Origination

Existing single-family home sales rose 1.9% in May, marking the third consecutive monthly rise, even though the purchase of foreclosed properties and first-time sales declined. The National Association of Realtors reported that sales of existing single-family homes rose to 4.25 million units (annualized) in May compared to 4.17 million in April. Compared to the same month a year ago sales fell 3%. NAR chief economist Lawrence Yun noted foreclosures and short sales accounted for roughly 33% of sales in May, down from 45% earlier in the year. Mr. Yun said the decline probably can be attributed to seasonal factors with more families entering the home buying market that are not interested in distressed properties. The percentage of buyers purchasing their first home fell to 29% of resales, down from a high of 50% in recent months. This is "puzzling" considering the availability of the first-time homebuyer tax credit, Mr. Yun said. Despite higher mortgage rates and other uncertainties in the market, NAR is still forecasting that existing home sales will be a "little better" in the second half. Meanwhile, the median price of an existing single-family home sold in May was $172,900, down 16.1% from a year ago.

Real estate agents are complaining to the National Association of Realtors that low-ball appraisals are upsetting sales transactions, blaming the recent implementation of a new appraisal code by Fannie Mae and Freddie Mac. "We are getting bombarded by members across the country who say that sales are falling apart," NAR chief economist Lawrence Yun told reporters. Realtors are blaming appraisals coming in at the last minute with "unrealistically low values." Mr. Yun said . NAR is investigating the complaints. The GSE appraisal code that went into effect in May — the Home Valuation Code of Conduct — encourages the use of appraisal management firms that do not always use local appraisers. Real agents are complaining that appraisals are being conducted by non-local appraisers who are using non-comparable properties and relying on computer models, Mr. Yun said. Mortgage brokers also are complaining that appraisals are taking longer and causing some transactions to fall through. Appraisal Institute government affairs director Bill Garber said there is a lot of frustration about market conditions and Realtors and loan brokers are unfairly blaming appraisers.

JPMorgan Chase has named Thanh Roetelle the head of warehouse lending for its bank division, putting him in charge of managing the company's five major warehouse lending clients, industry officials said. A spokesman for Chase confirmed that Mr. Roetelle is heading the effort but had little other information as National Mortgage News Online went to press. The warehouse division is based in Houston. There have been unconfirmed reports that Chase might possibly try to grow its warehouse business, even modestly, but the spokesman said he knew of no such plans. However, warehouse officials said there could be some announcement from Chase about its warehouse business at the upcoming Western Secondary conference in San Francisco. When it comes to warehouse, Chase is not funding any wholesale originators.

Commercial real estate prices as measured by Moody's/REAL Commercial Property Price Indices decreased 8.6% in April, leaving the index at 25.3% below its level a year ago and 29.5% below the peak in prices measured in October 2007. According to Moody's, the large negative return for April likely reflects that deals closed during that month were negotiated at the end of 2008 and in the first quarter of 2009, when securities markets and overall sentiment were plunging. "The size of April's decline, following a 5.5% decline in January, also suggests that sellers are beginning to capitulate to the realities of commercial real estate markets," says Moody's managing director Nick Levidy. The South has been the worst performing region over the last year, with an annual decline of more than 20%. Commercial real estate has performed worse in Southern California than in the Western region as a whole. In Southern California, the office market has been the worst performer, with prices dropping 22.2% in the last year.

The controversial Home Valuation Code of Conduct is "the most dangerous thing facing the housing finance industry today," NAMB president Marc Savitt warned at the NAREE conference. He called the HVCC "a train wreck" that will "cause another collapse of the housing industry if something isn't done" to stop it. The NAMB leader said that because most lenders are using appraisal management companies to comply with the new rules, the cost of a valuation has doubled, as has the time it now takes to get one completed. He also maintained that in many instances, the quality of appraisals is poor. And he charged the some appraisal management companies are owned and operated by former subprime lenders. The result, Mr. Savitt told the housing editors, is that borrowers are being overcharged to the tune of $2.8 billion a year. "That's not acceptable," he said. "Consumers are tired of paying for the mistakes and government and the industry."

A key Republican lawmaker has given his approval to the Obama Administration's proposal to require mortgage brokers and funding lenders, which sell their loans on the secondary mortgage market, to maintain a certain ownership level in their products. "Keeping some skin in the game has a wonderful cleaning effect," Sen. Kit Bond, R-Mo., said at the National Association of Real Estate Editors' Annual Real Estate Journalism Conference in Washington. The White House plan for the Consumer Finance Protection Agency would require brokers to be paid, in part, over time based on the performance of the loans they originate, and compel lenders to retain an interest in the loans that are packaged into securities and sold to investors. But Marc Savitt, the West Virginia broker who is president of the National Association of Mortgage Brokers, said the idea would never fly, if only because the accounting necessary to follow loans as they are sold and resold would be a nightmare. Mr. Savitt also reiterated NAMB's long-standing argument that brokers do not underwrite mortgages and, therefore, should not be responsible for their failure. If brokers have any part in fraudulent loan applications, he told Mortgage Wire, they can and should be prosecuted under existing federal law.

The Mortgage Bankers Association and its partner, the Warehouse Lending Project, are continuing to push for a warehouse solution that includes Fannie Mae and Freddie Mac and are asking for what they call a "constructive dialogue" with the GSEs and the government. In a letter sent to Treasury secretary Tim Geithner on Friday, the MBA and WLA included a legal opinion from Buckley Sandler LLP that says the GSEs are within their charter authority to buy participations in warehouses lines of credit. The groups have held meetings with both Treasury officials and regulators at the Federal Housing Finance Agency. The MBA/WLP project that residential fundings will total at least $2.6 trillion this year but argue there could be a $630 billion shortfall in origination capacity because of a lack of warehouse credit to non-bank lenders. The two say that depositories cannot pick up the slack, adding that, "independent mortgage banks with local market knowledge are critical to maintaining liquidity and competition in our real estate finance markets."

The 105% loan-to-value ratio limit on Fannie Mae and Freddie Mac's program to refinance underwater borrowers could be raised to increase participation, according to the GSEs' regulator. The Federal Housing Finance Agency is "looking at going significantly higher than 105%," FHFA director James Lockhart said. The 105% ceiling has kept too many borrowers on the sidelines, he told a National Association of Real Estate Editors conference. The GSEs have refinanced 80,000 homeowners under the special program that the Obama administration has promoted to help borrowers who can't qualify for a standard refinancing. The administration unveiled the refinancing program in February and estimated it will refinance at least 4 million homeowners who have loans that are owned or guaranteed by the government sponsored enterprises. The 105% LTV limit theoretically allows Fannie and Freddie to securitize the newly refinanced loans and sell them to the Federal Reserve and other investors. However, raising the LTV might force the GSEs to hold the loans on their books.

Canadian investment in U.S. real estate has more than doubled in one year to 23.5% from 11%, according to real estate investor Westward Fund, Scottsdale, Ariz. The fund said exchange rates between the Canadian dollar and the U.S. dollar in addition to falling property values in the United States have been catalysts for the increase. Arizona in particular, where values have fallen in many instances, has drawn foreign investors, said E. Patrick LaVoie, manager for the fund. The fund said investors from the United Kingdom, China, Indian and Germany also have shown strong interest in U.S. real estate.

Mission Capital Advisors LLC, New York, is marketing a portfolio of commercial mortgage loans for an unnamed commercial bank with an outstanding balance of $158 million. These are performing, sub- and non-performing assets secured by a variety of collateral types, including office, hospitality, industrial warehouse, self storage, multifamily, condominium and commercial development land, throughout multiple states. Mission Capital is initially soliciting indicative bids (on July 8) from prospective bidders for the purchase of individual loans, any combination of loans, or the entire portfolio. Overall, the package contains 12 loans secured by collateral in New York, California, Florida, and Mississippi.