Origination

The Senate Banking Committee late Monday passed a financial services regulatory reform bill as Republicans agreed to let the measure go through committee and work with Democrats on a possible compromise before it hits the Senate floor. The panel passed the 1,300-page bill by a 13 to 10 vote along party lines. The legislation -- which includes language on MBS risk retention -- largely resembles the bill that Senate Banking Committee chairman Chris Dodd (D-Conn.) introduced last week. The mortgage industry is lobbying against risk retention language that could crimp a revival of the private label MBS market. Sen. Dodd thanked Sen. Shelby (R-Ala.) for allowing the bill to clear committee this week which was Dodd's major goal in calling the markup. Sen. Shelby said he did not want to turn the markup process into a "long march" by offering hundreds of amendments. "Although I have raised a number of serious concerns I remain optimistic that we can, over time, reach an agreement that will garner bipartisan support," said Sen. Shelby. "I just don't think we are quite there yet."

Freddie Mac on Tuesday approved a reactivated subsidiary of The PMI Group Inc., Walnut Creek, Calif., as an eligible mortgage insurer, sending the MI's stock soaring. PMI has effectively created a "good bank" MI unit which allows it to continue writing policies in states where there is a risk-to-capital ratio requirement or a minimum policyholder position requirement. The unit, which is called PMI Mortgage Assurance Co., or PMAC, has $28 million in capital. A PMI spokesman said the company has not determined when PMAC will be implemented. In trading, PMI's shares were up 17%. Several MI firms have used the "good bank" strategy to segregate out the risk inherit in their "legacy" coverage.

Existing home sales fell fractionally in February from the previous month but the housing and mortgage industries received a new dose of bad news Tuesday morning with total inventories rising 9.5% during the month to 3.59 million units. Also, some housing analysts now expect a compressed spring home buying season because of expiring federal tax credits benefiting first-time home buyers and certain move-up customers. Another bad omen for the market, according to analyst Eric Landry of Morningstar, is an increase in listings by non-distressed sellers. The National Association of Realtors reported that existing homes sales slipped 1.4% in February on a seasonally adjusted basis to 4.37 million units. (The figure excludes condominiums and cooperatives.) Compared to February of last year, one- to four-family home sales rose 4.3%. NAR is blaming the poor numbers, in part, on bad weather in the Northeast and mid-Atlantic. "Some closings were simply postponed by winter storms, but buyers couldn't get out to look at homes in some areas and that should negatively impact near-term contract activity," said NAR economist Lawrence Yun. He added that, "Although sales have been higher than year-ago levels for eight straight months and home prices are much more stable compared to the past few years, the housing recovery is fragile at the moment."

Loan brokers may not be toast after all. According to new figures compiled by National Mortgage News, wholesale funding picked up slightly in the fourth quarter. Loans that were table funded by wholesalers accounted for 13.4% of all production in 4Q, a bounce from the all-time low of 13% reached in the third quarter. Three years ago table funding through brokers accounted for 28% of all residential loans originated in the U.S. NMN and its Quarterly Data Report found that Provident Funding, Burlingame, Calif., ranked first among all wholesale lenders in 4Q, originating $8.6 billion through loan brokers, edging out Wells Fargo & Co., San Francisco, which table funded $8.1 billion. Bank of America, which owns the old Countrywide Financial wholesale platform, ranked third with $6.4 billion. The nation's top 15 wholesale lenders, as a group, originated $51 billion in residential loans, a 42% increase from 4Q08. Then again, the fourth quarter of 2008 was one of the worst periods in terms of originations for mortgage bankers in 10 years.

Fannie Mae and Freddie Mac will not be buyers -- or active sellers -- of mortgage-backed securities while they remain in conservatorship, Treasury secretary Timothy Geithner declared Tuesday. During this conservatorship period, the secretary said Treasury will continue to provide capital for the GSEs, allowing them to support the primary and secondary mortgage markets. The Federal Reserve is slated to stop buying agency MBS at month's end and there had been speculation that the GSEs might become buyers -- if necessary -- to keep rates from spiking. At the same time, Treasury wants to reduce their giant investment portfolios. "Treasury remains firmly committed to ensuring that the GSEs' retained portfolios are substantially reduced," Geithner told the House Financial Services Committee. The secretary also said it would be "irresponsible" to abolish the GSEs today but he favors a redesign of the nation's housing finance system. At the beginning of Tuesday's hearing, committee chairman Barney Frank raised the issue of whether FHA, GNMA, and the FHLBs should be restructured too. Mortgage Bankers Association president Michael Berman told the panel the Obama administration should begin to wind down the GSEs as the housing finance system transfers to a new model. "Measures such as focusing the GSEs on a narrow range of mortgages and winding down their portfolios can be undertaken now," Mr. Berman said. "Additionally, the use of good/back bank strategy would help retain the best people, processes and infrastructure from the GSEs," the MBA president testified.

The USDA's 'Guaranteed Rural Housing Program,' which has soared in popularity the past two years, could run out of allocated funds shortly, affecting hundreds of lenders and secondary market buyers, including JPMorgan Chase. A memo written by Chase executive Jack Jones notes that the U.S. Department of Agriculture has been allocated $13.5 billion to cover residential guarantees but six months into the fiscal year, $9.6 billion has already been used. A Chase spokesman confirmed the memo to National Mortgage News as well as the fact that the bank is a large investor of USDA-backed residential loans. The GRHP functions like the FHA program but is geared toward properties in towns with populations of 20,000 or less. Word that USDA could run out of guarantee money is beginning to spread. It was acknowledged at a regional meeting held by RE/MAX Realtors in Northern Virginia and in interviews conducted by NMN. Telephone calls to USDA's press office had not been returned at press time. Ron Wright, a mortgage banker based in the Midwest, said the USDA mortgage insurance program "is a big deal for people in rural areas. It also has a low default rate." If GRHP runs out of money Congress must allocate more. Another possible solution would be for lenders to charge higher upfront premiums on the loans, increasing the pool of money available for guarantees. Currently, the upfront premium charged to borrowers is 2%.

Loan Value Group is launching a new website - RHReward.com - The Responsible Homeowner Reward Program, to reward homeowners who continue to pay their mortgage on time. Loan Value Group in Rumson, N.J., created the RH Reward program to offer incentives for homeowners to remain current on their mortgages by providing an opportunity to "earn" a significant cash reward when the mortgage is paid off, or if the home is refinanced or sold. There is no charge to eligible homeowners whose financial institutions choose to participate in the program. To get the program started, the homeowner with negative equity is presented with an initial RH Reward amount. The homeowner makes their full and timely mortgage payments, to keep their RH Reward status active. For a fixed period of time following registration, an additional amount of money will be added to the initial RH Reward amount for each month the homeowner maintains active status. Once the mortgage balance is paid in full either by sale of home, refinance of home, or paying off the mortgage, the homeowner can withdraw the entire RH Reward amount.

MRG Document Technologies in Dallas, a provider of mortgage document preparation, has been named a RegulatorConnect Certified Partner by ComplianceEase, which means that lenders can use the company's solutions to prepare loan data for industry standard electronic submission to state regulators for examinations. MRG's Miracle Online was certified by ComplianceEase due to its examination data export functionality as well as its integration with ComplianceEase's ComplianceAnalyzer product. This enables the electronic transfer of compliance audits to state regulators. "As the regulatory landscape continues to become more complex, it is vital for lenders to have automated processes in place in order to comply with state and federal regulations," said Laura LaRaia, an attorney and director of customer service at MRG.

Excessive concentrations of commercial real estate loans have produced huge losses at banks and regulators need to set "hard limits" on CRE portfolios, according to Comptroller of the Currency John Dugan. The federal banking regulator issued CRE concentration guidance on banks and thrifts in 2006 over the objections of the industry. The comptroller acknowledged his guidance has "obviously not worked" as well as he would have liked, considering the huge number of bank failures stemming from CRE loans -- in particular construction and development notes. The 2006 guidance advised banks and thrifts that C&D loan portfolios exceeding 100% of equity capital would be considered a "high concentration" by examiners. Regulators should consider a range of options, including harder limits, Dugan told the Independent Community Bankers of America. In addition, regulators might weigh increased capital requirements, minimum underwriting standards and a more granular approach to defining concentrations based on CRE loan type. He noted that newly-chartered banks are over-represented among the 195 bank failures in the past 24 months. "I also think we should consider the issue of minimum federal standards for all newly chartered depository institutions, with a particular focus on business plans that call for significant CRE concentrations or reliance on non-core deposits for extended periods," he said.

Fannie Mae purchased $103 billion of single-family loans under an "early-funding" program launched last summer during the height of the warehouse lending crisis, according to new figures released by the GSE. Under the program, Fannie pays cash immediately after a loan funds at the closing table, allowing the originator to make more loans. Previously, lenders had to wait at least one month for a mortgage-backed securities transaction to settle. "We sped up access to funds so a lender receives quicker payments for loans exchanged for Fannie Mae MBS," said the GSE in a statement. Fannie intends to keep the early funding program going for the rest of 2010. Separately, the GSE last month unveiled a $1 billion warehouse lending pilot program to provide additional funding for non-bank residential lenders. Through Natty Mac of Florida it is now providing $50 million to $150 million for warehouse lines. This pilot is slated to end in December. Natty Mac is owned by Guggenheim Partners.