Refinance Free Credit

In good news for at least one mortgage insurer, Radian Group Inc. (RDN: 6.18, +14.44%) said late Wednesday that it had finalized negotiations with key creditors, including Cleveland-based KeyCorp (KEY: 25.61, +6.13%), that amend the terms of the insurer’s primary back-up source of liquidity to eliminate covenants tied to the firm’s insurer financial strength ratings.

Radian had said on April 10th that it had secured a waiver on rating terms, and that its credit had been frozen pending a long-term resolution.

The finalized amendment agreed upon “would permanently eliminate the ratings covenant included in the current facility,” Radian said in a press statement, as well as relaxing net worth requirements. The new terms come with a price tag, however: the formerly unsecured credit facility will shift to a secured interest in as of yet unnamed company assets, while the size of the credit facility would be reduced from $400 million to $250 million.

Along with three other major mortgage insurers, Radian’s key insurer financial strength rating was cut below the critical AA- threshold recently by Standard & Poor’s, on the grounds that the rating agency expected housing price declines to be steeper than it had originally projected. Larger price declines usually translate into both higher claims and greater losses on claims for private mortgage insurers.

Both Fannie Mae and Freddie Mac generally require mortgage insurers to maintain at least a AA- rating level in order to remain a top-tier, approved insurer on the loans they purchase.

Radian has already submitted a required remediation plan to both GSEs, and has said it is committed to restoring profitability and a AA rating to its MI operation.

Shares in the mortgage insurer rallied on the news rising nearly 13 percent in Thursday’s trading session.

Disclosure: The author owned 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.

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Origen Financial, Inc. (ORGN: 2.53, +12.34%), a manfuactured home lending and servicing specialist, said late Wednesday that it would sell its servicing platform to St. Paul, Minn.-based Green Tree Servicing LLC, which already serviced the nation’s largest portfolio of manufactured housing loans.

The deal involves approximately $1.6 billion of manufactured housing loans, Origen said in a press statement. Green Tree will also assume the lease for Origen’s Fort Worth, Texas-based servicing facility.

The sale comes as Southfield, Mich.-based Origen has been sent reeling by a frozen secondary market; the company announced on March 17 that it had suspended portfolio originations and sold loans held for sale at a substantial loss in an effort to pay off credit facilities. Origen CEO Ronald Klein said Wednesday that proceeds from the servicing sale would be used to retire a $15 million loan, and to partially repay a $46 million secured loan facility entered into in April 2008.

“With the agreement to sell our servicing platform, we are focused on trying to sell our origination platform assets and right size our employee and cost structure to accommodate the continued management of our $1 billion securitized loan portfolio,” Klein said.

“The servicing sale does not reflect on the credit performance or long-term realizable value of Origen’s loan portfolio, which in management’s opinion continues to remain very high. We are pleased that in Green Tree, we have a new servicer for our loans that enjoys a well-deserved reputation for excellence and expertise as a manufactured home loan servicer.”

Shares of Origen had risen sharply on the NASDAQ after the news, and were up nearly 8 percent in heavy trading on Thursday.

For more information, visit http://www.gtservicing.com and http://www.origenfinancial.com.

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

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The mortgage mess hit the balance sheets of three large title insurance providers this week, showing that the real estate mess has yet to work its way through the system. Stewart Information Services Corporation (STC: 25.98, +6.08%), LandAmerica Financial Group, Inc. (LFG: 28.51, -0.66%) and The First American Corporation (FAF: 36.30, +10.67%) all said this week that the market downturn pushed revenues and income lower during the first quarter — with two of the title companies posting net losses for Q1.

LandAm Sees Transaction Volume Dry Up
At Richmond, Virginia-based LandAmerica, revenue fell by 27.6 percent to $686.4 million, leading the company to post a net loss of $24.2 million, or $1.60 per share, for the first quarter. The company cut 300 employees during the quarter, it said, meaning that LandAm has cut staffing by 25.4 percent since the start of 2007.

“Our first quarter results reflect the persistently challenging economic conditions and the measures we have taken during the latter half of 2007 to significantly reduce operating costs,” said CEO Theodore Chandler, Jr. “Tight mortgage lending conditions from reduced liquidity in the mortgage-backed securities market were factors in keeping transactional demand at bay.”

Severity on title claims also increased, LandAm said, leading the insurer to boost its claims provision to 9.7 percent of operating revenue, up from 8.6 percent one quarter earlier. Despite mounting losses in title operations, however, the company’s lender services division — which houses the LandAm’s default outsourcing businesses — posted pretax earnings of $10.1 million, with the company citing increased demand for its lien monitoring, BPO, appraisal, foreclosure and reconveyance services as a driving factor.

Stewart Sees Revenues Drop
Revenues at Houston-based Stewart fell 25.9 percent to $394.1 million, driving the title conglomerate to a net loss of $22.3 million, or $1.24 per share, for the first quarter. Like LandAm before it, Stewart cited “a decline in home sale and reduced financing activity” as the core driver behind the Q1 loss, and said it had laid off roughly 5.4 percent of its workforce during the first quarter.

“The first quarter of 2008 has been a challenging environment for profitability given the current adverse economic conditions, as well as the traditional negative impact of the seasonality of real estate sales,” said Stewart Morris, Jr., co-chief executive officer and president.

Underscoring just how tough March was, the company said that 47,000 title orders were opened at Stewart during the month; that compares to 52,700 orders one month earlier, and 63,800 orders opened one year ago.

First American sees title earnings drop 95 percent
Unlike both LandAm and Stewart before it, First American on Thursday posted a small profit of $29.3 million in the first quarter; but that profit was off 57 percent compared to year-ago numbers. The Santa Ana, Calif.-based title and information giant said that revenue fell 22 percent, to $1.7 billion — meaning that the bottom line took a much steeper dive than the top line.

“The company continues to be impacted by the slowdown in real estate and mortgage activity,” stated Parker S. Kennedy, chairman and CEO.

First American is planning to separate its title and specialty insurance businesses from its information and analytic solutions, and a look at the operating results of each segment suggests why: the company’s title business saw revenues fall 26 percent, as the number of title orders closed fell and margins in the title business were squeezed to the tune of 3 percent relative to year-ago levels. The result was a huge 95 percent drop in earnings to $2.9 million, First American said.

The company’s information services group, however, produced a pretax margin of 17.1 percent during the first quarter — the businesses in this unit include the company’s default family of companies, which the company said had seen an “increase in production volume.”

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

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Och-Ziff Capital Management Group LLC (OZM: 21.33, +10.35%), a New York-based hedge fund firm managing $33.3 billion in assets, said Wednesday that it’s gearing up to market a new mortgage fund that will buy whole mortgages — particularly troubled ones. The move makes Och-Ziff the latest to line up in what appears to be an increasingly crowded market for troubled residential mortgages.

The new fund would leverage Och-Ziff’s investment into subprime mortgage servicing; the firm bought a controlling interest in Residential Credit Solutions roughly two years ago.
RCS was itself borne out of an acquisition of the servicing platform and assets of the former Aames Financial Corp., with Och-Ziff and Redfin, a New York-based buyout group, backing the original deal.

Via MarketWatch:

“Given the opportunities we are currently seeing to acquire pools of assets at attractive levels, we are close to marketing this opportunity,” [CEO and chairman Dan] Och said. “The mortgages we have purchased to date have been done through this platform, which limits our exposure to the equity investment we have made alongside our partners.”

So far, the firm has been buying mortgages via its flagship $19.9 billion OZ Master Fund. In February, Och told investors that the funds had allocated 10 percent of its investments to “credit strategies” — technical speak for buying up whole mortgages, mostly.

At the time, Och explained the strategy as one the company had been planning on for some time.

“One of the tenets that this firm was founded on is the concept that luck is when preparation meets opportunity,” he said.

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

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HW readers likely know well by now the growing capital glut looking to make a play on some side of the distressed asset market for residential mortgages; it now appears that at least one fund is widening that focus to what it expects to be a booming market for distressed CRE (commercial real estate).

C. Daniel Clemente, a well-known distressed asset a real estate investor on the East Coast, said Wednesday that he had formed CDC Real Estate Opportunity Fund I, a private equity fund established to snap up distressed assets in the CRE market.

Clemente said the fund has $200,000,000 in committed funds that he hopes to leverage ten-fold to $2 billion in assets.

“With mortgage underwriting standards for commercial real estate tightening and capital availability becoming constrained, defaults are sure to occur upon maturity of loans closed between 2002 and 2007,” he said.

Clemente said he believes that starting in 2009, asset values for CRE will be lower, underwriting standards will be more conservative and capital will not be readily available to bail out syndicators that overpaid for buildings and other projects.

“Our fund intends to capitalize on the results of this ‘Perfect Storm,’ as commercial real estate begins to trade again at prices based on current net operating income instead of at prices based on unrealistic projections of future rental rates and income.”

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Extra mortgage payments often times will not save you money because lenders will charge a holding, or processing cost for making more than one payment in a month. To get around this particular fee, it can often time work to your advantage to add and additional fraction of your monthly payment onto the principal cost. Although this may seem small at the time, it ultimately will cut up to nine years (on a 30 year mortgage) off of your total term.

Looking at those nine years, it turns into nine year of saved interest on your mortgage. Look into the particular additional costs of your mortgage broker. If they will let you make biweekly payments, it could save you money if they don’t require an additional fee.

A Real World Example

Here is how an extra mortgage can actually save you a ton of money:

Lets say you current mortgage was for $200,000 for 30 years at a 6% APR. Your mortgage monthly payment would be $1199.10. Let’s say after five years you are doing pretty will with your income and decide you can afford to pay more, so you decide to start making two mortgage payments each month. So you make two $650 payments every two weeks. This will end up costing you $100 more dollars a month to $1,299. Since you have accelerated your payments you can actually save on your interest and shorten the length of your mortgage. In this case, by adding $100 a month, you shave almost four years and $31,582 off your mortgage.

Just like refinancing a mortgage will lower your monthly payment by extending the length of your loan, making second mortgage payments do the opposite. If you can afford to pay another $100 a month you can really save a lot of money in the long run. It is worth your money, if you can spare it, to shorten your mortgage and pay less interest. Don’t you want $30,000 plus dollars saved in the future? It doesn’t seem like to much to ask to come up with another $100 each month. If you can afford it, it becomes a great idea.

Additional Resources:

• Mortgage Calculators
• Extra Mortgage Payments Can Pay Off

biweekly payments, extra mortgage, mortgage calculators, mortgage payments, refinancing a mortgage, year mortgage

Too Much Debt?

Do you have too much debt? Are monthly credit card debt and installment loans getting in the way of your financial goals? Then consolidating your bills into one easy payment is the right option for you.  If you are a home owner you can qualify to consolidate all your high interest credit card and installment debts into one loan at a fraction of the interest rate.  Debt Consolidation loans are the best way to use your home as leverage towards becoming debt free!

When comparing Revolving Debt (Credit Cards and Line of Credits) vs. Installment loans (Mortgages, vehicle loans, personal loans etc.) people need to understand that revolving debt does NOT carry a term, where an installment loan has a fixed payment and term ex. 48 months therefore the loan is over when it is said to be over.

• ex. John Smith has credit card debt of $5000, the rule of thumb when you apply for a mortgage is that they use 3% of your current balance to determine your minimum monthly payments which is usually what you see on your bill. Therefore, John has a monthly payment of $150 which does not bring his balance down nor will his term end, so then John can be paying $150 a month for the rest of his life because revolving debt does NOT carry a term.  If John consolidates his debt into a Home Equity or Second Mortgage he can put that $150 dollars into the loan where he knows when it will be paid off at the fraction of the interest rate of the credit cards.

There seems to be a common misconception that putting a lien on your home, taking out a Home Equity loan or a Second Mortgage is deemed negative and is frowned upon.  More and more homeowners are using the equity in their homes as financial leverage to accommodate their lifestyle and budgets.  Don’t be afraid of using the equity in your home; you have worked hard for your home, now have your home work for you!

Debt Consolidation Loans

Breathe easier with lower monthly payments, lower interest rates and have the security knowing that your debt will be over when it says it will be over; you can start planning your future by clicking below.  Our XPX.ca Mortgage Broker / Specialists have lenders who can lend up to 100% of the value of your home.  Contact our XPX.ca Mortgage Specialists and let them know you want to start a consolidation loan using the equity in your home now!

Please visit our Mortgage Section in our blog

Reader Paul (big hat tip to him) pulled a key comment out of the B of A press release issued earlier this week that addressed Bank of America’s efforts to help homeowners keep their home. The comment, burried at the bottom of the release was:

“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. “

Paul thought it was absurd that no one pressed McGee on the last point which was “principal reductions.” This, he argued correctly, is a massive change in policy for the industry, as banks have been fighting tooth and nail to make sure <a href="http://calculatedrisk.blogspot.com/2007/10/just-say-yes-to-cram-downs.html
">that court-ordered principal reductions (cram downs) aren’t enforced from the bench.
The Implications of a BofA-led Principal Reduction Effort Would be Staggering

If Bank of America is truly making principal reductions a part of it’s “home-saving” playbook it would have incredibly wide-spread implications across not only the banking industry but the housing market and general economy.

As Paul mentioned, the press didn’t have a chance to grill him on this point and I agree with him that McGee needs to be held accountable for what he said and to outline in greater detail just what role these principal reductions are playing (or will play) in BofA’s loan modification process.

Bank of America, if they are making principal reductions even a trivial part of their options in keeping homeowners put they will set a precedent which will inexorably alter the housing market. Think of the ramifications of this action.

First of all, Bank of America’s adoption of this policy would make it essentially an industry-accepted practice overnight. Lenders of all types would gladly follow their lead in an effort to keep their REO rolls from growing exponentially. Why wouldn’t a lender take a $25,000 principal reduction if it keeps the mortgage current than risk the pain and headache of foreclosing for a property that might only sell for 50% of the current note?

The Ultimate Moral Hazard

Homeowners who are struggling with their payments due to myriad reasons (from fraudulently overstating their income to a resetting option-arm to death of the primary wage earner) will see principal reductions to keep them in their home. The homeowner next door in a comparable home will not see that relief as long as they continue to make their payments on time.

Homeowners are rewarded for feigning problems with their mortgage payments to get the reduction. It’s a less-painful version of mailing in your keys. Go down 60-days on your mortgage and get a nice chunk of your loan balance forgiven.

A Good Homeowner Gamble?

The argument that the mere idea of a damaged credit score is enough to keep full-balance folks paying right along while their neighbors get gifted $50k loses credibility in the current environment. If I’m a homeowner (which I am) and I’m current on my mortgage (yes, again) and I’m seeing all of the bail out plans and changes being made and I see Bank of America add principal reductions to their loan modification tool kit for delinquent borrowers I might start to think that there is going to be some government intervention on future credit as a result of this mess too.

Think about it - with all of the changes to save homeowners who are losing their homes and going down late on their mortgages the government will surely want to address future credit opportunities for those bailed-out. They may even be thinking of a way to help folks who suffered a foreclosure or late payments by a “resetting ARM” be distinguished in credit scoring from those who faced bankruptcy or late payments on consumer debt.

If I’m a homeowner who is seeing principal reduction around them I might trade $50,000 in debt forgiveness for a couple of years of higher interest-rate costs. Heck a back-of-the-envelope calculation might show that it’s worth it even without changes to current credit scoring methods and the laws governing same.

Is Once Enough?

Do you only get one shot at the reduction? Blown Mortgage regular Ann had this to say about the principal reduction path:

The question I have is what types of loans are going to be modified? Teaser ARMS? MTA’s? Also how do you modify? Based on True income when it was a liar loan? Principal Reductions in a declining market..does that mean that a year from now when the price goes down another 10% are those borrowers going to expect more? What about the average Joe next door, who isn’t a “troubled” borrower and now has a principal balance of $300K..while his neighbor had 50K forgiven and now has principal balance of $250K?

Seems to me there is no end in sight…

And that’s another major challenge. What happens to the neighbor who takes the write-down now, and then sees his neighbor take a write-down in six-months that is double the amount forgiven to him? Does that neighbor sue Bank of America for an additional reduction?

Where do Second Mortgages Fit In?

The questions keep going. What about second mortgages? Where do those fit in? Does Bank of America forgive debt on the second first or keep the higher-rate (mostly unsecured) second debt and reduce the principal on the first? How does that get figured out.

What did McGee Mean?

In the end Paul is right - what is Bank of America really considering with these loan modifications and principal reductions as they mentioned in their sweeping press release about homeownership. Did they “misspeak”? Were they only pointing to the options available in the entire universe of home-saving? It’s a question that needs to be drilled down on and Bank of America needs to be held accountable to what they said for the sake of all participants in this market.

What do you think?

Note to readers: I’m traveling today and tomorrow so the updates will be slow. Back in the saddle Saturday.

The Federal Reserve cut the key lending rate to 2% primarily due to concern over continuing woes in the housing and credit markets and the economy’s flirtation with recession, but hinted that they may be done for the time being.

From the <a href="http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B5BEA924C-7001-4F3A-BCB6-7E63326BB9ED%7D&siteid=nbi
">Market Watch article on the rate cut:

The Federal Reserve chose to cut short term interest rates on Wednesday for the fourth time this year, saying it remains troubled by the economic outlook, but signaling that it now may leave rates steady for a while.

The Fed lowered its benchmark federal funds rate by a quarter percentage point, to 2%.
Rates stood at 4.25% at the start of the year. Two Fed officials, Dallas Fed President Richard Fisher and Philadelphia Fed President Charles Plosser, dissented from today’s decision in favor of no rate cut.

In its statement, the Fed seemed comfortable where rates are now.

“The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity,” the statement said.

The FOMC did tweak the statement to add slightly more emphasis that it was worried about inflationary pressures and less worried about further weakening, a signal that the committee may leave rates steady at the next meeting.

With the economy showing little growth many analysts and pundits fear that we’re teetering on the verge of recession. This bias prompted the Fed to cut now, to try to help keep the economy from shrinking over the coming quarters.

The economy is treading water, managing to avoid slipping into recession. The Commerce Department reported earlier Wednesday that growth remained at an anemic 0.6% rate for the second straight quarter.

But many analysts say the economy can’t keep treading water forever and that a recession is likely. Treasury Secretary Henry Paulson is hoping that the fiscal stimulus package will act as a life-preserver and rescue the economy.

The money from the government may strengthen consumer spending but will also make it difficult to judge the underlying fundamentals, economists say.

The labor market has been weakening along with consumer spending as the housing market continues to sink to depression-era lows. In addition, gasoline prices have sky-rocketed.

The “credit crisis” along with the predatory lending practices of companies like Countrywide Home Loans has left a record number of homeowners facing foreclosure in the United States. This is the first article in a series I am writing about avoiding foreclosure; if you’re a homeowner in trouble with ...