Origination

Under a new plan unveiled Monday afternoon the Treasury Department — as well as Fannie Mae and Freddie Mac — will attempt to boost the struggling mortgage revenue bond market, which is currently operating at about 25% of capacity. Year-to-date, state and local housing finance agencies have issued just $4 billion in mortgage revenue bonds (MRBs), the proceeds of which are used to provide low-cost residential loans and build or renovate rental housing. As part of the plan to increase liquidity, the Treasury will purchase Fannie Mae and Freddie Mac securities which will be backed by new MRBs. The GSEs also will provide partial credit enhancements which will serve as a guarantee of sort on the bonds. Government officials declined to give an estimate on how much authority might be used under the program but did say there would be a ceiling to it. Some HFAs have completely shut down their lending programs because of a lack of liquidity caused by the housing crisis.

Fitch Ratings said it has affirmed the ratings on the majority of tranches in its review of 78 fixed-rate U.S. commercial mortgage-backed securities transactions from 2006-2008. Out of a total of $230.4 billion in unpaid principal balance from these deals, ratings on $186.1 billion were affirmed and ratings on $44.3 billion were downgraded. It said most of the downgrades were concentrated in the 2007 vintage.

Six individuals in the New York City area — Manre Ebhomielen, Tyshe Bankston, Merrick Henry, Val Taylor, Jocelyn Joseph and Bernard Lawson — have been charged with defrauding Rochester, N.Y.-based mortgage company Flaherty Funding. According to Kathleen M. Mehltretter, U.S. attorney for the Western District of New York, in an effort to expand its business into the New York City area, Flaherty Funding contacted Queens, N.Y.-based mortgage company Vista Mortgage. Flaherty and Vista agreed that Vista would close its operation and some of its staff would become Flaherty employees, one of them being Ebhomielen who, along with the other defendants, allegedly participated in a scheme to obtain large mortgage loans from Flaherty by submitting false information and documents to the company during the loan approval process. The scheme involved five properties purchased in the New York City area. Ebhomielen, Henry and Taylor have been arrested. They will have their initial appearances in the New York City area and are then expected to appear in Rochester at a later date. The defendants could not be reached for comment.

Moody's Investors Service is divulging some of the criteria in its originator assessments, which are used in conjunction with rating residential mortgage-backed securities transactions in Europe, the Middle East and Asia. Moody's said it primarily is focusing on each originator's origination, underwriting and closing practices and whether they are in line with good loan quality, as well as whether the originator is acting within its stated risk/reward strategy. Shivani Kak, a Moody's assistant vice president, further noted that the OAs focus only "on the originator's policies and practices on the loan performance as opposed to other factors such as the macro-economic environment and servicer performance."

Kroll Factual Data has released an Independent Verification Solution, which helps lenders comply with the proposed FHA credit policy changes announced on Sept. 18, 2009. Under the proposed guidelines, mortgage brokers will no longer receive independent FHA approval for origination eligibility, but will instead be required to originate through an FHA approved lender. Since FHA approved lenders will carry the liability for broker-originated loans, they need to bolster their verification process to support the additional volume that will come from the correspondent channel, said Loveland, Colo.-based Kroll Factual Data in a prepared statement. Adding to this new strain on scarce underwriting and quality control resources is a new rule for FHA streamlined refinances which requires lender certification of the borrower's capacity to pay at the time of application. Kroll Factual Data will deliver capacity-to-pay verifications. According to Kroll Factual Data, the detailed billing and reporting that is included with the service increases traceability and transparency for Real Estate Settlement Procedures Act compliance. To give lenders an extra measure of protection against the risk of errors, Kroll Factual Data's verifications are backed by representations and warrantees of accuracy. Lenders can customize the solution to include additional types of verifications and risk assessment analytics as required for their specific risk management program.

The Department of Veterans Affairs guaranteed $68.2 billion of single-family loans for the fiscal year ending Sept. 30, an 80% spike from last year. Refinancings drove most of the increase with VA guaranteeing 144,800 transactions. A year ago it backed just 37,300 refis. Purchase mortgage transactions rose 27% to 180,900 loans in FY 2009. Despite these impressive volumes, VA officials seem most pleased with the performance of the new loans. "VA is performing extremely very well," said Mark Bologna, the director of the VA home loan guarantee program. "We outperform every other product on the market including prime loans," he told National Mortgage News Online. The VA's seriously delinquent rate is 4.69%, compared to 5.44% for prime loans, according to the latest delinquency figures compiled by the Mortgage Bankers Association. VA officials contend that one of the reasons for the performance is that the agency did not bend to industry pressure during the housing boom to allow loan officers and mortgage brokers to select their own appraisers. VA approves, monitors and selects appraisers for property evaluations. This has resulted in "good solid values," he said. "It has proven to be a good decision."

Ginnie Mae issuers securitized a record $418.1 billion in residential mortgages in fiscal year 2009 as lenders flocked to loan programs tied to the Federal Housing Administration and Veterans Administration. Overall, GNMA issuance rose by 55% compared to the prior fiscal year. (By comparison, Fannie Mae issued $612 billion in MBS through the first eight months of the year.) The Government National Mortgage Association ended fiscal 2009 (Sept. 30) guaranteeing $39.7 billion in mortgage-backed securities during the month. In August its volume was a bit higher at $44.2 billion. In the last two quarters alone the agency backed $247.7 billion in mortgage securities. Fannie and Freddie Mac securitize conventional mortgages. Ginnie Mae MBS are backed by FHA, VA and Rural Housing Service loans. FHA, which is in danger of falling below its minimum capital requirement, accounts for by far the largest portion of GNMA collateral.

The stock of Fannie Mae and Freddie Mac is worthless and any hope of recapitalizing the two lies with their seller/servicers, according to a new research report from Keefe, Bruyette & Woods. "In our view, in order for Fannie Mae and Freddie Mac to survive going forward, they need to be recapitalized through investments by the banks that benefit from their guarantee," KBR writes. The firm says that seller/servicers should be required to retain 5% of the loan balance on mortgages sold to the GSEs, adding that the "new agencies" would be capitalized at a "solid 5% level of the new expanded balance sheets" under Financial Accounting Standards Board rules 166 and 167. It says that even under a "bad bank" approach to restructuring them the government would be owed $100 billion. The Federal Housing Finance Agency placed the two into a conservatorship 13 months ago. To date, the Treasury has invested $98 billion in capital into them. Both continue to trade on the New York Stock Exchange -- Fannie for $1.25, Freddie at $1.40.

The Mortgage Bankers Association and other trade groups are stepping up their pleas to the White House, imploring the administration to extend the $8,000 first time homebuyer tax credit by at least 12 more months while allowing consumers to use the money for closing costs. In a new letter to officials at the White House, Treasury and the Department of Housing and Urban Development, MBA and two other industry groups contend the tax credit has dramatically reduced the inventory of new homes for sale to seven months from 12.4 months back in January. MBA, the National Association of Home Builders, and the National Association of Realtors, also want the credit expanded to all types of homebuyers. They contend that buyers of new homes spend an additional $12,000 on goods and services while buyers of existing homes spend almost $9,000. The White House has recognized the value of the tax credit but has not commented either way on extending it.

Reversing the trend that began last year, average home prices in New York edged upward in the third quarter of 2009 compared to the previous quarter, which could be a sign that the market is leveling off, according to a new report by ResidentialNYC.com, a public real estate listings website of The Real Estate Board of New York. Average home sales prices for cooperatives, condominiums and one-to-three family dwellings increased by 6% in Brooklyn to $534,000 and by 3% in the Bronx to $367,000 compared to the second quarter of 2009. Average prices in Queens increased by 1% to $406,000 and Staten Island home prices declined by 1% to $382,000 compared to last quarter. The report found that citywide sales volume increased 35% to 9,734 compared to last quarter. Manhattan sales volume increased 59% to 2,840 while sales volume in Brooklyn increased 27% to 2,102. "The residential real estate market came back to life in the third quarter. The trend needs to continue for at least two more quarters before we can say with confidence that a recovery is underway," said Steven Spinola, REBNY president.