Originations

WCI Communities Inc., a luxury homebuilder and real estate services company based in Bonita Springs, Fla., has reported the approval of a package of relief designed to ensure the continued operation of its business. WCI said the approval by the U.S. Bankruptcy Court in Wilmington, Del., assures current and prospective homebuyers that WCI's Chapter 11 filing will not affect their rights or "create any unexpected risks." The company said the court action, among other things, authorizes WCI to deliver clear title to homes and tower residences at closing; directs closing agents and title companies to make all required closing payments; and authorizes the issuance of required title insurance policies. WCI can be found on the Web at http://www.wcicommunities.com.

Stewart Information Services Corp., Houston, has revised its second-quarter earnings as a result of the discovery of more fraudulent activity. Originally, the company reported a $26.6 million loss ($1.47 per share) for the period. However, Stewart has since connected several independent claims to a series of fraudulent transactions, which has resulted in the reclassification of the claims into a single, large title claim. As a result, Stewart has taken a pretax charge of $3.0 million ($2.0 million after taxes, or $0.11 per share). This brings the net loss for the second quarter to $28.6 million ($1.58 per share).

A week after Mercury Cos., Denver, closed its title agency businesses in Arizona, Texas, and California, the company sold its Colorado operations to Fidelity National Financial Inc., Jacksonville, Fla. The various operating units -- Security Title, First American Heritage Title, Title America, and United Title -- have a 30% market share in Colorado. A letter on Mercury's website blamed rising economic pressures and a declining real estate market for the closures. In the news release announcing the sale, Jerry Hauptman, chairman and chief executive of Mercury, said FNF "is an exceptionally strong, stable and well-run title company. Its financial strength and operational acumen will allow our Colorado operations to continue to provide the service and performance that our customers have come to expect for so many years." Mercury is the parent of Guardian Mortgage Documents and USA Digital Solutions. It can be found online at http://www.mercurycompanies.com.

Fannie Mae is increasing its "adverse market" delivery fee from 25 basis points to 50 bps starting Oct. 1. "This upfront charge primarily addresses continuing market deterioration and applies to all loans," whether under standard or negotiated terms, the mortgage giant said. The secondary-market agency is also adjusting its loan pricing, and it appears to favor loans with private mortgage insurance and loan-to-value ratios above 85%. "We are increasing loan-level prices on certain mortgages with loan-to-value ratios of 75.01%-85%," Fannie says. The government-sponsored enterprise can be found on the Web at http://www.fanniemae.com.

Freddie Mac officials on Wednesday said home price declines could be 25% worse than it had forecast just a few months ago. During the company's second-quarter earnings conference call, company chairman and chief executive Richard Syron said home values will fall 18% to 20% from "peak to trough," compared with a previous estimate of 15%. Mr. Syron added that, "We are now halfway through the peak-to-trough" declines. In tandem with its earnings, the government-sponsored enterprise said "default costs" on its $791 billion portfolio could range from a low of $16 billion to a high of $42 billion. During the conference call, Freddie chief financial officer Buddy Piszel said 90% of the "marks" the GSE is taking "will flow back to us." (Freddie took a $2.5 billion provision for credit losses in the second quarter, compared with $1.2 billion in the first quarter.) Freddie Mac's revenues increased 11% in the quarter to $1.7 billion, compared with those of the first quarter. Mr. Syron told analysts that the GSE "does not expect to draw upon" any of the federal borrowing permitted under the housing bailout bill recently signed by President Bush. Freddie Mac can be found online at http://www.freddiemac.com.

Forty-five classes of notes issued by six collateralized debt obligations linked to subprime residential mortgage-backed securities have been downgraded by Fitch Ratings. The affected securities include 13 classes from Delphinus CDO 2007-1 LLC/Ltd., a hybrid structured finance CDO; eight classes of notes from Duke Funding XIII Ltd. and Duke Funding XIII Corp., both hybrid structured finance CDOs; seven classes from Glacier Funding CDO V LLC/Ltd., a cash flow CDO; seven classes from Volans Funding 2007-1 Ltd., a hybrid structured finance CDO; six classes from West Trade Funding CDO I LLC/Ltd., a cash flow CDO; and four classes from Solstice ABS CDO III Ltd., a cash flow structured finance CDO. The downgrades were attributed in most cases to "significant collateral deterioration" in the portfolios' subprime RMBS and structured finance CDOs with underlying exposure to subprime RMBS. Fitch can be found online at http://www.fitchratings.com.

WCI Communities Inc., a luxury homebuilder and real estate services company that filed for Chapter 11 bankruptcy protection on Aug. 4, has reported that its common stock will now be traded on the Pink Sheets. The Bonita Springs, Fla.-based company said the move stems from the New York Stock Exchange's decision to suspend trading in WCI's common stock. In light of its bankruptcy filing, WCI said it will not appeal the exchange's decision. The company's stock will trade on the Pink Sheets under the symbol WCIMQ. WCI can be found on the Web at http://www.wcicommunities.com.

Intellidyn Corp., Boston, has announced the release of prospect lists that enable mortgage marketers to target borrowers now in negative-amortization loans. The company said this specialized information enables retail originators to pinpoint and market to prospects by their negative-amortization levels. "Where borrowers with loan balances higher than their original loan amount are located in neighborhoods that are still appreciating, they have the [loan-to-value ratios] needed to refinance," said Intellidyn CEO Peter Harvey. "Certainly this is a small group. However, this is the level of micro-targeting that lenders need to be engaged in while under these market conditions." The company can be found online at http://www.intellidyn.com.

LandAmerica Financial Group Inc., Richmond, Va., has announced the acquisition (by a subsidiary) of Aaron & Wright Inc., a Houston-based commercial real estate valuation company. The terms of the transaction were not disclosed. The acquisition was carried out by LandAmerica Valuation Corp., which last year acquired Butler Burgher Inc., a Dallas-based appraisal firm. LandAmerica said such acquisitions are part of a targeted growth strategy to gain greater geographic coverage and entry into new market niches and to make LandAmerica "the premier provider of real estate transaction services." The parent company can be found on the Web at http://www.landam.com.

Triad Guaranty Inc., Winston-Salem, N.C., has reported a net loss of $198.2 million ($13.36 per share) for the second quarter, compared with net income of $12.0 million ($0.80 per share) a year earlier. Two weeks after the quarter ended, on July 15, the company's subsidiary Triad Guaranty Insurance Corp. stopped issuing commitments for new mortgage insurance coverage and entered into runoff. That decision followed an unsuccessful attempt by management to capitalize a new mortgage insurance company. "The size of our second-quarter loss reflects the depth and breadth of the collapse of the housing and mortgage markets," said William Ratliff, chairman of Triad, who is also taking on the interim chief executive job in the wake of the retirement of Mark Tonnesen. "The continued growth in the number of defaults and foreclosures during the quarter required a significant increase in reserves. The distressed markets of California, Florida, Arizona, and Nevada continue to be adversely impacted by declining home prices, and reserves for defaults in these states comprised approximately 68% of the increase in our reserves for the quarter." After entering runoff, Triad reduced its work force by 45%, Mr. Ratliff said.

Seller-funded downpayment assistance on Federal Housing Administration loans could get a second life under a bill introduced by Rep. Al Green, D-Texas, that also authorizes the FHA to charge risk-based premiums. The Green bill would repeal sections of the recently passed housing bill that bans seller-funded downpayment assistance and institutes a 12-month moratorium on risk-based pricing starting Oct 1. The bill (H.R. 6694) would require the FHA to charge higher mortgage insurance premiums for homebuyers with credit scores below 680 that receive seller-funded downpayment assistance from nonprofit groups, such as Nehemiah Corporation of America and AmeriDream. Borrowers with credit scores below 620 would be charged risk-based premiums. "I have introduced this bipartisan bill to revive this critical program under new standards that will effectively balance the risk of potential foreclosures with the goal of increasing homeownership," Rep. Green said. The Texas congressman introduced the bill on July 30 just before the House adjourned for the August recess.

The sole class of notes issued by Brit Alliance ABSpoke 2005-X, a collateralized debt obligation referencing residential mortgage-backed securities and other assets, has been downgraded from BB to CC by Fitch Ratings and removed from Rating Watch Negative. The downgrade of the class A notes resulted from "significant collateral deterioration" in the reference portfolio, specifically subprime and alternative-A RMBS, the rating agency said. The transaction is an unfunded managed synthetic CDO.

Five classes of variable-rate notes issued by Magnolia Finance II PLC, a collateralized debt obligation that references chiefly mortgage-backed security assets, have been downgraded and removed from Rating Watch Negative by Fitch Ratings. The affected notes were from the following asset-backed securities portfolios: series 2006-5A, series 2006-5B, series 2006-5CU, series 2006-5CE, and series 2006-5CG. Fitch said the downgrades reflect "significant collateral deterioration" in the reference portfolio, especially subprime residential MBS, alternative-A RMBS, and structured finance CDOs with underlying exposure to subprime RMBS. Magnolia II is a static, synthetic, structured finance CDO.

Concord Debt Holdings LLC, a Boston-based joint venture of two real estate investment trusts, has announced a capital commitment of up to $100 million from a subsidiary of Inland American Real Estate Trust Inc. Concord, which was formed by Winthrop Realty Trust and Lexington Realty Trust to originate and acquire real estate securities and real-estate-related loans, said the commitment includes an initial investment of $20 million and extends over 18 months. Concord said the funds will be used chiefly to originate and acquire additional debt such as whole loans, "B notes," and mezzanine loans. Winthrop and Lexington can be found on the Web at http://www.winthropreit.com and http://www.lxp.com.

Old Republic International Corp., the Chicago-based parent company of Republic Mortgage Insurance Co. and Old Republic Title Insurance Co., has changed its policies on the recognition of when its equity investment securities are considered to be other-than-temporarily impaired. The change has increased the company's second-quarter net loss from the previously reported $45.4 million ($0.20 per share) to $364.7 million ($1.58 per share). In its original announcement, ORI reported after-tax unrealized investment losses of $100.5 million ($0.43 per share) for its investments in the common stock of MGIC Investment Corp., The PMI Group, and LandAmerica Financial Group. At the time, all three investments were categorized as temporarily impaired. A telephone call to ORI for further information had not been returned at deadline time. The company can be found online at http://www.oldrepublictitle.com.

The personal financial services division of HSBC's U.S. operation booked $6.8 billion in loan impairment and credit risk charges in the first half, according to a new report issued by the company. The London-based bank also reported that its subprime portfolio (housed in "mortgage services") fell 13%, to $31 billion. It said 60% of the decline was due to loan repayments. The bank's personal finance division lost $2.2 billion in the first half. "The U.S. remains a difficult market, with rising unemployment and falling house prices," it said in a statement. HSBC still originates subprime loans, but only through the retail branches of the old Household Finance network.

By the end of next year, financial institutions will be looking at $2 trillion in writedowns due to the current credit crisis, according to an economics professor at New York University. Speaking on CNBC Monday morning, Nouriel Roubini of NYU's Stern School of Business said the $2 trillion price tag includes not only subprime loans, but "A paper" mortgages, credit cards, auto loans, municipal bonds, and other asset categories. "The consumer is on the ropes," said Professor Roubini. "Banks have barely started [taking writedowns]," he said. To date, Wall Street firms, banks, and other financial institutions have suffered mortgage-related asset writedowns of more than $300 billion. He predicted that the Federal Deposit Insurance Corp. will have to "bail out hundreds of banks."

Thanks to the recently passed housing bill, veterans can now get zero-downpayment loans through the Department of Veterans Affairs home loan program with a maximum loan amount of $729,750 for the rest of this year. The housing bill (H.R. 3221) puts the VA on par with the Federal Housing Administration, according to VA home loan director Judy Caden. On Jan. 1, the maximum VA and FHA loan limit will adjust to $625,000. The VA has seen a 31% increase in loan originations in fiscal year 2008 and has already surpassed the $25 billion in loans guaranteed by the department in fiscal 2007. Ms. Caden told MortgageWire that veterans are turning to VA mortgages because of tighter underwriting on conventional loans. "They are much tighter, and the no-downpayment feature has dried up," she said. The VA is hoping Congress will extend its authority to make hybrid adjustable-rate mortgages, which expires Sept. 30, and that lawmakers will make it easier for veterans with subprime loans to refinance into a VA loan. Currently, the VA cannot refinance a conventional loan with a loan amount above $144,000, and the veteran has to have 10% equity. The VA could help a lot more veterans if Congress fixes the $144,000 limit and raises it to $625,000. Ms. Caden said.

The Department of Housing and Urban Development should reconsider its approach to RESPA reform and withdraw its current proposal, according to a letter to HUD Secretary Steve Preston signed by 10 industry trade groups. "We have serious concerns about HUD's current Real Estate Settlement Procedures Act proposal, and we oppose its finalization in anywhere near its current form," the July 31 letter says. The trade groups want HUD to work with the Federal Reserve Board and harmonize the RESPA and Truth in Lending Act mortgage disclosures. "If HUD adopts a final rule now, without coordinating with the [Fed] board, it will be to the detriment of consumers, forcing them to confront a baffling host of disclosures, and forcing the mortgage industry to comply with inconsistent rules," the industry groups say in the letter, which was also sent to the White House budget office. The Fed is working on TILA disclosures that provide borrowers with a better understanding of financing costs and mortgage broker fees. The American Bankers Association, the Mortgage Bankers Association, and the National Association of Realtors are among the signers. The associations can be found online at http://www.aba.com, http://www.mortgagebankers.org, and http://www.realtor.org.

Florida regulators have closed First Priority Bank, Bradenton, Fla., after losses on commercial real estate loans crippled the $260 million bank. The Federal Deposit Insurance Corp. will end up selling most of the assets. SunTrust Bank, Atlanta, has assumed all the insured deposits, but purchased none of the real estate assets. A subsidiary of Beal Bank Nevada, Las Vegas, purchased only $42 million of the failed bank's assets. As of March 31, First Priority had $34.9 million in nonperforming real estate loans on its books, up from $4.6 million in the first quarter of 2007. The FDIC estimates that First Priority will cost the deposit insurance fund $72 million. It is the eighth bank to fail this year.