Origination

Michael Blair, EVP and chief operating officer of Franklin Credit Management Corp.'s servicing department, plans to resign Dec. 30 and the company said his successor would soon be named. The unnamed new EVP/COO is expected to join the company's management team in the next few weeks, the company said. Franklin's chairman Thomas Axon said he is "looking forward to possibly working" with Mr. Blair again in the future. Mr. Blair is said to be resigning to pursue other interests.

Ohio attorney general Richard Cordray has filed yet another lawsuit that alleges unfair loan modification agreements and faulty customer service, this time against Barclays Capital Real Estate dba HomEq Servicing. Filed in Montgomery County Common Pleas Court, the lawsuit alleges that at-risk homeowners "were forced to enter into one-sided agreements," that released HomEq of all liabilities requiring borrowers to waive their defense rights and pay additional fees. "In Ohio we have zero tolerance for any more excuses," Mr. Cordray said, while stating that "many servicers" are aggravating the crisis through noncompliance and excuses. The attorney general has so far filed at least two similar lawsuits against other companies. A HomEq spokesperson told National Mortgage News the lawsuit is "a meritless complaint" and that HomEq will vigorously defend itself against it. "HomEq is committed to quality customer service and to working with financially distressed borrowers to help them remain in their homes," he said.

Signs of an improving economy are lifting average weekly mortgage rates, but they are still below 5% and spurring refinancing, according to Freddie Mac. "Interest rates have been below 5% over the past seven weeks," said Frank Nothaft, Freddie Mac's chief economist. The average rate for a 30-year fixed-rate mortgage, at 4.94% during the week ended Dec. 17, is getting closer to 5%. The previous week it was 4.81% and a year ago it was 5.19%. The average 15-year FRM rate was 4.38% during the most recent week. It was 4.32% a week ago and 4.92% a year ago. The average rate for a five-year hybrid Treasury-indexed adjustable-rate mortgage during the week ended Dec. 17 was 4.37%, up from 4.26% a week ago but down from 5.60% a year ago. The average one-year Treasury ARM rate was 4.34% in the most recent week, up from 4.24% a week ago but down from 4.94% 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 Treasury ARMs.

Independent mortgage bankers made a profit of $902 per loan in the third quarter, down 33% from the previous quarter, according to a new study by the Mortgage Bankers Association. "These are still healthy margins," said Marina Walsh, MBA associate vice president of industry analysis. But she noted that 18% of the reporting mortgage companies posted losses in the third quarter, up from 4% in the second quarter. The decline in third-quarter profitability reflects a 34% drop in loan volumes as well as refinancing volumes. The 306 reporting companies originated on average $189.8 million in home loans, down from $281 million in the second quarter. Refinancings comprised 44% of originations in the third quarter, compared to 62.3% in the previous quarter. Despite the drop in volume, the average "pull-through" rate of turning loan applications into closings was 72% in the third quarter, down only one percentage point from the second quarter. "The good news is we are not back to the third quarter of 2008," Ms. Walsh said, when 30% of the companies reported losses. A year ago, mortgage companies made only $332 per loan.

Apartment rental vacancies in Canada's major metropolitan areas increased slightly in the latest month as homeownership became more affordable and growth in youth employment slowed, according to a Canada Mortgage and Housing Corp. survey. "Rental construction and competition from the condominium market also added upward pressure on vacancy rates," said Bob Dugan, chief economist at CMHC. The average rental apartment vacancy rate in Canada's 35 major metropolitan areas increased to 2.8% in October 2009 from 2.2% in October 2008.

General Growth Properties, Chicago, has received Bankruptcy Court confirmation of the plans of reorganization for 194 debtors which own 85 regional shopping centers associated with approximately $10.25 billion of secured mortgage loans. The plans allow for the restructuring of the 87 secured mortgage loans and the payment in full of all undisputed claims of creditors. Key provisions of the plans include maturity date extensions resulting in an average loan duration of approximately 6.4 years from Jan. 1, 2010, with no loan maturing prior to January 2014, and continuation of interest on the loans at the current non-default rate. The weighted average contract interest rate for the loans covered by these plans is 5.33%. The all-in-interest rate after amortization of fees to be paid in connection with these plans is 5.51%. Among the properties involved are Ala Moana in Honolulu and St. Louis Galleria, plus 15 office properties and 3 community centers. Confirmation of the plans of reorganization for 26 additional debtors owning 10 properties associated with an additional $1.7 billion of secured mortgage loans has been adjourned pending satisfaction of various conditions. GCP and the associated debtors filed for Chapter 11 bankruptcy protection on April 16, 2009.

Total Mortgage Services LLC, Milford, Conn., is on track to surpass its $750 million total volume estimate for 2009 and, despite pessimism about 2010's origination environment, believes it could lend more than $1 billion next year. John Walsh, president of Total Mortgage Services, recently told Origination News that the company expects to be able to grow its volume further next year even though total originations are expected to decline because it is planning to soon add a wholesale channel and obtain a "full eagle" from the Federal Housing Administration. This is expected to expand on its growing core business of retail agency and jumbo originations, which alone have allowed the company to grow its volume considerably from 2008, when its total production was $450 million and the market was particularly challenging.

If covered bonds ever become a reality in the U.S., it would be a $21.5 trillion opportunity for financial institutions with about half of that tied to residential loans, according to analyst Bert Ely. In testimony before Congress, Mr. Ely cautioned that the $21.5 trillion figure is a number that represents the market's potential - not the reality. "While covered bonds will not come close to providing 100%" of the funding for all different asset types "even a 10% share would be enormous," he said. According to testimony before the House Financial Services Committee, the covered bond market has many hurdles to clear including the establishment of a regulator to oversee the business and how to treat a pool of covered assets should the issuer go out of business. A covered bond is bank issued debt that (unlike existing U.S. MBS) is not sold into a legal "trust." This allows investors to look to the issuing bank for repayment if something goes wrong with the credit quality of the underlying loans. The Obama Administration is expected to review the use of covered bonds in crafting its plans to revamp Fannie Mae and Freddie Mac.

Federal regulators are giving banks a one-year transition period to deal with the risk-based capital implications of moving certain mortgage securitizations onto their balance sheets due to recent accounting rules changes that go into effect Jan. 1. The Federal Deposit Insurance Corp. and the other regulators realize that affected banks and thrifts are going to see their assets balloon as they consolidate private-label MBS and commercial securities onto their books. A final rule adopted by the FDIC board of directors allows banks to exclude the consolidated assets from risk-based capital calculations during the first two quarters of 2010. Over the third and fourth quarters, banks only have to count 50% of the consolidated assets for RBC purposes. Banks can adopt these transition options voluntarily starting Jan. 1. FDIC-insured institutions also will see an increase in their allowance for loan losses due to the implementation of Financial Accounting Standard 166 and FAS 167. Regulators are relaxing restrictions on including loan loss allowances in Tier 2 capital for two quarters. FDIC chairman Sheila Bair said banks are already under capital pressure and the transition period is appropriate. "It is temporary and by 2011 banks will need to be fully compliant," Ms. Bair said at an FDIC board meeting. She also noted the transition relief does not apply to leverage capital ratios. "We have always followed GAAP accounting for the leverage ratio so there will be no transition there," she said.

The Department of Housing and Urban Development has issued a proposed rule that sets minimum standards for state licensing of loan officers and mortgage brokers. Congress directed HUD to set minimum licensing requirements for states under the Secure and Fair Enforcement Mortgage Licensing Act of 2008. If HUD determines a state does not meet the minimum standards, the department is charged with administering a licensing system for the state. "By introducing nationwide standards of uniform licensing for loan originators, the SAFE Act is taking an important step in returning integrity and accountability to the residential mortgage loan market," said HUD assistant secretary David Stevens. The public comment period on the proposed SAFE rule ends in 60 days.