Originations

The payment shock risk posed by interest-only and negative-amortization loans is a concern, but the percentage of these loans in the overall market is too small to consider them a "systemic risk," a Bear Stearns researcher said in a July 7 teleconference.Dale Westhoff, head of Bear's mortgage-backed securities research department, said the number of these loans in the market is "significant" but not large enough to be considered to have the potential to jeopardize the market as a whole or cause a severe home price correction. The risk of these loans is limited to some extent by the fact that relatively few are made to nonprime credit borrowers, Mr. Westhoff said. Instead, they tend to be made to near prime or prime credit nonagency borrowers, he said. Mr. Westhoff said the loans probably have contributed to rising house prices and have helped "marginal" buyers to purchase homes in high-cost areas such as Southern California, parts of Florida, Arizona and Las Vegas.

Nonprime lender New Century Financial Corp. has been added to the Russell 1000 Index, which includes the largest 1,000 securities in the Russell 3000 Index.New Century was previously a member of both the Russell 2000 Index and the Russell 3000 Index. "We are very pleased to become a member of the Russell 1000 Index as this accomplishment reflects our strong performance, continued growth and focus on increasing stockholder value," said Robert K. Cole, New Century's chairman and chief executive officer. "Additionally, we believe that being a member of this large-cap index will increase our visibility to the investment community," he said. New Century can be found online at http://www.ncen.com.

The average 30-year fixed mortgage rate rose to 5.62% during the week ended July 7 from 5.53% the previous week, according to Freddie Mac.Last year at this time, the 30-year fixed-rate mortgage averaged 6.01%. The average for the 15-year FRM during the week ended July 7 was 5.20%, up from last week when it averaged 5.12%. A year ago, the 15-year FRM averaged 5.42 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.19% during the week ended July 7, up from last week when it averaged 5.06%. There is no annual historical information for last year since Freddie Mac only began tracking this mortgage rate at the start of this year. One-year Treasury-indexed ARMs averaged 4.33% during the week ended July 7, up from last week when it averaged 4.24%. At this time last year, the one-year ARM averaged 4.05%. Points averaged 0.6% for 30-year FRMs, and 0.7% for 15-year FRMs, five-year hybrids and one-year ARMs. Freddie Mac can be found on the Web at http://www.freddiemac.com.

A number of executives who formerly worked for E*Trade's correspondent unit have joined a new correspondent division at American Home Mortgage Investment Corp.Rick Pishalski, AHMIC's new executive vice president and correspondent lending director, previously was correspondent channel senior executive and business manager at E*Trade Financial Mortgage Services; Jim Chatman, AHMIC's new vice president and Southeast account executive, previously was VP, Southeast Lending at E*Trade; Dan Ferris, AHMIC's new VP and Pacific Northwest AE, previously was VP, Southeast Lending, at E*Trade; and Brideen Gallagher, AHMIC's new VP and Northeast AE, previously was VP, Northeast lending at E*Trade. E*Trade said earlier this year that it planned to phase out its correspondent division. AHMIC can be found online at http://www.americanhm.com.

PMI Mortgage Insurance Co., Walnut Creek, Calif., has issued a study that said the increased use of piggyback loans could pose a risk to the financial strength of the mortgage system.Piggybacks, also known as 80-10-10 loans, add a second mortgage to the transaction so that the borrower does not need to get mortgage insurance. The increased use of this product has harmed the market share of PMI and its competitors. "Piggyback loans may contribute to overheating in local housing markets," said Charles Calhoun, the author of the PMI study. "Initially, they appear to support a rapid rise in housing values by qualifying borrowers for larger loans at higher loan-to-value ratios -- but I expect that as interest rates rise and house price appreciation slows or declines, defaults will rise and borrowers could lose their homes. It's particularly worrisome given that borrowers may not fully understand the risks they face." PMI chief risk officer Mike Milner said that among the top 10 metropolitan statistical areas PMI considers at risk for depreciation, seven "had more than half their mortgage lending for home purchases in piggybacks during the first half of 2004."

Application volume rose 9.6% over where it was the previous week on a seasonally adjusted basis, according to the Mortgage Bankers Association latest survey.The association said apps during the week ended July 1 also were up from the previous week on an unadjusted basis -- by 9.5%. Apps were also up year-over-year on an adjusted basis -- by 23.2%. On a seasonally adjusted basis, the MBA's Purchase Index rose 9.1% from the previous week, the Refinance Index was up 10.2% from a week earlier, the Government Index jumped 18.8% over the previous week and the Conventional Index increased 9.1% from the week before. The MBA also added moving averages that represent short-term trend in the indices in its latest report. These showed that, on a seasonally adjusted basis, the Market Index has been up 1.3%, the Purchase Index has been up 0.8% and the Refinance Index has been up 2.0%. In the latest reported week, refinances represented 45.7% of the applications during the week, slightly up from 45.4% a week earlier. The adjustable-rate mortgage share also inched up to 30.7% of applications from 30.0% the previous week. Average rates and points, including the origination fee, for 80% loan-to-value mortgages shifted as follows in the latest reported week vs. the prior week: for 30-year loans, the rate rose to 5.58% from 5.47% as points fell to 1.14 from 1.21; for 15-year loans, the rate increased to 5.18% from 5.06% as points rose to 1.13 from 1.07; and for one-year ARMs the rate rose to 4.60% from 4.42% with points falling to 0.97% from 1.01%.

Multifamily and commercial real estate lender Home Street Capital, Seattle, has provided $2.6 million to the Pike Place Market Preservation and Development Authority for the purchase of the Market House Apartments in downtown Seattle.The aforementioned funds were raised by the purchase of tax-exempt bonds issued by the PDA. PDA has purchased the residential property currently under Section 8. It includes 51 studios for income-restricted people who are charged HUD-regulated annual rents.

Capital Senior Living Corp., Dallas, and First Union Real Estate Equity and Mortgage Investments, Boston, have been included in the new Russell Microcap Index.Capital Senior Living is an owner and operator of senior housing communities. First Union Real Estate Equity and Mortgage Investments is a REIT. Russell indexes are widely used by investment managers and institutional investors for index funds and as benchmarks for investment strategies. More than $2.5 trillion in assets currently are benchmarked to the Russell indexes.

In partnership with the Department of the Army, GMH Communities Trust of Newtown Square, Pa. will design, build, manage and maintain military housing units in Fort Bliss, El Paso, Texas and the White Sands Missile Range near Las Cruces, New Mexico.The initial six-year development period project costs at approximately $445 million. GMH said it has been selected by the Army to finalize plans for the 50-year term Fort Bliss and White Sands project. It is operated following the 1996 Congressionally authorized "Military Housing Privatization Initiative" through the Department of Defense and the Department of the Army.

The use of positive information for credit reporting and scoring for existing bank customers has begun in Hong Kong, according to Chicago-based credit reporting company TransUnion.The use of the information follows a two year collection period that started in June 2003, TransUnion said. "The positive work that is being done and the relationships we are building [are] a testament to our commitment to China," said Ralph Sorice, president of TransUnion - International. "We plan to continue on this successful path working and consulting with the Peoples Bank of China, government officials and other financial institutions." TransUnion can be found on the Web at http://www.transunion.com.

The president and chief investment officer of New York Mortgage Trust Inc., New York, has resigned.It also announced a company-wide cost cutting initiative that will reduce annual compensation costs by $3.7 million. Ray Redlingshafer, who also has resigned from the company's board of directors, will pursue other career opportunities and spend time with his family, according to a statement issued by NYMT. Because of the resignation, NYMT will take a one-time charge to its second quarter earnings of $2.9 million. Mr. Redlingshafer's severance benefits include a lump sum payment of $2.5 million and approximately $400,000 of equity incentive awards, which immediately vested and became exercisable. Steven Schnall, chairman and co-chief executive adds the president's title. David Akre, co-chief executive officer adds the role of vice chairman and Steven Mumma, chief operating officer, adds the job of chief investment officer. NYMT announced it has made work force reductions in operations and support functions in order to streamline former Guaranty Residential Lending branches with its current branches. The reductions affected 45 full-time employees, none of which were loan officers.

Classes J and K of COMM 2003-FL8 commercial mortgage pass-through certificates have been placed on review for possible downgrade by Moody's Investors Service.The rating actions were attributed to a decline in the performance of the KFH Multifamily Portfolio Loan, which represents 25.3% of the pool. The loan is secured by a first-priority mortgage encumbering the fee interests on 13 multifamily properties in Illinois, Arizona, Texas, and Florida. "Despite increased portfolio occupancy since securitization, a preliminary review of the operating statements and other financial information shows a decline in base rent and increases in tenant concessions and delinquencies," Moody's said.

Classes M2 and B of ABFC mortgage loan asset-backed certificates series 2001-AQ1 have been placed on review for possible downgrade by Moody's Investors Service.In addition, Moody's upgraded 25 classes from 11 deals originated by Ameriquest Mortgage Co. and placed two classes on review for possible upgrade. The negative rating actions were attributed to credit enhancement levels that are low given the projected losses on the underlying pools. "The transaction has taken losses, and pipeline loss could cause eventual erosion of the overcollateralization," Moody's said. The deal is backed by first-lien adjustable- and fixed-rate subprime mortgage loans.

The rating on class B of Delta Funding Home Equity Loan Trust 1999-3 has been lowered from CCC to D by Standard & Poor's Ratings Services.In addition, the ratings on five other classes from the same transaction were affirmed. The downgrade was attributed to a $32,642 principal writedown realized by the class during the June 2005 remittance period. Originally rated BBB-minus, the class was supported by excess spread and overcollateralization, which have been completely exhausted, S&P said. Monthly net realized losses exceeded monthly excess interest cash flow for most of the past 12 months. The collateral consists of 15- to 30-year, fixed- and adjustable-rate, first- and second-lien subprime mortgage loans secured by one- to four-family residential properties. S&P can be found online at http://www.standardandpoors.com.

Five classes of Salomon Brothers Commercial Mortgage Trust commercial mortgage pass-through certificates, series 2001-MM, have been downgraded by Moody's Investors Service.The downgrades were as follows: class D, from A3 to Baa2; class G-1, from B2 to B3; class E-6, from Baa2 to Ba3; class F-6, from Ba2 to B3; and class G-6, from B2 to Caa2. In addition, Moody's upgraded one class and confirmed one class in the transaction. The rating agency said class G-1 was downgraded due to the poorer performance of the 2777 East Camelback Road Loan, while the other downgrades were due to the overall decline in property performance of Loan Group F. As of the June 20 distribution date, the transaction's aggregate balance had decreased by approximately 38.9% since securitization, the rating agency said. Moody's can be found online at http://www.moodys.com.

Getty Realty Corp., a real estate investment trust based in Jericho, N.Y., has obtained a $100 million, three-year revolving credit facility with a group of six commercial banks.The unsecured senior facility replaces the company's $45 million uncommitted line of credit, Getty said. The company will have the option to increase the amount of the facility to $125 million and extend the term for one year. J.P. Morgan is the administrative agent for the group of banks.

HSBC-North America has announced that it will open a new facility in the Tampa Bay region of Florida in August to accommodate growth in the customer service and management functions supporting HSBC Mortgage Services.HSBC-North America said the company will expand its employment in the region by up to 250 by the end of the year and by 500 by the end of 2007. The company said it already employs 1,400 in the Tampa Bay area, of which more than 1,000 are employed by HSBC Mortgage Services. HSBC-North America, a unit of the London-based HSBC Group, can be found on the Web at http://www.hsbcusa.com.

For the second consecutive month, there has been a double-digit increase in the Eleventh Federal Home Loan District Cost of Funds Index.The index, as computed by the Federal Home Loan Bank of San Francisco, stood at 2.622% for May, up almost 11 basis points from 2.515% in April. From March to April there was an 11.5-bp increase in the index. Looking at the Freddie Mac Primary Mortgage Market Survey data for the last few months illustrates the conundrum that Federal Reserve Board Chairman Alan Greenspan has referred to. The PMMS for the last week of each of the last four months show the average rate for the one-year adjustable-rate mortgage languishing. On March 31, it was 4.33%, before falling to 4.21% on April 28 and May 26. The most recent survey, June 30, put it at 4.24%. Meanwhile, the average for the 30-year fixed-rate loan on those same dates fell from 6.04% to 5.78% to 5.65% to 5.53%. Both COFI and the one-year Treasury-indexed ARM are more affected by the actions of the Federal Reserve than are long-term rates.

May was the best month of the year so far in terms of primary new insurance written for the nation's private mortgage insurance companies.According to the Mortgage Insurance Companies of America, the $18.0 billion in primary new insurance written was up 11% in May from $16.2 billion in April. The previous best month of the year was March, when the six MICA members (everyone in the business except Radian) did $17.2 billion. In the category of traditional primary new insurance, May was the best month so far this year, with volume of $13.4 billion. Business was off from that of the year before, as the mortgage insurers did $19.3 billion in volume. However, application volume was behind March's, although much better than April's. In May, there were 144,349 applications, compared with 126,596 in April and 147,105 in March. New pool risk written totaled $33.4 million, up from the revised April total of $30.9 million. A bad sign is that the cure/default ratio slipped to its second-lowest level of the year. There were 29,558 cures and 38,003 defaults, for a ratio of 77.8%.

Seventeen classes of mezzanine and subordinated tranches from eight 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 classes are as follows: series 2001-HE 8, class B; series 2001-HE 12, class M-2 and class B; series 2001-HE 16, class M-2 and class B; series 2001-HE 17, class M-2 and class B; series 2001-HE 20, class M-2 and class B; series 2001-HE 22, class M-2 and class B; series 2001-HE 25, class M-2 and class B; series 2001-HE 30, class M-2, class B, class M-F-2, and class B-F. In addition, Moody's has placed one subordinate tranche under review for possible upgrade. The pools consist of subprime, first-lien, adjustable- and fixed-rate loans. The negative actions were attributed to cumulative losses that exceeded original expectations, particularly as a result of higher-than-expected loss severities.