REO Sales, The Disappearing Act

Investigation One BHREO sales are not what they used to be. In fact, in June, REO sales hit their lowest point in nine years,according to a new report by CoreLogic.

Overall distressed sales in June accounted for 8 percent of U.S. sales. REOs accounted for 5 percent, which is a far cry from January of 2009, when REOs made up 30 percent of U.S. home sales. REO sales in June were 2 percent below last June and at their lowest for any month since September 2007.

While distressed sales play an important role in clearing the housing market of foreclosed properties, they sell at a discount to non-distressed sales, and when the share of distressed sales is high, it can pull down the prices of non-distressed sales. With this in mind, REO sales continued decrease contributes to the home price increase of 5.3 percent seen earlier this month.

California had the largest improvement of any state from its peak distressed sales share, falling 60.6 percentage points from its January 2009 peak of 67.5 percent.

“There will always be some level of distress in the housing market,” CoreLogic reported. “If the current year-over-year decrease in the distressed sales share continues, it will reach that ‘normal’ 2-percent mark in mid-2019.”

Only eight states recorded increases in their distressed sales shares in June, when compared to a year ago, CoreLogic reported. Maryland had the largest share of distressed sales, with 19.4 percent. The Baltimore area had the largest share of distressed sales of any city as well, 19 percent. Connecticut came a close second in states with the most distressed sales, 18.4 percent. Michigan had 17.6 percent in June; Illinois and New Jersey also each reported distressed sales above 15 percent.

Meanwhile, North Dakota, despite having nagging concerns with its energy industry and the fallout on home growth, had the smallest distressed sales share in June, 2.5 percent. It also saw a 0.1 percentage point year-over-year declines in distressed sales.

Similarly, oil states continued to see year shares in June. Texas saw a 1.2 percentage point decrease and Oklahoma saw a 0.5 percent decrease. Florida, though, led states in decreased declines, with nearly a 6 percent drop in its distressed sales share from a year earlier.

While some states stand out as having high distressed sales shares, only North Dakota and the District of Columbia are close to their pre-crisis levels, each within one percentage point.

House Puts Wells Fargo in the Hot Seat

All eyes fell again on Wells Fargo Chairman and CEO John Stumpf during the House Financial Services Committee Hearing examining the opening of unauthorized customer accounts at Wells Fargo.

Financial Services Committee Chairman Jeb Hensarling (R-Texas) delivered the open remarks the hearing noting that this hearing “is just the beginning of our investigation, not the end.”

“In the coming weeks, we will be questioning Wells Fargo executives,” said Hensarling. “If necessary, I will not hesitate to issue subpoenas because we will do what is necessary to get to the bottom of this.”

Hensarling did note that Wells Fargo was not the only one on the hot seat for this situation, citing that the OCC and CFPB should also be held accountable for conducting regular examinations but not exposing the issue until now.

“We launched this investigation because it is our job to hold both Wall Street and Washington accountable, and to protect consumers from the excesses of both,” said Hensarling.

In her opening, Congresswoman Maxine Waters (D-California), Ranking Member of the Committee on Financial Services, urged Stumpf to tell the truth about the fraudulent activity that occurred and take full responsibility.

“We still do not have the information we need to understand how this happened, when the sales culture turned toxic, and who knew about it and when,” Waters said.

Waters called for a thorough investigation by the Justice Department into executive conduct. “Someone who is responsible for the broken culture that led to this behavior needs to be held responsible,” she said. “Not the lower-level employees that have been left to bear the weight of the mistakes that have been made.”

Waters and Congressman Al Green (D-Texas), Ranking Member of the Subcommittee on Oversight and Investigations, requested this hearing to investigate these harmful practices. It is the first time Hensarling has brought a financial executive before the Committee to testify for misconduct.

Stumpf was then allowed to give a brief statement before questioning began, where he accepted full responsibility and shared with the Committee updated information about what work Wells Fargo is doing to rectify the issue at hand.

During the opening statements and subsequent questioning, the idea of déjà vu kept coming to into play as Hensarling and Waters, among others, noted that this investigation had marked resemblance to the fraudulent mortgage document scandal Wells Fargo was investigated for over 6 years ago.

“Unfortunately, this is not the first time we have seen abusive practices at Wells Fargo,” said Waters. “We thought you were working on these practices six years ago, your mortgage executive sat in that very chair, reassuring my Subcommittee that you were committed to fixing Wells Fargo’s forgery of mortgage documents. And yet, we haven’t seen the problem fixed, we’ve just seen it migrate to another part of your bank.”

RBS Settles With NCUA

Gavel Three BHThe Royal Bank of Scotland Group PLC (RBS) reached a final settlement with the National Credit Union Administration Board (NCUA) to resolve two outstanding civil lawsuits for $ 1.1 billion due to toxic mortgage-backed securities sold to credit unions that subsequently failed.

According to their press statement, NCUA was the first federal financial institutions regulator to recover losses from investments in these securities on behalf of failed financial institutions. Net proceeds from recoveries are used to pay claims against five failed corporate credit unions, including those of the Temporary Corporate Credit Union Stabilization Fund.

“NCUA is pleased with today’s settlement and fully intends to stay the course in fulfilling its statutory responsibilities to protect the credit union system and to pursue recoveries against financial firms that we maintain contributed to the corporate crisis,” said NCUA Board Chairman Rick Metsger.

RBS reports that these the settlements, involving its subsidiary RBS Securities Inc., relate to the two residential mortgage-backed securities (RMBS) cases (asserting claims on behalf of US Central Federal Credit Union and Western Corporate Federal Credit Union), most recently disclosed in RBS’s 2016 Interim Results Announcement. The settlement amount is substantially covered by existing provisions as of June 30, 2016 and will have no material impact on the RBS Group’s CET1 ratio.

The settlement covers claims asserted in 2011 by the NCUA Board as liquidating agent for Western Corporate Federal Credit Union and U.S. Central Federal Credit Union in federal district courts in California and Kansas, respectively. In connection with the settlement, NCUA will dismiss its pending suits against RBS. The statement from NCUA notes that RBS does not admit fault as part of the agreement.

RBS continues to litigate various other RMBS-related civil claims identified in its disclosure, including those of the Federal Housing Finance Agency, and to respond to investigations by the civil and criminal divisions of the U.S. Department of Justice and various other members of the RMBS Working Group of the Financial Fraud Enforcement Task Force (including several state attorneys general). As previously stated, RMBS litigation and investigations may require additional provisions in future periods that in aggregate could be materially in excess of the provisions existing as of June 30, 2016.

NCUA still has litigation pending against other financial institutions, including Credit Suisse and UBS Securities, alleging they sold faulty mortgage-backed securities to corporate credit unions. NCUA also has pending litigation against various residential mortgage-backed securities trustees and LIBOR banks related to corporate credit union losses.

Fannie Mae Sees Rarity in Monthly Volume Summary

Fannie Mae’s gross mortgage portfolio saw its first expansion since January of this year with an annual rate of 9.1 percent. Despite the increase shown this month, the GSE is still below its 2016 cap of $339.3 billion and serious delinquency decreased 6 basis points to 1.24, according to Fannie Mae’s August 2016 Monthly Volume Summary.

With the decrease seen for Fannie Mae’s serious delinquency rate, or the share of loans backed by Fannie Mae that were seriously delinquent, Fannie Mae also reports 7,489 completed loan modifications, a substantial increase from July’s 6,958.

The 9.1 percent rate of growth largely contrasts with the rate of shrinkage experience in July at 24.7 percent. With this increase, the aggregate unpaid principal balance (UPB) of Fannie Mae’s gross mortgage portfolio was $311.13 billion at the end of the month—up by about $2.25 billion from July, according to Fannie Mae. The portfolio has declined at an annual rate of 14.4 percent over the past eight months of 2016.

Fannie Mae’s total book of business, which includes the gross mortgage portfolio plus total Fannie Mae mortgage-backed securities and other guarantees minus Fannie Mae MBS in the portfolio, increased at a compound annualized rate of 3.8 percent in July up to a value of about $3.113 trillion.

In January 2016, Fannie Mae’s gross mortgage portfolio experienced a rare expansion, increasing at an annual rate of 5 percent. With August’s increase, the portfolio has now seen this rarity twice this year as well as in five months since June 2010. The four months prior to August in which the portfolio expanded were January 2016, March 2015, January 2015, and December 2012. At the beginning of that stretch in June 2010, the amount of unpaid principal balance (UPB) of the loans in the portfolio was $818 billion.

The Alternate Housing Market Universe — ksiconsultingco

It has been determined by industry experts that if the housing market follows the same trajectory it is currently on, the median home price in the U.S. will be equal to that of prices before the housing crisis by 2017. A recent report from Zillow, though, cautions correlating prices returning to these levels with market […]

via The Alternate Housing Market Universe — ksiconsultingco

Home Values Rise Higher in August

House fo Sale Two BHAugust in the housing market remained steady as warm breeze, with inventory tight and house prices growing slowly, Zillow reported Thursday. For the 49th month in a row, in fact, the median U.S. home value rose year-over-year in August, to $188,100. That’s up a really modest 0.4 percent, but up 5 percent from August 2015, according to Zillow’s August Real Estate Market Report.

“In each month thus far in 2016,” the report stated, “annual home value growth has been no slower than 5 percent per year, and no faster than 5.2 percent – a notable stretch of consistency.”

According to Zillow’s chief economist, Svenja Gudell, the steady appreciation of the  U.S. housing market began two years ago.

“Throughout much of 2015, home values grew in a similarly narrow range, between 4.4 percent and 4.7 percent annual growth, before accelerating into the 5 percent range at the end of last year‒‒where it has largely stayed since,” Gudell said. “This long period of steady annual home value growth almost looks like an anomaly when seen next to the sometimes wild up and down swings experienced nationwide over the past two decades.”

A potential answer for why the market has been so stable, she said, may just come down to those three famous needs for success in real estate: location, location, location.

“The U.S. housing market is really a collection of dozens of local markets, each behaving differently and with their own unique fundamentals,” Gudell said. For example, “some once-red-hot markets, including the San Francisco Bay Area, have cooled considerably this year.”

According to Zillow, values in San Francisco and San Jose metro areas dropped from a more than 11 percent annual pace in January to 6 percent in August. At the same time, home value growth in other markets like the booming Pacific Northwest has picked up. Seattle and Portland have both increased by more than a full percent each this year.

Home price growth, however, is bigger at the bottom, Zillow reported.

“Annual home value growth at the bottom end of the market continues to far exceed growth at the top end,” the report stated. “In August, the typical U.S. home valued in the bottom one-third of all homes was worth $106,200, up 7.3 percent from August 2015. The typical home valued in the top one-third was worth $342,600, up 3.8 percent year-over-year.”

Inventory remains well below peak levels from a few years ago in every large market.

“A big driver of faster home value growth overall among more entry-level homes is a lack of such homes to buy relative to the most expensive homes,” Gudell said.

Nationwide, inventory of bottom-third homes available for sale in August was down by 9.2 percent annually, compared to a smaller 1.8 percent annual decline in the number of top-third homes available, the report stated.

Black Knight Reports Increase In Home Prices for July

House fo Sale Two BHThe Data & Analytics division of Black Knight Financial Services, Inc. recently released its latest Home Price Index (HPI) report, based on July 2016 residential real estate transactions.

The Black Knight HPI utilizes repeat sales data from the nation’s largest public records data set, as well as its market-leading, loan-level mortgage performance data, to produce one of the most complete and accurate measures of home prices available for both disclosure and non-disclosure states.

Non-disclosure states do not include property sales price information as part of their publicly available county recorder data. Black Knight is able to obtain the sales price information for these states by combining and matching records across its unique data assets.

The report states that U.S. home prices are up 0.4 percent for the month as well as up 5.3 percent year-over-year. At $266,000, the U.S. HPI has risen over 33 percent from the market’s bottom and is now within just 0.8 percent of a new national peak.

Specifically New York and Minnesota led home price gains among the states, seeing 1.1 and 1 percent growth for the month, respectively, while Missouri was the only state to see home prices decline. This rate fell 0.1 percent.

The report also states that Albany, Oregon, led metro-area growth at 1.3 percent appreciation. In contrast, New York state metro areas reportedly accounted for six of the top 10 biggest monthly movers.

Black Knight reports that San Jose, California continued to back away from its May 2016 peak, with prices falling another 0.5 percent in July.

Home prices in Portland, Oregon saw the fastest rate of appreciation among the 40 largest metros, and Seattle increased over 10 percent since the start of the year. Additionally, home prices in nine of the nation’s 20 largest states and 14 of the 40 largest metros hit new peaks in July.

The report states that each month the Black Knight HPI reports five price levels (quintiles), along with REO discount rates, for 18,000+ U.S. ZIP codes. Findings are available with or without seasonal adjustments, although all numbers that follow have not been seasonally adjusted.