Tag Archives: Fitch Ratings

JPMorgan Chase's $4 billion settlement with the Federal Housing Finance Agency (FHFA) reached late last week ""sets a relatively high bar"" for the 13 other banks still facing litigation from the federal agency, according to Fitch Ratings, which suggested Tuesday that some of the banks may need to increase their litigation reserves before settling. The $4 billion is about 12 percent of the original face value of the private-label mortgage-backed securities for which FHFA sought damages.

Federal Housing Finance Agency Acting Director Edward DeMarco is deliberating lowering the loan limits for Fannie Mae and Freddie Mac. Congress and the industry, however, are voicing a singular opposition, claiming such action would be detrimental to the housing recovery that is starting to take place across the country. Federal lawmakers and several industry groups sent letters to DeMarco over the past week, some even questioning the legality of such a move.

According to Fitch Ratings, title insurance companies may be among the first in the housing sector to feel the effects of a Congress that the Brookings Institution describes as ""failing the American people."" Title insurers are sensitive to macroeconomic factors such as employment levels, consumer sentiment, and interest rates, and Fitch says the longer the government shutdown lasts, the bigger the potential profitability impact to title insurers.

Following the release of the revised Qualified Residential Mortgage (QRM) rule from six federal agencies, several analysts offered insight into how the revisions might benefit or impede progress in the mortgage market. Fitch Ratings believes adopting a QRM standard that mirrors the QM definition will trigger more activity for the jumbo origination and securitization market. Capital Economics, though, noted the QM and QRM proposals aren't much help when it comes to the long-term goal of reducing the presence of the GSEs in the mortgage market.

In the backdrop of a slow growing economy, Fitch Ratings projects the housing recovery will expand this year and the next-just not at an explosive pace, according to a report. The forecast for 2013 is for existing-home sales to increase 7.5 percent and for new home sales to rise by 22 percent. Meanwhile, single-family starts should grow 18 percent, and multifamily starts should jump 25 percent.

For several markets across the country, strong home price growth is also attached to a double-digit unemployment rate, leading Fitch Ratings to view the strong price appreciation as unsustainable. In a recent report, Fitch highlighted seven metro areas where high unemployment rates were in the backdrop of annual double-digit home price gains. The top two were Detroit and Las Vegas, while the remaining five were in California: Sacramento, Stockton, Los Angeles, Bakersfield, and Riverside.

In June, an increase in the sale of REO properties drove down the CMBS delinquency rate, bringing it to a three-year low, Fitch Ratings reported. At 7.18 percent, the CMBS delinquency rate fell 19 basis points (bps) from the month before in May and is at its lowest level since March 2010. ""The CMBS delinquency rate is likely to improve further in the coming months as other large REO properties are sold, including a slew from ORIX's portfolio,"" said Scott Pritchard, director at Fitch.

Fitch Ratings has observed inconsistencies in the way servicers report losses in cases of principal forbearance. According to the agency, before 2010, pooling and servicing agreements did not require servicers to report forborne principal as losses. Nationstar Mortgage announced it is revising losses on loans with principal forbearances acquired in 2012 from Aurora Bank FSB and Aurora Loan Services.

In recent months, Fannie Mae and Freddie Mac took important steps toward transparency with the release of historical credit performance data. The move also paved the way for credit risk sharing transactions as the FHFA looks to reduce the GSEs' role in housing finance. In an effort to help investors ""evaluate upcoming credit-sensitive securitization proposals from the GSEs,"" Fitch Ratings completed an analysis of the historical data in a recent report. Overall, the report determined loans originated from 2009 and beyond should outperform earlier vintages.

Fitch has added its voice to the chorus of those concerned about homebuilding industry's labor shortage and the effects it may have on new housing growth. The ratings agency noted that while a deficit in workers may not lead to ""disastrous national numbers for housing,"" it--combined with a lack of available lots and overly tight mortgage qualification standards--may put a damper on the recovery.