Origination

Lenders One Mortgage Cooperative, St. Louis, a national alliance of community mortgage bankers, said it increased membership rolls by 16 during the first half. The group now boasts 169 firms, which include lenders, servicers, correspondent funders and some vendors. Lenders One has been lobbying heavily to battle onerous risk retention requirements in the pending regulatory reform bill, which could crimp the ability of nonbank lenders to compete and survive. The 16 new members that joined this year are a diverse group with four from the West region of the U.S., five from the Midwest, four from the East and three from the Southeast.

Westcor Land Title Insurance Co., Winter Park, Fla., has created a National Agency Division to serve independent title agents who write business in multiple states. The unit, Westcor said, was formed out of demand from the growing number of multistate agents looking for an underwriter who provided a relationship built on trust and integrity and gives their agents access to all decision makers without competing for their customers. The team will include Barbara Allen, division manager, Sara Hewitt, vice president of national accounts, Kimberly Sledd, national agency representative, and Chris Skinner, national corporate coordinator. Westcor is currently licensed in 26 states with 10 additional state licenses slated for approval this year. "Westcor does not expect to be a 50-state solution, explains Allen. "Rather, our purpose is to identify and engage a network of quality agents and vendors to support independent multistate agents in most markets even if the policy is not issued on Westcor." Westcor, according to the American Land Title Association, was the third largest regional underwriter for 2009 and seventh largest overall.

Quarter-to-quarter delinquency rates for all commercial/multifamily mortgage investor groups reviewed by the banking group continued to increase in the first quarter, with securitized loans reaching the highest level since the series began in 1997. The Mortgage Bankers Association Commercial/Multifamily Delinquency Report shows that compared to 4Q09 the 30-plus-day delinquency rate on loans held in commercial mortgage-backed securities rose 1.54 percentage points to 7.24%. Delinquencies for five of the largest investor groups reviewed—commercial banks and thrifts, CMBS, life insurance companies, Fannie Mae and Freddie Mac—"remain below levels seen in the early 1990s, some by large margins," the MBA said. The 60-plus-day delinquency rates increased on loans held in life company portfolios by 0.12 percentage points to 0.31%, on multifamily loans held or insured by Fannie Mae by 0.16 percentage points to 0.79%, and on multifamily loans held or insured by Freddie Mac increased 0.05 percentage points to 0.24%. The 90-plus-day delinquencies on loans held by FDIC-insured banks and thrifts also increased by 0.32 percentage points to 4.24%. These findings are significant since together these groups hold over 80% of commercial/multifamily mortgage debt outstanding—excluding construction and development loans, which are not presented in the report. MBA's Jamie Woodwell attributed the deterioration to economic weakness noting that unless there is growth in jobs and consumer spending, the CRE mortgage market will not be stabilizing any time soon.

Housing starts fell 10% in May to an annualized rate of 593,000 units, far below the expectations of many analysts who were looking for a consensus reading of 648,000. The Commerce Department reported that applications for new building permits, a sign of future activity, also declined, sinking 5.9% to an annual rate of 574,000, the lowest level in a year. Meanwhile, April's numbers were revised downward to 659,000 from 672,000. According to a report by Barclays Capital, "The weakness in housing starts today was driven entirely by single family starts, which fell to 17.2%, to 468,000 from 565,000, completely reversing the 5.6% gain in April." There was some good news: multifamily rose 33% in May to 125,000 from 94,000. Regionally, the decline was concentrated in the South (21.3%) and the Northeast (6.3%). Analysts say builders are scaling back their construction plans now that federal tax credits for first-time and certain move-up buyers have expired.

Mortgage application volume again reversed course, spiking after a one-week decline. The Mortgage Bankers Association's Market Composite Index increased 17.7% on a seasonally adjusted basis from one week earlier and 29.7% on an unadjusted basis for the week ended June 11, 2010. The prior week's data was adjusted for the Memorial Day holiday. The Refinance Index increased 21.1% from the previous week to its highest point since May 2009. But it was not just refis that consumers were seeking as the seasonally adjusted Purchase Index increased 7.3% from one week earlier, which is the first increase in six weeks. Michael Fratantoni, MBA's vice president of research and economics, had some cautious words in interpreting this data. "While it is clear that purchase applications in May dropped sharply as a result of the tax credit induced increase in applications in April, it is unclear whether we are seeing the beginnings of a rebound now," he said. The refinance share of mortgage activity increased to 74.8% of total applications from 72.2% the previous week, which is the highest level since the week ending Dec. 18, 2009. The adjustable-rate mortgage share of activity increased to 5.2% from 5.1%. The average contract interest rate for the 30-year fixed-rate mortgage increased by a single basis point to 4.82% from 4.81% for the current week with points decreasing from 1.02 to 0.89 (including the origination fee) for loans with an 80% percent loan-to-value ratio, the association reported. The average contract interest rate for 15-year FRMs increased by 3 bps during the week to 4.23%. However, the average contract interest rate for one-year ARMs showed a large increase of 13 bps from the previous week, to 7.07%.

The Securities and Exchange Commission Wednesday accused the former owner of Taylor Bean & Whitaker with orchestrating a massive equity and MBS fraud tied to his firm's warehouse borrowings from Colonial Bank, a depository it tried to take control of last summer using TARP money. In a civil complaint, the SEC says TBW owner and CEO Lee Farkas created $1.5 billion worth of "fictitious" whole loans and impaired MBS which were pledged to the bank's balance sheet and served as collateral for warehouse lines of credit. The government says the nonbank ran into "liquidity problems" and began over-withdrawing on its warehouse lines which led to the equivalent of a check "kiting" scheme at the bank. The agency says the scam predated TBW's attempted takeover of Colonial, a troubled bank, by about 18 months. In the spring of last year TBW tried to buy a controlling stake in the Alabama-based warehouse lender, using $200 million of its own money (most of it borrowed using servicing rights as collateral) and $100 million from private investors. These investors included several nonbanks that also were warehouse clients of Colonial. The bank, which failed last summer, was at one point the nation's largest warehouse provider. Using TBW's $300 million investment, Colonial had applied for $550 million of Troubled Asset Relief Program funds to stabilize its capital position. Farkas could not be reached for comment. TBW filed for bankruptcy protection last fall.

I read an article last week (on Wednesday) in USA Today that discussed a topic I found to be disheartening but not surprising. Bankruptcies are once again on the rise and expected to hit levels not seen since 2005 when the new filing regulations took effect. It got me thinking about our seniors.

Meridian Capital Group, New York, has named Chad Johnson managing director of its commercial originations group. As an officer of the firm he will be originating loans nationally. He will work out of the firm's newly formed office in Kansas City, Kan. During his career, Johnson has worked for GMAC Commercial Mortgage, UBS, Deutsche Bank and Wachovia.

Red Capital Group, which was recently sold by PNC Bank, has exited the warehouse sector. The Ohio-based firm was a niche player in warehouse lending and was ordered out of the business by the Pittsburgh-based PNC. In an e-mail to NMN, company official James A. King said, "We are no longer in the warehouse business" but declined to answer follow up questions. PNC is in the process of winding down the warehouse operation of National City. A few weeks ago an investment group led by Orix USA Corp., Dallas, bought Red Capital for an undisclosed sum. Red also provides financing for multifamily, senior living and health care projects through various FHA and Fannie Mae programs.

Although one of the first steps the conference committee took last week was to preserve the existence of the thrift charter in the final regulatory reform bill, the charter's days are likely numbered anyway. The merger of the Office of Thrift Supervision into the Office of the Comptroller of the Currency will eliminate some of the key benefits of choosing the charter, and leave a single agency trying to enforce two different sets of rules, observers said. Ultimately, many said they expect the thrift charter to fade away. "It's a little complicated with two different charters in one agency," said James Barth, a finance professor at Auburn University and a senior fellow at the Milken Institute. "It seems it's not a real complete merger. I would think down the road one would want to eliminate that distinction." The future of the charter is just one of the difficulties stemming from the pending OTS-OCC merger, observers said, including how best to integrate the agencies' personnel, cultures and different supervisory approaches. "It's not a question of the OTS," said Dough Faucette, a partner at Locke Lord Bissell & Liddell LLP. "That's a foregone conclusion; that's gone. The real question is then what will the attitudes and culture of the new agency be like?" Although the bill has yet to pass—conferees were slated to address some of the remaining issues surrounding the merger during their session today—implementation of the agencies' combination has already begun.