Originations

Reunion Mortgage, Milpitas, Calif., has pulled out of Florida, abruptly closing its wholesale office there. A company official confirmed the shutdown to MortgageWire. "Yes, we're closed, as of today," he said. He declined to say why. Reunion opened its wholesale office in Tampa two years ago. A company official at the lender's California headquarters did not return a telephone call about the matter. Reunion, according to its website, has 100 employees. The company is almost 10 years old and focuses mostly on wholesale lending.

Despite weaker loan demand, about 80% of the largest banks and 55% of smaller banks tightened their lending standards on prime single-family loans during the third quarter, according to a Federal Reserve Board survey of senior loan officers. More than 70% of 52 respondent banks said they tightened the underwriting standards on prime loans even though 25 of the respondents reported "moderately weaker" demand for loans and five banks reported "substantially weaker" demand, according to the October survey. In the July survey, 75% of the banks said they had tightened their prime lending standards during the previous three months. The 52 banks in the latest survey held 78% of all residential mortgage loans in the commercial banking system. Almost all (90%) of the 29 banks that originate nontraditional mortgages said they tightened their lending standards. And all four respondent banks that originate subprime loans tightened too. Meanwhile, 85% of the participating banks that originate commercial real estate loans have tightened their lending standards during the third quarter.

Housing markets in Northern California remain four to eight quarters away from a "bottom," according to an analysis by FBR Capital Markets. FBR analysts traveled to the region to meet with Realtors, mortgage brokers and property managers as well as regional officials from the Office of Thrift Supervision. "While the most stressed markets may be near a bottom, losses to the financial system will be substantial, and markets that have held up well thus far are starting to experience greater weakness," FBR's Paul Miller said in a report. Peak industry losses related to Northern California housing are not likely to occur until late 2009 or early 2010, FBR estimated. Weakness that began in "overbuilt, distant suburbs" is moving closer to higher priced neighborhoods closer to northern California's big cities, FBR said.

For the first time since last September, there has been an increase in the Eleventh Federal Home Loan District Cost of Funds Index. The index for September is 2.769%, an increase of over seven basis points from August 2008's 2.693%. The total average funds used in the calculation was $105.4 billion and the total interest expense was $243.2 million; for August, the average total funds used in making the weighted average calculation was $375.6 billion and the total interest expense was $842.7 million. COFI is known as a lagging indicator, reflecting movement in other interest rates on a three-to-six month delay. The Freddie Mac Primary Mortgage Market Survey data for the one-year adjustable rate mortgage saw the average monthly commitment rate rise starting in February (with the exception of a dip in June) before peaking in August and declining in September.

Because of losses and loss adjustment expenses in its U.S. and European operations, a decrease in premiums earned and net realized investment losses, the PMI Group Inc., Walnut Creek, Calif., posted a net loss of $229.4 million or $2.81 per share for the third quarter of 2008. Of that loss, $80.1 million or $0.98 per share came from discontinued operations, namely PMI Australia, PMI Asia and PMI Guaranty. In the third quarter 2007, PMI lost $86.8 million or $1.04 per share. Consolidated losses and LAE for the third quarter were $382.7 million, compared with $351.0 million one year prior. Net premiums written fell to $176.5 million from $218.8 million for the third quarter of 2007. Its U.S mortgage insurance operations lost $137.1 million for the quarter, compared with a loss of $65.2 million the year prior. Persistency increased from 73.3% in the third quarter of 2007 to 81.0% for the most recent period. PMI reported an after tax equity in losses of $0.1 million from its CMG joint venture vs. after tax equity in earnings of $2.7 million for the third quarter 2007.

For the second consecutive month, the amount of new primary mortgage insurance written by the members of the Mortgage Insurance Cos. of America was at the lowest point since the group adopted its current reporting methodology. In September, there was just $8.1 billion of total primary new insurance written ($36 million of it through the bulk channel), compared with August's $10.2 billion (zero through the bulk channel). In August 2001, MICA adopted its current reporting methodology. The MICA numbers do not include any data from Radian Group or Triad Guaranty; the latter company is currently in run-off. The number of applications received slipped from 65,546 in August to 62,209 in September. The amount of primary insurance in force at MICA members fell from $801.7 billion in August down to $801.3 billion in September. The amount of pool risk written in September was $19.9 million, down from $24.2 million in August. The cure default ratio was 53.9%, with 41,400 cures and 76,776 defaults reported during the month.

A group of credit unions calling themselves the Credit Union Housing Roundtable is calling on their regulator, the National Credit Union Administration, to make $1 billion of low-cost loans available to help consumers refinance troubled mortgage loans. The proposal comes as banking regulators are preparing a plan to fund mortgage refinancings through banks for millions of homeowners facing foreclosure or in delinquency on their home loans. "We think that credit unions are in a position to help and we ought to be able to create our own version that is not going to be at the taxpayers' expense," said Gary Oakland, president of BECU (formerly Boeing Employees CU), one of the organizers of the group. --Credit Union Journal

Blaming its performance on "several significant credit and asset disposition charges," Flagstar Bancorp Inc., Troy, Mich., lost $62.1 million ($0.79 per share) in the third quarter, compared to a net loss of $32.1 million ($0.53 per share) in the same period last year. The company, which ranks 13th among all residential funders, according to the Quarterly Data Report, suffered $162.7 million (pre-tax) of credit and asset disposition charges during the quarter, including a $17.1 million decrease in loan administration income because of the failure by Lehman Brothers to honor a commitment to purchase $65 million in excess servicing. (Lehman filed for bankruptcy protection this fall.) In 3Q, Flagstar originated $6.7 billion in mortgages, an 18% decline from last year.

Zaio Corp. of Canada abruptly pulled the plug on its U.S. property database unit, dismissing its top officers. The end came on Thursday when Zaio issued a press release confirming the shut down. The company said that the division's top officers, James Kirchmeyer and Douglas Vincent have resigned. Zaio, which bills itself as a technology and database company, says its secure database has 140 million property records and 24 million photographs.

JPMorgan Chase said it is expanding it loan modification program to keep more people in their homes and plans to extend the effort to its Washington Mutual and EMC Mortgage divisions. "While implementing these enhancements, Chase will not put any additional loans into the foreclosure process," the company said. (JPM bought WaMu last month and took control of EMC when it acquired Bear Stearns.) As part of this initiative, the lender is setting up regional counseling centers, hiring additional councilors and introducing new financing alternatives. "The enhanced program is expected to help 400,000 families -- with $70 billion in loans -- in the next two years," the banking company said.

The White House is reviewing several foreclosure prevention programs but is not ready to endorse a new loan modification program that the Treasury Department and the FDIC are working on. "We're doing an analysis right now on several different ideas" to help more homeowners, said the President's press secretary Dana Perino. During a press briefing she said the White House is willing to consider the FDIC proposal, which involves guarantees to increase loan modifications. She said the Administration wants any program to strike a balance in terms of effectiveness, fairness and protecting the taxpayer. After her remarks, Senate Banking Committee chairman Christopher Dodd, D-Conn., sent a letter to President Bush urging him endorse the FDIC proposal and direct Treasury to create the new program. The program is needed to "address the exploding foreclosure crisis" and the country cannot afford "further delay," Sen. Dodd says in the letter, which was signed by eight other committee Democrats.

Suffering from decimated home values and a lack of customers -- not to mention no secondary market for non-prime -- mortgage bankers saw their loan volumes fall by 9% in the third quarter, according to preliminary survey figures compiled by National Mortgage News. The results are based on survey figures filed by ten firms, none of which are top ten lenders. However, the results show one intriguing trend: some lenders are posting gains in wholesale or correspondent production -- a likely response to all the companies that have left those channels. (For the full story and the rankings see the Monday edition of NMN.)

Federal law enforcement officials are close to announcing settlements in several mortgage and securities fraud probes that were started in 2007, according to one litigator watching the cases. "There are some discussions that are active," said attorney James Wareham of the Paul Hastings law firm. Settlements involving lenders and even home builders could be announced in a few weeks but there are no timetables, said Mr. Wareham, who supervises 300 litigators. The Department of Justice, and the Securities and Exchange Commission want to close out some of the cases and re-direct experienced investigators to bigger cases involving packaging of mortgage-backed securities and collateralized debt obligations, Mr. Wareham said in an interview. DOJ is investigating at least 20 subprime lenders and several Wall Street firms.

Roughly 48% of Nevada homes that are mortgaged have negative equity -- making the state, by far, the hardest hit when it comes to the nation's housing crisis, according to a new report issued by First American CoreLogic. After Nevada, Michigan ranked second in negative equity (39% of homes with mortgages), followed by Florida and Arizona (29% each), and California with 27%. FACL based its findings on a database of 42 million properties where there's a first and/or second lien. Nationwide, 18% of homes have negative equity, the company found. During the housing boom, Arizona, California, and Nevada where among the fastest growing in terms of price appreciation. Michigan and Ohio (where 22% of mortgaged homes have negative equity) have been hard hit by the decline in the U.S. auto industry.

As a result of condo construction lending, which led to significant increases in loan loss provisions, Corus Bankshares, Inc., Chicago, took a net loss for the 2008 third quarter of $128 million down from a net income of $35.5 million in the third quarter of 2007. The year-to-date 2008 results were a net loss of $139.7 million compared to net income of $104.3 million in 2007. "We are operating in an economic environment that is more challenging and volatile than any we have ever seen," said Robert J. Glickman, president and chief executive officer. "Our stock price has also suffered tremendously as a result. Unfortunately, we anticipate these difficulties will persist for some time." As of September 30, 2008, Corus Bank's capital totaled approximately $971 million.

Charges related to large title claims, investment securities writedowns and office closures contributed to a net loss of $30 million (-$1.66 per share) at Stewart Information Services Corp., Houston, in the third quarter. The loss included a $3.6 million ($0.20 per share) charge to earnings to cover reserves related to large title claims ($10.5 million on a pretax basis), impairment on investment securities ($2.6 million) and office closure costs ($2.5 million). The charge was partially offset by a $10 million recovery from claims made to a fidelity bond. In the same period one year ago, Stewart lost $14.3 million (-$0.79 per share). Co-chief executive and chairman Malcolm S. Morris said the company has cancelled 1,750 independent agents since June 1, 2008; these agents represented "a sizeable portion of our claims and management related expenses." The company closed 40 branch offices and reduced headcount by 470 during the quarter. The company's revenues in the greater Houston area were hurt by deals being cancelled as a result of Hurricane Ike. However, said co-CEO and president Stewart Morris Jr., while some of the company's offices were closed because of the storm, it was not prevented from completing scheduled closings, "proving the value of our investment in our paperless, Internet-based filed processing and transaction management technology."

Data show senior citizen borrowers are finding themselves particularly hard hit by recent market woes, according to one Internet-based reverse mortgage provider. "Seniors across the nation have been hit with a hard one-two punch. First the stock market, and now the realization of falling home values," said Eric Bachman, founder and CEO of Golden Gateway Financial, Oakland, Calif., noting that reverse mortgages may help rectify the problem. He said third quarter usage data from the company's reverse mortgage calculator show "a troubling picture." According to GGF, senior citizens self-reported a 4.5% decline in third quarter home values as compared to the first quarter of 2008. The average national existing mortgage debt of senior citizens in the third quarter of 2008 was $146,217. In California, the average mortgage debt in the third quarter was at $219,321 or 50% greater than the national average. The average mortgage debt reported by seniors in September was $211,411 or 74% of the month's reported home sale price of $283,000 across the state, DataQuick findings show. The company also quoted findings from a recent AARP study that shows over 684,000 of those aged 50 and over were either delinquent or in foreclosure.

With increasing portions of the $700 billion TARP bailout money being earmarked for banks and even insurance companies, credit unions are looking to develop a rescue plan of their own, according to a report in The Credit Union Journal. The Credit Union National Association, the largest trade group representing CUs, is calling on its regulator, the National Credit Union Administration, to create a "shadow" asset relief program that would purchase distressed mortgage loans and mortgage-backed securities from credit unions. (TARP stands for Troubled Asset Relief Program and was legislated into existence under the Emergency Economic Stabilization Act.) This effort would include corporate credit unions, which are sitting on more than $10 billion of losses on MBS, the newspaper reported. The program would be managed by the National CU Share Insurance Fund, which already provides emergency loans to troubled credit unions.

The average rate on a 30-year fixed-rate mortgage as tracked by Freddie Mac rose to 6.46% from 6.04% during the week ended Oct. 30. The average 30-year rate also was up from 6.26% a year ago, Freddie said. Freddie chief economist Frank Nothaft said longer-term mortgage rates have been following comparable Treasury yields higher. Both long- and short-term mortgage rates were up week-to-week: the 15-year FRM had an average 6.19% rate, up from 5.72% the week previous and from 5.91% the year before; the five-year Treasury-indexed hybrid adjustable-rate mortgage had an average 6.36% rate, up from 6.06% the week previous and from 5.98% a year ago; and the one-year Treasury-indexed ARM had an average 5.38% rate, up from 5.23% the week before and down from 5.57% a year ago. Mr. Nothaft said initial rates on ARMs might stabilize due to the Federal Open Market Committee's short-term rate cuts. Average points during the week were 0.7% on 30-, 15- and five-year loans, and 0.6% on one-year ARMs.

The Federal Funds rate's decline to 1% is unlikely to spur mortgage origination the way it did the last time it was at this level. "The risk appetite's not there, the credit's not flowing and also house prices are not going up, they're going down. The whole configuration [of the market] has changed," said Josh Feinman, chief economist at DB Advisors. Mr. Feinman, who works for Deutsche Bank's institutional asset management division, said this is in contrast to the market environment in 2003, when the Fed Funds rate last fell to 1% and originations boomed. The Fed Funds rate last fell below 1% in 1958.