Originations

Aries Hospitality Group LLC, Chicago, has formed an alliance with HI Group LLC, a commercial real estate investment banking firm with offices in Chicago and New York, according to Aries Hospitality's mortgage banking affiliate, Aries Capital. The alliance will provide hotel investment banking to source, process, and close mid-market and upscale hotel equity and sales transactions in the United States, Europe, and the Caribbean, Aries said. "Hotel transactions today are larger and more complicated than ever," said Neil D. Freeman, chairman and chief executive officer of Aries Capital. "Successful execution requires an in-depth knowledge of brands, capital sources, and development. Our professionals have the expertise and relationships with domestic and international investors to ensure that the goals in each transaction are achieved." The companies can be found on the Web at http://www.ariescapital.com and http://www.higroup.net.

Jones Lang LaSalle Inc., a Chicago-based firm specializing in financial and professional services, and The Staubach Co., a Dallas-based real estate services firm, have announced a $613 million merger agreement. Under the agreement, Jones Lang LaSalle will pay $123 million in cash and $100 million in stock at the close of the transaction, with the remainder to be paid in cash over five years. The pact also calls for potential earn-out payments of up to $114, subject to the achievement of certain performance levels, the companies said. The combined firm will operate under the Jones Lang LaSalle name. "The Staubach Company is recognized for exceptional tenant representation expertise and is a leading presence in markets throughout the United States," said Colin Dyer, chief executive officer of Jones Lang LaSalle, which can be found online at http://www.joneslanglasalle.com.

House prices may fall another 15% before they stabilize, and most of the drop will occur before the end of this year, according to the consensus view of economists on the American Bankers Association's economic advisory panel. "We are just about half way through the adjustment process in home prices," said Peter Hooper, chief economist at Deutsche Bank Securities and chairman of the ABA panel. He noted that the Standard & Poor's/Case-Shiller house price index shows house prices have fallen nearly 15% from the peak. "We have another 15% to go," Mr. Hooper said. The bank economists say they expect house prices to continue to decline well into the first half of 2009, but that the most precipitous drop will be in the second half of this year. The ABA can be found on the Web at http://www.aba.com.

Single-family housing starts fell 1% in May and were down 41% from the level recorded a year earlier, as the outlook for home sales continues to deteriorate. The U.S. Census Bureau reported that single-family housing starts declined from a seasonally adjusted annual rate of 681,000 in April to 674,000 in May. Builders are not seeing an improvement in the housing market, according to the latest National Association of Home Builders/Wells Fargo housing market survey. NAHB chief economist David Seiders says he does not expect housing starts to hit bottom until early next year. But his forecast has called for home sales to bottom out soon. "I may be compelled to kick that out a bit further," he told reporters. Mr. Seiders noted that mortgage rates have gone up as a result of the Federal Reserve's attempt to beat down inflation expectations. But the chief economist said he does not expect the Fed to tighten monetary policy this year. "I think we are going to be seeing further economic weakness," Mr. Seiders said. "I am hoping this recent surge on long rates will be easing back down within the next few weeks." If not, it could be a "big problem," he added.

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."

An analysis of loan servicing data by the Office of the Comptroller of the Currency has found that loss mitigation actions exceeded new foreclosure starts by a nearly two-to-one margin among subprime borrowers in March. Starting in February, the nation's nine largest OCC-regulated mortgage servicers began submitting some historical and monthly servicing metrics to the agency. Those lenders account for 23 million loans, or about 40% of all outstanding mortgages, the OCC said. The agency said overall credit quality remained "relatively satisfactory and relatively stable" over the six-month period ended in March. While the percentage of loans in the foreclosure process crept upward to 1.23% during that period, the number of new foreclosures peaked in January and fell in March, the OCC said. The OCC can be found on the Web at http://www.occ.treas.gov.

Although the government's mortgage program for military veterans continues to be hampered by a $417,000 loan limit, it is still going like gangbusters, according to the head of the Department of Veterans Affairs' loan guaranty service. In May alone, the volume of loans backed by the VA was up more than 50% over that of a year earlier, Judith Caden told the Mortgage Bankers Association's Government Housing and Loan Production Conference in Washington. Ms. Caden also said that California, a state where practically no VA-guaranteed mortgages were written in fiscal year 2007, is now among the agency's 10 most active states. But despite the resurgence in activity, the agency is unable to help veterans who are looking to the VA as a way out of their subprime loans. Because of what Ms. Caden called "a glitch" in the law, VA borrowers who want to refinance must have a 10% equity stake in their properties and cannot borrow more than $144,000. Calling both requirements impractical at a time when many subprime borrowers in high-cost areas are "upside down" in their current loans, Ms. Caden said her agency favors their elimination. "We'd like to see the limit raised and the percentage go away," she said.

The new head of the Department of Housing and Urban Development says the short seven months he will have on the job is enough time to "make a profound, powerful difference" in what has become the "American nightmare." In his first public appearance since being sworn in, HUD Secretary Steve Preston told the Mortgage Bankers Association's Government Housing and Loan Production Conference in Washington that "where there's urgency and commitment, there is terrific opportunity." What lawmakers, the administration, and the mortgage business do now to address the rising tide of defaults and foreclosures "can set the market on a firm foundation for future growth," said the former head of the Small Business Administration, who had been on the job at HUD for only four days. Calling on Congress to modernize the Federal Housing Administration and improve oversight of the housing government-sponsored enterprises, he said the "situation demands action now." And noting that the default situation will get worse before it gets better, Secretary Preston asked the industry to "continue to be aggressive" in reaching out to troubled borrowers.

Five classes of subprime mortgage pass-through certificates from two GSAMP Trust transactions have been downgraded by Fitch Ratings. The downgrades were as follows: GSAMP Trust 2002-HE2, classes A-1 and A-2, from AAA to AA; and GSAMP Trust 2002-NC1, class M-1, from AA to A, class M-2, from A to BB, and class B-1, from BBB to C/DR6. Fitch also affirmed the ratings on seven classes from three GSAMP subprime transactions.

Commercial and multifamily mortgage delinquencies rose in the first quarter for most major investor groups but remained near record lows, according to the Mortgage Bankers Association. The MBA reported delinquency rates for the five largest investor groups: commercial banks and thrifts, commercial mortgage-backed securities, life insurance companies, Fannie Mae, and Freddie Mac. The 30-plus-day delinquency rate on loans held in CMBS rose 0.08 percentage points to 0.48%, while the 60-plus-day delinquency rate on loans held in life company portfolios remained flat at 0.01%, the MBA said. The 60-plus-day delinquency rates on multifamily loans held or insured by Fannie Mae or Freddie Mac rose to 0.09% for Fannie and to 0.04% for Freddie. The 90-plus-day delinquency rate on loans held by banks and thrifts insured by the Federal Deposit Insurance Corp. rose 0.21 percentage points to 1.01%, the association reported.

Reverse Mortgage Solutions, Spring, Texas, has rolled out RM Compass, a loan origination system that it called the first front-end product built from the ground up specifically for the reverse mortgage origination process. RM Compass, an Internet-based Application Service Provider software system, is designed for both established reverse mortgage originators and new players, the company added. "This is one of those magical times in our industry that comes along only rarely when a new growth sector, customer demographics, and necessary technology combine to create an unparalleled opportunity for the right companies," said Robert D. Yeary, chairman and chief executive of RMS. This is especially important, he declared, "when you consider that the difference between originating a forward and reverse mortgage is like night and day, because of the former's counseling requirements, an extended 'gestation' period, more disclosures, complex calculations, and more." RMS chief information officer Kevin Gherardi added, "With RM Compass, originations can be fully integrated with a provider's servicing components in a real-time solution that exceeds what previously has been available."