Origination

Freddie Mac purchased $44 billion in mortgages from its seller/servicers in December, a handsome 58% spike from November, according to new figures released by the company. For the full year, the government-controlled GSE bought $548 billion of loans from its customers, a 19% jump in acquisitions. Meanwhile, its total delinquencies climbed to 3.87% during the month, more than double the rate a year ago. Its retained portfolio fell to $755.3 billion at year-end, a 1% decline from the previous month. However, as the Federal Reserve begins to exit the GSE MBS market, Freddie and its sister company, Fannie Mae, could wind up buying more MBS for its balance sheet. Fannie is expected to release its monthly purchase numbers shortly. Both will report earnings in February but an exact date has not been released.

Astoria Financial of New York posted a small profit in the fourth quarter as its nonperforming residential loans crept up slightly to $330 million at yearend. The Lake Success-based thrift — a player in both residential and multifamily funding — earned $8.1 million in the quarter, compared to a profit of $29.4 million in the fourth quarter of 2008. Astoria had net-charge offs of $32.6 million, of which $22.8 million was tied to one- to four-family loans, and $9.2 million for multifamily. Astoria chief executive George Engelke said he is encouraged "by the stabilizing trends we are seeing in non-performing loans, which if sustained, will have a positive impact on future credit costs and earnings." Astoria ranks 30th nationwide among all residential lenders, according to figures compiled by National Mortgage News.

Flagstar Bancorp Inc., Troy, Mich., has raised $300 million of capital through a previously announced rights offering, which closes on Feb. 8, 2010. The company's controlling stockholder, MP Thrift Investments LP, is purchasing an additional nearly 423 million shares of Flagstar common stock. That works out to a price of $0.71 per share. Flagstar was trading at $0.65 per share the morning of Jan. 28. In addition, Flagstar has entered into agreements with the Office of Thrift Supervision to address certain banking issues. Among other items, the agreements require the company to within 90 days, adopt specific timeframes for the remediation of certain issues related to mortgage servicing rights. It also within 30 days, must revise the asset concentration policy to establish the existing concentration limit for MSRs at a level consistent with the business plan. Todd McGowan joins Flagstar as its chief risk officer after 22 years at Deloitte Touche, where he last served as its regional quality risk management partner and advised companies in areas including enterprise risk management, business process controls, and Sarbanes-Oxley compliance.

Old Republic International Corp., Chicago, lost $99 million for the full year 2009, a loss that would have been nearly $50 million greater except for the restatement of its third quarter results earlier this week. That restatement was done to conform to GAAP requirements on certain mortgage reinsurance contract terminations. ORI noted that substantially all of the premiums being recognized as income now will be likely absorbed by loss costs related to future years' risk exposures. In the fourth quarter, ORI lost $36.7 million. Its mortgage guaranty insurance business has a pretax operating loss of $126 million for the quarter and $486 million for the year. However, its title insurance business made $1.5 million for the quarter and $2.1million in 2009 on a pre-tax basis. The company also reported the fair value of its investments in competitors MGIC and PMI went from $82.7 million at the end of 2008 to $130.7 million at the end of last year. New insurance written by Republic Mortgage Insurance Co. was just $7.9 million for 2009, compared with $20.8 million in 2008 and a peak of $31.8 million in 2007. However, the title insurance business reported 358,935 direct orders opened in 2009, up from 257,743 in 2008.

The Department of Justice is forming a special Fair Lending Unit which is expected to aggressively pursue residential lenders and brokers that engage in what the government calls "toxic and discriminatory" loans. The new FLU "will pursue cases of reverse redlining — where predatory lenders have targeted toxic products to minority communities, resulting in unprecedented numbers of foreclosures and the resulting disinvestment and blight," DOJ assistant secretary Thomas Perez said recently. The new unit also will review Home Affordable Modification Program data to see if servicers are treating minorities fairly and providing them with access to modifications and appropriate reductions in monthly payments. The Senate confirmed Mr. Perez several months ago to run the Civil Rights Division. "It is really ramping up now that he is there," said Paul Hancock, a partner at K&L Gates. The former Civil Rights Division attorney said it is important for lenders to be prepared and develop their own defenses to the type of claims that might be coming. "We expect this is going to be a very aggressive administration and push the envelope as much as they can to challenge lenders," Mr. Hancock said.

Fitch Ratings, New York, is maintaining its negative outlook for the private mortgage insurance business in 2010. It expects a high number of prime credit mortgage delinquencies, coupled with home prices unlikely to rebound any time soon, which will lead to elevated default and loss rates for the industry. The MIs have been benefiting from rescissions but Fitch does not expect that to continue, as prime loans will form a greater percentage of overall delinquencies. The longer term outlook for the mortgage insurance business is uncertain as it is likely to be tied to the ultimate future form of Fannie Mae and Freddie Mac and whether the secondary market will continue to have a need for private mortgage insurance. "The importance of housing to the U.S. economy, however, suggests a future that includes a role for private capital in the mitigation of mortgage losses to the GSEs. While 2008 and 2009 saw an increasing use of FHA-insured loans, the FHA has been insuring much of the business that no longer qualified under tightened private MI guidelines. However, the FHA has recently fallen below its mandated minimum capital level and its ability to provide additional insurance at historically high levels may be limited," the report from Fitch said.

Security Atlantic Mortgage of New Jersey, one of 15 lenders subpoenaed by the government two weeks ago, is telling mortgage brokers that it has stopped taking new applications while transferring unclosed loan files to Real Estate Mortgage Network, a nearby lender. The 17-year old company said it made the decision to shut its pipeline in "the wake of unfavorable publicity created by the recent unorthodox HUD press conference and the concerns this press conference has raised with our lenders and investors." As National Mortgage News Online went on deadline, company officials had not returned telephone calls about the matter. SAM said REMN is "actively recruiting" its existing operational staff, including underwriters and closers to fill positions in a new operations center." In an announcement on its website, SAM said it funded more than 17,000 loans, many of them in "government-designated disadvantaged neighborhoods, representing nearly 60% of our production." It added that "it has always been our mission to serve those qualified families most in need of the FHA program." In mid-January HUD subpoenaed 15 mortgage companies, seeking out possible fraud in an effort to stem losses on FHA loans. While publicizing the subpoenas, the agency noted that they had not yet found any evidence of wrongdoing at the firms, and were singling out those with the highest default rates, including SAM.

As projected, homebuilders in the Golden State put up the fewest number of homes in a single year in 2009, erecting just 36,209 units, according to the California Industry Research Board. That's just slightly more than 3,000 starts a month for the entire state. The total number of single-family houses, apartments, condominiums and townhouses was down 44% from 2008 - and a shocking 83% compared to the 176,751 units built in 2004, the peak year in the current cycle. The previous record low was 2008. "It's been a rough couple of years for the housing industry," said Liz Snow, president of the California Building Industry Association. Builders pulled permits for 3,594 units in December, a decline of 23% compared to December 2008, but an increase of 39% from the previous month. However, Ben Bartolotto, research director for CIRB, warned that any enthusiasm for the November-to-December increase should be tempered by the fact that December numbers are often inflated because of a rush to pull permits before certain regulations and fees get increased in January. CIRB is now projecting that builders will start 52,000 units 2010, an increase from 2009 but still down from 2008 and "by no means a recovery."

New home sales fell 23% in 2009 from the previous year and sales ended the year on a down note with a 7.6% decline in December. Despite the first-time homebuyer tax credit, sales of newly constructed homes totaled only 374,000 in 2009, compared to 485,000 in 2008, according to the U.S. Census Bureau. This year, economists at the National Association of Home Builders expect an improving economy and new homebuyer tax credit will push new home sales up 39% to 517,000. The tax credit, which includes repeat buyers this time, expires April 30. Buyers that sign a sales contract by April 30 have until June 30 to close. NAHB economist Bernard Markstein expects the new tax credit will generate 180,000 additional sales and 40,000 of the sales will involve new homes. Meanwhile, the Census Bureau reported that sales of new single-family homes fell to a 342,000 seasonally adjusted annual rate in December from 370,000 in November. November sales were revised upward. Last month, the bureau reported that sales plunged 11.3% in November to a 355,000 seasonally adjusted annual rate.

Citing a decline in refinancing activity, the Mortgage Bankers Association said there was an overall decline in new loan applications submitted for the week ending Jan. 22. According to the results of its Weekly Mortgage Applications Survey, MBA's Market Composite Index - a measure of mortgage loan application volume - decreased 10.9% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the index decreased 10.1% compared with the previous week. The Refinance Index fell by 15.1%. Michael Fratantoni, MBA's vice president of research and economics commented, "Although rates remain low, there appears to be a smaller pool of borrowers who are willing and able to refinance at today's rates." But even with the falloff in the number of refinance applications, these are still making up the lion's share of new apps, at 67.6% (although this is down from 71.7% the previous week). The seasonally adjusted Purchase Index also declined from one week earlier, by 3.3%. The market share of adjustable-rate mortgage loan applications increased to 4.7%, up from 4.1% for the previous week. The average contract interest rate for 30-year fixed-rate mortgages increased to 5.02% from 5%, with points decreasing to 1 from 1.05 (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 rose by 1 basis point to 4.34% while for one-year ARMs the average contract interest rate increased by 12 basis points to 6.84%.