Originations

The average 30-year fixed mortgage rate fell from 6.17% to 6.16% for the seven-day period ended April 26, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate fell from 5.89% to 5.87%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages declined from 5.92% to 5.88%, and the average rate for one-year Treasury-indexed ARMs decreased from 5.45% to 5.43%, Freddie Mac reported. Fees and points averaged 0.5 of a point for fixed-rate mortgages and 0.7 of a point for ARMs. "Recent economic data releases showing weaker existing-home sales in March, coupled with lower consumer confidence in April, caused the market to pause and re-evaluate the potential growth of the economy this year," said Frank Nothaft, Freddie Mac's chief economist. "This allowed all mortgage rates to decline slightly this week." A year ago, the average 30-year and 15-year fixed rates were 6.58% and 6.21%, respectively, and the average hybrid and one-year ARM rates were 6.21% and 5.68%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

Bank of America, Charlotte, N.C., has announced an agreement to acquire the reverse mortgage business of Seattle Mortgage Co., the third-ranked producer of federally backed reverse mortgages, for an undisclosed price.Approximately 400 associates from Seattle Mortgage, an indirect subsidiary of Seattle Financial Group Inc., will join Bank of America, including a retail sales force of more than 200 associates in 25 states and the District of Columbia, BoA said. John Nixon, executive vice president and chief operating officer of Reverse Mortgage of America (a division of Seattle Mortgage), and Charlie Jones, vice president of loan servicing at Reverse Mortgage of America, will join BoA. According to the Department of Housing and Urban Development, Seattle Mortgage is ranked third nationally among providers of Home Equity Conversion Mortgages, the reverse mortgage program of the Federal Housing Administration. BoA can be found online at http://www.bankofamerica.com.

Housing markets "continued to weaken" in March and early April, while many Federal Reserve banks reported declining home construction activity in their districts, according to the Fed's Beige Book."Residential real estate activity continued to weaken, with sales declining in many districts and flat in a number of others," the Beige Book says. The Dallas Federal Reserve Bank reported rising inventories of unsold homes, and builders that were "significantly curbing home starts." However, the Boston bank reported that the volume of residential sales across New England showed signs of increasing, though prices remained below 2006 levels. Meanwhile, commercial real estate markets continued to be strong, with reports of robust construction activity in several districts.

The ranking members of the House Financial Services Committee have asked the Government Accountability Office to conduct a study into the recent surge of foreclosures and promptly report back to the committee.The request by committee chairman Barney Frank, D-Mass., and Spencer Bachus, R-Ala., directs the investigative and auditing arm of Congress to assess the magnitude of the foreclosure problem as well as its causes and possible solutions. "Developing workable solutions to the current problems in the subprime market is a high priority for members of both Houses and both parties, and our committee will be considering legislation on the subject in the coming months," the April 25 letters says. The congressmen also want the GAO to look at the impact of "exotic" and subprime mortgage products on foreclosures, as well as the securitization of these loans. "It seems clear that the type of mortgages that have been offered to borrowers in recent years is one factor, but there is no reason to conclude that it is the only factor," the letter says. "Moreover, even if the types of mortgages recently being offered are the predominant factor, the question is why they have only now begun to lead to higher foreclosure rates."

Roughly 7% of U.S. homeowners have negative home equity, and the housing industry is currently in the throes of a "deep recession," according to the chief economist for Global Insight Inc., a forecasting firm.But Global Insight's Nariman Behravesh also said Thursday that the subprime mortgage crisis "is now off the front pages, but more firms could go belly up." Speaking at a forecast conference sponsored by the National Association of Home Builders, Mr. Behravesh added that "housing demand is beginning to recover." Even though 7% of mortgages are under water, 60% of homeowners have equity of 30% or more, he said. Outstanding subprime loans account for just 13% to 14% of the total market, according to Global Insight.

Three classes of Putnam Structured Products CDO 2001-1 Ltd., a collateralized debt obligation consisting partly of residential and commercial mortgage-backed securities, have been downgraded by Fitch Ratings.The rating agency also affirmed the ratings on four other classes in the transaction. "In Fitch's modeling, the portfolio is unable to generate sufficient interest proceeds to compensate [for] the costs of the floating-rate liabilities in both rising and flat interest rate scenarios," Fitch said. "This leads to deteriorating performance in the lower part of the capital structure while the senior notes benefit from structural protection features." Fitch said the portfolio backing the CDO consists of RMBS (32.3%), CMBS (13.6%), the debt of real estate investment trusts (23.5%), corporate bonds (16.1%), asset-backed securities (7.4%), and other CDOs (7.1%).

Three classes from two CitiFinancial Mortgage Securities Inc. securitizations have been downgraded by Fitch Ratings.The downgrades were as follows: series 2003-1, class MV-3, from A to BBB-minus, and class MV-4, from BBB-minus to BB-minus; and series 2003-3, class MV-3, from BBB to BB-minus. In addition, 16 tranches from four Citi transactions have been upgraded, and the ratings on 10 classes have been affirmed. The downgrades were attributed to deterioration in the relationship between credit enhancement and loss expectations. The collateral backing the affected classes consists primarily of first-lien subprime residential mortgage loans.

Two classes of mortgage pass-through certificates in Mortgage Asset Securitization Transactions Asset Back Securities Trust deals have been downgraded by Fitch Ratings.Class M-6 of series 2002-OPT1 was downgraded from BBB-minus to BB-minus, and class M-6 of series 2003-WMC2 was downgraded from BBB-minus to BB-plus. Fitch also placed classes M-10 and M-11 of series 2005-NC2 on Rating Watch Negative and affirmed the ratings on 22 classes in three MASTR ABS securitizations. The rating agency attributed the downgrades to deterioration in the relationship between credit enhancement and loss expectations. Fitch said the collateral backing the transactions consists primarily of first- and second-lien fixed- and adjustable-rate subprime mortgage loans.

Twenty-nine classes from 10 Credit Suisse First Boston Home Equity Asset Trust transactions have been downgraded by Fitch Ratings.In addition, the ratings on 97 classes from 18 CSFB HEAT transactions have been affirmed. The downgrades were attributed to a deterioration in the relationship between credit enhancement and loss expectations. The rating agency said the collateral backing the transactions consists of first- and second-lien fixed- and adjustable-rate subprime mortgage loans. The rating agency can be found online at http://www.fitchratings.com.

The national office market "took a bit of a breather" in the first quarter, although the upward trend remains intact, according to Colliers International, a Boston-based commercial real estate manager.Absorption totaled 12.8 million square feet, down from 25.9 msf in the fourth quarter and 22.2 msf a year earlier, Colliers said. But rents continued to rise, with downtown rents increasing 5.2% to a record high of $43.22 per square foot. The national vacancy rate stood at 12.55%, unchanged from that of the previous quarter but down from 13.25% a year earlier, Colliers said. "Don't be fooled by a somewhat disappointing first quarter," said Ross Moore, senior vice president and director of market and economic research at Colliers. "While absorption was well below levels experienced over the past couple of years, nearly all markets continue to clock steady demand. Absorption is almost certain to bounce back -- if not during Q2, then in the latter half of 2007." The company can be found online at http://www.colliers.com.

More than 430,000 foreclosure filings were reported nationwide in the first quarter, up 27% from those of the previous quarter and 35% from a year earlier, according to RealtyTrac, an online foreclosure marketplace based in Irvine, Calif.The nation's quarterly foreclosure rate of one foreclosure filing for every 264 households was the highest since RealtyTrac began issuing its report 27 months ago, the company said in its 2007 U.S. Foreclosure Market Report. (Foreclosure filings include default notices, auction sale notices, and bank repossessions.) "The rise in foreclosure activity was quite dramatic and widespread in the first quarter, with 37 out of the 50 states reporting year-over-year increases," said James J. Saccacio, chief executive officer of RealtyTrac. "Certainly the surge in subprime defaults has contributed to the overall rise in foreclosures -- we estimate that more than 50% of the foreclosure activity we charted in the first quarter was from subprime loans. However, it's not just low-end homes that are going into foreclosure. We're seeing a rising percentage of foreclosures with an estimated market value of more than $750,000." The company can be found online at http://www.realtytrac.com.

The Market Composite Index, an overall measure of mortgage applications, rose from 630.6 to 653.3 on a seasonally adjusted basis during the week ended April 20, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications increased 4.1% on the week and were up 18.2% from the level recorded a year earlier. The Purchase Index rose from 396.5 to 411.0 on a seasonally adjusted basis, while the Refinance Index rose from 2008.4 to 2081.6. Refinancings represented 43.4% of total applications, down from 43.6% the previous week, while adjustable-rate mortgages accounted for 18.3%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages fell from 6.22% to 6.13%, and points (including the origination fee) rose from 1.22 to 1.32 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

While rejecting the idea of a government bailout for delinquent subprime borrowers, a top government housing official said Wednesday that the Federal Housing Administration can come to the aid of "tens of thousands" of consumers through the refinancing process.Roy Bernardi, deputy secretary for the Department of Housing and Urban Development, said, "If a refi is doable, FHA would look at it and work with servicers." Mr. Bernardi noted that the agency could do more to help subprime borrowers if FHA reforms are passed by Congress, including a proposal that would allow the agency to charge risk-based premiums. "We must reach out to help the borrower," he said, speaking before a policy meeting sponsored by the Mortgage Bankers Association. "But we can't simply throw money at the problem."

Banks and thrifts can earn Community Reinvestment Act credit by placing their troubled subprime borrowers into newly refinanced loans, but not for ordinary workouts and loan modifications, according to regulators.When it comes to their own loans, "I don't think there is any question whether banks will do workouts and accommodate those individuals appropriately," said Robert Mooney, acting deputy director of the Federal Deposit Insurance Corp., at a CRA conference sponsored by the Consumer Bankers Association. The main thrust of the April 17 interagency statement is to encourage banks to work with nonprofit groups in helping subprime borrowers with adjustable-rate 2/28 and 3/27 mortgages that have been securitized. Mr. Mooney noted that a lot of the borrowers are trapped and facing foreclosure. And it isn't easy to "shake" those loans out of the securitizations so responsible banks can do the workouts, he said. Meanwhile, the regulators want to ensure that "you get the credit you deserve" in the CRA lending or service tests "for taking that extra step and going the extra mile," Mr. Mooney said. The CBA can be found on the Web at http://www.cbanet.org.

New-home sales rose 2.6% in March after falling 16% since December as homebuilders continued to struggle with large inventories of unsold homes.The U.S. Census Bureau reported that new single-family home sales rose from 836,000 in February to 858,000 in March. The sales pace is off by 23.5% since March 2006. Economists at the National Association of Home Builders were relieved to see an improvement in March, but sales are still slow and they said they don't expect to see a bottom until the end of the second quarter. Meanwhile, the increased sales did not put a dent in inventories. And NAHB senior economist Bernard Markstein said builders are still dealing with high cancellations due to a pullback in subprime lending. When many homebuyers signed a sales contract one or two months ago, they thought they were pre-qualified for a mortgage, Mr. Markstein said. "Now they are being told they can't handle the mortgage, and they cancel." Meanwhile, the Census Bureau still counts it as a sale even though the house is ready to be sold again.

Class B of Mesa Trust 2001-2 has been downgraded from B3 to Caa3 by Moody's Investors Service.The action was based on an analysis of the credit enhancement provided by subordination, overcollateralization, and excess spread relative to the expected loss, Moody's said. The transaction is backed by first- and second-lien fixed- and adjustable-rate subprime mortgage loans.

JER Partners Acquisitions, a private equity investor, is acquiring McLean, Va.-based Highland Hospitality Corp. for a total of $2.0 billion.The acquisition price includes the payment of $19.50 per Highland share and operating partnership unit in cash, and the assumption of about $260 million of Highland debt, the real estate investment trust reported. This price -- for a portfolio that includes 27 hotel properties with a total of 8,379 rooms in 14 states -- represents a 15% premium over Highland's recent stock price, according to the hotel REIT. James L. Francis, Highland's president and chief executive officer, said he believes that the price "reflects the underlying value" of Highland's assets. The transaction is expected to close in the third quarter. The lodging REIT can be found on the Web at http://www.highlandhospitality.com, and JER can be found at http://www.jer.com.

Countrywide Financial Corp. Calabasas, Calif., is creating a new 15-person unit in Calabasas to review the entire company's processes from top to bottom, one mortgage executive familiar with the matter has told MortgageWire.The executive, requesting anonymity, said: "They are going to review everything." He added that, "All businesses will be looked at to see if they are doing things the right way." At deadline time, a company spokeswoman had not returned telephone calls about the matter. According to the Quarterly Data Report, Countrywide is the nation's largest 'A' paper lender and the third-largest subprime funder.

Rising subprime mortgage defaults threaten to exacerbate an oversupply of housing inventory, according to a new report published by Standard & Poor's Ratings Services.The recently published article, "Credit FAQ: How Subprime Woes Might Affect Rated Homebuilders," addresses the potential effect of the subprime situation on homebuilders' captive finance subsidiaries, the glut of unsold homes, and other "hot-button" issues. "We haven't taken any rating actions on homebuilders solely because of the subprime issue," said credit analyst James Fielding. "However, rising foreclosure rates and tightening consumer credit raise additional red flags regarding a cyclical housing downturn that is already deeper and broader than previously anticipated. What's more, the duration of this downturn will be a function of how well the economy, and job growth, holds up over the next year, since it is the steady absorption of excess housing supply that will lead to eventual stabilization." S&P can be found online at http://www.standardandpoors.com.

Housing prices continued to decline in February and were down 1.0% over the past 12 months, according to the Standard & Poor's/Case-Shiller housing price indices covering 20 major metropolitan areas.The S&P Case-Shiller HPI has dropped dramatically from a 13.8% annual return in February 2006, and the "deceleration and declines in home prices are showing no signs of a turnaround," said Robert Shiller, chief economist at MacroMarkets LLC. The HPI fell into negative territory in January for the first time in this housing cycle, as prices in 11 of 20 cities posted negative annual returns. Only seven cities in the HPI posted positive annual returns in the February report. Those cities are: Atlanta (2.1%), Charlotte (7.3%), Chicago (1.3%), Dallas (1.3%), Miami (2.9%), Portland (7.7%), and Seattle (10.6%).