Origination

The Federal Housing Administration refinancing bill is on a fast-track in the House of Representatives but has hit a bump in the Senate Banking Committee, where a scheduled May 6 mark-up has been postponed. The House Financial Services Committee passed the FHA refinancing bill on May 1, and the full House is expected to vote on it during the week of May 5. The foreclosure prevention bill provides the Federal Housing Administration with $300 billion in loan commitment authority to refinance "underwater" mortgages. House leaders want to attach the FHA refinancing bill to a larger legislative package that includes FHA modernization and GSE reform bills the House passed last year. The bills increase the loan limits for the FHA, Fannie Mae, and Freddie Mac to $729,750. The package also includes a tax bill that provides revenue bonds to refinance subprime loans and a $7,500 tax credit for first-time homebuyers. Meanwhile, it appears that negotiations over a government-sponsored enterprise bill to strengthen regulation of Fannie and Freddie has bogged down, and Senate Banking Committee leaders will reschedule the May 6 mark-up. Committee Chairman Christopher J. Dodd, D-Conn., wants to tackle the GSE reform and FHA refinancing bills in the same mark-up.

Six classes of notes issued by Pyxis ABS CDO 2006-1 Ltd., a collateralized debt obligation backed partly by subprime mortgage-backed securities, have been downgraded by Fitch Ratings. The downgrades were as follows: class A-1, from BBB-minus to CC; class A-2, from BB to CC; class B, from BB-minus to CC; class C, from B to CC; class D, from CCC-plus to CC; and class X, from CCC to CC. The downgrades reflect "significant collateral deterioration" in the portfolio of the hybrid cash and synthetic CDO, specifically subprime residential MBS and structured finance CDOs with underlying exposure to subprime RMBS, Fitch said.

Eight classes from Silver Martin CDO I Ltd., a collateralized debt obligation backed partly by subprime mortgage-backed securities, have been downgraded by Fitch Ratings, and seven of the classes have been removed from Rating Watch Negative. Fitch attributed the downgrades to "significant collateral deterioration" in the portfolio, especially subprime residential MBS, alternative-A RMBS, and structured finance CDOs with underlying exposure to subprime RMBS. Since the last rating action on the transaction in November, nearly 66% of the portfolio has been downgraded, the rating agency said.

Ten classes from Ridgeway Court Funding II Ltd., a collateralized debt obligation backed partly by subprime mortgage-backed securities, have been downgraded by Fitch Ratings, and nine of the classes have been removed from Rating Watch Negative. Fitch attributed the downgrades to "significant collateral deterioration" in the portfolio, especially subprime residential MBS, alternative-A RMBS, and structured finance CDOs with underlying exposure to subprime RMBS. Since the last rating action on the transaction in November, nearly 77% of the portfolio has been downgraded, the rating agency said.

Sixty-three certificates from 19 First Franklin Mortgage Loan Trust transactions backed by first-lien subprime mortgage loans have been downgraded by Moody's Investors Service. Moody's also placed 11 certificates under review for possible downgrade. The downgrades were attributed to the fact that credit enhancement provided by subordination, overcollateralization, and excess spread for each deal is low compared to projected pipeline losses. "Stepdown and continuous losses have left the deals with thin credit enhancement levels and made them more vulnerable to pool deterioration in the tail end of the deals' lives," the rating agency said. Moody's can be found online at http://www.moodys.com.

More than 100 additional classes of subprime mortgage-backed securities were downgraded by Fitch Ratings on April 30. Fitch also affirmed the ratings on classes with outstanding balances of more than $5 billion. The securities affected by the latest downgrades were: 54 classes from 23 issues by Structured Asset Investment Loan; 31 classes from eight issues by CDC Mortgage Capital Trust; 20 classes from 19 issues by Chase Funding Loan Acquisition Trust; 17 classes from four issues by Structured Asset Securities Corp.; and nine classes from two issues by People's Choice Home Loan. Fitch can be found online at http://www.fitchratings.com.

CapLease Inc., a New York City-based real estate investment trust, has announced its entry into a $250 million term loan and revolving credit agreement with Wachovia Bank NA. CapLease said the two-year facility (with a one-year extension option) eliminated margin call risk to CapLease for general interest rate and credit spread changes on all loan collateral other than commercial mortgage-backed securities. The company used $210.4 million of term-loan borrowings at the closing of the facility to refinance all collateral previously financed on its short-term warehouse agreement with Wachovia.

C. Daniel Clemente, chairman and chief executive officer of Clemente Development Co., has announced the formation of a private equity fund to take advantage of investment opportunities in income-producing commercial real estate created by global financial disarray. The fund has $200 million in commitments, and Mr. Clemente said he is negotiating to leverage the commitments to $2 billion. "With mortgage underwriting standards for commercial real estate tightening and capital availability becoming constrained, defaults are sure to occur upon maturity of loans closed between 2002 and 2007," he said. Mr. Clemente said he believes that, in 2009, asset values will be lower, underwriting standards will be more conservative, and capital will not be readily available to bail out syndicators that overpaid for buildings.

A pair of the nation's largest title insurance underwriters -- Stewart Information Systems Corp. and LandAmerica Financial Group Inc. -- have reported increased losses in the first quarter. The Houston-based Stewart reported a net loss of $22.3 million ($1.24 per share) for the most recent period, compared with a net loss of $4.8 million ($0.26 per share) a year earlier. Its competitor, the Richmond, Va.-based LandAmerica, lost $24.2 million ($1.60 per share) for the first quarter, compared with net earnings of $4.7 million (0.26 per share) a year earlier. "Tight mortgage lending conditions from reduced liquidity in the mortgage-backed securities market were factors in keeping transactional demand at bay," said LandAmerica's chairman and chief executive, Theodore L. Chandler Jr. "These conditions, coupled with a reduction in our commercial business and some increased severity in claims, compressed margins during first-quarter 2008." The co-chief executive and chairman of Stewart, Malcolm S. Morris, said his company is "making progress in reducing our risk exposure by evaluating and potentially canceling agencies [MBS] that our models indicate are at the higher end of the risk spectrum. While we continue to add new agencies, we have increased our qualifying requirements."

Deutsche Bank has reported taking a 141 million euro ($220 million) loss in the first quarter, a period in which it also took 885 million euros ($1.38 billion) in writedowns on commercial real estate and residential mortgage-backed securities. The RMBS involved in the writedowns were predominantly backed by alternative-A credit mortgages, the company said. "In the month of March, pressure on the banking sector was more intense than at any time since the current credit downturn began," said DB chairman Josef Ackermann.