Originations

Sales of existing single-family homes fell 3.8% in August as problems in the subprime market spread to jumbo mortgages, according to the National Association of Realtors."The unusual disruptions in the subprime market, including a significant rise in jumbo loan rates, resulted in a fairly high number of postponed or canceled sales," said NAR senior economist Lawrence Yun. The NAR reported that sales of previously owned homes fell from a seasonally adjusted annual rate 5.0 million in July to 4.8 million in August -- down 13% since August 2006. The Realtors' survey found that the median price of a single-family property, $223,900, is "essentially even" with that of a year ago. But the newly released Standard & Poor's/Case-Shiller housing index, which covers 20 metropolitan areas, shows that house prices declined at a 3.9% annual rate in July. The NAR can be found online at http://www.realtor.org.

Mack-Cali Realty Corp., an Edison, N.J.-based office real estate investment trust, has announced that its operating partnership, Mack-Cali Realty LP, has increased its unsecured revolving credit facility from $600 million to $775 million with a syndicate of 23 banks.The facility, which matures in June 2011, carries an interest rate equal to 55 basis points above the London interbank offered rate, the REIT said. The interest rate is subject to adjustment, on a sliding scale, based on the operating partnership's unsecured debt ratings. Mack-Cali can be found on the Internet at http://www.mack-cali.com.

Members of the House Financial Services and Judiciary committees have fashioned a narrowly tailored bill to allow bankruptcy judges to modify "predatory" mortgages, but congressional "experts" think it has virtually no chance of passing.Rep. Brad Miller, D-N.C., told a Mortgage Bankers Association conference that the bankruptcy bill (H.R. 3609) is drafted to help troubled subprime borrowers with adjustable-rate 2/28 loans. It would allow bankruptcy judges to waive prepayment penalties and spread the principal payments over 30 years. The interest rate could be set a "couple of points" above that of the prime mortgage to recognize that the borrower is riskier than a prime borrower. The congressman noted that Sen. Arlen Specter, R-Pa., might support a similar bill on the Senate side, as opposed to a broader bill that Sen. Richard Durbin, D-Ill., is drafting to repeal other parts of the 2005 bankruptcy bill, which took 10 years to pass. MBA senior vice president Steve O'Connor told the mortgage bankers that bankruptcy experts think the chances of congressional passage of H.R. 3609 are "close to zero."

Nationstar Mortgage, Dallas, on Friday closed its subprime wholesale division, which ranked 18th nationwide.A posting on the lender's broker site says, "We have made the decision to stop all wholesale originations effective September 21, 2007," but offers no other details. Company executive Rick Cardillo, who manages secondary marketing for Nationstar, had not returned a telephone call as of MortgageWire's deadline. In March 2006 Fortress Investments, a publicly traded investment fund, paid $585 million for Centex Home Equity, a nondepository subprime lender/servicer. It then changed the lender's name to Nationstar Mortgage. Nationstar is also a retail originator. In the second quarter it funded $609 million through that channel, a 33% decline from the level recorded a year earlier, according to the Quarterly Data Report.

Gramercy Capital Corp., a New York-based investor in commercial mortgage-related loans and securities, has priced a public offering of approximately 3.62 million shares of common stock, which brought gross proceeds of approximately $95 million.The company also reported that it is selling approximately 1.2 million shares to its affiliate SL Green Realty Corp. for about $31.7 million. Deutsche Bank Securities Inc. was the sole book-running manager for the public offering, and was granted an option to buy up to 542,812 additional shares to cover any overallotments. Gramercy Capital can be found online at http://www.gramercycapitalcorp.com.

RAIT Financial Trust, a real estate investment trust based in Philadelphia, has announced the closing of a 900 million euro (approximately $1.21 billion) European securitization managed by a subsidiary.RAIT purchased Eur17.5 million (approximately $23.5 million) of unrated notes in the transaction and will earn collateral management and origination fees. The company said the securitization was its second euro-denominated deal backed mainly by subordinated and senior debt issued by real estate companies in Europe. The REIT can be found at http://www.raitft.com.

The average subprime loan servicer has only recently begun to make material loan modifications related to interest rate resets, and the modification activity remains low, according to a recent survey of mortgage servicers by Moody's Investors Service.The survey reviewed 16 subprime servicers with total servicing volume of approximately $950 billion, roughly 80% of the subprime servicing market. Moody's said the survey showed that most servicers had only modified about 1% of loans that underwent a reset in January, April, and July of 2007. It also found that the majority of large servicers surveyed continue to rely on passive letter-based contact with borrowers instead of more active methods such as telephone calls. "These trends can be a cause for some concern," said Nicolas Weill, chief credit officer in the Moody's Structured Finance Group. "Based on these survey results, the number of future loan modifications by subprime servicers on loans facing reset may be lower than needed to mitigate losses meaningfully." The rating agency can be found online at http://www.moodys.com.

The legal/regulatory playing field between nonbank and bank originators has been leveled, according to Ruth Dillingham, an attorney working for a division of First American Title Insurance Co.Ms. Dillingham told attendees at the New England Mortgage Banking Conference that today's market is one where both banks and brokers face largely the same legal and regulatory restrictions. Among the changes that nonbank players must now adjust to are stricter requirements about having a buyer for loans before they can take certain actions, she said.

British bank HSBC Holdings pulled the plug Friday on Decision One Mortgage, its subprime wholesale division, and will incur various charges of almost $1 billion by closing the unit and a related business.By exiting the subprime wholesale channel, 750 Decision One employees -- housed mostly in Charlotte, N.C.; Fort Mill, S.C.; and Phoenix -- will lose their jobs. Among B&C wholesalers, Decision One ranked 12th, according to the Quarterly Data Report. In March the bank exited the subprime correspondent channel. In 2003, HSBC paid $14 billion for Household Finance, a publicly traded subprime lender that included Decision One. Over the past year HSBC has whittled down what's left of Household. It has vowed to remain a subprime retail lender and will maintain the Beneficial and HFC retail brand names. A spokeswoman said HSBC Mortgage Corp., Depew, N.Y., is not affected by the decision to close Decision One. HSBC Mortgage continues to fund mostly conventional loans through three channels: retail, wholesale, and correspondent. Decision One can be found online at https://www.d1online.com.

Class N of Morgan Stanley Capital I Inc.'s commercial mortgage pass-through certificates series 1999-CAM1 has been downgraded from CC/DR4 to C/DR6 by Fitch Ratings.Fitch also assigned a Distressed Recovery rating of DR1 to class M, and the ratings on 12 other classes in the deal were affirmed. Fitch attributed the downgrade to higher-than-expected losses.

The class A notes from Brit Alliance ABSpoke 2005-X and 2005-XI, collateralized debt obligations tied to mortgage-backed securities, have been downgraded from AA to A-minus by Fitch Ratings.The transactions are unfunded managed synthetic CDOs that reference portfolios of various asset-backed securities, Fitch said. They are "designed to provide credit protection for realized losses on the reference portfolio[s] through a credit default swap between the issuer and the swap counterparty, Morgan Stanley Capital Services Inc.," the rating agency said. The downgrades were attributed to deterioration in the credit quality of the reference portfolios, which total $462 million of ABS assets for series 2005-X and $673 million of ABS assets for series 2005-XI. The swaps reference prime and subprime residential MBS in the case of series 2005-X, and RMBS, ABS, and commercial MBS in the case of series 2005-XI, Fitch reported.

Forty-eight classes from 14 structured finance collateralized debt obligations have been placed on Rating Watch Negative by Fitch Ratings.The actions, which affect approximately $1.2 billion of notes in CDOs issued in 2006 and 2007, were attributed to Fitch's ongoing review of structured finance CDOs in which "significant portions" of the portfolio have been downgraded or watchlisted by Fitch or other major rating agencies. "In addition to public rating actions, this collateral portfolio review identified concentrations of subprime [residential mortgage-backed securities] bonds issued in 2006 where expected losses may be significantly higher than the ratings suggest," Fitch said. The rating agency said CDO tranches watchlisted as a result of recent subprime RMBS credit deterioration now represent approximately 20.2% of Fitch-rated U.S. structured finance CDOs. Fitch can be found on the Web at http://www.fitchratings.com.

Citing rising six-month default rates, Moody's Investors Service says the fallout from aggressive mortgage underwriting and a prolonged housing downturn will produce downward ratings pressure on subprime and alternative-A tranches of recent-vintage U.S. residential mortgage-backed securities.Moody's said six-month default rates have continued to rise significantly for loans backing RMBS issued in the third and fourth quarters of 2006. In addition, Moody's said new data show that deteriorating performance is also evident in 12-month default rates. For example, 12-month collateral defaults for subprime RMBS issued in the second quarter of 2006 rose to 7.39%, more than three times the average of 2.00% for subprime RMBS issued between the first quarter of 2002 and the second quarter of 2005, Moody's reported. The rating agency can be found on the Web at http://www.moodys.com.

Financial Freedom, a subsidiary of IndyMac Bank FSB that originates reverse mortgages, has announced the introduction of a fixed-rate Home Equity Conversion Mortgage, its first government-insured, fixed-rate, closed-end reverse mortgage.Because the closed-end structure offers more cash-flow predictability, the HECM Fixed is expected to appeal to the secondary market, the company said. "We've worked extensively with industry leaders to clarify the rules governing fixed-rate HECMs in order to achieve a product that meets seniors' needs and which we believe will lead to the development of a strong secondary market for the product," said Michelle Minier, chief executive officer of Financial Freedom. The company, based in Irvine, Calif., can be found on the Web at http://www.financialfreedom.com.

Commercial and multifamily mortgage debt outstanding rose 3.4% ($103.8 billion) in the second quarter, reaching a level of over $3.1 trillion, according to an analysis of Federal Reserve Board data by the Mortgage Bankers Association.Considering just multifamily mortgage debt, the amount outstanding rose 2.1%, to $778 billion. In the second quarter, securitization avenues -- commercial mortgage-backed securities, collateralized debt obligations, and asset-backed securities -- saw the largest increase in dollar terms in their holdings of commercial and multifamily mortgage debt: $49 billion, or 7.5%, which represents 48% of the total $104 billion increase. "These numbers reflect the period preceding the recent changes in the credit markets, and show investors continued to invest heavily in commercial/multifamily mortgage debt during the second quarter," said Jamie Woodwell, MBA's senior director commercial/multifamily research. "And while next quarter's numbers are likely to show the impact of the recent market disruptions, commercial/multifamily fundamentals remain strong -- property markets remain solid, loan delinquency rates are extremely low, and bonds backed by commercial real estate loans continue to perform well." The MBA can be found online at http://www.mortgagebankers.org.

The average 30-year fixed mortgage rate rose from 6.31% to 6.34% for the seven-day period ended Sept. 20, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate rose from 5.97% to 5.98%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages climbed from 6.17% to 6.21%, and the average rate for one-year Treasury-indexed ARMs decreased from 5.66% to 5.65%, 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 were largely unchanged in the previous week, with long-term rates lingering at lower levels not seen since May," said Frank Nothaft, Freddie Mac's chief economist. "The recent retreat in mortgage rates has brought in an increased volume of mortgage applications, according to the Mortgage Bankers Association, and pushed the share of applications for refinancing to the highest rate since April." A year ago, the average 30-year and 15-year fixed rates were 6.40% and 6.06%, respectively, and the average hybrid and one-year ARM rates were 6.08% and 5.54%, Freddie Mac said. Freddie can be found online at http://www.freddiemac.com.

Mortgage insurers Radian Guaranty and Mortgage Guaranty Insurance Corp. have sold portions of their interest in Sherman Financial Group LLC to an entity owned by Sherman's senior management.Sherman is a single-source provider of debt recovery systems for financial institutions and other businesses. Following the sales, Philadelphia-based Radian owns 21.8% of the outstanding equity in Sherman, Milwaukee-based MGIC owns 24.2%, and the remainder is controlled by Sherman management, the companies said. MGIC reported that it received a cash payment of $240.8 million in the sale and is entitled to a contingent payment if the management entity's after-tax return on the purchased interests exceeds 16% annually by Dec. 13, 2013. Radian reported that it received a cash payment of approximately $278 million and may also receive a contingent payment based on unspecified terms involving the future rate of return. Radian also reported an option agreement under which Sherman management may buy Radian's remaining interest any time in the next year. The mortgage insurers can be found on the Web at http://www.radian.biz and http://www.mgic.com, and Sherman can be found at http://www.shermfin.com.

Fixed-income revenues at Bear Stearns & Co. plunged 88% in the company's third fiscal quarter because of rising residential subprime delinquencies and a lack of liquidity in the secondary market.Bear -- a major player in subprime mortgage-backed securities -- reported fixed-income revenues of $118 million for the quarter, compared with $945 million in the previous quarter. "Market conditions in both the mortgage and credit businesses were extremely challenging this quarter," the Wall Street giant said in a statement. Over the past few years, Bear has financed nonprime lenders and bought loans from many nonbanks as a way to secure a steady flow of product for its subprime securitization business. A few months ago, Bear closed down two hedge funds that had invested billions in subprime assets, only to later discover those assets were almost worthless. Bear Stearns can be found online at http://www.bearstearns.com.

Homestead Mortgage, Arden Hills, Minn., has reported that it will close its wholesale division, informing its brokers that all loans for which it has commitments must fund by Oct. 5.Notice of the shutdown was posted on the Grapevine, a feature of the National Mortgage News website. Bill Schwietz, an officer at Homestead, posted his telephone number on the Grapevine but had not returned telephone calls about the matter as of MortgageWire's deadline. No information was available on Homestead's loan volumes. The company can be found on the Web at http://www.homesteadmortgage.com.

The House has passed a 15-year extension of the federal government's terrorism insurance program that expands the lines of insurance that insurers will be required to offer their clients.The bill adds group life insurance to the lines of insurance for which terrorism coverage must be made available. It also expands insurance coverage for nuclear, biological, chemical, and radiological acts of terrorism. "This legislation is essential to the continued growth and development of American cities and to provide needed protections for those who work, live, and invest in downtown areas," said Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee. White House officials have indicated that the president will veto the bill. But many financial services and real estate groups, including the Mortgage Bankers Association, support the bill (H.R. 2761), which extends the Terrorism Risk Insurance Act. "We remain committed to working with the Congress and the administration on this very important legislation," MBA chairman-elect Kieran Quinn said.