Originations

The National Association of Business Economists says it expects home sales to bottom out this year, but the professional forecasters also see a significant decline in house prices. The 52 NABE respondents said they expect the Office of Federal Housing Enterprise Oversight's house price index to drop 4.8% in 2008 and edge down by 0.3% on 2009. The OFHEO HPI rose 0.8% in 2007 and the home-purchase-only index fell 0.3%. Meanwhile, the forecasters were evenly divided on whether home sales will bottom out in the second, third, or fourth quarter. They also expect a slow recovery in housing, with housing starts rising from 990,000 in 2008 to 1.12 million in 2009. "While our panel anticipates an improvement in credit markets and a bottoming out in housing this year, the forecasters have marked down their estimates of growth for both 2008 and 2009," NABE president Ellen Hughes-Cromwick said. The economists expect gross domestic product to grow at a 2.1% annual rate in the second half of this year and 2.7% in 2009.

The Mortgage Bankers Association has issued a policy paper backing its position that legal/regulatory efforts in the wake of the recent market crisis should make distinctions between mortgage bankers and brokers in four areas. The MBA's position runs counter to the National Association of Mortgage Brokers' longtime assertion that there should be a "level playing field" where legal and regulatory efforts are concerned. David Kittle, the MBA's chairman-elect, indicated during a teleconference Tuesday morning that the association has taken brokers' concerns into account. "Many of our members are brokers," he said. "We just want transparency." The MBA wants brokers to disclose "responsibilities and compensation" and to be "treated legally as agents" if they "claim to be, or act as, borrower agents." The mortgage bankers group also wants a national minimum net worth requirement for brokers, and "appropriate" bonding. The MBA can be found online at http://www.mortgagebankers.org.

BankUnited Financial Corp., Coral Gables, Fla., a major player in the payment-option ARM market, is scaling back its production of these somewhat controversial loans. A spokeswoman confirmed that only the company's private banking customers will be eligible for payment-option adjustable-rate mortgages. Until recently BankUnited was originating option ARMs to all customers, regardless of their income levels. "We always underwrote the loan to the fully indexed rate," said the spokeswoman. "If they qualified at the fully indexed rate, we would make the loan." Option ARMs have stirred controversy because they offer borrowers four different payment options each month, including negative amortization. BankUnited holds $7.4 billion in option ARMs on its balance sheet. The loans account for 69% of its residential loan balances. Private banking customers have higher incomes than average clients.

In an attempt to restructure its debt, Residential Capital Corp. of Minneapolis says it has received "requisite consents" from a certain number of investors that hold $14 billion of its outstanding notes. In a statement released over the weekend, ResCap said the consents have the effect of lifting "restrictive covenants" that are tied to "events of default." At deadline time, a ResCap spokeswoman could not be reached for comment. The company is negotiating a new $3.5 billion two-year credit facility with its parent company. ResCap, the parent of GMAC Mortgage, lost $859 million in the first quarter, compared with a loss of $910 million a year earlier. ResCap is the nation's eighth-largest residential lender and seventh-largest servicer, according to the Quarterly Data Report.

MBIA Inc., Armonk, N.Y., has been designated the "Bear of the Day" for May 19 by Zacks Equity Research, Chicago. The Bear of the Day is a stock expected to underperform the markets over the next three to six months. Noting that MBIA's loss of $3.01 per share in the first quarter was "substantially worse" than the Zacks estimate of $0.30 per share, the research firm said the "bulk of the loss came through the unrealized pretax loss of $3.6 billion on the company's credit derivatives portfolio and [collateralized debt obligations]." Zacks said the entry of Berkshire Hathaway into the bond insurance business will "further intensify competition" and that possible further deterioration in the mortgage markets "should not bode well for results over the next several quarters." Zacks can be found online at http://www.zacks.com, and MBIA can be found at http://www.mbia.com.

National Asset Direct, a purchaser of distressed residential assets and loans, has hired Ray Schalk, Melissa Dant, and Jill Parker, all formerly of Accredited Home Lenders, to senior management positions. Before joining NAD's whole loan trading team, Mr. Schalk sold loans and participated in the securitization of subprime and alternative-A loans for Accredited's capital markets group. He will be responsible for all aspects of loan acquisitions, including maintaining communication with sellers at all levels, monitoring credit and real estate market trends, and managing NAD's pricing model. Ms. Dant, who has been named general counsel, will be responsible for all legal affairs of the entire company and its affiliates. She was formerly associate general counsel at Accredited Home Lenders. Ms. Parker, NAD's director of project management, is responsible for all NAD and iServe (mortgage, real estate, servicing) projects. She previously managed the project office for Accredited Home Lenders.

Commercial Defeasance LLC, Charlotte, N.C., has announced the formation of Custom Hedging Solutions LLC to help real estate companies manage interest rate risk via derivatives such as interest rate swaps, caps, and options. "We have a broad knowledge of derivative products and hedge providers in the market that we can leverage for the benefit of our customers," said Jennifer Imler, managing director of Custom Hedging. Before leading the new hedging team, Ms. Imler traded and marketed derivative products at Wachovia and worked on its commercial mortgage trading desk. Custom Hedging Solutions can be found online at httop://www.customhedgingsolutions.com.

Two classes of Morgan Stanley Capital I Trust commercial mortgage pass-through certificates, series 2006-IQ12, have been downgraded by Fitch Ratings. Class M was downgraded from BB to BB-, and class N was downgraded from BB- to B. Fitch also affirmed the ratings on 23 other classes in the transaction. The downgrades were attributed to loss expectations on three specially serviced loans: two on separate multifamily properties in Memphis and a third on a multifamily property in Chicago.

Single-family housing starts fell 1.7% in April to a level not seen in 17 years as the rapid decline in construction activity appears to be slowing. The U.S. Census Bureau reported that single-family housing starts declined from a seasonally adjusted annual rate of 704,000 in March to 692,000 in April. The bureau revised the March number upward by 24,000 starts. However, single-family starts are down 44% since April 2007 and fell below 700,000 in April for the first time since 1991. Few builders expect market conditions to improve over the next six months, according to a National Association of Home Builders/Wells Fargo survey. "Despite the Federal Reserve's concerted efforts to lower short-term interest rates, free up credit markets and shore up the national economy, the housing market has shown no evidence of improvement thus far. In fact, conditions have continued to deteriorate in recent times," said NAHB chief economist David Seiders.

Realty Income Corp., Escondido, Calif., has replaced its $300 million credit facility with a $355 million facility. The real estate company said the new facility also contains a $100 million "accordion" expansion feature. Wells Fargo Bank NA was the sole lead arranger and administrative agent for the facility.

The Senate Banking Committee is going to try again on Tuesday to mark up and vote on a GSE bill to strengthen regulation of Fannie Mae and Freddie Mac and a foreclosure prevention bill that uses the Federal Housing Administration to refinance struggling homeowners with underwater mortgages. Committee chairman Christopher Dodd, D-Conn., has tentatively scheduled the May 20 markup in hopes of reaching a bipartisan agreement with Sen. Richard Shelby, R-Ala., and producing a legislative package with strong bipartisan support. "Sen. Shelby and I are very close to reaching an agreement on this important piece of legislation, and are working with each other and other members of the committee to resolve the few differences that remain," Sen. Dodd said. To help pay for the foreclosure bill, which is expected to cost $1.7 billion to refinance 500,000 homeowners into FHA-insured loans, committee leaders might tap funds that Fannie and Freddie are supposed to contribute to a new affordable housing trust fund created by the legislation. Sen. Shelby is pushing this idea because he does not want taxpayer funds used to "bail out" speculators and "irresponsible" homebuyers. However, the two government-sponsored enterprises have reported losses for the past three quarters and they are raising capital to shore up their capital. "Sen. Shelby's oft repeated concerns about GSEs having adequate capital seem to have fallen by the wayside in his rush to extract money from Fannie and Freddie to pay for an FHA plan he opposes as a bailout," industry consultant Howard Glaser said.

Hanover Capital Mortgage Holdings lost $23.3 million, or $2.71 per share, in the first quarter, as $21.2 million in declines to the fair value of its subordinate mortgage-backed securities portfolio weighed heavily on results. The company also faced an increase in interest expense under its new repurchase agreement with Ramius Capital Group. As of March 31, seriously delinquent loans in the company's subordinate MBS portfolio totaled 0.83% of collateral balances, up from 0.55% at Dec. 31, 2007. Chairman and CEO John Burchett said the company is continuing efforts to raise capital "sufficient to enable the company to return to profitability and to provide a positive return for our shareholders."

Under pressure from industry groups, Fannie Mae is retreating from its policy of requiring higher downpayments in markets where house prices are declining. Starting June 1 the mortgage giant will begin purchasing 97% LTV loans again in declining markets, provided the loans are processed through Desktop Underwriter, its automated underwriting system. Fannie also said it will accept manually underwritten single-family loans with 95% loan-to-value ratios under its new policy that will equalize downpayment requirements nationwide. "We are able to adopt his new, national downpayment policy requirement, even in markets where home prices are declining, because our new automated underwriting risk assessment model DU Version 7.0 will limit risk-layering and assess each loan more precisely," Fannie senior vice president Marianne Sullivan said. The National Association of Realtors recently complained to Fannie and Freddie Mac that their declining market policies are contributing to price declines and "stigmatizing" entire metropolitan areas as declining markets. By dropping the extra 5% downpayment requirement, Fannie's "new policies will help stabilize the credit markets," said NAR president Dick Gaylord, and "encourage buyers to come back into the housing market." Freddie recently clarified its policy and urged lenders and appraisers to be more vigilant in assessing local market conditions before determining a property is located in a declining market.

Washington Mutual, one of the nation's largest second-lien lenders, has terminated or suspended $6 billion in available home-equity lines of credit. According to a report in the San Francisco Business Times, the thrift will be sending out a notice to affected HELOC borrowers in the next few days. Seattle-based WaMu joins other lenders - including Countrywide Financial Corp., Bank of America and JPMorgan Chase - that have capped out certain HELOC borrowers or terminated unused lines. To date, most of the action has been in area codes suffering from large home price declines where borrowers have lost equity. As Mortgage Wire went to press today, a WaMu spokesman could not be reached for comment. In the fourth quarter, the thrift ranked third among second-lien lenders, according to the Alternative Products Quarterly Data Report.

In a recent item, MortgageWire overstated the mortgage impairment charges for HSBC North America Holdings. According to a spokeswoman for the company, its U.S. subprime division, HSBC Finance Corp., had impairment charges of approximately $2.2 billion in the first quarter, reflecting charges on subprime mortgages, unsecured consumer loans, and automobile notes. The company would not provide a specific impairment figure for subprime mortgages for the quarter. The entire company (HSBC NA) booked total loan impairment charges of $3.2 billion in the quarter, the figure that MortgageWire reported. This figure also includes credit-card-related charges, the spokeswoman said.

Three classes of LBUBS 2005-C7 commercial mortgage pass-through certificates have been downgraded by Fitch Ratings. The downgrades were as follows: class P, from B-plus to B; class Q, from B to B-minus; and class S, from B-minus to CCC. Fitch also affirmed the ratings on 22 classes in the transaction. The downgrades were attributed to projected losses on the three specially serviced loans, which are secured by: a 334-unit multifamily property in Detroit, an 83-unit multifamily property in Cleveland, and an office building in Reading, Pa.

Frederick L. Fellows has announced the establishment of Basalt Capital LLC, a Chicago-based investment management company specializing in commercial real estate debt securities. Basalt currently manages commercial mortgage-backed security investments for a related investment partnership and has launched a $500 million high-yield CMBS-oriented investment fund. Mr. Fellows said a "carefully selected, unlevered CMBS investment can yield better returns than many leveraged equity investments." Mr. Fellows is also the founder of Basalt's predecessor, Cargan Investment Management LLC, and previously worked at Southwest Securities and Nomura Securities International. The company can be found on the Web at http://www.basaltcapital.com.

Kalish & Associates PC, Newnan, Ga., a law firm that supports a variety of real estate and business transactions, has merged with Atlanta-based Morris|Hardwick|Schneider, one of the largest real estate closing law firms in the country. M|H|S managing partner Nat Hardwick said the merger meets a growing demand for the firm to expand its commercial real estate services. "Our merger with Kalish & Associates will increase our capacity to meet this burgeoning need, which is particularly strong south of Atlanta, where Kalish & Associates is based," Mr. Hardwick said. M|H|S can be found on the Web at http://www.closingsource.net.

Standard & Poor's has announced that Under Armour Inc. will replace mortgage lender Indymac Bancorp Inc. in the S&P MidCap 400 after the close of trading on May 15. S&P said Indymac ranked 400th in the index as of May 13, with a market capitalization of approximately $188 million. Indymac is the Pasadena, Calif.-based holding company for IndyMac Bank FSB. S&P can be found online at http://www.standardandpoors.com.

Hersha Hospitality Trust, a Philadelphia-based real estate investment trust, has priced a public offering of 6 million shares of common stock at $9.90 per share. The hotel REIT said the estimated net proceeds of $56.4 million are expected to be used to repay debt. UBS Investment Bank and Raymond James & Associates are the joint book-running managers of the offering. The company said it has granted the underwriters an option to buy up to 900,000 additional shares to cover any overallotments. Hersha can be found on the Web at http://www.hersha.com.