Originations

The average rate for a 30-year fixed-rate mortgage set another record low in the history of Freddie Mac's weekly survey, which started in 1971. The 30-year FRM rate, at 5.10%, was down from 5.14% the previous week and 6.07% a year ago. This marked the third consecutive week of survey-record lows and the ninth straight week of declines for the 30-year rate, according to Freddie Mac chief economist Frank Nothaft. "Since the end of October, these rates have declined about 1 1/3 percentage points," which represents "payment savings of approximately $173 a month for a $200,000 loan," Mr. Nothaft said in his weekly rate report. The average 15-year FRM rate, at 4.83%, was the lowest it has been since March 25 when it was 4.70% and represents a decline from 4.91% the week previous. The average 15-year rate was 5.68% a year ago. The average rate on a five-year Treasury-indexed hybrid adjustable-rate mortgage was 5.57% in the most recent week, up from 5.49% the week previous and down from 5.78% a year ago. The average rate on a one-year Treasury-indexed ARM was 4.85%, down from the previous week's 4.95% and the previous year's 5.47%. Average points were 0.7 for 30- and 15-year FRMs and five-year Treasury-indexed hybrids, and 0.5 for one-year Treasury-indexed ARMs.

The National Association of Mortgage Brokers is opposing implementation of reforms that would prohibit brokers from picking or working with appraisers in mortgage transaction. The appraisal code of conduct that Fannie Mae and Freddie Mac, along with their regulator, have agreed to implement as part of a settlement with New York Attorney General Andrew Cuomo tries to ensure that loan officers and brokers don't influence or interfere with the property valuation process. The code is slated to go into effect May 1 and applies to loans purchased by Fannie and Freddie. "This agreement will create a severe disadvantage to small business mortgage brokers, and prevent them from engaging competitively in the mortgage marketplace," said NAMB president Marc Savitt.

The Federal Reserve Board has selected four investment managers to run its mortgage-backed securities purchase program that will begin in early January and buy up to $500 billion in agency MBS by end of the second quarter. The Fed said it selected BlackRock Inc., Goldman Sachs Asset Management, PIMCO and Wellington Management Co. LLP to purchase Fannie Mae, Freddie Mac and Ginnie Mae MBS and employ a "passive buy and hold investment strategy." Credit Suisse analysts expect the Federal Reserve MBS purchases will drive mortgage rates down and boost the issuance of Fannie Mae, Freddie Mac and Ginnie Mae MBS. "We estimate that mortgage rates will get to 4.75% in the first quarter," said Mahesh Swaminathan, a Credit Suisse mortgage strategist. Fannie, Freddie and Ginnie combined MBS issuance has averaged $65 to $70 billion in recent months. "Monthly MBS issuance will rise to $100-$125 billion range in the first quarter of 2009," Mr. Swaminathan said. He expects Ginnie Mae MBS will make up one-third to 40% of monthly issuance.

The Treasury Department said it will invest $5 billion in Troubled Asset Relief Program funds in GMAC Financial Services to keep the auto and mortgage lender running as part of its effort to assist the domestic automobile industry. Treasury also is lending $1 billion to General Motors so the car maker can participate in a rights offering and support GMAC's reorganization as a bank holding company. The Federal Reserve Board approved GMAC's application to become a BHC on Dec. 24. GMAC said it would immediately expand its financing for car buyers thanks to its new access to low-cost funding. During the fourth quarter, the company's mortgage lending and servicing arm, Residential Capital, "dialed back" its lending, a spokeswoman said, because it had to pay servicing advances to investors on an increasing number of delinquent loans. ResCap services nearly $400 billion in mortgages. "We are hopeful that GMAC's bank holding company structure and the infusion of capital through the TARP program will improve ResCap's access to cost competitive capital, which will increase the amount of credit that we can extend to mortgage consumers," GMAC spokeswoman Jeannine Bruin said. GMAC originated $8.5 billion in single-family loans in the fourth quarter, down from $10.8 billion in the third quarter.

House prices fell by 2.2% from September to October and prices are off by 18% over the previous 12 months, according to Standard & Poor's/Case-Shiller housing price index that tracks existing home sales in 20 major metropolitan areas. "The bear market continues with home prices back to their March 2004 levels," said David Blitzer, chairman of S&P's index committee. Since the peak in house prices in mid-2006, the 20-city HPI is down 23.4% as of October 30. Over the previous 12 months, 14 of the 20 cities are reporting price declines in excess of 10%. Even Seattle and Portland are reporting annual rates of decline of 10.5% and 10.2% respectively. IHS Global Insight economist Patrick Newport expects house price declines will accelerate over the next few months. "Although prices are near equilibrium in many cities, they are likely to undershoot the equilibrium price on the way down-just as they overshot on the way up-because the number of homes on the market remains high," Mr. Newport said.

The American Financial Services Association is urging president-elect Barack Obama's transition team to consider several options to increase consumer credit, including bond insurance for asset-backed securities issued by finance companies. "Government must play a direct and immediate role in bringing liquidity and confidence back to the securitizations market through the purchase of securities or by issuance of insurance or guarantees," according to an AFSA report sent to the transition team. "Finance companies extend 40% to 50% of all consumer lending in the United States," AFSA executive vice president Bill Himpler said. But he noted that the flow of credit from finance companies to consumers is threatened by today's financial crisis. AFSA also wants the new administration to give Community Reinvestment Act credit to banks that extend credit to finance companies that are offering workouts to struggling borrowers.

Best known for its Funding Suite credit and AVM product, Cogent Road is expanding its offerings to enable lenders to go fully paperless with Business Spaces, an e-collaboration document management system designed to first help lenders eliminate paper and gradually move to full electronic processes. Business Spaces automates work processes by delivering documents, tracking their status and notifying key workgroups of issues that may delay closing. The moment a loan officer orders a credit report, a Business Space is created and the applicant is notified via e-mail. The loan applicant enters a private, secured environment through which he or she can view, e-sign or upload documents directly into the Business Space via computer, fax or an easy-to-use virtual printer. Further, the borrower can also communicate using micro-blogs and discussion threads integrated in different areas within the Business Space. With automatic audit logging, all borrower actions are effectively tracked for compliance purposes. As the loan progresses, the Business Space evolves into a collaborative workspace enabling communication between the loan officer and title agents, notary agents, appraisers and real estate agents.

Congress returns Jan. 6 to start a new session and House Financial Services Committee chairman Barney Frank, D-Mass., has already scheduled hearings on the Federal Housing Administration and the future use of Troubled Asset Relief Program funds. The FHA hearing on Jan. 9 will focus on the agency's oversight of FHA lenders. FHA single-family originations have tripled over the past year and more and more lenders are applying to make FHA loans. On Jan. 7, chairman Frank will hold a hearing on how the new administration should use the remaining $350 billion in TARP funds. The chairman has been critical of the Bush administration for failing to fund foreclosure prevention programs and for simply capitalizing banks without any lending or reporting requirements.

The Financial Accounting Standards Board is on track to give investors in mortgage-backed securities a break in the way they determine other-than-temporary impairment for their fourth quarter financial reports. FASB has issued a proposed staff position (FSP) that amends an impairment model, which required financial institutions to use "their best estimate of the cash flows that a market participant would use in determining the current fair value" of MBS. The FSP drops "market participant" and allows management to make a "reasonable judgment" of future cash flows, which should reduce charges if the securities are performing. The comment period on the proposed FSP EITF Issue 99-20-a ends Dec. 30. The Seattle Federal Home Loan Bank recently reported a $49.8 million "other than temporary impairment" charge against three private-label MBS. The FHLBank said it only expects to see a $4.9 million principal loss over the life of the three securities.

Distressed sales in Florida during November continued to boost the state's existing home market on a year-to-year basis but Realtors say buyers there and nationwide have yet to fully return to the market. The Sunshine State saw existing home sales rise 4% year-to-year to 8,751 during the month when the median price, at $158,300 was down 27% compared to a year ago, according to the Florida Association of Realtors. "Market conditions nationwide continue to vary with solid sales gains in some areas, including many Florida markets," said the National Association of Realtors. "We have favorable affordability conditions, but we need more than that to give buyers with jobs the confidence they need (to return to the housing market)," said NAR chief economist Lawrence Yun.

The average rate on the 30-year fixed-rate mortgage dropped to another new low during the week ending Dec. 24, according to Freddie Mac. The average 30-year FRM rate was 5.14%, down from the low of 5.19% seen the week before and from 6.17% the same week a year ago. The average 15-year FRM rate was 4.91%, a drop from 4.92% the previous week and 5.79% the year previous. The average 15-year rate has not been lower since April 1, 2004 when it was 4.84%. The average rate on five-year hybrid adjustable-rate mortgages fell to 5.49% from 5.60% the week before and 5.90% a year ago. The average rate on one-year Treasury ARMs inched up to 4.95% from 4.94% but was down from 5.53% a year ago. Average points were 0.8 for 30-year FRMs, 0.7 for 15-year FRMs, 0.6 for five-year hybrid and one-year Treasury-indexed ARMs. "Interest rates on 30-year fixed-rate mortgages eased for the eighth straight week and set another record low since Freddie Mac's survey began in 1971," said Frank Nothaft, Freddie Mac's vice president and chief economist.

The newly revised Appraisal Code of Conduct will not require lenders to fire in-house appraisers or sell-off their interests in affiliated appraisal shops, which raised so much controversy earlier this year when the code was first proposed by Fannie Mae and Freddie Mac, along with their regulator, and the New York Attorney General. The revised code does not rely on "unwieldy procedural prohibitions" to ensure appraiser independence, according to the Mortgage Bankers Association. "This will permit lenders and others to use their existing appraiser independence and quality control practices rather than mandate structural reorganization," MBA associate vice president Michael Carrier said. The code of conduct proposed back in March as part of a settlement with AG Andrew Cuomo, banned lenders from using affiliated appraisal shops. The Office of the Comptroller of the Currency threatened legal action to block its implementation. When asked about the revised code, an OCC spokesman said officials have no comment at this time.

A surge in refinance applications pushed the Mortgage Bankers Association mortgage composite index up 48% to 1245.4 for the week ending Dec. 19 from 841.4 the previous week. "The refinance index increased 62.5% to 6758.6 on a seasonally adjusted basis and the purchase index increased 10.6% to 316.5. "The refinance share of mortgage activity increased to 83.2% of total applications from 76.9% the previous week," MBA said. Borrowers are taking advantage of falling mortgage rates and going for fixed-rate financing. Less than 1% of applications involved adjustable-rate mortgages. The 30-year fixed-rate mortgage averaged 5.04% during the week of Dec. 19. But MBA economist Orawin Velz said she does not expect rates to go much lower. Nevertheless, the MBA associate vice president for forecasting expects refinancings will jump from $165 billion in the fourth quarter to $230 billion in the first quarter.

The Department of Housing and Urban Development is terminating the FHA Secure program for refinancing delinquent borrowers, but it is still keeping one option that made it easier for borrowers with second liens to refinance into a Federal Housing Administration loan. "While FHA will retain its standard rate and term refinance program for borrowers who are current on their existing mortgages, the FHA Secure program ... will terminate on Dec. 31, 2008," HUD says in a letter to FHA lenders. In a separate mortgagee letter, FHA updates its refinancing guidelines and said it will allow borrowers to re-subordinate second liens, which was an option provided under FHA Secure. FHA also has tightened its appraisal requirements on cash-out refinances where the loan-to-vale ratio is above 85%, according to Bud Carter, an FHA consultant with Potomac Partners. "FHA now requires two appraisals on cash-out refinancings above an 85% LTV, regardless of the amount of the loan," Mr. Carter said. Previously, FHA required two appraisals only if the loan amount was above $417,000.

The American Land Title Association's third-quarter results continue to show accelerating losses, but the Washington-based trade group said it feels the industry remains in a relatively strong financial position thanks to its asset levels. ALTA said the title industry saw an operating loss of $332.1 million in the third quarter, compared to an operating gain of $168.7 million for same period in 2007. The former period "marked the 10th consecutive quarter in which title premiums written declined from the prior year's equivalent quarter," ALTA said. "Despite these struggles, the industry remains in a very strong financial position with admitted assets of over $9.5 billion, including over $8 billion in cash and invested assets," the association said. "Also, statutory reserves were in excess of $5.3 billion and statutory surplus was up almost $2.6 billion," it added.

WinTrust Financial Corp., Lake Forest, Ill., has acquired certain assets and assumed certain liabilities of the Downers Grove, Ill.-based Professional Mortgage Partners' mortgage banking business and named PMP's president to an executive post within WinTrust's mortgage subsidiary. WinTrust said a "significant portion" of the cash transaction's purchase price is conditional based upon "certain future profitability measures. The Lake Forest, Ill.-based company also said the deal is not expected to have a material effect on its 2008 or 2009 earnings per share. PMP president Barton Pitts has been named executive vice president of Wintrust Mortgage Corp. as part of the transaction. Terms of the deal were not otherwise disclosed. "The addition of the staff hired from PMP and their offices will create one of the strongest mortgage lenders in the Chicago area," said David Hrobon, president of Wintrust Mortgage Corp. "Combined we will have more than 500 employees, 27 retail offices and, based on historical results, almost $3 billion in annual mortgage originations."

A Freddie Mac report shows the agency expanded its mortgage portfolio by over $40 billion in November, but its issuance of mortgage-backed securities remains relatively meager. The secondary market agency said it purchased $10 billion of its own MBS in November for its investment portfolio, which totaled $805.4 billion as of Nov. 30. However, Freddie issued only $14.5 billion in MBS in November, up slightly from $13.5 billion in October. Ginnie Mae issued $27 billion in single-family MBS in November. Freddie's monthly report also shows that single-family mortgage defaults continue to rise at a fast clip. Since October, loans 90-days or more past due are up 18 basis points to 1.52% as of Nov. 30. In November 2007, only 0.6% of Freddie guaranteed loans were seriously delinquent.

Single-family existing home sales fell 8% in November from October as deteriorating economic conditions produced a drop in homebuying for the second month in a row, as well as a further slide in house prices. National Association of Realtors said sales of previously owned homes fell from a seasonally adjusted annual rate of 4.37 million in October to 4.02 million in November. "The quickly deteriorating conditions in the job market, stock market and consumer confidence in October and November have knocked down home sales to another level," NAR chief economist Lawrence Yun said. Sales are down 8.8% from a year ago. But prices of single-family homes have declined by 12.8% from November 2007. Unless Congress takes steps to stimulate home sales and stabilize prices, "falling home prices will lead to faster contraction in consumer spending and further deterioration in bank balances sheets," Mr. Yun said.

The Office of Thrift Supervision has suspended a regulator whose career dates back to the S&L crisis for allegedly allowing IndyMac to backdate a capital infusion a few months before the alt-A lender/servicer was seized by the government. The OTS removed Darrel Dochow as director of its western region, which supervised IndyMac of Pasadena, Calif., Washington Mutual, Downey Savings, and several other large, now defunct thrifts that were key players in the subprime and alt-A markets. The matter is now under investigation by the Inspector General's Office of the U.S. Treasury. According to a letter written to Sen. Charles Grassley, R-Iowa, "The impact of West Region Director Dochow's approval to record the capital infusion in the quarter ending March 31, 2008, was that IndyMac was able to maintain its 'well-capitalized' status and avoid the requirement in law to obtain a waiver from FDIC to accept brokered deposits." IndyMac, which was taken over this past summer, was a big user of "hot money" to maintain its base of liabilities. Earlier in his career Mr. Dochow was a top regulator in Washington. In the late 1980s Mr. Dochow wanted the Federal Home Loan Bank Board (the forerunner of the OTS) to negotiate with rogue S&L operator Charles Keating Jr., who was threatening to sue the government. Eventually, Lincoln was seized by the FHLBB in one of the costliest thrift collapses in history, not counting failures that occurred this year.

New homes sold at an annualized pace of 407,000 units in November, the weakest showing in almost 18 years and further evidence that the housing market is still in distress. According to figures compiled by the Commerce Department and the Department of Housing and Urban Development, new home sales fell 2.9% compared to October, and 11.4% from the same month last year. "The November figure of 407,000 is the lowest since January 1991 and within a whisker of the lowest since 1982," said Greenwich Capital analyst Steve Stanley. "Builders are having increasing difficulty competing on price against the wave of foreclosed homes hitting the market, and the drastic tightening in credit is hitting developers on both sides (households are having more trouble qualifying for mortgages and the builders are having their own funding issues)." The median sales price rose to $220,400 from $214,600 in October.