Originations

Two classes of Credit Suisse First Boston Mortgage Securities Corp. commercial mortgage pass-through certificates, series 2001-CK3, have been downgraded by Moody's Investors Service.Class K was downgraded from Ba3 to B1, and class N was downgraded from B3 to Caa2. Moody's also upgraded five classes in the transaction and affirmed the ratings on nine classes. The downgrades were attributed to realized and anticipated losses from the three specially serviced loans, which represent 2.2% of the pool, and loan-to-value dispersion. Moody's said the certificates are collateralized by 167 mortgage loans, and the pool consists of three shadow-rated loans, representing 18.5% of the pool, and a conduit component, representing 81.5%. The rating agency said 13.9% of the conduit pool has an LTV greater than 100%, compared with 2% at securitization. Moody's can be found online at http://www.moodys.com.

Deerfield Triarc Capital Corp., Chicago, has priced an initial public offering of 25 million shares of common stock at $16 per share.The offering includes approximately 680,000 shares being sold by existing stockholders. Credit Suisse First Boston, Merrill Lynch & Co., UBS Investment Bank, and Deutsche Bank Securities were the joint book-running managers of the offering, the company said. The underwriters have been granted an option to buy up to 3.75 million additional shares to cover any overallotments. The shares of the new company are trading on the New York Stock Exchange under the symbol "DFR." The company said it will elect to be taxed as a real estate investment trust. It invests in real-estate-related securities and various alternative investments, such as collateralized debt obligations, consumer asset-backed securities, and corporate mezzanine loans.

The average 30-year fixed mortgage rate fell from 5.57% to 5.53% over the seven-day period ended June 30, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate decreased from 5.16% to 5.12%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages rose from 5.05% to 5.06%, and the average rate for one-year Treasury-indexed ARMs climbed from 4.23% to 4.24%. Fees and points averaged 0.6 of a point for fixed-rate mortgages and five-year hybrid ARMs and 0.7 of a point for one-year ARMs. "With still little or no threat of inflation to be found, long-term mortgage rates this week had some breathing room, and that allowed rates to drift a little lower," said Frank Nothaft, Freddie Mac's chief economist. "Short-term rates, though, may be another matter, since the Federal Reserve is expected to continue raising its target for the federal funds rate at least a few more times this year." A year ago, the average 30-year and 15-year fixed rates were 6.21% and 5.62%, respectively, and the average one-year ARM rate was 4.19%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

KB Home, Los Angeles, and Countrywide Financial Corp., Calabasas, Calif., have announced an agreement whereby KB Home will sell substantially all the assets of its mortgage subsidiary, KB Home Mortgage Co., to Countrywide's main subsidiary, Countrywide Home Loans.The terms of the deal were not disclosed. The companies also announced the formation of a 50-50 joint venture that will make home loans to KB Home customers. The joint venture will offer the full array of home loans provided by Countrywide, which will have day-to-day oversight of the venture. "Homebuilding and financing have evolved into substantially larger and more sophisticated businesses in the 40 years since KB Home pioneered in-house lending services for our customers," said Bruce Karatz, chairman and chief executive officer of KB Home. "We believe the transition to working directly with an established lending leader makes sense for the benefit of customers and business." The companies can be found online at http://www.kbhome.com and http://www.countrywide.com.

Bank of America Corp., Charlotte, N.C., has agreed to acquire MBNA Corp., Wilmington, Del., in a deal valued at $35 billion.In May, MBNA acquired Nexstar Financial Corp., St. Charles, Mo., a private-label originator of mortgages. As part of that deal, MBNA bought all of Nexstar's assets, including "Powered by Nexstar," the company's proprietary home loan origination and processing platform. The Nexstar management team and all Nexstar's employees joined MBNA, and plans were for Nexstar to continue to operate under its own name. For the first quarter of this year, Bank of America was the nation's fifth-largest mortgage originator, with volume of $32.5 billion, according to the Quarterly Data Report, a MortgageWire affiliate. The most recent edition of the Mortgage Industry Directory lists Nexstar Mortgage with volume of $2.5 billion for 2003, ranking it 122nd among the nation's originators. As of the morning of June 30, BoA had no announcement regarding its plans for Nexstar.

Citing improved economic performance since 2002, the Treasury Department has told Congress that the Bush administration opposes the extension of the Terrorism Risk Insurance Act of 2002 in its current form.In a June 30 letter to Congress mandated by TRIA, Treasury Secretary John W. Snow said any extension of the program should increase the event size that triggers coverage to $500 million, raise deductibles and co-payments, and eliminate certain lines of insurance. "It is our view that continuation of the program in its current form is likely to hinder the further development of the insurance market by crowding out innovation and capacity building," Secretary Snow said. He also noted that TRIA covers civil damages after a terrorist attack. "Current litigation rules would allow unscrupulous trial lawyers to profit from a terrorist attack and would expose the American taxpayer to excessive and inappropriate costs," the secretary said. TRIA was enacted after 9/11 to create a temporary federal program to ensure the availability of terrorism insurance. Mr. Snow said TRIA has been effective, but noted that gross domestic product grew from 2.3% in 2002 to 3.9% in 2004 and argued that extending TRIA "would have little impact on the economy given its current strength."

Two classes from one asset-backed transaction issued by Countrywide Home Loans Inc. have been downgraded by Moody's Investors Service, and four classes from two other deals have been placed under review for possible downgrade.Class BF-1 of CWABS Inc. asset-backed certificates series 2001-1 was downgraded from A3 to Baa3, and class BF-2 was downgraded from Baa2 to B1. The certificates placed on review were the MF-2 and BF classes of series 2000-1 and 2000-4. The negative rating actions were triggered by credit enhancement levels that "may be low" given the projected losses on the underlying pools, Moody's said. "The three transactions have taken significant losses, causing gradual erosion of the overcollateralization in the 2000-1 transaction and the gradual erosion of the corporate guaranty provided by Countrywide in the 2000-4 and 2001-1 transactions," the rating agency said. The deals are backed by first-lien adjustable- and fixed-rate subprime mortgage loans. Moody's can be found online at http://www.moodys.com.

Windrose Medical Properties Trust, Indianapolis, has priced 2.1 million shares of 7.5% series A cumulative preferred shares at $25 per share.The real estate investment trust said it plans to use the net proceeds of the offering, approximately $51.1 million, to repay debt and for general corporate purposes. Each share will be convertible into the company's common shares of beneficial interest at a price of $15.75, which the company said is equivalent to a conversion rate of 1.5873 common shares per preferred share. Cohen & Steers Capital Advisors LLC is the placement agent for the offering. Windrose, which has additional offices in Nashville, Tenn., acquires, selectively develops, and manages specialty medical properties. It can be found online at http://www.windrosempt.com.

BrooksAmerica Mortgage Corp., a wholesale mortgage banker based in Santa Ana, Calif., has announced the formation of a specialty lending division offering subprime mortgage loans.The division will be headed by Ed Plata, who was most recently assistant vice president of production for Countrywide Home Loans. He has also worked for Argent Mortgage Co., Ameriquest Mortgage Co., and Northwest Financial over the past decade, BrooksAmerica said. Among the specialty lending products -- which the company terms alternative-B mortgages -- available from the new division are: 2/28 and 3/27 adjustable-rate mortgages (or 30-year fixed-rate mortgages) with loan amounts up to $1 million and credit scores as low as 500; and loans up to $750,000 with 100% loan-to-value ratios and credit scores as low as 580 (with full documentation). "We have developed an efficient service model combined with unique loan products that will provide competitive programs to our brokers throughout the nation," said Michael Brooks, founder and chief executive officer of BrooksAmerica. The company can be found online at http://www.brooksamerica.com.

The Market Composite Index, an overall measure of mortgage applications, fell from 786.8 to 778.4 on a seasonally adjusted basis during the week ended June 24, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications decreased 1.4% on the week but were up 34.2% from the level recorded a year earlier. The Purchase Index fell from 479.4 to 477.4 on a seasonally adjusted basis, while the Refinance Index declined from 2575.0 to 2529.2. Refinancings represented 45.4% of total applications, down from 45.6% the previous week, while adjustable-rate mortgages accounted for 30.0%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages fell from 5.63% to 5.47%, and points (including the origination fee) increased from 1.17 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.

Investors expect continued housing price appreciation and are more optimistic about the performance of real estate investments than of stocks, according to the UBS/Gallup Index of Investor Optimism.In the June index, 63% of investors said they expect housing prices to rise over the next six months, 18% saying prices will rise "a lot" and 45% saying "a little," UBS reported. Only 13% said they expect housing price declines during that period. About 38% of investors say this is a good time to buy real estate, while 25% says it's time to sell, the company said. Regarding real estate versus stocks, 67% said they view real estate investments as more profitable and 77% said they see them as safer. Additional information on the index can be found online at http://www.ubs.com/investoroptimism.

Spending on mortgage technology increased 14% in the past year, according to the second annual Mortgage Bankers Association Technology Study.Study participants spent an average of $156 per loan application and $250 per closed loan on origination-related technology costs. In addition, those that serviced loans spent an average of $25 per loan on servicing-related technology costs, the MBA reported. About 75% of 2004 technology spending (operating expense before depreciation, plus capital expenditures) was dedicated to origination functions and 25% to servicing functions. Of 2004 technology spending, 73% was baseline maintenance (required in order to continue conducting business), while the remaining 27% was discretionary (needed to improve functionality and performance). Regulatory and compliance obligations accounted for 9% of technology budgets. Looking ahead, participants expect their technology budgets to increase by 5% over the next year. The participants represented approximately 20% of the U.S. mortgage origination market, according to the MBA. The association can be found online at http://www.mortgagebankers.org.

Automated valuation methods are immune to transactional pressures, according to a white paper issued by the Collateral Assessment and Technologies Committee of the Real Estate Information Professionals Association.REIPA said the study found that biases in full appraisal value opinions are sometimes pronounced, and consistent with allegations of transactional pressure placed on appraisers by originators. While AVMs have a lesser tendency to overstate values, they are not as accurate as full appraisals. But the overvaluations that come from a full appraisal are more highly correlated with mortgage default risk than are the overvaluations from AVMs, the study found. "High-quality AVM systems are proven solutions that are capable of bringing incremental objectivity, consistency, and controls to collateral valuation and risk assessment processes in our evolved and modern marketplace," said the white paper's author, Terry Loebs, senior vice president at Fiserv Inc. and a member of CATC's Executive Committee. "They can do so in an efficient and cost-effective fashion that even the best-intended appraisal industry reforms or new regulations may be hard-pressed to match." The paper, "Systemic Risks in Residential Property Valuations: Perceptions and Reality," was presented at REIPA's Annual Predictive Methods Conference in Newport Beach, Calif.

Pacific Mercantile Bancorp, Costa Mesa, Calif., has announced that its wholly owned banking subsidiary, Pacific Mercantile Bank, will exit the wholesale mortgage banking business.The company said the decision was based on several factors, including the steady growth in its commercial banking business and the increasing cost of operations and variability of expected results in wholesale mortgage banking. "The wholesale mortgage division was good for us in the early years of the bank when there was a decline in the commercial interest rates and a slowing in the economy that led to declines in commercial loan demand," said Raymond E. Dellerba, president and chief executive officer of Pacific Mercantile. "Now, however, we are seeing a steady growth in our commercial loan business, and we wish to deploy our capital and other resources into our successful core business, commercial banking, and the continued growth of our commercial banking franchise." Pacific Mercantile Bank can be found online at http://www.pmbank.com.

Taking yet another crack at RESPA reform, the Department of Housing and Urban Development on Monday announced six somewhat public meetings on the issue, while stressing that it has no timetable whatsoever on accomplishing the task.During a conference call with reporters where he left questions to an agency spokesman, HUD Secretary Alphonso Jackson declared, "I am more concerned about doing this right than doing it fast." A HUD spokesman said "everything's on the table" in regard to reforming the Real Estate Settlement Procedures Act, adding that one of the agency's priorities will be to save the consumer money. HUD estimates that consumers spend $55 billion each year on closing costs they do not fully understand. In attempting to once again reform RESPA (the agency halted a major reform effort in early 2004), HUD said it will focus on issues such as changes to the good-faith estimate, loan originator compensation, interest rate guarantees, and fixed settlement costs. Three meetings (by invitation only) involving consumer and industry groups will be held in Washington July 14, July 28, and Aug. 18. Three other meetings co-sponsored with the Small Business Administration will be held July 21, Aug. 4, and Aug. 11 in Los Angeles, Chicago, and Fort Worth, respectively.

Lexington Corporate Properties Trust, New York, has obtained a $200 million unsecured credit facility.The facility, which matures in June 2008, bears interest at a rate of 120-170 basis points over the London interbank offered rate, depending on Lexington's overall debt level, the company said. The new facility replaces a $100 million facility that bore interest at 150-250 bps over LIBOR. The real estate investment trust can be found on the Web at http://www.lxp.com.

Meanwhile, AMLI Residential Properties Trust said it was disappointed by the Moody's downgrades but that it has made only "limited use" of its investment-grade rating and has no bond issues that will be adversely affected."Unencumbered by the rating agency process to maintain an investment credit rating, AMLI believes it will have greater flexibility to pursue co-investment acquisition and development opportunities" and will use secured rather than unsecured debt, especially in its joint ventures, said Robert J. Chapman, executive vice president and chief financial officer at AMLI. The real estate investment trust can be found online at http://www.amli.com.

The preferred stock of Chicago-based AMLI Residential Properties Trust has been downgraded from Ba2 to Ba3 by Moody's Investors Service and the senior unsecured debt of its operating partnership, AMLI Residential Properties LP, has been downgraded from Baa3 to the non-investment-grade rating of Ba1.The rating outlook is stable. Moody's said the rating actions stem from AMLI's earnings weakness and "moderate deterioration" in credit measures. "The key rating driver was the enduring supply-and-demand imbalance in AMLI's markets, which continue to pressure the [real estate investment trust's] property net operating income and, as a consequence, fixed-charge coverage," the rating agency said. "This trend was exacerbated by the higher levels of leverage and secured debt relative to its Baa3-rated peers, as well as the significant level of joint ventures." Moody's added, however, that the REIT has taken "positive steps in enhancing its balance sheet with unsecured debt, a portfolio of superior quality apartment properties, and efforts to simplify its structure by buying in and unencumbering several of its joint venture properties." Moody's can be found online at http://www.moodys.com.

Commercial and multifamily mortgage debt outstanding rose 2.4% to $2.35 trillion in the first quarter, according to the Mortgage Bankers Association.Multifamily mortgage debt stood at $607 billion at the end of the first quarter, up 1.3% from the level at the end of 2004, the MBA reported, citing Federal Reserve Board flow-of-funds data. Commercial banks hold the largest share of commercial/multifamily mortgages, with $1.01 trillion (43% of the total), the MBA said. (This category includes "commercial and industrial" loans that have commercial property as collateral.) Issuers of commercial mortgage-backed securities hold $444 billion (19%) of the total, followed by life insurance companies, which hold $254 billion (11%), the MBA reported. Savings institutions hold $184 billion (8%), and government-sponsored enterprises hold $125 billion in the form of multifamily mortgages that back the securities they issue and also hold $56 billion of "whole loans" in their own portfolios, for a total share of 8%. The MBA can be found online at http://www.mortgagebankers.org.

Six classes of Bear Stearns Commercial Mortgage Securities Inc. series 2001-Top 2 Trust Fund have been placed on Rating Watch Negative by Fitch Ratings.The affected securities are classes G, H, J, K, L, and M. The actions were attributed to litigation between GMAC Commercial Mortgage Corp. and the borrower of a loan in the trust. "The dispute arose when the borrower, after leasing a portion of the space, requested the return of a lease termination fee," Fitch explained. "GMACCM, the special servicer, refused the release. The litigation went to jury trial and a verdict was rendered in favor of the borrower." The verdict awarded the borrower $7.8 million for breach of contract and $33 million in punitive damages, Fitch reported. The court recently issued a judgment affirming its ruling, but GMACCM is appealing the judgment, Fitch said. The rating agency said it is uncertain whether the trust would be responsible for paying the punitive damages. Fitch can be found online at http://www.fitchratings.com.