Origination

BB&T Corp., Winston-Salem, N.C., did not acquire any assets and liabilities relating to Taylor, Bean & Whitaker Mortgage Corp., Ocala, Fla., in its acquisition of the banking operations of failed Colonial Bank, Montgomery, Ala. A statement from the company also declared assets and liabilities that the Federal Deposit Insurance Corp. determines are related to fraudulent or criminal activities are excluded from the purchase as well, leaving the future of Colonial's warehouse lines in doubt. Further BB&T said FDIC indemnifies it "for any liabilities not expressly assumed in the transaction, including those related to fraudulent, criminal or inappropriate activities of Colonial." Colonial's Orlando mortgage warehouse business offices and TBW were raided by federal agents recently working under the auspices of the Special Investigator General for the Troubled Asset Relief Program. Colonial later said it was the target of a U.S. Department of Justice criminal investigation relating to its mortgage warehouse lending business. Calls to FDIC and BB&T about Colonial's warehouse lines to about 70 lenders were not returned by deadline.

Freddie Mac borrowers are increasing their interest in 15-year fixed-rate mortgages but continue to shun adjustable rate loans, according to second quarter loan figures released by the GSE. While the 30-year FRM remains the preferred product of choice — with both 30- and 15-year rates at or near their historical lows — some borrowers are finding 15-year payments more affordable while providing an opportunity to lessen their loan terms as well as their rates. In 2Q borrowers continued to show an increasing preference for FRMs: 99% of Freddie Mac borrowers that had an ARM switched to a FRM. In the first quarter the ratio was 98%.

Every month Fannie Mae and Freddie Mac are paying bondholders about $1 billion to cover seriously delinquent homeowners. Guaranteeing timely payments on MBS and supplying liquidity to the primary mortgage market is the government-sponsored enterprises' main business. But once a loan has been delinquent for four months Fannie and Freddie can buy it out of the pool and stop advancing unpaid interest to investors. Ajay Rajadhyaksha, an analyst with Barclays PLC, said the companies should exercise this right a lot more often than they have been. "Every day that passes," he said, "is another day in which wealth is transferred from the U.S. taxpayer" to bondholders. The problem is that such buyouts would result in staggering hits to the GSEs' capital. Under bondholder agreements, Fannie and Freddie would have to pay 100 cents on the dollar for the loans, but under accounting rules, they would have to then write the mortgages down to their steeply discounted market prices. The paper losses would in turn force the GSEs to accelerate their draws on the $400 billion backstop the Treasury is providing. Analysts said such a course would run counter to the aspiration that at least some part of the companies emerge from conservatorship intact. Fannie and Freddie declined to discuss the issue.

The Department of Housing and Urban Development has issued guidance to give settlement service providers a better understanding of a RESPA rule that goes into effect January 1, but it doesn't get into the more complicated issues that some lenders and title companies are "grappling with," one expert said. RESPA attorney Phillip Schulman noted that the written responses HUD has provided to frequently asked questions will be "informative and instructive" for those who are not familiar with the Real Estate Settlement Procedures Act rule. However, the new RESPA rule completely revises the HUD-1 settlement sheet and requires lenders to provide a standardized good faith estimate disclosure to mortgage applicants. "For lenders and title guys who have been struggling to put the software together — to be able to complete the revised HUD-1 and GFE — the instructions were lacking," Mr. Schulman said. The K&L Gates Washington partner is hoping HUD will do a second round of frequently asked questions to address some of the more difficult issues.

Contraction in the mortgage broker arena may be even greater than most realize, if statistics presented in Savannah at the American Association of Residential Mortgage Regulators' annual conference are on target. According to data compiled by the National Mortgage Licensing System, only 49% of the nearly 90,000 brokers licensed in 14 states signed up to be on the mandatory NMLS system. Worse, just 36% of those who went on to the NMLS have renewed their licenses. "It's unbelievable how quickly things have changed," remarked Bill Matthews, president of the State Regulatory Registry, the Conference of State Bank Supervisors' affiliate which operates the NMLS. The 14 states are the earliest adapters of the NMLS and have been on the system long enough to go through their first renewal period. They are: Connecticut, Iowa, Idaho, Kentucky, Louisiana, Massachusetts, Mississippi, Nebraska, New Hampshire, New York, North Carolina, Rhode Island, Vermont and Washington.

Deutsche Bank is beginning to make a run at non-bank mortgage lenders, offering them warehouse lines of credit but also requesting that they sell their loans to the bank on a correspondent basis, according to investment banking sources. At press time Detusche Bank could not be reached for comment. Meanwhile, there is a new concern among some warehouse managers and consultants that with Government National Mortgage Association president Joe Murin stepping down, the agency's effort to aid the warehouse lending industry could be delayed or even imperiled. "He was definitely the point guy there on the issue," said one warehouse consultant, requesting anonymity. In other warehouse news, there are new reports that BB&T Corporation is the leading bidder to buy Colonial Bancshares of Alabama, the troubled bank that is also the nation's largest warehouse provider. BB&T is already in the warehouse business.

FNC Inc., Oxford, Miss., has signed a three-year deal with credit and debit card processing firm Elavon, a wholly owned subsidiary of US Bancorp. The appraisal management company said the agreement is to help its customers comply with the Home Valuation Code of Conduct. Under HVCC, mortgage brokers can no longer pay for appraisals directly. Lender clients can pay for appraisals through the dashboard of FNC's Collateral Management System as a result of the agreement, the company said.

A real estate company owner who obtained over $4 million in mortgage loans through fraudulent means has pleaded guilty to his role in the scam. Michael I. Striker of Minnetonka, Minn., was the president and sole owner of U.S. Equities of Minnesota, a real estate company that entered into 21 real estate loans with Associated Bank from March 2003 to September 2003, according to Frank J. Magill, U.S. attorney for the District of Minnesota. A co-defendant was a construction loan officer at the bank who processed and approved the loans, which totaled more than $4 million. Striker admitted those loans were approved based on false and misleading information he submitted. In total, Striker obtained more than $724,000 in cash back at the closings on the loans. Although the loans were purported to be for construction rehab projects, Striker admitted he used some of the loan funds for unrelated expenses and debts. Furthermore, Striker paid more than $100,000 in brokerage fees to a mortgage brokerage company even though it did not broker any of the loans. U.S. District Court Judge Joan Ericksen will determine his sentence at a future date.

Moody's Investors Service ratings on 159 classes from 12 commercial mortgage-backed securities transactions worth about $6.3 billion could face downgrades due to uncertainty surrounding Maguire Properties Inc. "Additional material exposure to Maguire loans exists in other CMBS transactions, however Moody's has already accounted for such exposure in previous rating actions," the rating agency added. In other deals, "the smaller relative share of Maguire exposure within each deal does not necessitate the transaction being placed on review at this time as any potential losses are consistent with our current ratings," said Moody's senior vice president Michael Gerdes. Uncertainty about Maguire stems from second quarter earnings that showing the company "continues to experience ongoing levels of high effective leverage, declining operating performance and an inability to cover dividends from operating cash flow," he said. In addition, as part of a reorganization plan to put the company back on track, it has advised the master servicer for six mortgages in CMBS transactions that it would no longer fund cash shortfalls associated with those loans, making it likely that this imminent default would lead to their transfer into special servicing, according to Moody's. "Most Maguire properties are located in California in either Los Angeles or Orange counties, both of which have experienced significant rent and occupancy declines," the rating agency said.

In what is being hailed as practically warp speed for legislation, all but two states have now acted to implement provisions of the federal Secure and Fair Enforcement for Mortgage Licensing Act. Signed by President Bush on July 30, 2008, the SAFE Act gave states one year to pass laws requiring the licensing of loan originators according to national standards and start participating in the National Mortgage Licensing System. As of Aug. 8, 48 states and the District of Columbia have done so. California is expected to comply this month or next, leaving Minnesota as the lone holdout. The states have been aggressive, Bill Matthews, president of the Conference of State Bank Supervisors' subsidiary which runs the NMLS, said at the American Association of Residential Mortgage Regulators' annual conference in Savannah, Ga. "You tell me anytime in history that all states have acted so quickly? This is a huge lift," he said. AARMR Secretary Rod Carnes of North Carolina's Department of Banking and Finance, agreed: "I think this speaks volumes for the states." Mr. Matthews said CSBS is now in the process of adding "functionality" to meet the SAFE Act's other requirements, including a streamlined renewal component and consumer access.