Mortgage Banking

Senate Democratic and Republican leaders reached agreement Wednesday on a multibillion-dollar package to address rampant foreclosures and other problems stemming from what may be the worst housing slump since the Great Depression. The compromise measure, placed on a fast track by the election-year desire to mollify voters, could be approved by the Senate as early as this week. It would be the first significant intervention by federal lawmakers to aid victims of the mortgage crisis.

Irvine-based mortgage lender ECC Capital Corp. said Friday that it would eliminate 27% of its workforce, or more than 440 jobs, amid a cooling trend in the home loan business. ECC's main subsidiary, Encore Credit Corp., which funds loans through independent mortgage brokers, will consolidate seven processing centers into three sites in Irvine, Downers Grove, Ill., and Glen Allen, Va., the company said. Encore Credit created ECC as a real estate investment trust, or REIT, that went public at $6.

In fluent Spanish, Carlos Vasquez advertises his skills as a home loan officer on cable television in San Diego. "Being able to speak their language is a real help," said Vasquez, who learned Spanish from his Mexican parents and studied it in school and in Mexico. But "you need to know the technical side of the mortgage business to really be a help."

A former Cal State Fullerton baseball star who hired Steve Garvey to promote his mortgage company has agreed to plead guilty to an investment scam that raised more than $30 million, authorities said Tuesday. From 2000 until this year, Salvatore "Sam" Favata, 46, promised investors returns of 30% to 60% a year, the Securities and Exchange Commission said.

Local governments cannot regulate mortgage-lending operations that saddle heavy interest rates on home buyers who would not qualify for traditional loans, the state Supreme Court ruled last week. The 4-3 decision prevents Oakland and Los Angeles from enforcing local mortgage rules and blocks other cities from adopting lending ordinances. Ruling in a challenge to Oakland's ordinance, the divided court said that only the California Legislature can set lending controls.

Mortgage lenders have reaped huge profits in the last few years financing Americans' voracious demand for home loans. But as concerns rise that the housing boom has become a dangerous bubble, mortgage companies are facing a growing chorus of critics who say that the industry has been irresponsible in its lending practices and that it has set the scene for a potential financial crisis.

Signaling potential trouble in the home loan business, New Century Financial Corp. warned Friday that it would raise the rates it charges borrowers and cut back the number of riskier interest-only loans it approves. The Irvine-based lender slashed its earnings forecast for the second time in two months and said its losses related to Hurricane Katrina "could be significant." Its shares sank $3.95, or 10%, to $35. Shares of other mortgage lenders also fell.

Concerned about rising mortgage fraud, state regulators are developing plans to create a national registry that would show enforcement actions against lending industry insiders. The database is expected to include disciplinary actions and license revocations imposed on industry workers including mortgage brokers, finance company loan officers and appraisers. The need for the registry, experts say, is being driven largely by the rapid expansion of independent mortgage brokers.

The cost of funds index for savings institutions in the Federal Home Loan Bank's 11th District fell to 2.537% in November, down from 2.708% in October, lowering monthly payments on adjustable-rate mortgages in California, Arizona and Nevada. The index sets payments through January. It also is used as a base rate for West Coast mortgages and for bonds backed by those loans.

Federal regulators on Tuesday raised red flags about the accounting methods that mortgage bankers have used to determine the value of their loan-servicing businesses. The advisory by a group of federal agencies came on the heels of a credit warning issued last week by Fitch Ratings against Calabasas-based mortgage lender Countrywide Financial Corp.