Origination

Two classes of COMM 2006-FL2 commercial mortgage pass-through certificates have been downgraded by Fitch Ratings. Class TC-1 was downgraded from BBB to BB-plus, and class TC-2 was downgraded from BBB-minus to BB-plus. Fitch also placed classes MSH-1 through MSH-4 on Rating Watch Negative and affirmed the ratings on 49 other COMM classes. The downgrades were attributed to declining performance at The Avenue at Tower City in Cleveland, and the Rating Watch placement was attributed to "slower-than-expected recovery from ongoing renovations."

Citing mortgage-related concerns, Fitch Ratings has placed the long- and short-term Issuer Default Ratings of Constitution Corporate Federal Credit Union, Wallingford, Conn., on Rating Watch Negative. The credit union's long-term IDR stands at AA-minus, and its short-term IDR stands at F1-plus. The rating agency said it is concerned that the CU faces a growing likelihood of realizing significant losses. "Constitution's exposure to the troubled mortgage market, including home equity, subprime, and [alternative-A] product, has contributed to a large unrealized loss position in relation to capital," Fitch said. The rating agency can be found on the Web at http://www.fitchratings.com.

All categories of U.S. commercial construction, as well as multifamily housing, are likely to weaken in the months ahead, according to an article published by Standard & Poor's. The article reports that new commercial construction "dropped sharply" in the fourth quarter and projects that it should weaken further, but that "the carry-through from buildings that reached groundbreaking in 2007 should keep construction spending above that of 2007." On an inflation-adjusted basis, S&P is forecasting a 16% drop in commercial starts this year and a 9% decline in 2009. The article, "U.S. Commercial Construction: After the Wave Comes the Trough," says that apartments are in the weakest situation and offices the strongest. "On the positive side, the degree of overbuilding in commercial properties is far less than it was in the late 1980s, where downtown office vacancy rates were 20% even before the start of the recession," S&P said. "At the end of 2007, vacancies were averaging about half that level." S&P can be found online at http://www.standardandpoors.com.

Lender Lead Solutions, a reverse mortgage lender based in Melville, N.Y., is changing its name to Senior Lending Network, the name more commonly known to the public from its consumer education campaign. "We believe that Senior Lending Network more appropriately describes the products and services we offer and corporate culture in which we work." said David Peskin, chief executive officer of the company. The name change is expected to take place in September. Senior Lending Network's education campaign features actor Robert Wagner as its spokesman. The campaign was first established in 2004, with the late actor Jerry Orbach as its first spokesman. The company can be found on the Web at http://www.seniorlendingnetwork.com.

Mortgage Guaranty Insurance Corp., Milwaukee, has entered into a reinsurance agreement with an affiliate of HCC Insurance Holdings Inc., Houston. The agreement covers up to $50 billion of insurance written after April 1, 2008. It is scheduled to end on Dec. 31, 2010, subject to two one-year extensions at HCC's option. In its statement, MGIC said it believes that substantially all the insurance it writes qualifies to be reinsured by HCC. MGIC Investment Corp. chairman and chief executive Curt Culver said the agreement is another step in the company's capital plan and is expected to provide claims-paying resources in catastrophic loss environments for insurance written after April 1. This transaction is being accounted for under deposit accounting rather than reinsurance accounting, and the premium ceded and the brokerage commission will be recorded as an expense by MGIC. MGIC can be found on the Internet at http://www.mgic.com.

With price declines of 50% and more, home sales are picking up in the Central Valley of California thanks to higher loan limits on Federal Housing Administration-insured mortgages, but more losses for the banking industry are in the pipeline, according to Friedman Billing Ramsey. "With interest rate resets, defaults and foreclosures still growing, the peak in industry losses will probably be sometime in 2009," said FBR Capital Markets managing director Paul Miller. In Sacramento, a house that sold for $385,000 in April 2005 is likely to be sold at auction for $120,000 today, the company said. Prices are generally down 30% to 70% from peak values, with the average decline around 50%. FBR equity analysts who toured the valley during the week of June 9 said they were "surprised by just how bad things are" in the Central Valley and that it would be "even worse" without FHA financing, which is the "only game in town." Construction activity in the Central Valley has stopped, and speculators are getting back into the market because they can purchase properties for rentals at prices "with breakeven or even positive cash flows," the FBRCM report says.

The Department of Housing and Urban Development is finding few supporters for its RESPA reform proposal, so three key players are recommending that HUD refocus its efforts on refining the good-faith estimate and add a summary page that highlights key loan terms and payment information. In a joint letter to HUD, the National Association of Realtors, the American Land Title Association, and the Center for Responsible Lending say they have reached an agreement on the summary page, which is attached to the June 12 letter. The CRL wants a more prominent disclosure of the mortgage broker's fee, however. "Our organizations also share the belief that a summarized GFE should be accompanied by a more detailed GFE with explanations of each subcategory of fees to help consumers understand more fully the services and accompanying fees for which they are being charged," the joint letter says. The comment period on HUD's Real Estate Settlement Procedures Act proposal ended June 12, and the NAR and ALTA have urged HUD to withdraw the proposal. The American Bankers Association and the Consumer Bankers Association also want HUD to withdraw it. The Independent Community Bankers of America has said it opposes the rule.

Goldman Sachs Commercial Mortgage Capital LP, New York, has announced a strategic investment in Bulls Capital Partners LLC, a Vienna, Va.-based Fannie Mae DUS lender specializing in multifamily housing loans. The amount of the investment was not disclosed. In addition to taking a minority stake in Bulls Capital, GSCMC said it will also source loans to the Delegated Underwriting & Servicing lender. Bulls Capital can be found on the Web at http://www.bullscapitalpartners.com.

Commercial and multifamily mortgage debt outstanding rose 1.8% ($60.8 billion) in the first quarter, reaching a level of $3.4 trillion, according to an analysis of Federal Reserve Board data by the Mortgage Bankers Association. Considering only multifamily mortgage debt, the amount outstanding rose 2.2%, to $856 billion. The largest increase in percentage terms in holdings of commercial and multifamily mortgage debt occurred in the government-sponsored enterprise sector, where holdings grew by 7% ($10 billion) in the first quarter. "The global credit crunch meant a net decline in the balance of mortgages held in [commercial mortgage-backed securities, collateralized debt obligations, and other asset-backed securities], but banks, thrifts, life insurance companies, Fannie Mae, Freddie Mac, and nearly every other investor group increased their holdings of commercial and multifamily mortgages during the quarter," said Jamie Woodwell, MBA's senior director commercial/multifamily research. The MBA can be found online at http://www.mortgagebankers.org.

Credit standards for residential and commercial real estate loans got tighter in May, and housing markets "remained weak across most of the nation," according to the Federal Reserve's Beige Book. The New York and Chicago Federal Reserve district banks reported that potential homebuyers are having difficulty obtaining financing. And it is causing builders in the Chicago district to "suffer losses" on existing projects. "Inventory levels of new and existing homes remained high or were rising in New York, Philadelphia, Cleveland, Richmond and San Francisco," the Beige Book says. Meanwhile, the Boston, Atlanta, Kansas City, and San Francisco banks reported declining house prices in their districts. "Commercial real estate conditions varied in April and May," with the Boston, New York, Philadelphia, and San Francisco districts reporting that CRE activity had "softened."