Originations

The Treasury Department is reopening its Capital Purchase Program for six months so small banks can get another shot of capital and increase their lending capacity. Current CPP recipients and other small banks with less than $500 million in assets can apply for capital assistance that will be funded through the Troubled Asset Relief Program. "In addition, we will extend the deadline for small banks to form a holding company," which is a prerequisite for applying for the capital assistance, Treasury secretary Timothy Geithner said. "Both the window to form a holding company and the window to apply or re-apply for CPP will be open for six months," he added. The Treasury secretary also told the Independent Community Bankers of America that the Obama administration is working on regulatory reform that will simplify and consolidate the oversight of financial institutions and provide better supervision in the consumer area. The new rules will be sensible, conservative and apply to all lenders so there is a level playing field. The administration also wants "greater simplicity" in core financial products. "We want a standardized, simple product that consumers can choose to opt out of to meet their individual needs," Mr. Geithner said.

The attorney for Countrywide Financial Corp. founder and former CEO Angelo Mozilo acknowledged that civil SEC charges could be brought against his client but said there is no "fair basis" for them. As reported by The Wall Street Journal late Wednesday, staff at the Securities and Exchange Commission has recommend filing civil fraud charges against Mr. Mozilo, but it is unclear what those charges might entail. The SEC has been investigating his insider stock sales which totaled more than $300 million during his last three years as head of the company. In the past Mr. Mozilo has stated that his sales were disclosed publicly and made in accordance with SEC rules. Mr. Mozilo's attorney David Siegel issued a statement that said, "We do not believe there is any fair basis for allegations to be made against Mr. Mozilo. All of Mr. Mozilo's stock sales were made in compliance with properly prepared and approved trading plans and reflected recommendations by his financial advisor over a long period of time. The persistent innuendo in the media and political circles that Mr. Mozilo was selling Countrywide stock because he was aware of some supposedly 'secret' adverse information about the Company is scandalous and inconsistent with even a cursory examination of the facts surrounding the history of his stock holdings." Mr. Mozilo retired from the company on July 1 when it was sold to Bank of America for about $4 billion. Its shares once traded as high as $45 but by the time BoA bought the company it was only selling for a few dollars a share. Mr. Mozilo co-founded the lender in the 1960s with then partner David Loeb. CFC was once the nation's largest overall residential lender/servicer and the largest funder and servicer in the subprime sector.

Staff at the Securities and Exchange Commission have recommended filing civil fraud charges against Angelo Mozilo, the co-founder of Countrywide Financial Corp., The Wall Street Journal reported Wednesday afternoon. The newspaper quoted sources "familiar with the investigation." Mr. Mozilo, who lives in Granada Hills, Calif., not too far from the old Countywide headquarters, could not be reached for comment. His telephone number is not listed. It was widely known that the agency was investigating his insider stock sales over a three-year period. He retired from the company on July 1 when it was sold to Bank of America for about $4 billion. Its shares once traded as high as $45 but by the time BoA bought the company it was only selling for a few dollars a share. Mr. Mozilo co-founded the lender in the 1960s with then-partner David Loeb. His stock sales, which were publicly disclosed, totaled more than $300 million. CFC was once the nation's largest overall residential lender/servicer and the largest funder and servicer in the subprime sector.

Roughly 1,650 former employees of Mortgage Lenders Network will divide a $2.7 million settlement from the bankrupt subprime lender under a settlement approved by a Delaware judge. The privately held Connecticut B&C lender failed to provide the required 60-day warning notice to employees that it would close, said their lawyer, Charles Ercole of Klehr, Harrison, Harvey, Branzburg & Ellers of Philadelphia. The lender had argued in bankruptcy court that the federal Worker Adjustment and Retraining Notification Act allows companies not to give the notice if business conditions change too quickly. Former workers could receive a check from the bankruptcy court by late summer.

Mortgage Warehouse Network, Houston, is rolling out turnkey operations aimed at helping depositories enter the underserved warehouse-lending arena. Company chief operating officer Jeff White said its services consist of everything but "pushing the button on the wire for the bank." MWN said it provides the back office and systems, plus experienced personnel, while the bank controls the credit parameters. The warehouse-lending sector has been in the throes of a severe credit crisis because many banks and Wall Street firms have left the business or been unwilling to lend because of high capital requirements and eroding home values. The target bank for Mortgage Warehouse Network is one with $5 million in capital and willing to leverage it on a 10-to-one basis.

ICBA Mortgage, a subsidiary of the Independent Community Bankers of America, originated $7.2 billion of residential loans during the first quarter, nearly triple its production volume of a year ago."These numbers are a dramatic indication that community bankers are regaining lost market share in the residential mortgage arena," said David Petro, president and chief executive of ICBA Mortgage. In Q1 refinancings comprised 80% of the mortgages originated by the 1,200 participating banks. The loans are funded through Fannie Mae, Freddie Mac, and Taylor, Bean & Whitaker. Of the loans funded through TBW, 40% were FHA-insured.

Commercial and multifamily mortgage loan originations continued to drop in the first quarter of 2009, according to the Mortgage Bankers Association's Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations. "In the first quarter of 2009 we saw the effects of the continued recession coupled with little demand from borrowers and a constrained supply from lenders as a result of the credit crunch," said MBA's vice president of commercial real estate research Jamie Woodwell. "The net result was low levels of new originations." First quarter originations were 70% lower than during the same period last year and 26% lower than during the fourth quarter of 2008. The year-over-year decrease was seen across all investor groups and most property types. Decreases in total commercial/multifamily mortgage originations continued to be led by a drop in commercial mortgage-backed security conduit loans.

There has been a modest increase in demand for home purchase loans, but the drop-off in demand for refinances had more of an effect on the Market Composite Index, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. For the week ended May 8, the MCI — an overall measure of mortgage applications — was 895.6, a decrease of 8.6% on a seasonally adjusted basis from 979.7 one week earlier. The refinance share of mortgage activity decreased to 71.9% of total applications from 74.4% the previous week. The Refinance Index decreased 11.2% to 4588.6 from 5169.3 the previous week and the seasonally adjusted Purchase Index increased 0.5% to 265.7 from 264.3 one week earlier. On an unadjusted basis, the MCI decreased 8.1% compared with the previous week and increased 28.4% compared with the same week one year earlier. Adjustable-rate mortgages accounted for 2.3% of applications up from 2.1% for the previous week, the MBA said. There was a very slight decrease in the average contract interest rate for 30-year fixed-rate mortgages to 4.76% from 4.79%, with points (including the origination fee) increasing to 1.18 from 1.11 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

House leaders are preparing to vote on a housing bill next week that will fix a Federal Housing Administration refinancing program for underwater borrowers and likely make the $250,000 deposit insurance coverage permanent. However, the bill is not expected to include a controversial cramdown provision that would hold up final passage by the Senate. House majority leader Steny Hoyer, D-Md., told a bankers meeting that House and Senate bank committee chairmen "have pretty much reached agreement that the $250,000 is going to be made permanent." Congress temporarily raised the deposit insurance limit from $100,000 to $250,000 last fall. "There are a lot of good things in this bill," Rep Hoyer told MortgageWire after speaking at an Independent Community Bankers of America event. But Rep. Hoyer said Senate Democratic leaders stressed that they can't get a cramdown provision through the Senate. The House passed a cramdown provision that would allow bankruptcy judges to modify mortgages. But the Senate decisively rejected cramdowns in approving its version of the housing bill.

Freddie Mac — whose customer base traditionally has been more aligned with depositories — posted a $9.8 billion loss in the first quarter, a far better performance in the period than its sister company, Fannie Mae. Freddie's conservator, the Federal Housing Finance Agency, is asking the Treasury for a $6.1 billion infusion to maintain Freddie's net worth position above zero. Freddie said it had impairments of $7.1 billion on "available-for-sale" securities and $8.8 billion of provisions for credit losses. Its net interest income grew by almost 400% in 1Q to $3.8 billion (compared to just $798 million in 1Q08) because its funding costs plummeted thanks to government intervention in the credit markets. Fannie Mae, which released earnings on Friday, lost $23 billion and disclosed that it had $145 billion in nonperforming loans on its books. Fannie's earnings have been hammered by its huge investment in alt-A loans. Also, Fannie's largest customer for many years was Countrywide Home Loans. Countrywide's delinquencies were among the worst in the industry.

Freddie Mac's guaranteed loan portfolio is becoming more vulnerable to defaults due to a growing number of single-family mortgages with high loan-to-value ratios. The percentage of Freddie loans with LTV ratios above 90% had doubled over the past four quarters to 28% as of March 31. These mortgages are "more likely to default in the event of financial hardship," the mortgage giant says in its first quarter financial report. The company expects home prices will decline 5% to 10% this year and unemployment to rise, which will increase credit losses. In March, the percentage of single-family loans 90 days or more past due rose to 2.29%, up 57 basis points from Dec. 31. "We expect our delinquency rates will continue to rise in the remainder of 2009," Freddie says.

Freddie Mac — whose customer base traditionally has been more aligned with depositories — posted a $9.8 billion loss in the first quarter, a far better performance in the period than its sister company, Fannie Mae. Freddie's conservator, the Federal Housing Finance Agency, is asking the Treasury for a $6.1 billion infusion to maintain the Freddie's net worth position above zero. Freddie said it had impairments of $7.1 billion on 'available-for-sale' securities and $8.8 billion of provisions for credit losses. Its net interest income grew by almost 400% in 1Q to $3.8 billion (compared to just $798 million in 1Q08) because its funding costs plummeted thanks to government intervention in the credit markets. Fannie Mae, which released earnings on Friday, lost $23 billion and disclosed that it had $145 billion in nonperforming loans on its books. Fannie's earnings have been hammered by its huge investment in alt-A loans. Also, Fannie's largest customer for many years was Countrywide Home Loans. Countrywide's delinquencies were among the worst in the industry.

Half of all home sales in the first quarter involved first-time homebuyers and the National Association of Realtors expects more new buyers will be entering the market to take advantage of low prices and distressed property sales. "Close to 455,000 buyers purchased their first home during the first quarter, and those are likely just the first wave of new buyers coming into the market," NAR chief economist Lawrence Yun said. "Housing affordability conditions are at record levels and we expect a measurable increase in home sales in the second half of this year, which would help stabilize prices in most areas," he said. An NAR survey also found that half of all sales in the first quarter involved foreclosed properties and short sales, which continue to put downward pressure on prices. At NAR's Washington conference, some Realtors noted that first time buyers are competing with investors for foreclosed properties.

Looking to "take advantage of a space screaming for help," Mortgage Warehouse Network, Houston, is rolling out a turnkey solution to help depositories enter the warehouse lending arena. Company chief operating officer Jeff White said its services consist of everything but "pushing the button on the wire for the bank." MWN said it provides the back office and systems, plus experienced personnel, while the bank controls the credit parameters. The warehouse lending sector is in the throes of a severe credit crisis with many banks and Wall Street firms leaving the business or unwilling to lend because of high capital requirements and eroding home values. The target bank for Mortgage Warehouse Network is one with $5 million in capital and willing to leverage it on a 10-to-one basis.

After losing money for all of last year, Farmer Mac earned $34 million in the first quarter of 2009, citing valuation gains from financial derivatives and trading assets. In trading Tuesday its share soared 112% to $7.69. Michael Gerber, president of the government-sponsored enterprise, said, "As we look ahead, we expect any credit losses to remain within manageable levels." He noted that, lenders in the agricultural and rural utilities sectors continue to face capital markets and economic challenges. Farmer Mac increased its capital surplus to $67 million at the end of March from $13 million at December 31. Its delinquencies totaled 1.9%. Formerly known as the Federal Agricultural Mortgage Corp., Farmer Mac provides liquidity to agricultural real estate and rural housing lenders. It purchases eligible loans directly from lenders and guarantees securities.

Ginnie Mae guaranteed $34.5 billion in mortgage-backed securities in April for the second consecutive month, compared to $28 billion in February and $27.3 billion in January. "We are steadily growing," said Ginnie president Joseph Murin. Ginnie Mae single-family MBS totaled $33.8 billion and multifamily totaled $707 million in April. Ginnie I single-family MBS totaled $26.8 billion in April — $1.4 billion less than in the previous month. However, Ginnie II single-family multiple issuer pools totaled $6.6 billion, up $1.1 billion from the previous month.

The ten largest unsecured creditors of the recently bankrupted Thornburg Mortgage include banks and Wall Street firms that were owed at least $4.6 billion, according to court records. The nature of the debts include senior subordinated notes, master repurchase agreements, and junior notes. The top three unsecured creditors are owed (combined) $3.2 billion and include Wilmington Trust ($1.3 billion), Royal Bank of Scotland ($1 billion), and Credit Suisse ($911 million). A jumbo lender based in Santa Fe, Thornburg filed for Chapter 11 protection in Maryland, listing debts of more than $1 billion. It was a publicly traded REIT. At last check this once high flying "super jumbo" lender had a servicing portfolio of about $16 billion — all of it jumbos or super jumbos.

Housing secretary Shaun Donovan has decided to move ahead with a RESPA rule issued by the Bush administration that requires the industry to adopt new standardized mortgage disclosures by next January. However, the Department of Housing and Urban Development is dropping — for now — a "required use" section of the Real Estate Settlement Procedures Act rule that the National Association of Home Builders challenged in court. The RESPA rule issued shortly after the November election bans builders from offering homebuyers discounts or upgrades that are tied to the use of affiliated mortgage and title companies. "We will propose a clearer and more effective 'required use" definition that truly protects borrowers from those who force them to use affiliated businesses," said Mr. Donovan. The House passed a comprehensive mortgage reform bill May 7 that directs HUD to withdraw the RESPA rule and urges the department to work with the Federal Reserve Board in issuing "complimentary" mortgage disclosures. The Fed is working on updating its Truth in Lending Act mortgage disclosures. Secretary Donovan added: "We will implement the new RESPA rules as part of broader reforms to the mortgage process that include ensuring that RESPA and TILA are coordinated."

The Department of Housing and Urban Development will ask Congress for expanded commitment authority for Ginnie Mae and the Federal Housing Administration single-family program, allowing the government to insure up to $400 billion of new mortgages in fiscal 2010. HUD estimates that FHA will endorse $290 billion of single-family loans in FY 2009, which ends September 30. The government estimates that FHA loan production will continue at a torrid pace until private mortgage markets recover. "For FY 2010, we are asking Congress for the authority to endorse up to $400 billion of loans," HUD secretary Shaun Donovan told the National Association of Realtors at its mid-year legislative conference. The housing secretary stressed that FHA will be able to provide this level of support for the mortgage market without a congressional appropriation and without raising FHA mortgage insurance premiums or changing the premium structure. "FHA will continue to be a source of stable, reasonably priced safe financing in the marketplace." Mr. Donovan said.

The government today gave the green light to the financing of bridge loans of up to $8,000 to first time home buyers who qualify for tax credits under the Obama Administration's economic stimulus plan. The new mortgagee letter stipulates that government agencies, non-profits and FHA-approved lenders can give advances on the tax credits. Housing secretary Shaun Donovan told a national Realtor group Tuesday that, "We want to enable FHA consumers to access the tax credit funds when they close on their home loans so that cash can be used as a downpayment." The mortgagee letter is now available online but more details are to follow.