Originations

First American Corp. is buying Experian Information Solutions' 20% stake in First American Real Estate Solutions LLC for $314 million. First American, Santa Ana, Calif., is exercising a purchase option it holds. The deal will close at yearend. "Experian has been a valued partner in the FARES joint venture and we look forward to furthering our working relationship with them in the coming years," said Parker Kennedy, chairman and chief executive of First American. "Our exercising of the purchase option, combined with our previously announced transactions for the non-controlling interests in First Advantage Corp. and First American CoreLogic, provide us with control over substantially all of our assets as well as provide the Information Solutions Group with increased financial and operational flexibility as it prepares to be a stand-alone public company."

Fannie Mae and Freddie Mac seller/servicers originated 85% of all multifamily mortgages in 2009, according to an annual survey by the Mortgage Bankers Association. The survey found that "dedicated" commercial real estate finance firms originated $82 billion in CRE and multifamily mortgages last year. Multifamily originations totaled $36.5 billion or 44% of CRE lending. Fannie lenders originated $15.9 billion of the multifamily loans and Freddie lenders originated $15.2 billion. Originations of Federal Housing Administration-insured multifamily loans totaled $5.9 billion, up 168% from 2008. MBA said 75 of the respondent firms that also participated in the 2008 survey reported their loan volume was down 46%. "Relatively few commercial mortgages were made in 2009, as the recession curtailed both the supply and demand for new mortgage debt," said Jamie Woodwell, MBA's vice president of CRE research.

New home sales jumped 27% in March as the start of the spring home buying season got an extra kick from the soon-to-be expired homebuyer tax credit. Sales increased across all regions, most notably in the South (up 43.5%) and the Northeast (up 35.7%). The U.S. Census Bureau reported that sales of newly constructed homes rose to a seasonally adjusted annual rate of 411,000 in March from 324,000 in February, which was one of the lowest readings in the past 20 years. (The February rate was actually revised upward by 16,000 units.) The March home buying surge pushed the inventory of unsold new homes down to a 6.7-month-supply -- the lowest since December 2006. In that year, 536,000 newly completed homes were on the market compared to 228,000 today. Despite the depressed levels of activity, the National Association of Home Builders is pleased with the report. "It shows the homebuyer tax credit is working," said NAHB senior economist Bernard Markstein. But he noted it is pulling sales forward. "April will probably be good, but not as good as March and then there will probably be a drop-off with the tax credit going away," he said. Buyers have to sign a sales contract by April 30 to qualify for the tax credit and complete the closing by June 30.

Bank of America has expanded its residential underwriting guidelines for mortgage applicants that run their own businesses, which could loosen up credit to an underserved segment of the industry. Previously, the nation's second largest originator allowed the use of "business funds" to be considered by sole proprietors when applying for a mortgage. A spokesman for the lender said it has expanded those guidelines to include an applicant's partnerships and corporations. The change is for both retail and broker-sourced loans, the spokesman told National Mortgage News. With the crash in the alt-A and stated-income markets, self employed consumers and small business owners have found it tougher to get loans.

The Senate is moving closer to voting on a financial services regulatory reform bill and industry groups are pressing hard on the risk retention issue to get a qualified mortgage exemption. The current version of the bill requires securitizers to retain up to 5% of the credit risk with some of that risk shared with lenders. Industry groups are urging Senate Banking Committee leaders to give regulators more flexibility in determining risk retention requirements on different mortgage types. But they also want certain loans to be totally exempt from risk retention. "To ensure a liquid and efficient market for core mortgages, we think it is imperative that a mandatory 'zero' risk category be created for 'qualified mortgages' -- those that meet minimum standards for safely underwritten residential mortgages," says a letter penned by five trade groups: The Financial Services Roundtable, Mortgage Bankers Association, National Association of Home Builders, Community Mortgage Lenders of America and Community Mortgage Banking Project. In a separate letter, the MBA warned that the future of small independent mortgage bankers would be threatened if they are forced to retain a percentage of the loan amount on their books. Without a qualified mortgage exemption, these small local lenders might have to shut their doors and between 45,000 to 50,000 jobs could be at risk, MBA senior vice president Steve O'Connor told National Mortgage News. Final changes to the bill are expected to be worked out this weekend as the Senate prepares for a test vote on Monday evening.

Two Harbors Investment Corp., a Minnetonka, Minn.-based real estate investment trust that invests in mortgage-backed securities, has priced a public offering of 11,500,000 shares of its common stock at a price of $8.90 per share, for gross proceeds of approximately $102.4 million. In addition, the company has granted the underwriters a 30-day option to purchase up to an additional 1,725,000 shares of the company's common stock to cover over-allotments, if any. The offering is expected to close on or about April 26, 2010. Credit Suisse Securities LLC is acting as sole book-runner for the offering. Barclays Capital Inc. and JMP Securities LLC are acting as joint lead managers. Ladenburg Thalmann & Co., Inc. is serving as a co-manager in the transaction. At the end of the session on Wednesday, Two Harbors was trading at $8.85 per share, down $0.13 on the day.

A.M. Best Co. has affirmed the issuer credit rating of Genworth Financial Inc., as well as those of its life/health insurance subsidiaries. "Over the last year, Genworth has strengthened its balance sheet by completing several capital raising initiatives, de-risking its product and investment portfolios and implementing improved risk management practices within its U.S. mortgage insurance business," the statement from Best said. However, while Genworth's operating profile is now improving, it is being hurt by recent losses within the U.S. mortgage insurance business, as well as the underperformance of its international lifestyle protection business and moderately negative results within its legacy long-term care business. "Specific areas of concern include Genworth's exposure to commercial real estate, residential mortgage-backed securities and below investment grade bonds, which have experienced credit migration over the last year. A.M. Best notes that Genworth's commercial real estate portfolio has had limited losses to date, with an average loan-to-value around 65% and a debt service coverage ratio at 2.3 times," the rating agency said.

While as a company, Old Republic International Corp., Chicago, was profitable in the first quarter 2010, both its mortgage guaranty and title insurance segments had pre-tax operating losses. Still the results for the mortgage guaranty segment improved more than 76% when compared with the first quarter 2009. ORI had net income of $25 million for the first quarter 2010 compared to a net loss of $54 million for the same period in 2009. The mortgage insurance segment benefited from the termination of two captive reinsurance agreements and the cancellation of certain pool insurance contracts. The transactions reduced the incurred claim ratio for the quarter by approximately 27.4 percentage points, increased the paid claim ratio by 128.8 percentage points, and decreased the pretax operating loss by approximately $35.6 million. As a further consequence, these non-recurring transactions resulted in a reduction of operating cash flow of $167.1 million. The mortgage insurance segment had a pre-tax operating loss of $34.1 million, an improvement from the pre-tax operating loss of $144.6 million for the first quarter 2009. New insurance written went from $2.2 billion for the first quarter 2009 down to $784 million for the most recent period. The title insurance segment had a pre-tax operating loss of $8.6 million, a slight improvement over the year-ago period pre-tax operating loss of $9 million. Still net premiums and fees earned in the first quarter were up 65% over the previous year as Old Republic Title benefited from industry dislocations and consolidation. This segment also benefited from the consolidation of accounts from a joint venture formed with a Florida title underwriter in mid-year 2009. ORI holds investment stakes in competitors MGIC Investment Corp. and The PMI Group. The company had an original cost $416.4 million, which it wrote down to $106.8 million in 2008. As of March 31, 2010, the investment stakes had a fair value of $254 million or 61% of the original cost; as of Dec. 31, 2009, the fair value was $130.7 million.

The title insurance business at Fidelity National Financial Inc., Jacksonville, Fla., proved able to generate pre-tax earnings of nearly $23 million in a challenging first quarter, up from $7.3 million for the first quarter of 2009. Even though it had negative cash flow of $88 million during the period, the company as a whole posted first quarter 2010 earnings of $16.5 million, compared with a loss of $12.4 million one-year prior. Direct orders opened declined from 746,000 one year ago to 511,100 for the most recent period. Still, said William P. Foley II, FNF chairman, "Open order counts were relatively stable during the quarter, after the first two weeks of January, as we averaged between 8,500 and 8,800 open orders per day from the second half of January through March. Closed order counts were seasonally soft during the first quarter and were further impacted by new RESPA closing requirements. We also continued to aggressively manage our cost structure in the first quarter, eliminating nearly 600 additional positions during those three months. The two and a half months of consistent open order activity, the first quarter seasonal delay in order closings and the continued cost reductions should allow us to produce stronger results in the title business during the second quarter."

The average rate for a 30-year fixed rate mortgage remained at 5.07% during the week ended April 22, according to Freddie Mac. The 30-year rate was the same last week and 4.80% a year ago. "Mortgage rates on fixed-loans were relatively unchanged this week while ARM rates were mixed," said Frank Nothaft, Freddie Mac vice president and chief economist. The average 15-year FRM fell to 4.39% from 4.40% the previous week and from 4.48% a year ago. The average rate for a five-year Treasury-indexed hybrid adjustable-rate mortgage was 4.03%, down from 4.08% the previous week and 4.85% a year ago. The average one-year Treasury ARM rate was 4.22%, up from 4.13% the previous week but down from 4.82% a year ago. Average points were 0.7 for 30-year FRMs, 0.6 for 15-year FRMs and five-year Treasury hybrids, and 0.5 for one-year Treasury ARMs.

House prices fell 0.2% in February on a seasonally adjusted basis after a 0.6% drop in January, according to the Federal Housing Finance Agency house price index. "For the 12 months ending in February, U.S. prices fell 3.4%," the GSE regulator said. FHFA economists use Fannie Mae and Freddie Mac purchase mortgage transactions to compile the index. House prices rose in three of the nine regional areas. Prices rose 0.8% in the Pacific region (Calif., Oregon and Wash.), 0.6% in the West South Central region (Okla., Ark., Tex. and La.) and 1.9% in the Middle Atlantic region (N.Y., N.J. and Penn.) The FHFA HPI is 13.3% below its April 2007 peak.

Sales of existing homes rose moderately in March to 5.35 million units annualized as consumers rushed into purchase contracts to take advantage of expiring tax credits for first-time and move-up buyers. According to figures released by the National Association of Realtors, sales of one- to four-family homes, including condos and co-ops, rose almost 7% from the previous month, and 16% from the same month a year ago. NAR called the surge in sales "expected" but the news wasn't all good: home prices remained almost flat with the national median at $170,700, and the inventory of existing homes for sale rose 1.5% to 3.58 million units. "Foreclosures have been feeding into the inventory pipeline at a fairly steady pace and are being absorbed manageably," said NAR chief economist Lawrence Yun. When condos and co-ops are excluded, sales rose sequentially by 7.3% to 4.68 million units. Year-over-year the increase was 13.3%. Mortgage lenders fear that once the $8,000 FTHB tax credit expires home sales-and therefore loan applications-will suffer.

The House Financial Services Committee Thursday morning approved a bill that could make the Rural Housing Service single-family program self-funding by imposing higher loan guarantees fees and prevent a shutdown of the program in the next few weeks. The House is expected to pass the RHS bill (H.R. 5017) next week, sending it over to the Senate. The committee approved the bill by a voice vote. The measure, sponsored by Rep. Paul Kanjorski, D-Pa., doubles the upfront guarantee fee to 4% from 2% and allows the Agricultural Department to assess a 0.5% annual fee on the loan balance. Rep. Kanjorski said the Agriculture secretary plans to impose a 3.44% upfront fee, which can be rolled into the loan amount. (The program is administered by the U.S. Department of Agriculture.) It is estimated the increase would require borrowers to pay an extra $11 a month on a $120,000 loan. As of April 15, the RHS loan guarantee program had used $11.6 billion of its $13.1 billion in loan commitment authority for fiscal year 2010, which ends Sept. 30. The Kanjorski bill increases RHS' commitment authority to $30 billion.

Sterling Bancorp of New York is dipping its toe in the warehouse lending business, concentrating-not surprisingly- on Fannie Mae, Freddie Mac, and FHA-backed loans. The publicly traded commercial bank said it will focus on making lines of credit to only "established mortgage banking firms." Warehouse industry veteran Gary Timmerman has been hired to head the effort for Sterling. "Warehouse lending has historically been a successful product for a number of banks," said Sterling Bancorp CEO Louis Cappelli. "As the housing market has now begun to show signs of stabilizing, we see an opportunity to apply Sterling's capital, experience and market knowledge to fill this financing need and generate solid returns on our investment in the warehouse business." Over the past two quarters a handful of medium sized banks has entered the warehouse market, but at least one large player-PNC's National City warehouse group-is preparing to leave the business by this summer.

A proper reading of the Standard & Poor's/Case-Shiller 20-city house price index shows that home prices have declined by 0.7% over the past 12 months ending in January. The S&P index committee is advising users of the Case-Shiller HPI not to rely on the seasonally adjusted numbers. "After reviewing the data, the S&P Case-Shiller HPI committee believes that at the present time the unadjusted series is the more reliable indictor of U.S. housing trends," the committee said. In the last 20-city HPI report, prices fell by 0.4% in January, following a decline of 0.2% in December. Prices were up 0.3% in November. On a seasonally adjusted basis, values rose 0.3% in January and then a similar amount in December, which has been highlighted in many news reports. One independent economist said that large inventories of foreclosures and unsold and vacant houses on the market outweighs any seasonal effects. Few housing and mortgage analysts believe there will be any significant improvement in home prices until next year at the earliest.

First American CoreLogic, a provider of advanced property and ownership information, analytics and services, is partnering with The Prieston Group to offer a comprehensive fraud prevention and insurance solution to mortgage lenders. The solution combines First American CoreLogic's pattern-recognition fraud tool with TPG's risk management services, indemnity programs and training. Through this partnership, TPG will help lenders establish business rules and guidelines and employ the First American CoreLogic LoanSafe Fraud Manager tool to enforce those policies in the lender's daily operations. Lenders who use this joint solution will be insured against fraud losses by Lloyd's of London, which has a special relationship with TPG. The anti-fraud tool integrates patented pattern-recognition technology with a national property and fraud database. Tim Grace, senior vice president of fraud solutions at First American CoreLogic, said fraud is a $13 billion problem for the lending and investor communities. "This partnership will help lenders focus on best practices, products and processes and provide enterprise- and loan-level metrics to measure results. Our new joint effort will improve loan quality and rebuild confidence levels among lenders and investors," added Arthur Prieston, TPG's chairman.

Pennsylvania is cracking down on misleading marketing tactics from residential lenders that are hunting for refinancing opportunities. The Department of Banking's Office of Consumer Services said that some homeowners are receiving letters that look like they come from their lender or the federal government. In some cases, the company that sent the letter only has its name mentioned in fine print. Consumers call the number on the solicitation thinking they are talking with their lender or the federal government, but discover they are actually speaking with a competing lender. "These communications are brazenly misleading and intended to frighten and confuse consumers," said secretary of banking Steve Kaplan. "We are contacting the offending institutions as well as their marketing companies and ordering them to put an end to this practice."

Loan defaults will continue to escalate for United States commercial mortgage-backed securities, with the overall rate to exceed 11% among Fitch-rated deals by the end of the year, according to Fitch Ratings. New CMBS loan defaults increased more than five-fold last year (1,464 conduit loans totaling $17.75 billion), with 34% taking place in the fourth quarter alone. "Fourth-quarter default rates reached their highest ever levels both in principal balance and number of loans with no clear signs of stabilization," said managing director Mary MacNeill. In fact, 2009 defaults on their own surpassed the cumulative number from the inception of the CMBS market through 2008 ($17.74 billion). Another area of concern is large loan defaults, which increased dramatically last year. In 2009, 56 loans over $50 million in size defaulted compared to just five in 2008. Not surprisingly, most of the defaulted loans came from 2006-2008 vintages. Retail was the property type with the most new defaults at 32.3% last year. It was followed by former category leader multifamily at 22.1% new defaults, office (20.2%) and hotel (17.8%). Fitch projects sizeable default increases for each property type, with rates likely to increase at accelerated rates for office and hotel loans. "Office defaults spiked in the fourth quarter last year, with further rental and net operating income declines likely through next year before a rebound takes place," said senior director Richard Carlson. "Larger concentrations of hotel loans in recent vintages will translate to higher defaults, particularly among luxury properties, resort destinations and those hotels heavily reliant on group and convention business."

Wells Fargo & Co. on Wednesday promised that it soon would begin modifying second mortgages under a new wrinkle to the government's Home Affordable Modification Program. Wells noted that it would modify second liens when the corresponding first mortgage also is modified. During a conference call regarding the bank's earnings, chief financial officer Howard Atkins said the HAMP second lien program (2MP) would be up and running before the end of the second quarter. "We expect to begin offering the second lien program to customers who have both a Wells Fargo first and second lien in the next couple of weeks," Atkins said. Wells will offer 2MP to "other customers later in the second quarter," he said. The CFO told analysts and investors that the bank's $125 billion home equity loan portfolio "demonstrated some positive credit trends in the first quarter." The 60-day or more delinquency rate declined to 3.4% down from 3.58% in the fourth quarter. For HELs with LTV's above 100%, only 5.2% are delinquent. "The vast majority of customers with negative equity continue to make their payments," Atkins said.

Wells Fargo & Co. earned $2.5 billion from its residential mortgage business in the first quarter-a 26% decline from the prior period-due to lower originations and a reduction in hedging results. The nation's largest residential funder originated $76 billion in single-family loans, down 19% from the fourth quarter of 2009. Mortgage hedging results fell $983 million in the first quarter due to a change in the composition of hedge instruments to "maintain ongoing hedge effectiveness," the company said. Chief financial officer Howard Atkins said the performance of credit card, auto and commercial real estate has turned up, but it will take a "little longer" for residential real estate loans. The first quarter report shows the early delinquency rates on prime mortgages, home equity loans, and pick-a-pay loans crested in the first quarter. But one- to four-family loans in the non-accrual category-including charge-offs and foreclosures-increased significantly.