Originations

President Bush did not single out for criticism a Democratic plan to expand the Federal Housing Administration program in his speech about what should and should not be done in dealing with the housing correction. FHA commissioner Brian Montgomery also avoided commenting on the proposal, which the House and Senate banking committee chairmen are working on to help 1 million distressed borrowers refinance into an FHA loan. The Democratic plan would require the lender/investor to accept severe writedowns in the principal amount of the mortgage. "There are all sorts of options being floated out there," Mr. Montgomery told reporters. "We are exploring some options on our own, and we will have more to say about that in the next few weeks." Lenders are expecting the agency to liberalize its underwriting criteria under the FHA Secure program so more delinquent subprime borrowers can refinance into an FHA loan. Lenders also expect the FHA to issue a mortgagee letter soon that tightens its underwriting criteria on jumbo mortgages.

Federally regulated lenders will file more than 60,000 mortgage-related suspicious activity reports this fiscal year, a federal crime fighter said at last week's Mortgage Bankers Association's National Fraud Issues Conference in Chicago. The Financial Crimes Enforcement Network fielded nearly 15,000 SARs in the first quarter of fiscal `08, according to FBI special agent Scott Broshears. And he expects the flood of filings to continue at the same pace as the year progresses. "We'll get over 60,000" reports from suspicious lenders, the FBI's mortgage fraud coordinator said. In fiscal `07, 46,717 SARs were filed, up from 35,617 in fiscal `06. The FBI is currently working on 1,284 cases. Last fiscal year, the unit worked on 1,210 cases, some of which are still open. According to Mr. Broshears, the investigations cover "approximately $3 billion" in mortgage losses, which is the highest government estimate yet of the impact fraud has had on the lending business.

Twenty-eight classes of subprime mortgage pass-through certificates from three Residential Asset Mortgage Products transactions have been downgraded by Fitch Ratings as a result of changes to its subprime loss forecasting assumptions. Fitch also placed three RAMP classes on Rating Watch Negative and affirmed the ratings on nine other classes. The rating actions were attributed to changes in 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." Fitch can be found on the Web at http://www.fitchratings.com.

First Federal of Lakewood, a thrift based in Lakewood, Ohio, has announced the formation of a residential lending division, First Federal Lending, in connection with the opening of two residential lending offices in Westerville, Ohio, and Solon, Ohio. First Federal said it has also expanded its northeast Ohio-based residential lending staff to 10. "As other lenders exit the market, or pull back, we see opportunities to grow our residential loan business, which is one of our core areas of expertise," said Gary Fix, president, chief executive, and managing officer of First Federal of Lakewood. The thrift can be found online at http://www.ffl.net.

Freddie Mac is seeking public comments until April 30 on the appraisal policies it agreed to implement as part of a settlement with New York Attorney General Andrew Cuomo. Freddie Mac and Fannie Mae are slated to implement the new appraisal code by Jan. 1 under the March 3 settlement with Mr. Cuomo. "To implement the Code with minimum disruption to the market and, as required under the agreement, Freddie Mac is requesting comments on operational and implementation issues, as well as unintended consequences or risks you identify in connection with the requirements of the Code," Freddie said. The agreement bars Freddie and Fannie from purchasing mortgages from lenders that use in-house appraisers or subsidiary appraisal firms. On brokered loans, lenders must certify that the mortgage broker did not select the appraiser. Freddie Mac can be found online at http://www.freddiemac.com.

Origen Financial Inc., a manufactured housing lender structured as a REIT, says reduced pricing in the whole-loan sales market and the inability to securitize loans are forcing it to suspend originating loans for its own account until the markets recover. The Southfield, Mich.-based company added that it would continue to provide its third-party loan origination business. Ronald A. Klein, chief executive, said even though Origen has no direct exposure to subprime mortgage loans, it has "been subjected to margin calls and market value adjustments on our credit facilities despite our continued excellent loan performance. The ongoing uncertainty and credit stress in the housing and capital markets, and the resulting lack of liquidity, have curtailed access to the securitization market. Further securitization financings of our loans have effectively become unavailable to us on a profitable basis." Origen made the announcement in its statement of fourth-quarter results, revealing that it lost $39.1 million ($1.54 per share) for the quarter and $31.8 million ($1.26 per share) for all of 2007.

Standard & Poor's has raised its global estimate for total subprime mortgage-related securities writedowns but has indicated that "the end is in sight." S&P has increased the estimate from $265 billion to $285 billion and said that total writedowns to date "are likely past the halfway mark." A recent estimate for total mortgage writedowns from Wall Street firms and academics, in comparison, was $400 billion. But experts citing that figure said it was "very uncertain."

The Department of Housing and Urban Development has issued its long-awaited RESPA reform proposal, and it is more ambitious than the industry expected or wants to implement during the current market turmoil. Most observers expected HUD to issue a Real Estate Settlement Procedures Act proposal narrowly focused on providing consumers with concise and understandable disclosures of loan terms and settlement costs. However, HUD has "cast a wider net," according to RESPA attorney Phillip Schulman, who says the RESPA proposal is "complicated," "confusing," and "controversial." The RESPA proposal mandates the use of a standardized four-page good faith estimate that discloses loan terms and settlement costs, including the mortgage broker's compensation. HUD also wants the closing agent to read a closing scripting that summarizes important loan terms and highlights differences between the GFE and the HUD-1 settlement sheet. HUD Assistant Secretary Brian Montgomery expects industry opposition, but he told reporters it is "no longer acceptable" for industry to stand in the way of giving consumers clear disclosures. HUD has issued the proposal for a 60-day comment period. Seven major financial services trade groups, including the American Bankers Association and the Mortgage Bankers Association, have asked HUD to extend the comment period to 120 days.

The outlook is stable for U.S. bank and insurance Trust Preferred Securities collateralized debt obligations, but it is negative for real estate investment trust TruPS and REIT TruPS CDOs, according to Moody's Investors Service. In an annual sector review and outlook report, Moody's said problems among REIT TruPS CDOs have largely been limited to the mortgage REIT and homebuilder areas. Some portfolios holding REIT obligations have been directly affected by the subprime crisis, the rating agency said. Meanwhile, most bank and insurance issuers in TruPS CDOs have "minimal exposure" to subprime residential mortgages, Moody's said.

Freddie Mac is telling its lenders that it will start purchasing "conforming jumbos" in May and that jumbo loans originated "retroactive to March 1" will be accepted for delivery. In issuing interim guidance on the new jumbo program, the secondary-market agency laid out the loan-to-value ratios on fixed- and adjustable-rate mortgages and the delivery fees. "For deliveries in the May/June timeframe, we expect to offer 90-day pricing and credit coverage for newly originated conforming jumbos using a guarantor execution," Freddie Mac said. Freddie will allow jumbo borrowers to take out $100,000 in a refinancing, but the GSE is charging a 1.0% fee, with a 50-basis-point fee on no-cash-out refinancings. Fannie Mae is limiting cash-out refinancings to $2,000. Freddie's standard delivery fee for a fixed-rated mortgage is 25 bps, and 75 bps for a jumbo ARM. But a jumbo ARM with an LTV ratio above 80% would have a 1.50% fee.

Fremont General Corp., Brea, Calif., says it is unable to file its 10-K form in time to meet the 15-day extension of its deadline to do so. The added delay is due to a continuing review of Fremont's consolidated financial statements by the company and its auditors, Squar, Milner, Peterson Miranda & Williamson LLP. Because it cannot determine when it will be able to file the 10-K, Fremont said it is postponing its combined 2007 and 2008 annual meeting scheduled for April 16. The cancellation puts Fremont out of compliance with New York Stock Exchange requirements for the 2007 annual meeting, which needed to be held by April 30. Fremont said it will hold the meeting as soon as possible and will communicate further with the NYSE.

Countrywide Financial Corp. funded $26 billion of mortgages in February, up 17% from the level recorded in January, but the company said foreclosures in its servicing portfolio continued to rise. The company's pipeline totaled $48 billion at the end of February, down from $51 billion in January. The company serviced $1.48 trillion of home loans as of Feb. 29. The delinquency rate on the servicing portfolio was 7.44% by dollar volume, down 3 basis points from the rate in January. However, foreclosures stood at 1.64% at the end of February, double the rate of a year earlier and up 16 bps from that of January. Countrywide also announced that it will no longer report monthly operational results and will report data quarterly, "consistent with industry practice." The company can be found online at http://www.countrywide.com.

The long-term Issuer Default Ratings of Countrywide Financial Corp., Calabasas, Calif., and its related subsidiaries have been downgraded from BBB-plus to BBB-minus by Fitch Ratings as a result of deteriorating home equity portfolios. Fitch said the move "in no way reflects doubts" about the prospects for completion of Countrywide's acquisition by Bank of America, and the ratings remain on Rating Watch Positive. Various other IDR, debt, and deposit ratings of Countrywide and its affiliates were also downgraded. "Although CFC had expected credit quality to continue to deteriorate, as observed in significantly higher provisions and chargeoffs taken, indications from rated banks in the past few weeks suggest that home equity delinquency rates are rising at a far more rapid pace than many had anticipated," the rating agency said. Fitch can be found online at http://www.fitchratings.com.

Although Florida remains a hotbed for mortgage fraudsters, the crime is becoming more evenly spread among all states as opposed to being concentrated in just a few, according to the latest report from the Mortgage Asset Research Institute. MARI's 10th period fraud case report also found that while the most common types of fraud continue to involve erroneous employment histories and false income statements, the failure to disclose debts, liens, or judgments is an up-and-coming problem. "The tertiary issue of undisclosed or incorrect debts, liens or judgments increased 50% between 2006 and 2007," the report said. Merle Sharick, MARI's vice president of sales, told the meeting that "perpetrators are devising new and improved ways to beat the system." He also said that fraud for housing by individuals who fudge on their loan applications "is a much bigger deal that we thought it was." The report, which was issued in Chicago at the Mortgage Bankers Association's National Fraud Issues Conference, is based on 2007 data. But it stressed that many instances of fraud in last year's book of business have yet to be unmasked. "It will likely take three to five years to uncover most of the fraud and misrepresentation" in the `07 book, the report said.

The FBI has set mid-June for another "national sweep" in its continuing effort to nab perpetrators of mortgage fraud. The new sweep, which involves law enforcement agencies at the federal, state, and local levels and has been dubbed "Operation Malicious Mortgage," is intended as "an important statement," according to John Arterberry, executive deputy chief in the Justice Department's Fraud Section. "We want to send the message that law enforcement takes mortgage fraud seriously," Mr. Arterberry said at the Mortgage Bankers Association's National Fraud issues Conference in Chicago. The planned sweep will be the FBI's third such effort. The first, in 2004, resulted in charges against 150 alleged criminals. The second was a year later and resulted in charges against 155 people. But this time, Mr. Arterberry said, the goal is to "double the number" of defendants. "We want to send a strong deterrent message," the Justice Department official told the conference. The MBA can be found online at http://www.mortgagebankers.org.

MHI Hospitality Corp., a real estate investment trust based in Williamsburg, Va., has announced that its common stock is now trading on the NASDAQ Stock Market. The stock, which trades under the symbol MDH, will no longer trade on the American Stock Exchange. The lodging REIT can be found online at http://www.mhihospitality.com.

Regency Centers Corp., Jacksonville, Fla., has closed a new $341.5 million credit facility consisting of a term loan of approximately $227.7 million and a revolving credit facility of approximately $113.8 million. The real estate investment trust said the facility includes an option to increase the amount to $400 million. The initial interest rate is 105 basis points over the London interbank offered rate on the term loan, and LIBOR plus 90 bps on the revolving portion. Wells Fargo Bank NA was the sole lead arranger and administrative agent of the facility. The REIT can be found on the Web at http://www.regencycenters.com.

1031 Exchange Options, a real estate investment consultancy based in Walnut Creek, Calif., has changed its name to Inverness Real Estate Investments. The company said the name change reflects its "increased focus on individual investors" seeking to buy institutional-grade real estate. "While much of our past business came from clients seeking investment properties to complete a 1031 exchange, we have seen over the past three years that our broad selection of real estate investment opportunities is drawing increased interest from direct investors," said Cary Losson, founder and president of Inverness. The company can be found online at http://www.invernessrei.com.

Commercial and multifamily mortgage debt outstanding rose to $3.3 trillion at the end of 2007, a 12% increase from the level recorded a year earlier, according to the Mortgage Bankers Association. The Washington-based trade group said that, based on an analysis of Federal Reserve data, commercial and multifamily mortgage debt outstanding increased by $84.6 billion in the fourth quarter alone. Multifamily debt outstanding stood at $831 billion at the end of 2007 after a record increase of $28.2 billion, or 3.5%, in the fourth quarter. "Fourth-quarter increases in the level of mortgage debt outstanding were driven by increases in the holdings of commercial banks and the government-sponsored enterprises Fannie Mae and Freddie Mac," said Jamie Woodwell, the MBA's senior director for commercial/multifamily research. "Both groups took advantage of capital market disruptions and the lack of [commercial mortgage-backed securities] competition to increase their holdings of commercial and multifamily mortgages." Commercial banks continue to hold the largest share of commercial/multifamily mortgages, with almost $1.4 trillion, or 42% of the total.

Five classes of subprime certificates issued by Structured Asset Investment Loan Trust in 2003 have been downgraded by Moody's Investors Service. The downgrades were as follows: series 2003-BC4, class M1, from Aaa to A1, class M2, from Aa2 to Baa1, and class M3, from Aa3 to Baa3; series 2003-BC5, class M1, from Aa1 to A1; and series 2003-BC9, class M1, from Aa2 to A1. "The stepping down has left the deals with thin credit enhancement levels and made them more vulnerable to pool deterioration in the tail end of the deals' lives," Moody's said. The rating agency said all three deals had pool factors below 10% as of February. The transactions are backed by first- and second-lien subprime mortgage loans.