Originations

Houston may be one of the country's top performing real estate markets, but it is still suffering right along with most other places. Sales in November were off 33.7% from the same month a year ago, according to the Houston Association of Realtors. It was the 15th straight month that the number of sales in Houston has declined. On the bright side, though, rentals were up - 16% for single-family residences and 2.8% for townhouses and condominiums - as people wait out the economic storm. "Houston consumers are understandably cautious as they absorb news about layoffs, declining oil prices and other negative financial reports," said Michael Levitin, HAR chairman and principal of HTownRealty.com. "Many are opting to rent property for the time being." Despite being held up by the chief economist of the National Association of Realtors as a Mecca of stability, Houston also saw the average price of a single-family house drop 7% in November, from $201,862 last November to $187,766 now. The total number of sales fell from 5,887 to 3,906. Currently, according to HAR, the number of active listings for sale on the local multiple listing service totals 47,354, which is the lowest number since December 2006. That's only a six-month supply compared to 10 months nationally, based on how long it will take to deplete current active inventory based on the prior 12 months' sales activity.

Existing home sales in California are expected to increase by 12% this year, according to the state's Realtor group. But the jump is largely attributable to the sale of distressed properties at heavily marked down prices. Nearly one in five of the 395,600 sales projected for 2008 will be because the property was in default and the houses were sold either via a short sale or at foreclosure, the California Association of Realtors said in its annual state of the housing market report. Also, when all is said and done, almost one in four sales will result in a loss for the seller, said CAR chief economist Leslie Appleton-Young. "Price declines eliminated equity gains," she said. The number of sellers who sold their home with a loss almost doubled from 11.9% in 2007 to a record-setting 22.2% in 2008, well above 1.9% in 2006, and almost triple the long-term average of 7.7%. However, long-term owners who have not refinanced or removed equity from their homes were less likely to experience a loss. Only 3% of sellers who owned their homes for more than five years had a net cash loss from their home sale, while 47% who owned their homes for less than three years had a net cash loss. The median price of existing homes sold this year declined 17.5% to $440,000. That's the largest drop in the median since the inception of the study, surpassing the record decline of 10.2% set in 1995. Ms. Appleton-Young said the market will continue to experience falling prices into 2009.

Multifamily vacancy rates are forecast at 5.8% in the third quarter of 2009, unchanged from the third quarter of this year. According to the latest "Commercial Real Estate Outlook" by the National Association of Realtors, markets with the tightest vacancies include San Diego, Northern New Jersey and Boston, with vacancy rates of 4.2% or less. Areas with the highest vacancies include Jacksonville, Fla.; Phoenix; and Orlando, Fla., with vacancies of 8.5% or higher. Average rent is projected to grow 2.9% in 2008 and 2.8% next year. Multifamily net absorption should be 24,400 units in 59 tracked metro areas this year and 142,000 in 2009.

The New York Stock Exchange has informed Flagstar Bancorp Inc., Troy, Mich., that it no longer satisfied one of the exchange's standards for continued listing, namely that the closing price of its common stock was under $1 per share for 30 consecutive trading days ending on Dec. 9. Flagstar has 10 days to notify the NYSE of its intent to cure the pricing deficiency. Under NYSE policy, to cure this deficiency, Flagstar's common share price and the average share price over a consecutive 30-day trading period must exceed $1 per share within six months following receipt of the notice. On Dec. 16, Flagstar's common stock closed at $0.60 per share; its 52-week range is $0.40 to $9.12.

Fidelity National Financial Inc., Jacksonville, Fla., has cleared two hurdles for two of its subsidiaries to acquire two subsidiaries of bankrupt LandAmerica Financial Group Inc., Richmond, Va. The bankruptcy court handling the filing has approved Chicago Title Insurance Co.'s purchase of Commonwealth Land Title Insurance Co. and Fidelity National Title Insurance Co.'s purchase of Lawyers Title Insurance Co. for a total of $282 million; FNT is also acquiring United Capital Title Insurance Co. from LandAmerica, but that part of the deal is not expected to close until next year. Separately, the Nebraska Department of Insurance has approved the transaction, which is expected to close on Dec. 22, if all remaining conditions are met. The Nebraska Department of Insurance has also approved a potential transaction for Stewart Information Services Corp., Houston, to acquire the LandAmerica's subsidiaries; Stewart has also put a bid into the bankruptcy court to acquire Commonwealth and Lawyers.

Mortgage banking firm Luxury Mortgage Corp., Stamford, Conn. has expansion plans underway in its retail unit. The company said it is adding 15 loan officers to its existing staff and has broadened its product mix, which it said includes Fannie Mae, Freddie Mac, Federal Housing Administration, reverse mortgages and commercial loans. The company said it has been able to grow despite the current market's challenges because of its past "prudent lending history" and avoidance of subprime lending as well as the recent rate decrease and more affordable home prices.

The Market Composite Index, an overall measure of mortgage applications, increased 2.9% on a seasonally adjusted basis from a revised figure of 817.7 to 841.4 during the week ended Dec. 12, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. A note from MBA said all figures pertaining to the week of Dec. 5 have been revised. The Purchase Index decreased 4.5% to 286.1 on a seasonally adjusted basis, while the Refinance Index increased 6.5% to 4156.0. Refinancings continued to boom, representing 76.9% of total applications, up from 74.3% the previous week, while adjustable-rate mortgages accounted for 1.1% of applications, unchanged from the previous week, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages decreased 26 basis points from 5.44% to 5.18%, and points (including the origination fee) decreased from 1.24 to 1.13 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

Ginnie Mae officials expect to guarantee $300 billion to $325 billion in mortgage-backed securities in fiscal year 2009, up from $220 billion in FY 2008 (which ended Sept. 30). "We are looking at another significant growth year," said Ginnie president Joseph Murin. He told reporters that some of agency's biggest issuers expect to securitize 40% to 50% of their mortgage production through Ginnie Mae. Ginnie Mae topped Fannie Mae and Freddie Mac in MBS issuance in October and November. Mr. Murin said Ginnie issuance in December will probably be somewhere between $27 billion and $29 billion.

The Federal Open Market Committee said in a statement accompanying its decision to drop the fed funds target range to a record low rate of zero to 0.25% that it "stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant." The FOMC said it "will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability," including expanding the aforementioned agency program beyond its existing commitment to purchase $500 billion in MBS and $100 billion in debt. The committee said that it "anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time" and that it also is "evaluating the potential benefits of purchasing longer-term Treasury securities."

According to the Zillow Mortgage Marketplace, consumers were being offered 30-year, fixed-rate mortgages for rates below 5% on Monday. Zillow.com said that the average rate for 30-year FRMs offered on the Zillow Mortgage Marketplace dipped to 4.98% on Monday, Dec. 15. That is contributing to a spike in loan applications for refinancing. Refinancing during the first half of December was up 230% from the first half of November, Zillow.com said. Refinancing accounted for more than half of home loan applications in the December period.

October was perhaps the worst month yet for new home sales in California since the housing sector began its tailspin, according to the latest report from the Golden State's homebuilders. Sales in October were 63% below October 2007, according to the monthly count by the California Building Industry Association. Only 1,462 homes and condominiums were sold in October in the subdivisions tracked for CBIA by Costa Mesa-based Hanley Wood Market Intelligence, compared to 3,949 in October 2007. Single-family home sales were down by 62%, while sales of townhouses and two-to-four unit structures were down 64% and condominium sales were off 65%. Compared with the same period last year, the median base price of homes sold dropped by 9%. CBIA President Robert Rivinius said the "huge fall-off" is further proof that the new home sector in "in dire straits" and needs help in persuading people to re-enter the market. "With homebuilding in a depression, there's little chance the overall recession will begin to improve without tax credits and other incentives to push people off the fence and back into the marketplace," Mr. Rivinius said. The industry leader also said that housing production so far this year is by far the lowest since the end of World War II, and that 2009 is shaping up to be equally bad, or even worse.

Single-family housing starts plummeted 17% in November to the lowest level since 1959 (when the government started keeping records) and it could go even lower in the months ahead. The U.S. Census Bureau reported that single-family housing starts dropped from a seasonally adjusted annual rate of 531,000 in October to 441,000 in November, down 46% since November 2008. HIS Global Insight economist Patrick Newport pointed out that the drop in housing permits in November implies single-family starts are "likely to post double-digit declines in both December and January." Bernard Markstein, director of forecasting at the National Association of Home Builders, said it has "gotten so bad" there is "no point" in building. The homebuilders are urging president-elect Barack Obama to back an economic stimulus package that will increase incentives for homebuyers.

Valuation declines in commercial mortgages and "virtually every asset class" contributed to a $2.12 billion net loss at Goldman Sachs during the fourth quarter. "Our results for the fourth quarter reflect extraordinarily difficult operating conditions, including a sharp decline in values across virtually every asset class," said Lloyd C. Blankfein, chairman and chief executive officer. Among these, Goldman noted a net loss of approximately $700 million on commercial mortgage loans and a loss of roughly $1 billion related to non-investment-grade credit origination activities.

Hilco Real Estate LLC, Northbrook, Ill., has named Neil R. Aaronson as its new chief executive and Gregory S. Apter as its new president. Mr. Aaronson replaced Mitchell P. Kahn, 48, who has decided to pursue opportunities outside the Hilco family of companies. Most recently Mr. Aaronson had been executive vice president with Hilco Trading LLC, the parent company of Hilco Real Estate. Mr. Apter was promoted from chief operating officer and will now formally lead Hilco Real Estate's agency transactions group, managing owned and leased property disposition and lease restructuring services. Hilco Real Estate provides comprehensive real estate repositioning services. For more information about the company, visit http://www.hilcorealestate.com.

BioMed Realty Trust Inc., a San Diego real estate investment trust focused on providing real estate to the life science industry, today announced that Kent Griffin has been promoted to president and chief operating officer. He will oversee the day-to-day operational activities while continuing to serve chief financial officer. Alan Gold, BioMed's chief executive said, remarked, "I am very pleased that the board has chosen to recognize the contributions that Kent has made to BioMed, originating with him playing a key role in the company's successful initial public offering in August 2004. As our chief financial officer since 2006, Kent has been a critical member of our leadership team, developing and executing key financial strategies, while also taking an increasingly integral role in managing the growth of our organization and overseeing our operations."

Five Ohio residents have been charged for their roles in a mortgage fraud scheme. Paul A. Lesniak of Strongsville, Uri Gofman of Beachwood, Grennadiy Simkhovich of Highland Heights, Dave Pirichy of Burton and Howard Sieferd, Jr., of Euclid, have been charged with allegedly conspiring to purchase 18 properties in the Cleveland area for almost $2 million. The indictment alleges that Mr. Lesniak completed and submitted false and fraudulent loan applications with the assistance of Mr. Pirichy, a broker for Central National Mortgage, which falsified his employment, overstated his income and assets, falsified his intent to occupy the property and concealed the source of the down payment funds, which were provided by Mr. Gofman and Mr. Simkhovich through their company, Real Asset Fund, in order to obtain the financing to purchase the eighteen properties. The indictment also alleges that Mr. Sieferd served as the title agent on the properties and conspired with Mr. Gofman and Mr. Simkhovich to allow the loan proceeds to be fraudulently and improperly distributed. The defendants allegedly did all of this in order to defraud Long Beach Mortgage Company, Argent Mortgage Company and Mortgage IT into funding the loans.

Material rating actions on Fitch-rated U.S. commercial mortgage-backed securities transactions with significant exposure to General Growth Properties' assets are unlikely if GGP files for bankruptcy, according to Fitch Ratings. Fitch recently downgraded GGP's issuer default rating to 'C', indicating that it believes a default is imminent. "The likelihood for significant rating actions across transactions with GGP property exposure is slim given their strong performance, moderate leverage, and the bankruptcy remote nature of CMBS borrowers," according to Fitch managing director Susan Merrick. In the event of a GGP corporate bankruptcy, CMBS bondholders are protected by the bankruptcy-remote nature of CMBS borrowers. "A key factor limiting term default risk of CMBS loans in the event of a GGP bankruptcy is the strength of the current performance of the properties," said Fitch managing director Eric Rothfeld. "More than 75% of GGP loans rated by Fitch have actual debt service coverage ratios greater than 1.50 times and 67% are greater than 2.0 times." Meanwhile, Chicago-based GGP has refinanced approximately $896 million of mortgage loans. The maturity dates of these mortgage loans range from five to seven years. The proceeds were fully used to retire a $58 million bond issued by The Rouse Company LP that matured on Dec. 11, 2008, as well as to refinance approximately $814 million of mortgage indebtedness scheduled to mature in 2009. These refinanced loans are separate from the $900 million Fashion Show and Palazzo mortgage loans scheduled to mature on Dec. 12, 2008. However GGP said that it has not reached unanimous agreement with its syndicate of lenders to further extend the maturity date and is continuing its discussions with lenders.

Fitch Ratings, New York, has downgraded to RPS4 the primary servicer, master servicer and special servicer ratings for Residential Capital LLC, Minneapolis. The rating downgrades are due to ResCap's deteriorating financial condition, specifically the continued pressure on ResCap's liquidity position and financial flexibility and the potential impact on the company's servicing operations. A company's financial condition is an important component of Fitch's servicer rating analysis, the rating agency explained. As of June 30, 2008, ResCap serviced 3.1 million loans for $437 billion. The servicing portfolio was comprised of 14.3% non-agency prime first and second liens, 9.7% subprime first and second liens, 8.1% Alt-A, 2.4% HLTV, and 9.5% HELOC products, with the balance consisting of conventional conforming, FHA, VA, and manufactured housing loans. ResCap's master servicing portfolio was comprised of over 592,000 loans for $119.3 billion.

GMAC Financial Services - which is trying to become a bank holding company and tap the Treasury's TARP program - has extended the deadline for its $38 billion note exchange program until Dec. 26, 2008 at 11:59 p.m. The "early" delivery portion of the note exchange was extended to Dec. 16 at 11:59 p.m. from this past Friday. GMAC, the parent of Residential Capital Corp., the nation's sixth largest servicer, is offering investors $0.55 to $0.85 on the dollar in cash or in the form of new bonds and/or preferred shares. It needs a 75% participation rate from note holders to reach its goal of amassing $30 billion in regulatory capital to form a bank holding company. Late last week, its participation rate was about 25%. ResCap controls roughly $400 billion in mortgage servicing rights. If GMAC does not become a BHC (and tap TARP funds) it may be forced into bankruptcy protection.

Thornburg Mortgage Inc., Santa Fe, N.M., on Friday reached an agreement with several of its reverse repurchase counterparties allowing for it to make the interest payment on its 8% senior notes that was due last month. The past-due payment will be made within the 30-day grace period allowed under the indenture. The counterparty lenders agreed that during the override period, which expires on March 16, 2009, they will not invoke any margin calls on the jumbo investor. Thornburg's common shares have been delisted but continue to trade on the "pink sheets." Thornburg agreed to pay the counterparties the remaining $110 million out of the liquidity reserve fund except for $41.2 million, which the company can utilize to make the foregoing senior notes interest payments and for forecasted operating expenses and debt service payments through March 2009. The company has also agreed to pay to the counterparties all of the principal and interest collected on the underlying collateral subject to the override agreement to further reduce the outstanding financed balance on an accelerated basis. The reverse repurchase agreement counterparties and their affiliates who entered the override agreement include JPMorgan Chase Funding Inc. (formerly Bear Stearns Investment Products Inc.), Citigroup Global Markets Limited, Credit Suisse Securities (USA) LLC, Credit Suisse International, Greenwich Capital Markets Inc., Greenwich Capital Derivatives Inc., The Royal Bank of Scotland PLC and UBS AG.