Origination

Drawing on his hobby of whitewater rafting, Zach Oppenheimer, senior vice president for the single family business at Fannie Mae, noted that the mortgage industry has been through rough waters before, including the 1983 recession, problems in the Oil Patch States, the Russian debt crisis and the Sept. 11 attacks. But in those cases and others, Fannie Mae played a critical role in pulling the industry through tough times, he told attendees at the Regional Conference of Mortgage Bankers Associations in Atlantic City. He is confident the market will return and the lessons being learned will make the market more resilient. But first, Mr. Oppenheimer said, because things will get worse before they get better, we must "batten down the hatches." Paul Mullings, senior vice president at Freddie Mac, added he doesn't remember a period when the industry was so dependent on Freddie Mac, Fannie Mae and the Federal Housing Administration "to get us out of trouble." Freddie Mac wants standards that bring confidence and stability to the market. "When the markets lock up, our job is to unlock them."

Reflecting on how the mainstream press has treated the mortgage business in the past year, Mortgage Bankers Association chairman Kieran Quinn told attendees at the Regional Conference of Mortgage Bankers Associations in Atlantic City, "I'm convinced there is an endless supply of bad headlines and they are going to run through 2008." He called for a release of the portfolio caps on Fannie Mae and Freddie Mac as well as an expansion of the higher loan limits to all 50 states and not just selected areas. "We're not done" pushing for that to happen, Mr. Quinn said. As for dealing with troubled loans, "I'm almost ready for the second coming of the RTC," he said, but in this case the R would stand for residential. Furthermore, participation would be voluntary. He reiterated MBA's contention that if a bankruptcy "cramdown" bill is enacted, it would drive up the cost of mortgages by 150 basis points, adding there are some lenders who have told him it would be more than that. Noting the close vote that defeated the bill in the U.S. Senate, he warned the issue will be coming back, attached to a bill the industry really wants.

Thornburg Mortgage has entered a 364-day agreement with five of its remaining reverse repurchase counterparties and their affiliates that conditionally reduces margin requirements for financing the company's mortgage securities and suspends the counterparties' right to invoke further margin calls and related rights under their reverse repurchase agreements. The reverse repurchase agreement counterparties and their affiliates who entered the override agreement with Thornburg Mortgage include Bear Stearns Investment Products Inc., Citigroup Global Markets Ltd., Credit Suisse Securities (USA) LLC, Credit Suisse International, Greenwich Capital Markets Inc., Greenwich Capital Derivatives, Royal Bank of Scotland PLC, and UBS Securities LLC. "The continued effectiveness of this agreement is contingent upon a variety of factors that are specified in the agreement, the most urgent of which requires that within seven business days Thornburg Mortgage raise a minimum of net proceeds of $948 million in new capital," the company said.

New York Life Insurance Company has joined the Federal Home Loan Bank of New York as a new member, the FHLBank said. "New York Life is one of the premier financial institutions in the United States, and we are pleased to welcome them as a new member to the Home Loan Bank family of community financial institutions," said FHLB president Alfred DelliBovi. New York Life is a Fortune 100 company founded in 1845 and the largest mutual life insurance company in the U.S. "We are happy to partner with such a strong wholesale lender with over 75 years of service to the financial industry and we look forward to a long and prosperous relationship," said New York Life executive vice resident and chief financial officer Michael Sproule.

Rapid Reporting's DirectCheck product will be providing instant verification of Social Security numbers direct from the Social Security Administration for the first time in the mortgage industry. By adding immediate Social Security number verification to the other real-time components of DirectCheck, the industry now has a stronger, better way to reduce fraud at origination, noted Rapid Reporting at the MBA Technology Show in Dallas. The application's users get instant delivery by just entering the borrower's name, Social Security number and date of birth. This coincides with the SSA's new real-time program to begin in October that will allow for the seamless transfer of data back via an XML Web service interface.

Real estate investment banking firm and commercial mortgage broker Johnson Capital has opened an office in Chicago and named vice president Brendan Hotchkiss to head it. The office will specialize in debt and equity as well as structured finance with a focus on commercial properties. "A contributing factor to Johnson Capital's decision to expand to Chicago was the resilience of the city's commercial real estate market despite the downturn in the credit markets," the company said.

A Standard & Poor's index of commercial real estate prices shows that while prices were still rising for most property types and regions of the country in December, the rate of appreciation was slowing. The national composite annual appreciation rate was 6.7% in December, S&P said. Regionally, price gains were strongest in the Northeast and Pacific Northwest, while property in the Desert Mountain West region posted a small monthly decline in December, though prices remained up on a year-over-year basis. Among different property types nationally, office properties saw the strongest year-over-year appreciation as of December, at 11.8%, while apartments saw the smallest gains, at 3.9%.

Manufactured housing lender Origen Financial Inc., Southfield, Mich., said its auditor, Grant Thornton, has given the company an unqualified opinion, a move which in accounting terminology raises doubt about the real estate investment trust's ability to continue as a going concern. Based on the value of its assets and discussions with third parties regarding strategic alternatives, Origen said it would be able to raise the additional funds it needs on a timely basis. Meanwhile the company has sold unsecuritized loans with a carrying value of $176 million for proceeds of $155 million. Many of the proceeds were used to pay off its warehouse line. Origen's debt is now $46 million under its supplemental advance facility and $15 million under related party notes secured by servicing fees. Origen previously said it is halting all originations for its own portfolio because of the inability to securitize its production.

Single-family housing starts tumbled 6.7% in February after the government revised January starts upward by 15,000 units, which could be a sign that construction activity may be close to stabilizing in the next few months. The U.S. Census Bureau reported that single-family housing starts declined from a seasonally adjusted annual rate of 758,000 in January to 707,000 in February, which is down 40.5% since February 2007. Many economists are predicting that housing starts and home sales could bottom out this summer. "Sales and home construction can fall only so far," said Scott Anderson, a senior economist at Wells Fargo & Co. Meanwhile, many builders are struggling financially. Bank data shows that 4.25% of single-family construction and development loans were 90 or more days overdue in the fourth quarter, nearly double the third quarter rate.

Palm Harbor Homes Inc., Dallas, has extended the warehouse borrowing facility of its full-service lending subsidiary, CountryPlace Mortgage Ltd., until April 30. The facility, with $42.2 million outstanding, was scheduled to expire on March 14. The company said it will stop taking applications for nonconforming chattel loans during the extension period but will continue to originate conforming mortgage loans. Larry H. Keener, chairman and chief executive officer of Palm Harbor, said the extension "reflects directly on the consistent performance" of the company's portfolio. "Because of our careful underwriting and intense servicing, default rates and losses have been significantly lower than those experienced with manufactured home loans securitized in the late '90s, or than those experienced recently in the subprime mortgage industry," he said. The company can be found online at http://www.palmharbor.com.