Origination

The table funding of home mortgages through loan brokers fell almost 50% in the first quarter, according to preliminary survey figures compiled by National Mortgage News and the Quarterly Data Report. Among lenders reporting so far, PHH Mortgage, Mt. Laurel, N.J., had the biggest year-over-year decline with 57%. NMN is still collecting surveys and the final results could change. However, it's no secret that loan brokers are under extreme pressure with the outlook for their business cloudy. Some elected officials and consumer activists would like to see brokers legislated out of existence. (One amendment to the financial regulatory reform bill would place a cap on yield spread premiums, a key source of income for brokers.) FHA commissioner David Stevens, though, sees a need for loan brokers and wants to see this industry sub-sector survive. Meanwhile, broker-funded originations (as a percentage of all loans produced) have been falling steadily since mid-2007. In the third quarter, table funding accounted for just 13% of originations, the lowest figure ever recorded by NMN/QDR. In 4Q, the broker market share rose slightly to 13.4%.

Callan Associates, San Francisco, said that Sally Haskins joined the firm as a senior vice president in the real estate consulting group. In her new role, Haskins will assist in growing the firm's real estate consulting business. "This is an important step forward in the evolution of our real estate consulting business," said Jamie Shen, senior vice president and alternative investments consulting practice leader at Callan Associates. Haskins joins Callan Associates from ING Clarion where she was a director in the client service and marketing group.

The Principal Financial Group took issue with Standard & Poor's downgrading the insurer's financial strength rating from "A+" to "A". Terry Lillis, chief financial officer of Principal, said "S&P has introduced a new 'stress model' for investment portfolio assets for U.S. life insurers, one we believe is a very simple tool for commercial real estate and is at odds with our more detailed analysis of expected losses for commercial mortgage investments. As we stated in our 1st quarter 2010 earnings call, we believe the real estate market is returning to stability and values will be stable to rising going forward. While we expect higher than normal losses for several quarters, the losses from commercial mortgages will be quite manageable." CRE losses in the company's investment portfolio for the first quarter were $11 million, Lillis said.

Ramco-Gershenson Properties Trust, a real estate investment trust based in Farmington Hills, Mich., priced its public offering of 6 million shares of newly issued common stock at $11.50 per share. The company expects to receive net proceeds from this offering of approximately $65.6 million. Ramco-Gershenson intends to use the net proceeds from the offering to prepay the $33.0 million principal payment of its secured term loan facility, to pay off two mortgages in aggregate of $15.9 million and to reduce outstanding borrowings under its secured revolving credit facility. The joint book-running managers for this offering are B of A Merrill Lynch and J.P. Morgan Securities Inc. Deutsche Bank Securities Inc. and KeyBanc Capital Markets Inc. are acting as lead managers of the offering, and RBC Capital Markets Corp. and Stifel, Nicolaus & Co. Inc. are acting as co-managers. The underwriters have a 30-day option to purchase up to an additional 900,000 common shares to cover over-allotments, if any. Subject to customary conditions, the offering is expected to close on May 18, 2010. Just before noon on May 13, Ramco-Gershenson was trading at $11.65 per share, down $0.84 from the previous close.

Fannie Mae purchased $83 billion of mortgages during March, a 55% increase from the prior month. Compared to the same period a year ago, the government-controlled entity saw acquisitions fall by 11%. The $83 billion it purchased was its best month since last July. (Like everyone else in the mortgage business, Fannie benefited from the expiring federal tax credit for new homeowners.) During the first three months of the year, Fannie bought $191 billion in mortgages, giving it an annual run-rate of $764 billion. Last year it purchased $823 billion in mortgages but 2009 was a stronger year for loan production. Meanwhile, new figures show that homeowners who refinanced during the first quarter again overwhelmingly chose fixed-rate loans, regardless of whether their original loan had a fixed or adjustable rate. Also, shorter-term mortgages gained some favor, according to research conducted by Freddie Mac. More than 95% of refinanced loans during the quarter were FRMs, as interest rates remained historically low. According to the Quarterly Data Report, a National Mortgage News publication, FRMs accounted for 90% of all originations in the third and fourth quarters of last year.

The average weekly rate for a 30-year fixed-rate mortgage has dropped to its lowest level of the year, according to Freddie Mac. This marks the fifth straight week of declines for the fixed-rate mortgage, according to Freddie Mac vice president and chief economist Frank Nothaft. The average 30-year FRM according to the Primary Mortgage Market Survey for the week ending May 13 was 4.93%. This is its lowest level since the week ending Dec. 10, 2009 when it was at 4.81%. A week ago the average 30-year FRM was 5% and a year ago at this time it was 4.86%. The average 15-year FRM rate during the week ended May 13 was 4.30%, its lowest since the week ending Dec. 3, 2009 when it was 4.27%. A week ago the average 15-year rate was 4.36% and a year ago it was 4.52%. The average rate for a five-year Treasury-indexed adjustable-rate mortgage during the week ended May 13 was 3.95%. This is the lowest this rate has ever been since Freddie started tracking it in January 2005. The average five-year hybrid Treasury ARM rate was 3.97% a week ago and it was 4.82% a year ago. The average rate for a one-year Treasury ARM during the week ended May 13 was 4.02%, which is the lowest it has been since the week ending Nov. 4, 2004 when it averaged 4%. The one-year Treasury ARM averaged 4.07% a week ago and 4.71% a year ago. Average points in the most recent week were as follows: 0.7 for 30-year FRMs and 0.6 for all of the other types of loans.

The Federal Housing Administration expects the capital ratio of its reserve fund will be higher at yearend than it is today thanks to improving claim rates. FHA commissioner David Stevens told a Senate appropriations subcommittee Thursday morning that the federal mortgage insurance fund will end fiscal 2010 "where we are or higher." According to outside auditors, the MIF had a capital ratio of 0.53% as of Sept. 30, 2009. But the agency has not provided a public update on the MIF cash position in seven months. Stevens told the panel the fund's capital position is in a "stronger position" today than it was last fall but is still far below its 2% statutory minimum capital ratio. Stevens stressed that early default and claim rates on FHA single-family loans have declined 15% since December, which is a "strong indicator that loan quality is improving." However, he noted that actual foreclosures are increasing. He expects 125,000 foreclosures with a 50% loss on each sale. Last year, FHA paid claims on 76,300 foreclosures.

The Senate Thursday evening approved by unanimous consent an amendment that will exempt "qualified mortgages" from the 5% risk retention provisions in the Wall Street reform bill. As approved, the language will ensure the 5% risk retention provision does not obstruct the securitization of the safest mortgages: loans that generally have 20% down payments or carry mortgage insurance. The amendment, sponsored by Senators Mary Landrieu, D-La., Johnny Isakson, R-Ga., and Kay Hagan, D-N.C., instructs federal regulators to exempt low risk, fully documented loans from risk retention. "We commend the Senate for the passage of the Landrieu/Hagan/Isakson amendment that exempts soundly underwritten, stable, consumer friendly mortgages from the risk retention requirements," said Glen Corso, managing director of the Community Mortgage Banking Project. Sen. Isakson supported the qualified mortgage exemption after his effort to strike the risk retention provision from the bill failed. "Risk retention is not the cure-all for good lending-underwriting is," the Georgia lawmaker said. Sen. Landrieu noted the amendment will ensure that applicants with good credit who finance their home the "old fashioned way" will not face higher interest rates due to risk retention. At the same time, the 5% risk retention provision will "eliminate the risk taking we saw in the home mortgage market between 2004 and 2007," Landrieu said.

Indicating growing investor interest in commercial deals, bidders rushed to a U.S. Department of Housing and Urban Development auction of $306 million in non-performing multifamily and healthcare HUD loans that generated proceeds equal to almost half their unpaid balance, according to loan sale advisor KDX Ventures. KDX said 67 bidders submitted over 200 individual and pool bids for the 26 assets offered for sale in April. Executives said the 12 winning bids submitted on individual assets generated proceeds of over 48% of unpaid principal balance demonstrating "the pent-up demand and liquidity for commercial real estate assets." According to DebtX CEO Kingsley Greenland, even though over the past two years, investors have amassed a tremendous amount of capital to invest in commercial real estate loans, "there has been only a small amount of product available for sale." KDX is a joint venture between boutique investment banking firm KEMA Advisors, Hillsborough, NC, and international online marketplace, DebtX, Boston.

The delinquency rate on loans backing U.S commercial mortgage-backed securities jumped 60 basis points in April to 7.02%, according to Moody's Investors Service. This increase was the second highest in the history of Moody's Delinquency Tracker, surpassed only by the tracker's 69 bp jump the previous month. The tracker follows the history of all U.S. conduit/fusion deals issued in 1998 or later that still have an outstanding balance.