Origination

The House Financial Services Committee has approved a bill that would create a new Consumer Financial Protection Agency and revise the appraisal standards across the entire mortgage lending industry. By a 39-29 vote, the committee passed a bill which would give the newly-created CFPA director the authority to set and enforce the rules for mortgage and credit card lending. The new agency would take over the consumer lending rulemaking authority from the federal banking agencies. During the markup, the committee agreed to an amendment that would call on the CFPA director to work with the industry to establish one set of appraisal independence standards that would replace the Home Evaluation Code of Conduct adopted by Fannie Mae and Freddie Mac.

The Federal Housing Administration has delayed for a second time the effective date of new rules to tighten its condominium lending policies. The effective date is now Dec. 7, the agency said in a new notice. Until the new guidance takes effect, FHA said, "lenders may continue to use the Spot Loan Approval guidance issued on Mortgagee Letter 2009-19." The new FHA condo rules that were originally slated to go into effect Oct. 1 would have eliminated "Spot Loan Approval" that allows lenders to finance one condominium sale in a building that is not FHA approved. FHA subsequently delayed the effective date of the condo rules until Nov. 2 to make several modifications.

U.S. Housing and Urban Development Secretary Shaun Donovan has proposed an initiative designed to ensure its "core housing programs are open to all, regardless of sexual orientation or gender identity." The proposed rule will be open to public comment. In addition, HUD said it would commission the first-ever national study of discrimination against members of the lesbian, gay, bisexual and transgender community in the rental and sale of housing. Mr. Donovan said evidence shows "some are denied the opportunity to make housing choices in our nation based on who they are and that must end." Few state and local studies exist, HUD said, but for example, a study by Michigan's Fair Housing Centers found that nearly 30% of same-sex couples were treated differently when attempting to buy or rent a home. The goal, HUD said, is to clarify that the term "family" as used to describe eligible beneficiaries of its public housing and Housing Choice Voucher programs to include otherwise eligible LGBT individuals and couples. Plus, it will require HUD programs' participants to comply with local and state non-discrimination laws; and require that any FHA-insured mortgage loan must be based on the credit-worthiness of a borrower, not their sexual identity.

BB&T Corp., Winston-Salem, N.C., likely has eased the minds of many mortgage originators by stating it plans to remain in the mortgage warehouse lending business. The company has named Jeff Ellison as president of its mortgage warehouse lending division, located in Orlando. BB&T, which had been a small warehouse player, picked up the operations of Colonial Bank after the latter's failure. The terms of the transaction with the Federal Deposit Insurance Corp. required BB&T to stay in the business for one year. BB&T commercial finance president Robert Fentress, commented in a statement, "This is a commercial product that dovetails nicely with our retail mortgage business. After evaluating the business model, we plan to continue in the mortgage warehouse lending business. We feel it offers excellent growth opportunities given our client relationship model." Mr. Ellison started at BB&T in 1984. He most recently served as senior credit officer in the company's East Florida Region.

A federal court late Wednesday denied an injunction filed by the U.S. Attorneys' office in Brooklyn against Lend America, a development that will allow the nonbank — for now — to continue originating FHA loans. "The burden is high to get a judge to shut down a business instantly," said a spokesman for the Department of Housing and Urban Development. Spokesman Brian Sullivan noted that HUD still has a "notice of violations" against the Melville, N.Y.-based company which the company has less than a month to answer. He said HUD will continue to pursue action against the company. Almost all of the firm's production is FHA-backed. In a statement the lender said, "We are obviously pleased with the court's decision. We look forward to continuing our partnership with HUD and our mission of providing affordable financing for those borrowers in need." Earlier this week DOJ and HUD sought a court injunction to ban Lend America from originating FHA loans, accusing the nonbank lender with fraud in regard to $14 million in production. (The company also does business as Ideal Mortgage Bankers Ltd.) The government also sought injunctive relief against company executive Michael Ashley who holds the title "chief business strategist." According to figures compiled by National Mortgage News, Lend America ranks 18th nationwide in terms of GNMA MBS issuance. It services about $850 million in GNMA-backed product. Lend America recently stepped up plans for expansion into correspondent mortgage banking and wholesale that included FHA production. According to Newsday, back in 1993 Mr. Ashley pleaded guilty to three counts of conspiracy to commit wire fraud while employed by Liberty Mortgage Banking of Long Island. Asked about the guilty plea, a spokesman for the company said, "In Michael's eyes all that is in the past."

The sale of low- to medium priced homes - aided by the $8,000 first time homebuyer tax credit - is helping to improve the nation's economic outlook, according to the Federal Reserve's new Beige Book report. The Fed says improvements in both residential real estate and manufacturing "continued a pattern of improvement" that emerged this summer. However, the report cautions that one of the weakest sectors of the economy is commercial real estate with the Fed's business contacts describing conditions as "weak or deteriorating." Also, the residential construction sector is still suffering, it says. Even though the Fed sees some improvement in housing, it cautions that sales are not booming anywhere. In the Boston and Cleveland Fed districts Realtors fear a downturn once the tax credit expires in late November. It notes that new and existing home sales were flat in the Philadelphia area and in St. Louis residential sales actually fell.

Barry C. Westergom, a former real estate appraiser from Jacksonville, Florida, pleaded guilty to fraud and conspiracy charges connected to a mortgage scheme. Sentencing for Westergom has not yet been scheduled. According to A. Brian Albritton, U.S. attorney for the Middle District of Florida, Westergom was involved in a scheme in which a co-conspirator, Juan Carlos Gonzalez, negotiated the purchase of higher-end houses and entered into contracts with the sellers of the properties. Westergom was a licensed real estate appraiser and Gonzalez retained him to appraise the properties. Westergom used inappropriate comparable properties and other fraudulent means to appraise the properties. The appraised values were significantly higher than the agreed purchase price and the true market values of the properties. The inflated appraisals were submitted to lenders. Westergom knew that Gonzalez intended to submit the appraisal reports to lenders in support of mortgage loan applications. Gonzalez has pleaded guilty and is sentencing for scheduled on Nov. 9.

New England-based mortgage banker Mortgage Network Inc. has acquired Pennsylvania loan broker American Eagle Mortgage, which has been serving the Lansdowne and Whitehall areas of the state. American Eagle's former owner, Dan Murphy, plans to serve as branch manager for the locations. According to Mortgage Network, his team of about 20 loan officers also will remain intact and continue to operate in the same locations with the support of Pittsburgh and Lancaster Mortgage Network offices.

U.S. Bancorp, Minneapolis, saw a $215 million increase in its mortgage banking income over the year prior as it had loan production volume of $14.8 billion and loan application volume of $15.5 billion during the third quarter of 2009. The bank had mortgage banking revenue of $276 million for the third quarter 2009, compared with $308 million for the second quarter 2009 and $61 million for the third quarter of 2008. Year-to-date mortgage banking revenues are $817 million, up from $247 million for the same period last year. However, the bank also saw $189 million in commercial real estate loan net chargeoffs for the quarter, up from $65 million one year ago, and $129 million in residential mortgage net chargeoffs, up from $71 million for the third quarter of 2008. Home equity loan and second mortgage chargeoffs were $89 million for the most recent quarter, up from $48 million for the same period a year ago. U.S. Bancorp has approximately $4 billion in total nonperforming loans, including $1.7 billion in commercial real estate and $383 million in residential mortgage loans. For the third quarter, U.S. Bancorp had net income of $603 million ($0.30 per share), up from $576 million ($0.32 per share) for the same quarter in 2008. The third quarter results included a $415 million loan loss provision.

Real estate investment losses put a ding in Morgan Stanley earnings but the company as a whole was still profitable in the third quarter. The company took a $400 million loss on real estate investments "amid the ongoing industry-wide decline in this market," but generated net income of $757 million during the period. This was down from about $8.15 billion in net income during the third quarter of last year but it was an improvement over the loss it took in the second quarter.