Originations

Accredited Home Lenders of San Diego -- but for 43% less than it offered back in the spring.According to a statement issued by Accredited, Lone Star is willing to pay $8.50 a share for the subprime lender/servicer, compared with an original price of $15.10 (or $400 million). Based in Dallas, Lone Star had tried to back out of the original deal but was sued by Accredited. The subprime lender's management is encouraging its board to approve the new offer. In trading Friday, Accredited's shares were trading up 40% at almost $9 a share. The lender recently cut staff and stopped funding many new loans as a way to preserve capital. Among subprime lenders, it ranks 18th, according to the Quarterly Data Report. Accredited can be found online at http://www.accredhome.com.

H&R Block has conceded in its quarterly earnings statement what many had suspected in recent weeks: that a deal to sell Option One Mortgage Corp. to Cerberus Capital Management is in trouble.Kansas City, Mo.-based Block said certain closing conditions upon which the deal is contingent are not being met. Instead of a sale of the entire Irvine, Calif.-based Option One subsidiary, H&R Block said it is working on a deal to sell its servicing platform to Cerberus while Block contemplates "divesting or winding down" its loan origination business. Block executives said the company has already laid off some 615 Option One loan origination employees. About 400 remain on the staff. Block said it is "engaged in discussions" with Cerberus to modify terms of the proposed sale of Option One, which was negotiated before turmoil in the credit markets largely crippled the subprime mortgage origination business. Block said it is negotiating to waive a requirement that Option One fund $2 billion in loans within 60 days of closing and have a minimum of $8 billion in warehouse lines of credit. Block can be found on the Web at http://www.hrblock.com, and Option One can be found at http://www.optiononemortgage.com.

President Bush has announced that the Federal Housing Administration will roll out a new program in a few days that will provide certain subprime borrowers facing default with a refinancing option.The "FHASecure" program will help many families who are struggling to refinance into FHA-insured mortgages and keep their homes, the president said. The program is designed to refinance creditworthy borrowers who have been current on their monthly payments up to the time of the reset of their subprime adjustable-rate mortgage. It is understood that borrowers would be able to roll up to six missed payments into their new FHA loan, but they can’t go above a 97.75% loan-to-value ratio (based on a new appraisal). For the program to have a real impact, investors or lenders will have to write down the amount of the existing mortgage so the borrower meets the FHA LTV requirement. Or else someone will have to put up a "cash transfusion to cover the shortfall," said consultant Brian Chappelle of Potomac Partners in Washington. President Bush stressed that the new FHA program is not a "bailout" for lenders, and he called on lenders to work with homeowners to modify or restructure their mortgages. "I believe lenders have a responsibility to help these good people," the president said.

Thirty more classes of mortgage pass-through certificates in subprime securitizations by two issuers have been downgraded by Fitch Ratings as a result of changes to the rating agency's subprime loss forecasting assumptions.Fitch also affirmed the ratings on classes with outstanding balances of more than $2 billion. The latest downgrades affect the following securities: 20 classes from five Merrill Lynch Mortgage Investors issues and 10 classes from two Long Beach issues. 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."

Citing changes to its mortgage insurance capital model and the declining residential real estate market, Fitch Ratings has downgraded the insurer financial strength ratings of PMI Mortgage Insurance Co. and PMI Guaranty Co. from AA-plus to AA.In addition, Fitch has affirmed the A-plus senior debt and long-term issuer ratings of The PMI Group Inc., the Walnut Creek, Calif.-based parent company, as well as various other ratings of PMI affiliates. Fitch recently enhanced its proprietary MI capital model in light of the changing U.S. mortgage environment and corresponding changes to Fitch's residential mortgage-backed securities model. "Among the most significant changes to Fitch's MI model were a 20% increase to the frequency-of-foreclosure factors and an increase in the capital charge for illiquid assets to 100%," the rating agency said. In response to the rating actions, PMI chief executive officer Steve Smith said: "It is important to recognize that the ratings changes made by Fitch were primarily driven by a change in their ratings methodology and capital model, not by a deterioration in the financial position or results of The PMI Group Inc. or our subsidiaries." Fitch can be found online at http://www.fitchratings.com.

Wachovia Securities was the largest commercial and multifamily mortgage servicer as of midyear, at $356.6 billion in primary and master servicing volume, according to the Mortgage Bankers Association.According to the Washington-based trade association's midyear update, the other large commercial mortgage servicers are: Capmark Finance ($252.3 billion), Midland Loan Services ($245.5 billion), Wells Fargo ($153.2 billion), and KeyBank Real Estate Capital ($133.2 billion). Breaking out the rankings by the largest master and primary servicers of U.S. commercial mortgage-backed securities, collateralized debt obligation, and other asset-backed securities, Wachovia, Capmark, Midland, Wells Fargo, and Bank of America are the largest servicers, the MBA reported. While in the past the midyear update has focused on large servicers of CMBS loans, this year's update was expanded to include all large commercial/multifamily servicers, regardless of investor group, the MBA said. The association can be found online at http://www.mortgagebankers.org.

The average 30-year fixed mortgage rate fell from 6.52% to 6.45% for the seven-day period ended Aug. 30, though the one-year ARM rate jumped 24 basis points, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate fell from 6.18% to 6.12%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages climbed from 6.34% to 6.35%, and the average rate for one-year Treasury-indexed ARMs jumped from 5.60% to 5.84%, Freddie Mac reported. Fees and points averaged 0.5 of a point for fixed-rate mortgages, 0.6 of a point for hybrid ARMs, and 0.8 of a point for one-year ARMs. "Interest rates on conforming long-term fixed-rate mortgages declined slightly, while rates on one-year adjustable-rate mortgages increased by about a quarter of a percent," said Frank Nothaft, Freddie Mac's chief economist. "The increase in ARM rates is consistent with movement of the yields on short-term Treasury securities, which have exhibited higher volatility recently due to market uncertainties." A year ago, the average 30-year and 15-year fixed rates were 6.44% and 6.14%, respectively, and the average hybrid and one-year ARM rates were 6.11% and 5.59%, Freddie Mac said.

The Federal Housing Administration might be a better agency for helping subprime borrowers than the government-sponsored enterprises Fannie Mae and Freddie Mac, according to Federal Reserve Board Chairman Ben Bernanke."Congress might wish to consider FHA reforms that allow the agency more flexibility to design new products and to collaborate with the private sector in facilitating the refinancing of creditworthy subprime borrowers facing large resets," Mr. Bernanke says in a letter to Sen. Charles E. Schumer, D-N.Y. The Fed chairman noted that the GSEs' current programs can only help a relatively small share of subprime borrowers. "The GSEs should be encouraged to provide products for subprime borrowers to the extent permitted by their charters," he says. Mr. Bernanke also says the GSEs should be encouraged to "increase their mortgage securitization efforts, which are not constrained by their portfolio caps."

Sen. Charles E. Schumer, D-N.Y., is calling on Countrywide Financial Corp. to stop steering customers into high-cost mortgages and to help its troubled subprime borrowers by waiving prepayment penalties and refinancing them into more affordable loans."I am calling on Countrywide -- as the nation's largest lender --- to bury its bad business practices and reverse some of the damage it has already inflicted on our housing market," the Senate Banking Committee member said. The New York senator referred to abusive lending practices reported in a New York Times article, which Countrywide says "contained numerous inaccuracies and 'facts' taken out of context." The Calabasas, Calif.-based lender said its business processes prohibit steering and that it does not pay its loan officers higher commissions for making subprime loans with prepayment penalties. The Office of Thrift Supervision has initiated a review of Countrywide's lending and servicing practices based on complaints by Countrywide borrowers that the Neighborhood Assistance Corporation of America brought to the regulator's attention. Countrywide can be found online at http://www.countrywide.com.

1st National Bank of Arizona, Scottsdale -- a top ranked alternative-A funder -- has closed its third-party lending platform, according to sources who used to work at the company.In total, about 540 workers were let go. "The wholesale and correspondent units were closed," said one source. Since earlier this year the bank had been trying to sell the mortgage division but could not close a sale, said one investment banker. According to the Alternative Products Quarterly Data Report, FNBA was the nation's 19th-largest funder of alt-A mortgages. For the past seven years the bank had specialized in alt-A production. Over the past month, the secondary market for alt-A and subprime products has been almost nonexistent, with few Wall Street firms offering bids that would result in profitable whole-loan sales by primary funders. The bank can be found on the Web at http://www.fnbaonline.com.

Congressionally chartered mortgage giant Freddie Mac says its second-quarter earnings fell 45% to $764 million, blaming the performance on higher credit losses caused by rising loan foreclosures.In a statement, the company said the credit losses reflect "credit deterioration on 2006 and 2007 loan originations," citing "transition rates from delinquency to foreclosure and higher loan loss severities from slower home price appreciation and higher unpaid principal balances." Freddie's revenue was flat compared with that of a year earlier, but increased fourfold from revenue in the first quarter, a period in which Wall Street was still buying subprime loans. In the second quarter, many Street firms either stopped buying altogether or slowed their purchases to a trickle, sending lenders back into the conventional market. Even though Freddie's earnings fell in the quarter, its management and guarantee income increased 22% from that of the same period last year. After the earnings announcement, the company's stock had fallen approximately 4.5% as of midday Thursday. Freddie can be found online at http://www.freddiemac.com.

Forty-six classes of mortgage pass-through certificates in subprime securitizations by five issuers have been downgraded by Fitch Ratings as a result of changes to the rating agency's subprime loss forecasting assumptions.Fitch also affirmed the ratings on classes with outstanding balances of nearly $5 billion. Among the downgrades were the following securities: 18 classes from three IndyMac ABS Inc. issues; 11 classes from one GE-WMC Mortgage Securities LLC issue; nine classes from two Terwin Mortgage Trust issues; six classes from three Asset Backed Funding Corp. issues; and two classes from one GS Mortgage Securities Corp. 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."

The Market Composite Index, an overall measure of mortgage applications, fell from 641.1 to 615.2 on a seasonally adjusted basis during the week ended Aug. 24, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications decreased 5.3% on the week but were up 10.6% from the level recorded a year earlier. The Purchase Index fell from 441.5 to 424.0 on a seasonally adjusted basis, while the Refinance Index declined from 1806.3 to 1729.6. Refinancings represented 40.4% of total applications, up from 39.9% the previous week, while adjustable-rate mortgages accounted for 15.0%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages fell from 6.49% to 6.41%, and points (including the origination fee) remained unchanged, at 1.48, for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

Fitch Ratings has downgraded the issuer default ratings of six homebuilders -- Centex Corp., Hovnanian Enterprises Inc., Lennar Corp., Meritage Homes Corp., M/I Homes Inc., and Standard Pacific Corp. -- and revised the rating outlook from stable to negative for Centex, Lennar, and Meritage.The rating outlook remains negative for the other three companies as well. The IDR downgrades were as follows: Centex, from BBB-plus to BBB; Hovnanian, from BB-plus to BB-minus; Lennar, from BBB-plus to BBB; Meritage, from BB to BB-minus; M/I Homes, from BB to BB-minus; and Standard Pacific, from BB to BB-minus. Fitch also downgraded other ratings for the six homebuilders. In addition, the rating agency revised from stable to negative the rating outlooks of four other homebuilders -- D.R. Horton Inc., KB Home, MDC Holdings Inc., and Ryland Group Inc. -- while affirming their IDRs. Fitch said the new ratings and outlooks reflect its expectations for the housing market as well as company-specific performance. The rating agency said it expects the housing contraction to be "more severe" than originally anticipated for the rest of 2007, due chiefly to "tighter mortgage standards and disrupted mortgage markets," and that 2008 is likely to be "another challenging year for this sector." Fitch can be found on the Web at http://www.fitchratings.com.

The banking industry's increased exposure to mortgage-backed securities was a contributing factor to the recent liquidity disruptions in financial markets, according to a special report by A.M. Best Co., Oldwick, N.J.Volatile interest rates and greater MBS exposure may lead to lower asset valuations for banks, A.M. Best said. "Anticipation of this has contributed to recent liquidity disruptions in the financial markets, which have forced the Federal Reserve to reassert its status as lender of last resort to assure stability in the U.S. banking system," the company said. The report cites various factors contributing to the disruptions, including greater exposure to MBS stemming from "an effort to enhance yield, which has also added risk to their balance sheets." Among the other factors is the fact that the banking industry has "taken advantage of additional funding options" in recent years, "relying less on the securities portfolio for liquidity, which has led to a steady decline in highly liquid Treasury holdings," according to A.M. Best. The company can be found online at http://www.ambest.com.

Indymac Bank FSB, Pasadena, Calif., has announced the hiring of more than 600 retail lending professionals recently laid off by American Home Mortgage Investment Corp.The new hires specialize in prime conforming, agency-eligible single-family mortgage products. Indymac Bank said it is still in discussions on hiring more ex-AHM employees and expects to wind up hiring a total of 750-850. "The addition of 750 to 850 former AHM retail lending professionals provides a strong complement to the acquisition of the retail lending division of New York Mortgage Co. on the East Coast, which we completed in the second quarter of 2007," said Frank Sillman, chief executive officer of Indymac's mortgage bank. "That acquisition added 440 retail lending professionals operating out of 29 branches. In addition, we are set to close on the purchase of certain assets of Barrington Capital in Newport Beach., Calif., at the end of August, which will add 90 more retail loan officers operating from six branches in California and Nevada." Indymac Bank can be found online at http://www.indymacbank.com.

EquiFirst Corp., the subprime lending arm of Barclays Bank, has cut an untold number of employees, a spokeswoman for the company has confirmed.For the past few weeks, rumors have circulated that major layoffs were afoot at EquiFirst or that Barclays might even close the Charlotte, N.C.-based wholesaler. One source said several account executives were let go. Barclays bought EquiFirst from Regions Bank earlier this year. In 2006 EquiFirst ranked 20th among all subprime funders, according to the Mortgage Industry Directory. EquiFirst no longer discloses its production volume. "We're not releasing those numbers," said the spokeswoman. She also declined to say how many workers were cut. "We're not releasing much information," she said.

Sales of existing single-family homes in Florida totaled 11,674 in July, a decrease of 24% from the level recorded a year earlier, according to the Florida Association of Realtors.The median sales price of homes sold in July declined to $237,500, down 5% from $250,400 in July 2006, FAR reported. Among the state's larger markets, resales decreased 35% in the Orlando metropolitan statistical area and 25% in the Miami MSA, while median resale prices fell to $258,000 in Orlando, down 3% from $266,800 a year earlier, and to $377,400 in Miami, down 1% from $382,200 a year earlier.

The sales of existing single-family detached homes in California were down 22.7% in July from the level recorded a year earlier, according to the California Association of Realtors.The seasonally adjusted annualized rate of closed-escrow resales totaled 350,980 in July, down from the 453,980-unit rate recorded in July 2006, CAR reported. The median price of an existing single-family detached home in California totaled $586,030 in July, up 3.2% from a revised $567,860 a year earlier, the association said. "With credit drying up in recent weeks, we expect further weakness in sales over the next few months," said CAR president Colleen Badagliacco. "It is too early to say how long the current credit crunch will continue, but we are hopeful that we will avoid a prolonged credit crisis that might cause sales to decline over a longer period of time." CAR can be found online at http://www.car.org.

Home prices continued to decline during the second quarter, dropping 3.2% from the level recorded a year earlier, according to the quarterly S&P/Case-Shiller Home Price Indices.The S&P Case-Shiller data showed home prices trending down in its 10-city composite as well as its indices based on 15 and 20 metropolitan areas. Prices were falling in 15 of the 20 metro areas covered by the larger index. "The pullback in the U.S. residential real estate market is showing no signs of slowing down," said Robert Shiller, chief economist at MacroMarkets. He said the second-quarter year-over-year decline is the biggest drop in home prices since the index was started in 1987. Markets posting the biggest year-over-year declines in home values for the second quarter included Detroit (down 11%), Tampa, Fla. (down 7.7%), San Diego (down 7.4%), Washington (down 7.0%), and Phoenix (down 6.6%).