Originations

Six classes of J.P. Morgan Chase Commercial Mortgage Securities Corp. commercial mortgage pass-through certificates, series 2004-CIBC8, have been downgraded by Moody's Investors Service.The downgrades were as follows: class J, from Ba1 to Ba2; class K, from Ba2 to Ba3; class L, from Ba3 to B2; class M, from B1 to B3; class N, from B2 to Caa2; and class P, from B3 to Caa3. Moody's also affirmed the ratings of 14 classes from the same transaction. The rating agency attributed the downgrades to potential losses from the $25.6 million specially serviced loan, Parkwoods Apartments, secured by a 30-year old, 824-unit multifamily property in Dallas. "The property is 60% leased and suffers from extensive deferred maintenance and building code violations," Moody's said, estimating a $10 million loss for the loan. The rating agency can be found online at http://www.moodys.com.

The National Association of Realtors is forecasting that the sales of existing homes will rise gradually next year and record an annual total only slightly below this year's.Resales are expected to total about 6.47 million this year, a decline of 8.6% but the third-best year on record, the NAR said. Next year they are expected to rise from the "current cyclical low" and finish the year at 6.40 million, down 1%. David Lereah, the NAR's chief economist, said the overall picture does not reflect the mixed conditions around the country. "Roughly three-quarters of the country will experience a sluggish expansion in 2007, while other areas should continue to contract for at least part of the year," he said. "Most of the correction in home prices is behind us, but general gains in value next year will be modest by historical standards." The association can be found online at http://www.realtor.org.

Fieldstone Investment Corp., Columbia, Md., a top-25-ranked nonprime lender, has put itself on the auction block, hiring Lehman Brothers as its adviser, according to investment banking officials."There's definitely a book out on them," said one mergers-and-acquisitions adviser, requesting anonymity. Another investment banker confirmed this. Fieldstone president and chief executive officer Michael Sonnenfeld did not return a telephone call about the matter. The company is publicly traded. News of the sale was first reported in the Dec. 11 issue of National Mortgage News.

Total issuance of U.S. commercial mortgage-backed securities is likely to surpass $200 billion this year, and issuance is expected to rise 20% to $240 billion in 2007, according to Fitch Ratings.The rating agency said it expects transactions securitized this year to be more susceptible to economic downturns than other CMBS vintages because they have a higher concentration of more volatile property types and interest-only loans, and also because of the more competitive lending environment this year. The number of CMBS fusion transactions exceeding $3.5 billion has also increased this year, and the trend toward larger fusion deals is expected to continue. "Fitch has already seen five $3.5-plus billion deals through the first nine months of this year, and expects a total of nine such deals by year-end, compared to five in 2005," said Patty Bach, a Fitch senior director. Fitch expects the percentage of interest-only loans in multiborrower transactions to continue to rise in 2007. Fitch also said it expects performance of retail and industrial properties to remain stable in 2007, while office, multifamily, and hotel properties are expected to show improvement. Fitch can be found online at http://www.fitchratings.com.

The AA-minus risk-to-the-government, subordinated debt, and preferred stock ratings on Fannie Mae have been affirmed by Standard & Poor's Ratings Services and removed from CreditWatch.The outlook is negative. "The rating action reflects Fannie Mae's progress in its accounting restatement process and the build-up of a stronger capital position," S&P said. The rating agency said Fannie has maintained a mandated 30% capital surplus above its regulatory minimum capital for four consecutive quarters, chiefly through management of balance sheet growth and lower returns to shareholders. S&P noted that Fannie Mae has now filed its 2004 annual report, including restatements, with the Securities and Exchange Commission and has made "extensive changes" in its senior management and board over the past two years. Fannie Mae's recent SEC filing is a "significant milestone," S&P said, but added that "we continue to view the pervasiveness of the deficiencies discovered in its internal controls over financial reporting as a concern" and noted that Fannie's 2005 and 2006 quarterly financial statements remain outstanding. S&P can be found online at http://www.standardandpoors.com.

The subject of rumors concerning early payment defaults, Mortgage Lenders Network, Middletown, Conn., issued a statement Dec. 8 saying it is "actively" accepting submissions and funding loans.The company, a top-20-ranked subprime lender, would not elaborate. Industry officials familiar with the nondepository mortgage banker said rumors have been circulating since late last week that MLN may be having trouble with early payment defaults, and that one top official may have been let go. Founded almost 10 years ago, MLN employs 1,800 nationwide. The company is building a new headquarters in Wallingford, Conn. MLN can be found online at http://www.mlnapproves.com.

Median house prices will decline by 8% to 10% over the next nine months and could create a serious drag on the economy, according to Allen Sinai, president of Decision Economics.Even if the downturn in sales and construction is over early next year, there will be a huge inventory of unsold homes overhanging the housing market, Mr. Sinai told a housing symposium hosted by the Office of Thrift Supervision. "[M]edian prices of new and existing homes likely will continue to decline, particularly prices in those parts of the United States that have been bid up to unsustainable levels," the economist said. The National Association of Home Builders is forecasting that house prices will decline by 3.5% in 2007. NAHB chief economist David Seiders says he expects single-family housing sales to bottom out during the current [fourth] quarter, but not the condominium market. And residential construction will bottom out in the first quarter of 2007, he forecasts.

Class B-1 of Metropolitan Mortgage & Securities Co.'s series 1999-A securitization has been downgraded from B to CCC by Fitch Ratings and assigned a Distressed Recovery rating of DR2.In addition, two classes in Metro Mortgage's series 1998-B deal have been downgraded as follows: class B-1, from DR1 to DR2, and class B-2, from DR2 to DR6. Fitch also upgraded eight classes and affirmed the ratings on 18 other classes in nine Metro Mortgage deals. The downgrades were attributed to a deterioration in the relationship between credit enhancement and loss expectations. The majority of the mortgage loans were originated or acquired by Metropolitan Mortgage, which filed for Chapter 11 bankruptcy in February 2004. The collateral consists primarily of fixed- and adjustable-rate mortgage loans secured by first liens on residential properties or commercial real estate.

Mortgage-related bond and derivatives prices have seen notable changes in the past few days that appear to reflect recent housing finance market concerns.Agency mortgage-backed securities were one to three ticks wider vs. the 10-year Treasury for discount and current coupons on Dec. 7 in a move that a report by RBS Greenwich Capital mortgage strategist Alec Crawford attributed to subprime lender Ownit's Chapter 7 bankruptcy. In addition, the ABX tradable synthetic index of U.S. home equity asset-backed securities, which is considered reflective of housing market sentiment, has seen a "freefall" in the past few days, according to Andrew Davidson & Co.

Employment in the mortgage industry rose to a new high in October as lenders added 2,900 full-time employees to their payrolls, though overall employment in the mortgage industry has been surprisingly steady all year.The U.S. Bureau of Labor Statistics reported that employment in the mortgage banking/broker sector increased from 504,500 in September to 507,400 in October. Since October 2005, employment is up only 0.6%. However, it is surprising to see lenders hiring when sales of existing homes are down 11% and new-home sales are down 25% over the past 12 months. Orawin Velz, director of forecasting at the Mortgage Bankers Association, noted that mortgage rates were falling in September and October and refinancing activity had picked up. Nevertheless, "it is surprising that we haven't seen a year-over-year decline," Ms. Velz said. The MBA forecaster said she expects to see some payroll trimming in the coming months. The BLS can be found online at http://stats.bls.gov.

BRT Realty Trust, a Great Neck, N.Y.-based real estate investment trust, has announced the pricing of a public offering of 2.8 million shares of common stock at $28 per share.Friedman, Billings, Ramsey & Co., Stifel, Nicolaus & Co., and BMO Capital Markets Corp. are the managing underwriters of the offering. The company said it has granted the underwriters an option to buy up to 420,000 additional shares to cover any overallotments. BRT can be found on the Web at http://www.brtrealty.com.

GMAC-RFC Insurance Claims Services and Fidelity National Information Services Inc.'s Field Services division have announced a strategic alliance to jointly promote their services.GMAC-RFC Insurance Claims helps financial institutions optimize the property insurance claims recovery process to generate higher recoveries for clients. FIS Field Services is a provider of asset inspection and preservation services to financial institutions around the world. "The marketplace needs another competitive solution that will enable financial institutions and other real estate investors to optimize their insurance claims recovery process, repair homes faster, and minimize reputational risk between the financial institution and its borrowers," said Ron Reitz, vice president and director of GMAC-RFC Insurance Claims Services. Fidelity can be found online at http://www.fidelityinfoservices.com.

Duke Realty Corp., an Indianapolis-based industrial and office real estate investment trust, is acquiring Bremner Healthcare Real Estate, a health care real estate development and management firm.The terms of the deal, which aims to cash in on growth opportunities in the health care industry, were not disclosed. The company will operate as a division of Duke, the REIT reported, with Bremner Healthcare chief executive officer Jim Bremner and his associates joining the Duke division. Health care expenditures in the United States are expected to be over $33 billion by 2010, according to Denny Oklak, Duke's chairman and CEO. "Almost 35% of these expenditures will be for outpatient facilities such as medical office buildings, surgery centers, and clinics," Mr. Oklak said. The deal is expected to close in January 2007. Duke can be found online at http://www.dukerealty.com.

The average 30-year fixed mortgage rate fell from 6.14% to 6.11% over the seven-day period ended Dec. 7, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate fell from 5.87% to 5.84%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages declined from 5.95% to 5.92%, and the average rate for one-year Treasury-indexed ARMs decreased from 5.46% to 5.43%, Freddie Mac reported. Fees and points averaged 0.5 of a point for fixed-rate mortgages and hybrid ARMs and 0.7 of a point for one-year ARMs. "Continued signs of slowing in the housing market and weakness in the manufacturing sector helped keep mortgage rates down this week," said Frank Nothaft, Freddie Mac's chief economist. ".... Looking forward in the housing market, we think that housing is about two-thirds of the way through the correction, and should stabilize by midyear 2007." A year ago, the average 30-year and 15-year fixed rates were 6.32% and 5.87%, respectively, and the average hybrid and one-year ARM rates were 5.78% and 5.16%, respectively, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

OwnIt Mortgage Solutions, the Agoura Hills, Calif.-based mortgage company run by industry notable Bill Dallas, has shut its doors.According to an e-mail the company sent to its brokers (obtained via a link posted on our Mortgage Grapevine discussion board), the company is ceasing operations. "For the past three years, we have pursued a mission to influence the mortgage industry towards increased affordability options for a changing market of home buyers," the company says. "Change takes time, and we are saddened that the current unfavorable conditions of the mortgage industry did not afford us sufficient time to see our mission through." A message was left on Mr. Dallas' voicemail at OwnIt asking for comment, but the call had not been returned by MortgageWire's deadline. Among the investors in OwnIt is Merrill Lynch, which owned a small piece of the firm. OwnIt can be found online at http://www.ownitmortgage.com.

Sebring Capital, a Texas-based subprime wholesaler, has shut its doors amid rumors that the company was hit by large loan "buyback" requests.The lender officially closed on Dec. 1. Its website now contains a message confirming the shutdown. A Sebring official recently denied to National Mortgage News that the lender was going out of business. Sebring senior vice president Mike Waldron told MortgageWire Dec. 7 that Sebring's failure is due to "a combination of factors." He declined to elaborate, saying "it's a sad time for the company. A lot of people here worked very hard for its success." The lender employed 325 but is now down to a "skeleton crew," Mr. Waldron said. Sebring was 10 years old as a company and used warehouse lines of credit to fund production. Mr. Waldron declined to name its warehouse lenders or investors that bought its whole loans. (See the Dec. 11 issue of NMN for more details.)

Two classes of COMM commercial mortgage pass-through certificates, series 2000-C1, have been downgraded by Fitch Ratings.Class M was downgraded from CCC/DR1 to C/DR6, and class L was downgraded from B-minus to CCC and assigned a Distressed Recovery rating of DR1. (Distressed Recovery ratings, which designate a transaction's recovery prospects, range from a high of DR1 to a low of DR6.) Fitch also upgraded five classes from the transaction, and the ratings on seven classes were affirmed. The downgrades are the result of increased loss expectations on the specially serviced assets, the rating agency said. Fitch said its projected losses on the specially serviced assets are expected to fully deplete classes N and O and negatively affect classes L and M.

Hersha Hospitality Trust, a Philadelphia-based real estate investment trust, has announced the pricing of a public offering of 7.2 million shares of common stock at $11.20 per share.The hotel REIT said the estimated net proceeds of $76.6 million are expected to be used to repay debt, to fund acquisitions and development loans, and for other corporate purposes. UBS Investment Bank and Wachovia Securities are the joint book-running managers of the offering. The company said it has granted the underwriters an option to buy up to 1.08 million additional shares to cover any overallotments. Hersha can be found on the Web at http://www.hersha.com.

Acadia Realty Trust, a real estate investment trust based in White Plains, N.Y., has priced a private offering of $100 million of 3.75% convertible notes due 2026.The equity REIT said the notes will be convertible into cash up to their principal amount and, if the conversion value exceeds that amount, into cash, Acadia common stock, or a combination thereof (at the company's option) at an initial conversion price of $30.86 per share. The initial purchasers have been granted an option to buy up to an additional $15 million of notes, Acadia said.

First Potomac Realty Trust, Bethesda, Md., has announced that its operating partnership, First Potomac Realty Investment LP, has priced an offering of $110 million aggregate principal amount of exchangeable senior notes.First Potomac, a real estate investment trust, said the five-year, 4.0% notes will have an initial exchange rate of 27.6855 common shares per $1,000 principal amount of the notes, representing an exchange price of approximately $36.12 per share. First Potomac can be found online at http://www.first-potomac.com.