Capital Markets Today

Fears over the health of China's economy kept world markets on edge this week and the country will remain in focus, along with the question of whether the Federal Reserve will raise interest rates next month. Those concerns sent world stocks, commodities and currencies on a roller-coaster ride this week, and purchasing manager surveys due on Tuesday are expected to show manufacturing contracted during August in the world's second-biggest economy. Federal Reserve officials who are most anxious to hike interest rates said on Friday that continued turmoil in financial markets may cause the central bank to delay tightening monetary policy beyond next month, even though the U.S. economy remains strong. Joining the broadcast to discuss the economy, bond prices, the Fed and housing is Brent Nyitray, Director of Capital Markets at iServe Residential Lending.  Brent is responsible for managing iServe’s origination pipeline and Ginnie Mae securitizations. Prior to iServe, Brent was an analyst and trader at several hedge funds as well as ran the European Risk Arbitrage trading desk at Bear Stearns.  Brent is also the author of The Daily Tearsheet, a blog focused on the economy, financial markets and real estate.

According to a recent article published by Bloomberg, Oaktree Capital has raised $7 billion for a distressed debt fund as it prepares for the economic recovery to falter. For most investors, a capital raise the size of OakTree is simply out of the question.  However, there are still many opportunities in the NPL and distressed real estate space for middle lower market investors especially as FHA, FNMA and Freddie increase their NPL sales creating secondary markets for smaller investors.  Many middle and lower market funds are in active capital raise mode as we head into the 3rd and 4th quarter of the year.   Joining the broadcast to discuss the capital raise process is Bina Shetty, Head of Strategic Advisory at Tremony Capital. Bina Shetty joined Tremony Capital, as the Head of Strategic Advisory with a mission to expand Tremony’s third-party strategic advisory capabilities for lower middle market financial institutions and real estate focused businesses. Prior to joining Tremony, Bina was a Managing Director at Milestone Advisors, a boutique investment bank that exclusively focused on middle markets financial services clients across the depository institution, distressed real estate, specialty finance and financial technology sectors.

According a recent Core Logic Report, Distressed sales—real estate-owned (REO) and short sales—accounted for 9.9 percent of total home sales nationally in May 2015, down 2.8 percentage points from May 2014. Distressed sales shares typically decrease month over month in May due to seasonal factors, and this distressed sales share was the lowest for the month of May since 2007 when it was 5 percent. Within the distressed category, REO sales accounted for 6.4 percent and short sales made up 3.5 percent of total home sales in May 2015. The REO sales share was the lowest since October 2007 when it was 6 percent. The short sales share fell below 4 percent in mid-2014 and has remained stable since then. The ongoing shift away from REO sales is a driver of improving home prices since bank-owned properties typically sell at a larger discount than short sales. There will always be some level of distress in the housing market, and by comparison, the pre-crisis share of distressed sales was traditionally about 2 percent. If the current year-over-year decrease in the distressed sales share continues, it would reach that “normal” 2-percent mark in mid-2018. Joining me today to discuss housing and mortgage trends Rick Sharga, Executive Vice President at Auction.com.  Since 2003, Rick has been an industry spokesman covering the US Housing Market, Mortgage Industry and Real Estate trends, Rick’s is a sought after speaker and has been featured on Bloomberg, CNBC, CNN, FOX Business, MSNBC and other radio and news outlets. Auction.com is the largest nationwide online auctioneer of real estate

Although some investors are still holding tight to credit standards, mortgage credit availability loosened last month, according to a recent Mortgage Bankers Association report.  The MBA concluded that the Mortgage Credit Availability Index (MCAI) increased 0.5 percent to 122 in April. Of the index’s four components, Government lending saw the greatest easing and was up 1.1 percent over the month. The Jumbo index increased of 0.8 percent and the Conforming index saw an increase of 0.2 percent. The Conventional index decreased 0.6 percent. It appears the increase was driven by new offerings of FHA’s 203(k) home improvement program, new VA offerings and new jumbo products. The increase was partially offset by some investors tightening underwriting criteria on conventional cash out offerings.” Joining me today to discuss alternative mortgage lending is Lee Janc, a Strategy and Business Development Executive for the Financial Service Industry and Eric Morgensen of Angel Oak Home Loans.  Angel Oak Home Loans serves both the Retail and the Wholesale markets and specializes in non-conforming products.

CFPB servicing rules not only impact the servicer, but have a significant impact on 3rd party vendors, especially field service providers.    Oversight, audits, neighborhood stabilization, management of code violations and property preservation are just a few of the issues servicers and field service providers need to management. Standardization and data management appear to be vital to managing an auditable process to reduce risk and remain compliant with evolving legislation.  Joining the broadcast today to discuss the impact of compliance and quality control on the field service industry is Brian Mingham, President of Pacific Preservation Services. Pacific Preservation Services is a property preservation and inspection company for pre-foreclosure, vacant, and REO properties.   Pacific Preservation Services integrates advanced transactional technology and seamless asset management workflow which has propelled year-over-year sales growth by 34%

Most indicators point to substandard housing performance in 2015.  Many variables such as affordability, foreclosure trends, demographics, among others, will play a role nationally and regionally in presenting opportunities and pitfalls. Joining the broadcast today to discuss the 2015 housing market is Daren Bloomquist with RealtyTrac. Daren joined RealtyTrac in 2001 and has been instrumental in many facets of the company’s business as it transformed into the industry leader it is today. Daren is RealtyTrac’s primary media spokesperson and resident go-to expert on housing and foreclosure statistics and trends. Daren is also managing editor of RealtyTrac’s Foreclosure News Report, which was named the “Nation’s Best Newsletter” by the National Association of Real Estate Editors, and is directly responsible for the creation of the company’s U.S. foreclosure market and sales reports.  The report is cited by thousands of media outlets nationwide — including all the major news networks and leading publications such as The Wall Street Journal, The New York Times and USA TODAY.

According to a recent article is DS News, NeighborWorks America , a Washington, D.C.-based non-profit  , has announced the awarding of $44.8 million to various organizations in the National Foreclosure Mitigation Counseling program to help distressed families and individuals whose homes are facing foreclosure. While foreclosure numbers have declined significantly since the peak years of 2010 and 2011, a recent uptick in foreclosure starts demonstrates the need still exists for loss mitigation programs and non-profit expertise. Home Means Nevada is another unique non-profit / governmental partnership created to assist struggling homeowners.  Home Means Nevada is a Nevada State affiliated nonprofit organization established for the development and execution of homeowner assistance and outreach programs and events to address the challenges and needs of distressed homeowners. Joining the broadcast to discuss the expanding role of non-profits in the mortgage industry is Anna Zakowska, CEO of Home Means Nevada. Anna launched the Nevada Home Retention Program designed to assist those individuals and families at risk of losing their homes who have not been helped by other housing programs.

In November, FHA extended the principal reduction loan program for two more years.  The FHA short refinance program was first authorized by Congress in 2008 to assist non-FHA borrowers that are underwater. It has evolved over time and is now being extended through 2016. The short refinance is an under-utilized tool for investors who are looking to monetize their performing loans at a higher yield than a sale of the re-performing note. Joining the broadcast to discuss short refinances is Craig Everett, principal at Cairn Advisors. Craig has over 20 years’ experience in the mortgage industry in a variety of lending environments.  Craig’s previous positions include Vice President of Distressed Originations for Lime Financial/Credit Suisse and Founding Partner of Wealthbridge Mortgage a 50 state originator and special servicer. Craig has spent the last 5 years as principal of Cairn Advisors working in the distressed origination space where he has helped hedge funds, servicers and other clients maximize the return on their assets through unique loss mitigation strategies.

It was recently reported in DC News that three of the nation's largest mortgage lenders have put sizable packages of non-performing and performing mortgage loans on the market for investors to buy First reported by Bloomberg, The loans are worth a combined $4.5 billion.  Bank of America has put up approximately $2.56 billion worth of delinquent debt for sale, including non-performing loans, performing mortgages and home equity lines of credit (HELOCs), Citigroup has put up $1.8 billion worth of non-performing mortgages for sale, and JPMorgan Chase is looking for a buyer for $143 million worth of nonperforming mortgage loans.  And lastly, Freddie Mac just sold $440 million in non-performing loans. Data compiled by Mission Capital shows that about $4.2 billion worth of non-performing loans and $3.2 billion worth of modified or re-performing loans have traded or been put up for sale so far this year. Joining the broadcast to discuss the non-performing mortgage market is Troy Fullwood.  Troy is an 18+-year veteran of the secondary mortgage business, along with being a personal investor.  He has been involved in over 13 thousand residential mortgage transactions totaling over a billion dollars in transactional history throughout the United States.

According to the Financial Post, U.S. economic growth slowed sharply in the fourth quarter as weak business spending and a wider trade deficit offset the fastest pace of consumer spending since 2006. The slowdown, which follows two back-to-back quarters of very strong growth, is likely to be short-lived given the enormous tailwind from lower gasoline prices. Most economists believe fundamentals in the United States are strong enough to cushion the blow on growth from weakening overseas economies. Even with the moderation in the fourth quarter, growth remained above the 2.5% pace, which is considered to be the economy’s potential. Economists had expected the economy to expand at a 3% rate in the fourth quarter Joining the broadcast to discuss the economy, bond prices, the Fed and housing is Brent Nyitray, Director of Capital Markets at iServe Residential Lending.  Brent is responsible for managing iServe’s origination pipeline and Ginnie Mae securitizations. Prior to iServe, was an analyst and trader at several hedge funds as well as ran the European Risk Arbitrage trading desk at Bear Stearns.  Brent is also the author of The Daily Tearsheet, a blog focused on the economy, financial markets and real estate.