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Federally regulated thrifts -- excluding the failed Washington Mutual and IndyMac -- originated $66 billion in one- to four-family loans in the third quarter, a 49% decline from the same period last year, according to new figures released by the Office of Thrift Supervision. Meanwhile, the nation's remaining 800 or so thrifts set aside $7.9 billion for loan loss reserves in the quarter, reporting a $4 billion loss. In the second quarter the industry lost $1.7 billion. The failures of IndyMac and WaMu reduced thrift industry assets by more than 20%, but did not improve earnings or loan performance trends of the surviving 818 thrifts, OTS officials said. WaMu was purchased by JPMorgan Chase, a bank. IndyMac is in the process of being auctioned off by the government. Non current construction and land loans (90 days or more past) jumped from 6.5% in the second quarter to 7.8% in the third quarter, while charge-offs nearly doubled to 1.23%. Thrifts charged off $546.3 billion in construction loans in the third quarter. Meanwhile, non-current single-family loans rose 11 basis point to 3.39% in the third quarter and charge offs fell 10 bp to 0.24%. But OTS officials warned that one quarter is not a trend. Thrifts charged off $2.8 billion in 1-4 family loans in the third quarter. In the second quarter, OTS-regulated thrifts, including WaMu and IndyMac, originated $107 billion in single family loans and reported a $5 billion loss after setting aside $14 billion in loan loss reserves.

Jose Serrano of Stockton, Calif., has been sentenced to 15 months in prison and ordered to pay more than $219,000 in restitution to Washington Mutual Bank for his role in a mortgage fraud scheme involving the purchase of numerous residential properties in the Stockton area between 2003 and 2005. According to Matthew Stegman, assistant U.S. attorney for the Eastern District of California and prosecutor of the case, the investigation has also resulted in charges against other defendants, including Iftikhar Ahmad, Manpreet Singh, John Ngo, William Bridge and Paul Bridge. Each of these defendants has entered guilty pleas to various charges and awaits sentencing. Another defendant, Joel Blanford, has been charged and awaits trial.

Revis Otto Willis, a former mortgage broker from Houston, has been sentenced to 121 months in federal prison without parole followed by three years of supervised release for his leadership role in a mortgage fraud scheme. According to Tim Johnson, U.S. attorney for the Southern District of Texas, Willis was a mortgage broker who owned and operated Advanced Mortgage Services in Houston. Between October 2004 and May 2008, Willis recruited straw buyers to make false statements about their income, employment and bank account balances on loan applications to purchase residential properties in the Houston area. He encouraged the buyers to apply for mortgages in amounts greater than the actual sales price of the home. The loan applications containing the false statements were submitted to various financial institutions that traded mortgages on the secondary market. The difference between the actual sales price and the exaggerated loan amount was divided among Willis and others involved in the scheme. Almost all the loans secured as part of the scheme were defaulted upon and resulted in foreclosures. Willis' scheme involved 21 different residences and resulted in $2 million in losses.

Borrowers who are refinancing out of a one-year adjustable rate mortgage or a hybrid-ARM are overwhelmingly replacing those loans with fixed-rate loans, according to Freddie Mac. In total, 94% of prime borrowers who originally had a one-year, conforming ARM chose a conforming fixed-rate loan when refinancing in the third quarter, according to Freddie Mac's survey. 82% of prime borrowers who initially had a hybrid ARM refinanced into a conforming fixed-rate mortgage. Freddie Mac chief economist Frank Nothaft said that elevated interest-rate volatility in the third quarter has discouraged borrowers from seeking ARM loans. "When borrowers see so much change in interest rates it highlights the payment risk that they may face from future rate increases," he said.

The falling benchmark 10-year Treasury yield had accelerated its decline Thursday morning and had plummeted to a low below 3.2% that has not been seen in some time, but the move appears unlikely kick off a refinancing wave to the extent it has in the past. Today's tight lending standards and relatively wider spreads in mortgages are likely to prevent the kind of refi spike that a lower benchmark yield has been indicative of historically, said Art Frank, director and head of mortgage-backed securities research at Deutsche Bank. However, the Mortgage Bankers Association's index has indicated somewhat of an uptick in refis recently; and in March, around the time the benchmark yield was last relatively low, the index did register somewhat of a jump in refinancing, he said. The benchmark yield has been falling in recent days due to what fixed income strategists at Jefferies & Co. Inc. said has been a flight-to-quality into the U.S. government bond stemming from general uncertainty in the larger market.

CTX Mortgage of Dallas is in the process of closing its remaining retail branches, shifting its originations to a call center-like production center that caters only to consumers that are buying homes from its parent company. CTX Financial Services CEO Wayne Norton told MortgageWire that he expects the transition from branches to mortgage/call center to be completed by March at the latest. CTXFS is a subsidiary of the publicly traded Centex Homes. Area managers and mortgage counselors will work in the field to funnel customers to the mortgage center in Dallas. Offering GSE and FHA products, CTX will originate home mortgages in 21 states where it has Centex subdivisions. The production center will employ between 70 and 80 people.

The Financial Services Roundtable is urging the Treasury Department to "explicitly" guarantee Fannie Mae and Freddie Mac debt and reverse falling demand for the mortgage-backed securities issued by the two enterprises. FSR president and chief executive Steve Bartlett told a House panel the financial markets are "confused" about the extent of federal support for the government-sponsored enterprises. "Treasury should eliminate market confusion" by "explicitly guaranteeing GSE debt in a manner identical to the FDIC support for bank debt," Mr. Bartlett testified before the House Financial Services Committee. Treasury also should purchase GSE debt and MBS on a "more systematic and public basis," he said, which would reduce mortgage rates and stimulate the housing market.

After operating a residential mortgage scam that defrauded four Phoenix seniors of more than $400,000, Rick Thomas McCullough, a Phoenix mortgage broker, has been sentenced to three-and-a-half years in prison along with seven years probation and ordered to pay $343,811 in restitution. According to court documents, McCullough was the president of licensed mortgage broker CactusCash. In 2005 and 2006, he used this position to persuade four seniors, two single women and one couple, to refinance their homes through him for amounts far greater than the balance of their existing mortgages. McCullough also convinced them to invest their net refinancing proceeds with him, effectively obtaining for himself much of the equity that these elderly clients had in their homes. He claimed he would invest the victims' funds in real estate and personally guaranteed the loans. According to the terms of their investments, McCullough agreed to make monthly payments between $650 and $3,150 to the victims when in fact he lacked the assets to guarantee any of the loans and failed to make payments to three of the victims after several months. In one case, he failed to make any payments at all. Instead, McCullough used the money to make personal purchases.

Brian Tray of Pittsburgh has been sentenced in federal court to 41 months of imprisonment and five years of supervised release for his connection with a mortgage fraud scheme. According to information presented in the court, Tray worked as a loan officer for, among other places, America's Mortgage Outlet and Single Source Mortgage. In connection with numerous loans, Tray submitted loan applications on behalf of borrowers that he knew contained false information related to the borrowers' income and financial condition. In addition, Tray submitted fraudulent documents to the lending institutions, including fraudulent verifications of employment, verifications of rent and appraisals.

A market research firm is projecting that mortgage origination volume will be between $1.28 trillion and $1.35 trillion next year. iEmergent, based in Des Moines, Iowa, predicts that the industry will make 4.3 million home purchase loans next year for an aggregate amount of $708 billion. The firm predicts that refinancing volume will range from $575 billion to $640 billion. The firm's forecast for mortgage volume suggests that total volume will fall 5% in 2009 from the firm's estimated 2008 year-end total. iEmergent's economists predict that home purchase lending will reach a bottom in late 2009.