Compliance & Regulation

Commercial and multifamily mortgage bankers' loan originations were strong in the first quarter, according to the Mortgage Bankers Association's Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.While down from the fourth quarter of last year, first-quarter originations were up 37% compared to the same period last year. "Increases in total commercial/multifamily mortgage originations were led by increases in commercial mortgage-backed securities conduit loans and loans financing office properties," said Jamie Woodwell, MBA's senior director of commercial/multifamily research. The increase in lending activity was driven by increases in originations for all property types. When compared to the first quarter of 2006, the overall increase included a 64% increase in loans for health care properties, a 62% increase in loans for office properties, a 37% increase in loans for hotel properties, 26% increase in loans for multifamily, 25% increase in loans for retail properties and a 14% increase in loans for industrial properties. First-quarter 2007 mortgage bankers' originations were 15% lower than originations in the fourth quarter of 2006, reflecting the industry's usual push to finalize deals before the end of the year, and the traditional and subsequent drop-offs in first quarter numbers. First quarter numbers show decreases in all property types except hotel.

The National Association of Mortgage Brokers wants the federal government to establish a national registry for all mortgage originators that could also provide a funding source for financial literacy programs and state enforcement of mortgage laws.NAMB opposes a registry that the Conference of State Bank Supervisors and American Association of Residential Mortgage Regulators is slated to launch in January because it only covers state-licensed mortgage lenders and brokers. NAMB executive vice president Roy DeLoach said a registry needs to cover all originators, including loan officers at federally chartered or insured banks and thrifts. The CSBS/AARMR registry does not prevent a bad actor from going from bank to bank, he said. "If you don't plug all the holes up it is really a waste of money. And it gives all the people who use it a false of security," noted Mr. DeLoach. The federal agency running the national registry could also serve as a clearinghouse for consumer complaints and direct them to the appropriate regulator. "We took the CSBS model and improved upon it," Mr. DeLoach said.

Housing secretary Alphonso Jackson said the Federal Housing Administration will be able to help "hundreds of thousands" of distressed subprime borrowers refinance into affordable FHA loans if Congress passes an FHA reform bill this summer.The Department of Housing and Urban Development secretary noted that 80% of subprime loans are sound. But the other 20% are "headed for trouble" and the borrowers will have difficulty making their payments once the loans reset. "If we can get FHA modernization legislation passed quickly, we can probably address 70% to 80% of those [troubled] loans," Mr. Jackson told the National Press Club. Otherwise, FHA's ability to help will be limited to "tens of thousands" of subprime borrowers. "We need this reform now. President Bush and I have repeatedly urged Congress to act," the HUD secretary said.

Freddie Mac and Alaska USA FCU on Monday signed a deal making the $3 billion credit union the secondary mortgage market giant's first credit union correspondent. Under the agreement, Alaska USA FCU will aggregate mortgages from small and midsized credit unions for sale on the secondary market. Participating credit unions will be provided a one-quarter-point (25 basis points) premium for every closed mortgage loan under the program, according to Bob Cejka, spokesman for Alaska USA. "We've done this in the past on a regional basis, but never on a national basis," Mr. Cejka told the Credit Union Journal. "Because of our size, we have the ability to do this on a national basis." The announcement was made on Monday at the annual conference and expo for CUNA, which has a four-year-old alliance with Freddie Mac. Alaska USA's staff, which is experienced in the secondary mortgage market, will provide support and assistance to participating credit unions, many of which do not have the resources to conduct mortgage sales themselves. The program will allow smaller credit unions to sell their loans on the secondary market without having to add staff, build infrastructure or install costly technology. While Freddie Mac has conducted correspondent sales through banks and thrifts, Alaska USA is the first credit union to participate in the program.

The rate of serious delinquencies and foreclosures on adjustable-rate subprime mortgages has doubled since mid-2005 and it is going to get worst, according to Federal Reserve Board chairman Ben Bernanke.The chairman noted in a speech to an International Monetary Conference that the default rate on subprime ARMs has risen to about 12%. "We are likely to see further increases in delinquencies and foreclosures this year and next as many subprime adjustable-rate loans face interest-rate resets," Mr. Bernanke said. The Fed chairman also expects the tightening of subprime lending standards will lead to a further contraction in subprime originations and continue to act as a restraint on housing demand and sales. National Mortgage News survey data show that subprime originations declined by 16.4% in 2006 to $665 billion and a larger drop is expected this year.

The Federal Housing Administration's mutual mortgage insurance fund would lose money for the first time ever if the agency doesn't curtail seller-funded gift programs, according to an FHA official.The Department of Housing and Urban Development doesn't normally comment on proposed rules, especially one as controversial as the proposal put forth in May that would all but prohibit downpayment "gifts" from sellers or anyone else who would benefit from the transaction. But at the Mortgage Bankers Association's Government Housing Finance Conference in Washington last week, the FHA's Judith May said that "if downpayment assistance programs continue without change, the (insurance fund's) credit subsidy rate would go positive" within eight years. Ms. May, who is director of the office of evaluation in HUD's Office of Finance and Budget, told the conference that loss rates on FHA-insured mortgages with downpayment assistance are already three percentage points higher than those on loans without help from the seller. And she said that an independent actuarial review of the fund "predicted a much higher loss ratio in the future" if the current trend is allowed to continue. "That means the fund would no longer make money," Ms. May explained. "For the first time since the FHA was created in 1934, the program would cost more than it brings in." Downpayment assistance providers on a panel with Ms. May disputed the FHA's figures. But even if the study's dire forecast is true, they argued, it would be a mistake to simply toss DPA out the window, if only because the program currently accounts for a big chunk of the FHA's loan volume. "Amend it, don't end it," said Scott Syphax, president of the Nehemiah Corp. of America, Sacramento, Calif. The comment period on the proposed rule expires July 11.

Under the new Global Mortgage Alliance program, Credit Suisse is the warehouse lender and lead underwriter for securitizing single-family mortgages that Hillenbrand Partners plans to purchase from members of the Federal Home Loan Bank of Atlanta.Eric Hillenbrand, the founder of the Chicago investment management firm, told MortgageWire that he expects to start purchasing conventional conforming mortgages from community banks in the Atlanta district by the end of July. And he is in discussions with other FHLBanks to join the program. The GMA program's goal is to securitize $5 billion to $6 billion in mortgages over the next 12 months. The AAA-rated senior pieces will be sold to investors, and Hillenbrand Partners will hold all the subordinated pieces from AA down, Mr. Hillenbrand said in an interview. LaSalle Bank is GMA's master servicer. The Federal Housing Finance Board recently approved the Atlanta FHLBank's application to participate in the GMA affinity program.

House prices rose at a 1.8% annualized rate in the first quarter, the slowest rate in a decade, according to the Office of Federal Housing Enterprise Oversight.The OFHEO house price index shows that price appreciation has come down dramatically from an 8.9% annual rate in the first quarter of 2006, but it did not fall into negative territory. "Although some forecasters expected to see a drop in the HPI, nationwide house prices continued to rise in the first quarter of 2007, albeit at the lowest rate in 10 years," OFHEO Director James McLaughlin said. From the fourth quarter to the first quarter, house price rose by 0.5%, and a separate home purchase index (which excludes refinancing transactions) also rose by 0.5%. However, "the purchase-only index grew about 3% over the latest four quarters, less than the 4.3% growth in the all-transactions HPI," OFHEO said. A national house price index published by Standard & Poor's/Case-Shiller and released earlier indicated that house prices declined at a 1.4% annual rate in the first quarter.

Preston Martin, who served as chairman of the Federal Home Loan Bank Board and was involved in the formation of Freddie Mac, died of heart disease May 30 in San Francisco at the age of 83, according to the San Francisco Chronicle.Mr. Martin was vice chairman of the Federal Reserve Board from 1982 to 1986, and he founded PMI Mortgage Insurance Co. in the early 1970s after heading the FHLBank Board, the predecessor agency of the Federal Housing Finance Board. He was also instrumental in the creation of NeighborWorks America. "Preston Martin, at the helm of the Federal Home Loan Bank system in 1970, was ahead of his time in supporting community-based public-private partnerships as a viable approach to the revitalization of urban residential areas," said Ken Wade, chief executive officer of NeighborWorks. "In an era when conflict was more common than cooperation, Preston Martin helped propel NeighborWorks from very humble beginnings into a national housing and community development network."

Single-family mortgage originations by banks fell 20% to $286.3 billion in the first quarter, according to the Federal Deposit Insurance Corp.The FDIC reported that the 673 commercial banks and savings banks saw wholesale originations of first liens drop 21.6% in the first quarter to $184.3 billion and retail originations fall 16.6% to $92.1 billion. The FDIC first-quarter report also shows that banks and thrifts accelerated their whole-loan sales and mortgage securitization activities over the past four quarters by 175%. In the first quarter, FDIC-insured institutions sold and securitized $1.1 trillion in one- to four-family mortgages. The FDIC reported for the first time that 120 banks and thrifts hold 206.9 billion in negative-amortization loans on their books. These interest-only and payment-option mortgages constituted 9.5% of all mortgage loans held by banks and thrifts in the first quarter.