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Paul R. Spenard, CMPS
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Sunday, March 28, 2010
Friday, March 26, 2010
Feds Increase Incentives for HAFA Short Sales
Feds Increase Incentives for HAFA Short Sales
The Treasury Department has increased the incentives for servicers, investors and distressed homeowners to participate in an expedited short sales program that goes into effect April 5.Under the Home Affordable Foreclosure Alternative program, the servicer can receive a $1,500 incentive and the homeowner can receive $3,000 when a short sale or deed-in-lieu transaction is completed. "That $3,000 is going to turn some heads," said Travis Olsen, chief operating officer of Loan Resolution Corp. "That is going to make it truly worthwhile" for the borrower to complete a short sale, he added. LRC specializes in short sales.
Last December, Treasury proposed to pay the servicer only $1,000 and the homeowner $1,500 for relocation costs. Treasury also doubled the maximum payoff for subordinate lien holders that relinquish their claims and the reimbursement for first mortgage investors. Now the investor can pay the second lien holder up to 6% of the loan amount with a $6,000 cap and be reimbursed on a one-for-three match for up to $2,000. Originally, Treasury capped reimbursement at $1,000 and the payoff at $3,000. Subordinate liens must be extinguished under HAFA so the property can be sold and the former homeowner can walk away debt free.
The Week in Review
In an odd leap, long-term Treasury yields blew up, Wednesday the worst single day in nine months. The 10-year T-note stopped at 3.88%, a level touched for the fifth time since last June, but the violence of this move threatens upward breakout. Meanwhile, mortgages held fairly well, inside the 5.25% top that has held since August.
The peculiar part: big sell-offs like this are driven by good economic news, but that’s not what we got. February sales of new and existing homes fell (new ones at the lowest pace since stats began in 1963, 303,000 annualized), and unsold inventory rose.
Unemployment claims fell to 442,000 last week, but must drop well into the 300s to mark new hiring. The BLS says unemployment in February rose in 27 states, fell in 7, and 16 were flat. California at 12.5% unemployed rather more than offsets North Dakota at 4.1%, and Nebraska and South Dakota at 4.8%. Four states -- Florida, Nevada, North Carolina, and Georgia -- set all-time highs for percentages out of work.
So, why the rate blow-up? Three theories, so far. The first: the healthcare bill. Nobody in the credit markets believes its revenue assumptions, nor does anyone believe the expense forecast. No politics involved! If you work in the credit markets and trust government promises, your career will be short. Centerline market estimate for healthcare’s annual deficit addition: $50-$100 billion. However, no matter how accurate, that’s a long-term worry. Something short-term happened here.
Theory two: national debt of all kinds is in trouble, budgets from Club Med to Japan immensely out of balance, all selling mountains of new paper. Maybe, but the Europeans seem to be kicking the Grecian urn down the autobahn, no immediate crisis in prospect. Besides, that mess is pushing cash to dollars and Treasurys.
Theory three: The Fed is pulling the plug. The Fed has been buying MBS and associated Fannie-Freddie debt for fifteen months, the total roughly $1.4 trillion. This winter everyone wondered what would happen to mortgage rates when the Fed stops buying next week, but we’ve been watching the wrong market.
The Fed bought those Agency MBS from super-cautious investors who buy only government paper. The Fed’s buys had three effects, one indirect: they did pull down mortgage-Treasury spreads, and the buys did provide “quantitative easing” (the Fed shooting money directly into the economy, bypassing busted banks that can’t make loans). The third effect that most of us missed: the Fed’s buys soaked up last year’s entire federal deficit, pulling down Treasury yields themselves.
The mechanism: lift $1.4 trillion in government paper out of that market, and investors then used the cash to buy other government paper. Treasurys.
Next week the Fed will stop, but the Treasury will not: it will continue to sell bonds at a pace near $150 billion per month. Who will buy those bonds, and the flood issued by governments from Athens to Tokyo, and at what rates have been mysteries that will soon find answers. The Fed fears overdoing its quantitative easing: possibly inflationary, possibly generating backlash from excessive use of power, or worst of all, breeding accusations of round-heeled “monetizing” of government indiscipline.
If the Fed is out, the nightmare-dilemma end game has arrived. Cut the Keynesian deficit while the recession runs on? Or allow that spending to drive up interest rates, and maybe do more damage than fiscal discipline would do?
I think the Fed mistakes putting down panic for recovery, while we are still in a slow-motion landslide in asset values. Nothing but low rates will stop the slide. However, for the Fed to stay in the game a while longer, a commitment to fiscal discipline by Congress and Administration would be mandatory.
How different all of this might look if Mr. Obama had reversed priorities early last year: appointed a bi-partisan commission on healthcare, and put all of his momentum and majority behind getting our books in order.
by: Lou Barnes
The peculiar part: big sell-offs like this are driven by good economic news, but that’s not what we got. February sales of new and existing homes fell (new ones at the lowest pace since stats began in 1963, 303,000 annualized), and unsold inventory rose.
Unemployment claims fell to 442,000 last week, but must drop well into the 300s to mark new hiring. The BLS says unemployment in February rose in 27 states, fell in 7, and 16 were flat. California at 12.5% unemployed rather more than offsets North Dakota at 4.1%, and Nebraska and South Dakota at 4.8%. Four states -- Florida, Nevada, North Carolina, and Georgia -- set all-time highs for percentages out of work.
So, why the rate blow-up? Three theories, so far. The first: the healthcare bill. Nobody in the credit markets believes its revenue assumptions, nor does anyone believe the expense forecast. No politics involved! If you work in the credit markets and trust government promises, your career will be short. Centerline market estimate for healthcare’s annual deficit addition: $50-$100 billion. However, no matter how accurate, that’s a long-term worry. Something short-term happened here.
Theory two: national debt of all kinds is in trouble, budgets from Club Med to Japan immensely out of balance, all selling mountains of new paper. Maybe, but the Europeans seem to be kicking the Grecian urn down the autobahn, no immediate crisis in prospect. Besides, that mess is pushing cash to dollars and Treasurys.
Theory three: The Fed is pulling the plug. The Fed has been buying MBS and associated Fannie-Freddie debt for fifteen months, the total roughly $1.4 trillion. This winter everyone wondered what would happen to mortgage rates when the Fed stops buying next week, but we’ve been watching the wrong market.
The Fed bought those Agency MBS from super-cautious investors who buy only government paper. The Fed’s buys had three effects, one indirect: they did pull down mortgage-Treasury spreads, and the buys did provide “quantitative easing” (the Fed shooting money directly into the economy, bypassing busted banks that can’t make loans). The third effect that most of us missed: the Fed’s buys soaked up last year’s entire federal deficit, pulling down Treasury yields themselves.
The mechanism: lift $1.4 trillion in government paper out of that market, and investors then used the cash to buy other government paper. Treasurys.
Next week the Fed will stop, but the Treasury will not: it will continue to sell bonds at a pace near $150 billion per month. Who will buy those bonds, and the flood issued by governments from Athens to Tokyo, and at what rates have been mysteries that will soon find answers. The Fed fears overdoing its quantitative easing: possibly inflationary, possibly generating backlash from excessive use of power, or worst of all, breeding accusations of round-heeled “monetizing” of government indiscipline.
If the Fed is out, the nightmare-dilemma end game has arrived. Cut the Keynesian deficit while the recession runs on? Or allow that spending to drive up interest rates, and maybe do more damage than fiscal discipline would do?
I think the Fed mistakes putting down panic for recovery, while we are still in a slow-motion landslide in asset values. Nothing but low rates will stop the slide. However, for the Fed to stay in the game a while longer, a commitment to fiscal discipline by Congress and Administration would be mandatory.
How different all of this might look if Mr. Obama had reversed priorities early last year: appointed a bi-partisan commission on healthcare, and put all of his momentum and majority behind getting our books in order.
by: Lou Barnes
Mortgage News Brief
HAMP Changes Encourage Principal Writedowns
The Obama administration is expanding its flagging HAMP program to address the two main drivers of foreclosures-job loss and underwater mortgages where borrowers owe more on their loan than the property is worth.
New FHA Refi Program Tackles Underwater Mortgages
The Federal Housing Administration is taking another crack at creating a refinancing program that requires principal writedowns and gives investors an option to cut their losses on underwater conventional loans.
California Extends $10,000 Homebuyer Tax Credit
California Gov. Arnold Schwarzenegger has signed legislation that re-establishes and extends the state's $10,000 tax credit for homebuyers, a program that proved so popular last year that it ran out of money by the end of June, eight months before it was set to expire.
Regulators Put Pressure on First and Second Lien Holders
Federal regulators are working on ways to match holders of delinquent and/or modified first mortgages with the holders of seconds in an effort to improve communication between the two parties so they can restructure loans.
Major Banks Summoned to Testify On 2nd Lien Mods
Executive of major banks will be testifying before the House Financial Services Committee soon on their efforts to modify and write down second liens.
Fannie Completes Second Bulk REO Auction of 2010
Fannie Mae recently completed a bulk auction of 212 real estate owned properties, its second such offering of the year.
American General in the Market with Legacy Mortgages
American General Financial Services, a subsidiary of AIG, will be coming out with two deals backed by legacy mortgage assets within the next two weeks.
Michigan Thrift Raising $250MM in Stock Offering
Flagstar Bancorp Inc. has priced a public offering of 500 million shares of common stock at $0.50 per share, which is below the stock's 52-week low.
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The Obama administration is expanding its flagging HAMP program to address the two main drivers of foreclosures-job loss and underwater mortgages where borrowers owe more on their loan than the property is worth.
New FHA Refi Program Tackles Underwater Mortgages
The Federal Housing Administration is taking another crack at creating a refinancing program that requires principal writedowns and gives investors an option to cut their losses on underwater conventional loans.
California Extends $10,000 Homebuyer Tax Credit
California Gov. Arnold Schwarzenegger has signed legislation that re-establishes and extends the state's $10,000 tax credit for homebuyers, a program that proved so popular last year that it ran out of money by the end of June, eight months before it was set to expire.
Regulators Put Pressure on First and Second Lien Holders
Federal regulators are working on ways to match holders of delinquent and/or modified first mortgages with the holders of seconds in an effort to improve communication between the two parties so they can restructure loans.
Major Banks Summoned to Testify On 2nd Lien Mods
Executive of major banks will be testifying before the House Financial Services Committee soon on their efforts to modify and write down second liens.
Fannie Completes Second Bulk REO Auction of 2010
Fannie Mae recently completed a bulk auction of 212 real estate owned properties, its second such offering of the year.
American General in the Market with Legacy Mortgages
American General Financial Services, a subsidiary of AIG, will be coming out with two deals backed by legacy mortgage assets within the next two weeks.
Michigan Thrift Raising $250MM in Stock Offering
Flagstar Bancorp Inc. has priced a public offering of 500 million shares of common stock at $0.50 per share, which is below the stock's 52-week low.
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