Origination

FBR Capital Markets, Arlington, Va., is projecting Radian Group Inc., Philadelphia, will return to profitability in 2010. The company provided an earnings estimate of $0.25 per share for next year. This comes on top of reducing its loss estimate for this year from $1.40 per share down to $1.25 per share. The analysis assumes that Radian will have net premiums earned in 2010 of $1.0 billion, compared with a downward revised $877 million for this year. However, the report from Steve Stelmach and Amy DeBone also notes that Radian Group has $350 million of debt coming due in 2010. Additionally, the holding company has a tax sharing payment to its subsidiary of $138 million in 2009 and a projected $300 million payment in 2010. But in terms of cash to make these payments, the company has $472 million total, consisting of $367 million in cash at the holding company and the potential for $105 million in tax refunds coming. "Should Radian not be able to make these payments, the stock would prove to be overvalued. However, capital support at the holding company (either through government capital infusions or private equity) would help mitigate this risk," FBR said.

1st Metropolitan Mortgage, Charlotte, N.C., once a top ranked loan brokerage and net branch operator, has struck a deal to merge with another lender and then become part of Hestia Financial of Dallas, industry sources confirmed to National Mortgage News. Daniel Jacobs, president of 1st Metropolitan, declined to comment. It was well known in the industry that the company was in the process of converting to a mortgage banking firm and linking up with a strong capital partner. A source noted that "a deal has definitely been signed." Little is known about Hestia Financial but a notice on a financial website for Texas companies notes that its business plan is "to combine mortgage brokers into a mortgage banking platform." Its CEO is Patrick McGeeney but there is no listing for the company in the Dallas phone book. Hestia notes that it has signed letters of intent with a mortgage banking firm, and at least one loan brokerage.

Simon Property Group Inc., Indianapolis has increased a public offering of common stock to 20 million shares and priced it at $50.00 per share. Merrill Lynch & Co., J.P. Morgan Securities Inc. and Morgan Stanley are the joint book-running managers of the offering. Simon has granted the underwriters a 30-day option to purchase 3 million additional shares of common stock to cover overallotments, if any. Simon will contribute the net proceeds of the offering to its majority-owned operating partnership subsidiary, Simon Property Group LP, which will use the amount contributed for general corporate purposes.

April was the strongest month in more than a year for home sales under $1 million in the Las Vegas-Henderson area, and the region's REO market also appears to be improving even though prices in that range have continued to fall. "The month registered gains in almost every category except price," said Rob Jenson, who works for Jenson Group, a company that specializes in Vegas's high-end market. The monthly supply of unsold houses fell, the overall number of listings declined and, perhaps most importantly, the number of real estate owned listings also slipped. In houses priced under $1 million, moreover, sales were up 7.8%. But the average price in the below-$1 million sector fell by 3.4% to $161,729. It was the ninth monthly price decline in a row, but the 3,063 sales were the most recorded in a year in the beleaguered market. Mr. Jenson also said that above $1 million, listings were up, sales were down " only 12 units priced above the million dollar benchmark sold in April, an 8% decline " but the average price rose 2% to $1.53 million.

Fitch Ratings, New York has assigned a 'BB' rating to D.R. Horton's $450 million offering of convertible senior notes due 2014 and placed a negative ratings outlook on the company. "This offering was an opportunistic access of the capital markets which might not be as accessible to homebuilders in the future. Liquidity was enhanced at a lower cost than the debt it is likely to replace with limited constraints from covenants," the ratings agency said. When Fitch issued its statement, the offering was for only $400 million; Ft. Worth-based Horton increased its size by $50 million in addition to an option for the underwriters to purchase $50 million to cover overallotments. The initial conversion rate for the notes is 76.5697 shares of Horton common stock per $1,000 principal amount of notes (representing an initial conversion price of approximately $13.06 per share of common stock), subject to adjustment in certain events. Citi acted as sole book-running manager in connection with the offering, and J.P. Morgan, UBS Investment Bank and Wachovia Securities acted as joint lead managers.

The Depository Trust & Clearing Corp. is recommending daily trade netting for to be announced mortgage-backed securities transactions. The DTCC said the move would cut what have been high costs in processing the trades and increase risk protection for the market. "The idea is to streamline the somewhat complex current `balance order' netting process," said Murray Pozmanter, DTCC's managing director, clearance and settlement/fixed income. "The industry's process today requires trading firms to allocate pools of mortgages against the TBA obligations we establish, and then to settle all those pools with multiple counterparties at different prices." He said the DTCC is recommending this be changed to a process where trades would be netted daily and the DTCC's Fixed Income Clearing Corp. subsidiary would "step in as the allocation and settlement counterparty." Currently, MBS trades are netted only once a month, beginning 72 hours prior to the monthly settlement date established for each kind of TMBA security. Because this forces trading firms to meet a netting cut-off on the "72 hour day," the number of trades incorporated in the current netting process can be limited, according to a DTCC report.

JPMorgan Chase, New York, funded $4.5 billion worth of mortgages in the hard-hit California market during the first quarter, a slight increase from the previous period, according to statements made by the company. Overall, Chase -- the nation's third largest residential funder, according to the Quarterly Data Report -- made 15,251 mortgages. Its presence in the state has been greatly bolstered by last fall's federally assisted takeover of Washington Mutual. WaMu had a huge presence in both its home state of Washington, and in the Golden State where it had been on a thrift and mortgage banking buying spree for most of the decade. JPM's mortgage unit is called Chase and is based in Iselin, N.J. A recipient of TARP money, JPM received a clean bill of health under the government's "stress tests" and would like to return that money as soon as possible.

Freddie Mac's most recent Primary Mortgage Market Survey shows the long-term mortgage rate that dominates the market has inched up However, recent benchmark bond market activity suggests the upward trend in rates could weaken slightly. As of midday on May 7, a recent notable rise in the benchmark 10-year bond yield from a point below 3.0% to points solidly above it had given up a little bit of ground and was at about 3.25%. An influential employment report due on May 8 is expected to play a role in what yields and rates do in the near future. The average rate on the 30-year fixed-rate mortgage inched up to 4.84% in the week ended May 7, according to Freddie Mac. In other rate-related news, the European Central Bank has cut the interest rate on its main refinancing operations of the Eurosystem by another 25 basis points to 1.00% and the rate on the marginal lending facility by 50 bp to 1.75%. It left the rate on its deposit facility unchanged at 0.25%.

Residential lenders funded $124 billion in second liens in 2008, a startling -- but not unexpected -- decline of 70% from the prior year, according to new figures compiled by National Mortgage News and the Quarterly Data Report. In 2006 nationwide second lien production peaked at $491 billion, the newspaper found. Up until early 2008 the second lien market continued strong, in part because of "80-10-10" or "piggyback" loan structures where lenders offered both a first and second lien to home buyers; the combination of loans had the effect of increasing the loan-to-value ratio to 80% while allowing the borrower to put only 10% down, and thus allowing them to avoid paying private mortgage insurance. Also, rapidly increasing home values allowed home owners to tap equity, but now with real estate values down by as much as 50% (or even more) in some hard hit markets, the second lien business is limping along. Some lenders have severely tightened requirements on home equity lines of credit while others have stopped making the loans altogether or through third-party loan brokers. In 2008 the top second lien funders were: Bank of America, Chase, and Wells Fargo & Co., the QDR found.

United Guaranty Residential Insurance Co., Greensboro, N.C., has had its insurer financial strength rating cut by Fitch Ratings, New York, from "AA-" to "BBB" because the mortgage insurer will remain a part of American International Group and not be spun off with AIU Holdings Inc. "While UGRIC continues to maintain explicit capital support in the form of a net worth maintenance agreement with AIG and a substantial stop-loss treaty with an 'AA-' rated insurance company of AIU, Fitch believes that the announced restructuring reduces the level of support for UGRIC and raises uncertainty as to AIG's strategic intent with respect to the U.S. mortgage insurance operations. Consequently, today's rating action reflects Fitch's assessment of UGRIC on a stand-alone basis, inclusive of current capital support agreements, the ratings agency said. Fitch put UGRIC on "Ratings Watch Evolving" because of what it said was increased uncertainty about the future of the mortgage insurer, whether AIG would maintain it as a going concern or put it into run-off.