Originations

Delta Financial Corp., Woodbury, N.Y., has closed its satellite wholesale offices in Florida, Texas and California and eliminated 300 jobs, a 20% cut in its workforce."The rapid deterioration of the credit markets has caused issues in our sector that are beyond our control," explained Hugh Miller, president and chief executive. "As we continue to make the necessary rate increases and program cuts in order to address the changing business environment, the result in the near term is a likely reduction in loan production. Accordingly, it is with sadness that we must reduce our workforce to address the anticipated decrease in originations. We deeply regret having to take this action, but it is the fiscally responsible decision to make at this time." Delta expects to record a pre-tax charge of between $2.0 million and $2.5 million for the third quarter because of the workforce reductions and related expenses.

Lehman Brothers has made plans to shut down its BNC Mortgage LLC subsidiary in a move that affects about 1,200 employees in 23 U.S. locations.The Wall Street firm cited "market conditions have necessitated a substantial reduction in its resources and capacity in the subprime space" as the reason for the shutdown. Lehman will continue to originate mortgages in the U.S. through its Aurora Loan Services LLC platform. As a result of the BNC closure, the company will record related after-tax charges, including severance, real estate and technology costs, of approximately $25 million, and a 100% after-tax goodwill write-down of approximately $27 million. Lehman can be found on the Web at http://www.lehman.com.

Countrywide Financial Corp. is forcing tens of thousands of homeowners into foreclosure by refusing to restructure subprime adjustable rate mortgages with 10% and 11% interest rates, according to a community activist group that provides low-cost mortgage financing to prevent foreclosures.The Neighborhood Assistance Corporation of America chief executive Bruce Marks called on CWF to start working with its borrowers and restructure their unaffordable loans. NACA assembled a group of Countrywide borrowers to tell their stories at a Washington press conference and they repeatedly complained about being socked with $5,000 and $10,000 fees and receiving no help from servicing employees. NACA receives financial backing from Bank of America and Citigroup and Mr. Marks said maybe BoA's $2 billion investment in Countrywide will force the nation's largest mortgage lender and servicer to change its policies. "Isn't it ironic," he said, that Countrywide forced people into subprime loans with high rates and now Countrywide has to pay subprime rates to fund its operations and "can't survive."

Countrywide Home Loans chief Angelo Mozilo said Thursday morning that the subprime market is "damaged for the foreseeable future."In an interview with National Mortgage News Mr. Mozilo said consumers that will be hurt the most from the subprime fallout are low-income minorities, and even middle-class home buyers, especially in California where Countrywide is the largest residential lender. The CFC chairman and CEO also called on the Office of Federal Housing Enterprise Oversight to increase the loan limit cap for Fannie Mae and Freddie Mac, a move, he said, that would help troubled jumbo borrowers refinance their loans. The current cap is $417,000.

Late Wednesday Bank of America invested $2 billion in Countrywide Financial Corp., the nation's largest home lender, a possible sign that the mortgage liquidity crisis could be ebbing somewhat -- but only for conventional lenders. (See Angelo Mozilo's confidential memo to employees.)The news came just after Lehman Brothers closed its subprime unit, BNC Mortgage, and Quality Home Loans, the nation's largest "hard money" lender filed for bankruptcy protection. In a memo sent to employees CFC chairman, co-founder and CEO Angelo Mozilo said, "Through this important investment from Bank of America, today, Countrywide's future is much brighter." A little over a week ago, CFC's future was in doubt after a Merrill Lynch analyst, Kenneth Bruce, suggested that if the industry's liquidity crisis continued the lender might be forced into bankruptcy. Specifically, BoA invested $2 billion in the form of a non-voting convertible preferred security yielding 7.25% annually. The security can be converted into common stock at $18 per share, with resulting shares subject to restrictions on trading for 18 months after conversion.

Fitch Ratings has affirmed one class and downgraded four classes of notes issued by NovaStar ABS CDO I, Ltd and NovaStar ABS CDO I, Inc co-issuer.$243,700,000 class A-1 notes are affirmed at 'AAA'; $34,900,000 class A-2 notes are downgraded to 'AA' from 'AAA' and place on Rating Watch Negative; $28,500,000 class B notes are downgraded to 'A+' from 'AA' and placed on Rating Watch Negative; $24,400,000 class C notes are downgraded to 'BBB' from 'A' and placed on Rating Watch Negative; and $15,700,000 class D notes are downgraded to 'BB' from 'BBB' and remain on Negative Rating Watch. The class A-2, B and C notes have been placed on Rating Watch Negative and the class D notes remain on Rating Watch Negative due to exposure to 2005, 2006 and 2007 RMBS subprime collateral, currently experiencing high default and delinquency rates, of which a substantial percentage have not been reviewed by any agency. Fitch expects to resolve the Rating Watch status on these notes as the expected performance of these bonds is more apparent.

Fitch has downgraded one class of notes from Enhanced Mortgage-Backed Securities Fund V Ltd. and also has placed three classes from the same collateralized debt obligation on Watch Negative.In addition, the rating agency has placed one class of Enhanced Mortgage-Backed Securities Fund IV Ltd. on Watch Negative. Fitch can be found online at http://www.fitchratings.com.

Fitch has placed 131 pre-2006 transactions and 104 additional first-lien U.S. subprime transactions originated in 2006 "under analysis."The rating agency said this affects a total of 235 deals representing $92.1 billion of debt outstanding, including $4.2 billion in bonds rated BBB or lower. The bonds rated BBB or below are the ones most likely to face rating actions, Fitch said. Fitch can be found on the Web at http://www.fitchratings.com.

Single-family loan production by commercial banks jumped by 20% in the second quarter, compared to the previous quarter, but they sold an equivalent amount of loans into the secondary market, according to Federal Deposit Insurance Corp. data. The 657 commercial banks and saving banks that reported origination data to FDIC made $345.9 billion in 1-4 family loans in the second quarter, compared to $286.6 billion in the first quarter. But these depository institutions also sold $348.3 billion in first lien SF loans into the secondary market. FDIC also reported that 1.33% of $1.94 trillion in single-family loans held by banks and thrifts are 90 days or more past due, up from 0.92% in the second quarter of 2006. Charge-offs on first lien SF loans remain low at 0.14%. However, charge-offs on second liens, which could be associated with piggy-back loans, hit 0.79% in the second quarter, up from 0.45% in the same period a year ago.

Originations of commercial and multifamily mortgage loans continued strong in the second quarter the Mortgage Bankers Association reports, and were up 40% compared to last year's second quarter.Originations were also up 26% from first quarter levels. At the helm of the increased origination activity was a rise in commercial mortgage-backed securities loans and loans backed by hotel properties, the mortgage bankers' trade association reports. Volume was also positively influenced by real estate investment trust (REIT) privatizations. "A number of large deals helped boost commercial/multifamily origination volumes in the second quarter," said Jamie Woodwell, MBA's senior director of commercial/multifamily research. "As a result, the quarter saw significant growth in CMBS and hotel loans. Overall, second quarter commercial/multifamily originations remained strong despite the initial phases of a general re-pricing of risk in the commercial/multifamily and other capital markets." Compared to the second quarter of 2006, loans for hotel properties were up 330%.

The Market Composite Index, an overall measure of mortgage applications, decreased from 678.7 to 641.1 on a seasonally adjusted basis during the week ended Aug. 17, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications decreased 6.5% on the week and were up 14.2% from the level recorded a year earlier. The Purchase Index decreased from 464.9 to 441.5 on a seasonally adjusted basis, while the Refinance Index fell from 1929.6 to 1806.3. Refinancings represented 39.9% of total applications, unchanged from the level of the previous week, while adjustable-rate mortgages accounted for 18.6% the MBA said. The average contract interest rate for 30-year fixed-rate mortgages rose from 6.45% to 6.49%, and points (including the origination fee) fell from 1.54 to 1.48 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

A new research note issued by Friedman Billings Ramsey Group estimates that $150 billion to $250 billion of "permanent capital" is needed to "normalize" pricing in the mortgage market. FBR says the capital is needed because many firms are trying to de-leverage at the same time. "The big question is: Who will supply this permanent capital when many investors believe that housing assets are impaired?" writes FBR. The investment banking firm predicts it will take six to 12 months for the prices "of mortgage assets to adjust and for capital to flow back into the space."

A new report says that residential mortgage lender "insolvencies" caused by poor loan underwriting are nearing an end. But the company that issued the report, SMR Research Corp., Hackettstown, N.J., notes that even though the worst of the subprime crisis may be over, the secondary market for non-conforming product is still in turmoil. In its report, SMR grades 163 mortgage lenders, issuing scores relating to their chances of failure. Among the top 10 lenders, Bank of America had the lowest risk score (450), HSBC the highest (1,444). Nearly all lenders with a score north of 1,750 are already bankrupt, SMR says.

First Magnus Financial -- which closed its doors last week -- filed for Chapter 11 bankruptcy protection on Tuesday, listing 20 of its largest unsecured creditors, including Fannie Mae and National Bank of Arizona, Tucson. According to the filing, National Bank is owed $5 million, Fannie, just $550,000. (The Fannie debt is listed as an estimate.) In the filing, the Arizona-based mortgage banker lists assets of $942 million and debts of $812 million, which means, on paper, it is worth $130 million. When First Magnus closed its doors last week, it blamed its problems on "the collapse of the secondary mortgage market."

With its acquisition by Lone Star Fund V (U.S.) LP in doubt, Accredited Home Lenders Holding Co., San Diego, has announced a restructuring program that shuts down its U.S. mortgage originations operations for the time being.The company said it is closing all of its retail operations as of Sept. 5. This consists of 60 retail branches, five support locations and 480 people. The only retail to continue to operate will be the San Diego-based customer retention unit. Furthermore, five of the 10 wholesale divisions will shut on Sept. 5. Overall, it will reduce its wholesale workforce by 490 people, leaving 340 people employed. In addition, Accredited said it is not accepting any new applications in the U.S. Its headquarters staff will be cut by 180 positions. The company said the moves do not affect its Canadian mortgage originations business or its U.S. loan servicing platform. Accredited said this restructuring, plus the $1 billion loan trade will allow it to survive off of securitization cash flows, servicing income and other income until it can resume loan origination operations.

Hard money lender Quality Home Loans, Agoura, Calif., has suspended funding new mortgages but promises it will re-enter the market shortly, MortgageWire has learned.A spokeswoman for the privately held QHL said the suspension is "temporary," adding that brokers are still submitting loan applications to the company. "We're here, open and at full staff," she said. "It's only for a few days." According to the Mortgage Industry Directory, QHL funded about $600 million last year. It is a wholesale-only lender.

Fitch Ratings has downgraded two classes of notes issued by Whatley CDO I Ltd., citing "credit deterioration in the subprime residential mortgage-backed securities space." Specifically, Fitch lowered the ratings of classes BF and BV and affirmed the ratings of five other classes of the collateralized debt obligation. Fitch can be found online at http://www.fitchratings.com.

An index that gauges the prospects for commercial real estate brokerage activity was up 0.5% in the second quarter to a record reading of 120.7, according to the National Association of Realtors.The Washington-based Realtors' trade group said that this suggests "improved business opportunities for commercial real estate practitioners in the months ahead." Lawrence Yun, NAR's chief economist, said, "The rise in the index means net absorption of space in the industrial and office sectors is likely to expand over the next six to nine months. In addition, an improvement in returns on investment implies healthy rent increases for commercial property owners." Net absorption of space in the office and industrial sectors is likely to be 30 million to 40 million square feet in the fourth quarter, according to the association. The NAR index is based on input from 13 economic variables.

Thrift institutions originated $173.3 billion in single-family loans in the second quarter, up 17% from the same period a year ago, and posted strong profits despite an increase in troubled assets.Noncurrent loans and foreclosures stood at 0.95% of total assets as of June 30 -- the highest level since 1997, according to the Office of Thrift Supervision. Single-family loans 90-days or more past due have risen from 76 basis points at the start of the year to 1.16%. OTS officials expect delinquencies to increase but they noted thrifts are increasing their reserves faster than charge-offs are rising. Meanwhile, refinancings comprised 48% of thrift originations as adjustable-rate mortgage holders continued to convert into fixed-rate loans. Thrifts generally like to sell fixed-rate loans and OTS officials noted there is a "chance" they might have problems selling loans due to current problems in the credit markets. However, OTS senior deputy director Scott Polakoff noted that thrift institutions are well capitalized and they originate high quality mortgages. "Our institutions are well positioned to weather this stressed economic time and come out very successful," Mr. Polakoff told reporters.

MGIC Investment Corp., Milwaukee, has filed suit in the Federal District Court in Milwaukee looking for a court order to have the Radian Group Inc., Philadelphia, "provide MGIC with certain information needed by MGIC's management" to complete its analysis on whether it should pull out of the merger transaction.Back on Aug. 7, MGIC said it was not obligated to complete the merger because of the problems at C-Bass, a joint venture owned by both companies. At that time MGIC said it was looking to complete its analysis by the week of Aug. 13. In a statement, Radian said it was "disappointed that MGIC filed a lawsuit." It said it never consented to MGIC's timeline and "is compelled to carefully assess the proprietary nature of the subsequent information requests to ensure that Radian does not provide MGIC with an unfair competitive advantage" if the deal does not take place.