Origination

Senate Banking Committee chairman Christopher Dodd, D-Conn., appears to be backing away from the Obama administration's proposal to create an independent consumer financial protection agency. With it increasingly likely that a bipartisan reform bill in the Senate would not include an independent CFPA, lawmakers are now exploring alternatives. Sen. Dodd and the panel's ranking Republican, Richard Shelby, though far from a deal, are considering creating a consumer-protection division within the federal banking agency envisioned by the legislation. That would be a long way from the Obama administration's plan for a separate, independent agency with blanket consumer protection rule-writing and enforcement power over financial providers. "I'm confident that the administration proposal won't be what we end up with," Douglas Elliot, a fellow at the Brookings Institution told American Banker. "There will be some significant compromise," he said.

Even though JPMorgan Chase reported strong earnings for the fourth quarter, the hangover from the mortgage crisis and the resulting loan 'buybacks' forced on the company by Fannie Mae and Freddie Mac are continuing to hurt its bottom line. In an earnings conference call Friday morning, chairman and CEO Jamie Dimon told analysts that repurchases are a worsening problem for the company and the industry at large. He noted that "you can assume" purchase requests on broker-sourced loans "will be worse." He also signaled that buybacks have picked up in the mortgage industry as investors "assess their rights" and bring claims against lenders. However, he said he could not offer any "broad numbers" at this time. A year ago JPM said it would quit the residential wholesale channel but in recent quarters has still originated some loans using brokers. Part of JPM's mortgage woes are tied to Washington Mutual, the troubled Seattle thrift it purchased in the fall of 2008. In Q4 JPM reported home equity net charge-offs of $1.2 billion compared to $770 million in the same period a year earlier. Subprime mortgage net charge-offs totaled $452 million (giving it a net chargeoff rate of 14.01% in this category) compared to $319 million in Q4 08. Prime mortgage net charge-offs were $568 million (a 3.81% net charge-off rate) compared to $195 million in the comparable period. JPM, as a whole, earned $3.3 billion but its retail financial services unit lost $399 million. The company cited "lower MSR [mortgage servicing rights] risk management results and an increase in reserves for the repurchase of previously-sold loans."

Nearly 9% of all Federal Housing Administration-insured single-family loans are 90-days or more past due, according to the agency's latest monthly activity report. The November report shows that FHA has a 8.94% default rate, up from 6.53% in November 2008. The insurer is trying to keep its capital reserves in the black and there's renewed speculation in the industry that it's only a matter of time before HUD will be forced to ask Congress for a bailout of the fund. To date, FHA officials have said they can avoid a bailout. Later this month, agency officials are expected to unveil several moves to tighten underwriting and possibly increase mortgage insurance premiums. Meanwhile, FHA lenders originated $26.6 billion in single-family loans in November, down 11% from the previous month, according to the activity report. Purchase mortgage transactions totaled $15.8 billion and comprised 60% of FHA originations.

Freddie Mac believes single-family originations will fall by just 10% this year to $1.75 trillion — a decent year for a recovering industry and a forecast that is considerably higher than one made by the Mortgage Bankers Association. Earlier in the week MBA estimated that 2010 loan production would be a meager $1.3 trillion. (According to figures compiled by National Mortgage News, the industry funded about $1.9 trillion for the year just ending.) Freddie believes that despite a heavy flow of foreclosures, the housing market will "weather the growth of distressed sales without further setbacks, though risks remain." If MBA's forecast comes true, that means fundings will fall by 32% this year from 2009. Unlike MBA, Freddie sees unemployment falling below 10% in the second half of this year. The industry's best year came in 2003 when $3.9 trillion in home mortgages were originated. It was that year that subprime originations (and securitizations) began to grow rapidly. Today, subprime originations are non-existent. (For a full analysis see the Monday edition of NMN.)

Total Mortgage Services, Milford, Conn., said it has been approved by the Department of Housing and Urban Development to originate and purchase Federal Housing Administration-insured loans. The company, which hopes to fund up to $1 billion in mortgages this year, is about to launch a new wholesale division that will table fund through loan brokers. "Our Full-Eagle designation will also help us significantly increase our FHA mortgage volume, which was only 5% of our total production in 2009, to 20-25% of production in 2010," said company president John Walsh. The non-bank lender was founded in 1997.

Republic Bancorp Inc., Louisville, Ky., reported a $3.2 million year-over-year increase in its fourth quarter net income, aided by a $1.9 million increase in mortgage banking income. However, the fourth quarter had the lowest amount of mortgage banking income the company reported for 2009. Republic had fourth quarter 2009 mortgage banking income of $1.67 million, similar to the third quarter 2009 and much improved over a $270,000 loss in the fourth quarter 2008. In the first quarter 2009, Republic had mortgage banking income of $4.2 million, while in the second quarter it had $3.5 million. For the year, Republic more than doubled its secondary market mortgage origination volume, from $235 million in 2008 to $556 million in 2009. The company did not take a mortgage servicing rights impairment charge in the fourth quarter of 2009, vs. a charge of $1.2 million for the same period the previous year. Fourth quarter 2009 net income at Republic was $3.8 million, compared with net income of $604,000 one year prior.

Clark Street Capital, a Chicago-based provider of asset management and advisory services, is marketing what it describes as a $200 million loan portfolio secured by high-quality multifamily, mixed-use, residential, commercial and land assets in the Chicago area. This portfolio is offered in eight diverse pools, arranged by property type and asset quality. Property types include two-to-four family properties, properties designed to house five or more families, mixed-use properties of various performance types, performing single-family residences and residential condominiums, sub- and nonperforming SFRs and condos, performing retail and office assets, subperforming and nonperforming retail and office assets, and residential and commercial development land. The company said full due diligence information is available electronically, with indicative bids due by Jan. 26. Final bidders will be selected on Jan. 27 with final bids due on Feb. 4 and a closing date scheduled for Feb. 10. It also said buyers will have access to succinct asset summary reports prepared by Clark Street Capital and Loan Workout Advisers LLC, recent site inspections, and appraisals for the vast majority of the assets.

An Anchorage, Alaska-based title agency has settled Real Estate Settlement Procedure Act Section 8 kickback allegations made against it by the Department of Housing and Urban Development and the Alaska Division of Insurance. According to the settlement agreement posted on the HUD website, the regulators had alleged Alyeska Title Guaranty Agency had a sham employment agreement with Kirk Wickersham, the owner of FSBO System Inc., also of Anchorage. Mr. Wickersham was a "title marketer" for Alyeska, marketing the agency's services to FSBO. It is alleged the employment agreement was actually a way to pay referral fees to Mr. Wickersham, who supposedly did not provide any actual services for the payment. The relationship was terminated one year ago, on Jan. 14, 2009, and Alyeska has no other such relationships, the settlement agreement said. In the agreement Alyeska said it denied any RESPA or state law violations, and that entering into the agreement was not an admission of guilt. The agreement required Alyeska to pay $50,000 to both HUD and Alaska DOI ($25,000 each), within 30 days of the effective date; plus an additional $50,000 within one year. The agreement states the payments are not a civil money penalty or fine. There is a third payment totaling $55,000 that is scheduled to be made within two years. This payment will be waived if there are no further RESPA or state law violations and Alyeska remains in compliance with the settlement agreement. Mr. Wickersham is not a party to the agreement. He could not be reached for comment at deadline.

Sales of lower priced homes are doing much better than expensive ones in all parts of the nation, thanks, in part, to the first-time homebuyer tax credit, according to the Federal Reserve's latest "Beige Book" report. However, the central bank notes that home prices have changed little since its last "Beige Book." According to recent stories by National Mortgage News, the jumbo and super jumbo loan markets are suffering from a lack of available credit except for consumers with hefty down payments and large cash balances in their bank or brokerage accounts. Not surprisingly, residential construction activity remained at low levels in most districts with the Fed noting that home building "was reported to have increased in the Chicago and Minneapolis" districts. The $8,000 first-time homebuyer tax credit was extended through the spring but is not expected to be renewed after its current sunset.

The average rate for a 30-year fixed rate mortgage is slightly lower than it was last week but higher than it was a year ago, according to the most recent Freddie Mac Primary Mortgage Market Survey. "Interest rates for fixed-rate mortgages eased a littler further this week, while ARM rates were mixed," said Frank Nothaft, Freddie Mac vice president and chief economist. The average 30-year FRM rate during the week ended Jan. 14 was 5.06%, down from 5.09% a week ago but up from 4.96% a year ago. The average 15-year FRM rate was 4.45%, down from 4.50% a week ago and from 4.65% a year ago. The average five-year Treasury hybrid rate was 4.32%, down from 4.44% a week ago and 5.25% a year ago. The average one-year Treasury ARM rate was 4.39%, up from 4.31% a week ago but down from 4.89% a year ago. Average points were 0.7 for 30-year FRMs, 0.6 for 15-year FRMs and five-year Treasury hybrids, and 0.5 for one-year ARMs.