Origination

The Market Composite Index, an overall measure of mortgage applications, increased 45.7% on a seasonally adjusted basis to 875.3 from 600.6 for the week ended Feb. 13, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. This decline is once again driven by interest rates moving lower, causing consumers to consider refinancing, although there was a slight increase in purchase activity as well. On an unadjusted basis, the index increased 47.7% compared with the previous week and 5.2% compared with the same week one year earlier. The Purchase Index increased 9.1% to 257.3 from 235.9 one week earlier on a seasonally adjusted basis, while the Refinance Index increased 64.3% to 4472.9 from 2722.7 the week prior. Refinancings increased to 74.2% of applications from 66.7% the previous week, while adjustable-rate mortgages accounted for 1.7% of applications, down from 2.5% for the previous week, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.99% from 5.19%, with points (including the origination fee) increasing to 1.37 from 1.2 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

Barclays on Tuesday shuttered EquiFirst Corp. of Charlotte, its subprime lending arm. EquiFirst - which at one time had 9,000 approved brokers in its wholesale network - stopped disclosing its subprime production a year ago. Two years back EquiFirst ranked among the top 20 A- to D credit funders in the U.S. EquiFirst told its mortgage brokers on Tuesday that only completed application packages would be processed for funding and that no new loan submissions would be accepted. The move comes about two years after the British bank acquired EquiFirst from Regions Financial. Very little in the way of subprime residential loans are being originated today unless they can be sold to Fannie Mae or Freddie Mac. The private label subprime market has not functioned since early 2008 and shows little hope of coming back any time soon.

The Mortgage Bankers Association generally likes President Barack Obama's foreclosure plan but questions if $75 billion over three years will be enough to solve the problem. Josh Denney, associate vice president, public policy and government affairs, said MBA thinks the plan will "enhance servicers' ability to help borrowers in trouble and those who may be on the edge of trouble." Mr. Denney, who spoke to MortgageWire at MBA's annual servicing conference in Tampa, said the group was pleased that the $75 billion price tag was greater than the $50 billion figure that had been previously reported but said "it's unclear if $75 billion will be enough." He said the group is pleased with incentive payments to servicers in the plan and thinks a buy-down provision between lenders and the government to reduce debt-to-income levels to 31% is "a good structure." MBA would prefer to see incentives to Freddie Mac and Fannie Mae to make refinancings easier to go higher than 105% loan-to-value to "open it up to those a bit more underwater." The group remains opposed to judicial cramdowns other than to certain subprime mortgages of certain vintages, and Denney said the plan "doesn't seem to address mortgages in private-label securities." MBA would like to see a refi plan to assist those people who can't get loan mods because of legal provisions complicating access to a modification.

The Obama administration is creating a Fannie Mae and Freddie Mac refinancing program to give 4 million to 5 million homeowners a chance of obtaining lower interest rate loans even though the value of their homes has eroded and they are having difficulty refinancing under existing standards. This new program is limited to homeowners that owe more than 80% of the value of the house and currently have conforming loans owned or guaranteed by the government-sponsored enterprises. Fannie and Freddie can waive mortgage insurance requirements in refinancing these loans, unless the borrower has private mortgage insurance. In that case, the borrower will continue to pay insurance premiums on the new mortgage. This program will provide "access to low-cost refinancing for responsible homeowners suffering from falling home prices," according to a summary of the president's foreclosure prevention plan. President Barack Obama, Treasury secretary Timothy Geithner and Housing secretary Shaun Donovan unveiled a comprehensive plan to address the foreclosure crisis at an event in Mesa, Ariz.

Residential servicing firms could reap rewards of up to $2,000 per year (per loan) under the White House's new initiative to help struggling homeowners. Under the "stability" portion of the Obama administration's $75 billion Homeowner Affordability and Stability Plan, servicers will receive an upfront payment of $1,000 per loan for each eligible modification. As long as the borrower stays current on his modified loan the same servicer can receive a second payment of another $1,000 at year-end. The White House/Treasury/HUD program also is offering a $2,000 incentive to lenders and mortgage holders if they modify "at risk" loans before the borrower actually goes delinquent. Under this clause the servicer can make $500 and the investor $1,500 per loan. Roughly $75 billion in taxpayer money will be used to help 3 million to 4 million homeowners that might lose their homes to foreclosure.

Barclays on Tuesday shuttered EquiFirst Corp. of Charlotte, its subprime lending arm. EquiFirst -- which at one time had 9,000 approved brokers in its wholesale network -- stopped disclosing its subprime production a year ago. Two years back EquiFirst ranked among the top 20 A- to D funders in the U.S. EquiFirst told its mortgage brokers on Tuesday that only completed application packages would be processed for funding and that no new loan submissions would be accepted. The move comes about two years after the British bank acquired EquiFirst from Regions Financial. Very little in the way of subprime residential loans are being originated today unless they can be sold to Fannie Mae or Freddie Mac. The private label subprime market has not functioned since early 2008 and shows little hope of coming back any time soon.

Commercial loan losses are mounting on balance sheets around the nation, but analysts said banks should not expect any dedicated government help on that front, according to a report in American Banker. Corporate borrowers are likely last in line behind homeowners and consumers when it comes to prioritizing federal aid, analysts said, though they said banks burdened by bad corporate loans should be able to get some indirect assistance from government initiatives already under way, like the Troubled Asset Relief Program and Term Asset-Backed Securities Loan Facility. If those programs work as intended by reviving other credit markets and bolstering consumer confidence, corporate loan quality should also improve, analysts said.

Colonial Properties Trust, a commercial REIT, reported a net loss of $107.2 million for the fourth quarter, compared to income of $3.2 million, for the same period in 2007. Results for the fourth quarter include a non-cash impairment charge of $116.9 million related to some of the REIT's "for-sale" residential properties and writedowns on land held for future development. "The balance sheet and liquidity will be our top priority in 2009," said company CEO Thomas H. Lowder. "We are reducing overhead, postponing any new development and focusing on operations." He added that the outlook for 2009 remains challenging. Colonial is based in Birmingham, Ala.

The Fitch Commercial Real Estate CDO Delinquency Index increased by 111 basis points in January as 20 newly delinquent loans pushed the index to 3.83% for January 2009, compared to 2.72% in December 2008. "The inherently transitional nature of CREL CDO collateral has resulted in an increasing number of these assets becoming delinquent or failing to meet expectations in this stressed economic environment," said Fitch senior director Karen Trebach. Fitch said it anticipates that delinquencies on loans backed by land for development, turnaround projects and construction properties will continue to increase as interest reserves burn off and sponsors become unable or unwilling to come out of pocket to cover debt service payments. Meanwhile, defaults on three 2007 vintage loans ranging in size from $130 million to $225 million led to a 27 basis point increase for January U.S. commercial mortgage-backed securities loan delinquencies to 1.15%, according to Fitch. "High-profile loans secured by larger properties, which were often not stabilized at transaction issuance, have begun to default," said Susan Merrick, managing director and head of the U.S. CMBS group. Fitch said it expects that performance defaults on larger loans will push up the loan delinquency index in coming months, to approximately 3% by year-end 2009. With pools consisting of many larger assets, the 2006 and 2007 vintages are likely to be the largest contributors to delinquencies.

Freddie Mac said there will be no change to its business relationship with three mortgage insurance firms recently downgraded by Moody's Investor Service. The GSE clarified that there is no change to the "Type I" mortgage insurer status it has assigned to Mortgage Guaranty Insurance Corp., Radian Guaranty Inc., or PMI Mortgage Insurance. All three were downgraded by Moody's Investors Service on Feb. 13 to below investment grade. The share price of all three fell sharply Tuesday, along with the overall market. Moody's also downgraded United Guaranty Inc., Genworth Mortgage Insurance Corp. and Republic Mortgage Insurance - but maintained investment grade ratings on all three of those firms. A call to Fannie Mae to confirm if that company was still treating these firms as Type I insurers was not returned by deadline. In a statement, Radian Group chief executive S.A. Ibrahim said Moody's action did not reflect the company's "substantial claims-paying resource and the improving quality of our mortgage insurance portfolio." He added the move should not affect Radian's ability to insure loans sold to Fannie Mae or Freddie Mac. MGIC and PMI said they had no comment about the downgrade.