Originations

Troubled mortgage banker Taylor Bean & Whitaker has been hit with a class action law suit on behalf of 1,000 former employees who found themselves jobless last week when the lender's fortunes took a turn for the worse. The law firm of Outten & Golden LLP sued the non-bank mortgage firm in U.S. District Court for the Middle District of Florida, seeking back pay and health care benefits under the Worker Adjustment and Retraining Notification Act. The firm says the sudden loss of pay and benefits are "causing many employees immense hardship." Meanwhile, Bank of America has sued the troubled Colonial BancGroup — the nation's largest warehouse provider — seeking the return of $1 billion in collateral. BoA is the collateral agent for $1 billion in loans made to Ocala Funding LLC, a commercial paper vehicle sponsored by TBW. Taylor, Bean & Whitaker — which had hoped to rescue Colonial — is expected to file for bankruptcy protection soon. (See related story on this website).

First American Flood Data Services, Austin, has launched a new website dubbed FAFlood.com designed to give users efficient access to a range of flood determination services, products and information from a single source. The site introduces features and functions that include streamlined navigation, and aims to provide more useful tools and more detailed information about services offered. Features on the website, such as event schedules, legislative updates and upcoming map revisions are designed to make it easier for customers to track developments at First American Flood Data Services and within the flood risk management industry. Additional upgrades include a virtual tour of the First American Flood Data Services facilities.

Farmer Mac earned $25.4 million ($2.49 per share) in the second quarter, when its profits were driven by gains in the values of financial derivatives and recoveries of previously recorded losses related to loans for ethanol plants. For the same period last year, the company earned $21.4 million ($2.13 per share). Its outstanding portfolio of loans, guarantees and commitments stands at $10.4 billion as of the end of the second quarter. Farmer Mac's capital surplus, just $13 million at the end of last year, now stands at $100 million. Excluding ethanol loans, 90-day delinquencies were at $23.5 million as of June 30, 2009, down from $27.7 million on March 31, 2009.

Standard & Poor's is considering offering "stressed recovery ratings" for all senior tranches of certain residential mortgage-backed securities that originally received S&P's top rating but subsequently saw severe downgrades. The new ratings would be offered on U.S. prime, alternative-A and subprime RMBS that originally carried a AAA rating but later slipped to a speculative grade rating of BB+ or below. They would be designed to complement a security's current credit rating by providing S&P's opinion of the projected principal recovery on a security if it defaults. The rating agency is currently planning to express this as a percentage of the security's initial par amount but is seeking input on, among other things, whether market participants might want to see this expressed in another way.

Rising interest rates contributed to a declining Mortgage Bankers Association Market Composite Index for the week ended Aug. 7 when compared with the previous week, but continued increases in purchase activity suggest a housing recovery could help bolster volumes going forward. The MCI is calculated from the MBA's Weekly Mortgage Applications Survey; it was down 3.5% on a seasonally adjusted basis from the week ended July 31 and on an unadjusted basis, the Index decreased 3.7% compared with the previous week and increased 16.1% compared with the same week one year earlier. MBA stopped disclosing index values with the July 31 data release. The Refinance Index decreased 7.2% from the previous week. The seasonally adjusted Purchase Index increased 1.1% from one week earlier. This is the third gain in the Purchase Index in the past four weeks, MBA said. Looking at the Purchase Index's seasonally adjusted, four-week moving average gain of 0.8%, MBA said this behavior is consistent with the view that home sales hit bottom earlier this year and are now in a gradual recovery. The share of refinancing applications decreased to 52.3% of total applications from 54.2% the previous week and the seasonally adjusted, four-week moving average for the Refi Index is down 2.0%. The adjustable-rate mortgage share of activity increased to 5.8% from 5.4% of total applications the previous week. The average contract interest rate for 30-year fixed-rate mortgages increased to 5.38% from 5.17%, with points increasing to 1.18 from 1.02 (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 11 basis points to 4.71%, while for one-year adjustable rate loans, it increased by 4 BP to 6.71%.

Top executives from the National Association of Mortgage Brokers are set to meet with the new Federal Housing Administration commissioner on Aug. 19 over a plethora of issues. These include "Kiddie Condos" where a parent's credit is used (according to one trade group memo) for loan qualification purposes. A copy of the meeting's agenda was provided to National Mortgage News by an industry source. NAMB also hopes to discuss with FHA commissioner David Stevens the new RESPA rule and how it will affect the agency's use of origination and discount points. Also possibly on the agenda: implementation of risk based pricing rules, and the possible involvement of the Government National Mortgage Association in warehouse lending. A spokesman for NAMB confirmed that the meeting is set but said the agenda has not been finalized.

Freddie Mac forced its seller/servicers to buy back $951 million of bad mortgages during the second quarter, a 21% increase from the first quarter. Fannie Mae also saw its outstanding buyback requests continue to increase in the second half of 2009 - but the GSE, unlike Freddie, does not disclose the dollar amount in its securities filings. Lenders that sell loans to Freddie and Fannie are required to make "representations and warranties" that the loans comply with the GSEs' underwriting requirements. If the loans do not perform as expected and underwriting deficiencies are flagged, the lender is obligated to buy back the loans. The GSEs are concerned that their credit losses will grow if lenders cannot muster the financial wherewithal to meet their buyback obligations. Freddie recently noted that it terminated Taylor Bean & Whitaker's status as a seller/servicer on Aug. 4. "We are in the process of determining our total exposure to TBW in the event it cannot perform its contractual obligations to us. The amount of our losses in such an event could be significant," Freddie said in its second-quarter securities filing. The Federal Housing Administration recently suspended TBW as a lender.

Weak house prices are likely to continue in the Netherlands due to a high degree of leverage in households and a continuing economic recession, according to a Moody's Investors Service report on Dutch RMBS trends. Delinquencies of more than 60 days in Dutch residential mortgage-backed securities increased slightly to 0.42% in the second quarter compared to 0.35% during the same period a year ago, Moody's said. Weighted average cumulative foreclosures during the same two comparative periods jumped to 0.42% from 0.35%. The rating agency said it did not rate any new Dutch RMBS during the second quarter.

First American CoreLogic, Santa Ana, Calif., has launched a free Apple iPhone application that enables individuals to view market data on over 140 million residential properties in the United States using their iPhone. The product, called RealQuest Home Value Pro, provides mobile access to First American's database of property data. Users of RealQuest Home Value Pro can view property values, foreclosure information and housing trends. Specifically, RealQuest Home Value Pro features include estimated home values for a given subject property and neighboring properties, nearby foreclosure data including pre-foreclosures, auctions and real estate owned (REO) properties; graphs of 12-month median home price trends, foreclosure rates and home sales trend activity; interactive maps to view estimated home values in a neighborhood; and sharing tools that enable real estate agents and homebuyers to save, organize and share properties in real time.

Allied Home Mortgage Capital Corp., Houston, has entered into a consent order with the Georgia Department of Banking and Finance over allegations it transacted business in the state with a person who was unlicensed or unregistered. Back in June, the Department sought to revoke Allied's license and served cease and desist orders on company co-owners Jim Hodge and Kathy Hodge. This consent order settles those charges. The order calls on Allied to provide "an appropriate level of supervision" to its employees, perform background checks on new employees no later than 10 days after hiring and give $1,000 to State Registry LLC, to support the Nationwide Mortgage Licensing System. State Registry LLC is a subsidiary of the Council of State Bank Supervisors, which operates NMLS along with the American Association of Residential Mortgage Regulators. A call to Allied for comment was not returned by press time.

Sales at new-home communities in California continued to level off in June, according to a joint report from the California Building Industry Association and Hanley Wood Market Intelligence. Sales in projects of 10 units or more were 26% below June 2008, the same percentage decline as in May. Sales of homes and condominiums totaled 2,607 for the month, compared to 3,528 a year ago. Jonathan Dienhart, director of published research at HWMI, said the June numbers are slightly less encouraging than prior months. "We had been seeing year-over-year decline percentages steadily shrink, yet June's figures are essentially the same as last month so that's a bit of a stall in the trend," Mr. Dienhart said. "It will definitely take a longer time to start mounting a significant recovery with home purchase tax credits due to expire and the broader economy continuing to struggle." Sales of single family homes were down by 38% in June, while sales of townhouses and "plexes" — duplexes, triplexes, etc. — were down 16%. Condo sales, on the other hand, were up 9%. Compared with the same period last year, the median base price of homes sold dropped by 5%.

A former president of the National Association of Mortgage Brokers says the collapse of Taylor, Bean & Whitaker's wholesale division may not be as disastrous as it sounds for loan brokers. "The void they left will be filled not by one but by many," said Marc Savitt, who recently stepped down as NAMB's annual president. "It will be absorbed," he said in an interview with National Mortgage News. Mr. Savitt, who manages a small brokerage shop in West Virginia, said he has not had any trouble funding loans with the wholesalers he works with. "We did use TBW," he said. "They were a good shop and offered good service." Last week the Ocala, Fla.-based TBW closed its production division after the company was suspended by the Federal Housing Administration. It remains as a servicer.

Citigroup, which has not been an active warehouse lender in recent years, said Tuesday it has earmarked $2 billion in funds for warehouse lending commitments to non-bank mortgage lenders. The money is part of $6 billion in new funding initiatives that come from government Troubled Asset Relief Program funds. Citigroup, which owns the nation's fourth largest residential lender, said it will provide mortgage bankers with "collateralized lines of credit that are backed primarily by residential mortgages which are eligible for sale" to Fannie Mae, Freddie Mac, and the Federal Housing Administration. Few other details were available at press time.

The bulk of more than 150 recent CMBS-backed synthetic CDOs ratings lowered in a recent Standard & Poor's review could face could face further downgrades. Standard & Poor's has lowered 179 ratings from 63 commercial mortgage-backed security-backed synthetic collateralized debt obligation transactions, 169 of which remain on CreditWatch Negative. S&P also lowered five ratings from five CDO retranchings referencing residential MBS transactions and placed one of these ratings on CreditWatch Negative. The rating changes follow a monthly review of the synthetic CDO sector in which 173 ratings from 116 U.S. corporate-backed transactions also were lowered. S&P left 65 of these ratings on CreditWatch Negative.

Standard & Poor's Ratings Services has lowered its ratings on 37 classes from three residential mortgage-backed securities transactions backed by U.S. prime jumbo loans, alternative-A and subprime credit mortgage collateral issued in 2004 and 2006. S&P also removed 22 of the lowered ratings from CreditWatch with negative implications. "Although cumulative losses were generally low compared with our projected lifetime losses for the transactions reviewed, we are projecting an increase in losses due to increases in delinquencies and the current negative condition of the U.S. housing market," S&P said. In addition to lowering the ratings of 37 classes, S&P affirmed its ratings on 13 classes from the same transactions.

Ambac's ratings by Standard & Poor's Corp. appear relatively steady for now, but continuing residential mortgage-backed securities deterioration held to be largely responsible for the company's second quarter loss of close to $2.4 billion could be a concern going forward. Standard & Poor's analysts said they have revised their outlook on Ambac Assurance Corp.'s counterparty credit rating to negative from developing and that their outlook for Ambac Financial Group Inc.'s counterparty credit rating remains negative. But they also noted that they continue to consider the outlook for AAC's financial strength rating outlook to be "developing" because they could raise that rating going forward.

The Federal Home Loan Bank of San Francisco had net income of $303 million for the second quarter of 2009, up from $233 million for the same period last year, as it benefited from $168 million in net gains associated with derivatives, hedged items and financial instruments carried at fair value. However, FHLB-SF also took a non-credit impairment charge of $1.2 billion and a credit impairment charge of $88 million related to non-agency mortgage-backed securities in its held-to-maturity portfolio. The impairment was due to a lack of liquidity in the MBS market affecting the valuation of the securities. As of June 30, 2009, FHLB-SF had a regulatory capital-to-assets ratio of 6.1%, well above its 4% regulatory requirement, and its risk-based capital was $14.6 billion, also well above the $8.2 billion regulatory requirement.

The net loss for Triad Guaranty Inc., Winston-Salem, N.C., ballooned to $359.4 million ($23.91 per share) for the second quarter of 2009, compared with a loss of $55.2 million ($3.68 per share) for the first quarter of 2009 and $198.8 million for the second quarter of 2008 ($13.36 per share). Company president and chief executive Ken Jones said the cure rates on loans in default had a further decline during the second quarter of 2009, plus Triad had higher severity on settled losses. Settled losses increased significantly at the company as more loans from its 2006 and 2007 book of business completed the foreclosure process. Triad increased its loss reserves by $279 million during the quarter. As of June 30, 2009, total insurance in force at Triad, which is in run-off status, fell to $57.5 billion, a decline of just under 5% from March 31, 2009. Net loss and loss adjustment expenses at Triad were $431.4 million for the second quarter of 2009, compared with $101.6 million for the first quarter of 2009 and $292.7 million for the second quarter last year. During the second quarter, Triad recognized benefits of $285.4 million from risk-sharing arrangements, including captive reinsurance programs. This compares with $97.4 million in the first quarter of 2009 and $52.4 million in the second quarter last year.

The Comptroller of the Currency is urging national banks to take a look at the Federal Housing Administration loan program that can be used to restore foreclosed homes and help stabilize neighborhoods. The FHA 203(k) program provides government insured financing for the purchase and renovation of a property in a single loan transaction. OCC is promoting the benefits of FHA 203(k) loans in its "Community Development Insights" magazine. "This product can be used by banks to develop new business, mitigate risk, enhance profitability, as well as assist in the revitalization and stabilization of neighborhoods negatively impacted by the current foreclosure crisis," OCC says in the magazine. FHA commissioner David Stevens said he welcomes OCC's efforts to increase bank participation in the FHA loan program "With so many bank-owned properties in need of repairs, this program offers a great way for homebuyers to finance both the purchase and rehabilitation of these homes," Mr. Stevens said.

Freddie Mac reported a profit of $768 million in the second quarter and positive net worth of $8.2 billion so it will not have to seek additional capital from the Treasury Department this quarter. It is a remarkable turnaround for a company that posted a $9.9 billion loss in the first quarter. But after the paying the Treasury $1.1 billion in dividends for previous capital infusions, Freddie had a net loss per common share of $0.11 for the second quarter. "We are pleased that our financial results allow us to finish the quarter with a positive net worth," Freddie interim chief executive John Koskinen said. But he said the company remains cautious due to the recession and rising foreclosures. Freddie absorbed $5.2 billion in credit-related expenses in the second quarter, compared to $9.1 billion in the first quarter. The serious delinquency rate on its $172 billion Alt-A portfolio hit 9.44% in the second quarter. Overall, 2.9% of the GSE's single-family mortgages are 90 days or more past due. "Second quarter results were driven primarily by $4.3 billion in net interest income mainly due to lower funding costs, as well as $4.2 billion in gains on the company's derivative portfolio," Freddie said.