Originations

Senate appropriators are not providing any funds for the Federal Housing Administration to cover losses on FHA-insured mortgages with seller-funded downpayment assistance, and it could snuff out the controversial homebuyer assistance programs run by nonprofits. The Department of Housing and Urban Development has been trying to stop the downpayment assistance programs for years because of high foreclosure rates and losses. A housing bill pending in the Senate would ban seller-funded DPA on FHA loans. But House Democrats strongly support the continuation of the homebuyer assistance programs with some reforms. According to Senate Appropriations Committee staffers, the Congressional Budget Office has ruled that the appropriators must provide funding for DPA losses on a line item for contract expenses in the HUD budget. The HUD budget approved Wednesday morning by the Transportation-HUD appropriations subcommittee does not include such funding. Senate appropriators did provide an additional $39 million to meet the FHA's growing need for additional staffing and technology.

Prospect Mortgage, Northbrook, Ill., has signed an agreement to acquire the majority of IndyMac Bancorp's retail mortgage branches for an undisclosed amount. At deadline time, details were sketchy. No wholesale branches were included in the sale. On Monday, the Pasadena, Calif.-based IndyMac suspended most originations of home mortgages except reverse loans. The sale involves the transfer of about 60 locations that will be rebranded under the Prospect name. A statement released by Prospect, a nonbank, said roughly 750 employees will come to work for them. Prospect said John Johnston and Ron Bergum will remain in leadership roles with the retail branch group and report to Mark Filler, chief executive officer of the company. Mr. Filler used to work for American Home Mortgage, Melville, N.Y., which filed for bankruptcy protection about a year ago. Prospect can be found online at http://www.prospectmtg.com.

Classes M, N, and O of Cobalt CMBS Commercial Trust commercial mortgage pass-through certificates series 2006-C1 have been placed on Rating Watch Negative by Fitch Ratings. The rating actions were attributed to the transfer of the eighth-largest loan (which is shadow-rated by Fitch) to special servicing. The loan, the Fortress/Ryan's portfolio, is collateralized by 130 restaurant properties in 22 states, Fitch said. The loan is current, but was transferred to special servicing when the master lessee and lease guarantor filed for bankruptcy, the rating agency reported. The borrower and the special servicer are reviewing workout options. The rating agency can be found on the Web at http://www.fitchratings.com.

Nine classes of commercial mortgage pass-through certificates from GS Mortgage Securities Trust 2007-GKK1 have been placed on CreditWatch with negative implications by Standard & Poor's Ratings Services. The affected securities are classes A-2, B through H, and J. classes K and L remain in CreditWatch Negative. S&P said the actions followed "a preliminary analysis of the transaction, which included an examination of the current credit characteristics of the pool of assets," the rating agency said.

Synergos Technologies Inc., Austin, Texas, has announced the addition of mortgage-risk data to its quarterly STI:PopStats population data product. The new data, which highlight risk levels created by lending practices involving subprime and adjustable-rate mortgages, represent the first time that mortgage risk has been identified at the neighborhood level across the United States, Synergos said. Among the data fields added to the index are the number of mortgage transactions and average loan-to-income ratios. Company president Robert Welch cited several surprises in the mortgage data, including the discovery that Minneapolis and Baltimore scored high in mortgage risk, and that Houston has only a few pockets of high-risk mortgage activity while Los Angeles has such activity in most neighborhoods. "With today's economy in flux, econometrics is playing a larger role in growing and sustaining profitable businesses," Mr. Welch said. The index can be found online at http://www.popstats.com.

National banks need to deal fairly with all struggling homeowners when it comes to deciding who will qualify for loan workouts and who will slip into foreclosure, according to the comptroller of the currency. "It's important that borrowers aren't being foreclosed on more quickly or denied access to modification programs, because of their race," Comptroller John Dugan said. In the past, fair-lending exams used to be focused mainly on discriminatory lending practices. But now with so many mortgages going into default, banks need to make sure that "similarly situated borrowers who default or become delinquent are treated similarly," Mr. Dugan told an OCC compliance conference. The comptroller also noted that some banks made subprime mortgages that qualified for Community Reinvestment Act. And he called on those banks to continue to make "good loans that will fulfill their CRA obligation."

In light of the announcement from IndyMac Bancorp, Friedman Billings Ramsey has slashed its price target for the company's common stock from $1 to zero. "We are not predicting IndyMac Bancorp's failure, but we expect that the value of the common equity left after today's announced actions [see above item] will be immaterial," said the report written by Paul Miller, Bob Ramsey, and Annett Franke. The report called the decision to leave the forward mortgage business, given the company's business model until now, as "very significant." FBR said there isn't any value in the company left for common stockholders with continued home price declines, management's higher loss estimates, recent rating downgrades of the company's mortgage-backed securities portfolio, and the decision to stop new forward mortgage originations.

Citing regulatory pressure to maintain its capital levels, IndyMac is shifting away from and shutting down much of its forward mortgage origination business to focus on its reverse mortgage unit, Financial Freedom, according to a letter from chief executive Mike Perry posted on IndyMac's corporate blog. IndyMac said as of July 7 it would no longer accept any new loan submissions or rate locks in its retail and wholesale forward mortgage lending channels, except for its servicing retention channel, and would cut roughly half its staff of 7,200 over the next couple of months. The company said it plans to honor all its existing rate-locked loans and continue to fund them. "While the managers and employees in these units have worked incredibly hard, these units are not currently profitable due to the continuing erosion of the housing and mortgage markets," Mr. Perry said. "At the same time, these operations take up significant balance sheet capacity and 'feed' growth in the servicing asset, an asset we need to shrink given its size relative to our existing capital." IndyMac's blog can be found at http://www.theimbreport.com.

Class O of COMM 2006-C8 Mortgage Trust commercial mortgage pass-through certificates has been placed on Rating Watch Negative by Fitch Ratings. The rating action was attributed to the transfer of the 12th-largest loan (which is shadow-rated by Fitch) to special servicing. The loan, the Fortress/Ryan's portfolio, is collateralized by 130 restaurant properties in 22 states, Fitch said. The loan is current, but was transferred to special servicing when the master lessee and lease guarantor filed for bankruptcy, the rating agency reported. The borrower and the special servicer are reviewing workout options.

Two classes from two Ameriquest Net Interest Margin Trust issues have been downgraded by Fitch Ratings. Class A of series 2005-RN4 and class A of series 2005-RN5 were downgraded from AAA to BBB. "The rating actions reflect actual paydown performance of the NIM securities to date compared to initial projections, as well as changes that Fitch previously made to its subprime loss forecasting assumptions for the underlying transactions," the rating agency said. Fitch can be found on the Web at http://www.fitchratings.com.

Nine classes of subprime asset-backed pass-through certificates issued by Ace Securities Corp. Home Equity Loan Trust have been downgraded by Standard & Poor's Ratings Services. The affected securities were in series 2004-HS1, series 2006-HE3, and series 2006-HE4. S&P also affirmed the ratings on three classes from series 2004-HS1. The downgrades were attributed to "adverse collateral performance that has caused monthly losses to exceed monthly excess interest." S&P added that the amount of loans in the delinquency pipeline "strongly suggests that monthly losses will continue to exceed excess interest, thereby further compromising credit support." The collateral consists primarily of subprime first-lien mortgage loans.

Forty-seven classes in three commercial mortgage-related transactions from three issuers have been downgraded by Standard & Poor's Ratings Services. The downgrades affected 18 classes from Ansonia CDO 2006-1 Ltd., 16 classes from Greenwich Capital Commercial Mortgage Trust 2007-RR2, and 13 classes from GS Mortgage Securities Corp. II's series 2006-RR3. All the classes were removed from CreditWatch with negative implications. The downgrades were based on a "full analysis of the transaction's assets and liabilities" that incorporated S&P's revised recovery rate assumptions for commercial mortgage-backed securities, the rating agency said. S&P can be found online at http://www.standardandpoors.com.

Hanover Capital Mortgage Holdings Inc., Edison, N.J., has received notification from the American Stock Exchange that its stock will be delisted for failing to meet Amex's continued-listing standards. Hanover said the exchange staff had determined that a plan submitted to Amex on May 8 "does not make a reasonable demonstration of the company's ability to comply" with the continued-listing standards. Amex cited stockholder's equity of less than $2 million, losses from continuing operations, and net losses in two out of Hanover's three most recent fiscal years. The notification also said Hanover's sustained losses are "so substantial" or its financial condition has become "so impaired" that it appeared "questionable, in the opinion of the Exchange, as to whether the company will be able to continue operations or meet obligations as they mature." Hanover said it intends to appeal the decision. The company, a mortgage real estate investment trust, can be found online at http://www.hanovercapitalholdings.com.

Impac Mortgage Holdings, Irvine, Calif., has restructured its repurchase agreement financing facility with UBS Real Estate Securities Inc. The deal is contingent on the signing of a definitive agreement. Impac's remaining repurchase warehouse line, which has a balance of $200 million, will become a term facility with a 12-month period, with options to extend it for 18 months if certain targets are met. The new facility will remove any and all technical defaults Impac has. It will also allow Impac to manage the loans in the facility for eventual refinancing, sale, or securitization while taking away the risk of margin calls. UBS will receive warrants to buy 7% of Impac's common stock, and there is a right to cancel warrants equal to 3% of the company's outstanding common stock if Impac satisfies certain thresholds. Joseph R. Tomkinson, Impac's chairman and chief executive, said the new facility will give the company "more time to maximize recovery on the sale or refinance" of the mortgage loans and enable it "to focus on new initiatives and strategies."

Citing deterioration in the housing market, Milwaukee-based Marshall & Isley Corp. has announced plans to take a second-quarter provision of up to $900 million for loan and lease losses, prompting Fitch Ratings to downgrade the company's short-term Issuer Default Rating. M&I said the provision is expected to be approximately $485 million greater than expected second-quarter chargeoffs of $415 million. The company said it expects to report a loss of $1.50-$1.60 per share for the second quarter. "The continuing deterioration in the housing market, particularly in Arizona, on Florida's west coast, and in selected relationships in our correspondent business, makes this the prudent action to take at this time," said Mark F. Furlong, M&I's president and chief executive officer. Fitch, reporting that M&I's net loss is expected to be around $400 million in the second quarter, lowered the short-term IDRs of the parent company and its subsidiary banks from F1-plus to F1 and their individual ratings from A/B to B. Fitch also placed the company's A-plus long-term IDR and other long-term ratings on Rating Watch Negative. "While [M&I's] problematic areas of its loan portfolio appear to be well contained, construction and land development are sizable exposures for the company," Fitch said. M&I can be found online at http://www.micorp.com.

AmericasBank Corp., Towson, Md., says it will be closing its separate mortgage unit and integrating its operations into existing banking centers. The company said customer mortgage needs would be serviced from its Annapolis, Md., and Towson banking centers. In an 8-K filing with the Securities and Exchange Commission, AmericasBank said it "intends to cease its emphasis on originating mortgage loans for sale that are originated by commissioned salespeople and to focus on the traditional business of a community bank. The company believes that the integration of the mortgage unit into the bank's banking centers will be completed by July 31, 2008." The company estimated that closing the mortgage unit will cause it to incur pretax charges of approximately $250,000 in the second and third quarters of 2008 -- approximately $200,000 in noncash charges related to the writeoff of goodwill, and $50,000 in cash charges related to severance payments. AmericasBank lost $2.55 million in the fourth quarter of 2007, largely due to a $2.9 million writedown related to five fraudulent real estate loans. In May, the company fired its president and chief executive, Mark Anders.

Mortgage servicers increased their loss mitigation efforts by 26% from February to March as 49,000 borrowers agreed to loan modifications or payment plans, according to the first Mortgage Metrics Report from the Office of Thrift Supervision. The new OTS report uses loan-level data to examine the loss mitigation activities of the five largest OTS-regulated thrifts and their affiliates: Washington Mutual, Countrywide Financial, IndyMac, Wachovia FSB, and Merrill Lynch. The data show that 71% of the loss mitigation actions involved loan modifications rather than payment plans. However, subprime borrowers are more likely to get a loan modification than prime borrowers. "Prime mortgages received the fewest loan modifications relative to new foreclosure actions," the OTS report says. The report also indicates that new foreclosures in the first quarter were driven mainly by prime and alternative-A loans, not subprime loans.

The average 30-year fixed mortgage rate fell to 6.35% from 6.45% over the seven-day period ended July 3. The average 15-year fixed mortgage rate dropped to 5.92% from 6.04%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages slipped to 5.78% from 5.99% and the average rate for one-year Treasury-indexed ARMs declined to 5.17% from 5.27%, Freddie Mac reported. Fees and points averaged 0.6 of a point for fixed-rate mortgages and one-year ARMs, and 0.7 of a point for hybrid ARMs. "Mortgage rates reversed their three-week rise, falling this week after the release of the latest Federal Reserve's policy statement that it expects inflation to moderate later this year and the reporting of May's timid increase in core personal consumption prices," said Frank Nothaft, Freddie Mac vice president and chief economist. "According to recent trading activity in federal funds futures, market participants lowered somewhat their expectations of future rate hikes by the Fed compared to last week." A year ago, the average 30-year and 15-year fixed mortgage rates were 6.63% and 6.30%, respectively, and the average hybrid and one-year ARM rates were 6.29% and 5.71%, Freddie Mac said. Freddie can be found online at http://www.freddiemac.com.

Mortgage companies hired 1,500 full-time employees in May, ending 14 consecutive months of workforce reductions, and it could be a sign that the jobs drain may be ending soon. The U.S. Bureau of Labor Statistics reported Friday that employment in the mortgage banker/broker sector rose from 356,300 in April to 357,800 in May. A Mortgage Bankers Association economist expects to see more layoffs over the next few months. However, MBA senior director of economic forecasting Orawin Velz says industry employment could bottom out around 348,000. The previous uptick in mortgage jobs was in February 2007 when the industry had 489,800 employees. Since then, 132,000 people have lost their jobs or left the industry.

The ratings on three classes of noted issued by Visage CDO I Ltd., a managed hybrid collateralized debt obligation relating partly to commercial real estate, have been downgraded by Fitch Ratings and withdrawn. The downgrades were as follows: class A, from CCC to C/DR6; class B, from CC to C/DR6; and class C, from CC to C/DR6. The downgrades were attributed to a default resulting from the fact that the class A par value ratio was less than 100%. The CDO references a portfolio of mezzanine and high-grade asset-backed securities CDO tranches and commercial real estate CDO tranches, Fitch said.