Originations

Once again industry trade groups are trying to get HUD to backpedal on a Real Estate Settlement Procedures Act rule, claiming the department should work with the Federal Reserve Board on making mortgage disclosures complementary with the Fed's so consumers will not get confused. The Fed is working on making disclosure changes that fall under the Truth in Lending Act. "We urge that HUD and the board to join together, with industry, consumers and other stakeholders, to make the disclosures as effective as possible," according to a Feb. 9 letter sent to HUD secretary Shaun Donovan. The eight groups contend that the Department of Housing and Urban Development should withdraw or suspend a recently finalized RESPA that revamps the good-faith estimate disclosure. However, the housing industry is no longer united in opposition to the final RESPA rule. Stalwart opponents of past RESPA reforms -- the National Association of Realtors, RESPRO and the American Land Title Association -- did not sign the letter. The American Bankers Association, Mortgage Bankers Association and five other lender groups did. The eight trade groups noted that last summer 243 congressmen signed a petition urging HUD to pull back from issuing a final RESPA rule and coordinate its disclosures with the Fed's Truth in Lending Act mortgage disclosure project.

An Oxon Hill, Maryland, man pleaded guilty to mail fraud in connection with the fraudulent purchase of 25 properties in Maryland, the District of Columbia and Virginia. According to prosecutors, Terrence White and others used false mortgage and settlement documents to buy the homes, and paid at least 15 "straw buyers" $10,000 per property to purchase the properties on their behalf. White created false mortgage and settlement documents, many of which misrepresented the straw purchasers' income and assets. White and others also created false invoices to claim that their now defunct company, Brotherly Investment Group, performed "renovations" on some of the properties. Using these false invoices, White and others were "repaid" at closing for the purported renovations. Between 2006 and 2008, White and others received $3.83 million in fraudulent funds. Many of the purchased properties have been foreclosed upon.

Office of Thrift Supervision director John Reich said he is leaving his post as the chief supervisor of 800 federally chartered thrift institutions at the end of this month. OTS senior director Scott Polakoff will serve as acting director until President Obama nominates a new director to run the agency. During his four-year tenure at OTS, Mr. Reich witnessed the demise of some of the largest savings and loans in history. Washington Mutual, IndyMac Bank and Countrywide failed on his watch. The OTS director was the most reluctant of federal banking regulators to tighten subprime and Alt-A lending underwriting guidelines. He generally insisted on giving thrifts the most flexibility in setting their lending polices. Mr. Reich was a Sarasota, Fla., banker before he came to Washington to work on the staff of former Sen. Connie Mack, R-Fla. President Bush nominated Mr. Reich to run OTS in 2005.

Chase Home Mortgage, the nation's third largest residential servicer, today declared a three-week moratorium on home foreclosures. A subsidiary of JPMorgan Chase, the lender/servicer said is waiting for the White House to unveil its foreclosure reduction program. According to the Quarterly Data Report, Chase services $850 billion in home mortgages. Meanwhile, JPM opened its first homeownership assistance center in California -- in the town of Glendale -- as part of a plan to open a nationwide network of 24 centers by the end of March. Nine of the HOA centers will be in California to assist borrowers serviced by Chase, Washington Mutual or EMC, which now are part of JPMorgan Chase. "We created these local Homeownership Centers as a place for our borrowers to sit down and discuss their situation face-to-face with trained loan advisors in these challenging times," said David Schneider, head of mortgage servicing at Chase. "They are part of a wide-ranging initiative to help families stay in their homes whenever possible." Three other centers, designed to help families struggling with their mortgage payments, will open soon in the Los Angeles, Orange and San Bernardino County.

Obscure clauses in securitization documents could spell big losses for depositories if Congress passes mortgage bankruptcy legislation, according to a report in American Banker. U.S. banks and thrifts hold hundreds of billions of dollars of non-agency mortgage-backed securities. Most if not all of these bonds are rated triple-A, meaning that normally they would be well cushioned against any loss, as lower-rated classes would take a hit first. However, many securitization documents contain language that identifies bankruptcy as a condition in which all bondholders share losses equally. According to a report by Credit Suisse, pending cram down language "will be a distinct negative for many senior prime RMBS bonds that have a unique feature wherein bankruptcy losses are set at a maximum dollar amount, beyond which additional bankruptcy-related losses will be allocated to all bonds regardless of seniority."

MGIC Investment Corp., the nation's largest mortgage insurer, said it will still cover broker-sourced loans but come March 9 will eliminate other products from its menu, including cash-out refinancings. According to a company bulletin, MGIC also will no longer insure second homes, and notes on manufactured housing units. The MI also will not cover any condominium mortgages with LTVs north of 90% in certain "restricted" markets where home prices have fallen dramatically. In regard to broker-sourced loans, the company will continue coverage but is capping LTVs at 90% and FICOs at a minimum of 720. Also, wholesalers must track their MGIC brokers by providing an identification number on these third-party originators. Earlier this week, The PMI Group, said it would no longer cover any type of broker-sourced mortgages.

House and Senate conferees raised the first-time homebuyer tax credit to $8,000 (a $500 increase) during last-minute negotiations on the pending economic stimulus bill. Also, the effective date of the credit was increased by three months to December 1. The final stimulus bill (H.R. 1) also raises the maximum GSE loan limit to $729,720. At press time the House was voting on the $800 billion package. A Senate vote on final passage could come as early as Friday evening or during the weekend. As reported earlier, the conferees cut a $15,000 homebuyer tax credit approved by Senate in half and limited the tax benefit to first-time homebuyers. The final version of H.R. 1 also restores the maximum $729,750 loan limit for Fannie Mae, Freddie Mac and Federal Housing Administration loans for the rest of this calendar year. (The current limit is $625,500.) Reinstating the higher loan limits will "help to reduce inventory and improve liquidity in the overall mortgage market," said Charles McMillan, president of the National Association of Realtors. Although the $8,000 first-time homebuyer tax credit is a disappointment to many in the industry, the tax writers made it a real tax credit so homebuyers do not have to repay it like an interest-free loan. Eliminating the repayment provision should bring more buyers into the market, Mr. McMillan said. The final stimulus bill also raises the loan limit on FHA-insured reverse mortgages to $625,500 from $417,000 for the rest of the calendar year.

The number of annual purchase mortgages in the United Kingdom during 2008 declined by 49% from the preceding year to the lowest level seen since 1974, according to the Council of Mortgage Lenders, London. The CML said there were 516,000 purchase loans originated during the year, compared to about 1.02 million in 2007. U.K. lenders originated 32,000 purchase mortgages in December, a decline of 5% from November and the lowest level seen since the CML began tracking monthly data in 2002.

While others continue to drop out of the wholesale mortgage lending business, the U.S. outsourcer that made an innovative move into that space when British mogul Sir Richard Branson's Virgin Group acquired it last year has been expanding and has renewed its commitment to it, saying it plans to continue to grow it with an "elite" group of brokers. Since it acquired outsourcing firm Lendia and transformed it into a wholesaler that gives its brokers the option of converting their fixed staffing costs into variable-rate outsourcing costs, the Waltham, Mass.-based business has more than doubled its volume and client base of brokers and is now licensed in 30 states across the country, Virgin Money founder and chief executive officer Asheesh Advani told MortgageWire. More than 150 third-party originators have joined the company's network and while Mr. Advani said he could not quantify the extent to which they have opted to use the company's outsourcing option, he said the "timely offering" has had "a fair amount of success" in attracting brokers. He said the company has unique plans for the business that are "ahead of regulatory trends," including an effort designed to attract the highest quality brokers in the country. In addition to former Lendia executive Greg O'Connor, who is currently an executive vice president at the Virgin unit, executives that are now leading the business and supporting Mr. O'Connor include Kim Lanagan, who supports in-house account executives who work out of the company's home office in Waltham, and Dennis Waller, who manages AEs in the field. Virgin also does some social/retail mortgage lending in the United States and Sir Richard has had his eye on the U.S. mortgage market since at least 2007 when he appeared at the Mortgage Bankers Association's annual convention to underline his interest in it.

Eleven more jurisdictions are expected to join the Nationwide Mortgage Licensing System by this summer, bringing the total to 33. The system, which started operations 13 months ago, celebrated its first anniversary on Jan.2 with nearly 14,000 mortgage companies, 9.300 branches and 66,700 loan originators on board, according to the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators. "NMLS has exceeded our initial expectations and is on solid footing as it enters its second year," said Gavin Gee, Idaho's Director of Finance and chairman of the State Regulatory Registry LLC, a CSBS subsidiary, which owns and operates the system. NMLS allows state-licensed mortgage lenders, mortgage brokers and loan officers to apply for, amend, update or renew licenses online in all participating state agencies using a single set of uniform applications. "The states now have a powerful supervisory platform to continue our consumer protection efforts," said AARMR President David Bleicken, deputy secretary of banking for non-depository institutions and consumer services in Pennsylvania. "The credit for the success of the NMLS to date belongs to the states." According to Bill Matthews, president of the State Regulatory Registry, several upgrades are planned for the system this year, including the electronic submission of financial statements, consumer access and criminal credit background checks. Fifteen more states have indicated they will begin participating in 2010, which would bring the total to 47. Only Nevada, Minnesota and Ohio are not on board.

Gateway Mortgage Group, Tulsa, Okla., a mortgage banking and net branch operator, is having warehouse capacity problems. Company chief executive and president Kevin Stitt told MortgageWire that the lender has more business than it can fund right now, which is "a good problem," he said. However, it is reducing the number of originators it uses, eliminating less productive wholesale accounts because it cannot fund them all. Gateway is adding more lines, but even so, its capacity is still limited by the size of its balance sheet, he said. Mr. Stitt said Gateway is trying to be upfront with its employees. The company has 45 branches in the middle section of the country.

To make it easier for owners of apartment properties to secure financing, the Federal Housing Administration has temporarily relaxed one of its rules for insuring multifamily mortgages. Normally the agency, part of the Department of Housing and Urban Development, will not insure a loan to buy or refinance a multifamily property if it was built or substantially rehabilitated in the last three months. But now the FHA will waive this restriction for at least six months. For an FHA insurance application to be eligible under the waiver, the building must have a certificate of occupancy dated no later than July 31, 2008. In a Feb. 6 letter to lenders, FHA commissioner Brian D. Montgomery pointed out that HUD eased restrictions on insuring recently constructed or renovated properties once before, in 1974. The current waiver is more restrictive, he wrote, because it requires the FHA to ensure that the properties are viable and self-sustaining and will not be a financial drain on the multifamily property insurance program.

Ginnie Mae guaranteed the issuance of $26.5 billion in single-family mortgage-backed securities in January, just as issuance has leveled off over the past few months after a major upswing last year. Ginnie single-family MBS issuance hit an all time high of $29.2 billion in October and topped Fannie Mae and Freddie Mac in MBS issuance. But Ginnie volume dropped back to $27 billion in November and $23.6 billion in December. The agency also guarantees multifamily securitizations, including $342 million in January. Total issuance of Ginnie Mae MBS (including multifamily) for the first four months of fiscal year 2009 stands at $108.9 billion as of January 30, compared to $43.3 billion in the same four months of FY 2008. "Ginnie Mae was created to be there when the market needs it most and provide stability, and that is exactly what we are doing now," said Ginnie Mae president Joseph Murin.

The average rate for a 30-year fixed-rate mortgage slid to 5.16% during the week ending Feb. 12 from 5.25% the previous week and 5.72% a year ago, according to Freddie Mac. "Interest rates for 30-year fixed-rate mortgages are almost 1.5 percentage points below 2008's peak set on July 24, 2008, offering many homeowners an incentive to refinance. This would translate into a monthly payment savings of around $188 on a $200,000 mortgage," said Frank Nothaft, Freddie Mac vice president and chief economist. He also noted that the Bureau of Economic Analysis has estimated that the weighted average mortgage rate of loans outstanding was about 6.2% in the fourth quarter of 2008. "As a result, the share of refinancing among the total number of conventional mortgage applications has exceeded 50% for the past 11 weeks and averaged 80 percent over this period, according to the Mortgage Bankers Association," he said. The average 15-year FRM rate in the latest week averaged 4.81%, down from the previous week when it averaged 4.92%. A year ago, the 15-year FRM rate averaged 5.25%. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.23%, down from the previous week when they averaged 5.26%. A year ago, the five-year ARM averaged 5.19%. One-year Treasury-indexed ARMs averaged 4.94%, up from the previous week's 4.92%. A year ago, the one-year ARM averaged 5.00%. Average points were as follows: 0.7 for 30- and 15-year FRMs, 0.6 for five-year Treasury-indexed hybrids and 0.5 for one-year ARMs.

House and Senate conferences have cut the $15,000 homebuyer tax credit in half, according to sources, and limited the benefit to first-time homebuyers in hammering out the final version of the economic stimulus package. As MortgageWire went to press the conferees have not released the conference report on the $789 billion stimulus bill (H.R. 1) and it is unclear when the House will vote on the final bill. Industry lobbyists are confident the final bill will restore the maximum $729,750 loan limit for Fannie Mae, Freddie Mac and Federal Housing Administration loans for the rest of this calendar year. The $7,500 first-time homebuyer tax credit is due to expire September 1, one source said. The full amount of the tax credit is available to families with a maximum adjusted gross income of $150,000 and $75,000 for individuals.

In what could be another nail in the coffin of the loan brokerage industry, The PMI Group of San Francisco confirmed it will no longer insure any mortgages brought to them by third-party originators unless these firms have a warehouse line of credit. It's believed that PMI is the first of the nation's seven MI firms to totally exclude loan brokers from their coverage menus. In recent months other MIs - including Genworth and MGIC - have tightened guidelines on broker-sourced loans, particularly condominiums and high LTV notes. A PMI spokesman confirmed the new policy change to National Mortgage News adding that, "This does not apply to correspondents." He said PMI would honor any commitments on broker loans in its pipeline. Marc Savitt, president of the National Association of Mortgage Brokers, said he is seeking a meeting with White House officials to discuss issues affecting brokers (including the PMI matter) and believes the sector has been unfairly blamed for the nation's mortgage crisis. "We don't underwrite loans," he said. The NAMB chief believes the nation's largest commercial banks are part of a "well orchestrated campaign" to put brokers out of business and gain market share. In a letter NAMB sent to the White House today he writes: "Make no mistake about it. This campaign to eliminate our profession has absolutely nothing to do with consumer protection. It's about market share."

Subsidiaries controlled by BlackRock Financial have increased their stake in PHH Corp., Mt. Laurel, N.J. -- a top 10 ranked residential servicer -- to 9.67%, according to a new filing with the Securities and Exchange Commission. Previously, BlackRock affiliates controlled about 5% of PHH's outstanding common stock. The new SEC filing says the investment-banking firm now owns 5.27 million shares of PHH's common stock. Previously they owned 2.5 million common shares. At press time spokespersons for both PHH and BlackRock had not returned telephone calls about the investment. The publicly traded BlackRock owns the stake on behalf of five different advisory subsidiaries, all of which carry the BlackRock name. PHH Mortgage, the nation's largest private label lender, services about $146 billion in home mortgages. Based in New York, BlackRock is headed by Larry Fink, a pioneer in the mortgage-backed securities market.

Lenders scaled back new apartment and commercial real estate lending during the fourth quarter of last year, according to the Mortgage Bankers Association. Commercial/multifamily originations were 80% lower than during the fourth quarter of 2007, and the decline was seen across all property types and investor groups (with CMBS conduits seeing origination activity fall the most, 98% compared with the year-earlier quarter). Jamie Woodwell, the MBA's vice president of commercial real estate research, said commercial and multifamily lending for all of 2008 was 60% lower than in 2007. "Between the worsening economy and the continued credit crunch, lenders are extremely cautious about lending and borrowers are likely to hold onto the assets and the loans they already have."

Federal Housing Administration single-family endorsements totaled $71.7 billion in the first quarter of fiscal year 2009, up 235% from the same period a year ago. Lenders originated $22.8 billion in FHA loans in December alone, compared to $21.4 billion during the three months in the first quarter of FY 2008. The latest data also shows that FHA condominium and 203(k) purchase/improvement loans are growing at a fast clip. Lenders made $3.7 billion in condo loans in the first quarter of FY 2009, up 314% from a year ago and $541.5 million in 203(k) loans, up 255%. The condo and 203(k) loans are included in the $71.7 billion total of FHA single-family loans. Meanwhile, defaults continue to creep up, despite a 24% increase in FHA's portfolio of insurance-in-force over the previous four quarters. FHA loans 90 days or more past due hit 6.8% as of December 31, up from 5.98% in the first quarter of FY 2008.

The Market Composite Index, an overall measure of mortgage applications, decreased 24.5% on a seasonally adjusted basis to 600.6 from 795.4, as there was a significant drop-off in refinancing applications during the week ended Jan. 30, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. On an unadjusted basis, the Index decreased 23.5% compared with the previous week and 43.9% compared with the same week one year earlier. The Purchase Index decreased 9.8% to 235.9 from 261.4 one week earlier on a seasonally adjusted basis, while the Refinance Index decreased 30.3% to 2722.7 from 3906.3 the week prior. Refinancings decreased to 66.7% of applications from 73.2% the previous week, while adjustable-rate mortgages accounted for 2.5% of applications, an increase from 2.1% for the previous week, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.19% from 5.28%, with points (including the origination fee) increasing to 1.20 from 1.12 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.