Originations

The National Association of Mortgage Brokers has succeeded in getting a clarification on the treatment of yield-spread premiums included in a predatory lending bill that the House is expected to pass on Thursday.Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, and Rep. Spencer Bachus, R-Ala., agreed to insert language in the manager's amendment that allows the financing of the broker's fee, provided that the fee is "fully and clearly disclosed to the consumer early in the application process." The manager's amendment also includes a new "absent" creditor provision, sponsored by Rep. Mel Watt, D-N.C., that would hold securitizers accountable, if the lender or assignee goes out of business, for fixing subprime mortgages that violate the lending standards in the bill. The National Community Reinvestment Coalition board member said holding Wall Street accountable is essential to prevent "irresponsible" lending and investing. Without a strong assignee liability provision, NCRC president John Taylor said, the investment banks will have no incentive to do loan modifications.

Ramco-Gershenson Properties Trust, Farmington Hills, Mich., has completed the redemption of all 1 million of its outstanding 9.5% series B cumulative redeemable preferred shares.The redemption price was $25 a share plus accrued and unpaid dividends, resulting in an aggregate payout of $25.3 million, the real estate investment trust said. "With the redemption of the series B preferred shares, the company has no outstanding issues of preferred stock," said Dennis Gershenson, president and chief executive officer of Ramco-Gershenson. The shopping center REIT can be found on the Web at http://www.rgpt.com.

Fitch Ratings has downgraded $37.2 billion worth of collateralized debt obligations in 84 structured finance CDOs.The rating agency said the actions followed a review of 55 U.S. and European structured finance CDOs executed on a synthetic basis, and 29 U.S. and Asian structured finance CDOs executed on a cash/hybrid basis. The downgrades were based on continued credit deterioration in the underlying collateral and changes to the default forecasting assumptions of the rating agency's default model, Fitch said. "The updated assumptions reflect increased probabilities of default with respect to recent vintage subprime residential mortgage-backed securities and [structured finance] CDOs," the rating agency said.

Investor aversion to subprime credits has pushed the issuance of subprime mortgage-backed securities down to $3.8 billion in October -- the lowest level since July 2001, according to a report by Friedman Billings Ramsey.The FBR Investment Management Inc. report shows that the issuance of private-label subprime MBS has fallen by 91% since October 2006, when Wall Street sold $41.9 billion of such securities. Private-label alternative-A MBS issuance fell from $7.9 billion in September to $6.3 billion in October. In October 2006, Wall Street sold $25.8 billion in alt-A MBS. The Structured Finance Insights report also shows that private-label MBS issuance (including prime, alt-A, and subprime) totaled only $19.5 billion in October, down 50% from that of the previous month and 81% from that of a year earlier. FBR can be found on the Web at http://www.fbr.com.

Over 44 million homeowners could see the value of their properties decline by an average of $5,000 due to a nearby subprime foreclosure, according to a new study by the Center of Responsible Lending."The total decline in house values and tax base from nearby foreclosures will be $223 billion," the CRL issue paper says. The Durham, N.C.-based advocacy group warns that minority communities with large concentrations of subprime borrowers could experience more severe declines in property values. The CRL report is based on an academic study that found one foreclosure in a neighborhood could reduce surrounding property values by 0.9%. It is also based on CRL projections that 19.4% of subprime loans originated in 2005 and 2006 will end up in foreclosure and that 1.1 million borrowers will lose their homes. "By any measure, the epidemic of home losses is severe, and will not only harm families who lose their homes, but also nearby homeowners who suffer drops in their property values," the CRL paper concludes. The group supports legislation that would allow bankruptcy judges to restructure mortgages. It can be found online at http://www.responsiblelending.org.

Even though the future of loan brokering looks dicey, the business will survive, according Countrywide Financial Corp. chairman and chief executive Angelo Mozilo.In a recent speech at the annual UCLA Real Estate Conference, Mr. Mozilo said, "Mortgage brokers will continue to be an important channel, but the ultimate financing will come from banks and thrifts, or conduits directly related to their activities." He said banks and thrifts will be the "primary providers" of U.S. mortgage finance money in the future. A recent report issued by Wholesale Mortgage Research & Consulting, Columbia, Md., predicted that the number of loan brokerage firms operating in the United States would fall by one-third, to 35,000, by the end of 2009.

Countrywide Financial Corp. funded just $3.2 billion in mortgages through loan brokers during October, a startling 57% decline from the level of a year earlier.During the month its retail production fell by 29%, while loans bought through the correspondent channel declined 52%. The Calabasas, Calif.-based company funded $22 billion in October, a 48% drop from the level recorded a year earlier. Like most residential lenders, Countrywide has been hurt by the meltdown in the subprime and nonconforming niches and a credit crunch in the secondary market. In a statement, Countrywide president David Sambol noted that 90% of the company's production is now funded through its thrift affiliate. Countrywide can be found online at http://www.countrywide.com.

Four tranches of securities issued by Amortizing Residential Collateral Trust Mortgage Pass-Through Certificates, series 2004-1, have been downgraded by Moody's Investors Service.The downgrades were as follows: class M5, from A3 to Baa2; class M6, from Baa1 to Baa3; class M7, from Baa2 to Ba1; and class M8, from Baa3 to B1. The downgrades were based on an analysis of credit enhancement levels provided by excess spread, overcollateralization, and subordinate classes relative to projected and stressed losses, Moody's said. The collateral consists primarily of first-lien, fixed- and adjustable-rate subprime mortgage loans.

Federal Realty Investment Trust, Rockville, Md., has announced the closing of a new $200 million unsecured term loan facility.The equity real estate investment trust said the new facility has a one-year term with a one-year extension option and bears interest at 57.5 basis points over the London interbank offered rate. Wachovia Capital Markets LLC is the lead arranger and book-runner for the facility. The REIT can be found on the Web at http://www.federalrealty.com.

SecurityNational Mortgage Co., Salt Lake City, has announced the renewal of a $250 million warehouse line of credit with Countrywide Warehouse Lending.The company said the credit facility is divided equally between a traditional warehousing structure and an early purchase facility. The company also has a $200 million credit facility with UBS that was renewed earlier this year.

Standard & Poor's Ratings Services has announced a revision of its outlook on Washington Mutual Inc. and its subsidiaries from stable to negative.S&P also affirmed its A-minus/A-2 counterparty credit rating on WaMu. The outlook revision was based on lower earnings from WaMu's core mortgage banking business and "the negative trends in the national housing and mortgage markets that will depress earnings in the next year," said S&P credit analyst Victoria Wagner. WaMu's projections for higher credit provisions through the first quarter of 2008 are "quite sizable and reflect not only the weak housing markets, but the significant increase in subprime-related credit losses, the rise in second-lien home equity loans," the rating agency said. WaMu's other core retail banking businesses are seeing "good and stable performance," and its mortgage banking business has significant geographic diversification and "a significant reduction in subprime mortgage risk," S&P said. The current investigation by the New York attorney general into WaMu's appraisal practices with eAppraiseIT is not a consideration in the outlook revision, S&P said.

In response to the downturn in the homebuilding industry, Levitt and Sons LLC, Fort Lauderdale, Fla., and 37 of its subsidiaries have filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code.The company said the downturn has been particularly sudden and steep in Florida and in the Southeast, where Levitt and Sons operates. For the past several months, Levitt has been involved in intense negotiations with its bank lenders to restructure its debt and obtain funding to complete unfinished homes and other projects that were suspended due to the company's financial condition. The negotiations have not been successful to date but are still under way, the company said. Lawrence E. Young, who has been named chief restructuring officer, said the homebuilder will seek a mechanism to facilitate the completion of some unfinished homes. "Likewise, we seek a resolution that will allow closings to take place promptly for previously completed homes," he said. "Our principal objective during the Chapter 11 process will be to identify the best means of maximizing recoveries for all creditor constituencies, including our customers and employees. As part of this process, we will explore the potential sale of all or some of Levitt and Sons' assets."

The parent company of Republic Mortgage Insurance Co., Old Republic International Corp., Chicago, has disclosed the acquisition of significant equity positions in two of its rivals in the mortgage insurance business.ORI has purchased over 12 million shares of PMI Group Inc., Walnut Creek, Calif., over an 11-week period in open-market purchases. This represents a 15.1% stake in that company. At the same time, it has bought 8.98 million shares of MGIC Investment Corp., Milwaukee, in the open market, giving ORI an 11.0% stake. In a Securities and Exchange Commission filing, ORI said it intends to hold the stakes "strictly as passive investments and not for the purpose of or with the effect of changing or influencing control" of either company. As of midday Nov. 12, ORI was trading at $15.23 per share, up $0.16 from its close on Nov. 9, when the news became public. PMI stood at $14.92, up $0.04, and MGIC was at $22.07, up $0.77.

The House is on track to pass a Mortgage Reform and Anti-Predatory Lending bill Thursday, and the lawmakers will likely attach a separate bill that addresses escrow, appraisal, and servicing issues.The House Financial Services Committee approved the predatory-lending bill by a 45-19 vote Nov. 6. The next day the committee approved the servicing reform bill (H.R. 3837), sponsored by Rep. Paul Kanjorski, D-Pa., by voice vote. The Kanjorski bill establishes enforceable national appraisal independence standards with tough penalties for lenders who pressure appraisers to inflate property values. The bill also requires escrow accounts for taxes and insurance on most subprime mortgages and creates standards for force-placed insurance. New York Attorney General Andrew Cuomo endorsed the appraisal reforms at a news briefing arranged by Rep. Kanjorski last week. The New York AG has raised issues about major institutions that have allegedly been pressuring appraisers.

Top executives at Fannie Mae now believe that home prices will not "begin to stabilize until the end of 2009," Fannie Mae president and chief executive officer Daniel Mudd told investors and analysts on Friday.As a result, he said Fannie Mae has taken additional steps to tighten risk management, including an increase in the company's guarantee fee last week. Fannie Mae affirmed its 2007 credit loss estimate of 4 to 6 basis points of its total book of business. However, Mr. Mudd said the credit loss ratio could move up to 8-10 bps next year, an estimate that assumes a 4% national decline in home values and no national recession.

Class WA of Wachovia Bank Commercial Mortgage Trust commercial mortgage pass-through certificates, series 2006-WHALE 7, has been downgraded from Ba1 to Ba3 by Moody's Investors Service.In addition, Moody's upgraded one class, affirmed the ratings of 12 classes, and placed three classes on review for possible downgrade. The downgrade of the nonpooled class WA, which is secured solely by the Westin Aruba Resort & Spa Loan, was attributed to the poor performance of that loan. Classes BP-1, BP-2, and CM were placed on review for possible downgrade due to declines in property occupancy and net cash flow, the rating agency said. The certificates are collateralized by 14 loans ranging in size from less than 1.0% to 39.8% of the pool balance. The trust has not realized any losses since securitization and no loans are in special servicing.

Eleven classes of certificates from four deals issued by GSAMP Trust in 2002 and 2004 have been downgraded by Moody's Investors Service.The affected transactions are GSAMP Trust series 2002-HE, 2004-HE1, 2004-HE2, and 2004-SEA2. The downgrades were attributed to an analysis of the credit enhancement provided by subordination, overcollateralization, and excess spread relative to expected losses. GSAMP Trust 2002-HE, 2004-HE1, and 2004-HE2 are backed by subprime fixed- and adjustable-rate mortgage loans, while GSAMP Trust 2004-SEA2 is backed by seasoned subprime fixed-rate mortgage loans.

Health Care REIT, Toledo, Ohio, has announced that it joined the S&P MidCap 400 Index after the close of trading on Nov. 8.The real estate investment trust, a constituent of S&P's REIT Composite, is an equity REIT that invests in health care real estate and in housing for senior citizens. It can be found on the Web at http://www.hcreit.com.

Standard & Poor's has announced that Realty Income Corp., Escondido, Calif., will replace Nuveen Investments Inc. in the S&P MidCap 400 Index after the close of trading on Nov. 13.Realty Income, a constituent of S&P's REIT Composite, engages in the acquisition and ownership of commercial real estate. Nuveen is being replaced in the index because it is being acquired by an investor group.

Arbor Realty Trust Inc., a real estate investment trust based in Uniondale, N.Y., has entered into two financing agreements totaling over $540 million aimed at replacing short-term facilities with longer-term debt and eliminating market-to-market risk.The multifamily and commercial REIT said one of the agreements includes a $473 million term loan with a $100 million revolving commitment that will be used exclusively to finance new originations. The other is a $69 million term loan. Both agreements have a commitment period of two years with a one-year extension option. Arbor can be found online at http://www.thearbornet.com.