ABX Indexes Stabilizing: Turning Point or Seasonal? - Housing Tracker

Quote of the Day

"Markets go up, they go down, and the government should not be involved in determining which way they go." - Rep. Randy Neugebauer (R-Texas) said during a House Financial Services Committee meeting on US Representative Barney Frank's anti-foreclosure bill. (Wall St. Journal, Apr. 25th)

Subprime Fallout

'Workouts' On U.S. Prime Mortgages Rise - Hope Now. “Hope Now Alliance: New payment plans on mortgages to the most credit-worthy homeowners jumped nearly 20% in Q1’08, while "workouts" for subprime borrowers leveled off. Changes to repayment schedules or contractual terms of loans to prime borrowers helped push total mortgage workouts to 502,520 in Q1. That marked a 6% increase over Q4’07 and a 26% leap from Q3’07, according to Hope Now, the alliance of mortgage servicing and counseling companies formed in October. Mortgage companies negotiated new terms on 206,495 prime loans last quarter, a 19% gain from Q4’s 173,499.” (Reuters, Apr. 29th)

Investors Fail to Pass ‘Say-on-Pay’ Even After Subprime Losses. “With investors hurt by falling stock prices caused by record losses in the banking industry, shareholder advocates thought this would be the year to pressure corporate boards to rein in executive pay. It hasn't turned out that way. So-called say-on-pay proposals, which give shareholders a non-binding advisory vote on executive compensation, failed at Citigroup Inc. (C),Merrill Lynch & Co. (MER), Bank of America Corp. (BAC) and Morgan Stanley (MS), the U.S. financial firms that posted the largest asset writedowns and credit losses since the start of 2007.” (Bloomberg, Apr. 29th)

Subprime Loan Performance Stabilizes, Caution Urged. “[Closely-watched] remittance reports, which provide a snapshot of subprime loan performance over the last 30 days, showed the pace of delinquencies slowed from the sharp climb in previous months… Remittance reports... track the credit performance of subprime mortgage loans supporting the ABX… a synthetic index of home equity asset-backed securities tied to credit default swaps (comprised of the risky home loans). Delinquencies on mortgage loans of 60 days or more, which support the ABX 06-1, 06-2, 07-1 and 07-2 indexes, rose by 122, 191, 130 and 168 basis points, respectively in April, slowing the pace from March's increases of 160, 221, 140 and 204 basis points, analysts said… Analysts caution: Seasonal factors may have come into play.” (Reuters, Apr. 28th)

Loan Industry Fighting Rules on Mortgages. “As the Federal Reserve completes work on rules to root out abuses by lenders, its plan has run into a buzz saw of criticism from bankers, mortgage brokers and other parts of the housing industry. One common industry criticism is that at a time of tight credit, tighter rules could make many mortgages more expensive by creating more paperwork and potentially exposing lenders to more lawsuits. To the chagrin of consumer groups that have complained that the proposed rules are not strong enough, the industry’s criticism has already prompted the Fed to consider [applying] the plan to fewer loans.” (NY Times, Apr. 28th)

M.D.C. Holdings, Inc. Q1 2008 Earnings Call Transcript. “Analyst Timothy Jones – Wasserman & Associates: “Your FHA loans are only about 47% right now. Why aren’t you utilizing more FHA loans? MDC CFO Paris G. Reece, III: Tim that is something that is growing significantly. A year ago it was 5%. It’s something that has been building and it doesn’t replace overnight. But we can clearly an upward trend in that loan vehicle.” (Seeking Alpha, Apr. 27th)

U.S. Agency Helps Prop Up Housing Market. “Government data: Last year, the Federal Housing Administration's insurance fund paid $158.6 million in incentives to keep lenders from foreclosing on mortgages backed by the government… A 61% leap from 2003. More than six in 10 homeowners who defaulted on FHA-insured loans were able to stay in their houses, up from three in 10 in 2000… Democrats are promoting bills that would help refinance challenged borrowers into affordable loans backed by the FHA. As many as two million mortgages with a value of $300 billion could be included… Average payments to lenders agreeing to modify loan terms ranged from $136 to $7,169 last year... By contrast, the FHA insurance fund had to pay loan servicers an average of $98,740 for every mortgage that ended in foreclosure.” (Wall St. Journal, Apr. 25th)

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