Origination

REOMAC, a trade association serving the mortgage default industry, has created a commercial real estate committee. Until now, the group had been primarily focused on residential real estate owned. The new committee is led by co-chairs John Murray and Peter Monroe. "In light of the imminent tsunami of commercial mortgage defaults and foreclosures, it is crucial that our organization find new and innovative ways to help the private REO industry respond," said Shelley Kaye, president of REOMAC. Mr. Monroe is currently the president and chief executive of a venture capital firm. He served as the president of the Resolution Trust Corp. Oversight Board during the late 1980s and early 1990s. "There are more than a half a trillion dollars of commercial mortgages requiring refinancing over the next three years," Mr. Monroe said. "Given the state of the economy, the debt markets and the great number of commercial mortgages in complex conduit structures, a commercial meltdown of historic proportions is inevitable." Mr. Murray is a managing member of an investment firm.

The benchmark 10-year Treasury yield had risen above 3% as of midday on Monday, Feb. 9. The 10-year yield has not been above 3% since November of last year. Federal officials have been considering buying Treasuries, a move that could potentially counteract the increase in the yield.

The Mortgage Bankers Association is asking the Treasury Department to take quick action on a plan to offer federal guarantees on warehouse lines of credit, warning that many non-banks are facing a severe liquidity crisis as refinancing applications swell. In a letter to Treasury secretary Timothy Geithner, MBA president John Courson requested a meeting with the government to discuss the issue. Among other ideas, the trade group wants regulators to relax the risk-based capital charge on warehouse lines. MBA's plea comes as rumors mount that some non-banks are struggling to maintain warehouse lines and complaints from loan brokers about delivery fees and turnaround times. The government has yet to adopt a policy or plan on warehouse lending but lobbyists say both the Treasury and Federal Reserve are rapidly being educated on the issue. Glenn Corso, who runs a group called The Warehouse Lending Project, said he has a meeting with Federal Reserve officials next week to discuss the matter. Mr. Corso said the Federal Housing Finance Agency is aware of the warehouse crisis "and they understand it." One idea being promoted by the industry is to have Fannie Mae and Freddie Mac buy participation interests in warehouse lines, thus adding liquidity to the market. (For more on the story see the Monday, February 9 issue of National Mortgage News.)

The Mortgage Bankers Association is asking the Treasury Department to take quick action on a plan to offer federal guarantees on warehouse lines of credit, warning that many non-banks are facing a severe liquidity crisis as refinancing applications swell. In a letter to Treasury secretary Timothy Geithner, MBA president John Courson requested a meeting with the government to discuss the issue. Among other ideas, the trade group wants regulators to relax the risk-based capital charge on warehouse lines. MBA's plea comes as rumors mount that some non-banks are struggling to maintain warehouse lines and complaints from loan brokers about delivery fees and turnaround times. The government has yet to adopt a policy or plan on warehouse lending but lobbyists say both the Treasury and Federal Reserve are rapidly being educated on the issue. Glenn Corso, who runs a group called The Warehouse Lending Project, said he has a meeting with Federal Reserve officials next week to discuss the matter. Mr. Corso said the Federal Housing Finance Agency is aware of the warehouse crisis "and they understand it." One idea being promoted by the industry is to have Fannie Mae and Freddie Mac buy participation interests in warehouse lines, thus adding liquidity to the market. (For more on the story see the Monday, February 9 issue of National Mortgage News.)

Fannie Mae said Thursday that it would no longer require an appraisal or property inspection of some borrowers trying to refinance a Fannie-owned mortgage. Some analysts said the change would have a marginal impact. Starting April 4, Fannie said, its Desktop Underwriter system will validate property values for refis of Fannie loans by means of automated models instead of requiring an appraisal or property inspection. Brian Faith, a Fannie spokesman, said the change and several others would let "potentially millions of current mortgage holders" take advantage of historically low interest rates and "break the logjam in mortgage refinancing." A report by UBS analyst Jena Curro notes that the impact on prepayment speeds will be limited but says, "there are still some possible effects (pressure from lenders and third parties, origination) that should not be overlooked."

Citizens South Bank, Gastonia, N.C., will use all of its $20.5 million in federal Troubled Assets Relief Program money to create a 30-year residential loan program with a starting interest rate of 3.5% in an effort to stimulate the local housing market. The loan program has a maximum rate of 5.5% and waives closing costs. The program will bring together builders and developers, who are Citizens South customers and have extra housing stock or residential lots ready for sale, with consumers who are looking for the best possible mortgage rate. Participating builders and developers will agree to pay the closing costs on the mortgages as a form of assistance to qualified homebuyers. "Recent consumer surveys show that lower interest rates provide people with the assistance they need to purchase a home," Kim S. Price, president and chief executive of Citizens South Bank, said. "We believe this program is the best use of our CPP funds because it promotes home ownership and generates work for builders, developers, construction workers and real estate agents." The start rate of 3.5% is set for the first 24 months; then the loan adjusts to the 5.5% rate. Applicants will be qualified at the 5.5% rate. Citizens South will hold the loans in portfolio.

Bank of America CEO Ken Lewis said Friday the bank -- one of the largest players in residential finance -- will not need or ask for any more TARP funds from the government. In an interview on CNBC Mr. Lewis said the bank does not need more TARP money -- and therefore would not ask for additional assistance. To date the Charlotte-based bank has accepted $45 billion in funds provided under the Troubled Asset Relief Program or TARP. Over the past year the bank acquired the nation's largest subprime lender/servicer, Countrywide Home Loans, as well as Merrill Lynch which owns two large subprime servicing platforms: Home Loan Services, and Wilshire Credit Corp. Merrill was also a top underwriter and investor in subprime ABS and CDOs.

Union Bank of California originated $4.5 billion in mortgages in 2008, a 70% increase from the prior year. "Not to blow our horn but we refrained from all the lending excesses of the past," said Craig Cole, senior vice president of residential lending at the San Diego based bank. Mr. Cole said that Union's mortgage group has hired about 20 people over the past year. "Mostly in the underwriting area to accommodate the volume and growth," he said.

Senate Republicans are trying to revive and refine an interest rate buy-down proposal that would create a 4% mortgage even though the Senate shot down the language on a 35-62 procedural vote. The original buy-down amendment offered by Sen. John Ensign, R-Nev., provided low-rate mortgages to 40 million borrowers at an estimated cost of $300 billion. A majority of senators refused to waive budget procedures to add such an expensive program to the economic stimulus bill. In opposing the Ensign amendment, Sen. Charles Schumer, D-N.Y., said it would not help borrowers with underwater mortgages, adding that a refi surge would not reduce the glut of unsold homes on the market. "It is a totally flawed proposal," he said. One source said Sen. Ensign might pare down the buy-down program and possibly limit it to homebuyers. Sen. Patty Murray, D-Wash., is expected to offer an amendment on Friday that raises the maximum loan limit on Fannie Mae, Freddie Mac and Federal Housing Administration loans back to $729,750 for the rest of this calendar year. A similar loan limit provision is contained in the House-passed Economic Stimulus bill.

The Mortgage Bankers Association -- whose members have been decimated by the credit crisis and rising residential delinquencies -- is making contingency plans to cut staff and re-engineer its organization for leaner times. A spokeswoman for the trade group, which currently employs about 134 full-timers, stressed that no decision on layoffs is imminent. "We are going through a general re-engineering exercise," she told MortgageWire. "We want to make sure MBA is the right size and strong going forward." Former MBA employees said the trade group continues to struggle from poor leasing on its new 10-story headquarters in downtown Washington. The 160,000 square-foot building, which was completed last year, is about half leased. "The building is an albatross around their neck," said one former MBA executive.