Originations

Hilco Real Estate LLC, Chicago, has announced the formation of Hilco Residential Partners LLC, a residential real estate investment fund chartered to purchase distressed residential properties and debt. The size of the investment fund, a joint venture with Chicago-based Real Estate Principal Solutions LLC, was not disclosed. Hilco said three classes of distressed assets will be acquired from lenders: real estate owned portfolios of single-family and multifamily properties, condominiums, and senior housing; closeout units in a residential development; and nonperforming notes on single-family and multifamily projects. "Our goal is to provide immediate balance sheet relief for lenders and eliminate their further involvement with the costs of real estate ownership," said Navin Nagrani, vice president of Hilco Real Estate. "Our nationwide property management and marketing infrastructure enables us to monetize acquired assets more quickly and with less cost, which means the fund can pay more for distressed portfolios." Hilco can be found online at http://www.hilcorealestate.com.

MicroBilt Corp., Kennesaw, Ga., and Annapolis, Md.-based PRBC have announced a planned merger of payment data to help small to medium-size companies do more business with consumers who have thin credit histories. The data will be merged in PRBC's data repository, and MicroBilt will make an equity investment in PRBC under the arrangement. The companies said the credit crunch is forcing smaller businesses to be very cautious in originating new loans, making it "more difficult than ever" for consumers with thin (or no) established credit histories to qualify for competitive rates. "PRBC has done a tremendous job in developing methods and systems of aggregating nonreported bill payment data to help consumers demonstrate good payment track records and qualify for credit at competitive rates," said MicroBilt chairman Bob Raleigh. "By combining PRBC's data with the trade line data reported to MicroBilt by thousands of smaller companies, we can help this large sector build credit histories and receive FICO Expansion scores much faster, and in turn [enable] businesses to grant more credit with less risk." The companies can be found online at http://www.microbilt.com and http://www.prbc.com.

The Senate has approved an amendment by Sen. Christopher S. Bond, R-Mo., that requires lenders to provide better consumer disclosures on adjustable-rate mortgages with teaser rates. ARMs with teaser rates "played a large role in our current subprime mortgage crisis," Sen. Bond said recently during debate on a housing reform and foreclosure rescue bill. The new Truth in Lending Act disclosure would require mortgage lenders or brokers to disclose how high the mortgage payments would go once the teaser rate expires. In addition, they would have to disclose that there is "no guarantee" that the borrower will be able to refinance the loan before the initial low rate ends. "Many potential borrowers either did not understand what they were getting into or were falsely assured [that they could refinance and] everything would be OK," Mr. Bond said. The Senate approved the Bond amendment to the housing bill by unanimous consent on June 25.

Nine classes of Wachovia Bank Commercial Mortgage Trust 2005-C20 have been place on Rating Watch Negative by Fitch Ratings. The affected securities are classes F through H and J through O. The negative rating actions were attributed to concerns about the declining value of the special serviced Macon and Burlington Malls loan due to lower occupancy levels.

Countrywide Financial Corp., Calabasas, Calif., will be replaced by AK Steel in the S&P 500 Index after the close of trading on June 30, Standard & Poor's has announced. S&P said the reason for the change is Countrywide's pending acquisition by Bank of America, a constituent of the S&P 500, in a deal expected to close on or about that date. S&P can be found online at http://www.standardandpoors.com.

Vestin Realty Mortgage I Inc. and Vestin Realty Mortgage II Inc., Las Vegas-based real estate investment trusts, have announced temporary suspensions of dividend payments. Vestin I and II said they expect their operating results to be hurt by an increase in nonperforming assets, the recognition of writedowns on real estate held for sale, and legal expenses related to the defense of various lawsuits. The companies attributed the growth in NPAs and the writedowns largely to "the current state of the real estate markets and the continuing constraints in credit markets." Both REITs are managed by Vestin Mortgage Inc.

Municipal Mortgage & Equity LLC, Baltimore, has announced that it is considering strategic options, including a possible sale or recapitalization of business units. Additional asset sales will also be considered, MuniMae said. The company noted that there is no assurance that the exploration of options will result in any transaction, and said it does not plan to disclose developments unless its board approves a specific transaction. Lazard Ltd. has been advising MuniMae on the process. MuniMae and its subsidiaries arrange debt and equity financing for developers and owners of real estate and clean-energy projects. The company can be found on the Web at http://www.munimae.com.

Citing expanding inventories of unsold homes, Los Angeles-based homebuilder KB Home has reported a net loss of $255.9 million ($3.30 per share) for the fiscal quarter ended May 31, compared with a net loss of $148.7 million ($1.93 per share) a year earlier. The company attributed the current loss largely to pretax noncash charges of $176.5 million for inventory and joint venture impairments and the abandonment of certain land option contracts. It also cited a $98.9 million valuation allowance charge and a $24.6 million goodwill impairment charge. "Persistently poor demand for new homes during the second quarter amplified pricing pressures and diminished asset values in many of our served markets...," said Jeffrey Mezger, the company's president and chief executive officer. "Despite substantially lower home prices, relatively low interest rates, and an abundance of choices, potential new homebuyers remain reluctant to purchase a home." The company can be found online at http://www.kbhome.com.

Senate Banking Committee leaders are urging federal banking regulators to "wake up" and revamp their appraisal standards, instead of complaining about the changes Fannie Mae and Freddie Mac have agreed to implement under a settlement with New York Attorney General Andrew Cuomo. The bank agencies have a role in setting appraisal standards for lenders, committee Chairman Christopher J. Dodd, D-Conn., said during debate on a major housing reform bill. "However, the appraisal fraud over the past couple of years, and the attorney general's action, should serve as a wake-up call to the regulators that their appraisal standards must be revamped and their enforcement stepped up," Sen. Dodd said. Sen. Richard C. Shelby, R-Ala., also urged the regulators to revamp their standards to strengthen appraisal independence. The senators made the comments as Sen. Elizabeth Dole, R-N.C., withdrew an industry-supported amendment to quash the New York attorney general's appraisal standards. Under the standards, Fannie and Freddie could not buy mortgages from banks and mortgage companies that use in-house appraisers or affiliated appraisal firms. The standards also prohibit mortgage brokers from ordering appraisals. The Dole amendment would have directed Fannie's and Freddie's regulator to establish appraisal standards for the two government-sponsored enterprises.

Sen. Charles E. Schumer, D-N.Y., has sent a letter to banking and thrift regulators questioning the financial viability of IndyMac Bancorp -- the nation's 11th-largest mortgage lender -- but some observers in Washington are wondering about his timing. IndyMac's shares have been trading for less than $2 since May (82 cents at deadline time), and the thrift has received several downgrades from analysts and rating agencies. A spokesman for the Office of Thrift Supervision told MortgageWire that, "We receive a lot of letters from members of Congress, but not many about specific institutions." He declined to comment further. Jaret Seiberg, an analyst with the Washington Research Group, said the letters could actually cause a run on IndyMac's deposits "and cause a failure, which is what the senator is trying to avoid." Sen. Schumer's office did not return a telephone call about the letters, which he sent to the heads of the Federal Deposit Insurance Corp. and the Office of Thrift Supervision. In the letters, he said IndyMac's "financial deterioration poses significant risks to both taxpayers and borrowers" and questioned its use of brokered deposits. A source close to the company said management at IndyMac was caught off guard by the letters, adding that, "I guess IndyMac is getting picked on" because it's in the mortgage business. The source also said IndyMac is actually reducing its use of brokered deposits. "Some of the senator's information is just wrong," the source said. IndyMac had no official comment.

Bank of America, Charlotte, N.C., says it anticipates cutting 7,500 jobs as part of the acquisition of Countrywide Financial Corp., Calabasas, Calif. Final decisions on what groups and locations will be affected have not been made, but the bank said the reductions will take place over the next two years and will affect positions throughout the country. The companies can be found online at http://www.bankofamerica.com and http://www.countrywide.com.

Lexington Realty Trust, New York, has priced an offering of 3 million shares of its common shares of beneficial interest at $14 per share. The real estate investment trust said it expects to use the net proceeds of approximately $41 million to repurchase some of its outstanding debt securities. The underwriters -- Wachovia Securities and Keefe, Bruyette & Woods -- have been given an option to buy up to 450,000 additional shares to cover any overallotments. The industrial and retail REIT can be found online at http://www.lxp.com.

TierOne Corp., Lincoln, Neb., has announced the sale by TierOne Bank of a $63.8 million portfolio consisting primarily of delinquent residential construction loans in Florida. The more than 300 loans in the portfolio were originated primarily by TransLand Financial Services, a Florida-based mortgage brokerage, and chiefly involve single-family properties in the Cape Coral area of southwest Florida. TierOne said it does not expect to take "any material additional charge" as a result of the sale. The bank can be found on the Web at https://www.tieronebank.com.

Moody's Investors Service has downgraded the insurance financial strength ratings of Radian Group's mortgage insurance subsidiaries. Radian Guaranty and Amerin Guaranty were downgraded from Aa3 to A2, and Radian Insurance was downgraded from Aa3 to Baa1. Moody's also downgraded the IFS ratings of Radian Asset Assurance and Radian Asset Assurance Ltd. from Aa3 to A3, and the senior debt rating of the holding company, Radian Group, from A2 to Ba1. The outlook is negative. As a result of the actions, Moody's-rated securities guaranteed by Radian Asset were also downgraded to A3 (except those with higher public underlying ratings), the rating agency said. The actions reflect "the deterioration in Radian's capital adequacy and medium-term profitability prospects, as well as the firm's limited financial flexibility," Moody's said, adding that the performance of Radian's exposures originated before 2008 has eroded capitalization and the exposures "remain vulnerable to further economic deterioration." The downgrade of Radian Asset reflects deterioration in the company's franchise value and the prospect that its capital adequacy may be hurt given the announcement that it will likely cease writing new business and will serve as a potential source of capital for Radian's mortgage insurance platform.

The sales of existing single-family detached homes in California were up 18.1% in May from the level recorded a year earlier, surpassing 400,000 for the first time since early 2007, according to the California Association of Realtors. The seasonally adjusted annualized rate of closed-escrow resales totaled 423,700 in May, up from the revised 358,640-unit rate recorded in May 2007, CAR reported. The median price of an existing single-family detached home in California totaled $384,840 in May, down 35.3% from a revised $594,530 a year earlier, the association said. The statewide price decline was "a record for year-to-year percentage decreases in the median, reflecting the effect of large numbers of short sales and foreclosures in the market," said CAR vice president and chief economist Leslie Appleton-Young. CAR can be found online at http://www.car.org.

A mortgage industry veteran has launched No Paws Left Behind, a nonprofit organization that aims to find solutions for an apparently growing problem involving pets left behind by foreclosed owners. Citing statistics on American households with pets and the number of expected foreclosures, the nonprofit group concluded that more than 1.25 million pets are at risk. Cheryl Lang, the founder of No Paws Left Behind, said her Houston-based collateral protection company, Integrated Mortgage Solutions, has worked with borrowers, lenders, and servicers on loss mitigation and default management for more than five years. "Unfortunately, it is this experience that has brought me face-to-face with abandoned animals and their heart-wrenching stories," she said. The organization can be found online at http://nopawsleftbehind.org/paws.

Post Properties, an Atlanta-based real estate investment trust, has ended a five-month effort to sell the company, citing "an increasingly difficult market environment." The multifamily REIT said all potential bidders have withdrawn from the sale process. "We remain optimistic about the longer-term fundamentals for our business," said David P. Stockert, president and chief executive officer of the REIT. "We intend to actively pursue strategies to enhance shareholder value and to position the company so that the value of its assets, business, and brand is more fully realized." The options under consideration are expected to include asset sales, cost-cutting, and pursuing construction loan financing and joint venture equity to fund development activity, the company said. Post Properties can be found online at http://www.postproperties.com.

Fannie Mae appears to be emphasizing its credit guarantee/securitization business and taking a slow-growth approach when it comes to its mortgage investment portfolio, based on a monthly activity report issued by the giant mortgage company. During the first five months of this year, Fannie has issued $290.8 billion in mortgage-backed securities, according to the May report. (In comparison, Freddie has reported the issuance of $204.1 billion in MBS so far this year.) Meanwhile, Fannie has increased the size of its mortgage portfolio by $15.3 billion to $736.9 billion since March 1, when the Office of Federal Housing Enterprise Oversight removed a cap on its portfolio growth. OFHEO also removed a cap on Freddie's portfolio, but Fannie's competitor increased the size of its portfolio by $70.9 billion, to $770.4 billion, from March 1 to the end of May. The May activity reports show that Fannie had a 1.22% serious delinquency rate on its single-family portfolio and Freddie had a 0.81% rate.

Fannie Mae has tightened its underwriting guidelines to prevent homeowners who are preparing to default on their mortgage from purchasing a more affordable home with Fannie-guaranteed financing. To prevent these "buy-and-bail" schemes, Fannie is requiring the borrowers who are proposing to rent their home to show they have 30% equity in the property, a copy of the lease agreement, and a receipt for the security deposit. Usually buy-and-bail transactions involve borrowers with upside-down mortgages. If they don't have 30% equity, the borrowers must show that they have the resources to service both mortgages and reserves to cover six months of mortgage payments (including insurance and taxes) for both properties. These requirements go into effect Aug. 1. The June 25 seller guide announcement also requires lenders that sell loans seasoned six to 12 months to provide warranties that the original value of the property has not declined. Fannie also updated it policies on how long it takes borrowers involved in bankruptcies and foreclosures to quality for a new mortgage. Fannie Mae can be found online at http://www.fanniemae.com.

The Federal Open Market Committee has left the target federal funds rate unchanged as expected, marking the first time in recent months that it has not decided to cut rates. The FOMC, the monetary policy-making committee of the Federal Reserve Board, said June 25 that it remains concerned about "tight credit conditions, the ongoing housing contraction, and the rise in energy prices," which "are likely to weigh on economic growth over the next few quarters," but it is also concerned about inflation. "In light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high," the committee said. The federal funds rate is the interest rate banks charge each other for overnight loans.