Originations

BankAtlantic Bancorp, Ft. Lauderdale, Fla., has reported a net loss of $9.9 million in the fourth quarter after taking what it called "substantial" impairment charges on its commercial real estate portfolio. In its earnings statement, the bank said it has $150 million worth of builder loans, six of which ($86.5 million) are on "nonaccrual" status. It also has $152 million in acquisition, development, and construction loans -- $57 million of which are nonaccruing. In the same quarter a year earlier it posted a small profit of $1 million.

Franklin Bank Corp., Houston, has reported a net loss of $45.2 million ($1.85 per share) for 2007, compared with earnings of $15.5 million ($0.65 per share) in 2006, as a result of a housing-related goodwill impairment and increase in loan loss allowance. The loan loss allowance was increased by about $23.5 million. "While this increase obviously had a negative impact on our quarterly and yearly earnings, it was necessary and prudent given the turmoil in the housing markets nationwide, which has negatively impacted our homebuilder customers and many single-family borrowers," said Anthony J. Nocella, president and chief executive of Franklin Bank. The goodwill impairment, which totaled $65 million, was attributed to a low stock price "driven by these current market conditions." For the fourth quarter, the bank reported a net loss of $66.1 million, compared with a net loss of $4 million in the fourth quarter of 2007. Mortgage veteran Lewis S. Ranieri is the chairman of Franklin's board of directors. Franklin Bank can be found on the Web at http://www.bankfranklin.com.

The acquisition of Countrywide Financial Corp. by Bank of America Corp., Charlotte, N.C., has drawn opposition from SRM Global Fund, a Cayman Islands-based hedge fund that controls 5.19% of Countrywide's stock. In a Securities and Exchange Commission filing, SRM said "the merger agreement does not provide sufficient value to holders of [Countrywide's] common stock." The company also issued a news release saying it will vote against the merger and that the Calabasas, Calif.-based Countrywide is "strong and will rapidly return to profit on a standalone basis." If this is not true, SRM said it wants to know what management did to maximize shareholder value. As the deal now stands, SRM said Countrywide shareholders would get less than $8 dollars per share. But even after the fourth-quarter loss, it maintained that Countrywide still has a book value "in excess of $20 per share, in addition to its substantial franchise value as the leading mortgage business in the United States and its insurance business." It added that it is not surprised that BoA will proceed on the deal because it is paying a substantial discount to book value. SRM also asked the SEC to investigate movements in Countrywide's stock price in the days before the merger was announced.

Examiners are taking a sharp look at national banks with high concentrations of construction and development loans in declining markets, according to the comptroller of the currency, who expects to see some bank failures this year. "There will be more criticized assets, increases to loan loss reserves; and more problem banks," Comptroller John Dugan told the Florida Bankers Association. "And yes, there will be an increase in bank failures." The comptroller noted that large and small homebuilders are under stress, and the percentage of nonperforming C&D loans 90 days or more past due in Florida is 3.34% -- up 70% from a year ago. "We see clear signs of credit quality declining," and bank management needs to make "realistic assessments" of their portfolio's current conditional and get new appraisals, Mr. Dugan said.

Fitch Ratings has placed 2,972 classes of 2006 and 2007 subprime residential mortgage-backed securities (totaling approximately $139 billion) on Rating Watch Negative. Fitch said the actions resulted from an adjustment to its loss projections for subprime RMBS stemming from a significant deterioration in subprime mortgage performance in recent months. The rating agency attributed the deterioration to accelerating home price declines caused partly by "the dramatic contraction in the mortgage origination and securitization markets." Fitch said it has also increased its loss expectations for U.S. subprime RMBS backed predominantly by first-lien mortgages originated in 2006 and the first half of 2007. The rating agency can be found online at http://www.fitchratings.com.

Beazer Homes USA, Atlanta, is discontinuing the origination of mortgages through its troubled Beazer Mortgage Corp subsidiary. As a result, it has ended its mortgage services relationship with Homebuilders Financial Network LLC. Instead, the company has entered into an agreement with Countrywide Financial Corp., Calabasas, Calif., under which the latter will be marketed to Beazer homebuyers as the company's preferred mortgage lender. "Given the increasing complexities in mortgage financing today, we believe working with an established leader in mortgage lending makes the most sense for our homebuyers and our business," said Beazer president and chief executive Ian McCarthy. An investigation by the audit committee of Beazer's board of directors found evidence that employees of Beazer Mortgage violated Department of Housing and Urban Development regulations, particularly in relation to downpayment assistance programs, in certain Federal Housing Administration-insured loans dating back to at least 2000. Beazer Homes also said it is exiting the homebuilding business in Charlotte, N.C.; Cincinnati/Dayton, Ohio; Columbia, S.C.; Columbus, Ohio; and Lexington, Ky. Beazer can be found on the Web at http://www.beazer.com.

Mortgage companies cut 5,600 full-time employees from the payrolls in December to end a terrible year in which 114,600 workers -- nearly a quarter of the industry's work force -- lost their jobs. The U.S. Bureau of Labor Statistics reported that employment in the mortgage banker/broker sector fell from 374,600 in November to 369,000 in December -- down 23.7% from that of December 2006. (The BLS revised all the employment numbers in its latest report.) The mortgage industry started the year with 483,600 employees. But the subprime meltdown that sent the credit markets reeling forced scores of mortgage companies to shut their doors and others to cut their staffs. Industry employment may stabilize or even rise in coming months, however, due to an increase in refinancings and hiring by servicers to deal with rising defaults and resets of adjustable-rate subprime mortgages. The Bureau of Labor Statistics can be found online at http://stats.bls.gov.

Class M of Merrill Lynch Floating Trust commercial mortgage pass-through certificates, series 2006-1, has been placed on Rating Watch Negative. Fitch also affirmed the ratings on 17 other classes in the transaction. The negative rating action was based on "the lack of leasing at the pool's third-largest loan, Portals III," which is secured by an office building in Washington, D.C., the rating agency said.

Six classes of Credit Suisse First Boston Mortgage Securities Corp. commercial mortgage pass-through certificates, series 2007-TFL2, have been placed on Rating Watch Negative by Fitch Ratings. The affected securities were classes BSL-A through BSL-F. The actions were due to the potential default of the Biscayne Landing loan after the borrower missed the required amortization amount of $20 million on Dec. 31, Fitch said. "Considering current market conditions and the lack of available capital, funds may not be available and a default is likely," the rating agency said. "Upon default, the loan could transfer to the special servicer, and fees would likely be incurred by one or more of the BSL classes." The BSL classes are collateralized by the nonpooled senior portions of the Biscayne Landing loan and are subordinate to the pooled senior portion.

Municipal Mortgage & Equity, a Baltimore-based multifamily lender and investment manager, has reported that it will not be traded on the New York Stock Exchange after Feb. 6. After that date, the stock will be traded on the over-the-counter market. MuniMae said the NYSE is suspending trading in its shares because the company will not be meeting a March 3 deadline to file its audited financial statements for the 2006 fiscal year. The company is eligible to apply to be relisted on the NYSE after it meets the exchange's requirements. MuniMae stock closed at $7.13 on the NYSE on Jan. 30, a steep decline of over 50% from its Jan. 2 opening of $15.

Zacks.com, Chicago, has issued a "#5 (Strong Sell)" ranking on the stock of Merrill Lynch & Co. and Bear, Stearns & Co., placing them on Zacks' list of Stocks to Sell Now. The company noted that Merrill Lynch "has been one of the poster children for the subprime lending debacle" and that it reported "another disastrous quarter" on Jan. 17, disclosing an additional $11.5 billion writedown to the company's subprime portfolio. Regarding Bear Stearns, Zacks said it has also been hit hard by weakness in the credit and subprime markets. "In 2007, the company's stock price topped off at over $170 per share, but then proceeded to plummet in the ensuing months, shedding more than 50% of its value, and at one point dropping below $70." Bear recently reported "a fairly brutal fourth quarter" and fiscal year, Zacks said. Stocks with a #5 (Strong Sell) rank should be sold or avoided in the next one to three months, according to Zacks. The company can be found online at http://www.zacks.com.

Ryland Homes has agreed to implement a substantial portion of a shareholder proposal by a LIUNA pension fund requiring better disclosure of the homebuilder's mortgage risk. LIUNA -- the Laborers' International Union of North America -- said it filed the proposal as part of an initiative to help restore confidence in the housing industry. The Ryland proposal, filed by the Indiana State District Council of Laborers and HOD Carriers Pension Fund, sought regular reporting of the types of mortgages originated so investors can identify the level of exposure to prime, subprime, and alternative-A loans. The proposal also sought reporting on sales of those mortgages, including identification of buyers and terms. "We applaud Ryland for taking this action and call upon other homebuilders and mortgage originators to enact the provisions of our proposal," LIUNA general president Terence M. O'Sullivan said. "We believe restoring confidence to the industry must be multipronged and include responsible shareholder proposals, legislative action, and self-regulation by homebuilders, lenders, and credit rating agencies." LIUNA can be found online at http://www.liuna.org.

Fidelity National Financial Inc., Jacksonville, Fla., has reported a net loss of $44.9 million ($0.21 per share) for the fourth quarter, after taking a $135.7 million charge to strengthen its reserve for loan losses. For the same period last year, FNF earned $71.2 million ($0.34 per share). Through Oct. 23, 2006, the earnings included contributions from Fidelity National Information Services, which was until that date a majority-owned subsidiary of FNF. Fidelity National Title Group had a net loss of $65.9 million on a pretax basis for the fourth quarter, compared with profits of $155.7 million one year before. Without the charge, FNF said it would have had pretax earnings of $69.9 million in the title business. "We did find it necessary to strengthen our reserve for claim losses as we continued to experience adverse loss development in the fourth quarter, particularly for policy years 2005-2007, as the expected ultimate loss ratio for those policy years worsened to approximately 7.5% during the fourth quarter," said William P. Foley II, FNF's chairman.

Construction of single-family houses fell in California last year to the lowest level in 25 years as builders in the Golden State cut back their production dramatically in response to softer sales. According to statewide data compiled by the Construction Industry Research Board, permits for 112,300 new homes, condominiums, townhouses, and apartments were issued statewide, down nearly 32% from the level recorded in 2006 and 100,000 units less than in the most recent peak year of 2004. Multifamily construction -- both for-sale and rental properties -- was down 21%, to 44,307, while single-family construction dropped by 37% to 67,993, the lowest number of starts since 51,160 starts were recorded in 1982. However, construction picked up in December as builders rushed to pull permits before new, more expensive building codes were set to go into effect, and housing industry spokesmen say they are hoping it is a sign that a recovery will soon be at hand, perhaps by the third quarter of 2008. "The combination of declining interest rates, increasing the conforming loan rate, and improvements in the FHA lending practices will lead to a more rapid recovery than initially anticipated," said Alan Nevin, chief economist of the California Building Industry Association.

Five lender groups that are supporting quick passage of a Federal Housing Administration reform bill want the House and Senate banking committee leaders to drop a provision that would allow mortgage brokers to buy a $50,000 surety bond in lieu of meeting FHA net-worth and audit requirements. Because there is no federal oversight of brokers, "it is critical that they continue to submit the annual audited financial statements to the FHA in order to participate in the program, and more importantly, protect the integrity of the FHA," the five trade groups say in a letter to the committee chairmen. The National Association of Mortgage Brokers maintains that more brokers would be willing to distribute FHA loans if they didn't have to pay for an expensive audit. The surety bond provision in the House-passed FHA bill has "belts and suspenders to protect the FHA program," NAMB executive vice president Roy DeLoach said. He stressed that the FHA commissioner can control the number of brokers using surety bonds. In addition, every broker has to be coupled with an FHA-approved direct endorsement lender, who reviews every loan before the closing. The Mortgage Bankers Association, the Lenders One/National Alliance of Independent Mortgage Bankers, the Independent Community Bankers of America, the American Bankers Association, the American Financial Services Association, and the American Institute of Certified Public Accountants signed the Jan. 30 letter.

The Federal Open Market Committee dropped the target federal funds rate and the discount rate by 50 basis points at its regular meeting Wednesday. "Financial markets remain under considerable stress, and credit has tightened further for some businesses and households," said the FOMC, the Federal Reserve Board's monetary policy-making panel. "Moreover, recent information indicates a deepening of the housing contraction as well as some softening in labor markets." The Fed can be found on the Web at http://www.federalreserve.gov.

Countrywide Financial Corp., Calabasas, Calif., said Wednesday that it has been subpoenaed by the Florida attorney general's office, which is looking into its foreclosure practices, among other things. Florida joins several other states, including Illinois and Pennsylvania, that are reviewing allegations that the nation's largest lender/servicer charged excessive fees in regard to foreclosures and used high-pressure sales tactics in pushing payment-option adjustable-rate mortgages. Countrywide can be found on the Web at http://www.countrywide.com.

Fitch Ratings Agency has downgraded bond insurer Financial Guaranty Insurance Co. to AA, making it the third major guarantor to lose its top rating. The other two insurers that have received downgrades to AA are MBIA and Ambac. All three insure asset-backed subprime bonds held by institutional investors, including Fannie Mae and Freddie Mac. It is unclear whether the government-sponsored enterprises -- or any other investors that use Ambac, FGIC, and MBIA -- will have to write down their covered bonds because of the downgrades.

The largest global financial institutions are not likely to be significantly affected by the huge number of downgrades of subprime securities announced by Standard & Poor's Jan. 30 (see above item), but they could boost losses among "smaller players," the rating agency says. S&P said it believes that the total losses for financial institutions will eventually reach more than $265 billion. "In our opinion, the downgrades of mortgage securities could lead to the realization of these losses, especially among some of the smaller players that have yet to feel the full extent of the value impairments on securities held in their available-for-sale securities portfolios," S&P said.

Standard & Poor's Ratings Services has downgraded 3,787 classes from U.S. residential mortgage-backed securities that are collateralized by first-lien subprime mortgage loans rated between January 2006 and June 2007. S&P also announced that 2,602 classes of comparable subprime RMBS have been placed on CreditWatch with negative implications. The rating agency also placed 1,953 classes from 572 global collateralized debt obligations of asset-backed securities and CDO of CDO transactions on CreditWatch negative. The affected U.S. RMBS classes represent approximately $270.1 billion of securities, or approximately 47% of the par amount of U.S. RMBS backed by first-lien subprime mortgage loans rated by S&P during 2006 and the first half of 2007. The rating agency can be found online at http://www.standardandpoors.com.