Origination

Freddie Mac said there will be no change to its business relationship with three mortgage insurance firms recently downgraded by Moody's Investor Service. The GSE clarified that there is no change to the "Type I" mortgage insurer status it has assigned to Mortgage Guaranty Insurance Corp., Radian Guaranty Inc., or PMI Mortgage Insurance. All three were downgraded by Moody's Investors Service on Feb. 13 to below investment grade. The share price of all three fell sharply Tuesday, along with the overall market. Moody's also downgraded United Guaranty Inc., Genworth Mortgage Insurance Corp. and Republic Mortgage Insurance - but maintained investment grade ratings on all three of those firms. A call to Fannie Mae to confirm if that company was still treating these firms as Type I insurers was not returned by deadline. In a statement, Radian Group chief executive S.A. Ibrahim said Moody's action did not reflect the company's "substantial claims-paying resource and the improving quality of our mortgage insurance portfolio." He added the move should not affect Radian's ability to insure loans sold to Fannie Mae or Freddie Mac. MGIC and PMI said they had no comment about the downgrade.

PHH Corp., which owns the nation's ninth largest residential servicer, said its ability to borrow money under existing lines of credit will not be impacted by a ratings downgrade on its debt taken by Standard & Poor's. S&P lowered its ratings on the company, including its counterparty credit rating, to BB+/B from BBB-/A-3 and maintained a negative outlook on the company. PHH Mortgage of Mount Laurel, N.J. services roughly $144 billion in residential mortgages. Its credit facility, struck back in early 2006, is for $1.3 billion. PHH Mortgage is the nation's largest private label funder and servicer.

The pace of new home sales continued to slow in California - the nation's largest housing market - in December, according to new figures released by the California Building Industry Association. The latest sales and pricing report from the CBIA, in conjunction with Hanley Wood Market Intelligence, found that a paltry 1,117 units were sold in projects of 10 or more units in December. That's 59% fewer than the 2,695 units sold in December 2007. No sector of the for-sale market prospered: Sales of single-family homes were down 55%, townhouse sales were off 73% and condos were down 60%. "December is always slow for new-home sales," said Jonathan Dienhart, director of published research for HWMI, "but the problems with credit, consumer confidence and plummeting resale values made it an especially bad month." Mr. Dienhart said the December sales figures "should be close to the lowest absolute monthly sales number we see during this downturn." But he also warned that "the next couple of months are not likely to be much better."

Once again industry trade groups are trying to get HUD to backpedal on a Real Estate Settlement Procedures Act rule, claiming the department should work with the Federal Reserve Board on making mortgage disclosures complementary with the Fed's so consumers will not get confused. The Fed is working on making disclosure changes that fall under the Truth in Lending Act. "We urge that HUD and the board to join together, with industry, consumers and other stakeholders, to make the disclosures as effective as possible," according to a Feb. 9 letter sent to HUD secretary Shaun Donovan. The eight groups contend that the Department of Housing and Urban Development should withdraw or suspend a recently finalized RESPA that revamps the good-faith estimate disclosure. However, the housing industry is no longer united in opposition to the final RESPA rule. Stalwart opponents of past RESPA reforms -- the National Association of Realtors, RESPRO and the American Land Title Association -- did not sign the letter. The American Bankers Association, Mortgage Bankers Association and five other lender groups did. The eight trade groups noted that last summer 243 congressmen signed a petition urging HUD to pull back from issuing a final RESPA rule and coordinate its disclosures with the Fed's Truth in Lending Act mortgage disclosure project.

An Oxon Hill, Maryland, man pleaded guilty to mail fraud in connection with the fraudulent purchase of 25 properties in Maryland, the District of Columbia and Virginia. According to prosecutors, Terrence White and others used false mortgage and settlement documents to buy the homes, and paid at least 15 "straw buyers" $10,000 per property to purchase the properties on their behalf. White created false mortgage and settlement documents, many of which misrepresented the straw purchasers' income and assets. White and others also created false invoices to claim that their now defunct company, Brotherly Investment Group, performed "renovations" on some of the properties. Using these false invoices, White and others were "repaid" at closing for the purported renovations. Between 2006 and 2008, White and others received $3.83 million in fraudulent funds. Many of the purchased properties have been foreclosed upon.

Office of Thrift Supervision director John Reich said he is leaving his post as the chief supervisor of 800 federally chartered thrift institutions at the end of this month. OTS senior director Scott Polakoff will serve as acting director until President Obama nominates a new director to run the agency. During his four-year tenure at OTS, Mr. Reich witnessed the demise of some of the largest savings and loans in history. Washington Mutual, IndyMac Bank and Countrywide failed on his watch. The OTS director was the most reluctant of federal banking regulators to tighten subprime and Alt-A lending underwriting guidelines. He generally insisted on giving thrifts the most flexibility in setting their lending polices. Mr. Reich was a Sarasota, Fla., banker before he came to Washington to work on the staff of former Sen. Connie Mack, R-Fla. President Bush nominated Mr. Reich to run OTS in 2005.

Chase Home Mortgage, the nation's third largest residential servicer, today declared a three-week moratorium on home foreclosures. A subsidiary of JPMorgan Chase, the lender/servicer said is waiting for the White House to unveil its foreclosure reduction program. According to the Quarterly Data Report, Chase services $850 billion in home mortgages. Meanwhile, JPM opened its first homeownership assistance center in California -- in the town of Glendale -- as part of a plan to open a nationwide network of 24 centers by the end of March. Nine of the HOA centers will be in California to assist borrowers serviced by Chase, Washington Mutual or EMC, which now are part of JPMorgan Chase. "We created these local Homeownership Centers as a place for our borrowers to sit down and discuss their situation face-to-face with trained loan advisors in these challenging times," said David Schneider, head of mortgage servicing at Chase. "They are part of a wide-ranging initiative to help families stay in their homes whenever possible." Three other centers, designed to help families struggling with their mortgage payments, will open soon in the Los Angeles, Orange and San Bernardino County.

Obscure clauses in securitization documents could spell big losses for depositories if Congress passes mortgage bankruptcy legislation, according to a report in American Banker. U.S. banks and thrifts hold hundreds of billions of dollars of non-agency mortgage-backed securities. Most if not all of these bonds are rated triple-A, meaning that normally they would be well cushioned against any loss, as lower-rated classes would take a hit first. However, many securitization documents contain language that identifies bankruptcy as a condition in which all bondholders share losses equally. According to a report by Credit Suisse, pending cram down language "will be a distinct negative for many senior prime RMBS bonds that have a unique feature wherein bankruptcy losses are set at a maximum dollar amount, beyond which additional bankruptcy-related losses will be allocated to all bonds regardless of seniority."

MGIC Investment Corp., the nation's largest mortgage insurer, said it will still cover broker-sourced loans but come March 9 will eliminate other products from its menu, including cash-out refinancings. According to a company bulletin, MGIC also will no longer insure second homes, and notes on manufactured housing units. The MI also will not cover any condominium mortgages with LTVs north of 90% in certain "restricted" markets where home prices have fallen dramatically. In regard to broker-sourced loans, the company will continue coverage but is capping LTVs at 90% and FICOs at a minimum of 720. Also, wholesalers must track their MGIC brokers by providing an identification number on these third-party originators. Earlier this week, The PMI Group, said it would no longer cover any type of broker-sourced mortgages.

House and Senate conferees raised the first-time homebuyer tax credit to $8,000 (a $500 increase) during last-minute negotiations on the pending economic stimulus bill. Also, the effective date of the credit was increased by three months to December 1. The final stimulus bill (H.R. 1) also raises the maximum GSE loan limit to $729,720. At press time the House was voting on the $800 billion package. A Senate vote on final passage could come as early as Friday evening or during the weekend. As reported earlier, the conferees cut a $15,000 homebuyer tax credit approved by Senate in half and limited the tax benefit to first-time homebuyers. The final version of H.R. 1 also restores the maximum $729,750 loan limit for Fannie Mae, Freddie Mac and Federal Housing Administration loans for the rest of this calendar year. (The current limit is $625,500.) Reinstating the higher loan limits will "help to reduce inventory and improve liquidity in the overall mortgage market," said Charles McMillan, president of the National Association of Realtors. Although the $8,000 first-time homebuyer tax credit is a disappointment to many in the industry, the tax writers made it a real tax credit so homebuyers do not have to repay it like an interest-free loan. Eliminating the repayment provision should bring more buyers into the market, Mr. McMillan said. The final stimulus bill also raises the loan limit on FHA-insured reverse mortgages to $625,500 from $417,000 for the rest of the calendar year.