Origination

Federal Housing Administration lenders are expected to charge reasonable origination fees but in most cases they will no longer be bound to a 1% limit, according to the Department of Housing and Urban Development. As a result of a new Real Estate Settlement Procedures Act rule, "FHA no longer limits the origination fee to 1% of the mortgage amount for its standard mortgage insurance programs," HUD says in mortgagee letter 2009-53. However, the 1% limit will continue to apply to FHA-insured reverse mortgages and FHA 203(k) purchase/renovation loans. The new RESPA rule that goes into effect Friday (Jan. 1, 2010) mandates the use of a standardized Good Faith Estimate disclosure that bundles all origination charges into a single fee. The GFE does not disclose the lender's origination fee as a single line item. "FHA expects that lenders will continue to charge fair and reasonable fees for all origination services and the agency will continue to monitor to ensure that FHA borrowers are not overcharged," FHA commissioner David Stevens says in the mortgagee letter.

As mortgage brokers feel the pinch, Mortgage Options of America Inc., a full service mortgage broker, has managed to save more than $20,000 in operating costs while reducing its loan fees more than 15% by automating. Specializing in first and second mortgages, debt consolidation and refinancing, MOA is licensed in Florida, Maine, Massachusetts and New Hampshire. Because the majority of its employees work on the road, the company needed total transparency, which it was not receiving from its previous system. This spurred the company's decision to switch to Xetus' XetusOne Loan Origination System. Prior to utilizing XetusOne, MOA had costly server needs, a T1 fiber optic line, and had to devote a lot of time backing up files and updating software. MOA credits a lot of its success to its strategic plan to automate.

More smaller banks and credit unions are adopting online, integrated point-of-sale technology to grow in the current down market. For example, Louisiana Federal Credit Union of LaPlace, La., decided that offering an online mortgage application would not only enable the organization's two-person mortgage team to increase their application volume, but would also help LFCU become a bigger player in the local mortgage market. As a result from 2004 to 2009, LFCU has used Mortgagebot's PowerSite technology to triple its annual mortgage volume without having to add staff. Similarly, Illini Bank, a $248-million-asset commercial bank with 12 locations near Springfield, Ill., had actually exited the mortgage business until realizing that a lack of mortgage products was costing them business to competitors. The bank implemented PowerSite Consumer as its direct-to-consumer mortgage website - enabling self-serve borrowers to quickly apply for mortgages online. Illini Bank has benefited significantly from its online solution, citing an average annual increase in application volume of 71% over the last three years.

Zillow Mortgage Marketplace is launching its first distribution deal with online real estate brokerage Redfin. Visitors to Redfin's website can now fill out a mini loan request form on the "Financing Your Home" page of the site. This brings potential borrowers to Zillow Mortgage Marketplace, where they can complete the Zillow Loan Request Form and instantly get custom quotes - all anonymously - from Zillow's network of thousands of lenders. Once borrowers submit a loan request, they receive, on average, 22 custom quotes from lenders nationwide. After comparing quotes, borrowers decide which lenders to contact, responding lenders don't call the borrower.

The Employees' Retirement System of the Government of the Virgin Islands has reportedly sued Morgan Stanley, alleging investors in a subprime mortgage-related collateralized debt obligation were defrauded. According to combined news reports from Reuters and Bloomberg, the suit involves a $1.2 billion CDO called Libertas that originally carried the highest investment grade ratings possible. A Morgan Stanley spokeswoman declined to comment. Efforts to reach the Employees' Retirement System of the Government of the Virgin Islands were unsuccessful.

Fitch Ratings has downgraded 293 classes and affirmed 246 classes in 82 U.S. scratch and dent residential mortgage-backed securities transactions. "Many of these transactions contain collateral that was seasoned and/or seriously delinquent at the time of the transaction's issuance," Fitch said of the transactions, which have issuance dates ranging from 1997 to 2007. The deals were comprised at the time of issuance of some combination of performing, reperforming, subperforming, or nonperforming collateral.

GMAC is in line to get an additional $3.5 billion in assistance from the Treasury Department to cover mortgage losses from its troubled Residential Capital unit, according to published reports. 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. Treasury is expected to announce the $3.5 billion capital infusion soon, according to the Wall Street Journal, and GMAC is expected to announce a large writedown of its mortgage assets, as well. "GMAC has been conducting a strategic review of its business and evaluating options to address the challenges at ResCap and the mortgage operations," a GMAC spokeswoman said Wednesday. "We have no specific actions to announce at this time," she added. Treasury officials could not be reached for comment.

As many readers of this column know, I try to focus on practical items that affect the "on the street" loan originator who is in the reverse arena. No pie in the sky, no using the readers as guinea pigs for a new untested strategy. With that in mind, I'm throwing out a call to action: What is it that you want to see in this column in 2010? Are you looking for marketing strategies? Have you been relying on direct mail that is just not producing results anymore? Maybe it's a script that needs tweaking. Having trouble with that "kitchen table talk?" Wish you could increase your closing ratio? Perhaps if you are new to the reverse space it's something more basic.

A New Caanan, Conn.-based company plans to offer "cash back" rewards on credit and debit card purchases that card holders can choose to put into a Federal Deposit Insurance Corp. insured savings account for home purchases and repairs. The HomeCard Co. Inc. said it will make the card available to consumers in early 2010. The "cash back" amount will range from 1% to 25% of a purchase. The card also will offer holders savings on mortgages and insurance, as well as on other real estate and homeowner services. Jack Loop, president and founder of the company, said the card will be available as a debit card, a secured credit card or a standard credit card dependant on consumers' respective preferences and credit scores. He said the card's rates are set to be lower than those banks are charging.

OneWest Bank FSB, Pasadena, Calif. has put $10 million into the creation of a nonprofit foundation aimed at offering affordable housing and other types of support to the communities in which it operates its branch network. The bank has 72 retail branches in Southern California and total assets of $24 billion. Its assets include a loan portfolio, a securities portfolio, a servicing platform with mortgage servicing rights representing over 550,000 borrowers, and Financial Freedom, a reverse mortgage platform.