Originations

The average rate on 30-year, fixed-rate mortgages rose to 6.60% with an average of .5 points for the week of May 18, according to Freddie Mac.That was two basis points higher than a week earlier. But it was also the highest weekly average seen since June of 2002, Freddie Mac noted. The average rate on 15-year fixed-rate mortgages rose three basis points from a week earlier to 6.20%. On hybrid, Five-year Treasury-indexed adjustable-rate mortgages, the average rate rose just one basis point to an average of 6.23%. Freddie Mac chief economist Frank Nothaft said that financial markets are still trying to decipher recent economic data. "The current debate is between rising inflation and slower consumer spending. Until the market finds out which influence will be the strongest, mortgage rates should continue to fluctuate as they have the last couple weeks."

The Market Composite Index, an overall measure of mortgage applications, rose from 562.1 to 588.0 on a seasonally adjusted basis during the week ended May 12, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications jumped 4.8% on the week and were down 14.7% from the level recorded a year earlier. The Purchase Index increased from 416.5 to 426.7 on a seasonally adjusted basis, while the Refinance Index rose from 1427.4 to 1546.8. Refinancings represented 35.0% of total applications, up from 33.8% the previous week, while adjustable-rate mortgages accounted for 29.9%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages increased from 6.61% to 6.66%, and points (including the origination fee) rose from 1.14 to 1.17 for loans with 80% loan-to-value ratios, the association reported.

Madison Equity Corp., Gibbsboro, N.J., has created a warehouse/correspondent lending program aimed at purchasing lower credit quality loans from small mortgage bankers.The company said among the segments it hopes to reach are the sub-500 credit score and foreclosure bailout markets. "Smaller mortgage bankers are feeling the squeeze of rising interest rates in the form of compressed revenue margins, yet until now structural barriers have made it unfeasible for them to expand into large underserved customer segments where attractive margin opportunities exist," said Jason E. Osborne, chief executive and president. "We are very pleased to combine Madison Equity's capital strength, our expertise in underwriting collateral-based loans, our experience serving mortgage professionals and our robust technology platform to provide a meaningful growth opportunity for smaller mortgage bankers." Madison Equity will offer warehouse lines from $1 million to $10 million that allows mortgage bankers to fund collateral-based loans in accordance with its underwriting guidelines. It will also purchase, on a loan-by-loan basis, loans written on the warehouse line of credit and any other collateral-based loans already in existence.

Capital Lease Funding Inc., a New York-based real estate investment trust, has announced that its stock will be added to the MSCI US REIT Index (formerly the Morgan Stanley REIT Index) after the close of business May 31.Capital Lease Funding specializes in owning and financing commercial real estate that is net leased chiefly to single tenants with investment-grade credit ratings.

Kansas City, Mo.-based H&R Block has been named Zacks Equity Research's "Bear of the Day" for May 15, citing challenges in the company's mortgage and tax units.In its press release, the Chicago-based Zacks said Block's "management once again disappointed investors by announcing that earnings in fiscal year 2006 will be at the low end of previous guidance. Competition remains intense in the tax business, while fundamentals in the mortgage business continue to deteriorate." Block, the parent of subprime wholesaler Option One Mortgage Corp., Irvine, Calif., put out a statement on May 10, saying its full-year earnings per share is expected to be slightly below the $1.65 low end of its predicted range, in part due to weaker than expected results from mortgage services. Block added that its earnings guidance did not include the effect of previously announced charges to resolve refund anticipation loan litigation and for related fees, or charges for consolidation of a number of mortgage operations to reduce ongoing operating cost structures. Block's fiscal year is structured so that the bulk of tax season takes place in its fourth quarter. Full year results are expected to be announced on June 7.

Gramercy Capital Corp., a New York-based investor in and originator of commercial mortgage-related loans and securities, has priced a public offering of 2.25 million shares of common stock.Net proceeds totaled approximately $60 million, Gramercy said. The company also reported that it is selling 750,000 shares to its affiliate SL Green Realty Corp. for net proceeds of about $20 million. Wachovia Securities was the sole book-running manager for the public offering, and was granted an option to buy up to 337,500 additional shares to cover any overallotments. Gramercy Capital can be found online at http://www.gramercycapitalcorp.com.

Zacks.com, the online unit of Zacks Investment Research Inc., Chicago, is featuring a trio of mortgage real estate investment trusts in its Growth and Income Profit Track.They are American Home Mortgage Investment Corp., Melville, N.Y.; New Century Financial Corp., Irvine, Calif.; and Thornburg Mortgage Inc., Santa Fe, N.M. The companies targeted by Zacks for the list are those that have unusually high dividend yields. American Home raised its quarterly dividend to $0.96 per share, after regaining its financial footing in the first quarter. Its dividend yield is 10.3%, Zacks said. New Century also raised its dividend to $1.80 per share, the sixth straight increase since the subprime lender adopted a REIT structure in the fourth quarter of 2004. New Century's dividend yield is 13.8%. While Thornburg did not raise its first-quarter dividend of $0.68 per share (the same as a year earlier), its dividend yield stands at 9.8%. According to Zacks, "despite what is expected to be a tough 2006, [Thornburg] believes it can maintain its current dividend level and expects its prospects to improve once the market environment changes." Zacks can be found online at http://www.zacks.com.

Community Bank of the Bay, Oakland, Calif., has launched a new commercial real estate lending program and appointed Thomas Mitchell to head it up.Mr. Mitchell was most recently a vice president of commercial real estate finance with KeyBank Real Estate Capital in Walnut Creek, Calif., Community Bank said, and has over 20 years of experience in the commercial real estate market. The program will offer "a comprehensive and competitive choice of permanent, bridge and construction financing for commercial, industrial and multifamily residential properties," Mr. Mitchell said. He added that Community Bank's ability to place loans in the secondary market allows it to offer "a variety of rates and terms to accommodate almost any kind of borrower." The bank can be found online at http://www.communitybankbay.com.

ECC Capital Corp., a real estate investment trust based in Irvine, Calif., has reported a net loss of $6.4 million ($0.06 per share) in the first quarter, a big improvement from the fourth-quarter results of the troubled mortgage REIT but a bigger loss than it recorded a year earlier.The company reported a loss of $49.8 million ($0.50 per share) in the fourth quarter, and a loss of $2.7 million ($0.04 per share) in the first quarter of 2005. ECC Capital also announced that it will not pay a dividend for the second quarter. "The loss on the sale of loans was significantly reduced during the first quarter of 2006 as compared to the fourth quarter of 2005 largely due to marking down our inventory at Dec. 31, 2005, on most trades settling during the first quarter of 2006," said Shabi Asghar, co-chief executive officer and president of ECC Capital. "While we do not expect to see the full positive impact of our restructuring efforts in operating costs until the latter half of the year, we are starting to see some improvement in whole loan execution on loans originated in 2006." The company announced earlier this year that it would consolidate seven wholesale loan processing centers into three and lay off more than 440 employees. The REIT can be found online at http://www.encorecredit.com.

Silver Hill Financial LLC, a Miami-based real estate lender, has announced an alliance with NetBank Inc., an Atlanta-based online lender, to enable the latter to offer commercial real estate loans to its small-business customers.Silver Hill said it offers a customized approach that allows lenders of all sizes to become "instant commercial lenders" by relying on Silver Hill to perform back-office functions. "Our strategic alliance will allow [NetBank] to expand their product line and enhance their brand while we handle all the details of commercial transactions for NetBank's small-business customers," said Jerry Feinstein, senior director of correspondent lending at Silver Hill. The companies can be found online at http://www.silverhillfinancial.com and http://www.netbankinc.com.

Leaders of the House Financial Services Committee are working toward a mark-up of a Federal Housing Administration reform bill by the end of this month, possibly May 24, sources say.The FHA reform bill, co-sponsored by Reps. Bob Ney, R-Ohio, and Maxine Waters, D-Calif., would eliminate the FHA 3% downpayment requirement so FHA borrowers could get a low- or no-downpayment loan under a new risk-based premium structure. The bill (H.R. 5121) is based on a Bush administration proposal to modernize the FHA single-family program, provide safer and lower-cost loan products for subprime borrowers, and gain back market share for the 70-year-old mortgage insurance program. The FHA's market share has been declining for years, and only 3% of homebuyers use FHA loans today. Originations for the first six months of fiscal year 2006 (ending March 31) totaled $25.4 billion, down 25% from the level recorded a year earlier. And its shrinking insurance portfolio has pushed up the FHA default rate to 7.16%.

Eight tranches in six securitizations backed by Aames collateral (and issued by Aames or Morgan Stanley) have been downgraded by Moody's Investors Service, and two others have been placed on review for possible downgrade.The downgrades from Aames Mortgage Trust were as follows: series 2001-3, class M-2, from Ba3 to B2, and class B, from B3 to Caa3; and series 2002-1, class M-2, from A2 to Baa1, and class B, from Baa2 to B1. The downgrades from Morgan Stanley Dean Witter Capital I Inc. Trust were as follows: series 2002-AM1, class B-1, from Baa3 to Ba2; series 2002-AM2, class B-1, from Baa3 to B2; series 2002-AM3, class B-2, from Baa3 to B1; and series 2002-HE2, class B-2, from Baa3 to Ba3. Classes on review for possible downgrade are class M-1 of Aames Mortgage Trust 2001-3 and class B-1 of Morgan Stanley Dean Witter Capital I Inc. Trust 2002-HE2. In addition, Moody's upgraded one tranche from the Aames 2002-2 transaction. The negative rating actions were attributed to higher-than-expected severities on liquidated loans and an accelerating pace of losses, with an accompanying deterioration of credit enhancement. The collateral consists of subprime residential mortgage loans.

BioMed Realty Trust Inc., San Diego, has priced a public offering of 9.075 million shares of common stock at $28.65 per share.Raymond James & Associates Inc. is the sole book-running manager of the offering, with Citigroup Global Markets Inc. as co-lead manager. BioMed said it has granted the underwriters an option to buy up to approximately 1.36 million additional shares to cover any overallotments. BioMed specializes in acquiring, developing, and managing laboratory and office space in the life science industry. It can be found online at http://www.biomedrealty.com.

Stewart Title of Colorado has announced the opening of its first full-service office in the Denver metropolitan area aimed specifically at helping Hispanics buy and sell homes.The division, Primer Latino Titulo, handles title insurance, escrow, and closing services. Tammy Perez-Naca, Stewart Title's multicultural markets director, said the company spent considerable time trying to determine what adjustments should be made to the closing process to accommodate Hispanics. "Important considerations included generously proportioned closing rooms designed to comfortably seat larger Hispanic families, offering a schedule with evening appointments to accommodate customers' work schedules, and a play room with activities to entertain children," she said. The company's parent, Stewart Information Services Corp., can be found online at http://www.stewart.com.

The average 30-year fixed mortgage rate fell from 6.59% to 6.58% over the seven-day period ended May 11, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate fell from 6.22% to 6.17%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages crept up from 6.21% to 6.22%, and the average rate for one-year Treasury-indexed ARMs declined from 5.67% to 5.62%, 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. "Less-than-expected job growth in April helped mortgage rates to level off this week," said Frank Nothaft, Freddie Mac's chief economist. "Even ARM rates were little affected by the Federal Reserve's increase in the federal funds rate." A year ago, the average 30-year and 15-year fixed rates were 5.77% and 5.33%, 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.

Over 20 years after its inception, the Low Income Housing Tax Credit program has proven to be one of the most effective ways to finance affordable housing and will continue to be a viable tool, especially in the Gulf Coast areas affected by hurricanes, according to panelists at the 2006 Credit Bond Financing for Affordable Housing Conference in Chicago."For Katrina areas, the amount of annual Low Income Housing Tax Credits for the next three years totals $18 per capita," said George F. Littlejohn of Novogradac and Co. LLP, Austin, Texas. "For example, in Louisiana it is about $55 million worth of Low Income Housing Tax Credits through the Louisiana Housing Finance Agency." Mr. Littlejohn also said the demand for the funds is growing, and that about $230 million has been approved in Louisiana. Another panelist, Francine Friedman of Hunton & Williams in Washington, D.C., said, "We are excited that many investors who did not work in the area before are coming in, investing their dollars, and taking a risk, both as a great way to help and to do business."

Five classes from three deals issued by Long Beach Mortgage Co. have been downgraded by Moody's Investors Service, and seven classes from three other deals have been placed under review for possible downgrade.The downgrades of Long Beach Mortgage Loan Trust Asset Backed Certificates were as follows: series 2001-4, class M2, from Baa1 to Ba3, and class M3, from Caa1 to Ca; series 2002-1, class II-M1, from Aa2 to A2, and class M2, from A2 to Baa3; and series 2002-2, class M3, from Baa2 to Ba3. Under review for possible downgrade are (from Long Beach deals) classes M-1, M-2, and M-3 of series 2000-1 and classes M2F and M2V of series 2000-LB1, and (from an Asset Backed Securities Corp. deal) classes M-3 and M-4 from series 2002-HE3. The rating actions were taken because the transactions "have taken significant losses, causing gradual erosion of the overcollateralization," the rating agency said. "In addition, the severity of loss on the liquidated loans has begun to increase due, among other factors, to a higher concentration of manufactured housing loans." The transactions are backed primarily by first-lien subprime mortgage loans originated by Long Beach.

The Market Composite Index, an overall measure of mortgage applications, fell from 596.8 to 562.1 on a seasonally adjusted basis during the week ended May 5, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications decreased 5.2% on the week and were down 27.1% from the level recorded a year earlier. The Purchase Index fell from 433.3 to 416.5 on a seasonally adjusted basis, while the Refinance Index declined from 1565.6 to 1427.4. Refinancings represented 33.8% of total applications, down from 35.2% the previous week, while adjustable-rate mortgages accounted for 28.5%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages increased from 6.57% to 6.61%, and points (including the origination fee) decreased from 1.18 to 1.14 for loans with 80% loan-to-value ratios, the association reported.

The mortgage market is normalizing, Mortgage Bankers Association chief economist Doug Duncan says, adding that some markets will see declining home prices but that appreciation will average 6% to 7% nationwide.He told a media briefing at the group's National Secondary Market Conference in Chicago that the indicators show "an orderly slowing of the housing market" for 2006. Originations will decline from a revised $2.9 trillion for 2005 to $2.4 trillion this year, while refinancings will be down 30%, with less rate-sensitive cash-out refis making up an 80% share, Mr. Duncan predicted. The MBA is also forecasting that the Federal Reserve will stop raising the federal funds rate once it reaches 5%. The Fed is sensitive, Mr. Duncan said, to the fact that that this housing boom has been different from previous ones, with more borrowers holding products with adjustable terms and therefore more households subject to interest rate fluctuations. However, he cautioned that the Fed could go even 25 basis points higher than the forecast, and some economists have said the Fed could go to 6%. The MBA can be found on the Web at http://www.mortgagebankers.org.

Fixed-rate products were the most popular products in the second half of 2005, according to the Mortgage Bankers Association Mortgage Originations Survey.The survey was released at a media briefing during the MBA National Secondary Market Conference in Chicago. These loans made up 57% of originations during the second half of the year, up from 52% for the first half. Fixed rate interest only loans increased its share of the IO market from 7% in the first half up to 13% in the second half of the year. First time homebuyers were one-third of the market in the second half of last year, with an average loan amount of $183,000. The average loan amount for repeat buyers was $227,000. Among the hot products were reverse mortgages. Although still a small part of the overall market, total reverse mortgage dollar volume increased by 45%. The dollar volume of Federal Housing Administration Home Equity Conversion Mortgages was up 48%, while the other products were up by 22%. MBA chief economist Doug Duncan called the growth in reverse mortgages "quite striking." MBA chairman Regina Lowrie said that, from a lender's perspective, she is seeing consumer fears about reverse mortgages being allayed because of increased knowledge. Moreover, there is an aging baby boomer population that will add to possible borrowers, she said.