Origination

Commercial/multifamily mortgage origination volumes decreased 65% in 2008 as the number of loans intended for securities fell off sharply. Mortgage bankers closed $181.4 billion in commercial and multifamily loans, according to the Mortgage Bankers Association's 2008 Commercial Real Estate/Multifamily Finance: Annual Origination Volume Summation. The MBA report showed that decreases were seen across all property types and most investor groups. The largest declines were in loans intended for commercial mortgage-backed securities, collateralized debt obligations and other asset-backed security conduits. Intermediated loan volume decreased 68% between 2007 and 2008. "After seeing considerable growth in 2006 and 2007, commercial mortgage originations fell dramatically in 2008," said Jamie Woodwell, MBA's vice president of commercial real estate research. "The continuing credit crunch, a relatively low volume of commercial mortgages maturing in the coming years and little incentive for property owners to sell their properties all continue to put downward pressure on origination volumes." Originations were dominated by multifamily loans, representing $64.6 billion, or 36% of the lending total. Among major investor groups, CMBS, CDO and other ABS conduits saw the greatest percentage decrease in volume between 2007 and 2008, followed by real estate investment trusts, special finance companies and life insurance companies. Lending for hotel/motel properties had the largest decrease in originations by property type, followed closely by office properties.

The average rate for a 30-year fixed rate mortgage according to the Freddie Mac Primary Mortgage Market Survey for the week ended June 4 jumped to a high not seen since late last year. That reflects a recent spike in the benchmark 10-year Treasury yield. The average 30-year FRM rate was 5.29%, up from 4.91% the previous week but down from 6.09% a year ago. "Thirty-year fixed-rate mortgage rates caught up to the recent rise in long-term bond yields this week to reach a 25-week high," said Frank Nothaft, Freddie Mac vice president and chief economist. Points for fixed rate loans averaged 0.7 during the week and 0.6 for hybrid Treasury indexed adjustable rate mortgages and one-year Treasury ARMs. Rates for all loan types rose.

Weighted-average delinquencies and cumulative losses in the United Kingdom's securitized residential mortgages have doubled since the first quarter of last year, according to Moody's Investors Service's index. These had reached 18.0% and 0.78%, respectively, by the end of the first quarter of this year. "While a number of forward looking indicators point towards the pace of the economic decline abating, consensus forecasts look for 3.8% contraction in [gross domestic product] over 2009 as a whole, which will be the worst yearly growth rate since modern records began in 1949," said Nitesh Shah, a Moody's economist and co-author of a report on the index. "The U.K. unemployment rate was 7.1% in the three months [leading up] to March, up from 5.2% a year ago. As the economy contracts, more jobs are expected to be removed from the market." In addition, Moody's noted that home price declines also contributed. The downward slide in housing values will likely continue even though the monthly pace of the decrease has been slowing, Moody's said.

Maria Sanchez, a real estate agent and loan officer from El Monte, Calif., was found guilty of fraud and money laundering charges for scheming with her sister to falsify home loan applications. The evidence presented during Maria's trial showed she submitted loan packages to purchase residential real estate in the names of family members. Those applications contained false statements and forged signatures. When the loans were funded, Maria fraudulently obtained more than $1 million in loan proceeds from financial institutions and mortgage lenders. She financially benefited from this scheme by flipping one of the properties, as well as collecting points, fees and commissions from the loan transactions. In three of the deals, Maria's sister Beatriz Sanchez, Los Angeles, was identified as the buyer of the property. Beatriz also has pleaded guilty, specifically to charges that she filed false documents with the IRS. Beatriz is scheduled for sentencing on Aug. 17. Maria is scheduled for sentencing on September 10.

A.M. Best Inc., Oldwick, N.J. has cut by one notch the financial strength ratings of Fidelity National Financial Inc., Jacksonville, Fla., and its title insurance units. The New Jersey-based rating agency said the downgrades were due to the adverse implications of FNF's acquisition of the title insurance underwriting subsidiaries of LandAmerica Financial Group Inc., Richmond, Va. The deal made FNF the nation's largest title insurer with a 45% market share, but it also resulted in an increase in underwriting leverage. "While Fidelity in the past has shown an ability to manage large acquisitions, such as its acquisition of Chicago Title in 2000, the current negative business environment poses a greater challenge as it proceeds with the integration of its newly acquired underwriters," A.M. Best said.

Thrifts originated $88 billion in 1-4 family loans in the first quarter, up 69% from the previous quarter, as serious delinquencies hit a record level and the Office of Thrift Supervision anticipates a surge of resets on Alt-A and payment-option loans later this year. The 801 OTS-supervised thrifts posted a $47 million loss for the first quarter, the best performance for the thrift industry since third quarter of 2007. OTS acting director John Bowman said thrifts are "not out of the woods yet." But earnings were essentially at the "break even level," he said, and thrifts are well positioned with "solid capital, strong levels of loan loss reserves and improving operating income." However, non-current single-family loans (90 days or more past due or in non-accrual status) hit a record 5.2% as thrifts charged off $916 million in bad mortgages. OTS officials expect defaults and foreclosures will increase as house prices continue to decline and more mortgages lose all their equity. Moody's Economy.com is projecting that the number of underwater mortgages will rise from 15.4 million in first quarter to 17.5 million by the first quarter of 2010. OTS senior economic advisor Sharon Stark also noted that loss severity rates on Alt-A and payment-option ARMs are 55 cents on the dollar.

An increase in weekly loan purchase applications failed to offset a decline in refinancing from a recent rate spike, according to the Mortgage Bankers Association's index. The MBA's Weekly Applications Survey Market Composite Index fell over 16% on a seasonally- and holiday-adjusted basis. For the week ended May 29, the MCI was 658.7, compared with 786.0 one week earlier. The refinance share fell to 62.4% of total applications from 69.3% the previous week. The Refinance Index decreased 24.1% to 2953.6 from 3890.4 the previous week. But the seasonally adjusted Purchase Index increased 4.3% to 267.7 from 256.6 one week earlier. On an unadjusted basis, the index decreased 32.5% compared with the previous week and increased 14.4% compared with the same week one year earlier. Adjustable-rate mortgages accounted for 3% of applications, up from 2.6% for the previous week. There was an increase in the average contract interest rate for 30-year fixed-rate mortgages to 5.25% from 4.81%, with points (including the origination fee) decreasing by 26 basis points to 1.02 from 1.28 for loans with 80% loan-to-value ratios. The MBA can be found online at http://www.mortgagebankers.org.

The Consumer Mortgage Coalition is urging the government-sponsored enterprises' regulator to suspend the conforming loan limits and allow Fannie Mae and Freddie Mac to purchase single-family loans of up to $1 million. It is difficult and expensive to get jumbo loans and the current GSE loan limits that range from $417,000 to $729,750 are "causing market disruptions," the mortgage industry group says in a letter to the Federal Housing Finance Agency. "We recommend that the conforming loan limit be suspended for loans below $1 million while the FHFA serves as the GSE conservator so that the government-sponsored enterprises can add liquidity throughout the mortgage market and across the country," CMC says in a June 1 letter. Separately, the Mortgage Bankers Association is urging Congress to permanently raise the GSE conforming loan limit to $625,000 and retain the flexibility to provide financing of up to $729,750 in higher cost markets.

I received an overwhelming number of questions and comments in response to last week's article on websites and social networking for reverse mortgages. It stands to reason to address these right now and offer some further explanation about why I consider this so important and what I found that made all the difference, since I am decidedly not the guru in this area.

GMAC Financial Services — which controls the nation's fifth largest residential servicer — says it's "business as usual" at the company even though one of its owners, General Motors, filed for bankruptcy protection on Monday. A GMAC spokeswoman stressed that "we have no intention of filing for bankruptcy," adding that GM owns only 10% of the financial services company. GMAC is a bank holding company that a few months ago completed a large restructuring with its bondholders. Hedge fund giant Cerberus Capital owns 22% of GMAC with the U.S. Treasury owning a large piece as well because of a $5 billion TARP investment. Asked if GM might sell its stake in GMAC, the spokeswoman declined to comment.