Origination

The troubled Federal Home Loan Bank of Seattle reported a $34.3 million loss for the second quarter, up 50% from the first quarter, and it plans to submit a recapitalization plan to the GSE regulator before Aug. 24. The Federal Housing Finance Agency has classified FHLB-Seattle as "undercapitalized" due to continuing losses on its investments in private-label mortgage-backed securities. FHLB-Seattle said it held $3 billion of regulatory capital as of June 30. "Although the bank did not comply with its risk-based capital requirements as of June 30, 2009, the bank was in compliance with all of its regulatory capital requirements as of July 31, 2009," the bank said in releasing its second quarter results. It took $61.8 million in credit-related impairment charges in the second quarter, compared to a $71.1 million other than temporary impairment credit-related charge in the previous quarter. "We have seen some recent improvement in the market values of some of the mortgage-backed securities we own," FHLB-Seattle president and chief executive Richard Riccobono said. The $50 billion-asset bank has $5.3 billion invested in private label MBS, mostly backed by Alt-A and subprime loans.

The Federal Reserve said it would continue to support mortgage lending and the housing markets by purchasing agency mortgage-backed securities after concluding a two-day meeting of its Federal Open Market Committee. The FOMC members renewed the Fed's commitment to purchase up to $1.25 trillion in MBS issued by Fannie Mae, Freddie Mac and Ginnie Mae by the end of this year. The Fed has purchased $721.2 billion in agency MBS since last December. "Although economic activity is likely to remain weak for a time, the committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in the context of price stability," according to a FOMC statement. The Federal Reserve also renewed its commitment to purchase $200 billion in Fannie, Freddie and Federal Home Loan Bank debt by yearend. It has already purchased $107.3 billion in agency debt.

The average 30-year mortgage rate could give up some of the slight week-to-week gain seen in Freddie Mac's most recent survey if the declining trend seen this week in a benchmark bond yield continues. The average 30-year rate according to the Freddie Mac Primary Market Mortgage Survey for the week ended Aug. 13 rose to 5.29% compared to 5.22% the previous week due to a slight improvement in the still-weak labor market. The employment statistics drove the benchmark 10-year bond yield higher to levels near 3.85% on Aug. 7, but since then the yield has generally dropped and as of noon Thursday it was at about 3.66%. The current 30-year rate still remains far below the 6.52% 30-year rate seen a year ago. The average rate for a 15-year fixed-rate mortgage in the most recent week was 4.68%, up from 4.63% the previous week and down from 6.07% the previous year. The average rate for a five-year Treasury-indexed hybrid adjustable-rate mortgage was 4.75%, up from 4.73% the previous week and down from 6.02% a year ago. The average rate for a one-year Treasury ARM was 4.72%, down from 4.78% the previous week and 5.18% a year ago. Average points were 0.7 for 15- and 30-year loans, 0.6 for five-year Treasury hybrids, and 0.4 for one-year Treasury ARMs.

Franklin American Mortgage Co. of Tennessee, a top 20-ranked lender, has suspended the origination of jumbo loans through brokers. In a memo to its broker clients, Andrew Taylor, the company's director of national sales, said, "Due to constricting secondary market options and continued lack of demand for conventional nonconforming (jumbo) products, FAMC is temporarily suspending this product offering." The non-bank lender said rate lock requests would be accepted if they were filed by close of business Wednesday, Aug. 12. It's believed that one of Franklin's warehouse lenders is the troubled Colonial Bancshares of Alabama. The company did not return a telephone call about the matter.

Troubled mortgage banker Taylor Bean & Whitaker has been hit with a class action law suit on behalf of 1,000 former employees who found themselves jobless last week when the lender's fortunes took a turn for the worse. The law firm of Outten & Golden LLP sued the non-bank mortgage firm in U.S. District Court for the Middle District of Florida, seeking back pay and health care benefits under the Worker Adjustment and Retraining Notification Act. The firm says the sudden loss of pay and benefits are "causing many employees immense hardship." Meanwhile, Bank of America has sued the troubled Colonial BancGroup — the nation's largest warehouse provider — seeking the return of $1 billion in collateral. BoA is the collateral agent for $1 billion in loans made to Ocala Funding LLC, a commercial paper vehicle sponsored by TBW. Taylor, Bean & Whitaker — which had hoped to rescue Colonial — is expected to file for bankruptcy protection soon. (See related story on this website).

First American Flood Data Services, Austin, has launched a new website dubbed FAFlood.com designed to give users efficient access to a range of flood determination services, products and information from a single source. The site introduces features and functions that include streamlined navigation, and aims to provide more useful tools and more detailed information about services offered. Features on the website, such as event schedules, legislative updates and upcoming map revisions are designed to make it easier for customers to track developments at First American Flood Data Services and within the flood risk management industry. Additional upgrades include a virtual tour of the First American Flood Data Services facilities.

Farmer Mac earned $25.4 million ($2.49 per share) in the second quarter, when its profits were driven by gains in the values of financial derivatives and recoveries of previously recorded losses related to loans for ethanol plants. For the same period last year, the company earned $21.4 million ($2.13 per share). Its outstanding portfolio of loans, guarantees and commitments stands at $10.4 billion as of the end of the second quarter. Farmer Mac's capital surplus, just $13 million at the end of last year, now stands at $100 million. Excluding ethanol loans, 90-day delinquencies were at $23.5 million as of June 30, 2009, down from $27.7 million on March 31, 2009.

Standard & Poor's is considering offering "stressed recovery ratings" for all senior tranches of certain residential mortgage-backed securities that originally received S&P's top rating but subsequently saw severe downgrades. The new ratings would be offered on U.S. prime, alternative-A and subprime RMBS that originally carried a AAA rating but later slipped to a speculative grade rating of BB+ or below. They would be designed to complement a security's current credit rating by providing S&P's opinion of the projected principal recovery on a security if it defaults. The rating agency is currently planning to express this as a percentage of the security's initial par amount but is seeking input on, among other things, whether market participants might want to see this expressed in another way.

Rising interest rates contributed to a declining Mortgage Bankers Association Market Composite Index for the week ended Aug. 7 when compared with the previous week, but continued increases in purchase activity suggest a housing recovery could help bolster volumes going forward. The MCI is calculated from the MBA's Weekly Mortgage Applications Survey; it was down 3.5% on a seasonally adjusted basis from the week ended July 31 and on an unadjusted basis, the Index decreased 3.7% compared with the previous week and increased 16.1% compared with the same week one year earlier. MBA stopped disclosing index values with the July 31 data release. The Refinance Index decreased 7.2% from the previous week. The seasonally adjusted Purchase Index increased 1.1% from one week earlier. This is the third gain in the Purchase Index in the past four weeks, MBA said. Looking at the Purchase Index's seasonally adjusted, four-week moving average gain of 0.8%, MBA said this behavior is consistent with the view that home sales hit bottom earlier this year and are now in a gradual recovery. The share of refinancing applications decreased to 52.3% of total applications from 54.2% the previous week and the seasonally adjusted, four-week moving average for the Refi Index is down 2.0%. The adjustable-rate mortgage share of activity increased to 5.8% from 5.4% of total applications the previous week. The average contract interest rate for 30-year fixed-rate mortgages increased to 5.38% from 5.17%, with points increasing to 1.18 from 1.02 (including the origination fee) for loans with an 80% percent loan-to-value ratio, the association reported. The average contract interest rate for 15-year FRMs increased 11 basis points to 4.71%, while for one-year adjustable rate loans, it increased by 4 BP to 6.71%.

Top executives from the National Association of Mortgage Brokers are set to meet with the new Federal Housing Administration commissioner on Aug. 19 over a plethora of issues. These include "Kiddie Condos" where a parent's credit is used (according to one trade group memo) for loan qualification purposes. A copy of the meeting's agenda was provided to National Mortgage News by an industry source. NAMB also hopes to discuss with FHA commissioner David Stevens the new RESPA rule and how it will affect the agency's use of origination and discount points. Also possibly on the agenda: implementation of risk based pricing rules, and the possible involvement of the Government National Mortgage Association in warehouse lending. A spokesman for NAMB confirmed that the meeting is set but said the agenda has not been finalized.