Originations

Simon Property Group Inc., Indianapolis, has announced that it will sell $1.5 billion of senior notes of its majority-owned partnership subsidiary, Simon Property Group LP, at a yield of 235 basis points above their U.S. Treasury benchmarks. The offering consists of $700 million of 5.3% notes due 2013 and $800 million of 6.125% notes due 2018. The joint book-running managers of the offering are Banc of America Securities LLC, Citi Markets & Banking, Deutsche Bank Securities, and Goldman, Sachs & Co. Simon can be found online at http://www.simon.com.

The Market Composite Index, an overall measure of mortgage applications, rose from 655.4 to 674.4 on a seasonally adjusted basis during the week ended May 9, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. On an unadjusted basis, applications increased 2.9% on the week and were down 1.1% from the level recorded a year earlier. The Purchase Index fell from 381.3 to 378.5 on a seasonally adjusted basis, while the Refinance Index climbed from 2273.8 to 2422.1. Refinancings represented 48.7% of total applications, up from 47.1% the previous week, while adjustable-rate mortgages accounted for 8.3%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages fell from 5.91% to 5.82%, and points (including the origination fee) increased from 1.12 to 1.23 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

Bank of America, the nation's largest second-lien lender, says it expects losses on its home equity portfolio to be higher than previous estimates. At a recent investors' conference, Liam McGee, president of the bank's global and small-business division, said losses on its second-lien (home equity) portfolio would be higher than an earlier estimate of 2.0%-2.5%. He cited ailing housing markets in California and Florida as being among the worst. According to the Alternative Products Quarterly Data Report, BoA was the largest second-lien lender in the fourth quarter, with originations of $18 billion. (Second-lien rankings for the first quarter will be ready shortly.) Speaking at the investors' conference, Mr. McGee also reported that the bank's purchase of Countrywide Financial Corp. is on track and is expected to close in the third quarter.

The second-quarter Core Mortgage Risk Index stands 16% higher than the level of a year ago, reflecting rising delinquency and foreclosure rates, flat or declining price appreciation, and slower job growth, according to First American CoreLogic, Sacramento, Calif. Among the largest 100 markets in the country, CoreLogic reported that the five with the highest risk are: Riverside-San Bernardino-Ontario, Calif.; Los Angeles-Long Beach-Glendale, Calif.; Sacramento-Arden-Arcade-Roseville, Calif.; Stockton, Calif.; and Miami-Miami Beach-Kendall, Fla. "As of March 2008, 33 states were experiencing year-over-year house price declines, up from 28 states in February, demonstrating how quickly home price declines appear to be spreading," the company reported. CoreLogic, a provider of mortgage risk assessment and fraud prevention systems, can be found on the Web at http://www.facorelogic.com.

The Senate has passed a flood insurance reform bill in a 92-6 vote that phases out subsidized premiums for certain commercial properties and vacation/second homes and requires properties protected by dams and levees to have flood insurance for the first time. The bill (S. 2284) also requires lenders to escrow flood insurance premiums and increases penalties on lenders that don't insure homebuyers in flood-prone areas. A House-passed bill expands the National Flood Insurance Program to offer dual coverage for flood and wind damage. The Senate overwhelmingly rejected such an expansion by a 73-19 vote. The Senate bill also forgives $17 billion in debt that the Federal Emergency Management Agency borrowed from the U.S. Treasury to pay flood claims after hurricanes Katrina and Rita in 2005.

Seven tranches from two First NLC Trust 2005 subprime transactions have been downgraded by Moody's Investors Service. The downgrades were as follows: First NLC Trust 2005-1, class M-12, from Baa2 to Ba1, and class M-13, from Baa3 to B1; and First NLC Trust 2005-2, class M-5, from A2 to Baa1, class M-6, from A3 to Baa2, class M-7, from Baa1 to Ba1, class M-8, from Baa2 to Ba3, and class M-9, from Baa3 to B2. Moody's attributed the downgrades to "an increasing proportion of severely delinquent loans." The collateral consists primarily of first-lien subprime mortgage loans.

Prices paid for single-family homes fell 7.7% in the first quarter from the level of a year earlier, the steepest decline ever recorded by the National Association of Realtors, which has been tracking sales for 26 years. The trade group did offer one piece of good news (if it can be deemed such): 48 out of 149 metropolitan statistical areas tracked (or 32.2%) showed higher median prices in the quarter. In the first quarter, the average median sales price was $196,300, compared with $212,600 a year earlier. The NAR reported that there were "very few jumbo loan originations" in the quarter, "so sales are much slower in high-cost areas." Lawrence Yun, chief economist for the trade group, added that, "Neighborhoods with little subprime exposure are holding on very well." According to preliminary figures compiled by National Mortgage News and the Quarterly Data Report, mortgage bankers funded less than $4 billion worth of subprime loans in the first quarter. The NAR can be found online at http://www.realtor.org.

Classes E and F of Mortgage Capital Funding Inc. multifamily/commercial mortgage pass-through certificates, series 1998-MC3, have been placed on review for possible downgrade by Moody's Investors Service. The actions were attributed to interest shortfalls related to the Comfort Inn--Marietta Loan that are expected to begin with the May 2008 payment date. The loan has been in special servicing since October 2001. "The master servicer, Capmark Finance Inc., has advanced approximately $2.0 million on this loan and intends to begin recovering its advances commencing with the May 2008 payment date," Moody's reported.

The credit crunch is causing the volume of apartment property sales to slow "sharply" and making it harder for apartment firms to access the debt and equity markets, according to the National Multi Housing Council's multifamily industry survey. The trade association reported that its Market Tightness Index, which measures changes in occupancy rates and rents, rose significantly, from 33 in January to 44 in April, as more respondents reported tighter conditions. The availability of debt funding for multifamily properties declined significantly, according to the NMHC's Debt Financing Index, which dropped from 45 in January to 22 in April. "The bursting of the for-sale housing bubble has greatly slowed the outflow of renters into ownership"," said Mark Obrinsky, the association's chief economist. "More than 80% of the survey respondents reported a decrease in the number of renters leaving to become homeowners." The survey's respondent pool consists of 87 chief executive officers and other senior executives in the multifamily industry who also serve on the NMHC's board of directors or advisory committee. The council can be found online at http://www.nmhc.org.

ALPS Holdings Inc., Denver, and Cohen & Steers, New York, have announced the launch of a global real estate exchange-traded fund. The fund, Cohen & Steers Global Realty Majors ETF, is advised by ALPS Advisers Inc. It will seek investment results that correspond to the performance of the Cohen & Steers Global Realty Majors Index, which comprises securities of companies that have been evaluated on management strength and track record, market position, the composition and quality of their real estate portfolios, and other factors, the companies said. The fund targets "75 industry-leading real estate companies from an initial universe of 500 that are located in developed markets across North America, Asia Pacific, and Europe," they said. The companies can be found on the Web at http://www.alpsetfs.com and http://www.cohenandsteers.com.

Guild Mortgage Co., San Diego, has announced the recent acquisition of Liberty Financial Group, a residential mortgage bank based in Bellevue, Wash. The terms of the transaction were not disclosed. Guild Mortgage was acquired in 2007 through a partnership between its senior management and that of McCarthy Capital, the company said. "McCarthy Capital's approach combines the stability we were looking for in a partner with the resources we needed for continued growth," said Mary Ann McGarry, Guild's president and chief executive officer. Liberty Financial originates nearly $1 billion of prime home loans annually via branches located mainly in Washington and Colorado, Guild reported. Guild Mortgage can be found on the Web at http://www.guildmortgage.com.

Federal banking regulators have closed ANB Financial after finding that the Bentonville, Ark., national bank was undercapitalized and likely to fail. The $1.9 billion-asset bank reported a $59 million loss in the fourth quarter, with nearly $400 million in noncurrent loans. Its parent, ANB Bancshares, closed its wholesale subprime lending business in March. The Federal Deposit Insurance Corp. arranged for Pulaski Bank and Trust Co., Little Rock, Ark., to take over the national bank's nine offices, along with $212.9 million in insured deposits and $39.2 million in uninsured deposits. The Little Rock bank also agreed to purchase $235.9 million of the failed bank's assets.

Freddie Mac lenders may be "unnecessarily" limiting credit in some areas because of an "overly broad interpretation" of the agency's declining-market policy, a Freddie executive says in a letter to the National Association of Realtors. Freddie Mac has advised its lenders to use the Office of Federal Housing Enterprise Oversight's housing price index to determine whether a property is in a market where prices are declining and the maximum amount of financing should thus be reduced by 5%. Freddie executive vice president Patricia Cook said the HPI should not be used as "conclusive evidence" that every market in a metropolitan statistical area is declining. "If a lender and/or appraiser determine that the prices in a particular area are actually stable or increasing, and sufficient supporting evidence is provided, the 5% reduction would not apply," Ms. Cook says in a letter to NAR president-elect Charles McMillan. Ms. Cook also says Freddie is working on a "job aid" suggested by the NAR to help lenders "apply our declining markets policy appropriately." Freddie can be found online at http://www.freddiemac.com, and the NAR can be found at http://www.realtor.org.

Federal Housing Administration single-family mortgage originations took off in the first three months of this year, as FHA applications doubled to 181,900 between Dec. 31 and the end of March, according to Department of Housing and Development data. The data also show that FHA-insured loans jumped by 64%, to 89,000, from December to March. Mortgage banking consultant Brian Chappelle estimates that FHA lenders are now taking 200,000 FHA mortgage applications per month and insuring 100,000 loans per month. There are concerns that the FHA might not be able to handle the increase in business. But Mr. Chappelle said the FHA direct-endorsement lenders manage the whole approval process. From an origination standpoint, "there are no backlogs because the lender controls the process," he said. Mr. Chappelle is with Potomac Partners in Washington.

The PMI Group Inc., a mortgage insurer based in Walnut Creek, Calif., has reported a net loss of $274.0 million ($3.37 per share) in the first quarter, compared with net income of $102.0 million ($1.16 per share) a year earlier. PMI attributed the loss chiefly to a net loss of $172.5 million in its U.S. mortgage insurance operations due to increases in paid claims, loss-adjustment expenses and additions to loss reserves, and an other-than-temporary impairment of its investment in FGIC. Net premiums earned in the U.S. MI operations totaled $207.8 million, up 7.2% from $193.8 million a year earlier, PMI reported. In PMI's international operations, PMI Australia reported record net income of $30.5 million for the first quarter, PMI Europe reported a net loss of $13.9 million, and PMI Asia reported net income of $2.7 million. PMI Group can be found on the Web at http://www.pmigroup.com.

Classes B-3 and B-4 of Countrywide mortgage pass-through certificates series 2003-44 have been placed on Rating Watch Negative by Fitch Ratings. Fitch also removed class A-3 of the deal and class 1-A-2 of series 2003-1 from Rating Watch Negative and affirmed the ratings on 32 classes in the two transactions. The collateral consists of mixed-term fixed-rate prime mortgages.

Stewart Information Services Corp., Houston, has revised its first-quarter 2008 results following the discovery of an agency defalcation. As a result of the fraud, the company took a pretax charge of $4.6 million, which affected its results on an after-tax basis by $3.0 million, or $0.16 per share. Stewart is now reporting a first-quarter loss of $25.2 million ($1.40 per share). On April 30, it reported a loss of $22.3 million ($1.24 per share).

The Federal Housing Administration will start charging upfront mortgage insurance premiums based on the borrower's credit score and downpayment starting July 14, according to the Department of Housing and Urban Development. Upfront premiums paid at closing will range from 1.25% to 2.25% under the new pricing schedule that will apply to all FHA loans. Currently all FHA borrowers pay a 1.5% upfront premium regardless of risk. By charging slightly higher premiums based on credit risk, HUD expects to create a more financially sound FHA program and reach more borrowers struggling to keep up with their payments on high-cost subprime mortgages. Risk-based pricing will also be used for refinancing delinquent borrowers under the FHA Secure program starting in July. HUD is expanding the FHA Secure program so that borrowers who have missed two or three payments in the previous 12 months can be refinanced into FHA-insured mortgages. The risk-based pricing notice and a mortgagee letter with the underwriting standards for the expanded FHA Secure program are posted on the FHA website, which can be found at http://www.fha.gov.

American International Group Inc., New York, has reported a net loss of $7.81 billion in the first quarter, and its United Guaranty mortgage insurance subsidiary took an operating loss of $352 million due to housing and capital market disruptions. Analysts at Fitch Ratings, which downgraded AIG's issuer default and senior debt ratings from AA to AA-minus in response to the earnings results, said they believe AIG was primarily exposed to housing finance-related risks through $61 billion of structured finance collateralized debt obligations backed mainly by subprime U.S. residential mortgage-backed securities in its $469 billion portfolio of notional credit derivatives. AIG said the operating loss in its MI unit reflected "increased losses incurred in both the domestic first- and second-lien businesses" and occurred despite a 14.3% jump (from the level recorded a year earlier) in domestic first-lien net premiums written during the quarter. AIG also announced the commencement of offerings of common stock and equity units totaling $7.5 billion. If the company completes the capital raise successfully, Fitch said it plans to remove AIG's ratings from Rating Watch Negative and affirm them with a negative outlook. Fitch plans to lower AIG's ratings by one notch if the capital raise is not successful.

Six weeks after announcing its intention to pare $45 billion in mortgage assets, Citigroup said Friday that it will shed $500 billion in assets overall. No details were given at deadline time. The sales were expected to occur in "nonlegacy" businesses outside Citi's core consumer franchise, but also might entail more mortgage-related cuts. Meanwhile, Citigroup said May 7 that it would close mortgage offices in Orange and Irvine, Calif., eliminating 419 jobs, as part of a previously announced consolidation of its home lending businesses amid the housing and credit crisis. According to The Orange County Register, Citigroup is shutting down most of Argent Mortgage, which it bought from billionaire Roland Arnall last year. (Mr. Arnall died this spring.) Overall, Citi is cutting 1,860 jobs nationwide and keeping just 70 sales positions.