Originations

Origen Financial Inc., a real estate investment trust that manages residual interests on securitized manufactured housing loans, lost $2.3 million for the fourth quarter and $8.6 million for the full year 2009. This is an improvement over net losses of $4.4 million and $35.4 million for the same periods in 2008. In July 2008, the Southfield, Mich., company exited both the manufactured housing loan origination and loan servicing businesses. Net interest income for the fourth quarter was $8 million, down 10% from the same period in 2008, while for all of 2009, it was $31.5 million, up 4%. Origen's fourth quarter loan loss provision was $5.4 million, down 10% from the fourth quarter 2008. Ronald Klein, Origen's chief executive, said "we are generally pleased with the loan portfolio performance in 2009, especially in light of the economic environment. While fourth quarter 2009 loan performance worsened, particularly for California loans, we have seen improvement thus far in 2010 and we are hopeful that some stabilization is returning to the housing market."

Pentagon Federal Credit Union, Alexandria, Va., the nation's third largest credit union, said Friday it has signed with Sun West Mortgage Co. to offer reverse mortgages to its members. PenFed, one of the biggest mortgage lenders among credit unions, will initially market the federally insured Home Equity Conversion Mortgage reverse mortgage to its members located in Washington, D.C.; Maryland and Virginia. PenFed's Reverse Mortgage eliminates the upfront origination fee - 2% of the adjusted property value - and the $35 monthly servicing fee, which are customary in the industry. Consequently, PenFed's competitively priced reverse mortgage will make additional home equity available to the homeowner.

Rep. Scott Garrett, R- N.J., has reintroduced a bill to create a legal and regulatory framework for development of a covered bond market in the U.S. Covered bonds are used in Europe and Canada to fund commercial and residential mortgages. But unlike mortgage-backed securities in the U.S., covered bond issuers continue to hold the mortgages on their balance sheets. Under the Garrett bill, the Treasury Department would be the primary regulator of covered bonds and set standards and reporting requirements for issuers. "Once members understand how a covered bonds marketplace works and the benefits that it can offer homeowners, I believe Republicans and Democrats can come together and provide the legislative framework necessary to create a robust covered bonds marketplace here in the U.S.," Rep. Garrett said. Reps. Paul Kanjorski, D-Pa., and Spencer Bachus, R-Ala., are co-sponsors of the Garrett bill. Rep. Garrett is pushing for passage of his bill this year, possibly as a part of the financial services regulatory reform package. The House passed its reform bill in December and now it is in the Senate's court. If the Senate ever passes a bill, a House-Senate conference might present an opportunity. However, a spokesman for House Financial Services Committee chairman Barney Frank, D-Mass, indicated that the congressman may have missed his chance. "The House, without the support of Rep. Garrett, passed a comprehensive Wall Street Reform bill so that ship has sailed. As you may recall, Mr. Frank held a [covered bond] hearing at the request of Rep. Garrett in December. We have a very crowded calendar right now, so it is impossible at this time to say if we would be moving this legislation," the spokesman said.

The Federal Home Loan Bank of San Francisco has sued nine securities dealers that sold the government sponsored enterprise nearly $20 billion in private-label mortgage backed securities. The San Francisco bank, like other FHLBs, suffered losses due to its investment in AAA-rated private-label MBS. The complaint filed in Superior Court in the County of San Francisco, alleges that the dealers made "untrue or misleading statements" about the characteristics and quality of the mortgage loans underlying the securities. The San Francisco FHLB is seeking to rescind those MBS purchases, which originally cost $19.1 billion. In February, the Seattle FHLB filed a similar lawsuit against issuers to compel them to buy back $4 billion in private-label MBS.

Republicans on the House Financial Services Committee Friday released a bare bones blueprint for the future of the nation's housing finance system, saying "private capital" should be the "primary source" of home mortgage money, replacing Fannie Mae and Freddie Mac. According to a document entitled "Goals and Principles for GSE Reform," Republicans, led by ranking member Spencer Bachus (R-Ala.), said Fannie and Freddie should wind down their operations within four years. Under its blueprint, the GOP thinks a covered bond market should replace the secondary market role currently played by the GSEs. They also want to see an end to GSE "jumbo loan limits" which they say is a taxpayer subsidy for mortgages made to millionaires. To date, the government has provided $127 billion in capital to Fannie and Freddie through the purchase of preferred stock. The cash has kept their net worth positions above zero. Next year the Obama Administration will release its official plan on restructuring the GSEs. Fannie and Freddie were taken over by the government in September 2008.

Stearns Lending, Santa Ana, Calif., one of the fastest growing wholesale funders in the nation, plans to launch a new correspondent program next month, according to its founder and CEO. In an interview with National Mortgage News, CEO Glenn Stearns said it will "go after the larger shops out there" as a correspondent buyer. The privately held nonbank survived the credit crisis by shrinking during the subprime boom and sticking to conventional lending. Over the past two years it has grown rapidly by scooping up the wholesale production networks of many nonbanks that failed. According to the Quarterly Data Report, the 20-year old Stearns Lending ranked 13th among all wholesale originators in the fourth quarter with $1.7 billion in fundings. Among the top 15, it had the second highest growth rate: 141%. The only wholesaler growing faster was Provident Funding Associations, Burlingame, Calif., with 145%. PFA ranked first in 4Q, according to NMN/QDR.

The nation's mega banks and other depositories repurchased roughly $30 billion in residential mortgages from Fannie Mae and Freddie Mac in the second-half of 2009 and will suffer losses of up to 40% on the loans, according to a new report from Credit Suisse. Penned by CS analyst Moshe Orenbuch, the report notes that repurchase volumes are accelerating and will "remain elevated in 2010 and moderate thereafter." Mr. Orenbuch estimates that large cap banks followed by CS account for roughly 88% of the $30 billion in buybacks. Among this universe of large caps, he told National Mortgage News, is Wells Fargo & Co., Bank of America, JPMorgan Chase, and Citigroup -- all of which have acknowledged buyback problems in earnings reports. The analyst said the loans being repurchased are "likely to be delinquent and/or deficient" and include what he called "differentiated" products, meaning alt-A, interest only mortgages and payment option ARMs. But there is some good news in the report: "given the bulk of the repurchases are from the 2007 vintage, we would expect repurchase demands to moderate in 2011, as the quality of industry originations strengthened during 2008."

The average rate for a 30-year fixed-rate mortgage rose slightly in the most recent week while shorter-term rates were mixed, according to Freddie Mac's primary market survey. "Mortgage rates for fixed rate mortgages were virtually unchanged" for the week ending March 18, said Freddie's chief economist Frank Nothaft. The average 30-year FRM rate ended the period at 4.96%, up slightly from 4.95% the previous week. A year ago the rate was 4.98%. The average 15-year FRM rate was 4.33%, up from 4.32% the previous week but down from 4.61% a year ago. The average rate for a five-year hybrid Treasury-indexed adjustable-rate mortgage was 4.09%, up from 4.05% the previous week but down from 4.98% a year ago.

Freddie Mac is coming to market with a $1.1 billion MBS backed by multifamily loans. The various pass-through certificates in the bond are collateralized by 68 recently originated multifamily mortgages from Freddie approved seller/servicers. It is the second of six such issuances anticipated during 2010. These "K-006" certificates, which will price on or about March 25 and settle 10 days later, will be offered by several dealers lead by JPMorgan Securities Inc. and Bank of America Merrill Lynch. Co-managers for the transaction include Deutsche Bank Securities Inc., Goldman Sachs, Jefferies & Co. and Sandler O'Neill.

A federal judge has dismissed a shareholder lawsuit against Canadian Imperial Bank of Commerce and four executives for allegedly misleading investors about the bank's exposure to securities backed by subprime mortgages. Dow Jones reported that in an order Wednesday, U.S. District Judge William H. Pauley III in Manhattan threw out the case, saying a number of major financial institutions failed to anticipate a meltdown in the mortgage market and the plaintiffs failed to demonstrate that CIBC and its executives received information that was contrary to their public statements. "Looking back, a full turn of the wheel would have been appropriate. That CIBC chose an incremental measured response, while erroneous in hindsight, is as plausible an explanation for the losses as an inference of fraud," the judge said. "CIBC, like so many other institutions, could not have been expected to anticipate the crisis with the accuracy plaintiff enjoys in hindsight." A lawyer for the lead plaintiff didn't immediately return a phone call seeking comment.

Mortgage bankers originated $26.9 billion of Federal Housing Administration-backed single-family loans in January, a 10% decline from the previous month, according to a new government report. Refinancings totaled $11.5 billion and comprised 40% of January originations. FHA originations per month have been ranging between $26 billion and $30 billion over the previous five months. Meanwhile, FHA's serious delinquency rate continues to rise. The percentage of FHA loans 90 days or more past due hit 9.4% in January, up from 9.12% the previous month. FHA servicers have foreclosed on 28,000 homes from October 2009 through January 2010, up 42% from the same period a year ago. Short sales totaled 4,000 during that four-month period, up 132% from a year ago.

A federal consumer protection bureau should be under the oversight of banking regulators and coordinate its activities with those regulators, according to Sen. Richard Shelby, R-Ala. The ranking Republican on the Senate Banking Committee wants to restructure a Democratic proposal that creates a new and independent Consumer Financial Protection Bureau. "I will do everything I can to make sure it is not running out on its own, causing a heck of a lot of trouble," Sen. Shelby told an American Bankers Association summit on Thursday. Banking committee chairman Christopher Dodd, D-Conn., wants to house a CFPB at the Federal Reserve Board but keep it independent with a director appointed by the president and confirmed by the Senate. This new consumer regulator would have enforcement and examination powers, along with the ability to act quickly to stop abusive lending practices. Only a two-thirds vote by a new nine-member Systemic Risk Council chaired by the Treasury secretary could overturn a CFPB rule. Sen. Shelby contends the CFPB is too independent. Consumer protection should not "trump safety and soundness," the Alabama senator said.

The first two months of the year have been weak in terms of loan applications and a new forecast from Fannie Mae suggests that 2010 will result in just $1.32 trillion in residential loans being funded this year. If Fannie's forecast becomes reality, that means loan volume will be down 31% this year compared to 2009. Fannie's forecast is slightly more bearish than a recent one issued by the Mortgage Bankers Association that sees production coming in at $1.33 trillion this year. Freddie Mac, by comparison, looks like a wide-eyed optimist at $1.6 trillion. Fannie's new forecast did not include any market commentary. Lenders interviewed by National Mortgage News over the past few weeks have noted a decline in loan applications in January and February, but said March is shaping up to be a decent month. "We were down by 39% in January and February," said Glenn Stearns of Stearns Lending, Irvine, Calif., "but March will be a good month for us." According to the Quarterly Data Report, Stearns Lending, a national lender, ranks 13th among all wholesale funders.

The Department of Housing and Urban Development is getting deluged with many questions from mortgage bankers regarding the new good-faith estimate form, in particular the treatment of the real estate transfer tax, according to a top official at the agency. Speaking at a regional mortgage banking trade show in Atlantic City, HUD's RESPA director Ivy Jackson gave attendees a quick list of questions the agency has received since the new GFE and HUD-1 forms went into effect Jan. 1. After disclosing the list, audience members bombarded Jackson with questions, showing-as one questioner put it-the industry's frustration with HUD over how to implement the new forms. (The questioner admitted, however, that he liked the new forms.) In her formal presentation to the trade show, Jackson said the revised forms are a new concept for the mortgage industry and professionals must learn how to do things differently. The "worksheet" issue was discussed during the audience question-and-answer portion. Jackson said the Real Estate Settlement Procedures Act does not prohibit the use of a worksheet, but she warned that it must not look like the new GFE. If it does, HUD will be paying a call on the originator. She also reiterated that the lender is responsible for the GFE in a wholesale transaction, not the mortgage broker.

Jefferies & Co. named Mark Green as a managing director and head of CMBS capital markets. Green will report jointly to William Jennings and Johan Eveland, co-heads of Jefferies' MBS/ABS group, as well as Benjamin Lorello, global head of investment banking and capital markets at Jefferies. According to a report in Asset Securitization Report, Green will become part of a team consisting of Joe Accurso and Lisa Pendergast, who co-head CMBS trading and strategy, and Dana Arrighi who heads CRE origination. Green has 11 years of CMBS capital markets experience and joins Jefferies from UBS, where for four years he was a managing director and head of CMBS capital markets. "With the ongoing rebound in capital markets activity, there is an even greater need and demand from our clients for innovative financing and ideas," Jennings and Eveland said. The company views the CMBS market as a major investment banking opportunity this year. Asset Securitization Report is an affiliate of National Mortgage News.

Jacksonville, Fla.-based LOS MortgageFlex Systems Inc. has formed a strategic alliance with secondary market analytics firm Precision Risk Management Systems Inc. Through this partnership, MortgageFlex customers will gain new financial capabilities, including point-of-sale and delivery of loans into the secondary marketing through a fully managed lender pipeline. Precision Risk also offers what the company calls a "Precision Managed Hedge Service," for lenders who would like to improve their secondary marketing execution and extend their expertise without adding staff.

Impac Mortgage Holdings, a nonbank lender that has been struggling to recover its financial footing, posted a small profit in 2009 while disclosing that it originated a "minimal" amount of product. Once an alt-A lending giant, Impac generated a $10.8 million profit for the year but paid out $7.4 million of that in the form of dividends to shareholders. No figures were released regarding its origination volume. A large portion of its cash flow comes from residual interests it holds on MBS. The company noted in its earnings report that at yearend cash within its "continuing operations decreased to $25.7 million from $46.2 million at Dec. 31, 2008. The primary sources of cash between periods were cash flow of $30.4 million from residual interests in securitizations, $42.6 million fees generated from the mortgage and real estate fee-based business activities and income tax refunds of $15.8 million, including interest." In the fourth quarter California approved its purchase of a title insurance agency. Impac is based in Irvine, Calif.

The pace of new home sales slowed in California in January, the California Building Industry Association found. Sales in new home projects of 10 units or more were 12% below January 2009, but that's an improvement over the 15% year-over-year decline recorded in December. Builders logged 1,886 sales in 2010's first month, compared to 2,137 sales in January a year ago. But the median base price of the houses sold in January was 6% higher than a year ago. Jonathan Dienhart, director of published research for HWMI, noted the figures for January showed little in the way of improvement. "The last several months have bent the trend of improvement back toward one of volatile uncertainty," said Dienhart. "As California's broader economy still struggles with a myriad of challenges, it is unlikely we will see any dramatic recovery in coming months."

Sales of single-family homes priced at $250,000 and above recorded double-digit gains in February in the Houston area, according to the Houston Association of Realtors. But overall sales slid by 5.5% compared to February 2009. It was the third consecutive month that sales declined in the big Texas market. Sales of houses priced below $80,000 fell 27.5% and sales in the $80,000 to $150,000 price range went unchanged. But in the $250,000 to $500,000 bracket, sales were up 15.8%, and sales over $500,000 climbed 14.9%. Thanks to stronger activity in the upper price ranges, the average price of all sales appreciated for the fifth straight month, reaching $203,271, an increase of 12.3% from 12 months earlier. "We are encouraged by steady activity in the higher-end single-family segment, which has strengthened Houston's already enviable real estate pricing," said HAR chair Margie Dorrance, a principal at Keller Williams Realty Metropolitan. "We expect to see consumer interest extend to the other segments as the spring buying season heats up." Overall, 3,843 properties changed hands in February, but the number of active listings rose 4.3% in February, adding 1,448 properties to the inventory.

Mortgage applications fell 1.9% during the latest week tracked by the Mortgage Bankers Association's seasonally adjusted Market Composite Index from the previous week. That index fell 1.7% week-to-week on an adjusted basis during the week ended March 12. The MBA's Refinance Index slid 1.7% from the previous week and the seasonally adjusted Purchase Index dropped 2.3% on a week-to-week basis. The unadjusted Purchase Index was down 1.8% week-to-week and represented a 13.9% drop from the same week a year ago. Four-week moving averages are as follows: for the Market Composite Index, up 0.8%; for the seasonally adjusted Purchase Index, up 1.1%; for the Refinance Index, up 0.8%. Close to two-thirds (67.3%) of total applications in the latest week were for refinances, just slightly more than the previous week's 67.2%. The percentage of applications that were for adjustable-rate mortgages fell to 4.6% from 5.1% the previous week. The average contract interest rate for 30-year fixed-rate mortgages as tracked by the MBA during the week ended March 12 was 4.91%. This was down from 5.01% the previous week, but the MBA noted that a week-to-week increase in average points for this loan type (including the origination fee) to 1.30 from 0.82 left the effective rate unchanged. Somewhat similarly, an increase in average points (including the origination fee) for 15-year FRMs to 1.47 from 0.88 means the effective rate for the borrower actually increased even though the average contract rate for these loans fell to a record low for the second time in the last three weeks. (The average contract 15-year rate was 4.24%, down from 4.32% the previous week.) The average contract rate for one-year adjustable-rate mortgages fell to 6.75% from 6.8% with points unchanged at 0.30 (including the origination fee). All average rates and points as stated are for mortgages with 80% loan-to-value ratios.