Originations

The Federal Reserve Bank of New York has chosen commercial real estate information and technology provider Trepp LLC as collateral monitor for commercial mortgage-backed securities as part of the Term Asset-Backed Securities Lending Facility. TALF's monthly subscription window for new issue CMBS was set to open for the first time Tuesday afternoon. At press time midday Tuesday Trepp senior vice president Andy Liebman and Tom Sink said to their knowledge there was nothing pending for it, but they were already at work on aspects of the program that are being finalized, and said next month they anticipate the program will be underway for both new issue and legacy CMBS. Trepp said in its role as monitor it would assist the New York Fed in providing valuation, modeling, analytics and reporting as well as advise on matters involving newly issued and "legacy" CMBS in the program. The New York-based company said it would not establish policies or make decisions for the New York Fed, including decisions on whether to reject a CMBS as collateral for a TALF loan or exclude loans from mortgage pools. Trepp said it would use the analytics and forecasting services of its subcontractor and sister company, the Boston-based Property and Portfolio Research, in conjunction with its work as a TALF CMBS collateral monitor.

Even though residential loan production fell just 12% in the first quarter (compared to the same period a year ago), the origination of alt-A loans and interest-only loans plummeted, according to survey figures compiled by National Mortgage News. Alt-A fundings, not surprisingly, totaled just over $806 million, a fraction of their former volume. Non-GSE subprime production was non-existent in the quarter, according to the newspaper and its affiliate, the Quarterly Data Report. In 2008 alt-A production totaled $60 billion with IO fundings at $100 billion. Alt-A fundings peaked in 2006 at $612 billion. NMN also found that mortgage bankers originated just $8.8 billion in IO loans during the period, a 72% decline from a year ago. In the current credit environment, before a residential loan can be originated it must meet underwriting guidelines established by Fannie Mae, Freddie Mac, or the Federal Housing Administration.

The Federal Home Loan Bank of Pittsburgh lost $23.6 million for the first quarter of 2009, and as a consequence, it said it was unable to set aside any funds for affordable housing programs. The loss is because of $30.5 million of other-than-temporary impairment charges on its held-to-maturity investment portfolio and the establishment of a $35.3 million reserve related to the Lehman Brothers Special Financing Inc. receivable associated with the Lehman Brothers Holding Inc. bankruptcy. In the first quarter of 2008, FHLB-Pittsburgh had net income of $57.5 million. Advances to members fell nearly 16% from $62.2 billion at Dec. 31, 2008 down to $52.3 billion as of March 31, 2009. The bank said demand for advances began to decline in the fourth quarter of 2008 and continued into the first quarter of 2009 as its members gained access to additional liquidity from the Federal Reserve Banks and other government programs that only became available in the second half of 2008.

Massachusetts attorney general Martha Coakley's office has entered into a judgment with Valerie Hanserd, an attorney from Brockton, Mass., resolving allegations of her role as a closing attorney in two companion lawsuits that both allege unfair practices with respect to mortgage brokering services. The first lawsuit involved Ms. Hanserd's closing of a loan allegedly obtained by using false and forged documents and the second lawsuit involved allegations relating to her participation in an unfair and deceptive foreclosure rescue scheme. Under the terms of the consent judgment, filed in Suffolk Superior Court, Hanserd must refrain from acting as a real estate closing attorney or title agent for seven years retroactive to April 27, 2007. In addition, Hanserd must pay $80,000 in restitution to victims of foreclosure rescue schemes as well as $35,000 in fees and penalties to the state. The settlement against Valerie Hanserd resolves allegations against her as the closing attorney in both cases.

Hours after last week's guilty plea in the $140 million fraud offense at U.S. Mortgage Corp., insurers for the bankrupt mortgage firm moved to cancel the company's surety bond, which would foreclose one potential source of recompense for some 30 credit unions victimized in the biggest fraud ever to hit the industry. In a motion filed with the U.S. Bankruptcy Court, Zurich American Insurance Co. and its Fidelity & Deposit Co. unit asked the court to allow it to cancel the bond it held for U.S. Mortgage and its CU National Mortgage subsidiary because the companies have ceased originating loans. "As such, U.S. Mortgage no longer requires the surety bonds to support or guarantee its business operations," the company said in a filing with the bankruptcy court on Friday. In addition, U.S. Mortgage stopped paying premiums on the bond after it filed for bankruptcy, voiding the policy, the insurer asserted. The filing came the day after Michael McGrath, the 46-year-old owner of U.S. Mortgage, pleaded guilty in federal court to siphoning $140 million from CU customers by selling their loans to Fannie Mae and pocketing the funds. McGrath has agreed to forfeit $13 million, leaving more than $125 million of CU funds unaccounted for. Authorities told The Credit Union Journal last week they believe McGrath gambled away those funds in the stock market over the past year, leaving virtually nothing for credit unions to recover. One stock he invested in was Fannie Mae, which now trades for less than 70 cents a share.

The Federal Housing Administration is implementing a new approval process for condominium projects. Effective as of Oct. 1, the FHA will allow lenders to determine project eligibility, review project documentation and certify that it is in compliance with Section 203(b) of the National Housing Act. Under the new rules, lenders will have two approval options for processing condo projects, either via the old HUD review and approval process or the new direct endorsement lender review and approval process, which is outlined in a 14-page mortgagee letter issued June 12. However, the direct processing option is available only "to lenders who have unconditional direct endorsement authority and staff with knowledge and expertise in reviewing and approving condominium projects." To be approved, the property must be created in full compliance with state law. Condo hotels, timeshares, houseboat and commercial projects are not eligible. The Mortgagee Letter gives particular relief to developers in Michigan, the only state in the country where single-family houses are built under a so-called "site condo" development law. Single-family site condos are encumbered by a declaration of condominium covenants or condominium form of ownership. About 90% of the state's houses are built as site condos, but under the Housing and Economic Recovery Act, the FHA could not insure mortgages on such units. Effective immediately, though, condo project approval is no longer required for site condos. "Without being able to offer FHA, we were out of business," says Michigan developer Stuart Michaelson of The Windmill Group.

Conditions in the new home sector remain fragile, according to a survey of 306 building executives by John Burns Real Estate Consulting, Irvine, Calif. The execs said sales remained very weak in May and that prices continued to slide, and in some locations, they reported that traffic slowed in the early part of June. "They suspect the end of the spring selling season may be near," said Jody Kahn, the consulting firm's vice president. Builders also said that besides having to compete against escalating foreclosures, they must deal with appraisals that don't support sales prices. "That's a significant additional challenge," said Ms. Kahn. Nevertheless, builders in some of the most distressed market were more optimistic then they been since Burns Real Estate started the survey a year ago. Some builders also said the recent jump in loan rates is having a positive impact because it is pushing some otherwise hesitant buyers into signing contracts and locking in rates. "Clearly," the jump in rates "is not good for sales in the long term," said CEO John Burns. "But affordability remains excellent, so we don't think it will have a significantly negative impact if mortgage rates remain below 6%." Another positive note: Two-thirds of the respondents started between one to four homes in May. A total of 2,221 new home communities in 95 unique metros were represented in the survey.

Overdues on securities backed by multifamily and retail commercial loans climbed 29 basis points in May to 2.07%, according to Fitch Ratings Agency — the highest percentage of delinquencies since the company created a tracking index back in 2001. Fitch cited "large loan defaults coupled with declining performance on multifamily and retail properties" as a reason for the increase. Even though the late payment rate might appear alarming to some, it is much smaller than the residential delinquency rate, which is in the double-digits. Also, outstanding commercial mortgage debt is much smaller, in terms of dollars, than residential debt. Fitch noted "Defaults on larger loans continue to drive delinquency increases because later vintage transactions have larger loans, many underwritten with now unrealized pro forma income, as well as now-depleted debt service reserves and high leverage."

The Mortgage Bankers Association is losing yet another lobbyist, the second such departure in the past week. The trade group confirmed to NMN that Meghan Sullivan, who specializes in state mortgage-related legislation, will be leaving at the end of June. She holds the title of director of state legislative affairs. Her departure leaves MBA with just one manager to oversee state bills: Chris Oswald. The trade group said it has lobbyist/consultants "on the ground" to represent it in state capitals. "These are not staff people but consultants," she said. Earlier this week it was revealed that Francis Creighton, MBA's liaison on Capital Hill, was leaving to take a job with a Congressman. MBA will hire a replacement for Ms. Sullivan.

The nomination of David Stevens to be the new Federal Housing Administration commissioner appears to be in limbo while HUD investigates a RESPA complaint against his previous employer. The Department of Housing and Urban Development is conducting an investigation of Long & Foster — a mid-Atlantic real estate brokerage firm — for possible Real Estate Settlement Procedures Act violations. At a Senate Banking Committee meeting this past week, Sen. Richard Shelby, R-Ala., noted the HUD investigation is ongoing. "We don't know who is involved or what. We are waiting to see what comes out of the investigations," Sen. Shelby said. Committee chairman Christopher Dodd, D-Conn., said the nominee "comes highly recommended" for the FHA post. During his career Mr. Stevens also worked in executive positions at Freddie Mac and Wells Fargo Home Loans. Sen. Dodd urged caution and indicated he would like a bipartisan vote in moving the nomination along for confirmation by the full Senate. HUD general counsel Helen Kanovsky told Senators Dodd and Shelby in a letter that the RESPA complaints filed against Long & Foster neither "names nor alleges the personal involvement of David Stevens."

The newly released Home Data Index from Clear Capital, Truckee, Calif., shows small local areas of price stabilization are appearing even within largely troubled markets such as Cleveland. According to Clear Capital president Kevin Marshall, these data are fueling expectations that there will be more neighborhood-by-neighborhood-based pricing recovery that will renew strategic investor interest in these areas. For example, a specific segment within Cleveland in the index has "returned the first quarter-over-quarter gain since its downturn began in mid-2005, signaling some very specific investment activity," Mr. Marshall said. Another example is Sacramento, one of the hardest hit areas in California, where several of its MSAs are now outperforming not just that region but the national trend as well. In addition, Clear Capital said that although price declines continue across the country, they appear to be slowing down — especially in the Midwest and South. Clear Capital's index report includes a national and regional overview and ranking of the country's 15 highest and lowest performing metropolitan statistical areas. Highlights include quarter-over-quarter price gains of 8.9% in Birmingham, Ala., and 6.7% in Cleveland. The biggest losses were seen in Phoenix, Ariz., (17%) and Las Vegas, Nev. (15.5%).

The downward slide in new home sales in California lessened in April for the third consecutive month, a sign that the state's home builders say is an indication that the market is stabilizing. According to the monthly report from the California Building Industry Association, sales in projects of 10 or more units in April were still 31% below what they were a year earlier. But that's an improvement from the 44% decline registered in March and the third month in a row for that trend. "We're definitely headed in the right direction," said Jonathan Dienhart of Hanley Wood Market Intelligence, Costa Mesa, which compiles the figures for CBIA. "Aggressive pricing by builders and tax incentives seem to be helping stabilize the pace of new home sales despite substantial competition from the resale market in the form of foreclosures." In April, 2,771 new houses and condominiums were sold in the subdivisions tracked by HWMI compared to 3,989 in April 2008. CBIA President Robert Rivinius attributed much of the gain to California's $10,000 tax credit, which is on top of the $8,000 federal tax credit for first-time buyers. More than 8,500 buyers have taken advantage of the state credit since it went into effect March 1, with applications for the credit totaling more than $82.5 million. To date, the state has allocated $100 million for the credit, but the builder group is trying to persuade lawmakers to triple the original outlay.

Many Federal Reserve district banks are seeing an increase in home sales, according to the Fed's Beige Book. "A number of districts reported an uptick in home sales, and many said that new home construction appeared to be stabilizing at very low levels," the Beige Book says. The reporting district banks cited seasonal factors, low interest rates and declining house prices as well as the tax credit available for certain first-time homebuyers. They noted that, "much of the sales increase was found in the lower-priced end of the market." The New York and Cleveland Federal Reserve banks said they saw "strong demand" for refinancings. But the Richmond bank indicated there has been "waning" demand due to rising interest rates. Commercial real estate markets continued to "weaken," the Beige Books says, as rising vacancy rates have been putting downward pressure on rents.

The average weekly Freddie Mac rate for a 30-year fixed rate mortgage has risen to a seven-month high of 5.59%, up from 5.29% the previous week but down from 6.32% a year ago. Last time the 30-year rate was that high was the week of Nov. 26, 2008, when it was 5.97%. The 15-year FRM rate was 5.06%, the highest it has been since the week of Dec. 11, 2008 when it averaged 5.20% and up from 4.79% the previous week. But the 15-year rate still remained lower than it was a year ago, when it was 5.93%. The average rate for five-year hybrid Treasury-indexed adjustable-rate mortgages was even higher than the rate for 15-year product at 5.17%, up from the previous week's 4.85% but down from 5.51% a year ago. The average rate for one-year Treasury ARMs was 5.04%, up from the previous week's 4.81% and down just slightly from 5.09% a year ago. Points for 30- and 15-year FRMs, as well as for one-year Treasury ARMs, averaged 0.7. Points for five-year hybrid Treasury ARMs were 0.6.

The Department of Housing and Urban Development has suspended three lenders from originating Federal Housing Administration single-family loans while the agency completes investigations of their lending practices. HUD's Mortgagee Review Board placed Golden First Mortgage Corp. of Great Neck, N.Y., Great Country Mortgage Bankers, Inc. of Coral Gables, Fla., and Beneficial Mortgage Corporation of San Juan, P.R., on suspension. The board cited Golden First Mortgage and Beneficial Mortgage for failing to notify HUD of investigations of their operations by other regulators. Golden First Mortgage's president David Movtady is the subject of an Office of Thrift Supervision investigation, HUD said. Mr. Motvady, who is also the chairman of Golden First Bank, a $27.4 million-asset thrift, said the OTS allegations are "unfounded" and he continues to contest them. However, Golden First Mortgage has surrendered its FHA license and will suspend lending operations "until further notice," he said. Beneficial Mortgage failed to notify HUD of an investigation and sanctions imposed by the Puerto Rico commissioner of financial institutions, including revocation of license to originate mortgages, HUD said. In an audit of Great Country Mortgage Bankers, HUD said it discovered multiple violations of FHA requirements, including failure to ensure that employees worked exclusively for GCMB; failure to disclose business affiliations between GCMB and real estate and title service providers; and failure to properly verify key credit information in 55 FHA-insured mortgage loans. Executives from Beneficial Mortgage and GCMB did not return phone calls.

Congress needs to increase the Federal Housing Administration's loan commitment authority in fiscal year 2010 by $85 billion because private mortgage insurers are too weak to meet the demand for new loans, according to HUD secretary Shaun Donovan. "Even as the housing market recovers, we believe it will take some time for the mortgage insurers to build back up their financial strength," the secretary told Senate appropriators. The Department of Housing and Urban Development is seeking authority to insure up to $400 billion in single-family loans in FY 2010, up from $315 billion in the current fiscal year, which ends Sept. 31. The HUD secretary told the appropriators that FHA's single-family business will be in the "black" in FY 2010. However the FHA's reverse mortgage program needs an appropriation of $800 million to cover estimated losses. "We have not chosen to raise premiums given the stress that seniors are under right now," Mr. Donovan said. However, HUD is willing to tighten loan-to-value ratios and make other changes to "eliminate" the need for government subsidies, he said.

The newly released Home Data Index from Clear Capital, Truckee, Calif., shows small local areas of price stabilization are appearing even within largely troubled markets such as Cleveland. According to Clear Capital president Kevin Marshall, these data are fueling expectations that there will be more neighborhood-by-neighborhood-based pricing recovery that will renew strategic investor interest in these areas. For example, a specific segment within Cleveland in the index has "returned the first quarter-over-quarter gain since its downturn began in mid-2005, signaling some very specific investment activity," Mr. Marshall said. Another example is Sacramento, one of the hardest hit areas in California, where several of its MSAs are now outperforming not just that region but the national trend as well. In addition, Clear Capital said that although price declines continue across the country, they appear to be slowing down — especially in the Midwest and South. Clear Capital's index report includes a national and regional overview and ranking of the country's 15 highest and lowest performing metropolitan statistical areas. Highlights include quarter-over-quarter price gains of 8.9% in Birmingham, Ala., and 6.7% in Cleveland. The biggest losses were seen in Phoenix, Ariz., (17%) and Las Vegas, Nev. (15.5%).

Many Federal Reserve district banks are seeing an increase in home sales, according to the Fed's Beige Book. "A number of districts reported an uptick in home sales, and many said that new home construction appeared to be stabilizing at very low levels," the Beige Book says. The reporting district banks cited seasonal factors, low interest rates and declining house prices as well as the tax credit available for certain first-time homebuyers. They noted that, "much of the sales increase was found in the lower-priced end of the market." The New York and Cleveland Federal Reserve banks said they saw "strong demand" for refinancings. But the Richmond bank indicated there has been "waning" demand due to rising interest rates. Commercial real estate markets continued to "weaken," the Beige Books says, as rising vacancy rates have been putting downward pressure on rents.

After pleading guilty to participating in a complex fraud scheme in which he filed and foreclosed on false mortgages in Florida, Sergej Tews was sentenced to 33 months in prison. He also was sentenced to three years of supervised release following the prison term and ordered to pay $636,000 in restitution. According to R. Alexander Acosta, U.S. attorney for the Southern District of Florida, Tews induced homeowners to transfer their properties to him in exchange for his promise to assume their mortgage payments and caused the homeowners to execute warranty deeds, which gave the appearance that the properties were sold to a third party instead of being transferred to Tews. He then fabricated the amount paid for each property, paid the filing taxes based on the false amount and filed fraudulent mortgages on each property. At the foreclosure sales, third-party purchasers were deceived into believing that there were no pre-existing mortgages on the properties and bid on and bought the properties at auction. After the third-party purchasers paid for the properties, the court issued checks to Tews in the names of his purported foreclosing lenders.

New York attorney general Andrew Cuomo is joining other state crime fighters that are going after what they believe are foreclosure rescue scams targeting vulnerable homeowners. The New York AG this week filed a civil complaint against American Modification Agency Inc. and its owner and president, Salvatore Pane Jr., for allegedly charging illegal up-front fees and engaging in consumer fraud. The Uniondale, N.Y.-based firm markets itself as a foreclosure rescue company. It operates in all 50 states. The AG's office says American Modification targets homeowners facing foreclosure by claiming it can save their homes, but often fails to provide the services promised. In a statement released late Tuesday AMA — also known as "Amerimod" — said it is compliant with state foreclosure assistance laws and regulations. "Amerimod has been and will remain a frontrunner for compliance as well as a reliable source for distressed homeowners and consumer advocacy groups," the company said. Meanwhile, the New York AG's office has subpoenaed 14 other loan modification-related firms. Other large states that are investigating and filing charges against loan mod firms include California, Florida, and Georgia.