Originations

Commercial real estate prices were down 1.2% on a monthly basis in September, according to a commercial real estate index maintained by Moody's Investors Service.The decline in the Moody's/REAL Commercial Property Price Indices could indicate the beginning of a downturn in commercial real estate values following the recent liquidity crunch, Moody's said. "We expect to see the increased cost and reduced availability of debt put further pressure on commercial property prices over the coming months," said Tad Philipp, a managing director at Moody's. In the third quarter, office and apartment properties in particular saw price declines of 0.5% and 1.0%, respectively, from price levels in the second quarter. However, prices in the industrial and retail sectors continued to rise, gaining 3.0% and 2.6%, respectively, in the third quarter. Moody's also reported some softening in transaction volume in September, when volume declined from the peak levels of last summer. The rating agency can be found online at http://www.moodys.com.

Delta Financial Corp., Woodbury, N.Y., has entered into a letter of intent with an affiliate of Angelo, Gordon & Co. to receive new capital, according to a filing with the Securities and Exchange Commission.The letter of intent contemplates an aggregate financing of $100 million, including the amount outstanding under the $60 million residual financing facility established with Angelo Gordon in August. Delta will issue Angelo Gordon a new series of 10% senior secured notes with a maturity date of three years after issuance. The initial aggregate principal amount of the notes will be equal to $100 million, minus the principal amount outstanding under the August residual financing facility, as of the issuance date of the notes. If the transaction closes in December, such principal amount will be approximately $45-49 million. As a result, the principal amount on the new notes will be $51 million to $55 million. If the transaction closes as planned, Angelo Gordon will be the beneficial owner of approximately 61.4% of Delta's outstanding common stock, and approximately 66.5% of the outstanding stock if it exercises all of its warrants. Delta can be found on the Web at http://www.deltafinancial.com.

Goldman Sachs Commercial Mortgage Capital LP, Dallas, has announced a realignment of its regional operations under which the firm has begun operating through three regions instead of five.The three new geographic regions and their regional directors are as follows: Rod Reppe Jr., Eastern Region; Will Flaa, Central Region; and Paul Armour, Western Region. Bush Bowden, the company's senior vice president, will continue to originate commercial loans in the Eastern Region and senior vice presidents James Abbee and Michael Singh will continue to originate them in the Western Region, GSCMC said. "Realigning our regional operations, while maintaining staffing levels, positions GSCMC to more efficiently deploy team members and signals the firm's expanding real estate origination efforts," said Roddy O'Neal, co-chief executive officer. GSCMC can be found online at http://www2.goldmansachs.com/client_services/trading_capital_markets/cmc.

First American Title Insurance Co. has agreed to pay a $5 million fine and shut down 84 affiliated partnerships with real estate agents, mortgage brokers, and builders in Florida as part of a settlement with state regulators and the U.S. Department of Housing and Urban Development."Our joint investigation found these partnerships were created to generate referrals in violation of the Real Estate Settlement Procedures Act and HUD's policies against sham affiliated business arrangements," HUD Assistant Secretary Brian Montgomery said. The Santa Ana, Calif.-based company agreed to abide by HUD rules in operating future affiliated title companies in Florida that are separately capitalized and have full-time employees. First American said it is adjusting its practices to changing regulatory standards. "Homeowners who purchased title insurance through these joint venture companies were charged premiums consistent with the valid, filed rates for title insurance in Florida," the company said. "Rates were not adversely impacted by these business arrangements." First American can be found on the Web at http://www.firstam.com.

Freddie Mac could take an impairment charge ranging from $1 billion to $5 billion on its subprime mortgage investments, according to a Credit Suisse report released Monday morning.The government-sponsored enterprise is slated to report third-quarter earnings on Tuesday and was not commenting on the projections made by Credit Suisse analyst Moshe Orenbuch. Freddie owns roughly $120 billion in subprime-related asset-backed securities, which are triple-A rated. A spokeswoman noted that the investments have senior/subordinated enhancements and that for the government-sponsored enterprise to take a loss, all the subordinated pieces would have to be wiped out first. In his report, Mr. Orenbuch says Freddie's subprime investments "likely have substantial subordination." He refers to the anticipated writedowns as an "other-than-temporary" impairment charge. Credit Suisse also reduced its 12-month price target on the stock from $68 to $45. Credit Suisse can be found on the Web at http://www.credit-suisse.com.

The Senate has passed by unanimous consent a bill that provides for a seven-year extension of the Terrorism Risk Insurance Act, which is due to expire on Jan. 1.The Bush administration has signaled that it supports the Senate bill, but "strongly opposes" a House-passed bill that provides for a 15-year extension and expands coverage to include nuclear, biological, chemical, and radiological acts of terrorism. The Senate bill includes a study of such expanded coverage. The House and Senate banking committee leaders will have to reconcile their differences when Congress returns from its Thanksgiving break on Dec. 3. Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, has already suggested that a temporary 120-day extension may be needed. Meanwhile, real estate and financial services firms are hoping that a deal can be worked out quickly. "Extension of the Terrorism Risk Insurance program is crucial to maintaining the smooth operation of the commercial real estate finance market," said Mortgage Bankers Association chairman Kieran Quinn.

Capstead Mortgage Corp., a Dallas-based real estate investment trust, has priced a public offering of 8 million shares of common stock at $10.73 per share.The company said the net proceeds of the offering will be used to finance the purchase of additional adjustable-rate mortgage agency securities and for general corporate purposes. Bear, Stearns & Co., Keefe, Bruyette & Woods Inc., and JMP Securities LLC are the joint book-running managers of the offering. The underwriters have been granted an option to buy up to an additional 1.2 million shares to cover any overallotments. The REIT can be found online at http://www.capstead.com.

Annaly Capital Management Inc. has announced an agreement by Chimera Investment Corp. to sell approximately 33.3 million shares of common stock at $15 per share in an initial public offering.Chimera will be externally managed by Fixed Income Discount Advisory Co., a wholly owned subsidiary of Annaly. Annaly said it will acquire 9.8% of Chimera's outstanding shares. Merrill Lynch & Co., Credit Suisse, and Deutsche Bank Securities are the joint book-running managers of the IPO. Annaly, a real estate investment trust, can be found online at http://www.annaly.com.

Generation Mortgage, Atlanta, has announced the introduction of Generation Plus Estate Guard, which allows Gen Plus loan borrowers to halt interest accrual on their homes depending on real estate market conditions.(A Gen Plus loan is a jumbo reverse mortgage designed for owners of higher-valued homes.) Under the Estate Guard feature, which the company termed a first for the reverse mortgage industry, the lender will suspend the accrual of interest if the home value is significantly less than the loan balance, Generation Mortgage said. If a future appraisal indicates that the value of the home has risen, the interest rate will resume. "Estate Guard safeguards the borrower and his heirs, reducing an exposure many have not recognized to be present in nonrecourse loans," said Jeffrey M. Lewis, chairman of Generation Mortgage. The company can be found online at http://www.generationmortgage.com.

Originations of commercial and multifamily mortgage loans fell 4% in the third quarter from the level recorded a year earlier, although multifamily loan originations rose 14%, according to the Mortgage Bankers Association.Loan originations by conduits and commercial banks saw the biggest declines, at 28% and 18%, respectively, the trade group said. Fannie Mae and Freddie Mac originations declined less than 1%, while life insurance companies bucked the trend with an 11% increase in originations. Major property types other than multifamily and health care saw origination declines, with office properties leading the falloff with a 31% decline. Originations dropped 20% for retail loans, 18% for hotel loans, and 8% for industrial loans, while health care loan originations skyrocketed 149%, according to the MBA. "In addition to the impact of the credit crunch, it's also important to remember that previous periods included large volumes of originations spawned by large portfolio sales (and resales) and the privatizations of numerous [real estate investment trusts]," said Jamie Woodwell, the MBA's senior director of commercial/multifamily research. The MBA can be found online at http://www.mortgagebankers.org.

California foreclosure sales surged by 40% in October (and by 568% from the level recorded a year earlier) and they are unlikely to peak until late next year, according to ForeclosureRadar, Discovery Bay, Calif.The company reported that 12,336 California foreclosures (with a total loan value of $5.0 billion) were sold at auction in October, compared with 8,118 (with a total value of $3.6 billion) in September. "We see no sign of a foreclosure peak at this point, and we don't expect to see one until the third or fourth quarter of 2008 at the earliest," said Sean O'Toole, founder and chief executive officer of ForeclosureRadar. "The sales we are seeing now are from missed payments in March. So current auction sales really have not yet been impacted by either August's liquidity crunch or the [adjustable-rate mortgage] reset peaks this month and again in March '08." ForeclosureRadar, a foreclosure listings and software company, can be found on the Web at http://www.foreclosureradar.com.

The Laborers' International Union of North America has announced shareholder proposals that it terms "the most aggressive effort yet by any institutional investor" to protect workers' pension funds and restore accountability to the mortgage industry.The proposals focus on: helping investors understand mortgage securities risk by requiring disclosure of the types of mortgages bought and sold and their underlying value; limiting conflict of interest between rating agencies and mortgage buyers and sellers by requiring a cooling-off period before hiring key staff from financial services and mortgage holding companies; and enacting succession plans and executive compensation policies to deal with the likelihood that many chief executives will be replaced due to the mortgage crisis. "As many as 1 million residential construction workers will lose their jobs, up to 3 million homeowners face foreclosure, and hundreds of billions of dollars in shareholder value have been destroyed because of a system riddled with conflicts of interest, lack of disclosure, and lack of oversight," said Terence M. O’Sullivan, LIUNA general president. A "real solution" must also include legislative action and self-regulation by homebuilders, lenders, and rating agencies, he said.

Franklin Credit Management Corp., a New York-based finance company that acquires, originates, services, and resolves residential mortgage loans, has announced the suspension of loan acquisition and origination and a delay in reporting its third-quarter operating results.Citing the deteriorating real estate and mortgage credit market, Franklin said it is assessing the reserves for its portfolio of acquired loans, especially second-lien loans acquired during 2005 and 2006. "The company expects that this review will result in a substantial increase in the provision for loan losses for the quarter ended Sept. 30, 2007, due to increased delinquencies and the expectation of increased defaults and ultimate losses inherent in the portfolio as of Sept. 30, 2007, particularly for its portfolio of second-lien loans," Franklin said. The company can be found online at http://www.franklincredit.com.

NovaStar Financial Inc., Kansas City, Mo., has reported a net loss of $598.0 million ($64.05 per share) for the third quarter, compared with net income of $25.3 million ($2.91 per share) one year prior.Among the noncash items that contributed to the loss are a tax charge of $245.8 million (pretax) related to the revocation of the company's real estate investment trust status during the quarter and a $99.2 million (pretax) provision for credit losses. Overall, NovaStar reported six separate noncash items totaling $544.7 million (pretax) that hurt its results. The company has a waiver for compliance with the net worth covenant in its financing facilities with Wachovia that expires on Nov. 30. NovaStar said it will still be out of compliance on that day and there are no assurances it will be able to obtain additional waivers or that it will be able to repay Wachovia. Scott Hartman, chairman and chief executive of NovaStar, said the company's strategy is "to manage the cash flows from our portfolio of mortgage-backed securities and operate our retail brokerage operations." NovaStar can be found online at http://www.novastarmortgage.com.

A few Republican senators are blocking efforts by Democratic leaders to pass a Federal Housing Administration reform bill just before the Senate leaves for a two-week Thanksgiving break.Senate Majority Leader Harry Reid, D-Nev., urged Republicans to expedite passage by allowing an up-or-down vote on the bill (S. 2338), which would increase the FHA's capacity to refinance struggling subprime borrowers. "These borrowers need better mortgage options, and FHA loans will be a better option with this legislation," Sen. Reid said. But Sen. Tom Coburn, R-Okla., said he would object to such a vote, which caused Sen. Reid to withdraw his request for a vote late Thursday afternoon. The Oklahoma Republican said the Senate needs to take the time to debate and consider changes to the FHA reform bill. And he raised concerns about increasing the FHA loan limit to $417,000 (the conforming loan limit) and lowering the FHA downpayment requirement from 3.0% to 1.5%.

The Office of Federal Housing Enterprise Oversight has given Fannie Mae the green light to restart its construction lending program, but the government-sponsored enterprise is still waiting for the Department of Housing and Urban Development to complete a review.OFHEO Director James Lockhart told MortgageWire that he "signed off" on the program, but included some "growth" parameters on Fannie's purchases of acquisition, development, and construction loans from lenders. A HUD spokesman confirmed that the department has started a review of the ADC program, but could not say when it would be completed. HUD is the GSE's mission regulator. Fannie Mae could not be reached for comment. In July 2006, OFHEO ordered Fannie to suspend its ADC program until it had fixed certain operational and control problems. Fannie Mae can be found online at http://www.fanniemae.com.

Freddie Mac has decided to immediately exit the "no-income, no-asset" verification loan market and is hiking delivery fees on other nonconforming loan types.According to a seller/servicer bulletin dated Nov. 15, it is also hiking "delivery" fees on mortgages with loan-to-value ratios above 70% and FICO scores below 680. A loan with a FICO score below 620 will cost a seller/servicer 200 basis points. (This affects loans that settle on or after March 1, 2008.) "In response to deteriorating trends in credit quality, today we are announcing that we are immediately discontinuing the purchase of no income/no asset (NINA) mortgages and similar no documentation loans that we purchase on a negotiated basis," Freddie says in the seller/servicer bulletin. The secondary-market giant said it has also made underwriting changes on 80-10-10 loans. Freddie Mac can be found on the Web at http://www.freddiemac.com.

The House has passed a predatory-lending bill by a bipartisan vote of 291-127 that clamps down on abusive lending practices, makes securitizers responsible for loans they package, and lowers the points-and-fees trigger on the Home Ownership and Equity Protection Act to cover more high-cost subprime loans.Mortgage lenders, along with the Bush administration, oppose key provisions of the bill, contending that the lending standards are too subjective and that the assignee liability provisions (along with the HOEPA provisions) will reduce access to mortgage credit. However, Rep. Spencer Bachus, R-Ala., said the bill will "protect consumers from predatory lending practices" and preserve access to credit. "We are dealing with legislation that seeks to prevent a repetition of the events that caused one of the most serious financial crises in recent times," said House Financial Services Committee Chairman Barney Frank, D-Mass. The National Association of Mortgage Brokers succeeded in getting language in the bill (H.R. 3915) clarifying that a broker's fee can be financed into the loan. However, mortgage bankers are concerned that this language might require the disclosure of servicing-released premiums for the first time. Senate Banking Committee Chairman Christopher J. Dodd, D-Conn., said he will introduce a predatory-lending bill soon.

AvalonBay Communities Inc., an apartment development and management company based in Alexandria, Va., has expanded its revolving variable-rate unsecured credit facility from $650 million to $1 billion.The credit facility currently bears interest at 40 basis points above the London interbank offered rate, but the rate can be higher or lower based on credit conditions, AvalonBay said. The LIBOR spread can vary from 32.5 to 100 bps, the company said. AvalonBay can be found online at http://www.avalonbay.com.

Vestin Realty Mortgage II Inc., a Las Vegas-based real estate investment trust, has announced that its board is exploring the possibility of acquiring Vestin Realty Mortgage I Inc.Vestin II said its board believes the companies "could realize significant cost savings" if they operated as a single company for purposes of reporting to the Securities and Exchange Commission. Both REITs are managed by Vestin Mortgage Inc.