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Inside Nonconforming Markets

September 1, 2006

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Subprime Servicers Struggle with Portfolio Growth at Midway Mark

Subprime mortgage servicers didn’t reap much benefit from a solid growth in the origination market during the first half of the year. Perhaps more troubling for servicers, though, are the chinks that are starting to appear in their loan performance numbers. According to data compiled by Inside B&C Lending, the volume of subprime mortgages outstanding grew by 4.2 percent, to $1.25 trillion, in the second quarter. From the first quarter, volume was up by a tepid 0.8 percent... Read More

Changing Market Spells the Demise of Subprime Group

The National Home Equity Mortgage Association is closing up shop – a nod to changing market conditions that have seen the line between the prime and subprime market largely fade away. But while NHEMA ended life as a trade association last week when it announced a planned merger with the Mortgage Bankers Association, officials say that the subprime market will continue to have a dedicated voice on topics ranging from predatory lending to borrower education and loan suitability... Read More

Investor Repurchase Demands Dog Subprime Lenders in 2Q

Loan sellers are getting more repurchase requests from their investors – a development that is cutting into gain-on-sale margins and forcing changes in their product mixes. Repurchases have long been a bane for companies that sell their production on the whole loan market. In general, the repurchase requests are fueled by worse-than-anticipated performance, particularly early in the life of the loans... Read More

While Others Look for Sale, People’s Choice Seeks IPO

At a time when many of its competitors are looking to merge with deep-pocketed investment banks or depository intuitions, People’s Choice Financial Corp. wants to go public. The two-year-old real estate investment trust laid out its plans in a mammoth 260 page document filed in June with the Securities and Exchange Commission. “No public market currently exists for our common stock, and our common stock is not currently listed on any national exchange or market system,” People’s Choice said... Read More

New Citi MBS Deal Features Simple Interest Loans

CitiMortgage’s bank parent has completed a unique securitization of nonprime mortgages backed by simple interest and rate reduction loans. The loans backing the $786.33 million deal, Citicorp Residential Mortgage Trust Series 2006-1, were originated through the company’s Primerica unit and feature biweekly pay schedules offered as a part of a program that the bank believes will allow its customers to build equity more quickly. It’s the simple interest feature that is likely to raise some eyebrows, however. Read More

Empire State Makes Changes To High-Cost Regulations

New York’s Banking Department has updated its high-cost loan regulations. The update to the so-called “Part 41” are designed to make the banking regulations consistent with a state predatory lending law enacted in April of 2003. Among the key changes is a new high-cost trigger for loans insured by the FHA or VA. Such loans will now count as high cost if the total points and fees paid in connection with the mortgage exceed 6 percent of the loan amount... Read More

Abuse-Foreclosure Link Not All That Clear, OCC Says

Are predatory lending practices behind a troubling rise in foreclosures in Chicago? Many consumer groups say so. But a new white paper issued by the Office of the Comptroller of the Currency suggests that the link may be weaker than believed. “The relationship between predatory lending practices and foreclosure rates is more complicated than the arguments for restricting their use suggested,” the OCC said in “Economic Working Paper 2006-1, released this month... Read More

Borrower Behavior Should Shape Disclosures, Some Say

Federal regulators are weighing the mortgage market’s version of the old saw that “you can lead a horse to water, but you can’t make him to drink.” Of course, the Federal Reserve Board’s stiffer regulation of the home-equity market is needed has nothing to do with livestock. Instead, regulators are concerned that new disclosures and borrower education programs may prove useless if loan applicants won’t take advantage of them. The effectiveness of disclosures – and how consumers digest them... Read More

B&C News Briefs

Industry efforts to battle a Cook County, IL ordinance that creates an anti-predatory lending program were dealt a blow this week when Standard & Poor’s announced that it would continue to rate bonds backed by loans originated in the Chicago suburb. Based on its review of the “Predatory Lending Database Pilot Program,” S&P concluded that the law does not impose liability on purchasers or assignees of predatory loans. This finding essentially gives investors the green light to buy loans originated in the pilot area. Read More

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