Originations

Rep. Maxine Waters, D-Calif., says she suspects that subprime lending is responsible for rising foreclosure rates, and she is planning to hold hearings soon."Foreclosures are on the rise, and most evidence points to predatory and subprime lending as a major cause," the chairwoman of the House Financial Services subcommittee on housing told a Women in Housing and Finance luncheon. The chairwoman noted there are some areas with high foreclosure rates where economic problems and job losses cannot be identified. "We are really going to have to take a close look at what is going on with these foreclosures," she said. The housing subcommittee's first hearings will focus on housing problems in the Gulf Coast states that are still recovering from the 2005 hurricanes. Rep. Waters is planning to hold a hearing in New Orleans before the end of January.

Washington Mutual Inc., Seattle, has announced that it will securitize subprime mortgage loans originated by its Long Beach Mortgage division under its WaMu Asset Acceptance Corp. shelf registration in 2007.The name "Long Beach Mortgage Loan Trust" will no longer be used for new securitizations, WaMu said. The thrift noted that the WaMu Asset Acceptance registration is also used for its prime, alternative-A conduit, and subprime conduit securitizations. The new trusts will be designated "WaMu Asset-Backed Certificates, WaMu Series 200X-HEX Trust," WaMu said. Doug Potolsky, WaMu's senior vice president of subprime capital markets, said "many changes" have been made in Long Beach's business model and operations since it was consolidated into WaMu, and "this is a logical next step." The company can be found on the Web at http://www.wamu.com.

Equity capital will continue to flow strongly into real estate in 2007, but it will be recycled into investments such as small equity funds, limited partnerships, and niche properties, according to the chairman of the University of Southern California's Lusk Center for Real Estate.Stan Ross said some investors will shift their investments from public real estate investment trusts to smaller private equity funds, limited partnerships, joint ventures, and direct investments in niche properties. "Shareholders who received attractive payouts when the REITs were acquired are reinvesting some of that capital directly into real estate," he said. Mr. Ross predicted that capital will continue to flow into traditional office, retail, industrial, and hotel assets, but that alternative investments such as urban infill, adaptive reuse of old buildings, and multifamily/retail development near inner-city transit centers will attract greater interest.

Fitch Ratings has announced the introduction of what it terms "the first statistically valid U.S. CMBS multiborrower rating model" for evaluating credit risk in commercial mortgage pools.Fitch said the new model was developed after a study of over 32,000 commercial mortgage-backed securities fixed-rate conduit loans originated from 1994 to 2001 and how they performed through the end of 2006. The model now includes statistical methods to identify the greatest contributing factors for probability of default, probability of loss, and loss severity, along with the more sophisticated method of quantifying the effect of portfolio composition on a pool's credit risk profile. Fitch said it will begin using the new model on new transactions beginning March 1. The report, "Fitch's New U.S. CMBS Multiborrower Rating Model," will be available at the end of January on the rating agency's website at http://www.fitchratings.com.

The Chicago Board of Trade is launching a stock index futures contract in the first quarter based on the Dow Jones U.S. Real Estate Index.The contract, which will allow commercial real estate investors to take a view on the market and manage their exposures, will settle to the value of the Dow Jones U.S. Real Estate Index, which is composed primarily of real estate investment trusts. The CBOT said it believes that REIT securities reflect the underlying U.S. commercial real estate market because market fundamentals are all reflected in REIT share prices. "Commercial real estate remains one of the largest classes of tradable assets not currently served by an exchange-traded futures instrument," said Robert D. Ray, senior vice president of business development at the CBOT. "We developed this contract after researching the U.S. commercial real estate market and conducting various conversations with real estate portfolio managers and pension funds who seek new avenues for managing the risks associated with property ownership. Moreover, since the underlying instrument is an equity index, it also provides investors with an efficient means to express their views on movements in the real estate market, with the added advantages of transparency, leverage, liquidity and the ability to more efficiently short the market." The CBOT can be found online at http://www.cbot.com.

Impac Commercial Capital Corp. has agreed to purchase certain assets, and hire the employees, of Fidelity Bancorp Funding Inc., Westminster, Calif., to expand its commercial loan origination platform, according to ICCC's parent company, Impac Mortgage Holdings Inc.Impac Mortgage, a real estate investment trust based in Irvine, Calif., said William Sonsma, the sole shareholder of Fidelity, will assume the title of executive vice president and managing director of wholesale at ICCC. Joseph R. Tomkinson, chairman and chief executive officer of Impac Mortgage, said one of the mortgage REIT's strategic goals is to increase its small-balance multifamily and commercial loan originations. The companies can be found on the Web at http://www.impaccompanies.com.

The struggling Mortgage Lenders Network will auction off a bulk package of mortgage servicing rights believed to have a total value of just under $5 billion, investment banking sources have told MortgageWire.The auction is expected to occur this week. Meanwhile, a source inside the Middletown, Conn.-based company -- and others outside the firm -- say Lehman Brothers is talking to MLN about taking over some of its shuttered wholesale assets. Lehman had no comment. At MW's deadline, MLN had not responded to a telephone call and an e-mail message about the matter. In late December MLN, a nonprime lender, shuttered its entire wholesale operation -- which accounts for 90% of its production -- but said it will continue to fund through retail means. (For more details on the servicing sale, see the Jan. 8 issue of National Mortgage News.)

Servicing U.S. commercial mortgage-backed securities deals is becoming more complex because loan and deal structures and the regulatory framework have grown increasingly complicated, according to a special report by Fitch Ratings."Non-standard servicing opportunities for CMBS servicers are becoming more prevalent, and come with additional covenants, trigger events, and reporting requirements," said Fitch senior director Richard Carlson. "Servicers increasingly deal with third-party investors who have a say in the servicing of the loan, which makes it all the more important that the CMBS servicer is able to service the loan in a way that fulfills its duties under the servicing standard while satisfying third-party investors." Another primary concern for CMBS servicers is the decreased availability and increased cost of windstorm insurance, the rating agency said. "The State of the U.S. CMBS Servicing Market -- Anything but Standard" is available on Fitch's website at http://www.fitchratings.com.

TriLyn LLC, a provider of investment advisory and capital placement services, and Investcorp, a global investment group, have announced the initial closing of TriLyn-Investcorp Mezzanine Partners I LP, a real estate mezzanine fund.The companies said the fund will originate, invest in, and hold structured mezzanine and other high-yielding debt and preferred equity investments in U.S. commercial and residential real estate. The fund was established with $100 million in initial capital commitments from affiliates of Investcorp (the parent company of SourceMedia, the publisher of National Mortgage News) and its clients as well as the Bank of Scotland. Further capital commitments of up to $50 million may be sought by the partners. TriLyn and Investcorp intend to leverage the fund, which will create approximately $300-400 million of total investment capital, the companies said. TriLyn will be responsible for the day-to-day management of the fund. TriLyn, based in Greenwich, Conn., can be found online at http://www.trilyn.com, and Investcorp, whose real estate team is based in New York, can be found at http://www.investcorp.com.

Health Care Property Investors Inc., Long Beach, Calif., has announced the formation of a joint venture with an institutional capital partner for 25 senior housing assets.The real estate investment trust said it bought the assets in October through its acquisition of CNL Retirement Properties Inc. and retains a 35% interest in the venture, while continuing to perform the day-to-day management of the assets. The REIT said it received gross proceeds of approximately $726 million, of which approximately $280 million came from the unnamed institutional capital partner and $446 million came from a recently expanded debt facility with Fannie Mae. The company can be found online at http://www.hcpi.com.

Ramco-Gershenson Properties Trust, a Farmington Hills, Mich.-based retail real estate investment trust, has entered into a joint venture with another investor to acquire up to $450 million in retail properties in the Midwest and mid-Atlantic regions.Ramco will have a 20% equity stake in the venture, while its co-investor, an associate of Chicago-based Heitman, will have an 80% stake, the REIT reported. The venture is also expected to take on additional debt funding of 65% on the acquired properties. Ramco is contributing three retail properties to the venture for about $125 million. The venture is expected to acquire additional properties in two more years. Ramco can be found on the Web at http://www.rgpt.com.

Industry groups are warning a group of senators that bringing hybrid adjustable-rate mortgages under the nontraditional mortgage guidance could adversely affect existing homeowners with ARMs, increase defaults, and even put downward pressure on home prices.The Consumer Mortgage Coalition has sent the first letter to the six senators who are urging bank regulators to include hybrid ARMs, such as 2/28 ARMs, under the nontraditional mortgage underwriting guidance. Other trade groups are expected to send letters soon. The CMC warns that such an expansion could harm existing ARM borrowers who are trying to refinance. "Some borrowers would be unable to refinance existing loans because they no longer qualify for a loan -- not because the lending industry has changed its mind about their qualifications -- but because the government had made an arbitrary and unjustified decision to require all lenders to tighten their standards," CMC executive directive Anne Canfield says. The CMC contends that lenders have extensive experience in underwriting ARMs and that tighter underwriting standards are "unjustified." The CMC also warns that tightening underwriting on all ARMs could reduce the pool of potential homebuyers and contribute to downward pressures on home prices.

Secured Funding of California has shuttered its wholesale division, which accounts for about one-third of its total production.As MortgageWire neared its deadline, a company official declined to comment. It is the latest in what is turning out to be a long line of nondepositories that have run into financial problems in a difficult market. On its website, the Costa Mesa-based lender posted a notice saying that, based on "market conditions," it has "stopped funding new applications, and will have until the 12th of January" to fund out its pipeline. Secured is a retail and wholesale lender that originated $900 million in mortgages during the first half. Its specialty is second mortgages. In June of last year it increased its office space by 35,000 square feet and boasted 1,000 employees. It is not known how many workers lost their jobs. Among all funders, it ranked 149th in 2005, according to the Mortgage Industry Directory. No recent funding figures were available.

AmREIT, a Houston-based real estate investment trust, has announced the completion of a tender offer to purchase class B common shares of beneficial interest in the REIT at $9.25 per share in cash.Holders of 997,797 class B shares -- approximately 48% of the total class B common shares outstanding -- voluntarily tendered their shares, AmREIT reported. The class B shares are convertible on a one-for-one basis into the company's class A common shares and have a fixed dividend of 8%. Chad Braun, AmREIT's chief financial officer, said the completion of the tender offer "allows us to swap lower-cost secured debt for common shares with a higher dividend." The shopping center REIT can be found online at http://www.amreit.com.

Public Storage Inc., Glendale, Calif., has priced a public offering of 20 million depositary shares, each of which represents one-thousandth of a share of 6.625% series M cumulative preferred stock, at $25 per share.The real estate investment trust said gross proceeds are expected to total $500 million. The joint book-running managers for the offering are Merrill Lynch & Co., Citigroup Global Markets Inc., Morgan Stanley & Co., and Wachovia Securities. The REIT can be found on the Web at http://www.publicstorage.com.

Mortgage Payment Deferral Inc., Roseville, Calif., has announced the introduction of a patent-pending mortgage program that allows homeowners to defer from three to 36 months of their mortgage payments.The 12 Month Deferral program, or 12MoDef, works by setting aside home equity into a trust account, and the appointed trustee ensures that the mortgage payments are made. The homeowner receives a monthly statement that combines the mortgage and trust account statements. At the end of the deferral period, the trust account is closed, and the borrower receives all the earned interest and resumes making mortgage payments, the company said. "Many of our clients are making job changes, starting families, or struggling with a new business venture, while some are being crushed by meeting the monthly financial burden of their mortgage payment and credit card debt," said Jeremiah Miller, president of Mortgage Payment Deferral. "A year without the stress of a mortgage payment allows people to reassess their financial situation and regain control of their life again." The company can be found online at http://www.12modef.com.

Mortgage lenders cut 2,900 full-time employees from their payrolls in November, wiping out a 2,500 increase in October that established a new high for jobs in the mortgage industry.The U.S. Bureau of Labor Statistics reported that employment in the mortgage banking/broker sector declined from 507,000 in October to 504,100 in November. Housing economists have been expecting a cutback, with single-family originations trending down during the second half of last year. Freddie Mac estimates that originations of conventional mortgages dropped from $715 billion in the second quarter to $597 billion in the fourth quarter. For the whole year, originations totaled $2.65 trillion, compared with $3.17 trillion in 2005, according to a December economic outlook report by the secondary-market agency. The Bureau of Labor Statistics can be found online at http://stats.bls.gov.

Class M-3 of Soundview Home Equity Loan Trust 2001-2 has been downgraded from Baa2 to Ba2 by Moody's Investors Service.The downgrade was attributed to low credit enhancement levels relative to expected losses. "The collateral has taken losses, and the pipeline loss could cause continual erosion of the overcollateralization," Fitch said. The transaction is backed by first- and second-lien, fixed- and adjustable-rate subprime mortgage loans. The rating agency can be found online at http://www.fitchratings.com.

The servicer ratings of Mortgage Lenders Network USA Inc. have been placed on watch for possible downgrade by Moody's Investors Service.Moody's said the action was due in part to "MLN's recent announcement that it has ceased funding wholesale loans, has laid off a portion of its staff, and has placed on temporary furlough a substantial portion of its remaining staff." MLN is currently rated SQ3 as a primary servicer of prime, subprime, and second-lien mortgage loans. The rating scale ranges from SQ1 (strong) to SQ5 (weak). The rating agency can be found online at http://www.moodys.com.

AvalonBay Communities is being added to the S&P 500 Index on a date that will be announced, according to Standard & Poor's.The Alexandria, Va.-based multifamily real estate investment trust was previously a component of the S&P REIT Composite index. The REIT is replacing Symbol Technologies, a company that is being acquired by Motorola, S&P said. AvalonBay will be added to the S&P 500's residential REITs subindustry index.