Originations

Nearly 50 classes of subprime residential mortgage-backed securities with outstanding balances totaling more than $1 billion were downgraded by Fitch Ratings on Aug. 8.Fitch also affirmed the ratings on classes with outstanding balances of more than $8.5 billion. Among the downgrades were 42 classes from five issues of Long Beach Mortgage Loan Trust asset-backed certificates. Fitch reported that as of the end of the day on Aug. 8, it had downgraded 546 classes (with an outstanding balance of $10 billion) from subprime RMBS deals placed Under Analysis on July 12 and affirmed the ratings on 1,009 classes with an outstanding balance of $86 billion.

American International Group Inc., New York, has reported an operating loss in its mortgage insurance business for the second quarter, though the company's net income of $4.28 billion ($1.64 per share) was up considerably from $3.19 billion ($1.21 per share) a year earlier.AIG's Mortgage Guaranty operations incurred an operating loss of $78 million for the quarter, compared with net income of $110 million in the second quarter of 2006, the company said. "The continuing weakness in the U.S. housing market resulted in a significant increase in losses for the domestic mortgage insurance business," AIG said. "The domestic second-lien business was the primary contributor to the decline in operating income; however, the domestic first-lien business also experienced an increase in incidence and severity of losses incurred." The company said net premiums written grew 40.9% in the quarter, citing "strong growth in international markets" and higher renewal premiums in its domestic first-lien business.

Bank of America, Charlotte, N.C., has announced a mortgage program for police officers, firefighters, teachers, and medical workers that includes an insurance benefit providing for a full or partial payoff of the loan in the event of a covered accidental death, paralysis, or dismemberment.Citing Census Bureau figures, BoA said the Neighborhood Champions Protected Mortgage program is available to an estimated 16 million professionals. "Too many Americans in these professions of honor simply cannot find and afford quality housing, especially in metropolitan areas," said Floyd Robinson, president of BoA's Consumer Real Estate and Insurance Services Group. "Neighborhood Champions Protected Mortgage not only helps these heroes realize the dream of homeownership, but also provides security and peace of mind should tragedy strike." The program offers 100% financing, competitive loan rate, and flexibility on credit scores and credit histories, BoA said. The company can be found online at http://www.bankofamerica.com.

The average 30-year fixed mortgage rate fell from 6.68% to 6.59% for the seven-day period ended Aug. 9, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate fell from 6.32% to 6.25%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages climbed from 6.29% to 6.33%, and the average rate for one-year Treasury-indexed ARMs rose from 5.59% to 5.65%, Freddie Mac reported. Fees and points averaged 0.4 of a point for fixed-rate mortgages and 0.5 of a point for ARMs. "Interest rates on prime conforming fixed-rate mortgages eased further in the past week, according to the Primary Mortgage Market Survey, even though other sources such as HSH Associates reported that jumbo fixed rates increased by a quarter percent or more last week," said Frank Nothaft, Freddie Mac's chief economist. "Job creation fell short of market expectations, with 92,000 jobs added in July, the smallest gain since February, and June's number was revised down by 6,000." A year ago, the average 30-year and 15-year fixed rates were 6.55% and 6.20%, respectively, and the average hybrid and one-year ARM rates were 6.21% and 5.69%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

Subprime lender Delta Financial, Woodbury, N.Y., has delayed its second-quarter earnings release and conference call, set for Wednesday, Aug. 8, a move that sent its shares down 40% in trading on the day.The nondepository lender had hoped to report earnings before the market opened Wednesday. The delay was posted on its website, with no further details provided. Shortly before MortgageWire's deadline, Standard & Poor's issued a statement saying it had lowered its ratings on five classes of asset-backed securities from Delta transactions. S&P said the lower ratings reflect "[m]onthly net losses that have exceeded monthly excess interest cash flow." On Wednesday, Delta's shares fell $3.20, or 40%. The company can be found on the Web at http://www.deltafinancial.com.

Freddie Mac has announced that it will release its second-quarter 2007 financial results before the market opening of the New York Stock Exchange on Aug. 30.The government-sponsored enterprise said it will hold a conference call at 10 a.m. EDT on that date to discuss the company's results. Freddie Mac resumed quarterly reporting in June for the first time since 2002, citing a net loss of $211 million ($0.46 per share) that it attributed primarily to mark-to-market losses on its derivatives portfolio and to credit spread widening.

Fitch Ratings says statements by MGIC Investment Corp., Milwaukee, regarding C-BASS and MGIC's merger with Philadelphia-based Radian Group have made the probability that the merger will be consummated "lower than previously expected."Back on July 31, when both companies admitted they would have to take an impairment on Credit-Based Asset Servicing and Securitization LLC, a New York-based specialty servicer, Fitch put Radian on Rating Watch Negative. It said the move reflected Radian's "relatively weakened stand-alone financial position as a result of C-BASS." Fitch added that if the merger didn't occur, Radian's ratings would be downgraded by one notch. MGIC's announcements have increased the likelihood that this will happen. On the other hand, Fitch said MGIC is still in "a good position to operate at its current rating level, either combined with Radian or as a stand-alone company." Fitch can be found online at http://www.fitchratings.com.

The Radian Group Inc., Philadelphia, says it believes that the impairments it and MGIC Investment Corp., Milwaukee, will have to take on specialty servicer C-BASS will not "affect MGIC's obligation to go forward with the merger agreement."In its statement, Radian added that it did not know of any developments that would affect MGIC's obligation to close on the transaction. "We remain committed to the transaction, and look forward to completing it as promptly as possible," Radian said. Meanwhile, Friedman, Billings, Ramsey & Co. issued a report stating that, "given Radian's weaker position relative to its credit ratings, we believe that Radian needs the merger much more than MGIC. Also, the deal is not without its merits for MGIC either, namely the added breadth of product offerings at Radian and the cost savings available if the deal goes through. As a result, we believe the transaction will ultimately pan out, but at a renegotiated valuation for Radian shares." The other scenarios for the deal, according to FBR, are that the deal is broken or that it proceeds as planned. FBR described keeping the original terms as the least likely option. The two mortgage insurance firms can be found online at http://www.radian.biz and http://www.mgic.com.

Option One Mortgage Corp., Irvine, Calif., has trimmed 185 account executives from its work force as part of a restructuring plan, reporting that more cuts may lie ahead.Meanwhile, the nation's third-largest subprime lender said the sale of the company to hedge fund Cerberus Capital is moving forward and still may close by Oct. 31, the end of its fiscal second quarter. There has been speculation in the market that Cerberus may be getting cold feet in regard to Option One. Earlier in the week, the Cerberus-owned Aegis Mortgage of Houston stopped funding loans and trimmed hundreds of workers. (In May, Option One announced plans to close 12 mortgage processing offices and trim 600 workers by early September.) In April Cerberus agreed to pay just shy of $1 billion in cash for Option One, but the price is based on Option One's net asset value, which has dropped during the nation's subprime crisis. Option One can be found online at http://www.optiononemortgage.com.

President Bush, at a news conference Wednesday afternoon, ruled out any type of taxpayer bailout for lenders threatened by the subprime crisis.According to news reports on the president's remarks, he also dismissed proposals to grant Fannie Mae and Freddie Mac greater leeway in increasing their balance sheets. Fannie has asked its regulator for permission to increase the cap on its on-balance-sheet portfolio, a move that could increase liquidity in the secondary market.

Eight classes of subprime residential mortgage pass-through certificates from four transactions issued by Residential Asset Securities Corp. have been downgraded by Fitch Ratings.The downgraded classes, which had outstanding balances totaling $68.5 million, were among the subprime residential mortgage-backed securities placed Under Analysis by Fitch on July 12. Fitch also affirmed the ratings on 33 classes from the RASC transactions. Fitch reported that as of the end of the day on Aug. 7, it had downgraded 499 classes (with an outstanding balance of $9 billion) from subprime RMBS deals placed Under Analysis on July 12, and affirmed the ratings on 896 classes with an outstanding balance of $76 billion. Fitch can be found online at http://www.fitchratings.com.

First Potomac Realty Trust, Bethesda, Md., has announced the closing of a $50 million secured term loan facility.First Potomac, a real estate investment trust, said the three-year facility has a one-year extension option and can be expanded to $100 million. KeyBanc Capital Markets was the lead arranger and sole book manager of the facility. First Potomac can be found online at http://www.first-potomac.com.

BioMed Realty Trust Inc., a real estate investment trust based in San Diego, has amended its credit facilities to reduce its borrowing rates and boost its credit line.The borrowing rate under a $250 million secured term loan was reduced by 60 basis points, and the borrowing limit under its unsecured revolving line of credit was raised from $500 million to $600 million, the REIT said. KeyBank NA was the administrative agent and lead arranger for both facilities. BioMed, which specializes in providing real estate to the life science industry, can be found online at http://www.biomedrealty.com.

Standard & Poor's is launching commercial real estate indices to measure changes in commercial real estate prices in partnership with GRA, an affiliate of Charles Schwab Investment Management.The indices will measure price changes by property sector and geographic region, S&P reported. There will be 10 indices, including a national composite, five geographic indices (Desert Mountain West, Mid-Atlantic South, Midwest, Northeast, and Pacific West), and four property sector indices (multifamily, office, retail, and warehouse). The indices are to be based on closed commercial real estate transactions with input from GRA. The indices are slated to be launched on Aug. 21. S&P can be found online at http://www.standardandpoors.com.

More than half of consumers say they think the federal government should pass legislation to help subprime borrowers avoid foreclosure, according to the latest Experian-Gallup Personal Credit Index survey.The survey found that 55% of respondents favor such federal action, Experian reported. It also found that 50% are uncomfortable making a major purchase such as a home, a car, or major appliances over the next three months, and that 61% who said they were very familiar with subprime loans believe the problems in the subprime market will spill over into the wider mortgage market. The index can be found online at http://www.personalcreditindex.com.

Colorado Business Bank, Denver, has announced the formation of a Real Estate Capital Markets Group.The group will be led by executive vice president Craig Poulter and senior vice president Kathy Thurston, who have a combined 40 years of experience in real estate banking, according to the bank. The group will develop a "comprehensive capital markets product offering and platform," including mezzanine debt, and will establish a loan syndications desk, the bank said. Mr. Poulter was most recently group senior manager for the Western Region office of LaSalle Bank, and Ms. Thurston was most recently division head of LaSalle Bank's Western Region office. Colorado Business Bank can be found online at http://www.cobizinc.com.

The Market Composite Index, an overall measure of mortgage applications, rose from 607.1 to 656.5 on a seasonally adjusted basis during the week ended Aug. 3, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications increased 7.7% on the week and were up 18.0% from the level recorded a year earlier. The Purchase Index rose from 416.6 to 447.4 on a seasonally adjusted basis, while the Refinance Index climbed from 1724.1 to 1881.1. Refinancings represented 39.9% of total applications, up from 39.4% the previous week, while adjustable-rate mortgages accounted for 22.5%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages fell from 6.50% to 6.41%, and points (including the origination fee) fell from 1.66 to 1.62 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

Impac Mortgage Holdings, Irvine, Calif., saw its stock price soar 44% in trading Wednesday after it shot back at its brokerage house critics, clarifying that it has met all its margin calls, has "financing facilities," and is continuing to fund loans.Earlier in the week, Impac suspended originations of alternative-A loans -- a bread-and-butter product for the lender. (On Aug. 7, its stock fell by 40%.) Even though Impac has exited -- for now -- the alt-A niche, it is continuing to fund government loans and reverses. The nondepository real estate investment trust said it has "secured definitive agreements to begin originating and selling reverse mortgage loans through its wholesale and retail platforms." At deadline time its stock was trading at $1.70, compared with a 52-week low of $0.95 and a high of $9.99. This spring, Impac bought Pinnacle Financial Corp., a nationwide retail lender with expertise in conforming agency loan programs.

The National Association of Mortgage Brokers, responding to criticism of the mortgage brokerage industry by Sen. Hillary Rodham Clinton, D-N.Y., has criticized the senator for advocating policies that "single out small business America" and called instead for an examination of the entire mortgage system."The entire mortgage system needs to be examined from stem to stern -- from the home shopping phase, bankers, brokers, and lenders all the way to Wall Street and the rating agencies," the NAMB said in a statement. "NAMB welcomes Sen. Clinton's proposal to create a registry database, but it needs to go one step further -- it should be applied to all mortgage originators, not just mortgage brokers." In a recent speech, Sen. Clinton called for upfront disclosures of mortgage brokers' compensation, a ban on prepayment penalties, and a requirement that all subprime mortgages have escrow accounts. Regarding disclosures, the NAMB noted that it has also called for reform, pointing to Federal Trade Commission studies suggesting that "our entire mortgage disclosure system is broken and it needs a comprehensive fix." The association can be found on the Web at http://www.namb.org.

MGIC Investment Corp., Milwaukee, says it has informed the New York State Insurance Department that it is not obligated to complete the proposed merger with Radian Group Inc., Philadelphia, as a result of the impairments both companies will take in regard to C-BASS.The decision is a result of a preliminary assessment conducted by MGIC's management. The MGIC statement said Radian has informed MGIC that it disagrees with that assessment. The MGIC statement added that its management is "reviewing other developments that might affect MGIC's obligation to close. Whether MGIC will definitively conclude that it is not obligated to close the merger is a decision that will be made only by the board of directors of MGIC, which will not be asked to decide until MGIC's management has completed its analysis." MGIC has asked for additional information from Radian and says it does not expect the analysis to be completed until the week of Aug. 13. The two mortgage insurance firms recently announced that they had written down the value of their investment in Credit-Based Asset Servicing and Securitization LLC, a New York-based specialty servicer, by more than $1 billion combined. They also reported that C-BASS had been the subject of "unprecedented" margin calls.