Rising Prices, Shrinking Delinquencies Reduce Future RMBS Losses

Rising Prices, Shrinking Delinquencies Reduce Future RMBS Losses

05/22/2013 BY: ESTHER CHO

 

As home values improve and servicers continue to ramp up efforts to reduce delinquent pipelines through short sales and loan modifications, the composition of RMBS loan pools outstanding should also improve, according to Moody’s most recent ResiLandscape.

According to analysts from Moody’s, rising home prices motivate current borrowers to avoid default, and they increase the proportion of current loans with loan-to-value (LTV) ratios below 100, which are the loans that are the least likely to go incur losses.

The higher share of current loans with lower LTVs should then prevent new defaults for 2005-2008 RMBS pools, according to Moody’s.

In addition to rising prices, the analysts stated shrinking delinquent loan pipelines also work to lower future pool losses. For example, by liquidating delinquent loans through short sales rather than through foreclosure, servicers are able to reduce loss severities.

“A quickening pace of property liquidations will lower eventual pool losses because properties that spend less time in foreclosure and REO accrue fewer expenses and expose the related RMBS to lower loss severities,” the report stated.
The steady, but slightly faster pace in which servicers are modifying loans also helps to reduce delinquencies and future loan losses, according to Moody’s.

“[J]udiciously applied modifications can help to reduce loan losses because they keep cash flowing from troubled borrowers who might otherwise have stopped making payments,” the analysts wrote.

Currently, the delinquent loan modification rate is down from its 2010 peak, but modifications have increased over the past year due to servicers offering second and third modifications, while the 12-month re-default rate on modified loans has actually gone done, Moody’s reported.

2013
05/24
CATEGORY
Foreclosures
Home Prices
Short Sales
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Millions of Above-Water Borrowers Lack Enough Equity to Move

Millions of Above-Water Borrowers Lack Enough Equity to Move

05/23/2013 BY: TORY BARRINGER

The number of homeowners underwater on their mortgages continued to fall in Q1, but millions still lack enough equity to afford to move, Zillow revealed in its first-quarter Negative Equity Report.

According to the report, the national negative equity rate was 25.4 percent in the last quarter compared to 27.5 percent at the end of 2012. That percentage represents slightly more than 13 million homeowners with a mortgage, Zillow said.

However, when including homeowners with less than 20 percent home equity, the “effective” negative equity rate climbs to 43.6 percent, or a total of 22.3 million homeowners.

In its report, Zillow explained that these homeowners likely can’t afford a down payment for a new home, tying them to their current homes and exacerbating the inventory shortage.

“Reaching positive equity, even barely, is an important milestone. But things like real estate agents’ fees and a down payment for the next home traditionally come out of the proceeds from the prior home’s sale,” said Zillow chief economist Dr. Stan Humphries. “Without enough equity, these costs will instead have to come out of a homeowner’s pocket, leaving many still stuck.

“Looking at the effective negative equity rate could explain why recent, healthy declines in the number of underwater borrowers haven’t yet translated into more homes for sale. The only cure is patience, as rising home values continue to build equity to the point where more homeowners can realistically sell,” he continued.

Among the 30 largest metro areas covered by Zillow, those with the highest effective negative equity rate are Las Vegas, Nevada (71.5 percent); Atlanta, Georgia (64.1 percent); and Riverside, California (59.7 percent).

For the first quarter of 2014, Zillow predicts the negative equity rate among all homeowners with a mortgage (but excluding those who are in low positive equity) will fall to 23.5 percent, lifting more than 1.4 million additional homeowners into positive territory.

2013
05/24
CATEGORY
Home sales
Homeowners
Mortgage
Real Estate
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Freddie Mac Begins Securitizing Modified, Performing Loans

Freddie Mac Begins Securitizing Modified, Performing Loans

05/23/2013 BY: ESTHER CHO

Freddie Mac is in the process of securitizing over $1 billion in performing loans that were modified.

The loans are pooled into new Freddie Mac fixed rate modified participation certificates (modified PCs), according to a release. The modified loans have been performing for at least six consecutive months and were held in the company’s mortgage portfolio.

The loans are not TBA deliverable and none of the loans were modified through the government’s Home Affordable Mortgage Program (HAMP).

“As we continually seek to provide more transparency to the investment community, we are providing additional information on these securities which should aid in their valuation,” said Neil Hughes, VP and interim head of single family securitization.”

The GSE purchased most of the loans out of its related PCs when the loans became at least 120 days past due. Generally, Freddie Mac explained it buys delinquent loans out of the PCs and holds them in its mortgage-related investments portfolio while a resolution is sought.

“Securitizing loans that have been modified and are now performing will allow Freddie Mac to better manage its mortgage-related investments portfolio,” said Adama Kah, Freddie Mac VP of distressed assets management. “We are taking another important step that creates liquidity and taxpayer value for these modified loans through PC securitization. Freddie Mac’s goal is to help families stay in their homes and provide alternatives to foreclosure.”

2013
05/24
CATEGORY
Mortgage
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LPS: Delinquency Rate Slips to Lowest Level Since 2008

LPS: Delinquency Rate Slips to Lowest Level Since 2008

05/22/2013 BY: ESTHER CHO

Month-end mortgage performance data in April continued to point to a recovery as delinquency and foreclosure rates posted record improvements, Lender Processing Services, Inc. (LPS) reported Wednesday.

In April, the delinquency rate (30-plus delinquencies, excluding foreclosures) sunk below 6.5 percent for the first time since July 2008, according to the data provider.

At 6.21 percent, the delinquency rate recorded a month-over-month decrease of 5.81 percent and a year-over-year decline of 9.61 percent.

The foreclosure pre-sale inventory rate, which stood at 3.17 percent in April, fell 5.83 percent from March and plunged 24.55 percent from a year ago.

At the same time, the total number of past due mortgages slipped even further below the 5 million mark to 4.7 million, LPS data revealed.

Of that figure, 3.1 million properties are past due but not in foreclosure, while 1.6 million are in foreclosure inventory.

Florida continued to lead as the state with the highest percentage of non-current loans (delinquencies and foreclosures), followed by New Jersey, Mississippi, Nevada, and New York. The five states with the lowest percentage of non-current loans were Montana, Wyoming, Alaska, South Dakota, and North Dakota.

2013
05/23
CATEGORY
Foreclosures
Mortgage
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Home Prices Climb by at Least 5% for 6th Straight Month in April

Home Prices Climb by at Least 5% for 6th Straight Month in April

05/21/2013 BY: TORY BARRINGER

 

The majority of metros covered in Zillow’s Real Estate Market Reports saw home values inch up from March to April, the company reported Tuesday.

Zillow’s Home Value Index climbed to $158,300 for April, an increase of 0.5 percent month-over-month and 5.2 percent year-over-year. April marked the sixth consecutive month in which home values appreciated more than 5 percent on a yearly basis.

According to Zillow, the last time national home values were at this level was in June 2004. However, this kind of growth will likely be short-lived, said Zillow chief economist Dr. Stan Humphries.

“April marks the sixth straight month of annual home value appreciation of 5 percent or above, the longest such streak since the height of the bubble in 2006. In the short-term, this has been welcome news for homeowners. But in the long-term, this cannot be sustained, and consumers entering the market today should not expect this kind of appreciation to last,” Humphries said.

Fifty-percent of the 365 metros tracked reported rising home values in April. Of the 30 largest areas, Sacramento experienced the largest monthly increase at 3.4 percent. Other large metros with notable monthly gains include Las Vegas (3 percent) and San Francisco (2.8 percent).

On a yearly basis, 29 of the 30 biggest markets posted increases, with more than half going up by double-digit percentages. The largest improvements were seen in Phoenix (25.5 percent), Sacramento (25.4 percent), San Jose (25.2 percent), San Francisco (24.8 percent), and Las Vegas (23 percent). Chicago was the only market to see home values decline year-over-year (-0.2 percent).

For the 12-month period ending April 2014, Zillow projects home values will rise a more moderate 4 percent to approximately $164,648, reflecting shifts in supply and demand in some of the nation’s hard-hit markets.

“Overall, we expect home value appreciation to moderate as more supply comes on line over the next year, but in some areas, runaway home value appreciation, combined with expected interest rate hikes in coming years, runs a real risk of pricing out many potential buyers. Home values in these areas will have to flatten or even fall to come back in line,” Humphries explained.

Zillow also reported a slight monthly decline in national rents, which were down 0.2 percent from March. Year-over-year, rents were up 3.9 percent in April.

The number of completed home foreclosures in April fell to 4.81 homes foreclosed out of every 10,000 homes nationwide, down from March and April 2012. Foreclosure resales represented 12 percent of homes sold in April, down 1 percentage point from March and 4 percentage points from a year ago.

2013
05/23
CATEGORY
Foreclosures
Home Prices
Real Estate
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Federal Court in Washington Dismisses Wrongful Foreclosure Suit

Federal Court in Washington Dismisses Wrongful Foreclosure Suit

05/22/2013 BY: ESTHER CHO 

A federal judge of the U.S. District Court for the Eastern District of Washington ruled in favor of Mortgage Electronic Registration Systems, Inc. (MERS) and other defendants, MERSCORP Holdings, Inc. announced.

In Ukpoma v. U.S. Bank, the judge dismissed a plaintiff’s nine-count complaint alleging wrongful foreclosure and violations of the state’s Consumer Protection Act (CPA).

The plaintiff’s wrongful foreclosure claim was based on the argument that MERS cannot act as a beneficiary of a deed of trust under Washington law and thus, any assignments of the deed of trust by MERS to other entities were void.

The plaintiff cited Bain v. Metropolitan Mortgage Group, Inc. when making her argument.

“Contrary to Plaintiff’s assertions, securitization of the note through the MERS system did not extinguish the security interest evidenced by the deed of trust,” wrote Judge Thomas Rice, who further noted U.S. Bank is currently in possession of the original note and deed of trust. “Thus, by virtue of being in possession of the note, U.S. Bank is the lawful owner. Its right to receive payment on the note does not depend upon any assignment of the note from MERS.”

The judge also dismissed the plaintiff’s CPA claim, stating the plaintiff’s only alleged injury was the difficulty in determining who actually owned her loan, and the plaintiff failed to explain how the difficulty led to actual injury to her business or property.

“At bottom, Plaintiff simply has not been injured by MERS’s involvement with her loan,” Rice wrote. 
All other claims were dismissed as well.

“Unconvinced, Judge Rice explained in detail why a borrower’s attempts to halt a non-judicial foreclosure using the Bain decision and claims against MERS will not be successful. We continue to emphasize that struggling borrowers are better served by working with their mortgage servicers and seeking appropriate financial counseling, than by attempting to use the judicial system to avoid valid foreclosures,” said Jason Lobo, director of corporate communications for MERSCORP.

 

2013
05/23
CATEGORY
Foreclosures
Mortgage
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RealtyTrac: Building Permits Rise as Foreclosure Starts Decline

RealtyTrac: Building Permits Rise as Foreclosure Starts Decline

BY: ESTHER CHO

On a national level, the relationship between building permits and foreclosure starts resembled that of a seesaw in the first quarter, with an equal but opposite rise and fall, but in some markets, both permits and foreclosures are on the rise, according to a report from RealtyTrac.

After analyzing data from HUD, the online foreclosure marketplace found single-family building permits increased 27 percent year-over-year in the first quarter to the highest level in five years, while foreclosure starts fell 27 percent during the same time period to the lowest level since the second quarter of 2006.

Meanwhile, multifamily building permits trended upward, increasing overall by 23 percent. Overall, single-family homes accounted for 64 percent of total permits.

“Nationwide and in most markets it appears builders are planning to ramp up activity that will help offset a drop in foreclosure starts, but there are some markets where a jump in both building permits and foreclosure starts in the first quarter indicate the scales will tip more heavily in favor of supply of homes for sale in the coming months – both new homes and foreclosures,” said Daren Blomquist, VP at RealtyTrac, in a release.

“On the other extreme there are some markets where both building permits and foreclosure starts are down dramatically, indicating that there will be no reprieve from the shortage of homes for sale in those markets in the near future,” he added.

According to RealtyTrac’s analysis, the five states that led with the most single-family building permits in the first quarter were Texas, Florida, North Carolina, California, and Georgia.

All five states registered double-digits gains compared to a year ago, and all states also experienced decreases in foreclosure starts over a one-year period, though Florida’s drop in foreclosure starts was just 1 percent, RealtyTrac noted.

Out of the top five cities with the most single-family building permits, four were in Texas. Houston was No. 1, followed by Oklahoma City, Austin, El Paso, and Fort Worth. With the exception of Austin, all cities experienced decreases in foreclosure starts.

On the other hand, RealtyTrac data showed Miami, Las Vegas, Chicago, Fort Lauderdale, and Orlando posted the highest number of foreclosure starts in the first quarter. Single-family building permits also increased in all five cities compared to a year ago, while foreclosure starts rose year-over-year in Las Vegas, Fort Lauderdale, and Orlando.

A handful of cities saw both single-family building permits and foreclosure starts rise by at least 10 percent year-over-year in the first quarter, including Las Vegas; Seattle; Raleigh, North Carolina; Reno, Nevada; and Boca Raton, Florida.

Cities where building permits and foreclosure starts fell included San Antonio; Albuquerque; Fresno, California; Bakersfield, California; and Greensboro, North Carolina.

2013
05/20
CATEGORY
Foreclosures
Real Estate
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