Originations

The Eleventh Federal Home Loan District Cost of Funds Index stood at 3.111% for April, down 17 basis points from the level recorded for March. The decline represents the fifth consecutive monthly decrease of more than 10 basis points by COFI, which is a weighted-average calculation performed by the Federal Home Loan Bank of San Francisco. Since hitting its latest peak in September 2007, COFI has declined 127 bps. The index stands at its lowest point since November 2005, but still has a way to go to reach its all-time low. That took place in May 2004, when the index stood at 1.708%. COFI is computed from the actual interest expense reported for a given month by the Arizona, California, and Nevada savings institution members of the FHLBank-SF. According to the bank, the average funds used to calculate COFI totaled $407.4 billion in April (of which $239.1 billion came from deposits), while the total interest expense was $1.06 billion.

Federal Reserve Board Chairman Ben S. Bernanke says he expects economic conditions to improve in the second half of this year, but that the housing market will continue to be a problem. "Until the housing market -- and particularly house prices -- shows clearer signs of stabilization, growth risk will remain to the downside," the Fed chief told an international monetary conference in Barcelona, Spain. The precipitous decline of residential construction over the past two years should be less of a drag on the economy, he said. In addition, Fed officials expect that the monetary and fiscal stimulus already in the pipeline, along with further progress in the repair of the financial and credit markets, will help the economy. "This baseline forecast is consistent with our recently released projections, which also see growth picking up in 2009," Mr. Bernanke said.

Thornburg Mortgage Inc., a troubled real estate investment trust based in Santa Fe, N.M., has announced that it needs more time to file its first-quarter earnings report with the Securities and Exchange Commission and estimated that it will do so by June 12. The company previously estimated that it would file the report by June 2. To finalize its Form 10-Q, the company said it must, among other things, complete its valuation analysis and the accounting for a March 31 senior subordinated secured note transaction. (Thornburg completed a $1.35 billion private placement at that time after announcing that it had to raise nearly $1 billion in capital to keep in place a key 364-day agreement with certain counterparties involved in potentially "material" margin calls it had been facing.) The company has also announced receipt of a letter from the New York Stock Exchange stating that the company is not in compliance with the NYSE's continued-listing criteria because the average closing price of its common stock has been less than $1 for 30 consecutive trading days. Thornburg said it intends to cure the deficiency by implementing a reverse stock split. It can be found online at http://www.thornburgmortgage.com.

Commercial and multifamily loan originations plummeted 53% in the first quarter on a year-over-year basis, according to the Mortgage Bankers Association. The MBA said its Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations found year-over-year declines across all property types and most investor groups. "Three trends jump out from this quarter's figures: the impact of the credit crunch; a return from the extraordinary record origination volumes of 2005, 2006 and 2007; and strong variation between different investor groups," said Jamie Woodwell, the MBA's senior director of commercial/multifamily research. "First-quarter originations for the CMBS market were at their lowest since the survey began in 2001, originations for life companies and for banks and thrifts fell to levels last seen in 2004, and originations for the government-sponsored enterprises Fannie Mae and Freddie Mac hit record highs for a first-quarter." The MBA said the year-over-year origination swoon included the following declines by property type: office, 75%; hotel, 60%; retail, 53%; industrial, 37%; multifamily, 27%; and health care, 15%. Among investor types, year-over-year declines were recorded for conduits for commercial mortgage-backed securities, 96%; commercial banks, 28%; and life insurance companies, 25%. However, the dollar volume of loans for GSEs rose 62%.

Early delinquencies on securitized subprime loans declined slightly in March for the first time in years, but the percentage of B&C loans 90 days or more past due rose nearly 30 basis points to 9.67%, according to a Friedman Billings Ramsey Investment Management report. In addition, loans in foreclosure jumped nearly 50 bps to 11.47%, the report says. FBRIM managing director Michael Youngblood says loss mitigation efforts and economic stimulus checks, along with seasonal factors, will provide a "temporary respite" from sharply rising 30-day and 60-day delinquencies this summer. However, the research director says he expects defaults to accelerate in September and the fourth quarter due to deteriorating labor market conditions and weak housing markets. The 30-day delinquency rate on securitized alternative-A mortgages fell back 13 bps to 3.97% in March, according to FBRIM. But the 60-day delinquency rate rose 13 bps to 2.2% and loans 90 days or more past due rose 35 bps to 3.36%. Alt-A mortgages in foreclosure rose 42 bps to 4.77%. FBRIM is a subsidiary of Friedman Billings Ramsey, which can be found online at http://www.fbr.com.

The number of defaults reported for April by the Mortgage Insurance Companies of America totaled 73,880, compared with 58,131 in March, causing the cure/default ratio to drop from 87.0% to 53.6%. Cures totaled 39,584 in April. MICA officials said the increase in defaults results from an unnamed major lender's change in how it records delinquencies and is a one-time event. The April default statistic includes both newly reported defaults as well as previously unreported defaults for the lender. "Overall, the market is returning to fundamentals," said MICA executive vice president Suzanne C. Hutchinson. "The year-over-year increase of 11.7% in [traditional] new insurance written reflects that return to quality in the marketplace." The dollar volume of primary new insurance written fell from $20.5 billion in March to $19.8 billion in April. The traditional category accounted for $19.4 billion of the total, compared with $20.3 billion in March and $17.4 billion in April 2007. Application volume totaled just 128,243, the lowest since February 2007, when it stood at 123,059.

Meanwhile, the latest LoanPerformance Home Price Index reports that home prices in 42 states showed a three-month decrease in March and that 90% of the statistical areas studied had inflation-adjusted price declines. Los Angeles-Long Beach-Glendale topped the index's list of statistical areas experiencing three-month home price declines, recording a 7.41% decrease. Cleveland-Elyria-Mentor ranked second with a 7.38% decline, and Oakland-Fremont-Hayward (Calif.) finished third at 7.33%. "Two-thirds of all states now show year-over-year real estate declines, according to this latest LoanPerformance HPI release," said Mark Fleming, chief economist of First American CoreLogic, the Santa Ana, Calif.-based company that compiles the index. "Although only one-third of [Core-Based Statistical Areas] are depreciating on a nominal basis, on an inflation-adjusted basis 90% of CBSAs are experiencing real price declines." The LoanPerformance HPI provides monthly home price indices and median sales prices covering 7,523 ZIP codes and 670 counties in all 50 states and the District of Columbia, the company said. First American CoreLogic can be found online at http://www.facorelogic.com.

Global Insight, an economic forecasting and analysis firm, has reported that home values fell in 84% of the nation's housing markets during the first quarter. The company said home values declined nationally for the third consecutive quarter, dropping at a 6.7% annualized rate. Of the 330 markets covered by Global Insight's housing analysis, 262 saw values decline in the first quarter. Markets in California, Florida, and Michigan saw the steepest losses in the analysis. The company said a slowdown in the sale of expensive homes, the sale of a large number of foreclosed homes at a discount, and tighter mortgage underwriting standards have all contributed to the national price decline. On the bright side, Global Insight's James Diffley, a group managing director, said that fewer markets are now overvalued. "The large price adjustments we have seen are precisely what was required before we could begin to talk of recovery," he said. The company can be found online at http://www.globalinsight.com.

Citing "feedback" from shareholders, Seattle-based Washington Mutual Inc. has announced that it will separate the roles of chairman and chief executive officer, elevating independent director Stephen E. Frank to the post of board chair long held by Kerry Killinger. Mr. Killinger will remain as chief executive officer and will serve as a director of the troubled thrift. The board also adopted a majority-voting standard and made several changes to the composition and leadership of certain committees, including the appointments of retired Starbucks CEO Orin C. Smith to chair its finance committee and Dallas Mayor Thomas C. Leppert to head its governance panel. "The actions today by the board are a result of a deliberate review of how best to enhance WaMu's corporate governance policies and practices," said Mr. Frank, 66, who has served on the WaMu board since 1997. "They also reflect the board's commitment to listening to feedback from our shareholders." In February, CtW Investment Group warned that certain directors of WaMu and other top financial institutions might face an election challenge if they did not provide a satisfactory explanation of what they did to protect shareholders from "excessive mortgage-related risk" in the past two years. WaMu can be found on the Web at http://www.wamu.com.

Ken Thompson, who was removed from his position as Wachovia Corp.'s chairman in May, is now out as chief executive of the corporation as well. Lanty Smith, who replaced Mr. Thompson as chairman and will now be the interim chief executive officer as well, said in a statement that "no single precipitating event" caused the decision, but that "a series of previously disclosed disappointments and setbacks" have hurt the company and its performance. In the first quarter, Wachovia lost $350 million. A good deal of its problems stemmed from its May 2006 purchase of Golden West, a thrift holding company known for originating payment-option adjustable-rate mortgage loans. Wachovia boosted its provision for credit losses to $2.8 billion in the fourth quarter, citing more severe deterioration in the housing market than had been anticipated, particularly in California and Florida. Investors reacted negatively to the news, driving down Wachovia's common stock price by $0.90 per share as of midday June 2 to $22.90 a share. Wachovia's 52-week low, according to Yahoo!, is $23.13. Wachovia, based in Charlotte, N.C., can be found on the Web at http://www.wachovia.com.

The American Securitization Forum has issued a statement in support of Minnesota Governor Tim Pawlenty's veto of the Minnesota Subprime Foreclosure Deferment Act of 2008. "Participants in the mortgage finance market have ample incentives to avoid preventable foreclosures, including where appropriate by modifying mortgage loan terms, and an increasing number of such workouts are taking place," the ASF said. "However, by delaying the foreclosure process and reducing de-faulting borrowers' mortgage obligations by force of law, the legislation would have created a host of unintended consequences that would have ultimately hurt all Minnesotans." These consequences include eroding lender and investor confidence in the stability of contracts in Minnesota, causing lenders to restrict the amount of credit they extend going forward and to charge higher rates to compensate for the increased risk, the ASF said. Investors in mortgage-backed securities suffering losses due to the reduced amount of loan payments and the costs of foreclosure delays would have been likely to stop purchasing MBS, drying up the capital these investments provide to lenders, further reducing the amount of mortgage credit available to current and future homeowners, the organization said.

Looking to bolster its case for Real Estate Settlement Procedure Act reform, the Department of Housing and Urban Development is promoting a study done by the Urban Institute, which said many Americans overpay by thousands of dollars in closing costs when they purchase a home. Susan Woodward, author of the report, "A Study of Closing Costs for FHA Mortgages," looked at 7,500 mortgages originated in May and June 2001 and found significant disparities in closing costs even for borrowers with identical credit scores, loan terms and mortgage amounts. "This report demonstrates once and for all that the process consumers endure when they buy their homes is entirely too confusing," said HUD Deputy Secretary Roy A. Bernardi. "Clearly, we need to open the window and allow consumers to understand the fine print and shop more effectively for the largest purchase of their lives." HUD said its proposed four-page Good Faith Estimate, which is opposed by both the National Association of Mortgage Brokers and the Mortgage Bankers Association, would allow for more disclosure of the key elements of the loan and prevent what it termed "fee creep" at closing. It would also promote comparison shopping, HUD claimed.

CIT Group Inc., New York, said it disagreed with Moody's Investors Service's decision to cut the finance company's senior unsecured rating from "A3" down to "Baa1." Moody's said it made the cut because CIT has had deteriorating performance in its home lending business, leading to difficult operating and funding conditions. Furthermore, Moody's believes that uncertainty over the size of possible losses associated with CIT's mortgage portfolio is "a significant impediment to the firm reestablishing solid footing in the credit markets." A further downgrade is possible as "the mortgage portfolio could continue to limit the company's ability to re-establish its access to the unsecured funding markets, putting further negative pressure on the rating." In response, CIT issued a statement saying it disagreed with the action "in light of the significant progress we have made to strengthen our balance sheet, improve liquidity and position CIT for long-term success and profitability. We have successfully executed on our current strategic funding initiatives, which have included capital raising, asset sales, financings and growth at CIT Bank." These included raising $1.6 billion in new capital; completing financings of $1 billion; selling $2 billion of assets; and underwriting $600 million of loans at CIT Bank.

Even though consumers are being foreclosed on in near-record numbers, customer satisfaction with home-equity lenders is on the rise, according to a new study released by J.D. Power & Associates. On a scale of 1000, overall customer satisfaction totaled 780 this year, compared to 766 in 2007. J.D. Power surveyed consumers about the application/approval process, closing, treatment by loan officers and problem resolution. When it came to customer satisfaction, Bank of America scored the highest nationwide with 811, followed by SunTrust (809) and Wachovia (807). According to survey figures compiled by National Mortgage News, BoA is the largest second-lien lender in the nation. The bank is in the process of buying Countrywide Financial Corp., the nation's largest residential lender. Countrywide ranked 10th in customer satisfaction with a score of 728.

Bill Beckmann, president of CitiMortgage will leave the unit by the end of June, MortgageWire has learned. A spokesman for Citigroup confirmed the departure, noting that, "We're developing a transition plan now." No immediate successor was named. Up until last year Mr. Beckmann managed only Citigroup's 'A' paper business. Like a handful of other large originators, Citigroup merged its nonprime business into its prime unit. Until the end of June Mr. Beckmann will oversee CitiMortgage, which is based in O'Fallon, Mo., Citi Home Equity, and Citi Residential Lending. CRL, though, which includes the old Argent Mortgage subprime wholesale division, is being closed. In a memo, Citigroup said Mr. Beckmann is stepping down "to spend more time with his family."

The average 30-year fixed mortgage rate rose from 5.98% to 6.08% over the seven-day period ended May 29, according to Freddie Mac's Primary Mortgage Market Survey. The average 15-year fixed mortgage rate rose from 5.55% to 5.66%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages increased from 5.61% to 5.62%, and the average rate for one-year Treasury-indexed ARMs fell from 5.24% 5.22%, Freddie Mac reported. Fees and points averaged 0.6 of a point for 30-year fixed-rate mortgages and 0.6 of a point for 15-year fixed-rate mortgages and ARMs. "Mortgage rates drifted up this week over market concerns that the Federal Reserve Board may raise short-term rates later this year," said Frank Nothaft, Freddie Mac's chief economist. "A recent working paper published by the Federal Reserve Bank of Minneapolis suggested that the recent rate cuts run a risk of unhinging long-term market expectations for inflation. Indeed, market inflation expectations increased over the last few weeks and the federal funds futures market now has a 25 basis point rate hike priced in by the end of the year." A year ago, the average 30-year and 15-year fixed mortgage rates were 6.42% and 5.55%, respectively, and the average hybrid and one-year ARM rates were 5.62% and 6.19%, Freddie Mac said.

Standard & Poor's has dropped ratings on two closed-end second-lien, primarily fixed-rate residential mortgage-backed securities transactions to D. The ratings of GSAMP Trust 2006-5, classes A-1 and A-2 of Long Beach Mortgage Loan Trust 2006-A, classes A-1 through A3, were affected. "The downgrades reflect the deterioration of the collateral pools as these transactions have continued to realize monthly net losses at an unprecedented pace," S&P said.

1st Reverse Financial Services LLC has hired former regulator Dennis Thomas to be its new chief financial officer. Mr. Thomas will be responsible for all fiscal matters and reporting activities for 1st Reverse, a subsidiary of Wilmington Savings Fund Society FSB. Previously, Mr. Thomas was director of internal audit for the Federal Home Loan Bank of Chicago where he directed the GSE's staff in a variety of audits, including the Mortgage Partnership Finance, derivatives and hedging strategies. He also served as a regional accountant for the Office of Thrift Supervision.

Mission Capital Advisors, a commercial, residential and consumer loan and asset sale advisor, has brokered the sale of two residential mortgage loan portfolios with a balance of $195 million. The first deal consisted of $157 million of home loans, 73 of which are performing and 437 of which were subperforming or nonperforming first and junior liens. The deal also included 78 real estate-owned assets. The second deal consisted of a $37 million portfolio of 99 performing and 68 subperforming or nonperforming first and second liens. That deal included 105 ARM loans and 62 fixed-rate loans. Joseph Runk Jr., principal of Mission Capital Advisors, said that despite a "constrictive environment," there are still "a significant number of buyers entering the market who are seeking to add to their portfolios."

In an effort to improve liquidity, Impac Mortgage Holdings Inc., a real estate investment trust headquartered in Irvine, Calif., is making an offer to the holders of its Series B and Series C preferred stock to exchange those shares for common stock in the company. If approved and completed, the swap would end Impac's obligation to pay or accrue quarterly dividends on the preferred stock, allowing it to use or preserve the cash for other purposes. Joseph Tomkinson, chairman and chief executive, said, "The possible exchange offer to swap preferred for common stock could have a very positive effect on the liquidity of the company. If successful, not only will it reduce our fixed-dividend expense, it will also strengthen the company's capital structure. Ultimately a successful exchange offering will help management in its attempt to rebuild shareholder value." For 2007, Impac recorded a loss of $2 billion.