Originations

Two classes of notes issued by MWAM CBO series 2001-1 Ltd., a collateralized debt obligation composed partly of mortgage-backed securities, have been downgraded by Fitch Ratings.Class A was downgraded from AAA to AA-plus, and class B was downgraded from B/DR2 to C/DR1. The downgrades were attributed to "continued collateral deterioration resulting from negative credit migration." The CDO consists of residential and commercial MBS, asset-backed securities, other CDOs, investment-grade corporate securities, and U.S. government securities, Fitch said.

Three classes of Merrill Lynch Mortgage Investors Inc.'s mortgage loan asset-backed certificates, series 2005-SD1, have been downgraded by Fitch Ratings.The downgrades were as follows: class M-2, from A to BBB-plus; class B-1, from BBB to BB; and class B-2, from BB to B-minus/DR2. The rating agency also affirmed the ratings on two other classes in the deal. The downgrades were attributed to a deterioration in the relationship between credit enhancement and expected losses. The transaction consists primarily of subprime mortgage loans secured by first or second liens.

Signs of some "improved flows" have returned to the asset-backed commercial paper market that was damaged by the recent U.S. credit crunch sparked by subprime mortgage woes, according to American and European securitization groups.The American Securitization Forum and the European Securitisation Forum said they have been working to restore the smooth functioning of the ABCP markets and are offering "detailed information and education on transaction-specific assets, structural details and liquidity backstops" to that end. The organizations can be found on the Web at http://www.americansecuritization.com and http://www.europeansecuritisation.com.

The average 30-year fixed mortgage rate fell from 6.46% to 6.31% for the seven-day period ended Sept. 13, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate fell from 6.15% to 5.97%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages declined from 6.32% to 6.17%, and the average rate for one-year Treasury-indexed ARMs decreased from 5.74% to 5.66%, Freddie Mac reported. Fees and points averaged 0.4 of a point for 15-year fixed-rate mortgages, 0.5 of a point for 30-year fixed-rate mortgages, 0.6 of a point for hybrid ARMs, and 0.8 of a point for one-year ARMs. "Interest rates on prime conforming loans fell across the board in the past week, with rates on 30-year fixed mortgages averaging 0.15 percentage points below the previous week's level," said Frank Nothaft, Freddie Mac's chief economist. "The drop in mortgage rates may give some relief to borrowers who are looking to refinance or purchase a home." A year ago, the average 30-year and 15-year fixed rates were 6.43% and 6.11%, respectively, and the average hybrid and one-year ARM rates were 6.10% and 5.60%, Freddie Mac said. Freddie can be found online at http://www.freddiemac.com.

Foreclosure sales rose 10.4% in California in August, and speculator-owned properties represent a growing percentage of the foreclosed properties, according to ForeclosureRadar, Discovery Bay, Calif.The company reported that 9,477 California foreclosures (with a total loan value of $3.86 billion) were sold at auction in August. Non-owner-occupied properties accounted for $1.71 billion of the total and represented 44.3% of the properties, the company reported. "Many blame subprime lending for our current real estate crisis, but rampant speculation, even by those with great credit, played a leading role," said Sean O'Toole, founder and chief executive officer of Foreclosure Radar. "The subprime market took the first hit, as those borrowers had the least to lose when they walked away. Now that nearly half of foreclosures represent non-owner-occupied properties, it is clear that speculators are walking away, too." ForeclosureRadar, a foreclosure listings and software company, can be found on the Web at http://www.foreclosureradar.com.

Subprime and piggyback lending constituted a slightly higher percentage of mortgage originations in 2006 than in 2005, according to Home Mortgage Disclosure Act data released by the Federal Reserve Board.The HMDA data show that 28.7% of mortgages originated last year were "higher-priced," or subprime, up from 26.2% in 2005. The Fed also said piggybacks, in which a first mortgage and a second lien are originated simultaneously, were used in 22% of home purchase transactions, about the same as in 2005, but that more second liens were reported. "In 2006, lenders covered by HMDA reported about 1.43 million junior liens to purchase homes, almost all conventional loans, and a number about 4% greater than in 2005," the Fed said.

The Senate has passed a Department of Housing and Urban Development appropriations bill that provides $100 million for counseling for homeowners facing foreclosure."Across the country too many families are facing the nightmare threat of foreclosure," said Sen. Christopher S. Bond, R-Mo. "This is a good step to help stem the tide of foreclosures without bailing out risky lenders and speculators in the market." Sen. Christopher J. Dodd, D-Conn., co-sponsored the counseling amendment with Sen. Bond. The $100 million can go to public, private, and nonprofit entities (including the Neighborhood Reinvestment Corp. and state housing finance agencies) that provide foreclosure counseling. No federal funds can go directly to lenders or homeowners, according to the Bond/Dodd amendment. The Senate has passed the Transportation/HUD appropriations bill by an 88-7 vote. The HUD bill also increases Federal Housing Administration multifamily loan limits in high-cost areas and suspends for one year a cap on the number of reverse mortgages the FHA can insure. The bill does not include any funding for President Bush's downpayment assistance program.

Some 125,000 loan reps who work for mortgage brokers are likely to lose their jobs and 18,000 brokerage firms will probably shut down by the middle of next year, according to a partner in the Columbia, Md.-based research and consulting firm Wholesale Access."Given the current environment, survival should be everyone's goal," consultant Tom LaMalfa told the Illinois Association of Mortgage Brokers earlier this month. His talk was re-printed in the newsletter Holm Mortgage Finance Report. Some who blame brokers for the mortgage meltdown may see the analyst's prediction as the perfect antidote for what ails the market, but Mr. LaMalfa laid the blame squarely on Wall Street, saying this is the third time in 20 years that the Street has "pillaged MortgageLand." Investors throughout the world "got shafted by the guys from Wall Street," he told the IAMB. The consultant advised brokers to get out of subprime and refis and move swiftly into purchase-money mortgages that fall within the conforming loan limit. Otherwise, he said, they won't survive. "If someone doesn't want to operate in the agency space, there's no market for their services," he said.

Countrywide Financial Corp., Calabasas, Calif., says it recently obtained $12 billion in additional "secured" financing through new and existing credit facilities.The company also announced that it funded $34 billion of new loans in August, a 17% decline from the level recorded in the same month last year and a 12% drop from that of July. In a new research note, Credit Suisse says, "We believe the company's recent actions to secure additional funding, as well as the migration of funding its originations through the thrift should substantially address funding concerns at the company." Countrywide can be found online at http://www.countrywide.com.

Washington Mutual, Seattle, one of the largest warehouse financiers in the residential mortgage industry, is exiting that business, MortgageWire has learned.At MW's deadline a company spokeswoman confirmed the move. She said the warehouse group is in a "wind-down phrase" and that WaMu employees "just received the news themselves."

Six certificates from three subprime deals issued by Countrywide Home Loans Inc. in 2002 and 2003 have been placed under review for possible downgrade by Moody's Investors Service.The affected securities are as follows: CWABS Inc. Asset-Backed Certificates, series 2002-BC2, classes M-2 and B-1; series 2003-BC1, classes M-2 and B-1; and series 2003-BC2, classes M-3 and B-1. The negative rating actions were attributed to credit enhancement levels that may be low given the projected losses on the underlying pool. The transactions are backed by first-lien, fixed-rate subprime mortgage loans.

Class L of Salomon Brothers Mortgage Securities VII Inc. commercial mortgage pass-through certificates, series 1999-C1, has been downgraded from B-minus/DR1 to CCC/DR2 by Fitch Ratings.Fitch also affirmed the ratings on 11 other classes in the transaction. Fitch said the downgrade was based on expected losses on the pool's two specially serviced assets: a real-estate-owned office property in Rogers, Ark., and two mobile home parks in Wilkes Barre and Muncey, Pa.

Class B-5 of CAPCO America Securitization Corp. commercial mortgage pass-through certificates, series 1998-D7, has been downgraded from CC/DR4 to C/DR5 by Fitch Ratings.The ratings on 10 other classes in the deal have been affirmed. Fitch said the downgrade was based on increased loss expectations associated with the mortgage pool's two specially serviced assets: an industrial/mixed-use property in Baltimore that is real estate owned, and a multifamily property in Kansas City, Mo., that is more than 90 days delinquent.

Two certificates issued by Centex Home Equity Loan Trust, series 2002-D, have been downgraded by Moody's Investors Service.Class M-2 has been downgraded from A2 to Baa2, and class B has been downgraded from Ba3 to B3. The downgrades were attributed to credit enhancement levels that are deemed to be low in view of loss projections. "The credit support is declining due to the loan defaults," Moody's said. The subprime deal consists of fixed- and adjustable-rate residential mortgage loans. The rating agency can be found online at http://www.moodys.com.

Twenty-two 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 $2 billion. Among the securities affected by the latest downgrades were: 12 classes from two Structured Asset Investment Loan Trust issues; four classes from one issue of Wells Fargo Home Equity asset-backed certificates; 14 classes from one SACO issue; and two classes from one CSFB HEMT 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.

HRPT Properties Trust, Newton, Mass., has priced an offering of $250 million of 6.65% unsecured senior notes due 2018.The joint book-running managers for the offering were Wachovia Securities, Merrill Lynch & Co., and UBS Investment Bank. HRPT, a real estate investment trust, can be found on the Internet at http://www.hrpreit.com.

L2C, an Atlanta-based credit scoring company specializing in helping lenders reach the "underbanked" market, has announced the release of a new version of its Link2Credit Score customized for the mortgage industry.The mortgage-specific score was launched to provide a more accurate risk assessment tool for evaluating underbanked applicants, the company said. "In the wake of the subprime meltdown in the mortgage space, lenders are reluctant to extend loans to consumers with thin credit, even though many of these prospects are actually low-risk," said Mike Mondelli, president of L2C. "By using our mortgage-specific version of Link2Credit to identify these low-risk consumers, mortgage lenders are finding a new, relatively untapped market that can boost profitability without incurring the risk posed by subprime borrowers." The company can be found online at http://www.l2cinc.com.

The ongoing correction in the capital markets and reassessment of risk present opportunities for some, it emerged at the recent International Council of Shopping Centers' capital marketplace conference in New York.Dana Roffman, a director with Angelo, Gordon & Co., New York, said she expects the situation to get a little gloomier, depending on how badly people get hurt, what players are eliminated, and how it will affect the U.S. economy. But there are "a lot of interesting opportunities in this interim period," including a chance for mezzanine and other players to fill the void left by mortgage lenders, she said. Ms. Roffman said there is a group that is setting up a fund to buy some of the market's oversupply of securities. If the risk to return makes sense and the paper is priced right, she said she expects it to trade at about a 5%-15% discount. Aaron Walsh, a managing director at Barclays Capital Inc., New York, also said there are opportunistic funds looking at the available paper. "People are circling right now, and there is still a disconnect," he said, adding that it will take a while for Wall Street to digest the paper.

Despite charges of improprieties against builder-owned mortgage companies -- and a federal investigation into the practices of at least one such firm -- borrowers themselves are generally satisfied with their builder-lenders.According to a new J.D. Power & Associates survey of new-homebuyer satisfaction with their builders, the majority of those who obtain financing through builders do so because of competitive rates and because the processing is more streamlined. "They are more satisfied than when they use direct lenders, and that makes sense," said Paula Sonkin, vice president of the real estate and construction industries practices at J.D. Power. "When loan officers work for the builder, they can more easily coordinate the entire experience." The study also pointed out that builders offer price reductions, lower rates, and other incentives to attract buyers to the in-house mortgage operation. But Marc Savitt of the National Association of Mortgage Brokers said that's how many buyers are taken advantage of. "There's nothing for nothing -- there's no free lunch," the NAMB's president-elect said. "The incentives are illusionary. People don't understand that in most cases, the homebuyer ends up paying for his own incentive in the form of higher rates and closing costs." The West Virginia broker said the whole idea of offering incentives is to prevent the borrower from shopping around.

The Market Composite Index, an overall measure of mortgage applications, rose from 622.9 to 657.4 on a seasonally and holiday-adjusted basis during the week ended Sept. 7, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications decreased 16.7% on the week but were up 0.1% from the level recorded a year earlier. The Purchase Index rose from 425.8 to 448.0 on a seasonally adjusted basis, while the Refinance Index climbed from 1770.2 to 1876.6. Refinancings represented 42.1% of total applications, up from 41.4% the previous week, while adjustable-rate mortgages accounted for 13.2%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages fell from 6.42% to 6.25%, and points (including the origination fee) fell from 1.09 to 1.00 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.