Origination

The FBI had launched an investigation of IndyMac Bank for possible mortgage fraud shortly before the insolvent Pasadena, Calif.-based thrift was closed by regulators and placed into receivership, according to news reports. The $32 billion thrift, which specialized in alternative-A lending, is apparently one of 21 companies under scrutiny for possible mortgage fraud. "The FBI is currently investigating 21 companies involved in the mortgage/subprime industry," the bureau said in a statement in response to news reports about IndyMac. One month ago, FBI Director Robert Mueller told reporters that his agency had initiated 19 subprime-related corporate fraud investigations. Many of these investigations are coordinated with the Department of Justice and the Securities and Exchange Commission. In testimony July 15, SEC Chairman Christopher Cox told Congress that his agency has over four dozen law enforcement investigations in the subprime area. The Federal Deposit Insurance Corp. is operating IndyMac as a conservatorship and offering banking services to depositors and borrowers.

Thirteen classes from three Attentus collateralized debt obligations have been placed on Rating Watch Negative by Fitch Ratings. The managed CDOs -- Attentus CDO I Ltd./LLC, Attentus CDO II Ltd./LLC, and Attentus CDO III Ltd./LLC -- are supported by portfolios of trust preferred securities and subordinated debt issued by subsidiaries of real estate investment trusts, real estate operating companies, homebuilders, and specialty finance companies, as well as senior debt securities, commercial mortgage-backed securities and, in some cases, commercial real estate loans. Fitch attributed its rating actions to "heightened concern related to continued negative portfolio credit migration," as well as a collateral balance reduction stemming from one credit risk sale for Attentus CDO I and additional default activity for Attentus CDO II.

Thirty-one classes from six Taberna collateralized debt obligations have been placed on Rating Watch Negative by Fitch Ratings. Four of the transactions -- Taberna Preferred Funding II, II, IV, and V -- are static CDOs, and the other two -- Taberna Preferred Funding VI and VII -- are managed CDOs. The transactions are supported by portfolios of trust preferred securities and subordinated debt issued by subsidiaries of real estate investment trusts, real estate operating companies, homebuilders, and specialty finance companies, as well as commercial mortgage-backed securities and, in some cases, senior debt securities or commercial real estate loans. Fitch attributed its rating actions to "heightened concern related to continued negative portfolio credit migration, as well as additional default activity." Fitch can be found on the Web at http://www.fitchratings.com.

The Market Composite Index, an overall measure of mortgage applications, rose from 513.4 to 522.2 on a seasonally adjusted basis during the week ended July 11, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. The Purchase Index fell from 365.8 to 359.7 on a seasonally adjusted basis, while the Refinance Index climbed from 1379.3 to 1474.9. Refinancings represented 39.2% of total applications, up from 37.3% the previous week, while adjustable-rate mortgages accounted for 9.1%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages fell from 6.43% to 6.22%, and points (including the origination fee) increased from 1.06 to 1.21 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

ITAC, a Washington-based identity theft assistance center, is warning consumers "to regularly check their HELOC accounts" following the release of an FBI report showing an increase in the use of false identities to drain home equity from unsuspecting homeowners. ITAC said the report may indicate the emergence of a new identity-theft trend that could threaten holders of home equity lines of credit. According to the most recent FBI Mortgage Fraud Report, ID thieves are now targeting specific groups of individuals due to the mortgage crisis. "As financial institutions begin to enforce higher lending standards, the identities of individuals with good credit will increase in value to perpetrators," the FBI report said. The report warns homeowners that because they are seen as higher-value targets, individuals with good credit "will likely be at a more significant risk for identity theft."

Wells Fargo's second-quarter earnings fell $500 million short of last year's level, but investors cheered as the company's quarterly revenue rose to a new high and the board approved a 10% dividend increase. Wells earned $1.8 billion ($0.53 per share) in the second quarter, down from $2.3 billion ($0.67 per share) a year earlier. Results were weighed down by a $1.5 billion increase in the provision for future credit losses. Chargeoffs in the second quarter also totaled $1.5 billion, unchanged from the level recorded in the first quarter but double that of the first quarter of 2007. Chief credit officer Mike Loughlin said the increase in credit reserve reflects "expected higher losses" in Wells Fargo's home equity group and unsecured retail loans. Wells also reported higher losses from its first-lien mortgage portfolio, which Mr. Loughlin said was expected given the continued declines in home prices. Wells Fargo originated $31 billion of retail mortgages in the first quarter, little changed from the previous year's volume, and increased the size of its servicing portfolio to $1.55 trillion. Wells Fargo's stock price rose more than 20% in morning trading on Wednesday after the results were released.

Moody's has corrected a rating action affecting securities issued by First Franklin Mortgage Loan Trust on April 21, noting that 282 tranches from 30 transactions were downgraded rather than 286 as the ratings agency originally reported. "Certain specific features of the cash waterfall and loss allocation were not fully accounted for," Moody's said. The ratings agency said the collateral backing the residential mortgage-backed securities are first-lien, subprime adjustable-rate mortgage loans. "The ratings were downgraded, in general, based on higher than anticipated rates of delinquency, foreclosure, and REO in the underlying collateral relative to credit enhancement levels," Moody's said.

The Federal government's proposal to provide support for Fannie Mae and Freddie Mac has so far failed to stop the blood-letting for shareholders in the two firms. The Federal government's proposal to provide support for Fannie Mae and Freddie Mac has so far failed to stop the blood-letting for shareholders in the two firms. At the close of trading on Tuesday, Fannie Mae's shares were trading at $7.07, down 27% from their opening. Freddie Mac's shares were trading around $5.26, down 26%. Moody's Investors Service lowered key preferred stock and financial strength ratings on the firms. Other financials also fell after Federal Reserve Board chairman Ben Bernanke warned Congress that the economy faces "numerous difficulties," including the risk of higher inflation. The Dow industrial average was off 45 points, or about 0.4%, just after noon after recovering from a fall of nearly 200 points in earlier trading.

Fitch recorded a higher U.S. commercial real estate loan collateralized debt obligation delinquency rate in June that it said stemmed from the maturity default of one participated loan secured by a hotel/condominium development in South Florida. The CREL CDO delinquency index increased to 1.58% during the month from 1.08% the previous month. This is much higher than Fitch's commercial mortgage-backed securities delinquency rate because "the assets securing the loans in a CREL CDO are transitional in nature or highly leveraged," the ratings agency said. "In addition, the CREL DI covers 25 transactions with 340 assets while the CMBS DI covers many more (500) transactions with significantly more (42,000) loans," Fitch said. "As a result, because of the smaller number of loans in the index, one loan can have a big impact on the delinquency percentage," the ratings agency said. The CREL CDO delinquency index includes loans that are 60 days or longer delinquent, matured balloon loans and repurchased assets.

Thornburg Mortgage, Santa Fe, N.M., has received a majority consent to amend its preferred stock tender offer. The amendment changes the requirement that a tender offer for preferred stock result in the tender of at least 90% of the aggregate liquidation preference of the company's outstanding preferred stock. "To successfully complete the tender offer, the company must instead complete a tender of at least 66 2/3% of the aggregate liquidation preference of each series of its outstanding preferred stock," the company said. "Under the terms of the tender offer, for each share of Thornburg Mortgage Series C, D, E and F Preferred Stock that is validly tendered and accepted upon expiration of the tender offer, the holder will receive $5.00 in cash and approximately 3.5 shares of common stock." Executives have said that completion of the tender offer would clear a financial hurdle for the company.