Originations

Condominium developers in South Florida's famed South Beach area have closed on some 4,150 new units since 2003, for an average price of $891,000 per unit. But that still leaves about 1,450 apartments that remain unsold, according to a report published by Condo Vultures, a Bal Harbour-based real estate consulting firm. The unsold inventory represents 26% of the units built since '03 in the 37 projects erected in the trendy, 24-block South Beach neighborhood. Meanwhile, Condo Vultures also reports that more single-family houses are on the market in Palm Beach than in any other county in South Florida, and the inventory isn't getting any smaller. More than 10,000 houses were for sale in the county at the beginning of March, an increase of almost 4% since Thanksgiving. By comparison, the inventory of unsold houses in Miami-Dade is down more than 6% to about 8,300 units, while in Broward, the inventory is relatively unchanged at some 8,100 houses. Consultant Peter Zalewski suggests that one reason for the increase in the number of homes up for grabs in Palm Beach County is that some owners who are under no pressure to sell believe that sales have begun to stabilize and have decided to test the market.

Purchase mortgage application volume had a strong week and was the driver of the increase in the Mortgage Bankers Association's Market Composite Index for the week of Feb. 26. The MCI, a measure of mortgage loan application volume, increased 0.5% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 1.2% compared with the previous week. The Refinance Index decreased 1.5% from the previous week and the seasonally adjusted Purchase Index increased 5.7% from one week earlier. The market share of refi applications reached its lowest level since October 2009, MBA said. This fell to 67.2% of total applications, down from 69.1% the previous week. On the other hand, the market share of adjustable-rate mortgage applications is at its highest level since November 2009. This was 5.1%, up from 4.8% for the previous week. After a single week below the 5% mark, the average contract interest rate for 30-year fixed-rate mortgages is 5.01%. This is up 6 basis points from the previous week's 4.95%, with points declining to 0.82 from 0.99 (including the origination fee) for loans with an 80% percent loan-to-value ratio. The average contract interest rate for 15-year FRMs increased by 5 bps to 4.32%. The average contract interest rate for one-year ARMs increased by 3 bps to 6.80% from 6.77%.

Appraisers are raising alarms that the Treasury Department's decision to use broker price opinions (BPOs) for its new short sales program will exacerbate mortgage fraud and property "flopping." Three appraiser groups are urging Treasury to review the Home Affordable Foreclosure Alternatives program guidelines and prohibit the use of BPOs for property valuations on short sales. Their letter to Treasury secretary Timothy Geithner points to a new trend in sales of distressed properties: "flopping," whereby the value of a home is artificially deflated using a BPO and sold to a related party of the real estate agent who quickly sells that property for a profit. "Generally speaking, real estate agents and brokers are not independent or properly trained valuation specialists. They have an inherent bias toward quick results which produce a fee for themselves, irrespective of whether the lender/servicer/property owner/borrower gets a fair return on a short sale," the March 8 letter says. The Appraisal Institute, American Society of Appraisers and National Association of Independent Fee Appraisers signed the letter. Property "flipping" (as opposed to "flopping") usually involves the quick sale of real estate using straw borrowers (and payoffs to these borrowers) to artificially inflate a home for quick profit or some type of equity stripping scheme. Inflated appraisals play a key role in flipping schemes.

The entrance of a new firm, Essent Guaranty, into the mortgage insurance space is a positive for the sector as a whole, but could spell bad news for some existing players, according to a report from Moody's Investor Service. A new player, the report says, "expands the origination capacity, currently constrained, and, therefore the relevance, of the sector. The new player will, however, adversely affect the weakest mortgage insurers by bringing in alternative origination capacity." Moody's explained that supporting the continued relevance of mortgage insurance is key during this period when the government is deciding the future role of Fannie Mae and Freddie Mac. Even though a decision is not expected to be made until 2011, "We cannot rule out the possibility that narrower GSE charter modifications will be imposed that are intended to increase funding for the high LTV segment of the market ahead of such reform. Such modifications could hurt the mortgage insurers if they support an alternative to, or reduce the need for, mortgage insurance," says the report, written by Arlene Isaacs-Lowe, a senior vice president at Moody's. New capacity reduces the likelihood of that kind of charter modification taking place. But Moody's thinks weaker MI players could be hurt by the entrance of new capital because originators and the GSEs could reevaluate their relationships with those firms and limit the amount of new business they get.

Fairway Independent Mortgage Corp., Sun Prairie, Wisc., funded $720 million in residential loans in the New England area last year, a 244% jump from 2009. The 14-year old company said it now ranks among the top 30 lenders in Massachusetts (the most populous state in the region) compared to 76th a year earlier. Company CEO Steve Jacobson credited Fairway's branch managers for the strong showing. "It's back to selling mortgages like we did ten years ago when everybody had to be extremely detailed," he said. "Our local branch managers are proof that it's possible to thrive in a challenging market if you're a strong leader." FIMC has 80 branches and 900 employees nationwide.

The creation of an independent Consumer Financial Protection Agency would not impair safety and soundness regulation of banks, according to a majority of business economists. A survey by the National Association of Business Economics found 54% of economists are dismissive of claims by the banking industry (and their supporters in Congress) that a CFPA would undermine S&S regulation. A quarter (25%) of the 203 economists surveyed believe passage of CFPA legislation would be detrimental to safety and soundness. The House passed a bill that would create a stand-alone agency with rulemaking and enforcement powers to stop abusive mortgage lending and credit card practices. Such a strong consumer protection agency has run in to fierce opposition in the Senate where banking committee members are trying to wrap up negotiations on a massive financial regulatory reform bill. House Financial Services Committee chairman Barney Frank told a meeting of minority real estate professionals that CFPA opponents seem to be arguing that consumer protection will hurt banks. "There are people who believe if the banks aren't able to treat consumers unfairly they can't survive," Rep. Frank said.

Defunct FHA lender Lend America and its "chief business strategist," Michael Ashley -- who controlled the company -- have effectively been barred from the mortgage industry, according to newly released court documents. The ban springs from a civil suit brought by the Justice Department on behalf of the FHA against the Melville, N.Y.-based nonbank and Mr. Ashley. Amid investigations against the company, LendAmerica closed its doors in early December. FHA found that the company had violated numerous underwriting guidelines and according to interviews conducted by NMN the company was refinancing some loans without paying off the prior liens. In agreeing to a ban from mortgage banking, Mr. Ashley, 44, did not admit liability, according to the agreement filed recently in federal court in Central Islip. In return, anything tied to federal-related loans is off limits -- from appraising properties and marketing mortgages to working as a consultant or housing counselor, Newsday reported. "I'm beyond thrilled to be done with the mortgage business," Mr. Ashley said. "I've had it with the mortgage business. I'm done with everybody chasing me around."

The homebuyer tax credit has been a dud so far this year, but the National Association of Realtors is hoping it will kick in this spring and drive home sales higher before it expires at midyear. When the tax credit was due to expire in November, the rush by new first-time homebuyers to meet the deadline pushed November sales 45% higher than a year ago. "We would anticipate that April, May, June home sales figures will be high if there is a similar buying pattern as last year," said Lawrence Yun, chief economist for NAR. But so far the extension of tax credit by Congress has generated only a modest increase in foot traffic, he told reporters. And the expansion of the tax credit to existing homeowners or repeat buyers has not generated much excitement either. "Right now there is nothing to indicate we will get that 40% kick" in May or June, Mr. Yun said. "But we are keeping our fingers crossed."

The Government National Mortgage Association should be given its independence from the Department of Housing and Urban Development, its former president said. Joseph Murin, who ran Ginnie Mae for two years and is now a private sector consultant, called on Congress to cut the agency loose from HUD, during a speech he made at the recent Midwinter Housing Conference. Thanks to the collapse of the nonprime mortgage market, GNMA's issuance volume is booming. Along with Fannie Mae and Freddie Mac, GNMA-backed product dominates today's mortgage market. Mr. Murin left GNMA this past summer. The agency guarantees almost $1 trillion in product compared to $350 billion two years ago. Mr. Murin believes that because GNMA is now so large and plays such an integral part in the secondary market, "it requires a structure that provides for its independence and the ability to respond to the always changing secondary market." (For the full story see the weekly edition of National Mortgage News.)

Bill Petersohn, director of bulk acquisitions and capital market sales for Residential Capital Corp., Horsham, Pa., has resigned from the mortgage banker to take a job with an analytics firm. Mr. Petersohn is joining MCT Capital Trading, San Diego, as a regional director in charge of sales. Prior to his departure he managed ResCap's '3-D' correspondent program which involves ResCap/GMAC acquiring the servicing rights on mortgages that eventually are sold to Fannie Mae. Recently, according to sources familiar with the situation, ResCap eliminated smaller mortgage correspondents from the program. A ResCap spokeswoman said the 3-D program "has always been geared toward larger correspondents." She said Mr. Petersohn "is not a senior or executive level manager" at the company and his departure is "unrelated to changes made within the 3-D program." She declined to specify what those changes were.

Commercial banks will be big buyers of agency MBS this year and help keep mortgage rates in check after the Federal Reserve withdraws from the market, according to the head of securitization strategy at Barclays Capital. Managing director Ajay Rajadhyaksha said the banking sector is flush with cash and it normally starts buying securities as the economy comes out of recession. "I would expect $400 billion to $500 billion of buying from banks in securities -- primarily agency MBS in 2010," he told reporters. "I am not worried about mortgage-backed securities being bought," he added. After buying $1.25 trillion in Fannie Mae, Freddie Mac and Ginnie Mae MBS over the past 15 months, the Fed is slated to exit the market at the end of this month. Speaking at a National Association of Business Economics conference in Washington, the Barclay's MBS strategist said mortgage rates could rise 50 basis points in the second quarter and another 50 bps by yearend. However, pension funds, mutual funds and insurance companies were big sellers of MBS in 2009 and they will probably be buyers this year. "Mortgage rates will rise but the backstop will come from the private sector," Mr. Rajadhyaksha said.

Two top officers in charge of the fast growing MetLife Home Loans, Memphis, have departed the bank-owned residential lender/servicer, National Mortgage News has learned. Leaving the company is Peter Makowiecki, a senior vice president at MetLife Bank who had responsibility for MLHL, and Jeffrey Brown, a vice president at the bank who played a key role in the firm's originations. Both men were on board at First Horizon Mortgage when its parent bank, First Tennessee Corp., sold most of the lender to MetLife almost two years ago. At the end of September, MLHL ranked 11th nationwide in originations with a growth rate of 456%, according to the Quarterly Data Report. A spokesman for MetLife in Rhode Island confirmed to NMN that the two men resigned from the company "effective immediately to pursue other interests." He declined to elaborate. The two men, who were based in Texas, could not be reached for comment. Mr. Brown is the son of Carl Brown who ran Carl I. Brown & Co. for many years before that nonbank was sold to First Tennessee back in 1995. "Jeff has been with them a long time," said one business associate. "At one point he was the head of all production."

Austin, Texas-based mortgage accounting vendor Mortgage Banking Solutions has merged with San Diego-based Abacus Accounting Services. Abacus offers bookkeeping services to mortgage banks in the western U.S. MBS now offers bookkeeping services in addition to their CFO2Go product suite. The technology can now fully support outsourced bookkeeping activity with remote secure servers.

Fidelity National Financial Inc., Jacksonville, Fla., has received an extension of its $1.1 billion unsecured revolving credit facility. The line's maturity date has been extended from Oct. 24, 2011 to March 5, 2013 and although the size was cut to $935 million, FNF has an option to increase the limit back to $1.1 billion. Pricing will be in a range of 110 to 190 basis points over Libor, based on FNF's senior debt ratings. Right now FNF has a Moody's rating of Baa3 and a Standard & Poor's rating of BBB-, making the current applicable margin 150 bps. The applicable margin will increase by 50 bps on Oct. 24, 2011. Financial covenants remain the same as in the previous credit facility, including minimum consolidated net worth and maximum indebtedness to capitalization ratio covenants. Bank of America Securities LLC, Wells Fargo Securities LLC, J.P. Morgan Securities Inc., and U.S. Bank NA acted as joint lead arrangers of the credit facility.

The seasonally adjusted annual rate of Canadian housing starts climbed to 196,700 units in February from 185,400 units in January, according to Canada Mortgage and Housing Corp. Bob Dugan, chief economist at CMHC, said the volatile multifamily starts segment drove the increase. The seasonally adjusted annual rate of urban multifamily starts in Canada jumped 19.1% during the month while single-family starts inched up by just 0.5% during the period. The smaller rural start segment was estimated at a seasonally adjusted annual rate of 17,600 for the month.

Restructuring Fannie Mae and Freddie Mac-and the political compromises that must occur to make it happen-could render the passage of such legislation next to impossible, according to a new report from Keefe, Bruyette & Woods. Commenting on remarks made late last week by Rep. Barney Frank that investors in Fannie/Freddie securities should not assume that their holdings are guaranteed by the Treasury Department, KBW noted that the chairman of the House Financial Services Committee "had a busy day." Treasury quickly issued a statement, reiterating its financial commitment to the two. But in its report, KBW predicts that Democrats will lose more seats in the fall election, forcing Rep. Frank to compromise on GSE legislation next year. Several weeks ago the committee chairman said he wants to start from scratch on revamping the nation's housing finance system. KBW analyst Bruce Gardner notes that the undertaking is "monumental when one considers that such an effort would affect Fannie and Freddie, the capital markets, the banking system, mortgage bankers, mortgage insurers, Realtors, homebuilders and others."

The creation of an independent Consumer Financial Protection Agency would not impair safety and soundness regulation of banks, according to a majority of business economists. A survey by the National Association of Business Economists found 54% of economists are dismissive of claims by the banking industry and their supporters in Congress that a CFPA would undermine S&S regulation. A quarter (25%) of the 203 economists believes passage of CFPA legislation would be detrimental to S&S. The House has passed a bill that would create a stand-alone agency with rulemaking and enforcement powers to stop abusive mortgage lending and credit card practices. Such a strong consumer protection agency has run into fierce opposition in the Senate where banking committee members are trying to wrap up negotiations on a massive financial regulatory reform bill. House Financial Services Committee chairman Barney Frank told a meeting of minority real estate professionals that CFPA opponents seem to be arguing that consumer protection will hurt banks. "There are people who believe if the banks aren't able to treat consumers unfairly they can't survive," Rep. Frank said.

The Federal Housing Administration is extending the March 31 deadline for mortgage brokers to submit their audited financial statements by 30 days. FHA-approved brokers "must continue to comply with existing requirements for the submission of their annual certifications and renewal fees, but will be given until April 30 to submit audited financial statements," the Department of Housing and Urban Development said. HUD soon will issue a final rule requiring FHA-approved lenders to select the brokers they want to buy loans from and assume liability for their production. Brokers will no longer be required to go through an FHA approval process which entails the submission of annual financial statements. Meanwhile, the March 31 deadline is steadily approaching and HUD officials do not want brokers paying $8,000 to $15,000 for an unnecessary audit.

The Federal Housing Administration commissioner wants the nation's largest originators to loosen their underwriting standards, allowing more minorities to qualify for government-backed single-family loans. Many top ranked lenders voluntarily imposed a minimum 620 credit score in 2008 as subprime borrowers rushed to refinance into FHA loans. Commissioner David Stevens told minority real estate professionals that the lenders' action has improved the performance of FHA loans and reduced defaults. However, the commissioner is now urging lenders to consider borrowers with lower FICO scores. "The one thing I will tell you, the difference in approval rates for African-Americans and Latino borrowers between 580 and 620 is significant," Mr. Stevens said. The commissioner noted that FHA is taking several steps to reduce default risk. But the agency does not want to raise the FHA 3.5% downpayment requirement to 5%, despite congressional pressure. "If we had increased the downpayment to 5% we would severely impact the ability of a good family" to buy a home, he said. The FHA commissioner made his comments at a recent conference on minority home ownership.

Two subsidiaries of the government-owned AIG have agreed to pay at least $6.1 million to resolve charges that they discriminated against African American borrowers by failing to monitor loan brokers that charged excessive fees. The loans in question were funded through the wholesale channel by AIG Federal Savings Bank, and an affiliate, Wilmington Finance Inc. Neither is still active in wholesale lending. According to the Department of Justice, AIG FSB and WFI "failed to supervise or monitor brokers in setting broker fees. This practice had a disparate impact on African American borrowers, who were charged higher broker fees than white, non-Hispanic borrowers on thousands of such loans from July 2003 until May 2006." American International Group - whose empire includes mortgage firms and a mortgage insurance company - was placed under government control in the fall of 2008. It has received upwards of $150 billion in financial aid and guarantees. The settlement, brought under the Fair Housing and Equal Credit Opportunity Acts, was filed Thursday in conjunction with a complaint made by DOJ in U.S. District Court in Delaware. The settlement, which is subject to court approval, stipulates that the AIG affiliates will pay up to $6.1 million to African American customers who were charged higher broker fees than similarly-situated, non-Hispanic white customers. The two also will invest at least $1 million in consumer financial education efforts. AIG is in the process of liquidating its $20 billion nonprime whole loan portfolio.