Originations

Wells Fargo has issued a statement in support of American Securitization Forum guidelines for subprime mortgage loan modifications."We strongly believe that access to the global capital markets through securitization has increased access to credit and expanded homeownership across America," said Cara Heiden, division president, Wells Fargo Home Mortgage. Ms. Heiden said the ASF guidelines promote more flexible use of modifications in appropriate circumstances to address the difficulties presented by the current market environment. "We believe they will lead to reduced foreclosures, helping homeowners and communities, while continuing to balance the interests of all involved, including investors." She said Wells Fargo will continue to work with homeowners facing financial difficulties on a case-by-case basis to develop solutions that satisfy the needs of all participants in the mortgage lending process. This includes reviewing each contract and securing, where possible, any necessary approvals from investors that are legally required to modify a contract, and working within industry-acceptable accounting and tax requirements.

Loan modification efforts should be for the long term and investors should know about them, Federal Deposit Insurance Corp. chair Sheila Bair stressed at the ASF's annual meeting."If a loan modification puts a borrower into a loan that they can afford, and the details about that modification are disclosed, we believe this will create additional market pressure for sustainable loan restructuring," she said. Ms. Bair also said that fixed-rate mortgages should be given greater emphasis in the market and indicated in a question-and-answer session following her speech that adjustable-rate mortgages "should be the exception, not the rule."

The American Securitization Forum at its annual meeting Wednesday provided subprime lending guidance on issues such as loan modification and urged caution on the possible expansion of mortgage assignee liability in terms of its potential to further restrict credit.In regard to the latter, the ASF stressed that it believes responsibility should be focused on the primary market but it also suggested a national framework to the extent that the secondary market may be further affected. In regard to the former, the forum guidance included opposition to "any across-the-board approach to loan modifications" with the exception of standardization of loan modification language in securitization documents.

The U.S. Bankruptcy Court for the District of Delaware has issued a ruling confirming ResMAE Mortgage Corp.'s Plan of Reorganization.The ruling clears the way for ResMAE to emerge from Chapter 11 as an entity wholly owned by an affiliate of Citadel Investment Group LLC. ResMAE commenced its Chapter 11 case on Feb. 12, 2007 and made an agreement to sell certain assets of the company to affiliates of Citadel on March 6, 2007. ResMAE, based in Brea, Calif., has conducted operations and originated loans throughout the Chapter 11 process. In issuing his ruling, Judge Kevin J. Carey found that the company had met all of the requirements necessary to exit from Chapter 11. "The decision represents a critical step for us as we move our business forward with renewed energy and excitement about the prospects of ResMAE and this important industry. The progress we have made in the last several months speaks to the resolve of our team along with the significant commitment that Citadel has made to ResMAE," said Jack Mayesh, chairman of ResMAE. Ken Griffin, president and CEO of Citadel, said, "ResMAE has built a solid platform in the subprime mortgage industry. While the last several months have been trying for the industry as a whole, we are on course to position ResMAE as an industry leader."

Lehman Brothers has contributed $1.25 million to the National Reinvestment Coalition to support the coalition's foreclosure prevention funds and homeownership initiatives.Lehman Brothers, which owns two nonprime mortgage companies, also agreed to abide by NCRC's best lending and servicing practices. "We are delighted to join forces with Lehman Brothers to expand and sustain homeownership for all Americans," NCRC president and chief executive Paul Taylor said. The investment banking firm owns subprime wholesaler BNC Mortgage Inc., Irvine, Calif., and alt-A wholesaler and correspondent lender Aurora (Colo.) Loan Services Inc. "Lehman is committed to making home financing available to consumers by originating and purchasing sound residential mortgage loans to creditworthy borrowers and by servicing such loans and engaging in collection activities in a fair and equal manner," a Lehman spokesman said.

First Indiana Bank, Indianapolis, has agreed to pay $100,000 in settling allegations that it discriminated against minorities by refusing to make loans on row houses in Baltimore, Philadelphia and Washington.The National Community Reinvestment Act filed a fair housing complaint against the national bank in March alleging that First Indiana's policy of not lending on row houses valued under $100,000 discriminates against African-Americans and Hispanics. The Department of Housing and Urban Development facilitated the settlement between the Indianapolis national bank and NCRC. "Policies that pose barriers to people because of their national origin or race have no place in the lending process," HUD assistant secretary Kim Kendrick said. Under the settlement, "First Indiana denied any liability for violations under the Fair Housing Act," HUD said. The national bank had not responded to MortgageWire's request for a comment by press time.

Freddie Mac and Alaska USA FCU on Monday signed a deal making the $3 billion credit union the secondary mortgage market giant's first credit union correspondent. Under the agreement, Alaska USA FCU will aggregate mortgages from small and midsized credit unions for sale on the secondary market. Participating credit unions will be provided a one-quarter-point (25 basis points) premium for every closed mortgage loan under the program, according to Bob Cejka, spokesman for Alaska USA. "We've done this in the past on a regional basis, but never on a national basis," Mr. Cejka told the Credit Union Journal. "Because of our size, we have the ability to do this on a national basis." The announcement was made on Monday at the annual conference and expo for CUNA, which has a four-year-old alliance with Freddie Mac. Alaska USA's staff, which is experienced in the secondary mortgage market, will provide support and assistance to participating credit unions, many of which do not have the resources to conduct mortgage sales themselves. The program will allow smaller credit unions to sell their loans on the secondary market without having to add staff, build infrastructure or install costly technology. While Freddie Mac has conducted correspondent sales through banks and thrifts, Alaska USA is the first credit union to participate in the program.

The rate of serious delinquencies and foreclosures on adjustable-rate subprime mortgages has doubled since mid-2005 and it is going to get worst, according to Federal Reserve Board chairman Ben Bernanke.The chairman noted in a speech to an International Monetary Conference that the default rate on subprime ARMs has risen to about 12%. "We are likely to see further increases in delinquencies and foreclosures this year and next as many subprime adjustable-rate loans face interest-rate resets," Mr. Bernanke said. The Fed chairman also expects the tightening of subprime lending standards will lead to a further contraction in subprime originations and continue to act as a restraint on housing demand and sales. National Mortgage News survey data show that subprime originations declined by 16.4% in 2006 to $665 billion and a larger drop is expected this year.

Two certificates from a deal issued by Countrywide Home Loans Inc. in 2002 have been placed under review for possible downgrade by Moody's Investors Service.The affected securities are Classes M-1 and M-2 of CWABS Inc. Asset-Backed Certificates Series 2002-BC1. The rating actions were taken because credit enhancement levels may be low given the projected losses on the underlying pool, Moody's said. The transaction is backed by first-lien fixed-rate subprime mortgage loans.

Washington Real Estate Investment Trust, Rockville, Md., has priced a public offering of 1.6 million shares of its common shares of beneficial interest at $37 per share.The REIT said it will grant the underwriters an option to buy up to 240,000 additional shares to cover any overallotments. Robert W. Baird & Co. was the sole book-running manager of the offering. The REIT can be found online at http://www.writ.com.

The senior unsecured debt rating of Reckson Operating Partnership LP has been downgraded from Ba1 to Ba2 by Moody's Investors Service, citing SL Green Realty Corp.'s recent acquisition of Reckson Associates Realty Corp.The outlook was revised to stable. The rating agency noted that SL Green completed its acquisition of Reckson in January and entered into a supplemental indenture whereby SL Green "provided a full and unconditional guarantee of Reckson Operating Partnership LP's unsecured bond obligations. After review of SL Green's quarterly SEC filings, Moody's believes Reckson's bondholders remain in a weaker position post-closing because the transaction results in substantial asset and tenant concentrations at the Reckson Operating Partnership." Moody's also cited a "lack of transparency" surrounding the long-term strategic plan of Reckson Operating Partnership.

Apple Hospitality Five Inc., a real estate investment trust based in Richmond, Va., has retained Wachovia Securities as a financial adviser to help review the REIT's strategic options, including a possible sale or merger of the company.Apple Hospitality specializes in upscale, extended-stay and select-service hotels. It can be found on the Web at http://www.applehospitalityfive.com.

The long-term rate-indicative 10-year Treasury yield appears to have moved into a new higher trading range above 4.90%, according to Yahoo! Finance/Associated Press.Only recently had the benchmark yield begun to rise significantly outside of its previous range, which had averaged roughly around 4.75%. A notable increase in overall monthly employment that came despite an earlier downturn in mortgage jobs gave the yield its most notable recent boost to about 4.95% on Friday, June 1. It was trading slightly lower at about 4.94% as of midday Monday.

The Federal Housing Administration's mutual mortgage insurance fund would lose money for the first time ever if the agency doesn't curtail seller-funded gift programs, according to an FHA official.The Department of Housing and Urban Development doesn't normally comment on proposed rules, especially one as controversial as the proposal put forth in May that would all but prohibit downpayment "gifts" from sellers or anyone else who would benefit from the transaction. But at the Mortgage Bankers Association's Government Housing Finance Conference in Washington last week, the FHA's Judith May said that "if downpayment assistance programs continue without change, the (insurance fund's) credit subsidy rate would go positive" within eight years. Ms. May, who is director of the office of evaluation in HUD's Office of Finance and Budget, told the conference that loss rates on FHA-insured mortgages with downpayment assistance are already three percentage points higher than those on loans without help from the seller. And she said that an independent actuarial review of the fund "predicted a much higher loss ratio in the future" if the current trend is allowed to continue. "That means the fund would no longer make money," Ms. May explained. "For the first time since the FHA was created in 1934, the program would cost more than it brings in." Downpayment assistance providers on a panel with Ms. May disputed the FHA's figures. But even if the study's dire forecast is true, they argued, it would be a mistake to simply toss DPA out the window, if only because the program currently accounts for a big chunk of the FHA's loan volume. "Amend it, don't end it," said Scott Syphax, president of the Nehemiah Corp. of America, Sacramento, Calif. The comment period on the proposed rule expires July 11.

A leading indicator of existing-home sales fell 3.2% in April, but may suggest stability ahead for the housing market, according to the National Association of Realtors.The Realtors' Pending Home Sales Index, which is based on sales contracts signed in April, fell to 101.4 in April from an upwardly revised 104.8 in March. On a year-over-year basis, the index is down 10.2% since April 2006. "It looks like we may be leaving a period of market disruptions, and for the past two months the pending home sales index has been similar in year-ago comparisons, which means home sales might ease but should be fairly stable in the months ahead," NAR senior economist Lawrence Yun said. "In April, existing-home sales declined in part because some subprime lenders went out of business and disrupted the market, but the impact appears to be diminishing, and mortgage applications have risen in the last month." The NAR can be found online at http://www.realtor.org.

Lone Star U.S. Acquisitions LLC, a private equity firm, will purchase Accredited Home Lenders Holding Co., San Diego, in an all-cash transaction valued at approximately $400 million.Dallas-based Lone Star will pay $15.10 per share for all of Accredited's common stock. The deal was made before the market opened on June 4. On June 1, Accredited's stock closed at $13.76 per share. As of late morning on June 4, it was up to $15.33 per share, a gain of $1.57 on the day, and $0.23 above the Lone Star offer. The sale is a culmination of the shifting that Accredited's management had to do in order to keep the company going. There have been layoffs, a change in accountants and threats of delisting from the Nasdaq composite index. This also included receiving a $230 million term loan from Farallon Capital Management LLC in April. The loan has a five-year term and may be repaid by Accredited at any time over the life of the loan, subject to certain conditions and prepayment fees. In connection with the financing, Farallon received warrants to acquire approximately 3.23 million shares of the company's stock at an exercise price of $10 per share.

Nine tranches from several deals with loans originated by Option One Mortgage Corp. have been downgraded by Moody's Investors Service, and four have been placed under review for possible downgrade. The transactions were issued from 2002 to 2004 by Option One Mortgage Loan Trust, Asset Backed Funding Corp., Merrill Lynch Mortgage Investors Trust, and MASTR Asset Backed Securities Trust. In addition to the negative rating actions, Moody's upgraded four tranches and placed two under review for possible upgrade. "Although the deals' losses are performing within the area of original expectations, the subordinate certificates are being downgraded and placed on review for possible downgrade based on existing credit enhancement levels relative to the current projected losses on the underlying pools," Moody's said. "Overcollateralization amounts in most of the transactions are currently below their targets, and pipeline losses could cause further depletion of the overcollateralization and put pressure on the most subordinate tranches." The transactions consist primarily of first-lien, adjustable- and fixed-rate subprime mortgage loans. Moody's can be found online at http://www.moodys.com.

The Eleventh Federal Home Loan District Cost of Funds Index declined another 7 basis points in April, falling from 4.299% for March to 4.224%.Since December 2006, when COFI peaked at 4.396%, the index has declined 17 bps. Because of the way it is calculated, COFI is a lagging index, reflecting changes in the market that might have taken place three to six months earlier. In the past four weeks, the Freddie Mac Primary Mortgage Market Survey has reported large increases in three of the rates it tracks. The average rate for the 30-year fixed-rate mortgage went up 27 bps from the week ended May 10 to the week ended May 31. In the same period, the average rate on the 15-year fixed-rate mortgage rose 25 bps and the 5/1 adjustable-rate mortgage rate was up 30 bps. But the one-year ARM rose from 5.42% for the week ended May 3 to 5.64% for the week ended May 24 before falling by 7 bps in the May 31 survey. It should also be noted that the Federal Reserve Board has not raised the federal funds rate in some time, and declined to do so at its most recent meeting. The FHLBank can be found online at http://www.fhlbsf.com.

Cushman & Wakefield, a privately held commercial real estate service firm based in New York, has announced a preliminary agreement to acquire a majority ownership stake in Sonnenblick-Goldman LLC, a privately held real estate investment banking specialist.The terms of the deal were not disclosed. The companies said the partnership would create a global leader in real estate financial services that would offer "highly specialized" mortgage banking, equity raising, brokerage, and associated advisory services. "The integration of Sonnenblick Goldman with Cushman & Wakefield's robust investment sales business will enhance the ability of both firms to offer comprehensive capital solutions on a global basis," said Chris Lowery, chief executive officer of capital markets at Cushman & Wakefield. The companies can be found online at http://www.cushmanwakefield.com and http://www.sonngold.com.

House prices rose at a 1.8% annualized rate in the first quarter, the slowest rate in a decade, according to the Office of Federal Housing Enterprise Oversight.The OFHEO house price index shows that price appreciation has come down dramatically from an 8.9% annual rate in the first quarter of 2006, but it did not fall into negative territory. "Although some forecasters expected to see a drop in the HPI, nationwide house prices continued to rise in the first quarter of 2007, albeit at the lowest rate in 10 years," OFHEO Director James McLaughlin said. From the fourth quarter to the first quarter, house price rose by 0.5%, and a separate home purchase index (which excludes refinancing transactions) also rose by 0.5%. However, "the purchase-only index grew about 3% over the latest four quarters, less than the 4.3% growth in the all-transactions HPI," OFHEO said. A national house price index published by Standard & Poor's/Case-Shiller and released earlier indicated that house prices declined at a 1.4% annual rate in the first quarter.