Originations

The newest preferred investor for Lenders One Mortgage Cooperative is PHH Mortgage Corp., Mt. Laurel, N.J. Lenders One members will get direct access to PHH Mortgage underwriters, 24/7 online access to products, rates and pricing scenarios, ability to upload documents electronically, and ongoing training for governmental compliance and other regulatory requirements. At the Keefe, Bruyette & Woods Diversified Financial Services Conference PHH Corp. president and chief executive Jerome Selitto, said the company would be entering into a strategic partnership on the wholesale/correspondent side of the business but did not give further details at that time. A call to a PHH representative was not returned by press time. In a press release, Craig Dodds, PHH vice president, wholesale correspondent lending, said his organization "will support Lenders One's members with a correspondent lending platform for conventional, government-insured loan products and rural development loans." Lenders One has over 165 members.

Another wave of downgrades has hit U.S. residential mortgage-backed securities transactions as the Fitch ratings on 281 bonds in 267 transactions have dropped to D, indicating a principal writedown. The move followed a review of bonds that had speculative grade ratings ranging from CCC to C, indicating a default was expected. Ninety-eight percent of the bonds had CCC ratings. Ninety-eight percent had an outstanding recovery rating of RR6 indicating that minimal recovery was expected. Only the bonds with writedowns were included in the review. Of the 267 transactions impacted, 143 were prime credit deals and 115 were subprime credit deals. Fitch said the balance were "other" product types.

The Federal Reserve has no intention in the "near term" of selling off its $1.1 trillion portfolio of GSE-guaranteed mortgage-backed securities, according to Fed governor Kevin Warsh. But when the time comes, the Fed should take a gradual approach that is "communicated well in advance" in selling its Fannie Mae, Freddie Mac and Ginnie Mae MBS, he told the Atlanta Rotary Club on Monday. "Ultimately, in my view, gradual, predictable asset sales by the Fed should facilitate improvements in mortgage finance and financial markets," the Fed governor said. He also noted that sales of MBS or other assets would not necessarily signal that the Fed is going to raise interest rates. "Our [monetary] policy tools can indeed be used independently," Warsh said. The Federal Reserve began purchasing agency MBS in December 2008 to provide liquidity for the mortgage market during the financial crisis. The Fed stopped its purchases at the end of March 2010. However, the Fed said it engaged in a limited amount of coupon swaps on Tuesday to complete the final settlement of $9.2 billion in agency MBS. The Federal Reserve's latest report on its portfolio shows the central bank earned $11 billion in interest income during the first quarter on its agency MBS holdings.

Fannie Mae issued $36.2 billion in mortgage-backed securities in May, only slightly above Ginnie Mae's MBS issuance for the month. Ginnie Mae MBS issuance has been higher than Freddie Mac's for some time. But now it looks as if Ginnie Mae may be catching up to Fannie. Ginnie recently reported that its issuers securitized $33.9 billion in FHA and VA guaranteed loans in May. Meanwhile, the serious delinquency rate on Fannie Mae guaranteed single-family mortgages fell for the second consecutive month. The secondary market agency reported that 5.3% of its loans are 90 days or more past due in April, down 29 basis points since February. Fannie has a one-month delay in its reporting delinquency rates.

Continuing its pattern of alternating between upward and downward movements, the Mortgage Bankers Association's Market Composite Index for the week ended June 25 rose as lower rates drove an increase in refinance applications. The MCI increased by 8.8% on a seasonally adjusted basis and by 8.3% on an unadjusted basis when compared with the previous week. The Refinance Index increased 12.6% to its highest point since May 22, 2009. However, the low rates had little impact on home purchase volume as the seasonally adjusted Purchase Index decreased 3.3%. Michael Fratantoni, MBA vice president of research and economics, commented that even though the 15-year fixed rate mortgage hit its lowest point ever in the group's survey, refis are at only half the level seen in Spring 2009. He added the decline in purchase applications, the seventh in eight weeks, is keeping that index near a 13-year low. The refinance share of mortgage activity increased to 76.8% this week from 73.8% of total applications last week, reaching its highest point since April 2009. The adjustable-rate mortgage share of activity fell to 4.7% from 4.9%. The average contract interest rate for the 30-year fixed rate mortgage fell to 4.67% (its lowest point since April 24 last year) from 4.75% for the preceding week with points decreasing to 0.96 from 1.07 (including the origination fee) for loans with an 80% percent loan-to-value ratio, according to the association. The average contract interest rate for 15-year FRMs fell 13 bps during the week to 4.06%, its lowest point since MBA started tracking this rate. The average contract interest rate for one-year ARMs was unchanged at 7.05%.

The House has passed a bill to extend a closing deadline for the homebuyer tax credit to Sept. 30, but similar action in the Senate is uncertain. By a 409-5 vote, the House passed a stand-alone bill (H.R. 5623) to ensure homebuyers who are expecting to receive the tax credit are not disqualified because delays have pushed their closing past a June 30 deadline. Under the homebuyer tax credit that expired April 30, first-time buyers had until today (June 30) to close and qualify for the $8,000 tax credit. Repeat buyers are in line for a $6,500 tax credit. The National Association of Realtors estimates that 75,000 buyers won't meet the closing deadline due to loan processing delays and lapses in the National Flood Insurance Program and Rural Housing Service single-family loan program. "We are strongly urging the Senate to act quickly to pass their legislation and ease the minds and pocketbooks of these homebuyers," said NAR president Vicki Cox. Senate Democrats' leaders have inserted the homebuyer closing extension in a larger bill that extends benefits for unemployed workers through November. But a Republican filibuster has blocked passage of the $34 billion unemployed benefit package for several weeks. A House-passed bill (H.R. 5569) to re-start the National Flood Insurance Program also is pending in the Senate.

The death of Sen. Robert Byrd, D-W.Va., is likely to postpone a final vote on the sweeping regulation reform bill until the governor of West Virginia appoints a new Democratic senator. The 92- year senator had been ill for some time. But Democratic leaders were counting on Sen. Byrd and a few Republicans to muster the necessary 60 votes to pass the bill. Some key Republicans are having second thoughts about the bill because it includes an assessment on large banks and hedge funds to raise an estimated $19 billion. The bill creates a new resolution process to deal with the failure of large financial institutions, imposes risk retention on mortgage securitizations and creates a consumer protection agency. The assessments would cover the costs of implementing the legislation and two multi-year programs to prevent foreclosures and help municipalities deal with abandoned homes. One program, modeled after a Pennsylvania state program, would receive $1 billion annually to make loans to unemployed homeowners so they can make their mortgage payments. The other $1 billion program would renovate foreclosed homes so they can be rented. The House may vote on final passage of the bill on Tuesday.

Kinecta Federal Credit Union has named Dennis Kuncas vice president, mortgage lending operations. He will be responsible for overseeing all aspects of the Manhattan Beach, Calif., credit union's wholesale and retail mortgage operations, including broker approvals, lock desk, processing, underwriting and funding. Kuncas most recently held the position of branch operations and sales manager at Deutsche Bank/MortgageIT in Irvine.

DartAppraisal.com is offering a warranty that guarantees mortgage lenders and investors against potential loss for default and disclosure due to valuation inaccuracy. The product, DartAssurance, is being offered in partnership with an "A" rated insurance company and will provide up to $100,000 in coverage. The warranty covers the appraisal for 60 months and it is fully transferable. To be eligible for coverage, the maximum loan amount is $750,000, the loan-to-value ratio or combined LTV cannot exceed 100% and the minimum credit score is 620. First and second lien mortgages are covered. Darton Case, president of DartAppraisal.com, said the company understands the need for all types of risk mitigation for its clients. "We believe that our product will help stimulate the much needed private investors back into the mortgage market," he said.

House prices got a push from the homebuyer tax credit and rose 0.8% in April -- the first month-to-month price increase in seven months, according to the Standard & Poor's/Case-Shiller house price index. The non-adjusted 20-city HPI released Tuesday shows that prices are up 3.8% from April 2009. However, S&P index committee chairman David M. Blitzer said the increase in prices is mainly concentrated in California and gains in other markets are modest. He is concerned the April 30 expiration of the tax credit will lead to a "near-future pullback" in the housing market. "Consistent and sustained boosts in economic growth from housing may have to wait til next year," Blitzer said. IHS Global Insight economist Patrick Newport said the tax credit "pumped" up home sales and it will lead to a decline in prices later this year. The Case Shiller HPI is "likely to rise for another two-three months, but then start to decline. In our view, the housing glut and foreclosures will drive the national Case-Shiller index down another 6% - 8% with prices bottoming in 2011," Newport said. The April S&P Case Shiller 20-city HPI is down 30% from the peak in July 2006.

Small mortgage companies benefited from higher loan production in 2009 and posted healthy profits for the year, according to a Mortgage Bankers Association report. The annual report shows that 216 independent mortgage banks and subsidiaries of banks and thrifts on average originated $933 million loans in 2009, compared to $500 million in the prior year. These mortgage banking firms on average posted $4.9 million in pre-tax profits, compared to $700,000 in 2008. "Production profits increased in 2009 over 2008 as higher origination volumes, particularly in refinancing, reduced per-loan production expenses," said Marina Walsh, MBA's associate vice president of industry analysis. During 2009, MBA economists noticed the difference in profitability between the 41 bank subsidiaries and the independent mortgage companies widened. Historically, bank subs have lower overhead and compensation expenses, while independents generally had higher revenues. But now the independents' net production income is lower than their bank and thrift peers. Profits for the bank mortgage subsidiaries averaged 79.5 basis points per loan, compared to 54.9 bp for independents. "It was also clear bank and thrift subsidiaries had an advantage over independent mortgage companies because of lower loan officer compensation per loan and higher net interest spread due to lower warehouse funding costs and the ability to keep loans in warehouse longer," Walsh said.

The $1.3 billion refinancing this week of One Bryant Park, a Midtown Manhattan office tower, may be the first deal of its kind.

Valuation Partners, a national appraisal management company, named John Golletti vice president, national account executive, and Dan Kennard vice president, operations. Both Golletti and Kennard join Valuation Partners as veterans of the mortgage industry, with senior management experience from loan origination, processing and operations to appraisal and settlement services product sales among many other responsibilities. Golletti has been hired to broaden the company's sales reach, and will focus his initiatives in the Eastern United States. Kennard has been brought on to utilize his operational expertise to provide better service to the company's customer base.

Ladder Capital Finance Holdings LLC, a New York-based commercial real estate specialty finance company, has appointed Thomas Harney as head of Merchant Banking & Capital Markets to lead Ladder Capital's newly-created Capital Markets/M&A Group. With more than 25 years of experience in real estate and capital markets, including serving as senior managing director and co-head of real estate investment banking at Bear, Stearns & Co. Inc., Harney has completed over $70 billion in real estate M&A and capital markets transactions during the span of his career. Harney will be joined by Summer Nemeth, who has been appointed as a director of capital markets for the new Capital Markets/M&A Group. Nemeth worked extensively with Harney at Bear Stearns.

Fitch Ratings has downgraded 10 classes of a synthetic transaction, Home Re Ltd. 2005-2, which references mortgage insurance provided by Mortgage Guaranty Insurance Corp. The issuers of the securities, Home Re Ltd., and Home Re Credit Ltd., entered into a reinsurance agreement with MGIC on the pool of first lien mortgages. The stated maturity date for the notes is Oct. 25, 2012. The rating agency calculated an overall frequency of foreclosure of 30% of the outstanding exposure amount of $483 million. Fitch is estimating that 60% of the total losses will be realized before the notes mature. It calculated a total loss amount for the transaction of 12.30%. Besides the downgrades, Fitch assigned negative outlooks to five classes, M2 through M6, because it is concerned that if expected losses are realized faster than being projected, the transaction could be exposed to additional losses prior to maturity. The rating agency explained that losses are allocated to these notes in the reverse order of priority. The notes are not written down by losses, but an impairment amount is calculated based on the amount of losses allocated to that class.

LendingTree has launched its first Blackberry app, called the Mortgage RateFinder. The free application allows users to obtain on-the-spot loan offers anonymously. "In today's low-rate mortgage environment, it's important for consumers to shop around to ensure they're receiving the best possible rate," said Doug Lebda, founder and CEO of LendingTree. "In fact, since the introduction of our iPhone Mortgage RateFinder app in January, consumers have received more than 51,000 loan offers from participating lenders." In using the app, consumers have to enter information about the loan they would like and the app will instantly provide users with up to 30 different, customized loan offers from network lenders. Once a great offer is found, users can click to be contacted by that lender and move forward with the loan request.

The financial services reform bill does little to help consumers shop for a loan, according to the National Association of Mortgage Brokers. NAMB chief executive Roy DeLoach said the government is trying to impose its choices on consumers. An amendment by Sen. Jeff Merkley, D-Ore., restricts the way brokers can be paid by lenders and consumers. It is "too big brotherish," he said. NAMB feels regulators should be given the flexibility to make changes to the compensation provisions. The trade group also is worried about a safe harbor provision that limits points and fees to 3% of the loan amount. Congress directed regulators to make adjustments, giving lenders an incentive to make loans under $100,000, a move that helps low- and moderate- income homebuyers. "This will help to counter any unintended consequences for consumers," DeLoach said in an interview conducted during NAMB's annual meeting in Phoenix.

Due to opposition from the Treasury Department, Sen. Christopher Dodd, D-Conn., blocked an amendment that would allow covered bonds to get a start in the U.S. mortgage market. Treasury is "strongly opposed" to covered bonds. "We will probably go with a study," Sen. Dodd said late last week during the House-Senate conference on the regulatory reform bill. Sen. Bob Corker, R-Tenn., said a study would be "worse" than doing nothing, because it would delay legislative action for two years. The House conferees approved an amendment by Rep. Scott Garrett, R- N.J., that would create a legal and regulatory framework for the development of a covered bond market in the United States. But the Senate conferees rejected the Garrett amendment by one vote, according to sources. This was a disappointment for banking consultant Bert Ely and other covered bond supporters. "It prevents the emergence for a new way to finance housing in this country that would actually help to facilitate the resolution of Fannie Mae and Freddie Mac," Ely said. Covered bonds won't replace the GSEs or securitization, he added, but it will "help to fill that funding gap." Meanwhile, House Financial Services Committee chairman Barney Frank, D-Mass., said he will hold a markup on Garrett's covered bond bill in July. Senate Banking Committee chairman Dodd said he would hold a hearing on covered bonds. Under the Garrett bill, the Treasury Department would be the primary regulator of covered bonds, and set standards and reporting requirements for issuers.

If anyone in the mortgage broker industry thinks that the bills being proposed and/or passed by Congress are bad, they should have seen what the National Association of Mortgage Brokers' lobbying team and staff were able to keep out of them, newly-installed president Bill Howe told the audience at the group's annual meeting in Phoenix. In his final speech as president, Jim Pair elaborated on some of those successes during the past 12 months. They included changes in the Federal Housing Administration program that takes away the need for audited financials and opens up the program to more mortgage brokers. The SAFE Act created national education standards and the loan originator registry system, both of which Pair pointed out, were long-held positions by NAMB. As for the Home Valuation Code of Conduct, Pair lauded the results of the financial services reform bill conference committee and said that it will be likely that in the future, mortgage brokers would once again be able to order appraisals. The future of the industry is good, he said, declaring, "consumers still need us, wholesalers still need us." Brokers are the originators who need to meet education standards and be licensed, and they need to take pride in NAMB's Lending Integrity seal. As for NAMB itself, Howe said the organization has downsized and now operates out of a virtual office. It is working on several initiatives to improve communications with its members, including the use of video e-mails. Howe also announced a deal with the University of Phoenix, where members who hold the CMC and CRMS designations would be able to receive school credit for them towards a degree.

PennyMac Mortgage Investment Trust, a mortgage vulture fund that also is working on a new conduit, has signed up Impac Mortgage Holdings as a correspondent lender, according to industry officials. At press time both companies had not responded to telephone calls about the matter. The publicly traded PennyMac, a REIT based in Calabasas, is reportedly gathering product for a future securitization but has not released details about its plans. Impac, a former alt-A lender, has managed to survive the financial crisis and is acting as both a servicer and broker of loans, in addition to other side businesses. The company is based in Irvine.