Origination

Los Angeles-based real estate company Thomas Properties Group postponed its previously announced public offering of 22 million shares of common stock blaming unfavorable market conditions. The offering was originally announced earlier this week. According to the company's president and CEO James A. Thomas, the reason for postponing the offering is because of the unfavorable current market conditions. "The company's management team and board of directors do not consider the current market price of the company's common stock to be reflective of its inherent value," he said. Thomas Properties Group owns, acquires, develops and manages primarily office, as well as mixed-use and residential properties.

FBR Capital Markets increased its projected net loss for this year at The Radian Group, Philadelphia, as it believes credit losses will have a more significant near-term impact on the mortgage insurer. "While we expect Radian to benefit from the same loss mitigation efforts (rescissions, denials and modifications) that will also benefit MGIC, the outlook for credit losses and the associated capital relief coming from the financial guaranty subsidiary remains an open question for us," said analysts Steve Stelmach and Amy DeBone. FBR maintained its "outperform" rating on MGIC even after the large loss it reported. It rates Radian at "market perform." FBR increased its projected loss estimate for this year at Radian from $1 per share to $1.87 per share and its 2010 EPS estimate from a profit of $0.50 to a loss of $0.52. It is the financial guaranty business at Radian that concerns the analysts, who said their view of Radian's MI business is fairly consistent with the positive outlook they have for MGIC. Radian's fourth-quarter results will be negatively impacted by losses associated with trust preferred CDO exposure at the company's financial guaranty unit. "Until we gain some comfort that the financial guaranty book has avoided significant losses, we'll likely remain on the sidelines. Debt maturities are also a near-term hurdle," FBR added.

A slight drop in the average weekly rate for 30-year conforming mortgages to a point slightly below the key 5% level could spur more interest in housing loans. During the week ended Nov. 5 the rate inched down to 4.98% from 5.03% the previous week, according to Freddie Mac's Primary Mortgage Market Survey. A year ago the 30-year rate averaged 6.20%. The average rate for a15-year fixed-rate mortgage fell to 4.4% from 4.46% a week ago and from 5.88% a year ago. The average rate for a five-year Treasury indexed hybrid adjustable-rate mortgage slid to 4.35% from 4.42% a week ago and from 6.19% a year ago. The average one-year Treasury ARM rate declined to 4.47% from 4.57% the previous week and 5.25% a year ago. Average points were 0.7 for 30-year mortgages, 0.6 for 15-year mortgages and five-year Treasury hybrids and 0.5 for one-year Treasury ARMs.

Analysts at FBR Capital Markets state they are worried about capital adequacy at Flagstar Bancorp Inc., Troy, Mich., as the company's tangible common equity ratio decreased to 2.75% from 4.01% at the end of the third quarter. "We would encourage FBC to boost capital levels, as we expect credit headwinds to persist and remain elevated for some time. We are lowering our fiscal-year 2009 and fiscal-year 2010 earnings per share estimates to $1.85 and $0.30 from $1.25 and $0.20, respectively," said the report, written by Paul Miller, William Wallace and Jessica Halenda. FBR cut its price target by half to $0.50 per share from $1. Flagstar had missed the consensus estimate of $0.04 for its third-quarter loss and FBR's $0.10 estimate primarily driven by a $172 million deferred tax asset writedown in the quarter, which FBR estimated impacted EPS by about $0.38. The analysts added that they expect nonperforming assets at Flagstar to continue increasing over the next several quarters and are likely peak in mid 2010. FBR thinks Flagstar will start breaking even in late 2010 and begin posting positive EPS in 2011. In a section titled "The Other Side of the Story," the FBR analysts wrote. "If the economy recovers more quickly than expected and charge-offs do not continue to accelerate, lower credit costs could result in upside to our earnings estimates. With the government's support for the housing and mortgage markets, mortgage origination volumes could increase and benefit earnings. Higher earnings from mortgage originations could provide a cushion for higher credit costs."

GMAC Financial Services said during its third-quarter conference call that it would no longer provide separate quarterly or annual reports for Residential Capital Corp., its troubled residential mortgage division. The decision angered analysts that follow the company, which is 35% owned by the government. "It just doesn't send a very good signal to people on our side of the market," Sarah Thompson, a bond analyst at Barclays Capital, said on the call. Craig Emrick, a vice president and senior credit officer at Moody's Investor Service, lamented that there would be a "significant decline in the level of information provided publicly." Because only 300 investors hold ResCap's $4 billion of debt, Securities and Exchange Commission rules do not require it to file financials with the agency. GMAC's chief financial officer, Robert Hull, said the change would save it a "tremendous" amount of money, though he did not specify how much. The row with analysts comes as the $178-billion-asset GMAC has been trying to become less reliant on the capital markets for its funding by expanding the deposit gathering ability of its depository, Ally Bank. ResCap lost $747 million in the third quarter - thanks in part to loan repurchase liabilities - but its performance was a marked improvement over a $2 billion loss in the same period last year. It ranks fifth nationwide in originations.

A loss of $139 million in its mortgage servicing segment was the primary reason for a third-quarter net loss of $52 million at PHH Corp., Mount Laurel, N.J. The mortgage servicing loss was driven by a negative valuation adjustment on mortgage servicing rights of $186 million. Prepayments and portfolio decay were responsible for a $97 million reduction in the value of MSRs while lower rates forced the company to take an $89 million valuation adjustment. Prepayments of the MSRs' underlying mortgages went from $33 million in the third quarter of 2008 to $50 million for the most recent period. Sandra Bell, executive vice president and chief financial officer, noted, "We expect higher delinquency rates to continue to impact credit-related charges through the balance of the year and into 2010, which will likely negatively impact our mortgage servicing segment." Delinquencies at the end of the third quarter by percentage of unpaid balance were 2.28% for loans 30 days late, 0.79% for 60 days late and 1.47% for 90 days or more late. A year ago, those numbers were 2.03%, 0.55% and 0.53%, respectively. The mortgage production segment had a profit of $46 million for the quarter. PHH had origination volume of $9 billion for the period, with 50% coming from purchase loans. Jerry Selitto, PHH's new president and chief executive, said the improved results in the mortgage origination and fleet services businesses were more than cancelled out by the MSR issue. "PHH has been making steady progress in recent quarters, including the signing of a major new private-label account with $1.5 billion in annualized potential origination volume, but we are not satisfied with our financial performance - and we need to move quickly and aggressively to make PHH as competitive as possible for the long term, while staying true to our core, client-focused values," he said.

Fitch Ratings has placed 58 classes from 13 commercial real estate collateralized debt obligations containing a concentration of 2005 vintage commercial mortgage-backed securities on Rating Watch Negative. The affected transactions have greater than 10% exposure to 2005 vintage CMBS that are currently on Rating Watch Negative by Fitch. According to Fitch, the magnitude of the negative rating actions on the 2005 vintage CMBS is expected to be less significant than the 2006-2008 vintage CMBS rating downgrades. Nevertheless, the expected CMBS downgrades still exceed Fitch's expectation when the downgrade actions were taken on these CRE CDO bonds earlier this year following the implementation of revised criteria. On Oct. 22, Fitch placed 247 classes from 22 fixed-rate CMBS conduit transactions from the 2005 vintage on Rating Watch Negative, with the expectation that the majority of the classes will be downgraded one category when the Rating Watch Negative is resolved.

Mission Capital Advisors LLC is marketing a portfolio of commercial mortgages with an outstanding balance of approximately $120 million. The portfolio consists of a mix of performing, subperforming and nonperforming loans secured primarily by multifamily, retail, office and industrial collateral located in New York and northern New Jersey. Will Sledge, managing director at Mission Capital Advisors, said, "Offerings of this type in the New York/New Jersey market have been few and far between. We believe the transaction will be well received." Mission Capital is soliciting indicative bids on Nov. 18 and final bids on Dec. 10. Mission Capital, in conjunction with the seller, has prepared a comprehensive array of due diligence materials that is available to prospective bidders who execute confidentiality agreements. A detailed offering memorandum and confidentiality agreement can be found at www.missioncap.com/deals.

Old Republic International Corp., Chicago, is in a dispute with its auditors, PricewaterhouseCoopers LLC, over the reporting of reinsurance transactions undertaken by its mortgage guaranty business. In the third quarter, Republic Mortgage Insurance Co. recaptured business that was ceded to several captive reinsurers. ORI recorded proceeds of $149 million on the deal but established claim reserves of $68.4 million and premium reserves of $82.5 million. ORI had planned to shift the premium reserves to earned premiums in future quarters based on an amortization schedule. However, PwC said based on its analysis of the recapture transactions and its interpretation of generally accepted accounting principles, the $82.5 million should have been recognized in the third quarter 2009 results. ORI said its management believes recognition of that amount in the current quarter would create the appearance of much improved results where none existed or occurred. ORI said it would petition the Securities and Exchange Commission to resolve the matter. If PwC's position prevails, ORI's net operating loss of $66 million in the third quarter would be reduced to a net operating loss of $12.5 million. RMIC's net operating loss would be reduced from $103 million down to $49.3 million for the quarter, while the pretax operating loss would be whittled from $160.4 million down to $77.9 million.

Treasury Department officials are warning state and local housing finance agencies that the Obama administration's recently unveiled temporary bond purchase program is oversubscribed and that agencies will likely receive less assistance than they requested as a result. The officials issued the warning late last week and asked the HFAs to identify their peak years of issuance from 2004 to 2008 for both single-family and multifamily issues to help determine how much they should receive under the relief program. The agencies had to provide that information to the Treasury by noon on Monday, including CUSIP numbers or other ways to verify the information. The scale-back comes after Michael Barr, Treasury assistant secretary for financial institutions, last month declined to put a dollar amount on the program and instead told reporters it would be sized to meet demand. "We felt it is important to build estimates for the program from the ground up," he said during an Oct. 19 press conference when the temporary New Issue Bond Program was announced. Mr. Barr said at the time that there would be some form of ceiling on the size of the programs, but did not give any specifics. Program participants said yesterday that they do not know the total amount of allocations requested by the HFAs under the program and federal regulators could not be reached for comment.