Origination

The Federal Home Loan Bank of San Francisco reported a $123 million profit in the first quarter after adopting new accounting guidance that slashed its impairment charge on $25 billion in private-label MBS to $88 million. The FHLBank had a $103 million loss in the fourth quarter after taking a $569 million "other than temporary impairment" charge on $25 billion in private-label mortgage securities. Nearly $17 billion of the MBS is backed by Alt-A mortgages and the rest are prime loans. Adoption of the Financial Accounting Standards Board's new OTTI guidance allowed the San Francisco bank to take a $1.1 billion write down on the MBS and record it in "other comprehensive income," which reduces the bank's capital but not earnings. The $88 million impairment charge is for actual credit losses, which are reflected in earnings. "To continue building retained earnings and preserve the Bank's capital, the Bank did not pay a dividend for the first quarter and did not repurchase excess capital stock in April 2009," the FHLBank said.

Five Federal Home Loan Banks have delayed reporting their first-quarter financials while they grapple with new accounting rules to help minimize losses. But several of the banks continue to report big losses anyway. The Boston Bank is preparing to report an $83.4 million loss as it struggles with large holdings of private-label mortgage-backed securities. The Seattle Bank, also holding underwater private-label MBS, said Friday it expects to report a $16.2 million loss for the quarter. The FHLB Indianapolis reported a $5.9 million loss for the quarter. And the Atlanta Bank reported a $1.5 million first quarter loss on Friday. The troubles at the 12 FHLBs are similar to those being experienced at many depositories, which are struggling with distressed MBS. Last week, the Federal Housing Finance Agency, which regulates the FHLBs, issued guidance for the banks to adopt new processes for determining 'other than temporary impairment' (OTTI) and the early adoption of recently revised Financial Accounting Standards Board rules aimed at accounting for hard-to-price MBS.

The Federal Housing Administration has endorsed $143.9 billion in single-family loans in the first six months of fiscal year 2009, up 169% from the same period in FY 2008. The Department of Housing and Urban Development expects FHA endorsements will total $290 billion when the 2009 fiscal year ends on September 30. In March, FHA insured $25.4 billion in single-family loans, including $15.3 billion in refinancings, according to an FHA monthly report. The report shows that FHA has a 7.08% serious default rate as of March 31 with 347,500 loans that are 90 days or more past due. FHA had a 6.91% serious default rate back in September. Meanwhile, FHA has a 63% share of the mortgage insurance market, compared to 23% for private mortgage insurers and 13% for the Department of Veterans Affairs' loan guarantee program. This is a complete reversal from first half of FY 2008, when private insurers had a 69% market share and FHA a 24% share.

The Federal Housing Administration has endorsed $143.9 billion in single-family loans in the first six months of fiscal year 2009, up 169% from the same period in FY 2008. The Department of Housing and Urban Development expects FHA endorsements will total $290 billion when the 2009 fiscal year ends on September 30. In March, FHA insured $25.4 billion in single-family loans, including $15.3 billion in refinancings, according to an FHA monthly report. The report shows that FHA has a 7.08% serious default rate as of March 31 with 347,500 loans that are 90 days or more past due. FHA had a 6.91% serious default rate back in September. Meanwhile, FHA has a 63% share of the mortgage insurance market, compared to 23% for private mortgage insurers and 13% for Department of Veterans Affairs' loan guarantee program. This is a complete reversal from first half of FY 2008, when private insurers had a 69% market share and FHA a 24% share.

Wilbur Ballesteros, a licensed real estate agent from Lanham, Md., pleaded guilty to his role in the Metropolitan Money Store mortgage fraud scheme that targeted D.C. area homeowners facing foreclosure. Ballesteros, the ninth defendant to plead guilty in this case, conspired with others at the Lanham-based MMS to fraudulently promise homeowners help with avoiding foreclosure and repairing their credit, according to prosecutors. The homeowners were directed to allow title to their homes to be put in straw buyers' names for a year, during which time MMS promised to improve the homeowners' credit ratings, help them obtain more favorable mortgages, and eventually return title to them. The homeowners were told that the equity withdrawn from the properties would be used to pay the mortgages and expenses on their homes — and to repair their credit. Using the homeowners' properties, the conspirators applied for mortgages to extract the maximum available equity from the homes and submitted fraudulent loan applications to lenders to obtain inflated loans on the properties in the straw buyers' names. At settlements, the conspirators imposed numerous fees for services that weren't performed, disclosed or explained to the homeowners. The conspirators also transferred the sale proceeds out of the escrow accounts into their own bank accounts for personal use. Ballesteros served as a closing agent on more than 60 straw buyer properties, securing title insurance, facilitating the real estate settlements and submitting fraudulent closing documentation to the lenders. He allegedly often altered or created multiple settlement statements for some properties to disburse the homeowners' proceeds to himself and MMS employees and was paid more than $100,000 in kickbacks. The total loss attributable to Ballesteros is said to be $16.9 million. Sentencing is scheduled for December.

The Federal Reserve is seeing a pickup in activity in the asset-backed securities market and more demand for its Term Asset-Back Securities Loan Facility, according to chairman Ben Bernanke. In a letter to Rep. Keith Ellison, D-Minn., the Fed chief notes that investor demand for TALF loans fell to $1.4 billion in April from $4.7 billion the previous month due to certain issues involving primary dealer banks, which now have been resolved. "In the past few weeks, investors appear to be more willing to participate in the program, and $10.9 billion in TALF loans were requested at the subscription for the May funding. Early indications are that demand for TALF loans in June will be even higher," Mr. Bernanke said. The Fed recently expanded the TALF program to include commercial mortgage-backed securities. Rep. Ellison and 10 other lawmakers inquired about the Fed's efforts to make sure the loans underlying the ABS are not predatory or fraudulent. Each issuer has to hire an external auditor to provide an opinion on the quality of the assets being rated by the credit rating agencies. But the "eligibility of consumer ABS accepted as collateral in TALF does not depend on the terms of the loans backing the ABS," the May 12 letter says.

A few days after the HUD secretary said he will implement a RESPA rule next year, industry groups headed straight to Capitol Hill in an attempt to block it. Seven financial services and settlement services providers groups are backing an amendment that would require HUD to withdraw the Real Estate Settlement Procedures Act regulation. These groups hope Sen. David Vitter, R-La., will offer the amendment to a credit card or a housing bill soon. If adopted, the Vitter amendment would block the RESPA rule and direct the Department of Housing and Urban Development to work with the Federal Reserve Board in developing compatible RESPA and Truth in Lending Act mortgage disclosures. The Vitter amendment is based on an amendment co-sponsored by Rep. Judy Biggert, R-Ill., that the House passed recently as part of a mortgage reform bill (H.R. 1728). HUD is "ignoring" congressional intent in moving ahead with the "flawed" RESPA rule, Rep. Biggert said. "HUD must suspend this rule and work with the Federal Reserve to create disclosures that work for consumers and provide the clearest and most concise information possible," she said. Meanwhile, 12 industry groups have appealed directly to HUD secretary Shaun Donovan to reverse his decision and suspend the RESPA reform, which is set to go into effect January 1, 2010.

Fidelity National Financial Inc. will be picking up another piece of the LandAmerica Financial Group estate, this time acquiring LoanCare Servicing Center Inc. FNF will pay $16.3 million for the company. The deal is subject to the approval of a bankruptcy court. LoanCare was the nation's eighth largest subservicer at the end of 2008, according to the Quarterly Data Report, with contracts totaling $12.7 billion. The Norfolk, Va., company services more than 100,000 loans for 90 companies nationwide. It had revenue of $19 million and adjusted pre-tax earnings of $4.4 million in 2008. FNF chairman William P. Foley said, "We believe that LoanCare and ServiceLink, our national lender platform, can generate substantial ancillary product revenue opportunities through the subservicing and loss mitigation platforms, including additional title and closing revenue, trustee sales guarantees, valuations and a broad range of significant default based revenues." FNF is based in Jacksonville, Fla.

Now that the Treasury Department has agreed to bail out certain life insurance companies with TARP money, speculation is that mortgage insurance companies could be next. One MI executive, requesting anonymity, told National Mortgage News that "there are more conversations going on with Treasury that are real and tangible. "He added that, "They know how important we are to Fannie and Freddie." Fannie Mae and Freddie Mac are wards of the government and the nation's seven MI firms have written billions of dollars of coverage that affect loans held in portfolio or guaranteed by the two. If the MI industry collapses, the firms might not be able to make their claim payments which in turn would hurt the GSEs — and the taxpayers which now essentially own the two. (For the full story see the Monday edition of NMN.)

Fitch Ratings has downgraded the issuer default ratings of Colonial Properties Trust, Birmingham, Ala., stating the company's first quarter operating results and the expectations for the performance of its property portfolio in 2009-2010 make its creditworthiness more consistent with a 'BB+' rating. "The rating action also reflects the fact that secured debt increased materially, with secured debt-to-total debt rising to 26% as of March 31, 2009 from 5.9% as of Dec. 31, 2008. Fitch anticipates that the position of bondholders may further weaken over the next 12-24 months in the event that the company continues to fund unsecured debt maturities with new secured debt funding," the rating agency said. Colonial was given a stable outlook rating based on its manageable debt maturity schedule and good liquidity position, which was recently bolstered by a $350 million secured credit facility originated by PNC ARCS LLC for repurchase by Fannie Mae.