Why are Banks Closing? 986 Days to Foreclose in NY? Possible Changes to MBS Structure

For bank closures on Friday, and I am simplifying things, in NC the depositors of Blue Ridge Savings Bank were warmly embraced by Bank of North Carolina, First State Bank (NJ) became part of Northfield Bank (NY), and the depositors of Country Bank (IL) will receive new checks with Blackhawk Bank & Trust on them. And down in Georgia Piedmont Community Bank is now part State Bank and Trust Company. Six banks were closed by the FDIC in September for a total of 74 in the year to date according to information released today by Trepp, which provides CMBS and commercial mortgage information, to the financial services industry. At the current pace 100 will be closed this year, better than the 160 banks the FDIC closed due to insolvency in 2010 or the 139 that failed in 2009. According to Trepp, loans tied to real estate were virtually the sole source of the failures: commercial real estate loans accounted for 82% of the nonperforming loans at the failed banks. 

An expanding mortgage bank with a nationwide footprint is searching for Senior Vice President to head up National Production. The lender is 12 years old and is licensed in states coast to coast. The Denver-based company seeks qualified, experienced, candidates will have demonstrated a history of building production, and have strong knowledge of product, underwriting, financials, and marketing.  The banker has a very good reputation among investors and originators - if you know of anyone out looking or if you're a branch looking for a quality company, send me your resume: rchrisman@robchrisman.com.

Anyone with flood insurance questions may want to scan the document put out by several federal agencies that updates the Interagency Questions and Answers Regarding Flood Insurance. "The guidance finalizes two questions and answers that had been previously proposed. The first relates to insurable value. The second relates to force placement of flood insurance. The agencies withdrew another question regarding insurable value." See it here.

RealtyTrac has released its U.S. Foreclosure Market Report for the third quarter of 2011, which shows foreclosure filings-default notices, scheduled auctions and real estate-owned (REO) properties-were reported on 610,337 properties in the third quarter, an increase of less than 1% from the previous quarter and a decrease of 34% from the third quarter of 2010. The report shows one in every 213 U.S. housing units with a foreclosure filing during the quarter. Before you break out the party hats, "U.S. foreclosure activity has been mired down since October of last year, when the robo-signing controversy sparked a flurry of investigations into lender foreclosure procedures and paperwork," said James Saccacio, CEO of RealtyTrac. "While foreclosure activity in September and the third quarter continued to register well below levels from a year ago, there is evidence that this temporary downward trend is about to change direction, with foreclosure activity slowly beginning to ramp back up."

Folks wonder why servicing values are higher in one state than another. U.S. properties foreclosed in the third quarter took an average of 336 days to complete the foreclosure process, up from 318 days in the second quarter and the highest number of days going back to the first quarter of 2007. New York properties foreclosed in the third quarter took an average of 986 days to complete the foreclosure process. The second longest average foreclosure process was in New Jersey, at 974 days, and the third longest average foreclosure process was in Florida, at 749 days. The Great State of Texas, who has not threatened to secede yet this week, had the shortest average foreclosure process of any state, at 86 days.

Do away with the U.S. Government backing mortgage securities? "Think again," said trade groups and investors before a House subcommittee. Proponents of private money, however, believe that the U.S. mortgage market would not lose funding from foreign investors if the government stops backing mortgage bonds.

Government officials of various shapes and sizes are considering a program to draw private investment back into the mortgage market by having Fannie Mae and Freddie Mac sell slices of securities that wouldn't carry a federal guarantee but would pay a higher interest rate than current mortgage-backed bonds. The cost of the higher rate, of course, will be borne by the borrower. 5% or 10% of a bond issued by Fannie or Freddie would be sold without a federal guarantee. Not such a bad idea and investors in this "first loss" position would take on an additional risk of absorbing losses but would receive a higher interest rate. But don't look for too much exciting from Congress in this area ahead of the election 13 months from now - but FHFA may do a little pilot program on its own.

By the way, if you want to see what kind of mortgage-backed securities the Fed is buying, go to: http://www.newyorkfed.org/markets/ambs/. Its activities directly impact the demand for mortgages, which impact rate sheets across the nation. The Fed released its weekly report on MBS purchases made over the past week. From October 6 through 12, the Fed bought $5.2 billion in Agency MBS, which equates to a daily average of $1.3 billion. Over this same period, mortgage banker supply averaged $1.8 billion per day indicating the Fed covered 72% of the supply. This is improved from the first period where the Fed bought $3.95 billion while supply totaled $7 billion.

Are all the appraisers and AMC's out there ready for the updated data requirements? Maybe not, given the marketing efforts by wholesale lenders to waive the appraisal entirely. Or maybe, operationally, everyone is backed up. Some of the programs appear to be those that never needed an appraisal to begin with - so why not remind everyone of them? United Wholesale Mortgage wrote, "Appraisals on Conventional Loans? Not at UWM! How can you close conventional loans without an appraisal? Log onto our system, only run DU at our website. Higher FICO's and lower LTV's have better chances of getting appraisal waivers. Limit your DU runs! Run once or twice on our system and don't run them on any other DO or DU engine." SunTrust reps are sending similar notices, as is Wells Fargo. "Looking for an appraisal Waiver?  Look no further - Wells Fargo will honor Property Inspection Waiver from Fannie Mae (DU Findings)!" (Certain restrictions apply.)

CitiMortgage sent the word out to clients that, "A key component of the UMDP is the Uniform Loan Delivery Dataset (ULDD), which identifies the data elements and the data delivery format required in connection with the delivery of loans to each Agency. The agencies will not be requiring data in this format until December; however, in preparation for compliance with the upcoming delivery requirements, Citi will implement upgrades to our Correspondent website registration screen effective October 22...a new applicable Building Style description must be used (based on whatever Property Type is selected)." (Editor's note: It mentions log homes, but I didn't see any mention of other building styles like dome homes, manufactured homes, or yurts... I am sure I missed them.)

SunTrust issued a reminder to clients that for condominiums, it monitors project exposure and removes projects when they reach the maximum allowable exposure. The updated review said for both condominiums and PUD's, SunTrust Mortgage performs due diligence when the expiration date of a project is near. The investor also issued a list of settlement agents who are ineligible to close (and asked that clients confirm their agent is eligible), and issued a review guidance stating Suntrust Trust Mortgage requires special consideration in the underwriting and appraisal review process for rural properties or suburban properties with rural characteristics. "Outbuildings may not represent more than 5% of the appraised value. Pasture and cropland may not exceed 35% of the property's land size, including all excess acreage regardless of current use. At least 50% of the appraised value must represent improvements."

It wasn't done. SunTrust reduced asset verification for the Key Loan Program. It now requires two months bank statements that show beginning and ending balances to verify assets for the program, but will no longer accept loans originated on properties located in the state of Florida under the Key Loan Program.

GMAC issued revised guidelines for Rate and Term Refinances: "The interest rate of the new loan must be lower than the rate on the existing loan to be refinanced and the interest rate of the new loan must be a fixed rate," reminded clients of the inspection requirements for properties located in Federally Declared Disaster Areas, and Correspondent Funding announced enhanced Jumbo guidelines on appraisal requirements, acreage and second home DTI's. Lastly, it told clients that the Texas Equity LIBOR ARM Products are not eligible for submission to LP. (As a reminder the Texas Equity Fixed Rate Products are still eligible for submission to Loan Prospector.)

Flagstar warned brokers that October 21st is the last day to close FHA, VA, & USDA loans with credit scores between 600-619.

Kinecta announced it has "partnered with FNC, a leading web-based appraisal management organization, to provide an automated system that will enable you to request and track appraisals online and in real time."

News on the economy is continuing to show it is muddling along. Friday the University of Michigan preliminary index of consumer sentiment unexpectedly fell to 57.5 this month from 59.4 in September, weaker than the median estimate of 60.2. But Friday's strong Retail Sales number was enough to nudge rates higher, with the 10-yr closing at 2.23%. The good news for mortgage rates is that the Fed is indeed in buying agency mortgage-backed securities as its own mortgage portfolio prepays.

Looking at this week, today we'll have the Empire State Manufacturing Index, and Industrial Production & Capacity Utilization, tomorrow the Producer Price Index, Wednesday the CPI, Housing Starts, and the Fed's Beige Book, Thursday Existing Home Sales, Philly Fed, and Leading Economic Indicators. MBS markets are rallying this morning.

My first job was working in an orange juice factory, but I got canned - couldn't concentrate.
Then I worked in the woods as a lumberjack, but just couldn't hack it, so they gave me the axe.
After that, I tried being a tailor, but wasn't suited for it - mainly because it was a sew-sew job.
Next, I tried working in a muffler factory, but that was too exhausting.
Then, tried being a chef - figured it would add a little spice to my life, but just didn't have the thyme.

Later, I attempted being a deli worker, but any way I sliced it, couldn't cut the mustard.
My best job was a musician, but eventually found I wasn't noteworthy.

If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog takes a look at Fannie & Freddie & the FHFA, and the changes they have in the hopper. If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what's going on out there from the other readers.

Rob