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Mortgage Headlines
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Last Updated Saturday, November
25, 2001 12:34 PM CST
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Who Can Originate FHA Loans?
The rule is, and always has been, that FHA-insured loans may be originated, serviced, purchased, held, or sold only by mortgagees that have been approved by HUD. There are three categories of HUD approval: Supervised lender, non-supervised lender, and loan correspondent. A supervised lender is a commercial bank or credit union. A non-supervised lender is a mortgage banker. This category of approval may originate, service, purchase, hold, and sell FHA insured mortgages. A mortgage broker is, in HUD parlance, a loan correspondent. This category of approval may only originate FHA loans; it may neither hold nor service such loans. Furthermore, a loan correspondent must have one or more HUD-approved sponsors (see non-supervised lender above) to underwrite and fund the FHA loans that it originates. HUD correspondents must be licensed corporations with a minimum net worth of $50,000, and with one officer having three years' origination experience and all senior officers having acceptable credit.
NetBank Acquiring RBMG
NetBank, Inc. announced this week that it will acquire Resource Bancshares Mortgage Group, Inc. (RBMG). Terms of the deal call for RBMG shareholders to receive 1.1382 shares of NetBank for each share of RBMG common stock. NetBank's current Chairman, T. Stephen Johnson, and Vice Chairman, D.R. Grimes, will continue to serve in those posts and RBMG CEO Douglas K. Freeman will become CEO of the combined entity. The board of directors will consist of 11 members -- 6 from the NetBank board, 4 from the RBMG board and one member who currently serves on both boards. The combined company will have assets totaling $3.6 billion and approximately 1,950 employees. Following is a snapshot of selected data for both companies.
Rock Bottom?
According to Freddie Mac's weekly application survey, the average thirty-year fixed rate mortgage (FRM) was 6.51%, six basis points (BPS) higher than a week ago, and the fifteen-year rose 4 BPS to 5.98%. The majority of mortgage experts surveyed by Bankrate.com expect mortgage rates to remain within two BPS of current rates during the next 30-45 days. The average one-year adjustable rate mortgage (ARM) -- which Freddie reported was down 24 BPS from last week to 5.06% -- was more than two percent lower than a year ago. While refinance applications were setting records, MBA reported that applications for purchases fell more than ten percent from last week. Government applications fell almost ten percent while conventional applications rose 3.51%.
Improving Online Value
Mortgage companies that operate online need to clarify up front what loan programs they offer, according to a brief released by Gomez. Entitled "Best Practices: On-Site Resources That Keep Clients & Prospects on track & Returning Online," the brief is the third in a four-part series that highlights, by Gomez' Scorecard category, online mortgage best practices that in concert will help firms convert online mortgage shoppers into closed loans. Next, Gomez said that firms must enhance online decision support by adding sophisticated tools, such as "comparenators" and insightful educational content. Gomez also said that lenders should add anchor content to encourage repeat visits. Finally, Gomez suggests creative anchor content that converts shoppers into closed loans.
"Alt A" Guidelines Tightening
Mortgage brokers and lenders are reporting a tightening of credit standards for borrowers that utilize no-income verification loans, jumbo loans and subprime loans, according to a story in the interactive edition of the Wall Street Journal (WSJ). Greenpoint Mortgage reportedly raised its minimum credit score on no-documentation loans to 660 from 640. WSJ reported that Chase Manhattan Mortgage raised its minimum credit score requirements to 680 from 660 on some limited documentation loans last month.
PMI Expects Claim Payouts To Rise 15%-25% Next Year
Dow Jones Newswires (DJ) reported that PMI Group Inc. estimates total domestic primary claims paid during 2002 could be 15% to 25% higher than those paid during 2001, according to a regulatory filing released late Thursday by the Securities and Exchange Commission. The company reportedly also estimates total domestic losses in 2002, including paid claims, loss adjustment expenses and changes in loss reserves, could widen by 25% to 35% from 2001, the filing said.
Rates Slide To 30-Year Low
Fixed mortgage rates slipped to their lowest levels in thirty years, as Freddie Mac reported the average thirty-year fixed rate at 6.45%, down eleven basis points (BPS) from last week. The fifteen-year fixed rate was reported at 5.94 percent, down 10 BPS. Two-thirds of the mortgage experts surveyed by Bankrate.com expect for rates to decline further over the next 30-45 days. Applications for refinance mortgages shot up almost twenty-five percent from the prior week, according to the Mortgage Bankers Association of America (MBA). Total loan applications -- including applications for purchase-money mortgages -- rose twenty-three percent.
Originators Lack Adequate Education
Mortgage lenders and brokers nationwide do not feel that their originators and processors have the knowledge they need to be totally effective in their respective positions, according to a survey conducted by Mortgage-Education.com. The survey of 1,200 mortgage brokers and mortgage lenders was completed in August of this year.
Carolina Title Agency President Pleads Guilty
The owner and president of a North Carolina title insurance agency pled guilty to insurance fraud in federal court, according to an announcement from the U.S. Attorney. Robert B. Herbert, Jr. of Raleigh allegedly "embezzled and misappropriated moneys from Stewart Title from March 2, 2000 to May 31, 2000," according to documents referenced by the U.S. Attorney. The announcement went on to say that an audit of the company that Herbert owned and operated -- Carolina Title Insurance Agency -- revealed that more than $700,000 was missing from various escrow accounts.
Can 'A' Loans Be Predatory?
While subprime lenders have received most of the press associated with predatory lending practices, abuses can also occur on 'A' loans to 'prime' borrowers. Joe Falk, president of the National Association of Mortgage Brokers (NAMB), says that predatory lending does occur with 'A' paper borrowers. The higher rates charged by originators seeking more income from yield spread premiums (YSP) \ have fueled disputes over the use of YSP's. With the current refinance wave reaching record levels, many of the best originators may be too busy to handle more business. Unfortunately, unscrupulous originators that are aware of this may be better positioned to take advantage of uneducated borrowers.
Pro Athletes Among Investment Advisor's Victims
Federal securities regulators have sued Donald Lukens, an investment adviser catering to professional athletes and other wealthy clients, for allegedly defrauding more than 100 investors of at least $12.5 million in a series of schemes in the late 1990s, according to a story by the Associated Press (AP). The SEC also reportedly sued James Carter Allison, who, at Lukens' direction, made transactions through two shell companies that aided Lukens' diversion of clients' money, the SEC alleged. Lukens allegedly cheated investors in four schemes involving mortgage-backed securities in California and Nevada. Lukens secretly enriched himself with undisclosed commissions and fees, and diverted millions that his clients entrusted to him to invest in the securities, the SEC reportedly said in its complaint.
REO Disposition, Outsourcing and Related Exposure
The first opportunity to prevent unnecessary losses down the road is in the selection of the REO Outsourcer. A true REO Outsourcer should act as an extension of the client's REO Department providing all of the functions for which the typical REO Department would be responsible. There are many other specific areas of the disposition process that represent fertile ground for potential exposure problems. For example, closing delays frequently result from the inability to transfer clear title at closing thereby forcing the client to incur additional unnecessary carrying costs. If the outsourcer is simply referring title issues back to the client for resolution, a necessary and critical function of the outsourcer's job is not being fulfilled. An effective, knowledgeable and competent outsourcer should be able to identify many, if not all, of these potential problem areas as they arise. Doing so will enable the client to take immediate preventative measures to avoid incurring further losses and to effectively move the property through closing.
FBI Investigation Leads To Indictment
A federal indictment was unsealed last week charging two men in a 15-count indictment with mail and wire fraud in the operation of an advance fee scheme in Massachusetts and elsewhere, according to the U.S. Attorney. The two men were allegedly operators of a mortgage assistance company that defrauded consumers of over $1 million. The U.S. Attorney said that from September 1996 through August 1997, the men promised "guaranteed home ownership'' to hundreds of low income individuals who would not qualify for loans from traditional lenders. They allegedly collected in excess of one month's gross income in return for promises of financing, when they had no ability to obtain financing and had no experience in doing so.
$2.55 Billion CMBS To Hit Market
General Growth Properties is bringing a $2.55 billion commercial mortgage backed securities (CMBS) deal to the market, according to a story in Barron's. The issue, which is reportedly the largest securitization to hit the market since 1998, is composed of 27 regional shopping malls divided into three pools.
Falling Fixed Rates Nearing All-time Low
The average 30-year fixed rate mortgage (FRM) fell eight basis points (BPS) from last week to 6.56%, according to Freddie Mac's Primary Mortgage Market Survey for the week ending November 2. Since Freddie began tracking the 30-year FRM thirty years ago, the average has only been lower one time; October 9, 1998, when it averaged 6.49%. A year ago, the thirty-year average stood at 7.73 percent. BankRate.com reported that the majority of experts it surveyed for the period November 1st to November 11th expect rates to fall more than two BPS over the next 30-45 days. The Mortgage Bankers Association of America reported that according to its weekly survey of mortgage bankers, commercial banks and thrifts for the week ending October 26th, mortgage applications fell six percent from the prior week, with applications for refinances falling more than eight percent.
Mortgage Rates Falling Faster Than Cost Of Funds At Thrifts
Shares of Washington Mutual (NYSE: WM) fell more than five percent Thursday as investors worried that the Treasury Department's decision to suspend issuance of 30-year bonds might cause mortgage rates to decline faster than the borrowing costs of thrifts, according to Dow Jones Newswires (DJ). Shares of Golden West Financial Corp. (NYSE: GDW), parent of World Savings, were down 2.76 percent. However, DJ reported that during the day UBS Warburg upgraded the thrift sector to "strong buy" during the day, and said the recent selloff puts these stocks at "historic low valuations," and "the bond rally and ensuing refinancing boom are only modest and temporary negatives."
Mortgage Documents Drifted From WTC To Backyard
Nearly a month after the attacks on the U.S., the Los Angeles Times (Times) reported that attorneys at a Brooklyn law firm got a call from a woman in Sheepshead Bay, nearly 15 miles from the WTC. The Times said that on the tail of an eastward breeze, pieces of paper had come wafting down from the sky and into her backyard. Reportedly among the soggy and torn papers were mortgage agreements about to be signed. According to the Times, the lawyers hung up the phone and called a messenger service.
Threat of Loan Fraud Requires Lenders To Show Caution
Technology has helped make the it a lot easier for sophisticated, yet unscrupulous borrowers to commit fraud, according to a recent story from Mortgage Servicing News. Mortgage fraud has reportedly increased nationally approximately 10% to 15% from last year, according to the story, and this year's increase in foreclosure rates can be attributed, in part, to the increase of mortgage fraud schemes. Fraud is involved in 'flips', builder bailouts and straw borrowers.
COFI Falls Further
The Federal Home Loan Bank of San Francisco announced that the Monthly Weighted Average Cost of Funds Index (COFI) fell to 3.974%, down 13 basis points (BPS) from August. This is the eighth consecutive month that the COFI has declined. This is the lowest that the COFI has been since August, 1994.
German Banks To Merge Mortgage Units
Deutsche Bank, Dresdner Bank and Commerzbank have agreed to merge their mortgage units, according to Dow Jones Newswires. The name of the new entity will reportedly be Eurohypo, with ownership percentages at 35% for Deutsche Bank, 35% for Commerzbank and 30% for Dresdner Bank. Dow Jones reported the merger will result in job cuts of around 800 of the merged entity's 2400 employees.
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