Originations

Wachovia Securities, which services securitized commercial mortgages and facilitates related defeasance transactions, has announced the receipt of a private letter ruling from the Internal Revenue Service that may help reduce defeasance costs for borrowers.Charlotte, N.C.-based Wachovia said the ruling expands the time period for using securities in the defeasance process, but noted that it has not been published by the IRS and "may only be relied upon by the taxpayer who requested it." In a defeasance, a borrower substitutes government securities as collateral for a loan to obtain a release of the property that originally secured the loan, Wachovia noted. Existing practice required the securities to provide a stream of payments to fund the loan's debt service within four months of receipt. The IRS letter, which Wachovia received on behalf of a client, indicates that tax rules would not be violated by using securities maturing within 12 months rather than four, the company said. T.J. Maher, a managing director in Wachovia's Municipal Products Group, said expanding the period from 120 to 365 days will expand the security combinations available to borrowers.

HispanicLending.com, Dallas, has launched "Casa de Sueno," a new downpayment assistance gift program that offers qualified Hispanic buyers in all 50 states up to 10% of the purchase price of their new home.Executives said industry data continue to show that lack of downpayment funds remains one of the biggest barriers to homeownership. The program may also be used for closing-cost expenses and will be administered by AmeriDream Inc., a nonprofit provider of affordable housing opportunities for low- to moderate-income individuals and families. Other benefits of the program include a homebuyer education course and flexible qualifications for both first-time homebuyers and homeowners, regardless of age, race, creed, or gender, HispanicLending.com said. The company can be found online at http://www.hispaniclending.com.

Freddie Mac has expanded its affordable mortgage program to give active-duty soldiers and reservists more purchasing power when they buy a home.Under its Home Possible program, Freddie will purchase low- or zero-downpayment loans with flexible credit underwriting standards. If the borrower receives a gift from relatives or veterans' organization, the initial interest rate can be reduced by 150 basis points in the first year. This buydown of the interest rate effectively increases the soldier's or sailor's home purchasing power "by as much as 30%," Freddie Mac said in announcing its decision to expand the Home Possible program to 1.5 million military personnel. The secondary-market agency acted in response to requests by Sen. Ben Nelson, D-Neb., and the Hispanic War Veterans of America. The reduction in the interest rate is phased out over three years, and the source of the interest rate buydown funds can come from a wide range of sources, Freddie said.

The average 30-year fixed mortgage rate fell from 6.43% to 6.40% over the seven-day period ended Sept. 21, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate fell from 6.11% to 6.06%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages declined from 6.10% to 6.08%, and the average rate for one-year Treasury-indexed ARMs decreased from 5.60% to 5.54%, Freddie Mac reported. Fees and points averaged 0.5 of a point for fixed-rate mortgages and hybrid ARMs, and 0.8 of a point for one-year ARMs. "A slowing housing market and signs that inflation is leveling off have helped to lower mortgage rates lately and keep them more affordable," said Frank Nothaft, Freddie Mac's chief economist. "For example, housing starts dropped to a three-year low in August, and the Producer Price Index fell below market expectations." A year ago, the average 30-year and 15-year fixed rates were 5.80% and 5.37%, respectively, and the average hybrid and one-year ARM rates were 5.31% and 4.48%, respectively, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

The Federal Reserve Board's monetary policy-making committee has left the target federal funds rate unchanged at 5.25% for the second meeting in a row, citing moderation in economic growth that it said partly reflects a cooling in the housing market.Notable changes in the Federal Open Market Committee's statement from the previous month's included: the deletion of references to specific factors other than housing among the catalysts for economic slowing; a reference to economic growth as "continuing" rather than something that "has moderated;" and the addition of a drop in energy prices to the list of factors the Fed expects to eventually reduce inflation. "In essence, the changes to the statement both reflect the likely effects of the sharp turn in energy prices -- one on the growth side, one on the inflation side," said Stephen Stanley, chief economist of RBS Greenwich Capital Markets. As in the previous meeting, one FOMC member -- Jeffrey Lacker, president of the Richmond, Va. Federal Reserve Bank -- dissented, saying he preferred to see a 25-basis-point hike.

First Industrial Realty Trust Inc., a Chicago-based real estate investment trust, has announced that its operating partnership, First Industrial LP, has priced an offering of $175 million of exchangeable senior unsecured notes.The offering was made to qualified institutional buyers under rule 144A of the Securities Act of 1933. The operating partnership has granted the initial purchasers an option to buy up to $25 million in additional principal amount of notes to cover any overallotments. The REIT said the notes will have an initial exchange rate of approximately 19.6356 common shares per $1,000 principal amount.

Freddie Mac has announced the forthcoming telecast in Miami, Phoenix, and several Texas cities of Nuestro Barrio (Our Neighborhood), a homeownership-themed Spanish-language TV miniseries about Hispanic life in the United States.The 13-episode telenovela will "subtly" educate viewers on issues such as money management, credit, homeownership, and predatory lending, which are "played out against the traditional novela (soap opera) themes of romance, jealousy, greed, and conflict," Freddie Mac said. Collaborating with Freddie are Bank of America and Bank of Texas Mortgage, which will advertise on the series. The Community Reinvestment Association of North Carolina, a nonprofit consumer advocacy organization, produced Nuestro Barrio, and Freddie Mac funded the production. The series will be shown beginning Sept. 27 in Austin, Dallas/Fort Worth, Houston, San Antonio, and Phoenix; and Oct. 1 in Miami/Fort Lauderdale. "Educational telenovelas are a unique way to reach the growing Hispanic marketplace with accurate information and to help close the homeownership gap," said Paul Mullings, senior vice president of Freddie Mac. Freddie can be found online at http://www.freddiemac.com.

House Buyer Network, Marietta, Ga., has declared a real estate "bust" in 12 counties in Arizona, Florida, and California, citing what it called "a glut of motivated homesellers," or homeowners who need to sell a property fast.The counties identified by the company, which specializes in selling homes for motivated sellers, are Maricopa County, Ariz.; the Florida counties of Dade, Lee, Palm Beach, and Hillsborough; and the California counties of Alameda, San Joaquin, Orange, Fresno, San Bernardino, Riverside, and Los Angeles. On a statewide basis, Arizona has shown the highest percentage increase, 235%, in properties processed by the company in the past year, followed by Florida at 219% and California at 196%, the company reported. "In addition to being able to pinpoint today's bust markets, the volume of real estate coming through the system every month also allows House Buyer Network to spot emerging bust markets six months or more in advance," the company said. In this category, the company cited six Virginia and Maryland counties surrounding Washington, D.C., as well as Cook and Lake counties in Illinois and Middlesex and Worcester counties in Massachusetts. The company can be found online at http://www.homebuyernetwork.com.

Basketball star Shaquille O'Neal has announced the formation of The O'Neal Group, a Miami-based real estate and development company that will seek out joint ventures to undertake select projects across the United States.The company's first project will be MDM Development's Metropolitan Miami, a billion-dollar mixed-use development anchoring downtown Miami's urban renewal, the O'Neal Group said. "This is the largest residential development project in downtown Miami proper, and it sits on the site where the historical Royal Palm Hotel used to be, the property that first launched downtown Miami more than 100 years ago," Mr. O'Neal said. In addition to South Florida, the company will focus on Mr. O'Neal's native state of New Jersey, other select markets in the Northeast, Los Angeles, and Louisiana.

The GEO Group, a Boca Raton, Fla.-based provider of correctional and mental health services, is acquiring Palm Beach Gardens, Fla.-based CentraCore Properties Trust, a correctional real estate investment trust, for about $396 million.The purchase price includes the assumption of about $40 million of CentraCore debt. CentraCore owns 13 correctional facilities totaling 8,071 beds, of which 11 facilities totaling 6,945 beds are currently leased to GEO under sale-leaseback agreements, GEO said. Under the merger agreement, shareholders of CentraCore will receive $32 cash per common share, or about $356.1 million, and GEO will refinance CentraCore's debt, which is estimated to be $40 million, upon the expected closing of the deal in late 2006 or early 2007. The GEO Group said it plans to finance the acquisition, including fees and expenses, through the use of $57 million in cash and $360 million in debt to be arranged by BNP Paribas. The companies can be found on the Web at http://www.thegeogroupinc.com and http://www.correctionalpropertiestrust.com.

The Market Composite Index, an overall measure of mortgage applications, rose from to 584.2 to 595.8 on a seasonally adjusted basis during the week ended Sept. 15, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications increased 12.3% on the week but were down 22.5% from the level recorded a year earlier. The Purchase Index fell from 410.2 to 397.9 on a seasonally adjusted basis, while the Refinance Index rose from 1597.0 to 1748.7. Refinancings represented 43.7% of total applications, up from 40.3% the previous week, while adjustable-rate mortgages accounted for 27.0%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages increased from 6.32% to 6.36%, and points (including the origination fee) rose from 1.06 to 1.11 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

Lehman Brothers Bank FSB, a subsidiary of Lehman Brothers, the New York-based investment bank, has agreed to acquire Capital Crossing Bank, Boston, in a deal valued at $210 million.Lehman Brothers Bank will pay $30 per share in cash for each outstanding share of Capital Crossing, which is an investor in whole loans and loan portfolios secured by commercial, multifamily, and residential properties. "We have partnered with Lehman Brothers on loan purchase transactions for quite some time, and believe that a combination of our platform, people, and expertise with their balance sheet and brand equity will take our business to the next level," said Richard Wayne, president and co-chief executive officer of Capital Crossing. Mr. Wayne and Nicholas W. Lazares, chairman and co-chief executive, will continue as co-CEOs of Capital Crossing after the deal is completed and will become managing directors of Lehman Brothers. Edward Mehm and Demetrios Kyrios, executive vice presidents of Capital Crossing, will also join Lehman Brothers as managing directors.

House Financial Services Committee members have come very close to reaching a bipartisan agreement on predatory lending legislation, and they plan to circulate a draft of the bill soon for discussion purposes and to set the stage for committee action next year."I think we are awfully close [to an agreement]," Rep. Spencer Bachus, R-Ala, told reporters. The chairman of the financial institutions subcommittee acknowledged that the bill would impose a suitability standard on lenders making mortgage loans, but declined to provide other details. Rep. Barney Frank, D-Mass., noted that some conservative Republicans have problems with the bill. But he said mainstream Republicans on the committee are "ready to make the deal." In separate interviews, Reps. Bachus and Frank said that no matter which political party controls the House after the November elections, a predatory lending bill will be on the committee's agenda next year.

Federal regulators on Wednesday criticized the residential finance industry for aggressively marketing "exotic" mortgages without making full disclosures on the payment shock associated with some of the loans.At a jam-packed hearing before the Senate Banking subcommittee on housing, Sandra Thompson of the Federal Deposit Insurance Corp. told elected officials that in the monthly mortgage statements they send out, some lenders encourage borrowers "to make the minimum payment," adding that payment-option adjustable-rate mortgage customers "are not getting enough information" early in the application process. Also on Wednesday, the Government Accountability Office issued a report on "alternative mortgage products" (exotics), saying that some recent borrowers now lack sufficient equity in their homes to refinance out of the loans. The report notes that in their advertisements, "some lenders and brokers emphasize the benefits of AMPs without explaining the risks associated." According to exclusive survey figures compiled by National Mortgage News and Alternative Products Quarterly Data Report, mortgage bankers funded $264 billion in option ARMs and interest-only loans in the second quarter, or 31% of all mortgages funded.

AvalonBay Communities Inc., an apartment development and management company based in Alexandria, Va., has priced $500 million of medium-term unsecured notes.The offering consists of $250 million of five-year notes and $250 million of 10-year notes, AvalonBay said. The 5.50% five-year notes, due Jan. 15, 2012, were priced at 99.619, and the 5.75% 10-year notes, due Sept. 15, 2016, were priced at 99.478. AvalonBay can be found online at http://www.avalonbay.com.

Argent Mortgage will be a "major associate sponsor" for two cars owned by Andretti Green Racing, including the one being driven by Danica Patrick.The move apparently ends Argent's relationship with Ms. Patrick's former team, Rahal Letterman Racing, where it had been the primary sponsor of her car and that of former Indianapolis 500 winner Buddy Rice. The other car of which Argent will be the major associate sponsor is driven by Marco Andretti (son of team co-owner Michael Andretti), who in his first-ever Indianapolis 500 last May finished a very close second to Sam Hornish. "Danica and Marco are two of the most talented young drivers in racing and two of the sport's most recognizable names," said Argent president Sam Marzouk. "Bringing them together under the Argent banner creates an unbeatable combination to highlight our brand." The new primary sponsor for Ms. Patrick is Motorola, according to the Andretti Green website.

Rapidly slowing appreciation and declining affordability have produced "a marked increase" in the risk of home price declines in the nation's 50 largest housing markets, according to PMI Mortgage Insurance Co., Walnut Creek, Calif.The average score in the PMI U.S. Market Risk Index rose from 288 to 328 in the third quarter, the company reported. This means the company's estimate of the probability of experiencing a home price decline in the next two years has risen from 28.8% to 32.8% in the 50 largest metropolitan statistical areas. According to the index, there are now 18 markets with a greater than 50% chance of price declines over two years, up from 13 in the second quarter. "No one should be surprised by the slowdown we're seeing," said Mark F. Milner, chief risk officer of PMI Mortgage Insurance. "Over the past five years home prices appreciated much faster than incomes, and that can't continue forever." PMI can be found online at http://www.pmigroup.com.

Daniel P. Sussman has been named executive vice president and chief operating officer of People's Choice Financial Corp., an Irvine, Calif.-based residential mortgage lender organized as a real estate investment trust.Before joining People's Choice, Mr. Sussman was senior executive vice president at New Century Mortgage Corp., where he formerly held the title of EVP and COO, People's Choice reported. He previously held senior management posts at EDMC, Western Financial Savings Bank, The CIT Group, and Novus Financial. Mr. Sussman also served as president and chief executive officer of City First Mortgage Corp. People's Choice also announced the promotion of Brad S. Plantiko to executive vice president of finance and strategic planning. People's Choice Home Loan Inc., a wholly owned subsidiary of the REIT, can be found on the Web at http://www.pchl.com.

Flagstar Bank, Troy, Mich., has announced the expansion of its commercial real estate lending operations to 16 additional states, mostly in the West, the Midwest, and the South.Flagstar said it expects to offer different forms of commercial real estate financing, including land development, construction, "permanent end-financing," and loan participations. "Over the years, we've developed an expertise in commercial real estate lending in the states where we have a banking presence," said Peter Smith, head of Flagstar's consumer and commercial lending operations. "Now we want to bring that expertise to other states." Traditionally, Flagstar Bank has had a presence in Michigan, Indiana, and Georgia. The bank said it expects its national network of residential mortgage brokers to be a good source of referrals, as they know "what the hot spots are for commercial real estate." Flagstar can be found online at http://www.flagstar.com.

The risk that mortgage fraud will have an economic impact in vulnerable markets continues to rise at "an unprecedented rate," according to CoreLogic, a Sacramento, Calif.-based provider of mortgage risk assessment and fraud prevention systems.CoreLogic said its recently developed Core Mortgage Risk Monitor, which forecasts the most likely locations of fraud "hot spots" over the next 12 to 18 months, rose by 5% in the second quarter. The five U.S. markets currently most at risk are Detroit-Livonia-Dearborn, Mich.; Memphis; Dayton, Ohio; Akron, Ohio; and Gary, Ind. CoreLogic can be found on the Web at http://www.corelogic.com.