Origination

American International Group has agreed to sell its Canadian mortgage insurance unit to a private investor group with the Ontario Teachers' Pension Plan as the lead sponsor. Terms of the transaction were not disclosed. With assets of $274 million (Canadian dollars) and total equity of $127 million (Canadian), United Guaranty Canada is that nation's smallest non-government MI firm. (There are only two private MIs operating there.) The Toronto-based UGC commenced operations in 2006. Its chief competitors in Canada include a government-run organization (Canada Mortgage and Housing Corp.) and Genworth MI Canada Inc., whose majority shareholder is Genworth Financial, Richmond, Va. At one time three other U.S.-based mortgage insurers had established or attempted to establish operations in Canada — MGIC, PMI and Triad — but all three are no longer operational. "We believe the mortgage insurance industry in Canada to be an attractive market, and that United Guaranty Canada is well positioned to grow its market position," said Erol Uzumeri, senior vice president of Teachers' Private Capital, the private equity arm of OTPP. A request for comment from United Guaranty was not returned by press time.

A Department of Housing and Urban Development proposal goes "too far" in transferring all supervision of mortgage brokers and other loan correspondents to Federal Housing Administration-approved lenders, according to the National Association of Mortgage Brokers. NAMB wants the Department of Housing and Urban Development to continue setting standards for loan correspondents and start sharing oversight responsibilities with FHA-approved lenders that chose to sponsor brokers. "NAMB respectfully recommends that HUD revise the proposed rule and provide for a more balanced, dual oversight of loan correspondents," NAMB president Jim Pair said in a comment letter on the FHA proposal. To conserve resources, HUD wants to stop dealing directly with brokers and focus its attention on FHA lenders that buy loans from brokers. Under the HUD proposal, FHA-approved lenders would be totally responsible for the quality and performance of broker loans. Meanwhile, the brokers want to remain connected to FHA in some way — along with their authority to obtain case numbers for FHA loans. "The inability to communicate with FHA or access FHA websites will pose serious issues for loan correspondents attempting to determine whether a borrower is eligible for FHA financing," NAMB said.

The Federal Reserve Board will be able to influence interest rates through sales of the mortgage-backed securities it has accumulated over the past year, according to a Fed official. Fed governor Donald Kohn said the central bank has no "shortage of tools" to tighten monetary policy and raise interest rates. "And we can sell portions of our holdings of MBS, agency debt and the Treasury securities if we determine that doing so is an appropriate approach to tightening financial conditions when the time comes," Mr. Kohn said at the American Economic Association annual meeting in Atlanta. Previously, Fed officials said their "oversized" balance sheet would shrink over time as MBS mature or prepay. As of mid-December, the Federal Reserve had purchased $1.1 trillion in Fannie Mae, Freddie Mac and Ginnie Mae MBS and $157.7 billion in Fannie, Freddie and Federal Home Loan Bank agency debt. The Fed is planning to end its purchases of MBS by March 31.

Anthony Hsieh, an entrepreneur who previously created and sold LoansDirect and Home Loan Center, has started a new online mortgage company, loanDepot.com which is based in Irvine, Calif. The backers for loanDepot include San Francisco-based private equity company Parthenon Capital Partners. Mr. Hsieh has ambitious plans for the company, projecting the creation of over 1,000 jobs by 2013. Right now it is licensed in 18 states, with plans to be approved nationwide by the end of this year. In support of its business plan, loanDepot cites two studies, including one from National Mortgage News that shows 80% or more of all mortgages originated have touched the Internet at some point in their process. It also pointed to Deloitte Consulting research which found 93% of those who applied for a loan online started their research online, 71% of telephone applicants started their research online and 60% of face-to-face applicants started their research online. The company has already been approved by the Federal Housing Administration as a non-supervised lender.

The National Association of Realtors expects existing home sales will rise 9.9% in 2010 to 5.71 million units, after falling 12.8% last year. The trade group's updated forecast also calls for a surge in sales this spring as the newly extended and expanded homebuyer tax credit expires on April 30. Homebuyers that sign a sales contract before the end of April will have 60 days to close. NAR economists see sales surging to a seasonally adjusted rate of 6.03 million units in the second quarter before falling back to a 5.45 million rate in 3Q. Despite this optimistic outlook, a leading indicator of future home sales plunged 16% in November after rising nine consecutive months with the help of the first-time homebuyer tax credit. (Due to expire Nov. 30, the tax credit, this fall, was extended by Congress and the White House.) The uncertainty surrounding the tax credit legislation has been cited as a reason for first-time buyers staying on the sidelines. NAR reported that its 'Pending Home Sales' index fell to 96 in November from 114.3 in October. The PHS index is based on newly executed sales contracts with the closing expected to be completed in the next month or two.

The Independent Community Bankers of America has expanded its preferred service provider program with Wolters Kluwer Financial Services to include the company's RESPA and Regulation GG Tool Kits, as well as the company's suite of Regulation CC products. Wolters Kluwer Financial Services introduced all three solutions to financial institutions in 2009 to help them address regulatory changes. Under the terms of the expanded ICBA preferred service provider relationship, Wolters Kluwer Financial Services will provide ICBA community bank members with access to the company's RESPA tool kit, Regulation CC solutions and Regulation GG tool kit.

American Eagle Mortgage Co. LLC, Lorain, Ohio, is adding to its branch network in the greater Cleveland area through its acquisition of Real Estate Mortgage Corp. REMC has three locations — Rocky River, Beachwood and Twinsburg — and its president Mark Johnston will join AEMC as a vice president. Prior to the deal, AEMC had 12 offices, 10 across the state of Ohio and one each in Kentucky and Florida.

The advocacy arm of the Small Business Administration is taking the Federal Reserve Board to task for failing to estimate the economic impact a proposed mortgage lending rule would have on community bankers and mortgage brokers. The Fed has an "obligation" under the Regulatory Flexibility Act (RFA) to estimate the costs of changing the timing of Truth in Lending Act disclosures and imposing restrictions on loan officer and broker compensation, according to the SBA Office of Advocacy. "Failure to do so not only compromises and usurps the purpose of the RFA; it also impinges on the board's ability to consider less burdensome alternatives as required by the RFA," advocacy office acting chief counsel Susan Walthall says in a comment letter to the Federal Reserve Board. Under the Fed's TILA proposal, loan officer and broker compensation based on increases in the interest rate or changes to other loan terms would be prohibited. The National Association of Mortgage Brokers has proposed an alternative to prohibiting yield spread premiums, Ms. Whitehall says. It would ensure consumers know the "lowest interest rate the creditor will accept" so they can tell if the originator has increased the rate. "Advocacy encourages the board to consider this less costly alternative," the acting chief counsel says.

The Federal Reserve must be open to raising rates to pop future asset bubbles, even though stronger regulation remains the best solution to prevent a repeat of the nation's financial crisis, Fed chief Ben Bernanke said over the weekend. The nation's central banker said all efforts should be made to strengthen the U.S. financial regulatory system to prevent a repeat of a crisis that Mr. Bernanke described as perhaps the worst in modern times. "However, if adequate reforms are not made, or if they are made but prove insufficient to prevent dangerous build-ups of financial risks, we must remain open to using monetary policy as a supplementary tool," Mr. Bernanke told an annual meeting of the American Economic Association.

The Federal Housing Administration should give lenders five years, instead to three years, to meet a higher $2.5 million net worth requirement, according to the Mortgage Bankers Association. The current net worth requirement for FHA-approved lenders is $250,000. "MBA supports limiting the approval process to qualified mortgagees and increasing the net worth requirement," MBA president and chief executive John Courson says in a comment letter to the Department of Housing and Urban Development. "However, we strongly believe market conditions merit an increased phased-in period," MBA says, "with lenders meeting a minimum net worth of $1 million by the end of year one." HUD wants to raise the minimum to ensure the financial strength of lenders that endorse FHA-insured mortgages. "Based on MBA analysis, it will take companies with a current net worth of approximately $1 million five years to retain enough earnings to reach the $2.5 million threshold," the trade group says.