Originations

An investor group that includes hedge fund mavens J. Christopher Flowers and John Paulson has closed on its purchase of IndyMac Bank FSB, a $160 billion residential servicer that became a ward of the government last summer. At press time no information was available concerning billions of dollars of loan buy-back requests that Fannie Mae had with IndyMac. A spokesman for One West Bank Group had no information on the matter and the Federal Deposit Insurance Corp., which sold the Pasadena-based depository, could not be reached for comment. Among the assets that OWBC bought is Financial Freedom, a large player in the reverse mortgage market. The investor group has pumped $1.55 billion of cash into the thrift which will be called One West Bank FSB. In a statement the new owners said it would maintain IndyMac's "national mortgage banking" business and continue to modify troubled loans under an FDIC program started last summer.

The Government National Mortgage Association is poised to play a role in easing the warehouse lending liquidity crisis but does not think it will be a direct lender.In an interview with the American Banker GNMA president Joe Murin said the agency cannot become involved in warehouse lending without a change to its government charter but noted that "we certainly could help administer a program." He said one option is for GNMA to take possession of loans three days after they close and fund, instead of the 15 to 45 days it typically takes to put the mortgages in securitization pools. Depositories that hold warehouse loans on their books face a 100% risk weighting on such debts until the mortgages can be taken off the lines. Recently two of the largest players in warehouse lending—the PNC-owned National City and Guaranty Federal Bank—made plans to exit the business.

House Financial Services Committee chairman Barney Frank, D-Mass., is pushing the nation's GSE regulator to stop approving retention bonuses for Fannie Mae and Freddie Mac executives and to recoup past bonuses. In a letter to Federal Housing Finance Agency director James Lockhart, the powerful committee chairman stressed that the companies being propped up with public funds should not be paying large bonuses. "I am writing to urge strongly that you rescind the retention bonus programs at Fannie Mae and Freddie Mac, prohibit any further payment of bonuses to executives under that program, and pursue repayment of any already-paid bonuses," Rep. Frank says in a March 19 letter. A FHFA spokeswoman said the director will respond to chairman Frank's letter soon. Chairman Frank has drafted a bill that prohibits companies receiving TARP funds and Fannie and Freddie from paying bonuses until they repay all federal assistance. The Financial Services Committee is scheduled to markup the bill on Wednesday (March 25).

To protect consumers from aggressive lending practices, Congress should consider "curtailing" the powers of federal banking regulators to preempt state consumer protection laws, according to FDIC chairman Sheila Bair.In testimony submitted to the Senate Banking Committee, Ms. Bair said federal preemption was seen as a way to improve efficiencies for federally chartered banks and lower costs for consumers. "While that may have been true in the short run, it has now become clear that abrogating sound state laws, particularly consumer protection laws, created an opportunity for regulatory arbitrage that frankly resulted in a 'race-to-the-bottom' mentality," she said. The Comptroller of the Currency and Office of Thrift Supervision routinely preempted state predatory lending laws during the subprime lending boom. The FDIC chairman said setting a "floor" for consumer protection, based on state and federal laws, would be better than current system of establishing a "ceiling" at the federal level. She suggested that Congress could use a newly proposed financial products safety commission to establish the appropriate floor for consumer protection.

After its stock price dipped to under a dollar earlier this month, Citigroup, the nation's fourth largest residential lender, has seen its stock price more than triple, trading at $3.20 Thursday morning. The company said it plans to both increase the number of shares outstanding and undertake reverse stock split as part of the company's effort to exchange common stock for preferred securities, pending shareholder approval. Late last month, Citi announced that it is seeking to exchange about $27.5 billion in public and private preferred securities as part of its agreement with the Treasury Department, which has pledged to match up to $25 billion of the conversions.

After pleading guilty to conspiracy charges in connection with a multi-million dollar mortgage fraud scheme to commit bank fraud before U.S. District Judge George Caram Steeh, Ali Haidous, a real estate appraiser from Dearborn, Michigan, was sentenced to one year of imprisonment. Haidous admitted to inflating appraisals in a scheme involving 16 total properties located in Detroit, Dearborn, and Dearborn Heights, Michigan. Mortgages totaling $1.9 million were issued on the 16 properties by several financial institutions between April 2005 and April 2008. Haidous admitted to being paid $1,000, rather than his usual fee of $300-$500, for each fraudulent appraisal. Haidous prepared the fraudulent appraisals for co-defendant Hassan Nagi, a mortgage broker from Dearborn Heights, who used the fraudulent appraisals to submit false applications to obtain the mortgages for "straw buyers. Nagi pleaded guilty on Dec. 15, 2008 and is scheduled to be sentenced in April.

The level of commercial/multifamily mortgage debt outstanding grew by 0.7% in the fourth quarter of 2008, to $3.5 trillion, according to the Mortgage Bankers Association's analysis of the Federal Reserve Board flow of funds data. The total was an increase of $166 billion, or 5% from the end of 2007. The $3.5 trillion in commercial/multifamily mortgage debt outstanding recorded by the Federal Reserve was an increase of $23 billion from the third quarter of 2008. Multifamily mortgage debt outstanding grew to $900 billion, an increase of $5.4 billion or 0.6% from the third quarter. "Counter to what many expected, investors increased their holdings of commercial and multifamily mortgages during the fourth quarter," said Jamie Woodwell, MBA's vice president of commercial real estate research. "Banks, thrifts, Fannie Mae, Freddie Mac, life insurance companies and other lenders extended additional credit to the market during the fourth quarter, lending more in new commercial and multifamily mortgages than they saw paid off or paid down on existing loans." Commercial banks continue to hold the largest share of commercial/multifamily mortgages at $1.55 trillion, or 44% of the total.

The Treasury Department has explained how to use a new website that allows homeowners to learn about Obama administration's new housing plan and whether they can qualify for a loan modification.The new MakingHomeAffordable.gov website has a calculator that allows homeowners to estimate how they could benefit from a modification. "Be sure to check out the calculator that allows homeowners to estimate the reduction to their monthly mortgage that they might get under the plan," a White House blog says. Meanwhile, agency officials are working on a net present value (NPV) test that servicers will use to determine if a loan should be modified. They plan to roll out a standard NPV model soon that provides some flexibility for servicers. For example, a servicer with a low re-default rate would not have to use the national rate.

In an effort to get stalled housing markets going again in their respective jurisdictions, a number of states are following California's lead in adopting tax credits for homebuyers. According to the National Association of Home Builders' Sales and Marketing and Council, plus other sources, legislation awaiting the governor's signature in Utah offers a $6,000 grant to be used by buyers for downpayments. The Kentucky House has cleared a $5,000 tax credit for new home purchasers. A similar measure has cleared the Virginia Senate and has been introduced in the Illinois House. In Georgia, a $3,600 tax credit spread over three years for new homebuyers has passed the lower chamber. These are all in addition to the $8,000 federal tax credit adopted by Congress in February. Also, North Carolina and South Carolina are said to be looking at replicating California's program, which gives Golden State taxpayers who buy a new home a credit of 5% of the purchase price, up to a maximum of $10,000 to be paid out over a three-year period. If adopted, the combined federal-state benefit would be as much as $18,000. In Missouri, meanwhile, the state housing finance agency is advancing buyers the federal tax credit in the form of a short-term loan. Delaware has a similar program, and Pennsylvania, New Mexico and several other states are considering such programs. Builder associations in Indiana, Kentucky, Michigan, New York, Oregon, Tennessee, Texas, Washington are said to be pursuing Missouri's model, which, in effect, "monetizes" the credit so buyers can use it for cash needed to close on their mortgages instead of waiting until they file their tax returns.

The yield on the benchmark 10-year Treasury plummeted to 2.5% Wednesday afternoon after the Federal Reserve said it would give a $1 trillion-plus shot in the arm to the housing and mortgage markets by purchasing $750 billion of agency MBS, $100 billion of Fannie/Freddie debt as well as $300 billion of longer-term Treasury securities. "The Fed is now trying to influence not just the spread between private interest rates and Treasuries (through its mortgage-backed securities purchases, for example), but to pull down the entire spectrum of interest rates by driving down the rate on benchmark Treasuries," said IHS Global Insight chief U.S. economist Nigel Gault in a report. The agency MBS market shortly after 4 p.m. Thursday was "more than keeping up with swaps but not keeping up with Treasuries," Art Frank, director and head of agency mortgage-backed securities research at Deutsche Bank Securities, told MortgageWire. He said agency MBS rallied on the news without any huge volume. Ensuing investor activity was fairly modest with some servicer convexity-related buying but not to any large extent, Mr. Frank said.

SigniaDocs and World Wide Notary have integrated their platforms to support e-signatures and e-notarizations for any mortgage document or document set. The integration of data, from the loan origination systems through MERS registration, aims to eliminate errors that otherwise might result from fragmented paper-based systems. The resulting blend of capabilities allows lenders essentially to avoid printing mortgage documents requiring signatures by borrowers, so mortgage transactions can remain electronic from start to finish. At the MBA Technology Conference in Las Vegas, SigniaDocs said that by using SigniaDocs' eVault, all documents that are traditionally "papered out" and reviewed during the closing process are now available in advance of closing. Borrowers can review and click-to-sign the majority of documents at their leisure and then the few that need to be e-notarized or witnessed by a notary are passed to World Wide Notary's DigaSign system to complete the documents through this partnership.

Lenders delivering loans to the Federal Housing Administration can now manage the process online through Xerox Corp.'s BlitzDocs electronic collaboration tool. A big problem for lenders that are paperless or want to become paperless is that FHA has 20% to 40% market share and they don't have e-mortgage standards. So, at the MBA Technology Conference in Las Vegas, BlitzDocs launched an FHA connector. BlitzDocs helps lenders and investors reduce document-related costs by capturing and managing image-based loan documents. There is now a connector in BlitzDocs to FHA that will allow lenders to either go or remain paperless when dealing with FHA. BlitzDocs will do the conversion required to deliver an acceptable loan to FHA.

Fannie Mae and Freddie Mac officials are expressing concerns that the American Securitization Forum's efforts to draft consensus secondary market standards could potentially create another mortgage identification standard outside of the MERS Mortgage Identification Number and cause confusion in the industry. ASF has been seeking comment on delivery standards that are still under construction and may or may not include the MERS MIN. The ASF declined to comment on the issue. Each loan registered on MERS is given a unique MIN that identifies that loan. At present, the MIN and registering the e-note on MERS is mandated by both GSEs if they will accept an e-mortgage from any lender. Speaking at the Mortgage Bankers Association's Technology Conference in Las Vegas, Ted Adams of Freddie Mac stressed, "The MIN works and we're using it. The introduction of another loan identification number as purposed by ASF would be confusing." To combat the potential of the MIN being rendered obsolete by anything the ASF creates, R.K. Arnold, president and CEO at MERS, urged lenders to adopt e-processes and use the MIN, arguing that if usage is mainstream, the ASF will have to recognize the validity of the current MIN.

A day after press reports suggested that Jerry Howard might be dethroned as president and CEO of the National Association of Home Builders, the trade group issued a press release saying that he is still in charge. One builder, requesting anonymity, told National Mortgage News that Mr. Howard and certain homebuilding firms that were upset with the trade group's apparent stance on tax breaks that might only benefit small builders "have kissed and made up." In its statement NAHB noted that its High Production Home Builders Council met Monday for a "candid" discussion of issues facing builders, adding that "now more than ever, it is important for all homebuilders to be united." The Wall Street Journal reported in its Monday edition that Mr. Howard might be forced out of NAHB by a faction of large publicly traded building companies.

The chairman of the Mortgage Bankers Association, David Kittle, said there are changes coming to the organization that will make it a "lean mortgage machine going forward." He told attendees at the Regional Conference of Mortgage Bankers Associations in Atlantic City those changes will make MBA run like an entrepreneurial business. Details will come by the end of this month. Mr. Kittle made the theme of his speech, "If not now, when?" Speaking to the power of what one person can do, he noted the number of people in the room equals the gap in the disputed U.S. Senate race in Minnesota. As for issues with warehouse liquidity, MBA is meeting with the U.S. Treasury Department looking for the establishment of loan participation programs by Fannie Mae, Freddie Mac and/or the Federal Home Loan Banks. Such a program will reduce capital requirements for lenders and free up funds to be used to originate loans, he said. He addressed the cramdown issue, calling for members to fight for changes to the law. If the industry does not do something about it, "they will do something to us," Mr. Kittle said. He also said he is working with other housing trade groups to go to get a $15,000 tax credit for home purchases, and he called on the administration to drop plans to limit the mortgage interest deduction, declaring, "President Obama, don't kill it, expand it."

Mortgage applications during the week ended March 13 rose 21.2% on a seasonally adjusted basis from the previous week, bolstered by close to a 30% week-to-week jump in refinancing that some think could mark the beginning of an upward trend. Although the most recent uptick in apps followed the introduction of the government Home Affordable Refinance Program on March 4, market participants and observers generally think it probably does not yet reflect that program's effects. This means app numbers, already moving at a relatively fast clip, could continue to increase going forward. Researchers specializing in U.S. securitized product modeling at Barclays Capital said since HARP made its debut on March 4 and is set to allow mortgages made under it to be delivered to Fannie Mae and Freddie Mac by April 1, "It is not clear whether lenders have had time to update their underwriting process since HARP details were unveiled." Heidi Frigano, chief sales officer at Lend America, Melville, N.Y., told MortgageWire her company, which offers the Federal Housing Administration's existing but evolving Hope for Homeowners refinance program, has seen borrowers and their lenders continued to show interest in that program over HARP programs at Fannie Mae and Freddie Mac that have not fully geared up. She said warmer weather and buyer-friendly inventory and prices also have started and may continue to bolster purchase volumes as well as refis. She called the increase in refi applications in the most recent week "slight" in comparison to the larger upward trend over the last couple of months.

Fannie Mae's refinancing volume jumped to more than $41 billion in February, nearly three times the refis the company experienced during the month of January and the largest refinancing volume in nearly a year. Fannie also said more than 100,000 borrowers have accessed its online mailbox to inquire about their eligibility for refinancing under the Obama administration's refinancing plan, and about 50,000 callers have contacted Fannie's national hotline since the plan made its debut on March 4. The government-sponsored enterprise — currently held in government conservatorship — said it has launched a new addition to its website that will allow borrowers to quickly determine if they have a Fannie Mae-held mortgage. This is a determining factor in whether a borrower is eligible for the program, Fannie said.

Fannie Mae and Freddie Mac officials are expressing concerns that the American Securitization Forum's efforts to draft consensus secondary market standards could potentially create another mortgage identification standard outside of the MERS Mortgage Identification Number and cause confusion in the industry. ASF has been seeking comment on delivery standards that are still under construction and may or may not include the MERS MIN. The ASF declined to comment on the issue. Each loan registered on MERS is given a unique MIN that identifies that loan. At present, the MIN and registering the e-note on MERS is mandated by both GSEs if they will accept an e-mortgage from any lender. Speaking at the Mortgage Bankers Association's Technology Conference in Las Vegas, Ted Adams of Freddie Mac stressed that, "The MIN works and we're using it. The introduction of another loan identification number as purposed by ASF would be confusing." To combat the potential of the MIN being rendered obsolete by anything the ASF creates, R.K. Arnold, president and CEO at MERS, urged lenders to adopt e-processes and use the MIN, arguing that if usage is mainstream, the ASF will have to recognize the validity of the current MIN.

A day after press reports suggested that Jerry Howard might be dethroned as president and CEO of the National Association of Home Builders, the trade group issued a press release saying that he is still in charge. One builder, requesting anonymity, told National Mortgage News that Mr. Howard and certain home building firms that were upset with the trade group's apparent stance on tax breaks that might only benefit small builders "have kissed and made up." In its statement NAHB noted that its "High Production Home Builders Council" met Monday for a "candid" discussion of issues facing builders, adding that "now more than ever, it is important for all homebuilders to be united." The Wall Street Journal reported in its Monday edition that Mr. Howard might be forced out of NAHB by a faction of large publicly traded building companies.

Farmer Mac lost $61.1 million ($6.03 per share) in the fourth quarter 2008 as a result of its losses on financial derivatives and provisions for losses related to credits granted in the ethanol sector.The GSE halved its dividend for the first quarter, cutting it to five cents a share. For the full year 2008, Farmer Mac lost $154.1 million or $15.40 per share. Newly installed president and chief executive Michael A. Gerber, said "We have adjusted our funding strategies to reduce the reliance on financial derivatives that have adversely affected our capital position, notwithstanding that all of our derivatives have been economically effective." He said the company was able to raise $124.2 million in new capital through preferred stock offerings in the third and fourth quarters of last year.