Originations

LandAmerica Financial Group Inc., Richmond, Va., has reported an agreement with the Arizona Department of Insurance under which it will resolve disagreements over captive reinsurance transactions by voluntarily contributing $1 million to relief efforts related to Hurricane Katrina.LandAmerica said the "discussions over the propriety and legality" of such arrangements had been resolved "cooperatively and creatively" because the department agreed that no Arizona consumer had paid more for title insurance under captive reinsurance transactions. "We especially appreciate the willingness of the Arizona DOI to seek a creative resolution to our discussions and are grateful for this novel approach in a time of crisis for so many," said Theodore L. Chandler Jr., LandMark's president and chief executive officer. The $1 million will be given to Arizona chapters of the American Red Cross to benefit Arizona citizens and the hurricane victims recently evacuated to Arizona.

Delta Financial Corp., a Woodbury, N.Y.-based company that originates, securitizes, and sells nonconforming residential mortgage loans, has announced a $350 million committed warehouse line of credit from Bank of America.Delta said the additional LOC brings its total funding capacity to $1.25 billion through four financing providers. Hugh Miller, Delta's president and chief executive officer, said Delta expects to achieve at least 25% growth in loan origination volume from the $2.6 billion recorded in 2004. The company can be found on the Web at http://www.deltafinancial.com.

The senior debt rating of Doral Financial Corp., a San Juan, Puerto Rico-based mortgage lender, has been downgraded from Baa3 to Ba1 by Moody's Investors Service.Doral's subordinated debt was downgraded from Ba1 to Ba2, and the ratings remain on review for further possible downgrade. The actions "reflect concerns about the credit implications of the ongoing delay in filing financial statements, the uncertainty surrounding the board's recent investigation, as well as concerns about corporate governance issues, litigation exposure, and regulatory scrutiny," Moody's said. The rating agency pointed to corporate governance failures at Doral, notably in risk management, accounting practices, and board oversight. "The decision to remove some of the key management members, including the [chief executive officer, chief financial officer], and treasurer, raises some concerns about the extent of internal control failures," Moody's said.

American Financial Realty Trust, a real estate investment trust based in Jenkintown, Pa., has announced an alliance with Chicago-based Bank Property Advisors LLC to promote a new program designed to help community banks manage real estate assets.Under the alliance with BPA, which customizes sale leaseback arrangements for community banks and thrifts, American Financial said it intends to expand its bank branch holdings leased to community banks. "We have helped many of the nation's largest financial institutions and are now extending, through this program, the same opportunity to the nation's community banks the ability to improve operations by redeploying capital that otherwise would be tied up in real estate." American Financial can be found on the Web at http://www.afrt.com.

The average 30-year fixed mortgage rate was unchanged at 5.71% over the seven-day period ended Sept. 8, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate decreased from 5.32% to 5.30%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages fell from 5.30% to 5.24%, and the average rate for one-year Treasury-indexed ARMs declined from 4.48% to 4.45%. Fees and points averaged 0.6 of a point for fixed-rate mortgages and hybrid ARMs and 0.7 of a point for one-year ARMs. "We expect that near-term growth will now be a bit weaker than had been anticipated, due in very large part to the disruption in economic activity brought on by Katrina last week," said Frank Nothaft, Freddie Mac's chief economist. "However, the federal monies that will flow into the damaged areas and the lower interest rates brought on by the disaster will stimulate economic growth next year, making up for the slowdown in the last part of this year." A year ago, the average 30-year and 15-year fixed rates were 5.83% and 5.22%, 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.

A survey of subprime lenders and their consumer protection practices by the New Mexico attorney general could result in litigation, according to the state's chief deputy attorney general, Stuart Bluestone.Mr. Bluestone said state Attorney General Patricia Madrid is still evaluating the responses received from lenders and that the AG is not prepared to announce any initiatives. "Whether there will be additional legislation proposed or other litigation that is necessary is still on the table and remains to be decided," he said. In July, the New Mexico AG sent letters to nearly 160 subprime lenders nationwide to see if the industry has adopted the consumer protections spelled out in a 2002 settlement with Household Finance International. Mr. Bluestone made his remarks during a news conference in which several state officials and Rep. Brad Miller, D-N.C., attacked a predatory lending bill sponsored by Reps. Bob Ney, R-Ohio, and Paul Kanjorski, D-Pa., and supported by the subprime lenders. The Ney-Kanjorski bill would pre-empt New Mexico's predatory lending law, Mr. Bluestone said. "That bill would gut our new, effective law, install in its place a weak federal standard, and prevent us from adequately protecting our residents from lending abuses," he declared.

Mortgage Assistance Center Corp., Dallas, has announced the acquisition of 100% of the capital stock of Mortgage Assistance Corp. in a reverse merger transaction.The transaction, which took effect Aug. 22, included the issuance of approximately 11 million shares of MACC common stock to three shareholders of Mortgage Assistance Corp. who currently own 87.1% of the company's stock. Mortgage Assistance Corp. is a specialty financial acquisitions company that buys nonperforming mortgage promissory notes at a discount and then re-performs, manages, and resells the notes or the underlying real estate to unaffiliated investors. Dale J. Hensel, president and chief executive officer of MACC, said his company "sees great opportunity in the nonconforming and subprime mortgage assets that have become problems for mortgage bankers, commercial banks, and other financial institutions. As more traditional financial institutions have moved aggressively into subprime mortgage lending in recent years, they are inevitably discovering nonperforming loans, delinquencies, and foreclosed properties in their loan portfolios that do not meet regulatory standards or the requirements for securitization." MACC can be found online at http://www.mac-tx.com.

Occupancy fraud -- misrepresentation about whether a borrower plans to live at a property -- was the most common type of mortgage fraud reported during the first half of 2005 and was involved in nearly 53% of claims, according to The Prieston Group, San Rafael, Calif.Prieston, a provider of fraud insurance, training, and loss mitigation, reported that schemes involving hidden debt were the next most common type of mortgage fraud, implicated in 31.6% of claims. Employment fraud was involved in 30.3% of claims, and "straw borrowers" were involved in 12.9%, the company said. "Although occupancy fraud was the most commonly reported type of fraud during the first half of this year, we often find that claims contain multiple types of fraud and involve multiple people," said company chairman Arthur Prieston. "Recognizing all the fraud in a particular file is essential in identifying fraud schemes." Prieston can be found online at http://www.priestongroup.com.

Home prices rose 13.2% nationwide over the 12 months ended June 30, up from 10.0% in the comparable period a year earlier, according to Freddie Mac.In the second quarter alone prices rose 3.6%, for an annualized rate of 15.0%, Freddie Mac reported in releasing its quarterly Conventional Mortgage Home Price Index. "Home sales and housing starts are still expected to set a new record this year," said Frank Nothaft, Freddie Mac's chief economist. "The devastating effects of Hurricane Katrina will likely drive up costs of construction materials once the rebuilding effort gets under way and may slow deliveries of new homes in other areas of the country as resources are reallocated to Louisiana, Mississippi, and other areas affected by the storm." The index showed that, for the ninth quarter in a row, the Pacific states recorded the largest gains in home prices, which rose 21.1% for the 12-month period. The index was jointly developed by Freddie Mac and Fannie Mae. Freddie Mac can be found online at http://www.freddiemac.com.

The Market Composite Index, an overall measure of mortgage applications, rose from 722.5 to 771.6 on a seasonally adjusted basis during the week ended Sept. 2, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications increased 5.4% on the week, and were up 11.8% from the level recorded a year earlier. The Purchase Index rose from 470.6 to 499.1 on a seasonally adjusted basis, while the Refinance Index climbed from 2187.8 to 2357.1. The four-week moving average for the Purchase Index rose 0.1%, from 489.3 to 489.4, and the comparable average for the Refinance Index rose 1.9%, from 2240.9 to 2284.6. Refinancings represented 44.8% of total applications, up from 43.8% the previous week, while adjustable-rate mortgages accounted for 26.5%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages decreased from 5.73% to 5.64%, and points (including the origination fee) decreased from 1.21 to 1.13 for loans with 80% loan-to-value ratios, the MBA reported. The MBA can be found online at http://www.mortgagebankers.org.

The economic disruption caused by Hurricane Katrina could put a lid on mortgage rates and prolong the life of the housing boom, according to the chief economist for National City Corp."It is likely to extend the longevity of what otherwise seemed like a five-year housing boom that was nearing its end," chief economist Richard DeKaser told MortgageWire. He said he expects mortgage rates to stay below 6% until December if the Federal Reserve does not raise the federal funds rate at its Sept. 20 meeting. "We are likely to see some delay in the Fed's tightening efforts," he said. National City, based in Cleveland, is a major mortgage lender. Meanwhile, Business Roundtable chairman Hank McKinnell told reporters that the economic impact of Katrina could be more severe than that of other disasters because of its effect on oil prices. New Orleans is a major refining and distribution center for oil, gasoline, and natural gas. "The difference with Katrina, of course, is the impact on energy supplies," Mr. McKinnell said.

Citing damage caused by Hurricane Katrina, Capital One Financial, McLean, Va., has shaved $300 million (9%) off the price it will pay for Hibernia Corp., New Orleans, one of the largest residential lenders in Louisiana.Capital One, a credit card company, will now pay $5 billion for Hibernia, which ranks 89th nationwide among all mortgage lenders, according to figures compiled by the Quarterly Data Report. The two companies conducted diligence on the damage sustained by Hibernia, reviewing the effect on its retail branches, the bank's headquarters building in New Orleans, its loan portfolio, and its future business prospects. Hibernia said 107 of its 321 locations were "impacted" by the hurricane. Some 60 branches have yet to reopen, 21 of which have sustained significant damage. Directors at both companies approved the reduced purchase price, saying it was in the best interest of shareholders.

United Financial Mortgage Corp., Oak Brook, Ill., a fast growing, publicly traded lender, has agreed to sell its business to the Airlie Group, a private investment fund based in Greenwich, Conn.Airlie affiliates ARH Mortgage and Airlie Opportunity Master Fund have agreed to pay $5.64 a share for UFMC, a 30% premium from its share price when the market closed Sept. 2. National Mortgage News broke the news in its Sept. 5 issue that Airlie was talking to UFMC about a deal. For its fiscal year ending April 30, UFMC funded $2.7 billion in loans. It has 50 branch offices, compared with 35 a year ago. Founded almost 20 years ago, UFMC has a $1.7 billion mortgage servicing portfolio and $258 million in assets, according to documents filed with the Securities and Exchange Commission. (See NMN for more details.) UFMC can be found online at http://www.ufmc.com.

Three classes of mezzanine and subordinated tranches from two mortgage-backed securitizations issued by Credit Suisse First Boston Mortgage Securities Corp. have been placed under review for possible downgrade by Moody's Investors Service.The affected securities are class B of series 2002-HE1 and classes M-F-2 and B-F of series 2002-HE4. In addition, Moody's placed three tranches from three CSFB mortgage-backed deals under review for possible upgrade. The negative actions were based on the fact that the bonds' credit enhancement levels (including excess spread) are low compared with projected losses for the current rating level, the rating agency said. The pools are subprime first-lien adjustable-rate and fixed-rate loans.

The ratings of 20 classes from five commercial mortgage-backed transactions have been placed on review for possible downgrade by Moody's Investors Service due to concerns related to Hurricane Katrina.The affected classes are as follows: Asset Securitization Corp., series 1996-MD VI, class A-6; Bear Stearns Commercial Mortgage Securities Trust, series 2002-TOP6, classes E through H and J through M; Entertainment Properties Trust, series 2003-EPR, classes D through F; GE Commercial Mortgage Corp., series 2004-C3, classes SHP-1 through SHP-4; and Wachovia Bank Commercial Mortgage Trust, series 2004-WHALE 4, classes H, J, K, and RC. The classes are all rake classes (those supported entirely by a single asset) or pooled classes in which a significant portion of the supporting collateral is located in affected areas, the rating agency said. Moody's said its review will focus on the extent of property damage, the adequacy of insurance, the potential effect of sale or refinancing issues on loans maturing soon, and the mitigation of potential losses by cross-collateralization with loans outside the affected areas. Moody's can be found online at http://www.moodys.com.

PMI Mortgage Insurance Co., Walnut Creek, Calif., has announced that it will provide disaster relief for borrowers victimized by Hurricane Katrina in the form of forbearance, contributions, and matching support for employee donations.PMI said it will work with lenders and borrowers in declared federal disaster areas to avoid mortgage delinquencies and foreclosures. "PMI recognizes the same payment relief options offered by Fannie Mae and Freddie Mac, such as suspending or reducing mortgage payments, waiving late fees, and not reporting delinquencies caused by the disaster to credit bureaus," the company said. In addition, the PMI Foundation will donate $50,000 to the American Red Cross for disaster relief, PMI said. PMI's parent company, The PMI Group Inc., can be found online at http://www.pmigroup.com.

Mortgage companies continued to add new full-time employees to their payrolls in July, bringing the total of new hires over the past 12 months to 45,100.Lenders hired 4,800 new employees in July, according to the August employment report released by the U.S. Bureau of Labor Statistics, as jobs in the mortgage banking/broker sector rose from 517,100 in June to 521,900 in July. (There is a one-month lag in BLS reporting of mortgage sector employment data. The August data will be released Oct. 7.) Employment has been steadily rising over the past 12 months, and record home sales, along with a high level of refinancings, could make 2005 the second-best year ever for originations. Jay Brinkmann, financial economist for the Mortgager Bankers Association, pointed out that purchase-mortgage transactions are more labor intensive than refinancings, placing more demands on loan officers and back-office personnel. He also noted that heavy subprime volumes could be prompting more hires. Meanwhile, the U.S. economy generated 169,000 new jobs in August and the unemployment rate edged down to 4.9% from 5.0% in July. BLS economists also revised the July jobs number upward from 207,000 to 242,000 in the Sept. 2 report. The BLS can be found online at http://stats.bls.gov.

Class J of Morgan Stanley Capital I Inc.'s commercial mortgage pass-through certificates, series 1998-XL1, has been downgraded from B-plus to CCC by Fitch Ratings.In addition, Fitch upgraded three classes in the deal and affirmed the ratings on seven. The downgrade was attributed to the continuing decline in the performance of the Charlestowne Mall in Illinois. The certificates are collateralized by seven mortgage loans (68.3% of the pool) and government securities that support the defeasance of two of the original loans (31.7%), the Del Coronado Hotel and the Magellan Pool. With the exception of the Charlestowne Mall, all loans are performing at or above expectations at issuance, Fitch reported.

The Eleventh Federal Home Loan District Cost of Funds Index rose in July to its highest point since 2002, according to the Federal Home Loan Bank of San Francisco.The index climbed to 2.757% from 2.676% in June, according to the FHLBank. COFI last reached a high close to July's in September 2002, when it stood at 2.759%. The index declined between that month and May 2004, when it hit a low of 1.708% before beginning to rise. COFI lags the current interest rate environment by as much as six months. The FHLBank of San Francisco can be found on the Web at http://www.fhlbsf.com.

Chief financial officers are more worried than at any time in the past four years about the U.S. economy and fear the consequences of a housing market downturn, according to the September Duke University/CFO Magazine Business Outlook survey.For the first time in the four years that the survey has measure corporate optimism, there are more CFOs with growing pessimism about the U.S. economy than with growing optimism, Duke reported. Nearly 37% of CFOs were more pessimistic about the economy than they were in the previous quarter, while 28.6% were more optimistic. The chief fears were rising fuel and health care costs. "This is the greatest increase in pessimism that we have seen," said Don Durfee, research editor of CFO magazine. "We've found that this optimism index predicts future economic growth quite well." Regarding housing, more than two-thirds of the CFO respondents said they believe that a housing market correction would harm their firms, and nearly 28% said it would hurt them moderately or greatly, Duke said. The survey can be found online at http://www.cfosurvey.org.