Originations

Tax return giant H&R Block has received final approval to start a savings and loan, a move that will allow the depository to purchase mortgages from its subprime affiliate, Option One Mortgage, a top-10-ranked nonconforming lender.The Office of Thrift Supervision gave H&R Block final approval on March 15, noting that it had received "numerous" comment letters on the application, most of them opposed. "Commenters expressed concerns about the ability of the mortgage companies' borrowers to receive the best loan product for which they qualify," the agency said. The thrift will be headquartered in Kansas City, Mo., which will serve as the bank's Community Reinvestment Act designation area. (For more details, see the March 20 issue of National Mortgage News.)

Two classes of Structured Finance Advisors Collateralized Asset Backed Securities Trust II CDO Ltd. have been downgraded by Fitch Ratings.The class notes were downgraded from BB to B, and the class C notes were downgraded from CC to C. The triple-A rating on class A was affirmed. SFA CABS II is a collateralized debt obligation supported by residential and commercial mortgage-backed securities, asset-backed securities, and CDOs, Fitch said. The downgrades were attributed to the declining credit quality of the collateral and the decline in the coverage of the notes, the rating agency said. Fitch can be found online at http://www.fitchratings.com.

The three national credit reporting companies have launched a jointly developed credit scoring system designed to simplify the credit granting process by providing a consistent score to the marketplace.The system, called VantageScore, was developed as a result of market demand for a more consistent and objective approach to credit scoring, according to Costa Mesa, Calif.-based Experian. The system uses score ranges from 501 to 990 and assigns letter grades of A through D and F to each range. The top grade of A will be assigned to a borrower with a score of 901 to 990, and the other grades and score ranges are as follows: B, 801-900; C, 701-800; D, 601-700; and F, 501-600. "The new scoring system addresses the potential weaknesses in existing scoring solutions in the marketplace because any variances in credit scores between credit reporting companies will be attributed to data differences within each of the three consumer credit files and not to the structure of the scoring model or interpretation of the data," Experian said.

Fannie Mae is starting to see more demand for its fixed-rate, interest-only product as interest rates on riskier adjustable-rate loans increase.Fannie's fixed-rate IO loans generated $2.9 billion in business in 2005, according to Fannie executive vice president Tom Lund. During the first two months of this year "we have already seen $3.7 billion in business," Mr. Lund told investors and equity analysts during a March 13 conference call. "So consumers are beginning to shift into fixed-rate but affordable products," he said. Mr. Lund also noted that the federal banking regulators' guidance on nontraditional mortgages "has had a positive impact on reining in some of the layering of risk" in the alternative-A market. The guidance issued in December warns against underwriting IO and payment-option ARMs with reduced documentation of income and simultaneous second loans.

GMH Communities Trust, Newtown Square, Pa., has postponed the release of its results for the fourth quarter and the 2005 fiscal year, revised downward its earnings guidance for 2005, and withdrawn its earnings guidance for 2006.The real estate investment trust said the delay relates to an investigation launched by its Audit Committee following the receipt of a letter from the REIT's chief financial officer alleging, among other things, that there is a problem with the "tone at the top" of the company. The investigation "revealed evidence of several material weaknesses in the company's internal control over financial reporting" and evidence that certain "key executives" placed "significant pressure" on the Accounting Department, GMH said. It added, however, that the probe found no evidence that the department was pressured to falsify financial information or violate generally accepted accounting principles. The REIT, which provides housing to college students and members of the U.S. military services, can be found online at http://www.gmhcommunities.com.

Municipal Mortgage & Equity LLC, Baltimore, has reported that it will restate its net earnings upward for 2004 and the nine-month period ended Sept. 30, 2005, and restate them downward for 2002 and 2003.The restatements involve a recognition of syndication fees and interest income, the application of the equity method of accounting, and the amortization of mortgage servicing rights, the company said. They are expected to result in net earnings increases of $10.5 million ($027 per share) for the first nine months of 2005 and $19.4 million ($0.56 per share) for 2004, MuniMae said. Net earnings are expected to be revised downward by $4.2 million ($0.15 per share) for 2003 and $2.6 million ($0.09 per share) for 2002. MuniMae, a multifamily financing company, can be found online at http://www.munimae.com.

The five-year seller's market in homes is coming to an end, according to the latest forecast from the National Association of Realtors.The sales of existing homes are projected to fall 5.7% to 6.67 million this year from the record 7.08 million last year, the NAR's forecast indicates. "The cooling from overheated sales conditions in recent months is helping to bring inventory levels up to the point where buyers have more choices than they've seen in the last five years," said NAR chief economist David Lereah. "Annual price appreciation is still running at double-digit rates, but the cause of those sharp increases is going away. As the market readjusts, price appreciation should return to more normal rates of growth this year." The forecast also calls for a rise of only 5.8% in the national median existing-home price, compared with the 12.5% recorded in 2005. The NAR can be found online at http://www.realtor.org.

Fitch Ratings has announced that 319 classes from 75 commercial mortgage-backed securities deals have been placed on Rating Watch Positive, chiefly due to "a flurry of defeasance activity" in the fourth quarter.In addition to the defeasances reported in the January and February remittance reports, many deals have experienced paydowns since the last ratings review, Fitch said. Moreover, the transactions have generally shown improved performance, with decreased delinquency and fewer loans of concern since Fitch's last rating action, the rating agency said.

Morgan Stanley Real Estate, New York, has concluded fundraising for Morgan Stanley Real Estate Fund V International with $4.2 billion of equity commitments from global private and institutional investors.MSREF V, which raised funds from North America, Europe, Asia, Africa, and Australia, will acquire a diversified portfolio of assets, primarily in Japan, the Asia-Pacific region, and Europe, Morgan Stanley said. The fund has already committed approximately 50% of its capital to assets, predominantly in Japan, China, and Western Europe, the company said. Morgan Stanley RE can be found online at http://www.morganstanley.com/realestate.

Mortgage companies trimmed 2,900 full-time employees from their payrolls in January, marking the third consecutive month in which employment in the mortgage banker/broker sector has declined.The U.S. Bureau of Labor Statistics reported that employment in the mortgage industry declined from 500,700 in December to 497,800 in January. The decline in industry jobs occurred even though the 30-year mortgage rate hovered near 6.00% in January and refinancings constituted over 40% of mortgage applications. Since then, mortgage rates have gone up and the refi business has cooled. But the purchase-mortgage market has remained strong. Friday's employment report shows that construction jobs increased by 55,000 in January and 41,000 in February. "What housing slowdown, right?" asked Stephen Stanley, RBS Greenwich Capital's chief economist. "Home sales may be slowing down, but builders have plenty of orders in the pipeline to keep them busy for a long time."

Highland Hospitality Corp., a real estate investment trust based in McLean, Va., has priced a public offering of 7.3 million shares of common stock aimed at helping finance the purchase of two hotels at $12.35 per share.The REIT said the proceeds will help fund part of the $76 million purchase price of The Melrose Hotel in Washington, D.C., and part of the $85 million purchase price of an unnamed hotel that Highland has signed a nonbinding letter of intent to buy. Bear, Stearns & Co. and Deutsche Bank Securities are the joint book-running managers of the offering. The underwriters have been granted an option to buy up to 500,000 additional shares of common stock to cover any overallotments. The lodging REIT can be found online at http://www.highlandhospitality.com.

Two classes of GE Capital Commercial Mortgage Corp. commercial mortgage pass-through certificates, series 2000-1, have been downgraded by Fitch Ratings.Class I was downgraded from B to B-minus, and class J was downgraded from CCC to C. The rating agency also upgraded five classes in the deal and affirmed the ratings on five others. Fitch attributed the downgrades to decreased credit enhancement due to realized losses and expected losses on loans in special servicing.

Three classes from three issues of CDC Mortgage Capital Trust mortgage pass-through certificates have been downgraded by Fitch Ratings.The downgrades were as follows: series 2002-HE2, class B-2, from BB to B-plus; and series 2002-HE3, class B-1, from BBB-minus to BB-minus, and class B-2, from BB-plus to B-plus. In addition, Fitch affirmed the ratings on eight classes from three CDC deals. The rating agency attributed the downgrades to a deterioration in the relationship between credit enhancement and expected losses. The pools consist of fixed- and adjustable-rate subprime mortgages for one- to four-family residential properties.

The average 30-year fixed mortgage rate rose from 6.24% to 6.37% over the seven-day period ended March 9, representing its highest level since September 2003, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate rose from 5.89% to 6.00%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages increased from 5.97% to 6.03%, and the average rate for one-year Treasury-indexed ARMs climbed from 5.34% to 5.45%, its highest level since September 2001, Freddie Mac reported. Fees and points averaged 0.6 of a point for fixed-rate mortgages, 0.7 of a point for hybrid ARMs, and 0.8 of a point for one-year ARMs. "Stronger-than-expected gains in the manufacturing and service industries -- coupled with higher labor costs -- ignited inflation concerns, which led to the rise in mortgage rates this week," said Frank Nothaft, Freddie Mac's chief economist. "Financial markets are beginning to think that the Fed will hike rates three more times this year, instead of two, putting upward pressure on mortgage rates." A year ago, the average 30-year and 15-year fixed rates were 5.85% and 5.38%, respectively, and the average one-year ARM rate was 4.24%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

Equity One Inc., a real estate investment trust based in North Miami Beach, Fla., has announced the pricing of $125 million of 6.00% senior unsecured notes at 99.277.The notes, due Sept. 15, 2016, have a yield to maturity of 6.094%. The joint book-running managers of the offering are Banc of America Securities LLC, Deutsche Bank Securities Inc., and Wachovia Capital Markets LLC. Equity One, a shopping center REIT, can be found online at http://www.equityone.net.

Four classes of securities issued by E*Trade ABS CDO I Ltd., a collateralized debt obligation supported in part by residential and commercial mortgage-backed securities, have been downgraded by Fitch Ratings.The downgrades are as follows: classes C-1 and C-2, from CCC to CC; and $12.50 million of preference shares and approximately $4.97 million of composite securities, from CC to C. The rating agency said the downgrade of the class C notes was due to a low projected principal recovery for the notes. The downgrade of the preference shares "reflects the likelihood that there will not be future distributions to this class," Fitch said, and the downgrade of the composite securities was based on the likelihood that they will be limited to interest distributions from class C-1. The CDO is supported by RMBS, CMBS, CDOs, and asset-backed securities. Fitch can be found online at http://www.fitchratings.com.

The Market Composite Index, an overall measure of mortgage applications, rose from 571.5 to 575.6 on a seasonally adjusted basis during the week ended March 3, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications increased 12.9% on the week but were down 17.8% from the level recorded a year earlier. The Purchase Index fell from 400.8 to 399.0 on a seasonally adjusted basis, while the Refinance Index climbed from 1573.5 to 1614.4. The four-week moving average for the Purchase Index fell from 406.6 to 400.1, and the comparable average for the Refinance Index fell from 1633.2 to 1599.0. Refinancings represented 38.5% of total applications, up from 38.1% the previous week, while adjustable-rate mortgages accounted for 27.9%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages increased from 6.18% to 6.31%, and points (including the origination fee) rose from 1.19 to 1.22 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

Sun National Bank, Vineland, N.J., has announced the launch of a residential mortgage subsidiary, Sun Home Loans Inc., and its entry into the podcasting arena as a way of educating consumers about the mortgage process.Sun Home Loans will offer traditional and nontraditional mortgages, including two private programs -- SunPromise and SunKeys -- aimed at providing affordable mortgages for low- and moderate-income households. "Given New Jersey's current housing environment, we wanted to give consumers a very focused approach to obtaining a mortgage that best fits their specific needs," said Thomas A. Bracken, president and chief executive officer of Sun National. The bank's specialized subsidiary will make it a "one-stop mortgage resource," he said. Podcasting, which enables consumers to download audio files onto their computers or MP3 players, is "our way of stepping up to the times and giving consumers what they want, when they want it," said Brian G. Myers, president of Sun Home Loans. The bank can be found online at http://www.subnb.com.

Biomed Realty Trust Inc. will replace CenterPoint Properties Trust in the S&P REIT Composite Index after the close of trading on March 8, Standard & Poor's has announced.S&P said the reason for the change is that CenterPoint is being acquired by Solstice Merger Trust and CalEast Industrial Investors LLC. Biomed is a San Diego-based real estate investment trust that owns, leases, and manages laboratory and office space for life science tenants. S&P can be found online at http://www.standardandpoors.com.

CarrAmerica, a Washington, D.C.-based real estate investment trust, has been placed on Rating Watch Negative by Fitch Ratings in response to the REIT's announcement that it is being acquired by The Blackstone Group.Fitch currently rates CarrAmerica's senior unsecured debt BBB and its preferred stock BBB-minus. The watchlist placement was attributed to the office REIT's announcement that "it will give up access to the public equity capital markets" and to Fitch's concern that the company's leverage and funding strategy "may be more aggressive" after the transaction than they have been in the past. Fitch can be found online at http://www.fitchratings.com.