Origination

A strong Consumer Financial Protection Agency would even the playing field so community banks would not have to compete against unregulated mortgage bankers in offering products and services, according to the Treasury Department. "If you are a community bank or credit union, the last thing you want to do is compete against a set of unregulated players outside the system," Treasury assistant secretary Michael Barr told reporters. The American Bankers Association and Financial Services Roundtable oppose the proposed CFPA, claiming it will limit consumer choice and stifle competition. Financial institutions will have to offer plain-vanilla products, Mr. Barr said, so consumers can compare and make decisions about more complex mortgages based on products they actually understand. "The market can continue to offer whatever products it wants," he said. Mr. Barr made his comments after Treasury sent the text of a 150-page CFPA bill to Congress. House Financial Services Committee chairman Barney Frank, D-Mass, said the legislative text will make it easier for his committee to pass a CFPA bill before the August recess. "While the committee will, of course, exercise its own judgment on the specifics and we have already had a thorough hearing on the matter, it is helpful to have the administration's proposals as well because I believe there is a great deal of common ground between us," Rep. Frank said.

Freddie Mac's board of directors has selected Charles E. Haldeman Jr., a top executive at Putnam Investments, to be its next chief executive, according to a source familiar with the matter. "He's the leading candidate," said the source. The nomination has been sent to its regulator, the Federal Housing Finance Agency, which has yet to act on the pick. Mr. Haldeman would replace John Koskinen, a former Clinton Administration official. Mr. Koskinen replaced David Moffett who took control of the GSE when the government placed it into conservatorship this past fall. In other company news, the GSE said in a new regulatory filing that it received $6.1 billion in new funds from the Treasury Department to help offset its mounting liabilities. Counting the new infusion, the Treasury Department, to date, has given the GSE $51.7 billion to keep its net worth above zero.

A common question asked by new reverse mortgage originators is "what is the best way to get started?" It's a question that is to be expected since beginning any new venture requires a plan.

The National Association of Mortgage Brokers has elected Jim Pair to be its president for 2009-2010. The announcement came at the trade group's midyear meeting in San Antonio. Mr. Pair, who is from Corpus Christi, Texas, succeeds Marc Savitt, who remains as an officer of the group as immediate past president. The new president-elect is William Howe, Scottsdale, Ariz., who moves up from vice president. The brokerage industry is facing an uphill battle for survival thanks to the credit crisis and the blame placed on third-party originators for poor credit quality. Wholesale production now accounts for about 15% of all fundings compared to 28% three years ago, according to National Mortgage News and the Quarterly Data Report.

Genworth Financial Inc., Richmond, Va., has priced the initial public offering of its Canadian mortgage insurance subsidiary, revealing that it hopes to raise up to $730 million (U.S.) The IPO has been priced at $19 per share, Canadian, which translates into $16.45. U.S. Genworth hopes to complete the IPO by July 7. The stock will trade on the Toronto Stock Exchange under the symbol MIC. "This IPO reinforces our already sound financial foundation and provides additional capital flexibility to Genworth," said Michael D. Fraizer, chairman and chief executive of Genworth Financial. "At the same time, we will continue to benefit from the earnings associated with our majority position in Genworth MI Canada as it plays an important role in providing solutions to the housing finance market in Canada." The Canadian business had first quarter 2009 net operating income of $66 million, compared with $75 million for the same period one year prior. The unit had $2.4 billion of flow insurance sales and $0.4 billion of bulk sales for the first quarter 2009.

The deterioration of the mortgage market and rising foreclosures and delinquencies is expected to cause increasing losses on billions of dollars of mortgage-backed securities being held by corporate credit unions, according to the National Credit Union Administration. The prediction comes as NCUA revealed it has pumped almost $20 billion into U.S. Central FCU and WesCorp FCU over the last six months to keep these two corporate CUs afloat. Scott Hunt, director of NCUA's Office of Corporate CUs, said current estimates are that U.S. Central will have a loss of $1.7 billion and WesCorp a loss of $5.7 billion on their mortgage securities, but agency officials expect those numbers to be even higher because of the ongoing deterioration in the market.

House prices fell by only 0.6% from March to April, according to the Standard & Poor's/Case-Shiller 20-city house price index, signaling that home values may be stabilizing. From February to March, prices fell 2.2%. "We are entering the seasonally strong period in the housing period, so it will take some time to determine if a recovery is really here," said David Blitzer, chairman of S&P's index committee. Overall, home prices are down 18.1% from April of last year. In 13 of the 20 metro areas, the annual rate of decline slowed from March to April. Eight metro areas experienced price increases in April, including Cleveland which saw values rise 1.2%. Dallas saw a 1.7% gain, and Denver 1.5%.

The General Accountability Office is urging the Department of Housing and Urban Development to increase its monitoring of housing counselors who provide information about FHA reverse mortgages to senior citizens. GAO auditors secretly participated in 15 counseling sessions and discovered that counselors did not cover all the topics required by HUD. Seven of the 15 counselors did not discuss required information about alternatives to Federal Housing Administration reverse mortgages, which are known as 'home equity conversion mortgages.' GAO also noted some claims made by counselors are potentially misleading. One potentially misleading claim is that seniors are told they will "never owe more than the value of your house." HUD had approved this claim at one time, but later said it is not true in all situations, GAO said. "A borrower or heirs of a borrower would owe the full loan balance — even if it were greater than the value of the house — if the borrower or heirs chose to keep the house when the loan became due," said Mathew J. Scire, director of financial markets and community investment, in prepared testimony released Monday. The report also recommends that other federal regulators need to be "vigilant about emerging consumer protection risks" in the reverse mortgage market.

The default rate on prime loans backing private-label securities jumped 214 basis points from April to 8.8% in May, according to a report by Five Bridges Advisors Inc. "In dramatic fashion, the performance of prime loans has deteriorated more severely [in May] than either Alt-A or subprime borrowers," the default report says. [Defaults include loans 90 days or more past due, in foreclosure or real estate owned.] The jump in prime defaults partially reflects the lifting of foreclosure moratoriums, as well as the "very tight credit markets for jumbo loans in the United States and the increase in mortgage rates over the last six weeks," according to analysts at Five Bridges, which is based in Bethesda, Md. Prime loans make up 23.5% of all non-agency mortgage loans with Alt-A making up 41% and subprime 35.5%.

Standard & Poor's has placed more than 1,000 U.S. conduit and fusion commercial mortgage-backed securities deals on "watch negative." S&P says the move does not represent a change in the expected performance of pools but rather a change in its CMBS criteria. The main change is a revision of credit enhancement levels in line with an effort to establish ones that enable securities carrying top investment-grade ratings of AAA to "withstand market conditions commensurate with an extreme economic downturn without defaulting." S&P said its analysis has resulted in a AAA credit enhancement figure of 19% for the "archetypical" pool. "We determined the higher enhancement level based on a number of factors, but primarily on our assessment of potential commercial property value declines in the range of 40% to 50% under conditions of extreme stress, such as during the Great Depression," the rating agency said. "This represents a major recalibration of our CMBS criteria and is intended to make U.S. CMBS ratings more comparable with ratings in other sectors." S&P also said, "While the new criteria represents a major change in our opinion of what might happen under highly stressful conditions, it does not represent a change in our view of the expected performance of commercial pools under current conditions."