International Mortgage News

Municipal Mortgage & Equity LLC, Baltimore, has announced the closing of $175 million of capital commitments and participating debt to the South Africa Workforce Housing Fund of MuniMae's International Housing Solutions affiliate. The fund invests in rental and for-sale housing for low- and moderate-income families in South Africa. MuniMae said IHS expects the fund to total $240 million within several months. "We began IHS in order to bring our expertise in financing affordable housing projects to countries around the world," said Michael L. Falcone, MuniMae's chief executive officer. MuniMae can be found on the Web at http://www.munimae.com.

UBS has reported a loss of 11.5 billion Swiss francs ($10.9 billion) and suffered about $19 billion in mortgage-related writedowns in first-quarter results that were in line with an earlier April estimate. "The downward spiral in U.S. mortgages and related instruments accelerated during the first quarter and also spread to other structured credit positions," UBS said. "This development led to first-quarter 2008 losses of around $19 billion on these affected positions." The company also said it is making progress in clearing the problematic mortgage assets from its books and that the market has improved somewhat. "While our exposure is still subject to swings in market conditions, we see market demand for these securities returning in certain areas and at the current level of valuations," said UBS chief executive Marcel Rohner.

Five classes of notes from Taberna Europe CDO I PLC, a collateralized debt obligation backed partly by commercial mortgage-related securities and the debt of real estate investment trusts, have been downgraded by Fitch Ratings. The downgrades were as follows: class A2, from AAA to AA; class B, from AA to A-minus; class C, from A to BBB-minus; class D, from BBB to B; and class E, from BB to B-minus. Fitch also removed the notes from Rating Watch Negative and affirmed the triple-A rating on the class A1 notes. The rating agency noted that it had placed the notes on Rating Watch in February, citing "moderate credit deterioration" of the collateral and the effect on junior classes of the portfolio's shortened weighted average life. "Proposed remedial actions have not been executed," Fitch said in explaining the downgrades. The collateral consists of senior and subordinated debentures issued by subsidiaries of REITs and real estate operating companies, as well as commercial mortgage-backed securities and commercial mortgage B-notes.

The European Central Bank, the Federal Reserve, and the Swiss National Bank have expanded their liquidity measures, and the Fed has added a wider range of asset-backed securities to the list of collateral types allowed to be pledged in one type of its term securities lending facility auctions. "Primary dealers may now pledge AAA/Aaa-rated asset-backed securities, in addition to already eligible residential- and commercial-mortgage-backed securities and agency collateralized mortgage obligations, beginning with the Schedule 2 TSLF auction to be announced on May 7," the Fed said. "The wider pool of collateral should promote improved financing conditions in a broader range of financial markets."

A United Kingdom mortgage group is calling for the European Commission to shelve proposals to integrate European Union mortgage markets in light of recent market changes. "Many European mortgage markets have changed so dramatically in recent months that the only sensible step at this stage is to drop the proposals and start again from a basis of analyzing likely future market conditions," said Andrew Heywood, deputy head of policy at the London-based Council of Mortgage Lenders. The EC, which issued an integration paper in December, has focused more recently on new financial stability efforts that the CML praised as "sensible and timely."

Credit Suisse took a loss of 2.1 billion Swiss francs ($2.0 billion) in the first quarter and 5.3 billion Swiss francs ($5.1 billion) in net writedowns, about 3.6 billion Swiss francs ($3.5 billion) of which appear to be mortgage-related. The mortgage-related writedowns stem from collateralized debt obligations (2.7 billion Swiss francs, or $2.6 billion), commercial mortgage-backed securities (848 million Swiss francs, or $819 million), and residential MBS (96 million Swiss francs, or $93 million). The remaining writedowns reflect leveraged-finance concerns. While the writedowns remain sizable, the company said it has made progress reducing exposures in problem areas like commercial mortgage, which has been cut by 25%. Credit Suisse also said it has reduced leveraged-finance exposures by 41%. Credit Suisse can be found on the Web at http://www.creditsuisse.com.

Morgan Stanley Real Estate has announced the raising of an additional $2.5 billion of equity commitments for its Special Situations Fund III, more than 60% of it from investors outside the United States. The company said the commitments bring to $5.9 billion the total amount raised for the fund from institutional investors, high-net-worth investors, and Morgan Stanley (which represents 23% of the total). The fund is focused mainly on making noncontrolling investments in real estate securities in growth/emerging, developed, and distressed markets around the world. "The heavy emphasis on the high-growth emerging economies (China, India, Russia, Poland, Mexico, and Brazil), the flexibility to invest across the capital structure of real estate companies, and the ability to invest in developments and recurring income-producing assets in all real estate sectors is what makes this fund attractive in the marketplace," said Willem de Geus, managing director and global portfolio manager of Special Situations. Morgan Stanley Real Estate can be found online at http://www.morganstanley.com/realestate.

The Bank of England has made plans to address liquidity concerns by allowing banks to temporarily swap certain high-quality securities, including some mortgage-backed debt, for United Kingdom Treasury bills. Michael Coogan, director general of the Council of Mortgage Lenders, said his group had requested the move and welcomed it, but noted that the effectiveness of the plan in its current form may be limited. "What the scheme does not do is give all mortgage lenders direct access to the new funds," he said. "In particular, it does not include smaller building societies and specialist lenders."

The current financial crisis "will affect market structure and pricing for at least a decade," according to a new report from JPMorgan Securities Ltd., London. The report from JPMorgan's global asset allocation and alternative investments unit blames excessive credit risk taking in "housing, leverage, and maturity transformation" for the crisis. It predicts, among other things, that central banks' extension of liquidity to broker-dealers will be permanent and lead to regulation in that area.

Standard & Poor's has revised its outlook for Britannia Building Society, a United Kingdom mortgage lender, to negative. "The outlook revision follows Britannia's 2007 results and reflects Standard & Poor's view that Britannia's material exposure to specialist mortgage lending makes it relatively vulnerable to a sharper-than-expected housing market downturn, and that the risk-adjusted returns on this book may be weaker than expected through the cycle," said S&P credit analyst Giles Edward. S&P added that it expects 2008 to be "a tough operating environment for all U.K. banks, due to the ongoing disruption in the capital markets and the turn in the credit cycle." The rating agency can be found online at http://www.standardandpoors.com.