Originations

As mortgage brokers feel the pinch, Mortgage Options of America Inc., a full service mortgage broker, has managed to save more than $20,000 in operating costs while reducing its loan fees more than 15% by automating. Specializing in first and second mortgages, debt consolidation and refinancing, MOA is licensed in Florida, Maine, Massachusetts and New Hampshire. Because the majority of its employees work on the road, the company needed total transparency, which it was not receiving from its previous system. This spurred the company's decision to switch to Xetus' XetusOne Loan Origination System. Prior to utilizing XetusOne, MOA had costly server needs, a T1 fiber optic line, and had to devote a lot of time backing up files and updating software. MOA credits a lot of its success to its strategic plan to automate.

More smaller banks and credit unions are adopting online, integrated point-of-sale technology to grow in the current down market. For example, Louisiana Federal Credit Union of LaPlace, La., decided that offering an online mortgage application would not only enable the organization's two-person mortgage team to increase their application volume, but would also help LFCU become a bigger player in the local mortgage market. As a result from 2004 to 2009, LFCU has used Mortgagebot's PowerSite technology to triple its annual mortgage volume without having to add staff. Similarly, Illini Bank, a $248-million-asset commercial bank with 12 locations near Springfield, Ill., had actually exited the mortgage business until realizing that a lack of mortgage products was costing them business to competitors. The bank implemented PowerSite Consumer as its direct-to-consumer mortgage website - enabling self-serve borrowers to quickly apply for mortgages online. Illini Bank has benefited significantly from its online solution, citing an average annual increase in application volume of 71% over the last three years.

Zillow Mortgage Marketplace is launching its first distribution deal with online real estate brokerage Redfin. Visitors to Redfin's website can now fill out a mini loan request form on the "Financing Your Home" page of the site. This brings potential borrowers to Zillow Mortgage Marketplace, where they can complete the Zillow Loan Request Form and instantly get custom quotes - all anonymously - from Zillow's network of thousands of lenders. Once borrowers submit a loan request, they receive, on average, 22 custom quotes from lenders nationwide. After comparing quotes, borrowers decide which lenders to contact, responding lenders don't call the borrower.

The Employees' Retirement System of the Government of the Virgin Islands has reportedly sued Morgan Stanley, alleging investors in a subprime mortgage-related collateralized debt obligation were defrauded. According to combined news reports from Reuters and Bloomberg, the suit involves a $1.2 billion CDO called Libertas that originally carried the highest investment grade ratings possible. A Morgan Stanley spokeswoman declined to comment. Efforts to reach the Employees' Retirement System of the Government of the Virgin Islands were unsuccessful.

Fitch Ratings has downgraded 293 classes and affirmed 246 classes in 82 U.S. scratch and dent residential mortgage-backed securities transactions. "Many of these transactions contain collateral that was seasoned and/or seriously delinquent at the time of the transaction's issuance," Fitch said of the transactions, which have issuance dates ranging from 1997 to 2007. The deals were comprised at the time of issuance of some combination of performing, reperforming, subperforming, or nonperforming collateral.

GMAC is in line to get an additional $3.5 billion in assistance from the Treasury Department to cover mortgage losses from its troubled Residential Capital unit, according to published reports. Losses due to ResCap's mortgage operations totaled $3.9 billion for the first three quarters of 2009, including a $747 million loss in the third quarter. Treasury is expected to announce the $3.5 billion capital infusion soon, according to the Wall Street Journal, and GMAC is expected to announce a large writedown of its mortgage assets, as well. "GMAC has been conducting a strategic review of its business and evaluating options to address the challenges at ResCap and the mortgage operations," a GMAC spokeswoman said Wednesday. "We have no specific actions to announce at this time," she added. Treasury officials could not be reached for comment.

A New Caanan, Conn.-based company plans to offer "cash back" rewards on credit and debit card purchases that card holders can choose to put into a Federal Deposit Insurance Corp. insured savings account for home purchases and repairs. The HomeCard Co. Inc. said it will make the card available to consumers in early 2010. The "cash back" amount will range from 1% to 25% of a purchase. The card also will offer holders savings on mortgages and insurance, as well as on other real estate and homeowner services. Jack Loop, president and founder of the company, said the card will be available as a debit card, a secured credit card or a standard credit card dependant on consumers' respective preferences and credit scores. He said the card's rates are set to be lower than those banks are charging.

OneWest Bank FSB, Pasadena, Calif. has put $10 million into the creation of a nonprofit foundation aimed at offering affordable housing and other types of support to the communities in which it operates its branch network. The bank has 72 retail branches in Southern California and total assets of $24 billion. Its assets include a loan portfolio, a securities portfolio, a servicing platform with mortgage servicing rights representing over 550,000 borrowers, and Financial Freedom, a reverse mortgage platform.

Tree.com Inc. has entered into a limited extension of its $50 million mortgage warehouse line at its LendingTree Loans operation in Irvine, Calif. One of its warehouse line providers, PNC Bank, had previously said it was exiting the warehouse business and existing lines would expire at the end of their current terms. The Tree.com facility had an original term running through Dec. 29, 2009 and is now available for funding newly originated agency and FHA loans through March 31, 2010. Matt Packey, Tree.com's CFO, stated, "This brief extension, coupled with our two other warehouse lines, enables us to maintain flexibility as we evaluate our longer-term needs and options with respect to our warehouse capacity requirements."

The volume of requests for conforming loans submitted online to Zillow's Mortgage Marketplace last week dropped 26% from the prior week. Last week 63% of requests were for purchase loans, 35% were for refinances and 2% were for home equity loans, according to Zillow. The week previous to last Zillow said 55% of requests were for purchase loans, 43% of requests were for refis and 2% were for home equity product.

House prices were unchanged in October after a 0.4% increase in September, according to the Standard & Poor's/Case-Shiller 20-city house price index. Until October, prices had been on the rise for four consecutive months. "Coming after a series of solid gains, these data are likely to spark worries that home prices about to take a second dip," said David Blitzer, chairman of S&P's index committee. Overall, the 20-city HPI is down 7.3% from a year ago and 29% from the peak in home prices in the second quarter of 2006. IHS Global Insight economist Patrick Newport expects prices to decline by another 5% to 10% due to downward pressure by sales of distressed properties. "The foreclosure outlook is not a good one," Mr. Newport said. Foreclosure and delinquency rates hit a record in the third quarter and they are "likely to rise, perhaps sharply," he said.

Fitch Ratings has affirmed 41 and downgraded 171 classes within 20 Bayview Commercial Asset Trust small balance commercial asset-backed certificate transactions in the course of its ongoing reviews. The underlying collateral pool for these transactions consists of fixed- and adjustable-rate mortgage loans secured by senior liens on commercial, multifamily and mixed-use properties and unimproved land. The average current loan size for each transaction is less than $400,000.

A new $1.2 billion statewide mortgage program has been created to help more than 11,000 homebuyers with affordable loans that will also help boost Pennsylvania's economy. The initiative is a partnership between the Pennsylvania Housing Finance Agency, the U.S. Treasury, Fannie Mae and Freddie Mac. Key elements of the program include making 11,000 long-term (30-year), fixed rate, low-interest mortgage loans; expanding the Keystone First program with an additional $10 million to help buyers who are eligible for federal homebuyer tax credits to borrow up to $6,000 interest-free for closing costs and down payments; and providing $50 million for approximately 450 new-home construction loans to encourage new building activity and create jobs. The new program targets $50 million to encourage new home construction because funds for building new homes have been scarce in these tight credit markets. It will assist in moving existing inventory for homebuilders, and create jobs for architects, builders, laborers and others in the construction industry.

PMI Mortgage Insurance Co., Walnut Creek, Calif., sold its entire investment in RAM Holdings Ltd. (RAM Holdings Ltd. is the holding company for RAM Reinsurance Co. Ltd.). Terms and conditions of the sale were not disclosed. The company had impaired its investment in RAM Holdings Ltd. in 2008 and reduced the carrying value of the investment to zero. The completion of this sale continues the company's focus on its core U.S. mortgage insurance operations and the proceeds from the sale will add to PMI Mortgage Insurance Co.'s liquidity position.

Tower Bancorp Inc., Harrisburg, Pa., has agreed to buy First Chester County Corp., West Chester, Pa., including its American Home Bank unit, in an all-stock deal valued at $65 million. As part of the agreement, Tower's subsidiary bank, Graystone Tower Bank, has agreed to increase its lending facility with First Chester to up to $26 million as well as to purchase up to $100 million of residential mortgage and commercial loans from First National Bank of Chester County. These moves are aimed at allowing the bank to satisfy the regulatory capital requirements of the Office of the Comptroller of the Currency. Upon the closing Tower "will be one of central and southeastern Pennsylvania's largest independent community banks," said Tower chairman and chief executive officer Andrew S. Samuel. Under the terms of the agreement, each First Chester shareholder will receive 0.453 shares of Tower common stock for each First Chester share. The market value as of Dec. 24 of $10.22 per First Chester share represents 90% of the company's tangible book value. The exchange ratio is subject to upward or downward adjustment if loan delinquencies at First Chester increase or decrease beyond specified amounts. Management anticipates that there will be no branch closures, but Tower expects to achieve a 15% cost savings, or approximately $12 million, through the reduction of administrative and operational redundancies. The acquisition will immediately be significantly accretive to earnings per share. It is expected to close in the second quarter of 2010 if it obtains necessary shareholder and regulatory approvals. First Chester's American Home Bank originates through retail and wholesale channels, as well as through joint venture mortgage partnerships with builders and others.

The Federal Reserve Board should permit compensation of loan officers and mortgage brokers based on a percentage of the loan amount with a minimum and maximum limit, according to the Consumer Mortgage Coalition. "It should also be permissible to use percentages that decrease as the loan amount increases," CMC says in a comment letter on a proposed Truth in Lending Act rule. Under the Fed's TILA proposal, LO and broker compensation based on increases in the interest rate or changes to other loan terms would be prohibited. The Fed invited comment on allowing compensation based on the loan amount. The industry trade group recommends that lenders should be permitted to reduce compensation for loans with high loan-to-value ratios. This approach would address the Fed's concerns about originators financing closing costs and packing other fees into the loan amount. CMC also wants the Fed to allow compensation based on the overall loan volume -- in terms of number of loans and loan amount. "We request clarification that compensation may be based upon pull-through rates, file quality, customer satisfaction and communication quality. Lenders need these common sense management tools," CMC says.

Mortgage brokers are urging the Federal Reserve Board to withdraw a proposed rule that would regulate broker compensation and delay any action until Congress finalizes pending consumer protection legislation. The National Association of Mortgage Brokers said the Fed has not met the standard for determining that the payment of yield-spread premiums to brokers is an "unfair and deceptive" practice. "Such a determination should be made, if it is to be made, by Congress, not the board," NAMB says in a comment letter on the Fed's Truth in Lending Act proposal. Under the proposed TILA rule, compensation based on increases in the interest rate or changes to other loan terms would be prohibited. The Fed suggests that loan officers and mortgage brokers could be compensated based on a set percentage of the loan amount. As an alternative, NAMB suggests a mortgage brokerage business could receive secondary market fees and compensate the brokerage's LOs based on a percentage of the loan amount. "NAMB strongly urges the board to explore this proposed alternative ... prior to finalizing any rule," the trade group says.

PMI Mortgage Insurance Co., Walnut Creek, Calif., sold its entire investment in RAM Holdings Ltd. (RAM Holdings Ltd. is the holding company for RAM Reinsurance Co. Ltd.) Terms and conditions of the sale were not disclosed. The company had impaired its investment in RAM Holdings Ltd. in 2008 and reduced the carrying value of the investment to zero. The completion of this sale continues the company's focus on its core U.S. mortgage insurance operations and the proceeds from the sale will add to PMI Mortgage Insurance Co.'s liquidity position.

A bipartisan effort by members of the Senate Banking Committee to draft a financial regulatory reform bill is making progress, according to committee leaders. Committee members have been in talks for several weeks to reach a consensus on producing a bill, according to committee chairman Christopher Dodd, D-Conn., and ranking Republican Richard Shelby of Alabama. The two said the talks have been productive and they hope to resolve remaining issues by January. The House of Representatives passed a reform bill that deals with the resolution of large financial institutions, strengthening consumer protection, restructuring the supervision of depository institutions and improving oversight of derivatives. Senate Banking Committee members are trying to address the same issues but they are expected to come up with a very different bill. In mid-November, Sen. Dodd released a "discussion draft" of his regulatory reform bill. It garnered weak support among his fellow Democrats and the Republicans blasted it.

By restructuring certain modified pool mortgage insurance policies, PMI Mortgage Insurance Co., Walnut Creek, Calif., has seen an aggregated statutory capital benefit of $51 million. As part of this restructuring, PMI paid a counterparty aggregate accelerated discounted claim payments of approximately $264 million. The capital benefit is because the deal had a positive impact on PMI's loss reserves for the fourth quarter of 2009.