Origination

Firms that securitize mortgages and other assets will have to take a 10% first loss position on any new issuances under draft legislation being discussed in Congress. House Financial Services Committee chairman Barney Frank, D-Mass., said requiring a first loss hit for securitizers would stop Wall Street firms from providing liquidity on mortgages that borrowers cannot repay. Rep. Frank, a key player in any MBS related legislation, noted that assignee liability on MBS failed to stop bad underwriting practices during the subprime boom. The committee chairman is working with the Senate Banking Committee and Treasury Department in drafting proposals that the Obama Administration will present at an international summit on systemic risk in April.

Otéra Capital, a Montreal-based commercial real estate financing subsidiary of the Caisse de dépôt et placement du Québec, is purchasing the ownership interest held by Todd Schuster in the Needham, Mass.-based commercial real estate finance company CW Financial Services. Otéra will now control 81% of the firm. Mr. Schuster, who had been chief executive of CWFS, has resigned. He is being replaced by Charles Spetka, president of CWCapital Investments and CWCapital Asset Management, which are units of CWFS. Michael Berman will assume the role of CEO of CWCapital, the company's Fannie Mae DUS, Freddie Mac and FHA lending entity. Mr. Berman has served as president of CWCapital since 1991 and will report to Mr. Spetka in this new role. In a statement, Mr. Schuster said since CDP invested in CWFS in 2002, "annual loan production has grown from $600 million to a peak of nearly $3 billion, the loan servicing portfolio has grown from $3 billion to $10 billion, and we launched both an investment management business which currently has $11 billion of assets under management, and a special servicing company that is named servicer on $174 billion of underlying collateral."

Adjustable-rate mortgage lending fell sharply last year as the initial payment savings disappeared, according to a survey by Freddie Mac. "Our survey found that starting rates for conforming 1-year ARMs averaged 1.76 percentage points above their fully-indexed rate, the largest rate premium observed since Freddie Mac began collecting ARM data in 1984," said Frank Nothaft, chief economist at the firm. In addition, with rates on conforming, 30-year, fixed- mortgage rates falling to a 50-year low, consumers could find FRMs at rates about the same or in some cases lower than the initial rate on an ARM loan. In December, the ARM share of loan applications fell to 3%, the lowest ever recorded in Freddie Mac's survey. During the peak of the housing boom, the ARM share was around 36%, Freddie Mac said.

Genworth Financial Home Equity Access Inc., Richmond, Va., a reverse mortgage lender once known as Liberty Reverse Mortgage Inc., is expanding its wholesale lending operations. It cited the increased number of companies (more than 1,300) that started a reverse mortgage lending program in 2008; most of those broker loans through a larger lender like Genworth. Genworth also said recent changes at other wholesale reverse mortgage lenders have shown a need for additional capacity. The company has created an inside sales division to build relationships with new reverse mortgage lenders. It will be headed up by Bob Marseilles, national wholesale manager; most recently he was with Financial Freedom. Genworth has also hired four regional account managers to work with mortgage brokers on the east coast. They are: Barbara Chearney, who covers Maryland, Virginia and the District of Columbia; Gina Monopoli, New Jersey and Southern Pennsylvania; Kirk O'Connor, New England; and Tim Frederick, Alabama, Eastern Florida and Georgia.

Lend America, a non-depository FHA lender based in Melville, N.Y., expects its origination volume to increase by almost 80% this year to $2.5 billion. The privately held company - which also will announce a new product launch this week - forecasts its servicing portfolio will grow to $1.5 billion by year-end, compared to just $223 million at the end of December 2008. Lend America is headquartered in an office building which once housed executives for American Home Mortgage, a non-depository alt-A and conventional lender/servicer that went bankrupt in the summer of 2007. A spokesman for the company provided the estimates to MortgageWire. Lend America uses warehouse lines to finance its production.

FirstFed Financial Corp., Los Angeles, which recently shut its mortgage wholesale production operations, lost $244.8 million ($17.91 per share) in the fourth quarter of 2008 because of a $220 million provision for loan losses. The company is now operating under an Office of Thrift Supervision cease and desist order. Its level of delinquent mortgage loans was affected by adjustable-rate mortgages which had reached their maximum allowable negative amortization and required an increased payment. In 2008, there were 1,741 loans with a total balance of $802.3 million that were scheduled to recast; in 2009, there are an additional 913 loans, with a total balance of $396 million set to recast. FirstFed chief executive Babette Heimbuch said "we are focused on modifying our adjustable-rate loans where possible so that borrower payments are affordable and stable." The company has $403.8 million in non-accrual single-family mortgage loans as of the end of last year, down from $445.2 million at the end of the third quarter.

The benchmark 10-year Treasury yield, while remaining historically low, has climbed back to levels seen before its steepest plunge in December. The yield was near 2.8% as of noon on Monday, up from lows below 2.2% late last year. The yield generally has been rising recently but that could change as a federal purchase program for Treasury bonds is being considered.

Genworth Financial Home Equity Access Inc., Richmond, Va., a reverse mortgage lender once known as Liberty Reverse Mortgage Inc., is expanding its wholesale lending operations. It cited the increased number of companies (more than 1,300) that started a reverse mortgage lending program in 2008; most of those broker loans through a larger lender like Genworth. Genworth also said recent changes at other wholesale reverse mortgage lenders have shown a need for additional capacity. The company has created an inside sales division to build relationship with new reverse mortgage lenders. It will be headed up by Bob Marseilles, national wholesale manager; most recently he was with Financial Freedom. Genworth has also hired four regional account managers to work with mortgage brokers on the east coast. They are: Barbara Chearney, who covers Maryland, Virginia and the District of Columbia; Gina Monopoli, New Jersey and Southern Pennsylvania; Kirk O'Connor, New England; and Tim Frederick, Alabama, Eastern Florida and Georgia.

It's official: Total housing production in California in 2008 slammed to the lowest level on record, according to the California Building Industry Association. Just 65,380 building permits were issued statewide last year for new homes, condominiums, townhouses and apartments, the trade group said. That's down 42 percent from 2007 and 69 percent -- 147,580 units - compared to 2004, the peak of the current cycle. Continuing the industry's siren call for help in bringing buyers back into the market, CBIA President Robert Rivinius said a temporary tax credit enacted in the 1970s during a similar downturn did the trick back then and could do so again. Just a few months after the credit was put in place, sales had increased by 100 percent, Mr. Rivinius said. And within two years, construction in the Golden State was back to normal levels. He also said the state's lagging economy is not likely to recover until homebuilding does. "Because homebuilding has declined so dramatically, California has lost nearly 300,000 jobs and $46 billion in economic impact in just the last three years, enough to plug the budget deficit and lift our economy out of the doldrums," he said. "New-housing construction creates jobs, generates revenue for state and local coffers and puts California back on the path to economic recovery."

Citing its strong loan production, Fidelity D & D Bancorp Inc., Dunmore, Pa., declined to participate in the U.S. Treasury Department's Troubled Asset Relief Program Capital Purchase Program, even though the government had approved its entry. It said it had ample liquidity to fund loans for the foreseeable future. Steven C. Ackmann, president and chief executive, said, "We are well-capitalized, solid, and continue to invest in our community. Because we are so well capitalized, we felt our customers and shareholders would be better served by not participating in the Treasury program." The lender continues to fund consumer, mortgage and commercial loans. In the fourth quarter Fidelity D&D originated $12 million in residential mortgages, and $40 million in commercial.