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Inside Mortgage Finance

March 27, 2014

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Home-Equity Lending Rebounded Strongly In 2013, But Remains Far Below Earlier Highs

Home-equity lending increased sharply last year, hitting its highest level in new originations since 2009, according to a new Inside Mortgage Finance analysis and ranking. Lenders originated an estimated $60.0 billion in home-equity lines of credit and closed-end second mortgages in 2013, up 36.4 percent from the previous year. That still represented only 3.2 percent of total residential mortgage production, but it was the only sector other than jumbo to show a gain from 2012 levels. Despite the improved home-equity originations, the supply of home-equity debt in the market continued...[Includes three data charts] Read More

Most Mortgage Firms Continue to Undervalue Their Servicing Rights; But are Some Being Too Conservative?

In general, newly-created mortgage servicing rights are being valued at 4 to 4.5 times the servicing fee, which has become the industry norm of late, but there’s a school of thought that says lenders are being a bit too conservative in their “marks.” “Whether your company is public or private you have to be within [generally accepted accounting principles] on these valuations,” said Ken Richey, managing partner in Richey & Co., an accounting and advisory firm based in Englewood, CO. “GAAP dictates that you have to book it at fair value. But what’s fair value?” On a Fannie Mae or Freddie Mac loan, 4 times the servicing fees translates... Read More

Carrington Tests Low-FICO Market, But Skeptics Suggest It’s More Marketing Than Substance

Carrington Mortgage made a big splash this week, unveiling a plan to offer to fund FHA loans for borrowers with credit scores as low as 550, but already some skeptics are openly questioning just how many such loans Carrington – or any company – can produce. Carrington Executive Vice President Ray Brousseau declined to estimate production. The company’s minimum FICO score for FHA loans had been 580. The expanded FHA program will be...[Includes one data chart] Read More

Old Republic Encounters Cold Reception in Capital Markets,Will Use Own Funds to Prop Up Ailing MI

Old Republic International has abandoned plans to recapitalize its mortgage guaranty subsidiary for lack of investor interest and will tap its own resources to boost the regulatory capital of its ailing MI companies while trying to pay off remaining claims, according to top company executives. The decision was due to ORI’s unsuccessful bid to attract new investors under the terms and conditions laid out by the RMIC Companies, which constitutes Old Republic’s consumer credit indemnity and mortgage guaranty lines of business. The two operations are currently in runoff mode and have not written any new business since 2008 and 2011, respectively. While the failure to attract fresh funding was disappointing, it does not change... Read More

Johnson-Crapo Housing Finance Reform Bill Could Lead to Higher Mortgage Rates

The cost of borrowing for many homebuyers could rise as a consequence of the Senate’s newest housing finance reform legislation if it’s enacted as is, according to an analysis by Barclays. The bill, filed last week by Sens. Tim Johnson, D-SD, and Mike Crapo, R-ID, would replace Fannie Mae and Freddie Mac with a new mortgage-backed securities program for conventional mortgages that requires private investors to take the first 10 percent of losses. The Barclays analysis found... Read More

Feds Propose Minimum Requirements for State Oversight of Appraisal Management Companies

The Consumer Financial Protection Bureau, the Federal Housing Finance Agency and four other federal financial regulators issued a proposed rule this week that would implement minimum requirements for state registration and supervision of appraisal management companies. Mandated by the Dodd-Frank Act, the requirements would apply to states that voluntarily choose to establish an appraiser certifying and licensing agency with the authority to register and supervise AMCs. While there would be no penalty imposed on states that do not establish a regulatory structure for AMCs, these businesses would be barred from providing appraisals in such states. The provisions in the proposed rule are... Read More

Experts: Shareholders Lawsuits Challenging Government’s GSE Profit Grab a ‘Tough Row to Hoe’ for Plaintiffs

Expect a long and winding legal road to resolution of investor lawsuits challenging the Treasury Department’s “net worth sweep” of Fannie Mae and Freddie Mac earnings, warn legal experts. More than a dozen lawsuits filed against the government – including hedge funds Perry Capital and Fairholme Capital Management – are pending in federal district court in Washington, DC, and in the Court of Federal Claims. The shareholder plaintiffs allege that the Treasury’s change in the dividend structure of its preferred stock leaves the government-sponsored enterprises with no funds to pay dividends to junior shareholders. The complaints raise... Read More

Industry Experts Spell Out How to Get the Most Mileage From Your Mortgage Servicing Rights

Lenders are discovering hidden gold in their mortgage servicing rights these days. But even with the run-up in values, many lenders are choosing to keep their servicing, some because it maintains relationships with customers who have additional valuable banking needs, and others to avoid the regulatory headaches associated with servicing transfers. Some lenders are taking a middle path, selling the asset but continuing to work the loans as subservicer. During a webinar sponsored by Inside Mortgage Finance this week, Mark Garland, president of MountainView Servicing in Denver, noted that there are far more sellers today than even one year ago. In the first three months of 2014, 36 deals went to auction with $98 billion in unpaid principal balance. That compares with the 13 deals ($146 billion) auctioned during the same period last year, although $100 billion of that was in one deal. “Despite strong demand and pricing levels, sellers are vetting... Read More

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