Origination

Federal Housing Administration single-family mortgage originations took off in the first three months of this year, as FHA applications doubled to 181,900 between Dec. 31 and the end of March, according to Department of Housing and Development data. The data also show that FHA-insured loans jumped by 64%, to 89,000, from December to March. Mortgage banking consultant Brian Chappelle estimates that FHA lenders are now taking 200,000 FHA mortgage applications per month and insuring 100,000 loans per month. There are concerns that the FHA might not be able to handle the increase in business. But Mr. Chappelle said the FHA direct-endorsement lenders manage the whole approval process. From an origination standpoint, "there are no backlogs because the lender controls the process," he said. Mr. Chappelle is with Potomac Partners in Washington.

The PMI Group Inc., a mortgage insurer based in Walnut Creek, Calif., has reported a net loss of $274.0 million ($3.37 per share) in the first quarter, compared with net income of $102.0 million ($1.16 per share) a year earlier. PMI attributed the loss chiefly to a net loss of $172.5 million in its U.S. mortgage insurance operations due to increases in paid claims, loss-adjustment expenses and additions to loss reserves, and an other-than-temporary impairment of its investment in FGIC. Net premiums earned in the U.S. MI operations totaled $207.8 million, up 7.2% from $193.8 million a year earlier, PMI reported. In PMI's international operations, PMI Australia reported record net income of $30.5 million for the first quarter, PMI Europe reported a net loss of $13.9 million, and PMI Asia reported net income of $2.7 million. PMI Group can be found on the Web at http://www.pmigroup.com.

Classes B-3 and B-4 of Countrywide mortgage pass-through certificates series 2003-44 have been placed on Rating Watch Negative by Fitch Ratings. Fitch also removed class A-3 of the deal and class 1-A-2 of series 2003-1 from Rating Watch Negative and affirmed the ratings on 32 classes in the two transactions. The collateral consists of mixed-term fixed-rate prime mortgages.

Stewart Information Services Corp., Houston, has revised its first-quarter 2008 results following the discovery of an agency defalcation. As a result of the fraud, the company took a pretax charge of $4.6 million, which affected its results on an after-tax basis by $3.0 million, or $0.16 per share. Stewart is now reporting a first-quarter loss of $25.2 million ($1.40 per share). On April 30, it reported a loss of $22.3 million ($1.24 per share).

The Federal Housing Administration will start charging upfront mortgage insurance premiums based on the borrower's credit score and downpayment starting July 14, according to the Department of Housing and Urban Development. Upfront premiums paid at closing will range from 1.25% to 2.25% under the new pricing schedule that will apply to all FHA loans. Currently all FHA borrowers pay a 1.5% upfront premium regardless of risk. By charging slightly higher premiums based on credit risk, HUD expects to create a more financially sound FHA program and reach more borrowers struggling to keep up with their payments on high-cost subprime mortgages. Risk-based pricing will also be used for refinancing delinquent borrowers under the FHA Secure program starting in July. HUD is expanding the FHA Secure program so that borrowers who have missed two or three payments in the previous 12 months can be refinanced into FHA-insured mortgages. The risk-based pricing notice and a mortgagee letter with the underwriting standards for the expanded FHA Secure program are posted on the FHA website, which can be found at http://www.fha.gov.

American International Group Inc., New York, has reported a net loss of $7.81 billion in the first quarter, and its United Guaranty mortgage insurance subsidiary took an operating loss of $352 million due to housing and capital market disruptions. Analysts at Fitch Ratings, which downgraded AIG's issuer default and senior debt ratings from AA to AA-minus in response to the earnings results, said they believe AIG was primarily exposed to housing finance-related risks through $61 billion of structured finance collateralized debt obligations backed mainly by subprime U.S. residential mortgage-backed securities in its $469 billion portfolio of notional credit derivatives. AIG said the operating loss in its MI unit reflected "increased losses incurred in both the domestic first- and second-lien businesses" and occurred despite a 14.3% jump (from the level recorded a year earlier) in domestic first-lien net premiums written during the quarter. AIG also announced the commencement of offerings of common stock and equity units totaling $7.5 billion. If the company completes the capital raise successfully, Fitch said it plans to remove AIG's ratings from Rating Watch Negative and affirm them with a negative outlook. Fitch plans to lower AIG's ratings by one notch if the capital raise is not successful.

Six weeks after announcing its intention to pare $45 billion in mortgage assets, Citigroup said Friday that it will shed $500 billion in assets overall. No details were given at deadline time. The sales were expected to occur in "nonlegacy" businesses outside Citi's core consumer franchise, but also might entail more mortgage-related cuts. Meanwhile, Citigroup said May 7 that it would close mortgage offices in Orange and Irvine, Calif., eliminating 419 jobs, as part of a previously announced consolidation of its home lending businesses amid the housing and credit crisis. According to The Orange County Register, Citigroup is shutting down most of Argent Mortgage, which it bought from billionaire Roland Arnall last year. (Mr. Arnall died this spring.) Overall, Citi is cutting 1,860 jobs nationwide and keeping just 70 sales positions.

Class B-2 of Morgan Stanley mortgage pass-through certificates series 2002-AM3 has been downgraded from CC/DR2 to C/DR4 by Fitch Ratings. Fitch also affirmed the ratings on five other classes in the transaction and removed class A-2 from Rating Watch Negative. The collateral consists of fixed- and adjustable-rate subprime mortgages.

Fitch Ratings has downgraded 30 classes of notes from eight collateralized debt obligations backed primarily or partly by subprime residential mortgage-backed securities. The affected securities are: seven classes issued by Jupiter High-Grade CDO III Ltd.; five classes issued by Davis Square Funding III Ltd.; four classes issued by Pacific Bay CDO Ltd.; four classes issued by South Coast Funding II Ltd.; three classes issued by South Coast Funding VI Ltd.; three classes issued by Grenadier Funding Ltd.; three classes issued by Davis Square Funding II Inc.; and one class issued by Millstone Funding Ltd. Fitch attributed the downgrades to "significant collateral deterioration" in the portfolios' subprime RMBS and, in some cases, alternative-A RMBS, commercial MBS, prime MBS, and structured finance CDOs with underlying exposure to subprime RMBS.

Three large portfolios of mortgage servicing rights have just been put out for bidding. Interactive Mortgage Advisors, Denver, is selling servicing rights on a $5.5 billion portfolio of subprime mortgage loans. The two-part offering includes both primary and master servicing rights on the portfolio. The portfolio has an average loan size of $160,686; an average weighted interest rate of 8.523%; an average weighted servicing fee of 45.3 basis points; and a total 30-day-plus delinquency rate of 19.6%. Bids are due May 28. Separately, IMA is also taking master and primary servicing bids on alternative-A and subprime deals involving $5.0 billion and $3.9 billion, respectively. The portfolios have similar characteristics to the previous one. Bids are due May 28. Also separately, the Prestwick Mortgage Group, Alexandria, Va., is brokering the sale of monthly flow servicing rights on an estimated $5 million per month of Fannie Mae loans. The seller desires to start deliveries in July. Bids are due May 21.