Originations

Fifteen classes of mortgage-backed securities issued by Morgan Stanley in 2002 and 2003 have been downgraded by Fitch Ratings.In addition, class B-3 of series 2004-HE4 was placed on Rating Watch Negative and the ratings on 46 classes in 11 Morgan Stanley transactions were affirmed. The negative rating actions were based on a deterioration in the relationship between credit enhancement and expected losses, Fitch said. The collateral in the mortgage pools consists of fixed- and adjustable-rate, 15- and 30-year subprime residential loans.

Delta Financial Corp., a mortgage lender based in Woodbury, N.Y., has been added to the Russell 3000 Index.Russell Investment Group made the addition in connection with its recent reconstitution of the index, Delta said. Touting the company's inclusion in the index, Delta president and chief executive Hugh Miller said 2007 has been "a milestone year" for the company. "We transitioned to the NASDAQ in March; we produced record origination volume in the first quarter; securitized more than $1.9 billion of mortgage loans through May 2007; and increased our credit facilities to $2.5 billion," Mr. Miller said. The companies can be found online at http://www.deltafinancial.com and http://www.russell.com.

Americans 62 years of age or older hold an estimated $4.3 trillion of home equity, according to the NRMLA/Hollister Reverse Mortgage Market Index.The index, launched by the National Reverse Mortgage Lenders Association and The Hollister Group, is the first market indicator to collect critical market, housing, and demographic data and to track and project the market for reverse mortgages, Hollister said. "The idea of using home equity to finance retirement is becoming increasingly mainstream even among the current generation of seniors who have traditionally been debt-averse," said NRMLA president Peter Bell. "The RMMI illustrates the significant opportunity for mortgage industry participants as the home increasingly plays a role as a retirement asset." The reverse mortgage industry has grown rapidly in the past five years, but only about 300,000 reverse mortgages have been originated, representing less than 1% market penetration, Hollister said. In the first quarter, home equity held by senior citizens rose by $19 billion, which was reflected in a 0.4% increase in the RMMI from 204.7 to 205.6. The organizations can be found online at http://www.nrmlaonline.org and http://www.hollisterllc.com.

Federal financial regulators have issued final subprime guidance cautioning against the use of stated-income and reduced-documentation mortgage loans unless there are "documented mitigating factors that clearly minimize the need for verification of a borrower's repayment capacity."The Statement on Subprime Mortgage Lending calls for "a fully indexed, fully amortized qualification for borrowers" and "prudent" consumer protection standards. The standards should include "clear and balanced product disclosures to customers and limits on prepayment penalties that allow for a reasonable period of time, typically at least 60 days, for customers to refinance prior to the expiration of the initial fixed interest rate period without penalty," the statement says. The Mortgage Bankers Association characterized the guidance as "a strong statement that will help curb abuses" but that will likely "constrain consumer credit choices." The association urged Congress to do two things. "First, quickly pass FHA modernization in order to restore affordable credit options for worthy borrowers, and second, refrain from passing legislation that will further constrain credit by forcing lenders to deal with rigid underwriting standards and litigation risk," the MBA said. "Instead, Congress should focus on legislation to improve transparency and accountability throughout the mortgage transaction."

Class M-10 of Mortgage Asset Securitization Transactions Asset Back Securities Trust mortgage pass-through certificates, series 2005-FRE1, has been downgraded from BB-plus to B by Fitch Ratings.Fitch also placed classes M-8 and M-9 of the deal on Rating Watch Negative and affirmed the ratings on 45 classes in four MABS securitizations. The rating agency attributed the negative rating actions to a deterioration in the relationship between credit enhancement and expected losses. The collateral consists chiefly of conforming and nonconforming, fixed- and adjustable-rate subprime mortgage loans.

Class B5 of Merrill Lynch Mortgage Investors Trust series 2005-HE1 has been downgraded from BB to B-plus and removed from Rating Watch Negative by Fitch Ratings.In addition, class B4 was removed from Rating Watch Negative, and the ratings on 16 classes from two MLMI transactions were affirmed. The downgrade was based on a deterioration in the relationship between credit enhancement and loss expectations, Fitch said. The rating agency said the transactions are backed by fixed- and adjustable-rate, first- and second-lien subprime residential mortgages.

Five certificates from two mortgage securitizations issued by Structured Asset Securities Corp. have been downgraded by Moody's Investors Service.The downgrades were as follows: series 2002-HF1, class B, from B1 to Caa2; and series 2005-AR1, class M8, from Baa2 to Baa3, class M9, from Baa3 to Ba1, class B1, from Ba1 to Ba3, and class B2, from B1 to B3. The five mezzanine and subordinate certificates have been downgraded because credit enhancement levels are low given the projected losses on the underlying pools, Moody's said. The transactions consist of subprime first-lien adjustable- and fixed-rate loans. Moody's can be found online at http://www.moodys.com.

The rating outlook for Citizens Republic Bancorp Inc. and its principal subsidiaries has been revised from Stable to Negative by Fitch Ratings, which cited increased losses and nonperforming loans related to a commercial real estate loan portfolio acquired from Republic Bancorp.CRBC has estimated that net chargeoffs in the second quarter will total $20-25 million, and it has announced a provision for loan losses of $30-35 million. The company reported that it detected "deterioration" in the commercial real estate loan portfolio in the second quarter and downgraded the risk rating of 180 CRE loans with outstanding balances of approximately $145 million. Fitch said nonperforming assets may increase further "if CRBC identifies additional credit concerns." The CRE loan portfolio was acquired from Republic Bancorp as a result of a merger in December 2006, the rating agency said. Fitch can be found on the Web at http://www.fitchratings.com.

Jim Giuliano has been named president of Dividend Capital Total Realty Trust Inc., a Denver-based real estate investment trust, replacing Marc Warren, who is leaving to develop a real estate debt business.Mr. Giuliano will also remain chief financial officer of the REIT. In addition, Sonya Rosenbach, the company's vice president of finance and controller, has been promoted to the position of chief accounting officer and treasurer. The diversified REIT can be found on the Web at http://www.dividendcapital.com.

Robert M. Dunn has been named president of Oxford Funding Corp., a Houston-based asset resolution company specializing in the purchase and restructuring of subprime residential and commercial mortgage portfolios.Mr. Dunn was most recently the owner and manager of San Felipe Commercial Mortgage, which Oxford Funding recently announced its intention to acquire. He was previously president of Angelina Capital Corp., a mortgage lender, from 1992 to 1998. Oxford has also announced that it plans to acquire Huntington Financial Corp., a Houston-based commercial and residential mortgage broker. Oxford Funding can be found on the Web at http://www.oxfordfunding.com.

The average 30-year fixed mortgage rate fell from 6.69% to 6.67% for the seven-day period ended June 28, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate fell from 6.37% to 6.34%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages declined from 6.31% to 6.30%, and the average rate for one-year Treasury-indexed ARMs fell from 5.66% 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. "Mortgage rates edged down slightly for the second week in a row after having risen over the previous month and a half, and as financial markets prepared for the June 28th Federal Open Market Committee's announcement on monetary policy," said Frank Nothaft, Freddie Mac's chief economist. "This week we saw further effects of the current housing recession. May's existing-home sales (including condominiums and co-ops) fell 0.3% to the slowest pace since June 2003, and the number of months houses were available for sale rose to 8.9, the longest since June 1992." A year ago, the average 30-year and 15-year fixed rates were 6.78% and 6.43%, respectively, and the average hybrid and one-year ARM rates were 6.39% and 5.82%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

House Financial Services Committee Chairman Barney Frank, D-Mass., has introduced legislation that fleshes out the details of how his affordable housing trust fund would distribute $800 million to $1 billion in grants annually.Rep. Frank said he plans to finance the trust fund with mandated contributions by Fannie Mae and Freddie Mac, savings from Federal Housing Administration reforms, revenues from the Expanding Americans' Home Ownership Act, and possibly other sources. (The House has already passed government-sponsored enterprise reform legislation that would require Fannie and Freddie to contribute $600 million, and the committee has approved an FHA bill expected to generate nearly $500 million in new revenues, mainly by expanding the FHA reverse mortgage program.) The fund would provide grants for the construction and rehabilitation of affordable housing for low-income families, with 60% allocated to local communities and the remainder to states, insular areas, and American Indian tribes. The Department of Housing and Urban Development would be required to develop an allocation formula based on factors such as population, housing affordability, percentage of very and extremely low-income families, and cost of construction. Rep. Frank said he plans to hold hearings on the trust fund bill on July 12.

Winthrop Realty Trust, a Boston-based a real estate investment trust, has announced the sale of nearly 800,000 common shares of America First Apartment Investors Inc. in market transactions, representing "substantially all" its shares in the company.Winthrop said the sale of the 793,956 shares at $25.02 per share resulted in net proceeds of approximately $19.82 million, for a gain of approximately $9.74 million (exclusive of dividends). Winthrop can be found on the Web at http://www.winthropreit.com.

The Pew Charitable Trusts has announced a $1 million investment with the Center for Responsible Lending aimed at curbing abusive subprime home loans by strengthening underwriting standards.Pew noted that federal financial regulators are poised to issue guidance on subprime lending, but that more than half of subprime mortgages are issued by lenders not subject to such guidance. "With Pew's support, the Center for Responsible Lending will work to protect all subprime borrowers by urging other federal and state policymakers with jurisdiction and industry leaders to adopt basic, much-needed standards," the organization said. Pew said its two-year investment in CRL is intended to strengthen underwriting standards by pushing lenders to verify a borrower's income and ensure that borrowers can repay the loan after scheduled interest rate increases. The organization can be found on the Web at http://www.pewtrusts.org.

The Market Composite Index, an overall measure of mortgage applications, fell from 643.7 to 618.6 on a seasonally adjusted basis during the week ended June 22, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications decreased 4.5% on the week but were up 16.3% from the level recorded a year earlier. The Purchase Index fell from 450.9 to 428.9 on a seasonally adjusted basis, while the Refinance Index declined from 1776.8 to 1731.6. Refinancings represented 38.7% of total applications, up from 38.0% the previous week, while adjustable-rate mortgages accounted for 20.4%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages remained unchanged, at 6.60%, and points (including the origination fee) fell from 1.58 to 1.54 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

Freddie Mac has announced changes in its interest-only fixed-rate mortgage product to make more IO financing available, as well as changes aimed at providing greater flexibility in its Treasury Plus Yield Maintenance Option."Freddie Mac has expanded the credit terms of its interest-only product in response to feedback from its customers and the unique challenges presented by the marketplace," said Mitchell W. Kiffe, Freddie Mac's vice president of multifamily production and sales. "The changes are twofold: Freddie Mac is providing the potential of a longer interest-only term for all loans, and it is also offering lower debt coverage ratios for certain acquisition loans with above-average fundamentals." Regarding its Treasury Plus product, the government-sponsored enterprise is offering to modify the assumed reinvestment rate in the yield maintenance formula up to the Treasury yield rate plus 100 basis points or the net spread, whichever is lower. The GSE can be found on the Web at http://www.freddiemac.com.

Power Express Mortgage Bankers, a direct lender of jumbo home loans nationwide, has announced its acquisition of Pasadena, Calif.-based Valley Mortgage Bankers.The terms of the transaction were not disclosed. Valley Mortgage, which will continue to operate under that name, has been originating and closing residential, commercial, and construction loans for more than five years. It is the third branch location for Power Express in California, and the 30th branch nationally, Power Express said. "The acquisition of Valley Mortgage represents an advancement in our company's goal to increase total loan volume through the expansion of retail branches throughout California and nationally," said Keith Kantrowitz, president of Power Express. The company said it has also acquired Valley Mortgage's partnership with "House Calls," a Saturday morning call-in radio program on 97.1 FM in Los Angeles.

Regina M. Lowrie, former chairman of the Mortgage Bankers Association and founder of Gateway Funding, has announced the launch of Vision Mortgage Capital, which she said is "dedicated to meeting America's emerging housing and changing demographic needs."Vision, based in Blue Bell, Pa., will be an operating subsidiary of Lancaster, Pa.-based American Home Bank. Ms. Lowrie has nearly 30 years of experience in the financial services industry, including many years as a senior executive at Commonwealth Federal. Ms. Lowrie founded Gateway Funding in 1994 with seven employees, and by 2005 the company had over 750 employees and revenues of over $100 million, she said. Ms. Lowrie became the first woman to serve as MBA chairman in 2005, and she sold her interest in Gateway in July 2006. "With changing demographics and housing markets, there is a unique opportunity to create a home financing resource that utilizes industry best practices and proven leadership to provide competitive products to underserved markets, as well as provide a solid platform for mortgage banking professionals to build and nurture successful origination practices," Ms. Lowrie said.

Bear Stearns & Co. said Wednesday that it has reduced by half a $3.2 billion line of credit to one of its two subprime-related hedge funds, citing asset sales from the High-Grade Structured Credit Fund.In a statement, Bear said it is continuing efforts to de-leverage both the High-Grade Fund and a related hedge fund called High-Grade Structured Credit Enhanced Leverage Fund. Bear's line of credit to the High-Grade Fund now stands at $1.6 billion. Both funds, according to sources, have been hit with margin calls from lenders, including Merrill Lynch, Goldman Sachs, and Bank of America. Bear has moved to prop up the High-Grade Fund with loans. Market sources say it may liquidate, in an orderly fashion, the Enhanced Fund. A Bear Stearns spokeswoman did not return a telephone call placed by MortgageWire. Meanwhile, according to combined news reports, the Securities and Exchange Commission has opened an informal inquiry into these two Bear Stearns managed funds, which have billions of dollars in subprime-related investments. An SEC spokeswoman said the agency neither confirms nor denies investigations.

Sen. Charles E. Schumer, D-N.Y., wants to impose a fiduciary duty on mortgage brokers and the initial lender that funds a subprime loan under a bill he is trying to get through the Senate Banking Committee."We need a fiduciary duty" that applies to nonbank lenders that are not federally regulated, Sen. Schumer told reporters. "If we did that, the vast majority of abuses would be cleaned up without affecting the functioning of the subprime market." The National Association of Mortgage Brokers contends that there are many problems with this approach -- since relationships between businesses and consumers are usually addressed at the state level. "The idea that imposing a fiduciary/agency relationship is going to fix everything is a fallacy, and it is not well thought out," said NAMB executive vice president Roy DeLoach. The Schumer bill (S. 1299) also requires lenders to underwrite loans at the fully indexed rate and requires escrow accounts on all subprime loans. Sen. Schumer told reporters that he plans to talk to banking committee Chairman Christopher J. Dodd D-Conn., about holding a mark-up of the bill. "The sooner the better," he said.