Originations

To ensure that mortgage borrowers are treated fairly, Congress should impose a fiduciary duty on loan officers and mortgage brokers, according to a newly formed trade association of mortgage professionals."The National Association of Mortgage Professionals is calling for legislation that would establish a higher level of trust and accountability for mortgage agents who enter into a relationship with borrowers," the NAMP said. The association was launched in March to help clean up the mortgage industry, a spokeswoman said. Getting a mortgage is usually the most significant financial transaction in a person's life, and it should not be treated simply as a "retail transaction," the NAMP said. The group can be found on the Web at http://www.namp.org.

Transnational Financial Network Inc., San Francisco, has announced the suspension of its wholesale mortgage lending operations and the closing of one of its retail mortgage offices.Transnational said its Campbell, Calif., office has been closed and the company's staff has been reduced "to a handful of senior people" who will continue its San Francisco retail operations. "The turmoil in the mortgage industry has made wholesale mortgage operations almost impossible," said Joseph Kristul, Transnational's chief executive officer. "Buyers of mortgages have ceased to fund broad categories of mortgages, often refusing to honor previous commitments to purchase mortgages that we have funded.... With our severely diminished capital base, we lack the resources to continue wholesale operations in this environment." The company can be found online at http://www.transnational.com.

Shore Mortgage, Birmingham, Mich., has announced that it is recruiting 150 new employees, including underwriters, account executives, and loan officers, for its five locations in the Detroit metropolitan area.Noting that its announcement runs counter to the industry trend of downsizing and layoffs, the company touted its "consistent growth pattern" and said full-time positions are available in Birmingham, Canton, Roseville, and Taylor. Shore said mortgage professionals with experience in closing, processing, underwriting, servicing, post-closing, accounting, secondary marketing, quality control, information technology, or customer service are encouraged to apply for the positions. The company can be found online at http://www.shoremortgage.com.

A predatory-lending bill that House Democrats plan to introduce in September will place a lot of emphasis on the borrower's ability to repay the loan as a way to prevent loan flipping and to restore investor confidence in the mortgage-backed securities market."Given the meltdown in the subprime market and the foreclosure rate, we will pay more attention to that [ability to repay] -- not just as a protection for consumers, but as a protection to reassure the market," Rep. Brad Miller, D-N.C., told MortgageWire. He said most of the protections in the bill will apply to all loans. "We want to make sure that lenders are lending to people who can actually pay back the loan according to its terms," he said. Reps. Miller and Mel Watt, D-N.C., will be the lead sponsors of the anti-predatory-lending bill that House Financial Services Committee Chairman Barney Frank, D-Mass, wants to mark up in late September or early October. "We are developing a bill that we fully expect to pass the House and the Senate," Rep. Miller said in an interview.

The default rate on subprime mortgage loans hit a record 13.44% in June after rising 100 basis points from that of May, and the foreclosure rate jumped to 5.44%, which also topped the previous record set back in August 1997, according to a Friedman Billings Ramsey report.The default rate on alternative-A loans moved up from 2.69% in May to 3.0%. "The default rates on alt-A and subprime loans deteriorated sharply in June from May, after six months of gradual erosion," FBR managing director Michael Youngblood said. During 2006, underwriting standards on subprime loans became progressively worse with each successive month, Mr. Youngblood said. He noted that debt-to-income ratios rose from 46% in May to 47% in June. The FBR researcher said he expects default rates to drift higher through May of next year. (The default rate includes loans 90 days or more past due, those in foreclosure, and real estate owned.) FBR can be found on the Web at http://www.fbr.com.

Sales of previously owned single-family homes edged down 0.4% in July as the supply of unsold homes on the market was nearing record levels, according to the National Association of Realtors.The NAR reported that sales of existing single-family homes fell from a seasonally adjusted annual rate of 5.02 million in June to 5.0 million in July, which is off by 9.3% since July 2006. NAR senior economist Lawrence Yun said sales are holding on despite problems in the mortgage market. "Home sales probably would be rising in the absence of the mortgage liquidity problems of the past two months," he said. But home sales have declined over the past five months, and the supply of unsold single-family homes climbed to a 9.2-month supply -- uncomfortably close to the record 9.6-month supply set in September 1990 during the savings-and-loan crisis. The NAR economist noted that foreclosures may be pushing up the stock of unsold homes by 3% to 4%. The NAR report also shows that the median single-family house price fell to $228,600 in July, down 1% from the July 2006 price. The NAR can be found online at http://www.realtor.org.

Following its monthly surveillance review, Fitch Ratings has identified 67 of its U.S. CMBS deals as 'Under Analysis', indicating that Fitch will be issuing a rating action within 30 days. Approximately 400 U.S. CMBS deals were designated with a SMARTView date of Aug. 23, 2007, indicating that no immediate action is necessary.SMARTView, a recent addition to Fitch's Structured Finance Surveillance, Metrics, Analytics, Research, and Tools (SMART) products, monitors collateral performance in structured finance bonds providing investors greater insight to Fitch's internal analytic screening process and furthers transparency by publicly identifying the deals that Fitch has identified as requiring an immediate review. As Fitch receives monthly information on structured finance transactions from trustees and servicers, Fitch analysts run the data through various internal algorithms that identify classes of a transaction as possible candidates for upgrade or downgrade. Fitch's analysts scrutinize the output to decide which deals need a formal review, which are noted as 'under analysis', and those deals which can be given a SMARTView date.

Fitch has affirmed one class of notes, downgraded five classes, and placed three classes of notes issued by GSC ABS CDO 2006-4u Ltd. (GSC 2006-4u) on Rating Watch Negative.The following rating actions are effective immediately: $0 class A-S1VF notes affirmed at 'AAA'; $85,000,000 class A1 notes downgraded to 'AA' from 'AAA', placed on Rating Watch Negative; $45,000,000 class A2 notes downgraded to 'A' from 'AA', placed on Rating Watch Negative; $45,000,000 class A3 notes downgraded to 'BB' from 'A', placed on Rating Watch Negative; $33,000,000 class B notes downgraded to 'CCC' from 'BBB', remains on Rating Watch Negative; $10,000,000 class C notes downgraded to 'CC' from 'BB+', remains on Rating Watch Negative. GSC 2006-4u is a hybrid cash and synthetic arbitrage collateralized debt obligation (CDO), which closed on Oct. 6, 2006. The portfolio is managed by GSC Group who maintains a CDO asset manager rating of 'CAM2' for structured finance CDOs. GSC 2006-4u is composed of 94.28% residential mortgage-backed securities, 0.84% commercial mortgage-backed securities, and 4.88% CDOs. On July 12, 2007, class B and class C notes were placed on Rating Watch Negative because of negative migration of subprime RMBS assets in the portfolio. In addition, Fitch has also removed three classes of notes from Rating Watch Negative. The following rating actions are effective immediately: $0 class A-1A notes affirmed at 'AAA'; $125,000,000 class A-1B notes affirmed at 'AAA'; $13,500,000 class A-2 notes affirmed at 'AAA'; $56,500,000 class B notes affirmed at 'AA'; $14,500,000 class C notes affirmed at 'AA-'; $22,500,000 class D notes downgraded to 'A-' from 'A'; $21,000,000 class E notes downgraded to 'BB' from 'BBB', removed from RWN; $4,718,616 class F notes downgraded to 'B' from 'BB+', removed from RWN; $4,718,616 class G notes downgraded to 'B-' from 'BB', removed from RWN. GSC 2006-2m is an arbitrage cash flow collateralized debt obligation, with hybrid features, which closed on May 31, 2006. The portfolio is managed by GSC Group who maintains a CDO asset manager rating of 'CAM2' for structured finance CDOs. GSC 2006-2m is composed of 82.97% RMBS, 6.62% CMBS, and 9.47% CDOs. The class A-1A is structured as delayed draw notes. On July 12, 2007, classes E, F and G notes were placed on Rating Watch Negative because of negative migration of subprime RMBS assets in the portfolio.

Fannie Mae issued $56.1 billion in mortgage-backed securities in July, up slightly from the previous month, according to the mortgage giant's monthly report.The secondary market agency has issued over $50 billion in guaranteed MBS over the three previous months and its securitization business grew at a compound annual rate of 15.5% during the month. In July 2006, the company issued $35.7 billion in guaranteed MBS. Meanwhile, Fannie purchased $21.2 billion in assets for its $730 billion mortgage portfolio last month, but it is constrained from being a more aggressive buyer. Fannie's regulator has refused to increase a cap on its $730 billion mortgage portfolio, despite demands from congressional Democratic leaders who believe lifting the cap would provide much needed liquidity for the mortgage markets. In its monthly report, Fannie notes that "option-adjusted spreads have continued to widen" in August.

New homes sales rose a surprising 2.8% in July despite growing problems in the subprime mortgage sector and tightening credit standards.The U.S. Census Bureau reported that sales of new single-family homes rose from a seasonally adjusted annual rate of 846,000 in June to 870,000 in July. The July sales report shows "fairly good momentum" in housing demand, said Wachovia Corp. economic analysts Adam York. But "everything has changed so dramatically because of financial conditions," he said, that it does not shed much light on market conditions today. He noted some of the sales contracts signed in July will probably be canceled because the buyers can't get financing. "Sales are probably going to continue to decline through the end of this year and starts could decline well into next year," Mr. York said.

Given the Bank of America investment, Fitch Ratings has revised the Rating Watch on Countrywide Financial Corp. and related subsidiaries to Evolving from Negative, signifying that Fitch may upgrade, downgrade or affirm CFC's ratings once additional information has been gathered.The Rating Watch Evolving reflects the $2 billion strategic equity investment from Bank of America in non-voting convertible preferred stock of CFC. The preferred securities, which yield 7.25%, can be converted into common stock at $18 per share, subject to restrictions on trading for 18 months. BoA will receive no Board representation as a result of its investment. Fitch's downgrade of CFC and subsidiary ratings on Aug. 16, 2007 was prompted by the company's announcement that it had drawn down its $11.5 billion unsecured bank facility, a clear sign that liquidity pressure was mounting. While the decision in and of itself raises concerns, Fitch believes the added liquidity provides relief in the short term. Fitch also believes that CFC's current liquidity issues were not caused by a fundamental breakdown of the company's financing plan or strategy, but more so with investor's extreme risk aversion that has triggered unprecedented disruption in the capital markets. Even if the environment normalizes in relative short order, Fitch believes that residual effects caused by the company's temporary liquidity stress will have a significant impact on origination volume and operating performance.

Freddie Mac's Primary Mortgage Market Survey notes that the 30-year fixed-rate mortgage rate averaged 6.52% with an average 0.4 point for the week ending August 23, 2007, down from last week when it averaged 6.62.Last year at this time, the 30-year FRM averaged 6.48%. The 15-year FRM this week averaged 6.18% with an average 0.5 point, down from last week when it averaged 6.30%. A year ago, the 15-year FRM averaged 6.18%. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.34% this week, with an average 0.6 point, down from last week when it averaged 6.35%. A year ago, the 5-year ARM averaged 6.14%. One-year Treasury-indexed ARMs averaged 5.60% this week with an average 0.6 point, down from last week when it averaged 5.67%. At this time last year, the 1-year ARM averaged 5.60%. (Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)

Fitch Ratings, New York, has revised its mortgage insurer capital model. Some of these changes correspond to changes made by the U.S. Residential Mortgage-Backed Securities Group to its mortgage default and loss model.Fitch is increasing the default probability in its MI capital model by 20%. It will also be applying a 100% capital charge to all illiquid equity investments. The model will also now recognize a greater level of reinsurance credit as a partial offset to the higher level of gross losses. Fitch said this is an interim step in the development of an updated model for U.S. mortgage insurers. Fitch said there is the potential that some of the MIs will not have the level of capital for their current rating. Where any downgrades occur, it is expected to be only on notch. Fitch is reviewing the ratings of any companies affected by the model revisions and expects to provide updates within two weeks.

Nearly 88,000 mortgage industry workers have lost their jobs this year, according to the latest count by Challenger Gray & Christmas, a Chicago outplacement consulting firm.And that's on top of the 100,00-plus who were let go in 2005 and 2006. More people were given pink slips in April - 33,781, to be exact - than in any other month. But as of Aug. 21, 20,957 have been cut loose this month and there are still 11 days to go. In the last week, more than 13,000 jobs were lost at Accredited Home Lenders, BNC Mortgage, Sun Trust, First Magnus, Countrywide and Capital One. With few exceptions, the cuts are directly related to the housing market, said CEO John Challenger. "Last week, the mortgage industry basically told their loan officers and call centers representatives to simply stop taking calls. They basically stopped on a dime." The financial sector isn't the only casualty of the slowdown. Realty companies announced 1,950 job cuts so far this year, the company said, but that doesn't include "hundreds, if not thousands" of independent agents who have simply stopped working because there are no buyers, Mr. Challenger said. Another big victim are construction companies, which have announced 19,670 layoffs, a figure that also is underestimated because most crews are small, independent contractors.

BB&T Corp. is acquiring Birmingham, Ala.-based Collateral Real Estate Capital, in a move that will add a Fannie Mae Delegated Underwriting and Servicing platform and also enhance the bank's Freddie Mac coverage.The terms of the deal were not disclosed. The Winston-Salem, N.C.-based bank is looking to combine Collateral with its Laureate Capital commercial mortgage banking arm, which was acquired in 2000. BB&T reports that the combined company will have a commercial real estate servicing portfolio of over $20 billion. Also, it will offer access to various commercial real estate financing avenues, including life insurance companies, pension funds, FHA, and commercial mortgage-backed securities, in addition to proprietary products. Thomas Dennard, Laureate Capital president and CEO, will be CEO of the combined company after the expected closing of the transaction in the fourth quarter.

Moody's Investors Service, New York, has issued downgrades on 120 securities originated in the second half of 2005 and backed by subprime, first-lien mortgage loans.The actions follow a review of the securities rated in the second half of 2005 and affect securities with an original face value of over $1.5 billion, representing 0.7% of the dollar volume and 4.1% of the securities rated by Moody's in the second-half of 2005 that were backed by subprime, first-lien loans. The actions reflect the higher than anticipated delinquency rates of first-lien subprime mortgage loans securitized in the second half of 2005.

IndyMac, Pasadena, Calif., is once again originating prime, single-family residential, full-documentation jumbo loans after temporarily reducing the origination of this product due to current illiquidity in the secondary market."Given our strong financial position, we are fully committed to the market for prime jumbo home loans," said Michael W. Perry, Indymac's Chairman and CEO. "Until the secondary market recovers, we plan to retain this product in our investment portfolio at what we believe will be attractive returns." These prime jumbo products will be available through all Indymac's distribution channels for borrowers providing full documentation only. The product offerings include 5/1 adjustable rate mortgages, 7/1 ARMs, and 15- and 30-year fixed rate products. The borrower must have a FICO score of 680 and above and a down payment, or equity, of 25% is eligible for a loan of up to $2 million. A down payment, or equity, of 20% is eligible for a loan of up to $1 million. A down payment, or equity, of 15% and mortgage insurance, is eligible for a loan of up to $750,000. Jumbo loans are single-family residential mortgage loans that have a loan balance exceeding that which is saleable to the government sponsored agencies, currently $417,000.

Due to the market's decrease in origination volume, HSBC has made plans to shut down a 600-employee Carmel, Ind. facility next year.A spokesman said the company plans to complete the office's shutdown by the second quarter of 2008 and is encouraging workers from the office being shut to apply for open positions elsewhere within the organization. The office primarily handled retail mortgage production and the employees affected generally hold sales, underwriting or support positions, according to the spokesman.

Impac Mortgage Holdings Inc., Irvine, Calif., has laid off approximately 350 people as part of its previously announced plans to reduce operating expenses.Impac blamed the volatility in the secondary and securitization markets for nonconforming mortgages. Joseph R. Tomkinson, chairman and chief executive of Impac, commented, "We are deeply saddened by the displacement of these employees, many of whom have been loyal to the company for more than a decade. During this very difficult time, the company is hosting a variety of seminars, career days, daily lab environments and a job fair to assist our employees in their job searches. Further, we have engaged multiple business partners within the industry to place infrastructures in various sale regions either partially or in their entirety."

Department of Housing and Urban Development officials are considering a way to help certain subprime borrowers refinance into Federal Housing Administration loans, but they have not made a final decision despite pressure from the Bush administration.FHA Commissioner Brian Montgomery said HUD has to consider the impact the additional risk would have on the FHA mortgage insurance fund. "We have not made a decision. We hope to make one soon," Mr. Montgomery told MortgageWire Wednesday evening. Under the plan, FHA would refinance creditworthy subprime borrowers who have been current on their payments up to the time of the reset on their adjustable rate mortgage. FHA could roll some missed payments into the new loan, but they can't go above a 97.75% loan-to-value ratio. In most cases, lenders are going have to write down the loan amount and take a loss so the borrower can fit into a FHA loan.