Origination

Freddie Mac soon may be receiving a notice from the New York Stock Exchange, saying it is back in compliance with the NYSE's listing requirements. At press time Freddie's common was trading at $2.22, which means that its average share price will have been north of $1 for the past 30 days - that is, as long as its stock price doesn't collapse by close of business Monday. Under NYSE rules, the exchange can initiate delisting proceedings for companies whose 30-day average price falls below $1. "We're waiting for official notification from the NYSE," a company spokeswoman said Monday. In a week it will mark the one-year anniversary since Freddie and its sister company, Fannie Mae, were taken over the government and placed into conservatorship. The share price of both GSEs has been rising over the past month. Some stock analysts attribute the price increase to bottom fishing and speculation by short sellers. Freddie's 52-week low is 25 cents, its high $5.52. In the second quarter Freddie actually posted a profit while Fannie lost money.

The nation's beleaguered mortgage insurance companies wrote $7.54 billion of new traditional MI policies in July, its third worst volume month of the year. Compared to the same month a year ago, new business fell by 39%, according to figures compiled by the Mortgage Insurance Companies of America, a trade group. July was the industry's weakest month in terms of new applications received: 44,532 -- almost half the number received in July 2008. Meanwhile, MICA reported that primary insurance defaults rose to 94,571 units in July, the second highest reading of the year for the industry. January was the worst month of the year for defaults at 106,482. The data was culled from six of the nation's seven MI companies. Triad, which is self-liquidating, is not represented in the numbers.

Guaranty Financial Group Inc., the parent company of the recently failed Guaranty Bank, Austin, Texas, has filed for bankruptcy protection, listing assets of $24.3 million and debts of $323.4 million. Guaranty Bank was also a warehouse provider to non-bank mortgage lenders, a business it was in the process of winding down when the Federal Deposit Insurance Corp. seized the lender on August 21. The agency sold Guaranty to Banco Bilbao Vizcaya Argentaria SA, Spain's second-biggest depository. "Beginning in 2007, volatility in the credit and residential housing markets resulted in extensive impairment of existing mortgage-backed securities held by GFG and its subsidiaries," the company said in its bankruptcy court papers.

Mortgage technology software provider Mortech, Lincoln, Neb., said it has plans to address a legal challenge by LendingTree, Charlotte, N.C. Mortech said in an e-mailed statement that it would deal with the issue in a "timely fashion," and noted it has a good track record and reputation when it comes to its dealings with industry partners and customers. According to a New York Times press report, the suit alleges that LendingTree feels that Mortech, as its business partner, is in violation of its contract because it is planning to make its pricing engine services available for another online provider's use (Google) and those services would compete with LendingTree's. LendingTree could not be reached for comment at press time. (The Mortech referenced here is not industry expert Jeff Lebowitz's similarly named Mortech LLC, which has its principal office in Guilford, Conn.)

Deutsche Bank Securities is the largest unsecured creditor of Taylor, Bean & Whitaker and is owed at least $42 million, according to a supplemental filing in the bankruptcy case of the nonbank lender. A spokesman for DB had no comment at press time. The claim is labeled as "disputed" in the filing and no additional information is provided. The second largest unsecured creditor is James G. Hicks of Lawrenceville, Ga., who has staked a claim for $9 million. Mr. Hicks, however, is not listed in the telephone directory as a consumer or business. The third largest unsecured creditor is RBC capital Markets, New York, which is owed $2.2 million. Meanwhile, the Office of Thrift Supervision has hit Platinum Community Bank, owned by TBW, with a cease-and-desist order, telling it to stop unsafe and unsound practices. The C&D, which is available on the agency's website, says the depository has failed to maintain accurate books and records, has not operated independently from affiliates and is having liquidity problems. The bank issued a statement saying it's working closely with OTS to address the issues in the order. In July 2008 TBW bought controlling interest in Platinum Bankshares, the holding company of the depository. The parent was based in Rolling Meadows, Ill.

Fannie Mae's issuance of mortgage-backed securities fell 39% in July from the previous month, according to the company's new monthly activity report. The mortgage giant issued $79.7 billion in MBS during July, compared to $130 billion in June. At the same time, its commitments to purchase loans jumped 42% in July to $103.6 billion, a sign that residential production could be picking up. Freddie Mac recently reported a 30% decline in July MBS issuance along with a 33% drop in purchases of refinanced mortgages. Freddie said it purchased $34.1 billion in refinancings in July, but Fannie has stopped reporting refinancing volumes. However, their regulator reported that Fannie purchased 264,317 refinanced loans in July and Freddie purchased 158,182 refinancings. Based on Freddie's average loan size, Fannie purchased approximately $57 billion in refinancings. Fannie also said 3.9% of its single-family mortgages in June were 90 days or more past due, up from 1.36% a year ago.

Some 41 people and four companies have been indicted for engaging in a massive mortgage fraud scheme to purchase 453 homes using $44 million worth of fraudulent loans. The state charges are the result of an 18-month investigation by the Cuyahoga County Mortgage Fraud Task Force in conjunction with the Ohio Organized Crime Investigations Commission. Ohio attorney general Richard Cordray singled out Uri Gofman of Beachwood, Ohio, as the scam's ringleader, saying he enlisted family, friends and others to invest in his real estate company, Real Asset Fund, with promises of profit. Mr. Gofman's alleged enterprise began with seed money from an investor who transferred funds from a bank account in Latvia. The scheme involved using straw buyers to purchase homes, falsely claiming home improvements were performed on houses in order to refinance them and then selling houses to unqualified buyers with the assistance of real estate agents, mortgage brokers and title companies. The defendants, who were unavailable for comment, allegedly siphoned off more than $31 million in profits from their criminal enterprise. Eventually, 358 of the homes fell into foreclosure. The Cuyahoga County Mortgage Fraud Task Force was formed in December 2007. To date, 289 defendants have been indicted on mortgage fraud charges involving $111 million in loans on 812 homes, 616 of which are now in foreclosure.

Federal regulators are seeking information from banks and thrifts on how a new accounting rule on securitized assets will impact their balance sheets and capital levels. Financial Accounting Standards 166 and 167 can trigger consolidation of securitized assets on the balance sheet if a bank controls the servicing or provides support for assets in the trusts. "It will require institutions to bring a lot more assets on the balance sheet," Comptroller of the Currency John Dugan said at a Federal Deposit Insurance Corp. board of directors meeting. As part of the proposed rulemaking, the FDIC is seeking information on what assets will likely be consolidated and how it will impact lending and securitization activities. The proposal also asks whether a phase-in of risk-based capital requirements over four quarters is needed. Comments are due in 30 days. The new accounting rule goes into effect at the yearend. Separately, the FDIC agreed to extend its Temporary Liquidity Guarantee Program until June 30, 2010. This program provides unlimited insurance for servicer accounts and other non-interest bearing accounts.

There was a two basis point increase in the average rate for the 30-year fixed-rate mortgage over the previous week, according to the Freddie Mac Primary Mortgage Market Survey for the week ended Aug. 27. The current rate of 5.14% with an average of 0.7 points is still well below the average rate of 6.4% for this week one year ago. The 15-year FRM had a similar increase to the 30-year FRM as this week it averaged 4.58% with an average of 0.7 points, up from last week when it averaged 4.56%. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 4.67% this week, with an average of 0.6 points, down from last week when it averaged 4.57%. One-year Treasury-indexed ARMs averaged 4.69% this week with an average of 0.6 points, unchanged from last week. "Long-term mortgage rates were barely changed this week, remaining historically low, which is helping to sustain a high level of affordability in the home-purchase market," said Frank Nothaft, Freddie Mac vice president and chief economist.

The Federal Reserve Board is now seeking public comment on a Truth in Lending Act proposal that could completely change the way most mortgage brokers and loan officers are compensated. The proposed rule pushes the industry toward paying originators a flat fee that is stated upfront and cannot be increased due to changes in the interest rate or changes to other loan terms. Consumers can still finance closing costs and origination fees, "provided this does not affect the amount the originator receives for the transaction," the Fed says. If finalized, the TILA proposal will "dramatically alter compensation for all mortgage originators, whether they are loan officers in retail operations or mortgage brokers," said Brian Chappelle, a mortgage banking consultant with Potomac Partners in Washington. Compensation based on loan volume, the performance of loans delivered by an originator or hourly wages is permissible under the proposal. The Fed is specifically seeking comment on whether it should allow compensation based on the loan amount, which is not an uncommon practice. The comment period on the 195-page proposal ends Dec. 24. The Fed also issued a separate TILA proposal that would create an entirely new disclosure regime for home-equity lines of credit and new safeguards for consumers. The comment period on the HELOC proposal also ends on Dec. 24.