Origination

Today's piece will be something of a follow up to last's week's entry. As we continue to deal with pricing changes at a rapid pace, let's not lose focus and start marketing based only on price. It's important to remember that we all have marketing strategies in place and long after these pricing shifts are behind us, our seniors will still look to us as a source of information and advice. Stay on pace with your current plan- do not deviate. You are in this for the long term and the commitment to your well thought out marketing plan is crucial. That being said, remember these tips to reach out to your prospects who may have been on the fence, or simply did not qualify-

Financial Freedom, a subsidiary of OneWest Bank and a lender and servicer of reverse mortgages is making a reduction in the interest rate margin on its LIBOR-based reverse mortgages and the introduction of the Financial Freedom Senior Saver, a fixed-rate reverse mortgage which eliminates origination and servicing fees. The company, based in Irvine, Calif., says changes to both loan programs dramatically reduce costs and provide significantly more cash benefit to borrowers. The Financial Freedom Senior Saver is a fixed-rate Home Equity Conversion Mortgage, which waives the origination and servicing fees normally paid to lenders, offering seniors a typical savings of $3,500 - $10,000 in costs on a reverse mortgage. Financial Freedom has also reduced the interest rate margin on the Financial Freedom HECM LIBOR from 250 basis points to 175 basis points. On a typical $150,000 reverse mortgage, the reduction of the margin will provide the borrower with additional benefit of approximately $10,000. The Financial Freedom Senior Saver does not eliminate all closing costs. Borrowers are still responsible for the mortgage insurance premium required on HECM loans under HUD guidelines as well as third-party costs that include title search and insurance, appraisal, inspections, recording fees, mortgage taxes, and credit checks.

The Federal Housing Administration is going easy on independent mortgage bankers as it increases its net worth requirements for larger lenders to $1 million, according to a long-awaited final rule. The final rule raises the net worth requirement from $250,000 to $1 million one year from now. For FHA-approved "small business lenders," the net worth requirement will be $500,000. Meanwhile, mortgage brokers will no longer have to go through the FHA approval process, which included an annual audit. "Mortgage brokers or other third-party originators, already approved by FHA, will be authorized to continue to originate FHA-insured loans through the end of the calendar year without sponsorship of an FHA-approved lender," HUD said. After three years, the Department of Housing and Urban Development will raise the net worth requirements again. "Approved lenders and applicants to FHA single-family programs must have a net worth of $1 million plus 1% of total loan volume in excess of $25 million."

Nearly nine in 10 Americans, including seven in 10 who are delinquent on their own mortgages, do not believe it is acceptable for people to stop making payments on an underwater mortgage, according to the latest National Housing Survey by Fannie Mae. However, when asked if financial distress makes it okay to stop paying, 15% answered yes. Furthermore, the study found that not just delinquent borrowers but also those who are current on their payments are more than twice as likely to have seriously considered stopping their payments if they know someone who has already defaulted. The survey, which was conducted in December and January and polled some 3,000 owners and renters to assess, among other things, their confidence in home ownership, found that non-financial motivations have once again eclipsed investment factors as the primary reason for owning. But many people believe achieving and holding ownership status is more difficult for them than it was for their parents and will be even more so for their children. "Consumers are still committed to owning a home, but are showing increased cautiousness, regardless of whether they rent, own their homes outright or have a mortgage," said Fannie Mae's chief economist, Doug Duncan. "They are rebalancing their attitudes toward housing and home ownership by adopting a more realistic, long-term approach, and are less willing to take risks." Seven out of 10 respondents said they believe buying a home continues to be one of the safest investments available, and three-quarters think housing prices will go up or stay the same over the next year.

Independent mortgage bankers made $890 on each single-family loan they originated and sold in the fourth quarter, down slightly from a $902 per loan profit in the previous quarter, according to a Mortgage Bankers Association quarterly report. "Production profits remained favorable in the fourth quarter because of strong servicing rights valuations and secondary market gains," said Marina Walsh, MBA associate vice president of industry analysis. She warned, however, that mortgage repurchase demands by investors "may weaken profitability in upcoming quarters." The MBA report shows that 76% of the 300 firms surveyed posted pre-tax profits in the fourth quarter, compared to 82% in the previous quarter. It has been a wild ride during the financial crisis for independents. While the government was bailing out banks and Wall Street in the fourth quarter of 2008, small mortgage bankers made only $289 per loan. But they hit the jackpot when the Federal Reserve started buying mortgage-backed securities. In the first quarter of 2009, the independents pocketed $1,088 per loan.

National homebuilder Pulte Homes Inc. has changed its name to PulteGroup Inc., as part of a branding strategy, which includes a new corporate logo and brand identity standards to present a consistent look and message to customers. "We are separating the corporate function from the consumer-facing brand names. The PulteGroup umbrella creates a house of brands model-a first in homebuilding-allowing us to emphasize the names of our homebuilding brands in the marketplace," said Richard J. Dugas, Jr. chairman, president and CEO of PulteGroup Inc. PulteGroup refers only to the corporate entity while the national consumer-facing brand names will remain Centex, Del Webb and Pulte Homes. Regional brands include DiVosta Homes in Florida and Fox & Jacobs in Texas. Following its merger with Centex last summer, PulteGroup embarked on an innovative strategy through which it will align its specific brands with defined homebuyer segments: Centex for first-time and value-conscious buyers; Pulte Homes for the move-up market; and Del Webb for active adults age 55 and better. The name change was approved by the shareholders in August 2009 and will not affect the Company's stock ticker of PHM on the New York Stock Exchange.

KB Home, in partnership with the U.S. Environmental Protection Agency's WaterSense program, will be the first national homebuilder to construct homes to meet the WaterSense specification. According to the EPA, WaterSense labeled new homes use 20% less water than conventional new homes and save homeowners more than 10,000 gallons of water per year. A new WaterSense labeled home built by KB Home will also allow homeowners to significantly reduce their water and energy consumption, resulting in lower monthly utility bills. KB Home currently includes WaterSense lavatory faucets as a standard feature in all its new homes. With its new commitment to the WaterSense program, the homebuilder will incorporate additional water-efficient products and features inside and outside its homes at select communities that meet the full WaterSense guidelines-all at no additional cost to the homebuyer. To meet the criteria of a WaterSense labeled home, builders must upgrade to more environmentally friendly features. This includes installing WaterSense labeled showerheads, faucets and toilets and utilizing landscaping designs and technology that minimize water usage. Additionally, the program calls for the use of energy-efficient hot water distribution systems.

The National Association of Realtors has seen a jump in homebuyer activity in February, which could be a sign the homebuyer tax credit is going to stimulate sales in March and April. NAR's index of pending home sales jumped 8.6% in February to 97.6 after falling 7.7% in January. The index is based on contract signings that are expected to close in one or two months. "Anecdotally, we're hearing about a rise of activity in recent weeks with ongoing reports of multiple offers in more markets," said NAR chief economist Lawrence Yun. So the March sales report could "demonstrate additional improvement from buyers responding to the tax credit," Yun said. The homebuyer tax credit expires April 30. But buyers have until June 30 to close and still qualify for the tax credit. The Realtors are forecasting that existing home sales will hit nearly 5.5 million this year, up 6.5% from 2009.

The Department of Housing and Urban Development has taken actions against two lenders and banned them from making Federal Housing Administration-insured loans. HUD's Mortgagee Review Board permanently withdrew the privileges of RSA Financial Inc., Atlanta, and 1st Alliance Mortgage, Houston, to participate in the FHA program. The board also imposed a civil money penalty of $267,900 against 1st Alliance and a $15,000 CMP against RSA Financial. 1st Alliance allegedly used independent contractors to originate 708 FHA loans after certifying they were full-time employees. HUD also claims the Houston-based firm failed to properly ensure that fees "paid outside of closing" were listed on the borrower's HUD-1 settlement statement. HUD discovered that the owner of RSA Financial had a criminal conviction and had been debarred by HUD on two occasions. The MRB also claims that the Atlanta mortgage company was not properly licensed in Georgia. And RSA engaged in prohibited branch arrangements and violated other FHA standards, it found. HUD also reported that Franklin First Financial, Melville, New York agreed to pay a $413,500 civil money penalty and indemnify FHA for possible losses on 31 loans.

Mortgage companies added 4,400 full-time employees to their payrolls in February, reversing 3,900 layoffs seen the previous month, according to the most recent jobs report. The U.S. Bureau of Labor Statistics reported that employment in the mortgage banker/broker sector rose to 254,000 in February from 249,600 in January. It is the first sign of hiring since July when the mortgage industry had a 267,300 workforce. This unexpected increase comes as industry executives are bracing for a sizable decline in loan production in 2010, compared to last year when the Federal Reserve sparked a refinancing boom. However, servicing shops are straining to keep up with demands for loan modifications and many companies have relied on temporary workers and contractors to deal with the workload. (There is a one-month lag in BLS reporting of mortgage industry employment data.) In another good sign, the construction sector shed only 15,000 jobs in March, compared to an average of 72,000 lost jobs in the prior 12 months.