Originations

A unit of Fortress Investment Group has agreed to purchase Centex Home Equity Co., Dallas, in a deal valued at about $575 million.Late in the day on March 30, Centex Homes, the homebuilder parent of CHEC, disclosed it had signed a definitive agreement to sell the nation's 28th largest subprime lender to Fortress, which bills itself as a "global alternative investment and asset management firm." Fortress was one of the investment companies that purchased Green Tree from Conseco when the latter was in bankruptcy. The sale is subject to certain conditions, including regulatory approvals, and is expected to close within three to four months. Among subprime servicers, CHEC ranks 22nd, according to National Mortgage News and the Quarterly Data Report.

The Bush administration is proposing to increase loan limits on Federal Housing Administration single-family loans so that FHA is not shut out of high-cost areas of California and Massachusetts.The legislative proposal would increase the FHA loan limit in high-cost areas to $417,000 -- which is the conforming loan limit on Fannie Mae and Freddie Mac loan purchases. Currently, the ceiling for FHA loans is $362,790 in high-cost areas and the floor is $200,160. The legislation proposal the Department of Housing and Urban Department sent to Capitol Hill raises the floor to $271,050 or 65% of the conforming loan limit. The legislative proposal also allows FHA to charge risk-based premiums so it can price its mortgage insurance based on the borrowers' credit score and loan-to-value ratio. HUD secretary Alphonso Jackson told the House Financial Services Committee this pricing flexibility would allow FHA to offer lower-cost mortgages to borrowers who are currently paying excessively high interest rates on subprime loans. FHA reform is a "top legislative priority for me this year," he said.

The Zacks Growth and Income Profit Track strategy looks for stocks with unusually high dividend yields.Among the stocks that meet its criteria are NovaStar Financial Inc., and Trustreet Properties Inc. NovaStar is the parent company of a nonconforming mortgage lender. Zacks noted its current dividend yield is 17.42%. In its comments, Zacks said "NovaStar stated that 2005 demonstrated the value of having both portfolio and mortgage banking businesses for its shareholders. Trustreet's current dividend yield of 8.81% qualifies it for the list. It focuses on properties connected with the restaurant industry. Zacks has a website at http://www.zacks.com.

American Spectrum Realty, Houston, said its board of directors has determined that it is not in the best interests of the company to restructure as a real estate investment trust.As part of this decision, the company is seeking to eliminate from its Articles of Incorporation restrictive provisions on stock ownership. Those restrictions were put in to preserve American Spectrum's ability to elect to become a REIT. A vote to remove the restrictions will take place at its annual meeting in Houston on May 5.

Standard & Poors, New York, said it is adding a pair of REITs to its S&P 500 index, replacing companies in other sectors that are being acquired.Boston Properties Inc., will join the index after the close of trading on March 31. It is replacing energy firm Cinergy Corp. Kimco Realty Corp., will join the index after the close of trading on April 3. It will replace insurance holding company Jefferson-Pilot Corp. Both Boston Properties and Kimco are in the S&P REIT Composite index. Boston Properties is a Boston-based office real estate investment trust and Kimco Realty is a New Hyde Park, N.Y.-based retail REIT. The J.P. Morgan equity REIT research group estimates that this development is going to generate about $1.7 billion of demand from index funds for the stocks of these REITs (since the equity holdings of index funds modeled on the S&P 500 will have to reflect the makeup of this index). Kimco will have about a 0.07% weighting in the index, and index fund demand for Kimco stock should be over $800 million, according to J.P. Morgan. And Boston Properties should have about a 0.1% weighting in the S&P 500, making for about $900 million of demand. Both Kimco and Boston will be added to the REIT sub-industry component of the S&P 500, S&P reports. With these additions, 11 REITs are on the S&P 500, comprising about 1% of the index, according to J.P. Morgan. S&P's website is http://www.standardandpoors.com.

Looking to increase its market share in the west, LandAmerica Financial Group Inc., Richmond, Va., has agreed to buy Capital Title Group Inc., Scottsdale, Ariz., in a deal valued at $251 million.Ted Chandler, LandAmerica's president and chief executive said Capital has market shares of 4.4% in Arizona, 3.9% in California and 2.4% in Nevada. In those same states, LandAmerica has market shares of 22.7%, 11.6% and 16.8%. Among the approvals needed for completion of the deal, one has to come from the California Department of Insurance. Mr. Chandler told a conference call that LandAmerica has already reached out to the staff of Commissioner John Garamendi, who has been a critic of the industry. He said that much of Mr. Garamendi's comments about pricing have come regarding refinancings. Capital Title Group gets most of its business from buy/sell transactions. LandAmerica's website is http://www.landam.com.

The Department of Housing and Urban Development is preparing to issue a Real Estate Settlement Procedures Act reform proposal soon, according to secretary Alphonso Jackson.The HUD secretary told the National Association of Mortgage Brokers that it is "too early" to discuss the "substance" of the RESPA proposal. "But I will tell you that there will be a new rule proposed very soon." It is believed HUD is working with the White House budget office on the final drafts of the RESPA proposal. The HUD secretary thanked the mortgage brokers for their input at the RESPA roundtables HUD sponsored last summer. "You made a meaningful difference. I am confident, once you see the HUD proposal, it will be much better because we had your help," the secretary said.

Homebuyers with good credit would be able to get a Federal Housing Administration insured mortgage with no upfront insurance premium under a legislation proposal the Department of Housing and Urban Development is finalizing.The legislation will allow FHA to offer risk-based premiums so that it can both serve and attract borrowers with high credit scores as well as subprime borrowers. Based on their credit score and loan-to-value ratio, creditworthy borrowers would only have to pay a 50 basis point annual insurance premium on FHA loans. For subprime borrowers, FHA could charge a maximum 3% upfront premium and a 75 bp annual premium. "This would provide an option to potential homebuyers who have no choice right now except to go to subprime lenders," HUD secretary Alphonso Jackson said. FHA is a "cheaper" and a safer option, the secretary added.

QuoteMeARate.com, a Houston-based net branch operator, closed its doors this week amid allegations of loan fraud, MortgageWire has learned. Company president Richard Barroso could not be reached for comment but a letter he sent to employees and net branch operators blames its problems on declining loan volumes and the cost of defending the company in a lawsuit. One net branch operator told MW that at one time QMRC had 600 franchisees. The operator, requesting her name not be used, said guards are now stationed at the front door of the company in Houston. (For more details see the Monday, April 3 issue of National Mortgage News.)

Fitch Ratings has raised the primary and master servicer ratings for GMAC Commercial Mortgage to 'CPS1-minus' while affirming the special servicer rating at 'CSS1.'The new ratings reflect a one notch upgrade in the primary and master servicer ratings, while the special servicer rating is already at the highest level. Fitch said the change comes in the wake of GM's partial sale of General Motors Acceptance Corporation to an entity controlled by affiliates of Kohlberg, Kravis Roberts & Co; Five Mile Capital Partners and The Goldman Sachs Group. At the end of last year, GMACCM's primary servicing portfolio consisted of about $100 billion of commercial mortgage loans. GMACCM was also the master servicer on 164 commercial mortgage-backed securities transactions totaling $107.2 billion.

Fieldstone Investment Corp., a real estate investment trust whose subsidiary originates non-conforming mortgages, said it is filing a Form 12b-25 Notification of Late Filing with the Securities and Exchange Commission.The company, headquartered in Columbia, Md., is seeking an extension to file its 10-K until April 17, 2006. Fieldstone said it is in the process of re-examining its financial statements from 2003 through 2005 and "needs additional time to complete its reassessment regarding the appropriate recognition of income tax expense on inter-company transactions in 2003 and 2005 within Fieldstone's consolidated group." Any change would affect the company's results in 2003, 2004 and the first three quarters of 2005.

MortgageIT Holdings, New York, a residential mortgage REIT, has issued $50 million of trust preferred securities in a private placement.The floating rate TPS bear a variable interest rate of 360 basis points above 3-month LIBOR, paid quarterly. The TPS will mature in 2036 and are redeemable at par after five years. MortgageIT said proceeds will be used to support strategic initiatives and the expansion of the company's national loan origination platform.

Aames Investment Corp., Los Angeles, said it is in the process of closing two of its wholesale centers, as well as eliminating 100 positions from that channel of business.The two centers closing are located in Deerfield, Fla., and Parsippany, N.J. A. Jay Meyerson, chairman and chief executive, said the operations conducted at those locations will be shifted to three other locations: Irvine, Calif.; Jacksonville, Fla.; and Dallas. "We estimate that the combined annual savings from these initial actions will be $10 million. We have identified additional cost reductions in operating expenses of approximately $10 million, which we plan on eliminating within the next four months," he said. Aames will incur a first quarter charge of $2.0 million as a result of these changes. The company announced these changes as part of its fourth quarter 2005 earnings statement and as a follow-up to last week's announcement it was shifting back to a "C" Corp structure from being a real estate investment trust.

When the states agreed to a landmark $325 million legal settlement with subprime giant Ameriquest Mortgage, prosecutors did not single out individual loan officers but in the future they might. At a speech before the National Association of Mortgage Brokers on Tuesday, Iowa attorney general Tom Miller said the "next step" is to target "individual" loan officers engaged in lending abuses. Without offering specifics, he said "criminal cases" might be brought against LOs who are a party to appraisal fraud, and "up-selling" though he noted that up-selling may not necessarily be illegal. (Up-selling occurs when a loan officer is compensated extra money for bringing a mortgage in at a higher-than-market note rate or points.) Mr. Miller was the lead AG in the case against Ameriquest of Orange, Calif. In January the privately held mortgage company settled abusive lending allegations without admitting any guilt. Mr. Miller said he is also very concerned about appraisal fraud in the industry, and home builder-owned mortgage firms overcharging consumers. In response to a question about home builder/lenders, he said, "We're aware of it and we're looking at it."

Class L of Morgan Stanley Dean Witter Capital I Inc. commercial mortgage pass-through certificates, series 2000-LIFE1, has been downgraded from B to B-minus by Fitch Ratings.In addition, Fitch upgraded and removed five classes in the deal from Rating Watch Positive, upgraded two others, and affirmed the ratings on four classes. Fitch attributed the downgrade to expected losses on specially serviced loans. Four loans representing 3.4% of the pool are in special servicing, of which the largest (1.0%) is an office property in St. Paul, Minn., that is 30 days delinquent. The property is vacant and the special servicer is exploring workout options with the borrower, the rating agency reported. The second-largest specially serviced loan (0.7%) is an industrial property in New Orleans that was damaged as a result of Hurricane Katrina and is 60 days delinquent.

Realty Income Corporation, Escondido, Calif., has offered 5,200,000 shares of common stock at $24.39 in a deal expected to close on March 29.Realty Income said the offering will raise gross proceeds of approximately $126.8 million, which will be used to repay borrowings under the company's $300 million unsecured acquisition credit facility and for general corporate purposes.

Pennsylvania Real Estate Investment Trust, a Philadelphia-based shopping center REIT, has entered into $150 million (notional amount) of interest rate swap agreements, according to PREIT.The swap agreements, bearing a blended 10-year swap rate (starting in 2008) of 5.3562%, are aimed at hedging the expected interest payments associated with a portion of the company's anticipated issuances of long-term debt, PREIT said. The company cited an earlier round of swap agreements totaling a notional $370 million, noting that they had been arranged in connection with expected debt issuances in 2007 and 2008. "In 2008, PREIT has some additional, previously disclosed obligations that are likely to require financings," the company said. "Also, the company may have strategic opportunities for other financings in that year." The company can be found online at http://www.preit.com.

A survey of bank real estate loan officers concludes that banks' appetite for commercial real estate loans remains strong despite higher interest rates.The survey, conducted by Bridger Commercial Funding, found that loan officers believe that despite higher rates, commercial real estate credits will remain relatively healthy with no increases in delinquency and default rates anticipated. Three-quarters of respondents expect rent and occupancy levels to remain steady in 2006. Almost 60% said they expect capitalization rates to rise in 2006, and 37% think cap rates will stabilize.

Financial Services subcommittee chairman Spencer Bachus, R-Ala., has postponed a markup of a predatory lending bill that was originally scheduled for March 29. In working with key subcommittee Democrats and Republicans, Rep. Bachus acknowledged that he needs a "little more time" to work out a compromise. "I am hopeful that the end product will be something akin to if not identical to the North Carolina statute," Rep. Bachus said. The Alabama congressman is trying to forge a compromise around a well-known North Carolina predatory lending law. A draft of the bill uses the 1999 North Carolina law as a national subprime lending standard. It also includes a federal preemption of state predatory lending laws.

Proposed regulatory guidance on interest-only and payment-option ARMs may be tougher than a lot of people realize, according to the deputy comptroller of the currency.Deputy Comptroller Barry Wides told a consumer group that federal banking regulators expect lenders to make "conservative assumptions" in their underwriting of these nontraditional adjustable-rate mortgage products. First, lenders should qualify borrowers at the current fully indexed interest rate, not the teaser or introductory rate. Second, the lender should calculate the monthly payment as if the loan were fully amortizing on day one. When it comes to an option ARM, lenders should assume that the borrower will make the minimum payment, calculate the potential negative amortization, and add it to the loan amount. So a $400,000 option ARM with potential negative amortization of $44,000 should be underwritten as if it were a $444,000 mortgage, he said. "We are telling lenders to make conservative assumptions about the borrower making minimum payment and how much they can end up owing, and then amortize that at the current rate," Mr. Wides told the National Community Reinvestment Coalition. The public comment period on the proposed guidance ends March 29.