author held no positions JPM when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.