Originations

Sometime by late June PNC Financial Services will officially pull the plug on the warehouse lending business it inherited from National City, cutting 55 workers who man the division in Kentucky, and sending its nonbank borrowers into the arms of other banks. "At this point I would say the chances of PNC selling this thing or allowing for a 'lift out' is pretty nil," said one source close to the situation. "You might say this is an official wrap." To date, PNC officials have said little about the NatCity warehouse business but have stayed firm regarding a recent forecast of closing the unit by mid-2010. Paul Best, who managed the business for NatCity and stayed on at PNC when it bought the Cleveland bank in late 2008, said he could not comment.

The Senate Tuesday rejected an attempt to strike from the regulatory reform bill new authority for state attorneys general to take enforcement actions against national banks for violations of federal consumer protection laws. The amendment by Sen. Bob Corker, R-Tenn., to keep state AGs out of national banks failed on a 55-43 vote. Corker also wanted to strike a section of the bill (S. 3127) that rolls back the Office of the Comptroller of the Currency's powers to pre-empt state consumer protection laws. The Senate went on to pass an amendment by Sen. Tom Carper, D-Del., that clarifies the state AG has the authority to enforce rules promulgated by the proposed Consumer Financial Protection Bureau which will have oversight over residential lending. "It preserves the state attorneys general role in protecting their citizens from abusive practices," said Sen. Chris Dodd, D-Conn. The Carper amendment clarifies that the AGs can enforce the CFPA rules to prevent unfair, deceptive and abusive lending practices, but AGs cannot use their own interpretations of the underlying statutes. The Senate approved the Carper amendment by an 80-18 vote.

Loan applications to buy new or existing homes plummeted 27% last week, reaching a 13-year low, according to new figures released by the Mortgage Bankers Association. The trade group noted that purchase applications have declined almost 20% over the past month despite interest rates on fixed-rate loans averaging less than 5%. The trade group tracks applications using an index it created back in 1990. In a statement MBA vice president of research and economics Michael Fratanoni said the results indicate that the expiring $8,000 federal tax credit "pulled sales into April at the expense of the remainder of the spring homebuying season." Although purchase apps were pummeled for the week ending May 14, the index that tracks refinance applications increased 14.5% from the previous week. Housing and mortgage economists believe total loan production will range from a low of $1 trillion to a high of $1.4 trillion this year. MBA's forecast is at the lower end of those estimates. Over the past two quarters refis have accounted for about 60% of all originations.

Existing home sales rose for the second straight month in April in the greater Houston area, according to new figures compiled by the Houston Association of Realtors. Single-family home sales climbed 26.7% in April compared to the same month a year ago, with all segments reporting gains except for the under $80,000 sector, which remained flat, according to HAR. Although the biggest gains took place among houses priced above $500,000, the average sales price in the region in April stood at $206,414, a gain of 6.8% from a year ago. Some 6,200 properties changed hands during the month, for a total volume of $1.2 billion. At the same time, the number of available listings rose 8% to nearly 49,000, an inventory of roughly 6.5 months at the current sales pace. Still, that compares favorably to the national inventory of 8 months.

Cash buyers - spell that i-n-v-e-s-t-o-r-s - purchased more than four out of every five new condominium units in the Greater Downtown Miami area in the first quarter, according to the latest figures from the Bal Harbour-based CondoVultures consulting firm. Of the some 700 apartments sold during the three-month period in the 60-square-block area, financing was used to acquire less than 120. "Even though the U.S. government is encouraging lenders to once again finance condo purchases, the results have not been impressive in South Florida," says consultant Peter Zalewski. "Many lenders claim to be willing to consider writing loans for buyers of condominiums, but the end results simply do not support that." Meanwhile, The Miami Herald reports that the developer of the opulent ICON Brickell condominium complex in Greater Downtown Miami has deeded back two of the three luxury towers that make up the complex to a group of construction lenders led by HSBC. The Related Group relinquished ownership of the 57-story North and South towers in the three-building, 1.793-unit complex after selling just a fourth of the apartments in the two structures, the newspaper said.

Single-family housing starts jumped 10% in April as builders rushed to meet demand from buyers seeking to take advantage of the expiring Federal homebuyer tax credit. The U.S. Census Bureau reported that single-family housing starts rose to a seasonally adjusted annual rate of 593,000 in April, up from a 538,000 rate in March. On a sequential basis, construction activity rose 18% in the Midwest, 15% in the South, 5% in the Northeast but fell 5% in the West. Overall, single family housing starts rose 54% from April 2009. The spike in activity caused the National Association of Home Builders/Wells Fargo Housing Market Index to rise three points to a reading of 22 in May -- its highest showing since August 2007. "Builders are hopeful that the solid momentum that the tax credits initiated will continue even now that those incentives are gone," said NAHB chairman Bob Jones. The homebuyer tax credit expired April 30, but buyers have until June 30 to close and qualify for the credit. (A California tax credit for $10,000 for new home purchases is on the verge of expiration.) Builders broke ground on 68,000 multifamily units in April, down 24% from March.

Navy Federal Credit Union, the largest credit union player in mortgages, funded $847 million worth of residential loans in the first quarter, a 60% decline from the same period a year ago. Even though its loan production fell, the average size of new loans being funded by Navy FCU rose slightly to $248,606 from $233,825. In the fourth quarter the CU giant originated $1.2 billion of one- to four family mortgages. Among all lenders, Navy ranks 30th nationwide in terms of loan production, according to the Quarterly Data Report. Based in Merrifield, Va., not too far from Washington, it is also an active jumbo lender. Many of its mortgage customers are employed by the military.

In denying a mortgage application, lenders will have to show the borrower their credit score under an amendment approved by the Senate and attached to the Wall Street Reform bill. Sen. Mark Udall, D-Colo., said his amendment will "empower consumers" by giving them immediate access to their credit score for free. "If you are turned down for credit because you have applied for a loan or you have a higher loan rate, you will have access to your credit score," Sen. Udall said. The Senate approved the Udall amendment Monday evening by a voice vote. The Senate also approved an amendment preserving the Federal Trade Commission's existing consumer protection mandate. The amendment by Sen. John Rockefeller (D-W.Va.) aims at getting the FTC and the new Consumer Financial Protection Bureau created by the reform bill (S. 3217) to work together. "The amendment directs the FTC and the new bureau to enter into a memorandum of understanding and coordinate their regulatory efforts," Rockefeller said. "The bottom line is that businesses will not be subject to multiple layers of regulation and rules," he added.

CitiMortgage, a top ten player in wholesale lending, will no longer fund non-agency jumbo mortgages through loan brokers, National Mortgage News has learned. A New York area broker that has used the bank for years said he received notification on Monday and a spokeswoman for Citi confirmed that "we are not currently offering jumbos through the broker channel." The bank-owned lender, however, will continue funding jumbos through its retail channel. The spokesman said CitiMortgage offers "attractively priced" jumbo mortgages to "our highly credit-worthy customers, as we anticipate holding these loans on our balance sheet." CitiMortgage is based in O'Fallon, Mo., but its parent bank is headquartered in New York, one of the most expensive housing markets in the nation, and home to many financial service executives who live in New Jersey, New York, and Connecticut where home prices can easily exceed the GSE jumbo limit of $729,750. Many jumbo providers today require down payments of at least 20%. Liquidity in the market is beginning to loosen up somewhat thanks to a recent jumbo securitization done by Redwood Trust, a publicly traded REIT.

In the United Kingdom, purchase mortgages have continued their year-to-year rise for the ninth consecutive month, according to a London-based industry trade group. However, refinancing volume continued to fall on a year-over-year basis for the 23rd consecutive month, data from the Council of Mortgage Lenders, London, show. The number of purchase loans increased by 45% year-over-year and the value of these loans jumped by 62% in March while the value and number of refinance loans was down 29% year-to-year. The 45,000 purchase loans in March (worth £6.3 billion or $9.1 billion), were up 25% in terms of the number of loans (24% in value) from February and the 28,000 refinance loans (worth £3.5 billion or $5.0 billion) were up 23% in volume (21% in value).

Presidio Residential Capital, a private real estate construction lender, said it has closed $40.3 million in new commitments since its formation six months ago. Over the next 24 months, the company's goal is to fund in excess of $250 million in construction loans for home-building projects in the Western part of the U.S. and Texas. The first loan was $11 million to Cornerstone Communities of San Diego to provide the funding needed to build homes in its Andorra neighborhood within the master-planned community of Eastlake in Chula Vista, Calif. Other loans include $6.2 million closed in January to TRI Pointe Homes to fund the completion of 29 homes in its Traditions neighborhood in Riverside, Calif., another $8.2 million to TRI Pointe Homes for an Oceanside project of 30 homes dubbed Arrowood, and $14.9 million closed in March to McMillin Homes to fund 45 homes in its Santee, Calif., neighborhood of Morning View. Although Presidio Residential Capital targets single-family builders, condominium projects will be considered, according to Don Faye, president. Loans, with a minimum loan commitment of $10 million, are being made based on the project and builder meeting specific standards, including the project having a strong feasibility, good product and location.

Quicken Loans, Livonia, Mich., is jumping into the private label origination business, offering its services to community banks and credit unions. The company said it has launched Quicken Loans Mortgage Services for lenders that want to originate home loans, but do not feel they have sufficient resources to hire loan officers, underwriters and support staff. Currently, PHH Mortgage is the largest private label funder in the U.S.

Despite aggressive efforts to stay alive, Midwest Bank and Trust Co., was closed late Friday by Illinois regulators. The failure of the $3.2 billion-asset, Chicago-area bank came on a night when the Federal Deposit Insurance Corp. also found buyers for three other institutions, bringing the year's failure total to 72. Midwest's collapse - brought on in part by losses tied to the government-sponsored enterprises - came despite its receiving bailout funds to address its capital needs. The FDIC sold the bank's operations to $12 billion-asset FirstMerit Corp. in Akron, Ohio. The government's losses from the failure were estimated at $216 million. The three other failed banks totaled $342 million of assets. They were: $136 million-asset Satilla Community Bank in Saint Marys, Ga., $109 million-asset New Liberty Bank in Plymouth, Mich., and $97 million-asset Southwest Community Bank in Springfield, Mo. Together, the four failures were estimated to cost the FDIC about $300 million. Like other institutions, Midwest, the bank subsidiary of Midwest Banc Holdings, suffered sharp losses in its preferred stock holdings when the government's 2008 conservatorship of Fannie Mae and Freddie Mac depleted the GSEs' value. Midwest's problems were compounded by rising loan losses.

Moody's Investors Service has downgraded $2.2 billion of securities backed by 'alt-A' mortgages issued in 2005 by Residential Funding Co. LLC, a unit of what is now Ally Financial. According to wire service reports, Moody's has downgraded several hundred billion dollars of MBS since the start of April as falling home prices, high joblessness and the slow economy led credit raters to revise loss expectations. In January Moody's placed $573 billion of alt-A MBS issued from 2005 through 2007 on review for possible downgrade after it revised its loss forecasts. Alt-A loans include mortgages made to borrowers that cannot document assets and/or income.

Bank of America completed 23,500 permanent HAMP modifications in April, almost double what it processed the previous month. The nation's largest servicer of residential loans is becoming more proficient in the use of the Home Affordable Modification Program, which requires servicers to reduce a borrowers' mortgage debt to 31% of income, and put the applicant through a three-month payment trial before qualifying him for a permanent modification. "We continue to evaluate homeowners' eligibility and activate trial modifications while focusing on completing as many permanent modifications as possible," said Jack Schakett, B of A's credit and loss mitigation executive. B of A had completed 32,900 HAMP modifications as of March 30, overtaking JPMorgan Chase (31,460 completed mods) as the top HAMP servicer. "We continue to demonstrate momentum executing HAMP," B of A Home Loans president Barbara Desoer said recently. She noted that another 38,000 permanent modifications would be completed once the customers signed the contract. Since the Obama Administration launched HAMP in the spring of 2009, B of A has completed 56,400 modifications.

PHH Corp. on Monday named industry veteran Luke Hayden president of its mortgage division, effective immediately. In a statement PHH said Hayden replaces Mark Danahy, who left the nonbank lender/servicer to "pursue other opportunities." At press time the company had not returned telephone calls concerning Danahy's departure. According to figures compiled by National Mortgage News and the Quarterly Data Report, the Mount Laurel-based PHH Mortgage is the nation's ninth largest servicer with $151 billion in receivables. It ranks eighth among funders. PHH Mortgage also is one of the largest private label lenders in the nation. During his 30-year career in mortgage banking, Hayden has worked at Chase Home Mortgage, GMAC Mortgage, and Renaissance Investment Trust.

Fannie Mae economists expect the second quarter will be the high point for single-family originations this year before fundings fall below the $300 billion mark in the fourth quarter. Fannie chief economist Doug Duncan estimates originations will hit $361 billion in the second quarter boosted by the homebuyer tax credit and low mortgage rates. With rising rates, loan production will drift down to $324 billion in the third quarter and fall to $294 billion in the fourth. "We expect purchase originations to increase and refinance originations to drop off sharply," Duncan says. His forecast calls for refinancings to drop from 45% of originations in the second quarter to 36% on the third quarter and 37% in the fourth quarter. Meanwhile, total home sales will rise from 5.5 million in the first quarter to 6.01 million in the year-end quarter. "The pace of employment growth and confidence in the labor market will be key factors for a pickup in home sales by the end of the year," Duncan said.

With rumors mounting that some USDA offices are running out of money to fund its single-family insurance program, a Senate committee has included a premium increase for the Rural Housing Service in an emergency supplemental appropriations bill. Lenders that fund home mortgages in rural areas hope the measure will pass, placing the RHS program back on solid financial footing. The RHS provision, sponsored by Sen. Michael Bennet, D-Colo., allows the agency to increase its current 2% upfront premium to 3.5%, making the insurance program self-funding and removing it from the congressional appropriations process. The House passed a separate RHS reform bill, sponsored by Rep. Paul Kanjorski, D-Pa., that raises the upfront premium to 4%. House and Senate appropriators want to pass the emergency supplemental before Congress adjourns for the Memorial Day recess. Meanwhile, the Agriculture Department is being tightlipped about the funding status of the RHS program, frustrating many lenders that use it. It's believed the agency has exhausted its loan commitment authority, a belief shared by the Mortgage Bankers Association. "This is affecting independent mortgage bankers," said Tamara King, MBA's director of loan production. Even though the program may have run out of money, RHS has issued "conditional" commitments to some lenders. RHS officials have not responded to numerous requests by this newspaper for information about the status of the lending program.

Clayton Holdings LLC, a risk analytics firm, said it has adopted new Fannie Mae promulgated quality control standards into its product offerings. The Shelton, Conn.-based Clayton said Fannie's requirements (mandated in lender letter LL-2010-03) requires GSE originators to create "written operational work flow procedures" and increases both post- and pre-closing work. Among the new chores, lenders must confirm ten basic data elements prior to closing.

Three public stock offerings from different real estate investment trusts have been priced. The largest in terms of proceeds is from Strategic Hotels & Resorts Inc., Chicago. The IPO is expected to bring in nearly $290 million ($333 million if the over-allotment is exercised in full). Strategic is selling 66 million shares at $4.60 each. The proceeds will be used to fund a tender offer for senior notes of its operating partnership, Strategic Hotel Funding LLC, with the remainder used for general corporate purposes. American Capital Agency Corp., a Bethesda, Md., REIT that invests in mortgage-backed securities and collateralized mortgage obligations, is expecting $147 million in net proceeds from its 6 million share offering. The price is $25.75 per share. Proceeds will be used to acquire agency securities as market conditions warrant and for general corporate purposes. Finally, Getty Realty Corp., Jericho, N.Y., priced its 4.5 million share offering at $22 per share. Net proceeds are expected to be $94 million and should be used to acquire properties in the gas station and convenience store sector, repayment or refinancing of outstanding debt and general corporate purposes. All three offerings are expected to close by May 19.