What is the Willis Tower? I don't know, but the $1.3 billion Sears Tower, complete with a $775 million loan, was sold to Blackstone. The WSJ reports that the property backs a $775 million loan of which several pieces were securitized in commercial mortgage-backed securities. The building has more than 3.75 million square feet of office space and is the second tallest office building in the United States, after One World Trade Center in downtown Manhattan. The property faced large tenant leasing and capital costs in the first quarter of 2014. Subsequently, the loan was transferred into special servicing after the borrower expressed concern about the capital required to keep the property fully funded. The loan could be defeased and a special servicing workout fee likely when the loan pays off. Currently with two years to maturity (20 months till open) and a 6.27% coupon, it is unclear whether Blackstone will assume the loan or defease it.
Hey, who is more likely to go into foreclosure, a conforming conventional borrower or a jumbo borrower?
While we're talking about big money, Ginnie Mae has added HMBS Enhanced Monthly Pool and Loan Level Disclosure Layout revisions. To view its disclosure, click here.
And not to be outdone, Fannie updated its LLPA matrices. "This Notice announces that Fannie Mae has updated the pricing guidelines in the Loan-Level Price Adjustment (LLPA) Matrix and Adverse Market Delivery Charge (AMDC) Information and the Refi Plus™ Mortgages Only Loan-Level Price Adjustment (LLPA) Matrix and Adverse Market Delivery Charge (AMDC) Information matrices to reflect the policy change that pertains to how loan-level price adjustments are applied to mortgage loans with more than one borrower, specifically when one borrower has a credit score and one or more borrowers do not have credit scores."
Also not to be outdone, Freddie Mac released Bulletin 2015-3 which announced changes that "enhance our modification options and expand borrower eligibility using our loss mitigation toolkit. All changes are effective for new evaluations conducted on or after July 1, 2015, but you're encouraged to implement them immediately." Freddie's Bulletin addressed Step-Rate Mortgages ("Offering borrowers with Step-Rate Mortgages the opportunity for an earlier modification with our Freddie Mac Streamlined Modification - Streamlined Modification; adding a new eligible hardship to our Freddie Mac Standard Modification - Standard Modification.) Imminent Default Hardship test. There are plenty of other thrilling details - please read Guide Bulletin 2015-3 for more details on these changes and for additional updates.
So Freddie is asking its servicers to change certain loans "to reduce the risk of re-defaults as scheduled interest rate adjustments under the HAMP program begin." As a reminder, under HAMP rates on modified mortgages fixed for 5 years, then increase in steps by as much as 1% a year until matching the market rate when HAMP modification took effect. The bulletin above directs servicers to start evaluating HAMP borrowers on July 1 for streamlined modification if they become 60 days delinquent within 12 months after rate increase, and borrowers facing imminent default as a result of increases should also be considered for modifications.
And let's not forget that a couple weeks ago the Rural Housing Service proposed a Rule amending the Single Family Housing Guaranteed Loan Program. The Rural Housing Service (RHS) has proposed a rule, amending the current regulation for the Single Family Housing Guaranteed Loan Program. The RHS seeks to expand its lender indemnification authority, allow lenders to reduce principal balances (in some cases), revise its interest rate refinance requirements, and to amend its regulation to indicate that a loan guaranteed by the RHS is a Qualified Mortgage if it meets certain requirements set out by the CFPB. Comments on the rule must be received by May 4, 2015.
Speaking of agency news, the FHFA (overseer of Freddie & Fannie) released its Progress Report on the initiatives outlined in its 2014 Strategic Plan and 2014 Conservatorship Scorecard for Fannie Mae and Freddie Mac (the GSEs). The Progress Report is a summary of the work undertaken in furtherance of FHFA's key goals for the GSEs, including issues MBA has championed, such as clarifying lenders' liability under the GSE representation & warranty framework, reducing the number and severity of the GSEs' assessments of compensatory fees, increasing the amount of credit-risk that is transferred to the private market, and pursuing "front-end" risk-sharing transactions, and develop a single security that can be fungible for TBA delivery to increase overall liquidity.
Let's keep going with some random program and lender changes that have been announced over the last several weeks.
First, a correction on some New Penn Financial program notes. Its Home Key product is for borrowers who've experienced a credit event; it is not a credit repair product.
JPMorgan announced that it is buying $45 billion in servicing from Ocwen. Chase's production is down and wants those 277,000 loans, and it would bring its servicing portfolio to roughly $1 trillion (still behind Wells' $1.75 trillion). And, let's face it, Ocwen is shrinking and wants the ducats.
A while back Angel Oak Wholesale began offering a mini- correspondent program for eligible parties. Angel Oak Mortgage Solutions, specializes in non-agency lending, with a focus on non-prime loans, announced that its non-agency mortgage products are now available to third party lenders through a mini-correspondent channel. The platform provides affiliated lenders with the opportunity to offer Angel Oak Mortgage Solutions' non-agency products in their respective lenders' name.
Flagstar posted information regarding the new rural area eligibility maps that become effective on February 2 for purchase transactions under the GRHDoc. #5830 program. As a reminder, refinance transactions do not require the property to be in an area currently defined as rural by Rural Development. Therefore only purchase transactions are affected by the new maps. Also, updates have been made to its Early Loan Payoff policy which will now feature a graduated calculation based on duration and product. This new policy will be applied to all loans which payoff on or after February 1, 2015.
Rates: up a little, down a little. Yesterday they continued downward after a very weak housing start number for the month of February. The press is talking about how traders and investors were hesitant to position ahead of today's Fed statement and press conference. The focus is on whether or not the word "patient" appears in the FOMC statement. Really? With countries struggling around the world, people engaged in violent conflicts, huge currency fluctuations... watching for the word "patient" is what it's all about?
The war of words between Greece's government and Euro group & German officials continued. Greece feels that it has sacrificed given the austerity plan, and highlights the gains to the European core. Germany and others have benefited from exchange and interest rates that are lower than they would have faced had they still had their own currencies.
But since this is mortgage and economic commentary, returning to yesterday Housing Starts fell 17.0% in February although the January number was revised higher. That was a surprise but analysts quickly attributed it to record snowfall in the Northeast and extreme cold in the Midwest. But the West didn't do its part: high-than-average temperatures should have compensated for some of the decline in other regions, but housing starts fell 18.2% in the West. February Building Permits, however, beat estimates. And let's not forget that West Texas Intermediate Crude (WTI) made a new 6-year low Tuesday - don't forget the impact falling oil prices have on certain states and oil-related businesses!
This morning we've had the MBA's application numbers from last week: apps dropped 4%, refis fell 5%, and purchases fell 2%. Not great news for April and May...
Executive Rate Market Report:
A solid open this morning in the bond and mortgage markets; US stock indexes started weaker; ahead of this afternoon’s long awaited FOMC meeting that has ground the word patience into dust. Most investors and traders as well as the media (including ourselves) have been mesmerized with ‘patience’, it’s time to remove it so it isn’t the word of the month. Get rid of ‘patience’, please. Removing that word is supposed to signal a rate increase in June, we don’t agree; removing it likely will be replaced with another phrase or word that is likely to keep markets guessing. One trader this morning with tongue in cheek ventured the FOMC would remove patience and re-enter ‘considerable period of time’ that was the previous buzz phrase.
Yellen won’t ignore the soft economy, jobs are welcome but this year so far the economy is slowing based on the high majority of reports that confirm the economy has slowed. Dec, Jan, and Feb retail sales declined; was it weather, or the lack of internet sales in the monthly reports, or the collapse of oil prices; or the sum of all of those? Industrial production and factory use has slipped recently, there is absolutely no wage pressures the Fed can point to. Inflation is not increasing but declining. From my advantage point there is little reason for the Fed to move now. Why now? Because in the past the Fed has been behind the curve in terms of moving more rapidly in changing monetary direction, so the thinking is that Yellen won’t make that mistake. Look for extreme market volatility this afternoon beginning at 2:00 pm.
The only data this morning, the weekly MBA mortgage applications. Overall apps dropped again, -3.9%; purchases down 2.0%, re-financing -5.0%. Rates moved lower in the week with the average 30-year mortgage for conforming loans ($417,000 or less) down 2 basis points to 3.99%. Most believe that the housing market will gain momentum now that weather is improving. An anticipated increase in the FF rates will also increase mortgage rates, if the recent fractional increase in rates has slowed sales and re-fis has dampened the sector, a 25 bp increase in mortgage rates certainly has to be a worry point.
Crude oil is declining once more, this morning a new six year low. Commodity prices are going to follow crude lower as they did a few months ago when oil prices were falling daily. If Obama’s negotiations with Iran lead to relaxed sanctions Iran’s first move would be increasing oil exports; the country needs any monies it can get.
At 9:30 the DJIA opened -77, NASDAQ -13, S&P -7. 10 yr at 9:30 at 2.02% -4 bps, 30 yr MBS price +11 bp frm yesterday’s close and +11 bps frm 9:30 yesterday.
The drop in the rate on the 10 this morning has broken the bearish technical pattern; now trading below its 100, 40, and 20 day averages and the momentum oscillators have turned slightly positive. Any other day we would take it seriously but with the FOMC and Yellen this afternoon we will withhold our enthusiasm for now. Not only the FOMC and Yellen this afternoon, the Fed will also release its quarterly economic outlook; a lot to absorb in a few minutes so expect increased volatility frm 2:00 to 3:30 this afternoon.
PRICES @ 10:00 AM
10 yr note: +7/32 (22 bp) 2.03% -3 bp
5 yr note: +2/32 (6 bp) 1.54% -1 bp
2 Yr note: unch 0.67% unch
30 yr bond: +17/32 (53 bp) 2.58% -3 bp
Libor Rates: 1 mo; 0.177%; 3 mo; 0.270%; 6 mo; 0.401%; 1 yr 0.713%
30 yr FNMA 3.0 Apr: @9:30 101.50 +11 bp (+11 bp frm 9:30 yesterday)
15 yr FNMA 3.0 Apr: @9:30 104.22 +1 bp (+10 bp frm 9:30 yesterday)
30 yr GNMA 3.0 Apr: @9:30 102.55 +9 bp (+10 bp frm 9:30 yesterday)
Dollar/Yen: 121.18 -0.19 yen
Dollar/Euro: $1.0599 +$0.0002
Gold: $1147.40 -$0.80
Crude Oil: $42.35 -$1.11
DJIA: 17,770.46 -78.62
NASDAQ: 4926.46 -10.97
S&P 500: 2068.23 -6.05http://globalhomefinance.blogspot.com