Mortgage bankers funding loans in the Mid-Atlantic and Northeast can expect their originations to be on hold for awhile because of Hurricane Sandy, and properties being financed will need to be reappraised in the wake of storm damage, National Mortgage News reported Oct. 30.

David Stevens, president of the Mortgage Bankers Association, told National Mortgage News that he expected mortgage profits and origination volumes to dip for a short period because of days lost to the storm.

Business is expected to be interrupted the most in the New York/New Jersey/Long Island metro area.

Stevens anticipated that Fannie Mae and Freddie Mac will reopen its trading window within days and that the Federal Housing Administration and the U.S. Department of Veterans Affairs also will soon reopen.

Borrowers who already have a mortgage backed by Fannie or Freddie and whose homes were damaged by Hurricane Sandy can take advantage of the enterprises' disaster-relief policies. Freddie Mac allows forbearance on mortgage payments for up to one year while Fannie Mae allows borrowers forbearance for up to 90-days.

Preliminary estimates showed that storm damage could exceed $10 billion.

Bank of America was hit with a $1 billion civil mortgage fraud lawsuit Oct. 24 in which Manhattan U.S. Attorney Preet Bharara alleged the bank ran a scheme to defraud Fannie Mae and Freddie Mac, USA Today reported.

According to the lawsuit, Countrywide Financial, which was purchased by Bank of America in 2008, ran a program known internally as “Hustle” or “High Speed Swim Lane,” which pushed mortgages through the approval process without checking for fraud, misstatements and inaccuracies or missing information.

Bharara’s lawsuit, filed in U.S. District Court in New York, is the sixth such case filed against the nation’s biggest banks in the last 18 months by the Manhattan U.S. Attorney’s office.

Lawrence Grayson, spokesman for Bank of America, told USA Today that “at some point, Bank of America can’t be expected to compensate every entity that claims losses that actually were caused by the economic downturn.”

However, federal prosecutors said that it was fraud and not a bad economy that caused Bank of America to allegedly sell unqualified mortgages to Fannie and Freddie in order for them to be packaged into mortgage-backed securities. The lawsuit alleged that Countrywide employees were given bonuses between 2007 and 2009 based on the volume of mortgages they processed. The suit also claimed that the bank’s executives were aware of the faulty mortgages being issued; a January 2008 internal review indicated that 58 percent of “Hustle” loans defaulted, USA Today reported.

The complaint also noted that Fannie and Freddie failed to review the mortgages before purchase, instead relying on the bank’s statements regarding the quality of the loans.

Bank of America has denied all allegations.

While Fannie Mae has started to limit the number of loans it guarantees or buys so as to avoid a further bailout, the new policies have driven profits for big banks but have not helped consumers applying for mortgage loans, Bloomberg reported Oct. 22.

With federal agencies and conservatorships still backing 90 percent of new loans, competition is limited as is capacity for meeting loan demands, and the result has been large lenders getting very high margins on mortgages. Despite the Federal Reserve’s bond buying and its latest plans to acquire $40 billion of home-loan securities each month, interest rates for borrowers remained higher than they should have because of lack of competition in the marketplace, Bloomberg reported.

Fannie currently has about 1,000 approved lenders, but the agency has not disclosed how many have been capped or the total number of applications it has received and approved this year for seller-servicers. Some experts are worried that Fannie’s decision to limit volume on the number of loans its guarantees will hurt smaller lenders, which are a critical component to a housing recovery.

Refinancing applications reached a three-year high this month, straining staff at the nation’s largest banks and also resulting in higher interest rates designed to reduce demand. Bloomberg reported that interest rates could be more than 0.4 percent lower based on the gap between bond yields and borrowing costs over the last 10 years, but new regulatory expenses and legal risks have led to higher spreads.

JPMorgan, for example, had mortgage-production margins at well over 2 percent, according to CEO Jamie Dimon.

Smaller lenders have been trying to assume more market share now that Bank of America and MetLife Inc. are pulling out of the mortgage business, but that’s hard to do when they can’t get approval for government-backed loans. Bloomberg reported that the industry’s top player, Wells Fargo, made or bought 33.1 percent of home loans originated in the first half of 2012.

Bloomberg noted that lenders that are forced to sell mortgages they originate to larger firms instead of using the backing of government programs typically must give up contracts to manage outstanding debt created with new loans. Even in the current climate of low interest rates, buyers pay three to four times the contracts’ annual payments. Lenders also faced stricter standards from loan aggregators than they have from agencies like Fannie or Freddie.

Fed Governor Elizabeth Duke said that keeping smaller lenders in the market is critical because they will finance unusual loans that larger banks won’t. “You need to make sure you can still make the irregular loan, the one that doesn’t fit exactly in a box,” she told Bloomberg.

The number of homeowners who received aid through the U.S. Department of the Treasury’s Hardest Hit Fund has more than doubled since April in states battling the highest volumes of foreclosures, the Special Inspector General for the Troubled Asset Relief Program announced Oct. 25, HousingWire reported.

The Treasury created the program to disseminate $7.6 billion in funds to agencies in 19 of the “hardest hit states” dealing with local foreclosures. To date, a total of $1.1 billion has been spent to aid struggling homeowners

According to Saralyn Stafford with the Georgia Department of Community Affairs, the number of borrowers in Georgia receiving aid has increased 82 percent since April, HousingWire reported. Nearly $45.6 million in funds have been committed in the state, with a total of 2,066 borrowers receiving aid through the program since its inception.

In New Jersey, another of the hardest-hit states, the program went from aiding a total of 54 people in December 2011 to 498 homeowners in the latest SIGTARP report.

The Treasury asserted that state agencies have made rapid progress in distributing aid to homeowners.

“Every state is showing tremendous progress and remains singularly focused on getting assistance out to homeowners,” Andrea Risotto, spokeswoman for the Treasury, told HousingWire. “To date, more than 77,000 families have been assisted by the program with another 30,000 in progress.”

Benjamin Lawsky, head of the New York State Department of Financial Services, said that the proposed Basel III banking requirements would hurt small and mid-sized community banks, and he called on lawmakers to exempt smaller banks from the new regulations, Reuters reported Oct. 22.

In a letter to the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, Lawsky stated that “most community and regional banks did not engage in the risky behaviors that led to the financial crisis, and yet … they will be affected disproportionately by the increased complexity,” Reuters reported.

Lawsky has given banks a strong ally in their opposition to the complexity of the new global banking rules that are designed to prevent another major financial crisis. Under the new rules, banks would have to hold about three times more capital than under current regulations, and the amount of reserve capital would be dependent on the riskiness of banks’ assets.

Basel III will be phased in over the next six years, starting in January, but regulators in the U.S. have not yet finalized the reforms, Reuters reported. Public comments were due Oct. 22.

Community banks have repeatedly argued that the new rules would unduly burden them compared to their impact on large institutions. Lawsky argued that smaller banks still should have to meet higher capital ratios than those called for by current regulations, but he noted that risk-weighting calculations should mirror those under a previous Basel accord.

RBS Financial will pay $42 million to settle an investigation launched by Nevada Attorney General Catherine Cortez Masto that focused on the firm’s purchase and securitization of subprime and payment option adjustable rate mortgages, HousingWire reported Oct. 24.
 
The investigation into the firm’s practices centered on the subprime activities of Countrywide and Option One, which originated mortgages securitized by RBS between 2004 and 2007, HousingWire reported.

“I remain committed to enforcing Nevada’s laws against the players — including those on Wall Street — that contributed to and profited from reckless and deceptive mortgage lending in Nevada,” Masto said in a news release, HousingWire reported. “The payment from RBS will alleviate some of the injury to the Silver State and its residents. The changes to its securitization process should help make sure that we do not go down this road again.”

Mastro’s office alleged that RBS did not perform sufficient due diligence on the loans, and had they done so, they likely would have uncovered many borrowers who took out mortgages that they were unable to repay or refinance.

According to the news release issued by Masto’s office, RBS will commit to certain changes in its practices associated with securitization operations concerning mortgages originated and serviced within the state, HousingWire reported.

Fannie Mae President and Chief Executive Officer Timothy Mayopoulos acknowledged that the government-sponsored enterprise still is playing too big a role in the mortgage market and noted a concerted effort to attract private capital to the mortgage business, National Mortgage News reported Oct. 22.

Speaking at the Mortgage Bankers Association’s annual convention in Chicago, Mayopoulos said that four years after the housing market collapsed there has been little private capital entering the market, National Mortgage News reported.

Currently, Fannie Mae has more small and mid-sized mortgage bankers selling directly to it, a result of deconsolidation in which some participants reduced their involvement as whole loan purchasers, National Mortgage News reported. Large aggregators previously had absorbed the risk of smaller players, but now Fannie has assumed that risk.

Mayopoulos told the conference that his counterpart at Freddie Mac, Donald Layton, also is trying to build a new and improved infrastructure for housing finance.

Meanwhile, Carol Galante, acting commissioner for the Federal Housing Administration, told the conference that her agency’s future role is tied to the future of the GSEs, National Mortgage News reported. Any adjustments must be synchronized so all borrowers are covered.

Matthew Feldman, president and CEO of the Federal Home Loan Bank of Chicago, cited the secondary market programs of his 12 FHLBs as models for what future mortgage programs could be. He told the conference that one of the most significant elements of the FHLBs is the requirement that lenders have “skin in the game” for loans sold into its Mortgage Partnership Finance program.

Feldman noted that in the future, the FHLBs presence in the secondary market could be either as aggregators or as financial intermediaries, and noted the “MPF Extra” program, which currently sells loans to Fannie Mae and is being expanded to sell to other groups, National Mortgage News reported.

Feldman told the conference that securitization does not need to occur at the FHLB level, but at a point where it offered the greatest benefit for its members, National Mortgage News reported.

Home prices nationwide rose 0.7 percent from July to August on a seasonally adjusted basis, according to the Federal Housing Finance Agency’s monthly House Price Index released Oct. 23.

For the 12 months ending in August, U.S. prices rose 4.7 percent. The HPI is 15.9 percent below its April 2007 peak and is roughly the same level as the June 2004 index.

Seasonally adjusted monthly price changes for the nine census divisions tracked by the HPI ranged from a 0.5 percent decrease in the East South Central division (Alabama, Kentucky, Mississippi and Tennessee) to a 3.0 percent increase in the Pacific division (Alaska, California, Hawaii, Oregon and Washington). The 12-month changes ranged from increases of 0.4 percent in the Middle Atlantic division (New Jersey, New York and Pennsylvania) to 11.4 percent in the Mountain division (Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming).

FHFA calculates the monthly indexes using the purchase prices of homes with loans owned or guaranteed by Fannie Mae or Freddie Mac.

See the monthly HPI.

Fixed mortgage rates barely moved during the past week; they edged slightly higher but remained at near record lows, Freddie Mac reported Oct. 25 in its weekly Primary Mortgage Market Survey.

The 30-year fixed-rate increased 0.04 percentage points to 3.41 percent (down from 4.10 percent a year ago). The 15-year fixed-rate rose 0.06 percent to 2.72 percent (down from 3.38 percent a year ago).

The one-year adjustable-rate mortgage, however, fell slightly again this week, down 0.01 percentage points to 2.59 percent (down from 2.90 percent a year ago). The five-year Treasury-indexed adjustable-rate remained steady at 2.75 percent (down from 3.08 percent a year ago).

“Mortgage rates remained relatively unchanged this week and should continue to support the housing market and mortgage refinance,” Frank Nothaft, Freddie Mac’s vice president and chief economist, said in a news release. “Existing home sales in September eased slightly to 4.75 million but was the second strongest annualized pace since May 2010. Moreover, new home sales rose to the most since April 2010. In addition, low rates and strong demand have already pushed the FHFA purchase-only home price index in August to its highest level (seasonally adjusted) since June 2010. And not surprisingly, the Federal Reserve in its October 24th  monetary policy announcement acknowledged the further signs of improvement in the housing sector, albeit from a depressed level.”

View Freddie Mac’s weekly Primary Mortgage Market Survey.

Real estate data firm Zillow announced Oct. 25 that it will show 1.2 million pre-foreclosure and foreclosed properties that are not yet listed for sale and not in the Multiple Listing Service database.

All the data that Zillow will be sharing is public information, although the company acknowledged that it expected to face questions about privacy issues.

Until now, foreclosures have made up a large, yet invisible, part of the housing inventory, the company noted in a news release. With this new data, Zillow said is “bringing this information to light, and taking this inventory out of the shadows can help bring these homes to market faster than ever before,” Zillow CEO Spencer Rascoff, said in a news release.

Zillow's pre-market inventory includes: 
• Nearly 1 million pre-foreclosure properties: Homes where the lender has initiated foreclosure proceedings or an auction has been scheduled,
• More than 260,000 foreclosed properties: Homes that are owned by a bank or a lender but have not yet been listed for sale,
• Foreclosure Estimate: Zillow's estimate of the sale price of the home if sold as a foreclosure, in addition to the percentage and dollar discount this represents off fair market value. Number of beds and baths, square footage and historical sales and listing history, and
• Foreclosure details, including: timeline of the foreclosure process, foreclosing loan amount, unpaid balance, lender, trustee and/or attorney information.

Zillow's pre-market inventory search is currently available on Zillow.com and iOS mobile apps.

Following three months of steady declines in late payments, early-stage residential delinquencies increased 36 basis points in September, according to data from Lender Processing Services Inc., Mortgage Daily reported Oct. 23.

The data showed that the percentage of home loans that were delinquent in September was 11.27 percent, a rate based on 5,640,000 mortgages in the foreclosure pre-sale inventory or at least 30 days past due. The percentage of delinquencies in August was 10.91 percent based on 5,450,000 overdue loans.

This recent peak, however, remained well below the 12.27 percent delinquency rate one year ago when 6,373,000 mortgages were delinquent.

States with the highest delinquency rates were Florida, Louisiana, Mississippi, New Jersey and Nevada. States with the lowest delinquency rates were Alaska, Montana, North Dakota, South Dakota and Wyoming.

September’s increased delinquency rate was concentrated in the 30-day category, excluding loans in foreclosure; the U.S. rate climbed 53 basis points from August to 7.40 percent. The 30-day rate had not increased since May, when it stood at 7.20 percent. A year ago, the 30-day rate was 8.09 percent.

September’s foreclosure pre-sale inventory rate fell 17 BPS from August to 3.87 percent. A year ago, the foreclosure rate was 4.18 percent.

The Appraisal Institute’s blog, “Opinions of Value,” received honorable mention in the Blog category Oct. 23 in the Construction Writers Association Marketing Communications Awards. 

The Marketing Communications Awards program recognized construction writing focused on advertising, corporate communications and public relations. The competition was open to any industry-related individual, corporation, association or publication.

According to CWA, the competition showcases the best-of-the-best in construction-related communications and is an acknowledgment that the writers’ communications efforts have met a very high standard of excellence. Seasoned business-to-business media professionals served as competition judges.

Read AI’s Opinions of Value blog.

Michael Esposito, MAI, SRPA, SRA, spoke with New York’s Newsday Oct. 24 about the pros and cons of owning or buying property next to cemeteries. He explained that appraisers look at “surrounding, external things that could affect the value of the property,” and cemeteries certainly are one of those things.

“There are homebuyers who could never be comfortable living close to a cemetery,” Esposito said. “Some have concerns that a cemetery could invite mischief or crime at night; others may be opposed to the location due to religious beliefs.” Esposito also noted that “there is the matter of resale value — even if you're not afraid, the next buyer might be.”

Featured in national media coverage this past week were Michael Hobbs, SRA, and Sandra K. Adomatis, SRA, Yahoo! News, Money and PRWeb; and Kay Van Hoesen, SRA, PRLog.

These stories are among the recent media coverage included in the “AI in the News” feature on the members-only section of the Appraisal Institute website.

Appraisal Institute members appearing recently in local media coverage include Pam Dubov, MAI, Central Florida News 13 (Orlando, Fla.), Bay News 9 (Tampa, Fla.); John R. Mako MAI, SRA, The Post-Standard (Syracuse, N.Y.); Sara W. Stephens, MAI, Sentinel-Tribune (Bowling Green, Ohio); Ron Stickelman, SRA, Yellow Springs (Ohio) News; and Marilyn M. Woods, SRA, Anderson (S.C.) Independent-Mail.

See the latest media coverage about the real estate valuation profession, the Appraisal Institute and its members. Media coverage at “AI in the News,” found on the member log-in page of the Appraisal Institute’s website, is updated daily and also includes the latest news releases from the Appraisal Institute.