Origination

Even though residential originations spiked 63% in the first quarter from the previous one, warehouse lending commitments to non-depository funders continued to suffer. According to survey figures compiled by National Mortgage News, known commitment volumes totaled $9.2 billion with five firms reporting compared to $8.3 billion at year-end. Even though commitments rose, they did so by only 11% while originations in the primary market soared. The figures indicate that not only is warehouse lending restricted but it appears that the nation's "mega" originators, firms such as Wells Fargo & Co., Bank of America, and Chase, are picking up market share at the expense of non-banks.

The Federal Housing Administration has insured only $13.8 billion in mortgages with loan balances above the old $417,000 conforming loan limit, including $5.3 billion in California and $2.5 billion in New York, according to new government data. In February 2008 Congress raised the maximum limit on FHA loans to $729,750 from $362,790 as part of the first economic stimulus package. It was later extended until the end of 2009. From April 2008 through April 2009, Department of Housing and Urban Development data shows that only 3% of FHA endorsements involved single-family loans above $362,790 and only 1.7% above $417,000, which used to be the limit for Fannie Mae and Freddie Mac loans. During that April to April period, FHA endorsed 1.7 million loans totaling $292.3 billion and 10.5% are above former limits in each state. In low-cost areas, FHA had minimum loan limits of $200,160 to $271,050 based on median house prices. "The increase in the FHA loan limits has benefited every part of the country," said Brian Chappelle, a mortgage banking consultant with Potomac Partners in Washington.

With almost a 50% increase in year-over-year sales, the inventory of unsold existing single-family homes for sale in California has been cut in half, from a 9.8 months' supply in April 2008 to 4.6 months' supply this April, the state's Realtors reported. However, while sales were up 49.2% to a seasonally adjusted rate of 540,360 — the eighth straight month above the 500,000 level — the median price of houses sold in the month declined by more than a third, largely because the majority of sales were at the low-end of the market. "Inventory levels for homes in the under $500,000 segment shrank to nearly three months in April, compared with almost 10 months a year ago, while unsold inventory in the more than $1 million segment rose to approximately 17 months, compared with roughly 10 months in April 2008," says California Association of Realtors President James Liptak. "The dramatic difference in inventory exemplifies how the low end of the market is attracting more first-time buyers and investors, creating a shortage of distressed properties for sale." The median price of existing homes sold in the month was $256,700, a 36.5 percent decrease from the revised $404,470 a year ago. But it was 1.4% greater than March's $253,040 median price. CAR's figures are based on data collected from more than 90 local Realtor associations statewide.

The Department of Housing and Urban Development issued guidance that opens the door for FHA-approved lenders to provide short-term loans — with restrictions — to borrowers who are eligible for the $8,000 first-time home buyer tax credit. Borrowers must still come up with the required minimum 3.5% down payment using their own funds. But after that, they can use the short-term liens to increase their down payments, cover their closing costs or buy-down their mortgage rate. Calling the tax credit advance "another step towards accelerating the housing market," HUD secretary Shaun Donovan told the National Association of Home Builders' annual spring board meeting in Washington that the initiative is a "real win for everyone." The NAHB estimates the advance will lead to 160,000 more sales — 101,000 to first-time buyers and 59,000 to move-up buyers who are selling their current residences to first-timers. Tax credit loans made by state and local housing finance agencies, government agencies and certain nonprofit groups can be used to cover the minimum 3.5%. However, non-profits that receive fees from sellers cannot provide downpayment assistance under this program. HUD didn't want to do anything that would allow "these seller-funded schemes back in," a senior HUD official said. The department has issued a mortgagee letter (2009-15) with guidance on acceptable interest rates and fees. "We are putting in place the necessary safeguards and consumer protections, and if monitored the right way, tax credit loans can be used efficiently and safely," secretary Donovan said.

Redwood Trust Inc., Mill Valley, Calif., has priced a public offering of 15 million shares of its common stock at $14.50 per share. The real estate investment trust, which invests in and finances residential and commercial mortgage loans and securities, has granted the underwriters a 30-day overallotment option to purchase up to 2.24 million additional shares of common stock. Redwood Trust will receive estimated net proceeds from the offering of $207 million, which will be used to acquire residential and commercial real estate loans and mortgage-backed securities and may also be used to co-invest with third party investors in investment funds which Redwood Trust may sponsor and for other general corporate purposes. The offering is expected to close on June 2, 2009. The sole bookrunning manager for the offering is J.P. Morgan Securities Inc.

Brandywine Realty Trust, Radnor, Pa., has priced a public offering of 35 million shares of its common stock at a price of $6.30 per share. In addition, the company has granted to the underwriters an option for 30 days to purchase up to 5.25 million additional common shares to cover overallotments, if any. The estimated net proceeds from the offering are expected to be approximately $210.8 million. BRT plans to use the net proceeds from the offering to reduce outstanding borrowings under its $600 million unsecured revolving credit facility and for general corporate purposes. The offering is expected to close on or about June 2, 2009. Merrill Lynch & Co., J.P. Morgan and Citi are acting as the joint bookrunning managers. ABN AMRO Inc., BNY Mellon Capital Markets LLC, Deutsche Bank Securities, Janney Montgomery Scott LLC, Morgan Keegan & Co. Inc., PNC Capital Markets LLC, Piper Jaffray, and TD Securities are acting as senior co-managers for the transaction. BMO Capital Markets, Comerica Securities Inc., Commerzbank Corporates & Markets, FTN Equity Capital Markets, Raymond James, RBC Capital Markets, Santander Investment, Stifel Nicolaus and SunTrust Robinson Humphrey are acting as co-managers.

Fitch Ratings has placed the ratings for City National Corp. and its bank subsidiary, City National Bank, Beverly Hills, Calif., on Rating Watch Negative, citing expectations of further asset quality deterioration, particularly in the construction and land development portfolio, as well as other portions of the commercial real estate book and the commercial and industrial loan portfolio. City, because it targeted affluent clientele for its private banking business and because of conservative underwriting, has higher than average asset quality in its consumer loan book. However, Fitch said, the issues in the California and Nevada housing markets and unemployment rates continue to pressure consumer spending and will likely result in further asset quality weakness in other parts of City's commercial loan book.

The Federal Deposit Insurance Corp. reported a surge in single-family originations by banks that contributed to a rebound in earnings for the first quarter. Commercial banks and FDIC-insured savings institutions reported combined earnings of $7.6 billion in 1Q, down 60% from a year ago, but a definite rebound from the $38.6 billion loss posted in the fourth quarter. FDIC officials attribute the first quarter profit mainly to securities trading by the larger banks. But they noted that an increase in refinancing activity also contributed to revenues. Originations by commercial banks and savings banks totaled $369.7 billion in the first quarter, a 72% gain from the previous period. (The total does not include originations by federally chartered S&Ls, which the Office of Thrift Supervision will report on Tuesday, June 2). The FDIC says 836 banks and savings institutions that are heavily committed to mortgage lending and investing earned $1.4 billion in the first quarter, compared to a $4 billion loss in the fourth quarter.

The average weekly rate for the 30-year fixed rate mortgages that dominate the market rose to 4.91% from 4.82% as the benchmark 10-year Treasury yield spiked to a high not seen since late last year, according to the latest Freddie Mac Primary Mortgage Market Survey. The 10-year yield just after noon on May 28 was at 3.68%, up from what had been a range closer to 3.4% earlier the same week. The benchmark yield has not been that high since November 2008. "Fixed-rate mortgage rates followed long-term bond yields higher this week as financial markets try to discern the state of the economy," said Frank Nothaft, Freddie Mac vice president and chief economist. "Consumer confidence rose again in May and represented the largest two-month rally since records began in 1967. According to the National Association for Business Economics, the consensus of a recent survey of 45 professional forecasters called for the recession to end in the second half of this year, but the recovery is to be more moderate than the previous survey. Housing continues to be a drag on the economy, however."

Freddie Mac's purchases of refinanced mortgages slowed in April despite the launch of the Obama administration's new program to help borrowers with high loan-to-value ratios refinance into lower cost loans. The mortgage giant purchased $43.3 in refinanced mortgages in April, down from $52 billion the previous month. "We began the purchase of refinance mortgages originated under the program in April," Freddie Mac said in its monthly activity report. "Due to the implementation of this program and recent declines in mortgage interest rates, our refinancing activity will likely remain high." Meanwhile, the serious delinquency rate on Freddie Mac-guaranteed single-family loans continues to rise. Loans 90 days or more past due or in foreclosure rose to 2.44% in April, up 15 basis points from the previous month. Issuance of mortgage-backed securities by Freddie Mac also slowed to $51.1 billion in April from $57.7 billion in March. The company also reported that its mortgage portfolio fell by $36.8 billion to $830.3 billion during April.