Origination

The Independent Cities Finance Authority, a Joint Powers Authority representing more than 7 million people in 66 California counties, has started a second-loan program for first-time buyers who are eligible for the $8,000 federal tax credit. ICFA will lend qualified buyers up to $8,000 at closing in the form of a second mortgage. Upon receipt of the credit, buyers can file amended returns for 2008 to receive the credit this year rather than waiting until they file their 2009 returns - the buyer must pay off the second lien. The second can be used to meet the 3.5% minimum downpayment requirement on an FHA loan, essentially eliminating the need for the borrower to come up with a downpayment. The program is available on a first come, first served basis through real estate brokers, residents or builders in any ICFA member city of ICFA. The 66 regions are: Alhambra, Azusa, Baldwin Park, Barstow, Bell, Bellflower, Brea, Carson, Chino, Claremont, Colton, Commerce, Compton, Covina, Downey, Duarte, El Monte, Fairfield, Fontana, Fresno, Gardena, Garden Grove, Glendale, Glendora, Hawaiian Gardens, Hawthorne, Hermosa Beach Huntington Park, Indio, Inglewood, La Habra, La Puente, Lakewood, Lancaster, Lawndale, Long Beach, Los Angeles, Lynwood, Monrovia, Montebello, Monterey Park, Morgan Hill, Norwalk, Palmdale, Paramount, Pico Rivera, Pomona, Rancho Cucamonga, Rialto, Riverside, Rohnert Park, San Bernardino, San Bernardino County, San Diego County, San Fernando, San Mateo County, San Juan Capistrano, Santa Clarita, Santa Rosa, Signal Hill, South Gate, Vernon, Vista, West Covina, Whittier and Yucaipa.

Wolters Kluwer Financial Services, Minneapolis, has acquired flood compliance solutions provider Stormwater Research Group, Austin, Tex. Terms of the agreement were not released. The deal allows WKFS to expand its presence in the flood determination field. Stormwater's products include basic and life of loan flood determination services. WKFS Settlement Services unit includes its own flood determination solution, PCi. Stormwater clients will get access to other PCi products including those that address compliance with the Community Reinvestment Act, the Home Mortgage Disclosure Act and other fair lending requirements. They will also have access to WKFS' financial crime control products plus an expanded suite of settlement services.

BBVA Compass originated $773 million in single-family loans in the second quarter and its acquisition of the failed Guaranty Bank, Austin, Texas, will expand the retail mortgage lender's branch network in Texas and California. "The acquisition creates the 15th largest U.S. commercial bank with approximately $49 billion in deposits in seven high growth states in the Sunbelt, include Texas, Alabama, Arizona, California, Florida, Colorado and New Mexico," according to BBVA, a global banking company based in Madrid. Compass Bank, based in Birmingham, Ala., gains 300,000 new customers through its deal with the Federal Deposit Insurance Corp. along with 103 branches in Texas and 59 branches in California. Compass now has 411 branches in Texas and 84 branches in California. Guaranty Bank exited the residential mortgage market several years ago to focus on commercial real estate and construction lending.

The mortgage banking firm Taylor, Bean and Whitaker, which recently ceased making mortgages, originated an estimated $22 billion in Federal Housing Administration-insured loans over the past 24 months, which represents 4.5% of the FHA's total business during that period. TBW was FHA's third largest direct endorsement lender and it approved 119,800 loans over the past two years. However, 7.1% of those FHA-insured loans are 90 days or more past due or in foreclosure, according to FHA's Neighborhood Watch System. The average default rate for FHA loans is 4.6%. Based on a higher than average claim rate and loss severity rate of 40%, FHA could face possible losses of $800 million to $900 million due to its exposure to TBW, one source said. As previously reported, the Department of Housing and Urban Development on Aug. 4 suspended the Ocala, Fla., mortgage banking firm from making FHA loans. Freddie Mac also terminated TBW on Aug. 4. In a recent securities filing, Freddie said approximately 5.2% of its mortgage purchase volume in 2008 came from TBW and TBW accounted for 2.7% of its mortgage purchases during the first half of this year.

The Federal Housing Administration has no plans to implement the Home Valuation Code of Conduct, Commissioner David Stevens told a delegation from the National Association of Mortgage Brokers. NAMB's FHA chairman John Councilman, who attended the meeting, reported that Mr. Stevens said he was well aware of the problems originators have been having with the code, which only applies to loans sold to Fannie Mae and Freddie Mac. That being said, the commissioner added FHA is looking at alternatives it feels would insulate appraisers from pressure from originators. Mr. Stevens also told NAMB that plans for FHA to start risk-based pricing for mortgage insurance on Oct. 1 will not be implemented anytime soon. The meeting also clarified upcoming changes in the Real Estate Settlement Procedures Act as it applies to FHA. Mortgage brokers will no longer be allowed to charge discount points starting on Jan. 1, 2010. The 1% fee limitation has been removed, and there is no limit as long as the fees are customary to the market. Furthermore, all fees, including those that are charged by the lender, must be lumped into one sum. A yield-spread premium may be charged, but it must be disclosed on a separate line on the good-faith estimate. FHA reserves are higher than they have ever been, Mr. Stevens told NAMB. That being said, he would not rule out that the government would have to bail out FHA because those reserves are projections and those projections could be changed. Still the average credit score for the program has risen from 633 to 693, due to the elimination of what were termed "troublesome programs" such as seller-paid downpayment assistance and cash-out refinancings.

Mark M. Mr. Benun of New York has been charged with fraudulently selling a Bronx building for more than $5 million and not disclosing several liens on the property. According to Preet Bharara, U.S. attorney for the Southern District of New York, Mr. Benun and a real estate company operator purchased a commercial property in the Bronx near Yankee Stadium for $9.5 million. Mr. Benun, purporting to be the sole owner of the property, allegedly sold it for approximately $5.96 million to another buyer, who paid $4 million in cash and gave Mr. Benun a note for the remaining $1.96 million. Shortly after the sale, Mr. Benun is alleged to have sold the note for $1.46 million. To establish his apparent sole ownership of the building, Mr. Benun allegedly created false satisfactions of the three mortgages on the property and transferred ownership of his co-purchaser's majority interest in the property to himself. U.S. District Judge Victor Marrero has been assigned to the case. Mr. Benun was unavailable for comment.

Single-family existing home sales jumped 6.5% in July from the previous month as "demand for foreclosed and lower-priced homes spiked," according to the National Association of Realtors. NAR reported that sales of previously owned SF homes rose to a seasonally adjusted annual rate of 4.61 million in July, up from 4.33 million in June. "The housing market has decisively turned for the better," said NAR chief economist Lawrence Yun, who noted that sales have increased for four consecutive months. First-time homebuyers who are eligible for an $8,000 tax credit purchased 30% of the homes, and distressed sales made up 31% of transactions. "In some recovering markets like San Diego, Las Vegas, Phoenix, and Orlando, the demand for foreclosed and lower priced homes has spiked, and the lack of inventory is becoming a common complaint," Mr. Yun said. The median existing single-family home price was $178,300 in July, which is 14.6% below the sales price a year ago. The NAR report also shows that the inventory of unsold existing homes fell to an 8.6-month supply in July, down from a 10.4-month supply a year ago.

The Federal Reserve accepted $2.3 billion in investor requests for financing to purchase legacy commercial mortgage-backed securities at the second TALF subscription, up from $669 million at the first subscription in July. The Fed's Term Asset-Backed Securities Loan Facility also provides financing for newly issued CMBS but there were no takers at the Thursday (Aug. 24) subscription. It is understood that several real estate investment trusts are gearing up to sell CMBS and may participate in the September TALF subscription. At the urging of commercial real estate interests, the Federal Reserve Board recently extended the CMBS TALF program until March 31 for legacy bonds and June 30 for newly issued bonds. The TALF program was due to expire at yearend.

Fannie Mae Delegated Underwriting and Servicing credit facilities structured and executed as mortgage-backed securities have been scarce, but there have been signs they may be making a comeback. PNC said recently it originated a $420 million Fannie Mae DUS MBS credit facility for Houston-based multifamily real estate investment trust Camden Property Trust. It represents the first Fannie Mae DUS credit facility of this type since 2007. The Pittsburgh-based PNC said the facility was structured using 11 separate Camden multifamily assets with a combined total of nearly 5,000 units located in California, Colorado, Georgia, Maryland and Texas.

The new Federal Housing Administration commissioner said the suspension of Taylor, Bean & Whitaker should send a clear message to the mortgage industry that FHA will not do business with lenders that don't play by the rules. "If you don't operate within our standards — if you don't act transparently and ethically — we won't do business with you," FHA commissioner David Steven said in a recent speech that was just released by the agency. The Department of Housing and Urban Development suspended TBW from making FHA single-family loans on Aug. 4 after it learned the Ocala, Fla.-based lender failed to provide financial statements and did not disclose that it was the target of two separate investigations. Shortly afterwards, TBW ceased originating loans. On Aug. 14, Mr. Stevens told a Housing Renaissance meeting in San Diego that FHA will improve lender monitoring as well as tighten product guidelines and counterparty requirements to "ensure the strength of the FHA Mutual Mortgage Insurance Fund over the long term."