Originations

Commercial and multifamily mortgage delinquencies ended 2007 at or near record lows for most major investor groups, according to the Mortgage Bankers Association. In its first such analysis, the MBA looked at commercial/MF delinquency rates since 1996 and compared year-end rates for the five largest investor groups: commercial banks and thrifts, commercial mortgage-backed securities, life insurance companies, Fannie Mae, and Freddie Mac. For CMBS, delinquency rates were lower than those at the end of nine of the previous 10 years; for Fannie and Freddie they were equal to or lower than in 10 of the previous 11 years; and for life companies they were lower than in the previous 11 years. For banks and thrifts, they were lower than in five of the previous 11 years, the MBA reported. "While the numbers aren't comparable across different investor groups, within each group they show a common theme -- for nearly every investor group, commercial/multifamily loans are currently performing at some of the strongest levels on record," said Jamie Woodwell, MBA's senior director of commercial/multifamily research. The MBA can be found online at http://www.mortgagebankers.org.

Payment Reporting Builds Credit, a national credit bureau based in Annapolis, Md., and the National Credit Reporting Association have released new protocols for manually verifying credit applicants' identity and bill payment accounts and histories. The new procedures include safeguards to prevent conflicts of interest and to audit members' compliance, the organizations said. PBRC said only trade line histories that have been manually verified using the new procedures will be incorporated in PRBC's credit data repository and its credit reports. "For some time, mortgage and some auto lenders have considered rent and utility payment histories to assess creditworthiness and price loans when borrowers lacked traditional credit histories," said Michael Nathans, PRBC's founder. "But the collection and verification of such trade line data has been inconsistent, un-monitored, and un-scored. As a result, we have been told by secondary-market investors and mortgage insurers that the repayment performance of loans approved using this data has varied widely from lender to lender and that data quality is the suspected cause." PBRC can be found online at http://www.pbrc.com.

The PMI Group Inc., Walnut Creek, Calif., has again rescheduled the release of its fourth-quarter and year-end financial results because of problems in obtaining final 2007 financial results from FGIC Corp., in which it owns a 42% stake. Originally, PMI had announced March 12 as the rescheduled release date. Now the company says it will issue its financial results before the financial markets open on March 17, followed by a conference call at 11:30 a.m. EDT. PMI also said it plans to complete and file its Form 10-K on March 17. In connection with the preparation of its consolidated financial statements, PMI says it is conducting an analysis to determine whether the value of its investment in FGIC was impaired as of Dec. 31, 2007. The analysis cannot be completed until it receives the final information from FGIC necessary to complete its consolidated financial statements, PMI said. The company previously released preliminary results, which indicated that its U.S. mortgage insurance operations lost $236.0 million in the fourth quarter and $190.8 million for all of 2007.

The Federal Reserve, in conjunction with several other central banks, has announced new measures to promote liquidity in financial markets. Under the new Term Securities Lending Facility, the Fed will lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days (rather than overnight, as in the existing program) by a pledge of other securities, including federal agency debt, agency residential-mortgage-backed securities, and nonagency triple-A rated private-label residential MBS. Securities will be sold via weekly auctions, beginning March 27. In addition, the Federal Open Market Committee has authorized increases in its temporary reciprocal currency arrangements, or swap lines, with the European Central Bank and the Swiss National Bank. The latest actions supplement measures announced March 7 to boost the size of the Fed's Term Auction Facility to $100 billion, among other things. Sen. Christopher J. Dodd, D-Conn., chairman of the Senate Banking Committee, termed the Fed move "a significant step" to address the "liquidity lock-down" in U.S. credit markets, but he called for further steps to address "the foreclosure crisis." He said he is preparing legislation to do so.

If mortgage lenders thought a stronger-than-expected spring homebuying season would help reverse their fortunes, they should think again, according to a new report issued by Morgan Stanley. The report says the housing market is weak in most key markets, including California and Florida. After polling 1,000 Realtors, Morgan is predicting a 19% decline in sales this homebuying season. Morgan analyst Ken Posner writes that his group is "defensively positioned, preferring to avoid or short stocks with mortgage-related credit exposure." He adds that, "Zeroing in on the issue of obtaining mortgages, our Realtors report that down payments are now the biggest stumbling block" to buying a home.

Treasury Secretary Henry Paulson continues to dismiss calls for helping borrowers with "underwater" mortgages through principal reductions that are being advocated by some federal banking regulators. It's not the "government's job" to help borrowers who would walk away from their homes because the properties' values have dropped and they don't want to pay the mortgage, Secretary Paulson told the American Bankers Association. The Treasury secretary played an important role in getting mortgage servicers to join the Hope Now alliance, which is focused on helping struggling homeowners who want to stay in their homes but can't afford their mortgage payment because of a change in their ability to pay or the reset of an adjustable-rate mortgage. He stressed that it is important for the Hope Now servicers to publicly disclose the results of their workout efforts so that everyone can see whether the servicers are following through on the commitments. "I won't look kindly on free riders," Mr. Paulson said. Last week, Federal Reserve Board Chairman Ben S. Bernanke called on lenders to make permanent reductions in the principal amount of a mortgage to help troubled borrowers stay in their homes or refinance into a Federal Housing Administration-insured mortgage.

The class A-1 floating-rate notes of Ballantyne Re PLC, which holds "significant" amounts of subprime residential asset- and mortgage-backed securities, has been downgraded from BB to B-plus and placed on Rating Watch Negative by Fitch Ratings. Fitch also placed the class B-1 subordinated notes and class B-2 subordinated floating-rate notes on Rating Watch Negative. The actions were attributed to "Fitch's heightened concern about subprime and alt-A ABS/RMBS."

Two classes of Credit Suisse First Boston Mortgage Securities Corp. commercial mortgage pass-through certificates, series 2004-C3, have been downgraded by Moody's Investors Service. Class N was downgraded from B2 to Caa1, and class O was downgraded from B3 to Caa2. Moody's also affirmed the ratings on 18 other classes in the deal. The downgrades are due to expected losses of $6.8 million from five specially serviced loans and LTV dispersion, the rating agency said. The certificates are collateralized by 171 mortgage loans ranging in size from less than 1.0% to 9.4% of the pool.

Thirty tranches from five subprime mortgage deals issued by Structured Asset Investment Loan Trust in 2005 have been downgraded by Moody's Investors Service, and eight tranches have been placed under review for possible downgrade. The actions were based on the fact that the number of seriously delinquent loans in the pools continues to grow for all five transactions, Moody's said. "In addition, pending stepdown on some of the transactions may make certain securities more vulnerable to pool deterioration in the future," the rating agency said. The deals are backed by first- and second-lien subprime mortgage loans.

InsideValuation, a real estate valuation company based in Reno, Nev., has announced a partnership with International Financing Engineering Group, Rockville, Md., that has created a ZIP code-level mortgage default projection. The two companies offer combined access to millions of recent loan histories and "a large quantity" of subprime loan default information, according to InsideValuation. "This product presently allows mortgage risk managers to determine the relative safety of loans based on econometric and demographic variables relating to property location, such as median home price, median household income, affordability, unemployment, and rent-versus-price ratios," the company said. InsideValuation can be found online at http://www.insidevaluation.com.

In contrast to the downturn in the single-family residential sector, conditions in the apartment sector remain strong, according to the National Multi Housing Council's latest Market Trends report. The multifamily industry trade association reported that the number of renters in professionally managed apartments increased last year by the largest amount since 2000, and was as large as that of the previous five years combined. "While the so-called shadow rental market (unsold houses and condos that have left the for-sale market to enter the rental market) may attract some apartment renters, thus far the lowest homeownership rate in almost seven years seems to have increased demand for apartment residences, especially professionally managed apartments," said Mark Obrinsky, the association's chief economist. According to the Washington-based NMHC, the number of renters nationwide is projected to rise by nearly four million households over the next 10 years, and half are likely to rent apartments. The council can be found online at http://www.nmhc.org.

Citing a worse mortgage market than expected even two months ago, Standard & Poor's Ratings Services has lowered the long-term counterparty credit ratings of Washington Mutual Inc., Seattle, and Washington Mutual Bank. WaMu's counterparty rating was downgraded from BBB-plus to BBB, and WaMu Bank's was downgraded from A-minus to BBB-plus. S&P also placed all its WaMu ratings on CreditWatch with negative implications. "We now believe that the severity of losses on all residential mortgages will be higher that we had thought and that the weak housing market will now be a longer cycle," said S&P credit analyst Victoria Wagner. S&P said it also has a more negative view of the overall economy, which could "push loan losses and loan delinquencies much higher than we previously factored into the WaMu ratings." Despite the downgrades, S&P said WaMu "has made significant strides at shoring up bank and holding-company liquidity and has substantial liquidity at the holding company to meet all of its fixed-income and dividend obligations through the next few years."

Thornburg Mortgage Inc., a real estate investment trust, will be replaced by Ventas Inc. in the S&P U.S. REIT Composite Index because Thornburg is a mortgage REIT and only equity REITs are currently eligible for addition to the index, according to Standard & Poor's. The replacement will be made after the close of trading March 10. Ventas, based in Louisville, Ky., finances, owns, and leases health-care-related and senior housing facilities. The rating agency can be found online at http://www.standardandpoors.com.

Mortgage brokerage firms cut 4,100 employees in January, while employment at mortgage banking companies appeared to stabilize, according to a government jobs report. The U.S. Bureau of Labor Statistics reported that 3,900 full-time employees in the mortgage banker/broker sector lost their jobs in January. Total employment in the sector fell from 368,800 in December to 364,900 in January. Over the past 12 months, mortgage bankers have cut their payrolls by 25% and eliminated 86,700 jobs, while 23,900, or 17%, of the brokers counted by the BLS have lost their jobs or left the sector. But the recent uptick in refinancings along with rising defaults and workout cases that are straining servicing departments must have forced mortgage banking companies to stop cutting, at least for now. They added 200 workers to their payroll in January. Friday's job report also shows that the troubled homebuilding industry has lost 346,000 jobs since September 2006. Homebuilders laid off 14,400 employees in February, and residential specialty trade contracts cut another 16,300 employees. (There is a one-month lag in the BLS's reporting of jobs data on the mortgage industry.) The BLS can be found online at http://stats.bls.gov.

Class G of JP Morgan Chase Commercial Securities Corp. series 2001-A has been removed from Rating Watch Negative by Fitch Ratings. Fitch also affirmed the ratings on seven other classes in the transaction. The removal of class G from Rating Watch was attributed to "the pending modification of the largest loan in the transaction," which had been transferred to special servicing due to a maturity default. The borrower is negotiating with the special servicer on a loan extension, Fitch reported. A majority of the collateral (54.8%) consists of retail properties, and 9.8% consists of health care properties, the rating agency said.

More than 50 additional classes of subprime mortgage pass-through certificates were downgraded by Fitch Ratings on March 5 as a result of changes to its subprime loss forecasting assumptions. Fitch also placed 18 classes of subprime pass-throughs on Rating Watch Negative and affirmed the ratings on classes with outstanding balances of more than $200 million. The securities affected by the latest downgrades were 54 classes from four Soundview Home Loan Trust deals. Fitch also placed the following securities on Rating Watch Negative: 12 classes from one Bear Stearns Asset Backed Securities Trust deal and six classes from one Soundview Home Loan Trust deal. 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." Fitch can be found on the Web at http://www.fitchratings.com.

Health Care REIT Inc., a Toledo, Ohio-based real estate investment trust, has priced an offering of 3 million shares of common stock at $41.44 per share. The REIT said it plans to use the net proceeds to invest in additional health care and senior-housing properties. The underwriters have been given an option to buy up to 450,000 additional shares to cover any overallotments. Deutsche Bank Securities and UBS Investment Bank are the joint book-running managers for the offering. The company can be found online at http://www.hcreit.com.

National City Corp., Cleveland, has been tagged the "Bear of the Day" for March 6 by Zacks Equity Research, Chicago. Zacks said National City's fourth-quarter loss and full-year earnings were "substantially worse than the estimates," chiefly due to higher loss provisions and mark-to-market losses on mortgage loans held for sale. "Though NCC has taken several initiatives to restructure its mortgage operations, we continue to see elevated risks in NCC's mortgage and residential development loan portfolio and expect higher losses in the coming quarters," Zacks said. "We are maintaining our Sell rating and our six-month target price of $14 per share for NCC." The research firm can be found online at http://www.zacks.com.

Lower interest rates prompted an increase in refinancings even as residential loan demand "remained sluggish or declined" during January and February, according to the Federal Reserve's Beige Book. The periodic survey of economic activity in the 12 Federal Reserve districts reported that home sales "were low in every district with very few local exceptions." Inventories of unsold homes remain "high," and "districts that reported home prices all saw overall declines." Meanwhile, markets for office and retail space "showed signs of a slowdown" in several districts. "Office vacancies were reported up and leasing volumes down in Manhattan, Baltimore, Washington D.C., Memphis, portions of Maine and Rhode Island, and Las Vegas," the Beige Book says.

The overall home mortgage delinquency rate jumped to 5.82% in the fourth quarter, the highest level since 1985, according to the national delinquency survey of the Mortgage Bankers Association. When the foreclosure inventory is added to the delinquency rate, nearly 8% of all homeowners with a mortgage were not making payments in the fourth quarter. Foreclosures reached the highest level in the history of the MBA survey, with the inventory of loans in the foreclosure process rising to 2.04% and 0.83% of loans entering the foreclosure process during the fourth quarter. In a conference call with reporters, MBA chief economist Doug Duncan noted that adjustable-rate mortgages to subprime borrowers accounted for 42% of the loans entering foreclosure during the fourth quarter, though subprime ARMs only account for 7% of loans outstanding. "Roughly a third of subprime adjustable-rate loans are late on their payments," Mr. Duncan said. The MBA can be found online at http://www.mortgagebankers.org.