Originations

Grandbridge Real Estate Capital LLC, Charlotte, N.C., the commercial mortgage banking subsidiary of Branch Banking and Trust Co., Winston-Salem, N.C., will buy Houston-based commercial mortgage banking firm Live Oak Capital Ltd. Live Oak Capital specializes in debt and equity placement and loan servicing for the commercial real estate industry. Founded in 2000, the privately owned company has closed more than $7 billion in commercial real estate capital transactions. The acquisition is expected to be completed by the end of the month. Terms were not disclosed. "Partnering with the blue-chip professionals at Live Oak will strengthen our commercial mortgage franchise in Texas with a highly experienced business and management team," said Grandbridge chief executive Tom Dennard. "This is a firm whose principals have more than 125 years of combined industry experience and one that has achieved national recognition for its customer service, integrity and intellectual capital." Grandbridge has a servicing portfolio of $22.5 billion representing 100 capital providers. It was founded in October 2007 when BB&T combined Laureate Capital LLC of Charlotte with Collateral Real Estate Capital LLC of Birmingham, Ala. Grandbridge already operates a loan production office in Dallas.

Kite Realty Group Trust, Indianapolis, has promoted John A. Kite, its current president and chief executive, to chairman and CEO. Alvin E. Kite Jr., the current chairman, has been given the title of chairman emeritus. Thomas K. McGowan, previously senior executive vice president and chief operating officer, has been promoted to president and COO. Alvin Kite founded the REIT and has served as chairman since August 2004, when the company first went public.

The KKR-controlled Capmark Financial Group - one of the nation's largest commercial mortgage banking firms - has hired Jay N. Levine as its new president and chief executive. He replaces William F. Aldinger III, who resigned his positions as president, chief executive and chairman. Mr. Aldinger, who once ran subprime giant Household Finance, will serve as a consultant to Capmark. Mr. Levine formerly was president and chief of RBS Global Banking & Markets, North America. He also served as chief executive officer of RBS Greenwich Capital with responsibility for the company's institutional, banking and fixed-income businesses in the United States. Dennis D. Dammerman was named chairman of Capmark. Capmark, formerly known as GMAC Commercial Holding Corp., was acquired in March 2006 by an investor group led by affiliates of Kohlberg Kravis Roberts & Co., Five Mile Capital Partners LLC, Goldman Sachs Capital Partners and Dune Capital Management LP.

House Financial Services Committee chairman Barney Frank, D-Mass., wants to create a new "set of rules" for the securitization of mortgages and empower servicers to modify loans as part of his 2009 agenda. "Our job is to come up with a set of rules that diminishes excessive risk-taking while still giving us the benefits of securitization," Rep. Frank told a Consumer Federation of America Washington conference. He said issuers of mortgage-backed securities will have to retain some liability. "They can't lay off all of the risks" to investors. Servicers of MBS should be able to make decisions about resolving troubled mortgages, he advocated. The committee chairman also said he expects to pass a tough subprime bill that will do away with yield-spread premiums that gives mortgage brokers an incentive to raise interest rates.

The plummeting yield on the 10-year Treasury - which historically has served as a benchmark for mortgage rate direction - hit a new 45-year low on Friday. Early in the afternoon the benchmark yield was at 2.57%, more than 20 basis points lower than where it was earlier in the week. The last time the 10-year Treasury yield was lower came in 1962 when it was at 2.55%, according to Thomas L. di Galoma, managing director and head of U.S. Treasuries at Jefferies & Co. An employment report released Friday morning has been a "focus" for Treasuries as has "the plan to lower mortgage rates by the Fed/Treasury," Mr. di Galoma and fixed-income researchers at Jefferies said in their Friday morning Treasury market report. International rate cuts also have played a role, the researchers said.

Mortgage companies dropped 8,400 full-time employees from their payrolls in October after mortgage originations fell to an eight-year low in the third quarter. The U.S. Bureau of Labor Statistics reported that employment in the mortgage banker/broker sector fell to 343,400 positions from 351,800 in September, a 9% decline from a year ago. The mortgage industry took its biggest job hit in 2007 when 110,000 workers lost their jobs or left the industry. Friday's job report shows "we are the deepest part" of the recession, said Brian Bethune, chief U.S. financial economist at IHS Global Insight. The overall U.S. unemployment rate rose to 6.7% as 533,000 workers lost their jobs in November. Although the government's response to the financial crisis came six to 12 months too late, said the economist, he expects mortgage rates to fall below 5%, and spur a surge in refinancing activity. "It is going to get hot," Mr. Bethune said. But he warned there will be a "huge bottle neck" because the banks don't have people in place in process the applications.

Apollo Management, an investment fund controlled by Leon Black, is one of three finalists for the government controlled IndyMac Bank, mortgage and investment banking officials told MortgageWire. Apollo is backing Vantium Capital, managed by Amy Brandt, the former head of subprime lender WMC Mortgage of California. Vantium is investing in both troubled mortgages and functioning as a "scratch and dent servicer." A spokesman for Apollo declined to comment. A FDIC spokeswoman would not discuss the status of the sale except to say, "We'll announce the winning bidder by year end." Early on in the bidding process two other investment funds - Cerberus Capital and J.C. Flowers & Co. - expressed an interest in the thrift, which services roughly $180 billion in mortgages. IndyMac, created by Countrywide Home Loans two decades ago, is based in Pasadena, Calif.

There's little hope to stem the tide of rising mortgage delinquencies and defaults in the short term, according to economists who follow the industry. Jay Brinkmann, chief economist for the MBA, said that declining home values, which limit the ability of troubled borrowers to sell a home, have increased the "roll rate" of 30-days delinquent loans in one quarter that go into foreclosure during the next quarter. In the 1990s, about 10% of 30-day past due loans moved into foreclosure. Today, about 30% of short-term delinquencies roll into foreclosure, he said during a conference call to discuss the MBA's delinquency survey. Moreover, in hard hit states, the roll rate is even higher, 75% today in California, for instance. And with unemployment rising fast, there's little hope for relief in the short term, according to Ryan Sweet, an economist at Moody's Economy.com. He told MortgageWire that he expects the unemployment rate to rise to 8.5% by early 2010. "Mortgage credit quality is going to decline well into 2009," Mr. Sweet said.

Derrick Polk of Los Angeles, Oludola Akinmola and Oladeji Craig, both of Brooklyn, and Oluwajide Ogunbiyi of Springfield, Ill., have been charged with engaging in an international conspiracy to deplete millions of dollars from U.S. victims' home equity lines of credit using personal information obtained through identity theft and unauthorized computer access. According to the FBI, the four men allegedly conspired to deplete available funds from HELOCs belonging to identity theft victims either by engineering fraudulent wire transfers or by gaining unauthorized access to the victims' online bank accounts. The defendants and their co-conspirators have been accused of acquiring the identity information of thousands of victims and used that information to conduct numerous fraudulent schemes, withdrawing more than $2.5 million from HELOC accounts and attempting to withdraw at least $4 million more in unsuccessful transfers. Hakeem Olokodana and Yomi Jagunna, both of Queens, N.Y., Abayomi Lawal of Brooklyn and Daniel Yummi of New York, have also been charged with conspiring to identify HELOCs with large balances and to acquire all of the confidential customer information necessary to transfer money out of victim accounts.

MGIC Investment Corp., Milwaukee, is Zacks Equity Research's Bear of the Day for Dec. 4, 2008. Back on Sept. 10, Zacks also gave the struggling mortgage insurer that title. In its statement for this most recent designation, Chicago-based Zacks said that MGIC's core results for the third quarter of 2008 "were slightly worse than we anticipated. The results continued to be impacted by increases in both the number of delinquent loans and foreclosures due to a further decline of home prices and slowing of economy. In addition, higher loss severities, especially in California and Florida, also negatively affected the results. The company has taken several combative actions to bolster its capital. We expect significant overhangs for the industry in general and for MGIC in particular, for at least the next several quarters. Our Sell rating is maintained on the shares."

DBRS has downgraded class K through class O of commercial mortgage-backed securities deal COMM2004-LNB3, citing projected liquidation losses from a delinquent Franklin Township, N.J., loan in special servicing. The Chicago office of the Canadian ratings agency said foreclosure proceedings involving the loan are expected to be completed by April 2009 and the property recently was appraised with an estimated "as is" value of $10.5 million and projected market values (after curing and deferred maintenance) of $12.5 million. Both of these values are "well below" the loan's outstanding balance of $22.4 million, DBRS said. The lowered ratings were as follows: class K to BB (low) from BB, class L to B (high) from BB (low), class M to B (low) from B (high), class N to CCC from B and class O to CCC from B (low). DBRS also said it "changed the trend on the BB (high) class J rating to Negative from stable" and confirmed the ratings of the remaining classes in the transaction.

The PMI Group, Walnut Creek, Calif., for the second time in two months, reduced its paid claims guidance at its U.S. mortgage insurance operations for 2008. Originally, the company projected paid claims, net of captive reinsurance recoveries, of between $900 million and $975 million. At the start of November, it cut the guidance to between $850 million to $900 million. Its latest guidance now calls for paid claims of between $810 million to $835 million for the full year 2008.

For the third consecutive month, the amount of primary new insurance written by members of the Mortgage Insurance Cos. of America hit a new low. The $7.7 billion written in October ($0 from the bulk channel for the second time in three months) is down from $8.1 billion in September. The group changed its reporting methodology in August 2001. The amount of primary insurance in force fell from $801.3 billion in September to $800.9 billion in October. Applications received were 55,085, down from 62,209 in September. The cure/default ratio improved by 10 basis points, to 54.0%, with 43,211 cures and 80,071 defaults. MICA's numbers do not include any information from Radian or Triad (Both are no longer members of the group; in addition, Triad is in run-off and had minimal production).

Reported incidents of mortgage fraud in the U.S. increased by 45% on fewer loan applications in the second quarter of 2008 from a year ago, according to a new report released by the Mortgage Asset Research Institute. Key findings from the MARI Quarterly Fraud Report, which is based on data submitted by MARI subscribers on loans originated in the second quarter of this year that have since been classified as fraudulent, include that fraud most often occurs at the beginning of the loan process. According to the report, the top three states for reported incidents of mortgage fraud in the second quarter of 2008 are Florida, California and Illinois. Florida saw a 5% increase in general application misrepresentation in the second quarter, while California saw a 20% decrease. Illinois has the highest percentages of income and employment misrepresentation on the loan application. More than 65% of fraud incidents are attributed to "general application misrepresentation," a trend where information is potentially misrepresented during the application process. This fraud trend is followed closely by reported misrepresentations related to income at 36% of seconds quarter applications and employment at 20% of 2Q08 applications.

In his Economic Update at the 10th Annual Strategies for Success in Construction Lending Seminar in New Orleans, Doug Duncan, chief economist for Fannie Mae, said the recession will go through the second quarter of 2009 and there will be some positive growth in the third and fourth quarters although the market will still be weak. He said 70% of households currently have no equity, and the rise in delinquencies in the mortgage space is unprecedented. Jobs were still being added in the first half of this year, he told attendees at the conference, hosted by Granite Loan Management. "There are no buyers today, but there are lots of sellers," he said. "The last 18 months has seen policy efforts by the government to get the market functioning to get a price and establish a bottom." The industry needs to leverage real principle in order to know how to value these assets, he added. Mr. Duncan used the analogy of a swimming pool to analyze the mortgage market, saying the water in the pool is dangerously high. "We are adding and subtracting to supply at different speeds. The pipe pumping foreclosures has to get fixed. Drains for new and existing home sales is in a historically tight filter. Not much water is getting through." He said the economic stimulus will likely cost a couple hundred billion if the current decline in gas prices is sustained.

The average rate for a 30-year fixed-rate mortgage during the week ended Dec. 3 saw its largest weekly drop since Nov. 27, 1981, and fell to a low not seen since Jan. 24, according to Freddie Mac. The 30-year rate during the week, at 5.53%, was down from 5.97% the week before and from 5.96% a year ago, Freddie Mac said. "After Federal Reserve actions to increase liquidity in the mortgage market, interest rates for fixed-rate mortgages (FRMs) took a dive," said Frank Nothaft, Freddie Mac vice president and chief economist. "This week's decline was the largest since the week of Nov. 27, 1981, and 30-year FRM rates are now almost a full percentage point lower since the last week in October." The average rate for a 15-year FRM fell to 5.33% from 5.74% the week before and 5.65% a year ago, the average rate for a five-year Treasury-indexed hybrid adjustable-rate mortgage slid to 5.77% from 5.86% on the week but was up from 5.75% a year ago, and the average rate for a one-year Treasury-indexed ARM decreased to 5.02% from 5.18% the previous week and from 5.46% a year ago. Average points were 0.7 for 30- and 15-year FRMs, 0.6 for five-year hybrids and 0.5 for one-year ARMs.

Improving the disclosure of information on underlying assets for residential mortgage-backed securities has been identified among four priorities for immediate action by a group of securitization organizations that met Tuesday in New York to discuss and coordinate global efforts to restore market confidence. The Global Joint Initiative to Restore Securitization Markets said its other immediate priorities are to enhance transparency with regard to underwriting and origination practices, restore the creditability of credit rating agencies and improve confidence in valuations, methodologies and assumptions. The Securities Industry Financial Markets Association, the American Securitization Forum, the European Securitisation Forum and ASF-Australia set the four immediate priorities and also set eight other recommendations for restoring confidence in the securitization markets in line with their ongoing efforts to this end. Half of the other recommendations center on RMBS market improvements and standards. Specifically, the groups called for better RMBS issuer information, due diligence/quality assurance, representations and warranties, and servicing.

The Securities and Exchange Commission is putting out for public comment a new set of proposed credit agency reform measures, noting that the agencies' ratings of mortgage securities "backed by subprime mortgage loans" and collateralized debt obligations linked to subprime loans "contributed to the recent turmoil in the credit markets." The new measures "impose additional requirements on credit rating agencies," the SEC said. This is the second set of credit rating agency reforms since the SEC received its new regulatory authority from Congress to register and oversee credit rating agencies. According to Mortgage Bankers Association chairman John A. Courson, the SEC also delayed a vote on a measure that would have "imposed different ratings symbols for structured finance versus other investment products" and likely would have led to "confusion" and "continued disruption to secondary market transactions."

Commercial real estate markets "weakened broadly," according to the Beige Book, which noted that many Federal Reserve district banks reported falling rents and rising vacancy rates. "Leasing activity was down in almost all districts," the Beige Book says. Vacancy rates rose in the Boston, New York, Richmond, Chicago, and Kansas City districts while rents fell in the Boston, New York and Kansas City districts. Meanwhile, CRE and residential lending contracted. Home sales were down in most districts. The only bright spot in the Beige Book is that some district banks reported "relatively stronger demand" for starter homes. In a recent speech, Federal Reserve Board chairman Ben Bernanke noted that the housing correction still has a way to go. "Housing markets remain weak, with low demand and the increased number of distressed properties on the market contributing to further declines in house prices," the Fed chairman said.

A Federal Reserve Board study discovered that banks and thrifts made only a small percentage of subprime loans in their Community Reinvestment Act assessment areas and these findings refute critics who claim CRA lending contributed to the subprime crisis. "Only 6% of all higher-priced [subprime] loans were extended by CRA-covered lenders to lower-income borrowers or neighborhoods in their CRA assessment areas," Fed governor Randall Kroszner said. This evidence does not support the view that CRA contributed in any substantial way to the subprime mortgage crisis, he added. In examining foreclosure data, Fed researchers also discovered that foreclosure filings have increased at a faster pace in middle-income and higher-income areas than in lower-income areas served by CRA lenders.