Originations

Fieldstone Investment Corp., a Columbia, Md.-based real estate investment trust whose primary subsidiary originates subprime mortgage loans, has cut its 2006 dividend guidance for 2006.Previously, the company expected to pay out between $1.84 and $2.04 per share this year in dividends; it now expects to pay between $1.60 and $1.80. Michael J. Sonnenfeld, president and chief executive, said the change "reflects the current market conditions: stable originations in a competitive market and the impact of slowing home price appreciation on prepayments and prepayment fees. Fieldstone has continued to focus on building its origination franchise, lowering its cost to originate and managing its investment portfolio for quality of assets and income." The company said it expects annual nonconforming mortgage fundings of between $5.0 billion and $6.0 billion; previously the high end was $6.2 billion. In its first quarter operating results issued in May, the company had reaffirmed that prior dividend guidance.

Alexandria Real Estate Equities, a real estate investment trust based in Pasadena, Calif., has priced a follow-on public offering of 3.3 million shares of common stock at $84 per share.The book-running managers for the offering were Merrill Lynch, Pierce, Fenner & Smith Inc. and Citigroup Global Markets Inc. The office/laboratory REIT said it has granted the underwriters an option to buy up to 495,000 additional shares to cover any overallotments.

Delinquencies on commercial mortgage-backed securities resumed their downward trend in May, falling three basis points to 0.66%, according to a Fitch Ratings loan delinquency index.Loans that have become real estate owned total 47% of the index, while foreclosures represent an additional 18%, the rating agency said. "Hotel properties represent a larger share of the REO category, 23%, than their 8% contribution to the outstanding CMBS universe, reflecting the sector's higher default probability due to the short-term nature of hotel leases," said Patty Bach, a Fitch senior director. Fitch can be found online at http://www.fitchratings.com.

Homebuilding contributes nearly $68 billion a year to California's economy and creates nearly 487,000 jobs, according to a study released on the eve of the industry's largest regional convention in San Francisco.Prepared by the Sacramento Regional Research Institute, the report, "The Economic Benefits of Housing," says the entire housing industry -- including all goods and services purchased for existing homes as well as new homes -- generates nearly $273 billion in economic activity, supports about 960,000 jobs, and accounts for about 11% of all economic activity in the Golden State. But it also points out that if new-home production were closer to the 220,000 units the Department of Housing and Community Development says is necessary to meet demand, homebuilding would generate $6 billion more in economic activity annually and create 43,000 more jobs. The Pacific Coast Builders Conference, which is largely a California affair, begins the week of June 19.

Commercial and multifamily mortgage debt outstanding rose 2.9% to surpass $2.7 trillion in the first quarter, according to the Mortgage Bankers Association.Multifamily mortgage debt stood at $690 billion at the end of the first quarter, up 2.3% from the level at the end of 2005, the MBA reported, citing Federal Reserve Board flow-of-funds data. Commercial banks hold the largest share of commercial/multifamily mortgages, with nearly $1.2 trillion (43% of the total), the MBA said. (The category includes "commercial and industrial" loans that have commercial property as collateral.) Issuers of commercial mortgage-backed securities hold $577 billion (21%) of the total, followed by life insurance companies, which hold $269 billion (10%), the MBA reported. Savings institutions hold $202 billion (7%), and government-sponsored enterprises hold $132 billion in the form of multifamily mortgages that back the securities they issue and also hold $66 billion of whole loans in their own portfolios, for a total share of 7%. "Nearly every investor group continues to expand their investments in commercial and multifamily mortgages," said Doug Duncan, the MBA's chief economist. The MBA can be found online at http://www.mortgagebankers.org.

The average 30-year fixed mortgage rate rose from 6.62% to 6.63% over the seven-day period ended June 15, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate rose from 6.23% to 6.25%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages was up from 6.20% to 6.23%, and the average rate for one-year Treasury-indexed ARMs climbed from 5.63% to 5.66%, Freddie Mac reported. Fees and points averaged 0.5 of a point for 30-year fixed-rate mortgages and hybrid ARMs and 0.6 of a point for 15-year FRMs and one-year ARMs. "Mixed economic indicators are causing some volatility in financial markets," said Frank Nothaft, Freddie Mac's chief economist. "This invariably leads to the fluctuations in mortgage rates like what we have seen recently." A year ago, the average 30-year and 15-year fixed rates were 5.63% and 5.22%, respectively, and the average one-year ARM rate was 4.25%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

The loss of qualifying special-purpose entity status would have a potentially "catastrophic" impact on the commercial mortgage securitization business, according to Rick Jones, a lawyer with Dechert LLP, an international law firm.Moderating a panel session at the Commercial Mortgage Securities Association's annual convention in New York, Mr. Jones said that, if a vehicle is not considered a QSPE, the entities deemed to be primary beneficiaries of the securitization vehicle would have to consolidate the loans on their balance sheets. This could result in, say, $50 billion of assets and liabilities on their balance sheets that were not there before, Mr. Jones said. In this case, "why would they securitize if they didn't make money?" he asked. According to Mr. Jones, the accountants "don't understand these issues" and are on a "steep learning curve." Lee Cotton of ARCap REIT, a "B-piece" player, said an industry group is also working with the "powers that be" in Washington to persuade them that what the industry has been doing fits in with standards set by Statement No. 140 of the Financial Accounting Standards Board. According to Mr. Cotton, if B-piece buyers had to consolidate the loans, it would make their balance sheets "totally unreadable" and not helpful to investors. Dechert can be found online at http://www.dechert.com.

CharterMac, a New York-based commercial real estate lender, is acquiring ARCap Investors, Dallas, in a transaction that increases its exposure to the commercial mortgage-backed securities sector.The acquisition price of $284.5 million will be funded through a term loan from UBS Securities and Bank of America, CharterMac said. ARCap is a fund manager, specializing in the acquisition, management, and servicing of "B- piece" CMBS and high-yield direct real estate loans. The privately held company manages a portfolio of over $2.8 billion of CMBS, according to CharterMac, which already owns a 10.7% stake in ARCap. "As commercial real estate finance continues its migration to the capital markets, it is a necessity to have a strong presence in the CMBS industry," said Marc D. Schnitzer, chief executive officer and president of CharterMac. Other drivers of the transaction include the expansion of CharterMac's fund management business, ARCap's technology platform, and "operating synergies" between the companies, Charter Mac said. After the transaction closes, ARCap will become a CharterMac subsidiary and its existing management team, led by Leonard Cotton and J. Larry Duggins, will continue to oversee ARCap operations. CharterMac can be found online at http://www.chartermac.com.

Habitat for Humanity Kansas City and NovaStar Financial Inc., Kansas City, Mo., have announced a pilot program under which NovaStar's mortgage servicing group is contributing personnel and systems to service mortgages owned by Habitat.The contribution, which is accompanied by job counseling and credit education for homeowners, frees the nonprofit group's resources for other activities, Habitat and NovaStar said. "NovaStar approached us last year with an idea for donating business expertise to help Habitat focus on our mission of broadening homeownership and revitalizing neighborhoods in our city," said Yahna Gibson, executive director of Habitat for Humanity Kansas City. "Nearly 150 families own Habitat for Humanity homes in Kansas City with active mortgages." The organizations can be found online at http://www.habitatkc.org and http://www.novastarmortgage.com.

Longview Fibre Co., a Longview, Wash.-based timberlands owner and specialty paper manufacturer, has announced a special cash-and-stock distribution to its common shareholders in connection with a plan to convert to a real estate investment trust.In addition to the distribution, valued at $7.54 per share, the company announced an amendment to its senior secured credit agreement to provide for a new $300 million term loan facility, among other things. The special distribution "represents the last significant milestone in our REIT conversion process," said company president Richard H. Wollenberg. Longview can be found online at http://www.longviewfibre.com.

DeepGreen Financial, Cleveland, has announced the introduction of a 30-year fixed-rate home equity loan that is being offered direct to consumers.The loan is available to qualified borrowers at rates beginning at 7.375% and in amounts up to $250,000, DeepGreen said. The loan carries no lender fees, annual fees, or closing costs. "By distributing monthly payments over 30 years, our new home equity loan gives borrowers access to more of their equity with lower payments," said Sy Naqvi, chief executive officer of DeepGreen. "More importantly, borrowers can access the money they need without worrying about a balloon payment down the road." The company can be found on the Web at http://www.deepgreenfinancial.com.

The Market Composite Index, an overall measure of mortgage applications, rose from 534.4 to 571.9 on a seasonally adjusted basis during the week ended June 9, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications increased 17.9% on the week but were down 34.3% from the level recorded a year earlier. The Purchase Index rose from 395.6 to 414.6 on a seasonally adjusted basis, while the Refinance Index climbed from 1356.0 to 1499.4. Refinancings represented 35.7% of total applications, up from 34.2% the previous week, while adjustable-rate mortgages accounted for 30.7%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages increased from 6.60% to 6.61%, and points (including the origination fee) decreased from 1.19 to 1.13 for loans with 80% loan-to-value ratios, the association reported.

Four classes of notes issued by Prudential Structured Finance CBO I, which are supported in part by residential mortgage-backed securities, have been downgraded by Fitch Ratings.The downgrades were as follows: classes B-1L and B-1, from CCC/DR3 to C/DR3; and classes B-2L and B-2 notes, from CC/DR5 to C/DR5. In addition, two classes were upgraded and the rating on one other class was affirmed. Fitch attributed the downgrades to "the continued expectation of low recovery estimates for several distressed securities." The transaction, a collateralized bond obligation, is supported by a portfolio of RMBS (61.3%), asset-backed securities (31.7%), and collateralized debt obligations (7%).

Hospitality Properties Trust, Newton, Mass., has priced an offering of $275 million of 6.30% senior unsecured notes due 2016.The joint book-running managers of the offering are Merrill Lynch & Co. and RBC Capital Markets, and the joint lead managers are UBS Investment Bank and Wachovia Securities. Hospitality Properties, a real estate investment trust that specializes in hotels, can be found on the Internet at http://www.hptreit.com.

Zacks Equity Research, Chicago, has made H&R Block its "Bear of the Day" -- a stock expected to underperform the markets over the next three to six months -- for June 13.Block is the parent of Option One Mortgage Corp., and recently reported earnings of $490.4 million ($1.49 per share) for its fiscal year, down from $623.9 million ($1.88 per share) for the prior year. Earnings for the quarter and the year were hurt by an after-tax charge of $6.4 million ($0.02 per share) for a restructuring of the mortgage operations. In a brief statement, Zacks said, "as expected, earnings in fiscal year 2006 were at the low end of previous guidance. Competition remains intense in the tax business, while fundamentals in the mortgage business continue to deteriorate." Zacks can be found online at http://www.zacks.com.

The values of U.S. commercial real estate properties in coastal areas may suffer -- and affect commercial mortgage-backed securities -- as insurance companies reduce loss exposure to hurricane-prone areas, according to Fitch Ratings.Joseph Kelly, a Fitch senior director, said CMBS servicers have noticed a "sharp increase" ranging from 25% to 400% in windstorm and flood insurance premiums since the beginning of hurricane season. "This may present a problem for commercial real estate properties where premium increases cannot be passed through to tenants," he said, "and in fact the resulting value decline may be severe enough so a property can no longer support its full debt service, increasing the likelihood of payment default." Besides premium hikes, insurance companies may raise deductibles, reduce coverage amounts, or drop coverage altogether, Fitch noted. "Fitch's chief concern is that windstorm insurance along coastal areas may become commercially unavailable, possibly echoing in severity the terrorism insurance issues of late 2001/early 2002," said Patty Bach, a Fitch senior director. Fitch can be found online at http://www.fitchratings.com.

Two classes from Lehman Brothers floating-rate commercial mortgage trust 2002-LLF C3 have been downgraded by Fitch Ratings.Class L was downgraded from BB-plus to BB, and class M was downgraded from B-plus to B. Fitch also affirmed the ratings on six other classes in the transaction. The rating agency attributed the downgrades to "the continuing decline in net cash flow performance and lack of new leasing activity at the transaction's two remaining loans since Fitch's last review."

Defaults on loans in commercial mortgage-backed securities declined last year for the second year in a row, according to an annual study by Fitch Ratings.The rating agency reported that 317 CMBS loans totaling $1.86 billion defaulted in 2005, down from 324 loans totaling $2.16 billion in 2004. Fitch said it expects CMBS loan defaults to rise, however, because the composition of mortgage pools is becoming more heavily weighted with hotels. "Although commercial property markets generally are improving, the impact of a future market downturn on CMBS could be greater due to an increased exposure to the volatile hotel sector," said Patty Bach, a Fitch senior director. Fitch can be found online at http://www.fitchratings.com.

Wes Iseley and Arvin Wijay have been hired by Morgan Stanley Credit Corp. in Orange County, Calif., to help build "a world-class wholesale [mortgage] lending platform," according to Morgan Stanley.Mr. Iseley, as executive vice president, will head the company's wholesale mortgage lending operations, and Mr. Wijay will hold the title of senior vice president. Mr. Iseley, 47, has more than 25 years of experience in the subprime mortgage industry, Morgan Stanley said. He most recently held responsibilities for sales, servicing, operations, and support at Fremont General Investment & Loan, a Santa Monica, Calif.-based mortgage originator where he was employed for five years. Before that, he was at Associates First Capital for 19 years, Morgan Stanley said. Mr. Wijay, 38, has over 12 years of experience in financial analysis and planning.

The Blackstone Group, a New York-based private investment fund, has closed a real estate opportunity fund with total commitments of $5.25 billion, according to Blackstone.The new fund, together with an international fund, gives the company over $7 billion of capital available for real estate "opportunity investing," Blackstone said. "We have a solid pipeline of potential real estate investments both in Europe and North America, and this new fund will give us the resources to take full advantage of those opportunities," said Chad Pike, senior managing director at Blackstone. The company is an investor, together with Brookfield Properties, in the recently announced acquisition of Trizec Properties and Trizec Canada, and it also acquired CarrAmerica Realty earlier this year.