Origination

The politically powerful National Association of Home Builders has started the ball rolling on a new policy position regarding the future role and structure of the government sponsored housing enterprises. Though the group's current policy statement was adopted only a year ago, leadership believes that it is now time to become more specific. "Change is coming," said Housing Finance Committee Chairman Earl Armiger, a Maryland apartment builder. "We need to be out front with detailed policies." A final document will go through an arduous vetting process culminating with a vote by the NAHB board at the group's convention in Las Vegas on Thursday. But over the three-day Martin Luther King holiday weekend, the group's housing finance and federal government affairs committees signed off on a carefully worded resolution that, among other things, backs the notion that Fannie Mae and Freddie Mac should retain sufficient government backing to allow them to continue to ensure a reliable flow of credit at reasonable rates. "Mortgages should be packaged and sold as securities with a federal government guarantee of timely payment of principal and interest to investors," the resolution also says. "The federal government should incur exposure only for catastrophic risk." The two panels also voted to back the idea that entities benefiting from securitization of their mortgages should have some skin in the game by paying a fee to capitalize an insurance fund to mitigate government risk. And while they agreed that part of Fannie and Freddie's problems resulted from being public companies with an eye toward their bottom lines, they rejected a call that the two companies be recast as public utilities with limits on their profit. They also agreed that policies concerning the Federal Home Loan Banks should be kept separate so as not to inflict collateral damage on that GSE. "We need to focus on what needs to be fixed," said Dallas builder Kent Conine, a past NAHB president.

Citigroup marked up the asset value of its residential mortgage servicing rights by 15% in the fourth quarter to $6.5 billion, even though the dollar volume of its portfolio of housing receivables is declining. The mark-up in MSR value is mentioned in a new SEC filing accompanying its fourth quarter results. At press time a company spokesman had not returned a telephone call about the change in asset value on the MSRs. The bank's CitiMortgage affiliate services roughly $740 billion in home mortgages compared to $809 billion at year-end 2008. (At Dec. 31, 2008 it valued its residential MSRs at $5.66 billion.) The mega-bank - which is experiencing major declines in residential production - reported total company-wide credit losses of $7.1 billion in the fourth quarter. It took a $2.1 billion net credit loss on its $177.2 billion North American residential loan portfolio, a 7% drop from the previous quarter. Citi said the decline reflected lower losses on second mortgages and an increase of distressed borrowers that have been placed in payment trials for a possible loan modification. "Increasing volumes of trial modifications under the Home Affordable Modification Program contributed to the sequential decline in losses; the loan loss reserve was increased to offset this impact," Citi said in a summary of its quarterly earnings. Overall, 8.3% of its U.S. residential portfolio is 90 days or more past due, an increase of 114 basis points from the third quarter.

The supply of ready-to-occupy new houses has fallen to a point where the lack of inventory "could become a problem in certain markets and certain prices ranges," the chief economist for the National Association of Home Builders warned in Las Vegas at the group's annual convention. While there's still a six-month supply of houses sitting on builders' shelves, David Crowe said the actual number of new units that are finished and waiting for buyers is at the lowest level since 1971. That point was part of a rather upbeat forecast by the housing economist, who told the meeting that "we are starting to see some improvements" in the housing landscape. Mr. Crowe's annual outlook wasn't without some negatives, or, as he called it, "not so good news." But he pointed out that the recession is over, inflation is in check, mortgage rates will remain under 6% through the rest of the year, and house prices have "finally settled down" to a point where they are now at 3.28 times median income, which is roughly in line with long-term stability. At the height of the housing bubble, the price-to-income ratio had reached 4.7% nationally - and 9.2% in California. Noting that "conditions are ripe for people to come back into the market," Mr. Crowe predicted that it won't be long before buyers recognize that the bottom has been reached. He also said by the end the year, ten states - Mississippi, Alabama, Louisiana, Texas, Oklahoma, Nebraska, New Mexico, Wyoming, North Dakota and Montana - will be back at 100% or more of normal production. At the same time, though, 10 others - California, Nevada, Arizona, Florida, Michigan, Ohio, Illinois, Minnesota, Vermont and Maryland - will still be below 70% of normal.

Google this week is rolling out a new search function allowing consumers to shop and compare mortgage offerings from roughly 15 participating lenders. Google says the service — called AdWords Comparison Ads — will be fully deployed over the next few days. The rates will be visible in specific states where there is matching mortgage coverage from participating lenders. One Google partner in the service, Mortech, will enable participating lenders to list instant mortgage rate quotes through the service. PriceMyLoan is also a participating partner that will offer up mortgage pricing through Google. With Google's new offering, potential borrowers can view live rate quotes from mortgage professionals in a consistent manner. The feature, which does not require Google visitors to enter any private information, was designed to make the lending process more transparent, allowing applicants to access rate quotes instantly online. Clicking on the link takes the borrower to a page where they can view a variety of related mortgage offerings from lenders in that geographic area.

Citigroup marked up the asset value of its residential mortgage servicing rights by 15% in the fourth quarter to $6.5 billion, even though the dollar volume of its portfolio of housing receivables is declining. The mark-up in MSR value is mentioned in a new SEC filing accompanying its fourth quarter results, which were released Tuesday morning. The bank's CitiMortgage affiliate services roughly $740 billion in home mortgages compared to $809 billion at year-end 2008. (At Dec. 31, 2008 it valued its residential MSRs at $5.66 billion.) The mega-bank — which is experiencing major declines in residential production — reported total company-wide credit losses of $7.1 billion in the fourth quarter. It took a $2.1 billion net credit loss on its $177.2 billion North American residential loan portfolio, a 7% drop from the previous quarter. Citi said the decline reflected lower losses on second mortgages and an increase of distressed borrowers that have been placed in payment trials for a possible loan modification. "Increasing volumes of trial modifications under the Home Affordable Modification Program contributed to the sequential decline in losses; the loan loss reserve was increased to offset this impact," Citi said in a summary of its quarterly earnings. Overall, 8.3% of its U.S. residential portfolio is 90 days or more past due, an increase of 114 basis points from the third quarter.

The Federal Housing Administration is temporarily lifting an "anti-flipping" rule, allowing borrowers using government-insured loans to be more competitive in bidding on foreclosed properties recently purchased from banks and even the government. The Department of Housing and Urban Development's anti-flipping policy prohibits FHA financing on purchase transactions where the seller has owned the property for only 90 days. HUD found this policy blocked potential FHA borrowers from taking advantage of quick resales of real estate owned. REO sellers, generally, are unwilling to go with FHA borrowers because of holding costs and vandalism risk during the 90-day holding period. FHA is lifting the 90-day rule for one year starting February 1. FHA borrowers have "often been shut out from buying affordable properties," said FHA commissioner David Stevens. "This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity." FHA has been burned by property flipping scandals before. This time around it insists that all sales must be arms-length transactions with no evidence of flipping in the previous 12 months. If the resale price is 20% higher than the REO sales price, the lender has to provide supporting documentation and a second appraisal in some cases.

SL Green Realty Corp., which owns Manhattan office properties, has priced a public offering of 5.4 million shares of 7.625% Series C Cumulative Redeemable Preferred Stock at $23.53 per share. Including accrued dividends, the stock has a yield of 8.101%. The real estate investment trust intends to use the estimated net offering proceeds of $122.6 million for general corporate and/or working capital purposes, which may include investment opportunities, purchases of the indebtedness of its subsidiaries in the open market from time to time and the repayment of indebtedness at the applicable maturity or put date.

Moody's Investors Service says hundreds of billions of dollars of Alternative-A residential mortgage-backed securities from 2005-2007 could face another wave of downgrades in the second half of this year. The ratings on 10,330 tranches of RMBS with a current balance of $330.1 billion and an original balance of $572.7 billion are being reviewed to see if they need to be downgraded due to revised loss projections, Moody's said. The rating agency now projects 2007 securitizations in this category will see cumulative losses of 35%, 2006 bonds of this type will experience losses of 29% and 2005 alt-A RMBS will see losses of 14%. The outlook for these bonds is considered worse due to deterioration seen in their performance to date as well as "macroeconomic conditions that remain under duress," Moody's said. While there have been signs of eventual recovery, the rating agency's Economy.com unit said the drop in home prices and employment is expected to persist and not peak until the second half of this year, after which there could be a slow rebound.

Fitch Ratings has withdrawn the insurer financial strength ratings of Mortgage Guaranty Insurance Corp., and the long-term issuer rating of MGIC Investment Corp., Milwaukee, Wis. These actions were taken at MGIC's request, a company spokeswoman said. She added MGIC had no additional comment. Fitch Ratings also had no comment. MGIC's mortgage insurance subsidiary had a BB- financial strength rating, while the parent company had a long-term issuer rating of B-. Also withdrawn were B- ratings on a pair of senior notes offerings and a C-rating on convertible junior subordinated debentures due in 2063.

Former Lendia executive Greg O'Connor said he is moving forward with a U.S. mortgage wholesaler he bought from Richard Branson's Virgin Money unit. A few years back Mr. O'Connor actually sold the lender — then called Lendia — to the Branson unit and stayed on as an executive vice president. He plans to rebrand the mortgage lender 'ClearPoint Funding.' Mr. O'Connor said he could not comment on anything related to Virgin Money. A spokeswoman for Virgin, however, confirmed the sale back to Mr. O'Connor. No purchase price was disclosed.