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OFHEO: Home Prices Decline in 1st Quarter

Thursday, May 22, 2008

by Michael Peron

Kerri Panchuk

The Office of Federal Housing Enterprise Oversight (OFHEO) released its House Price Index (HPI) for the first quarter of 2008 on Thursday. The new report says on a seasonally-adjusted basis, the prices of homes in the United States fell 1.7-percent between the first quarter of this year and the fourth quarter of 2007.

In addition, OFHEO says home prices in its index dropped 3.1-percent between the first quarter of 2007 and the first quarter of 2008—making it the largest price drop in the purchase-only index's 17-year history.

“These substantial home price declines bring positive and negative news,” said James Lockhart, OFHEO's director. “For homeowners and financial market observers, these declines spell further erosion in home equity levels and potentially more trouble for mortgage markets. To prospective home buyers who have been shut out of homeownership because of affordability constraints, these declines may be welcome news, as are continued low mortgage rates.”

More Significant Data from OFHEO's HPI Index:

43 states experienced price declines

eight states had declines greater than 3-percent

California and Nevada had price declines above 8-percent

prices are the weakest in the Pacific Census Division

states with the most appreciation include Wyoming, Utah, Montana, Texas and Alabama

states with the most depreciation include California, Nevada, Florida, Arizona and Michigan

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Quote of the Day

Thursday, May 22, 2008

by Michael Peron

"The difference between intelligence and education is this: Intelligence will make you a good living."

Charles Kettering, Social Philosopher

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UBS Completes Sale of Subprime-Related Securities

Thursday, May 22, 2008

by Michael Peron

Kerri Panchuk

Global investment bank UBS announced Wednesday that the company has officially completed the sale of its subprime and Alt-A U.S. residential mortgage-backed securities to investment management firm BlackRock.

The transaction is valued at $15 billion and allows UBS to offload assets that remain a significant financial risk.

“Risk reduction remains a critical part of our ongoing financial restructuring and this sale is a big step towards further reducing our positions in this asset class,” said Marcel Rohner, group chief executive officer of UBS. “We continue to manage our legacy risks in a flexible and creative way in the best interests of our shareholders.”

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Fannie CEO: Recovery Not Expected Until 2009

Thursday, May 22, 2008

by Michael Peron

Kerri Panchuk

Fannie Mae Chief Executive Officer Daniel Mudd told shareholders Tuesday that he expects the housing correction will last through 2009 and describes the volatile real estate sector as “the worst housing market this side of the Great Depression.”

Mudd added, “On the other hand, Fannie Mae also has the best opportunity in years to grow and add shareholder value, simply by doing our job. That job is to stay in the market while others have fled, and keep money flowing from investors to housing. All so that people can still buy homes … refinance their loans and keep their homes … or live in affordable rental housing.”

Mudd told shareholders that despite the grim outlook for housing, and the $2.1 billion in losses the company experienced last year related to credit and market instability, Fannie Mae has increased its capital levels to OFHEO guidelines and stands prepared to be an outlet that can provide solid lending opportunities to families during the housing downturn.

“Your company goes into the tough months ahead with a rock-solid capital base – roughly $18 billion above our statutory requirement,” Mudd said. “And with revenue on the upswing and other steps we are taking to preserve capital, I believe we are in a better position to bridge the correction – and benefit in the recovery.”

Mudd outlined some of the common cures that will jumpstart the housing market, while also providing long-term, sustainable growth:

- do more to help borrowers

- license mortgage brokers

- simplify loan contracts by adding one cover page that includes a starting rate, payment, as well as a maximum rate and payment

- go back to the principal of long-term homeownership

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Quote Of The Day For Wednesday

Thursday, May 22, 2008

by Michael Peron

"The difference between intelligence and education is this: Intelligence will make you a good living."

Charles Kettering, Social Philosopher

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Mozilo's E-Mail Mishap Countrywide Runs For Cover

Thursday, May 22, 2008

by Michael Peron

Kerri Panchuk

It’s not uncommon in the business world for someone to accidentally hit “reply to all” rather than “forward” when responding to an e-mail. For most, this minor mishap leads to an uncomfortable feeling, or maybe a minor mea culpa for failing at workplace etiquette. But, for Countrywide Financial Corp.’s embattled Chief Executive Officer Angelo Mozilo it’s a PR-campaign gone amok and time to call corporate communications when an e-mail goes awry.

The mishap started this week when a homeowner trying to refinance out of a skyrocketing adjustable-rate mortgage sent a form letter request to Countrywide from a Web site that is now specializing in helping borrowers contact their lenders, according to Reuters. Mozilo, himself, received the e-mail and accidentally “replied to all” – including the borrower—saying it was “disgusting” that the letters were starting to resemble each other and that the writers were obviously pulling these form letters from the same source or the internet.

When the story leaked to the Los Angeles Times, the e-mail caused more controversy, prompting Countrywide to issue a statement to the Los Angeles Times, saying it regrets the misunderstanding and is working with borrowers to save at-risk mortgages

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Impac Mortgage Reports Net Loss! More To Come

Thursday, May 22, 2008

by Michael Peron

Kerri Panchuk

Irvine, California-based Impac Mortgage Holdings, Inc., a real estate investment trust (REIT), announced this week that the company lost $2.0 billion, or $27.10 per diluted common share in 2007, a much greater loss when compared to the $75.3 million the company lost the year before.

Impac attributes a large portion of the losses—approximately $1.4 billion—to a provision made for loan losses that was required to deal with declining market conditions, higher delinquencies and severities.

Impac elaborated on these conditions saying, “The mortgage market faced adversity during the second half of 2007 as the continued broad repricing of mortgage credit risk led to a severe contraction in market liquidity. Furthermore, the market has continued to try to quantify the ultimate loss rates that are going to be experienced in asset backed securities.”

Impac said it is now restructuring its operating costs through staff reductions and re-sizing the company to a more appropriate level.

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QUOTE OF THE DAY

Tuesday, May 20, 2008

by Michael Peron

"In the end it is important to remember that we cannot become what we need to be by remaining what we are."

Max Dupree

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Foreclosures Spark Growth at Online Auction Site

Tuesday, May 20, 2008

by Michael Peron

Kerri Panchuk

Rainbow City, Alabama-based online auction provider RealtyBid.com has more than doubled its business in the past year because of an influx of new properties and a string of new Web shoppers who are searching the site for deals.

In its latest report, the company says 630,000 unique visitors prowled RealtyBid's Web site in April, a 413-percent increase when compared to the 122,000 unique visitors recorded last year.

“The rising tide of foreclosures around the country is definitely piquing the interest of investors and savvy home buyers who are hoping to find real estate deals in this buyer's market, and many of them are finding the deal they are looking for on RealtyBid.com,” said Tony Isbell, RealtyBid's chief executive officer and president.

The number of properties listed by RealtyBid also grew by 165-percent between the years 2006 and 2007 and property sales also jumped 157-percent last year when compared to the year before.

Isbell believes 2008 is on-track to outdue the results from 2007 and 2006. “We've offered more than 20,000 properties around the country via online auction over the past year, and unlike some sites, access to view property details and bid on our properties is always free,” said Isbell. “So, the transparency and open nature of RealtyBid.com is definitely a facet of the site that keeps bidders coming back.”

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REO Auctions Growing in Importance

Tuesday, May 20, 2008

by Michael Peron

Kerri Panchuk

New York-based Fitch Ratings says in a new report that REO auctions will likely become more attractive to lenders and servicers who are dealing with an influx of foreclosures on their books.

“A recently completed Fitch survey showed over 60-percent of RMBS subprime servicers using auctions to liquidate REO holdings, a number that Fitch expects will continue to increase as servicers are faced with growing REO inventories and increasing loss severities,” Fitch said in a recent report.

Fitch believes the prevalent attitude towards REO auctions has always been one in which servicers feel it's better to hold onto a property and wait for a sale rather than experience greater loss severities through an auction. Fitch believes that's changing in light of today's real estate slow down.

The ratings agency concluded in its report that “taking an early loss through an auction, although appearing larger, may indeed be better than incurring an ultimately greater loss through prolonged REO liquidation efforts.”

Fitch's Senior Director Mary Kelsch says areas with depreciating home values are likely to become prime REO auction markets where lenders are presented with the challenge of offloading properties in a seller's market with falling home prices.

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