Origination

Fitch Ratings blamed deteriorating credit quality in SunTrust's prime mortgage portfolio for downgrading the Atlanta bank's long-term issuer default ratings. The rating agency dropped the company's IDR to 'A-' from 'A+'. "Although the credit problems still arise largely from its home equity, Alt-A mortgage, and residential construction portfolios, problems are beginning to surface in the company's core prime mortgage portfolio," said the rating agency. Additionally, Fitch is concerned that continued economic stress will weigh on SunTrust's commercial book, leading to increased credit problems in that portfolio. In Fitch's opinion, the escalating credit issues will facilitate significantly higher loan loss provisioning, which will make it difficult for SunTrust to return to profitability in 2009 and weaken its capital position.

The former CEO of KB Home, Bruce E. Karatz, has been charged with multiple counts of fraud and other crimes related to a stock option backdating scheme that bilked the homebuilder's shareholders out of millions of dollars.In addition to selling various types of homes, KB Home offers mortgage services in a joint venture with Countrywide KB Home Loans, which is now the property of Bank of America. KB also provides title and insurance services to homebuyers through a subsidiary. The 20-count indictment against Mr. Karatz charges the former chief executive with 15 counts of mail, wire and securities fraud, four counts of making false statements in reports filed with the Securities and Exchange Commission and one count of lying to the company's accountants. Mr. Karatz is expected to make an initial court appearance on March 26, 2009. "We will show a jury that Bruce Karatz, who as a CEO helped create 5,000 jobs and oversaw significant company growth, acted appropriately," said John Keker, Mr. Karatz's attorney, in a statement.

At least one sector of the real estate market is doing fairly well. Although the dollar volume of goods and services sold at auction last year declined by almost 1%, gross receipts from real estate increased for the sixth consecutive year, according to the National Auctioneers Association. Revenues from residential real estate sales grew by 1.1% in 2008, while receipts from land and agricultural real estate was up 0.5%, NAA reported. Only the commercial real estate category fell last year, dipping 1.4%. Real estate owned properties were "a major contributor" to the auction business's growth, NAA said. Banks frequently contract professional auctioneers to sell foreclosed properties at auction, as well as refer auctioneers to customers with troubled assets and use them to sell their own foreclosed properties. Headquartered in Overland Park, Kan., the NAA represents some 5,000 auctioneers.

Sales increased a bit in Las Vegas last month, and the number of listings declined. But the average price of houses sold also dipped, according to monthly figures supplied by Robert Jenson, a realty agent who specializes in luxury properties. In February, a total of 20,953 units were listed for sale in the city, a decline of just 19 units from January. Only 2,023 units were sold last month, an increase of 28 units. But the average sales price fell 2.2%, to $179,303, Mr. Jenson reported. Nearly half the units listed for sale were properties that have been foreclosed on by lenders (9,037) while most of the rest were listed as short-sales (7,416). Despite the glut of houses for sale, the number of luxury units priced over $1 million that sold in February increased to eight, from just three the previous month. The average selling price was $1.99 million. Mr. Jenson's data does not include sales by builders.

The yield on the benchmark 10-year Treasury dropped to 2.8% as of noon on March 6 from 3% at mid-week, a sign that mortgage rates could be headed lower soon. The yield moved below its recent range as investors — discouraged by the stock market's current bleak prospects — moved into Treasuries as a safe haven, according to a market update from Jefferies & Company. Also causing investors to flock to Treasuries, boosting prices (which move in the opposite direction from their yields) was a relatively pessimistic employment report. (See related story above.) Meanwhile, Quicken Loans is advertising a 30-year fixed-rate conventional loan at 4.7% if the consumer pays 1.6 in upfront points.

The mortgage insurance division of Genworth Financial lost $368 million in 2008 compared to a $167 million profit the year before as default claims swamped the unit.According to the Quarterly Data Report, Genworth — one of the industry's most conservatively managed MIs — ranks fourth nationwide in terms of policies-in-force with $147 billion. Genworth's shares have been trading under $1 for the past two weeks. Meanwhile, according to a recent report in Reuters, the U.S. Treasury Department has no current plans to give the ailing MI sector an injection of capital using Troubled Asset Relief Program funds. As reported by National Mortgage News, Federal Housing Finance Agency chief James Lockhart is in favor of the MIs receiving a capital injection under TARP.

Wells Fargo & Co., San Francisco, said it originated more mortgage loans in the first two months of this year than it did for all of the fourth quarter last year. The statement appeared in the same release announcing the company was slashing its quarterly common stock dividend from $0.34 per share to $0.05 per share. The move will allow Wells Fargo to retain an additional $5 billion in common equity annually, and chief financial officer Howard Atkins said the company plans to reinvest the money in its businesses "at a time when we can profitably gain market share for the long term." He added mortgage banking was one of the reasons for Wells Fargo's strong operating results in the first two months of the year. "Mortgage originations for the first two months alone were $59 billion, exceeding in two months the exceptionally strong fourth quarter of 2008, and mortgage applications were $107 billion," Mr. Atkins said.

Employment in the loan brokerage sector fell to an eight-year low in January to 73,600 positions, yet another sign that this third-party lending channel is facing a grim future. According to new figures released Friday morning by the Bureau of Labor Statistics, total employment in the mortgage industry (which includes loan brokers) fell to 271,800 full-time positions, also a multi-year low. Year-over-year broker employment fell by 20% while total residential finance employment declined by 18%. In recent months more lenders have eliminated their wholesale production channels, and several mortgage insurers have placed restrictions on broker-sourced loans. Meanwhile, the national unemployment rate jumped to 8.1% in January, the highest since 1983. More Americans collecting unemployment means these families will have a harder time paying their monthly mortgages. Meanwhile, one investment banker told National Mortgage News that some large banks that are still involved in correspondent lending are considering increasing their net worth requirements on third-party lenders, which could cause more job displacement in the industry.

Mortgage bankers funded a meager $273 billion in the fourth quarter — a 45% decline from the same period last year — as the national recession deepened and lenders continued to exit certain loan channels, according to new figures compiled by National Mortgage News and the Quarterly Data Report. For the full year, residential loan production cratered: $1.61 trillion compared to $2.65 trillion in 2007, a 39% plunge in activity. The fourth quarter was the industry's worst showing since the first quarter of 2000 when just $209 billion in loans was originated by non-depositories, banks, thrifts and credit unions. Based on the current "run-rate" industry production could total just $1.092 trillion this year. (For the full story with individual company rankings see the Monday, March 9 edition of National Mortgage News.)

Employment in the loan brokerage sector fell to an eight year low in January to 73,600 positions, yet another sign that this third-party lending channel is facing a grim future. According to new figures released Friday morning by the Bureau of Labor Statistics, total employment in the mortgage industry (which includes loan brokers) fell to 271,800 full-time positions, also a multi-year low. Year over year broker employment fell by 20% while total residential finance employment declined by 18%. In recent months more lenders have eliminated their wholesale production channels, and several mortgage insurers have placed restrictions on broker-sourced loans. Meanwhile, the national unemployment rate jumped to 8.1% in January, the highest since 1983. More Americans collecting unemployment means these families will have a harder time paying their monthly mortgages. Meanwhile, one investment banker told National Mortgage News that some large banks that are still involved in correspondent lending are considering increasing their net worth requirements on third-party lenders, which could cause more job displacement in the industry.