Origination

Fitch has revised the status of Capmark Finance Inc.'s commercial mortgage-backed securities servicing ratings to Rating Watch Evolving from Rating Watch Negative, citing a put option agreement to sell its servicing and origination operations to Berkadia III LLC. Fitch also said the rating may change "depending upon whether the transaction is completed." The company's CMBS servicing ratings are as follows: primary servicer, CPS2-; master servicer, CMS2-; special servicer, CSS2-. Fitch said it is closely monitoring Capmark. As of June 30, its total servicing portfolio consisted of 35,507 loans with an unpaid principal balance of $270.1 billion, of which $131.1 billion were CMBS.

Delinquency rates are continuing to increase for all commercial/multifamily mortgage investor groups, according to the most recent Commercial/Multifamily Delinquency Report from the Mortgage Bankers Association. The economic recession drove the latest surge in commercial and multifamily delinquency rates during the second quarter, said Jamie Woodwell, MBA's vice president of commercial real estate research. Between the first and second quarters, the 30-plus day delinquency rate on loans held in commercial mortgage-backed securities rose 2.04 percentage points to 3.89%. The 60-plus day delinquency rate on loans held in life company portfolios rose 0.03 percentage points to 0.15%. The 60-plus day delinquency rate on multifamily loans held or insured by Fannie Mae rose 0.17 percentage points to 0.51%. The 90-plus day delinquency rate on multifamily loans held or insured by Freddie Mac rose 0.02 percentage points to 0.11%. The 90-plus day delinquency rate on loans held by FDIC-insured banks and thrifts rose 0.64 percentage points to 2.92%. "Lower levels of employment, the pullback by consumers and other aspects of the slowdown translated into a difficult operating environment for many income-producing properties. That in turn has led to increased stress on the loans those properties support," Mr. Woodwell added.

Finn Casperson, former chief executive of Beneficial Finance — once one of the largest players in consumer home equity-based lending — has been found dead in what authorities say is an apparent suicide. Mr. Casperson served as CEO from 1976 to 1998, during a time when the firm specialized in low loan-to-value ratio second liens backed by homes. When he became CEO of the firm he succeeded his father. Beneficial was sold to Household International in 1998 for about $9 billion. HSBC Holdings eventually bought Household for $14 billion. The British bank later booked huge losses on Household's subprime business.

Due to the scarcity of warehouse lending, Fannie Mae is providing faster funding in mortgage-backed securities transactions so lenders can quickly turn around and make more loans. "We're providing faster funding to lenders so that they get cash immediately after closing to continue funding loans," Fannie president and chief executive Michael Williams said. "Previously, they had to wait a month or more for the MBS transaction to settle," he told the financial services executives and lobbyists at an Exchequer Club luncheon in Washington. In response to a question from one executive, the CEO indicated that Fannie is not interested in getting into the warehouse lending business. But Fannie has looked at ways to provide support for warehousing lending at the request of the GSE regulator and Treasury Department. "If asked, we will do it," Mr. Williams said.

The average weekly 30-year conforming mortgage rate appears to be stabilizing at levels near 5.07%, according to the Freddie Mac Primary Mortgage Market Survey. That rate, seen during the week ending Sept. 10, was down just slightly from 5.08% the week before, despite economic indicators the market interpreted as somewhat positive. Among these was news the economy lost 216,000 jobs in August, the smallest job loss seen since the previous August. These indicators may have contributed to increases in the benchmark 10-year Treasury yield that generally serves as a rough indicator of long-term rates at certain points during the week. But on a net basis the secondary market mortgage bond yields that more closely correlate to rates appear to have remained relatively stable. A year ago the average 30-year primary mortgage rate was higher at 5.93%. The average 15-year mortgage rate in the most recent week, at 4.50%, also was down slightly from last week (when it was 4.54%) and represented a more marked decrease from a year ago (when it was 5.54%). The average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages was 4.51%, down from 4.59% the week previous and from 5.87% a year ago. The average one-year Treasury ARM rate was 4.64%, up from the previous week's 4.62% and from 5.21% a year ago. Average points during the week ended Sept. 10 were as follows: 0.7 for 30- and 15-year mortgages, 0.5 for five-year Treasury hybrids and 0.6 for one-year ARMs.

The dollar amount of mortgages funded through loan brokers hit a new low in the second quarter in terms of market share — just 14.9% of all originations — according to new figures compiled by National Mortgage News. The newspaper found that wholesale lenders tabled funded just $87 billion in loans in the period out of a total origination pie of $583 billion. In the first quarter 2009 and fourth quarter 2008 brokers had a 15.5% and 15% share respectively. The results could indicate that wholesale/broker lending has stabilized at a low rate and is no longer falling off the cliff. Loan brokers' dominance of mortgage lending peaked in the fourth quarter of 2007 just shy of 30%. Many loan brokers see their business under attack by federal regulators who hold them responsible, in part, for the mortgage crisis because of the all the subprime loans they facilitated from 2002 to 2007. Loan brokers, in turn, blame wholesalers and Wall Street firms for creating subprime loan menus tailor made for certain securities and investors.

The 10 large markets which will have the best performance in home price over the next 12 months were those that did not have a housing boom and had relatively small job losses in the past year, according to the Local Market Monitor third quarter 2009 Home Price Forecast. Those markets are: Baton Rouge, La.; Buffalo/Niagara Falls, N.Y.; Dallas; Fort Worth/Arlington; Houston; Little Rock, Ark.; Omaha, Neb.; Pittsburgh; San Antonio; Syracuse, N.Y.; and Wichita Falls, Texas. "Right now, a good market is still one where home prices aren't going down. However, this will change as the recession eases. Next year we'll see good price increases in many markets," said Ingo Winzer, president of Local Market Monitor, a Cary, N.C.-based company that provides real estate valuation forecasts. At the other end of the spectrum, the markets with populations over 600,000 which could see the largest declines in home prices in the next 12 months are: Fresno, Calif.; Las Vegas; Miami; Orlando; Phoenix; Portland, Ore.; San Jose, Calif.; Stockton, Calif.; Tacoma, Wash.; Tucson, Ariz.; and West Palm Beach, Fla.

Genworth Financial, which operates the nation's fourth largest mortgage insurer, said it is seeing a decline in delinquencies in such hard hit states as Arizona, California, Florida, and Nevada. Speaking at an investor conference in New York, company chief financial officer and senior vice president Patrick Kelleher said Genworth's improvement is coming from a variety of factors, including active loss mitigation. Its MI business, he noted, is the company's "biggest source of pressure." Even though there is improvement in the four "sand states," the company is seeing an increase in delinquencies on prime products. "These trends are what we would expect, given the historic relationship between rising unemployment and delinquencies." The company's stock has made a strong comeback over the past two months and at deadline was trading at just over $10 compared to a 52-week low of 70 cents.

PMI Mortgage Insurance Co., Walnut Creek, Calif., said Arizona legislation that gives state regulators discretionary authority over MI firms in the event they do not meet the state's required minimum policyholder position to write new business would help it as well as its competitors. PMI is domiciled in Arizona and is regulated by the state's Department of Insurance. The company said the bill, which becomes effective in November, recognizes that minimum policyholder position (MPP) should not be the only factor used to evaluate a mortgage insurer's ability to write new business. PMI noted there are 16 states that have a maximum risk-to-capital ratio or MPP. Although the Arizona bill may benefit PMI the most, the capital standard for the state can apply to all MI firms that underwrite policies there.

Residential mortgage-backed securities performance is expected to continue to deteriorate into 2010 while commercial MBS woes could persist into 2010 or 2011, according to Moody's Investors Service. "Commercial real estate is usually one of the last sectors both to enter a recession and exit one," Moody's said. Claire Robinson, a Moody's senior managing director, said changes in disclosure and regulation affecting the securitized markets is among other reasons MBS recovery may take this long. Higher investor risk premiums also play a role. The combination of these are likely to mean higher costs of securitization for issuers that also affect the market's rate of recovery, she said.