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Archive for the 'Polls' Category

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A failed prosecution

November 17th, 2009, 1:00 am by Mathew Padilla

“There was a reasonable doubt on every charge,” said a juror in the case against two former Bear Stearns hedge fund managers. The quote comes from the New York Times.

Ralph Cioffi and Matthew Tannin were found not guilty of securities fraud in federal court in New York last week.

I am writing about the case now, only because I was too focused on other things to do it last week.

The collapse of the funds managed by Tannin and Cioffi marked the beginning of the credit crisis. In reality their case was great theater but not very significant. By the time the funds collapsed toxic debt had already spread to the books of countless banks here and abroad and was held by many investors. Subprime was the tip of the iceberg.

Still, a commentary by William Cohan for the Times is an interesting read. He writes:

In short, the prosecution blew it — on two counts. First, in devising the original indictment for conspiracy and securities fraud … it relied on damning snippets of lengthy e-mail messages that when viewed in their entirety proved to be highly ambiguous. Second, the prosecution made a reductionist opening argument claiming the men were nothing more than out-and-out liars, needlessly raising the bar in terms of what it had to prove to jurors.

So far I have not heard of any criminal charges against the real players in real estate finance’s recent boom and bust. It seems like the Securities and Exchange Commission’s civil charges against Angelo Mozilo, co-founder of Countrywide Financial, are the closest thing I have seen. (No opinion from me on his innocence or guilt, just noting the case.)

So what do you think?
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Will we see many more criminal prosecutions?
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Posted in: Crime • Polls | 8 Comments »

Will ‘risk retention’ prevent another credit fiasco?

November 12th, 2009, 1:00 am by Mathew Padilla

There are many ideas for preventing another period of extremely reckless lending.  Some think the answer is for lenders to maintain a stake in the loans they make even after the loans are sold. Here’s more from National Mortgage News yesterday:

Senate Banking Committee chairman Christopher Dodd, D-Conn., has produced a “discussion draft” of a comprehensive regulatory reform bill that requires sellers of mortgage-backed securities to retain 10% of the credit risk. However, the draft provides a risk retention exemption for government-guaranteed mortgages as well as mortgages purchased and securitized by Fannie Mae and Freddie Mac. In addition, regulators can approve a “total or partial” risk retention exemption for other MBS and allocate risk retention between securitizers and the lenders. The House Financial Services Committee is moving toward approving a similar bill to address systemic risk that also requires 10% risk retention, a mandate that the mortgage industry opposes. “To restore confidence in our markets and encourage investment, we will require companies that sell products such as mortgage-backed securities to keep ’skin in the game’ so that they won’t sell worthless securities to investors,” Sen. Dodd said. His bill also creates an independent Consumer Financial Protection Agency to protect consumers from “hidden fees and abusive terms” so they know they are being offered “safe” mortgages and other products, he said. Sen. Dodd said he would seek input on his draft bill and reach out to Republicans in an attempt to mark up and approve a bill by the first week of December. Dodd’s CFPA plan focuses on companies that “pose the greatest risk to consumers — mortgage bankers, brokers, finance companies and the largest institutions,” according to a legislative summary.

This will be interesting to watch. I have no idea if it will become law.

I’m also curious to see what readers think.

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Is risk retention the way to prevent another crisis?
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Posted in: Credit Crunch • Credit stats • Loan underwriting • Meltdown • Polls • Regulation | 15 Comments »

Minorities get fewer mortgages. But is that bad?

November 2nd, 2009, 1:00 am by Mathew Padilla

National Mortgage News reports that Home Mortgage Disclosure Act figures for 2008 show that minorities “were big losers in the market contraction last year.”

And with credit still tight, the outlook for minority access to home loans this year and next looks bleak.

But is that a bad thing?

Subprime lending enabled more minorities to become homeowners during the boom, but many of those folks got mortgages they couldn’t afford. The result: record foreclosures.

Mark Fogarty writes:

Lenders made $342 billion in mortgages to minorities last year, out of a total of some $2.1 trillion. That’s just 17% of the total, down from 20% in 2007 and 22.6% in 2006.

With the U.S. having a minority population of 33% in the 2000 Census, much of the progress made toward serving the underserved market in recent years seems to have unraveled.

The vaporizing of the subprime mortgage market, which targeted minorities (for better or for worse) is a major factor in the downturn. The merger of Countrywide Home Loans, Calabasas, Calif., and Bank of America, Charlotte, N.C., last year may have had some impact as well, as Countrywide lost its spot as top lender to minorities last year after many years of holding the lead position.

…

Lending to Hispanics fell by more than half, from $266 billion to $130 billion. African Americans also registered a sharp drop in mortgages last year, from $170 billion in 2007 to $96 billion, a more than 40% drop in dollar terms. Asian mortgage loans dropped to $95 billion from $145 billion in 2007, or approximately a third.

So what do you think of the data. Here’s a two-part survey:

Are minorities underserved by banks?
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Should government expand lending programs directed at minorities?
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Posted in: HMDA • Polls | 79 Comments »

Fed ending Treasury purchases. Will rates rise?

October 29th, 2009, 7:14 am by Mathew Padilla

The Federal Reserve today is buying the last of the $300 billion in government bonds it pledged to purchase to maintain low interest rates and stimulate housing and the economy.

But will mortgage rates go up as a result? Maybe not on loans that can be sold to Fannie Mae and Freddie Mac, because the Fed will continue buying mortgage securities issued by those government controlled companies until the end of March.

What’s your vote? (Note: There are 100 basis points in one percent.)
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Will mortgage rates rise now that Fed is ending Treasury purchases?
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Posted in: Fed • Mortgage rates • Polls | 4 Comments »

Are more foreclosures and short sales coming?

October 28th, 2009, 12:00 pm by Mathew Padilla

ForeclosureRadar.com reports banks seized 429 houses and condos, which became bank-owned or REO properties, in September in Orange County, a 12% decline from August.

Also, buyers grabbed 277 properties at trustee’s sales (the same auctions where properties reverted to banks as REO) — that total was down 2% from August. And trustee’s sale cancellations fell to 672.

The graph below shows fewer properties becoming REO over the past three months, while properties sold to investors have been increasing or flat. Cancellations dipped the past two months after spiking in July. (The chart tracks new REOs, properties sold to investors, and canceled sales from July ‘07 to September ‘09):

click to enlarge
click to enlarge

One question the chart raises is what will investors do with these foreclosures? I have seen some foreclosures put up quickly for resale, but not all. (Note: the blog Effective Demand earlier did a similar chart — minus cancellations — by running numbers on ForeclosureRadar and not waiting for an official report.)

Now look at a chart (below) with pre-foreclosure filings. Notices of default, which initiate the foreclosure process, totaled 2,309 in September, a slight increase from August. Lenders have filed more than 2,000 NODS every month since December 2008. That suggests foreclosures should be higher — but, of course, government programs and pressure on lenders to do loan workouts have stalled the foreclosure process. I hear there will be more short sales in the future — when a lender agrees to accept less than debt owed on a property — but short sales are complicated and can take months to complete.

The chart below also shows notices of trustee’s sale (a warning a property will be offered at auction) and those have have totaled more than 1,500 a month for the seven months ending in September.

click to enlarge
click to enlarge

The latter chart suggests there is still a lot of distress in Orange County housing that will hit the for-sale market eventually as short sales or foreclosures as Obama’s loan modification program fails to help as many borrowers as hoped.

What do you think?
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Are more foreclosures and short sales coming?
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Posted in: Defaults & Foreclosures • Polls | 34 Comments »

Are banker pay cuts justified?

October 22nd, 2009, 7:20 am by Mathew Padilla

The Obama administration has ordered executive pay cuts of an average of 50 percent at financial companies owing the government billions of dollars from taxpayer-funded bailouts.

“I don’t think there will be any charity cases on Wall Street,” said Representative Barney Frank, 69, a Democrat from Massachusetts and chairman of the House Financial Services Committee in a telephone interview with Bloomberg News. “This is a very good thing.”

But to critics, the cuts represent further government intervention in private enterprise.

What do you think?

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Should government restrict banker pay?
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Posted in: Bailout Buzz • Polls | 23 Comments »

How low will rates go?

October 1st, 2009, 5:00 pm by Mathew Padilla

Mortgage rates dipped for the second day today as an indicator of manufacturing unexpectedly fell and jobless claims grew more than forecast, some brokers and lenders said.

down-arrow.jpgJeff Altman, partner with WestCal Mortgage Corp. in Orange, said borrowers could get a 30-year fixed-rate loan at 4.75% interest with a one-point fee Thursday, down from 4.875% on Wednesday. That’s for loans up to $417,000 that can be sold to Fannie Mae or Freddie Mac.

Paul Scheper, vice president with mortgage bank Trust One Mortgage in Irvine, said his company offered rates today as low as 4.625% with a one-point fee. Trust One actually dropped rates yesterday, but it takes a day to filter down to brokers, he said.

Scheper said rates could go as low as 4.5% with one-point but he doubts they would go any lower.

He added that no one should “wait, hope or pray” for rates to fall to 4% or lower. “It’s not going to happen,” he said.

But what do you think?

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What's next for rates?
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Posted in: Mortgage rates • Polls | 3 Comments »

Super bank regulator planned

September 20th, 2009, 10:11 am by Mathew Padilla

Senator Christopher Dodd (D-Connecticut) will propose merging four bank agencies into one super-regulator, a more drastic step than suggested by President Barack Obama, reports the New York Times.

Dodd, who heads the Senate Banking Committee, also is at odds with Obama on the Federal Reserve; Dodd wants to diminish the role of the central bank as a systemwide overseer.

The legislation being drafted by Dodd will be the starting point for the Senate’s debate on reshaping oversight of the financial industry. Here’s more from the Times:

For consumers, banks and the markets, Mr. Dodd’s bill is expected to take on the same central role in the debate as Senator Max Baucus’s recent bill is to remaking the health care system.

“We clearly need to put in place an architecture that restores confidence and makes people feel that when they engage in financial activities, from making a bank deposit to buying insurance or investing in stock, that they can have confidence in the system,” Mr. Dodd said in an interview on Friday. “On the other side of this, I don’t want to strangle business.”

Having one regulator for banking will prevent companies from shopping for the easiest regulator. Critics say Countrywide Financial switched to the Office of Thrift Supervision because that agency was the biggest supporter of lenders, giving them room to be as “innovative” as they wanted.

As for the Federal Reserve, critics say its interest rate cuts fueled the housing bubble while the Fed simultaneously neglected to prevent lending abuses. Why expand its oversight powers with such a track record?

What do you think about the plan?
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Would we be better off with just one banking regulator?
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Posted in: Polls • Regulation | 8 Comments »

What? Mortgage rates at 4 percent?

September 4th, 2009, 3:36 pm by Mathew Padilla

Mortgage rates in Orange County ended the week under 5%, with a fee, amid gloomy presentiments about the economy.

Rates are loosely tied to the yield on a 10-year Treasury note. Although the yield gained a bit today, hitting 3.44%, it has been trending down from a high of 3.85% on Aug. 7. Yields fall when investors buy bonds seeking safety from economic/stock market turmoil.

Today’s unemployment report was mixed. The nation lost 216,000 jobs in August, less than economists forecast; but the unemployment rate climbed to a 26-year high of 9.7 percent last month, a steeper increase than anticipated. The higher ratio means more people are looking for a job without success.

Jeff Lazerson

Lazerson

Jeff Lazerson, with online brokerage Mortgage Grader in Laguna Niguel, said at least one lender Friday offered 4.75% with a .625-fee on 30-year fixed loans eligible for sale to Fannie Mae or Freddie Mac.

Lazerson sees the glass half empty.

“National unemployment is almost 10% today. And, almost 1-in-10 homeowners (with mortgages) are late on their mortgage payments,” Lazerson said.

He expects the Federal Reserve to continue support for housing.

“The Fed will do a U-turn,” Lazerson said. “They will soon announce the continued purchasing of Treasuries and (mortgage securities). We will see 30-year fixed rates drop to 4% within the next 60 days. Yes, this is round two of circling the Depression drain.”

Jeff Altman, a partner with brokerage WestCal Mortgage Corp. in Orange, said he saw rates closer to 4.875% today with a one-point fee vs. 5% last week.

He’s also concerned about high unemployment and sees more potential defaults on adjustable loan resets. (Note: low rates have taken the bite out of some resets, and some borrowers have actually seen payments drop. That would change if rates rise, obviously.)

“Washington needs to wake up and realize that until the housing market turns, the economy will stay flat,” Altman said.

Things may get worse as foreclosures rise, but I have a hard time seeing the Fed and Treasury trying to force mortgage rates to 4% as was rumored during the previous administration. But how about you?

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Do you think Feds will force mortgage rates to 4%?
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Posted in: Mortgage rates • Polls | 4 Comments »

Foreclosures dip. Second wave coming?

August 3rd, 2009, 11:53 am by Mathew Padilla

Foreclosures plummeted across Orange County in the second quarter vs. a year ago. Here’s a map showing the decreases by ZIP.

Foreclosure Map Q2 @009

A couple of economists I interviewed for a Sunday story on foreclosures said they see monthly totals rising from the 800 range in June to around 1,000 houses and condos seized per month. But they don’t see foreclosures returning to the 1,300 to 1,400 a month peak of last summer.

What do you think?

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Is a big second wave of foreclosures coming?
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Posted in: Defaults & Foreclosures • Distressed sales • Polls | 12 Comments »

Should loan-broker pay be limited?

July 25th, 2009, 10:32 am by Mathew Padilla

The Federal Reserve is considering restrictions on how mortgage brokers are paid by banks. As I explained in my last post, the Fed wants broker pay tied solely to loan amount and not to the interest rate on the home loan. The hope is that will prevent brokers from leading people into high cost loans who might have qualified for a lower rate.

questionmark.jpgBut the policy puts a lot of blame on brokers and tinkers with a free market. So what do you think?

Should mortgage-broker pay be limited?
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Posted in: Broker Corner • Polls | 33 Comments »

When will these foreclosures hit the market?

July 21st, 2009, 2:00 am by Mathew Padilla

I visited a couple of foreclosure auctions in recent weeks and wrote about how investors bought 30% to 50% of the houses and condos for sale.

Auctioned foreclosures going to banks and investorsBut visiting an auction, known as a trustee’s sale, at random could give a misleading impression. That’s why I decided to post this chart (click on it for larger image) from the blog Effective Demand.  The chart shows foreclosures by month that reverted to bank (blue portion of columns) and went to buyers (red portion). Note: for July the chart shows foreclosures through mid-month.

The chart clearly shows that investors began buying more properties at auctions in spring 2008 and are buying even more properties now, in the range of 20% to 30%.

However, the chart also shows foreclosures peaked in summer 2008 in Orange County, right before California enacted a law requiring lenders and servicers to talk to borrowers at least 30 days before filing a notice of default.

Since that law began in September 2008, notices of default, which initiate the foreclosure process, have rebounded back to peak levels in the range of 2,500 per month. But foreclosures remain depressed, though they have increased in recent months.

Foreclosures are down for several reasons: borrowers filing for bankruptcy; lenders and servicers doing loan workouts, including modifications; and a moratorium in California (though most major players have exemptions).

But the big question is what will happen to properties sold at trustee’s sales. What do you think?

What will most buyers do with properties bought at auction?
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Posted in: Auctions • Defaults & Foreclosures • Polls • REO • Santa Ana auctions | 2 Comments »

Should Obama help homeowners become renters? Vote now…

July 15th, 2009, 2:00 am by Mathew Padilla

Reuters, citing anonymous sources, reported yesterday Obama administration officials are considering a plan that would let borrowers who have fallen behind on their mortgage payments avoid eviction by renting their own homes, possibly for years.

Officials are considering whether homeowners would surrender ownership or whether the government should make mortgage payments for them, tapping an unused portion of $50 billion in housing aid. I suppose if they don’t surrender ownership it’s not technically renting.

It sounds like administration officials are testing the idea by leaking it to Reuters and that it may never be offered. The plan could help families avoid a major disruption in their lives. But I don’t think it could stop the foreclosure tsunami.

questionmark.jpgWhat do you think?

Should Obama help homeowners become renters?
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Posted in: Bailout Buzz • Polls | 11 Comments »

Fed to keep buying mortgage securities

June 24th, 2009, 12:52 pm by Mathew Padilla

The Federal Reserve today said it will continue to buy up to $1.25 trillion in mortgage securities by the end of this year and that it is maintaining its target for a benchmark interest rate at between zero and 0.25 percent.

Some market watchers have hoped the Fed would buy more securities than previously announced to push down mortgage rates, which are above 5%.

But the Fed also has to face concerns a $1 trillion expansion of its balance sheet over the past year to $2.07 trillion will fuel inflation, drive up interest rates, and hamper any potential economic recovery. The Fed said:

The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.

Read the full statement HERE.

questionmark.jpgWhat do you think?

Should the Fed expand its purchases of mortgage securities?
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Posted in: Bailout Buzz • Fed • Polls | 6 Comments »

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