Originations

Home values declined slightly on a year-over-year basis for the second consecutive quarter in the first quarter of 2007, though the Pacific Northwest is bucking the trend, according to Zillow.com, an online real estate community based in Seattle.Zillow's quarterly national home value report, which is also released in 46 metropolitan areas, found that home values fell 1.01% in the first quarter and were 0.83% lower than in the first quarter of 2006. "While numerous cities around the nation are showing actual year-over-year declines in home values, the Pacific Northwest is largely bucking that trend and, in fact, is showing double-digit appreciation in some areas," said Stan Humphries, Zillow's vice president of data and analytics. "Four of the top five highest-appreciating metropolitan areas are located in Washington state or Oregon. Conversely, the two areas with the most depreciation are on the Gulf Coast of Florida, both with double-digit depreciation." Zillow can be found online at http://www.zillow.com.

Commercial and multifamily mortgage originations were up 10% in 2006, with mortgage bankers closing a record high $406.1 billion in commercial and multifamily loans, according to the Mortgage Bankers Association.The trade group said loans backed by office properties and loans for commercial bank and savings institution portfolios led the increase. "Conduits packaging loans for commercial mortgage-backed securities, collateralized debt obligations, and other asset-backed securities continued to be the dominant investor group in 2006, and office properties surpassed multifamily as the dominant property type," said Jamie Woodwell, the MBA's senior director for commercial/multifamily research. The increase in originations in 2006 was driven both by higher loan amounts -- the average loan size rose to $11.5 million -- and by the closing of a greater number of loans. Among major investor groups, real estate investment trusts saw the greatest percentage increase in volume in 2006, followed by commercial banks/thrifts.

The average 30-year fixed mortgage rate held steady at 6.16% for the seven-day period ended May 3, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate was also unchanged, at 5.87%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages declined from 5.88% to 5.87%, and the average rate for one-year Treasury-indexed ARMs decreased from 5.43% to 5.42%, Freddie Mac reported. Fees and points averaged 0.5 of a point for fixed-rate mortgages, 0.6 of a point for hybrid ARMs, and 0.7 of a point for one-year ARMs. "The recently advanced report of first-quarter gross domestic product was weaker than expected, growing only 1.3%," said Frank Nothaft, Freddie Mac's chief economist. "The housing market alone shaved a full percentage point off real GDP growth. Additionally, both consumer spending and price increases in consumer expenditures were quite tame in March. These contributing factors allowed mortgage rates to hold steady this week." A year ago, the average 30-year and 15-year fixed rates were 6.59% and 6.22%, respectively, and the average hybrid and one-year ARM rates were 6.21% and 5.67%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

Mortgage brokers and other nonbank lenders would have a fiduciary duty to their borrowers under a bill introduced by Sen. Charles E. Schumer, D-N.Y., that also holds lenders accountable for the subprime loans they fund and purchase from brokers.The bill introduced by Sens. Schumer, Robert P. Casey Jr., D-Pa., and Sherrod Brown, D-Ohio, amends the Truth in Lending Act to prohibit all lenders from steering borrowers into loans they cannot afford or repay. It also requires all originators to underwrite loans at the fully indexed rate and mandates the establishment of escrow accounts. The subprime market has been the "Wild West" of the mortgage industry, and this bill "brings the sheriff back in town," Sen. Schumer said. The senators are also calling for a $300 million appropriation to fund foreclosure prevention counseling that could help 300,000 distressed subprime borrowers. The senators are also calling on mortgage companies to voluntarily match these federal funds.

Citigroup, JPMorgan Chase, Litton Loan Servicing, and HSBC have agreed to a set of principles espoused by Senate Banking Committee Chairman Christopher J. Dodd, D-Conn., to take early action to help subprime borrowers through loan modifications to avoid foreclosure."I commend the organizations and companies that have joined me in formulating and agreeing to these principles, and I urge others to participate," Sen. Dodd said. Under the principles, lenders and servicers should contact subprime borrowers with adjustable-rate mortgage loans to make sure they can afford the payments once the loan resets. If not, loan modifications should be explored, including switching the loan to a fixed rate or making the introductory rate permanent. The principles also call for servicers to ramp up so that loan modifications can be done on a scale needed to address the foreclosure crisis. Chase Home Loan chief executive David Lowman said his company supports Sen. Dodd's efforts to help families who are struggling with their mortgage payments. "We believe we can develop the best solutions by working with the Senate committee, our regulators, borrowers, investors, and community representatives," Mr. Lowman said. The Mortgage Bankers Association, Fannie Mae, Freddie Mac, Bear Stearns & Co., and Self-Help Credit Union also support the principles.

A key rating of Residential Capital LLC was lowered by Standard & Poor's Ratings Services after the announcement of ResCap's huge subprime-related first-quarter loss, and Moody's Investors Service and Fitch Ratings revised ResCap's ratings outlook from stable to negative.S&P downgraded ResCap's counterparty credit rating from BBB/A-3 to BBB-minus/A-3, while affirming the counterparty credit rating of its parent company, GMAC LLC, at BB-plus/B-1. "ResCap's loss was significantly worse than we had anticipated," S&P said. S&P rated ResCap's outlook as stable, but GMAC's outlook was revised from developing to negative. Moody's revised ResCap's outlook from stable to negative and said GMAC's ratings are not affected. Fitch also revised its rating outlook for ResCap from stable to negative and affirmed the company's issuer and debt ratings. The rating agencies can be found online at http://www.standardandpoors.com, http://www.moodys.com, and http://www.fitchratings.com.

Residential Capital LLC, the holding company for GMAC's residential lending affiliates, posted a stunning $910 million loss in the first quarter, citing deterioration in its U.S. subprime business.In a statement, ResCap said it has already reduced the size of its subprime holdings and "decreased its warehouse lending against nonprime collateral." It also said it would "sharply" curtail subprime production. "Amid the sharp downturn in the U.S. mortgage market, many of ResCap's nonprime assets were liquidated at a loss or marked substantially lower to reflect the severe illiquidity and depressed valuations in the prevailing market environment," the company said. "In addition, substantial incremental reserves were established during the quarter against various nonprime loans on the balance sheet." Among subprime lenders, Minneapolis-based GMAC-RFC ranked 12th last year, according to the Quarterly Data Report. GMAC-RFC is a correspondent buyer of subprime loans. ResCap can be found online at https://www.rescapholdings.com.

Class N-SO of GCCFC 2004-FL2 has been placed on Rating Watch Negative by Fitch Ratings.The rating agency also affirmed the ratings on 10 other classes in the transaction. Fitch said the action stemmed from concerns about the Southfield Office Center loan, which represents 85.4% of the loan pool. The concerns relate to declining rents at the property and the general conditions in the Southfield, Mich., office market, the rating agency said.

Camden Property Trust, a Houston-based real estate investment trust, has priced a $300 million offering of 5.7% senior unsecured notes at 99.65.The multifamily REIT said it will use the net proceeds of approximately $297 million to reduce the balance under its unsecured credit facility. The joint book-running managers of the 10-year note offering were Banc of America Securities LLC and J.P. Morgan Securities Inc. Camden can be found on the Web at http://www.camdenliving.com.

Equity Residential, Chicago, has reported net income of $126.23 million for the first quarter ($0.40 per share), compared with $377.8 million ($1.25 per share) for the first quarter of 2006.The real estate investment trust attributed the decline to higher gains on sale of property in the first quarter of 2006, which it said resulted in $0.82 of the $0.85 differential in earnings per share. Equity Residential's funds from operations (an alternative earnings measure used in the REIT world) were $0.55 per share for the first quarter, compared with $0.56 for the first quarter of 2006. David Neithercut, president and chief executive officer of the multifamily REIT, said good job growth and limited new supply in many markets bodes well for the company's performance for the rest of the year. "As we head into our primary leasing season, however, we have recently begun to see certain markets experiencing somewhat slower sequential rental rate growth than we had hoped," he added. Equity Residential can be found online at http://www.equityapartments.com.

For the first time since it bottomed out in May 2004, the Eleventh Federal Home Loan District Cost of Funds Index has declined for several months in a row.The index, as calculated by the Federal Home Loan Bank of San Francisco, stood at 4.299% in March, representing a decline of almost 8 basis points from 4.376% in February. It declined 0.4 of a basis point in January, followed by a 1.6-bp decline in February. Previously, there had been a single-month drop in the rate, in October 2006. Back then COFI declined by nearly 4 bps, before reaching its latest peak of 4.396% in December. For comparative purposes, the average rate for the one-year adjustable-rate mortgage in the Freddie Mac Primary Mortgage Market Survey peaked last July at 5.79%. Since then it has mostly declined, and for April it stood at 5.45%. The FHLBank can be found online at http://www.fhlbsf.com.

The Market Composite Index, an overall measure of mortgage applications, rose from 653.3 to 657.2 on a seasonally adjusted basis during the week ended April 27, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications increased 1.4% on the week and were up 9.4% from the level recorded a year earlier. The Purchase Index rose from 411.0 to 427.3 on a seasonally adjusted basis, while the Refinance Index fell from 2081.6 to 2015.8. Refinancings represented 41.5% of total applications, down from 43.4% the previous week, while adjustable-rate mortgages accounted for 17.9%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages rose from 6.13% to 6.14%, and points (including the origination fee) fell from 1.32 to 1.31 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

Volatility in the U.S. commercial real estate markets is likely to continue declining this year, with the office sector leading the way, according to the latest Property Market Metric annual report from Fitch Ratings.Fitch's overall volatility score fell 23 basis points in 2006 from the average 2005 score, with office-sector volatility dropping 40 bps in primary markets. "Office volatility scores are expected to continue to improve, especially in primary markets, despite a recent uptick in overall office vacancy rates and delinquencies in the first quarter," said senior director Patty Bach. Primary office markets with lower volatility scores include: New York City (including Jersey City); Los Angeles; San Diego; San Jose, Calif.; Chicago; Dallas/Fort Worth; Austin, Texas; San Antonio; Denver; Philadelphia; Miami; and Seattle. The multifamily sector continued to have the lowest overall volatility score in Fitch's study, with average volatility falling 13 bps to 1.60 for primary markets in 2006. Average volatility among hotel properties fell from 4.34 to 4.21 in 2006. Fitch can be found online at http://www.fitchratings.com.

Cautious optimism in the commercial real estate industry "has given way to a new type of exuberance," according to a survey by DLA Piper US LLP, an international law firm.The firm said 78% of the 274 top CRE executives who responded to the survey described their 12-month outlook for the U.S. commercial real estate market as "bullish," up from 43% in 2005. "The growing influence of private equity capital in the real estate markets is unmistakable, yet the overwhelming spike in optimism throughout the industry is surprising at a time when some industry experts fear that pricing may have peaked and there is new evidence of a slowdown in the U.S. economy," said Jay Epstien, chair of DLA Piper's U.S. real estate practice. "It is also interesting to note that the majority of executives believe the public-to-private consolidation trend, which has been dominated by many of the largest players in the industry, will create an abundance of opportunities for the smaller players, not just the large investors." The survey results were released in conjunction with the firm's 2007 Global Real Estate Summit in Chicago. DLA Piper can be found online at http://www.dlapiper.com.

Granting bankruptcy judges the authority to modify mortgage loans would provide relief to homeowners facing foreclosure who can't get the servicers of mortgage-backed securities to restructure their loans, a consumer bankruptcy attorney has told a House Judiciary subcommittee.Henry Sommer, president of the National Association of Consumer Bankruptcy Attorneys, testified that about half of the securitized trusts prohibit loan modifications. If Congress amends the bankruptcy code to allow loan modifications, it would "resolve that problem," he said. Steve Bartlett, president and chief executive of the Financial Services Roundtable, warned that giving bankruptcy judges a free hand to modify loans would make mortgage credit "much more expensive and less available to low- and moderate-income people." Rep. Melvin Watt, D-N.C., indicated he would consider changes to the bankruptcy code in putting together a predatory-lending bill.

Fannie Mae, which is still trying to get its financial books in order, says it earned $6.35 billion in 2005, a 28% increase from the profits recorded in the prior year.The congressionally chartered mortgage giant said it expects to release results for 2006 later this year. In a filing with the Securities and Exchange Commission May 2, Fannie revealed that its strongest profit growth came in the capital markets area, where it had net income of $2.99 billion, up 42% from that of 2004. Its two other main business segments -- the single-family credit business, and housing and community development -- earned $2.88 billion (up 15%), and $462 million (up 37%), respectively. Fannie Mae can be found on the Web at http://www.fanniemae.com.

Casa Latino, which calls itself the only national Latino real estate brand in the United States, has announced the expansion of its franchise into Florida.The Casa Latino Franchise Corp., based in Southbury, Conn., said the first Florida franchise has been acquired by Gabriel Diaz of Loxahatchee, Fla., but that he has not yet settled on a location. The office "will likely be located in or near West Palm Beach," the franchiser said. The company said it has awarded over a dozen franchises, and currently operates in Nevada, Arizona, New Mexico, Utah, and North Carolina as well as Connecticut and Florida.

The industrial real estate market posted a "shaky" first quarter as absorption fell well below expected levels, according to Colliers International, a Boston-based real estate services firm.Absorption totaled 27.3 million square feet, down from 36.9 msf in the fourth quarter and 40.0 msf a year earlier. Though demand was far less than expected, rents increased slightly in the first quarter. "Despite a slow start, it's too early to sound the alarm," said Ross Moore, senior vice president and director of market and economic research at Colliers. "The underlying economy, with the exception of the housing sector, continues to register measured growth, which we believe will eventually help bolster the warehouse leasing market." Industrial vacancies totaled 8.15% in the first quarter, down from 8.11% in the fourth quarter and 8.51% in the first quarter of 2006, Colliers reported. The company can be found online at http://www.colliers.com.

March was the best month for the traditional category of primary new insurance written in terms of dollar volume since August 2005, according to data from the Mortgage Insurance Companies of America.By application volume, it was the best month since October 2003. Overall dollar volume of primary new insurance written was $26.6 billion, up 57.1% from February's $16.95 billion. The traditional category totaled $15.9 billion written, up from $12.6 billion the previous month. In August 2005, just under $16.0 billion was written. Bulk primary new insurance written totaled $10.7 billion. Bulk production tends to rise at the end of each quarter -- in March 2006, just under $9 billion of bulk volume was recorded. The number of applications received totaled 191,525, up 55.6% from February's 123,059. October 2003 was the last time MICA members had received over 200,000 in applications. (Comparisons with periods prior to July 2003 are not valid because that is when Radian withdrew as a member of the trade group.) New pool risk written totaled $185.1 million. The cure/default ratio stood at 92.3% in March, down four percentage points from that of February.

Purchases of second homes accounted for 36% of all home sales in 2006, down from 40% the previous year, as investment-property activity fell sharply, according to the National Association of Realtors.Sales of investment properties fell 28.9% to 1.65 million in 2006 from a record 2.32 million in 2005. The median price of an investment house fell 18.3% to $150,000. At the same time, sales of vacation homes rose 4.7% to a record 1.07 million last year. But the median price of a vacation home fell 2% to $200,000. "We expected the drop in investment sales because investors left the market in 2006, which caused investment sales to fall much faster than the primary market," said NAR chief economist David Lereah, who is leaving the Realtors soon to join Move Inc. Meanwhile, vacation homebuying rose due to "strong demographic and lifestyle factors," he said.