During the holiday break, a number of news events news took place. Below is a brief summary:
HUD Terminates FHASecure
HUD said “maintaining the program past the original termination date would have a negative financial impact on the [Mutual Mortgage Insurance] Fund that would have to be offset by either substantial across-the-board single family program premium increases or the suspension of FHA’s single family insurance programs altogether.”
Under FHASecure, HUD insured refinancings for borrowers delinquent on their mortgages. MBA and other trade and consumer groups sent a joint letter to HUD last month urging the agency to extend the program through 2009.
FHA will not issue any new case numbers for lenders seeking to refinance borrowers into FHASecure loans. Any loans for which the lender has requested a case number and taken a loan application prior to December 31 will be processed and will be insured by FHA.
Little Changed MBA Weekly
The seasonally adjusted Refinance Index decreased
by 0.4 percent to 6733.8 the previous week; The
refinance share of mortgage activity decreased to 82.9 percent
of total applications from 83.2 percent the
previous week. The seasonally adjusted Purchase Index increased by 1.4 percent to
320.9 from one week earlier. The seasonally
adjusted Conventional Purchase Index increased by 1.1
percent while the Government Purchase Index
(largely FHA) increased by 2.2
OTS, FDIC Okay IndyMac
The sale to IMB is for nearly $14 billion. The bank is led by Steven Mnuchin, a former Goldman Sachs executive; other investors include J. Christopher Flowers, computer icon Michael Dell and hedge fund manager John Paulson.
IMB, a $27 billion savings association, proposed to form a savings and loan holding company. The business model for the new institution would focus on home mortgage lending and mortgage loan servicing. Final OTS action on the successful bidders’ formal application is expected later this month.
IndyMac has been operated by the FDIC since July 11, when OTS closed its predecessor institution, IndyMac Bank FSB and transferred its operations to the FDIC.
Fed to Begin MBS Purchase
Treasury Announces TARP
Investment in GMAC
Under the agreement GMAC must be in compliance with the executive compensation and corporate governance requirements of Section 111 of the Emergency Economic Stabilization Act, as well as enhanced restrictions on executive compensation. GMAC will issue warrants to Treasury in the form of additional preferred equity in an amount equal to 5 percent of the preferred stock purchase that will pay a 9 percent dividend if exercised.
However, Treasury’s announcement also meant that it has allocated more money than it had been authorized to provide under TARP. Of the $350 billion in authorization from Congress, Treasury has pledged $358.4 billion, raising questions on Capitol Hill. Under TARP, Treasury must ask Congress for additional funding authority.
Fed Study Cites ‘Piggyback’
Mortgages as Obstacle to Modifications
The Fed, in its Federal Reserve Bulletin, said because second mortgages are not necessarily owned by those holding first mortgages and that owners of second mortgages must give approval when a first mortgage is modified to avoid foreclosure, loss mitigation efforts become more complicated and could delay efforts beyond a point of resolution.
Case-Shiller Indexes Show
Since peaking in 2006, the 20-city index has
fallen by 23 percent. All 20
cities saw declines, led by
The index also reported that home prices fell by 2.2 percent in October, following a 1.8 percent decline in September.
Bank of America’s all-stock purchase of Merrill Lynch was announced on Sept. 15; the acquisition makes Bank of America the nation’s largest bank. Merrill Lynch shareholders received 0.8595 shares of Bank of America common stock for each common share of Merrill Lynch owned.
Wells Fargo’s all-stock purchase of Wachovia,
announced Oct. 3, gives it a
banking presence in 39 states and the
‘Dealmaking’ Down by 29
Percent in 2008
Dealogic reported 37,445 deals
globally, totaling $3.3
trillion. In the