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(long, mainly about BofA) Principal Reductions Begin In Earnest – Felix Salmon – Seeking Alpha

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LPS: Home Prices Increased, but We’ve Been Down This Road Before – BY: ESTHER CHO – DS News
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HAMP Changes Can Expand Eligibility to More Military Members – BY: ESTHER CHO – Starting June 1, military homeowners who are permanently displaced by a job-related move may still be able to be considered owner-occupants when applying for the Home Affordable Modification Program (HAMP). … According to the announcement, borrowers may now qualify if they are displaced due to an out-of-area job transfer (such as Permanent Change of Station orders), intend to return to the home at some point in the future, and do not own any other single-family real estate. … – DS News
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(Ally-Rescap) Edens of Fortress Says Newcastle is Close to ‘Large’ Deal – By Jody Shenn – Newcastle Investment Corp. (NCT), the mortgage-asset buyer run by Fortress Investment Group LLC (FIG), is “very optimistic” it will participate in a big investment in mortgage-servicing rights with other entities its manager oversees,  … The real-estate investment trust, which is based in New York, has been partnering with Nationstar Mortgage Holdings Inc. (NSM), the servicer and lender taken public by Fortress in March, on investments in mortgage servicing rights since December. … – Bloomberg
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JP Morgan Loss Bomb Confirms That It’s Time to Kill VaR - Yves Smith – Naked Capitalism
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CFPB Pursues Screening Standards for Mortgage Originators - BY: RYAN SCHUETTE – The Consumer Financial Protection Bureau (CFPB) unveiled new rulemaking proposals Thursday that would require background checks for mortgage originators and complement a previous rule that prohibits loan officers from steering borrowers to higher-priced products. Together with these rules, others would provide consumers with discounts for paying mortgage origination points, mandate comparison plans for those interested in tracking different products, and ban brokerage firms from charging fees that vary by the loan size. - The M Report
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(GDP growth per $1 of debt) Guest Post: How Long Before Massive Government Debt Buildup Triggers Another Financial Shock? – Submitted by Tyler Durden – From Madeline Schnapp, Director of Macroeconomic Research at TrimTabs – …  Durden noted that, “It now takes $2.52 in new federal debt to buy $1 worth of economic growth.” … – Zero Hedge

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(about Donald Layton) Freddie Mac Names Retired JPMorgan Official CEO – Mortgage broker Freddie Mac named Donald Layton as its new chief executive officer. Layton worked for JPMorgan Chase for nearly 30 years before retiring in 2004. – NPR.org

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(rental REIT) Beazer Homes USA Investing in Distressed Homes - by Mike Wheatley – … For the last 12 months, Beazer Homes USA has responded to the housing crisis by snapping up hundreds of distressed homes, renting these properties out in the hope that one day, some of these renters may be able to buy the homes they are living in. The hard-hit cities of Las Vegas and Phoenix have been the focus  … In line with this new policy, the builder has decided to create a new subsidiary called Beazer Pre-Owned Rental Homes Inc. (BPRH), which will act as a real estate investment trust tasked with furthering the growth of the company’s new rental business. … – Realty Biz News

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Will the CFPB Kill the Mortgage Recovery? – By Paul Muolo – … let’s not kid ourselves: the CFPB’s decision to once again play with compensation formulas after the industry when through a wrenching LO comp nightmare a year ago will not help. … But regarding the new LO comp proposal, there’s always the possibility that the CFPB will come to its senses and not create an industry where only the megabanks will thrive. After all, the CFPB’s mission is to help consumers, not commercial bankers … – National Mortgage News
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Mortgage-aid revisions paying off for lenders and some borrowers – By E. Scott Reckard – Los Angeles Times – A newly streamlined government plan to reward homeowners who diligently pay their underwater mortgages is proving a bonanza for banks, which by one estimate may pocket $12 billion in extra revenue by refinancing loans. …  “The banks should charge lower than the market interest rate because the new version of the program means less work and less risk for them. Instead, they are charging more,” said Amherst Securities analyst Laurie Goodman, who titled a recent report on the program “And the Winner Is … the Largest Banks.” … – Myrtle Beach Online 
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(table: REOs "unable to market") Lawler: Fannie SF REO Inventory: Total vs. “Listed/Available for Sale” – by CalculatedRisk – … Of Fannie’s 114,157 SF REO properties, almost half – 54,795 – were characterized as being “unable to market” (meaning can’t be listed for sale). … Every so often some “quack” writes a piece saying that “lots” of GSE REOs aren’t listed for sale, “proving” that the GSEs are “holding properties off the market.” Hopefully disclosure such as these will make such quacks “duck” for cover. …
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The great realtor rip-off – Why is it so expensive to buy or sell a house in America? – The Economist

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Will the FHA require a bailout? – 12,000,000 underwater mortgages 3,000,000 are FHA insured loans. 1 million underwater mortgages originated in last two years. – Dr. Housing Bubble – …  For first time home buyers it was a stunning 50 percent showing that most people can only purchase a home today with a very small down payment.  Yet small down payments create instant negative equity positions if the market moves sideways or pops lower (aka our current market).  For example, the 3.5 percent standard FHA down payment is wiped away by the 5 to 6 percent selling costs. …

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For Rob Chrisman’s latest daily post, click here.

To subscribe to Joe Garrett’s news letter, send an email to  jgarrett at garrettmcauley dot  com

    Nom de Plumber is a Nom de Plume.

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The CIO has earned tremendous net profits over the past several years, despite this $2BLN loss. How? The core business of JPM is taking calculated risks. Shareholders and regulators would be irrational to expect gains without also accepting inevitably occasional, albeit sizeable, losses.

The CIO is essentially a proprietary trading desk, funded with retail branch deposits. Proprietary trading desks, like those at JPM, Merrill Lynch, Deutsche Bank, and even Lehman, actually generated substantial profits throughout the credit crisis. By contrast, their presumably “safe” customer facilitation businesses, like home mortgage origination, CMBS lending, and ABS warehousing, generally suffered the critical—sometimes fatal—losses. Examples include Bear Stearns, BofA, Countrywide, Citibank, WAMU, Wachovia, RBS, and Lehman. (Fannie Mae, AIG, and Freddie Mac were in this camp, via their guarantee franchises.) History, ironically, simply dispels the Volcker-rule bias against proprietary trading.

If the intended CDX positions degraded from being hedges to outright risks, that should be no news. Our global regime of counterparty walk-away and publicly sponsored contract abrogation tends to trigger hedge-strategy failures. Think about the risk-averse investors who bought Greek sovereign default protection or MBIA-written ABS guarantees, in good faith.

This JPM loss, whether $2BLN or even $5BLN, is modest in both absolute and relative terms, versus its overall profitability and capital base, and especially against the far greater losses at other institutions. In practical current terms, the hit resembles a rounding error, not a stomach punch. As either taxpayers or long-term JPM investors, we should be more grateful than sorry about the JPM CIO. If only other institutions could also do so “poorly”………

Thank you.

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($1.1 $ Trillion) MBA Projects 2012 To See Lowest Mortgage Lending Level In Five Years – by Elizabeth Ecker – Projections show a low year for reverse mortgage endorsements. The forward lending world, too, sees 2012 as having the lowest volume in five years, by dollar amounts. Originations will fall to less than $1.1 trillion in 2012, according to a report by National Mortgage News, which cites statements made by the Mortgage Bankers Association’s Michael Fratantoni, VP of research. – Reverse Mortgage Daily

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Donovan: Servicer Competition Prevents More Refinancing – BY: RYAN SCHUETTE – … The hearing quickly turned to servicer competition, which the HUD official said is lacking in part because of strict underwriting guidelines under Fannie Mae and Freddie Mac, … “Servicers who don’t service that loan are being discouraged from competing to refinance those loans,” he told lawmakers, citing a “number of changes” that legislators and regulators could make to remove barriers to homeowners. He faulted existing loan representations and warranties for discouraging servicers from allowing borrowers to refinance at historically low interest rates. … – The M Report 

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New Rules May Curtail Some Fees in Mortgage – By EDWARD WYATT – WASHINGTON — The Consumer Financial Protection Bureau said it planned to propose tighter mortgage lending regulations that would limit the ability of banks and mortgage brokers to charge certain transaction fees, possibly ending one of the most abusive costs levied on consumers when they buy a house. Bureau officials said that the rules, which were released Wednesday ahead of formal introduction this summer, would ban mortgage companies from charging origination fees that vary with the amount of the loan. Those fees are sometimes referred to as origination points … But they can easily be confused with the upfront discount points that borrowers often pay to secure a lower interest rate. … more – NY Times 
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Renting Prosperity - Daniel Gross – … Americans are increasingly acclimating to the idea of giving up the stability of being an owner for the flexibility of being a renter. This may sound like a decline in living standards. But the new realities of our increasingly mobile economy make it more likely that this transition from an Ownership Society to what might be called a Rentership Society, far from being a drag, will unleash a wave of economic efficiency … – Wall Street Journal

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(QM’s 2 paths – which to choose?) Safe Harbor or Sinking Ship? – Diane Gozza – The Consumer Financial Protection Bureau … Lenders that adhere to the guidelines may gain a higher degree of legal protection, known as “safe harbor,” against potential law suits that result from borrower default. … However, like most regulatory changes of late, there are two schools of thought on this issue. There are those that want a guarantee of ultimate protection, that there would be no permissible cause of action with regulation adherence, versus those that would like a more broad definition of “qualified mortgages” in exchange for weaker legal protection. … – National Mortgage News

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(subservicing deal) BRIEF: HSBC turns over mortgage processing to PHH Mortgage Corp. – David Robinson, Buffalo News – HSBC Bank has agreed to transfer its retail mortgage servicing and processing operations to PHH Mortgage Corp. in a deal that will have an impact on the bank’s Depew mortgage processing center. – Chicago Tribune

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Ginnie Mae to tighten MBS standards – By Jon Prior – Lenders applying for Ginnie Mae mortgage-backed approval will find it more challenging in the coming months, according to one official. "We’re undergoing a philosophical re-examination of the question: Who is it that should be a Ginnie Mae issuer," asks Michael Drayne, senior vice president of the Ginnie office of mortgage-backed securities. … According to the current policy, issuers seeking approval must demonstrate the ability to do the job and have certain practices in place. Single-family issuers must also hold a minimum net worth of $2.5 million. Under the new guidelines, potential issuers must be able to demonstrate they have the capital to keep moving cash to investors and to service these loans during any type of economic cycle, not just the current one, Drayne said. "If we ask a firm how they’re going to service the loans, and they come back and say, ‘Well, we’re going to just use a subservicer," that entity won’t be approved," Drayne said. … – Housingwire

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HUD secretary says some homeowners received $100K+ in principal reductions - By Justin T. Hilley – Some families living in the most deeply underwater states such as Nevada and California are receiving principal reductions exceeding $100,000 from the mortgage servicing settlement, Department of Housing and Urban Development Secretary Shaun Donovan said before the Senate Banking Committee … – Housingwire

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press release – CoreLogic Announces New GSE REO-to-Rental Data Offering for Bulk Investors - … Updated Valuations, Average Rent Pricing and Market Trends: Available in One Business Day … – 4Traders.com
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(chart) Radar (Logic) Watching: March 2012 – … As for the latest trends, it’s important to note that the 25-MSA Composite is showing significant year-over-year declines while prices continue to bounce from the lows set in late-January. The latest data shows that as of early-March, prices have declined 2.71% below the level seen in March 2011 continuing the pattern of past years with prices now heading higher as the data moves into the typically more active spring selling season. … – Paper Economy – A US Real Estate Bubble Blog

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FHFA Explains Intentions of REO-to-Rental Initiative – ESTHER CHO – … Meg Burns, FHFA’s senior associate director for housing and regulatory policy, explained in a testimony to lawmakers … the bulk sale of Fannie Mae REO properties to investors who will then convert their purchases into rental units. Calling the initiative “highly inappropriate on a national scale,” Burns said the “markets are carefully selected, based on obvious market characteristics – an oversupply of single family homes for sale and a strong demand for rental housing.” ... – DS News

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Despite bump, Las Vegas home prices expected to fall through 2013 – By Steve Green – VegasInc
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AARP to Congress: Lift Cap on the Number of FHA Reverse Mortgages – by Elizabeth Ecker – … “To guarantee continuity of the HECM program, AARP supports legislation that would remove the statutory limit on the number of loans that can be insured by HUD in a given year,” Trawinski said. “Loan limits were imposed when the HECM program was a pilot program. The loan number cap has been raised several times over the years and has, at times, led to a halt in originations when the cap was reached. Lifting the statutory loan limit would be helpful in encouraging lenders to offer reverse mortgages and remain committed to this market.” … – Reverse Mortgage Daily
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(mostly common sense) How to Prepare for an Annual Home Inspection – by Nicole Martinez – Realty Biz News

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For Rob Chrisman’s latest daily post, click here.

To subscribe to Joe Garrett’s news letter, send an email to  jgarrett at garrettmcauley dot  com

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(Originator comp proposals from CFPB 37 pages) Small Business Review Panel for Residential Mortgage Loan Origination Standards Rulemaking – OUTLINE OF PROPOSALS UNDER CONSIDERATION AND ALTERNATIVES CONSIDERED – hattip Peter Miller – CFPB website
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TD Bank Eyes Role as Mortgage-Bond Issuer – TD Bank is giving serious thought to securitizing its portfolio of U.S. jumbo mortgages. – Asset Backed Alert

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Fiserv Expects Home Prices to Stabilize This Year Despite Price Declines – BY: ESTHER CHO – DS News
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(more delevering) Profile of a Refinanced Loan in the First Quarter - BY: ESTHER CHO – According to Freddie Mac’s first quarter refinance analysis, 79 percent of homeowners who refinanced their first-lien mortgage either maintained or reduced their mortgage debt. Of these borrowers, 58 percent retained about the same loan amount, which is the highest level reached in the 26-year history of the analysis, while 21 percent managed to reduce their principal balance. The remaining 21 percent of those who refinanced were “cash-out” borrowers, or those who increased their balance by at least five percent. Between 1985 and 2008, the weighted average for the cash-out share was 50 percent. – more – DS News
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S&P: 46 months to clear shadow inventory – by Justin T. Hilley – The time it will take to clear the nation’s shadow inventory contracted one month in the first quarter to 46 months, just enough to slow the rate of home price declines, according to Standard & Poor’s Rating Services. – Housingwire

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Affidavits Are Not a Substitute for Evidence of Debt Ownership – posted by Bob Lawless – The Tennessee Court of Appeals has issued a decision that highlights the problems facing credit card debt collectors in a post-robosigning world (see here and here). The decision reaffirms what should be a simple principle in a debt-collection lawsuit. The burden is on the debt collector to show it owns the debt and to show the consumer is liable for the amount the debt collector asserts. The debt collector’s say-so is not enough. – Credit Slips

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FHA New Foreclosures Jump as Modified Loans Default – By Kathleen M. Howley – … after half the mortgages it modified to ease repayment terms were in default again a year or more later. … Borrowers with mortgages for homes bought in 2010, the FHA’s peak lending year, now owe almost 7 percent more than their homes are worth if they used the minimum down payment, according to S&P/Case-Shiller home price index data … The agency in 2010 began mandating credit scores of at least 580 for borrowers who use its minimum down payment –which was raised to 3.5 percent from 3 percent in 2009. Last year the FHA cut the amount that sellers can give to buyers for down payments to 3 percent from 6 percent. … – Bloomberg 
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(commercial real estate) Accuracy of Appraisals Is Spotty, Study Says – By JULIE SATOW – … Using data from thousands of securitized real estate bonds in which the properties were foreclosed on and liquidated, the study, … found a wide discrepancy between the appraisal values and the eventual sales prices of the properties. In general, appraisals overvalued the properties, the study found. Of the 2,076 properties it examined, 64 percent were appraised at values that exceeded the sale price, by a total of $1.4 billion, while 35.5 percent were appraised at less than the sale price, by a total of $661 million. … – NY Times 

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(why is this buried in a highway funding bill?) Groups Lobby to Temporarily Lift Bank-Qualified Bond Limit – By Kyle Glazier – The Bond Buyer
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(agency buybacks) Mortgage Putbacks Must Change, Former Freddie Credit Chief Says – By Jody Shenn – Fannie Mae and Freddie Mac should charge more to guarantee mortgages if lenders make loans with underwriting flaws, rather than punish banks after debts default by demanding repurchases, according to Freddie Mac (FMCC)’s former chief credit officer. “The way it should be paid for is not through a call on your balance sheet, but through the price,” said Ray Romano, who earlier this year joined Genworth Financial Inc. (GNW)’s U.S mortgage-insurance unit. “What we’ve done as an industry is we’ve provided investors a put option against changes in economic conditions for a risk they were supposed to take.” – Bloomberg

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Fannie, Freddie are Set to Reduce Mortgage Balances in California – POSTED BY ALEX FERRERAS – LoanSafe.org

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In California, GSE-Backed Loans to Accept Funds for Reducing Principal – BY: ESTHER CHO     – … Different from simply writing off principal or forgiving principal, the GSEs instead, may accept dollars provided through the Hardest Hit Fund (HHF). The Keep Your Home California program, which was established through the HHF, once required participants to match funds it provided towards reducing principal balances, which could be up to $50,000. Recently, housing finance agency (HFA) officials from the state announced a decision to no longer require lenders to match the funds the program provides ... – DS News

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PIMCO Total Return Fund MBS Holdings Hit Record $137 Billion As Fund Rises To All Time High AUM – Submitted by Tyler Durden – Zero Hedge
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(mostly sand states) The 15 Best Housing Markets For The Next Five Years – Mamta Badkar – Business Insider 
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(summary and presetation) Jeff Gundlach Shares His Wisdom On Debts And Deficits – Simone Foxman – Bujsiness Insider 

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For Rob Chrisman’s latest daily post, click here.

To subscribe to Joe Garrett’s news letter, send an email to  jgarrett at garrettmcauley dot  com