Origination

Radian Group Inc., Philadelphia, lost $70.5 million ($0.86 per share) for the third quarter, driven by a mortgage insurance provision of $376.5 million as a result of higher delinquencies. The company said it expects delinquencies to continue to rise in the fourth quarter. It paid claims of $243.2 million, but said this was lower than what the company forecast. In its second-quarter release it predicted paid claims for the third quarter of between $275 million and $300 million. For the fourth quarter, it is now projecting paid claims of $290 million. Primary new mortgage insurance written for the third quarter was $3.4 billion. This total does not include $300 million of insurance for loans originated in the Home Affordable Refinance Program. HARP loans are treated by Radian as a modification of existing coverage, so they are not added into the total. In the same quarter in 2008, Radian wrote $7.5 billion of primary new insurance. The company's risk-to-capital ratio was 16.1-to-1 at the end of the third quarter, up from 15.9-to-1 at the end of the second quarter. This is still well within the 25-to-1 limit some states have to be able to write new policies. Radian added it expects to have sufficient capital to write mortgage insurance business into next year.

The mortgage division of GMAC Financial Services lost $747 million in the third quarter — thanks in part to loan repurchase liabilities — but its performance was a marked improvement over a $2 billion loss in the same period last year. GMAC's residential unit, Residential Capital Corp., is still grappling with a large portfolio of nonperforming mortgages, $7 billion compared to $8.5 billion a year ago. ResCap originated $15.8 billion in the third quarter, a 33% gain from the third quarter of 2008. Year-to-date, its fundings are almost on par with last year. According to the earnings statement, GMAC took a $515 million charge because of mortgage repurchase requests. No details were provided. ResCap is the nation's fifth largest player in mortgages, according to National Mortgage News and the Quarterly Data Report.

With long-term mortgage rates once again slipping under 5%, the Market Composite Index increased as refinance applications increased for the week of Oct. 30, the Mortgage Bankers Association Weekly Mortgage Applications Survey found. The MCI, a measure of loan application volume, increased 8.2% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the index increased 7.9% compared with the previous week. The refinance index increased 14.5% from the previous week but the seasonally adjusted purchase index decreased 1.8% from one week earlier. The market share of refinance applications, according to the survey, rose to 66.1% from 62.3% for the previous week. The share of adjustable-rate mortgage applications fell to 6.1% for the week, up from 6.9% one week prior. The average contract interest rate for 30-year fixed-rate mortgages fell to 4.97% from 5.04%, with points decreasing from 1.25 to 1.01 (including the origination fee) for loans with an 80% loan-to-value ratio, the association reported. The average contract interest rate for 15-year FRMs declined by a rather large 20 basis points from the previous week, to 4.33%, while for one-year adjustable-rate loans, it increased by 4 bps to 6.79%. The MBA stopped disclosing index values with the July 31 data release. The group said because of Veterans Day on Nov. 11, the release of next week's survey results would be delayed a day. The MBA can be found online at http://www.mortgagebankers.org.

The Department of Housing and Urban Development late Tuesday unexpectedly delayed the release of a much-anticipated audit of the FHA's capital reserves, raising questions about the accuracy of some of the findings. The delay fueled industry speculation that the government insurance fund is perilously close to reaching the zero mark. In a statement, FHA commissioner David Stevens said the government asked its outside auditor, IFE Group of Rockville, Md., "to run additional economic scenario testing above and beyond what was going to be included in the actuarial study to better understand a broader range of risk scenarios." Based on what it saw of the results, FHA raised questions about the accuracy of IFE's modeling. The auditor then told FHA that it should not treat the report as final. IFE is now running additional tests to ensure that the final report is accurate, FHA said. FHA insures just over $700 billion in mortgages. At midyear its reserves stood at just under $8 billion. But with claims rising that number may have fallen below $5 billion, according to industry sources. Ed Pinto, an industry consultant and FHA critic, said Tuesday that he believes the audit results will be based on "overly optimistic" assumptions relative to the fund's delinquencies, cure rate on defaulted loans and success rate on loan modifications. Mr. Pinto told National Mortgage News that if the FHA's reserves do in fact go negative, "however small that number is, it will be ominous." HUD officials could not be reached for comment.

Bank of America said is now giving its home equity borrowers the same "Clarity Commitment" summary it gives to its first lien customers. The document was introduced last April as a one-page summary of loan terms that was written in plain language. Now, the company will be giving a similar document for all stand-alone home equity lines of credit and any home equity loan whose term is longer than 36 months. The borrower will receive a copy at the point of sale, as a redisclosure in the event of a loan product change and with the closing package. However, consumers who apply through the company's website will get their copy only in their closing package. Reverse mortgage customers with closed-end, fixed rate, full draw loans already receive a copy of this document.

Early Wednesday morning the Federal Housing Administration will release a much anticipated audit of its finances, including details about how much capital is left in its single-family reserve fund which covers losses on its massive book-of-business. To date, FHA commissioner David Stevens has vowed that the government's single family insurer will not need tax payment money to weather the recession and housing crisis. "I have read so many stories attacking FHA without relevant data," he told National Mortgage News last month. A spokesman for the agency said it does not anticipate releasing any results that will vary widely from "what we've already signaled." In recent weeks FHA has tightened its underwriting guidelines and taken administrative action against certain lenders that it believes were violating its guidelines.

Flagstar Bancorp, the largest thrift player in mortgages, posted a $299 million loss in the third quarter, but vowed to continue investing in what it called its "position as one of the leading residential mortgage originators in the country." Its new CEO Joseph Campanelli added, "We anticipate a significant level of industry consolidation and want to be active in that process. But in the near term, we will have to bring expenses into better alignment and make prudent operating decisions as we seek to broaden our earnings streams beyond our traditional mortgage activity." Its third quarter loss was almost triple the loss it suffered in the same period a year ago. The company stressed that its thrift unit remained "well-capitalized" for regulatory purposes, with capital ratios of 6.39% for Tier 1 capital. According to its earnings statement, the Michigan-based Flagstar funded $6.6 billion in residential loans during the quarter, a slight drop from the same period last year, but a 29% decline from the second quarter. Despite the loss, there was some good news in the numbers: its gain-on-sale of loans grew to 137 basis points compared to just 33 bps a year ago. At the end of September Flagstar serviced $53.2 billion in loans, which paid a weighted average service fee of 32.6 basis points. Non-performing residential real estate loans grew to $606 million at the end of the third quarter, up from $588 million at the end of the second quarter. A year ago it held $305 million of delinquent loans. Its non-performing commercial real estate loans climbed to $420 million. According to the Quarterly Data Report, Flagstar is the nation's 11th largest residential funder and ranks 18th among servicers.

Hudson Valley FCU of New York has filed a lawsuit, challenging the state's mortgage tax, arguing that federally chartered credit unions should be exempt from the levy. The credit union claims that federally chartered credit unions, which are defined as instrumentalities of the federal government under the Federal CU Act, should be exempt from all federal and state taxes, according to Paul Quartararo, Hudson Valley's attorney in the case. However, John McDermott, a real estate attorney who has closed loans in New York for 20 years, said he is unsure of the CU's case. "New York does not collect the lender's portion of mortgage tax from credit unions. It does collect the borrower's portion of New York's mortgage tax from credit union mortgagors (loan borrowers) because those borrowers are individuals not credit unions." (Mr. McDermott, who has worked for Citibank, is also a columnist for Origination News, a SourceMedia publication.) The tax varies from county to county, but is $1.30 per $1,000 of a new mortgage when the deed is recorded, and is as high as $2 per $1,000 in New York City, Manhattan County. An exemption from the four-decade-old tax could save credit unions millions of dollars a year. Hudson Valley FCU is a $2.8 billion Poughkeepsie, N.Y., credit union that was one of more than two dozen credit unions chartered in the 1960's to serve employees of IBM Corp. The credit union claims that the tax is unconstitutional as applied to federal credit unions because federally chartered credit unions are instrumentalities of the federal government and the U.S. Constitution bars taxation of those entities without the express consent of the Congress.

Tree Inc., which operates the LendingTree.com website, saw its third quarter revenues fall 17% sequentially but was able to add a $75 million warehouse line of credit. The publicly traded mortgage bank/lead generator lost $7.4 million in the third quarter, compared to a slight profit in 2Q. In the year ago quarter it lost $22.6 million. According to its earnings statement, the company was hurt by what it called "unanticipated items" including $4.2 million in loan loss settlement requests and additional legal costs associated with a lawsuit. Even though the company lost money in the period, revenue at its lending operation — its largest segment by that measure — increased 21% from a year earlier, but fell 34% from the previous quarter to $24.1 million. The company said the decrease was primarily driven by higher interest rates, which led to a 31% drop in loan production, to $620.2 million. Its new warehouse lender is JPMorgan Chase & Co.

The apartment market is showing signs of improvement, according to the National Multi Housing Council's latest quarterly survey of apartment market conditions. The survey showed increased sales activity and improvements in the availability of debt and equity capital compared with three months ago. The survey's sales volume index hit its highest level in four years, while the equity and debt financing indices were the highest in three years. Although the report showed that market tightness (vacancies and rent levels) remained substandard, it also showed improvement over the previous quarter. "The broad improvements in sales volume and debt and equity financing suggest the transactions market may finally be thawing," said NMHC chief economist Mark Obrinsky. He added that nearly half of respondents (45%) indicated that the gap between what sellers are asking for and what buyers are offering has narrowed.