Origination

Mortgage rates will rise no more than 50 basis points after the Federal Reserve stops purchasing agency MBS in March, according to a new survey of business economists. "Three-quarters of the panelists believe mortgage interest rates will increase 50 basis points or less," a summary of the survey results says. The 48 professional forecasters surveyed by the National Association of Business Economics generally say economic expansion is on a "firm track" and the rebound in the housing market is "ongoing and sustainable." The economists expect housing starts will hit 730,000 this year, up from 550,000 in 2009. And starts will jump to 1 million units in 2011. House prices will rise 1.6% this year and 2.6% in 2011, based on the Federal Housing Finance Agency housing price index. "Such increases would barely keep up with inflation," the survey says. The February survey does not include a forecast for mortgage rates. However, the economists see the 10-year Treasury rate drifting upward to 4.25% by yearend and 4.5% by the second quarter of 2011.

Although mortgage insurer Radian Group continued its money losing ways in the fourth quarter, management is looking ahead to what it believes will be a brighter future — with improving liquidity and a stronger capital position. In 4Q, Radian lost $92 million, a marked improvement over the same period last year when it lost $250 million. For all of 2009, Radian lost $148 million vs. $411 million in 2008. S.A. Ibrahim, chief executive, said not only has the MI taken care of any near-term liquidity issues, it anticipates it will have excess liquidity through 2012. Unlike some of its peers, the company's risk-to-capital ratio is trending downward: 15.4-to-1 at the end of 2009 compared to 16.4-to-1 at the end of 2008. Still, in case of the "unexpected event we need it in the first place," Radian has prepared an affiliate, Amerin Guaranty, to write business in states where Radian Guaranty might run afoul of the 25-to-1 standard. The company is prepared to write mortgage insurance business in "an uninterrupted fashion" Mr. Ibrahim said. New insurance written for the fourth quarter 2009 was $2.4 billion, with $17 billion written for the whole year. Radian is looking to grow, having moved into new markets, but this growth will not occur at the expense of loan quality, he noted.

Even though home values continued to firm up in December, the man who created the Standard & Poor's/Case-Shiller index is worried that "underwater borrowers" will eventually stop making payments, sending delinquency rates rising again. In a conference call discussing housing prices, Robert Shiller, chief economist for MacroMarkets LLC, noted that 80% of underwater homeowners are continuing to make payments "but I'm worried about what will happen if they stop paying." David Blitzer, chairman of S&P's index committee, cautioned that one of great unknowns for housing is whether "the idea you did whatever it takes" to make the mortgage payment is fading. Still, the new indices released Tuesday show that home values rose for the seventh straight month in December. The S&P/Case 20-city home price index rose 0.3% during the month compared to November. Compared to December 2008, the index fell 3.1%. Five of 20 cities in the index showed declines from November to December. The index is now up more than 3% from its bottom in May, but still 30% below its May 2006 peak. Los Angeles and Phoenix posted the largest price increases. The worst performer was Chicago with a 0.6% decline.

Arch Bay Capital has issued a $57.4 million MBS backed by seasoned performing and delinquent subprime loans, garnering a AAA rating on the bond, a sign that the private-label market could come back but only if issuers are willing to make little money on their deals. The mortgage-backed security was rated by DBRS and the end investor is a bank, said one official familiar with the transaction. Quincy Tang, senior vice president of structured finance/RMBS for DBRS, told National Mortgage News that because of the credit enhancement put on the security by Arch Bay, the investor in the AAA bond will not suffer any losses unless delinquencies on the underlying loans exceed 75%, an astronomical number. The loans — originally funded a few years back by such subprime firms as Accredited Home Loans, NovaStar Mortgage and others — have a 30-day delinquency rate of 21%. The collateral for the bond are loans with a principal balance of $229 million. One NPL investor, requesting anonymity, said based on what he knows of the deal, Arch Bay doesn't stand to make much money, if any, on the transaction. The Irvine, Calif.-based hedge fund could not be reached for comment. Its profit will be determined by how much it paid for the NPLs — which it bought in the secondary market — and the cost of the credit enhancement on the bond. Roughly 19% of the loan pool has been modified, according to DBRS.

The Department of Housing and Urban Development might use the newly implemented good faith estimate disclosure as a way to cap origination fees on Federal Housing Administration loans. All lender origination fees — including yield spread premiums — are captured in 'Block 1' of the GFE. It's unclear what the cap might be, but HUD deputy assistant secretary Vicki Bott, who is in charge of FHA's single-family program, told attendees of a National Association of Mortgage Brokers conference that the issue is on the table. "We are actually looking at capping total Block 1 fees," Ms. Bott told the group. HUD officials are looking at all origination fees charged on FHA loans. It plans to take into consideration loan size so that lenders making $40,000 loans are not penalized. In setting an origination fee limit, "we are not going to be extra conservative," Ms. Bott told the brokers.

Fitch Ratings has downgraded 393 bonds in 254 residential mortgage-backed securities transactions it was reviewing to "D," indicating that the bonds have incurred principal writedowns. Eighty-five of the downgraded bonds were from transactions originally said to have alternative-A credit, 80 were from deals originally considered to be prime credit transactions and 77 were from transactions originally categorized as subprime credit. The remaining 12 bonds were said to come from "other" transaction types. All the downgraded bonds were previously rated "CC" or "C," which indicated defaults were expected.

RealEC Technologies Inc. has launched new income verification services to its RealEC Collaborative Partner Network, the RealEC Exchange. The income verification suite, provided by Lender Processing Services' Applied Analytics group, enables lenders to validate a borrower's identity and verify the accuracy of income information provided during the application process. The borrower's income is confirmed directly with the Internal Revenue Service by uploading the signed IRS 4506-T form electronically through the RealEC interface. LPS Applied Analytics then securely delivers a report from the IRS.

PeoplesBank has given its members access for mobile banking and payment services through the iPhone, courtesy of technology provided by Online Resources Corp. The Massachusetts-based $1.5 billion asset bank is now one of fewer than 50 U.S. financial institutions that currently offer the iPhone application through the App Store or iTunes. PeoplesBank has used Online Resources' full suite of retail and business Internet banking and bill payment services since 1999. An extension of these online services, the new iPhone application allows users to view account balances, transaction history, schedule same day transfers, pay bills, and send and receive secure in-session messages. PeoplesBank customers register online for mobile access and download the iPhone application, which also works on iPad and iPod touch devices.

After months of planning, Fannie Mae on Monday finally unveiled new details on its warehouse lending pilot, a $1 billion effort designed to provide additional funding to nonbank residential lenders. Its partner in the pilot is Natty Mac of Florida, a warehouse lender owned by Guggenheim Partners LLC. The program will provide credit lines for 10 to 12 lenders in 2010, the GSE said. "In this market, lenders who rely on warehouse funding are struggling to sell their loans and replenish their funds in a timely way," said Fannie Mae CEO and president Michael Williams. "We are taking action now to help fill the gap by providing a billion dollars of critical liquidity targeted at smaller lenders across the country." Fannie would not identify the lenders that will be on the receiving end of the credit lines. National Mortgage News Online reported last week that the pilot was on the verge of being launched.

The Department of Housing and Urban Development is preparing to issue a final rule soon that will give mortgage bankers additional time to adjust to coming higher net worth requirements. The final rule will "ensure there is a chance to ramp up to the new requirements," said Federal Housing Administration assistant secretary Vicki Bott. HUD is seeking to increase its minimum net worth requirement for FHA lenders to $2.5 million from the current $250,000. The phase-in period for the higher amount was originally proposed at three years, but could be lengthened. Ms. Bott made her comments on Monday at a legislative conference sponsored by the National Association of Mortgage Brokers. She cautioned that changes to the final rule are "not substantially" different from what appears in the proposed rule. No other details were available at press time. Ms. Bott is encouraging brokers to send in their FHA audits as early as possible this spring. FHA still plans to move forward with a plan to have actual funders police brokers as opposed to having brokers register and be approved by HUD. But this change will hot happen until early 2011.