Originations

Atlanta-based SouthStar Funding LLC has ceased mortgage lending operations, according to a statement posted on the nonconforming lender's website.A former company official told MortgageWire that senior management was let go on March 30 and that operations ceased April 2. An e-mail notice was sent to employees from president Kirk Smith, the source said. The company offered wholesale financing for the residential nonconforming mortgage market, offering subprime, alternative-A, interest-only, and payment-option adjustable-rate mortgages as well as home equity lines of credit. "SouthStar Funding, LLC sincerely regrets that it was necessary to cease its mortgage lending operations," the website statement says. "The recent unprecedented downturn and policy changes in the mortgage industry necessitated this action." Calls to the company's headquarters for comment went unanswered as of MortgageWire's deadline. SouthStar can be found online at http://www.southstar.com.

In other news from Impac, the company is cutting its dividend by 60% in the first quarter to $0.10 a share, but it also completed two securitizations totaling $2.2 billion in alt-A and commercial loans.The Irvine-based real estate investment trust also said "outstanding repurchase requests" at the end of the first quarter have been substantially reduced compared to year-end. In trading at midday on March 30, its shares were up 7% to $4.87.

Democrats and Republicans on the House Financial Services Committee have introduced competing bills to reform the Federal Housing Administration single-family program.These bills differ mainly on the pricing of mortgage insurance premiums. The reform bill introduced by Judy Biggert, R-Ill., H.R. 1752, is the same bill the House passed by a 415-7 vote last fall. It authorizes the agency to charge risk-based premiums, which the Bush Administration supports. "My bill will give low- and moderate-income borrowers a safer alternative to the kinds of subprime loans that quickly go south," Rep. Biggert said. The FHA bill introduced by Rep. Maxine Waters, D-Calif., and committee chairman Barney Frank, D-Mass., also is directed at offering borrowers a safer and more affordable alternative to subprime loans. However, the Democrats bill essentially keeps the current FHA premium structure in place so everyone pays the same premium. To cover higher losses associated with subprime lending, Rep, Frank recently said he wants to tap revenues generated by changes to the profitable FHA reverse mortgage program to subsidize single-family premiums.

H&R Block, Kansas City, Mo., said that "recent events in the subprime mortgage industry" are affecting its efforts to sell Option One Mortgage Corp., Irvine, Calif., the nation's seventh largest subprime funder. In a statement issued on March 30, Block said it remains in negotiations to sell OOMC but offered no further details. A spokesman declined to set a timetable on when it would next update the market. The subprime sector is in the midst of a correction brought on by lax underwriting and rising delinquencies. Over the past two months Wall St. firms have greatly reduced their bids for non-prime whole loans while strictly enforcing repurchase agreements. Meanwhile, OOMC is continuing to fund mortgages. The lender, according to Block, currently has $14.5 billion in warehouse lines with nine "major" lenders.

CIT Group, New York, is coming out with an initial public offering of common shares on Care Investment Trust, a real estate investment trust that will invest in healthcare-related mortgage debt and real estate.CIT Group has filed a registration statement on the offering, the pricing on which is not yet available, with the Securities and Exchange Commission. Care Investment Trust will provide financing to various healthcare-related ventures, and will be managed by CIT Healthcare, CIT Group reports. CIT Healthcare will fund its activities through the use of warehouse lines in the short term and by securitization through the collateralized debt obligation format longer term, according to the SEC filing. As well, permanent financing will be used to fund real estate.

Shelton, Conn., Clayton Holdings Inc., a provider of information-based analytics, consulting and outsourced services for capital markets firms, lending institutions, fixed income investors and loan servicers, will acquire Euro Risk Management Limited, Bristol, a credit and risk consultancy operating in the United Kingdom, Italy and Holland.Terms of the deal, which is expected to close in April, were not disclosed. Euro Risk Management provides services including underwriting, due diligence, outsourced quality control, credit policy reviews and operational consulting to capital markets firms and buyers of residential mortgages and other assets. The company, which was established in 1997, uses a variable workforce model to provide teams of experts that perform reviews. As a result of the deal, the company will be re-named Clayton Euro Risk Limited, and Tim Keast, chief executive officer of Euro Risk Management, will continue to lead the company as president. Clayton can be found on the Web at http://www.clayton.com.

W.J. Bradley Co. Merchant Partners has purchased SB Financial of Los Angeles, a mortgage brokerage firm that originated $650 million in mostly prime and alt-A loans last year.No purchase price was disclosed. Based in Denver, W.J. Bradley is a privately held venture capital firm. In the mortgage space it has been buying mostly brokerage firms for two years now. SBF is its 10th purchase. W.J. Bradley's president of mortgage banking is Mark Korell who once headed the nation's largest mortgage banking firm, Norwest Mortgage (now part of Wells Fargo Home Mortgage).

The Federal Deposit Insurance Corp and other regulators are looking for ways to help delinquent subprime borrowers avoid foreclosure and have invited Wall Street bond market officials to a forum on April 16 to help."We are inviting the participants in the subprime securitization market to join us in trying to come up with some constructive ideas," FDIC general counsel Sara Kelsey said. In taking an enforcement action against Fremont General Corp., FDIC directed the California subprime lender to develop a plan to work with its delinquent borrowers. "The goal is to restructure the loans so that the borrowers would be able to repay them," Ms. Kelsey said at a Women in Housing and Finance meeting.

Bank Atlantic Bancorp Inc., Ft. Lauderdale, a residential and commercial lender, has laid off 225 employees, or about 8% of its workforce.The cuts came earlier in the week. According to the Quarterly Data Report, the federally insured depository ranked 83rd among residential servicers in the fourth quarter. The staff reduction affected jobs at the bank's headquarters, branches, and call centers. The Florida residential real estate market -- particularly the condo market -- has been among the hardest hit in the current downturn.

The delinquency rate on home equity loans held by banks rose 13 basis points to 1.92% in the fourth quarter of last year, according to the American Bankers Association.However, delinquencies on other types of property secured consumer loans declined, according to the ABA. The delinquency rate on home equity lines of credit was steady at 0.57%, the lowest rate posted on any consumer credit category in the ABA survey. The mobile home delinquency rate improved to 2.82%, down from 3.24% in the third quarter. And the delinquency rate on property improvement loans fell to 1.29% in the fourth quarter, down from 1.68% in the third. James Chessen, the ABA's chief economist, said the rise in home equity delinquencies was not a surprise "given the weaknesses in the housing market."

Senator Chuck Schumer, D-N.Y., is drafting a predatory lending bill that would create suitability standards for mortgage lending and a national regulatory system for all mortgage brokers.Congress must respond to the "emerging crisis" in the subprime market," Sen. Schumer said. "When so many mortgage brokers are able to deceive our most vulnerable families into loans that they can never afford, without batting an eye -- the system is broken." The suitability standard will ensure mortgage lenders and brokers "never issue a loan that the borrower cannot afford," he said. The New York senator, who chairs the Senate Banking subcommittee on housing, said he will be introducing the bill "very shortly."

Ailing subprime giant New Century Financial Corp. -- which is expected to file for bankruptcy protection in the next week -- said it has voluntarily terminated its seller/servicer eligibility with Freddie Mac.However, according to a Freddie Mac spokeswoman, the Irvine, Calif.-based mortgage banker never sold a whole loan to the secondary market investor. "They did have a seller/servicer designation with us but we never bought a whole loan from them," she said. The spokeswoman noted, however, that Freddie may have bought a mortgage bond backed by loans funded by New Century.

The nation's central banker told elected officials on Wednesday that problems in the subprime mortgage market are "contained" and likely will not spill over to the overall economy.Testifying before a joint committee of Congress, Federal Reserve chairman Ben Bernanke cautioned, however, that the subprime meltdown does pose a risk, noting, "We will be watching it carefully." He added, "The ongoing tightening of lending standards, although an appropriate response, will reduce somewhat the effective demand for housing, and foreclosed properties will add to the inventory of unsold homes."

Fulton Financial Corp. of Pennsylvania said it will take a $5.5 million pretax charge in the first quarter because of early payment defaults on 80/20 stated-income loans it sold into the secondary market.The publicly traded depository said it has been asked to repurchase $22 million in 80/20 loans, all of which were funded last year. (The minimum Fair Isaac & Co. credit score on the product was 620.) Another $72 million in these loans are "subject to potential repurchase," it said in a statement. The bank suspended the loan program in February after having originated $247 million in such loans in 2006, and another $22 million this year. The loans were sold to secondary investors by FFC's affiliate, Resource Bank. The investors were not identified. FFC is based in Lancaster.

IBM has formed a new business unit that will specialize in mortgage origination services.IBM Lender Business Process Services Inc. "will enable mortgage lenders to replace the fixed costs associated with typical loan fulfillment operations with a variable cost framework," the company said. Services it will offer include loan application, underwriting, processing, vendor management, document preparation and loan closing, according to IBM.

The Market Composite Index, an overall measure of mortgage applications, slipped slightly from 672.1 to 671.0 on a seasonally adjusted basis during the week ended March 23, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications also slid 0.2% on the week but were up 16.6% from the level recorded a year earlier. The Purchase Index edged up from 410.6 to 411.1 on a seasonally adjusted basis, while the Refinance Index inched down to 2197.7 from 2208.6 the previous week. Refinancings represented 45.1% of total applications, down slightly from 45.3% the previous week, while adjustable-rate mortgages accounted for 20.2%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages slid slightly from 6.06% to 6.04%, and points (including the origination fee) edged up from 1.30 to 1.33 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

The U.S. attorney general has requested documents "generally relating" to builder Beazer Homes' mortgage business, the company said. "At this time, there have been no allegations of wrongdoing," Beazer said. "We are fully cooperating with this request and the U.S. attorney's office," the company added. Beazer said it believes the request "was fueled" by information published in the Charlotte Observer and BusinessWeek indicating that there is a federal investigation of the company in connection with alleged mortgage fraud. However, the company said that, based on its internal investigations to date, it has found "no evidence to support the allegations in these articles."

The Center for Responsible Lending said high foreclosure rates on subprime loans have resulted in a net loss of homeownership since 1998, directly contradicting claims by the mortgage industry about the benefits of subprime lending.Considering only 9% of subprime loans go to first-time homebuyers and projected foreclosure rates, "we see a net loss of homeownership every year since 1998 totaling almost 1 million families," CRL president Michael Calhoun told a House panel. Last year, an estimated 354,172 FT homebuyers used subprime loans, but the consumer group projects 624,631 subprime loans originated in 2006 will eventually end up in foreclosure -- resulting in a net loss of homeownership to 270,459 families. The Mortgage Bankers Association argues that CRL "invented" a set of assumptions and combined it with a worst-case scenario. "A more honest analysis, even using pessimistic numbers, would show that 85%-90% of subprime borrowers are ultimately successful on their loan," MBA said in a response to Mr. Calhoun's testimony.

Commercial Defeasance, a Charlotte, N.C.-based company that helps manage the process of defeasing commercial mortgage-backed securities loans, is opening a new office in Los Angeles next month.Matt Rothman, vice president of sales, will manage the new office, according to the company. Defeasance is a process whereby a portfolio of government securities replaces real estate as the collateral for a mortgage loan. Redemption of principal and interest from the securities pays all remaining debt service, so the note technically remains in place but is repaid from the securities purchased.

American Brokers Conduit, the wholesale division of American Home Mortgage Investment Corp., has named Carl Cody branch manager in Dallas.In his new role as branch manager, Mr. Cody is responsible for overseeing and directing all branch activities for the Dallas, Oklahoma, Arkansas, Kansas and Missouri markets. Prior to joining ABC, he was vice president, regional sales manager with LoanCity.