Origination

The 130-members of Lenders One are reporting very heavy volumes of refinancings, according to Scott Stern, the chief executive of the mortgage cooperative, who is already looking ahead for another refinancing surge."We expect continued heavy volume at least through June," Mr. Stern said. But he is hoping the Federal Reserve succeeds in driving mortgage rates even lower. "We think another $1 trillion in refinancing volume could come if mortgage rates drop into the 4.25% and 4.5% range," the CEO told MortgageWire. He noted that his members sold nearly $10 billion in mortgages to the coop's preferred investors in the first quarter and refinancings comprised 77% of originations. "The only thing slowing down refinances is warehouse line capacity. That is a problem," Mr. Stern said. "We could be refinancing more loans, if there was more warehouse lending capacity."

The Government National Mortgage Association is expanding its reach internationally, according to its president. Joseph Murin.In what he called a "telling statistic" for his "no frills organization," Mr. Murin told the MBA government lending conference that 48% of Ginnie Mae's issuances currently are being gobbled up by foreign investors compared to 32% a year ago. "The international community loves our bonds," he said.

Even though some mega banks have been exiting the wholesale arena en masse, BankTennessee of Collierville is jumping in.The bank recently hired industry veterans Jim House and Hugh Edwards to lead the effort. Mr. House was wholesale division manager for RMC Funding and also worked at National Bank of Commerce, which eventually became SunTrust Bank. Mr. Edwards also worked at RMC. A spokeswoman for BT said that the effort is still young and that so far the depository only has two "approved" brokers.

Although the Federal Housing Administration is on a pace to insure some 2 million mortgages in fiscal year 2009 — a 30% market share or better — fears that the agency will soon be mired in a sea of defaults are "premature," said FHA Commissioner Brian Montgomery.Mr. Montgomery told the Mortgage Bankers Association's Government Housing and Loan Production Conference in Washington that FHA-insured loans "continue to outperform" the subprime loans that helped bring the mortgage market to its knees. He said only 7% of FHA loans are past due 90 days or more compared to nearly one in four subprime loans. One reason for the agency's success is that it is attracting "better quality borrowers," Mr. Montgomery told the meeting. The average FICO score of an FHA borrower was 680 at the end of fiscal 2008 compared to 640 the year prior. Another factor cited by the commissioner, who was making his last official appearance in the nation's capital, is that the agency doesn't have a lot of exposure in high-flying markets such as California, where the cost of housing has made the insurance program all but a non-entity until its loan limits were raised recently. Senate confirmation of Mr. Montgomery's replacement, David Stevens, is expected to come any day.

The House Financial Services Committee has approved an amendment to a mortgage reform and anti-predatory lending bill that would give federal regulators the discretion to make exceptions to a 5% credit risk retention requirement. The bill requires lenders to retain 5% of the credit risk on non-prime mortgages that are sold or securitized. The amendment would allow the Federal Reserve Board and Treasury Department to relax the 5% requirement on lenders for certain mortgage products. In addition, it would allow regulators to apply credit risk retention to securitizers. Committee chairman Barney Frank, D-Mass., noted that Treasury asked for this discretion over securitizers. "I think it is justifiable," Rep. Frank said. But the chairman believes the main responsibility should be on the lender and he wants to talk with Treasury officials more about their approach. The committee also approved an amendment by Rep. Paul Kanjorski, D-Pa. which requires state monitoring of appraisal management companies and federal oversight of AMCs that are subsidiaries of banks and thrifts.

A proposal that would allow the Government National Mortgage Association to give some type of assistance to the warehouse lending sector is moving closer to fruition, according to industry sources.At press time it was still unclear what role GNMA would play in the market but it's anticipated that it might provide certain guarantees on lines made to already approved GNMA issuers. The agency could not be reached for comment at press time. The Mortgage Bankers Association and other industry lobbyists have been working on the warehouse issue for months. One MBA official said "we are closer" on a proposal that would be sent to the Treasury and the White House. The official declined to give details. Non-banks that depend on warehouse lines have been starved for credit because many Wall Street lenders and banks have exited the market. Those that are left have been restrained in their lending because of high capital charges against outstanding warehouse lines. There are roughly 10 active warehouse lenders compared to 30 two years ago.

The 130-members of Lenders One are reporting very heavy volumes of refinancings, according to Scott Stern, the chief executive of the mortgage cooperative, who is already looking ahead for another refinancing surge. "We expect continued heavy volume at least through June," Mr. Stern said. But he is hoping the Federal Reserve succeeds in driving mortgage rates even lower. "We think another $1 trillion in refinancing volume could come if mortgage rates drop into the 4.25% and 4.5% range," the CEO told MortgageWire. He noted that his members sold nearly $10 billion in mortgages to the coop's preferred investors in the first quarter and refinancings comprised 77% of originations. "The only thing slowing down refinances is warehouse line capacity. That is a problem," Mr. Stern said. "We could be refinancing more loans, if there was more warehouse lending capacity."

Mark Anthony McBride of East Point, Georgia, pleaded guilty in federal district court to obtaining millions of dollars in fraudulent mortgages and other loans and to a bankruptcy fraud designed to stay foreclosures on dozens of fraudulently obtained properties. According to the information presented in court, immediately after being released from prison in 2001, McBride began a mortgage fraud scheme that continued through 2002, when he had to report for service of another federal prison sentence. As soon as he was released from prison again in November 2006, McBride continued his scheme by completing fraudulent mortgage loans and other extensions of credit in his name, in his aliases, in a number of stolen identities, including those of his children and in the identities of other unqualified borrowers. These fraudulent loans continued until McBride was arrested in September 2008 for violating his supervised release. Dozens of banks and other funded fraudulent loans for McBride. McBride generated mortgage loan proceeds for himself using inflated valuations for properties, securing the loans and sharing those proceeds with his straw borrowers and other conspirators. He was able to retain proceeds from the frauds by filing eight bankruptcy cases in Georgia, Alabama and South Carolina. The last such fraudulent filing was a May 2008 petition in Atlanta, filed in a phony name and stolen Social Security Number. The petition falsely stated he had never filed bankruptcy in the past. Sentencing is scheduled for July 9 before U.S. District Judge Jack T. Camp.

Analysts at FBR Capital Markets have cut their earnings per share estimates at Flagstar Bancorp, Troy, Mich., citing higher credit costs for the company that will pressure capital levels. Flagstar had a net loss to common stockholders for the first quarter of $67.4 million ($0.76 per share). But the company was able to successful raise new capital, including $566 million from private investors and the TARP program. Plus Flagstar expects to add $50 million of private capital during the quarter. FBR said the new capital is a positive for the company but would result in significant dilution to existing common shareholders. On the bad news side, the analysts said, is Flagstar's exposure to weak markets, namely California, Florida, Michigan and Atlanta, which have yet to show signs of stabilization. As a result, FBR expects credit losses to remain elevated. Like a number of banks, Flagstar benefited from a strong performance in the residential mortgage area. But the FBR report said, "Although Flagstar's mortgage banking revenues were strong this quarter, we expect the revenues to taper to more normalized levels in the coming quarters as spreads narrow."

U.S. home prices may fall further than previously expected, by another 12.5% to 2002 levels, before showing more stability in late 2010, according to Fitch Ratings. "Currently, prices are hovering around levels seen in mid 2003," Fitch said. The rating agency said it previously had expected a 10% further decline. Huxley Somerville, group managing director and U.S. residential mortgage-backed securities group head at Fitch, said reasons for the revised forecast include "very weak employment, limited refinancing opportunities and turbulent financial markets have extended into the first months of 2009." He added that "government initiated programs have yet to yield any positive benefits."