Origination

Non-bank mortgage lenders and depositories would be assessed millions of dollars in fees to fund the creation and maintenance of the Consumer Financial Protection Agency, a new government body that would have massive enforcement powers over all players in residential finance, according to a White House draft proposal. Funding of the new agency also would come from transaction fees, the White House says. The Obama Administration notes that mortgage lenders not owned by banks fall into a regulatory "no man's land" where no government body "exercises leadership and state [attorneys general] are left to fill in the gap." The administration feels the Federal Trade Commission lacks the jurisdiction over the banking sector and has limited tools to "promote compliance of nonbank institutions." The White House believes the core of the CFPA can be "assembled reasonably quickly from discrete operations of other agencies." (For the full plan see Editor's Choice below or visit: http://www.nationalmortgagenews.com/documents/reg_reform_paper.pdf.

This past week, as I do once per quarter, I conducted a reverse mortgage continuing education class for Realtors at my local real estate board in Baltimore. It's always well received and I always get a least one deal from the presentation. This time, it looks like I got two, perhaps three. The topic is of course timely and our real estate partners are looking for ways to increase their business. This is just one strategy I teach in the Reverse Mortgage Success course, but what makes it particularly beneficial to the reverse mortgage originator is how the course is structured. And what I do afterward as well.

After hearing a guilty plea to participating in a mortgage-flipping scheme, Judge Martin L.C. Feldman sentenced Calvin Davis of New Orleans to 40 months in prison and ordered him to pay more than $1 million in restitution. According to Jim Letten, U. S. attorney for the Eastern District of Louisiana, Davis purchased various properties, obtained fraudulent appraisals and arranged for straw buyers to purchase them. Davis then sent the straw buyers to obtain loans by using fraudulent employment and credit documents as well as false tax returns. The loans were approved for the straw buyers and forwarded to the HUD offices in Denver. Based on the fraudulent applications, HUD insured the loans, which were then sold to another mortgage company. Various properties eventually went into default and HUD became responsible for paying off those loans. Davis is the fifth person to be sentenced in this case.

Windsor Capital Mortgage Corp., the San Diego-based company that was once the nation's second largest mortgage broker according to Broker magazine, is not filing for bankruptcy or closing down, said its chief executive Ron Temko. Instead, the company is becoming a "boutique-type" mortgage originator and shedding "a lot" of its branches, he explained. Reports that the company is filing for bankruptcy are "not accurate." Approximately two-and-one-half weeks ago, Windsor sent a letter to its branches saying it is establishing minimum production requirements and terminating any branch that did not meet those. Mr. Temko said the company, which once operated in 40 states, would now basically operate in California. Everything, he said, is being handled in an orderly fashion. "There is no fire drill here," Mr. Temko said, adding everyone will be paid the commissions they are owed.

The newest client for PHH Mortgage's private label outsourced origination platform is Amalgamated Bank, New York. Amalgamated customers can apply for loans at a bank branch, online, or via telephone with PHH staying in the background as the private label processor. Product types include fixed and adjustable rate mortgages, jumbo loans, second/vacation homes, condos and co-ops. Amalgamated will continue to offer its Money Sense financial literacy workshops for first-time homebuyers. It has 14 branches in New York City, three in Los Vegas and one each in Lyndhurst, N.J., Washington and Pasadena, Calif. Hector Fernandez, Amalgamated's first vice president, said the private label deal was struck "as the housing market begins to show signs of emerging from a long period of adversity. Refinancing activity continues to be strong."

The Treasury Department is circulating a proposal that would require originators to retain 5% of a loan's credit risk when selling it into the secondary market. An early snippet from the Obama administration's regulatory restructuring plan, which is expected to be unveiled Wednesday, indicates the proposal also would ban loan originators from hedging or even indirectly transferring the risk they are required to retain. Loan broker and loan officer compensation would be disbursed over time and reduced if a loan is not repaid because of poor underwriting. Some of these concepts — or similar ones — have already been introduced in the House by House Financial Services Committee chairman Barney Frank, D-Mass.

All homebuyers — not just new ones — would be entitled to a $15,000 federal tax credit and no qualification caps would be placed on their income, under recently introduced legislation. The language was introduced by Sen. Johnny Isakson, R-Ga., who says that a $8,000 first-time homebuyer (FTHB) tax credit that become law last year "has made a difference" but wants to expand it. Sen. Isakson says he has bipartisan support from at least nine senators, including Banking Committee chairman Chris Dodd, D-Conn. The $8,000 FTHB tax credit is set to expire Dec. 1 and has income caps of $75,000 for an individual and $150,000 for a couple. The Mortgage Bankers Association and National Association of Realtors have already voiced their support for the bill (S. 1230, "The Homebuyer Tax Credit of 2009.") Before he was elected, Sen. Isakson was a Realtor and worked in real estate for three decades, according to his office.

Construction of new single-family homes rose to a seasonally adjusted rate of 401,000 units in May, the best reading in six months and a sign that the homebuilding sector may have hit bottom this spring and is now showing tentative signs of a recovery. May starts rose 7.5% from April but compared to the same month last year fell 41%. All housing starts (including multifamily) rose to a seasonally adjusted rate of 532,000 units, a 17% jump from April but a 45% decline from May 2008. New construction for single-family units was strongest in the South (rising 10.6%) but weakest in the Northeast, which suffered a 12.5% sequential decline. Even though May's construction numbers are a hopeful sign, housing and mortgage executives are concerned that rising interest rates could snuff out the momentum. In trading Tuesday, most homebuilder stocks were flat or down slightly after some initial appreciation.

The Federal Reserve Bank of New York has chosen commercial real estate information and technology provider Trepp LLC as collateral monitor for commercial mortgage-backed securities as part of the Term Asset-Backed Securities Lending Facility. TALF's monthly subscription window for new issue CMBS was set to open for the first time Tuesday afternoon. At press time midday Tuesday Trepp senior vice president Andy Liebman and Tom Sink said to their knowledge there was nothing pending for it, but they were already at work on aspects of the program that are being finalized, and said next month they anticipate the program will be underway for both new issue and legacy CMBS. Trepp said in its role as monitor it would assist the New York Fed in providing valuation, modeling, analytics and reporting as well as advise on matters involving newly issued and "legacy" CMBS in the program. The New York-based company said it would not establish policies or make decisions for the New York Fed, including decisions on whether to reject a CMBS as collateral for a TALF loan or exclude loans from mortgage pools. Trepp said it would use the analytics and forecasting services of its subcontractor and sister company, the Boston-based Property and Portfolio Research, in conjunction with its work as a TALF CMBS collateral monitor.

Even though residential loan production fell just 12% in the first quarter (compared to the same period a year ago), the origination of alt-A loans and interest-only loans plummeted, according to survey figures compiled by National Mortgage News. Alt-A fundings, not surprisingly, totaled just over $806 million, a fraction of their former volume. Non-GSE subprime production was non-existent in the quarter, according to the newspaper and its affiliate, the Quarterly Data Report. In 2008 alt-A production totaled $60 billion with IO fundings at $100 billion. Alt-A fundings peaked in 2006 at $612 billion. NMN also found that mortgage bankers originated just $8.8 billion in IO loans during the period, a 72% decline from a year ago. In the current credit environment, before a residential loan can be originated it must meet underwriting guidelines established by Fannie Mae, Freddie Mac, or the Federal Housing Administration.