Category Archives: Commercial

Freddie Debt Eases Derivative Use That Prompted New Bailout Talk

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Freddie Mac’s latest sale of risk-sharing bonds, its biggest yet, was structured in a way that will help reduce the earnings volatility that’s added to concerns that the mortgage giant may again need to tap taxpayer funds.

That’s because the initial version of the notes — through which it’s shifting risk to investors on more than 10% of its $1.6 trillion in mortgage guarantees — needed to be accounted for as derivatives and subject to regular valuations that affected profits, according to Mike Reynolds, a vice president of credit-risk transfer at Freddie Mac.

The original treatment “can create income-statement volatility,” Reynolds said in a telephone interview. The new bonds aren’t considered derivatives, so they “do not have that volatility. We see that as a more sustainable vehicle to be able to grow the numbers in a large way.”

Freddie Mac and competitor Fannie Mae, which were seized by the U.S. in 2008, still operate much like normal companies in reporting earnings, which are used to determine how much they owe or will take from the Treasury. Freddie Mac posted $3.4 billion in derivatives losses in the fourth quarter largely tied to a drop in interest rates, which because of accounting rules weren’t offset by changes in the values of assets being hedged.

After the period in which Freddie Mac’s profits fell to $227 million from $8.6 billion, a watchdog for its overseer said last month that Freddie Mac and Fannie Mae’s ability to keep posting profits shouldn’t be presumed. Shareholders argue that the companies should be allowed to retain earnings now being passed on to the U.S. to address the risk of quarterly losses requiring more draws from their Treasury bailout lines.

Freddie Mac, which has paid $21 billion more than the $71 billion it took during the housing slump, and Fannie Mae began turning to the risk-sharing deals in 2013 to reduce taxpayer dangers. At the same time, buying the protection can lower Freddie Mac’s income because it makes regular payments on the debt, Reynolds said.

With its latest deal Wednesday, the structure was changed so that investors can see their principal erased by amounts generally equivalent to losses suffered on its guarantees. Previously, losses were based on fixed percentages for each default.

While some investors complained about an adjustment that left buyers at risk from loan modifications, the deal’s size was increased to $1 billion from $720 million and more than 100 firms put in orders before the yields at which the debt was being marketed were lowered, according to Reynolds.

Freddie Mac sold the securities that are first in line to suffer losses at yields that float 9.2 percentage points above a benchmark rate, the company said. That compares with a potential spread as high as 10.25 percentage points in earlier marketing and the yield premium of 10.75 percentage points on a similar slice of its previous deal last month.

Regarding loan modifications, Reynolds said many investors see Freddie Mac’s oversight of outstanding loans as “better than all the alternatives” and that it has incentives to properly manage policies on homeowner aid because it also shares the risks.

“We always have skin in the game,” he said. “We always have money on the line.”

Article source: http://www.nationalmortgagenews.com/news/secondary/freddie-debt-eases-derivative-use-that-prompted-new-bailout-talk-1049453-1.html

Mortgage Rates Drop Slightly; Average 30-Year at 3.65%

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Mortgage rates have dropped slightly, Freddie Mac’s survey of lenders shows, with the average for a 30-year fixed home loan at 3.65%, down from 3.67% in last week’s report.

The average rate for a 15-year fixed mortgage edged down from 2.94% to 2.92%, and the start rate for a home loan that adjusts annually fell to 2.44% from 2.46%.

The weekly report, released Thursday, is the fifth in a row to show the benchmark 30-year loan leveled off at less than 3.75%, remarkably cheap home financing by historical standards.

The issue for many borrowers has been qualifying for the favorable rates.

Banks generally have kept credit standards tighter than required for loans guaranteed by Freddie Mac and its sister company, Fannie Mae, which have been wards of the government since the financial crisis.

Many borrowers with credit scores under 700 and less than 20% down payments instead have turned to loans backed by the Federal Housing Administration.

Such FHA loans require hefty insurance payments, which, unlike the private mortgage insurance sometimes added to Fannie and Freddie loans, cannot be canceled if rising home prices cause the borrower’s equity to rise above 20%.

Freddie Mac asks lenders early each week about the terms that they are offering to solid borrowers seeking mortgages of up to $417,000 that conform to guidelines for loans guaranteed by Freddie and Fannie.

The borrowers would have paid a little more than half of 1% of the loan balance in upfront lender fees and discount points to obtain the rates.

Payments for such services as appraisals and title insurance are not included.

The survey provides a consistent gauge of mortgage trends, but actual rates adjust constantly and are influenced by many factors.

The borrowers’ credit histories, income and debt loads affect the rates they may be offered.

Additional factors include whether the borrowers opt for zero-cost loans at higher rates or pay extra to lenders initially to lower the rates.

Article source: http://www.nationalmortgagenews.com/news/origination/mortgage_rates_drop_slightly_average_30_year_at_365-1049469-1.html

Stock Yards in Ky. Posts Higher Profit on Surge in Mortgage Revenue

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Stock Yards Bancorp in Louisville, Ky., reported much better-than-expected earnings in the first quarter one the strength of higher mortgage revenue and net interest income.

The $2.5 billion-asset company said Wednesday that net income climbed 13% from the same period last year, to $9.3 million. Earnings per share of 62 cents topped by 6 cents the average estimates of analysts polled by Bloomberg.

Noninterest income grew 2%, to $9.7 million, mostly on a 41% increase in revenue from Stock Yards’ mortgage banking business.

Though the net interest margin fell 4 basis points, to 3.72%, net interest income edged up 6.5% year-over-year, to $21.6 million, as the total loans increased 8.4%, to nearly $1.9 billion. Still, in a news release, management said it was “disappointed” in the pace of the loan growth and that it expects demand to pick up this year.

Credit quality also improved, as net chargeoffs fell 82% from a year earlier, to $38,000.

Some of these gains were tempered by a 1.7% rise in noninterest expenses, to $17.8 million. The increase was a result of a small loss on the disposition of foreclosed properties, versus a gain in 2014.

Article source: http://www.nationalmortgagenews.com/news/secondary/stock-yards-in-ky-posts-higher-profit-on-surge-in-mortgage-revenue-1049383-1.html

California Realtors Happier With Lenders: Survey

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Real estate agents’ satisfaction with lenders and the underwriting process is rising as distressed home sales decrease, according to the latest survey from the California Association of Realtors.

CAR’s Lender Performance Index recorded an overall score for the lending process of 66 at the end of 2014, up from 56 a year earlier, according to an April 20 press release. An improved housing market helped push the growing approval.

The satisfaction rating for all transactions, including distressed sales, also improved to a 3.7 on a scale of 1 to 5, with 5 being “very satisfied.” In 2013, the rating stood at 3.2. Real estate agents’ opinions on the ease of closing a transaction has also improved only 20% rated it as “extremely difficult” in 2014 versus nearly 50% in 2011. The shift from distressed to nondistressed sales has helped to improve lenders’ performance in this area, the association said in the release.

Additionally, the group’s Underwriting Standards Index also showed improvement, though CAR noted that room to progress remained. The USI measured at 23 in 2014, up year-over-year from 17, due to a lack of tightening in underwriting standards.

CAR’s lender performance survey has been conducted since 2010.

Article source: http://www.nationalmortgagenews.com/news/origination/california-realtors-happier-with-lenders-survey-1049259-1.html

Radian, MGIC Rally as U.S. Eases Rules on Crisis-Era Mortgages

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Radian Group Inc. and MGIC Investment Corp. surged in New York trading after a U.S. regulator softened mortgage insurers’ standards on some loans.

Radian jumped 5.9% to $18.16 at 10:02 a.m., the most since August. Milwaukee-based MGIC climbed 5.1%.

The Federal Housing Finance Agency announced rules Friday that eased capital requirements on some loans from 2005 through 2008, when compared with measures that were proposed by the regulator in July. Mortgage insurers were hobbled by guarantees issued in those years, because housing prices collapsed soon after. The final rules grant relief on loans from that period in cases where borrowers steadily met their commitments.

“We view it as a big win” for MGIC and Philadelphia-based Radian, Darren Marcus and Harry Fong of MKM Partners said in a note to clients Monday.

Mortgage insurers cover losses when homeowners default. Fannie Mae and Freddie Mac, the government-owned, mortgage-investment companies that are overseen by the FHFA, require insurance when homeowners make down payments below 20%.

The new standards are designed to ensure there’s no repeat of what happened after the financial crisis, when a plunge in home prices pushed about half the industry out of the business. Fannie Mae and Freddie Mac were saddled with losses when insurers were unable to honor their obligations.

Mortgage insurers that began selling coverage after the depths of the financial crisis had more modest moves in New York trading. Essent Group Ltd. slipped 0.2%. NMI Holdings Inc. rose 2%.

Radian, which sold a unit this month for about $800 million, could comply with the new capital rules immediately by using about $330 million in liquid assets, the insurer said Friday. The standards are effective Dec. 31, and MGIC said it will probably be in compliance by then, though there was a shortfall of about $230 million as of March 31.

Genworth Financial Inc. said it had a shortfall of as much as $700 million and plans to meet the standards by the effective date. The Richmond, Va.-based company, which also sells life insurance and long-term care coverage, dropped 0.8%.

Article source: http://www.nationalmortgagenews.com/news/servicing/radian-mgic-rally-as-us-eases-rules-on-crisis-era-mortgages-1049184-1.html

People Movers of the Week: April 17

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DISTRICT OF COLUMBIA

WASHINGTON

The Mortgage Bankers Association appointed Bradley Padratzik as director of member engagement.

Prior to joining MBA, Padratzik spent his career in sales and business development, including time at LendersOne, a national cooperative for independent mortgage bankers.

He brings nearly two decades of experience in sales, analysis, account development and vendor relationship management experience to the MBA.

MASSACHUSETTS

DANVERS

Beatrice Tilley has joined Mortgage Network Inc. as a regional operations manager in the company’s Mount Laurel, N.J., office.

Tilley will be responsible for operations and underwriting for the mid-Atlantic region.

Most recently, she served as senior divisional operations manager for Everbank.

Tilley held similar responsibilities as regional fulfillment director for MetLife Home Loans and as senior vice president, director of operations for Gateway Funding Diversified Mortgage Services.

John Harrington has also joined Mortgage Network as a sales manager in the company’s Plymouth, Mass., branch office.

Harrington will be responsible for serving borrowers and homeowners throughout the South Shore area.

He brings to Mortgage Network 16 years of mortgage banking experience in the South Shore area and most recently served as a sales manager at First Eastern Mortgage.

MINNESOTA

MINNEAPOLIS

BetterLoanOfficers.com said that industry veteran A.R. Smith has joined the company as president and chief operating officer.

Most recently, she was the co-founder and president of TVMA Inc./TeraVerde Management Advisors, where she pioneered its mortgage banking technology consulting and advisory services.

Previously, Smith served as vice president of mortgage lending at Parent Federal Savings Bank, president of Keystone National Bank, and co-founder, president and COO of American Home Bank.

The company also hired Brian Karoff to become its director of digital.

Karoff, a veteran of the digital marketing space, will control all aspects of BetterLoanOfficers.com’s software development, digital marketing implementation and marketing team management.

NEW YORK

UNIONDALE

Arbor Commercial Mortgage appointed Ben Truitt as director, FHA in the company’s Denver office.

A 17-year commercial real estate finance veteran, Truitt will be responsible for providing capital for the refinance, acquisition and construction of multifamily housing and senior housing.

Prior to joining Arbor, he began his commercial lending career as an originator with GMAC Commercial Mortgage.

Truitt has also served through various roles with GMAC, PNC Bank, Red Stone and AmeriSphere.

PENNSYLVANIA

PITTSBURGH

ServiceLink said that Tony Ebers has joined the company as its new division president, originations.

In his new role, he will be part of the ServiceLink executive leadership team and be responsible for the strategy, operations, and growth of the company’s entire originations business.

Ebers has more than 25 years of experience, most recently serving as the executive vice president for mortgage lending and servicing at OneWest Bank.

TEXAS

HOUSTON

Stewart hired Brad Rable as chief information officer to help guide the company’s information technology transformation.

Rable most recently served as an executive partner with Gartner Executive Programs.

Prior roles include serving as executive vice president, chief information officer and chief strategy officer for AIG/United Guaranty where he lead the technology and product development divisions as well as the innovation team that launched the AIG Mortgage Advisory Co.

SUGAR LAND

Valuation Partners hired Tim Bartek as vice president, national account executive, to expand sales in the Eastern U.S. region.

Bartek brings to Valuation Partners more than 20 years of mortgage industry sales and loan fulfillment experience.

Most recently he served as vice president of account management at PC Lender.

Previously, he held executive positions at Lender Processing Services, Integra Software Systems and Gallagher Financial Systems.

Are you a mortgage professional who recently changed jobs? Let us know! Send your announcement and photo (if available) to Glenn McCullom at glenn.mccullom@sourcemedia.com.

Article source: http://www.nationalmortgagenews.com/news/people/people-movers-of-the-week-april-17-1048974-1.html

Interest Rates Hold Steady Near 2015 Lows

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Interest rates remained stable as the real estate industry eyes the start of spring home-buying season, according to the Freddie Mac Primary Mortgage Market Survey.

Freddie Mac’s survey reported that the average 30-year fixed-rate mortgage barely edged up this week to 3.67% from 3.66% the week prior, according to an April 16 news release. This figure is 60 basis points below the rate during the same period in 2014.

For 15-year fixed-rate mortgages, the average rate also rose by 1 basis point to 2.94%. At this same time in 2014, 15-year FRMs were again higher at an average rate of 3.33%.

The average rate for a five-year Treasury-indexed hybrid adjustable-rate mortgage rose by a higher amount week-to-week to 2.88% from 2.83%. The one-year Treasury-indexed adjustable-rate mortgage remained unchanged at 2.46%.

A “light week” of economic data explained the lull in interest rates, according to Freddie Mac deputy chief economist Len Kiefer.

Article source: http://www.nationalmortgagenews.com/news/origination/interest-rates-hold-steady-near-2015-lows-1048895-1.html

CFPB Clarifies Counseling on High-Cost Mortgages

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The Consumer Financial Protection Bureau issued a final interpretive rule Wednesday that clarifies its housing counseling requirements with respect to high-cost loans.

The Truth in Lending Act (Reg Z) requires precounseling before a lender can offer a borrower a mortgage with high fees and rates as defined by the Home Owners Equity Protection Act.

According to the agency, lenders can rely on Department of Housing and Urban Development-approved counselors to advise borrowers who are considering a high cost mortgage. HUD-approved counselors are required to go over the consumer’s budget to see if they can afford the payments on a high cost mortgage.

“To the extent that a counselor from a HUD-approved counseling agency” fulfills that roll, “the housing counseling requirement is met,” according to the final rule.

Lenders can use the CFPB’s online tool to provide mortgage applicants with a list of local housing counselors or generate their own lists using the same HUD data that the CFPB uses to generate its lists.

The final rule, which goes into effect as soon as it is published in the Federal Register, includes instructions for lenders to build their own housing counseling lists.

Lenders are required to list at least ten housing counseling agencies to ensure loan applicants have a “thorough and diverse list of counseling options,” the CFPB final rule says.

“Buying a home is often the largest financial decision in a consumer’s lifetime, and we want to ensure that consumers can access the independent and informed advice they deserve before making that decision,” said CFPB Director Richard Cordray in a press release. “Housing counselors are a crucial source of that helpful advice. We will continue to work to improve the home-buying experience for consumers, and today’s interpretive rule will help industry comply with these important protections.”

Article source: http://www.nationalmortgagenews.com/news/regulation/cfpb-clarifies-counseling-on-high-cost-mortgages-1048793-1.html

Zillow Drops as Forecast Falls Short on Trulia Integration

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Zillow Group Inc. dropped after giving a 2015 revenue forecast that fell short, blaming delays in regulatory approval for its purchase of rival real estate website Trulia Inc.

The stock fell 3.2% to $89.93 at 11:08 a.m. in New York. The shares earlier slumped as much as 13% for the biggest intraday drop in almost two and a half years after being briefly halted.

“2015 is a transition year and we’re trending a couple quarters behind where we’d like to be, due to the protracted FTC approval process which only ended two months ago,” Chief Executive Officer Spencer Rascoff said on a conference call to update on Zillow’s progress since the deal closed on Feb. 17.

The real estate website expects pro-forma revenue of about $690 million this year, with earnings before interest, taxes, depreciation and amortization of $80 million to $85 million, Rascoff said. The company only gave pro-forma numbers, which assume the Trulia deal had would have closed at the start of the year. Analysts anticipated revenue of $733 million, the average of estimates compiled by Bloomberg.

The company bought Trulia for $2.5 billion including stock-based compensation, reflecting a decline in Zillow’s share price since the agreement was signed in July.

Investor Kevin Stadtler, president of Stadtler Capital Management in Fort Worth, Texas, said he’s buying additional shares on today’s dip because of the long-term prospects of the company. Zillow is a useful tool for real estate buyers, sellers and agents, and will benefit from the improving economy, Stadtler said, declining to say how many shares he owns.

Zillow will provide a formal earnings outlook when it releases first-quarter results in mid-May.

Article source: http://www.nationalmortgagenews.com/news/secondary/zillow-drops-as-forecast-falls-short-on-trulia-integration-1048663-1.html

Wells Fargo Beats Estimates as Lower Rates Spur Mortgage Lending

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Wells Fargo Co., the most valuable U.S. bank, posted profit that beat analysts’ estimates as lower interest rates spurred more borrowers to purchase homes or refinance debt.

First-quarter net income fell 1.5% to $5.8 billion, or $1.04 a share, from $5.89 billion, or $1.05, a year earlier, the San Francisco-based company said Tuesday in a statement. The average estimate of 24 analysts surveyed by Bloomberg was for profit of 98 cents a share. Net interest margin dropped below 3% for the first time since the 1990s.

“The high end of the mortgage market, the larger-balance loans, are doing better than the run-of-the-mill loans,” Jennifer Thompson, an analyst at Portales Partners in New York, said in an interview before the results were released. The bank is “well positioned” for that type lending, she said.

Chief Executive John Stumpf is searching for more revenue while trying to cap expenses as he awaits higher interest rates from the Federal Reserve, which most economists expect to act later this year. The bank’s efficiency ratio, a measure of how much it costs to bring in a dollar of revenue, has stayed at the top end of management’s 55% to 59% range.

Chief Financial Officer John Shrewsberry has highlighted one area of strength, the U.S. mortgage market. On Feb. 10 he said that volume at the nation’s largest home lender would be similar to the fourth quarter, when it made $44 billion in loans, “despite the fact that the first quarter usually reflects a slower purchase market.”

Average rates for 30-year residential mortgages fell 0.20 percentage point in the first quarter to 3.79%, spurring an uptick in refinancing activity. The industry originated $288 billion in home loans in the first quarter, 17% more than the first three months of 2014, according to a March 20 forecast from the Mortgage Bankers Association, a Washington-based trade group. Fifty-two percent of those replaced existing loans, the group estimates.

Wells Fargo pays commission to loan officers based on the number of loans they complete, and Stumpf has said the bank is willing to pay employees more in return for additional revenue. Investment bankers and financial advisers also receive incentive pay, which can add to costs.

Investors are focused on expenses as the banking industry struggles to show it can increase revenue amid persistent low interest rates. Expenses at Wells Fargo rose to the highest level in two years in the fourth quarter, climbing 4.7% from a year earlier to $12.6 billion, and costs remain one of analysts’ chief concerns.

Wells Fargo’s net interest margin, the difference between what it makes on lending and what it pays for funding, fell to 2.95% and has dropped more than a percentage point from the end of 2010.

Stumpf has taken action to add loans, including purchasing portfolios from competitors. Last week, the bank agreed to buy performing mortgages on commercial real estate valued at $9 billion in the U.S., U.K. and Canada from General Electric Co. as that firm decided to largely exit the business.

Wells Fargo fell 0.8% in the first quarter, compared with the 0.4% gain in the Standard Poor’s 500 Index. The shares rose 21% in 2014, outpacing the 7.2% advance of the 24-company KBW Bank Index and bringing the bank’s market value at year-end to $284 billion.

Article source: http://www.nationalmortgagenews.com/news/origination/wells-fargo-beats-estimates-as-lower-rates-spur-mortgage-lending-1048647-1.html

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