Origination

Mark Oman, who oversees the mortgage division of Wells Fargo & Co., has been granted a "retention" bonus in the form of stock that is valued at $5 million, according to a statement made by the company. Wells says the "grant" is not a form of cash compensation and has strings attached to it: Mr. Oman will forfeit the shares if he leaves the lender to join a competitor; the shares do not vest for three years and only if Wells meets certain performance goals. In total, Mr. Oman — who joined a Wells affiliate back in 1979 — was granted 189,800 shares. The bank's stock has been trading in the range of $28 a share of late. Four other Wells executives were given retention bonuses including CEO John Stumpf. Wells is the nation's second largest originator of home loans, according to the Quarterly Data Report. Mr. Oman carries the title of senior executive vice president.

There was a record increase in the Eleventh Federal Home Loan Bank District Cost of Funds Index between October and November, wiping out all of the decline which had taken place since February. According to the Federal Home Loan Bank of San Francisco, the Index for November was 2.094%, up approximately 84 basis points from October's 1.259%, which is COFI's all time low point. The previous record increase in COFI, which has been issued every month since July 1981 and is used as an index for adjustable rate mortgages, was 51 basis points between May and June 1982, according to data on the FHLB-SF website. February 2009 was the last time COFI was above the 2% mark, at 2.003%. FHLB-SF calculated the weighted-average Index using total average funds of $38.5 billion and total interest expense of $67.2 million. There were 25 institutions that reported data for the COFI calculation, which is the cost of funds used by those institutions to originate mortgage loans.

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Social media seems to be the new buzzword for commerce of all varieties these days. Big and small businesses are seeing the power of reaching out virally through social networking platforms. Consumers, especially those in the Gen X and Y sector, are seeking advice and information from these resources before making their purchasing decisions. If you aren't online, in a variety of ways, you may not be considered of value.

A temporary tax break for those buying properties sold in a certain price range in the United Kingdom has benefited a greater percentage of borrowers than expected but its effects vary by region, according to the Council of Mortgage Lenders, London. The trade group said, "In September last year, when the government first raised the nil rate threshold for stamp duty, ... the CML estimated that this would mean the proportion of homebuyers who would not have to pay would rise from a quarter to a half. In fact, at its peak in the first quarter of this year, the concession benefited even more than this, with 57% of all those buying with a mortgage not having to pay [the tax]." However, that percentage decreased over the course of the year. "Modest house price increases and a shift in the mix of houses bought (toward higher value properties) brought this down to 51% in the third quarter." The CML also noted, "The flat nature of the concession - the same in all regions of the country - means that there is a wide geographic variation in the effect. Those areas with generally lower home prices see the greatest benefit."

In lieu of cash bonuses for 2009, the board of Wells Fargo & Co., San Francisco, Calif., has approved multimillion-dollar retention performance shares for three key executives, including the head of Wells Fargo Home and Consumer Finance, Mark Oman. Mr. Oman, a senior executive vice president, and Howard Atkins, also a senior EVP as well as well as the company's chief financial officer, both got approved for a target of 189,800 shares having a current value of about $5 million. The board approved for John Stumpf, president and chief executive officer, a target of 379,600 shares having a current value of about $10 million. "These retention performance shares, which are not a form of cash compensation or annual incentive bonus, are forfeited if the executive receiving the shares leaves the company to work for a competitor," Wells said. The shares will vest after three years of service only if the company meets specified performance goals. A portion of all shares earned by executives as compensation must be held for as long as they remain employed by the company. Steve Sanger, chair of the board's human resources committee and retired chairman and CEO of General Mills Inc., said the executives receiving the compensation have been "leading the company through the largest merger integration in U.S. banking history and they have played key roles in generating record profits in the first three quarters of 2009, despite the challenging economy." Commenting on the rationale behind the performance shares, he noted that given those accomplishments and "the current challenges impacting the banking industry, Wells Fargo executives, at all levels, are being increasingly and aggressively recruited by competitors."

After the biggest housing boom and bust in U.S. history, prices of existing homes managed to increase by only 25% over the past 10 years, according to the National Association of Realtors. The Realtors reported that median home values rose from $137,600 in November 1999 to $172,600 in November 2009 or 25%. At the peak of the market, the median house price hit $230,300 in July 2006. The latest forecast by NAR economists shows that the median house price will rise 3.6% in 2010 to $178,900, after falling 12.8% in 2009. The economists expect existing home sales will rise 10.8% in 2010 to 5.71 million from 5.15 million in 2009.

The dollar volume of primary new insurance written for the private mortgage insurance companies remained relatively low in November at just under $4.9 billion but was an improvement over last month. According to data from the Mortgage Insurance Cos. of America, that was higher than the low seen for the year in October (just shy of $4.8 billion). A statement from MICA said this includes HARP originations, but the group did not break out how many. Last November, MICA members wrote $5.8 billion, but this does not include figures from Radian Guaranty Inc., whose data was not included in the group's statistics until December 2008. Since that month, the industry's primary insurance in force has declined to $879.7 billion from $952.2 billion. New pool risk written was $2.5 billion for November, compared to $7.9 billion during the same month a year ago. The cure/default ratio in November, at 61.8%, was an improvement over 57% in October. There were 55,437 cures and 89,772 defaults during the latest month.

The year ends with the average weekly rate for a 30-year fixed-rate mortgage a bit above 5%. The average 30-year FRM rate for the week ending Dec. 31 was 5.14%, up from 5.05% the prior week and from 5.10% a year ago. "Although long-term mortgage rates rose for the fourth week in a row, they still remain affordable by historical standards," said Frank Nothaft, Freddie Mac vice president and chief economist. "Based on today's median loan amount of $138,000, monthly principal and interest payments for a 30-year fixed-rate mortgage are close to one-third less than a decade ago when rates peaked at 8.6% in May 2000." The average 15-year FRM rate during the week ending Dec. 31 was 4.54%, up from 4.45% a week ago but down from 4.83% a year ago. The average rate for a five-year hybrid Treasury-indexed adjustable-rate mortgage was 4.44% in the most recent week, up from 4.40% a week ago but down from 5.57% a year ago. The latest average weekly one-year Treasury ARM rate was 4.33%, down from 4.38% a week ago and from 5.57% a year ago. Average points were 0.7 for 30-and 15-year FRMs and 0.6 for five-year Treasury hybrids and one-year Treasury ARMs.

GMAC Financial Services has used a $3.8 billion capital infusion from the Treasury Department to take a $2 billion writedown on its mortgage assets and pursue options that could include the sale of Residential Capital. GMAC also made a $2.7 billion capital contribution to ResCap in the form of mortgage loans, debt forgiveness and cash. "These decisive balance sheet actions and resulting capital infusions are intended to minimize the impact on GMAC and Ally Bank of any future losses related to ResCap's legacy mortgage business," GMAC chief executive Michael Carpenter said. (ResCap was known as a subprime and Alt-A mortgage lender before that market died.) The CEO also noted these actions will allow GMAC to "pursue strategic alternatives" with respect to ResCap and the mortgage business. "We expect to consider various possible options," company spokeswoman Gina Proia said when asked about a possible sale. "There are no special plans at this time," she added. Losses due to ResCap's mortgage operations totaled $3.9 billion for the first three quarters of 2009, including a $747 million loss in the third quarter. In propping up ResCap, GMAC also took a $500 million "repurchase reserve expense" for mortgage buyback demands from investors who claim the loans they purchased from ResCap violate representations and warranties. GMAC took a similar $515 million expense in the third quarter. ResCap and its mortgage affiliates originated $15.4 billion in residential loans in the third quarter - predominantly Fannie Mae, Freddie Mac and Federal Housing Administration product. It is a top-10 mortgage servicer with a $380 billion servicing portfolio.