Originations

Congress is considering legislation to raise the loan limits for Fannie Mae, Freddie Mac, and the Federal Housing Administration, which could give the government-sponsored enterprises and the FHA a large share of the jumbo mortgage market, according to banking expert Karen Shaw Petrou."Atop this is talk from Treasury that the GSEs could also go beyond their current charter to rely on self-insurance for high-risk mortgages," she told a group of general counsels from large banks. Treasury Secretary Henry Paulson recently suggested that the mortgage insurance requirements on Fannie Mae and Freddie Mac could be relaxed to facilitate refinancings of subprime borrowers with little or no equity in their homes. "I think lenders and securitizers are looking at legislation that would put the federal government -- directly through the FHA and indirectly through the GSEs -- into every segment of the mortgage market from the highest-risk subprime loans to jumbo, prime-quality loans," she said. Ms. Petrou is the managing partner of Federal Financial Analytics in Washington.

National banks should have high standards for underwriting residential mortgages even if they are selling the loans to Wall Street conduits or other investors, according to the comptroller of the currency.National banks "simply cannot cede underwriting standards" to third-party purchasers of mortgages, Comptroller John Dugan told the American Bankers Association at its annual convention in San Diego. He warned that examiners expect banks to adhere to regulatory guidance in making subprime and nontraditional mortgages, including loans originated for sale. There can be some deviation, "but only so long as the risk differences are manageable" and there is a "credible prospect of repayment," Mr. Dugan said. The comptroller noted that national banks avoided significant losses on subprime loans because they sold their weaker credits in the secondary market. But he stressed that banks are not "primarily responsible for the worst abuses and losses arising from subprime credit." The ABA can be found on the Web at http://www.aba.com.

Servicers of private-label mortgage-backed securities are concerned that some investors are preparing to sue them for approving loan modifications, according to the Consumer Mortgage Coalition."We are aware of securities holders that have begun scrutinizing the actions of servicers and the ways the servicers' actions have allegedly improperly hurt the interests of the securities holders by insufficient adherence to the [servicing contract's] restrictions on modifications and related actions," CMC says in a letter to Sheila Bair, chairman of the Federal Deposit Insurance Corp. The FDIC chief recently said she is "frustrated" with the slow pace of modifications to help subprime borrowers avoid foreclosure. The CMC letter also points out that "global" remedies, such as forgoing interest rate increases on 2/28s and 3/27s, would violate servicing contracts. "We believe that the 'loan by loan' methods we use are appropriate and allow all the stakeholders -- the borrower, the investor and the servicer -- to reach the correct outcome…," CMC executive director Anne Canfield says in the Oct. 6 letter.

Jumbo lender Thornburg Mortgage, Santa Fe, N.M., says its loss on asset sales will total $1.1 billion in the third quarter, or $236 million more than it originally anticipated.The publicly traded real estate investment trust -- which is slated to report earnings on Oct. 16 -- said it has sold $22 billion worth of what it calls "high-quality" adjustable-rate mortgages since Aug. 10. Even though its delinquency ratio is among the lowest in the mortgage industry, it has been selling assets as a way to bolster its liquidity. At the end of September its seriously delinquent ratio was just 0.27%. Commenting on the revised loss estimate, company president Larry Goldstone noted that, "The global dislocation of the mortgage finance and credit markets this past summer has had a greater impact on our balance sheet than we initially estimated. However, we have begun to see a modest improvement in financing conditions since August. Despite the greater-than-previously-reported losses, we believe we have adequate liquidity to support our current borrowings portfolio and excess capital to continue to fund new loans." Thornburg can be found online at http://www.thornburg.com.

Deutsche Bank recently laid off 580 workers at MortgageIT, its New York-based alternative-A/conventional lending affiliate, industry sources have told MortgageWire.A spokeswoman for the bank confirmed that layoffs had occurred but would not comment further. The job cuts reportedly took place Oct. 2. The spokeswoman issued a statement that says, "Deutsche Bank still maintains an active loan origination platform, but is reducing its residential mortgage origination business in line with current market conditions and industry demand." MortgageIT funds loans in multiple states through three production channels: retail, wholesale, and correspondent. All three channels are still open. The company does not service loans. Deutsche Bank can be found online at http://www.db.com.

Class M of Banc of America Commercial Mortgage Inc. commercial mortgage pass-through certificates, series 2001-1, has been downgraded from B3 to Caa1 by Moody's Investors Service.Moody's also upgraded five classes in the transaction and affirmed the ratings on 10 others. The downgrade was attributed to realized losses from the specially serviced loans and increased dispersion of loan-to-value ratios. The certificates are collateralized by 149 mortgage loans, of which four, representing 2.5% of the pool, are in special servicing.

Class K of Wachovia Bank Commercial Mortgage Trust commercial mortgage pass-through certificates, series 2005-WHALE 6, has been downgraded from Baa3 to Ba2 by Moody's Investors Service.Moody's also affirmed the ratings on six other classes in the transaction. The downgrade was attributed to the poor performance of the One Oliver Plaza loan, secured by a Class A office building in the central business district of Pittsburgh, and the 230 Peachtree loan, secured by an office building in downtown Atlanta. Both loans have low occupancy levels. "Property income is sufficient to cover debt service on the pooled debt amount for each of the two loans but is insufficient to cover the debt service on the total debt amount," Moody's said. The rating agency can be found online at http://www.moodys.com.

Over 140 classes of net interest margin notes from more than 20 issuers have been downgraded by Fitch Ratings as a result of the performance of the NIM securities and, in the vast majority of cases, of changes to its subprime loss forecasting assumptions.Fitch also affirmed the ratings on more than 70 NIM classes. Among the NIM securities affected by the latest downgrades are: 26 classes from 13 Structured Asset Investment Loan Trust deals; 17 classes from 17 Structured Asset Backed Receivables deals; 10 classes from four Park Place deals; eight classes from three J.P. Morgan deals; and seven classes from six Structured Asset Securities Corp. deals. The rating actions were attributed to actual pay-down performance of the NIM securities to date compared with initial projections, as well as changes to 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." Fitch can be found online at http://www.fitchratings.com.

Simon Property Group Inc., an Indianapolis-based real estate investment trust, has invoked the accordion feature of its unsecured corporate credit facility, increasing its revolving borrowing capacity from $3.0 billion to $3.5 billion.The facility will mature in January 2010 and contains a one-year extension option. The base interest rate is 37.5 basis points above the London interbank offered rate, the company said. Simon can be found online at http://www.simon.com.

Benjamin S. Nummy has been named a managing principal at Equibase Capital Group LLC, a real estate investment firm based in Chicago.Equibase said Mr. Nummy will become a member of the firm's management and investment committees and join its efforts in sourcing, structuring, and executing investment transactions. Before joining Equibase, Mr. Nummy was an executive director in the Real Estate Group at Morgan Stanley.

Ray Wirta, vice chairman of CB Richard Ellis, has announced the creation of a proprietary Web-based system that enables smaller investors to own commercial real estate.Mr. Wirta, 63, said the system is being made available through NexREGen, a Newport Beach, Calif.-based company he founded to allow investors with as little as $2,500 to enter the CRE market with low risk and high return. "There is a growing market of younger investors that want nontraditional yet profitable ways to invest their money," Mr. Wirta said. NexREGen, which stands for the next real estate generation of investors, "is the first company to make an opportunity like this available to the public online," he said. The company can be found on the Web at http://www.nexregen.com.

Miami Valley Bank was cited by federal regulators for purchasing poor-quality subprime mortgages before they closed the Lakeview, Ohio, bank Oct. 4 and placed it in receivership.The bank had $86.7 million in total assets when it failed, including nearly $30 million in subprime mortgages, according to the Federal Deposit Insurance Corp. In April, the FDIC ordered the bank to reverse a purchase of $7 million in mortgages from affiliate MVB Mortgage Corp., Southfield, Mich. The temporary cease-and-desist order said the bank's mortgage activities were "likely to cause insolvency or significant dissipation of assets or earnings." The FDIC also fined a former owner of the bank. The Citizens Banking Co., based in Sandusky, Ohio, paid a 2% premium for the $62 million in insured deposits. The failed bank had $14 million in uninsured deposits, and the depositors will become creditors of the receivership. The FDIC has retained all the assets of failed bank.

State attorneys general and bank commissioners have initiated an effort to monitor the top 20 subprime mortgage servicers to ensure that borrowers get the loan modifications they need."We feel this is a serious effort to avert a foreclosure avalanche that we potentially face," Iowa AG Tom Miller told MortgageWire. A working group of 11 AGs and three bank commissioners recently met with the top 10 subprime servicers in Chicago to discuss loan modifications. The working group expects the servicers to provide regular reports on their loss mitigation efforts. The state officials also expect to have contact with the servicers on a weekly or even daily basis.

Washington Mutual, Seattle, says its third-quarter net income will likely fall by 75% because of subprime and home equity-related writedowns of almost $1 billion.WaMu, the nation's largest thrift, anticipates not only chargeoffs in its loans "held-for-sale" account, but also securities trading losses of $150 million and an impairment charge of $110 million on investment-grade mortgage-backed securities. In a new research note, Credit Suisse called WaMu's exposure to higher credit risk "outsized." CS says WaMu "is far from being out of the woods," adding that, "We expect the trend of higher NPAs [nonperforming assets]" to persist through 2008. According to the Quarterly Data Report, WaMu is the nation's 13th-largest subprime servicer. with $45 billion in receivables.

Merrill Lynch has estimated that it will take $4.5 billion in credit crunch-related writedowns (net of hedges) to subprime mortgages, collateralized debt obligations, and leveraged finance commitments in the fiscal third quarter.The company pegged its expected net loss for the quarter at up to 50 cents per share. "While market conditions were extremely difficult and the degree of sustained dislocation unprecedented, we are disappointed in our performance in structured finance and mortgages," said Merrill Lynch chairman and chief executive officer Stan O'Neal. "We can do a better job in managing this risk." The company also has confirmed multiple reports that at least two of its fixed-income executives, Osman Samerci and Dale Lattanzio, have left and that it has promoted David Sobotka -- head of commodities in the fixed-income, currencies, and commodities unit -- to global head of that unit.

The mortgage industry suffered an astounding job loss of 27,200 positions in August as the subprime industry collapsed amid concerns about foreclosures and a near-dormant secondary market for many nonconforming loan types.In mid-September, National Mortgage News reported that publicly traded lenders alone had cut at least 20,000 positions during August. On Friday, the U.S. Bureau of Labor Statistics reported that employment in the mortgage banker/broker sector fell to 428,300 positions from 455,500 in July. Revised figures show that 4,200 mortgage full-timers lost their jobs in July, not 2,100 as originally reported. The government says 76,800 jobs have been lost in the mortgage industry since the start of this year. The BLS can be found online at http://stats.bls.gov.

Fitch Ratings has completed the "re-rating" of its rated universe of 2006 vintage U.S. subprime residential mortgage-backed security transactions, consisting of 228 deals with an outstanding balance of $173 billion.Fitch's most severe rating actions affected a subsector of the subprime market, RMBS exclusively backed by closed-end second-lien loans, consisting of 274 rated classes with a par balance of $6.6 billion. Fitch downgraded 32 of 51 triple-A rated closed-end second-lien classes from this cohort. For first- and second-lien transactions combined, Fitch said it downgraded 1,003 classes with a par balance of $18.4 billion and affirmed 2,228 classes with a par balance of $155.1 billion. Fitch is now reviewing subprime RMBS ratings from the first quarter of 2007. Fitch said it initiated the review of subprime RMBS ratings in July due to the "unprecedented reversal in home prices and the resulting impact on high-risk mortgage products." The rating agency can be found online at http://www.fitchratings.com.

Almost one-third (31%) of seniors are carrying $100,000 or more of mortgage debt, according to a survey of seniors aged 62-75 from Financial Freedom Senior Funding Corp., a reverse mortgage lender based in Irvine, Calif.More than half, 56%, said they expect it to take 10 years to pay off the mortgage debt, and 11% said they never expect it to be paid off. The findings come from Financial Freedom's Senior Sentiment Survey, which explores the financial, social, and quality-of-life attitudes of older Americans. The company, a subsidiary of IndyMac Bank FSB, can be found online at http://www.financialfreedom.com.

The average 30-year fixed mortgage rate fell from 6.42% to 6.37% for the seven-day period ended Oct. 4, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate fell from 6.09% to 6.03%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages declined from 6.15% to 6.11%, and the average rate for one-year Treasury-indexed ARMs decreased from 5.60% to 5.58%, Freddie Mac reported. Fees and points averaged 0.5 of a point for fixed-rate mortgages and hybrid ARMs, and 0.6 of a point for one-year ARMs. "Mortgage rates eased slightly this week following three weeks of increases," said Frank Nothaft, Freddie Mac's chief economist. "The initial effects of the credit market turmoil that began in August are starting to emerge in housing statistics. New-home sales in August fell to the slowest pace in more than seven years, and the median sales price had the largest 12-month decline since 1970." A year ago, the average 30-year and 15-year fixed rates were 6.30% and 5.98%, respectively, and the average hybrid and one-year ARM rates were 6.00% and 5.46%, Freddie Mac said. Freddie can be found online at http://www.freddiemac.com.

A pilot program aimed at the nation's estimated 6.8 million non-owners with "thin" credit files is being tested in the nation's capital, where an alliance of public and private entities have pledged $200 million to get the initiative started.Under the R-Home program, consumers who are often unable to qualify for financing under traditional underwriting guidelines or are steered toward high-price loans will be qualified using an innovative automated program powered by Anthem, First American Corp.'s alternative credit-evaluation model. CitiMortgage will buy loans generated by nonprofit and private-sector participants and sell them on the secondary market, but retain the servicing rights. Borrowers will be counseled before the purchase, and counseling will be made available afterwards if they have trouble making payments. If problems persist longer than 60 days, the Neighborhood Housing Services of America says it will repurchase the loans and work "personally and patiently" with borrowers to get them back on track. "We see this as a model of how all borrowers should be supported, not just low-income borrowers," said Mary Lee Widener, president of NHSA.