Originations

More than two hundred additional classes of subprime mortgage-backed securities were downgraded by Fitch Ratings on April 28. Fitch also affirmed the ratings on classes with outstanding balances of approximately $9 billion. Among the securities affected by the latest downgrades were: 74 classes from 16 issues by CSFB Home Equity Asset Trust; 35 classes from 11 issues by Countrywide (CWABS); 26 classes from nine issues by Option One Mortgage Loan Trust; 26 classes from 10 issues by Long Beach; 22 classes from six issues by Securitized Asset Backed Receivables; 20 classes from four issues by Finance America Mortgage Loan Trust; and 10 classes from four issues by EquiFirst Mortgage Loan Trust. Fitch can be found online at http://www.fitchratings.com.

AmStar Financial Services Inc., Miami, has announced plans to launch a reverse mortgage warehouse facility to serve small Federal Housing Administration correspondents originating FHA-insured Home Equity Conversion Mortgages. AmStar said it has reached an agreement in principle with Value Financial Mortgage Services whereby AmStar would use Value's platform to provide the infrastructure necessary for the launch. Value will commit up to 50% of its future production to the facility, AmStar said. AmStar can be found on the Web at http://www.amstarweb.net.

Radian Group Inc., Philadelphia, has presented a comprehensive business and financial plan to Fannie Mae and Freddie Mac that is aimed at restoring the profitability of its mortgage insurance business, according to the company. Radian said it presented the plan to officials from both government-sponsored enterprises on April 10, two days after Standard & Poor's Ratings Services lowered its rating on the MI subsidiary, Radian Guaranty Inc., from AA-minus to A. This triggered a requirement that Radian submit a remediation plan to the GSEs. "We have been maintaining a frequent and productive dialog with the GSEs about the market downturn and its impact on our business since last year," said Dave Applegate, president of Radian Guaranty. He said the company presented "detailed plans on the transformation of Radian Guaranty" at the April 10 meetings. The parent company can be found online at http://www.radian.biz.

First Team Real Estate, Irvine, Calif., has announced the launch of a joint venture between Wells Fargo Home Mortgage and Blue Diamond Enterprises LLC, which is owned by the founder of First Team. The venture, Bankers Funding Co., has agreed to originate, process, and fund mortgage loans collaboratively with the Des Moines, Iowa-based Wells Fargo Home Mortgage. "The joint venture will offer customers of Bankers Funding and First Team, as well as other homebuyers, a wide range of home financing products and services through Wells Fargo Home Mortgage, expanding the options of financial services available to homebuyers," First Team said. The company said Bankers Funding's new offerings include private mortgage banking for high-net-worth individuals and a Home Opportunities Program that provides up to 95% financing for public employees.

Greater Atlantic Bank has consented to cease making commercial real estate loans and certain other loans without the written approval of the Office of Thrift Supervision, according to Greater Atlantic Financial Corp., Reston, Va. The parent company said an OTS cease-and-desist order bars the bank from making such loans without the prior written approval of the OTS director for the Southeast region, except for loans governed by a legally binding written commitment as of the April 25 effective date of the order. The C&D order also requires, among other things, that the bank report on negotiations with Summit Financial Group, maintain a Tier One (Core) capital ratio of at least 6% by June 30, and cease accepting brokered deposits, Greater Atlantic Financial said.

The Federal Home Loan Bank of Chicago expects to report a $78 million loss for the first quarter and losses in "subsequent quarters," the bank says, as it takes steps to improve earnings and reduce hedging costs on its $34.5 billion mortgage portfolio. "Although the first-quarter loss is significant, the Bank has retained earnings of $581 million at the end of the first quarter," acting FHLBank president Matthew Feldman said in a letter to members. The Chicago FHLBank warned its members several months ago to expect a loss when it files it first quarter financial report on May 7. In providing the early disclosure, Mr. Feldman also noted that the bank booked an impairment loss of $33 million on $4.5 billion in private-label subprime mortgage-backed securities that had been degraded. Management estimates the "economic loss" on the subprime MBS will be "approximately $1 million." Separately, the Office of Finance released preliminary financial results for the 12 FHLBanks, which shows consolidated earnings of $697 million in the first quarter, up 12.2% from the level of the same quarter in 2007.

Prices of existing single-family homes continued their descent in February, falling to a level that was down 12.7% over the previous 12 months, according to a Standard & Poor's/Case-Shiller housing price index that tracks resales in 20 metropolitan statistical areas. Since its peak in July 2006, the 20-city HPI has fallen 14.8%. "There is no sign of a bottom in the numbers," said S&P economist David Blitzer. The Charlotte, N.C., market is the only MSA in the index still registering an annual increase (1.5%) in house prices. "The monthly data show that every one of the MSAs has now declined every month since September 2007, marking six consecutive months," Mr. Blitzer said. Separately, the Office of Federal Housing Enterprise Oversight reported that house prices are down 3.1% on a seasonally adjusted basis for the 12 months ended in February. However, prices rose 0.6% from January to February. OFHEO collects sales price data from Fannie Mae and Freddie Mac purchase mortgages.

Federal Housing Administration loans have become the fastest-growing product for an alliance of 110 local and regional mortgage bankers, constituting 35% of their loan volume in March, according to Lenders One chief executive president Scott Stern. Back in January 2007, FHA lending represented only 1% of their loan production. "Due to the tremendous growth, we refer to FHA as the 'Loan Product of the Year'," Mr. Stern said. The Lenders One CEO said he believes that FHA production could hit 40% of originations if Congress makes the increase in loan limits permanent and does not raise the FHA downpayment requirement. Alliance members originated $40.4 billion in residential mortgages in 2007, and they are currently originating $3.3 billion to $3.5 billion a month.

House Financial Services Committee Chairman Barney Frank, D-Mass., says it is "entirely possible" that Congress will send President Bush a legislative package by the Fourth of July that is responsive to the current housing crisis, reduces foreclosures, and increases confidence in the secondary-market agencies. The package would include two Federal Housing Administration bills and a GSE bill to strengthen regulation of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, the chairman told a Washington conference sponsored by the Independent Community Bankers of America. On Wednesday, Rep Frank expects to complete a committee mark-up of his FHA bill to refinance struggling homeowners with "underwater" mortgages. (The Senate Banking Committee is scheduled to mark up a government-sponsored enterprise bill on May 6.) The House has already passed a GSE regulatory reform bill. In addition, the House and Senate are close to an agreement on an FHA modernization bill that will make the FHA a safer alternative to subprime loans. "The crisis has generated some pressure" to act, Rep Frank told reporters. "We should have it done in June."

Nearly 650,000 foreclosure filings were reported nationwide in the first quarter, up 23% from those of the previous quarter and 112% from a year earlier, according to RealtyTrac, an online foreclosure marketplace based in Irvine, Calif. The nation's quarterly foreclosure rate was one filing for every 194 households, the company said in its Q1 2008 U.S. Foreclosure Market Report. (Foreclosure filings include default notices, auction sale notices, and bank repossessions.) "Foreclosure activity in the first quarter increased on a year-over-year basis in 46 out of the 50 states and in 90% of the nation's 100 largest metro areas, demonstrating that most regions of the country are seeing more foreclosures," said James J. Saccacio, chief executive officer of RealtyTrac. "In some areas there are also some unusual, nonmarket factors impacting the foreclosure numbers. For example, the city of Philadelphia in late March issued a temporary moratorium on all foreclosure auctions for April, and the city has since adopted a program that will delay foreclosure proceedings on owner-occupied properties until the owners have met face-to-face with lenders to attempt a loan workout plan that would prevent foreclosure." The company can be found online at http://www.realtytrac.com.

Countrywide Financial Corp., Calabasas, Calif., has reported a net loss of $893 million ($1.60 per share) in the first quarter, citing $3 billion of credit-related charges that weighed down results. The credit costs hit both Countrywide's mortgage banking unit, which lost $552 million in the quarter, and its bank, which lost $960 million. Countrywide posted small profits from its capital market and insurance units. The company produced $73 billion of loans in the first quarter, down from $117 billion in the first quarter of 2007. It serviced $1.484 trillion of home loans as of March 31, up from $1.352 trillion a year earlier. The $3 billion of credit-related charges included a $456 million provision for representation and warranty claims, a more than tenfold increase from the reps-and-warranties provision during the first quarter of 2007.

Class M9 of Soundview Home Loan Trust 2004-1 has been downgraded from BBB-minus to BB-plus by Fitch Ratings. Fitch also affirmed the ratings on eight other classes in the deal and six classes in another Soundview transaction. The collateral consists primarily of subprime mortgages.

Fifteen classes from three subprime mortgage-backed securities issued by New Century Home Equity Loan Trust have been downgraded by Fitch Ratings. Fitch also affirmed the ratings on classes with outstanding balances of $501 million.

Twenty-two classes from seven subprime mortgage-backed securities issued by Aegis Mortgage Corp. Asset Backed Securities Trust have been downgraded by Fitch Ratings. Fitch also affirmed the ratings on classes with outstanding balances of $556 million. Fitch can be found online at http://www.fitchratings.com.

Sixty-eight classes in five commercial real estate CDOs from various issuers have been downgraded by Fitch Ratings and removed from Rating Watch Negative. The affected collateralized debt obligations were as follows: 17 classes from ACAS CRE CDO 2007-1 Ltd./LLC; 15 classes from Ansonia CDO 2006-1 Ltd./LLC; 14 classes from JER CRE CDO 2006-2 Ltd./LLC; 12 classes from LNR CDO V series 2007-1 Ltd./LLC; and 10 classes from LNR CDO VI series 2007-2 Ltd./LLC. The deals are backed primarily by B-pieces of commercial mortgage-backed securities, as well as the debt of real estate investment trusts (in the Ansonia deal) and commercial real estate loans (in the JER deal). The rating agency said it believes investment-grade CMBS "will perform well even in a heightened stress environment," but that the risks facing first-loss and junior-rated bonds in CMBS have risen along with expectations of an increase in commercial real estate defaults. Fitch can be found online at http://www.fitchratings.com.

The sales of existing single-family detached homes in California were down 24.5% in March from the level recorded a year earlier, according to the California Association of Realtors. The seasonally adjusted annualized rate of closed-escrow resales totaled 318,830 in March, down from the 422,300-unit rate recorded in March 2007, CAR reported. The median price of an existing single-family detached home in California totaled $413,980 in March, down 29% from a revised $582,930 a year earlier, the association said. "Both tighter underwriting standards and the ongoing effects of the credit/liquidity crunch continue to constrain sales," said CAR vice president and chief economist Leslie Appleton-Young. "Historically, mortgage rates on jumbo loans are 0.2% to 0.4% higher than those on conforming loans, but the spreads in recent weeks have been as large as 2 percentage points, reflecting an increase in the perceived risk associated with these loans." CAR can be found online at http://www.car.org.

Bank of America, Charlotte, N.C., has announced plans to modify or work out at least $40 billion in troubled mortgages over the next two years and to expand its 10-year community development goal to $1.5 trillion. Both goals assume the successful completion of BoA's proposed merger with Countrywide Financial Corp., slated for the third quarter. BoA also said it will locate the companies' combined national mortgage operations under the BoA name in Countrywide's Calabasas, Calif. headquarters. "We believe the financial strength, security, and stability of the combined company will allow us to enable people to buy homes and stay in homes, and to assist many of those affected by the current mortgage troubles," said Liam McGee, BoA's president of global consumer and small business banking, in testimony at a Federal Reserve Board hearing in Los Angeles on the merger. The $1.5 trillion community development goal will focus on affordable housing, economic development, and consumer and small-business lending. BoA can be found on the Web at http://www.bankofamerica.com.

Over 9% of securitized subprime loans were 90 days or more past due in February, 11% were in foreclosure, and over 6% were real estate owned, according to a Friedman Billings Ramsey Investment Management report. Overall the default rate on subprime loans stood at 26.6% in February, up from 25.2% in the previous month. Only 60% of subprime borrowers are current on their loans. The default rate on private-label securitized alternative-A mortgages jumped to 9.3% in February, up 103 basis points from the previous month's level. Of these alt-A mortgages, 3% were 90 days or more past due and 4.35% were in foreclosure. "We continue to expect default rates ... to rise persistently in 2008," said FBRIM managing director Michael Youngblood. Mr. Youngblood said he expects the default rate on securitized subprime loans to hit 30.3% by year's end. (The default rate includes loans 90 days or more past due, in foreclosure, and REO.)

Servicers provided nearly 503,000 loan workouts for homeowners in the first quarter, bringing to nearly 1.4 million the total number of workouts since the Hope Now alliance was created last July. Of the 502,500 prime and subprime loan workouts that servicers provided to homeowners during the first quarter, about 323,000 were repayment plans and 179,500 were loan modifications. The Hope Now alliance said that among subprime mortgage loans, loan modifications accounted for 44% of workouts in the first quarter, double the 2007 rate. Some consumer advocates say that modifications, in which loan terms are changed, are a better long-term solution than repayment plans that attempt to bring a borrower current over a shorter-term period.

The Census Bureau has reported that the inventory of vacant homes listed for sale rose to 2.3 million in first quarter, up 4.6% from that of the previous quarter, and that the homeownership rate was unchanged. Listings of vacant homes rose dramatically in 2006 to 2.1 million, and this overhang on the real estate market continues to exert downward pressure on house prices. Since 2006 it has remained above the 2 million mark, and over the past two quarters there has been an uptick in listings -- probably reflecting bank sales of more foreclosed properties. The Census Bureau report also indicates that the homeownership rate held steady at 67.8% in the first quarter. However, the rate is down from 68.4% in the first quarter of 2007. The homeownership rate for blacks fell from 47.7% in the fourth quarter to 47.1% in the first quarter, while the rate for Hispanics rose from 48.5% to 48.9%.