Originations

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.

The mortgage banker of the future will be an organization that is both horizontally and vertically integrated, along the lines of Countrywide Financial Corp., according to Paul Miller, a buy-side equity analyst for the Friedman, Billings, Ramsey Group.Speaking at the Mortgage Bankers Association National Secondary Market Conference in Chicago, Mr. Miller said the continued evolution of the nonagency securitization market will disintermediate the government-sponsored enterprises and other Wall Street nonproducers of mortgage assets. Countrywide is the model, as two-thirds of its production is traded on the secondary market, not by Wall Street, but by its internal operations. In the future, mortgage bankers will have to do all four loan categories -- prime, subprime, alternative-A, and niche -- to stay in business, Mr. Miller said. Many of their best loans will have to be put into portfolio in order to be profitable. Finally, mortgage bankers will need to be better at retaining their servicing portfolio, something they have not done a good job of so far, Mr. Miller said. The successful mortgage banker will retain over 40% of its servicing customers and cut out the mortgage broker, he said.

Printing mortgage documents in foreign languages isn't enough to reach the growing legions of minority and immigrant homebuyers, according to a Freddie Mac executive."Just translating documents into Spanish won't cut it," said Craig Nickerson, vice president of expanding markets at the huge financial intermediary, noting that most borrowers also want to converse with lenders in their native tongues. But language differences aren't the only "unique" barriers faced by minorities, Mr. Nickerson said Tuesday at the Mortgage Bankers Association's National Secondary Market Conference in Chicago. All would-be homeowners face the challenges of high housing costs, a lack of cash for a decent downpayment, and poor, thin, or even nonexistent credit records, but minorities face additional roadblocks, including the lack of a trusted intermediary and a gross misunderstanding of the lending process, according to the Freddie Mac officer. Minorities distrust financial institutions and, to a lesser extent, the real estate community at large, he said. And they have so many misconceptions about lending procedures that "they are taking themselves out of the game" before they even get up to the plate. Freddie Mac can be found online at http://www.freddiemac.com.

Fannie Mae is planning a number of changes to its My Community Mortgage suite of loans in an effort to reach deeper into the first-time buyer market -- and placate lenders.As outlined in a fast-paced session Tuesday at the Mortgage Bankers Association's National Secondary Market Conference in Chicago, the company is going to waive the minimum $500 borrower contribution required of borrowers who are purchasing single-family houses, allow for 2-1 buydowns, and add a 40-year, fully amortizing term as an option. The company also is planning a change in the way its automated underwriting system, Desktop Underwriter, looks at condominiums, according to Jeanne Hunter, director of product development at Fannie Mae. Another change "targeted for this summer" is a more streamlined pricing system. The new "much more simplified" system will replace one that is now "too complicated," said Ms. Hunter, who told a conference session that the pending improvements are a result of customer feedback. Lenders have been particularly vocal about their belief that DU penalizes condos, so the next release will treat condos the same as single-family detached units, which should result in more favorable underwriting decisions, she said. Fannie Mae can be found online at http://www.fanniemae.com.

Mortgage rates are rising faster than expected, and the 30-year fixed mortgage rate will likely hit 7% in the third quarter, according to a new forecast by David Lereah, chief economist for the National Association of Realtors.However, job creation and economic growth will offset rising rates, and existing-home sales are likely to fall only 6.4% in 2006 from last year's record of 7.08 million sales, the forecast says. At the beginning of the year, the NAR's forecast called for the 30-year mortgage rate to drift up to 6.9% by year-end. But now Mr. Lereah projects that the 30-year rate will rise to 7% this summer and hold at that level in the second half of the year. Meanwhile, Freddie Mac's new forecast predicts that the 30-year fixed mortgage rate will average 6.6% in the third quarter. The NAR can be found online at http://www.realtor.org.

Wachovia Corp., which is buying Golden West Financial Corp., is "very good" at integrating acquisitions, an American Mortgage Network executive told a news conference held by the Mortgage Bankers Association at its secondary mortgage market conference in Chicago.It is a topic on which John Robbins, AmNet's chairman and chief executive, speaks with authority, because a unit of the Charlotte, N.C.-based Wachovia acquired AmNet last year. From his point of view, the acquisition of AmNet was "relatively seamless," Mr. Robbins said. Wachovia, he said, is "very intelligent" about how it brings companies into the fold. Mr. Robbins, who will be the next president of the MBA, said he does not know whether the deal will affect the San Diego-based AmNet, but that there might be synergies between Golden West and AmNet in terms of product originated. Approximately 70% of Golden West's volume is in option adjustable-rate mortgages, he said, while 40%-45% of AmNet's production is in alternative-A loans, option ARMs, and interest-only loans. Mr. Robbins said this is a good time for companies to be making acquisitions, rather than paying top dollar at the height of the market. "The game here is eat or be eaten," he said.

Thornburg Mortgage, Santa Fe, N.M., is on the verge of rolling out a wholesale channel, according to a Thornburg executive at the MBA National Secondary Market Conference in Chicago.Ron Chicaferro, executive vice president of Thornburg Mortgage Home Loans, said the company will start doing business with brokers in New York to test its systems and processes, and then slowly start rolling it out nationwide. It will concentrate on the same type of high-quality borrower as its retail and correspondent channels, he said. Thornburg Mortgage, a single-family residential mortgage lender and real estate investment trust, can be found online at http://www.thornburgmortgage.com.

The next president of the Mortgage Bankers Association is forming a special task force to look into the benefits of a simple, easy-to-understand tool that spells out the strengths and weakness of the loan the borrower has chosen."I see it as a final gut-check for the borrower," said John Robbins, chief executive of the San Diego-based American Mortgage Network, at the MBA National Secondary Market Conference in Chicago. "Here's what you've chosen. These are all the risks, and these are the possible rewards." Mr. Robbins is calling on Fannie Mac, Freddie Mac, and the MBA's Residential Board of Governors to develop recommendations for an industrywide disclosure document, and when and how best to deliver the document to borrowers. While the effort might have the side benefit of calling off state efforts to curtail abusive practices, Mr. Robbins sees it as bringing more transparency to the lending process. "This isn't about the industry being nervous," he told the conference. "It's about helping consumers make truly informed choices" and showing that their welfare is of the utmost importance. The final piece of paper, perhaps a one-pager that outlines the chosen loan's pros and cons, is one way to "make it clear that we want consumers to make informed choices," Mr. Robbins said.

The ratings of Chicago-based CenterPoint Properties Trust's senior unsecured debt have been lowered from Baa2 to Baa3 by Moody's Investors Service.The outlook is stable. Moody's said the action reflects CenterPoint's acquisition by CalEast Industrial Investors LLC, as well as CenterPoint's announcement on May 4 that cash tender offers for its outstanding $450 million of senior unsecured notes had expired and that consents were received from a majority of the noteholders. Moody's said there will be more incentive to manage CenterPoint at higher levels of leverage now that it is a private company. CalEast is a partnership between California Public Employees' Retirement System and LaSalle Investment Management Inc., the investment management business of Jones Lang LaSalle that serves as the managing member of CalEast. The rating agency can be found online at http://www.moodys.com.

Wells Fargo is notifying certain of its home mortgage customers and prospective customers that a computer carrying their information has gone missing, and it is encouraging them to take precautionary steps.An unnamed global express shipping company was transporting the computer between unidentified Wells Fargo facilities when it disappeared. "There is no indication that the information on the computer equipment has been accessed or misused," Wells said. "The computer has two layers of security, making it difficult to access the information. Nevertheless, individuals whose information was stored on the equipment are being notified by mail." Law enforcement originally asked Wells Fargo to delay notification, indicating that it would hurt their investigation. They have since informed the company that this is no longer a concern and indicated they believe that, if theft was involved, it was for hardware rather than information. The company said the equipment "contained confidential information … including names, addresses, Social Security numbers, and mortgage loan account numbers." Wells can be found on the Web at http://www.wellsfargo.com.

A steady rise in interest rates has resulted in a "sharp decline in debt financing conditions" for apartment properties, according to the National Multi Housing Council.The NMHC's April 2006 quarterly survey of apartment market conditions found that an index of debt financing conditions had dropped to 21, its lowest level since January 2000, and the third-lowest level in the survey's history. Over 69% of survey respondents, the second-highest ever, said that borrowing conditions for debt financing had worsened in the last three months, based on interest rates and nonrate conditions. However, they also see mortgage financing as being widely available, the NMHC said. Another index showing availability of equity financing edged down only a little, indicating that equity finance conditions are "unchanged" compared with those of three months ago, according to the multifamily industry trade association.

JPMorgan Chase has entered into an agreement with National People's Action to improve its banking and credit services in minority communities and to assist local NPA organizations in resolving foreclosure issues."We are making agreements with the major banks so that when we do have trouble with a local bank we have a connection with the top guys," NPA co-chair Brenda LaBlanc said in announcing the agreement at NPA's annual conference. JPMorgan Chase has been working with the community activist group since the banking company formed a homeownership preservation office 18 months ago, and it recently conducted a loss mitigation seminar with NPA, according to executive vice president Mark Willis. "We have been together for awhile, and I think we have developed a terrific relationship," Mr. Willis said at NPA's 35th anniversary conference in Washington, where the agreement was signed.

Wachovia Corp. struck a deal over the weekend to buy Golden West Financial Corp. for about $26 billion in cash and stock, placing the combined institution squarely among the top 10 in residential servicing and production.The Charlotte, N.C.-based Wachovia, a bank, has shown a growing appetite for mortgages over the past few years, and its purchase of GWF -- the nation's second-largest thrift -- could serve as the first real sign of rapid consolidation in the mortgage finance industry. The Oakland, Calif.-based GWF, the parent of World Savings, is also one of the nation's largest adjustable-rate mortgage lenders. For decades the thrift has been managed by co-chief executive officers Herbert and Marion Sandler, who steered the company through the turbulent waters of the savings-and-loan crisis. According to the Quarterly Data Report, Wachovia ranked 12th in residential production last year, funding $58.1 billion. GWF ranked 15th, with $50.5 billion. Combined, they ranked sixth, with a market share of 3.27%. The companies can be found online at http://www.wachovia.com and http://www.worldsavings.com.

Residential Capital Corp.'s chief financial officer Davee Olson has accepted a new position leading the company's warehouse lending business.ResCap said it has already begun a search for a new CFO and that Mr. Olson will continue to serve as acting CFO until a replacement can be found. Bruce Paradis, ResCap's chief executive officer, noted that Mr. Olson "played a key role in acquiring the warehouse lending business for GMAC-RFC more than 15 years ago and has always maintained strong ties to the business." Mr. Olson said the new position gives him the opportunity to "take on an operational role," something he said he has "wanted to do for a long time." ResCap can be found online at http://www.rescapholdings.com.

The Internal Revenue Service is cracking down on non-profit organizations that fund downpayment assistance programs through contributions from sellers and builders and it is threatening to revoke their tax-exempt charitable status.The IRS is examining 185 nonprofits to see if there is a direct correlation between the amounts of downpayment assistance provided to homebuyers and the payments nonprofits receive from the sellers. Nearly a third of Federal House Administration single-family loans are originated with downpayment assistance and the defaults are generally twice as high as other FHA loans. IRS noted that DA loans not only perform badly; the cost of the house is generally increased to cover the seller's contribution. "So-called charities that manipulate the system do more than mislead honest homebuyers and ultimately jack up the cost of the home. They also damage the image of honest, legitimate charities," IRS commissioner Mark Everson said.

Merit Financial, Kirkland, Wash., has reportedly laid off 300 workers and is considering filing for bankruptcy protection, according to a report in the Seattle Times. On Friday a receptionist at the company told MortgageWire that no one was available to talk about the situation and she herself declined to answer questions. She said company CEO and founder Scott Greenlaw a former college football star was not in. A voice mail message left for Mr. Greenlaw had not been returned at press time. Founded just five years ago, the company was funding about $2 billion a year in mortgages. This past fall it published a press release, saying it had been honored by the Puget Sound Business Journal as one of the fastest growing companies in the area. Over the past six months several mortgage firms have announced sizeable layoffs while others have either gone out of business or are for sale.

Employment in the mortgage industry edged down in March after lenders added 6,500 full-time employees to their payrolls in February.The U.S. Bureau of Labor Statistics reported that employment in the mortgage banker/broker sector slipped by 400 jobs to 504,400 in March. During March, the 30-year mortgage rate inched up to 6.4%, but mortgage applications held fairly steady compared to the previous month. Friday's jobs report also shows that hiring in the construction trades has come to a halt after large gains in January and February. As previously reported, single-family housing starts fell 11.2% in March. Meanwhile, the U.S. economy created 138,000 new jobs in April compared to 200,000 in March. The unemployment rate remained unchanged at 4.7%.

Two certificates from securitizations issued by IndyMac in 2000 and 2001 have been downgraded by Moody's Investors Service.The downgrades were as follows: IndyMac Home Equity Mortgage Loan Asset Backed Trust, series 2000-C, class MV-1, from Aa2 to A3; and IndyMac ARM Trust, series 2001-H2, class B-3, from Baa2 to Ba1. Moody's also confirmed the rating on one class in another IndyMac deal. The downgrades were attributed to credit enhancement levels that "may be low" in view of projected losses on the underlying pools. The securitizations are backed by alternative-A and subprime mortgage loans that were originated by IndyMac Bank FSB. Moody's can be found online at http://www.moodys.com.

Equity Residential, Chicago, has reported net income of $367.72 million ($1.25 per share) for the first quarter, up from $214.014 million ($0.74 per share) for the first quarter of 2005.The largest multifamily real estate investment trust by market capitalization, Equity Residential also reported funds from operations of $0.56 per share for the first quarter, down from $0.74 per share for the comparable period of last year. The REIT attributed the decline in FFO to income recognized in 2005 from the sale of EQR's interest in Rent.com, and gains from other sales activity that occurred in 2005. EQR said it expects a good year for the multifamily industry. "We continue to see good job growth and household formation across all of our markets," said David J. Neithercut, EQR's president and chief executive officer. "That, combined with little new supply, existing rental units taken off the market when converted to condominiums, and the rising cost of single-family homes, make for the strongest fundamentals we have seen in years."

The Mills Corp., an Arlington, Va.-based owner and operator of entertainment malls, has obtained a $2.23 billion commitment from Goldman Sachs Mortgage Co. (subject to certain contingencies) to boost its liquidity and financial flexibility.The real estate investment trust said the commitment consists of a senior term loan of up to approximately $1.48 billion and first-mortgage facilities totaling approximately $746 million. Laurence C. Siegel, the company's chairman and chief executive officer, said the commitment is part of "a series of important initiatives" in recent months that include restructured operations and layoffs, the hiring of a new chief operating officer and executive vice president of finance and accounting, and the hiring of financial advisers to explore strategic alternatives. The REIT can be found online at http://www.themills.com.