Originations

The National Association of Mortgage Brokers is urging brokers, appraisals and consumers that have concerns about the new GSE appraisal code to register them with their congressmen, Fannie Mae, Freddie Mac and New York Attorney General Andrew Cuomo. The appraisal code that went into effect May 1 is forcing lenders to extend 30-day rate locks to 45 or 60 days because it takes so long to get an appraisal, according to NAMB executive vice president Roy DeLoach. "It is increasing costs for consumers and it is making transactions fall through," Mr. DeLoach said. In addition, appraisers working for appraisal management firms are unfamiliar with local market conditions and they are coming in with "depressed appraisals," he said. So NAMB is giving brokers, appraisers and consumers a channel to contact their congressmen and senators and air their complaints. NAMB has opposed the new code that Fannie, Freddie and their regulator devised under pressure from AG Cuomo. The code is designed to reduce conflicts of interest by prohibiting mortgage brokers and loan officers from selecting or influencing the choice of appraisers.

A group of nonprofits isn't waiting for Congress to repair the mortgage delivery system to make it more consumer-friendly, but instead aims to do so by promoting market participants that, among other things, refrain from offering what it considers to be "inferior" loan products. With backing from the Ford Foundation, the Fair Mortgage Collaborative has launched an effort to put would-be borrowers in front of lenders and brokers who promise to put them into safe mortgages at a fair return. FMC Chair Janis Bowdler described the effort as "a delivery system" in which consumers will be able to separate the good guys from the bad. Honest lenders who didn't push borrowers into loans they couldn't afford or for which they weren't otherwise qualified have always been out there, said Ms. Bowdler, who works for the National Council of La Raza, a major player in FMC. But they were pushed aside by big budget lenders who didn't always have consumers' best interests at heart, she said. Not only are FMC's five core standards backed by a 75-page certification process, the group will use an unidentified third-party to perform "rigorous reviews" to make sure participants do not waiver from FMC's goal of helping consumers find good lenders offering good products, said executive director Howard Banker. Lenders who offer any loans on FMC's list of banned products cannot participate in the program, even if they also offer mortgages that pass the group's muster. But consumers can still access the good loans through FMC-approved brokers. "It's the loans, not the borrowers," the Ford Foundation's George McCarthy said of the foreclosure debacle that has brought the housing and mortgage markets to their knees. "A lot of people were driven into inferior products, even when they qualified for prime loans." FMC is starting with a long list of certified lending organizations that originated $520 million in mortgages over the last 12 months.

Residential lenders funded just $8.8 billion in interest-only loans during the first quarter, a 72% decline from the same period last year, according to figures compiled by National Mortgage News. The fall-off in IO production was not surprising given the rising popularity of FHA-backed mortgages and the rush by borrowers to lock-in low fixed-rate loans that can be sold to Fannie Mae and Freddie Mac. Wells Fargo & Co., San Francisco, ranked first among all IO lenders, producing $2.39 billion, a 69% decline from 1Q08. Just one lender among the top 20 IO producers showed an increase in production. The rankings appear in NMN's Alternative Products Quarterly Data Report.

Citing the uncertainty of its strategic direction, as well as overall concerns about the mortgage insurance business, Fitch Ratings, New York, has assigned United Guaranty Residential Insurance Co., Greensboro, N.C., a negative outlook. Fitch has affirmed the "BBB" insurer financial strength rating of the company, saying it reflects its view on UGRIC's risk profile and capitalization, including existing support agreements and a recently executed reinsurance agreement with MG Reinsurance. The statement from Fitch also noted that Eric Martinez — who United Guranty Corp.'s ultimate corporate parent AIG recently appointed as chief executive of UGC — "is part of the management team tasked with restructuring and/or disposing of businesses and assets as part of AIG's effort to repay U.S. government funds. For the past two months, [Mr.] Martinez has led a comprehensive strategic review for UGC. Should UGC be placed into run-off and/or if steps are taken to reduce current levels of capital and/or capital support, then additional negative rating action may result."

Fitch Ratings has downgraded its rating on Colonial Bancgroup — the nation's largest warehouse provider to non-banks — saying a new federal cease and desist order against the Alabama bank may have a negative impact on a $300 million investment in the company. At press time the bank had not commented on the Fitch note. The C&D order from the Federal Deposit Insurance Corp. and state regulators requires it to increase Colonial Bank's Tier I capital ratio to 8% by the end of September. Recently, mortgage banker Taylor, Bean & Whitaker finalized its commitment to pump $300 million of equity into Colonial. Once Colonial receives the equity it will then be eligible for $550 million in Troubled Asset Relief Funds from the Treasury Department. TBW has several investment partners on the deal. Colonial's stock continues to sell for less than $1 and was down 27% in trading to 88 cents Wednesday afternoon. The Alabama-based bank — stung by large commercial real estate loans — reported a net loss of $168 million for the quarter ended March 31.

National home prices tracked monthly by Integrated Asset Services LLC's IAS360 House Price Index have ceased falling and stabilized for the first time in 10 months. For the nation as a whole, the index found virtually no change in prices between April and March. The index last registered a month-to-month increase in prices in June 2008 when they rose 0.16%. Since that time home prices nationally have dropped by 13.3%. Within the country's four main regions, only the South saw a slight decline of 0.3% in the latest month-to-month period. Prices in the Northeast jumped the most, at 0.6%, while prices in the Midwest inched up by 0.1% and prices in the West remained stable. "It's too soon to call this a turn in the housing market, particularly given all the political and regulatory uncertainties," said Dave McCarthy, president and chief executive officer of Integrated Asset Services, Denver. "I think that we're still in for some difficult spells ahead, but we are seeing a certain kind of pricing equilibrium in several important markets. That's encouraging for the long term."

The market share of refinancings has dropped to its lowest point since November 2008, according to the Mortgage Bankers Association. The group's Weekly Applications Survey Market Composite Index, an overall measure of mortgage applications, fell over 7% on a seasonally adjusted basis. Refis only made up 59.4% of total applications, down from 62.4% the previous week, as mortgage rates continued their sharp rise. As a result of the drop in refis, for the week ended June 5, the MCI was 611.0, compared with 658.7 one week earlier. However, rising rates have not had a negative impact on purchase activity, according to the survey. While the refinance index decreased 11.8% to 2605.7 from 2953.6 the previous week, the seasonally adjusted purchase index increased 1.1% to 270.7 from 267.7 one week earlier. On an unadjusted basis, the index increased 15.7% compared with the previous week and increased 7.6% compared with the same week one year earlier. Adjustable-rate mortgages accounted for 3.4% of applications, up from 3% for the previous week, the MBA said. There was an increase in the average contract interest rate for 30-year fixed-rate mortgages to 5.57% from 5.25%, with points (including the origination fee) increasing to 1.09 from 1.02 for loans with 80% loan-to-value ratios, according to the association. The MBA can be found online at http://www.mortgagebankers.org.

Comptroller of the Currency John Dugan is urging HUD to require escrow accounts for tax and insurance on FHA-insured reverse mortgages while the banking regulators work on consumer protection guidelines. The Federal Housing Administration-insured home equity conversion mortgage is the predominant reverse mortgage product in the nation, Mr. Dugan told an American Bankers Association compliance conference. The reverse market is expected to grow substantially in coming years, he said, and "it is a product fraught with consumer concerns." He noted that seniors can receive the loan proceeds in one lump-sum payment and failure to pay taxes and insurance during the life of the loan can lead to foreclosure. "I think it would be a major step forward for HUD to issue guidelines or requirements addressing the escrow issue for HECMs, and I would like to begin dialogue with them on the issue," the Comptroller said.

Mark Hammond will step down as president and chief executive of Flagstar Bancorp — one of the nation's largest wholesale lenders — by the end of January, the company disclosed. The lender, the nation's eighth largest wholesaler according to the Quarterly Data Report, said it will conduct a search for a new president and chief executive and consider both internal and external candidates. Mr. Hammond has been Flagstar's president since 1995 and its CEO since 2002. He started the company in 1987. He will retain his position as vice chairman of the board of both the holding company and its thrift affiliate. Mr. Hammond also will remain as a "non-officer executive advisor" to Flagstar.

Francis Creighton, a top lobbyist for the Mortgage Bankers Association, is departing the trade group to take a job on Capital Hill, National Mortgage News has learned. A source familiar with the matter said Mr. Creighton, a vice president who is MBA's top liaison with elected officials, has accepted a chief of staff position with Rep. Chris Murphy, D-Conn. He informed the trade group of his plans last Friday. He will officially depart MBA within a few weeks. Mr. Creighton was promoted to VP in late 2006. He previously served as director of government affairs for MBA. During his career he also worked as a legislative director to Rep. Steve Israel of New York.

Thanks to record low interest rates, residential lenders funded $466 billion in product during the first quarter, a 68% jump from the dismal fourth quarter, according to exclusive survey figures compiled by National Mortgage News. Refinancings and fixed-rate production dominated the business and many lenders are now reporting strong profits. Also, this newspaper found that among the mega-lenders, firms that still use loan brokers were out-producing their competitors. For instance, Wells Fargo & Co., and Bank of America, ranked first and second, respectively, in originations during the period, with gains of 50% and 133% compared to the 1Q 2008. Both still have a wholesale/broker presence. But the number three and four ranked funders — Chase and CitiMortgage — saw their volumes fall 28% and 40%, respectively. Chase has exited wholesale with Citi scaling way back. (For the full story and rankings see the Monday edition of NMN.)

Comptroller of the Currency John Dugan is urging HUD to require escrow accounts for tax and insurance on FHA-insured reverse mortgages while the banking regulators work on consumer protection guidelines. The Federal Housing Administration-insured home equity conversion mortgage is the predominant reverse mortgage product, Mr. Dugan told an American Bankers Association compliance conference. It is expected to grow substantially in coming years, he said, and "it is a product fraught with consumer concerns." He noted that seniors can receive the loan proceeds in one lump-sum payment and failure to pay taxes and insurance during the life of the loan can lead to foreclosure. "I think it would be a major step forward for HUD to issue guidelines or requirements addressing the escrow issue for HECMs, and I would like to begin dialogue with them on the issue," the Comptroller said.

The seasonally adjusted annual rate of Canadian housing starts increased to 128,400 units in May from 117,600 units in April, in line with expectations that the market will see gradual improvement going forward. "Housing starts are expected to improve through 2009 and over the next several years to gradually become more closely aligned to demographic demand," the CMHC said. The corporation added that it currently estimates demographic demand to be at about 175,000 units per year. Bob Dugan, CMHC's chief economist, said the overall increase seen during May was "broadly based" and consisted of increases within both the single-family and multifamily markets. In urban areas, both multifamily and single-family starts increased by 11.1% on a seasonally adjusted basis during the month. Regionally, the seasonally adjusted annual rate of growth was greatest in Ontario, where it was 22.0%. It was slowest in Quebec, where starts increased only 3.3%.

Flagstar Bank, Troy, Mich., will no longer originate on a wholesale basis conventional products with a loan term longer than 30 years, according to a notice posted through the LendingArt messenger alert system. This goes into effect on June 12; all of the loan applications affected must be locked by June 11. According to the posting, the following product types which may have terms of 35 or 40 years are affected: Fannie Mae 40-year fixed rate; Fannie Mae MyCommunityMortgage; Fannie Mae 3/1, 5/1 & 7/1 LIBOR adjustable-rate mortgages; Freddie Mac Home Possible; and Fannie Mae High Balance.

National Asset Direct Inc., San Diego, has acquired United Residential Lending LLC, Scottsdale, Ariz., a Federal Housing Administration, agency and jumbo lender that does business in 18 states. Terms of the deal were not announced. NAD is a service provider to purchasers of performing and distressed residential mortgage loans and assets; among its subsidiaries are iServe Servicing Inc., iServe Real Estate Operations Inc. and iServe Mortgage Co. Inc. United Residential is being renamed iServe Residential Lending LLC, with its co-founder and chief executive Gary Willis remaining onboard as chief operating officer and co-founder Doug Wilson remaining as chief financial officer. A spokeswoman for NAD said United Residential is being integrated as a separate unit to maintain the FHA approvals and state licenses that it holds. Company executives at NAD said the deal takes it from its roots focused on loss mitigation and asset disposition strategies to being able to offer a full spectrum of lending, refinancing, servicing and real estate disposition services.

Servicers participating in the Obama Administration's loan modification program are required to collect "detailed" racial information to make sure the program is reaching minority communities that were targeted by subprime lenders. The 14 servicers participating in the Making Home Affordable program have agreed in their contracts to collect "very detailed information on race and other characteristics," HUD secretary Shaun Donavan told a the National Fair Housing Alliance. The information will allow "us to monitor and ensure that the solution is impacting the communities that were disparately targeted," the secretary said. The Department of Housing and Urban Development secretary noted that 60% of all loans in African-American communities were subprime in 2005.

New mortgage insurance policies written by the nation's seven MI firms fell by 66% in the first quarter to just $25.4 billion, according to figures compiled by National Mortgage News and the Quarterly Data Report. The poor showing, in part, reflects the huge demand for government insured loans, including FHA and VA-backed product. One MI, Triad Guaranty of Winston-Salem, N.C., did not write one new policy during the quarter, but that firm is in self liquidation mode. At the end of March the MI industry had outstanding policies on $1.04 trillion in home mortgages, or 12% of all outstanding mortgages in the U.S. Over the past 12 months there has been no growth in the policies-in-force number, according to NMN/QDR. The PMI Group, San Francisco, ranked first in policies written with $6.47 billion in 1Q.

Mortgage companies are scrambling to implement an over-looked Truth-in-Lending Act rule that goes into effect July 30 requiring timely delivery of the good faith estimate on home purchases, refinancings, and home equity loans. On applications taken after July 29, lenders must deliver the GFE to the borrower within three business days and they cannot collect any fees before delivery — except for the credit report. The TILA rule also requires lenders to "wait seven business days after they provide the early disclosures before closing the loan," according to the Federal Reserve Board. If the financing charges or annual percentage rate changes, the lender must provide a new disclosure with the revised APR "and wait another three business days before closing the loan," the Fed says. Consumers can waive this three-day waiting period in emergency situations such as a foreclosure. The Fed approved the rule on May 8. The FDIC recently reminded lenders about banks about the rule.

Mortgage companies are scrambling to implement an over-looked Truth-in-Lending Act rule that goes into effect July 30 requiring timely delivery of the good faith estimate on home purchases, refinancings, and home equity loans. On applications taken after July 29, lenders must deliver the GFE to the borrower within three business days and they cannot collect any fees before delivery — except for the credit report. The TILA rule also requires lenders to "wait seven business days after they provide the early disclosures before closing the loan," according to the Federal Reserve Board. If the financing charges or annual percentage rate changes, the lender must provide a new disclosure with the revised APR "and wait another three business days before closing the loan," the Fed says. Consumers can waive this three-day waiting period in emergency situations such as a foreclosure. The Fed approved the rule on May 8. The FDIC recently reminded lenders about banks about the rule.

The European Central Bank has released some details of its plan to purchase euro-denominated covered bonds, including those backed by mortgages. The ECB said that it plans to start the purchases in July and have the program "fully implemented" by the end of June 2010 at the latest. The central bank also said that the purchases would total 60 billion euros ($85 billion) and "will be distributed across the euro area and will be carried out by means of direct purchases" conducted in both the primary and secondary markets. Covered bonds eligible for purchase must, among other things, meet eligibility requirements for Eurosystem credit operations collateral. They also must have an issue volume of about 500 million euros ($708 million) or more or, in any case, a volume no lower than 100 million euros ($142 million). In addition, they must have a minimum rating of AA or an equivalent rating from Fitch, Moody's, Standard & Poor's or DBRS or, in any case, a rating no lower than the lowest investment grade ratings of BBB- or Baa3.