HECM Volume Increases in July; Top 10 Lenders Shaken Up

HECM volume increased dramatically this month. 9,830 HECMs were endorsed in July, up from 8,633 last month. This is a good sign if 2009 HECM volume is to surpass the HECM volume in 2008.

The same 9 lenders continued to possess an increased market share despite one of them (World Alliance Financial Corp) going out of buisness last month. One wonders if the increased number of endorsed HECMs from World Alliance Financial Corp (also known as Senior Lending Network) are a result of them trying to close out their pipeline as fast as possible. World Alliance Financial Corp rose to the #3 spot this month from number 4 a month ago. It will be interesting to see if they remain in the #3 spot next month.

The top nine lenders are ordered below with rankings determined by the number of HECMs endorsed by the lenders YTD. Financial Freedom only endorsed 10 HECMs last month, while Countrywide endorsed 8. One Reverse Mortgage surpassed Countrywide this past month in HECMs closed YTD. Countrywide was acquired by Bank of America back in January, and it will be interesting to see if the HECM volume attributed to them continues to decline as well (so far it looks as if it has).

Finally, it is important to note that only nine lenders were highlighted because several lenders, led by 1st AAA Reverse Mortgage Inc. are clustered under Urban Financial. This group has closed between 900 and 960 leads so far this year, but is still well under Urban Financial’s totals.

Top Nine HECM Lenders by Volume – June

1. Wells Fargo

2. Bank of America

3. Financial Freedom

4. World Alliance Financial Corp.

5. Countrywide

6. One Reverse Mortgage

7. MetLife

8. Generation Mortgage

9. Urban Financial

Top Nine HECM Lenders by Volume – July

1. Wells Fargo

2. Bank of America

3. World Alliance Financial Corp.

4. Financial Freedom

5. One Reverse Mortgage

6. Countrywide

7. MetLife

8. Generation Mortgage

9. Urban Financial

The complete lender list can be found here.

Former Countrywide CEO Charged with Fraud

Former Countrywide CEO Angelo Mozilo

Former Countrywide CEO Angelo Mozilo was charged with securities fraud by the Security and Exchange Commission today, along with former COO and President David Sambol and former CFO Eric Sieracki. They are being charged with deliberately misleading investors about the increasing credit risk that Countrywide took to maintain its market share. Mozilo is also being charged with insider trading. He allegedly sold his Countrywide stock for 140 million dollars in profit when he knew that the business model was deteriorating. The SEC alleges that Mozilo, Sambol, and Sieracki misled investors to believe that Countrywide was primarily a prime mortgage lender, although they actually were doing a large number of subprime mortgages.

Mozilo’s lawyer says his client acted lawfully and that the charges are “baseless.” It will be interesting to see how the trial plays out.

Countrywide has since been acquired by Bank of America and is now Bank of America Home Loans.

Obama's Homeowner Relief Program Still Excludes Many

While the Obama Administration’s Home Loan Modification Program was supposed to help homeowners who have lost their jobs and are having trouble making their mortgage payments, the NYTimes wrote an article today highlighting the many people whom the banks have been unwilling to help because they have never been late on a mortgage payment before. Some of these homeowners are upside down on their mortgages–others are having trouble simply due to the circumstances of the recession.

Although it is often dangerous to make generalizations solely based on the case highlighted in the story, it is extremely plausible that banks are unsure how to handle customers with good payment histories who are now running into financial difficulties. The banks and government programs seem to be waiting for people to get into a lot of trouble before bailing them out, rather than helping prevent those problems in the first place.

Furthermore, the number of subprime and Alt-A mortgages refinanced in May fell 11 percent from April, according to research by Alan White at the Valparaiso School of Law. Given the record number of homeowners behind on their mortgage payments or facing foreclosure, this statistic is problematic and disturbing.

Many of those affected include seniors. The woman profiled in the article, Eileen Ulery, is 63, old enough to qualify for a reverse mortgage. However, her property is upside down, meaning she would be likely to face a shortfall.

While I agree that on a scale of priorities we should be helping those whose circumstances are most dire first, it does not seem to correlate that homeowners who have been responsible are being penalized. Bank of America Home Loans is quoted in the article as saying they are still putting the programs in place for those not facing a severe threat of foreclosure. I would hope that those programs are as inclusive as possible, and put together soon so that these individuals do not end up in a dire situation before they can get help.

Housing-Rescue Plan to Make Short Sales Easier

Obama unveils the first part of his housing rescue plan in February.

The additions to Obama’s housing plan that were laid out on Thursday are designed to make it easier for homeowners to sell houses that are worth less than their mortgages. The initiative will help incentivize short sales as well as “deed in lieu” transactions. These proposals will hopefully help assist borrowers who cannot be helped by a loan modification.

“The government will pay mortgage-servicing companies up to $1,000 and borrowers up to $1,500 for successful short sales or “deeds in lieu” transactions.”(WSJ) The government will also spend up to $1,000 to help get the holders of second mortgages to release their liens so the short sales or “deeds in lieu” transaction can be completed. In addition, additional payments will be provided to lenders, servicers, and investors in areas where home prices have been dropping to assist with loan modifications. These funds will hopefully help make investors feel more comfortable modifying loans, rather than being overly concerned that they will face additional losses if the modified loans redefault.

So far 75% of loans are currently being covered by the plan, including those by Bank of America, Citigroup, J.P. Morgan Chase and Wells Fargo. Other companies are evaluating whether they wish to participate.

Given that short sales have accounted for 15-20% of existing home sales this year according to the National Association of Realtors, this new program should provide benefits to investors, lenders, servicers and borrowers looking to sell homes or find other ways out of underwater mortgages and tough financial situations. Hopefully it will help make short sales easier to complete and make foreclosure easier to avoid.

If the popularity of the loan modification plan unveiled by the administration nearly three months ago is any indication, this program should be a huge success.

The plan also has positive ramifications for the reverse mortgage industry due to the new HECM for Purchase program. Negotiating a short sale is often part of the process of a reverse mortgage when the borrower is trying to avoid a foreclosure or underwater on their previous mortgage. Hopefully, this plan will make reverse mortgages that fall into this category easier to obtain as well.

Mortgage Legislation Fails in Senate

A piece of legislation supported by President Barack Obama failed in the Senate yesterday. The measure, which would have allowed judges to reduce the value of some mortgages in bankruptcy proceedings, failed 45-51. The WSJ called it Obama’s first big legislative defeat. The bill had previously passed in the House.

The bill would have allowed a bankruptcy judge to reduce a mortgage to reflect a home’s market value — known as a “cramdown.” Banks such as Bank of America, Wells Fargo, and Citigroup, had supported the legislation, even as community bankers and two major credit-union groups opposed it.

Countrywide becomes Bank of America Home Loans

The Countrywide name will soon be gone for good. The WSJ announced that Bank of America, which recently acquired Countrywide, will discard the Countrywide name. Countrywide will now be rebranded as Bank of America Home Loans.

Bank of America acquired Countrywide, a home mortgage lender, last July for $2.5 billion (the initial $4 billion deal was revalued due to Bank of America’s falling share price by the time it was completed). Bank of America Home Loans will continue to be based in Calabassas, CA, where Countrywide is based.

Note: I saw an article announcing this information on the nytimes website last night, but it does not appear to be up today.