Category Archives: Secondary

AICPA Releases Q&As on Real Estate Settlement Services

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The American Institute of CPAs has issued a set of questions and answers on the services a practitioner can provide in connection with the American Land Title Association’s Best Practices Framework for real estate settlement.

Questions and Answers (QA) section 9540.01.05of theAICPA Technical Questions and Answersaim to provide nonauthoritative guidance to practitioners in connection with the framework.

The QAs address the types of engagements a practitioner can perform, the applicability to an attest engagement, the suitability of criteria, the nature of examination or review procedures, the form and content of the report, along with illustrative reports.

The American Land Title Association aims to guide its membership on best practices to protect consumers, promote quality service, provide for ongoing employee training, and meet legal and market requirements. The ALTA Best Practices Framework assists lenders in satisfying their responsibility to manage third-party vendors.

Article source: http://www.nationalmortgagenews.com/news/origination/aicpa-releases-qas-on-real-estate-settlement-services-1049877-1.html

Mortgage Applications Drop on Depressed Refinance Activity

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Mortgage application activity fell once again as refinance volume dropped to its lowest level since September 2014, according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey.

There was a 2.3% decline in application volume on a seasonally adjusted basis for the period ending April 24. The seasonally adjusted purchase index remained unchanged, while the refinance index plunged 4% during the same time span.

Overall, the refinance share of mortgage activity fell to its lowest level since last September at 55%.

Other mortgage types saw gains, however. The FHA share of total applications increased to 13.7% from 13.6% a week prior, while the VA share lifted to 11.3% from 11% during the same period.

Adjustable-rate mortgages also grew their share of total activity to 5.7%, but the USDA share yet again remained steady at 0.8%.

As for interest rates, the results for the week were more of a mixed bag. The contract interest rate for 30-year fixed mortgages with a balance above $417,000 dropped one basis point to 3.82% from 3.83%. The average contract interest rate for 5/1 adjustable-rate mortgages also decreased by one basis point to 2.88%.

Otherwise though, interest rates rose modestly. For 30-year fixed conforming mortgages below $417,000 the average interest rate increased two basis points to 3.85%. The average interest rate for 30-year fixed-rate mortgages backed by the FHA rose by one basis point to 3.65% and the average rate for 15-year fixed-rate mortgages grew to 3.14% from 3.11%.

Article source: http://www.nationalmortgagenews.com/news/origination/mortgage-applications-drop-on-depressed-refinance-activity-1049870-1.html

Homeownership Rate Falls to 63.7%, Lowest Since 1993

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The U.S. homeownership rate fell to the lowest level in more than two decades, extending a multiyear decline as rising prices and stagnant wages keep young families out of the property-buying market.

The share of Americans who own their homes was 63.7% in the first quarter, down from 64% in the prior three months, the Census Bureau said in a report Tuesday. The rate was the lowest since 1993, data compiled by Bloomberg show.

Entry-level buyers are struggling to save enough money to purchase homes as gains in real estate prices outstrip increases in wages, while mortgage lending remains tight. The median household income in March grew 2.1% from a year earlier while the median home price gained 7.8% in the same period. Last year, the share of home purchases by first-time buyers fell to the lowest level in almost three decades, according to the National Association of Realtors.

“The No. 1 issue in the housing market right now is wages,” said Jay Morelock, an economist with FTN Financial in New York. “For the housing recovery to be sustainable in the long run, we have to see wages increase at a faster pace.”

As homeownership falls, demand for rental housing is booming. The vacancy rate for rented homes fell to 7.1% in the first quarter from 8.3% a year earlier, the Census Bureau report showed. It was the lowest first-quarter rate since 1986. The median monthly asking rent was a record $799, according to the agency.

The number of renter-occupied units increased by almost 1.9 million from a year earlier, the census data showed, indicating growth in household formations. Owner-occupied housing decreased by 386,000.

The median U.S. household income in March was $54,203, according to Sentier Research in Annapolis, Md. When adjusted for inflation, that’s 5.3% lower than January 2008, the beginning of the economic downturn, said Gordon Green, a Sentier partner who formerly directed the Census Bureau office that compiles wage statistics.

“Although the economic recovery officially began in June 2009, the recovery in household income didn’t begin to emerge until after August 2011,” Green said in an April 23 report.

The median household income has gained 5.5% since reaching that bottom, Sentier’s data show. Home prices have increased 24% in the same period, according to the National Association of Realtors.

Article source: http://www.nationalmortgagenews.com/news/origination/homeownership-rate-falls-to-637-lowest-since-1993-1049788-1.html

NASDAQ Delisting Home Loan Servicing Solutions

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The NASDAQ stock market has delisted mortgage servicer Home Loan Servicing Solutions.

The stock market notified Home Loan Servicing Solutions last week, but the company only disclosed the news late Friday.

NASDAQ delisted the company under its Listing Rule 5101 discretionary authority, under which it can deny or delist companies with executives connected to fraud, or, as in Home Loan Servicing Solution’s case, plans to merge with another company.

HLSS had plans to merge with Ocwen before the mortgage giant’s recent legal problems and resulting major losses, and announced on April 10 that it planned to sell itself to New Residential Investment Corp. for about $1.2 billion.

The delisting will be effective April 29.

Article source: http://www.nationalmortgagenews.com/news/servicing/nasdaq-delisting-home-loan-servicing-solutions-1049731-1.html

Surprise Refi Boom Spurs Unseasonably Strong Fees in 1Q Results

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The recent dip in mortgage rates has been a boon for community banks.

As low interest rates continue to pressure margins and net interest income, a spike in mortgage banking volume fueled by refinancing activity has provided a welcome boost for banks that sell their originations.

Several bankers, pleased that refi activity padded first-quarter results, were quick to caution that they aren’t counting on refinancing levels remaining elevated going forward.

“When refinance comes around, that’s extra for us,” said Steve Brolly, chief financial officer at Fidelity Southern in Atlanta. Brolly said that he expects refinancing activity to decelerate in the second quarter, though purchase volume should benefit from a seasonal lift.

“It all depends on what happens in the secondary markets,” said Lynne Pulford, mortgage division manager at Sandy Spring Bancorp in Olney, Md.

Banks with $40 billion or less in assets, on average, increased noninterest income by 11% in the first quarter compared to a year earlier, based on American Banker’s preliminary analysis of earnings reports from nearly 180 banks.

Bankers, by and large, would prefer to see interest rates move up, since spread income often accounts for three-fourths of a community bank’s revenue. But every bit of fee income helps, particularly in a quarter where mortgage revenue is seasonally slow.

“We’d give up some mortgage fees to get a rate increase,” Phil Wenger, chief executive of Fulton Financial in Lancaster, Pa., said in an interview. Still, he agreed that having added fee income helps as the industry awaits some upward movement in rates.

Lower mortgage rates are a function of broader trepidation about the economy, industry observers said.

“We continue to see lower rates due to concerns over weaker economic growth abroad,” said Joel Kan, associate vice president of industry surveys and forecasting at the Mortgage Bankers Association.

The average rate on a 30-year fixed-rate mortgage dipped as low as 3.59% in early February, and has since edged up to 3.65%, according to a weekly survey from Freddie Mac. Rates on 15-year loans also fell over the period.

At the same time, refinancing has increased, as consumers have taken advantage of the opportunity to reduce payments. Refinancing accounted for 59% of February’s originations or more than double the share of new loans from six months earlier, according to mortgage data from Ellie Mae.

Refinancing levels are expected to remain high into the second quarter, as applications from the first quarter continue to pull through, Kan said.

That would be welcome news to bankers since rates aren’t budging much.

Mortgage finance loans nearly doubled at Texas Capital Bancshares in the first quarter compared to a year earlier, to $3.7 billion, largely due to a late-period surge in refinance volume, Keith Cargill, the Dallas company’s chairman and chief executive, said.

Such activity “lifted our volumes significantly in what could’ve been an otherwise softer seasonal quarter,” Cargill said during a conference call to discuss quarterly results.

Fidelity Southern also benefited from heightened refinancing activity. The $3.1 billion-asset company’s quarterly earnings beat Wall Street expectations in the first quarter, in part because of higher fee income.

Noninterest revenue jumped 65% from a year earlier, to $32 million, and mortgage banking revenue more than doubled. Refinancing accounted for 41% of the first quarter’s loan production at Fidelity Southern, compared to 22% a year earlier.

Fidelity is “seeing an increase in the level of refinanced loans,” said Brady Gailey, an analyst at Keefe, Bruyette Woods, adding that some momentum is expected in the current quarter. “We are still in the middle of a refinance boom.”

The $4.4 billion-asset Sandy Spring Bancorp also benefited from borrower demand for refis. Noninterest income increased 17% from a year earlier, to $13.2 million, featuring a nearly threefold increase in mortgage banking activity.

Most of Sandy Spring’s originations came from refinanced loans, Daniel Schrider, the company’s president and chief executive, said during the company’s earnings call last week. Nearly 75% of the company’s mortgages were refinancings, compared to 45% a year earlier, Schneider said.

“On the positive side, originations drove a significantly higher level of revenue for mortgage banking activity,” Schrider said. “It was more refi activity that drove our mortgage performance and gains, as opposed to new home sales or construction originations.”

Paul Davis contributed to this article.

Article source: http://www.nationalmortgagenews.com/news/origination/surprise-refi-boom-spurs-unseasonably-strong-fees-in-1q-results-1049555-1.html

Share of Seriously Underwater Homes Increased from Last Quarter

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The share of seriously underwater homes increased quarterly for the first time since 2012, according to housing data firm RealtyTrac.

More than 7.3 million properties across the country had a combined loan amount at least 25% higher than their estimated value. Altogether, 13.2% of properties with a mortgage were seriously underwater during the first quarter, up 0.4 percentage points from the previous quarter but down 4 percentage points from the same period in 2014.

“At the end of 2014 we saw the lowest share of seriously underwater properties since we began tracking such data, but in the first quarter that share bumped up slightly as home price appreciation continued to slow down in many markets,” said Daren Blomquist, vice president at RealtyTrac, in a news release.

Equity-rich properties declined as well in the first quarter to 19.8% of all properties from 20.3% a quarter before.

Most of the markets with the highest percentage of seriously underwater properties were located in Florida, with Lakeland having the highest share at 28.7%. Las Vegas was the leader in terms of markets where the share of seriously underwater distressed properties exceeded 50%.

Article source: http://www.nationalmortgagenews.com/news/distressed/share-of-seriously-underwater-homes-increased-from-last-quarter-1049464-1.html

Alert Sounded About Cheating on Mortgage-Licensing Exams

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Test files are for frat houses, not your mortgage business.

That is the clear takeaway from a recent $5.3 million fine and consent order slapped on New Day Financial in Fulton, Md., which had saved questions and answers from past licensing exams for new test-takers. A joint settlement was reached with regulators from 43 states, who deemed the practice a violation of the rules of conduct for mortgage-license testing and continuing education.

It is unclear how widespread the problem is, but the incident raises doubts at an important time, given the recent rise in licensing-renewal rates among individual loan officers and financial institutions.

When asked whether there have been other instances of licensing-test fraud or cheating, a Conference of State Bank Supervisors official said it was the first one made public.

“We cannot speak to other instances that may or may not have happened, unless those instances have resulted in public orders, and I am not aware of other public orders that address this issue,” said John Prendergast, a vice president of the CSBS, which through a subsidiary owns and operates the Nationwide Mortgage Licensing System and Registry.

There is little doubt that, particularly in the early days of licensing testing, some lenders sought examples of the questions and answers involved. But the message they generally received from industry officials was that getting the answers to actual questions that had been on the test is banned.

The Mortgage Testing and Education Board has rules of conduct for mortgage licensing test-takers. If any test-takers are still wondering what is allowed, they might want to review them. In light of the recent consent order, they might want to take note in particular of No. 7, which pertains to test confidentiality, and No. 11, which specifically prohibits fraud and actions that would undermine the integrity of the tests, according to a CSBS spokeswoman. There also is a broader set of originator education and licensing standards and rules that applies to course providers and whistle-blowers.

CSBS officials acknowledge test cheats are hard to uncover, particularly in cases of in-house collusion. But with more regulatory encouragement of whistle-blowers in many quarters, in addition to the increased communication and cooperation among regulatory bodies, it remains a constant risk for lenders.

Regulators expect lenders to have controls in place to at least try to prevent testing and education infractions.

Under the consent order, New Day must work temporarily with an outside agency that will monitor its compliance efforts until regulators are more confident that its in-house operations are sound. So while working with third-parties has its own risks, it may be advisable in certain situations like this one.

“If [mortgage businesses] are aware that there are more eyes on people, there is independent oversight and they have to sign off that they have to manage their employees in a particular way, it is really going to make them think twice about trying to do something that they know isn’t right,” Prendergast said.

He also said that having a tip line that allows employees to anonymously report any infractions, as New Day will provide going forward, is a good practice.

Regulators are not the only ones worried about licensing-test fraud. Employers are broadly concerned with the integrity of individuals’ licenses as they move from company to company, said Greg Schroeder, president of Comergence, a risk management firm for originators and appraisers.

This is particularly important for nonbanks and brokers, who often find the testing requirements related to their licenses gives them a competitive edge over bank originators who only have to register without testing.

New Day’s consent order will force some of its licensed originators who took tests during 2013, when the questionable activity took place, to retake the exams to assure the integrity of their licenses.

But all anyone can find out when they search the Nationwide Mortgage Licensing System is whether a particular individual has a license, noted Schroeder.

“You either pass or fail, and that would be the issue with your NMLS number. If you don’t pass, you obviously don’t get the number,” he said.

Regulators report actions such as this consent order as they come out, said Schroeder, whose company has a contract with the NMLS to share pertinent alerts each night with its clients.

In general, if an integrity question arises about existing or would-be employees, re-testing them may be a way to address the concerns. But companies need to be sure that whatever action they take complies with applicable labor laws, Schroeder said.

Article source: http://www.nationalmortgagenews.com/news/origination/alert-sounded-about-cheating-on-mortgage-licensing-exams-1049479-1.html

Mortgage Applications Increase for Fourth Time in Five Weeks

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Mortgage applications increased a seasonally adjusted 2.3% from last week, according to the Mortgage Bankers Association’s weekly mortgage applications survey.

On a non-seasonally adjusted basis applications rose 3%. The strong weekly number represents the continuation of a month-long upward trend.

“Purchase applications increased for the fourth time in five weeks as we proceed further into the spring home buying season,” said the MBA’s chief economist Mike Fratantoni. “Despite mortgage rates below four percent, refinance activity increased less than 1% from the previous week.”

Refinances dropped to 56% of total applications, the lowest level since October. The Federal Housing Administration’s share of total applications increased 10 basis points to 13.6% from 13.5% while the Department of Veterans Affairs’ share dropped 10 basis points to 11% from 11.1%. The U.S. Department of Agriculture share of applications remained unchanged.

Article source: http://www.nationalmortgagenews.com/news/origination/mortgage-applications-increase-for-fourth-time-in-five-weeks-1049381-1.html

Investors Grumble as Freddie Shifts Risk of Helping Homeowners

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Some mortgage-bond investors are criticizing a change in Freddie Mac debt that increases the risk of loss from homeowners who can’t afford their loans.

The government-controlled company’s latest version of securities that put bondholders on the hook when borrowers miss mortgage payments can now generate losses if the loans are modified, such as by having their interest rates reduced to help the homeowners, according to a document posted on its website.

“That’s definitely not a welcome change,” said Vitaliy Liberman, a portfolio manager at DoubleLine Capital, which oversees about $73 billion. “Clearly nobody wants to be subject to the political pressure on Fannie and Freddie to do things that could adversely affect investors.”

While the change introduces a new danger for bond investors who are shouldering an increasing amount of risk previously borne by taxpayers through the deals, Freddie Mac is finding ample demand this week as it markets $720 million of the securities in a transaction tied to loans with relatively strong characteristics.

Unlike Freddie Mac’s previous deals, the new structure means investors can see their principal erased by amounts generally equivalent to losses suffered by Freddie Mac on its mortgage guarantees. Previously, investor losses were amounts based on fixed percentages for each default.

Freddie Mac and Fannie Mae guarantee separate bonds backed directly by home loans, and since being taken over by the U.S. in 2008 have been able to tap government funds to make good on the insurance if needed.

The treatment of loan modifications in the risk-sharing debt comes after unprecedented steps were taken to keep borrowers in their homes. The government introduced the Home Affordable Modification Program in 2009 to set standards and provide funds for aid, and then encouraged mortgage servicers to make loan changes as part of legal settlements.

Freddie Mac and rival Fannie Mae have sold about $16 billion of risk-sharing debt since 2013, curbing taxpayer risks. Investors in previous deals only suffered damage when loans became 180 days delinquent or were liquidated at losses before then. That meant investors were leaving holders were unaffected by loan modifications that took place before 180 days of impairment.

Patti Boerger, a spokeswoman for Freddie Mac, declined to comment on the change while the debt is being marketed.

“Definitely that is a new risk, especially when you’re talking about the lower tranches of the deal,” said Vishal Khanduja, a money manager at Calvert Investments, which oversees about $13.6 billion. Freddie Mac’s set of rules for the loan servicers that manage its mortgages “is a living document, it’s not set in stone. If housing or the economy in general does experience a slowdown, things could change” in how troubled borrowers get treated.

He said the strength of the loans — which were made more than two years ago and so have benefited from the jump in home prices since then — referenced by the deal this week helps minimize the danger for those bonds.

Freddie Mac may sell the securities that are first in line to suffer losses at a yield that floats from 9.75 percentage points to 10.25 percentage point above a benchmark rate, according to a person with knowledge of the transaction who wasn’t authorized to speak publicly. That compares with a spread of 10.75 percentage points on a similar slice of its previous deal last month.

Moody’s Investors Service said in a report that the loans underlying the first issue of the new bonds “were all originated in 2012, at a time when home-lending activity was still contracted, and loans were made only to high credit quality borrowers using strict underwriting standards.” The credit grader said that it took the risk of modification losses into account in assigning ratings as high as A3.

Article source: http://www.nationalmortgagenews.com/news/secondary/investors-grumble-as-freddie-shifts-risk-of-helping-homeowners-1049295-1.html

Home Prices Jump 0.6% in February: FNC

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The residential real estate market remained healthy in February as home prices climbed and completed foreclosures fell year-over-year, mortgage technology firm FNC reported.

The FNC Residential Price Index found a 0.6% increase in home prices for February with year-over-year prices rising over 4%. The share of completed foreclosures during the month was 15.8% of total existing home sales, higher than the 15.5% recorded in January but well below the 17.1% from the same period a year ago.

The median asking price discount was 4.9%, while the time-on-market was 133 days; both were down from January.

Additionally, Sacramento, Calif., had the highest month-to-month increase in prices at 3.4%, and Las Vegas featured the greatest price growth over 2014 at 12.8%. Detroit and St. Louis recorded the most significant price decreases, both month-to-month and year-over-year.

The RPI is based on sales recorded for nondistressed properties in the top 100 metropolitan areas nationwide.

Article source: http://www.nationalmortgagenews.com/news/distressed/home-prices-jump-06-in-february-fnc-1048998-1.html

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