Originations

DBRS's New York office downgraded 497 classes from 122 residential mortgage-backed securities transactions, the majority of which are pre-2006 vintages backed by subprime or alternative A credit collateral. "Given the combination of current delinquencies and corresponding potential significant losses, along with expectations for future delinquencies and defaults, current credit support is not expected to sufficiently cover the anticipated losses," the rating agency said. "In many cases, subordinate classes have already been impaired, further weakening the available credit support for the remaining senior and mezzanine classes."

Luxembourg-based investment companies affiliated with private investment firm Elliott Management Corp. have agreed to buy all of the outstanding shares of Capmark Financial's Tokyo-based servicing business, Premier Asset Management Co. Financial terms for the transaction were not disclosed. Elliott said it will keep Premier's current management in place and expects to maintain its existing platform in the Japanese market. Premier is a commercial mortgage-backed securities and warehouse non-recourse loan servicer that also provides special servicing to defaulted non-recourse loans as well as third party nonperforming loan collections. A U.S. bankruptcy court has approved the transaction and it is expected to close by Jan. 29, 2010.

Embrace Home Loans, Newport, R.I., has acquired Mason Dixon Funding, Rockville, Md. The terms of the agreement were not disclosed. Mason Dixon Funding said its principal owners, including executive vice president Cary Reines, will remain with the company and report to Embrace Home Loans' president, Kurt Noyce, and Embrace's chief executive officer and founder Dennis Hardiman. Mason Dixon has nine retail branches in Maryland, Virginia, the District of Columbia and Delaware. Embrace, which earlier this month changed its name from Advanced Financial Services, has originated more than $3 billion in loans this year and operates 16 retail branches.

The Department of Housing and Urban Development expects lenders to provide consumers with a just-updated consumer booklet when they start using the new good faith estimate disclosure and the newly designed HUD-1 Settlement sheet on Jan. 1. But some lenders are ticked that HUD did not give them more notice about the newly revised "Settlement Closing Booklet" that was released on Dec. 18. "We were startled to learn that HUD expects us to begin using the new Booklet on Jan. 1, 2010 - 10 business days from its publication," the Consumer Mortgage Coalition said in a letter to HUD. The mortgage industry group is asking HUD to go easy on lenders that don't have the new booklet until May 1. "This would allow an orderly transition, and would help reduce unnecessary expenses," CMC executive director Anne Canfield says in the letter. Mortgage banking attorney Robert Lotstein said the new settlement cost booklet will be "really helpful" to consumers. It goes over the various sections of the four-page GFE and explains how mortgage brokers' fees (yield spread premium) works and what the tolerances are for certain settlement services. It also tells the consumer in plain English that origination fees charged by the lenders cannot change, unless certain circumstances arise, he said. Mr. Lotstein is the managing attorney at Mortgage Banking Advisors in Washington.

The Federal Reserve has purchased more than $1 trillion in agency mortgage-backed securities to support the mortgage market this year and Fed officials are trying to wind down its $1.25 trillion purchase program by March 31. The New York Federal Reserve Bank purchased $1.09 trillion in Fannie Mae, Freddie Mac and Ginnie Mae MBS this year, according to the Federal Housing Finance Agency. At the start of the program in early January, the New York Federal Reserve Bank was purchasing $20 billion to $25 billion in agency MBS a week. Now the Fed is purchasing agency MBS at a $16 billion weekly rate, which means it could continue at that pace for another 10 weeks. At the conclusion of its monetary policy meeting on Dec. 16, Fed officials said they are "gradually slowing" the pace of MBS purchases so the last transactions will be completed by the end of the first quarter of 2010. Mortgage strategists at Credit Suisse say the slowdown in Fed purchases will not affect MBS spreads to any large degree. "The Fed's exit from the MBS purchase program will likely be well absorbed by the market," according to a weekly Credit Suisse "Market Watch" publication. After March 31, the "Fed will likely assume a backstop role for the MBS market to prevent a double dip in housing," Credit Suisse strategists say.

Fitch Ratings has placed $20.6 billion in bonds from 33 floating-rate U.S. CMBS on Rating Watch Negative. The rating also said it also has assigned negative rating outlooks to 22 classes totaling $1.1 billion that currently have fairly high AAA and AA+ investment grade ratings. "The Rating Watch Negative placements are the result of the significant stress on cash flow experienced by floating-rate loans in 2009 and Fitch Ratings' expectation that cash flows will continue to be stressed for the foreseeable future," Fitch said. "Floating-rate loans are transitional in nature and more susceptible to declining market conditions."

The Federal Reserve has purchased more than $1 trillion in agency mortgage-backed securities to support the mortgage market this year and Fed officials are trying to wind down its $1.25 trillion purchase program by March 31. The New York Federal Reserve Bank purchased $1.09 trillion in Fannie Mae, Freddie Mac and Ginnie Mae MBS this year, according to the Federal Housing Finance Agency. At the start of the program in early January, the New York Federal Reserve Bank was purchasing $20 billion to $25 billion in agency MBS a week. Now the Fed is purchasing agency MBS at a $16 billion weekly rate, which means it could continue at that pace for another 10 weeks. At the conclusion of its monetary policy meeting on Wednesday (Dec. 16), Fed officials said they are "gradually slowing" the pace of MBS purchases so the last transactions will be completed by the end of the first quarter of 2010. Mortgage strategists at Credit Suisse say the slowdown in Fed purchases will not affect MBS spreads to any large degree. "The Fed's exit from the MBS purchase program will likely be well absorbed by the market," according to a weekly Credit Suisse "Market Watch" publication. After March 31, the "Fed will likely assume a backstop role for the MBS market to prevent a double dip in housing," Credit Suisse strategists say.

The estimate for gross mortgage lending in the United Kingdom faltered a bit in the latest month, according to an industry group. In November, the U.K.'s gross mortgage lending estimate dropped to £12 billion ($19.4 billion) from £13.3 billion ($21.5 billion) in October and £13.9 billion ($22.5 billion) from November of last year. Observers expect volumes will not drop much from current levels, even though a tax break is due to expire at the beginning of 2010. There "is little reason to expect much underlying change in the coming months," said Paul Samter, economist at the Council of Mortgage Lenders, London. "There has been a modest increase in the availability of mortgage credit recently, including some tentative signs of a few higher LTV products emerging. But there is no sign of a swift recovery in lending volumes," he added.

Concerns that housing and employment woes will persist into the second half of next year have contributed to a rating criteria change at Moody's Investors Service that leaves thousands of prime jumbo residential MBS on review for possible downgrade. Moody's has placed 4,474 tranches of jumbo RMBS with an original balance of $234 billion and a current outstanding balance of $143 billion on review. The rating agency said the move "will have the greatest impact on senior securities issued in 2005." At 3.8%, this vintage's new projected cumulative losses are much less than for 2006 securitizations of this type (8%) as well as 2007 and 2008 jumbo RMBS (10.9% and 12.3%, respectively). "Even though the Case-Shiller index in recent months has reported very modest home price gains, Moody's believes the overhang of impending foreclosures will impact home prices negatively in the coming months," the rating agency said. "Adding to borrowers' financial pressure, unemployment is now projected to peak at around 10.6% from previous projections of 9.8% from the first quarter of this year. Both measures are expected to reach their peaks some time in the second half of 2010, after which recovery is expected to be slow."

By the end of the third quarter the estimated number of homes heading toward foreclosure, but not yet included in "unsold inventory" figures, reached 1.7 million units, up from 1.1 million a year earlier, according to new First American CoreLogic data. The increase in this estimate of real estate-owned by depositories and mortgage firms is affecting home sale rates and is in contrast to the shrinking visible supply of unsold inventory, which decreased from 4.7 million in the third quarter of 2008 to 3.8 units during the same period this year. The visible inventory supply fell to 7.8 months in September 2009, down from 10.1 in 2008. But the supply of REO home estimates, also referred to as "shadow housing inventory," is at 3.3 months, up from 2.4 months a year ago. Combined, the total unsold inventory by September 2009 reached 5.5 million units, down from 5.7 million in 2008. Shadow housing inventory is comprised of mortgages that are 90 days or more delinquent and that are not included in unsold inventory.

Loan Value Group, Rumson, N.J., is close to partnering with a national mortgage lender to begin rolling out a patent-pending program aimed at heading off "strategic defaults," according to industry sources. An LVG representative declined to comment and the lender was not identified. The sources told NMN the program avoids the use of loan modifications or reduction of principal. Instead it provides an alternative way to keep at-risk borrowers who might otherwise be encouraged to default due to negative equity paying on their original mortgage notes. The program is said to be designed to align the interests of lenders, servicers, government-sponsored enterprises and taxpayers while avoiding costs to homeowners or taxpayers. The sources said it is set for roll out and implementation on a private-label basis to eligible homeowners as early as the first quarter of 2010.

Flagstar Bank saw its warehouse lending commitments to nonbanks rise 31% in the third quarter to $1.48 billion, according to figures compiled by NMN. The thrift, one of the largest remaining S&Ls in the nation, is part of a shrinking base of depositories willing to extend credit to mortgage banking firms. However, its stock continues to trade for less than $1 a share. Despite raising nearly $620 million in capital this year, the $14.8-billion-asset company earlier in the week said it would be turning to shareholders for as much as $500 million through a rights offering. The fresh capital is likely needed to satisfy regulators, who have limited the Troy, Mich., company's ability to grow and imposed other restrictions on it. Among wholesale lenders, it ranks eighth, according to the Quarterly Data Report.

AmTrust Mortgage Banking — including its wholesale division — has resumed accepting new loan registrations and rate-lock commitments, according to a message posted by LendingArt Messenger Alert service. At press time, no further information was available. AmTrust Bank and its affiliates were seized by the FDIC two weeks ago with most of its assets sold to New York Community Bank. NYCB has yet to make any long-term decisions regarding AmTrust's wholesale division and its servicing portfolio.

Marc Savitt, the recent past president of the National Association of Mortgage Brokers, has launched a new trade group and hopes to have 100,000 new members signed up within a year. "I'm only charging $50 a year membership dues," he said in an interview with National Mortgage News. Mr. Savitt, who owns and operates his own loan brokerage in West Virginia, stressed that he will not be competing against NAMB (he continues to head its HVCC task force) but will gear the efforts of the upstart National Association of Independent Housing Professionals strictly toward government affairs and lobbying outreach. He plans to officially launch the NAIHP next week and already has "a few hundred" committed members. "This organization will be run like a business," he said. Mr. Savitt has been a vocal critic of the Home Valuation Code of Conduct and is pushing for immediate changes to how lenders and brokers order and manage appraisals.

The closure of ISGN Solutions Inc.'s acquisition of Fiserv Inc.'s loan fulfillment services business is helping the former company move forward with its larger plans to reorganize, according to an ISGN spokeswoman. The deal, slated to close in November, took slightly longer simply because of holiday season delays, the spokeswoman told NMN. The company's larger reorganization refocuses servicing and origination functions for marketing purposes, she said. This was done to mirror the organization structure of the lending industry, the company serves, according to the spokeswoman.

Michael Blair, EVP and chief operating officer of Franklin Credit Management Corp.'s servicing department, plans to resign Dec. 30 and the company said his successor would soon be named. The unnamed new EVP/COO is expected to join the company's management team in the next few weeks, the company said. Franklin's chairman Thomas Axon said he is "looking forward to possibly working" with Mr. Blair again in the future. Mr. Blair is said to be resigning to pursue other interests.

Ohio attorney general Richard Cordray has filed yet another lawsuit that alleges unfair loan modification agreements and faulty customer service, this time against Barclays Capital Real Estate dba HomEq Servicing. Filed in Montgomery County Common Pleas Court, the lawsuit alleges that at-risk homeowners "were forced to enter into one-sided agreements," that released HomEq of all liabilities requiring borrowers to waive their defense rights and pay additional fees. "In Ohio we have zero tolerance for any more excuses," Mr. Cordray said, while stating that "many servicers" are aggravating the crisis through noncompliance and excuses. The attorney general has so far filed at least two similar lawsuits against other companies. A HomEq spokesperson told National Mortgage News the lawsuit is "a meritless complaint" and that HomEq will vigorously defend itself against it. "HomEq is committed to quality customer service and to working with financially distressed borrowers to help them remain in their homes," he said.

Signs of an improving economy are lifting average weekly mortgage rates, but they are still below 5% and spurring refinancing, according to Freddie Mac. "Interest rates have been below 5% over the past seven weeks," said Frank Nothaft, Freddie Mac's chief economist. The average rate for a 30-year fixed-rate mortgage, at 4.94% during the week ended Dec. 17, is getting closer to 5%. The previous week it was 4.81% and a year ago it was 5.19%. The average 15-year FRM rate was 4.38% during the most recent week. It was 4.32% a week ago and 4.92% a year ago. The average rate for a five-year hybrid Treasury-indexed adjustable-rate mortgage during the week ended Dec. 17 was 4.37%, up from 4.26% a week ago but down from 5.60% a year ago. The average one-year Treasury ARM rate was 4.34% in the most recent week, up from 4.24% a week ago but down from 4.94% a year ago. Average points were 0.7 for 30-year FRMs, 0.6 for 15-year FRMs and five-year Treasury hybrids, and 0.5 for one-year Treasury ARMs.

Independent mortgage bankers made a profit of $902 per loan in the third quarter, down 33% from the previous quarter, according to a new study by the Mortgage Bankers Association. "These are still healthy margins," said Marina Walsh, MBA associate vice president of industry analysis. But she noted that 18% of the reporting mortgage companies posted losses in the third quarter, up from 4% in the second quarter. The decline in third-quarter profitability reflects a 34% drop in loan volumes as well as refinancing volumes. The 306 reporting companies originated on average $189.8 million in home loans, down from $281 million in the second quarter. Refinancings comprised 44% of originations in the third quarter, compared to 62.3% in the previous quarter. Despite the drop in volume, the average "pull-through" rate of turning loan applications into closings was 72% in the third quarter, down only one percentage point from the second quarter. "The good news is we are not back to the third quarter of 2008," Ms. Walsh said, when 30% of the companies reported losses. A year ago, mortgage companies made only $332 per loan.

Apartment rental vacancies in Canada's major metropolitan areas increased slightly in the latest month as homeownership became more affordable and growth in youth employment slowed, according to a Canada Mortgage and Housing Corp. survey. "Rental construction and competition from the condominium market also added upward pressure on vacancy rates," said Bob Dugan, chief economist at CMHC. The average rental apartment vacancy rate in Canada's 35 major metropolitan areas increased to 2.8% in October 2009 from 2.2% in October 2008.