HUD EXPANDS JOB AND CONTRACTING OPPORTUNITIES FOR LOW-INCOME INDIVIDUALS AND THE BUSINESSES THAT HIRE THEM

WASHINGTON – The U.S. Department of Housing and Urban Development (HUD) today announced that it is launching a Section 3 Business Registry pilot program in Washington, D.C. that will expand job opportunities for low-income people and public housing residents by maintaining a registry of businesses that currently hire them. Additionally, HUD will implement the pilot program in New Orleans, Detroit, Los Angeles and Miami, to give contracting agencies and low-income residents a single source of information to find eligible Section 3 businesses and job opportunities.

First Round of Pilot Rental Initiative Completed with 2,500 Homes Sold

The first round of winners has been
selected to purchase foreclosed real estate from Freddie Mac and Fannie
Mae.  The Federal Housing Finance Agency
(FHFA) announced today that 2,500 single family homes had been awarded to successful
bidders under a pilot initiative to convert real estate acquired by the two
government sponsored enterprises (GSE) through foreclosure into rental property. 

Successful candidates for purchasing properties
from the GSE’s real estate portfolio (REO) had undergone several steps in a
qualification process before being permitted to bid on the houses which they had
to agree to hold and rent for a period of time before reselling. 

The properties were offered in sale
pools which were geographically concentrated in various locations across the
United States.  The GSEs, FHFA and other federal
agencies involved, Departments of Treasury, Housing and Urban Development,
Federal Deposit Insurance Corporation and the Federal Reserve, had several
goals
for the program.  They hoped to
relieve the GSEs of the costs and administrative burdens of managing thousands
of foreclosed properties, alleviate the blight imposed on communities by large
number of vacant and possibly deteriorating properties, increase the rental
stock, while at the same time not flooding the market with distressed
properties.

 FHFA described the response to the pilot
initiative as “robust with strong qualified bidder interest.”  Some 4,000 responses were received to the
initial “Request for Information” issued by the program sponsors last February,
however beyond announcing that the awards had been made FHFA released no
information on the names or even the numbers of successful bidders.

“FHFA
undertook this initiative to help stabilize communities and home values in
areas hard-hit by the foreclosure crisis,” said Edward J. DeMarco, Acting
Director of FHFA. “As conservator of Fannie Mae and Freddie Mac, we believe
this pilot program will assist us in achieving our objectives and help to
maximize the benefit to taxpayers. We are pleased with the response from the
market and look forward to closing transactions in the near future.”

…(read more)

Forward this article via email:  Send a copy of this story to someone you know that may want to read it.

First Horizon’s Buybacks; Buyback Legal Chatter; Basel III and Construction Loans; Congress Snubs Small Business?

I have been subtly warning groups during speeches, and writing in this commentary, about the implications of Basel III. Most of the focus is on servicing & the value of it. But did you know that under the new Basel III rules, construction lending would likely go into the “high risk commercial real estate” category and require a 150% risk weighting? “Lenders would seek deals where a developer would contribute a substantial amount of cash equity; while banks would be less likely to let developers rely just on the equity from appraisals” per American Banker. And the government and the Fed are asking why banks aren’t lending? This is just another reason.

Last month we sold the house where my kids grew up, and I had a handyman remove the doorframe where we marked heights on birthdays. I am not mentioning this to turn the daily into a Hallmark card, but because it reminded me of one thing that the press seems to forget: a house is a home and not a share of stock. And when it comes to that, the popular press seems to forget that people need a place to live, that people want a good school district for their kids, a place to get to know the neighbors, a place to create an emotional attachment. I could go on and on, but there are very concrete reasons why people who are underwater on a house still make the payments, why many who supposedly saw the real estate decline didn’t sell their home, and why so many people don’t care about minute fluctuations in the price of housing based on the latest metric.

I’ll get off my soapbox, and get on with business: I think that the last time the S&P/Case-Shiller Home Price Index went up was during the Eisenhower Administration – until now. Seriously, for the first time in eight months the S&P/Case-Shiller Home Price Indices rose over levels of the previous month.  Data through April 2012 showed that on average home prices increased 1.3% during the month for both the 10- and 20-City Composites. Prices are still down 2.2% for the 10-City and 1.9% for the 20-City over figures for one year earlier but this is an improvement over the year-over-year losses of 2.9% 2.6% recorded in March. This report followed Monday’s news that New Home Sales jumped 7.6% in May to 369k and was up 19.8% from a year ago, and last week’s Existing Home Sales, Housing Starts and NAHB HMI which all contained some positive signs.

How’s this to grab one’s attention: “Congressional Subcommittee REFUSES Small Business Brokers and Appraisers a Seat at the Table.” The notice from the NAIHP goes on, “For the second time in a week, the Subcommittee on Insurance, Housing and Community Opportunity, Chaired by Rep. Judy Biggert (R-Illinois), refused small business housing professionals the right to be represented during Congressional testimony.” Here you go: http://www.naihp.org/.

Yes, there are plenty of rumors that the agencies are hotly pursuing buybacks to recoup taxpayer losses, and that the agencies are losing personnel except for QA & auditing. But that reasoning doesn’t help companies like First Horizon National Corp. It “cited new information it recently received from Fannie Mae as the basis for incurring the $272 million charge this second quarter. About $250 million will go to repurchase loans made with “inadequate or incorrect” documentation, and $22 million is being charged to address pending litigation.” I don’t make this stuff up.

Last week I received a legal question about buybacks. “I was asked by a former customer of a major investor’s correspondent lending group about how others are handling repurchase/make-whole requests on older vintage loans.  His experience has been that the investor will ask to be reimbursed for losses associated with loans that have been foreclosed and disposed of without being given an opportunity to refute the alleged rep and warrant deficiency.  He has had to hire a law firm to argue each of these requests and the major investor has backed off each time. Normally, when a correspondent is still active, there is obviously leverage against the correspondent under an implied or actual threat of being terminated as a customer if a make-whole is not made, and when an investor is no longer in the correspondent business, I’ve heard rumors of it being more inclined to back down but sometimes taking a former customer to court or ‘saber rattling’. Needless to say, it is expensive to have a lawyer prepare a rebuttal to a make-whole request, just to have the investor ultimately back-off – what to do?”

I turned this over to attorney Brian Levy, who wrote, “Your question about investor willingness to sue originators over repurchase claims is difficult to answer with specificity.  My clients have been able to settle and/or avoid litigation in every engagement that I have undertaken in this area. That does not mean, however, that the threat of investor repurchase litigation over individual loans is not real or that litigation is not occurring, but it has been my experience that these disputes can be resolved (or dismissed) through extensive and detailed settlement negotiations and information exchange.  Litigation over individual repurchase claims may be fairly unusual now, but so were repurchase claims entirely prior to 2007-2008. Due to the unique nature of each originator’s position and the facts around applicable repurchase claim(s), however, it would be reckless to assume one will not be sued on specific claims based on what is generally occurring in the industry or based on what may have been past investor appetite for litigation (although these are important elements to consider in one’s strategy).”

Brian goes on. “For example, much depends on the facts and circumstances of the loan(s) in question, whether there are any other relationships between the parties that can be leveraged (loans in the pipeline, warehouse lines etc.) the overall quality, stability and reputation of the originator and, significantly, the parties’ tolerance for risk, availability or need for reserves and the desire for finality.  Moreover, investor and originator appetite for lawsuits may change over time as strategies can change in organizations and as the few cases that have been filed begin to yield decisions that are more or less favorable to one side or another. Even the tenor of discussions or lack of attention to the matter can impact a party’s willingness to file a lawsuit. All of these issues should be explored with legal counsel as part of an originator’s comprehensive repurchase management strategy.” (If you’d like to reach Brian Levy with Katten & Temple, LLP, write to him at blevy@kattentemple.com.)

Here are some somewhat recent conference & investor updates, providing a flavor for the environment. They just don’t stop. As always, it is best to read the actual bulletin.

Down in California, it is time again for the CMBA’s Western Secondary conference. (I’ve been wandering around that San Francisco conference since 1986 – if those halls could talk…) The CMBA has presentations on “QM, QRM, the CFPB, Agency Direct Delivery – Reviving the Lost Art of Servicing Retained Execution, Compliance issues Facing State Licensed Mortgage Banks Today and How Regulatory Change will Impact Your Business and the Secondary Market, Manufacturing Quality – Steps to Produce a Quality Loan (Operation Focus),” and several other topics. Check it out.

In light of the increasing number of non-conforming transactions where the departure residence is retained by the borrower and is in a negative equity position, Wells Fargo issued a reminder that underwriters must weigh any and all risk factors evident in the loan file.  Each case should be weighed individually, as there are only so many situations underwriting guidelines can predict.  The Wells Seller Guide now states that, in a case where the departure residence won’t be sold at the time of closing and is in a negative equity position, paying down the lien or using additional reserves to cover the negative equity may be required to reduce overall risk.

Wells has issued another reminder that a signed Borrower Appraisal Acknowledgement is required for all loans.  The Acknowledgment, whether it’s the Wells-issued form or a custom document, must include the property address, complete lender name, borrower name, borrower signature, and borrower signature date.  If the form has checkboxes where the borrower can make a choice, these boxes must be ticked.

Due to changes to FHA Single Family Annual Mortgage Insurance and Up-Front Mortgage Insurance Premiums announced by HUD back in March, one of which requires lenders to determine the endorsement/insured date of the FHA loan as part of a Streamline Refinance transaction, Refinance Authorization results will need to be submitted to Wells with the closed loan package.  These results are necessary to ensure that the accurate MIP was applied.  This applies to all FHA Streamline Refinances with case numbers assigned on or after June 11, 2012, while loans purchased through Pass-Thru Express are excepted.

Wells’ government pricing adjusters are set to change on July 2nd.  For VA loans with scores between 620 and 639, the adjuster will go from -0.750 to -1.500.  The adjuster for loans with scores between 640 and 679, currently at -0.250, will change to -0.500.  This affects Best Effort registrations, Best Effort locks, Mandatory Commitments, Assignments of Trade, and Loan Specified Bulk Commitments.

How sensitive are our markets to European news? Sure, instead of buying our 10-yr yielding 1.65% you could buy a Spanish 10-yr yielding 6.74%. But there is instability, evidenced by this note from an MBS trader yesterday: “News of Merkel stating Europe would not have shared liability for debt ‘as long as she lives’ caused Treasuries to immediately surge higher, only to be met by better real money selling of 7s.  While the selling did help to stall the rally, the true relief didn’t come until Reuters posted a correction to its initial release, re-quoting Merkel as having said Europe would not have ‘total shared’ liability for debt as long as she lives.  The amendment took Treasuries off the highs ahead of the 2yr auction…”

Say all you want about the market, bond prices and yields are not doing a whole heckuva lot. Tuesday the 10-yr closed at 1.63%, very close to where it’s been all week, although there was some intra-day volatility blamed on Europe. (European problems will be with us for years, and paying attention to intra-day swings can become wearisome after years…) For agency mortgage-backed securities, volume has been around “average” all week, with the usual buyers (the Fed, hedge funds, money managers, overseas parties) absorbing it. Up one day, down another – yesterday was down/worse by about .250, which was about the same as the 10-yr T-note. We could have been helped by the Conference Board’s Consumer Confidence index which dropped for a fourth straight month, to 62 from a revised 64.4 in the prior month, but nope.

No one is getting any younger… (Part 1 of 2)
I very quietly confided to my best friend that I was having an affair. She turned to me and asked, “Are you having it catered?” And that, my friend, is the definition of ‘OLD’!

Just before the funeral services, the undertaker came up to the very elderly widow and asked, “How old was your husband?”
“98,” she replied. “Two years older than me.”
“So you’re 96,” the undertaker commented.
She responded, “Hardly worth going home, is it?”

Reporters interviewing a 104-year-old woman:
“And what do you think is the best thing about being 104?” the reporter asked.
She simply replied, “No peer pressure.”

I feel like my body has gotten totally out of shape, so I got my doctor’s permission to join a fitness club and start exercising.  I decided to take an aerobics class for seniors. I bent, twisted, gyrated, jumped up and down, and perspired for an hour. But, by the time I got my leotards on, the class was over.

…(read more)

Forward this article via email:  Send a copy of this story to someone you know that may want to read it.

Scope of California Homeowner Bill of Rights Narrowed by Recent Negotiations

California’s proposed Homeowner Bill
of Rights
, originally proposed by the state’s attorney general Kamala Harris
and covered here
has been modified extensively following what the Center for Responsible Lending
(CRL) calls six weeks of intense negotiation with banks, legislators, the
attorney general and consumer groups. 

Among the changes reported by CRL is
a narrowed scope for both the loans and servicers covered by the bill.  The only loans to which the bill will now
apply are first mortgages on owner occupied one-to-four family houses and only
servicers who process more than 175 foreclosures per year will be subject to
many of its requirements.

Earlier versions of the bill
required the lender or servicer to record and provide evidence of all
assignments as part of the chain of title to foreclose.  The current version requires that only
evidence of the last assignment be available to the borrower.  The current bill also includes an express and
comprehensive right to cure until the notice of trustee sale is filed.  A servicer can avoid liability by curing a
violation before the foreclosure sale.

Originally the bill provided
post-sale minimum statutory damages of the greater of actual damages or
$10,000; the new version allows only actual damages with triple damages or a
minimum of $50,000 available only in cases of intentional reckless violations
or willful misconduct.

Unlike the National Mortgage
Settlement the California bill allows for multiple contact persons as long as
they have the access and authority of a single point of contact.  Prohibitions against dual tracking and false
documents remain as in the original law, however the enforcement provisions
sunset after five years.

CRL says that this Homeowner Bill of
Rights remains critical for large number of borrowers, their communities, and
the California housing market.  It
ensures that borrowers in owner-occupied homes applying for loan modifications
get full and fair consideration for those modifications before the foreclosure
process begins.  This will allow the
foreclosure process to move more quickly for those who do not qualify for home
retention alternatives while preventing unnecessary foreclosures on borrowers
who do.

CRL released a new study of
California delinquencies with three principal findings.  First, loan modifications work well to keep
borrowers in their homes.  More than 80 percent
of California homeowners who received modifications in 2010 stayed current and
avoided re-default despite the continued recession.  Only 2 percent of those modified loans ended
in foreclosure.

Second, large numbers of borrowers
remain at risk with nearly 700,000 California mortgages in some state of delinquency
or foreclosures.  This is one out of nine
borrowers.

Third, middle class, African
Americans, and Latinos are the hardest hit. 
The delinquency rates for African Americans and Latinos are 11.1 and
10.7 percent respectively while for Asians and whites the rates are 7 and 7.3
percent.  Delinquencies are concentrated
among middle class borrowers, those making between $42,000 and $120,000
annually.

 “California policymakers will soon have the
chance to extend key servicing reforms from the National Mortgage Settlement to
all California borrowers, said Paul Leonard, CRL’s California Director. 
“Our legislators have an historic opportunity to overcome intense opposition
from the big banks and ensure that all Californians get a fair shot at loan
modifications.”

…(read more)

Forward this article via email:  Send a copy of this story to someone you know that may want to read it.

New Home Sales at Highest Point in Two Years

Sales of new single-family homes increased to a seasonally
adjusted annual rate of 369,000 in May from a rate of 343,000 in April
according to figures released this morning by the U.S. Census Bureau and the
U.S. Department of Housing and Urban Development.  The month-over-month increase from the
slightly revised April number was 7.6 percent and May’s figure was 19.8 percent
higher than the new home sales estimate of 308,000 in May 2011.

The median price of a newly constructed single family home
was $234,500 and the average was $273,900. 
In May 2011 the median and average prices were $222,000 and $262,700
respectively.

Sales in the Northeast region were at a seasonally adjusted
rate of 41,000, a 36.7 percent increase from April and up 127.8 percent from a
year earlier.  In the Midwest sales were
down 10.6 percent to 42,000 an increase of 2.4 percent compared to May
2011.  Sales in the South increased 12.7
percent to a 204,000 unit rate, a 16.6 percent year-over-year change and in the
West there were 82,000 sales, down 3.5 percent month-over-month but up 10.8
percent on an annual basis.

Sales on a non-seasonally adjusted basis totaled 35,000 nationally
in May compared to 33,000 in April.  More
than half (19,000) of the sales were in the Southern region.

At the end of May there were an estimated 145,000 new homes
for sale which represents a supply of 4.7 months at the current sales
rate.  One year earlier there were
169,000 homes available, representing a 6.6 month supply.  The average house for sale has been on the
market for 7.9 months
since construction was completed.

New Home Sales

Click Here to View the New Homes Sales Chart

…(read more)

Forward this article via email:  Send a copy of this story to someone you know that may want to read it.