Originations

Fannie Mae issued $69.4 billion in mortgage-backed securities in February, up from $49.1 billion in January and $41.7 billion in February of 2007. The mortgage giant's monthly report also indicates that the serious delinquency rate on its conventional single-family portfolio hit 1.06% in February, up 8 basis points from that of the previous month. Fannie executives have been warning investors to expect rising delinquencies and defaults this year. But they also project that tighter underwriting and higher fees will make their MBS business very profitable. The government-sponsored enterprise recently received regulatory approval to expand its investment portfolio again, along with a reduction in its capital requirements. This might stir more investment activity in the coming months. The mortgage portfolio totaled $724 billion in February and has hovered between $710 billion and $730 billion for over a year. Fannie can be found online at http://www.fanniemae.com.

The 12 Federal Home Loan Banks have been given a green light by their regulator to purchase over $100 billion in mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac over the next two years to provide additional liquidity for the MBS market. The Federal Housing Finance Board agreed by notational vote to raise the cap on MBS investments from 300% to 600% of capital as part of the government's effort to help stabilize the housing market. The FHLBanks held $136.4 billion in MBS as of Sept. 30. Fannie and Freddie will be testing the market soon with the issuance of jumbo MBS for the first time. In addition, the Finance Board said the FHLBanks can purchase agency MBS that are secured by subprime and nontraditional mortgages that meet federal regulatory guidance. "Increasing the agency MBS investment authority for the banks is another way in which the FHLBank System can perform its traditional mission," said Finance Board Chairman Ronald Rosenfeld. Fannie's and Freddie's regulator recently relaxed their capital requirements so the two government-sponsored enterprises could expand their investment portfolios and purchase $200 billion in mortgage loans and MBS.

Sales of existing single-family homes rose 2.8% in February as sellers in tough markets finally began coming to terms with falling house prices and accepting lower bids. The National Association of Realtors reported that resales rose from a seasonally adjusted annual rate of 4.35 million in January to 4.47 million in February. The report marks the second monthly increase in resales and provides "another sign that the market is stabilizing," NAR chief economist Lawrence Yun said. Meanwhile, the sales price of previously owned single-family homes has declined 8.7% nationally since February of last year. In its January report, the NAR reported that prices had declined by 5.1% over the previous 12 months. Some markets are seeing healthy gains in housing appreciation, Mr. Yun said. "In other areas, such as Sacramento [Calif.], a rapid price decline has induced buyers to come into the market, and sales are now rising."

Financial stocks led a broad rally on Thursday, and some analysts attributed the gains in part to confidence stemming from recent moves to pump liquidity into the mortgage sector. All 15 mortgage-related stocks tracked by MortgageWire closed higher on Thursday, with six posting double-digit percentage gains. Washington Mutual's shares rose 19%, closing at $11.70. Franklin Bank Corp.'s shares were up 17%, closing at $3.09. Countrywide's shares rose 13%, closing at $5.78. Shares in Fannie Mae and Freddie Mac were up by 12% and 9%, respectively, capping a strong week for the two companies after their regulator eased capital requirements so the firms can finance a larger volume of home loans. Overall, the Dow Jones Industrial Average rose 262 points, or 2.16% on the day, and other major indices rose by similar percentages. Markets are closed on Friday, March 21, in observance of Good Friday.

The Mortgage Bankers Association reports that the commercial and multifamily mortgage market faces limited exposure to refinance risks stemming from the current credit crunch through the release of its Research DataNote. The report notes that relatively few commercial/multifamily mortgages will mature in the next two years. "There's been a general impression that a large volume of commercial/multifamily mortgages are coming due this year and next," said Jamie Woodwell, senior director of commercial/multifamily research at the MBA. "The reality is that 2008 and 2009 will see a relatively small volume of maturing mortgages, with the majority of CMBS loans not maturing until 2015 or later." Capturing data from JPMorgan and Wachovia Capital Markets, the DataNote reports that there are more than $600 billion of outstanding loans in CMBS fixed-rate deals. Of this, only $16 billion is scheduled to mature in 2008 and another $19 billion in 2009. The surge in sales and financing volume during 2005, 2006 and 2007, coupled with the fact that CMBS loans tend to have a 10-year term, mean that the majority of CMBS loans will not mature until 2015 or later -- $98 billion of loans are scheduled to mature in 2015, $128 billion in 2016 and $127 billion in 2017.

Freddie Mac released the results of its Primary Mortgage Market Survey in which the 30-year fixed-rate mortgage averaged 5.87% with an average 0.5 point for the week ending March 20, 2008, down from last week when it averaged 6.13%. Last year at this time, the 30-year FRM averaged 6.16%. The 15-year FRM this week averaged 5.27% with an average 0.5 point, down from last week when it averaged 5.60%. A year ago at this time, the 15-year FRM averaged 5.90%. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.56% this week, with an average 0.9 point, down from last week when they averaged 5.58%. A year ago, the 5-year ARM averaged 5.91%. One-year Treasury-indexed ARMs averaged 5.15% this week with an average 0.8 point, up from last week when it was 5.14%. At this time last year, the one-year ARM averaged 5.40%

Bank of America has a rigid transition process it uses for any of the acquisitions it has done or is doing, said its president for consumer real estate Floyd Robinson. He was asked during a panel session at the Regional Conference of Mortgage Bankers Associations in Atlantic City to provide an update on BoA's acquisition of Countrywide Financial Corp., Calabasas, Calif. The Charlotte, N.C.-based bank is assigning "hundreds" of associates to the transition process. There has been a 30-day look at the practices of both companies, Mr. Robinson said, and one of the items that resonated with him is the disparity in the two companies' respective direct-to-consumer businesses. BoA has done $168 billion in this channel while Countrywide has $113 billion. Much of Countrywide's production comes from the correspondent and wholesale channels, areas that BoA does not do business in, leading Mr. Robinson to point out Countrywide has a very different business model than BoA does. The different approaches and attitudes between the two, he added, could make this one of the most challenging acquisition integrations for BoA. One business the combination will not do is subprime, an area BoA has not been in for several years. The company will not take an inappropriate risk to its reputation, Mr. Robinson said.

A Moody's Investors Service index of commercial real estate prices declined by 0.6% in January and now stands down 2.4% from its peak in October of 2007. Regionally, Moody's said that in the East, apartments and retail continue to outperform national averages. In the South, however, the apartment sector is languishing, pulled down by a weak Florida market. Southern California remained strong in all real estate categories. Moody's said its repeat sales index may actually understate possible declines in CRE values, because "winners" in the market dominate sales activity (buildings with more appreciation and stronger cash flow), while "losers" have difficulty funding transactions to sell properties. Moreover, because CMBS loans can be assumed by new borrowers, existing loans with favorable terms may be bolstering the value of the underlying real estate.

Wolters Kluwer Financial Services has sought to make the closing process for first mortgage and home equity faster with its new Simplified Mortgage tool, which reduces the recordable mortgage document into two smaller, easier to understand pieces. At the MBA Tech Show WKFS pointed out that this application reduces the recordable instrument into a two- to three-page document that contains all information required to create a valid lien and fully compliant recording document based on each state's requirements. The second piece is a non-recordable supplement that outlines a loan's standard covenants between the lender and the borrower. This tool allows for a simpler closing in which less paper is required and a portion of the recordable instrument can be presented to the borrower online before the actual closing for e-signing.

Drawing on his hobby of whitewater rafting, Zach Oppenheimer, senior vice president for the single family business at Fannie Mae, noted that the mortgage industry has been through rough waters before, including the 1983 recession, problems in the Oil Patch States, the Russian debt crisis and the Sept. 11 attacks. But in those cases and others, Fannie Mae played a critical role in pulling the industry through tough times, he told attendees at the Regional Conference of Mortgage Bankers Associations in Atlantic City. He is confident the market will return and the lessons being learned will make the market more resilient. But first, Mr. Oppenheimer said, because things will get worse before they get better, we must "batten down the hatches." Paul Mullings, senior vice president at Freddie Mac, added he doesn't remember a period when the industry was so dependent on Freddie Mac, Fannie Mae and the Federal Housing Administration "to get us out of trouble." Freddie Mac wants standards that bring confidence and stability to the market. "When the markets lock up, our job is to unlock them."

Reflecting on how the mainstream press has treated the mortgage business in the past year, Mortgage Bankers Association chairman Kieran Quinn told attendees at the Regional Conference of Mortgage Bankers Associations in Atlantic City, "I'm convinced there is an endless supply of bad headlines and they are going to run through 2008." He called for a release of the portfolio caps on Fannie Mae and Freddie Mac as well as an expansion of the higher loan limits to all 50 states and not just selected areas. "We're not done" pushing for that to happen, Mr. Quinn said. As for dealing with troubled loans, "I'm almost ready for the second coming of the RTC," he said, but in this case the R would stand for residential. Furthermore, participation would be voluntary. He reiterated MBA's contention that if a bankruptcy "cramdown" bill is enacted, it would drive up the cost of mortgages by 150 basis points, adding there are some lenders who have told him it would be more than that. Noting the close vote that defeated the bill in the U.S. Senate, he warned the issue will be coming back, attached to a bill the industry really wants.

Thornburg Mortgage has entered a 364-day agreement with five of its remaining reverse repurchase counterparties and their affiliates that conditionally reduces margin requirements for financing the company's mortgage securities and suspends the counterparties' right to invoke further margin calls and related rights under their reverse repurchase agreements. The reverse repurchase agreement counterparties and their affiliates who entered the override agreement with Thornburg Mortgage include Bear Stearns Investment Products Inc., Citigroup Global Markets Ltd., Credit Suisse Securities (USA) LLC, Credit Suisse International, Greenwich Capital Markets Inc., Greenwich Capital Derivatives, Royal Bank of Scotland PLC, and UBS Securities LLC. "The continued effectiveness of this agreement is contingent upon a variety of factors that are specified in the agreement, the most urgent of which requires that within seven business days Thornburg Mortgage raise a minimum of net proceeds of $948 million in new capital," the company said.

New York Life Insurance Company has joined the Federal Home Loan Bank of New York as a new member, the FHLBank said. "New York Life is one of the premier financial institutions in the United States, and we are pleased to welcome them as a new member to the Home Loan Bank family of community financial institutions," said FHLB president Alfred DelliBovi. New York Life is a Fortune 100 company founded in 1845 and the largest mutual life insurance company in the U.S. "We are happy to partner with such a strong wholesale lender with over 75 years of service to the financial industry and we look forward to a long and prosperous relationship," said New York Life executive vice resident and chief financial officer Michael Sproule.

Rapid Reporting's DirectCheck product will be providing instant verification of Social Security numbers direct from the Social Security Administration for the first time in the mortgage industry. By adding immediate Social Security number verification to the other real-time components of DirectCheck, the industry now has a stronger, better way to reduce fraud at origination, noted Rapid Reporting at the MBA Technology Show in Dallas. The application's users get instant delivery by just entering the borrower's name, Social Security number and date of birth. This coincides with the SSA's new real-time program to begin in October that will allow for the seamless transfer of data back via an XML Web service interface.

Real estate investment banking firm and commercial mortgage broker Johnson Capital has opened an office in Chicago and named vice president Brendan Hotchkiss to head it. The office will specialize in debt and equity as well as structured finance with a focus on commercial properties. "A contributing factor to Johnson Capital's decision to expand to Chicago was the resilience of the city's commercial real estate market despite the downturn in the credit markets," the company said.

A Standard & Poor's index of commercial real estate prices shows that while prices were still rising for most property types and regions of the country in December, the rate of appreciation was slowing. The national composite annual appreciation rate was 6.7% in December, S&P said. Regionally, price gains were strongest in the Northeast and Pacific Northwest, while property in the Desert Mountain West region posted a small monthly decline in December, though prices remained up on a year-over-year basis. Among different property types nationally, office properties saw the strongest year-over-year appreciation as of December, at 11.8%, while apartments saw the smallest gains, at 3.9%.

Manufactured housing lender Origen Financial Inc., Southfield, Mich., said its auditor, Grant Thornton, has given the company an unqualified opinion, a move which in accounting terminology raises doubt about the real estate investment trust's ability to continue as a going concern. Based on the value of its assets and discussions with third parties regarding strategic alternatives, Origen said it would be able to raise the additional funds it needs on a timely basis. Meanwhile the company has sold unsecuritized loans with a carrying value of $176 million for proceeds of $155 million. Many of the proceeds were used to pay off its warehouse line. Origen's debt is now $46 million under its supplemental advance facility and $15 million under related party notes secured by servicing fees. Origen previously said it is halting all originations for its own portfolio because of the inability to securitize its production.

Single-family housing starts tumbled 6.7% in February after the government revised January starts upward by 15,000 units, which could be a sign that construction activity may be close to stabilizing in the next few months. The U.S. Census Bureau reported that single-family housing starts declined from a seasonally adjusted annual rate of 758,000 in January to 707,000 in February, which is down 40.5% since February 2007. Many economists are predicting that housing starts and home sales could bottom out this summer. "Sales and home construction can fall only so far," said Scott Anderson, a senior economist at Wells Fargo & Co. Meanwhile, many builders are struggling financially. Bank data shows that 4.25% of single-family construction and development loans were 90 or more days overdue in the fourth quarter, nearly double the third quarter rate.

Palm Harbor Homes Inc., Dallas, has extended the warehouse borrowing facility of its full-service lending subsidiary, CountryPlace Mortgage Ltd., until April 30. The facility, with $42.2 million outstanding, was scheduled to expire on March 14. The company said it will stop taking applications for nonconforming chattel loans during the extension period but will continue to originate conforming mortgage loans. Larry H. Keener, chairman and chief executive officer of Palm Harbor, said the extension "reflects directly on the consistent performance" of the company's portfolio. "Because of our careful underwriting and intense servicing, default rates and losses have been significantly lower than those experienced with manufactured home loans securitized in the late '90s, or than those experienced recently in the subprime mortgage industry," he said. The company can be found online at http://www.palmharbor.com.

The PMI Group Inc., Walnut Creek, Calif., had a net loss in the fourth quarter 2007 of $1 billion (-$12.51 per share), compared with net income of $100.5 million ($1.19 per share) for the same period one year ago. Most of the loss can be attributed to PMI's 42% investment in FGIC Corp., New York. FGIC had a $1.89 billion net loss for the fourth quarter, which resulted in a loss of $776.1 million after-tax for PMI. PMI previously reported its U.S. mortgage insurance operations had a net loss of $236 million in the fourth quarter. PMI created a valuation allowance of approximately $168.1 million against a $214.3 million deferred tax asset associated with its investments in FGIC and RAM Re. The deferred tax asset is created upon the recognition of losses from FGIC and RAM Re in excess of its tax basis with respect to the investment in those companies. PMI took a $2.3 million loss on its RAM Re investment for the quarter. FGIC says it is ceasing writing new financial guarantee business for a period of time to preserve capital. It has hired Goldman Sachs to advise it on capital enhancement initiatives.