Originations

First Interstate Mortgage of New Jersey is pulling the plug on its wholesale division, at least for now, according to an e-mail memo sent out to some of its approved brokers. The memo notes that "effective immediately" the Shrewsbury-based non-depository will no longer accept applications from brokers, but will honor mortgages that have been submitted and/or locked. Company officials did not return telephone calls and e-mails seeking comment. One mortgage banker familiar with the company speculated that the lack of warehouse credit available to non-bank funders may have something to do with FIM's decision, adding that the company might re-enter the space eventually. Towards the end of the memo company vice president Ed Pascocello notes, "Market conditions specific to third-party originators has necessitated this decision."

The average rate for a 30-year fixed-rate mortgage rose to 5.25% from 5.10% during the week ending Feb. 5, according to Freddie Mac. "Interest rates for fixed-rate mortgages rose this week amid economic reports that were somewhat better than consensus forecasts had anticipated," said Frank Nothaft, Freddie Mac vice president and chief economist. The average 30-year FRM rate was down from 5.67% a year ago. The 15-year FRM rate averaged 4.92% in the latest week, up from the previous week's 4.80% but down from 5.15% last year. The average rate for the five-year Treasury-indexed hybrid adjustable-rate mortgage fell slightly to 5.26% from 5.27% but was up from 5.21% a year ago. One-year Treasury-indexed ARM rates averaged 4.92% in the latest week, up from the previous week's 4.90% but down from 5.03% last year. Average points were as follows: 0.8 for 30- and 15-year year FRMs, 0.6 for five-year Treasury-indexed hybrids and 0.5 for one-year Treasury-indexed ARMs.

Wells Fargo has gotten some backlash from industry supporters after canceling a scaled-backed mortgage employee recognition event "in light of the current environment" and in response to what the company called a "misleading" Associated Press report. According to Wells, the report suggested the expenditure was inappropriate given that the company, like many of its peers, has been under financial duress and accepted public money. The company said the meeting was one of the few pre-planned events for 2009 it had not cancelled only because there was no "meaningful" savings to be derived from it. Wells also noted that the government has encouraged that the public funds it received be used for lending and the originators that had been invited to the event, in combination with their colleagues, had produced $230 billion in mortgages during 2008. "Last quarter alone, we made $22 billion in loan commitments and $50 billion in mortgage originations. That's more than $70 billion or almost three times the amount of the U.S. Treasury's investment in Wells Fargo," the company said. Industry supporters, such as author Scott McKain, criticized such cancellations as set backs to go-forward company efforts to compete in the market and improve its finances. Many commentators, however, lambasted the lender for what they felt was a totally inappropriate junket after receiving $25 billion in taxpayer funds.

Often held out as the poster boy for all that is wrong with the housing sector, Las Vegas is attracting more than its share of bargain hunters. According to Robert Jenson, an agent with RE/MAX Central who specializes in Sin City's high-end properties, of the nearly existing home 2,000 sales logged in Vegas in January, 88% were distressed sales, either foreclosures (1,588) or short sales (180). "Lower interest rates and a drop in the average sales price to under $184,000 is attracting more bargain hunting," Mr. Jenson said. While the inventory of homes on the market peaked in the Las Vegas area in July, there are still roughly 21,000 units on the market. Of those, nearly 1,000 are priced at $1 million or more. January's sales pace was the second lowest over the past 12 months, according to the local real estate agent, who distributes a monthly report to his clients. At $184,000 the average price in January was down 7.25% from December, "the biggest drop in more than a year," Mr. Jenson said.

California's home builders last year produced just 65,380 units in a state where population estimates alone dictate a need for nearly three times that many new houses annually. And 2009 could be even tougher yet on the state's moribund housing industry. The California Building Industry Association is predicting that only 63,400 units will be started in 2009. That's a 3% decline from 2008's all-time low. The previous low point in the Golden State's housing production also was during a recession. But in 1993, builders in the state still managed to start 84,656 units. In the early 1980s recession, production bottomed out at 85,656 units in '82. The 2009 forecast, prepared by the Construction Industry Research Board, predicts California builders will produce 30,000 single-family units in 2009, down 9% from the 33,048 constructed in 2008, and 33,400 multifamily units, up a modest 3% from the 32,332 permits issued in 2008. "These numbers do not bode well for our industry, or the economy, and we could be in for a very rough year," said CBIA President Robert Rivinius.

Fidelity National Financial Inc.'s acquisition of LandAmerica's title underwriting subsidiaries resulted in a loss that pushed FNF into the red for the fourth quarter but still left the company with improved year-to-year results for the period. FNF lost $1.7 million ($0.01 per share) for the fourth quarter 2008, an improvement over its loss of $44.9 million ($0.21 per share) for the same period in 2007. The fourth quarter 2008 results include the nine days during the period it owned the former title underwriting subsidiaries of LandAmerica Financial Group. Those units - Commonwealth Land Title, Lawyers Title and United Capital Title - were responsible for a net loss of $2.8 million. Otherwise, FNF would have earned $1.2 million ($0.01 per share) for the first quarter. For the full year, FNF lost $165.8 million ($0.79 per share) compared with profits of $129.8 million ($0.59 per share) for 2007. FNF chairman William P. Foley II said through the end of January, the company has "eliminated approximately 1,500 of the 5,500 employees we inherited" from the former LandAmerica firms and closed 125 offices. This, he said, has given FNF run-rate savings of $180 million. More good news, Mr. Foley said, was that FNF's per day open order counts doubled between November and December. In January, they improved even further to 14,200 new open orders per day.

The Market Composite Index, an overall measure of mortgage applications, increased 8.6% on a seasonally adjusted basis to 795.4 from 732.1 during the week ended Jan. 30, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. On an unadjusted basis, there was an increase of 28.1% when compared with the previous week but a decrease of 26.9% when compared with the same week in 2007. The Purchase Index decreased 11.2% to 261.4 from 294.3 one week earlier on a seasonally adjusted basis, while the Refinance Index increased 15.8% to 3906.3 from 3373.9 the week prior. Refinancings increased to 73.2% of applications from 72.8% the previous week, while adjustable-rate mortgages accounted for 2.1% of applications, down from 2.4% for the previous week, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages increased to 5.28% from 5.22%, with points (including the origination fee) increasing to 1.12 from 1.05 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

In response to declining home values, Freddie Mac is increasing delivery fees for certain high LTV and low FICO score mortgages, effective April 1. Some wholesalers -- in response to Freddie's actions and similar changes implemented by Fannie Mae -- are implementing price increases, especially on condominium loans. One broker provided an e-mail from Taylor Bean & Whitaker that notes, "As a result of recently announced Freddie Mac revised delivery fees, TB&W will implement new price adjustments on any loan locked on or after Feb. 4, 2009 with the issue of the rate sheet posted in the morning." A TB&W account executive did not return a telephone call about the matter. The hikes in delivery fees ultimately will be paid for by the consumer who will see an increase in his closing costs. Besides high LTV loans and low FICO scores, increases in delivery fees are coming on cash-out refis, condominiums, and certain ARMs. A Freddie Mac spokesman said the GSE is increasing its fees because of "market dynamics." The changes in fees are outlined in a Freddie bulletin dated January 30.

The Mortgage Bankers Association Tuesday afternoon asked Congress to provide short-term government guarantees on warehouse lines of credit to address what it believes is a liquidity crisis facing non-depository residential funders. The trade group also thinks it might be a good idea to allow Fannie Mae and Freddie Mac to buy participations in warehouse lines of credit, a move it thinks will add liquidity to the sector. In years past mortgage bankers -- and warehouse executives -- were adamantly opposed to allowing the GSEs to get anywhere near the warehouse niche. MBA claims warehouse lending capacity has shrunk to just $25 billion or so compared to $200 billion two years ago. "This sub-crisis is the result of a shortage of warehouse lines of credit, meaning independent mortgage bankers are doubly hamstrung to originate new mortgages threatening their viability," said MBA chief John Courson in written testimony before the House Financial Services Committee. According to exclusive survey figures compiled by National Mortgage News, there are just 10 or so active warehouse lenders compared to 30 two years ago. Many warehouse providers have either failed or closed down that line of business including most of the Wall Street firms that played in the space. Active warehouse firms include Horizon Bank, Flagstar, GMAC-RFC, National City, and a few others. MBA wants the government to provide federal guarantees on warehouse lines for 12 to 24 months -- but only on Fannie Mae, Freddie Mac and government-backed loans, which currently accounts for most of the market.

AllRegs, Eagan, Minn., has created a new certification program for residential mortgage underwriters of government loans. The program is offered through AllRegs Academy and will give participants the designation of Residential Government Underwriter. Those seeking the designation must have two years experience in the mortgage industry, with an emphasis in underwriting, processing, government lending, risk analysis or quality assurance. They also must complete 12 hours of education with a passing score of 75% or above and pass an examination. The coursework includes underwriting, appraisal and compliance programs; Federal Housing Administration and Veteran's Administration underwriting courses; and courses in the USDA's Rural Housing program. Once certified, designees must renew their RGU every two years by successfully completing approved education courses.

Banks have significantly tightened their underwriting standards on commercial real estate loans since the shutdown of the commercial mortgage-backed securities market last year, but the shutdown has not hurt loan volume, according to a Federal Reserve Board survey of senior loan officers. Only seven out of 53 U.S. banks reported a reduction in CRE lending during the second half of 2008. "About 30% indicated the shutdown of the CMBS securitization market had led to an increase in CRE lending," the Fed said in a summary of the responses to its January survey. About 95% of the surveyed banks said they increased their loan-rate spreads on CRE loans, 80% tightened their loan-to-value ratios and 70% tightened their debt-service ratios. Meanwhile, 45% of the 51 banks engaged in residential mortgage lending said they have tightened their lending standards on prime loans over the past three months. Only 10% reported weaker demand for prime loans, compared to 50% in the October survey.

Citigroup, New York, said it authorized the use of $25.7 billion of Troubled Asset Relief Program Funds for its residential mortgage activities in the fourth quarter 2008 but only an undisclosed portion of the money was spent during that period. That is by far the biggest chunk of the $36.5 billion of TARP money authorized for use during that period. The company said it made $75 billion in new loans of all types during the fourth quarter. The report also covered Citi's activities with troubled residential mortgage borrowers. The company said it has worked with approximately 440,000 homeowners whose mortgages totaled $43 billion since the start of the housing crisis in an effort to prevent foreclosure. In 2008, Citi said it kept approximately four out of five distressed borrowers whose loans it serviced in their homes. Citi said it is adopting the streamlined model for post-delinquency modification programs developed by the Federal Deposit Insurance Corp. In addition, through the Citi Homeowner Assistance Program, it is reaching out to those who may be experiencing some form of economic distress although they are current on their mortgage payments.

Private mortgage insurance companies finished 2008 with the second worst month of the year in terms of primary new insurance written and its worst month of the year in terms of the cure/default ratio. And December's numbers included information from a company which hadn't reported in almost five and one half years. According to the Mortgage Insurance Cos. of America, in December, the private mortgage insurers had $7.2 billion of primary new insurance written, all but $28.4 million through the traditional channel. The December statistics included data from Radian Guaranty Inc., Philadelphia, which recently rejoined the group after leaving in a dispute over its title insurance alternative in July 2003. In November, MICA members had volume of $5.8 billion, while, in December 2007, they had volume of $26 billion. The inclusion of Radian in the data has brought the primary insurance in force up to $952.2 billion; without Radian and Triad Guaranty, which is in runoff, this was $799.5 billion in November. New pool risk written was $8.1 million, the best month of the fourth quarter. The cure/default ratio crashed to 47.3%, with 49,749 cures and 105,110 defaults reported.

Even though the U.S. housing market is still flat on its back, there were signs of improvement in December, according to the National Association of Realtors' pending home sales index. But NAR president Brian McMillan, a broker with Coldwell Banker, is warning that a rebound in the market is not necessarily afoot. "Housing activity remains weak compared with potential demand and the market is fragile given the economic drop," he said. NAR's pending home sales index (PHSI) rose to 87.7 in December, the best reading since September. The biggest improvements in the PHSI came in the Midwest and South with declines in Northeast and West. NAR's index, as the name indicates, is based on pending sales of existing homes where a contract for sale has been signed. The higher the index, the healthier the housing market is. Falling interest rates and declining home prices have been credited with the improvement.

Mortgage banker Residential Capital Corp. -- whose parent recently completed a huge debt swap with bond holders -- continued to bleed red ink in the fourth quarter, posting another huge loss as both its loan fundings and servicing rights suffered. ResCap, which late last year closed its wholesale channel, funded $8.5 billion in home mortgages in the fourth quarter, a 59% decline from the fourth quarter of 2007. Its servicing portfolio fell to $393.8 billion at year-end 2008 from $453.3 a year earlier. Moreover, its non-accrual rate spiked to 23.93% at December 31, compared to 12.13% twelve months earlier. ResCap, a subsidiary of GMAC Financial Services, lost $981 million in the fourth quarter and $5.6 billion for the year. The loss comes despite the fact that it posted a $754 million gain on a debt swap with bondholders. GMAC, on the other hand, earned $7.46 billion in the fourth quarter thanks to proceeds from its debt swap, which extinguished billions of dollars in liabilities. GMAC said that overall the debt swap improved its results by a stunning $11.4 billion. GMAC, partly owned by General Motors and hedge fund giant Cerberus Capital, recently received $5 billion in government TARP money.

Senate support for adding a housing component to the economic stimulus bill is growing and a proposal by minority leader Mitch McConnell, R-Ky., to include a 4% mortgage rate buy down program is gaining bi-partisan interest. "This proposal has been getting a lot of attention from many different sources and it appears that Congress is very seriously considering it," said Francis Creighton, the Mortgage Bankers Association's chief lobbyist. National Association of Home Builders chief executive Jerry Howard said senators realize that they have to do more to fix the housing market and stimulate home sales. The builders support what Sen. McConnell is trying to do. "I am not sure that 4% is enough to have the kind of stimulus impact we are pushing for," the NAHB CEO said. The builders have been lobbying for a buy down program that will provide a 2.9% mortgage rate for the first half of 2009 and a 3.9% rate in the second half. The National Association of Realtors is backing the McConnell proposal. But the MBA wants to see how it is structured and how it will be phased out. If the buy down program expires in 18 months, MBA is concerned a sudden jump in mortgage rates could be disruptive.

Firms that securitize mortgages and other assets will have to take a 10% first loss position on any new issuances under draft legislation being discussed in Congress. House Financial Services Committee chairman Barney Frank, D-Mass., said requiring a first loss hit for securitizers would stop Wall Street firms from providing liquidity on mortgages that borrowers cannot repay. Rep. Frank, a key player in any MBS related legislation, noted that assignee liability on MBS failed to stop bad underwriting practices during the subprime boom. The committee chairman is working with the Senate Banking Committee and Treasury Department in drafting proposals that the Obama Administration will present at an international summit on systemic risk in April.

Otéra Capital, a Montreal-based commercial real estate financing subsidiary of the Caisse de dépôt et placement du Québec, is purchasing the ownership interest held by Todd Schuster in the Needham, Mass.-based commercial real estate finance company CW Financial Services. Otéra will now control 81% of the firm. Mr. Schuster, who had been chief executive of CWFS, has resigned. He is being replaced by Charles Spetka, president of CWCapital Investments and CWCapital Asset Management, which are units of CWFS. Michael Berman will assume the role of CEO of CWCapital, the company's Fannie Mae DUS, Freddie Mac and FHA lending entity. Mr. Berman has served as president of CWCapital since 1991 and will report to Mr. Spetka in this new role. In a statement, Mr. Schuster said since CDP invested in CWFS in 2002, "annual loan production has grown from $600 million to a peak of nearly $3 billion, the loan servicing portfolio has grown from $3 billion to $10 billion, and we launched both an investment management business which currently has $11 billion of assets under management, and a special servicing company that is named servicer on $174 billion of underlying collateral."

Adjustable-rate mortgage lending fell sharply last year as the initial payment savings disappeared, according to a survey by Freddie Mac. "Our survey found that starting rates for conforming 1-year ARMs averaged 1.76 percentage points above their fully-indexed rate, the largest rate premium observed since Freddie Mac began collecting ARM data in 1984," said Frank Nothaft, chief economist at the firm. In addition, with rates on conforming, 30-year, fixed- mortgage rates falling to a 50-year low, consumers could find FRMs at rates about the same or in some cases lower than the initial rate on an ARM loan. In December, the ARM share of loan applications fell to 3%, the lowest ever recorded in Freddie Mac's survey. During the peak of the housing boom, the ARM share was around 36%, Freddie Mac said.

Genworth Financial Home Equity Access Inc., Richmond, Va., a reverse mortgage lender once known as Liberty Reverse Mortgage Inc., is expanding its wholesale lending operations. It cited the increased number of companies (more than 1,300) that started a reverse mortgage lending program in 2008; most of those broker loans through a larger lender like Genworth. Genworth also said recent changes at other wholesale reverse mortgage lenders have shown a need for additional capacity. The company has created an inside sales division to build relationships with new reverse mortgage lenders. It will be headed up by Bob Marseilles, national wholesale manager; most recently he was with Financial Freedom. Genworth has also hired four regional account managers to work with mortgage brokers on the east coast. They are: Barbara Chearney, who covers Maryland, Virginia and the District of Columbia; Gina Monopoli, New Jersey and Southern Pennsylvania; Kirk O'Connor, New England; and Tim Frederick, Alabama, Eastern Florida and Georgia.