Origination

The completion of the PMI Group Inc.'s sale of common stock and senior notes has contributed enough proceeds to bring the Walnut Creek, Calif.-based company's primary mortgage insurance underwriter back into compliance with the risk-to-capital ratio and minimum policyholders' position requirements some states have. The transactions netted $706 million, of which $586 million went to PMI Mortgage Insurance Co. This had the effect of reducing the company's risk-to-capital ratio on a pro forma basis as of March 31 to 13.4:1. In its first quarter earnings release, the company gave a preliminary risk-to-capital ratio figure of 26.6:1 for the subsidiary, above the 25:1 requirement a number of states have. However because the capital raise took place after that date, this is not being reflected in PMI Mortgage Insurance Co.'s balance sheet, policyholders' position or risk-to-capital ratio for the first quarter statutory filing. Steve Smith, chairman and chief executive noted that this means the PMI Mortgage Insurance Co. is able to continue writing new policies in all 50 states and the company won't have to turn to a reactivated subsidiary to write policies in states with a risk-to-capital or related requirement.

Mortgage software provider Ellie Mae filed to go public Monday morning after posting $38 million of revenues in 2009 and a profit of $1.7 million. The company offers no estimates on how much stock it will sell-or at what price-but notes in its IPO filing that its privately held shares have an estimated value of $47.2 million or $4.69 a share. The firm has entertained buyout offers over the past few years, but never completed a sale. The Pleasanton, Calif.-based company, known for its Encompass software, lost money in 2008 and earned a meager profit in 2007. In its S-1 filing with the Securities and Exchange Commission, the 13-year old firm says its Ellie Mae electronic network connects 55,000 mortgage professionals to lenders and service providers. In 2009, roughly 2.8 million of loans were initiated over its network-or about 20% of the market. Discussing the risks of its business, Ellie Mae cautions about "extreme turmoil" in the residential business, noting that its future performance hinges on attracting more customers to Encompass. Goldman Sachs & Co. is listed as the lead underwriter of the offering.

PennyMac Mortgage Investment Trust, a vulture fund that invests in troubled mortgage assets, will release its first-quarter results on Tuesday morning before the opening of the stock market. Since going public almost a year ago the company has yet to turn a profit but has reviewed billions of dollars in delinquent loans for possible purchase. The company is also working on launching a new lending conduit and could be eyeing the jumbo market.

Entitle Direct, a direct-to-consumer title insurance underwriter, has written a guidebook for loan applicants to help them understand the new good-faith estimate. "We want borrowers to aggressively compare fees from different lenders and third-party service providers, including title insurance companies, before choosing a mortgage," says Timothy Dwyer, chief executive of Entitle Direct Group, Stamford, Conn. "Our guide will help consumers shop for a mortgage, and then compare, analyze and finalize." The Smart Consumer's Guide to the New Good-Faith Estimate walks readers through each section of the GFE, highlighting ways consumers can compare and lower their financing and closing costs. It also covers origination charges.

D.R. Horton Inc. turned a profit in its fiscal second quarter, reporting a 19% increase in completed home sales. The homebuilder reported a 55% spike in new home orders as its results outpaced analysts' expectations. Builders have enjoyed a bump in sales this year as buyers scurry to grab expiring federal tax credits that end April 30 at midnight. However, California recently extended a $10,000 credit for purchasers of new homes. D.R. Horton earned $11.4 million, or 4 cents a share, for the three months ended March 31. A year earlier, it had a loss of $108.6 million, or 34 cents a share. Revenue was $896.8 million, up 16% from $775.3 million.

Wells Fargo Securities said it has expanded its residential mortgage-backed securities unit that previously had limited structuring and distribution capabilities. WFS has been working on expanding the RMBS unit since early this year. The unit is now fully staffed, providing advisory, structuring, research, distribution and trading services to lenders and investors as well as to its own Wells Fargo Home Mortgage unit. Mike Buttner, who previously managed the hedging of Wells Fargo Home Mortgage's servicing rights, loan pipeline and warehouse assets, heads the RMBS unit. In addition to Buttner, key senior executives include Doug Lucas, head of mortgage trading. Lucas most recently ran structured products trading in London for Bear Stearns. Dash Robinson heads residential mortgage finance structuring and lending. Robinson was previously responsible for the execution surveillance and restructuring oversight of Wells Fargo's structured finance transactions.

Even though PHH Corp.'s new CEO says his "transformation initiative" is working, the mortgage banker suffered an earnings decline and lower profit margins in the first quarter. The company had "core earnings" of $13 million in 1Q10 compared to $52 million for the same period in 2009. The performance was driven by a reduction in the mortgage profit margin to 118 basis points from 193 basis points. But CEO and president Jerry Selitto promised investors that PHH has seen the worst of the margin contraction and is confident margins will remain where they are for the rest of the year. The CEO also trumpeted the fact that while mortgage originations at PHH Mortgage fell 12% during the quarter (compared to 1Q09), many top originators suffered 1Q production declines of 30%. He noted that a new private-label client of PHH Mortgage, KeyBank, is adding $1.5 billion of production volume on an annualized basis. PHH's mortgage production unit posted a profit of $25 million, but its servicing division lost $13 million.

Late payments on Freddie Mac-guaranteed mortgages fell to 4.17% in March, the first monthly decline in almost two years and a sign that real estate conditions might finally be improving. A spokesman for the GSE told National Mortgage News that an "uptick in completed loan modifications" and rising short sales were the chief reasons for the improvement. Delinquencies on Freddie's book of business declined 7 basis points from February. A year ago late payments totaled a more benign 2.41%. Even though loan performance improved, secondary market purchases by Freddie from seller/servicers increased slightly to $31 billion in March from February. However, compared to March 2009, loan acquisitions fell by 64%. Based on the first-quarter run-rate, Freddie will buy $384 billion this year compared to $548 billion the year before.

Chicago Bancorp, a retail mortgage banking company, has hired Jeffrey Walker as the new president of Chicago Bancorp Direct, its direct-to-consumer lending platform. Most recently he was with CitiMortgage Inc. where he was the managing director/executive vice president of national sales and lending. In his new role, Walker will be responsible for expanding the company's national footprint through Internet lending, call centers, and strategic partner relationships. He will be based in Chicago and assume his new responsibilities with the firm on May 1.

Consumers are taking less time to research their mortgage loan than they do for buying a car, a survey conducted for Zillow Mortgage Marketplace found. The five hours a consumer typically spends to research a mortgage loan is the same as the last time this survey was conducted two years ago. Nearly one-third of the respondents spent two hours or less researching a mortgage. On the other hand, they spend 10 hours researching what car they are looking to buy, four hours researching the computer they are looking to buy and five hours on where they want to go on vacation. The survey also found that consumers who got a mortgage in the last five years are soliciting an average of three quotes; in 2008, there was an average of four quotes solicited. Zillow chief economist Stan Humphries said he was surprised consumers do not spend more time shopping for a mortgage now than they did two years ago, especially in light of the foreclosure crisis. "In an area like mortgages, where the lender has so much more information than the typical borrower, getting multiple offers from lenders and being able to compare them relative to one another is critical to leveling the playing field."