Originations

Two Congressmen have introduced legislation that would place an 18-month moratorium on the Home Mortgage Valuation Code of Conduct, a Fannie Mae/Freddie Mac edict that — among other things — bans loan brokers and loan officers from directly ordering appraisals. The bill specifically directs the Federal Housing Finance Agency to suspend the HVCC that went into effect May 1 for 18 months. The National Association of Mortgage Brokers claims the HVCC is delaying closings and costing it business. Brokers also have complained about being forced to pay high fees to appraisal management companies. "This ill-thought out code is basically damaging the economy. It will rob consumers of the low rates that are available now," said NAMB executive director Roy DeLoach. However, it's unclear where the bill goes from here. The legislation was introduced on Thursday night by Rep. Travis W. Childers, D., Miss., and Rep. Gary G. Miller, R., Calif.

The Senate Banking Committee has approved the nomination of David Stevens to be the new Federal Housing Administration commissioner, clearing the way for his confirmation by the full Senate. Mr. Stevens' nomination has been held up for several months due to alleged Real Estate Settlement Procedures Act violations by his former employer, Long & Foster — a mid-Atlantic real estate brokerage firm. The RESPA complaints did not name Mr. Stevens and HUD secretary Shaun Donovan continued to support him, claiming his experience as an executive at Freddie Mac and Wells Fargo Home Loan is really needed at FHA. The committee approved Mr. Steven's nomination by a voice vote late Thursday afternoon. The Senate adjourned a few hours later so his confirmation will be pending when the senators return from their 4th of July recess on July 6.

Doing its part to help promote the aims of the Homeowner Affordability and Stability Plan, Radian Guaranty Inc., Philadelphia, has created a program which helps qualify borrowers for traditional refinances on loans not currently serviced by their present lender, even with today's declining home process and tighter lending standards. The new program enables Radian to transfer a homeowner's existing mortgage insurance policy to any new loan that meets the policy's more flexible eligibility criteria, making it easier for homeowners to refinance their existing mortgage into a more predictable loan type and/or take advantage of today's lower interest rates to lower their monthly payment. This, in turn, helps more borrowers avoid default and/or foreclosure and remain in their homes.

Irvine, Calif.-based Loan-Score Decisioning Systems has completed the necessary integration for lenders to connect to the Federal Housing Administration's TOTAL Scorecard platform directly from its automated underwriting system. Specifically, lenders that are using Loan-Score's product and pricing engine and AUS are able to able to instantly return decisions to loan officers or brokers electronically with this integration. In order to attain results from TOTAL Scorecard, lenders must use an AUS to connect to the system. Because Loan-Score is now an FHA integrated AUS, their clients' end users are able to hit TOTAL Scorecard for instant decisioning.

An Ohio man has been charged with mail fraud in connection with a scheme to fraudulently obtain mortgage loans. According to William J. Edwards, U.S. attorney for the Northern District of Ohio, from August 2003 through January 2005, Paul R. Tomko of Middleburg Heights, among others, allegedly executed a scheme to defraud lenders in connection with 12 mortgage loans totaling nearly $1.2 million on properties located in the Cleveland area. Mr. Tomko, who could not be reached for comment, also allegedly caused fraudulent loan applications to be processed through mortgage brokers. He's also alleged to have used straw buyers to purchase properties and to obtain financing in their names and cause fraudulent appraisals to be prepared that artificially inflated the properties' true values. The loan application packages that were submitted to the lenders allegedly included false and fraudulent documentation and information. It is further alleged that the lenders sustained significant losses as these mortgage loans went into default and the properties were sold through foreclosure.

Based on the "strength" of the single-family market in the Golden State, the California Industry Research Board for the first time this year has adjusted its annual forecast upward. The board now expects single-family housing starts to total 24,900 by the time 2009 comes to an end and total housing starts to reach 40,200. CIRB upped its forecast even though builders took out 40% fewer permits in May than they did in May a year ago. But the 2,203 permits were just 7% fewer than in April, and builders are viewing the slight dip as an indication that the state's new home market is making something of a recovery. On a seasonally adjusted basis, CIRB reported that May's figures were down just 1.6 percent compared to April. Permits for condominiums and apartments fell sharply, however, to just 671 units, down from 1,073 in April and from 3,333 in May 2008. CIRB noted, however, that multi-family construction tends to be extremely volatile from month to month. It also pointed out that a relatively large number of multi-family units were started in March, which may account for the drop off in April and May.

The decline in the number of direct mail marketing pieces sent out by mortgage and home equity loan originators is leveling off, a study by Mintel Comperemedia said. After more than two years of declines, for the six months between December 2008 and May 2009 the monthly average number of pieces sent out has been flat. Mintel said lenders sent an average of 38 million direct mailings per month during the period; approximately 31 million solicited mortgage loans and 7 million were for home equity loans. Still, Mintel noted that in the first quarter of 2009, the volume of mortgage and home equity direct mail solicitations fell nearly 84% from the volume in the first quarter 2007. Stephen Clifford, vice president of financial services for Mintel, said, "Many experts believe housing is stabilizing, based on indicators such as rising consumer confidence, more housing starts and increased existing home sales in recent months. The leveling off of home loan direct mail is another indicator that America may be reaching the floor of this downturn in the housing market."

House Financial Services Committee chairman Barney Frank, D-Mass., wants his committee to move quickly and pass a bill that creates a new agency to regulate mortgage lending and protect consumers from financial abuse. The chairman said he plans to mark up a consumer finance protection agency bill in July and act on other regulatory reforms proposed by the Obama administration when Congress returns from its August recess. Chairman Frank also indicated that he wants to curb the Comptroller of the Currency's broad powers to pre-empt state banking laws. And he wants to craft a pre-emption provision that would become part of the consumer protection agency bill. "I have spoken to the secretary of the Treasury and initiated conversations with the Comptroller of the Currency, the state attorneys general and state bank supervisors," Rep. Frank said at a committee hearing. The chairman said the pre-emption provision may render a pending Supreme Court case moot. The high court is expected to issue a decision soon in a case where the New York AG was blocked from investigating national banks for possible discriminatory subprime lending practices.

The current average interest rate for a 30-year fixed-rate mortgage is 5.42%, up slightly from 5.38% the previous week, according to the latest Freddie Mac Primary Mortgage Market Survey. However, the interpolated 30-year secondary market Fannie Mae mortgage-backed security current coupon yield that drives mortgage rates is still somewhat lower from where it was when it spiked earlier this month, according to Art Frank, director and head of mortgage-backed securities research at Deutsche Bank Securities. According to Freddie Mac, in the most recent week the average interest rate for a 15-year FRM fell slightly, the average five-year Treasury indexed hybrid rate inched up and the average rate for a one-year Treasury-indexed adjustable-rate mortgage inched down. Points averaged 0.7 for all mortgage types and all rates were lower than they were a year ago. "Mixed economic reports on the state of the housing market helped hold mortgage rates fairly flat this week," said Frank Nothaft, Freddie Mac vice president and chief economist. He noted that while the sales for the existing home market appear to be picking up, a slide in prices seems to be continuing. However, "the inventory of unsold homes has lessened from a year ago, which may help cushion further house price declines," Mr. Nothaft said.

The National Reverse Mortgage Lenders Association has created two ethics advisories, one that deals with expected standards and practices in selling other financial products and the other creates standards for lead generation activities. "Ethical Offers of Other Financial and Insurance Products and Services" discusses ethical practices in which reverse mortgage originators may refer, recommend, originate or sell other financial or insurance products. This guidance includes a framework for implementing the relevant provisions of the Housing and Economic Recovery Act of 2008 requirements for firewalls and safeguards in offering other financial and insurance products. Important points here include the need to act in the client's best interest and the need to provide a bona fide advantage to the client, NRMLA said. The advisory titled "Lead Generation State Licensing Requirements and Ethical Advertising" also outlines the NRMLA Ethics Committee's intention to take action, including reporting to appropriate government authorities and the public naming of entities that are dismissed in accordance with the "NRMLA Code of Ethics and Professional Responsibility." Liz Scholz, the chief operating officer of NRMLA, declared the group "will continue to move in the direction of self-regulating, enforcing and taking action against any unethical activity as the integrity and reputation of our industry depend on this. We urge members and non-members to report any ethical infractions or concerns to NRMLA for further investigation."

The Federal Housing Administration insured $27.3 billion in single-family mortgages in April — up 8% from the previous month due to higher mortgage purchase volume. Mortgage purchase volume rose $1.6 billion to $11.7 billion, while refinancings crept up by $350 million to $15.6 billion, according to an FHA monthly activity report. Lenders One Mortgage Cooperative reported that FHA-insured mortgages comprised 40% of its members' loan production in the first quarter. A national cooperative of 135 mortgage lenders originated $17.3 billion single-family loans in the first quarter, up from $9.2 billion in the previous quarter. Meanwhile, FHA servicers ramped up their loss mitigation efforts and completed 7,366 loan modifications in April, up from 4,837 in March. But this didn't stop a 24 basis point increase in the FHA seriously delinquent rate in April and the percentage of FHA loans 90 days or more past due hit 7.32%.

Citigroup has suspended purchases of new loans through its correspondent channel until July 6 while it re-engineers CitiMortgage's quality control processes, the company said. "We will temporarily suspend the acceptance of correspondent mortgage loan registrations while we work with correspondent customers to make improvements to this important business that will ensure the continued delivery of superior quality loans," Citi spokesman Mark Rodgers said. As part of an internal review, CitiMortgage decide to put new processes in place for handling appraisals, income statements and HUD-1 settlement forms. The Fallon, Mo.-based mortgage unit suspended purchases on June 23 after giving its customers 24 hours notice. The temporary suspension does not affect the retail or wholesale channels. Last October, Citigroup made huge cuts in its wholesale division and mortgage broker networks. In the first quarter, CitiMortgage purchased $17.3 billion in loans through its correspondent channel, according to NMN's Quarterly Data Report. For full year 2008, correspondent purchases totaled $58.5 billion.

Forty-one defendants, including LaSalle Title Co., are facing federal charges relating to various mortgage fraud schemes in five separate cases in Chicago. In some of the schemes, the defendants face charges that they allegedly falsely inflated the values of dilapidated homes in urban areas. In other schemes, defendants are charged with deals involving million-dollar condominiums in a Chicago high-rise and homes in affluent suburbs. According to Patrick J. Fitzgerald, U.S. attorney for the Northern District of Illinois, 37 individuals and four businesses, including LaSalle, which closed on allegedly fraudulent loans, are facing charges relating to five mortgage fraud cases involving more than $48 million in fraudulently obtained mortgages in the Chicago area, including two in the suburbs of Wheaton and Glenview. The various lending companies suffered millions of dollars in losses after the loans went into default and the properties were foreclosed upon. No one from LaSalle could be reached for comment.

A Fitch Solutions/Portsmouth Financial Systems desktop application that offers loan-level analytics for the U.S. structured finance market will start with a focus on subprime, alternative-A and prime credit residential mortgage-backed securities. Michael Megliola, chief executive officer of Portsmouth Financial Systems, Portsmouth, N.H., said the application differs from others offered in the market because it offers "more granular structured finance analytics at the loan, bond and deal level." Users can define the parameters for the analytics in the application, which is called Deal View. These can include, for example, a comparison of prepayment and default rates for arbitrary loan pools, or interactive yield tables on a collection of loans, the companies said. They plan to add more asset classes to the application going forward.

The Government National Mortgage Association put its stamp on $39 billion of mortgage-backed securities in May, bringing its five-month issuance volume to $163 billion, double its production for the same period last year. The agency's strong showing in its guarantee business is yet another sign that lenders are overwhelmingly choosing the Federal Housing Administration insurance program, which allows for low downpayment mortgages. Based on the current run rate, GNMA could issue a record $391 billion in MBS this year, giving it a 20% market share (of total originations).

The National Association of Home Builders wants federal regulators to enforce appraisal standards that would stop appraisers from valuing newly constructed homes at distressed sale prices. Some appraisers are engaged in "inappropriate practices" that will forestall a recovery in the housing sector, according to Jerry Howard, NAHB executive vice president and chief executive. He said valuing new homes at prices below replacement value doesn't make sense. "It is one of the components of why sales are not rebounding," Mr. Howard said in an interview. NAHB is working with banking trade groups on getting the Department of Housing and Urban Development and the Federal Housing Finance Agency to address appraisal issues. "We are hoping to get them to join with us and send a letter to HUD and FHFA," he said.

New-home sales edged down 0.6% in May after rising during the previous two months and builders continued to trim their inventories of unsold homes. "The housing market is gradually stabilizing, but showing no signs whatsoever of a vigorous rebound," said Mike Larson, real estate analyst at Weiss Research. The U.S. Census Bureau reported that sales of new single-family homes fell to a 342,000 seasonally adjusted annual rate in May from a 344,000 rate in April. Economists were expecting sales of 360,000 and the numbers are a "disappointment," Mr. Larson said. He noted that the results of previous months saw a downward revision by 32,000 units. Meanwhile, builders have trimmed their inventories by 35% over the past 12 months but they still carrying 292,000 unsold homes, which represents a 10-month supply at the current sales pace.

For the first time since the week of May 15 the Mortgage Bankers Association Weekly Applications Survey Market Composite Index increased. The MCI, an overall measure of mortgage applications, was 548.2, an increase of 6.6% on a seasonally adjusted basis for the week ending June 19, when compared with 514.4 one week earlier. The refinance index increased 5.9% to 2116.3 from 1998.1 the previous week and the seasonally adjusted Purchase Index increased 7.3% to 280.3 from 261.2 one week earlier. On an unadjusted basis, the index increased 6% compared with the previous week and increased 17.2% compared with the same week one year earlier. There was a very tiny decline in the share of refi applications to 54%, down from 54.1% the previous week, while the share of adjustable-rate mortgages applications, dropped to 4.1% from 4.3% for the previous week, the MBA said. There was a decrease in the average contract interest rate for 30-year fixed-rate mortgages to 5.44% from 5.5%, with points (including the origination fee) dropping 20 basis points to 0.98 from 0.89 for loans with 80% loan-to-value ratios, according to the association. The MBA can be found online at http://www.mortgagebankers.org.

Almost half of all American adults no longer believe that homeownership is a realistic way to build wealth, according to a new study released by the National Foundation for Credit Counseling. The non-profit, which has been around since 1951, said one-third of those surveyed, do not think they will ever be able to afford a home. NFCC also found that 31% of those surveyed do not think they will ever be able to buy another home which potentially spells bad news for the upgrade and vacation home market. Meanwhile, a new study by Genworth in Canada found that 84% of those surveyed said that owning a home goes beyond its financial value and feel that homeownership pays off in more ways than one.

The economy may be recovering, but even in a recovery residential estate's performance is likely to continue to vary by market and commercial real estate's health is likely to lag that of the broader market, two influential portfolio managers said at a New York Society of Security Analysts meeting in New York. "You've really got to make a decision on a market-by-market basis," said Philip J. Orlando, senior vice president, senior portfolio manager and chief equity market strategist at Federated Investors Inc., when asked at the 4th annual Wall Street Forum how residential RE might perform in a recovery. Commenting on the outlook for CRE, TIAA-CREF's managing director and head of global real estate portfolio management Philip J. McAndrews said its recovery is generally unlikely to occur on a broad basis until after the broader economic recovery becomes more established and credit availability improves. "It's going to take awhile for us to get through this," he said.