Origination

Bank of America and Wells Fargo ranked first and second among all commercial/multifamily originators in 2008, according to a new ranking.Other originators in the top 10 include PNC Real Estate, Holliday Fenoglio Fowler, Wachovia, GE Real Estate, Capmark Financial Group, CBRE/Melody, Deutsche Bank Commercial Real Estate and KeyBank Real Estate Capital. The list was compiled by the Mortgage Bankers Association, which did not release the origination volumes along with its press release. National Mortgage News also publishes a list of top commercial mortgage lenders and servicers in its Quarterly Data Report product.

Trying to cut its losses, Bank of America has changed its policy on "short sales," making it easier for borrowers to sell their homes instead of going into foreclosure, according to a report in American Banker. Until a month ago, BoA's mortgage unit (which includes the old Countrywide franchise) had required that 10% of a home's sale price go toward paying off home-equity lines of credit before they would agree to a short sale. But Terry Francisco, a spokesman for the Charlotte-based lender, confirmed that the bank changed its policy last month, agreeing to accept 5% of the sale price when there is no equity available to holders of the first or second liens. The new policy "is based on the assumption that it is in the best interest of all parties involved to accept a short sale, as opposed to proceeding to a foreclosure," Mr. Francisco said. "We believed that the previous policies set an arbitrary amount that did not take into account the savings derived from proceeding with a short sale." The bank expects the change to increase the number of short sales.

Moves to encourage active and more innovative account management by servicers might bring federal efforts aimed at clearing the problem mortgage asset glut and restoring the non-agency secondary market closer to their goals, according to one MBA National Secondary Market conference panelist. Clearing problem assets should be a priority and done quickly in order to restore the market, Jeremiah Buckley, partner at BuckleySandler LLP, told this publication. He told attendees at the Chicago meeting while speaking as part of a panel discussion on secondary market impacts of government relief programs, that he believes the mortgage industry may make more progress toward this end by taking a page from the credit card industry, which manages its unsecured borrowers' payments more closely and on a monthly basis. He and fellow panelist Tom Knox, managing director in PriceWaterhouseCoopers structured finance group, told attendees that efforts like TALF and PPIP that recently have taken steps toward helping revive the non-agency secondary mortgage market currently are too preliminary or vague when it comes to how ultimately effective they will be when it comes to reaching this goal.

House Financial Services Committee chairman Barney Frank, D-Mass., might be open to exempting certain Federal Housing Administration loan products from his subprime mortgage bill. Rep. Frank told the National Low Income Housing Coalition conference that he wants the bill to restrict subprime lending and increase FHA lending. FHA currently insures one-year adjustable-rate mortgages and hybrid ARMs. The subprime lending bill (H.R. 1728) requires lenders that originate ARMs to retain 5% of the credit risk when the loans are sold or securitized. When asked about ARMs, Rep. Frank said FHA will have to be "more cautious" but added that ARMs are not a "problem for people in upper incomes." He also noted that FHA will have stronger debarment powers to deal with bad lenders. "We will be talking with FHA," Rep. Frank told reporters after speaking at the NLIHC Washington conference. He wants the committee to mark up H.R. 1728 next week or the week after.

The Mortgage Bankers Association plans to challenge a proposal that requires originators to have "skin in the game" when it testifies Thursday on Rep. Barney Frank's legislation to curb predatory lending practices. The bill, H.R. 1728, by the chairman of the House Financial Services Committee would require lenders to retain a minimum 5% economic interest in loans they sell on the secondary market. Such a provision would be a "huge call on capital," MBA president John Courson told reporters at the group's National Secondary Market Conference in Chicago. He said that it is unclear whether the Massachusetts Democrat means 5% of the loan amount, a 5% loan cap, a 5% share of the total loss, or 5% of the first loss. But anyway you look it, he said, the requirement represents a "total change of the landscape." Calling the proviso "premature," Mr. Courson said it "seem to be totally out of place with this particular piece of legislation" and should be debated as part of the discussion expected later this year to totally restructure the secondary market. "We will urge as aggressively as we can that this does not belong as part of an anti-predatory lending bill," the MBA president said.

Seven out of every 10 mortgages originated this year will be replacing loans already on the books, which means servicing "runoff" could accelerate dramatically, according to the Mortgage Bankers Association.In his forecast to the MBA's Peer Group Roundtable and the Risk Management Association in Chicago, Jay Brinkman, the group's chief economist predicted that refinancings will more than triple in 2009, from a dollar volume of $765 billion last year to $1.925 trillion in 2009. The volume of purchase money mortgages, on the other hand, is expected to decline nearly 6%, from $855 billion in 2008 to $806 billion this year. Mr. Brinkman said "plain old refis" will total $1.5 trillion while ones done under a special Fannie Mae/Freddie Mac effort that include underwater loans will reach $400 billion. The number of purchase money loans will fall only 1%, the MBA economist said. But because of shrinking loan sizes, the dollar volume will be down 5.7%. Overall, the MBA is projecting a banner year for mortgage production, $2.73 trillion.

Independent mortgage bankers counting solely on potential loan growth as a basis for their warehouse lines may find the financing particularly hard to come by, executives told attendees at the Mortgage Bankers Association's National Secondary Market Conference in Chicago. Given the refinancing boom, some originators have been trying to convince executives to give them lines by telling them that they could use the funding to "really grow," said Ken Logan, director, residential mortgage and consumer group, Wachovia Securities. "I don't want to hear that right now. The refi boom is eventually going to end. What's going to happen to them at that point?" said the executive, whose company is now owned by Wells Fargo and represents one of the few large institutions that has committed itself to the warehouse lending game at a time when some other notable players have dropped out. He and other panelists said mortgage bankers most likely to continue receiving warehouse financing are those that have strong pre-existing balance sheets and business relationships. Others may be forced to close. The MBA has sought government assistance to deal with the warehouse crisis and has found players like Fannie Mae, Freddie Mac and Ginnie Mae to be most likely to help; but there are some hurdles standing in the way of such a move, the panelists said.

The Federal Reserve Board has no particular exit strategy in mind when it comes to leaving the MBS market once it reaches the $1.25 trillion net purchase goal it set for 2009, said former FRB governor Randall Kroszner. Speaking at the Mortgage Bankers Association's National Secondary Market Conference, Mr. Kroszner said the central bank will "do whatever it takes" to keep rates in check until the MBS market returns to some semblance of normalcy. For the most part, the central bank is now the secondary market for mortgage-backed securities issued by Fannie Mae and Freddie Mac, having purchased more than $300 billion worth of the bonds in the first quarter. But the MBA is worried that when the Fed reaches its goal, its exit from the market will cause mortgage rates to shoot upward. Mr. Kroszner, who spent three years at the central bank before returning to the University of Chicago in January, said, "The real challenge is to thread the needle. Whether the Fed will purchase more or less will depend on the facts and circumstances at the time." If the central bank is satisfied by 2010 that the market is coming back, it will reduce it purchases, said Mr. Kroszner, who was a member of the President's Council of Economic Advisors from 2001 to 2003, and "mortgage rates should rise at a normal pace."

Moves to encourage active and more innovative account management by servicers might bring federal efforts aimed at clearing the problem mortgage asset glut and restoring the nonagency secondary market closer to their goals, according to one Mortgage Bankers Association Secondary Market conference panelist. Clearing problem assets should be a priority and done quickly in order to restore the market, Jeremiah Buckley, partner at BuckleySandler LLP, told this publication. He told attendees at the Chicago meeting while speaking as part of a panel discussion on secondary market impacts of government relief programs, that he believes the mortgage industry may make more progress toward this end by taking a page from the credit card industry, which manages its unsecured borrowers' payments more closely and on a monthly basis. He and fellow panelist Tom Knox, managing director in PriceWaterhouseCoopers structured finance group, told attendees that efforts like TALF and PPIP that recently have taken steps toward helping revive the nonagency secondary mortgage market currently are too preliminary or vague when it comes to how ultimately effective they will be when it comes to reaching this goal.

House Financial Services Committee chairman Barney Frank, D-Mass., might be open to exempting certain Federal Housing Administration loan products from his subprime mortgage bill. Rep. Frank told the National Low Income Housing Coalition conference that he wants the bill to restrict subprime lending and increase FHA lending. FHA currently insures one-year adjustable rate mortgages and hybrid ARMs. The subprime lending bill (H.R. 1728) requires lenders that originate ARMs to retain 5% of the credit risk when the loans are sold or securitized. When asked about ARMs, Rep. Frank said FHA will have to be "more cautious" but added that ARMs are not a "problem for people in upper incomes." He also noted that FHA will have stronger debarment powers to deal with bad lenders. "We will be talking with FHA," Rep. Frank told reporters after speaking at the NLIHC Washington conference. He wants the committee to mark up H.R. 1728 next week or the week after.