Origination

The Market Composite Index, an overall measure of mortgage applications, rose from 420.8 to 432.6 on a seasonally adjusted basis during the week ended Aug. 1, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. The Purchase Index rose from 309.5 to 315.2 on a seasonally adjusted basis, while the Refinance Index climbed from 1074.4 to 1121.8. Refinancings represented 35.9% of total applications, up from 35.2% the previous week, while adjustable-rate mortgages accounted for 6.9%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages fell from 6.46% to 6.41%, and points (including the origination fee) decreased from 1.16 to 1.13 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

Fitch Ratings has downgraded the preferred-stock rating of Freddie Mac from A-plus to A, while affirming the Issuer Default Ratings of the government-sponsored enterprise. The GSE's long-term IDR was affirmed at AAA, and its short-term IDR was affirmed at F1-plus. Noting that the actions followed Freddie's announcement of a $972 million net loss for the first half, Fitch attributed the downgrade to a greater likelihood that Freddie will eliminate dividends on preferred stock as housing prices decline. It also speculated that the GSE's expected capital raise "may meet market resistance" and that the way the issue is structured (between preferred and common stock) may affect Freddie's preferred-stock ratings. Fitch can be found on the Web at http://www.fitchratings.com.

Irwin Financial Corp., a bank holding company based in Columbus, Ind., has reported a net loss of $107 million ($3.64 per share) for the second quarter, citing charges linked to a strategic restructuring of the company and its exit from the home equity business. The loss includes approximately $94 million in losses from the leasing and home equity businesses Irwin is leaving. "Through asset sales and significantly reducing our exposure to home equity credit losses, management and the board are refocusing the corporation on our core services to small business and local branch-based customers," said Will Miller, chairman and chief executive officer of Irwin Financial. "With the remaining home equity portfolio in runoff mode, we have capped our exposure to the national home equity industry while we exit this business." Mr. Miller predicted a return to profitability for the company in 2009. Irwin can be found online at http://www.irwinfinancial.com.

The PMI Group Inc., Walnut, Creek, Calif., has reported a net loss of $246.3 million ($3.03 per share) for the second quarter, compared with net income of $83.8 million ($0.95 per share) for the same period last year. The company said the loss was primarily due to a net loss of $225.9 million in U.S. mortgage insurance operations owing to increases in paid claims and loss adjustment expenses and additions to the reserve for losses, partially offset by higher net income from its international operations. The company said it is shutting down its Canadian business and restructuring its European subsidiary. In early August, PMI Guaranty paid approximately $144 million of its excess capital to the parent company. It was able to do this because of an agreement to transfer its entire FGIC-related reinsurance portfolio to a third party. Before the end of the third quarter, PMI Group said it expects to reinvest at least 80% of that capital into its U.S. mortgage insurance operations. In addition, as a result of the closure of PMI Canada, PMI Group said it expects to repatriate approximately $60 million of capital to U.S. mortgage insurance operations in the second half of 2008. PMI Group can be found on the Web at http://www.pmigroup.com.

American International Group, New York, has 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 market losses on AIG's super-senior credit default swaps totaled $3.6 billion. Operating losses at its United Guaranty Corp. mortgage insurance subsidiary were $440 million. "Our second-quarter results were adversely affected by the severe conditions in the housing and credit markets and a very difficult investment environment," said AIG chairman and chief executive Robert B. Willumstad. ".... We are conducting a comprehensive review of all AIG's businesses with the objectives of improving results, reducing AIG's risk profile, and protecting our capital base. We are examining every business, as well as the assumptions underlying how we do business in the markets where we have a presence. We are considering all options." The company can be found online at http://www.aig.com.

Connecticut Attorney General Richard Blumenthal is the latest state AG to file suit against Countrywide Financial Corp. for allegedly pushing consumers into deceptive, unaffordable loans and workouts, and allegedly charging homeowners in default unjustified and excessive legal fees. Mr. Blumenthal's lawsuit, filed in Superior Court in Hartford, seeks restitution of up to $100,000 per violation of state banking laws and up to $5,000 per violation of state consumer protection laws. "Countrywide conned customers into loans that were clearly unaffordable and unsustainable, turning the American Dream of homeownership into a nightmare," Mr. Blumenthal said in a statement. "When consumers defaulted, the company bullied them into workouts doomed to fail. Countrywide crammed unconscionable legal fees into renegotiated loans, digging consumers deeper into debt." A spokeswoman for Bank of America, which now owns Countrywide, said in a statement: "While we cannot comment on pending litigation, we will respond to the AG in due course."

The National Association of Realtors estimates that 2.5 million first-time homebuyers will take advantage of a temporary homebuyer tax credit recently passed by Congress and help push up sales of existing homes in the second half of this year and stabilize house prices. "Home prices are projected to increase 3% to 6% in 2009," NAR chief economist Lawrence Yun said. The Realtors' latest forecast calls for sales of previously owned homes to increase from an annual rate of 4.9 million in the second quarter to a 5.6 million rate in the fourth quarter. The NAR also reported that its pending home sales index rose from 84.5% in May to 89.0% in June as sharply discounted houses in distressed markets attracted multiple buyers. "The pickup in contract signings appears to be broadening, with many affordable markets in mid-America showing year-over-year gains," the NAR said. The NAR can be found online at http://www.realtor.org.

The Department of Housing and Urban Development is preparing to go back to the old standard of charging all Federal Housing Administration borrowers the same upfront mortgage insurance premium starting on Oct 1 -- only this time the premium will be higher. HUD officials are telling industry groups that a notice of the across-the-board MI premium increase might be issued next week. "They are running models right now to see how much we should raise it," a HUD official told MortgageWire. FHA lenders have been charging risk-based premiums since July 14. But a recently passed housing bill requires the FHA to stop risk-based pricing by Oct. 1. Before July 14, the FHA charged a standard 1.5% upfront mortgage insurance premium. Some estimate that the FHA will raise the upfront premium at least 25 basis points.

Eleven classes of notes issued by two collateralized debt obligations linked to subprime residential mortgage-backed securities have been downgraded by Fitch Ratings. The affected securities are six classes from Duke Funding IX Ltd./Corp., a hybrid cash and synthetic structured finance CDO; and five classes from Porter Square CDO III Ltd./Inc., a cash flow structured finance CDO. The downgrades were attributed to "significant collateral deterioration" in the portfolios' subprime RMBS. In the case of Duke Funding IX, the downgrade was also attributed to alternative-A RMBS, and in the case of Porter Square III, it was also attributed to structured finance CDOs with underlying exposure to subprime RMBS. Fitch can be found online at http://www.fitchratings.com.

WCI Communities Inc., a luxury homebuilder and real estate services company based in Bonita Springs, Fla., has reported the approval of a package of relief designed to ensure the continued operation of its business. WCI said the approval by the U.S. Bankruptcy Court in Wilmington, Del., assures current and prospective homebuyers that WCI's Chapter 11 filing will not affect their rights or "create any unexpected risks." The company said the court action, among other things, authorizes WCI to deliver clear title to homes and tower residences at closing; directs closing agents and title companies to make all required closing payments; and authorizes the issuance of required title insurance policies. WCI can be found on the Web at http://www.wcicommunities.com.