Latest Headlines on OCRegister.com
[x] Close
Mortgage Insider ~ Just another Freedomblogging.com weblog

Archive for the 'Bailout Buzz' Category

« Previous Entries

BofA agrees to Obama’s second-mortgage aid program

January 27th, 2010, 5:31 pm by Mathew Padilla

I missed this yesterday from Bank of America:

Bank of America announced that it is the first mortgage servicer to sign an agreement formally committing to participation in the pending second-lien component of the federal government’s Home Affordable Modification Program (HAMP). The formal action follows a verbal commitment to the program made by Bank of America’s Chief Executive Officer Brian Moynihan during a meeting with Treasury Secretary Timothy Geithner earlier this month.

Bank of America has systems in place to begin implementing the Second Lien Modification Program (2MP) with the release of final program policies and guidelines by federal regulatory agencies, which is expected soon. 2MP will require modifications that reduce the monthly payments on qualifying home equity loans and lines of credit under certain conditions, including completion of a HAMP modification on the first mortgage on the property.

“For many homeowners facing severe financial difficulty, decreasing the payment on the first mortgage without a reduction in the payment on the second lien may not produce an affordable combined mortgage payment,” said Barbara Desoer, president of Bank of America Home Loans.

…

As the nation’s largest mortgage servicer — nearly 14 million loans, including approximately 3 million second liens — the bank’s participation in 2MP is particularly noteworthy. Bank of America will modify eligible second liens regardless of whether the first lien is serviced by Bank of America or another participating servicer.

Bank of America is a leader in providing modification opportunities under the HAMP first-lien program. In fact, it is the only bank that has placed more than 200,000 customers into the program through trial modifications. The bank also was among the earliest to offer and close loans under the Home Affordable Refinancing Program, and has refinanced 130,000 mortgages through the enhanced loan-to-value and streamlined provisions of that part of the Making Home Affordable initiative.

Read the full release HERE.

The prevalence of second mortgages — especially when one lender controls the first and another the second — has been a major obstacle to successful loan modifications.

More details of the Obama plan are needed to estimate its chances of improving loan mods.

Posted in: Bad debt • Bailout Buzz • Bank of America • Company Watch • Defaults & Foreclosures | 2 Comments »

U.S. tightens standards on FHA program

January 20th, 2010, 2:09 pm by Mathew Padilla

The Federal Housing Administration today announced a few tweaks to its home loan insurance program, charging borrowers a little more and requiring a bigger down payment for folks with very low credit scores.

FHA purchase loansThe FHA program, which generally allows for down payments as low as 3.5%, has accounted for roughly 20% to 25% of purchase loans in Orange County for more than a year now. (The chart shows FHA’s market share in O.C. as of November 2009).

On the other end of the spectrum, all cash buyers have been around 20% of home sales since January.

The U.S. Department of Housing and Urban Development, which oversees FHA, said borrowers will now be charged an up-front premium of 2.25%, up from 1.75%. The change is set for this spring.

Another key change: New borrowers will now be required to have a minimum FICO score of 580 to qualify for the 3.5% down payment program. Otherwise they have to put down at least 10%. This change takes place in summer.

Read about the other changes HERE.

Posted in: Bailout Buzz • FHA | 21 Comments »

Economists react to Obama’s bank tax plan

January 14th, 2010, 3:17 pm by Mathew Padilla

President Barack Obama today called for a special fee on the 50 biggest financial firms. A bank economist and an independent economist react:

Scott Anderson, senior economist, Wells Fargo
Anderson said much of the losses Obama mentions actually went to nonbanks like failed insurance giant AIG and General Motors.

“To just tax the 50 largest banks is probably not the fairest way to do it,” he said.

He also said an additional tax on banks would work against their efforts, encouraged by government, to raise more capital and lend more liberally.

Jack Kyser, founding economist of The Kyser Center for Economic Research
“Will this do what the government wants it to do? I feel there are two goals: 1.) is to limit risk taking by the largest banks, and 2.) to demonstrate to the public that the government is punishing the “bad” guys.”

Posted in: Bailout Buzz • Meltdown • Regulation | 4 Comments »

Obama wants tax on 50 big banks. Agree?

January 14th, 2010, 9:13 am by Mathew Padilla

President Barack Obama today proposed a special fee on 50 financial firms with assets greater than $50 billion each, saying banks should pay for their own bailout and calling executive bonuses “obscene.”

While companies have paid back most of the money they got from a $700 billion program to rescue banks and homeowners, Obama said tax payers are expected to lose about $117 billion. He wants financial companies to pay that money.

“My commitment is to recover every single dime the American people are owed,” Obama said in a statement released this morning. “My determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at the very firms who owe their continued existence to the American people.”

Here’s more from Bloomberg:

The levy would be based on bank liabilities and be imposed starting June 30 on companies such as Citigroup Inc., American International Group Inc. and Bank of America Corp. The administration estimates it will raise $90 billion over a minimum of 10 years, said an administration official, who briefed reporters on the condition of anonymity.

White House or Treasury officials contacted most of the companies affected, according to a senior administration official. The plan must be approved by Congress.

Obama plans to outline the proposal this morning at the White House and a more detailed plan will be included in the budget message he is due to send Congress next month. The announcement comes as public anger is rising over the taxpayer bailouts of the financial and auto industries, Wall Street bonuses and the deficit, which hit $1.4 trillion last year.

Vote in an opinion poll on the bailout tax HERE.

Note that banks have paid interest on the money they received.

And read reactions from two economists HERE.

MORE BAILOUT BUZZ…

Posted in: Bailout Buzz | 65 Comments »

Obama mulls bailout tax on banks

January 11th, 2010, 1:07 pm by Mathew Padilla

President Obama is likely to propose a fee on financial companies to help close the budget deficit and recoup some taxpayer funds used to bolster the financial system, reports the New York Times (with a nod to Politico.com).

However, the administration wants to avoid a transaction tax that would be passed on to consumers.

The Times story had few details, saying the plan should be revealed along with other budget plans expected next month.

What do you think?
questionmark.jpg

Should Obama hit banks with bailout tax?
View Results

MORE HEADLINES…

Posted in: Bailout Buzz • Bank woes • Polls • Regulation • Taxes | 18 Comments »

Aid for second mortgages on hold, report says

January 7th, 2010, 7:21 am by Mathew Padilla

Economics blog Calculated Risk hears the Obama administration’s plan to help homeowners with their second mortgages has stalled. We already know the plan for first mortgages is only keeping a fraction of delinquent borrowers in their homes.

The blog says housing economist Tom Lawler emailed the Web site for HAMP, as the umbrella program is known, to ask for a list of companies that have signed up for the Second Lien Modification Program. Lawler got this response:

“That program is currently on hold and there is no list of servicers that registered before it was placed on hold.”

A big chunk of the homeowners underwater now got second mortgages during the boom. The ones who have a second from a different lender than the first are the hardest to help. While this email Mr. Lawler got is not an official statement from the Obama administration, it’s not a good sign either.

Posted in: Bailout Buzz • loan mods | 3 Comments »

Buffett eyes Ditech.com parent, report says

January 5th, 2010, 1:28 pm by Mathew Padilla

Warren Buffett is in talks to buy Residential Capital — which controls Costa Mesa-based Ditech.com — from GMAC, the New York Post reported just before the holidays.

National Mortgage News ran a more recent story on ResCap, saying the Buffett deal is a likely scenario for the troubled company, which is the fifth largest loan servicer with a $380 billion portfolio.
Top Servicers
Kate Berry, reporting for NMN and American Banker, writes that the biggest loan servicers have their own problems — lots of dud loans and pressure from the Obama administration to help homeowners — and are unlikely to take on ResCap. That leaves the field open for a private investor with a strong stomach. Berry writes:

Warren Buffett’s Berkshire Hathaway Inc. is reportedly interested in buying ResCap. Observers said that would make sense, since Berkshire has already bought a commercial mortgage servicer with ties to GMAC, and it is one of the largest holders of ResCap’s debt. The Omaha investment company did not return calls seeking comment.

By the way, taxpayers now control GMAC and its subsidiaries ResCap and Ditech.com. In December, GMAC received a third taxpayer-funded bailout, this one at $3.79 billion. That gave us a controlling interest. Yea!

Here’s more from the NMN story:

Kirk Ludtke, a senior vice president at CRT Capital Group LLC, a Stamford, Conn., investment bank, whose clients include some ResCap bondholders, said they were pleasantly surprised that Treasury did not ask them for any concessions with the latest infusion. That welcome (for them) news fueled speculation that Treasury has lined up a deal for Buffett to buy ResCap, he said. “They didn’t ask bondholders for concessions because Treasury and GMAC want to attempt a consensual deal with bondholders, whether they recapitalize ResCap, spin it off, break it up or sell it, or any combination,” Ludtke said.

Another possibility, some observers said, would be for GMAC to try to isolate its legacy private-label loans at ResCap and pursue a prepackaged bankruptcy of the unit or negotiate a liquidation with creditors. In this scenario, more attractive parts of ResCap, such as the online lender Ditech, would move to GMAC’s Ally Bank.

Anyway, if Buffett does buy ResCap, I would not expect him to do anything creative with all the delinquent mortgages. Since the loans are generally securitized, his hands will likely be tied by existing contracts.

Buffett, a part-time Laguna Beach resident, bought a Chicago real estate brokerage last year. His company controls, among other property interests, the Prudential California brokerage operation.

And in related news, the Register reported last month that GMAC may be hiring in Costa Mesa.

LATEST HEADLINES…

Posted in: Bailout Buzz • Company Watch • Ditech • Market hogs | 8 Comments »

Are property short sales getting easier?

January 4th, 2010, 1:00 am by Mathew Padilla

I’ve been writing on this blog that housing short sales may become more popular this year as loan modification programs fail to help as many struggling homeowners as once hoped.

In a short sale, a homeowner sells for less than outstanding mortgage debt on a property.

In a recent story I wrote for the Register’s Sunday Business section, two real estate agents debate whether banks are already making short sales easier to complete:

Susan Piazza, an agent with First Team Estates in Newport Beach who focuses on short sales, said she is seeing lenders reduce the time they take to approve a short-sale offer to six weeks, down from three to four months.

Lenders have changed their attitude within the past few months as a loan modification program pushed by the Obama administration has failed to help as many borrowers as hoped, Piazza said.

And some lenders are improving their computer systems to better handle delinquent mortgages, just like they automated the loan underwriting process during housing’s better days, she said.

“I think you will see short sales become automated also,” Piazza said.

Of course, the short-sale process runs smoother, she said, when sellers get their paperwork in order: pay stubs, tax returns, bank statements and a hardship letter.

The Southern California Multiple Listing Service reports 530 short sales closed in October, up 70 percent from the average during the first three months of the year. Still, there were more foreclosures (763) in October and more loans that started the foreclosure process with a notice of default (2,152), according to MDA DataQuick.

And some brokers are unconvinced most banks are moving faster on short sales.

Veronica Hicks, an agent with Condos etc. in Newport Beach, said lenders are dragging their feet with short sales in twin condo towers in Irvine known as the Marquee. She represents owners who have received cash offers on their condos but banks have been silent for months, Hicks said.

“I don’t know what their motivation is not to clean these up,” she said.

Hicks speculates lenders may be reluctant to recognize losses, since the units once were worth $800,000 and now are getting offers for half that value.

She said if lenders are simply reluctant to take losses, than things are “not going to get any better for a long time.”

What do you think?

Will banks make short sales easier?
View Results

Posted in: Bad debt • Bailout Buzz • Defaults & Foreclosures • Polls • short sales | 14 Comments »

Blank check for Fannie and Freddie

December 24th, 2009, 2:52 pm by Mathew Padilla

The Wall Street Journal reports the U.S. Treasury said it will “provide capital as needed” to mortgage buyers Fannie Mae and Freddie Mac over the next three years. The blank check courtesy of taxpayers is a bid to reassure buyers of the debt of the government-controlled companies.

But note: Treasury will stop buying mortgage-backed securities issued by Fannie and Freddie and nix a “never-used short-term liquidity facility set up for the firms and the Federal Home Loan Banks.” (Of course the Federal Reserve is buying MBS until March 31, and some folks expect the deadline to be extended.)

Finally, Treasury moved to allow the companies to shrink their portfolios of mortgage securities more slowly.

Read the full story HERE.

And in related news, the Journal did a separate story on Fannie, Freddie execs set to get big pay packages.

I think what should be done with Fannie, Freddie will be much debated next year, but I don’t anticipate action until the housing market is on more solid ground. I would guess 2011.

Posted in: Bailout Buzz • Fannie & Freddie | 4 Comments »

U.S. gives struggling homeowners more time

December 23rd, 2009, 6:22 pm by Mathew Padilla

This should come as no surprise, from Bloomberg:

Mortgage servicers must give U.S. homeowners more time before kicking them out of the government’s loan-modification program, reflecting further struggles in the execution of the plan.

Servicers can’t cancel an active Home Affordable trial modification scheduled to expire before Jan. 31 for any reason other than property eligibility requirements, according to a posting today on a government Web site. They must write to borrowers to inform them about missed payments or needed documents, and give them at least 30 more days to submit them.

“The Treasury Department believes that this further guidance and associated requirements will provide more certainty and transparency regarding the final determination of eligibility for borrowers in trial modifications,” Meg Reilly, a department spokeswoman, said in an e-mailed statement.

The extension follows the Obama administration announcing a “Mortgage Modification Conversion Drive” on Nov. 30, meant to aid borrowers with trial plans set to expire at year end. The drive began after servicers struggled to acquire the documentation from homeowners required by the government to make loan changes permanent under its $75 billion program. Officials have placed some of the blame on both servicers and borrowers.

In October, the U.S. loosened documentation requirements and said an initial round of trial modifications could be completed over an extra two months, rather than the three-month standard.

Through November, servicers have permanently modified 31,382 of as many as 4 million mortgages targeted by the Home Affordable program, the Treasury said Dec. 10. A total of 728,000 were under way. The Treasury said last month that 375,000 trial modifications were scheduled to be converted into permanent repayment plans or expire by the end of the year.

“Servicers have made substantial progress in staffing up and dedicating further resources in support of HAMP,” Reilly said.

More from this blog…

Posted in: Bailout Buzz • Defaults & Foreclosures • loan mods | 12 Comments »

Many loan mods offered, few completed

December 10th, 2009, 1:00 am by Mathew Padilla

Here’s what we know so far about the Obama administration’s loan modification program:

JPMorgan Chase said as of November 30 it has offered 199,033 loan modifications this year to homeowners under the plan, known as Home Affordable Modification Program, or HAMP. Of those, just 2% have completed the mod process.  (Download the presentation HERE.)

And the company said for every 100 “seasoned” mods offered:

  • 29% don’t make required payments
  • 71% make payments but of those 51% don’t submit all the needed paperwork or submitted documents that needed more work.

To be sure, Chase also performs mods outside of the government’s programs. Including HAMP, Chase has offered 568,458 mods this year as of November 30 but only completed 15%.

Bank of America has had somewhat similar results, according to a report by CNBC’s Diana Olick.

Jack Schakett, a Bank of America “credit loss mitigation strategies executive,” told Olick that of the 65,000 trial mods set to expire Dec. 31st with the bank, a full two-thirds of the borrowers, while current on their payments, have not submitted the full documentation required to become permanent.

“We don’t really know the major reason why the customers are not returning the documentation,” Schakett said.

Here’s more from Olick:

Well I can tell you why (and I’m sure he knows this too). The trial modification process only requires oral verification of income to begin, but to go permanent, you need to prove your income, submit your tax returns, and basically come clean with all your finances. I’m guessing a lot of folks who took out their initial loans with false or non-existent documentation, aren’t eager to let the government know that.

Schakett also said Treasury may require much more documentation up front, so that banks won’t have all these trial mods going with borrowers who inevitably won’t reach permanent modification status.

I think 2010 will be the year of short sales. Agree?

Posted in: Bad debt • Bailout Buzz • Defaults & Foreclosures • loan mods • short sales | 22 Comments »

FDIC may give underwater homeowners a break

December 8th, 2009, 1:00 am by Mathew Padilla

Here’s the latest bailout update, courtesy of National Mortgage News:

The Federal Deposit Insurance Corp. is considering amending its loss-sharing agreements with acquirers of failed banks, allowing certain homeowners who are “under water” on their mortgages to reduce the principal amount owed. “There would be no requirement that they perform principal forgiveness - though there would be financial incentives under the ‘loss share,’ particularly for deeply underwater loans,” said FDIC spokesman Andrew Gray. Under the current loss sharing agreements, FDIC agrees to absorb 80% of the losses on the failed bank’s assets. But the acquirer is required to modify residential loans for struggling homeowners and reduce their payments to an affordable level. These agreements cover $44.7 billion in single-family loans. Now, FDIC is “actively considering” making debt forgiveness a modification option. “It would be based upon the use of tools that would maximize the value of the mortgage and provide long-term sustainable mortgage payments for the borrower,” Mr. Gray said.

Will wonders never cease?

More from this blog…

Posted in: Bailout Buzz • Defaults & Foreclosures • FDIC | 22 Comments »

Bank bailouts — some good, some bad news

December 7th, 2009, 7:23 am by Mathew Padilla

First the good news:The Treasury Department expects to recover all but $42 billion of the $370 billion lent to financial companies under TARP, reports the New York Times. The Obama administration previously estimated losses would total $341 billion.

Treasury is expected to update Congress today on the $700 billion bailout.

However, there could be more red ink ahead. Quoting Treasury officials, the Times writes that taxpayers could eventually lose $100 billion more “in new loans to banks, aid to troubled homeowners and credit to small businesses.”

And here’s perhaps more troubling news: While some big banks are paying back TARP funds, regional banks are locked into government’s support until at least 2011 because of loan defaults on commercial property. Here’s more from the story:

Unpaid loans on malls, hotels, apartments and home developments stood at a 16-year high of 3.4 percent in the third quarter and may reach 5.3 percent in two years, according to Real Estate Econometrics LLC, a property research firm in New York. That’s a bigger threat to regional banks, which are almost four times more concentrated in commercial property loans than the nation’s biggest lenders, according to data compiled by Bloomberg on bailout recipients.

The concentration makes regulators less likely to let regional lenders like Synovus Financial Corp. and Zions Bancorporation leave the Troubled Asset Relief Program, analysts said. Smaller banks would remain stuck in TARP, while bigger lenders, including Bank of America Corp., repay the government and free themselves to set their own policies on executive pay.

“Community and regional banks basically became real estate banks in the past 25 years, and now real estate is on its back,” said Jeff Davis, an analyst at FTN Equity Capital Markets Corp. in Nashville, Tennessee. “The largest banks have other areas where they can make money, be it consumer lending, capital markets and asset management.”

By the way, I saw these stories on Calculated Risk this morning, a great economics and real estate blog.

More headlines…

Posted in: Bad debt • Bailout Buzz | Post a Comment »

Mortgage giants quietly shop $250 billion in bad loans

December 1st, 2009, 1:00 am by Mathew Padilla

This could be one of the biggest bad-debt sales in history — Paul Muolo of National Mortgage News writes:

Every so gingerly, Fannie Mae and Freddie Mac are beginning to contemplate selling their nonperforming mortgages — roughly $250 billion worth of single-family product — in the open market. But will it ever happen? And if so, who will step up to the plate with cash?

Investment bankers who play in the nonperforming loan market say the two have quietly begun talking to Wall Street firms and several hedge funds about how they might unload their bad assets. The buyers, I’m told, would presumably be hedge funds and investment partnerships with certain Wall Street trading desks — Goldman Sachs and Morgan Stanley — acting as middlemen.

“There’s been lots of meetings and they’re talking to a lot of people about it,” said one veteran investment banker, requesting his name not be used because of the sensitivity of the matter, “but they’re a long way away from doing anything yet.”

One idea the two are said to be contemplating involves the securitization of NPLs. The GSEs would hire third-party vendors to gather broker price opinions on the properties collateralizing the mortgages. Fannie and Freddie might then issue a security backed by the NPLs based on the new BPO value. “If they could get 80% of the current BPO value they’d be ecstatic,” said one investment banker.

Both GSEs declined to comment for this column. To date, neither has tapped the NPL market but they’ve “force-placed” the servicing of delinquent loans away from certain seller/servicers to specialists such as Ocwen and Nationstar. Both continue to sell single-family properties out of their REO portfolios, offering homes both to owner-occupants and investors. (As reported on the National Mortgage News website recently, Fannie is now once again offering REO assets in bulk.)

Interesting column, but I have a hard time seeing the Obama administration allowing Fannie and Freddie to dump so many bad mortgages onto private investors — what about loan modifications?

More from this blog…

Posted in: Bad debt • Bailout Buzz • Bank failures • Defaults & Foreclosures • Distressed sales • Fannie & Freddie | 17 Comments »

« Previous Entries