 | | | | By Paul Muolo pmuolo@imfpubs.com Prospect Mortgage, Sherman Oaks, CA, continues to scour the nation for possible mortgage acquisitions, but so far hasn’t landed any deals, according to investment banking officials familiar with the company’s plans. Two investment advisors, who spoke anonymously, told IMFnews they have been contacted by Prospect about buying other firms over the past two months. “Prospect is on a mission to acquire and grow production,” said one source. According to exclusive production figures compiled by Inside Mortgage Finance, the privately held nonbank ranked 29th among all originators during the first half of 2014 with almost $3.5 billion in volume. The company grew fundings by 41 percent in the second quarter compared to the first. The lender is owned by Sterling Partners, a private equity firm with $5 billion in assets. A few months back, merger talks between Prospect and Caliber Home Loans broke down. To date, both companies have declined to discuss the matter. A Prospect spokesman declined to comment for this story. Other areas of interest: Originations, Servicing, Mergers & Acquisitions, Trends & Profitability | | By Paul Muolo pmuolo@imfpubs.com Roughly 81 percent of independent mortgage banking firms turned a profit in the second quarter, a noticeable improvement from 1Q when just 54 percent were in the black, according to new figures compiled by the Mortgage Bankers Association. The trade group also found that lenders, on average, posted a net gain of $954 per each loan originated in the second quarter, compared to a loss of $194 per unit in the first quarter. MBA’s findings follow recent reports in IMFnews and Inside Mortgage Trends that highlight strong industry profits during the period. Warehouse consultants interviewed by IMFnews said very few lenders are losing money these days. One reason is that warehouse credit is the cheapest it has been in years. But the most important reason profits jumped in 2Q is the fact that loan production increased by 26 percent on a sequential basis. MBA derived its profit figures from survey data provided by 349 residential originators. The reporting group includes nonbanks as well as mortgage subsidiaries of depositories. Average production volume was $378 million per firm for 2Q compared to $274 million for the first quarter. Other areas of interest: Originations, Data/Rankings, Warehouse, Trends & Profitability | | By Thomas Ressler tressler@imfpubs.com Citibank and other defendants will issue at least $115 million in refunds and escrow credits to roughly 400,000 borrowers whose mortgages were serviced by the bank as part of a nationwide class-action settlement in a pair of consolidated legal disputes involving force-placed insurance. The lawsuits – Casey v. Citigroup, Inc., and Coonan v. Citibank, N.A. – alleged that Citibank and its force-placed insurance vendors Assurant Inc., American Security Insurance Co., and Standard Guaranty Insurance Co. unlawfully profited from force-placing insurance on borrowers’ properties, such as arranging for improper kickbacks or “commissions” to be paid to Citibank or its affiliates by the vendors. The Casey lawsuit also alleged that Citibank increased the amount of force-placed flood insurance required for some borrowers in excess of their unpaid principal balance, in violation of borrowers’ loan agreements. The settlement was recently granted final approval by Judge David Hurd of the U.S. District Court for the Northern District of New York. Citibank spokesman Mark Rodgers told IMFnews, “We are pleased with the court’s decision,” but declined to elaborate beyond the court filings. Other areas of interest: Originations, Regulatory | | By Paul Muolo pmuolo@imfpubs.com A multi-billion dollar mortgage fraud scheme perpetrated by the now-defunct Taylor, Bean & Whitaker Mortgage was missed by regulators, counterparties and investors because they ignored “various” red flags, according to a new report from the Inspector General of the Federal Housing Finance Agency. Among other things, the FHFA IG claims a Fannie Mae executive back in 2000 discovered that TBW had pledged the same collateral – mortgages – to both Fannie and another company. After studying the issue for almost two years, Fannie terminated the nonbank’s right to sell loans to the company, but did not “formally advise Freddie Mac or its regulator about TBW’s termination,” the IG audit says. (Freddie continued to do business with the seller/servicer.) TBW filed for bankruptcy in 2009. The company’s collapse led to a massive criminal investigation and resulted in several convictions, including that of its CEO Lee Farkas and Cathy Kissick, a warehouse lending executive at Colonial Bank, who helped cover up huge overdrafts at TBW. By 2005, Colonial Bank – the largest warehouse lender to TBW – had $250 million worth of fake or previously “disposed of” loans on its books, the FHFA IG writes. When TBW failed in 2009, Colonial collapsed shortly thereafter. In the year prior Farkas had orchestrated an elaborate scheme whereby TBW would actually buy Colonial using funds from the Troubled Asset Relief Program. Freddie Mac lost almost $1.8 billion because of TBW and Ginnie Mae was saddled with $4 billion of nonperforming mortgages that it had bought out of guaranteed MBS pools. The IG’s office said it studied TBW’s downfall to “extract lessons learned from a multifaceted and multiyear fraud scheme.” Other areas of interest: Originations, Secondary/MBS, Regulatory, Fannie, Freddie, Ginnie Mae/FHA, Warehouse | | By Brandon Ivey bivey@imfpubs.com Natural disasters appear to pose only limited risks to investors in non-agency mortgage-backed securities, according to analysts at Barclays Capital. An earthquake north of San Francisco in Napa this week renewed concerns about the geographic concentration risk on non-agency MBS. Barclays said few loans in vintage non-agency MBS were exposed to the recent earthquake. Jumbo MBS issued since 2010 had greater exposure, but only 1 percent to 2 percent of the loans in any given deal were in the quake zone. Barclays noted that those are much lower levels than the area impacted by Hurricane Sandy, where up to 20 percent of the loans in some deals were in affected areas. Barclays said loan performance deteriorated in Sandy storm-surge areas, but even with the large exposure for loans in non-agency MBS, the deterioration was not significant enough to be material at deal level. Barclays is one of the main underwriters in the sector and has a keen interest in issuance of non-agency product. Rating services continue to require higher credit enhancement levels on jumbo MBS that include a significant number of loans in any particular metropolitan statistical area. Other areas of interest: Secondary/MBS, Regulatory, Nonconforming | | By Paul Muolo pmuolo@imfpubs.com Less than two weeks remain before the Federal Housing Finance Agency will stop taking comments on its mortgage insurance eligibility rules. So far, not one “legacy” MI firm has filed a comment letter and most told us they will wait until the deadline is just a few days away. Meanwhile, some MI observers believe the FHFA might extend the comment period past its September 8 deadline… It’s safe to say the FHFA has plenty of key issues on its plate these days. Besides the MI eligibility rules, the agency is taking comments on guaranty fees and a single GSE security. Meanwhile, FHFA director Mel Watt is on the road, hitting different cities and trying to convince more consumers to use the HARP refi program. The agency says at least another 800,000 borrowers are eligible. In one radio interview we heard this morning, Watt noted that when a consumer hears that he/she can refinance their underwater mortgage, their first inclination is to believe such an offer is a scam… The new FHFA Inspector General report offers some interesting insights into what went wrong at the now defunct Taylor Bean & Whitaker, which collapsed in the late summer of 2009. As we all now know, TBW CEO Lee Farkas (now wearing an orange jumpsuit) was running a huge scam, which involved creating fictitious mortgage collateral. As early as 2000, Fannie Mae noticed something was awry and two years later dumped TBW as a client. Then Freddie Mac swooped in, sensing it could gain a huge customer. But what kind of due diligence did Freddie conduct on the privately held nonbank? According to the IG report, the due diligence “essentially consisted of discussions between a Freddie Mac employee, Farkas, and representative of Colonial.” Colonial Bank was TBW’s warehouse lender… By the way, the world “farkas” is Hungarian and translates into “wolf.” If only Freddie knew that… CLARIFICATION: In the Monday edition of IMFnews, we reported that Ocwen chairman Bill Erbey owns a mere 724 shares in Altisource Portfolio Solutions, a company that Ocwen spun off. We should point out that the 724 shares represent his “direct” holdings in the vendor. Indirectly, Erbey controls about 5.9 million shares through a limited liability company called Salt Pond Holdings. CORRECTION: In an early version of our story on Goldman Sachs’ MBS settlement with the FHFA, we incorrectly reported that the investment banker would repurchase $3.1 billion of non-agency MBS from the GSEs. Goldman instead agreed to pay $3.1 billion to repurchase certain private-label MBS from the GSEs. According to the Inside Mortgage Finance MBS Database, the original unpaid principal balance of the deals in question was almost $40 billion.
Servicing Sales Expected to Stay at Elevated Levels Into 2015 Poor mortgage performance, new capital requirements and a strong appetite for servicing from new players have combined to create a busy market for servicing rights with both more buyers and more sellers than just a year ago. Learn what to weigh as you consider whether to enter the market and what to watch for—both in your own organization and in those across the bargaining table from you—when you do with Inside Mortgage Finance’s Guide to Servicing Strategies and Mortgage Servicing Rights Other areas of interest: Originations, Secondary/MBS, Regulatory, Nonconforming, Fannie, Freddie, Technology | | | |
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