Originations

Mortgage originations could take off again in 2008, according to Countrywide Home Loan's chief economist, Jeff Speakes.Noting that loan production has shot higher every five years since the mid-1990s, Mr. Speakes told mortgage brokers meeting at their annual convention in Philadelphia that if they can hold on through next year, brighter days are on the horizon. Of more immediate concern to the economist, however, is the fear that the Federal Reserve Board won't stop ratcheting up short-term interest rates until it goes too far and sends the economy spinning into a recession. Mr. Speakes said he believes the Fed should "stop right here" by bumping the federal funds rate 0.5% at its next meeting in July and "be done with it." He voiced hope that the Fed "will get itself off the treadmill. Otherwise, it's going to overdo it." As for whether the bottom will fall out of the housing market, the economist agreed with most of his colleagues. "No kerplunko," he said. But he warned that price appreciation could slip below income growth for the first time in years. "Not negative. It's never been negative," he told the National Association of Mortgage Brokers. "But in the low single digits."

The Coalition Against Broker Fraud has created a "comprehensive database" on brokers and other finance business insiders known or suspected to have been involved in fraudulent activity.Being on the list is not tantamount to an immediate indictment, the database's co-founders, Mitch Freifeld and Ron Litt, said at the National Association of Mortgage Brokers' convention in Philadelphia, where they formally introduced their effort. Some people could be listed in error or out of retribution, they admitted. But a listing should be enough to give pause to anyone considering using someone whose name is registered, they added. Seeing a name on the list is a "red flag that you need to go a little deeper into the resume," said Mr. Freifeld, who is president of Global Net Branch Solutions, Clearwater, Fla. "We've got to act aggressively," he said. "We have to attack it." The co-founders said fraud against loan brokers goes much deeper than the $86 billion in losses estimated by the FBI in 2004. "It's putting entire companies out of business," Mr. Freifeld said. "And not just little mom-and-pop companies, either. Nobody is immune." Mr. Freifeld, who has been arrested on numerous charges, including credit card fraud and bouncing at least one check, said the coalition is his way of atoning for his past transgressions.

The National Association of Mortgage Brokers has updated both its Code of Ethics and Best Business Practices statement to condemn the use of pressure tactics between mortgage brokers and other service providers.At a news conference June 24 during the NAMB's annual convention in Philadelphia, NAMB past president Joe Falk said "we abhor" any effort to influence another professional because it ends up hurting the consumer. But pressure goes both ways, and mortgage brokers should not be pressured "to lower our standards," he continued. While mortgage brokers should not pressure another provider, they still have a duty to their customers to correct problems, Mr. Falk said, including the right to review an appraisal and point out any errors and to help clean up any problems with the title. Mr. Falk is currently the chairman of the NAMB's Legislative Committee. The organization can be found online at http://www.namb.org.

New-home sales rose 4.6% in May, but economists are cautioning that the rebound in sales that started in March is deceptive and that the real trend is downward.The U.S. Census Bureau reported new single-family home sales increased from a seasonally adjusted annual rate of 1.18 million in April to 1.23 million in May. However, sales are down 9.6% for the first five months of this year, compared with those of the same period in 2005 on a seasonally adjusted basis. Phillip Neuhart, a Wachovia Corp. economic analyst, said the government's sales numbers do not account for sales contract cancellations, and "builders are reporting a very large level of cancellations." With sales moderating on a year-to-year basis, he said, homebuilders have 127,000 completed homes for sale as of May 31. Builders are "beginning to face" an inventory problem, Mr. Neuhart said, and "you hope to see that number contained" in the coming months.

Two tranches of RFC's RFSC series 2003-RP1 Trust have been downgraded by Moody's Investors Service.Class M-2 was downgraded from A2 to Baa1, and class M-3 was downgraded from Baa2 to B3. The downgrades were attributed to "high and rapidly rising levels of cumulative loss," a large proportion of severely delinquent loans, and "significant deterioration" of overcollateralization in recent months. The underlying collateral consists of subprime and re-performing residential mortgage loans. Moody's can be found online at http://www.moodys.com.

First Potomac Realty Trust, Bethesda, Md., has announced the completion of a private placement of $75 million of unsecured senior notes.First Potomac, a real estate investment trust, said the transaction consists of $37.5 million in seven-year series A senior notes bearing a fixed interest rate of 6.41% and $37.5 million in 10-year series B senior notes bearing a fixed interest rate of 6.55%. KeyBanc Capital Markets was the placement agent for the transaction. First Potomac can be found online at http://www.first-potomac.com.

The Mills Corp., a real estate investment trust based in Arlington, Va., has announced various management changes, including new responsibilities for its president and its chief operating officer, in connection with a previously announced restructuring.Company president Mark Ettenger will now devote his time exclusively to advising Mills chairman and chief executive officer Laurence C. Siegel and a newly formed Special Negotiating Committee of the board, Mills said. COO Mark S. Ordan will assume responsibility for asset management and international operations while retaining his other responsibilities. In addition to various other changes, Richard J. Nadeau, who joined Mills in March as executive vice president for finance and accounting, has been named chief financial officer, the company said. "These organizational changes are intended to create a management structure that focuses on day-to-day operational matters that will enhance the value of our properties," Mr. Siegel said. Mills said its restructuring efforts in recent months have resulted in 222 fewer full-time employees. The retail and shopping center REIT can be found online at http://www.themills.com.

Equity One Inc., Marlton, N.J., has announced the signing of a private-label agreement with Phoenixville Federal Bank & Trust, Phoenixville, Pa., that allows Equity One to make mortgage loans in the name of Phoenixville to customers who might otherwise have been turned down for a traditional mortgage.Through the private-label program, Equity One provides residential, mixed-use, and commercial prime and nonprime products to community banks. "The banks benefit from increased customer loyalty, fee income, additional Community Reinvestment Act credits, and a reduction in fixed costs associated with an in-house mortgage operation," Equity One said. Equity One is a wholly owned subsidiary of Popular Financial Holdings Inc., which can be found online at http://www.popularinc.com.

Harbourton Capital Group Inc., McLean, Va., has announced an agreement to acquire Molton Allen & Williams Mortgage Co., a privately held mortgage banker based in Fairfax, Va.The terms of the deal were not disclosed. Harbourton said that after it acquires all the membership interests in MAW, it plans to merge it into a wholly owned subsidiary, Harbourton Mortgage Investment Corp. "The ability of the combined companies to offer a full range of mortgage programs covering the entire credit spectrum, including conforming and nonconforming loan products, through branch origination and operations facilities in California, Virginia, and Alabama will provide significant new opportunities for growth," said J. Kenneth McLendon, president and chief executive officer of Harbourton Capital. Harbourton Mortgage Investment Corp. and MAW can be found on the Web at http://www.hmic.com and http://www.mawmortgage.com.

Barclays Bank PLC, London, has announced an agreement to acquire the U.S. subprime mortgage servicing business of HomEq Servicing Corp. from Wachovia Corp., Charlotte, N.C., for a total consideration of $469 million.The consideration represents net book value for the mortgage servicing rights and fixed assets "and $209 million in respect of advances, the collection of which is fully indemnified by Wachovia," Barclays said. The consideration is subject to an adjustment mechanism based on the value of the MSRs and advances at the closing of the transaction. The company said the acquisition will expand the capabilities of the growing U.S. mortgage securitization franchise of Barclays Capital, the bank's investment banking division. Barclays Capital can be found on the Web at http://www.barclayscapital.com.

Spirit Finance Corp., Scottsdale, Ariz., has priced a public offering of 15 million shares of its common stock at $10.74 per share.The real estate investment trust said it has granted the underwriters an option to buy up to 2.25 million additional shares to cover any overallotments. Citigroup Corporate and Investment Banking is the sole bookrunner for the offering. Spirit can be found online at http://www.spiritfinance.com.

EOP Operating LP, a subsidiary of Chicago-based Equity Office Properties Trust, has commenced an offering of $1.0 billion aggregate principal amount of exchangeable senior notes due 2026.In addition, Equity Office said the subsidiary is offering $150 million of notes that may be issued, at the option of the initial purchasers, within 30 days to cover any overallotments. The notes will be senior unsecured obligations of EOP Partnership that will be fully and unconditionally guaranteed by Equity Office. Equity Office, a real estate investment trust, can be found online at http://www.equityoffice.com.

Cardinal Communications Inc., Broomfield, Colo., a digital communications provider and specialized developer of residential real estate, has announced an independent mortgage broker affiliation between its Lighthouse Lending mortgage division and Union Colony Bank of Greeley.Lighthouse Lending will lease space initially in four Union Colony branches, where it will operate as an independent broker, and may expand into four additional branches later, Cardinal Communications said. "The opening of these locations will create numerous opportunities for Lighthouse Lending to expand our client base," said Tom Beck, managing partner of Lighthouse Lending. "We anticipate that our volume will grow by 20% over the next 12 months." The parent company can be found online at http://www.cardinalcomms.com.

A real estate slowdown is probable in California and the United States in general, but the problems are not likely to lead to a national recession, according to the quarterly UCLA Anderson Forecast.Edward Leamer, director of the UCLA Anderson Forecast, said he does not expect real estate prices to fall significantly, noting that sales volume typically falls further than prices. The real decline will come in residential investment, he said, including new-home construction, repair and remodeling, and brokerage commissions on home sales. In California, the forecast calls for a real estate slowdown and a flat housing market. "We do not predict a recession, nor do we predict a substantial decline in average nominal home prices," said Ryan Ratcliff, an economist who prepared the California forecast. "This forecast us based on two arguments. There is not enough vulnerability in the usual sources of employment loss to create a recession, and the historical record suggests that average home prices do not usually fall without this kind of job loss." The UCLA Anderson Forecast can be found online at http://www.uclaforecast.com.

Housing production in California is expected to continue slowing for the remainder of the year as the market shifts to more normal conditions, according to the midyear housing forecast by the California Building Industry Association.But starts for the year are still expected to be the fourth-highest in 17 years, the forecast says. Speaking at the Pacific Coast Builders Conference, CBIA chief economist Alan Nevin said he now expects overall housing starts in California this year to total 170,000-180,000, down 15%-20% from 2005. Multifamily construction remains extremely strong in most markets and is expected to total 45,000-55,000 units, about the same as last year's level. But single-family starts are expected to drop to 125,000-135,000, compared with nearly 155,000 in 2005. The single-family sector remains solid in most of Southern California, but starts are likely to be significantly below last year's level in San Diego, the San Joaquin Valley, the Sacramento region, and the Bay Area. "The decline in single-family production in those areas is the result of a combination of rapid price run-ups in the upscale market and rising interest rates," Mr. Nevin noted. The economist also projected that prices will continue leveling off in most metro areas, with annual increases of less than 5% statewide. "The rapid run-up in prices is over, but we do not see prices dropping significantly, if at all," he said.

A panel of bank economists is forecasting that conventional 30-year mortgage rates will stay below 7% this year and next, which should support an orderly and gradual decline in housing sales and starts.The American Bankers Association's Economic Advisory Committee says it expects a continuing slowdown in the housing sector and a plateauing of the price of oil at around $70 a barrel. This scenario should allow 3% economic growth for the remainder of the year and take pressure off the Federal Reserve Board to raise the federal funds rate above 5.25%. Three of the nine economists on the ABA's panel say they expect the Fed to raise it again, to 5.5%, by the end of the year. The ABA consensus forecast shows new- and existing-home sales declining by 7% in 2006 to 7.13 million and another 5% decline in 2007, to 6.79 million. Home sales in 2005 totaled a record 7.67 million. U.S. Trust Co. chief economist Robert McGee noted that the committee's forecast is for moderate growth. However, the economists are more concerned that the forecast will be off on the downside. "It was unanimous that we are more concerned with downside risk," Mr. McGee said. "I think that largely reflects the fact that energy prices and housing are two big uncertainties out there."

The average 30-year fixed mortgage rate rose from 6.63% to 6.71% over the seven-day period ended June 22, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate rose from 6.25% to 6.36%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages was up from 6.23% to 6.32%, and the average rate for one-year Treasury-indexed ARMs climbed from 5.66% to 5.75%, Freddie Mac reported. Fees and points averaged 0.5 of a point for fixed-rate mortgages, 0.6 of a point for hybrid ARMs, and 0.8 of a point for one-year ARMs. "Financial markets believe that the current rate of inflation is above the Fed's comfort zone, which will lead to more rate hikes in the near future," said Frank Nothaft, Freddie Mac's chief economist. "A rate hike in June is thought to be a sure thing, and what was believed to be a vaguely possible hike in August is now considered to be highly likely. That change in market expectations caused mortgage rates to jump higher this week." A year ago, the average 30-year and 15-year fixed rates were 5.57% and 5.16%, respectively, and the average one-year ARM rate was 4.23%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

Poland is the newest market in which The First American Corp., Santa Ana, Calif., will offer title insurance.The company cited figures showing that nearly $3 billion of foreign capital is invested in real estate in Poland, but added that there are title uncertainties affecting the Polish market, such as delays in registering mortgages, the filing of restitution claims, and land status issues. First Title Poland, the limited liability company established to offer the product, has created insurance policies to address title issues unique to that country. "While the Polish real estate market is booming in all aspects, we are happy to see more and more American investors active here," said Dorota Dabrowska, executive director of The American Chamber of Commerce in Poland, of which First Title is a member. "Importantly, U.S. companies are bringing in sophisticated products and services that will help develop the market -- title insurance being one great example." First Title Poland is a venture of First Title PLC, a United Kingdom firm that is a wholly owned subsidiary of First American, and First Title CEE, a Hungarian company established to market First American products in a number of former Iron Curtain countries. First American can be found online at http://www.firstam.com.

The Market Composite Index, an overall measure of mortgage applications, fell from 571.9 to 567.6 on a seasonally adjusted basis during the week ended June 16, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications decreased 1.6% on the week and were down 26.8% from the level recorded a year earlier. The Purchase Index inched up from 414.6 to 414.8 on a seasonally adjusted basis, while the Refinance Index declined from 1499.4 to 1466.1. Refinancings represented 35.5% of total applications, down from 35.7% the previous week, while adjustable-rate mortgages accounted for 29.6%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages increased from 6.61% to 6.73%, and points (including the origination fee) increased from 1.13 to 1.14 for loans with 80% loan-to-value ratios, the association reported.

The House has passed key Federal Housing Administration reforms advocated by the Bush administration as part of a HUD appropriations bill that is now pending in the Senate.The provisions would increase FHA loan limits, allow the agency to charge risk-based premiums, and eliminate a 3% downpayment requirement. These provisions would get the FHA back into the market so that it could serve borrowers who are being steered into subprime loans, according to Brian Chappelle, an FHA consultant. At a Senate Banking Committee hearing on Tuesday, housing subcommittee Chairman Wayne Allard, R-Colo., said there are a lot of unanswered questions about the FHA's ability to implement risk-based pricing. Only Sen. Mel Martinez, R-Fla., supported the administration's reform efforts. However, it appears that the legislative fight over the FHA reforms will occur in the Senate Appropriations Committee, not the banking committee. Sen. Christopher Bond, R-Mo., is expected to mark up the Department of Housing and Urban Development appropriations bill in mid-July. Meanwhile, Sen. Allard and banking committee Chairman Richard Shelby, R-Ala., have asked the Government Accountability Office to conduct a study on the administration's FHA reform package and recommend the "most viable options FHA can pursue to serve additional low-income and first-time homebuyers."