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Mortgage Industry News Headlines
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Last Updated Wednesday, November 19, 2008 07:00 PM CST
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FHLB Performance Holding Up
Total combined net income fell $213 million from the second quarter at the Federal Home Loan Banks, according to third-quarter earnings data. Like the FHLB, Fannie Mae and Freddie Mac are government sponsored enterprises. While the FHLB's profits waned, earnings were dramatically better than combined third-quarter losses of $54 billion reported by Fannie and Freddie.
H4H Gets Better
The maximum loan-to-value on the HOPE for Homeowners program has been raised to 96.5 percent, the U.S. Department of Housing and Urban Development announced. In conjunction with the increase to LTVs, HUD said it would eliminate the previously required trial modification. Another change to the H4H program includes an extension of mortgage terms to 40 years from 30 years.
Wave of Subprime Downgrades Coming
Cumulative losses on subprime residential mortgage-backed securities issued in 2007 are now projected at 31 percent, Fitch Ratings announced. The frequency of foreclosure on the 2007 issuances are projected at 52 percent. Fitch said it is reviewing subprime RMBS issued from 2005 to 2007 and expects to release updated ratings during the next several days.
Lenders Testify Against Cramdowns
The chairman of the Mortgage Bankers Association testified before a Senate committee about giving bankruptcy judges the power to modify mortgages on primary residences, according to a transcript of his prepared statement. He said cramdown legislation would lead to tighter underwriting standards, increased interest rates and lower loan-to-values. It could also lead to the re-emergence of redlining.
Wrath of the Regulators
Southern Community Bancshares Inc. last week entered an agreement with the Federal Reserve Bank of Atlanta and the Banking Commissioner of the State of Georgia. FirstBank Financial Services Inc. also entered an agreement with the Fed and Georgia's banking regulator. The New York State Banking Department issued a cease-and-desist order against Dresdner Bank AG of Germany and its New York branch.
Thornburg Defaults on Notes
Thornburg Mortgage Inc. announced it missed an interest payment on its 8 percent senior notes. The payment was due on Nov. 15. Thornburg said it did not have available funds to make the payment.
Purchase Production to Plummet
Purchase mortgage originations are projected at $0.7 trillion next year by iEmergent. Purchase activity is expected to turn higher after next year. However, 2009 purchase production is expected to fall to its lowest level since the early 1990s.
HSBC Closes Indirect Channels
HSBC Mortgage Corp. closed its indirect lending channels, according to a statement from spokeswoman Kate Durham. The closure was effective on Nov. 28. "Unprecedented market conditions have made it necessary for HSBC Mortgage Corporation (USA) to cease Wholesale/Correspondent origination operations effective immediately," a senior management announcement stated.
Brokers Settle Deceptive Advertising Claims
Three Colorado mortgage brokers have settled claims of deceptive advertising, according to an announcement from the Colorado attorney general. The firms ran newspaper advertisements for option adjustable-rate mortgage programs with low teaser rates. The state claims that disclosures of true interest rates and other loan terms were either buried in the fine print or not included at all.
Banks Grab TARP Capital
A number of large banks have utilized the capital purchase program, the Federal Deposit Insurance Corporation's chairman testified to a House committee. In addition, more than 1,000 community financial institutions have applied so far for the program. She warned that it is critically important for community banks with less than $1 billion in assets to participate in the program.
Paulson Explains Why Mortgage Purchases Abandoned
The Department of the Treasury released an editorial written by Secretary Henry M. Paulson Jr. for the New York Times. Between the proposal for the Troubled Asset Relief Program and its enactment, economic conditions deteriorated. After committing $250 billion in TARP funds for capital injections into U.S. banks, the Treasury decided that the remaining funds would not be enough to effectively impact the system.
FHA Activity Doubles
During fiscal 2008, the Federal Housing Administration endorsed 1.2 million loans, an annual FHA management report said. Endorsements were more than double the 0.5 million endorsements reported for 2007. "FHA saw an increase in market share primarily due to the collapse of the subprime mortgage market," the report stated.
Alt-A Performance Sinks
As of October, delinquency of at least 90 days on Alt-A loans backing securitizations averaged 20 percent on the 2006 vintage, Moody's Investors Service reported. Six months earlier, delinquency was just 17 percent. Moody's noted that performance deteriorated even further on Alt-A option adjustable-rate mortgages.
Market Values for Less
Similar Sales Inc. announced that it offers an appraiser opinion of value for just 10 percent of the cost of a full residential appraisal report. The company said its benchmark report utilizes a state-licensed real estate appraisers to estimate market value. The appraiser assumes the home is in average condition and that there are no negative internal or external factors.
First American Restructuring
First American Corp. announced that it created two new business lines. The first line, valuations and property solutions, will focus on valuation products. The second line is Outsourcing and Technology Solutions.
Origination Forecast Lowered
U.S. residential originations are projected to reach $1.65 trillion during 2009, Freddie Mac said in its November economic outlook. Last month, production was forecasted to reach $1.92 trillion next year. The decline was driven by a decline in projected conventional residential lending.
More Than 50,000 Citi Layoffs
In its third-quarter earnings data, Citigroup Inc. reported a direct staff of 352,000 as of Sept. 30. An investor presentation today indicated the company plans to reduce its employee count to 300,000 in the "near-term." A spokesman didn't immediately respond to a request for more details about mortgage jobs impacted.
Biggest U.S. Mortgage Lenders
During the third quarter, Bank of America Corp. reported more residential production than any other lender, according to earnings data analyzed by MortgageDaily.com. Wells Fargo & Co. ranked No. 2., followed by JPMorgan Chase & Co. No. 4 was Citigroup, and No. 5 was Residential Capital LLC.
JPMorgan Won't Stand Behind WaMu Repurchases
In a filing with the Securities and Exchange Commission, Freddie Mac reported that JPMorgan Chase & Co. has asserted that it will not be responsible for Washington Mutual Bank's existing and future obligations to repurchase mortgages. Freddie noted that WaMu and a JPMorgan subsidiary were responsible for 16 percent of its business this year. "We have informed JPMorgan Chase that we are unwilling to consent to it being successor servicer unless it assumes the Washington Mutual repurchase obligations," Freddie stated.
Fannie Updates Appraisal Procedures
Fannie Mae has established its own requirements to supplement the Uniform Standards of Professional Appraisal Practice, according to a seller announcement. Fannie has implemented Form 1004MC, a market conditions addendum to the appraisal report. Also, the company will now require that any supervisory appraisers who sign an appraisal must have inspected the property.
TARP Czar Defends Decision to Divert Funds From Mortgages
The U.S. Treasury's interim assistant Treasury secretary for financial stability tesified before the House Committee on Oversight and Government Reform, Subcommittee on Domestic Policy. He defended the Treasury's decision to divert Troubled Asset Relief Program funds from troubled mortgage assets to investments in banks. He said quickly strengthening bank capital was the most timely, effective step to improve credit market conditions.
FDIC Gets Aggressive With Modifications
The Federal Deposit Insurance Corporation has proposed a plan that calls for a $1,000 payment to servicers for each modification to cover expenses. Qualified borrowers would be at least 60 days delinquent and need to occupy the property securing the loan being modified. In addition, the FDIC would share in half of any losses on loans that default no sooner than seven months after modification.
$25 Billion Loss at Freddie
Freddie Mac reported that losses before income taxes during the three months ended Sept. 30 were $25 billion. Freddie said it was impacted by a non-cash charge for deferred tax assets. Freddie also took charges for security impairments on available-for-sale securities.
Subprime Ratings Slammed
Moody's Investors Service downgraded classes of more than 270 subprime residential mortgage-backed securities. The actions followed the update to Moody's loss projections on subprime first mortgages. More than 2,000 tranches were impacted.
CMBS Originations Spike
Third-quarter commercial mortgage originations were 11 percent lower than the second quarter, according to the Mortgage Bankers Association. Conduit originations for commercial mortgage-backed securities were up 67 percent, helping to offest a big decline by commercial banks. Compared to a year earlier, however, conduit originations were down 93 percent.
LIBOR Tumbles as Fixed Rates, Apps Improve
The six-month London Interbank Offered Rate fell 42 basis points from last week, Bankrate.com reported. The 30-year fixed-rate mortgage average dropped 6 BPS from last week, Freddie Mac reported. Total mortgage applications rose 12 percent on a seasonally adjusted basis from the prior week in the Mortgage Bankers Association's latest survey.
CA REOs Tumble
Real estate owned filings were 20,631 in California during October, RealtyTrac reported. REO filings dropped from 6,742 from September. Still, California saw the highest level of REO filings of any state last month.
Foreclosure Strategies Widely Varied
Treasury Secretary Paulson commended the chairman of the Federal Deposit Insurance Corporation for her streamlined modification strategy at failed IndyMac Federal Bank FSB. California's governor has proposed a 90-day hiatus on some foreclosure proceedings, a notice from the state said. Maryland's governor announced agreements with six servicers to improve the loss mitigation process. A preliminary injunction against Option One Mortgage Corp. and H&R Block Mortgage Corp. was granted to Massachusetts' attorney general by a superior court, a press release said.
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Copyright © 2007 MortgageDaily.com
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Brokers Settle Deceptive Advertising Claims
Five mortgage brokers operating in Colorado have settled allegations of deceptive advertising. Another broker settled charges of mortgage fraud.
The state's Attorney General John Suthers announced the settlements today.
Three of the firms -- Arbor Financial Inc., 5280 Financial Group and Mortgage Toolbox -- ran advertisements in mortgage sections of the Denver Post and Rocky Mountain News.
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3 Brokers Elected to Fla Legislature
Three mortgage brokers were elected to Florida's legislature. The trio attribute their success to political activity, volunteer work and professional experience.
All three have been active in the Florida Association of Mortgage Brokers, two of them as office holders.
Ritch Workman was elected to Florida's House of Representatives with 54 percent of the vote.
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CitiMortgage Reduces Broker Business
CitiMortgage is slashing the number of mortgage brokers it does business with -- leading to hundreds of layoffs. Business from a smaller and more productive group of brokers will ultimately be channeled through offices in Missouri and Texas.
The O'Fallon, Mo.-based lender is cutting off some of its mortgage brokers, spokesman Mark Rodgers told MortgageDaily.com in an interview.
He could not reveal which brokers are being cut or how exactly the company is determining this, but he did note that the brokers they are keeping tend to be those with the higher quality loans and higher volume.
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Broker Share, Loan Profits Decline
A new trade group report indicated broker share fell last year as retail and correspondent share rose. Mortgage bankers saw losses climb more than $500 for each loan they originated, though servicing profits per loan nearly doubled.
Average income for mortgage banking firms was $0.9 million during 2007, tumbling from $6.4 million the prior year, according to the 2008 MBA Cost Study released today by the Mortgage Bankers Association.
In 2003 -- at the height of the biggest refinance wave in U.S. history -- net income averaged $57.9 million.
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Bad Loans, Bad Investments
Five Southern California mortgage brokers have been charged by the Securities and Exchange Commission with allegedly placing borrowers in unaffordable subprime loans to finance unsuitable securities -- earning commissions every step of the way.
The defendants, Kederio Ainsworth, Jesus Gutierrez, Guillermo Haro, Gabriel Paredes and Angel Romo, worked for World Group Securities Inc. in the Los Angeles area, an SEC statement Friday said.
Each was a registered representative and a mortgage broker.
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