The Fed Acts to Push Mortgage Rates Lower

In it's first action to directly influence mortgage rates and the housing market, the Federal Reserve has announced that they "will initiate a program to purchase the direct obligations of housing-related government-sponsored enterprises (GSEs)--Fannie Mae, Freddie Mac, and the Federal Home Loan Banks--and mortgage-backed securities (MBS) backed by Fannie Mae, Freddie Mac, and Ginnie Mae."

There's more:

This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally.

This action is aimed directly at, and intended to narrow, the interest rate "spreads" between Mortgage related securities and treasury securities, which have been leaking wider ever since the Fed stopped short of affirming a "full faith and credit guarantee" for Fannie and Freddie's obligations.

If you read our post last week on why mortgage rates are higher than they should be, you'll have some great context as to why the Fed had to do this.

Prices of mortgage backed securities are sharply higher on this news.  Expect mortgage rates to see .25 in improvement immediately, (putting them in the sub 5.5% range for 30 year fixed paper) with further gains possible as the market sorts out the impact of this action.

11/25/08 at 09:35 AM Permalink | Comments (0) | TrackBack (0)
Filed Under: Breaking News, Fannie Mae, Freddie Mac, GSE's, Interest Rates, The Fed

Star-Tribune on Centennial Mortgage & Funding

Jim Buchta provides some additional color to the story we broke right here yesterday:

Bill Walsh said that such orders, issued in this case for what he calls "substantial financial problems," are unusual for a company this size...in 2006, the latest year for which data was available, Centennial closed 1,828 mortgages.

We'd like to re-iterate the call for any borrowers, employees, (or anyone else) who've been impacted by this shutdown, or have direct knowledge of the goings on to contact us via email, or in the comments below.

03/29/08 at 10:10 AM Permalink | Comments (2) | TrackBack (0)
Filed Under: Breaking News, Consumer Protection, Credit Crunch, Twin Cities

Breaking News: Lender with 9 Local Branches Can't Fund Loans, Ordered to Cease and Desist

We've only got a single source on this for now (working on more) so we'll leave the name of this outfit blind until we can get some confirmation.  Name now confirmed as Centennial Mortgage and Funding, out of Bloomington, see update below.
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The word is a south-metro headquarted Mortgage lender Centennial Mortgage and Funding, a local correspondent/broker with 9 Minnesota branches, and two in Wisconsin, has had their warehouse lines pulled, and cannot fund loans.  Allegedly the company CFO was using one warehouse line to fund another (this is bad, see below.)

40 some odd loans scheduled to close today cannot fund, leaving the borrowers, some of whom were set to close on purchase transactions, in the lurch.

UPDATE 3:54P Friday 28 March

We just received the following confirmation via email from Bill Walsh, Director of Communications for the Minnesota Department of Commerce:

The Minnesota Department of Commerce issued a Consent Cease and Desist Order today against Centennial Mortgage and Funding of Bloomington because of their substantial financial problems. The company agreed to cease and desist from engaging in any and all new mortgage loan origination or servicing activities in the State of Minnesota.

The order should be on our website soon.

Though the name has now been confirmed, the exact nature of the financial problems remain a bit of a mystery, but since our original sources information has now largely been substantiated, we can only assume it was warehouse line shenanigans that did them in.

UPDATE 2, 4:43P Friday 28 March
Here is a copy of the consent order: Download CentennialMortgage.pdf

For the civilians and non-mortgage people:
A warehouse line, or warehouse line-of-credit is the mechanism that most larger brokers (or correspondent lenders) use to fund loans before they are sold off to the investor (such as a Countrywide, Chase, Wells Fargo, etc.) who will ultimately own and/or service the loan.

Warehouse lines are used because the typical broker does not have the cash to fund each loan themselves, so they need short term borrowing capacity to fund production.  A warehouse line is essentially a giant revolving line of credit, and their use is the standard business model for non-bank lenders.

Normally, and by design, closed loans are "on" a warehouse line for very short periods of time - a matter of days or weeks - until the loan is shipped off to the investor.  For this reason, there is not normally a lot of risk for the providers of these types of facilities. 

But occasionally, the investor the loan was destined for will reject the loan and push it back to the originator/broker.  There are many reasons this can happen.  Maybe the loan was underwritten incorrectly, maybe it was flagged for fraud, maybe it was an early payment default, or some other violation of the representations and warranties the lender and originator agree to. 

So if nobody will buy the loan, it sits on the warehouse line.  Once enough loans (or just one of the wrong kind- warehouse lenders are VERY conservative these days) get put back on the warehouse line, the warehouse lender says something like: "Hey, this is supposed to be a short term deal here, we didn't sign up to take the long term credit risk for you on a loan, so you need to pay this loan off yourself if you can't sell it on the secondary market." This is known as a margin call.

And if the broker/originator does not have the cash to pay up, they might just look to other sources to raise cash.  If desperate, they might just use one warehouse line to meet the margin call of another.

But back to our story:

If this is what happened here, they are up a creek.  And the solution is not likely to be just about throwing the CFO under the bus, offering a mea-culpa to the warehouse lender, and re-instating the line.  It may not be that easy.

That's because, presumably, the broker faced a cash call it could not meet, and tried to use another warehouse line to come up with the dough.  Point being: The original obligation that caused this may remain unmet, and unless they've got another way to quickly raise capital, or a VERY cozy relationship with another warehouse lender, it could spell the end.

Again, this is speculation and theory to a large degree at this point, and we will work on confirming the brokers identity.  Anyone with any personal knowledge, especially borrowers caught in this, feel free to jump in the comments. 

More as things develop.

03/28/08 at 11:49 AM Permalink | Comments (8) | TrackBack (0)
Filed Under: Blind Item, Breaking News, Credit Crunch, Twin Cities

Fed Cuts Rates: Will Mortgage Rates Rise as a Result?

Moments ago, The FOMC (Federal Open Market Commitee, or "The Fed") released it's policy statement accouncing a .75% cut to both the Federal Funds Rate, and The Discount Rate, which now stand at 2.25%, and 2.50%, respectively.  This comes on the heels of a .25% cut to the discount rate on Sunday, and caps off a series of Fed moves that can only be described as extraordinary.

Here is a link to the Full Fed Statement (be patient, the servers are flooded):

Worth noting was this particular passage:

Recent information indicates that the outlook for economic activity has weakened further. Growth in consumer spending has slowed and labor markets have softened.  Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters.

Inflation has been elevated, and some indicators of inflation expectations have risen. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization.  Still, uncertainty about the inflation outlook has increased.  It will be necessary to continue to monitor inflation developments carefully.

03/18/08 at 01:35 PM Permalink | Comments (0) | TrackBack (0)
Filed Under: Breaking News, Interest Rates, The Fed

Minnesota May Pass Nations Strongest Foreclosure Moratorium

Audio only from MPR.  A few highlights we pulled from a quick listen:

• The measure would block foreclosures for a full year.
• Applys to owner occupied properties only.
• It is intended to force lenders to modifyout the loan, rather than foreclose.
• Borrowers would be required to Keep making payments - 65% of payment at the time of default, or initial interest rate, whichever is lower.

Here's a link to the text of the bill, we'll scan through it and share any further thoughts later:

UPDATE: More highlights, from the bill:

• Loan must have closed between January 1st 2001 and August 1st 2007.
• Must be a sub-prime or a loan with negative amortization for which the minimum payment increased.
• To suspend foreclosure, borrower must send an affidavit to the lender, which states:
  • I am the borrower
  • A foreclosure sale has been scheduled
  • I currently reside at subject property
  • I intend to reside at the subject property for 12 months.
  • I believe that the mortgage loan is sub-prime or has negative amortization and the payment has increased.
• There are criminal penalties (2yrs, $2000 fine) for misrepresentation in affidavit above.
• If the borrower does not make the reduced payment, the lender may re-initiate the foreclosure process and schedule a foreclosure sale.
• During the deferrment period, lender cannot charge an eligible foreclosed borrower any other amount than the reduced payment.

Questions, questions.  Chief among them: What happens when the 12 month deferrment period is up?  Can the lender go after the borrower for unpaid principal and interest during the deferrment period after it is over? What about unpaid amounts that pre-date the deferrment?  If that's the case, aren't we just postponing the inevitable?

Will the wholesale we-writing of these contracts make lenders less likely to lend in MN in the future?

03/05/08 at 02:11 PM Permalink | Comments (2) | TrackBack (0)
Filed Under: Breaking News, Consumer Protection, Foreclosures, Housing Market Politics

News On Conforming Limit Increase: $625,000?

We'll post this without comment other than to say, anything can happen in Washington (so don't place any big bets on this info), and this is from a very reliable source:

"Sources in the House, the Senate, and the White House are all indicating today that a tentative consensus has been reached that the economic stimulus bill that Congress will send to the President will include much of the FHA Reform Legislation including raising the FHA loan limit max to match the FHA conforming limit AND a one year raise of the conforming limit to $625,000 with the possibility of an additional one year extension at expiration. All sources also indicate Congress will deliver the bill to the President before their break in mid-February and that it should be signed by the end of February. Obviously this is not "done" but all of the sources I am using are very close to the action. This would mean that we could see at least the loan limit portions of the legislation we are hoping for within the next 6 weeks."

[Update: Lively discussion on this topic over at Calculated Risk, courtesy of Tanta, who was kind enough to link up this post ]

yo

01/23/08 at 05:15 PM Permalink | Comments (1) | TrackBack (0)
Filed Under: Breaking News, Conforming Limit Increase, Financing Options, Mortgage Economics

Rumor Mill: Coldwell Banker Burnet Has Purchased Minnetonka Realty

Though this can be filed as (maybe) rumor for now, we have it from a very good and trusted source that Coldwell Banker Burnet has purchased Minnetonka Realty.  Given the love-letter of Interest that CBB sent out to local brokers, which we covered in September, this should not surprise. 

We expect to see more big-fish-gobbling-little-fish consolidation activity in the real estate, home builder, and mortgage space during The Great Real Estate Unwind™.

We'll work on further information, details, and confirmation through the day.  Anyone with any knowledge, speculation, or opinion, feel free to add some color in the comments below.

12/21/07 at 08:08 AM Permalink | Comments (1) | TrackBack (0)
Filed Under: Breaking News, Industry News, Twin Cities, Western Burb's

Media Appearance: KSTP News on Mortgage Fraud

At 1PM today, a press conference will be held to announce criminal charges against two suspects in yet another mortgage fraud ring in the Twin Cities.  The suspects, Donald L. Walthall,  40, of Anoka, and Rahmeen D. Underwood,  30, of Minnetonka, both of Universal Mortgage Inc. (which you might remember from this Story) were arrested Friday.  From the Strib:

...[I]n what has become a widening mortgage fraud investigation involving hundreds of properties...[R]ecords showed that Universal has been at the center of a web of transactions where a small group of investors, including several Universal employees, bought rental properties and quickly resold many at above-market prices.

We'll be sitting down with KSTP's Bob McNaney after the presser to discuss the impact of this latest round of mortgage fraud charges, how it may impact you, and how you can avoid getting caught up in one of these scams.  We expect the piece to air at 5PM 6PM on KSTP, but will update here if this changes. 

12/10/07 at 12:37 PM Permalink | Comments (2) | TrackBack (0)
Filed Under: Breaking News, Fraud, Press, Twin Cities

September Existing Home Sales Down 8% Nationally, 28% in Twin Cities

More blood on the streets today for homesellers, as the NAR reports September existing home sales down 8% nationally:

Sales of previously owned homes fell 8 percent in September to an annual rate of 5.04 million, the fewest since records began in 1999, the National Association of Realtors said in Washington. The decline was almost twice as steep as economists forecast,

Of course, all real estate is local, as they say, so we spoke with the Minneapolis Area Association of Realtors director of research Jeff Allen (whose research and reports page is dynamite, by the way) to drill down a bit and get the local picture.

Turns out, the local picture is even worse, for September at least.  In the 13 county Twin Cities metro area, sales of previously owned/existing homes dropped by a whopping 28% - from 3,329 closed sales in September 2006 to 2,398 closed sales in September 2007.

That is jaw dropping stuff, though Mr. Allen does caution against reading to much into that figure:

The sample size in our market is small enough that the month-to-month fluctuations can be sizable - which is why we use the year over year sales of previously owned homes, rather than month-to-month figures like the NAR.

This metric (see graphic below, which can be found in its entirety here) shows year over year sales of previously owned homes down 12.8% - still a big drop, to be sure, but not so bleak as a 28% drop might suggest.

Either way, we've got a bear of a sellers market to conted with, and despite all the chatter about a buyers market, these stats suggest they have not yet shown up for the party.
Minneapolis Area Association of Realtors [mplsrealtor.com]
Existing Home Sales Take Record Dive [Startribune]

10/24/07 at 02:16 PM Permalink | Comments (0) | TrackBack (0)
Filed Under: Breaking News, Industry News, National & Abroad, Reports & Research, Twin Cities

Lawyer Up! W Minneapolis Condos Receive Cease and Desist Letter From Starwood Hotels & Resorts

Way back in the spring of 2006, we ran a contest around these parts to name a condo project in Minneapolis' Whittier Neighborhood.  Maybe you remember.

The winning entry was the W, or WMinneapolis (the W for the Whittier neighborhood - get it?)  Anyway, turns out that Starwood Hotels and Resorts has now delivered a cease and desist letter to the owner/developers defending this "W" trademark.  Quoting from the letter, of which we have a copy:

...Plainly, you are attempting to capitalize on the fame and reputation of the Starwood W properties to mislead potential buyers into believing that WC is associated with Starwood, and that you will have the same superior quality and attention to detail that consumers have come to expect from Starwood's W Properties...

The letter goes on to accuse W Minneapolis of cybersquatting the wminneapolis.com domain, and demands that all W references anywhere be eliminated and/or destroyed.

Not that we know thing one about trademark law, but given that there is a darn good record of how the property was actually named, which in no way involved piggybacking on Starwoods "fame and reputation" we think they have a reason to fight this.

There's also an Irony Angle.  Starwood is involved in Ralph Burnet's (Chairman of Coldwell Banker Burnet realty) plan to convert the landmark Foshay tower into the "W Foshay" Hotel.  The agent marketing the condos, Derrik Dyka, is employed by Coldwell Banker Burnet.

But the best part? It's all Jason Derusha's fault, since he was the one who submited the winning entry.  We still have the email.

10/16/07 at 01:38 PM Permalink | Comments (3) | TrackBack (0)
Filed Under: Breaking News, Condos & New Developments, Industry News, Minneapolis, Name That Condo