Originations

Bank of America Corp., Charlotte, N.C., has reported net income of $5.26 billion ($1.16 per share) for the first quarter, an increase of 5% from $4.99 billion ($1.07 per share) a year earlier that it attributed partly to a rise in mortgage banking income.BoA said the net income from its Consumer Real Estate segment, including its home equity and mortgage businesses, rose 33% to $227 million. Revenues for the segment totaled $840 million, a 21% increase derived "partly from increased home equity balances," the company said. BoA can be found online at http://www.bankofamerica.com.

Sovereign Bancorp Inc., Philadelphia, has reported that its mortgage banking business incurred a loss of $107 million in the first quarter, in large measure due to a $120 million charge related to the sale of correspondent home equity loans.The charge included the establishment of a repurchase reserve. Mortgage banking lost $7.6 million in the fourth quarter of 2006, but had a gain of $13.0 million in the first quarter of that year, Sovereign reported. Also included in mortgage banking revenues was a gain of $6.1 million related to the sale of $1.3 billion of multifamily loans. The after-tax effect of the charge was $76.4 million ($0.15 per share). Sovereign reported first-quarter net income of $48.1 million ($0.09 per share), substantially down from $141 million ($0.36 per share) a year earlier.

Delinquencies on mortgages supporting commercial mortgage-backed securities fell 1 basis point in March to 0.33%, but the recovery in the office sector may be slowing, according to a Fitch Ratings loan delinquency index.Office properties were the only major property type whose loans had a higher delinquent dollar balance as of March 31, said Patty Bach, a Fitch senior director. Fitch also cited a report by Torto Wheaton Research indicating that the U.S. office vacancy rate rose 10 basis points in the first quarter, to 12.6%. "While a 10-basis-point movement is not cause for alarm, it may indicate the recovery the office sector was enjoying is slowing, especially in suburban markets," Ms. Bach said. Fitch can be found online at http://www.fitchratings.com.

The average 30-year fixed mortgage rate fell from 6.22% to 6.17% for the seven-day period ended April 19, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate fell from 5.90% to 5.89%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages declined from 5.93% to 5.92%, and the average rate for one-year Treasury-indexed ARMs decreased from 5.47% to 5.45%, Freddie Mac reported. Fees and points averaged 0.5 of a point for fixed-rate mortgages, 0.6 of a point for hybrid ARMs, and 0.7 of a point for one-year ARMs. "Mortgage rates slipped following the latest reports of moderation in inflation rates from the core producer price and consumer price indexes," said Frank Nothaft, Freddie Mac's chief economist. "Excluding food and energy, the core inflation rate for consumer prices rose 2.5% year-over-year, the smallest annual growth rate since May 2006. This helped calm markets and brought mortgage rates down." A year ago, the average 30-year and 15-year fixed rates were 6.53% and 6.17%, respectively, and the average hybrid and one-year ARM rates were 6.16% and 5.63%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

The era of publicly traded real estate is not over, as some have speculated following the privatization of a number of real estate investment trusts, and the REIT structure is likely to gain more favor as it catches on worldwide, according to Sam Zell, chairman of Equity Group Investments.Speaking at an annual REIT symposium in New York sponsored by New York University's Real Estate Institute, Mr. Zell said he expects U.S. real estate markets to be positive for the rest of 2007. The first quarter of 2009 is when he expects any negative developments, considering that a new president will be in office (and new presidents "tend to take medicine early") and that it will be the tail end of a very strong period of recovery. He noted that he did not sell Equity Office Properties in a bid to cash in at the top of the cycle and to "get out before they bring in the troops." At two different panel sessions at the symposium, eight of 11 panelists indicated that they expect the wave of mergers and acquisitions in the REIT world to continue.

A partisan dispute over an affordable housing trust fund could slow passage of a Federal Housing Administration reform bill that many in Congress view as a way to help subprime borrowers get into safer and more affordable home loans.Rep. Judy Biggert, R-Ill., warned Democrats that she has "grave concerns" about the solvency of the FHA single-family program if excess FHA revenues are earmarked for a yet-to-be-created AH trust fund. "Removing the housing trust fund provision will allow us to work together on a bipartisan bill that can move expeditiously to the House floor," Rep. Biggert said. But Rep. Maxine Waters, D-Calif., warned that the FHA reform bill will not get out of the House Financial Services Committee without the affordable housing fund provision. The FHA bill, co-sponsored by Rep. Waters and the committee chairman, Rep. Barney Frank, D-Mass., does not create an AH trust fund -- that requires separate legislation that Rep. Frank plans to introduce later this year. It simply allows the future affordable housing trust fund to tap the FHA as a funding source.

Freddie Mac has announced that it will purchase $20 billion in fixed-rate and hybrid adjustable-rate mortgage products that will provide more options for lenders to offer subprime borrowers.The products, which are under development and slated to be introduced by midsummer, will limit payment shock by offering reduced adjustable-rate margins, longer fixed-rate terms, and longer reset periods, the government-sponsored enterprise said. The $20 billion commitment was made by Freddie Mac chairman and chief executive Richard F. Syron at the Homeownership Preservation Summit convened by Sen. Christopher J. Dodd, D-Conn., and attended by Sen. Richard Shelby, R-Ala. Mr. Syron said the pledge is intended "to assist families caught up in the subprime crisis and to make the market more stable and transparent for all borrowers." The commitment followed a recent announcement that Freddie Mac will stop buying subprime mortgages that have "a high likelihood of excessive payment shock" and of risking foreclosure. The GSE can be found online at http://www.freddiemac.com.

Class B-1 of Diversified Asset Securitization Holdings II LP has been downgraded from B/DR4 to CCC/DR4 by Fitch Ratings.The ratings on three other classes in the deal were affirmed. Fitch said DASH II is a collateralized debt obligation that was originated and managed by Asset Allocation & Management LLC, but that Western Asset Management Co. became the substitute asset manager for AAMCO in October 2002. The portfolio backing the CDO consists of residential and commercial mortgage-backed securities, asset-backed securities, and other CDOs.

A report from the Government Accountability Office has cited competition and pricing as areas of concern in the title insurance business.The report calls on the Department of Housing and Urban Development to "consider expanding the information in its homebuyer information booklet; evaluating the costs and benefits to consumers from [affiliated business arrangements]; clarifying regulations related to referral fees and ABAs; and enhancing the agency's coordination with state regulators." It also called on Congress to increase HUD's enforcement ability under the Real Estate Settlement Procedures Act to levy civil money penalties for Section 8 violations. In a letter (included in the report) written by Federal Housing Commissioner Brian Montgomery, HUD said amending RESPA would allow it to "protect consumers from unnecessarily high settlement charges caused by kickbacks and referral fees that tend to increase unnecessarily the costs of title insurance and other settlement services." The report was done at the request of Rep. Spencer Bachus, R-Ala., the ranking member of the House Committee on Financial Services. Rep. Bachus said it showed that "the title industry could be improved through better oversight by state and federal regulators, as well as better education of consumers."

JPMorgan Chase & Co., New York, has reported net income from its mortgage banking operations of $84 million for the first quarter, up from $39 million a year earlier.The company said mortgage production revenue totaled $400 million in the first quarter, up $181 million from a year earlier, reflecting higher gain-on-sale income and "the reclassification of certain loan origination costs to expense (previously netted against revenue) due to the adoption of" Statement of Financial Accounting Standards 159. Mortgage originations totaled $34.1 billion, up 21% from those of a year earlier and 10% from those of the previous quarter. Overall, JPMorgan reported record net income of $4.8 billion ($1.34 per share) for the first quarter, up from $3.1 billion ($0.86 per share) a year earlier. The company can be found online at http://www.jpmorganchase.com.

Washington Mutual Inc.'s home loan segment incurred a net loss of $113 million in the first quarter as a result of weakness in the subprime mortgage market, the Seattle-based thrift has reported.The segment recorded net income of $52 million in the first quarter of 2006, WaMu said. The company said its first-quarter gain on sale included net losses of $164 million on sales of subprime mortgage loans and adjustments to reflect declines in market values of loans held for sale. WaMu decreased the value of its subprime mortgage residual portfolio by $88 million, ending the quarter with a balance of $105 million. Overall, WaMu reported net income of $784 million ($0.86 per share) for the first quarter, down from $985 million ($0.98 per share) a year earlier.

Washington Mutual Inc., Seattle, has announced a $2 billion assistance program designed to help homeowners with subprime mortgage loans avoid foreclosure.Under the program, WaMu subprime borrowers who remain current on their loans and expect payment increases may apply for new discounted fixed-rate loans or other mortgage products. Specialists will provide assistance to subprime customers who want to learn more about their options, which may include prime mortgage products, WaMu said. "We're reaching out to our subprime borrowers to help ensure they are in the best possible position to manage challenges posed by payment adjustments," said Kerry Killinger, WaMu's chairman and chief executive officer. "We want our customers to know what's ahead, to avoid surprises, and to understand the choices available to them." WaMu can be found online at http://www.wamu.com.

The Market Composite Index, an overall measure of mortgage applications, fell from 646.6 to 630.6 on a seasonally adjusted basis during the week ended April 13, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications decreased 2.2% on the week but were up 9.9% from the level recorded a year earlier. The Purchase Index fell from 413.8 to 396.5 on a seasonally adjusted basis, while the Refinance Index fell from 2015.0 to 2008.4. Refinancings represented 43.6% of total applications, up from 42.8% the previous week, while adjustable-rate mortgages accounted for 18.1%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages rose from 6.16% to 6.22%, and points (including the origination fee) fell from 1.39 to 1.22 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

The General Electric-owned WMC Mortgage -- the nation's fourth-largest subprime lender -- funded $3.4 billion in residential mortgages in the first quarter, a stunning 50% decline from its funding level in the same quarter last year.A company spokeswoman confirmed the production number to MortgageWire. Last month WMC slashed its work force by 20% -- about 460 workers -- as it moves to restructure amid a major shakeout in the subprime sector. It has also stopped funding 80/20 loans, once a hot product for the firm.

Credit Suisse has agreed to buy nonprime wholesale residential lender Lime Financial Services, Lake Oswego, Ore.The terms of the deal, which is contingent on being able to obtain necessary state regulatory approvals, were not disclosed. Credit Suisse said it hopes to close the transaction this summer. Lime's senior management team and its sales and marketing teams will be joining Credit Suisse.

A Federal Deposit Insurance Corp. summit may have found a way to restructure adjustable-rate 2/28s mortgages in subprime securitizations and prevent foreclosures, according to FDIC Chairman Sheila Bair.She told a congressional panel that one way to restructure or modify these loans is to continue with the starter rate on the ARM. This approach was discussed at the April 16 summit with lenders, securitizers, and servicers, where it was learned that MBS investors really don't have a realistic expectation of getting the higher reset rate. Investors will have to approve this approach, even though they will incur losses. But Ms. Bair pointed out that foreclosures would cause bigger losses. "I think they are willing to do that," she told reporters. One hurdle is an accounting interpretation that requires a securitized mortgage to be delinquent 30 days before it can be restructured. "I think that is a problem," the FDIC chairman said. She said she plans to discuss it with the Financial Accounting Standards Board.

The chairman of the Senate Banking Committee and the ranking Republican member on Wednesday ruled out any type of government bailout for delinquent subprime borrowers.At a news conference, Senate Banking Committee Chairman Christopher J. Dodd, D-Conn., said, "This problem can be solved without using" taxpayer money. Sen. Richard Shelby, R-Ala., said "I'd be unalterably opposed" to a government bailout. At the news conference, Freddie Mac chairman Richard Syron unveiled that government-sponsored enterprise's plans to provide $20 billion worth of assistance to delinquent subprime borrowers.

Feldman Mall Properties Inc., Great Neck, N.Y., has announced a $25 million credit agreement between its affiliate, Feldman Equities Operating Partnership, and Kimco Capital Corp.Feldman said the affiliate executed a promissory note providing for up to $25 million in loans that will be used for redeveloping mall assets, repaying debt, and general corporate purposes. The loans will bear an interest rate of 7%. The REIT can be found online at http://www.feldmanmall.com.

FICO scores are less significant as an early default indicator when other high-risk loan attributes, such as no income verification, are present, according to a Fitch Ratings report on defaults of subprime mortgages underlying residential mortgage-backed securities.The report says the normal lag between slowing home price appreciation and a rise in mortgage defaults has been shortened in the case of 2006 subprime mortgages by high borrower leverage and the widespread use of stated-income loan programs. "While FICO scores continue to be highly predictive measures of relative risk for loans with similar characteristics, FICO scores play a lesser role when additional risk layers are added," said Glenn Costello, managing director of RMBS at Fitch. "In the case of the 2006 vintage delinquencies, additional risk layers that are factoring into the sharply higher delinquencies include high combined loan-to-value ratios and stated-income loan programs, as borrowers with higher FICO scores tend to be highly levered." The rating agency can be found online at http://www.fitchratings.com.

Standard & Poor's has announced changes to the S&P MidCap 400 and SmallCap 600 indices involving real estate investment trusts.Cousins Properties Inc., a constituent of S&P's REIT Composite Index, will replace Longview Fibre Co. in the S&P MidCap 400 after the close of trading on a date to be announced. Cousins is an Atlanta-based REIT that owns, develops, and manages its own real estate portfolio. In addition, S&P REIT Composite constituent Tanger Factory Outlet Centers Inc., Greensboro, N.C., will replace United Surgical Partners International Inc. in the S&P SmallCap 600 after the close of trading on a date to be announced. Tanger is engaged in the acquisition, ownership, and operation of factory outlet shopping centers. S&P can be found online at http://www.standardandpoors.com.