Origination

While some U.S. subprime residential MBS prices are continuing to stabilize, 2004 and 2007 vintages are still showing notable declines, according to a Fitch Solutions credit default swap-based price index. On a month-to-month basis, prices for RMBS overall as of Jan. 1 had jumped just over 5% to 7.62 from 7.25 the previous month. "The 2005 vintage was the main driver of the positive trend, showing strong growth up 4.7% to 8.42," the company said. "The 2006 vintage also showed marginal improvement by rising to 2.81." However, the 2004 and 2007 vintages dropped 7% and 11%, respectively. "Higher quality borrowers' ability to refinance this summer resulted in higher prepayment rates, but left 2004 vintage pools on average with lower credit quality borrowers," said Fitch Solutions managing director Thomas Aubrey. He also noted the historical 90-day plus delinquencies in the 2007 vintage "jumped significantly," which he said suggests "default rates may begin increasing within the 2007 vintage."

Invesco Mortgage Capital Inc., Atlanta has priced its public offering of 7 million shares of common stock at $21.25 per share. The transaction will give the company gross proceeds of nearly $149 million. In addition, the underwriters have a 30-day option to purchase up to an additional 1 million shares to cover over-allotments. The offering is expected to close early next week. Invesco, a real estate investment trust that focuses on financing and managing residential and commercial mortgage-backed securities and mortgage loans, expects to use the proceeds to acquire residential and commercial MBS (and loans) on a leveraged basis, and to invest in a public-private investment fund managed by Invesco Advisers Inc. Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. are acting as joint book-running managers for the offering. Invesco's shares have been trading for about $22 each of late.

Even though PNC Financial Services has no plans to keep National City's warehouse lending division, investors are continuing to a show an interest in the group, according to executives close to the situation. According to one investment banker, there currently are three suitors for the warehouse division: two private equity groups and an off-shore bank. A PNC spokesman said the bank's plan concerning the warehouse division remains unchanged: "We plan to wind down that business." Asked whether PNC would consider a sale, he said, "We don't comment on mergers and acquisitions." He declined to provide a warehouse commitment number for National City whose warehouse operation is based in Kentucky. "Earnings come out next week," he said. The Pittsburgh bank bought the Cleveland-based NatCity a year ago.

Impac Mortgage Holdings, a once troubled alt-A lender that appears to have a new lease on life, is considering making a move into warehouse lending, a business it gave up on a few years ago. Company CEO Joe Tomkinson confirmed that warehouse lending is indeed on the firm's radar. "It's something we hope to get back into," he said in an interview with National Mortgage News. Two weeks ago Impac's stock began trading on the AMEX after an extended stay on the OTC "pink sheets" market. In the third quarter, the Irvine-based Impac turned a small profit. Mr. Tomkinson said Impac is waiting on seller/servicer approvals from Fannie Mae and Freddie Mac. "It's day to day on that," he said. The company already has FHA approvals, he noted. In the third quarter Impac earned $3 million, compared to a $20 million loss in 3Q 2008. Its chief asset is $5.76 billion worth of securitized mortgages, left over from its days as an alt-A lender/securitizer. It also has a $16 billion master servicing portfolio. A nonbank, the company last year gave up its status as a real estate investment trust.

The Mortgage Bankers Association believes residential originations will fall to just $1.28 trillion in 2010 -- a 33% decline from last year and the industry's worst year since 2000. In early December, the trade group had forecast loan production of $1.5 trillion but lowered its estimate Tuesday morning. (According to National Mortgage News, the industry funded $1.9 trillion in 2009.) The MBA now believes 30-year FRMs will average 5.8% this year and recent increases in rates have already "choked off" refinancings. Refis will fall to $166 billion in the first quarter compared to $363 billion in 4Q. However, home sales will see a steady improvement. "We do expect purchase originations in 2010 to be about 5% higher than in 2009," MBA chief economist Jay Brinkmann told reporters. A few months back veteran mortgage analyst David Olson of Access Research said some large lenders were bracing for just $1 trillion in production for 2010. Despite the poor outlook on originations, many mortgage lenders are continuing to earn strong profits (thanks to the wide yield curve). The profit picture also improved, in part, because of a lack of competition. In 2000 mortgage bankers funded just over $1 trillion in new loans.

Zacks Equity Research, Chicago, made Regency Centers its Bear of the Day for Jan. 8, 2010. It dropped its long-term recommendation for the real estate investment trust's common stock down to underperform "as we anticipate it to perform well below the broader market. The prolonged recession has led to increased tenant bankruptcies, which in turn have led to a decline in occupancy and an increase in vacancy rates. In addition, consumer discretionary spending continues to be under severe stress with a reduction in disposable income." On the positive side, Zacks noted that Regency is one of the largest owners of retail strip properties among REITS with its properties in high income, high-barrier markets that are tenanted by leading national and regional retailers. "If the company can tide over the storm, it can expect a reversal of fortunes in the future. For now, we have a six-month target price of $30 per share," Zacks said.

Macquarie Research has upgraded Radian Group Inc. - the nation's third largest residential mortgage insurer - to "outperform" from "neutral," saying it expects the company to return to profitability by the second half of 2010. Macquarie analyst Matt Howlett said he sees the Philadelphia-based Radian as not only a survivor "but a leader in an industry poised for a comeback in 2010." Mr. Howlett recently raised the entire mortgage insurance sector to "overweight" from "marketweight." According to the Quarterly Data Report, Radian had $153 billion in "policies-in-force" at the end September, ranking behind MGIC ($216 billion), and PMI ($163 billion). At least two new MI firms are in the process of forming. Radian's shares have been trading at $9 of late compared to a 52-week low of 95 cents and a high of $12.50.

Perrin & Associates has brokered a $245 million warehouse facility to a nonbank residential lender that is currently funding about $1 billion a month in new loans. Michele Perrin, who manages the company that bears her name, said she could not identify the warehouse provider or the client at this time. She noted that the loan is a "true funding facility" and not a gestation repo. "The loans do not have to be securitized," she said, adding that the mortgages originated, however, are being sold servicing released to an aggregator. All of the loans were funded through retail means. Perrin & Associates is based in Santa Ana, Calif. During her career in the industry, Ms. Perrin has worked in the warehouse lending division of Washington Mutual and other firms.

Developers sold some 2,350 new condominium apartments last year in the Greater Downtown Miami area, which is considered the epicenter of South Florida's housing crash. According to CondoVultures, a Bal Harbour-based consulting firm, 700 units were sold in the fourth quarter, a 27% decline from 995 closings in the third quarter. But that's still better than the 265 apartments sold in the first quarter and 465 units sold in the second quarter. "Buying activity really picked up velocity in the second half of the year once retail condo prices were slashed by lenders from $300 per square foot down to $200 per square foot, which is in many cases below the replacement cost of the finished product," said CondoVultures' Peter Zalewski. The lower prices triggered a flurry of activity among foreign nationals from countries with strong currencies, Mr. Zalewski reported. Developers also completed about a dozen bulk sales last year in the tri-county area of Miami-Dade, Broward and Palm Beach.

The inventory of unsold homes in the distressed Las Vegas metro market is at its lowest point in 18 months, according to the Rob Report, a monthly market overview published by luxury real estate broker Rob Jenson of RE/MAX Central. As 2009 drew to a close, there was a 6.1 months' supply of houses for sale in the Vegas-Henderson area. But there was just a 2.8 months' supply if homes under contract but not yet closed are excluded. A total of 10,651 single-family houses are in contingent or pending status, Mr. Jenson reports. Most of the houses on the market at $1 million or less are distressed sales - 10,633 short sales and 4,272 foreclosures out of a total of 18,343. But take-backs are outselling short sales three-to-one, the agent says. In December, 3,071 properties actually changed hands, a 5%, or 151-unit, increase from November. Of those sales, 78% were distressed, including 1,822 foreclosures and 583 short sales.