Originations

A class action lawsuit has been filed in the Circuit Court of Cook County in Chicago by borrowers against Wells Fargo Financial, alleging that Wells has violated an Illinois state law barring loans with interest rates above 8% from having fees greater than 3%.Many Wells loans with high rates made in recent years have fees of 5%, 7%, or even more than 10% of the loan amount, according to the Association of Community Organizations for Reform Now, whose general counsel, Steve Backman, is one of the plaintiffs' attorneys. "This lawsuit lets us demand that the excess fees and finance charges Wells has been sucking out of our communities need to be returned to the people they were taken from," said Maude Hurd, president of ACORN. Lynn Greenwood, senior vice president for communications at Wells Fargo Home and Consumer Finance Group, said any allegations of a pattern of deceptive behavior are false and that the source of the claims is an organization that has tried to misrepresent Wells' practices and policies. "We do not tolerate any attempt to sell a customer any product or service unless the terms are fully disclosed," Ms. Greenwood said. "We have a long-standing policy and process for responding to customers who have complaints. We carefully research those complaints and, if we have erred, we do what is right for the customer."

The average 30-year fixed mortgage rate rose to 6.30% for the week ending June 11 from 6.28% the previous week, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate rose from 5.63% to 5.67%, while the average rate for one-year Treasury-indexed ARMs jumped from 3.98% to 4.14%. Fees and points averaged 0.7 of a point for all three mortgage categories. "The one-year ARM responds more directly to movements by the Federal Reserve Board, and market chatter has it that the Fed will not only raise rates at the end of this month, but may do so consecutively throughout the rest of the year," said Frank Nothaft, Freddie Mac's chief economist. "News like that is good news for keeping long-term fixed-rate mortgage rates low, since those are more sensitive to inflationary expectations." A year ago, the average 30-year and 15-year fixed rates were 5.21% and 4.60%, respectively, and the average one-year ARM rate was 3.54%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

Twice as many respondents in a recent survey are likely to have home equity loans by the end of the year as had them in 2003, indicating the rising popularity of such loans, according to LendingTree Inc., Charlotte, N.C.The company said its first Survey on Consumer Trends in Home Equity Lending found that a projected 23.5% of respondents will have obtained a home equity loan by the end of 2004, compared with 11.7% who did so last year and 6.7% in 2002. "It's clear that homeowners are becoming more sophisticated about tapping into their home's borrowing power," said Brian Regan, LendingTree's chief consumer officer. The survey also found that the popularity of home equity lines of credit has increased "dramatically" over the past 10 years. In the first four months of 2004, 68.3% of homeowners chose a HELOC over a home equity loan, compared with 37.5% in 1999 and 23.1% in 1994, LendingTree reported.

Fannie Mae has announced that it has given the green light, at least temporarily, to the use of a cost-based valuation alternative (when sales comparables are not available) that aims to eliminate mortgage lending barriers to Native Americans.The exemption from the Native Americans tribal trust and restricted lands regulation, along with various mortgage products designed for Native American borrowers, was introduced at the National American Indian Housing Council's Annual Convention in Anaheim, Calif. "Allowing alternative property valuation techniques will go a long way to helping more Native Americans achieve a home of their own," said Gary L. Gordon, executive director of the NAIHC. Although often unavailable -- given the low level of mortgage lending activity on tribal lands -- sales prices of nearby comparable properties are nonetheless required during the lending process. The new cost-based valuation alternative "will create a more robust sales market, which will eventually eliminate the need for this type of valuation technique," Fannie Mae said. The government-sponsored enterprise can be found online at http://www.fanniemae.com.

Texas Regional Bancshares Inc., McAllen, Texas, has agreed in principle to acquire Valley Mortgage Co., also of McAllen, in a cash/stock transaction valued at approximately $13.63 million.Texas Regional said up to 50% of the consideration will be paid in cash, and the balance in newly issued common stock of Texas Regional. The company said Valley Mortgage is a full-service mortgage banking firm that reported total assets of $22.5 million for the fiscal year ended Aug. 31, 2003. Paul Schwab, Valley Mortgage's president and chief executive officer, and his professional staff are expected to remain in their present positions, Texas Regional said. Texas Regional can be found on the Web at http://www.trbsinc.com.

Cardinal Financial Corp., Tysons Corner, Va., has announced an agreement to acquire George Mason Mortgage LLC, Fairfax, Va., from United Bankshares Inc., Parkersburg, W. Va., for $17 million in cash.Cardinal Financial, the parent of Cardinal Bank NA, said Mason Mortgage engages mainly in originating and purchasing residential mortgages for sale into the secondary market through nine retail branches in the metropolitan Washington, D.C. area. It reported originations of more than $4 billion in 2003. United said it will continue in the mortgage banking business, but not on a wholesale basis. "We felt that we had achieved the best from our mortgage banking segment during an extended period of historically low interest rates," said Richard M. Adams, chairman and chief executive officer of United. "United will continue its focus on retail mortgage lending through our banking subsidiaries."

The Market Composite Index, an overall measure of mortgage applications, fell from 624.6 to 568.8 on a seasonally adjusted basis during the holiday-shortened week ended June 4, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications fell 18.5% on the week and were down 68.0% from the level of a year earlier. The Purchase Index fell from 459.8 to 432.2 on a seasonally adjusted basis, while the Refinance Index fell from 1583.6 to 1363.2. Refinancings represented 32.6% of total applications, down from 34.3% the previous week, while adjustable-rate mortgages accounted for 34.6%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages crept up from 6.24% to 6.25%, and points (including the origination fee) rose from 1.35 to 1.41 for loans with 80% loan-to-value ratios, the MBA reported. The MBA can be found online at http://www.mortgagebankers.org.

Housing is expected to enjoy another decade of significant growth driven mainly by women, minorities, and immigrants, a trend that will generate even bigger affordability challenges, according to an annual report by Harvard University's Joint Center for Housing Studies.Released at the Ford Foundation in New York, "The State of the Nation's Housing 2004" highlights the impact of demographic changes as drivers of housing demand. It says that, "bolstered by strong immigration during the 1990s, housing has been set upon a higher path that is likely to continue over the next decade," while a larger-than-predicted share of households will be younger, foreign-born, and minority. The study indicates that relatively low average incomes among these segments of the population will add to the demand for "modest starter homes" and affordable rental housing. "Largely as a result of immigration, minorities accounted for 27% of households in 2003 and will contribute at least two-thirds of net household growth in the coming decades," said JCHS director Nicolas P. Retsinas. "While two-thirds of Americans are well-housed, the remaining third have significant housing problems, and many struggle to meet other basic needs while still managing to keep a roof over their heads."

Publicly traded real estate investment trusts could become a reality in the United Kingdom by next May, according to Nicholas Ritblat, executive director of The British Land Co.Speaking at a panel session at the National Association of Real Estate Investment Trusts' institutional investor forum in New York, Mr. Ritblat said the U.K. government is inviting public comment on the proposal, and he urged convention attendees to "write in" if they think that having REITs in the United Kingdom is a good idea. A U.K. general election scheduled for next year could delay the process, Mr. Ritblat said, but he does not see "too many obstacles outside the political process." If the proposal goes through, there could be a major impact, since there is a "huge, unsatisfied demand for real estate in the U.K.," according to Mr. Ritblat. He noted that about 207 trillion pounds is invested in U.K. residential real estate and about 300 billion pounds in commercial real estate. Entities such as Fannie Mae and Freddie Mac don't exist in the United Kingdom, and fixed-rate mortgages are not available.

Chase Home Finance is offering incentives to brokers for home equity line-of-credit products, an executive from the company told attendees at the National Association of Mortgage Brokers' 2004 annual conference in Salt Lake City.For certain HELOCs, the J.P. Morgan Chase subsidiary is offering brokers the opportunity to earn up to $1,000, said Ron Sullivan, a vice president at Chase Home Finance. Among other ways the company is courting brokers is a plan to offer certain brokers the ability to draw their own documents electronically, said Rod Brace, senior vice president and broker wholesale division manager. He said this feature is slated to be put in place by the beginning of the fourth quarter.

Defaults on commercial mortgage-backed securities have been "extraordinarily low" during the 14-year history of the bonds, according to a study by Fitch Ratings.However, the rating agency says it expects a "gradual rise" in below-investment-grade CMBS defaults as rating agencies change their credit enhancement levels over time. The study compared the performance of CMBS to that of corporate bonds and found that the cumulative overall default rate for CMBS was 0.2% during the period 1990-2003, compared with about 11% for corporate bonds. "Only 41 of the 8,296 classes that make up the collateral in 914 transactions the Fitch study evaluated have defaulted, resulting in, on a dollar basis, an investment-grade default rate of 0.1% and a below-investment-grade default rate of 1.61%," said Mary O'Rourke, a Fitch senior director. Fitch can be found online at http://www.fitchratings.com.

The National Association of Mortgage Brokers is putting out a request for proposal that calls for a comprehensive study of how state anti-predatory-lending laws have affected credit availability.The study will be similar to one the association did recently in conjunction with the National Home Equity Mortgage Association that examined the effects of a New Jersey law on that state's market, said A. W. Pickel, who has presided over the group during the past year. The NAMB official's comments were made at the group's 2004 annual meeting in Salt Lake City.

A. W. Pickel, the outgoing president of the National Association of Mortgage Brokers, has issued a personal challenge to mortgage brokers to fill the needs of certain underserved communities in America.At the group's annual convention in Salt Lake City, he quoted a line from the movie Spiderman that said with great power comes great responsibility. Mortgage brokers, by virtue of their dominant market share, "have a great responsibility," he said. His first challenge to fellow brokers involved Native Americans. "These people need home loans," he said, noting that just 1,269 loans have been made on Native American lands as of 2002. "We need to help these people." Mr. Pickel's second challenge called on brokers to supply homes to rural America. "The key is, brokers can go where banks cannot," he said. "It takes a lot of money to put up a brick-and-mortar branch for a bank. But all I need and all you need is a laptop and a car." Finally he called on mortgage brokers to help expand homeownership in the colonias, Hispanic communities along the Mexican border. While singling out those three areas, Mr. Pickel added that there are other groups and other ethnic minorities that mortgage brokers need to reach out to. Mr. Pickel also used the opportunity to denounce the use of the terms subprime, nonprime, and alternative loans, saying these should really be called "choice" loans. Conforming loans fit into a small box, while choice loans fit a larger definition, he said, holding his hands wide apart.

The new president of the National Association of Mortgage Brokers has called for an industry-government alliance at the state and local level to expose and, most importantly, to prosecute predatory lenders.Bob Armbruster, a broker from Lawrenceville, Ga., outside Atlanta, envisions a system that would "grease the judicial process" to bring bad actors to court more quickly." Mr. Armbruster admitted his idea is "a little visionary," and said he's still not sure about all the legal whys and wherefores. But he told MortgageWire at the NAMB's annual convention in Salt Lake City that if state and local authorities don't take some steps to curb abusive lending practices, federal regulators will. "The feds are loaded up, so the states need to act more effectively and quicker," the 40-year housing finance veteran said. "As it is now, it takes five years to get predatory lenders into court. We need to lubricate the process." The new NAMB president, who heads Armbruster Mortgage, also vowed not only to continue his predecessor A.W. Pickel's efforts to create a national registry of all loan originators, but also to formalize the effort within the now 24,000-member association's governing system. Mr. Pickel said during a news conference that interest in a registry that would report and track unscrupulous players is growing. "I think more people than ever favor it," he said, noting that Fannie Mae, Freddie Mac, the Federal Housing Administration, and even the Federal Trade Commission have indicated their interest in a self-policing system to eliminate the business's rotten apples.

A new brochure titled "Don't Buy the Myths: Renting Can Be a Smart Investment" has been issued by the National Multi Housing Council and the National Apartment Association.The brochure maintains that the tax and investment benefits of owning a home are often overstated and the costs understated. "The best-kept secret in the housing market is that renting is often the better financial choice," said Douglas M. Bibby, president of the NMHC. "Researchers estimate that nearly 20% of house buyers would have saved money by renting, while another report by Harvard University concluded that 'in many places, at many times, and for many holding periods during the past 15 years, renting made better financial sense than owning'." The organizations can be found online at http://www.nmhc.org and http://www.naahq.org.

Criimi Mae, Rockville, Md., has refinanced a 7%, $45.7 million collateralized mortgage obligation and says it expects to take a financial statement loss of about $1.1 million in the second quarter as a result.The real estate investment trust expects the refinancing to result in cost savings as a result of a $2 million reduction in associated interest costs. In addition, the refinancing netted about $3.4 million in cash for the commercial mortgage REIT because the CMO was overcollateralized, Criimi Mae said. "As a result of exercising the 'clean-up' call on CMO-1, the early extinguishment of debt will result in a financial statement loss of approximately $1.1 million related to the unamortized discount and deferred financing costs associated with the CMO," Criimi Mae said. The REIT can be found online at http://www.criimimaeinc.com.

Deutsche Bank Securities Inc., New York, has announced the formation of a Correspondent Lending Group in Boca Raton, Fla., that buys closed subprime mortgage loans from originators on a bulk and a loan-by-loan flow basis.The group has hired Maxine Matteo, who was most recently employed by First Franklin/National City Bank, as managing director of correspondent lending. Ms. Matteo reports to Michael Commaroto, who heads Deutsche Bank Securities' private-label mortgage-backed securities and whole loan trading in New York. Deutsche Bank can be found on the Web at http://www.deutsche-bank.com.

Mortgage lenders added 5,200 full-time employees to their payrolls in April, according to the May employment report released June 4 by the U.S. Bureau of Labor Statistics.The BLS report shows that jobs in the mortgage banking/broker sector rose from 444,700 in March to 448,900 in April. (There is a one-month lag in BLS's reporting of mortgage sector employment data.) Mortgage rates averaged 5.81% in April and demand for purchase mortgages was at record levels. The June 4 jobs report shows that the economy generated 248,000 new jobs in May and the unemployment rate remained at 5.6%. "Employment in financial activities rose by 15,000 in May, reflecting continued increases in real estate and in credit intermediation," the BLS said. The BLS can be found online at http://stats.bls.gov.

Consumer Direct of America, a Las Vegas-based consolidator in the mortgage brokerage industry, has announced a private placement of approximately $5 million of securities.The company said it will offer a minimum of $750,000 of units on a "best efforts all or none" basis and an additional $4.25 million of units on a "best efforts" basis. A unit, consisting of one share of common stock and a class A warrant exercisable by the holder to buy one share of common stock, is priced at 25% of the five-day closing bid price average at closing, Consumer Direct said. The company can be found on the Web at http://www.cdofamerica.com.

Upromise Inc., Needham, Mass., has announced the launch of a program in conjunction with Awards for Mortgage & Real Estate under which members can earn 0.25% of their home loan amount at closing in Upromise ScholarDollars.To benefit from the program, members of Upromise, a privately funded service that helps families save for college, can pick from four major mortgage lenders: CitiMortgage, Chase Home Finance, Washington Mutual Inc., and Wachovia Mortgage Corp.'s corporate mortgage services division. To qualify, members submit a home loan application (for a purchase-money mortgage, a refinance, or a home equity line of credit) online or by telephone, the company said. After the loan closes, members automatically receive their college savings. Upromise and Awards for Mortgage & Real Estate can be found online at http://www.upromise.com and http://www.awardsformortgageandrealestate.com.