Interest rates on home loans saw mild improvement during the week ending May 15, according to the latest weekly survey from mortgage financier Freddie Mac.Freddie Mac chief economist Frank Nothaft said mortgage rates benefited from statements from the Fed hinting that more liquidity would be provided if needed, and data that proved inflation was being […]
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Countrywide, the poster-child for housing bubble lending greed is facing an inquiry by the FTC regarding it’s lending practices. The probe, requested by New York Senator Schumer, asks the FTC to review the lending practices of the mortgage giant. Renewed interest in the business practices are a result of numerous lawsuits against delinquent mortgage-holders being withdrawn for inaccurate or potentially fraudulent evidence against the defendants.
Countrywide admitted in court that it had re-created late payment notices to mortgage-holders who had never actually received the original notice.
None of this should come as a surprise to those following Countrywide. The company has a long history of shady business practices from allegations of routing prime borrowers to subprime products, inappropriate sales incentives to push borrowers to higher cost loans, inaccurate accounting of current mortgage balances and predatory lending by it’s retail team and wholesale channels.
From Market Watch on the Countrywide FTC investigation:
Schumer made the request in a letter to FTC Chairman William Kovacic, citing “cases in multiple states in which Countrywide attorneys were reportedly forced to withdraw motions that incorrectly contended that debtors were delinquent on payments.”In addition, a federal judge in Los Angeles has ruled that besieged mortgage lender Countrywide Financial Corp. must face a shareholder lawsuit against 14 current and former top executives and board members that alleges the company engaged in risky lending practices that led to its collapse this fall.“It defies reason, given the entirety of the allegations, that these committee members could be blind to widespread deviations from the underwriting policies and standards being committed by employees at all levels,” wrote Judge Mariana Pfaelzer of Federal District Court in Los Angeles.
Schumer raised concerns Wednesday about the lender’s admission in court that it had sometimes “re-created” delinquency or foreclosure letters that were never actually sent to delinquent borrowers.Countrywide has faced multiple lawsuits nationwide alleging it fabricated or altered documents, intimidated borrowers and assessed illegal or exorbitant fees in foreclosure or bankruptcy proceedings.
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According to reps from the bank Chase Wholesale is eliminating second mortgage products from its product offering. All loans need to be registered/submitted by end of business tomorrow. There has been wide concern and speculation about the value of second mortgage loan portfolios held by the big banks with the precipitous decline of housing prices nationwide. Many of the second mortgages issued over the last two to three years in bubble areas are now essentially unsecured.
You can’t blame Chase for making this move as the risk/reward ratio just isn’t there for them. No word on the retail channel. If you have any info let me know and I’ll update the post.
Update: Confirmed from numerous tipsters (thanks!)
An email from reps:
Good Morning,
First and foremost I would like to thank you for the business you have sent
and I appreciate the opportunity to have worked with you. Unfortunately,
given the market conditions Chase Home Finance has made the decision to
eliminate the Home Equity Channel. Effective end of day Friday May 16, 2008
Chase Home Equity will no longer accept applications for home equity
products. All new applications/registrations must be received by end of
day on Friday (5-16-08) and all pipeline deals must fund by 7/15/08. Rate
lock extensions will not be available.
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There is an elevated amount of reluctance from banks to lend, according to Boston Fed President Eric Rosengren, speaking Wednesday at the Boston Fed’s Basel II conference on New Challenges for Operational Risk Measurement and Management.
“The practices of risk management in general…
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Alan Greenspan, the former Fed reserve chief who many blame for the housing meltdown told audiences in Asia that he saw the bottom of the housing downturn as hitting sometime in early 2009 proving once again you can take the bull out of monetary policy but not out of the man. Greenspan’s remarks come as market sentiment seems to be improving over the dour mood the of the past few months.
According to Research Recap Fitch reported that they anticipate 80% of all subprime-related writedowns have been booked by the banks and institutions holding subprime-backed assets.
From Research Recap on Fitch’s analysis of subprime writedowns:
Further subrime-related ratings bank downgrades are likely to be minimal as global banks have already written down more than 80% of their losses from subprime mortgage assets, Fitch Ratings says in a Special Report.
Fitch estimates total market losses from subprime mortgage assets at $400 billion, though estimates may be as high as $550 billion, depending on the method of calculation used.
In addition Freddie Mac posted a less-than-expected loss for the quarter on the back of the credit mess, suggesting to some that the GSE’s revenue will be adequate to help power through losses related to the housing mess.
From Market Watch on Freddie Mac’s quarterly results:
Freddie Mac said it lost $151 million, or 66 cents a share, in the first quarter, compared to a loss of $133 million, or 46 cents a share, in the year-ago period. The company said difficult housing- and credit-market conditions were behind a $1.2 billion provision for credit losses taken in the latest quarter.However, analysts surveyed by FactSet Research had, on average, predicted that Freddie Mac would lose 91 cents a share for the first three months of 2008.
However, the upbeat sentiment belies some difficult truths that still face the market in the coming months and years. In the same article on the Freddie Mac quarter several disquieting facts were disclosed including the reduction in the capital cushion maintained by the mortgage giant and its admission that the “worst had yet to come” in terms of credit costs charged against it’s existing portfolio.
When that money is raised, Freddie Mac’s federal regulator said it will lower the excess-capital cushion on the company to 15% from 20%, with another cut to 10% after the company completes other steps including completion of registration with the Securities and Exchange Commission.“This does not mean we have seen the worst in credit costs, but it does mean that revenue growth will be significantly stronger than the growth in credit costs,” he wrote to clients.Richard Syron, Freddie Mac’s chief executive, warned investors that the company probably faces more tough times ahead as the housing market remains weak.“While our expectation is for continued weakness in the housing and economic environment to negatively impact our overall performance through the remainder of this year, we have put Freddie Mac on a better foundation to manage through the current cycle and emerge a successful, long-term competitor,” Syron said in a statement Wednesday.Moody’s Investors Service, meanwhile, downgraded Freddie Mac’s financial strength rating but affirmed the company’s Aaa senior and all other debt ratings.
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hi when my grandfather died land was split up one of my aunts deeded her portion my other aunt and my daddid not my grandmother also did not grandmother 20 acresaunt 18 acresaunt 18 acresdad 18 acres (passed away)before my grandmother passed away my aunt quit claimedall of the land from my grandmotherbut it was not my grandmothers to givemy grandmother was sick and did not knowwhat she was signingmy aunt told all of us my grandmother left no willand there was nothing left and we all got nothingi know my grandmother left a will she told me soright after my grandmother went into a homeher house was robbed so we were toldthank you
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As we discussed the other day in our post about MBIA’s $2.4 billion quarterly loss, the bond insurers are seemingly sitting on the edge of a cliff waiting for loan performance to deteriorate to a tipping point that pushes these companies in to insolvency. Warren Buffett himself questioned the business models of these bond insurers (PDF) who have taken very ‘thin’ positions in terms of exposure to mortgage risk.
This risk is particularly high in the second-mortgage insurance business as now many second mortgages are essentially non-collateralized loans against properties that are now valued at far less than when the original second-mortgage lien was written.
Moody’s apparently feels the same way as they have issued fresh warnings on the ratings of bond insurers. While this presentation on the bond insurers seems to point to plenty of reasons for concern MBIA is (of course) protesting the warnings.
From Market Watch:
Poor performance of second-lien residential mortgage-backed securities could put pressure on the credit ratings of bond insurers, Moody’s said on Tuesday.
But there are “significant” differences between the subprime second-lien mortgage securities that Moody’s is worried about and the prime second-lien mortgage securities that the bond insurer has guaranteed, MBIA said.Moody’s also said Tuesday that higher-than-expected losses on these types of securities could affect the amount of capital that some bond insurers need to keep their all-important AAA ratings.
MBIA countered that it’s unaware of any changes to capital requirements covering the securities it has guaranteed. “Nor do we believe any is warranted based on deal performance or expected losses,” the New York-based company said in a statement.
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could anyone explain to me what is andquot;30 yr Conv w/ PMIandquot; is? what is andquot;Convandquot;?
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Mortgage interest rates dropped as fears of inflation eased. Adjustable rate mortgages were helped the most. The Fed’s aggressive posture and track record for action (i.e. Bear Stearns, liquidity injections, rate cuts), and led by stability of the dollar and tamer-than-expected inflation data all helped the cause.
From Market Watch on mortgage rates:
The 30-year fixed-rate mortgage averaged 6.01% for the week ending May 15, down from last week’s 6.05% average, according to Freddie Mac’s weekly survey. The mortgage averaged 6.15% a year ago.
Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.57% this week, down from 5.67% last week. The ARM averaged 5.89% a year ago. And 1-year Treasury-indexed ARMs averaged 5.18% this week, down from last week’s 5.29% average. The ARM averaged 5.48% a year ago.To obtain the rates, the 30-year fixed-rate mortgage and the 5-year ARM required payment of an average 0.6 point. The 15-year fixed-rate mortgage required an average 0.5 point and the 1-year ARM required an average 0.7 point. A point is 1% of the mortgage amount, charged as prepaid interest.“Fed Chairman Bernanke indicated in a speech on May 13 that the Fed stands ready to continue to add liquidity to the markets,” Nothaft said in a news release. “On the same day, San Francisco Fed bank president Janet Yellen added that she anticipates inflation will slow as commodity prices level off in the second half of the year.”
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Weakness in U.S. industrial production is consistent with recessionary levels, economists said following the 0.7% decline in Thursday’s report from the Federal Reserve.
T.J. Marta, fixed income strategist from RBC Capital Markets, said the “collapse” resembles the turbulence seen during the 1990 recession, the 2001 recession, Hurricane Katrina, and the start of the Iraq War.
Michael Montgomery, economist at Global Insight, said there were…
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