Originations

General Motors Acceptance Corp. -- which controls almost $400 billion in residential servicing rights -- made it official on Thursday, declaring that it's in talks with regulators to become a bank holding company. In a statement GMAC said that as a bank holding company it would have "expanded opportunities for funding and for access to capital." A spokeswoman for the company declined to elaborate. The BHC move comes at a precarious time for the company: its residential lending/servicing arm, Residential Capital Corp., continues to lose money, has slashed its work force (including its broker/wholesale channel), and one of its owners, General Motors, has been in merger talks with Chrysler. GMAC is 51% owned by hedge fund giant Cerberus, and 49% by the automaker. Rumors about GMAC filing to become a BHC have been floating around all week. ResCap already owns a depository, GMAC Bank of Utah. As a BHC, GMAC, in theory, would have been able to apply for capital assistance under the new Troubled Asset Relief Program.

Fannie Mae purchased $44.1 billion in mortgages during September, a 9% increase from the previous month, according to new figures released by the company. The rise in acquisitions occurred during a month in which the Congressionally-chartered mortgage giant was taken over by its regulator, the Federal Housing Finance Agency. Even though September's purchase volume was an improvement from August, acquisitions were down 33% compared to September 2007, reflecting residential originations in the primary market. The company reported that 1.57% of its loans were in delinquency, compared to 1.45% the prior month. A year ago, late payments on Fannie Mae loans were less than half at 0.71%. At month's end Fannie had $761.4 billion of loans and securities in portfolio, a slight rise from August. But compared to September 2007, its holdings are up 5%.

Because of so many foreclosures, Fannie Mae, Freddie Mac and the Federal Housing Administration should temporary suspend their requirements for owner-occupied units in condominiums to facilitate condo sales, according to the National Association of Realtors. Specifically, the agencies should not count bank-owned units toward the owner-occupancy requirement. Currently, the government sponsored enterprises and FHA will not finance condo units unless 51% of the units are owner-occupied. NAR also wants the 51% ratio reduced to 48%. "Reducing the owner-occupancy ratio and not including bank-owned REO properties will help condominium developments with significant percentages of REO properties," NAR says in letters to FHA and the GSE regulator.

The Federal Housing Administration is reversing a long-standing policy and now it wants to help borrowers who have filed for bankruptcy stay in their homes. "Effective immediately, mortgagees must, upon receipt of notice of bankruptcy filing, send information to debtor's counsel indicating that loss mitigation may be available, and provide instruction sufficient to facilitate workout discussions, including documentation requirements, timeframes and servicer contact information," according to a FHA mortgagee letter. Previously, FHA thought the bankruptcy courts might consider such contact by the lender to be a violation of automatic stay on collection activities. But recent discussions with bankruptcy experts have persuaded FHA to change its policy so struggling homeowners that file for bankruptcy protection can benefit from FHA loss mitigation policies. Waiting until the bankruptcy is discharged or dismissed "may be injurious to the interests of the borrower, the mortgagee and the FHA insurance funds," FHA commissioner Brian Montgomery says in the letter.

Net losses related to investments and restructuring contributed to a third-quarter net loss of $8.3 million (-$0.09 per share) at mortgage-related services and technology provider First American Corp., Santa Ana, Calif. One year prior, it had net earnings of $46.6 million ($0.49 per share). The title insurance and services segment took a pretax loss of $27.0 million for the third quarter (compared with profits of $43.7 million the previous year). But the company said, take away investment losses of $44.6 million, employee separation costs of $8.6 million and lease termination costs of $5.5 million, the segment would have reported pretax income of $31.6 million. Title orders opened during the quarter fell from 555,800 in the third quarter 2007 to 438,600 in the most recent period, while at the same time, paid title claims went from 70,904 up to 76,307. Total revenues for the title business declined from $1.4 billion in the third quarter 2007 to $957.1 million for the most recent period. The information and outsourcing solutions business contributed $29.8 million in pretax income, while the data and analytic solutions business contributed $10.2 million. Results in the data and analytic solutions segment were negatively affected by a pretax loss of $6.5 million in its second lien product company.

Treasury and FDIC officials are making progress on developing a loan modification program that relies on government guarantees to help up to 3 million struggling homeowners -- but a final agreement has not yet been reached. Washington sources indicate that a program being pushed by Federal Deposit Insurance Corp. chairman Sheila Bair might provide $500 billion to $600 billion in loan guarantees that would allow banks, hedge funds and other mortgage holders to restructure residential loans and lower a homeowners' monthly payments. The program could include some guarantees on second liens which might prevent HELOC investors from blocking loan modifications. The talks between Treasury and FDIC are ongoing. "While we've had productive conservations with Treasury and the Administration about options for the use of credit enhancements and loan guarantees, it would be premature to speculate about any final framework or parameters of a potential program," said an FDIC spokesman.

The Market Composite Index, an overall measure of mortgage applications, increased 16.8% on a seasonally adjusted basis from 408.1 to 476.7 during the week ended Oct. 24, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. The Purchase Index increased from 279.3 to 303.1 on a seasonally adjusted basis, while the Refinance Index increased from 1158.8 to 1489.4. Refinancings represented 46.9% of total applications, up from 42.6% the previous week, while adjustable-rate mortgages accounted for 1.9%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages decreased 2 basis points from 6.28% to 6.26%, and points (including the origination fee) increased from 1.09 to 1.10 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

The mandate for investing in commercial real estate is on the rise, according to a recent survey released by J.E. Robert Companies. According to the survey, 60% of respondents indicated their mandate for real estate is growing. When asked to rank their top choice of regions to invest in commercial real estate, 44% of respondents chose North America, 30% selected Asia and 18% named Europe. Other findings indicate that senior management, overall performance and history/reputation are the most important attributes investors consider when selecting a particular commercial real estate investment firm. Of the survey respondents, 45% indicated that senior management is the most important criteria in selecting an investing partner, followed by performance at 34% and history/reputation at 17%.

The commercial real estate sector is at a virtual standstill, with lenders on one sideline and borrowers on the other, each waiting for the right investment opportunity, specialists said at the Urban Land Institute's annual fall meeting in Miami Beach. They also agreed that the credit markets are, in the words of Randy Reiff, senior managing director at JP Morgan, New York, in a period of "protracted restructuring." Last year at this time, Mr. Reiff was at Bears Stearns and had $28 billion to invest. Now, at JP Morgan, he has only $5 billion to $7 billion at his disposal. "I definitely don't think the credit crisis is a blip," he said on a panel with other capital market experts. "It's gone far past a blip. As far as the pendulum has swung one ways, that's how far back it's swung back now." John Kukral, president of Northwood Investors, Greenwich, Conn., took a more optimistic view. "My feeling is that we're back to normal after being abnormal for the last five years," he said. But Mark Gibson, executive managing director of Holiday Fenoglio Fowler, Dallas, said commercial real estate specialists aren't facing a liquidity issue. "Capital is available," he commented. "We just don't like the price." About 6,100 real estate professionals are attending the three-day conference. That's down from 7,000 last year when ULI met in Las Vegas. But the sessions on capital markets were all standing room only.

Now that the Treasury is handing out TARP investment money to insurance companies (or is about to), speculation is beginning to center on the nation's seven mortgage insurers. According to a new research report from Sandler O'Neill, MIs are potential participants in the "capital investment program" under TARP where Treasury buys preferred stock in selected financial service firms, including insurers. But a spokesman for the Mortgage Insurance Companies of America said the trade group has not seen any of its members apply for a capital infusion. The Troubled Asset Relief Program initially involved Treasury buying problem loans and securities from financial services firms. Instead of buying problem mortgages Treasury has earmarked $250 billion of the $700 billion bailout money to buy preferred stock in banks and others, believing the firms will use the cash to lend, freeing up the so-called logjam in the commercial paper market. The Sandler report notes that with TARP MI firms would be on "new regulatory ground," adding that, "It is unclear how insurers can or will access TARP."

Fannie Mae has reinstated mandatory homeownership counseling and education requirement for first-time homebuyers interested in qualifying for Fannie's MyCommunityMortgage loan or nontraditional credit profile customers applying for any other loan type. The goal, Fannie Mae said, is to help borrowers "better assess their options and responsibilities both before and after they purchase a home." The service must be provided in compliance with the National Industry Standards for Homeownership Education and Counseling developed by a national advisory council of industry stakeholders, including Fannie Mae, launched by the NeighborWorks Center for Homeownership Education and Counseling. "In this extraordinary market, we think it is critical to reinstate this requirement and to work with counseling agencies and our lender partners to help homeowners succeed," Fannie Mae president and CEO Herb Allison said in a press release.

Zillow, an online provider of home price data, said that mortgage rates dropped by 36 basis points in the week ending Oct. 24. The average 30-year mortgage rate fell to 6.00%, from 6.36% the week before, according to Zillow. However, Zillow said rates rose on Monday, Oct. 26, to 6.20%. The Zillow rate monitor is based on rates quoted by lenders on the Zillow mortgage Marketplace.

The number of vacant houses for sale edged up to 2.23 million vacant units in the third quarter from 2.1 million units in the second quarter, according to a Census Bureau report, as foreclosures continue to bolster this inventory of unsold homes. The number of vacant houses on the market rose above 2 million in the fourth quarter of 2006 and has not retreated despite builders slashing construction of new homes to levels not seen in 26 years. The U.S. Census Bureau also reported that the homeownership rate declined to 67.9% in the third quarter from 68.1% in the second quarter. The homeownership rate was unchanged for African-Americans (47.8%) and Hispanics (49.5%). On the brighter side, a quarterly survey by the Wall Street Journal finds that the total number of homes on the market in 28 major metropolitan areas declined in most areas during the third quarter.

Winthrop Realty Trust, Boston, has acquired 3.5 million shares of the common stock of Lexington Realty Trust for $5.60 per share in a privately-negotiated transaction. The seller of the shares has provided Winthrop with non-recourse financing equal to 50% of the purchase price, with a term of three years at an interest rate set at LIBOR plus 250 basis points. Michael Ashner, chairman and CEO of Winthrop, said his company's view is that Lexington's shares "have been significantly oversold by the market." He said the view reflects Winthrop's focus on pursuing "deep value and distressed investments."

First Financial Network, Inc., Oklahoma City, Okla., is marketing a $500 million loan portfolio on behalf of the Federal Deposit Insurance Corp. It includes loans from the recently failed First National Bank of Nevada, Reno, Nev. and First Heritage Bank, NA, Newport Beach, Calif. There are approximately 585 performing and non-performing commercial real estate, commercial and industrial, gaming, Small Business Administration 504, residential and consumer loans to bid on Dec. 16. The majority of the collateralized properties are located in Arizona (44%), Nevada (35%) and California (15%). The portfolio will be stratified into pools based on performance, collateral type and geographic location. Investor due diligence materials will be available online at http://www.firstfinancialnet.com/ beginning Nov. 3. Bliss Morris, president and CEO of First Financial Network, said, "First Financial Network anticipates continued strong secondary market interest for this diverse portfolio comprised predominantly of CRE and C&I loans. We continue to see high demand for both performing and non-performing loans in all asset classes as evidenced by the successful closing of several major transactions conducted by First Financial Network in the third quarter."

The country is in for a prolonged recession that will end only when a sense of confidence and trust returns to the U.S. financial markets, former Federal Reserve Board Chairman Paul Volcker told a group of real estate developers in Miami Beach. "It's going to be a tough period," Mr. Volcker said at the Urban Land Institute's Fall Meeting. "We learn the hard way, but we do learn." Appointed by President Carter to rule over the country's banking system in 1979, and reappointed by President Reagan, Mr. Volcker was chairman of the Fed's board of governors for eight years. He is largely credited with taming rampant inflation, bringing to an end a severe recession in the 1980s, and laying the groundwork for the following two decades of economic stability. He was succeeded by Alan Greenspan in 1987. He told ULI that while the economy was in a "serious recession," he was "not suggesting at all" that the downturn is comparable to the Great Depression. Noting that the economy continued to expand right up to the point where the financial markets hit the rocks, the former Fed chairman said confidence will eventually return, "it's just a question of how long it takes. Unfortunately, it takes a crisis to wake us up, and this is a big one." Mr. Volcker said he was "amazed" when he learned how large the subprime mortgage sector had become.

While some argue that the uncertainty bedeviling investors and institutions that own mortgages has its roots in the subprime and alternative-A markets, "there are numerous factors to review and to understand before coming to any conclusions," Anthony Ryan, the Treasury's acting undersecretary for domestic finance, told the Securities Industry and Financial Markets Association's annual conference in New York. "Credit as a whole -- not just in the housing sector -- has been plentiful over the past decade," he said. "Today, we are experiencing the repercussions of this unbridled expansion and access to credit," said Mr. Ryan. "We needed to strike a balance between strong market discipline and regulatory oversight and we have not."

Financial Freedom Senior Funding Corp., Irvine, Calif., has created a partnership with the National Association of Realtor's Seniors Real Estate Specialists Council to provide educational content and instruction to the latter's members regarding the Department of Housing and Urban Development's Home Equity Conversion Mortgage program. This month SRES members have begun accessing regularly scheduled webinars and local area seminars about reverse mortgages. Additional seminars will be provided once the new HECM for Home Purchase program is implemented early next year. Once the new provisions for the HECM program are implemented, Financial Freedom and SRES will jointly create helpful tools and guidance to assist SRES members with evaluating a range of options regarding seniors' homes during retirement.

Genworth Mortgage Insurance Corp., Raleigh, N.C., will provide recapture tax protection available to borrowers on all loans it insures which are made with state housing finance agency funding. The program will reimburse consumers up to $6,000 for any federal recapture tax they might incur if they sell their homes nine years after closing. The federal government taxes home sellers if they used mortgage revenue bonds or mortgage credit certificate program assistance to buy their property if they then turn around and sell it within nine years. Rohit Gupta, senior vice president product, market intelligence and strategy at Genworth said "This protection will provide piece of mind for HFA borrowers concerned about their tax liability if they sell their homes. Available at no cost to either lender or borrower, it's another example of our commitment to providing safe, secure mortgage solutions for low down payment borrowers." The program is applied automatically and there is no change in the current submission process for HFA loans to Genworth.

Fitch Ratings, Chicago, has cut the issuer default rating of Fidelity National Financial Inc., Jacksonville, Fla., from BBB+ down to BBB, while at the same time cutting the insurer financial strength ratings of the company from A down to A-. FNF recently reported a $198.3 million net loss for the third quarter, 2008, with its title insurance business losing $279.4 million on a pre-tax basis. During the quarter FNF took a $261.6 million charge to strengthen its reserves. Fitch commented "FNF had been less conservative than its national peers, booking expected loss reserves for the policy years 2005-2007. Consequently, FNF's profitability was somewhat overstated during the period, negatively impacting what was seen as a core advantage of FNF relative to peers." FNF also cut its dividend by 50%, to $0.15 per share. Fitch said the slash addressed its "concern that the underlying profitability of the title operations in the current environment did not support the shareholder dividend."