TheMReport — News and strategies for the evolving mortgage marketplace.
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what's next Acquisitions and Accountability Preparing for market fluctuations depends on correctly predicting the industry's response to regulatory issues and risk factors, and the latest lending headlines reveal that organizations are investing in new strategies and statistical studies in a quest for future fulfillment. Now vs. next While Capitol Hill may have successfully avoided 2013's budgetary landmines so far, the Mortgage Bankers Association (MBA) is calling for modest economic growth during the year ahead. The trade group is predicting progress, "with home sales continuing on an upward trend, purchase applications showing small but steady year over year growth, and refinance activity starting to rebound." The MBA cited rising single-family and multifamily starts throughout 2012, which displayed increases of 23 percent and 38 percent respectively. Though the organization believes that activity observed in 2012 "is likely to continue into 2013 as housing permits also continued on a healthy upward trajectory," the MBA confirmed its previous assertion that originations will decline to $1.4 trillion in 2013, off of an estimated $1.7 trillion during 2012. Additionally, the MBA's survey indicated limited economic growth, "as the effects of the payroll tax increase and the spending cuts from sequestration or a similar decline in government spending kicks in." Texas-based Nationstar Mortgage LLC purchased $215 billion in residential mortgage servicing rights (MSRs) from Bank of America (BofA), as calculated by unpaid principal balance. Striking the agreement with backing from Newcastle Investment Corp. and Fortress Fund, all parties will retain one-third interest in the MSRs; Nationstar will service all the loans. While the agreement between BofA and Nationstar is solidified, the company is still awaiting approval from investors and other third parties. It expects most of the MSR purchases to close during the first quarter of 2013, and according to CNBC, Nationstar also plans to acquire "approximately $5.8 billion in related servicing advance receivables." The media outlet went on to note the company "expects to enter into third-party financing agreements to fund the servicing advances." Facing backlash from financial institutions, lenders, and trade organizations, the Federal Housing Administration (FHA) announced it would ease reporting standards for smaller supervised lenders. The recent decision followed the agency's previous mandate that allowed smaller lenders to submit unaudited regulatory reports (as opposed to audited reports required from larger institutions), but did not eliminate the policy on compliance reports. Under the FHA's updated requirements, smaller, supervised lenders would be exempt from submitting internal controls and compliance reports related to programs from the U.S. Department of Housing and Urban Development (HUD). Additionally, the FHA noted that non-supervised lenders and supervised lenders with consolidated assets that meet or exceed the audited financial reporting threshold set by their federal regulatory agencies are not affected by these interim requirements. As the industry reacted to the recently released qualified mortgage (QM) rules, Fitch Ratings showed support for the new policies, citing benefits for jumbo prime securities. While many analysts anticipate a boost in lending and securitization now that the QM standards are defined, Fitch pointed out that many of the guidelines have already been put into practice post-crisis, and the organization believes that the confirmation of the QM rules will stimulate investor interest in the jumbo prime market. "Further, finalizing the rule on QM will help advance the determination of a qualified residential mortgage (QRM), an additional constructive step in re-starting the jumbo securitization market," Fitch stated, clarifying projections for 2013. However, the ratings agency went on to note remaining unresolved regulatory issues that could present future roadblocks. "Ultimately, the re-start of private label securitization market will depend on this definition and clarity on risk retention rules, the application of Basel III and other liquidity rules, and a decision on agency guarantee fees." Despite the steady increase in home prices in 2012, Fitch Ratings started the new year by releasing markedly cautious projections for home values. Fitch's report acknowledged that prices rose "at their greatest pace since 2005" last year, but the ratings agency noted that in some markets, technical factors rather than "fundamentals" acted as the driving force behind the gains. However, Fitch's survey brought good news for hard-hit cities including Phoenix and Atlanta, which the group considers "undervalued." As for what's ahead in 2013, Fitch warned that growth "is likely to be muted or even modestly negative in the nearterm as liquidation volumes increase and expand supply, particularly in the lengthy judicial states where inventory has been off the market." Gauging sustainability, Fitch concluded that 22 metropolitan areas out of 41 appear to be "undervalued" or "sustainable" heading into the new year, while only five were categorized as "overvalued" by 5 to 10 percent. The M Report | 19