Originations

Mortgage companies trimmed 1,400 full-time employees from their payrolls in December, following 2,000 job cuts in November.The U.S. Bureau of Labor Statistics reported that employment in the mortgage banker/broker sector declined to 500,900 in December from 502,300 in November. BLS previously reported that mortgage firms shed 200 employees in November. But a year-end benchmark revision now shows that companies actually were more aggressive in cutting their payrolls. Overall, industry employment averaged 489,900 in 2005, compared with 467,700 in 2004. In the past few weeks, MortgageWire has reported on layoffs at prime and subprime lenders alike, including Ameriquest Mortgage, Argent Mortgage, Aurora Loan Services, BNC Mortgage, ECC Capital Corp., and Countrywide Home Loans. (See the Feb. 6 issue of National Mortgage News for more employment-related stories.) The BLS can be found online at http://stats.bls.gov.

New York-based AFL-CIO Housing Investment Trust and AFL-CIO Building Investment Trust have announced that they surpassed their goal of investing $750 million over five years and are now launching the second phase of their New York City initiative.The new commitment includes $250 million to construct and rehabilitate multifamily housing in the five boroughs and $150 million in commercial real estate funds. In addition, in collaboration with Union Privilege's "Union Plus Program," the initiative will provide $1 billion for home mortgages for New York members of participating AFL-CIO labor unions. During the past four years, the AFL-CIO trust funds invested $750 million in NYC housing production to create union construction jobs and promote homeownership opportunities for working families. They also successfully enacted the New York City Community Investment Initiative to help the city rebuild after the 9/11 terrorist attacks, AFL-CIO president John Sweeney noted.

Franklin Bank Corp., a thrift holding company based in Houston, has reported that its performance in the fourth quarter was adversely affected by a $5.8 million nonperforming mortgage banker finance loan.The company did not identify the borrower, which it said has ceased operations and is under investigation by federal authorities for possible fraud and other claims. Franklin added that the loan is "potentially collateralized by single-family residential mortgage loans." It set aside a reserve of $4.4 million, or $0.13 per share, to cover potential losses. Still, Franklin posted net income of $26.3 million ($1.13 per share) for the year and $4.7 million ($0.19 per share) for the fourth quarter. Net of tax, the reserve had an impact of $2.8 million on Franklin's earnings.

Equity Office Properties Trust, Chicago, has reported net income of $19 million ($0.02 per share) for the fourth quarter, compared with $61.3 million ($0.15 per share) in the fourth quarter of 2004.The real estate investment trust, the largest office REIT by market capitalization, said the decrease in net income stems mostly from losses related to Hurricane Katrina, as well as "rent roll-down, higher utility costs, increased spending on repairs and maintenance, as well as the dilutive impact of the net disposition activity." The REIT said it sold $2.7 billion of assets in 2005. "The leasing environment is improving across our markets, with positive trends in occupancy, net absorption, and rental rates," said Richard D. Kincaid, president and chief executive officer of the REIT. "Although we expect further rent roll-down, we believe a number of the challenges we faced in the past are behind us." The REIT can be found online at http://www.equityoffice.com.

New Century Financial Corp., an Irvine, Calif.-based real estate investment trust, has announced that its vice chairman, president, and chief operating officer, Brad A. Morrice, will become chief executive officer as of July 1.Mr. Morrice will succeed Robert K. Cole, who will remain as New Century's executive chairman. The announcement came in conjunction with the company's earnings report for the fourth quarter and 2005, in which New Century reported net earnings available to common stockholders of $411.1 million ($7.17 per share) for the year, compared with $375.6 million ($8.29 per share) in 2004. Mortgage loan originations totaled $56.1 million, up from $42.2 billion in 2004. For the fourth quarter, the company reported net earnings available to common stockholders of $114.0 million ($2.00 per share), compared with $78.7 million ($1.44 per share) in the fourth quarter of 2004. New Century can be found online at http://www.ncen.com.

Fairway New England Mortgage, Needham, Mass., has announced the formation of an alternative lending division that will focus solely on nontraditional financing.Heath Lefort has been appointed vice president and will head the new division. Mr. Lefort will focus initially on helping expand Fairway New England, but its parent company, Fairway Independent Mortgage Corp., plans to incorporate his expertise into its nearly 100 branches, Fairway said. (Until now, Fairway Independent Mortgage had been a traditional lender that referred out nontraditional loans.) The company said Mr. Lefort is an 11-year veteran of the mortgage industry who spent seven years with Fleet Boston Financial and several years with Patriot Funding LLC. The parent company can be found online at http://www.fairwayindependentmc.com.

The Western Regional Mortgage Lenders Conference will shut its doors after the 2006 event, according to the show's organizers.At the same time and in a related move, the National Association of Mortgage Brokers has decided to postpone its first-ever NAMB West event. Originally the two shows were to take place just weeks apart in Las Vegas this fall. In its statement, the organizers of the WRMLC said the show "fulfilled its mission by delivering quality education, the best mortgage conference in the country and by creating a unique revenue sharing model that provided 14 state mortgage associations over $1.4 million dollars in the past nine years." In addition, the WRMLC made $160,000 in grants and charitable contributions, including $76,000 to Habitat for Humanity, the organizers said. "The organization expects to make substantial distributions after what is planned to be the final and most successful event for WRMLC," they added. NAMB president Jim Nabors said his group understood that "it would have been difficult for NAMB's state affiliates to change their 2006 meeting plans so quickly. The NAMB Board wanted to help our state affiliates and others honor long-standing relationships and commitments without having to choose between NAMB and the Western Regional Conference."

Freddie Mac says it expects that a flattening yield curve will increase its opportunities to expand its credit guarantee business and invest in fixed-rate mortgages this year.A flattening of the yield curve "plays to our traditional strength," Freddie's president and chief operating officer, Eugene McQuade, told an investor conference sponsored by Citigroup. Freddie is forecasting a decline in adjustable-rate mortgage originations in 2006 and 2007 and projects that banks will find it less profitable to invest in fixed-rate mortgages. "While we have yet to see a selloff of fixed-rate mortgages from bank portfolios, even slightly reduced investment by banks should create better fixed-rate buying opportunities for us in 2006," Mr. McQuade said. The Freddie COO also pointed out that most of the growth in the company's mortgage portfolio came from purchasing subprime mortgage securitizations that are rated triple-A. "We generated most of our retained portfolio growth last year in that sector," he said. Mr. McQuade also told investors that Freddie Mac gained market share from Fannie Mae in 2005 in the issuance of guaranteed mortgage-backed securities. Freddie said its share increased from 41% in 2004 to 45% in 2005.

The average 30-year fixed mortgage rate rose from 6.12% to 6.23% over the seven-day period ended Feb. 2, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate rose from 5.70% to 5.81%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages increased from 5.75% to 5.87%, and the average rate for one-year Treasury-indexed ARMs climbed from 5.20% to 5.33%. 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. "Declines in worker productivity coupled with accelerating labor costs increase the threat of inflation down the road," said Frank Nothaft, Freddie Mac's chief economist. "Inflationary pressure generated by these factors pushes long-term mortgage rates upward, which is why we have seen rates rise these last two weeks." A year ago, the average 30-year and 15-year fixed rates were 5.63% and 5.14%, 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.

Entertainment Properties Trust, Kansas City, Mo., has amended its credit facility, increasing it to $200 million and changing several other aspects of the credit line.The real estate investment trust said the three-year facility (with a one-year option to extend) has been converted to an unsecured credit line and bears interest at 130-175 basis points over the London interbank offered rate (compared with 175-250 bps before). KeyBanc Capital Markets acted as the sole lead arranger of the facility. The REIT's website is at http://www.eprkc.com.

Two classes of Morgan Stanley Dean Witter Capital I Trust commercial mortgage-backed securities, series 2001-TOP1, have been downgraded by Fitch Ratings.Class J was downgraded from B-minus to CCC, and class K was downgraded from CCC to C. In addition, the rating on class F was affirmed and removed from Rating Watch Negative, and the ratings on 13 other classes were also affirmed. Fitch attributed the downgrades to expected losses on four specially serviced loans secured by an office property in San Jose, Calif.; a multifamily property in Marietta, Ga.; an industrial property in Lafayette, Colo.; and an office property in Robinson Township, Pa. The rating agency can be found online at http://www.fitchratings.com.

Trizec Properties Inc., Chicago, will replace AMLI Residential Properties Trust, Chicago, in the S&P REIT Composite Index after the close of trading on a date to be announced, Standard & Poor's has announced.S&P said the reason for the change is that AMLI, an umbrella partnership REIT, is being acquired by Prime Property Fund LLC in a deal that is still pending final approval. Trizec's portfolio of commercial office properties is concentrated in the metropolitan areas of seven major U.S. cities. S&P can be found online at http://www.standardandpoors.com.

Equity Residential, a Chicago-based real estate investment trust, has reported net income of $215.2 million ($0.74 per share) for the fourth quarter, compared with $137.6 million ($0.48 per share) a year earlier.The company, the largest multifamily REIT by market capitalization, reported funds from operations (a non-GAAP measure commonly used by REITs) of $0.66 per share for the fourth quarter, compared with $0.56 for the fourth quarter of 2004. "As we expected, the continuing improvement in the economy, growth in jobs, and diminished supply in our core markets facilitated a strong finish to 2005 and will continue to benefit Equity Residential in 2006," said David J. Neithercut, Equity Residential's president and chief operating officer. The REIT can be found online at http://www.equityapartments.com.

ResMAE Mortgage Corp., Brea, Calif., has announced the launch of a commercial lending operation in California that will specialize in multifamily properties of five units or more.The company said the move is part of a broader nationwide rollout that will include commercial lending for mixed-use, office, retail, and light industrial properties. Though chiefly a subprime residential wholesale lender, ResMAE said it sees commercial opportunities through its customer base. "Many of our residential brokers encounter multifamily lending opportunities but are forced to pass because they are not familiar with the intricacies of commercial lending," said Ed Resendez, president and co-chief executive officer of ResMAE. "Our commercial operation will act as a resource to enable them to make those loans." Jorge Ramos, senior vice president of commercial lending, will head the new operation. The company can be found online at http://www.resmae.com

The Federal Open Market Committee, the monetary policy arm of the Federal Reserve Board, has raised its target for the federal funds rate to 4.5%, saying that "possible increases in resource utilization" and "elevated energy prices" could add to inflation pressures.In addition to the 25-basis-point hike in the target rate, the Fed has approved a similar increase in the discount rate, to 5.5%. (The federal funds rate is the rate at which banks make overnight loans to each other. The discount rate is the rate charged by regional Federal Reserve Banks to commercial banks and other depository institutions.) Swiss Re U.S. senior economist Arun Raha said the federal funds rate hike "comes as no surprise" and predicted further hikes because "inflation concerns have yet to subside, and incoming Chair Ben Bernanke needs to establish his inflation-fighting credentials." The Fed can be found online at http://www.federalreserve.gov.

The Market Composite Index, an overall measure of mortgage applications, fell from 660.5 to 626.8 on a seasonally adjusted basis during the week ended Jan. 27, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications increased 9.1% on the week but were down 12.1% from the level recorded a year earlier. The Purchase Index fell from 473.7 to 435.7 on a seasonally adjusted basis, while the Refinance Index declined from 1773.9 to 1747.2. The four-week moving average for the Purchase Index rose from 448.3 to 452.7, and the comparable average for the Refinance Index rose from 1570.0 to 1666.0. Refinancings represented 43.0% of total applications, up from 42.8% the previous week, while adjustable-rate mortgages accounted for 30.5%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages rose from 6.04% to 6.20%, and points (including the origination fee) fell from 1.24 to 1.17 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

The homeownership rate for Hispanics finally hit 50% in the fourth quarter, while the homeownership rate for blacks declined to 48.0%, according to the U.S. Census Bureau.The Census Bureau reported that 50.0% of Hispanic households now live in their own homes, up from 48.9% in the fourth quarter of 2004. However, the fourth-quarter report also shows that the homeownership rate among blacks fell to 48.0% from 49.1% in the same quarter of 2004. Housing Secretary Alphonso Jackson recently said 2 million minority families have purchased homes in the past two years. Overall, the U.S. homeownership rate ended 2005 at 69.0%, down from 69.2% in the fourth quarter of 2004.

The slowdown in home sales continued through December, according to a leading indicator of existing-home sales that has declined for four consecutive months.The National Association of Realtors reported that its index of pending home sales fell from 120.0 in November to 116.4 in December, a 3% drop. The seasonally adjusted annual index peaked at 129.2 in August. Despite the slowdown, NAR chief economist David Lereah said mortgage applications have trended up in recent weeks, and he is looking for a pickup in sales. "So we shouldn't be surprised to see pending home sales rise in the next couple of months," Mr. Lereah said. The NAR pending home sales index fell 8.1% in the West and 9.3% in the Midwest. The index rose 2.3% in the South and 1.5% in the Northeast. The NAR can be found online at http://www.realtor.org.

Gramercy Capital Corp., a New York-based commercial real estate specialty finance company, has announced the issuance of $50 million of trust preferred securities through a wholly owned subsidiary.The 30-year securities were priced to bear interest at 2.65% above the London interbank offered rate for the first 10 years. (Through a swap agreement, Gramercy said it fixed the effective interest rate at 7.43% during that period.) Thereafter, the rate will float at 2.70% above the three-month LIBOR. Gramercy Capital specializes in acquiring first mortgage loans, subordinate mortgage participations, mezzanine loans, preferred equity, and net-lease investments involving commercial property. The issuing subsidiary is Gramercy Capital Trust III. The company can be found online at http://www.gramercycapitalcorp.com.

LoanCity, a wholesale mortgage lender based in San Jose, Calif., has expanded its alternative-A program, increasing loan limits to $3 million for first mortgages and to $600,000 for alt-A second mortgages.The new program includes "piggyback" loan combinations to $2 million with a single underwrite, the company said. Loan types include 15- and 30-year fixed-rate mortgages and a variety of adjustable-rate mortgages, all with interest-only options and 100% loan-to-value ratios. The program can be used for primary residences, second homes, and investment properties. "Our enhanced alt-A program addresses the market demand for larger loan sizes for both firsts and seconds and gives brokers the flexibility and the pricing they'll need to do business in a more competitive environment," said Rick Soukoulis, chief executive officer of LoanCity. "Best of all, our program is easy to use, and thanks to our advanced automated underwriting engine, delivers decisions and stipulations in conforming loan time frames." The company can be found online at http://www.loancity.com.