Originations

For the second time in seven weeks, Fitch Ratings, Chicago, has downgraded the insurer financial strength rating of Attorneys' Title Insurance Fund Inc., Orlando, this time cutting the rating to 'CCC' from 'BBB'. Back on Feb. 9, Fitch downgraded the company from an 'A-' rating. Fitch's latest action follows Attorneys' Title seeing an 82% or $122 million decline in statutory surplus to $27 million at year-end 2008. An underwriting loss of $89 million, $16 million in realized investment losses and $30 million in unrealized losses due to an above average allocation to common stocks in the investment portfolio all contributed to the decrease in surplus. Future rating actions by Fitch depend on Attorneys' Title's ability to access additional capital. A potential problem, said Fitch, is that Attorneys' Title is owned by a business trust that in turn is owned by attorneys who serve as agents for the company. Consequently, this ownership structure adds a layer of complexity in any attempt to access new capital. Fitch added that the company's capital adequacy was a key component of its financial strength ratings in light of its more limited geographic scope. The company underwrites title insurance in Florida, Georgia, North Carolina, South Carolina and Illinois.

Origen Financial Inc., Southfield, Mich., saw an improvement in its fourth quarter results, posting a net loss of $4.4 million ($0.17 per share) for the quarter ended Dec. 31, 2008, as compared with a net loss of $39.1 million ($1.54 per share) for the fourth quarter of 2007. The company, formerly an originator of manufactured housing loans but now just a real estate investment trust that manages residual interests in securitized manufactured housing loan portfolios, had a net loss of $35.4 million ($1.38 per share) for the full year 2008 vs. a net loss of $31.8 million ($1.26 per share) for the full year of 2007. Ronald A. Klein, Origen's chief executive, said the company's loan portfolio performed well in the fourth quarter and that has continued into 2009. However, he continued " our portfolio is now an aging static pool which is approaching its peak default years. Accordingly, we expect to see increases in both delinquencies and defaults. In the current economic environment we expect our borrowers to face challenges especially if the unemployment rate continues to increase."

KB Home reported a net loss of $58 million for the first quarter, ending February 28, compared to a net loss of $268 million for the year-earlier period. First-quarter housing revenues totaled $304.5 million, down 58% from the same period in 2008, reflecting a 51% decrease in homes delivered and a 15% decrease in the average selling price. Net orders for new homes in the first quarter of 2009 increased 26% to 1,827, up from 1,449 net orders in the same quarter a year ago. KB also said its cancellation rate based on gross orders improved to 28% in the current period, down from 46% in the fourth quarter of 2008 and 53% in the first quarter of 2008. The first quarter pretax results included non-cash charges for inventory and joint venture impairments and land option contract abandonments of $32.3 million.

Tom Donatacci, who recently left Residential Capital Corp., has joined The Clayton Group, a loan advisory firm based in Shelton, Conn.Clayton named Mr. Donatacci executive vice president of marketing and sales. At ResCap Mr. Donatacci was in charge of new business development and oversaw its subservicing division. Meanwhile, Clayton named Tom Cronin managing director of government relations.

Loan originators are so swamped with applications that it is taking three to four weeks to get new mortgages through underwriting departments, according to the president of the National Association of Mortgage Brokers. Mr. Savitt also said that he is still concerned about large wholesalers leaving the business but sees some positives signs. "Bank of America is committed to the business, and we've seen some new entrants recently," he said.

The House Financial Services Committee on Tuesday will mark up a mortgage reform bill that bans certain types of yield spread premium payments and requires lenders to retain 5% of the credit risk on subprime loans that are sold to investors."A creditor may not directly or indirectly transfer the credit risk it retains," according to the bill sponsored by committee chairman Barney Frank, D-Mass., and fellow Democratic Reps. Brad Miller and Mel Watt of North Carolina. The sponsors want to crack down on compensation that might encourage mortgage lenders and brokers to steer borrowers into higher cost loans. "Specifically, the new measure will strengthen restrictions on compensation paid to mortgage loan originators and brokers that is based on a loan's interest rate and terms, often called a yield-spread premiums," according to Rep. Miller. Marc Savitt, president of the National Association of Mortgage Brokers told National Mortgage News that he is okay with the language in the bill, noting that "this doesn't ban yield spread premiums outright" and instead "prevents people from making a couple of extra points" by putting consumers in higher cost loans. Mr. Savitt added that his reading of the bill indicates that it would require mortgage banking firms to disclose their "servicing released premiums" to the public as well. "The bill means you have to disclose everything," said Mr. Savitt. The legislation also mandates that all licensed and registered originators would be subject to a "federal duty of care" measure under the bill, obligating them to only make loans that a customer can afford. With refinancings, lenders would have to prove a "net tangible benefit."

Loan sale advisory firm DebtX, Boston, plans to sell through two separate sales a total of 108 million euros ($147 million) in nonperforming real estate loans from financial institutions in Germany. The first sale involves 94 million euros ($128 million) in nonperforming commercial real estate loans from throughout Germany and is scheduled to take place on April 23. The second involves 14 million euros ($19 million) of nonperforming loans secured primarily by residential real estate in East Germany and it is scheduled to take place on May 14. The company expects to hold additional European loan sales in coming months as more financial institutions in the euro zone seek to sell the assets rather than managing them through prolonged workouts, said DebtX managing director Gifford West.

The Federal Housing Administration is adopting Fannie Mae and Freddie Mac forms for appraisers to use in collecting more information about property values in declining markets. Starting April 1, appraisals for FHA loans must include the Fannie and Freddie addendum for market conditions in declining markets. In those markets, FHA wants appraisals to include at least two comparable sales that closed within 90 days. "As home prices continue to decline in many housing markets throughout the country due to job losses and increased foreclosed, FHA finds it necessary and prudent to set additional guidance for collateral assessment practices for properties located in a declining market," FHA commissioner Brian Montgomery, a holdover from the Bush administration awaiting Senate confirmation of his replacement, says in the letter to lenders and appraisers.

Integrated Asset Services LLC, a Denver-based default management and residential collateral valuation services provider, has rolled out a new product, called the "Conditioned Valuation Model." The company describes a CVM as a cost-effective tool that allows the integration of automated property analytics with human observation, adding that it falls out on the continuum between an automated valuation model and a broker price opinion. A CVM delivers a real-time, 360-degree view of the condition of the property, the neighborhood, the condition-adjusted value and market price trends. "Traditionally, the industry has had the choice of a more expensive human-based solution or faster and riskier automated solutions. But the current mortgage industry requires these two valuation approaches interact intelligently and at the right price point," said Dave McCarthy, chief executive of IAS. A CVM costs half the price of a standard BPO. The executive said CVM was designed to help avoid AVM failure to disclose supporting data and valuation methodologies that result in questionable property valuations. The CVM uses a valuation formula that integrates property data from IntelliReal, IAS' technology partner, to provide real estate intelligence, analysis, current neighborhood sales data and active listings. The data is then combined with a hands-on inspection performed by a third-party property inspection firm, including photos on the subject property and its neighborhood condition, occupancy status, and conditions that impact value.

FBI director Robert S. Mueller told Congress that the growing number of mortgage fraud cases are "straining" the agency's resources and that the bureau now has 250 agents working on investigations — double the number from two years ago. In his prepared testimony Mr. Mueller said there are now 2,000 open mortgage fraud cases. Three years ago the agency had 700 open cases. "We have had to shift resources from other criminal programs to address the fiscal crisis," Mr. Mueller said. He noted that the agency is trying to combat mortgage fraud by using computer programs, including what he called "property flipping computer applications."

The average rate for the 30-year fixed-rate mortgage fell to a record low in the Freddie Mac Primary Mortgage Market Survey for the week ending March 26. In addition, the average rates for 15-year FRMs and five-year hybrid Treasury-indexed adjustable-rate mortgages fell to lows not seen since Freddie began tracking them. "The Federal Reserve's announcement that it intends to purchase Treasury securities over the next six months caused bond yields to drop and mortgage rates followed," said Frank Nothaft, Freddie Mac vice president and chief economist. The average 30-year FRM rate was 4.85%, down from 4.98% the week before and 5.85% the year before; the average 15-year FRM rate was 4.58%, down from 4.61% the week before and 5.34% the year before; and the average five-year Treasury-indexed hybrid rate was 4.96%, down from 4.98% the week before and 5.67% the year before. Freddie has tracked the 30-year rate since 1971, the 15-year rate since 1991 and the five-year rate since 2005. The average rate on one-year Treasury indexed ARMs also fell in the latest week when it was 4.85%, down from 4.91% the week before and 5.24% a year ago. Average points were 0.7 for 30- and 15-year FRMs as well as five-year Treasury-indexed hybrids, and 0.6 for one-year Treasury-indexed ARMs.

The Mortgage Bankers Association has asked federal banking regulators to cut the capital requirement on warehouse lines of credit by as much as 80% to alleviate a funding crisis facing non-depositories. Currently, depending on what stage of funding a loan is in, the risk weighting on a warehouse loan can be as high as 100%. This means $8 in capital must be held for every $100 in warehouse credit outstanding. For Fannie Mae, Freddie Mae, Federal Housing Administration and Veterans Affairs loans the trade group wants the capital charge to be 20%. Non-bank mortgage lenders are seeing their lines disappear or reduced with several regional banks exiting the warehouse sector as a way to preserve capital. MBA's letter was sent to the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of Thrift Supervision.

Mission Capital Advisors, LLC in New York is now accepting bids for a commercial real estate mortgage loan and real estate owned portfolio with an outstanding balance of $48 million. The sale offers prospective bidders an opportunity to acquire nonperforming and REO assets secured by a variety of collateral types, including office, industrial warehouse, retail, condominium, town homes, marinas, single family residential, and commercial development land. On behalf of a Southeastern super regional bank, Mission Capital is soliciting final bids from investors for the purchase of individual loans/REO, any combination of loans/REO, or the entire portfolio. Overall, there are 17 loans or REO assets available, including five loans in Florida, four loans in South Carolina and six loans and two REO assets in Georgia. The portfolio is divided into several single asset pools, allowing investors to target specific assets by performance, collateral type or geography based on their individual acquisition criteria, said Will Sledge, director at Mission Capital Advisors.

The new home market may be picking up a little steam in California. Though only 2,298 permits were pulled by builders in February — a 66% decline from the same month a year ago — that's still a 15% improvement over January, according to the California Industry Research Board. Better yet, rumblings from the field indicate that traffic has picked up in recent weeks, thanks largely to a combined federal-state tax credit package that could result in a savings of up to $18,000 for buyers who purchase by Dec. 1. "After hearing preliminary reports of increased sales traffic from local builders, we believe the tax credits are doing their job in attracting buyers and we remain hopeful that this will have a positive impact on homebuilding," said Robert Rivinius, president of the California Building Industry Association. For now, though, only 1,261 single-family houses were started in the entire state in February, and work began on just 1,037 multifamily units. The two-month total for 2009 so far: 4,298 starts, a decline of 63% compared to 11,531 for the first two months of 2008. CBIA is now forecasting 50,000 starts statewide for this year, which would be the lowest total on record.

Amerisave Mortgage Corp. of Atlanta is offering consumers a 4% 30-year fixed-rate loan — but with strings attached. At press time, the mortgage lender was advertising a 4% 30-year FRM on its website (APR: 4.357%) but when a consumer called for more information she was told that to get that rate she would need a FICO score of at least 720 and a downpayment of 15%. Points were not discussed but on its website Amerisave is telling borrowers that the lower rates carry higher fees and points. On one low-rate, 30-year loan the fees/points totaled almost $11,000.

The Mortgage Bankers Association has drafted and sent to Washington officials a regulatory reform proposal suggesting how a new federal mortgage regulatory agency the group has been calling for might set lending and servicing rules for the entire mortgage industry, regardless of charter or license. "Under our proposal, we are calling for one federal regulator to implement standards and oversee all mortgage bankers and brokers," MBA president and chief executive John Courson said. State and federal regulators would sit on the board of directors of the newly created Federal Mortgage Regulatory Agency, which will establish uniform lending standards and update them as needed without going to Congress for approval. "The new regulator also will work with federal and state regulators to enforce lending standards for their regulated entities," MBA says in a letter to House and Senate banking committee leaders.

The Office of Management and Budget is considering changes to the estimates the Federal Housing Administration is using for house values over the next several years, which could lead to a possible increase in mortgage insurance premiums FHA charges on single-family loans. Sources also note that losses on FHA loans with seller-funded downpayment assistance continue to rise. A re-estimate by OMB could show "massive losses," which might require a congressional appropriation or higher premiums, said a former Department of Housing and Urban Development official. William Apgar, senior advisor to the HUD secretary for mortgage finance, said HUD is working with OMB, but he could not comment further because the budget projections have not been finalized yet. Mr. Apgar noted that FHA is vulnerable to rising unemployment, declines in house prices and a weak economy. The FHA program has weathered many housing downturns, Mr. Apgar said. "FHA has historically played the role as the stabilizer in tough markets." OMB is expected to send the President's fiscal year 2010 budget to Congress in late April to early May.

Spurred by lower long-term mortgage interest rates as a result of the Federal Reserve Board's actions, the Market Composite Index, an overall measure of mortgage applications, increased 32.2% on a seasonally adjusted basis to 1159.4 from 876.9 for the week ended March 20, according to the Mortgage Bankers Association. "Mortgage rates fell sharply to low levels not seen in six decades following the Federal Reserve's announcement on the Treasury bond and mortgage-backed securities purchase programs. The drop offered a sizable refinance incentive for most homeowners sparking a pickup in refinance activity," said Orawin Velz, associate vice president of economic forecasting. For the current week, the average contract interest rate for 30-year fixed-rate mortgages decreased to 4.63% from 4.89%, making it three consecutive weeks with rates under 5%; points (including the origination fee) decreased to 1.13 from 1.23 for loans with 80% loan-to-value ratios, the association said. On an unadjusted basis, the Index increased 31.4% compared with the previous week and 18% compared with the same week one year earlier. The Purchase Index increased 4.2% to 267.8 from 257.1 one week earlier on a seasonally adjusted basis, while the Refinance Index increased 41.5% to 6363.2 from 4497.6 the week prior. Refinancings increased to 78.5% of total applications from 72.9% the previous week, while adjustable-rate mortgages accounted for 1.4% of applications, down from 2.0% the week prior, the MBA said. The MBA can be found online at http://www.mortgagebankers.org.

New homes sales jumped 4.7% in February from January and it could be a sign that the housing market is finally bottoming out. "We have been looking for a bottom to form sometime in the first half of the year and it looks like things have firmed up a little bit," said Scott Anderson, senior economist at Wells Fargo & Co. The U.S. Census Bureau reported that sales of new single-family homes rose from a seasonally adjusted annual rate of 322,000 in January to 337,000 in February. The bureau revised the January sales number upward from 309,000. The new home sales report combined with the 4.4% jump in sales of previously owned homes is "very encouraging at this point," Mr. Anderson said. But he wants to see a couple more months of good reports before calling a bottom. "Now that the Federal Reserve is trying to push down mortgages, we are seeing a refi boom and it seems like it is helping to give some confidence to buyers to go ahead with a purchase."

Freddie Mac purchased $40 billion of mortgages in February, an 84% increase from the previous month as declining interest rates led to increased business for the government-controlled giant. However, compared to the same month a year ago, purchases fell 16%. According to new figures released by the company, Freddie now holds $123 billion of whole loans (not securitized) in its portfolio, a 43% increase over 12 months. The GSE ended the month with a retained portfolio of $822 billion, a 16% increase compared to February 2008. But there was some negative news in the new numbers: its mortgage "purchase and sale agreements" fell to $4 billion in February, from $17 billion the prior month. Fannie Mae has not yet released its February numbers.