Origination

The average rate for a 30-year fixed-rate mortgage remained near lows last seen in December of 2009 as it continued its slide, the Freddie Mac Primary Mortgage Market Survey for the week ended May 27 found. Freddie said instability in financial markets overseas led to the decline. This instability at one point lowered the benchmark 10-year Treasury yield to near 3.1% on Tuesday, but there has been somewhat of a rebound since then and as of late morning Thursday that yield was closer to 3.3%. The average weekly 30-year FRM rate as of Thursday was 4.78%, down from 4.84% in the latest week and 4.91% a year ago. The average 15-year FRM during the week ended May 27 was 4.21%, the lowest it has been since Freddie started tracking this type of loan in August 1991. This was down from 4.24% the week before and 4.53% the year before. In contrast to other loan types, the average rate for a five-year Treasury indexed hybrid adjustable-rate mortgage rose during the week ended May 27 to 3.97% from 3.91% the previous week but was still considerably lower than a year ago when it was 4.82%. The average one-year Treasury ARM rate dropped to 3.95% during the week ended May 27, a low not seen since the week ending May 27, 2004 when it was 3.87%. A week ago the average one-year Treasury ARM rate was 4.00% and a year ago it was 4.69%. Average points during the week ended May 27 were 0.7 for all the aforementioned loan types except one-year Treasury ARMs, for which average points were 0.6. "These low rates will help to elevate homebuyer affordability and soften the effects of the sunset of the homebuyer tax credit," said Frank Nothaft, Freddie Mac vice president and chief economist.

Prime Group Realty Trust, Chicago, has had its Series B Preferred Shares delisted and ceased trading on the New York Stock Exchange, with the last day of trading being May 26, 2010. This listing was part of its obligations under its July 2005 acquisition by The Lightstone Group and the delisting at that time of its common shares. Prime Group agreed to voluntarily file reports under the Exchange Act for five years after the closing of the acquisition. After the voluntarily delisting of the Series B Preferred Shares from the NYSE, the company expects that they will trade on the Pink Sheets with Pink OTC Markets Inc.

The executive director of the Pennsylvania Housing Finance Agency said even though the first-time homebuyer tax credit program is over, it is still the best time for people to purchase their first home or to make the move to a newer or larger home. Brian Hudson said interest rates are at historic lows. For example, his agency is offering a 30-year fixed-rate mortgage at 4.5% for new home purchases and 4.95% for the purchase of an existing home. PHFA offers closing cost assistance, and buyers can put down as little as $1,000. "Keep in mind, too, there is an excellent inventory of homes on the market, providing prospective buyers with plenty of selection. Plus the time available to make an offer is greater than it was just four years ago, so homebuyers don't have to rush their decision due to competition and can take more time to research their potential purchase," Hudson said. He added the housing market in the state did not overheat during the boom, meaning homes have remained a stable investment. PHFA is seeing record volumes because of its "disciplined, common sense lending strategy. We have always required full documentation from families requesting PHFA loans. We have stood by our guidelines, insisting that a person's ability to repay a loan must be a critical factor in the lending decision. We only offer fixed-rate mortgages, so that our borrowers aren't surprised by increased or balloon payments a few years into their home purchase," Hudson said.

Healthcare Trust of America Inc., a real estate investment trust headquartered in Scottsdale, Ariz., has appointed Kellie S. Pruitt to serve as its chief financial officer. She was the company's chief accounting officer and principal financial officer since Jan. 28, 2009. Prior to that, Pruitt served as HTA's controller. Before joining HTA, she worked at Fender Musical Instruments Corp. and at Deloitte & Touche LLP. "Kellie has played a vital and hands-on role in growing our organization and in establishing our self management team," stated Scott D. Peters, president and chief executive of HTA.

The Financial Accounting Standards Board wants banks and thrifts to apply fair value accounting to the multifamily and single-family loans they hold on their books. The FASB proposal would require depositories to mark-to-market the value of their loans on a quarterly basis to provide more timely information on anticipated credit losses. The American Bankers Association claims mark-to-market accounting should not be used for assets that are not traded. "If a company's business is not based on mark-to-market, then using it as a basis of accounting can be misleading to users of financial statements," ABA president and chief executive Edward Yingling said. The ABA president also noted it will reduce the availability of long-term loans and increase "pro-cyclicality" in the financial system. The comment period on the FASB exposure draft ends Sept. 30, 2010. Under the proposal, non-public lenders with less than $1 billion in assets would have four years to implement the new accounting rule.

Fannie Mae and Freddie Mac seller/servicers will continue to face extra charges called "loan level price adjustments" which compensate the GSEs for buying certain non-vanilla mortgages. Federal Housing Finance Agency acting director Edward DeMarco told a congressional panel that the LLPAs the GSEs charge are periodically reviewed, but gave no indication there would be any coming reductions in these fees. Rather, he told Rep. Scott Garrett, R-N.J., that the mispricing of risk on loans the GSEs bought between 2006 to 2008 landed them in conservatorships that have cost taxpayers $145 billion, and counting. Despite better underwriting, Fannie and Freddie will continue to set their fees to cover expected losses on new loans. The regulator also noted that guarantee fees have been reduced and the performance of the 2009 book of loans is quite good. The current Home Valuation Code of Conduct regulation on appraisals is due to sunset in November. HVCC critics want to see it replaced or abolished, including Rep. Paul Kanjorski, D-Pa., who sponsored appraisal reforms that were incorporated in the House-passed financial services regulatory reform bill. But the FHFA director told Rep. Kanjorski that the HVCC regulation would still apply to Fannie and Freddie seller/servicers after November. FHFA also is reviewing a new practice of including a private real estate transfer tax in sale documents that allows investors to receive a percentage of future sales proceeds. DeMarco said he is "troubled" by this practice and FHFA is reviewing the matter to see if this transfer tax should be banned in Fannie/Freddie transactions.

Homeownership costs north of the U.S. border in Canada have now been rising for three quarters in a row, according to a Royal Bank of Canada economics expert. Affordability in the first quarter was moderately above the long-term average but below peak levels, according to RBC senior economist Robert Hogue. The RBC Housing Affordability index, which measures the proportion of income needed to service the cost of homeownership, shows an increase on a national basis for all property types in the first quarter. For detached bungalows the index rose by 0.9 of a percentage point to 41.1%, for standard townhouses it was up 0.4 of a percentage point to 33%, for standard condominiums it jumped by 0.5 of a percentage point to 28.2% and for standard two-story homes it climbed by 0.6 percentage points to 46.8%. Affordability is expected to continue to deteriorate through 2010 and 2011 due to anticipation that the Bank of Canada will move to raise what have been exceptionally low central bank rates in the second half of this year and in 2011, Hogue said. But the extent of the deterioration is likely to be limited by a balance between supply and demand and it is not expected to exceed 2008's peak levels.

Mission Capital Advisors is taking bids on what is roughly a $500 million sub- and nonperforming commercial mortgage loan portfolio. Collateral types securing the loans include multifamily, office, student housing, condominiums, marina, industrial, residential and commercial land, medical office and bank stocks. Properties are located in various parts of Florida, Illinois, Wisconsin, Arizona, Colorado, New Jersey, Kansas, Minnesota, Indiana, North Carolina, Nevada, Ohio, Missouri and Virginia. The loan pools are broken down by region with the largest portfolios located in Florida, Illinois and Wisconsin. On behalf of an unidentified seller, Mission Capital is initially soliciting indicative bids on May 27 for the purchase of individual loan pools, any combination of loan pools or the entire portfolio. The top 15 single assets by size range between $8 million and $36 million each and represent 55% of the entire portfolio, for a total balance of about $278 million. Many of the loans have recent appraisals, which will be provided to investors. The sale must be completed prior to quarter end; investors will be required to finalize loan sale agreements prior to the final bid date on June 16.

House prices fell 1% in the first quarter, compared to the previous quarter, and 3.2% from the first quarter of 2009, according to the Standard & Poor's/Case-Shiller 20-city house price index. The HPI released Tuesday also shows that prices on a nonadjusted basis have fallen for the past six months, including 0.5% in March and 0.6% in February. "The housing market may be in better shape than this time last year, but when you look at recent trends there are signs of some renewed weakening in home prices," says David Blitzer, chairman of the S&P index committee. IHS Global Insight economist Patrick Newport said that housing demand is improving due to a better job market and low rates. However, an increase in foreclosures is putting downward pressure on prices. "In our view, the housing glut and foreclosures will drive the national Case-Shiller down another 6%-8% with prices bottoming in 2011," Newport said.

Fannie Mae and Freddie Mac say the declining condition of commercial properties is one of the biggest challenges facing multifamily servicers today. "Our top shared concern is really all about physical risk," said Karyn Sandelman, portfolio services director for Freddie Mac, speaking at an MBA conference in New York. "We have declining cash flows and overextended borrowers and an unwillingness to take care of the real estate." Fannie Mae is conducting onsite inspections to deal with the problem. "We are concerned about the health of our servicers," added Caroline Blakely, vice president, Fannie Mae. Also, so-called watch lists on problem loans are growing in size. Robert Shean, chief operating officer of M&T Realty Corp., listed loan maturity management as a third hot topic for servicers. He says it causes him "a lot of sleepless nights," adding that "balloons [mortgages] are facing their maturity dates. While the flow of maturing loans isn't particularly overwhelming [presently], when you look out over the next few years, we all know we're in for a rough ride." Wells Fargo is trying to be proactive on CRE problems, said Maureen Fitzgerald, senior vice president of the bank. Wells is staffing up while reducing the number of loans per asset manager. The bank also is hiring experienced managers with "more expertise" to handle watch lists. Such employees come at a higher price tag because they are "more mature," Fitzgerald told the conference.