Origination

Record low mortgage rates have done nothing to stop a renewed housing slide, as new home sales fell to record lows in May and both refinance and purchase volumes fell throughout June.

The automated underwriting systems of Fannie Mae and Freddie Mac could be worth up to $500 million, according to one veteran mortgage technology analyst.

Citibank's strategy to increase its presence in the jumbo mortgage market appears to be working — applications in the sector are up 60% in the past 60 days, according to sources familiar with the lender's operations.

NorthStar Realty Finance Corp., a real estate investment trust that originates commercial debt, has fully repaid and extinguished its $304 million credit facility with Wells Fargo NA.

Fortress Investment Group LLC, New York, has agreed to acquire CW Financial Services, a servicer, special servicer and originator of commercial and multifamily real estate loans, from majority shareholder Otéra US Holding Inc.

Many housing markets could see stronger recoveries two years from now even though the latest forecast for the coming year shows only modest ones, according to one company's forecast. Although there aren't any overwhelmingly strong appreciating forecasts in the near term, the depreciating ones are milder than they were a year ago, according to Veros Real Estate Solutions, a collateral valuation provider based in Santa Ana, Calif. In its quarterly forecast update for June 2010 through June 2011, Veros said California's Inland Empire area, including Riverside, San Bernardino and Ontario, is seeing modest appreciation, joining the state's strongest metro region, San Diego. "Colorado is beginning to look good again to buyers, with three cities among the top 10," said Eric Fox, Veros' vice president of statistical and economic modeling. "A new entry among the top five positive trending areas is Louisiana's Shreveport and Bossier City area." Chico, Calif. leads the list of weakening markets, but Florida continues its depreciation trend in many areas along its East Coast. Nevada's second largest market, Reno/Sparks, stays on the list of weakest markets while Las Vegas avoided inclusion. Utah did not, however; the Salt Lake City and nearby Provo/Orem areas occupy the last two slots in Veros' bottom 10. Fox said while the Houston metro area is also demonstrating modest improvement, at this point the company can only speculate on the effects, if any, that will result in the residential real estate market from the catastrophic BP oil spill in the Gulf. The company said none of its ZIP code level models for the impacted coastal areas have yet shown significant forecast differences from those ZIP code models that are further inland and less impacted. Real estate values in the Central Plains areas are expected to hold steady in the coming year. Texas, Oklahoma, Kansas, Nebraska and parts of Louisiana and Arkansas are holding steady, underscoring a weak but consistent mild recovery.

Mortgage investors are very interested in a refinancing program the Federal Housing Administration plans to roll out this fall to help underwater borrowers with non-FHA loans, according to a Government Accountability Office report. However, the GAO auditors also found that the investors don't believe many borrowers will qualify for this principal reduction program. The aim of the new program is to prevent strategic defaults by giving investors an incentive to reduce the principal amount of the first and second mortgages. The new refinance option requires servicers to write down the principal amount of the first mortgage by at least 10%. The loan-to-value ratio on the newly originated FHA mortgage cannot exceed 97.75%. If there is a second lien on the property, the combined LTV cannot exceed 115%. "Investors we spoke with supported the principal reduction in conjunction with an FHA refinance," the GAO report says. "However, they also noted that the program might reach only a limited number of borrowers as it would only help borrowers who are current on their existing first-lien mortgage payments," the report says. After the refinancing, the borrower's mortgage payments cannot exceed 31% of income. And other debts cannot push the back-end ratio over 50% unless the borrower has a strong credit history. FHA officials did not respond to requests for comment on the GAO report.

Digital Realty Trust has completed an amendment to its revolving credit facility that gives it the ability to add eligible unencumbered international assets. The company said the international technology-related real estate assets include properties in Canada, England, Wales, France, Spain, the Netherlands, Singapore and Australia. International assets may comprise up to 25% of the borrowing base, with assets in Spain and Singapore limited to up to 10% of the borrowing base. The amendment aims to provide the company's unsecured lenders with the additional benefit of geographic and tenant concentration diversification and pursue an unsecured financing strategy in Europe and Asia similar to the one it uses in the U.S., according to A. William Stein, chief financial officer and chief investment officer at Digital Realty Trust.

The newest preferred investor for Lenders One Mortgage Cooperative is PHH Mortgage Corp., Mt. Laurel, N.J. Lenders One members will get direct access to PHH Mortgage underwriters, 24/7 online access to products, rates and pricing scenarios, ability to upload documents electronically, and ongoing training for governmental compliance and other regulatory requirements. At the Keefe, Bruyette & Woods Diversified Financial Services Conference PHH Corp. president and chief executive Jerome Selitto, said the company would be entering into a strategic partnership on the wholesale/correspondent side of the business but did not give further details at that time. A call to a PHH representative was not returned by press time. In a press release, Craig Dodds, PHH vice president, wholesale correspondent lending, said his organization "will support Lenders One's members with a correspondent lending platform for conventional, government-insured loan products and rural development loans." Lenders One has over 165 members.

Another wave of downgrades has hit U.S. residential mortgage-backed securities transactions as the Fitch ratings on 281 bonds in 267 transactions have dropped to D, indicating a principal writedown. The move followed a review of bonds that had speculative grade ratings ranging from CCC to C, indicating a default was expected. Ninety-eight percent of the bonds had CCC ratings. Ninety-eight percent had an outstanding recovery rating of RR6 indicating that minimal recovery was expected. Only the bonds with writedowns were included in the review. Of the 267 transactions impacted, 143 were prime credit deals and 115 were subprime credit deals. Fitch said the balance were "other" product types.