Origination

Citigroup -- which has whittled down its third-party lending programs severely over the past year -- is changing course, at least when it comes to correspondent loan production. It a recent interview with Bloomberg, Sanjiv Das, who heads the lender's U.S. mortgage business, confirmed that CitiMortgage, O'Fallon, Mo., will ramp up its purchase of mortgages underwritten by other companies and keep more loans on its balance sheet. Two months ago National Mortgage News reported that CitiMortgage had been selectively contacting certain high performance loan brokers with the idea of expanding its wholesale business. According to the Quarterly Data Report, CitiMortgage bought $3.2 billion of home mortgages through the correspondent channel in the fourth quarter, a stunning 69% decline from 4Q08. Among correspondent buyers, CitiMortgage ranks sixth nationwide but was the only top 10 buyer to post a huge decline in 4Q. (A year ago CitiMortgage cut back its broker network significantly.) Now, based on what Das told Bloomberg, it appears CitiMortgage has changed course on correspondent lending. "We decided that we can't have a consumer bank without a mortgage product," Das said. "Then, we said, 'let's now start to grow this business back in a high-quality way.'"

Origen Financial Inc., a real estate investment trust that manages residual interests on securitized manufactured housing loans, lost $2.3 million for the fourth quarter and $8.6 million for the full year 2009. This is an improvement over net losses of $4.4 million and $35.4 million for the same periods in 2008. In July 2008, the Southfield, Mich., company exited both the manufactured housing loan origination and loan servicing businesses. Net interest income for the fourth quarter was $8 million, down 10% from the same period in 2008, while for all of 2009, it was $31.5 million, up 4%. Origen's fourth quarter loan loss provision was $5.4 million, down 10% from the fourth quarter 2008. Ronald Klein, Origen's chief executive, said "we are generally pleased with the loan portfolio performance in 2009, especially in light of the economic environment. While fourth quarter 2009 loan performance worsened, particularly for California loans, we have seen improvement thus far in 2010 and we are hopeful that some stabilization is returning to the housing market."

Pentagon Federal Credit Union, Alexandria, Va., the nation's third largest credit union, said Friday it has signed with Sun West Mortgage Co. to offer reverse mortgages to its members. PenFed, one of the biggest mortgage lenders among credit unions, will initially market the federally insured Home Equity Conversion Mortgage reverse mortgage to its members located in Washington, D.C.; Maryland and Virginia. PenFed's Reverse Mortgage eliminates the upfront origination fee - 2% of the adjusted property value - and the $35 monthly servicing fee, which are customary in the industry. Consequently, PenFed's competitively priced reverse mortgage will make additional home equity available to the homeowner.

Rep. Scott Garrett, R- N.J., has reintroduced a bill to create a legal and regulatory framework for development of a covered bond market in the U.S. Covered bonds are used in Europe and Canada to fund commercial and residential mortgages. But unlike mortgage-backed securities in the U.S., covered bond issuers continue to hold the mortgages on their balance sheets. Under the Garrett bill, the Treasury Department would be the primary regulator of covered bonds and set standards and reporting requirements for issuers. "Once members understand how a covered bonds marketplace works and the benefits that it can offer homeowners, I believe Republicans and Democrats can come together and provide the legislative framework necessary to create a robust covered bonds marketplace here in the U.S.," Rep. Garrett said. Reps. Paul Kanjorski, D-Pa., and Spencer Bachus, R-Ala., are co-sponsors of the Garrett bill. Rep. Garrett is pushing for passage of his bill this year, possibly as a part of the financial services regulatory reform package. The House passed its reform bill in December and now it is in the Senate's court. If the Senate ever passes a bill, a House-Senate conference might present an opportunity. However, a spokesman for House Financial Services Committee chairman Barney Frank, D-Mass, indicated that the congressman may have missed his chance. "The House, without the support of Rep. Garrett, passed a comprehensive Wall Street Reform bill so that ship has sailed. As you may recall, Mr. Frank held a [covered bond] hearing at the request of Rep. Garrett in December. We have a very crowded calendar right now, so it is impossible at this time to say if we would be moving this legislation," the spokesman said.

The Federal Home Loan Bank of San Francisco has sued nine securities dealers that sold the government sponsored enterprise nearly $20 billion in private-label mortgage backed securities. The San Francisco bank, like other FHLBs, suffered losses due to its investment in AAA-rated private-label MBS. The complaint filed in Superior Court in the County of San Francisco, alleges that the dealers made "untrue or misleading statements" about the characteristics and quality of the mortgage loans underlying the securities. The San Francisco FHLB is seeking to rescind those MBS purchases, which originally cost $19.1 billion. In February, the Seattle FHLB filed a similar lawsuit against issuers to compel them to buy back $4 billion in private-label MBS.

Republicans on the House Financial Services Committee Friday released a bare bones blueprint for the future of the nation's housing finance system, saying "private capital" should be the "primary source" of home mortgage money, replacing Fannie Mae and Freddie Mac. According to a document entitled "Goals and Principles for GSE Reform," Republicans, led by ranking member Spencer Bachus (R-Ala.), said Fannie and Freddie should wind down their operations within four years. Under its blueprint, the GOP thinks a covered bond market should replace the secondary market role currently played by the GSEs. They also want to see an end to GSE "jumbo loan limits" which they say is a taxpayer subsidy for mortgages made to millionaires. To date, the government has provided $127 billion in capital to Fannie and Freddie through the purchase of preferred stock. The cash has kept their net worth positions above zero. Next year the Obama Administration will release its official plan on restructuring the GSEs. Fannie and Freddie were taken over by the government in September 2008.

Stearns Lending, Santa Ana, Calif., one of the fastest growing wholesale funders in the nation, plans to launch a new correspondent program next month, according to its founder and CEO. In an interview with National Mortgage News, CEO Glenn Stearns said it will "go after the larger shops out there" as a correspondent buyer. The privately held nonbank survived the credit crisis by shrinking during the subprime boom and sticking to conventional lending. Over the past two years it has grown rapidly by scooping up the wholesale production networks of many nonbanks that failed. According to the Quarterly Data Report, the 20-year old Stearns Lending ranked 13th among all wholesale originators in the fourth quarter with $1.7 billion in fundings. Among the top 15, it had the second highest growth rate: 141%. The only wholesaler growing faster was Provident Funding Associations, Burlingame, Calif., with 145%. PFA ranked first in 4Q, according to NMN/QDR.

The nation's mega banks and other depositories repurchased roughly $30 billion in residential mortgages from Fannie Mae and Freddie Mac in the second-half of 2009 and will suffer losses of up to 40% on the loans, according to a new report from Credit Suisse. Penned by CS analyst Moshe Orenbuch, the report notes that repurchase volumes are accelerating and will "remain elevated in 2010 and moderate thereafter." Mr. Orenbuch estimates that large cap banks followed by CS account for roughly 88% of the $30 billion in buybacks. Among this universe of large caps, he told National Mortgage News, is Wells Fargo & Co., Bank of America, JPMorgan Chase, and Citigroup -- all of which have acknowledged buyback problems in earnings reports. The analyst said the loans being repurchased are "likely to be delinquent and/or deficient" and include what he called "differentiated" products, meaning alt-A, interest only mortgages and payment option ARMs. But there is some good news in the report: "given the bulk of the repurchases are from the 2007 vintage, we would expect repurchase demands to moderate in 2011, as the quality of industry originations strengthened during 2008."

The average rate for a 30-year fixed-rate mortgage rose slightly in the most recent week while shorter-term rates were mixed, according to Freddie Mac's primary market survey. "Mortgage rates for fixed rate mortgages were virtually unchanged" for the week ending March 18, said Freddie's chief economist Frank Nothaft. The average 30-year FRM rate ended the period at 4.96%, up slightly from 4.95% the previous week. A year ago the rate was 4.98%. The average 15-year FRM rate was 4.33%, up from 4.32% the previous week but down from 4.61% a year ago. The average rate for a five-year hybrid Treasury-indexed adjustable-rate mortgage was 4.09%, up from 4.05% the previous week but down from 4.98% a year ago.

Freddie Mac is coming to market with a $1.1 billion MBS backed by multifamily loans. The various pass-through certificates in the bond are collateralized by 68 recently originated multifamily mortgages from Freddie approved seller/servicers. It is the second of six such issuances anticipated during 2010. These "K-006" certificates, which will price on or about March 25 and settle 10 days later, will be offered by several dealers lead by JPMorgan Securities Inc. and Bank of America Merrill Lynch. Co-managers for the transaction include Deutsche Bank Securities Inc., Goldman Sachs, Jefferies & Co. and Sandler O'Neill.