Repurchase Shield
Blaise Dietz, a co-president and chief executive of Creative Mortgage Lending, says the Southfield, Mich., subprime lender has structured its agreements with loan buyers to protect itself from the repurchase requests that have felled so many others, including ResMae Mortgage Corp. (Story here.)

Creative agreed to accept a margin that was 50 basis points less than what competitors were getting for their loans, Mr. Dietz said. In return, his company is off the hook for any early-payment defaults — even first-payment ones.

"This is the financial day of reckoning, and it's not because the institutions are being unfair," Mr. Dietz said. "Who wants to invest in defaulted mortgage notes?"

West Coast Deal
TMSF Holdings Inc., the Los Angeles parent company of Mortgage Store Financial Inc. that wants to expand nationwide, has agreed to acquire the wholesale assets of Central Pacific Mortgage, a Folsom, Calif., originator.

TMSF did not say how much it would pay for Central Pacific's six wholesale branches in the West and the 80 employees who work in them.

Central Pacific, which has more than 70 retail locations, lacked the operating capital to support its wholesale business, TMSF said.

Daniel Rood, the chief financial officer of TMSF, said Central Pacific would "fit in nicely" with his company's infrastructure and "basically doubles" its "production without a corresponding increase in expense." TMSF said it would not assume any repurchase obligations.

The deal, announced Wednesday, is expected to close by March 1.

Mortgage Store has six wholesale branches and is licensed in 45 states.

Clouded Horizon
Accredited Home Lenders Holding Co. said Wednesday that it would not issue earnings guidance for 2007 because there are so many uncertainties in the subprime mortgage business.

Accredited posted a fourth-quarter net loss of $37.8 million, or $1.49 a share, compared with a profit of $155.4 million, or $7.07 a share, a year earlier. It blamed lower gain-on-sale premiums on the loans it sold as well as higher repurchase provisions and lower spreads.

On a conference call with investors, the San Diego company's chairman and chief executive, James Konrath, said the fourth quarter and the weeks following it "brought significant change to Accredited" and its competitors as buybacks on loans increased and credit deteriorated.

Accredited's results were further hurt by the integration of Aames Investment Corp., a Los Angeles lender it purchased for $235 million in October.

"We spent much of the quarter completing the integration of Aames' retail business … which negatively affected key profitability drivers such as volume, costs, and premiums," Mr. Konrath said in a press release.

On the call, he said the integration accounted for about half of the quarterly loss, but he said Accredited was "pleased with the merger and the larger retail franchise" it now has.

Its cost to originate loans increased by 50 basis points, to 1.85%, from a year earlier because of lower volumes and the Aames integration. Operating expenses likewise increased by 51%, to $120.2 million, as a result of the merger.

Accredited said it added $42 million to its reserve balance during the quarter to cover rising delinquencies and buybacks.

Despite the "dissatisfying" results, Mr. Konrath said in the release that he remained optimistic because Accredited made a profit for the full year, "when a number of nonprime mortgage companies either posted losses or exited the business."

Away from Home
Most community bankers plan to scale back their home construction lending this year, but they remain bullish on their prospects for lending to commercial developers, a survey found.

With demand for single-family homes cooling, just 27% of respondents said they planned to equal or exceed the number of residential construction loans they made in 2006. In the previous survey, 37% predicted an increase in construction lending for the coming year.

Bankers were even less optimistic about multifamily lending, said America's Community Bankers, which conducted the survey in the fourth quarter. Eighteen percent of lenders said they expected multifamily volume to increase this year, down from 25% in the previous survey.

However, 85% said that this year they expected to match or top the amount of commercial real estate lending they did in 2006.

ACB sent out roughly 1,000 questionnaires and received responses from 215 banks and thrifts. Thirty-one of the respondents had assets of more than $1 billion. The trade group has conducted its real estate lending survey for 14 consecutive years.

Bankers also said that they made fewer adjustable-rate and interest-only mortgages in 2006. Fixed-rate loans accounted for 65% of loan production among banks surveyed, down from 58% in 2005. Interest-only loans made up just 2% of originations, down from 8%.

Banks are becoming slightly more comfortable using the Internet to originate loans. Forty percent said that they accepted mortgage applications online, up from 37% in the previous survey, while 18% said that they could render a decision online, up from 17%.

Debra Cope, senior vice president for publishing at ACB, told reporters Tuesday that she expected those numbers to continue to increase.

"We're moving toward half the industry accepting applications online — it's 40% now," she said. "Once it makes that tip — over 50% — then, I think you'll see it snowball."

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