Originations

Morgan Stanley has pulled a $265 million line of credit from ailing subprime giant New Century Financial Corp., a decision that likely will force the company to file for bankruptcy protection.The LOC was made just last week. According to documents filed with the Securities and Exchange Commission Monday morning, the Irvine-based NCFC also revealed that several of its financiers -- Bank of America, Citigroup, Credit Suisse, Deutsche Bank -- had declared the non-depository in default on warehouse lines or other financial obligations. Documents show that NCFC owes Credit Suisse almost $1 billion due to a repurchase obligation. Meanwhile, some Wall Street firms are terminating NCFC's servicing rights, which could reduce cashflow at the company's servicing unit. According to the just-released Quarterly Data Report, NCFC has $40 billion in servicing rights on its books, ranking 14th nationwide. Among subprime funders it ranks second. Its stock had been halted in trading as MortgageWirewent to press. A spokeswoman did not return telephone calls.

Morningstar Properties LLC, a national self-storage operator and developer based in Matthews, N.C. (a suburb of Charlotte), has announced a joint venture with Harrison Real Estate Capital focused on self-storage facilities in the Carolinas.The joint venture plans to develop and acquire a portfolio of assets valued at more than $200 million over the next three years, Morningstar said. The properties will operate under the Morningstar Mini-Storage brand. Harrison RE Capital is a Chicago-based real estate private equity firm. The companies can be found online at http://www.mstarproperties.com and http://www.harrisonst.com.

Countering an earlier acquisition proposal from Wilbur Acquisition, Inland Capital Markets Group, Oak Brook, Ill., has made an offer to acquire Winston Hotels for $15 per share in cash.In late February, Wilbur had entered into an agreement to acquire the Raleigh, N.C.-based hotel real estate investment trust for $14.10 per share. Inland, which is looking to acquire Winston for its Inland American Real Estate Trust, reported that its offer (which is not subject to any financing arrangement) would provide shareholders "with a higher transaction price" than the existing agreement with Wilbur. Following news of the Inland bid, Winston common shares were trading above $15 on March 9, after closing at $13.97 on March 8. The companies can be found online at http://www.inland-american.com and http://www.winstonhotels.com.

Home Energy Savings Corp., a provider of home improvement products and services based in Roanoke, Va., has announced an agreement to sell Houston-based AIM American Mortgage Inc. to X-Press America Inc., effective Dec. 31, 2006.Under the agreement, X-Press America will pay $100,000 and assume a convertible debt instrument estimated at $500,000, Home Energy said. "The recent acquisition of MLI Capital affords us the opportunity to consolidate the financing side of our business in one location while simultaneously obtaining value for our Texas subsidiary and improving our balance sheet," said Bruce Edwards, chairman and chief executive officer of Home Energy. "Mortgage and lending services are a key component to the continued roll-out of our business plan, and we are taking the steps necessary to offer these services to our DreamHome customers in a cost-efficient manner." AIM American can be found online at http://www.aimamerican.com.

There is a consensus within the National Association of Hispanic Real Estate Professionals that mortgage wholesalers and brokers should be held accountable for the loans they originate, but the trade group is still in discussions on how to formulate a suitability standard."Clearly the lenders need to have more accountability with respect to the types of loans they deliver to consumers," said NAHREP executive committee member Gary Acosta. The San Diego mortgage broker noted that mortgage brokers and other lenders at the point of sale should be more accountable than wholesalers. But wholesalers have the ability to ensure that a loan has some "tangible benefit" for the consumer, Mr. Acosta said. Meanwhile, NAHREP released a survey at its annual legislative conference in Washington showing that 65% of its members are counseling homeowners who can no longer afford their house payments due to an upward adjusting mortgage. Large majorities of the 500 respondents favor capping mortgage broker compensation and eliminating lender incentives for making loans with prepayment penalties. Nearly 50% of the respondents said they are not aware of Fannie Mae's and Freddie Mac's community-based lending programs.

Troubled B&C giant New Century Financial Corp., Irvine, Calif., secured a $265 million line of credit March 8 from a large unidentified lender but still could be headed for bankruptcy court.After the company revealed in a public filing that it had limited financing -- the $265 million -- stock analysts continued to predict its demise. Merrill Lynch & Co. issued a research report March 9 saying the nondepository's "next disclosure" likely will be a bankruptcy filing. Sources told MortgageWire that the company is trying to sell the firm, but is running out of time. According to the Quarterly Data Report, NCFC is the nation's 14th-largest subprime servicer, with $40 billion in receivables. Meanwhile, the company said it is funding little in the way of new loans -- an allegation that first appeared on the Grapevine, a broker discussion board operated by National Mortgage News. In a filing with the Securities and Exchange Commission, NCFC reported that it had been hit by $150 million worth of margin calls -- $80 million of which it had satisfied. Disclosures about a criminal probe and possible bankruptcy filing have swamped the company's stock over the past 10 days. New Century, the nation's second-largest subprime funder in the fourth quarter, can be found online at http://www.ncen.com.

Mortgage companies scaled back their payrolls by 5,900 full-time employees in January, as the decline in subprime originations and rising defaults took a toll on wholesalers and mortgage brokers.The U.S. Bureau of Labor Statistics reported that employment in the mortgage banking/broker sector declined from 495,100 in December to 489,200 in January. Since October, employment in the mortgage industry has declined for three consecutive months, and 15,500 employees have lost their jobs. NMN's Quarterly Data Report shows that subprime originations declined by 18.2% during the fourth quarter, to $143.6 billion. Meanwhile, rising defaults have forced over 20 subprime lending shops to close their doors. The default rate on subprime mortgages rose to 10.12% during the fourth quarter, up from 7.07% in December 2005, according to a report by Friedman, Billings, Ramsey.

Hammered by losses on its subprime business, banking giant HSBC Holdings plans to unload some of its A-minus to D loans, which total in the billions, investment banking sources have told MortgageWire.The bank -- which owns No. 1-ranked subprime lender HSBC Finance -- also plans to stop providing warehouse financing on subprime mortgages, sources said. A bank spokeswoman declined to address both matters, citing company policy "not to comment on speculation." One warehouse executive said, "A client of ours was told by HSBC they are exiting the business and ending their relationship." Two bidders that invest in nonperforming product said they have already approached HSBC about buying its subprime holdings -- but at a discount. (For more details, see the March 12 issue of National Mortgage News.)

Annaly Capital Management Inc., New York, has priced a public offering of 50 million shares of the company's common stock at $13.50 per share, for estimated gross proceeds of $675 million.The real estate investment trust said the estimated net proceeds of $641 million will be used to purchase mortgage-backed securities and for general corporate purposes. The sole book-running manager of the offering is Merrill Lynch & Co. Annaly can be found online at http://www.annaly.com.

Zacks Investment Research, Chicago, has put American Home Mortgage Investment Corp., a lender based in Melville, N.Y., on its High Rank Value Profit Track list.The company said value investors look for stocks that trade at a price-to-earnings multiple below 15 and a price-to-book multiple below 3. The list is created from stocks that meet those criteria and are ranked by Zacks as either "#1 Strong Buy" or "#2 Buy." American Home had a P/E multiple of 5.21 and a P/B multiple of 1.19 as of the morning of March 8. Zacks noted that American Home's fourth-quarter earnings amounted to $1.21 per share, well above the fourth-quarter 2005 EPS of $0.27, beating the consensus estimate by nearly 2%.

Health Care Property Investors, Long Beach, Calif., has withdrawn its offer to acquire Toronto-based Sunrise Senior Living Real Estate Investment Trust, according to Sunrise.The announcement follows a ruling by a Canadian court that Sunrise is "obligated to comply with its covenants" in its purchase agreement with Ventas Inc., a Louisville, Ky.-based assisted-living REIT. This leaves the field clear for the previously announced acquisition of Sunrise by Ventas for $1.8 billion, including the assumption of debt. The companies can be found online at http://www.hcpi.com, http://www.sunriseseniorliving.com, and http://www.ventasreit.com.

Delta Financial Corp., Woodbury, N.Y., has reported net income of $8.0 million ($0.33 per share) for the fourth quarter, up from $5.7 million ($0.27 per share) for the same period a year earlier.For the year, Delta reported net income of $29.8 million ($1.28 per share), compared with $18.0 million ($0.84 per share) in 2005. Delta originated a record $1.1 billion of mortgage loans in the fourth quarter of 2006, a 13% increase from the volume in the third quarter of 2006 and a 3% increase from that of the fourth quarter of 2005. Meanwhile, Delta's fourth-quarter total cost to originate, as a percentage of total loan production, decreased to 1.6%. Hugh Miller, president and chief executive of Delta, said much of the reason for the strong results is due to the experience of the company's management. "Coupled with management's depth and breadth of experience are the key distinguishing elements of our business model, which include originating predominantly fixed-rate loans, retaining the majority of the loans we originate, and maintaining a diversified origination platform in which approximately 50% of our loan production emanates from our retail franchise," he said.

Housing markets are "weak" and house prices are generally "flat or declining," according to the Federal Reserve's Beige Book."Almost all districts reported that housing markets remained weak," the Beige Book says, although a few Federal Reserve district banks reported some signs of stabilization in February. The Cleveland and Atlanta district banks noted that construction has "flattened out." The Richmond bank reported signs of a "firming" housing market. However, inventories of unsold homes in the Dallas-Fort Worth areas hit "new highs due to slowing sales and cancellations." The San Francisco bank reported "noticeable" recent price declines in some areas, while "[c]ontacts in the Boston district saw no signs that the weakness in housing was nearing an end," according to the Beige Book. Meanwhile, commercial real estate markets "continued to firm or remained solid" the Fed publication says.

The average 30-year fixed mortgage rate fell from 6.18% to 6.14% over the seven-day period ended March 8, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate fell from 5.92% to 5.86%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages declined from 5.93% to 5.90%, and the average rate for one-year Treasury-indexed ARMs decreased from 5.49% to 5.47%, Freddie Mac reported. Fees and points averaged 0.5 of a point for fixed-rate mortgages and hybrid ARMs and 0.6 of a point for one-year ARMs. "Mortgage rates slid further in the past week to the lowest level this year, as volatility in overseas stock markets led to questions about implications for the U.S. economy," said Frank Nothaft, Freddie Mac's chief economist. "Uncertainties about the strength of the economy dominated the effects of other indicators, such as January's personal income growth and core inflation rate measured through the personal consumption report. Both increased at rates faster than had been expected, and potentially would have put upward pressure on interest rate. But the flight to quality due to the stock market's fall pushed bond yields down instead." A year ago, the average 30-year and 15-year fixed rates were 6.37% and 6.00%, respectively, and the average hybrid and one-year ARM rates were 6.03% and 5.45%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

David Einhorn, considered to be an "activist" shareholder of the struggling New Century Financial Corp., resigned from the company late Wednesday night, according to a new filing with the Securities and Exchange Commission.The resignation comes amid rumors that the subprime funder is negotiating a new warehouse line of credit with a major Wall Street firm to avoid being in violation of its warehouse covenants. As of MortgageWire's deadline, the company could not be reached for comment. Mr. Einhorn's hedge fund, Greenlight Capital, owns 3.49 million shares of New Century, or 6.3% of the company. Over the past week New Century's share price has plunged, causing huge paper losses for Greenlight. The subprime giant's stock now trades at just over $5, compared with a 52-week high of almost $52. New Century is the focus of a criminal probe by the U.S. attorney's office in central California regarding trading in the company's securities and errors tied to its accounting for loan repurchases.

Countrywide Financial Corp. chairman and chief executive Angelo Mozilo has defended his decision to sell $140 million worth of company stock over the past 14 months, noting that "I have almost all my personal net worth tied up in the company."In an interview with National Mortgage News, Mr. Mozilo -- who founded Countrywide in the late 1960s -- said he started the firm with his own money and has made tremendous profits for shareholders. "I have created $25 billion in value for the shareholders," he said. "It's been one of the best-performing stocks on the New York Stock Exchange. I gave them 98% of the value and took 2%. And they [the shareholders] didn't have to do the work. I did it for them." The 68-year-old executive has been criticized by financial columnists and shareholder activists for unloading such large blocks of stock at a time when the mortgage industry -- subprime in particular -- is cratering. Mr. Mozilo, though, has been exercising options, which have an expiration date, and then selling those shares. He said if he kept all the shares, he'd have to pay taxes on them. "These critics expect me to hold my shares forever?"

Zacks Equity Research, Chicago, has declared Denver-based Affordable Residential Communities its "Bear of the Day" -- a stock expected to underperform the markets over the next three to six months -- for March 7.The REIT, which specializes in manufactured home communities, "pays no dividend, has high debt levels, and is in an industry with little pricing power," Zacks said. Based on the ratio of price to funds from operations, ARC is "valued well above better-positioned peers," the research firm said. "We don't see much upside in the next few quarters, and ARC will continue to struggle throughout 2007." Zacks can be found online at http://www.zacks.com, and ARC can be found at http://www.aboutarc.com.

The ratings of New Plan Excel Realty Trust Inc. have been placed on Rating Watch Negative by Fitch Ratings in the wake of an announcement that the real estate investment trust is being acquired by Australia-based Centro Properties Group and Centro Retail Trust.The shopping center REIT's issuer default, senior unsecured note, and bank credit facility ratings stand at BBB-plus, and its preferred stock is rated BBB. Fitch said the rating watch placement is based on "concerns that Centro will increase New Plan's leverage and rely more heavily on secured debt."

The Market Composite Index, an overall measure of mortgage applications, rose from 626.1 to 671.6 on a seasonally adjusted basis during the week ended March 2, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications increased 19.9% on the week and were up 15.6% from the level recorded a year earlier. The Purchase Index rose from 401.3 to 405.3 on a seasonally adjusted basis, while the Refinance Index rose from 1943.5 to 2234.2. Refinancings represented 46.1% of total applications, up from 43.2 the previous week, while adjustable-rate mortgages accounted for 21.4%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages fell from 6.16% to 6.04%, and points (including the origination fee) rose from 1.05 to 1.27 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

The House Financial Services Committee will act on a long-term extension of the federal terrorism risk insurance program in April and a flood insurance reform bill in May, according to the committee chairman, Rep. Barney Frank, D-Mass.Rep. Frank told an insurance company forum he wants to expand the federal backstop to cover losses on group life and workers' compensation insurance that are due to a terrorist attack. He also said he wants a bill that covers nuclear and biological attacks and does not distinguish between international and domestic terrorism. The committee chairman said the bill to reform the National Flood Insurance Program will be similar to the bill the committee passed last year. That bill would penalize lenders that allow flood insurance to lapse on mortgaged properties in flood zones. It would also eliminate subsidized premiums on second homes and commercial properties. Premiums on those properties would be increased 15% a year until they reach the unsubsidized rate. "It will discourage people from building where they shouldn't build, and raises premiums on second homes," Rep. Frank said.