Originations

Nearly four in 10 seniors have heard, read, or seen some information about reverse mortgages, according to the 2007 Financial Freedom Senior Sentiment Survey.Financial Freedom is the reverse mortgage lending unit of IndyMac Bank, Pasadena, Calif. The results, the company said, are consistent with the 2006 survey (which found that 41% of seniors had heard of reverse mortgages) and up from 35% in 2005. Most of the respondents who had heard of reverse mortgages had a favorable opinion of them. On the negative side, more than half said they haven't heard, seen, or read anything about reverse mortgages or considered taking out a reverse mortgage in the last year. Roughly one quarter had an unfavorable opinion of reverses and almost half, 44%, said they have heard of them but don't know enough about them to offer an opinion. "As an industry, we've come a long way in a short time when you consider that the industry has grown from 7,000 to over 100,000 loans in just a few years," said Michelle Minier, chief executive of Financial Freedom. The data also reveal "a tremendous opportunity for reverse mortgage lenders and brokers to connect with seniors by showcasing their expertise," she said. The company can be found online at http://www.financialfreedom.com.

The Eleventh Federal Home Loan Cost of Funds Index fell 15 basis points in October to its lowest level since April.According to the Federal Home Loan Bank of San Francisco, which calculates the index, COFI stood at 4.233% in October, compared with 4.383% in September. In April, the index fell by 7 bps to 4.224%, but gave back all of that in May. The index fell slightly in June and July, but in August shot back up to 4.359%. According to information on the FHLBank's website, this is the first double-digit decline in COFI since November and December of 2002, though there have been a couple of instances since then of declines of over 9 bps. The index is a weighted average of the cost of mortgage funding for the member thrifts of the San Francisco FHLBank. Because it takes these costs into consideration over a period of several months, the movement of COFI tends to lag movements in other rates by three to six months.

The leading multifamily lenders for 2006 were Wachovia, Washington Mutual Bank, and Deutsche Bank Commercial Real Estate, according to a multifamily lending report from the Mortgage Bankers Association.Retaining its 2005 position, Wachovia was again the largest multifamily lender in 2006 in dollar terms, closing 1,465 multifamily loans for a total of $16.1 billion. The average loan size was $11 million. WaMu Bank and Deutsche Bank CRE were the No. 2 and No. 3 multifamily lenders, with multifamily lending activity of $9.2 billion and $6.3 billion, respectively. Multifamily lending rose by $5 billion in 2006, according to the MBA. The multifamily lending market grew by 4%, from $133 billion in closed loans in 2005 to $138 billion in 2006, the trade group said. The report, which focuses on apartment buildings with five or more units, also found an average loan size of $2.7 million based on 50,959 loan originations. Very small multifamily loans saw a dropoff in dollar volume of 13% in 2006, the MBA reported. The organization can be found online at http://www.mortgagebankers.org.

October was the best month of the year so far in terms of traditional primary new mortgage insurance written by members of the Mortgage Insurance Companies of America.However, because that same month was the worst in the bulk category since the trade group began releasing its statistics using the current format, overall production was down 9%. Primary new insurance written totaled $26.3 billion in October, down from $28.9 billion in September. The traditional channel's volume totaled $25.3 billion, compared with $23.1 billion in September. But the bulk channel had just $911.5 million in volume, down from September's $5.8 billion. Application volume increased from 168,073 in September to 183,560. New pool risk written fell from $55.1 million in September to $23.6 million. October's cure/default ratio was the lowest of the year so far, falling over five percentage points to 56.1%. There were 33,290 cures and 59,308 defaults. MICA can be found online at http://www.micanews.com.

Top Bush administration officials are urging Congress to pass Federal Housing Administration reform legislation before the end of the year, and they appear ready to compromise on a risk-based premium structure for FHA mortgages."We are working with the leadership in Congress to resolve differences on this issue," a Department of Housing and Urban Development spokesman said. A few weeks ago, it appeared that HUD was ready to move ahead administratively with a risk-based premium structure despite congressional opposition. But now HUD does not want to antagonize Congress while there is still a chance the Senate could act on FHA reforms in the next few weeks, which would increase refinancing options for troubled subprime borrowers. "It has been sitting in the Senate for too long," HUD Secretary Alphonso Jackson told an Office of Thrift Supervision housing forum. "Each day of delay unnecessarily places thousands of families at risk of foreclosure."

The Treasury Department's "teaser freezer" plan to help subprime borrowers facing resets will have a "limited" impact on the total number of loan modifications and the coming wave of foreclosures, according to some Wall Street analysts.Reports by UBS and Friedman Billings Ramsey & Co. point out that the group of homeowners targeted for modifications -- where the servicer freezes the interest rate at the starter (or "teaser") rate -- would likely get their loans modified without a government-sponsored plan. "That is why we suspect this effort will have only marginal impact on total modifications and little impact on the coming wave of foreclosures," said Thomas Zimmerman, a managing director at UBS Investment Bank. FBR analyst Paul Miller contends that the teaser freezer plan simply represents what is already being done in the market. "In our opinion, the plan will affect a limited number of borrowers, many of whom might receive a loan modification even without a government-sponsored plan," Mr. Miller says. "The plan will not enable borrowers who are unable to pay their mortgages to keep their homes or support home prices."

Sen. Hillary Rodham Clinton, D-N.Y., is urging the Bush administration to impose a 90-day moratorium on subprime foreclosures so that at-risk borrowers are not harmed before lenders and servicers are able to implement a freeze on interest rates.The presidential candidate said she is "encouraged" by news that Treasury officials are working with the mortgage industry to curb foreclosures and freeze interest rates on adjustable-rate subprime mortgages. A freeze of at least five years or until the mortgage is converted to an affordable fixed-rate mortgage will "give the housing market time to stabilize," Sen. Clinton says in a letter to Treasury Secretary Henry Paulson. In March, Sen. Clinton called for "foreclosure timeout," which the Bush administration dismissed as unnecessary. "While you and others in the administration misdiagnosed the problem, over 1 million additional foreclosure notices were sent out," the New York Democrat said.

Hedge fund giant Cerberus Capital Management will not purchase Option One Mortgage Corp. from H&R Block, a decision that will result in the death knell for Option One's 620-person production unit.The termination of the sale was announced Tuesday morning before the market opened. H&R Block has hired Lazard Asset Management to sell Option One's servicing division, which has $62 billion in subprime receivables, ranking fourth nationwide, according to the Quarterly Data Report. Earlier this year Cerberus -- which also controls GMAC Mortgage -- agreed to buy Option One for $1 billion, but as the subprime crisis worsened, most mortgage executives familiar with the deal expected Cerberus to back out. Block said Option One would stop funding loans immediately and dismiss 620 workers, taking a $75 million charge. Option One has $30 million of mortgages in its origination pipeline, most of which it will sell to Fannie Mae or Freddie Mac. Option One, based in Irvine, Calif., can be found online at http://www.optiononemortgage.com.

Three classes of Lehman Brothers Inc.'s commercial mortgage pass-through certificates, series 2006-CCL-C2, have been placed on Rating Watch Negative by Fitch Ratings.The affected securities are classes M, ASH-1, and ASH-2. Fitch also upgraded one class in the transaction and affirmed the ratings of six other classes. The negative rating actions were attributed to the transfer of the Avalon at Seven Hills loan, representing 10.9% of the pool, to special servicing. The loan is secured by a former multifamily property in Henderson, Nev. "There is an oversupply of condominiums in the Las Vegas metropolitan area, and unit sales have occurred slower than anticipated at issuance," the rating agency reported. "Special servicing fees and other fees associated with the loan's resolution could result in interest shortfalls to the trust."

Class B-7 of DLJ Commercial Mortgage Corp's series 1999-CG1 commercial mortgage pass-through certificates has been downgraded from B-minus to CCC/DR1 by Fitch Ratings.Fitch also affirmed the ratings on 11 other classes in the transaction. "The downgrade is due to expected losses on specially serviced loans and the refinance risk of upcoming maturities," the rating agency said. The largest specially serviced asset is a retail property in Roanoke Rapids, N.C., that has been liquidated, Fitch reported. The second specially serviced asset is a retail property in Joliet, Ill., that is in foreclosure.

Post Properties, an Atlanta-based multifamily real estate investment trust, has been designated the "Bear of the Day" for Dec. 3 by Zacks Equity Research, Chicago.The Bear of the Day is a stock expected to underperform the markets over the next three to six months. Zacks said the REIT continues to report good quarterly results, but that "there are signs that rental rate growth will slow in the coming quarters and could turn negative in 2008 as the U.S. economy heads toward a recession. Despite a sector-wide selloff over the past six months, Post still trades at an inflated valuation due to persistent buyout rumors." Zacks can be found online at http://www.zacks.com, and Post can be found at http://www.postproperties.com.

Mortgage servicers are going to face many challenges in processing loan modifications of subprime adjustable-rate mortgages, including the capacity of their systems to deal with the loan impairment requirements of Financial Accounting Standard 114.Mortgage servicers are concerned that "they don't have the systems infrastructure in place today" to manage loan modifications in compliance with FAS 114, Steve Davies of PricewaterhouseCoopers told a meeting of the American Institute of Certified Public Accountants on Nov. 30. Once a loan is modified, it has to be evaluated for impairment on an individual basis to determine the loss. Servicers generally evaluate groups of mortgages segmented into loan types. Industry groups are expected to ask the Financial Accounting Standards Board for some relief.

A panel of mortgage professionals -- including the chief executives at Fannie Mae and Washington Mutual -- have told an OTS-sponsored forum that they believe a series of interest rate cuts by the Federal Reserve could help alleviate the current liquidity crisis facing the nonconforming mortgage market."The Fed needs to keep cutting rates," WaMu chairman and CEO Kerry Killinger told the Office of Thrift Supervision housing forum, adding that "We need liquidity for the immediate future, not three years from now." Mr. Mudd said lower rates could help banks clear out their inventory of collateralized debt obligations and specialized investment vehicles. North Carolina Banking Commissioner Joseph A. Smith Jr. cautioned that too many rate cuts "could cause another mess" by adding too much liquidity.

Hope Now alliance members are close to agreeing on a systematic approach for dealing with resets on adjustable-rate mortgages, but they are still developing criteria for determining which borrowers will be eligible for streamlined refinancings and loan modifications."I am confident they will finalize these standards soon," Treasury Secretary Henry Paulson told a housing forum sponsored by the Office of Thrift Supervision. Secretary Paulson also stressed that he expects the industry to implement the streamlined procedures "quickly" and create benchmarks for measuring their success in preventing foreclosures. One mortgage industry executive said he expects that an agreement on the criteria and for freezing the initial interest rate for borrowers facing an unaffordable reset will be worked out by the end of the week. Meanwhile, Secretary Paulson saluted the Hope Alliance members for expanding the capacity and hours of its 888-995-HOPE hotline so that struggling homeowners can talk with a mortgage counselor 24 hours a day.

Two classes of Asset Backed Funding Corp. mortgage pass-through certificates have been downgraded by Fitch Ratings.Class M-2 of ABFC series 2002-SB1 has been downgraded from A to BBB and placed on Rating Watch Negative, and class M-3 has been downgraded from BB to B-minus/DR1 and removed from Rating Watch Negative. The ratings on two other classes in the deal were affirmed. The downgrades were attributed to the deterioration of credit enhancement relative to loss expectations. The collateral consists of first- and second-lien subprime mortgage loans.

The percentage of first-time buyers in California able to afford an entry-level home stood at 24% in the third quarter of 2007, unchanged from the level recorded a year earlier, according to the California Association of Realtors.The minimum household income needed to purchase an entry-level home at $482,910 in California was $99,590 in the third quarter, based on an adjustable interest rate of 6.56% and assuming a 10% downpayment, according to CAR's First-time Buyer Housing Affordability Index. (First-time buyers typically purchase a home equal to 85% of the prevailing median price.) The monthly payment, including taxes and insurance, stood at $3,320. At 48%, the High Desert region was the most affordable region in the state, and Santa Barbara was the least affordable, at 11%. CAR can be found on the Web at http://www.car.org.

Citing the subprime mortgage crisis, MortgageBrokers.com Holdings Inc., Toronto, has announced the suspension of plans to enter the U.S. mortgage market.The company said it would suspend the plans "until such time as the full economic effect of the current market turmoil is known." MortgageBrokers.com said the U.S. downturn will prevent it from reaching previous revenue projections for this year, and that the fallout from the crisis has affected the performance of its Canadian operations. The company reported that it had increased its national sales force of mortgage agents from 247 to 307 in the third quarter, but that the ramp-up of newly recruited agents "has been slower than expected." The mortgage brand and technology firm can be found online at http://www.mortgagebrokers.com.

More than 224,000 foreclosure filings were reported nationwide in October, up 2% from the level recorded in September and up 94% from that of a year earlier, according to RealtyTrac, an online foreclosure marketplace based in Irvine, Calif.The nation's foreclosure rate stood at one foreclosure filing for every 555 households, the company said in its October 2007 U.S. Foreclosure Market Report. (Foreclosure filings include default notices, auction sale notices, and bank repossessions.) "Overall foreclosure activity continues to register at a high level compared to last year, but it appears to have leveled off over the past two months after hitting a high for the year in August," said James J. Saccacio, chief executive officer of RealtyTrac. "Default notices were down nearly 9% in October, indicating that some of the efforts on the part of homeowners, lenders, and advocacy groups to find alternatives to foreclosure may be starting to have an impact. On the other hand, bank repossessions were up nearly 35%, evidence that more homeowners who enter foreclosure are losing their homes." The company said Nevada, California, and Florida recorded the highest foreclosure rates in October. The company can be found online at http://www.realtytrac.com.

Bear Stearns & Co. recently laid off 100 account executives working at its subprime wholesale division in Irvine, Calif., according to industry sources.The layoffs affect employees of Encore Credit Corp., a nonprime wholesaler that Bear took over earlier this year and recently folded into its Wall Street-managed mortgage group. "They have about 50,000 square feet of office space in Irvine," said one mortgage executive, "but they don't have too many people left." The AE job cuts were among 650 positions that Bear terminated the week of Nov. 25. A Bear spokeswoman declined to provide any breakdown on the job cuts.

Treasury officials and mortgage servicers agree on the need to expedite loan modifications for certain subprime borrowers but have yet to reach a consensus on the specifics of a plan that could lead to a massive restructuring of ARMs that will reset in 2008 and 2009.As one veteran mortgage banker put it: "Who's going to pay for this plan?" The plan centers on identifying borrowers who cannot afford a reset and freezing the interest rate for at least three (and maybe five) years to prevent a default. Several servicers are already allowing borrowers to remain at the starter rate for five years. Treasury Secretary Henry Paulson wants a commitment from large servicers to take an aggressive approach and expedite such loan modifications. However, there are concerns about litigation risk and restrictions in servicing contracts, as well as the losses that lenders, investors, and servicers might take. At a Washington forum scheduled for Dec. 3, Secretary Paulson is expected to discuss the status of the loan modification talks he has held with servicers, including Bank of America, Countrywide Home Loans, Washington Mutual, and Wells Fargo.