Origination

The Eleventh District Federal Home Loan Bank Cost of Funds Index for August stands at 2.693%, virtually unchanged from 2.698% in July. According to the Federal Home Loan Bank of San Francisco, which uses a weighted-average calculation to determine the index, the average total funds for August were $375.6 billion and the total interest expense was $842.7 million. In calculating the total funds, the averages consist of the simple average of the month-end balances for that month and the prior month for total funds, deposit accounts, advances, and other borrowing, according to the FHLBank's website. The total interest expense is derived from interest expense reported on deposit accounts, Federal Home Loan Bank advances, and other borrowings, adjusted for the number of days in the month. Among the factors that could affect future calculations is the failure of Washington Mutual, which was a member of the San Francisco FHLBank. A disclaimer in the COFI announcement said if there is a charter change or merger, the FHLBank might determine that a financial institution no longer qualifies as a COFI reporting member. "The impact of such removals on the COFI will depend entirely on the amount of interest expense and total funds of the entity being removed, and may be significant," the FHLBank said.

August 2008 was the worst month for total primary new insurance written for the members of the Mortgage Insurance Companies of America since MICA changed its reporting methodology seven years ago. There was just $10.2 billion of primary new insurance written, all of it through the traditional channel. No bulk certificates were issued in August -- the previous low was 10 in May of this year. The bulk channel is where most subprime mortgages were insured. In August 2007, 24,698 certificates were issued. The $10.2 billion figure was not the all-time low volume for the traditional channel. In February 2006, the channel contributed $9.3 billion, compared with $10.1 billion the month before. Another event that has affected the reported volume was the departure of Radian Group from the organization in 2003. Triad Guaranty, which entered runoff this summer, is also no longer counted in the organization's statistics. In July, $12.3 billion of primary new insurance was written, all but $31.2 million from the traditional channel. In August, the cure/default ratio stood at 57.4%, with 41,783 cures and 72,818 defaults.

American International Group Inc., New York, is refocusing its business on its core property-and-casualty insurance units, as it looks to raise liquidity to repay its loan from the Federal Reserve Bank of New York. AIG has already drawn $61 billion of the $85 billion available. In a statement, the company said it is "exploring divestiture opportunities for its remaining high-quality businesses and assets." Representatives of the company said specifics of the sales have not been disclosed, and it could not confirm whether the mortgage insurance business, United Guaranty Corp., Greensboro, N.C., was one of the units on the block. The AIG statement added that the company was "actively at work on a number of alternatives for its financial products business and its securities lending program." AIG's global coordinators for the divestiture program are The Blackstone Group and J.P. Morgan.

The Department of Housing and Urban Development is shooting for a Nov. 1 increase in the loan limit for Home Equity Conversion Mortgages to $417,000. The new single, nationwide maximum isn't as great as some had hoped, but it will still be higher than the current $200,160 floor or the $362,790 maximum in high-cost markets. Lending interests tried to persuade the FHA to go along with the new national $625,000 ceiling on Fannie Mae-Freddie Mac loans, which took effect Oct. 1. But at this week's Mortgage Bankers Association's reverse mortgage lending conference in Atlanta, FHA Commissioner Brian Montgomery revealed that the lower figure prevailed. "We tried to convince HUD that [reverse mortgages] should be tied to the higher limit," said Daryl Hicks, vice president of communications at the National Reverse Mortgage Lenders Association, "but the lower ceiling is still going to be very helpful." Mr. Montgomery also said that HECM origination fees would be capped at $6,000. While HUD is aiming for Nov. 1, the exact effective date will not be finalized until Mr. Montgomery issues a mortgagee letter on the new loan limit.

Fannie Mae is rolling back a 25-basis-point hike in its "adverse market" delivery fee that went into effect Oct. 1, and it is telling its lenders to waive the additional charge for borrowers who have not yet closed on their loan. Freddie Mac also said it is rescinding a previously announced 25-bp hike in its "market condition" delivery fee that was due to take effect Nov. 7. Over the past year, the two secondary-market agencies have increased their fees and underwriting standards as they struggled to deal with rising delinquencies and losses. The agencies told lenders in August that they were going to double those delivery fees before the companies were placed into conservatorships by their regulator. Since then, Fannie and Freddie have been under orders to review their loans fees and underwriting standards to increase the availability of affordable mortgage credit. Fannie is evaluating underwriting guidelines, pricing, and cost in light of changing market conditions, according to chief executive Herb Allison. "As we move forward, we will seek to balance our responsibility to provide the most market support possible with our obligation to protect the company and its many stakeholders, including taxpayers," Mr. Allison said. Fannie can be found online at http://www.fanniemae.com.

Mortgage companies cut 6,000 full-time employees from their payrolls in August -- the biggest monthly drop since 15,000 industry workers lost their jobs in September 2007. The U.S. Bureau of Labor Statistics reported that employment in the mortgage banker/broker sector fell from 355,100 in July to 349,100 in August. Since January, the employment reports showed a gradual decline in mortgage jobs totaling less than 10,000 layoffs until the drop in August. Since the subprime meltdown spooked the financial markets in August 2007, the mortgage industry has shed 58,900 jobs. Friday's jobs reports indicates that 159,000 U.S. workers lost their jobs in September following the loss of 73,000 jobs in August. The unemployment rate held steady a 6.1%. (There is a one-month lag between the release in national employment data and the release of mortgage industry data.)

The Federal Deposit Insurance Corp. -- which five days ago thought it had sold the ailing Wachovia Corp. to Citigroup -- has a conundrum on its hands: back Citi's original bid (which had federal aid) or allow the Charlotte, N.C.-based banking giant to be bought by Wells Fargo, which isn't asking for any type of government assistance. As of MortgageWire's deadline, the situation -- to say the least -- was fluid. Citigroup was threatening legal action while demanding that its original purchase go through as planned. The FDIC issued a statement saying it stood behind the original purchase agreement (which it helped engineer) but also said it will review "all proposals" with an eye toward coming up with a resolution "that best serves" the public interest." (The Citi deal values Wachovia at $1 a share, while the Wells bid amounts to about $7.) The trouble started Friday morning when Wells Fargo unexpectedly announced that it was buying Wachovia with no federal assistance whatsoever. The deal, if it goes through, will help Wells battle Bank of America for control of the residential lending and servicing sectors. With Wachovia under its belt, Wells would control 17.65% of the $9.6 trillion housing receivables market, compared with Bank of America's 21.06%. In lending, Wells/Wachovia would have an origination share of 17.73% vs. BoA's 19.99%. (The market share figures are based on June 30 data and take into account BoA's July 1 purchase of Countrywide Home Loans.) Even though the FDIC put no money into the original Citi-Wachovia purchase deal, it was on the hook for potential losses on Wachovia's payment-option ARM portfolio. Wells is buying Wachovia outright in a stock deal valued at $15 billion.

Three classes of CBRE Realty Finance CDO 2007-1 Ltd./LLC have been downgraded by Fitch Ratings. The downgrades were as follows: class J, from BB-plus to B-plus; class K, from BB to B; and class L, from BB-minus to B-minus. Fitch also affirmed the ratings on 11 other classes in the collateralized debt obligation. The rating agency attributed the downgrades to expected losses, a breach of the transaction's poolwide expected-loss covenant, and "failure of Fitch's property value decline stress scenarios." The deal is a revolving commercial real estate CDO.

The Issuer Default Ratings of Emigrant Bancorp Inc. and its subsidiaries have been downgraded by Fitch Ratings, which cited concerns about Emigrant's capital position and expected losses. The long-term IDR of the parent company was downgraded from BBB to BB-plus, and its short-term IDR was downgraded from F2 to B. The comparable downgrades to its subsidiaries were from BBB to BBB-minus and from F2 to F3, respectively. "While Fitch expects capital to meet the definition of 'well capitalized', both tangible and regulatory capital ratios remain under considerable pressure due to expected recognition of losses in its investment portfolio," the rating agency said. Fitch can be found online at http://www.fitchratings.com.

UDR Inc., a real estate investment trust based in Denver, has priced a public offering of 8 million shares of common stock at $24.25 per share. The net proceeds of approximately $184.9 million are expected to be used to repay $116.1 million outstanding under its revolving credit facility and for general corporate purposes, the company said. The underwriters have been given an option to buy up to 1.2 million additional shares to cover any overallotments. Merrill Lynch & Co., Citi, and Morgan Stanley are the joint book-running managers of the offering. UDR, a multifamily REIT, can be found online at http://www.udr.com.