Origination

The Federal Home Loan Bank of New York is concerned it may have to take an impairment charge against $2 billion in private-label mortgage-backed securities and has reduced its fourth quarter dividend to 1.1%. The FHLBank has subjected its private-label MBS to a "substantial review," under the "other than temporary impairment" accounting rules that should be completed in late February, according to FHLBank president Alfred DelliBovi. "Based on our current knowledge, we do not expect to record material impairment charges in relation to our non-agency portfolio," Mr. DelliBovi said in a report to shareholders. Once the OTTI review is completed, the board of directors will consider a supplemental dividend. The New York bank paid a 3.5% dividend in the third quarter.

The Federal Trade Commission has challenged the way a Gateway Funding Diversified Mortgage Services LP executive characterized his company's previous pricing practices and the FTC's understanding of them in commenting on a December 2008 settlement between the company and the federal agency related to those practices. In a letter responding to the Horsham, Pa.-based Gateway's president and chief executive Bruno Pasceri's comments denying that his company's past pricing practices were discriminatory and suggesting that the FTC did not understand those practices, Peggy L. Twohig -- associate director in the FTC's Division of Financial Practices/Bureau of Consumer Protection -- said, "In fact, the FTC conducted an extensive investigation, and our analysis was based on a thorough understanding of Gateway's loan pricing practices. On that basis, the commission concluded that Gateway's policy and practice of allowing loan officers to charge discretionary overages resulted in African-Americans and Hispanics being charged higher prices because of their race or ethnicity -- price disparities that were substantial, statistically significant, and could not be explained by factors related to underwriting risk or credit characteristics of the applicants." Ms. Twohig also noted that the commission "voted unanimously to file these fair lending charges." Gateway in December 2008 agreed to pay $200,000 to settle the charges.

Only one-third of financial institutions are using the Internet to send confidential documents to customers, partners and service providers using a secure electronic document delivery solution, according to a recent Wolters Kluwer Financial Services survey. Nearly 62% of the 347 banks, credit unions and mortgage companies responding to the survey said they are using the Internet to transmit confidential documents such as loan disclosures and documents. Of those institutions, however, only one-third say they are using a secure electronic delivery solution. Approximately another third are using traditional e-mail, which does not encrypt customer data. The remainder use less secure document delivery methods such as password protected e-mail and websites, regular or overnight mail, or are not sure of the method they use. According to Jason Marx, vice president and general manager, Mortgage, Wolters Kluwer Financial Services, the recent growth of identity theft and other forms of electronic fraud make it harder to send documents or information safely via traditional mail, e-mail and websites. Even with password protection, he says, fraudsters can hack into these systems to access customer information.

The Senate late Thursday unanimously confirmed Shaun Donovan to be the nation's new housing secretary in the Obama Administration. The former New York City housing commissioner worked at the Department of Housing and Urban Development as a deputy assistant secretary for multifamily housing during the Clinton administration. At his confirmation hearing, Mr. Donovan noted that originations of Federal Housing Administration-backed single-family loans have tripled over the past year. FHA has "capacity issues that require immediate attention," he said. The General Accountability Office released its new list of high-risk agencies on Thursday and it did not include FHA. FHA was removed from the GAO list in 2007. The HUD nominee has pledged to undertake strong enforcement of fair housing laws and to make management reform at HUD a "high priority."

Adding its voice to the forthcoming debate on the future of housing finance, the politically powerful National Association of Home Builders has adopted a five-point policy statement that calls for continued federal support of both the primary and secondary mortgage markets. But the group also wants lenders to share the rate and credit risk investors in mortgages now shoulder alone. As envisioned by the NAHB, the sharing concept would be a "cooperative structure loosely based on the Federal Home Loan Bank model, and lenders would be liable for a "significant portion of the risk" in direct proportion to the volume of loans they sell to Fannie Mae and Freddie Mac. The policy resolution was passed by unanimous vote at the NAHB's annual convention in Las Vegas after President Jerry Howard told the NAHB board that "we need to be very very engaged if the secondary market is to remain intact." The resolution passed through eight committees this week and then the board. Though it cleared its final hurdle with no discussion, during one committee session, Dallas builder Kent Conine, who headed the NAHB in 2003, urged members to move more slowly and run the sharing concept by those it would more directly impact. But Rick Judson, who chaired the Housing Finance Task Force that produced the recommendations, said there already has been "a vocal, good exchange of information" among his members. "No one member agreed with everything," the Mathews, N.C., builder said, "but if implemented, the (task force's) advice will solve a majority of the problems caused by the financial crisis." Noting some would turn the government-sponsored enterprises into public utilities while others would totally privatize the GSEs, Mr. Howard said, "We are concerned about the future of Fannie Mae and Freddie Mac."

Fannie Mae, which has been operating under a government conservatorship since September, has laid off hundreds of workers over the past four weeks, according to sources both inside and outside the mortgage investing giant. At press time, a Fannie Mae source confirmed that "hundreds" of layoffs have occurred but said the company is beefing up its foreclosure and loss mitigation efforts -- particularly in its Dallas office -- and hopes to end 2009 with as many employees as it had in 2008. The GSE issued a statement saying it is "taking steps to realign the company's organization, personnel and resources to focus on our most critical priorities, which include preventing foreclosures to help keep people in their homes and aiding in the recovery." Among the known job cuts, said one individual, are reductions in government affairs, communications, marketing, and technology. "They can't lobby any more so what's the point in having a government affairs division?" said the individual. Freddie Mac also has been quietly laying of workers with more cuts on the way, said one mortgage executive close to the company. "This shouldn't be surprising to anyone," he said.

The Federal Trade Commission has challenged the way a Gateway Funding Diversified Mortgage Services LP executive characterized his company's previous pricing practices and the FTC's understanding of them in commenting on a December 2008 settlement between the company and the federal agency related to those practices. In a letter responding to the Horsham, Pa.-based Gateway's president and chief executive Bruno Pasceri's comments denying that his company's past pricing practices were discriminatory and suggesting that the FTC did not understand those practices, Peggy L. Twohig - associate director in the FTC's Division of Financial Practices/Bureau of Consumer Protection - said, "In fact, the FTC conducted an extensive investigation, and our analysis was based on a thorough understanding of Gateway's loan pricing practices. On that basis, the commission concluded that Gateway's policy and practice of allowing loan officers to charge discretionary overages resulted in African-Americans and Hispanics being charged higher prices because of their race or ethnicity - price disparities that were substantial, statistically significant, and could not be explained by factors related to underwriting risk or credit characteristics of the applicants." Ms. Twohig also noted that the commission "voted unanimously to file these fair lending charges." Gateway in December 2008 agreed to pay $200,000 to settle the charges.

As a result of problems in its mortgage guarantee and title insurance lines of business, Old Republic International Corp., Chicago, has reported a net loss of $126.5 million ($0.54 per share) for the fourth quarter 2008 and a net loss of $558.3 million ($2.41 per share) for the full year. For the same periods one year prior, the company had profits of $20.2 million ($0.09 per share) and $272.4 million ($1.17 per share). The mortgage insurance business had a pretax loss for the fourth quarter of $178.3 million, compared with a $112.6 million loss for same period in 2007. The title insurance segment saw its loss grow to $19.3 million for the fourth quarter 2008 vs. $15.7 million for the year ago period. In its statement, Old Republic said, "Given the continuing downtrend in U.S. economic activity and the substantial dislocations that have enveloped all organizations with housing and mortgage-lending exposures, it is likely that these factors will exert additional earnings pressures throughout 2009 and, at the least, a part of 2010."

The Market Composite Index, an overall measure of mortgage applications, decreased 9.8% on a seasonally adjusted basis to 1195.3 from 1324.8 during the week ended Jan. 16, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. On an unadjusted basis, there would have been an 10.3% decrease compared with the previous week and when compared with the same week one year earlier the index would have increased by 23.1%. The Purchase Index increased 2.5% to 303.1 from 295.8 one week earlier on a seasonally adjusted basis, while the Refinance Index decreased 12.4% to 6491.8 from 7414.1. Refinancings decreased to 83.3% of applications from 85.3% the previous week, while adjustable-rate mortgages accounted for 1.5% of applications, up from 1.1% for the previous week, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages increased to 5.24% from 4.89%, with points (including the origination fee) decreasing to 1.16 from 1.20 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

Single-family housing starts plummeted 13.5% in December from November as a dismal year for builders came to a close in which construction dropped off by nearly 50% from a year ago. The U.S. Census Bureau reported that single-family housing starts declined from a seasonally adjusted annual rate of 460,000 in November to 398,000 in December. The bureau revised November starts upward from 441,000. Construction of new homes fell to 622,400 in 2008 from 1.05 million in 2007 or 48.9%. Total starts were way down as well, off 45% to 550,000. The National Association of Home Builders is forecasting that single-family starts will fall another 26% in 2009. "Clearly, conditions in the nation's housing market aren't getting any better, and they aren't going to get any better until the federal government takes substantial action to encourage qualified buyers to get back in the market," NAHB chairman Sandy Dunn said. The builders are urging Congress to approve an interest rate buy-down program along with more generous homebuyer tax credits.