Mortgage Broker News Archives March 7, 2008 from MortgageChronicle.com

Mortgage Industry News Headlines

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Last Updated Friday, March 07, 2008 06:27 PM CST

Thornburg Facing Collapse
Thornburg Mortgage Inc. has received notices of defaults from Natixis Securities North America Inc., ING Financial Markets LLC and Goldman, Sachs & Co., according to an 8-K filing with the Securities and Exchange Commission. The company noted the remaining margin calls significantly exceeded its available liquidity. "These events have raised substantial doubt about the company's ability to continue as a going concern without significant restructuring and the addition of new capital," Thornburg stated.
Conforming Jumbos Retroactive
Fannie Mae issued an announcement that it will purchase fixed-rate mortgages under temporarily higher limits beginning in April. Adjustable-rate mortgages can be purchased at the higher limit beginning May 1. While Fannie said loans must have been originated on or after March 1, 2008, it noted it will consider loans originated as of July 1, 2007, in bulk purchases.
Validity of Repurchase Agreements
American Home Mortgage Investment Corp.'s opposition to certain financial institutions which helped finance its mortgage loan originations serves as both a cautionary tale for mortgage loan repo participants and an affirmation by the Bankruptcy Court of the broad protections intended by Congress to be granted to such participants. As evidenced throughout the code, subsequent amendments and legislative history, Congress has long recognized the importance of protecting financial markets from the disastrous effect that may occur if the insolvency of one participant is allowed to spread to other players. In particular, the viability and stability of the repo market was a key concern addressed in the 1984 amendments to the code and, then again, as part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
Execs Defend Compensation
The House's Committee on Oversight and Government Reform, chaired by Rep. Henry Waxman (D-Calif.), held the hearing, Executive Compensation II: CEO Pay and the Mortgage Crisis. Among those testifying were Angelo R. Mozilo, founder and chief executive officer of Countrywide Financial Corp.; E. Stanley O'Neal, former chairman and CEO of Merrill Lynch & Co. Inc.; and Charles Prince, former chairman and CEO at Citigroup Inc. "Collectively, the companies run by Mr. Mozilo, Mr. O'Neal, and Mr. Prince lost more than $20 billion in the last two quarters of 2007 alone as a result of investments in subprime and other risky investments," a House memorandum stated. "During the five-year period from January 2002 through December 2006, as the stock of Countrywide, Merrill Lynch, and Citigroup appreciated, and the three CEOs collectively received more than $460 million in compensation."
Mortgage Employment Edges Lower
In January, there were 364,900 people employed in the mortgage industry, according to data released today from the Bureau of Labor Statistics. Mortgage jobs were down slightly from December. But employment in the sector is down more than 100,000 from a year earlier.
Rapid Alt-A Deterioration
A rapid deterioration in Alt-A performance has prompted Fitch Ratings to take a closer look at the Alt-A transactions it rates. The ratings agency noted its analysis is based on a 25 percent home price decline from the peak in 2006. Another factor is the willingness of Alt-A borrowers with high loan-to-values to walk away from properties.
Mortgage Market Better
The average 30-year fixed-rate mortgage came in at 6.0 percent, according to Freddie Mac's Primary Mortgage Market Survey for the week ending March 6. The 30-year tumbled from a week earlier. A 5% increase in refinance applications pushed overall activity 3% higher, the Mortgage Bankers Association reported.
Citi Shrinking Mortgage Business, Assets
Citigroup announced it would reduce its residential mortgage assets in its U.S. mortgage business by approximately $45 billion over the next 12 months. The actions were prompted by a company wide business review that is still in process. "In addition, the company will integrate middle office and support areas to serve both first and second mortgage operations, organize sales channels around customer segments, and strengthen ties with Citi Markets & Banking, which will be the primary provider of capital markets services to its U.S. mortgage business going forward," the announcement stated.
Increased FHA, Conforming Limits Published
The U.S. Department of Housing and Urban Development has uploaded the temporary FHA limit increases to its Web site. The maximum loan amount of $729,750 will apply in 14 California counties, one Florida county and 10 counties in New York. The new limits also apply to conforming loans that can be purchased by Fannie Mae and Freddie Mac.
Delinquency Continues Deterioration
Excluding loans in foreclosures, seasonally-adjusted residential delinquency ended the fourth quarter at 5.82 percent, the Mortgage Bankers Association reported. Delinquency rose from the prior quarter and the prior year. MBA said loan delinquency reached the highest level since 1985.
Mortgage Fraud Investigations Soar
The number of mortgage fraud investigations currently pending at the Federal Bureau of Investigation is 1,200, the agency's director testified to Congress this week. Pending cases are up 50 percent over 2006. He said the FBI will build on existing "intelligence databases to identify large-scale industry insiders and criminal enterprises conducting systematic mortgage fraud."
LOS, Documentation Enhancements
INTEGRA Software Systems has integrated Interthinx Inc.'s FraudGUARD and PredProtect into its loan origination system, according to an announcement. INTEGRA separately announced it is integrating Compliance Systems Inc.'s IntelleDoc Solutions into its system. IntelliScan SDS, a mixed document scanner, was launched by BancTec Tuesday, a press release said. eLynx announced the release of a newly-enhanced SwiftPublish document capture application.
Crisis Deepens at Thornburg
A letter dated Feb. 28 was sent by JPMorgan Chase Bank N.A. to Thornburg Mortgage Inc., according to a Form 8-K filing with the Securities and Exchange Commission. The letter indicated an event of default had occurred on a reverse repurchase agreement. JPMorgan told Thornburg it "will exercise its rights under the agreement."
Higher FHA Rolled Out in Some CA Counties
A new law temporarily raises the maximum FHA loan to $729,250 through Dec. 31, 2008. HUD Secretary Alphonso Jackson said the new maximum will be available in Los Angeles County and Orange County. He said the temporary limits, ranging from $271,050 to $729,750 for varying areas, will be published later this week.
First Franklin Closing Confirmed
The parent of First Franklin Financial Corp. announced it will discontinue originations at the unit. More than 600 people will be laid off as a result. The closing was attributed to the deterioration of the subprime lending market.
The Lead Pool
Network Earth Inc. announced the release of mbrokertools.com, which it says creates synergistic lead-generating relationships between the mortgage industry and real estate professionals. Intellidyn Corp. announced its new marketing models can help retail lenders immediately identify and market to refinance loan prospects who now qualify under higher limits for conforming mortgages and FHA insured loans. Until Friday, 1st Choice Mortgage Leads is giving away free leads in addition to regular packages purchased, according to a promotional e-mail.
RMBS Ratings Still Suffering
Negative ratings actions continue as a result of changes to Fitch Ratings' subprime loss forecasting assumptions. Classes totaling $7.2 billion from 12 First Franklin Mortgage Loan Trust deals from 2006 were downgraded. Six SASCO mortgage pass-through certificates from last year had $3.5 billion in classes downgraded. Three IndyMac Home Equity Mortgage Loan Asset-Backed Trust transactions from 2004 and 2005 had 19 tranches placed on review for possible downgrade by Moody's Investors Service.
Secondary Marketing Journal
American General Finance Inc. acquired a $1.5 billion portfolio from Equity One, according to an announcement. Ginnie Mae announced London Interbank Offered Rate index options for forward market adjustable-rate mortgage pools are now available on GinnieNET. Oxford Funding Corp. announced it acquired a $2.7 million portfolio at a 70 percent discount from a national lender that is in bankruptcy.
Builder's Mortgage Unit Settles with N.C.
Ryland Mortgage has entered into a consent order with the North Carolina Office of the Commissioner of Banks, according to an announcement from the state. The affiliate of Ryland Homes has agreed to pay more than $300,000 to settle allegations it used unlicensed originators and overcharged borrowers who purchased a home from its parent company. The order stems from an examination in October 2006 by the state.
Fed Advocates More Write Downs
As equity continues to decrease and resets accelerate, delinquencies and foreclosures will likely continue to rise, the Federal Reserve chairman told the Independent Community Bankers Association this week. With the contraction in subprime lending, refinances are not an option for most borrowers who face resets. The chairman suggested investors should allow servicers to write down balances enough to enable borrowers to refinance.
Brokers May Fight New Appraisal Requirements
Fannie Mae and Freddie Mac have have entered into cooperation agreements with New York's attorney general to only purchase loans that meet a new home valuation protection code. Under the new code, mortgage brokers are prohibited from choosing or communicating with appraisers on conforming loans. The National Association of Mortgage Brokers has denounced the agreements and said it is considering legal action.
Judge Rules in Favor of DPA Firm
A federal judge has ruled in favor of Nehemiah Corporation of America in its lawsuit against the U.S. Department of Housing and Urban Development and HUD's secretary. HUD had finalized a rule on Oct. 1, 2007, prohibiting DPA funded by a home seller or anyone that financially benefits from the transaction or is reimbursed directly or indirectly by the seller. But the judge granted a summary judgment in favor of Nehemiah setting aside the final rule.
Downgrades Pile Up
More fallout has resulted from changes to Fitch Ratings' subprime loss forecasting assumptions. Eight Securitized Asset Backed Receivables LLC Trust mortgage pass-through certificates from last year saw $6.4 billion in classes downgraded, with $3.6 billion remaining on Rating Watch Negative. Classes amounting to $2.8 billion of four 2007 HSBC mortgage pass-through certificates were downgraded and another $1.6 billion were placed on watch. Standard and Poor's placed 1,887 classes for $14.0 billion of Alt-A RMBS from 404 transactions in 2006 and 2007 on CreditWatch with negative implications.
IndyMac Performance Deteriorates
Residential loan fundings were $2.8 billion during January, IndyMac Bancorp Inc. reported Sunday. Fundings were well off December's level and far below originations a year earlier. Delinquency and foreclosures jumped during January.
Subprime Debacle to Shrink U.S. Credit by $2 Trillion
International losses from the mortgage crisis are estimated at $400 billion, according to a study issued by the U.S. Monetary Policy Forum Conference. The report indicated about $20.5 trillion in total assets at leveraged institutions. Leverage ratios varied at these companies from 8.4 to 31.6. Factoring in all these figures, the report concluded balance sheets will likely decrease by about $2 trillion.
MTA Keeps Getting Better
The Monthly Treasury Average was 4.08% in February, according to data from the U.S. Treasury. The index fell from January and from a year earlier. MTA has not been this low since March 2006.
Servicers Required to Report Foreclosure Data
The Office of the Comptroller of the Currency announced it is requiring monthly servicing data from the nine largest banks. The request was made in coordination with the HOPE NOW alliance. The first report for data will be due on March 31.
Conforming Appraisal Overhaul
Fannie Mae and Freddie Mac have entered into cooperation agreements with New York's attorney general to only purchase loans that meet a new home valuation protection code, the state announced. The code is effected on Jan. 1, 2009. Under the new code, mortgage brokers and loan originators are prohibited from choosing or communicating with appraisers.
Liquidity Crisis at Thornburg
Thornburg Mortgage Inc. announced it faces $270 million in margin calls on its reverse repurchase agreement borrowings outstanding as of Feb. 29. "If the company is unable to satisfy outstanding margin calls, any or all of its reverse repurchase agreement counterparties may declare an event of default and liquidate the pledged securities," the company stated. "Such an occurrence would have a material adverse effect on the company's ability to continue its business in the current manner."
Losses Driving Downgrades to Debt Ratings
Fannie Mae saw its financial strength rating placed on review for downgrade by Moody's Investors Service. Moody's announced negative ratings actions taken on a number of primarily regional and community banks as a result of their exposure to commercial real estate. Fitch Ratings revised its rating outlook for the long-term issuer default rating of SunTrust Banks Inc. and subsidiary SunTrust Bank to negative. American International Group Inc. reported a fourth quarter loss of $5.3 billion.

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