Origination

An investor group that includes hedge fund mavens J. Christopher Flowers and John Paulson has closed on its purchase of IndyMac Bank FSB, a $160 billion residential servicer that became a ward of the government last summer. At press time no information was available concerning billions of dollars of loan buy-back requests that Fannie Mae had with IndyMac. A spokesman for One West Bank Group had no information on the matter and the Federal Deposit Insurance Corp., which sold the Pasadena-based depository, could not be reached for comment. Among the assets that OWBC bought is Financial Freedom, a large player in the reverse mortgage market. The investor group has pumped $1.55 billion of cash into the thrift which will be called One West Bank FSB. In a statement the new owners said it would maintain IndyMac's "national mortgage banking" business and continue to modify troubled loans under an FDIC program started last summer.

The Government National Mortgage Association is poised to play a role in easing the warehouse lending liquidity crisis but does not think it will be a direct lender.In an interview with the American Banker GNMA president Joe Murin said the agency cannot become involved in warehouse lending without a change to its government charter but noted that "we certainly could help administer a program." He said one option is for GNMA to take possession of loans three days after they close and fund, instead of the 15 to 45 days it typically takes to put the mortgages in securitization pools. Depositories that hold warehouse loans on their books face a 100% risk weighting on such debts until the mortgages can be taken off the lines. Recently two of the largest players in warehouse lending—the PNC-owned National City and Guaranty Federal Bank—made plans to exit the business.

House Financial Services Committee chairman Barney Frank, D-Mass., is pushing the nation's GSE regulator to stop approving retention bonuses for Fannie Mae and Freddie Mac executives and to recoup past bonuses. In a letter to Federal Housing Finance Agency director James Lockhart, the powerful committee chairman stressed that the companies being propped up with public funds should not be paying large bonuses. "I am writing to urge strongly that you rescind the retention bonus programs at Fannie Mae and Freddie Mac, prohibit any further payment of bonuses to executives under that program, and pursue repayment of any already-paid bonuses," Rep. Frank says in a March 19 letter. A FHFA spokeswoman said the director will respond to chairman Frank's letter soon. Chairman Frank has drafted a bill that prohibits companies receiving TARP funds and Fannie and Freddie from paying bonuses until they repay all federal assistance. The Financial Services Committee is scheduled to markup the bill on Wednesday (March 25).

To protect consumers from aggressive lending practices, Congress should consider "curtailing" the powers of federal banking regulators to preempt state consumer protection laws, according to FDIC chairman Sheila Bair.In testimony submitted to the Senate Banking Committee, Ms. Bair said federal preemption was seen as a way to improve efficiencies for federally chartered banks and lower costs for consumers. "While that may have been true in the short run, it has now become clear that abrogating sound state laws, particularly consumer protection laws, created an opportunity for regulatory arbitrage that frankly resulted in a 'race-to-the-bottom' mentality," she said. The Comptroller of the Currency and Office of Thrift Supervision routinely preempted state predatory lending laws during the subprime lending boom. The FDIC chairman said setting a "floor" for consumer protection, based on state and federal laws, would be better than current system of establishing a "ceiling" at the federal level. She suggested that Congress could use a newly proposed financial products safety commission to establish the appropriate floor for consumer protection.

After its stock price dipped to under a dollar earlier this month, Citigroup, the nation's fourth largest residential lender, has seen its stock price more than triple, trading at $3.20 Thursday morning. The company said it plans to both increase the number of shares outstanding and undertake reverse stock split as part of the company's effort to exchange common stock for preferred securities, pending shareholder approval. Late last month, Citi announced that it is seeking to exchange about $27.5 billion in public and private preferred securities as part of its agreement with the Treasury Department, which has pledged to match up to $25 billion of the conversions.

After pleading guilty to conspiracy charges in connection with a multi-million dollar mortgage fraud scheme to commit bank fraud before U.S. District Judge George Caram Steeh, Ali Haidous, a real estate appraiser from Dearborn, Michigan, was sentenced to one year of imprisonment. Haidous admitted to inflating appraisals in a scheme involving 16 total properties located in Detroit, Dearborn, and Dearborn Heights, Michigan. Mortgages totaling $1.9 million were issued on the 16 properties by several financial institutions between April 2005 and April 2008. Haidous admitted to being paid $1,000, rather than his usual fee of $300-$500, for each fraudulent appraisal. Haidous prepared the fraudulent appraisals for co-defendant Hassan Nagi, a mortgage broker from Dearborn Heights, who used the fraudulent appraisals to submit false applications to obtain the mortgages for "straw buyers. Nagi pleaded guilty on Dec. 15, 2008 and is scheduled to be sentenced in April.

The level of commercial/multifamily mortgage debt outstanding grew by 0.7% in the fourth quarter of 2008, to $3.5 trillion, according to the Mortgage Bankers Association's analysis of the Federal Reserve Board flow of funds data. The total was an increase of $166 billion, or 5% from the end of 2007. The $3.5 trillion in commercial/multifamily mortgage debt outstanding recorded by the Federal Reserve was an increase of $23 billion from the third quarter of 2008. Multifamily mortgage debt outstanding grew to $900 billion, an increase of $5.4 billion or 0.6% from the third quarter. "Counter to what many expected, investors increased their holdings of commercial and multifamily mortgages during the fourth quarter," said Jamie Woodwell, MBA's vice president of commercial real estate research. "Banks, thrifts, Fannie Mae, Freddie Mac, life insurance companies and other lenders extended additional credit to the market during the fourth quarter, lending more in new commercial and multifamily mortgages than they saw paid off or paid down on existing loans." Commercial banks continue to hold the largest share of commercial/multifamily mortgages at $1.55 trillion, or 44% of the total.

The Treasury Department has explained how to use a new website that allows homeowners to learn about Obama administration's new housing plan and whether they can qualify for a loan modification.The new MakingHomeAffordable.gov website has a calculator that allows homeowners to estimate how they could benefit from a modification. "Be sure to check out the calculator that allows homeowners to estimate the reduction to their monthly mortgage that they might get under the plan," a White House blog says. Meanwhile, agency officials are working on a net present value (NPV) test that servicers will use to determine if a loan should be modified. They plan to roll out a standard NPV model soon that provides some flexibility for servicers. For example, a servicer with a low re-default rate would not have to use the national rate.

In an effort to get stalled housing markets going again in their respective jurisdictions, a number of states are following California's lead in adopting tax credits for homebuyers. According to the National Association of Home Builders' Sales and Marketing and Council, plus other sources, legislation awaiting the governor's signature in Utah offers a $6,000 grant to be used by buyers for downpayments. The Kentucky House has cleared a $5,000 tax credit for new home purchasers. A similar measure has cleared the Virginia Senate and has been introduced in the Illinois House. In Georgia, a $3,600 tax credit spread over three years for new homebuyers has passed the lower chamber. These are all in addition to the $8,000 federal tax credit adopted by Congress in February. Also, North Carolina and South Carolina are said to be looking at replicating California's program, which gives Golden State taxpayers who buy a new home a credit of 5% of the purchase price, up to a maximum of $10,000 to be paid out over a three-year period. If adopted, the combined federal-state benefit would be as much as $18,000. In Missouri, meanwhile, the state housing finance agency is advancing buyers the federal tax credit in the form of a short-term loan. Delaware has a similar program, and Pennsylvania, New Mexico and several other states are considering such programs. Builder associations in Indiana, Kentucky, Michigan, New York, Oregon, Tennessee, Texas, Washington are said to be pursuing Missouri's model, which, in effect, "monetizes" the credit so buyers can use it for cash needed to close on their mortgages instead of waiting until they file their tax returns.

The yield on the benchmark 10-year Treasury plummeted to 2.5% Wednesday afternoon after the Federal Reserve said it would give a $1 trillion-plus shot in the arm to the housing and mortgage markets by purchasing $750 billion of agency MBS, $100 billion of Fannie/Freddie debt as well as $300 billion of longer-term Treasury securities. "The Fed is now trying to influence not just the spread between private interest rates and Treasuries (through its mortgage-backed securities purchases, for example), but to pull down the entire spectrum of interest rates by driving down the rate on benchmark Treasuries," said IHS Global Insight chief U.S. economist Nigel Gault in a report. The agency MBS market shortly after 4 p.m. Thursday was "more than keeping up with swaps but not keeping up with Treasuries," Art Frank, director and head of agency mortgage-backed securities research at Deutsche Bank Securities, told MortgageWire. He said agency MBS rallied on the news without any huge volume. Ensuing investor activity was fairly modest with some servicer convexity-related buying but not to any large extent, Mr. Frank said.