Origination

Mortgage Guaranty Insurance Corp., the nation's largest MI company in terms of policies-in-force, posted a $340 million loss in the second quarter, warning that it may not meet minimum capital standards that would allow it to continue writing new policies. The company stressed to this publication, however, that it is continuing to write new MI policies. In a statement, MGIC — which insures $223 billion in home mortgages — warned that there are no plans by the U.S. Treasury to provide it, or any other MI, with capital support. "Nothing's going on in that regard," a company spokesman told NMN. MGIC hopes to activate a subsidiary called MGIC Indemnity Corp. that would allow it to begin writing new policies in January of next year. MGIC is supplying the unit with $1 billion in fresh capital. Despite all the bad news for the company, MGIC's share price was up $0.37 in trading early in the afternoon of July16.

Mortgage stocks rebounded modestly at the end of the trading day on Wednesday as the Dow went up nearly 257 points. MI companies Milwaukee-based MGIC Investment Corp. and Richmond, Va.-based Genworth Financial, however, saw healthy upticks at 19.8% and 11%, respectively. Philadelphia-based Radian's stock price closed the end of trading on Wednesday up 7.9%, while Winston-Salem, N.C.-based Triad Guaranty's stock rose 6.7%. Walnut Creek, Calif.-based PMI Group's closed up 4.7%.

Andrea Goode-James, a closing attorney from Roxbury, Mass., pleaded guilty before U.S. District Judge Douglas P. Woodlock to mortgage fraud for pocketing more than $1 million in proceeds of loan closing transactions. According to Michael K. Loucks, acting U.S. attorney for the District of Massachusetts, Goode-James performed closings on three different properties between 2005 and 2007 and pocketed more than $1 million in lender proceeds rather than using those funds to pay off pre-existing mortgages as directed by the lenders. To conceal her fraud, Goode-James made some monthly payments on the pre-existing mortgage loans. She also issued title insurance commitments to the new lenders, which bound the title insurance company for title defects and misled lenders to believe that she had in fact cleared title by paying off prior loans and obtaining discharges of those mortgages. Judge Woodlock scheduled sentencing for Oct. 29.

The mortgage insurance industry should survive, declared analysts at Keefe, Bruyette & Woods, but any fundamental recovery is still well down the road. Meanwhile, the second quarter spike in interest rates has made estimated volumes for the rest of the year at the title insurers "more tenuous" and as a result, KBW is lowering its earnings estimates and price targets for those companies. For Fidelity National Financial, it lowered its second quarter 2009 earnings estimate to $0.37 per share from $0.48 per share primarily due to lower fee-per-file expectations, slightly higher expenses and reduced commercial activity. The EPS estimate for First American Corp. was cut from $0.87 to $0.73 and for Stewart Information Services Corp. from $0.52 to $0.39 for the same reasons. As for the mortgage insurers, the KBW analysts "expect the second quarter will see an increase in the sequential growth rate in delinquencies, likely returning to the mid-teens percent range rather than the single-digit growth rates seen in the first quarter." The analysts increased their estimates for the loss at Old Republic (which operates in both segments, but which was grouped with the MI companies) to $0.18 per share from 0.13 per share on lower orders and lower fee per file in the title segment. For MGIC, KBW's second-quarter operating EPS estimate was increased to a loss of $1.28 from a loss of $0.74 primarily on the elimination of the tax benefit from operating losses due to the establishment of a valuation allowance. PMI had its loss estimate increased by $0.01 per share to $1.62, while KBW held its estimates for Radian at a loss of $1.19 per share. For the mortgage insurance segment at Genworth, analysts Nathaniel Otis and William Clark predict it will lose $23.0 million or $0.05 per share for the second quarter.

The Financial Crimes Enforcement Network (FinCEN) is seeking public comment on a proposal to require mortgage brokers to file suspicious activity reports with the federal agency. FinCEN is in charge of the government's anti-money laundering efforts and it recently turned its attention to detecting loan modification scams and foreclosure rescue scams. "FinCEN believes that new regulations requiring non-bank residential mortgage lenders and originators to adopt anti-money laundering programs and report suspicious transactions could augment FinCEN's initiatives in these areas," the agency's director James Freis said. The agency is issuing an advance notice of proposed rulemaking for a 30-day comment period.

Freddie Mac reopened its 1.75% three-year Reference Notes security that matures on June 15, 2012. The issue was priced at 99.942046 or approximately 24 basis points more than three-year U.S. Treasury Notes. The bid-to-cover ratio was 3.275 to 1. The stop yield was 1.770%. It will settle on July 16. The $1 billion reopening of the security was conducted via an Internet-based auction. The issue, CUSIP 3137EACC1, is listed on the Euro MTF market of the Luxembourg Stock Exchange. After the reopening, the outstanding size of the 1.75% three-year Reference Notes security will be $7 billion. All auction details can be found on Freddie Mac's Debt Securities Web page. Freddie Mac has issued $40 billion of reference notes securities during 2009 and has approximately $257.5 billion in reference notes and reference bonds securities outstanding.

Yes, I know those are the words to an old song, but one of the most common questions I hear is, "how to I get the senior to want to use me and not shop around for a reverse mortgage?" Even seasoned reverse mortgage originators sometimes struggle with this. Every once in a while we need to be sure that all of our marketing and outreach is sending a consistent message to our prospects and their children. Do not forget or ignore the children. In fact, I recommend you target them.

The Federal Housing Administration will now provide mortgage loan insurance on refinanced commercial loans collateralized by hospitals. Previously, hospital owners could only get FHA insurance on loans that included a substantial construction component such as replacing, rebuilding, or renovating existing structures. "This refinance program will help hospitals struggling with skyrocketing interest rates and limited credit options," said HUD Secretary Shaun Donovan. "The savings provided through FHA refinancing should also help hospitals decrease the cost of healthcare, which is a major priority of the Obama Administration." HUD is prepared to accept refi applications as soon as lenders are prepared to submit them. The application process will be similar to that for construction loans, but it is expected to be faster and with fewer required steps. HUD anticipates that full applications will start to be received in August and that, following application review, insurance commitments for refis will start being issued in October.

The Government National Mortgage Association issued a record $43.6 billion in mortgage-backed securities in June, and reported that issuance during the first six months of this year has nearly doubled from a year ago. In May the agency issued $39 billion in MBS, a record at the time. Ginnie Mae issued $207 billion in MBS during the first half of this year, compared to $107 billion in the first half of 2008. The secondary market agency guarantees mostly single-family MBS. It guaranteed only $584 million in multifamily mortgages in June and $319 million in May. The June monthly report shows a 125% jump in the issuance of MBS backed by FHA-insured reverse mortgages, which are called 'home equity conversion mortgages' or HECMs. Ginnie issuers securitized $590 million in HECMs in June — the highest level ever.

In what was otherwise a good period for the Goldman Sachs Group, commercial mortgages were one of the down items in the firm's second quarter 2009 results. The Fixed Income, Currency and Commodities business, in which the mortgage business reports, had record quarterly net revenues of $6.8 billion. Net revenues in mortgages, Goldman Sachs said, were higher when compared with the second quarter 2008. However, the results in mortgages included a loss of approximately $700 million on commercial mortgages. No details were offered in its SEC filing. One lingering problem on Goldman's balance sheet is its exposure to commercial real estate as the economy remains weak and defaults rise. Goldman owns Litton Loan Servicing, a specialty servicer that specializes in subprime mortgages and 'scratch & dent' loans.