Origination

Lenders originated $156.5 billion in FHA single-family loans in the first 11 months of fiscal year 2008, nearly triple the total for all of fiscal 2007, according to Department of Housing and Urban Development data. The HUD numbers show that FHA loan production accelerated in the spring and the summer. In July and August, lenders originated $47.9 billion in FHA loans, nearly topping the $54.3 billion originated over the previous three months. The FHA surge is also boosting the issuance of Ginnie Mae mortgage-backed securities. In July, Ginnie's single-family MBS issuance totaled $25.8 billion, which exceeded Freddie Mac's MBS issuance by $4 billion. In August, FHA lenders originated $24.4 billion in single-family loans and Ginnie guaranteed $28.8 billion in MBS. The Department of Veterans Affairs guarantee loan program is also kicking in. Lenders originated $8.2 billion in VA loans in July and August, compared with $10.4 during the previous three months.

Will American International Group be the next domino to fall? That seems to be the bet on Wall Street, as the company's common stock price fell over 65% just after noon Sept. 15 from its close on Sept. 12, off $7.89 to $4.25. Other media outlets are reporting that AIG will offer a restructuring plan, and the company has reportedly contacted the Federal Reserve seeking a bridge loan. AIG said it was unable to confirm this information. Standard & Poor's placed AIG on CreditWatch with negative implications on Sept. 12. "We believe that AIG has sufficient capital and liquidity to meet its policy obligations and potential collateral requirements, which are significantly greater than the expected cash losses on the mortgage-related assets," said S&P credit analyst Rodney Clark. "However, additional market value losses will place some strain on the company's resources." S&P added that AIG's access to the capital market may be more restricted in the short term. AIG reported a net loss of $5.86 billion ($2.06 per share) for the second quarter, compared with net income of $4.28 billion ($1.64 per share) a year earlier. The effect of capital markets unrealized losses on AIG's super senior credit default swaps was $3.6 billion. Operating losses at AIG's United Guaranty Corp. mortgage insurance subsidiary totaled $440 million for the quarter.

Standard & Poor's Ratings Services has lowered its long-term counterparty credit rating on Bank of America Corp. from AA to AA-minus following BoA's agreement to acquire Merrill Lynch. The long-term ratings of its subsidiaries were also lowered one notch, and those on its holding company and bank subsidiaries were placed on CreditWatch with negative implications. S&P also placed its ratings on Merrill Lynch & Co. and all related entities on CreditWatch with developing implications. The rating actions "reflect the risks of acquiring Merrill Lynch in the present turbulent market environment," said S&P credit analyst John Bartko. S&P noted that the acquisition "takes place on the heels of BoA's recent July 1 acquisition of troubled mortgage lender Countrywide Financial Corp. In our view, the purchase of Merrill will place further pressure on BofA's capital, already strained by the Countrywide acquisition." S&P said Merrill will introduce more residential housing risk to BoA, "notably in the form of its sizable holdings of collateralized debt obligations backed by subprime residential mortgage-backed securities." The rating agency can be found online at http://www.standardandpoors.com.

Bank of America's deal to buy Merrill Lynch could spell trouble for PHH Corp., which has a mortgage lending and servicing relationship with Merrill. Analysts at FBR Capital Markets note that the lending and servicing contract cannot be terminated until the end of 2010, but say they expect that Bank of America probably will take over Merrill's lending and servicing business at that time. FBR said Merrill accounts for 20%, or $8 billion, of PHH's origination volume. The loss of the Merrill relationship could be "incrementally negative for PHH," an FBR report said. FBR lowered its rating on PHH to "market perform" in the wake of the BoA/Merrill Lynch deal.

Eleven classes of notes issued by two collateralized debt obligations linked to subprime or alternative-A residential mortgage-backed securities have been downgraded by Fitch Ratings. The affected securities include seven classes from Charles River CDO I Ltd./Inc., and four classes from Northlake CDO I Ltd., both structured finance CDOs. All the downgraded classes were removed from Rating Watch Negative, as well as an additional class whose rating was affirmed. The downgrades were attributed variously to collateral deterioration in the portfolios from subprime and alt-A RMBS as well as to underlying exposure to subprime RMBS. Fitch can be found online at http://www.fitchratings.com.

Behringer Harvard Multifamily REIT I Inc., a Dallas-based company that intends to qualify as a real estate investment trust, has announced a $2 billion initial public offering. The offering will include the sale of up to 200 million shares of common stock at $10 per share, Behringer Harvard said. The company said it is offering all the shares in a "best efforts" offering through a network of independent financial advisers, and up to 50 million shares through a distribution reinvestment plan at $9.50 per share. The company can be found on the Web at http://www.bhfunds.com.

Late next month the Federal Deposit Insurance Corp. will accept bids for $360 million in performing commercial real estate loans owned by IndyMac Bank, Pasadena, Calif. The portfolio is being marketed for the agency by First Financial Network Inc., Oklahoma City. As reported by MortgageWire on Sept. 8, bids are due on most of IndyMac's other assets, including its residential servicing franchise. Buyers can buy the whole company or pieces of it. The commercial real estate loan portfolio is being marketed separately, with bids due Oct. 21. FDIC and FFN officials did not respond to telephone calls about the auctions by MW's deadline. The commercial portfolio is being stratified into pools based on collateral and geographic location. The loans are backed by properties in California, Texas, Ohio, Washington, Arizona, and Georgia, according to a statement released by FFN.

The House Financial Services Committee is slated to mark up a bill Sept. 16 that would give the Federal Housing Administration some latitude to price mortgage insurance premiums based on risk and allow nonprofit housing groups to continue to arrange downpayment assistance on FHA loans. The bill (H.R. 6694) would reverse provisions in a major housing bill Congress passed this summer that bans seller-funded downpayment assistance on FHA loans starting Oct 1 and bars the FHA from using risk-based pricing for 12 months. The Department of Housing and Urban Development says it has "deep reservations" about the bill even though the FHA has been seeking congressional authorization for risk-based pricing for several years. On Tuesday morning, a HUD official is scheduled to testify before a House Financial Services subcommittee on its Real Estate Settlement Procedures Act reform proposal, which many in Congress and the housing industry want HUD to withdraw. HUD Secretary Steve Preston continues to insist, however, that the department will issue a final RESPA rule that will provide homebuyers with a "clear and understandable" disclosure of their mortgage terms and costs.

JPMorgan Chase is in advanced talks to buy Washington Mutual, one of the nation's largest residential lenders and servicers, according to a report in American Banker. No other details were available at deadline time. According to figures compiled by National Mortgage News and the Quarterly Data Report, if JPM buys WaMu and all its mortgage assets, it would challenge Wells Fargo for the No. 2 spot among residential servicers. A combined Chase/WaMu servicing platform would have $1.429 trillion in housing receivables, compared with $1.496 trillion for Wells. Bank of America and its Countrywide franchise serviced $2.025 trillion in home mortgages at midyear, according to NMN/QDR. Over the past few years WaMu has been mentioned as a takeover target, with JPM, Citigroup, and a handful of foreign banks mentioned as possible suitors. Hammered by delinquent loans (including subprime), WaMu has been hemorrhaging money. Its stock recently fell to just $1.75. Late Thursday the nation's largest thrift released a preview of its third-quarter results, saying its credit loss provision would be about $4.5 billion, with residential mortgage losses accounting for $3.4 billion of the total. In the second quarter, WaMu's loss provision totaled $5.9 billion. WaMu said net chargeoffs may increase by about 20% in the third quarter, down from a 60% increase tallied in the second quarter.

Four classes of notes issued by Orion 2006-1 Ltd./LLC, a collateralized debt obligation linked to subprime residential mortgage-backed securities, have been downgraded by Fitch Ratings. The downgrades in the hybrid cash and synthetic structured finance CDO were as follows: class A, from BB-minus to CC; class B, from B to CC; class C, from CCC to CC; and class D, from CCC-minus to CC. All four classes were removed from Rating Watch Negative. Fitch said the downgrades stemmed from "significant collateral deterioration" in the portfolio, especially from U.S. subprime RMBS and structured finance CDOs with underlying exposure to subprime RMBS.