Originations

Integra Software Systems, a provider of mortgage origination software based in Brentwood, Tenn., has acquired the assets of Financial Compliance Corp. for an undisclosed amount."We are finding that more lenders, especially banks, want one software partner to handle their overall lending processing needs," said Integra president Jerry Pratt. Tim Bartek, senior vice president of sales-marketing for Integra, said the acquisition "is going to be a tremendous, immediate complement to our Destiny mortgage loan origination system, which is among the most robust in the industry. Now, we can also address lenders' other software needs -- beyond residential mortgages." Integra said it will immediately begin marketing FCC's WinBanker and WinDeposit as standalone products, and plans eventually to integrate key features into the Destiny software. The company also announced that Jim Williams, formerly president of FCC, has joined Integra, bringing over 30 years of experience in software development for banks and other lenders.

The default rate on subprime mortgage loans hit 12.4% in May, up 41 basis points from the rate recorded in April, and the foreclosure rate climbed to 5%, according to a Friedman Billings Ramsey report.FBR managing director Michael Youngblood said he expects the subprime default rate to continue to drift upward to 14.45% by April 2008. The default rate on subprime loans stood at 5.7% in May 2006 and the foreclosure rate was 2.73%. The report by the Alexandria, Va.-based investment banking firm also shows that the default rate on alternative-A loans rose to 2.69% in May, up 21 bps from that of the previous month. (The default rate includes loans 90 days or more past due, in foreclosure, and real estate owned.) FBR can be found online at http://www.fbr.com.

HSBC Holdings, in a new earnings statement, says its U.S. mortgage business suffered writedowns of $760 million in the first half.But the bank -- which earlier this year exited the subprime correspondent market -- said the $760 million in mortgage-related writedowns is not significant because it had already booked reserves of $715 million. "As a result, our impairment allowances remained largely unchanged at $2.1 billion," it said. The London-based bank is the parent of HSBC Finance, Prospect Heights, Ill., the nation's second-largest subprime lender. HSBC said it has modified 5,000 loans as part of a "contact" program geared toward 19,000 troubled borrowers.

The New York Stock Exchange halted trading in the stock of American Home Mortgage Investment Corp., Melville, N.Y., on Monday after the company revealed that it was the subject of "significant margin calls" from its warehouse lenders.As of MortgageWire's deadline, the company's spokeswoman had not returned telephone calls about the matter. According to the Quarterly Data Report, AHM is the nation's 10th-largest funder of home mortgages, and eighth-largest wholesaler. Late Friday the publicly traded REIT said its board had decided to delay its dividend payment. In a statement, it also revealed that it had suffered "major writedowns" on its loan and securities portfolios that in turn had caused margin calls "with respect to its credit facilities." A month ago, hedge funds managed by Marathon Asset Management LLC purchased $125 million worth of preferred securities in AHM. The mortgage REIT can be found online at http://www.americanhm.com.

As part of a plan to help borrowers better understand their mortgage options, JPMorgan Chase has unveiled simplified disclosures, tightened credit standards, and a requirement of an initial fixed rate of at least five years on adjustable-rate mortgages for nonprime borrowers.The company said it will also use underwriting guidelines that require borrowers to demonstrate their ability to handle increases in interest rates on nontraditional mortgages. "Our simplified mortgage disclosure and product choices will help meet the goals of borrowers as well as investors, community leaders, and regulators in today's challenging housing market and beyond," said David Lowman, chief executive officer of Chase Home Lending, the mortgage unit of JPMorgan Chase. The company said its simplified disclosures enable consumers to compare product features for traditional and nontraditional mortgages and provide more information on how an adjustable-rate feature can affect the monthly payment. Chase Home Lending can be found online at http://www.chase.com.

The number of vacant single-family homes with "For Sale" signs in the front yard fell to 2.04 million in the second quarter, down 6.5% from that of the first quarter, registering the first quarterly decline since home sales started to slow in early 2006, according to a Census Bureau report.However, vacancies were up 17.8% since the second quarter of 2006, and it appears the spring sales season only put a dent in the huge inventory of empty homes, which exerts downward pressure on home prices. The number of vacant homes on the market rose by 600,000 in 2006 as homebuilders, homeowners, and speculators got caught in the slowdown last year. The Census Bureau report also shows that the homeownership rate declined to 68.2% in the second quarter, down from 68.7% a year earlier. The homeownership rate for blacks fell to 46.3% in the second quarter from 48.0% in the first quarter, while the homeownership rare for Hispanics was unchanged at 50.0%.

Wells Fargo & Co., San Francisco, has announced that it will close its nonprime wholesale lending business, citing the "turmoil" in that sector of the mortgage business.Wells Fargo said the decision will have no effect on its prime lending business, and does not mean that the company will exit the nonprime sector. "Wells Fargo will continue to offer nonprime loans in channels where the company has direct relationships with consumers, including Wells Fargo Home Mortgage's retail channel and Wells Fargo Financial, an affiliate of Wells Fargo Bank NA," said Cara Heiden, president of Wells Fargo's home mortgage division. Wells said it made the move because it believes that "continued turmoil" in the sector would have resulted in returns for the wholesale channel for "the foreseeable future" that "are not commensurate with the risks inherent in this business." Wells Fargo can be found online at http://www.wellsfargo.com.

American Mortgage Acceptance Co., a New York City-based multifamily and commercial real estate investment trust, has priced an offering of 680,000 shares of series A convertible preferred stock at a liquidation preference of $25 per share.AMAC said the net proceeds will total approximately $16 million. The underwriters, Sterne, Agee & Leach Inc. and Boenning & Scattergood Inc., have been granted an option to buy up to 60,000 additional shares to cover any overallotments. The REIT can be found on the Web at http://www.americanmortgageco.com.

A first-of-its-kind look at research on the link between affordable housing and children's well-being has found that decent, affordable rental and owned homes play a critical role in improving the lives of children.Enterprise Community Partners and the Center for Housing Policy, which released the research survey, argued that the results show that housing should be elevated "to its rightful place" on the national agenda. "This comprehensive analysis provides real insight into the many ways in which quality, affordable housing can help in addressing this nation's health and educational challenges," said Jeffrey Lubell, executive director of the Center for Housing Policy. The study indicates that children of homeowners and their families achieve better physical and mental health than renters. Approximately 85% of homebuyers reported that homeownership made them feel better about themselves, indicating "a strong correlation between homeownership and overall health and well-being" mostly tied to housing stability, which "plays a key role in helping children do better in school."

Principal Real Estate Investors, Des Moines, Iowa, has announced the introduction of Principal Commercial Mortgage Edge, a program designed to originate, securitize, and service small-balance commercial real estate loans on a national basis.The new operation, based in Dallas, will source, underwrite, and close loans ranging from $250,000 to $5 million and package them for securitization by Principal Commercial Funding II. "Through this program, we will be able to significantly diversify our borrower base and geographical coverage," said Kerry Studer, national sales director for Principal Commercial Mortgage Edge. "By targeting cities with populations of 25,000 or more within a five-mile radius and borrowers with one to five core properties, we will have access to a much larger number of borrowers in a wider range of real estate markets." Principal Real Estate Investors is the real estate group of Principal Global Investors, a member of the Principal Financial Group. Principal Financial can be found online at http://www.principal.com.

Street Resource Group Inc., a provider of technology and consulting services for mortgage warehouse lenders, has announced the formation of the Closing Agent Risk Committee, an industry group focused on risks associated with the loan closing process.The committee, a response to "the growing incidence of mortgage fraud and the pivotal role closing agents play in that process," stemmed from discussions at SRG's annual Warehouse Lenders Forum in New York City, where Scott Broshears of the Federal Bureau of Investigation presented mortgage fraud data, SRG said. Tom Holland, senior vice president of Regions Funding, led a discussion on closing agent risk and argued for the formation of a committee of executives from leading warehouse lenders to address the issue. Mr. Holland now heads the committee. Citing the growth of the recently formed Warehouse Information Network, SRG president Stanley Street promised that WIN will form committees on regulatory issues and industry standards and practices.

Inland Capital Markets Group Inc., Oak Brook, Ill., has announced a merger agreement under which Inland American Real Estate Trust Inc. will acquire Apple Hospitality Five Inc., Richmond, Va., through a wholly owned subsidiary for approximately $709 million.The price is based on a cash payment of $14.05 per common share of Apple, including the preferred share conversion, Inland said. Inland American's business manager will be responsible for overseeing the portfolio, which consists of 28 properties operating under the Hilton and Marriott brands, and the assets will be operated by third-party managers, the company said. Inland American and Apple, both real estate investment trusts, can be found online at http://www.inland-american.com and http://www.applehospitalityfive.com.

Quality Home Loans, a hard-money residential mortgage lender based in Agoura Hills, Calif., has announced the acquisition of Bankers Express Mortgage Inc., a mortgage banker specializing in subprime products based in Calabasas, Calif.The terms of the deal were not disclosed. Quality said the acquisition adds 50 employees to its work force of 130 and consolidates the operations of Bankers Express in Quality's Agoura Hills headquarters. Bankers Express president Brian O'Shaughnessy will be president of the combined entity, which will operate under the Quality name. "This transaction will allow us to offer a broader array of residential hard-money loans and builds on our strength in California with a strong presence in Florida," said John Gaiser, Quality's chief executive officer. Both companies specialize in loans to borrowers with marginal credit but who have significant equity in their homes. Quality also announced that it has obtained a credit facility of $40 million from Pacificor LLC, a Santa Barbara, Calif.-based hedge fund. The lender can be found online at http://www.qualityhomeloans.com.

Friedman, Billings, Ramsey Group Inc., Arlington, Va., has entered into a transaction that will recapitalize First NLC Financial Services, Boca Raton, Fla., while reducing its exposure to the subprime mortgage lender to a 20% equity stake.Sun Capital Partners Inc., Boca Raton, will make a $60 million investment in First NLC, while FBR will make a $15 million investment. This is not the first time First NLC and Sun have teamed up. When First NLC's management reacquired the company in 1999 from the defunct IMC Mortgage, Sun was its partner. When FBR and First NLC agreed to their transaction in January 2005, that deal was valued at $88 million. "Having been through a number of industry cycles, we understand what is needed to restructure our product mix and refocus our strategic operating plan on present opportunities now that a significant amount of origination capacity has exited the nonconforming space," said Neal Henschel, chairman and chief executive of First NLC. The president and chief operating officer of FBR Group, J. Rick Tonkel Jr., said the 20% stake his firm is keeping would allow it to participate in First NLC's upside when the market turns around.

A House Financial Services subcommittee has approved a 10-year extension of the federal government's terrorism insurance program along with changes to expand the coverage to include nuclear, biological, chemical, and radiological acts of terrorism.The Terrorism Risk Insurance Act extension bill also provides a federal backup for insurers providing group life insurance. Republican amendments to shorten the extension period to two years and then to five years failed, and the subcommittee members approve the bill by a voice vote. The full committee is expected to mark up the TRIA extension bill (H.R. 2761) soon. The Bush administration opposes a 10-year extension and efforts to expand the terror insurance program.

The Securities and Exchange Commission has ruled that servicers of mortgage-backed securities can take the lead in restructuring or modifying subprime loans that are headed for default without running into adverse accounting consequences.The agency's professional staff believe that "modifications undertaken when loan default is reasonably foreseeable should be consistent with the nature of modification activities undertaken that would be permitted if a default had occurred," SEC Chairman Christopher Cox says in a letter to House Finance Services Committee Chairman Barney Frank, D-Mass. The SEC letter also clarifies that such loan modifications would not trigger a Financial Accounting Standard 140 requirement and force the lender to repurchase the loan. Rep. Frank thanked the SEC chairman for such a quick response to the issue. "This is a constructive approach that will allow mortgage lenders to provide help at the earliest possible moment to people who might otherwise be trapped in bad loans or forced into foreclosure," the committee chairman said. A few months ago, the Mortgage Bankers Association circulated a position paper concluding that servicers have a lot of latitude in helping borrowers avoid foreclosure. MBA senior director Alison Utermohlen said the SEC letter is good news. "We thought we were on firm ground," she said.

The chief economist of Moody's Economy.com says he expects mortgage credit quality to "erode measurably" between now and the summer of 2008.Speaking with reporters on a conference call, prominent housing economist Mark Zandi predicted that the industry will see slightly more than 1.2 million mortgage defaults this year and 1.3 million next year. By contrast, about 800,000 mortgages defaulted in 2005. Mr. Zandi said those defaults will lead to about $125 billion of losses for investors in mortgage-backed securities, an estimate significantly higher than Federal Reserve Board Chairman Ben Bernanke's recent prediction that the subprime lending crisis could cause $50 billion to $100 billion in losses.

Although housing starts should begin to increase by the end of the year, it will be a "long, slow climb" until production reaches the trend line, according to the latest forecast from the National Association of Home Builders.In his midyear housing outlook conference call, chief economist David Seiders said it won't be until 2010-2011 that starts will hit the 1.95 million-a-year level suggested by demographics and other factors. "We have a lot to overcome, and we don't have the usual propellants behind us such as a surge in job growth or lower interest rates," Mr. Seiders said. The new-home sector's performance in the first half and outlook for the second half is "a lot weaker than we thought six months ago," the economist said. His projection for both single-family and multifamily starts is "well down" to 1.42 million this year and 1.45 million next year. The NAHB official blamed the debacle largely on the "unanticipated and sudden turmoil in the subprime sector." He said the "breakdown in lending standards," which has spread into the prime market, has brought with it "massive uncertainty." And as a result, he added, "the ball is still rolling downhill." Single-family production, which topped out at 1.74 million units a year in the first quarter of 2006, will drop to 1.1 million units annually in the fourth quarter, the NAHB says. That's the lowest level in a decade, and a 37% decline, peak to trough. The NAHB can be found online at http://www.nahb.com.

The average 30-year fixed mortgage rate fell from 6.73% to 6.69% for the seven-day period ended July 26, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate fell from 6.38% to 6.37%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages declined from 6.35% to 6.30%, and the average rate for one-year Treasury-indexed ARMs fell from 5.72% to 5.69%, Freddie Mac reported. Fees and points averaged 0.4 of a point for fixed-rate mortgages and hybrid ARMs and 0.5 of a point for one-year ARMs. "Mortgage rates eased this week on market concerns that a further weakening of housing demand this spring will delay any recovery in the sector," said Frank Nothaft, Freddie Mac's chief economist. "For example, building permits fell last month to the slowest pace in a decade, and more recent data on June sales of existing homes showed a fourth consecutive monthly decline." A year ago, the average 30-year and 15-year fixed rates were 6.72% and 6.34%, respectively, and the average hybrid and one-year ARM rates were 6.35% and 5.78%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

New-home sales fell 6.6% in June, according to the government's latest report, in which sales data for the previous two months were revised downward by 40,000 units.The U.S. Census Bureau reported that sales of new single-family homes fell from a seasonally adjusted annual rate of 893,000 in May to 834,000 in June, which is 22.3% below the level recorded in June 2006. The June sales report also shows that builders have a 7.8-month supply of homes for sale and made no progress in reducing their inventories. Separately, the Federal Reserve Board reported that residential construction and sales activities "continued to decline" in June and early July in most parts of the United States. "Two notable exceptions were the Cleveland and Richmond regions, which experienced slight increases in sales," according to the Fed's Beige Book.