Origination

House prices rose 0.3% on a seasonally adjusted basis in January following a similar rise in December, according to the Standard & Poor's/Chase-Shiller 20-city house price index. On a non-adjusted basis, prices fell 0.4% in January following a 0.2% decline in December. Prices are down only 0.7% from January 2009 on a non-adjusted basis. "Fewer cities experienced month-to-month gains in January than in December 2009 on both a seasonally adjusted and unadjusted basis," said David Blitzer, chairman of S&P's index committee. "The rebound in housing prices seen last fall is fading," he said. Citicorp mortgage analyst Robert Young said, "Home prices could drop another 5% from current levels." He noted that the housing market is being negatively impacted by the large inventory of distressed properties and seriously delinquent mortgages. "Although we are not expecting a flood of foreclosures, the inventory is going to weigh on home prices for years. So we are not expecting much appreciation for quite a while," Mr. Young told MortgageWire. Of the 20 cities in the Case-Shiller HPI, only Los Angeles and San Diego posted price increases in January on a non-adjusted basis. In Los Angeles, prices rose 0.9% during the month and 3.9% over the previous 12 months. San Diego experienced a 0.4% price increase in January and is up 5.9% from January 2009.

Fairway Independent Mortgage Corp., Sun Prairie, Wis., has promoted Paul Walnick from senior vice president of information technology to president of mortgage operations and Dan Cutaia from chief operating officer to president of capital markets and risk management. Walnick will oversee Fairway's day-to-day mortgage business and underwriting operations while providing branch and product support. Cutaia will oversee the overhaul of Fairway's loan origination platform, as well as all technical and compliance related issues, systems and secondary business. In 2009, Fairway closed $3.3 billion in mortgage volume, a 70% increase from the prior year. Steve Jacobson remains as chief executive. Walnick has held sales management positions at both Waterfield Financial Corp., and American Home Mortgage, where he oversaw retail sales production in Texas and Arizona. Cutaia was the founder and former president of Aucita Mortgage Capital and held executive positions with Waterfield Financial, where he oversaw numerous infrastructure initiatives involving post production and delivery, and product and credit risk.

Phoenix-based CCG Catalyst, a bank consulting firm providing strategic guidance for financial organizations, now offers merger and acquisition services for financial institutions that are designed to quickly deliver a higher rate of return to the acquirer's shareholders. CCG Catalyst delivers a road map document communicating new strategies and business objectives based on the original rationale for the transaction; a communications plan announcing the transaction and its transition details to key stakeholders; a human resources plan assisting with the retention and integration of staff following the merger or acquisition; a management information systems integration plan defining workable implementation objectives; a product and service integration plan defining the go-forward product and service mix and an operations integration plan establishing a detailed vision of how things will work in the future and what steps need to be taken to get there.

According to Aite Group senior analyst John Jay, the impact of adjustable-rate mortgages resetting at higher rates is now expected to be less severe than feared. Low interest rates, loan modification efforts and the fact that many borrowers have already defaulted, mean less rate hikes and fewer defaults, said Jay. "The fact that the number of exotic, adjustable-rate mortgages scheduled to reset to higher rates is shrinking should not be taken as a sign that this sector is 'OK.' It is only manageable from here because so much of the sector already fell into default and required loan modifications or some other type of lender remediation," he added. "If such products are to be offered ever again in the future, lenders are advised to underwrite the loans to the fully-indexed and maximum loan sizes. In addition, the creditworthiness of the borrower must be able to withstand economic scenarios. After all, the current remaining nontraditional ARMs were underwritten to what was assumed to be a real estate market that would never decline."

Bank of England data showing approvals for purchase loans in January were down 2% on the month but up 20% on the year are in line with an industry group's forecasts for activity to be subdued early in 2010. The Council of Mortgage Lenders said it believes this reflects its forecast for uncertainty about the political and economic outlook as well as the recent end of a previous housing-related tax break. A new tax break for certain buyers "is likely to boost activity in the coming months, although it is extremely difficult to assess how many potential buyers will qualify and what the impact will be," the CML said. Refinancing, in contrast to purchase activity, was up 12% on the month but down 21% on the year.

The HUD Office of Inspector General has found significant underwriting deficiencies in Federal Housing Administration-insured loans originated by a subsidiary of homebuilder D. R. Horton Inc. The Department of Housing and Urban OIG auditors also discovered that DHI Mortgage placed "unallowable" covenants on FHA loans that restricted the sale or rental of the property for one year. The Fort Worth, Texas, builder strongly disagrees with the auditors' findings and claims the anti-flipping covenants were recorded "without its knowledge or approval." The builder also said the covenants on eight FHA-insured properties were unenforceable and presented no harm to the homebuyer. The OIG auditors reviewed 20 FHA loans at DHI Mortgage and spotted improper calculation of borrowers' income, inadequate documentation of income, inadequate determination of credit and/or debt, and inadequate compensating factors when the debt-to-income ratio exceeded FHA's benchmark ratio. DHI Mortgage strongly disagrees with the OIG findings and filed a 22-page comment letter in response. The HUD IG is recommending that HUD Mortgagee Review Board require DHI Mortgage to indemnify FHA for possible losses of $1.2 million on seven loans and reimburse HUD for $265,000 for losses on three loans. The company had not responded to a request for comment by press time.

Flagstar Bancorp Inc. has priced a public offering of 500 million shares of common stock at $0.50 per share, which is below the stock's 52-week low. Over the past 12 months, the stock hit a low of $0.54 per share on Dec. 16, 2009, according to Yahoo. On March 25, the stock closed at $0.72 per share. But after news that the offering is being priced at $0.50 per share, the next morning Flagstar opened at $0.54 per share. The company will receive total gross proceeds of approximately $250 million. The Troy, Mich., based company expects to close the sale on March 31, 2010. The underwriters will have a 30-day option to purchase up to an additional 75 million shares of common stock at the offering price, less underwriters' discounts and commissions solely to cover over-allotments. The public offering is being underwritten by Sandler O'Neill & Partners, L.P., as book-running manager, and Keefe, Bruyette & Woods, Inc., as co-manager.

American General Financial Services, a subsidiary of AIG, will be coming out with two deals backed by legacy mortgage assets within the next two weeks. RBS Securities is lead manager on the first deal, which will be backed by Alt-A legacy mortgages. Deutsche Bank Securities is co-manager on the transaction. The offering is expected to price within the next two days. The second transaction, which will be backed by subprime mortgage assets, will be led by Deutsche Bank. Both deals will be in the $800 million range. With the dearth in new-issue securitized mortgage deals, sources said that investors are excited about having new-issue mortgage transactions come to market. "With credit enhancement two to three times more than it was three years ago and the fact that these transactions are backed by loans that have seasoned and performed well, these structures are much better all around," Ryan Stark, a director at Deutsche Bank said. At the end of last July, the company also came to market with a more than $1.57 billion deal that was backed by sub- and nonperforming whole loans - many of which are non-prime in quality, according to a report from Asset Securitization Report, a sister publication of National Mortgage News. Credit Suisse was lead manager on the deal.

Executive of major banks will be testifying before the House Financial Services Committee soon on their efforts to modify and write down second liens. Committee chairman Barney Frank, D-Mass, has summoned Bank of America, Citigroup, JPMorgan Chase and Wells Fargo to testify on April 13. Chairman Frank is concerned that the major banks have become the "principal obstacle" to modifying first mortgages because of their large holdings of second liens and home equity loans. And he has been pressuring the banks to fully participate in the Treasury Department's fledging second lien modification program. "We will be urging the banks to show full cooperation with this plan at a hearing," Rep. Frank said, and "we hope they will be able to explain how they are working with it." The committee chairman also welcomed the Obama administration's new initiatives to assist unemployed homeowners and underwater borrowers. "I was particularly pleased that the administration has adopted the proposal that many of us have been advocating to provide help to the unemployed. While clearly there are some people in trouble on their mortgages who bear some of the responsibility for their plight, this is not true of the unemployed who are fully deserving of this help," Rep. Frank said.

California Gov. Arnold Schwarzenegger has signed legislation that re-establishes and extends the state's $10,000 tax credit for homebuyers, a program that proved so popular last year that it ran out of money by the end of June, eight months before it was set to expire. The measure sets a $10,000 credit, up to 5% of the purchase price, for buyers of newly built homes and a similar credit for first-time buyers who purchase existing homes. The credit will be available on "personal residences" purchased between May 1 and Dec. 31, and "principal residences" acquired between Dec. 31 and Aug. 1, 2011, as long as long as they were purchased pursuant to a contract executed on or before Dec. 31. The $200 million allocated for the program, which is offered in addition to the revised and extended federal tax credit, will be split evenly between new homebuyers and buyers of existing houses. The credit comes with two caveats, however: It must be claimed in equal installments over a three-year period, and buyers must live in the homes they buy for two years or forfeit the benefit. Despite the restrictions, both builders and Realtors hailed the measure. "The tax credit will help push prospective buyers off the fence, clear out inventory, and jump start the home building industry, which will help create jobs and reinvigorate the state's economy," said Liz Snow, president of the California Building Industry Association. Nearly 40% of first-timers said they wouldn't have purchased a home if the federal credit to buyers was not offered, according to CAR research conducted last year.