Originations

Vornado Realty Trust has submitted a bid to buy CW Financial Services, the parent of the second-largest manager of delinquent commercial real estate loans, according to a report by Bloomberg. A winner for New York-based CW Financial could be selected by next week, the news organization reported, quoting a source familiar with the deal. Buyout firms Apollo Global Management LP and Centerbridge Capital Partners LLC, which had made competing offers, are no longer seeking to buy the company, according to two people familiar with the auction. CWCapital Asset Management, a unit of CW Financial, is the special servicer of $144 billion of securitized real estate loans, including more than $18 billion that are delinquent, according to data compiled by Bloomberg. Ben Thypin, an analyst at Real Capital Analytics Inc. in New York, said CWCapital has access to valuable pricing and payment information. "Owning a firm like CW gives access to information on a lot of troubled loans as well as an established platform for originating new ones," Thypin said. "That puts the owner in the driver's seat and in control of distressed real estate that they may want for themselves." Vornado is the third-largest U.S. real estate investment trust by market value.

The National Credit Union Administration approved a $1 billion charge Thursday to pay for the corporate credit union bailout. The corporate assessment comes after last year's charge of $1.1 billion, which included $337 million for the first year of the corporate bailout and the remainder to replenish reserves for the National Credit Union Share Insurance Fund. This year's corporate assessment amounts to 13.4 basis points and must be accrued by credit unions for the second quarter, and paid by Aug. 30. The corporate assessment is expected to drive as many as 1,068 credit unions into the red for the second quarter and as many as 552 into the red for the year, while pushing about 60 credit unions into undercapitalized territory, according to NCUA. Almost half of the nation's 7,800 credit unions, 49.5%, reported losses for fiscal 2009, many of them because of the NCUA assessments.

CWCapital, Boston, a national multifamily and healthcare real estate lender, has named David Lundin senior vice president and production manager for its Northeast FHA lending unit. Lundin is a 20 year industry veteran who has underwritten in excess of $500 million of HUD insured loans, the company said. Lundin, who began his career at the Department of Housing and Urban Development in Boston, is an approved underwriter for refinance and construction financing of multifamily properties under the MAP program. CWCapital has closed over $11.5 billion in loans since 2002, and currently services a portfolio of $11.6 billion in loans in 48 states.

Freddie Mac is telling its servicers they can grant forbearance to mortgagors affected economically by the oil spill in the Gulf Coast region. Under Freddie's policy, servicers have the discretion to suspend a borrower's payments for three months if necessary-or reduce them for up to six months. Servicers may recommend forbearance for up to 12 months based on the borrower's circumstances, the GSE said. Under Freddie's requirements, servicers must not accrue or collect late fees from the borrower during short-term forbearance or any subsequent repayment plan period if the borrower is paying according to the agreement. Freddie senior vice president of default asset management Ingrid Beckles said, "We are instructing our servicers to work with borrowers with Freddie Mac-owned mortgages to extend forbearance of mortgage payments where appropriate to help them stay in their homes as they navigate through this financial hardship."

Investors believe financing and buyer interest in "second-tier" commercial real estate markets remains limited, according to a new survey from PricewaterhouseCoopers. Respondents told the accounting firm that until they see signs of "uniform patterns of stability" in the market, investment opportunities will be highly bifurcated with little attention paid to offerings with vacancy issues that don't deliver sought after gains in value. But there was some good news in the survey: commercial investors said financing for properties has become more readily available for the right borrower seeking quality assets. The economy is blamed for the lack of quality buying opportunities that many CRE investors feel should have materialized by now. Among the concerns is the large amount of CRE debt that comes due in 2011 and 2012. Troubled sales accounted for just 25% to 30% of the market with lenders more willing to extend existing loans than take back assets along with special servicers providing greater flexibility in modifying loans in lieu of forcing defaults. But, the low percentage of distressed asset deals is also being attributed to buyers steering clear of what they consider to be "junk" and focusing only on core assets.

Lenders living off of refinancings will be sorely disappointed by a new forecast from Fannie Mae. The GSE sees refinancings falling to just 34% of total production in fourth quarter, the lowest reading in almost a decade. (The third quarter of 2008 was a near disaster for refinancings with a reading of 38%, according to figures compiled by the Quarterly Data Report. In 3Q08 the stock market was about to begin a freefall with Fannie being taken over by the government and several other large financial firms failing or teetering.) In the first quarter of this year, refis accounted for 65% of residential fundings. Last year refis accounted for 67% of production.

California's Franchise Tax Board is warning consumers that nearly 80% of the state's $100 million first-time buyer credit has been claimed. As of June 15, the agency has received more than 15,000 applications from consumers. However, since many are duplicates or invalid, FTB will accept at least 28,000 applications to ensure the entire $100 million allocation is spent. It will announce a cut-off date for the program on its website, giving at least 24 hours notice for applicants to fax in their documentation. However, submission before the deadline does not guarantee consumers being approved for the credit. FTB will stop allocating credits once the $100 million is exhausted. A separate program, the $100 million tax credit for the purchase of a newly constructed home, is still operational. Consumers need to enter into contract before Jan. 1, 2011 and complete the purchase before Aug. 1, 2011.

Title insurance firms wrote $2.07 billion of new premiums in the first quarter, a 4% gain from the same period last year as the federal home buyer tax credit gave the business a boost. According to figures compiled by the American Land Title Association, Fidelity National Financial wrote more title policies than any other company, $763 million, giving it a 1Q market share of 37%. (FNF ended 2009 with a market share of 42%.) First American Title Insurance Group ranked second with $585 million (market share, 28%), followed by Stewart Title ($283 million/14% MS), and Old Republic ($217 million/11%). The states generating the most title insurance premiums during the first quarter of 2010 were California, Texas, Florida, New York and Pennsylvania. ALTA said title insurers which do business in Canada saw a 57% increase in premiums written in the most recent quarter over the same period in 2009.

Some nonbank mortgage lenders that pass the state LO tests required under the SAFE Act plan to market their expertise and use it as a competitive advantage against commercial banks. "It's definitely a plus in our favor," said Marc Savitt, a former past president of the National Association of Mortgage Brokers. "We can wave that piece of paper around and say, 'Hey, we're certified.'" Bodhi Kraus, for one, said his company, Priority Lending Mortgage Corp. in Santa Rosa, Calif., plans to highlight the fact that its loan officers are licensed on its business cards and mailings, and may even tout the licensing in its radio advertisements. "We advertise and make the phones ring," said Kraus, Priority's vice president. "We just don't have the employees to take" the calls. Under the Secure and Fair Enforcement Licensing Act, part of the Housing and Economic Recovery Act of 2008, loan officers working for state-supervised mortgage firms must now meet minimum standards for licensing and registration, including several hours of education and passing a test. Nonbanks say the requirements can be costly and time consuming, which puts them at a disadvantage to depositories, which are exempt from the SAFE Act. But Glen Corso, managing director of the Community Mortgage Banking Project, a trade group for independent lenders, said a number of companies he works with plan to use the licensing as a competitive tool, as a way to tell consumers that their loan officers are well qualified.

What goes down and also goes up? Answer: California new home sales. The latest count among new home projects of 10 or more units in the Golden State shows that just 2,203 units were sold in April. That's a 32% decline from April 2009, when 3,218 units were sold, according to the monthly report compiled by the California Building Industry Association and Hanley Wood Market Intelligence. At the same time, the median base price of the houses and condos that were sold was a bit higher than the previous April, rising 2%, from $342,783 to $349,736. In March, though, the median was 4.9% higher at $367,933. Jonathan Dienhart, director of published research for HWMI, said the latest figures don't bode well, at least for the short-term. "With the federal tax credit expiring in April and persistently high unemployment throughout most of the state, we could be in for a rough summer," Dienhart said. "Some areas will fare better than others, however. The long recovery process will be uneven, with the coastal areas faring better than the inland areas where there are still bigger problems with oversupply." But CBIA's president Liz Snow took a more optimistic stance. Noting that California's $10,000 tax credit went into effect on May 1, she said her members are hoping to see a pickup in sales when the May figures are tabulated.

Mortgage bankers originated $16.3 billion of jumbo loans in the first quarter, a 2% decline from the same period last year but a much stronger performance than the overall market, according to figures compiled by National Mortgage News. The slight drop in these 'non-GSE jumbos' came during a quarter when all residential fundings fell dramatically, by 32%. On the surface it appears that jumbo production is gaining an even bigger piece of the origination pie—but not because there is now a securitization market supporting the sector. The largest originators of jumbo loans—non-Fannie Mae/Freddie Mac jumbo loans, that is—are placing the mortgages on their balance sheets. "There's not much of an incentive to sell them at this time," said Mike McMahon, an executive at the Mill Valley, Calif.-based Redwood Trust. Also, some lenders note that they are beginning to see new entrants to the market. (For a complete ranking of jumbo lenders and additional analysis see the Monday weekly edition of NMN.)

It appears that House/Senate conferees are leaning toward adopting risk retention language requiring issuers of residential MBS to hold a "vertical" slice of securitized assets, which means mortgage bankers will be affected by losses on all tranches, not just one. According to interviews with lobbyists working the issue, the details will not be hammered out until next Tuesday, at the earliest. "We think we're going to be okay on the issue but you never know," one MBS investor told National Mortgage News. It appears that language stipulating 5% risk retention for "qualified" mortgage assets (Fannie Mae, Freddie Mac, FHA and other government products) will survive, though there was even talk of cutting that down to 3% for certain loans. If issuers are required to take on vertical risk they suffer losses on all MBS tranches that are created. Under a "horizontal" model only the most subordinated bond is first in line to absorb credit losses. None of the executives interviewed wanted to be identified because of the sensitive nature of the talks. The House and Senate are trying to shape a compromise bill on overhauling regulation of financial services, including many facets of mortgage banking.

Willis North America, a subsidiary of insurance broker Willis Group Holding, has started a distressed assets practice to advise clients on how they can manage the risks associated with distressed, foreclosed or abandoned properties. The new unit will be headed by Brian Ruane, national real estate and hotel practice leader, who founded the group in 2005. It will bring together resources from Willis' real estate and hotel, construction, environmental, executive risks, financial services and mergers and acquisitions practices, and its loan protector unit. The distressed assets practice coordinates capabilities from across Willis' practice areas to structure insurance programs that respond to a range of risk management and insurance issues related to distressed assets. Major areas of focus include property, liability and environmental insurance; forced-placed coverage; insurance for real estate-owned assets; professional liability insurance and construction insurance for incomplete projects.

Gramercy Capital Corp., New York, has redeemed $52.5 million of junior subordinated notes due June 30, 2035 issued by its operating partnership subsidiary. Gramercy completed the transaction by transferring to the noteholders an equivalent par value amount of various classes of bonds issued by affiliates Gramercy Real Estate CDO 2005-1, Gramercy Real Estate CDO 2006-1 and Gramercy Real Estate CDO 2007-1, which had been previously purchased by the company in the open market, and $5 million in cash equivalents. In October 2009, the company settled an exchange of $97.5 million of junior subordinated notes for an equivalent par amount of CDO bonds. This redemption eliminates Gramercy's junior subordinated notes from its consolidated financial statements, which had an original balance of $150 million.

FelCor Lodging Trust Inc., Irving, Texas, priced its public offering of 27.5 million shares of its common stock at $5.50 per share, giving the company estimated net proceeds of $145 million. The REIT granted the underwriters a 30-day option to purchase up to 4.125 million additional shares of common stock, which if exercised, will up the net proceeds to approximately $167 million. JPMorgan Securities Inc., Goldman Sachs & Co., B of A Merrill Lynch and Deutsche Bank Securities Inc. acted as joint book-running managers for the offering. Citi and FBR Capital Markets acted as senior co-managers. JMP Securities and Keefe, Bruyette & Woods acted as co-managers. FelCor intends to use the net proceeds from the offering, together with cash on hand, to repay or repurchase certain of its mortgage debt at substantial discounts and for acquisition opportunities. It may invest the proceeds in short-term, interest-bearing investments until it elects to use them for the above purposes. The offering is expected to close on June 22.

The Senate has approved a plan to give those already in contract to purchase a home an extra three months to be able to use federal homebuyer tax credits. The language, pushed through the chamber by Senate Majority Leader Harry Reid gives homebuyers until Sept. 30 to complete their purchases and qualify for tax credits of up to $8,000. Under the current terms, buyers had until April 30 to get a signed sales contract and until June 30 to complete the sale. The proposal was approved by a 60-37 vote but only applies to consumers who already have signed contracts to finish at the later date. About 180,000 homebuyers who already signed purchase agreements would otherwise miss the deadline.

Associated Banc-Corp., Green Bay, Wis., plans to become a national warehouse lender, breaking out of its two-state only business model. At press time details were not available but advisors close to the company confirmed the news about its plans. Currently, the bank will extend warehouse credit to nondepositories in Illinois and Wisconsin. Matt Wolfe, an officer at the bank's office in Chicago, has been put in charge of the effort. The move into national lending is being extended into other product sectors as well, including the insurance sector.

The average interest rate for the 30-year fixed-rate mortgage loan gained three basis points from last week, the Freddie Mac Primary Mortgage Market Survey found. For the week ending June 17, the 30-year FRM averaged 4.75%; one week prior, it averaged 4.72%. Last year at this time, the 30-year FRM averaged 5.38%. "Mortgage rates were little changed this week amid preliminary signs that the expiration of the homebuyer tax credit in April may have led to a slowdown in new construction," said Frank Nothaft, Freddie Mac vice president and chief economist. "Nonetheless, household balance sheets have been improving over the past four quarters. In aggregate, households gained $6.3 trillion in net worth in the first quarter from a year ago, according to the Federal Reserve. In addition, homeowners have regained $1.1 trillion in home equity over the same time period." The 15-year FRM also gained 3 bps during the week to 4.2%. The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.89% this week, a drop of 3 bps, to its lowest point since Freddie Mac started tracking this rate in January 2005. The one-year Treasury-indexed ARM averaged 3.82% this week, down 9 bps to its lowest level since the week ending May 6, 2004 when it averaged 3.76%. Average points for all loans were at 0.7, except for the one-year ARM at 0.6.

The United Kingdom's first-time homebuyer share of the purchase loan market hit a low not seen since September 2007 in the latest reported month, according to the Council of Mortgage Lenders, London. First-time buyers represented 35% of purchase mortgages made in April, down from 39% in March and from 38% during April 2009. The CML said this likely reflects high downpayment hurdles imposed by lenders and first-time buyers general lack of downpayment resources. There were 40,000 purchase loans in total during April 2010, down from 45,000 the previous month but up from 35,000 during April 2009. There were 24,000 refinance loans during April 2010, down 16% from March and 26% from April 2010.

Origination technology provider Calyx Software has launched MyCalyx.com, a self-service Web portal for users. MyCalyx was designed to simplify Calyx account management with Web access and greater administrative control over Calyx accounts. With MyCalyx customers can install upgrades to Calyx online. Each user is assigned a login and password to download new products and updates. Customers also now have greater control over seat assignments and can make changes online instead of uninstalling and reinstalling CD applications.