Origination

Declines in the weekly 30-year fixed mortgage rate and a key benchmark bond yield to lows never before seen in their recorded histories may put the deeply-cut origination business back in hiring mode by early next year - if it is sustained and all the stars are aligned. "That is a big 'if,'" said Art Frank, director and head of mortgage-backed securities research at Deutsche Bank Securities. A lot of other factors would have to fall into place, but it is possible, said Dennis Hedlund, founder and president of regional industry data forecast firm iEmergent. One originator, Lendability, already has had to speed up its timetable for existing hiring due to the lower rates, according to chief executive officer Paulo LaGreca. The average rate on a 30-year fixed-rate mortgage during the week ended Dec. 18 fell to 5.19% from 5.47% and, according to Freddie Mac, this was the lowest it has ever been since it started its rate survey in 1971. A Freddie spokeswoman said the lowest it had gotten previously was 5.21% in June 2003. Also the 10-year Treasury yield, a mortgage benchmark, has dropped sharply to near 2.1% and hit a low not ever before seen in the recorded trading history of that bond, which goes back to the 1950s. "We're at the lowest levels we've ever seen," said David Ader, head of government bond strategy at RBS Greenwich Capital. The last time the 10-year yield even approached this level was in 1954, when it hit a low of 2.29%, he said.

Gateway Funding Diversified Mortgage Services, Horsham, Pa., has agreed to pay $200,000 to the Federal Trade Commission to settle charges that it engaged in discriminatory lending practices, even though it refutes the allegations. The FTC had originally levied a $2.9 million judgment against the non-bank lender, which was once headed by a top officer of the Mortgage Bankers Association. Gateway had been battling the FTC for three-and-a-half years. The agency alleged that in 2004 and 2005 the lender violated the Equal Credit Opportunity Act. During these two years, Diversified was managed by Regina Lowrie, who served as annual chairman of the Mortgage Bankers Association for 2005/2006. The FTC alleged that Gateway allowed its loan officers to charge overages that resulted in African-Americans and Hispanic applicants paying higher fees and interest rates than whites. But Gateway president and chief executive Bruno Pasceri says the company uses the term overage in an unusual way and it does not mean loan officers can charge overages. "We tried to explain," he said. "But they could not get their heads around that we don't operate like other people." FTC began its investigation in 2005 when Ms. Lowrie was president and CEO of Gateway and MBA chairman. She could not be reached for comment. She left Gateway about two years ago. "We do not discriminate," Mr. Pasceri said. "The only we reason we agreed to settle is because the legal fees are destroying us. Our legal bills were $100,000 a month," he added.

Houston may be one of the country's top performing real estate markets, but it is still suffering right along with most other places. Sales in November were off 33.7% from the same month a year ago, according to the Houston Association of Realtors. It was the 15th straight month that the number of sales in Houston has declined. On the bright side, though, rentals were up - 16% for single-family residences and 2.8% for townhouses and condominiums - as people wait out the economic storm. "Houston consumers are understandably cautious as they absorb news about layoffs, declining oil prices and other negative financial reports," said Michael Levitin, HAR chairman and principal of HTownRealty.com. "Many are opting to rent property for the time being." Despite being held up by the chief economist of the National Association of Realtors as a Mecca of stability, Houston also saw the average price of a single-family house drop 7% in November, from $201,862 last November to $187,766 now. The total number of sales fell from 5,887 to 3,906. Currently, according to HAR, the number of active listings for sale on the local multiple listing service totals 47,354, which is the lowest number since December 2006. That's only a six-month supply compared to 10 months nationally, based on how long it will take to deplete current active inventory based on the prior 12 months' sales activity.

Existing home sales in California are expected to increase by 12% this year, according to the state's Realtor group. But the jump is largely attributable to the sale of distressed properties at heavily marked down prices. Nearly one in five of the 395,600 sales projected for 2008 will be because the property was in default and the houses were sold either via a short sale or at foreclosure, the California Association of Realtors said in its annual state of the housing market report. Also, when all is said and done, almost one in four sales will result in a loss for the seller, said CAR chief economist Leslie Appleton-Young. "Price declines eliminated equity gains," she said. The number of sellers who sold their home with a loss almost doubled from 11.9% in 2007 to a record-setting 22.2% in 2008, well above 1.9% in 2006, and almost triple the long-term average of 7.7%. However, long-term owners who have not refinanced or removed equity from their homes were less likely to experience a loss. Only 3% of sellers who owned their homes for more than five years had a net cash loss from their home sale, while 47% who owned their homes for less than three years had a net cash loss. The median price of existing homes sold this year declined 17.5% to $440,000. That's the largest drop in the median since the inception of the study, surpassing the record decline of 10.2% set in 1995. Ms. Appleton-Young said the market will continue to experience falling prices into 2009.

Multifamily vacancy rates are forecast at 5.8% in the third quarter of 2009, unchanged from the third quarter of this year. According to the latest "Commercial Real Estate Outlook" by the National Association of Realtors, markets with the tightest vacancies include San Diego, Northern New Jersey and Boston, with vacancy rates of 4.2% or less. Areas with the highest vacancies include Jacksonville, Fla.; Phoenix; and Orlando, Fla., with vacancies of 8.5% or higher. Average rent is projected to grow 2.9% in 2008 and 2.8% next year. Multifamily net absorption should be 24,400 units in 59 tracked metro areas this year and 142,000 in 2009.

The New York Stock Exchange has informed Flagstar Bancorp Inc., Troy, Mich., that it no longer satisfied one of the exchange's standards for continued listing, namely that the closing price of its common stock was under $1 per share for 30 consecutive trading days ending on Dec. 9. Flagstar has 10 days to notify the NYSE of its intent to cure the pricing deficiency. Under NYSE policy, to cure this deficiency, Flagstar's common share price and the average share price over a consecutive 30-day trading period must exceed $1 per share within six months following receipt of the notice. On Dec. 16, Flagstar's common stock closed at $0.60 per share; its 52-week range is $0.40 to $9.12.

Fidelity National Financial Inc., Jacksonville, Fla., has cleared two hurdles for two of its subsidiaries to acquire two subsidiaries of bankrupt LandAmerica Financial Group Inc., Richmond, Va. The bankruptcy court handling the filing has approved Chicago Title Insurance Co.'s purchase of Commonwealth Land Title Insurance Co. and Fidelity National Title Insurance Co.'s purchase of Lawyers Title Insurance Co. for a total of $282 million; FNT is also acquiring United Capital Title Insurance Co. from LandAmerica, but that part of the deal is not expected to close until next year. Separately, the Nebraska Department of Insurance has approved the transaction, which is expected to close on Dec. 22, if all remaining conditions are met. The Nebraska Department of Insurance has also approved a potential transaction for Stewart Information Services Corp., Houston, to acquire the LandAmerica's subsidiaries; Stewart has also put a bid into the bankruptcy court to acquire Commonwealth and Lawyers.

Mortgage banking firm Luxury Mortgage Corp., Stamford, Conn. has expansion plans underway in its retail unit. The company said it is adding 15 loan officers to its existing staff and has broadened its product mix, which it said includes Fannie Mae, Freddie Mac, Federal Housing Administration, reverse mortgages and commercial loans. The company said it has been able to grow despite the current market's challenges because of its past "prudent lending history" and avoidance of subprime lending as well as the recent rate decrease and more affordable home prices.

The Market Composite Index, an overall measure of mortgage applications, increased 2.9% on a seasonally adjusted basis from a revised figure of 817.7 to 841.4 during the week ended Dec. 12, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. A note from MBA said all figures pertaining to the week of Dec. 5 have been revised. The Purchase Index decreased 4.5% to 286.1 on a seasonally adjusted basis, while the Refinance Index increased 6.5% to 4156.0. Refinancings continued to boom, representing 76.9% of total applications, up from 74.3% the previous week, while adjustable-rate mortgages accounted for 1.1% of applications, unchanged from the previous week, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages decreased 26 basis points from 5.44% to 5.18%, and points (including the origination fee) decreased from 1.24 to 1.13 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

Ginnie Mae officials expect to guarantee $300 billion to $325 billion in mortgage-backed securities in fiscal year 2009, up from $220 billion in FY 2008 (which ended Sept. 30). "We are looking at another significant growth year," said Ginnie president Joseph Murin. He told reporters that some of agency's biggest issuers expect to securitize 40% to 50% of their mortgage production through Ginnie Mae. Ginnie Mae topped Fannie Mae and Freddie Mac in MBS issuance in October and November. Mr. Murin said Ginnie issuance in December will probably be somewhere between $27 billion and $29 billion.