Origination

Terence Mayfield of Phoenixille, Pa., pleaded guilty before U.S. District Judge Joseph H. Rodriguez to charges stemming from his role in operating two ponzi schemes upon members of a Toms River church. The first defrauded members of the Church of Grace and Peace of more than $1 million through a phony real estate investment scheme. In this scheme, Mayfield spoke to church members about an investment opportunity he had developed through investments in income-generating real estate. He required each potential investor to pay between approximately $1,000 and $1,500 as an "entry fee" to the program and that they provide the investment funds directly to him. Mayfield neither maintained the funds in escrow accounts nor purchased investment properties, but rather used the investors' funds to repay earlier investors and to pay his personal expenses. The second scheme defrauded three sets of homeowners, who participated in three "foreclosure bailouts" purportedly involving two properties in Georgia and one in Pennsylvania, of more than $75,000. In this scheme, Mayfield solicited potential investors to buy homes facing foreclosure and lease the homes back to the homeowners for a two-year period. The homeowners would place two years' worth of rent payments into an escrow account maintained by Mayfield as a security deposit. At the closing of the foreclosure bailout transactions, Mayfield directed the homeowners to directly deposit funds intended for an escrow account into his company's bank account. He again used these funds for his own benefit. Judge Rodriguez released the defendant on a $100,000 bond pending sentencing, which is scheduled for July 14.

The securitization process that led to the subprime meltdown has been "absolutely discredited" and retention of a portion of the credit risk is one way to reform the mortgage market, according to a Senate Banking Committee staffer. Requiring lenders to retain 5% of the credit risk on nonprime loans, as proposed under a House bill, is "one way to get at the issue," said Jonathan Miller, a professional staff member. He works closely with committee chairman Christopher Dodd, D-Conn., on housing issues. He stressed that mortgage reform also should give consumers a way to get relief if mortgage lenders violate the rules. Mr. Miller spoke at a Washington meeting of Real Estate Services Providers Council and he noted his views should not be interpreted as Sen. Dodd's views. But he said the Federal Reserve Board has resisted using its consumer protection authority until recently. And the Fed could lose that authority by the time Congress passes a regulatory modernization bill.

The Federal Reserve expanded its purchases of GSE mortgage-backed securities by $750 billion in March to sustain the refinancing boom and keep mortgage rates low, according to the minutes of the last Federal Open Market Committee meeting. When the committee met in mid-March, the Fed was already on track to reach its initial target of purchasing $500 billion in Fannie Mae, Freddie Mac and Ginnie Mae MBS and $100 billion in GSE debt by the end of June. But committee members noted that the "pace of MBS issuance was likely to be especially brisk over the next few months, in part because of the Administration's new Making Home Affordable program," and they wanted to "accommodate the pattern of mortgage refinancing," the minutes say. So the committee agreed to expand the MBS purchase program to $1.25 trillion and extend it until the end of the year. The FOMC members said low mortgage rates, affordable housing prices and the Obama administration's new refinancing and loan modification programs could bring about a "sustained increase in home sales and a stabilization of house prices."

Ginnie Mae's growing mortgage-backed securities issuance has hit a record monthly high of $34.5 billion. The record was set in March. Total single-family issuance was $34.1 billion with the balance coming from multifamily issuance during the month. Within the single-family category, Ginnie I s represented $28.2 billion of the total and Ginnie II s represented the remaining $5.9 billion.

Bank of America has trimmed certain loan brokers from its active list, according to loan representatives who still use the wholesaler for table funding.However, according to Marc Savitt, president of the National Association of Mortgage Brokers, the move is really just a housecleaning effort involving unproductive brokers that rarely submit loans to BoA. "This isn't Bank of America dumping brokers," said Mr. Savitt. He noted that brokers that are removed from the active list have the right to re-apply within 60 days. But one broker who uses BoA for certain loans said the timing of list cleaning is curious. "I don't want to make it sound like a conspiracy but it's happening while refis are booming," he said. Brokers were notified of the move about two weeks ago.

Wells Fargo & Co. hit a residential home run in the first quarter with originations soaring by 51% to $100 billion, and mortgage-related commitments topping $175 billion.Released early Thursday morning, the figures were preliminary and included an earnings estimate of $3 billion, which could prove to be a record for the bank. Final numbers will be released when it discloses earnings on April 22. Wells' strong residential quarter was aided by historically low interest rates and its 2008 acquisition of Wachovia Corp., a bank with a strong (but somewhat troubled) mortgage operation. The results also indicate that the San Francisco-based bank is poised to gain a huge amount of market share in the mortgage space as other lenders either fail or sell out to stronger competitors. In the fourth quarter Wells had a loan production market share of 18.37% and a servicing share of 18.58%, according to National Mortgage News and the Quarterly Data Report. Late last year Wells received a $25 billion capital injection via the government's TARP program.

Twenty-four individuals have been charged with allegedly using a corrupt enterprise to conduct a massive San Diego-based mortgage fraud scheme involving 220 properties with a total sales price of more than $100 million dollars. U.S. Attorney Karen P. Hewitt called this "the largest mortgage fraud case ever prosecuted in the history of the Southern District of California." The lead defendants charged with running the corrupt enterprise are Darnell Bell, Michael Ivy, Stanley Gentry and Billie Bishop. The indictment alleges that Bell, allegedly a member of the Lincoln Park street gang, led the enterprise and received at least $9 million in proceeds from the conspiracy. Mr. Ivy was allegedly responsible for negotiating the purchase of real estate. Mr. Gentry, a licensed real estate broker, is alleged to have allowed the enterprise to use his broker's license to facilitate the fraudulent purchase of property in exchange for a $10,000 monthly payment and a percentage of the real estate commission and broker's fees associated with each fraudulent purchase. Mr. Bishop was an escrow officer charged with allegedly facilitating the fraudulent purchase of more than 100 properties. In addition to charging the defendants with using multiple real estate businesses to facilitate the fraudulent purchase of real estate, the indictment also charges several real estate professionals with recruiting individuals to obtain fraudulent mortgage loans and purchase properties. Bell is already in federal custody serving a sentence for the distribution of cocaine. Besides the lead defendants, the other individuals arrested in the scheme are: Joseph Lewis, Nicoele Watson, Daniel Williams, Diana Jaime, Jorge Cortez, Lorena Callu, Desiree Holiday, David Lewis, Ray Logan, Stevie Frazier, Latashia McKinney, Marcus Dozzell, Esteban Valenzuela, Anton Ewing, Randolph Hirsch, Dennis Tapia, Dexter Holiday, Keith Holiday, Gerard Holiday and Jorge Magana. All of the defendants are being detained and could not be reached for comment.

More renters moved out of apartments last year in Los Angeles County than moved in over the previous five years, according to a new report that finds the recession forcing Southern California landlords to lower rents and offer more valuable concessions. According to the Lusk Center for Real Estate at the University of Southern California, some tenants who still have jobs are taking advantage of fire-sale housing prices to become owners, while unemployed tenants are doubling up with family or friends. And those trends are likely to continue, the report said of apartment markets in Los Angeles, Orange, Riverside, San Bernardino and San Diego Counties. "The dramatic changes in the economy are taking their toll on landlords," said Delores Conway, director of the annual Casden Real Estate Economics Forecast. Only San Diego, which has a 95% occupancy rate and has seen rents rise by 1%, is bucking the trend. In Orange County, on the other hand, rents fell 2% in 2008, the first time they have declined in 13 years. In Riverside and San Bernardino, the so-called Inland Empire, occupancy levels showed their largest drop-off in a decade.

Builders are seeing increased foot traffic at model homes and say potential buyers are drawn by low mortgage rates, affordable prices as well as a first-time homebuyer tax credit, according to the National Association of Home Builders. "With affordability up dramatically, reports from our builders in the field indicate that foot traffic in new homes is on the rise and consumer interest is increasing," said NAHB chairman Joe Robson. The trade group noted that 1.5 million visitors have logged on to its website to learn more about the $8,000 first-time homebuyer tax credit that Congress approved in February. A survey by Move Inc. found that "nearly 20% of those that plan to purchase a home this year are doing so to take advantage of the tax credit, which expires at the end of November," NAHB said. Move Inc., based in Westlake Village, Calif., provides home listing services for builders and Realtors. Buyer interest typically increases in the spring.

Once homebuilders Pulte Homes and Centex Corp. complete their just announced merger, their combined mortgage units will rank 23rd nationwide in residential originations, according to figures compiled by National Mortgage News. However, when it comes to residential servicing rights, neither of the their mortgage divisions service much in the way of loans. Two years ago — before the A- to D credit market crashed — Centex sold its subprime division, Centex Home Equity, to a hedge fund. In the fourth quarter Pulte Mortgage, Englewood, Colo., ranked 29th among all funders ($848 million) with Centex's CTX Mortgage ranking 34th with originations of $601 million. It's expected that, in time, the two publicly traded HBs will merge their mortgage divisions, though at press time this could not be confirmed.