Originations

Subprime lender NovaStar Financial, Kansas City, Mo., says it will not pay a dividend related to 2006 taxable income, a move that will cause its status as a real estate investment trust to be terminated.The troubled subprime lender also revealed that the change in its REIT status will have a "significant adverse impact" on its financial statements for the third quarter. In July it announced that it would pay a dividend on its common shares in the form of convertible preferred securities. NovaStar is now in talks with the New York Stock Exchange concerning its listing requirements. Like many subprime firms, NovaStar is facing a liquidity crunch because buyers of subprime loans are scarce in the secondary market. It has been forced to lay off workers and shut offices. NovaStar can be found online at http://www.novastarmortgage.com.

E*Trade Financial Corp., Menlo Park, Calif., said Tuesday that it will close its wholesale residential unit and take a $245 million charge against earnings in the second half because of bad home equity loans and what it calls a "deterioration in the mortgage market."The company also said it may take a $100 million hit because of impairments on its second-lien, asset-backed security, and collateralized debt obligation holdings. The New York-based E*Trade will focus on residential lending through its retail outlets only. The company can be found on the Web at http://www.etrade.com.

Citing the collapse of the nonprime secondary market, Impac Mortgage Holdings said Tuesday that it will exit most of its lending businesses, including warehouse finance and commercial real estate.The announcement comes a day after National Mortgage News reported that Bear Stearns & Co. had hit Impac with $20 million worth of margin calls. (Both companies declined to comment on the matter.) Impac, a nonbank real estate investment trust based in Irvine, Calif., said it will continue to fund conforming residential loans through certain retail branches it acquired in May from Pinnacle Financial Corp. of Florida. The new round of cutbacks will result in 144 full-time workers losing their jobs. A few months ago, Impac exited the alternative-A market, where it ranked 10th nationwide. Impac can be found online at http://www.impaccompanies.com.

Bank of America, Charlotte, N.C., has announced the introduction of special pricing, through Nov. 30, for borrowers seeking to refinance their home with fixed-rate loans.Under the Great Rate Refi Event, conforming 30-year and 15-year loans and nonconforming 30-year loans are being offered by all BoA's retail channels, including its banking centers, mortgage loan officers, telephone LoanLine, and website. "Millions of borrowers are feeling the pressure of resetting adjustable-rate mortgages, and we now invite them to examine the security of a Bank of America fixed-rate mortgage at attractive pricing," said Floyd Robinson, president of BoA's Consumer Real Estate and Insurance Services Group. The details of the offer can be found online at http://www.bankofamerica.com/greatrate.

EverBank Financial Corp., Jacksonville, Fla., has reported the termination of its previously announced agreement to acquire the consumer deposit accounts, business finance division, and other assets of Atlanta-based NetBank (formerly the parent company of Meritage Mortgage).The agreement was announced May 21 along with the acquisition of NetBank's mortgage servicing portfolio, which was completed on July 1, EverBank said. The cancellation of the agreement to purchase the other assets came about "after it became clear that NetBank would not be able to complete certain conditions required to close and receive regulatory approval," EverBank said. EverBank chairman Robert Clements said the company's earnings grew 11% in the first half and that EverBank "remains in a strong position to take advantage of many other growth and acquisition opportunities that exist in this market." The companies can be found on the Web at http://www.everbank.com and http://www.netbank.com.

The joining of America's Community Bankers and the American Bankers Association has moved another step closer with a unanimous vote by ACB's board of directors to approve the merger.The membership of the two trade groups will cast their votes to ratify the merger at their annual conventions in October. "Today's vote underscores our board's belief that we are combining two great organizations into one extraordinary organization that will serve its members well through outstanding advocacy, an experienced and talented staff, a wealth of education and training programs, and an unmatched breadth and depth of products and services," ACB chairman Mark E. Macomber said. The organizations can be found online at http://www.acbankers.org and http://www.aba.com.

Downey Financial Corp., a savings and loan engaged in mortgage banking activities, has reported that its nonperforming assets jumped to 1.96% at the end of August, compared with 1.30% three months earlier.On a percentage basis, its NPA ratio spiked 50% over the time period. Based in Newport Beach, Calif., the publicly traded Downey services $5.74 billion in mortgages for others. In August it funded $171 million in residential loans for its investment portfolio. The previous month it funded just $94 million. Downey can be found online at http://www.downeysavings.com.

Continued "challenging" mortgage-related credit market conditions have caused Merrill Lynch to make "fair value adjustments" to exposed securities and businesses that it says will affect its third-quarter results.Merrill disclosed the concern in a Sept. 14 Securities and Exchange Commission filing, which it says it made "in anticipation of the closing" of its acquisition of First Republic Bank, set for Sept. 21. The company also reiterated past statements in which it noted that it is a "major player" in the areas exposed to the risk, namely the "subprime mortgage market, including certain collateralized debt obligations (CDOs), as well as other structured credit products and components of the leveraged finance origination market." Merrill Lynch can be found online at http://www.merrilllynch.com.

Senate Banking Committee Chairman Christopher J. Dodd, D-Conn., has scheduled a mark-up of a Federal Housing Administration reform bill on Sept. 19, and the House is expected to vote on passage of an FHA bill this week.The FHA reform bill "can be an important component in addressing the tidal wave of foreclosures" and provide troubled homeowners with "safe, affordable home loans," Sen. Dodd said. When the House takes up the FHA bill (H.R. 1852), Financial Services Committee Chairman Barney Frank, D-Mass., will offer a manager's amendment that specifically authorizes the FHA to refinance homeowners who are in default and have mortgages with "adverse terms or rates." Rep. Frank also plans to offer an amendment that boosts FHA loan limits to 125% of the median house price or $730,000 (175% of the conforming loan limit), whichever is lower. The Senate FHA reform bill is expected to raise the FHA loan limit to the $417,000 conforming loan limit in high-cost areas.

Eighteen additional classes of subprime mortgage- and asset-backed securities have been downgraded by Fitch Ratings as a result of changes to its subprime loss forecasting assumptions.Fitch also affirmed the ratings on classes with outstanding balances of nearly $1.7 billion. The securities affected by the latest downgrades were: 12 classes from three Residential Asset Mortgage Products Inc. issues; and six classes from one Soundview Home Equity Loan Trust issue. The rating actions were attributed to 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.

Standard & Poor's Ratings Services has lowered its ratings on 46 tranches from nine U.S. trust preferred collateralized debt obligations backed in part by trust preferred securities issued by mortgage real estate investment trusts.S&P also removed from CreditWatch with negative implications 39 CDO ratings. In addition, it affirmed the ratings on five tranches from two trust preferred CDOs and removed them from CreditWatch negative. The downgrades primarily reflect the weakening credit quality of the mortgage REIT assets in the CDO collateral pools, the rating agency said, noting that many REITs and other mortgage originators and purchasers have recently had trouble getting funding to finance their operations because of mortgage market conditions. Including the latest downgrades, S&P said it had downgraded 121 tranches from 27 cash flow and hybrid CDOs with exposure to U.S. residential mortgage-backed securities (and other securities) that have been hit with negative rating actions since July. In addition, the ratings of 117 tranches from 40 cash flow and hybrid CDO transactions are still on CreditWatch with negative implications. S&P can be found online at http://www.standardandpoors.com.

Senior citizens rank mortgage brokers as the least trusted of financial professionals, according to the 2007 Financial Freedom Senior Sentiment Survey.The fourth annual survey from Financial Freedom, an Irvine, Calif.-based reverse mortgage originator and subsidiary of IndyMac Bank FSB, found that personal referrals are less important in establishing trust than seniors' perceptions of a professional's character. Among financial professionals, 53% of seniors indicated they trust, somewhat trust, or very strongly trust their local bank representatives, while Realtors, stockbrokers, and mortgage brokers (all of whom work off commissions) finished at the bottom of the list at 25%, 21%, and 18%, respectively. "These findings underscore what we have been preaching to reverse mortgage originators and other financial professionals for over a decade -- to gain acceptance among seniors, it's crucial to demonstrate integrity across the entire enterprise from point of contact to products to servicing," said Michelle Minier, chief executive officer of Financial Freedom. The company can be found online at http://www.financialfreedom.com.

The Bank of England, the British Treasury, and the Financial Services Authority have authorized a liquidity support facility for Northern Rock PLC, a major U.K. lender pressured by the global liquidity squeeze."The FSA judges that Northern Rock is solvent, exceeds its regulatory capital requirement, and has a good quality loan book," the three entities said in a joint news release. "The decision to provide a liquidity support facility to Northern Rock reflects the difficulties that it has had in accessing longer-term funding and the mortgage securitization market, on which Northern Rock is particularly reliant." The entities can be found on the Web at http://www.bankofengland.co.uk, http://www.hm-treasury.gov.uk, and http://www.fsa.gov.uk.

Hispanic and low- and moderate-income borrowers are having trouble getting mortgage financing, according to the National Association of Hispanic Real Estate Professionals, which is urging Congress to pass a Federal Housing Administration reform bill to help alleviate the credit crunch."Our members overwhelming favor reform and believe a majority of their customers could benefit from an FHA loan," NAHREP chairman Felix DeHerrera said. The House is expected to vote on an FHA reform bill (H.R. 1852) during the week of Sept. 17. Nearly 67% of the NAHREP members surveyed by the trade group and Wells Fargo Home Mortgage said they have turned away one-third of their customers because they could not qualify for conventional mortgage products. "However, 77% of respondents said that more than half of their customers could be helped if proposed changes in FHA programs are enacted," NAHREP said. About 58% of NAHREP's 14,000 members are real estate agents and 34% are mortgage brokers and lenders.

Mortgage company stocks should react positively to a rate cut by the Federal Reserve, but it will be short-lived because rising credit costs and a "tougher origination environment" will be drag on earnings, according to a Friedman Billings Ramsey report."It will be tough going for mortgage banking companies for the next 12 to 24 months," FBR analyst Paul Miller Jr. says in the Sept. 14 report. And it will be a particularly tough adjustment for companies that generated most of their earnings from gain-on-sale income or hold a large percentage of nonagency products in their portfolios. But banks and thrifts that took a cautious approach to credit risk should benefit from the current environment, according to the FBR analyst. "Additionally, a Fed rate cut should help improve margins as funding costs move lower," Mr. Miller said. The Federal Open Market Committee meets Sept. 18 to consider a cut in the Fed Funds rate.

ARC Systems of Austin, Texas -- which offers loan underwriting and related software to mortgage bankers -- is considering selling the company, or what its president calls "our intellectual property."Company chief executive and founder Ed Jones said the technology provider has not yet hired an investment banker to represent it. "We're a clean company," he said. "We have no debt." Founded in 1984, ARC flourished during the subprime boom as lenders and investors bought its software to analyze nonconforming loans. Over the past year, some of its mortgage banking clients have either exited the nonprime niche or filed for bankruptcy protection. LendTech is one of its software products. The company can be found online at http://www.arcsystems.com.

Countrywide Financial Corp. Chairman Angelo Mozilo said Thursday that rising loan delinquencies are not being caused by adjustable-rate mortgage "resets" but by a combination of job losses exacerbated by falling home values -- particularly in California.In an interview with National Mortgage News, Mr. Mozilo said news media reports that resets are causing delinquencies are being blown out of proportion. "Resets are not the reason for delinquencies and foreclosures," he stressed. He also said that Countrywide is working with customers who are having trouble with resets by not increasing their loan rate. "If they are struggling to make the payment, we will not increase the rate," he told NMN. The Calabasas, Calif.-based company can be found online at http://www.countrywide.com.

The Merrill Lynch-owned First Franklin Financial Corp., San Jose, Calif., has cut an undisclosed number of jobs, a company spokesman has confirmed to MortgageWire.The spokesman for the subprime lender said he could not elaborate much, except to say that "We have adjusted our staffing levels." In the second quarter, First Franklin funded $5.3 billion in loans, ranking second nationwide, according to the Quarterly Data Report. Its second-quarter volume fell 21% compared with that of the same quarter last year.

Four classes of Securitized Asset Backed Receivables LLC 2005-FR1 have been placed on Rating Watch Negative by Fitch Ratings.The affected securities were classes B-1, B-2, B-3, and B-4. In addition, Fitch affirmed the ratings on three other classes in the deal. Fitch said the securities were placed on watch pending receipt of additional performance information that could affect the ratings. The collateral in the transaction consists of subprime residential loans secured by first- and second-lien deeds of trust on residential properties, the rating agency said.

Class B-2 of C-BASS mortgage pass-through certificates, series 2005-RP1, has been downgraded from BBB to BB by Fitch Ratings.Fitch also affirmed the ratings on nine other classes in the transaction. The downgrade was attributed to recent 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."