Origination

Congress returns Jan. 6 to start a new session and House Financial Services Committee chairman Barney Frank, D-Mass., has already scheduled hearings on the Federal Housing Administration and the future use of Troubled Asset Relief Program funds. The FHA hearing on Jan. 9 will focus on the agency's oversight of FHA lenders. FHA single-family originations have tripled over the past year and more and more lenders are applying to make FHA loans. On Jan. 7, chairman Frank will hold a hearing on how the new administration should use the remaining $350 billion in TARP funds. The chairman has been critical of the Bush administration for failing to fund foreclosure prevention programs and for simply capitalizing banks without any lending or reporting requirements.

The Financial Accounting Standards Board is on track to give investors in mortgage-backed securities a break in the way they determine other-than-temporary impairment for their fourth quarter financial reports. FASB has issued a proposed staff position (FSP) that amends an impairment model, which required financial institutions to use "their best estimate of the cash flows that a market participant would use in determining the current fair value" of MBS. The FSP drops "market participant" and allows management to make a "reasonable judgment" of future cash flows, which should reduce charges if the securities are performing. The comment period on the proposed FSP EITF Issue 99-20-a ends Dec. 30. The Seattle Federal Home Loan Bank recently reported a $49.8 million "other than temporary impairment" charge against three private-label MBS. The FHLBank said it only expects to see a $4.9 million principal loss over the life of the three securities.

Distressed sales in Florida during November continued to boost the state's existing home market on a year-to-year basis but Realtors say buyers there and nationwide have yet to fully return to the market. The Sunshine State saw existing home sales rise 4% year-to-year to 8,751 during the month when the median price, at $158,300 was down 27% compared to a year ago, according to the Florida Association of Realtors. "Market conditions nationwide continue to vary with solid sales gains in some areas, including many Florida markets," said the National Association of Realtors. "We have favorable affordability conditions, but we need more than that to give buyers with jobs the confidence they need (to return to the housing market)," said NAR chief economist Lawrence Yun.

The average rate on the 30-year fixed-rate mortgage dropped to another new low during the week ending Dec. 24, according to Freddie Mac. The average 30-year FRM rate was 5.14%, down from the low of 5.19% seen the week before and from 6.17% the same week a year ago. The average 15-year FRM rate was 4.91%, a drop from 4.92% the previous week and 5.79% the year previous. The average 15-year rate has not been lower since April 1, 2004 when it was 4.84%. The average rate on five-year hybrid adjustable-rate mortgages fell to 5.49% from 5.60% the week before and 5.90% a year ago. The average rate on one-year Treasury ARMs inched up to 4.95% from 4.94% but was down from 5.53% a year ago. Average points were 0.8 for 30-year FRMs, 0.7 for 15-year FRMs, 0.6 for five-year hybrid and one-year Treasury-indexed ARMs. "Interest rates on 30-year fixed-rate mortgages eased for the eighth straight week and set another record low since Freddie Mac's survey began in 1971," said Frank Nothaft, Freddie Mac's vice president and chief economist.

The newly revised Appraisal Code of Conduct will not require lenders to fire in-house appraisers or sell-off their interests in affiliated appraisal shops, which raised so much controversy earlier this year when the code was first proposed by Fannie Mae and Freddie Mac, along with their regulator, and the New York Attorney General. The revised code does not rely on "unwieldy procedural prohibitions" to ensure appraiser independence, according to the Mortgage Bankers Association. "This will permit lenders and others to use their existing appraiser independence and quality control practices rather than mandate structural reorganization," MBA associate vice president Michael Carrier said. The code of conduct proposed back in March as part of a settlement with AG Andrew Cuomo, banned lenders from using affiliated appraisal shops. The Office of the Comptroller of the Currency threatened legal action to block its implementation. When asked about the revised code, an OCC spokesman said officials have no comment at this time.

A surge in refinance applications pushed the Mortgage Bankers Association mortgage composite index up 48% to 1245.4 for the week ending Dec. 19 from 841.4 the previous week. "The refinance index increased 62.5% to 6758.6 on a seasonally adjusted basis and the purchase index increased 10.6% to 316.5. "The refinance share of mortgage activity increased to 83.2% of total applications from 76.9% the previous week," MBA said. Borrowers are taking advantage of falling mortgage rates and going for fixed-rate financing. Less than 1% of applications involved adjustable-rate mortgages. The 30-year fixed-rate mortgage averaged 5.04% during the week of Dec. 19. But MBA economist Orawin Velz said she does not expect rates to go much lower. Nevertheless, the MBA associate vice president for forecasting expects refinancings will jump from $165 billion in the fourth quarter to $230 billion in the first quarter.

The Department of Housing and Urban Development is terminating the FHA Secure program for refinancing delinquent borrowers, but it is still keeping one option that made it easier for borrowers with second liens to refinance into a Federal Housing Administration loan. "While FHA will retain its standard rate and term refinance program for borrowers who are current on their existing mortgages, the FHA Secure program ... will terminate on Dec. 31, 2008," HUD says in a letter to FHA lenders. In a separate mortgagee letter, FHA updates its refinancing guidelines and said it will allow borrowers to re-subordinate second liens, which was an option provided under FHA Secure. FHA also has tightened its appraisal requirements on cash-out refinances where the loan-to-vale ratio is above 85%, according to Bud Carter, an FHA consultant with Potomac Partners. "FHA now requires two appraisals on cash-out refinancings above an 85% LTV, regardless of the amount of the loan," Mr. Carter said. Previously, FHA required two appraisals only if the loan amount was above $417,000.

The American Land Title Association's third-quarter results continue to show accelerating losses, but the Washington-based trade group said it feels the industry remains in a relatively strong financial position thanks to its asset levels. ALTA said the title industry saw an operating loss of $332.1 million in the third quarter, compared to an operating gain of $168.7 million for same period in 2007. The former period "marked the 10th consecutive quarter in which title premiums written declined from the prior year's equivalent quarter," ALTA said. "Despite these struggles, the industry remains in a very strong financial position with admitted assets of over $9.5 billion, including over $8 billion in cash and invested assets," the association said. "Also, statutory reserves were in excess of $5.3 billion and statutory surplus was up almost $2.6 billion," it added.

WinTrust Financial Corp., Lake Forest, Ill., has acquired certain assets and assumed certain liabilities of the Downers Grove, Ill.-based Professional Mortgage Partners' mortgage banking business and named PMP's president to an executive post within WinTrust's mortgage subsidiary. WinTrust said a "significant portion" of the cash transaction's purchase price is conditional based upon "certain future profitability measures. The Lake Forest, Ill.-based company also said the deal is not expected to have a material effect on its 2008 or 2009 earnings per share. PMP president Barton Pitts has been named executive vice president of Wintrust Mortgage Corp. as part of the transaction. Terms of the deal were not otherwise disclosed. "The addition of the staff hired from PMP and their offices will create one of the strongest mortgage lenders in the Chicago area," said David Hrobon, president of Wintrust Mortgage Corp. "Combined we will have more than 500 employees, 27 retail offices and, based on historical results, almost $3 billion in annual mortgage originations."

A Freddie Mac report shows the agency expanded its mortgage portfolio by over $40 billion in November, but its issuance of mortgage-backed securities remains relatively meager. The secondary market agency said it purchased $10 billion of its own MBS in November for its investment portfolio, which totaled $805.4 billion as of Nov. 30. However, Freddie issued only $14.5 billion in MBS in November, up slightly from $13.5 billion in October. Ginnie Mae issued $27 billion in single-family MBS in November. Freddie's monthly report also shows that single-family mortgage defaults continue to rise at a fast clip. Since October, loans 90-days or more past due are up 18 basis points to 1.52% as of Nov. 30. In November 2007, only 0.6% of Freddie guaranteed loans were seriously delinquent.