Originations

Home prices fell 18.2% in the fourth quarter, retreating to their 2003 levels, according to the newly released Standard & Poor's/Case-Shiller housing price index. "This is the steepest rate of decline we have seen," S&P managing director David Blitzer told reporters. The December HPI report shows that average house prices are down 26.7% since the peak in the second quarter of 2006. Wellesley College professor Karl Case noted that Case-Shiller data includes auction sales, which is one reason the index shows steeper price declines than other indexes. "There are very few, if any, pockets of turnaround that one can see in the data," said Mr. Blitzer. However, Boston, Denver, Los Angeles, San Diego and Washington D.C. showed a relative improvement in lesser rates of decline.

Bank of America has decided to combine the wholesale and correspondent lending divisions of Countrywide Home Loans into one unit, placing executive Doug Jones in charge of both. Mr. Jones also will oversee warehouse lending for the bank, said a company spokesman. Todd Dal Porto, executive vice president in charge of wholesale, was named retail sales executive in charge of the Western U.S. In late April the Countrywide Home Loans brand will disappear entirely, replaced with Bank of America Home Loans, which will incorporate all residential lending for BoA and the old Countrywide franchise. BoA bought Countrywide Financial Corp., the parent of CHL, in July of last year. Prior to the purchase, BoA had ceased funding loans through wholesale and correspondent means, but so far has vowed to remain in these third-party lending channels, which Countrywide routinely dominated along with Wells Fargo & Co.

Table funding using mortgage brokers accounted for just 16.6% of all new residential loans originated in the fourth quarter, the lowest on record since National Mortgage News began tracking originations 15 years ago. As recently as mid-2007 wholesale -- where broker-sourced loans are table funded -- accounted for 28% of production. The 30 or so table funders reporting to NMN and the Quarterly Data Report originated roughly $50 billion in mortgages through loan brokers. All lenders -- using retail, wholesale and correspondent means -- funded $300 billion in product during 4Q, according to preliminary figures. Retail and correspondent lending accounted for the balance of production. Several of the nation's largest lenders have exited the wholesale channel in the past year and mortgage insurance companies have tightened their guidelines on broker-sourced loans.

FHA lenders would be reimbursed for losses on any cramdowns under a housing bill pending in Congress. The bankruptcy bill recently approved by the House Judiciary Committee raised concerns that lenders of FHA and Department of Veterans Affairs guaranteed mortgages could suffer losses if a mortgage is crammed down. The housing bill (H.R.1106) that the House of Representatives is slated to vote on this Thursday allows FHA and VA lenders to cover lender losses (principal and interest) due to a bankruptcy cramdown. Despite these changes, the mortgage industry continues to oppose passage of the bankruptcy section of the housing bill. H.R. 1106 also provides legal protections for servicers that engage in loan modifications.

Expecting another big year for the FHA single-family insurance program, House appropriators are increasing the agency's commitment level to $315 billion, a 70% improvement from last year. Lenders originated $171.8 billion in Federal Housing Administration loans in FY 2008, which ended September 30. In the first quarter of FY 2009, FHA single-family endorsements totaled $71.9 billion, compared to $21.4 billion for the same period a year earlier. The House of Representatives is slated to vote on an omnibus appropriations bill this Wednesday (Feb. 25) that increases commitment levels for the Government National Mortgage Association and FHA. Meanwhile, appropriators have allotted the HUD Inspector General an extra $13 million to keep a closer watch on FHA, focusing on new programs, including the 'Hope for Homeowners Now' initiative which helps consumers refinance their underwater mortgages. On Thursday, the House is expected to vote on a bill (H.R. 1106) to make the H4H program more attractive to borrowers and servicers. H.R. 1106 also includes provisions to allow bankruptcy cramdowns, shield servicers engaged in loan modifications from investor lawsuits, and bolster the federal deposit insurance programs for banks and credit unions.

Bank of America has decided to combine the wholesale and correspondent lending divisions of Countrywide Home Loans into one unit, placing executive Doug Jones in charge of both. Mr. Jones also will oversee warehouse lending for the bank, said a company spokesman. Todd Dal Porto, executive vice president in charge of wholesale, was named retail sales executive in charge of the Western U.S. In late April the Countrywide Home Loans brand will disappear entirely, replaced with Bank of America Home Loans, which will incorporate all residential lending for BoA and the old Countrywide franchise. BoA bought Countrywide Financial Corp., the parent of CHL, in July of last year. Prior to the purchase, BoA had ceased funding loans through wholesale and correspondent means, but so far has vowed to remain in these third-party lending channels, which Countrywide routinely dominated along with Wells Fargo & Co.

NetMore America Inc., Walla Walla, Wash., is the latest mortgage lender to be affected by the lack of funds available to originate loans, although the company is still bullish on its growth prospects for 2009. Mark Freedle, president and chief executive of NetMore commented in a statement, "NetMore is giving priority to purchase transactions which will still be handled within five days and is curtailing its focus refinances for a time. Last week we realigned our staffing in line with the ongoing credit crisis and lack of access to growth capital. We reduced our overall number of employees by about 20 or less than 10% of our total of over 200 employees. We regret taking this action because it impacts dedicated and talented people whose work we value. However, it was a necessary step given the current environment impacting the mortgage industry. Such as, one, the reduced number of warehouse lenders offering credit lines even to responsible and growing lenders such as NetMore; and two, the difficulty of accessing growth capital due to the disruption in the capital markets. We will still be funding between $85-100 million a month of high quality FHA and agency loans, which at this rate would double our 2008 closings, and we will increase this level once the credit and capital markets return to normal."

U.S. Mortgage Corp. of Pinebrook, N.J., whose credit union lending affiliate went bust last week, has closed its doors according to industry sources and a posting on its website. Company officials could not be reached for comment. One loan officer familiar with the company said it may have had a servicing portfolio as large as $1 billion but that figure could not be confirmed. A posting on the lender's website says it has ceased operations "due to unforeseen circumstances." USMC was the parent of CU National Mortgage, a private label funder that served the nation's smaller credit unions. CUNM was founded 13 years ago.

Alesco Financial Inc., a Philadelphia-based specialty finance real estate investment trust, is merging with its external manager Cohen & Co., a privately held investment firm specializing in credit related fixed income investments. Cohen & Co. will become a subsidiary of AFN after the deal is completed. In the merger, members of Cohen & Co will have the option to exchange each of their membership units for either shares of common stock of AFN, or replacement units of membership interest in Cohen & Co., which may be exchanged into shares of AFN in the future. The terms of the merger agreement include a "go shop" provision for AFN to pursue superior merger or other strategic opportunities for a period of 40 days from the date of the execution of the merger agreement. AFN's investment banker, Stifel, Nicolaus & Co., Inc. will evaluate any potentially superior opportunities. Daniel Cohen, chairman of AFN and Cohen & Co., said, "The fixed income and structured credit markets continue to be faced with significant challenges and dislocation. For companies with deep industry expertise and financial resources, this dislocation creates multiple opportunities for: value creation through strategic investments and acquisitions at attractive valuations; providing credit fixed income trading services to institutional investors that are currently underserved in this space; recruiting and retaining the best and brightest in the industry; and originations and underwriting of debt issuances as required by clients."

The mortgage insurance industry - after receiving certain assurances from the nation's GSE regulator - has signaled its support for a new Fannie Mae and Freddie Mac program to refinance certain high LTV loans without using MI coverage. The refinance program is designed to lower the interest rate on at-risk risk loans that the GSEs already own or guarantee. Federal Housing Finance Agency director James Lockhart assured the Mortgage Insurance Companies of America that the MI exemption is limited and mortgage insurance will continue to be required on notes with loan-to-value ratios above 80% that are sold to Fannie and Freddie, as required by their charters. "We commend director Lockhart for offering this important clarification of the President's housing recovery plan," said MICA president Kevin Schneider. An estimated 4 million to 5 million borrowers who cannot refi because of falling house prices and tighter loan and mortgage insurance standards could be helped by the GSE refinance program. The GSEs can waive private mortgage insurance in refinancing these high LTV loans unless the borrower already has PMI. In that case, they have to "use best efforts to get the mortgage insurance rolled over to the new mortgage," Mr. Lockhart said. "Thus, it would be beneficial to the success of this initiative for the mortgage insurers to work with both companies as they move toward implementation."

The Obama administration is still standing behind a Real Estate Settlement Procedures Act rule and urged a U.S. district court to dismiss a legal challenge to the rule with "prejudice." Department of Justice attorneys did not present a defense or any praise of the RESPA rule, which the National Association of Mortgage Brokers claims in a lawsuit would place brokers at a "permanent disadvantage in the marketplace." Opponents of the RESPA rule noted that the DOJ response was expected and the new administration still has time to reconsider its position, since the main provisions of the final rule do not go into effect until January 10, 2010. "We hope the new administration will pull back the RESPA rule as they are doing with other regulations that were put into effect by the Bush administration after the election," said Matt Dolan, a NAMB consultant with the Federal Policy Group. The Department of Housing and Urban Development issued the RESPA rule in November. It requires lenders to provide a standardized and expanded good faith estimate disclosure to borrowers shortly after they file a mortgage action. The GFE includes a disclosure of the mortgage broker's compensation, which NAMB claims is unfair - since other originators don't have to disclose their compensation.

The National Association of Mortgage Brokers has filed suit against the Federal Housing Finance Agency to block implementation of a new GSE appraisal rule, claiming it could put brokers out of business and allow appraisal management firms to profit at the expense of independent appraisers and consumers. The new 'Home Valuation Code of Conduct,' which goes into effect May 1, prohibits loan officers and mortgage brokers from directly ordering appraisals. NAMB claims the code has a "bias toward mortgage lenders" and that major banks are already requiring brokers to order appraisals through their affiliated appraisal management companies. The trade groups says the new code of conduct is a result of an investigation led by New York Attorney General Andrew Cuomo into the relationship between an appraisal management company (AMC) and the now defunct Washington Mutual, which sold mortgages to Fannie Mae and Freddie Mac. "Although the WaMu lawsuit ostensibly related to how WaMu's relationship with its AMC generated fraudulent appraisals and contributed to WaMu's financial demise, the resulting agreements focused on mortgage brokers, which had nothing to do with the claims alleged in the WaMu lawsuit," NAMB says. The new appraisal code stems from a GSE/FHFA settlement with the New York AG. The valuation code's "abolition on broker-ordered appraisals will force mortgage brokers and customers to rely on lenders and their affiliates for home value appraisals, disrupting the established business practices of mortgage brokers, decreasing the efficiency of the marketplace and increasing the costs to consumers," NAMB says.

U.S. Mortgage Corp. of Pinebrook, N.J., whose credit union lending affiliate went bust last week, has closed its doors according to industry sources and a posting on its website. Company officials could not be reached for comment Friday afternoon. One loan officer familiar with the company said it may have had a servicing portfolio as large as $1 billion but that figure could not be confirmed. A posting on the lender's website says it has ceased operations "due to unforeseen circumstances." USMC was the parent of CU National Mortgage, a private label funder that served the nation's smaller credit unions. CUNM was founded 13 years ago.

The mortgage insurance industry -- after receiving certain assurances from the nation's GSE regulator -- has signaled its support for a new Fannie Mae and Freddie Mac program to refinance certain high LTV loans without using MI coverage. The refinance program is designed to lower the interest rate on at-risk risk loans that the GSEs already own or guarantee. Federal Housing Finance Agency director James Lockhart assured the Mortgage Insurance Companies of America that the MI exemption is limited and mortgage insurance will continue to be required on notes with loan-to-value ratios above 80% that are sold to Fannie and Freddie, as required by their charters. "We commend director Lockhart for offering this important clarification of the President's housing recovery plan," said MICA president Kevin Schneider. An estimated 4 million to 5 million borrowers who cannot refi because of falling house prices and tighter loan and mortgage insurance standards could be helped by the GSE refinance program. The GSEs can waive private mortgage insurance in refinancing these high LTV loans unless the borrower already has PMI. In that case, they have to "use best efforts to get the mortgage insurance rolled over to the new mortgage," Mr. Lockhart said. "Thus, it would be beneficial to the success of this initiative for the mortgage insurers to work with both companies as they move toward implementation."

Genworth Financial Inc., Richmond, Va., has been downgraded by A.M. Best Inc., Oldwick, N.J., which cited concern over exposure to mortgages on the company's balance sheet -- both at its life insurance side (as an originator and investor in commercial mortgages and securities, as well as residential mortgage-backed securities) and on the mortgage insurance side. While Best said Genworth had prudent commercial mortgage loan underwriting practices and limited delinquencies so far, the rating agency added it expected "rising defaults in response to the deepening recession, and is most cautious on the retail, hotel and office properties within close proximity to distressed housing markets and/or labor markets where unemployment is high." Best cut the financial strength rating on Genworth Financial from A+(Superior) to A(Excellent). The Best move came days after Fitch Ratings, Chicago, cuts its Insurer Financial Strength rating on Genworth Financial two notches, from A+ down to A-.

Gross mortgage lending in the United Kingdom fell to a monthly low not seen since April 2001 during January and there is little hope for an immediate end to the downturn in this area, according to the Council of Mortgage Lenders, London. "Mortgage lending activity continues to be very weak and while people are searching eagerly for some signs of recovery, it would be unrealistic to expect a meaningful revival in lending in coming months," said Bob Pannell, the CML's head of research. "Even when conditions do improve, gross lending will be one of the later measures to recover," he added. Gross U.K. mortgage lending in January totaled 12.4 billion pounds ($17.7 billion), an 8% decline from December and a 52% drop from January of last year.

January sales of single-family homes in the Houston area dropped 22.7% from a year earlier, according to data compiled by the local Realtors' association.Also, the average price of a single-family home in the big Texas market declined 12.8%, to $164,922. The Realtor group attributes much of the decline to an increase in foreclosure sales, which accounted for a third of all closed transactions recorded in January, up from 25% a year earlier.

New home sales, traffic and expectations picked up a tick in January, especially in Texas, according to John Burns, an Irvine, Calif.-based real estate consultant. "The pick-up is real" in the Lone Star State, where price appreciation has been insignificant and the economy is still okay. He said the increase is driven by lower mortgage rates. Nationally, the consultant's proprietary survey of 236 building industry executives found traffic at new home subdivisions picked up "slightly" for the second straight month, pushing the needle from "very low" to "low." The survey also found that inventory is declining, most notably in the Southwest and South Florida, where the number of completed but unsold units dropped two and three units per community, respectively. Also worth noting, while two out of five builders surveyed report starting no new houses in January, 14% indicated they pulled permits on three or more units, up from 9% the month before. Despite these slivers of good news, Mr. Burns said it is too early to call a bona fide upturn.

Three of the nation's top four residential servicing companies -- which together control almost half of all U.S. home loans -- saw their share prices fall to new 52-week lows on Friday. The three are: Bank of America, Wells Fargo & Co., and Citigroup, which rank first, second and fourth, respectively, among residential servicing firms with a combined market share of 47.75% ($4.65 trillion in loans), according to the Quarterly Data Report. The nation's third largest servicer, JPMorgan Chase, saw its share price fall to $19.03, a dollar and change above its yearly low. At press time the share price of BoA had fallen more than 14% on the day to $3.37, while Citigroup slid about 20% to $2.01. Citigroup briefly fell below the $2 mark. The decline was stoked, in part, by concerns from analysts that Citigroup and BoA could be nationalized.

Sy Naqvi, who ran PNC Mortgage for 11 years until it was sold to Washington Mutual earlier this decade, has returned to the bank-owned lender. According to an official familiar with the matter Mr. Naqvi's chief job will be to evaluate all the mortgage operations of PNC Bank and National City Mortgage, which the bank inherited when it bought National City Corp. of Cleveland at year end. (For the full story see the Monday edition of National Mortgage News.)