Arch Capital Group Ltd. reported net income of $126.1 million, or $0.31 per share, a 5.9% annualized return on average equity, compared to $203.5 million, or $0.49 per share, for the 2017 fourth quarter.

Pre-tax current accident year catastrophic losses, net of reinsurance and reinstatement premiums were $118.2 million, primarily related to Hurricane Michael and the California wildfires.

The 2018 fourth quarter loss ratio reflected six points for current year catastrophic activity, primarily related to Hurricane Michael and the California wildfires, while the 2017 fourth quarter loss ratio reflected a benefit of 1.3 points due to reserve releases in the quarter from 2017 third quarter hurricanes.

Gross premiums written by the mortgage segment in the 2018 fourth quarter were 6.8% higher than in the 2017 fourth quarter, while net premiums written were 13.5% higher. The growth in gross premiums written primarily reflected an increase in U.S. insurance in force and government sponsored enterprise credit-risk sharing transactions, partially offset by a lower level of U.S. single premium business and a decrease in Australian mortgage reinsurance business.

The increase in net premiums earned for the 2018 fourth quarter primarily reflected the growth in insurance in force in the U.S. over the past 12 months. Insurance in force increased to $383.7 billion at December 31, 2018, compared to $351.8 billion at Dec. 31, 2017.

Arch MI U.S. generated $16.7 billion of new insurance in the 2018 fourth quarter, compared to $14.4 billion in the 2017 fourth quarter, as a higher level of purchase market activity more than offset a reduction in refinance market activity.

In federal court in Central Islip, N.Y., Edward E. Bohm, president of sales and an undisclosed owner of Long Island mortgage lender Vanguard Funding LLC, pleaded guilty to conspiring to commit wire and bank fraud.

The plea related to the illegal diversion of over $8.9 million of warehouse loans that the lender had obtained to fund mortgages.  The guilty plea was entered before U.S. District Judge Sandra J. Feuerstein. Bohm faces up to 30 years in prison, as well as restitution, criminal forfeiture and a fine.

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According to court filings and facts presented at the plea proceedings, between August 2015 and March 2017, Bohm engaged in a scheme in which he and others obtained warehouse, or short-term, loans for Vanguard by falsely representing that Vanguard would fund or refinance mortgages for clients.  Instead, Bohm and others used the money to pay personal expenses, compensation, as well as to pay off loans they had obtained with fraudulent loan submissions for improper purposes.

Richard P. Donoghue, U.S. Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office, and Linda A. Lacewell, Acting Superintendent, New York State Department of Financial Services, announced the guilty plea.

The government’s case is being handled by the office’s business and securities fraud section. Assistant U.S. Attorneys Whitman G.S. Knapp and Elizabeth Losey Macchiaverna are handling the prosecution with assistance from assistant U.S. Attorney Laura Mantell of the office’s asset forfeiture section.

Homestreet Inc. has retained Keefe, Bruyette & Woods to seek buyers to acquire its stand-alone home loan centers .

Also, the Company has retained MountainView Transaction Advisory LLC to seek buyers for the majority of its single-family mortgage servicing rights principally related to loans originated by those home loan centers and personnel.

These moves could “free up more than $100 million of capital, simplify operations, allow for meaningful cost reductions and lead to significantly higher returns on capital,” according to Blue Lion Capital.

Once the sales are completed, HomeStreet expects to retain a smaller mortgage operation integrated with the commercial and consumer banking business, with originations sourced through the branch network, online banking services and affinity relationships.

“The board made the difficult decision to explore the potential sale of our mortgage banking business after extensive deliberations, ultimately concluding that this potential change would be in the best long-term interests of the company and its shareholders,” said Mark K. Mason, chairman, president, and chief executive officer of HomeStreet. “We are considering a sale at this time after having taken substantial steps in the last two years to improve the profitability of our mortgage banking business while expecting a near term recovery in industry volume and profitability. Unfortunately, it is still unclear when, and to what extent, industry conditions will improve.

HomeStreet will continue to offer mortgages, but on a far smaller scale, and focused on the retail deposit network and regional markets and positioned for ongoing profitability.

HomeStreet made the decision to sell because increased interest rates reduced the demand for refinance mortgages, and higher home prices have decreased the affordability of home purchases. These factors continue to put downward pressure on mortgage origination volumes. In addition, historically low new and resale home inventories in many of HomeStreet’s primary markets continue to adversely impact the volume of available purchase mortgages.

Further, the challenging regulatory environment, including changes to loan underwriting and disclosure rules and increased data integrity requirements, have combined with higher loan officer compensation to increase loan-origination costs. Non-bank lenders are regulated by different regulators with different approaches to compliance and regulatory oversight than bank mortgage lenders. This condition has resulted in uneven compliance interpretations, guidance, and enforcement risks between banks and non-bank lenders.

In addition, in September 2017, the banking regulators proposed a rule to simplify and reduce the capital burden for banks holding mortgage-servicing assets.

A final rule, however, has not been published, and given the recent proposal of a community bank leverage ratio which omits the expected capital relief for such assets, HomeStreet no longer expects the proposed rule to reduce the capital burden for banks holding mortgage servicing assets to be enacted or implemented.

The regulatory capital required for holding mortgage servicing assets is onerous, and in conjunction with declining hedge profitability as a result of a flattening yield curve, the return on invested capital in this line of business has been adversely impacted.