Origination

A la mode, Oklahoma City, has released "The Appraisal Fee Reference," a monthly guide to what independent appraisers charge nationwide. The software vendor/publisher says the AFR will help lenders/servicers with compliance issues especially in regard to new Federal Housing Administration appraisal guidelines. FHA now requires lenders to ensure that appraisers are paid reasonable and customary fees, independent of what might be added on by an appraisal management company. The AFR provides the median appraisal fees for each of the 3,221 counties in the 50 states, the District of Columbia, Puerto Rico and Guam.

Associated Banc-Corp., Green Bay, Wis., is working on a plan to expand its warehouse lending platform with a target date of midyear, according to executives familiar with the matter. "Right now they're hiring people and getting the systems in place," said one source who has been briefed on the situation. However, advisors caution that the commercial bank's strategy is to only provide credit to nonbanks that operate in Associated's bank footprint in Wisconsin, Illinois and Minnesota. (For the full story see the paper edition of National Mortgage News.)

Despite the dimming prospects for the creation of an independent Consumer Financial Protection Agency, TARP watchdog Elizabeth Warren isn't ready to consider alternatives. "Right now there is no Plan B," Ms. Warren, the chairman of the Troubled Asset Relief Program's Congressional Oversight Panel, said in response to a reporter's question on a conference call. "Right now all the chips are on the table with the Consumer Financial Protection Agency." If the CFPA becomes reality it would oversee mortgages, credit cards and other types of consumer debt, taking certain oversight functions away from federal banking regulators. The conference call was organized by the U.S. Public Interest Research Group ahead of a Monday compliance deadline for the Credit Card Accountability, Responsibility and Disclosure Act.

The benchmark 10-year Treasury yield rose above 3.8% Friday morning and stayed there into the early afternoon, suggesting possible upward pressure on mortgage rates. Late Thursday the Federal Reserve surprised the markets by raising the discount rate it charges its member banks, citing improvement in financial market conditions. However, the Fed said, "The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy, which remains about as it was." The 10-year has been as low as 3.6% this month but has been on average closer to 3.7% recently.

The delivery of certain coupons within the "TBA" mortgage-backed securities market were disrupted (or failed) in the wake of massive loan buyout plans unveiled by Fannie Mae and Freddie Mac last week. These settlements are expected to be resolved soon, according to Credit Suisse researchers. The "fails," which represent situations in which a promised amount of securities cannot be delivered by the settlement date, have been seen in to-be-announced 5% and 5.5% MBS coupons. These higher premium coupons are prioritized in the buyout plans. Credit Suisse researchers said in a report accompanying an investor call that they expect fails should move toward resolution as investors deliver more of the needed pools going forward. They see the buyouts of delinquent loans as ultimately a positive for the agency MBS market as they remove prepayment uncertainty, among other things. That uncertainty is removed almost entirely in Freddie Mac securities due to its "one [month] and done" buyout plan. Fannie's multimonth buyout plan presents opportunities for short-term trades in those securities, said Mahesh Swaminathan, director and head of residential mortgage-backed securities for CS.

The nation's GSE regulator says Fannie Mae and Freddie Mac will not provide their traditional support for the mortgage-backed securities market when the Federal Reserve stops purchasing agency MBS at the end of March. The government-sponsored enterprises are already obligated to purchase up to $200 billion in delinquent loans out of their own MBS, according to GSE regulator Edward DeMarco. "Given the size of the enterprises' current outstanding retained portfolios, and the potential volume of delinquent mortgages to be purchased out of guaranteed mortgage-backed security pools, it is my expectation that any net additions to their retained mortgage portfolios would be related to this activity," Mr. DeMarco said. The acting director of the Federal Housing Finance Agency spoke at a Women in Housing and Finance luncheon on Thursday. He stressed that FHFA is "committed to the principle of reducing" the GSEs' retained portfolios. On Thursday, a Freddie economist said Fannie and Freddie have room in their portfolios to buy MBS if private investors don't return to the market. FHFA declined to comment on the economist's remarks. Mr. DeMarco told the WHF luncheon that the Fed's exit from the MBS market will be smooth. "I expect that other private parties will begin to invest in new enterprise mortgage-backed securities as the Federal Reserve gradually withdraws its purchase activity," he said. Since December 2008, the Federal Reserve has purchased nearly $1.2 trillion in Fannie, Freddie and Ginnie Mae MBS. The Fed has $55.1 billion remaining of its $1.25 trillion commitment to support the MBS market.

The FHA's nearly forgotten Hope for Homeowners program may get a jump-start now that Joel Harrison of Banker's Portfolio has lined up an investor willing to make a multibillion-dollar bet on underwater mortgages. The H4H program turns conforming Fannie Mae and Freddie Mac loans that are "underwater" into new Federal Housing Administration-backed mortgages. Mr. Harrison said the investor — who he refused to identify — is willing to buy Ginnie Mae II H4H mortgage-backed securities. He hopes his Irvine, Calif., firm can deliver $25 billion to $50 billion in H4H loans before the congressionally approved refinancing program sunsets in September 2011. "We are really open to mortgage investors and asset managers contacting us," he said. Mr. Harrison said he has arrangements with several originating servicers to refinance the loans. Under the program, underwater mortgages must be written down to a 96.5% loan-to-value ratio based on a current appraisal with any subordinated liens being extinguished. (The Department of Housing and Urban Development is authorized to pay incentives to second-lien holders for releasing their liens.) Mr. Harrison started his shop two years ago and he believes mortgage holders are ready to accept such writedowns. "A H4H refinancing can be completed in 45 days with a 15% to 20% higher return than going through the foreclosure process, which can take 8-10 months," he said.

American homeowners are overly cynical about where their homes' value moved in the fourth quarter 2009, according to the latest Zillow Homeowner Confidence Survey. The survey gave a Zillow Home Value Misconception Index of -2; zero is when homeowners' perceptions and reality are equal. The index is in negative territory because only 20% of homeowners said their property value increased in 2009; the reality was 28% of homes increased in value last year. This is the first time the index has been negative and the closest it has been to zero since it was introduced in the second quarter of 2008. About half the respondents believe their homes lost value last year (in reality it was 65%) while 30% said the value said the same (in reality, 7%). Stan Humphries, chief economist at Zillow, said "Given recent news about the stabilization of home values in some markets, I can see why homeowners are so optimistic. However, home values in many markets are still under substantial downward pressure from high levels of foreclosures and we don't believe we'll see a definitive bottom nationally until the second quarter of this year. We're not out of the woods yet."

The average rate for a 30-year fixed rate mortgage remained below 5% and crept a little lower in the most recent week, according to the most recent Freddie Mac Primary Mortgage Market Survey. The average for the 30-year FRM during the week ended Feb. 18 was 4.93%, down from 4.97% the week previous and 5.04% a year ago. "Mortgage rates eased for the second week, while economic data releases suggest that the housing market may be in a slow state of recovery," said Frank Nothaft, Freddie Mac's vice president and chief economist. The average 15-year FRM rate was 4.33%, down from 4.34% the previous week and 4.68% a year ago. The average rate for five-year Treasury-indexed hybrid adjustable rate mortgages was 4.12%, down from 4.19% the previous week and 5.04% a year ago. The average one-year Treasury ARM rate was 4.23%, down from 4.33% a week ago and 4.80% a year ago. Average points were 0.7 for 30-year FRMs, 0.6 for 15-year FRMs and one-year Treasury ARMs, but 0.5 for five-year Treasury hybrid ARMs.

In the third quarter of 2009, Stewart Information Services Corp., Houston, reported that its title insurance operations had regained profitability. Now for the fourth quarter 2009, the entire company has become profitable, with net income of $31 million, compared with a loss of $164 million one year prior. However, for the full year 2009, Stewart lost $51 million, vastly improved over the 2008 loss of $248 million. Included in the fourth quarter net income was a $23.5 million income tax benefit. Stewart also recorded fourth quarter gains of $12.1 million on the sale of investment securities; the sale proceeds were reinvested in similar securities. Title losses for the fourth quarter 2009 were 8.8% of title revenues and included only one defalcation. For the full year, title losses were 7.6% of title revenues, vs. 7.1% in 2008. Stewart cited American Land Title Association data which showed its market share grew from 11.7% for 2007 to 14.7% in the third quarter 2009. As for this year's outlook, Malcolm S. Morris, chairman and co-chief executive, commented "We believe there remains a very challenging market in 2010, and that while sales of both new and existing homes will likely improve compared to 2009, residential refinance volumes are forecast to retreat. Commercial sales and refinance activity will improve in 2010 compared to 2009, although much of it is likely to be distressed driven."