Originations

The Cerberus-owned Aegis Mortgage Corp., Houston, once a top-ranked subprime funder, revealed Tuesday that it will terminate a "substantial number of its employees" effective immediately.On Monday it stopped originating loans through its only remaining channel, wholesale. Aegis has lending operations in 50 states and offices in 24. No employee head count was available, but sources say it once employed 5,000. The nondepository said it is maintaining its servicing business. (A month ago National Mortgage News reported that Aegis was trying to sell its servicing business.) Cerberus -- which also controls GMAC Mortgage -- is in the process of buying subprime giant Option One Mortgage Corp., Irvine, Calif., but there is speculation that the hedge fund may seek to renegotiate that transaction. In a statement, Aegis chief executive Dan Gilbert said, "The change in market conditions, coupled with the rapid decline in the secondary mortgage market, has forced Aegis to take this action, despite the best efforts of our management team and hard-working employees."

Health Care REIT, Toledo, Ohio, has replaced its $700 million unsecured credit facility with a $1.15 billion facility.The real estate investment trust said the revolving facility's maturity date was extended to August 2011, with an option to extend it for another year. KeyBank was the joint lead arranger and administrative agent for the modification, and Deutsche Bank Securities was the co-lead arranger and syndication agent. The company also announced that its $40 million line of credit with Fifth Third Bank has been consolidated into the new facility. The REIT can be found on the Web at http://www.hcreit.com.

The residential primary servicer rating for subprime product of Accredited Home Lenders Inc. has been placed on Rating Watch Negative by Fitch Ratings.The company's primary servicer rating is RPS3-minus. (Fitch rates residential servicers on a scale of 1 to 5, with 1 being the highest rating.) Fitch said the actions reflect "the continued pressure on [Accredited Home Lenders Holding Co.'s] liquidity position in the increasingly challenged subprime mortgage market." The rating agency noted that Accredited Home Lenders Holding Co., the parent company of Accredited Home Lenders Inc., has announced a merger agreement with Lone Star Fund V (U.S.) LP.

Class B of notes issued by Bristol CDO I Ltd. have been downgraded from B/DR2 to CCC/DR2 by Fitch Ratings and removed from Rating Watch Negative.In addition, the ratings on classes A-1 and A-2 in the deal were affirmed. The collateralized debt obligation is secured by a static pool of asset-backed securities, of which 18.4% are manufactured housing residential mortgage-backed securities and 17.1% are subprime RMBS issued in 2002 and 2001, Fitch said. The rating agency attributed the downgrade to a deterioration in collateral, reporting that the overcollateralization ratio of class C remains below its minimum threshold of 104.5%, despite an improvement in the deal's collateral quality tests. "The class B notes will not receive any principal proceeds until the class A-1 and A-2 notes have been paid in full," Fitch said.

Standard & Poor's Ratings Services has placed its BBB ratings on the series 2004-A and 2005-A subordinated notes issued by Broadhollow Funding LLC on CreditWatch with negative implications.Broadhollow is a single-seller warehouse asset-backed commercial paper conduit that issues extendible notes to finance mortgage loans originated by American Home Mortgage Corp. The rating actions followed a bankruptcy filing by American Home Mortgage Investment Corp., which is a "termination event" under the Broadhollow transaction documents, S&P said. Broadhollow is no longer permitted to buy additional mortgage loans, and all collections and sales proceeds will be held to pay off Broadhollow's secured liquidity notes as they mature. S&P said the rating actions reflect its uncertainty about the bankruptcy filing and the extent to which AHM's recent announcements and reduced operating structure will affect its servicing operations. "Further aging of delinquent loans, in combination with the current market environment for pricing those nonperforming loans, has increased the risk of unprecedented market value declines," the rating agency said.

More than 100 classes of subprime residential mortgage-backed securities with outstanding balances totaling over $2.1 billion were downgraded by Fitch Ratings on Aug. 6.Fitch also affirmed the ratings on classes with outstanding balances of more than $15 billion. Among the downgrades were the following mortgage pass-through certificates: 65 classes from nine issues of Ameriquest Mortgage Securities Inc.; 24 classes from four issues of Fremont Home Loan Trust; and 13 classes from two issues of CDC/IXIS Corp. The rating actions were based on changes to Fitch's subprime loss forecasting assumptions, which "better capture the deteriorating performance of pools from 2006 and late 2005 with regard to continued poor loan performance and home price weakness," the rating agency said. Fitch reported that as of the end of the day on Aug. 6, it had downgraded 491 such classes (from subprime RMBS deals placed Under Analysis on July 12) with an outstanding balance of $9 billion, and affirmed the ratings on 850 classes with an outstanding balance of $74 billion. Fitch can be found online at http://www.fitchratings.com.

More than 200 classes of securities backed by alternative-A residential mortgages have been placed on CreditWatch with negative implications by Standard & Poor's Ratings Services.The rating agency reported that the 207 affected classes total approximately $913.9 million in residential mortgage-backed securities, representing 0.20% of the $455.4 billion in U.S. RMBS backed by first-lien alt-A collateral that were rated by S&P from October 2005 through December 2006. The negative rating actions were attributed to "a rising level of delinquencies among the alt-A collateral supporting these transactions, as well as our expectation that losses on the collateral will exceed historical precedent and may exceed our original expectations." The weak performance was attributed to various factors, including high combined loan-to-value ratios, home price declines, looser underwriting standards, and risk layering (the combination of several risk elements for a single borrower). The rating agency can be found online at http://www.standardandpoors.com.

The Core Mortgage Risk Index increased 4.4% in the second quarter, reflecting the pressures of rising delinquency and foreclosure rates and slow price appreciation, according to First American CoreLogic, a Sacramento, Calif.-based provider of mortgage risk assessment and fraud prevention systems.The index is "increasingly driven by the fallout caused by high delinquency rates in the subprime and alt-A markets," the company said. CoreLogic listed the five U.S. markets currently most at risk as Detroit-Livonia-Dearborn, Mich.; Warren-Troy-Farmington Hills, Mich.; Memphis; Youngstown-Warren-Boardman, Ohio-Pa.; and Dayton, Ohio. CoreLogic can be found on the Web at http://www.corelogic.com.

Freddie has issued a $105.6 million subprime mortgage-backed security as part of its $20 billion commitment to Congress to provide liquidity to the subprime market and safer underwriting standards.The subprime and alternative-A loans originated by Wells Fargo Home Mortgage include fixed-rate products along with adjustable-rate 2/28 mortgages. The maximum margin on the ARMs is 450 basis points. One group of loans in the Freddie Mac structured pass-through security (Series T-074) has FICO credit scores ranging from 550 to 752 with a weighted average score of 613. Freddie spokesman Brad German said loans have a wide range of credit scores, loan-to-value ratios, debt-to-income ratios, and other characteristics. He said Freddie does not have a cookie-cutter model with every detail worked out. But the secondary-market agency will work with lenders in putting loan pools together that meet a certain risk profile. "The prospectus will give the market a strong idea of what we are looking to buy," Mr. German said.

Speakers at the California Mortgage Bankers Association's Western States Loan Servicing Conference were largely pessimistic about the prospects for a quick recovery in home values and loan performance, especially for the subprime mortgage sector.That means mortgage servicers will continue to face pressure as they manage rising delinquencies and foreclosures. "The eyes of the industry are really on us. We are in the throes of another cycle," said Scott Whittle, an attorney with Incal Associates, Los Angeles, who chaired the Las Vegas conference. William Leroy, head of the American Legal & Financial Network, said the industry has never before faced a time like the present. "It's going to be a wild ride over the next couple of years," he said. Mr. Leroy said he doesn't expect the market to recover before the end of 2009, as the industry struggles to contain fallout from weakening home prices and the reset of adjustable-rate loan products to higher payments. Michael Drawdy, senior vice president for home retention at Countrywide Home Loans, said his company is preparing for an increase in short sales as troubled borrowers struggle to find a way out of difficult options.

To crack down on abusive lending, Sen. Hillary Rodham Clinton, D-N.Y., wants upfront disclosures of a mortgage broker's compensation and a ban on prepayment penalties, along with a requirement that all subprime mortgages have escrow accounts."We need to put an end to fly-night-night mortgage brokers peddling loans to unqualified applicants based on inflated appraisals," the Democratic presidential candidate said in a speech outlining legislative proposals she intends to introduce when Congress returns in September. Her legislation will also provide $1 billion to assist state-sponsored foreclosure rescue funds and expand Fannie Mae's and Freddie Mac's mission to include helping at-risk homeowners avoid foreclosure. "If I were president, I would address abuses across the mortgage industry with a plan to curb unfair lending practices and hold brokers and lenders accountable, give families the support they need to avoid foreclosure, and increase the supply of affordable housing," the New York senator said.

NovaStar Financial Inc., Kansas City, Mo., has issued a statement saying it will again fund loans in the wholesale channel starting on Aug. 7.On Aug. 3, the company suspended issuing new commitments for wholesale production, blaming disruptions in the secondary market. "Based on a re-evaluation of current conditions in the secondary market, NovaStar is adjusting its pricing and guidelines and expects to return to committing on new loans in the wholesale channel and funding those loans, effective Tuesday Aug. 7," the company said. "Meanwhile, NovaStar has continued to honor all existing commitments and fund all loans that have already been approved and committed for closing." NovaStar said its retail channel has continued to make loans, using guidelines that are "evolving to meet changing needs of the secondary market." NovaStar can be found online at http://www.novastarmortgage.com.

Transnational Financial Network Inc., San Francisco, says it is getting out of the mortgage business after entering into an agreement to acquire Telava Networks Inc., a provider of wireless broadband connectivity, also in San Francisco."We believe that our shareholders will have the benefit of new enterprise in a new, expanding industry, an opportunity that would not otherwise be available to our shareholders," said Joseph Kristul, Transnational's chief executive officer. "Consistent with the challenges in the mortgage industry, Transnational has seen its operations and capital position deteriorate. Given the current difficulties in the mortgage industry and our anticipation that these problems will continue for an indefinite time, this acquisition holds promise for our shareholders that they would not otherwise see in the mortgage industry for some time." The mortgage operations are being sold to an entity not disclosed in the Transnational statement. Transnational's stock, which trades on the pink sheets, more than doubled in price by midday on Aug. 7, rising by $0.33 to $0.50 per share.

Morgan Stanley has closed the correspondent division of subprime lender Saxon Mortgage, Glen Allen, Va., shifting that effort over to the Wall Street firm's conduit.A spokeswoman for Morgan Stanley confirmed the shutdown, noting that Saxon remains a wholesale lender. "Correspondent was a small part of Saxon's overall business," she said. "We have a large conduit over at Morgan Stanley Home Loans." Morgan bought Saxon in late 2006. Saxon can be found on the Web at https://www.saxonmortgage.com.

The broker-based wholesale home equity lending unit of National City Corp. has suspended its approvals of new applications for new home equity loans and lines of credit, but the company is continuing to offer home equity products through its retail bank.The company said the suspension "is one of a number of steps National City has taken in recent weeks to help ensure that mortgage origination strategies are in line with existing and anticipated market conditions. The company continues to closely monitor the market and take the appropriate steps to respond to changing conditions." National City can be found online at http://www.nationalcity.com.

Impac Mortgage Holdings has suspended originations of alternative-A loans -- a bread-and-butter product for the lender -- sending its stock down 40% in trading on Tuesday.Company chairman and chief executive Joseph Tomkinson also said the nondepository real estate investment trust has made all its "margin calls to date," adding that Impac "has negotiated sales of approximately $1.0 billion of our $1.6 billion of loans held on financed facilities." The loan sales are scheduled to close over the next 30 days. "In the interim, loans held in aggregate continue to generate a positive net interest spread," the California-based company said. Impac said that in response to the nonprime sector's liquidity crisis, it has suspended production of loans "previously referred to as alt-A loans." It will originate only mortgages that are eligible for sale to the government-sponsored enterprises. Impac is the nation's 15th-largest funder of alt-A loans, according to the Alternative Products Quarterly Data Report.

Nonconforming lender Aegis Mortgage Corp., Houston -- which is controlled by hedge fund giant Cerberus Capital -- ceased funding loans on Monday.A spokeswoman for Aegis said, "We are looking at all our options right now," adding that no office closures or layoffs have occurred. Cerberus is in the process of buying Option One Mortgage Corp., Irvine, Calif., which is owned by H&R Block. In mid-July, National Mortgage News reported that Aegis had placed its servicing platform on the auction block. An internal memo provided to NMN says Aegis is plagued by $100 million in early payment defaults, or EPDs.

Facing a liquidity crisis, HomeBanc Corp., Atlanta, says it will sell certain assets related to its retail mortgage operations, including up to five branch offices, to Countrywide Financial Corp., Calabasas, Calif.Countrywide said it is not paying a cash premium. As part of the agreement, Countrywide is expected to hire a significant number of HomeBanc's loan officers. The transaction should close on Aug. 10. In its statement, HomeBanc said it is not able to borrow on its credit facilities and thus has not funded any loans starting on Aug. 6. It will not fund any future loans nor fund any loans previously originated but not yet funded. Kevin D. Race, HomeBanc's president and chief executive, said "in light of the extraordinary difficulties that HomeBanc continues to face in the mortgage loan origination market, we feel that it is in the best interests of the company to exit this business so that we can focus on preserving the value of our investment portfolio assets and loan servicing operations."

Freddie Mac has not yet asked its regulator for permission to increase its portfolio caps in the wake of a widening liquidity crisis in the nonconforming sector, industry sources have told MortgageWire.A Freddie Mac spokeswoman declined to comment on the matter. However, in a June conference call with analysts, Freddie Mac chief financial officer Buddy Piszel reported that the government-sponsored enterprise is "beginning" to have discussions with its regulator in regard to its portfolio caps. (Mr. Piszel's comments were made before the nonprime sector's liquidity worsened.) At the end of June, Freddie's on-balance-sheet holdings totaled $720 billion, about $20 billion shy of its cap. MW and other news media outlets reported Aug. 6 (see item above) that Fannie Mae -- reacting to the requests of its seller/servicers -- recently asked its regulator for permission to increase its on-balance-sheet holdings in order to provide liquidity to the secondary mortgage market. Freddie Mac can be found online at http://www.freddiemac.com.

Fannie Mae -- reacting to the requests of seller/servicers -- has asked its regulator for permission to increase its on-balance-sheet holdings in order to provide liquidity to the secondary mortgage market, sources have told MortgageWire.At deadline time, representatives of Fannie Mae and the Office of Federal Housing Enterprise Oversight declined to comment. Fannie, which is struggling to get current on its financial reporting, has been operating under portfolio caps since late 2005. The cap is currently set at $720 billion. With Wall Street conduits shutting down or tightening loan standards, conforming lenders that play in the nonprime market cannot sell their loans in the secondary market. (At deadline time, the bank-owned National City Home Equity, a unit of National City, told its loan brokers that it would suspend the taking of new applications, according to sources.) Fannie Mae can be found online at http://www.fanniemae.com.