Origination

Urdang Capital Management, a real estate investment manager based in Plymouth Meeting, Pa., has announced the closing of the Urdang Value-Added Fund II LP after raising $463 million in equity. Richard Ferst, the company's president and chief operating officer, said the fund will target mainly office, retail, multifamily, and industrial properties with capitalizations ranging from $20 million to $75 million. "To date, the fund has acquired eight properties with an aggregate capitalization of $400 million," he said. Urdang is a unit of Bank of New York Mellon, which can be found on the Web at http://www.bnymellon.com.

The Congressional Budget Office estimates that several hundred thousand borrowers could benefit over the next few years from an expanded FHA Secure program and that it would encourage lenders/servicers to restructure more loans. Without federal involvement, restructurings will be "rare" and unlikely to involve any significant writedown of principal that would leave the borrower with positive equity, the CBO says in a paper that explores policy options for stabilizing the housing and financial markets. "Although Federal Reserve chairman Ben Bernanke has urged loan servicers to consider reducing the principal on outstanding loans, voluntary reductions are likely to be rare," the paper says. The Federal Housing Administration is implementing changes to its FHA Secure program to help more delinquent adjustable-rate subprime borrowers refinance into FHA-insured loans. The CBO admits that FHA Secure has its drawbacks and that lenders could receive a "windfall" on loans they should restructure on their own. "Despite that, lenders will be more willing to restructure more mortgages with federal subsidies than without them," CBO says.

FGIC Corp., the New York-based parent of Financial Guaranty Insurance Co., is in negotiations with potential investors about "strategic alternatives" for the troubled financial guaranty unit. The company disclosed that raising capital for a new triple-A rated insurer dedicated exclusively to the global public finance business is one of the options being explored. The new company would also assume FGIC's public finance and international infrastructure business. The PMI Group, Walnut Creek, Calif., owns 42% of FGIC. "With a high-quality and diversified portfolio, coupled with a focused business strategy, the new company would have a unique platform to deliver superior value to its clients and investors in the securities it insures," an FGIC spokesman said in a statement. "Other alternatives include, but are not limited to, the sale of all or part of the company, and a bulk reinsurance transaction on all or parts of FGIC's in-force business to a third party." FGIC's statement also said the alternatives are consistent with the goals of New York state insurance regulators in regard to the company and its policyholders.

Wachovia Corp., Charlotte, N.C., has reported a net loss available to common stockholders of $393 million ($0.20 per share) for the first quarter, citing the decline in the housing market as one of the reasons and announcing a reduced quarterly dividend. Ken Thompson, Wachovia's chief executive officer, said the company has "substantially increased" its reserves and cut the dividend to $0.375 per share. "The precipitous decline in housing market conditions and unprecedented changes in consumer behavior prompted us to update our credit reserve modeling and rely less heavily on historical trends to forecast losses," he said. The company recorded a provision for credit losses of $2.8 billion in the quarter, which it said exceeded net chargeoffs by $2.1 billion. The provision "largely reflected more severe deterioration in the residential housing market, particularly in specific markets in California and Florida, as well as the result of the refinements to the credit reserve model for the payment-option product," Wachovia said. The company's home equity lending was 41% lower than the volume in the first quarter of 2007, "reflecting implementation of tightened credit standards," Wachovia said. The company's exposure to the housing market stems largely from its acquisition of Golden West Financial Corp., a Oakland, Calif.-based thrift, in 2006. Its net loss compared with net earnings of $2.30 billion ($1.20 per share) a year earlier. Wachovia can be found online at http://www.wachovia.com.

Ninety-three additional classes of subprime mortgage pass-through certificates were downgraded by Fitch Ratings on April 11 as a result of changes to its subprime loss forecasting assumptions. Fitch also placed 11 classes on Rating Watch Negative and affirmed the ratings on classes with outstanding balances of more than $3.2 billion. The pass-through securities affected by the latest downgrades were: 31 classes from four issues by HSBC Home Equity; 22 classes from three issues by Saxon Asset Securities Trust; 22 classes from three issues by Fremont Home Loan Trust; 13 classes from three issues by Merrill Lynch Mortgage Investors; and five classes from one issue by Specialty Underwriting and Residential Finance Trust. The rating actions were attributed to changes to Fitch's subprime loss forecasting assumptions that "better capture the deteriorating performance of pools from 2006 and late 2005 with regard to continued poor loan performance and home price weakness." Fitch can be found online at http://www.fitchratings.com.

CapitalSource Inc., Chevy Chase, Md., is acquiring the deposits, the assets, and the branch locations of Fremont Investment & Loan, the industrial bank subsidiary of Fremont General Corp., Brea, Calif. However, rather than acquiring FIL itself, CapitalSource is filing an application with the California Department of Financial Institutions and the Federal Deposit Insurance Corp. to create a de novo state-chartered industrial bank. CapitalSource said it is paying a 2% premium on the deposits and a 3% discount on FIL's participation interests in commercial real estate loans. It will also pay Fremont $58 million in cash. The sale, which does not include Fremont's loan servicing operation or residential mortgage assets, allows Fremont to comply with a Supervisory Prompt Corrective Action Directive issued by the FDIC. "We have long sought deposit funding as a way to further diversify and strengthen our funding platform.... Forming the new bank and acquiring branches with $5.6 billion in deposits will enhance CapitalSource's liquidity profile, increase our profitability, and improve our capital efficiency," said Thomas A. Fink, CapitalSource chief financial officer. "Our business plan envisions the sale of approximately $2.5 billion of CapitalSource loans to the new bank, making this transaction immediately accretive."

Nearly half of all loan workouts on subprime mortgages in January and February involved loan modifications, according to the latest update by Hope Now servicers. The new data show that servicers modified 81,885 subprime mortgages in the first two months of the year, compared with 90,420 subprime borrowers who ended up in repayment plans. Only 30% of troubled prime borrowers got a loan modification that included a reduction in their mortgage payments. Federal regulators have been pressing servicers to modify subprime adjustable-rate mortgages by freezing the interest rate at the starter rate. Hope Now also reported that 60,000, or 43%, of 2/28 and 3/27 subprime ARMs that were scheduled to reset in January and February had been paid off. These loans were "paid in full through refinancing or sale," the Hope Now update says.

Triad Guaranty Inc., Winston-Salem, N.C., has issued a statement assuring the market that it is still writing new mortgage insurance business and is pursuing negotiations to create a new mortgage insurance company. Mark K. Tonnesen, Triad's president and chief executive officer, said the company is still a qualified mortgage insurer with Fannie Mae and Freddie Mac, which he said are "supporting" the company. "This is an important step" in a transaction that Triad hopes to complete by the end of the quarter, he said. "If the transaction is completed, we would put our existing insurance operations into a voluntary run-off, and a newly capitalized mortgage insurer, which would be a separate company from Triad Guaranty Inc., would be created." The company can be found online at http://www.triadguaranty.com.

Clayton Holdings Inc., a due diligence and surveillance provider based in Shelton, Conn., has announced its entry into a merger agreement with an affiliate of a fund managed by Greenfield Partners LLC, a private equity firm. Under the agreement, the affiliate will acquire all outstanding common shares of Clayton for $6 per share (approximately $134 million) plus the repayment of $23.8 million of debt, the company said. The purchase price represents a premium of approximately 24% over Clayton's closing price on April 11. Investment funds affiliated with TA Associates, which own approximately 37% of Clayton's outstanding common stock, have agreed to vote in favor of the transaction, Clayton said. "For our clients and employees, the transaction will strengthen our balance sheet and allow us to continue to invest in European operations and in the development of products and services that will deliver the greater transparency and predictive solutions that the market will require," said Frank Filipps, chairman and chief executive officer of Clayton Holdings. Clayton can be found on the Web at http://www.clayton.com.

Eight-five classes of subprime mortgage pass-through certificates from 11 transactions issued by First Franklin Mortgage Loan Trust have been downgraded by Fitch Ratings as a result of changes to its subprime loss forecasting assumptions. Fitch also placed five First Franklin classes on Rating Watch Negative and affirmed the ratings on classes with outstanding balances of $2.3 billion. The rating actions were attributed to changes in Fitch's subprime loss forecasting assumptions that "better capture the deteriorating performance of pools from 2006 and late 2005 with regard to continued poor loan performance and home price weakness." The rating agency can be found online at http://www.fitchratings.com.