Originations

Loans with five-year maturities will be available for June funding through the government's Term Asset-Backed Securities Loan Facility to finance purchases of AAA-rated commercial mortgage-backed securities. Previous to this expansion of the program, TALF had only allowed maturities of three years. The Federal Reserve had said in February it could broaden eligible collateral for TALF to encompass other types of newly issued AAA-rated asset-backed securities such as commercial mortgage-backed securities and private-label residential MBS.

Senate Democratic leaders want to pass an FDIC/housing bill on Tuesday but first they have to wade through a number of amendments including one that would require a temporary shutdown of the FHA single-family program if it is headed toward insolvency. The sponsor of the Federal Housing Administration amendment, Sen. David Vitter, R-La., says there are signs that FHA is a "ticking time bomb" and the government should be "very cautious" about expanding the FHA program. "My amendment would simply say that the first duty of the FHA is to maintain solvency," Sen. Vitter said. Industry groups, such as the mortgage cooperative Lenders One, are urging the Senate to reject the Vitter amendment. Shutting down the FHA program would be "devastating to the economy," and "shock" the housing and mortgage markets, Lenders One warns in a letter to the Senate. The FDIC/housing bill (S. 896) includes improvements to the FHA Hope for Homeowners program, legal protections for servicers and increases the Federal Deposit Insurance Corp.'s borrowing authority. The House has passed a similar bill (H.R. 1106). The House version contains a bankruptcy cramdown provision that the Senate has rejected.

The percentage of CMBS loans delinquent by 30 or more days in April skyrocketed to roughly five times its level a year ago, according to Trepp LLC.Thirty-plus day CMBS delinquencies have not ever seen a year-to-year spike like this in the history of the CMBS market, Trepp senior managing director Manus Clancy told MortgageWire. He added that CMBS delinquencies have been accelerating month-by-month since January. Delinquencies during the past two months have been at highs not seen since February 2004 and April's month-to-month jump in delinquencies was the largest seen since November 2001. When asked whether CMBS delinquencies may continue to ramp up, Mr. Clancy said he could not provide a forecast. However, he noted that, "It's a bad sign the fact that they're accelerating. In other parts of the economy people are looking for floors, but this seems to be accelerating." Despite the high delinquency rates, spreads on AAA CMBS eligible for the government's TALF program under new terms added Friday have been tightening, Mr. Clancy said.

An MBIA Inc. subsidiary and LaCrosse Financial Products LLC have filed a lawsuit against two Merrill Lynch entities for misrepresentation and breach of contract in connection with credit default swaps tied to subprime residential mortgages.A spokesman for Merrill, which is now owned by Bank of America, declined to comment on the lawsuit which was filed in New York State Supreme Court. The plaintiffs are seeking rescission and damages. MBIA alleges in the suit that Merrill's "effort to market the CDS contracts to MBIA was part of a deliberate strategy to offload billions of dollars in deteriorating U.S. subprime residential mortgages that Merrill held on its books by packaging them into collateralized debt obligations or hedging their exposure through swaps guaranteed by insurers." The plaintiffs charge that "as a direct result of Merrill Lynch's misrepresentations" and breaches of contract, MBIA now faces expected losses of almost $700 million on four CDOs.

PHH Corp. recorded a $71 million write-down on its mortgage servicing assets for the first quarter, which crimped profits.The Mt. Laurel, N.J., mortgage company reported a decline in net income at the company to $2 million ($0.04 per share) from $30 million ($0.55 per share) for the first quarter of 2008. By segment, mortgage servicing had a loss of $118 million, canceling out the $113 million profit of the mortgage production segment. PHH originated $8.9 billion in the first quarter 2009, down from $10 billion in the same period one year prior. Terry Edwards, president and chief executive, said the mortgage production segment "had its strongest quarter since the spin-off, as we experienced increased refinance volumes" adding that PHH expects this to continue through the summer months. Only 29% of PHH's first quarter 2009 volume was from home purchases. But refinancings drove PHH to the servicing asset write-down as well as forcing it to take a $92 million reduction in the value of its MSRs. The company does not hedge its MSRs.

The deteriorating performance of commercial mortgage-backed securities has resulted in a "dramatic jump" in the transfer of commercial real estate loans to special servicers during the first quarter, according to a Fitch Ratings report.The Fitch CMBS report: "What's in Special Servicing?" shows the dollar balance of specially serviced CMBS loans rose to $23.7 billion in the first quarter, up 48% from the previous quarter. Many of the "loans of concern" are jumbo vintage loans originated in 2006-2007 and Fitch said 20 of the largest specially serviced loans have balances ranging from $360 million to $73.5 million. "Later vintage CMBS transactions are backed by loans originated at the height of the market and are thus susceptible to significant income and value declines," said managing director, Mary MacNeill. Fitch said actual delinquencies remained relatively low at 1.53%. But the number of loans transferred to special servicing "due to imminent default" is growing.

Primary insurance-in-force among the nation's mortgage insurers fell to $937 billion in March, a slight decline from the pervious month, according to new figures released by the Mortgage Insurance Cos. of America.The decline, however slight, means MI firms are not writing enough new policies to replace the ones running off. In March, the nation's six active MI firms wrote $9.9 billion of primary new insurance, compared to $8.5 billion in February. A very small percentage of the policies were "bulk" in nature. The MI industry is facing a competitive threat from the boom in FHA/VA-backed loans. Meanwhile, the cure/default ratio improved for the second consecutive month, going from 75.5% in February to 83.2% in March, its best performance in a year. There were 69,931 cures and 84,042 defaults in March.

Guaranty Bank of Milwaukee on Friday confirmed that it will exit the wholesale lending channel. The bank originates loans through a subsidiary called GB Mortgage, which is based in Austin, Texas. No origination figures were available at press time but it's believed that GBM was not a very large player in wholesale. In a statement the bank said it will continue to fund loans through its retail channel "which remains unaffected by this change."

Thanks to interest rates that were at or near historical lows, residential mortgage lenders saw their loan production jump by 36% in the first quarter, according to preliminary survey figures compiled by National Mortgage News and the Quarterly Data Report.If the final results match the early results, it means the industry could wind up producing $714 billion in home mortgages in 1Q. In the year-ago quarter mortgage bankers funded $525 billion. If that run-rate holds mortgage bankers could fund close to $2.8 trillion this year. Moreover, according to interviews with some top ranked lending shops a large percentage of new loan applications are for refinancings — not new home purchases. A spokesman for Chase of Iselin, N.J., said 80% of its originations in 1Q were refinancings. Chase is a subsidiary of JPMorgan Chase.

Benefiting from historically low interest rates and a refinancing boom, Fannie Mae issued $87.8 billion in mortgage-backed securities in March, nearly doubling the previous month's volume. The last time MBS issuance was this high was in 2003. The mortgage giant's refinancing volume totaled $77 billion in March, nearly double February's total. And in April, Fannie began accepting refinancings that lenders are originating under the guidelines of President Obama's Making Home Affordable program. "We expect that the MHA program will bolster refinance volumes over time as major lenders adopt necessary system changes and consumer awareness continues to build," Fannie said. Fannie and Freddie are expected to refinance 4 million to 5 million homeowners under the President's program. Despite the surge in new business, Fannie reported that its ratio of "seriously delinquent" loans is continuing to rise. The percentage of loans 90 days or more past due rose 19 basis points during the month of February to 2.96%, compared to 1.1% a year ago. (The delinquency figures lag by a month.) Fannie will report March delinquencies in its next monthly report. Freddie has already reported its serious delinquency rate: 2.29% for March.

Accredited Home Lenders of San Diego, once a top ranked subprime lender, is expected to file for bankruptcy protection in Delaware, perhaps as soon as this afternoon, according to a source close to the matter.According to company notes provided to National Mortgage News it appears that Accredited will go into liquidation and will auction off its servicing platform. The lender, which was bought by Lonestar Funds, a hedge fund company, two years ago, at last check had about $6 billion in servicing rights on its books. The source said that Accredited Home Lenders (a holding company) and "certain affiliates and subsidiaries" will file voluntary petitions under chapter 11 of the bankruptcy code and then "commence an orderly wind-down of operations." Accredited, the source said, decided to liquidate "as a result of extremely challenging market conditions and the desire to conduct an orderly wind-down and disposition of assets." The lender is currently trying to sell its real estate owned (REO) portfolio. The source said the company is promising its borrowers that "there will be no disruption" for them in regard to the servicing of their loans. Accredited's board of directors is prepared to name Meade Monger of AlixPartners as its chief restructuring officer, the source said.

Washington Real Estate Investment Trust, Rockville, Md., has priced its 5 million share public offering of common stock at $21.40 per share. The transaction is expected to close on May 5, 2009. WRIT has granted the underwriters a 30-day option to purchase an additional 750,000 common shares. The company estimates that the net proceeds from this offering will be approximately $102.6 million and will be used to repay borrowings outstanding under WRIT's line of credit and for general corporate purposes. Wachovia Capital Markets LLC, Citi and Raymond James & Associates Inc. are joint book-running managers. J.P. Morgan Securities Inc. is a co-lead manager and Robert W. Baird & Co., Credit Suisse Securities (USA) LLC, RBC Capital Markets Corp., BNY Mellon Capital Markets LLC and Morgan Keegan & Co. Inc. are the co-managers for the offering. WRIT was trading at $20.98 per share, down $1.33, in early afternoon trading on April 30.

The Georgia Department of Banking and Finance issued Cease and Desist Orders to two mortgage companies that were unlicensed to do business in the state. The first order was issued to Kalle Kivinen, doing business as Loan Restructuring Solutions in Chandler, Ariz. The second order went to Atlanta Loan Modifications Inc. of Alpharetta, Ga. Both of these orders were issued after the Department obtained evidence that both Atlanta Loan Modifications and Mr. Kivinen through Loan Restructuring Solutions were engaged in mortgage broker/lending activities without a license. According to Rod Carnes, deputy commissioner for non-depository financial institutions, these orders "only indicate that they were not licensed in the state. This action is just for Georgia." Mr. Carnes would not comment on how investigations of these two companies came about, nor would he comment on whether the entities were engaged in fraudulent activity. Mr. Kivinen, who is still doing business through Loan Restructuring Solutions — though not in Georgia — did not return calls seeking comment.

The credit crisis has impacted commercial mortgage banking revenues at Southwest Georgia Financial Corp., Moultrie, Ga., which saw a 54.3% decline in the first quarter of 2009. The bank holding company generated $313,000 in income from mortgage banking services in the first quarter of 2009, compared to the $685,000 generated the same time a year prior. According to the company, the drop in revenue was due to the credit crisis restricting mortgage loan funding opportunities. "Our first quarter results reflect the challenging economic environment that continues to negatively impact us," said DeWitt Drew, the company's president and chief executive, adding that the company increased its loan loss provision. "However, we are encouraged by the 19% increase in total loans year-over-year."

According to a study by Freddie Mac of its own portfolio, refinancings during the first quarter are on track to reduce consumer mortgage payments by $2.5 billion in the coming year. "The payment savings from 'rate-and-term' refinancing done during the quarter is about $160 a month on a $200,000 loan and in aggregate this adds up to about $2.5 billion," said Freddie Mac chief economist and vice president Frank Nothaft. Half of all borrowers who refinanced their loans during the period lowered their interest rate by at least 20%, according to Freddie Mac. The median ratio of new-to-old mortgage rate was 0.80 in the quarter and this marked the lowest ratio since the third quarter of 2003, Freddie Mac said. The government-sponsored enterprise added that this corresponds to a new interest rate that is about 1.25 percentage points below the old rate. Refinances in which the resulting new loan amounts were at least 5% higher than paid-off first-lien mortgage balances fell to a five-year low of 42% during the period. The volume of home equity loans and lines of credit rolled into the first lien during refinance increased during the first quarter to $7 billion in second-lien debt consolidations from $4.7 billion the previous three-month period, according to Freddie deputy chief economist Amy Crews Cutts. "Because second liens generally carry higher interest rates, the consolidation of $11.7 billion into a lower-cost first lien provides about $200 million in interest savings over the next year to these households," she said.

The average rate for a 30-year fixed-rate mortgage dropped slightly to match a Freddie Mac Primary Mortgage Market Survey-record low. Freddie Mac chief economist Frank Nothaft said the industry might be near a bottom, adding, "Rates for fixed-rate mortgages hovered at record lows this week as ARM rates eased further." The average 30-year FRM rate during the week ended April 30 was 4.78%, down from 4.8% the previous week and 6.06% a year ago; the average 15-year FRM rate remained unchanged for the third week in a row at 4.48% and was down from 5.59% a year ago; the average five-year Treasury-indexed hybrid adjustable-rate mortgage rate was 4.8%, down from 4.85% the previous week and 5.73% a year ago; and the average one-year Treasury ARM rate was 4.77%, down from 4.82% the previous week and 5.29% a year ago. Mr. Nothaft cited as the "most important" evidence the housing market may be moving toward a bottom is a drop in the inventory of unsold new homes to a low not seen since 2002. Among other indicators, he also noted that the Standard & Poor's/Case-Shiller 20-city composite home price index did not show a record year-over-year decline for February, the first time there was not a larger decrease since December 2006.

Analysts at FBR Capital Markets are making what they call the "bull case" that MGIC Investment Corp., Milwaukee, will not have to undertake a capital raise that would be highly dilutive to current shareholders. Steve Stelmach and Amy DeBone noted that MGIC had a relatively high rate, 20%, of policy rescissions in the first quarter. The case against a capital raise is by the company's current capital proving sufficient or by MGIC entering a hibernation period in which little to no new business is written. "We note that 20% is relatively high and, if sustainable, could have a material impact on lowering ultimate loss assumptions and could move MGIC toward profitability sooner than forecasted. We note that our own estimates incorporate modest profitability returning in the second half of 2009, an improvement from our prior estimates," the analysts said. While it is still too early to make the call on the need for more capital, the analysts said they were "highly encouraged" by the rate of rescissions.

The mortgage reform bill approved by the House Financial Services Committee directs the Department of Housing and Urban Development to withdraw the Real Estate Settlement Procedures Act rule that was issued by the previous administration shortly after the November elections. The committee approved an amendment by Rep. Judy Biggert, R-Ill., that directs HUD to work with the Federal Reserve Board in issuing mortgage disclosures that are "complementary" and don't confuse consumers that are applying for a mortgage. HUD is responsible for designing mortgage disclosures under RESPA and the Fed has similar responsibilities under the Truth in Lending Act. Ideally lenders would like to see a single RESPA/TILA disclosure. Nine industry groups backed the Biggert amendment. Meanwhile, the committee narrowly defeated an amendment by Rep. Gary Miller, R- Calif., to postpone for 12 months the implementation of the Home Valuation Code of Conduct. HVCC affects appraisals on all loans sold to Fannie Mae and Freddie Mac. Starting May 1, lenders must comply with HVCC that the government-sponsored enterprises agreed to implement as part of a settlement with New York Attorney General Andrew Cuomo.

The House Financial Services Committee has passed by a 49-21 vote a mortgage reform bill that favors the origination of prime fixed-rate mortgages and discourages subprime and nontraditional lending. The basic premise of the bill (H.R. 1728) is to require lenders to retain 5% of the credit risk on "nonqualified" mortgages that are sold or securitized. However, the committee expanded the definition of "qualified mortgages" to include government insured mortgages, such as Federal Housing Administration loans, and loans purchased or securitized by Fannie Mae and Freddie Mac. Lenders don't have to retain capital against qualified mortgages. The committee also approved an amendment by Rep. Leonard Lance, R -N.J., that would ensure all jumbo loans aren't considered subprime because of their high interest rates. In addition, the bill gives federal regulators the discretion to make exceptions to the 5% credit risk retention requirement. The full House of Representatives is expected to vote on the bill on May 7.

U.S. District Judge James S. Moody has sentenced a St. Petersburg, Fla. mortgage broker who pled guilty to fraud charges to five years in federal prison. The broker, Victor Thomas Clavizzao, also was sentenced to pay more than $2 million in restitution, as well as to forfeit an additional $6 million. According to court documents, Clavizzao acted as mortgage broker in the purchase of 13 different properties and conspired with Mark Lepzinski, a property flipper from Clearwater, Fla., to submit false and fraudulent information to various lenders in order to induce the lenders to fund bad loans. U.S. District Judge James D. Whittemore previously sentenced Lepzinski to 13 months in prison for his role in the conspiracy.