Originations

The Mortgage Bankers Association and the Financial Services Roundtable strongly oppose the bankruptcy "cramdown" deal Citigroup stuck Thursday with key Democratic senators. "We remain opposed to bankruptcy cramdown legislation because of the destabilizing effect it will have on an already turbulent mortgage market," said MBA chairman David Kittle. During negotiations, Sen. Dick Durbin, D-Ill., agreed to limit his bill so that bankruptcy judges could only reduce or cram down the amount of existing mortgages -- not new loans originated after enactment of the bill. "The compromise changes are a first step to improve the bill, but the Durbin bill is still far too broad and presents a serious risk to the mortgage markets," said Roundtable senior vice president Scott Talbott. MBA wants the bankruptcy provisions limited to subprime loans (2005- 2007 vintages) along with a specific exemption for Federal Housing Administration and Department of Veterans Affairs guaranteed loans.

The number of Home Equity Conversion Mortgages originated in calendar year 2008 increased by 6.4% over the previous year, according to new figures released by the Department of Housing and Urban Development. There were 115,176 of the Federal Housing Administration-insured reverse mortgage loan product originated last year, compared with 108,293 in 2007. Dollar volume figures were not available. According to an analysis from Reverse Market Insight, a consulting firm based in Aliso Viejo, Calif., Miami was the No. 1 market for reverse mortgage originations, with 9,561 HECMs originated in 2008, followed by Los Angeles at 4,126; Tampa, Fla., at 3,956; Santa Ana, Calif., at 3,695 and Baltimore at 3,595. Reverse Market Insight also determined that 2,949 lenders produced at least one HECM last year, a 76.5% increase over the previous year. NRMLA president Peter Bell said changes to the program recently put in place, such as a higher loan limit, the ability to use the loan for purchases and co-op eligibility, will lead to further growth of the product.

In early April a U.S district court judge will hear arguments in the National Association of Home Builders' case against the government, challenging newly issued Real Estate Settlement Procedures Act regulations that could hurt builders.NAHB originally filed for a preliminary injunction to block implementation of the "required use" section of the RESPA rule that bans builders from offering discounts and upgrades to buyers that are contingent on their use of an affiliated mortgage company. The trade group dropped that request after the Department of Housing and Urban Development agreed to delay the effective date. HUD extended the implementation date from Jan. 16 to April 16. NAHB claims the RESPA rule will force them to divest their affiliated mortgage and title companies, which could "greatly obstruct" the industry's effort to stimulate demand and sell off the excess supply of newly constructed homes. "In promulgating the final rule, HUD has flouted consumer satisfaction surveys and dampened the housing sector's efforts toward economic recovery," NAHB said in a filing with the U.S district court in Alexandria, Va.

The House Financial Services Committee released draft legislation on Friday that will revamp the TARP program, requiring that a minimum of $50 billion of the remaining $350 billion be used for foreclosure mitigation to help consumers. Among other things, the committee wants the government to pay down second liens that are impeding loan modifications. It also wants to continue the practice of offering cash incentives to residential servicers that engage in loan modifications. The effort is focused solely on owner-occupied homes. In October President Bush signed a $700 billion bailout bill for the mortgage and credit markets. Half the money has already been spent. Only Congress can release the balance of the money to the Treasury, which is managing the Troubled Asset Relief Program. The committee will hold a hearing on TARP next Tuesday, January 13. "We want to make it clear what our conditions will be," said House Financial Services Committee chairman Barney Frank, D., Mass. Rep. Frank also wants the FHA and the Office of Management and Budget to tell the committee what additional resources (staffing and technology) the mortgage insurance agency needs to keep up with the demand for FHA loans and to prevent fraud and abuses in the lending program.

The economic stimulus package, which is slated for a full House vote next month, will hike the Fannie Mae/Freddie Mac loan limit back up to $729,500, said Rep. Barney Frank, chairman of the House Financial Services Committee. The Democrat from Massachusetts said the loan limit increase has received the blessing of the incoming Obama Administration. The loan limit (for high-cost housing areas only) had been temporarily increased to $729,500 early last year but expired at Dec. 31. The new loan cap is $625,000, which will remain in place until the stimulus legislation passes. Many top ranked lenders continue offering jumbo mortgages but at interest rates 200 basis points higher than on "conforming" loans.

Because of a lack of warehouse financing available to non-bank primary funders, upwards of $370 billion in new residential originations could be at risk, according to an estimate made by The Warehouse Lending Project, a coalition of 50 lenders. The estimate, the group said, is based on "current projections of mortgage demand in 2009." Meanwhile, one warehouse source said the freeze in warehouse credit might be easing somewhat. The source, requesting his name not be used, said, "Some banks are beginning to take more applications and extend credit." He cited Comerica and National City as two examples. This past fall the Mortgage Bankers Association formed a task force on warehouse financing, but the MBA group is not affiliated with The Warehouse Lending Project. The WLP is headed by a former Fannie Mae official and two other industry veterans. (For the full story see the Monday edition of National Mortgage News.)

The average rate for a 30-year fixed rate mortgage as tracked by Freddie Mac fell for the 10th consecutive week in a row to another survey-record low of 5.01%, down from 5.09% the week before. "Since the end of October 2008, these rates have declined by almost 1 ½ percentage points, or payment savings of about $184 a month for a $200,000 loan - an additional $11 dollars from last week," said Freddie Mac chief economist Frank Nothaft in the weekly report. The average 30-year rate was up from 5.87% a year ago. The average 15-year FRM rate was 4.62%, down from 4.83% the previous week and from 5.43% a year ago. It has not been lower since June 13, 2003 when it was 4.6%. The average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages was 5.49%, down from 5.57% the previous week and 5.63% a year ago. The average rate for one-year Treasury-indexed ARMs was 4.95%, up from 4.85% the previous week but down from 5.37% a year ago. Average points were 0.6 for 30-year FRMs, 0.7 for 15-year FRMs and five-year hybrids and 0.5 for one-year Treasury-indexed ARMs.

The Bank of England's Monetary Policy Committee has cut the Bank Rate paid on commercial bank reserves by 50 basis points to 1.5%, citing among other things a deterioration in the outlook for residential investment and tighter credit. "The outlook for business and residential investment has deteriorated. And the availability of credit to both households and businesses has tightened further, pointing to the need for further measures to increase the flow of lending to the non-financial sector," the BoE said.

One supporter of seller-funded downpayment assistance programs believes the recent decline in pending home sales to an all-time low is further evidence of housing market woes that reflect a need for federal officials to reauthorize the use of such programs in conjunction with government loans. Ann Ashburn, president of AmeriDream Inc, Gaithersburg, Md., went so far as to say, "our housing market and our economy depend" on Congress restoring seller-funded DPA programs. "The next generation of qualified homeowners has little incentive to enter the market, particularly after DPA programs expired last fall. DPA is a common sense approach to getting responsible, creditworthy homebuyers off the sidelines and into homes without costing the taxpayer a dime. DPA is also recognized as a logical means to directly help Main Street Americans while stimulating the broader economy. President-elect Obama was right when he said we need to move beyond the stale arguments that say low-income Americans shouldn't even try to own a home," Ms. Ashburn said.

The Financial Accounting Standards Board has approved by a 3-2 vote changes to its other-than-temporary impairment guidance that should reduce the amount of charges banks and other holders of mortgage-backed securities have to report in the fourth quarter. The new guidance (first proposed on Dec. 19) allows management to make a "reasonable judgment" of future cash flows of debt securities in determining impairment. Previous guidance required consideration of what "market participants" would use in determining the current fair value of MBS. At Wednesday's meeting, the board amended the proposed guidance to stress that MBS holders are required to assess collections of future cash flows even when the securities are performing and borrowers making timely payments. In making that assessment, MBS investors must consider all available information reflecting past events and current conditions in developing estimates of future cash flows. "I don't think it represents amnesty on OTTI in the fourth quarter. It still requires an assessment of the collectibility of the cash flows," said FASB member Leslie Seidman. Board members also stressed that the new guidance is not retroactive to the third quarter or previous periods.

The Mortgage Bankers Association released its Commercial Real Estate/Multifamily Finance Quarterly Data Book for the third quarter of 2008, which reveals that commercial/multifamily real estate began to be affected by the slowing economy during the third quarter. Property fundamentals showed a slowdown in leasing activity. Property sales and mortgage originations showed the impact of economic uncertainty, shifting investor expectations and the continued capital markets malaise, while mortgage investment levels were depressed by the capital constraints of traditional investors and headline risks associated with holding mortgage-related assets. Despite relatively modest new construction activity, the slowdown in job growth, retail sales and other aspects of the economy has led to lower demand for commercial space and to declines in net absorption of space. As a result, supply is outpacing demand. Nationally, asking rents fell in the third quarter for office and retail space. Rents were flat for industrial space and up slightly for apartments and vacancy rates increased for each of the major property types. Commercial property sales have also stalled. On a dollar basis, commercial property sales through the first three quarters of 2008 were 67% lower than for the same period in 2007. While part of the large percentage fall off can be attributed to the extraordinary volumes seen in the first half of 2007, sales volume in the third quarter was the lowest since 2003's third quarter.

A coalition of mortgage lenders led by a former Fannie Mae official and two other industry veterans, may lobby elected officials and regulators to allow Fannie Mae, Freddie Mac and the Federal Home Loan Bank system to provide warehouse financing to non-banks, MortgageWire has learned. Glen S. Corso, a former executive at PMI Group of Walnut Creek, Calif., said having the GSEs provide warehouse financing is just one of many ideas the group is kicking around. Currently, the warehouse lending arena is dominated by commercial banks, but there are major capacity issues regarding warehouse financing because of all the lenders that have left the sector. Mr. Corso is heading a group called the 'Warehouse Lending Project' along with Bob Englestad, a former Fannie Mae official, and Pete Mills, who was once the top Washington lobbyist for Countrywide Home Loans. Mr. Corso said 50 non-bank mortgage lenders are part of the coalition. (For the full story see the Monday edition of National Mortgage News.)

The Financial Accounting Standards Board has approved by a 3-2 vote changes to its other-than-temporary impairment guidance that should reduce the amount of charges banks and other holders of mortgage-backed securities have to report in the fourth quarter. The new guidance (first proposed on Dec. 19) allows management to make a "reasonable judgment" of future cash flows of debt securities in determining impairment. Previous guidance required consideration of what "market participants" would use in determining the current fair value of MBS. At Wednesday's meeting, the board amended the proposed guidance to stress that MBS holders are required to assess collections of future cash flows even when the securities are performing and borrowers making timely payments. In making that assessment, MBS investors must consider all available information reflecting past events and current conditions in developing estimates of future cash flows. "I don't think it represents amnesty on OTTI in the fourth quarter. It still requires an assessment of the collectibility of the cash flows," said FASB member Leslie Seidman. Board members also stressed that the new guidance is not retroactive to the third quarter or previous periods.

Timothy Pearson of Beavercreek, Ohio, was sentenced to 20 months in federal prison, followed by three years of supervised release and ordered to pay $171,211 in restitution to the Internal Revenue Service for his role in a mortgage fraud scheme. Pearson had previously been employed as a loan officer. Pearson pleaded guilty on March 12, 2007 to one count of conspiracy to commit money laundering and to two counts of income tax evasion. According to court documents, Pearson was involved in a mortgage fraud conspiracy between March 2001 and December 2005 where he directly and indirectly participated in at least 365 fraudulent real estate closings in the greater Dayton, Ohio area. Pearson prepared and submitted fraudulent mortgage loan applications on behalf of prospective purchasers of residential properties, a majority of which were located in the Dayton area. In addition, Pearson fraudulently provided downpayments for the purchasers at the real estate closings.

Chicago-based commercial real estate firm Sheldon Good & Co. Auctions International LLC marked the passing of its chairman and CEO, Steven L. Good - a globally-known author and philanthropist - on Tuesday by closing all its offices as it made plans to reopen Wednesday under its president's day-to-day management. Multiple news reports indicate Mr. Good's death was an apparent suicide. He had been quoted as saying, like many industry executives, that the commercial real estate market has been challenging. A spokeswoman who has worked with the family since 1976, Susan Berman Hammer, told MortgageWire that the death was a surprise to all that knew him and he had been optimistic and energized by his many business and philanthropic activities as well as his writing, and had been looking forward to chairing the National Association of Realtors' commercial alliance this year. Several family members survive Mr. Good, including his father, Sheldon Good, whom his company was named after and who also is a well-known international real estate executive. Company president Alan R. Kravets said in a statement posted on the company's website that it plans to "continue the tradition of excellence established by our founder, Sheldon Good, and expanded upon by our late chief executive" going forward. "We have a number of exciting projects currently in development. Steve enjoyed this fact," he said.

Federal regulators have decided to give banks and thrifts Community Reinvestment Act credit for helping to prevent foreclosures. "Examiners may consider favorably" the establishment of loan programs to modify and restructure mortgages for homeowners facing foreclosure, according to a newly revised "Interagency Questions and Answers Regarding Community Reinvestment." Banks can also receive community development services points by providing foreclosure prevention programs to low- and moderate-income homeowners. "The new and revised Questions and Answers encourage financial institutions to participate in foreclosure programs that have the objective of providing affordable, sustainable, long-term restructurings and modifications for homeowners who are facing foreclosure on their primary residences," according to a joint statement by the regulators.

The delinquency rate on home equity lines of credit reached its highest level ever in the American Bankers Association's third quarter 2008 consumer credit delinquency bulletin. The HELOC overdue rate rose seven basis points from the second quarter to 1.15% in the third, according to the ABA. The percentage of closed-end home equity loans that were past due rose to 2.63% from 2.56% in the previous quarter. And consumer delinquency rates likely have not peaked, according to ABA chief economist James Chessen. Noting that a composite ratio of overdue rates on eight types of consumer loans rose by 22 basis points to 2.90% in the third quarter, he said the data point to continuing financial stress for consumers. With job losses continuing to mount, he predicts that delinquencies on all types of consumer loans will continue rising in the coming quarters.

The Market Composite Index, an overall measure of mortgage applications, decreased 8.2% on a seasonally adjusted basis from 1245.7 down to 1143.8 during the week ended Jan. 2, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. The index was adjusted by MBA to account for the short week because of New Year's Day. On an unadjusted basis, there would have been an 8.9% decrease compared with the previous week but the index would have increased by 28.3% compared with the same week one year earlier. The Purchase Index increased 7.3% to 344.2 from 320.9 one week earlier on a seasonally adjusted basis, while the Refinance Index decreased 12.3% to 5904.5 from 6733.8. Refinancings fell to 79.8% of applications from 82.9% the previous week, while adjustable-rate mortgages accounted for 0.9% of applications, up from 0.8% for the previous week, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages increased to 5.07% from 5.03%, with points (including the origination fee) decreasing to 1.16 from 1.24 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

The National Association of Home Builders is willing to discuss a temporary change in the bankruptcy code to facilitate loan modifications as they lobby Congress for passage of key provisions to boost home sales. "It is a 180 degree turn for us. But desperate times call for desperate measures," NAHB chief executive Jerry Howard said. The builders are concerned foreclosures are making it difficult to sell off excess inventory and vacant homes are pushing appraisals on new homes down to liquidation prices. NAHB also supports a loan modification program developed by the Federal Deposit Insurance Corp. and it is urging Congress to provide $25 billion for the loan guarantees. The builder's main legislative agenda calls for passage of an interest rate buy-down program and an expanded homebuyer tax credit as part of the massive economic stimulus bill that Congress is expected to pass in mid-February. Builders and executives from related industries met in Washington Wednesday to lobby for the buy-down and tax credit provisions. NAHB estimates enactment could increase new home sales by 200,000 and existing home sales by 1 million this year.

Wells Fargo Home Mortgage, Des Moines, Iowa, has decided to "temporarily suspend" the purchase of nonconforming mortgage loans through its wholesale channel. The move was effective on Jan. 5. A statement from a company spokesman said "Wells Fargo has long been the nation's No. 1 retail mortgage lender and a leading third-party lender. Due to low market demand and higher risks, we have decided to temporarily suspend nonconforming product offerings through our wholesale channel."