Origination

AmTrust Bank of Cleveland, which until recently was the nation's third largest residential wholesaler, was seized by the government late Friday with a majority of its assets sold to New York Community Bank, Westbury, N.Y., a top ranked player in multifamily lending. A source familiar with the matter said the government actually took bids on AmTrust's operations two weeks ago, saying interested investors included BB&T, EverBank, Fifth Third Bancorp, Key Bank and others. Its failure is expected to cost the government roughly $2 billion. The lender's demise is yet another blow for loan brokers in search of wholesalers willing to table fund their customers. At press time, it was unclear whether NYCB would keep AmTrust's wholesale division intact. A thrift, AmTrust had $12 billion in assets and until a few years ago was called Ohio Savings and Loan. The thrift was a national correspondent originator, selling its conventional loans to Fannie Mae and Freddie Mac. NYCB paid no premium to assume all of AmTrust's $8 billion in deposits, and also agreed to take over $9 billion of the failed thrift's assets. New York Community and the FDIC will share losses on $6 billion of those assets. The nation's largest privately owned thrift, AmTrust had been stung by a string of losing quarters and mounting losses from construction and development loans. Last Monday its holding company, AmTrust Financial Corp., filed for Chapter 11 bankruptcy protection.

Residential lenders funded $503 billion worth of home mortgages in the third quarter, a 48% gain from the same period last year, but a letdown compared to the second quarter, according to figures compiled by National Mortgage News and the Quarterly Data Report. Mortgage lenders are continuing to benefit from record low interest rates and the $8,000 first-time homebuyer tax credit which was extended by Congress through the Spring. In the second quarter the industry wrote $583 billion in new home loans. Bank of America and Wells Fargo continued to dominate the production business with a combined market share of 39% in 3Q, NMN/QDR found. (For complete rankings see the Monday edition of NMN.)

Genworth Financial Inc. has priced a $300 million seven-year senior note offering at an interest rate of 8.625% per year. Proceeds from the offering will be used by the Richmond, Va., life and mortgage insurer for "general corporate purposes." Deutsche Bank Securities Inc., Keefe, Bruyette & Woods Inc. and UBS Securities LLC are joint book-running managers for this offering, which is expected to close on Dec. 8, 2009.

Construction of multifamily housing weakened further in October, falling to the lowest number of starts on record. Apartment builders started just 48,000 properties with five or more units in October, the Commerce Department reported. The previous low was reached in July and again in September, when started five-plus apartments had an annual rate of 72,000. According to the National Association of Home Builders, while the government's monthly multifamily production figures tend to be volatile. But until this April, they had not dipped below 90,000 units on a seasonally adjusted basis since 1963. Since April, the multifamily starts rate has gone below 90,000 four times. Apartment completions also have fallen. There were just 200,000 of these in October.

Willie Newman, the former executive vice president of ABN Amro Mortgage Group, has been hired to head up the newly created residential mortgage origination unit at Cole Taylor Bank, Rosemont, Ill. The new affiliate will have offices in several states and source loans from established relationships with mortgage brokers, remote retail origination sites and the bank's retail branches. Cole Taylor Bank said it does not plan to hold the originations in its portfolio but will sell them in the secondary market. "We expect that the addition of this new line of business will be an important new source of fee income for our organization and will provide additional earnings diversification," said Bruce W. Taylor, chairman of Taylor Capital Group Inc., the bank's parent company. "We believe that this is a significant opportunity for us, and we are fortunate to be able to attract an industry leader like Willie Newman for this new line of business." The company expects to start originating mortgage loans in the first quarter of 2010. During his time at AAMG, Mr. Newman also had the title of president of InterFirst Wholesale Mortgage Lending. At Cole Taylor, he will report to Randy Conte, Taylor Capital's chief financial and chief operating officer. Mr. Conte at one time was COO at AAMG.

If the Federal Housing Administration had raised its annual mortgage insurance premiums by a modest amount in September 2008, its capital reserves would not have fallen below its statutory 2% minimum, according to a former Freddie Mac economist. "We found that a 20 to 25 basis point increase in the premium would have allowed the [FHA mortgage insurance] fund to meet its statutory capital requirement in fiscal year 2009," economist Ann Schnare told a congressional committee. FHA officials have asked Congress to raise the 55 bp cap on the annual premium so they can replenish the FHA fund's capital reserves. However, these same officials have not told Congress how high they want to raise it. "While we have not updated our analysis, we believe that something around" a 20 bp to 25 bp increase "would be appropriate today," she testified. She noted such an increase would bring FHA's pricing in line with Fannie Mae and Freddie Mac pricing. Ms. Schnare is a partner at Empiris LLC, a Washington economic consulting firm. In the 1990s, she was vice president for housing economics and financial research at Freddie Mac.

The housing recovery is still at a fragile stage, but with inventories of unsold homes receding and home sales and prices rising "we may be finally seeing the light at the end of the tunnel," HUD secretary Shaun Donovan said. The Department of Housing and Urban Development secretary made his remarks at a Consumer Federation of America conference. He stressed to reporters afterwards that it is "far too early to say we are out of the woods." But he noted that completed foreclosures have declined three months in a row and the Obama administration's loan modification program is a contributing factor. Foreclosures are "still too high," he said, and the administration is considering several options to assist unemployed homeowners. "We will make an announcement relatively soon," he added. The HUD secretary noted that a Pennsylvania state mortgage assistance plan does not require lenders or private investors to absorb any of the principal reduction. "I would not support a process where there is no principal reduction by whoever owns the loan," he told reporters.

The Mortgage Bankers Association is continuing to lose experienced staffers, confirming the departures of senior vice president in charge of commercial/multifamily, Jan Sternin, and one other. Leaving the trade group next week is Chris Oswald, who serves as director of state government affairs. Ms. Sternin will depart by late January. A spokeswoman for the trade group confirmed the departures but said MBA will hire replacements. The trade group, which hopes to turn a profit in the current fiscal year, is in the process of reorganizing parts of its government affairs division. It is in the process of selling its new Washington headquarters building but expects to take a loss on the sale.

Lend America, which was banned from FHA lending on Monday, was refinancing certain customers without paying off their prior existing lien, according to veteran mortgage banking attorney Robert Lotstein. Mr. Lotstein, who has clients that did business with Long Island-based Lend America, said this has created a situation where customers received a new loan from the lender but without their existing lien being paid off. A managing attorney with Mortgage Banking Advisors PLLC, Mr. Lotstein said this has created a situation where some Lend America mortgagors "will get a call from their old lender asking where the payment is." The attorney said his mortgage banking and vendor clients informed him of the situation. He said he could not quantify how many Lend America refi customers might be having this problem. A spokesman for the company said the lender is trying to rectify the problem.

The mortgage industry continues to shrink in terms of full-time employees as companies rely more on temporary workers to deal with servicing and origination demand. The U.S. Bureau of Labor Statistics reported that mortgage companies cut 3,700 full-time workers from their payrolls in October, including 1,700 mortgage brokers. Overall employment in the mortgage banker/broker sector fell to 255,500 in October from 259,200 in September. "You have a lot of temps being hired," a Mortgage Bankers Association executive said, noting that those figures do not show up in the BLS mortgage sector data. MBA associate vice president of industry analysis Marina Walsh said that mortgage firms are definitely hiring servicing-related workers but it is hard for them to justify hiring full-timers given the volatility in the market. "To forecast what it going to happen with originations and interest rates is very difficult," she said. Meanwhile, Friday's jobs report provided some good news with the national unemployment rate falling to 10% from 10.2% previously. BLS also revised downward the job losses in October and September - by a combined 150,000. (There is a one-month lag in BLS reporting of mortgage industry employment data.)