Pipeline: Mortgage Production News and Trends

Prime Time
Richard Powers, the general manager of GMAC LLC's Ditech unit, said the direct-to-consumer lender's new "People Are Smart" advertising campaign is meant to better align the Ditech brand with prime lending in the minds of borrowers.

"We have a very large cross section of folks who know Ditech, they've seen our ads, but they don't pick up the phone and call us because they perceive us as a subprime company," Mr. Powers said Tuesday at Ditech's Costa Mesa, Calif., headquarters.

That perception was the reason Ditech ditched a character in its television ads — that goofy banker who bemoaned that he "lost another loan to Ditech" — late last year.

The new television, newspaper, and radio campaign is designed "to make sure our products are much more clearly aligned with who we are," Mr. Powers said. It was created by Keith Goldberg, Ditech's senior vice president of marketing, who oversaw Capital One Financial Corp.'s "What's in Your Wallet?" campaign.

April was Ditech's best funding month since October 2005, said Mr. Powers, who joined the lender in August from Metrociti Mortgage Corp.

"The fallout from subprime has helped our business," he said. "Consumers migrate towards brands they trust."

Foreign Exchange
The Santa Fe, N.M., real estate investment trust and prime lender Thornburg Mortgage Inc. has introduced a jumbo and super-jumbo loan product for affluent foreign nationals interested in purchasing a second home in the United States.

To qualify for the loan, borrowers must have a bank account in the United States and either a Social Security or individual taxpayer identification number.

Borrowers without credit reports can use the loan to finance up to 60% of the home's value — or 100% if they can pledge eligible investments in lieu of a down payment.

Joseph H. Badal, the president and chief executive of Thornburg's lending unit, said in an interview Tuesday that few other lenders served high-end foreign homebuyers.

Many of these customers buy second homes in the United States as a safe haven for some of their money, he said. They often work for multinational companies and spend a lot of time in a U.S. office; sometimes they come from countries where credit reports are not available.

Thornburg also has joined the growing list of companies that offer hybrid option adjustable-rate mortgages. The rate on Thornburg's version is fixed for the first three to 10 years and the term ranges from 15 to 40 years.

Mr. Badal called the loan ideal for consumers with high credit scores who want to make interest-only payments for 10 years before treating the loan like a fully amortizing 30-year note. Thornburg stressed that the product was not intended for first-time homebuyers who could not afford the 80% combined loan-to-value.

Option ARMs usually start adjusting after the first year. Thornburg already offered a regular option ARM, but Mr. Badal said the product was "not one we have pushed." (Thornburg's traditional option ARM is not available to foreign nationals.)

Speedy Solution
Jim Gladden, an executive vice president with ATM Corp., a vendor management company, says there has been "a significant migration to a managed approach" for appraisals in the past couple years.

The problems in the subprime market have created "even more significant demand" for a "truly arm's-length evaluation of the collateral as opposed to just using approved appraisers that the loan officers have relationships with," he said.

However, Mr. Gladden said, lenders have shown "resistance" to "using a vendor management company to perform appraisals" because it makes loan officers feel "out of the loop." The "perception" among loan officers is that hand-picked appraisers with whom they have established relationships produce quick turnarounds, he said.

Today his Pittsburgh company will announce the availability of a package that it says preserves elements of loan officer control while ensuring arm's-length valuations.

The Streamlined Settlement Package also cuts the time between application and closing to as few as six days, or "four days faster than its nearest competitor," ATM Corp. says.

The package lets loan officers schedule guaranteed appraisal appointments — specific to date and time — with the borrower at the time of application. Appointments can be scheduled for as soon as two days after an order is placed. Competing vendors may take up to two days to confirm an appointment, Mr. Gladden said.

"We're giving the lenders days back in the process" so they can "close more loans in the same 20-day business month," Mr. Gladden said.

The package also includes an electronic document-management system and steps that shorten the title process. All told, it should let lenders schedule closing at the time of application, Mr. Gladden said. ATM Corp. pilot tested the package with a lender whose "traditional cycle time" was shaved by "10-plus days" in certain markets, Mr. Gladden said.

Schumer Mirrored
New Yorkers for Responsible Lending, a coalition of 131 civic and community organizations from across the state, presented legislation in Albany Wednesday aimed at curbing predatory subprime lending.

The group says it is seeking sponsors for the bill in the New York State Assembly Banking Committee, the New York State Senate Banking Committee, and the administration of Gov. Eliot Spitzer.

The bill, similar to a federal one backed by New York's senior senator, Charles Schumer, would require lenders to escrow property taxes and mortgage insurance and verify borrowers' ability to pay loans. It would also prohibit abusive terms like balloon payments, the group said.

"The legislature must act now to stem the foreclosure crisis that's been mounting in our state," Sarah Ludwig, executive director of the Neighborhood Economic Development Advocacy Project and a spokeswoman for the coalition, said in a press release.

The coalition cited the experience of a 78-year-old retired postal worker whose broker allegedly lied to him about the true costs of refinancing.

"Now I can't sleep at night because I am worried about losing my house," the retiree, Edward Jordan, said in the release.

From FBI to Fannie
Louis J. Freeh, a former director of the Federal Bureau of Investigation and executive of MBNA Corp., has been elected to the board of Fannie Mae.

Mr. Freeh ran the FBI from 1993 to 2001, and was the general counsel, corporate secretary and ethics officer at MBNA from 2001 to 2006. (Bank of America Corp. bought MBNA last year.)

The eighth new director elected to Fannie's board since 2004, he sits on the compliance and compensation committees.

Mr. Freeh, who runs an eponymous consulting firm, is also a director of Bristol-Myers Squibb and L-1 Identity Solutions.

Quotable …
"Who made this mess? … People who get a commission when the deal happens. … Good loan? Bad loan? Who cares? … Frankly, it's too easy to hang a shingle and call yourself an expert in mortgages. We need licensing of brokers." John M. Robbins, the chairman of the Mortgage Bankers Association, speaking at the National Press Club on May 22 on the causes of the subprime debacle.

"It is truly unfortunate that the president of the Mortgage Bankers Association has attempted to shift blame away from Wall Street, federally chartered banks, state-chartered lenders, and underwriters for the subprime situation we find ourselves in today. … In fact, most lenders are really just brokering the transaction but afraid or ashamed to admit it." Harry Dinham, the president of the National Association of Mortgage Brokers, responding to Mr. Robbins.