Origination

The Federal Housing Administration is taking another crack at creating a refinancing program that requires principal writedowns and gives investors an option to cut their losses on underwater conventional loans. The FHA refinance option requires servicers to write down the principal amount of the mortgage by at least 10% so the loan can be refinanced into a standard, fully underwritten FHA mortgage with a 97.75% loan-to-value ratio. To qualify, the borrower must be current on the existing mortgage and payments on the new FHA-insured mortgage cannot exceed 31% of the borrower's income. If there is a second lien on the property, the refinanced combined LTV cannot exceed 115%. "This refinancing will help homeowners by setting monthly payments at the affordable levels and decreasing the mortgage burden for families owing significantly more than their homes are worth," according to a summary of the new refi program. This new refinancing option will be available in the fall, possibly earlier. For the past two years, FHA has been trying to get a principal writedown program called Hope of Homeowners off the ground without a lot of success. The congressional mandated H4H program has too many restrictions and places too many obligations on the borrowers and investors. The new FHA refinancing program is much simpler and it appears administration officials believe it will be attractive to investors and homeowners. The minimum FICO credit score is 500.

The Obama administration is expanding its flagging HAMP program to address the two main drivers of foreclosures-job loss and underwater mortgages where borrowers owe more on their loan than the property is worth. Under the new initiative, the Treasury Department will pay incentives to Home Affordable Modification Program servicers for allowing unemployed homeowners to skip three to six months of payments while they look for work. The Treasury also is encouraging servicers to consider principal writedowns for HAMP-eligible borrowers who owe more than 115% of the current appraised value of their home. Incentives will be paid for each dollar of principal writedowns by servicers and investors to bring the loan-to-value ratio below 115% and the monthly payments down to 31%, along with lowering the interest rate and extending the term. Lenders will treat the writedowns as forbearance over the first three years. The principal reduction does not become permanent unless the borrower is current on the modified mortgage for all three years. Treasury also is increasing incentives for investors to writedown or to relinquish their claims on second liens.

Citing volatility and an expected decline in market fundamentals for the multifamily sector, Zacks Equity Research's Bear of the Day for March 24 was BRE Properties, a multifamily real estate investment trust based in San Francisco. In its press release, Zacks said its long-term recommendation for the company's stock is underperform. "BRE Properties also has exposure to some weakening multifamily markets, notably, the Inland Empire, Los Angeles, and Orange County. However, home values in most of BRE Properties markets are still among the highest in the country and the rent-to-own gap remains high. The company also maintains strong occupancy levels and high operating margins. If the company can weather the current storm, it may expect a reversal of fortunes." But Zacks has a target price of $32 per share as it thinks BRE will perform "well below the broader market." During the morning on March 25, BRE has been trading at or near its 52-week high, with a price of $37.44 around midday.

CMG Mortgage, San Ramon, Calif., has acquired General Mortgage, a banker/broker based in San Diego, and its four retail offices. The deal comes on the heels of CMG opening new offices in Kirkland, Wash., Minneapolis and Denver. "The opportunity for us to expand into a vibrant new market ties directly into our strategic plan," said Chris George, founder and chief executive of CMG Mortgage. "Establishing a retail presence in the San Diego area enables us to fast-track our company's ability to offer our proprietary Home Ownership Accelerator loan product to an even broader base of consumers. We are continuing to evaluate additional growth opportunities and will do so throughout 2010." CMG recently re-introduced the HOA product that it originally introduced in 2005. After funding $2.5 billion of the HOA over a three-year period, the company suspended offering the mortgage in 2008 due to the onset of the mortgage market meltdown.

The average rate for a 30-year fixed-rate mortgage during the week ended March 25 rose a little bit over the previous week but stopped just short of 5% despite a more pronounced rise in bond yields near the end of the period, according to Freddie Mac's Primary Mortgage Market Survey. "Mortgage rates inched up slightly this week as bond yields rose even further," said Frank Nothaft, vice president and chief economist at Freddie Mac. "Interest rates on 30-year fixed mortgages, however, were still below 5% for the fourth consecutive week." The average 30-year FRM rate was 4.99%, up from 4.96% the previous week and from 4.85% a year ago. The average 15-year FRM rate was 4.34%, up from 4.33% the previous week but down from 4.58% a year ago. The average rate for a five-year hybrid Treasury-indexed adjustable-rate mortgage was 4.14%, up from 4.09% the previous week but down from 4.98% a year ago. The average one-year Treasury ARM rate was 4.20%, up from 4.12% the previous week but down from 4.85% a year ago. Average points were 0.6 for all aforementioned types of loans.

Interactive Data Corp.'s pricing and reference data business is providing daily independent evaluations for Ginnie Mae HMBS fixed-rate reverse mortgage securities. The program is designed to provide liquidity for reverse mortgage lenders who originate the Federal Housing Administration Home Equity Conversion Mortgages which make up these securities. IDC said HMBS holders have had to rely on broker quotes or information from a dealer to assess the current market value of their securities. IDC clients, added Liz Duggan, managing director, evaluations, interactive data pricing and reference data, "are increasingly requesting evaluations for these structures."

Wolters Kluwer Financial Services, Minneapolis, is marketing its new RESPA Post-Implementation Audit Service to banks and credit unions. The company said that since changes to the Real Estate Settlement Procedures Act went into effect on Jan. 1, 2010, financial institutions have found several common compliance challenges, including meeting the new fee tolerance and good-faith estimate redisclosure requirements. Another challenge is the lender responsibility to make certain their mortgage brokers and settlement agents are in compliance as well. The review includes an examination of an institution's lending, compliance, vendor management and staff training procedures. It also includes a loan file review that looks at GFEs and HUD-1 and HUD-1A forms for accuracy and adherence to all RESPA requirements. WKFS highlights any areas of potential concern and suggests ways in which policies, procedures and documentation can be improved.

The newest participant in the government's Second-Lien Modification Program is Citigroup. It becomes the fourth participant in the program, joining Bank of America, Chase and Wells Fargo. "It is our priority and commitment at Citi to help homeowners in need," said Vikram Pandit, chief executive. "The 2MP program will further improve the affordability on mortgages and help families facing financial distress stay in their homes."

The Department of Labor late Wednesday declared that commissioned loan officers are entitled to overtime pay, reversing a 2006 ruling that favored the mortgage firms that employed them. If DOL's declaration stands, it could increase compensation costs for mortgage originators at a time when production volumes are beginning to decline thanks to rising loan rates and expiring tax credits. "If your primary job duty is to sell loans inside an office, then (under this ruling) you are entitled to overtime," said Rachhana Srey, a senior associate at the law firm of Nichols Kaster which represents LOs working for Quicken Loans and Rock Financial. The Quicken/Rock overtime case is scheduled for trial in June. (Nichols Kaster is based in Minneapolis, Quicken and Rock in Michigan.) In its brand new ruling, DOL found that a mortgage loan officer's primary duty is sales, which "falls squarely on the production side of the business." A DOL ruling in September 2006 requested by the Mortgage Bankers Association classified LOs as administrators, which are not entitled to overtime under the Fair Labor Standards Act. "We're obviously disappointed with the Labor Department's ruling," said MBA senior vice President Steve O'Connor. "It has been, and remains our contention that those who fall into the category of mortgage loan officers described in the opinion spend a majority of their time performing exempt administrative or executive duties; thus they should be exempt from FLSA coverage."

The Association of Community Organizations for Reform Now Inc., a group that often over the years had an adversarial relationship with lenders but also partnered with some on occasion, said it plans to bring its operations to a close over the coming months. ACORN said it will be closing its remaining state affiliates and field offices by April 1 as well as developing a plan to resolve its outstanding debts and other obligations. The group lost its government funding after right-wing political activists pretending to be involved in prostitution distributed a video of a group representative advising the "prostitute" to misrepresent her profession in financial dealings. The group has responded by noting, among other things, that one of the activists involved in creating the video has been arrested in a separate incident. It also said it has challenged the loss of government funds in court and received a ruling in its favor. Nevertheless, the group has decided the obstacles are too great to continue operating. While the larger organization is folding, some previously involved are still operating under different names. Two separate groups of people who previously were involved with ACORN's New York and California affiliates, for example, have said they are respectively establishing new organizations in those states.