Originations

The fundamentals in the commercial real estate market remain healthy, according to the National Association of Realtors.A record $325 billion was invested in commercial real estate in the first 10 months of 2007, up from $306.8 billion for all of last year, the NAR reported in its latest Commercial Real Estate Outlook. "Although vacancy rates remain relatively low for all sectors, they are expected to rise slightly in the office and industrial markets during the coming year because much of the space being absorbed is in high-quality buildings or is built to suit," said NAR chief economist Lawrence Yun. "As a result, there is a fair amount of older space on the market, particularly in the industrial sector where obsolescence is a factor, although industrial rents are showing healthy gains. Vacancy rates in the retail and multifamily sectors are projected to tighten in 2008, with rents rising in all sectors." The association can be found on the Web at http://www.realtor.org.

Credit One Financial Solutions, Newark, Del., has announced the formation of Marble Arch Home Loans in conjunction with GB Mortgage to offer consumers more debt consolidation options.The joint venture will provide "a full spectrum" of such options that offer advantages over the transfer of debt to a new credit card, according to Joe DePaulo, Credit One's chief executive officer. "We can now offer customers the option of using the power of their homes to get the most competitive rates available," he said. Marble Arch can be found on the Web at http://www.marblearchhomeloans.com.

Equifax Inc., Atlanta, has introduced a loan modification system aimed at streamlining the determination of who qualifies for assistance under the HOPE NOW alliance of counselors, servicers, investors, and other mortgage market participants.HOPE NOW recently developed a plan to help financial institutions direct borrowers into four categories: those eligible for refinancing; those eligible for a loan modification; those who need intensive analysis of their debts and income; and those who can afford the higher reset rate and therefore require no assistance. "Leveraging the power of our vast data and advanced analytics, we are equipping lenders with a systematic solution that offers a clear and concise way to segment their portfolios, evaluate loan modification requests, and streamline the qualification process," said Dann Adams, president of U.S. consumer information solutions at Equifax. the company can be found on the Web at http://www.equifax.com.

The average 30-year fixed mortgage rate rose from 6.11% to 6.14% over the seven-day period ended Dec. 20, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate rose from 5.78% to 5.79%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages climbed from 5.89% to 5.90%, and the average rate for one-year Treasury-indexed ARMs rose from 5.50% to 5.51%, Freddie Mac reported. Fees and points averaged 0.4 of a point for fixed-rate mortgages, 0.5 of a point for hybrid ARMs, and 0.6 of a point for one-year ARMs. "Stronger-than-expected inflation reports and retail sales in November put upward pressure on long-term interest rates late last week," said Frank Nothaft, Freddie Mac's chief economist. "However, ensuing data releases suggested further weakness in the housing market over November and December and allowed interest rates to drift back down. The net effect left mortgage rates little change this week." A year ago, the average 30-year and 15-year fixed rates were 6.13% and 5.89%, respectively, and the average hybrid and one-year ARM rates were 5.96% and 5.44%, Freddie Mac said. Freddie can be found online at http://www.freddiemac.com.

The ailing NovaStar Financial, one of the last of the remaining subprime shops, says its co-founder, chief executive, and chairman Scott Hartman will resign effective Jan. 3.Also departing is Greg Metz, senior vice president and chief financial officer. Lance Anderson, another co-founder who serves as president and chief operating officer, will assume the CEO and chairman duties. Vice president Rodney Schwatken will assume the CFO duties. Messrs. Hartman and Anderson founded the publicly traded real estate investment trust in 1996. NovaStar recently sold its $15 billion servicing portfolio (estimated) to an affiliate of Morgan Stanley & Co. for $175 million in cash. NovaStar is no longer funding subprime loans and, like many nonconforming funders, has laid off most of its production staff. It can be found online at http://www.novastarmortgage.com.

The credit squeeze has found its way to the market where builders and developers raise money to buy land, develop it, and build houses, according to the latest economic report from the National Association of Home Builders.Two out of every five builders responding to a recent survey said the availability of construction financing for single-family houses has worsened since the middle of the year, with the decline showing up most commonly as a tightening in allowable loan-to-value ratios. About a fifth of the respondents -- most commonly larger builders and those located in the West -- also said they had been asked by their lenders to pay down a portion of their land acquisition loans because the value of the ground had declined since the loans were originated. The NAHB's economists said the stiffer stance taken by land acquisition, development, and construction lenders was not unexpected. "Some tightening in AD&C markets has been virtually inevitable in view of the major downswing in home sales, the major upswing in inventories of unsold homes, and associated weakening in prices of both homes and buildable land in many parts of the country," they said in the latest Eye on the Economy newsletter. The NAHB can be found online at http://www.nahb.com.

Barclays Bank of London, which lent $400 million to two subprime hedge funds managed by Bear Stearns & Co., has sued the Wall Street firm, charging that Bear misled it about the performance of the funds.The funds -- High-Grade Structured Credit Strategies Fund, and High-Grade Structured Credit Strategies Enhanced Leverage Fund -- filed for bankruptcy protection in the Cayman Islands this summer. Barclays is owed money by the firms. The funds were managed by two Bear executives: Ralph Cioffi and Matthew Tannin. Mr. Cioffi recently left Bear. At deadline time, Bear Stearns had not commented on the suit. The failure of the funds is the subject of a criminal probe and an investigation by the Securities and Exchange Commission.

Bear Stearns & Co. posted an $854 million loss in the fourth quarter and increased its provision for subprime writedowns to $1.9 billion, a 60% hike from its previous damage estimate.Bear was a major player in the subprime asset-backed securities market, funding nondepository mortgage bankers, buying their loans, and then securitizing them. Bear Stearns currently owns a nonprime shop in Texas called EMC Mortgage. The Wall Street firm made headlines this summer when two subprime-related hedge funds it had started filed for bankruptcy protection. The London-based Barclays Bank -- which had lent $400 million to the funds -- sued Bear on Wednesday, saying the Wall Street firm misled it about the funds' performance. Bear Stearns can be found online at http://www.bearstearns.com.

Class J of GMAC Commercial Mortgage Securities Inc. series 1999-C1 mortgage pass-through certificates has been downgraded from B-minus/DR1 to CCC/DR2 by Fitch Ratings.Fitch also affirmed the ratings on nine other classes in the transaction. The downgrade was due to increased loss expectations for certain specially serviced loans and a greater number of Fitch loans of concern since its last rating action.

Twenty-three classes of mortgage-backed securities from four issuers have been downgraded by Fitch Ratings as a result of changes to its subprime loss forecasting assumptions.Fitch also placed two classes on Rating Watch Negative and affirmed the ratings on classes with outstanding balances of about $2.4 billion. Securities affected by the latest downgrades were as follows: 11 classes from two issues of HASCO mortgage pass-through certificates; six classes from two issues of Fieldstone mortgage pass-throughs; four classes of RASC mortgage pass-throughs; and two classes of NovaStar Mortgage Funding Trust mortgage pass-throughs. The rating actions were attributed to changes in Fitch's subprime loss forecasting assumptions that "better capture the deteriorating performance of pools from 2006 and late 2005 with regard to continued poor loan performance and home price weakness." The rating agency can be found online at http://www.fitchratings.com.

Grubb & Ellis Healthcare REIT Inc., Santa Ana, Calif., has increased its secured, revolving credit line with LaSalle Bank NA from $50 million to $80 million.The three-year line of credit bears interest (at the option of the real estate investment trust) at 1.50% above the London interbank offered rate; LaSalle's prime rate or the federal funds rate, whichever is greater; or a combination of these rates. The REIT is sponsored by Grubb & Ellis Co., which can be found on the Web at http://www.grubb-ellis.com.

Lender Lead Solutions, a reverse mortgage services company based in Melville, N.Y., has announced an expansion of its Flex Margin Advantage line of reverse mortgages.The new LIBOR 85 product, which boasts an 85-basis-point margin over the London interbank offered rate, pays a premium to the broker and provides greater liquidity to the consumer, the company said. The new product "has comparable principal limits to the CMT 100 and CMT 150, but provides a lower margin on the interest index" than products based on the constant-maturity Treasury, said David Peskin, chief executive officer of Lender Lead Solutions. The Flex Margin Advantage product line enables brokers to structure rates and loan terms on monthly Home Equity Conversion Mortgage loans to better fit the needs of consumers, according to the company. The reverse mortgage lender can be found online at http://www.lenderleadsolutions.com.

Zions Bancorp, Salt Lake City, says it will take a $94 million pretax charge in the fourth quarter because the collateral backing some of its investments in collateralized debt obligations is "impaired."According to a new filing with the Securities and Exchange Commission, Zions said the collateral backing the CDOs includes debt issued by residential mortgage real estate investment trusts, commercial mortgage-backed securities, home builder debt, and commercial income REITs. Seven REIT-related CDOs are of concern to the bank. (It has investments in 12.) Even though it expects to take a large hit, Zions said five of the seven CDOs are rated "investment grade."

The Market Composite Index, an overall measure of mortgage applications, fell from 811.8 to 653.8 on a seasonally adjusted basis during the week ended Dec. 14, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications decreased 21.3% on the week but were up 1.7% from the level recorded a year earlier. The Purchase Index fell from 472.0 to 422.2 on a seasonally adjusted basis, while the Refinance Index declined from 2879.8 to 2093.6. Refinancings represented 53.2% of total applications, down from 57.6% the previous week, while adjustable-rate mortgages accounted for 9.9%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages rose from 6.07% to 6.18%, and points (including the origination fee) fell from 1.17 to 1.12, for loans with 80% loan-to-value ratios, the association reported.

Home prices in 21 states showed a 12-month decline in October, according to the latest LoanPerformance Home Price Index."The overall picture continues to be mixed, however," said Damien Weldon, vice president of collateral and prepayment analytics for the San Francisco-based First American LoanPerformance. "Some states such as New York and Vermont, for example, actually show an increase in year-over-year home price appreciation compared to last month's LoanPerformance HPI release." The LoanPerformance HPI provides a comprehensive set of monthly home price indices and median sales prices covering 7,451 ZIP codes and 662 counties in all 50 states and the District of Columbia, the company said. The index incorporates more than 30 years of repeat sales transactions from the property database of its parent company, First American CoreLogic Inc. First American LoanPerformance can be found online at http://www.loanperformance.com.

The National Ethics Bureau, San Diego, has announced that it is now accepting real estate and mortgage professionals as members.Mortgage brokers who apply must pass a comprehensive seven-year background check for criminal, civil, and business violations, hold a valid mortgage broker license, and meet NEB continuing education requirements. In return, they will be authorized to use NEB branding and communication tools, the organization said. "The real estate industry is under stress due to the market downturn, credit crunch, and subprime crisis," said NEB chairman Steven R. McCarty. "Unfortunately, this has increased unethical sales practices and outright fraud, especially in subprime mortgage applications.... By qualifying for NEB membership, real estate professionals can take a bold step to restore public confidence and lay the groundwork for future growth." The organization can be found online at http://www.ethicscheck.com.

The National Association of Mortgages Brokers contends that the Federal Reserve Board's proposal requiring brokers to disclose their fees up front and in dollars simply places mortgage brokers at a competitive disadvantage to banks.The Fed proposal would hurt thousands of small brokerage shops that sell loans to investors just like banks, NAMB executive vice president Roy DeLoach said. He added that the NAMB is trying to determine whether the Fed complied with the Federal Regulatory Flexibility Act in measuring the impact of the proposal on small businesses. The Fed is issuing its Home Ownership and Equity Protection Act proposal for a 90-day comment period. One Washington mortgage banking consultant said the Fed's treatment of broker fees is similar to that of the Real Estate Settlement Procedures Act proposal expected to be issued for public comment by the Department of Housing and Urban Development in six to eight weeks. Like the HUD rule, the Fed's proposal would stop brokers from making money from interest rate movements. "The Fed is effectively implementing RESPA reform when it comes to yield-spread premiums and mortgage broker compensation," Potomac Partners' Brian Chappelle said. The NAMB can be found online at http://www.namb.org.

Morgan Stanley, a top player in home equity and asset-backed securities, took a $9.4 billion writedown in its fiscal fourth quarter, citing declining values in the subprime market.In November the Wall Street firm disclosed $3.7 billion in subprime writedowns, but on Wednesday it revealed $5.7 billion in additional charges. In its earnings statement, Morgan blamed the writedowns on "continued deterioration and lack of liquidity in the market for subprime and other mortgage-related securities." Roughly $7.8 billion of the writedowns are tied to subprime trading positions. For the quarter, Morgan posted a $3.58 billion operating loss. Morgan owns Saxon Mortgage, a nonprime wholesaler that recently cut back its loan menu. Morgan Stanley can be found online at http://www.morganstanley.com.

Nearly 202,000 foreclosure filings were reported nationwide in November, down 10% from the level recorded in October but up 68% from that of a year earlier, according to RealtyTrac, an online foreclosure marketplace based in Irvine, Calif.The nation's foreclosure rate stood at one foreclosure filing for every 617 households, the company said in its November 2007 U.S. Foreclosure Market Report. (Foreclosure filings include default notices, auction sale notices, and bank repossessions.) "The 10% drop in November is the first double-digit monthly decrease we've seen since April 2006," said James J. Saccacio, chief executive officer of RealtyTrac. "This could indicate that foreclosure activity has topped out for the year, but the test of whether this ceiling will hold will come at the beginning of next year -- when we anticipate that a seasonal surge in foreclosure filings and another possible wave of resetting mortgages could place further pressure on the housing market." RealtyTrac said Nevada, Florida, and Ohio recorded the highest foreclosure rates in November. The company can be found online at http://www.realtytrac.com.

Following the Senate's lead, the House has passed a seven-year extension of the Terrorism Risk Insurance Act, which is due to expire on Jan. 1.The House originally passed a 15-year extension of the federal government's terrorism insurance program that would have expanded federal backing to cover insurance for nuclear, biological, chemical, and radiological acts of terrorism. The Senate went with a simple seven-year extension with the blessing of the Bush administration, which caused a lot of friction. But House members reluctantly agreed to a compromise that allows for terrorism insurance to cover domestic acts of terrorism for the first time. The final bill also includes a study on insurance for nuclear, biological, chemical, and radiological acts of terrorism. "I am disappointed that the final TRIA bill omitted key elements of our stronger House legislation, but this is a solid compromise measure that will stabilize the market and ensure the ongoing availability of affordable terrorism insurance," said Rep. Carolyn Maloney, D-N.Y. President Bush is expected to sign the bill.