Originations

Republic Property Trust, Herndon, Va., has been added to the Standard & Poor's REIT Composite Index, according to the real estate investment trust.The company said it was added to the index after the close of trading on June 29. The office REIT can be found on the Web at http://www.rpbtrust.com.

Gramercy Capital Corp., a New York-based investor in commercial mortgage-related loans and securities, has announced modifications to $900 million of secured repurchase facilities and the expansion of its unsecured credit facility from $100 million to $175 million.The company said the repo modifications -- involving a $500 million facility with Wachovia Securities LLC and a $400 million facility with Goldman Sachs Mortgage Co. -- reduced the credit spreads under the facilities by approximately 25%, increased advance rates against selected collateral, and enhanced the flexibility of the facilities. Regarding the credit facility, the interest rate was reduced from 2.10% above the London interbank offered rate to 1.65% over LIBOR. The amendment and restatement also extended the facility to June 28, 2010, and eased certain financial and other restrictive covenants, the company reported. The facility was arranged by KeyBanc Capital Markets. Gramercy Capital can be found online at http://www.gramercycapitalcorp.com.

SL Green Realty Corp., a New York-based real estate investment trust, has announced the closing of modifications to its unsecured revolving credit facility, including an expansion from $800 million to $1.25 billion.The modifications also reduced the undisclosed interest rate on the four-year facility and eased certain financial and other restrictive covenants, the REIT reported. The facility is provided by Wachovia Capital Markets LLC and KeyBanc Capital Markets. SL Green, which specializes in acquiring, owning, and managing office properties in Manhattan, can be found online at http://www.slgreen.com.

After four consecutive months of declines, the Eleventh Federal Home Loan District Cost of Funds Index reversed course in May and increased 5 basis points.The index (as calculated by the Federal Home Loan Bank of San Francisco) stood at 4.293%, compared with 4.224% for April. COFI is calculated from the cost of mortgage lending funds (including deposits) used by thrifts in the Eleventh District. According to national data from the Federal Reserve Bank of St. Louis, the secondary-market rate for the one-month certificate of deposit, after topping out at 5.34% last July, has ranged from 5.28% to 5.31% since then. The three-month CD topped out at 5.46% last July and sunk to 5.30% in March before going back up to 5.33% by June. The sixth-month CD rate stood at 5.54% last July, hit a low of 5.28% in March, but was back up to 5.36% in June. COFI, which lags changes in other rates, hit its most recent high point in December 2006. The FHLBank can be found online at http://www.fhlbsf.com.

A leading indicator of existing-home sales fell 3.5% in May, signaling that sales activity is continuing to slow due to a lack of buyer confidence and tighter lending standards."Some transactions are being postponed from mortgage market disruptions," National Association of Realtors senior economist Lawrence Yun said, as buyers reapply for alternatives to subprime financing. The NAR Pending Home Sales Index fell from 101.2 in April to 97.7 in May, its lowest level since September 2001. Since May 2006, the index is down 13.5%. The May PHS index is based on sales contracts that were expected to close in June and July. However, Mr. Yun said he expects home sales to stay close to present levels in the months ahead due to accumulating pent-up demand.

Subprime lending grew at the expense of the Federal Housing Administration's market share as minorities and lower-income homebuyers opted for teaser rates and other subprime features that are ultimately "more costly" than FHA loans, according to a Government Accountability Office report.The FHA's share of the home purchase market dropped from 31.6% in 1996 to 6.9% in 2005, while the conventional subprime market jumped from a 2.0% share to a 26.0% share. Now that subprime defaults and foreclosures are rising, the FHA could provide those borrowers with "lower-price and more sustainable mortgages," GAO says in the report to Congress. However, a second GAO report urges "caution" in allowing the FHA to offer zero-downpayment loans at a time of stagnant or declining housing prices. The GAO auditors recommended that Congress require the FHA to use a pilot program to test its zero-down products. The GAO also told Congress that legislation to increase the FHA's loan limit in high-cost areas would have boosted FHA loan production by 9%-10% in 2005. The GAO can be found online at http://www.gao.gov.

Wells Fargo Home Mortgage has shut down its nonprime correspondent lending shop in Baton Rouge, La., as subprime loan production continues to contract."As a result of changing market conditions, we will no longer operate our Correspondent Alternative Lending channel," Wells Fargo vice president Teri Schrettenbrunner said. "We are exploring alternative options for fulfilling the nonprime needs of our correspondent clients. We will continue to serve the nonprime segment of the mortgage market through our retail and wholesale broker channels." The correspondent lending shop was shut down on June 29, and 13 positions were eliminated at the Baton Rouge office.

Two classes from Equity One ABS Inc. mortgage pass-through certificates series 2002-3 have been downgraded by Fitch Ratings.Class B-1 was downgraded from BB to B, and class B-2 was downgraded from B to C/DR4. Fitch also affirmed the ratings on four classes in the transaction. The rating agency attributed the downgrades to a deterioration in the relationship between credit enhancement and expected losses.

Two classes of IndyMac ABS Inc. Home Equity issues have been downgraded by Fitch Ratings.Class B-1 of series SPMD 2002-B Total Groups 1 & 2 was downgraded from BB to B, and class B-2 was downgraded from BB-minus to C/DR5. In addition, the ratings on 45 classes in four IndyMac ABS deals were affirmed, Fitch said. The rating agency attributed the downgrades to a deterioration in the relationship between credit enhancement and expected losses. The collateral in the deals consists of fixed- and adjustable-rate subprime residential loans.

Three classes of Asset Backed Securities Corp. mortgage pass-through certificates have been downgraded by Fitch Ratings, and two classes have been placed on Rating Watch Negative.The downgrades were as follows: series 2002-HE1, class B, from BBB-minus to B (and placed on Rating Watch Negative); series 2003-HE1, class M-3, from BB-minus to B; and series 2005-HE5, class M12, from BB to B. Fitch also placed class M-2 of series 2002-HE1 on Rating Watch Negative. In addition, Fitch affirmed the ratings on 14 classes in the three ABSC deals. The rating agency attributed the downgrades to a deterioration in the relationship between loss expectations and credit enhancement. The transactions consist primarily of fixed- and adjustable-rate subprime mortgage loans on one- to four-family properties.

Six certificates from two First Franklin Mortgage Loan Trust deals issued in 2002 and 2004 have been placed under review for possible downgrade by Moody's Investors Service.The affected classes were as follows: classes M2 and M3 of series 2002-FF3, and classes M-6, M-7, M-8, and M-9 of series 2004-FFH1. The negative rating actions stemmed from credit enhancement levels that were deemed to be low given the projected losses on the underlying pools, Moody's said. The transaction consists of adjustable- and fixed-rate subprime first-lien mortgage loans originated by First Franklin Financial Corp. Moody's can be found online at http://www.moodys.com.

Thirty-eight classes from 12 First Franklin Financial Corp. residential mortgage-backed security transactions have been downgraded by Fitch Ratings.In addition, 12 classes from four deals were placed on Rating Watch Negative, and the ratings on 188 classes from 21 First Franklin deals were affirmed. The downgrades were attributed to a deteriorating relationship between credit enhancement and expected losses. The collateral for the transactions consists of subprime mortgage loans secured by first liens on residential properties. Fitch can be found online at http://www.fitchratings.com.

May was the best month since October 2003 for the members of the Mortgage Insurance Companies of America for writing primary new mortgage insurance policies.There was $30.2 billion of primary insurance written in May, compared with $20.7 billion in April. Back in October 2003, $30.6 billion of primary new mortgage insurance was written. Comparisons of data prior to July 2003 are not meaningful because that is when Radian withdrew its membership in the trade group. Traditional insurance totaled $21.9 billion in May and bulk insurance totaled $8.3 billion, up from $17.4 billion and $3.3 billion, respectively, in April and from $13.0 billion and $5.2 billion in May 2006. The number of applications topped 200,000 billion for the first time in 2007, at 208,596. The bad news in the May report is that the cure/default ratio had fallen to its lowest level since January, to 65.1%. There were 29,941 cures and 45,986 defaults in the month. In January, the ratio stood at 60.2%, with the highest number of defaults so far this year, 52,528.

Opteum Inc., Vero Beach, Fla., has announced the completion of the sale of substantially all the assets of its subsidiary Opteum Financial Services' retail mortgage origination business to Prospect Mortgage Co. for $1.5 million plus the assumption of approximately $4 million in certain liabilities.The company said the sale also involved certain other assets associated with OFS's corporate staff functions. Jeffrey J. Zimmer, chairman, president, and chief executive of Opteum Inc., said the purchase price was "less than we originally expected" and reiterated that the company has now exited the mortgage origination business entirely. "OFS has been a significant drain on our earnings, and we will now focus our energies on managing and growing our [residential mortgage-backed securities] portfolio as we restore our profitability." In conjunction with the sale, Peter R. Norden resigned his position as OFS's president, CEO, and co-head of capital markets, as well as his posts as board member and senior executive vice president of Opteum Inc. The parent company, structured as a real estate investment trust, can be found on the Web at http://www.opteum.com.

With interest rates on millions of adjustable-rate mortgages predicted to reset in Pennsylvania and nationally over the next two years, Pennsylvania Gov. Edward G. Rendell is urging homeowners with these types of loans to prepare for possibly significant increases in their monthly payments."Many working families are facing tough situations as their monthly payments increase," Mr. Rendell said. "Homeowners with adjustable-rate mortgages should contact their lenders to confirm when, and by how much, their payments will increase." The Pennsylvania Banking Department wants to change the regulations to require mortgage originators to qualify borrowers under the fully indexed rate and amortized repayment schedule. "This would help to protect consumers from being put into loans they can't afford to pay back," he said. "There also needs to be clearer disclosures to help borrowers better understand their loans." Consumers can learn more about Pennsylvania's Homeowner's Emergency Mortgage Assistance Program by calling a toll-free help line, 800-PA-BANKS, or visiting the banking department's website at http://www.banking.state.pa.us.

The default rate on subprime mortgages jumped 55 basis points in April to 12% -- the highest level since 1997, according to a report by Friedman Billings Ramsey, Arlington, Va."The default rate has climbed to the highest level since August 1997 (13.42%), which was the peak of the prior decade," says the monthly report by FBR Investment Management Inc. The default rate on securitized subprime loans rose to 11.99% in April from 11.44% in March. FBR researchers noted that there are metropolitan areas of California, Arizona, Florida, Nevada, and the District of Columbia that have seen default rates increase by more than 200% since April 2006. The default rate on alternative-A loans rose 22 bps in April, to nearly 2.48%. (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.

In finalizing the subprime mortgage guidance, federal banking regulators rejected industry requests for flexibility in helping subprime borrowers by refinancing them into another adjustable-rate 2/28 mortgage.The guidance, issued June 29, suggests that workout arrangements should provide permanent affordability, and that lender/servicers might consider converting ARMs into fixed-rate mortgages to provide "financially stressed borrowers with predictable payment requirements." Comptroller John Dugan said the emphasis is on putting borrowers into loans they can afford. "It doesn't do any good to keep putting people into loans that they can't repay," he said. In underwriting subprime 2/28 ARMs, regulators expect lenders to qualify borrowers at the fully indexed rate, "regardless of any interest rate caps that limit how quickly the fully indexed rate may be reached." The payment schedule should be fully amortizing over 30 years, unless it is a balloon loan.

Three classes of Saxon Asset Securities Trust residential mortgage-backed securities have been placed on Rating Watch Negative by Fitch Ratings.The affected securities were as follows: class BV-2 of series 2000-2 group 2; class MF-3 of series 2003-3 group 1; and class M-2 of series 2001-3. In addition, three Saxon classes were upgraded and the ratings on 29 classes in 12 Saxon deals were affirmed. Fitch attributed the negative rating actions to "current trends in the relationship between serious delinquency and credit enhancement." The pool collateral consists of fixed- and adjustable-rate subprime residential mortgages, the rating agency said.

Two classes from Credit Based Asset Servicing and Securitization LLC series 2006-SL1 have been downgraded by Fitch Ratings and placed on Rating Watch Negative, and three other classes have also been placed on Rating Watch Negative.Class B-4 was downgraded from BBB-minus to BB-minus, and class B-5 was downgraded from BB-plus to B. They were placed on Rating Watch Negative, along with classes B-1, B-2, and B-3. Fitch also affirmed the ratings on nine classes from the C-BASS deal. The negative rating actions reflect a deterioration in the relationship between credit enhancement and loss expectations, the rating agency said. The collateral consists mainly of second-lien residential mortgage loans extended to subprime borrowers, Fitch said.

Two classes from two issues of Morgan Stanley Capital I Inc. commercial mortgage-backed securities pass-through certificates have been downgraded by Fitch Ratings.Class F of series 1997-RR and class F-7 of series 2004-RR were downgraded from BB-minus to B-plus. Fitch also upgraded five classes and affirmed the ratings on four other classes in the two deals. The rating agency attributed the downgrades to the reduced credit quality of the remaining collateral. The deals are collateralized by all or a portion of 21 classes of fixed-rate commercial mortgage-backed securities in 11 separate transactions, Fitch said.