Originations

The Obama administration has sent a legislative package to Capitol Hill that strengthens supervision of credit rating agencies and improves disclosures about the risks of structured mortgage-backed securities. The administration wants ratings on structured products to have different symbols than corporate bonds allowing investors to know there is a difference between the two. Second, the rating agencies would provide a "clear report" containing assessments of data reliability, the probability of default, the estimated severity of losses in the event of default, and the sensitivity of a rating to changes in assumptions on structured products, said assistant Treasury secretary Michael Barr. The administration's proposals also are designed to discourage issuers from "shopping" for the best rating. Mr. Barr said the administration "strongly supports" a proposed rule issued by the Securities and Exchange Commission last year that requires issuers to make the same data they provide to their rating agency available to all rating agencies. This sharing of data is expected to encourage other rating agencies to provide additional, independent analysis to the market.

Thanks, in part, to last year's acquisition of Wachovia Corp., Wells Fargo & Co. doubled its residential loan production in the second quarter, including a 111% jump in fundings through correspondent mortgage bankers and loan brokers. Overall, Wells funded $129 billion in home mortgages during the period, $57 billion of which came in through third-party sources. The balance was originated through its retail branches and online. However, the company - which released record earnings in 2Q -- provided no breakdown on how much of its fundings came solely from brokers. (The TPO figure was reported as one.) Meanwhile, home equity or second-lien fundings plummeted to $1 billion during the period compared to $3 billion a year ago. Late last year the bank bought Wachovia, a large investor in payment-option ARMs. The Wachovia franchise included the bank's existing residential production unit, which had been bolstered by its 2006 purchase of Golden West Financial of Oakland, then one of the largest funders of POAs. The GWF POAs turned out to be a major headache for both Wachovia and now Wells because of soaring delinquencies. In the second quarter Wells reported residential charge-offs of $1.8 billion, a majority of which are tied to second liens. Wells has $7.6 billion in nonaccruing home loans on its books and another $7.5 billion in nonaccruing commercial loans. Wells is the nation's second largest residential servicer ($1.6 trillion) and largest commercial servicer ($470 billion), according to the Quarterly Data Report.

A private equity investment appears to have saved and maintained the ongoing operation of loan origination system provider MortgageDashboard, which last week said it had lost its funding and was planning to shut down. On its website, the company said, "MortgageDashboard has been purchased by a private equity group and will continue to operate with no interruption to service." Specifically, Catalizador Private Equity Group has acquired a majority interest in MortgageDashboard. The deal consists of a buyout of both major shareholders and a private equity group. MortgageDashboard's new funding will be used to fuel a new leadership team, finalize development on MortgageDashboard's new mortgage banking software solution and to sustain daily operations for its client base.

Federal Housing Administration endorsements are up 83% compared to a year ago, as the federal mortgage insurance program ends its third quarter of the 2009 fiscal year. As of June 30, FHA has endorsed 1.39 million single-family mortgages, according to an FHA outlook report. This represents roughly an estimated $255 billion in loans, based on an $184,000 average loan size. Congress authorized FHA to insure up to $315 billion in loans in FY 2009. So the agency could bump up against this loan limit before Sept. 30. FHA reports also show that defaults (loans 90 days or more past due) were 7.42% in May, up from 6.47% a year ago. Credit scores of new FHA borrowers also are rising. In April, the average FICO score was 661, up from 628 a year ago.

Freddie Mac has named Charles "Ed" Haldeman Jr., a former mutual fund executive, its new chief executive office, effective this August. About a month ago his name leaked out in relation to the CEO job and was considered a done deal but needed the approval of Freddie's regulator, the Federal Housing Finance Agency. FHFA signed off on the nomination this week. Mr. Haldeman, 60, recently stepped down as chairman of Putnam Investment Management after a seven-year term. He succeeds John Koskinen who had been serving as interim CEO since March. Freddie Mac, which continues to lose money, has been operating under a government conservatorship since September. It's expected to release second quarter earnings some time in August.

The Federal Reserve Board is expanding its consumer protection role by performing targeted exams of mortgage banking subsidiaries of bank holding companies, according to Fed chairman Ben Bernanke. The Fed traditionally has taken a hands-off approach to the non-bank subsidiaries of BHCs, but last year it engaged in targeted exams with state banking regulators. "In looking at our responsibility to enforce consumer protection laws, we believe a somewhat more pro-active stance is justified," Mr. Bernanke told a congressional panel Tuesday. He acknowledged that the Fed's authority over the non-bank subsidiaries of BHCs is a "bit vague" and said it would be helpful if Congress clarified the Federal Reserve Board's authority. The Fed chief also made it clear that he does not like the Obama administration's regulatory reform proposal to create a Consumer Financial Protection Agency, which would strip the Fed and the other federal banking regulators of their consumer protection role. He stressed that the Fed is committed to consumer protection and the board has done a "good job" in the past few years. "If you allow us to continue to work in this area we will be interested in doing so," he told the House Financial Services Committee.

House Financial Services Committee Chairman Barney Frank said Tuesday that he will postpone next week's planned vote on legislation to create a consumer protection agency until after the August recess.The delay was due in part to the panel's busy schedule, but committee officials also said they wanted to give consumer groups more time to respond to lobbying by the banking industry, which is opposed to the bill. Industry lobbyists said this week that their arguments to curb the powers of a new agency were gaining traction. Steve Adamske, a spokesman for Frank, said consumer groups needed time to respond to industry arguments against the new agency and efforts to limit its authority. "Consumer groups and advocates have planned a ground campaign in August and we want to give them time to preserve this agency," said Adamske. The goal is to allow lawmakers more time to "hear from their constituents," he said.

Lee Farkas, chairman and founder of Taylor, Bean & Whitaker — the lead investor in the recapitalization of Colonial BancGroup of Alabama — said he doesn't know if the deal is going to happen. In a brief interview with National Mortgage News, Mr. Farkas said he is not heard anything about the status of the investment lately. Asked whether he thought the recap of Colonial would happen, he said, "I don't know." He declined to comment further. Colonial is the nation's largest warehouse lender to non-depository mortgage banking firms. TBW is slated to invest $100 million in Colonial and has lined up additional commitments of $200 million. With that money committed, Colonial has applied for $550 million in Troubled Asset Relief Program funds to stabilize its capital position. In a new research note, Sandler O'Neill said there has been a "deafening silence" from banking regulators regarding the recap plan. (For the full story see the print edition of NMN.)

Reed Kyle Diehl, a former player with the Tennessee Titans from Coto de Caza, Calif., pleaded guilty in U.S. District Court to federal fraud charges related to a scheme in which he collected funds with false promises of high rates of returns on investments in condominium projects in Mexico. According to the U.S. attorney's office for the Central District of California, Diehl fraudulently collected deposits for lines of credit for people who desired financing for construction and development projects in Mexico. Despite paying him sometimes millions of dollars, none of the victims ever obtained a line of credit. Diehl caused losses of more than $5 million. Judge David O. Carter has scheduled sentencing for Sept. 28. Diehl was initially charged and arrested in this case in March 2008. After being freed on bond, Diehl's bond was revoked in January after he attempted to enter into a real estate transaction for a $3.5 million house using a false name and someone else's Social Security number.

The latest gross mortgage lending estimates for the United Kingdom show that, despite a seasonal boost in the latest month, several underlying weaknesses persist. Gross mortgage lending in June rose an estimated 17% month-to-month to 12.3 billion pounds ($20.3 billion) from 10.5 billion pounds ($17.3 billion) the previous month, according to the Council of Mortgage Lenders, London. However, the June figure represented a 48% decline from 23.8 billion pounds ($39.3 billion) the same month a year ago, and the total estimate for gross mortgage lending between April and June of this year matched the first quarter's £33.3 billion ($54.9 billion). These are the lowest quarterly totals seen since the first quarter of 2001. "The pick-up in June's lending largely reflects seasonal factors, and these may well support lending volumes at moderately higher levels over the rest of the summer. But the combined effects of the restricted nature of mortgage funding, reduced number of active lenders, weak labor market and limited consumer demand are likely to hold back any significant and underlying improvement," CML economist Paul Samter said.

The Federal Reserve's first subscription involving legacy commercial mortgage-backed securities attracted $668.9 million in requests for TALF financing, but analysts at Bank of America/Merrill Lynch Research expect better participation in the second subscription on August 20. "Over the next month we think more investors will gear up and ... the next subscription should see greater participation," the analysts said in their weekly Mortgage Investor report. They noted that the Fed just opened the Term Asset-Backed Securities Loan Facility to legacy CMBS and some investors held back because of the "lack of clarity about which bonds would be rejected because of credit concerns" at the New York Federal Reserve Bank. "As a result our assumption is that many that participated in the first go-around were simply "testing the waters.''

Fortress Investment Group, which controls a mid-sized subprime servicing operation, has hired former Fannie Mae chief Daniel Mudd to be its new chief executive. Mr. Mudd was forced out of the money-losing Fannie Mae in September when the company and its sister firm, Freddie Mac, were placed into separate conservatorships. Mr. Mudd became CEO of the GSE in 2004 in the wake of a $6 billion accounting scandal where the firm's former management understated its prior years earnings. Under Mr. Mudd's stewardship Fannie became a large investor in MBS backed by alternative-A credit loans. The declining value of those securities has forced the GSE to book multibillion-dollar losses. A few years back Fortress bought Centex Home Equity of Dallas, once one of the nation's largest subprime lenders. Centex changed its name to Nationstar Mortgage and eventually ceased originating new loans but remains as a servicer. Mr. Mudd will take the reins of the publicly traded Fortress on Aug. 11. He is currently a director of the company. Fortress, whose shares trade for $3, manages $26.5 billion in assets.

Fannie Mae provided $10.1 billion in debt financing for the multifamily rental housing market through its lender and housing partners in the first half of 2009. At a press conference held Monday in Washington, Fannie's vice president of multifamily production Heidi McKibben said that, of the $10.1 billion in debt financing the government sponsored enterprise provided, $9.9 billion of the company's total investment in multifamily housing were delivered. All of the business delivered by this group utilized the company's delegated underwriting and servicing platform, which provides liquidity to multifamily housing projects. "Fannie Mae and its DUS lenders had a very strong first half of the year," said Phil Weber, senior vice president of Fannie's multifamily division, adding that reinvigorating its mortgage-backed securities business and broadening the investor base was Fannie Mae multifamily's top priority in 2009. According to the GSE, 71% of total production in the first half of 2009 was an MBS execution, compared to 17% in the first half of 2008.

House appropriators have instructed the Federal Housing Administration to cut the proceeds seniors receive when taking out a FHA-insured reverse mortgage in fiscal year 2010, which starts Oct. 1. The Obama administration originally asked the appropriators to provide FHA with an $800 million credit subsidiary to cover possible losses coming from declining house prices. However, HUD secretary Shaun Donovan told Congress he was willing to make changes to the FHA Home Equity Conversion Mortgage program to offset some of the losses, but he did not want to increase the mortgage insurance premiums. The House Appropriations Committee approved a Department of Housing and Urban Development appropriations bill on July 17 that instructs HUD to reduce the principal amount a senior can receive on a HECM. The principal limit is based on the borrower's age and the expected interest accrual over the life of the loan. The committee's action "reduces what seniors will get, which is problematic at a time when there is great need," said Peter Bell, president of the National Reverse Mortgage Lenders Association. "We might find that some people that want a reverse mortgage won't be able to get enough money to pay off their existing mortgage. They will be forced to sell the house and move."

The House Appropriations Committee has approved an extension of the $729,750 loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration through September 2010. The committee also increased the lending and guarantee authority of FHA and Ginnie Mae, as requested by the Obama Administration. The Department of Housing and Urban Development appropriations bill authorizes FHA to insure $400 billion in single-family loans during fiscal year 2010, up from $315 billion in the current 2009 fiscal year, which ends Sept. 30. The FY 2010 appropriations bill allows Ginnie Mae to guarantee up to $500 billion in securities backed by single-family and multifamily loans. Congress provided the secondary market agency with $400 billion in MBS guarantee authority in the FY 2009 appropriations bill. The massive stimulus bill that President Barack Obama signed in February raised the maximum loan limit for the GSEs and FHA to $729,750. But the higher limit is due to expire at year-end, if the full House as well as the Senate does not approve this bill.

The House Appropriations Committee has approved an extension of the $729,750 loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration through September 2010. The committee also increased the lending and guarantee authority of FHA and Ginnie Mae, as requested by the Obama Administration. The Department of Housing and Urban Development appropriations bill authorizes FHA to insure $400 billion in single-family loans during fiscal year 2010, up from $315 billion in the current 2009 fiscal year, which ends Sept. 30. The FY 2010 appropriations bill allows Ginnie Mae to guarantee up to $500 billion in securities backed by single-family and multifamily loans. Congress provided the secondary market agency with $400 billion in MBS guarantee authority in the FY 2009 appropriations bill. The massive stimulus bill that President Barack Obama signed in February raised the maximum loan limit for the GSEs and FHA to $729,750. But the higher limit is due to expire at year-end, if the full House as well as the Senate does not approve this bill.

The average rate for the 30-year fixed-rate mortgage fell to 5.14% during the week of July 16, down six basis points from the previous week, according to the Freddie Mac Primary Mortgage Market Survey. Lenders charged an average of 0.7 points for a 30-year FRM. The average rate on a 15-year FRM was 4.63% with a 0.7 point. The five-year Treasury indexed adjustable rate mortgage averaged 4.83%, up slightly from 4.82% the previous week. "Average fixed rate mortgage rates were lower than last week and were down 0.4% to 0.5% from the levels of early June," said Freddie Mac chief economist Frank Nothaft.

Catherine Cruz Wojtasik, a Democratic lobbyist for the Mortgage Bankers Association, is leaving the trade group to take a job on Capitol Hill. A MBA spokeswoman confirmed her departure noting that it will hire a replacement for Ms. Wojtasik. It's believed that she has accepted a position with the Senate Banking Committee but at press time it could not be confirmed. Meanwhile Cheryl Malloy, who handles multifamily issues for MBA, is retiring soon but will stay on as consultant through September.

Citigroup reported net income of $4.3 billion for the second quarter of 2009, after taking $2.4 billion in credit losses on its residential mortgage portfolio. The New York banking giant said $12.1 billion or 6.5% of its residential loans are 90 days or more past due. On a dollar basis, seriously delinquent loans are up 88% from a year ago. The company did tout the fact that since 2007, it has worked with 625,000 homeowners to avoid a potential foreclosure on mortgages totaling over $67 billion. The second-quarter earnings report also shows that Citigroup reported a mark-to-market gain of $613 million on its subprime-related direct exposures (as opposed to a loss one year prior of $3.4 billion). It reported a loss of $390 million on mark-to-market and impairments on alt-A mortgages (one year prior, there was a loss of $277 million). Mark-to-market on its commercial real estate positions resulted in a loss of $354 million, an improvement from a loss of $480 million for the second quarter 2009.

The mortgage insurance division of Genworth Financial is removing 136 metropolitan areas from its "Declining/Distressed Markets" list which will effectively loosen loan-to-value requirements and FICO scores for certain borrowers. The changes are effective Monday, July 20. On Friday the company would not provide the identity of the markets removed with a spokesman saying the metro areas are on an "internal site and protected so they can't be copied." However, Genworth is telling its lender clients that 14 states "in their entirety" will remain on the list. The 13 include Arizona, California, Connecticut, Florida, Hawaii, Maryland, Michigan, Nevada, New Hampshire, New Jersey, Oregon, Rhode Island, Utah and Vermont. In Arizona, California, Florida and Nevada the minimum FICO score is 720. In California Genworth will not insure loan amounts north of $417,000.