Originations

U.S. home prices stabilized (relatively) in 2009 after losing trillions of dollars in value during 2008, according to real estate website Zillow.com. Homes lost $489 billion in value during the first 11 months of 2009, significantly less than the $3.6 trillion lost during 2008, according to Zillow's real estate market reports. Forty-eight of the 154 markets tracked by Zillow showed gains in home values during 2009. The Boston metropolitan statistical area showed the largest gain of $23.3 billion, while the Providence, Rhode Island, MSA was second, with a gain of $12.4 billion. The stabilization in home values reduced rates of negative equity in the third quarter of the year. Twenty-one percent of single-family homeowners had mortgages under water compared with 23% in the second quarter. Most housing markets had a good summer, spurred largely by the government's tax credits for homebuyers, combined with very low mortgage rates, said Stan Humphries, Zillow chief economist. "Unfortunately, we believe that demand will come under downward pressure as mortgage rates creep back up after the first quarter and that housing supply will experience upward pressure as the volume of foreclosures continues to remain high," Mr. Humphries said. "Both these factors will challenge the recent stabilization of home prices." Zillow.com said the biggest home value losses, in terms of total dollars lost in 2009, were in the large MSAs of Los Angeles, down $60.8 billion; Chicago, down $49.6 billion; and New York, down $49 billion.

The fourth quarter home price forecast from Local Market Monitor says the largest market with the best expected performance in home price is Baton Rouge, La. These top markets, identified as those with populations greater than 600,000, include cities in Texas, where good home price increases are likely once the economy improves, and others, notably in New York, where poor economic prospects make future price gains less likely. The other areas on its top markets list are: Columbia, S.C.; Fort Worth-Arlington, Tex.; Houston-Sugar Land-Baytown, Tex.; Little Rock-North Little Rock-Conway, Ark.; New Orleans-Metairie-Kenner, La.; Pittsburgh; Rochester, N.Y.; San Antonio and Santa Ana-Anaheim-Irvine, Calif. "Even our 'top' markets don't yet show price increases; rather, they're markets where prices will be steady," said Ingo Winzer, president and founder of Local Market Monitor in Cary, N.C. "Significantly, we now see Santa Ana-Anaheim among those markets, with Los Angeles not very far behind, as demand for housing from population growth absorbs excess inventory in Southern California." The largest markets with the worst expected performance in price are Bakersfield, Calif.; Bradenton-Sarasota-Venice, Fla.; Fort Lauderdale-Pompano Beach-Deerfield Beach, Fla.; Fresno, Calif., Las Vegas-Paradise, Nev.; Miami-Miami Beach-Kendall, Fla.; Orlando-Kissimmee, Fla.; Phoenix-Mesa-Scottsdale, Ariz.; Portland-Vancouver-Beaverton, Oregon-Wash.; San Jose-Sunnyvale-Santa Clara, Calif., Stockton, Calif.; and West Palm Beach-Boca Raton-Boynton Beach, Fla. Further large decreases will mainly be confined to markets in Arizona, California, Florida and Nevada, where massive overbuilding took place, the company said. Overall, national home prices in the 3Q2009 were down 5% from a year ago. The company expects to see a further 5% decrease in home prices during the next 12 months, with double-digit decreases in some markets.

1st Commonwealth Bank of Virginia has become the first to offer the Harmony Loan, a mortgage with a rate that adjusts downward at certain times if the borrower requests it, and has a patented ongoing compensation structure. The bank said it is offering the product as a 3/1, 5/1 or 7/1 adjustable-rate mortgage and will generally allow borrowers to lower their rate as often as every 120 days with a phone call so long as they have paid on time in the past and they meet certain rate reset parameters. Craig Chapman, managing director, mortgage services for 1st Commonwealth Bank of Virginia said it sees the loan as a means to strengthen relationships with both borrowers and loan officers. The loan was designed to mimic a competitive refinance without having to go through a full refi, according to Shane Chalke, president of Mortgage Harmony, Tysons Corner, Va. It aims to allow borrowers to reset their rates based on those rates' updated market values during the reset period.

Freddie Mac's Conventional Mortgage Home Price Index Purchase-Only Series registered a 0.9% gain for the third quarter from the second quarter, marking the second consecutive quarterly increase. Most importantly, Freddie reports that the increases of the past two quarters erased about two-fifths of the declines registered during the final quarter of 2008 and the first quarter of 2009. Year over year home sales prices in the third quarter were down 3.9%. Sales volume increased 15% between the first and the third quarter of this year, said Freddie Mac chief economist Frank Nothaft. He cited the 50-year low interest rates, higher affordability, tax incentives and efforts to stem foreclosures through loan modifications. "Moreover, the price gains were broad-based with increases in seven of nine regions during the third quarter, and all nine regions up from their first quarter values," he said. However, the CMHPI indicates that in most markets prices are still down, compared to their peak levels. For example, Mr. Nothaft said, according to CMHPI measurements home values in the New England, East North Central and Pacific areas are at 2004 levels, on average, and at 2005 levels in the South Atlantic, West North Central, and Mountain states. In the West South Central area values have tied their third quarter 2008 peak, while in the Middle Atlantic values have reached their 2006 levels and in the East South Central states are at their 2007 levels.

The effects of a rise in long-term mortgage rates that began with what was seen as a relatively optimistic employment report Dec. 4 persisted on average through the latest week, according to Freddie Mac's Primary Mortgage Market Survey. Like the Mortgage Bankers Association's report for the week ending Dec. 4 that was released Wednesday, the Freddie Mac report for the week ending Dec. 10 showed all the average weekly mortgage rates it tracked rising with the exception of the one-year adjustable-rate mortgage rate, which dropped slightly by a basis point. The move ends a trend toward record-low rates in the 30-year loans that dominate the market but Freddie Mac vice president and chief economist Frank Nothaft notes that rates for those loans are still relatively low, about 0.7 percentage points below those at the same time last year. This represents a savings of $81 per month on a $200,000 mortgage. During the week ended Dec. 10, the average rate for a 30-year fixed rate mortgage was 4.81% compared to 4.71% the previous week and 5.47% a year ago. The average 15-year FRM rate was 4.32%, compared to 4.27% the previous week and 5.20% a year ago. The average five-year Treasury-indexed hybrid adjustable-rate mortgage rate was 4.26%, compared to 4.19% the previous week and 5.82% a year ago. The average one-year Treasury ARM rate was 4.24% compared to 4.25% a week ago and 5.09% a year ago. Average points were as follows: 0.7 for 30-year FRMs and one-year Treasury ARMs, 0.6 for 15-year FRMs and 0.5 for five-year Treasury hybrids.

The National Association of Mortgage Brokers is encouraging its members to comment to the Federal Reserve before its Dec. 24 deadline on a rule that will ban yield spread premium payments. A letter sent to loan brokers asks them to "express your concern" on a YSP ban by telling the Fed "how this proposal will negatively impact your business and customers." The trade group says the Fed has acknowledged that in some cases YSPs can actually help borrowers "but believes that this benefit may be outweighed by costs incurred by consumers who obtain a higher interest rate or negative loan terms" including prepayment penalties. According to new figures compiled by National Mortgage News and the Quarterly Data Report, loan brokers in the third quarter, accounted for just 14.6% of originations - half of what they did two years ago.

The Department of Housing and Urban Development plans to lift the 1% cap on origination fees for Federal Housing Administration-insured loans, according to sources close to the agency. The change is expected to be unveiled within the next few weeks. HUD argues that competition will prevent fees from rising too much once a regulation overhauling up-front disclosures takes effect Jan 1. (FHA is the fastest growing niche in the market.) If borrowers think they are being overcharged, the thinking goes, they can shop around for a better price and potentially take their business elsewhere. "HUD feels the marketplace will drive origination fees down once the 1% cap is removed," said mortgage attorney Phillip Schulman, a partner in the K&L Gates LLP law firm. HUD has been hinting for a while that it might remove the cap when it completed a new Real Estate Settlement Procedures Act rule. However, the agency is expected to reserve the right to reinstate or add limits on fees charged to the borrower.

House and Senate appropriators are increasing the Department of Housing and Urban Development's resources to combat mortgage fraud, update its technology, while increasing the Federal Housing Administration's lending capacity to $400 billion. The conference report on the HUD appropriations bill for fiscal year 2010 includes $20 million to combat mortgage fraud, and $80 million to modernize its legacy computer systems. The appropriators also provide the HUD Inspector General with an additional $5 million to conduct audits of FHA-approved lenders. (Over the past week HUD banned two FHA lenders.) FHA endorsed $328 billion in loans in fiscal yeas 2009, which ended Sept. 30, and its business continues to grow. (The $400 billion figure is for FY 2010.) Ginnie Mae, which provides a secondary market outlet for FHA and other government-backed loans, is in line for a $185 billion increase in commitment authority to $500 billion in FY 2010, up from $315 billion in 2009. Congress is late in passing the FY 2010 budget bills. Democratic leaders have rolled the HUD appropriations bill into a consolidated appropriations bill that the House of Representatives is expected to pass soon. The timing in the Senate is unclear.

The winning bidder has been named in a foreclosure sale of certain ownership interests of the W New York-Union Square, a hotel trophy property that combined news reports indicate Dubai World's private equity unit had originally bought in 2006. The bidder, identified as 201 Park Avenue South PEH LLC, called the winning bid a "step to assume equity ownership" of the hotel. The limited liability company is an affiliate of Philadelphia-based private equity fund LEM Mezzanine, which in 2007 bought a mezzanine loan backed by the W New York-Union Square's property owner. The W New York-Union Square's foreclosure sale proceedings had been initiated in November. Near the end of that month, combined news reports indicated Dubai World, the United Arab Emirates' investment vehicle, was delaying some of its payments on debt in a move that briefly shocked world markets. The current owner of the aforementioned interests in the property attributes the foreclosure largely to the recent downturn in the hotel industry. Despite the downturn, it indicated it sees some value in the hotel's brand and location. It said its goal is to maintain the W New York-Union Square's operational strength and ensure it is well positioned for any market recovery that may occur.

In separate announcements, Fitch Ratings, New York, has downgraded Republic Mortgage Insurance Co., Winston-Salem, N.C., and CMG Mortgage Insurance Co., a joint venture between PMI Mortgage Insurance Co., Winston-Salem, N.C., and CUNA Mutual Insurance Society, Madison, Wis. Both were cited for increasing numbers of delinquent loans in their respective insured portfolios. However, CMG was hit much harder, as its A+ insurer financial strength rating was slashed to BBB. In its report, Fitch said CMG is not likely to get additional capital from either PMI or CUNA Mutual. The company's ownership agreement provides for a capital call to its parent companies if its risk-to-capital ratio reaches 19-to-1. At the end of the third quarter, it was 16.8-to-1. "Furthermore, Fitch notes that CMG is operationally dependent on PMI and this raises uncertainty regarding CMG's operational stability and infrastructure in a scenario where PMI is placed into runoff," the report said. RMIC's IFS rating was only cut a single notch from BBB to BBB-. Even though RMIC's default rate has gone from 10.34% at the end of last year to 15.04% for the most recent quarter, it is still better than its peers. But Fitch is worried about RMIC's "high exposure to 2007 vintage loans."

Sellers under duress were responsible for more than three out of four sales in the Las Vegas area in November, according to Rob Jenson, an agent with Re/Max Central. According to Mr. Jenson's monthly report, 77% of the 2,905 properties that changed hands in the month were distressed sales. That is the lowest share since June 2008. Total sales were down 10.2% in November. Mr. Jenson, who heads the Jenson Group at Re/Max, attributes the declines to the holiday season and the uncertainty over the first-time buyers tax credit, which was set to expire at the end of November, only a few days before Congress voted to extend the benefit through next June. On the brighter side - if there is such a thing in the devastated Vegas area - the average sales price rose a tad in November to $161,071. Also, the number of foreclosures on the market was down for the seventh consecutive month. But the number of short sale listings rose 2.6%, to 10,650. Overall, there is now a 6.8-month supply of homes for sale in the Vegas market. Excluding listings currently under contract, however, the supply dips to just three months' worth of houses. According to the report, nearly 11,500 properties are in contingent or pending status.

Mark Hammond, the former president and chief executive of Flagstar Bancorp Inc., Troy, Mich., has cut all of his ties with the company by resigning as vice chairman and as a member of the board of directors of both the holding company and its thrift subsidiary. "I believe that the time is right to focus all of my attention on my future endeavors," said Mr. Hammond in a statement issued by Flagstar. On Oct. 1, Mr. Hammond resigned his president and CEO posts. Joseph P. Campanelli replaced him. Mr. Campanelli later added the chairman's title after the resignation of Thomas Hammond, Mark Hammond's father. Flagstar was the 12th largest residential originator in the third quarter.

Shore Mortgage, Birmingham, Mich., for a limited time, is offering certain customers a 30-year fixed-rate loan with no points, a product backed by the Federal Housing Administration. The APR on the note is 5.192%, the lender said. The loan program runs through Dec. 31 and is available in all states where the company originates loans. Shore is licensed in 32 states. The rate applies to both purchase and refinance loans. Shore said that with mortgage rates close to 5% and climbing, the lock in opportunity would assist the consumer especially during these challenging economic times. The APR is for borrowers who meet certain credit criteria.

An increase in the average 30-year fixed mortgage rate for the first time in over a month during the week ending Dec. 4 could be responsible for an increase in refinance applications during the period, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. A rate rise sometimes causes a rush to refinance as borrowers may see it as a sign rates are rising and they need to lock in immediately. A relative improvement in unemployment put upward pressure on rates Dec. 4. During that week, the MBA's Market Composite Index, a measure of overall mortgage loan application volume, increased 8.5% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 54% compared with the previous week, which was a shortened week due to the Thanksgiving holiday. The Refinance Index increased 11.1% from the previous week and the seasonally adjusted Purchase Index increased 4% from one week earlier. The increase in purchase applications reflected a 10% increase in applications for government mortgages and a 0.2% decrease in conventional mortgage applications, both on a seasonally adjusted basis. The share of refinance activity increased to 74.4% of total applications, up from 72.1% the previous week. The adjustable-rate mortgage share of activity decreased to 4.7% from 4.8%. The average contract interest rate for 30-year fixed-rate mortgages, which for the previous week was at its lowest point since May of this year, increased from 4.79% to 4.88%, with points increasing to 1.17 from 1.00 (including the origination fee) for loans with an 80% percent loan-to-value ratio, the association reported. The increase ended a run of six consecutive weeks of decline in the average rate. The average contract interest rate for 15-year FRMs came off of its lowest point ever increasing by 6 basis points, to 4.33%. For one-year adjustable-rate loans, rates decreased by 1 bp to 6.55%. The MBA stopped disclosing index values with the July 31 data release. The MBA can be found online at http://www.mortgagebankers.org.

The Treasury Department cited mortgage challenges among other concerns that persist despite an improving economy in deciding Wednesday that it would extend the Troubled Asset Relief Program to early October of next year. In a letter to lawmakers, Treasury secretary Tim Geithner said there have been improvements in the economy but said TARP must be extended due to remaining challenges for mortgagors, homeowners and small businesses. "This extension is necessary to assist American families and stabilize financial markets because it will, among other things, enable us to continue to implement programs that address housing markets and the needs of small businesses, and to maintain the capacity to respond to unforeseen threats," Mr. Geithner wrote. The secretary said he would limit the use of the program to a few areas: mitigating foreclosures, helping small businesses, providing capital to community banks and increasing the Term Asset Backed Securities Loan Facility, the latter of which now includes commercial mortgages. The Treasury secretary said he would only use TARP for other purposes if other moves were necessary to stabilize the financial industry. He said he would first consult with the president and the chairman of the Federal Reserve as well as submit written notification to Congress before taking other actions. He warned emergency actions might still be necessary.

Triad Guaranty Inc., Winston-Salem, N.C., has notified NASDAQ that it will voluntarily delist its shares from the exchange. The nation's smallest MI is in the process of self liquidating and recently sold off its technology and other assets to Essent Guaranty, a new MI company based in Philadelphia. The delisting is expected to occur by the last week of December. The move follows receipt of a notice from Nasdaq that Triad was no longer in compliance with the rule to maintain a minimum bid price of $1 per share.

ViewPoint Bank, Plano, Texas, has hired former Chase Mortgage executive Ed Bratton to lead its mortgage subsidiary, ViewPoint Bankers Mortgage. Mr. Bratton, who has more than 25 years of mortgage banking experience, will carry the official title of president and CEO. He worked for Chase Mortgage for the past 20 years, recently serving as regional vice president for Texas and other western states. He is also a past president of the Dallas Mortgage Bankers Association. ViewPoint Bankers Mortgage operates 16 loan production offices throughout Texas.

Low rates have led to adverse selection and performance deterioration in 2005 subprime residential MBS while low loan-to-value ratios have limited the prepayment concern for other recent vintages, according to a new report from Fitch Solutions. The company's monthly subprime RMBS index for the 2005 vintage dropped 11.4%. Managing director Thomas Aubrey said this reflects the fact that higher credit quality loans have been able to refinance out of the pool, leaving relatively poorer credit quality mortgages behind. The refinancing has affected the six-month constant prepayment rate for the securities, which over the last three months has risen to 4.3% from 3.5%. Fitch Solutions' Subprime RMBS Price Index, which is based on credit default swaps of RMBS, as a whole registered just under a 10% drop in the most recent month to 7.25 from 8.02. This is due primarily to the 2005 vintage's performance decline.

The Securities and Exchange Commission has charged three former executives of now-defunct subprime mortgage giant New Century Financial with fraud for misleading investors as their business was "collapsing" in 2006. At the time, Irvine, Calif.-based New Century was a top-ranked subprime lender, and management was considering selling the company to Merrill Lynch. SEC director of enforcement Robert Khuzami said investors in the once publicly traded company "took a double-hit: The company's mortgage assets and business performance became increasingly impaired, and management manipulated its numbers and concealed its deteriorating performance." At one time, New Century's shares traded for $50. Former top managers accused of fraud include Brad Morrice (vice chairman/president), Patti Dodge (EVP) and David Kenneally (SVP). New Century filed for bankruptcy protection in April 2007. The complaint, filed in federal court in the Central District of California, seeks civil penalties and from Morrice and Dodge reimbursement of bonuses and other incentive or equity-based compensation. The agency is seeking a severe personal penalty against the three: a bar against ever again serving as officers or directors of a publicly traded company. Josh Epstein, a spokesman for Proskauer, the law firm representing Mr. Morrice, told The Orange County Register that the SEC's charges against the former executive are "flatly false." He said, "Brad did all he could to save the company and to accurately report the company's numerous challenges to its shareholders. While his efforts failed, there was no fraud." Mr. Morrice remained a large shareholder until the end, losing millions of dollars when New Century filed for bankruptcy in April 2007, Mr. Epstein said. John Vandevelde, an attorney for Mr. Kenneally, said the former executive was never a top executive there but a new accountant who lost "every penny he ever invested" in the company he believed in. "Kenneally never signed any financial statements and relied on the outside auditors for accounting treatment now under question by the SEC," his lawyer said. Ms. Dodge could not be reached for comment.

The Department of Housing and Urban Development late Monday suspended Equitable Trust Mortgage Corp. of Baltimore from making Federal Housing Administration-backed loans -- the second such suspension of a lender within a week. ETMC, which has branches in Maryland, Virginia, and South Carolina, told National Mortgage News it will make a statement on the matter later in the day Tuesday. Its specialty is renovation financing. For now, the suspension is for a minimum of six months. HUD alleges that the nonbank lender charged excessive origination fees to minority borrowers and others. In some cases, the company charged borrowers a broker fee and an additional 1% origination fee, HUD said. "ETM received excessive compensation and improperly charged consumers duplicative and unreasonable fees to originate their loans," HUD noted. It originated nearly 2,250 FHA-insured loans over the past two years, 8% of which are in default. It has filed only 8 claims. HUD's Office of Inspector General also is investigating ETMC's lending practices. Last week HUD suspended Lend America of Long Island which a few days later laid off most of its workforce.