Origination

Many owners of health care facilities are finding that projects that could have gotten financing directly from commercial banks are unable to access that source now, according to an attorney who is an expert in the field. Andrea C. Barach, a partner in the Health Care Practice Group at Bradley Arant Boult Cummings LLP, Nashville, said this is due to tightened credit requirements, increased cost and/or inability to access funds through interbank markets. Ms. Barach, who advises health care facilities regarding financing options, said this has led those who need credit to reconsider applying for Federal Housing Administration-insured loans. "The terms are extremely attractive, and in many cases the FHA financing will be the only viable option for many borrowers. FHA financing offers a way for owners to control costs and maintain a predictable level of debt service," she said. While the FHA program still has its heavy red tape and compliance requirements, it has been streamlined. "The new Lean processing system should make financing more attractive by reducing processing time and bureaucratic red tape," said Ms. Barach, who added borrowers should work with lenders who have experience doing the Section 232 program.

Nearly half of all purchasers who bought existing homes in California last year were first-timers, according to a report by the state's realty professionals. At 47%, the share of rookie buyers was the highest since 1995, when half of all buyers were first-timers, and exceeded the long-run average of 38.6%, the California Association of Realtors study found. "It is clear that the federal tax credit for home buyers worked well in 2009 and is continuing to drive home sales," said CAR president Steve Goddard. "The credit is arguably the most successful strategy employed by the government to stimulate the economy." Nearly 40% of last year's buyers said they would not have purchased a home without the credit. Statewide, meanwhile, almost half the deals last year were distressed sales, up from 35.6% in 2008. Lower prices improved affordability ratios for buyers, but they cut heavily into sellers' profits. Indeed, a third of all sellers last year sold their properties at a loss. That's the highest percentage since CAR started tracking net cash losses in 1989, and well above the long-run average of 9.3%. It also was the fifth consecutive year that the number of losers increased, the association reported. On a more positive note, the median price in the Golden State hit bottom in February 2009 at $245,170. Since then, the median home price has increased steadily in month-to-month comparisons. Still, the median remained below 2008 levels throughout 2009. The annual median price is projected to increase this year by $9,000 to $280,000.

The average rate for a 30-year mortgage inched down a little further below 5% during the week ended March 11, according to Freddie Mac's Primary Mortgage Market Survey. "During a light week of mixed economic reports, mortgage rates eased somewhat," said Frank Nothaft, Freddie Mac vice president and chief economist. The average 30-year FRM rate was 4.95% compared to 4.97% the previous week and 5.03% a year ago. The average 15-year FRM rate was 4.32%, down from 4.33% the previous week and from 4.64% a year ago. The average rate for a five-year hybrid Treasury-indexed adjustable-rate mortgage was 4.05%, down from 4.11% the previous week and 4.99% a year ago. The average one-year Treasury ARM rate was 4.22%, down from 4.27% the previous week and 4.80% a year ago. Average points were 0.7 for 30- and 15-year FRMs, and 0.6 for five-year Treasury hybrids and one-year Treasury ARMs.

Data from Integrated Asset Services LLC, Denver, Colo., show that national home prices fell 2.3% in January, when there was somewhat less variation than usual at micro-market levels. The IAS360 House Price Index said "severe winter weather" in large regions of the country likely lay behind the relatively widespread depressed home prices even in micro-markets. The default management and residential collateral valuations provider found that all four of the U.S. census regions fell in January. The Northeast was down another 0.5% and the South was down 2.2% due to double-digit declines in Georgia and Alabama. The West saw a 2.6% decline and Midwest prices dropped another 2.6% for the month, following a drop in December. The Midwest region, which includes hard-hit states like Illinois (-4.9%), Missouri (-4.4%), and Minnesota (-3.5%) has now given back all of its 2009 gains. In addition, national home prices saw their largest single-month decline in the index in over a year, down 30% from its high in mid-2007.

Tighter credit standards, along with Congressional approval of higher annual mortgage insurance premiums will enable the Federal Housing Administration to replenish its capital reserves by 2013, possibly as early as 2012, Congress heard. The Department of Housing and Urban Development is on track to raise the FHA upfront premium 75 basis points this April to 2.25% and raise its down payment requirement on homebuyers to 10% for borrowers with credit scores below 580, HUD secretary Shaun Donovan testified at a Senate Appropriations Committee hearing. But FHA would prefer to set the upfront premium at 1% and raise the annual premium to 90 basis points on single-family mortgages with loan-to-value ratios above 95%. FHA is asking Congress to raise the cap on annual premiums from 55 bps to 1.55%. Raising the annual premium would be "safer for homeowners and better for the health of the FHA fund," Mr. Donovan told Senate appropriators. The secretary also noted that the new premium structure is more in line with the private mortgage insurance companies, which have seen their market share shrink as FHA's has grown in the past three years. "Increasing the premiums is the single most important thing FHA can do to encourage the private market to return," the secretary testified. He noted that private insurers are already moving back into the market on the expectation that FHA is increasing the upfront premium to 2.25%. If Congress approves the annual premium adjustment, FHA will be able to meet its minimum 2% capital ratio in a few years, the secretary told committee chairwoman Sen. Patty Murray, D.-Wash. "We believe the 2% is achievable by 2012 or 2013 based on conservative assumptions," Mr. Donovan said.

Reversing recent trends, most U.S. subprime vintages increased in value during the past month, according to a Fitch Solutions index. The U.S. Subprime RMBS Total Market Price Index, which is based on credit default swaps of residential mortgage-backed securities, had increased by a little over 6% from the previous month as of March 1. The index was 7.63 as of that day, up from 7.17 as of Feb. 1. The 2006 vintage performance was the strongest with a 17% increase. The 2004 and 2005 vintages respectively saw 3% and 9% increases month over month. Only the 2007 vintage declined in value, dropping 2% to a record low at 2.06. Fitch Solutions loan level analysis found that declines in both the constant prepayment rate and constant default rate drove the rise in value for the 2006 vintage. The three-month CPR dropped to 1.8% from 2.4% and the three-month CDR fell to 25.7% from 26.3% for the vintage. In addition, that vintage's historical 60-day delinquencies dropped to 1.65% from 1.77%. "The different performance of the CPR and CDR across diverse vintages reinforces the need to drill down and extensively assess each vintage from a broader perspective," said Fitch Solutions managing director Thomas Aubrey. "This explains why the 2007 and 2006 vintages are showing such different pricing movements."

Most commercial mortgage investor groups saw an increase in their loan delinquency rates in the fourth quarter, according to data gathered by the Mortgage Bankers Association. MBA's Commercial/Multifamily Delinquency Report found between the third and fourth quarters, the 30-plus day delinquency rate on loans held in commercial mortgage-backed securities rose 1.63 percentage points to 5.69%. The 60-plus day delinquency rate on multifamily loans held or insured by Fannie Mae rose 0.01 percentage points to 0.63%. The 90-plus day delinquency rate on multifamily loans held or insured by Freddie Mac increased 0.04 percentage points to 0.15%. The 90-plus day delinquency rate on loans held by banks and thrifts rose 0.49 percentage points to 3.92%. In a rare bit of good news, the 60-plus day delinquency rate on loans held in life company portfolios decreased 0.04 percentage points to 0.19%. Jamie Woodwell, MBA's Vice president of commercial real estate research, said, "Continued job losses, consumer restraint and a lack of household growth all sustained the pressure on commercial real estate operations and mortgages during the fourth quarter."

A scathing report by a Congressional watchdog examining the bailout of GMAC Inc. found that the Treasury Department did not adequately protect taxpayer money. The government should have orchestrated a strategic bankruptcy of the auto finance and mortgage lender last year rather than invest $17.2 billion to save it, according to a draft of the report to be released Thursday by the Congressional Oversight Panel of the Troubled Asset Relief Program. GMAC is the parent company of Residential Capital Corp., an active residential funder and the nation's fifth largest servicer. "The rescue came at great public expense," the 152-page report says. The oversight panel also found that GMAC was treated more favorably than other companies in comparable circumstances, including both General Motors Corp. and Chrysler Group LLC, which were forced into bankruptcy. Last month, the report says, the oversight panel asked for "assurances from witnesses" that no third-party shareholder in GMAC would receive a return on its investment before taxpayers. The government currently owns 56.3% of the company. "The fact remains that the only way to ensure that result would have been through a bankruptcy," the report stated. "The panel remains unconvinced that in 2008 or very early 2009 bankruptcy or a similar restructuring, including a sale of the automotive financing business, was not a real possibility; nor has the panel been convinced that even now a GMAC or ResCap bankruptcy or sale of the automotive financing is impossible." In 2006 a consortium led by Cerberus Capital agreed to pay $14 billion for a 51% stake in GMAC. After the government takeover of the company, Cerberus' position in GMAC has been severely reduced with the value of its investment becoming almost worthless.

The sale of commercial mortgage-backed securities servicer Centerline Servicing Inc. to an Island Capital affiliate has reversed the ratings damage caused by its corporate parent's financial woes, according to analysts. Fitch said Wednesday due to CSI's sale to C-III Capital Partners LLC it has upgraded CSI's CMBS servicer ratings, reversing a December 2009 downgrade based on the financial condition of its corporate parent, Centerline Capital Group. Fitch, which noted that its servicer ratings in part are driven by companies' ability to retain staff and their operational strength, said C-III "has indicated that it plans to retain CSI's servicing management and staff, its servicing and asset management systems and policies and procedures."

ICP Capital has agreed to transfer its domestic and international capital markets businesses to PrinceRidge Holdings LP to create an international investment-banking boutique serving investors and issuers in the institutional fixed income markets. The combined firms will operate under the PrinceRidge Holdings name and ICAP will become a partner of PrinceRidge. ICP president and CEO Tom Priore will be advising on the combined firm's continuing international expansion as well as "strategic development initiatives" in the United States. The companies expect integration and closing to be completed in the second quarter, subject to regulatory approvals. PrinceRidge has been working on a capital markets effort targeting the underserved U.S. jumbo mortgage market.