Secondary Market

Fannie Mae has extended its contract with Lenders One Mortgage Cooperative as a preferred investor. The organization says continuing its preferred investor relationship with Fannie ensures that cooperative members selling to the GSE have access to more competitive pricing and technology than they would working with Fannie Mae independently.

Federal regulators are warning that by the end of 2010, half of all commercial real estate mortgages will be underwater. Their biggest concern is that most of these souring loans are concentrated in mid-sized banks, making them especially vulnerable to failure. The Treasury secretary, though, says commercial real estate is a problem that can be managed, and news from the field supports his assumption, as lenders appear to be moving more aggressively to modify commercial mortgages and avert another default tsunami.

The Treasury Market Practices Group (TMPG), an organization created by the New York Federal Reserve to advise on the trading of Treasury bonds, announced Tuesday that it is expanding its scope to include government agency debt - such as that from mortgage giants Fannie Mae and Freddie Mac - and agency mortgage-backed securities (MBS). There is speculation that the organization's extended reach is in response to an increase in unresolved mortgage deals and secondary market trades.

The delinquent unpaid balance for commercial mortgage backed securities (CMBS) increased to $47.82 billion in February, according to investment rating agency Realpoint, LLC. The overall delinquent unpaid balance was up almost 300 percent from February 2009, when only $11.98 billion was reported. Last month's numbers represent a delinquency ratio of 6 percent, and Realpoint says it expects the growth trend to continue, potentially reaching 12 percent by year-end.

The Wisconsin Office of the Commissioner of Insurance has taken control of mortgage bond insurer Ambac Assurance Corp.'s ""most troubled holdings,"" as the insurance commissioner phrased it. The commandeering occurred last week, as rumors began to surface that the company may be headed for bankruptcy, which could trigger billions of dollars in losses for municipalities who invested in mortgage securities insured by Ambac.

The U.S. Department of the Treasury announced Monday that it is ready sell off its 27 percent ownership stake in Citigroup. The Wall Street bank was one of the biggest bailout recipients among financial institutions, and the government is expected to turn a pretty penny for its efforts to keep Citi afloat - a net of more than $8 billion, according to preliminary estimates. Treasury said it plans to fully dispose of its 7.7 billion shares of Citigroup common stock by the end of the year.

NewOak Capital LLC recently announced the appointment of Donald H. Layton as senior advisor and co-chairman of its investment committee. Layton will take a lead role in developing the firm's private equity vehicle for bank recapitalization investments, assisting in the identification and full evaluation of investment opportunities, as well as providing ongoing advice regarding strategic and operational improvements for the banks in the firm's investment portfolio.

Senior officials of the FDIC held a roundtable discussion this week with members of the private equity sector to discuss acquisitions of failed banks and the role these investors can play in bringing additional capital to the nation's struggling banking industry. Participants in the open dialogue included fund managers, investment groups, and pension funds, as well as public interest organizations and banking trade groups.

Janney Montgomery Scott LLC, a regional full-service financial services firm, recently announced that it has named former Bear Stearns executive Brent Giese to lead the company's newly created whole loan initiative. Joining Giese is former Bear colleague, James Stauss.

Big 5 Asset Management, an alternative asset management firm based in Denver, announced Thursday that it has acquired a real estate securities fund launched by Credit Suisse. Renamed the Rhino Income Opportunity Fund, it will continue to invest in preferred shares of real estate investment trusts (REITs) and will also join Big 5 Asset Management's flagship global long-short equity fund, Lion Global.