Origination

The Treasury Department cited mortgage challenges among other concerns that persist despite an improving economy in deciding Wednesday that it would extend the Troubled Asset Relief Program to early October of next year. In a letter to lawmakers, Treasury secretary Tim Geithner said there have been improvements in the economy but said TARP must be extended due to remaining challenges for mortgagors, homeowners and small businesses. "This extension is necessary to assist American families and stabilize financial markets because it will, among other things, enable us to continue to implement programs that address housing markets and the needs of small businesses, and to maintain the capacity to respond to unforeseen threats," Mr. Geithner wrote. The secretary said he would limit the use of the program to a few areas: mitigating foreclosures, helping small businesses, providing capital to community banks and increasing the Term Asset Backed Securities Loan Facility, the latter of which now includes commercial mortgages. The Treasury secretary said he would only use TARP for other purposes if other moves were necessary to stabilize the financial industry. He said he would first consult with the president and the chairman of the Federal Reserve as well as submit written notification to Congress before taking other actions. He warned emergency actions might still be necessary.

I was recently speaking with an experienced reverse mortgage originator who has a bit more time on her hands than she would like right now. She asked what she could do to keep her activity level up, set her apart, and above all, not spend a lot of cash doing it.

Triad Guaranty Inc., Winston-Salem, N.C., has notified NASDAQ that it will voluntarily delist its shares from the exchange. The nation's smallest MI is in the process of self liquidating and recently sold off its technology and other assets to Essent Guaranty, a new MI company based in Philadelphia. The delisting is expected to occur by the last week of December. The move follows receipt of a notice from Nasdaq that Triad was no longer in compliance with the rule to maintain a minimum bid price of $1 per share.

ViewPoint Bank, Plano, Texas, has hired former Chase Mortgage executive Ed Bratton to lead its mortgage subsidiary, ViewPoint Bankers Mortgage. Mr. Bratton, who has more than 25 years of mortgage banking experience, will carry the official title of president and CEO. He worked for Chase Mortgage for the past 20 years, recently serving as regional vice president for Texas and other western states. He is also a past president of the Dallas Mortgage Bankers Association. ViewPoint Bankers Mortgage operates 16 loan production offices throughout Texas.

Low rates have led to adverse selection and performance deterioration in 2005 subprime residential MBS while low loan-to-value ratios have limited the prepayment concern for other recent vintages, according to a new report from Fitch Solutions. The company's monthly subprime RMBS index for the 2005 vintage dropped 11.4%. Managing director Thomas Aubrey said this reflects the fact that higher credit quality loans have been able to refinance out of the pool, leaving relatively poorer credit quality mortgages behind. The refinancing has affected the six-month constant prepayment rate for the securities, which over the last three months has risen to 4.3% from 3.5%. Fitch Solutions' Subprime RMBS Price Index, which is based on credit default swaps of RMBS, as a whole registered just under a 10% drop in the most recent month to 7.25 from 8.02. This is due primarily to the 2005 vintage's performance decline.

The Securities and Exchange Commission has charged three former executives of now-defunct subprime mortgage giant New Century Financial with fraud for misleading investors as their business was "collapsing" in 2006. At the time, Irvine, Calif.-based New Century was a top-ranked subprime lender, and management was considering selling the company to Merrill Lynch. SEC director of enforcement Robert Khuzami said investors in the once publicly traded company "took a double-hit: The company's mortgage assets and business performance became increasingly impaired, and management manipulated its numbers and concealed its deteriorating performance." At one time, New Century's shares traded for $50. Former top managers accused of fraud include Brad Morrice (vice chairman/president), Patti Dodge (EVP) and David Kenneally (SVP). New Century filed for bankruptcy protection in April 2007. The complaint, filed in federal court in the Central District of California, seeks civil penalties and from Morrice and Dodge reimbursement of bonuses and other incentive or equity-based compensation. The agency is seeking a severe personal penalty against the three: a bar against ever again serving as officers or directors of a publicly traded company. Josh Epstein, a spokesman for Proskauer, the law firm representing Mr. Morrice, told The Orange County Register that the SEC's charges against the former executive are "flatly false." He said, "Brad did all he could to save the company and to accurately report the company's numerous challenges to its shareholders. While his efforts failed, there was no fraud." Mr. Morrice remained a large shareholder until the end, losing millions of dollars when New Century filed for bankruptcy in April 2007, Mr. Epstein said. John Vandevelde, an attorney for Mr. Kenneally, said the former executive was never a top executive there but a new accountant who lost "every penny he ever invested" in the company he believed in. "Kenneally never signed any financial statements and relied on the outside auditors for accounting treatment now under question by the SEC," his lawyer said. Ms. Dodge could not be reached for comment.

The Department of Housing and Urban Development late Monday suspended Equitable Trust Mortgage Corp. of Baltimore from making Federal Housing Administration-backed loans -- the second such suspension of a lender within a week. ETMC, which has branches in Maryland, Virginia, and South Carolina, told National Mortgage News it will make a statement on the matter later in the day Tuesday. Its specialty is renovation financing. For now, the suspension is for a minimum of six months. HUD alleges that the nonbank lender charged excessive origination fees to minority borrowers and others. In some cases, the company charged borrowers a broker fee and an additional 1% origination fee, HUD said. "ETM received excessive compensation and improperly charged consumers duplicative and unreasonable fees to originate their loans," HUD noted. It originated nearly 2,250 FHA-insured loans over the past two years, 8% of which are in default. It has filed only 8 claims. HUD's Office of Inspector General also is investigating ETMC's lending practices. Last week HUD suspended Lend America of Long Island which a few days later laid off most of its workforce.

Almost 217,000 mortgage borrowers in the United Kingdom that moved in the past two years did it primarily to get a better home, but the main motivation of a smaller but significant subset of others was to get away from annoying neighbors, according to new research by Santander U.K.'s Abbey Mortgages division. About 95,000 of the 680,000 mortgage borrowers the Council of Mortgage Lenders said moved in the past two years did it because they disliked the people they had been living near, according to Abbey. Other significant borrower motivations included a need for more space, about 136,000; finding one's dream home, 108,000; downsizing, 102,000; and moving into an area with better schools, 40,800. Layoffs and financial woes forced about 6,800 to move.

The creation of a Consumer Financial Protection Agency would ensure that loan brokers have a vested interest in the performance of mortgages they facilitate, according to HUD secretary Shaun Donovan. The CFPA could end "abusive" yield spread premiums and impose a "duty of best execution" on brokers to make sure they put borrowers into affordable mortgages, the Department of Housing and Urban Development secretary told a Consumer Federation of American conference. In addition, the broker's fee could be paid over time, instead of in a lump sum at the closing table, giving brokers "skin in the game" the secretary said. The National Association of Mortgage Brokers top lobbyist Roy DeLoach said NAMB has a long-standing policy against abusive YSPs that act as incentives for brokers to steer borrowers into riskier, higher cost loans. He noted that NAMB supports a provision in a House-passed bill (H.R. 1728) that prohibits incentivized YSPs. As long as the broker's fee can be financed inside the interest rate, "we are supportive," he said. However, NAMB believes brokers should be paid at closing. In terms of best execution, the NAMB lobbyist noted that wholesale lenders, not brokers, underwrite and approve the loans. "The lenders have all the information we have before the loan goes to close," Mr. DeLoach said.

Delinquency rates on commercial real estate mortgages continued to rise in the third quarter as the 30-day or more past due rate on commercial mortgage-backed securities topped 4% - the highest ever. "Commercial and multifamily mortgages continue to feel stress in the face of the weakened economy, " said Jamie Wood, MBA's vice president of CRE research. The 30-day plus delinquency rate on CMBS hit 4.06% in the third quarter, up 17 basis points from the previous quarter. It was 0.63% in the third quarter of 2008. Meanwhile, 3.4% of CRE mortgages held by banks and thrifts are 90 days or more past due, up 51 bps from the second quarter. These delinquency rates do not include construction and development loans.