Originations

Four certificates from two Finance America Mortgage Loan Trust securitizations issued in 2004 have been downgraded by Moody's Investors Service.The downgrades were as follows: series 2004-1, class M6, from A3 to Baa2, class M7, from Baa1 to Ba2, and class M8, from Baa2 to B3; and series 2004-2, class M-9, from Baa3 to Ba2. The downgrades were attributed to credit enhancement levels that may be low given the projected losses. "Both transactions have stepped down, causing the subordinated certificates to start receiving their share of unscheduled prepayments," Moody's reported. "In addition, the severity of loss on liquidated loans has begun to increase." The transactions are backed primarily by first-lien adjustable- and fixed-rate subprime mortgage loans.

The Mortgage Bankers Association has released an 8-page booklet called "Simple Facts" that is designed to help consumers evaluate mortgage options and have an informed conversation with their lender."We felt there was a real need for this sort of concise plain-English information," said MBA senior vice president Steve O'Connor. In conjunction with the booklet, consumers can go to the MBA's HomeLoanLearningCenter website and use a "Simple Calculator" to see what their monthly payments would be with fixed-rate, adjustable-rate, and payment-option mortgages. The MBA is going to be promoting "Simple Facts" through a series of advertisements and public service announcements. "Ideally we would like to get some of our key member companies and other industry stakeholders to help promote it," Mr. O'Connor said. The MBA used consumer focus groups in developing the booklet. The HomeLoanLearningCenter can be found online at http://www.homeloanlearningcenter.com.

The National Association of Mortgage Brokers has released new trend data showing that mortgage brokers continue to close fewer nontraditional or subprime loans than in 2006.The survey of more than 200 brokers found that prime loans fell from a 61% share of the market in March to roughly 56% in April, but that they were still by far the most widely used type of mortgage. In April, only 11% of all loans were subprime, compared with 13% in all of 2006, the NAMB reported. "The shift in the market toward more traditional loan products is yet another reason we have cautioned Congress not to overreact to existing concerns and allow the market to adjust," said NAMB president George Hanzimanolis. The association said researchers expect monthly data to fluctuate throughout the year. "There will be some volatility, but as the year progresses, the trend will be toward lower-risk loans," said David Olson of Wholesale Access Mortgage Research and Consulting Inc., which conducts the continuing survey for the NAMB. "New legislation will make it more difficult to offer higher-risk loans." The association can be found online at http://www.namb.org.

Citing continuing problems with alternative-A mortgage loans originated through the wholesale channel in 2006, First Mariner Bancorp, Baltimore, has reported a net loss of $3.87 million ($0.59 per share) for the second quarter.This compares with net income of $2.2 million ($0.33 per share) for the same period last year. "We have been aggressive in identifying the potential loss in our wholesale-originated mortgage products, specifically alt-A financing, which have been repurchased under recourse provisions," said Edwin F. Hale Sr., First Mariner's chairman and chief executive. "Further value declines in residential real estate, particularly in the Northern Virginia region, resulted in the recognition of additional loan-loss provisions, valuation reserves, and writedowns on foreclosed real estate totaling $5.0 million for the quarter. It is important to recognize that this additional loss provision is not the result of increases in the volume of loans repurchased or subject to repurchases, but rather what we believe to be an additional decline in the value of the properties for which we already made loan-loss provisions in previous quarters." The company said it has closed its wholesale mortgage lending unit. Credit performance of its retail originations has remained strong, it added.

The Market Composite Index, an overall measure of mortgage applications, fell from 631.6 to 609.0 on a seasonally adjusted basis during the week ended July 20, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications decreased 3.5% on the week but were up 13.1% from the level recorded a year earlier. The Purchase Index fell from 446.5 to 424.2 on a seasonally adjusted basis, while the Refinance Index declined from 1717.4 to 1692.9. Refinancings represented 38.5% of total applications, up from 37.7% the previous week, while adjustable-rate mortgages accounted for 21.0%, unchanged from the ARM share of the previous week, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages fell from 6.61% to 6.59%, and points (including the origination fee) fell from 1.60 to 1.55 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

Clayton Holdings Inc., a provider of information and analytics to the banking and fixed-income securities markets, has introduced an analytic tool to help large lenders and Wall Street conduits determine whether closed loans they are buying meet prevalent "suitability" standards.The first release of the product focuses on payment shock and recalculates ability-to-pay using a fully indexed, fully amortized schedule, the company said. The suitability issue -- the contention that lenders are responsible for ensuring that a loan is suitable for a specific borrower -- has gained momentum as subprime loan defaults and foreclosures have mounted, Clayton noted. "There are layers to the debate -- and the definitions -- around suitability and nontraditional mortgages," said Keith Johnson, Clayton's chief operating officer. "Rather than wait for it to be fully defined and legislated, we assessed the issues currently being debated, spoke with our clients, and determined what is immediately needed to address this issue." Clayton, based in Shelton, Conn., can be found online at http://www.clayton.com.

FirstPlus Financial Group Inc., Irving, Texas, has announced the purchase of substantially all the assets of Rutgers Investment Group LLC, Wayne, Pa., which is applying in 14 states for licensure as a mortgage banker.The purchase price consisted of a cash payment of $1.825 million and 500,000 shares of FirstPlus' common stock, plus the assumption of certain liabilities. FirstPlus said Rutgers expects to provide first and second mortgage loans, construction and hard-money loans, international letters of credit, and equity and credit lines. Pending completion of licensure, Rutgers will act as a broker for licensed lenders, FirstPlus said. Rutgers can be found online at http://www.rutgersinvestmentgroup.com.

Weak earnings from Countrywide Financial Corp. have sparked renewed concern about the housing sector, helping fuel a widespread selloff in the stock market.Countrywide, which reported earnings that missed Wall Street's consensus estimate and were down sharply from year-earlier levels, led the stock downturn among mortgage stocks. Countrywide's share price fell $3.73, or almost 11%, in trading on July 24. But the biggest decline came at subprime shop Accredited Home Lenders, where the share price fell $1.95, or 15%. News reports attributed the drop to concern about whether Accredited's deal to be acquired by a private equity firm will be completed. Another subprime lender, Delta Financial Corp., saw its stock price fall 10% for the day. Mortgage insurance stocks also were hard hit, with Triad Guaranty, PMI, Radian, and MGIC all seeing their share prices fall more than 6% on the day. The Dow Jones industrial average fell 226 points, or 1.62%, on the day. By midday Wednesday, the Dow had regained more than 40 points.

The National Association for the Advancement of Colored People has filed a class action lawsuit against 12 major mortgage lenders alleging that they violated the Fair Housing Act by "systematically" placing blacks into higher-cost subprime loans."African Americans who received loans from these lenders were over 30% more likely to be issued higher-rate loans than Caucasian borrowers with the same qualifications," according to the lawsuit filed July 11 in a U.S. district court in California. The lawsuit argues that subprime loans are typically laden with improperly disclosed fees and excessive prepayment penalties. "African Americans are more than three times as likely as Caucasians to be put into one of these equity draining subprime loans," the suit contends. NAACP chairman Julian Bond is urging African-American borrowers who bought or refinanced a home with the named lenders to "come forward and tell us their stories, or at least re-examine their mortgages" to "help us correct these egregious and demoralizing practices." The NAACP filed the lawsuit against Long Beach Mortgage Co., Citigroup Inc., BNC Mortgage Inc., Accredited Home Lenders Inc., Bear Stearns Residential Mortgage Corp., First Franklin Financial Corp., HSBC Finance Corp., Washington Mutual Inc., Ameriquest Mortgage Co., Fremont Investment and Loan, Option One Mortgage Corp., and WMC Mortgage Corp.

Who says home prices are falling? Certainly not the Federal Housing Finance Board, which reports that home prices as calculated in its monthly survey increased by $12,700 in June to a national average of $309,700.In another bit of good news, the agency also reported that the average loan-to-price ratio in June was 79.7%, down 70 basis points from 80.4% in May. That means borrowers are putting slightly more of their own money into the deal when they borrow to buy or refinance their homes. The monthly study also said the average rate on conventional 30-year fixed-rate loans rose by 23 bps to 6.59% in June. But since the rate is generally determined 30-45 days before the loans surveyed were closed, the June average is more reflective of market conditions in mid- to late May.

The sales of existing single-family homes fell 3.5% in June as the spring sales season ended with an 8.7-month supply of unsold properties on the market, according to the National Association of Realtors.The Realtors reported that sales fell for the fourth consecutive month to a seasonally adjusted annual rate 5.01 million in June, down from 5.19 million in May. Compared with the level in June 2006, when there was a 6.8-month inventory of unsold homes, sales of previously owned homes were down 12.1%. NAR senior economist Lawrence Yun said one "bright spot" in the June report is that the median single-family house price rose to $230,300, up 0.1% from the June 2006 price (see item below). The median house price fell to $209,300 in January, and there have been month-to-month increases over the past five months. Meanwhile, sales of condominiums and cooperatives fell 6.3% in June, but the median condo price stood at $228,900, up 2.6% from June 2006. The NAR can be found online at http://www.realtor.org.

Twenty-six classes from 12 structured finance collateralized debt obligations have been placed on Rating Watch Negative by Fitch Ratings.The actions, which affect approximately $603 million of notes in CDOs issued between 2001 and 2006, were attributed to collateral deterioration related to recently downgraded or watchlisted subprime residential mortgage-backed securities. The affected CDOs are as follows: Bluegrass ABS CDO III Ltd.; Diversified Asset Securitization Holdings III LP; Fulton Street CDO Ltd./Funding Corp.; Independence IV CDO Ltd.; Independence V CDO Ltd.; Independence VII CDO Ltd.; Libertas Preferred Funding I Ltd.; Northlake CDO I Ltd.; Oceanview CBO I Ltd.; Pacific Coast CDO Ltd.; South Coast Funding III Ltd.; and Whately CDO I Ltd./Corp. Fitch said CDO tranches placed on Rating Watch Negative as a result of recent subprime RMBS credit deterioration now total approximately $1.4 billion of notes from $16 billion of CDOs, representing approximately 17% of Fitch-rated U.S. CDOs.

Liberty Property Trust, a Malvern, Pa.-based office and industrial real estate investment trust, is acquiring Republic Property Trust, a Herndon, Va.-based office REIT, for a total payment of about $900 million.The price includes a payment of $14.70 per Republic common share as well as the assumption of $415 million in debt, Liberty reported. The acquisition is expected to add 24 office buildings to Liberty's portfolio, which will swell to 2.6 million square feet of office properties. William P. Hankowsky, Liberty's chairman and chief executive officer, said the acquisition will create a "critical mass of office assets in the D.C. market" for Liberty. The Washington, D.C., presence will also be "a natural complement to our Baltimore/Washington corridor presence," he said. The purchase price represents a 28% premium over Republic's common share price on July 23, according to Republic. The REITs can be found online at http://www.libertyproperty.com and http://www.republicpropertytrust.com.

The issuance of subprime mortgage-backed securities totaled $25.9 billion in June, down nearly 55% from the level recorded in June 2006, and a Friedman Billings Ramsey researcher says he expects subprime securitizations to remain at the $25 billion-a-month level for the rest of the year."It looks like a sustainable rate," FBR managing director Michael Youngblood said, considering that the rate on the 10-year Treasury note dropped below 5% recently, which should help to make subprime fixed-rate product more attractive to borrowers. However, the FRB researcher said he will be looking to FBR's August report for confirmation. He noted that July is a seasonally weak month for subprime MBS issuance. Mr. Youngblood said there are multiple factors involved in the sharp decline in subprime MBS and originations, including the decision by some major lenders to stop offering popular subprime products -- adjustable-rate 2/28 and 3/27 mortgages. In addition, there is a shift to fixed-rate products as lenders tighten and underwrite ARMs at the fully indexed rate. Right now a newly originated subprime fixed-rate loan at 9.5% is more attractive to a borrower stretching to buy a home or refinance than a 2/28 ARM at 9% because the fully indexed rate is 11.25%. "If you are underwritten at a higher rate, you will go for the fixed rate," Mr. Youngblood said in an interview.

Wells Fargo & Co., San Francisco, has discontinued offering certain subprime products in response to recent actions by rating agencies and industry guidance.Wells Fargo said it will no longer offer one-year adjustable-rate mortgages, 2/28 ARMs, or 40/30 two-year ARMs through its third-party, subprime lending channel. In its retail business line, Wells also said it will no longer offer the one-year ARM, the 2/28 ARM, or the 40/30 2/6 ARM linked to the London interbank offered rate. Wells said the changes were made "to align our practices with industry guidance" as well as in response to rating agency actions. Wells Fargo can be found online at http://www.wellsfargo.com.

Countrywide Financial Corp., Calabasas, Calif., has reported net income of $485.1 million ($0.81 per share) for the second quarter, up from that of the first quarter but down 33% from $722.2 million ($1.15 per share) a year earlier due in part to $417 million of impairment charges.The company said the charges included $388 million on residual securities collateralized by prime home equity loans, stemming from accelerated delinquencies and higher estimates of future defaults and loss severities. However, pretax earnings by the mortgage production sector rose from $139 million in the first quarter to $439 million, chiefly as a result of improved gain-on-sale and net warehouse spread margins and lower expense rates, the company said. "Consolidated quarterly funding volume was the third-highest in our history, prime production margins were relatively stable, and subprime production margins substantially improved," said Angelo R. Mozilo, Countrywide's chairman and chief executive, adding that the sector's pretax profit was at the highest level since the first quarter of 2005. The servicing sector took $147 million in pretax losses, compared with $279 million in pretax earnings a year earlier, the company reported. Countrywide can be found online at http://www.countrywide.com.

Countrywide Home Loans, Calabasas, Calif., has announced the launch of a national "It's Your Choice" initiative to educate consumers about the many options available to obtain or refinance a home loan.The company said it is providing specialized cost calculators and other new tools to the more than 9,000 members of its mortgage sales force to enable them to show customers cost-effective choices for structuring their home loans. Countrywide cited the results of a national survey commissioned by the company showing that 76% of more than 2,280 homeowners surveyed strongly agreed that they wanted to be informed about as many closing-cost choices as possible. The company said it will advise consumers about options such as: lender-paid closing costs; loan discount points; first- and second-mortgage combinations; and avoiding mortgage insurance payments. The company can be found online at http://www.countrywide.com.

The U.S. office market "staged a modest comeback" in the second quarter as absorption increased 34% and rents continued to surge, according to Colliers International, a Boston-based commercial real estate manager.Absorption totaled 18.3 million square feet, up from 13.7 million square feet in the first quarter but down from 27.8 million square feet in the second quarter of 2006, Colliers reported. Downtown asking rents jumped 8.3% in the quarter to $46.81 per square foot, while suburban rents rose 4.5% to $27.45 per square foot, the company said. "As predicted, demand for office space picked up relative to the first quarter, but is still operating below anticipated levels," said Ross Moore, senior vice president and director of market and economic research at Colliers. "Of particular concern is the slowdown in office-using employment. However, that aside, the story is generally the same -- steady demand, significant increases in rents, and a gradual increase in supply." The company can be found online at http://www.colliers.com.

Fannie Mae reports that it has financed $27.2 billion in multifamily rental housing in the first half of 2007, a company record for six-month production."Fannie Mae's record performance in the first half of this year was fueled by strong deliveries by our DUS lenders and a substantial increase in our seniors business," said Phil Weber, senior vice president of Fannie Mae's multifamily division. The company reported at its DUS conference in Carlsbad, Calif., that Fannie Mae's delegated underwriting and servicing lenders delivered $14 billion of the company's total investment in multifamily housing. In addition to the total multifamily investment, Fannie Mae committed $620.5 million in equity investments that qualify for Low Income Housing Tax Credits. Fannie Mae can be found online at http://www.fanniemae.com.

Wachovia Corp., Charlotte, N.C., has reported record earnings of $2.34 billion ($1.22 per share), up from $1.88 billion ($1.17 per share) a year earlier, attributing a 53% increase in average loans to consumer real estate loans linked to its acquisition of Golden West Financial Corp. last October.The integration of the Oakland, Calif.-based thrift into Wachovia "is proceeding as planned," said Ken Thompson, Wachovia's chairman and chief executive officer, citing "the cross-sell potential of our expanded platform." The company can be found online at http://www.wachovia.com.