Originations

Moody's Investors Service has downgraded two certificates from a subprime mortgage transaction issued by Structured Asset Securities Corp., series 2005-AR1.Class B1 has been downgraded from Baa3 to Ba1 and class B2 has been downgraded from Ba1 to B1. "The two most subordinate certificates from the transaction have been downgraded because existing credit enhancement levels are low given the current projected losses on the underlying pools. The pools of mortgages have built up a large delinquency pipeline and future loss could cause a significant erosion of the overcollateralization," Moody's said. The transaction consists of first-lien adjustable- and fixed-rate loans originated primarily by wholesaler Argent Mortgage Co. LLC, according to the rating agency. In addition, Argent's retail affiliate Ameriquest Mortgage Co. originated loans comprising 4% of the pool.

Genworth Financial, Richmond, Va., has teamed up with a professor at the University of Pennsylvania's Wharton School of Economics to create the U.S. Mortgage Index, a quarterly report to look at trends in residential real estate financing.The author of the report, Susan M. Wachter, said consumers and mortgage professionals "should take a look at more traditional financing tools" in the current market environment. The first report compares monthly payments for five popular low downpayment products. In her study, the pay-option adjustable-rate mortgage has the lowest first month payment, but the highest payment in month 61. The piggyback product and the 10/1 interest-only ARM also have higher payments, while the 30-year fixed-rate mortgage with single premium mortgage insurance stays level and the 30-year FRM with monthly MI has a lower payment. Genworth is the parent of a Raleigh, N.C.-based private mortgage insurer. "It's troubling that short term, adjustable-rate mortgages remain popular, even for borrowers who might not be able to afford their mortgage payment after the interest rate adjusts. This includes piggyback loans and other mortgages that lead to little equity build up," Ms. Wachter said. "With little or no equity available, refinancing has become difficult, and foreclosures are up nationwide." The report is available at http://www.genworth.com/mortgageinfo.

Standard & Poor's/Case-Shiller housing price indices dipped into negative territory in January for the first time as prices in 11 of 20 cities posted negative annual returns.Single-family house prices fell to a negative 0.2% annual return in January, according to the S&P Case-Shiller HPI, down dramatically from a 14.7% annual return in January 2006. The annual decline is a "good indicator of the dire state of the U.S. residential real state market," said Robert Shiller, chief economist at MacroMarkets LLC. Detroit and Boston led the declines with negative annual returns of 6.9% and 5.6%, respectively. Charlotte is the only metro area that showed a price increase between December and January.

Eight classes from four First Franklin Financial Corp. residential mortgage-backed security transactions have been downgraded by Fitch Ratings.The downgrades were as follows: series 2001-FF2, class M-1, from AA to A, class M-2, from BBB-minus to BB, and class M-3, from BB-minus to B; series 2002-FF2, class M-2, from BBB-minus to BB-plus; series 2003-FF2, classes M-4-A and M-4-F, from BBB-plus to BBB; and series 2003-FF3, class M-4, from BBB-plus to BBB-minus, and class B, from BBB to BBB-minus. In addition, 12 classes from six deals were placed on Rating Watch Negative, and the ratings on over 200 classes from more than 20 deals were affirmed. The downgrades were attributed chiefly to "negative trends" in the relationship between delinquency and credit enhancement. The collateral for the transactions consists of subprime mortgage loans secured by first liens on residential properties. Fitch can be found online at http://www.fitchratings.com.

Nine classes from four First Franklin Financial Corp. residential mortgage-backed security transactions have been downgraded by Fitch Ratings.The downgrades were as follows: series 2004-FFH1, class M-7, from BBB-plus to BB-plus, class M-8, from BB to B-plus, and class M-9, from BB-minus to C/DR4; series 2004-FFH2, class B-1, from BB-plus to B-plus, and class B-2, from BB to CC/DR2; series 2004-FFH3, class M-9, from BBB-minus to BB-minus, and class B-1, from BB-plus to B-plus; and series 2004-FFH4, class M-11, from BBB-minus to BB-minus, and class B-1, from BB to B-plus. In addition, six classes from the same four deals were placed on Rating Watch Negative, and the ratings on nearly 100 classes from eight deals were affirmed. The downgrades were attributed primarily to losses that have exceeded excess spread for at least seven of the past nine months, eroding the over-collateralization. The collateral for the transactions consists of subprime mortgage loans secured by first liens on residential properties.

EverBank, Jacksonville, Fla., has purchased the Bank of New York's interest in BNY Mortgage Company.EverBank said it will reposition BNYMC to focus exclusively on growing its reverse mortgage business nationwide. Originally a joint venture between EverBank and The Bank of New York, BNYMC is shifting to focus on the origination of retail reverse mortgages, along with wholesale, correspondent and private label reverse mortgage services, the company said. EverBank is a private financial services company with approximately $4.2 billion in assets and 1,500 employees.

New home sales fell to a seasonally adjusted annual rate of 848,000 units in February, the weakest reading in seven years, according to newly released government figures.Further casting a pall on the spring home buying season, there is now an 8.1 month supply of new homes on the market, a 26% spike from the same month last year. New home sales fell 3.9% compared to the previous month, but declined 18.3% compared to February of last year. The largest sequential decline came in the Northeast and West, which fell 26.8% and 24.6%, respectively. "Based on all of the proxies we look at and the anecdotal information from industry contacts, we believe that the recent weakness is mostly weather, but there will be no definitive answer to this question for at least a month," writes RBS Greenwich Capital analyst Stephen Stanley. "In the meantime, it is a safe bet that many tubs of ink will be spilled debating this point." The Census Bureau and the Department of Housing and Urban Development compile the new home sales figures.

National Retail Properties Inc., a real estate investment trust based in Orlando, Fla., has priced a public offering of 5.0 million shares of common stock at $24.70 per share.The underwriters were granted an option to buy up to 750,000 additional shares to cover any overallotments. Citigroup Corporate and Investment Banking was the sole book-running manager for the offering. National Retail Properties, which focuses primarily on properties subject to long-term net leases, can be found online at http://www.nnnreit.com.

Joe DeMarkey, director of corporate development at BNY Mortgage Co., and Bart Johnson, president of Financial Freedom, have been elected co-chairs of the National Reverse Mortgage Lenders Association.The pair succeed Sarah Hulbert of BNY and Jim Mahoney of Financial Freedom, who have served as co-chairs for the past three years. BNY is a leading producer of federally insured reverse mortgages based in Renton, Wash., and Financial Freedom, a subsidiary of IndyMac Bank FSB, is the largest producer and servicer of reverse mortgages in the United States, NRMLA reported. The association can be found online at http://www.reversemortgage.org.

Freddie Mac has disclosed that it held $124 billion of securities backed by subprime home loans at the end of last year, though virtually all were triple-A rated tranches from mortgage securities deals.That accounted for about 18% of Freddie Mac's $704 billion retained portfolio. In total, nonagency mortgage-backed securities accounted for $238 billion of the retained portfolio, consisting of both prime and subprime credits. Nearly all -- 96% -- of the nonagency mortgage securities were rated triple-A, Freddie Mac said. The government-sponsored enterprise said that by most measures, its credit risk exposure remains low. The guarantee portfolio had a loan-to-value ratio of 57% at the end of 2006. Fixed-rate loans constituted 82% of the company's guarantee portfolio. Freddie can be found online at http://www.freddiemac.com.

New Century Financial Corp., says it will realize a $46 million loss on a deal struck with Barclays Bank PLC to settle $900 million in buyback/financing claims.In a filing with the Securities and Exchange Commission, New Century said it will be relieved of an obligation to repurchase $900 million in loans and Barclays will accept the mortgages "as is." However, if New Century strikes a similar deal with better terms with other warehouse providers/investors, the subprime lender will compensate Barclays by offering the London bank the same terms. As part of the deal, the Irvine-based New Century has agreed to transfer the servicing of the mortgages to a third party approved by Barclays. New Century, which is no longer funding loans, has been delisted by the New York Stock Exchange. Investment banking sources told MortgageWire that the company is working on a pre-packaged bankruptcy and sale agreement but is in the very early stages of negotiations. (See the March 26 issue of National Mortgage News for more details.)

Hammered by the meltdown in the subprime sector, the General Electric-owned WMC Mortgage slashed 500 jobs -- including most of its junior account executive sales force -- on March 22 while its president testified before the Senate Banking Committee.A WMC spokeswoman confirmed that layoffs had occurred March 22 but would not provide a head count or job type. The jobs cuts were reported to MortgageWire by industry sources. A few weeks ago WMC laid off 460. One former employee told MW that president and chief executive Laurent Bossard said in a recent sales call with account executives that he wished the company would not receive any loan files for 90 days because Wall Street firms are not buying product. The former employee, requesting anonymity, was recently laid off. The WMC spokeswoman said she would not comment on what she called "second-hand information." The former employee also said WMC is now relying on financing from a GE unit. The spokeswoman declined to comment. Mr. Bossard testified before the Senate Banking Committee on conditions in the subprime market. (See the March 26 issue of National Mortgage News for complete details.)

Existing single-family home sales rose to 5.88 million units in February, the best reading in 10 months, according to figures compiled by the National Association of Realtors.Compared with the level recorded in January, home sales rose 3.7%, but they declined 3.4% compared with those of February 2006. RBS Greenwich Capital strategist Omair Sharif said, "We would caution against reading too much into the data, because similar to the January advance, it seems that the weather boosted the headline figure last month." NAR chief economist David Lereah called the gain a surprise, but noted that "fundamentals have improved in the housing market and buyers see a window now with historically low mortgage interest rates and competitive pricing by sellers." Condominium and cooperative sales rose 5.3% to 810,000 units, but declined 5.2% compared with those of February 2006, the NAR found. The condo/co-op figures are exclusive of the single-family numbers. The NAR can be found online at http://www.realtor.org.

SL Green Realty Corp., New York, has announced that its subsidiary, SL Green Operating Partnership LP, has priced an offering of $750 million of exchangeable senior notes.SL Green Realty, a real estate investment trust, said the 20-year 3.00% notes will have an initial exchange rate that represents a 25% premium to the last reported sale price of the company's common stock on March 20. The estimated $736 million net proceeds of the offering, which was upsized from $500 million, will be used to repay debt, invest in additional properties, and make open-market purchases of the company's common stock, as well as for general corporate purposes, the office REIT said. SL Green can be found online at http://www.slgreen.com.

A nationwide Zogby poll commissioned by a coalition of advocacy groups has found that nearly 70% of Americans would be more likely to vote for a presidential candidate in 2008 "who articulated his or her detailed plan for providing affordable housing."Nearly 75% of those polled said a presidential candidate's stand on "how to provide more affordable housing" is important in determining whom they would vote for. Moreover, over 50% of the respondents believe the current national policy on affordable housing is on the wrong track. Findings confirm concerns about an affordable housing crisis that housing experts have been warning about in recent years. The Mortgage Bankers Association stressed that despite an unprecedented national homeownership rate of 69%, "Affordable housing in quality communities is becoming more and more difficult to find." The poll was part of a nationwide affordable housing awareness campaign, entitled "Housing America 2007," spearheaded by the National Association of Housing and Redevelopment Officials.

BCSB Bankcorp Inc., Baltimore, is restructuring its balance sheet by selling part of its investment portfolio (including mortgage-backed securities) and paying off Federal Home Loan Bank advances.The company is selling $180 million of MBS and investment securities, which had an average yield of 3.51%. Most of the proceeds will be used to prepay $104 million in FHLBank advances, which have an average cost of 4.97%, the company said. The rest of the proceeds will be invested in FHLBank-Atlanta overnight deposits and will be used to fund certificate-of-deposit accounts that will close in the future. Baltimore County Savings Bank FSB is reducing the use of CDs as a funding source. The company also plans to sell $73.9 million of mutual funds and fixed-rate single-family mortgages that have an average yield of 5.11%. BCSB said it will use three-quarters of the proceeds to purchase investment securities with an expected yield of 5.55%, and use the rest to originate commercial mortgage loans. The holding company will take a $4.8 million after-tax charge to income in the current quarter as a result of the restructuring.

The average 30-year fixed mortgage rate rose from 6.14% to 6.16% for the seven-day period ended March 22, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate rose from 5.88% to 5.90%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages climbed from 5.90% to 5.91%, and the average rate for one-year Treasury-indexed ARMs decreased from 5.42% to 5.40%, Freddie Mac reported. Fees and points averaged 0.4 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 were stable this week as the bond market took readings on producer prices and consumer prices in stride," said Frank Nothaft, Freddie Mac's chief economist. "Excluding food and energy, core inflation at the wholesale level was up more than had been anticipated in February, but at the retail level the increase was in line with expectations." A year ago, the average 30-year and 15-year fixed rates were 6.32% and 5.97%, respectively, and the average hybrid and one-year ARM rates were 5.96% and 5.41%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

Nearly three-quarters of Washington-area real estate agents in a recent online survey said the availability of subprime mortgages and tighter standards for alternative-A loans have hurt their ability to get homes under contract, according to City Influence, a market research firm.In addition to the 73% who responded affirmatively on this question, 60% said their clients are having difficulty qualifying for the loan they need to buy a home, the Washington-based firm reported. "I think this raises a number of questions about the longer-term impact of mortgage availability on the velocity of sales in the market," said Kim Hoover, president of City Influence. "We know that a significant portion of buyers who were able to enter the homeownership category over the last decade took advantage of more flexible lending standards. The question is, if that group is unable to buy a home going forward, how much of a ripple effect will that have up the chain?" The firm, which specializes in urban real estate, can be found online at http://www.cityinfluence-dc.com.

Increased litigation is likely in the subprime mortgage arena, according to the head of the mortgage and lending litigation practice of Stradley Ronon Stevens & Young LLP, Philadelphia.Stradley Ronon cited a recent finding in a Credit Suisse report that nearly 25% of subprime mortgage deals issued last year had a delinquency rate of at least 8% as of December. "With rising default rates among subprime borrowers, lenders will be faced with the potential for increased litigation and an [increasingly] hostile regulatory environment," said Andrew K. Stutzman, the law firm's mortgage and lending litigation chair. "I think borrowers will look for any avenue they can to avoid bankruptcy or foreclosure, and some will choose litigation as a way to keep their house and credit intact. As I see it, mortgage companies will not sit idly by and settle these suits, but will defend them vigorously."

The Connecticut Department of Labor has confirmed that it has applied for an arrest warrant for the former president of Mortgage Lenders Network, Mitch Heffernan.The agency would like Mr. Heffernan -- who founded the now-defunct subprime lender -- to be charged with 61 counts of failing to pay wages to employees of MLN, which filed for bankruptcy protection last month. Although the warrant was placed about 10 days ago, the labor department has yet to hear from authorities on whether the warrant was obtained, said Gary Pechie, director of the department's wage and workplace division. "Prosecutors are very sensitive about this stuff," he said. "We don't call them, they call us. We're all just waiting now." The department expects to hear an update within the next few days, he said. Mr. Heffernan could not be reached for comment. MLN closed its wholesale division in late December. Some former MLN account executives have complained that they were not paid commissions owed to them.