Origination

The chairman of a key subcommittee is predicting that the House of Representatives will pass a regulatory reform bill this year, including new standards for securitizing mortgages and other assets. Rep. Paul Kanjorski, D-Pa., chairman of the House Financial Services Subcommittee on Capital Markets, Insurance and GSEs, said, "We're coordinating our efforts with the European Community and the United Kingdom to try and come up with similar responsibilities when it comes to securitization." Speaking to reporters at a National Association of Federal Credit Unions conference, he said securitization became too speculative during the subprime crisis. He thinks the business can be rebuilt with less risk and more security. "I think having skin in the game is a good principle," he said, adding that this is particularly true when it comes to mortgage makers. Separate from regulatory reform, Rep. Kanjorski said there are discussions going on within his subcommittee about how to restructure Fannie Mae and Freddie Mac and "how we can better use the Federal Home Loan Bank System."

Envoy Mortgage of Houston, a nondepository, expects its loan origination volume will increase to $2 billion this year, a growth rate of almost 200%. The firm, formerly known as First Houston Mortgage, underwent a change of control about 18 months ago. Its CEO and owner is industry veteran Rick Thompson who during his long career in mortgages has managed such nonbanks as Troy & Nichols and Aegis Mortgage. Envoy - which depends on warehouse lines of credit - is in the process of obtaining its Freddie Mac and Government National Mortgage Association servicing approvals. It already has Fannie Mae approvals, said Mr. Thompson in an interview with National Mortgage News.

The Federal Housing Administration is giving appraisers the freedom to record their fee on the appraisal report that is separate from the fee charged by the appraisal management company. "The fee for the actual completion of an FHA appraisal may not include a fee for management of the appraisal process or any activity other than the performance of the appraisal," FHA mortgagee letter 2009-28 says. Previously, FHA required the appraiser and management company's fees to be combined and based on customary and reasonable fees in the local market. Appraisers claimed this policy inadvertently capped the fees they could charge. The new policy "correctly separates fees for services charged by appraisers from the fees charged by appraisal management companies, allowing each to float at reasonable and customary levels," the Appraisal Institute said. FHA does not require lenders to use AMCs. But if they do, lenders must "ensure that FHA appraisers are not prohibited" by the AMC from recording their fee.

Zacks Equity Research's Bear of the Day for Sept. 18 was Developers Diversified Realty Corp., Beachwood, Ohio. DDR is a real estate investment trust which invests in retail properties. The statement from Zacks said the company "has a relatively high leverage compared to its peers due to acquisitions over the past several years. Developers Diversified is raising cash through asset sales, debt, and by selling 30 million shares and additional warrants to the Otto family, a shopping center developer in Germany. The equity sale is dilutive and the long-term sustainability of the company is under doubt. Our recommendation for the company is underperform as we anticipate it to perform well below the broader market. However, if Developers Diversified can tide over the current storm, the share price can rise."

Invesco Mortgage Capital Inc., an Atlanta-based real estate investment trust, is having its common stock added to three Russell Investments equity indexes. Effective after the markets close on Sept. 30, Invesco shares will become part of the Russell 2000 Index; the Russell 3000 Index; and the Russell Global Index. Invesco had its initial public offering on June 26, 2009 and focuses on financing and managing residential and commercial mortgage-backed securities and mortgage loans.

After pleading guilty in June to charges connected to a scheme to use a stolen identity to buy a home, Shawn Cannon of St. Louis was sentenced to 60 months in prison. According to Michael W. Reap, U.S. attorney for the Eastern District of Missouri, between August and October 2005, Cannon, knowing he would be unable to qualify for a loan to purchase a home using his true identity, used fraudulent information, including a false Social Security number and false payroll information, to obtain a loan from Pulaski Bank to purchase a personal residence in Florissant, Missouri, for approximately $300,000. Cannon failed to make required payments. In December 2008, Cannon filed a Chapter 13 bankruptcy petition in U.S. Bankruptcy Court, again using the false Social Security number.

Pricing and decisioning vendor Mortech Inc., Lincoln, Neb., has settled a lawsuit with online mortgage comparison site LendingTree. LendingTree filed a federal lawsuit against Mortech, seeking an injunction preventing the company from collaborating with Google on a competing service. In the lawsuit filed in Charlotte, N.C., LendingTree claimed Mortech had violated an exclusivity agreement by working with Google. Terms of the settlement were not disclosed, and both companies would not comment on the dispute resolution. A call to Google about the suit also had not been returned at deadline. Mortech Inc. has no connection to industry research firm MORTECH LLC, Guilford, Conn.

Effective Oct. 1, 2009, the Social Security Administration will be raising its fees for mortgage and financial companies to authenticate borrower Social Security numbers from $0.56 to $5.00 per verification. This price increase could significantly impair the industry's move to protect itself against identity-based mortgage fraud, according to fraud detection vendor Rapid Reporting. In a letter sent to Michael Astrue, Commissioner of the Social Security Administration by Congresswoman Kay Granger (R-Texas), Rep. Granger says this fee increase could lead to the de facto cancellation of the CBSV (Consumer-Based Social Security Number Verification) program, as it could significantly lead to fewer and fewer lenders using the program. According to that same letter, the decision to increase fees for the CVSB program was made by the Social Security Administration without collaboration with the U.S. Congress. Mr. Astrue denied Congresswoman Granger's initial request for a 60-day delay to evaluate the necessity of this fee increase. On Tuesday, Sept. 22, Congresswoman Kay Granger and key staff, which includes committees of oversight for the Social Security Administration, plan to meet with the SSA to discuss the negative repercussions this planned increase in fees will have on the mortgage industry and the nation as a whole, and intend to re-propose a delay in implementing these fees. Senate Majority Leader Reid, House Speaker Pelosi, House Majority Leader Hoyer and Senators Hutchinson, Harkin, Cochran and Cornyn have been contacted and are expected to support a delay in implementation as well.

The mortgage insurance division of Genworth Financial has knocked nine states off its list of declining/distressed markets, leaving its troubled list to just five: Arizona, California, Florida, Michigan and Nevada. Genworth, the nation's fourth largest MI, on Monday liberalized some of its underwriting guidelines, telling its mortgage banking customers that it will insure cash-out refis and second homes in non-declining markets. However, the cash-out refi rule changes apply to loans with maximum LTVs of 85% and minimum credit scores of 700.

The Federal Deposit Insurance Corp. is auctioning off a $2.6 billion pool of performing and nonperforming acquisition, development and construction loans through Keefe, Bruyette & Woods. Offered as a structured transaction, the bid deadline is Nov. 12. The package has been stratified into three different geographic pools: western ($652 million), central ($545 million), and eastern ($1.4 billion). Bidder due diligence starts this week, but final bids are due in mid-November. KBW notes that investors can purchase "sole membership interest in a newly-formed limited liability company" to which the loans are pledged.