Originations

More renters moved out of apartments last year in Los Angeles County than moved in over the previous five years, according to a new report that finds the recession forcing Southern California landlords to lower rents and offer more valuable concessions. According to the Lusk Center for Real Estate at the University of Southern California, some tenants who still have jobs are taking advantage of fire-sale housing prices to become owners, while unemployed tenants are doubling up with family or friends. And those trends are likely to continue, the report said of apartment markets in Los Angeles, Orange, Riverside, San Bernardino and San Diego Counties. "The dramatic changes in the economy are taking their toll on landlords," said Delores Conway, director of the annual Casden Real Estate Economics Forecast. Only San Diego, which has a 95% occupancy rate and has seen rents rise by 1%, is bucking the trend. In Orange County, on the other hand, rents fell 2% in 2008, the first time they have declined in 13 years. In Riverside and San Bernardino, the so-called Inland Empire, occupancy levels showed their largest drop-off in a decade.

Builders are seeing increased foot traffic at model homes and say potential buyers are drawn by low mortgage rates, affordable prices as well as a first-time homebuyer tax credit, according to the National Association of Home Builders. "With affordability up dramatically, reports from our builders in the field indicate that foot traffic in new homes is on the rise and consumer interest is increasing," said NAHB chairman Joe Robson. The trade group noted that 1.5 million visitors have logged on to its website to learn more about the $8,000 first-time homebuyer tax credit that Congress approved in February. A survey by Move Inc. found that "nearly 20% of those that plan to purchase a home this year are doing so to take advantage of the tax credit, which expires at the end of November," NAHB said. Move Inc., based in Westlake Village, Calif., provides home listing services for builders and Realtors. Buyer interest typically increases in the spring.

Once homebuilders Pulte Homes and Centex Corp. complete their just announced merger, their combined mortgage units will rank 23rd nationwide in residential originations, according to figures compiled by National Mortgage News. However, when it comes to residential servicing rights, neither of the their mortgage divisions service much in the way of loans. Two years ago — before the A- to D credit market crashed — Centex sold its subprime division, Centex Home Equity, to a hedge fund. In the fourth quarter Pulte Mortgage, Englewood, Colo., ranked 29th among all funders ($848 million) with Centex's CTX Mortgage ranking 34th with originations of $601 million. It's expected that, in time, the two publicly traded HBs will merge their mortgage divisions, though at press time this could not be confirmed.

The ability to generate income from affiliated mortgage and title entities has been "the difference between life and death" for many real estate brokerages, members of the Real Estate Services Providers Council were told at their annual conference in Washington. "If they hadn't had mortgage, title and other affiliated businesses, they'd be gone," said Steve Murray of REAL Trends, a research organization based in Littleton, Colo. Chad Ochsner, broker-owner of RE/MAX Alliance, a Denver-based firm with 22 offices and some 800 agents, said that "having a good, solid mortgage partner" has helped his bottom line. "Real estate is now a loss-leader for our mortgage and insurance affiliates," Mr. Ochsner said. Jon Coile, president of Champion Realty, Annapolis, said the capture rate at his mortgage affiliate, HomeServices Lending, the largest of Wells Fargo's joint ventures, is way up because agents are "terrified" they will lose the deal if they take their clients to other lenders. "If you don't have mortgage and title in this market, you are dead-man walking," said Mr. Coile, whose firm entered the mortgage and title businesses in the early 1990s. Mr. Ochsner also cited an increased capture rate, noting that the down market has helped create an esprit d'corps among his agents and support staff.

When it comes to complying with the new Real Estate Settlement Procedures Act regulations, many lenders appear to be sticking their heads in the sand, according to a pair of Washington regulatory lawyers. Jeffrey Naimon of BuckleySandler said his clients seem to be adopting a wait-and-see attitude, hoping, perhaps, that the new Obama Administration will pull the regulations before their most onerous sections take effect on Jan. 1. "The rules are incredibly complicated," he said at the annual RESPRO conference, "yet our phones are not ringing off the hook." Lots of "petrified" lenders are "waiting to see what others do," agreed Jeffrey Arouh of Holland & Knight. At the same time, though, Mr. Arouh warned that lenders who are not ready to implement the regs will be "out of the game." "The rule is the rule," he said. "You're kind of stuck with it, so you have to deal with it." Mr. Naimon, meanwhile, said he's surprised lenders haven't attacked the regulations on the grounds that the Department of Housing and Urban Development has overstepped its bounds. "I question HUD's legal authority" for many of the changes in RESPA's new rules, he said. "I don't think a lot of this holds water, but no one is interested in poking the government in the face right now."

Housing industry groups are urging the Treasury Department to provide capital support for the private mortgage insurers so more financing will be available for homebuyers that can't muster a 20% downpayment. In a letter to Treasury secretary Timothy Geithner, the trade groups warn that "a vibrant housing market will not be possible unless new homeowners enter the market." They point out that a $1 billion capital infusion into the MI companies would allow lenders to finance $80 billion in purchase mortgages that could be sold to Fannie Mae and Freddie Mac. (By charter, the GSEs cannot finance mortgages with less than 20% down unless they are credit enhanced with private mortgage insurance.)"This increased level of financing is critical to meet the demands of potential homeowners, restore growth in the market and reduce the excess supply of homes," the five trade groups say. The Financial Services Roundtable, Mortgage Bankers Association, National Association of Home Builders, National Association of Hispanic Real Estate Professionals and Asian Real Estate Association of America signed the letter. GSE regulator James Lockhart also has called on Treasury to provide support for the capital-constrained private MIs.

The Department of Justice is moving closer to forming a national mortgage fraud task force to investigate and prosecute real estate and mortgage related crimes, according to government officials familiar with the matter. The effort, if it comes to fruition, would involve state and local and federal prosecutors working together "to find trends and bring cases," said one government official talking on background. Presently, DOJ has a "working group" on mortgage fraud that is an informal effort and focuses more on mortgage issues and trends, as opposed to specific cases. David Fleck, who recently stepped down as deputy District Attorney in charge of real estate fraud for Los Angeles, said he has talked to DOJ about the task force, but noted that the agency has yet to make a final decision. (Once Lanny Breuer is confirmed by the Senate to head DOJ's criminal division a final decision on the task force is anticipated.) Speaking at SourceMedia's servicing show in Dallas this week, Mr. Fleck noted that Los Angeles has 20 detectives working on real estate fraud related investigations but added that, "We're just scratching the surface."

Zacks Equity Research has named UDR Inc., a multifamily REIT, as its "Bull of the Day" for April 7. The Highlands Ranch, Colo.-based real estate investment trust owns, operates, acquires, develops and renovates middle-market apartment communities. Although it has assets across the country, UDR's exposure is mostly in the Western and Mid-Atlantic states. The Chicago research firm said "2009 will be a more difficult year for multifamily REITs. The lack of job growth will force landlords to cut rents and offer more concessions. In a recessionary environment, we would stick to well-capitalized REITs." Zack noted that UDR has plenty of liquidity to take care of 2009 debt maturities and fund its development pipeline. "The current yield is attractive, and the company does not anticipate paying any portion of the 2009 common dividend in stock, as several REITs are now doing. We like the multifamily sector going forward, as residential landlords will continue to benefit from the national housing meltdown."

A housing recovery isn't likely to begin until the middle of next year at the earliest, according to the chief economist for the trade group representing U.S. and Canadian cement makers. Edward Sullivan of the Portland Cement Association, Skokie, Ill., said for the market to begin rebounding, there must be a "meaningful recovery" in sales and a corresponding reduction in unsold inventory. "Housing construction activity cannot begin until sales recover," Mr. Sullivan said in PCA's latest Economic Research report. "Increased foreclosures, coupled with deteriorating labor markets and tight credit conditions, will delay significant sales activity until mid-2010. Improvements in housing starts are not expected to be significant until 2011." The economist said that be expects the housing recovery bill, along with bank efforts to rewrite toxic mortgages, will help slow foreclosures over the next 18 months. But he also predicted that the weak labor market and declining house prices will lead to a net increase in repossessions, which will be added to the housing inventory. Furthermore, Mr. Sullivan said, unless Uncle Sam injects more cash into the banking system, tighter credit standards will serve as another drag on housing. "Under such a scenario, the housing recovery and overall economic recovery could be delayed significantly," he said.

The owner of a company that provides mortgage financing to the health care industry is purchasing a troubled state-chartered commercial bank in Maryland. Jack Dwyer, a Baltimore businessman and owner of Capital Funding Group Inc., is acquiring AmericasBank Corp., Towson, Md., in a cash transaction and at no cost to the FDIC. Financial terms of the deal were not disclosed. After the close of the transaction, the newly formed Capital Funding Bancorp intends to inject more than $35 million in capital into the bank, which has $146 million in assets. Mr. Dwyer said AmericasBank is a good platform that Capital Funding Group can use to expand its health care related mortgage lending program. Last summer AmericasBank closed its residential mortgage banking operation but continues to make mortgage loans through its bank branches. Its stock was delisted from Nasdaq and now trades over the counter. It closed on April 6 at $0.10 per share. At the end of September, AmericasBank signed an agreement with the Federal Reserve Board giving it 60 days to submit a capital plan and a written business plan for 2009 to improve earnings and the overall condition of the bank.

The government's ongoing purchases of Fannie Mae and Freddie Mac debt and mortgage securities have "not completely" overcome investor concerns about the financial condition and future of the mortgage giants, according to a Federal Reserve governor. "Indeed, even after extraordinary actions, mostly recently by the Federal Reserve, to improve liquidity and market functioning in the agency debt markets, confidence in the GSEs is less than markets were long accustomed to before this period," said Gov. Kevin Warsh. The Fed governor blames the financial "Panic of 2008" for a loss of investor confidence and for a deeper and longer recession. "We are witnessing a fundamental reassessment of value of every asset everywhere in the world," he told a meeting of the Council of International Investors. He expects "elevated levels of volatility and unwillingness by many investors to participate in certain asset markets at virtually any price." The Fed governor also pointed out that household wealth fell by $11 trillion or 18% in 2008. And falling house prices accounted for much of that decline. "Homeownership is no longer perceived to ensure low-risk capital appreciation," he said. Mr. Warsh counseled that it will be a while before positive gross domestic product numbers are seen. "Though the pace of decline is likely to abate, I am decidedly uncomfortable forecasting a sharp and determined resumption in growth in the coming quarters."

Flagstar Bank of Troy, Mich., will reconfigure its wholesale mortgage sales operations, going from 12 sales regions down to eight. As part of the changes, Dave Bowers, executive vice president and national sales manager, will leave his post and move to Atlanta to manage Flagstar's new South region. His successor as executive vice president and national sales manager is Gregory Lutin. Mr. Lutin has been with Flagstar since 1994, serving in several management positions, most recently as senior vice president of the South division. He will relocate to Flagstar's headquarters in Troy. Other changes at Flagstar include Tim Kalaris managing the Northeast region, Linda Bissell remains as head of the Great Lakes region, Paul Wyner in charge of the North Central region, Rich Hoffman remains as regional manager of the Sunshine region, Rob Mally will oversee the Pacific Southwest region, and Mike Fowler and Kurt Mason are new managers of the Mountain and Northwest regions, respectively. The changes will be effective May 1.

Flagstar Bank, Troy, Mich., will reconfigure its wholesale mortgage sales operations, going from 12 sales regions down to eight. As part of the changes, Dave Bowers, executive vice president and national sales manager, will leave his post and move to Atlanta to manage Flagstar's new South region. His successor as executive vice president and national sales manager is Gregory Lutin. Mr. Lutin has been with Flagstar since 1994, serving in several management positions, most recently as senior vice president of the South division. He will relocate to Flagstar's headquarters in Troy. Other changes at Flagstar include Tim Kalaris managing the Northeast region, Linda Bissell remains as head of the Great Lakes region, Paul Wyner in charge of the North Central region, Rich Hoffman remains as regional manager of the Sunshine region, Rob Mally will oversee the Pacific Southwest region, and Mike Fowler and Kurt Mason are new managers of the Mountain and Northwest regions, respectively. The changes will be effective May 1.

Fannie Mae said its refinancing volume totaled $77 billion in March, up from $41 billion in the previous month, as borrowers took advantage of lower mortgage rates and a new flexible refinancing program. The mortgage giant it has not seen this level of activity since refinancing boom of 2003. "We anticipate that volumes will increase even more as millions of additional homeowners become eligible to refinance" under the Home Affordable Refinance initiative, according to Fannie executive vice president Tom Lund. Under that initiative, Fannie and Freddie Mac are expected to use flexible underwriting to refinance mortgages they already own or guarantee. Borrowers with loan-to-value ratios between 80% and 105% can refinance at current market rates under this initiative. Mortgage insurance requirements have been waived on those refinancing transactions. Existing insurance policies will be transferred to the new loan, however. Lenders and brokers can use Fannie's Desktop Underwriter to process those refinancing applications.

A new Southeast Mortgage Conference will take place on Oct. 7 to 9 in Destin, Fla. According to the sponsors of the show, the new multistate 2009 conference will aid mortgage professionals in adapting to ever-changing legislative and regulatory rules that shape the industry's future and the way it does business. The event is set to include education and networking opportunities as well. The show is co-hosted by six state mortgage broker trade groups from Alabama, Arkansas, Florida, Georgia, Mississippi and Tennessee. For more details, visit http://www.semc2009.com.

Gramercy Capital Corp., New York, has entered into an amendment and compromise agreement with KeyBank NA, the administrative agent for a group of lenders, to settle and satisfy at a discount pre-existing loan obligations of approximately $174.6 million.Gramercy made a cash payment of $45 million and agreed to pay over time an additional $15 million from a portion of free cash flow generated by its collateralized debt obligations. Furthermore, Gramercy satisfied all of its obligations under a $9.5 million master repurchase facility with JPMorgan Chase Bank N.A. by making a cash payment of approximately $1.9 million to the bank. JPMorgan assumed full ownership and control of, and responsibility for, the related loan asset. Gramercy and its advisors continue to negotiate amendments of its credit facility with Wachovia Bank NA, and its master repurchase facility with an affiliate of Goldman, Sachs & Co.

Kimco Realty Corp., New Hyde Park, N.Y., has priced its public offering of 91,500,000 shares of its common stock at $7.10 per share.The company has granted the underwriters an option to purchase up to an additional 13,725,000 shares to cover over-allotments, if any. Merrill Lynch & Co., Deutsche Bank Securities Inc. and UBS Investment Bank are acting as joint book-running managers for the offering. Citi, RBC Capital Markets, Scotia Capital and Wachovia Securities are acting as joint lead managers. Barclays Capital, CIBC World Markets and Morgan Keegan & Company, Inc. are acting as co-managers. Subject to customary conditions, the offering is expected to close on or about April 8, 2009. The company intends to use the net proceeds from this offering, which are expected to be approximately $623.6 million (without giving effect to any exercise of the underwriters' over-allotment option), for debt repayment and for general corporate purposes. The pricing took place prior to the markets opening on April 3. The day before, Kimco closed at $7.49 per share. On April 3, it opened at $8.68 per share.

With the unsecured bond market closed for nearly all issuers, U.S. equity real estate investment trusts will likely continue to use a variety of tools at their disposal in order to maintain adequate liquidity, according to a new special report from Fitch Ratings.In the report, entitled, "U.S. Equity REIT Liquidity Update: The Clock is Ticking," Fitch notes that Fannie Mae and Freddie Mac financing remains a key source of capital to the multifamily sector. In obtaining this financing, apartment REITs are faced with the challenge of maintaining strong unencumbered asset coverage metrics while weakening liquidity, or strengthening liquidity and likely weakening quality of the unencumbered pool remaining for unsecured bondholders. Also, many REITs have repurchased unsecured bonds in the open market at discounts to par. While this may be an opportunistic investment opportunity to reduce leverage, such transactions, if large enough, can weaken liquidity if longer-dated bonds are repurchased, according to Fitch. Additionally, many REITs have paid common dividends through a combination of cash and the issuance of new common shares to preserve liquidity.

Fannie Mae has priced a new $4 billion issue of three-year 1.875% Benchmark Notes at 99.874 to yield 1.918% at a spread of 74 basis points over a comparable U.S. Treasury issue. The Treasury spread is specifically compared to the 1.375% Treasury due March 15, 2012. Barclays Capital Inc., Deutsche Bank Securities Inc. and J.P. Morgan & Co. are the joint lead managers. The co-managers include Cabrera Capital Markets LLC, Credit Suisse Securities (USA) LLC, FTN Financial Capital Markets and Morgan Stanley & Co. The Committee for Uniform Securities Pricing number for the Benchmark Notes issue is 31398AWK4. Its payment dates are each April 20 and Oct. 20, starting this month.

Iberiabank Corp., Lafayette, La., is changing the name of its Little Rock, Ark.-based banking and mortgage operations to reflect the parent company. Effective May 4, Pulaski Bank and Trust Co. will become Iberiabank FSB, while Pulaski Mortgage Co., will become Iberiabank Mortgage Co. Pulaski was acquired in January 2007. The company has recently recruited commercial banking teams in Baton Rouge, La., Memphis, Mobile, Ala., New Orleans and Houston. It intends to open full-service offices in Mobile and Houston under the Iberiabank FSB name. Daryl G. Byrd, president and chief executive, said, "Expanding our company under the thrift charter also allows us tremendous flexibility to grow quickly and with great ease into new markets."