Origination

The effects of a rise in long-term mortgage rates that began with what was seen as a relatively optimistic employment report Dec. 4 persisted on average through the latest week, according to Freddie Mac's Primary Mortgage Market Survey. Like the Mortgage Bankers Association's report for the week ending Dec. 4 that was released Wednesday, the Freddie Mac report for the week ending Dec. 10 showed all the average weekly mortgage rates it tracked rising with the exception of the one-year adjustable-rate mortgage rate, which dropped slightly by a basis point. The move ends a trend toward record-low rates in the 30-year loans that dominate the market but Freddie Mac vice president and chief economist Frank Nothaft notes that rates for those loans are still relatively low, about 0.7 percentage points below those at the same time last year. This represents a savings of $81 per month on a $200,000 mortgage. During the week ended Dec. 10, the average rate for a 30-year fixed rate mortgage was 4.81% compared to 4.71% the previous week and 5.47% a year ago. The average 15-year FRM rate was 4.32%, compared to 4.27% the previous week and 5.20% a year ago. The average five-year Treasury-indexed hybrid adjustable-rate mortgage rate was 4.26%, compared to 4.19% the previous week and 5.82% a year ago. The average one-year Treasury ARM rate was 4.24% compared to 4.25% a week ago and 5.09% a year ago. Average points were as follows: 0.7 for 30-year FRMs and one-year Treasury ARMs, 0.6 for 15-year FRMs and 0.5 for five-year Treasury hybrids.

The National Association of Mortgage Brokers is encouraging its members to comment to the Federal Reserve before its Dec. 24 deadline on a rule that will ban yield spread premium payments. A letter sent to loan brokers asks them to "express your concern" on a YSP ban by telling the Fed "how this proposal will negatively impact your business and customers." The trade group says the Fed has acknowledged that in some cases YSPs can actually help borrowers "but believes that this benefit may be outweighed by costs incurred by consumers who obtain a higher interest rate or negative loan terms" including prepayment penalties. According to new figures compiled by National Mortgage News and the Quarterly Data Report, loan brokers in the third quarter, accounted for just 14.6% of originations - half of what they did two years ago.

The Department of Housing and Urban Development plans to lift the 1% cap on origination fees for Federal Housing Administration-insured loans, according to sources close to the agency. The change is expected to be unveiled within the next few weeks. HUD argues that competition will prevent fees from rising too much once a regulation overhauling up-front disclosures takes effect Jan 1. (FHA is the fastest growing niche in the market.) If borrowers think they are being overcharged, the thinking goes, they can shop around for a better price and potentially take their business elsewhere. "HUD feels the marketplace will drive origination fees down once the 1% cap is removed," said mortgage attorney Phillip Schulman, a partner in the K&L Gates LLP law firm. HUD has been hinting for a while that it might remove the cap when it completed a new Real Estate Settlement Procedures Act rule. However, the agency is expected to reserve the right to reinstate or add limits on fees charged to the borrower.

House and Senate appropriators are increasing the Department of Housing and Urban Development's resources to combat mortgage fraud, update its technology, while increasing the Federal Housing Administration's lending capacity to $400 billion. The conference report on the HUD appropriations bill for fiscal year 2010 includes $20 million to combat mortgage fraud, and $80 million to modernize its legacy computer systems. The appropriators also provide the HUD Inspector General with an additional $5 million to conduct audits of FHA-approved lenders. (Over the past week HUD banned two FHA lenders.) FHA endorsed $328 billion in loans in fiscal yeas 2009, which ended Sept. 30, and its business continues to grow. (The $400 billion figure is for FY 2010.) Ginnie Mae, which provides a secondary market outlet for FHA and other government-backed loans, is in line for a $185 billion increase in commitment authority to $500 billion in FY 2010, up from $315 billion in 2009. Congress is late in passing the FY 2010 budget bills. Democratic leaders have rolled the HUD appropriations bill into a consolidated appropriations bill that the House of Representatives is expected to pass soon. The timing in the Senate is unclear.

The winning bidder has been named in a foreclosure sale of certain ownership interests of the W New York-Union Square, a hotel trophy property that combined news reports indicate Dubai World's private equity unit had originally bought in 2006. The bidder, identified as 201 Park Avenue South PEH LLC, called the winning bid a "step to assume equity ownership" of the hotel. The limited liability company is an affiliate of Philadelphia-based private equity fund LEM Mezzanine, which in 2007 bought a mezzanine loan backed by the W New York-Union Square's property owner. The W New York-Union Square's foreclosure sale proceedings had been initiated in November. Near the end of that month, combined news reports indicated Dubai World, the United Arab Emirates' investment vehicle, was delaying some of its payments on debt in a move that briefly shocked world markets. The current owner of the aforementioned interests in the property attributes the foreclosure largely to the recent downturn in the hotel industry. Despite the downturn, it indicated it sees some value in the hotel's brand and location. It said its goal is to maintain the W New York-Union Square's operational strength and ensure it is well positioned for any market recovery that may occur.

In separate announcements, Fitch Ratings, New York, has downgraded Republic Mortgage Insurance Co., Winston-Salem, N.C., and CMG Mortgage Insurance Co., a joint venture between PMI Mortgage Insurance Co., Winston-Salem, N.C., and CUNA Mutual Insurance Society, Madison, Wis. Both were cited for increasing numbers of delinquent loans in their respective insured portfolios. However, CMG was hit much harder, as its A+ insurer financial strength rating was slashed to BBB. In its report, Fitch said CMG is not likely to get additional capital from either PMI or CUNA Mutual. The company's ownership agreement provides for a capital call to its parent companies if its risk-to-capital ratio reaches 19-to-1. At the end of the third quarter, it was 16.8-to-1. "Furthermore, Fitch notes that CMG is operationally dependent on PMI and this raises uncertainty regarding CMG's operational stability and infrastructure in a scenario where PMI is placed into runoff," the report said. RMIC's IFS rating was only cut a single notch from BBB to BBB-. Even though RMIC's default rate has gone from 10.34% at the end of last year to 15.04% for the most recent quarter, it is still better than its peers. But Fitch is worried about RMIC's "high exposure to 2007 vintage loans."

Sellers under duress were responsible for more than three out of four sales in the Las Vegas area in November, according to Rob Jenson, an agent with Re/Max Central. According to Mr. Jenson's monthly report, 77% of the 2,905 properties that changed hands in the month were distressed sales. That is the lowest share since June 2008. Total sales were down 10.2% in November. Mr. Jenson, who heads the Jenson Group at Re/Max, attributes the declines to the holiday season and the uncertainty over the first-time buyers tax credit, which was set to expire at the end of November, only a few days before Congress voted to extend the benefit through next June. On the brighter side - if there is such a thing in the devastated Vegas area - the average sales price rose a tad in November to $161,071. Also, the number of foreclosures on the market was down for the seventh consecutive month. But the number of short sale listings rose 2.6%, to 10,650. Overall, there is now a 6.8-month supply of homes for sale in the Vegas market. Excluding listings currently under contract, however, the supply dips to just three months' worth of houses. According to the report, nearly 11,500 properties are in contingent or pending status.

Mark Hammond, the former president and chief executive of Flagstar Bancorp Inc., Troy, Mich., has cut all of his ties with the company by resigning as vice chairman and as a member of the board of directors of both the holding company and its thrift subsidiary. "I believe that the time is right to focus all of my attention on my future endeavors," said Mr. Hammond in a statement issued by Flagstar. On Oct. 1, Mr. Hammond resigned his president and CEO posts. Joseph P. Campanelli replaced him. Mr. Campanelli later added the chairman's title after the resignation of Thomas Hammond, Mark Hammond's father. Flagstar was the 12th largest residential originator in the third quarter.

Shore Mortgage, Birmingham, Mich., for a limited time, is offering certain customers a 30-year fixed-rate loan with no points, a product backed by the Federal Housing Administration. The APR on the note is 5.192%, the lender said. The loan program runs through Dec. 31 and is available in all states where the company originates loans. Shore is licensed in 32 states. The rate applies to both purchase and refinance loans. Shore said that with mortgage rates close to 5% and climbing, the lock in opportunity would assist the consumer especially during these challenging economic times. The APR is for borrowers who meet certain credit criteria.

An increase in the average 30-year fixed mortgage rate for the first time in over a month during the week ending Dec. 4 could be responsible for an increase in refinance applications during the period, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. A rate rise sometimes causes a rush to refinance as borrowers may see it as a sign rates are rising and they need to lock in immediately. A relative improvement in unemployment put upward pressure on rates Dec. 4. During that week, the MBA's Market Composite Index, a measure of overall mortgage loan application volume, increased 8.5% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 54% compared with the previous week, which was a shortened week due to the Thanksgiving holiday. The Refinance Index increased 11.1% from the previous week and the seasonally adjusted Purchase Index increased 4% from one week earlier. The increase in purchase applications reflected a 10% increase in applications for government mortgages and a 0.2% decrease in conventional mortgage applications, both on a seasonally adjusted basis. The share of refinance activity increased to 74.4% of total applications, up from 72.1% the previous week. The adjustable-rate mortgage share of activity decreased to 4.7% from 4.8%. The average contract interest rate for 30-year fixed-rate mortgages, which for the previous week was at its lowest point since May of this year, increased from 4.79% to 4.88%, with points increasing to 1.17 from 1.00 (including the origination fee) for loans with an 80% percent loan-to-value ratio, the association reported. The increase ended a run of six consecutive weeks of decline in the average rate. The average contract interest rate for 15-year FRMs came off of its lowest point ever increasing by 6 basis points, to 4.33%. For one-year adjustable-rate loans, rates decreased by 1 bp to 6.55%. The MBA stopped disclosing index values with the July 31 data release. The MBA can be found online at http://www.mortgagebankers.org.