Originations

Deutsche Bank in a profitable first quarter took another 1.0 billion euros ($1.3 billion) in partially mortgage-related sales and trading writedowns as well as a 500 million euro ($663 million) impairment charge on a resort and casino property and said it may see a rebound in its fortunes in the medium term. DB's total debt sales and trading markdowns were dominated by provisions against the mononline insurance segment. There were 1.4 billion euros ($1.9 billion) of writedowns in this category during the same period a year ago. During last year's first quarter, these were dominated by exposures to residential mortgage-backed securities and commercial real estate loans. The company generated 1.2 billion euros ($1.6 billion) in net income in the first quarter, up from a net loss of 141 million euros ($187 million) during the same period a year ago.

Fidelity National Financial Inc.'s business is picking up thanks to the refinance wave, but the time it is taking to close orders is slowing and losses on recent acquisitions are putting a drag on its earnings. "We saw a surge in open order volumes in the first three weeks of April, nearing their highest levels of 2009," chairman William P. Foley II said. The increase in refis has resulted in an increase in the time it takes to close an order, he said. The Jacksonville, Fla.-based company's direct orders opened rose to 746,400 in the first quarter from 562,000 during the same period a year ago. The former LandAmerica title operations now owned by FNF had pre-tax operating losses for two of the three months of the first quarter and that contributed to a net loss of $12.4 million ($0.06 per share) for the entire operation. Mr. Foley said the legacy FNF business was profitable all three months of the first quarter, but the operations of Lawyers Title and Commonwealth Title lost $17 million in January and $5 million in February on pre-tax basis. Mr. Foley added that FNF realized $231 million in run-rate cost savings from the former LandAmerica operations by the end of the quarter, up from its original estimate of $150 million and a revised estimate of $225 million. FNF recently closed a public offering of its common stock, which raised net proceeds of $331 million. While $135 million will be used to repay its existing credit facility, the company is considering using the rest to repurchase "a meaningful amount" of its bonds. If both actions are completed, FNF will reduce its debt to capital ratio from approximately 32% to near 25%.

Lately, it has been as refinancings go, so goes the total number of applications for new mortgages and the past week was no exception. The number of refinancings declined by 18.1% on a seasonally adjusted basis to 960.6 from 1172.2, according to the Market Composite Index, an overall measure of mortgage applications, for the week ended April 24. The index is compiled from the Mortgage Bankers Association's Weekly Mortgage Applications Survey. The Refinance Index fell by 21.9% to 5108.2 from 6540.7 in the previous week. The seasonally adjusted Purchase Index decreased 0.6% to 251.6 from 253.0 one week earlier. The Conventional Purchase Index decreased 1.4% while the Government Purchase Index increased 0.8%. On an unadjusted basis, the MCI decreased 17.4% compared with the previous week and increased 62.7% compared with the same week one year earlier. Refinancings decreased to 75.3% of total applications from 79.7% the previous week, while adjustable-rate mortgages accounted for 2.1% of applications, an increase from 1.4% the week prior, the MBA said. There was a decrease in the average contract interest rate for 30-year fixed-rate mortgages to 4.62% from 4.73%, with points (including the origination fee) increasing to 1.14 from 1.12 for loans with 80% loan-to-value ratios, the association said. The MBA can be found online at http://www.mortgagebankers.org.

Fair Isaac — the company behind the most commonly used credit scoring system in the nation — has launched a new website that tells consumers if they qualify for a Fannie Mae or Freddie Mac loan modification under the Obama Administration's plan. The website asks the borrower 15 basic questions about their mortgage including the identity of their servicer. The GSEs launched similar initiatives a few weeks ago. The "Making Home Affordable" effort aims to modify or refinance up to 9 million GSE borrowers who are either underwater on their loans or have little in the way of refi options.

Global DMS LLC, Lansdale, PA, a commercial and residential real estate valuation software solutions provider since 1999, said it considers many lenders and correspondents to be not fully prepared to comply with the Home Valuation Code of Conduct, which goes into effect on May 1. Global DMS executives said "widespread misconceptions are leaving lenders and correspondents exposed to possible HVCC violations." One example, judging from the "numerous calls" president Vladimir Bien-Aime said the company has recently received from companies trying to get ready, is that, "quite a few" are under the impression that using an appraisal management company will eliminate their liability in HVCC compliance, and he said that leaves them exposed to compliance violations. Further, some lenders are not aware that if they follow HVCC guidelines they can also use independent appraisers and still be HVCC compliant. Other misconceptions include the belief that it will require a huge capital investment to become HVCC-compliant, or that COD payments are still widely accepted. In fact, he said, compliance costs are low and COD payments are going away, "so lenders and correspondents are going to have to manage prepayments in addition to managing the appraisal process."

Former American Home Mortgage founder and CEO Michael Strauss — who is now running a loan modification startup — has agreed to pay the Securities and Exchange Commission $2.45 million to settle a slew of allegations including one where he had others turn company losses into "fictional" profits. Mr. Strauss, who could not be reached for comment, also agreed not to serve as an officer or director of a publicly traded company for five years. The SEC also brought charges against two other former AmHome executives, Stephen Hozie (CFO), and Robert Bernstein. Both could not be reached for comment and have yet to settle. Two former officers of AmHome (once a publicly traded REIT) told National Mortgage News that they have been contacted by the FBI concerning AmHome's operations. Mr. Strauss' new loan modification company is called InstaModify and according to its website has offices in East Meadow, N.Y., and Irvine, Calif. This publication left a message for Mr. Strauss at the East Meadow office and had received no response at press time. A prime and alt-A lender/servicer, AmHome filed for bankruptcy in the summer of 2007, costing investors hundreds of millions of dollars.

MGIC Investment Corp., Milwaukee, said it is seeking new capital in order to continue to write new mortgage insurance policies. Curt S. Culver, chairman and chief executive said that while MGIC has yet to pursue raising capital from private sources, it has been in discussions with the U.S. Treasury and the Office of the Commissioner of Insurance of Wisconsin to explore options. The statement came in the company's first quarter 2009 earnings release. MGIC lost $184.6 million ($1.49 per share) during the period, compared with a loss of $34.5 million ($0.41 per share) one year ago; in the fourth quarter 2008, it lost $273.3 million ($2.21 per share). Mr. Culver added that MGIC believes it has adequate capital to pay its insured claims obligations. Losses incurred during the first quarter were $757.9 million, up from $691.6 million for the same period last year. Delinquencies went from 7.68% (5.19% flow, 23.19% bulk) in the first quarter 2008 to 13.51% (10.59% flow, 34.53% bulk) for the first quarter 2009. The amount of primary new insurance written decreased from $19.1 billion for the first quarter of 2008 to $6.4 billion for the most recent period.

To jumpstart the Hope for Homeowners program, the Treasury Department will pay servicers hefty bonuses to use the FHA refinancing program and purchase Ginnie Mae securities backed by H4H loans. "These purchases will increase secondary market liquidity for new Hope for Homeowners loans, supporting additional assistance to homeowners," Treasury says in an update to the Obama administration's loan modification program. Participating servicers are expected to evaluate homeowners that are going through a trial loan modification to see if they can qualify for a principal writedown under the Federal Housing Administration H4H program. If the investor agrees to a writedown, the servicer would receive a $2,500 up-front incentive payment for a successful H4H refinancing, instead of the $1,000 that is paid for a standard loan modification. In addition, "lenders who originate the new H4H loan are eligible for success fees of up to $1,000 per year for up to three years, so long as the refinanced loan remains current," Treasury says.

The Treasury Department has revised the President's loan modification plan to require participating servicers to consider the FHA Hope for Homeowners program as an option and write down the principal amount of the mortgage. "For borrowers where Hope for Homeowners works, it can be a better option for them," because it allows underwater borrowers to re-establish equity in their homes, HUD secretary Shaun Donovan said. If the investor is willing to do a writedown, "that will be first alternative to a modification," the Department of Housing and Urban Development secretary told reporters. The HUD secretary admitted the FHA H4H program is flawed and it has only refinanced 50 homeowners. However, the Obama administration is urging Congress to pass a housing bill (H.R. 1106) to revamp the H4H program and make it a more effective part of the administration's loan modification program. The new HUD secretary also said 11 of the largest servicers have signed up to participate in the President's loan modification program and they are beginning to modify mortgages in private-label securities. "Servicers are moving forward with modifying PLS loans." He also noted that an increasing number of investors are willing to do principal write downs under the FHA program.

Sen. Richard Shelby, R-Ala., has placed on hold on the President's nominee David Stevens to be the new Federal Housing Administration commissioner as the result of a lawsuit against his former employer Long and Foster. The Senate Banking Committee approved four other Department of Housing and Urban Development nominees on Tuesday (April 28) and cleared the way for their confirmation by the full Senate. However, committee chairman Christopher Dodd, D-Conn., did not seek a vote on Mr. Steven's nomination. "Sen. Shelby agreed with chairman Dodd that this matter needs to be thoroughly examined before moving forward with a committee vote on Mr. Stevens' nomination," said a spokesman for Sen. Shelby. The class action lawsuit is understood to involve possible RESPA violations by Long and Foster, which is the largest privately owned real estate brokerage firm. Meanwhile, the committee approved the following HUD nominees: Ronald Sims to be deputy secretary, Helen R. Kanovsky to be general counsel, Peter Kovar to be assistant secretary for congressional and intergovernmental affairs, and John D. Trasvina, to be assistant secretary for fair housing and equal opportunity.

The Senate has passed a bill that expands the bank fraud statutes to cover independent mortgage companies and mortgage brokers and increases funding for federal investigations of mortgage and financial fraud by $165 million. By a vote of 92-4, the Senate approved the Fraud Enforcement and Recovery Act that also expanded federal fraud laws to cover funds involving the $700 billion Troubled Asset Relief Program that is being used to capitalize banks and deal with problem assets. The bill (S. 386) expands the definition of "finance institutions" to ensure mortgage brokers and mortgage companies are held fully accountable under the federal fraud laws. It also makes it a crime for brokers and mortgage bankers to make materially false statements or to willfully overvalue properties to influence any action by a mortgage lending business. The Obama administration supports the bill and the House of Representatives is working on a similar bill. "The legislative enhancements would help the Department of Justice to combat mortgage fraud, securities and commodities fraud, money laundering and related offenses, and to protect taxpayer money that [has] been expended on recent economic stimulus and rescue packages," the White House told the Senate in a statement of administration policy.

Sen. Richard Shelby, R-Ala., has placed on hold on the President's nominee David Stevens to be the new Federal Housing Administration commissioner as the result of lawsuit against his former employer Long and Foster. The Senate Banking Committee approved four other Department of Housing and Urban Development nominees on Tuesday (April 28) and cleared the way for their confirmation by the full Senate. However, committee chairman Christopher Dodd, D-Conn., did not seek a vote on Mr. Steven's nomination. "Sen. Shelby agreed with chairman Dodd that this matter needs to be thoroughly examined before moving forward with a committee vote on Mr. Stevens' nomination," said a spokesman for Sen. Shelby. The class action lawsuit is understood to involve possible RESPA violations by Long and Foster, which is the largest privately owned real estate brokerage firm. Meanwhile, the committee approved the following HUD nominees: Ronald Sims to be deputy secretary, Helen R. Kanovsky to be general counsel, Peter Kovar to be assistant secretary for congressional and intergovernmental affairs, and John D. Trasvina, to be assistant secretary for fair housing and equal opportunity.

Data through February 2009 show continued broad-based declines in the prices of existing single family homes across the U.S. with 10 of the 20 metro areas showing record rates of annual decline, and 15 reporting declines in excess of 10% versus February 2008, according to Standard & Poor's Case-Shiller Home Price Indices. The three worst performing cities continue to be in the Sunbelt, each reporting negative returns in excess of 30%. Phoenix was down 35.2%, Las Vegas declined 31.7% and San Francisco fell 31%. Dallas, Denver and Boston faired the best in terms of annual declines down 4.5%, 5.7% and 7.2%. Dallas also had the distinction of being the best performer for the month, returning -0.3%. "We witnessed some deceleration in the rate of decline in some of the markets," says David M. Blitzer, chairman of the index committee. "All 20 metro areas recorded a decline in February, but 16 of the 20 metro areas saw an improvement in their monthly returns compared to January. We will certainly need a few more months of data before we can determine if home prices are finally turning around." Nine of the 20 metro areas showed improvement in their annual returns compared to their returns in January. In February, Cleveland was the only metro area having a record monthly decline, returning -5%. Cleveland, Charlotte, New York and Washington were the only MSAs showing larger declines in home prices in February compared to January's report.

California's home building business is picking up steam, too. Builders pulled 39% more permits in March compared to February, a jump in activity the California Building Industry Association is taking as a clear sign the combined federal-state tax credits are working to clear out unsold inventory and generate new construction. Though housing starts still are down on a year-over-year basis by 31%, CBIA President Robert Rivinius said the big month-to-month increase shows that builders are gaining confidence due to increased sales generated by the tax credits. In addition to the $8,000 tax credit offered to first-time buyers by Uncle Sam, the state is offering up to a $10,000 credit to buyers of finished but unsold new houses. The state has earmarked $100 million for its credit, and the Franchise Tax Board says one-third was applied for in the first six weeks after it was approved by lawmakers in Sacramento. "It's having the desired effect," said Mr. Rivinius. "But the allocated funds for the credit are being rapidly absorbed, which is why we believe a second round of the tax credit would be extremely helpful in keeping the momentum going."

Buyers are starting to bang heads once again in California, according to March sales figures produced by the state Realtors organization.Existing single-family home sales were up almost 64% over March a year ago, driving the median sales prices higher on a month-to-month for the first time in nearly two years, the California Association of Realtors reported. CAR's unsold inventory index also fell to five months in March, compared to 12.2 months a year earlier, and the median days on the market for houses sold in the month was down more than a week, from 56.8 to 48.3 days. Said CAR President James Liptak: "All of the regions in the state experienced increases in month-to-month raw sales." The largest gain was posted in the Riverside-San Bernardino region, which saw sales jump by almost a third. It wasn't all candy and roses, though. While the March median sales price was $253,040, a 2.2 gain from $247,590 in February, it was 39% lower than the March 2008 median of $414,520. Chief Economist Leslie cited an increase in the number of multiple offers as an indication that first-time home buyers and investors are responding to dramatically improved housing affordability in the Golden State as well as relatively low loan rates and the federal first-time buyer tax credit. The economist also noted that a number of the group's 90 local affiliates have registered monthly gains for one or more months since the beginning of this year. But she said it is still too early to call the bottom of the California's housing slide.

The 130-members of Lenders One are reporting very heavy volumes of refinancings, according to Scott Stern, the chief executive of the mortgage cooperative, who is already looking ahead for another refinancing surge."We expect continued heavy volume at least through June," Mr. Stern said. But he is hoping the Federal Reserve succeeds in driving mortgage rates even lower. "We think another $1 trillion in refinancing volume could come if mortgage rates drop into the 4.25% and 4.5% range," the CEO told MortgageWire. He noted that his members sold nearly $10 billion in mortgages to the coop's preferred investors in the first quarter and refinancings comprised 77% of originations. "The only thing slowing down refinances is warehouse line capacity. That is a problem," Mr. Stern said. "We could be refinancing more loans, if there was more warehouse lending capacity."

The Government National Mortgage Association is expanding its reach internationally, according to its president. Joseph Murin.In what he called a "telling statistic" for his "no frills organization," Mr. Murin told the MBA government lending conference that 48% of Ginnie Mae's issuances currently are being gobbled up by foreign investors compared to 32% a year ago. "The international community loves our bonds," he said.

Even though some mega banks have been exiting the wholesale arena en masse, BankTennessee of Collierville is jumping in.The bank recently hired industry veterans Jim House and Hugh Edwards to lead the effort. Mr. House was wholesale division manager for RMC Funding and also worked at National Bank of Commerce, which eventually became SunTrust Bank. Mr. Edwards also worked at RMC. A spokeswoman for BT said that the effort is still young and that so far the depository only has two "approved" brokers.

Although the Federal Housing Administration is on a pace to insure some 2 million mortgages in fiscal year 2009 — a 30% market share or better — fears that the agency will soon be mired in a sea of defaults are "premature," said FHA Commissioner Brian Montgomery.Mr. Montgomery told the Mortgage Bankers Association's Government Housing and Loan Production Conference in Washington that FHA-insured loans "continue to outperform" the subprime loans that helped bring the mortgage market to its knees. He said only 7% of FHA loans are past due 90 days or more compared to nearly one in four subprime loans. One reason for the agency's success is that it is attracting "better quality borrowers," Mr. Montgomery told the meeting. The average FICO score of an FHA borrower was 680 at the end of fiscal 2008 compared to 640 the year prior. Another factor cited by the commissioner, who was making his last official appearance in the nation's capital, is that the agency doesn't have a lot of exposure in high-flying markets such as California, where the cost of housing has made the insurance program all but a non-entity until its loan limits were raised recently. Senate confirmation of Mr. Montgomery's replacement, David Stevens, is expected to come any day.

The House Financial Services Committee has approved an amendment to a mortgage reform and anti-predatory lending bill that would give federal regulators the discretion to make exceptions to a 5% credit risk retention requirement. The bill requires lenders to retain 5% of the credit risk on non-prime mortgages that are sold or securitized. The amendment would allow the Federal Reserve Board and Treasury Department to relax the 5% requirement on lenders for certain mortgage products. In addition, it would allow regulators to apply credit risk retention to securitizers. Committee chairman Barney Frank, D-Mass., noted that Treasury asked for this discretion over securitizers. "I think it is justifiable," Rep. Frank said. But the chairman believes the main responsibility should be on the lender and he wants to talk with Treasury officials more about their approach. The committee also approved an amendment by Rep. Paul Kanjorski, D-Pa. which requires state monitoring of appraisal management companies and federal oversight of AMCs that are subsidiaries of banks and thrifts.