Originations

FirstPlus Financial Group, Irving, Texas, has announced a $1 million debenture agreement with its subsidiary Rutgers Investment Group to enable Rutgers to expand its mortgage banking operations "more aggressively." Under the agreement, FirstPlus issued to Rutgers 10 million shares of common stock secured by a $1 million subordinate debenture issued by Rutgers. "This infusion permits Rutgers to more aggressively pursue its plans for licensing and expansion as a mortgage banking firm in selected areas of the United States," FirstPlus said. The parent company can be found on the Web at http://www.firstplusgroup.com.

Younan Properties Inc., Los Angeles, has announced the formation of a commercial debt group and opportunity fund to acquire underperforming commercial loans backed by commercial real estate. The company said the new unit, the Younan Financial Group, will invest up to $200 million in underperforming loans and distressed office properties around the country in transactions ranging from $5 million to $50 million. The fund will purchase mispriced mezzanine loans, "B notes," whole loans, and nonperforming first mortgages backed by commercial real estate. "The current instability in the debt markets and the inability of lenders to hold an underperforming loan while the property is stabilized provides an excellent opportunity for our company to acquire debt at discounted prices for key assets in major markets," said Zaya S. Younan, chairman and chief executive of Younan Properties. The company can be found online at http://www.younanproperties.com.

National City Corp., Cleveland, says it is exploring "strategic alternatives," a corporate euphemism for putting the company up for sale. NatCity, which has hired Goldman Sachs as the adviser for the review, said it would make no further statements until its board has approved a specific course of action. Even though NatCity sold the First Franklin subprime originations and servicing platforms to Merrill Lynch at the end of 2006, the company has still suffered in the current credit crisis. According to its 10-K filing, NatCity had $1.0 billion in loans at the end of last year that were not eligible for sale to Fannie Mae or Freddie Mac. "Declining real estate prices and higher interest rates have caused higher delinquencies and losses on certain mortgage loans, particularly second lien mortgages and home equity lines of credit and especially those that have been sourced from brokers that are outside National City's banking footprint," the 10-K says. "These trends could continue. These conditions have resulted in losses, write downs and impairment charges in the mortgage business, especially in the fourth quarter of 2007." NatCity finished 2007 as the nation's 10th-largest servicer, with a portfolio of $187.5 billion, and the 12th-largest originator, with volume of $46.4 billion for the year, according to the Quarterly Data Report. The company can be found on the Web at http://www.nationalcity.com.

UBS AG -- once a major warehouse lender to the subprime industry -- says it will take a $19 billion writedown on its mortgage-related investments in the first quarter, including charges against its structured finance positions. The Swiss bank also announced that its chairman, Marcel Ospel, is stepping down. (On Tuesday morning, the German bank Deutsche Bank announced $4 billion in mortgage-related writedowns.) UBS also said it is forming a new unit "to hold certain currently illiquid U.S. real estate assets." The bank/investment bank said it expects to lose $12 billion in the first quarter. UBS estimated that it has $15 billion in financial exposure to subprime-related assets, compared with $28 billion at the end of December. The bank plans to raise $15 billion in new capital.

Seventy additional classes of subprime mortgage pass-through certificates were downgraded by Fitch Ratings on March 28 as a result of changes to its subprime loss forecasting assumptions. Fitch also placed four classes of subprime pass-throughs on Rating Watch Negative and affirmed the ratings on classes with outstanding balances of approximately $1.6 billion. The securities affected by the latest downgrades were: 30 classes from four issues of Centex Home Equity Loan Trust mortgage pass-throughs; 18 classes from two issues of CSFB Home Equity pass-throughs; 12 classes from one issue of SG Mortgage Securities Trust pass-throughs; nine classes from two issues of Countrywide pass-throughs; and one class from an issue of Aames Mortgage Investment Trust pass-throughs. The rating actions were attributed to changes to Fitch's subprime loss forecasting assumptions that "better capture the deteriorating performance of pools from 2006 and late 2005 with regard to continued poor loan performance and home price weakness."

Delinquencies on mortgages supporting commercial mortgage-backed securities rose slightly to 0.33% in February, largely as a result of higher delinquencies on multifamily loans, according to a Fitch Ratings loan delinquency index. Office properties were the only major property type whose loans had lower delinquencies as of Feb. 29, the rating agency reported. Susan Merrick, a Fitch managing director, said $130 million in newly delinquent multifamily loans "were the major contributor to the slight rise in the delinquency index. Multifamily delinquencies continue to be overrepresented in the index, now comprising 60% of all delinquent loans, though they only represent 14.6% of the Fitch-rated universe." Fitch can be found online at http://www.fitchratings.com.

American Community Properties Trust, St. Charles, Md., has announced that a special committee of its board is exploring the possibility of restructuring the company so that it may elect to be treated as a real estate investment trust. The move was recommended by the family of J. Michael Wilson, the company's chairman and chief executive, in a filing with the Securities and Exchange Commission. The filing indicates that the Wilson family "believes that the company's two distinct lines of business (i.e., its multifamily and commercial rental properties and its community development and homebuilding business) may limit the company's growth potential, and may be deterring potential acquirers and investors," the company said. The Wilson family has proposed to separate the company's development assets from its rental properties and to revamp its capital structure to allow the rental properties to be held in a REIT. The company can be found online at http://www.acptrust.com.

ARE Asset Management, Miami, has launched two offshore investment funds registered in Tortola, British Virgin Islands, with the aim of making income-producing and opportunistic investments in the U.S. residential and commercial real estate credit markets. "Although turbulence due to the repricing of subprime adjustable-rate mortgages may continue, the U.S. real estate market has stabilized somewhat, producing some unique circumstances," said Jeffrey Kirsch, managing principal of ARE. "Given today's prevailing interest rate scenario, a U.S. real estate portfolio based upon accurate appraisals and aggressive loan servicing has the potential to yield above-average returns."

Wallick & Volk Mortgage Bankers, Cheyenne, Wyo., has announced the acquisition of the retail branch network of Citizens Mortgage Corp., Waco, Texas. The terms of the deal were not disclosed. The company said the acquired network consists of four Texas branches, in Dallas, Waco, College Station, and Victoria. Wallick & Volk can be found on the Web at http://www.wvmb.com.

The Federal Deposit Insurance Corp. has sent Fremont General Corp., Brea, Calif., and its subsidiary Fremont General Credit Corp. a supervisory prompt corrective action directive ordering them to recapitalize Fremont Investment & Loan by May 26. The FDIC issued the directive with the concurrence of the California Department of Financial Institutions, which regulates FIL, a chartered industrial loan company. The directive gives FGC three options: the sale of enough shares or obligations of FIL to raise the money to capitalize it adequately; a merger with or acquisition by another insured depository; or the divestiture of FIL by FGC and FGCC. In its statement, FGC noted that it had hired Credit Suisse Securities (USA) LLC and Sandler O'Neill & Partners LP at the end of February to develop and implement strategic options. The FDIC directive says FGC, FGCC, and FIL had failed to comply with the capital maintenance provisions in a cease-and-desist order issued March 7, 2007. FGC did submit a revised capital restoration plan to the FDIC on Nov. 9, 2007, that FIL admitted was obsolete on March 17, 2008.

The Treasury Department is proposing a federal Mortgage Origination Commission that would rate the adequacy of state regulation and licensing of mortgage lenders and brokers as part of a larger plan to restructure the financial regulatory system. Treasury Secretary Henry Paulson said the MOC would provide "important information to the marketplace about the strength of each state's mortgage compliance standards." If a state is rated "weak," mortgages originated in that state "should be viewed cautiously before being securitized," he said. The secretary noted that a large percentage of "problematic" subprime loans were originated by state-licensed lenders. (The Office of Thrift Supervision, which oversees thrifts, would be incorporated into the Office of the Comptroller of the Currency under the Treasury plan.) The "powerful" new commission, coupled with the Federal Reserve's Home Ownership and Equity Protection Act rules to ban abusive lending practices, "should go a long way in preventing recent issues from recurring," he said. The Conference of State Banking Supervisors responded that the Treasury plan "disregards" recent improvements in state licensing standards and reporting systems. In addition, the CSBS supports legislation currently under consideration in Congress that would strengthen the states' initiatives.

More than 100 additional classes of subprime mortgage pass-through certificates were downgraded by Fitch Ratings on March 27 as a result of changes to its subprime loss forecasting assumptions. Fitch also placed 10 classes of subprime pass-throughs on Rating Watch Negative and affirmed the ratings on classes with outstanding balances of more than $1.4 billion. The securities affected by the latest downgrades were: 37 classes from three issues of Aegis mortgage pass-throughs; 21 classes from two issues of GE pass-throughs; 18 classes from two issues of Ace pass-throughs; 10 classes from one issue of Fremont pass-throughs; 10 classes from one issue of Option One Mortgage Loan Trust pass-throughs; and nine classes from one issue of Residential Asset Mortgage Products Trust pass-throughs. The rating actions were attributed to changes to Fitch's subprime loss forecasting assumptions that "better capture the deteriorating performance of pools from 2006 and late 2005 with regard to continued poor loan performance and home price weakness."

Purchases of second homes accounted for 33% of all home sales in 2007, down from 36% the previous year, according to the National Association of Realtors. Sales of vacation homes fell 30.6% to 740,000 in 2007 from a record 1.07 million in 2006. The median price of a vacation home fell 2.5% to $195,000. At the same time, sales of investment properties declined 18.1% to 1.35 million last year. The median price of an investment house was unchanged, at $150,000. NAR chief economist Lawrence Yun said the numbers suggest that the two sectors have undergone different cycles in the past two years. "Investment home sales declined sharply in 2006 as speculators disappeared, leaving the market to serious buyers, with the pattern continuing in 2007," he said. "Vacation home sales rose to a new record in 2006 because there was a pent-up demand from buyers who couldn't find a property as a result of tight supplies in preceding years." The NAR can be found online at http://www.realtor.org.

Radian Guaranty Inc., Philadelphia, the primary mortgage insurance subsidiary of Radian Group Inc., says it will no longer issue policies for stated-income and stated-asset loans. In a message to its customers, Radian said, "while certain forms of alternative documentation used to verify assets and income are appropriate with a disciplined underwriting process, the stated programs will no longer be insurable as a result of poor performance." This change takes effect on April 30. It is in addition to other changes affecting loan-to-value, documentation, and credit score requirements Radian is implementing on March 31. "These changes reflect the current market conditions and a commitment to our business partners and shareholders to write new business that will allow homebuyers appropriate and affordable alternatives," said Dave Applegate, president of Radian Guaranty. "The continued weakness in the housing market and overall economy has created unprecedented challenges for the industry and our clients. .... Accordingly, we have tightened guidelines and increased pricing in areas in which we continue to see deterioration in our risk-adjusted returns." Radian can be found online at http://www.radianmi.com.

Home prices in 28 states showed year-over-year declines in January in the LoanPerformance Home Price Index, according to First American CoreLogic, San Francisco. However, Damien Weldon, the company's vice president of collateral and prepayment analytics, pointed out that on a quarter-over-quarter basis there are now 36 states with decreasing property values. "Regionally, it is notable that the three-month declines in the New York-White Plains, Philadelphia, Seattle, Detroit, and Portland [Ore.] are steeper than the 12-month declines in these areas, whereas in California and Florida this pattern is reversed," Mr. Weldon said. The index incorporates more than 30 years of repeat sales transactions from the company's property database. First American CoreLogic can be found online at http://www.facorelogic.com.

The default rate on securitized subprime loans hit 25.2% in December, up 185 bp from that of the previous month, but defaults on alternative-A loans are also surging, according to a report by Friedman Billings Ramsey Investment Management. Defaults on alt-A mortgages jumped to 8.26% in January, up 106 basis points from the level in December and 250 bps from that of November. Alt-A borrowers have high credit scores, but are generally self-employed and highly leveraged. There are 2.8 million securitized alt-A loans totaling $839 billion, and nearly 20% of the loans are secured by second homes and investment properties. The alt-A world is vulnerable in today's market with falling house prices and deteriorating labor market conditions. "It is really a double-whammy for alt-A," said FBRIM managing director Michael Youngblood. (The default rate includes loans 90 days or more past due, in foreclosure, and real estate owned.) FBRIM is a subsidiary of Friedman Billings Ramsey, which can be found online at http://www.fbr.com.

The Federal Reserve Board is soliciting public input on Bank of America's acquisition of the nation's largest mortgage lender and servicer, Countrywide Financial Corp., and plans to hold two public hearings in April. The hearings are scheduled for April 22 in Chicago and April 28-29 in Los Angeles. In weighing the public benefits of a bank merger, the Fed normally considers competitive issues as well as the institutions' Community Reinvestment Act ratings. Based in Calabasas, Calif., Countrywide originated $408.3 billion in mortgages in 2007, and it serviced $1.48 trillion in mortgages as of Feb. 28.

Housing prices may not bottom out until 2010, if then, according to the deputy chief economist at Freddie Mac. Amy Crews Cutts says she expects prices to fall 11% on a national level, from peak to trough. So far, however, prices have dipped just 1% or so, meaning that "we've got a long way to go," the economist said at the National Association of Hispanic Real Estate Professionals' annual legislative conference in Washington. While some local markets may be doing better already, she stressed that prices nationally could be on a downward slope for 20-24 quarters from their peak in the third quarter of 2005 -- "or longer if the financial markets continue to falter," she told MortgageWire. "We're not even forecasting when prices go back to their '05 level," she added. "We're merely forecasting when the pain stops." However, LaVaughn Henry, director of economic analysis at PMI, Walnut Creek, Calif., said he is "starting to see some evidence" that house prices in some places aren't falling as fast as they have been. "It's not a reversal -- prices are still going down," Mr. Henry told the conference. "But things are not as bad as they were. It's not huge, but it's a change in the right direction." Freddie can be found online at http://www.freddiemac.com, and PMI can be found at http://www.pmigroup.com.

Two classes from ML-CFC commercial mortgage pass-through certificates series 2006-3 have been downgraded by Fitch Ratings, and four have been placed on Rating Watch Negative. Class M was downgraded from B-plus to B, and class N was downgraded from B to B-minus, while class P (rated B-minus) was assigned a distressed recovery rating of DR1. Classes H, J, K, and L were placed on Rating Watch Negative, and the ratings on 16 other classes in the deal were affirmed. The negative rating actions were attributed to expected losses on three specially serviced loans, two involving adjoining multifamily properties in Webster, Texas, and the third involving a multifamily property in Live Oak, Texas

Eight classes from three CBA Commercial Assets small-balance commercial mortgage-backed securities deals have been downgraded by Fitch Ratings. Fitch also affirmed the ratings on 22 classes from four CBA small-balance transactions. The downgrades were attributed to an increase in specially serviced loans and loss expectations. The loans collateralizing the deals range from approximately $50,000 to $3 million, and a "high proportion" of the transactions have forthcoming adjustable-rate mortgage resets, Fitch said. The rating agency can be found on the Web at http;//www.fitchratings.com.