Originations

The weakening economy and continued credit crunch led to increases in commercial/multifamily mortgage delinquencies during the first quarter of 2009, according to new figures released by the Mortgage Bankers Association. Between the fourth quarter of 2008 and first quarter of 2009, the 30-plus day delinquency rate on loans held in CMBS rose 68 basis points to 1.85%. The 60-plus day delinquency rate on loans held in life insurance company portfolios rose 5 basis points to 0.12%. The 60-plus day delinquency rate on multifamily loans held or insured by Fannie Mae rose 4 bps to 0.34%. According to the MBA, the 90-plus day delinquency rate on multifamily loans held or insured by Freddie Mac rose 8 bps to 0.09%. The 90-plus day delinquency rate on loans held by FDIC-insured banks and thrifts rose 66 bps to 2.28%. "Delinquency rates on commercial and multifamily mortgages held by banks and thrifts, by Fannie Mae and in commercial mortgage-backed securities are all now at levels higher than at any time since the 2001 recession," said Jamie Woodwell, vice president of commercial real estate research at the MBA. Mr. Woodwell added that delinquency rates on commercial mortgages held by life insurance companies during 1Q09 remained below the 2001 recession levels.

A forward looking indicator of existing home sales rose 6.7% in April from the previous month, according to the National Association of Realtors. NAR's Pending Home Sales Index hit 90.3 in April, up from 84.6 in March to notch its third consecutive monthly gain. The index tracks the signing of sales contracts even though some deals do not make it to closing. NAR noted that mortgage processing times have increased due to appraisal issues, tighter underwriting, and lender approvals on short sales. The trade group is forecasting that existing home sales will jump to a 5.5 million seasonally adjusted annual rate in the fourth quarter, a 19% gain from 1Q. NAR cites the $8,000 first-time homebuyers tax credit for attracting more buyers. "There is going to be a crush of people in October and November," trying to take advantage of the tax credit before it expires November 30, said NAR spokesman Walter Maloney. NAR's economic forecast shows that home sales hit bottom in the first quarter at a 4.58 million seasonally adjusted annual rate and should end the second quarter at a 4.72 million rate.

Even though loan purchases by Fannie Mae fell by 38% in April its commitment to buy mortgages over the next few months rose by 50%, according to new figures released by the company. This somewhat good news was tempered by rising delinquencies at the government sponsored enterprise. At the end of April, 3.15% of Fannie Mae loans were considered late, compared to 2.96% in March. (A year ago its delinquency rate was just 1.15%.) The company, which is operating under a federal conservatorship, owns roughly $280 billion in alt-A loans, 9.54% of which were considered "seriously delinquent" at the end of March. In April Fannie bought $57.6 billion of mortgages. Year-to-date it has purchased $232 billion and issued $210 billion in MBS. At the end of April its total book of business was $3.137 trillion: $770 billion of on-balance sheet assets, and guarantees of $2.63 trillion.

A mix of non-depository mortgage banking companies and private individuals make up a majority of the private investment group led by Taylor, Bean & Whitaker that will inject $300 million into warehouse giant Colonial BancGroup, Montgomery, Ala., according to a new public filing. Mortgage firms cited in the Securities and Exchange Commission filing include Allied Mortgage Group, American Home Equity Corp., Atlantic Bay Mortgage, Envoy Mortgage, Myers Park Mortgage, Provident Funding Associates, WR Starkey Mortgage and others. Sources say most of these lenders are warehouse clients of the bank. Former Friedman, Billings, Ramsey executive Henry Fan is also part of the investor group, as is Florida developer Tibor Hollo.

Federal banking regulators have issued a proposed rule that sets parameters for federally supervised banks and their subsidiaries to register their loan officers through a national licensing system developed by state regulators. As required by the Secure and Fair Enforcement for Mortgage Licensing Act, mortgage originators working for federally chartered banks and thrifts are required to file background information and fingerprints with the Nationwide Mortgage Licensing System and Registry. Once registered, the loan originator will be assigned a unique identifier that they will carry like a Social Security number for the rest of their careers. The federal agencies are proposing de minimis rules that will exempt institutions that make 25 or fewer single-family mortgages at year from registering their employees. Employees that originate five or fewer loans a year or only engage in loan modifications would be exempt. State licensed originators in 26 states have completed or are in the midst of registering. Once the federal regulators finalize registration requirements, the system will be expanded for federal mortgage originators.

GMAC Financial Services — which controls the nation's fifth largest residential servicer — says it's "business as usual" at the company even though one of its owners, General Motors, filed for bankruptcy protection on Monday. A GMAC spokeswoman stressed that "we have no intention of filing for bankruptcy," adding that GM owns only 10% of the financial services company. GMAC is a bank holding company that a few months ago completed a large restructuring with its bondholders. Hedge fund giant Cerberus Capital owns 22% of GMAC with the U.S. Treasury owning a large piece as well because of a $5 billion TARP investment. Asked if GM might sell its stake in GMAC, the spokeswoman declined to comment.

Federal banking regulators have issued a proposed rule that sets the parameters for federally supervised banks and their subsidiaries to register their loan officers on a national licensing system developed by state regulators. As required by the Secure and Fair Enforcement for Mortgage Licensing Act, mortgage originators working for federally chartered banks and thrifts are required to file background information and fingerprints with the Nationwide Mortgage Licensing System and Registry. Once registered, the loan originator will be assigned a unique identifier that they will carry like a Social Security number for the rest of their careers. The federal agencies are proposing de minimis rules that will exempt institutions that make 25 or fewer single-family mortgages at year from registering their employees. Employees that originate five or fewer loans a year or do only loan modifications would be exempt also. State licensed originators in 26 states have completed or are in the midst of registering on the system. Once the federal regulators finalize their registration requirements, the registry system will be expanded for federal mortgage originators. "This proposal provides for a 180-day period within with to complete the initial registrations after the Registry is capable of accepting registrations from employees of agency-regulated institutions," the federal regulators say in the proposed rule that is being issued for a 30-day comment period.

Housing Secretary Shaun Donovan is "open to suggestions" on how his department can establish higher FHA loan limits for high-cost submarkets. Congress gave HUD discretionary authority under the American Recovery & Reinvestment Act to establish separate loan limits for submarkets in places where prices are "significantly higher" than the median for the county or MSA within which they are located. But in response to a question after his talk at the National Association of Home Builders' spring board meeting in Washington, Sec. Donovan said setting a ceiling for more than 3,300 separate jurisdictions is "already complex enough" without introducing submarkets into the equation. "It's a brain twister at this point," he said. At the same time, though, the secretary said he understood the need for more flexibility in setting the limits and welcomed input on how to implement "a very, very complex" challenge. Past NAHB President Mark Tipton, a builder in Raleigh, N.C., said there are numerous places throughout the country where buyers in high-cost communities don't have access to FHA financing because the houses they want to purchase are located within larger jurisdictions where the overall median is much lower or even depressed because of a large concentration of older or foreclosed properties. The NAHB favors the removal of the high-cost designation altogether and bumping the limit higher for the entire country. But Sec. Donovan said that "could be putting the FHA risk."

Mortgage insurance stocks rallied on Monday as newly released figures showed insurance default rates and "cures" improving. According to the Mortgage Insurance Companies of America, primary insurance cures fell to 58,587 units in April, the lowest monthly reading since January. A loan is considered "cured" when after being declared in arrears the payments become current again. The default ratio (60 days or more late) fell to 81,171 units in April, the lowest reading since October. Even though these were positive indicators for the struggling MI industry, private mortgage insurance applications fell to 60,947 in April, the weakest reading since November (39,098). Traditional MI written fell to $7.8 billion, a 20% sequential decline, and a 60% tumble from April 2008. Still, MI stocks soared Monday - along with the rest of the Dow. Winston-Salem, N.C.-based Triad Guaranty saw its stock price shoot up 36% to 83 cents per share. The PMI Group Inc., Walnut Creek, Calif., experienced a 29% leap in stock price, trading at $2.25 per share. Both Philadelphia-based Radian Group Inc. and Richmond, Va.-based Genworth Financial saw upticks of 10% in their stock prices. And MGIC Investment Corp., Milwaukee, saw its stock price go up by 7%. Old Republic, the healthiest of the nation's MIs, saw its share price increase by 2%.

Colonial BancGroup, the nation's largest warehouse lender, said its chairman and CEO Robert Lowder will retire once Taylor, Bean & Whitaker completes its investment in the bank. Mr. Lowder founded the company in 1981. TBW is a mortgage banking firm based in Ocala, Fla. It is paying two-thirds of the $300 million that will be invested in the Montgomery, Ala.-based Colonial. Until the deal is finalized Mr. Lowder will continue on as chairman, director and CEO of the bank. Under his leadership Colonial completed 68 acquisitions and became the top player in residential warehouse finance.

Even though residential originations spiked 63% in the first quarter from the previous one, warehouse lending commitments to non-depository funders continued to suffer. According to survey figures compiled by National Mortgage News, known commitment volumes totaled $9.2 billion with five firms reporting compared to $8.3 billion at year-end. Even though commitments rose, they did so by only 11% while originations in the primary market soared. The figures indicate that not only is warehouse lending restricted but it appears that the nation's "mega" originators, firms such as Wells Fargo & Co., Bank of America, and Chase, are picking up market share at the expense of non-banks.

The Federal Housing Administration has insured only $13.8 billion in mortgages with loan balances above the old $417,000 conforming loan limit, including $5.3 billion in California and $2.5 billion in New York, according to new government data. In February 2008 Congress raised the maximum limit on FHA loans to $729,750 from $362,790 as part of the first economic stimulus package. It was later extended until the end of 2009. From April 2008 through April 2009, Department of Housing and Urban Development data shows that only 3% of FHA endorsements involved single-family loans above $362,790 and only 1.7% above $417,000, which used to be the limit for Fannie Mae and Freddie Mac loans. During that April to April period, FHA endorsed 1.7 million loans totaling $292.3 billion and 10.5% are above former limits in each state. In low-cost areas, FHA had minimum loan limits of $200,160 to $271,050 based on median house prices. "The increase in the FHA loan limits has benefited every part of the country," said Brian Chappelle, a mortgage banking consultant with Potomac Partners in Washington.

With almost a 50% increase in year-over-year sales, the inventory of unsold existing single-family homes for sale in California has been cut in half, from a 9.8 months' supply in April 2008 to 4.6 months' supply this April, the state's Realtors reported. However, while sales were up 49.2% to a seasonally adjusted rate of 540,360 — the eighth straight month above the 500,000 level — the median price of houses sold in the month declined by more than a third, largely because the majority of sales were at the low-end of the market. "Inventory levels for homes in the under $500,000 segment shrank to nearly three months in April, compared with almost 10 months a year ago, while unsold inventory in the more than $1 million segment rose to approximately 17 months, compared with roughly 10 months in April 2008," says California Association of Realtors President James Liptak. "The dramatic difference in inventory exemplifies how the low end of the market is attracting more first-time buyers and investors, creating a shortage of distressed properties for sale." The median price of existing homes sold in the month was $256,700, a 36.5 percent decrease from the revised $404,470 a year ago. But it was 1.4% greater than March's $253,040 median price. CAR's figures are based on data collected from more than 90 local Realtor associations statewide.

The Department of Housing and Urban Development issued guidance that opens the door for FHA-approved lenders to provide short-term loans — with restrictions — to borrowers who are eligible for the $8,000 first-time home buyer tax credit. Borrowers must still come up with the required minimum 3.5% down payment using their own funds. But after that, they can use the short-term liens to increase their down payments, cover their closing costs or buy-down their mortgage rate. Calling the tax credit advance "another step towards accelerating the housing market," HUD secretary Shaun Donovan told the National Association of Home Builders' annual spring board meeting in Washington that the initiative is a "real win for everyone." The NAHB estimates the advance will lead to 160,000 more sales — 101,000 to first-time buyers and 59,000 to move-up buyers who are selling their current residences to first-timers. Tax credit loans made by state and local housing finance agencies, government agencies and certain nonprofit groups can be used to cover the minimum 3.5%. However, non-profits that receive fees from sellers cannot provide downpayment assistance under this program. HUD didn't want to do anything that would allow "these seller-funded schemes back in," a senior HUD official said. The department has issued a mortgagee letter (2009-15) with guidance on acceptable interest rates and fees. "We are putting in place the necessary safeguards and consumer protections, and if monitored the right way, tax credit loans can be used efficiently and safely," secretary Donovan said.

Redwood Trust Inc., Mill Valley, Calif., has priced a public offering of 15 million shares of its common stock at $14.50 per share. The real estate investment trust, which invests in and finances residential and commercial mortgage loans and securities, has granted the underwriters a 30-day overallotment option to purchase up to 2.24 million additional shares of common stock. Redwood Trust will receive estimated net proceeds from the offering of $207 million, which will be used to acquire residential and commercial real estate loans and mortgage-backed securities and may also be used to co-invest with third party investors in investment funds which Redwood Trust may sponsor and for other general corporate purposes. The offering is expected to close on June 2, 2009. The sole bookrunning manager for the offering is J.P. Morgan Securities Inc.

Brandywine Realty Trust, Radnor, Pa., has priced a public offering of 35 million shares of its common stock at a price of $6.30 per share. In addition, the company has granted to the underwriters an option for 30 days to purchase up to 5.25 million additional common shares to cover overallotments, if any. The estimated net proceeds from the offering are expected to be approximately $210.8 million. BRT plans to use the net proceeds from the offering to reduce outstanding borrowings under its $600 million unsecured revolving credit facility and for general corporate purposes. The offering is expected to close on or about June 2, 2009. Merrill Lynch & Co., J.P. Morgan and Citi are acting as the joint bookrunning managers. ABN AMRO Inc., BNY Mellon Capital Markets LLC, Deutsche Bank Securities, Janney Montgomery Scott LLC, Morgan Keegan & Co. Inc., PNC Capital Markets LLC, Piper Jaffray, and TD Securities are acting as senior co-managers for the transaction. BMO Capital Markets, Comerica Securities Inc., Commerzbank Corporates & Markets, FTN Equity Capital Markets, Raymond James, RBC Capital Markets, Santander Investment, Stifel Nicolaus and SunTrust Robinson Humphrey are acting as co-managers.

Fitch Ratings has placed the ratings for City National Corp. and its bank subsidiary, City National Bank, Beverly Hills, Calif., on Rating Watch Negative, citing expectations of further asset quality deterioration, particularly in the construction and land development portfolio, as well as other portions of the commercial real estate book and the commercial and industrial loan portfolio. City, because it targeted affluent clientele for its private banking business and because of conservative underwriting, has higher than average asset quality in its consumer loan book. However, Fitch said, the issues in the California and Nevada housing markets and unemployment rates continue to pressure consumer spending and will likely result in further asset quality weakness in other parts of City's commercial loan book.

The Federal Deposit Insurance Corp. reported a surge in single-family originations by banks that contributed to a rebound in earnings for the first quarter. Commercial banks and FDIC-insured savings institutions reported combined earnings of $7.6 billion in 1Q, down 60% from a year ago, but a definite rebound from the $38.6 billion loss posted in the fourth quarter. FDIC officials attribute the first quarter profit mainly to securities trading by the larger banks. But they noted that an increase in refinancing activity also contributed to revenues. Originations by commercial banks and savings banks totaled $369.7 billion in the first quarter, a 72% gain from the previous period. (The total does not include originations by federally chartered S&Ls, which the Office of Thrift Supervision will report on Tuesday, June 2). The FDIC says 836 banks and savings institutions that are heavily committed to mortgage lending and investing earned $1.4 billion in the first quarter, compared to a $4 billion loss in the fourth quarter.

The average weekly rate for the 30-year fixed rate mortgages that dominate the market rose to 4.91% from 4.82% as the benchmark 10-year Treasury yield spiked to a high not seen since late last year, according to the latest Freddie Mac Primary Mortgage Market Survey. The 10-year yield just after noon on May 28 was at 3.68%, up from what had been a range closer to 3.4% earlier the same week. The benchmark yield has not been that high since November 2008. "Fixed-rate mortgage rates followed long-term bond yields higher this week as financial markets try to discern the state of the economy," said Frank Nothaft, Freddie Mac vice president and chief economist. "Consumer confidence rose again in May and represented the largest two-month rally since records began in 1967. According to the National Association for Business Economics, the consensus of a recent survey of 45 professional forecasters called for the recession to end in the second half of this year, but the recovery is to be more moderate than the previous survey. Housing continues to be a drag on the economy, however."

Freddie Mac's purchases of refinanced mortgages slowed in April despite the launch of the Obama administration's new program to help borrowers with high loan-to-value ratios refinance into lower cost loans. The mortgage giant purchased $43.3 in refinanced mortgages in April, down from $52 billion the previous month. "We began the purchase of refinance mortgages originated under the program in April," Freddie Mac said in its monthly activity report. "Due to the implementation of this program and recent declines in mortgage interest rates, our refinancing activity will likely remain high." Meanwhile, the serious delinquency rate on Freddie Mac-guaranteed single-family loans continues to rise. Loans 90 days or more past due or in foreclosure rose to 2.44% in April, up 15 basis points from the previous month. Issuance of mortgage-backed securities by Freddie Mac also slowed to $51.1 billion in April from $57.7 billion in March. The company also reported that its mortgage portfolio fell by $36.8 billion to $830.3 billion during April.