Originations

First Federal Bank of California FSB has shut its wholesale lending operations, effective Jan. 26. In a message posted on the thrift's website and also distributed via the LendingArt Message Alert system, the company said all files received on that day would be returned unprocessed. All files not approved as of Jan. 26 would automatically be rejected. All approved files must be funded by Feb. 27, as long as they meet all of the lender's conditions. The shut down comes as First Federal's parent company, FirstFed Financial Corp., Los Angeles, reduced the staff at its thrift subsidiary by 62 persons with the cuts coming primarily from the single-family lending and commercial lending operations. FirstFed said the cuts cover 10% of the thrift's current workforce and should result in estimated annualized compensation cost savings of approximately $4.2 million. Furthermore, the Office of Thrift Supervision has issued a cease-and-desist order to the holding company and its thrift subsidiary. The order required FirstFed to submit to the OTS within 15 days a detailed capital plan to address how the thrift will remain "well capitalized" at each quarter-end through Dec. 31, 2011. If it fails to remain well capitalized, FirstFed must then submit to the OTS a detailed contingency plan to merge or liquidate the thrift.

ING and the Dutch government have agreed to establish an illiquid assets back-up facility covering 80% of ING's more than $36 billion portfolio of alternative-A credit mortgage securities from its ING Direct USA and ING Insurance Americas units after the company released a sizable net loss estimate for fourth-quarter 2008 that stemmed largely from mortgage-related writedowns. ING, which also is planning to cut 7,000 positions and replace its CEO, expects to take an estimated 3.3 billion euro ($4.3 billion) "underlying" net loss for the full year 2008 largely due to poor fourth quarter market conditions that led to 2 billion euros ($2.6 billion) in writedowns on subprime and alt-A residential mortgage-backed securities as well as on collateralized debt obligations and collateralized loan obligations. The facility would transfer 80% of the aforementioned alt-A portfolio's risk to the Dutch government and the Dutch government would, in return, be entitled to 80% of the cash flows of the entire portfolio. ING said the risk transfer would "take place at a discount of 10% of par value" and that it would remain the legal owner of 100% of the securities while remaining exposed to 20% of any results on the portfolio. The company said it would earmark part of the capital released by the facility to support the growth of its Dutch lending business "for an amount of 25 billion euros [$33 billion] at market conforming conditions." The agreement includes an exchange of fees between the Dutch government and the company that are expected to have a "limited" impact on ING first quarter profit and loss.

Following an 80% drop in global hotel transaction volume in 2008, Jones Lang LaSalle Hotels, Chicago forecasts that this year will have a further decline, to levels last seen between 2001 and 2003, according to the firm's Hotel Investment Outlook 2009 report. The report reveals that $23 billion worth of hotels changed ownership in 2008, down from $113 billion in 2007, as the credit crisis and the chilling effects of the global economic slowdown took hold. With no short-term market recovery likely, the forecast for 2009 is for transactions worldwide to further decline to $19 billion in 2009. "The United States registered the greatest decline in transaction volume, down 82% to $8.2 billion in 2008, followed by Asia Pacific, marking a decline of 80% to $2.5 billion. Our research highlights that EMEA proved comparatively more resilient - transaction volume amounted to $12 billion, 58% lower than the level recorded in 2007," said Arthur de Haast, global chief executive of Jones Lang LaSalle Hotels. "The first half of 2009 will be equally idle as late-2008, but the second half of 2009 will likely see more activity - a shake out of investment portfolios as some investors will be forced to sell or make strategic portfolio decisions to dispose of assets even while pricing remains weak," said Mr. de Haast. While equity is available in the marketplace, the credit markets will continue to be the greatest challenge facing hotel investors in 2009. Highly-leveraged investors such as private equity funds, the largest buyer group of hotel assets from 2005 to 2007, will shift to the sidelines in many markets, replaced by institutional investors, selected sovereign wealth funds and high net worth individuals.

Single-family existing home sales unexpectedly jumped 7% in December from November but prices continue to slide as nearly half of all sales involved foreclosed houses. The National Association of Realtors reported that sales of previously owned homes rose from a seasonally adjusted annual rate of 4 million in November to 4.26 million in December. The recent drop in mortgage rates really did not affect December sales so it may be a good sign that sales will rebound in the months ahead. However, NAR estimates that 45% of December sales were foreclosed properties as buyers took advantage of large discounts. The home sales report shows that single-family house prices have fallen by 14.8% since December 2007. The Realtors are hoping the Congress will pass an economic stimulus package that will increase sales and quickly soak up the large inventory of unsold homes that continues to drag down home prices. "The Obama administration and Congress need to move fast to stimulate a spring sales upturn which will help to stabilize home prices and set the foundation for a sustainable economic recovery," said NAR chief economist Lawrence Yun.

First American CoreLogic's LoanPerformance Home Price Index, based on November and early December home price data, found national housing prices fell 10.6% for the full year 2008, which it said is the largest decline in more than 30 years. November's decline was 10.2% compared to a year earlier and early December preview data suggest declines continued in the 10 percent-plus range last month. Since peaking in 2004, home prices have fallen 18.5% and are now at the same levels where they were in spring of 2004. Full year 2008 prices fell in 35 states, with California leading the way with a 26.9% decline, followed by Nevada (-22.8%), Arizona (-19%), Florida (-18.2%), and Rhode Island (-13.7%). Since home prices peaked in July 2006, home prices in California have declined 42% on a cumulative basis since their most recent peak, followed closely by Nevada (39%). Prices in Arizona and Florida have declined by 33% cumulatively. First American CoreLogic said in 2008 the number of total unique foreclosure filings increased to 3.4 million, up 76 percent from 1.9 million in 2007 and more than triple the 1.1 million filings in 2006. "Collateral risk continues to depress the housing market with the top four states for price depreciation accounting for nearly half of all outstanding foreclosures. But economic risk is also rapidly rising: California, Nevada and Rhode Island stand out as being among the top 10 states for both price depreciation and highest unemployment. Until home prices and economic activity stabilize, mortgage distress will remain high," said Mark Fleming, chief economist for First American CoreLogic.

The Federal Home Loan Bank of New York is concerned it may have to take an impairment charge against $2 billion in private-label mortgage-backed securities and has reduced its fourth quarter dividend to 1.1%. The FHLBank has subjected its private-label MBS to a "substantial review," under the "other than temporary impairment" accounting rules that should be completed in late February, according to FHLBank president Alfred DelliBovi. "Based on our current knowledge, we do not expect to record material impairment charges in relation to our non-agency portfolio," Mr. DelliBovi said in a report to shareholders. Once the OTTI review is completed, the board of directors will consider a supplemental dividend. The New York bank paid a 3.5% dividend in the third quarter.

The Federal Trade Commission has challenged the way a Gateway Funding Diversified Mortgage Services LP executive characterized his company's previous pricing practices and the FTC's understanding of them in commenting on a December 2008 settlement between the company and the federal agency related to those practices. In a letter responding to the Horsham, Pa.-based Gateway's president and chief executive Bruno Pasceri's comments denying that his company's past pricing practices were discriminatory and suggesting that the FTC did not understand those practices, Peggy L. Twohig -- associate director in the FTC's Division of Financial Practices/Bureau of Consumer Protection -- said, "In fact, the FTC conducted an extensive investigation, and our analysis was based on a thorough understanding of Gateway's loan pricing practices. On that basis, the commission concluded that Gateway's policy and practice of allowing loan officers to charge discretionary overages resulted in African-Americans and Hispanics being charged higher prices because of their race or ethnicity -- price disparities that were substantial, statistically significant, and could not be explained by factors related to underwriting risk or credit characteristics of the applicants." Ms. Twohig also noted that the commission "voted unanimously to file these fair lending charges." Gateway in December 2008 agreed to pay $200,000 to settle the charges.

Only one-third of financial institutions are using the Internet to send confidential documents to customers, partners and service providers using a secure electronic document delivery solution, according to a recent Wolters Kluwer Financial Services survey. Nearly 62% of the 347 banks, credit unions and mortgage companies responding to the survey said they are using the Internet to transmit confidential documents such as loan disclosures and documents. Of those institutions, however, only one-third say they are using a secure electronic delivery solution. Approximately another third are using traditional e-mail, which does not encrypt customer data. The remainder use less secure document delivery methods such as password protected e-mail and websites, regular or overnight mail, or are not sure of the method they use. According to Jason Marx, vice president and general manager, Mortgage, Wolters Kluwer Financial Services, the recent growth of identity theft and other forms of electronic fraud make it harder to send documents or information safely via traditional mail, e-mail and websites. Even with password protection, he says, fraudsters can hack into these systems to access customer information.

The Senate late Thursday unanimously confirmed Shaun Donovan to be the nation's new housing secretary in the Obama Administration. The former New York City housing commissioner worked at the Department of Housing and Urban Development as a deputy assistant secretary for multifamily housing during the Clinton administration. At his confirmation hearing, Mr. Donovan noted that originations of Federal Housing Administration-backed single-family loans have tripled over the past year. FHA has "capacity issues that require immediate attention," he said. The General Accountability Office released its new list of high-risk agencies on Thursday and it did not include FHA. FHA was removed from the GAO list in 2007. The HUD nominee has pledged to undertake strong enforcement of fair housing laws and to make management reform at HUD a "high priority."

Adding its voice to the forthcoming debate on the future of housing finance, the politically powerful National Association of Home Builders has adopted a five-point policy statement that calls for continued federal support of both the primary and secondary mortgage markets. But the group also wants lenders to share the rate and credit risk investors in mortgages now shoulder alone. As envisioned by the NAHB, the sharing concept would be a "cooperative structure loosely based on the Federal Home Loan Bank model, and lenders would be liable for a "significant portion of the risk" in direct proportion to the volume of loans they sell to Fannie Mae and Freddie Mac. The policy resolution was passed by unanimous vote at the NAHB's annual convention in Las Vegas after President Jerry Howard told the NAHB board that "we need to be very very engaged if the secondary market is to remain intact." The resolution passed through eight committees this week and then the board. Though it cleared its final hurdle with no discussion, during one committee session, Dallas builder Kent Conine, who headed the NAHB in 2003, urged members to move more slowly and run the sharing concept by those it would more directly impact. But Rick Judson, who chaired the Housing Finance Task Force that produced the recommendations, said there already has been "a vocal, good exchange of information" among his members. "No one member agreed with everything," the Mathews, N.C., builder said, "but if implemented, the (task force's) advice will solve a majority of the problems caused by the financial crisis." Noting some would turn the government-sponsored enterprises into public utilities while others would totally privatize the GSEs, Mr. Howard said, "We are concerned about the future of Fannie Mae and Freddie Mac."

Fannie Mae, which has been operating under a government conservatorship since September, has laid off hundreds of workers over the past four weeks, according to sources both inside and outside the mortgage investing giant. At press time, a Fannie Mae source confirmed that "hundreds" of layoffs have occurred but said the company is beefing up its foreclosure and loss mitigation efforts -- particularly in its Dallas office -- and hopes to end 2009 with as many employees as it had in 2008. The GSE issued a statement saying it is "taking steps to realign the company's organization, personnel and resources to focus on our most critical priorities, which include preventing foreclosures to help keep people in their homes and aiding in the recovery." Among the known job cuts, said one individual, are reductions in government affairs, communications, marketing, and technology. "They can't lobby any more so what's the point in having a government affairs division?" said the individual. Freddie Mac also has been quietly laying of workers with more cuts on the way, said one mortgage executive close to the company. "This shouldn't be surprising to anyone," he said.

The Federal Trade Commission has challenged the way a Gateway Funding Diversified Mortgage Services LP executive characterized his company's previous pricing practices and the FTC's understanding of them in commenting on a December 2008 settlement between the company and the federal agency related to those practices. In a letter responding to the Horsham, Pa.-based Gateway's president and chief executive Bruno Pasceri's comments denying that his company's past pricing practices were discriminatory and suggesting that the FTC did not understand those practices, Peggy L. Twohig - associate director in the FTC's Division of Financial Practices/Bureau of Consumer Protection - said, "In fact, the FTC conducted an extensive investigation, and our analysis was based on a thorough understanding of Gateway's loan pricing practices. On that basis, the commission concluded that Gateway's policy and practice of allowing loan officers to charge discretionary overages resulted in African-Americans and Hispanics being charged higher prices because of their race or ethnicity - price disparities that were substantial, statistically significant, and could not be explained by factors related to underwriting risk or credit characteristics of the applicants." Ms. Twohig also noted that the commission "voted unanimously to file these fair lending charges." Gateway in December 2008 agreed to pay $200,000 to settle the charges.

As a result of problems in its mortgage guarantee and title insurance lines of business, Old Republic International Corp., Chicago, has reported a net loss of $126.5 million ($0.54 per share) for the fourth quarter 2008 and a net loss of $558.3 million ($2.41 per share) for the full year. For the same periods one year prior, the company had profits of $20.2 million ($0.09 per share) and $272.4 million ($1.17 per share). The mortgage insurance business had a pretax loss for the fourth quarter of $178.3 million, compared with a $112.6 million loss for same period in 2007. The title insurance segment saw its loss grow to $19.3 million for the fourth quarter 2008 vs. $15.7 million for the year ago period. In its statement, Old Republic said, "Given the continuing downtrend in U.S. economic activity and the substantial dislocations that have enveloped all organizations with housing and mortgage-lending exposures, it is likely that these factors will exert additional earnings pressures throughout 2009 and, at the least, a part of 2010."

The Market Composite Index, an overall measure of mortgage applications, decreased 9.8% on a seasonally adjusted basis to 1195.3 from 1324.8 during the week ended Jan. 16, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. On an unadjusted basis, there would have been an 10.3% decrease compared with the previous week and when compared with the same week one year earlier the index would have increased by 23.1%. The Purchase Index increased 2.5% to 303.1 from 295.8 one week earlier on a seasonally adjusted basis, while the Refinance Index decreased 12.4% to 6491.8 from 7414.1. Refinancings decreased to 83.3% of applications from 85.3% the previous week, while adjustable-rate mortgages accounted for 1.5% of applications, up from 1.1% for the previous week, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages increased to 5.24% from 4.89%, with points (including the origination fee) decreasing to 1.16 from 1.20 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

Single-family housing starts plummeted 13.5% in December from November as a dismal year for builders came to a close in which construction dropped off by nearly 50% from a year ago. The U.S. Census Bureau reported that single-family housing starts declined from a seasonally adjusted annual rate of 460,000 in November to 398,000 in December. The bureau revised November starts upward from 441,000. Construction of new homes fell to 622,400 in 2008 from 1.05 million in 2007 or 48.9%. Total starts were way down as well, off 45% to 550,000. The National Association of Home Builders is forecasting that single-family starts will fall another 26% in 2009. "Clearly, conditions in the nation's housing market aren't getting any better, and they aren't going to get any better until the federal government takes substantial action to encourage qualified buyers to get back in the market," NAHB chairman Sandy Dunn said. The builders are urging Congress to approve an interest rate buy-down program along with more generous homebuyer tax credits.

Homes in the Western U.S. and South led in price declines in November, according to new figures compiled by the Federal Housing Finance Agency, the regulator of Fannie Mae and Freddie Mac. FHFA - which calculates its numbers solely on the value of homes collateralizing mortgages bought or guaranteed by Fannie and Freddie - said that nationwide home values fell 1.8% in November compared to the previous month. Year-over-year, prices fell 8.7%. In November the steepest declines occurred in the West North Central region of the nation (-2.7%), Mountain (-2.4%), South Atlantic (-2.3%) and Pacific (-2.2%). The Pacific region, which includes California, had the largest 12-month decline: -22.1%.

The average rate for a 30-year fixed-rate mortgage jumped back above 5% to 5.12% during the week ended Jan. 22, according to Freddie Mac. The average 30-year FRM rate had fallen below 5% the week before when it was 4.96% but remains below the 5.48% average rate seen during the same week the year previous. The week-to-week gain in the rate reversed 11 consecutive weeks of declines. "Fixed-rate mortgages followed bond yields and edged up this holiday week," said Frank Nothaft, Freddie Mac vice president and chief economist. "However, over the first three weeks of 2009, 30-year fixed-rate mortgages averaged 0.25 percentage points below their monthly average for December 2008. As a result the number of mortgage applications for refinancing was roughly about 86% of all conventional loans over the same time period." The average 15-year FRM rate, at 4.80%, also was up from the previous week when it was 4.65% but represented a decline from 4.95% the year previous. The average rate for a five-year Treasury-indexed hybrid adjustable-rate mortgage was 5.24%, down from 5.25% the previous week and the lowest it has been since Sept. 8, 2005, when it also was 5.24%. The average rate for one-year Treasury-indexed ARMs was 4.92%, up from the previous week's 4.89% and down from 4.99% the year previous. Average points were as follows: 0.7 for 30- and 15-year FRMs and for one-year Treasury-indexed ARMs and 0.6 for five-year Treasury-indexed hybrids.

With demand for its product red hot, the Government National Mortgage Association issued $24 billion of mortgage-backed securities in December, and moved to ask the Obama Administration for a 50% increase in staff. "We sent in a request for additional people," GNMA president Joseph Murin told MortgageWire. The guarantor wants to add 30 people to its current staff of 61. Mr. Murin said the Obama transition team has supported his request. "We're just waiting for appropriations," he said. "We're looking for analytic types." For calendar year 2008 GNMA issued a record $270 billion in MBS. In recent selected months it has been issuing even more MBS than Fannie Mae and Freddie Mac. (For the full story see the Monday edition of National Mortgage News.)

Congressman Al Green has introduced H.R. 600, a bill that would reinstate the controversial seller-funded down payment assistance banned last October despite being credited with helping over one million families become homeowners. Scott Syphax, president and CEO of the Nehemiah Corp. of America, Sacramento, CA, a DPA pioneer and supporter, applauded the bill that helps broaden homeownership opportunities for borrowers who qualify for Federal Housing Association-insured loans without using government or taxpayer dollars. "With foreclosures on the rise and banks maintaining their stranglehold on credit," he said, DPA can have a big impact on the market's recovery. "Through H.R. 600, DPA offers a simple solution that can empower thousands of worthy families to take advantage of depressed home prices therefore reducing the glut of homes on the market. Further, it does so without spending a single government or taxpayer dime, according to the Congressional Budget Office." Mr. Syphax said DPA is a source of opportunity for responsible, sustainable homeownership in times when the housing market is crumbling. DPA supporters hope President Obama's Administration will help reinstate the program.

Builders have seen the light, according to the latest NAHB's Builders' Economic Council survey. Nearly nine out of ten who started houses in the fourth quarter of 2008 are switching to smaller units with a lower price. Only 12% reported building larger, more expensive houses. The latest Census Bureau figures confirm what the builders are saying. While the average square footage of houses completed during the third quarter was on the upswing, the average size of those started in the quarter is going down. And the change is "significant," according to Gopal Aluhwalia, head of NAHB research. The average square footage in newly started single-family houses was 2,629 in the second quarter vs. 2,438 in the third quarter, a difference of nearly 200 square feet, or an amount equal to a good-sized bedroom. Until the third quarter, the size of houses had been creeping up almost steadily.