Origination

In a surprise move, Richard Dorfman, president of the Federal Home Loan Bank of Atlanta resigned effective Friday. Sources indicate his contract with the FHLB expires June 30 and the former Wall Street executive will be making an announcement soon about his future job plans. The Wall Street Journal is reporting that Dorfman has landed a job with the Securities and Financial Markets Association. The FHLB's executive vice president and general counsel Jill Spencer has been named interim president and chief executive. "Our team successfully executed its mission during an unprecedented credit crisis and economic downturn. These events clearly displayed the value and importance of our institution," Mr. Dorfman said in statement issued by the Atlanta FHLB. He has served at the FHLB since 2007.

The House and Senate passed another short-term extension bill Thursday evening that will allow for the continued issuance of new flood insurance policies, and unemployment benefits. President Obama immediately signed the bill (H.R. 4851) that extends the National Flood Insurance Program through May 31. The Federal Emergency Management Agency's authority to write new flood insurance policies, renew policies or increase coverage expired on March 28. Without flood coverage, lenders would not originate loans on homes located in designated flood zones. The NFIP reauthorization is retroactive, which means that any mortgage transactions completed during the three-week hiatus will be covered if the borrowers completed an application for flood insurance. (However, there must be proof they paid the insurance premium, including a copy of the check.) Flood insurance reauthorization had become ensnarled in a tax extension bill. Congressional tax writers hope to find ways to pay for the tax provisions until the end of this year, but so far have been unsuccessful. They have been "kicking this can down the road" with short-term extensions for the past six months, one lobbyist said.

Single-family housing starts fell slightly in March to an annualized rate of 531,000 units, but compared to the same month last year rose an impressive 47%. Then again, March of 2009 was one of the worst on record for homebuilders, thanks to the recession, soaring unemployment, and a swooning stock market. The single-family figures released by the U.S. Census Bureau Friday morning represent starts on one-unit abodes only. In the volatile multifamily category starts surged almost 19% from February to March but were down 32% year over year. (For March, the annualized figure for multifamily was 88,000 units.) Some housing analysts believe multifamily construction could benefit from the "new normal" in the U.S. economy as consumers opt to rent instead of buying a home. Weiss Research analyst Mike Larson said the new numbers fit his firm's "anemic recovery" scenario. He noted that permit activity was strong in both the single- and multifamily sides of the business. "With new home inventories running at their lowest level since 1971, it's not surprising that builders are starting to swing their hammers again," he said, but predicted that a "vigorous rebound" will not appear "due to the overhang of distressed, 'used' homes."

Bank of America reported a $2.1 billion loss for its home loan and insurance business in the first quarter due to lower originations and increased provisions for credit losses totaling $3.6 billion. In the fourth quarter those provisions totaled $1.35 billion. The giant bank originated $69.5 billion of single-family homes during the quarter, down 20% from the fourth quarter. "Production income remains impacted from expenses associated with reps and warranties," B of A said. In 1Q, reps and warrants on loan buybacks cost the bank roughly $500 million. The $3.6 billion for credit losses includes $2.3 billion of net charge-offs. Of that amount, $813 million was for home equity loans. It also added $1.3 billion to its loan loss reserves.

Sales in California's new home projects slowed even more in February than they did in the previous two months, according to the state's builders. The monthly report from the California Building Industry Association and Hanley Wood Market Intelligence showed that year-over-year sales in communities of 10 units or more were down nearly 25%, far worse than the 12% slide recorded in January and the15% drop registered in December. A grand total of just 1,938 new houses and condos were sold in the entire state in February vs. a mere 2,570 units a year earlier. Jonathan Dienhart, director of published research for the Contra Costa-based HWMI, said the February figures show the nature of the challenges still facing the new home market in the not-so Golden State. "The February numbers are a stark reminder that we are still wallowing at the bottom of this housing market cycle," he said. "The extended federal tax credit and new California tax credit may help spur some sales activity in March and April, but even so it's apparent we have a long road ahead before we can consider the market in true recovery." On a little more positive note, the base price of units sold was slightly higher than a year ago, although still lower than last month. Compared with the same period last year, the median base price of homes sold - $365,240 - was 4% higher than a year ago.

Arch Bay Capital, an active buyer and seller of nonperforming mortgages, is on the verge of jumping into the origination market and is busily gathering lending licenses in several states, according to officials briefed on its plans. A non-bank based in Southern California, Arch Bay made news last year when it bought $600 million in nonperforming loans from Wells Fargo & Co. It also recently issued a bond backed by NPLs. A company official confirmed to National Mortgage News that Arch Bay is working on something tied to originations but would not comment further. The firm, though, has created a website for a unit called Arch Bay Mortgage LLC that says "Coming Soon." Industry sources said some of Arch Bay's financing comes from a special fund controlled by partners at Goldman Sachs & Co. One lender in the Southern California market said he has heard of Arch Bay's plans, but questioned its timing. "They're getting in at a time when fundings are shrinking," he said.

The Securities and Exchange Commission on Friday accused Goldman Sachs & Co., of civil fraud, charging that the firm created a synthetic CDO -- with the help of a hedge fund that was shorting the same bond -- and then marketed the RMBS to investors who eventually lost an alleged $1 billion on the deal. The suit, however, has just two defendants: Goldman and company vice president, Fabrice Tourre, 31, who the SEC says devised the bond known as ABACUS 2007-AC1 which came to market in 2007. At press time the hedge fund involved in the alleged scheme -- Paulson & Co. -- said it would not comment. Goldman Sachs denied the charges, saying it would "vigorously" defend itself. In a statement Robert Khuzami, director of the SEC's enforcement division, called the CDO -- which was backed by subprime loans -- "new and complex but the deception and conflicts are old and simple: Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party." Since the collapse of financial markets in 2008, Paulson & Co. has made headlines worldwide for earning billions by shorting the subprime market, in particular the ABX Index, which represents the value of outstanding subprime MBS. During the height of the subprime boom, Goldman -- unlike many other Street firms -- did not own any large B&C lenders, nor was it a top ranked issuer of subprime MBS. The agency is seeking to recoup profits reaped on the deal.

Mission Capital Advisors is marketing two nonperforming CMBS loans with an aggregate outstanding balance of $50.7 million. The CMBS special servicer loan sale offers prospective bidders the chance to buy two large-balance, nonperforming loans secured by different collateral types. The biggest loan in the sale, with a principal balance of $25.6 million, is secured by 24 office buildings and a retail center. Collateral securing the respective loan is mostly located in Okemos, Mich. with two parcels in East Lansing and Grand Ledge, Mich. The sale's second loan is secured by 20 property parcels with a mixture of asset classes such as retail, industrial, office, medical office, multifamily and mixed-use assets. The respective loans are being sold out of separate CMBS trusts. The buyers must provide individual, loan-level bid pricing for each asset. Investors are allowed to bid for one or both of the assets.

GMAC Financial Services has promoted Jeffrey Lemieux, a former executive at Cerberus Capital, to the position of senior vice president of business lending sales in its mortgage division. In his expanded role he will oversee customer relationships in the firm's correspondent channel and warehouse network under the auspices of the business lending/mortgage capital markets unit. Lemieux's promotion comes in the wake of several recent departures of top managers in the servicing department of Residential Capital Corp., GMAC's mortgage banking affiliate. Earlier this week, National Mortgage News broke the news that servicing executive John Vella had left the company to take a position with another firm. Prior to his promotion, Lemieux was senior vice president of fee based servicing and he retains these responsibilities managing the servicing capabilities that GMAC provides to third-party organizations. A few years back Cerberus paid $14 billion for a 51% stake in GMAC. Today, that stake has been reduced to just under 15%, leaving Cerberus with a massive paper loss on its investment. The U.S. Treasury is the largest stakeholder in GMAC with 56.3%. The company has hired Goldman Sachs to explore a sale of ResCap.

Residential real estate activity increased in most Federal Reserve Bank districts in March despite sluggish sales of higher end homes, according to a periodic Federal Reserve report. "Contacts in Philadelphia, Cleveland and Kansas City expressed concern about whether sales would continue to grow after the expiration of the first-time home buyer tax credit," the Fed's Beige Book says. Most district banks noted the house prices were stable and construction activity increased slightly in New York, Atlanta, St. Louis, Minneapolis and Dallas. As usual, the Beige Book notes that commercial real estate activity remains "very weak" in most districts.