“FHA and Bank of America, NOT Friends”
It is very hard to understand, that with the Federal bailout that B of A got, it is now making a decision to bailout of the FHA mortgage insurance fund.
The moves that B of A continue to make, shows me that they don’t give a damn about the public, even though public money bailed them out. They must be on a mission to decision themselves right out of business.
FHA Knocks Reports on B of A Deal
By: Kate Berry
The acting commissioner of the Federal Housing Administration this week blasted news reports that claim Bank of America Corp. was essentially bailing out the agency's mortgage insurance fund.
B of A's $1 billion settlement with the agency was "not a gift," but rather compensation for past losses, said Carol Galante, the FHA's acting assistant commissioner, at a conference for mortgage servicers hosted by the Mortgage Bankers Association in Orlando, Fla.
The $1 billion payment was announced earlier this month as part of the $26 billion national robo-signing settlement with five major servicers.
Galante, however, did not dispute that the payment will essentially keep the FHA's mortgage insurance fund from going into the red.
The FHA has said it will apply a $750 million payment from B of A that was negotiated as part of the robo-signing settlement to patch a $688 million shortfall in its mortgage insurance fund.
"Yes, the settlement is generating close to $1 billion that will go into FHA's capital reserve," Galante said. "This is not a gift. This is to make sure FHA is compensated for losses."
B of A agreed to the settlement to resolve allegations of "fraudulent and wrongful conduct" in the origination of FHA loans, according to a Justice Department press release.
Galante said the FHA plans to announce additional premium increases in the next week, though it will do so in a way "to have the least impact on borrowers."
The agency is already slated to raise premiums on FHA jumbos by 25 basis points and 10 basis points on lower balance loans, which is reflected in its $9.4 billion fiscal 2013 budget, she said.
The FHA also is expected to announce changes to its streamlined refinance program that may include lowering premiums to get more borrowers to apply.
Galante said lenders have been "reluctant" to sign on to the program because of its higher default rates. The FHA is going to "pull streamlined refinances out of the compare ratios" for its Neighborhood Watch program, which is a closely monitored benchmark in which lenders are compared with their peers.
image: jscreationzs/freedigitalphotos.net
“Shame on YOU, Ocwen Financial”
Ocwen is one of the largest mortgage servicers in this country. How sad that this company, along with many of the major servicers, have outsourced outside of this country. 
I don’t know about you, but when I speak to a foreign call center, it is often a frustrating experience. I don’t see anything different for the Ocwen clien,t that calls to get information about their mortgage, to be anything but frustrating.
Will Ocwen's Play in Cheap Overseas Labor Pay Off?
By: Paul Muolo
Given the ugly employment picture in the U.S., now isn't exactly the best time for a company to be crowing about how cheap its labor costs are thanks to overseas outsourcing. But don't tell that to Ocwen Financial, soon to become the nation's largest specialty servicer.
You might say the publicly traded Ocwen – which years ago threw its thrift charter overboard – has been on a (acquisition) roll lately. Over the past five months it has racked up almost $80 billion in MSR purchases: $39 billion from Litton Loan Servicing, $26 billion from Saxon, and another $15 billion in the works from JPMorgan Chase.
Most of it, as you might guess, is tied to nonprime mortgages and was purchased on the cheap. It's a buyer's market for MSRs and Ocwen isn't bashful about its intentions. It's the industry's garbage man, and so be it. Nothing wrong with that – it goes where angels fear to tread.
Oh, and it case you missed its recent investor presentation before a Sterne Agee conference, the firm is currently investigating the purchase of an additional $300 billion of other MSRs.
In short, Bill Erby, Ocwen's CEO – and a former GE executive – has been a busy man. And his hard work appears to be paying off. The company's share price is close to its 52-week high ($16), and the company is profitable.
Four years ago its future may not have looked so bright. Its share price was $4 and there were certain whispers about its future. But not anymore. There's nothing wrong with being a garbage man. Ocwen's goal is to clean up the mistakes of others by modifying loans and curing defaults.
To get where it is today it has relied on a veteran management team headed by Erby and his lieutenants – and a back office workforce that is mostly ensconced in Bangalore, India.
According to Sterne Agee numbers, Ocwen employs roughly 2,600 workers in India compared to 730 in the U.S. Sterne Agee analyst Henry Coffey describes the company's presence in India as “massive,” adding that its employment costs are significantly lower than its peers.
How much lower? According to Ocwen's own numbers, its employee cost in overseas locations is one-eighth that of a U.S. firm, a difference that Coffey calls “significant.”
Calculated in terms of basis points, Ocwen's labor cost is 26bps compared to 48 for Walter Investment Management, a competitor that owns Green Tree Servicing. PHH Mortgage has a 7bps cost structure but it deals with mostly 'A' paper performing loans.
As any servicing executive knows, the processing of mortgages – troubled or otherwise – is a scale business where cheap labor quickly finds its way to the bottom line.
It might be argued that Ocwen's only problem – other than the occasional servicing related lawsuit – is its image: that of a fast growing mortgage company giving away American office jobs to foreigners and taking advantage of the Great Recession by purchasing receivables on the cheap.
Then again, this is business – not personal -- and I doubt too many executives at Ocwen are losing sleep over its growing workforce in Bangalore. As analyst Coffey points out: “It's an effective and efficient strategy. The workforce in Bangalore is well educated and hard working. That's what you have to look at.”
Maybe so, but there are potential risks overseas as well. In late December Fitch Ratings downgraded Ocwen's servicer rating, questioning both its rapid expansion and its heavy reliance on a foreign workforce. India also is vulnerable to terrorist attacks with its business district being a potential target.
When Ocwen bought Litton in the fall rumors were rampant that it would close its Houston office and ship most of its jobs to India. So far, that hasn't happened. The firm has even pledged to keep the office open. At least for now.
“Appraisal Management Companies Called Out”
Not much good that has come out of HVCC. This is a bill that should be repealed. I have heard all the arguments as to why, this is a good bill and is a benefit to the public. The negative result is a higher price for the cost of each appraisal.
I originate a lot of mortgages, there are constantly appraisal issues. When there are issues, it is pathetic, that I have to tell my client, that I can’t speak to the appraiser. At which point, I have an upset borrower, probably one or two upset Realtors and I can’t speak to the appraiser.
“THEY” or “BIG BROTHER”, must think that we have such unbelievable powers that we are going to convince someone to do something illegal.
Loan Broker Trade Group Raises Questions on AMCs
By: Brad Finkelstein
Certain appraisal management companies acting as a middleman between an originator and appraiser are not registering with the states, raising concerns about lost tax revenue, according to the National Association of Independent Housing Professionals.
Marc Savitt, president of NAIHP who also operates a small mortgage brokerage firm in West Virginia, said he came across the problem while discussing a problem appraisal with an AMC. (Savitt declined to name the AMC.)
While on the phone, he decided to look up this company's status with the West Virginia Secretary of State's website. The company did not appear to be officially registered with the state, a fact he later confirmed with the department.
All businesses need to register with either the Department of State or a similar entity (like a Department of Corporations). The registration lets the state tax department know the business exists and that certain taxes need to be remitted. This is needed in the business' home state as well as any state it seeks to do business in.
AMCs also must register with state appraisal regulators.
When he raised the issue with the AMC he was working with, the company told Savitt they were exempt. But this is not the case, he said.
The trade group president has conducted additional research, discovering that a “a significant number of AMCs” are not registered in the individual states they might conduct business in.
Carl Streck, a principal at MountainSeed Advisors, an Atlanta-based consulting firm which also operates an AMC, said it's a real issue for the industry. (With a few notable exceptions, the sector is dominated by mom-and-pop businesses.)
Nathan Brown, MountainSeed's chief legal officer, said the issue is whether the company is qualified to do business in a state, "which is a requirement for every business, not just AMCs and it's a requirement that is often overlooked."
But it could come back to haunt AMCs in certain states, he continued. In Alabama, for instance, if a company is not properly registered, there could be a problem enforcing contracts.
For companies looking to do business outside of their home state of incorporation, they have to "qualify to do business, which is filling out a form. Typically there is a very small fee associated with that," Brown said.
Filling out that form notifies the state's taxing authorities that they need to contact this company and provide them with information on the appropriate taxes to be remitted.
This requirement is in addition to the 29 states (and soon all states will have to do under Dodd/Frank) that have rules that regulate AMCs.
As a general rule, a business that solicits clients outside of its home state needs to qualify with the Secretary of State in those other states, Brown explained, echoing what Savitt said.
To comply with the AMC regulations, these companies need to be registered with the Secretary of State first.
Streck added a lot of those smaller AMCs are not completing the registration properly. He doesn't think they are doing this intentionally, but that they lack the staff and capabilities to deal with this as a primary course of business.
The registration also includes having a registered agent in that state -- someone who can accept legal papers in case they are sued. Brown noted there are companies that will act as a registered agent for a fee.
InHouse Inc., a Ponte Vedra Beach, Fla.-based provider of appraisal technology and an operator of an AMC, "is registered, licensed and pays taxes in all of the states in which it does business," said president and CEO Jennifer Creech.
“Even if there is an issue where a tax hasn't been paid, the states are very quick to let a company know there is an issue. If you want to keep operating in that state, you must pay the taxes,” she adds.
New Mexico is an interesting state in terms of appraisals, Creech notes. When InHouse places an appraisal order there, the appraiser will not accept the order unless he or she is given a Nontaxable Transaction Certificate.”
“On our platform, we only have AMCs that are registered to do business in a particular state receiving orders for those states. I think it is becoming increasingly difficult for AMCs to do business in states where they are not licensed and registered,” Creech says. “If an AMC missed a state registration or law change, it generally catches up with them quickly.”
Many appraisers, she said, make sure an AMC is licensed or registered in the applicable state prior to accepting an order.
image: chris sharp/freedigitalphotos.net
“The Mortgage Balancing Act”
I talk to clients that share the following stories: If my rate was lower, I could afford to keep my home. The value of my home is so much lower than the mortgage(s), it will take years before that changes. My husband or wife has been out of work for “blank” time.
These are very real problems that many families are experiencing. Many of these families have attempted to get a modification done, but have been unsuccessful. Many could refinance, if their credit scores were higher and I mean much higher. I am in the process of refinancing a mortgage that is written at 11.75%, fortunately I can refinance him, in spite of a 591 mid score.
Mortgages Improve, Delinquencies Rise
By: Steve Cook
While delinquencies and defaults slowly improve in the housing economy as a whole, FHA’s portfolio has not shared the same good fortune, creating increased pressure on the agency to reduce risk and increase costs to its borrowers, most of whom are first-time buyers.
In December, about one out of every 10 FHA mortgages, 9.73 percent, was seriously delinquent, or 90 days past due. Compare that to all mortgages, whose seriously delinquent rate fell to 7.3 percent in December from 7.8 percent a year earlier.
For nine straight months, FHA delinquencies have risen while mortgages in general have improved. From September through November, FHA serious delinquencies rose a full percentage point and in 2011, the number of seriously delinquent loans increased by 100,399.
As of December 31, 2011, the FHA insured a total of 7,415,002 loans and the prior fiscal year showed a total of 598,140 mortgages seriously delinquent. The number of mortgage defaults from the previous year increased by18.9 percent.
The large increase in FHA defaults is a source of growing concern since the FHA’s insurance reserve fund to cover loan losses is virtually depleted. By law, the FHA is supposed to maintain a capital ratio of 2.0 percent but the fund ratio is currently at only 0.12 percent. Recently released analysis from the White House’s Office of Management and Budget showed the fund would actually fall into the red this year and need an unprecedented bailout from the Treasury Department. The American Enterprise Institute estimated the FHA would need a total capital infusion of $52.90 billion.
Over the past two years, FHA implemented several reforms to reduce its risk, including increasing is mortgage insurance payment and limiting eligibility of high risk borrowers. Continued deterioration of the reserve fund will certainly trigger additional legislation to increase costs to borrowers even more. Last month FHA financed some 35 percent of all purchase mortgages in the nation. Seventy-seven percent of FHA borrowers are first-time home buyers.
image:renjith krishnan/freedigitalphotos.net
“I’m With You on This One Mr. President”
As I have shared many times in the past, I am not an advocate of our current administration. Even though he did not author the original Principle Forgiveness bill, he is jumping on the band wagon to extend this tax break, that helps individuals that lose their home through foreclosure or short sale.
Both of these events can cause a taxable result, that would further harm them financially. Without this bill, these individuals would end up owing thousands of dollars in taxes to the government. These folks have already been hurt enough.
The present bill expires at the 12/31/12. A two year extension to this bill would certainly help many folks that need this kind of help.
Obama Seeks Extension of Principal Forgiveness Tax Break
By: Brian Collins
The Obama administration is urging Congress to extend a tax provision allowing troubled homeowners that complete a short sale -- or benefit from a principal reduction -- to avoid paying taxes on the discharged amount of their loan balance.
The current tax exclusion for discharges of "qualified principal residential indebtedness" has been in effect since 2007, but is due to expire at the end of 2012. Without the QPRI exclusion, the amount of the discharged mortgage debt would by counted as income for tax purposes.
"Although there has been some improvement in the residential real estate market, there is still an elevated number of cases in which homeowners may have discharge of indebtedness income with respect to their home mortgage loans," the Treasury Department says in its new "Green Book" report.
As part of the budget process, Treasury issues the Green Book to explain all the tax proposals the administration wants Congress to act on.
The White House desires at least a two-year extension of the QRPI exclusion. "An extension beyond January 1, 2015 may be appropriate to correspond to the availability of additional homeowner relief as a result of government actions and other arrangements," Treasury says.
The $26 billion robo-signing settlement with the five mega-servicing banks provides nearly $17 billion in principal reduction modifications and short sales. The servicers have three years to complete these residential relief transactions that would result in discharges of mortgage debt.
image:renjith krishnan/freedigitalphotos.net
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