Origination

Fitch Ratings has downgraded 119 bonds in 85 residential mortgage-backed securities transactions to 'D,' saying the securities have suffered writedowns on the underlying principal. All the bonds affected previously had had 'C' ratings that indicated a default was expected. Eighty of the bonds downgraded were from subprime credit deals and 33 of the bonds downgraded were from alternative-A credit deals. The remaining six bonds were from miscellaneous other RMBS transaction types, according to Fitch.

Senate Banking Committee chairman Christopher Dodd, D-Conn., has scheduled a committee meeting for November 19, giving members a chance to air their opinions on his comprehensive regulatory reform bill. Chairman Dodd wants to use the vetting session to gauge the level of support for his bill and see what changes are needed to forge a consensus. The initial draft of the legislation would consolidate bank supervisory activities into one agency, establish a separate consumer financial protection agency, and create a process for safely shutting down firms that are currently considered "too big to fail." So far, no Republican members have expressed support for the bill and a few Democrats have noted they have problems with some provisions. Sen. Dodd plans to release a revised draft of his bill on November 23. He wants the committee to meet December 2 to start the markup of the bill where senators offer and vote on amendments.

Over the past two months the Federal Housing Administration has suspended or "eliminated" at least eight mortgage banking firms from using its insurance program, according to Assistant Housing Secretary David Stevens. Mr. Stevens told reporters at a press conference that the eight firms — which were not identified — "were originating a poor quality book of business." He noted that mortgage banking firms that were approved to do business with the agency between 2005 to 2009 account for just 5% of its overall business. "A vast majority" of FHA's $685 billion book of business consists of what Mr. Stevens called "long tendered institutions." One mortgage banking source told National Mortgage News that the government is now looking into a large number of early payment defaults at a New Jersey-based FHA lender. No further details were available. On Thursday HUD released an audit showing that at the end of September the FHA's Mutual Mortgage Insurance fund had a razor thin capital cushion of just $3.6 billion, or 0.53% of its entire coverage universe. HUD is considering raising premiums to bolster the fund. HUD officials say that despite the thin capital base of the MMI, the fund is constantly bringing in new cash through premiums and that almost 30% of borrowers using the program in fiscal 2009 had a credit score of 720 or better, an all-time high. Four years ago just 12.6% of FHA borrowers had a credit score that high.

Year-over-year declines in California's new home sales market continued to shrink in September, a signal perhaps that the market is stabilizing. Sales in projects with 10 or more units were 11% below September 2008's total. But that's an improvement from the 13% year-to-year decline reported in August, and stands in stark contrast to much greater declines posted earlier this year, according to the monthly count by the California Building Industry Association and the Hanley Wood Market Intelligence research firm. Overall, just 2,310 new houses and condominiums were sold in September in the subdivisions tracked by the Costa Mesa-based HWMI. Compared with September 2008, the median base price of a new house statewide fell 6%. Jonathan Dienhart, director of published research for HWMI, said the slowdown in the slowdown is a "good sign" that the market is starting to reach a balance. But he also said that given "the dismal conditions" that 2009 figures are being compared with, it is still too early to make the call that a recovery is in the winds. "Broader economic issues, especially job losses, will continue to be a drag on the housing market and prevent it from a return to healthy equilibrium," Mr. Dienhart said. CBIA is pushing California lawmakers to follow the lead on Congress by re-instituting the state's $10,000 homebuyer tax credit.

The Federal Housing Administration has set new standards for housing counselors who want to work with seniors taking out FHA-insured reverse mortgages. To provide these services, counselors have to pass an AARP-approved examination and apply to be on FHA's new roster for Home Equity Conversion Mortgage counselors. "Only those counselors on the HECM roster can provide HECM counseling to potential HECM borrowers," according to FHA mortgagee letter 2009-47. FHA created the HECM roster in response to criticism that some counseling sessions are pro forma — conducted by counselors that are not knowledgeable about the product. The Government Accountability Office identified problems and Congress directed FHA to take corrective action. Darryl Hicks, a spokesman for the National Reverse Mortgage Lenders Association, noted that the new standards and roster have been a work in progress for the past two years. "We think it is great for the industry because it will establish a higher bar for counseling," Mr. Hicks said.

Experian, Costa Mesa, Calif., has created a suite of "ability to pay" products for use by mortgage lenders and brokers, among other credit grantors. Ability for a borrower to repay the mortgage loan is one of the hot button topics coming out of the mortgage crisis. The first product, Income Insight, provides an estimate of a borrower's individual income utilizing verified income data and proprietary credit bureau attributes. This product complies with the Fair Credit Reporting Act and the Equal Credit Opportunity Act, Experian said. The company targets customers while considering the complete financial picture, it improves risk-management efforts by including modeled debt-to-income ratios and it aims to accurately segment defaulted borrowers to maximize collection processes. Income View is a Web-based tax verification service that provides clients with what it said is reliable IRS 4506-T processing and prompt access to applicants' verified income via the Internal Revenue Service.

The average appraiser in most metro markets traveled 13 miles or less to value a property, according to a new survey by the Title Appraisal Vendor Management Association in Pittsburgh. The group is using the results to counter an argument made by the opponents of the Home Valuation Code of Conduct, that appraisal management companies are assigning work to appraisers who have to travel long distances and are not familiar with the neighborhood. One of the reasons AMCs are getting a bad rap is because the whole mortgage industry is changing and more work is going through them, which means there can be pushback from some appraisers and mortgage brokers that may not like how business is business done, says Jeff Schurman, executive director of TAVMA. "We polled our AMC members in light of unsubstantiated statements that AMCs send out-of-market appraisers great distances to value properties," he said. "Based on what our members are reporting to us that's simply not the case." AMCs typically use one of three methods for controlling how far appraisers travel: Geo-coding; ZIP code to ZIP code mapping; and/or order form instructions not to exceed defined distance parameters. The 40 companies in TAVMA represent 85% of the market share in the appraisal management space. That an appraiser services a particular area, how often, and how recently are three critical selection criteria that AMCs use in selecting the most appropriate appraiser for an assignment. "The nature of the business is that appraisers sometimes travel outside of their own neighborhood but that doesn't mean outside of their sphere of professional expertise," said Steve Haslam, CEO, StreetLinks National Appraisal Services.

A pair of real estate investment trusts managed by Vestin Mortgage Inc. saw net losses for the third quarter of 2009 due in large part to their level of nonperforming loans and the increase in properties acquired through foreclosure. Vestin Realty Mortgage I reported a net loss of $4.7 million for the period, compared with a net loss of $6.4 million in the same period in 2008, while Vestin Realty Mortgage II reported a net loss of $17.4 million for the third quarter of this year, compared with a net loss of $40.1 million for the third quarter of 2008. As of Sept. 30, 2009, Vestin I had 21 loans outstanding with an aggregate principal amount of $36.1 million, of which 10 loans with an aggregate principal amount of $24.5 million were considered nonperforming. Vestin II had 28 loans outstanding with an aggregate principal amount of $143 million, of which 11 loans with an aggregate principal amount of $79.5 million were considered nonperforming.

The average rate for a 30-year fixed-rate mortgage has dropped to its lowest level in five weeks, according to the most recent Freddie Mac Primary Mortgage Market Survey. "This comes at a time when house price declines are moderating and consumer demand for prime mortgages at commercial banks has picked up," said Frank Nothaft, Freddie Mac vice president and chief economist. The average 30-year FRM rate during the week ended Nov. 12 was 4.91%, down from 4.98% the week before and from 6.14% a year ago. The average 15-year FRM rate was 4.36%, down from 4.40% last week and 5.81% a year ago. The average rate for a five-year Treasury-indexed hybrid adjustable-rate mortgage was 4.29%, down from 4.35% last week and 5.98% a year ago. The average one-year Treasury ARM rate was 4.46%, down from 4.47% a week ago and 5.33% a year ago. Average points were 0.7 for 30-year FRMs and 0.6 for the three other types of loans.

Refinance applications made up more than seven of every 10 mortgage applications submitted for the week ended Nov. 6, the Mortgage Bankers Association Weekly Mortgage Applications Survey found. The market share of refinance applications, according to the survey, rose to 71.5% from 66.1% for the previous week. MBA said this is the largest share of refi applications since this past May, when 30-year fixed rates were near an historical low. The Market Composite Index, a measure of loan application volume, increased 3.2% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 2.8% compared with the previous week. The Refinance Index increased 11.3% from the previous week but lower rates have not yet contributed to an increase in purchase applications. The seasonally adjusted Purchase Index decreased 11.7% from one week earlier. The share of adjustable rate mortgage applications fell to 5.5% for the week, from 6.1% one week prior. The average contract interest rate for 30-year fixed-rate mortgages fell to 4.90% from 4.97%, with points increasing to 1.03 from 1.01 (including the origination fee) for loans with an 80% percent loan-to-value ratio, the association reported. The average contract interest rate for 15-year FRMs was unchanged from the previous week, at 4.33%, while for one-year adjustable rate loans, rates increased by 2 BP to 6.85%. The MBA stopped disclosing index values with the July 31 data release. The group released this information a day later than normal because Wednesday this week was Veterans' Day. The MBA can be found online at http://www.mortgagebankers.org.