Origination

In response to the DocMagic lawsuit filed against Ellie Mae, the origination vendor says that it is "surprised and very disappointed that DocMagic has taken these drastic actions." Ellie Mae asserts that DocMagic opted to terminate service and displace its own customers, abandoning a preplanned 60-day orderly transition. Ellie Mae says the agreements between both parties were set to expire on September 1, 2009. Further, Ellie Mae says on April 28, 2009, DocMagic notified Ellie Mae that it was opting to end its Reseller Agreement with Ellie Mae. On May 21, 2009, DocMagic was also informed that Ellie Mae had decided not to renew the outdated terms of its ePASS Agreement with DocMagic. Ellie Mae proposed new terms for their agreement with DocMagic. However, DocMagic did not respond, according to Ellie Mae, and instead decided to stop servicing mutual clients and file the lawsuit. DocMagic did not respond by deadline.

Fannie Mae and Freddie Mac — which are wards of the government — are seeking significant revisions to a regulatory rule that forces them to submit all new products and activities for review, arguing it is too restrictive and goes against congressional intent. In a rare joint comment letter sent this week to the Federal Housing Finance Agency, the two GSEs objected to several parts of the July 2 interim rule, saying it was unnecessarily burdensome and ineffective, and could make it difficult for the GSEs to help during a financial crisis. The letter marked one of the first times the two companies have publicly taken issue with their regulator, which seized them nearly a year ago and continues to manage them in conservatorship. No doubt because the companies are writing to their conservators, the letter is exceedingly polite, but it still makes clear that the GSEs think the current rule needs critical changes. On Wednesday the Mortgage Bankers Association released a working paper on overhauling the secondary mortgage market which assumes that Fannie Mae and Freddie Mac will no longer exist in the future but also calls for the creation of up to five mini-GSEs that would act as loan guarantors but without holding large on-balance sheet portfolios.

Delinquencies and losses in the United Kingdom's securitized nonconforming mortgage market are continuing to increase, according to Moody's Investors Service's latest available index data for the sector. Delinquencies and losses continue to rise at a rapid pace, as unemployment continues to rise, said Nitesh Shah, a Moody's economist and co-author of a second quarter report on the index. With only a few exceptions, deterioration can be observed for all U.K. vintages and transaction series, according Georgij Ludmirskij, a Moody's senior associate and also a co-author of the report. According to the report, 54 U.K. nonconforming transactions have more than 20% of 90-plus days delinquent loans in their portfolios, while 22 transactions posted 90-plus days delinquencies higher than 30%. In the second quarter, Moody's placed on review for possible downgrade 133 classes of notes in 13 U.K. nonconforming transactions. Eighty-eight transactions worth £27.3 billion ($44.4 billion) are currently outstanding in this market, according to Moody's.

Equi-Trax Asset-Solutions, Santa Barbara, Calif., is offering a service designed to provide clients with a way to quickly scan their portfolios and identify properties currently on the market that could be potential short sale, loan modification, portfolio retention or origination opportunities. The new Current Listing Search is designed primarily for use by servicers but Equi-Trax chief executive officer Guy Taylor said it also could serve as a source of sales leads for originators if the borrowers involved are moving. He said the search provides information as soon as it is available on multiple listing services. It draws on data from about 72% of multiple listing services in the country, which the company said represent most major Metropolitan Statistical Areas. Data available includes contact information for brokers that can be imported into servicers' contact databases on properties. Mr. Taylor said he believes the new service improves on alternatives such as other services that offer less extensive information, or borrower contact that may involve offering borrowers home valuation data in exchange for information about their future real estate plans.

The First American Corp. reaffirmed plans for a split into two companies it noted will come relatively soon as it celebrated its 120-year anniversary. The plan to separate the Santa Ana, Calif.-based company's information solutions and financial services businesses into two new, separate publicly traded companies could come as soon as the first half of 2010. Originally an Orange County, Calif. title abstract company, The First American Corp. said it has grown to the point where 90% of all real estate transactions in the United States involve at least one of its products or services. It is one of the nation's largest title insurance companies, has trust company, tax services, home warranty and flood certification businesses and is a national data and analytics provider to the mortgage industry and the investment community. The company first went public, trading on the over-the-counter market, in 1964 and began offering its stock on the New York Stock Exchange in 1993.

Wells Fargo & Co. is said to be auctioning off a $65 million portfolio of sub- and non-performing residential loans and is set to take final bids next week. "They've been offering a lot of stuff lately," said one bidder requesting his name not be used. There is more to come, he said. At press time a company spokesman had not returned a telephone call about the auction. In the past the bank has rarely commented on its offerings. A few years back Wells Fargo Home Mortgage was one of the largest correspondent buyers of subprime loans but eventually exited that business.

The Federal Housing Administration is providing a helping hand to some multifamily developers that started construction but had their financing pulled after completing the foundation. FHA generally does not insure multifamily projects where construction has already started. But for the next six months, the federal mortgage insurer is willing to consider applications in cases where construction was halted early and only foundation and site preparation work was completed. The FHA mortgagee letter indicates that the agency is not going to insure multifamily loans for condominium projects that are 90% complete and are trying to convert to rental units. To qualify, developers have to prove that their financing was cancelled and they have been unable to find alternative financing. The Department of Housing and Urban Development said it is taking this step "due to the illiquidity in the financial markets." The mortgagee letter points out some lenders are backing out of commitments and refusing to fund construction draws. The Census Bureau recently reported that multifamily starts fell to an all-time low of 80,000 units in July, down 72% from a year ago.

After six months of gains, the Credit Managers' Index is showing slower progress, according to the National Association of Credit Managers, Columbia, Md. The index climbed inched up to an August score of 48.3 from July's combined index score of 48. While this represented some positive movement in the index as a whole, there also was some weaknesses in terms of credit availability, credit applications and sales. "This suggests that the proposed recovery is a little weaker than some of the indicators reflect, especially in terms of availability of money," NACM said. "There are some shoes left to drop, most notably the commercial property sector," said NACM chief economist Chris Kuehl. "It is mildly encouraging to note that the index has not fallen, but an anemic .3 gain was much less than had been anticipated," he said. The index had been expected to rise to closer to 50 in August.

The latest 2.7% quarterly gain in Freddie Mac's Conventional Home Price Index's Purchase-Only Series suggests a more broad-based recovery in housing values is starting to emerge. "For the first time in two years average home sales values rose at least a little bit in every region," Freddie Mac vice president and chief economist Frank Nothaft said. "Values are still down relative to their peaks, though. For example, as measured by the CMHPI, average values in the New England, East North Central and Pacific divisions are at 2004 levels, on average. In contrast, the average value in the West South Central area is only slightly below its 2008 peak, while the index for the East South Central region is at about its 2006 level. Other areas have home-purchase values at 2005 levels."

The latest Mortgage Bankers Association Weekly Mortgage Applications survey shows an overall seasonally adjusted 2.2% decline in apps, with only the government-insured share of purchases rising. The government Purchase Index rose 0.5% in the latest recorded week, which ended Aug. 28. That index has seen seven consecutive weekly gains. In the latest week, the government-insured share of purchase applications during the period was 40.4%, the highest share seen since 1991. This is up from 38.3% in July and 31.7% in August 2008. The overall Purchase Index dropped 1.0% and the Refinance Index fell 3.1% on the week on a seasonally adjusted basis. On an unadjusted basis, the overall Market Composite Index decreased 3.1% on the week but increased 22.7% compared to the same week one year earlier. The four-week moving average for the seasonally adjusted Market Index is up 1.7%. This same average is up 1.2% for the seasonally adjusted Purchase Index and up 2.1% for the Refinance Index. The refi share of mortgage activity during the week stayed constant at 56.5% while the adjustable-rate mortgage share of activity fell to 5.6% of total applications from 6.5% the previous week. During the week, the MBA said the average contract interest rate for 30-year fixed rate mortgages slid to 5.15% from 5.24%, with points (including the origination fee) increasing to 1.09 from 1.07 for loans with 80% loan-to-value ratios. The average rate for 15-year FRMs inched down to 4.57% from 4.58%, and the points for 15-year FRMs with 80% LTVs dropped to 0.85 from 1.18. The average rate for one-year ARMs fell to 6.71% from 6.74%, and the points for one-year ARMs with 80% LTVs rose to 0.20 from 0.17.