Originations

It's not how much marketing you can do, it's doing the right stuff, a marketing expert told mortgage brokers Dec. 7 at the Business Plan 2006 show in Las Vegas.Bill Hillestad, who runs his own consulting firm, added that it is not what marketing technique is being used, it is whether there is an underlying strategy. The key, he said, is that everything is aimed at adding more names to one's database or increasing the pull-through of closed loans. Citing data indicating that most people will seek a new loan every 29 months, Mr. Hillestad said mortgage brokers do not sell loans, they "create opportunities" for their customers, and the goal of being in the opportunity business is to create as many chances as possible to take advantage of those opportunities. He noted that every marketing campaign needs to be evaluated. Brokers need to know how many people are in their database, how much it has grown, the conversion rate resulting in a closed loan, how much it cost to put the name into the database, and how much it cost per closed loan, Mr. Hillestad said. Business Plan 2006 is being put on by LoanToolbox in conjunction with Broker and Origination News.

The average 30-year fixed mortgage rate rose from 6.26% to 6.32% over the seven-day period ended Dec. 8, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate rose from 5.81% to 5.87%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages increased from 5.76% to 5.78%, and the average rate for one-year Treasury-indexed ARMs was unchanged, at 5.16%. 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. "Looking ahead, as mortgage rates rise, housing activity will ease somewhat," said Frank Nothaft, Freddie Mac's chief economist. "So although 2006 will not be another record-setting year, it will likely beat the previous record for home sales and new construction set in 2003." A year ago, the average 30-year and 15-year fixed rates were 5.71% and 5.14%, respectively, and the average one-year ARM rate was 4.15%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

Freddie Mac chief economist Frank Nothaft sees home sales slowing in the fourth quarter as higher mortgage rates take a bite out of housing demand and house prices begin to moderate.House prices have been rising on average at a 14%-16% clip for the past year. But Mr. Nothaft says he expects a single-digit increase in the fourth quarter and a rise in the 7% range next year. He noted that existing-home sales declined by 2.7% in October. "We may see some further retrenchment in homes sales and housing demand in the fourth quarter, and we may very well begin to see a moderation in house price growth," Mr. Nothaft told MortgageWire. The Freddie Mac economist called the recent report by the U.S. Census Bureau that new single-family home sales jumped 13% in October (to a seasonally adjusted annual rate of 1.42 million units) an "aberration." He said he expects the November report to show a sizable decline. "It will probably drop by 200,000 units," Mr. Nothaft said. The 30-year mortgage rate rose 50 basis point in October to 6.25%, and he projects that the 30-year rate will average 6.5% in 2006, which will hurt the refinancing business. His forecast calls for mortgage originations to decline by 14% next year to $2.5 trillion. Mr. Nothaft estimates that his year's originations will total $2.9 trillion -- the second-best year ever.

Ventas Inc., a health care real estate investment trust based in Louisville, Ky., has priced a private offering of $125 million of 6 1/2% notes issued by its operating partnership, Ventas Realty LP, and a wholly owned subsidiary, Ventas Capital Corp.The senior unsecured notes, due 2016, were issued at a price of 99.5% of the principal amount, Ventas reported. The company said it plans to use the net proceeds of the offering, together with borrowings under its revolving credit facility, to repay all the outstanding debt under its commercial mortgage-backed securities loan. The REIT can be found online at http://www.ventasreit.com.

Prime and alternative-A mortgage asset performance will remain stable next year in the United States, but subprime asset performance will decline, according to Fitch Ratings.The refinancing trend is expected to continue, but at a slower pace as rates rise, the rating agency said. The prospect of higher rates on adjustable-rate mortgages will increase the percentage of refis into fixed-rate mortgages, ARMs with longer fixed periods, option ARMs, and 40-year mortgages, Fitch predicts in a report titled "Global Structured Finance: 2006 Outlook and 2005 Review." Noting the "excellent performance" of subprime assets over the past two years, Fitch foresees a dropoff in performance "as higher rates and slower home price growth curtail the cash-out refinancing boom and cause some borrowers to experience payment increases on ARM loans." Delinquencies on subprime assets may rise as much as 10%-15%, but credit enhancement on subprime securities has risen rapidly and "should help protect bonds from the expected decline in loan performance," Fitch declared. The rating agency can be found online at http://www.fitchratings.com.

ResMAE Mortgage Corp., Brea, Calif., has announced the introduction of a 40/30 mortgage loan product that amortizes over 40 years and is due in 30 years.The company said the loan will "provide homeowners with a lower monthly payment without the major increases associated with other loan products" such as interest-only mortgages and payment-option adjustable-rate mortgages. The ResMAE 40/30 loan will offer the lowest possible payment over 30 years and a chance to build equity, the company said. ResMAE can be found on the Web at http://www.resmae.com.

Wells Fargo, Des Moines, Iowa, has announced that it will extend for at least 90 days the payment deferral period for mortgage customers who need assistance as a result of Hurricane Katrina.During the deferral period, Wells Fargo said it will not assess late fees, file negative credit reports, or place collection calls to its customers. The company said one of its biggest challenges is reaching its borrowers, some of whom have left the Gulf Coast region to find work and rebuild their lives. "Wells Fargo is encouraging its customers to contact the company's disaster response teams during this deferral period so that it can begin to serve each customer's individual needs," the company said. Wells Fargo can be found online at http://www.wellsfargo.com.

Kroll Factual Data Inc., a provider of customized mortgage services based in Loveland, Colo., has announced the acquisition of its franchisee D, D & C Inc. (d/b/a Factual Data of the Carolinas) for an undisclosed amount.D, D & C, a franchisee since 1991, provides mortgage credit reports to mortgage brokers, banks, and credit unions in North and South Carolina, Kroll Factual Data said, adding that it was the company's 54th acquisition since 1998. "The acquisition of D, D & C continues our strategy of reacquiring previously licensed territories and competitors, and will further enhance our marketability among national mortgage lenders," said James Donnan, president of Kroll Factual Data. "Charlotte [N.C.] and its surrounding areas are strong banking centers for the United States, and Kroll Factual Data is poised to capitalize on this opportunity." The company can be found online at http://www.krollfactualdata.com.

The Market Composite Index, an overall measure of mortgage applications, rose from 624.1 to 656.7 on a seasonally adjusted basis during the week ended Dec. 2, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications increased 46.8% on the week but were down 6.1% from the level recorded a year earlier. The Purchase Index rose from 476.2 to 495.1 on a seasonally adjusted basis, while the Refinance Index climbed from 1484.3 to 1596.4. The four-week moving average for the Purchase Index rose from 473.0 to 480.4, and the comparable average for the Refinance Index fell from 1642.4 to 1591.8. Refinancings represented 41.0% of total applications, up from 39.1% the previous week, while adjustable-rate mortgages accounted for 33.1%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages increased from 6.20% to 6.32%, and points (including the origination fee) increased from 1.17 to 1.30 for loans with 80% loan-to-value ratios, the MBA reported. The MBA can be found online at http://www.mortgagebankers.org.

Mortgage brokers will have to face some "brutal facts" about the business in the next year, Ownit Mortgage Solutions chairman and chief executive Bill Dallas told attendees Dec. 6 at the Business Plan 2006 meeting in Las Vegas.The challenge is for mortgage brokers to change while their business is still good, according to Mr. Dallas. Comparing mortgage brokers to the boiled frog parable, he said, "I think what's happening to you and me is, we are being boiled alive," explaining that most originators keep doing the same things even as rates rise. It's been a great run, Mr. Dallas said, but "the party is over, [it's time to] go home, but we don't want to leave." Another challenge is that "everyone wants a piece of your pie," including Realtors, builders, and the retail units of mortgage bankers, he said. But the mortgage is a commodity that nobody wants -- what everyone wants 100% of is the "customer's wallet," Mr. Dallas said. To survive, mortgage brokers need to exploit their competitive advantage of being able to "touch and feel" the customer at the point of sale, he said. Business Plan 2006 is being sponsored by LoanToolbox in conjunction with Broker magazine and Origination News.

Moody's Investors Service has placed on review for possible downgrade two classes of notes issued by Global Hotel One Ltd., a synthetic commercial mortgage-backed securities deal sponsored by Germany's Aareal Bank AG.The move affects the A2 rating of the 85 million euro (about $100 million) class B-1 floating-rate credit-linked notes and the A2 rating of the 5 million euro (approximately $5.9 million) class B-2 fixed/floating-rate credit-linked notes in the transaction. Moody's said the rating action "follows the review for potential downgrade of the Aa3 rating of DEPFA Deutsche Pfandbriefbank AG's ('Depfa') senior unsecured debt rating." Depfa's senior unsecured notes serve as collateral for the two affected classes in the deal, according to Moody's. The rating agency can be found online at http://www.moodys.com.

DeepGreen Financial, Cleveland, has announced the introduction of a 30-year fixed-rate home equity loan.The company said the new HELoan, which will be available through its network of wholesale mortgage brokers, is aimed at the growing fixed-rate segment of the home equity market. The product is part of DeepGreen's strategy to expand its product line to meet the demands of the wholesale home equity market, the company said. DeepGreen can be found on the Web at http://www.deepgreenfinancial.com and http://www.dgbroker.com.

Home prices increased at an annualized rate of 12.3% nationwide in the third quarter, down from a revised rate of 15.3% in the second quarter, according to the Conventional Mortgage Home Price Index released by Freddie Mac.The South Atlantic and Mountain states recorded the biggest price increases, with a 19.5% annualized growth rate, Freddie Mac said. The Pacific states experienced the third-highest annualized gains in the third quarter, with a 15.2% growth rate. "The gradual rise in mortgage rates during the third quarter moderated home price gains, compared with the second quarter," said Frank Nothaft, Freddie Mac's chief economist. ".... Home sales and single-family housing starts are still expected to set a new record this year. The devastating effects of hurricanes Katrina, Rita, and Wilma will likely keep overall construction material costs high and add to new construction in the affected region." The index was jointly developed by Freddie Mac and Fannie Mae. Freddie Mac's website address is http://www.freddiemac.com.

KB Home, Los Angeles, and The Shaw Group Inc., Baton Rouge, La., have announced the formation of KB Home/Shaw Louisiana LLC, a joint homebuilding venture aimed at boosting Louisiana's economy in the wake of hurricanes Katrina and Rita.New Orleans native Steve Davis of KB Home will head the joint venture as Gulf Coast region president, overseeing land acquisition and development, construction, purchasing, customer service, sales, and marketing. Representing Shaw in the venture is company vice president David Landers, a Louisiana native. "This is the first new residential construction program to be announced in Louisiana since Hurricane Katrina came ashore," said J. M. Bernhard, Shaw's chairman and chief executive officer. ".... This joint venture is designed to provide desperately needed new homes to stricken areas and will attract a broad demographic range of homeowners, which is vital to the recovery of our state." The companies can be found online at http://www.kbhome.com and http://www.shawgrp.com.

American Home Bank NA, Mountsville, Pa., has announced the opening of a Correspondent Lending Division that will specialize in the construction-to-permanent loan market.The new division, to be headed by senior vice president Brad La Salle, will service national and regional mortgage bankers who need customized CTP loans for borrowers and builders, the bank said. A new automated online platform, ConstructionMac, customizes the draw schedule to a builder's building schedule and "simplifies, streamlines, and accelerates the entire funding process by coordinating the loan structuring, underwriting, closing, and construction servicing into a seamless operation," according to AHB. Mr. La Salle said the division enables lenders "to expand their new home financing business without having to invest in internal CTP processes and training." The bank can be found online at http://www.bankahb.com.

HomeView Lending Inc., Orange County, Calif., has announced the launch of its operations in major California markets to bring what it calls "a new kind of mortgage company" to serve the nonprime, alternative-A, and option ARM markets.HomeView said its aim is to help mortgage originators get more deals done quickly and efficiently. The company said it plans to expand across the country in the coming months. "Brokers and homeowners are looking for fast, no-hassle ways to close nonprime and alt-A loans," said Kal Elsayed, HomeView's president and chief executive officer. Mr. Elsayed was previously president of the Wholesale Division of New Century Mortgage Corp.

Bresler & Reiner Inc., Washington, has announced the completion of a $40 million private placement of 30-year trust preferred securities through a newly created subsidiary, Bresler & Reiner Statutory Trust I.The proceeds of the private placement will be used to repay debt with less favorable terms and provide added liquidity for future investments, the company said. The securities bear interest at 8.37% for the first five years, and thereafter at the three-month London interbank offered rate plus 3.50%. They are redeemable at par beginning in January 2011. Bresler & Reiner, which owns and develops commercial and residential properties, can be found online at http://www.breslerandreiner.com.

Genworth Financial, Richmond, Va., has reported the pricing of General Electric's secondary public offering of 38 million class A shares of Genworth's common stock at $34.66 per share.Genworth, whose mortgage insurance subsidiary is headquartered in Raleigh, N.C., said GE would own approximately 18% of Genworth's common stock if the underwriter's overallotment option to buy up to 2.85 million additional shares is exercised. (The sole underwriter of the offering is Morgan Stanley & Co.) Genworth said it will not receive any proceeds from the transaction. The company noted that GE has indicated its intention to sell its remaining holdings in Genworth by the end of next year. Genworth can be found online at http://www.genworth.com.

Equity One Inc., Marlton, N.J., has announced the introduction of 40-year fixed- and adjustable-rate mortgage products and a 40/30 ARM, citing market needs for longer amortization terms and lower monthly payments.The 40-year ARM begins with a lower monthly payment for two or five years, after which payments adjust every six months. The 40/30 ARM has similar features, with a balloon payment due at year 30. Bill Williams, president and chief executive officer of Equity One's parent company, Popular Financial Holdings Inc., said the new products will help first-time homebuyers buy the house they want in the face of rising home prices. "These products also provide a good alternative for those customers who may otherwise consider an interest-only product as a way to keep their monthly payments low, because in addition to low monthly payments, our 40-year products allow customers to build equity in their homes," he said. The parent company can be found online at http://www.popularinc.com.

Real estate investor Russel S. Bernard has announced the formation of Westport Capital Partners LLC, a firm that will specialize in opportunistic real estate investments.Mr. Bernard, 47, was most recently the real estate group portfolio manager at Oaktree Capital Management LLC. Before that, he was a managing director and portfolio manager of The Distressed Mortgage Fund at Trust Company of the West. Westport will be geared to institutional and private clients.