Originations

Two classes of Credit Suisse First Boston Mortgage Securities Corp. commercial mortgage securities trust series 2006-TFL2 have been placed on review for possible downgrade by Moody's Investors Service. The affected securities are classes MW-A and MW-B. The rating actions were due to slower-than-expected condominium sales and a lower sales price per square foot at Metropolitan Warner Center, Moody's said. The rating agency can be found on the Web at http://www.moodys.com.

Class L of CS First Boston Mortgage Securities Corp. pass-through certificates series 2007-TFL2 has been downgraded from BBB-minus to BB-minus by Fitch Ratings. Fitch also affirmed the ratings of 26 classes in the transaction. The rating agency attributed the downgrade to the failure of the Resorts Atlantic City loan to perform as well as expected. Nearly half of the deal (49.1%) consists of loans collateralized by hotel properties. the remainder consists of loans on office properties (24.0%), health care properties (16.0%), and land (10.9%).

Two classes of Lehman Brothers-UBS commercial mortgage pass-through certificates series 2006-C1 have been downgraded by Fitch Ratings. Class M was downgraded from BB to BB-minus, and class N was downgraded from BB-minus to B-plus. Fitch also affirmed the ratings of 28 classes in the transaction. The rating agency attributed the downgrades to expected losses on the six assets in special servicing, five of which are real estate owned. The largest of the specially serviced loans is the Country Inn and Suites in Omaha, Neb.

Seven classes of notes issued by one collateralized debt obligation linked to subprime residential mortgage-backed securities has been downgraded by Fitch Ratings. All the downgraded classes were removed from Rating Watch Negative. The affected securities are as follows: seven classes from Bluegrass ABS CDO III Ltd., a cash flow structured finance CDO. The downgrade was attributed to collateral deterioration in subprime RMBS and structured finance CDOs with underlying exposure to subprime RMBS.

Commercial real estate markets have not yet begun their rebound to market equilibrium, according to the 2Q 2008 SIOR Commercial Real Estate Index, compiled by the Society of Industrial and Office Realtors in association with the National Association of Realtors. In the survey, 83% said their local markets are feeling the impact of the decline in the national economy -- 59% higher than a year ago. Leasing activity is down, according to 75% of respondents, while 23% believe virtually no new construction is going on in their marketplace, the SIOR reported. Half the respondents predict a 1%-15% decline in activity for the third quarter. The index indicates that the office market has been hard hit, scoring only 67.8 points, down almost 48 points from a year ago. The industrial market index, at 68.5 points, is more than 53 points off its first-quarter 2006 high. Underperforming all regions, the Midwest tallied a score of 73.1 -- the lowest index value for the second quarter. Respondents from the South, with a score of 84.6, were the most optimistic about the next three months. The West, weighing in with a score of 68.4 points, experienced the greatest decline in positive attitudes regarding the office and industrial markets.

Omega Commercial Finance Corp., Miami, has announced the formation of Omega Opportunity Fund I LLP, which will focus on identifying distressed U.S. and Canadian commercial real estate development projects that have been delayed or temporarily halted. The fund's strategy will be "optimize development-stage projects and, upon their completion, produce a high-quality stabilized asset," Omega said. Because the cost of capital to borrowers will exceed standard bank rates, the fund's exit strategy is to enable Omega's lending arm to structure the permanent financing, the company said. Omega can be found on the Web at http://www.omegacommercialfinancecorp.com.

Fifteen classes of notes issued by two collateralized debt obligations linked to subprime residential mortgage-backed securities have been downgraded by Fitch Ratings. All the downgraded classes were removed from Rating Watch Negative. The affected securities are as follows: eight classes from Fourth Street Funding Ltd./LLC and seven classes from Jupiter High-Grade CDO VII Ltd./Inc. Both are cash CDOs. The downgrades were attributed to collateral deterioration in subprime RMBS and structured finance CDOs with underlying exposure to subprime RMBS.

Liquidity pressures are limiting the ability of asset managers to remove underperforming loans from U.S. commercial real estate loan CDOs, according to Fitch Ratings. The rating agency said its delinquency index for CREL collateralized debt obligations increased to 1.46% in July, up from 0.36% in October 2007 when Fitch began tracking the numbers. Karen Trebach, a Fitch senior director, said the CREL CDO index has remained relatively low partly because asset managers had been removing underperforming loans, but that many now face capital constraints that will hamper their ability to keep doing so. "Reduced CDO cushions are becoming more commonplace with the dual pressures of reduced liquidity and increased delinquencies," Ms. Trebach said. "Constrained liquidity may also lead to more managers' modifying and extending loans rather than repurchasing them, which, if not merited, may only serve to delay the possible realization of losses on these loans." Fitch can be found on the Web at http://www.fitchratings.com.

The percentage of first-time buyers in California able to afford an entry-level home rose to 48% in the second quarter, compared with 24% a year earlier, according to the California Association of Realtors. The minimum household income needed to purchase an entry-level home at $329,120 in California stood at $62,870 in the second quarter, based on an adjustable interest rate of 5.69% and assuming a 10% downpayment, according to CAR's First Time Buyer Housing Affordability Index. (First-time buyers typically purchase a home equal to 85% of the prevailing median price.) The monthly payment, including taxes and insurance, stood at $2,100. At 68%, the High Desert region was the most affordable area in the state, and the San Francisco Bay area was the least affordable, at 32%, the association reported. CAR can be found on the Web at http://www.car.org.

Apollo Real Estate Advisors, New York, has announced the raising of more than $300 million of additional capital for its debt investment fund, Apollo Real Estate Finance Corp. Apollo said it increased overall capital for the fund from $621 million to $930 million through the formation of AREFIN Co-Investment Corp. The fund originates loans for development, redevelopment, and repositioning and invests in whole loans, B-notes, and mezzanine loans. Bradford Wildauer, an Apollo partner who oversees the firm's U.S. debt investments, said the new entity was formed to accommodate the growing deal flow and to handle loan commitments of up to $250 million. "The new vehicle gives us the ability and the flexibility to handle large portfolio transactions," he said. Apollo can be found on the Web at http://www.apollorealestate.com.

The Market Composite Index, an overall measure of mortgage applications, fell from 425.9 to 419.3 on a seasonally adjusted basis during the week ended Aug. 15, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. The Purchase Index fell from 315.2 to 314.0 on a seasonally adjusted basis, while the Refinance Index declined from 1074.6 to 1034.5. Refinancings represented 34.8% of total applications, down from 35.2% the previous week, while adjustable-rate mortgages accounted for 8.0%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages fell from 6.57% to 6.47%, and points (including the origination fee) decreased from 1.14 to 1.10 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

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.