Originations

The average 30-year fixed mortgage rate rose from 6.10% to 6.12% over the seven-day period ended Jan. 26, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate rose from 5.67% to 5.70%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages remained at 5.75%, and the average rate for one-year Treasury-indexed ARMs climbed from 5.18% to 5.20%. Fees and points averaged 0.5 of a point for fixed-rate mortgages and 0.6 of a point for ARMs. "The minuscule rise in mortgage rates this week most likely reflects market expectations that the Federal Reserve will once again raise rates next week," said Frank Nothaft, Freddie Mac's chief economist. "At the beginning of last week, financial markets priced in a 90% probability that the Fed would increase short-term rates. Today, the odds are statistically certain." A year ago, the average 30-year and 15-year fixed rates were 5.66% and 5.14%, respectively, and the average one-year ARM rate was 4.18%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

Citing a cooling housing market and higher interest rates, the Mortgage Bankers Association is forecasting that residential production will drop by almost 20% this year.The trade group says it expects residential funders of all stripes to originate $2.24 trillion in 2006, compared with $2.79 trillion last year. According to the Quarterly Data Report, a MortgageWire affiliate, mortgage bankers funded $3.02 trillion in 2005 (preliminary) and $2.87 trillion in 2004. Compared with the QDR figure for 2005, loan production could slip by 26% if the MBA's forecast proves true. MBA officials -- including MBA chairman Regina Lowrie -- acknowledged declining profit margins as a huge concern for the industry. "Investors are no longer paying premium prices for loans," Ms. Lowrie said at a press briefing. Despite the bad news for residential, the trade group says 2006 could be a good year for commercial mortgage bankers. "Capital continues to flow into the commercial and multifamily real estate markets on both the debt and equity sides," said MBA chief economist Doug Duncan. The MBA can be found online at http://www.mortgagebankers.org.

Hersha Hospitality Trust, a Philadelphia-based real estate investment trust, has announced a new revolving credit agreement with Commerce Bank NA.The hotel REIT said the agreement provides for a $60 million revolving line of credit, of which $10 million will be made available on an unsecured basis. The credit line replaces a $35 million line of credit with Sovereign Bank, the company reported. Hersha can be found on the Web at http://www.hersha.com.

Two classes of Banc of America Large Loan Inc.'s series 2003-BBA2 have been downgraded and the ratings have been removed from Rating Watch Negative by Fitch Ratings.Class K has been downgraded from BBB to BBB-minus, and class L has been downgraded from BBB-minus to BB. In addition, the ratings on 15 other classes in the deal were affirmed The downgrades were attributed to the continuing poor performance of the Colonnade Portfolio loan, representing 21.7% of the pool. The collateral consists of office properties in Atlanta (78%), Irving, Texas (15%), and Minneapolis (7%). Overall occupancy in the portfolio has declined to 64% from 73% at issuance, Fitch said. "Despite the downgrade, there is protection for investors as the leverage on the property is approximately $46 per square foot, below the market value of recent comparable sale properties in these three markets," Fitch said. "Furthermore, existing subordinate debt would take first losses should the loan default and experience losses as a result of disposition." Fitch can be found online at http://www.fitchratings.com.

The Opportunity Finance Network, a new $4 billion network of 167 financial institutions across the United States, has unveiled a campaign that includes the first phase of a multibillion-dollar "Fair Mortgage" strategy to combat predatory lending.Other aspects of the campaign include plans for $100 million in financing to preserve the affordability of housing units in manufactured home parks for low- and moderate-income homeowners; a relief-and-recovery fund for communities and businesses hit by natural disasters or acts of terrorism; and the launch of a National Opportunity Investor Council to be headed by former Federal Reserve Governor Edward Gramlich. The network, which supersedes the 20-year-old National Community Capital Association, said its launch marks "a major shift" beyond traditional community development strategies rooted in government funding toward engaging private capital in "opportunity markets." Mark Pinsky, president and chief executive officer of the network, said the Fair Mortgage strategy is a partnership between the network and mainstream mortgage lenders. "After a pilot launch in 2006, we expect to originate $1 billion or more per year of Fair Mortgages by 2010, growing from there," he said. The network can be found online at http://www.opportunityfinance.net.

The Market Composite Index, an overall measure of mortgage applications, rose from 613.3 to 660.5 on a seasonally adjusted basis during the week ended Jan. 20, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications decreased 0.2% on the week and were down 0.4% from the level recorded a year earlier. The Purchase Index rose from 443.9 to 473.7 on a seasonally adjusted basis, while the Refinance Index climbed from 1645.2 to 1773.9. The four-week moving average for the Purchase Index rose from 438.1 to 448.3, and the comparable average for the Refinance Index rose from 1441.3 to 1570.0. Refinancings represented 42.8% of total applications, down from 44.0% the previous week, while adjustable-rate mortgages accounted for 29.5%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages fell from 6.07% to 6.04%, and points (including the origination fee) rose from 1.23 to 1.24 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

Irwin Financial Corp., Columbus, Ind., is fielding offers for its conventional mortgage banking affiliate, which ranks 35th among residential funders.However, the bank holding company is keeping its home equity division. IFC chairman Will Miller cited declining profit margins in the conventional sector as a reason for the sale, adding that "our servicing activities have grown to a size where we believe they can be managed and grown more effectively within another organization." Among residential servicers, Irwin Mortgage Corp. ranks 31st nationwide, with a receivables portfolio of $23.7 billion. According to the Quarterly Data Report (a MortgageWire affiliate), 90% of IMC's production is sourced through loan brokers or correspondents. The mortgage division has 47 offices in 26 states. (See the Jan. 30 issue of National Mortgage News for more details.)

In yet another sign the housing market is cooling, existing-home sales fell 5.7% in December to an annualized rate of 6.6 million units, according to figures released by the National Association of Realtors.Compared with their level a year earlier, resales fell 3.1%. Still, resales set a record in 2005 with 7.07 million units sold. In 2004 and 2003 home sales totaled 6.78 million and 6.18 million units, respectively. "The housing market is indeed finally cooling after overheating earlier this year," said Stephen Stanley, chief economist for RBS Greenwich Capital. ".... Given the solid economic fundamentals (strong job and income growth and a favorable pace of household formation) and the likelihood of continued affordable mortgage rates, we believe that housing demand will return to a pace that is well off 2005's clip but still quite robust by historical standards."

Class B-4 of DLJ Mortgage Acceptance Corp.'s commercial mortgage pass-through certificates, series 1995-CF2, has been downgraded from B to CCC by Fitch Ratings.Fitch also upgraded one class in the transaction. The downgrade was attributed to expected losses on the one specially serviced loan in the pool and the increasing concentrations within the deal. Fitch said it considers 42.2% of the pool to be loans of concern. The one asset in special servicing is a real-estate-owned multifamily property in Amarillo, Texas, that accounts for 12.2% of the pool.

BRE Properties Inc., San Francisco, has announced the closing of a $600 million unsecured revolving line of credit with a group of 14 lenders.The real estate investment trust, which specializes in developing, acquiring, and managing apartments in the Western states, said the new facility has a four-year term with a one-year extension. Based on current debt ratings, the credit line bears an interest rate of 57.5 basis points above the London interbank offered rate. The joint lead arrangers of the LOC were Wachovia Bank NA and RBS Securities Corp. The REIT can be found online at http://www.breproperties.com.

Total returns from U.S. real estate investments will remain stable but will begin "a slight decline" this year, according to Prudential Real Estate Investors, Parsippany, N.J.PREI said it expects private, unleveraged real estate investments to produce average total returns of 12%-15% in 2006, down from 20% last year. In its quarterly outlook report on the real estate markets, PREI said, however, that the "most immediate risk" to the outlook for the commercial real estate market is the possible fallout from a slowing housing market, especially the market for condominiums. "All good things must end, including the terrific run that real estate has enjoyed over the past several years," said Youguo Liang, managing director of PREI Research. "Real estate should continue to perform well in 2006, however, and it remains attractive to investors, particularly with property fundamentals improving and new supply still years away in most markets and property types." PREI can be found online at http://www.prei.com.

Iowa Attorney General Tom Miller, who headed the Ameriquest Mortgage investigation, is vowing that the states might next tackle the origination practices of loan brokers.Speaking Jan. 23 during the Ameriquest settlement news conference, Mr. Miller said broker practices "are something we will look at in the future." (Subprime giant Ameriquest Mortgage has agreed to pay $325 million to settle claims with 49 states that the company engaged in abusive lending practices.) During the news conference, the participating AGs singled out the practice of "up selling" to consumers -- whereby the retail loan officer receives extra compensation for originating mortgages that carry either a higher note rate or extra points. Ameriquest's wholesale arm, Argent, was not a party to the settlement. (For more details, see the February issue of Origination News.)

Kennedy Wilson, a real estate investment and services company based in Beverly Hills, Calif., has reported the sale of a 20% stake in its apartment management division to Kenedix Inc., a Japanese real estate company.The 20% interest was sold for $9 million, giving the division a valuation of $45 million, Kennedy Wilson said. "This significant transaction completes an 11-year strategy of creating an operating presence in Japan and subsequently bringing institutional Japanese capital back to the U.S.," said William J. McMorrow, chairman and chief executive officer of Kennedy Wilson. The company also announced that it will form a joint venture with Kenedix, to be named Kennedy Wilson Multifamily Group, that is expected to purchase $400 million of apartment properties in the United States this year. Kennedy Wilson can be found online at http://www.kennedywilson.com.

Commercial Capital Bancorp Inc., Irvine, Calif., and Lawyers Asset Management Inc., an Oakland, Calif.-based "qualified intermediary" that facilitates tax-deferred real estate exchanges, have announced that Commercial Capital will acquire LAMI in an all-stock transaction valued at $8 million.LAMI facilitates exchange transactions chiefly in Northern California and provides services nationwide for unique transactions involving hotels and business assets. LAMI will operate as a subsidiary of Commercial Capital under the Lawyers Asset Management brand name, the companies said. Lloyd W. Kendall Jr. will continue as president of LAMI, and James G. Beck will serve as executive vice president and chief operating officer. The bank, based in Irvine, Calif., can be found online at http://www.commercialcapital.com/, and LAMI, based in Oakland, Calif., can be found at http://www.lawyersasset.com.

Bank of America Corp., Charlotte, N.C., has reported net income of $16.89 billion ($4.15 per share) for 2005, up 19% from $14.14 billion ($3.69 per share) in 2004.Home equity production volume rose 27% to a record $72 billion, BoA said. For the fourth quarter, the company reported net income of $3.77 billion ($0.93 per share), down from $3.85 billion ($0.94 per share) a year earlier. The company can be found online at http://www.bankofamerica.com.

MuniMae, a Baltimore-based multifamily lender and investment manager, has announced the completion of a company reorganization that resulted in an 8% reduction in its work force over the past year.The company now has two major business groups, MuniMae said. Executive vice president Gary A. Mentesana will lead the affordable housing group, which combines the company's tax credit equity, tax-exempt, and taxable lending businesses. Executive vice president Charles M. Pinckney will lead MuniMae's real estate finance and investment management group, which will focus on market rate multifamily and commercial financings. Jenny Netzer and Frank G. Creamer Jr. will lead efforts to expand business opportunities and capital relationships. "While efforts such as these are never easy, and good people were asked to leave the business, we have nonetheless now positioned ourselves to deliver services more efficiently and pursue new opportunities that will improve profitability," said Michael Falcone, MuniMae's chief executive officer. The company can be found online at http://www.munimae.com.

Wauwatosa (Wis.) Savings Bank has announced that it is purchasing Waterstone Mortgage Corp., Pewaukee, Wis.The terms of the deal were not disclosed. Eric J. Egenhoefer will continue as president of Waterstone after the deal is completed, and the mortgage company will continue to operate under that name. Douglas S. Gordon, president and chief operating officer of Wauwatosa Savings, said the combination of the two companies "is a logical integration of mortgage lenders. It provides the ability for both companies to offer products that are unique to each." Besides its offices in Pewaukee, Waterstone has Wisconsin offices in Madison, Lake Geneva, and Sheboygan plus an office in Livonia, Mich. Wauwatosa also has a Pewaukee office, plus offices in Oak Creek, Oconomowoc, and Waukesha.

Santander BanCorp, the San Juan, Puerto Rico, bank whose majority owner is the Spanish bank Banco Santander Central Hispano, has agreed to purchase the Puerto Rican operations of Island Finance, a real estate-secured and consumer lender based in San Juan, from Wells Fargo & Co., San Francisco.Santander will pay $734.5 million in cash for the unit, which had been a part of Wells Fargo Financial, the consumer finance subsidiary of Wells Fargo & Co. Norwest Corp., now part of Wells Fargo, acquired Island Financial from ITT Corp. in May 1995. Wells Fargo is retaining the Island Finance operations in Trinidad & Tobago, Aruba, and the Netherlands Antilles. A new subsidiary, Santander Financial Services Inc., will operate that company's consumer finance and auto loan businesses. The acquired operations will retain the Island Finance brand name. Island Finance is the second-largest consumer lender in Puerto Rico. As of the end of last year, it had $627 million in loan receivables from borrowers on the island.

American Mortgage Network, the San Diego-based wholesaler better known as AmNet, has left the subprime business, according to a source that confirmed published reports.AmNet succumbed to increasing pressures in this line of business, including compressed margins, and felt it could no longer compete with the larger players, the source said. The company, which was started as a conforming wholesaler, entered the subprime business in the first quarter of 2004. Ironically, at the time it entered the business, company chief executive John Robbins said AmNet wanted to be a one-stop shop where its brokers could place all their products. AmNet will still be doing alternative-A mortgage originations as well as home equity loans. According to the company, alt-A loans made up 41% of its volume in November. Subprime, home equity, and second liens totaled 10%. In December, AmNet's parent, AmNet Mortgage Inc., was sold to Wachovia Corp., Charlotte, N.C., which has its own subprime unit, EquiBanc Mortgage Corp. The company can be found online at http://www.amnetmortgage.com.

After months of negotiation, subprime giant Ameriquest Mortgage has agreed to pay $325 million to settle claims with 49 states that the company engaged in abusive lending practices.On Monday Ameriquest's parent company, ACC Capital Holdings of Orange, Calif., promised to change some of its business practices, but without acknowledging any wrongdoing. The settlement covers every state but Virginia because, as one company spokesman put it, "Ameriquest doesn't lend in that state." (Its wholesale affiliate, Argent Mortgage, is not a party to the settlement.) Roughly $295 million of the money will be used to compensate borrowers who feel they were wronged by Ameriquest, with the balance going to repay the states for their legal costs. Attorney Kelly Dermody, who represents Ameriquest borrowers, said the size of the settlement "reflects the enormous scope of wrongdoing underlying Ameriquest's lending practices." Borrowers who lodged complaints against the company and its other retail brands must now decide whether to accept the settlement money or pursue claims through civil court. According to the Quarterly Data Report, Ameriquest and Argent funded about $70 billion in subprime loans combined last year, ranking first among all players in that niche. The privately held ACC took a $325 million hit to earnings last year to cover the settlement. The lender disclosed in a public filing that state attorneys general were concerned about these issues: the "appropriateness" of discount points charged prior to February 2003; the accuracy of appraisal valuations; stated income loans; "oral" statements made to borrowers regarding loan terms; and its policies on funding Native American reservation properties.