Richard Nacht's The Daily Mortgage

Michigan amending Identity Theft Protection Act

Michigan Senators have introduced Senate Bill 309 which, if adopted, will amend Michigan’s identity Theft Protection Act by adding a notification requirement on agencies or persons that own, license or maintain computerized data that includes personal identifying information.

The act would require any such party to provide notice of a breach of the security of the data or where the data is acquired by any unauthorized person.

Free credit reports for Southern states

 

Starting Wednesday, Texans and other southern state consumers can get a free copy of their credit report as part of changes under federal Fair and Accurate Credit Transactions Act to combat identity theft.

 

Consumers can get a free copy of their credit report every 12 months. Requests can be made online or by calling (877) 322-8228.

GA gets tough on mortgage fraud

The new Georgia Residential Mortgage Fraud Act increases the penalties for mortgage fraud; violators can be sentenced to ten years in prison and fined up to $5,000 (more severe penalties exist for multiple instances).  The law also provides for forfeiture of any property obtained from the fraudulent activities.

The law defines residential mortgage fraud as “knowingly misstating, misrepresenting, or omitting information during the mortgage lending process; receiving proceeds from a mortgage closing that one knew to be fraudulent, conspiring for either of the previous or filing with the official registrar of deeds of any county any fraudulent document.”

Mortgage Bankers anti-fraud website

The Mortgage Bankers Association has launched an online anti-fraud resource center located at http://www.mortgagebankers.org/MBAFightsFraud/

The website features fraud alerts and mortgage industry news and helps lenders “prevent investigate and combat mortgage fraud,” according to the site.  There are also links to report fraud activity.

WAMU to acquire Providian

Washington Mutual, which has spent the last several years digesting previous acquisitions has announced that it is to acquire Providian Financial for $6.45 billion and cash and stock.  Washington Mutual said it expects the transaction will add to its consumer banking business and strengthen its middle market customer segment.  Providian will be WaMu’s fourth major unit.

Kerry Killinger, chairman and chief executive of Washington Mutual, said in a statement. “Providian is a highly profitable business with solid credit quality. Its focus on middle market consumers makes Providian a natural fit for our business and a winning combination for both companies’ customers,” he said.

”This combination also helps to further diversify our balance sheet and earnings by adding attractive, high-yielding credit card assets, while improving our net interest margin and adding stable fee income,” Mr. Killinger added.

In other words - mortgages just don’t do it anymore.

Online MLS sites expanding

Research company Research and Markets has released its “2004 Analysis Online Real Estate Advertising Comes of Age” report.

While newspaper real estate advertising is declining (on a per sold home basis) internet media advertising is increasing.  The report reveals that the internet is now the number two medium for reaching homebuyers (just behind yard signs).  MLS listing databases were previously little threat to media advertising as they were closed systems.

However NAR’s two year old Internet Data Exchange (IDX) now lets consumers access MLS databases online that are more comprehensive than newspaper and magazine listings.  The report notes the IDX policy is changing how agents and brokers are reaching consumers.  According to the report nine of the twenty most visited real estate websites are operated by traditional brokerage firms which include extensive MLS data.

We previously reported on the increase in online local mortgage advertising.

House GSE oversight bill

The House Financial Services Committee has approved a bill that would establish a new independent regulator to oversee Fannie, Freddie and the Federal Home Loan Banks.

Features include an increase in conforming limits in high cost markets, required contributions to an affordable housing fund, a lack of authority by the regulator to reduce the size of Fannie and Freddie’s portfolios and no restrictions on their AU systems.

And we thought the GSEs had lost some capital hill mojo with the absences of Raines and Brendsel.

Subprime still on fire?

It would appear subprime continues to drive the market.  National Mortgage News will be reporting in Monday’s edition that the first quarter saw a second best ever $169 billion in subprime closings.  While second best in dollars, it was a new record in terms of market share.  Look for subprime lender rankings in Monday’s edition.

PBS Newshour on the Real Estate Boom

Link to a video regarding real estate speculation from PBS.  Watch here.

Thanks again to Alex.  I love his comment, “Better watch this if you are thinking about becoming a real estate investor of the “Buy, flip-for-profit, repeat until rich” variety.  If after watching it you are not reconsidering this idea, watch it again, but this time, pretend it is 2000, and mentally replace “Real Estate Investor” with “Day Trader.”

Hope for buyers with no credit history

At a recent House Financial Services subcommittee hearing, Representative Michael Castle, R-Del., estimated that there may be as many as 50 million young adults, minorities, immigrants and members of ethnic groups who have not used the traditional banking system and may, therefore, not have established a satisfactory credit reporting history.  These consumers end up paying higher costs and rates when buying a house, but may in fact pay their bills on time as well as the strongest of credit scored individuals.  The purpose of the hearing was to help identify alternative data, not collected by credit bureaus, that might help gauge creditworthiness.

Michael Turner, president of the Information Policy Institute, a New York based nonprofit research group active in credit issues, noted prime data forms such as utility payments, telephone and cable bills are good indicators of credit worthiness.  And “since the utility sector is highly concentrated, relatively few potential data furnishers would have to be convinced of the merits of reporting”, said Turner.

But, there is a roadblock to use of this data - most state utility regulations restrict or prohibit dissemination of consumer payment records, so state regulatory changes would be necessary.

There are other existing “thin” credit data sources that could be used by lenders (although none are currently acceptable as alternative sources by Fannie or Freddie).  They include First American Corp.’s Anthem system, Fair Isaac’s Expansion Score and PRBC’s (Pay Rent, Build Credit) Bill Payment Scorecard.

Fannie and Freddie will have to step up to the plate to include such data sources in their AU’s to make a dent in this problem.

What bubble?

The question of whether there is a real estate bubble will finally be decided when this home creates a bidding war:

Michigan amending Identity Theft Protection Act

Michigan Senators have introduced Senate Bill 309 which, if adopted, will amend Michigan’s identity Theft Protection Act by adding a notification requirement on agencies or persons that own, license or maintain computerized data that includes personal identifying information.

The act would require any such party to provide notice of a breach of the security of the data or where the data is acquired by any unauthorized person.

Ohio makes it easier to buy a home

The Ohio Housing Finance Agency has introduced its My Ohio Mortgage program which is intended to allow more people to buy their first home, as compared to other existing state programs.

My Ohio Mortgage allows home buyers with lower credit scores and in some cases will not require a downpayment.  The program is backed by Fannie Mae.  Lenders participating in the program are entitled to a 1% origination fee.

Housing still hot

The Commerce Department is reporting that new home sales jumped 12.2% last month. The New York Times (registration required) is reporting that Fed Chairman Alan Greenspan concedes a lack of rational for why long term rates have remained low, even though the central bank has jacked rates several times.

Most economists aren’t quite as confused; it is reported that there continues to be a massive movement of foreign dollars into government bonds and mortgages, explaining why interest rates haven’t climbed.  As long as foreign money keeps the bond market steady and rates remain level the bubble is unlikely to burst.  But any variety of economic shocks or reduction in that foreign investment is likely to have a dramatic impact.  Merrill Lynch senior economist Sheryl King, noted by the Times as one analyst who believes that increased speculation and soaring prices have created a bubble, is quoted as saying, “Even if you adjust for population growth, you’re seeing numbers that are bigger than any we have seen at this point in any economic cycle.”

Mozilo earned it

Update:  Following up on my post from earlier today, Countrywide Financial Corp., has reported earnings of $668 million for the first quarter, up 27% from the first quarter of 2004.  The company’s mortgage banking operation contributed $772 million.

”Countrywide’s heightened profitability was driven primarily by an increased contribution from the mortgage banking segment, where pretax earnings were up 38% from the same quarter a year ago and 196% from last quarter,” said Angelo Mozilo, Countrywide’s chairman and chief executive officer.  In addition, Countrywide’s servicing portfolio has grown to a record $893 billion, up $211 billion from a year ago.  Pay the man his money!

Offshore outsourcing

A recent research report notes that the offshore BPO market for the US residential mortgage business is $6-$7.4 billion.  Trinity Partners, Inc., a provider of technology enabled outsourcing solutions to financial solutions notes the current BPO market in India is $150 million which includes 7,500 employees.

Pijush Sinha is quoted in the report as saying, “Increasing competition in the BPO market is forcing providers to deliver more and more value to their clients each day.  To maintain market share and thought leadership, providers must look toward delivering higher value processes for their customers.”  The report notes that the general availability of diverse skills and technology advances are driving the offshoring trend.

The report notes that with Countrywide, IndyMac, Greenpoint and CitiMortgage in the forefront of utilizing offshore solutions, many more US players will seek to capture similar competitive advantages, looking to India in particular.

Mozilo top mortgage executive earner

Forbes.com has posted an article which notes that Angelo Mozilo, chairman and chief executive officer of Countrywide Financial Corp., was the ninth-highest paid CEO among the 500 largest American public companies in 2004.  Forbes calculated Mr. Mozilo’s 2004 compensation at $96.9 million.  Other mortgage  CEOs among the top 100 in 2004 included Richard Kovacevich of Wells Fargo, who was 12th with $53.1 million in compensation; Jerry Grundhofer of US Bancorp, 21st at $38.6 million; William Foley of Fidelity National Financial, 32nd at $33.9 million; Robert Wilmers of M&T Bank, 80th at $16.4 million; and Kerry Killinger of Washington Mutual, 83rd at $15.7 million.

MBNA and Nexstar

The recent announcement by MBNA that it will acquire Nexstar was primarily a home equity loan play.  The Nexstar platform will be used to “provide private label and co-branded home equity loans through our many affinity group partners, further broadening our relationships with these groups,” said MBNA Vice Chairman Richard Struthers in the announcement regarding the deal.  Struthers pointed to the confidence its partners would have in the process as handled by Nexstar. 

Nexstar isn’t cheap but one wonders whether they might start reducing their processing fees in order to generate new loan business for MBNA.  The income from mortgage processing can’t compare to the interest income that MBNA will see from the loans running through the Nexstar system and that will be MBNA’s focus going forward.

Volume down

Non-news flash:

Chase, WaMu, Wells, Bank of America, Citigroup and National City all report volume down.

Chase’s first quarter originations were $38.5 billion down from $44.4 billion the quarter before.  BofA, Citi and Wells all report declines of less than 6%, quarter to quarter.  WaMu was down just about 5%.

New credit information site

Equifax has created “Take Control of Your Credit,” an online information site which purports to help consumers protect themselves against identity theft and provides guidance into the role that credit plays.  The site is available in English and Spanish and is located at mycrediteducation.com.

The site has worthwhile information for those who aren’t aware of the importance of managing their credit, which according to a previous post may include two-thirds of our population.

The selling of Equifax’s credit monitoring and other products is low-key.