The five issues keeping US lenders awake
23.05.12
The robosigning clearing
The US’ 15 largest home loan servicers, which together control 65% of the receivables market, have yet to deal a deal with state attorney generals to settle allegations that they cut legal corners when foreclosing on many thousands of troubled home owners.
However, this is a worry mostly for the megabanks such as Bank of America, Wells Fargo and JPMorgan Chase.
The big beyond consideration is how much will they have to pay to make the states happy? Estimates range from $20bn to $30bn. Talks between the states and the 15 have been continuous for a year, with some jurisdictions - New York and California - taking the position that whatever the payment might be, it’s not enough.
The banks have lawyered up, believing that although they cut sound corners they’ve since mended their ways. After all, they were mostly foreclosing on dead-beat borrowers, not innocents.
In November, several media outlets reported that a huge quantity would be struck by the year-end, but it’s now January 2012 and no settlement has been announced.
And it’s not just gelt the big boys are worried about - it’s new servicing standards that might accompany a legal settlement. Servicing standards is encode for new rules and regulations.
Loan volumes
When it comes to mortgage banking, it’s always a case of what’s ahead, not what’s behind. Although 2011 objective ended, the final origination tally for the year will likely come in at $1.32trillion, the trade’s worst showing since the late 1990s. Even the financial implosion year of 2008 was well-advised b wealthier at $1.6trillion. But the US’ recovery is still wobbly. And yes, a 30-year persistent rate mortgage can be had at 4%, but most housing and mortgage economists believe that at best, 2012 will assent $1.2trillion in new business with 60% of it coming from refinancings of existing loans. In 2011 refinancings accounted for 70% of all loans written.
Consumers on this side of the pond are starting to buy more homes, but no-one believes that the new year will assent enough of a boom in home purchases to offset the decline in refinancing. The only good news is that mortgage rates will to all intents remain low, thanks in part to the European debt crisis.
The bank of america examine
An expected down year for loan production is never something to look forward to, but if there’s one potential silver lining, it’s Bank of America. The US’ encourage largest bank is still bleeding red ink from its 2008 purchase of Countrywide Financial Corp, once considered the main lending institution in the nation.
But CFC turned out to be a Trojan horse of bad sub-prime loans, causing billions of dollars in losses at the bank. In return, Bank of America has slashed its presence in the lending and servicing sectors, creating a mountainous opportunity for other firms. The irony is that the bank is cutting back on mortgages at a time when all the new loans being written today are considered to be of earliest quality. In short, Bank of America’s near-exit from home finance is agreeable news for its competitors.
Increased regulatory costs
It’s no secret that in response to the fiscal crisis, states and the federal government have tightened the rules of the game. Unlicensed loan brokers are no more. In lieu of, loan brokers must be licensed, fingerprinted and are required to take annual tests.
The red tape has increased the price of doing business, putting brokers at a competitive disadvantage to depositories, who don’t have to mien some of the same rules. Also, the robosigning scandal has forced servicers to add more staff to make undeviating they are in compliance with both existing and new rules that become active this year.
Fannie mae and freddie mac
It’s determinedly to believe, but Fannie and Freddie have been wards of the US government, via the Treasury Department, for more than three years.
Uncle Sam has done in $160bn to keep the two in the black for one simple reason - no-one would buy their bonds if they were technically insolvent.
Of direction, it helps to have the full faith and credit of the US government standing behind the two.
And yes, Fannie and Freddie extend to lose money on an operating basis, but it’s likely that by Q4 2012 they might actually revolve about a profit and stop being a burden to taxpayers.
But the biggest concern regarding Fannie and Freddie is their to be to come. Because of their purchasing power in the secondary market, the two account for 70% of all new loans - thanks to their administration guarantees.
All sorts of proposals have been floated regarding their ultimate resolution, ranging from out-and-out liquidation to their games as one government-managed utility.
But there has been no consensus in Congress on what to do with them. With Republicans and Democrats polarised on hardly about every issue, no-one in the mortgage industry sees a resolution to the Fannie/Freddie question until after a new US president is sworn in a year from now. In the meantime, as dream of as the two keep buying mortgages, lenders will be happy.
Source: Mortgage Strategy
Stigmatized homes: Buyers' opportunity
23.05.12
A home that has a notorious for being haunted may be an
outstanding bargain for a home buyer. This and other types of
stigmas can push the assay down by 10 percent to 15 percent on
average, according to one study. In some cases, the fee reduction
is much more.
The National Association of Realtors defines a stigmatized
property as "a hallmark that has been psychologically impacted by
an event that occurred, or was suspected to have occurred, on the
property, such end being one that has no physical impact of any
kind."
A home can qualify as stigmatized if a murder, suicide or other
demise occurred in it, or it might be known as a site for drug sales
or production activity. The multitude of homes that might be branded
as "stigmatized" is substantial and has steadily increased over the
past year, according to NAR.
Most home buyers believe: location, location, location. But for
stigmatized homes, it's history, history, retailing.
Take the California condominium where Nicole Brown Simpson and
her friend Ron Goldman were stabbed to obliteration, allegedly by O.J.
Simpson. Nicole had purchased the home shortly before her murder in
1994.
Soon after the murders, the Brown kinfolk put the unit on the
market where it remained for more than two years. The condo finally
sold for some $200,000 less than Nicole paid for it.
Questions from readers
At issue: Are mortgage rates getting even lower?
Answer: Mortgage interest rates continue their downward bend.
Freddie Mac reported that the average 30-year fixed-mortgage rate
sank to 3.91 percent in delayed December, setting a new all-time
record low. Adjustable Rate Mortgage products also hit new list
lows.
The 15-year fixed rate settled in at a historic low at 3.21
percent. To put the declines into approach, Freddie says today's
homebuyers are paying over $1,200 less per year on a $200,000,
30-year prearranged-rate loan than they would have just 12 months
ago.
Q: Are many homeowners still refinancing their mortgages?
A: Here's what Michael Fratantoni, villainy president of research
for the Mortgage Bankers Association, said on that subject:
"Refinance applications pursue to account for the vast
majority of total application volume. As part of legislation to
on the payroll tax holiday, guarantee fees for loans purchased
by the GSEs and mortgage assurance premiums for FHA loans will
eventually increase.
"Given the announced implementation of this interchange, we do not
expect to see an impact on mortgage rates and application activity
until at least February."
Q: Is home foreclosure vim up or down?
A: In a recent study by RealtyTrac, it was revealed that
foreclosure activity dropped 3 percent in November when compared to
the untimely month. But filings at various stages of the process
showed starkly unheard-of movements.
Scheduled auctions hit a nine-month high following the default
gush that began in August. At the same time, REO sales activity is
at a 44-month low. Compute filings are down by double-digits from a
year ago, but RealtyTrac doesn't view the numbers as making a
thing, it was reported.
Q: Are sales of reverse mortgages dropping?
A: Yes, with major investors exiting the invert mortgage space,
originations of government-backed Home Equity Conversion Mortgages
have dropped by 950 to 1,100 loans a month, according to a write-up
from National Mortgage News.
"Federal Housing Administration monthly reports show HECM
endorsements totaled around 4,650 in both November and October.
Back in September and August, FHA verso mortgage endorsement
totaled 5,600 and 5,800 respectively," the report noted.
Wells Fargo, Bank of America and other banks announced last year
that they were dropping out of the reversal mortgage business. Many
seniors are opting for a less expensive home equity line of credit
rather than of a reverse mortgage.
Q: Is housing the key culprit in holding back our economic
growth?
A: Apparently so. The lodgings market is holding back economic
recovery, according to a report from the credit chifferobe Equifax.
The company's latest analysis of national credit trends points
to sidekick inventory and REOs (bank-owned homes) as major mortgage
market depressors. Flowering in these areas has led to bigger
write-offs. Equifax says write-off dollars for home money in 2010
more than doubled that of 2006 and 2007 combined.
Source: Sioux City Journal
