To make it into the ranks of the top 40 servicers, according
to Inside Mortgage Finance, a company needed $20 billion of servicing on their
books. Countrywide and Wells each have about $1.5 trillion (Bank of America has
about $520 billion). These servicers will continue to face a high volume of
ARM resets through most of 2008, and many of these resetting loans are of weak
credit quality originated during a period of very aggressive underwriting in
2006. Many expect delinquencies to continue higher due to expectations of
continued problems in the housing and credit markets and challenges posed by
the portfolio of ARM loans due to reset. Lower rates may help, as will Fannie
& Freddie & FHA changes. Servicers are likely to respond with
additional loss mitigation efforts, but foreclosures, REOs and losses will
nevertheless rise as many borrowers will not qualify for loss mitigation
options and even some who do will not be able to continue paying under the new
terms. If there is a “good” side, prepayment rates are likely to
remain low. But servicing loans is becoming more expensive. Servicers
continue to increase staffing levels in loss mitigation, foreclosure, and REO
management. Servicers with smaller portfolios may be unwilling or unable to
make the necessary investments and may therefore be at a competitive
disadvantage, and the large may become larger. Expect more consolidation in the
mortgage servicing industry in 2008.
The California Housing Finance Agency, known as
CalHFA, announced that for conventional loan reservations done after March 7th,
for loans with a LTV greater than 95%, CalHFA will require the borrowers to
have a minimum FICO score of 680. Loans with an LTV equal to or less than 95%
will require a minimum credit score of 620.
“The spread between mortgage and Treasury yields is on
everyone’s watch list: why is the 10-yr doing ___ and mortgage prices
aren’t doing anything? Last week 30-year mortgages were almost 3.00% higher
than Treasuries! Normally in the mid-1% range, are today’s borrowers
really 3% “riskier”? Some of this is due to lack of investor
demand, while some analysts feel that when volatility declines, mortgage rates
are likely to improve on a relative basis. Wall Street is seeing the volume
of ARM production rise relative to fixed-rate production. Who can blame
borrowers when the yield curve is this steep? FNMA reported that 5/1
adjustables accounted for 2/3 of the sales, given that they’re up to 1%
lower in rate.
In an article for the New York Times, Alan Binder brought up
a drastic measure that the federal government may resort to in order to resolve
the huge number of foreclosures: the Home Owners’ Loan Corporation, which
ran from 1933 to 1951. Established to help distressed families avert
foreclosures by replacing mortgages that were in or near default with new ones
that homeowners could afford, the HOLC did so by buying old mortgages from
banks in exchange for US government bonds and giving the homeowners new loans.
The HOLC financed itself by borrowing from capital markets and the Treasury.
Back then, almost 20% mortgages in America became owned by the HOLC!
The primary targets were owner-occupied, primary residences, free of fraud.
The march toward lower rates continued yesterday, and again
today (mortgages are .125 better in price, and the 10-yr is down to 3.60%).
U.S. Personal Income and Personal Consumption in January rose more than
expected, but inflation ate up a bigger portion of these as a key price index
also rose. The Commerce Department reported that PI was +.3% and PC was +.4%,
both higher than the +.2% that was expected. The “personal consumption
expenditure price index”, a key measure of inflation, was +.4% in January
after an upwardly revised increase of 0.3 percent in December. Excluding
volatile food and energy costs, the personal consumption expenditure index rose
0.3 percent - in line with analysts' expectations and the steepest monthly rise
since September 2007. The personal saving rate, meanwhile, stood at negative
0.1 percent, marking the third straight month in negative territory.
A man walks in a bank, gets in line and when it is his turn
he pulls out a gun...and robs the bank! Just to make sure he leaves no
witnesses. He Turns around and asks the next customer in line. "Did you
see me rob this bank?" The customer replies, "Yes!" The bank
robber raises his gun, points it to the customer's head and BANG!!!
He quickly moves to the next customer in line and says to
the man, "Did you see me rob this bank?"
The man calmly responds ... "No, but my wife did!"
Rob
