Origination

SecondMarket, a New York-based secondary market for illiquid assets such as private-label residential and commercial mortgage-backed securities, has raised $15 million from Asian investors. The investors include Li Ka Shing Foundation, a charitable foundation founded by the Asian entrepreneur that is its namesake. The other investor is Dunearn Investments (Mauritius) Pte. Ltd., a subsidiary of Singapore investment company Temasek Holdings (Pte) Ltd. Each of the investors put $7.5 million into the New York company. Proceeds from the investment are slated for use in further scaling the SecondMarket's platform and infrastructure in preparation for its upcoming expansion into the Asian markets.

The pace of existing home sales decreased year-to-year in January in California, but the inventory of unsold units sitting on the market waiting for buyers dropped as well, according to the California Association of Realtors. Sales were off 10.6% from the same month a year ago, CAR said. Nevertheless, the pace of sales remained above the half-a-million-units-a-year threshold for the 17th consecutive month. In that regard, the sales pace is "holding steady at prepeak levels from early in the last decade," said CAR president Steve Goddard. At a seasonally adjusted rate, sales were running at a 539,040-unit-a-year pace in January, according to data collected from more than 90 local Realtor associations statewide. The median price of an existing, single-family detached house in January was $287,440, a 15% jump from the revised median for January 2009 of $259,960. But the January median was down 6.3% compared with $306,820 in December 2009. The year-over-year gain was the largest since December 2005, said CAR's chief economist, Leslie Appleton-Young. And though the month-to-month decline was large, it was not as great as the dropoffs in the same time period in both 2008 and 2009, when the median fell by more than 11%. Better yet, according to the economist, "the median price still is 17.2% ahead of the trough in this cycle."

MGIC Investment Corp., the nation's largest mortgage insurer, is cutting premiums to better compete with the Federal Housing Administration. In a new filing with the Securities and Exchange Commission, the Milwaukee insurer said that beginning May 1 it will offer lower rates for borrowers with credit scores of 720 or greater, and higher rates for borrowers with credit scores between 620 and 679. There will be no change in rates for borrowers with scores between 680 and 719, MGIC said. Previously, MGIC did not include a borrower's credit score in its pricing model. Lenders that find the transition difficult have the option of continuing to use the insurer's old rate structure, MGIC said. Since the housing bubble burst, the FHA has become a more formidable contender in the mortgage insurance business, gaining market share in the coverage of loans with small downpayments as private insurers tightened their underwriting standards. In fact, MGIC said in the filing that it did not consider the FHA a significant competitor until 2008. Over the past few months — in an effort to improve the quality of its loans and protect its reserve fund — FHA has hiked downpayments for borrowers with lower credit scores and raised its upfront mortgage insurance premium.

The Federal Housing Administration is advising mortgage brokers to hold off on getting their annual financial audits until they see a final rule that will change the net worth requirements for lenders and brokers. "I would strongly encourage you to wait until you see the rule," FHA commissioner David Stevens told a National Association of Mortgage Brokers conference in Washington. On Monday, comments made by a top FHA official were incorrectly interpreted as a signal that brokers should file their audits by March 31. Mr. Stevens told National Mortgage News Online that the final rule is coming out very soon and an audit can cost a small broker $8,000 to $10,000. "Before they spend that money," he said, "they should wait until the rule comes out just to make sure they actually need one." The FHA commissioner told the NAMB meeting he cannot discuss the contents of the final rule. But he was able to get the FHA general counsel to grant permission for him to advise brokers on filing financial audits. The original proposed rule eliminates the need for brokers to meet FHA audit and net worth requirements. Going forward, FHA-approved direct endorsement lenders will be responsible for the brokers they work with and policing the quality of their loans.

Former Federal Reserve chairman Alan Greenspan was cautiously optimistic about an economic recovery while speaking to CUNA's Government Affairs Conference this week, in stark contrast to his last appearance at the GAC when his suggestion that homeowners try adjustable-rate and other nontraditional mortgages helped spark a flurry of exotic residential loans. Mr. Greenspan said that high-income individuals with growing investment portfolios and companies with rising stock prices are driving the recovery, which he described as "extremely unbalanced." He noted that the nation is recovering economically but the "really forceful" areas of recovery "are reasonably dead" — namely the housing market and autos where sales are subdued. "Small businesses also continue to face challenges, and while things aren't getting worse for them, the environment is showing very few signs of getting better," said Mr. Greenspan. His appearance before the group came roughly six years after he last spoke at the GAC when his much-watched remarks sparked a flurry of ARM and nontraditional mortgage purchases by borrowers hoping to buy homes in the booming real estate markets around the nation. "American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage," Mr. Greenspan said then. "To the degree that households are driven by fears of payment shocks but are willing to manage their own interest rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home."

Weak housing demand is contributing to a decline in new mortgage applications, the Mortgage Bankers Association's Weekly Mortgage Applications Survey found. MBA's Market Composite Index for the week of Feb. 19, a measure of mortgage loan application volume, decreased 8.5% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the index decreased 7.3% compared with the previous week. The seasonally adjusted Purchase Index decreased 7.3% from one week earlier, putting the index at its lowest level since May 1997. "As many East Coast markets were digging out from the blizzard last week, purchase applications fell, another indication that housing demand remains relatively weak," said Michael Fratantoni, MBA's vice president of research and economics. "With home prices continuing to drift amid an abundant inventory of homes on the market, potential homebuyers do not see any urgency to lock in purchases." Meanwhile, the Refinance Index decreased 8.9% from the previous week. The market share of refi applications was 68.1% of total applications, down from 69.3% the previous week. The market share of applications for adjustable-rate mortgages increased to 4.7%. The average contract interest rate for 30-year fixed-rate mortgages has zoomed back above the 5% line to 5.03% from the previous week's 4.94%, with points rising to 1.34 from 1.09 (including the origination fee) for loans with an 80% percent loan-to-value ratio, the association reported. The average contract interest rate for 15-year FRMs increased two basis points to 4.35%. The average contract interest rate for one-year ARMs increased 13 basis points to 6.80% from 6.67%. The MBA can be found online at http://www.mortgagebankers.org.

New home sales plunged 11.2% in January from the previous month ending a streak of encouraging news on a possible housing recovery. Despite the extension of the homebuyer tax credit in November, sales of newly constructed homes fell to a seasonally adjusted annual rate of 309,000 in January from a 348,000 rate in December. The latest reading on new home sales is below the 329,000 rate in January 2009 and there is no way to sugarcoat these numbers, according to Weiss Research real estate analyst Mike Larson. "They stink," he said. "Fewer new homes were sold in this country than at any time since the Kennedy administration. The inventory of homes for sale increased, and the median price of a new home fell to its lowest level in more than six years," Mr. Larson said.

Mortgage industry groups are urging the Treasury Department to act quickly and extend the Home Affordable Refinance Program so that borrowers with high LTV or underwater mortgages still have an avenue to refinance and lower their payments. HARP is due to expire June 10. But the trade groups are concerned there could be disruptions if the program is not extended soon. "By April 1, lenders will no longer be able to extend even 60-day rate locks," according to a joint letter by five trade groups. Launched last April, HARP has facilitated the refinancing of nearly 190,000 Fannie Mae and Freddie Mac mortgages with loan-to-value ratios of 81% up to 125%. "HARP makes it easier for families to stay in their homes," the Feb. 18 letter says. "HARP also appropriately rewards borrowers who have worked hard to stay current on the mortgage loans" and "prevents unnecessary foreclosures." The American Bankers Association, American Financial Services Association, Consumer Mortgage Coalition, Housing Policy Council and Mortgage Bankers Association signed the letter.

Freddie Mac, which continues to mark down the value of its mortgage assets, lost $6.5 billion in the fourth quarter but will not need fresh capital from the U.S. Treasury. At yearend its loss reserves increased to $33.9 billion, more than double what it had set aside 12 months earlier. In releasing its quarterly and full-year results, the GSE also revealed that it found two errors in how it calculates loss severity rates that would have made its results look better. It said that by fixing its calculations these changes would have been "material" to its earnings. The national mortgage delinquency crisis continued to hammer its bottom line in the 4Q with the GSE reporting total credit losses of $7 billion, a modest improvement over 4Q08 when it had CLs of $8 billion. However, when it comes to operating results that come from management and guarantee fees, Freddie earned $743 million in the fourth quarter, an 8% decline from the third quarter. The government-controlled company also revealed that the delinquency rate on its structured bonds increased to 3.87% at yearend from 3.33% three months earlier. Despite all its problems, the company still has a positive net worth of $4.4 billion, but to date Freddie has received $51 billion in aid from the Treasury. The company lost $21.6 billion for all of 2009, excluding dividends paid to the government. In 2008 it lost $50.1 billion. Fannie Mae is scheduled to report its results on Friday. Late last year, the White House said it would cover unlimited losses on the GSEs over the next three years, removing a previous ceiling of $400 billion.

For the next few weeks, Broker Universe will feature some of our favorite Sue Haviland columns from the past year.I was recently speaking with an experienced reverse mortgage originator who has a bit more time on her hands than she would like right now. She asked what she could do to keep her activity level up, set her apart, and above all, not spend a lot of cash doing it.