Origination

Derrick Polk of Los Angeles, Oludola Akinmola and Oladeji Craig, both of Brooklyn, and Oluwajide Ogunbiyi of Springfield, Ill., have been charged with engaging in an international conspiracy to deplete millions of dollars from U.S. victims' home equity lines of credit using personal information obtained through identity theft and unauthorized computer access. According to the FBI, the four men allegedly conspired to deplete available funds from HELOCs belonging to identity theft victims either by engineering fraudulent wire transfers or by gaining unauthorized access to the victims' online bank accounts. The defendants and their co-conspirators have been accused of acquiring the identity information of thousands of victims and used that information to conduct numerous fraudulent schemes, withdrawing more than $2.5 million from HELOC accounts and attempting to withdraw at least $4 million more in unsuccessful transfers. Hakeem Olokodana and Yomi Jagunna, both of Queens, N.Y., Abayomi Lawal of Brooklyn and Daniel Yummi of New York, have also been charged with conspiring to identify HELOCs with large balances and to acquire all of the confidential customer information necessary to transfer money out of victim accounts.

MGIC Investment Corp., Milwaukee, is Zacks Equity Research's Bear of the Day for Dec. 4, 2008. Back on Sept. 10, Zacks also gave the struggling mortgage insurer that title. In its statement for this most recent designation, Chicago-based Zacks said that MGIC's core results for the third quarter of 2008 "were slightly worse than we anticipated. The results continued to be impacted by increases in both the number of delinquent loans and foreclosures due to a further decline of home prices and slowing of economy. In addition, higher loss severities, especially in California and Florida, also negatively affected the results. The company has taken several combative actions to bolster its capital. We expect significant overhangs for the industry in general and for MGIC in particular, for at least the next several quarters. Our Sell rating is maintained on the shares."

DBRS has downgraded class K through class O of commercial mortgage-backed securities deal COMM2004-LNB3, citing projected liquidation losses from a delinquent Franklin Township, N.J., loan in special servicing. The Chicago office of the Canadian ratings agency said foreclosure proceedings involving the loan are expected to be completed by April 2009 and the property recently was appraised with an estimated "as is" value of $10.5 million and projected market values (after curing and deferred maintenance) of $12.5 million. Both of these values are "well below" the loan's outstanding balance of $22.4 million, DBRS said. The lowered ratings were as follows: class K to BB (low) from BB, class L to B (high) from BB (low), class M to B (low) from B (high), class N to CCC from B and class O to CCC from B (low). DBRS also said it "changed the trend on the BB (high) class J rating to Negative from stable" and confirmed the ratings of the remaining classes in the transaction.

The PMI Group, Walnut Creek, Calif., for the second time in two months, reduced its paid claims guidance at its U.S. mortgage insurance operations for 2008. Originally, the company projected paid claims, net of captive reinsurance recoveries, of between $900 million and $975 million. At the start of November, it cut the guidance to between $850 million to $900 million. Its latest guidance now calls for paid claims of between $810 million to $835 million for the full year 2008.

For the third consecutive month, the amount of primary new insurance written by members of the Mortgage Insurance Cos. of America hit a new low. The $7.7 billion written in October ($0 from the bulk channel for the second time in three months) is down from $8.1 billion in September. The group changed its reporting methodology in August 2001. The amount of primary insurance in force fell from $801.3 billion in September to $800.9 billion in October. Applications received were 55,085, down from 62,209 in September. The cure/default ratio improved by 10 basis points, to 54.0%, with 43,211 cures and 80,071 defaults. MICA's numbers do not include any information from Radian or Triad (Both are no longer members of the group; in addition, Triad is in run-off and had minimal production).

Reported incidents of mortgage fraud in the U.S. increased by 45% on fewer loan applications in the second quarter of 2008 from a year ago, according to a new report released by the Mortgage Asset Research Institute. Key findings from the MARI Quarterly Fraud Report, which is based on data submitted by MARI subscribers on loans originated in the second quarter of this year that have since been classified as fraudulent, include that fraud most often occurs at the beginning of the loan process. According to the report, the top three states for reported incidents of mortgage fraud in the second quarter of 2008 are Florida, California and Illinois. Florida saw a 5% increase in general application misrepresentation in the second quarter, while California saw a 20% decrease. Illinois has the highest percentages of income and employment misrepresentation on the loan application. More than 65% of fraud incidents are attributed to "general application misrepresentation," a trend where information is potentially misrepresented during the application process. This fraud trend is followed closely by reported misrepresentations related to income at 36% of seconds quarter applications and employment at 20% of 2Q08 applications.

In his Economic Update at the 10th Annual Strategies for Success in Construction Lending Seminar in New Orleans, Doug Duncan, chief economist for Fannie Mae, said the recession will go through the second quarter of 2009 and there will be some positive growth in the third and fourth quarters although the market will still be weak. He said 70% of households currently have no equity, and the rise in delinquencies in the mortgage space is unprecedented. Jobs were still being added in the first half of this year, he told attendees at the conference, hosted by Granite Loan Management. "There are no buyers today, but there are lots of sellers," he said. "The last 18 months has seen policy efforts by the government to get the market functioning to get a price and establish a bottom." The industry needs to leverage real principle in order to know how to value these assets, he added. Mr. Duncan used the analogy of a swimming pool to analyze the mortgage market, saying the water in the pool is dangerously high. "We are adding and subtracting to supply at different speeds. The pipe pumping foreclosures has to get fixed. Drains for new and existing home sales is in a historically tight filter. Not much water is getting through." He said the economic stimulus will likely cost a couple hundred billion if the current decline in gas prices is sustained.

The average rate for a 30-year fixed-rate mortgage during the week ended Dec. 3 saw its largest weekly drop since Nov. 27, 1981, and fell to a low not seen since Jan. 24, according to Freddie Mac. The 30-year rate during the week, at 5.53%, was down from 5.97% the week before and from 5.96% a year ago, Freddie Mac said. "After Federal Reserve actions to increase liquidity in the mortgage market, interest rates for fixed-rate mortgages (FRMs) took a dive," said Frank Nothaft, Freddie Mac vice president and chief economist. "This week's decline was the largest since the week of Nov. 27, 1981, and 30-year FRM rates are now almost a full percentage point lower since the last week in October." The average rate for a 15-year FRM fell to 5.33% from 5.74% the week before and 5.65% a year ago, the average rate for a five-year Treasury-indexed hybrid adjustable-rate mortgage slid to 5.77% from 5.86% on the week but was up from 5.75% a year ago, and the average rate for a one-year Treasury-indexed ARM decreased to 5.02% from 5.18% the previous week and from 5.46% a year ago. Average points were 0.7 for 30- and 15-year FRMs, 0.6 for five-year hybrids and 0.5 for one-year ARMs.

Improving the disclosure of information on underlying assets for residential mortgage-backed securities has been identified among four priorities for immediate action by a group of securitization organizations that met Tuesday in New York to discuss and coordinate global efforts to restore market confidence. The Global Joint Initiative to Restore Securitization Markets said its other immediate priorities are to enhance transparency with regard to underwriting and origination practices, restore the creditability of credit rating agencies and improve confidence in valuations, methodologies and assumptions. The Securities Industry Financial Markets Association, the American Securitization Forum, the European Securitisation Forum and ASF-Australia set the four immediate priorities and also set eight other recommendations for restoring confidence in the securitization markets in line with their ongoing efforts to this end. Half of the other recommendations center on RMBS market improvements and standards. Specifically, the groups called for better RMBS issuer information, due diligence/quality assurance, representations and warranties, and servicing.

The Securities and Exchange Commission is putting out for public comment a new set of proposed credit agency reform measures, noting that the agencies' ratings of mortgage securities "backed by subprime mortgage loans" and collateralized debt obligations linked to subprime loans "contributed to the recent turmoil in the credit markets." The new measures "impose additional requirements on credit rating agencies," the SEC said. This is the second set of credit rating agency reforms since the SEC received its new regulatory authority from Congress to register and oversee credit rating agencies. According to Mortgage Bankers Association chairman John A. Courson, the SEC also delayed a vote on a measure that would have "imposed different ratings symbols for structured finance versus other investment products" and likely would have led to "confusion" and "continued disruption to secondary market transactions."