Originations

Industry cooperative Lenders One, St. Louis, said Wednesday it set records for production and membership in 2009 with more than $77 billion in volume. That volume is more than twice its total production in 2008, the group said, and latest-available NMN data suggest that if counted as one entity rather than broken down by its individual members' production, Lenders One would rank fourth or fifth nationally. The cooperative added 47 new members during the year, bringing its total number of member financial institutions to 156. Members of the group include mortgage bankers, correspondent lenders, and suppliers of mortgage-related products and services.

Freddie Mac purchased $44 billion in mortgages from its seller/servicers in December, a handsome 58% spike from November, according to new figures released by the company. For the full year, the government-controlled GSE bought $548 billion of loans from its customers, a 19% jump in acquisitions. Meanwhile, its total delinquencies climbed to 3.87% during the month, more than double the rate a year ago. Its retained portfolio fell to $755.3 billion at year-end, a 1% decline from the previous month. However, as the Federal Reserve begins to exit the GSE MBS market, Freddie and its sister company, Fannie Mae, could wind up buying more MBS for its balance sheet. Fannie is expected to release its monthly purchase numbers shortly. Both will report earnings in February but an exact date has not been released.

Astoria Financial of New York posted a small profit in the fourth quarter as its nonperforming residential loans crept up slightly to $330 million at yearend. The Lake Success-based thrift — a player in both residential and multifamily funding — earned $8.1 million in the quarter, compared to a profit of $29.4 million in the fourth quarter of 2008. Astoria had net-charge offs of $32.6 million, of which $22.8 million was tied to one- to four-family loans, and $9.2 million for multifamily. Astoria chief executive George Engelke said he is encouraged "by the stabilizing trends we are seeing in non-performing loans, which if sustained, will have a positive impact on future credit costs and earnings." Astoria ranks 30th nationwide among all residential lenders, according to figures compiled by National Mortgage News.

Flagstar Bancorp Inc., Troy, Mich., has raised $300 million of capital through a previously announced rights offering, which closes on Feb. 8, 2010. The company's controlling stockholder, MP Thrift Investments LP, is purchasing an additional nearly 423 million shares of Flagstar common stock. That works out to a price of $0.71 per share. Flagstar was trading at $0.65 per share the morning of Jan. 28. In addition, Flagstar has entered into agreements with the Office of Thrift Supervision to address certain banking issues. Among other items, the agreements require the company to within 90 days, adopt specific timeframes for the remediation of certain issues related to mortgage servicing rights. It also within 30 days, must revise the asset concentration policy to establish the existing concentration limit for MSRs at a level consistent with the business plan. Todd McGowan joins Flagstar as its chief risk officer after 22 years at Deloitte Touche, where he last served as its regional quality risk management partner and advised companies in areas including enterprise risk management, business process controls, and Sarbanes-Oxley compliance.

Old Republic International Corp., Chicago, lost $99 million for the full year 2009, a loss that would have been nearly $50 million greater except for the restatement of its third quarter results earlier this week. That restatement was done to conform to GAAP requirements on certain mortgage reinsurance contract terminations. ORI noted that substantially all of the premiums being recognized as income now will be likely absorbed by loss costs related to future years' risk exposures. In the fourth quarter, ORI lost $36.7 million. Its mortgage guaranty insurance business has a pretax operating loss of $126 million for the quarter and $486 million for the year. However, its title insurance business made $1.5 million for the quarter and $2.1million in 2009 on a pre-tax basis. The company also reported the fair value of its investments in competitors MGIC and PMI went from $82.7 million at the end of 2008 to $130.7 million at the end of last year. New insurance written by Republic Mortgage Insurance Co. was just $7.9 million for 2009, compared with $20.8 million in 2008 and a peak of $31.8 million in 2007. However, the title insurance business reported 358,935 direct orders opened in 2009, up from 257,743 in 2008.

The Department of Justice is forming a special Fair Lending Unit which is expected to aggressively pursue residential lenders and brokers that engage in what the government calls "toxic and discriminatory" loans. The new FLU "will pursue cases of reverse redlining — where predatory lenders have targeted toxic products to minority communities, resulting in unprecedented numbers of foreclosures and the resulting disinvestment and blight," DOJ assistant secretary Thomas Perez said recently. The new unit also will review Home Affordable Modification Program data to see if servicers are treating minorities fairly and providing them with access to modifications and appropriate reductions in monthly payments. The Senate confirmed Mr. Perez several months ago to run the Civil Rights Division. "It is really ramping up now that he is there," said Paul Hancock, a partner at K&L Gates. The former Civil Rights Division attorney said it is important for lenders to be prepared and develop their own defenses to the type of claims that might be coming. "We expect this is going to be a very aggressive administration and push the envelope as much as they can to challenge lenders," Mr. Hancock said.

Fitch Ratings, New York, is maintaining its negative outlook for the private mortgage insurance business in 2010. It expects a high number of prime credit mortgage delinquencies, coupled with home prices unlikely to rebound any time soon, which will lead to elevated default and loss rates for the industry. The MIs have been benefiting from rescissions but Fitch does not expect that to continue, as prime loans will form a greater percentage of overall delinquencies. The longer term outlook for the mortgage insurance business is uncertain as it is likely to be tied to the ultimate future form of Fannie Mae and Freddie Mac and whether the secondary market will continue to have a need for private mortgage insurance. "The importance of housing to the U.S. economy, however, suggests a future that includes a role for private capital in the mitigation of mortgage losses to the GSEs. While 2008 and 2009 saw an increasing use of FHA-insured loans, the FHA has been insuring much of the business that no longer qualified under tightened private MI guidelines. However, the FHA has recently fallen below its mandated minimum capital level and its ability to provide additional insurance at historically high levels may be limited," the report from Fitch said.

Security Atlantic Mortgage of New Jersey, one of 15 lenders subpoenaed by the government two weeks ago, is telling mortgage brokers that it has stopped taking new applications while transferring unclosed loan files to Real Estate Mortgage Network, a nearby lender. The 17-year old company said it made the decision to shut its pipeline in "the wake of unfavorable publicity created by the recent unorthodox HUD press conference and the concerns this press conference has raised with our lenders and investors." As National Mortgage News Online went on deadline, company officials had not returned telephone calls about the matter. SAM said REMN is "actively recruiting" its existing operational staff, including underwriters and closers to fill positions in a new operations center." In an announcement on its website, SAM said it funded more than 17,000 loans, many of them in "government-designated disadvantaged neighborhoods, representing nearly 60% of our production." It added that "it has always been our mission to serve those qualified families most in need of the FHA program." In mid-January HUD subpoenaed 15 mortgage companies, seeking out possible fraud in an effort to stem losses on FHA loans. While publicizing the subpoenas, the agency noted that they had not yet found any evidence of wrongdoing at the firms, and were singling out those with the highest default rates, including SAM.

As projected, homebuilders in the Golden State put up the fewest number of homes in a single year in 2009, erecting just 36,209 units, according to the California Industry Research Board. That's just slightly more than 3,000 starts a month for the entire state. The total number of single-family houses, apartments, condominiums and townhouses was down 44% from 2008 - and a shocking 83% compared to the 176,751 units built in 2004, the peak year in the current cycle. The previous record low was 2008. "It's been a rough couple of years for the housing industry," said Liz Snow, president of the California Building Industry Association. Builders pulled permits for 3,594 units in December, a decline of 23% compared to December 2008, but an increase of 39% from the previous month. However, Ben Bartolotto, research director for CIRB, warned that any enthusiasm for the November-to-December increase should be tempered by the fact that December numbers are often inflated because of a rush to pull permits before certain regulations and fees get increased in January. CIRB is now projecting that builders will start 52,000 units 2010, an increase from 2009 but still down from 2008 and "by no means a recovery."

New home sales fell 23% in 2009 from the previous year and sales ended the year on a down note with a 7.6% decline in December. Despite the first-time homebuyer tax credit, sales of newly constructed homes totaled only 374,000 in 2009, compared to 485,000 in 2008, according to the U.S. Census Bureau. This year, economists at the National Association of Home Builders expect an improving economy and new homebuyer tax credit will push new home sales up 39% to 517,000. The tax credit, which includes repeat buyers this time, expires April 30. Buyers that sign a sales contract by April 30 have until June 30 to close. NAHB economist Bernard Markstein expects the new tax credit will generate 180,000 additional sales and 40,000 of the sales will involve new homes. Meanwhile, the Census Bureau reported that sales of new single-family homes fell to a 342,000 seasonally adjusted annual rate in December from 370,000 in November. November sales were revised upward. Last month, the bureau reported that sales plunged 11.3% in November to a 355,000 seasonally adjusted annual rate.

Citing a decline in refinancing activity, the Mortgage Bankers Association said there was an overall decline in new loan applications submitted for the week ending Jan. 22. According to the results of its Weekly Mortgage Applications Survey, MBA's Market Composite Index - a measure of mortgage loan application volume - decreased 10.9% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the index decreased 10.1% compared with the previous week. The Refinance Index fell by 15.1%. Michael Fratantoni, MBA's vice president of research and economics commented, "Although rates remain low, there appears to be a smaller pool of borrowers who are willing and able to refinance at today's rates." But even with the falloff in the number of refinance applications, these are still making up the lion's share of new apps, at 67.6% (although this is down from 71.7% the previous week). The seasonally adjusted Purchase Index also declined from one week earlier, by 3.3%. The market share of adjustable-rate mortgage loan applications increased to 4.7%, up from 4.1% for the previous week. The average contract interest rate for 30-year fixed-rate mortgages increased to 5.02% from 5%, with points decreasing to 1 from 1.05 (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 rose by 1 basis point to 4.34% while for one-year ARMs the average contract interest rate increased by 12 basis points to 6.84%.

Mortgage Guaranty Insurance Corp., Milwaukee, Wis., revealed Bank of America stopped doing business with the company prior to filing a lawsuit against it in December 2009. Both the decision to stop doing business and the lawsuit were driven by MGIC's rescission policies, the mortgage insurer said. During parent company MGIC Investment Corp.'s fourth quarter results teleconference, chairman and chief executive Curt Culver said the rescission policies are no different involving Countrywide (now a part of B of A) than the company's general rescission practices and that MGIC has not changed its practices as a result of the lawsuit. The company has mitigated its 2009 claims paid losses by $1.2 billion; for 2008 and 2009 rescissions of Countrywide-related flow loans mitigated paid losses by approximately $100 million. A substantial number of loans involved in the lawsuit are stated income loans which were insured through the flow channel. Mr. Culver also revealed MGIC was granted a change in venue for the case from a state court in San Francisco to the U.S District Court for the Northern District of California. According to MGIC, BofA and Countrywide accounted for 12% of its flow new insurance written in 2008 and 8.3% of its new insurance written during the first three quarters of 2009. A call to BofA was not returned by press time.

Some vendors are making it easier for lenders to complete the new good faith estimate disclosure by providing price guarantees, according to a Real Estate Settlement Procedures Act attorney. "We are seeing a lot of vendors guaranteeing the [settlement] charges. And I expect to see more of that," said Phillip Schulman, a partner at K&L Gates in Washington. Lenders also want third-party vendors that they recommend to homebuyers not to raise prices without providing 60-day advance notice, Mr. Schulman told clients during a webinar. Under the new RESPA rule, charges for lender-required or lender-recommended services should not exceed the initial estimate given to mortgage applicants by more than 10% at closing. If the settlement costs are higher than the good faith estimate, the lender ends up paying the difference at the closing table. In guaranteeing prices, vendors are expected to pay the overage, Mr. Schulman said.

Orange County prosecutors arrested two Ladera Ranch men - and issued a warrant for a third - accusing them of defrauding more than 400 homeowners in an alleged $1.25 million loan modification scam, according to a report in The Orange County Register. Christopher Lee Diener, 42, Terrence Green Sr. 43, and Stefano Joseph Marrero, 40, are each charged with a felony count of conspiracy and 97 felony grand theft counts, according to the Orange County District Attorney's office. Messrs. Diener and Green were taken into custody and are each being held on $1.5 million bail. They will be arraigned by midweek, at the latest. The business partners are accused of getting upfront fees from homeowners, and falsely promising they can get them loans with cheaper payments in less than 90 days and offering a 100 percent money-back guarantee, prosecutors said.

Farmer Mac raised $250 million in additional capital in a private offering of shares of non-cumulative perpetual preferred stock of Farmer Mac II LLC, a Delaware limited liability company in which it owns all of the common equity. Farmer Mac II LLC is now operating the Farmer Mac II business that has operated since 1992 purchasing and holding U.S. Department of Agriculture-guaranteed loans. Farmer Mac is using the proceeds from the sale to repurchase and retire $150 million of Farmer Mac's currently outstanding Series B preferred stock and to further enhance its regulatory capital position. Farmer Mac's president and chief executive Michael Gerber said, "Today's transaction further strengthens Farmer Mac's financial position in support of our core business. It provides Farmer Mac with additional capital at a significantly lower cost."

The Department of Housing and Urban Development on Monday stopped three lenders from originating Federal Housing Administration loans and suspended another as part of a continuing effort to weed out firms that do not follow its underwriting rules. The HUD Mortgagee Review Board permanently withdrew FHA approval from Strategic Mortgage Corp., Oklahoma City, ProMortgage Inc., Claremore, Okla., and Americare Investment Group Inc., Arlington, Texas. FHA also suspended Home Mortgage Inc., of Burr Ridge, Ill., for six months. Strategic Mortgage had a 14.7% early default and claim rate and FHA said it charged borrowers impermissible or excessive fees and submitted a false certification to HUD. The MRB also levied a $71,000 civil money penalty against the Oklahoma City company. ProMortgage had a 7.3% early default and claim rate and HUD said it failed to comply with numerous FHA requirements such as reviews of early defaulted loans, verifying borrower income and reporting employee compensation on appropriate forms. The MRB levied a $124,000 CMP against the firm. HUD terminated Americare for failing to make monthly payments on a settlement involving a $124,000 civil money penalty.

Home prices fell 0.2% in November on a seasonally adjusted basis after leveling off in October, suggesting the housing market has lost momentum and values could decline over the winter months, according to the Standard & Poor's/Case-Shiller 20-city price index. "On balance, while these data do show that home prices are far more stable than they were a year ago, there is no clear sign of a sustained, broad-based recovery," said David Blitzer, chairman of S&P's index committee. Until October, the HPI registered four consecutive months of house price increases. But for 2009 through the month of November, the HPI is down 2.8%. S&P's chief economist David Wyss expects home sales will drop over the winter and house prices could fall 8% based on the 20-city HPI. Separately, the Federal Housing Finance Agency reported that its seasonally adjusted HPI -- based on Fannie Mae and Freddie Mac purchase mortgage transactions -- rose 0.7% in November from October. For the 12 months ending in November, the Federal Housing Finance Agency HPI is up 0.5%.

MGIC Investment Corp., the largest mortgage insurer in the nation, lost $280 million in the fourth quarter, its tenth straight quarterly loss. In the same period a year earlier, the Milwaukee-based firm lost slightly less, $275.6 million. At Dec. 31, the percentage of loans it guarantees that were delinquent, excluding bulk loans, was 15.46% compared with 9.51% a year ago. Curt S. Culver, chairman and chief executive, said in a statement that the weak economy, higher levels of unemployment and lower home prices have led to an increase in the delinquent inventory and elevated incurred losses. But there was some good news: MGIC has seen a sequential decline in the number of new notices received and its book of business written since implementing tighter underwriting guidelines in 2008 has improved the credit risk profile of its insurance-in-force. Total revenue fell 1% to $405.5 million in the quarter, but beat analysts' view of $393.8 million. Despite the bad news, its stock was up as much as 14% on Tuesday.

The National Association of Home Builders is trying to line up its cash-strapped members with hard-to-find sources of financing. In an effort to bring some capital back to the suffering housing business, the trade group brought together about two dozen financial firms and as many as 200 builders in a private back room of its annual convention here last week. "We are bringing the mountain to Muhammad," Michelle Hamecs, a staff member at the builder group, said of its Partnership Pavilion program. "We're doing what we can to raise awareness and try to get some money flowing again." Earl Armiger, the president of Orchard Development Corp., an apartment builder in Ellicott City, Md., said the dearth of funding for acquisition, development and construction is his industry's No. 1 problem. "Housing can't lead the country out of the recession if it doesn't have capital," he said. "The problem is so large, so global, that progress has to be taken in small steps." It's too early to assess the initiative's success, said Michael Sivage of Sivage Homes in Albuquerque, who became chairman of the trade group's housing finance committee at the convention last week. "The real proof will be if some of us actually get some capital," he said.

BB&T Bancorp plans to grow its warehouse lending business in the coming months and is receiving multiple requests for not only new lines but expansion of existing credits. Jeff Ellison, president of warehouse lending for BB&T, said in an interview with NMN that the company "is definitely looking for new business" but the one caveat is that it will only lend to nonbanks in BB&T's branch "footprint" in the South and mid-Atlantic. To date, the bank has said little about its warehouse plans but Mr. Ellison made it clear that he has been given a mandate to grow the business. "We'll be doing more in the second quarter." The warehouse chief declined to give a specific dollar amount of its commitments at yearend but said it was between $1.5 billion and $2 billion. Last summer BB&T, in a federally assisted transaction, purchased Colonial BancGroup, Montgomery, Ala., then the largest warehouse provider in the nation.