1Q Home Price Decline Steepest in 26 Years
May 13, 2008
Prices paid for single-family homes fell 7.7% in the first quarter from the level of a year earlier, the steepest decline ever recorded by the National Association of Realtors, which has been tracking sales for 26 years.
The trade group did offer one piece of good news (if it can be deemed such): 48 out of 149 metropolitan statistical areas tracked (or 32.2%) showed higher median prices in the quarter. In the first quarter, the average median sales price was $196,300, compared with $212,600 a year earlier. The NAR reported that there were "very few jumbo loan originations" in the quarter, "so sales are much slower in high-cost areas." Lawrence Yun, chief economist for the trade group, added that, "Neighborhoods with little subprime exposure are holding on very well." According to preliminary figures compiled by National Mortgage News and the Quarterly Data Report, mortgage bankers funded less than $4 billion worth of subprime loans in the first quarter. The NAR can be found online at http://www.realtor.org.
Guild Mortgage Buys Mortgage Bank
May 12, 2008
Guild Mortgage Co., San Diego, has announced the recent acquisition of Liberty Financial Group, a residential mortgage bank based in Bellevue, Wash.
The terms of the transaction were not disclosed. Guild Mortgage was acquired in 2007 through a partnership between its senior management and that of McCarthy Capital, the company said. "McCarthy Capital's approach combines the stability we were looking for in a partner with the resources we needed for continued growth," said Mary Ann McGarry, Guild's president and chief executive officer. Liberty Financial originates nearly $1 billion of prime home loans annually via branches located mainly in Washington and Colorado, Guild reported. Guild Mortgage can be found on the Web at http://www.guildmortgage.com.
Feds Shut Arkansas Bank
May 12, 2008
Federal banking regulators have closed ANB Financial after finding that the Bentonville, Ark., national bank was undercapitalized and likely to fail.
The $1.9 billion-asset bank reported a $59 million loss in the fourth quarter, with nearly $400 million in noncurrent loans. Its parent, ANB Bancshares, closed its wholesale subprime lending business in March. The Federal Deposit Insurance Corp. arranged for Pulaski Bank and Trust Co., Little Rock, Ark., to take over the national bank's nine offices, along with $212.9 million in insured deposits and $39.2 million in uninsured deposits. The Little Rock bank also agreed to purchase $235.9 million of the failed bank's assets.
Freddie Cautions Re Declining-Market Policy
May 12, 2008
Freddie Mac lenders may be "unnecessarily" limiting credit in some areas because of an "overly broad interpretation" of the agency's declining-market policy, a Freddie executive says in a letter to the National Association of Realtors.
Freddie Mac has advised its lenders to use the Office of Federal Housing Enterprise Oversight's housing price index to determine whether a property is in a market where prices are declining and the maximum amount of financing should thus be reduced by 5%. Freddie executive vice president Patricia Cook said the HPI should not be used as "conclusive evidence" that every market in a metropolitan statistical area is declining. "If a lender and/or appraiser determine that the prices in a particular area are actually stable or increasing, and sufficient supporting evidence is provided, the 5% reduction would not apply," Ms. Cook says in a letter to NAR president-elect Charles McMillan. Ms. Cook also says Freddie is working on a "job aid" suggested by the NAR to help lenders "apply our declining markets policy appropriately." Freddie can be found online at http://www.freddiemac.com, and the NAR can be found at http://www.realtor.org.
FHA Volume Doubled in 3 Months
May 12, 2008
Federal Housing Administration single-family mortgage originations took off in the first three months of this year, as FHA applications doubled to 181,900 between Dec. 31 and the end of March, according to Department of Housing and Development data.
The data also show that FHA-insured loans jumped by 64%, to 89,000, from December to March. Mortgage banking consultant Brian Chappelle estimates that FHA lenders are now taking 200,000 FHA mortgage applications per month and insuring 100,000 loans per month. There are concerns that the FHA might not be able to handle the increase in business. But Mr. Chappelle said the FHA direct-endorsement lenders manage the whole approval process. From an origination standpoint, "there are no backlogs because the lender controls the process," he said. Mr. Chappelle is with Potomac Partners in Washington.
PMI Reports $274M 1Q Loss
May 12, 2008
The PMI Group Inc., a mortgage insurer based in Walnut Creek, Calif., has reported a net loss of $274.0 million ($3.37 per share) in the first quarter, compared with net income of $102.0 million ($1.16 per share) a year earlier.
PMI attributed the loss chiefly to a net loss of $172.5 million in its U.S. mortgage insurance operations due to increases in paid claims, loss-adjustment expenses and additions to loss reserves, and an other-than-temporary impairment of its investment in FGIC. Net premiums earned in the U.S. MI operations totaled $207.8 million, up 7.2% from $193.8 million a year earlier, PMI reported. In PMI's international operations, PMI Australia reported record net income of $30.5 million for the first quarter, PMI Europe reported a net loss of $13.9 million, and PMI Asia reported net income of $2.7 million. PMI Group can be found on the Web at http://www.pmigroup.com.
HSBC Taking $3.2B in 1Q Mortgage Hits
May 12, 2008
HSBC Holdings says it will take $3.2 billion worth of mortgage impairment charges in the first quarter, adding that the "deterioration in the U.S. housing market will extend into 2009."
At March 31, 12.5% of its U.S subprime portfolio was 60-days or more delinquent, compared with 11.2% at the end of December. In the same quarter last year HSBC took $1.6 billion in mortgage charges, and in the fourth quarter it suffered $4.6 billion in writedowns. The London-based bank is still smarting from its foray into America's subprime market, which commenced in 2003 when it paid $14 billion for Household Finance, then one of the nation's largest subprime lenders and servicers. Over the past year, HSBC has closed all third-party lending channels that were once part of Household. Even though HSBC continues to take writedowns on its residential holdings, it reported that the "vast majority of our mortgage customers continue to meet their commitments."
Fraud Prompts Stewart to Revise 1Q Results
May 9, 2008
Stewart Information Services Corp., Houston, has revised its first-quarter 2008 results following the discovery of an agency defalcation.
As a result of the fraud, the company took a pretax charge of $4.6 million, which affected its results on an after-tax basis by $3.0 million, or $0.16 per share. Stewart is now reporting a first-quarter loss of $25.2 million ($1.40 per share). On April 30, it reported a loss of $22.3 million ($1.24 per share).
FHA Introducing Risk-Based Pricing
May 9, 2008
The Federal Housing Administration will start charging upfront mortgage insurance premiums based on the borrower's credit score and downpayment starting July 14, according to the Department of Housing and Urban Development.
Upfront premiums paid at closing will range from 1.25% to 2.25% under the new pricing schedule that will apply to all FHA loans. Currently all FHA borrowers pay a 1.5% upfront premium regardless of risk. By charging slightly higher premiums based on credit risk, HUD expects to create a more financially sound FHA program and reach more borrowers struggling to keep up with their payments on high-cost subprime mortgages. Risk-based pricing will also be used for refinancing delinquent borrowers under the FHA Secure program starting in July. HUD is expanding the FHA Secure program so that borrowers who have missed two or three payments in the previous 12 months can be refinanced into FHA-insured mortgages. The risk-based pricing notice and a mortgagee letter with the underwriting standards for the expanded FHA Secure program are posted on the FHA website, which can be found at http://www.fha.gov.
AIG Takes $7.8B Housing-Linked Loss
May 9, 2008
American International Group Inc., New York, has reported a net loss of $7.81 billion in the first quarter, and its United Guaranty mortgage insurance subsidiary took an operating loss of $352 million due to housing and capital market disruptions.
Analysts at Fitch Ratings, which downgraded AIG's issuer default and senior debt ratings from AA to AA-minus in response to the earnings results, said they believe AIG was primarily exposed to housing finance-related risks through $61 billion of structured finance collateralized debt obligations backed mainly by subprime U.S. residential mortgage-backed securities in its $469 billion portfolio of notional credit derivatives. AIG said the operating loss in its MI unit reflected "increased losses incurred in both the domestic first- and second-lien businesses" and occurred despite a 14.3% jump (from the level recorded a year earlier) in domestic first-lien net premiums written during the quarter. AIG also announced the commencement of offerings of common stock and equity units totaling $7.5 billion. If the company completes the capital raise successfully, Fitch said it plans to remove AIG's ratings from Rating Watch Negative and affirm them with a negative outlook. Fitch plans to lower AIG's ratings by one notch if the capital raise is not successful.
