Origination

While home prices continue to depreciate at a double-digit level, there seems to be some regional stabilization, according to the latest First American CoreLogic HPI report. "In September nominal home prices declined 11.2% from a year ago and our October early preview data indicates a decline of 10.5%," said Mark Fleming, chief economist for First American CoreLogic. "Home prices have now maintained an annualized depreciation rate of between 10% and 11% for eight months in a row. Thirty-four states experienced annual price declines as of September, but the geographic breadth of the declines seems to have stabilized. Our early estimate of October sales transaction volumes has declined substantially, which is not a surprise given recently released economic data and events in the credit and financial markets." The five areas with the most depreciation between last September and this September are: Oakland-Fremont-Hayward, Calif., down 29.07%; Riverside-San Bernardino-Ontario, Calif., down 28.56%; Los Angeles-Long Beach-Glendale, Calif., down 28.46%; Miami-Miami Beach-Kendall, Fla., down 27.38%; and Las Vegas-Paradise, Nev., down 26.20%. On the other hand, four Texas markets showed price appreciation over the 12-month period: Austin, followed by Houston, San Antonio and Dallas.

Freddie Mac is reducing its delivery fees on jumbo mortgages and is discontinuing purchases of stated-income loans. Freddie is eliminating the extra delivery fees that it charged on fixed-rate purchase and "no cash-out" refinancings jumbo mortgages, beginning Jan. 2, when the maximum loan limit for the government sponsored enterprise is scheduled to drop from $729,750 to $625,000. The GSE also is reducing its delivery fees on fixed-rate, cash-out refinancings of jumbo loans, according to a Freddie Bulletin to seller/servicers. Fannie Mae and Freddie began purchasing jumbo loans earlier this year when Congress the raised the maximum loan limit from $417,000 to $729,750 as part of an economic stimulus bill. Freddie also used the bulletin to tell lenders that is "discontinuing the purchase of all mortgages originated with stated income and stated assets, including Loan Prospector Accept Plus Mortgages."

Freddie Mac, a ward of the government since early fall, bought just $19.27 billion worth of mortgages during October, its worst showing of the year. Meanwhile, the delinquency rate on its single-family portfolio rose to 1.34% in October, a 10% increase in late payments from September. A year ago just 0.54% of its holdings were considered delinquent. Its retained portfolio increased to $763.66 billion, a 4% gain from the pervious month. Compared to the same month last year, its portfolio has increased 9%. Two weeks ago the GSE received a $13.8 billion cash injection from the government after posting a record $25.3 billion loss in the third quarter. Like many mortgage investors the company has been forced to slash the value of its massive mortgage holdings in the wake of rising loan delinquencies.

In a related move, Fitch Ratings, Chicago, has downgraded the insurer financial strength of LandAmerica's insurance subsidiaries to 'BB' from 'BBB+'. Fitch has also downgraded the issuer default rating to 'B' from 'BBB-' and placed the company on Rating Watch Negative. Fitch said the downgrade "considers LandAmerica's deteriorating financial condition, constrained liquidity and consequences from not meeting the renegotiated covenants of its credit agreements." The rating agency noted LandAmerica has already taken a $225 million write-off of goodwill and could take more in the fourth quarter. "LandAmerica faces serious liquidity constraints now that the acquisition plans have fallen through," said Fitch, pointing to $290 million invested in auction-rate securities. LandAmerica is also believed to be in violation of covenants on its $250 million of bank debt and thus unable to access the remaining $50 million it has on a line of credit. "Lastly, Fitch estimates consolidated statutory surplus at the title underwriting subsidiaries to be $300 million as of Sept. 30, 2008, down from $426 million at year-end 2007. Surplus has been depleted by operating losses and dividends to the holding company and consequently, Fitch's estimate of LandAmerica's risk-adjusted capital ratio is substantially below 100%," the rating agency said.

Fidelity National Financial Inc., Jacksonville, Fla., has terminated its merger agreement with LandAmerica Financial Group Inc., Richmond, Va. In a terse statement, Fidelity said it took the action "pursuant to its contractual due diligence termination right." It had the right to cancel the deal on or prior to Nov. 21. In its own statement, LandAmerica chairman and chief executive Theodore L. Chandler Jr. said, "We are disappointed with Fidelity's decision; however, our attention remains focused on strengthening LandAmerica's business and exploring strategic alternatives during these incredibly difficult economic times."

Freddie Mac said in a public filing Friday it received notice that it may lose its listing on the New York Stock Exchange because its share price has been under $1 for more than 30 days. In a filing with the Securities and Exchange Commission, the mortgage investing giant -- now a ward of the government -- said it received the notice on Monday. The NYSE requires that the average closing price of a stock remain above $1 per share. The company continues to buy mortgages from its seller/servicers. Its regulator seized control of the GSE in September. The company is, more or less, owned by the government, though its shares still trade on the NYSE. It recently hit a low of 25 cents.

The average rate on a 30-year fixed rate mortgage fell to 6.04% during the week ending November 20 from 6.14% the week before and 6.20% the same week a year ago, according to Freddie Mac. The average rate on a 15-year FRM dropped to 5.73% from 5.81% the previous week and from 5.83% a year ago, the average rate on a five-year Treasury-indexed hybrid adjustable-rate mortgage slipped to 5.87% from the previous week's 5.98% and 5.88% a year ago, and the average rate on a one-year Treasury-indexed ARM slipped downward to 5.33% from 5.29% a week ago and 5.42% 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. Freddie Mac can be found online at http://www.freddiemac.com.

Goldman Sachs predicted on Friday that the yield on the 10-year Treasury -- which mortgages are pegged to -- could fall to 2.75% by the end of the first quarter. On Friday morning the 10-year Treasury was yielding 3.24%. In years past, when the 10-year fell so too did mortgage rates but because of the housing recession lenders -- as well as Fannie Mae and Freddie Mac -- are charging extra points, fees and higher rates to compensate for the worst housing market since the Great Depression.

The Federal Deposit Insurance Corp. is offering to share its playbook on streamlined loan modifications with all residential servicers. The process was developed at IndyMac FSB, now a ward of the government. FDIC said it will share its "Mod in a Box" guide to provide servicers with the "necessary tools to facilitate streamlined and systematic loan modifications." According to FDIC chairman Sheila Bair, the IndyMac approach is effective in dealing with mortgages in portfolios and securitized pools. "I would encourage all industry participants to adopt the FDIC loan modification program as the standard approach in dealing with the grave problems facing us with continued mounting foreclosures," she said. FDIC inherited 60,000 delinquent mortgages when IndyMac was placed into conservatorship in July. Under the program FDIC mailed 23,000 loan modification proposals to borrowers and completed more than 5,300 transactions after verifying the borrowers' income. On average, the modifications cut a borrower's monthly payment by $380 or 23%.

Federally regulated thrifts -- excluding the failed Washington Mutual and IndyMac -- originated $66 billion in one- to four-family loans in the third quarter, a 49% decline from the same period last year, according to new figures released by the Office of Thrift Supervision. Meanwhile, the nation's remaining 800 or so thrifts set aside $7.9 billion for loan loss reserves in the quarter, reporting a $4 billion loss. In the second quarter the industry lost $1.7 billion. The failures of IndyMac and WaMu reduced thrift industry assets by more than 20%, but did not improve earnings or loan performance trends of the surviving 818 thrifts, OTS officials said. WaMu was purchased by JPMorgan Chase, a bank. IndyMac is in the process of being auctioned off by the government. Non current construction and land loans (90 days or more past) jumped from 6.5% in the second quarter to 7.8% in the third quarter, while charge-offs nearly doubled to 1.23%. Thrifts charged off $546.3 billion in construction loans in the third quarter. Meanwhile, non-current single-family loans rose 11 basis point to 3.39% in the third quarter and charge offs fell 10 bp to 0.24%. But OTS officials warned that one quarter is not a trend. Thrifts charged off $2.8 billion in 1-4 family loans in the third quarter. In the second quarter, OTS-regulated thrifts, including WaMu and IndyMac, originated $107 billion in single-family loans and reported a $5 billion loss after setting aside $14 billion in loan loss reserves.