Servicing

The common stock of United Financial Mortgage Corp., Oak Brook, Ill., has been approved for listing on the Nasdaq SmallCap Market, according to UFMC.The company said the first trading date for its stock on Nasdaq is expected to be May 18, and that it will continue to trade on the American Stock Exchange until the close of business on May 17. The expected ticker symbol is UFMC. Steve Khoshabe, president and chief executive officer of UFMC, said the company has been pleased with its dealings with Amex but that the move to Nasdaq is expected to "improve the liquidity in our common stock and increase our visibility, while at the same time providing investors in our common stock with better pricing and faster execution." The company can be found online at http://www.ufmc.com.

The Mortgage Partnership Finance program offered by a number of Federal Home Loan Banks is a long-term proposition and the "political scrutiny" surrounding the government-sponsored enterprises hasn't changed that, according to an executive from one of the Federal Home Loan Banks."The MPF program has always intended to be here [in the long run]," said Renee Pfender, a vice president at the Federal Home Loan Bank of Pittsburgh, at the Mortgage Bankers Association's National Secondary Market Conference. Speaking during a session on the "Role of the FHLB Today," she said the program includes several hundred participating financial institutions.

In the first quarter, 64% of the homeowners who refinanced their homes got a mortgage at least 5% larger than the original loan, up from 56% in the previous quarter, according to Freddie Mac.The percentage was much higher than the 42% level recorded a year earlier, the government-sponsored enterprise said in its quarterly refinance review. "The first quarter had record home sales and single-family housing starts and a lot of refinancing activity," said Frank Nothaft, Freddie Mac's chief economist. "The share of borrowers who decided to cash out some home equity as part of their refinance increased too, which helped prop up consumer spending on home improvements even though total consumer expenditures grew more slowly." Freddie Mac can be found online at http://www.freddiemac.com.

The agencies have been eyeing the possibility of creating a to-be-announced market for adjustable-rate mortgages, a Freddie Mac executive has told attendees at the Mortgage Bankers Association's National Secondary Market Conference in San Francisco.A TBA ARM market is likely to be among the main issues in the mortgage market over the next decade, said Mark Hanson, vice president of mortgage funding at Freddie Mac. He said the agencies "have really missed out" so far on ARM market share. But it is a market that Freddie Mac "very much wants to pursue," Mr. Hanson said. While speaking as part of a conference panel on "Ten Years of Change" in the mortgage capital markets, he also expressed faith in the strength of the existing fixed-rate TBA market, which has been threatened somewhat in recent times by increased specified pool trading. "It's so resilient," he said of the TBA mortgage-backed securities market, which has maintained the advantage of trading efficiently, generically, and in high volumes in ways specified pools do not.

Rising interest rates and home prices and a recently passed job creation act may spur a big increase in the issuance of home equity lines of credit in the residential mortgage-backed securities sector, according to Fitch Ratings."HELOCs were not able to be securitized using a REMIC structure, as each additional draw was considered a new loan prior to the passing of the American Jobs Creation Act of 2004, which went into effect Jan. 1 of this year," said Andrea Murad, a Fitch director. "The jobs act addresses the revolving nature of a HELOC that allows borrowers to draw on their lines, after the loan has been securitized." The analysis was published in the latest edition of Mortgage Principles and Interest, the rating agency RMBS newsletter. Fitch can be found on the Web at http://www.fitchratings.com

Freddie Mac has laid off 1,500 consultants -- or about 44% of its consulting team -- since last fall.The government-sponsored enterprise began hiring outside contractors in large numbers in 2003 in the wake of its $5 billion accounting scandal. These temporary employees have been assisting Freddie Mac in getting its books and accounting systems in order. However, the company also terminated the positions of about 10 full-time communications/marketing people as part of a "centralization" effort. (About 12 outside communications specialists also were let go.) A Freddie Mac spokeswoman stressed that the 10 on-staff workers were not let go for cause but were reorganized out of a job. She said Freddie's nonconsulting head count has remained steady.

Irwin Financial Corp., Columbus, Ind., has reported net income of $3.6 million ($0.13 per share) for the first quarter, compared with $14.4 million ($0.48 per share) a year earlier, a decline it attributed chiefly to a loss in its mortgage banking operations.The mortgage banking segment recorded a $9.6 million loss in the first quarter, compared with net income of $9.7 million in the first quarter of 2004, the company reported. "Like many in the industry, we have found it difficult to reduce the size of operations after the refinance boom of 2001-2003 in a rapid enough fashion to align with the reduced margins of the past several quarters," said Will Miller, Irwin Financial's chairman. He noted that interest rates had fallen rapidly, prompting Irwin to reposition its hedges, but then rebounded, driving the company's servicing values above the "lower of cost or market" cap under generally accepted accounting principles. "The economic value of our servicing rights continued to rise and would have offset the hedge losses had we been allowed to book the increase in value under GAAP," Mr. Miller said. The company can be found online at http://www.irwinfinancial.com.

The Federal Home Loan Bank of Seattle has hired Black Rock Financial and a firm headed by former Comptroller of the Currency Eugene Ludwig to assist it in getting its finances and management practices in order.According to officials familiar with the situation, Black Rock, including its managing director Peter Fisher, is helping the government-sponsored enterprise with its three-year business and capital management plan. (Mr. Fisher is a former top official at the Treasury Department.) Promontory Financial Group of Washington, Mr. Ludwig's group, is working on a review of the Seattle bank's management. The two firms, however, are not involved in an investigation of FHLBank stock sales by three depositories that may have redeemed stock based on nonpublic information they had access to. That review is being conducted by five nonmember directors with the assistance of an unidentified outside law firm. The Seattle GSE is forecasting possible losses for the next few years and recently disclosed a $260 million unrealized loss on its balance sheet.

The risk of a general decline in home prices over the next two years is highest in the Northeast and California, according to the latest PMI Risk Index.The average value of the index for the 50 largest metropolitan statistical areas stood at 202 in the latest quarterly index, up from its previous reading of 161, said PMI Mortgage Insurance Co., the Walnut Creek, Calif.-based mortgage insurer that created the index. The index value means that these MSAs have on average a 20.2% probability of experiencing a home price decline in the next two years. But for the MSAs topping the index, the risk is much higher. They are Boston-Quincy (Mass.), at 534; Nassau-Suffolk (N.Y.), at 511; and Oakland-Fremont-Hayward (Calif.), at 487. Fourteen of the 15 riskiest MSAs are in the Northeast or California. "The latest PMI Risk Index numbers reveal that most of the increase in house price risk is concentrated in certain markets, caused by regional weakening in affordability," said Mark Milner, chief risk officer of PMI Mortgage Insurance. PMI can be found online at http://www.pmigroup.com.

The Department of Housing and Urban Development is increasing its fines on residential servicers that fail to engage in loss mitigation on federally insured residential loans.Under a regulation that goes into effect in late May, HUD can impose fines of up to three times the claim amount of the mortgage. In fiscal year 2003 the average Federal Housing Administration claim was $92,254, which means some fines could be as large as $276,000. Currently, the maximum FHA penalty is $6,500 for each violation -- or $1.25 million for all violations during any one-year period. Victoria Vidal, a senior director for the Mortgage Bankers Association, said the rule "is not one of our favorites" and that such harsh penalties could ultimately "push some firms away from doing FHA servicing." (See the May 2 issue of National Mortgage News for more details.)