Origination

First Horizon National Corp. — once a large player in mortgages — saw its third-quarter loss narrow as loan-loss provisions continued to fall. Last year it sold part of its mortgage division to Metropolitan Life, a life insurance company. The parent of First Tennessee Bank, Memphis, lost $52.9 million in the period compared to a loss of $125 million in the third quarter of 2008. Revenue dropped 5% to $494.7 million. Results beat analysts' expectations. FNC has trimmed its mortgage banking operations over the past 18 months and sold branches outside its Tennessee footprint. Loan-loss provisions fell 29% to $185 million from the prior quarter and dropped 46% from a year earlier. Last fall, First Horizon received $866 million from the Treasury Department's Troubled Asset Relief Program.

Mortgage delinquencies in the financial services division of General Electric are high and continuing to climb but the rate of increase appears to be slowing. The 13.38% 30-plus-day mortgage delinquency rate seen in the GE Capital Finance unit's managed assets during the third quarter is only slightly higher when compared to 13.23% in the second quarter. But it is up notably from 9.22% during the third quarter last year. GE Capital is a key concern for GE given that the company said falling revenue from that unit was "primarily" behind a year-to-year reduction in the company's total revenue and earnings. Every segment at GE Capital except real estate was profitable during the quarter. GE chairman and chief executive officer Jeff Immelt described the real estate concern as the result of a "tough environment but [one] where we believe the risks are well understood and manageable." The company said it is "preparing GE Capital to be a smaller, more focused franchise." Overall, GE's earnings in the third quarter dropped to $2.4 billion from $4.3 billion during the same period a year ago.

Wells Fargo Home Mortgage says it is ready to implement the new RESPA disclosure rule and urged the Department of Housing and Urban Development to stay with the Jan. 1 effective date. "We have already programmed the mandated RESPA changes into over 40 computer systems and have no choice but to proceed with implementation of the new forms on the Jan. 1 effective date," WFHM co-president Michael Heid says in a letter to HUD. As previously reported, HUD has decided to stay with original effective date despite pressure from Congress and major trade groups to postpone the change. "We fully appreciate that there are challenges involved in transitioning to the new RESPA rule, but I want to personally assure all mortgage professionals that we will continue to make every effort to assist them throughout this process," said HUD assistant secretary David Stevens. "Even after Jan. 1, HUD will continue to help lenders, brokers and other settlement service providers in complying with the rule," he added.

Department of Housing and Urban Department officials are moving ahead with the Jan. 1 effective date for the new RESPA rule, despite warnings from industry groups that it could lead to a compliance train wreck. Six industry groups urged HUD to postpone the effective date of the Real Estate Settlement Procedures Act rule that requires lenders to use a new standardized good-faith estimate disclosure and a revised HUD-1 settlement sheet. "HUD, particularly the Office of Housing, is acutely aware of the procedural concerns, timing constraints and ancillary costs attributable to the implementation of these new requirements and the issues they raise for your members," HUD assistant secretary David Stevens says in a letter to industry executives. Mr. Stevens pledged that HUD would continue to work with lenders, title underwriters, escrow agents and others to make implementation as smooth as possible.

Bank of America's home loans and insurance division lost $1.6 billion in the third quarter — compared to a slight loss last year — citing weakening home prices and "further deterioration" in the mortgage portfolio it inherited when it bought Countrywide Financial Corp. in July 2008. Most of the CFC portfolio acquired includes payment-option ARMs, subprime mortgages and HELOCs. Overall, the company lost $1 billion in the quarter compared to earnings of $1.2 billion in the third quarter of 2008. The home loans and insurance division had credit losses of $2.9 billion during the period. (Companywide, BoA had $11.7 billion in credit losses, $1.7 billion lower than the second quarter and $5.3 billion higher than the same period last year.) In the mortgage group, the firm's noninterest expense rose to $3 billion "mostly due to increased compensation costs and other expenses related to higher production volume and higher delinquencies," it said. The bank's residential division funded $95.7 billion in first mortgages. In the second quarter it originated $114 billion in residential loans, but some of that figure includes second liens. No HELOC figure was immediately available for the third quarter.

The House Financial Services Committee has approved an amendment to the Consumer Financial Protection Agency bill that eases some of the regulatory burden on community banks and makes the measure easier for midsize and small banks to accept. For banks with $10 billion in assets or less, consumer compliance examinations and enforcement authority would be delegated to the banks' primary regulator. CFPA examiners would still examine larger banks. The amendment, sponsored by Reps. Brad Miller, D-N.C., and Dennis Moore, D-Kan., also applies to credit unions with less than $1.5 billion in assets. The Independent Community Bankers of America welcomed the Miller/Moore amendment. It "recognizes that community banks are responsible lenders that didn't cause the financial crisis," ICBA president Camden Fine said. However, ICBA has concerns about the new regulatory agency's broad rulemaking authority to ban abusive lending products and practices. The bill only gives the federal banking regulators an advisory role in the process. ICBA wants the banking regulators to have more authority in approving consumer protection regulations, possibly joint rulemaking authority, according to ICBA's top lobbyist Steve Verdier. "The rulemaking authority ought to be cut back to where the agency [CFPA] is implementing statutes written by Congress or the rulemaking should be assisted by the prudential regulators. They would understand the safety and soundness implications," Mr. Verdier said. The committee's markup of the CFPA bill resumes on Tuesday (Oct. 20) afternoon.

The California Senate has cleared a measure that would reinstate the popular $10,000 tax credit for new homebuyers. The measure, which would re-authorize the use of $30 million in credits not awarded during the first program, is expected to be taken up by the General Assembly next week. The state set aside $100 million for the original program, and more than 10,600 buyers were approved for the original credit before the Franchise Tax Board stopped taking applications July 2. But the FTB has since determined that the average credit would be $7,000, not the full $10,000, freeing up $30 million to cover the tax credit extension. Under the bill, only buyers who close after the extension is approved will be eligible. Those who closed after July 2 but before the bill's effective date would not be eligible. On the federal level, lobbyists from the Mortgage Bankers Association and other trade groups are trying to persuade the White House and Congress to extend the $8,000 first-time homebuyer tax credit at least for a few more months.

MGIC Investment Corp., the nation's largest mortgage insurer outside the federal government, posted a massive $518 million loss in the third quarter, sending its share price plunging. Its net loss for the first nine months was $1.04 billion, compared to $249.8 million for the same period last year. Company chairman and CEO Curt Culver blamed the results on a weak economy, higher unemployment and lower home prices. In tandem with the poor results, MGIC said Fannie Mae has approved its insurance unit MGIC Indemnity Corp. (MIC) as an eligible mortgage insurer through the end of 2011. (Mr. Culver said MGIC is seeking similar approval from Freddie Mac.) Loan delinquencies (not including bulk loans) in its book of business were just under 14% for the quarter; one year prior, the delinquency rate was 7.54%. Under the agreement with Fannie, MGIC cannot contribute more than $200 million to MIC, which limits the amount of business it can write going forward. For MIC to start writing new policies, Wisconsin's Office of the Commissioner of Insurance must sanction the unit. In addition, MIC would need a waiver from OCI regarding Wisconsin's capital requirements. There are 16 states, including Wisconsin, that have specific mortgage insurer capital requirements. Under the plan MIC could do business in those states because MGIC would no longer meet minimum capital requirements.

Saddled with delinquent home mortgages, Citigroup reported net credit losses of $9.4 billion in the third quarter, a slight decline from the previous period. Citigroup, which controls the nation's fourth largest residential funder, said its credit losses showed some improvement because of a "higher volume of trial modifications" under the government's Home Affordable Modification Program (HAMP). In total Citi had roughly 63,000 loans in the trial program. The bank said because the modifications are considered "trial" it does not have to charge them off — though the mortgages are considered delinquent. (The bank deferred the recognition of $100 million of net credit losses during the quarter because of the trial designation.) According to its earnings statement, the banking giant completed more than 24,000 mortgage loan modifications during the period. The impact of the HAMP also contributed to the $2 billion sequential increase in loans 90-plus days past due in its North America residential lending business. Citigroup reported net income of $101 million for 3Q09, compared to net income of $4.3 billion in the previous quarter and a net loss of $2.8 billion the same time last year. It posted third quarter revenues of $20.4 billion. Results included $8 billion in net credit losses and an $802 million net loan loss reserve build.

A federal grand jury in West Palm Beach, Fla., returned a 15-count indictment against eight individuals who have been allegedly involved in making false statements to banks to obtain mortgage money to purchase five properties in Wellington, Fla. . The defendants include licensed mortgage brokers, title agents and straw buyers. According to Jeffrey H. Sloman, acting U.S. attorney for the Southern District of Florida, the indictment alleges that the defendants and straw buyers engaged in a scheme which resulted in property being sold twice in one day and nearly doubling the value of that property during that one day. A total of more than $8.5 million in mortgage money was obtained through this alleged scheme. The defendants charged in this alleged scheme are Rony Alberto Aguilar-Hecker, Reinaldo Perez-Sanchez, Pablo Atouro Aponte-Torres, Fabio Salazar, Roger Omar Nunez-Murillo, Idalmis C. Arias, Ericson Perez and Juan Carlos Lopez. At press time, they could not be reached for comment.