Originations

General Growth Properties, Chicago, has received Bankruptcy Court confirmation of the plans of reorganization for 194 debtors which own 85 regional shopping centers associated with approximately $10.25 billion of secured mortgage loans. The plans allow for the restructuring of the 87 secured mortgage loans and the payment in full of all undisputed claims of creditors. Key provisions of the plans include maturity date extensions resulting in an average loan duration of approximately 6.4 years from Jan. 1, 2010, with no loan maturing prior to January 2014, and continuation of interest on the loans at the current non-default rate. The weighted average contract interest rate for the loans covered by these plans is 5.33%. The all-in-interest rate after amortization of fees to be paid in connection with these plans is 5.51%. Among the properties involved are Ala Moana in Honolulu and St. Louis Galleria, plus 15 office properties and 3 community centers. Confirmation of the plans of reorganization for 26 additional debtors owning 10 properties associated with an additional $1.7 billion of secured mortgage loans has been adjourned pending satisfaction of various conditions. GCP and the associated debtors filed for Chapter 11 bankruptcy protection on April 16, 2009.

Total Mortgage Services LLC, Milford, Conn., is on track to surpass its $750 million total volume estimate for 2009 and, despite pessimism about 2010's origination environment, believes it could lend more than $1 billion next year. John Walsh, president of Total Mortgage Services, recently told Origination News that the company expects to be able to grow its volume further next year even though total originations are expected to decline because it is planning to soon add a wholesale channel and obtain a "full eagle" from the Federal Housing Administration. This is expected to expand on its growing core business of retail agency and jumbo originations, which alone have allowed the company to grow its volume considerably from 2008, when its total production was $450 million and the market was particularly challenging.

If covered bonds ever become a reality in the U.S., it would be a $21.5 trillion opportunity for financial institutions with about half of that tied to residential loans, according to analyst Bert Ely. In testimony before Congress, Mr. Ely cautioned that the $21.5 trillion figure is a number that represents the market's potential - not the reality. "While covered bonds will not come close to providing 100%" of the funding for all different asset types "even a 10% share would be enormous," he said. According to testimony before the House Financial Services Committee, the covered bond market has many hurdles to clear including the establishment of a regulator to oversee the business and how to treat a pool of covered assets should the issuer go out of business. A covered bond is bank issued debt that (unlike existing U.S. MBS) is not sold into a legal "trust." This allows investors to look to the issuing bank for repayment if something goes wrong with the credit quality of the underlying loans. The Obama Administration is expected to review the use of covered bonds in crafting its plans to revamp Fannie Mae and Freddie Mac.

Federal regulators are giving banks a one-year transition period to deal with the risk-based capital implications of moving certain mortgage securitizations onto their balance sheets due to recent accounting rules changes that go into effect Jan. 1. The Federal Deposit Insurance Corp. and the other regulators realize that affected banks and thrifts are going to see their assets balloon as they consolidate private-label MBS and commercial securities onto their books. A final rule adopted by the FDIC board of directors allows banks to exclude the consolidated assets from risk-based capital calculations during the first two quarters of 2010. Over the third and fourth quarters, banks only have to count 50% of the consolidated assets for RBC purposes. Banks can adopt these transition options voluntarily starting Jan. 1. FDIC-insured institutions also will see an increase in their allowance for loan losses due to the implementation of Financial Accounting Standard 166 and FAS 167. Regulators are relaxing restrictions on including loan loss allowances in Tier 2 capital for two quarters. FDIC chairman Sheila Bair said banks are already under capital pressure and the transition period is appropriate. "It is temporary and by 2011 banks will need to be fully compliant," Ms. Bair said at an FDIC board meeting. She also noted the transition relief does not apply to leverage capital ratios. "We have always followed GAAP accounting for the leverage ratio so there will be no transition there," she said.

The Department of Housing and Urban Development has issued a proposed rule that sets minimum standards for state licensing of loan officers and mortgage brokers. Congress directed HUD to set minimum licensing requirements for states under the Secure and Fair Enforcement Mortgage Licensing Act of 2008. If HUD determines a state does not meet the minimum standards, the department is charged with administering a licensing system for the state. "By introducing nationwide standards of uniform licensing for loan originators, the SAFE Act is taking an important step in returning integrity and accountability to the residential mortgage loan market," said HUD assistant secretary David Stevens. The public comment period on the proposed SAFE rule ends in 60 days.

Even though the warehouse lending platform of National City is among the largest in the mortgage space - and continues to be profitable - PNC Financial Services plans to close it by mid-year 2010, according to warehouse lending officials. A spokesman for PNC confirmed the closing but declined to provide details. Commercial banks and other investors interested in the business have contacted PNC about buying the division but those talks have gone nowhere. "It's really a shame," said one warehouse advisor, requesting his name not be used. "They still have about $1.5 billion in commitments." This official noted that nonbank residential originators continue to fear that none of the remaining players in warehouse lending will fill the void once the National City unit ceases to exist. (For the full story see this week's issue of National Mortgage News.)

As rates increased for the second straight week, the share of applications from consumers looking to refinance their mortgages rose to the highest level since the end of April, said the Mortgage Bankers Association in its Weekly Mortgage Applications Survey for the week ending Dec. 11. The Market Composite Index, a measure of mortgage loan application volume, increased 0.3% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 0.3% compared with the previous week. The Refinance Index increased 0.9% from the previous week and the seasonally adjusted Purchase Index fell 0.1% from one week earlier. The share of refinance activity increased to 75.2% of total applications, up from 74.4% the previous week. This is the largest share of refinance applications since the week of April 24, 2009. The adjustable-rate mortgage share of activity decreased to 4.1% from 4.7%. This is the lowest share of ARM applications since mid-June. The average contract interest rate for 30-year fixed-rate mortgages increased from 4.88% to 4.92%, with points decreasing to 1.08 from 1.17 (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 for the second consecutive week was 4.33%. For one-year adjustable rate loans, rates decreased by 3 BPs to 6.52%. The MBA stopped disclosing index values with the July 31 data release. The MBA can be found online at http://www.mortgagebankers.org.

Construction of new single-family homes rose 2.1% from October to November at a seasonally adjusted annual rate of 482,000, a sign that housing construction might finally be on firm footing. When compared to November 2008 the gain is even more impressive: 5.5%. According to figures released Wednesday morning by the U.S. Census Bureau and Department of Housing and Urban Development, all housing starts (single- and multifamily) rose by 8.9% in November from October to 574,000 units. But when compared with November 2008 all starts fell 12.4%. In November multifamily construction was the laggard: just 83,000 units started compared with 180,000 in the same month a year ago. Applications for new building permits were also up, rising 6% to an annual rate of 584,000 units, a stronger showing than economists predicted. "Stabilization in home construction appears to be on solid footing, with single-family housing starts at levels well above the low set in March of this year," said Freddie Mac's chief economist Frank Nothaft. "The bottom in home construction has coincided with increasing home sales throughout the past nine months, as homebuyers are now attracted by the combination of lower home prices, low mortgage rates and the perception that the free fall in the housing market is behind us."

The American Securitization Forum has released a new set of model representations and warranties aimed at better aligning incentives of mortgage originators with those of investors as part of a larger, ongoing effort to get the new-issue securitized market going again. The new model includes provisions not included in existing market 'reps and warrants' such as making origination parties responsible for the coverage of fraud and enforcing buybacks of 100% of the value of "defective" mortgages. The inclusion of fraud coverage "is probably one of the most significant examples" of differences between the range of reps and warrants currently used in the market today and what the model suggests, Tom Deutsch, deputy director of the American Securitization Forum, told NMN. Mr. Deutsch said the model provides a "baseline set" of recommended reps and warrants that originators and investors may wish to vary from or even reduce if it is agreed, for example, that an originator has strong fraud controls in place. He also noted that the forum had "very detailed involvement from all the major originators" and "it was a tremendous undertaking to get consensus." The model also covers the qualifications and independence of the person performing a property appraisal and requires originators to use "reasonable" processes to authenticate documentation and verify income for loans with less than full documentation. The model is part of the ASF's "Project on Residential Securitization Transparency and Reporting" also known as Project RESTART. The American Securitization Forum sets recommended standards for market participants based on discussions with its members.

Genworth Financial, whose mortgage insurance division has been bloodied by claims payments tied to record delinquencies, said the business will not turn an operating profit until mid-2011. Company CEO Michael Frazier said at the firm's annual investor day meeting in New York that the business will have to get through more delinquencies. He said losses will be mitigated by steps Genworth has taken to head off claims. According to figures compiled by NMN, Genworth operates the nation's fourth largest MI in terms of policies-in-force: $133 billion as of Sept. 30. Even though Genworth's MI unit continues to lose money it recently loosened some of its underwriting standards. Mr. Frazier said he expects U.S. mortgage delinquencies to peak in the coming year.

The Federal Deposit Insurance Corp. has issued a proposed rule on securitization standards that include a 5% risk retention requirement on newly issued MBS by depositories. The new standards are part of the agency's revision of "safe harbor" policies with regard to receivership assets. The current safe harbor assures MBS investors that FDIC will not seize the underlying mortgages of MBS sold by a bank that later fails. The regulator is making the proposal because of recent changes in accounting rules and wants to set a securitization requirement as a way to revive the private-label MBS market. FDIC wants to move quickly on the new policies. Chairman Sheila Bair says securitization standards are compatible with current House and Senate legislative efforts. However, at an FDIC board meeting Tuesday, Comptroller of the Currency John Dugan raised objections and is forcing FDIC to move more deliberately. "A rigid minimum retention requirement risks closing down securitization markets," he said.

The American Securitization Forum has released a new set of model representations and warranties aimed at better aligning incentives of mortgage originators with those of investors as part of a larger, ongoing effort to get the new-issue securitized market going again. The new model includes provisions not included in existing market reps and warrants such as making origination parties responsible for the coverage of fraud and enforcing buybacks of 100% of the value of "defective" mortgages. The model also covers the qualifications and independence of the person performing a property appraisal and requires originators to use "reasonable" processes to authenticate documentation and verify income for loans with less than full documentation. The model is part of the ASF's "Project on Residential Securitization Transparency and Reporting" also known as Project RESTART. The American Securitization Forum sets recommended standards for market participants based on discussions with its members.

Amherst Securities Group is warning MBS investors that not all triple-A rated restructured REMICs are the same and some could run into problems including possible downgrades under "modest stress" conditions. The investment banking boutique notes that Wall Street has restructured $43 billion in downgraded REMICs over the past 11 months — five times the volume it did last year. Amherst says the credit rating agencies are requiring different subordination levels for triple-A rated tranches. "As a result of the ratings patchwork, some of the ratings are too aggressive to us while others are too conservative," the company said.

Origination vendor Ellie Mae has acquired compliance provider Mavent for an undisclosed sum, National Mortgage News has learned. "In terms of what's going on in the industry, it was an opportunity that came along and fits strategically with what we think our clients need," Jonathan Corr, chief strategy officer at Ellie Mae told NMN. Employees from both companies will be merged. Mavent president Lou Pizante initially will stay to oversee the transition, but his future with the company is not decided, said Mr. Corr. "We're integrating the two organizations. Lou will work through the transition." Mavent analyzes electronic mortgage loan data to determine whether a mortgage transaction complies with over 330 federal and state consumer protection laws related to mortgage lending.

The Federal Housing Administration insured $29.6 billion in single-family loans in October, a 6.7% gain from October 2008, according to new government figures. FHA insured $328 billion in loans in fiscal year 2009 (which ended Sept. 30) with production averaging $27.3 billion a month. The FHA monthly report shows the government's mortgage insurance agency endorsed nearly 167,100 loans in October. Refinancings comprised 35% of endorsements and 48% of the loans went to first-time homebuyers. Meanwhile, FHA insured $1.9 billion in condominium loans and $2.5 billion in reverse mortgages (Home Equity Conversion Mortgages). As of Oct. 30, FHA's insured single-family mortgage portfolio totaled $716.4 billion with 8.7% of the loans 90 days or more past due. FHA servicers completed 8,100 loan modifications in October, up 40% from a year ago, and 971 short sales, up 130% from a year ago.

New York Community Bank has yet to make a final decision on what it will do with the wholesale lending division of AmTrust Bank, until recently one of the largest table funders in the nation. NYCB chief executive and president Joseph Ficalora said the company is working closely with the FDIC regarding AmTrust's assets. He said no immediate decisions will be made. "The values present in those lines of business are real," Mr. Ficalora said. Ten days ago NYCB bought the Cleveland-based thrift after the government seized the insolvent lender. According to the Quarterly Data Report, AmTrust ranked eighth among wholesalers in the third quarter, table funding $2.87 billion through loan brokers. The prior quarter it ranked third nationwide.

Three out of every 10 loan originators who have taken the national mortgage licensing test required under the SAFE Act have failed what is characterized as an "entry level" exam. The pass rate is better on the state-specific portion of the exam, but not by much. More than one in four applicants who have taken the tests so far have failed to achieve a passing grade, according to statistics released by the Conference of State Bank Regulators. The CSBS figures do not break out pass-fail rates by occupation. But Roy DeLoach of the National Association of Mortgage Brokers is certain his members have better scores than loan officers working directly for mortgage bankers or state-chartered financial institutions. (Although representatives of those groups may disagree.) "It's not brokers (who are failing), I guarantee you that," NAMB's executive vice president told National Mortgage News. "If you parse that out, I'm betting that the pass rate is tremendously higher" among brokers. Bill Matthews, president of the State Regulatory Registry, the CSBS subsidiary which owns and operates the National Mortgage Licensing System, said its "hard to tell" who is passing the entry-level exams at this point because testing only began on July 30. During the four-month span between July 30 and Nov. 30, according to the CSBS tally, 10,421 mortgage loan originators took the national test but just 7,219 passed, a failure rate of 31%. Of the 6,097 originators who took the tests specific to the state or states where they want to be licensed, 4,461 earned the 75% score needed to pass, a failure rate of 27%. The figures include first-time test takers as well as those licensing candidates who took the exams again. When testing began on July 30, 11 unique state tests were available. In October, seven more state tests were released, bringing the total to 18 as on Nov. 30.

Pulte Homes Inc., Bloomfield Hills, Mich., is selling its Commerce Title retail title insurance agency platform to Real Estate Disposition LLC, a real estate services company headquartered in Irvine, Calif. The Commerce Title brand, retail branch network and certain additional support assets are included in the sale. No purchase price was disclosed. Subject to regulatory and licensing approvals, the sale is expected to close in the first quarter of 2010. Commerce Title will remain headquartered in Dallas and approximately 130 retail employees will transition with the sale. Pulte is keeping a portion of the Commerce Title operations to support its homebuilder business. This will also operate out of Dallas. "This is a good transaction for both companies as it allows Pulte to focus on its builder title operations while providing new growth opportunities for the Commerce Title retail team," said Debra Still, who oversees Pulte's Financial Services Operations. Pulte acquired Commerce when the homebuilder purchased rival Centex Corp.

The First American Corp., Santa Ana, Calif., has filed a Form 10 registration statement with the Securities and Exchange Commission. The filing is an important step toward the completion of the company's separation of its financial services businesses from its information solutions businesses. The transaction is expected to close on April 1, 2010. First American shareholders will receive 100% of the common stock of the newly formed First American Financial Corp., the new parent of the financial services business.

The commercial origination and servicing business of bankrupt Capmark Financial Group Inc. has been acquired by Berkadia Commercial Mortgage LLC, a joint venture of Berkshire Hathaway Inc. and Leucadia National Corp. The sale includes a commercial servicing portfolio of more than $240 billion. Michael I. Lipson, head of global services and loan originations, and a member Capmark's executive team since 1996, has been named president of Berkadia and will continue to lead the business. Berkadia's board of directors will include two representatives each from Berkshire Hathaway and Leucadia National. Berkadia is in the process of hiring more than 1,000 of Capmark's approximately 1,500 current employees. Berkshire is headed by billionaire investor Warren Buffett. Capmark is based in Horsham, Pa. Three years ago Capmark (then known as GMAC Commercial Mortgage) was sold to an investor group led by Goldman Sachs & Co.