Origination

The Mortgage Bankers Association is now supporting the creation of a national mortgage regulator, the group's chief executive John Courson said in a meeting with the SourceMedia Mortgage Group editorial staff. The industry has lost its credibility and its image has been tarnished across the board. To restore that credibility, the industry needs to take bold actions, he declared, and there now is the opportunity for "a do-over." This includes "aggressively" seeking federal regulation of nondepository mortgage lenders. Mr. Courson pointed to the patchwork of state regulatory schemes, noting that there are some states where it is virtually non-existent. There is still room for state regulators, in terms of examinations, audits and enforcement, he said. But there needs to be a federal regulator to set the bar and that bar needs to be set high enough to be credible. Another topic of discussion was the future of the secondary market. Mr. Courson said MBA held a summit that brought together parties across the spectrum of divergent views of what should be done regarding Fannie Mae and Freddie Mac. The result was a paper that Mr. Courson described as a starting point for what to do. It discusses several models but does not advocate any particular one.

Continued writedowns on mortgage trading positions and leveraged loans totaling $2.9 billion pretax contributed "largely" to "disappointing" fourth quarter 2008 results at JPMorgan Chase, but the company also noted that there also were some positive mortgage-related developments during the period. The company produced $702 million in net income during the quarter, a result chairman and chief executive Jamie Dimon said was "very disappointing" and "driven by a loss in investment banking largely attributable to continued markdowns on leveraged loans and mortgage trading positions, as well as weak trading results." But the company also noted that it received an $854 million after-tax benefit from mortgage servicing risk management and touted more than $100 billion in "safe and sound lending activities" in areas that included home equity and mortgage. It also said it made "significant enhancements to mortgage modification programs" during the fourth quarter.

The 30-year fixed-rate mortgage averaged 4.96% with an average 0.7 point for the week ending January 15, 2009, representing a decline from 5.01% last week and its first time below 5%, according to Freddie Mac. Last year at this time, the 30-year FRM averaged 5.69%. Similarly, five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.25%t his week, with an average 0.6 point, down from last week when it averaged 5.49%. A year ago, the 5-year ARM averaged 5.4% and it has not been lower since the week ending September 8, 2005, when it averaged 5.24%. Also, the one-year Treasury-indexed ARMs averaged 4.89% this week with an average 0.5 point, down from last week when it averaged 4.95%. At this time last year it averaged 5.26%. However, the 15-year FRM this week averaged 4.65% with an average 0.7 point, up from last week when it averaged 4.62 percent. A year ago at this time, the 15-year FRM averaged 5.21%. "Interest rates for 30-year fixed rate mortgages fell for the 11th straight week to another record low, due in part to the slowing economy and government actions," said Frank Nothaft, Freddie Mac vice president and chief economist. "So far, both the U.S. Treasury Department and the Federal Reserve have added over $100 billion in liquidity to the mortgage market since September 2008, which put downward pressure on interest rates for fixed-rate mortgages."

Deutsche Bank reduced its exposure to problematic commercial real estate loans to less than half its previous size in the fourth quarter of 2008, but it still estimates it will take a 4.8 billion euro ($6.3 billion) after-tax loss for the period from other writedowns. The German company said its commercial real estate loans (held on a fair value basis, net of risk reduction) had declined to less than 3 billion euros (less than $3.9 billion) by the end of the fourth quarter from 8.4 billion euros ($11.1 billion) at the end of the third. Deutsche Bank said its preliminary loss estimates for the fourth quarter "reflect exceptional market conditions, which severely impacted results in the sales and trading businesses, most notably in credit trading including its proprietary trading business, equity derivatives and equities proprietary trading." It said the loss "also reflects exposure reduction and other de-risking measures, a significant increase in provisions against certain of our monoline counterparties, and certain other exceptional gains and charges, including reorganization charges."

The Market Composite Index, an overall measure of mortgage applications, increased 15.8% on a seasonally adjusted basis to 1324.8 from 1143.8 during the week ended Jan. 9, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. On an unadjusted basis, there would have been a 95.7% increase compared with the previous week and when compared with the same week one year earlier the index would have increased by 52.4%. The Purchase Index decreased 14.1% to 295.8 from 344.2 one week earlier on a seasonally adjusted basis, while the Refinance Index increased 25.6% to 7414.1 from 5904.5. Refinancings increased to 85.3% of applications from 79.8% the previous week, while adjustable-rate mortgages accounted for 1.1% of applications, up from 0.9% for the previous week, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.89% from 5.07%, with points (including the origination fee) increasing to 1.2 from 1.16 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

Bank of America says that it will remain in the wholesale channel and even sees some potential growth in the broker lending niche. "We see opportunities in the wholesale business," said a company spokesman who called the decision by JPMorgan Chase to exit the channel "interesting." He added that, "We have the scale and ability to grow the relationships we have today." BoA, which bought Countrywide Financial Corp. this past summer, has 8,000 approved brokers working for the company. About two years ago CFC had 30,000 approved brokers. Since buying the lender speculation has been rampant that in time BoA would exit the channel but the bank has repeatedly shot down such speculation. According to figures compiled by National Mortgage News, BoA ranks sixth among wholesale lenders with a market share of 4.84%.

The incoming administration of Barack Obama wants to revamp the Hope for Homeowners program to make the Federal Housing Administration refinancing initiative more "effective," according to Shaun Donovan, Obama's nominee to be the new Housing and Urban Development secretary. Mr. Donovan told the Senate Banking Committee at his confirmation hearing that he is taking an active role in developing a "bold, comprehensive" foreclosure prevention effort that Mr. Obama has advocated. The former New York City housing commissioner and HUD deputy assistant secretary said the H4H program would be an "important piece" of the foreclosure prevention plan. And he said the Federal Deposit Insurance Corp. plan that provides loan guarantees for newly modified loans is "promising." But they want to make sure the incentives are structured to reduce re-defaults and minimize taxpayer costs. The Senate is expected to confirm Mr. Donovan to be the new HUD secretary next week after Mr. Obama is sworn in as president.

Taking umbrage at both JPMorgan Chase's decision to exit the wholesale channel and blaming brokers for poor loan quality, the current president of the National Association of Mortgage Brokers declared that the bank "will have a new competitor" on its hands. In an interview with National Mortgage News, NAMB chief Marc Savitt said, "Chase just dissolved a partnership. We are going to go out there and compete against them using other relationships. We will be using the products of others to go against their products." Mr. Savitt was also angered by comments a JPM spokeswoman made concerning retail loan quality being superior to wholesale. "Chase has told me that in person too -- that their retail delinquency rates are lower," he said. "But brokers do not approve loans. Brokers do not underwrite loans. Those decisions are made by the underwriter. That would be Chase." According to figures compiled by NMN and the Quarterly Data Report, Chase is the nation's largest wholesale funder (as of the third quarter). But Mr. Savitt said he is not particularly concerned about another large wholesaler exiting the market. "There are other lenders with programs out there," he said. He added that as recently as December a representative from Chase told him the bank would be remaining in wholesale. But a source at the bank said the move away from wholesale had been in the works for several months.

Unemployed mortgage professionals should look into working in Billings, Mont., according to one workforce solutions provider. Adecco USA says it has demand for more than 200 mortgage professionals in that locale, which it said is one of the strongest job markets in the nation and has a low unemployment rate of 3.3%. Tasha Mills, Adecco's Billings branch manager, said, "the need for mortgage talent in the area is very hot right now. Mortgage professionals who were negatively impacted by the housing crisis are now in high demand again and should take the opportunity to apply for these great mortgage industry jobs now."

The inventory of distressed homes in Orange County, Calif. - one of the hardest hit real estate markets in California - dropped slightly over the past few weeks. According to a report by Altera Real Estate of Mission Viejo, the inventory of distressed homes (short sales and foreclosures) fell by 401 units over the past month, bringing the total to 5,118, the lowest reading since March of 2008. Distressed homes account for 45.3% of the homes-for-sale inventory, a slight decline over the past few weeks. Altera's findings were first reported by The Orange County Register. Roughly 79% of distressed homes are priced under $500,000.