Despite increased activity in the Fannie Mae and Freddie Mac refinance programs for underwater borrowers during the second quarter of 2012, total refi originations declined by 4.8 percent from the first three months of the year, according to a new Inside Mortgage Finance analysis and ranking. Refinance activity still accounted for 68.1 percent of originations during the most recent quarter, but that was down from 75.3 percent in the first three months of the year. Partly offsetting the drop in refi business was a 35.8 percent increase in purchase-mortgage originations, which rose to an estimated $129.0 billion in the second quarter. But compared to the first half of 2011, purchase-mortgage lending was down 1.3 percent as of the midway point this year. Refinance originations appear to be climbing in the third quarter. Data on Fannie and Freddie securitization activity in July and August suggest that total refi business at the government-sponsored enterprises is...[Includes four data charts]

The blowback over yield-spread premiums and subprime mortgages continued in Lee v. Countrywide Home Loans, Inc., in which the U.S. Court of Appeals for the Sixth Circuit has determined that a lender – in this case, Countrywide Home Loans, and by extension, parent Bank of America – may be liable under state common law claims of civil conspiracy for failing to disclose fees paid to a mortgage broker. This subprime mortgage case was brought by the borrowers (the Lees) against the lender (Countrywide), its parent company (Bank of...

The Department of Housing and Urban Development said it will step up its oversight of the department’s loan quality review to ensure that weaknesses, such as those uncovered in a recent internal audit, will not happen again. An audit performed by the agency’s Office of the Inspector General concluded that HUD’s Quality Assurance Division had adequate oversight of lenders’ compliance with FHA underwriting standards but for two loans that apparently eluded reviewers. QAD reviewers are required to ...

FHA jumbo activity kicked into high gear in the second quarter of 2012 as originations jumped more than 30 percent from the first quarter, Inside FHA Lending’s analysis of FHA data showed. The volume of FHA loans exceeding $417,000 totaled $6.33 billion in the second quarter, up from $4.78 billion during the first quarter. FHA jumbo production was robust during the first half of the year as the top lenders reported $11.1 billion in total originations, which was 9.1 percent more compared to the same period a year ago. Purchase jumbo loans accounted for ...

The Treasury Department’s recent announcement on the next steps to “wind down” the government-sponsored enterprises will have little immediate impact on the non-agency market, according to industry analysts. The Treasury will require Fannie Mae and Freddie Mac to contribute all future profits to the government, reduce their investment portfolios at a quicker pace and submit annual plans to reduce mortgage credit risk. “[The changes] will help expedite the wind down of Fannie ... [Includes one chart]

$7.5 Million FHA Mortgage Fraud Scheme. The Department of Justice has filed charges against top executives of a real estate brokerage for their participation in a mortgage fraud scheme that may cost the FHA $7.5 million in losses. Indictments were unsealed earlier this month in Manhattan federal court charging Mitchell Cohen and Erin Davis, the owner and sales manager, respectively, of Buy-A-Home, a real estate brokerage business in Queens, NY. The criminal charges follow a civil fraud lawsuit filed by the U.S. Attorney’s Office for the Southern District of New York last December against ...

A lawsuit filed last week by Bank of New York Mellon against WMC Mortgage and GE Mortgage Holdings is the latest sign that repurchase issues on non-agency mortgage-backed securities are increasing. After years of resistance, trustees are starting to act on behalf of non-agency MBS investors seeking repurchases. Three of the four major banks reported increases in non-agency repurchase requests in the second quarter of 2012 compared with the previous quarter, according to an analysis by Inside Nonconforming Markets ...

The five servicers participating in the $25.0 billion national servicing settlement have taken vastly different approaches to loss mitigation, according to a report released this week by the Office of Mortgage Settlement Oversight. Short sales dominated early activity and Bank of America, the servicer with the largest obligations under the settlement, accounted for a small amount of initial loan modifications completed by the servicers. Combined, the five servicers granted non-agency borrowers ... [Includes one chart]

The Securities and Exchange Commission is conducting an in-depth investigation of non-agency mortgage-backed securities issued by Ally Financial’s Residential Capital, according to court documents released this week. The documents revealed that due diligence provider R.R. Donnelley & Sons Company has delayed the investigation, which started in February. “The commission is investigating ResCap’s origination and underwriting practices used to make and approve loans in connection with offerings of ...

The streamlined short sale programs announced last week by Fannie Mae and Freddie Mac could increase losses on bank holdings of second liens, according to industry analysts. The changes, directed by the Federal Housing Finance Agency, include the ability for the government-sponsored enterprises to offer up to $6,000 to second-lien holders to expedite a short sale. “Previously, second-lien holders could slow down the short sale process by negotiating for higher amounts,” the FHFA said. Overall ...