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Jumbo Jitters
Keith Kantrowitz, the president of Wall Street Mortgage Bankers Ltd., a Lake Success, N.Y. jumbo lender that does business as Power Express Mortgage Bankers, says the market for such loans has already bottomed out.

"Could it get worse? I don't think so," he said Wednesday.

Power Express raised its rate on jumbo loans last week by roughly 100 basis points, to 7.375%, to compensate for the diminished appetite of Wall Street investors, Mr. Kantrowitz said, and most jumbo lenders have reacted similarly.

Some have raised their rates as much as 150 basis points, he said. "We are all in the same arena."

A spokesman for Wells Fargo & Co. confirmed that it raised the rates on its jumbo loans originated by third parties. However, it has not raised rates for retail jumbo loans, he said.

Mr. Kantrowitz said most jumbo lenders are facing margin calls. "The value of loans in warehouse has suffered, so you have to make up the difference through a margin call. It's like the infection has gone right through subprime to alt-A and to A paper."

In a research note published Tuesday, Deutsche Bank Securities Inc. said that Thornburg Mortgage Inc., a prominent jumbo lender, could face margin calls.

A spokeswoman for the Santa Fe, N.M., real estate investment trust said executives were unavailable for comment Wednesday.

Mr. Kantrowitz said that Power Express has not had any margin calls.

"We are financially very stable," he said.

"Thank God we don't have that problem, yet."

For the Record
Impac Mortgage Holdings Inc. rebutted a UBS AG analyst's report that called the Irvine, Calif., lender "unlikely to navigate its way out of margin calls" and speculated that if it were liquidated, shareholders could end up with nothing.

On Wednesday, Impac said that it has made "all margin calls to date." Even though it has suspended funding alternative-A loans — its main product — the company reiterated that it still has credit lines and continues to fund loans that are eligible for sale to government-sponsored enterprises, and that the May acquisition of Pinnacle Financial Corp. brought "expertise" in such loans.

"Despite the significant volatility in the secondary market, we have negotiated sales of about $1 billion of our $1.6 billion of loans held" on warehouse lines, the company said. Those sales should "satisfy the related current borrowing balances."

Impac also said that it will begin making reverse mortgages soon, and that in July it declared a dividend for its preferred stock - though it has suspended dividend payments on common stock.

Omotayo Okusanya 2nd, the analyst who published the UBS report Monday, wrote that Impac's suspension of its common dividend, "along with its continued breach of warehouse line covenants in the past two quarters, suggests that things are rapidly deteriorating." The fact that Impac has not set a date for reporting second-quarter earnings "heightens our concerns."

Subprime, and Beyond
For those who have lost track, here is a roundup of the past week's turmoil in the mortgage market.

Aegis Mortgage Corp.: Disclosed late Tuesday that it is no longer taking mortgage applications and "will be terminating a substantial number of its employees." Continues to service loans.

American Home Mortgage Investment Corp.: Filed for bankruptcy protection after scrambling to find a buyer for its retail and wholesale origination businesses.

Delta Financial Corp.: Postponed its second-quarter earnings report and conference call, which had been scheduled for Wednesday. A company spokeswoman would not give a reason. The stock dropped about 40% Wednesday.

Fannie Mae: Reportedly asked the Office of Federal Housing Enterprise Oversight to lift a portfolio cap so the GSE can help shore up the market.

HomeBanc Corp.: Said it is getting out of the mortgage origination business and selling assets, including up to five branches, to Countrywide Financial Corp. for book value.

Luminent Mortgage Capital Inc.: Received notices of default from two repo lenders.

MGIC Investment Corp.: Said it is not obligated to complete a proposed merger with Radian Group Inc., because of the impairments both private mortgage insurers would take in regard to their distressed-loan joint venture C-Bass LLC. (Radian disagreed.)

National City Corp.: Suspended approvals of home equity loans and lines of credit made through brokers. Still making them on a retail basis.

NovaStar Financial Inc.: Wholesale arm resumed funding loans with new pricing and guidelines after a two-day suspension. It, Luminent and Thornburg were among the mortgage REITs identified in a report Tuesday by RiskMetrics Group as having a moderate to high risk of failure.


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