BusinessWeek: Which Lenders Made the Worst Home Loans?

October 28, 2009

The worst mortgage loans were made in 2006, according to research by data provider MDA DataQuick. And those loans are begining to blow up now. According to DataQuick’s numbers, the lenders with the most foreclosure related filings in this year’s third quarter in California—-a hot bed of dicey loans were:
Countrywide (now Bank of America) with 7,583 default filings.

Washington Mutual, 5,146.

Wells Fargo, 4,425.

Bank of America loans not made by Countrywide accounted for 1,979 more filings and World Savings, now a part of Wells Fargo, had an additional 4,237. The numbers show the extent to which just a handful of big banks are bearing the burden of the mortgage crisis.

Mortgage1While World Savings, formerly Golden West Financial, had the highest percentage of loans from that 2006 period default at 11.9%, its stinky loans were nothing compared to the subprime orginators’ dismal record. Here are some of the numbers for them:

The default percentage at ResMAE Mortgage was 73.9 percent, Ownit Mortgage 69.5 percent, BNC Mortgage 61.4 percent, Argent Mortgage 59.9 percent and First Franklin 59.4 percent.

Some of this bad news is circular because First Franklin was acquired by Merrill Lynch which was subsequently bought by Bank of America. If you’re having trouble getting a loan officer from B of A on the line, now you know why, he’s busy!

The overall number of mortgage default notices filed against California homeowners fell last quarter compared with the prior three-month period. A total of 111,689 default notices were sent out during the July-through-September period, down 10.3 percent from the prior quarter, but still up 18.5 percent from the third quarter 2008. DataQuick cites changes in lender foreclosure policies and an uptick in the number of mortgages being renegotiated.

The firm says lenders may have intentionally slowed down the pace of foreclosures. “If so, it’s not out of the goodness of their hearts,” said John Walsh, DataQuick president. “It’s because they’ve concluded that flooding the market with cheap foreclosures in this economic environment may not be in their best financial interest.”

Source: BusinessWeek

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Written by djumper · Filed Under Real Estate Blog 

Bank of America Loses $2.2B in 3rd Quarter

October 16, 2009

Bank of America Corp. said Friday it lost more than $2.2 billion in the third quarter as loan losses kept rising, providing further evidence that consumers are still struggling to pay their bills.

The nation’s second-largest bank said it wrote down loans on its books by almost $10 billion during the July-September period, up almost $1 billion from the second quarter. The bank also added $2.1 billion to its reserves to cover bad loans, bringing its provision for credit losses to $11.7 billion. The bank’s total allowance for loan and lease losses now totals $35.83 billion.

BoABank of America’s results were aided by profit from investment bank Merrill Lynch, including income from bond, stock and currency trading.

Its earnings follow the pattern set earlier this week by Citigroup Inc. and JPMorgan Chase & Co., which also reported more loan losses during the third quarter as consumers struggled to keep up with their credit card and mortgage payments. And on Friday, General Electric Co. reported that its GE Capital business, which includes credit cards, saw an 87 percent drop in profits, although it was also weighed down by commercial real estate losses. Together, the reports depict a financial industry that is still deeply troubled.

Banks have predicted for some time that their loan losses would keep rising. And Bank of America’s CEO Ken Lewis confirmed that this trend continues.

“Based on (the) economic scenario, results in the fourth quarter are expected to continue to be challenging as we close the year,” Lewis said on a conference call with analysts.

Bank of America said it lost $2.24 billion, or 26 cents per share, after accounting for the preferred dividends of $1.24 billion. That compared with earnings of $704 million, or 15 cents per share, a year earlier.

Revenue in the quarter increased 33 percent to $26.04 billion.

The loss was 5 cents more per share than the 21 cents forecast by analysts surveyed by Thomson Reuters Inc. Investors sent Bank of America shares down 90 cents, or 5 percent, to $17.20 in morning trading.

“Obviously, credit costs remain high, and that is our major financial challenge going forward,” Lewis said in a statement accompanying the earnings report. “However, we are heartened by early positive signs, such as the leveling of delinquencies among our credit card numbers.”

During the analyst call, Lewis said the bank believes it may have peaked in total credit losses this quarter, “although the levels going forward will continue to be elevated and certain businesses will still experience higher losses.”

Bank of America is considered particularly vulnerable to unemployment, which climbed last month to 9.8 percent in the U.S. Economists predict the jobless rate will pass 10 percent in the coming months.

The bank’s massive portfolio of credit-card loans could help investors determine where the economy is headed and how well the industry at large will fare, said Doug Dannemiller, senior analyst at Boston-based research firm Aite Group.

“As unemployment rates are in the 10 percent range, the results on consumer lending aren’t going to improve until that number gets lower,” Dannemiller said.

The bank has about 53 million consumer and small business customers, making it vulnerable to delinquencies and defaults, yet also ready to thrive when the economy recovers.

Bank of America’s global card services unit loss widened significantly to $1.04 billion from $167 million a year ago.

The loss in the bank’s home loans and insurance division grew to $1.6 billion from $54 million a year ago, as credit costs continued to rise.

The bank, which being investigated by federal authorities for its Merrill acquisition, has received $45 billion in bailout funds as part of the Treasury Departments $700 billion financial rescue package. It’s not known when it will repay the government.

Lewis, who is retiring at year’s end, has agreed to give up his salary and other compensation for 2009.


Source: The Washington Times

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Written by djumper · Filed Under Real Estate Blog 

BoA Struggles With Loan Modifications

October 14, 2009

Bank of America could collect about $6 billion if it meets the deadline set by the federal government to help struggling borrowers for the Making Home Affordable program.

But the Treasury Department released a report last week that showed that only 11 percent, about 95,000, of Bank of America’s delinquent borrowers who are potentially eligible for the program have been given a loan modification. That puts Bank of America at the bottom of the list of major banks involved in the program.BoA

“We’re sure working hard,” said Ken Scheller, senior vice president for home retention at Bank of America, when asked about his company’s low success rate. “We don’t want to be down there.”

There appear to be multiple problems, not the least of which is that many of the employees handling the modifications are completely new to the business. Angry investors complicate the issue, with 15 percent of them demanding that the bank get their approval for every single case.

Source: REALTOR.org

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Written by djumper · Filed Under Real Estate Blog 

Time May Be Running Out to Get Home Buyer Credit

September 14, 2009

Barring a last-minute extension from Congress, first-time home buyers aiming to take advantage of an $8,000 federal tax credit are running out of time to get a deal in place.

With the time it takes to arrange financing, inspections and the other steps that go into closing a home purchase, home buyers should have a contract no later than the end of October, but preferably within the next few weeks, local real estate agents and lenders say.

The deal has to be completed no later than Nov. 30 to qualify for the credit.

Agents and bankers say they expect they’ll be able to handle the anticipated added workload without delays, but that buyers shouldn’t chance it. Most advise having a home under contract by Oct. 15.

“We are doing purchase loans in under 30 days right now,” said Sharon Decker, director of mortgage lending for Fifth Third Bank. “But if there is a big surge (in applications), all the lenders will be behind the 8-ball.”

The market for lower-priced homes in Louisville has already seen a surge and the final days of the housing credit could bring a wave of last-minute buyers making offers for starter homes, said Jan Scholtz, president of the Greater Louisville Association of Realtors.

After being outbid on two houses, Gina Scarpino, a 24-year-old hair stylist, recently found one in Schnitzelburg. With someone else making an offer the same day, she agreed to pay $124,000, less than $1,000 below the seller’s asking price.

“It was actually super-difficult because everyone was looking to buy a house with the tax credit,” she said. “They are being snapped up.”

But while the market for starter homes has improved because of the credit, it’s rarely come to bidding wars, said John Oldfather, Scarpino’s real estate agent. He noted there are still more than 3,800 listings for houses priced from $75,000 to $200,000 in Louisville, as of Monday. “And we don’t have that many buyers in the market,” he said.

The $8,000 credit is available typically to first-time home buyers, but can also be used by anyone who hasn’t owned a home for at least three years prior to the purchase. As a credit, the buyer’s tax bill is reduced by $8,000; buyers whose tax bill isn’t that big will collect the money in the form of a government refund.

Source: Courier Journal

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Written by djumper · Filed Under Real Estate Blog 

Bank of America Still in Talks to Exit Government Pact

September 14, 2009

WASHINGTON – Bank of America Chief Executive Ken Lewis said his company is still in talks with U.S. officials on how to compensate the government for a prior loss-sharing agreement, according to a letter released by a watchdog lawmaker on Thursday.

Lewis called the government talks “thoughtful and professional” and said Bank of America was confident it would resolve the issue, in a Wednesday letter to Rep. Edolphus Towns, chairman of the Committee on Oversight and Government Reform.

Bank of America has been negotiating how much it must pay for an agreement — part of a $20 billion bailout for the firm — in which the government said it would share losses on $118 billion of toxic assets.

Towns called on Lewis to repay the taxpayers and stop “stonewalling.”

“It seems that the bank wants to have it both ways — all the benefits of government insurance without having to pay a dime for all of its benefits,” he said in statement.

Towns’ committee is examining the role of the government in Bank of America’s buy of investment bank Merrill Lynch.

Source: Reuters

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Written by djumper · Filed Under Real Estate Blog 

Two Major Lenders Step Up Mortgage Modifications

September 10, 2009

The sluggish $75-billion federal mortgage relief program got a boost from Wells Fargo & Co. and Bank of America Corp., both of which stepped up their efforts last month to modify home loans.

The two banks, which took a total of $70 billion in taxpayer bailout funds to shore up their finances, have been roundly criticized on Capitol Hill for not moving quickly to help distressed homeowners.

Last month, Bank of America more than doubled the number of home loan modifications it started, to 59,891, over its July numbers, while Wells Fargo increased its modifications 64% to 33,172. That helped pump up the industry’s response to the slow-starting federal program 53% to more than 360,000 modifications, according to figures released Wednesday by the banks and in the Treasury Department’s now monthly report.

Still, the Obama administration’s Making Home Affordable program isn’t getting to struggling homeowners quickly enough, some argue. The administration itself set a target of modifying 500,000 mortgages by Nov. 1.

“I am disappointed at the pace of this program,” said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee.

Kevin Stein, associate director of the California Reinvestment Coalition, a homeowner advocacy group, said, “These numbers still aren’t where they should be.”

Even the Treasury Department acknowledged that the pace of modifications had to pick up.

“There are signs the plan is working,” Michael Barr, assistant Treasury secretary for financial institutions, told the House committee Wednesday. “But we can do better.”

The department’s monthly report, its second since the program was launched in March, should get some credit for giving the program a boost, Stein said.

“For the first time, last month we were able to see data on which companies were helping families avoid foreclosure and which companies were not,” he said. That exposure for July’s activity, he said, shamed especially Bank of America and Wells Fargo, which had turned in embarrassingly low numbers in July.

Also, although 85% of the mortgages nationwide are held by institutions voluntarily participating in the program, Stein suggested that banks and other lenders would be moving faster if participation were mandatory.

Up to 4 million homeowners have mortgages that qualify for adjustment under the administration’s program.

Bank of America, Wells Fargo and other loan servicers said slowdowns were caused by the need to increase staffing in loan-servicing departments and by government delays in distributing information about the program. Wells Fargo said it was well on its way to modifying more than its share of eligible loans.

Overall, about 1 in 5 eligible homeowners, or nearly 19%, have had their mortgages changed through the program, the report said. In July, that number was about 9%.

In some cases, loan servicers are using the plan’s rules to keep homeowners from taking part, which results in homes heading to foreclosure anyway, said Bruce Dorpalen, director of housing counseling for the Assn. of Community Organizations for Reform Now, or ACORN.

“We need stronger enforcement,” Dorpalen said. “We’re still finding foreclosure sales going through with no review to see if homeowners are eligible for loan modifications.”

ACORN is calling for the federal government to impose a one-year freeze on foreclosures to allow homeowners more time to figure out whether they are eligible for loan changes under the program.

Source: The L.A. Times

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Written by djumper · Filed Under Real Estate Blog