Origination

In response to reports of abusive lending practices in the reverse mortgage arena, an Atlanta-based lender has instituted procedures to protect seniors from taking on loans that are unsuitable for their personal situations. Under Generation Mortgage's policies, products that are designed for long-term wealth accumulation for young adults or that impose surrender or withdrawal charges -- deferred annuities, for example, or long-term certificates of deposit -- are considered inappropriate. "We have an obligation to lead our industry on this important issue," said CEO Joe Morris. "Our new policy will ensure that, as in the past, no Generation customer will buy inappropriate financial products with the proceeds of his or her loan." Products that remain potentially suitable under Generation's policies are those that address the needs and risks seniors face, such as provisions for lifetime income and long-term care needs. Immediate annuities and long-term care insurance, properly designed and purchased, address these needs and risks and remain suitable choices for some seniors, the company said.

Fannie Mae issued $69.4 billion in mortgage-backed securities in February, up from $49.1 billion in January and $41.7 billion in February of 2007. The mortgage giant's monthly report also indicates that the serious delinquency rate on its conventional single-family portfolio hit 1.06% in February, up 8 basis points from that of the previous month. Fannie executives have been warning investors to expect rising delinquencies and defaults this year. But they also project that tighter underwriting and higher fees will make their MBS business very profitable. The government-sponsored enterprise recently received regulatory approval to expand its investment portfolio again, along with a reduction in its capital requirements. This might stir more investment activity in the coming months. The mortgage portfolio totaled $724 billion in February and has hovered between $710 billion and $730 billion for over a year. Fannie can be found online at http://www.fanniemae.com.

The 12 Federal Home Loan Banks have been given a green light by their regulator to purchase over $100 billion in mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac over the next two years to provide additional liquidity for the MBS market. The Federal Housing Finance Board agreed by notational vote to raise the cap on MBS investments from 300% to 600% of capital as part of the government's effort to help stabilize the housing market. The FHLBanks held $136.4 billion in MBS as of Sept. 30. Fannie and Freddie will be testing the market soon with the issuance of jumbo MBS for the first time. In addition, the Finance Board said the FHLBanks can purchase agency MBS that are secured by subprime and nontraditional mortgages that meet federal regulatory guidance. "Increasing the agency MBS investment authority for the banks is another way in which the FHLBank System can perform its traditional mission," said Finance Board Chairman Ronald Rosenfeld. Fannie's and Freddie's regulator recently relaxed their capital requirements so the two government-sponsored enterprises could expand their investment portfolios and purchase $200 billion in mortgage loans and MBS.

Sales of existing single-family homes rose 2.8% in February as sellers in tough markets finally began coming to terms with falling house prices and accepting lower bids. The National Association of Realtors reported that resales rose from a seasonally adjusted annual rate of 4.35 million in January to 4.47 million in February. The report marks the second monthly increase in resales and provides "another sign that the market is stabilizing," NAR chief economist Lawrence Yun said. Meanwhile, the sales price of previously owned single-family homes has declined 8.7% nationally since February of last year. In its January report, the NAR reported that prices had declined by 5.1% over the previous 12 months. Some markets are seeing healthy gains in housing appreciation, Mr. Yun said. "In other areas, such as Sacramento [Calif.], a rapid price decline has induced buyers to come into the market, and sales are now rising."

Financial stocks led a broad rally on Thursday, and some analysts attributed the gains in part to confidence stemming from recent moves to pump liquidity into the mortgage sector. All 15 mortgage-related stocks tracked by MortgageWire closed higher on Thursday, with six posting double-digit percentage gains. Washington Mutual's shares rose 19%, closing at $11.70. Franklin Bank Corp.'s shares were up 17%, closing at $3.09. Countrywide's shares rose 13%, closing at $5.78. Shares in Fannie Mae and Freddie Mac were up by 12% and 9%, respectively, capping a strong week for the two companies after their regulator eased capital requirements so the firms can finance a larger volume of home loans. Overall, the Dow Jones Industrial Average rose 262 points, or 2.16% on the day, and other major indices rose by similar percentages. Markets are closed on Friday, March 21, in observance of Good Friday.

The Mortgage Bankers Association reports that the commercial and multifamily mortgage market faces limited exposure to refinance risks stemming from the current credit crunch through the release of its Research DataNote. The report notes that relatively few commercial/multifamily mortgages will mature in the next two years. "There's been a general impression that a large volume of commercial/multifamily mortgages are coming due this year and next," said Jamie Woodwell, senior director of commercial/multifamily research at the MBA. "The reality is that 2008 and 2009 will see a relatively small volume of maturing mortgages, with the majority of CMBS loans not maturing until 2015 or later." Capturing data from JPMorgan and Wachovia Capital Markets, the DataNote reports that there are more than $600 billion of outstanding loans in CMBS fixed-rate deals. Of this, only $16 billion is scheduled to mature in 2008 and another $19 billion in 2009. The surge in sales and financing volume during 2005, 2006 and 2007, coupled with the fact that CMBS loans tend to have a 10-year term, mean that the majority of CMBS loans will not mature until 2015 or later -- $98 billion of loans are scheduled to mature in 2015, $128 billion in 2016 and $127 billion in 2017.

Freddie Mac released the results of its Primary Mortgage Market Survey in which the 30-year fixed-rate mortgage averaged 5.87% with an average 0.5 point for the week ending March 20, 2008, down from last week when it averaged 6.13%. Last year at this time, the 30-year FRM averaged 6.16%. The 15-year FRM this week averaged 5.27% with an average 0.5 point, down from last week when it averaged 5.60%. A year ago at this time, the 15-year FRM averaged 5.90%. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.56% this week, with an average 0.9 point, down from last week when they averaged 5.58%. A year ago, the 5-year ARM averaged 5.91%. One-year Treasury-indexed ARMs averaged 5.15% this week with an average 0.8 point, up from last week when it was 5.14%. At this time last year, the one-year ARM averaged 5.40%

Bank of America has a rigid transition process it uses for any of the acquisitions it has done or is doing, said its president for consumer real estate Floyd Robinson. He was asked during a panel session at the Regional Conference of Mortgage Bankers Associations in Atlantic City to provide an update on BoA's acquisition of Countrywide Financial Corp., Calabasas, Calif. The Charlotte, N.C.-based bank is assigning "hundreds" of associates to the transition process. There has been a 30-day look at the practices of both companies, Mr. Robinson said, and one of the items that resonated with him is the disparity in the two companies' respective direct-to-consumer businesses. BoA has done $168 billion in this channel while Countrywide has $113 billion. Much of Countrywide's production comes from the correspondent and wholesale channels, areas that BoA does not do business in, leading Mr. Robinson to point out Countrywide has a very different business model than BoA does. The different approaches and attitudes between the two, he added, could make this one of the most challenging acquisition integrations for BoA. One business the combination will not do is subprime, an area BoA has not been in for several years. The company will not take an inappropriate risk to its reputation, Mr. Robinson said.

A Moody's Investors Service index of commercial real estate prices declined by 0.6% in January and now stands down 2.4% from its peak in October of 2007. Regionally, Moody's said that in the East, apartments and retail continue to outperform national averages. In the South, however, the apartment sector is languishing, pulled down by a weak Florida market. Southern California remained strong in all real estate categories. Moody's said its repeat sales index may actually understate possible declines in CRE values, because "winners" in the market dominate sales activity (buildings with more appreciation and stronger cash flow), while "losers" have difficulty funding transactions to sell properties. Moreover, because CMBS loans can be assumed by new borrowers, existing loans with favorable terms may be bolstering the value of the underlying real estate.

Wolters Kluwer Financial Services has sought to make the closing process for first mortgage and home equity faster with its new Simplified Mortgage tool, which reduces the recordable mortgage document into two smaller, easier to understand pieces. At the MBA Tech Show WKFS pointed out that this application reduces the recordable instrument into a two- to three-page document that contains all information required to create a valid lien and fully compliant recording document based on each state's requirements. The second piece is a non-recordable supplement that outlines a loan's standard covenants between the lender and the borrower. This tool allows for a simpler closing in which less paper is required and a portion of the recordable instrument can be presented to the borrower online before the actual closing for e-signing.