The Federal Reserve will hear the first round of testimony next Thursday on the construction and dissemination of data provided for by the Home Mortgage Disclosure Act. The meeting will be held at the Atlanta branch of the Federal Reserve. Three other meetings are scheduled in the following weeks for Washington, DC, Chicago, and San Francisco.

HMDA data is freely distributed each fall through the Federal Financial Institutions Examination Council (FFIEC). The (more…)

Happy Thanksgiving!

If you are not struggling through negative equity, a looming prepayment penalty on a loan that you need to refinance, or in foreclosure, then tomorrow is a time to be thankful.  Yesterday’s Wall Street Journal tells us the harrowing story that almost one in four U.S. borrowers (23 percent) owes more on their mortgage than the value of their home.   In Nevada, more than sixty percent are “under water.”

Want to know more than you should about subprime lending?  The New York Fed has all of your answers.  Here are some of my favorite scary bits:

• In six states, more than 20 percent of existing sub-prime loans made with more than 90 percent loan-to-value and to a borrower with a credit score below 620. Those states: Tennessee, Georgia, Alabama, North Carolina, North Dakota, and Iowa.
• West Virginia has the infamous honor of being the state where borrowers with outstanding subprime loans have the lowest average credit score – 596.  Don’t smile too much Louisiana, you’re right there at 599.  Oh wait, what about Mississippi!  Gee, they’ve got everyone “beat” at 594.
• There are 282,000 subprime loans outstanding in California that were originated with a prepayment penalty.  That’s one more reason why its hard to get out from a bad loan.  Florida’s not far behind (214,774).
• Average initial interest rate on outstanding subprime ARMs in the United States: 6.25 percent.  Average amount that those loans can go up (margin): 9.73 percent.
• In New York and Maryland, more than 15 percent of outstanding ARMs are yet to even reset once.
• Scary: 30.1 percent of owner-occupied homes with a subprime loan in Florida are in foreclosure right now.
• Scarier: Another set of borrowers, constituting 28.1 percent of outstanding subprime borrowers, are currently at least one payment behind on their mortgage.  16.4 percent are more than 90 days past due – meaning that the lender is just putting off foreclosure already.
• More than 44 percent of subprime mortgages currently outstanding in both New York and in New Jersey were underwritten with stated-income guidelines.
• The Northeastern United States are often exonerated from guilt about subprime lending.  That said, in Vermont, Rhode Island, and New Hampshire, borrowers took cash out from more than two out of every three subprime refinance loans.

Scary but interesting.

News reports would have you believe that servicers are doing their best to work out problem loans.  The other day, Treasury announced that the HAMP program had realized its 500,000th loan modification.

The devil is in the details, though.  These loan modifications, by and large, are merely short-term band aids.  For borrowers with real problems, most of these modifications are not going to make a difference.  Consider the breakdown on the nature of the loan modifications:

• 95,729 refinancings (Home Affordable Refinance Program)
• 362,348 three-month trial modifications (Home Affordable Modification Program)
• 1,711 permanent mortgage modifications. (HAMP)

You are reading that correctly.  Of the 459,788 modifications recorded as of September 1, 2009, less than 4/10th of one percent of those actions resulted in a permanent modification.  By and large, the efforts of HAMP are serving to put a (more…)

Morgan Stanley jumped into the subprime mortgage market in 2006.  Now, they are getting burned.

We recently met in New York with representatives from a number of their departments.  Their servicing staff was there for Saxon Mortgage.  Morgan Stanley purchased Saxon in 2006 for $704 million.  Saxon has been a “leading” subprime lender and servicer.

Morgan Stanley has already been hurt.  In November 2007, they wrote down $3.7 billion in U.S. subprime assets. At (more…)

The Federal Financial Institutions Examination Council (FFIEC) released the new Home Mortgage Disclosure Act records for 2008 this week.  The data, referred to as “HMDA data,” covers 14.2 million mortgage loan applications and another 2.9 million mortgage loan purchases on the secondary market.  Want to see what I am talking about? You can download the data here.

The HMDA data is released to help citizens understand how banks and other lenders are working in their neighborhoods.  It was legislated through the Home Mortgage Disclosure Act, and it dovetails within the broader aims of the Community Reinvestment Act.

New legislation is on the table in DC that would counter the shortcomings of this data.  HMDA is broken.  (more…)