Collateral Damage?

Some of the changes announced by the Federal Housing Administration last month may have the unintended consequence of making it harder for veterans of the armed services to refinance their government loans.

On Nov. 17, FHA will raise its standards for "streamlined" refinancings — those replacing loans the agency already insures. Lenders will have to certify that the borrower has a job and income, and appraisals will now be required if the proposed refi would leave the borrower owing more than 125% of the home's original value.

The Department of Veterans Affairs has no appraisal or income requirements for its streamlined refis. But "when FHA makes a change, it seems to impact everything else across the board," said Fred Chamberlin, a mortgage banker at Alpine Mortgage Planning, a Lake Oswego, Ore., unit of Pinnacle Capital Mortgage Corp. in Folsom, Calif. "So lenders will always do things more stringently than the program requires."

Hence, now "some lenders will not do a streamlined refinance for a VA loan without an appraisal," though the government still allows it, said Chamberlin.

Matthew Pineda, the president of Castle & Cooke Mortgage LLC in Salt Lake City, said he thinks it is unfair to require appraisals or proof of income from veterans, particularly those who have been disabled, in order for them to get a refi that would cut their interest rate.

"They're encouraging veterans to walk away from their house if they can't do a streamlined refinance without an appraisal," Pineda said.

For at least a year, the big national lenders that buy mortgages from correspondents like Chamberlin and Pineda have been setting higher standards than the government agencies that guarantee the loans.

For example, many lenders have required a FICO score of at least 620 for FHA loans, though FHA itself requires no minimum credit score. (However, in another change being made in the agency's streamlined refi program, lenders will have to provide credit scores for borrowers when they are available.)

Multifamily Moves

Freddie Mac said Wednesday that it plans to offer about $1 billion of bonds backed by multifamily mortgages this month in its second such deal.

The McLean, Va., government-sponsored enterprise completed a similar $1 billion offering in June and now plans to execute at least one per quarter.

Freddie has "a growing and active pipeline of multifamily loans for securitization," David Brickman, the GSE's vice president of multifamily and commercial mortgage-backed securities capital markets, said in a press release.

Both Freddie and Fannie Mae have shifted away from holding multifamily property loans in their balance sheet portfolios this year, instead turning to bond markets and filling ground vacated by Wall Street issuers amid the financial crisis and deteriorating conditions in real estate markets.

Commercial property loans held by the GSEs or in government-backed pools increased by 1.8% from the previous quarter, to $351.8 billion in the second quarter, according to Federal Reserve Board data. Overall, commercial property loans contracted by 0.3%, to $3.5 trillion.

The Freddie offering is backed by 46 recently originated loans. The securities are divided into different classes, including one tied to interest payments on the collateral alone, and are guaranteed by Freddie.

Also Wednesday, Grandbridge Real Estate Capital LLC, an Atlanta commercial and multifamily mortgage bank owned by BB&T Corp., said it had acquired similar outfits in Texas and Kentucky.

Grandbridge did not say how much it paid for Quantum First Capital in Dallas or BFG Realty Advisors in Louisville.

Stuart Wernick, Quantum First's founder, joined Grandbridge as a senior vice president. The BB&T unit bought another Texas mortgage bank, Live Oak Capital in Houston, last year.

BFG Realty added $400 million of loans to the more than $24 billion that Grandbridge already serviced. Grandbridge said acquiring BFG will help it serve clients of the $152.4 billion-asset BB&T in the Louisville market, which the mortgage unit left about 18 months ago.

It also said seven more of its loan production offices had been authorized to originate and service mortgages for Program Plus, Freddie's main multifamily program. Twenty of Grandbridge's 28 offices now have this authorization; it also can arrange loans nationwide under Freddie's targeted affordable-housing program.

Quotable …

"I don't think it affects us at all, but we will not be shy about referring complaints on non-state banks to our attorney general."

Marjorie Gross, the deputy superintendent and general counsel at the New York State Banking Department, responding to a question on the impact of the Supreme Court's ruling in Cuomo v. Clearing House Association LLC that states have enforcement authority over national banks. She spoke Wednesday at a seminar in New York sponsored by Brooklyn Law School's Dennis J. Block Center for the Study of International Business Law.

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