Originations

Craig S. Phillips, former global head of securitized products for Morgan Stanley, has announced the founding of Ptarmigan Capital LLC, an alternative asset management firm with offices in Stamford, Conn., and Bangalore, India.The firm said it plans to focus on real-estate-related investments, including private equity real estate investments in India and opportunistic investments in the U.S. residential markets. Mr. Phillips, who will serve as chairman and chief executive of Ptarmigan, has been involved in the global asset-based finance markets for over 30 years. He served as a managing director of Morgan Stanley, where he started the company's franchise in commercial mortgage-backed securities underwriting when he joined the firm in 1994. Ptarmigan also announced that RVS Rao is joining the company as chairman of Ptarmigan Capital Investment Advisors Private Limited, the firm's real estate investment management arm, based in Bangalore. Mr. Rao previously served as executive director and member of the board of the Housing Development Finance Corp., India's largest mortgage bank.

The House GSE bill would raise the conforming loan limit in seven high-cost metropolitan areas, but not in Massachusetts, the home state of the bill’s chief architect and sponsor, Rep. Barney Frank.The House Financial Services Committee chairman's bill would allow Fannie and Freddie to purchase loans in four metropolitan statistical areas in California and multistate areas surrounding New York and Washington where the median sales price exceeds the conforming-loan limit. However, the median sales price in the Boston-Cambridge-Quincy MSA was $406,000 in the fourth quarter, according to National Association of Realtors data, slightly below the current $417,000 conforming-loan limit. The government-sponsored enterprise reform bill (H.R. 1427) caps the loan limit in high-cost areas at 150% of the conforming-loan limit. The Realtors support "regional adjustments to the conforming loan," NAR president Thomas Stevens told committee members at a March 12 hearing. But the Mortgage Bankers Association and America's Community Bankers oppose an increase. "Jumbo loan borrowers are well served by the private sector," MBA chairman John Robbins testified.

Congress may have to act quickly to protect subprime borrowers who are in danger of losing their homes over the next 18 months, according to Senate Banking Committee Chairman Christopher J. Dodd, D-Conn."We may need to get some forbearance or something like that to give them a chance to work through their problems," Sen. Dodd told reporters after speaking to the National League of Cities. "Clearly we are looking at what we can do to help out." Before deciding whether predatory lending legislation is needed, the committee chairman told reporters he wants to see how the subprime securities market behaves and what actions federal and state regulators take to correct underwriting standards on subprime loans. If the regulators finally do a "good job" and the market is "working well," that may be enough, Sen. Dodd said.

The best way to "cure" the serious problems in the subprime market is to pass Federal Housing Administration reform legislation that will allow lower-income homebuyers to get safer and affordable loans, HUD Secretary Alfonso Jackson has told a congressional panel."All you have to do is read the news articles to recognize that New Century and others created serious problems in the subprime market," the secretary of the Department of Housing and Urban Development testified. The FHA single-family reform bill would give the agency more flexibility in setting mortgage insurance premiums and downpayment requirements so it can serve more subprime borrowers. "I am convinced that is the best way to save" those homeowners, Secretary Jackson said. The HUD secretary also told the House panel that discussions with industry groups could soon lead to a consensus on reform of the Real Estate Settlement Procedures Act. "I think we are pretty close," he said.

Mortgage Bankers Association chairman John Robbins has told an industry conference that predatory lending is the biggest and most challenging issue he has faced, but he also accused certain consumer groups of hyping potential foreclosure numbers.At the Regional Conference of Mortgage Bankers Associations in Atlantic City, N.J., Mr. Robbins specifically addressed the Center for Responsible Lending's claim of 2 million foreclosures from subprime loans. He said the largest loss in the modern history of foreclosures was in 2000, but that current foreclosures are less than half that number. Furthermore, 50% of loans using loss mitigation techniques do not enter the foreclosure process. Approximately 86% of subprime borrowers are current on their mortgages, he said. Mr. Robbins also attacked Freddie Mac's plan to require 2/28 and 3/27 loans that it purchases to be underwritten to the fully indexed rate. He said this would create a disparity in the marketplace, and would hit those who need credit the most, especially the borrowers of $1.1 trillion in adjustable-rate mortgages that are set to reset this year. Some of these borrowers will not be able to get out of the products, he said.

Residential Capital Corp., which houses the GMAC-related mortgage units, posted a $651 million operating loss in the fourth quarter due to higher delinquencies and loss severities on subprime loans.For the full year, ResCap earned $182 million, an 81% decline from its profit level in 2005. However, General Motors Acceptance Corp., which includes ResCap, earned $2.1 billion last year, a modest 9% decline from that of 2005. (Approximately $791 million of the $2.1 billion represents a one-time tax benefit.) In a statement, GMAC chief executive Eric Feldstein said, "The sharp downturn in the U.S. mortgage market in the fourth quarter posed enormous challenges for the industry as a whole -- origination volume was down, margins narrowed, delinquencies rose, and pressure on home prices intensified." According to the Quarterly Data Report, GMAC ranks 10th among subprime funders. GMAC-RFC is a major warehouse lender to subprime firms. In November, hedge fund Cerberus Capital bought 51% of GMAC.

H&R Block says it has reduced by $29.2 million the carrying value of "residual interests" in its Option One Mortgage Corp. unit due to "volatility in the mortgage market."The tax services giant said it will provide an update on Option One's sale by the end of the month. The announcement came late Tuesday. Because of the hit on Option One, Block restated its fiscal third-quarter earnings downward by $15.5 million (after tax), resulting in a $60.3 million loss in the period. The Irvine, Calif.-based Option One lost $69.7 million in its most recent quarter (ending Jan. 31), reflecting a large increase in loan-loss reserves. Option One's earnings are reported as part of H&R Block's. According to the Quarterly Data Report, Option One ranked seventh among subprime funders in the fourth quarter, originating $6 billion, a 38% decline from the volume in the fourth quarter of 2005.

Some 700,000 homes funded by subprime mortgages could return to the market in 2008 and 2009, according to an upcoming report by Lehman Brothers.Lehman economist Michelle Meyer told MortgageWire that many of the homes in question were purchased in 2005 and 2006 using stated-income, 80/20 loan combinations and no-money-down subprime mortgages. She could not offer a geographic breakdown, but said her impression is that many of the homes are in California, Florida, and Michigan. Currently, some 4 million homes are on the market. Lehman said it expects the subprime crisis to return 300,000 homes to the market in 2008 and 400,000 in 2009. She expects "fewer" to return this year. The Lehman report will be released March 16.

The Friedman, Billings, Ramsey Group investment banking firm is considering "strategic alternatives" for its subprime mortgage division, First NLC Financial Services, Deerfield Beach, Fla., the nation's 17th-largest subprime funder."Strategic alternative" is a phrase commonly used to suggest a company is for sale. In a statement, FBR said "there can be no assurances that any particular strategic alternative will be pursued or that any transaction will occur, or on what terms." If FBR sells First NLC, it will be the first Wall Street firm to exit the subprime industry amid the current carnage. First NLC, the investment banker said, has "more than sufficient liquidity." FBR can be found on the Web at http://www.fbr.com.

Host Hotels & Resorts, a Bethesda, Md.-based hotel real estate investment trust, is being added to the S&P 500 index, Standard & Poor's reports.The REIT will be added to the index on a future date, which is to be announced later. Managers of S&P 500-based index funds, which maintain stock holdings tied to the composition of the S&P 500, will have to add the REIT to their holdings, which is likely to generate additional demand for the Host Hotels stock.

OceanFirst Financial Corp., Toms River, N.J., will revise earnings for 2006 because of early payment defaults at its subprime mortgage affiliate, Columbia Home Loans.On certain loans, Columbia was funding 100% of the purchase price to subprime borrowers. The Jersey shore, where OFFC funds mortgages, has experienced incredible home price appreciation the past few years. In a statement issued Monday, the federally chartered savings bank said it is evaluating how much in reserves it should set aside for EPDs. As MortgageWire went to press, no dollar amount had been mentioned. In trading, its stock fell 5% on Monday.

The New York Stock Exchange has informed ECC Capital Corp., a real estate investment trust headquartered in Irvine, Calif., that trading in the company's common stock will be suspended and the exchange will take action to delist it prior to the market's opening on March 15.On March 1, NYSE warned ECC that it had fallen below the exchange's continued listing standard related to minimum share price. NYSE requires firms to have a minimum average closing price of $1 per share during a 30-day period. ECC said it was in contact with NYSE Regulation Inc. (the Big Board's regulatory unit) regarding the noncompliance issue but was unsuccessful in its efforts to avoid suspension and delisting. ECC Capital is considering appealing the latest ruling. When the stock is suspended, ECC Capital expects it to be quoted on the OTC Bulletin Board. ECC sold its mortgage production unit in February and now exists as the holder of a portfolio of mortgage investments.

The New York Stock Exchange on Tuesday halted trading in the common and preferred stock of ailing subprime giant, New Century Financial Corp., Irvine, Calif. Investment banking sources told MortgageWire that they expect the lender to file for bankruptcy protection shortly. The non-depository REIT is the subject of a criminal probe into its accounting and recently disclosed that the Securities and Exchange Commission is now investigating the company. Late last week most of its warehouse lenders stopped financing the company. It has $40 billion in servicing rights on its books.

Countrywide Financial Corp., the nation's eighth largest subprime table-funder, has cut 108 jobs in its wholesale subprime division, citing a need to align the lender's "workforce with the recent changes in the mortgage market."The company declined to comment further and would not disclose how many of the jobs eliminated belong to account executives. Last week the Calabasas-based Countrywide disclosed that 19% of its $119 billion subprime servicing portfolio was in some stage of delinquency. According to the Quarterly Data Report, CFC ranks first among all subprime servicers, and third among lenders.

Accredited Home Lenders, the nation's 12th largest subprime funder, said it has been hit with millions of dollars in margin calls and is now exploring "various strategic options."As MortgageWire went to press, its stock had been decimated on the news, plummeting 54% to a new 52-week low: $5.19. Its 52-week high is $60. In a statement, the San Diego-based non-depository said it has paid $190 million in margin calls since January to satisfy its warehouse lenders. Meanwhile, the company also is seeking waivers on its warehouse covenants. "There can be no assurance that the company will be successful in receiving any of the acquired waivers," says an Accredited statement. The lender is now in the process of cutting costs and laying off workers. Among subprime servicers, it ranks 23rd, according to the Quarterly Data Report.

At the end of 2006, the percentage of home loans that were at least 30 days overdue rose to 4.95%, up from 4.67% at the end of the third quarter, according to the Mortgage Bankers Association's quarterly delinquency survey.The foreclosure rate also rose by 14 basis points, with 1.19% of all loans outstanding being at some point in the foreclosure process. The number of loans entering the foreclosure process rose to a record high of 0.54%, up eight basis points from the third quarter. Delinquencies rose across the board, but the steepest rise in late payments was seen in the subprime and FHA loan categories. The FHA delinquency rate reached a record high in the fourth quarter of 13.46%, up from 12.80% in the third quarter, and 13.33% of subprime loans were overdue, up from 12.56%. In addition, the MBA said that the delinquency rate on subprime adjustable-rate mortgages jumped by 122 basis points to 14.44%. MBA chief economist Doug Duncan said that given the MBA's forecast of "below-trend economic growth and a slowly recovering housing market," the MBA expects delinquency and foreclosure rates to level off toward the end of 2007.

BayNorth Capital has closed a commercial real estate investment fund with over $472 million in funding and expects to invest in more than $1.7 billion of real estate nationwide over a four-year period.The investors include endowments, pension funds, banks and family trusts, the Boston-based real estate investment company reported. BayNorth invests in equity or mezzanine debt, sometimes in joint venture with others. Investments, ranging between $15 million and $50 million per transaction, will include office, residential, hotel, industrial, self-storage, and retail properties. Chip Douglas and Charles F. Wu are the co-founders of BayNorth, which was previously the Real Estate Group of Charlesbank Capital Partners.

Moody's Investors Service has placed on review for possible downgrade two classes of certificates from two subprime/home equity Aegis mortgage securitizations, one from a deal issued in 2003 and another from a deal issued in 2004.Specifically, the tranches being reviewed are class B of Aegis Asset Backed Securities Trust 2003-2, which currently has a Baa2 rating; and class B3 of Aegis Asset Backed Securities Trust 2004-1, which currently has a Baa3 rating. "Credit enhancement available to the two Aegis deals has declined due to losses and stepdown, and is expected to decline further due to continued losses," Moody's said. Both deals are backed by subprime credit fixed and adjustable rate collateral, as well as small percentages of second lien mortgages, according to the rating agency.

Nonprime loan fundings at Countrywide Financial Corp., Calabasas, Calif., totaled $2.6 billion in February 2007, down from $2.8 billion in February 2006.Home equity loan fundings fell 13% to $3.0 billion from $3.4 billion the year before. Countrywide funded $2.4 billion in pay-option loans during February, down from $6.0 billion the year before. The company said the above categories were not mutually exclusive. Overall, it produced $35 billion for the month, up from $31 billion in February 2006. Originations for home purchases declined to $12.6 billion from $13.6 billion the year before, while "non-purchase" originations increased to $22 billion from $17.7 billion in the same time frame. David Sambol, Countrywide president and chief executive, said, "In response to market factors, management has implemented changes to our origination policies to mitigate future exposure including further tightening of underwriting guidelines. Nonprime fundings were only 7% of total mortgage loan fundings in February and recent nonprime application volumes have declined as a result of our recent policy changes." He added because of the issues in the subprime market, Countrywide might experience short-term earnings volatility. Investors punished the company's stock, driving it down $0.99 in one day as of 12:22 p.m.

The General Electric-owned WMC Mortgage, the nation's fourth largest subprime lender, confirmed that it has trimmed staff by 20% -- about 460 workers -- as it moves to restructure amid a major shakeout in the subprime sector.The cuts were revealed late Friday, a few days after National Mortgage News reported that layoffs were in the works at the wholesaler. Sources also told NMN that WMC has been trying to sell delinquent second liens in the secondary market, but has not liked the bids. The Burbank, Calif.-based company has not returned several telephone calls made to it by NMN and MortgageWire.