Originations

The average conforming mortgage rates during the week ending Oct. 29 were only very slightly higher than the week previous, according to the most recent Freddie Mac Primary Mortgage Market Survey. The average rate for a 30-year fixed-rate mortgage inched up to 5.03% from 5.00% the previous week but remained significantly lower than a year ago when it was 6.46%. The average 15-year FRM rate also inched up week-to-week to 4.46% from 4.43% but was still far lower than it was around the same time 12 months ago when it was 6.19%. Average rates for adjustable-rate mortgages also were slightly higher week-to-week but looked much better than a year ago. The five-year hybrid Treasury ARM rate was 4.42%, compared to 4.40% a week ago and 6.36% a year ago. The one-year Treasury ARM rate was 4.57%, compared to 4.54% the previous week and 5.38% 12 months ago. Average points were 0.7 for 30-year FRMs and 0.6 for all the other products mentioned. Because rates have averaged just below 5% this year, the lowest 10-month average since the survey started in 1971, refinances have dominated the market, according to Freddie vice president and chief economist Frank Nothaft. In the past week, there have been mixed signals as to the current state of the housing market that drives purchases, he said.

The struggling GMAC Financial Services sold $2.9 billion in government-backed debt late on Oct. 28, ahead of a regulatory deadline in November that will test the mortgage/auto lender's capital levels and ability to absorb losses. The bonds are senior fixed rate notes guaranteed by the Federal Deposit Insurance Corp. under its Temporary Liquidity Guarantee Program. Thanks to the government guarantee, the notes will be rated AAA by all three major rating agencies. GMAC is a bank holding company that controls Residential Capital Corp., the nation's fifth largest residential lender and servicer. The government has invested $12.5 billion in the company to date and owns 35% of it. Concerns that GMAC could fail the impending capital test had sent the cost of insuring debt at its residential mortgage arm, Residential Capital, spiraling in the past week as investors worried that the unit would need to be spun off.

Commercial banks and other lenders are unsecured creditors on $4.8 billion in loans made to Capmark Financial, Horsham, Pa. — loans that Citibank serves as lead agent on. The bankruptcy filing by Capmark does not specifically identify the other lenders on the facility which once totaled $5.5 billion and was made back in 2006 when Capmark — formerly known as GMAC Commercial Holding Co. — was being sold to a group led by Kohlberg Kravis & Roberts. Other unsecured creditors contacted by National Mortgage News said they believe their debts are in fact secured. A Citibank spokeswoman said she could not comment but stressed that Citibank is the agent on the credit. A source close to the situation said Citibank's exposure ranges from $500 million to $1 billion. Documents compiled by Bankruptcy.com, show that Citibank put in a $4.62 billion claim on a 2006 loan made to Capmark. "It's a true bank loan," said Peter Chapman who runs Bankruptcy.com. Separately, the bank — which is controlled by the U.S. government — put in another claim for $234 million. Meanwhile, Fitch Ratings on Thursday said a $1 billion revolving "CRE CDO" tied to Capmark remains on "rating watch negative." Fitch is concerned about 11 defaulted loans backing the collateralized debt obligation.

The Obama Administration said it supports an extension of the current loan limits for Fannie Mae, Freddie Mac and Federal Housing Administration mortgages following an agreement by House and Senate appropriators to extend those limits for another year as part of the continuing funding resolution Congress is expected to pass this week. "The CR [continuing resolution] maintains the limits for FHA, GSE ... single-family mortgages at $729,750 through the end of calendar year 2010," according to a statement issued by the chairmen of the appropriations committees. The maximum $729,750 loan limit is due to expire Dec. 31 and it would drop down to $625,500 if not extended. "This could result in major disruptions in the mortgage origination market for larger loan sizes as early as November," the appropriations chairmen said. Earlier in the week, industry trade groups warned Congress that quick action is needed because it is becoming more difficult for lenders to approve mortgages with balances above $625,500 due to uncertainty about an extension.

Senate leaders have agreed on an extension of the $8,000 first-time homebuyer tax credit along with a new $6,500 tax credit for move-up buyers, but it is unclear when the chamber will vote on the measure. The credit extension would run from Dec. 1, 2009 through April 30, 2010 and give buyers with a binding contract an extra 60 days to close. The tax credit extension raises the income limits to $125,000 for single-filers and $225,000 for joint filers. This applies to first-time and repeat buyers. To qualify for the $6,500 tax credit, repeat buyers must have used a previous home as a principal residence for five of the previous eight years. The Obama administration said it supports an extension of the first-time homebuyer tax credit. "In extending the tax credit, we urge Congress to include strict measures to combat tax fraud and protect responsible homeowners," Treasury secretary Timothy Geithner said. The tax credit extension is expected to be attached to a bill extending unemployment benefits by 20 weeks. Still, it is unclear when the Senate will pass the extension bill (H.R. 3548), despite broad bi-partisan support. The current $8,000 first-time homebuyer tax credit is set to expire Nov. 30.

Declining commercial real estate fundamentals are likely to induce more interest shortfalls well into next year, according to a new report by Fitch Ratings. According to the report, "'Understanding Interest Shortfalls in CMBS Transactions," Fitch expects CMBS interest shortfalls to increase in size and magnitude through 2010 or until the commercial real estate market recovers. Interest shortfalls occur when fees and expenses associated with troubled loans reduce the amount of interest available to be paid on CMBS bonds. When the interest shortfall takes place, interest is then deferred, with subordinate CMBS classes usually the first to be affected. "The prolonged downturn in commercial real estate increases the possibility that additional bonds will incur interest shortfalls," said Fitch senior director Britt Johnson.

Karen Axline, a former title agent from Granville, Ohio, was sentenced to four years in prison for her role in a $9 million mortgage fraud scheme involving more than 30 properties in central Ohio. According to Ohio Attorney General Richard Cordray, in the scheme, participants falsified loan applications and documents on behalf of borrowers and made downpayments allowing borrowers to secure loans in which tens of thousands of dollars were laundered through fictitious home contractor companies. Axline operated the now-defunct Granville Title Agency in Granville and colluded with others in structuring many of the transactions to deceive lenders. Axline is one of 13 defendants charged in the scheme. The investigation is still ongoing.

Refinancings of Federal Housing Administration-backed reverse mortgages doubled in the past fiscal year as the loan limit jumped to $625,000 and interest rates fell. Seniors refinanced 8,985 FHA-insured home equity conversion mortgages in fiscal year 2009 (which ended September 30), compared to 4,435 refinancings in FY 2008. Refinancings became more attractive because Congress established a nationwide HECM loan limit of $417,000 in November 2008 and then raised it to $625,500 in February 2009. Overall, lenders originated $29.9 billion in HECMs in FY 2009, compared to $24.7 billion in FY 2008. In terms of the number of loans insured, HECM originations rose just 2.3%. Congress also passed legislation last year making it possible for seniors to purchase a home with a HECM for the first time. The new purchase option went into effect January 2009. During the first nine months of the year 550 seniors used a HECM to purchase a home.

Zillow Mortgage Marketplace, an online lead generation site, says consumer requests for refinancing their loans rose 39% in the first half of October compared to the same period in September. Zillow says the catalyst for the searches was mortgage rates dropping below the 5% level during that time frame. "When rates drop to record lows we see homeowners move quickly to take advantage," said Stan Humphries, Zillow's chief economist. "But, as the Federal Reserve ramps down its purchase of mortgage-backed securities, I expect rates will rise somewhat by the end of the first quarter of 2010."

For the third straight week, interest rates for the 30-year fixed rate loan being above 5% led to a continued decline in new applications, the Mortgage Bankers Association Weekly Mortgage Applications Survey found. The Market Composite Index, a measure of loan application volume, decreased 12.3% for the week ending Oct. 23 on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 2.8% compared with the previous week. An adjustment was made to the Index for the week ending Oct. 16 to take into account Columbus Day. The Refinance Index decreased 16.2% from the previous week and the seasonally adjusted Purchase Index decreased 5.2% from one week earlier. The market share of refinance applications, according to the survey, declined to 62.3% from 65.0% for the previous week. The share of adjustable-rate mortgage applications increased to 6.9% for the week, up from 6.4% one week prior. The average contract interest rate for 30-year fixed-rate mortgages fell to 5.04% from 5.07%, with points increasing from 1.13 to 1.25 (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 increased 2 basis points from the previous week, to 4.53%, while for one-year adjustable rate loans, it declined by 7 BP to 6.79%. The MBA stopped disclosing index values with the July 31 data release.

GMAC Financial, which controls the nation's fifth largest mortgage banking franchise, is talking to the Treasury Department about the government investing up to $5 billion in additional capital into the struggling mortgage and auto lender. According to published reports, Treasury officials have confirmed the talks but GMAC, for now, is saying little about the situation. "GMAC continues to work with the Federal Reserve regarding the remaining capital requirements related to the Supervisory Capital Assessment Program," said a company spokeswoman. "We will comply with the Federal Reserve Bank's final assessment for additional capital." Earlier in the year Treasury told GMAC to raise an additional $11.5 billion in capital after undergoing a "stress test" along with other large banks. While other banks deemed undercapitalized have been able to raise money from private investors, GMAC has been forced to go back to the government via the TARP program. At mid-year Residential Capital Corp., the mortgage banking arm of GMAC, ranked fifth nationwide with $383 billion in housing receivables.

It is becoming more difficult for some lenders to approve mortgages with balances above $625,500, according to industry groups that are urging Congress to move quickly and extend the current higher loan limit. The $729,750 maximum loan limit for Fannie Mae, Freddie Mac and Federal Housing Administration loans is due to expire at yearend. In a letter to House and Senate leaders, three trade groups warn that some lenders are pulling back because they don't want to get caught with loans they can't sell. "The result is that borrowers are being unnecessarily denied financing because of the uncertainty about expiring loan limits," according to a letter by the Mortgage Bankers Association, National Association of Home Builders and National Association of Realtors. "Therefore, we request Congress extend the limits as soon as possible so as not to jeopardize the fragile recovery," the Oct. 26 letter says.

More bad news for California's home builders as housing starts dipped again in September. According to the California Industry Research Board, builders in the state pulled just 2,920 permits in the entire state in September. That's down only 1% from the previous month, but it represents a 36% slide from the same month a year ago. As a result of the continued decline, the CIRB has revised its 2009 forecast down from 39,500 units to 37,700, which would be "by far" the fewest number of starts on record in the heretofore "golden" Golden State. The California Building Industry Association has called for extending the state's $10,000 home buyer tax credit, saying that traffic to new home subdivisions has fallen drastically since it expired. "The tax credit program only lasted for four months due to its growing popularity, but we saw a significant increase in traffic during that time, which led to an increase in job-generating new-home construction," said CBIA President Liz Snow. "Extending the program would help continue that positive momentum and would help reinvigorate the overall economy."

PHH Corp., has named Jerome J. Selitto, a former mortgage insurance executive at Amerin Guaranty Corp., president and chief executive, effective immediately. Mr. Selitto brings to PHH -- the nation's eighth largest lender -- nearly forty years of experience in mortgages and investment banking. His most recent position was as a senior consultant and then member of the senior management team of mortgage industry software provider Ellie Mae. George Kilroy, who in June had stepped in on an interim basis as acting president and CEO, will continue to lead the company's fleet management business. Mr. Selitto was CEO of DeepGreen Financial, an online home equity lender that he helped found. (DGF later closed the business.) From 1992 to 1999 he was the vice chairman and a founder of mortgage insurance company Amerin, which later merged with Commonwealth Mortgage Assurance Corp. and is now known as Radian Guaranty.

Senate leaders are nearing agreement on a six-month extension of the $8,000 first time homebuyer tax credit. It appears the tax credit will be expanded to more buyers and the income limits will be raised. The current tax credit is limited to first-time homebuyers and expires November 30. Details are still being worked out. But the tax credit extension is expected to be rolled into a manager's amendment and attached to a bill that extends unemployment benefits (H.R. 3548). The Senate is slated to vote on ending a filibuster Tuesday evening so that the senators can vote Wednesday on H.R. 3548 and send the extension bill back to the House of Representatives.

The embattled Lend America, Melville, N.Y., has been trying to sell a large package of Government National Mortgage Association servicing rights but has yet to close on a deal, according to investment banking sources. The company and an investment banker believed to be brokering the sale declined to comment. Sources say the portfolio of GNMA rights could be as large as $1 billion. Last week the Department of Justice and Department of Housing and Urban Development sought a court injunction to ban the firm from originating FHA loans, accusing it of fraud in regard to $14 million in originations. The court ruled against the injunction. Lend America's spokesman stressed that it is business as usual at the company. "The phones are ringing and they're still doing business," he said.

The Mortgage Bankers Association, which lost money in its last fiscal year, has decided to put its Washington headquarters up for sale, 14 months after occupying the $100 million building. The property, which has proven to be a white elephant for the financially strapped trade group almost from the instant it was purchased in May 2008, is listed with Holliday Fenoglio Fowler, a national commercial brokerage firm. No asking price was mentioned in a letter this morning to the MBA membership. According to the letter, the decision to unload the structure at 1331 L Street was deemed by the MBA board to be "in the best interest" of the association, which will continue to lease "a substantial portion" of space as its HQ through 2020. According to the letter, the decision to buy the building in the first place was made by three different member-led task forces. But the letter did not say what many observers believe: that the decision cost former President Jonathan Kempner his job after a decade as the MBA's chief operating officer. That the MBA has been unable to lease much space to other tenants in what was described as "one of the most severe recessions in a century" was sited as a major reason for the sale. "The board concluded that continued ownership...was economically imprudent and over the long term would impair MBA's ability to continue to provide our members with MBA's full range of services," the letter said.

It is becoming more difficult for some lenders to approve mortgages with balances above $625,500, according to industry groups who are urging Congress to move quickly and extend the current higher loan limit. The $729,750 maximum loan limit for Fannie Mae, Freddie Mac and Federal Housing Administration loans is due to expire at yearend. In a letter to House and Senate leaders, three trade groups warn that some lenders are pulling back because they don't want to get caught with loans they can't sell. "The result is that borrowers are being unnecessarily denied financing because of the uncertainty about expiring loan limits," according to a letter by the Mortgage Bankers Association, National Association of Home Builders and National Association of Realtors. "Therefore, we request Congress extend the limits as soon as possible so as not to jeopardize the fragile recovery," the Oct. 26 letter says.

U.S. District Judge Alexander Williams, Jr., sentenced Sidney Okosun, a Nigerian national residing in Washington, D.C., to 18 months in prison, followed by five years of supervised release for bank fraud in connection with a scheme to defraud mortgage lenders. Judge Williams also ordered Okosun to pay $2.2 million in restitution. According to Rod J. Rosenstein, U.S. attorney for the District of Maryland, Okosun, a loan officer formerly licensed as a mortgage originator by the state of Maryland, conspired with others to purchase properties from a company co-defendant Oladipo Olafunmiloye owned. Conspirators sought mortgages and refinance loans to purchase the properties without having to identify Olafunmiloye's ownership interest. The defendants recruited straw buyers who made almost none of the payments related to the purchase of the properties. Once the purchase of the properties had been funded, Olafunmiloye caused the straw buyers to default on their mortgage payments. As a result, the lenders were forced to foreclose on those properties. Acting as mortgage broker, Okosun coordinated the submission of nine fraudulent loan applications to lenders and brokered the fraudulent loans. Olafunmiloye was sentenced to 46 months in prison for his role in the scheme. Oyekunle Ikudayisi was sentenced to six months in prison and six months home detention with electronic monitoring. Kolawole Aminu was sentenced to three years probation.

Commercial loan balances for Wilmington Trust Corp. were $6.69 billion on average during the third quarter of 2009. Within the Wilmington, Del.-based wealth management firm's commercial portfolio, commercial mortgage balances rose on a trailing quarter and year-over-year basis. According to the company's earnings report, commercial construction balances were slightly higher than for the year-ago third quarter, but lower than for the trailing quarter. Balances of other types of commercial, financial and agricultural loans were lower than for the trailing quarter and the year-ago third quarter. According to Wilmington Trust, the increase in commercial mortgage balances reflected changes in the credit markets that have minimized the competitive advantages formerly held by specialty commercial mortgage lenders. Wilmington Trust extends commercial mortgage loans to middle-market business owners within the mid-Atlantic region. More than half of commercial mortgage loans at Sept. 30, 2009, were for owner-occupied properties. According to the company, 18% were for community shopping centers. The rest were for a variety of other types of commercial and industrial properties. More than half — 57% — of Wilmington Trust's commercial mortgage loans were for properties in Delaware, with the majority in the state's northern-most county.