Originations

Ginnie Mae issuance of single-family and multifamily mortgage-backed securities hit a record $414 billion in 2009, up 53% from the previous calendar year. The secondary market agency ended the year on a strong note, as MBS issuance jumped to $42.5 billion in December, up from $35.5 billion in November. The Ginnie MBS issuance topped $46 billion in July, which is a single-month record for the agency. Most of Ginnie MBS is backed by Federal Housing Administration single-family loans — only $6.8 billion of the Ginnie MBS issued in 2009 involved multifamily loans guaranteed by FHA, as well as single family loans originated through the Department of Veterans Affairs and U.S. Department of Agriculture Rural Housing Service programs. Outstanding Ginnie Mae MBS has a 3.25% default rate as of Nov. 30, 2009. The percentage of FHA-insured single-family loans that are 90-days or more past due hit 8.94% in November.

The pace of sales at California new-home communities continued to fall in November, but the decline was small enough for the California Building Industry Association to say that the industry is "on the threshold" of stabilization. According to the monthly CBIA/Hanley Wood Market Intelligence report, sales in projects of 10 units or more in November were 4% below November 2008. Although activity was down, the relatively small movement is an improvement over most month-to-month changes in 2009. During November, 1,860 new homes and condominiums were sold in the subdivisions tracked by Costa Mesa-based HWMI, compared to 1,934 in the same month the year before. Sales of single-family homes were down 18%, while condo sales were 39% higher, thanks to strong sales at projects in the Los Angeles and San Diego areas. Compared with the same period last year, the median base price of homes sold was nearly unchanged, down just 0.3%. "We have more or less reached (a) threshold," said Jonathan Dienhart, director of published research at HWMI. "While that milestone of stabilization is encouraging, it is far from what could be termed a recovery."

Titanium Holdings Inc., a Fort Mill, S.C., firm that contacts troubled homeowners on behalf of mortgage servicers to discuss loan workouts, has started a unit for when such efforts fail. The unit, Excellen REO, helps Titanium clients unload repossessed properties. Its services include premarketing, valuations, marketing and sales negotiation, closing and funding and alternative sales methods. Excellen has "a nationwide network of real estate brokers and local eviction attorneys as well as property preservation companies," Titanium said. Excellen's president, Cary Sternberg, is the former senior vice president of the real estate owned department for American Home Mortgage Servicing, Coppell, Texas, which is owned by the private-equity firm Wilbur Ross & Co. LLC. In that position Mr. Sternberg managed more than 200 employees and 33,000 assets.

The market share of refinance applications has climbed back above the 70% level as long-term interest rates had their first decline in several weeks, the Mortgage Bankers Association's Weekly Mortgage Applications Survey found. For the week ending Jan. 8, 2010, the Market Composite Index, a measure of mortgage loan application volume, increased 14.3% on a seasonally adjusted basis and 66% on an unadjusted basis from one week earlier, which was a shortened week due to the New Year's holiday. The Refinance Index increased 21.8% from last week's holiday adjusted index while the seasonally adjusted Purchase Index increased 0.8% from one week earlier. The share of refinance activity, which had fallen under 70% during the last two weeks of 2009, rose to 71.5% for the survey period. The market share of adjustable-rate mortgage loan applications remained at 4% for the second consecutive week. The average contract interest rate for 30-year fixed-rate mortgages fell to 5.13% from 5.18%, with points decreasing to 1.17 from 1.28 (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 decreased by 17 basis points to 4.45% from 4.62%, while for one-year ARMs the average contract interest rate increased by 41 basis points to 6.83%.

Large banks increasingly are opening up the warehouse spigot for independent mortgage banking firms and it looks as though government assistance may not be needed, according to the Mortgage Bankers Association. "We are encouraged by the information we are receiving from our members that lines have opened up a little bit," said MBA chairman Robert Story at a press briefing. However, the trade group would like to see more liquidity for nonbanks in need of financing. One of the nation's largest warehouse providers is National City, which is controlled by PNC Financial Services. PNC has made little effort to sell the division and plans to close it by midyear unless a committed buyer steps forward. Warehouse lending began to dry up in the fall of 2008 when Lehman Brothers filed for bankruptcy and other Wall Street firms left the sector. Over the past year MBA and other industry groups have been urging the Treasury Department to provide some type of government support for warehouse lending but little has been accomplished. MBA believes the private sector (mostly banks) is finally coming back to the sector, albeit at reduced levels. MBA noted that mid-sized banks are returning to profitability, which could spur more entrants to the sector.

The expansion-minded MetLife Home Loans is eyeing a possible entry into both correspondent residential lending and warehouse financing, a company spokesman confirmed. In an interview with National Mortgage News, the spokesman said MetLife is exploring these sectors for 2010 but could not provide any details at press time. Over the past two months rumors have circulated that MLHL, a subsidiary of MetLife Bank, N.A., was not only entering correspondent and warehouse lending but had hired a manager to spearhead the effort. The spokesman said he could not confirm the hiring of anyone at this time. In mid-2008 MetLife bought the origination and servicing divisions of First Horizon National Corp. of Memphis. The sale was accomplished through an asset purchase that included 230 retail and wholesale offices. Today, MLHL ranks 11th nationwide in both residential lending and servicing, according to the Quarterly Data Report.

The House Financial Services Committee this year will hold hearings on not only restructuring the nation's financial system, but what to do with Fannie Mae and Freddie Mac which together guarantee half of all outstanding home loans in the U.S. Committee chairman Barney Frank (D-Mass.) noted that the GSEs currently operate as public utilities and he has no desire to see them returned to their former "hybrid" status as private companies with a public mission. Talking to reporters, he said he does not know, at this time, what form the two eventually will take. (Fannie and Freddie were taken over by the federal government in September 2008 and continue to draw billions in taxpayer aid to maintain a net worth above zero.) The chairman stressed that the housing finance system, as a whole, must be analyzed, including the Federal Home Loan Bank System, the Government National Mortgage Association and the Federal Housing Administration. In terms of specific legislation, the chairman wants to address mortgage servicing and the decision-making process among investors, trustees, and servicers in regard to modifying loans. He said it seems unclear at this time which entities have the decision-making power on loan mods. "That is something we want to solve," he said.

The HUD Inspector General has subpoenaed 15 Federal Housing Administration direct-endorsement lenders as part of an investigation into why these firms have the highest default and claim rates in the nation. "We are not making any accusations at this time." said Department of Housing and Urban Development IG Kenneth Donohue. "We have no evidence of wrongdoing, but we will aggressively pursue indicators of fraud." Despite the subpoenas, the targeted lenders will continue to originate FHA-insured mortgages. This investigation is "focusing on many of the worst performers in the FHA portfolio," said FHA commissioner David Stevens at a Washington press conference. The FHA chief said he supports the IG's effort to determine why these lenders have such a high claim rate on mortgages that are only 30 months old. "I will be interested to see what comes out of the audit work," said Mr. Stevens. The lenders issued subpoenas include: First Tennessee Bank N.A., Memphis; Alethes LLC, Lakeway, Texas; Security Atlantic Mortgage, Edison, N.J.; Pine State Mortgage of Georgia; Birmingham Bancorp Mortgage, West Bloomfield, Mich.; Alacrity Financial Services, Southlake, Texas; Assurity Financial Services, Englewood, Colo.; D and R Mortgage Corp. Farmington, Mich.; Webster Bank, Cheshire, Conn.; Mac-Clair Mortgage Corp., Flint, Mich.; Americare Investment Group, Inc., Arlington, Texas; 1st Advantage Mortgage, Lombard, Ill.; American Sterling Bank, Independence, Mo.; Sterling National Mortgage, Great Neck, N.Y.; and Dell Franklin Financial, Columbia, Md. These lenders have originated at least 1,000 FHA loans and their claim rates exceed their peers by 200%, HUD said. FHA streamlined refinancings or loans approved by automated underwriting systems are excluded from the claims rate.

Elmira Savings Bank FSB of New York says the record income it posted last year was aided, in large part, by its mortgage origination business. The thrift earned $4.5 million in 2009, compared to a profit of $3 million the year prior. Mortgage loan originations totaled $104 million last year, an increase of $40 million, or 63%, over the $64 million originated in 2008. Michael P. Hosey, president and chief executive, said "This level of mortgage originations and associated fee income, derived from secondary mortgage market sales, gives us the flexibility to accumulate a significant amount of short term funds that we will have available to invest in future periods when we expect interest rates to be higher."

While some U.S. subprime residential MBS prices are continuing to stabilize, 2004 and 2007 vintages are still showing notable declines, according to a Fitch Solutions credit default swap-based price index. On a month-to-month basis, prices for RMBS overall as of Jan. 1 had jumped just over 5% to 7.62 from 7.25 the previous month. "The 2005 vintage was the main driver of the positive trend, showing strong growth up 4.7% to 8.42," the company said. "The 2006 vintage also showed marginal improvement by rising to 2.81." However, the 2004 and 2007 vintages dropped 7% and 11%, respectively. "Higher quality borrowers' ability to refinance this summer resulted in higher prepayment rates, but left 2004 vintage pools on average with lower credit quality borrowers," said Fitch Solutions managing director Thomas Aubrey. He also noted the historical 90-day plus delinquencies in the 2007 vintage "jumped significantly," which he said suggests "default rates may begin increasing within the 2007 vintage."

Invesco Mortgage Capital Inc., Atlanta has priced its public offering of 7 million shares of common stock at $21.25 per share. The transaction will give the company gross proceeds of nearly $149 million. In addition, the underwriters have a 30-day option to purchase up to an additional 1 million shares to cover over-allotments. The offering is expected to close early next week. Invesco, a real estate investment trust that focuses on financing and managing residential and commercial mortgage-backed securities and mortgage loans, expects to use the proceeds to acquire residential and commercial MBS (and loans) on a leveraged basis, and to invest in a public-private investment fund managed by Invesco Advisers Inc. Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. are acting as joint book-running managers for the offering. Invesco's shares have been trading for about $22 each of late.

Even though PNC Financial Services has no plans to keep National City's warehouse lending division, investors are continuing to a show an interest in the group, according to executives close to the situation. According to one investment banker, there currently are three suitors for the warehouse division: two private equity groups and an off-shore bank. A PNC spokesman said the bank's plan concerning the warehouse division remains unchanged: "We plan to wind down that business." Asked whether PNC would consider a sale, he said, "We don't comment on mergers and acquisitions." He declined to provide a warehouse commitment number for National City whose warehouse operation is based in Kentucky. "Earnings come out next week," he said. The Pittsburgh bank bought the Cleveland-based NatCity a year ago.

Impac Mortgage Holdings, a once troubled alt-A lender that appears to have a new lease on life, is considering making a move into warehouse lending, a business it gave up on a few years ago. Company CEO Joe Tomkinson confirmed that warehouse lending is indeed on the firm's radar. "It's something we hope to get back into," he said in an interview with National Mortgage News. Two weeks ago Impac's stock began trading on the AMEX after an extended stay on the OTC "pink sheets" market. In the third quarter, the Irvine-based Impac turned a small profit. Mr. Tomkinson said Impac is waiting on seller/servicer approvals from Fannie Mae and Freddie Mac. "It's day to day on that," he said. The company already has FHA approvals, he noted. In the third quarter Impac earned $3 million, compared to a $20 million loss in 3Q 2008. Its chief asset is $5.76 billion worth of securitized mortgages, left over from its days as an alt-A lender/securitizer. It also has a $16 billion master servicing portfolio. A nonbank, the company last year gave up its status as a real estate investment trust.

The Mortgage Bankers Association believes residential originations will fall to just $1.28 trillion in 2010 -- a 33% decline from last year and the industry's worst year since 2000. In early December, the trade group had forecast loan production of $1.5 trillion but lowered its estimate Tuesday morning. (According to National Mortgage News, the industry funded $1.9 trillion in 2009.) The MBA now believes 30-year FRMs will average 5.8% this year and recent increases in rates have already "choked off" refinancings. Refis will fall to $166 billion in the first quarter compared to $363 billion in 4Q. However, home sales will see a steady improvement. "We do expect purchase originations in 2010 to be about 5% higher than in 2009," MBA chief economist Jay Brinkmann told reporters. A few months back veteran mortgage analyst David Olson of Access Research said some large lenders were bracing for just $1 trillion in production for 2010. Despite the poor outlook on originations, many mortgage lenders are continuing to earn strong profits (thanks to the wide yield curve). The profit picture also improved, in part, because of a lack of competition. In 2000 mortgage bankers funded just over $1 trillion in new loans.

Zacks Equity Research, Chicago, made Regency Centers its Bear of the Day for Jan. 8, 2010. It dropped its long-term recommendation for the real estate investment trust's common stock down to underperform "as we anticipate it to perform well below the broader market. The prolonged recession has led to increased tenant bankruptcies, which in turn have led to a decline in occupancy and an increase in vacancy rates. In addition, consumer discretionary spending continues to be under severe stress with a reduction in disposable income." On the positive side, Zacks noted that Regency is one of the largest owners of retail strip properties among REITS with its properties in high income, high-barrier markets that are tenanted by leading national and regional retailers. "If the company can tide over the storm, it can expect a reversal of fortunes in the future. For now, we have a six-month target price of $30 per share," Zacks said.

Macquarie Research has upgraded Radian Group Inc. - the nation's third largest residential mortgage insurer - to "outperform" from "neutral," saying it expects the company to return to profitability by the second half of 2010. Macquarie analyst Matt Howlett said he sees the Philadelphia-based Radian as not only a survivor "but a leader in an industry poised for a comeback in 2010." Mr. Howlett recently raised the entire mortgage insurance sector to "overweight" from "marketweight." According to the Quarterly Data Report, Radian had $153 billion in "policies-in-force" at the end September, ranking behind MGIC ($216 billion), and PMI ($163 billion). At least two new MI firms are in the process of forming. Radian's shares have been trading at $9 of late compared to a 52-week low of 95 cents and a high of $12.50.

Perrin & Associates has brokered a $245 million warehouse facility to a nonbank residential lender that is currently funding about $1 billion a month in new loans. Michele Perrin, who manages the company that bears her name, said she could not identify the warehouse provider or the client at this time. She noted that the loan is a "true funding facility" and not a gestation repo. "The loans do not have to be securitized," she said, adding that the mortgages originated, however, are being sold servicing released to an aggregator. All of the loans were funded through retail means. Perrin & Associates is based in Santa Ana, Calif. During her career in the industry, Ms. Perrin has worked in the warehouse lending division of Washington Mutual and other firms.

Developers sold some 2,350 new condominium apartments last year in the Greater Downtown Miami area, which is considered the epicenter of South Florida's housing crash. According to CondoVultures, a Bal Harbour-based consulting firm, 700 units were sold in the fourth quarter, a 27% decline from 995 closings in the third quarter. But that's still better than the 265 apartments sold in the first quarter and 465 units sold in the second quarter. "Buying activity really picked up velocity in the second half of the year once retail condo prices were slashed by lenders from $300 per square foot down to $200 per square foot, which is in many cases below the replacement cost of the finished product," said CondoVultures' Peter Zalewski. The lower prices triggered a flurry of activity among foreign nationals from countries with strong currencies, Mr. Zalewski reported. Developers also completed about a dozen bulk sales last year in the tri-county area of Miami-Dade, Broward and Palm Beach.

The inventory of unsold homes in the distressed Las Vegas metro market is at its lowest point in 18 months, according to the Rob Report, a monthly market overview published by luxury real estate broker Rob Jenson of RE/MAX Central. As 2009 drew to a close, there was a 6.1 months' supply of houses for sale in the Vegas-Henderson area. But there was just a 2.8 months' supply if homes under contract but not yet closed are excluded. A total of 10,651 single-family houses are in contingent or pending status, Mr. Jenson reports. Most of the houses on the market at $1 million or less are distressed sales - 10,633 short sales and 4,272 foreclosures out of a total of 18,343. But take-backs are outselling short sales three-to-one, the agent says. In December, 3,071 properties actually changed hands, a 5%, or 151-unit, increase from November. Of those sales, 78% were distressed, including 1,822 foreclosures and 583 short sales.

Approximately 38% of existing home sales in 2009 were distressed sales and 12% were short sales, according to the National Association of Realtors. Foreclosure sales accounted for two-out-of-three distressed sales and the rest were short sales, NAR spokesman Walter Maloney said. The NAR began tracking short sales in October 2008 and by February and March short sales peaked at 18% of sales. Lately, short sales have been averaging 12% to 13% of sales on a monthly basis. In a short sale, the lender or servicer allows the defaulted homeowner to sell the property to avoid a foreclosure. Fannie Mae and Freddie Mac completed 17,400 short sale transactions in the third quarter, up from 4,900 in the same period a year ago. Fannie alone completed 11,100 short sales in the third quarter, compared to 10,400 for all of 2008.