Origination

A commercial real estate index maintained by the National Association of Realtors declined in the second quarter, auguring weaker CRE markets over the next six to nine months, according to the NAR. The Commercial Leading Indicator for Brokerage Activity stood at 117.9 in the second quarter, down 0.9% from a 119.0 in the first quarter, the association reported. The record high, 120.5, was reached in the second quarter of 2007. "The pace of decline has intensified due to job cuts and very sluggish economic activity since the beginning of the year, particularly in those industries requiring commercial building spaces," said NAR senior economist Lawrence Yun. "We anticipate the weakest commercial brokerage activity in nearly three years as a result." The association can be found online at http://www.realtor.org.

Commercial and multifamily loan originations dropped in the second quarter to a level 63% below that of a year earlier, according to the Mortgage Bankers Association. The MBA said its Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations found year-over-year declines across most property types and investor groups. "The slowdown in originations has come from both a decrease in supply of capital available and a decrease in the demand for new mortgages," said Jamie Woodwell, the MBA's vice president of commercial/multifamily real estate research. "It is likely volumes will remain muted until buyers, sellers, borrowers, lenders, and their expectations of rates and terms match closely enough for transaction activity to pick back up." The MBA said the year-over-year origination nosedive included the following declines by property type: hotel, 87%; health care, 66%; office, 65%; retail, 63%; industrial, 57%; and multifamily, 42%. Among investor types, year-over-year declines were recorded for conduits for commercial mortgage-backed securities, 98%; commercial banks, 29%; and life insurance companies, 27%. However, the dollar volume of loans for GSEs rose 66%.

Countrywide Financial Corp., which is now the property of Bank of America, saw its wholesale originations plunge in the second quarter to just $6.76 billion, according to figures compiled by National Mortgage News. In the same quarter of 2007, Countrywide table-funded $23.4 billion in loans. (BoA bought Countrywide on July 1.) In the quarter ended June 30, just 11% of Countrywide's total originations came through loan brokers, compared with 18% a year earlier. In 2007, brokers accounted for 21% of Countrywide's residential fundings. The company can be found on the Web at http://my.countrywide.com.

North Carolina Gov. Mike Easley has signed a bill that bars lenders from paying yield-spread premiums on subprime mortgages starting Oct. 1. North Carolina is the first state to ban YSPs, which is a form of mortgage broker compensation that is based on the interest rate of the mortgage. Consumer groups like the Center for Responsible Lending supported passage of House Bill 2188, and they contend that YSPs provide brokers with an incentive to steer borrowers into higher-interest-rate subprime mortgages. "By getting rid of yield-spread premiums, we are eliminating one of the root causes of the foreclosure crisis," said CRL senior counsel Chris Kukla. Roy DeLoach, executive director of the National Association of Mortgage Brokers, noted that the North Carolina law simply allows the lenders to pocket the YSP without disclosing it to the consumer. "Consumers are going to pay more money in the long run," Mr. DeLoach said.

Class N of CD Commercial Mortgage Trust series 2007-CD4 commercial mortgage pass-through certificates has been placed on Rating Watch Negative by Fitch Ratings. The rating action was due to the recent transfer of Riverton Apartments, the seventh-largest loan in the transaction, to special servicing for imminent default, Fitch said. The loan is secured by a dozen 13-story buildings in the Harlem section of New York City.

The sole class of trust certificates issued by COUNTS Trust series 2004-1, a credit-linked note that provides synthetic exposure to mortgage-related securities, among others, has been downgraded from AA to CCC by Fitch Ratings. The rating has also been removed from Rating Watch Negative. The downgrade was attributed to raised loss expectations due to greater-than-expected collateral deterioration in the reference portfolio, especially in subprime residential mortgage-backed securities issued in 2004, 2005, and 2006. The portfolio consists of U.S. subprime RMBS (7.2%), alternative-A mortgage loans (16.9%), and U.S. diversified structured finance collateralized debt obligations (51.4%), Fitch said. The rating agency can be found online at http://www.fitchratings.com.

Post Properties, an Atlanta-based multifamily real estate investment trust, has been designated the "Bear of the Day" for Aug. 19 by Zacks Equity Research, Chicago. The Bear of the Day is a stock expected to underperform the markets over the next three to six months. Noting that Post is no longer for sale, Zacks said the company will "try to reposition itself" through asset sales and personnel reductions. "Operationally, the company has been underperforming its peer group; management has been focused on a sale of the company," Zacks said. Post had a "weak" second quarter due mainly to impairments on development deals that will not be pursued, and the research firm said it has changed its near-term recommendation on the REIT's stock to Sell. Zacks can be found online at http://www.zacks.com, and the REIT can be found at http://www.postproperties.com.

Commercial real estate prices rose 0.7% in May on a national basis and recorded a 12-month increase of 3.6%, according to the S&P/GRA Commercial Real Estate Indices. The highest 12-month rates of return were recorded by the apartment sector, at 5.8%, and the Pacific West, at 7.2%, S&P reported. The worst 12-month performances were recorded in the retail sector, with a 0.5% return, and the Desert Mountain West, with a negative-1.9% return, according to the company. "This month's numbers offer some encouragement," said David Blitzer, managing director and chairman of S&P's Index Committee. ".... Only one of the regions and two of the property sectors saw price declines during the May/April period." The indices can be found on the Web at http://www.standardandpoors.com/indices.

A portfolio of $148 million of commercial real estate loans is being sold by Bridger Commercial Funding's BankXchange program on behalf of an undisclosed major bank in the West. The San Francisco-based Bridger said the portfolio is the largest pool of West Coast performing CRE loans to be brought to market this year, consisting of 88 loans secured by owner-occupied and income-producing properties in the Los Angeles Basin. The majority of the owner-occupied properties secure loans financed under the Small Business Administration's 504 program, Bridger said. The overall portfolio loan-to-value ratio is below 60%, and the debt service coverage ratio exceeds 1.60. The portfolio is being offered in two pools, one composed of 58 owner-occupied loans totaling $95 million and the other composed of 30 income-property loans totaling $53 million. Potential buyers can bid on either pool, or both, and bids will be accepted on a "subject to due diligence" basis through Aug. 29 at 5 p.m. Pacific Daylight Time. The company can be found online at http://www.bridgerfunding.com.

With single-family housing starts falling 3% in July, home construction has plummeted 65% since the peak in January 2006, and some building industry economists say a bottom is finally in sight and may be only months away. The U.S. Census Bureau reported that single-family housing starts declined from a seasonally adjusted annual rate of 660,000 in June to 641,000 in July -- down 39% from the level recorded a year earlier. Bernard Markstein, senior economist at the National Association of Home Builders, noted that the Census Bureau revised the June number upward from 647,000 starts, which sometimes signals a bottom is near. The NAHB forecaster said he believes the bottom in single-family starts is only a few months away. "We are approaching the bottom here, and at least by the end of the year we will have hit bottom," he told MortgageWire. Mr. Markstein also said he expects home sales to "stabilize shortly," due in part to the $7,500 first-time homebuyer tax credit recently passed by Congress.