Originations

Meanwhile, Countrywide Financial Corp.'s litigation problems are growing as California and Washington state officials filed separate complaints against the giant mortgage lender for its lending practices. California Attorney General Edmund G. "Jerry" Brown Jr. has sued Countrywide and its chairman Angelo Mozilo and president David Sambol for allegedly using deceptive practices to "push" borrower into complex, risky, and expensive loans they did not understand and could not afford so the company could sell as many loans as possible to Wall Street securitizers at the highest premiums. "The lawsuit seeks relief for California who were ripped off by Countrywide's deceptive scheme," Mr. Brown said. The Washington Department of Financial Institutions has charged Countrywide with allegedly engaging in discriminatory lending and fined the Calabasas, Calif.-based lender $1 million. In addition, the state is seeking to revoke Countrywide's lending license. As previously reported, the Illinois attorney general has sued Countrywide and Mr. Mozilo for allegedly engaging in unfair and deceptive lending practices. Countrywide had no comment on the California complaint, but said, "We continue to be duly authorized to conduct business in Washington and are actively serving homebuyers and existing customers there."

Single-family existing-home sales rose 1.6% in May as buyers took advantage of declining prices in distressed markets and snatched up foreclosed properties, according to the National Association of Realtors. The Realtors reported that sales of previously owned homes rose from a seasonally adjusted annual rate 4.34 million in April to 4.41 million in May. NAR senior economist Paul Bishop said one-third of resales in May involved short sales or sales of bank-owned real estate. He noted that sales have picked up in troubled markets like Battle Creek, Mich.; Sarasota, Fla.; Las Vegas; and Orange County, Riverside, and Sacramento, Calif. The median home price in the West has declined 16% since May 2007. However, sales have softened in stable markets -- such as Portland, Ore.; Seattle; Raleigh, N.C.; and Salt Lake City -- that continue to enjoy solid job growth. Meanwhile, the median price of a single-family home was $296,700 in May, down 6.8% from that of a year ago. The inventory of single-family homes fell slightly in May to a 10.4 month-supply. The NAR can be found online at http://www.realtor.org.

Two classes of J.P. Morgan Chase Commercial Mortgage Securities Corp. series 2005-CIBC13 have been downgraded by Fitch Ratings. Class N was downgraded from B to B-minus, and class P was downgraded from B-minus to CCC/DR1. Fitch affirmed the ratings on 23 other classes in the deal. The downgrades were attributed to projected losses on the seven specially serviced loans. The projected losses are expected to affect the credit enhancement to classes N and P, Fitch said.

Private commercial mortgages recorded a total return of 0.82% for the first quarter, according to the LifeComps Commercial Mortgage Index. Of the total return, income return accounted for 1.58% and price return amounted to negative-0.78%, LifeComps reported. The index had recorded a 3.11% total return for the previous quarter. Office properties topped the ranks in total return for 2007, with 6.70%, compared with 6.62% for industrial properties, 6.51% for apartments, and 6.35% for retail properties, according to the index. LifeComps said its index is "the only published benchmark for the private commercial mortgage market based on actual cash flow data, which has been collected quarterly from participating life insurance companies since 1996." LifeComps can be found on the Web at http://www.lifecomps.com.

The Radian Group Inc., Philadelphia, will be dropped from the S&P MidCap 400 after the close of trading on July 2, according to Standard & Poor's. It will be replaced by Lender Processing Services Inc., Jacksonville, Fla., which is being spun off by Fidelity National Information Services, also of Jacksonville, on July 3. At the close of trading on June 24, Radian had a market capitalization of $165 million, ranking it 400th in the index. S&P is also removing BankUnited Financial Corp., Coral Gables, Fla., from the S&P SmallCap 600 as of the close of trading on June 30. On June 24, BankUnited was 600th in the index in terms of its market cap, at $47 million, S&P said. It will be replaced by media company E.W. Scripps Co. (On July 1, the original E.W. Scripps is slated to spin off Scripps Networks Interactive Inc., which will take its former parent's place in the S&P 500.) S&P can be found online at http://www.standardandpoors.com.

California is usually the bellwether of the housing market, but new home production in the Golden State is expected to drop to the lowest level since accurate counts of statewide totals began in 1954, according to the Construction Industry Research Board. The board is forecasting just 79,000 starts for all of 2008. During the first four months of the year, single-family home production was down 58% from that of the same period last year, with 15,254 units permitted, while multifamily home production fell 24%, with 14,419 permits pulled. Overall, production was off 46%, and start figures for May show the slowdown continuing. Total starts for the month declined 37% from the level recorded a year earlier, CIRB reports. Just 3,531 single-family permits were pulled in the entire state in May. Don't look for the things to pick up in California any time soon, either, according to Alan Nevin, chief economist of the California Building Industry Association. The prospect of a major recovery by the end of the year is looking less and less likely as demand for new construction continues to wane in the face of the foreclosure crisis, Mr. Nevin said. "We see little change in the status of the new residential construction market for the balance of 2008 as homebuilders opt to wait out a return of demand," he said.

The Illinois attorney general has sued Countrywide Financial Corp. and its chairman Angelo Mozilo for engaging in allegedly unfair and deceptive lending practices that placed borrowers into risky subprime and payment-option mortgages they could not afford. "Countrywide used egregious unfair and deceptive lending practices to steer borrowers into loans that were destined to fail," AG Lisa Madigan said. The lawsuit alleges that Countrywide weakened its lending standards and pushed reduced document loans to qualify more borrowers and increase its loan production. "Through the investigation, we have learned the larger story of how Countrywide created and implemented a corporate strategy that resulted in widespread loan failures," Ms. Madigan said. Countrywide, which is being acquired by Bank of America, had not responded to a request for comment by deadline time. The Illinois AG wants the Cook County Circuit Court to order the Calabasas, Calif.-based lender to rescind or restructure all the loans it originated using the allegedly unfair and deceptive practices.

Classes RS-1 through RS-7 of J.P. Morgan Chase series 2007-FL1 commercial mortgage-backed securities have been placed on Rating Watch Negative by Fitch Ratings. The negative rating actions were attributed to deteriorating cash flow in connection with a Resorts International loan secured by three casino/hotel properties in Atlantic City, N.J., and Tunica, Miss. Fitch can be found on the Web at http://www.fitchratings.com.

IRR-Residential, a residential appraisal firm based in Westwood, Kan., has announced the addition of four new affiliates and the appointment of Thomas M. Munizzo as chief appraiser and compliance officer. The new offices are IRR-Residential Krantz Appraisal Firm, which serves six Lake Ozark, Mo. counties; IRR-Residential Value Experts, with two offices servicing the New Orleans and Baton Rouge, La. markets; and IRR-Residential Rayburn Appraisals & Consulting, which serves the Chicago-area market. Mr. Munizzo started his career with a third-generation, family-owned business, Munizzo Appraisal Co., IRR-Residential said. The firm was acquired in 2000 by Real Estate Appraisal Services (a subsidiary of Charter One Financial Services), and Mr. Munizzo joined REAS as regional vice president and chief appraisal manager. The company can be found online at http://www.irr-residential.com.

Radian Guaranty, the Philadelphia-based primary mortgage insurance subsidiary of Radian Group, has introduced enhanced functionality to its MI Online Web-based system for mortgage insurance ordering, servicing, and claims submissions. Designed to streamline the claims process and improve the online experience, the enhancements allow clients to view claims around the clock, review documentation requirements, access a more detailed explanation of benefits, and obtain real-time information on payment status, the company said. The new features include a Claim Status Information section that allows clients to review a snapshot of a claim's details, including processing status, and a Claim Payment Information section that displays three key pieces of data for paid claims (claim payment, date paid, and payee) and a new hyperlink to the main Certificate Inquiry screen. The system can be found online at https://mionline.radianmi.com.

Freddie Mac has announced the renewal of an alliance agreement with the Credit Union National Association. The alliance provides participating credit unions with a comprehensive set of technological services, mortgage products, and correspondent lending, such as Freddie Mac's borrower outreach initiatives, according to the government-sponsored enterprise. "With the current economic climate, this renewed alliance ensures that credit unions will continue to have options to succeed in the mortgage lending market, including affordable lending solutions to meet the needs of low- to moderate-income borrowers," said Wes Millar, senior vice president of CUNA Strategic Services. The alliance provides expanding execution and mortgage product options; customized learning opportunities, such as assistance and training on low-downpayment mortgages; and technological advantages such as Freddie Mac's Loan Prospector automated underwriting service and a business-to-consumer website for online mortgage lending. Freddie can be found online at http://www.freddiemac.com.

The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators have announced that six more states will begin using their Web-based mortgage licensing system on July 1, bringing the total to 14. The new additions to the Nationwide Mortgage Licensing System are Connecticut, Louisiana, Mississippi, North Carolina, New Hampshire, and Vermont. The system is designed to automate and streamline state licensing of mortgage lenders and brokers. The states already using the system are Idaho, Iowa, Kentucky, Massachusetts, Nebraska, New York, Rhode Island, and Washington. More than 5,000 companies and nearly 17,000 loan officers are being managed by the system, the organizations said. "This unprecedented adoption rate is the result of hard work begun several years ago by state regulators as we envisioned a new regulatory framework that would begin to address some of the gaps we experienced in state and federal oversight of the mortgage industry," said Gavin Gee, Idaho's director of finance and chairman of State Regulatory Registry LLC, the CSBS subsidiary that developed and operates the online registry. CSBS can be found online at http://www.csbs.org.

REX & Co., a San Francisco-based real estate investment company, has announced the introduction of its REX Agreement, a real estate equity financing arrangement, in Colorado. The REX Agreement is a real estate equity purchase agreement that gives the homeowner a portion of the home's equity in cash in exchange for granting the company a portion of the future increase or decrease in the home's value, the company said. It offers access to home equity without interest charges or monthly payments. To qualify, homeowners must have a history of financial responsibility, good credit, and at least 25% equity in their home. The REX Agreement is also available in California, Connecticut, Florida, Illinois, Massachusetts, Oregon, and Washington. The company can be found online at http://www.rexagreement.com.

Lendia LLC, a Marlborough, Mass.-based provider of outsourced systems for residential mortgage originators, has announced the acquisition of the company's assets by Virgin Money USA, Waltham, Mass. The terms of the deal were not disclosed. Lendia's chief executive officer, Greg O'Connor, will serve as executive vice president of Virgin Money and continue to run the day-to-day aspects of the Lendia business, the company said. "Joining the Virgin Money family will present us opportunities on many levels, including access to social lending products as well as the capacity and resources to enter new markets and expand our proprietary loan processing capabilities and lending capacity," Mr. O'Connor said. Lendia's business model is built around Comprehensive Outsource Solutions, a back-office system that can scale to meet the needs of any size mortgage originator, Lendia said. Virgin Money can be found online at http://www.virginmoneyus.com.

In his first speech as new president of the National Association of Mortgage Brokers, Marc Savitt declared that mortgage brokers are being unfairly blamed for the mortgage meltdown because the mainstream news media do not understand the issues. Speaking at the group's annual convention in Indianapolis, Mr. Savitt said the mainstream media have failed to talk about the positive things going on in the market. Housing affordability has returned, and people who were priced out of the market can now afford to purchase. Furthermore, interest rates remain low. But consumers "are not getting that message," which he said they need to hear from the mainstream media. Among the goals of Mr. Savitt's presidency will be to improve the image of mortgage brokers. He said he is willing to meet with critics of the industry and educate them about the role mortgage brokers play in the process.

In his final speech as president of the National Association of Mortgage Brokers at the group's annual convention in Indianapolis, George Hanzimanolis told attendees that members have come out of the industry's difficult times "head and shoulders" above the competition. The group has fought for a more level playing field for mortgage brokers and has raised the level of professionalism, Mr. Hanzimanolis said. Members of the group testified 11 times at congressional hearings in the past year and have had an influence, he said, noting changes the NAMB was able to bring about to H.R. 3915. Another triumph cited by Mr. Hanzimanolis is the introduction of the Lending Integrity program. Since the program was unveiled late last year, 1,700 members have qualified and 21 states have met the criteria for program participation. These brokers are being recognized as the cream of the crop, Mr. Hanzimanolis said. The NAMB can be found on the Web at http://www.namb.org.

Federal banking regulators are pressing the Office of Federal Housing Enterprise Oversight to exempt federally regulated institutions from proposed appraisal standards Fannie Mae and Freddie Mac agreed to implement under a settlement with New York Attorney General Andrew Cuomo. The appraisal standards or code would "materially disrupt mortgage lending processes and raise costs," according to a joint letter signed by the Federal Reserve Board, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the National Credit Union Administration. Comptroller of the Currency John Dugan previously urged OFHEO Director James Lockhart to withdraw the appraisal code, which would ban the use of in-house or affiliated appraisers on loans sold to the two government-sponsored enterprises. "If not withdrawn, the agreements and code should be revised to exempt federally regulated lenders," the June 19 letter says. Meanwhile, the Senate is likely to vote on an amendment to a major housing bill this week that directs OFHEO to issue regulations that establish appraisal standards for Fannie and Freddie. The appraisal amendment by Sen. Elizabeth Dole, R-N.C., would nullify the appraisal code the GSEs worked out with the New York AG. Senate Banking Committee Chairman Christopher J. Dodd, D- Conn., opposes the Dole amendment.

Six classes of notes issued by Bonifacius Ltd. and Bonifacius LLC, which together constitute a collateralized debt obligation consisting partly of subprime mortgage-backed securities, have been downgraded by Fitch Ratings. The downgrades were as follows: classes A-1M and A-1Q, from BBB to CC/DR4; class A-1J, from BB to C/DR6; class A-2, from B-minus to C/DR6; class A-3, from CCC to C/DR6; and class A-4, from CC to C/DR6. Fitch also assigned Distressed Recovery ratings of DR6 to classes B, C, and D. The downgrades were attributed to "significant collateral deterioration" in the portfolio, especially subprime residential MBS, alternative-A RMBS, and structured finance CDOs with exposure to subprime RMBS. Fitch can be found on the Web at http://www.fitchratings.com.

Paradigm Default Services LLC, Denver, has announced the introduction of third-party servicing of real estate owned designed to serve clients and investors "awash in a sea of subprime foreclosures." The company said it is creating a special default servicing unit that will provide "cradle-to-grave, hands-on" servicing, taking loans from their initial default to reperformance or liquidation. Paradigm said it acts as a third-party facilitator between lenders and real estate brokers around the nation to ensure that the details of local asset management -- taking possession of foreclosed property, readying it for sale, marketing it, and closing the sale -- are "capably discharged without liability." The company can be found on the Web at http://www.paradigmdefaultservices.com.

The Federal Bureau of Investigation is undertaking 19 subprime-related corporate fraud investigations, according to FBI Director Robert Mueller. "The majority of these corporate fraud investigations address accounting fraud, insider trading, and the failure to disclose the proper evaluations of the securitized loans or derivatives," Mr. Mueller said at a news conference. "In many of these investigations, we are working with the Securities and Exchange Commission and the Department of Justice to determine the criminal intent of these identified violations." The FBI director added that targets are "relatively large corporations." He declined to comment on when the first indictments would be issued in the cases.