Originations

All but one of the country's strongest single-family home markets are in the nation's heartland, according to the latest quarterly forecast from Veros Real Estate Solutions. While coastal markets like Modesto, Riverside, and San Bernardino, Calif., and Ft. Myers, Fla., continue to show weakness, Wichita, Kan., Raleigh, N.C., Sioux Falls, S.D., Fargo, N.D., and Tulsa, Okla., are doing well. "Not all markets are experiencing drastic reductions in real estate values," said the company, which bases its findings on more than 50 variables. Appreciation rates aren't what they have been in Raleigh, but the North Carolina capital is "hanging on longer than some of the surrounding areas," Veros said. But the central part of the country has so far been "largely unaffected" by the rapid run-up in prices that is now hurting other parts of the country. "This region is moving forward without distress from the depreciation felt elsewhere and is experiencing minor growth," said Veros, a leader in predictive technology.

The PMI Group Inc., Walnut Creek, Calif., has reported that its fourth-quarter and full-year 2007 results cannot be released because of delays in obtaining fourth-quarter financial results from FGIC Corp. The company added that it has completed the financial results for its U.S. mortgage insurance and international operations. PMI is the largest shareholder in FGIC, with a 42% interest. FGIC recently lost its triple-A rating and has proposed splitting off some of its operations. PMI did not disclose when it would be able to release its results. At noon on Feb. 21, PMI's common stock was down $0.23 to $7.69 per share.

LandAmerica Financial Corp., Richmond, Va., has reported a net loss of $45.9 million ($3.01 per share) for the fourth quarter, compared with net income of $34.3 million ($1.95 per share) a year earlier. For the full year, the company lost $54.1 million ($3.31 per share), compared with net income of $98.8 million ($5.61 per share) the year before. LandAmerica took a pretax charge of $41.3 million in the fourth quarter, of which $30.4 million was related to closed offices, $6.4 million to the early extinguishment of debt, and $4.5 million to the impairment of intangible and long-lived assets. "The liquidity crunch in the mortgage credit markets beginning early in the third quarter of the year brought a precipitous 34% decline in residential mortgage originations in fourth-quarter 2007 compared to the same period in 2006," said LandAmerica chairman and chief executive Theodore L. Chandler Jr. "Despite the challenging operating environment, our liquidity remained strong, with cash flows from operations of $30 million for the quarter and $114 million for the year."

Friedman, Billings, Ramsey Group lost $270 million in the fourth quarter and is blaming its performance partly on the bankruptcy of its subprime division, First NLC Financial Services of Florida. For the year, the publicly traded real estate investment trust -- once a major player in the subprime sector -- lost $660 million. On Wednesday, FBRG's affiliate, FBR Capital Markets Corp., posted a $27.8 million loss for the quarter. FBRG is traded on the New York Stock Exchange, FBR Capital on the Nasdaq. (FBRG owns 52% of the affiliate.) In a statement, company president Rock Tonkel said the firm has "eliminated" most of its subprime whole-loan mortgages and on-balance-sheet residuals. Its exposure in this asset category is roughly $30 million. The REIT is putting its available cash into agency-quality mortgage-backed securities. It had $1.1 billion invested in MBS at the end of December.

Eight of the nation's 10 least affordable metropolitan areas -- and 24 of the bottom 30 -- are in California, according to the latest quarterly opportunity index compiled by the National Association of Home Builders and Wells Fargo. Although homes were more affordable in all of California's 28 metro areas in the fourth quarter, the cost of housing remains out of reach for mainstream buyers. Statewide, just 18.1% of all the homes sold in the period were affordable by a median-income family, the index indicates. That's up from 12.6% in the third quarter. But it still leaves the majority of Californians way behind when it comes to buying power. Nationally, in contrast, 46.6% of new and existing homes sold in the fourth quarter were affordable to families earning the national median income. "Despite market corrections that have made some areas in California more affordable, the fact remains that the cost of housing in California is out of reach for the vast majority of hard-working families struggling to buy their first home," said Robert Rivinius, president of the California Building Industry Association. The NAHB can be found online at http://www.nahb.com.

Despite continuing turmoil in the housing and financial markets, a U.S. recession is not imminent, partly because the housing downturn is "nearly over," according to The Conference Board. Housing will likely reduce growth by about 0.4% this year, the board said, but housing affordability is improving and recent interest rate cuts and home price declines should improve it further. Meanwhile, demographic trends favor housing, and the rise in households is outpacing the rise in permits. "All of this adds up to good structural demand for housing if the credit markets and lending institutions can ease the credit flow," the Conference Board said. Despite the weakened U.S. economy, consumer spending is rising at a rate of 2.0%-2.5% a year, and with the exception of the auto industry, the economy is showing gains nearly across the board, the Conference Board said. "While there is continuing uncertainty about the economic outlook, economic shocks from the contracting financial sector are not enough to tip the U.S. economy into recession," said Gail D. Fosler, president and chief economist of the Conference Board. The board can be found online at http://www.conference-board.org.

The Department of Housing and Urban Development expects to issue the new loan limits for Fannie Mae, Freddie Mac, and Federal Housing Administration loans by March 7, sources have told MortgageWire. Congress raised the loan limits as part of the economic stimulus bill that President Bush signed on Feb. 13. And lenders are waiting for HUD to compute the new loan limits, which are based on 125% of median home prices, with a $729,750 cap. In a Feb. 20 conference call with industry groups and lenders, HUD officials indicated that separate lists of the higher-priced metropolitan statistical areas would be issued for FHA mortgages and for Fannie and Freddie mortgages. However, FHA lenders were disappointed that HUD has not decided whether the effective date should be determined by the date the lender receives an FHA case number or the date FHA insures the loan. The stimulus bill raised the FHA floor from $201,060 to $271,050, and lenders could begin making those higher-balance loans right now if HUD chose the date the loan is insured.

Seventy-four additional classes of first-lien subprime mortgage pass-through certificates were downgraded by Fitch Ratings on Feb. 19 as a result of changes to its subprime loss forecasting assumptions. Fitch also affirmed the ratings on classes with outstanding balances of more than $1.4 billion. The securities affected by the latest downgrades were: 44 classes from four Residential Funding Co. Residential Asset Securities Corp. deals; 15 classes from one ResMae deal; and 15 classes from one People's Choice 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 online at http://www.fitchratings.com.

Foreign buyers are likely to replace U.S. investors sidelined by the credit crunch in acquiring commercial assets, especially in so-called gateway markets such as New York, Miami, Chicago, Los Angeles, and other coastal markets, according to Ernst & Young. In its Global Real Estate Market Outlook 2008, the firm identifies trends in global CRE markets and predicts that foreign investors will "step into the vacuum for commercial assets." However, Dale Anne Reiss, global real estate director for Ernst & Young, warned that the overall situation "isn't likely to ease in 2008 and, with the lack of available financing and the specter of recession in the U.S., we expect real estate market conditions both here and abroad to be difficult through this year." Other trends identified by the report include continuing defaults and foreclosures in U.S. housing markets, rising delinquencies and defaults in the commercial sector, growing strength in the market for real estate investment trusts, and rapid growth in investments by sovereign funds on behalf of national governments. The company can be found online at http://www.ey.com.

CB Richard Ellis Group Inc., a Los Angeles-based commercial real estate services company and lender, has become a Fannie Mae Delegated Underwriting and Servicing lender and will be doing this multifamily lending through its capital markets platform. "We have continued to strengthen our fully integrated capital markets platform through a wide range of initiatives, ensuring our clients have every possible resource at their disposal -- essential in today's complex market environment," said Brian Stoffers, president of CBRE capital markets. Ron Halpern, managing director of CBRE's multihousing group, will be responsible for overseeing the production, underwriting, and closing of CBRE loans under the Fannie Mae DUS program, the company said. The DUS initiative has added two other executives -- Don Brais and Kyle Draeger. Mr. Brais will be responsible for the credit quality and investor compliance of Fannie Mae DUS loans, and Mr. Draeger will oversee the marketing and transaction structuring of the loans.

Nine out of 10 adjustable-rate mortgage borrowers chose fixed-rate loans when they refinanced in the fourth quarter, according to Freddie Mac. Of those borrowers who originally had a one-year ARM, 92% chose a fixed-rate mortgage in the second quarter, as did 89% of borrowers who originally had a hybrid ARM, Freddie Mac said in its Refinance Product Transition Report. "The turmoil in the financial markets that started in August and continued through the fourth quarter led most mortgage lending institutions to tighten their underwriting standards, and thus some ARM products were either no longer available or came with more restrictions," said Amy Crews Cutts, Freddie's deputy chief economist. Freddie Mac can be found online at http://www.freddiemac.com.

First Florida Financial Group LLC, Fort Myers, Fla., has launched a program under CashToolBox.com aimed at helping builders and Realtors sell more properties by enabling borrowers to get a mortgage approval through the use of equity in their owned properties, or a relative's. Eddie Hoskins, president and chief executive officer of First Florida, said CashToolBox.com lends 125% LTV Pre-Closing Cash against a property's equity by using Mortgage Approval Tools such as the Credit Score Optimizer, Down Payment Assistance Gifter, Cash Reserves Booster, and Debt-to-Income Reducer. "When they generate needed cash and apply their 'tools' to un-approvable mortgage loan applications, in many cases they're able to get a loan approval and closing that had seemed impossible," Mr. Hoskins said. The company can be found online at http://www.cashtoolbox.com.

Walter Industries Inc., Tampa, Fla., has announced a major restructuring of JWH Holding Co., the company's financing and homebuilding business. Walter Industries said it has closed or will close 36 underperforming Jim Walter Homes sales centers as part of the restructuring, and it is reducing its financing and homebuilding work force by approximately 25%. The closure of the sales centers is expected to significantly improve the company's operational and financial outlook. As a result of the restructuring, the business expects to offset the impact of lower sales volumes with annualized reductions in operating expenses in the range of $26-28 million, with a significant portion recognized in 2008.

Investment banker FBR Capital Markets Corp., which recently threw its subprime division into bankruptcy, lost $27.8 million in the fourth quarter. In a statement, FBR blamed the performance on impairment charges tied to its investment portfolio and merchant banking business as well as severance costs. Last month FBR's First NLC Financial Services unit filed for Chapter 11 bankruptcy protection. At one time, First NLC was a top-20-ranked subprime lender. Between 2002 and 2005, FBR took several subprime mortgage firms public, converting them to a REIT ownership structure.

Stewart Information Systems Corp., Houston, has reported a loss of $31.3 million ($1.74 per share) for the fourth quarter, compared with net earnings of $10.7 million ($0.59 per share) a year earlier. For the full year, Stewart lost $40.2 million ($2.21 per share), compared with net earnings of $43.3 million ($2.36 per share) in 2006. It is the first full-year net loss recorded by Stewart since 1974, the company said. The full-year loss includes a pretax charge of $40.9 million to increase reserves due to large title claims. In the fourth quarter, there were nine large title claims totaling $15 million, and Stewart took an additional adjustment of $5 million relating to incurred but not reported reserves resulting from an increase in the frequency of large title claims. Malcolm S. Morris, chairman and co-chief executive, said Stewart's methodology for estimating its provision for future title losses is basically unchanged. "However, applying that methodology in light of our worse-than-expected claims payment experience related to policies issued in 2004-2006, together with a number of large claims, resulted in an increase in our provision for future losses, as a percentage of title operating revenues, to 8.5% in 2007 from 6.0% in 2006," he said.

Barclays PLC, London, has reported the equivalent of a $3.18 billion mortgage-related writedown and profit to shareholders equal to about $8.58 billion for 2007, the latter down from about $8.87 billion the previous year. "In the second half, we were not immune from the impact of credit market turbulence," the company said, adding that it felt it managed the risk relatively well. Barclays bought EquiFirst, a U.S. subprime originator, early last year and indicated that as of Dec. 31 it still had billions of dollars of U.S. subprime whole loan and net trading book exposure from the subsidiary, consisting primarily of first-lien product with an average 80% loan-to-value ratio.

The Maryland Department of Labor, Licensing and Regulation is examining the servicing practices of Ocwen Loan Servicing, West Palm Beach, Fla., one of the largest subprime servicers in the United States. A spokeswoman for the agency told MortgageWire that "We don't randomly conduct exams," adding that "we saw some flags." She did not elaborate. Ocwen was singled out by Maryland Gov. Martin O'Malley at a news conference on Tuesday. Bill Rinehart, vice president and chief credit officer for the publicly traded Ocwen, said, "We received an examination request in the ordinary course of business. That's as much as we know. If they find something in the exam, we'll address it." Ocwen services $53.5 billion in loans. At year's end, its foreclosure rate was 6.47%, compared with 3.21% a year earlier. Mr. Rinehart noted that less than 1% of Ocwen's foreclosure cures result from "short sales" or "deeds in lieu."

Single-family housing starts fell 5.2% in January as builders continued to retrench, and construction activity has plummeted 38.5% over the past 10 months. The U.S. Census Bureau reported that single-family housing starts declined from a seasonally adjusted annual rate of 784,000 in December to 743,000 in January. The bureau revised December starts downward by 10,000 units. The National Association of Home Builders projects that single-family starts will total 769,000 this year, down from 1.04 million in 2007. The Census Bureau also reported that multifamily starts jumped 17.6% to 247,000 units in January. The Census Bureau, an agency of the Commerce Department, can be found online at http://www.doc.gov.

Urstadt Biddle Properties Inc., Greenwich, Conn., has closed a $50 million, three-year, unsecured revolving credit agreement with The Bank of New York Mellon and Wells Fargo NA. Under the terms of the facility, the real estate investment trust has an option to increase the facility to $100 million and two options to extend it for a year. The facility bears an interest rate, at the REIT's option, of either 85 basis points over the London interbank offered rate or 50 bps over BNY Mellon's prime lending rate.

Standard & Poor's has announced the acquisition of all rights previously owned by MacroMarkets LLC in the S&P/Case-Shiller Home Price Indices. The financial terms of the transaction, which includes the right to license and sublicense the indices for the development of financial products, were not disclosed. The home price indices track the prices of typical single-family homes in 20 metropolitan regions across the United States using the repeat-sales pricing technique pioneered by Karl Case and Robert Shiller, S&P said.