Origination

The Credit Managers' Index combined score for August was 48.1, up from 48 in July, according to the National Association of Credit Management, Columbia, Md. NACM said it originally stated the gain incorrectly as slightly higher. As a result, a news item that originally ran Sept. 2 incorrectly stated the combined index score for August.

Rates moved higher after the market interpreted one closely watched economic indicator as somewhat positive ahead of prepayment reports the market will see when it reopens Tuesday. The benchmark 10-year Treasury yield that generally serves a rough indicator of mortgage rate direction was at 3.43% midday Friday, up from 3.33%, where it was at roughly the same time the day before. Art Frank, director and head of mortgage backed securities research at Deutsche Bank Securities, New York, said after Friday's employment-related numbers, the next anticipated major release expected to be seen in the mortgage bond market that drives rates are prepayment reports that market will likely see on Tuesday.

The action is picking up in Sin City, one of the hardest hit housing markets in the nation. Lower interest rates and an average sales price under $160,500 (for homes priced under $1 million) are attracting more bargain hunting foreclosure and short-sale buyers to the Las Vegas-Henderson market, according to local broker Robert Jenson, who reports that the inventory in that sector has dropped to a 6.5-month supply - 2.8 months if houses under contract are not counted. Prices actually inched upward 1.3 percent for single-family residences in August, only the second month in the last 12 that they have moved higher. In another hopeful sign, Mr. Jenson, who hangs his hat at RE/MAX Central, reports that the number of foreclosures on the market is down 7.4 percent. On the flip side, the number of short-sale offers is up. "There are twice as many short-sale listings, but REOs outsell short sales, five to one," the realty broker says. Distressed properties accounted for 82% of all sales in August, including one short sale at over $1 million.

CMG Mortgage of San Ramon, Calif., is re-launching a once popular first lien home equity product - and is even accepting applications from third-party loan brokers. The California-based non-depository stopped offering its 'Home Ownership Accelerator' a year ago when its secondary market investor -- GMAC Bank and its affiliates -- faced liquidity problems and had to pull the plug on the loan. At the time CMG was funding about $100 million a month in HOAs. It has found a new HOA investor - Ameriprise Bank of Minneapolis. (For more details see the Monday edition of National Mortgage News.)

Warren Buffett's Berkshire Hathaway Inc. and Leucadia National Corp. have teamed up to buy Capmark Financial Group's struggling commercial mortgage servicing and production units for a reported $490 million. At June 30, Capmark ranked third among all commercial servicers with $248 billion in receivables. According to figures compiled by National Mortgage News, Capmark is a top five ranked commercial funder. The announced sale comes a few days after Capmark said it might file for Chapter 11 bankruptcy protection after delinquent commercial mortgages left it with a $1.62 billion second-quarter loss. It said stockholders had negative equity of $1.14 billion as of June 30. In 2006 an investor group led by affiliates of Kohlberg Kravis Roberts & Co., Five Mile Capital Partners LLC, and Goldman Sachs Capital Partners bought a majority stake in Capmark's predecessor company, GMAC Commercial Mortgage of Horsham, Pa.

Mortgage companies added 3,600 full-time employees to their payrolls in July while the number of active mortgage brokers fell to a level not seen since September of 2001. The U.S. Bureau of Labor Statistics reported that employment in the mortgage banker/broker sector rose to 267,200 in July from 265,500 in June. The BLS survey counted 70,100 existing mortgage brokers in July, a 1,900 drop from the previous month. After a slight decline in the second quarter, employment at mortgage banking companies is now at first quarter levels. Meanwhile, Friday's employment report contains some encouraging signs that job losses are continuing to slow -- which could mean mortgage delinquencies might subside somewhat. BLS reported that 216,000 U.S. workers lost jobs in August, down from 276,000 in July. The nation's unemployment rate rose to 9.7%, up from 9.4% in July. (There is a one-month lag in BLS's reporting of mortgage industry employment data.)

The Federal Housing Administration mortgage insurance fund will not need a capital infusion from Congress, the FHA commissioner said in response to concerns that the program is experiencing larger than expected credit losses due to delinquencies and home price declines. "FHA will not need a congressional subsidy even if the congressional capital reserve ratio falls below 2%," FHA commissioner David Stevens said in response to a report in The Wall Street Journal that rising defaults have "eaten through" FHA's capital cushion and that the fund is in danger of falling below the statutory minimum of 2%. FHA's capital reserve is based on an annual actuarial study that is generally completed by October. The FHA commissioner said he would not comment on FHA's reserve ratio until he sees the study. At the end of the second quarter, 6.88% of FHA single-family loans were 90 days or more past due, up 35 basis points from June 2008, according to FHA. FHA foreclosures are up 17%, however. Meanwhile, the new commissioner has been conducting a thorough review of FHA's credit parameters. "It is expected that FHA will be coming out with some new tightening measures in the next several weeks, which the industry will welcome," said Brian Chappelle, a mortgage banking consultant with Potomac Partners in Washington.

Bond yields that pressured Freddie Mac's average for 30-year primary market mortgage rates slightly lower over the past week appeared to be stabilizing as of late Thursday morning ahead of an influential economic indicator due Friday. Art Frank, director and head of mortgage-backed securities research at Deutsche Bank Securities, New York, compared the secondary market for the agency mortgage-backed securities yields that influence primary market rates as slightly lower and in a calm before a potential storm Friday when some employment-related statistics are set to be released. The average rate for a 30-year fixed-rate mortgage during the week ended Sept. 3 dropped to 5.07% from 5.14% the previous week and 6.35% a year ago, according to Freddie Mac. "Bond yields pushed mortgage rates slightly lower this week," said Frank Nothaft, Freddie Mac vice president and chief economist. The benchmark 10-year Treasury bond yield had slid to 3.3% from near 3.5% since Aug. 28. At deadline, it was holding relatively steady at 3.33%. The average 15-year FRM rate during the week was 4.54%, down from 4.58% the previous week and 5.9% a year ago. The average rate for a five-year Treasury indexed hybrid adjustable-rate mortgage was 4.67%, down from 4.59% the week before and 5.97% a year ago. The average rate for a one-year Treasury ARM was 4.62%, from 4.69% last week and 5.15% a year ago. Average points were 0.7 for 30-year FRMs and 0.6 for 15-year FRMs, five-year Treasury hybrids and one-year ARMs.

The addition of 432 commercial real estate loans totaling approximately $5.2 billion resulted in a 7% increase in U.S. CMBS "loans of concern" between June and last month, according to Fitch Ratings in the latest edition of "What's in Special Servicing." One notable entry is the $227.9 million Resorts International Casino Portfolio loan, which transferred to special servicing in July due to monetary default when the borrower failed to make their July payment citing significant declines in cash flow at the properties. "Properties directly tied to consumer spending such as hotels are the first to exhibit signs of performance declines," said Fitch senior director Adam Fox in a statement. Declining property performance and increasing CMBS defaults within remain the chief contributors to the rising amount of loans of concern. Fitch designated loans with declining performance as a concern because they have a higher probability of future default and current market conditions would result in significantly higher losses if the loans were liquidated in today's market. To date, Fitch has identified more than $80.7 billion in commercial real estate loans (17% of its rated U.S. CMBS portfolio) as having declining performance or defaulted loans. Recent vintage loans account for more than 12% of the $80.7 billion in loans of concern.

August Federal Open Market Committee minutes show members discussed slowing the Fed's agency mortgage-backed securities and debt purchases before their planned end this year, making it likely there will be a decision on this issue this fall. As the initial August FOMC meeting statement revealed, the Fed has made plans to end its Treasury purchases in October and the minutes showed a similar plan for the agency MBS and debt buys also was discussed. Some analysts think the FOMC might take action on the issue as early as this month. "Minutes of the August FOMC meeting suggest that the Fed could continue at its current pace, but taper off the purchases as we approach the program completion for a smooth transition. The September FOMC meeting would be an optimal time to make the announcement, in our view," Credit Suisse researchers said in a Sept. 3 report. Art Frank, director and head of mortgage-backed securities research at Deutsche Bank Securities, New York, said he believes slowing the purchases before stopping them could help the market avoid a shock that could cause disruptive spread widening. He said the minutes and comments from Fed officials showing they have discussed this are a good sign to that end. The minutes also showed FOMC members talked about possibly including agency MBS backed by adjustable-rate mortgages in the purchase program to address unusually large spreads between ARM rates and comparable Treasury yields. But divided opinions on the topic made the move seem unlikely. The plan to end Fed Treasury purchases in October may have some implications for MBS and potentially could boost mortgage rates. But these are less of a concern for the MBS market than the end of the MBS purchases themselves, Mr. Frank said.