Originations

Creditors of Taylor Bean & Whitaker are seeking permission from a bankruptcy judge for authority to sue former company insiders, including president Lee Farkas, who founded the company and made it into a top 10 ranked lender. According to a report on Dow Jones, the committee representing Taylor Bean's unsecured creditors in the bankruptcy case wants to sue Farkas and other insiders for money the company loaned them that allegedly hasn't been paid back. The creditors committee said in court filings this week that TBW's lawyers have "conflicts or other concerns that make it unable or unwilling" to pursue the suits, but the committee said the company is backing its efforts. The committee is also planning to go after Bank of America for money the bank allegedly held back after selling securities backed by TBW mortgages. Pursuit of claims against the bank's insiders could well represent the unsecured creditors' best shot at seeing a significant recovery in the bankruptcy case. Judge Jerry Funk of the Bankruptcy Court in Jacksonville, Fla., has scheduled a Feb. 19 hearing to consider the committee's request. TBW filed for bankruptcy protection last summer after trying to buy a controlling stake in its chief warehouse provider, Colonial Bank. Colonial failed shortly thereafter.

A lone Republican on the Senate Banking Committee has stepped forward to work with committee chairman Christopher Dodd, D-Conn., on crafting a financial regulatory reform bill, but the two have decided to postpone talks on consumer protection, an issue closely being watched by mortgage bankers. Sen. Bob Corker, R-Tenn., said creation of a Consumer Financial Protection Agency is "probably the hot button issue." As a result, the two senators have agreed to set that topic aside for now. The Tennessee senator moved fairly quickly after discussions between chairman Dodd and the ranking Republican senator on the committee, Richard Shelby of Alabama, broke down. "I hope to make it clear that I am stepping forward purely as one Republican senator who believes this is a piece of legislation that needs to be passed and is willing to see if it is possible in a bipartisan way," Sen. Corker said. However, Sen. Corker has serious concerns about the creation of a CPFA, which brought Senators Dodd and Shelby to an impasse. This new independent agency would set uniform standards for mortgage lenders and credit card issuers with an eye toward preventing abusive and deceptive practices. Washington observers say that unless language creating a CFPA is in a final bill the White House will oppose it.

The average size of commercial MBS loans moved into 'special servicing' has more than doubled over the past 12 months, according to Fitch Ratings. Five of the loans newly transferred into special servicing in January had balances of more than $100 million, the rating agency said. In total, 248 loans totaling $4.27 billion moved into special servicing during the month. This is more than four times the balance transferred during the same month a year ago.

Federal Housing Administration is moving ahead with the implementation of its appraisal reforms after making accommodations for mortgage brokers to secure a case number. The new FHA rules are designed to shield appraisers from loan officer and mortgage broker pressure by prohibiting these parties from selecting appraisers. Starting Feb. 15, brokers can secure a case number for FHA loans online without inputting appraiser information. Previously, a broker or LO had to input appraiser information to get a case number assignment from the agency's 'FHA Connection' website. FHA delayed the original Jan. 1 effective date to address mortgage broker concerns. Under the new regime, the FHA-approved lender can input the appraiser information when the appraisal is completed. This approach preserves the mortgage broker's ability to get FHA case numbers and shop loans to several wholesalers. The new appraisal rules still require changes for brokers and LOs but "they made it as easy as possible," said mortgage consultant Brian Chapelle of Potomac Partners, Washington.

Guardian Solutions, a commercial loan modification firm based in Clearwater, Fla., will donate 10% of its profits to various charities that help families in need in the Haitian capital of Port-Au-Prince and the surrounding area. "The situation in Haiti is one that just can't be ignored. While there is nothing we can do for those that lost their lives, we can help those that managed to survive. We're in the business of helping people with their commercial property troubles, so helping people with more dire problems was not a difficult choice for us," said Jeramie P. Concklin, chief executive of Guardian Solutions. The company has also partially funded a team of volunteers that is going to Haiti next week to help rebuild a school.

The average rate for a 30-year fixed-rate mortgage was back below 5% during the week ended Feb. 11, according to the Freddie Mac Primary Mortgage Market Survey. At 4.97%, "interest rates on 30-year fixed-rate mortgages are below 5% for a third week this year," said Freddie Mac's chief economist Frank Nothaft. This is down from 5.01% the previous week and from 5.16% last year. The average weekly rates for all other loans types commonly tracked by Freddie Mac also were down from the previous week, with the exception of one-year Treasury-indexed adjustable-rate mortgages. The one-year Treasury ARM rate rose to 4.33% during the week from 4.22% the previous week, but was down from 4.94% a year ago. The five-year Treasury hybrid ARM rate was 4.19%, down from 4.27% the previous week and 5.23% a year ago. The 15-year FRM rate was 4.34%, down from 4.40% the previous week and 5.23% a year ago. Average points were 0.7 for 30-year FRMs and 0.6 for the other three types of mortgages.

Treasury Department and bank supervisors must undertake a coordinated effort to address a developing commercial real estate "crisis" that could be very damaging to the economy, according to a Congressional panel that oversees the government's Troubled Asset Relief Program. Nearly half of the $1.4 trillion in commercial real estate loans that need to be refinanced between 2010 and 2014 are under water and this could lead to a "significant wave of CRE defaults" and "prolong an already painful recession" the Congressional Oversight Panel says in a new 190-page report. CRE losses at banks could range as high as $200 billion to $300 billion with small and mid-sized banks facing the greatest exposure to write-downs and losses, the report warns. The banking regulators are encouraging banks to refinance CRE loans if the borrowers have the capacity to make the payments on the restructured loan. This policy allows banks to avoid writedowns of problematic loans for now but its success depends on a quick recovery of the overall economy. "Lenders obviously like" this policy, the COP report says. But investors looking to buy distressed properties warn it will push losses into the future and slow the recovery of the CRE market. "It is critical that bank supervisors fully recognized and are publicly clear about the potential for a CRE crisis and are quick to force loss recognition where necessary," the COP report says.

Mortgage lender Embrace Home Loans, Newport, R.I., replaced its annual sales meeting this year with a Haiti benefit, according to the company. The company said its fundraising auction brought in $20,000 for a group called Partners with Haiti that supports Haitian orphanages. Employees donated items to the auction that included the use of a Florida vacation house for a week and use of an RV for a week, as well as sports and concert tickets. The Port-Au-Prince area of Haiti was devastated by a Jan. 12 earthquake.

NetMore, a mortgage banking firm based in Walla Walla, Wash., has hired Comergence Compliance Monitoring as a third-party due diligence provider to keep an eye on its correspondent lenders. CCM will manage all reviews and monitor third-party originators that source loans to the company. CCM is based in Orange, Calif. NetMore, a nonbank, said it is "committed to working with the highest quality mortgage brokers in the industry in a 'friction free' manner."

Residential mortgage lender Platinum Home Mortgage Corp. has appointed a senior executive vice president for the company's "Midwest expansion" division. Don Grudzinski, who previously was vice president of production at Platinum Home Mortgage, has been named to the post. In his new position, Mr. Grudzinski will be responsible for both residential originations and operations. He has more than two decades of experience in mortgage sales.

Flagstar Bancorp Inc., which controls one of the nation's largest wholesale lenders, came up nearly $200 million shy of its capital-raising goal in a rights offering that expired earlier in the week. The company is also in the process of trying to sell a $10 billion package of mostly Fannie Mae servicing rights. In an interview with American Banker, Flagstar CEO Joseph Campanelli acknowledged that the rights offering did not bring in as much capital as Flagstar desired. But he said the total was still in line with the capital level targeted in its business plan. The $300.6 million raised, he said, "brings us north of 8% capital, which we believe is a good, solid number." As part of a plan to diversify its portfolio this year, Mr. Campanelli noted recently that Flagstar would seek to broaden its revenue stream with ventures outside its national mortgage banking model. According to figures compiled by National Mortgage News and its Quarterly Data Report affiliate, Flagstar ranks eighth among residential wholesale funders with a quarterly run-rate just shy of $3 billion. Flagstar is also an active warehouse lender. In the fourth quarter it lost $72 million, an improvement over its third quarter loss of $298 million. Its shares continue to trade for less than $1 on the New York Stock Exchange.

Since it introduced its Clarity Commitment document in April 2009, Bank of America, Charlotte, N.C., has issued more than 1 million of them to its mortgage customers. Potential homebuyers receive a Clarity Commitment with their welcome package and again with their closing documents. The Clarity Commitment provides basic information on terms such as interest rates, monthly payments and closing costs. "Customers told us they wanted transparency and 'no surprises' in the lending process, and the Clarity Commitment answers that need — helping potential homeowners clearly understand the key terms and conditions of their mortgage agreement prior to closing a loan," said Barbara Desoer, president of Bank of America Home Loans. The Clarity Commitment is now available for most B of A home loan products, including home equity loans, reverse mortgages, and most recently, permanent mortgage modifications under the government's Home Affordable Modification Program.

Agency mortgage-backed securities investor Annaly Capital Management Inc. has priced a public offering of $500 million in an aggregate principal amount of its 4% convertible senior notes due 2015 and plans to use the proceeds, in part, to buy MBS for its investment portfolio. The company said it would also use the proceeds for general corporate purchases. It estimated net proceeds of about $485 million after deducting underwriting discounts and expected offering expenses. The offering is slated to close Friday. Interest on the notes is set to be paid semi-annually at a rate of 4% per year with the notes maturing on Feb. 15, 2015 unless they are repurchased or converted earlier. The notes will be convertible into shares of Annaly's common stock at an initial conversion rate of roughly 46.6 shares per $1,000 principal amount of notes. This is equal to about $21.46 per share of common stock, subject to adjustment in certain circumstances. Credit Suisse Securities (USA) LLC is the sole underwriter for the offering.

PHH Corp., Mt. Laurel, N.J., has rescheduled an investor call on its corporate "transformation initiative" until next Tuesday due to blizzard conditions in the mid-Atlantic. A top-10 ranked lender/servicer, PHH said the transformation initiative is centered on making it a "more successful, more efficient and more customer-focused company." PHH Mortgage is one of the largest private-label lender/servicers in the United States. Jerry Selitto, president and CEO, will host the conference call along with Mark Danahy, EVP in charge of mortgages, and others.

Rates on 30-year fixed rate mortgages are back below the 5% threshold, but that has not translated into an increase in activity, the Mortgage Bankers Association's Weekly Mortgage Applications Survey found. MBA's Market Composite Index for the week of Feb. 5, 2010, a measure of mortgage loan application volume, decreased 1.2% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 0.6% compared with the previous week. The Refinance Index increased a scant 1.4% from the previous week and the seasonally adjusted Purchase Index decreased 7.0% from one week earlier. The market share of refi applications is 69.7%, an increase over the previous week's 69.2%. The market share of adjustable rate mortgage loan applications remained at 4.5% for the second consecutive week. The average contract interest rate for 30-year fixed-rate mortgages fell to 4.94% from 5.01%, with points rising to 1.06 from 1.04 (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 remained unchanged at 4.33%. The average contract interest rate for one-year ARMs decreased to 6.68% from 6.70%.

PHH Corp., Mt. Laurel, N.J., said it will hold an investor call on Wednesday afternoon to provide an update on its previously announced "transformation initiative." No further details were available at press time. PHH's largest corporate share holder is Black Rock Financial, New York. Its mortgage unit ranks among the top ten in both lending and servicing, according to the Quarterly Data Report.

The now-profitable UBS AG still faces at least a couple of challenges that date back to its involvement in the U.S. subprime mortgage space, but is seeing some funding diversification benefits from a new Swiss residential mortgage covered bond program. The company as a whole, which previously had been struggling with a chain of quarterly losses, generated a profit of about 1.2 billion Swiss francs ($1.1 billion) in the fourth quarter. Remaining mortgage-related challenges for the firm include exposures to monoline insurers through credit-default swaps of asset-backed securities. As of Dec. 31, the total fair value of CDS protection purchased from the monolines was $2.3 billion after cumulative credit valuation adjustments of $2.8 billion. Some of the related charges in this area did not flow through as profit or loss because of accounting rules for assets characterized as loans and receivables. The company in the fourth quarter also faced a suit in the Southern District of New York alleging securities fraud in connection with disclosures relating to its losses in certain areas that include subprime mortgage markets. It is seeking to have the claim dismissed. During the fiscal period the company said it was able to diversify funding by issuing the equivalent of 4.5 billion Swiss francs ($4.2 billion) in euro-denominated five- and 10-year covered bonds backed by Swiss residential mortgages.

A community group says minorities in California are twice as likely as whites to have a home loan application denied to them, raising concerns that large lenders have returned to the practice of redlining. The findings are based on Home Mortgage Disclosure Act figures for the calendar year 2008. In a study titled "From Foreclosure to Re-Redlining," the California Reinvestment Coalition used HMDA figures to analyze lending patterns in five California cities. The 45-page report examined the overall drop in prime lending from 2006 to 2008 and claims that lower-cost prime loans fell dramatically in minority neighborhoods during that period as compared to white neighborhoods. Redlining, the practice of denying, discouraging or increasing the cost of banking services to residents on the basis of race or ethnicity, is forbidden by the Community Reinvestment Act of 1977.

President Obama wants to expand Small Business Administration guarantees to commercial real estate loans, a move that may bolster the struggling market. The administration is asking Congress to allow owner-occupied commercial real estate loans maturing in the next year to be refinanced through the SBA's 504 program. That program currently cannot be used to refinance maturing debt. The president also proposed increasing the cap for SBA Express loans, which carry a 50% government guarantee, to $1 million from $350,000. "Even companies with great credit histories are facing challenges refinancing at what are historically low rates," Obama said during a speech in Maryland. "Property values have fallen and lending has dropped. As a result, many businesses that would otherwise survive this downturn are at risk of defaulting, which in turn will lead to even lower property values and less lending." Under the proposal, existing lenders would refinance up to 70% of the current property value and the SBA would finance the balance. When new lenders do the refinancing, the SBA would finance even more, up to 40%. The administration said nearly $19 billion of commercial real estate loans could be refinanced each year.

GMAC Financial Services says it remains committed to its Ditech brand, even as it shifts most of its Costa Mesa, Calif. operations to Fort Washington, Pa. GMAC said Ditech, "was not performing up to expectations in its previous configuration." By being moved to Fort Washington, GMAC hopes to gain efficiencies by sharing common infrastructure with Ditech and GMAC Mortgage. A GMAC spokeswoman said there are 269 employees affected by the move, including 119 loan officers that have been let go. All new applications are already being handled in Fort Washington. Another 150 back office employees remain working out of Costa Mesa for the next 60 days to clear the pipeline of loan originations generated before the announcement. There will be approximately 30 employees left at Costa Mesa to support mortgage servicing. During the heyday of subprime and home equity lending, Ditech was known for its marketing prowess and cable TV ads. In a statement GMAC said it would continue to support Ditech "with a dynamic mix of marketing and advertising designed to reach its target customers, and this mix may include direct marketing, digital advertising and more traditional forms of advertising such as television spots."