Origination

Though executives at many private-equity firms continue to raise capital and scout opportunities, few have emerged victorious in the bidding for failed institutions in recent months. The reasons are many. The pace of failures has been slower than dealmakers expected. Methodical due diligence is slowing deals for banks that are still open, in which government loss-sharing is not available to protect buyers. And regulators remain reluctant to quickly sign off on deals that do not involve traditional bank buyers. "You're not going to see floodgates opening up soon in terms of a plethora of deals," said Mark Graf, an investment professional at Aquiline Capital Partners LLC, a New York private-equity firm. "The challenge is finding the right confluence of events with the right return on investment, and you have to meet the regulators' guidelines." The overall tone from private-equity executives appears calm despite an eagerness to put billions of dollars in capital to work. Most agree that as failures accelerate and traditional buyers prove scarce, private equity will be in the thick of things, ready to pursue an aggressive consolidation strategy. There have been notable deals, some point out, including one that closed last week where Aquiline bought common stock and convertible preferred shares that would give it a 24.9% of BNC Bancorp in High Point, N.C. BNC expects to use the funding for traditional and government-assisted acquisitions. Still, it took time for Aquiline to green-light its first direct U.S. bank investment. Graf, who will join BNC's board, has been with the private equity firm since late 2008 and former Wachovia Corp. CEO G. Kennedy Thompson came on board more than a year ago. Graf said, however, that Aquiline is looking at similar deals in other parts of the country.

Despite efforts to assist distressed homeowners, the number of foreclosure actions completed by mortgage servicers has steadily risen over the past four quarters, according to a new report from the Comptroller of the Currency and the Office of Thrift Supervision. "Completed foreclosures increased across all risk categories, with the highest percentage increase among prime mortgages," the OCC/OTS Mortgage Metrics report says. The joint report says completed foreclosures in the first quarter totaled 152,650, up 19% from the prior quarter and 68% since the first quarter of 2009. Roughly 76,000 prime borrowers lost their homes in 1Q as the servicer or investor took title to the property. Meanwhile, servicers initiated 370,500 new foreclosure actions in 1Q, up 19% from the fourth quarter, and at levels experienced during the first three quarters of last year. More than 174,000 prime borrowers received their first foreclosure notice in 1Q, according to government figures collected from 11 of the nation's largest bank and thrift servicers. These institutions service almost 34 million first liens with $6 trillion in outstanding balances. The servicers "indicated that new foreclosure actions and completed foreclosures are likely to continue increasing as alternatives for seriously delinquent borrowers are exhausted," the regulators said.

The American Land Title Association is calling on its members to contact their elected officials in Washington to support an extension of the June 30 closing deadline for the homebuyer tax credit. A Senate amendment to the American Jobs and Closing Tax Loopholes Act would give buyers an extra three months to finalize their purchases, and ALTA is joining the National Association of Realtors and the National Association of Home Builders in supporting the rider. According to a Grassroots Action Alert to members, the group says that in markets with the highest volume of short sales, "it is not uncommon" for the closing to take up to 120 days. Consequently, the memo warns "the two-month window afforded by the homebuyer tax credit is simply not long enough for current market conditions in the most severely distressed markets." NAR has estimated that between 55,000 and 75,000 contracts may be unable to close by the current deadline, and ALTA worries that many of the pending short-sale deals could easily become foreclosures if the buyer fails to qualify by the deadline. ALTA's members handle the bulk of settlements in most states.

Hawaii Gov. Linda Lingle has joined state legislatures and governors in 14 states across the country who are placing bans on Wall Street Home Resale Fees (also known as "private transfer fee covenants"). The coalition says this "new financial scheme" lowers home resale values and adds another layer of difficulty to selling a home. Lingle's signing of House Bill 2288 means Hawaii joins Arizona, Florida, Kansas, Iowa, Maryland, Minnesota, Mississippi, Missouri, Ohio, Oregon, Texas and Utah in banning Wall Street Home Resale Fees. California requires notification that these fees exist in a contract. Companies in the real estate industry, such as Manhattan-based Freehold Capitol Partners, are attempting to add language to home purchase contracts requiring that a percentage of the sales price be paid to the original corporate owner of a property every time the property is sold, typically for 99 years. The right to collect these fees would then be securitized and sold "to enrich investors at the cost of stealing equity from consumers, forcing homeowners to pay a large fee to sell their homes and adding a complicated legal roadblock to the home sale process." In addition, Illinois and Louisiana have bills awaiting a governor's signature. Alabama, Georgia, New Jersey, North Carolina, Rhode Island and South Carolina, and seven additional states are expected to introduce legislation in 2011 (Massachusetts, Montana, New York, Nevada, South Dakota, Washington and Wyoming).

OneWest Bank CEO Terry Laughlin is leaving the company to join Bank of America where he will be reunited with CEO Brian Moynihan and succeed mortgage executive Jack Schakett. Laughlin announced his resignation from OneWest, Pasadena, Calif., on Monday and will stay with the bank through the end of July. At B of A Laughlin will be in charge of limiting home loan losses and monitoring relations with mortgage investors, said a company spokesman. Schakett, a former Countrywide Financial Corp. executive, plans to pursue entrepreneurial ventures. B of A bought Countrywide, once the nation's largest home lender and servicer, in the summer of 2008. OneWest is the successor to IndyMac Bancorp, which was seized by the Federal Deposit Insurance Corp. in 2008.

Residential servicers on Thursday told a House panel that consecutive changes to the Treasury Department's foreclosure prevention program have made it increasingly difficult to keep distressed borrowers in their homes. Mortgage consultant Edward Pinto described the Home Affordable Modification Program in two words: "numbing complexity," noting that HAMP has 800 requirements and servicers are expected to certify compliance," he said. "With ever-changing regulations, a constant need to re-evaluate past decisions in light of new regulations, and multiple appeals, it is no wonder that the HAMP pipeline became clogged through no substantial fault of servicers." HAMP was created to help financially strained borrowers avoid foreclosure, but the program's performance, to date, has been lackluster. On Thursday, members of the House Oversight and Government Reform Committee held the second of two hearings to assess HAMP's progress. This latest hearing is focusing on what servicers are doing to ensure borrowers receive adequate relief.

House and Senate conferees working on the regulatory reform bill dealt a double-blow to loan brokers Thursday morning by extending HVCC appraisal ordering bans and capping yield-spread premium payments at 3%, according to one trade group official. Marc Savitt, who has been lobbying on behalf of the brokerage industry, said conferees decided against a sunset provision that would have allowed approved brokers and loan officers to order appraisals. (Under the Home Valuation Code of Conduct regulation originators cannot directly order appraisals and must use appraisal management companies.) Savitt, past president of the National Association of Mortgage Brokers who leads a new industry trade group, said the appraisal ordering ban was set to expire but Sen. Chris Dodd, D-Conn., supported language maintaining it. Savitt, who runs a small brokerage operation in West Virginia, noted that the House and Senate agreed to a compromise, essentially capping yield-spread premiums at 3%, though the final language allows for certain fees and charges to be excluded from the cap. He said that, overall, the loan brokerage industry was "shafted" and is being unfairly blamed for the financial crisis. "We've been convicted and sentenced without having a trial," he said.

Williston Financial Group and its wholly owned subsidiary, WFG National Title Insurance Co., which is headed up by title insurance industry veteran Patrick Stone, have opened their national headquarters in Lake Oswego, Ore. In the six months since Stone and his group formed the company, it has become licensed in 33 states and hired 200 employees nationwide. Stone plans to continue WFG's aggressive growth program, declaring, "It is the most opportune time in the market's history to make cost effective acquisitions. Moreover, the real estate settlement services industry has become internally focused, creating a disconnect with clients forced to adjust to a challenging market dynamic." Stone is the former president and chief operating officer of Fidelity National Financial and also served as the chief executive of Fidelity National Information Systems. He also has served as the vice chairman of Metrocities Mortgage and as a director for First American Corp.

Web-based LOS Avista Solutions has integrated with verification service company Kroll Factual Data. This integration was done at the request of joint clients to allow Avista Solutions' customers to pull credit through Kroll without leaving the Avista Agile LOS. The Avista Agile platform lets users create loan applications online through the system or import applications from external loan origination software. The consumer website portal allows lenders to provide their customers online loan application, status updates, loan officer webpages and online disclosure. Now Avista users will have access to Kroll's credit service, which provides reports in both PDF and text file formats.

Multifamily and commercial debt outstanding combined dropped in the first quarter but the multifamily component increased a bit, according to a recently released Mortgage Bankers Association analysis of Federal Flow of Funds data. While commercial/multifamily debt dropped by $31 billion or 0.9% to $3.31 trillion between the fourth quarter of 2009 in the first quarter of this year, multifamily jumped by $3 billion or 0.4% to $852 billion. "Low levels of commercial mortgage borrowing mean that property investors are paying off and paying down more in mortgages than they are taking out," said Jamie Woodwell MBA's vice president of commercial real estate research. "The balance of construction loans at banks, and commercial and multifamily mortgages held in CMBS and by life insurance companies, saw the largest declines. The balance of multifamily mortgages backed by Fannie Mae, Freddie Mac and FHA saw the largest increase."