Origination

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.

Clayton Holdings LLC, a risk analytics firm, said it has adopted new Fannie Mae promulgated quality control standards into its product offerings. The Shelton, Conn.-based Clayton said Fannie's requirements (mandated in lender letter LL-2010-03) requires GSE originators to create "written operational work flow procedures" and increases both post- and pre-closing work. Among the new chores, lenders must confirm ten basic data elements prior to closing.

Three public stock offerings from different real estate investment trusts have been priced. The largest in terms of proceeds is from Strategic Hotels & Resorts Inc., Chicago. The IPO is expected to bring in nearly $290 million ($333 million if the over-allotment is exercised in full). Strategic is selling 66 million shares at $4.60 each. The proceeds will be used to fund a tender offer for senior notes of its operating partnership, Strategic Hotel Funding LLC, with the remainder used for general corporate purposes. American Capital Agency Corp., a Bethesda, Md., REIT that invests in mortgage-backed securities and collateralized mortgage obligations, is expecting $147 million in net proceeds from its 6 million share offering. The price is $25.75 per share. Proceeds will be used to acquire agency securities as market conditions warrant and for general corporate purposes. Finally, Getty Realty Corp., Jericho, N.Y., priced its 4.5 million share offering at $22 per share. Net proceeds are expected to be $94 million and should be used to acquire properties in the gas station and convenience store sector, repayment or refinancing of outstanding debt and general corporate purposes. All three offerings are expected to close by May 19.

For the fifth consecutive year, title underwriter premiums declined but appear to be showing signs of stabilizing. Last year premiums fell just 4.5%, according to new figures compiled by the American Land Title Association. Premiums peaked in 2005 at $16.9 billion. In 2009, underwriters took in $9.6 billion of premiums. However, ALTA chief executive Kurt Pfotenhauer noted that 2009 mortgage volume was driven by tax incentives and low interest rates. In 2010, he noted, refinancings are expected to contract from the 65% share in 2009, and purchase volume is expected to remain flat. California generated the most premium volume: $1.5 billion, up 8.4% over the previous year. The next three states, ranked by volume, all showed a decline from 2008: Texas, $1 billion (-17.6%), Florida, $700 million (-23.8%), and New York, $585 million (-22.7%). In terms of percentage, Alaska had the largest increase, 26.3%, followed by Wisconsin, 17.6%, and Montana, 15%. "As indicated by these results, the profitability of the title insurance industry always has been and always will be contingent on the cyclical nature of the mortgage market," Pfotenhauer said. "The scattered improvements illustrate real estate is an extremely local business. Each market performs differently depending on local economic conditions."

The former servicing manager of U.S. Mortgage Corp./CU National Mortgage has pleaded guilty to conspiring to defraud credit unions and Fannie Mae in the $140 million mortgage scandal. Leroy Hayden, 47, was convicted of conspiracy to assist U.S. Mortgage/CU National president Michael McGrath in his scheme to fraudulently sell Fannie Mae mortgages that the company was servicing on behalf of credit unions. "Frauds of this magnitude don't happen without someone to cook the books and push the paper," said U.S. Attorney Paul Fishman of Newark, N.J. "Leroy Hayden had to decide whether to go along with his boss' fraud or alert law enforcement to the scheme. Unfortunately, he made the criminal choice." Hayden told authorities he provided numerous reports to credit unions falsely stating that loans that had been sold were still in the credit unions' portfolios, and falsified records, at McGrath's direction, to conceal these fraudulent sales. Hayden also admitted that he modified data in U.S. Mortgage's servicing system to help carry out the scheme. As many as 28 credit unions in the Mid Atlantic states stand to lose as much as $125 million in the case and are frantically negotiating with Fannie Mae for the return of their mortgages. Several of the credit unions are also in litigation with their insurer, CUNA Mutual Group's CUMIS Insurance Society over coverage of the fraud. McGrath pleaded guilty last June and is scheduled to be sentenced in July.

Though notably slower than a year ago, the pace of sales in California's new home communities picked up a tad between February and March, according to the state's builders. Sales in March at properties with at least 10 units were off 31% from the same month last year, but were up 13% from the preceding month, the California Building Industry Association reported. Still, only 2,189 new houses and apartments sold in the month in subdivisions tracked for the group by Hanley Wood Market Intelligence, Costa Mesa. Single-family sales were up by 5% from the previous month, but down 36% from a year earlier. Meanwhile, sales of townhouses and "plex" style units rose 24% from February but were off 32% from March 2009. Condo sales were up 37% on a month-to-month basis but down 16% year-over-year. The median price of the 2,189 sales was up 7% from last year, from $342,567 to $367,933. According to Hanley Wood's Jonathan Dienhart, the decline in year-over-year sales was due in part to the lower number of actively selling projects. "So while sales overall are off 30% from a year ago, the number of sales per project was off 10%," he said. "Still nothing to celebrate, but better than the 30 percent headline figure."

While the odds of passage remain strong, the process behind the regulatory reform legislation is increasingly chaotic. Senate Banking Committee Chairman Chris Dodd (D-Conn.) took to the floor late Thursday to beg his colleagues on both sides of the aisle to stop adding more amendments, warning the process is in danger of spinning out of control. In a rare spectacle, Dodd rebuffed another senior retiring Democrat, Sen. Byron Dorgan of North Dakota, and argued his plea to debate yet another amendment was threatening the legislation. "I'll be very candid with my friend from North Dakota, it complicates my job," Dodd said. "They all have amendments they want to bring up. ... We run the risk of losing this bill." This past week, several amendments directly affecting the residential mortgage industry were introduced, including language on risk retention, underwriting standards, yield spread premiums, and reverse mortgages.

If Congress fails to appropriate $250 million for the Federal Housing Administration reverse mortgage program, seniors could see the principal amount of a new loan reduced by 30%. "Without the budget request, we would be forced to reduce the amount of funds that would be available to seniors by more than 30%, which is, on average, a $23,000 to $27,000 impact," said FHA commissioner David Stevens. Last year, the Department of Housing and Urban Development requested $798 million in funding for the FHA home equity conversion mortgage program. When Congress rejected that request, HUD reduced the HECM principal limit by 10% for fiscal year 2010, which started October 1. During the first-half of FY 2010, FHA endorsed 45,200 HECMs, down nearly 22% from the same six-month period in FY 2009. The National Reverse Mortgage Lenders Association estimates that a significant portion of that reduction in loan volume is due to seniors coming up short at the closing table: the principal amount of the HECM is not enough to pay off the senior's existing mortgage. NRMLA president Peter Bell noted that funding is very tight with the appropriation process challenging this year. "We want to minimize any further principal limit reductions," he said. "Because every time we lower principal limits, we shut off access to the program for some seniors."