FHA Experiences High Defaults from Builder-Run Lenders

The Federal Housing Administration has implemented new policy changes designed to curb the losses the agency has suffered as a result of bad loans. As part of its new policy announced Jan. 20, the FHA’s overseer, the Department of Housing and Urban Development, will conduct reviews every three months of FHA loans originated over the preceding two years.

 

This could spell trouble for many of the FHA’s worst performing lenders, particularly for builder-run lenders.

 

According to a story in the Feb. 1 issue of American Banker, several builder-run lenders (owners or businesses that finance their own projects) rank among the 10 worst-performing lenders of the 50 highest-volume FHA originators. As the American Banker piece noted, part of the problem may be that being an in-house lender at a company whose main business is selling houses makes for loose underwriting.

 

With HUD turning a watchful eye to the performance and previous activities of FHA lenders, builder-run lenders with poor performance records may find themselves terminated from the FHA list of lenders or, worse in many cases, be forced to indemnify HUD for loan losses.

 

Under the new policy, HUD could terminate any lender whose default and claim rate was more than triple that of its region, if it also exceeded the national rate. According to American Banker, two builder-affiliated lenders already met that criteria and would have been in serious danger of being terminated — were it not for the fact that they had already ceased their loan departments. In Las Vegas, Centex's CTX Mortgage ran a 27 percent default rate in the two-year period, more than triple that of its peers. And in Los Angeles, loans by D.R. Horton's DHI Mortgage Co. have produced a 19 percent default rate, yielding an off-the-charts compare ratio of 572 percent, according to American Banker.

 

HUD is positioning itself to mitigate risk to the FHA by gradually making it tougher for any lender to stay on the FHA roster. The task ahead for HUD now, according to American Banker, is to determine a way to differentiate between lenders with high default rates that are due to mismanagement and those whose high default rates are attributable to other factors, such as the 2008 congressional ban on seller-funded down-payment assistance programs or broader fraud schemes.

Two-thirds of failed banks had problems with appraisals

An analysis conducted by the Appraisal Institute of failed banks shows that nearly two-thirds had been previously cited by federal bank examiners or had ongoing appraisal administration problems, highlighting a significant weakness in many struggling financial institutions.

 

Of the 35 Federal Deposit Insurance Corporation Inspector General Material Loss Reviews of failed banks nationwide, 22 contained concerns or unheeded recommendations from previous reviews, regarding the appraisal practices of the banks, according to the Appraisal Institute. These results were analyzed from Material Loss Reviews conducted by the FDIC Inspector General in 2009 and 2010. Examples of such concerns include: “Failure to obtain current appraisals or perform adequate appraisal reviews”; “Bank frequently relied on stale appraisals”; “Inadequate control of the lending function, including appraisals”; and “Poorly explained upward adjustments to the appraisal values.”

 

“The findings of the Material Loss Reviews illustrate that many institutions have not adequately invested in critical risk management functions like appraisal administration and oversight,” said Bill Garber, director of government and external relations of the Appraisal Institute. “Moving forward, if we are going to have any success in stabilizing mortgage markets, preventing mortgage fraud and kick-starting the secondary markets, bank examiners must place more emphasis on risk management, mitigation, meaningful oversight and enforcement of these critical issues.”

Greenville SC in top 5 retirement citys in the country

Boomers are willing to move farther than previous generations when they retire, and they are choosing places unlike stereotypical retirement hotspots, says Tom Brokaw in his report on Boomer retirement, airing on CNBC, Thursday, March 4 at 9 p.m. ET.

The top places listed by AARP and explored on the show are:

1. Loveland/Fort Collins, Colo.
2. Las Cruces, N.M
3. Rehoboth Beach, Del.
4. Portland, Ore.
5. Greenville, S.C.
6. Sarasota, Fla.
7. Ann Arbor, Mich.
8. Tucson, Ariz.
9. Montpelier, Vt.
10. Honolulu
11. Santa Fe, N.M
12. Atlanta
13. Charleston, S.C
14. Northampton, Mass.
15. San Diego, Calif.

Palmetto Bank hires new VP for Laurens County

Thomas Hardy has retired as The Palmetto Bank executive vice president, Laurens County, where the bank was founded and headquartered before relocating to downtown Greenville last year.
The Palmetto Bank today announced the appointment of Jeff Thompson to senior vice president, regional executive, Laurens County, as Hardy’s successor.
Hardy joined the bank in 1977. His retirement was effective Dec. 31.
He is a graduate of Lander College, Graduate School of Retail Bank Management at University of Virginia, South Carolina Bankers School, National Commercial Lending School at University of Oklahoma and Leadership Laurens County Class III.
Hardy currently serves as chairman of the Laurens Commission of Public Works. He also serves on the board of directors for the Laurens Chamber of Commerce and the Laurens County Development Corp. Along with his service as past chairman of United Way – Commercial Division, he served as a member of the Kiwanis Club and Palmetto Investment Club.
Hardy will assist Thompson and The Palmetto Bank with the leadership transition.
Thompson is a Laurens County native and graduate of Presbyterian College and the South Carolina Bankers School. Thompson has more than 17 years banking experience, the past five as a commercial banking executive.
He currently serves on the executive committee of the United Way of Laurens County and is a committee member of the SC Waterfowl Association. He is past chairman of the Laurens American Red Cross, served on the steering committee of Boy Scouts of America, and served as board member of Crime Stoppers of Laurens County.
“Jeff has strong ties to Laurens County and is an excellent addition to The Palmetto Bank,” said Mark Fox, executive vice president, Abbeville, Laurens and Greenwood Counties. “His high level of commercial banking experience, coupled with his demonstrated ability to build strong, lasting relationships with customers will be invaluable to our customers in Laurens County.”

Foreclosure Rate Dips in January

U.S. foreclosures declined 10 percent in January compared to December, but were still up 15 percent year over year, foreclosure marketer RealtyTrac reported Thursday.

RealtyTrac CEO James Saccacio predicted an increase on the horizon: “January foreclosure numbers are exhibiting a pattern very similar to a year ago: a double-digit percentage jump in December foreclosure activity followed by a 10 percent drop in January, then a surge in foreclosures over the next few months.”

States with the top 10 foreclosure rates are:
1. Nevada
2. Arizona
3. California
4. Florida
5. Utah
6. Idaho
7. Michigan
8. Illinois
9. Oregon
10. Georgia

Six states account for nearly 60 percent of the national total: California, Florida, Arizona, Illinois and Michigan.

Bank of America Units File Suit Against MGIC for faulty review appraisals

A pair of Bank of America subsidiaries, Countrywide Home Loans, and BAC Home Loans Servicing, is suing Mortgage Guaranty Insurance Corp. (MGIC), seeking a declaratory judgment against the mortgage insurer.
The complaint states MGIC is denying paying Countrywide "millions of dollars in valid mortgage insurance claims."
In a Securities and Exchange Commission filing, MGIC Investment Corp. said it intends to defend the mortgage insurer against the allegations "vigorously," although it added a disclaimer stating it is unable to predict the outcome of the case or its effect on the company.
Countrywide had obtained mortgage insurance on the loans in question via a flow policy. According to the court filing, MGIC is denying claims based on allegations that misrepresented information was provided by or on behalf of the borrower. Countrywide counters in the filing that MGIC is basing its decisions on "second or third-hand accounts of one-sided, self-serving and/or unsubstantiated hearsay and would not be admissible."
The court filing does state a substantial number of loans involved are stated income loans and MGIC was aware of that fact.
The filing said MGIC did not demand income information for all loans, not just the stated income loans, which Countrywide submitted for insurance underwriting.
The suit also alleges MGIC is denying claims payments based on faulty review appraisals the mortgage insurer is conducting.

Lennar Corporation Purchased two loan portfolios from FDIC

One of America’s largest homebuilders is getting into the loan restructuring business. Lennar Corporation said Wednesday that it has purchased two loan portfolios from the FDIC with a combined unpaid balance of $3.05 billion.

Lennar paid $243 million for the portfolios, which include 5,500 distressed residential and commercial real estate loans from 22 failed bank receiverships. But the Miami-based builder says it’s no stranger to working with troubled mortgages.

“Acquiring and working out distressed real estate loans was a large and extremely profitable part of our business during the last major real estate down cycle in the early 1990s,” said Stuart Miller, president and CEO of  Lennar Corporation. 

“We are pleased to return to this business and honored to partner with the FDIC to manage, work through and add value to these portfolios of real estate loans.”
Miller says the company has been preparing to invest in the distressed loan space for the last two years and has been closely watching the market to identify “the opportune point of entry.”
As part of the deal with the FDIC, Lennar receives a 40 percent stake in the limited liability companies created to hold the loans. The FDIC will retain a 60 percent equity interest in the companies and will provide $627 million of nonrecourse financing at zero percent interest for seven years, Lennar explained.
Rialto Capital, a subsidiary of Lennar, will conduct the day-to-day management of the portfolios and the loan workouts, and will contribute up to $5 billion toward the acquisition, Lennar said. Rialto is a real estate investment management company focused on distressed real estate assets.

A Rialto related entity is also a sub-advisor to Alliance Bernstein in one of the eight Public Private Investment Program (PPIP) partnerships sponsored by the U.S. Treasury to purchase residential and commercial mortgage backed securities.

Video Marketing and Mortgage News Designed for Mortgage and Real Estate Sales

Video Marketing and Mortgage News Designed for Mortgage and Real Estate Sales

The February 15, 2010 Implementation Date Will NOT Change for Mortgagee Letters 2009-28 and 2009-51

Implementation Date for New Requirements in ML 2009-28:

As indicated in the industry email of December 22, 2009, enactment of ML 2009-28 (Appraiser Independence) WILL be implemented February 15, 2010. ML 2009-28 (originally planned for a January 1, 2010 implementation) has two parts: a) prohibition of mortgage brokers and commission-based lender staff from the appraisal process, and b) appraiser selection in FHA Connection.

The effective date for both sections of this guidance will take effect for all case numbers assigned on or after February 15, 2010. This extension has allowed FHA and lenders additional time to adjust systems to accommodate the changes. Detailed instructions on changes to FHA Connection will be issued in a new mortgagee letter, which was delayed due to federal offices being shut down the week of February the 8th and will be released the week of February 15th.

However, lenders will be able to secure a case number assignment in FHA Connection via the Case Number Assignment Screen without inputting the appraiser information. The Case Number Assignment Screen will no longer capture the assignment choice, license ID and assignment date. Instead, lenders will be required to enter all appraisal data, including the appraiser ID, in the Appraisal Logging Screen once the completed appraisal is received by the lender and prior to closing the loan.

Vacant Lots Hot Property

Vacant Lots Become Hot Property
Vacant residential lots are looking better and better to real estate investors.

The cost of a finished, ready to build lot, can cost a developer about 25 percent of the finished home price. There are a number of these ready-to-go lots on the market at about half what they actually cost to prepare. Investor groups are snapping them up, figuring that the time will come soon when they will be in demand.

"The country needs 1.2 million new units for the next 10 years just because of population growth," says Scott Clark, president of American Development Partners, which has bought thousands of vacant lots all over the West. "[U.S. builders] built about 500,000 units in 2009 and 600,000 units in 2008, so there eventually will be pent-up demand. We want to get as many of those finished lots as we can because as demand begins to rise, the need for housing will become painfully obvious. The delta (ratio of change to value of underlying asset) in this investment will be significant."

SC State Housing Approved Lending Partner

SouthEastern Evaluation is pleased to announce that The South Carolina State Housing Authority has selected SouthEastern Evaluation's ordering platform to place appraisal orders for loans with SC State Housing Authority.  SouthEastern Evaluation is headquartered in Greenville, SC.  Our appraisal management team consists of highly trained professionals. Our company culture is to create long term, lasting relationships with our clients and appraiser base.  We can create your profile over the phone.  Please contact us at 864-467-9511 or info@see-amc.com.  We look forward to working with you.

StellarOne Wholesale Lending News

FHA And USDA Appraisal Ordering

Effective February 15, 2010 StellarOne will start adhering to the new appraiser independence guidelines for FHA and USDA loans.

Please note that the appraisal ordering and rebuttal process will be the same for FHA and USDA loans, as it is currently for conventional loans with StellarOne. 

Effective with case numbers assigned on or after Monday February 15, 2010 brokers will be required to order appraisals through SouthEastern Evaluation (SEE) our preferred Appraisal Management Company (AMC).

SEE will upon receiving acceptance of the assignment from the selected appraiser provide StellarOne with the necessary information needed to order the case number.

StellarOne will then order the case number for you (in your company’s name) and provide you with the case number.  This will be done in an effort to insure that case number will be issued prior to the effective date of the appraisal which if not completed correctly would result in delays.

Please contact myself or your Account Executive with any questions. 

And as always thank you for your business!

StellarOne Excellence. Partnership. Service.

8 Parkway Commons Way

Greer, SC 29650

t  864-848-3608c  864-907-9688  f  864-848-3608

Welcome to SEE-AMC

SouthEastern Evaluation is an appraisal management company consisting of a highly trained team of real estate professionals. We excel by utilizing both our fee appraiser and corporate experience in the development of internal policies and procedures. Our company culture is to create long term lasting relationships with our customer and appraiser base. SEE believes in a common sense approach to the appraisal process, with appraisers being paid a fair fee for work completed and lenders being assured that their reports are accurate and independently completed by true appraisal professionals.

Our work ethic is reflected in our daily interaction with appraisers and lenders. At SEE, we understand the need for handling each file with professionalism and urgency. Since a good quality appraisal report takes time, we strive to get the assignment to the correct appraiser without delay. In return, we expect appraisers to meet their turn time commitments and to alert us to potential timing issues as they develop.