Origination

After putting its residential correspondent loan purchase program on hold in late June, CitiMortgage has begun accepting new correspondent registrations from what it calls "select, qualified" mortgage banking customers. The bank owned mortgage firm offered few details accept to say that it will phase in remaining correspondents over the next several weeks. CitiMortgage — which declined to say how many active correspondents it had prior to the shutdown — stopped buying loans so it could work on improving its quality control procedures. Registrations for correspondent transactions began anew on Monday, July 6. Last year CitiMortgage scaled back its wholesale production by roughly 90%. According to the Quarterly Data Report, the company ranked fourth nationwide among correspondent buyers in 1Q.

Refinancings of existing mortgages accounted for 77% of all loans funded in the first quarter, the highest reading since National Mortgage News began tracking such figures in the late 1990s. The last time the refi rate was close to being this high came in the first quarter of 2003 with refis accounting for 76.7% of all fundings. (In that year mortgage bankers funded a record $3.9 trillion in home loans.) Last month mortgage rates began to tick up as the yield on the 10-year Treasury began to increase. However over the past week the 10-year has come down and at press time was yielding 3.5%. According to the Quarterly Data Report, a National Mortgage News publication, all home lenders funded $462 billion in 1Q: $355 billion in refis and just $107 billion in "purchase money" loans.

The 30-day delinquency rate on "open-end" home equity lines of credit jumped 43 basis points in the first quarter to a record high of 1.89% on a seasonally adjusted basis, according to an American Bankers Association survey. The delinquency rate on closed-end second liens jumped 49 bps to 3.52% in the first quarter -- also a new high. "The number one driver of delinquencies is job losses," said ABA chief economist James Chessen. He noted that 2 million Americans lost their jobs in the first three months of this year. "Even if home prices stop falling this year, employment will keep home equity delinquencies high for some time," he added. The Federal Deposit Insurance Corp. recently reported that charge-offs on HELOCs totaled $4 billion in the first quarter, compared to $3.3 billion in the previous quarter. Charge-offs on closed-end second liens totaled $2.5 billion, a 25% increase from the fourth quarter. Meanwhile, a new report from PMI Mortgage Insurance says that 85% of the nation's metropolitan areas are "now facing an increased risk" of lower home prices into 2011. The only good news PMI could offer is that the rate of home price declines has slowed and that falling values are making homes more affordable in many metro areas.

After being convicted of 51 counts of conspiracy, fraud and money laundering in connection with a mortgage fraud scheme, Harold Stafford of Sumner County, Tenn., has been sentenced to eight years in prison, followed by three years of supervised release. His co-defendants, Miles Jackson Black and Jeffrey Dunn Hathcock, also from Sumner County, were each sentenced to a year and a day in prison, followed by five years of supervised release. All three defendants were ordered to jointly pay $1 million in restitution and a special assessment of $5,100. According to the U.S. attorney's office for the Middle District of Tennessee, Stafford engaged in a scheme that involved the purchase of 22 luxury homes in Hendersonville, Gallatin and Goodlettsville through unqualified straw buyers. Stafford, Black and Hathcock caused the submission of false mortgage loan applications to lenders that overstated the straw buyers' income, falsely stated that the homes would be the straw buyers' primary residences and failed to disclose other recent home purchases by the same straw buyers. All of these mortgage loans ended in default and foreclosure, resulting in losses to mortgage lenders, after foreclosure, totaling $2,214,700.

The president of the Florida Association of Realtors said the availability and affordability of property insurance has an impact on the real estate market and the importance of it, not only for homeowners, potential homeowners and the owners and potential owners of commercial properties "cannot be overstated." Cynthia Shelton testified at a West Palm Beach, Fla. hearing of the U.S. House Financial Services Committee's Oversight and Investigations Subcommittee held on July 2. "Homeowners' insurance is a necessary component in securing a mortgage and buying and selling a home. If a potential homebuyer is unable to obtain or afford the required insurance, the sale will not be completed. As a result, potential homebuyers are excluded from the market," she said. Ms. Shelton also claimed that home values are directly tied to the cost of property insurance. Because homeowners are required by lenders to have property insurance, policies that are expensive or unavailable devalue real estate. She also spoke in support of a bill proposed by Rep. Ron Klein, D.-Fla., called The Homeowners' Defense Act of 2009. "The lack of a national natural disaster policy has had a measurable direct impact on the availability and affordability of property casualty insurance in many parts of the country. The inability to obtain affordable homeowners' insurance is a serious threat to the residential real estate market - and thus, our entire economy," Ms. Shelton said.

Security One Lending, San Diego, has acquired Omni Reverse, Mission Viejo, Calif., in a stock transaction whose details were not disclosed. The website for Security One describes the company as specializing in the reverse mortgage product, although it apparently does forward mortgages as well and is an approved Fannie Mae seller/servicer. Torrey Larsen, president of Security One said, "The combined entity will be well positioned to compete for market share as the industry, in my opinion, experiences consolidation during the next 18 months." The company is currently licensed in 13 states and plans to be licensed in 38 by the end of the year. Until last year, Omni Reverse was known as OmniHome Financing. Its president, David Bancroft said Omni Reverse has been looking for a partner for a long time.

The 12 Federal Home Loan Banks reported combined earnings of $345 million in the first quarter, down 50% from a year ago, as six banks took a net loss for the quarter primarily due to impairment charges on private-label mortgage-backed securities. "Other than temporary impairment" charges on the $61.2 billion in private-label MBS held by the FHLBanks reduced earnings by $516 million. The banks also recognized $4.7 billion in private-label MBS valuation losses in "accumulated other comprehensive income." Federal Housing Finance Agency director James Lockhart recently told Congress that the credit quality of the FHLBanks' investments in private-label securities has proven to be "much worse" than expected. "With ongoing uncertainty surrounding the true economic value of PLS, those investments will continue to raise safety and soundness concerns," the GSE regulator said. As of March 31, combined retained earnings totaled $5 billion while losses recognized in accumulated other comprehensive income totaled $7.4 billion. Half of the FHLBanks have suspended dividend payments to rebuild retained earnings. The 12 banks have $1.2 trillion in assets and $60 billion in regulatory capital, according to the combined first quarter report issued by the FHLBank Office of Finance.

The real estate business is one of the few bright spots in the Monster Employment Index for June, the online job search website said. The index fell from 118 in May to 117 in June; it most recent peak was in September 2008 at 160. The year-over-year decline in the index, a gauge of online job demand culled from a representative selection of corporate career websites and job boards, was 28%. But the real estate industry registered the largest monthly increase in online job demand during June. Monster noted that the rise coincides with "marginally improved statistics" on residential home sales from the National Association of Realtors. This rise, it continued, suggests a pick-up in housing sector activity "may be imminent." The index for the real estate sector went from 50 in May to 61 in June; in June 2008 it was 105.

In spite of seeing an uptick in business because of the refinance boom during the first quarter, according to data collected by the American Land Title Association, title underwriters had an operating loss of $127.5 million and a net loss of $117.4 million for the first quarter 2009. This compares to operating income of $59.9 million and net income of $224.8 million for the same period last year. The industry also did not benefit from a 49% reduction in loss and loss adjustment expenses for the quarter. The period also was the 12th consecutive quarter where title premiums written declined on a year-over-year basis. But ALTA pointed out it was the first of the 12 where the quarterly decline was less than the prior quarter's decline. In fact, the first-quarter 2009 decline of 25% was less than the first quarter 2008 decline (over 26%), the second quarter 2008 decline (almost 28%), the third quarter decline (over 30%) and the fourth quarter decline of 34%. Title insurers wrote $1.98 billion in premiums during the first quarter of 2009, compared to $2.64 billion in premiums during the same period a year ago. By market share, Fidelity National Financial was the largest group at nearly 45%, followed by First American at 28%, Stewart at 13% and Old Republic at 6%. Those four companies control 92% of the business; the largest regional player, Attorneys' Title Insurance Fund, has a market share of under 2%.

Beazer Homes USA Inc., Atlanta, has agreed to pay the United States $5 million, plus contingent payments of up to $48 million to be shared with victimized private homeowners, to resolve allegations that it and Beazer Mortgage Corp. were involved in fraudulent mortgage origination activities in connection with federally insured mortgages. The settlement resolves the following allegations: that, when Beazer Mortgage Corp. made Federal Housing Administration-insured mortgage loans for homes built by Beazer Homes, the companies fraudulently and improperly required purchasers to pay interest discount points at closing but then kept the cash and failed to reduce interest rates; that it provided cash gifts to home purchasers through certain charities so purchasers could come up with minimum required down payments, with assurances the gifts would not have to be repaid, and then increased home purchase prices to offset the amount of the gifts; that it obscured which of its branches made defaulting loans to avoid FHA detection of excessive default rates; and that it ignored stated income requirements in making loans to unqualified purchasers. Beazer Homes operates in at least 21 states.