Origination

Lending is steady or slower and residential real estate generally remains weak with signs of improvement, according to the Federal Reserve's Beige Book. Residential real estate lending is decreasing in New York, Richmond, and St. Louis, according to the Fed. Dallas' outstanding mortgage volumes are steady but low, while Kansas City's rise in mortgages is slowing. Refinancing activity is dropping dramatically in Richmond, decreasing in New York and Cleveland, and maintaining its pace in Dallas. Credit quality is varying by district with commercial real estate concerns leading to tighter credit in some areas as generally credit standards continue to tighten or remain stable. The only district where residential real estate sales are failing to improve is St. Louis, where they instead are seeing a steep drop. The Fed said the low end of the market, particularly entry-level sales, continues to do relatively well, with some districts attributing this to the first-time homebuyer tax credit. The Boston and New York districts said condominium sales are still far below 2008 levels. Home prices continue to decline in most cases although some districts see possible signs of stabilization. Three districts said foreclosure sales are putting downward pressure on prices. Residential construction appears to remain slow, with three districts noting that financing is difficult, according to the report. Respondents said commercial real estate sales volume is low, or even "non-existent" in some districts, citing a combination of tight credit and weak demand. Tight credit also was cited as a factor in limited or declining commercial construction in most districts, exceptions being health and institutional construction in the St. Louis district, public sector construction in the Chicago district and World Trade Center reconstruction in Manhattan.

A Senate appropriations subcommittee has approved new funding for the Federal Housing Administration to hire additional staff and update its aging information systems as part of the Department of Housing and Urban Development budget for fiscal year 2010. "It provides funds to start modernizing its technology systems in order to track its mortgages and obligations, which — I regret to tell you — it cannot do right now," said Sen. Christopher Bond, R-Mo. Sen. Bond also expressed concerns about the rapid growth of the FHA program and the lack of staff and expertise to manage the FHA single-family program effectively. "It may be at the edge of a meltdown," he warned. Sen. Richard Shelby, R-Ala., expressed similar concerns. "If we don't watch out we could have another Fannie Mae or Freddie Mac," Sen. Shelby said at a subcommittee markup of the HUD appropriations bill.

The House has passed a bill to provide the Federal Housing Administration with an additional $85 billion in loan committee authority so FHA can continue to insure single-family loans through Sept. 30 without interruption. The bill (H.R. 3357) also provides Ginnie Mae with an additional $100 billion in authority to guarantee the issuance of mortgage securities backed by FHA and other government guaranteed loans. The Department of Housing and Urban Development warned Congress back in June that it had used 75% of FHA's $315 billion in loan commitment authority. Now FHA might have to suspend its single-family program if Congress does not provide additional commitment authority before lawmakers leave Washington for the August recess. The House passed H.R. 3357 by a 363-68 vote. The Senate was debating the bill as MortgageWire went to press.

The National Association of Mortgage Brokers has received a setback in its lawsuit against the Department of Housing and Urban Development over the proposed Real Estate Settlement Procedures Act rule. NAMB president Jim Pair told attendees at the California Association of Mortgage Brokers convention in San Diego that the judge hearing the case ruled that HUD followed the Administrative Procedures Act in creating the rule. However, he added, the ruling, "Does not hurt us because the judge did not make any comments regarding yield spread premiums." In NAMB's favor, Mr. Pair said, is pressure from two different sources on HUD to withdraw the RESPA rule, first from the Federal Reserve proposal and the proposed Consumer Financial Protection Agency legislation. NAMB is still looking at the ruling, Mr. Pair said, but it is quite likely it will wait and see before deciding how to proceed on this suit. Mr. Pair was asked about a moratorium on the Home Valuation Code of Conduct. He said there was a good chance a bill will pass Congress but it needs more sponsors. He also said NAMB has obtained an e-mail from an appraisal management company sent to an appraiser saying the appraisal came in too low and it needs to be raised. This goes to the heart of the HVCC issue, which was said to be originator pressure of appraisers over valuations.

Essent Guaranty, Inc., Radnor, PA, a new mortgage insurer, has received approval from the Pennsylvania Insurance Department to write mortgage insurance. Essent is the first private mortgage insurer established in the United States since the start of the current financial crisis. Essent also announced that it has been approved by a working group of the National Association of Insurance Commissioners to participate in an expedited licensing pilot project, and is currently seeking approvals from other state insurance departments. Essent anticipates that it will become a licensed mortgage insurance company throughout the United States in the near future. As part of its expedited licensing pilot, the NAIC seeks to streamline state-specific application requirements, including the need for hard copies of forms and supplemental information involved in Uniform Certificate of Authority Applications. This is intended to facilitate the efficient regulatory review of new entrants in insurance industry sectors deemed of national importance.

Helped by the strong performance in its title insurance operations, Fidelity National Financial Inc., Jacksonville, Fla., had net earnings of $91.9 million ($0.40 per share), an improvement on the $6.9 million ($0.03 per share) reported one year prior. Pre-tax earnings at Fidelity National Title Group went from just $5.1 million in second quarter 2008 to $133.3 million one year later. Total title premiums went from $745 million in the second quarter 2008 up to $1.0 billion one year later. For the full quarter, William P. Foley II, chairman said, FNT had a pre-tax title margin of 9.2% for the quarter and over 10% for the month of June alone. Furthermore, it completed the integration of the former LandAmerica units, giving the company an additional $32 million in cost synergies on top of the $231 million previously realized. Mr. Foley added that order counts for July have been consistent with the levels the company saw for most of June and thus put FNF in a position to continue to generate "solid profitability."

Ambac Financial Group Inc., New York, said it expects to see second-quarter statutory loss and loss expenses that relate primarily to deterioration in second-lien and alternative-A credit securitized mortgage financial guarantee portfolios amount to $800 million. The company said it also expects to see a more than $1 billion increase in its second-quarter statutory impairment losses. Ambac estimates the second quarter statutory impairment losses will increase by about $1.6 billion to roughly $4.9 billion. "The increase in impairment losses, which relate to [Ambac Assurance Corp.'s] insured portfolio of collateralized debt obligations of asset-backed securities transactions, was driven by rising forward LIBOR rates, which increase estimated future cash outflows, and further deterioration of the underlying collateral within the CDO of ABS transactions," Ambac said.

Flagstar Bancorp, Inc., Troy, Mich., saw its mortgage banking unit's loan production in the second quarter decline compared to the first quarter, but it was still better than it was during the same period last year. The company's agency-dominated loan production decreased to $9.3 billion for the second quarter, as compared to $9.5 billion in the first quarter, but increased from the $8.2 billion seen in the second quarter of 2008. The company as whole took a $76.6 million net loss, compared to $67.4 million during the same period a year ago. "Although it is always disappointing to lose money, we were able to continue to generate positive income on an operating basis and are encouraged by ... improvement in mortgage delinquency trends that we experienced towards the end of the quarter," said Mark T. Hammond, Flagstar's chief executive officer.

The Mortgage Bankers Association's latest weekly Mortgage Composite Index shows applications slid 6.3% on seasonally adjusted basis from one week earlier to 495.4. On an unadjusted basis, the index for the week ending July 24 decreased 6.0% from the previous week and increased 16.1% compared with the same week one year earlier. The Refinance Index declined 10.9% to 1862.1 from 2089.7 the previous week and the seasonally adjusted Purchase Index remained unchanged from one week earlier at 262.0. The four-week moving average for the seasonally adjusted overall Market Index is up 2.6%, and while it is down 0.5% for the seasonally adjusted Purchase Index, this average is up 5.2% for the Refinance Index. The refinance share of mortgage activity decreased to 52.6% of total applications from 55.5% the previous week. The adjustable-rate mortgage share of activity increased to 5.5% from 4.8% of total applications from the previous week. Average contract interest rates and points (including the origination fee) for 80% loan-to-value ratio loans during the week ending July 24 were: for 30-year fixed-rate mortgages, 5.36%, up from 5.31% the week before, with points decreasing to 0.93 from 1.18; for 15-year FRMs, 4.75%, down from 4.80%, with points increasing to 1.14 from 1.03; for one-year ARMs, 6.66%, up from 6.50%, with points decreasing to 0.09 from 0.11. Starting next week, the MBA plans to no longer publicly report index values but said it will continue to provide index percentages.

Two-thirds of the 94,000 foreclosure sales in June involved properties previously financed by prime mortgages as the tide of subprime foreclosure sales has declined over the past four quarters, according to the Hope Now alliance. The alliance's monthly report shows the foreclosure sales involving subprime loans crested in the second quarter of 2008 and foreclosure sales involving prime loans have surged since the expiration of several moratoriums in March of this year. Prime foreclosure sales hit 154,000 in the second quarter, up 36% from the first quarter. Prime sales totaled 62,600 in June, up 13% from May and 50% from April. Meanwhile, the Hope Now servicers completed 96,000 loan modifications in June, down 5% from the previous month. This marks the second monthly decline as servicers put more modification candidates through a 90-day trial period as required by the Obama administration's Home Affordable Modification Program. Most of the Hope Now servicers have signed up for President's program but some are waiting for permission from their investors to modify loans.