Originations

Sales of new single-family homes rose by 2.7% in September from the previous month to a seasonally adjusted annual rate of 464,000 units but the median price of a house fell to the lowest level in four years - $218,400, according to new government figures. On the surface the sales figure looks promising but the comparison is to the prior month. Compared to the same month a year ago new home sales are down a stunning 33%. The Northeast and Western regions suffered the most with declines of 65.1%, and 37.9%, respectively, compared to September 2007. The median price of a new home sold in September declined by 9.1% from the year ago. Meanwhile, the inventory of unsold existing homes remains near historic highs thanks to the huge increase in foreclosures.

Freddie Mac purchased or guaranteed $27.2 billion of mortgages in September, a slight gain from the multi-year low of $25.8 billion established the month before. The GSE was placed in a conservatorship on September 7. Its regulator, the Federal Housing Finance Agency, has directed the secondary market giant to increase purchases of its own mortgage-backed securities. However, Freddie reported that its holdings of its own MBS declined by $22.6 billion to $375 billion in September. Its investment portfolio declined by $24 billion to $738.9 billion. Freddie issued $22 billion in guaranteed MBS in September, nearly matching its issuance in the previous month. The mortgage company has added a new data table ("Other Investments") to its monthly summary report. The September issue shows that Freddie purchased $10.4 billion of private-label "non-mortgage" asset backed securities.

U.S. Central FCU said its mortgage-backed securities portfolio took a beating over the past month, declining in value by another $700 million, increasing the corporate credit union's unrealized losses to $3.8 billion at September 31. That doesn't include additional losses of $2.3 billion when U.S. Central marks-to-market its entire portfolio - a total fair value loss of $6.1 billion - which U.S. Central is required to report under generally accepted accounting principles. The largest portion of the losses are on so-called private label mortgage backed securities, those not issued by Fannie Mae or Freddie Mac. U.S. Central reported a book value of $19.9 billion of private label MBS that it is carrying for $17.1 billion, but has a fair market value of just $14.8 billion - a whopping unrealized loss of $5 billion on those securities. U.S. Central has indicated an intent to hold most of those securities to maturity, allowing it to account for them at carrying value, instead of fair market value. The corporates' corporate is also sitting on $880 million of unrealized losses on $12 billion worth of other asset backed securities, backed by credit card loans, student loans, auto loans, and commercial real estate, as well as $145 million of losses on corporate bonds and notes that it holds. -- Credit Union Journal

If residential lenders and housing professionals didn't have enough bad economic news to worry about, they may soon have a fresh set of anxieties: rising delinquencies in the vacation or "second home" market. Obtaining hard numbers on just how many outstanding mortgages are backed by second/vacation homes is not easy -- but one figure is clear: of the $2.8 trillion in Fannie Mae loan guarantees 5% cover the sector, or $140 billion. According to Freddie Mac spokesperson Sharon McHale, 9% of her GSE's portfolio includes second homes, including "investment properties" where the owner is trying to make his mortgage payment by renting out a home or condo. No one is saying that property values in the second home business are in a freefall, at least not yet, but according to recent interviews with Realtors who sell beach properties the outlook borders on grim. Diana Silvester, a Realtor who sells properties in Cape Cod, Mass., told National Mortgage News that home values in this popular New England vacation area are down 20% in two years. (For the full story see the upcoming issue of Origination News.)

Existing single-family home sales jumped 6.2% in September to its highest level in more than a year, according to figures released by the National Association of Realtors. NAR reported that sales of previously owned homes rose on a seasonally adjusted annual rate to 4.62 million units in September compared to 4.35 million the month before. It was the best showing since August 2007 when the rate averaged 4.79 million units. Single-family sales have been bouncing between 4.25 million and 4.5 million units all year. NAR chief economist Lawrence Yun considers September's breakout to be encouraging because traditional buyers are returning to the market. "The current market is not being dominated by speculative investors," he said. "Rather, 80% of current buyers are purchasing primary residences, which is a bit higher than historic norms." Despite the jump, there is a 9.4 month supply of homes on the market. Foreclosures and short sales continue to make up 35% to 40% of sale transactions and continue to put downward pressure on prices. The median sales price of single-family homes was $190,600 in September, down 8.6% from the same month last year.

PNC Financial Services, which has limited participation in the mortgage business, may be wading back into the game with its purchase of National City Corporation. But don't bet on PNC using the National City platform to expand its mortgage presence much. In a conference call, PNC executives said they expect to see high cumulative losses on National City's mortgage and home equity portfolios, suggesting that PNC will exit "low return asset classes" and instill a "moderate risk culture" at the combined firm. PNC estimates that losses on NatCity's remaining $4.5 billion non-conforming mortgage portfolio will total 43.5%. The remaining $10 billion third-party originated home equity portfolio is expected to see a loss ratio of 52.5%. In the all stock deal, PNC has agreed to pay $5.2 billion, or $2.23 per share, for NCC. The price represents a discount of almost 20% to NCC's share price the day before. PNC highlighted the deposit franchise, which will make it the fifth largest bank by deposits in the nation, in explaining the deal. PNC largely exited the first lien mortgage space in 2001 when it sold its mortgage subsidiary to Washington Mutual. However, PNC currently operates a mortgage business through a joint venture relationship with Wells Fargo and heavily markets HELOCs to its bank customers. Both banks are mid-sized players in commercial mortgages.

Mortgage borrowers increasingly are seeking advice on costly or complicated loans from their financial planners. At the Mortgage Bankers Association's annual conference in San Francisco, one technology firm touted a deal to roll out its mortgage analysis product to a network of 330 financial advisors. Broker/dealer GWN Securities, Palm Beach Gardens, Fla., has licensed Independent Advisor from Financial Crossing, Palo Alto, Calif., to allow its advisors to help borrowers analyze and potentially restructure their loans. Adrian Nazari, CEO of Financial Crossing, told MortgageWire that his firm has a number of other financial advisors on the platform, and his analysis is that two of three of their clients would benefit from restructuring their mortgages, achieving an average savings of $650 per month. Financial Crossing has affiliated with mortgage fulfillment provider Lydian Data Services, real-time pricing vendor NYLX, and Citizens Community Bank of New Jersey to provide loans to financial planner clients that would benefit from such a restructuring.

The Mortgage Bankers Association's Market Composite Index registered a 16.6% seasonally adjusted drop in mortgage applications during the week ended Oct. 17. The MBA said that in addition to its usual adjustments for seasonal variations it adjusted the figure to account for the Columbus Day holiday. On an unadjusted basis the index was down 25% on the week and 44% year-to-year. The Refinance Index fell 23.5%, the seasonally adjusted Conventional Purchase Index declined 10.9%, and the Government Purchase Index, which is largely comprised of FHA loans, dropped 11.9%. On a seasonally adjusted basis, the four-week moving average for the composite index registered a decline of 9.2%, the same average for the purchase index was down 4.9% and this average showed a drop of 14.2% for the refi index. Forty-two percent of apps were refis during the most recent week, down from 46.4% the week earlier. Adjustable-rate mortgages made up just 2.7% of total apps, a slight increase from 2.6% the previous week. Changes in average contract interest rates for different common loan types were as follows: for 30-year fixed-rate mortgages, a drop to 6.28% from 6.47% with points falling to 1.09 from 1.14; for 15-year FRMs, a decline to 6.05% from 6.17% with points sliding to 1.11 from 1.18; and for one-year ARMs, an increase to 6.97% from 6.67% with points falling to 0.40 from 0.43. All points include the origination fee and are for 80% loan-to-value mortgages.

Macroeconomic issues will have an effect on delinquencies and foreclosures, Mortgage Bankers Association chief economist Jay Brinkmann said during a press briefing at the group's annual convention in San Francisco. The recession may have started in the third quarter 2007 and it could last through the second quarter 2009. On a non-seasonally adjusted basis, it could take as long as 10 quarters before employment returns to pre-recession levels as the economy has shifted away from a manufacturing base, he said. The growing number of recently constructed properties going into foreclosure will affect 2009 housing starts, he said. MBA is projecting 2009 loan origination volume of $1.67 trillion, down from its estimate for 2008 of $1.86 trillion. Most of the decline will come in refinancings as that will drop from $949 billion in 2008 to $736 billion next year. Among the drivers of the market, Mr. Brinkmann said, could be sales of foreclosed properties in California and Florida to investors looking to rent them. Speaking of renters, there has been a buildup in rental households over the last two-and-one-half years, while there has been a decline in owner-occupied households. There could be a return of renters to the market that are able to qualify for loans at the lower prices, as long as they have good credit, he said.

The Department of Housing and Urban Development will issue a final rule by year-end revising the Real Estate Settlement Procedures Act, HUD secretary Steve Preston told attendees at the Mortgage Bankers Association's annual convention in San Francisco. Bankers and lenders, who have long opposed the rule, will have a year to implement it, he said. "With so many families in trouble with their mortgages because in many cases they didn't understand, our goal is to make sure it never happens again," he said. On RESPA reform, he said the "unnecessary complexity" of mortgages had contributed to the housing crisis. "We must make mortgages more understandable and the process more transparent," he said. HUD has proposed a four-page form that would require mortgage lenders and brokers to provide an estimate of closing costs, interest rates, monthly mortgage payments as well as settlement services, prepayment penalties and balloon payments.

Midland Loan Services, a servicer of commercial mortgage-backed securities, and data provider Trepp are collaborating to provide investors with faster access to information about loans serviced by Midland. Under the deal, investors can use Trepp's website to hyperlink directly to Midland's CMBS Investor Insight master servicing portfolio, providing access to data on more than 100,000 loans supporting over $1 trillion in securities. Specifically, Trepp said that its loan-level links gives investors access to borrower financial statements, OSA/NOI worksheets, rent rolls and property inspections.

Idaho Housing and Finance Association (IHFA), a housing finance agency and administrator of affordable housing resources, is saving time and streamlining labor tasks with MORvision, ISGN's loan origination system that automates the loan cycle from point-of-sale and Web origination through processing, underwriting, closing, secondary tracking, and delivery. IHFA, which recently opened up a new segment for funding and closing loans, had previously been fulfilling all functions on a manual basis prior to implementing MORvision. "IHFA functions a lot like a secondary market investor does, but also recently began working with brokers and has expanded into closing and funding loans," said Susan Semba, director, homeownership lending for IHFA. "Prior to implementing MORvision, we had been doing everything manually, which meant that we were producing all of our closing documents by hand, based on a Microsoft Word template. On the processing side, it's faster and easier for us to keep track of the progress of each loan, which saves us a lot of time on phone calls with brokers."

Metavante Corp. now offers support for new FHA compliance regulations enabling lenders to take advantage of this significant business opportunity. According to the Federal Housing Administration (FHA), twice as many people with subprime loans are refinancing into government-insured FHA mortgage loans and these types of loans are also ideal for first time homebuyers and those who may have less than perfect credit. Metavante's LOS supports the FHA Loan Transmittal, the Maximum Mortgage Worksheet for 203k and 203k Streamline loans and the Mortgage Credit Analysis Worksheets (MCAW-PUR for purchases and MCAW-W/S for refinances). Metavante's LOS also supports key components of the FHA Modernization Act of the Housing and Economic Recovery Act of 2008 (HERA), as well as the minimum cash investment requirement and maximum combined loan-to-value changes.

Nationstar Mortgage, a mortgage lender headquartered in Dallas, Texas, has re-entered the wholesale market in October 2008, and has selected Overture's Mozart Decision Engine and Mozart POS broker centric user interface as the technology it will use to support its wholesale operations. The decision to use Mozart was reinforced by Nationstar's successful roll out of Overture's Mozart Decision Engine and Mozart point-of-sale user interface to its 200+ retail and consumer direct originators companywide. Thanks to Mozart, Nationstar's retail division is now benefiting from real-time, rich automated decisioning, which gives the lender the ability to put risk-based pricing, product eligibility, underwriting, best fit, mortgage insurance premium calculations, fee generation and analysis and loan optimization into the hands of the consumer consultant, all on a real-time basis.

Ellie Mae chairman and CEO Sig Anderman is bullish on the future of the mortgage broker, he told MortgageWire during an interview at the Mortgage Bankers Association convention in San Francisco. Secondary market investors are not going to go directly to the consumer and therefore there will still be a need for mortgage brokers and correspondent originators in his opinion. The same entrepreneurial skills that led to the rise of the mortgage broker will still come into play, including the ability to do a loan at any time, in any place, Mr. Anderman said. If the broker is not willing to jump through hoops to meet the customer's needs, it will not get the loan and be out of business. Right now it is a great time to start a lender. He foresees the use of technology to "create a perfectly efficient wholesaler," with all the processes done digitally. It is vital that a lender that is new in 2008 still has processes that look new in 2018. Mr. Anderman has put his money where his mouth is, with Ellie Mae providing technology and seed capital into a pair of new companies ready to be launched in the first quarter of 2009.

In an effort to bring additional liquidity to the housing market, the Mortgage Bankers Association is recommending increasing the size of mortgage loans that Fannie Mae, Freddie Mac and the Federal Housing Administration can purchase in high-cost markets like California and New York. The 2008 Economic Stimulus Plan, enacted in February, temporarily increased the size of mortgage loans purchased by FHA and the government-sponsored enterprises to as much as $729,750, enabling many borrowers in high-cost metro areas to refinance. The temporary stimulus expires at year-end and loan limits next year will be determined by a provision of the American Housing Rescue and Foreclosure Prevention Act, which sets both conforming and FHA loan limits to 115% of the local median home price, not to exceed $625,000. Garry Cipponeri, a senior vice president of secondary marketing at Chase Home Finance in Iselin, N.J., said the MBA wants to extend the temporary loan limits particularly in high-cost areas of California, New York and Texas. "There are lots of suburbs where the current plan has no effect," he said Tuesday at the MBA conference in San Francisco. "Hopefully this will really help the housing industry."

1st Metropolitan Mortgage, Charlotte, N.C., one of the nation's largest mortgage brokers, is considering becoming a mortgage banker, said company chief executive Daniel Jacobs. The reasoning includes having control of the process, he said during an interview at the Mortgage Bankers Association annual convention in San Francisco. In the typical mortgage broker refinance transaction, control is not as important. As the business shifts to a purchase market, the ability to control the transaction is important, he said. Right now, 1st Metropolitan is focused on agency and FHA loan products. In September over 60% of its volume was FHA. Mr. Jacobs said he is concerned about where wholesale is going and he is considering holding a summit with both mortgage lenders and brokers. Lenders are going to have to find other ways to measure success in wholesale than just volume, he said. The measures he said, include pull through and performance.

The average customer's satisfaction with mortgage originators has risen slightly as consumer expectations have fallen and lenders have become more diligent, according to J.D. Power & Associates' yearly study. The average satisfaction rate for mortgage originators on a scale of 1-1,000 was 757, up seven points from the previous year. The top 10 ranked originators received the following scores: SunTrust Mortgage (790), National City Mortgage (788), Wachovia (786), Wells Fargo (766), Bank of America and Washington Mutual (both scored 764), CitiMortgage/CitiBank (760), GMAC Mortgage (742), Chase (729) and Countrywide (728). BoA, which slipped slightly to No. 5 this year, had held varying positions among the top three along with SunTrust and Wachovia the previous two years. National City, which ascended to No. 3 this year, had been ranked No. 4 in 2007.

Lender Processing Services, Jacksonville, will offer servicers using its systems access to servicing technology from Reverse Mortgage Solutions.Dan Scheuble, co-chief operating officer at LPS, said the partnership extends LPS's reach into the growing business for reverse mortgage loans. The primary market for reverse mortgage loans, or home equity conversion mortgages, is homeowners over the age of 65 who have paid off their mortgages. Currently, there are approximately 34 million seniors in the nation. LPS estimates that 12.5 million seniors currently own their homes mortgage-free, representing $4 trillion in equity.

The housing market will hit bottom between mid-2009 and mid-2010, economist Christopher Thornberg said at the REOMAC Fall Conference in Hollywood Beach, Calif.. At the show's opening session, he predicted the industry will see negative growth in the third and fourth quarters and through most of 2009. Positive growth will begin in the fourth quarter of 2009 and first couple of quarters of 2010, he said. "In the second half of 2010 things will finally start to get back up and running," said Mr. Thornberg. "The scarring of this downturn will have worn off. Your typical homebuyer has a two year memory. People are going to be so scared, they're not going to touch it for two years. By mid-2012 they will start buying again." Housing markets, when they hit bottom, they don't bounce, he added. "It's not like the stock market. Housing markets splat. They hit bottom and stay there." He encouraged REOMAC members, which include asset managers and REO agents, to keep some perspective, because mortgage rates are still lower than they were in 2000. States like California have to see prices come down 40-45% to get back in line with historic norms relative to incomes, he said. "Every state is different. We're getting there."