Originations

PMI Mortgage Insurance Co., Walnut Creek, Calif., has created an online tool to help lenders see the pricing advantages of the company's private mortgage insurance products when compared with Federal Housing Administration insurance on loans with high credit scores. "We developed this calculator to counter the commonly held but incorrect perception that FHA is always the lowest cost solution," said Jan Walker, senior vice president of product development and marketing for PMI. "On FICO scores above 680, PMI's pricing is better than the FHA and can save borrowers thousands of dollars." Lenders are able to price various scenarios by entering loan amounts, credit scores and loan-to-value ratios using simple dropdown windows. Scenarios assume owner-occupied purchase transactions, 30-year, fully amortizing 6% fixed rate, and conforming loan balances. The tool can be found on the company's website at http://www.pmi-us.com/pmi_fha_calculator.

U.S. investors still consider real estate as a good investment, according to a survey released by Citi. When asked to rate whether it was a good or excellent time to invest in a specific type of investment, the real estate sector-which for this survey was defined as property, investment properties and/or real estate investment trusts-came back with a positive response from 47% of all investors and 50% of large investors, tops among both groups. "Real estate may have been badly battered in recent years. Still, it has an enduring appeal for Americans, who find it far easier to grasp the value of a house than the value of a stock or stock fund," said Jonathan Clements, director of financial education for Citi Personal Wealth Management. Hart Research Associates conducted the survey for Citi, with the respondents consisting of 756 investors with at least $100,000 of investible assets with 317 of those have more than $500,000 of assets.

In a surprise move, Richard Dorfman, president of the Federal Home Loan Bank of Atlanta resigned effective Friday. Sources indicate his contract with the FHLB expires June 30 and the former Wall Street executive will be making an announcement soon about his future job plans. The Wall Street Journal is reporting that Dorfman has landed a job with the Securities and Financial Markets Association. The FHLB's executive vice president and general counsel Jill Spencer has been named interim president and chief executive. "Our team successfully executed its mission during an unprecedented credit crisis and economic downturn. These events clearly displayed the value and importance of our institution," Mr. Dorfman said in statement issued by the Atlanta FHLB. He has served at the FHLB since 2007.

The House and Senate passed another short-term extension bill Thursday evening that will allow for the continued issuance of new flood insurance policies, and unemployment benefits. President Obama immediately signed the bill (H.R. 4851) that extends the National Flood Insurance Program through May 31. The Federal Emergency Management Agency's authority to write new flood insurance policies, renew policies or increase coverage expired on March 28. Without flood coverage, lenders would not originate loans on homes located in designated flood zones. The NFIP reauthorization is retroactive, which means that any mortgage transactions completed during the three-week hiatus will be covered if the borrowers completed an application for flood insurance. (However, there must be proof they paid the insurance premium, including a copy of the check.) Flood insurance reauthorization had become ensnarled in a tax extension bill. Congressional tax writers hope to find ways to pay for the tax provisions until the end of this year, but so far have been unsuccessful. They have been "kicking this can down the road" with short-term extensions for the past six months, one lobbyist said.

Single-family housing starts fell slightly in March to an annualized rate of 531,000 units, but compared to the same month last year rose an impressive 47%. Then again, March of 2009 was one of the worst on record for homebuilders, thanks to the recession, soaring unemployment, and a swooning stock market. The single-family figures released by the U.S. Census Bureau Friday morning represent starts on one-unit abodes only. In the volatile multifamily category starts surged almost 19% from February to March but were down 32% year over year. (For March, the annualized figure for multifamily was 88,000 units.) Some housing analysts believe multifamily construction could benefit from the "new normal" in the U.S. economy as consumers opt to rent instead of buying a home. Weiss Research analyst Mike Larson said the new numbers fit his firm's "anemic recovery" scenario. He noted that permit activity was strong in both the single- and multifamily sides of the business. "With new home inventories running at their lowest level since 1971, it's not surprising that builders are starting to swing their hammers again," he said, but predicted that a "vigorous rebound" will not appear "due to the overhang of distressed, 'used' homes."

Bank of America reported a $2.1 billion loss for its home loan and insurance business in the first quarter due to lower originations and increased provisions for credit losses totaling $3.6 billion. In the fourth quarter those provisions totaled $1.35 billion. The giant bank originated $69.5 billion of single-family homes during the quarter, down 20% from the fourth quarter. "Production income remains impacted from expenses associated with reps and warranties," B of A said. In 1Q, reps and warrants on loan buybacks cost the bank roughly $500 million. The $3.6 billion for credit losses includes $2.3 billion of net charge-offs. Of that amount, $813 million was for home equity loans. It also added $1.3 billion to its loan loss reserves.

Sales in California's new home projects slowed even more in February than they did in the previous two months, according to the state's builders. The monthly report from the California Building Industry Association and Hanley Wood Market Intelligence showed that year-over-year sales in communities of 10 units or more were down nearly 25%, far worse than the 12% slide recorded in January and the15% drop registered in December. A grand total of just 1,938 new houses and condos were sold in the entire state in February vs. a mere 2,570 units a year earlier. Jonathan Dienhart, director of published research for the Contra Costa-based HWMI, said the February figures show the nature of the challenges still facing the new home market in the not-so Golden State. "The February numbers are a stark reminder that we are still wallowing at the bottom of this housing market cycle," he said. "The extended federal tax credit and new California tax credit may help spur some sales activity in March and April, but even so it's apparent we have a long road ahead before we can consider the market in true recovery." On a little more positive note, the base price of units sold was slightly higher than a year ago, although still lower than last month. Compared with the same period last year, the median base price of homes sold - $365,240 - was 4% higher than a year ago.

Arch Bay Capital, an active buyer and seller of nonperforming mortgages, is on the verge of jumping into the origination market and is busily gathering lending licenses in several states, according to officials briefed on its plans. A non-bank based in Southern California, Arch Bay made news last year when it bought $600 million in nonperforming loans from Wells Fargo & Co. It also recently issued a bond backed by NPLs. A company official confirmed to National Mortgage News that Arch Bay is working on something tied to originations but would not comment further. The firm, though, has created a website for a unit called Arch Bay Mortgage LLC that says "Coming Soon." Industry sources said some of Arch Bay's financing comes from a special fund controlled by partners at Goldman Sachs & Co. One lender in the Southern California market said he has heard of Arch Bay's plans, but questioned its timing. "They're getting in at a time when fundings are shrinking," he said.

The Securities and Exchange Commission on Friday accused Goldman Sachs & Co., of civil fraud, charging that the firm created a synthetic CDO -- with the help of a hedge fund that was shorting the same bond -- and then marketed the RMBS to investors who eventually lost an alleged $1 billion on the deal. The suit, however, has just two defendants: Goldman and company vice president, Fabrice Tourre, 31, who the SEC says devised the bond known as ABACUS 2007-AC1 which came to market in 2007. At press time the hedge fund involved in the alleged scheme -- Paulson & Co. -- said it would not comment. Goldman Sachs denied the charges, saying it would "vigorously" defend itself. In a statement Robert Khuzami, director of the SEC's enforcement division, called the CDO -- which was backed by subprime loans -- "new and complex but the deception and conflicts are old and simple: Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party." Since the collapse of financial markets in 2008, Paulson & Co. has made headlines worldwide for earning billions by shorting the subprime market, in particular the ABX Index, which represents the value of outstanding subprime MBS. During the height of the subprime boom, Goldman -- unlike many other Street firms -- did not own any large B&C lenders, nor was it a top ranked issuer of subprime MBS. The agency is seeking to recoup profits reaped on the deal.

Mission Capital Advisors is marketing two nonperforming CMBS loans with an aggregate outstanding balance of $50.7 million. The CMBS special servicer loan sale offers prospective bidders the chance to buy two large-balance, nonperforming loans secured by different collateral types. The biggest loan in the sale, with a principal balance of $25.6 million, is secured by 24 office buildings and a retail center. Collateral securing the respective loan is mostly located in Okemos, Mich. with two parcels in East Lansing and Grand Ledge, Mich. The sale's second loan is secured by 20 property parcels with a mixture of asset classes such as retail, industrial, office, medical office, multifamily and mixed-use assets. The respective loans are being sold out of separate CMBS trusts. The buyers must provide individual, loan-level bid pricing for each asset. Investors are allowed to bid for one or both of the assets.

GMAC Financial Services has promoted Jeffrey Lemieux, a former executive at Cerberus Capital, to the position of senior vice president of business lending sales in its mortgage division. In his expanded role he will oversee customer relationships in the firm's correspondent channel and warehouse network under the auspices of the business lending/mortgage capital markets unit. Lemieux's promotion comes in the wake of several recent departures of top managers in the servicing department of Residential Capital Corp., GMAC's mortgage banking affiliate. Earlier this week, National Mortgage News broke the news that servicing executive John Vella had left the company to take a position with another firm. Prior to his promotion, Lemieux was senior vice president of fee based servicing and he retains these responsibilities managing the servicing capabilities that GMAC provides to third-party organizations. A few years back Cerberus paid $14 billion for a 51% stake in GMAC. Today, that stake has been reduced to just under 15%, leaving Cerberus with a massive paper loss on its investment. The U.S. Treasury is the largest stakeholder in GMAC with 56.3%. The company has hired Goldman Sachs to explore a sale of ResCap.

Residential real estate activity increased in most Federal Reserve Bank districts in March despite sluggish sales of higher end homes, according to a periodic Federal Reserve report. "Contacts in Philadelphia, Cleveland and Kansas City expressed concern about whether sales would continue to grow after the expiration of the first-time home buyer tax credit," the Fed's Beige Book says. Most district banks noted the house prices were stable and construction activity increased slightly in New York, Atlanta, St. Louis, Minneapolis and Dallas. As usual, the Beige Book notes that commercial real estate activity remains "very weak" in most districts.

The average rate for a 30-year fixed rate mortgage during the week ended April 15 fell back to 5.07% from 5.21% the previous week. "After rising for four consecutive weeks, mortgage rates eased back to where they were two weeks ago and still remain historically low," said Frank Nothaft, Freddie Mac vice president and chief economist. The average weekly 30-year rate was 4.82% a year ago. The 15-year FRM in the most recent week averaged 4.40%, down from the previous week when it averaged 4.52%. A year ago at this time, the 15-year FRM averaged 4.48%. The five-year Treasury-indexed hybrid adjustable-rate mortgage in the most recent week averaged 4.08%, down from the preview week when it averaged 4.25%. A year ago, the five-year ARM averaged 4.88%. The one-year Treasury ARM in the most recent week averaged 4.13%, down from the previous week when it averaged 4.14%. At this time last year, the one-year ARM averaged 4.91%. Average points were 0.7 for 15-year FRMs, 0.6 for 30-year FRMs and five-year Treasury hybrids and 0.5 for one-year Treasury ARMs.

Rep. Paul Kanjorski, D-Pa., has introduced a bill to make the Rural Housing Service single-family program self-funding by imposing higher loan guarantees fees. The bill (H.R. 5017) would increase the upfront guarantee fee to 3.5% and allow the Agricultural Department to assess a 0.5% annual fee on the loan balance. "This change will cost taxpayers nothing and ensure families in rural areas can continue to access affordable mortgages," Rep. Kanjorski said. The second-ranking Democratic on the House Financial Services Committee noted that more and more rural families are turning to the RHS program in these difficult economic times and the RHS program is running out of loan commitment authority. RHS has $13.1 in funding authority for fiscal year 2010, which ends Sept. 30, and less than $3 billion is left. "Rather than relying on ad hoc federal funding, my bill would transform the (RHS) program and allow it to pay for itself," the Pennsylvania congressman said. House Financial Services Committee chairman Barney Frank, D-Mass., said the committee would act on the bill soon.

Lenders can use worksheets with the new good-faith estimate to provide information to mortgage applicants that is not disclosed in the GFE, according to the Department of Housing and Urban Development. "A loan officer may use a worksheet to provide the consumer with additional information about his or her loan transaction, such as the amount of cash needed at closing, seller credits and other non-loan transaction fees that would be helpful to the consumer," HUD says in an update of its "Frequently Asked Questions" on the Real Estate Settlement Procedures Act rule that went into effect Jan. 1. HUD warns, however, that the worksheet should not look like the GFE and a loan originator should "never" use a worksheet in lieu of a GFE. The new RESPA rule makes it very difficult for lenders to change their origination fee once the GFE is given to a mortgage applicant. HUD officials were suspicious of worksheets at first because the estimates of lender fees and settlement costs would not be enforceable under the RESPA rule. But now "HUD is acknowledging these documents have their place," said RESPA attorney Phillip Schulman, a partner at K&L Gates.

The Department of Housing and Urban Development has issued its long-awaited final rule that eliminates the Federal Housing Administration's approval process for mortgage brokers starting Jan. 1, 2011. The final rule increases the net worth requirement for FHA-approved lenders and requires those lenders to be fully accountable for the loans they purchase from brokers. "Mortgage brokers already approved by FHA will be authorized to continue to originate FHA-insured loans through the end of the calendar year," HUD said. Brokers appear to be divided over these changes which essentially mirror the way Fannie Mae and Freddie Mac require their lenders to underwrite and approve broker-originated loans. Some brokers are preparing to qualify as FHA-approved "small business" lenders, according to National Association of Mortgage Brokers executive vice president Roy DeLoach. The final rule creates this new category of FHA-approved lenders, which requires a minimum net worth requirement of $500,000. The final rule raises the net worth requirement from $250,000 to $1 million for other FHA-direct endorsement lenders starting a full year after the final rule goes into effect.

JPMorgan Chase plans to hire 300 local mortgage officers in the next six months in the New York Tri-state metropolitan area. The new loan officers will serve customers through bank branches in New York, New Jersey and Connecticut, bringing the total number of loan officers in the area to about 700. Chase is holding open house recruiting events on April 20th in Melville, N.Y., Purchase, N.Y., and Iselin, N.J.; on April 21st in Brooklyn and on April 29th in Manhattan.

Omega Healthcare Investors Inc., a real estate investment trust based in Hunt Valley, Md., has entered into a new $320 million revolving senior secured credit facility. The new line expires in four years, provided the company has refinanced or repaid its $310 million, 7% Senior Notes due April 2014 prior to Dec. 31, 2013. In the event the senior notes have not been refinanced or repaid by that deadline, the maturity date will become Dec. 31, 2013. The new credit facility includes an "accordion feature" that permits Omega to expand its borrowing capacity to $420 million during its first three years. It is priced at Libor plus an applicable percentage (ranging from 325 basis points to 425 basis points) based on the company's consolidated leverage. The applicable percentage above Libor is currently 350 basis points. The credit was extended by a syndication of eight financial institutions. Banc of America Securities LLC was joint lead arranger and sole book manager. Deutsche Bank Trust Co. Americas was joint lead arranger and co-syndication agent. UBS Securities LLC was co-syndication agent and Bank of America NA was the administrative Agent. General Electric Capital Corp., Credit Agricole Corporate and Investment Bank, Jefferies Group Inc., RBS Citizens NA, and Stifel Bank & Trust are the managing agents.

Prior to the mortgage insurance industry reporting its first quarter earnings, Keefe Bruyette & Woods has increased its price target on the four publicly traded companies' common stock, although it did not increase its earnings outlook. According to analyst Nathaniel Otis, "In our opinion, within the last several weeks, the Obama Administration has significantly ratcheted up efforts to prevent lenders from foreclosing on at-risk borrowers. In addition, delinquency trends thus far in 2010 indicate a better-than-expected seasonal improvement for first-quarter 2010. Although any positive impact from (the) Home Affordable Modification Program may be pushed out another quarter or two, we believe the result could be a more sustained positive stretch of quarterly reporting." The risks include changes to HAMP and to the Federal Housing Administration programs aren't successful. Otis said KBW is remaining neutral for the companies in the space, preferring to revisit its outlook after the earnings reports. KBW's price target on MGIC went from $7 to $12, for Old Republic from $11 to $14, for PMI from $3 to $6 and from Radian from $9 to $18. KBW also issued a preview on title company earnings. Otis said, "While origination expectations appear much more rational this year, reflecting the reality that the real estate market is in a more stable position, the bias is slightly negative given weather issues and compliance with new RESPA rules. This is in stark comparison to last year at this time, when low rates and increased refi volumes fostered optimism. With this in mind, we are reducing our industry estimates for (the first quarter) to factor in these trends." Fidelity National Financial's earnings per share estimate for the first quarter was cut from $0.16 to $0.11; for First American it was cut from $0.23 to $0.20; for Stewart it was cut from a loss of $0.13 to a loss of $0.45; and for Investors Title Co., it was cut from $0.34 to $0.21.

Increases in Federal Housing Administration premiums were one of the factors in another large decline in application volume even though the average 30-year fixed rate mortgage rate regained half of the increase of the previous week, according to the Mortgage Bankers Association's Market Composite Index for the week ended April 9, 2010. According to Michael Fratantoni, MBA's vice president of research and economics, "Applications for government mortgages dropped substantially last week, following the implementation of an increase in FHA mortgage insurance premiums. Applications for conventional mortgages also dropped last week, with refinance application volume continuing to drop following last week's jump in rates." The MCI, a measure of mortgage loan application volume, decreased 9.6% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 9.5% compared with the previous week. For the fifth consecutive week there was a decline in the Refinance Index, this time down 9.0% from the previous week. Unlike last week, there was a decline in the Purchase Index of 10.5%. The decline in purchase applications was driven by government purchase applications, which decreased 19.1% from last week, compared to a decrease of 2.0% in conventional purchase applications. The government purchase index last week reached its third highest level in the history of the survey. The market share of refi applications increased slightly to 58.9% for the survey period, up from 58.7% during the previous week. The market share of adjustable rate mortgage applications is up to 6.3%, from 6.2% for the previous week. The average contract interest rate for the 30-year fixed rate mortgage which one week ago rose a whopping 27 basis points to 5.31%, came back down to 5.17% for the current week with points increasing to 0.91 from 0.64 (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 fell by 9 bps to 4.45%. The average contract interest rate for one-year ARMs fell 1 bp to 7.02%.