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After careful research, UFirst has adapted the Money Merge Account system for Texas availability.
There are three types of credit lines that are compatible with the system's normal operation:
- Personal Lines of Credit (PLOC)
- Business Lines of Credit (BLOC)
- Credit Card
If a client wants to use a Home Equity Line of Credit (HELOC) in Texas, they must fulfill certain requirements. The client is required to submit a handwritten letter acknowledging certain restrictions with version 3 of the software.
Version 4 of the software due to be released in July will have modifications to handle the Texas HELOC.
Please visit with your U1st agent for complete requirements.
Stay tuned for more exciting information regarding Version 4.
Builders picked up the building pace in April as the industry streaked past analyst estimates for new home starts. Led mainly by the development of multi-family projects builders showed that they exist to do one thing - build. While the country still faces a massive glut in properties builders are placing their bets in lower-cost multi-family units. As deep discounts and incentives seem yet to stem the tide of single-family malaise home builders are looking for other ways to keep the revenue streams to at least a trickle.
From Market Watch on the housing start up-tick:
U.S. home builders broke ground on 8.2% more homes in April, led by a 36% increase in multi-family units, the Commerce Department estimated Friday. Housing starts rose to a seasonally adjusted annual rate of 1.032 million, far more than the 954,000 estimated for March or the 939,000 expected by economists. Starts of single-family homes declined for the 12th straight month, falling 1.7% to a seasonally adjusted annual rate of 692,000, the lowest since January 1991. Building permits increased 4.9% in April to a seasonally adjusted annual rate of 978,000.
The single-family home starts were the lowest in 17 years.
While builders are still building they’re not necessarily confident in the market, as incentives and deep discounts have yet to correct the downward trend of single family homes.
More from Bloomberg on the housing market doldrums:
Lower prices and other incentives have yet to revive demand for houses, indicating builders will need to come up with even more discounts to attract buyers. Stricter lending rules, job losses and growing pessimism about the economy signal sales will not rebound quickly.
“The trends are horrific,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York, who had the closest housing-starts estimate in Bloomberg’s survey. “There’s just no reason things are getting any better. Why would you buy a house? Why would you spend money to buy a depreciating asset?”
Starts increased in three of four regions, led by a 24 percent jump in the Midwest. Construction rose 19 percent in the West and 3.6 percent in the South. Starts dropped 13 percent in the Northeast.
Residential construction has subtracted from economic growth since the first three months of 2006, culminating in a 27 percent drop at an annual rate in the first quarter. That was the biggest decline since 1981.
Perhaps the biggest story of the week was CDO woes anew at Alesco Financial (AFN: 2.66, -6.01%). This week’s blowup came courtesy of ailing Alt-A lender IndyMac Bancorp (IMB: 1.8899, -5.03%), which announced (in addition to a worse-than-expected quarterly loss) that it would defer the interest payment on its trust preferred securities. Alesco holds a portion of the equity interests in eight CDOs that include trust preferred securities issued by IndyMac.
The disclosure sent Alesco shares reeling, and prompted the company to issue a statement quantifying the impact of the IndyMac non-payment. Alesco admitted that that IndyMac’s deferral will trigger the over-collateralization tests in five of the eight CDOs for a period of time. Failing the O/C tests will cut Alesco off from the cash flow from these CDOs, although the company will still record the interest income (as it is doing with CDOs tied to Kleros, a subsidiary of top CDO manager Cohen & Co.).
Alesco claims it can maintain its current dividend stream despite the O/C test failures, but cautions that it “is reviewing a number of strategies for the company, including whether to continue to maintain its REIT qualification. Any change in strategy could impact the level of future dividend payments.” Not exactly a ringing endorsement.
Alesco shares gyrated wildly during the week, as a result, recovering some of their losses in a 20 percent rise on Thursday.
Earnings Central
Earnings season wrapped up this week with reports from JER Investors Trust (JRT: 8.60, -1.04%), Newcastle Investment (NCT: 10.14, -3.43%), Anthracite Capital (AHR: 8.72, +1.63%) and Crystal River Capital (CRZ: 6.54, -5.22%). JER surprised the market with adjusted funds from operations (AFFO) of $0.41/share, well above the first-quarter dividend of $0.30/share. Shares popped higher as a result, though the REIT cautioned that AFFO may decline in the future as a result of asset sales and realized losses on its CMBS investments.
Newcastle also reported better than expected first-quarter results, turning in AFFO of $0.56/share and slashing $1 billion in repurchase agreement debt; its results far surpassed the $0.25/share first-quarter dividend. The company commented on its earnings call that it is looking to buy back pieces of its CDO debt, and take advantage of other attractive opportunities in subordinate MBS now that its liquidity profile has improved.
Anthracite posted solid beats on both the top and bottom lines, with a 16 percent rise in first-quarter operating earnings to $0.37/share. The bottom line number beat market estimates by $0.07/share. The company also upped its dividend by a penny to $0.31/share. The market liked what Anthracite had to say, with shares jumping 5 percent on Thursday as a result.
On the flip side, Crystal River Capital released first-quarter earnings after the bell Monday, and the news was worse than expected. Despite posting better-than-expected net investment income of $0.99/share and operating earnings of $0.81/share, Crystal River disclosed that it had sold its agency MBS portfolio during March and April — and that the agency portfolio had been contributing half of Crystal River’s REIT taxable income.
The company warned that it “expects its future distributions to be less than previous distributions,” as a result. Shares tumbled over 20 percent on Tuesday on the expected dividend cut and a dismal forecast, only to fall again on Wednesday on the heels of a Wachovia downgrade. Separately, Crystal River also announced that its Board of Directors had appointed William Powell as its president and CEO. Powell joins Crystal River from his former position as co-head of Brookfield Asset Management’s Real Estate Finance Funds Group, a possible sign that Brookfield may simply fold Crystal River back into its portfolio — much like Hypo AG did with Quadra Realty several months ago.
Show Me the Money
Annaly Capital (NLY: 17.06, -0.47%) is asking investors to put up the cash, as it launched a $969 million secondary offering for 60 million shares. The move surprised Stifel Nicolaus analyst Michael Widner, who told Forbes magazine this week that he suspected that Annaly’s offering is an attempt to crowd out competition from some of the new agency IPOs, such as Hatteras Financial (HTS: 25.35, +0.60%) and American Capital Agency (AGNC: 19.55, +1.03%).
Speaking of American Capital, the company’s shares had an unimpressive debut on the NASDAQ Thursday, dropping 3 percent from the IPO price of $20/share.
Next week, we’ll give you an update on how American Capital is faring –- and how the competition for agency-backed securities is heating up.
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 held no positions in any publicly-traded companies mentioned herein when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
As usual, what is good for the economy is good for stocks and bad for bonds and vice versa. And, what is good for bonds is also good for mortgage rates. This morning, the bond market was lumbering along without much going on…and then the University of Michigan’s Consumer Sentiment report came out with the worst reported numbers in 26 years. This triggered a buying frenzy in the bond market, and mortgage bonds are currently trading at 70 basis points higher than the open.
On the surface there was good news in the housing market with Housing Starts for April up to 1.038 million, up from March’s 932,000 and significantly higher than the projected 940,000. I say on the surface because even though housing starts and building permits are up, it is yet to be seen how oil prices hitting record highs on a daily basis will affect the costs to build later. (Oil hit a new high again this morning at $127.43 per barrel).
Goldman Sach’s (one of the world’s leading securities firms) said today that they expect oil to hit $141 per barrel by the end of the year, and as much as $149 in 2009. If this is true, you better dust off the solar panels and check the air in the bicycle tires because this may be a bumpy ride.
As far as mortgages go, the bond has soared past resistance levels at the 25, 50 and 100 day moving averages. With strength like that, we may see push in the refinance market soon. If you are even considering refinancing, get your ducks in a row as movement like this will correct itself quickly, and the window of opportunity will be short.
Ultimately solving the current housing and mortgage mess isn’t likely to come from measures now being debated Capitol Hill — that’s the message that was whispered in hallways and at coffee breaks at a recent MBA Secondary Market convention in Boston. Instead, solutions are already emerging on various fronts from aggressive investors looking to turn trouble into profit; the result may just yet be a stabilization of housing’s teetering axis.
A wide-ranging, hodge-podge, and completely disjointed group that can best be called “distressed mortgage asset investors” is emerging within the industry, and their approaches to the problem can be as varied as the organizations themselves.
One small example is Angel Gutierrez, an investor in San Diego that buys whole loans on what’s known as a “onsies, twosies” basis. Gutierrez knows his local area and scopes out potentially troubled homeowners; his goal isn’t exactly altruistic, but it does manage to keep credit scores out of harm’s way for borrowers facing foreclosure.
Gutierrez buys bad mortgages a dozen at a time for a fraction of their face value from lenders overwhelmed by the highest number of defaults in 23 years. When he goes door to door to negotiate lower payments for homeowners or pay them to move so he can sell the house, he’s speeding up the recovery by establishing a price for the homes and flushing out the least reliable borrowers.
“You buy the mortgage for pennies on the dollar, carry the big stick, tell the homeowner how it’s going to be, then double your money very easily,” Gutierrez said.
Most of the time, “how it’s going to be” is a cash-for-keys agreement and an accord to keep the borrower’s credit intact; and, of course, guys like Gutierrez only step in where the house can actually be resold at a profit. But there are plenty of erstwhile investors like him out there — sort of the new breed of home flipper, many of them coming from that side of the business before learning to ply their trade in the industry’s back side.
Building a bigger-money pool
There are more institutional plays out there than just local door-bangers like Gutierrez, of course. More than a few huge hedge funds and distressed asset specialists are lining up captive servicing operations, with the distinct goal of buying distressed mortgages and then actually keeping the borrower in their home.
One such example is San Diego-based National Asset Direct, which owns its own servicing shop called iServe Servicing. The company recently moved into the California market with a license to grant and service loans in the state; NAD characterizes iServe as a “high-touch” servicing platform, a term that means the servicer invests heavily in loss mitigation. And, of course, by buying up bad mortgages for pennies on the dollar, servicers like iServe can do quite a bit more to refinance a troubled borrower into a more affordable mortgage.
“As an opportunistic buyer of distressed residential assets and loans with its own servicing platform, NAD is uniquely positioned to provide a private-sector solution to many home owners whose lives have been affected by the ongoing dislocation in the U.S. mortgage industry,” said CEO Louis Amaya in describing his firm — and while it is likely that companies like his will play a pivotal role in helping housing recover, the business model is quickly becoming anything but unique within the industry.
BlackRock Inc. (BLK: 214.27, -2.20%), the biggest publicly traded U.S. asset manager, said in March it was backing a new company called Private National Mortgage Acceptance Co. LLC, also known as PennyMac, that will buy mortgages at a discount and look to make money in the so-called scratch-and-dent business. PennyMac has a $2 billion war chest to step in and start buying, and will bankroll its own in-house servicing platform; BlackRock also recently negotiated a deal to snap up $15 billion in mortgages from Swiss bank UBS AG (UBS: 30.72, -1.22%).
Beyond BlackRock’s move, Marathon Asset Management, LLC, a global investment manager with $10.6 billion under management and over $20 billion in assets, is also buying up distressed mortgages and is also pumping the mortgages it buys to its own captive servicing operation, Phoenix-based Marix Servicing, LLC. The company has said in recent weeks that it has been buying well over a billion dollars in bad mortgages for the platform to service; it’s not clear how successful the “high touch” servicing model has been just yet, but the approach is clearly yielding dividends for investors.
Banks stepping into the fray, too
Even forward-thinking banks are now sensing opportunity in the distressed asset space, stepping in to compete directly with hedge funds to purchase assets that might otherwise flow through to foreclosure and REO losses. In some cases, some banks are looking to step in to buy assets directly from the hedge funds that themselves purchased a portfolio of distressed mortgages, too.
Kate Berry at American Banker covers the story of National Bank of Kansas City, a community bank with a big plan to boost FHA volume:
Since January the $963 million-asset Overland Park, Kan., unit of Ameri-National Corp. has been approaching noteholders with a proposition: Identify loans in your portfolio that you would like to unload, and the bank will solicit the borrowers to refinance.
The loans it targets are current but typically are adjustable-rate mortgages whose teaser rate is soon to reset. “These loans might have a high possibility of default or foreclosure, and the noteholder would rather get them refinanced,” said Todd Geiman, an executive vice president at the bank’s mortgage division …
Bill Alread, a managing partner of contract finance at Steel Mountain Capital Management LLC, a Lakewood, Colo., investor in scratch-and-dent mortgages, said it has had “quite a bit of success” using the program. “This is one of the few options to show liquidity out of our portfolio.”
Regardless of the approach — and there are many — one thing is becoming clear: investors aren’t waiting for legislators to spend taxpayer dollars. Not when there is money to be made, even in bad mortgages or the increasing number of junk bonds backed by them.
Disclosure: The author held no positions in any publicly-traded companies mentioned herein when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
Under increasing pressure from consumer groups, Fannie Mae (FNM: 28.91, -4.37%) said Friday that it had eliminated its prior loan-to-value restrictions in so-called “declining markets,” or those local housing markets most directly hit by the ongoing housing correction. New underwriting and downpayments standards will apply to all mortgages accepted by Fannie Mae, regardless of geographic location, eliminating the controversial policy.
In December 2007, Fannie Mae adopted a “Maximum Financing in Declining Markets Policy” that restricted the loan-to-value ratios on properties in markets where home prices are declining, essentially requiring higher down payments in these markets. That policy, as reported by Housing Wire, essentially added 5 percent to the LTV requirements of existing loan programs — so a 95 percent LTV program became a 90 percent LTV program in an identified declining market, for example.
Industry representatives had defended the move as prudent risk management, but consumer groups targeted the policy as so-called red-lining. Red-lining refers to decades ago, when banks once used red markers on maps to outline neighborhoods they would not lend in.
Starting June 1, Fannie Mae said it will accept up to 97 percent loan-to-value ratios for conventional, conforming mortgages processed through its automated underwriting system, and 95 percent loan-to-value ratios for loans manually underwritten, in all geographic locations in the United States. The LTV requirements will apply only to single-family, primary residences; other properties will face different underwriting restrictions, Fannie Mae said.
The change means that all borrowers nationwide will be required to put at least 3 percent into the purchase of any home.
“As another part of our ‘Keys to Recovery’ initiative, we are today announcing that we will be equalizing the down payment requirements for borrowers in all parts of the country, regardless of local market conditions,” Marianne Sullivan, senior vice president, single-family credit policy and risk management, said.
Sullivan said Fannie mae was able to adopt the new policy because of an improvement in the GSE’s loan-level risk assessment via its automated underwriting system, known as Desktop Underwriter.
Despite the new 3 percent down payment requirement, Fannie Mae said it will continue to provide support for down payment assistance, and will continue to allow loans via its Community Seconds program, up to a maximum 105 percent combined loan-to-value ratio.
Community Seconds allow a borrower to obtain a second-lien mortgage to help cover down payment and closing costs, with funding typically provided by a state or local housing agency, an employer, or a nonprofit organization.
“We recognize that down payment assistance programs remain a viable tool for borrowers who can afford a mortgage long term, but might need a little help getting started,” Sullivan said.
It’s unclear if sister GSE Freddie Mac (FRE: 26.35, -3.37%) will make a similar move; calls to the company for comment were not immediately returned.
For more information, visit http://www.fanniemae.com.
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.
Millions of home owners nationwide are concerned about the economy, the real estate market, and the rising energy costs. As if that weren't enough, many of them have a ticking clock on their mortgage rate that will be adjusting soon. Like sands through the hourglass, that day will eventually come and you can bury your head in the sand and hope that it goes away, or you can be proactive.
There are obviously more details involved in your situation than what I have covered here, but hopefully this helps to put your options out on the table.
For a day, at least, market participants can bask in some good news on housing. Builders shifted their focus to multi-family housing starts in April, helping push total housing starts up an astounding 8.2 percent compared to a revised March total, the Commerce Department said Friday morning. Privately-owned housing starts registered a seasonally-adjusted annual rate of 1.032 million last month, up from a rate of 954,000 in March.
The April total far surpassed the 939,000 that economists had predicted, MarketWatch reported, and was the third increase in the past four months.
That number, however, doesn’t necessarily signal returning health to the U.S. residential housing market: single-family housing starts hit their lowest level since January 1991, registering an annual rate of 692,000 in April. That rate was 1.7 percent below March’s figure, according to the report.
The strong overall reading for April is certain to bolster the arguments of those who have suggested recently that the housing market has hit bottom; critics, however, will suggest that increasing construction starts is the last thing an over-supplied housing market needs.
“You cannot take the headline starts number seriously because of the increase in the multifamily number,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York, who had the closest estimate in a Bloomberg News survey. “The trends are horrific” because “why would you spend money to buy a depreciating asset?” he said.
Yes, multi-family housing is dwarfed by the size of the single-family market; but there is some good news buried in the report. First of all, the jump in apartment starts is something that many housing economists have said is much needed; the idea that the nation’s housing supply skewed far too heavily towards single-family construction during the recent housing boom is something that many have argued recently is now hurting consumers, who are finding their rental options limited.
A recent study by Harvard University’s Joint Center for Housing Studies suggested that the nation’s housing supply was “imbalanced” by a lack of affordable rental housing. If so, news that multi-family starts are surging should come as at least some ray of good news.
Permits, an indicator of future building activity, jumped 4.9 percent in April, driven by a 4.0 percent jump in single-family authorizations — the first jump in single-family permits in over one year. For those that see inventory as critical to housing’s recovery, the jump could mean future bad news: permit activity often presages future starts, which serve to lead completions, in a general sense.
“The data reads like builders can only hold back for so long, and are now looking to start building up inventory again,” said one source, an analyst who asked not to be named. “That’s exactly what the market doesn’t need right now.”
Completions, reflecting dismal single family starts over the past few months, dropped 16 percent in April; single-family completions fell 13 percent to a seasonally-adjusted annual rate of 13.0 percent, the Commerce Department said.
Read the full report on new residential construction here.
Non-performing assets continue to mount at California-based Downey Financial Corp. (DSL: 9.80, 0.00%), with the option ARM specialist reporting Thursday afternoon that NPAs had reached 13.24 percent of the bank’s $13.15 billion in total assets — or $1.74 billion — by the end of April.
More troublesome, perhaps, is that efforts by the bank to modify outstanding option ARM mortgages ahead of scheduled recapitalization appear to be losing steam. So-called troubled debt structurings grew by just 10 basis points to 4.59 percent in April versus one month earlier, while more traditional non-performing loans grew by 124 basis points to 8.65 percent (a basis point is one-hundredth of a percent).
Downey reports troubled debt restructuring in its non-performing assets category, as the refis represent “borrower retention” efforts — in other words, borrowers with option ARMs are refinanced into a fixed-rate, traditional mortgage without new underwriting or appraisals. The graph to the right illustrates just how quickly and consistently the company’s $10.7 billion residential mortgage portfolio has come under duress.
Roughly 65 percent of Downey’s mortgage assets come in the form of option ARMs, and the lender has reserved roughly $546.7 million against a balance of NPAs that appears set to break the $2 billion threshold in the next few months. The proportion of existing reserves to currently non-performing assets would seem to suggest that the company is likely to bump up its loss provision charges further during the second and third quarters.
Downey reported a loss of $247.7 million for the recently-completed first quarter, primarily due to rising credit losses.
Disclosure: The author held no positions in DSL when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.