DSNews delivers stories, ideas, links, companies, people, events, and videos impacting the mortgage default servicing industry.
Issue link: http://digital.dsnews.com/i/143997
CONFERENCE FITCH DOLES OUT UPGRADES BUT INSISTS CALENDAR PLACES TO BE THIS MONTH RMBS STILL VULNERABLE JULY 9 - 11 CMBA Western Secondary Market Conference WESTIN ST. FRANCIS SAN FRANCISCO, CALIFORNIA Contact: 916.446.7100 Online: CMBA.COM JULY 10 - 12 Real Estate Connect HILTON SAN FRANCISCO UNION SQUARE SAN FRANCISCO, CALIFORNIA Contact: 800.775.4662 Online: INMAN.COM/CONNECT JULY 11 - 12 USFN Legal Issues in Mortgage Servicing Seminar SOFITEL WATER TOWER CHICAGO, ILLINOIS Contact: 800.635.6128 Online: USFN.ORG JULY 21 - 24 ALFN's 11th Annual Leadership Conference THE BROADMOOR COLORADO SPRINGS, COLORADO Contact: 636.257.4500 Online: ALFNANSWERS.ORG JULY 30 - 31 8th National Summit on Preventing, Detecting and Resolving Mortgage Fraud SHERATON FISHERMAN'S WHARF SAN FRANCISCO, CALIFORNIA Contact: 888.224.2480 Online: AMERICANCONFERENCE.COM JULY 31 – AUGUST 1 International Conference on Collateral Risk: Moderating Housing Cycles and Their Systemic Impact AMERICAN ENTERPRISE INSTITUTE WASHINGTON, D.C. Contact: 202.862.5853 Online: AEI.ORG/EVENTS 14 While perhaps not completely out of the woods yet, residential mortgage backed securities (RMBS) are on the mend with some improved performance of late, according to Fitch Ratings. In a report issued last month, Fitch said an "improving U.S. housing market and stable macro environment" are boosting the performance of loan pools, leading the agency to upgrade about 480 RMBS bonds so far this year and harbor a "Positive Outlook" on about 800 RMBS bonds. Positive Outlooks are particularly prevalent among real estate mortgage investment conduits (REMICs) issued since the start of 2010, subprime deals issued from 2003 to 2005, and seasoned manufactured housing, according to Fitch. Looking ahead, the agency does not anticipate widespread upgrades in the year to come. "[M]any RMBS securities continue to face sizeable risks that will limit the number of upgrades this year," the agency warned. Fitch put its recent upgrades into perspective, stating, "It is important to note that while a welcome improvement, the recent upgrades encompass a small percentage of the total number of securities that Fitch monitors." Possible upgrades may occur among loans with "relatively short remaining lives within sequential payment priority transactions," the agency stated. While Fitch has noticed increasing collateral gains for 2006 and 2007 deals, the result will likely be "improved principal recoveries on distressed classes rather than rating upgrades," the agency said. High delinquencies, risk resulting from adverse selection, and elevated underwater rates continue to pose threats to RMBS, according to Fitch. "What's more, U.S. RMBS transaction cash flows remain vulnerable to servicer actions including advancing policies and modification reporting," Fitch added. HOME EQUITY JUMPS 2.5% IN Q1 By Mark Lieberman, Chief Economist for the Five Star Institute Household net worth jumped by $3 trillion in the first quarter as real estate values grew $836 billion, the Federal Reserve reported last month in its quarterly Flow of Funds report. With a drop in mortgage debt, owners' equity in real estate increased a sharp 2.5 percentage points to its highest level since 2007. While the first-quarter increase in real estate assets was twice that of the fourth quarter last year, stock investments increased $1.02 trillion in the first quarter, more than three times the increase in the fourth quarter. And, as real estate values improved, outstanding mortgage debt—including home equity loans and lines of credit—dropped $53.2 billion to $9.38 trillion. Owners' equity as a percentage of real estate value rose to 49.2 percent from 46.7 percent. The change in household balance sheets reflects the positive movement in the stock market and an increasing reluctance of households to take on more debt. Mortgage debt fell just $10 billion in the fourth quarter. Owners' equity as a percentage of real estate value has been on a steady upward trajectory since dropping to 36.3 percent in the first quarter of 2009. It rose to 46.7 percent at the end of 2012. The 2.5 percentage point increase in the first quarter of this year is the fastest quarter-over-quarter growth this century. Even with the increase, though, the equity percentage remains sharply lower than 57.7 percent in 2000. The improvement in household balance sheets came despite a first-quarter drop in disposable personal income, a reflection of the rollback of the cut in payroll taxes, which ended at the start of the year. Disposable personal income—essentially after-tax income—fell $237 billion in the first quarter to just under $12 trillion. Consumers did not borrow to compensate for the drop in personal income. Indeed, consumer credit outstanding declined $5.8 billion in the first quarter as all liabilities fell $59.1 billion. The increase in household assets—$2.94 trillion—was driven by the improvement in stock and real estate, though traditional time and savings accounts increased $66.7 billion. KNOW THIS Companies with "significant servicing platforms" are "the clear winners" in a rising rate environment, with higher earnings power and MSR valuations, according to FBR Capital Markets.