Origination

The average rate for a 30-year fixed-rate mortgage rose to 5.20% from 5.14% during the week ended July 23, according to the Freddie Mac Primary Mortgage Market Survey. "Mortgage interest rates were mixed this past week with fixed-rate loans averaging somewhat higher while initial rates on ARMs were flat-to-down slightly," said Frank Nothaft, Freddie Mac vice president and chief economist. The 15-year FRM this week averaged 4.68%, up from the previous week when it averaged 4.63%. A year ago at this time, the 15-year FRM averaged 6.18%. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 4.74%, down from the previous week when they averaged 4.83%. A year ago, the five-year ARM averaged 5.49%. One-year Treasury-indexed ARMs averaged 4.77%, up slightly from the previous week when they averaged 4.76%. At this time last year, the one-year ARM averaged 5.49%. Average points for almost all the aforementioned loans were 0.7. The exception was the one-year Treasury ARM, for which the average was 0.6.

The regulator of the government-sponsored enterprises has moved to clear up some "misinformation" about the Home Valuation Code of Conduct that Fannie Mae and Freddie Mac adopted three months ago and counter criticism that the new appraisal code is causing problems in the real estate market. "Market participants should appreciate the difficulty facing appraisers when valuing properties in a declining market, especially when sharply dropping home prices and foreclosures are prevalent. The challenges of appraising properties exist with or without the Code," the Federal Housing Finance Agency says. The code was designed to shield appraisers from inappropriate pressure from lenders, borrowers and brokers. But critics are complaining that the code has slowed the appraisal process, led to lower appraisals and the use of unqualified appraisers. The HVCC notice issued by FHFA stresses that professionals should report appraisers that are unqualified or unfamiliar with local markets to state licensing agencies. The GSE regulator also notes that lenders are requiring additional comparables and even second appraisals, which slowed processing. "FHFA believes that the Code is serving the intended purpose and will continue its oversight role both as to the implementation of the Code by the enterprises and its market impact," the agency said.

Existing single-family home sales rose 2.4% to an annualized rate of 4.32 million units in June and prices appear to be firming up as well, according to figures released Thursday morning by the National Association of Realtors. The comparison is to the previous month and when measured against the same month last year, the figures aren't as promising. Sales of single-family homes (condos and cooperatives excluded) rose 0.2% compared to June 2008 and prices fell 15% (to $181,400). NAR points out that it revised downward the May 2009 sales figure as well. Taken by themselves, the condos and cooperatives sales numbers look somewhat promising: a 14% increase from May to June but a 3.1% decline from May 2008. In total Realtors hope to sell 570,000 condos and co-ops this year (based on the June numbers) and are banking on the market being bolstered by state and federal tax credits for first-time home buyers. Meanwhile, NAR is blaming the somewhat new Home Valuation Code of Conduct — which sets appraisal ordering rules for GSE loans — for some lost sales. NAR says 37% of its members said they "experienced at least one lost sale as a result" of HVCC "with seven out of 10 reporting an increased use of out-of-area appraisers."

Hudson City Bancorp Inc., Paramus, N.J., charged off $9.6 million of nonperforming mortgage loans whose current values were below the outstanding loan balance during the second quarter. The charged-off loans, said Ronald E. Hermance Jr., chairman, president and chief executive, are still in the foreclosure process. These loans may or may not become real estate-owned. Even with the charge-off, Hudson City made $127.9 million, or $0.26 per share, up from $110.7 million, or $0.22 per share, for the same period one year prior. During the quarter, the company originated $1.7 billion and purchased $1.2 billion of first-mortgage loans.

Standard & Poor's Fixed Income Risk Management Services and the American Securitization Forum are creating a loan identifier and mortgage loan repository. FIRMS, an analytics unit separate from S&P's ratings business, said it will create a new loan numbering system and a central loan data repository aimed at providing investors with a means to understanding the risk, collateral and credit of an individual loan that has been securitized or may be repackaged for the secondary market. Assigned by Standard & Poor's at no cost to issuers, the unique Loan ID linked to the CUSIP and ISIN number of the security are aimed at helping investors track loans throughout their life spans and providing a chain of accountability between loan originators and investors.

U.S. Bancorp, Minneapolis, saw record mortgage banking revenue for the second quarter 2009, driven by loan applications of $21.6 billion and record mortgage loan production volume of $16.3 billion. It had $308 million in mortgage banking revenue for the period, up from $233 million in the first quarter of 2009 and $81 million in the second quarter of 2008. The company also had over $25 billion of new and renewed commercial real estate and commercial loan commitments. The mortgage banking division's contribution to U.S. Bancorp's net income was $162 million. The company had net income of $471 million ($0.12 per share) for the second quarter, down from $950 billion ($0.53 per share) one year prior as the provision for credit losses exceeded net charge-offs by $466 million. The loan loss provision for the quarter was $1.4 billion, up $799 million over the same period in 2008, reflecting continued stress in residential real estate markets driven by declining home prices in most geographic regions. Net charge-offs for the quarter included $121 million in commercial real estate, $116 million in residential mortgages and $83 million in home equity and second mortgages.

There was an apparent anomaly in the findings of the Mortgage Bankers Association's latest Weekly Applications Survey, which showed long-term rates, refinancing and total apps all increased during the week ended July 17. Rates on the 30-year fixed-rate mortgage increased, but also there was an increase in Market Composite Index and its refinance component. The MCI was 528.9, an increase of 2.8% on a seasonally adjusted basis from 514.4 one week earlier. On an unadjusted basis, the index increased 2.9% compared with the previous week and increased 6.6% compared with the same week one year earlier. The Refinance Index increased 4% to 2089.7 from 2009.4 the previous week and the seasonally adjusted Purchase Index increased 1.3% to 262.1 from 258.8. The share of refinancing applications saw a slight increase to 55.5% from 54.9% a week ago. The share of adjustable-rate mortgages applications decreased to 4.8% from 5% for the previous week, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages rose to 5.31% from 5.05%, with points (including the origination fee) increasing to 1.18 from 1.12 for loans with 80% loan-to-value ratios, the association said. The average contract interest rate for 15-year FRMs rose 21 basis points to 4.8%, while for one-year adjustable-rate loans, it increased by 3 bps to 6.5%. The MBA can be found online at http://www.mortgagebankers.org.

The Obama administration has sent a legislative package to Capitol Hill that strengthens supervision of credit rating agencies and improves disclosures about the risks of structured mortgage-backed securities. The administration wants ratings on structured products to have different symbols than corporate bonds allowing investors to know there is a difference between the two. Second, the rating agencies would provide a "clear report" containing assessments of data reliability, the probability of default, the estimated severity of losses in the event of default, and the sensitivity of a rating to changes in assumptions on structured products, said assistant Treasury secretary Michael Barr. The administration's proposals also are designed to discourage issuers from "shopping" for the best rating. Mr. Barr said the administration "strongly supports" a proposed rule issued by the Securities and Exchange Commission last year that requires issuers to make the same data they provide to their rating agency available to all rating agencies. This sharing of data is expected to encourage other rating agencies to provide additional, independent analysis to the market.

Thanks, in part, to last year's acquisition of Wachovia Corp., Wells Fargo & Co. doubled its residential loan production in the second quarter, including a 111% jump in fundings through correspondent mortgage bankers and loan brokers. Overall, Wells funded $129 billion in home mortgages during the period, $57 billion of which came in through third-party sources. The balance was originated through its retail branches and online. However, the company - which released record earnings in 2Q -- provided no breakdown on how much of its fundings came solely from brokers. (The TPO figure was reported as one.) Meanwhile, home equity or second-lien fundings plummeted to $1 billion during the period compared to $3 billion a year ago. Late last year the bank bought Wachovia, a large investor in payment-option ARMs. The Wachovia franchise included the bank's existing residential production unit, which had been bolstered by its 2006 purchase of Golden West Financial of Oakland, then one of the largest funders of POAs. The GWF POAs turned out to be a major headache for both Wachovia and now Wells because of soaring delinquencies. In the second quarter Wells reported residential charge-offs of $1.8 billion, a majority of which are tied to second liens. Wells has $7.6 billion in nonaccruing home loans on its books and another $7.5 billion in nonaccruing commercial loans. Wells is the nation's second largest residential servicer ($1.6 trillion) and largest commercial servicer ($470 billion), according to the Quarterly Data Report.

A private equity investment appears to have saved and maintained the ongoing operation of loan origination system provider MortgageDashboard, which last week said it had lost its funding and was planning to shut down. On its website, the company said, "MortgageDashboard has been purchased by a private equity group and will continue to operate with no interruption to service." Specifically, Catalizador Private Equity Group has acquired a majority interest in MortgageDashboard. The deal consists of a buyout of both major shareholders and a private equity group. MortgageDashboard's new funding will be used to fuel a new leadership team, finalize development on MortgageDashboard's new mortgage banking software solution and to sustain daily operations for its client base.