On Friday the House Oversight Committee had its crack at Angelo Mozilo, Stan O’Neal and Charles Prince, considered by some to be the three horsemen of the subprime apocalypse. (In the Bible there are four horsemen but who’s counting?) The witnesses, along with the compensation chiefs of Countrywide, Merrill Lynch and Citigroup, respectively, came into the Rayburn hearing room through the back door, thus avoiding the press. However, once seated, 10 different photographers began clicking away as the men were sworn in. As might be expected, committee chairman Henry Waxman of California raked Mr. Mozilo over the coals for his insider stock sales (an estimated $400 million over seven years). Rep. Waxman, among other things, was interested in CFC’s decision in November 2006 to use $2.5 billion in capital ($1.5 billion of it borrowed) to buy back its stock in the open market. This decision was made just as Mr. Mozilo began speeding up his stock sales (after exercising options). Mr. Mozilo, who kept a calm demeanor throughout much of the hearing, said there was no connection between the corporate buyback and the acceleration of his stock sales. Harley Snyder, a CFC board member in charge of compensation, noted in his testimony that Mr. Mozilo was scheduled to retire from the company in late 2006, saying, “The individual we thought would succeed Mr. Mozilo as CEO had left the company.” Mr. Snyder forgot to say that the individual, Stanford Kurland, did not leave on his own accord. He was pushed. And I would guess Mr. Kurland is sitting poolside these days, sipping a cocktail, and thanking Mr. Mozilo and the board for kicking his butt the heck out of the company…

Two take-aways concerning congressmen sitting on the House Oversight Committee: Rep. Eleanor Holmes Norton of Washington needs to work on her pronunciation of Italian surnames. She repeatedly mangled “Mozilo” referring to him as “Mr. Mozlo.” (I just hope I never get called before the committee.) Rep. Tom Davis of Virginia was clearly the apologist on the panel, explaining away the mortgage crisis as something caused by “the unsustainable promise of ever-rising home prices.” I guess, Rep. Davis, a Republican, is unaware of ABS, CDOs, SIVs, payment-option ARMs, stated-income loans, subprime REITs, credit default swaps, inflated appraisals, predatory lending by such firms as Ameriquest and Household, loan fraud, broker fraud, accounting fraud, insider selling and related matters, which prompts me to ask: Why is this elected official sitting on an oversight committee?…

Meanwhile, CFC’s $28 billion payment-option ARM portfolio is in deep trouble with 5.36% of the loans 90 days past due. For the full story see the Monday edition of National Mortgage News. Don’t subscribe? Call: (800) 221-1809…

Jumbo REIT Thornburg Mortgage late this past week revealed that it will have to restate its results for 2007, noting that a spate of margin calls have raised substantial doubts about its ability to continue as a going concern. A week ago Friedman Billings Ramsey reiterated its “outperform” rating on the company, setting a price target on the stock of $13 a share. On Friday its shares were trading at just over $1. FBR, of course, has underwritten some of the lender’s equity offerings, which means its objectivity in regard to Thornburg is, shall we say, questionable…

MBA’s COMMERCIAL MORTGAGE WOES: The Mortgage Bankers Association expects to close on a mortgage this month to finance a newly constructed eight-story office building it purchased in downtown Washington last year. MBA officials signed the contract at the height of the office building boom. Its staff is scheduled to move to 1331 L St. NW this summer. But MBA’s elected officers are getting nervous. Office leasing has slowed in Washington and so far they have no tenants lined up for the top four floors, sources say.

MICHAEL JACKSON COMMERICAL MORTGAGE UPDATE: In November, NMN reported that Michael Jackson’s 2,800-acre estate was in danger of foreclosure after the former king of pop defaulted on his mortgage payments with Fortress Music Trust. According to documents filed with the county recorder’s office in Santa Barbara, Mr. Jackson finally paid the state tax lien of $600,000 on his abandoned Neverland Ranch in Los Olivos, Calif. However, according to NMN’s Nathasha Lim, this payment doesn’t cover any of the $24 million in loans taken out against the ranch, which are, shall we say, way past due. (There’s late penalties, too.) If Jackson fails to pay the outstanding balance by March 19, his property, along with everything at the ranch will be sold at a public auction…

WASHINGTON NEWS: Ginnie Mae said that pools backed by the Federal Housing Administration’s temporary high-balance loans will be ready for issuance on April 1.

LOAN OFFICER SURVEY NOTICE: National Mortgage News has launched its new 2008 Loan Officer Survey. To participate (it’s free) just visit http://data.nationalmortgagenews.com/surveys/losurvey.

MUST-ATTEND MORTGAGE MEETINGS: SourceMedia will hold its second annual Mortgage Servicing Conference at the Westin Park Hotel in Dallas on April 17 and 18. The keynote speaker is Paul Bennett, chief economist for the New York Stock Exchange. For more information visit http://www.sourcemediaconferences.com/MS08.

MORTGAGE BANKER/BROKER SURVEY NOTICE: National Mortgage News is in the process of surveying residential and commercial lenders, servicers, and loan brokers for its annual Mortgage Industry Directory. To participate in the survey (1,000 industry movers and shakers see the book) send an e-mail to: [email protected]

https://www.brokeruniverse.com/daily-origination-news/

First American Spin-Off to Take CoreLogic Name
April 29, 2010

When the Information Solutions Group of First American Corp. becomes a separately traded public company, it will take the name CoreLogic and trade on the New York Stock Exchange under the symbol CLGX. The spin-off is targeted for June 1. The title company will be part of First American Financial Group, which will retain the FAF ticker symbol. The new CoreLogic will encompass more than 20 different business lines, making it larger and more diverse than the entity currently known as First American CoreLogic. Meanwhile, two sets of First American bondholders have approved debt tender offers and consent solicitations. The approvals by those who hold the 5.7% senior notes due 2014 and the 8.5% capital securities due 2012 expressly affirm the spin-off transaction. A third solicitation for the holders of the 7.55% senior debentures due 2028 remains in progress, with 43% tendered so far.

Growing Ambac Woes Add MBS Losses to CU’s Results
April 28, 2010

Escalating troubles at Ambac Assurance Corp. and the resulting inability of the bond insurer to make even less of a partial payment on claims than it previously expected caused U.S. Central Federal Credit Union to restate its fourth quarter results for 2009, adding $274 million in losses that came from MBS investments. As a result, U.S. Central had losses of $750.9 million for the fourth quarter and $2.04 billion for the full year. U.S. Central, which has been run under a National Credit Union Administration’s conservatorship program since March 2009, had a loss of $4.9 billion for 2008. Financial troubles at Ambac caused its regulator, the Wisconsin Insurance Commissioner, to issue an order restricting the company’s activities and its ability to pay bond claims. As a result, U.S. Central now projects it will collect 25% of its claims from Ambac, down from earlier projections of 80%. This increased U.S. Central’s estimates for credit losses on Ambac-backed bonds to $416.1 million. Ambac is one of several troubled bond insurers whose financial troubles are trickling down to customers like the corporate credit unions, with other corporates cutting their recovery estimates in recent months on bonds insured by MBIA, Financial Guarantee Insurance Corp., Syncora Guarantee and FSA (now Assured Guarantee Municipal). Both FGIC and Syncora have been ordered by the New York Insurance Department to stop paying claims in order to preserve what little capital they have.

Relative Mortgage Weakness Contributes to Flagstar’s Loss
April 28, 2010

A relatively weak quarter for Flagstar Bancorp’s mortgage business contributed to the Troy, Mich., company’s nearly $82 million loss in the first quarter of 2010. For the same period in 2009, the company lost over $67 million and in the fourth quarter of 2009, it lost approximately $72 million. Gain on loan sales fell from $96.5 million in the fourth quarter of last year to $52.6 million in the most recent period. This reflects a decline in interest rate locks on mortgage loans, from $7.9 billion in the fourth quarter of 2009 to $6.1 billion for the first quarter of 2010 as well as a decline in residential mortgage sales during the same period from $7.1 billion down to $5.0 billion and a decline in loan fees from mortgages from $27.8 million down to $16.3 million. Loan originations fell from $9.5 billion in the first quarter last year to $6.9 billion in the fourth quarter to $4.3 billion in the most recent period. Its servicing portfolio declined from $56.5 billion at the end of last year to $48.3 billion on March 31, 2010. During the first quarter, Flagstar had two bulk servicing sales totaling nearly $11 billion. Nonperforming residential first mortgage loans were $709.4 million at the end of the first quarter, up from $659.5 million as of Dec. 31, 2009, while nonperforming commercial mortgages increased to $395.8 million from $385.7 million during the same period.

MBA Expecting a Flood of Home Price Listings
April 28, 2010

With home prices stabilizing, the market may soon be flooded with new listings from sellers that have been waiting for such an improvement, according to the Mortgage Bankers Association. “There will be a flood of listings,” predicted MBA vice president of research Michael Frantantoni. “We will have a rather volatile, sort of topsy-turvy market for the next couple of years.” Speaking at an MBA trade show, Frantantoni noted that both owner (2.6%) and rental vacancy rates (10.6%) are increasing. He said this trend suggests “we are losing households.” MBA anticipates that home prices will be flat for the rest of the year. The trade group anticipates that the Federal Reserve will not start hiking short-term rates until December of this year, at the earliest. But Frantantoni fears that even with the economy improving, consumers may not spend much. “Their outlook on spending, saving and risk taking may have changed,” he told the audience. As for the job market, MBA sees unemployment falling steadily to 7.5% by 2012, but a large portion of that improvement may come in the hiring of temporary workers, he said. “Roughly one-quarter to one-third of this audience is hiring temps,” Frantantoni said. “We’re not anywhere close to a peak. Businesses are seeing an increase in demand for their services and they need to staff up as a result, or plug the hole while they wait to see if this demand will persist.”

Purchase Apps Seen Rising in Week as Refis Drop
April 28, 2010

Purchase mortgage applications were up last week as the homebuyer tax credit program moved toward its month-end deadline, but overall applications were down from the preceding week as refinancings declined, according to the Mortgage Bankers Association. The MBA’s Market Composite Index for the week ended April 23 fell 2.9% on a seasonally adjusted basis compared with one week earlier. On an unadjusted basis, the Index decreased 1.9% compared with the previous week. According to Michael Fratantoni, MBA’s vice president of research and economics, “Purchase applications were up almost 9% from a month ago, with a disproportionate share of the increase due to government purchase applications. Government applications for purchasing a home accounted for almost 49% of all purchase applications last week.” The seasonally adjusted Purchase Index increased 7.4% from one week earlier and reached its highest level since October 2009. The government purchase index increased 11.9% from last week on a seasonally adjusted basis, while the conventional purchase index increased 3.5%. The Refinance Index declined by 8.8% from the previous week. The market share of refi applications fell to 55.7%, its lowest point since August 2009. This was down from 60% for the previous week. The market share of adjustable-rate mortgage applications was unchanged at 6.0%. The average contract interest rate for the 30-year fixed rate mortgage rose four basis points from 5.04% to 5.08% for the current week with points decreasing to 0.91 from 0.98 (including the origination fee) for loans with an 80% percent loan-to-value ratio, according to the association. The average contract interest rate for 15-year FRMs also had a 4 bps increase to 4.38%. The average contract interest rate for one-year ARMs increased 8 bps to 7.03%.

Congress Passes Bill to Save Rural Housing Program
April 28, 2010

Picture of Paul KanjorskiThe House of Representatives Tuesday afternoon passed a bill that reforms the Rural Housing Service’s single-family program, extending it through Sept. 30 to prevent a shutdown. Supporters of the bill (H.R. 5017) hope the Senate acts quickly to approve the measure this week. The chief sponsor of the legislation, Rep. Paul Kanjorski, D-Pa., said RHS could run out of loan guarantee authority by the end of April. The bill makes RHS self-funding by increasing the upfront guarantee fee to 4% from the current 2% requirement. The Agriculture Department, which administers the program, is expected to impose a 3.44% fee on borrowers. The original bill allowed the Agriculture secretary to assess a 0.5% annual fee on the loan balance, but the measure was dropped during a committee markup. Congress originally granted RHS $13.1 billion for loan guarantee authority for fiscal 2010, but thanks to the program’s popularity, the allocation is nearly gone. The bill increases that authority to $30 billion, but it expires Sept. 30 when the fiscal year ends. Congress will have to renew RHS’s loan guarantee authority as part of the FY 2011 appropriations process. Rep. Shelley Moore Capito, R-W.Va., said the short-term extension is needed to foster a return of private lenders.

Bill Giving FHA More Flexibility in MIP Adjustments Moves Ahead
April 28, 2010

Picture of Shaun DonovanThe House Financial Services Committee has approved a bill that will give the Federal Housing Administration more flexibility in adjusting its mortgage insurance premiums. The committee passed the bill (H.R. 5072) on a voice vote after amendments by Rep. Scott Garrett, R-N.J., to raise the FHA downpayment requirement, prohibit financing of upfront premiums and limit the FHA guarantee to 95% of the loan amount were voted down. Garrett’s amendment to raise the FHA downpayment to 5% from the current 3.5% minimum failed on a 52-12 vote. FHA recently increased its upfront premium 50 basis points to 2.25% of the loan amount to help recapitalize the FHA insurance fund. But the agency would prefer to raise its 55 basis point annual premium instead. If passed by the Senate, H.R. 5072 would allow FHA to reduce the upfront premium to 1% and raise the annual premium to 90 bps on single-family mortgages with loan-to-value ratios above 95%. Raising the annual premium would be “safer for homeowners and better for the health of the FHA fund,” according to Housing and Urban Development secretary Shaun Donovan. The FHA reform bill also strengthens FHA enforcement powers to hold lenders accountable for bad loans. “Further, the bill provides that a lender’s improper or imprudent activities at the regional level may now yield enforcement actions that restrict their nationwide activities,” the HUD secretary said.

GOP Alternative Offers Hope on MBS Risk Retention
April 28, 2010

A Republican alternative to Sen. Chris Dodd’s massive financial services bill gives the mortgage banking industry hope that Congress understands the dire need for an exemption on MBS risk retention. According to an outline prepared by Sen. Richard Shelby’s staff, an exemption on the 5% risk retention rule would be granted for loans that “meet minimum underwriting standards” established by bank regulators. However, no details are provided in the outline. All factions of the mortgage industry are lobbying furiously for a risk retention exception for issuers of bonds backed by Fannie Mae, Freddie Mac, and FHA loans. Language in the Shelby outline regarding risk retention is more specific than what is in the Dodd bill. However, lobbyists say Dodd has been open to more specific language on risk retention. Some industry participations believe that if no “carve out” is granted, a new round of consolidation will result in large players having even more control over the industry than they do now.

Survey Shows Stability in Canadians’ Mortgage Broker Usage
April 27, 2010

Mortgage broker usage in Canada has remained stable during the past year, according to Canada Mortgage and Housing Corp.’s annual online consumer survey. The use of mortgage brokers by first-time buyers remains at about 45% and approximately one-third of repeat buyers continue to use brokers. Use of brokers to refinance remains stable at roughly 23%, where it has been since 2006. The survey also shows Canadians’ confidence that homeownership is a good long-term investment has remained stable to slightly higher, with 92% agreeing with this statement in 2010 compared to 90% in 2009. The online survey polled more than 2,500 active mortgage borrowers.

Fannie Extends Seller Assistance on REO
April 27, 2010

Fannie Mae has extended its seller assistance incentive on all company-owned HomePath properties. Buyers will receive 3.5% of the final sales price to be used toward closing cost assistance or their choice of selected appliances. The offer is available to any owner/occupant who closes on the purchase of a property listed on www.HomePath.com by June 30. “We are happy with the results of the program, which has helped us to sell properties quickly, thereby stabilizing neighborhoods and property values,” said Terry Edwards, Fannie Mae executive vice president of credit portfolio management.

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