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Monday, March 31, 2014

Mortgage Delinquencies, Foreclosures Continue to Fall: OCC

The latest Mortgage Metrics report from the Office of the Comptroller of the Currency shows that 2013 was a more stable year for mortgage portfolios. Overall, 91.8 percent of the 24.9 million loans covered by the report were current in the fourth quarter, slightly better than 91.4 percent in the previous quarter and 89.4 percent a year earlier. Mortgages in the early stages of delinquency (defined as 30 to 59 days past due) accounted for 2.6 percent of the loans covered by the report, the lowest level since tracking began in January 2008. The share of home loans that were seriously delinquent fell 20.7 percent from a year earlier and one basis point from the previous quarter to 3.5 percent of the portfolio. Also, foreclosures initiated in the fourth quarter fell 20.6 percent from a year ago and nearly 5 percent from the previous quarter. Home-retention actions were nearly three times the number of completed foreclosures, short sales, and deed-in-lieu-of-foreclosure actions in the fourth quarter.

From "Mortgage Delinquencies, Foreclosures Continue to Fall: OCC"
American Banker (03/28/14) Witkowski, Rachel

Friday, March 28, 2014

Proposed Housing Bill Would Create a Co-Op of Mortgage Lenders

Rep. Maxine Waters (D-Calif.) believes the housing finance system should act more like a public utility. She plans to introduce a reform bill that would create a co-op of lenders that would be the sole issuer of mortgage-backed securities insured by the government. Private backers would be required to take the first 5 percent loss before the government guarantee takes effect. Karen Shaw Petrou, managing partner at Federal Financial Analytics, says whether enough entities will provide private-sector capital is a concern. "A utility, or co-op, may solve for that because it creates a special purpose entity that doesn't need to meet shareholder demand the same way a big bank or bondholder does," she explains. The proposal would establish a new federal regulator. A minimum down payment of 3.5 percent would be expected from a first-time buyer and 5 percent from everyone else, although the regulator would have the authority to lower those requirements.

From "Proposed Housing Bill Would Create a Co-Op of Mortgage Lenders"
New York Times (03/27/14) P. B3 Dewan, Shaila

Wednesday, March 26, 2014

Change Around the Corner for Credit Scoring

Data company FICO, which developed the credit scoring formulas often used by mortgage and auto lenders as well as credit card issuers, will release a new model this summer that it says will analyze risk more correctly. The new model is FICO's first major change in six years and is meant to address lenders' concerns about credit score consistency among the three major credit bureaus. The new formula, FICO Score9, will analyze data to see how a consumer's spending and credit habits may have changed compared to six years ago, before the recession. Consumers with good pre-recession scores may score slightly better in the new version.

From "Change Around the Corner for Credit Scoring"
Chicago Tribune (03/24/14) Umberger, Mary

Tuesday, March 25, 2014

Housing Advocates Criticize Johnson-Crapo GSE Bill

A number of advocacy groups have come together to protest legislation that would revamp the nation's residential finance system. They argue that a bipartisan bill from Sens. Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho) would come at the expense of minority and lower-income households, whose access to credit could be narrowed. "The organizations warn that the measure also lacks provisions to ensure that the housing finance system is fair and non-discriminatory. The Johnson-Crapo plan would capitalize several affordable trust funds and offer incentives for lenders to work in underserved areas, but it would end affordable housing goals put in place under Fannie Mae and Freddie Mac. It also outlines lending criteria, including down payment requirements of 3.5 percent for first-time buyers and 5 percent for others, for mortgages to be included in a federally insured security.

From "Housing Advocates Criticize Johnson-Crapo GSE Bill"
American Banker (03/24/14) Finkle, Victoria

Monday, March 24, 2014

ABA Posts Staff Summary of Johnson-Crapo Proposal

ABA today released a staff summary of the bipartisan housing finance reform proposal unveiled recently by Sens. Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho). The summary offers an overview of Johnson and Crapo’s proposals for a new Federal Mortgage Insurance Corporation, a mutual entity and securitization platform, multifamily housing finance, affordable housing and underwriting.

“We note that the draft includes many key provisions urged by ABA including equitable access to the secondary market for lenders of all sizes,” the summary says, adding that areas of concern include the regulatory authority of the FMIC, capitalization and first loss positions and the impact on affordable housing.

--ABA Daily Newsbytes

Tuesday, March 18, 2014

Adjustable-Rate Mortgages Make a Comeback

Adjustable-rate mortgages (ARMs) are riding a new wave of popularity. Some financial groups are even sweetening terms to attract more customers to these loans, whose rates can jump after a few years. The tactics recall a period prior to the 2008 economic meltdown when ARMs flourished as banks and mortgage brokers touted their low initial rates to the public. Now, though, financial executives insist that they are focusing on borrowers with strong credit who are using the option for "jumbo" mortgages -- not subprime borrowers who could not afford the loans after the rates reset. ARMs made up 31 percent of mortgages in the $417,001-to-$1 million range that were originated during last year's October-through-December period, notes Black Knight Financial Services. That is an increase from 22 percent during the same period a year prior and the largest share since 2008's third quarter.

From "Adjustable-Rate Mortgages Make a Comeback"
Wall Street Journal (03/17/14) P. A1 Andriotis, Annamaria ; Raice, Shayndi

Monday, March 17, 2014

Friday, March 14, 2014

CFPB Takes Aim at 'Zombie' Foreclosures

The Consumer Financial Protection Bureau is looking into how bank "walkaways" from distressed homes are hurting borrowers and how to rectify the situation. "There is direct borrower harm if a borrower believes a foreclosure on their property has been conducted and they are no longer responsible, and months or years later find out that they are, that there was never a foreclosure and they have large financial responsibilities that they never knew about," explains the CFPB's Laurie Maggiano. According to RealtyTrac, there are more than 150,000 vacant or abandoned dwellings for which the servicer has not taken title. Maggiano believes the zombie foreclosure epidemic could be addressed by creating a standard definition of "abandonment" and expediting the foreclosure process so that vacant homes are sold faster to new owners or nonprofits.

From "CFPB Takes Aim at 'Zombie' Foreclosures"
American Banker (03/13/14) Berry, Kate

Thursday, March 13, 2014

Senators Outline Plan to Replace Mortgage Giants

The Senate Banking Committee's top leaders want to wind down Fannie Mae and Freddie Mac and have private capital cover the first 10 percent of losses on mortgage-backed securities under a new U.S. housing finance system. The plan from Sens. Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho) also would create an insurance fund, paid for by fees from the issuers of the securities, that would protect taxpayers against future bailouts. Moreover, underwriting standards would mandate a 5 percent down payment from borrowers -- but only 3.5 percent down for first-time home buyers. Industry fees would go toward a fund to ensure the availability of affordable housing. Johnson and Crapo plan to unveil the legislation in "the coming days."

From "Senators Outline Plan to Replace Mortgage Giants"
Washington Post (03/12/14) P. A13 ElBoghdady, Dina

Monday, March 10, 2014

Mortgage Lending Declines Due to Harsh Winter

Bankers in New York, Richmond, St. Louis, and Kansas City said demand for new mortgages for home purchases fell in the first quarter and blamed the inclement weather this winter for the decline, according to the Federal Reserve's Beige Book survey. Demand also softened in other markets like Philadelphia and Dallas. Cleveland and Atlanta reported an increase in purchase mortgages, but home refinancing fell in four other Federal Reserve districts. Bankers in Atlanta also expressed concern about the Qualified Mortgage rule -- which took effect in January -- with some community bankers reporting that they were leaving the residential mortgage business altogether due to increasing regulatory burdens. "Overall, most bankers remained optimistic for continued slow, steady growth and for some pickup from pent-up demand for housing," said the survey.

From "Mortgage Lending Declines Due to Harsh Winter"
American Banker (03/06/14) Borak, Donna

Friday, March 7, 2014

Friday Rate Update

Mortgage Rates Dip on Weaker Economic News

The average rate for a 30-year fixed-rate mortgage dropped to 4.28 percent from last week’s 4.37 percent following weaker than expected economic and housing news, Freddie Mac said yesterday. At this time in 2013, the 30-year FRM rate averaged 3.52 percent.

Thursday, March 6, 2014

Are Regulators Driving Banks Out of Mortgage Servicing?

Banks are calling for regulators to revisit Basel III rules that significantly restrict banks' ability to hold mortgage servicing rights, especially among smaller institutions. The rules may create an environment that makes it more difficult for banks to hold servicing assets, says Robert Davis, an executive vice president at the American Bankers Association. The issue centers around a provision in the Basel package of rules that limits mortgage-servicing assets to 10 percent of a bank's tier-one common equity, with additional holdings deducted from the tier-one capital account. Assets below that cap eventually would be risk weighted at 250 percent, and combined holdings of mortgage servicing and several other assets are limited to 15 percent. Although there is currently little chance of tangible legislative action on this issue, Rep. Blaine Luetkemeyer (R-Mo.) recently introduced a bill to delay the requirements from taking effect for smaller institutions until the banking agencies complete a study on the impact on the mortgage-servicing market.

From "Are Regulators Driving Banks Out of Mortgage Servicing?"
American Banker (03/04/14) Finkle, Victoria