Originations

Merrill Lynch asked subprime wholesaler ResMae Mortgage, Brea, Calif., to buy back $308 million worth of loans in December, according to the company's bankruptcy filing.Merrill and several other Wall Street firms -- some of which provided warehouse credit to, or bought mortgages from, the nondepository -- are listed as creditors of ResMae, which ranked 23rd among all subprime funders in the third quarter, according to the Quarterly Data Report. (The lender filed for bankruptcy protection on Feb. 12.) Merrill also is listed as a creditor in recent bankruptcy filings of two other large subprime wholesalers: Mortgage Lenders Network of Connecticut and OwnIt Mortgage of California. According to the The Orange County Register, ResMae has disputes with Merrill over the buybacks, saying the subprime funder believes the buyback period had expired. Merrill's spokesman declined to comment. ResMae can be found on the Web at https://www.resmae.com.

Class M5 of Asset Backed Securities Corp. mortgage pass-through certificates, series 2003-HE3, has been downgraded from BBB-minus to BB by Fitch Ratings.In addition, Fitch placed the following four ABSC classes on Rating Watch Negative: series 2003-HE2, class M-5; series 2004-HE6, classes M6 and M7; and series 2004-HE8, class M7. Fitch also affirmed the ratings on 184 other classes in 24 ABSC deals. The rating agency attributed the downgrade to a deterioration in the relationship between loss expectations and credit support levels. The watchlist placements were due to "signs of increasing credit risk, posing a potential threat to subordinate bonds," Fitch said.

Two classes of J.P. Morgan Chase Commercial Mortgage Securities Corp. commercial mortgage pass-through certificates, series 2002-CIBC4, have been downgraded by Moody's Investors Service.Class L was downgraded from B2 to B3, and class M was downgraded from Caa1 to Caa2. In addition, Moody's upgraded three classes and affirmed the ratings on 10 other classes in the transaction. Moody's attributed the downgrades to losses from specially serviced loans and the dispersion of loan-to-value ratios. The certificates are collateralized by 114 mortgage loans on properties in 29 states plus the District of Columbia. The pool collateral is a mix of retail (36.3%), office and mixed-use (18.5%), multifamily (15.2%), and industrial and self-storage (12.7%) properties, as well as U.S. government securities (17.3%). The rating agency can be found online at http://www.moodys.com.

AIG United Guaranty, Greensboro, N.C., has opened AIG United Guaranty Insurance (Asia) Ltd., a company incorporated and licensed to do business in Hong Kong.AIGUGI provides mortgage guaranty insurance and other financial products to residential mortgage lenders in Hong Kong and other markets in the Asia-Pacific region. "We have substantial expertise and experience in mortgage insurance and are committed to expanding our operations in Hong Kong, Australia, South Korea, Japan, India, and other high-potential markets in the region," said Chris Wei, chief executive of AIGUGI. "The introduction of mortgage insurance and mortgage guaranty products will allow increased homeownership opportunities through greater borrower access to low-downpayment mortgages. We believe this will allow the company to maximize long-term opportunities in the Asia-Pacific region through providing flexible, market-leading mortgage insurance products and services that meet the financial needs of our mortgage lending partners." AIGUGI has received an insurer financial strength rating of AA, with a stable outlook, from Standard & Poor's.

WCI Communities, one of only 14 publicly owned homebuilding companies, is exploring the possibility of selling itself.The Bonita Springs, Fla.-based builder of expensive homes and condominiums in Florida and the Washington and New York metropolitan areas, has retained Goldman, Sachs & Co. to either find a suitor or recommend changes to its capital structure, including the repurchase of stock. Activist investor Carl Icahn purchased stock in the company in November and then boosted his share to 14.6%, causing WCI to adopt a shareholder rights plan, otherwise known as a "poison pill." The Bill & Melinda Gates Foundation Trust, a charitable foundation founded by the chairman of Microsoft Corp., also has taken a stake in the company. WCI also said it is exploring the disposition of certain assets. In 2007, it expects to generate about $1 billion of free cash flow, which will help in reducing debt.

In another brewing takeover battle in the real estate investment trust sector, The Mills Corp. has received an offer from Simon Property Group and Farallon Capital Management to acquire the company for $24 per common share.The Chevy Chase, Md.-based retail REIT said it considers this to be a better offer than the previously reported bid of $21 per common share and the assumption of debt from Brookfield Asset Management. The Mills board of directors said it will enter into a new agreement with the Simon/Farallon partnership unless Brookfield comes up with a better offer in three days. Simon Property Group is an Indianapolis-based retail REIT. The Mills can be found online at http://www.themills.com.

Subprime wholesaler ResMae Mortgage, Brea, Calif., has filed for bankruptcy protection, but has agreed to sell certain assets to Credit Suisse for an undisclosed sum.Industry sources said ResMae -- like many subprime funders -- has been hurt by buyback requests from Wall Street. According to the firm's bankruptcy filing, its unsecured creditors include warehouse providers Barclays Bank, Merrill Lynch, and others. As of MortgageWire's deadline, ResMae officials could not be reached for comment. Credit Suisse, which is not listed in the filing as a large unsecured creditor, declined to comment. On Feb. 12 ResMae filed a voluntary petition for reorganization. The asset sale to Credit Suisse will require court approval. The Wall Street firm, which also operates a subprime wholesale platform, has agreed to provide warehouse financing to ResMae allowing the nondepository "to operate in a normal manner during the reorganization," according to a statement released by the lender. According to the Quarterly Data Report, ResMae ranks 23rd among all subprime funders and 30th among servicers. ResMae is one of a dozen or so nondepository subprime lenders that have failed in the past 60 days. The company can be found on the Web at https://www.resmae.com.

Bear Stearns & Co., New York, has completed the purchase of the ECC Capital Corp. subprime mortgage banking platform.The unit, known as Encore Credit Corp., will retain its brand name, and Shabi Asghar, who has resigned as president and co-chief executive of ECC, will be Encore's president and chief executive. Bear Stearns paid $26 million for Encore. The purchase price was credited against certain amounts owed to Bear Stearns, including warehouse borrowings, because Bear Stearns had agreed to acquire ECC's loan production from Oct. 10, 2006, until the sale closed on Feb. 9. Because loan sale prices were lower than anticipated, ECC owed $33 million to repay the outstanding warehouse borrowings, so Bear Stearns received a payment of $7 million from ECC. ECC had intended to make a distribution of $0.80 per share to its shareholders within 30 days of the closing of the asset sale. For a number of reasons, ECC said it might not be able to make a distribution to shareholders prior to March 30. It has already made a distribution of $0.24 per share, which counts toward a total eventual distribution of $1.60 per share. Roque Santi, formerly ECC's chief financial officer, is the REIT's new president. Steve Holder remains as chairman and chief executive. Bear Stearns can be found online at http://www.bearstearns.com, and Encore can be found at http://www.encorecredit.com.

A majority of senior executives and board members of companies in real estate and related industries -- with the notable exception of homebuilders -- expect revenue growth and higher profits in 2007, according to a report by FPL Advisory Group, Chicago.Based on interviews and surveys of more than 150 chief executive officers, presidents, board members, and other senior executives, the report is the first of its kind to assess the views of such real estate leaders on strategic, financial, and organizational issues, the company said. Among the key findings are that "it's all about finding deals and making sure you have the right people to execute and manage them"; global expansion will be a key source of growth for companies in many RE-related sectors; and a search for appropriate investment opportunities is the top financial challenge for a majority of respondents. Unlike the executives in most sectors, homebuilders predict a decline in revenue and profitability this year. FPL, a provider of specialized advisory services to RE-related industries, can be found online at http://www.fpladvisorygroup.com.

Fannie Mae is working on new structures that would allow the mortgage giant to guarantee and securitize mortgages it likes (in terms of pricing and risk) and sell off the pieces it doesn't like to other investors."We tested our first structure to transfer risk to other market participants who have a different view of risk than us," Fannie executive vice president Thomas Lund told a Credit Suisse financial services forum Feb. 8. "These structures will allow Fannie to serve its customers and participate in more transactions," he said, and it works with many products, including subprime mortgages. The EVP for single-family mortgages noted that Fannie started purchasing subprime loans from a "very limited" number of its lenders last year. "We began to dip our toe in the water of subprime whole loans to determine if we could bring value to that segment of the market," Mr. Lund said. He indicated that Fannie wants to increase its involvement in the subprime market. The government-sponsored enterprise can be found on the Web at http://www.fanniemae.com.

Subprime funder Lenders Direct Capital Corp., Lake Forest, Calif., has closed its wholesale division, citing a lack of "investor demand" and the "current state" of the subprime industry.A notice was posted on the lender's website on Feb. 8. An executive who competed against LDCC said that at one point the firm was funding up to $200 million a month. As of MortgageWire's deadline, company chief executive Mike McQuiggan could not be reached for comment. LDCC is just another in what is turning out to be a long line of subprime firms -- many based in California -- that are either shutting down or closing their wholesale platforms.

Merrill Lynch & Co. -- which has been stung by two high-profile subprime bankruptcies in six weeks -- is conducting margin calls on certain B&C originators that receive financing through the firm's warehouse group.The margin calls, which require that these lenders post additional capital, were confirmed by two mortgage bankers and a spokesman for Merrill. The spokesman noted that margins calls are "something we do on an as-needed basis." He declined to quantify the margin calls. Merrill, which recently bought First Franklin Financial, a top-ranked subprime funder, has provided warehouse financing to several large nondepositories, including the now-defunct OwnIt Mortgage Solutions of California and Mortgage Lenders Network USA of Connecticut. Merrill is an unsecured creditor to both these bankrupt wholesalers. One warehouse executive said Merrill "is being super-aggressive on margin calls. After what happened on MLN and OwnIt they are under a lot of pressure." One California executive said Merrill's actions are fueling what he called a "liquidity crisis" in the subprime funding niche.

Five classes from Ameriquest Mortgage Securities Inc. home equity issues have been downgraded by Fitch Ratings.The downgrades were as follows: series 2002-4, class M-4, from BB-minus to B; series 2003-AR2, class M-4, from BB-minus to B; and series 2003-1, class MF-3, from BBB-minus to BB, class MV-3, from BBB-minus to BB, and class M4, from BB to B. In addition, Fitch upgraded 18 classes and affirmed the ratings on nearly 300 classes from 44 Ameriquest deals. The downgrades were attributed to a deterioration in the relationship between credit enhancement and expected losses. Fitch can be found online at http://www.fitchratings.com.

Senior Housing Properties Trust, a real estate investment trust based in Newton, Mass., has priced a follow-on public offering of 6.0 million common shares of beneficial interest at $26.49 per share.The joint book-running managers of the offering are UBS Investment Bank and Morgan Stanley. The REIT said it has granted the underwriters an option to buy up to 900,000 additional shares to cover any overallotments. The company can be found online at http://www.snhreit.com.

NorthStar Realty Finance Corp., a New York-based real estate investment trust, has announced the closing of a public offering of 6.2 million shares of 8.25% series B cumulative redeemable preferred stock, priced at $25 per share.The share total includes 800,000 shares purchased by the underwriters under an overallotment option. Bear, Stearns & Co. and Wachovia Securities were the joint book-running managers of the offering.

American Home Bank, Orlando, Fla., has announced the introduction of Builder's Total Control, a turnkey mortgage operation for small to medium-size homebuilders.The program provides one-stop shopping financing packages to help builders compete with national and regional builders, the company said. "Larger builders have learned that they sell more houses, at higher prices, when they provide buyers with one-stop shopping for financing," said Jim Deitch, founder and chief executive officer of American Home. The company can be found online at http://www.bankahb.com.

American Bank Holdings Inc., Silver Spring, Md., and The Grange Bank, Columbus, Ohio, have announced an agreement under which American Bank will acquire Grange, including substantial amounts of home equity and commercial real estate loans.The terms of the transaction were not disclosed. The companies said American Bank, a subsidiary of American Bank Holdings, will acquire approximately $95 million of home equity lines of credit, fixed-rate home equity loans, CRE loans, and commercial business loans as well as approximately $196 million of deposits in the deal. They said Grange Bank, a subsidiary of the Grange Mutual Casualty Co., will also sell its residential mortgage loan and auto loan portfolios in other transactions that have not been finalized. The companies can be found online at http://www.americanfsb.com and http://www.grangeinsurance.com.

The average 30-year fixed mortgage rate fell from 6.34% to 6.28% over the seven-day period ended Feb. 8, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate fell from 6.06% to 6.02%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages declined from 6.04% to 5.99%, and the average rate for one-year Treasury-indexed ARMs decreased from 5.54% to 5.49%, Freddie Mac reported. Fees and points averaged 0.3 of a point for fixed-rate mortgages, 0.4 of a point for hybrid ARMs, and 0.7 of a point for one-year ARMs. "News of moderate employment gains in January led to a halt in the recent upward trend of interest rate movements," said Frank Nothaft, Freddie Mac's chief economist. "The 111,000 jobs added last month were fewer than had been anticipated, while the unemployment rate edged up unexpectedly." A year ago, the average 30-year and 15-year fixed rates were 6.24% and 5.83%, respectively, and the average hybrid and one-year ARM rates were 5.89% and 5.34%, respectively, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

Equity Office Properties Trust, Chicago, will be replaced by Varian Medical Systems in the S&P 500 Index on a date to be announced, according to Standard & Poor's.The reason for the change is the merger agreement [see item above] under which Equity Office, a real estate investment trust, will be acquired by affiliates of The Blackstone Group. The REIT will also be replaced by Extra Space Storage Inc., Salt Lake City, in the S&P REIT Composite Index. S&P can be found at http://www.standardandpoors.com.

After a fierce bidding war, the battle for Equity Office Properties Trust is finally over, with the real estate investment trust approving a merger with The Blackstone Group.The final consideration of over $38 billion -- including $55.50 cash for Equity Office common shareholders and the assumption of the REIT's debt -- reportedly makes this the largest private equity buyout deal ever. The prize is an office portfolio comprising 543 office buildings, with 103 million square feet, in 16 states and the Washington, D.C. area. With economic growth taking off and rising demand for office space, office market fundamentals are seen as healthy. The Chicago-based Equity Office is the largest REIT by market capitalization. Initially, the Blackstone offer was for about $36 billion -- $48.50 per Equity Office share in cash and the assumption of the real estate investment trust's debt. The private equity investor was forced to raise its price after Vornado Realty Trust, a Paramus, N.J.-based office REIT, got into the fray in partnership with Starwood Capital Group and Walton Street Capital. Vornado dropped out of the bidding war on Feb. 7. Equity Office can be found online at http://www.equityoffice.com.