Posts Tagged ‘banks’

Fed Uses ‘Dollar Rolls’ in Mortgage-Bond Program Shift

December 6, 2011

Jody Shenn and Caroline Salas Gage, San Francisco Chronicle

The Federal Reserve Bank of New York entered into paired contracts to buy and sell mortgage securities for the first time since it began reinvesting in the debt in October, in a move that may reduce funding costs.

The so-called dollar roll transactions will "facilitate the settlement of our outstanding MBS purchases," Jonathan Freed, a New York Fed spokesman, said in an e-mailed statement.

The central bank is purchasing bonds for December settlement and agreeing to sell the same amount of similar debt in January, said two people familiar with the matter, who declined to be identified because details haven’t been disclosed. Funding costs for mortgage-bond investors, which had risen in anticipation of banks trimming their balance sheets before year-end, fell after the Fed transactions.

"I applaud the Fed," Scott Simon, mortgage-bond head at Newport Beach, California-based Pacific Investment Management Co., which runs the world’s largest debt fund, said in an e- mail. "This both makes them money and helps the MBS market. There wasn’t enough year-end balance sheet."

The central bank began reinvesting proceeds from its holdings of $1.4 trillion in housing debt into government-backed mortgage bonds to help support the real-estate market and homeowner refinancing, shifting from additional purchases of Treasuries. On Nov. 30, the Fed joined with global central banks to cut emergency dollar funding costs for European lenders as the region’s sovereign debt crisis roils markets.

‘Funding Pressure’

The New York Fed says on its website that it "may use dollar roll transactions if needed to facilitate settlement" of its purchases. The Fed posts details on its mortgage bond buying each Thursday.

With dollar rolls, an investor seeking to borrow money enters into contracts to sell mortgage securities in any month and then buy similar bonds the following month; a lender would undertake the opposite trades. Investors entering into transactions for other reasons may be on either side of the contracts.

The transactions are similar to so-called repurchase agreement, or repo, loans.

The Fed’s latest move in the mortgage bonds may help "alleviate some mild funding pressure" in the market, said Bryan Whalen, co-head of mortgage bonds at Los Angeles-based firm TCW Group Inc., which oversees $120 billion in assets.

The implied cost of dollar-roll financing for some of Fannie Mae’s securities rose earlier yesterday to more than 40 basis points, depending on prepayment-speed estimates, according to Whalen. That compared with 27 basis points for similar repo loans, he said. A basis point is 0.01 percentage point.

Backstop Role

That disconnect "implied a little bit of stress" in money markets, he said. "It’s typical to see this type of mispricing of liquidity" around year-end, and Europe’s crisis is exacerbating the situation, Whalen said.

The implied cost of dollar-roll funding for Fannie Mae’s 3.5 percent 30-year securities fell to between 10 basis points and 20 basis points, depending on prepayment assumptions, early today, according to Credit Suisse Group AG analyst Mahesh Swaminathan. It had increased about 25 basis points since the end of October, he said in an e-mail.

The "Fed’s move to buy dollar rolls underscores their backstop role to support liquidity in the market," Swaminathan said. "I don’t think they are going to do these regularly. It is something intended to be done only when liquidity is perceived to be low."

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/12/06/bloomberg_articlesLVSMVH07SXKX.DTL#ixzz1fnJO8H85

 

 

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Obama Says Solving Euro Crisis of ‘Huge Importance’ to U.S.

November 29, 2011

via Margaret Talev & Roger Runningen, Bloomberg Businessweek

President Barack Obama said resolving the European debt crisis is of “huge importance” to the U.S. and his administration is “ready to do our part” in stabilizing the global economy.

Obama said a “large part” of the annual U.S.-European Union summit was spent on the impact of the crisis in the euro- zone. He spoke at the White House after meeting with European Council President Herman Van Rompuy and European Commission President José Manuel Barroso.

Van Rompuy said the U.S. and EU “both need to take strong action” to maintain the economic recovery. Barroso said he has “full confidence” that Europe will deal with the sovereign debt issue.

Iran’s nuclear program, strengthening exports and investments, Middle East peace prospects, terrorism and cyber crime also were on the agenda for annual meeting.

The summit comes as European finance chiefs are set to meet this week to discuss a rescue plan, and days ahead of a Dec. 2 report by the U.S. Labor Department on the nation’s unemployment rate for November. The rate for October was 9.0 percent.

About $4.6 trillion was wiped from the value of global equities this month on mounting concern that Europe’s debt crisis is spreading.

Wider Threat

Moody’s Investors Service said today the “rapid escalation” of the crisis threatens all of the region’s sovereign ratings, and the Organization for Economic Cooperation and Development said doubts about the survival of Europe’s monetary union has caused global growth to stall.

“The euro-area crisis represents the key risk to the world economy,” the Paris-based OECD said. Government bond yields for both Germany and France, Europe’s two largest economies, climbed last week as a German bond auction failed to get bids for 35 percent of the 10-year debt on offer.

News of a possible framework for a rescue plan helped push global stocks higher for the first time in 11 days. The MSCI All-Country World Index added 3 percent at 1:20 p.m. in New York, snapping its longest slump since 2008, and the Standard & Poor’s 500 Index rallied 2.9 percent.

The euro strengthened 0.6 percent to $1.3322. The yield on the 10-year German bund advanced four basis points, with the similar-maturity Treasury yield increasing two points after jumping as much as 11 points.

Push to Act

Obama has been calling on European governments to act decisively on a plan to address the crisis. Leaders must summon the “political will” among the 17 nations that use the euro to take steps to ensure fiscal discipline while stabilizing markets, Obama said Nov. 4 in France as the leaders of the G-20 ended a summit.

Van Rompuy and Barroso are top leaders of European institutions having influence over a final resolution, though France and Germany, the largest European economies, are critical to any success.

Obama has spoken frequently with German Chancellor Angela Merkel and French President Nicolas Sarkozy, and today’s White House meetings gave him a chance to further increase his lobbying. Neither head of state is attending today’s summit.

White House press secretary Jay Carney wouldn’t say whether Obama was making any new, explicit requests of the European leaders at the summit.

In a separate fact sheet, the U.S. and European leaders said they directed the Transatlantic Economic Council to create a Working Group on Jobs and Growth.

The panel, to be led by U.S. Trade Representative Ron Kirk and EU Trade Commissioner Karel De Gucht, is ordered to “identify policies and measures” to boost U.S.-EU trade and investment to increase job creation, economic growth and international competitiveness.

The panel is to provide an interim report in June 2012 and a package of final conclusions and recommendations by the end of 2012.

 

 

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A Realistic Fix for the Mortgage Crisis

November 1, 2011

By Elyse Cherry via Los Angeles Times

President Obama recently announced that the federal government will take steps to reduce interest rates on mortgages for some existing homeowners. Unfortunately, that won’t help millions of U.S. homeowners already in foreclosure and millions more about to join them.

The current foreclosure crisis is not due to poor choices by individual homeowners. Most people caught up in it fell prey to a national bubble and bad lending practices. These taxpayers – schoolteachers and medical technicians, salesclerks and mechanics, veterans and parents of soldiers in Iraq and Afghanistan – are often simply people who got in over their heads. They deserve a second chance.

One reason the mortgage industry hasn’t done more, its leaders say, is that it fears creating a "moral hazard" – the concept being that if homeowners in default are given too much help, other homeowners might be tempted to deliberately default in order get the same help. That hasn’t been the experience of Boston Community Capital, a 27-year-old nonprofit, community development finance institution I’ve led for 14 years.

As part of its Stabilizing Urban Neighborhoods initiative, Boston Community Capital has renegotiated many mortgages on foreclosed homes, and we’ve seen no evidence that doing so sets off a flood of voluntary defaults. We believe our model could be applied much more widely in this national crisis.

Foreclosure isn’t something a homeowner chooses if it can be avoided. Today, a good credit score is required for countless transactions, and foreclosure destroys a person’s credit score. In many states foreclosed homeowners can’t qualify for another mortgage for many years, nor can they easily rent houses, qualify for college and car loans, or even get some jobs.

Since 2009, Stabilizing Urban Neighborhoods has prevented the eviction of almost 150 Massachusetts households by securing reduced mortgage payments that line up with homeowners’ real incomes – rather than with the value set by a real estate bubble that burst long ago.

Our formula is straightforward. We negotiate with the lender’s representative to buy foreclosed homes at current, distressed market values – often 50 percent less than the amount paid by the homeowner. We then resell the homes to their current occupants with a new 30-year mortgage at a fixed interest rate of 6.375 percent (a rate that, although higher than the best loans available to people with excellent credit, is far lower than the rate that the high-risk clients we assist could get elsewhere – if they could get other loans at all).

We qualify our clients by closely analyzing their finances and employment situations. We work with local nonprofits to understand client histories. Even after accounting for reserves, emergency repairs and closing expenses, we are able to lower monthly housing expenses and the overall cost of a home loan to affordable levels. On average, homeowners pay about 40 percent less per month.

We require homeowners to share any future potential appreciation with our neighborhood nonprofit if the market rebounds, discouraging speculators and people who aren’t serious about keeping their homes from coming to us.

Our initiative cannot solve every foreclosure problem. Some would-be participants don’t have enough income to sustain even a sharply reduced mortgage payment. Some in the mortgage industry, citing moral hazard, refuse to sell us homes at their current values because we plan to keep foreclosed homeowners in the homes. At times, we have been outbid for a home we were trying to save, but we won’t spend more on a home if that would mean we would have to offer our borrowers new mortgages that were still too high for them to manage.

Our Stabilizing Urban Neighborhoods initiative is not a bailout or a charity. It is a sustainable model that can offer relief to a substantial percentage of homeowners in foreclosure and relieve mortgage industry gridlock. The Open Society Foundations and others have provided us planning funds to explore other locations across the country where our model might work. The approach is best suited to areas that have suffered substantial depreciation in housing prices, that have high levels of foreclosures, and that have trusted, long-standing community organizations interested in entering partnerships to administer the program. We estimate that our approach could help 1 in 5 homeowners whose homes have significantly dropped in market price, and who are either late in paying their mortgages or in foreclosure.

Renegotiating realistic mortgages that keep people in their homes helps homeowners and neighborhoods. It also helps the mortgage industry, which must come to grips with the fact that many of its borrowers can’t afford to continue to make payments on mortgages that were entered into during the bubble. Our strategy could work on a far grander scale – the kind of scale that, say, Bank of America, Citigroup, HSBC or Wells Fargo or others could adopt.

Foreclosure and eviction are lengthy and expensive. As more homes become owned by lenders, those institutions will bear increasing responsibility for paying local property taxes, insurance and maintenance costs, as well as steep fines if they fail to comply with local building codes and city ordinances.

The groundless fear that helping some borrowers will lead to an avalanche of new foreclosures has discouraged sensible and systemic solutions to the foreclosure crisis. Allowing the mortgage industry to hide behind this fiction has created a genuine hazard – to neighborhoods, to communities and to the nation’s economic health.

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Mortgage Rates Week of October, 31, 2011

November 1, 2011

Brian McKay via Monitor Bank Rates

Mortgage rates are barely changed this week over last. Today’s mortgage rates on 30 year mortgage loans are averaging 4.13%, a slight increase from last week’s average 30 year mortgage rate of 4.11%. Average mortgage rates on 15 year mortgages are higher this week averaging 3.42%, an increase from last week’s average 15 year mortgage rate of 3.39%.

Compare current mortgage rates from several lenders by using our rate tables here: Current Mortgage Rates . Unlike most websites, no personal information is needed to view a list of mortgage rates.

30 year jumbo mortgage rates are averaging 4.61%, up from last week’s average 30 year jumbo mortgage rate of 4.55%. 15 year jumbo mortgage rates are averaging 3.89%, down from last week’s average 15 year jumbo mortgage rate of 4.90%.

Mortgage Rates

Conforming Adjustable Loans – Today’s Mortgage Rates

1 year adjustable mortgage rates today are averaging 3.79%, up from last week’s average 1 year adjustable jumbo mortgage rate of 3.77%.

3 year adjustable mortgage rates today are averaging 2.60%, down from last week’s average 3 year adjustable mortgage rate of 2.74%.

5 year adjustable mortgage rates are averaging 2.78%, a decrease from the prior week’s average 5 year adjustable rate of 2.82%.

Current 7 year adjustable mortgage rates are averaging 3.12%, no changed from the previous week’s average 7 year adjustable mortgage rate.

10 year adjustable mortgage rates currently are averaging 3.60%, unchanged from last week’s average 10 year adjustable rate.

Adjustable Jumbo Loans – Mortgage Rates Today

Current 1 year jumbo adjustable mortgage rates are averaging 4.50%, up from last week’s average adjustable jumbo mortgage rate of 4.05%.

3 year adjustable jumbo rates today are averaging lower at 3.42%, down from last week’s average 3 year jumbo adjustable rate of 3.49%.

5 year adjustable jumbo mortgage rates and refinance rates currently are averaging 3.03%, up from last week’s average jumbo adjustable rate of 3.02%.

7 year jumbo adjustable mortgage rates and refinance rates today are averaging 3.57%, unchanged from last week’s average 7 year adjustable home loan rate.

10 year jumbo loan rates and ‘refi’ rates are averaging 3.97%, up from the prior week’s average 10 year jumbo home mortgage loan rate of 3.96%.

Conforming Interest Only Adjustable Loans – Current Mortgage Rates

3 year interest only adjustable mortgage loan rates and refinancing rates are averaging 2.85%, down from last week’s average interest only mortgage loan rate of 3.15%.

5 year IO adjustable loan mortgage rates and mortgage refinance rates are averaging 2.93%, down from last week’s average five year interest only mortgage rate of 3.18%.

7 year interest only adjustable mortgage rates and refinance rates are averaging 3.44%, down from last week’s average 7 year interest-only mortgage interest rate of 3.54%.

Interest Only Jumbo Loans – Today’s Mortgage Rates

Today’s 3 year jumbo interest only adjustable loan rates are averaging 3.58%, down from last week’s average jumbo adjustable interest only rate of 3.67%

Current 5 year adjustable jumbo interest only rates are averaging 3.43%, a decrease from last week’s average IO home mortgage interest rate of 3.44%.

Today’s 7 year jumbo interest only adjustable rates are averaging 3.79%, unchanged from last week’s average jumbo 7 year home mortgage loan rate.

Home Equity Loan Rates – Today’s Home Equity Rates

10 year home equity loan rates are averaging 6.45%, unchanged from last week’s average home equity loan rate.

15 year home equity rates are averaging 6.41%, no change from last week’s average home equity loan rate.

Home Equity Line of Credit – Current HELOC Rates

Home equity line of credit rates currently are averaging 4.81%, unchanged last week’s average rate HELOC rate

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MetLife Provides $725 Million in Financing for Manhattan Office Buildings

November 1, 2011

Emily Philips via MetLife

NEW YORK, Oct 31, 2011 (BUSINESS WIRE) — MetLife, Inc. MetLife announced today that it provided, through its real estate investments department, a $350 million, five year, fixed rate mortgage for the office condominium unit at the Bertelsmann Building, located at 1540 Broadway in Manhattan. MetLife, which provides loans on office, multi-family, industrial and retail properties, has a $40 billion* commercial mortgage portfolio.

"We are pleased to be providing financing for such a high quality asset as 1540 Broadway," said Robert Merck, senior managing director and head of real estate investments for MetLife. "We originate, underwrite and manage each investment with a long-term view, and we are well positioned to identify and complete attractive financing opportunities in top-tier markets such as New York."

The Bertelsmann Building is a 44-story, 907,000 square foot, Class A office building located in Times Square. The building is leased to several high quality tenants, including Viacom, Pillsbury Winthrop Shaw Pittman LLP, Duane Morris LLP, and Yahoo!. The borrower is a joint venture between affiliates of Edge Fund Advisors and HSBC Alternative Investments.

In addition to providing financing for 1540 Broadway, MetLife was the lead lender on a $725 million loan for Boston Properties’ 59-story, 1.6 million square foot, Class A office tower and retail property located at 601 Lexington Avenue in Manhattan. MetLife provided $375 million of the total $725 million loan, joining with Prudential Mortgage Capital Co. and New York Life.

Through its real estate investments department, MetLife oversees a well diversified real estate portfolio of approximately $60 billion*, which is one of the largest in the U.S. and consists of real estate equities, commercial mortgages and agricultural mortgages. MetLife is a global leader in real estate investment and real estate asset management, with a vast network of regional offices that keep in close contact with major real estate markets. For more information, visit http://www.metlife.com/realestate .

MetLife, Inc. is a leading global provider of insurance, annuities and employee benefit programs, serving 90 million customers in over 50 countries. Through its subsidiaries and affiliates, MetLife holds leading market positions in the United States, Japan, Latin America, Asia Pacific, Europe and the Middle East. For more information, visit http://www.metlife.com .

This press release may contain or incorporate by reference information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe" and other words and terms of similar meaning in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operations and financial results.

Any or all forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the actual future results of MetLife, Inc., its subsidiaries and affiliates. These statements are based on current expectations and the current economic environment. They involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance. Actual results could differ materially from those expressed or implied in the forward-looking statements. Risks, uncertainties, and other factors that might cause such differences include the risks, uncertainties and other factors identified in MetLife, Inc.’s most recent Annual Report on Form 10-K (the "Annual Report") filed with the U.S. Securities and Exchange Commission (the "SEC") and Quarterly Reports on Form 10-Q filed by MetLife, Inc. with the SEC after the date of the Annual Report under the captions "Note Regarding Forward-Looking Statements" and "Risk Factors", MetLife, Inc.’s Current Report on Form 8-K dated March 1, 2011 and other filings MetLife, Inc. makes with the SEC. MetLife, Inc. does not undertake any obligation to publicly correct or update any forward-looking statement if we later become aware that such statement is not likely to be achieved. Please consult any further disclosures MetLife, Inc. makes on related subjects in reports to the SEC.

 

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FDIC Expects Fewer Bank Losses than Originally Estimated

October 20, 2011

Appraiser News Online

The Federal Deposit Insurance Corporation lowered its projections on estimated bank-failure losses in the coming years, the FDIC announced Oct. 11. Bank failures are now estimated to cost the Deposit Insurance Fund $19 billion through 2015 compared to the estimated $23 billion in losses in 2010 alone.

Acting FDIC Chairman Martin J. Gruenberg said the fund is on track to recover and will meet the goals established by Congress, including a requirement that the fund reserve ratio reach 1.35 percent by Sept. 30, 2020.

The Deposit Insurance Fund’s balance has climbed for six consecutive quarters following seven previous quarterly declines, reaching a balance of $3.9 billion in the second quarter of 2011. That’s an increase of nearly $25 billion from its negative balance of $20.9 billion at the close of 2009.

Responding to the FDIC’s announcement, Jim Chessen, chief economist at the American Bankers Association, noted in American Banker Oct. 16 that the data “reaffirms the fact that the banking industry is rapidly returning to health and the losses once expected were overstated.” Chessen reported that the FDIC had set aside $17.7 billion for bank-failure losses in 2011, twice what is estimated to actually be needed for the year.

The American Bankers Association reported that banks pay $13.5 billion in annual premiums to the FDIC, which is well above the yearly costs the agency expected over the next few years and showed that the fund is rebuilding much faster than anticipated.

 

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