Origination

Two main business units that used to make up Friedman Billings Ramsey Group Inc., Arlington, Va., are going for the full divorce. Arlington Asset Investment Corp. (the name FBR is using and expects to adopt legally after its annual meeting in June) will sell 16.7 million shares of common stock it holds in FBR Capital Markets Corp. back to that company for $72.5 million. FBR Capital became a separately traded public entity in 2007. The deal reduces Arlington's holdings in FBR Capital from 56% to 39% when it closes on June 2. Furthermore, the two sides will cooperate to facilitate the sale of Arlington's remaining holdings in FBR Capital. They also are terminating intra-company service and governance agreements. Rock Tonkel Jr., president and chief operating officer of Arlington, said the deal gives his company substantial additional liquidity and the ability to utilize its net operating loss carry-forwards and capital loss carry-forwards on a timely basis. The FBR Group was a major player in the subprime REIT IPO business, taking several firms public during the industry's boom.

Private label MBS — in particular subprime and alt-A loans — continue to be a "significant issue" for all the housing GSEs and have caused $26 billion of losses and impairments at these firms, according to a new report issued by the Federal Housing Finance Agency. In its first ever annual report to Congress, FHFA blames the previous managements of Fannie Mae and Freddie Mac for not requiring originators "to fully assess borrower capacity." It adds that, "Certain decisions, including the underestimation of risk associated with these products, coupled with changes in the economy, led to escalating increases in delinquencies, foreclosures, credit-related expenses and losses." FHFA's assessment also includes the Federal Home Loan Bank system. The government placed Fannie and Freddie into separate conservatorships in September and replaced their CEOs. The regulator says all housing GSEs face significant challenges including buying and guaranteeing mortgages with LTVs north of 80% due to declining home values and "constraints on the availability of private mortgage insurance."

Roughly one-quarter of homeowners have no savings to cover their living expenses should they lose their jobs, according to new survey results released by Wells Fargo & Co., the nation's second largest residential servicer. The bank and mortgage lender also found that anxiety over possible job losses increased significantly in the first quarter compared to the previous one. Job losses lead to higher residential loan delinquencies which currently are at levels not seen since the Great Depression. Wells says consumers are taking "drastic actions" to reduce debt and increase their savings. When the bank asked consumers what would boost their confidence in the economy, one-fourth said "an improvement in their personal situation."

SL Green Realty Corp., a New York-based real estate investment trust that manages Manhattan office properties, completed a public offering of 19.55 million shares of common stock at a price per share of $20.75, including 2.55 million shares issued and sold to the underwriters to cover over-allotments. Merrill Lynch & Co., Morgan Stanley, Deutsche Bank Securities, Citi, Goldman, Sachs & Co. and J.P. Morgan acted as the joint book-running managers. The net proceeds to SL Green from the offering after deducting underwriting commissions and discounts and offering expenses were approximately $387.4 million. SL Green plans to use the net proceeds from the offering for general corporate and working capital purposes.

A decline in incurred losses at Triad Guaranty Inc., Winston-Salem, N.C., led to a first quarter 2009 loss of $55.2 million ($3.68 per share), which is much improved over the fourth quarter 2008 net loss of $122.2 million ($8.16 per share) and first quarter 2008 net loss of $150.0 million ($10.09 per share). Net loss and loss adjustment expenses were $101.9 million for the first quarter of 2009, compared with $178.1 million for the fourth quarter of 2008 and $221.3 million for the first quarter 2009. The improvement is because Triad is seeing an increased benefit from captive reinsurance programs and stop loss provisions in the contracts for its modified pool insurance policies. These risk sharing structures returned $97.4 million in benefits to Triad, compared with $66.7 million in the fourth quarter 2008 and $20.1 million in the first quarter 2009. The company, currently in run-off, had total insurance in force of $60.5 billion at the end of the first quarter 2009, a drop of 3.4% from the end of last year. The results did not address the recent meteoric rise in Triad's common stock price, which went from a close of $0.33 per share on April 30 to $0.80 per share one day later and by May 12, up to $1.39 per share.

Private label MBS — in particular subprime and alt-A loans — continue to be a "significant issue" for all the housing GSEs and have caused $26 billion of losses and impairments at these firms, according to a new report issued by the Federal Housing Finance Agency. In its first ever annual report to Congress, FHFA blames the previous managements of Fannie Mae and Freddie Mac for not requiring originators "to fully assess borrower capacity." It adds that, "Certain decisions, including the underestimation of risk associated with these products, coupled with changes in the economy, led to escalating increases in delinquencies, foreclosures, credit-related expenses and losses." FHFA's assessment also includes the Federal Home Loan Bank system. The government placed Fannie and Freddie into separate conservatorships in September and replaced their CEOs. The regulator says all housing GSEs face significant challenges including buying and guaranteeing mortgages with LTVs north of 80% due to declining home values and "constraints on the availability of private mortgage insurance."

Associated Banc-Corp., Green Bay, Wisc., one of the largest in-state mortgage lenders, said its president and chief operating officer, Lisa Binder, resigned, effective Friday, May 15. No reason was given for Ms. Binder's departure. She had been with the lender for more than two years. Sandler O'Neill, which covers the publicly traded depository, said it was surprised by Ms. Binder's departure but noted, "based on our conversation with management, we believe that the decision to leave was hers and was not based on any specific incident or event." Based on rankings in the Mortgage Industry Directory, Associated is a top 20 ranked residential lender in the Milwaukee metropolitan area.

Bank of Commerce Holdings, Redding, Calif., is acquiring a majority stake in Simonich Corp., which does business as BWC Mortgage Services, San Ramon, Calif. BOCH will take a 51% stake in BWC Mortgage. According to a Securities and Exchange Commission filing, the total price of the purchase is $2.5 million, with $1.5 million paid at closing and the additional $1.0 million to be earned-out over a period of three years based upon delivering an established level of profits. It is possible to earn out the $1.0 million in a shorter period of time if the profit levels exceed expectations. Previously the two companies had an affiliated business arrangement, where BWC Mortgage underwrote or brokered mortgage products and managed the independent contractors, supporting staff and broker relationships with secondary market lenders. BOCH provided office space, equipment and marketing support. BWC Mortgage will be re-branded Bank of Commerce Mortgage, which is the name of the BOCH mortgage brokerage operation. BWC Mortgage has over 100 employees in nine branch locations. Until May 2006, BWC Mortgage was majority owned by the Bank of Walnut Creek, but as part of that company's pending acquisition by First Republic Bank, Simonich Corp. acquired all of the equity in the mortgage unit. BOCH will receive 51% of the earnings of BWC Mortgage through quarterly dividend payments.

Precision Financial, Syosset, N.Y., a mortgage banking/brokerage firm, has reportedly closed its doors, according to industry officials. It had annual originations of about $600 million. Over the past week the telephones were not being picked up at the company and e-mails were not returned. One of the company's top executives, Ira Zimmerman, did not return a telephone call about the matter. According to its website, the company has licenses to lend in several states including California, New York, New Jersey, and Pennsylvania, among others.

The Federal Home Loan Bank of Cincinnati reported $83 million in earnings for the first quarter, up from $49 million a year ago, and noted a pickup in member participation in its mortgage purchase program and strong refinancing activity. The FHLBank's MPP portfolio jumped 13% during the first quarter to $9.7 billion as more members joined the program and began selling their conventional and Federal Housing Administration single-family loans to the bank. "We approved 11 members in the first quarter," the bank said, after approving 21 members in 2008. The Cincinnati bank has seen a sharp drop in member borrowing over the past four quarters, however, and advances have dropped by 24% to $46.1 billion as of March 31. "The ability of the Mortgage Purchase Program to be countercyclical helped offset a portion of the business lost from the advance portfolio," the bank said in its securities filing. The FHLBank has only $280 million in private-label MBS and "no credit-risk related or impairment charges were required," the bank said.