Archive for August, 2007
August 31st, 2007, 6:54 pm by Mathew Padilla
The day has come.
Ameriquest Mortgage, once one of the largest subprime lenders in the country, will be shut down, the company said today.
The retail company stopped accepting loan applications on Aug. 1, said spokesman Chris Orlando.
Citigroup Inc. said it’s buying the wholesale operation, known as Argent Mortgage, and the loan servicing unit of ACC Capital Holdings in Orange. The deal closes tomorrow.
The terms of the deal were not disclosed, except to say the servicing portfolio totals $45 billion of loans.
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Posted in: Ameriquest • Company Watch | 8 Comments »
August 31st, 2007, 7:17 am by Mathew Padilla
President Bush is set to announce this morning plans to help homeowners facing foreclosure and those who already lost their homes to the bank, reports the Wall Street Journal.
Here are the key points as outlined in the Journal:
Among the moves will be an administrative change to allow the Federal Housing Administration, which insures mortgages for low- and middle-income borrowers, to guarantee loans for delinquent borrowers. The change is intended to help borrowers who are at least 90 days behind in payments but still living in their homes avoid foreclosure; the guarantees help homeowners by allowing them to refinance at more favorable rates.
Mr. Bush also will ask Congress to suspend, for a limited period, an Internal Revenue Service provision that penalizes borrowers who refinance the terms of their mortgage to reduce the size of the loan or who lose their homes to foreclosure. And he will announce an initiative, to be led jointly by the Treasury and Housing and Urban Development departments, to identify people who are in danger of defaulting over the next two years and work with lenders, insurers and others to develop more favorable loan products for those borrowers.
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Posted in: Defaults & Foreclosures • Subprime news | 27 Comments »
August 31st, 2007, 6:00 am by Andrew Galvin
Standard & Poor’s Ratings Services said today that it lowered its credit rating on H&R Block Inc. to ‘BBB-/A-3′ from ‘BBB+/A-2,’ citing concerns about Block’s plan to sell its Irvine-based subprime subsidiary, Option One.
Here’s a clip from S&P’s release:
Given the turmoil in the mortgage markets, we believe that there is a high probability that Block’s deal to sell Option One to Cerberus may not occur as originally planned. Management has publicly stated that it is currently in talks with Cerberus to renegotiate this agreement. While these efforts may succeed, we believe that any renegotiated deal would occur on less-favorable terms than we had previously contemplated.
Posted in: Company Watch • Option One • Subprime news | Post a Comment »
August 30th, 2007, 3:21 pm by Mary Ann Milbourn
(Contributed by Register staff writer Mary Ann Milbourn)
California military veterans who have been virtually shut out of the VA loan market because of high housing costs here are getting some help.
The Government National Mortgage Association — known as Ginnie Mae — announced today that on Sept. 1 it is lifting the ceiling on home loans guaranteed by the Department of Veterans Affairs as collateral for its mortgage-backed securities. VA loans currently are subject to the conforming loan limit, which is $417,000 in California and most other states.
Although there will be no overall ceiling now for the amount of a VA loan, Ginnie Mae will still require that the down payment plus the VA guaranty equal at least 25 percent of the value of the home.
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Posted in: Loan underwriting | Post a Comment »
August 30th, 2007, 7:58 am by Mathew Padilla
H&R Block, the largest U.S. tax preparer, said today its deal to sell Irvine-based subprime lender Option One Mortgage Corp. is in jeopardy amid a global credit crunch. Under terms of a new deal, H&R Block said it would immediately divest or shut down the loan-making operation of Option One.
The Option One announcement was included in H&R Block’s earnings report for its fiscal first quarter. The tax preparer reported a loss of $302.6 million, more than double the year ago loss of $131.4 million.
H&R Block said it has failed to meet certain aspects of its agreement to sell money-losing Option One and is trying to strike a new deal with Cerberus Capital Management, L.P. which was going to buy the mortgage unit. The news follows at least two rounds of layoffs at the lender in the past four months.
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Posted in: Company Watch • Option One • Subprime news | 7 Comments »
August 30th, 2007, 6:30 am by Mary Ann Milbourn
(Contributed by Register staff writer Mary Ann Milbourn)
It’s not just homeowners who have gotten caught up in the mortgage mess — and not just with subprime loans.
The Mortgage Bankers Association reports today that non-owner-occupied homes are a major contributor to defaults in California and the other three states that have the fastest-rising default rates in the country.
As of June 30, 21 percent of the prime loan defaults in California were in non-owner-occupied homes and 15 percent of the subprime defaults.
“Defaults are on the rise in most parts of the country, but it should be recognized that it is not always the case of a homeowner losing his or her home but is often the case of an investor gambling on a continued increase in home values and losing that gamble,” said Doug Duncan, MBA’s chief economist and senior vice president of research and business development.
“California, Nevada, Arizona and Florida were among the states with the fastest home price appreciation over the last five years. This rapid price appreciation attracted both speculators and home builders, a volatile combination that led to an over-supply of homes that was beyond the capacity of the local populations to support. When this over-supply became apparent and prices began to fall, many of these investors simply walked away from their mortgages,” Duncan said.
Nevada led the country with 32 percent of its prime loan defaults in non-owner-occupied houses and 24 in subprime. Among prime loan defaults in Florida, 25 percent were non-owner-occupied homes while 14 percent defaulted in subprime.
Non-owner-occupied homes accounted for 26 percent of the prime loan defaults in Arizona and 18 percent of that state’s subprime loan defaults.
Nationwide, non-owner-occupied homes made up 13 percent of prime loan defaults and 11 percent of subprime defaults.
Defaulted mortgages are defined as those 90 days or more past due or in foreclosure.
Posted in: Defaults & Foreclosures | 2 Comments »
August 29th, 2007, 5:52 pm by Mathew Padilla
Presidential hopeful Barack Obama today joined the chorus calling for a bailout of homeowners facing foreclosure, although he adds the idea of fining lenders to help pay for it.
His commentary, which ran in the Financial Times, said:
We need to help struggling borrowers to weather this storm. One way to protect innocent homeowners – at least until this crisis passes – is to establish a fund to help people refinance or sell to avoid foreclosure. We can partially pay for this fund by imposing penalties on lenders that acted irresponsibly or committed fraud.
If you subscribe to the FT, read his piece by CLICKING HERE.
Posted in: Defaults & Foreclosures | 17 Comments »
August 29th, 2007, 2:43 pm by Mathew Padilla
The Wall Street Journal just published a letter from Ben Bernanke, chairman of the Federal Reserve, to Sen. Charles Schumer (D-N.Y.), in which the Fed chief says what he sees as reasonable proposals to stem the tide of foreclosures and shore up financial markets.
For my part, the most interesting passage in the letter is this one (emphasis added) :
It might be worth considering at this juncture whether the private and public sectors, separately or in collaboration, could help the situation by developing a broader range of mortgage products which are appropriate for low-and moderate-income borrowers, including those seeking to refinance. Such products could be designed to avoid or mitigate the risk of payment shock and to be more transparent with respect to their terms. They might also contain features to improve affordability, such as variable maturities or shared-appreciation provisions for example. One public agency with considerable experience in providing home financing for low-and moderate-income borrowers is the Federal Housing Administration (FHA). The Congress might wish to consider FHA reforms that allow the agency more flexibility to design new products and to collaborate with the private sector in facilitating the refinancing of creditworthy subprime borrowers facing large resets.
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Posted in: Defaults & Foreclosures • Fed | 6 Comments »
August 29th, 2007, 7:24 am by Mathew Padilla
Mortgage applications nationwide fell to a four-week low and the rate on one-year adjustable loans jumped by the most since the Mortgage Bankers Association began tracking it in 1996, reports Bloomberg.
Here’s more from Bloomberg:
The report demonstrates the difficulty some home buyers face in securing affordable financing. The organization’s index fell 4 percent last week to 615.2. The group’s purchase and refinancing gauges each decreased for a second week.
Banks may be jacking up short-term rates to dissuade buyers from choosing riskier mortgages as defaults on subprime loans climb. The housing slump will worsen as banks restrict the availability of credit and falling real-estate prices prevent owners from tapping home equity for extra spending money, economists said.
“If rates go up and credit gets tighter, that is going to lead to a drop in demand on top of what we have already seen,” said Abiel Reinhart, an economist at JPMorgan Chase & Co. in New York. “That is going to have an adverse impact” on the economy through the first half of 2008, he said.
As for rates, Bloomberg reports:
The average rate on a one-year adjustable mortgage surged to 6.51 percent, the highest since January 2001, from 5.84 percent the prior week. The rate also surpassed the cost of a 30-year fixed loan for the first time.
Wow, I find that jump in one-year adjustables incredible and hope there wasn’t some kind of error in the MBA’s data. We will know more when other experts report rates tomorrow.
You can read the full Bloomberg article by CLICKING HERE.
For the full Mortgage Bankers Association press release, CLICK HERE.
Posted in: Loan volume • Mortgage rates | 2 Comments »
August 28th, 2007, 5:12 pm by Mathew Padilla
Last week Bill Gross, the bond king of Newport Beach-based Pimco, got some press and took some heat from readers on his proposal for a tax-payer bailout of homeowners facing foreclosure.
When my fellow blogger Jon Lansner posted an item on it, among the 63 comments in response was one from ‘JD’ who wrote, “This is not a homeowner bailout, it’s a bank bailout. What’s the fix? A 90 year mortgage for the troubled homeowner?”
And on the opposite side, ‘observer’ wrote, “Mr. Gross realizes that this is one of those cases of ‘the greater good’ theory. Additionally, he’s right to question our government’s insistence on bailing out corporations but not individual Americans. Bravo to Mr. Gross. Finally something from Pimco that makes sense.”
But what got less attention was a letter from Senator Christopher Dodd (D-CT) to Treasury Secretary Henry Paulson.
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Posted in: Uncategorized | 18 Comments »
August 28th, 2007, 12:47 pm by Mathew Padilla
In further proof that retail is king in the mortgage biz these days, Indymac Bancorp in Pasadena said today its bank unit has hired more than 600 former retail employees of American Home Mortgage Investment Corp.
American Home Mortgage, based in Melville, N.Y., filed for bankruptcy and laid off most of its 7,400 workers earlier this month.
Indymac also said it’s nearly done with its purchase of assets of Barrington Capital in Newport Beach. Indymac is picking up 90 retail loan officers operating from six branches in California and Nevada in the deal, the company said. Retail workers deal directly with consumers.
Here’s more on American Home from Indymac’s release:
These retail lending professionals specialize in prime conforming, FHA/VA and other agency eligible single-family mortgage products. The Company is in discussions to hire additional former AHM employees and anticipates that it will end up hiring 750 to 850 former AHM employees in total. Roughly 75 percent of the staff consists of retail loan officers, with the balance being in operations, marketing and recruiting. Roughly 83 percent of the new staff will be located in the western United States, with the balance being located in the East.
Indymac also said it has entered into a license agreement to use more than 90 of American’s offices “and is in the process of assuming the leases on these offices and purchasing the related furniture and equipment.”
Indymac’s release goes on:
The new employees are being hired into Indymac Bank’s Retail Lending Group (RLG), and are expected to generate quarterly production of roughly $1 billion for the Company, once they are fully integrated.
“The addition of 750 to 850 former AHM retail lending professionals provides a strong complement to the acquisition of the retail lending division of New York Mortgage Company on the East Coast which we completed in the second quarter of 2007,” commented Frank Sillman, CEO of the Company’s mortgage bank. “That acquisition added 440 retail lending professionals operating out of 29 branches.
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Posted in: Company Watch • IndyMac | 3 Comments »
August 28th, 2007, 7:35 am by Mathew Padilla
Indymac Bancorp in Pasadena said that last Friday it traded $240 million of AAA bonds backed by jumbo fixed-rate home loans and $350 million of AAA bonds backed by jumbo adjustable-rate loans — the first bonds it’s traded in 36 days.
The market for jumbo loans, which are prime loans greater than $417,000 in most states, has been rocked by a lack of investor confidence in all home loans except those with some kind of government guarantee.
Here’s more from Indymac’s blog:
While the trade prices on these sales are still outside historical ranges, they do reflect an improvement over several “fire sale” trades made by others in recent weeks. We are encouraged by these sales as they represent the first small sign that the ice is beginning to melt, and some modest liquidity is beginning to return to the private-label mortgage market. It appears as though, given the current historically wide spreads, significant tightening of underwriting standards by lenders, and the updated rating agency models requiring stronger subordination levels, investors are beginning to recognize that private mortgage-backed bonds may offer strong risk-adjusted returns. This further supports our decision last week to re-enter the prime jumbo mortgage market after a brief hiatus.
That’s pretty much all they said, but you can check out the blog by CLICKING HERE.
In related news, Reuters reports Moody’s Investors Service might downgrade Indymac to junk status. Here’s a clip from Reuters:
Moody’s said it may cut IndyMac’s “Baa3″ issuer rating, its lowest investment grade, and the “Baa2″ rating for its IndyMac Bank unit.
“Investor demand for non-agency product has declined severely over the past month and Moody’s expects write-downs on IndyMac’s inventory to be large in the third quarter,” Moody’s Senior Vice President Sean Jones wrote. “These potential write-downs, and the significant drop in residential mortgage loan origination and sales volumes, is likely to weigh on the thrift’s profitability for a few quarters.”
Reuters also reports that Moody’s affirmed Washington Mutual’s medium investment grade rating. Read on by CLICKING HERE.
Posted in: Company Watch • IndyMac | Post a Comment »
August 28th, 2007, 7:30 am by Mathew Padilla
Orange County’s mortgage companies rose to prominence with help from investment banks and other financial firms that were eager to buy their loans and sell them as securities on Wall Street. Now it looks like they may fall together, sort of.
Bloomberg reports today that a Merrill Lynch analyst downgraded his fellow financial giants Lehman Brothers Holdings, Bear Stearns and Citigroup to “neutral” from “buy” due to probable losses on mortgage bonds and leveraged loans, as well as a slowdown in investment banking.
Analyst Guy Moszkowski writes that Lehman and Bear Stearns are vulnerable because of their dependence on debt markets and Citigroup could take a hit from loans and leveraged finance commitments, according to Bloomberg. Moszkowski cut his profit estimates for all three companies and JPMorgan Chase & Co.
Here’s more from Bloomberg:
“There has been no good place to hide during the month of August, which must surely go on record as one of the industry’s most hair-raising ever,” wrote New York-based Moszkowski, the top-rated U.S. brokerage analyst in Institutional Investor magazine’s survey of money managers. Next year’s “forecasts appear increasingly unrealistic for most,” he wrote.
Goldman Sachs Group Inc. and Morgan Stanley, the two biggest U.S. securities firms by market value, are the best placed of the American brokers to weather the credit crunch, Moszkowski said in his report, written with Patrick Davitt and entitled “Differentiation Escalates.”
To read the full article, CLICK HERE.
Posted in: Mortgage securities • Subprime news | Post a Comment »
August 27th, 2007, 1:48 pm by Mathew Padilla
These days more folks in a financial jam need help keeping their homes and the Federal Reserve knows it. But it’s not clear yet if it plans to cut a key interest rate it controls in order to ease the sting of home loan borrowers with low introductory interest rates that are about to jump.
What we do know is that the Fed has compiled a list of information sources on avoiding foreclosure, which you can visit by CLICKING HERE. Or see a short list of federal-agency-only sites HERE.
Posted in: Defaults & Foreclosures • Fed | 3 Comments »
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