Origination

Chase — which shuttered its residential wholesale network in January — is going full bore into retail lending, announcing new plans to hire 1,200 additional loan officers by the end of 2010. Chase currently employs 1,925 LOs in its 5,200 branches. According to the Quarterly Data Report, Chase currently ranks third among all retail lenders, trailing Wells Fargo and Bank of America. Asked about the expansion, a spokesman for the Iselin, N.J.-based lender told National Mortgage News that, "We see the mortgage business as core to our relationship with consumers and expect to be a major leader in the industry for many years to come." He added that the company, a subsidiary of financial services giant JPMorgan Chase, has invested in "new systems, grown our capacity, and now we're looking to increase our sales force." Chase, he noted, is looking to improve access to mortgage expertise at the local level. "We think it's important to have a mortgage officer located at the branches that our customers can go and talk to." In addition, he said the company would hire LOs to work out of their homes or central offices in areas where branches are not present, such as Boston, St. Louis and Washington, D.C. He said these LOs would receive the same professional support as those working in the branches.

Senate Banking Committee chairman Christopher Dodd, D-Conn., has produced a "discussion draft" of a comprehensive regulatory reform bill that requires sellers of mortgage-backed securities to retain 10% of the credit risk. The House Financial Services Committee is moving toward approving a similar bill to address systemic risk that also requires 10% risk retention — a mandate that the mortgage industry opposes. "To restore confidence in our markets and encourage investment, we will require companies that sell products such as mortgage-backed securities to keep 'skin in the game' so that they won't sell worthless securities to investors," Sen. Dodd said. His bill also creates an independent Consumer Financial Protection Agency to protect consumers from "hidden fees and abusive terms" so they know they are being offered "safe" mortgages and other products, the chairman told reporters. Sen. Dodd said he will seek input on his draft bill and reach out to Republicans in an attempt to mark up and approve a bill by the first week of December. Dodd's CFPA plans focuses on companies that "pose the greatest risk to consumers — mortgage bankers, brokers, finance companies and the largest institutions," according to a legislative summary.

Commercial banks are extending the maturities of a significant portion of their commercial real estate mortgages and construction loans, according to a Federal Reserve Board survey of senior loan officers. Over 75% of the respondent banks extended more than 25% of their maturing construction and development loans. Only 16% of the banks refinanced more than a quarter of their maturing C&D loans. Meanwhile, 70% of the banks extended more than 25% of their CRE mortgages that were on their books at the beginning of the year and scheduled to mature by September. Only 20% of respondents refinanced more than a quarter of those maturing CRE loans. The October survey revealed weaker demand for CRE loans but "stronger" demand for prime residential mortgages. However, 25% of the banks said they tightened their underwriting standards on prime single-family loans over the past three months, which is a slightly higher percentage than reported in the July loan officer survey.

An increase in nonperforming loans in its portfolio helped cause iStar Financial to see a drop in its third-quarter revenue. Revenue for the New York-based commercial real estate finance company was $210.2 million for the third quarter of 2009, compared to the $337.3 million for the same period the year prior. According to iStar, the year-over-year decrease is primarily due to a reduction of interest income resulting from an increase in nonperforming loans, an overall smaller asset base and lower interest rates. At Sept. 30, first mortgages, participations in first mortgages, senior loans and corporate tenant lease investments collectively comprised 87% of iStar's asset base vs. 91% in the prior quarter. The company's loan portfolio consisted of 78.3% floating rate loans and 21.7% fixed-rate loans, with a weighted average maturity of two years.

William Everett Nichols of Alexandria, La., president and sole shareholder of First Fidelity Mortgage, pleaded guilty to defrauding Sabine State Bank out of $2.9 million. Sentencing is scheduled for Feb. 4, 2010. According to Donald W. Washington, U.S. attorney for the Western District of Louisiana, Sabine State Bank provided a line of credit to First Fidelity Mortgage, monies that were in turn used by First Fidelity to fund mortgages for its customers. The customer notes pledged by First Fidelity secured this line of credit at Sabine State Bank. Nichols devised a scheme by which he prepared fraudulent notes by forging signatures of borrowers and notaries public, and would then deliver them to Sabine State Bank as collateral in order to cause the bank to deposit more money into First Fidelity Mortgage's account. When the bank would deposit funds into the account to fund these loans, Nichols just kept the money for himself. In total, Nichols defrauded the bank out of $2.9 million. Nichols has been detained without bond since his arrest in July.

The seasonally adjusted annual rate of single-family housing starts in Canada softened slightly in the latest month but the volatile multifamily segment surged. "Despite a small decline in single-home starts in October, the level of single-home starts remains at its second highest level since October 2008," said Bob Dugan, chief economist, Canada Mortgage and Housing Corp. In total, the seasonally adjusted annual rate of single-family and multifamily starts combined was 157,300 during the month, up from 149,300 the previous month, according to CMHC.

The Wright-Patt Credit Union, Fairborn, Ohio, has acquired Select Mortgage Group Ltd., a nondepository mortgage banking firm, for an undisclosed sum. Based in Centerville, Ohio, Select Mortgage receives customer referrals from credit unions that cannot or do not want to fund loans. Select will retain its name, its 12 employees and its executive management team of Rodger Merkel, president, and David Mills, vice president of sales. The acquisition allows Wright-Patt to expand its mortgage operations, said Tim Mislansky, vice president of the credit union and president of its myCUmortgage operation. "SMG's infrastructure and credit union client base offers us the opportunity to expand," Mr. Mislansky. SMG was established in 1996.

After several false starts, the Federal Housing Administration has finally issued new condominium lending policies that go into effect Dec. 7. But the agency is making several temporary exceptions to the new rules due to the "volatility" in the condo market. The new FHA lending policies spelled out in Mortgagee Letter 2009-46 B limit the number of condo units in one complex that can be financed with FHA-insured loans at 30%. And 50% of the units must be owner-occupied before FHA financing can be used. However, Mortgagee Letter 2009-46 A allows exceptions to the FHA concentration and owner-occupancy requirements until Dec. 31, 2010. One exception allows FHA lenders to ignore foreclosed units in calculating the owner-occupancy rate until the end of next year. Meanwhile, the Department of Housing and Urban Development will allow FHA lenders to use a "Spot Loan Approval Process" for condominium units until Feb. 1, 2010. Spot approvals allow FHA lenders to finance one condominium unit in a building that has not been approved by HUD. The new condo lending policies gives FHA direct endorsement lenders the authority to approve condominium projects for the first time ever. The new streamlined lender approval process eliminates the "need" for spot approvals, HUD says.

Over the past nine months Freddie Mac has received $658 million from mortgage insurance firms to cover losses on delinquent loans, but in a new public filing the GSE reveals that if the MI industry collapses its risk exposure would be $63.4 billion. Eight different MI firms have written policies on Freddie Mac loans with MGIC and Radian being the two largest in terms of outstanding coverage, $15.5 billion and $12.1 billion, respectively. Despite the shaky state of the housing market not one MI has failed, though one company, Triad Guaranty, is in self-liquidation mode. In a filing with the Securities and Exchange Commission, Freddie notes that it has "institutional credit risk" relating to "the potential insolvency or nonperformance of mortgage insurers" that cover its loans. But the GSE also says that based on "currently available information" it expects that all of its MI counterparties will continue to pay claims even though many have received "credit watch negative" ratings. The $63.4 billion figure represents the "remaining aggregate contractual limit for reimbursement of losses" of principal, Freddie says.

Freddie Mac had credit-related expenses of $7.5 billion for the third quarter, which was the leading driver of its $6.3 billion net loss to common stockholders. Without a $1.3 billion dividend payment to the U.S. Treasury, the loss would have been $5 billion. During the quarter, Freddie Mac had further deterioration in its single-family guarantee portfolio. The delinquency rate went from 2.78% at the end of the second quarter to 3.33% at the end of the third quarter. The company blamed the increase on weak economic conditions and, in part, to extended foreclosure timelines and to a high volume of seriously delinquent loans that are remaining in trial periods under the Home Affordable Modification Program that might have otherwise completed modification or proceeded to foreclosure. Single-family net charge-offs increased to $2.2 billion in the third quarter of 2009, compared with $1.9 billion in the second quarter of 2009, while nonperforming assets increased to $91.6 billion from $76.9 billion during the same period. Freddie Mac had positive net worth of $10.4 billion at Sept. 30. As a result of the positive net worth, no additional funding from Treasury was required for the third quarter. The positive net worth reflects an $8.5 billion gain in accumulated other comprehensive income primarily driven by improved values on the company's available-for-sale securities.