Pipeline

He Said, She Said

There has been some confusion over first-quarter figures at Fannie Mae, Freddie Mac and the Federal Housing Administration. But one thing is indisputable: the mortgage market is still on government life support.

At a Mortgage Bankers Association conference on Monday in New York, FHA Commissioner David Stevens caused a stir by saying his agency insured more loans than Fannie and Freddie purchased during the first quarter, "a shocking statement." He cited Washington consulting firm Potomac Partners for the data.

Stevens went on to say that "having FHA do this much volume … is a sign of a very sick market," one that he doesn't anticipate improving anytime soon. Several media outlets, including American Banker, published the finding.

Later in the day, the government-sponsored enterprises' conservator, the Federal Housing Finance Agency, countered the claim. Fannie purchased $24.9 billion of single-family mortgages during the period ended March 31, while Freddie purchased $18.7 billion of loans, for a total of $43.6 billion, said FHFA spokeswoman Corinne Russell. According to FHA's website, the agency insured $42.8 billion of single-family loans in the first three months of 2010.

But the FHA's fiscal year is from October through September. In its fiscal first quarter, or the final three months of 2009, the FHA insured $51.9 billion of single-family mortgages.

Still, Brian Chappelle, of Potomac Partners, later admitted in an e-mail he made "an arithmetic mistake" in his FHA number. The discrepancy reflects that the average loan the FHA insures is about $175,000, whereas the average loan purchased by Fannie and Freddie is around $215,000 to $220,000, Chappelle said.

In any event, Chappelle said, why split hairs over dollar volume? The point is that FHA's market share has grown considerably in the past few years. "It is remarkable that as recently as 2006, the GSEs were doing 20 times the total business of FHA," he said.

The confusion didn't end there. When asked by American Banker to confirm which study Stevens was citing, the FHA said it was one produced by Campbell Communications — which said the agency was mistaken and that Potomac was indeed Stevens' source.

According to figures that will be published next week in National Mortgage News, the Government National Mortgage Association (which securitizes loans insured by FHA and other federal agencies) had a 23% market share in the first quarter, against 25% for Freddie and 50% for Fannie. The GSEs' shares reflect loan purchases from seller/servicers, not mortgage-backed security issuance.

Non-Optional Option

Fannie is putting mortgage lenders in a Catch-22 with its "loan quality initiative," which takes effect June 1.

One of the new requirements is that lenders have to check any undisclosed liabilities a borrower has taken on between the initial loan application and the closing.

In order to check a borrower's debt-to-income ratios, a lender typically would have to pull a second credit report.

Fannie has only recommended that lenders pull a second report. "It is not a requirement," said Fannie spokeswoman Janis Smith.

Teresa Grove, a senior vice president at Kroll Factual Data in Loveland, Colo., said lenders "are between the proverbial rock and a hard spot."

"Fannie Mae does not require a credit report, but the fact is that there is no better source for detecting undisclosed liabilities."

When pressed, Brian Faith, a Fannie spokesman, said the GSE did not want to mandate any specific method and that there are other "processes" a lender may choose to fulfill the requirement. "In all likelihood, in the overwhelming majority of instances, pulling the credit report a second time in some manner will be the method used."

'Foreclosure World'

A Miami judge took the extreme action of wiping out the $207,238.72 mortgage debt of a borrower who was in foreclosure but trying to get a loan modification after HSBC Bank USA ignored a previous court order to post a bond.

Miami-Dade Circuit Court Judge Jennifer Bailey cancelled the mortgage debt of a local teacher at a hearing May 6 to determine whether HSBC should be sanctioned for failing to post a $414,000 bond because it had lost the underlying mortgage note. The judge said she hoped to give "a wake-up call" to lawyers handling foreclosure cases that they need to know where the borrower and bank are in the process of loss mitigation.

In a contentious exchange with HSBC's lawyers, Judge Bailey lambasted banks for the "chaos and disorganization" that has bombarded courts with foreclosure actions while banks simultaneously pursue loan mods. "Somehow in Foreclosure World everybody thinks that … you can know absolutely nothing about your files and walk in here and ask judges for things left and right without even knowing what's going on."

Suzanne Hill, a lawyer who represents Florida Default Law Group in Tampa, the attorneys handling the foreclosure action for HSBC, said it was evaluating whether to appeal or file a motion for a rehearing before the same judge. The Florida Attorney General has identified the Florida Default firm as the subject of a civil investigation.