Originations

Bank of Internet USA, San Diego, said it has launched a new jumbo lending effort in California using loan brokers and correspondent funders. The depository will originate its first loan next week, said a top official at the company. Heading the initiative for the Internet-only depository is Jerry Konzen, a former regional manager for Thornburg Mortgage, Santa Fe, N.M. Konzen, who was based in San Diego for Thornburg, told National Mortgage News that BoI would like to gear up jumbo (and super jumbo) production to a rate of at least $300 million a year but isn't ready to make any solid predictions at this time. He also hopes to eventually expand out the effort to other states. BoI is concentrating its effort on what it calls "affluent sophisticated borrowers," adding that it wants "the upper-end client." Konzen said the minimum downpayment on any jumbo or super jumbo mortgage is 20%, but it will go as low as 10% if the borrower keeps marketable securities or a certain amount of deposits in the bank.

Wells Fargo Home Mortgage is "very aggressively" looking to back multifamily properties, an executive with the Des Moines-based lender said at the Pacific Coast Builders Conference in San Francisco. "We can do just about any kind of deal, but it has to make sense," said Eric Smith, a senior vice president who works out of Wells Fargo's San Francisco office. Smith said lending on income-producing properties has been a "core product" for his company for a dozen years, and the acquisition of Wachovia Bank has made Wells' commitment to multifamily "even stronger." Currently, Smith confided during PCBC's Multifamily Trends day, Wells has a particular appetite for student housing, which Smith called "a pretty good opportunity." With colleges looking to expand by bringing in out-of-state students who pay a higher tuition, he noted, there is "a built-in demand" for apartments on and near many campuses. Freddie Mac also is looking for deals, but Steve Griffin, managing director of multifamily in its Los Angeles office, said good properties are "hard to find." The apartment sector may no longer be "in a free fall," he said, but "it is not stable just yet." And noting that Freddie Mac has reverted to underwriting guidelines that were in place before the housing sector went haywire, he said 70% of Freddie Mac's apartment loans represents "repeat business with good quality sponsors."

The seasonally adjusted annual rate of housing north of the border was 189,1000 units in May, down from a revised 201,800 units in April, according to Canada Mortgage and Housing Corp. Chief economist Bob Dugan said starts dropped in both the single-family and multifamily markets during the month and the current start rate is considered in line with projections that the start rate for this year will be 182,000 units. The seasonally adjusted annual rate of urban starts fell 9.5% during the month to 165,200 units during May with multifamily starts that category down 5.6% at 92,800 units and single-family start in that category down 14.1% at 72,400 units.

With securitized private-label mortgage product in short supply in the United States, investors are showing an interest in international product, according to one speaker at the American Securitization Forum's annual meeting. Sixty percent of an international residential mortgage-backed securities deal done a month ago was sold to U.S. investors, said David Jacob, executive managing director at Standard & Poor's, speaking as part of a mid-year securitization market review panel. Bob Behal, vice president and co-head of asset- and mortgage-backed securities research at investor The Vanguard Group Inc., confirmed that investors have an appetite for product that has sent them on a search for it. "We're trying to find other sources of loans to...feed the machine," he said.

Gateway Funding Diversified Mortgage Services has launched a correspondent lending division, offering to buy residential loans — including renovation products — from depositories and nonbanks in the Mid-Atlantic region. At press time officials of the Horsham, Pa.-based company had not returned telephone calls about the new effort, but according to statements made by company CEO Bruno Pasceri, FHA's 203(k) program will be one product it offers. Gateway is a nonbank that in past years has ranked 140th or so among residential funders, according to figures compiled by National Mortgage News. Pasceri said, "Demand for renovation products is likely to continue increasing over the next several years." Two years ago Gateway made headlines in the industry when it agreed to pay $200,000 to the Federal Trade Commission, settling charges that it engaged in discriminatory lending practices. While setting with the government, it denied the allegations. The FTC's original judgment against Gateway was for $2.9 million.

Paul Peters, the former president of Hibernia Bank's mortgage division, has joined residential mortgage advisory firm KLS Consulting LLC, dba Mortgage Banking Solutions. Peters, who will be a senior mortgage consultant at MBS, will run a national practice focused primarily on bank and credit union-owned mortgage operations. He will advise banks and credit unions on cross selling, risk mitigation, and regulatory compliance issues, among others. In addition to being the former president of Hibernia's mortgage division, Peters also was president of Capital One Mortgage N.A. for two years after the latter company acquired the former.

The American Securitization Forum is planning to issue a paper on risk retention proposals and related amendments. The paper was not immediately available at press time but executive director Tom Deutsch told this publication at the group's annual meeting Tuesday that it would weigh in with suggestions that the proposal allow for different treatment of different asset classes. It also would address a proposal to allow strict underwriting requirement to serve as a form of risk retention. Deutsch said the group is unified in calling for different forms of risk retention for different asset classes given differences in the way they are affected by regulatory capital requirements and recently-changed accounting standards. For example, while mortgage deals might be able to accomplish the 5% risk retention through a "vertical" slice of all the asset classes in a deal without triggering certain onerous accounting requirements, another type of securitized assets may not. Some issuers of non-mortgage assets would prefer the option of using a horizontal slice of the deal to accommodate this, he said. The group —which sometimes issues separate "educational" positions split between investor and issuer contingents when they cannot immediately agree on an issue —is currently divided when it comes to the underwriting issue, Deutsch said.

Federal Reserve chairman Ben Bernanke Wednesday blamed a weak housing market for restraining the pace of the economic recovery, saying residential real estate conditions have "firmed only a little" since mid-2009, despite homebuyer tax credits. The central banker also called the private label MBS market "nonfunctional," saying the "status quo" of using Fannie Mae and Freddie Mac to provide liquidity via securitizations is not sustainable. The Fed chairman told the House Budget Committee the economy would nevertheless continue its slow expansion with the nation's gross domestic product growing at a 3.5% this year and 4% in 2011. He noted that housing "activity is being weighed down, in part, by a large, inventory of distressed or vacant existing houses and by the difficulty of many builders in obtaining credit." At the last meeting of the Federal Reserve's monetary policy committee, members expressed concerns that the recovery in housing had "stalled," according to the minutes of the April 28 meeting. Federal Open Market Committee members noted that house prices have stabilized in many parts of the U.S. However, some members see "elevated foreclosures as posing a downside risk to home prices," according to the minutes of the meeting. The next FOMC gathering is June 22. Bernanke did have some good news, noting that there is a "glimmer of hope" in the commercial real estate market. He said the Fed, as a regulator, is working with lenders to restructure troubled CRE loans.

The Mortgage Bankers Association's Market Composite Index ended a streak of four consecutive weeks of gains as it fell by 12.2% on a seasonally adjusted basis for the week ended June 4, 2010. On an unadjusted basis, the Index decreased 21.1% from the previous week. The most recent results were adjusted for the Memorial Day holiday. The Refinance Index ended its streak of gains as it fell by 14.3% from the previous week while the seasonally adjusted Purchase Index decreased 5.7%. "Purchase applications are now 35% below their level of four weeks ago, as homebuyers have not yet returned to the market following the expiration of the homebuyer tax credit at the end of April," said Michael Fratantoni, MBA's VP of Research and Economics. Pointing out that refi applications fell even though rates were flat compared with the previous week, Fratantoni added that "many homeowners have already refinanced recently, remain underwater on their mortgages, have uncertain job situations, or have damaged credit following this downturn, and therefore may not qualify to refinance." The market share of refi applications decreased to 72.2% of total applications from 73.8% the previous week, while the share of adjustable-rate mortgage applications fell from 5.2% to 5.1%. The average contract interest rate for a 30-year fixed rate mortgage decreased by 2 basis points to 4.81% from 4.83% for the most recent week with points decreasing from 1.05 to 1.02 (including the origination fee) for loans with an 80% percent loan-to-value ratio, the association reported. The average contract interest rate for 15-year FRMs increased by 2 bps during the week to 4.26%. The average contract interest rate for one-year ARMs declined 2 bps from the previous week, to 6.94%.

Industry groups are urging House lawmakers to pass a Federal Housing Administration reform bill while rejecting several amendments that would lower the insurer's loan limit to $500,000, reduce its market share to 10%, and increase downpayments. "We urge you to oppose these amendments that will only hamper this important program," according to a joint letter signed by the Mortgage Bankers Association, National Association of Home Builders, and National Association of Realtors. The House is about to begin debate on the bill (H.R. 5072) which would give FHA more flexibility in adjusting its mortgage insurance premium structure. The measure also strengthens the agency's hand in getting lenders to indemnify FHA for bad loans and to terminate lenders with excessive early default rates. Industry groups oppose an amendment by Rep. Scott Garrett, R-N.J., that would increase the FHA 3.5% minimum downpayment to 5% and prohibit closing costs from being rolled into the loan amount. The Garrett amendment is expected to be voted down. An amendment by Rep. Melissa Bean, D-Ill., that requires FHA to report annually on its downpayment policy discussions is expected to pass. FHA currently has a market share of 30% and Rep. Tom Prices, R-Ga., is offering an amendment to cap it at 10%. Rep. Michael Turner, R-Ohio, wants to reduce the agency's maximum loan limit to $500,000 from $720,000. Industry groups contend the amendment would be disruptive and hurt the housing recovery. Meanwhile, real estate, apartment and low-income housing groups are supporting an amendment by Reps. Anthony Weiner, D. N.Y, and Gary Miller, R-Calif., that increases the FHA multifamily loan limit for elevator properties in high-cost areas. The House is expected to vote on final passage of H.R. 5072 Thursday.

Inland Real Estate Corp., Oak Brook, Ill. has formed a new joint venture with PGGM, a Dutch pension fund administrator and asset manager, to acquire up to $270 million of grocery-anchored and community retail centers in Midwest U.S. markets. Upon the initial closing, PGGM will contribute $20 million of equity and Inland Real Estate will contribute three retail centers with a gross equity value of $45 million to the joint venture. The three Inland contributed properties include the 97,638-square-foot Shannon Square Shoppes in Arden, Minn., the 82,929-square-foot Mallard Crossing neighborhood retail center in Elk Grove Village, Ill., and the 170,122-square-foot Woodland Commons community retail center in Buffalo Grove, Ill.

A bipartisan panel has issued a subpoena to Goldman Sachs & Co. after the investment banker failed to comply with a documents request and a request for interviews. Chairman Phil Angelides and vice chairman Bill Thomas of the Financial Crisis Inquiry Commission, who made the announcements regarding the subpoenas, stressed the commission's commitment "to using its subpoena power if there is a lack of, or delay in, compliance." They added: "Failure to comply with a commission request is viewed with the utmost seriousness, as the commission will not be deterred from getting desired information." In an e-mailed statement, a Goldman spokeswoman said, "We have been and continue to be committed to providing the FCIC with the information they have requested." Goldman is under investigation on several fronts for selling subprime CDOs to clients while playing a role in helping short sellers bet against the same securities. Meanwhile, renowned banking analyst Dick Bove said Tuesday that Goldman CEO Lloyd Blankfein should resign.

Clayton Holdings, a mortgage analytics provider, has hired Brian R. Clark as senior managing director and chief business officer in charge of commercial real estate. During his 15 years in the business, Clark has worked for both depositories and investment banks, including stints at Merrill Lynch, and ING. At Merrill he oversaw real estate "hybrids" in the firm's alternative asset group.

Farm banks largely stayed out of the muck the past few years, but that hasn't stopped regulators from trying to rein in these lenders. In the first quarter, farm banks - those with at least a quarter of their loans in agriculture - outperformed the broader banking industry, reporting fewer credit problems, stronger capital ratios and higher returns on assets. Only 7.28% of farm banks were in the red, compared with 18.67% of all institutions, according to the Federal Deposit Insurance Corp. Economists doubt an agricultural bust is coming, though they expect growth in the business to slow in coming years. Still, regulators are applying lessons from the recent debacles in construction and commercial real estate and stepping up scrutiny of farm banks to guard against surprises. "We are a little bit less willing to accept that ag is immune to a downturn," said James LaPierre, regional office director of the FDIC's division of supervision and consumer protection in Kansas City, Mo. "It would be foolish for us, or for our bankers, to think that while ag has been good that it will continue forever." So far, some agricultural bankers say, the heightened scrutiny has focused on ensuring they could withstand a downturn, rather than making them write down loans.

Freddie Mac is issuing another $1 billion security backed by apartment loans as part of its 'K-Certificates' program. The mortgage-backed securities are expected to price on or about June 11, and settle later in the month. In total, 83 rental buildings serve as collateral for the multifamily bonds. A few months back Freddie came to market with a $1 billion K-Certificate deal. The GSEs are a key source of liquidity for the apartment market with commercial banks remaining skittish about commercial lending. Bank of America Merrill Lynch, and Deutsche Bank Securities Inc. are the co-lead managers and joint book runners on the transaction. Barclays Capital Inc., Goldman Sachs & Co., J.P. Morgan Securities Inc., Jefferies & Company, and Wells Fargo Securities LLC are the co-managers. The K-007 multifamily MBS deal is the third K-Certificate deal this year. Freddie plans to issue three more K-Certificate deals this year.

Roughly 71% of loan officers pass the national test to become qualified mortgage professionals the first time they take the exam, according to new figures released by the Nationwide Mortgage Licensing System. The state (first-time) pass rate is even better: 78%, according to NMLS. The results reflect tests administered between July 30 of last year and April 30, 2009. "Everyone seems to be passing these days," said Christopher Cruise, a continuing education trainer based in Maryland. The tests, which feature multiple choice questions, are required under the SAFE Act.

The House is likely to reject an amendment that would raise the minimum downpayment on Federal Housing Administration loans to 5% from 3.5%, but legislators might accept language giving the government insurer the authority to raise the downpayment as needed. The Rules Committee meets Tuesday evening to decide which amendments can be offered to the FHA reform bill (H.R. 5072) that the House of Representatives will vote on during Wednesday's session. If approved by the Rules Committee, Rep. Melissa Bean, D-Ill., will offer an amendment giving FHA the authority to raise its downpayment, or minimum cash investment, requirement. The Bean amendment also asks FHA to submit an annual report to Congress discussing proposed or actual increases in downpayment requirements. In the past, Rep. Bean has garnered the support of conservative Democrats and Republicans for her amendments. H.R. 5072 gives the FHA more flexibility in adjusting its mortgage insurance premium structure and rebuilding its capital reserves.

Experian has expanded CreditHorizons for Securities, which delivers Experian's consumer credit information for nonagency mortgage-backed security deals, to offer the ability to link consumer credit data to Lewtan's private-label deal library, ABSNet Loan. This capability expands the CreditHorizons for Securities offering to a broader base of nonagency residential mortgage-backed securities investors. By linking consumer credit data to loan-level data, CreditHorizons for Securities provides an additional set of influences that helps investors better predict delinquency and default probabilities, obtain more granular data about the underlying collateral and understand how consumer trends impact their RMBS portfolios. Using a proprietary matching algorithm developed by Experian's credit and industry experts, Experian has achieved a high consumer-to-loan match rate in linking to Lewtan's data.

MHI Hospitality Corp., a real estate investment trust based in Williamsburg, Va., has entered into an amendment to its credit agreement with Branch Banking & Trust Co., which fixes the interest rate spread for variable Libor-based interest rate loans at 4% and sets a Libor floor at 0.75%. Furthermore, the facility has become nonrevolving. The agreement also eliminates MHI's ability to borrow any further funds under the facility or re-borrow previously repaid funds. There is also an option to extend the maturity date to May 8, 2012 if certain valuation and other criteria are met. MHI will be required to make mandatory prepayments based on excess cash flow and if it raises equity within certain parameters. The agreement modifies the methodology used to value the company's existing hotel properties and increases the percentage of a hotel property's value available for compliance purposes, except for the Tampa property.

Included in the sale of three retail banking branches from Integra Bank NA, Evansville, Ind., to United Community Bank, Lawrenceburg, Ind., was approximately $10.7 million in commercial and residential mortgage loans that were originated in other Integra offices. There were also $35 million of branch loans sold in the transaction, which involved offices located in Milan, Osgood and Versailles, Ind. The loans were purchased at par value. United Community assumed $53.3 million of deposits for a 4.5% premium. The sale increased Integra's tier I and total risk-based capital ratios by approximately 32 basis points and the tier 1 leverage ratio increased by approximately 22 basis points.