Originations

Forty-two classes totaling $785 million from seven subprime issues of Credit Suisse First Boston Mortgage Securities Corp. mortgage pass-through certificates have been downgraded by Fitch Ratings. In addition, Fitch placed three classes on Rating Watch Negative, removed two classes from Rating Watch Negative, and affirmed the ratings on 21 CSFB classes. The downgrades were based on deterioration in the relationship between credit enhancement and expected losses, Fitch said. The collateral for the transactions consists of second-lien subprime mortgage loans.

Nearly 100 classes -- totaling $2.1 billion -- from nine subprime issues of C-BASS Mortgage Loan Asset-Backed pass-through certificates have been downgraded by Fitch Ratings. In addition, Fitch affirmed the ratings on C-BASS classes totaling $1.8 billion. The downgrades were based on changes to Fitch's subprime loss forecasting assumptions that it says "better capture the deteriorating performance of pools from 2007, 2006, and late 2005 with regard to continued poor loan performance and home price weakness." The collateral for the transactions, all issued in 2006, consists of first-lien subprime mortgage loans. The rating agency can be found on the Web at http://www.fitchratings.com.

The lender processing division of Fidelity National Information Services Inc., which the company plans to spin off in midyear, will be named Lender Processing Services Inc., the Jacksonville, Fla.-based FNIS has announced. Jeff Carbiener, currently executive vice president and chief financial officer of FNIS, will become president and chief executive officer of the new company. George Scanlon, who recently joined FNIS as executive vice president of finance, will assume the role of CFO of FNIS after the spinoff is complete, the company said. FNIS can be found on the Web at http://www.fidelityinfoservices.com.

Worldwide acquisitions of commercial property surpassed the $1 trillion mark in 2007, according to Real Capital Analytics, a New York-based research firm focusing on capital markets for commercial real estate. The "Global Capital Trends" report also found that 114 cities recorded more than $1 billion of commercial property sales, of which 48 were in North America, 35 in Europe, and 21 in Asia. "The size of the commercial property marketplace is much larger than previous estimates," said Robert M. White, founder and president of RCA. "Our research has documented more than $1 trillion of significant property sales in 2007 across 75 countries on five continents. Considering our research only includes sales greater than $10 million, the total size of the marketplace may be closer to $1.5 trillion." The report also indicates that office space was the most active property type, representing 32% of total sales, and that the risk premium for property ranges from 20 to 350 basis points, with the United Kingdom and Hong Kong ranking as the least risky investment locations. RCA can be found online at http://www.rcanalytics.com.

Median house prices in over half the covered metropolitan statistical areas were lower in the fourth quarter than they were a year earlier, according to the National Association of Realtors. The NAR's fourth-quarter metro area home price report indicates that 77 of 150 MSAs experienced price declines in median existing-home prices, while 73 had increases. The NAR also reported that the national median resale price stood at $206,200 in the fourth quarter, down 5.8% from $219,000 a year earlier. "The continuing crunch in the jumbo loan market that began in August has disproportionately reduced the number of transactions in higher price ranges," said NAR chief economist Lawrence Yun. "For buyers who need loans of more than $417,000, mortgage interest rates have been running more than a percentage point higher, and that has been having an obvious impact." The NAR can be found on the Web at http:/www./realtor.org.

Home prices in three quarters of the ZIP codes tracked by the LoanPerformance Home Price Index showed a three-month decline in December, according to The First American Corp. "Of the 7,472 ZIP codes tracked by the LoanPerformance HPI, home prices in 5,691 (76.16%) of these ZIP codes have decreased over the last three months," said Damien Weldon, vice president of collateral and prepayment analytics for the San Francisco-based First American LoanPerformance. "Year over year, however, just 4,028 (53.91%) of the ZIP codes we track indicate decreasing property values." The index incorporates more than 30 years of repeat sales transactions from the property database of its parent company, First American CoreLogic Inc. First American LoanPerformance can be found online at http://www.loanperformance.com.

Triad Guaranty Inc., Winston-Salem, N.C., has reported a net loss of $75.0 million ($5.05 per share) for the fourth quarter, compared with net income of $8.1 million ($0.54 per share) a year earlier. For the year, Triad lost $77.5 million ($5.22 per share), compared with profits of $65.6 million ($4.40 per share) the year before. "The trends we encountered in the third quarter accelerated in the fourth, especially the rise in defaults in locations where home prices are under pressure," said Mark K. Tonnesen, Triad's president and chief executive. "While the total portfolio default counts increased 38% during the quarter, in California and Florida default counts rose a combined 85%." In response, the company tightened its underwriting guidelines in the fourth quarter, which reduced production. As a result, Mr. Tonnesen said Triad "is actively pursuing a plan to manage and enhance its capital resources. .... Capital management dictated our decision during the quarter to withdraw from Canada and contribute this capital to our U.S. insurance subsidiary."

MGIC Investment Corp., Milwaukee, has reported a loss of $1.47 billion ($18.17 per share) for the fourth quarter, compared with net income of $121.5 million ($1.47 per share) a year earlier. Affecting MGIC's results was the establishment of a $1.2 billion (pretax) premium deficiency reserve relating to Wall Street bulk transactions. Also included is an after-tax charge of $33 million related to equity losses incurred by C-BASS in the quarter. The charge reduces the carrying value of a $50 million note from C-BASS to zero. For the full year, MGIC lost $1.67 billion ($20.54 per share) compared with net income of $564.7 million ($6.65 per share) in 2006. Curt S. Culver, MGIC's chairman and chief executive, said that unless the cure rate and loss severity improves, 2008 will not be a profitable year for the company. MGIC said it has retained an adviser to assist it in exploring alternatives for increasing its capital. But Mr. Culver said MGIC has adequate capital to meet its claim obligations. The percentage of loans that are delinquent stood at 7.45%, compared with 6.13% a year earlier. Excluding loans insured through the bulk channel, MGIC had a 4.99% delinquency rate, compared with 4.08% a year earlier.

UBS took a net loss equal to about $11.28 billion for the fourth quarter due to almost $14 billion of residential mortgage-related writedowns that largely matched an earlier earnings estimate by the company. "While most of our businesses continued to be very profitable, the sudden and serious deterioration in the U.S. housing market, in combination with our large exposure in subprime mortgage-related securities and derivatives, has driven us into loss," said Marcel Rohner, UBS chief executive officer. The company's residential mortgage-related losses consisted of $10.8 billion related to U.S. subprime loans, $2.0 billion related to U.S. alternative-A loans, and $871 million related to bond insurer credit protection on U.S. residential mortgage-backed security collateralized debt obligations.

Freddie Mac has announced a temporary change in its eligibility requirements for private mortgage insurers, citing the need to allow mortgage insurers to retain more insurance premiums to pay claims and rebuild their capital base during the current market correction. Effective on June 1, Freddie Mac-approved private mortgage insurers may not cede new risk if the gross risk or gross premium ceded to captive reinsurers is greater than 25%, the government-sponsored enterprise said. Freddie also said it is now requiring all eligible private MIs to provide additional information about their business activities to better monitor the state of the industry. The GSE also announced that it is suspending its Type II Insurer requirements that are otherwise automatically applicable to mortgage insurers that are downgraded below AA-minus or Aa3 by the rating agencies, provided that the MI commits to submitting a complete remediation plan for Freddie's review and approval within 90 days of the downgrade. Freddie can be found online at http://www.freddiemac.com.

Three classes from First Union National Bank -- Bank of America commercial mortgage trust pass-through certificates, series 2001-C1, have been downgraded by Fitch Ratings. The downgrades were as follows: class N, from B-plus to B-minus; class O, from B to CCC/DR1; and class P, from CCC/DR2 to C/DR6. Fitch also affirmed the ratings on 14 other classes in the deal. The downgrades stemmed from increased loss expectations for one specially serviced loan and projected losses on an additional specially serviced loan, the rating agency said.

Twenty-five classes from six subprime issues of Merrill Lynch Mortgage Investors mortgage pass-through certificates have been downgraded by Fitch Ratings. Fitch also affirmed the ratings on eight classes from the six transactions. The downgrades were attributed to deterioration in the relationship between credit enhancement and loss expectations.

Sixty-two classes from 11 subprime issues of SACO mortgage pass-through certificates have been downgraded by Fitch Ratings. Fitch also affirmed the ratings on 33 classes from the SACO transactions. The downgrades were attributed to deterioration in the relationship between credit enhancement and loss expectations.

Forty-six classes of residential mortgage-backed securities supported by a financial guaranty policy provided by Ambac have been downgraded by Fitch Ratings. The ratings of 18 other such classes were affirmed and removed from Rating Watch Negative, while the downgraded classes remain on Rating Watch Negative. The actions followed Fitch's downgrade of the insurer financial strength rating of Ambac and its financial guaranty insurance subsidiaries to AA/Rating Watch Negative. The rating agency can be found on the Web at http://www.fitchratings.com.

The Market Composite Index, an overall measure of mortgage applications, fell from 1086.6 to 1063.5 on a seasonally adjusted basis during the week ended Feb. 8, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. On an unadjusted basis, applications decreased 0.4% on the week but were up 65.0% from the level recorded a year earlier. The Purchase Index fell from 405.3 to 403.9 on a seasonally adjusted basis, while the Refinance Index declined from 5054.0 to 4901.5. Refinancings represented 67.4% of total applications, down from 69.2% the previous week, while adjustable-rate mortgages accounted for 9.9%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages rose from 5.61% to 5.72%%, and points (including the origination fee) rose from 0.98 to 1.15 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

Home values continued to decline in the fourth quarter, falling 3.5% on a quarterly basis and 3.0% on a year-over-year basis, according to Zillow.com, an online real estate community based in Seattle. Zillow's quarterly home value report, which has been expanded to cover 125 metropolitan areas, found that home values stood at a Zindex home value indicator of $224,890, representing the median estimated valuation of all homes in an area. "With consecutive declines over the past five quarters, we haven't seen the housing market bottom yet, and it may very well get worse before things get better," said Stan Humphries, Zillow's vice president of data and analytics. "Even many markets that have been largely insulated from recent declines, like some in the Pacific Northwest, reported notable value declines in the fourth quarter." Zillow can be found online at http://www.zillow.com.

The temporary loan limits contained in the recently passed economic stimulus bill should increase FHA mortgage endorsements by 154,000 loans this year, according to HUD estimates. John Garvin, deputy assistant secretary of the Department of Housing and Urban Development, told homebuilders at their annual convention that 85,000 will be purchase loans and 69,000 will be refinancings. The Federal Housing Administration expects to begin processing these higher-balance loans 30 days after President Bush signs the bill. He noted that HUD is calculating the loan limits for metropolitan statistical areas, which should be completed within 30 days. Once HUD publishes the MSAs and issues its mortgage letter, "FHA systems will be ready," Mr. Garvin said. Fannie Mae and Freddie Mac executives said they are working to be ready in 30 days as well. But a lot will depend on HUD's getting the MSA list out and getting its models and controls in place to satisfy the Office of Federal Housing Enterprise Oversight. National Association of Home Builders officials pressed OFHEO Deputy Director Edward DeMarco not to put hurdles in the GSEs' way. He stressed that OFHEO is working cooperatively with Fannie and Freddie. "We understand the importance of getting this moving," Mr. DeMarco said.

Congress will have to appropriate $1.4 billion to keep the Federal Housing Administration operating after Sept. 30 if House and Senate conferees don't agree to allow the FHA to implement risk-based premiums and stop downpayment assistance on FHA loans, according to Housing Secretary Alphonso Jackson. The secretary says in a letter that the Department of Housing and Urban Development "strongly supports" a provision in the Senate's FHA reform bill that prohibits seller-financed downpayment assistance on FHA loans. He also stresses the need for the FHA to price its loans by risk and opposes the restrictions on risk pricing in the House FHA bill and the 12-month moratorium on charging risk premiums in the Senate bill. Regarding loan limits, the secretary says he prefers raising the FHA ceiling from $362,790 to $417,000. HUD does not support raising the maximum to $729,750 on a permanent basis, as provided in the House bill and temporarily in the economic stimulus bill that Congress just passed. The Feb. 11 letter stakes out HUD's position in advance of a conference where House and Senate banking committee members will iron out the final FHA reform bill.

Homebuilders are working through a second wave of sales cancellations, according to an industry management consultant who says most builders are "shell-shocked" and entering the year with no backlog of sales. "That is a bad omen for 2008," said Charles Shinn, president of the Shinn Group. The first wave started in 2005 when speculators started walking away from their deals, and there was a huge number of cancellations in 2006. The second wave started with the subprime meltdown last summer when lenders tightened lending standards and prequalified buyers couldn't close because lenders had changed the rules. The Littleton, Colo., consultant estimates that sales cancellations during the two waves total 250,000. "Builders seem to be feeling the worst is over," Mr. Shinn said, but they are "wondering when this thing is going to turn around." However, the banks have their problems, lending standards are tight, and inventories of unsold homes are already high and feeding on foreclosures. "I don't think the market is back yet," said the consultant, who lists 500 builder clients. He is also concerned that the economy may have entered a recession in December, which could delay a housing recovery until 2009 or even 2010.

Morgan Stanley has announced that it will scale back its residential mortgage operations in the United States and shut down Advantage Home Loans, its U.K.-based residential mortgage lending business. The company cited the continued deterioration of the mortgage markets as the reason for the moves, which it said will affect about 1,000 employees in the United States and the United Kingdom. Morgan said it will continue to service mortgage loans in the United States through Saxon Mortgage Services Inc., Fort Worth, Texas, and continue to offer residential mortgages to retail brokerage clients through Morgan Stanley Credit Corp. "Given the continued dislocation in the mortgage markets, we have restructured our residential mortgage business to ensure we are appropriately positioned for the environment going forward," said Anthony Meola, chief operating officer of Morgan Stanley's U.S. residential business. The company can be found online at http://www.morganstanley.com.