Originations

Suncoast Schools Credit Union of Tampa — one of the largest CU players in home mortgages — is talking to a crosstown CU about a possible merger, according to The Credit Union Journal. The other institution, GTE Federal Credit Union, ranks 95th in CU mortgage holdings, whereas Suncoast ranks seventh, according to The Mortgage Industry Directory. If the two combine forces it would be the biggest merger ever of two credit unions. Both institutions, however, have been saddled with large losses because of the mortgage meltdown. Suncoast is Florida's largest credit union. A merger would create a giant with almost $8 billion in assets serving roughly 675,000 members. Last year Suncoast lost $76.7 million and GTE lost $27.5 million, according to figures compiled by the National Credit Union Administration.

For the second consecutive month there has been a large decline in the Eleventh Federal Home Loan District Cost of Funds Index, driving it to its lowest point since April 2005.As calculated by the Federal Home Loan Bank of San Francisco, the index for January was 2.455%, down from 2.757% in December 2008. The 30 basis point decline follows a drop of nearly 40 basis points between November and December. For January 2008, the index was 3.970%. The index was calculated using total average funds of $82.0 billion and total interest expense of $167.7 million. The total interest expense is derived from interest expense reported on deposit accounts, Federal Home Loan Bank advances, and other borrowings, adjusted for the number of days in the month, according to FHLB-SF. The all-time low for the index was reached in May 2004, when it was 1.708%.

Union Bank of California, which originated $4.5 billion in mortgages last year, says it's sticking with loan brokers. The San Diego-based depository told The Orange County Register that brokered residential loans perform as well as retail ones. Craig Cole, a senior vice president for Union, said the key to third-party lending is carefully picking the brokers it does business with. Union Bank has 80 approved brokers in its wholesale network and monitors them and their loans over time. "Most lenders mismanage the broker channel by not being disciplined about who they work with and offering products indiscriminately through that channel," said Mr. Cole. Union Bank avoided subprime lending. The SVP recently told National Mortgage News that, "Not to blow our horn but we refrained from all the lending excesses of the past," adding that 2008 "was the best year we have ever had."

United Guaranty Inc., the mortgage insurance division of the troubled American International Group, lost $1.25 billion in 2008 on its U.S. first lien business, compared to a $239 million loss the year before. In the fourth quarter UGI's domestic first lien business lost $408 million while its second lien division posted an operating profit of $23 million. In 4Q 2007 its first lien business lost $208 million. In the quarter the MI took in $156 million in first lien premiums, a 4% decline from the year ago. According to the Quarterly Data Report, UGI is the nation's fifth largest MI (out of seven) in terms of policies-in-force.

Financial institutions last year filed 62,084 mortgage-related "suspicious activity reports" with government regulators -- a 44% increase from the prior year, according to new figures released by the Financial Crimes Enforcement Network. FinCEN director James H. Fries said one trend the agency found "is the increase in mortgage fraud detection in connection with mortgage purchasers sending home loans back to originators for repurchase." FinCEN also is seeing an increase in foreclosure-related fraud. The SARs figures cover reports filed for the 12-month period ending June 30, 2008.

A civil lawsuit filed against CU National Mortgage last week - hours before the company filed for bankruptcy - charges that the owner and CEO of CUNM masqueraded as an executive vice president of another credit union and approved "allonges," assigning millions of dollars of that credit union's mortgages to Fannie Mae as part of a wide-ranging fraud scheme that may involve hundreds of millions of dollars of credit union loans. CUNM was a private-label lender/servicer for more than a dozen credit unions. During a hearing last week in U.S. bankruptcy court (where CUNM and its parent U.S. Mortgage of Pinebrook, N.J. filed for protection), lawyers for the other CU, Picatinny FCU of Dover, N.J., said CUNM may have sold as much as $14 million of its loans to Fannie Mae without authorization and without sending the receipts to the credit union. "[USM CEO Michael] McGrath endorsed Picatinny's name to a note which assigned the mortgages to Fannie Mae," said James Forte, Picatinny's lawyer in the case. "These loans were sold without our authorization." Picatinny and dozens of other CUs are currently working with officials of USM/CUNM for the return of tens of millions of mortgages sold to Fannie Mae without their authorization, according to a report in Credit Union Journal. Lawyers for Mr. McGrath did not return telephone calls about the matter. The FBI is now investigating the collapse of USM and CUNM.

The ceiling on FHA-insured loans has been raised to $729,750 in 76 high-cost counties, including 51 in just four states - 15 in Virginia, 14 in California, 12 in New Jersey and 10 in New York. In 666 other counties, meanwhile, the FHA maximum has been set somewhere between the $271,000 floor and the high-cost ceiling. The new limits, which were authorized under the American Recovery and Reinvestment Act signed into law by President Obama on Feb. 17, will remain in effect until Dec. 31, 2009. A complete list of the affected counties is attached to HUD mortgagee letter 09-07.

Freddie Mac's Conventional Mortgage Home Price Index's purchase-only series, which excludes refinancing data, registered the largest annual decrease in its 39-year history during 2008. Home sales prices dropped 9.5% on average during the year and their decline accelerated notably in the fourth quarter when the index registered a 17.9% annualized decrease compared to an 8% annualized fall during the third quarter. The fourth quarter index results for 2008 mark "the first time that year-over-year declines in home values were recorded in each of the nine regions of the country," according to Freddie Mac vice president and chief economist Frank Nothaft. The index also showed for the second consecutive quarter "every region of the nation experienced flat or declining home values," he said. He noted, however, that the range of declines was wide, with the West South Central area experiencing declines of one-tenth of 1% over the year while the Pacific region had a decline of 23%.

Freddie Mac said chief executive David Moffett — who took the helm of the GSE when it was placed into conservatorship in early September — has resigned from the company effective March 13. The mortgage investing giant said its board is working with the Federal Housing Finance Agency to appoint a successor and hopes to name an interim CEO before the 13th. Freddie said Mr. Moffett is leaving "to return to a role in the financial services sector." Mr. Moffett retired as vice chairman and chief financial officer of U.S. Bancorp in 2007. After his retirement, and before joining Freddie, he was a senior advisor to The Carlyle Group, working on financial service matters. Freddie Mac is supposed to report earnings soon. Last week Fannie Mae reported an annual loss of $58.7 billion.

HSBC said it plans to cease all new real estate secured originations through the HFC and Beneficial brands only, but will continue its prime bank and HSBC Mortgage Corp. business. The company also said its pretax profit in 2008 was about $9.3 billion, 62% down from about $14.9 billion in 2007 and it said it has a "difficult outlook" for 2009. About 6,100 positions will be impacted.

Freddie Mac said chief executive David Moffett — who took the helm of the GSE when it was placed into conservatorship in early September — has resigned from the company effective March 13. The mortgage investing giant said its board is working with the Federal Housing Finance Agency to appoint a successor and hopes to name an interim CEO before the 13th. Freddie said Mr. Moffett is leaving "to return to a role in the financial services sector." Mr. Moffett retired as vice chairman and chief financial officer of U.S. Bancorp in 2007. After his retirement, and before joining Freddie, he was a senior advisor to The Carlyle Group, working on financial service matters. Freddie Mac is supposed to report earnings soon. Last week Fannie Mae reported an annual loss of $58.7 billion.

PHH Corp., Mt. Laurel, N.J., said its mortgage production segment was profitable in December, allowing that unit to break even for the fourth quarter; but its mortgage servicing segment lost $382 million in the three-month period due to $445 million of valuation adjustments on mortgage servicing rights, contributing to a 4Q loss for the company as a whole. For the fourth quarter, the company lost $216 million ($3.98 per share), compared with net income of $12 million ($0.21 per share) for the same quarter of 2007. For the full year, PHH lost $254 million ($4.68 per share), vs. a net loss of $12 million ($0.23 per share) in 2007. The servicing adjustment consists of a $390 million writedown of the mortgage servicing asset and $55 million reduction in MSR value due to prepayments and portfolio decay. There also were foreclosure-related charges of $16 million and a net reinsurance loss of $13 million. PHH serviced just under $150 billion at the end of last year. The production segment's break-even results included $12 million of writedowns for scratch-and-dent and second-lien mortgage loans plus $4 million of reorganization costs. PHH originated $5.4 billion during the quarter, down from $8.3 billion in the same period in 2007. However, because of cost savings initiatives, the company said it believes it has lowered the break-even point for the production segment from $39 billion in annual volume to $27 billion.

Five of the 10 Federal Home Loan Banks that have thus far released unaudited 2008 financial results have taken fourth-quarter net losses and at least four of those have recorded "other than temporary impairments" for the year linked to private-label mortgage-backed securities market deterioration that the FHLBanks Office of Finance's warns could continue. The fourth-quarter net losses for these FHLBanks are as follows: Boston, $232 million; Pittsburgh, $188 million; San Francisco, $103 million; Dallas, $68 million, and Topeka, $63 million, according to the FHLBanks office in Reston, Va. Of these, FHLBanks that said they have recorded the OTTIs for 2008 as follows are: San Francisco, $590 million; Boston, $339 million; Pittsburgh, $266 million and Topeka, $5 million.

The FBI is investigating claims of a massive fraud at U.S. Mortgage Corp., Pinebrook, N.J., the privately held owner of Credit Union National Mortgage, which has filed for bankruptcy. More than three dozen credit unions allege the failed mortgage company owes them more than $110 million of loan proceeds it had collected for them as a servicer. The company's attorney said he is working with the U.S. Justice Department, the National Credit Union Administration, and regulators in several states in investigating the case. Lawyers for U.S. Mortgage could not be reached for comment. In documents filed earlier this week with the U.S. Bankruptcy Court, Picatinny FCU claims CU Mortgage sold more than $14 million worth of its mortgages to Fannie Mae without its knowledge and without paying the Dover, N.J.-based credit union the proceeds of the sale. Picatinny is one of more than three-dozen credit unions that have filed claims against the troubled lender. The largest unsecured claim is by Fannie Mae for $99.2 million, but the next 19 largest unsecured claims are all credit unions -- including the Treasury Department's CU.

Operating as a ward of the federal government, Fannie Mae posted a massive $25.2 billion loss in the fourth quarter, blaming its abysmal performance on asset- and derivative-related writedowns. For the year the GSE lost an eye popping $58.7 billion. The Congressionally chartered mortgage investing giant declared that it had a negative net worth of $15.2 billion at year-end - a gap that must be filled with taxpayer money. FHFA director James Lockhart already has requested that the Treasury Department cover the financial hole by increasing its preferred stock ownership stake in the company. In 2007, Fannie lost just $2.1 billion. It was taken over by the Federal Housing Finance Agency in early September of 2008. Its common stock continues to trade on the NYSE but at just 40 cents a share. Its main competitor, Freddie Mac, also is a ward of the government.

A number of real estate-related stocks have been affected by changes to several Standard & Poor's indices that are scheduled to go into effect after the close of trading on March 3. Being removed from the S&P MidCap 400 are Hovnanian Enterprises Inc., Red Bank, N.J., and The PMI Group Inc., Walnut Creek, Calif. At the close of trading on Feb. 24, S&P said, "Hovnanian and PMI Group had market capitalizations of $74 million and $64 million, respectively, whereas the minimum market cap needed to be admitted to the S&P MidCap 400 index is currently $750 million." Ventas, a health care real estate investment trust headquartered in Chicago, will be added to the S&P 500 in the GICS Specialized REITs Sub-Industry index. Trustmark Corp., a Jackson, Miss.-based financial services company, will replace Hormel Foods in the S&P MidCap 400, as Hormel is being moved to the S&P 500. Anchor BanCorp Wisconsin Inc., Madison, Wis., is being dropped from the S&P SmallCap 600, because it had a $19 million market cap, whereas the minimum market cap for this index is currently $200 million.

Capmark Financial Group Inc., Horsham, Pa., has a preliminary pre-tax loss of $800 million in the fourth quarter of 2008. The company said it is still reviewing certain accounts, including deferred tax assets, intangibles and certain investment securities for recoverability or impairment. Depending upon the outcome of this review, the fourth quarter net loss could be higher than the pre-tax loss mentioned above, which could cause its leverage ratio to exceed the maximum level permitted which, absent an amendment or waiver, would constitute an event of default. Capmark has already borrowed substantially all of the amounts available under its revolving credit facility; as of Feb. 24 it has $1.4 billion on hand to fund its operations. The commercial real estate company has commenced discussions with the lenders under its senior credit facility, and has hired Lazard Frères & Co. LLC as its financial adviser. Capmark is withdrawing its application with the Federal Reserve Board to become a bank holding company after evaluating the financial and other requirements for becoming a bank holding company. Fitch Ratings, New York, cut Capmark's long-term issuer default rating to 'B-' from 'BBB-' in reaction to the statement. "If these additional impairments are required, these could put the company in violation of its leverage covenant in the company's bank credit facility. Fitch is concerned that should this occur, and the company does not successfully obtain a waiver or amendment, Capmark's auditors may not give the company a 'going concern' opinion," the rating agency said.

The average rate for a 30-year fixed-rate mortgage inched up to 5.07% during the week ended Feb. 26 from 5.04% but remained well below where it was a year ago when it was 6.24%, according to Freddie Mac. Mortgage rates in general saw little change week-to-week because economic indicators have been mixed, said Freddie chief economist Frank Nothaft, noting that while consumer confidence in February dropped to the lowest level seen since records began in 1967, both producer and consumer price indices rose in January to levels higher than the market consensus. The average rate for 15-year FRMs during the latest week was 4.68%, the same as the previous week but down from 5.72% a year ago. The average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages was 5.06%, up from 5.04% the previous week but down from 5.43% a year ago. The average one-year Treasury-indexed ARM rate was 4.81%, up from 4.80% the previous week but down from 5.11% a year ago. Average points were as follows: 0.7 for 30- and 15-year FRMs and five-year Treasury-indexed hybrids, and 0.6 for one-year ARMs.

The First American Corp., Santa Ana, Calif., reported a fourth quarter 2008 loss of $66.9 million ($0.72 per share) a slight improvement over the fourth quarter 2007 of $67.5 million per share ($0.74 per share). The bulk of the loss is due to a $50.7 million reserve strengthening adjustment; FAF also took intangible asset impairments of $13.7 million and employee separation and other restructuring costs of $11.3 million. For the full year, the company lost $26.3 million ($0.28 per share), compared with a $3.1 million ($0.03 per share) loss in 2007. Total revenues for the fourth quarter were $1.4 billion, down 28% from $1.9 billion for the same period in 2007. In the title insurance and services segment, FAF had a pretax loss of $94.2 million, much improved over the $185.5 million for the fourth quarter of 2007. Total revenues in this segment were down 32% from the previous year due to a decline in the number of title orders closed, a decrease in the average revenue per order closed and the termination of certain agency relationships. Average revenue per direct title order was $1,462, a 19% drop off from the fourth quarter 2007.

Moody's Investors Service is again increasing its loss expectations for U.S. subprime residential mortgage-backed securities issued between 2005 and 2007, raising them to a range of 28% to 32% of the original pool balance from 22% and placing 7,942 tranches of subprime RMBS with an original balance of $680 billion on review for possible downgrade. It said that ratings actions expected to occur as a result of this move make it likely that "mezzanine and subordinate certificates currently rated B or above would be downgraded to ratings of Caa or below, particularly for bonds issued in 2006 and 2007" while actions on senior bonds "will differ based on payment priority and protection relative to projected losses." The rating agency added however, that "given the losses currently being projected, a majority of senior certificates will likely be downgraded below investment grade" and "many are expected to be downgraded to Caa or below, particularly longer duration bonds from 2006 and 2007." Moody's said the Homeowner Affordability and Stability Plan "is expected to have a mitigating impact" on this. It added that while it already has formed a preliminary estimate of the impact of the plan and included that estimate in its numbers, that estimate could change when additional detail of the plans are released on March 4.