Originations

The Government National Mortgage Association has hired Bank of America to service the roughly $25 billion in FHA receivables it seized from Taylor, Bean & Whitaker last week, according to industry sources. One investment banking official also noted that TBW is a major servicer of Freddie Mac-guaranteed loans and that the GSE may soon make a decision regarding its rights. "They haven't serviced for Fannie in years," said the banker. At the end of March TBW, a non-bank, ranked 13th nationwide among residential servicers with $78.2 billion in receivables, according to the Quarterly Data Report. At press time officials at BoA, GNMA, Freddie Mac and TBW were not commenting or had not returned telephone calls about the matter. Last week the Federal Housing Administration suspended the Ocala, Fla.-based TBW as a lender which then caused it to pull the plug on its wholesale division. Shortly before that, TBW's $300 million financial rescue of its chief warehouse provider, Colonial Bancshares, fell apart after the Alabama bank reported a huge loss. Colonial is now the subject of a federal probe of its warehouse lending operations.

There are signs the housing markets are returning to a more normal state, according to a survey conducted for Relocation.com. The survey, conducted in June, found that 50% of those who moved recently did so to improve their living situation. A Relocation.com survey done in March found the recession had a much larger role in the decision to move. The top reason to move was living in a bigger and/or better home, cited by 26% of respondents. This was followed by better neighborhood, 24%; closer to family/friends, 12%; lower cost of living, 9%; and change in marital status, 6%. Those respondents who moved because of foreclosure or losing their jobs were among the categories in the survey that garnered a response of 3% or less. "Even in the midst of the toughest economy in years, people who are moving are still motivated by the same things that motivated them in the past: to make a better life," says Sharon Asher, founder and chairman of Relocation.com. "Despite the drumbeat of bad news, our survey indicates that consumers are starting to return to actively making positive moving choices, and fewer reactive moves due to the down economy."

United Guaranty Corp., the Greensboro, N.C.-based mortgage guaranty business of American International Group, New York, had an operating loss of $488 million for the second quarter 2009, an improvement over a loss of $518 million for the same period last year. American General Financial Inc., which is where the mortgage lending operation resides, had a second quarter operating loss of $202 million, a fall-off in performance from the $40 million loss for the second quarter of 2008. AIG said this fall-off reflects the sales of real estate portfolios as part of liquidity management efforts and a $22 million increase in the provision for finance receivable losses. AIG Financial Products, which held the toxic securities that ended up placing the parent company in dire straits, posted a $132 million operating loss for the period, much improved over a $6.2 billion operating loss for the second quarter 2008. AIGFP's results include $636 million in unrealized market valuation gains on its super senior credit default swap portfolio and $702 million of interest charges from borrowings from the parent company that are being eliminated in an internal consolidation.

The PMI Group Inc., Walnut Creek, Calif., had a loss of $222.6 million ($2.71 per share) for the second quarter of 2009, a slight improvement over the net loss of $246.3 million ($3.09 per share) for the same period last year. However, the results last year were boosted by a $4.7 million profit from units no longer part of PMI, namely PMI Australia, PMI Asia and PMI Guaranty. Total revenues at its U.S. mortgage insurance operations were $230.8 million for the second quarter of 2009, up from $219.9 million one year prior. The unit was able to improve on its second quarter 2008 loss of $225.9 million, with a loss of $175.8 million for the most recent period. Consolidated losses and loss adjustment expenses for the second quarter of 2009 were $480.8 million, down from $556.1 million for the second quarter of 2008.

Fannie Mae reported a $14.8 billion loss for the second quarter, compared to a $2.3 billion loss a year ago, and the mortgage giant is seeking a $10.7 billion draft from the Treasury Department to maintain a zero net worth. The government sponsored enterprise, which is in conservatorship, absorbed $18.8 billion in credit expenses due to defaults and foreclosures. The company benefited from a change in the accounting rules and recorded a $753 million impairment charge on its Alt-A and subprime private-label securities. In the first quarter, Fannie recognized a $5.7 billion "other than temporary impairment" charge, which contributed to a $23.2 billion loss for that quarter. The GSE also increased its reserves by $13 billion and ended the second quarter with a $54 billion single-family loss reserve. Guaranty fee income fell 5% to $1.7 billion in the second quarter from the previous quarter while net interest income rose 15% to $3.7 billion. Fannie said it is experiencing increasing default rates across its entire guaranty book of business and the serious delinquency rate on its $270 billion Alt-A portfolio hit 11.9% in the second quarter. Overall, 3.9% of the GSE's single-family mortgages are 90 days or more past due, up from 1.7% a year ago.

The Obama administration's Home Affordable Refinance Program jumped into second gear in July as Fannie Mae purchased 16,000 HARP refinancings in a single month. July purchases matched the total number of HARP loans the mortgage giant acquired during the whole second quarter. Fannie noted in its second quarter securities filing that lenders have been ramping up for the HARP program that allows homeowners with loan-to-value ratios of 80% to 125% to refinance their mortgages. But the number of refinancings completed was limited due to capacity. "As a result, we expect an increase in refinancings under this program in the third quarter... as second quarter applications are closed and delivered," Fannie said. Overall, Fannie acquired or guaranteed 843,000 refinanced loans in the second quarter, up 40% from the previous quarter.

Mortgage companies trimmed their payrolls of 500 full-time employees in June and continue to hold back on hiring despite stabilizing home sales and high demand for refinancings. The U.S. Bureau of Labor Statistics reported that employment in the mortgage banker/broker sector fell to 265,100 in June from 265,600 in May. The decline in mortgage industry jobs has leveled in the past few months, although the number of jobs is off by 16% since June 2008. Meanwhile, Friday's job report contains some encouraging signs that job losses are slowing, which could also slow foreclosures since layoffs have been driving up defaults. BLS reported that 247,000 U.S. workers lost their jobs in July, compared to 443,000 in the previous month. The nation's unemployment rate edged down slightly to 9.4%. [There is a one-month lag in BLS's reporting of mortgage industry employment data.

Colonial BancGroup Inc. said it is the target of a U.S. Department of Justice criminal investigation relating to its mortgage warehouse lending business. The Montgomery, Ala., company said it is cooperating with the investigation which concerns accounting irregularities on more than one year's audited financial statements and regulatory financial reports. The company also revealed it has provided documents to the Special Inspector General for the Troubled Asset Relief Program and the Securities and Exchange Commission. A Justice Department spokesman said the agency is not commenting on Colonial. Colonial also said its bank subsidiary received notice that the Alabama State Banking Board will meet on Aug. 12 at which time Colonial Bank will be asked to consent to the appointment of the Federal Deposit Insurance Corp. as receiver or conservator if and when the state regulator deems necessary. This news wraps a bad week for Colonial as it reported the death of its recapitalization deal with Taylor, Bean & Whitaker, a $606 million second quarter loss, and a raid by the TARP IG on its warehouse office in Orlando as well as the abrupt closing of TBW.

American Advisors Group, a reverse mortgage lender based in Irvine, Calif., said it has both a new management team and an infusion of investment capital. The capital comes from JAM Equity Partners LLC, El Segundo, Calif.; an affiliate had committed to make a $4 million investment in the firm. "The combination of a strong capital base from an industry-experienced partner — and one of the most seasoned and accomplished teams in the industry — positions us to be a substantial player in the reverse mortgage space in the coming year," said Reza Jahangiri, president of American Advisors Group. AAG is starting a direct mail campaign and television campaign with the theme of "The Best Advice for a Better Life." The campaign will have a celebrity spokesman whose name was not disclosed.

There are two more lenders that have joined the National Reverse Mortgage Lenders Association's new Wholesale Lenders Program. The companies are Live Well Financial Inc., Richmond, Va., and Generation Mortgage Co., Atlanta. Both are being treated as charter members of the group along with Bank of America Home Loans, Metlife Home Loans and Genworth Financial Home Equity Access Inc. Senior Lending Network is also listed as a participant, but the company said its Belgium-based parent is no longer making funds available for reverse mortgages. Sherry Apanay, senior vice president of wholesale lending at Generation, said "Wholesale lenders working together for the good of the reverse mortgage industry should make us all stronger."

The Mortgage Bankers Association has released a draft model whole loan purchase agreement proposal for a 30-day comment period. The 95-page, copyrighted draft whole loan sale and servicing agreement provides standard formatting and text for standard practices and is aimed at reducing the time, effort and cost of legal and due diligence reviews. It also includes standard formats for transaction-specific terms. The group said the agreement is part of an initiative to help increase liquidity and efficiency in the non-conforming residential mortgage market and that its use is voluntary. More information can be found on the MBA's website at http://www.mortgagebankers.org.

Second quarter 2009 commercial and multifamily mortgage loan originations were 50% higher than during the first quarter of 2009, but remained 54% lower than during the same period last year, according to the Mortgage Bankers Association's Quarterly Survey of Commercial/Multifamily Mortgage Banker Originations. "Commercial and multifamily mortgage originations continue to feel the effects of the recession and the credit crunch," said MBA's vice president of commercial real estate research Jamie Woodwell, adding that the increase in volumes between the first and second quarter of this year "follows a traditional seasonal increase in the second quarter." According to the MBA, the 54% year-over-year decrease in commercial/multifamily lending activity during the second quarter was driven by decreases in originations for all property types. When compared to the second quarter 2008, the decreases included an 81% decrease in loans for office properties, a 77% decrease for hotel properties, a 70% decrease for health care properties, a 65% decrease for industrial properties, a 51% decrease in retail property and a 21% decrease in multifamily property. Compared to the first quarter of this year, second quarter originations for health care properties saw a 173% increase. There was a 129% increase for hotel properties, a 93% increase for retail properties, a 73% increase for multifamily properties, but a 28% decrease for office properties and a 46% decrease for industrial properties.

The 30-year fixed-rate mortgage averaged 5.22% with an average of 0.6 points for the week ending Aug. 6, according to the Freddie Mac Primary Mortgage Market Survey. This was down from the previous week when it averaged 5.25%. A year ago, the 30-year FRM averaged 6.52%. The benchmark 10-year Treasury yield has been pressuring long-term rates upward recently but it appears that a plunge in that yield on July 31 offset the more recent increase on a relative basis when averaged over the course of the week. The 15-year FRM over the course of the week averaged 4.63% with an average 0.6 point, down from the previous week when it averaged 4.69%. A year ago, the 15-year FRM averaged 6.10%. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 4.73% with an average 0.6 point, down from the previous week when it averaged 4.75%. A year ago, the five-year ARM averaged 6.05%. One-year Treasury-indexed ARMs averaged 4.78% with an average 0.5 point, down from the previous week when it averaged 4.80%. A year ago, the one-year ARM averaged 5.22%.

Taylor, Bean & Whitaker Mortgage Corp., Ocala, Fla., has suspended origination operations effective immediately. The company was suspended or terminated as a seller/servicer on Aug. 4 by the Federal Housing Administration, Ginnie Mae and Freddie Mac. In a memo, the company said it was unsuccessful in its efforts to reverse those decisions and as a result must cease all origination activities immediately. Loans currently in its pipeline will not be funded, the memo states. The memo also states that the company is working with the agencies regarding its servicing operation and expects to continue to service mortgage loans as it restructures its business. However, the announcement from Ginnie Mae said it was taking control of a $25 billion mortgage servicing portfolio of its products.

PHH Corp. generated a $106 million profit for the second quarter, up from $16 million a year ago, mainly due to the strong performance of its mortgage production and servicing business. The Mount Laurel, N.J.-based company said it had stronger mortgage production margins, a higher volume of first mortgage originations and an increase in mortgage servicing rights mark-to-market valuation and benefited from cost efficiency efforts in both segments. PHH Corp. originated $11 billion in single-family loans during the quarter and the production unit posted earnings of $82 million. The servicing unit posted $86 million in earnings. Acting chief executive and president George Kilroy said PHH has reduced its fixed general and administrative costs by $14 million year-to-date over the prior year period. "Moving forward, we expect the near-term environment to provide attractive consumer mortgage interest rates, and we are well-positioned to leverage those dynamics. We also believe that the wider production margins we are currently experiencing are reflective of a longer term view of the returns required to manage the underlying risk of a mortgage production business, which is another encouraging trend. Our mortgage servicing portfolio may continue to see some erosion from loan defaults and prepayments due to ongoing recessionary trends. However, the servicing we are now adding is more valuable than the current portfolio given lower note rates, better credit quality and a longer expected life," he said.

UBS during the second quarter still was working on reducing monoline insurance risks that can be traced partially back to U.S. residential real estate finance exposures, but it said in an earnings report that as of July it had agreed to commute certain trades with insurers, mitigating those bond insurance risks. Monoline risk exposures, about one-third of which were linked to credit protection on subprime and other U.S. residential mortgage-backed security collateralized debt obligations, were among "identified risk concentrations" listed in the company's first-quarter financials. But UBS said that during the period and in July it "agreed to commute certain trades with three monoline insurers which significantly decreased remaining exposures." During the second quarter, UBS took a loss of 1.4 billion Swiss francs ($1.3 billion). This was greater than the net loss of 395 million Swiss francs ($372 million) seen during the same period last year but an improvement over the loss of 1.97 billion Swiss francs ($1.86 billion) seen in the first quarter. The company said its second quarter loss "was driven by lower losses on risk positions now exited or in the process of being exited by the investment bank" and "significantly affected" by charges for own credit on financial liabilities designated at fair value, restructuring and goodwill impairment charges in relation to the sale of a unit.

Barclays PLC saw a $1.1 billion loss on its U.S subprime loans during the first half of 2009 but the London banking company still generated £2.98 billion ($5.05 billion) in pretax profit for the period. Overall, Barclays saw about £4.68 billion ($7.93 billion) in total gross losses due largely to real estate and mortgage-related writedowns. The company said in its interim results that £1.44 billion ($2.44 billion) of the losses stemmed from commercial real estate, £654 million ($1.11 billion) came from U.S. subprime credit residential mortgages, £549 million ($930 million) stemmed from monoline insurer-wrapped commercial mortgage-backed securities, £398 million ($674 million) came from alternative-A credit residential mortgages and £256 million ($434 million) came from monoline-wrapped U.S. residential MBS.

Even though Radian Group Inc. had a mortgage insurance provision of $142.8 million because of higher delinquencies, the company still saw net profits of $231.9 million ($2.82 per share) for the second quarter. For the same period last year, the Philadelphia-based company lost $392.5 million ($4.91 per share). Still mortgage insurance claims paid of $167.7 million were lower than Radian forecast. For the third quarter, the company said it expects between $275 million and $300 million in mortgage insurance claims; for the full year, it predicts $1.1 million, down from between $1.2 million and $1.4 million. Radian wrote $5.5 billion of primary new insurance during the quarter. The company trumpeted the fact that nearly all of it was prime quality, with 98.4% having a credit score of 680 or higher. Furthermore, in the 2009 book of business, Radian said there has been a significant decrease in the number of early payment defaults, which shows it has improved its underwriting. The mortgage insurance segment had net income of $13 million, compared with a net loss of $434 million one year ago. Radian's most profitable segment was its financial guaranty business, with net income of $215.7 million, up from $32.5 million for the second quarter of 2008. As of June 30, Radian had a primary insurance default rate of 14.84%, compared with 8.36% on the same day in 2008. Persistency as of the end of the second quarter 2009 was 87%, up from 81.2% a year ago.

Fitch has downgraded 270 bonds from 59 residential mortgage-backed securities transactions to "D." Forty-nine of the transactions are second-lien deals and the rest of the transactions are "scratch and dent" or subprime deals. All of the bonds had previously had CC or C ratings, indicating a default was expected. A D rating indicates a principal writedown has occurred.

Often pointed to as the poster child for real estate excess, the Las Vegas housing market is showing some signs of improvement, local agent Rob Jenson reports in his monthly market study. "Lower interest rates and a drop in the average sales price to under $158,500 for homes priced under $1 million is attracting more bargain-hunting foreclosure and short sale buyers," says Mr. Jenson, whose Jenson Group flies under the Re/Max banner. The recent spate of sales in Sin City's lower price ranges has brought down the inventory to a healthy 5.9-month supply. And if houses under contract are subtracted, the supply drops to 3.1 months. That's the good news. The bad news is that more than four out of five sales are still distressed deals, with foreclosures outselling short sales, seven-to-one, even though there are four times more short-sale properties on the market as REO. Overall, there were nearly 19,000 listings on the market in July, according to Mr. Jenson's "Las Vegas Real Estate Market Report." Some 3,300 properties sold in the month — 2,750 of them under duress — at an average price of $158,392, a drop of $84,620 from July a year ago.