Origination

Catherine Cruz Wojtasik, a Democratic lobbyist for the Mortgage Bankers Association, is leaving the trade group to take a job on Capitol Hill. A MBA spokeswoman confirmed her departure noting that it will hire a replacement for Ms. Wojtasik. It's believed that she has accepted a position with the Senate Banking Committee but at press time it could not be confirmed. Meanwhile Cheryl Malloy, who handles multifamily issues for MBA, is retiring soon but will stay on as consultant through September.

Citigroup reported net income of $4.3 billion for the second quarter of 2009, after taking $2.4 billion in credit losses on its residential mortgage portfolio. The New York banking giant said $12.1 billion or 6.5% of its residential loans are 90 days or more past due. On a dollar basis, seriously delinquent loans are up 88% from a year ago. The company did tout the fact that since 2007, it has worked with 625,000 homeowners to avoid a potential foreclosure on mortgages totaling over $67 billion. The second-quarter earnings report also shows that Citigroup reported a mark-to-market gain of $613 million on its subprime-related direct exposures (as opposed to a loss one year prior of $3.4 billion). It reported a loss of $390 million on mark-to-market and impairments on alt-A mortgages (one year prior, there was a loss of $277 million). Mark-to-market on its commercial real estate positions resulted in a loss of $354 million, an improvement from a loss of $480 million for the second quarter 2009.

The mortgage insurance division of Genworth Financial is removing 136 metropolitan areas from its "Declining/Distressed Markets" list which will effectively loosen loan-to-value requirements and FICO scores for certain borrowers. The changes are effective Monday, July 20. On Friday the company would not provide the identity of the markets removed with a spokesman saying the metro areas are on an "internal site and protected so they can't be copied." However, Genworth is telling its lender clients that 14 states "in their entirety" will remain on the list. The 13 include Arizona, California, Connecticut, Florida, Hawaii, Maryland, Michigan, Nevada, New Hampshire, New Jersey, Oregon, Rhode Island, Utah and Vermont. In Arizona, California, Florida and Nevada the minimum FICO score is 720. In California Genworth will not insure loan amounts north of $417,000.

Bank of America saw its residential mortgage income increase more than fivefold in the second quarter to $2.6 billion as it originated $110 billion worth of home loans during a strong refinancing boom. Refinancings accounted for 71% of its residential loan production. In the year-ago quarter, the bank did not own Countrywide Financial Corp., which at the time was still the nation's largest lender. Even though BoA posted strong mortgage (and overall results) its 2Q mortgage earnings fell compared to 1Q when it earned $3.4 billion.

The Federal Reserve Board will consider amendments to the Truth in Lending Act placing new restrictions on mortgage broker compensation. "The proposal will include new rules governing mortgage originator compensation," Fed governor Elizabeth Duke said. The proposed rule — which the Fed will take up on July 23 — also includes "re-redesign, consumer tested disclosures and rule changes for closed-end mortgages and home-equity lines of credit," Ms. Duke told a congressional panel. The Fed punted on regulating broker compensation and yield-spread premiums last July when it approved a Home Ownership and Equity Protection Act rule to clamp down on abusive lending practices that led to the subprime meltdown. However, Fed chairman Ben Bernanke directed staff to continue their efforts to address the issue. He noted YSPs that brokers receive from lenders are based on the interest rate, which "on its face seems to be an incentive for steering borrowers into higher price loans."

Federal Reserve policy makers "revised upward" their outlook for economic growth at a June 23 meeting and decided to keep the $1.25 trillion mortgage-backed securities purchase program on track without any changes. The Fed launched the MBS purchase program in December to lower mortgage rates and support the housing market. So far, it has purchased $622 billion in Fannie Mae, Freddie Mac and Ginnie Mae MBS. The purchase program is due to expire at yearend. The minutes of the Federal Open Market Committee meeting indicate the members see the housing market as "vulnerable to further weakness." And they are concerned increases in mortgage rates could "further depress demand for housing and thus impede an economic recovery." Nevertheless, home sales appear to be leveling off and they expect the economy will expand in the second half of this year. However, unemployment could hit 10% this year and remain above 9.5% during 2010, according to the Fed's revised outlook.

Farmer Mac said it no longer owns securities issued by troubled CIT Group Inc. in its investment portfolio. A few weeks back the GSE said it sold its entire position ($35 million principal amount) of CIT bonds to mitigate its risk of loss on those securities. The same day, Farmer Mac also sold its Fannie Mae preferred stock holdings realizing a book gain on this transaction, thereby partially offsetting the loss on the sale of the CIT bond holdings. The net loss realized by Farmer Mac on the two transactions will be included in its third-quarter results and was approximately $1 million. Farmer Mac said it issued the statement after inquiries driven by the end of CIT's bailout talks with the government.

Credit unions continue to sell increasing portions of their home loans as interest rates fall to decade-lows. A new report by the National Association of Federal Credit Unions shows through the first six months of the year credit unions sold 49.1% of their mortgages, compared to just 32.3% in 2008, when mortgage rates were as much as 100 basis points higher. "Despite the fact that a vast majority of the responding credit unions currently consider interest rate risk as a bigger problem when compared to liquidity risk (92.7%), they hold a smaller average percentage of their loans granted this year in portfolio (50.9%) than they did in 2008 (67.7%)," said the NAFCU report. The increase in secondary market sales came after the federal government took both Fannie Mae and Freddie Mac under conservatorship last September, and as the average rate for 30-year, fixed-rate loans was plunging to 4.5%, the lowest in decades.

American General Financial Services, a subsidiary of the government-controlled AIG, is considering a plan to liquidate up to $10 billion in whole loans using the securitization market, investment banking sources told NMN. The first part of that liquidation was revealed in a new regulatory filing where the company said it would securitize roughly $1.6 billion in subperforming and nonperforming whole loans — many of which are nonprime in quality — through Credit Suisse. PennyMac, which is controlled by former Countrywide president Stan Kurland, is involved in the transaction as a servicer. At press time both CS and AIG declined to comment on the record. Initially, CS will purchase the loans and then issue securities. In an SEC filing AGFS and "sellers" could reap net cash proceeds of up to $975 million. The transaction is expected to close by the end of July. The company said it will use the cash to support its liquidity position and funding needs, "including the discharge of approximately $313 million of debt security obligations under an indenture dated Jan. 1, 1988 that are due during 2009."

MortgageDashboard, an Austin, Texas-based loan origination software firm, lost funding unexpectedly and is out of business. The company's head of marketing confirmed the company was forced to close its doors yesterday. One Maryland lender told National Mortgage News that he received an e-mail from the company saying it would be closing. "They gave us seven days to get our files in order," he said. "It's too bad. It's a wonderful program." Since 2001 MortgageDashboard's claim to fame was that it operated a Web-based on-demand system that allowed users to pay as they go. Jordan Brown, president of MarketWise Advisors, a mergers and acquisition consulting firm, said he is not surprised by the development. "I've looked at least 30 loan origination systems [firms] looking for a buyer. It's a tough market for an LOS. I suspect more will go out of business going forward." Mr. Brown predicted that the more prominent LOS firms will find refuge and eventually be bought.