Origination

ShoreBank is having problems originating affordable mortgages with private mortgage insurance that meet Fannie Mae's and Freddie Mac's tighter underwriting standards, according to Ellen Seidman, an executive vice president at the Chicago bank. "That is a serious problem because we have to portfolio the loans," Ms. Seidman told a Community Reinvestment Act conference sponsored by the Consumer Bankers Association. "It is virtually impossible to get mortgage insurance" for borrowers with a credit score under 620, "and it is very expensive between 620 and 680," she said. Ms. Seidman is also a director at the New America Foundation. Michael Shea, executive director of the Association of Community Organizations for Reform Now, noted that the only loans available in many communities are Federal Housing Administration loans. He is particularly critical of Fannie's and Freddie's policies of requiring higher downpayments in markets with declining house prices. "If that is not redlining, I don't know what is," Mr. Shea said.

A new research report by Friedman Billings Ramsey predicts that if Bank of America moves forward with its purchase of Countrywide Financial Corp., it may face $30 billion in loan writedowns once the deal closes. FBR's advice to BoA is to "completely walk away" from the deal. Late last week BoA filed an amended S-4 with the Securities and Exchange Commission, noting that there is no assurance that any of Countrywide's debt will be redeemed, assumed, or guaranteed. The filing prompted Standard & Poor's to downgrade Countrywide's debt to junk status, from BBB-plus/A-2 to BB-plus/B. (Roughly 25% of Countrywide's subprime servicing portfolio is delinquent.) FBR also says it believes that BoA will soon renegotiate the purchase price down to $2 or less per share from $7. Countrywide's spokesman could not be reached for comment by MortgageWire's deadline.

ProLogis, a Denver-based real estate investment trust, has priced a public offering of $500 million of 2.625% convertible senior notes due 2038 at 99% of par. The company also announced the pricing of $600 million of fixed-rate senior notes at 99.766% of par. Goldman Sachs & Co., Banc of America Securities LLC, and Morgan Stanley & Co. were the joint book-running managers for the offering of convertible senior notes, and Citigroup Global Markets Inc., Goldman Sachs, and RBS Greenwich Capital were the managers for the fixed-rate senior note offering. The REIT can be found online at http://www.prologis.com.

Class M of Morgan Stanley Capital I Inc. series 2005 XLF commercial mortgage pass-through certificates has been downgraded from BBB-minus to BB-plus by Fitch Ratings and removed from Rating Watch Negative. Fitch also affirmed the ratings on seven other classes in the transaction. The downgrade was based on "continued uncertainty regarding leasing" in connection with the Dominion Tower loan, the rating agency said. Dominion Tower is an office building in Pittsburgh that is only 42% occupied, Fitch said.

Fitch Ratings has downgraded 10 classes of notes and preference shares from two collateralized debt obligations backed partly by mortgage-backed securities. The affected securities are four classes of notes and one class of preference shares issued by Enhanced Mortgage Backed Securities Fund III Ltd., and four classes of notes and one class of preference shares issued by Enhanced Mortgage Backed Securities Fund IV Ltd. Both are mortgage market value CDOs. Fitch attributed the downgrades to "significant" declines in the net asset values of the CDOs, putting them "closer to hitting the class C and class D trigger levels." If the triggers are breached, the transactions "would be forced to sell assets, which would result in the realization of further losses," the rating agency said.

Fitch Ratings has downgraded 12 classes of notes from three collateralized debt obligations backed partly by subprime residential mortgage-backed securities. The affected securities are four classes of notes issued by Robeco High Grade CDO I Ltd.; four classes issued by C-BASS CBO XV Ltd.; and four classes issued by C-BASS CBO XVI Ltd. All three transactions are static cash flow CDOs. All the downgraded classes were removed from Rating Watch Negative. Fitch attributed the downgrades to "significant collateral deterioration" in the portfolios, especially subprime RMBS, alternative-A RMBS, and -- in two of the three CDOs -- structured finance CDOs with underlying exposure to subprime RMBS.

More than 150 additional classes of subprime mortgage-backed securities were downgraded by Fitch Ratings on May 1. Fitch also affirmed the ratings on classes with outstanding balances of approximately $7.5 billion. The securities affected by the latest downgrades were: 38 classes from 18 issues by Ameriquest Mortgage Securities Inc.; 37 classes from six issues by Park Place Securities Inc.; 36 classes from 17 issues by Residential Asset Securities Corp.; 24 classes from seven issues by Ace Securities Corp.; and 17 classes from nine issues by Argent Securities Inc.

LandCastle Title LLC, the title company of real estate law firm Morris/Hardwick/Schneider, has announced the establishment of a new vendor management division, LandCastle Lender Services. The division "will allow clients to use LandCastle Title as a one-stop operation for closing, title, and appraisal services in all 50 states," the company said. Using an optimized, Web-based ordering system, clients are able to place title, closing, and appraisal orders using a unique login and password, LandCastle said. Clients can also follow the progress of orders, with current status updates, and can retrieve title and appraisal products online. The company can be found on the Web at http://www.closingsource.net.

Fitch Ratings is withdrawing its ratings of Radian Group Inc., and its mortgage and financial guaranty subsidiaries. Radian first requested that Fitch take the action on Sept. 5, 2007, but at that time Fitch refused. Radian made its request in response to a downgrade of Radian Asset Assurance. Back in September, Fitch said it would maintain ratings coverage of Radian due to investor interest, but would withdraw them if it believed it no longer had access to adequate public and nonpublic information to credibly maintain the ratings. In its latest statement, Fitch said it believes the information available is no longer adequate to maintain credible ratings under its methodologies for rating mortgage insurers and financial guaranty insurers. Fitch added that it will continue to monitor investor interest in its ratings coverage of Radian and may review its methodologies to explore ways to provide ratings using only publicly available information. Fitch can be found online at http://www.fitchratings.com.

Triad Guaranty Inc., Winston-Salem, N.C., is negotiating exclusively with Lightyear Capital LLC, New York, on the creation of a new monoline mortgage insurer. In its most recent 10-K filing, Triad said this was one of the options it was exploring for the future of the company. If the negotiations are successful, after the creation of the new company Triad Guaranty Insurance Corp. will be placed into run-off. Triad's regulator, the Illinois Department of Insurance, has been informed by both parties of the negotiations. It is expected that Lightyear and its investor group will provide up to $400 million ($200 million from Lightyear itself) in capital to the new Illinois-domiciled mortgage insurer. "Certain key members of Triad's current management and many of its employees" will join the new company, which will also purchase certain assets and the right to use certain systems and technologies of Triad, the company said. TGIC is continuing to write new mortgage insurance business and is working on a remediation plan for presentation to Fannie Mae and Freddie Mac. If a definitive agreement is signed this month, the deal could close in the third quarter.