Originations

Bank of America is hiring thousands of new employees to keep up with surging residential originations even though its mortgage business posted a $500 million loss for the first quarter due to deteriorating loan performance. The giant bank originated $85.2 billion in single-family loans in the first quarter, up 91% from the previous quarter. Nearly one quarter of the funding involved home purchases, according to BoA chief financial officer Joe Price. The mortgage business is "going full bore as evidence of the fact we have added or intend to add almost 5,000 new positions in addition to transferring another 700 associates from other parts of the bank to fulfill the increased volume," Mr. Price said during a conference call on the bank's earnings report. The bank reported $5.2 billion in total revenues from its home loan and insurance business, up 60% from the fourth quarter. "However, earnings were negative due to a high level of provisions," the CFO said. The first quarter loss provision was $3.4 billion, up $1.7 billion from the previous quarter. Net charge-offs on its $261.6 billion mortgage portfolio increased $319 million to $785 million in the first quarter. "Nonperforming loans increased by $3.8 billion from the fourth quarter and now represents 4.13% of loans," BoA said.

The land title industry is hoping the first quarter surge in refinancings is going to turn 2009 into a good year after they posted operating losses of $710 million in 2008, following an $87.8 million loss the previous year. "The land title industry is beginning to see an increase in orders and is anticipating growth based on a growing market for refinance transactions," said Kurt Pfotenhauer, chief executive of the American Land Title Association. Economists at the Mortgage Bankers Association recently forecast that refinancings could make 2009 the fourth highest origination year on record. "This is welcome news following a very tough market in 2008," Mr. Pfotenhauer said. Last year was all downhill for ALTA members as the decline in title premiums followed the decline in residential sales and refinancing transactions right up to the very end of the fourth quarter. Despite the large loss, ALTA said the land title industry remains in a "strong financial position."

Mortgage brokers are staging a last-ditch lobbying effort to get Congress to block the implementation of a new appraisal code that applies to all loans sold to Fannie Mae and Freddie Mac. The new code, which goes into effect May 1, prohibits the government sponsored enterprises from purchasing mortgages if loan officers or mortgage brokers are involved in selecting appraisers or influencing the appraisal process. The National Association of Mortgage Brokers claims the GSE code will marginalize brokers and independent appraisers by encouraging major lenders to rely on "unregulated" appraisal management companies. "Please contact your Senators and Representatives today to urge them to stop or delay (for at least 12 months) the implementation of the Home Valuation Code of Conduct, which is de facto regulation, forced on Freddie Mac and Fannie Mae by New York Attorney General Andrew Cuomo," NAMB says in a "Call to Action" emailed to its members on April 16. "Please contact your legislators today at their in-district offices, as Congress currently is in recess." The appraisal management company model is "flawed," NAMB says, and it will produce "poor quality" appraisals at an increased cost to consumers.

Weingarten Realty Investors has priced a public offering of 28 million shares of its common stock at $14.25 per share. The shopping center and industrial real estate investment trust has granted the underwriters an option to purchase up to an additional 4.2 million shares. Merrill Lynch & Co. and JPMorgan are acting as joint book-running managers for the offering. RBC Capital Markets and Wachovia Securities are acting as joint lead managers. Robert W. Baird & Co., BBVA Securities, J.J.B. Hilliard, W.L. Lyons LLC and Stifel Nicolaus are acting as co-managers. The company intends to use the net proceeds, expected to be approximately $381.9 million, to reduce borrowings outstanding on its revolving credit facility and for general corporate purposes, including the repayment or repurchase of outstanding indebtedness. As of midday on April 17, Weingarten was trading at $15.72 per share, up $0.04 on the day.

Five Florida residents have been arrested for their alleged involvement in a criminal mortgage fraud operation that defrauded several financial institutions of $4.5 million. Emerio Lima, Inocencia Soto, Pedro Fornos and Josefa Herrera, all from Miami, and Stephen Zalka of Parkland, Fla., are facing charges of organized fraud, mortgage fraud and grand theft. They allegedly recruited straw buyers who lent their names and credit to purchase numerous properties. They were told that they wouldn't have to make any mortgage payments, since the properties would be flipped in a few months. The scheme also included a certified public accountant who allegedly provided falsified employment verification letters for the straw buyers. With the straw buyers lined up, HUD-1 statements with inflated sales prices were submitted to lenders for funding. The title agent, acting on behalf of the other co-conspirators, allegedly transferred the funds into a bank account of either a third party or a shell company controlled by one of the co-conspirators. The arrest affidavit identifies nine properties located in Miami-Dade, Broward, Lee and Charlotte counties, which were allegedly used by the defendants to facilitate their scheme. Most of the properties are now in foreclosure. The five defendants were unavailable for comment. According to the Attorney General's Office of Statewide Prosecution, the investigation is ongoing and additional arrests are expected.

The House Financial Services Committee is holding a hearing April 23 on a regulatory reform bill that would restrict nonprime mortgage lending and lender compensation. Committee chairman Barney Frank, D- Mass., originally wanted the committee to mark up and approve the bill (H.R. 1728) before Congress left April 6 for its two-week break. But the chairman agreed to postpone the markup due to objections by committee Republicans and industry groups. Now it appears the committee markup will be April 28 or April 29. The mortgage reform bill (H.R. 1728) requires lenders to retain 5% of the credit risk when they sell single-family loans that are not prime fixed-rate mortgages to investors. Lenders say the 5% is too high and they are looking for some middle on the risk retention issue. H.R. 1728 also restricts yield spread premiums and mortgage bankers are concerned the language is ambiguous and could restrict servicing release premiums.

GMAC Mortgage said it is hiring new staffers at its nationwide lending and servicing centers.On April 13, the company joined the Home Affordable Modification Program and the hires are needed to accommodate the increase in loan modifications, as well as the recent surge in refinance activity. Even before becoming formally part of the program, the Fort Washington, Pa., based company sent out more than 100,000 financial packages to homeowners who are potentially eligible for modifications under the new program. While the press release issued by GMAC Mortgage did not give a number for the new hires, other published reports say the company is adding 1,000 people. A call to GMAC Mortgage for confirmation was not returned by deadline.

BB&T Corp., Winston-Salem, N.C., saw its mortgage-related revenues in the first quarter of this year increase by 218.6% when compared with the same period in 2008.The $188 million of mortgage-related revenues included an increase of $30 million in the value of its mortgage servicing rights when compared with the first quarter 2008. The MSR increase was because its hedge outperformed the decline in the value of the asset. Excluding the impact of this item, mortgage banking income increased $99 million or 162.3% over the same period last year. BB&T had $7.4 billion in mortgage loan originations in the first quarter 2009, more than double the $3.6 billion it did in the fourth quarter 2008. However, nonperforming asset levels and charge-offs increased, driven by continued deterioration in housing-related credit. The company said the largest concentration of credit issues are in Georgia, Florida and the District of Columbia metropolitan area. BB&T had net income of $318 million, including $271 million of net income available to common shareholders ($0.48 per share), compared with net income of $428 million ($0.78 per share) one year prior.

Citigroup reported $1.9 billion in net credit losses on its residential mortgage portfolio in the first quarter, up from $887 million a year ago, due to a "continued rise" in delinquencies, the company said. The New York-based banking giant said the percentage of first mortgages 90 days or more past due jumped to 7.15%, up from 3% in first quarter of 2008. The single-family loans that Citi owns with FICO scores below 620 have a 13.7% serious delinquency rate. Meanwhile, Citigroup has a 3.25% serious delinquency rate on its home equity loans as of March 31, up from 1.45% a year ago. Citigroup said it originated $22.4 billion in residential mortgages in the first quarter, up from $16.6 billion in the previous quarter, but down 40% from the first quarter of 2008. Overall, Citigroup's North American consumer and mortgage banking units reported a $178 million loss for the first quarter. The company does not break out losses due to its residential mortgage business.

The fourth and final defendant involved with a scheme targeting Maryland homeowners facing foreclosure via local television ads has pleaded guilty to related charges. Earnest Lewis of Takoma Park, Md., admitted in U.S. District Court to participating in a scheme were his brother Michael K. Lewis aired television advertisements that targeted financially vulnerable individuals, representing that he could improve their credit, save their homes from foreclosure and assist them with bankruptcy. The co-conspirators fraudulently told the homeowners that they had to sign their homes over to Earnest Lewis and, in turn, he would use his credit to temporarily refinance their homes. They could repurchase the homes in a year, or once they regained their financial footing. During the interim, they could remain in their homes by paying "rent" and fees to Earnest Lewis by having their bank accounts directly debited by an account belonging to another co-conspirator. Co-conspirators Michael Lewis, Cheryl Brooke and Winston Thomas have also all pleaded guilty to participating in this scheme.

Generation Mortgage Company, Atlanta, closed 1,405 government backed 'Home Equity Conversion Mortgages' (HECMs) in the first quarter of 2009, a 233% increase from the first quarter of 2008.GMC says it is the nation's sixth largest funder of reverse mortgages. Company president Joe Morris said higher loan limits for reverses (HECMs) "provide greater liquidity in homes with higher values. This in turn makes the reverse mortgage more attractive than ever before for older boomers and seniors seeking greater financial independence."

Residential mortgage originations at Wells Fargo and other banks receiving TARP assistance rose at a "healthy" clip in February from January, according to a monthly lending survey compiled by the Treasury Department.Single-family originations at Wells Fargo, for instance, totaled $34.8 billion in February, a 45% increase from the previous month. The bank ended the month with $75 billion of mortgages in its pipeline, according to the Treasury survey. Led by refinancings, the median increase in residential mortgage originations across the 21 TARP banks rose at a "healthy" rate, the lending survey says. Bank of America originated $28.7 billion in single-family loans in February, up 25% from January. Refinancings totaled $22.3 billion. Refinancings at Wells Fargo totaled $28.5 billion. Due to the large pipeline, the San Francisco-based bank said "strong funding levels are expected in March."

Homebuyer traffic is beginning to pick up in certain parts of the country, a sign that lower interest rates and tax credits are working, according to the Federal Reserve's new 'Beige Book.'Still, the government reports that residential prices, overall, are weak with home values and construction "still falling in most areas." The Fed reported this one positive note: "better-than-expected" buyer traffic led to a scattered pickup in sales in a number of its 12 regional districts. Districts seeing an increase in homebuyers include Atlanta, Kansas City, Minneapolis, Richmond and San Francisco. In the commercial real estate sector the outlook is negative: "Nonresidential real estate conditions to deteriorate," the Fed says. "Difficulty obtaining commercial real estate financing was constraining construction and investment activity." The government notes, however, that "Nonresidential construction is expected to decline through year-end, although there were some hopeful reports that the stimulus package may lead to some improvement."

Even though JPMorgan Chase earned $2.1 billion in the first quarter, its consumer and mortgage lending group lost $389 million during the same period due to loan servicing and credit charges and higher mortgage costs tied to loan modifications.In particular the company singled out higher servicing costs and MSR "risk management results." JPM CEO Jamie Dimon said the banking giant "benefited from underlying growth" in, among other things, higher mortgage refinancing volumes. Mortgage production revenue for JPMorgan Chase was $481 million, as wider margins on new originations were offset partially by an increase in reserves for the repurchase of previously sold loans and lower mortgage origination volumes. Even though the consumer and mortgage unit lost money, net mortgage servicing revenue totaled $1.2 billion, compared to $1 billion a year ago. JPM said it also bought $34 billion in mortgage-backed securities, and has prevented 150,000 foreclosures since October 2008.

Home building permits hit another all-time low in March with the seasonally adjusted rate weighing in at 513,000 applications, another sign that the housing crisis is far from over.According to new government data, single-family (one-unit) housing starts totaled 361,000 sites (seasonally adjusted), a 7.4% decline from February and an ugly 42% decline from the same month last year. Meanwhile, multifamily starts (five-units or more) fell 15.4% to a seasonally adjusted rate of 132,000 units. Year-over-year multifamily starts plunged 52%. According to Weiss Research, "Tighter funding conditions for construction projects, the large overhang of housing inventory, and the broad economic weakness we're seeing are all conspiring to dampen building activity." Weiss notes that any future recovery "will come in fits and starts, and will take time." Even though the figures were horrible, the National Association of Home Builders said its 'Builder Confidence Index' posted its biggest gain in five years. NAHB chief economist David Crowe said, "we are at or near the bottom of the current housing depression."

The Treasury Department is providing $9.9 billion to six major mortgage servicers for successful loan modification incentives that will be paid not only to them but to borrowers and investors. Administration officials asked Citigroup and JPMorgan Chase and the other companies participating in the Obama administration's loan modification program to estimate how many loans in their portfolios can be modified under the new program to determine the possible cost of the incentive payments. One source familiar with the situation told National Mortgage News that these firms have been lobbying Treasury hard for the incentive payments because they realize the fee income at stake is enormous. According to published reports, Chase Home Finance is receiving a $3.6 billion allotment, Wells Fargo Bank $2.87 billion, CitiMortgage $2.1 billion, GMAC Mortgage $633 million, Saxon Mortgage Services $407 million and Select Portfolio Servicing $376 million. Under the Obama plan, the servicer receives a one-time $1,000 incentive for a loan modification, plus an annual $1,000 incentive if the borrower remains current for three years. The borrower can receive an annual incentive of $1,000 that is applied to principal reduction for up to five years. As an incentive to modify the non-GSE loans, there is a one-time payment of $1,500 payment to the investor.

Builders in California are still waiting for the impact of the state's landmark tax credit for new home buyers. For now, though, sales are just bouncing along at a historically low pace, the California Building Industry Association reported. In February, only 1,918 houses and condos were sold in the Golden State subdivisions tracked by Hanley-Wood Market Intelligence, Costa Mesa. That's up from 42% from the record low recorded in January, but it's down by more than half from the 4,170 sales logged in February 2008. Still, noting that the state has received more than 3,100 applications for the $10,000 state tax credit which is in addition to the $8,000 federal credit builders are hopeful. "That strongly suggests that the tax credit is working and stimulating the market," said CBIA President Robert Ruvinius. Jonathan Dienhart, director of published research for HWMI, called the February numbers "poor." But because of the improvement over January's dismal figures, he said "they suggest we may finally be seeing the bottom of housing declines." While it is typical for new home sales to pick up in February, the increase this year was much larger than the 11% increase recorded from January to February a year ago.

Can Realtors become catalysts for change in the downtrodden market? The answer, according to one industry veteran, founder of The Distressed Property Institute in Austin, Texas, Alex Charfen is: Yes, if they acquire the knowledge to help homeowners avoid foreclosure.Mr. Charfen is calling on thousands of Realtors across the country to do just that. Since seven out of 10 homes go into foreclosure without any professional intervention, he says, Realtors who are certified as distressed property experts must and can help. Realtors skilled at home pricing can help owners avoid foreclosure. CDPE training and certification is a way for Realtors to not feel "painted into a corner."

First-time home buyers in 11 states don't have to wait until they file their tax returns next year to reap the benefit of the $8,000 federal tax credit approved by Congress in the American Recovery and Reinvestment Act.The Metro Buyers Group, Alpharetta, Ga., is offering qualified buyers cash at closing in return for assigning the credit to MBG. In effect, the program "monetizes" the credit by turning the post-closing credit into cash at closing, a step the politically powerful National Association of Home Builders was unable to convince Congress to take when it raised the credit from $7,500 and dropped the requirement that it be paid back. Upon signing an IRS form allowing MBG to receive the credit, the buyer will receive a sum equal to their down payment. If there is money left over after MBG receives these credits, that amount less a $125 processing fee is returned to the buyer. Builders and other participants pay a seller's fee of $9.12 per $1,000 of the purchase price — $912 on a $100,000 house — to participate as well as other fees. MBG's Corey Brown believes the Tax Creditor Purchase program, which was created to encourage hesitant purchasers to get off the fence, does not run afoul of the federal ban on seller-assisted down payments because the buyer is selling something of value for cash. The program is currently available in Georgia, Florida, South and North Carolina, Virginia, Tennessee, Alabama, Mississippi, Louisiana, Texas and Arkansas, states where MBG approved tax preparers.

Title insurance giant Fidelity National Financial, Jacksonville, Fla., has increased the size of its planned public offering to 15.8 million shares, pricing the stock at $19.Originally, it was slated to sell 13.3 million shares. The new shares being issued are covered under an existing shelf registration the company has with the Securities and Exchange Commission. Earlier this week Fidelity said it would post a first-quarter loss of 6 to 10 cents a share, compared with a profit of 13 cents a year earlier. In December Fitch downgraded Fidelity's credit rating to junk after it bought LandAmerica, a troubled competitor in the title space. At press time its shares were trading at just over $19 a share compared to a 52-week low of $6.66 and a high of $22. Fidelity said it plans to use the proceeds of the stock sale "for general corporate purposes," including the potential repayment of $1.1 billion in syndicated credits.