Originations

The Market Composite Index, an overall measure of mortgage applications, rose from 571.7 to 612.8 on a seasonally adjusted basis during the week ended March 31, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications increased 7.2% on the week but were down 4.6% from the level recorded a year earlier. The Purchase Index rose from 404.1 to 438.2 on a seasonally adjusted basis, while the Refinance Index climbed from 1558.4 to 1640.8. The four-week moving average for the Purchase Index rose from 399.9 to 409.7, and the comparable average for the Refinance Index rose from 1582.7 to 1589.3. Refinancings represented 36.6% of total applications, down from 37.3% 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 6.36% to 6.49%, and points (including the origination fee) rose from 1.02 to 1.13 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found on the Web at http://www.mortgagebankers.org.

Sales of vacation and investment homes hit record highs last year and together accounted for nearly 40% of residential transactions, according to the National Association of Realtors.In an annual report based on two surveys, the NAR said 27.7% of all homes purchased in 2005 were investment properties and 12.2% were vacation homes. Vacation-home sales rose 16.9% to a record 1.02 million units last year from a downwardly revised 872,000 in 2004, the NAR reported. Investment-home sales climbed 15.7% to a record 2.32 million from an upwardly revised 2.00 million. NAR chief economist David Lereah cited several factors that made 2005 so favorable for the second-home market. "To begin with, the baby boom generation is driving second-home sales," he said. "They're at the optimum point in life when people become interested in second homes, they're at the peak of their earnings, interest rates remain historically low, and boomers want to diversify investments." The association can be found online at http://www.realtor.org.

A Bush administration reform proposal that would allow the Federal Housing Administration to charge risk-based mortgage insurance premiums is not going down well with Democrats and consumers groups.Rep. Barney Frank, D-Mass., said he is in "overwhelming agreement" with the administration FHA reform package, except for charging lower-income subprime borrowers higher mortgage insurance premiums. The ranking Democrat on the House Financial Services Committee recommended that the premiums be cross-subsidized with other funds. Meanwhile, several Republicans on the committee want FHA Commissioner Brian Montgomery to increase the participation of mortgage brokers in the FHA program. The mortgage brokers have concerns about the FHA annual audit requirement, Mr. Montgomery said. "We are in communication with them to see if we can resolve that," he said. The Bush administration formally released its FHA reform package April 5. The legislative proposal would increase the FHA single-family loan limits and allow the FHA to insure 40-year mortgages for the first time.

Two-thirds of lenders nationwide believe a real estate bubble exists, and half believe it will burst within six months, according to a quarterly survey by Phoenix Management Services, Chadds Ford, Pa.A housing correction would result in a decline of 10%-20% in real estate prices across the United States, according to 93% of lenders polled in the company's Lending Climate in America Survey. "In the minds of lenders, the housing bubble has moved from 'Loch Ness monster' myth status to an economic reality that could have a significant, negative impact on the lives of many Americans," said Michael E. Jacoby, managing director and shareholder of Phoenix. "A year ago, 46% of lenders believed we were in a housing bubble. Today, that number has climbed to 66% -- and many of them believe a correction is imminent and could lead to a drop in housing prices of up to 20%." About 30% of the 92 participating lenders said the housing bubble has already begun to burst, while 20% said it would occur in the next six months, Phoenix reported. When asked which region is likely to be most affected by a housing correction, 30% named the Northeast and 27% named the West Coast. The company can be found online at http://www.phoenixmanagement.com.

Resource Capital Corp., a Philadelphia-based specialty finance company that invests in real-estate-related and commercial finance assets, has been added to the Russell 3000 Index.The action came as part of the index's addition of 27 initial public offerings at the close of the market on March 31, the company said. The Russell 3000 index is composed of the 3,000 largest U.S. stocks, ranked by total market capitalization.

The risk of price declines over the next two years has risen in 48 of the nation's 50 largest housing markets, but the rate of appreciation has slowed in 21 of the markets, according to PMI Mortgage Insurance Co., Walnut Creek, Calif.The average score in the PMI U.S. Market Risk Index rose from 261 to 287, 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 26.1% to 28.7% in the 50 largest metropolitan statistical areas. According to the index, there are now 14 markets with a greater than 50% chance of price declines over two years, up from 11 in the fourth quarter. PMI also reported the results of a study of the value of homeownership from 1986 through 2005. "What we found was that across the nation's 50 largest MSAs, owning a home for 10 years or more resulted in a positive return in 100% of the cases," said Mark Milner, chief risk officer of PMI Mortgage Insurance. "This dropped to 95% with a seven-year ownership term and to 92% with a five-year ownership term -- still a pretty impressive rate." PMI can be found online at http://www.pmigroup.com.

There was good news and bad news in February for the members of the Mortgage Insurance Cos. of America.The bad news was that the dollar volume of traditional primary new insurance written fell to $9.3 billion, down from $10.0 billion in January. But when the $5.9 billion of bulk insurance written in February is added to traditional insurance, total primary new insurance written increased 12.1% in February, from $13.6 billion in January to $15.3 billion. And the really good news was in application volume, which rebounded from 95,131 in January to 108,788 in February, an increase of 14.3%. Pool risk written in February totaled $31.4 million. For the first time in 11 months, there were more cures than defaults: 45,081 cures and 40,365 defaults, for a ratio of 111.7%. MICA can be found online at http://www.micanews.com.

Mortgage lenders should expect a higher proportion of their originations to be classified as subprime loans in their Home Mortgage Disclosure Act reports for 2005, according to the Federal Reserve Board.Owing to the flattening of the yield curve in 2005, "one would expect a higher proportion of loans originated in 2005 than originated in 2004 to be reported under HMDA as higher-priced loans," the Fed said in an update of its "Frequently Asked Questions about the New HMDA Data." Loans with an interest rate 3.0 percentage points above the comparable Treasury security rate are consider higher-priced loans. The Fed created this category to find out who is originating subprime loans and what the pricing of the loans is. Since short-term rates rose during 2005 and long-term rates remained relatively stable, the "proportion of loans reported as higher-priced will increase," the Fed said, if most other factors remain constant. Total originations increased in 2005 by 16.6% compared with those of 2004 on a dollar basis, according to the Quarterly Data Report, a MortgageWire affiliate. In 2004, lenders included 33.3 million loans in their 2004 HMDA reports, and 2.18 million loans (or 15.5%) fell into the subprime bucket.

The Federal Reserve Board intends to hold public hearings this summer on home equity lending that will address predatory lending practices and mortgage disclosure issues.Fed Governor Susan Schmidt Bies said the hearings will review the effectiveness of the Home Ownership and Equity Protection Act regulations in addressing abusive lending practices as well as the availability of subprime credit. "These hearings are a first step to a broader review of mortgage disclosure rules," Ms. Bies said. She noted that the recent guidance on interest-only and payment-option adjustable-rate mortgages suggests that lenders should alert consumers about the potential for negative amortization and payment shock. The hearings will explore the adequacy of existing disclosures on IO and option ARMs, as well as 40-year mortgages and reverse mortgages, she said.

Subprime lender Mandalay Mortgage, Woodland Hills, Calif., trimmed its workforce by at least 70 positions on Monday, industry sources have told MortgageWire.At deadline time, officials at the company could not be reached for comment. Mandalay ranks 43rd among subprime lenders, according to the Quarterly Data Report, an MW affiliate. The privately held lender also operates a large sales office in Irvine, Calif. One competitor said the company employed at least 300 workers at year-end, and had been for sale last year. In the fourth quarter it funded $474 million in mortgages, a 5% increase from the volume in the same quarter of 2004. The company can be found on the Web at http://www.mandalaymortgage.com.

CapitalSource, a Chevy Chase, Md.-based real estate investment trust, has priced a privately placed securitization of $782.25 million of debt.The proceeds from the offering, CapitalSource Commercial Loan Trust 2006-1, were used to repay borrowings under some of its credit facilities, the company said. The interest rates on the different classes of the offering range from 12 basis points above the one-month London interbank offered rate to LIBOR plus 130 bps. CapitalSource retained 8.5% of the pool, which consisted of senior and subordinated commercial loans from the company's portfolio. CapitalSource can be found online at http://www.capitalsource.com.

Fieldstone Investment Corp., Columbia, Md., has restated its earnings from 2003 through the first three quarters of 2005 to correct accounting errors related to the timing of its recognition of income tax paid by its Fieldstone Mortgage Co. subsidiary.The tax payments were related to the sale of loans from the mortgage company to its real estate investment trust parent. Because of the restatement, net income for 2003 increased by $3.7 million, to $51.5 million. Its net income in 2004 decreased by $2 million, to $63.6 million. First-quarter 2005 net income was reduced by $350,000, while income increased by $751,000 in the second quarter and decreased by $399,000 in the third quarter. Therefore, the change in net income for the first nine months was just $2,000. Fieldstone said shareholder equity as of Sept. 30, 2005, increased by $1.7 million because of the accounting corrections.

GMH Communities Trust, a real estate investment trust based in Newtown Square, Pa., has announced the firing of its chief financial officer and says it expects to restate certain previously reported financial results.The REIT said Bradley W. Harris has been terminated as CFO and replaced by Dennis J. O'Leary, who was named interim CFO. The expected restatements are due chiefly to adjustments involving the expensing of certain expenditures related to student housing properties and the timing of the recognition of previously reported revenues and expenses, the company said. "While the anticipated adjustments to prior periods do not affect our year-end cash position, they are essential to a meaningful comparison of our quarterly and year-end results for future periods on a [generally accepted accounting principles] basis," said Gary M. Holloway Sr., GMH's president and chief executive officer. Mr. Holloway said an independent counsel report by the REIT's audit committee said no evidence had been found that anyone had intentionally instructed the company's accounting department to falsify financial information. The company also said there would be a further delay in the filing of its annual financial report for 2005. The REIT can be found online at http://www.gmhcommunities.com.

New York University has appointed Lawrence Longua to be director of the NYU REIT Center, a forum for the study and analysis of publicly traded real estate investment trusts within NYU's Real Estate Institute.Mr. Longua is an associate professor in NYU's graduate real estate program as well as the senior managing director of Multi Capital Group, a real estate investment company based in New York. He is also a principal of Canopy Development, a Massachusetts-based developer of resort properties domestically and in the Caribbean. He is also a co-founder and principal of UrbAnalysis, a real estate research firm. Mr. Longua has more than 35 years of experience in commercial real estate, having held senior positions in the real estate units of Chemical Bank, Irving Trust Co., Bankers Trust Co., and the Mitsubishi Trust and Banking Corp. He was a director of Acadia Realty Trust.

For the first time since the Eleventh Federal Home Loan District Cost of Funds Index began its current streak of increases in May 2004, the index has risen over 20 basis points in a single month.The index as calculated by the Federal Home Loan Bank of San Francisco stood at 3.604 in February, up over 25 bps from 3.347% in January. It was one year ago, in February 2005, that the COFI index recorded its second-largest rise in the current upward trend, 13 bps. The last time the index was in the area of 3.6% was October 2001. Since May 2004, COFI has increased by nearly 190 bps. In contrast, the Federal Reserve Board has raised the federal funds target rate from 1.00% in June 2004 to 4.75% at its most recent meeting, a rise of 375 bps.

Newkirk Realty Trust Inc. and Winthrop Realty Trust, two Boston-based real estate investment trusts, have announced the formation of a joint venture to acquire and originate loans secured directly or indirectly by real estate assets.Each company has committed to invest up to $50 million in the venture, which will be owned equally by the two companies. The joint venture has also entered into a $300 million repurchase agreement with Column Financial Inc. under which the venture said it expects to leverage up to 75% of its assets. The companies said the venture is also expected to enter into another repo agreement to obtain an additional $200 million in leverage.

With the possible sale of all or part of Mills Corp., Fitch Ratings, Chicago, looked at the U.S commercial mortgage-backed securities transactions that have exposure to the company.The rating agency said it is making no rating adjustments at this time. Any future rating actions would depend primarily on the operating performance of each property and its affect on the overall credit composition of its respective CMBS transaction. The properties continue to perform well and Fitch is not worried about defaults. However a possible sale, said Lauren Cerda, senior director, Fitch Ratings, brings to light a potential concern about who could buy the company. "While Mills' portfolio does include some traditional malls, they are more widely known as an operator of large hybrid malls which combine outlet, entertainment and traditional stores. Therefore, a potential sale may necessitate that only a more specialized mall owner would be able to come in and purchase at least that portion of Mills' properties, leaving open the possibility that the portfolio could be split up between traditional mall operators and outlets," she said.

Capital Alliance Income Trust Ltd., San Francisco, is discontinuing the operations of Capital Alliance Funding Corp., its mortgage banking subsidiary.CAFC plans to sell its mortgage loan inventory. Any unsold loans will be transferred to CAIT or sold to an affiliated company at fair market value. Investment mortgage loans will continue to be originated for CAIT's portfolio, the company said in a statement.

ECC Capital Corp., the Irvine, Calif.-based real estate investment trust, said it is considering dropping that status and becoming a "C" Corp.This announcement comes on the heels of Aames Investment Corp., Los Angeles, doing exactly that. Both firms are subprime mortgage lenders with substantial wholesale operations. In a statement issued by the company, ECC said it is examining the issue "in order to improve liquidity through the permanent elimination of required dividend distributions and utilize the operating loss carry forwards of its mortgage banking segment. ECC Capital is exploring several potential strategic actions, the realization of which will further impact the decision of whether to convert its current REIT status." This decision is one of the reasons behind ECC's request for an extension from the Securities and Exchange Commission to file its 10-K statement. Previously ECC consolidated both its wholesale and retail production operations and suspended its first quarter 2006 dividend payment. ECC's forerunner, Encore Credit Corp., started operations in March 2002 and became a REIT in February 2005 following an initial public offering.

ATM Corp., a Pittsburgh-based provider of settlement solutions, has joined forces with Equifax to launch a national settlement services company. The companies said that Equifax Settlement Services will provide a complete set of mortgage settlement offerings, including title, closing and appraisal services. "The introduction of Equifax Settlement Services enables us to provide a centralized resource to meet the growing settlement needs of our mortgage lending customers," said Dann Adams, group executive, Equifax North America Information Services. "This new venture is an important step in establishing Equifax's comprehensive suite of end-to-end mortgage solutions." ATM Corporation is the holding company for Vision Global Solutions, which helps lenders build settlement service subsidiaries.