Origination

The American Financial Services Association says it could support the Federal Reserve Board's HOEPA proposal for dealing with yield-spread premiums if lenders are not held responsible for a mortgage broker's actions. The Home Ownership and Equity Protection Act proposal requires brokers to negotiate their fee in a dollar amount with the borrower upfront before an application fee is charged and to provide the lender with a signed document. Lenders are expected to rely on this document in paying the YSP to the broker. However, AFSA points out that the lender would not know when it was signed and could be liable if it is not signed and dated contemporaneously. "AFSA asks that the Board clearly and unambiguously remove liability from the lender for things that the broker controls," AFSA executive vice president Bill Himpler says in a comment letter. The Consumer Federation of America is asking the Fed to prohibit YSPs on subprime mortgages. "Negotiating fees up front is good, but it still leaves opportunities for abuse," CFA housing and credit policy director Allen Fishbein told MortgageWire.

Classes F, G, and H of Wachovia Bank Commercial Mortgage Trust commercial mortgage pass-through certificates, series 2005-C20, have been placed on review for possible downgrade by Moody's Investors Service. Moody's also affirmed the ratings on 17 classes in the deal. The certificates are collateralized by 207 mortgage loans, one of which (representing 4.2% of the pool) is in special servicing. Moody's said it is estimating "a significant loss" from the specially serviced loan, the Macon & Burlington Mall Pool Loan, which is secured by two regional malls in Macon, Ga., and Burlington, N.C. As of December, the Macon Mall was approximately 75% leased and the Burlington Mall was 53% leased, the rating agency said. Moody's said the one owned anchor, Parisan, recently terminated its lease early, and the loan was transferred to the special servicer for imminent default in March.

Class M-5 of CBA Commercial Assets LLC small balance commercial mortgage pass-through certificates, series 2005-1, has been downgraded from Ba2 to B1 by Moody's Investors Service. In addition, classes M-2, M-3, and M-4 were placed on review for possible downgrade and the ratings on two classes were affirmed. Moody's attributed the downgrade to the high percentage of loans (12.1%) in special servicing and the projected losses from those loans. The certificates are collateralized by 263 mortgage loans, with the top 10 loans representing 21.1% of the pool.

More than 100 additional classes of subprime mortgage pass-through certificates were downgraded by Fitch Ratings on April 7 as a result of changes to its subprime loss forecasting assumptions. Fitch also placed five classes of subprime pass-throughs on Rating Watch Negative and affirmed the ratings on classes with outstanding balances of more than $3 billion. The securities affected by the latest downgrades were: 78 classes from 10 issues of Soundview Home Loan Trust mortgage pass-throughs; 15 classes from three issues of Wells Fargo Home Equity Asset-Backed Securities pass-throughs; nine classes from one issue of CSFB Home Equity Asset Trust pass-throughs; and eight classes from one issue of Meritage Mortgage Loan Trust pass-throughs. 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.

Moody's Investors Service has downgraded more than 750 tranches in 77 subprime residential mortgage-backed security transactions from three issuers. Of the downgraded tranches, 162 remain on review for possible further downgrade. The negative rating actions affected the following securities: 315 tranches from 31 subprime RMBS deals issued by ACE Securities Corp. Home Equity Loan Trust; 238 tranches from 22 RMBS deals supported by subprime loans originated by Long Beach; and 218 tranches from 24 subprime RMBS deals issued by Merrill Lynch Mortgage Investors Trust. The downgrades were generally based on higher-than-expected rates of delinquency, foreclosure, and real estate owned in the underlying collateral relative to credit enhancement levels, Moody's said. The collateral consists primarily of first-lien subprime mortgage loans. Moody's can be found on the Web at http://www.moodys.com.

The credit crisis is continuing to broaden and spread to other mortgage and corporate debt markets, but emerging markets so far have been largely unaffected by the concern, according to the International Monetary Fund. "Credit deterioration, which was first evident in the U.S. subprime market, is now showing up in higher-quality residential mortgages, U.S. commercial real estate, and the corporate debt markets," the IMF said in a new report. Financial markets continue to be stressed by weakened financial institution balance sheets, a continuing deleveraging process, declining asset prices, and a "macroeconomic environment that is more challenging because of the weakening global growth," said Jaime Caruana, head of the IMF's Monetary and Capital Markets Department.

The reverse mortgage market will look far different in the years ahead, according to the co-chair of the National Reverse Mortgage Lenders Association. While today's senior citizens are using their homes as "a product of last resort" to live out their remaining years as comfortably as possible, future seniors will see their homes as financial assets to be used to live their lives to the fullest, Bart Johnson said at NRMLA's Eastern Regional Meeting in Philadelphia. "People will have to finance their longevity," he said in a luncheon address. "The good news is they have wealth in the form of home equity, and they won't mind using it to maintain the lifestyle they want." Though some are worried that the reverse mortgage field is the next subprime market, Mr. Johnson, who is president of Life Stages Financial, Newport Beach, Calif., said the negative press will eventually blow over and the business will become re-energized. "This is a vastly underserved market," he said. "The unmet needs are huge."

The reverse mortgage business is "a guaranteed growth industry," according to a venture capitalist who says he's willing to invest in practically any aspect of the sector. "Lots of companies need growth capital," Diogo Teixeira of the Revmore Investing Group, Wellesley, Mass., said at the National Reverse Mortgage Lenders Association's Eastern Regional Meeting in Philadelphia. Revmore has already made one reverse mortgage deal with an investment in Your Home for Life, the 10th-largest originator in New England in 2007 and the sixth-largest independent originator. Now it is casting about for other investments, possibly in technology firms or lead generation companies. "We're looking for additional opportunities elsewhere in the country and elsewhere in the business," Mr. Teixeira said on a panel session entitled "Where Is the Capital Coming From?" The private investor said he's particularly interested in firms with strong management teams in place and sound plans for how they'll use his money. NRMLA can be found online at http://www.reversemortgage.org.

Deutsche Bank managing director Michael Commaroto, who has overseen the foreign bank's whole-loan trading operation for much of the decade, has left the company, industry sources have confirmed to MortgageWire. A few months back Paul Mangione, managing director in charge of subprime trading and asset-backed securities for the bank, also departed. He was Mr. Commaroto's deputy. A spokeswoman for Deutsche Bank declined to comment. Mr. Commaroto's departure has been the subject of rumors since December. Sources say he is looking at employment opportunities in the "scratch-and-dent" market. (For full details, see the April 7 issue of National Mortgage News.)

The current response to the foreclosure crisis is "inadequate," and a federally funded program to restructure subprime mortgages in bulk is crucial to avoid the wave of impending foreclosures, according to the National Housing Conference, which is supported by major mortgage lenders and affordable housing advocates. "A bulk restructuring plan, administered and funded by a new agency or division specially empowered to administer this process, would be the most effective solution to the nation's economic crisis," the NHC says in spelling out principles for addressing the mortgage and foreclosure crisis. The housing policy group calls for "substantial principal reductions" along with government assistance to close the affordability gap, which could include a "silent" second mortgage. Freddie Mac, Bank of America, Wells Fargo Home Mortgage, and HSBC Bank USA are key contributors to the nonpartisan council, which was founded in 1931. The NHC noted that the bipartisan housing bill being debated in the Senate "omits any bold plan" for restructuring existing mortgages. The NHC is urging its members to contact their senators and representative and "ask them to take more action in helping families at risk of foreclosure."