Origination

Thornburg Mortgage of Santa Fe, once a top ranked jumbo lender, said it will not appeal a decision by the New York Stock Exchange to delist the company. It's expected that Thornburg will be officially kicked off the NYSE before the market opens on this Friday. The company - whose shares trade for about 25 cents compared to a 52-week high of $140 - will trade, instead, on the OTC Bulletin Board or "pink sheets." In a recent interview with National Mortgage News, company CEO Larry Goldstone said TM has "four to five months" to find alternative financing for its $21 billion portfolio. TM no longer funds new loans. In the third quarter the company posted a net profit of $140 million but only because the value of some of its liabilities fell. Mr. Goldstone said TM - which as of September 30 had just 300 delinquent loans - "is seeing a noticeable increase in our defaults." The interview took place in late November. The publicly traded REIT narrowly escaped bankruptcy in April thanks to a new fundraising plan and a renegotiation of its bank lines.

The Federal Housing Administration just completed one of its best years ever in terms of loan originations and the mortgage insurer's auditor expects the surge in FHA originations to continue for several years. FHA endorsed a record 154,240 single-family loans in FY 2008 and it is projected to endorse 280,400 loans in FY 2009 and 331,100 in FY 2010, according to a FY 2008 actuarial review. However, declining house prices are expected to undermine the performance of FY 2008 loans and result in high claims rates. The independent auditor pegged the economic value of the FY 2008 book of business at a negative $3.6 billion over the life of the loans. The auditors also reduced the estimated economic value of the FHA Mutual Mortgage Insurance fund by 39% to $12.9 billion. This reduction, combined with a 29% increase in the number of insured FHA loans, decreased the capital ratio of the MMI fund to 3% from 6.4% in FY 2007. The auditors estimate that loans originated in the current year (FY 2009) will perform better and have a positive $2.4 billion economic value.

Seasonally adjusted refinance applications tracked by the Mortgage Bankers Association skyrocketed in the week ending Nov. 28 by 203% as a result of falling mortgage rates sparked by the Federal Reserve's plan to buy housing government-sponsored enterprises' mortgage-backed securities and debt. "When rates plummeted following the Fed's announcement that it would buy GSE debt and MBS, many of those on the sidelines decided to quickly jump in and take advantage of lower rates before they started to rebound," said Orawin Velz, associate vice president of economic forecasting at the MBA. Seasonally adjusted purchases also rose during the week by 28% and the seasonally adjusted Market Composite Index that combines both refis and purchases jumped 112%. On an unadjusted basis, the composite index was up 51.4% compared to the previous week and down 21.9% from a year ago. Refis dominated the market, representing 69% of apps compared to 49.3% the previous week. The seasonally adjusted four-week moving averages for the composite, purchase and refi indices were respectively up 29.7%, 9.5% and 56.1%. In the latest week, conventional purchases jumped 37.4% while government purchases increased by 39.2%. Adjustable-rate mortgage activity decreased to 1.4% of applications from 3.0% the week previous. Average contract interest rates for 30-year fixed rate mortgages, 15-year FRMs and one-year adjustable-rate mortgages with 80% loan-to-value ratios respectively slid to 5.47% from 5.99%, to 5.13% from 5.78% and to 6.61 from 6.87%. Average points, including the origination fee, fell to 1.16 from 1.23 for 30-year FRMs; to 1.28 from 1.29 for 15-year FRMs and to 0.52 from 0.64 for one-year ARMs.

Mortgage Network Inc., Danvers, Mass., has temporarily suspended its wholesale and correspondent originations in order to cope with a federal policy-driven spike in refinance applications that an executive at the company said has strained market-wide warehouse line capacity in the channels. "We still love wholesale and correspondent, it's just the ... lines [are] restricted," executive vice president Brian Koss told National Mortgage News. He said the company is exploring several options to try to address the problem before January. He said the retail arm of the company and the institution as a whole remains sound. "You want to leave your loan with us, we're fine as an institution, we've just had too much capacity," Mr. Koss said. The company, which also does business as MNET Mortgage, will continue to process any loans currently in the pipeline as of Dec. 1. It said loans in a floating status must be locked by Dec. 3 and loans in the pipeline must close and fund no later than Dec. 31.

A Federal Reserve Board study discovered that banks and thrifts made only a small percentage of subprime loans in their Community Reinvestment Act assessment areas and these findings refute critics who claim CRA lending contributed to the subprime crisis. "Only 6% of all higher-priced [subprime] loans were extended by CRA-covered lenders to lower-income borrowers or neighborhoods in their CRA assessment areas," Fed governor Randall Kroszner said. This evidence does not support the view that CRA contributed in any substantial way to the subprime mortgage crisis, he added. In examining foreclosure data, Fed researchers also discovered that foreclosure filings have increased at a faster pace in middle-income and higher-income areas than in lower-income areas served by CRA lenders.

Fifth Third Bank has named Steven Alonso as executive vice president and head of the company's mortgage and consumer lending lines of business. Mr. Alonso previously was founder, chairman and chief executive officer of Oakstreet Mortgage LLC, Indianapolis. Prior to that he served as president and CEO of Bank One's Consumer Finance Group. At Fifth Third, Mr. Alonso will develop strategy for the mortgage, consumer lending, student loan and collections areas and will work with his direct reports to implement that strategy.

The Treasury Department, to date, has spent $150 billion of taxpayer money investing in preferred shares of 52 different institutions, outgoing secretary Henry Paulson said Monday afternoon. Mr. Paulson noted that hundreds of banks have applied for Troubled Asset Relief Program money, adding that, "we will work through the remaining applications in the coming weeks and months." He said the agency is continuing "to examine potential foreclosure mitigation ideas" that could use TARP funds. He also complemented the FDIC's loan modification effort at IndyMac Bank, Pasadena, Calif., calling it "effective." IndyMac is expected to be sold by the Federal Deposit Insurance Corp. this month. It's anticipated that whichever investor buys IndyMac will continue the loan modification program.

Mortgage delinquencies will not peak until early 2010 after reaching their highest level in decades, according to projections from credit reporting bureau TransUnion. TransUnion, which reported that 3.96% of home loans were 60 or more days delinquent in the third quarter, believes the 60-day delinquency rate will rise to 4.66% in the fourth quarter, up 55% from a year earlier. TransUnion projects that by the fourth quarter of next year, 7.17% of home loans will be at least 60 days past due. Ezra Becker, principal consultant in TransUnion's financial services group, told MortgageWire that lenders should expand collection efforts and add to loss reserves in response to current conditions. But he also said lenders shouldn't overlook the opportunity to make good loans to low risk customers in the current low interest rate market. "For the first time in recent memory, demand for credit outstrips the supply of credit," he said.

The Federal Reserve Board could take further actions to reduce mortgage rates, including purchases of longer-term Treasury and government sponsored enterprise debt, according to Fed chairman Ben Bernanke. He noted that that the response to the Fed's decision to purchase up to $500 billion in Fannie Mae and Freddie Mac mortgage-backed securities and $100 billion in GSE debt over the next few quarters has been positive. "It is encouraging that the announcement of that action was met by a fall in mortgage interest rates," the Fed chief told the Austin (Tex.) Chamber of Commerce. However, he noted that housing markets "remain weak," house prices are falling and an eventual stabilization of the housing market would be a plus for the economy. "The Fed could purchase longer-term Treasury or agency securities in the open market in substantial quantities. This approach might influence the yields on these securities, thus helping to spur aggregate demand," Mr. Bernanke said.

The Eleventh Federal Home Loan District Cost of Funds Index rose significantly in the latest reported month to a point above 3.0%. The index for October is 3.125%, an increase of more than 35 basis points from September's 2.769%, according to the Federal Home Loan Bank of San Francisco. COFI is known as a lagging indicator, reflecting movement in other interest rates on a three-to-six month delay.