Archive for the ‘ Homeowners ’ Category

GSEs Announce New Mortgage Insurance Requirements

GSEs Announce New Mortgage Insurance Requirements


Moving forward on another of its performance goals for 2013, the Federal Housing Finance Agency (FHFA) announced Monday that Fannie Mae and Freddie Mac have completed a major overhaul of mortgage insurance master policy requirements.

Earlier in the year, FHFA laid out its 2013 Conservatorship Scorecard, which—among other things—calls for the GSEs to develop aligned requirements for master policies. Through an ongoing effort, FHFA says both enterprises have worked with the mortgage insurance industry “to address and update gaps in the existing master policy framework.”

“Updating the mortgage insurance master policy requirements is a significant accomplishment for Fannie Mae and Freddie Mac,” said FHFA acting director Ed DeMarco. “The new standards update and clarify the responsibilities of insurers, originators, and servicers, and they enhance the insurance protection provided to Fannie Mae and Freddie Mac, which ultimately benefits taxpayers.”

The new requirements include a number of provisions intended to facilitate faster and more consistent claims processing, establishing specific timeframes, and creating standards for the circumstances under which coverage must be maintained and when it may be revoked.

Also included are requirements for master policies to support recently developed loss mitigation strategies and guidelines to promote information sharing among mortgage insurers, servicers, and the GSEs.

FHFA anticipates the master policies will go into effect in 2014 pending review and approval by state insurance regulators. Both enterprises will provide guidance to lenders and servicers in the coming weeks regarding specific effective dates.

For their parts, Fannie Mae and Freddie Mac both put their support behind the new master policies.

“The updated master policy for mortgage insurance announced today builds on the market reforms of the past five years, and we were happy to work with FHFA to bring about this latest step toward greater operational efficiency and transparency in the mortgage market,” said Paige Wisdom, EVP and chief enterprise risk officer at Freddie Mac. “We look forward to working with our servicers and the nation’s mortgage insurers as they adopt the new master policy.”

“Mortgage insurers are an important part of the mortgage finance system and these changes help lay the foundation for a stronger system going forward,” added Andrew Bon Salle, EVP of single-family underwriting, pricing, and capital markets at Fannie Mae. “These updates will help us better manage our credit risk, which we believe will ultimately benefit Fannie Mae, mortgage insurers, homeowners and taxpayers.”


JPMorgan Chase Reaches $13B RMBS Settlement with U.S. Government

JPMorgan Chase Reaches $13B RMBS Settlement with U.S. Government


JPMorgan Chase has struck a deal with the U.S. Department of Justice to resolve civil claims from both federal and state officials over residential mortgage-backed securities (RMBS) issued prior to January 1, 2009, by the bank and two financial institutions it acquired in 2008–-Bear Stearns and Washington Mutual.

The $13 billion settlement is the largest in American history between the U.S. government and a single entity.

Under the agreement reached, JPMorgan will pay $9 billion in restitution and provide an additional $4 billion in relief for homeowners at risk of foreclosure and communities impacted by the housing crisis. Federal officials say the relief funding could benefit more than 100,000 borrowers.

According to JPMorgan, the cash portion of the settlement payment consists of a $2 billion civil monetary penalty and $7 billion in compensatory payments, including a previously announced $4 billion payment to resolve litigation claims from the Federal Housing Finance Agency.

Borrower relief will be in the form of principal reduction, forbearance, and other direct benefits from various relief programs, the bank explained. JPMorgan Chase has committed to complete delivery of the promised relief to borrowers before the end of 2017.

The settlement was negotiated through the Residential Mortgage-Backed Securities Working Group, a joint state and federal unit formed in 2012 by President Obama to investigate wrongdoing within the mortgage-backed securities market that helped to trigger, contribute to, or exacerbate the U.S. financial crisis.

New York Attorney General Eric T. Schneiderman co-chairs the RMBS Working Group. Tuesday’s settlement comes 13 months after Schneiderman sued JPMorgan for fraudulent RMBS packaged and sold by Bear Stearns before it was acquired by JPMorgan at the behest of government officials at the Federal Reserve, FDIC, and U.S. Treasury.

In announcing the unprecedented settlement, Schneiderman said, “Since my first day in office, I have insisted that there must be accountability for the misconduct that led to the crash of the housing market and the collapse of the American economy. This historic deal … is exactly what our working group was created to do.”

He continued, “We refused to allow systemic frauds that harmed so many New York homeowners and investors to simply be forgotten, and as a result we’ve won a major victory today in the fight to hold those who caused the financial crisis accountable.”

Separately, the FDIC announced Tuesday that it also reached a settlement with JPMorgan Chase and its affiliates in relation to the failure of six banks. The FDIC, acting as receiver for the failed institutions, says misrepresentations where made in the offering documents for 40 RMBS purchased by the now-defunct banks.

JPMorgan agreed to pay $515.4 million, which will be distributed among the receiverships for the failed Citizens National Bank (failed May 22, 2009), Strategic Capital Bank (May 22, 2009), Colonial Bank (August 14, 2009), Guaranty Bank (August 21, 2009), Irwin Union Bank and Trust Company (September 18, 2009), and United Western Bank (January 21, 2011).

From May 2012 to September 2012, the FDIC as receiver for five of the failed banks filed 10 lawsuits against JPMorgan, its affiliates, and other defendants for violations of federal and state securities laws in connection with the sale of RMBS.

As part of the global settlement reached, JPMorgan acknowledged it made serious, material misrepresentations to the public—including the investing public—about numerous RMBS transactions, according to a statement on the New York attorney general’s website.

JPMorgan Chase says it is fully reserved for this settlement.

Rate of Appreciation Slows but Unseasonal Gains Remain Elevated

Rate of Appreciation Slows but Unseasonal Gains Remain Elevated


Home prices continued to advance in September, bringing third-quarter growth to 3.2 percent, according to the S&P/Case-Shiller Home Price Indices released Tuesday.

Both the 10- and 20-city composite indices rose 0.7 percent month-over-month and 13.3 percent year-over-year in September. Since bottoming out in March 2012, the 10- and 20-city composites have recovered 22.9 percent and 23.6 percent, respectively; compared to their June/July 2006 peaks, both indices are down about 20 percent.

Price gains decelerated on a monthly basis in 19 cities in September. Las Vegas and Tampa saw the greatest slowdown, with growth rates dropping 1.6 percentage

points compared to August. Miami was the only city where growth kept its pace at 0.8 percent.

Detroit was the strongest city in September, seeing a monthly price increase of 1.5 percent—though it remains the only market still below its January 2000 level. Meanwhile, Charlotte was the weakest, reporting a decline of 0.2 percent—the first drop for that city since November 2012.

Looking at annual changes, all 20 cities reported growth, and 13 fared better than they did in August. Cleveland posted the strongest acceleration (moving from 3.7 percent annual appreciation in August to 5.0 percent in September), though it remains the second-worst performing city, beating only New York.

Las Vegas, Los Angeles, San Diego, and San Francisco had the strongest year-over-year price improvements, each posting gains of over 20 percent. Las Vegas topped the rest with a year-over-year price increase of 29.1 percent.

David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, said September’s numbers are proof that housing is making its way out of the rubble of the financial crisis.

“The longer run question is whether household formation continues to recover and if homeownership will return to the peak levels seen in 2004,” he said.


Negative Equity: A New Way of Life in the Recovery

Negative Equity: A New Way of Life in the Recovery


Fast-paced price increases have helped bring many underwater homeowners afloat. In the third quarter, 1.4 million homeowners rose to the surface as their home values once again outranked their equity, according to the Zillow Negative Equity Report released Thursday.

The third quarter drop in negative equity rate was the largest on Zillow’s record, which dates back to the second quarter of 2011.

The negative equity rate now stands at 21 percent, down about one-third from its peak of 31.4 percent and from 23.8 percent in the second quarter, according to Zillow.

“Rising home prices and a greater willingness among lenders to engage in short sales have both contributed substantially to the significant decline in negative equity this quarter,” said Stan Humphries, chief economist at Zillow.

“We should feel good that we’re moving in the right direction and at a fast clip,” Humphries said.

However, with analysts—including Humphries— predicting moderating price gains in the coming year, that “fast clip” is set for decline.

In fact, Humphries says negative equity will remain a persistent trait of the housing market and become “part of the new normal” for several years.

While 4.9 million homeowners have risen from underwater since the negative equity peak in 2011, one in five homeowners with a mortgage remains underwater today, according to Zillow’s data.

That’s about 10.8 million homeowners currently in a negative equity position.

The “effective” negative equity rate is even higher at 39.2 percent in the third quarter, according to Zillow.

The “effective” rate includes all homeowners who have less than 20 percent equity in their homes. This rate is significant because selling a home and purchasing a new one “requires equity of 20 percent or more to comfortably meet related expenses,” according to Zillow.

More than half of underwater homeowners are underwater by at least 20 percent, Zillow stated. Assuming Zillow’s estimate for home price growth at 3.8 percent over the next year, it will take a homeowner with 20 percent negative equity five years to rise to the surface.

Of the nation’s 30 largest metros, those with the highest concentration of negative equity are Las Vegas at 30.6 percent, Atlanta at 38.2 percent, and Orlando at 34.2 percent.

California Foreclosures Tick Up but Remain Lower Than Last Year

California Foreclosures Tick Up but Remain Lower Than Last Year


Foreclosures edged up over the month of October in California but continue to remain well below year-ago levels, according to PropertyRadar.

Notices of default rose 15.3 percent, notices of trustee sales increased 4.1 percent, and foreclosure sales grew 3.9 percent over the month of October in California.

However, over the year, notices of default were down 45.2 percent, notices of trustee sale declined 59.2 percent, and foreclosure sales decreased 65.4 percent. Foreclosure sales continue to hover near record lows, according to PropertyRadar.

Foreclosure inventories in California have been “trending mostly sideways since July,” according to PropertyRadar.

“While the low level of foreclosures seems to be good news, the market is ignoring the 1.5 million underwater California homeowners at risk of default that can neither sell an existing home or buy another,” said Madeline Schnapp, PropertyRadar’s director of economic research.

“These underwater homeowners are a big drag on the California real estate market recovery and keep much needed inventory off the market,” Schnapp said.

A closer look at foreclosure sales reveals a decline in foreclosures sold to third parties and an increase in REO sales. Third party sales were down 2.1 percent over the month, while REO sales increased 7.6 percent, according to PropertyRadar.

The REO increase can be partly attributed to an adjustment period after a short interim during which banks stalled on foreclosures this summer after the Office of the Comptroller of the Currency “specified minimum standards for handling borrower files subject to foreclosure,” according to PropertyRadar.

PropertyRadar also compared California and four of its Western neighbors – Arizona, Nevada, Oregon, and Washington – in terms of foreclosure starts, sales, and inventories.

California came out ahead by volume in all three categories, and its percentage increase in foreclosure starts over the month of October was also highest at 15.7 percent.

At the other end of the spectrum, Nevada posted an 82.5 percent decline in foreclosure starts over the month.

Washington experienced the greatest increase in foreclosure sales for the month with a 7.1 percent rise, while Nevada posted the most momentous decline.

While posting the greatest declines in foreclosure starts and sales, Nevada posted the highest increase in foreclosure inventory, a 4 percent rise over the month.

Oregon experienced the greatest drop in foreclosure inventory, a 2.5 percent decrease in October.

Report: Delinquency Rate Continues to Plunge

Report: Delinquency Rate Continues to Plunge

11/13/2013 BY: ASHLEY R. HARRIS

Homeowners are working harder to make timely mortgage payments, according recent data from TransUnion. The mortgage delinquency rate dropped 23.3 percent in the past year, ending Q3 2013 at 4.09 percent. Last year it stood at 5.33 percent. The mortgage delinquency rate also dropped on a quarterly basis, down 5.3 percent from 4.32 percent in Q2 2013, the seventh straight quarterly decline.

Around the United States, most states experienced a decline in their mortgage delinquency rate between Q3 2012 and Q3 2013. California, Arizona, Nevada, Colorado, and Utah experienced more than 30 percent declines in their mortgage delinquency rate. Three states—California, Florida, and Nevada—had double-digit percentage drops in the last quarter.

TransUnion cultivated the data from anonymized credit data from virtually every credit-active consumer in the United States. TransUnion’s forecast is based on various economic assumptions, such as gross state product, consumer sentiment, unemployment rates, real personal income, and real estate values. The forecast would change if there are unanticipated shocks to the economy affecting recovery in the housing market or if home prices begin to depreciate once again.

“This isn’t a sample data set,” said Tim Martin, group VP of U.S. Housing for TransUnion’s financial services business unit.

“We looked at all 52 million installment-based mortgages in the U.S. and the trend is clear—the percentage of borrowers willing and able to make their mortgage payments continues to improve,” Martin continued. “The overall delinquency rate is still high relative to ‘normal,’ but a 23 percent year over year improvement is great news for homeowners and their lenders.”

The credit agency recorded 52.31 million mortgage accounts as of Q3 2013, down from 54.23 million in Q3 2012. This variable was as high as 63.14 million in Q3 2008 prior to the housing crisis.

Viewed one quarter in arrears (to ensure all accounts are included in the data), new account originations increased to 2.34 million in Q2 2013, up from 2.09 million in Q2 2012. This is a major increase from just two years ago when there were 1.32 million new account originations in Q2 2010.

“New mortgage originations showed good growth through the second quarter of this year, largely the result of increased refinance transactions driven by low rates and increasing home prices,” Martin said. “However, mortgage rates started to increase right around Memorial Day, and when the data come out next quarter, we expect it to show that new originations are decreasing as a result.”

TransUnion’s latest mortgage report also found that the non-prime population (those consumers with a VantageScore credit score lower than 700) continues to represent a smaller portion of all mortgage loans, more than 50 percent lower than was observed in 2007. Non-prime borrowers constituted 5.82 percent of all new mortgage originations in Q2 2013. In Q2 2008, non-prime borrowers represented 12.69 percent of the total.

TransUnion is forecasting that the downward consumer delinquency trend will continue in the final three months of 2013. The delinquency rate will likely be just under 4 percent at the end of the year.

“New originations will be down and non-prime borrowers will start to re-emerge,” Martin said. “At this point we believe delinquency rates will continue to decline.”

Execs from Lending Community Hash Out QM Questions

Execs from Lending Community Hash Out QM Questions


When it comes to next year’s regulatory obstacles, CEOs and senior executives from the mortgage industry’s biggest players agree on one thing: Education will be key to keeping business going smoothly.

In a panel at the 2013 Realtors Conference and Expo, high-level names from Quicken Loans, Wells Fargo Home Mortgage, JP Morgan Chase, and Bank of America discussed the qualified mortgage (QM) guidelines, which go into effect in January 2014. While the initial implementation of these rules is expected to restrict lending to some buyers in the short-term, panelists agreed that business should even out over time.

Because the QM rule lays out specific criteria for accepted loans, it’s going to be more important than ever for lenders to retain significant documentation to back up their

underwriting decisions—something that professionals and consumers alike need to keep in mind, says Matt Vernon, home loan sales executive for BofA.

“It’s important for Realtors to be educated about the new documentation requirements so they can work with buyers and meet lender expectations,” Vernon said.

With a shortage of home inventory lifting competition in markets across the United States, one of the biggest concerns is the impact that more stringent standards will have on approval timelines. While timelines can vary depending on many factors, Vernon says the process is quicker and smoother when borrowers are educated about their lender’s application requirements.

Bill Emerson, CEO of Quicken Loans, agreed: “Our mission is to get someone approved. With clarity and transparency, buyers will know exactly what is needed of them. We want to do this in a manner that is as stress free as possible for consumers and Realtors.”

Despite the complications ahead, the leaders on the panel agreed that they expect a healthy improvement in the market next year, with purchase originations dominating the scene as interest rates rise and refinancing continues to trend downward.

“In spite of the economic crisis, Americans still want to be homeowners. That hasn’t changed one bit,” said Mike Heid, president of Wells Fargo Home Mortgage. “Homeownership is at the heart of what we do and that is worth preserving.”

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