Origination

The Market Composite Index, an overall measure of mortgage applications, increased 8.6% on a seasonally adjusted basis to 795.4 from 732.1 during the week ended Jan. 30, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. On an unadjusted basis, there was an increase of 28.1% when compared with the previous week but a decrease of 26.9% when compared with the same week in 2007. The Purchase Index decreased 11.2% to 261.4 from 294.3 one week earlier on a seasonally adjusted basis, while the Refinance Index increased 15.8% to 3906.3 from 3373.9 the week prior. Refinancings increased to 73.2% of applications from 72.8% the previous week, while adjustable-rate mortgages accounted for 2.1% of applications, down from 2.4% for the previous week, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages increased to 5.28% from 5.22%, with points (including the origination fee) increasing to 1.12 from 1.05 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

In response to declining home values, Freddie Mac is increasing delivery fees for certain high LTV and low FICO score mortgages, effective April 1. Some wholesalers -- in response to Freddie's actions and similar changes implemented by Fannie Mae -- are implementing price increases, especially on condominium loans. One broker provided an e-mail from Taylor Bean & Whitaker that notes, "As a result of recently announced Freddie Mac revised delivery fees, TB&W will implement new price adjustments on any loan locked on or after Feb. 4, 2009 with the issue of the rate sheet posted in the morning." A TB&W account executive did not return a telephone call about the matter. The hikes in delivery fees ultimately will be paid for by the consumer who will see an increase in his closing costs. Besides high LTV loans and low FICO scores, increases in delivery fees are coming on cash-out refis, condominiums, and certain ARMs. A Freddie Mac spokesman said the GSE is increasing its fees because of "market dynamics." The changes in fees are outlined in a Freddie bulletin dated January 30.

The Mortgage Bankers Association Tuesday afternoon asked Congress to provide short-term government guarantees on warehouse lines of credit to address what it believes is a liquidity crisis facing non-depository residential funders. The trade group also thinks it might be a good idea to allow Fannie Mae and Freddie Mac to buy participations in warehouse lines of credit, a move it thinks will add liquidity to the sector. In years past mortgage bankers -- and warehouse executives -- were adamantly opposed to allowing the GSEs to get anywhere near the warehouse niche. MBA claims warehouse lending capacity has shrunk to just $25 billion or so compared to $200 billion two years ago. "This sub-crisis is the result of a shortage of warehouse lines of credit, meaning independent mortgage bankers are doubly hamstrung to originate new mortgages threatening their viability," said MBA chief John Courson in written testimony before the House Financial Services Committee. According to exclusive survey figures compiled by National Mortgage News, there are just 10 or so active warehouse lenders compared to 30 two years ago. Many warehouse providers have either failed or closed down that line of business including most of the Wall Street firms that played in the space. Active warehouse firms include Horizon Bank, Flagstar, GMAC-RFC, National City, and a few others. MBA wants the government to provide federal guarantees on warehouse lines for 12 to 24 months -- but only on Fannie Mae, Freddie Mac and government-backed loans, which currently accounts for most of the market.

AllRegs, Eagan, Minn., has created a new certification program for residential mortgage underwriters of government loans. The program is offered through AllRegs Academy and will give participants the designation of Residential Government Underwriter. Those seeking the designation must have two years experience in the mortgage industry, with an emphasis in underwriting, processing, government lending, risk analysis or quality assurance. They also must complete 12 hours of education with a passing score of 75% or above and pass an examination. The coursework includes underwriting, appraisal and compliance programs; Federal Housing Administration and Veteran's Administration underwriting courses; and courses in the USDA's Rural Housing program. Once certified, designees must renew their RGU every two years by successfully completing approved education courses.

Banks have significantly tightened their underwriting standards on commercial real estate loans since the shutdown of the commercial mortgage-backed securities market last year, but the shutdown has not hurt loan volume, according to a Federal Reserve Board survey of senior loan officers. Only seven out of 53 U.S. banks reported a reduction in CRE lending during the second half of 2008. "About 30% indicated the shutdown of the CMBS securitization market had led to an increase in CRE lending," the Fed said in a summary of the responses to its January survey. About 95% of the surveyed banks said they increased their loan-rate spreads on CRE loans, 80% tightened their loan-to-value ratios and 70% tightened their debt-service ratios. Meanwhile, 45% of the 51 banks engaged in residential mortgage lending said they have tightened their lending standards on prime loans over the past three months. Only 10% reported weaker demand for prime loans, compared to 50% in the October survey.

Citigroup, New York, said it authorized the use of $25.7 billion of Troubled Asset Relief Program Funds for its residential mortgage activities in the fourth quarter 2008 but only an undisclosed portion of the money was spent during that period. That is by far the biggest chunk of the $36.5 billion of TARP money authorized for use during that period. The company said it made $75 billion in new loans of all types during the fourth quarter. The report also covered Citi's activities with troubled residential mortgage borrowers. The company said it has worked with approximately 440,000 homeowners whose mortgages totaled $43 billion since the start of the housing crisis in an effort to prevent foreclosure. In 2008, Citi said it kept approximately four out of five distressed borrowers whose loans it serviced in their homes. Citi said it is adopting the streamlined model for post-delinquency modification programs developed by the Federal Deposit Insurance Corp. In addition, through the Citi Homeowner Assistance Program, it is reaching out to those who may be experiencing some form of economic distress although they are current on their mortgage payments.

Private mortgage insurance companies finished 2008 with the second worst month of the year in terms of primary new insurance written and its worst month of the year in terms of the cure/default ratio. And December's numbers included information from a company which hadn't reported in almost five and one half years. According to the Mortgage Insurance Cos. of America, in December, the private mortgage insurers had $7.2 billion of primary new insurance written, all but $28.4 million through the traditional channel. The December statistics included data from Radian Guaranty Inc., Philadelphia, which recently rejoined the group after leaving in a dispute over its title insurance alternative in July 2003. In November, MICA members had volume of $5.8 billion, while, in December 2007, they had volume of $26 billion. The inclusion of Radian in the data has brought the primary insurance in force up to $952.2 billion; without Radian and Triad Guaranty, which is in runoff, this was $799.5 billion in November. New pool risk written was $8.1 million, the best month of the fourth quarter. The cure/default ratio crashed to 47.3%, with 49,749 cures and 105,110 defaults reported.

Even though the U.S. housing market is still flat on its back, there were signs of improvement in December, according to the National Association of Realtors' pending home sales index. But NAR president Brian McMillan, a broker with Coldwell Banker, is warning that a rebound in the market is not necessarily afoot. "Housing activity remains weak compared with potential demand and the market is fragile given the economic drop," he said. NAR's pending home sales index (PHSI) rose to 87.7 in December, the best reading since September. The biggest improvements in the PHSI came in the Midwest and South with declines in Northeast and West. NAR's index, as the name indicates, is based on pending sales of existing homes where a contract for sale has been signed. The higher the index, the healthier the housing market is. Falling interest rates and declining home prices have been credited with the improvement.

Mortgage banker Residential Capital Corp. -- whose parent recently completed a huge debt swap with bond holders -- continued to bleed red ink in the fourth quarter, posting another huge loss as both its loan fundings and servicing rights suffered. ResCap, which late last year closed its wholesale channel, funded $8.5 billion in home mortgages in the fourth quarter, a 59% decline from the fourth quarter of 2007. Its servicing portfolio fell to $393.8 billion at year-end 2008 from $453.3 a year earlier. Moreover, its non-accrual rate spiked to 23.93% at December 31, compared to 12.13% twelve months earlier. ResCap, a subsidiary of GMAC Financial Services, lost $981 million in the fourth quarter and $5.6 billion for the year. The loss comes despite the fact that it posted a $754 million gain on a debt swap with bondholders. GMAC, on the other hand, earned $7.46 billion in the fourth quarter thanks to proceeds from its debt swap, which extinguished billions of dollars in liabilities. GMAC said that overall the debt swap improved its results by a stunning $11.4 billion. GMAC, partly owned by General Motors and hedge fund giant Cerberus Capital, recently received $5 billion in government TARP money.

Senate support for adding a housing component to the economic stimulus bill is growing and a proposal by minority leader Mitch McConnell, R-Ky., to include a 4% mortgage rate buy down program is gaining bi-partisan interest. "This proposal has been getting a lot of attention from many different sources and it appears that Congress is very seriously considering it," said Francis Creighton, the Mortgage Bankers Association's chief lobbyist. National Association of Home Builders chief executive Jerry Howard said senators realize that they have to do more to fix the housing market and stimulate home sales. The builders support what Sen. McConnell is trying to do. "I am not sure that 4% is enough to have the kind of stimulus impact we are pushing for," the NAHB CEO said. The builders have been lobbying for a buy down program that will provide a 2.9% mortgage rate for the first half of 2009 and a 3.9% rate in the second half. The National Association of Realtors is backing the McConnell proposal. But the MBA wants to see how it is structured and how it will be phased out. If the buy down program expires in 18 months, MBA is concerned a sudden jump in mortgage rates could be disruptive.