Originations

Midlantic Office Trust, Rockville, Md., has decided not to proceed with a previously announced initial public offering, and therefore a proposed acquisition of certain properties from Bresler & Reiner Inc., Washington, will not occur, according to Bresler & Reiner.In its notification, Midlantic cited general market conditions as the reason for its decision, Bresler & Reiner said. Sidney M. Bresler, who had indicated his intention to resign as chief executive officer of Bresler & Reiner to take a similar post at Midlantic, will remain in his current position, the company said. Bresler & Reiner also announced the appointment of Robert O. Moore as its chief financial officer. Mr. Moore was most recently CFO of The Deltona Corp., a developer of planned residential communities. Bresler & Reiner can be found online at http://www.breslerandreiner.com.

Seven subprime mortgage lenders have voluntarily responded to a state attorney general's request for information about their practices and procedures for protecting borrowers from abusive lending.New Mexico Attorney General Patricia Madrid sent letters to nearly 160 subprime lenders nationwide in July to see if they have adopted consumer protection standards spelled out in a 2002 settlement with Household Finance International. "The information I have requested will help us determine if these consumer protection standards are being followed by the other members of the subprime lending industry," she said. So far, the AG's office has received seven written responses and numerous phone calls from companies that plan to send written responses, according to spokeswoman Sam Thompson. While the July letter indicated an Aug. 22 deadline, Ms. Thompson said responses will be appreciated even if they are late. Attorney General Madrid is vice chair of the subprime lending working group of the National Association of Attorneys General. However, the spokeswoman explained that Ms. Madrid is soliciting the best-practices information on her own initiative, not the NAAG's.

The average 30-year fixed mortgage rate fell from 5.89% to 5.80% over the seven-day period ended Aug. 18, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate decreased from 5.47% to 5.40%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages fell from 5.40% to 5.34%, and the average rate for one-year Treasury-indexed ARMs climbed from 4.57% to 4.58%. Fees and points averaged 0.5 of a point for fixed-rate mortgages, 0.6 of a point for hybrid ARMs, and 0.7 of a point for one-year ARMs. "Mortgage rates can fluctuate from week to week depending on market conditions and expectations," said Frank Nothaft, Freddie Mac's chief economist. "That is probably what happened this week. Although economic indicators of late have been positive, they were not quite what the market had been expecting." A year ago, the average 30-year and 15-year fixed rates were 5.81% and 5.19%, respectively, and the average one-year ARM rate was 4.01%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

Class B of First Union HEL mortgage pass-through certificates, series 1997-3, has been downgraded from BB to B by Fitch Ratings.The downgrade reflects the fact that poor collateral performance has reduced credit enhancement in the form of overcollateralization, the rating agency said. The transaction consists of 15-year fixed-rate mortgages extended to subprime borrowers. "Over the last six months, the monthly average in realized losses (after the application of excess interest) is approximately $75,000," Fitch said. "The high percentage of loans more than 60 days delinquent (approximately 25% of the current pool) suggests continued poor performance." The rating agency can be found on the Web at http://www.fitchratings.com.

Public Storage Inc., Glendale, Calif., has priced a public offering of 8.0 million depositary shares, each of which represents one-thousandth of a share of 6.45% series F cumulative preferred stock, at $25 per share.The real estate investment trust said gross proceeds are expected to total $200 million. The co-lead underwriters for the offering are Merrill Lynch & Co. and Morgan Stanley. Public Storage also announced that it has retained Goldman, Sachs & Co. as a financial adviser in connection with its previously announced proposal to acquire Seattle-based Shurgard Storage Centers, another self-storage REIT. The REIT can be found on the Web at http://www.publicstorage.com.

Reckson Associates Realty Corp., Melville, N.Y., has announced a planned initial public offering of approximately $202 million worth of units in a newly formed Australian property trust that it says will enable it to focus on "operating locally and financing globally."Reckson NYPT, a listed property trust, will be managed by Reckson Australia Management Ltd., which is wholly owned by Reckson Operating Partnership. The LPT structure will enable Reckson Associates, a real estate investment trust, to "get deeper into our New York tri-state area office markets to enhance our competitive advantage, while sourcing capital globally," according to Scott Rechler, Reckson's president and chief executive officer. Mr. Rechler said Reckson NYPT is the first Australian LPT to focus on U.S. suburban office properties. The offer document was filed with the Australian Securities and Investments Commission, and the transaction is expected to close Sept. 26, the company said. Reckson Associates can be found online at http://www.reckson.com.

MortgageBrokers.com Holdings Inc., a New York-based mortgage brokerage consolidator, has announced limited availability of its franchise model to mortgage brokers in the United States.The company said its model allows small and medium-size brokerages to compete with established national mortgage originators by combining them into a "scalable operating entity" that can better compete under one recognizable brand. "The prime objective is to improve the economic performance of the combined companies through the reduction of operating costs, expansion of a national brand, diversification of product lines, and investment in technology," the company said. Alex Haditaghi, chief executive officer of MortgageBrokers.com, said an estimated 40,000 small and medium-size brokerages in the United States will find it more and more difficult to survive in the face of rising interest rates and tougher competition. "Given the current business and economic climate, we strongly believe this is the right time for us to introduce our business model," he said. The company can be found online at http://www.mortgagebrokers.com.

The Market Composite Index, an overall measure of mortgage applications, rose from 745.0 to 761.3 on a seasonally adjusted basis during the week ended Aug. 12, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications increased 1.3% on the week and were up 10.6% from the level recorded a year earlier. The Purchase Index rose from 498.8 to 499.3 on a seasonally adjusted basis, while the Refinance Index climbed from 2176.5 to 2285.5. The four-week moving average for the Purchase Index rose 0.5%, from 494.4 to 491.8, and the comparable average for the Refinance Index fell 0.3%, from 2341.3 to 2335.3. Refinancings represented 42.4% of total applications, up from 40.9% the previous week, while adjustable-rate mortgages accounted for 28.9%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages decreased from 5.91% to 5.79%, and points (including the origination fee) decreased from 1.24 to 1.22 for loans with 80% loan-to-value ratios, the MBA reported. The MBA can be found online at http://www.mortgagebankers.org.

More than 50 metropolitan areas representing 31% of the U.S. housing market are "extremely overvalued" and face a high risk of price declines, according to the economics department of National City Corp., Cleveland.The company said the study looked at the top 299 U.S. real estate markets (representing 80% of U.S. single-family housing) over the past 20 years. It concluded that 53 metro areas may face price corrections. "Markets with valuation premiums above 30% were deemed at risk for price corrections based on the typical degree of overvaluation that preceded the 63 known local market price declines observed since 1985," National City reported. The study by National City chief economist Richard DeKaser found Santa Barbara, Calif., to be the nation's most overheated market, at 69% above the norm. The study, "House Prices in America: Valuation Methodology and Findings," can be found online at http://www.nationalcity.com/economics.

Public Storage Inc., Glendale, Calif., will replace Delta Air Lines in the S&P 500 after the close of trading Aug. 18, Standard & Poor's has announced.S&P said the reason for the change is that Delta's market capitalization had declined to approximately $200 million as of Aug. 15, ranking 500th in the index. Public Storage is a real estate investment trust that invests primarily in self-service storage facilities. S&P also announced that homebuilder M/I Homes Inc., Columbus, Ohio, will replace Accredo Health Inc. in the S&P SmallCap 600 after the close of trading Aug. 18. S&P can be found online at http://www.standardandpoors.com.

New Century Financial Corp., Irvine, Calif., has announced the promotion of two senior executives in connection with "integration efforts" for company ventures.Daniel P. Sussman was named senior executive vice president of New Century Mortgage Corp., and he will oversee all "strategic implementation" projects, starting with the expected integration of certain business assets being acquired from RBC Mortgage Co., New Century said. Mr. Sussman has over 20 years of experience in the financial services and mortgage banking industries, most recently as executive vice president and chief operating officer of New Century Mortgage. The other promotion went to Robin C. Auerbach, who was named senior vice president and COO of New Century Mortgage and will assume many of Mr. Sussman's previous duties. Ms. Auerbach has 21 years of experience in the mortgage industry, most recently as senior vice president of NC Capital Corp., a subsidiary of New Century Mortgage. New Century can be found online at http://www.ncen.com.

Single-family housing starts edged up 0.5% in July as construction activity continued to stay ahead of last year's pace.The U.S. Census Bureau reported that single-family starts increased from a seasonally adjusted annual rate of 1.70 million in June to 1.71 million in July. The July start rate was 3% above that of July 2004. A monthly survey of builder attitudes suggests that "new-home sales and starts will continue to be brisk in the coming months," according to National Association of Home Builders chief economist David Seiders. In most parts of the country, builders remain confident about sales and are concerned mainly about the high cost of land and shortages of lots. But in the Midwest, builders are concerned about economic conditions and job losses, particularly in the auto industry, Mr. Seiders said. The August survey of builder confidence slipped three points to 67, but in the Midwest it slipped from 48 to 45. (Any number below 50 indicates that more builders view sales conditions as poor than good.) Meanwhile, multifamily starts of five or more units fell 5.6% in July to a seasonally adjusted annual rate of 289,000 units, down from 306,000 units in June.

Cedar Shopping Centers Inc., a real estate investment trust based in Port Washington, N.Y., has priced 9.0 million shares of common stock at $14.60 per share.Of the shares sold, 6.0 million were newly issued by Cedar, while 3.0 million shares were sold in a forward sale to Merrill Lynch, Pierce, Fenner & Smith Inc. The forward sale agreement will settle in approximately 12 months, or earlier at the company's option. The net proceeds of $83.2 million will be used to repay the secured revolving credit facility and for general corporate purposes, the REIT said. An additional $41.6 million in proceeds will be received when the forward sale agreement is physically settled. Those funds could be used to finance potential acquisitions and for general purposes. Merrill Lynch & Co. is the sole bookrunner for the offering.

Interest-only loans have jumped to about 66% of all commercial mortgage-backed securities loans rated by Moody's Investors Service in the second quarter from 7% in the first quarter of 2003, according to the rating agency.The rating agency is concerned about the trend, which it says "creates a credit issue for investors." Sally Gordon, a Moody's analyst, said CMBS pools with more IO loans "inherently have less margin for error to allow for underperformance in the supporting collateral." This is because IO loans have little or no amortization, which would normally reduce the principal balance. Borrowers could also face problems at the time of refinancing if interest rates are higher, the rating agency said. Therefore, Moody's said it sees the possibility of balloon default and believes that the increase in IO loans could affect CMBS performance for several years. Moody's can be found online at http://www.moodys.com.

House prices posted strong gains in the majority of metropolitan statistical areas in the second quarter, according to the National Association of Realtors.The NAR's metro area home price report indicates that 67 of the 149 surveyed MSAs had double-digit annual increases in median existing-home prices. The NAR also reported that the national median single-family resale price rose to $208,500 in the second quarter, up 13.6% from that of a year earlier. NAR chief economist David Lereah said the price gains were unprecedented. "When you look at appreciation of home prices relative to the overall rate of inflation, these are the strongest increases on record," Mr. Lereah said. "The continuing shortages of housing inventory are driving the price gains." The NAR can be found online at http://www.realtor.org.

Credit Suisse First Boston, New York, has agreed to buy 100% of the outstanding stock of SPS Holding Co. and its subsidiary, Select Portfolio Servicing, for $144.4 million.SPS, a major servicer of nonprime mortgage loans, is being acquired from the PMI Group, FSA Portfolio Management, and Greenrange Partners. Under the agreement, CSFB will make future contingency payments of up to $39.9 million for mortgage loans currently serviced by SPS on behalf of third parties. The transaction is expected to close in the fourth quarter. SPS services collateral underwritten by CSFB, and CSFB said it plans to integrate SPS into its mortgage securities business. SPS was formerly known as Fairbanks Capital Corp.

It is not only the below investment grade classes in U.S. commercial mortgage-backed securities transactions that can be adversely affected if GMAC Commercial Mortgage loses a class action lawsuit, said Fitch Ratings, New York.Investment grade bondholders in the single borrower and large loan arena are at risk of extraordinary expenses. The suit, certified in June 2004 as a class action, was filed by a borrower whose loan is in the GMAC 1999-C1 trust over the issue of forced-placed terrorism insurance. GMACCM has put through expenses related to the suit across 178 trust pools; these are part of the suit because they contain loans originated before the attacks of Sept. 11, 2001. "Single borrower and most large loan deals do not have non-rated classes or other provisions to cover extraordinary expenses, so the investment grade classes in these deals are more likely to be shorted interest than other investment grade bonds when unusual legal expenses or other fees or expenses are incurred," said Mary MacNeill, managing director, Fitch Ratings. "Some structural protection for single borrower and large loan bondholders should be in place in order for all classes with the same ratings and similar credit profiles to perform similarly." Fitch can be found online http://www.fitchratings.com.

ECC Capital Corp., Irvine, Calif., reported a net loss of $38.7 million ($0.40 per share) for the second quarter compared with net income of $11.9 million ($0.28 per share) for the same period in 2004.ECC is a real estate investment trust that originates nonconforming mortgage loans. The company took a $29.3 million loss on derivatives. A statement from ECC said those losses "reflect a flattening of the yield curve that reduced expected future cash flows from the company's derivative contracts." However since the quarter ended, a shift in the forward curve now gives ECC's hedge position a year-to-date gain of $25 million. ECC president and co-chief executive Shabi Asghar said the company remains "on track." A key achievement during the quarter includes an increase of $1.3 billion in REIT portfolio assets.

Friedman, Billings, Ramsey & Co., Arlington, Va., believes that the number of cities facing home price bubbles increased 55% in the first quarter compared to research it conducted last year.In a just released, updated report on housing bubbles, FBR says 42 cities (urban areas or "UAs") are at risk compared to 27 identified in an earlier report. FBR economist Michael D. Youngblood says the UAs are overpriced based on per capita personal income compared to the median home price. Nine of the top 10 UAs most likely to burst are in California and 27 of California's 28 UAs have home prices that are bubbles waiting to burst. However, Mr. Youngblood cautions that he does not expect the bubbles to burst in any UA until economic activity contracts for a minimum of four quarters. Mortgage lenders have been criticized for fueling high prices by offering interest-only and payment option loans that allow consumers to make low monthly payments at the expense of building equity.

Midatlantic Office Trust, Rockville, Md., is making an initial public offering of 12.75 million shares that is expected to price Aug. 15. Pricing is expected to be in the range of $14 to $16, according to the company’s offering prospectus. Midatlantic, which is expecting to qualify for real estate investment trust status, has applied to list the shares on the New York Stock Exchange. The company will invest in office properties in the Mid-Atlantic region and is initially acquiring nine properties consisting of about 1.4 million square feet for about $228.1 million. Net proceeds from the IPO of about $202.1 million, including the exercise of the underwriters’ over-allotment option, will go primarily to fund this acquisition, including repayment of mortgage debt on some of the properties. Friedman, Billings, Ramsey is the managing underwriter to the offering.