Origination

The sole class of notes issued by Brit Alliance ABSpoke 2005-X, a collateralized debt obligation referencing residential mortgage-backed securities and other assets, has been downgraded from BB to CC by Fitch Ratings and removed from Rating Watch Negative. The downgrade of the class A notes resulted from "significant collateral deterioration" in the reference portfolio, specifically subprime and alternative-A RMBS, the rating agency said. The transaction is an unfunded managed synthetic CDO.

Five classes of variable-rate notes issued by Magnolia Finance II PLC, a collateralized debt obligation that references chiefly mortgage-backed security assets, have been downgraded and removed from Rating Watch Negative by Fitch Ratings. The affected notes were from the following asset-backed securities portfolios: series 2006-5A, series 2006-5B, series 2006-5CU, series 2006-5CE, and series 2006-5CG. Fitch said the downgrades reflect "significant collateral deterioration" in the reference portfolio, especially subprime residential MBS, alternative-A RMBS, and structured finance CDOs with underlying exposure to subprime RMBS. Magnolia II is a static, synthetic, structured finance CDO.

Concord Debt Holdings LLC, a Boston-based joint venture of two real estate investment trusts, has announced a capital commitment of up to $100 million from a subsidiary of Inland American Real Estate Trust Inc. Concord, which was formed by Winthrop Realty Trust and Lexington Realty Trust to originate and acquire real estate securities and real-estate-related loans, said the commitment includes an initial investment of $20 million and extends over 18 months. Concord said the funds will be used chiefly to originate and acquire additional debt such as whole loans, "B notes," and mezzanine loans. Winthrop and Lexington can be found on the Web at http://www.winthropreit.com and http://www.lxp.com.

Old Republic International Corp., the Chicago-based parent company of Republic Mortgage Insurance Co. and Old Republic Title Insurance Co., has changed its policies on the recognition of when its equity investment securities are considered to be other-than-temporarily impaired. The change has increased the company's second-quarter net loss from the previously reported $45.4 million ($0.20 per share) to $364.7 million ($1.58 per share). In its original announcement, ORI reported after-tax unrealized investment losses of $100.5 million ($0.43 per share) for its investments in the common stock of MGIC Investment Corp., The PMI Group, and LandAmerica Financial Group. At the time, all three investments were categorized as temporarily impaired. A telephone call to ORI for further information had not been returned at deadline time. The company can be found online at http://www.oldrepublictitle.com.

The personal financial services division of HSBC's U.S. operation booked $6.8 billion in loan impairment and credit risk charges in the first half, according to a new report issued by the company. The London-based bank also reported that its subprime portfolio (housed in "mortgage services") fell 13%, to $31 billion. It said 60% of the decline was due to loan repayments. The bank's personal finance division lost $2.2 billion in the first half. "The U.S. remains a difficult market, with rising unemployment and falling house prices," it said in a statement. HSBC still originates subprime loans, but only through the retail branches of the old Household Finance network.

By the end of next year, financial institutions will be looking at $2 trillion in writedowns due to the current credit crisis, according to an economics professor at New York University. Speaking on CNBC Monday morning, Nouriel Roubini of NYU's Stern School of Business said the $2 trillion price tag includes not only subprime loans, but "A paper" mortgages, credit cards, auto loans, municipal bonds, and other asset categories. "The consumer is on the ropes," said Professor Roubini. "Banks have barely started [taking writedowns]," he said. To date, Wall Street firms, banks, and other financial institutions have suffered mortgage-related asset writedowns of more than $300 billion. He predicted that the Federal Deposit Insurance Corp. will have to "bail out hundreds of banks."

Thanks to the recently passed housing bill, veterans can now get zero-downpayment loans through the Department of Veterans Affairs home loan program with a maximum loan amount of $729,750 for the rest of this year. The housing bill (H.R. 3221) puts the VA on par with the Federal Housing Administration, according to VA home loan director Judy Caden. On Jan. 1, the maximum VA and FHA loan limit will adjust to $625,000. The VA has seen a 31% increase in loan originations in fiscal year 2008 and has already surpassed the $25 billion in loans guaranteed by the department in fiscal 2007. Ms. Caden told MortgageWire that veterans are turning to VA mortgages because of tighter underwriting on conventional loans. "They are much tighter, and the no-downpayment feature has dried up," she said. The VA is hoping Congress will extend its authority to make hybrid adjustable-rate mortgages, which expires Sept. 30, and that lawmakers will make it easier for veterans with subprime loans to refinance into a VA loan. Currently, the VA cannot refinance a conventional loan with a loan amount above $144,000, and the veteran has to have 10% equity. The VA could help a lot more veterans if Congress fixes the $144,000 limit and raises it to $625,000. Ms. Caden said.

The Department of Housing and Urban Development should reconsider its approach to RESPA reform and withdraw its current proposal, according to a letter to HUD Secretary Steve Preston signed by 10 industry trade groups. "We have serious concerns about HUD's current Real Estate Settlement Procedures Act proposal, and we oppose its finalization in anywhere near its current form," the July 31 letter says. The trade groups want HUD to work with the Federal Reserve Board and harmonize the RESPA and Truth in Lending Act mortgage disclosures. "If HUD adopts a final rule now, without coordinating with the [Fed] board, it will be to the detriment of consumers, forcing them to confront a baffling host of disclosures, and forcing the mortgage industry to comply with inconsistent rules," the industry groups say in the letter, which was also sent to the White House budget office. The Fed is working on TILA disclosures that provide borrowers with a better understanding of financing costs and mortgage broker fees. The American Bankers Association, the Mortgage Bankers Association, and the National Association of Realtors are among the signers. The associations can be found online at http://www.aba.com, http://www.mortgagebankers.org, and http://www.realtor.org.

Florida regulators have closed First Priority Bank, Bradenton, Fla., after losses on commercial real estate loans crippled the $260 million bank. The Federal Deposit Insurance Corp. will end up selling most of the assets. SunTrust Bank, Atlanta, has assumed all the insured deposits, but purchased none of the real estate assets. A subsidiary of Beal Bank Nevada, Las Vegas, purchased only $42 million of the failed bank's assets. As of March 31, First Priority had $34.9 million in nonperforming real estate loans on its books, up from $4.6 million in the first quarter of 2007. The FDIC estimates that First Priority will cost the deposit insurance fund $72 million. It is the eighth bank to fail this year.

WCI Communities, a developer and builder of luxury homes based in Bonita Springs, Fla., has announced a Chapter 11 bankruptcy filing for itself and over 100 subsidiaries, but excluding WCI Mortgage and certain other WCI ventures. WCI said WCI Mortgage, an affiliate of Wells Fargo Home Mortgage, will continue to honor all its obligations. The company also announced the departure of Jerry L. Starkey as chief executive officer and his replacement by David L. Fry as interim president and CEO. Carl C. Icahn, chairman of WCI's board, said the bankruptcy filing was necessary "because of the recent failed effort to obtain financing and the recognition that the company's entire $1.8 billion of debt may soon be in default." The filing involved approximately 130 of WCI's wholly owned subsidiaries, but excluded WCI Mortgage, Prudential Florida WCI Realty, and "certain other joint ventures in which WCI is a partner," the company reported. WCI said the departure of Mr. Starkey was mutually agreed upon, and that he will be available to the company for consultation. WCI can be found online at http://www.wcicommunities.com.