Originations

Concern is rising at the Federal Reserve Board over how Hurricane Katrina could affect the economy, Doug Duncan, the Mortgage Bankers Association's chief economist, said Sept. 23 at the 18th Annual New England Mortgage Banking Conference."How are consumers going to react to $5-a-gallon gas? How will it lead through into the economy?" Mr. Duncan asked during the closing session of the conference in Providence, R.I. ".... In the last 25 years, we've become more fuel-efficient than we used to be, but the economy has grown tremendously. Homeowners use more energy than ever before. It will have an impact on household budgets on the consumption side." Mr. Duncan said he sees interest rates rising more aggressively, up to 6.5% in mid-2006. House prices will continue to rise, but not nearly as fast, Mr. Duncan added. "There are certain hotspots and markets that are troubling, but it's not a national issue," he said.

Existing-home sales increased 2% in August to a seasonally adjusted annual rate of 7.29 million units, the second-best reading ever by the industry.According to new figures compiled by the National Association of Realtors, the median home price in the United States increased 15.8%, to $220,000, from that of a year earlier. (The 2% increase in sales reflects activity from July to August.) "Clearly, reports of the housing market's demise have been greatly exaggerated," said Greenwich Capital analyst Todd Miller. However, the inventory of existing homes for sale rose 3.5%. Mr. Miller said the "uptick" in inventory is a sign that homeowners are "willing to test the waters, which should help to, at the margin, keep a lid on the uptrend in prices going forward." NAR chief economist David Lereah said, "With a general background of growing population and favorable affordability conditions, homes sales are staying at very healthy levels." The NAR can be found online at http://www.realtor.org.

Fannie Mae and the California Association of Realtors have teamed up to launch the CAR Employer Assisted Housing Program, which is designed to increase affordable homeownership opportunities for California's work force.The initiative will use EAH benefit plans to offer access to homebuying workshops provided by participating real estate professionals and to financial benefits such as loans or grants to fund downpayments, closing costs, or interest-rate buydowns. "Homeownership is key to stabilizing communities and increasing economic opportunities, and we want to encourage businesses to invest in their employees by offering housing benefits," said Carl San Miguel, chair of CAR's Housing Affordability Fund. Fannie Mae will provide free tools to employers to help them design an EAH plan that fits their business needs. Participating lenders, including CitiMortgage, GMAC, and Washington Mutual, will offer low-cost financing options.

Subprime giant New Century Financial Corp., Irvine, Calif., trimmed its earnings forecast for the year on Friday, its share price falling at least 7% to a new 52-week low.New Century, the nation's second-largest subprime lender, revised downward its earnings-per-share guidance from a range of $8.25-$9.00 to $7.25-$7.75. The company cited continued margin compression in its subprime residential business as the chief reason for the lower earnings projections. It also said the revised guidance does not reflect the impact of potential weather-related losses in the Gulf Coast region, which it said "could be significant." A few weeks ago, New Century closed its commercial mortgage business without explanation.

Home price appreciation will moderate next year in California, and home sales will decline slightly from this year's record pace, according to the California Association of Realtors.In its 2006 Housing Market Forecast released at the CAR Centennial Realtor Expo in San Diego, CAR predicted that the median home price in California will rise 10% next year to $575,500. (This year's projected median home price is $523,150.) The forecast calls for sales of 630,610 units, which would be a 2% decline from this year's projected total, the association said. "We expect the fixed mortgage interest rate to rise to 6.4% next year, and the adjustable rate to hit 5.1%, which will make it more difficult for many families in California to be able to afford a home," said CAR president Jim Hamilton. "While still near their historic lows, upticks in interest rates coupled with the continued increase in the median home price will push affordability in California to a new all-time annual low of 15% next year." The association can be found online at http://www.car.org.

Representatives of the New York State Banking Department were on the defensive Sept. 22 when members of the New York Association of Mortgage Brokers questioned them about a proposed education requirement at the group's convention in Saratoga Springs, N.Y.Barbara Kent, the department's director of consumer services and financial products, told the general session that no one thinks it is a bad idea to provide education, but that the banking department is in a tough position because it is trying to cut its budget by 10%. This would be difficult if the department were adding the administrative costs of an education program, Ms. Kent explained. The department is not against education, she said, but it has to be done in such a way that it "does not get bogged down" and has real significance. Kenneth Bielemeier, deputy superintendent of the department's mortgage banking division, added that the department's educational thrust has been aimed at consumers, not the industry. He noted that the department does bring in new brokers for a half-day meeting where the department explains what it expects from them.

Lenders who do 50 or more loans in Massachusetts will soon be subject to fair-lending examinations, according to Bonita Irving, senior deputy commissioner for compliance and community affairs at the Massachusetts Division of Banks.Ms. Irving, a member of the state regulators' panel at the 18th Annual New England Mortgage Banking Conference in Providence, R.I., said any derogatory results from those exams will have a direct impact on an institution's overall compliance rating. "While there has been no identification of trends yet, recently we found people did not respond within certain time frames or provide information in the format we requested," Ms. Irving said. "Rather than request information specific for Massachusetts, we will ask for all [Home Mortgage Disclosure Act] data, and we'll break it out ourselves." Mary Jurta, director of the New Hampshire Banking Department's consumer credit division, is part of a working group that is pursuing a national mortgage licensing system. "Fingerprints will be a critical part," Ms. Jurta told the panel. "The system will make the renewal process much easier.... A lot of it will require statutory changes." The conference was hosted by the Massachusetts Mortgage Bankers Association.

The average 30-year fixed mortgage rate rose from 5.74% to 5.80% over the seven-day period ended Sept. 22, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate increased from 5.32% to 5.37%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages rose from 5.26% to 5.31%, and the average rate for one-year Treasury-indexed ARMs climbed from 4.46% to 4.48%. Fees and points averaged 0.6 of a point for 30-year fixed-rate mortgages, 0.7 of a point for 15-year FRMs and one-year ARMs, and 0.8 of a point for hybrid ARMs. "Mortgage rates look like they are back on track where the Fed wants them, which is gradually rising," said Frank Nothaft, Freddie Mac's chief economist. "Freddie Mac's economic forecast calls for a cooling of the housing market going into next year, and gently rising rates are part of that scenario." A year ago, the average 30-year and 15-year fixed rates were 5.70% and 5.10%, respectively, and the average one-year ARM rate was 4.00%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

Alexandria Real Estate Equities, a real estate investment trust based in Pasadena, Calif., has announced plans to offer 1.2 million shares of common stock.The office/laboratory REIT said the expected proceeds of approximately $97.2 million will be used to reduce the balance on its $500 million unsecured line of credit and for general corporate purposes. A.G. Edwards & Sons Inc. is the sole book-running manager for the offering. The REIT has granted the underwriter an option to buy up to 180,000 additional shares to cover any overallotments.

Richard Caldwell has been named executive vice president and chief lending officer at California Savings Bank's San Francisco office as part of the bank's expansion of commercial real estate lending in Northern California.The San Francisco-based bank said it now has three commercial lending offices serving Northern California: San Francisco, Walnut Creek, and Sacramento. Patricia Theophilus, EVP and chief credit officer, said the bank now has a commercial loan pipeline of over $300 million. Mr. Caldwell, who was previously a principal at Buchanan Street Partners, a regional mortgage bank and fund manager, said California Savings plans to "move quickly to meet rising demand in the region for land loans, ground-up construction, value-added bridge financing, and permanent loans across a broad range of commercial property types, including multifamily, retail, hospitality, R&D, office, industrial, and single-family residential tracts." Mr. Caldwell has also held positions at GMAC Commercial Mortgage and Merrill Lynch Capital.

Freddie Mac is providing additional services to credit unions under a newly restructured alliance with the Credit Union National Association.Under the new agreement, Freddie will provide a special account management team for CUs and it will provide secondary-market execution for single-loan transactions. "Other advantages include implementation and transaction fee discounts for Web-based Mortgagebot with the Loan Prospector business-to-consumer website," Freddie and CUNA said. Mortgagebot is a Web-based loan origination portal. CUNA first entered into an alliance with Freddie in 2002. CUNA senior vice president Wes Miller said the alliance provides CUs with much-needed flexibility to originate mortgages. "Through Freddie Mac, credit unions will have affordable lending solutions to meet the needs of low- and moderate income borrowers," he said.

The Market Composite Index, an overall measure of mortgage applications, rose from 760.6 to 772.2 on a seasonally adjusted basis during the week ended Sept. 16, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications increased 11.9% on the week, and were up 12.0% from the level recorded a year earlier. The Purchase Index fell from 513.4 to 500.3 on a seasonally adjusted basis, while the Refinance Index climbed from 2198.7 to 2353.7. The four-week moving average for the Purchase Index rose 0.6%, from 492.9 to 495.9, and the comparable average for the Refinance Index rose 0.4%, from 2264.4 to 2274.3. Refinancings represented 45.6% of total applications, up from 42.9% the previous week, while adjustable-rate mortgages accounted for 29.8%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages increased from 5.72% to 5.81%, and points (including the origination fee) increased from 1.18 to 1.21 for loans with 80% loan-to-value ratios, the MBA reported. The MBA can be found online at http://www.mortgagebankers.org.

Lehman Brothers has decided to merge its two subprime wholesale divisions -- BNC Mortgage and Finance America, both of Irvine, Calif. -- leaving BNC as the surviving brand.A source close to the situation confirmed to MortgageWire that the merger is well under way and that BNC instituted a 3% reduction in force on Tuesday. (MW broke the news Tuesday about the merger.) The combination of the two lenders creates the nation's ninth-largest subprime lender, according to figures compiled by the Quarterly Data Report. Back in May, Lehman Brothers fired several top executives at Finance America. It then named Kelly Monahan, president of BNC Mortgage, to manage both FA and BNC. Mr. Monahan will remain in charge of the newly merged company. (For full details, see the Sept. 26 issue of National Mortgage News.)

The Federal Open Market Committee has raised its target for the federal funds rate by 25 basis points to 3.75%, indicating that while Hurricane Katrina has "increased uncertainty," its effects "do not pose a more persistent threat" to the economy.According to RBS Greenwich Capital chief economist Stephen Stanley, "the FOMC is taking the position that the energy price spike" resulting from the hurricane "will either be strictly temporary, or, if it persists, that it will not be enough to substantially dampen economic growth for more than the 'near term'." The FOMC is the monetary policy arm of the Federal Reserve Board. The Fed can be found online at http://www.federalreserve.gov.

Mack-Cali Realty Corp., a Cranford, N.J.-based office real estate investment trust, has announced a revision of the unsecured revolving credit facility of its operating partnership, Mack-Cali Realty LP, with a syndicate of 23 banks.The $600 million facility, which is expandable to $800 million, has been extended for an additional two years and now matures in November 2009. The facility fee was reduced by 5 basis points, to 15 bps. Mack-Cali said the fee and the interest rate (currently 65 bps above the London interbank offered rate) are subject to adjustment, on a sliding scale, based on the partnership's unsecured debt ratings. The lending group was arranged by J.P. Morgan Chase, as administrative agent, and Bank of America NA as syndication agent. Mack-Cali can be found on the Internet at http://www.mack-cali.com.

The BBB-minus senior unsecured debt rating of CapitalSource Inc., Chevy Chase, Md., has been placed on Rating Watch Negative by Fitch Ratings in the wake of its announcement that it intends to convert into a real estate investment trust.The rating agency said CapitalSource's planned REIT conversion is driven by management's desire to lower the company's cost of capital and improve the efficiency of its equity. "While converting to a REIT is generally viewed as a credit negative for bondholders, in CapitalSource's case there are come offsets, specifically the revised loan-loss reserve policy, which makes this more of a credit neutral," Fitch said. "The Rating Watch action is driven by Fitch's concern regarding the execution of CapitalSource's REIT conversion, including the impact of paying a quarterly dividend and what, if any, changes will result in the company's business to support the dividend in connection with a higher level of common equity outstanding." Fitch can be found online at http://www.fitchratings.com.

Integrity Mortgage Corp., St. Louis, has changed its name to American Equity Mortgage, which acquired the company in 2004.The name change will affect Integrity's seven branches in Ohio, Kentucky, and Indiana. "With the majority of our branches operating under the same name, we can fully leverage the effectiveness and buying power of national advertising, public relations, and community relations programs," said Deanna Daughhetee Vinson, president and chief executive officer of American Equity Mortgage. American Equity Mortgage specializes in debt consolidation, using home equity to combine all bills into one monthly payment. The company can be found online at http://www.americanequity.com.

Most executives in the commercial real estate industry expect the booming market to cool off next year, according to a survey by DLA Piper Rudnick Gray Cary US LLP, an international law firm.The firm said 70% of the 258 top CRE executives who responded to the survey expect the market to flatten out in 2006, while 27% say they expect a continued boom. Few foresee a crunch. "It is both surprising and encouraging that only 3% of industry executives surveyed expect a market downturn in the next 12 months," said Jay Epstien, chair of DLA Piper's U.S. real estate practice. "At the same time, however, the survey yielded a nearly equal amount of bulls and bears, so a feeling of 'cautious optimism' fueled by continued confidence in the strength of the U.S. economy is clearly the common thread among senior real estate executives." The survey results were released in conjunction with the firm's 2005 Global Real Estate Summit in Chicago. DLA Piper can be found online at http://www.dlapiper.com.

The Dallas-based Centex Corp. has sold its United Kingdom homebuilding operations and is "exploring strategic alternatives" -- including a possible sale -- for its U.S. subprime home equity group.The company said the sale of its U.K.-based Fairclough Homes unit to The Miller Group, a U.K. housing, property development, and construction company, will result in estimated net proceeds to Centex (after projected foreign and domestic taxes) of about $290 million. Regarding the exploration of strategic options for its subprime home equity group, Centex Home Equity Co., Centex said it has retained Goldman Sachs & Co. to assist in that task and noted that, "There can be no assurance that this initiative will result in a CHEC transaction."

Single-family housing starts held steady in August even though builders are becoming more cautious about the outlook for sales over the next six months.The U.S. Census Bureau reported that single-family starts remained largely unchanged, at a seasonally adjusted annual rate of 1.71 million, from July to August. The August rate is 1.2% above the rate in August 2004. A National Association of Home Builders monthly survey shows that builder expectations of home sales dropped eight points, to 69, in September. NAHB chief economist David Seiders noted that the survey reveals builder concerns about the impact of Hurricane Katrina and higher interest rates, as well as buyer resistance to housing prices, which have been rising at double-digit rates. Even though builder confidence remains relatively high, the "results show that builders are cognizant of the anticipated signs of slowing housing activity in certain areas," Mr. Seiders said.