Origination

Flagstar Bancorp, one of the nation's largest residential wholesalers, has picked StreetLinks National Appraisal Services as one of its preferred vendors.The Indianapolis-based vendor will offer evaluation services to Flagstar's retail branches as well as its brokers and correspondents. SLNAS says it is compliant with the new Home Valuation Code of Conduct (HVCC) which governs appraisal practices. Flagstar, which according to the Quarterly Data Report ranks ninth overall in residential fundings, is based in Troy, Mich.

Bank of America, which releases first quarter earnings shortly, is facing more writedowns on its Countrywide-related mortgage holdings, according to a new report from Credit Suisse.Initiating coverage of BoA with a "neutral" rating, CS analyst Moshe Orenbuch writes that when the bank bought Countrywide Financial Corp. last summer CFC's $92 billion (mostly) residential portfolio was marked down by $14.4 billion or 15.6%. In his new report he says "further headwinds could put losses in excess" of the original marks. The $92 billion includes $33 billion in home equity loans, and $26.4 billion in payment option ARMs, two of the most toxic asset classes out there. Several months after the July 1 deal closed, BoA wrote down the portfolio by an additional $750 million. Citing CFC in particular, Mr. Orenbuch says "Credit quality deterioration is fairly broad-based" at the bank.

Chase Home Finance said it will no longer fund construction-to-permanent loans for consumers who want to build their own homes.A spokesman for the lender said a decision was made three weeks ago but not publicized. It took its last application in this product line on April 7. Roughly 60 employees based in Chase's Denver office are affected by the change. Some will be offered other jobs at the company. The spokesman declined to provide construction-to-perm origination volumes. "It's not a big part of our overall business," he said. Earlier this year Chase exited the wholesale channel. It remains as a correspondent funder. Based in Iselin, N.J., Chase is a subsidiary of financial services giant JPMorgan Chase.

Servicer guidance along with the net present value (NPV) test for the Obama administration's new loan modification program will be issued "very soon," according to Federal Housing Finance Agency director James Lockhart."I'm hopeful we can get this kicked up very fast," Mr. Lockhart said in an interview with National Mortgage News Online. Fannie Mae and Freddie Mae have already issued servicer guidance for modifying loans they own or guarantee. The NPV test will be used to determine which non-agency loans qualify for a loan modification. "That is being finalized," the FHFA director said. Under the new modification program servicers are expected to reduce the homeowner's monthly mortgage payments to a 38% debt-to-income level at their own expense. To achieve a 31% DTI ratio, the government will share in the cost and reimburse the servicer. Fannie and Freddie are using an existing NPV test because they are not being reimbursed by the government, Mr. Lockhart said.

The Federal Home Loan Bank of Boston is reporting a huge impairment charge on its investments in private-label mortgage-backed securities and a net loss of $115.8 million for 2008, but the bank expects recent changes to accounting rules will mitigate the impact on its retained earnings. "The net loss eliminated retained earnings, resulting in an accumulated deficit of $19.7 million," the Boston FHLBank president Michael Jessee said. Nevertheless, the bank continues to meet its minimum capital requirements. The Boston FHLBank delayed its annual 2008 securities filing while it reviewed its "other-than-temporary impairment" analysis on $652.9 million in private-label MBS. This review resulted in a $381.7 million OTTI charge — $42.7 million larger than originally estimated. However, the Financial Accounting Standards Board recently loosened its mark-to-market accounting and OTTI guidance. These changes "will restore a significant portion of the retained earnings that were lost in 2008 when implemented in the first or second quarter of 2009," Mr. Jessee said.

Lenders say first-quarter profit margins are the widest they have seen in years, despite concerns that the refi wave could result in higher prepayment costs for servicers, according to a report in American Banker "If you're in a position to make loans, you're making historically wide profit margins, so this is a very good time to be in the lending business," said Tom Million, president and chief executive of Capital Markets Cooperative, Ponte Vedra Beach, Fla., a provider of secondary marketing services to banks. The big caveat, of course, is that some of these loans "could go bad," Mr. Millon said, and many lenders are "looking backward" at loans made in the third and fourth quarters with the same concern. Still, there has been a significant pricing shift since late last year that is boosting profits, especially for mega lenders and large aggregators such as Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo & Co. (See related stories on loan volumes.)

An analysis by federal regulators of investments held by two large corporate credit unions prior to their March 20 takeover shows that they had a vast exposure to risky subprime, Alt-A and payment option ARM mortgage securities. The two corporate CUs — U.S. Central FCU and WesCorp FCU — provided liquidity to smaller credit unions. Placed into conservatorship by federal regulators last month, U.S. Central and WesCorp accumulated billions of dollars in losses on their mortgage securities. The National Credit Union Administration analysis released Friday and based on a review by bond experts PIMCO shows that securities backed by the risky mortgages (most of them rated AAA at the time of purchase) continued to deteriorate over the past two years with defaults and foreclosures skyrocketing and forcing down the ratings on many of them to below investment-grade. At U.S. Central, where 95% of its $35 billion of holdings were rated AAA at purchase, more than half of those holdings — a staggering $17 billion — had slid below AAA, while almost one-third, $11 billion worth, were below investment grade at Feb. 23.

Genworth Financial, which controls the nation's fourth largest mortgage insurance company, said it failed to meet requirements to receive a large capital infusion under the Treasury Department's Troubled Asset Relief Program. The revelation came late last week, but on Monday Genworth's shares were hammered, falling 21% to just over $2. In a statement company CEO Michael Frazier said TARP money is only one of Genworth's options for surviving in the current economic climate. A spokesman could not be reached for comment at press time. The Richmond, Va.-based Genworth has abandoned plans to buy a small Minnesota depository, which would have served as its conduit to getting TARP money. In 2008 Genworth posted a net loss of $572 million. For years it had garnered a reputation for being the most conservative of the nation's seven MI firms.

Even though it appears that loan applications and fundings swelled in the first quarter of this year, 2008 was one of the bleakest ones on record with all of the nation's top ranked firms suffering, according to a new annual tally by National Mortgage News. NMN found that the top five residential funders — Wells Fargo & Co., Chase, Bank of America, Countrywide (pre-BoA), and CitiMortgage — suffered large declines in originations. BoA's full-year origination volume suffered the least (down 4%) — but only because it had Countrywide under its corporate umbrella in the second half of the year. (The purchase closed on July 1.) Wells ranked first among all originators with $234 billion in fundings and a market share of 13.41%, followed by Chase ($187 billion/10.69%), Bank of America ($187 billion/10.41%); Countrywide ($132 billion/7.54%), and CitiMortgage ($115 billion/6.59%). If Countrywide's first half fundings are added to BoA's it would give the latter full year production of $314 billion, far eclipsing Wells. Year-over-year, Wells' originations fell by 14%. Chase, Countrywide and Citigroup had declines of 11%, 68% and 42%, respectively.

The global law firm Morrison & Foerster LLP has created an interdisciplinary team of attorneys to represent clients in the accelerating wave of dealmaking, as real estate companies worldwide seek to deleverage, recapitalize, restructure and otherwise seek liquidity. The newly formed Real Estate Companies Solutions Group brings together experts with expertise from the firm's real estate, corporate, capital markets, tax, fund formation, bankruptcy, restructuring and litigation groups. The group will provide targeted advice to real estate companies, investors and other capital sources in entity-level transactions resulting from the current unprecedented real property and finance sector dislocations. It will represent clients to implement a broad range of options, such as M&A, tender offers, spin-offs, joint ventures, or bankruptcy including "prepackaged" bankruptcies. "The current 'perfect storm' affecting the real estate industry is creating both risks and opportunities for our clients," said Michael Cohen, a Los Angeles partner in the Corporate Finance Practice Group. Among the categories of transactions involving real estate companies, including REITs, the group expects to execute mergers and acquisitions, restructuring and workout transactions, and representing new equity in bankruptcies.