Wednesday, January 11, 2012

MetLife Closes Mortgage-Origination Business

MetLife Inc., the nation’s largest insurer, announced Tuesday it is getting out of the mortgage-origination business and that it will no longer be accepting new mortgage applications as it prepares to shutter its residential mortgage unit. However, the company says MetLife Home Loans will continue to offer reverse mortgages as well as service its current mortgage customers.

For any loan applications already in the pipeline, the company said it will continue to process those loans and expects most of the loans to close within 90 days.

In October, MetLife had said that excessive regulations in the banking industry was prompting the company to get out of the mortgage business. Last month, General Electric agreed to buy MetLife Bank for about $7.5 billion. However, MetLife was unable to find a buyer for its mortgage business.

The closing of the company’s home mortgage origination business is expected to cost MetLife at least $90 million, and 4,300 employees are expected to lose their jobs.

In 2010, MetLife was the 13 largest mortgage originator in the nation, issuing more than $22 billion in home loans.

Source: MetLife and “MetLife Exits Forward Mortgage Business,” HousingWire (Jan. 10, 2012)

Mortgage Applications Soar 4.5%

Mortgage applications for purchase -- a gauge of future home buying -- increased 8.1 percent last week, the Mortgage Bankers Association reports. The purchase index on an unadjusted basis now stands at 41.9 percent higher than last year, signaling more people taking out loans to buy homes.

More home owners are also taking advantage of low interest rates. Refinance activity last week also increased, inching up 3.3 percent from a week earlier. Overall, mortgage applications were up 4.5 percent last week.

For the fifth consecutive week, 30-year fixed-rate mortgages have averaged at historical lows below 4 percent, Freddie Mac reported last week. For the week ending Jan. 5, 30-year fixed-rate mortgages averaged 3.91 percent, with an average 0.8 point, matching the previous record low set a few weeks ago.

Source: “Mortgage Applications Rise 4.5%,” HousingWire (Jan. 11, 2012)

Banks Face Scrutiny Over Home Insurance Steering

The New York State’s Department of Financial Services is investigating several big banks to determine if they illegally steered distressed home owners toward overpriced insurance policies, The New York Times reports.

The agency has found cases where large banks have steered distressed home owners into insurance policies “up to 10 times as costly as the home owners’ original plans,” The New York Times reports. For example, in one case, the agency found that a home owner was paying $2,000 a year to State Farm but then saw an increase to $6,000 a year when switching to a new insurer.

The agency is also investigating whether the banks showed conflicts of interest in offering customers home insurance policies that may have been affiliated with the banks rather than shopping for the best rate in the open market.

“In general, mortgage servicers are allowed to take out insurance policies on homes after a home owner allows existing coverage to lapse,” The New York Times' article explains. “Though home owners have little choice and sometimes little notice about the new plans, they often end up shouldering the costs of the insurance through their mortgage payments.”

JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo are among the major banks named in the investigation.

Source: “Big Banks Face Inquiry over Home Insurance,” The New York Times (Jan. 10, 2012)

Home Affordability Offering Up 40-Year Deals

Home affordability is at 1971 levels, due to falling home prices and record low mortgage rates, pushing home ownership in reach to more families, according to the U.S. Department of Housing and Urban Development (HUD).

Home owners are bringing in nearly double the median income they need to cover the cost of an average home, HousingPredictor reports.

"With interest rates at historically low levels and markets across the country beginning to improve, home ownership is within reach of more households,” Bob Nielsen, chairman of the National Association of Home Builders, said in a statement.

Home sales have been ticking up, according to recent reports by the National Association of REALTORS®, the National Association of Home Builders, as well as the Obama administration’s December Housing Scorecard.

However, some consumers are finding more stringent lending standards for getting a mortgage a roadblock to home ownership, and some housing experts have blamed tighter underwriting standards in recent years for continuing to hold back the housing market.

Source: “Home Affordability Reaches 1971 Level,” HousingPredictor (Jan. 11, 2012

Justice Department Issues Report in Support of Foreclosure Mediation

The U.S. Department of Justice released a 69-page report Tuesday on a foreclosure intervention method that is becoming increasingly popular across the country – mediation.

The paper, titled Foreclosure Mediation: Emerging Research and Evaluation Practices, draws from a March 7, 2011 workshop put on by the Justice Department’s Access to Justice Initiative, a panel established in 2010 which works to ensure the U.S. justice system remains accessible and fair to all, irrespective of wealth and status.

The workshop was attended by dozens of foreclosure mediation program stakeholders and researchers. Tuesday’s report summarizes the workshop proceedings and shares recent research and resources for foreclosure mediation.

“The loss of a home to foreclosure can be devastating to a family,” said Mark Childress, who heads the Access to Justice Initiative as senior counselor.

“The report released today compiles the best available research on foreclosure mediation programs and serves as an important resource for existing programs around the
country as well as for jurisdictions attempting to establish foreclosure mediation programs,” Childress said. “Well-structured foreclosure mediation programs may offer the millions of families at risk of foreclosure a way to stay in their homes.”

Foreclosure mediation programs are viewed by policymakers and consumer advocates as a means to bring borrowers and their lenders together to work out an alternative to foreclosure. But some industry participants contend that mandated mediation programs only delay the inevitable.

Florida’s Supreme Court terminated its state-wide mediation program last month, citing the program’s lack of success in resolving foreclosure disputes between lenders and borrowers. The court-run mediation program had been operational for two years, but the Supreme Court said after reviewing the files, it “determined it cannot justify continuation of the program.”

As the Justice Department suggests, there has not been a lot of research or analysis conducted to assess the effectiveness of foreclosure mediation. Officials say the department’s March 2011 workshop was designed to define best practices for evaluating foreclosure mediation programs and to strengthen relationships among program administrators, the lending community, and government agencies.

One of the key findings that emerged from the workshop is that the “federal government should take an active role, both in helping to develop program and evaluation guidelines and in providing resources for mediation programs and research,” according to DOJ officials.

The full report, Foreclosure Mediation: Emerging Research and Evaluation Practices, is available for download at

Suspected Mortgage Fraud Continues to Rise, But at Slower Pace

Suspicious activity reports (SARs) involving fraud across the financial industry rose from 1.32 million in fiscal 2010 to 1.45 million in fiscal 2011, according to the latest annual report from the Financial Crimes Enforcement Network (FinCEN), based in Vienna, Virginia.

The mortgage industry is in keeping with this trend, though the pace of increase has been slowing over the past few years, according to FinCEN.

FinCEN reported in June that mortgage fraud SARs had risen 31 percent from the first quarter of 2010 to the first
quarter of 2011. However, 86 percent of these reports concerned actions that took place more than two years prior.

FinCEN says this trend is the result of mortgage lenders reviewing loans on which they received repurchase demands.

Mortgage SARs in the second quarter of 2011 were also higher than their year-ago levels, having risen from 15,727 to 29,558.

FinCEN reported the most common types of suspicious activity reported included misrepresentations of income, occupancy, and debts and assets.

Debt elimination scams and fraudulent use of Social Security numbers were also common.

Mortgage SARs reports have also increasingly referenced bankruptcy, according to FinCEN.

Commercial real estate SARs have been on the rise, having nearly tripled between 2007 and 2010.

“Analysis of SARs shows that non-bank mortgage lenders and originators initiated many of the mortgages that were associated with SAR filings,” stated the FinCEN report.

Loan Mods and Delinquencies Rise in November: HOPE NOW

The number of mortgage modifications completed during the month of November rose 5 percent from October, bringing the year-to-date total to about 969,000, according to HOPE NOW, a voluntary private sector alliance of mortgage industry participants.

Proprietary modifications continue to outpace modifications completed through the government’s Home Affordable Modification Program (HAMP). Of the nearly 84,000 modifications completed in November, 57,000 were proprietary while 26,877 were completed through HAMP.

Of the 5.13 million modifications that have been completed since 2007 when HOPE NOW began reporting data, 4.22 have been proprietary and a little more than 900,000 were completed through HAMP.

While completed modifications rose from October to November, 60-plus day delinquencies also increased. After reporting 2.65 million 60-plus day delinquencies in October, HOPE NOW reported 2.77 million in November.
Foreclosure starts, on the other hand, declined in November from 209,000 to 166,000.

Completed foreclosure sales rose from 64,000 in October to 71,000 in November.

About 68 percent of proprietary modifications completed in November reduced principal and interest payments for borrowers, and about 66 percent lowered principal and interest payments by at least 10 percent.

About 83 percent of proprietary modifications were fixed-rate modifications with an initial fixed period of at least five years.

“There are more alternatives to foreclosure than ever before for homeowners through federal programs, proprietary modifications, and state level initiatives such as Hardest Hit Funds,” said Faith Schwartz, executive director of HOPE Now.

“Mortgage servicers and non-profit, housing counselors are using all tools at their disposal to find options that fit each individual homeowner’s situation whenever possible,” Schwartz said.

According to Schwartz, the industry continues to emphasize “improving the customer experience through enhanced technology, single point of contact and leveraging all tools available to assist with foreclosure prevention, which in some cases includes graceful exits.”

HOPE NOW plans to host homeowner outreach events in several cities in the first quarter of 2011, including: Charlotte, North Carolina; Miami and Tampa, Florida; Las Vegas, Nevada; and Sacramento and Los Angeles, California.

Number of 'Improving' Housing Markets Nearly Doubles

The number of housing markets showing measurable improvement nearly doubled in January, with the addition of 40 new metros to the Improving Markets Index put out by First American and the National Association of Home Builders (NAHB).

The index tracks housing markets that are showing signs of improving economic health based on three independent datasets – employment growth from the Labor Department, home price appreciation from Freddie Mac, and single-family housing permits from the Census Bureau.

The index identifies metropolitan areas that have shown improvement from their respective troughs in employment, home prices, and housing permits for at least six consecutive months.

The following 40 metros were added to the Improving Markets Index this month:

•Florence, Alabama
•Tuscaloosa, Alabama
•Fayetteville, Arkansas
•Denver, Colorado
•Greeley, Colorado
•Bridgeport, Connecticut
•New Haven, Connecticut
•Cape Coral, Florida
•Jacksonville, Florida
•Punta Gorda, Florida
•Honolulu, Hawaii
•Ames, Iowa
•Des Moines, Iowa
•Dubuque, Iowa
•Elkhart, Indiana
•Indianapolis, Indiana
•Lafayette, Indiana
•Lake Charles, Louisiana
•Worcester, Massachusetts
•Grand Rapids, Michigan
•Lansing, Michigan
•Monroe, Michigan
•Minneapolis, Minnesota
•Columbia, Missouri
•Joplin, Missouri
•Fargo, North Dakota
•Manchester, New Hampshire
•Cincinnati, Ohio
•Oklahoma City, Oklahoma
•Tulsa, Oklahoma
•Corvallis, Oregon
•Erie, Pennsylvania
•Philadelphia, Pennsylvania
•Chattanooga, Tennessee
•Clarksville, Tennessee
•Nashville, Tennessee
•College Station, Texas
•Dallas, Texas
•Victoria, Texas
•Madison, Wisconsin
While relatively small metropolitan areas continue to dominate the list, several major metros in diverse parts of the country were added this month, including Dallas, Denver, Honolulu, Indianapolis, Nashville, and Philadelphia.

The full list now stands at 76, with 31 states and the District of Columbia all represented by at least one entry. The current tally is up from 41 in December. Five metros on the list in December were dropped from the index in January. These included Anchorage, Alaska; Fort Wayne, Indiana; Canton, Ohio; Scranton, Pennsylvania; and Charleston, West Virginia.

According to Bob Nielsen, NAHB chairman, the list would be much stronger, were it not for restrictive lending and growing inventories of distressed properties in certain markets.

A complete list of all 76 metropolitan areas currently on the Improving Markets Index is available at:

Fannie Mae CEO to Resign

Michael Williams has decided to step down from his position as CEO and president of Fannie Mae, the GSE announced Tuesday.

Williams was appointed to the top post at Fannie Mae in 2009, after the company was placed in federal conservatorship. He will continue as CEO and as a director until Fannie Mae’s board names a successor, the GSE said in a statement.

Under Williams’ leadership, Fannie Mae has enabled six million households to refinance into a lower cost mortgage, 1.7 million homeowners to purchase a home, and provided financing for nearly one million units of affordable rental housing.

In addition, the company has built a stronger new book of business. This new book, which consists of loans purchased or guaranteed since January 2009, is nearly 50 percent of the company’s overall book of business.

Through its loss mitigation efforts, nearly one million homeowners have avoided foreclosure, while Fannie Mae
has helped to stabilize neighborhoods and reduce credit losses on its legacy (pre-2009) book of business.

Williams joined Fannie Mae in 1991 after tenures with KPMG Peat Marwick and Dupont. He led the company’s eCommerce and eBusiness divisions, including the development of the Desktop Underwriter product, which became a standard for the housing finance industry.

Williams was appointed COO in 2005 and was responsible for overseeing the company’s financial restatement and accounting and control reforms pre-conservatorship.

Edward DeMarco, acting director of the GSE’s regulator, the Federal Housing Finance Agency (FHFA), said his organization will work closely with Fannie Mae’s board of directors in searching for a new CEO.

“Mr. Williams’ leadership was instrumental in guiding Fannie Mae through the transition into conservatorship and in directing Fannie Mae’s efforts to enhance loss mitigation strategies, including loan modification and refinance options to help struggling homeowners,” DeMarco said.

“As conservator, I am grateful for Mr. Williams’ steadfast dedication to ensuring Fannie Mae meets its public mission of providing stability, liquidity, and affordability to housing finance while both leading his company and working with government officials to that end,” DeMarco added.

With the start of a new year, both GSEs are looking to fill their top posts. Freddie Mac’s CEO Charles Haldeman Jr. notified his board of directors back in October that he intends to step down in 2012. He has committed to stay on until a succession plan has been put in place.

Rental History: More Important in Getting a Mortgage?

Borrowers who have a history of paying rent on time may see a boost to their credit score.

Experian, a leading credit report company, added a section to its credit reports last year that reflected on-time rent payments, which helped give a boost in the credit scores to some on-time rent payers. Now the two other major credit reporting companies are following suit.

CoreLogic and FICO recently announced they are also adding a score that reflects payment histories from landlords, The New York Times reports.

“Evidence of positive rental payments could be a plus for consumers,” Joanne Gaskin, FICO’s director of product management global scoring, told The New York Times.

Nearly half of high-risk consumers saw an increase of 100 points or more after their rental history was added to their credit report, says Brannan Johnston, the managing director of Experian’s rent bureau. Consumers with average or higher credit scores, on the other hand, did not see any major difference to their scores.

For former home owners who lost their homes to foreclosure, they may be able to rebuild their credit histories more quickly now by showing they are “very responsible renters,” Tim Grace, senior vice president of CoreLogic, told The New York Times.

Source: “A Good Rental History Can Help Borrowers,” The New York Times (Jan. 5, 2012)

More Cities Join 'Improving' Housing Market List

The National Association of Home Builders’ list of improving housing markets nearly doubled this month, as more cities showed signs of a rebound with their real estate markets.

The list now contains 76 improving markets, up from 41 in December, according to NAHB’s and First American’s Improving Markets Index, a monthly gauge that measures a city’s improvements in housing permits, employment, and housing prices for at least six months.

"The fact that the list of improving housing markets nearly doubled this month shows that a significant, positive trend is developing, and is even more relevant when you consider the expanding geographic distribution of the list — which now includes 31 states and the District of Columbia," NAHB Chairman Bob Nielsen said in a statement.

These cities were added to the list in January:

•Florence, Ala.
•Tuscaloosa, Ala.
•Fayetteville, Ark.
•Denver, Col.
•Greeley, Col.
•Bridgeport, Conn.
•New Haven, Conn.
•Cape Coral, Fla.
•Jacksonville, Fla.
•Punta Gorda, Fla.
•Honolulu, Hawaii
•Ames, Iowa
•Des Moines, Iowa
•Dubuque, Iowa
•Elkhart, Ind.
•Indianapolis, Ind.
•Lafayette, Ind.
•Lake Charles, La.
•Worcester, Mass.
•Grand Rapids, Mich.
•Lansing, Mich.
•Monroe, Mich.
•Minneapolis, Minn.
•Columbia, Mo.
•Joplin, Mo.
•Fargo, N.D.
•Manchester, N.H.
•Cincinnati, Ohio
•Oklahoma City, Okla.
•Tulsa, Okla.
•Corvallis, Ore.
•Erie, Pa.
•Philadelphia, Pa.
•Chattanooga, Tenn.
•Clarksville, Tenn.
•Nashville, Tenn.
•College Station, Texas
•Dallas, Texas
•Victoria, Texas
•Madison, Wisc.
View a complete list of all 76 metro areas on the Improving Markets Index list at

Source: National Association of Home Builders

Overall Mortgage Litigation Rises; Servicing Litigation Declines

In the third quarter of 2011, mortgage lawsuits reached their highest level since the Mortgage Litigation Index began tracking them in 2007; however, lawsuits involving servicers declined over the quarter.

The index, tracked by and prepared along with Patton Boggs LLP, observed 218 cases over the

quarter, up from 190 the previous quarter and 151 cases in the same quarter last year.

Litigation against servicers dropped from 65 cases in the second quarter to 51 cases in the third quarter. However, the number is up significantly from the third quarter of 2010 when the index reported just five cases involving servicers.

The only other type of mortgage litigation to decline in the third quarter, according to the index, was criminal litigation, which declined from 44 cases in the second quarter of 2011 to 34 cases in the third quarter.

With 90 cases, foreclosure litigation made up the greatest portion of the 218 mortgage lawsuits in the third quarter.

Investor lawsuits followed with 82 cases, having risen from 50 cases the previous quarter.

The mortgage-backed securities category saw the greatest increase over the quarter, rising from 26 cases in the second quarter of 2011 to 62 cases in the third quarter.

HAMP Mods Pass 900,000 as Servicers Tackle Seconds, Negative Equity

The Treasury Department released a new report Monday highlighting the results of its flagship Home Affordable Modification Program (HAMP). Nearly 910,000 homeowners have received a permanent HAMP modification to date, saving an estimated $9.9 billion in monthly mortgage payments.

Treasury says borrowers now entering HAMP have a better chance of earning a permanent modification and realizing long-term success. Eighty-three percent of eligible homeowners that signed on to HAMP since June 2010 have received a permanent modification, with an average trial period of 3.5 months.

Treasury’s report stressed that the latest mortgage performance report from the Office of the Comptroller of the Currency found that HAMP has proven more sustainable for homeowners than industry modifications. Because of HAMP’s emphasis on affordability relative to a homeowner’s income and successful completion of a trial payment period, the OCC says 70.5 percent of HAMP-modified loans remain current, versus 57.6 percent of other proprietary modifications.

In releasing the latest numbers, Raphael Bostic, HUD assistant secretary, said when you compare today’s data to market data from 2009, “…it’s clear that we’ve made important progress in recovering from this housing crisis.”

Treasury’s report indicates there are 891,542 more borrowers who are currently delinquent and eligible for HAMP assistance.

Bostic says with so many homeowners still struggling to pay their mortgages, “[t]here is still a lot of work to do.”
He says the administration will continue to press servicers to make use of other government housing programs to assist underwater borrowers, as well as the unemployed.

HAMP’s Principal Reduction Alternative (PRA) requires servicers of non-GSE loans to evaluate program applicants for a principal reduction when the loan-to-value (LTV) ratio is 115 percent or greater. Servicers, however, are not required to reduce principal as part of the modification.

Through November 2011, 38,243 permanent PRA modifications had been granted, with another 15,875 PRA trials in active status. Among active permanent PRA mods, servicers have reduced borrowers’ principal by a median 31.3 percent, or $66,308.

Bank of America leads the way, with 10,940 permanent PRA mods started.

Treasury’s Making Home Affordable Unemployment Program (UP) provides a temporary forbearance to homeowners who’ve lost their jobs. Under Treasury guidelines, unemployed homeowners must be considered for a minimum of 12 months’ forbearance. So far, servicers have initiated 16,633 UP forbearance plans.

The government’s Second Lien Modification Program (2MP) was also prominently featured in this month’s report. Treasury says 47 percent of eligible second liens have received a 2MP modification, with many of the remaining second liens still in the evaluation process, awaiting homeowner response to the 2MP offer, or awaiting conversion of the first lien HAMP trial to permanent status.

Servicer participation in 2MP is voluntary. Six of the 10 largest servicers currently take part in the second-lien program. Treasury’s report shows 54,828 2MP mods have been started, with nearly 10,000 of those resulting in full extinguishment of the second lien.

The median amount of fully extinguished liens is $60,688. Homeowners in 2MP save a median of $163 per month on their second mortgage, in addition to the savings realized from the modification of their first mortgage under HAMP.

Over one-third of 2MP borrowers reside in California (35 percent), followed by Florida (9 percent) and New York (6 percent).

Fed: Enforcement Actions, Monetary Penalties Necessary for Servicers

Standing before the Association of American Law Schools in Washington D.C., Sunday, Federal Reserve Governor Sarah Bloom Raskin discussed the importance of enforcement in the mortgage servicing industry and argued that monetary penalties are an important part of that enforcement.

Her message stated simply that “laws and regulations must be enforced.”

A lack of enforcement “leads to the entrenchment of bad practices and an increase in the costs of correction,” Raskin said, calling many of the mortgage servicing industry’s recent practices “shoddy.”

Amid heightened foreclosure rates, mortgage servicers have encountered “critical weaknesses” in their processes,
Raskin said, pointing out specific problem areas such as oversight of third-party law firms and foreclosure document preparation.

Raskin added that courts are also rejecting many practices that were standard among underwriters and the secondary market.

“The longer it takes for mortgage servicers to make the operational adjustments necessary to fix their sloppy and deceptive practices, the costlier and more difficult it becomes for them to sort them out and correct them,” Raskin said.

The Federal Reserve issued enforcement actions against several servicers in April to address specific aspects of mortgage servicing and foreclosure procedures.

The servicers must create and submit plans to adjust their procedures to correct improper actions moving forward.
However, Raskin says this is “only a start.” She favors imposing monetary penalties against servicers for two reasons.

First, charging fines for misconduct “incentivize[s] mortgage servicers to incorporate strong programs to comply with laws.”

Second, monetary penalties “remind regulated institutions that non-compliance has real consequences,” Raskin said.