Servicing

Cash buyers - spell that i-n-v-e-s-t-o-r-s - purchased more than four out of every five new condominium units in the Greater Downtown Miami area in the first quarter, according to the latest figures from the Bal Harbour-based CondoVultures consulting firm. Of the some 700 apartments sold during the three-month period in the 60-square-block area, financing was used to acquire less than 120. "Even though the U.S. government is encouraging lenders to once again finance condo purchases, the results have not been impressive in South Florida," says consultant Peter Zalewski. "Many lenders claim to be willing to consider writing loans for buyers of condominiums, but the end results simply do not support that." Meanwhile, The Miami Herald reports that the developer of the opulent ICON Brickell condominium complex in Greater Downtown Miami has deeded back two of the three luxury towers that make up the complex to a group of construction lenders led by HSBC. The Related Group relinquished ownership of the 57-story North and South towers in the three-building, 1.793-unit complex after selling just a fourth of the apartments in the two structures, the newspaper said.

Single-family housing starts jumped 10% in April as builders rushed to meet demand from buyers seeking to take advantage of the expiring Federal homebuyer tax credit. The U.S. Census Bureau reported that single-family housing starts rose to a seasonally adjusted annual rate of 593,000 in April, up from a 538,000 rate in March. On a sequential basis, construction activity rose 18% in the Midwest, 15% in the South, 5% in the Northeast but fell 5% in the West. Overall, single family housing starts rose 54% from April 2009. The spike in activity caused the National Association of Home Builders/Wells Fargo Housing Market Index to rise three points to a reading of 22 in May -- its highest showing since August 2007. "Builders are hopeful that the solid momentum that the tax credits initiated will continue even now that those incentives are gone," said NAHB chairman Bob Jones. The homebuyer tax credit expired April 30, but buyers have until June 30 to close and qualify for the credit. (A California tax credit for $10,000 for new home purchases is on the verge of expiration.) Builders broke ground on 68,000 multifamily units in April, down 24% from March.

The Federal Deposit Insurance Corp. has once again pushed back the bid deadline on the sale of $23 billion in servicing rights that once belonged to AmTrust Bank, Cleveland, according to officials close to the deal. "It's just taking longer to get bidders in to conduct due diligence," said one investment banker who has reviewed the package. Originally, the FDIC had hoped to hold a first round of bidding in early May then pushed it back to later in the month. The new bid deadline is mid June. It's anticipated that the receivables could fetch a decent price: just 3.29% of the underlying loans are delinquent. Milestone Merchant Partners is the FDIC's advisor on the sale. The company declined to comment.

In denying a mortgage application, lenders will have to show the borrower their credit score under an amendment approved by the Senate and attached to the Wall Street Reform bill. Sen. Mark Udall, D-Colo., said his amendment will "empower consumers" by giving them immediate access to their credit score for free. "If you are turned down for credit because you have applied for a loan or you have a higher loan rate, you will have access to your credit score," Sen. Udall said. The Senate approved the Udall amendment Monday evening by a voice vote. The Senate also approved an amendment preserving the Federal Trade Commission's existing consumer protection mandate. The amendment by Sen. John Rockefeller (D-W.Va.) aims at getting the FTC and the new Consumer Financial Protection Bureau created by the reform bill (S. 3217) to work together. "The amendment directs the FTC and the new bureau to enter into a memorandum of understanding and coordinate their regulatory efforts," Rockefeller said. "The bottom line is that businesses will not be subject to multiple layers of regulation and rules," he added.

Ginnie Mae issuers repurchased $15.5 billion of delinquent government-guaranteed mortgages out of MBS pools in the first quarter -- a significant decline from the prior period. In 4Q buybacks approached a staggering $57.6 billion. In 1Q 2009 repurchases came in at almost $5 billion. GNMA issuers can repurchase residential loans out of securities when they become 90 days or more past due. Issuers are required to advance interest and principal payments to investors which make it expensive to leave delinquent Federal Housing Administration, Veterans Affairs, and Rural Housing Service guaranteed mortgages in GNMA pools. Government National Mortgage Association president Ted Tozer attributed the 4Q surge to issuers cleaning house. He also noted that servicers allowed delinquent loans to pile up last year while they focused on implementing new loan modification programs.

Despite aggressive efforts to stay alive, Midwest Bank and Trust Co., was closed late Friday by Illinois regulators. The failure of the $3.2 billion-asset, Chicago-area bank came on a night when the Federal Deposit Insurance Corp. also found buyers for three other institutions, bringing the year's failure total to 72. Midwest's collapse - brought on in part by losses tied to the government-sponsored enterprises - came despite its receiving bailout funds to address its capital needs. The FDIC sold the bank's operations to $12 billion-asset FirstMerit Corp. in Akron, Ohio. The government's losses from the failure were estimated at $216 million. The three other failed banks totaled $342 million of assets. They were: $136 million-asset Satilla Community Bank in Saint Marys, Ga., $109 million-asset New Liberty Bank in Plymouth, Mich., and $97 million-asset Southwest Community Bank in Springfield, Mo. Together, the four failures were estimated to cost the FDIC about $300 million. Like other institutions, Midwest, the bank subsidiary of Midwest Banc Holdings, suffered sharp losses in its preferred stock holdings when the government's 2008 conservatorship of Fannie Mae and Freddie Mac depleted the GSEs' value. Midwest's problems were compounded by rising loan losses.

Moody's Investors Service has downgraded $2.2 billion of securities backed by 'alt-A' mortgages issued in 2005 by Residential Funding Co. LLC, a unit of what is now Ally Financial. According to wire service reports, Moody's has downgraded several hundred billion dollars of MBS since the start of April as falling home prices, high joblessness and the slow economy led credit raters to revise loss expectations. In January Moody's placed $573 billion of alt-A MBS issued from 2005 through 2007 on review for possible downgrade after it revised its loss forecasts. Alt-A loans include mortgages made to borrowers that cannot document assets and/or income.

PHH Corp. on Monday named industry veteran Luke Hayden president of its mortgage division, effective immediately. In a statement PHH said Hayden replaces Mark Danahy, who left the nonbank lender/servicer to "pursue other opportunities." At press time the company had not returned telephone calls concerning Danahy's departure. According to figures compiled by National Mortgage News and the Quarterly Data Report, the Mount Laurel-based PHH Mortgage is the nation's ninth largest servicer with $151 billion in receivables. It ranks eighth among funders. PHH Mortgage also is one of the largest private label lenders in the nation. During his 30-year career in mortgage banking, Hayden has worked at Chase Home Mortgage, GMAC Mortgage, and Renaissance Investment Trust.

Fannie Mae economists expect the second quarter will be the high point for single-family originations this year before fundings fall below the $300 billion mark in the fourth quarter. Fannie chief economist Doug Duncan estimates originations will hit $361 billion in the second quarter boosted by the homebuyer tax credit and low mortgage rates. With rising rates, loan production will drift down to $324 billion in the third quarter and fall to $294 billion in the fourth. "We expect purchase originations to increase and refinance originations to drop off sharply," Duncan says. His forecast calls for refinancings to drop from 45% of originations in the second quarter to 36% on the third quarter and 37% in the fourth quarter. Meanwhile, total home sales will rise from 5.5 million in the first quarter to 6.01 million in the year-end quarter. "The pace of employment growth and confidence in the labor market will be key factors for a pickup in home sales by the end of the year," Duncan said.

With rumors mounting that some USDA offices are running out of money to fund its single-family insurance program, a Senate committee has included a premium increase for the Rural Housing Service in an emergency supplemental appropriations bill. Lenders that fund home mortgages in rural areas hope the measure will pass, placing the RHS program back on solid financial footing. The RHS provision, sponsored by Sen. Michael Bennet, D-Colo., allows the agency to increase its current 2% upfront premium to 3.5%, making the insurance program self-funding and removing it from the congressional appropriations process. The House passed a separate RHS reform bill, sponsored by Rep. Paul Kanjorski, D-Pa., that raises the upfront premium to 4%. House and Senate appropriators want to pass the emergency supplemental before Congress adjourns for the Memorial Day recess. Meanwhile, the Agriculture Department is being tightlipped about the funding status of the RHS program, frustrating many lenders that use it. It's believed the agency has exhausted its loan commitment authority, a belief shared by the Mortgage Bankers Association. "This is affecting independent mortgage bankers," said Tamara King, MBA's director of loan production. Even though the program may have run out of money, RHS has issued "conditional" commitments to some lenders. RHS officials have not responded to numerous requests by this newspaper for information about the status of the lending program.