Origination

Condominium developers in South Florida's famed South Beach area have closed on some 4,150 new units since 2003, for an average price of $891,000 per unit. But that still leaves about 1,450 apartments that remain unsold, according to a report published by Condo Vultures, a Bal Harbour-based real estate consulting firm. The unsold inventory represents 26% of the units built since '03 in the 37 projects erected in the trendy, 24-block South Beach neighborhood. Meanwhile, Condo Vultures also reports that more single-family houses are on the market in Palm Beach than in any other county in South Florida, and the inventory isn't getting any smaller. More than 10,000 houses were for sale in the county at the beginning of March, an increase of almost 4% since Thanksgiving. By comparison, the inventory of unsold houses in Miami-Dade is down more than 6% to about 8,300 units, while in Broward, the inventory is relatively unchanged at some 8,100 houses. Consultant Peter Zalewski suggests that one reason for the increase in the number of homes up for grabs in Palm Beach County is that some owners who are under no pressure to sell believe that sales have begun to stabilize and have decided to test the market.

Purchase mortgage application volume had a strong week and was the driver of the increase in the Mortgage Bankers Association's Market Composite Index for the week of Feb. 26. The MCI, a measure of mortgage loan application volume, increased 0.5% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 1.2% compared with the previous week. The Refinance Index decreased 1.5% from the previous week and the seasonally adjusted Purchase Index increased 5.7% from one week earlier. The market share of refi applications reached its lowest level since October 2009, MBA said. This fell to 67.2% of total applications, down from 69.1% the previous week. On the other hand, the market share of adjustable-rate mortgage applications is at its highest level since November 2009. This was 5.1%, up from 4.8% for the previous week. After a single week below the 5% mark, the average contract interest rate for 30-year fixed-rate mortgages is 5.01%. This is up 6 basis points from the previous week's 4.95%, with points declining to 0.82 from 0.99 (including the origination fee) for loans with an 80% percent loan-to-value ratio. The average contract interest rate for 15-year FRMs increased by 5 bps to 4.32%. The average contract interest rate for one-year ARMs increased by 3 bps to 6.80% from 6.77%.

Appraisers are raising alarms that the Treasury Department's decision to use broker price opinions (BPOs) for its new short sales program will exacerbate mortgage fraud and property "flopping." Three appraiser groups are urging Treasury to review the Home Affordable Foreclosure Alternatives program guidelines and prohibit the use of BPOs for property valuations on short sales. Their letter to Treasury secretary Timothy Geithner points to a new trend in sales of distressed properties: "flopping," whereby the value of a home is artificially deflated using a BPO and sold to a related party of the real estate agent who quickly sells that property for a profit. "Generally speaking, real estate agents and brokers are not independent or properly trained valuation specialists. They have an inherent bias toward quick results which produce a fee for themselves, irrespective of whether the lender/servicer/property owner/borrower gets a fair return on a short sale," the March 8 letter says. The Appraisal Institute, American Society of Appraisers and National Association of Independent Fee Appraisers signed the letter. Property "flipping" (as opposed to "flopping") usually involves the quick sale of real estate using straw borrowers (and payoffs to these borrowers) to artificially inflate a home for quick profit or some type of equity stripping scheme. Inflated appraisals play a key role in flipping schemes.

Every once in a while I get a slew of questions and comments centered on the family members of the seniors. And yes you guessed it, those questions and comments are about the kids.

The entrance of a new firm, Essent Guaranty, into the mortgage insurance space is a positive for the sector as a whole, but could spell bad news for some existing players, according to a report from Moody's Investor Service. A new player, the report says, "expands the origination capacity, currently constrained, and, therefore the relevance, of the sector. The new player will, however, adversely affect the weakest mortgage insurers by bringing in alternative origination capacity." Moody's explained that supporting the continued relevance of mortgage insurance is key during this period when the government is deciding the future role of Fannie Mae and Freddie Mac. Even though a decision is not expected to be made until 2011, "We cannot rule out the possibility that narrower GSE charter modifications will be imposed that are intended to increase funding for the high LTV segment of the market ahead of such reform. Such modifications could hurt the mortgage insurers if they support an alternative to, or reduce the need for, mortgage insurance," says the report, written by Arlene Isaacs-Lowe, a senior vice president at Moody's. New capacity reduces the likelihood of that kind of charter modification taking place. But Moody's thinks weaker MI players could be hurt by the entrance of new capital because originators and the GSEs could reevaluate their relationships with those firms and limit the amount of new business they get.

Fairway Independent Mortgage Corp., Sun Prairie, Wisc., funded $720 million in residential loans in the New England area last year, a 244% jump from 2009. The 14-year old company said it now ranks among the top 30 lenders in Massachusetts (the most populous state in the region) compared to 76th a year earlier. Company CEO Steve Jacobson credited Fairway's branch managers for the strong showing. "It's back to selling mortgages like we did ten years ago when everybody had to be extremely detailed," he said. "Our local branch managers are proof that it's possible to thrive in a challenging market if you're a strong leader." FIMC has 80 branches and 900 employees nationwide.

The creation of an independent Consumer Financial Protection Agency would not impair safety and soundness regulation of banks, according to a majority of business economists. A survey by the National Association of Business Economics found 54% of economists are dismissive of claims by the banking industry (and their supporters in Congress) that a CFPA would undermine S&S regulation. A quarter (25%) of the 203 economists surveyed believe passage of CFPA legislation would be detrimental to safety and soundness. The House passed a bill that would create a stand-alone agency with rulemaking and enforcement powers to stop abusive mortgage lending and credit card practices. Such a strong consumer protection agency has run in to fierce opposition in the Senate where banking committee members are trying to wrap up negotiations on a massive financial regulatory reform bill. House Financial Services Committee chairman Barney Frank told a meeting of minority real estate professionals that CFPA opponents seem to be arguing that consumer protection will hurt banks. "There are people who believe if the banks aren't able to treat consumers unfairly they can't survive," Rep. Frank said.

Defunct FHA lender Lend America and its "chief business strategist," Michael Ashley -- who controlled the company -- have effectively been barred from the mortgage industry, according to newly released court documents. The ban springs from a civil suit brought by the Justice Department on behalf of the FHA against the Melville, N.Y.-based nonbank and Mr. Ashley. Amid investigations against the company, LendAmerica closed its doors in early December. FHA found that the company had violated numerous underwriting guidelines and according to interviews conducted by NMN the company was refinancing some loans without paying off the prior liens. In agreeing to a ban from mortgage banking, Mr. Ashley, 44, did not admit liability, according to the agreement filed recently in federal court in Central Islip. In return, anything tied to federal-related loans is off limits -- from appraising properties and marketing mortgages to working as a consultant or housing counselor, Newsday reported. "I'm beyond thrilled to be done with the mortgage business," Mr. Ashley said. "I've had it with the mortgage business. I'm done with everybody chasing me around."

The homebuyer tax credit has been a dud so far this year, but the National Association of Realtors is hoping it will kick in this spring and drive home sales higher before it expires at midyear. When the tax credit was due to expire in November, the rush by new first-time homebuyers to meet the deadline pushed November sales 45% higher than a year ago. "We would anticipate that April, May, June home sales figures will be high if there is a similar buying pattern as last year," said Lawrence Yun, chief economist for NAR. But so far the extension of tax credit by Congress has generated only a modest increase in foot traffic, he told reporters. And the expansion of the tax credit to existing homeowners or repeat buyers has not generated much excitement either. "Right now there is nothing to indicate we will get that 40% kick" in May or June, Mr. Yun said. "But we are keeping our fingers crossed."

The Government National Mortgage Association should be given its independence from the Department of Housing and Urban Development, its former president said. Joseph Murin, who ran Ginnie Mae for two years and is now a private sector consultant, called on Congress to cut the agency loose from HUD, during a speech he made at the recent Midwinter Housing Conference. Thanks to the collapse of the nonprime mortgage market, GNMA's issuance volume is booming. Along with Fannie Mae and Freddie Mac, GNMA-backed product dominates today's mortgage market. Mr. Murin left GNMA this past summer. The agency guarantees almost $1 trillion in product compared to $350 billion two years ago. Mr. Murin believes that because GNMA is now so large and plays such an integral part in the secondary market, "it requires a structure that provides for its independence and the ability to respond to the always changing secondary market." (For the full story see the weekly edition of National Mortgage News.)