Origination

Housing secretary Shaun Donovan has decided to move ahead with a RESPA rule issued by the Bush administration that requires the industry to adopt new standardized mortgage disclosures by next January. However, the Department of Housing and Urban Development is dropping — for now — a "required use" section of the Real Estate Settlement Procedures Act rule that the National Association of Home Builders challenged in court. The RESPA rule issued shortly after the November election bans builders from offering homebuyers discounts or upgrades that are tied to the use of affiliated mortgage and title companies. "We will propose a clearer and more effective 'required use" definition that truly protects borrowers from those who force them to use affiliated businesses," said Mr. Donovan. The House passed a comprehensive mortgage reform bill May 7 that directs HUD to withdraw the RESPA rule and urges the department to work with the Federal Reserve Board in issuing "complimentary" mortgage disclosures. The Fed is working on updating its Truth in Lending Act mortgage disclosures. Secretary Donovan added: "We will implement the new RESPA rules as part of broader reforms to the mortgage process that include ensuring that RESPA and TILA are coordinated."

The Department of Housing and Urban Development will ask Congress for expanded commitment authority for Ginnie Mae and the Federal Housing Administration single-family program, allowing the government to insure up to $400 billion of new mortgages in fiscal 2010. HUD estimates that FHA will endorse $290 billion of single-family loans in FY 2009, which ends September 30. The government estimates that FHA loan production will continue at a torrid pace until private mortgage markets recover. "For FY 2010, we are asking Congress for the authority to endorse up to $400 billion of loans," HUD secretary Shaun Donovan told the National Association of Realtors at its mid-year legislative conference. The housing secretary stressed that FHA will be able to provide this level of support for the mortgage market without a congressional appropriation and without raising FHA mortgage insurance premiums or changing the premium structure. "FHA will continue to be a source of stable, reasonably priced safe financing in the marketplace." Mr. Donovan said.

The government today gave the green light to the financing of bridge loans of up to $8,000 to first time home buyers who qualify for tax credits under the Obama Administration's economic stimulus plan. The new mortgagee letter stipulates that government agencies, non-profits and FHA-approved lenders can give advances on the tax credits. Housing secretary Shaun Donovan told a national Realtor group Tuesday that, "We want to enable FHA consumers to access the tax credit funds when they close on their home loans so that cash can be used as a downpayment." The mortgagee letter is now available online but more details are to follow.

Housing secretary Shaun Donovan has decided to move ahead with a RESPA rule issued by the Bush administration that requires the industry to adopt new standardized mortgage disclosures by next January. However, the Department of Housing and Urban Development is dropping — for now — a "required use" section of the Real Estate Settlement Procedures Act rule that the National Association of Home Builders challenged in court. The RESPA rule issued shortly after the November election bans builders from offering homebuyers discounts or upgrades that are tied to the use of affiliated mortgage and title companies. "We will propose a clearer and more effective 'required use' definition that truly protects borrowers from those who force them to use affiliated businesses," said HUD secretary Shaun Donovan. The House passed a comprehensive mortgage reform bill May 7 that directs HUD to withdraw the RESPA rule and urges the department to work with the Federal Reserve Board in issuing "complimentary" mortgage disclosures. The Fed is working on updating its Truth in Lending Act mortgage disclosures.

Ginnie Mae guaranteed $34.5 billion in mortgage-backed securities in April for the second consecutive month, compared to $28 billion in February and $27.3 billion in January. "We are steadily growing," said Ginnie president Joseph Murin. Ginnie Mae single-family MBS totaled $33.8 billion and multifamily totaled $707 million in April. Ginnie I single-family MBS totaled $26.8 billion in April -- $1.4 billion less than in the previous month. However, Ginnie II single-family multiple issuer pools totaled $6.6 billion, up $1.1 billion from the previous month.

Mortgage insurers Triad Guaranty and PMI Group closed out the end of trading on Monday on high notes despite the Dow closing down nearly 156 points. Winston-Salem, N.C.-based Triad saw its stock price close at $1.10 per share, up 22.2%. PMI, Walnut Creek, Calif., ended the day at $2.36 per share, a 26.9% rise. PMI recently reported improved financial results for the first quarter 2009 over the same period last year, but the amount of new insurance written declined while the default rate increased. The company lost $115.3 million for the quarter, compared with a loss of $274 million for the first quarter of 2008.

While The PMI Group Inc., Walnut Creek, Calif., reported improved financial results for the first quarter 2009 over the same period last year, the amount of new insurance written declined while the default rate increased. The company lost $115.3 million ($1.41 per share) for the quarter, compared with a loss of $274 million ($3.37 per share) for the first quarter of 2008. The company said the loss from its continuing operations was primarily driven by continued high losses and loss adjustment expenses in the U.S. mortgage insurance business. The loss in its U.S. mortgage insurance operations was $127.6 million for the first quarter of 2009, an improvement over the $172.5 million recorded for the year ago period. The primary loans in default rate went from 8.78% for first quarter 2008 to 15.29% one year later; during the same time frame total claims paid went from $162.6 million to $202.6 million. PMI has also reached an agreement with the lenders on its revolving credit facility. If certain conditions are met and the agreement goes into effect, the facility will be reduced to $125 million and certain financial covenants and events of default will be eliminated. The conditions need to be met by May 29; otherwise an event of default could occur on May 30. If there is such an event, PMI would have to repay the facility; the company said it currently has sufficient funds to do so. Just before noon on May 11, PMI was trading at $2.72, up $0.86 per share.

The Senate has confirmed Ron Sims to be the deputy secretary and second in command at the Department of Housing and Urban Development. Mr. Sims is the former executive of King County, Washington, and has plenty of experience in urban affairs. Meanwhile, the HUD secretary continues to support David Stevens to be the new Federal Housing Administration commissioner. But the Senate Banking Committee is holding up his confirmation due to a RESPA lawsuit filed against his former employer — the real estate brokerage firm Long and Foster. Stevens' supporters are hoping he will be confirmed before the Senate adjourns for the Memorial Day recess.

American International Group reported a $4.35 billion ($1.98 per share) loss for the first quarter that included a $1.9 billion charge for restructuring costs at AIG Financial Products Corp. Over the past five quarters, AIGFP has reduced its portfolio of collateralized debt obligations (backed mostly by subprime MBS) by more than 40% to $1.5 trillion. AIG also reported that American General Finance Inc., which originates mortgages, lost $203 million in the first quarter, due to a $186 million increase in the provision for finance receivables. Meanwhile, AIG continues to own mortgage insurer United Guaranty Corp. after the split off of its property/casualty business. UGC, based in Greensboro, N.C., had $483 million in operating losses during the quarter. Overall, the first quarter results mark an improvement, compared to AIG's $7.8 billion ($3.09 per share) loss a year ago.

Massachusetts has reached a multimillion dollar settlement with Goldman Sachs & Co. concerning its role in securitizing risky subprime mortgages that are now at the center of the nation's economic crisis. At deadline state Attorney General Martha Coakley was holding a press conference on the matter. The settlement includes a monetary payment and extensive relief to homeowners. The deal with Goldman is the result of the "Attorney General's ongoing investigation of the role of investment banks in the origination and securitization of subprime mortgage loans," according to a statement issued by the AG's office. Compared to its peers on Wall Street, Goldman was not that large of player in subprime securitization - a business dominated by Bear Stearns, Citigroup, Greenwich Capital, Lehman Brothers, and Merrill Lynch.