Originations

Capital constraints on mortgage insurance companies could impede the ability of Fannie Mae and Freddie Mac to keep up with the demand for mortgage financing during the housing recovery, according to a report by the government-sponsored enterprises' regulator. Former Federal Housing Finance Agency director James Lockhart has been urging the Treasury Department to provide capital assistance for the private MIs since last November. The Mortgage Insurance Cos. of America also is seeking assistance. "We have a request pending and we are waiting for a response," said MICA spokesman Jeff Lubar. The GSEs can purchase single-family mortgages with loan-to-value ratios higher than 80% only if the homebuyer gets mortgage insurance. The FHFA Mortgage Market Note issued a day before Mr. Lockhart's August 21st departure projects that the demand for such high LTV loans could hit $230 billion in 2009. The ability of the MIs to meet that level of demand is "remote," the FHFA report says. "The industry's ability to build and maintain sufficient capital to meet the needs of the enterprises over the short term without some federal assistance or an infusion of private capital is unclear," the report concludes.

The Mortgage Bankers Association's Market Composite Index increased 7.5% on a seasonally adjusted basis for the week ended Aug. 21, driven by refinancings, which zoomed even as the average rate for the 30-year fixed rate mortgage increased nine basis points. The Refinance Index gained 12.7% after rising by 7%, dropping by 7% and rising again by 7% in the previous three weeks. On an unadjusted basis, the MCI increased 6.3% compared with the previous week and 34.1% compared with the same week one year earlier. The MCI is calculated from the MBA's Weekly Mortgage Applications Survey. MBA stopped disclosing index values with the July 31 data release. Driven by an increase in applications for government loans, the Purchase Index increased by 1% over the previous week. This makes the fourth consecutive weekly increase in this component. The share of refinancing applications increased to 56.5% of total applications, up from 53.3% the previous week. For the second consecutive week the share of adjustable-rate mortgage applications remains at 6.5%. The average contract interest rate for 30-year fixed-rate mortgages fell to 5.24 % from 5.15%, with points increasing to 1.07 from 0.98 (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 by six basis points to 4.58%, while for one-year adjustable-rate loans, it increased by 8 bps to 6.74%. The MBA can be found online at http://www.mortgagebankers.org.

New-home sales unexpectedly spiked 9.6% in July following a 9.1% rise in June, another sign that the housing market could indeed be on the mend. According to figures compiled by the U.S. Census Bureau, sales of new single-family homes rose to a seasonally adjusted annual rate of 433,000 in July, compared to a 395,000 rate in June. The June rate was revised upward by 11,000 sales. Weiss Research analyst Mike Larson said sales were "hotter" than expected. "This is clear evidence the dramatic cut in housing starts, plus increasing consumer confidence and the targeted tax credit for first-time buyers is restoring stability to the new home market," he said. The federal government's $8,000 federal tax credit expires later this year. The National Association of Home Builders and other trade groups are lobbying to have it extended.

Seriously delinquent single-family loans held on the balance sheets of thrift institutions hit a record high of 5.5% in the second quarter, an increase of 180 basis points over the past six months, according to new figures released by the Office of Thrift Supervision. The 794 federal chartered thrifts hold $437.6 billion in single-family loans, $24.1 billion of which are 90 days or more past due. "Mortgages on one-to-four family properties comprise approximately 68% of troubled assets," OTS said, compared to only 23% of troubled assets during the thrift crisis in 1990 when commercial real estate loans were responsible for the failure of many S&Ls. The thrift delinquency rate increased from the first to the second quarter even through the largest thrift, Countrywide Savings, was merged into Bank of America, a national bank, in April. Countrywide Savings had $6.7 billion in troubled assets and it originated $30 billion in single-family loans in the first quarter. The remaining thrift institutions originated $62.4 billion in the second quarter, an increase of less than 1% from the first quarter if Countrywide is not counted. (Thrifts, including Countrywide, originated $88.1 billion in mortgages during the first quarter.) OTS reported that thrift institutions posted a $4 million profit for the second quarter, the first profit in nearly two years. First-quarter losses totaled $1.6 billion.

Colonial BancGroup, the holding company for the now-defunct Alabama bank, has filed for Chapter 11 bankruptcy protection, listing assets of just $45 million against debts of $380 million. Up until recently the bank - sold 10 days ago by the Federal Deposit Insurance Corp. to BB&T - was the nation's largest warehouse lender to nonbank mortgage lenders. Its largest unsecured creditor is the Bank of New York Trust Co., which is owed $254 million. The debt is related to the issuance of subordinated notes. A Florida affiliate of the bank is owed an additional $104 million.

John A. Bui of San Jose, Calif., pleaded guilty in federal court in San Francisco to charges related to his role in a mortgage fraud scheme. According to Joseph P. Russoniello, U.S. attorney for the Northern District of California, Bui and others assisted individuals who wanted to obtain mortgages from lenders. He routinely transmitted fraudulent loan applications containing false employment information and false and inflated income and bank account information to mortgage lenders. In addition, the loan applications were supported by false and forged documents that purported to verify the borrowers' employment, income and assets. Bui and other members of the scheme used a network of co-conspirators who agreed to pose as the borrowers' employers and falsely verify to the mortgage lenders the accuracy of the employment and income information listed on the loan applications. As a result of the scheme, Bui gained more than $3.5 million. Bui, who is currently in custody, is scheduled for sentencing on Nov. 6, 2009 before U.S. District Court Judge Susan Illston.

As a result of challenges brought on by new regulations and restrictions that are making it increasingly difficult for independent mortgage bankers and brokers to offer loans with competitive rates, Mortgage Network Inc., Lancaster, Pa., has merged with Source Mortgage, Wyomissing, Pa. Keith Alan Zielaskowski, president of Source Mortgage Corp. has been named branch manager for the Mortgage Network Wyomissing retail location. Mr. Zielaskowski, along with his entire team, will continue to operate in the same location but with the support of the Pittsburgh and Lancaster MNET locations. "Most large lenders are capitalizing on the increased demand for loans by raising rates, putting brokers in a position where they cannot compete," said Bob Johnson, senior regional vice president of Mortgage Network. "Brokers used to play a valuable role in the lending ecosystem, offering expertise and personalized service to their customers." He said brokers today are forced with either leaving the industry or joining a big institution, which typically compromises their customer service values. "It is not uncommon for large companies to charge higher rates with long processing delays of over 60 days," said Mr. Johnson.

Affiliated Mortgage Co., West Monroe, La., has become a preferred investor for members of the Lenders One mortgage cooperative. Under the new relationship, Lenders One's 135-plus members will have access to special terms offered by AMC, which, in turn, will be granted special marketing and promotional opportunities to generate business with members of the St. Louis, Mo., cooperative. AMC, a wholly owned subsidiary of Benchmark Bank, Dallas, focuses on correspondent lending and purchasing agency-quality whole loans servicing released. Both companies praised the alliance. AMC "has a strong commitment to correspondent lending, and ... a strong commitment to providing the type of customer service that is necessary to make a correspondent lending channel successful," said Lenders One CEO Scott Stern. "With investor partners such as Affiliated Mortgage, we can continue to give our members access to programs, products and pricing that will allow them to remain competitive in their markets." AMC President Dan Hastings said partnering with Lenders One is "a way to work with well-recognized, experienced mortgage bankers (throughout the country). Members have a reputation in the industry that is second to none in terms of producing quality loans, which is the type of relationship that we pride ourselves in building."

Freddie Mac reported a 30% drop in the issuance of mortgage-backed securities in July, compared to the previous month, as refinancing activity slowed dramatically. Freddie said it issued $43 billion in MBS in July, down from $61.1 billion in June when it experienced heavy seasonal deliveries from some of its largest customers. Refinancing activity also dropped off by 33% from the previous month. Purchases of refinanced loans totaled $34.1 billion in July, down from $50.9 billion in June. Freddie has issued $302.7 billion in MBS during the first seven months of this year, compared to $269.8 billion in the same period last year. The government-sponsored enterprise also reported a 17 basis point monthly increase in its single-family delinquency rate. The percentage of Freddie loans 90 days or more past due and in foreclosure rose to 2.95% in July, up from 1.01% a year ago.

House prices rose 1.4% in June following a 0.5% increase in May as the Standard & Poor's/Case-Shiller 20-city house price index registered its first consecutive monthly increase in nearly three years. However, Yale University professor Robert Shiller cautioned that it may not be a turning point due to high unemployment and the large inventories of foreclosed homes weighing on the market. Despite the upward momentum in house prices, "I would express great reluctance in forecasting where we are going from here, because we have conflicting signals right now," Mr. Shiller said. The June HPI shows that house prices are down 15.4% from a year ago and down 30.2% from their peak in the second quarter of 2006. However, only 2 cities, Detroit and Las Vegas, in the 20-city HPI experienced price declines from May to June. "For the second month in a row, we're seeing some positive signs," said David Blitzer, chairman of S&P's index committee.

President Barrack Obama wants Ben Bernanke to remain at his post at the Federal Reserve Board and has re-nominated the Fed chairman to serve for four more years. "Ben approached a financial system on the verge of collapse with calm and wisdom; with bold action and out-of-the-box thinking that has helped put the brakes on our economic freefall," the President said during a break from his vacation on Martha's Vineyard. The President said he wants Mr. Bernanke to "continue the work he's doing" to fix the financial system and engineer an economic recovery. And he stressed the need of financial regulatory reform to "ensure we never face another crisis like this again." Senate Banking Committee chairman Christopher Dodd, D-Conn., said re-appointing chairman Bernanke is "probably the right choice." However, Sen. Dodd said he has serious concerns about the Fed's failure to use its regulatory powers to protect consumers from abusive subprime lending practices. "Chairman Bernanke was too slow to act during the early stages of the foreclosure crisis, but he ultimately demonstrated effective leadership and his reappointment sends the right signal to the markets," Sen. Dodd said.

A Treasury Department proposal aimed at reforming the private-label securities market would give federal regulators some flexibility in setting risk retention standards for the banks. The legislative proposal Treasury recently sent to Congress requires securitizers to retain at least 5% of the credit risk, which cannot be sold or hedged. However, regulators can make "exceptions" and "adjustments" for banks provided they retain some risk and it leads to sound underwriting practices. "We felt it was important to give agencies some flexibility on the no hedging requirement to ensure banks were able to do appropriate risk management at the same time they were being required to retain some risk from their lending," a Treasury official said. The regulators could also lower the 5% threshold on credit risk retention for banks that securitize mortgages if some of the credit risk is retained by originators. "That would also be consistent with our aims," the Treasury official said.

In filing its petition for protection under Chapter 11 of the Bankruptcy Code Taylor, Bean & Whitaker Mortgage Corp., Ocala, Fla. indicated its bankruptcy estates might have funds available to distribute to unsecured creditors. The filing was made on Aug. 24 in the U.S. Bankruptcy Court, Middle District of Florida in Jacksonville. A statement from the company said it will operate on a scaled-down basis, and it could possibly liquidate its assets. Neil Luria of Navigant Capital Advisors has been named chief restructuring officer, while two directors, Bill Maloney and Bruce Layman, will direct TBW's business. The TBW statement recounted the timeline involving the suspension of its origination activities, adding that on Aug. 6, the now-failed Colonial Bank suspended approximately 100 TBW bank accounts, creating problems for the company in terms of processing borrower payments and making insurance and tax payments on their behalf. TBW said it is in discussions with the Federal Deposit Insurance Corp. "in hopes that this circumstance can be remedied immediately." A copy of the petition, which was obtained courtesy of Bankruptcy Creditors' Service Inc., Fairless Hills, Pa., contains over 2,900 creditors listed. The company checked off that it had over $1 billion in assets and $1 billion in liabilities. The company also checked off the box that stated it believed funds from the bankruptcy estate would be available to distribute to the unsecured creditors.

The Cortland Savings and Banking Company, a Youngstown-Warren, Ohio area state bank engaged in commercial and retail banking services, has opted to change LOS systems in an effort to create a more customer-driven experience. The company said it chose Mortgage Builder because it needed to modernize its residential real estate lending system in order to control costs and stay well within the compliance requirements of today's financial world, but it did not want to lose its personal touch and feel in order to gain efficiency. The company's old LOS was DOS-based and Cortland found that it was not adequate technology to help the lender keep up with new RESPA and Regulation Z changes.

Pricing vendor Mortgage Pricing Systems has integrated its LEAP! application with Ellie Mae's Encompass LOS. This integration enables Encompass users to automatically export a loan file into LEAP! and return key product and pricing data back to Encompass with a few clicks. Mortgage Pricing Systems distinguishes itself from other product and pricing engine providers by giving Encompass users immediate access to pricing, eliminating the need for additional data entry on the LEAP! website. Qualified programs and pricing are displayed in seconds. Furthermore, by combining simple presentation with numerous sorting and filtering options, users can modify desired rate, price and program (agency, FHA and VA) on a single page without constantly re-qualifying a loan.

Financial marketing firm Victory Financial Group LLC has integrated PriceMyLoan's automated underwriting and loan pricing engine into their online mortgage lending platform, myTurboLoan. The integration between the two companies enables consumers to instantly prequalify and accurately price loans for their custom loan scenarios. Victory Financial Group maintains a network of over 30,000 financial planners and real estate agents. The company provides technology solutions to these professionals in the form of custom websites, online tools and search engine optimization services. myTurboLoan is a featured tool that is used by their network to provide instant loan qualification and rate quotes to their clients.

Another defendant in the fraud case involving $12.6 million mortgage fraud scheme that involved 25 upscale residential properties in Lee's Summit and Raymore, Mo., has pleaded guilty in federal court. According to Matt J. Whitworth, acting U.S. attorney for the Western District of Missouri, Jerome Shade Howard of Anaheim, Calif., pleaded guilty before U.S. Chief District Judge Fernando J. Gaitan to his role in a scheme to buy new homes built by Jerry R. Emerick at inflated prices, obtaining mortgage loans for more than the actual sale price by providing false information to mortgage lenders, then keeping the extra proceeds. Howard admitted that he received more than $900,000 in illegal kickbacks as part of nearly $8.5 million in fraudulent mortgage loans. Howard is among 12 defendants who have pleaded guilty to the scheme. Sentencing for Howard will be scheduled after the U.S. Probation Office completes a pre-sentence investigation. Emerick pleaded guilty in April to conspiracy to commit mortgage fraud and wire fraud and to transfer funds obtained by fraud across state lines.

The Independent Cities Finance Authority, a Joint Powers Authority representing more than 7 million people in 66 California counties, has started a second-loan program for first-time buyers who are eligible for the $8,000 federal tax credit. ICFA will lend qualified buyers up to $8,000 at closing in the form of a second mortgage. Upon receipt of the credit, buyers can file amended returns for 2008 to receive the credit this year rather than waiting until they file their 2009 returns - the buyer must pay off the second lien. The second can be used to meet the 3.5% minimum downpayment requirement on an FHA loan, essentially eliminating the need for the borrower to come up with a downpayment. The program is available on a first come, first served basis through real estate brokers, residents or builders in any ICFA member city of ICFA. The 66 regions are: Alhambra, Azusa, Baldwin Park, Barstow, Bell, Bellflower, Brea, Carson, Chino, Claremont, Colton, Commerce, Compton, Covina, Downey, Duarte, El Monte, Fairfield, Fontana, Fresno, Gardena, Garden Grove, Glendale, Glendora, Hawaiian Gardens, Hawthorne, Hermosa Beach Huntington Park, Indio, Inglewood, La Habra, La Puente, Lakewood, Lancaster, Lawndale, Long Beach, Los Angeles, Lynwood, Monrovia, Montebello, Monterey Park, Morgan Hill, Norwalk, Palmdale, Paramount, Pico Rivera, Pomona, Rancho Cucamonga, Rialto, Riverside, Rohnert Park, San Bernardino, San Bernardino County, San Diego County, San Fernando, San Mateo County, San Juan Capistrano, Santa Clarita, Santa Rosa, Signal Hill, South Gate, Vernon, Vista, West Covina, Whittier and Yucaipa.

Wolters Kluwer Financial Services, Minneapolis, has acquired flood compliance solutions provider Stormwater Research Group, Austin, Tex. Terms of the agreement were not released. The deal allows WKFS to expand its presence in the flood determination field. Stormwater's products include basic and life of loan flood determination services. WKFS Settlement Services unit includes its own flood determination solution, PCi. Stormwater clients will get access to other PCi products including those that address compliance with the Community Reinvestment Act, the Home Mortgage Disclosure Act and other fair lending requirements. They will also have access to WKFS' financial crime control products plus an expanded suite of settlement services.

BBVA Compass originated $773 million in single-family loans in the second quarter and its acquisition of the failed Guaranty Bank, Austin, Texas, will expand the retail mortgage lender's branch network in Texas and California. "The acquisition creates the 15th largest U.S. commercial bank with approximately $49 billion in deposits in seven high growth states in the Sunbelt, include Texas, Alabama, Arizona, California, Florida, Colorado and New Mexico," according to BBVA, a global banking company based in Madrid. Compass Bank, based in Birmingham, Ala., gains 300,000 new customers through its deal with the Federal Deposit Insurance Corp. along with 103 branches in Texas and 59 branches in California. Compass now has 411 branches in Texas and 84 branches in California. Guaranty Bank exited the residential mortgage market several years ago to focus on commercial real estate and construction lending.