Origination

Mark Savitt, the immediate past president of the National Association of Mortgage Brokers — and who recently launched a new trade group — has resigned from NAMB's board of directors, effective immediately. Mr. Savitt said his resignation from NAMB was his own decision but declined to comment further except to say this week he is meeting with government representatives on two key issues facing the industry: the Home Valuation Code of Conduct, and yield spread premiums. Mr. Savitt's new trade group is called the National Association of Independent Housing Professionals. He is president and CEO of the group, which officially launched two weeks ago. At NAMB, George Hanzimanolis, who was the organization's president in 2007- 2008, has been appointed to fill out Mr. Savitt's term and will serve as chairman of NAMB's nominating committee. No reason was given in a statement issued by NAMB.

Wells Fargo generated $3.4 billion in income from its mortgage banking operations in the third quarter, up from $3.1 billion in the previous quarter. Residential mortgage originations totaled $94 billion, down by $2 billion from the second quarter. The company said the $55 billion in "pick-a-pay" mortgages it acquired from Wachovia are "performing better than expected." Nearly 50,000 of these payment-option mortgages were modified during 2009 and the borrowers' monthly payments were reduced by 25% on average. The redefault rate is half the industry norm for payment-option mortgages, a company executive said. Overall, Wells Fargo has placed nearly 500,000 of its mortgage borrowers in trial or permanent modifications during 2009. The 60-day redefault rate is about 14%, the executive said.

Bank of America's residential mortgage operation appears be earning money hand-over-fist on an operating basis — until credit charges are factored into the equation. BoA, the nation's largest lender and servicer, reported a $3.8 billion loss in its mortgage and insurance division for all of 2009 compared to a $2.4 billion loss the year before. New figures show that $11.2 billion worth of credit charges (on delinquent loans) have more than wiped out its net profit in mortgage banking. The bank noted that at year-end it had $35.7 billion in nonperforming assets (company wide) and a provision for credit losses totaling $48.6 billion — most of it tied to residential "legacy" mortgages brought in-house when it bought Countrywide Financial Corp. and Merrill Lynch as well as their residential divisions. But according to supplemental materials released along with its fourth quarter earnings, BoA's mortgage banking division had an operating profit (before charges) of $1.8 billion in the fourth quarter, a 13% improvement over the fourth quarter of 2008. In the third quarter, its residential mortgage unit earned $1.4 billion before charges. To date, BoA has said little publicly about selling the problem mortgage loans and securities it acquired from Countrywide and Merrill. In the fourth quarter it funded $83.9 billion in residential loans, double its volume a year ago but a 7% drop from the third quarter.

The Federal Housing Administration is determined to clamp down on bad lending practices and it is preparing to suspend a lender's operations in a whole metropolitan area for six months if one branch has a default rate three times above the norm. FHA commissioner David Stevens said he is prepared to use FHA Credit Watch termination powers for the first time. And FHA will be issuing a mortgagee letter to implement it with an immediate effective date. After one year, the suspension threshold will be two times the normal default rate. "This is strong medicine, but it will have a positive impact," said mortgage banking consultant Brian Chappelle. At the same time, FHA is increasing its monitoring of lenders and it will publish a "report call" on lender performance that lenders can use as a "benchmark," the commissioner said. The Department of Housing and Urban Development also is pursuing regulatory and legislative changes to impose indemnification requirements on all FHA direct endorsement lenders. "This would essentially require all approved mortgagees to assume liability for loans they originate or underwrite should they violate our polices and underwriting standards," Mr. Stevens told reporters.

The Federal Housing Administration, which is trying to bolster its depleted cash reserves, unveiled tighter underwriting guidelines Wednesday morning, including a hefty downpayment for low FICO score borrowers and an increase in the upfront mortgage insurance premium to 225 basis points. However, in announcing the changes, FHA commissioner David Stevens declined to provide any guidance on how much money the changes will raise for the reserve fund. Most of the new guidelines outlined Wednesday will go into effect this spring. The 10% downpayment is required for borrowers with FICOs of less than 580. The MIP will be increased in a few months from the current charge of 1.75 basis points. FHA will allow borrowers to continue financing the upfront MIP. The agency also will pursue legislative authority to allow flexibility to bring the annual premium, which borrowers pay on a monthly basis, higher. (This premium is currently 55 basis points for low-downpayment loans that are popular with borrowers.) Also, seller concessions will be reduced to 3% from 6%. Scott Stern, who runs the Lenders One cooperative said, "On the whole, mortgage lenders will find the new rules painful but necessary. The problem is that for the past four years, FHA was an 'anything goes' environment." He added that, "What makes this hard is with FHA hovering around 40% of new loan originations, even small rule changes echo through the housing market with a big impact."

For the next few weeks, Broker Universe will feature some of our favorite Sue Haviland columns from the past year.Seems like more often than not, the stories you see in the media about reverse mortgages are, well, less than complimentary. Let's face it they are down right ugly. Seniors are cautioned to be extra careful and our segment of the industry is labeled as the next subprime crisis. Gimme a break.

The Department of Housing and Urban Development is seeking White House approval to increase the upfront mortgage insurance premium charged by the Federal Housing Administration to borrowers. At a press conference scheduled for Wednesday morning, HUD and FHA officials are expected to announce other changes, including tighter underwriting standards. If approved by the White House, FHA will increase the 1.75% upfront mortgage premium (paid by those who take out a common type of home loan) simply by issuing a "notice" that goes into effect within 30 to 60 days. HUD also may ask Congress for permission to raise the annual premium that is paid monthly. This is 55 basis points paid over the course of the year for relatively low-downpayment loans.

Though credit availability is expected to pick up this year, it will be a slow improvement, according to a new report released by a group of senior bank economists. At the unveiling of their 2010 economic outlook, members of the American Bankers Association's Economic Advisory Committee said consumer and business lending will recover when other economic factors also show more strength. "Consumers are still retrenching to some extent — paying down debts — and small businesses as well are very conservative and reluctant to take on more debt at this point," said Scott Anderson, a senior economist at Wells Fargo & Co., Mr. Anderson said he expects improvement, "but it's just going to take some time for that to happen." The group predicted 3.1% growth in the gross domestic product. That would be an improvement of 3.4 percentage points over 2009 but much more modest growth than the 6% that has followed previous recessions. "I refer to it or characterize it on my own as a 'half-speed' economic recovery," said Stuart Hoffman, the committee's chairman and the chief economist at PNC Financial Services. He referred to "constraining factors," such as continued problems in commercial real estate and a lack of confidence in consumer spending, as holding back growth.

First Horizon National Corp., the parent of First Tennessee Bank, saw its fourth quarter loss widen, thanks, in part, to charges related to loan repurchases. The company — which lost $70.6 million in the quarter (compared to $52.8 million in 3Q) — said it is dealing with a "challenging economy." In the fourth quarter it booked a foreclosure and loan repurchase provision of $59.3 million. (It did not identify where the loan repurchase requests came from.) In mid-2008 it sold a large portion of its residential mortgage and servicing platform to Metropolitan Life which has a banking affiliate. In the fourth quarter of 2008 the bank lost $63.1 million,

Lenders took back 83 properties per day last year in the tri-county South Florida region, according to CondoVultures.com. In a report based on government records in Miami-Dade, Broward and Palm Beach counties, the consulting firm counted more than 30,000 foreclosures in 2009, and the number "could have been higher" had the local court system not been so overwhelmed, said Peter Zalewski, a principal in the Bal Harbour-based CondoVultures. "The courts and government are searching for creative measures — including online auctions and required discussions between borrowers and lenders at the early stages of mortgage defaults — to stem the foreclosure problem," he reported. Lenders seized 8,864 properties in the fourth quarter of 2009, outpacing the 8,240 properties seized in the third quarter, the 5,992 properties repossessed in the second quarter, and the 7,311 properties taken back in the first quarter, according to the report.