Originations

The term "slow growth" was the bane of the homebuilding business for years, but now builders in the Golden State, where "a modest recovery" is expected to begin sometime around midyear, welcome the idea.Alan Nevin, chief economist of the California Building Industry Association, is projecting a "slight increase in new-home sales" in 2008. He bases his forecast on continued population growth, a continued reduction in inventory, and a "return to normalcy" in the credit markets. Specifically, Mr. Nevin is projecting sales of 80,000 new houses this year vs. about 70,000 in 2007. With the upturn, he is also forecasting an increase in starts to 128,400, a number that is almost 90,000 shy of the record 212,960 units begun in 2004. The economist also expects multifamily production to bump higher this year, from some 44,000 units in 2007 to 46,700 in 2008. CBIA is a statewide trade group representing more than 7,000 businesses -- builders, remodelers, subcontractors, and allied professionals -- that employ more than 500,000 people.

Mortgage companies dropped 9,100 full-time employees from their payrolls in November, and over 100,000 mortgage-related jobs have been lost in the wake of the subprime meltdown.The U.S. Bureau of Labor Statistics reported Jan. 4 that employment in the mortgage banker/broker sector declined from 401,000 in October to 391,900 in November. Nearly 110,000 loan officers and other mortgage workers have lost their jobs or left the industry since November 2006. Over the same period, 200,000 construction workers have lost their jobs. Meanwhile, President Bush is considering new initiatives to stimulate the economy and stabilize the housing market. And Friday's dismal jobs report, which indicates that the unemployment rate jumped from 4.7% to 5.0% in one month, is going to put more pressure on White House officials to come up with a stimulus package to reverse a slowing economy. The BLS can be found online at http://stats.bls.gov.

The U.S. real estate investment trust sector turned in a negative total return of 17.83% for 2007, trailing other major equity indices, according to the National Association of Real Estate Investment Trusts.The return is based on the FTSE NAREIT series of indices maintained by the Washington-based REIT industry trade group. Taking into account only mortgage REITs, total return was down 42.35%. The only REIT sectors to show a positive total return for the year were the industrial (0.38%), health care (2.13%), and specialty (14.56%) sectors. "Following seven consecutive years of outperforming the broader equity market, U.S. REIT returns suffered in 2007 as some investors began to reduce their REIT positions early in the year," said Michael Grupe, NAREIT's executive vice president for research and investor outreach. "The downturn continued later in the year as many investors shied away from real estate investments, including REITs, in the wake of illiquidity in the credit markets." NAREIT can be found online at http://www.nareit.com.

The Eleventh Federal Home Loan District Cost of Funds Index fell to 4.172% in November, its lowest level since the summer of 2006.This represents a decline of 6 basis points from 4.233% in October. COFI is a weighted average index calculated by the Federal Home Loan Bank of San Francisco. According to the FHLBank-SF website, 26 institutions reported COFI data for the month. The average fund level used in determining November's index totaled $397.4 billion, while the total interest expense was $1.381 billion. Total interest expense is derived from interest expense reported on deposit accounts, Federal Home Loan Bank advances, and other borrowings, adjusted for the number of days in the month. The index is always reported on the last business day of the following month.

The Market Composite Index, an overall measure of mortgage applications, fell from 603.8 to 533.9 on a seasonally adjusted basis during the holiday-shortened week ended Dec. 28, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications decreased 47.2% on the week and were down 20.0% from the level recorded a year earlier. The Purchase Index fell from 394.5 to 360.8 on a seasonally adjusted basis, while the Refinance Index declined from 1915.3 to 1620.9. Refinancings represented 50.9% of total applications, down from 53.0% the previous week, while adjustable-rate mortgages accounted for 9.8%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages fell from 6.10% to 6.05%, and points (including the origination fee) were unchanged, at 1.05, for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

The average 30-year fixed mortgage rate fell from 6.17% to 6.07% over the seven-day period ended Jan. 3, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate fell from 5.79% to 5.68%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages declined from 5.90% to 5.78%, and the average rate for one-year Treasury-indexed ARMs decreased from 5.53% to 5.47%, Freddie Mac reported. Fees and points averaged 0.5 of a point for 30-year fixed-rate mortgages and ARMs and 0.6 of a point for 15-year FRMs. "The latest home sales data ... sent mixed messages on the direction of housing activity towards the end of 2007," said Frank Nothaft, Freddie Mac's chief economist. "The mostly grave home sales reports came with a few light notes. While new-home sales fell in November to the slowest pace since April 1995, existing-home sales rose by a small margin to an annual pace of 5 million units." A year ago, the average 30-year and 15-year fixed rates were 6.18% and 5.94%, respectively, and the average hybrid and one-year ARM rates were 6.02% and 5.42%, Freddie Mac said. Freddie can be found online at http://www.freddiemac.com.

Members of the Federal Reserve's monetary policy committee are concerned that rising foreclosures and the huge supply of unsold homes on the market could put additional downward pressure on house prices and lead to "further disruptions in the financial markets."The minutes of the Dec. 11 Federal Open Market Committee also reveal that members did not expect that the housing market would continue to deteriorate after their last meeting on Oct. 31 or that the reduced availability of jumbo mortgages would last so long. The FOMC members "agreed that the housing correction was likely to be both deeper and more prolonged than they had anticipated in October," the Dec. 11 minutes say. The committee voted to lower the target federal funds rate 25 basis points to 4.25%. But Boston Federal Reserve Bank president Eric Rosengren advocated a more aggressive cut due to a "deteriorating housing sector, slowing consumer and business spending, high energy prices, and ill-functioning financial markets."

The subprime mortgage crisis and stock market volatility are the likely causes of a 43% increase in securities fraud class action litigation filings in 2007, according to a study from Stanford Law School and Cornerstone Research.Joseph Grundfest, director of the Stanford Law School Securities Class Action Clearinghouse, said if litigation related to the subprime crisis is removed from the calculation, "the resulting core litigation rate remains well below historical norms." Forty-seven firms in the finance sector were sued in 2007, compared with just 11 in 2006. The problems in subprime lending contributed to the increase, with 28 of the 2007 filings related to subprime market disclosure issues. There were 100 securities class action filings in the second half of the year, compared with 66 in the first half. For all of 2006, there were 116 filings. John Gould, vice president of Cornerstone Research, said: "[W]hile it is likely that both the subprime crisis and the increase in stock market volatility contributed to the increase in filings in the second half of the year, it is not possible, as a technical matter, to separate these two effects."

National City Corp., Cleveland, said Wednesday that it will exit all "broker-based" mortgage lending and will shut down its wholesale unit, resulting in layoffs of 900 workers.The company also said it will not fund any mortgage unless it is "agency eligible." According to the Quarterly Data Report, NCC's National City Mortgage division ranked 10th among residential wholesalers in the third quarter. It will remain a residential lender, but only through the retail channel. The bank announced companywide layoffs of 1,700. National City chief executive officer Peter Raskind said, "[I]t is clear that origination volumes will be lower going forward, and we are configuring our mortgage business to operate profitably in that environment." The bank also issued $500 million in hybrid capital securities in a move to bolster liquidity. The company can be found on the Web at http://www.nationalcity.com.

Simon Property Group Inc., Indianapolis, has announced that holders of its series I 6% convertible perpetual preferred stock may convert their shares during the first quarter of 2008.The option exists because the closing price of Simon's common stock exceeded $78.71 (125% of the applicable conversion price) for at least 20 trading days in a period of 30 consecutive trading days ended Dec. 31, the real estate company said. At the current conversion price, each share of preferred stock is convertible into 0.794079 of a share of Simon's common stock, the company said. Simon can be found online at http://www.simon.com.

Vertical Lend Inc., Melville, N.Y., is changing its name to World Alliance Financial Corp., a move the company says aligns its identity with its expanded product and service offerings.In the second half of 2007, KBC Financial Products, a wholly owned subsidiary of Belgian-based KBC Bank NV, acquired Vertical Lend. The name change most affects the retail reverse mortgage business, which until now had been known as Mortgage Warehouse. Lender Lead Solutions, a reverse mortgage leads and wholesale reverse mortgage loan provider, will maintain its current branding and will operate as a separate organization within World Alliance Financial, as will The Senior Lending Network, the company's consumer education program. David Peskin, chief executive of World Alliance Financial, said the company's commitment to the reverse mortgage industry has not changed. The renamed company can be found on the Web at http://www.worldalliancefinancial.com.

Production of new primary mortgage insurance remained relatively strong in November, even though there was an 8% decline from the level recorded in October.The members of the Mortgage Insurance Companies of America reported $24.2 billion in total primary new insurance written during November, down from $26.2 billion in October. It was the seventh consecutive month in which the volume in the traditional category exceeded the $20 billion mark. In November, $23.4 billion of new traditional insurance was written, down from $25.3 billion in October but a huge improvement from the $13.0 billion written in November 2006. But October's anemic production in the bulk channel of $911.5 million was duplicated in November as that channel, through which most subprime mortgage originations are insured, fell to $793.8 million. There continued to be gains in primary insurance in force, from $790.5 billion in October to $804.8 billion in November. New pool risk written totaled $53.8 billion, up from $23.6 billion in October. The cure/default ratio improved from 56.1% in October to 60.8% in November. There were 37,137 cures and 61,033 defaults during the month. MICA can be found online at http://www.micanews.com.

Grubb & Ellis, a Chicago-based real estate services company, is projecting that the expected "sluggish" growth of the U.S. economy will be enough to keep commercial real estate leasing markets stable this year.G&E said it expects the volume of investment activity to decline by as much as 25% from the record levels of 2007. "Even in the absence of a recession, the U.S. economy is likely to expand at a sluggish pace," said Robert Bach, senior vice president and chief economist at G&E. "Monthly payroll job growth is expected to average 75,000 in 2008, quite modest, but enough to keep a floor under demand for commercial real estate." The office market is expected to absorb 36 million square feet in 2008, down nearly 50% from absorption in 2007, the company projects in its 2008 Global Real Estate Forecast. The company can be found online at http://www.grubb-ellis.com.

The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators launched a Web-based mortgage licensing system on Jan. 2, as promised, with the initial participation of seven states.Four years in the making, the Nationwide Mortgage Licensing System is designed to automate and streamline state licensing of mortgage lenders and brokers. It will also help regulators track and identify bad actors, including originators that move from state to state. "NMLS provides the underpinnings of a regulatory framework to address the weaknesses of our current fragmented and complex system of mortgage origination and supervision," said CSBS executive vice president John Ryan. Idaho, Iowa, Kentucky, Massachusetts, Nebraska, New York, and Rhode Island are participating in the initial start-up. Forty other states have indicated their intent to transition to the system. The House recently passed a predatory-lending bill (H.R. 3915) that requires the creation of a nationwide mortgage licensing system and registry.

Four classes of Asset Backed Funding Corp. mortgage pass-through certificates have been downgraded by Fitch Ratings.The downgrades were as follows: series 2004-FF1, class M-4, from BB-plus to B, class M-5, from BB to CC/DR4, and class M-6, from BB-minus to C/DR4; and series 2004-OPT1, class M-6, from BBB to B. Fitch also affirmed the ratings on eight other classes in the two transactions. The downgrades were attributed to deterioration in the relationship between credit enhancement and expected losses. The collateral backing the deals consists of first- and second-lien subprime mortgage loans.

Thirty-eight classes of mortgage-backed securities from two issuers were downgraded by Fitch Ratings on Dec. 28 as a result of changes to its subprime loss forecasting assumptions.Fitch also affirmed the ratings on classes with outstanding balances of approximately $600 million. The securities affected by the latest downgrades were 27 classes of SASCO mortgage pass-through certificates and 11 classes of Securitized Asset Backed Receivables mortgage pass-throughs. The rating actions 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." The rating agency can be found online at http://www.fitchratings.com.

A new mortgage company, Express Capital Mortgage Inc., has been launched in Chandler, Ariz.The company touts its "advanced technologies" and declares that it differs from other mortgage companies in Arizona because of the training, marketing assistance, and face-to-face support it offers employees. "We don't intend on reinventing the wheel," said Ryan Kohl, vice president of Express Capital. "Our plan is to respond and change with the market while delivering a wide range of available products coupled with exceptional customer service." The new company can be found on the Web at http://www.expresscapitalmtg.com.

Webster Bank NA, a subsidiary of Webster Financial Corp. based in Waterbury, Conn., has announced plans to reorganize and streamline its mortgage banking group to maximize support for Webster's direct and retail banking activities.Webster said it will discontinue wholesale and correspondent loan originations, reflecting a "strategic focus on direct banking activities in its core New England franchise." The reorganization will result in a reduction of staffing levels, mostly in Connecticut, the bank said. The company can be found on the Web at http://www.websteronline.com.

Sales of existing single-family homes in Florida totaled 8,106 in November, a decrease of 30% from the level recorded a year earlier, according to the Florida Association of Realtors.The median sales price of homes sold in November declined to $215,800, down 10% from $239,800 in November 2006, FAR reported. Among the state's larger markets, resales decreased 35% in the Orlando metropolitan statistical area and 59% in the Miami MSA, while median resale prices fell to $239,000 in Orlando, down 9% from $263,600 a year earlier, and to $359,300 in Miami, down 4% from $372,400 a year earlier, the trade group said. FAR can be found on the Web at http://media.living.net.

Sales of previously owned single-family homes rose 0.7% in November, and sales appear to be stabilizing as house prices continue to decline.The National Association of Realtors reported that sales of existing single-family homes rose from a seasonally adjusted annual rate of 4.37 million in October to 4.40 million in November. Sales transactions were down 20% since November 2006, but sales have stabilized since September, according NAR chief economist Lawrence Yun. The inventory of available homes for sale fell 3.7% from that of the previous month, to 3.6 million. And the median price of an existing single-family home stood at $208,700 in November, down 3.7% from that of a year earlier. Mr. Yun said jumbo mortgage rates are still 90-100 basis points higher than normal, which is crimping sales in high-cost areas, and too many homebuyers are trying to time the market. To spur sales, he said Congress should raise the $417,000 conforming loan limit so Fannie Mae and Freddie Mac can purchase jumbo mortgages, and the Federal Reserve should cut the target federal funds rate by 75 bps at its Jan. 29-30 meeting. Meanwhile, sales of existing condominiums and cooperatives slipped 1.6% to a seasonally adjusted annual rate of 600,000 in November from that of the previous month, and the median sales price stood at $221,000, down 0.7% from the level recorded in November 2006.