Refinance Free Credit

The risk of borrower delinquencies jumped 16 percent nationally versus levels recorded one year ago, according to a risk report published by First American CoreLogic, underscoring the continuing trouble confronting many of the nation’s key local housing markets.

CoreLogic’s Core Mortgage Risk Index, which tracks 380 metropolitan markets across the U.S., reached its highest level on record during the first quarter of 2008. CoreLogic said that risk is now 47 percent above the levels recorded during the first quarter of 2002, which served as the tail end of the last economic downturn.

Click for larger view. (source: First American CoreLogic)

Three things: Prices, prices, and prices
First American CoreLogic gauges mortgage risk by assessing both fraud and collateral risk as well as house price appreciation; it said in the report that price declines have “overwhelmed” other factors that drive risk, even swamping rapid gains in measured fraud and collateral risk activity at the MSA level.

In Q1 2008, CoreLogic reported that house prices in U.S. metropolitan markets fell, on average, 5.2 percent from a year ago, a rate of decline sharply higher than Q4 2007. As of March 2008, 33 states were experiencing year-over-year house price declines, up from 28 states in February. Of the more than 380 markets tracked in CoreLogic’s dataset, 176 are now experience home price declines in March, the company said, up from the 143 reported in Q1 2008.

Steep price declines in larger metropolitan markets put borrowers under the gun when they lose a job, get ill, are disabled, face a divorce, are forced to care for an ill loved one; without additional equity to fall back on, many borrowers are finding workouts hard to come by.

Not surprisingly, CoreLogic reported that California markets are experiencing the largest price declines, accounting for 16 of the top 20 largest price-decline markets. California and Florida — once among the two hottest housing markets in the nation — now account for 42 of the top 50 largest price-decline markets, the company said.

Not helping matters is the fact that California’s unemployment rate has surged to 6.2 percent as well, according to data from the Commerce Department.

The nation’s least risky markets? Try looking to Texas: CoreLogic reported that 4 of the nation’s ten least risky housing markets were located in the Lone Star state.

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

An earlier warning this week from Moody’s Investors Service over worsening performance of subprime second liens and associated implications for the Aaa ratings of key monoline bond insurers led both MBIA Inc. (MBI: 9.57, +2.90%) and Ambac Financial (ABK: 3.93, +0.77%) to publicly contest the agency’s suggestion that their ratings were at risk.

Moody’s said that it now expects subprime second lien pools to lose 17 percent in the 2005 vintage, on average; losses are expected to average 42 percent in the 2006 vintage, and 45 percent in the 2007 vintage, the agency said. The higher losses might “materially impact” the capital adequacy needed by bond guarantors to hold on to their Aaa credit ratings, Moody’s suggested.

In a press missive fired off Wednesday afternoon, Ambac said it has “no material exposure to subprime borrowers” in either of its HEL or HELOC portfolios, although it does hold $4.6 billion in non-subprime closed-end seconds and another $8.8 billion in exposure to non-subprime HELOCs.

“We have already taken substantial reserves against our CES and HELOC portfolios,” the company said in a press statement on Wednesday. “Moreover, we have not assumed any recoveries related to our active remediation efforts … we believe we have already exceeded Moody’s stressed Aaa target as of April 30th, 2008 and we continue to build excess capital.”

MBIA also argued that it has less exposure to the troubled asset class singled out by Moody’s than the agency suggested, saying that there are “significant differences between subprime second lien pools referenced in Moody’s report and the prime second lien securitizations we have guaranteed.”

The company didn’t clarify what those difference were, but did say that it has been aggressively putting second liens back to originators on the basis of misrepresenting the borrower’s credit as prime.

“We continue to believe that our direct Residential Mortgage Backed Securities expected losses are modestly above Moody’s expected losses,” the company said, “and significantly less than their stress loss estimates based on their transaction level review in February of 2008.”

New losses unveiled Wednesday at Financial Security Assurance Holdings Ltd., a unit of the Belgian bank Dexia SA, underscored that second liens may yet prove problematic for bond insurers, regardless of whether in prime or subprime credit classes.

FSA increased its loss estimate by $355 million as losses rose in its $4.5 billion HELOC portfolio during the quarter, according to a report published Thursday by the Wall Street Journal. The jump in reserves led the insurer $421.6 million into the red for the quarter.

FSA, along with Assured Guaranty Ltd., is one of only two bond insurers that has kept a stable AAA credit rating from all three major rating agencies.

Prospects for home builders dimmed in the back half of April and into early May amid market conditions that continue to erode, the National Association of Homebuilders said Thursday. The NAHB/Wells Fargo Housing Market Index fell slightly to a reading of 19, off just one point from the record low set in December 2007.

NAHB president Sandy Dunn, herself a home builder, said that a continued slide in the housing market must be stopped, ostensibly for the sake of the association’s constituency.

“With the HMI hovering in the historically low two-point range that’s prevailed over the past nine months, the message is very clear: The single-family housing market is still deteriorating and Congress and the Administration must move immediately to enact legislation that will help reverse the trend,” she said.

The NAHB is traditionally among the largest sources of PAC donations on Capitol Hill each year, and recently decided to return to lobbying and, of course, donating to key Senators again after earlier withdrawing its participation in protest of what NAHB leaders characterized at the time as a “lack of action” from Congress.

House Financial Services Committee Chairman Barney Frank (D-MA) pushed legislation through last week that contained key provisions builders have in the past lobbied in favor of, and — whether through coincidence or not — the NAHB PAC said it had resumed its participation a week ago, after naming Frank its “person of the year.”

Both the House and Senate have approved bills creating a temporary home buyer tax credit of up to $7,500 for qualified buyers, but the legislation has yet be crafted into a comprehensive bill that can be sent to President Bush for his signature; the proposed legislation also would extend the so-called “net operating loss carry-back rule” to four years from two years. The carry-back rule allows U.S. companies to use losses from one year to offset income from the previous two years.

Critics say the proposed tax change is a hand-out to builders.

“The housing market has shown no evidence of improvement thus far,” said NAHB Chief Economist David Seiders. “In fact, conditions have continued to deteriorate in recent times.”

Scores over 50 on the Wells Fargo/NAHB index indicate that more builders view sales conditions as good than poor.

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

According to reps from the bank Chase Wholesale is eliminating second mortgage products from its product offering.  All loans need to be registered/submitted by end of business tomorrow.  There has been wide concern and speculation about the value of second mortgage loan portfolios held by the big banks with the precipitous decline of housing prices nationwide.  Many of the second mortgages issued over the last two to three years in bubble areas are now essentially unsecured.

You can’t blame Chase for making this move as the risk/reward ratio just isn’t there for them.  No word on the retail channel.  If you have any info let me know and I’ll update the post.

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ISGN Technologies, Ltd., a mortgage technology provider, said Thursday that it is re-branding its flagship origination platforms MortgageHub and Dynatek, along with other companies owned by the Pennsylvania-based firm.

The company said it will pursue a so-called unified branding strategy, renaming MortgageHub and Dynatek as ISGN; the company’s offshoring platform, Inuva, and its doc prep/fulfillment provider, Tradewinds, will be known as ISGN Fulfillment Services. An inspection and risk mitigation company, Cocamar, will be rebranded as ISGN Inspection Services.

The re-branding initiative comes as the company, formerly an India-based offshoring services provider, has been buying and integrating across the many technology platforms it once used as part of its offshoring business.

ISGN purchased Dynatek’s MORvision automated underwriting system in May of last year; the company’s online services, including the MORvision platform, will not be included in the rebranding effort, the company said. In March of last year, ISGN also purchased all of FairIsaac’s former mortgage software holdings, a purchase which delivered MortageHub, as well as the well-known defaults software platforms LenStar and FORTRACS into the company’s portfolio.

“By design, our company’s products and services can offer companies a unified and complete end-to-end solution to dramatically streamline and improve their mortgage processes, which is one of the reasons why we are rebranding all our divisions under one name,” said Krishna Srinivasan, chief executive officer at ISGN.

The branding shift will not involve changes in company locations or headcount, ISGN said in a press statement.

“We have grown substantially in recent years, expanding both our product lines and range of services,” said Srinivasan, who characterized the re-branding effort as a way to “clarify” the company’s range of product and service offerings.

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

There are some people out there who cannot wait to get a mortgage because it means that they will own a home. Owning a home is something that can be very rewarding and really be a positive experience. Is there ever a point when someone is too young to have a mortgage? Some kids like to think they are more grown up then they really are and this is when they try and decide on whether or not they would like a mortgage and a home. This is a lot of responsibility and you need to make sure that you are always acting in the most positive way for yourself. Let’s take a look at some things that will determine if there is an age that is too young for a mortgage.

What is Your Financial Situation?

The first thing that kids (and we are talking 18 years and up) need to think about is their financial situation. They need to know that is costs a good amount of money to buy a home and this is not something that you can randomly do. Not many kids have a large savings account which should be used for a down payment. Also, the jobs that they are holding down are not likely to be high paying jobs. This means that they might not currently have a lot of money when you factor in savings and a job. At this point this does not sound like a lot of positives to add together to make a mortgage happen. A financial situation is what you need to look to in order to make sure you have enough for a mortgage.

Are You in School?

If you are in school then this can be a big factor as well. First of all school will probably be taking up a lot of your time and energy. This means that it will be tough to add a lot of work hours onto that. Plus, if you are in school then you are working your way to a degree that can set you up with a better, higher paying job. This will really be helpful. This could also be a determining factor that makes you wait until you are out of school to get a mortgage. It really can be tough to take on a lot of financial responsibility if you are in school, especially if you already have to take on a few student loans in the first place. Hopefully that is something you think about.

Yes, There is an Age That is Too Yong

In the end we can only conclude that there is an age that is too young to get a mortgage. What is that age you ask? Well, it really varies. Some people in their late 20s, early 30s can think they are still too young. It just depends on where you are in your life, and what you can take on financially. If you are 18-20 then you probably should not rush into anything because you are still relatively new to the financial game. No matter what age you are you still need to make sure that you are acting responsibly and are only taking on a mortgage when you truly can.

Related:

• Countrywide admits mistakes, not wrongdoing
• What if You Can’t Pay Your Mortgage

After a blistering take on what he called a “vulture mentality” among servicers last week, Senator Charles Schumer (D-NY) on Wednesday urged the Federal Trade Commission to open an investigation into “an emerging of pattern of apparent misconduct by Countrywide Financial Corporation involving its behavior with regard to debtors during bankruptcy.”

Critics allege that Countrywide Financial (CFC: 4.68, -3.51%) is willfully attempting to harm debtors in post-petition Chapter 13 repayment plans, adding hidden fees and misapplying borrower’s payments that put them back at foreclosure’s doorstep.

In testimony last week, Countrywide’s loan servicing director Steve Bailey acknowledged mistakes, but argued that the number of mistakes were small — less than 1 percent of Chapter 13 filings — and that none were due to willful misconduct by the nation’s largest mortgage servicer.

The testimony before the Senate Judiciary Subcommittee on Administrative Oversight and the Courts clearly did little to change Schumer’s mind.

“An investigation by the Federal Trade Commission would help pull the curtain back on a hidden corner of the existing foreclosure crisis, and could help stem the tide of homeowners who are now unnecessarily being forced into bankruptcy and foreclosure,” he wrote in a letter sent to FTC Chairman William E. Kovacic on May 14.

Public audits of borrower defaults
Schumer also wrote a separate letter to Countrywide CEO Angelo Mozilo and President David Sambol demanding that the audit’s results referred to by Bailey in his testimony be made public. In the same letter, Schumer inquired about whether any action had been taken against Countrywide employees involved in the documented abuses.

Signaling potentially broader inquiries in the future, Schumer also suggested that Countrywide was adding “unsubstantiated, undocumented, and perhaps illegal fees” to delinquent borrowers not in bankruptcy as well, and asked that Countrywide extend its audits to all defaults

Additionally, Schumer said he is considering the introduction of legislation that would solidify the authority of the U.S. Trustee’s office to investigate bad actors, and dramatically increase the penalties and sanctions on lenders that skirt bankruptcy law.

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

Mortgage interest rates dropped as fears of inflation eased.  Adjustable rate mortgages were helped the most.  The Fed’s aggressive posture and track record for action (i.e. Bear Stearns, liquidity injections, rate cuts), and led by stability of the dollar and tamer-than-expected inflation data all helped the cause.

From Market Watch on mortgage rates:

The 30-year fixed-rate mortgage averaged 6.01% for the week ending May 15, down from last week’s 6.05% average, according to Freddie Mac’s weekly survey. The mortgage averaged 6.15% a year ago.

Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.57% this week, down from 5.67% last week. The ARM averaged 5.89% a year ago. And 1-year Treasury-indexed ARMs averaged 5.18% this week, down from last week’s 5.29% average. The ARM averaged 5.48% a year ago.

To obtain the rates, the 30-year fixed-rate mortgage and the 5-year ARM required payment of an average 0.6 point. The 15-year fixed-rate mortgage required an average 0.5 point and the 1-year ARM required an average 0.7 point. A point is 1% of the mortgage amount, charged as prepaid interest.

“Fed Chairman Bernanke indicated in a speech on May 13 that the Fed stands ready to continue to add liquidity to the markets,” Nothaft said in a news release. “On the same day, San Francisco Fed bank president Janet Yellen added that she anticipates inflation will slow as commodity prices level off in the second half of the year.”

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A federal judge in Los Angeles ruled Tuesday that a shareholder lawsuit against executives and officers at Countrywide Financial Corp. (CFC: 4.70, -3.09%) can continue to trial, an outcome that many in the industry see as potential precedent for future litigation. The plaintiffs in the case, including numerous pension funds that have seen their investment in the Calabasas-based lender go sour amidst the housing crisis, alleged that insider trading and a lack of corporate oversight by the company’s directors caused Countrywide’s collapse and subsequent agreement to be acquired by Bank of America Corp. (BAC: 36.19, -1.66%) for $4 billion.

In a 61-page ruling issued Tuesday, Judge Mariana R. Pfaelzer of Federal District Court in Los Angeles said that the plaintiffs in the case presented a “cogent and compelling inference” that Countrywide’s directors had misled the public and investors.

“It defies reason, given the entirety of the allegations, that [Countrywide’s directors] could be blind to widespread deviations from the underwriting policies and standards being committed by employees at all levels,” she wrote.

The lead plaintiffs in the putative class action case — called a derivative shareholder suit, because shareholders are suing the company’s directors personally on behalf of the company — include the Arkansas Teacher Retirement System, the Fire & Police Pension Association of Colorado and the Public Employees Retirement System of Mississippi.

Both the New York Times and Business Week reported Thursday morning that plaintiff’s attorneys will seek to expedite a trial ahead of the expected completion of a BofA/Countrywide merger, although HW’s sources suggest that it’s possible for Countrywide to seek an appeal to the Federal ruling.

One legal expert, who asked not to be named, said that Countrywide could ask Pfaelzer to certify an appeal to the state’s Ninth Circuit Court of Appeals.

“This could go straight up to the Ninth Circuit, given how important the case is and its implications for the larger industry,” said the source.

Countrywide officials did not immediately respond to a request for comment.

Fourteen current and former directors at the company are named in the suit, which alleges that they bilked investors while raiding the company for their own benefit, while creating a culture that led the company’s to take on undue riskin underwriting bad mortgages.

Countrywide CEO Angelo Mozilo, in particular, has taken plenty of heat for so-called 10b5-1 stock distribution plan — an executive stock distribution program that paid him $474 million over three years, according to the New York Times. Mozilo amended the program to speed up his distributions just as the housing crisis was gaining momentum.

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

Countrywide, the poster-child for housing bubble lending greed is facing an inquiry by the FTC regarding it’s lending practices.  The probe, requested by New York Senator Schumer, asks the FTC to review the lending practices of the mortgage giant.  Renewed interest in the business practices are a result of numerous lawsuits against delinquent mortgage-holders being withdrawn for inaccurate or potentially fraudulent evidence against the defendants.

Countrywide admitted in court that it had re-created late payment notices to mortgage-holders who had never actually received the original notice.

None of this should come as a surprise to those following Countrywide.  The company has a long history of shady business practices from allegations of routing prime borrowers to subprime products, inappropriate sales incentives to push borrowers to higher cost loans, inaccurate accounting of current mortgage balances and predatory lending by it’s retail team and wholesale channels.  

From Market Watch on the Countrywide FTC investigation:

Schumer made the request in a letter to FTC Chairman William Kovacic, citing “cases in multiple states in which Countrywide attorneys were reportedly forced to withdraw motions that incorrectly contended that debtors were delinquent on payments.”

In addition, a federal judge in Los Angeles has ruled that besieged mortgage lender Countrywide Financial Corp. must face a shareholder lawsuit against 14 current and former top executives and board members that alleges the company engaged in risky lending practices that led to its collapse this fall.

“It defies reason, given the entirety of the allegations, that these committee members could be blind to widespread deviations from the underwriting policies and standards being committed by employees at all levels,” wrote Judge Mariana Pfaelzer of Federal District Court in Los Angeles.

Schumer raised concerns Wednesday about the lender’s admission in court that it had sometimes “re-created” delinquency or foreclosure letters that were never actually sent to delinquent borrowers.

Countrywide has faced multiple lawsuits nationwide alleging it fabricated or altered documents, intimidated borrowers and assessed illegal or exorbitant fees in foreclosure or bankruptcy proceedings.

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