Originations

Late payments on Freddie Mac-guaranteed mortgages fell to 4.17% in March, the first monthly decline in almost two years and a sign that real estate conditions might finally be improving. A spokesman for the GSE told National Mortgage News that an "uptick in completed loan modifications" and rising short sales were the chief reasons for the improvement. Delinquencies on Freddie's book of business declined 7 basis points from February. A year ago late payments totaled a more benign 2.41%. Even though loan performance improved, secondary market purchases by Freddie from seller/servicers increased slightly to $31 billion in March from February. However, compared to March 2009, loan acquisitions fell by 64%. Based on the first-quarter run-rate, Freddie will buy $384 billion this year compared to $548 billion the year before.

Chicago Bancorp, a retail mortgage banking company, has hired Jeffrey Walker as the new president of Chicago Bancorp Direct, its direct-to-consumer lending platform. Most recently he was with CitiMortgage Inc. where he was the managing director/executive vice president of national sales and lending. In his new role, Walker will be responsible for expanding the company's national footprint through Internet lending, call centers, and strategic partner relationships. He will be based in Chicago and assume his new responsibilities with the firm on May 1.

Consumers are taking less time to research their mortgage loan than they do for buying a car, a survey conducted for Zillow Mortgage Marketplace found. The five hours a consumer typically spends to research a mortgage loan is the same as the last time this survey was conducted two years ago. Nearly one-third of the respondents spent two hours or less researching a mortgage. On the other hand, they spend 10 hours researching what car they are looking to buy, four hours researching the computer they are looking to buy and five hours on where they want to go on vacation. The survey also found that consumers who got a mortgage in the last five years are soliciting an average of three quotes; in 2008, there was an average of four quotes solicited. Zillow chief economist Stan Humphries said he was surprised consumers do not spend more time shopping for a mortgage now than they did two years ago, especially in light of the foreclosure crisis. "In an area like mortgages, where the lender has so much more information than the typical borrower, getting multiple offers from lenders and being able to compare them relative to one another is critical to leveling the playing field."

When the Information Solutions Group of First American Corp. becomes a separately traded public company, it will take the name CoreLogic and trade on the New York Stock Exchange under the symbol CLGX. The spin-off is targeted for June 1. The title company will be part of First American Financial Group, which will retain the FAF ticker symbol. The new CoreLogic will encompass more than 20 different business lines, making it larger and more diverse than the entity currently known as First American CoreLogic. Meanwhile, two sets of First American bondholders have approved debt tender offers and consent solicitations. The approvals by those who hold the 5.7% senior notes due 2014 and the 8.5% capital securities due 2012 expressly affirm the spin-off transaction. A third solicitation for the holders of the 7.55% senior debentures due 2028 remains in progress, with 43% tendered so far.

First American Corp., Santa Ana, Calif., had net income for $29.5 million for the first quarter, down from $36 million for the previous year as the unit soon to be known as CoreLogic reported lower revenues and pre-tax income. The title insurance segment at First American, on the other hand, saw its pretax income soar from $9.3 million for the first quarter of 2009 to $28.6 million for the most recent period. Average revenue per direct title order was $1,435, up 15% over the previous year, due to a better mix of higher-premium purchase transactions. The loss provision rate for title claims during the first quarter of 2010 was 5% of premiums and related revenues, compared with 6.5% for the same quarter in 2009. The Information Services Group, which is being renamed CoreLogic, suffered as there were fewer mortgage refinancings in the first quarter 2010, compared to 2009. Revenues were off by nearly $40 million and pretax income down by almost $31 million.

Stewart Information Services Corp., Houston, said its first quarter was impacted by poor weather in January and February that reduced new title orders (and ultimately loan closings) as well as issues related to the new HUD-1 form that went into effect Jan. 1 2010. The latter created a backlog that negatively impacted Stewart's first quarter results, but the company added the situation should improve in the second quarter. The company lost $29 million for the first quarter 2010, an improvement over the loss of $37.6 million for the same period one year prior. For title companies, the first quarter of the year is typically difficult because home sales are normally slow. For the quarter, Stewart had 96,900 orders open (38,500 in March alone), compared with 141,400 for the first quarter of 2009. Still, as competition in the title industry decreased, Stewart's market share was at an all-time high of 16.1% for the fourth quarter 2009, said chairman and co-chief executive Malcolm S. Morris. "Much of the market share improvement is being driven by a highly-improved agency network, with fewer anticipated claims to us. Stewart has increased title premium rates or has increases pending in 28 states. We continue to actively increase remittance rates from agents where warranted and remain focused on competitive and profitable pricing in all states," said Morris. However, in the first quarter, Stewart had title losses and related claims of 7.9% of title revenues, vs. 6.5% one year prior; more than 60% of cash claim payments are from policies issued by now-cancelled agents.

The Federal Open Market Committee said financial markets are functioning well enough that it can finish closing its special liquidity facilities as planned by shutting down its Term Asset Backed Securities Facility for new-issue commercial mortgages June 31, but it is leaving short-term rates unchanged for now. While there has been "improved functioning" in financial markets, the Fed also noted several continuing economic concerns, the fact that "investment in nonresidential structures is declining" among them. The Fed also said "lower housing wealth" persists and noted, "Housing starts have edged up but remain at a depressed level." Among other concerns were "tight credit" conditions and a lack of employment growth. "While bank lending continues to contract, financial market conditions remain supportive of economic growth," the FOMC said. "Although the pace of economic recovery is likely to be moderate for a time, the committee anticipates a gradual return to higher levels of resource utilization in a context of price stability." Only Thomas M. Hoenig, president of the Federal Reserve Bank of Kansas City, voted against the decision to leave short-term rates where they are. In dissenting, Hoenig continued "to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to a build-up of future imbalances and increase risks to longer run macroeconomic and financial stability."

Distressed properties are selling at prices 15% below other home sales, according to a March survey by the National Association of Realtors. Last year the discount on foreclosure and short sales was normally 20%. But Realtors say they are receiving multiple bids from investors on single-family homes priced at $150,000 and lower. They also are complaining that banks won't release their inventory. The Realtor survey shows that foreclosure sales comprised 24% of existing home sales in March and short sales comprised 12% of sales. Realtors also reported that 11% of sales contracts were canceled in the first quarter as a result of low appraisals. Realtors also noted that sales were delayed or renegotiated because of low appraisals. "The appraisal process continued to draw a significant number of negative comments, particularly as related to selection of comps, the competency of appraisers, and lags between the actual market and appraised values," said Jed Smith, NAR managing director of quantitative research.

Redwood Trust officials said its groundbreaking prime jumbo residential mortgage securitization did better than expected in the market, suggesting that there is a considerable amount of pent-up demand for this type of product. A source close to the deal said, "We had orders for $1.2 billion." Martin S. Hughes, president and co-chief operating officer of Redwood Trust, said in a statement released by the company, "The execution on this securitization exceeded our expectations, which is significant given that the market has been closed for nearly two years." A call to Hughes for further comment had not been returned at press time.

The average rate for 30-year fixed-rate mortgages continued to show stability in the most recent week and was even slightly lower, according to Freddie Mac's Primary Mortgage Market Survey. The average rate for the 30-year FRM during the week ended April 29 was 5.06%, down just slightly from 5.07% the previous week. A year ago the average 30-year FRM rate was 4.84%. "Mortgage rates on 30-year fixed loans have averaged about 5% over the first four months of this year, staying within a band of roughly a quarter percentage point and virtually matching 2009's annual average," said Frank Nothaft, Freddie Mac vice president and chief economist. "These low rates have been helping to moderate house price declines over the course of the year." The average 15-year FRM rate during the most recent week remained at 4.39% where it was the previous week. This was lower than a year ago when it averaged 4.51%. The average rate for a five-year Treasury-indexed hybrid adjustable-rate mortgage in the most recent week was slightly lower than the previous week's 4.03% and also down more notably from 4.90% a year ago. The average one-year Treasury ARM rate was up slightly in the most recent week at 4.25%, compared to 4.22% the previous week. A year ago the average one-year Treasury ARM rate was 4.78%. Average points were 0.7 for 30- and 15-year FRMs, 0.6 for five-year Treasury hybrids and 0.5 for one-year Treasury ARMs.

Escalating troubles at Ambac Assurance Corp. and the resulting inability of the bond insurer to make even less of a partial payment on claims than it previously expected caused U.S. Central Federal Credit Union to restate its fourth quarter results for 2009, adding $274 million in losses that came from MBS investments. As a result, U.S. Central had losses of $750.9 million for the fourth quarter and $2.04 billion for the full year. U.S. Central, which has been run under a National Credit Union Administration's conservatorship program since March 2009, had a loss of $4.9 billion for 2008. Financial troubles at Ambac caused its regulator, the Wisconsin Insurance Commissioner, to issue an order restricting the company's activities and its ability to pay bond claims. As a result, U.S. Central now projects it will collect 25% of its claims from Ambac, down from earlier projections of 80%. This increased U.S. Central's estimates for credit losses on Ambac-backed bonds to $416.1 million. Ambac is one of several troubled bond insurers whose financial troubles are trickling down to customers like the corporate credit unions, with other corporates cutting their recovery estimates in recent months on bonds insured by MBIA, Financial Guarantee Insurance Corp., Syncora Guarantee and FSA (now Assured Guarantee Municipal). Both FGIC and Syncora have been ordered by the New York Insurance Department to stop paying claims in order to preserve what little capital they have.

A relatively weak quarter for Flagstar Bancorp's mortgage business contributed to the Troy, Mich., company's nearly $82 million loss in the first quarter of 2010. For the same period in 2009, the company lost over $67 million and in the fourth quarter of 2009, it lost approximately $72 million. Gain on loan sales fell from $96.5 million in the fourth quarter of last year to $52.6 million in the most recent period. This reflects a decline in interest rate locks on mortgage loans, from $7.9 billion in the fourth quarter of 2009 to $6.1 billion for the first quarter of 2010 as well as a decline in residential mortgage sales during the same period from $7.1 billion down to $5.0 billion and a decline in loan fees from mortgages from $27.8 million down to $16.3 million. Loan originations fell from $9.5 billion in the first quarter last year to $6.9 billion in the fourth quarter to $4.3 billion in the most recent period. Its servicing portfolio declined from $56.5 billion at the end of last year to $48.3 billion on March 31, 2010. During the first quarter, Flagstar had two bulk servicing sales totaling nearly $11 billion. Nonperforming residential first mortgage loans were $709.4 million at the end of the first quarter, up from $659.5 million as of Dec. 31, 2009, while nonperforming commercial mortgages increased to $395.8 million from $385.7 million during the same period.

With home prices stabilizing, the market may soon be flooded with new listings from sellers that have been waiting for such an improvement, according to the Mortgage Bankers Association. "There will be a flood of listings," predicted MBA vice president of research Michael Frantantoni. "We will have a rather volatile, sort of topsy-turvy market for the next couple of years." Speaking at an MBA trade show, Frantantoni noted that both owner (2.6%) and rental vacancy rates (10.6%) are increasing. He said this trend suggests "we are losing households." MBA anticipates that home prices will be flat for the rest of the year. The trade group anticipates that the Federal Reserve will not start hiking short-term rates until December of this year, at the earliest. But Frantantoni fears that even with the economy improving, consumers may not spend much. "Their outlook on spending, saving and risk taking may have changed," he told the audience. As for the job market, MBA sees unemployment falling steadily to 7.5% by 2012, but a large portion of that improvement may come in the hiring of temporary workers, he said. "Roughly one-quarter to one-third of this audience is hiring temps," Frantantoni said. "We're not anywhere close to a peak. Businesses are seeing an increase in demand for their services and they need to staff up as a result, or plug the hole while they wait to see if this demand will persist."

Purchase mortgage applications were up last week as the homebuyer tax credit program moved toward its month-end deadline, but overall applications were down from the preceding week as refinancings declined, according to the Mortgage Bankers Association. The MBA's Market Composite Index for the week ended April 23 fell 2.9% on a seasonally adjusted basis compared with one week earlier. On an unadjusted basis, the Index decreased 1.9% compared with the previous week. According to Michael Fratantoni, MBA's vice president of research and economics, "Purchase applications were up almost 9% from a month ago, with a disproportionate share of the increase due to government purchase applications. Government applications for purchasing a home accounted for almost 49% of all purchase applications last week." The seasonally adjusted Purchase Index increased 7.4% from one week earlier and reached its highest level since October 2009. The government purchase index increased 11.9% from last week on a seasonally adjusted basis, while the conventional purchase index increased 3.5%. The Refinance Index declined by 8.8% from the previous week. The market share of refi applications fell to 55.7%, its lowest point since August 2009. This was down from 60% for the previous week. The market share of adjustable-rate mortgage applications was unchanged at 6.0%. The average contract interest rate for the 30-year fixed rate mortgage rose four basis points from 5.04% to 5.08% for the current week with points decreasing to 0.91 from 0.98 (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 also had a 4 bps increase to 4.38%. The average contract interest rate for one-year ARMs increased 8 bps to 7.03%.

The House of Representatives Tuesday afternoon passed a bill that reforms the Rural Housing Service's single-family program, extending it through Sept. 30 to prevent a shutdown. Supporters of the bill (H.R. 5017) hope the Senate acts quickly to approve the measure this week. The chief sponsor of the legislation, Rep. Paul Kanjorski, D-Pa., said RHS could run out of loan guarantee authority by the end of April. The bill makes RHS self-funding by increasing the upfront guarantee fee to 4% from the current 2% requirement. The Agriculture Department, which administers the program, is expected to impose a 3.44% fee on borrowers. The original bill allowed the Agriculture secretary to assess a 0.5% annual fee on the loan balance, but the measure was dropped during a committee markup. Congress originally granted RHS $13.1 billion for loan guarantee authority for fiscal 2010, but thanks to the program's popularity, the allocation is nearly gone. The bill increases that authority to $30 billion, but it expires Sept. 30 when the fiscal year ends. Congress will have to renew RHS's loan guarantee authority as part of the FY 2011 appropriations process. Rep. Shelley Moore Capito, R-W.Va., said the short-term extension is needed to foster a return of private lenders.

The House Financial Services Committee has approved a bill that will give the Federal Housing Administration more flexibility in adjusting its mortgage insurance premiums. The committee passed the bill (H.R. 5072) on a voice vote after amendments by Rep. Scott Garrett, R-N.J., to raise the FHA downpayment requirement, prohibit financing of upfront premiums and limit the FHA guarantee to 95% of the loan amount were voted down. Garrett's amendment to raise the FHA downpayment to 5% from the current 3.5% minimum failed on a 52-12 vote. FHA recently increased its upfront premium 50 basis points to 2.25% of the loan amount to help recapitalize the FHA insurance fund. But the agency would prefer to raise its 55 basis point annual premium instead. If passed by the Senate, H.R. 5072 would allow FHA to reduce the upfront premium to 1% and raise the annual premium to 90 bps on single-family mortgages with loan-to-value ratios above 95%. Raising the annual premium would be "safer for homeowners and better for the health of the FHA fund," according to Housing and Urban Development secretary Shaun Donovan. The FHA reform bill also strengthens FHA enforcement powers to hold lenders accountable for bad loans. "Further, the bill provides that a lender's improper or imprudent activities at the regional level may now yield enforcement actions that restrict their nationwide activities," the HUD secretary said.

A Republican alternative to Sen. Chris Dodd's massive financial services bill gives the mortgage banking industry hope that Congress understands the dire need for an exemption on MBS risk retention. According to an outline prepared by Sen. Richard Shelby's staff, an exemption on the 5% risk retention rule would be granted for loans that "meet minimum underwriting standards" established by bank regulators. However, no details are provided in the outline. All factions of the mortgage industry are lobbying furiously for a risk retention exception for issuers of bonds backed by Fannie Mae, Freddie Mac, and FHA loans. Language in the Shelby outline regarding risk retention is more specific than what is in the Dodd bill. However, lobbyists say Dodd has been open to more specific language on risk retention. Some industry participations believe that if no "carve out" is granted, a new round of consolidation will result in large players having even more control over the industry than they do now.

Mortgage broker usage in Canada has remained stable during the past year, according to Canada Mortgage and Housing Corp.'s annual online consumer survey. The use of mortgage brokers by first-time buyers remains at about 45% and approximately one-third of repeat buyers continue to use brokers. Use of brokers to refinance remains stable at roughly 23%, where it has been since 2006. The survey also shows Canadians' confidence that homeownership is a good long-term investment has remained stable to slightly higher, with 92% agreeing with this statement in 2010 compared to 90% in 2009. The online survey polled more than 2,500 active mortgage borrowers.

Fannie Mae has extended its seller assistance incentive on all company-owned HomePath properties. Buyers will receive 3.5% of the final sales price to be used toward closing cost assistance or their choice of selected appliances. The offer is available to any owner/occupant who closes on the purchase of a property listed on www.HomePath.com by June 30. "We are happy with the results of the program, which has helped us to sell properties quickly, thereby stabilizing neighborhoods and property values," said Terry Edwards, Fannie Mae executive vice president of credit portfolio management.

The PMI Group Inc., Walnut Creek, Calif., has priced its common stock offering at $6.15 per share, paving the way for a capital raise of more than $700 million. Its convertible senior note offering will carry an interest rate of 4.5%. PMI estimates the aggregate net proceeds from the concurrent offerings to be approximately $706 million, which is an increase from an initial offering of $400 million in common stock and $200 million in notes. PMI, which closed Monday at $6.46 per share, was selling for $5.87 per share in early afternoon trading.