Originations

U.S. Housing and Urban Development Secretary Shaun Donovan has proposed an initiative designed to ensure its "core housing programs are open to all, regardless of sexual orientation or gender identity." The proposed rule will be open to public comment. In addition, HUD said it would commission the first-ever national study of discrimination against members of the lesbian, gay, bisexual and transgender community in the rental and sale of housing. Mr. Donovan said evidence shows "some are denied the opportunity to make housing choices in our nation based on who they are and that must end." Few state and local studies exist, HUD said, but for example, a study by Michigan's Fair Housing Centers found that nearly 30% of same-sex couples were treated differently when attempting to buy or rent a home. The goal, HUD said, is to clarify that the term "family" as used to describe eligible beneficiaries of its public housing and Housing Choice Voucher programs to include otherwise eligible LGBT individuals and couples. Plus, it will require HUD programs' participants to comply with local and state non-discrimination laws; and require that any FHA-insured mortgage loan must be based on the credit-worthiness of a borrower, not their sexual identity.

BB&T Corp., Winston-Salem, N.C., likely has eased the minds of many mortgage originators by stating it plans to remain in the mortgage warehouse lending business. The company has named Jeff Ellison as president of its mortgage warehouse lending division, located in Orlando. BB&T, which had been a small warehouse player, picked up the operations of Colonial Bank after the latter's failure. The terms of the transaction with the Federal Deposit Insurance Corp. required BB&T to stay in the business for one year. BB&T commercial finance president Robert Fentress, commented in a statement, "This is a commercial product that dovetails nicely with our retail mortgage business. After evaluating the business model, we plan to continue in the mortgage warehouse lending business. We feel it offers excellent growth opportunities given our client relationship model." Mr. Ellison started at BB&T in 1984. He most recently served as senior credit officer in the company's East Florida Region.

A federal court late Wednesday denied an injunction filed by the U.S. Attorneys' office in Brooklyn against Lend America, a development that will allow the nonbank — for now — to continue originating FHA loans. "The burden is high to get a judge to shut down a business instantly," said a spokesman for the Department of Housing and Urban Development. Spokesman Brian Sullivan noted that HUD still has a "notice of violations" against the Melville, N.Y.-based company which the company has less than a month to answer. He said HUD will continue to pursue action against the company. Almost all of the firm's production is FHA-backed. In a statement the lender said, "We are obviously pleased with the court's decision. We look forward to continuing our partnership with HUD and our mission of providing affordable financing for those borrowers in need." Earlier this week DOJ and HUD sought a court injunction to ban Lend America from originating FHA loans, accusing the nonbank lender with fraud in regard to $14 million in production. (The company also does business as Ideal Mortgage Bankers Ltd.) The government also sought injunctive relief against company executive Michael Ashley who holds the title "chief business strategist." According to figures compiled by National Mortgage News, Lend America ranks 18th nationwide in terms of GNMA MBS issuance. It services about $850 million in GNMA-backed product. Lend America recently stepped up plans for expansion into correspondent mortgage banking and wholesale that included FHA production. According to Newsday, back in 1993 Mr. Ashley pleaded guilty to three counts of conspiracy to commit wire fraud while employed by Liberty Mortgage Banking of Long Island. Asked about the guilty plea, a spokesman for the company said, "In Michael's eyes all that is in the past."

The sale of low- to medium priced homes - aided by the $8,000 first time homebuyer tax credit - is helping to improve the nation's economic outlook, according to the Federal Reserve's new Beige Book report. The Fed says improvements in both residential real estate and manufacturing "continued a pattern of improvement" that emerged this summer. However, the report cautions that one of the weakest sectors of the economy is commercial real estate with the Fed's business contacts describing conditions as "weak or deteriorating." Also, the residential construction sector is still suffering, it says. Even though the Fed sees some improvement in housing, it cautions that sales are not booming anywhere. In the Boston and Cleveland Fed districts Realtors fear a downturn once the tax credit expires in late November. It notes that new and existing home sales were flat in the Philadelphia area and in St. Louis residential sales actually fell.

Barry C. Westergom, a former real estate appraiser from Jacksonville, Florida, pleaded guilty to fraud and conspiracy charges connected to a mortgage scheme. Sentencing for Westergom has not yet been scheduled. According to A. Brian Albritton, U.S. attorney for the Middle District of Florida, Westergom was involved in a scheme in which a co-conspirator, Juan Carlos Gonzalez, negotiated the purchase of higher-end houses and entered into contracts with the sellers of the properties. Westergom was a licensed real estate appraiser and Gonzalez retained him to appraise the properties. Westergom used inappropriate comparable properties and other fraudulent means to appraise the properties. The appraised values were significantly higher than the agreed purchase price and the true market values of the properties. The inflated appraisals were submitted to lenders. Westergom knew that Gonzalez intended to submit the appraisal reports to lenders in support of mortgage loan applications. Gonzalez has pleaded guilty and is sentencing for scheduled on Nov. 9.

New England-based mortgage banker Mortgage Network Inc. has acquired Pennsylvania loan broker American Eagle Mortgage, which has been serving the Lansdowne and Whitehall areas of the state. American Eagle's former owner, Dan Murphy, plans to serve as branch manager for the locations. According to Mortgage Network, his team of about 20 loan officers also will remain intact and continue to operate in the same locations with the support of Pittsburgh and Lancaster Mortgage Network offices.

U.S. Bancorp, Minneapolis, saw a $215 million increase in its mortgage banking income over the year prior as it had loan production volume of $14.8 billion and loan application volume of $15.5 billion during the third quarter of 2009. The bank had mortgage banking revenue of $276 million for the third quarter 2009, compared with $308 million for the second quarter 2009 and $61 million for the third quarter of 2008. Year-to-date mortgage banking revenues are $817 million, up from $247 million for the same period last year. However, the bank also saw $189 million in commercial real estate loan net chargeoffs for the quarter, up from $65 million one year ago, and $129 million in residential mortgage net chargeoffs, up from $71 million for the third quarter of 2008. Home equity loan and second mortgage chargeoffs were $89 million for the most recent quarter, up from $48 million for the same period a year ago. U.S. Bancorp has approximately $4 billion in total nonperforming loans, including $1.7 billion in commercial real estate and $383 million in residential mortgage loans. For the third quarter, U.S. Bancorp had net income of $603 million ($0.30 per share), up from $576 million ($0.32 per share) for the same quarter in 2008. The third quarter results included a $415 million loan loss provision.

Real estate investment losses put a ding in Morgan Stanley earnings but the company as a whole was still profitable in the third quarter. The company took a $400 million loss on real estate investments "amid the ongoing industry-wide decline in this market," but generated net income of $757 million during the period. This was down from about $8.15 billion in net income during the third quarter of last year but it was an improvement over the loss it took in the second quarter.

Hudson City Bancorp, Paramus, N.J., a top ranked residential funder in the Northeast, originated $1.7 billion in new loans through its retail network during the third quarter, noting that it is poised to "capture additional" market share. Overall, the thrift - one of the nation's largest - grew its earnings 11% to $135 million. However, its ratio of nonperforming loans more than doubled to $518 million compared to yearend. Its allowance for loan reserves now stands at $114 million, more than double the Dec. 31 figure. Among all residential lenders, Hudson City ranks 22nd, according to the Quarterly Data Report.

With rates back above 5% for the second consecutive week, the Mortgage Bankers Association's Weekly Applications Survey registered a decrease in overall, refinance and home purchase activity. The Market Composite Index, a measure of loan application volume, decreased 13.7% for the week ending Oct. 16 on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 22.4% compared with the previous week. An adjustment was made to the Index to take into account Columbus Day. The Refinance Index decreased 16.8% from the previous week and the seasonally adjusted Purchase Index decreased 7.6% from one week earlier. The market share of refinance applications, according to the survey, declined to 65.0% from 67.4% for the previous week. The share of adjustable rate mortgage applications increased to 6.4% for the week, up from 6.2% one week prior. The average contract interest rate for 30-year fixed-rate mortgages rose to 5.07% from 5.02%, with points increasing from 1.11 to 1.13 (including the origination fee) for loans with an 80% percent loan-to-value ratio, according to the association. The average contract interest rate for 15-year FRMs increased 6 basis points from the previous week, to 4.51%, while for one-year adjustable rate loans, it increased by 15 BP to 6.71%. The MBA stopped disclosing index values with the July 31 data release. The MBA can be found online at http://www.mortgagebankers.org.

The U.S. Attorney and the Department of Housing and Urban Development are seeking a court injunction to ban Lend America, Melville, N.Y., from originating FHA loans, accusing the nonbank lender with fraud in regard to $14 million in product. A spokesman for the company - which also does business as Ideal Mortgage Bankers Ltd. - issued a statement saying it was taken by surprise by the complaint and expects to continue doing business. It added that it plans to "respond more completely once all allegations are reviewed." In a joint statement from the U.S. Attorney for the Eastern District of New York, and the HUD Inspector General's office, the government says Lend America/Ideal "falsely certified" that borrowers met FHA underwriting requirements. Using the civil courts, the government is seeking injunctive relief from both the company and its chief business strategist Michael Ashley. According to figures compiled by National Mortgage News, Lend America ranks 18th nationwide in terms of GNMA MBS issuance. It services about $850 million in GNMA-backed products. Lend America recently stepped up plans for expansion into correspondent mortgage banking and wholesale that included FHA production.

Wells Fargo & Co. earned $3.1 billion from its residential mortgage banking business in the third quarter and is seeing lower than expected losses on the "Pick-a-Pay" ARM portfolio it inherited when it bought Wachovia Corp. last year. While its mortgage banking earnings increased by 243% (compared to the same period last year), it originated $96 billion in new home mortgages, a 25% decline from the second quarter but more than double what it produced in 3Q08 when the credit markets froze up and mortgage lending and housing went into a freefall. (The entire bank earned $3.2 billion in 3Q09).

The U.S. Attorney and Department of Housing and Urban Development are seeking a court injunction to ban Lend America, Melville, N.Y., from originating FHA loans, accusing the nonbank lender with fraud in regard to $14 million in product. The company issued a statement saying it was taken by surprise by the complaint and expects to continue doing business. It added that it plans to "respond more completely once all allegations are reviewed." In a joint statement from the U.S. Attorney for the Eastern District of New York, and the HUD Inspector General's office, the government says Lend America/Ideal "falsely certified" that borrowers met FHA underwriting requirements. Using the civil courts, the government is seeking injunctive relief from both the company and its chief business strategist Michael Ashley. According to figures compiled by National Mortgage News, Lend America ranks 18th nationwide in terms of GNMA MBS issuance. It services about $850 million in GNMA-backed products. Lend America recently stepped up plans for expansion into correspondent mortgage banking and wholesale that included FHA production.

Regions Financial Corp., Montgomery, Ala., a top 20 player in mortgages, swung to a third-quarter loss amid higher loan loss provisions. Regions saw a loss of $377 million, or 32 cents a share, compared with a year-ago profit of $79 million, or 11 cents a share. Loan-loss provisions grew to $1.03 billion from $912 million in the previous quarter and $417 million a year earlier. Net charge-offs — loans the bank doesn't expect to collect — jumped to 2.86% of average net loans from 2.06% and 1.68%, respectively. "The operating environment remains challenging and credit-related costs continue to be elevated," said chief executive Dowd Ritter. "However, the economy appears to have bottomed and that bodes well for customers and for us." Regions ranks 20th among all residential originators, according to the Quarterly Data Report.

The Obama administration late Monday unveiled a long-awaited temporary bond purchase and liquidity program designed to help state and local housing finance agencies provide billions of dollars in low-cost mortgage money to consumers. Even though officials from the Treasury Department and other agencies — including the Federal Housing Finance Agency — refused to quantify the effort, it's believed to be in the range of $30 billion. The plan is aimed at boosting the struggling market for mortgage revenue bonds, which is currently operating at about 25% of capacity. Year-to-date, state and local housing finance agencies have issued just $4 billion in mortgage revenue bonds, the proceeds of which are used to provide low-cost residential loans and build or renovate rental housing. As part of the plan to increase liquidity, Treasury will purchase Fannie Mae and Freddie Mac securities, which will be backed by new MRBs. The GSEs also will provide partial credit enhancements, which will serve as a guarantee of sort on the bonds. Some HFAs have completely shut down their lending programs because of a lack of liquidity caused by the housing crisis. Officials stressed that the programs will be paid for by state and local HFAs, through fees, and not taxpayers. Asked who would be on the hook for losses, Treasury assistant secretary Michael Barr said, "The HFAs are in the first loss position," followed by the Treasury and then Fannie Mae or Freddie Mac.

Senate Banking Committee chairman Chris Dodd, D-Conn., went on the record Tuesday calling for a seven-month extension of the $8,000 first-time homebuyer tax credit, which is set to expire in five weeks. Chairing a hearing on the state of the housing market, Sen. Dodd said home prices are stabilizing but "we still need to use every tool at our disposal to try and fix this problem." The White House has yet to reveal its position on the extension. The Mortgage Bankers Association and other trade groups, predictably, support the extension. MBA chief economist Jay Brinkmann told the committee that one great unknown facing the market is what will happen to interest rates when the Federal Reserve stops purchasing mortgage-backed securities from Fannie Mae and Freddie Mac. He noted that there is growing concern over the issue saying, "While the most benign estimates are for increases in the range of 20 to 30 basis points, some estimates of the potential increase in rates are several times those amounts."

PNC Financial Services is continuing to talk to at least one interested bidder that wants to buy the warehouse lending division of National City Corp., according to officials close to the situation. PNC, which bought NatCity late last year, declined to discuss the issue. One warehouse analyst told National Mortgage News that PNC will not extend warehouse credit to nondepository mortgage bankers beyond midyear 2010. In some cases, the cut-off will be March 31, said the analyst, requesting anonymity. After the failure of Colonial Bank this summer, the NatCity unit is believed to be one of the largest warehouse providers in the industry. PNC, though, has declined to release commitment figures.

Under a new plan unveiled Monday afternoon the Treasury Department — as well as Fannie Mae and Freddie Mac — will attempt to boost the struggling mortgage revenue bond market, which is currently operating at about 25% of capacity. Year-to-date, state and local housing finance agencies have issued just $4 billion in mortgage revenue bonds (MRBs), the proceeds of which are used to provide low-cost residential loans and build or renovate rental housing. As part of the plan to increase liquidity, the Treasury will purchase Fannie Mae and Freddie Mac securities which will be backed by new MRBs. The GSEs also will provide partial credit enhancements which will serve as a guarantee of sort on the bonds. Government officials declined to give an estimate on how much authority might be used under the program but did say there would be a ceiling to it. Some HFAs have completely shut down their lending programs because of a lack of liquidity caused by the housing crisis.

Fitch Ratings said it has affirmed the ratings on the majority of tranches in its review of 78 fixed-rate U.S. commercial mortgage-backed securities transactions from 2006-2008. Out of a total of $230.4 billion in unpaid principal balance from these deals, ratings on $186.1 billion were affirmed and ratings on $44.3 billion were downgraded. It said most of the downgrades were concentrated in the 2007 vintage.

Six individuals in the New York City area — Manre Ebhomielen, Tyshe Bankston, Merrick Henry, Val Taylor, Jocelyn Joseph and Bernard Lawson — have been charged with defrauding Rochester, N.Y.-based mortgage company Flaherty Funding. According to Kathleen M. Mehltretter, U.S. attorney for the Western District of New York, in an effort to expand its business into the New York City area, Flaherty Funding contacted Queens, N.Y.-based mortgage company Vista Mortgage. Flaherty and Vista agreed that Vista would close its operation and some of its staff would become Flaherty employees, one of them being Ebhomielen who, along with the other defendants, allegedly participated in a scheme to obtain large mortgage loans from Flaherty by submitting false information and documents to the company during the loan approval process. The scheme involved five properties purchased in the New York City area. Ebhomielen, Henry and Taylor have been arrested. They will have their initial appearances in the New York City area and are then expected to appear in Rochester at a later date. The defendants could not be reached for comment.