Originations

Twelve classes of mortgage-backed securities issued by Credit Suisse First Boston Home Equity Asset Trust 2007-3 were downgraded by Fitch Ratings on Jan. 7 as a result of changes to its subprime loss forecasting assumptions. Fitch also affirmed the ratings on classes with outstanding balances of more than $170 million. The downgrades 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."

EastGroup Properties, a real estate investment trust based in Jackson, Miss., has obtained a new four-year, $200 million unsecured revolving credit facility from a group of seven banks. The interest rate is based on the London interbank offered rate and varies according to debt-to-total-asset value ratios, the industrial REIT reported. The rate now stands at 5.27%, with an annual facility fee of 20 basis points. The facility, which replaces an expiring three-year, $175 million facility, was arranged by PNC Capital Markets LLC. EastGroup can be found online at http://www.eastgroup.net.

Fitch Ratings has announced that it is likely to raise its required subordination levels for commercial mortgage-backed securities, citing an increased risk of commercial mortgage loan defaults. The rating agency reported that for a BBB rating, an increase in enhancement levels of 10%-20% would address the greater risk, while a triple-A rated bond would require an additional subordination of 5%-10%. The market is expecting higher commercial mortgage loan defaults, based on the spreads on the CMBX market indices, the rating agency said. However, Fitch said it does not expect defaults to rise as much as the indices appear to be anticipating. "Fitch expects loan defaults to rise given the current capital market environment, but not threefold," said Susan Merrick, managing director and head of Fitch's CMBS group. The rating agency can be found online at http://www.fitchratings.com.

Webster Financial Corp., Waterbury, Conn., has reported preliminary information on its fourth-quarter earnings results, including charges related to the discontinuation of its national wholesale mortgage business. Webster said it has recorded $3.5 million in pretax severance and other costs related to the closure of its wholesale lending offices in Seattle, Phoenix, Chicago, and Cheshire, Conn. Its remaining mortgage operations in Cheshire will focus solely on direct-to-consumer retail originations, the company said. Webster had previously announced the discontinuation of indirect residential construction lending and indirect home equity lending outside its primary New England market area. "Given our strategic decision to discontinue out-of-market, indirect mortgage and consumer lending activities, we decided to manage these portfolios as a liquidating, nonstrategic asset," said James C. Smith, Webster's chairman and chief executive officer. The company can be found on the Web at http://www.websteronline.com.

G REIT Inc., a real estate investment trust based in Santa Ana, Calif., has announced that it intends to enter into a liquidating trust agreement on or about Jan. 22 to wind up the REIT's affairs and liquidate its assets. The company said it expects to transfer, on or about Jan. 28, its then-remaining assets to the trustee of the G REIT Liquidating Trust, which will also assume any remaining liabilities of the REIT. The company's stock transfer books will be closed as of Jan. 22. Triple Net Properties LLC, the holder of a special limited-partner interest in the REIT's operating partnership, will redeem its interest in exchange for the right to receive 15% of certain distributions made by the company and the liquidating trust, the REIT reported. Triple Net Properties can be found online at http://www.1031nnn.com.

Behringer Harvard Opportunity REIT I, a nontraded real estate investment trust, has reached full subscription, according to Behringer Harvard, a Dallas-based commercial real estate company. The REIT generated approximately $530 million in gross offering proceeds through the sale of approximately 53.1 million shares in its primary offering, the company reported. The company said the REIT will invest primarily in commercial real estate with "value-added and opportunistic characteristics" that are either operating or newly constructed and that may require development, redevelopment, or repositioning to achieve favorable returns. Behringer Harvard can be found on the Web at http://www.bhfunds.com.

Continuing market concerns related to subprime mortgage woes are expected to reduce the overall annual issuance of fixed-income securities by 15% to $3.4 trillion in 2008, according to the Securities Industry and Financial Markets Association. "Issuance is expected to decline significantly in the sectors most affected by subprime mortgage deterioration, while both corporate and municipal issuance are projected to remain high relative to historic levels," said SIFMA, in a forecast based on a survey of its member firms. The association can be found online at http://www.sifma.org.

The Community Reinvestment Act may have deterred banks from engaging in the kind of risky mortgage lending that has led to the foreclosure crisis, according to a Traiger & Hinckley LLP study of 2006 loan data. The company said the study indicates that banks making loans in their CRA assessment areas were less likely to make high-cost loans, charged less for the ones they did make, and were "substantially more likely" to avoid the secondary market and retain high-cost loans and other loans in their portfolios. "Without the CRA, the foreclosure crisis might have negatively impacted even more borrowers and neighborhoods," said Warren Traiger, a partner in the law firm. The study is available at http://www.traigerlaw.com.

James Cayne, the chairman and CEO of Bear Stearns -- once a major player in the subprime mortgage market -- is expected to relinquish his chief executive title. As of MortgageWire's deadline, a spokesman for Bear had not returned a telephone call about the matter. A few weeks ago, Bear laid off all remaining account executives who once worked in the Irvine, Calif., office of Encore Credit Corp., a subprime wholesaler that it had merged into its mortgage group. Among those let go was Shabi Asghar, who served as president of ECC. Mr. Cayne, according to combined news reports, is expected to remain as chairman. In years past Bear has been a top-ranked securitizer of subprime loans and, like many investment banking firms, has taken large writedowns on its holdings. This past summer, two subprime-related hedge funds managed by Bear filed for bankruptcy protection. Bear Stearns can be found online at http://www.bearstearns.com.

Since August, financial institutions across the globe have written down the value of their nonprime mortgage assets by about $94 billion, according to a new tally done by Friedman, Billings, Ramsey & Co. FBR noted that in addition to the writedowns, financial institutions -- including depositories -- have taken $14.7 billion in what it calls "elevated loss provisions." FBR estimated that banks could suffer $59 billion to $148 billion of losses on their portfolios over the next few years. It says banks that had high concentrations of subprime and alternative-A loans, payment-option adjustable-rate mortgages, home equity lines of credit, and other nontraditional loans will suffer the most. The company can be found online at http://www.fbr.com.

Servicers participating in the Hope Now alliance are working at an "intense pace" to implement streamlined processes for loan modifications and refinancings, according to Treasury Secretary Henry Paulson, who said he wants to see tangible results in a few weeks. "We expect most servicers to begin fast-tracking borrowers in the next few weeks," Mr. Paulson told the New York Society of Securities Analysts. Fast-tracking is supported to move troubled borrowers into refinances and interest rate freezes quickly. The secretary said he wants servicers to "fully implement connections" to the Federal Housing Administration and other lenders to facilitate refinancings. The Treasury secretary also stressed that the alliance members need to develop a standard reporting process to monitor their progress. "We need to see all the servicers reporting results to Hope Now to measure effectiveness and then to make adjustments as needed," Mr. Paulson said. Outreach efforts by Hope Now have prompted 45,000 borrowers who are facing possible foreclosure to contact their servicers for assistance.

Astoria Financial Corp. "may actually benefit from the mortgage turmoil" and is a good buy for value investors, according to Zacks.com. In its Jan. 4 list of Zacks Rank Buy Stocks, the research firm said Astoria may benefit from the turmoil because it doesn't have to sell loans. "Rather, it keeps them in a portfolio while many other banks are going out of business," Zacks said. "The stock is attractively priced at 13.7 times 2008 [earnings] estimates." Every day, Zacks.com highlights four stocks based on how well they match the criteria for four kinds of investing: aggressive growth, growth and income, momentum, and value. The research company can be found online at http://www.zacks.com.

First Florida Financial Group, Fort Myers, Fla., has announced the launch of DeadDeals.net, which purchases qualified "unclosable" mortgage and foreclosure leads from mortgage brokers and loan officers in Florida. DeadDeals.net pays from $50 to $500 for each lead, and its CashToolBox.com program fixes mortgage application problems that are preventing a loan approval and closing, First Florida said. Eddie Hoskins, president and chief executive officer of First Florida, said the new division enables mortgage professionals "to make some money on a deal where previously there was no revenue." The division can be found on the Web at http://www.deaddeals.net.

Hahn & Hessen LLP, New York, has been selected as the counsel to the Official Committee of Unsecured Creditors in the bankruptcy filing of Delta Financial Corp., Woodbury, N.Y. According to the law firm, members of the Creditors Committee include Mortgage Information Services, Delta Funding Residual Exchange Co., DB Structured Products, J2 Global Communications, and AT&T Corp. Landis Rath & Cobb LLP has been selected as Delaware counsel. Other official creditors' committees being represented by Hahn & Hessen are: New Century Financial, American Home Mortgage, Aegis Mortgages and ResMae Mortgage. "We are hopeful that our knowledge of the issues unique to distressed mortgage lenders will enable us to assist the committee in maximizing creditor returns," said Mark Power, a partner in Hahn & Hessen's bankruptcy group.

Five of seven commercial property types tracked by Moody's Investors Service had lower scores in the fourth quarter than in the third quarter, showing some signs of softening in commercial real estate markets. The rating agency reported that the multifamily and shopping center sectors maintained or improved their scores in the fourth quarter. "Retail bears watching because forecasts in personal income, a primary driver of retail demand, are still strong but are shallower than they were a quarter ago," said Sally Gordon, a Moody's analyst and senior vice president. "The issues in the single-family sector, in turn, are a bit of a wild card for multifamily, both as to potential demand increase from owners facing foreclosure as well as potential supply increases from condo projects converted to rentals." Moody's also said the two largest markets backing commercial mortgage-backed securities, New York and Los Angeles, continue to have the strongest scores. Even so, "expectations of a weakening economy are starting to be reflected in the outlooks for several property sectors," according to Ms. Gordon. Office vacancy rates, currently at 9% for central business districts and 14% for suburban, are expected to rise in the face of softening demand. Moody's can be found online at http://www.moodys.com.

Members of the so-called Generation X now represent more than half of mortgage borrowers, which means the long-term outlook for the mortgage industry is bright, according to Minneapolis-based Dexma. Citing research on 230,000 mortgage loan applications from over 1,100 lenders using Dexma mortgage technology, the company reported that Gen Xers -- those born from 1965 to 1979 -- represented more than 50% of the mortgage customers. In addition, 64% of borrowers had a credit score of 680 or higher, leading to instant approvals for 58% of the applicants who used a brief online application process, Dexma said. "Plenty of quality Gen X borrowers are going to online sites, and they're expecting and getting instant approvals," said Dexma president Steve Mase. The company can be found on the Web at http://www.dexma.com.

According to the findings of a Harris Poll survey, 2008 will be a bad year for those who rely on originations of cash-out refinancings or home equity lines of credit for business. Americans have become weary of using their home as equity to finance loans, Harris Interactive said. Only 4% said they plan to refinance their mortgage in 2008, while only 2% said they would take out a HELOC. If any group were more likely than others to refi this year, it would be the Generation Xers and the baby boomers, which gave a 6% positive response to the refinance question. When asked which issue will affect them personally, 70% said they were concerned about Americans who default on their mortgages and 61% said they were concerned about companies that lose money as a result of defaulting mortgages. The survey was conducted online between Dec. 4 and Dec. 12, with 2,335 adults participating.

The default rate on subprime mortgages jumped 170 basis points to nearly 19.5% in October, according to Friedman Billings Ramsey Investment Management, which cited weaker job markets and declining house prices as the causes of rapid deterioration in credit performance -- not resets. The default rate on nonagency securitized subprime mortgages jumped from 17.7% in September to 19.4% in October. And the default rate on alternative-A loans jumped 75 bps to 5.4% in October. "These substantial changes in a single month suggest that labor market conditions are worsening broadly across the United States," FBRIM managing director Michael Youngblood says in the report. "Indeed, we continue to believe that these conditions are characteristic of a recession in economic activity." The managing director of fixed-income research noted that resets of adjustable-rate subprime mortgages were not responsible for the October jump in default rates. However, the upward adjustment of mortgage rates "may drive the default of hybrid ARMs higher in the year ahead," he said. The report also shows that 8% of subprime mortgages and 2.5% of alt-A mortgages are in foreclosure. (The default rate includes loans that are 90 days or more past due, in foreclosure, or real estate owned.) FBRIM is a subsidiary of Friedman Billings Ramsey, which can be found online at http://www.fbr.com.

The Better Mortgage Bureau, Baltimore, has changed its name to the Consumer Mortgage Bureau.The bureau said the name change is aimed at making people aware that it is a consumer-driven organization. "We intend to make it crystal clear to the public who we are, what we stand for, and what we do, so there will be no confusion whatsoever," said Lance Cassell, managing director of the bureau. "We see an industry that is losing its consumers' trust, and we intend to revive it." The group said consumers can be assured that its members are licensed, trained, and will adhere to the Consumer Mortgage Bureau code of ethics. The bureau can be found online at http://www.consumermortgagebureau.org.

State Street Corp., Boston, has taken a $279 million net charge after taxes for the fourth quarter to establish a reserve designed to address costs related to active fixed-income strategies exposed to subprime mortgage markets.State Street has also named James S. Phalen, executive vice president and head of international operations for investment servicing and investment research, as the new interim chief executive officer of State Street Global Advisors. William W. Hunt, the previous SSGA CEO, has resigned. SSGA, State Street's investment management arm, manages its fixed-income strategies.