Category Archives: Secondary

Ocwen Fails Loan Mod Compliance Test in Mortgage Settlement

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Ocwen Financial failed a test to determine whether it had notified borrowers of missing or incomplete documents for loan modifications in a timely manner, according to the national mortgage settlement monitor.

Joseph A. Smith Jr., the settlement monitor, plans to file a report Thursday with the U.S. District Court for the District of Columbia outlining corrective actions taken by Ocwen, which passed eight other tests.

Ocwen reported preliminary first-quarter earnings last week in which it said it does not expect to face any fines or actions from regulators that would have a material impact on its results.

In December, Smith launched an investigation of Ocwen saying he could not rely on the Atlanta servicer’s internal review process.

The retesting of metrics began last year after a whistleblower contacted Smith claiming that Ocwen was selecting its own samples of loan files instead of taking a statistical sample. Smith then created a hotline to allow any concerned employees to contact him.

The results of the current review by the independent accounting firm McGladrey show that Ocwen failed just one metric, on loan mod documentation, that it had previously claimed to have passed. The company passed eight other tests including one that its internal review group claimed to have failed on terminating force placed insurance agreements.

To put Ocwen’s results in perspective, last year, Green Tree Servicing failed eight tests during one testing period, prompting further scrutiny of nonbank servicers’ processes.

Ocwen has replaced an unnamed executive who had previously led the internal review group that was created to comply with terms of the 2012 national mortgage settlement, Smith said. The company also has reorganized its employees, adopted corporate governance principles and enhanced the monitor’s access to information, Smith said.

The settlement allows banks and servicers to correct all violations, and it only subjects them to financial penalties if their mistakes reach a specific “error threshold” after corrective actions have been taken. No bank or servicer has yet paid financial penalties for failing any of the 33 metrics being tested by independent reviewers working for Smith.

Ocwen said it is committed to being fully compliant with all the rules and regulations related to its business.

“We are pleased with the progress we have made so far working with the monitor, and we will continue to make every effort to improve all aspects of our compliance procedures and processes,” the company said in an emailed statement.

The 2012 national mortgage settlement with federal regulators and 49 state attorneys general resulted from servicers’ “robo-signing” foreclosure documents and other lapses. Ocwen became a party to the settlement after purchasing mortgage servicing rights from Residential Capital, the former lending arm of General Motors that later belonged to Ally Financial.

Article source: http://www.nationalmortgagenews.com/news/servicing/ocwen-fails-loan-mod-compliance-test-in-mortgage-settlement-1050237-1.html

Wall Street Sway Over Rental Boom Makes Landlord Prey

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A pioneer in the U.S. home-rental boom that grew out of the housing bust is becoming a takeover target.

American Residential Properties Inc. built up a portfolio of about 9,000 houses worth $1.3 billion over seven years. Now, the Scottsdale, Ariz.-based landlord is running out of options to raise money for more purchases. The company, with a market value of $600 million, may find its best bet is to sell out to one of the bigger firms in the market, such as Blackstone Group’s Invitation Homes or American Homes 4 Rent.

“The way to maximize shareholder value would be to sell themselves,” David Segall, an analyst at Green Street Advisors Inc. in Newport Beach, Calif., said in a phone interview. “They have no source of new capital, so either they just sit there with their small portfolio or they have to face the music at some point and make the decision of trying to sell themselves.”

Owners of single-family rentals are consolidating and buying in bulk as the pool of low-cost foreclosures shrinks and U.S. home prices rebound. American Residential may attract suitors because its shares are trading below their initial public offering price and amount to less than the value of the companys real estate, Segall said.

American Residential Chief Executive Officer Stephen Schmitz said during an April 21 interview in Miami Beach that while the company hasn’t put itself up for sale, “we do everything to maximize shareholder value.”

Invitation Homes CEO John Bartling, whose company owns about 47,000 homes, declined to comment on whether it would consider buying American Residential. David Singelyn, CEO of American Homes 4 Rent, the largest publicly traded single-family landlord, with more than 36,000 homes, also declined.

Investors who purchased at least 10 homes a year have spent about $68 billion on 528,000 single-family houses since 2011, according to Morgan Stanley analyst Haendel St. Juste, making a corporate business out of a space dominated by mom-and-pops. American Residential is among four U.S. landlords that have gone public as real estate investment trusts since 2012. Eight companies have issued $9.8 billion in debt backed by mortgages on almost 70,000 homes.

Earlier this year, Tricon Capital Group Inc. agreed to pay $150 million for almost 1,400 rentals, while Silver Bay Realty Trust Corp. bought a portfolio of more than 2,400 homes.

Demand for rentals continues to rise. Owners of more than 9 million homes lost property through foreclosure or distressed sales from 2006 through 2014, according to the National Association of Realtors. The U.S. homeownership rate fell to 63.7% in the first quarter, down from a 2004 peak of 69.2% and the lowest since 1993, the Census Bureau reported April 28.

American Residential has slowed home purchases even as rivals continue to expand, because it doesn’t want to take on too much leverage and “we’re not going to go out and issue equity at these prices,” Schmitz said during a March 12 conference call. For now, the company is mostly focused on improving cash flow and the efficiency of its current portfolio, he said.

The company’s net asset value, calculated from estimates of stabilized net operating income and capitalization rates, is $23 a share, St. Juste of Morgan Stanley said in a March note. American Residential, which went public at $21 a share in May 2013, never closed above that level and ended Tuesday at $18.52 in New York. The company reports first-quarter earnings on Wednesday after the close of the market.

Pressure to boost the stock may come from Jonathan Litt, founder of activist real estate hedge fund Land Buildings Investment Management. The company bought 300,000 American Residential shares last year. Litt, who has pushed this year for changes at MGM Resorts International and Macerich Co., said during American Residentials last quarterly conference call that it was trading “at a 30-some-odd percent discount” to its net asset value.

“To me, the next step would be to sell some assets and buy back stock,” he said.

Litt declined a request May 1 for any further comment, according to his spokesman Dan Zacchei.

Green Street’s Segall said American Residentials portfolio may not be a good fit for either Invitation Homes or American Homes 4 Rent, because they have preferred higher-priced properties than most of the smaller firms homes.

Even so, mergers among single-family rental companies are likely to follow the pattern of apartment real estate investment trusts, the most similar asset class in the industry, according to Jeffrey Langbaum, a Bloomberg Intelligence analyst. The sales of Colonial Properties Trust to Mid-America Apartment Communities Inc., BRE Properties Inc. to Essex Property Trust Inc. and Associated Estates Realty Corp. to Brookfield Asset Management Inc. are examples of big apartment players consuming smaller competitors.

“The smaller companies that are struggling to grow and are underperforming could be takeout candidates,” Langbaum said.

Article source: http://www.nationalmortgagenews.com/news/distressed/wall-street-sway-over-rental-boom-makes-landlord-prey-1050229-1.html

Homeownership Moving Further Away for Poorest Americans: Zillow

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For all the talk about an economic and housing recovery, homeownership remains out of reach for a third of Americans, a new report from real estate data firm Zillow found.

Increased home prices have far outpaced wage growth amongst Americans in the bottom third of income over the last 15 years. Home value has grown 41% since 2000, as opposed to a 15% increase in wages for U.S. workers at our below the 33rd percentile of wages.

Zillow said in its report that the problem of affordability had become exacerbated over the last two years, but did not provide specific numbers. Still, the problem appears to be confined mainly towards those in the lower tiers of income.

“Low interest rates and still-recovering home values makes homeownership more affordable than renting for those who make median to high incomes,” the company said in its report.

Article source: http://www.nationalmortgagenews.com/news/origination/homeownership-moving-further-away-for-poorest-americans-zillow-1050217-1.html

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