Originations

Class BF of Bear Stearns Asset Backed Securities Inc. series 1999-2 has been downgraded from B2 to Ca by Moody's Investors Service.Moody's said the securitization is backed by fixed-rate and adjustable-rate subprime mortgage loans that have multiple originators, including ContiMortgage Corp., Amresco Residential Mortgage Corp., and Provident Funding Associates LP. Class BF, the subordinate fixed-rate certificate, was downgraded because the transaction has taken "significant losses" -- the fixed-rate pool had realized cumulative losses of 6.41% as of May 25 -- that have gradually eroded the overcollateralization, the rating agency said. Moody's can be found online at http://www.moodys.com.

The Mortgage Bankers Association is defending interest-only and payment-option adjustable-rate mortgages, two of the hottest -- but most controversial -- loan products on the market today.MBA chief economist Doug Duncan said mortgage lenders, particularly depositories, will get into trouble with their regulator if they underwrite payment-option loans at the minimum payment. He also said mortgage bankers have a huge stake in these loans after they are sold into the secondary market because of buyback provisions and "reps and warranties." He noted that buybacks can be "quite expensive." The National Association of Realtors said June 22 that it was concerned about the growing use of IO and payment-option ARMs by homebuyers, and would be launching an educational outreach campaign later this summer. According to figures compiled by National Mortgage News, IO production accounts for 21% of all loans funded in the United States. The MBA can be found online at http://www.mortgagebankers.org.

The interest rate charged on a mortgage loan is directly related to a borrower's credit risk profile, according to two new studies commissioned at the request of the National Home Equity Mortgage Association.NHEMA said the studies of approximately a million mortgage loans made last year found that the higher the FICO score, the lower the interest rate, and that borrowers who have more-secure income and occupy their homes, and whose loans have lower loan-to-value ratios and contain prepayment penalties, pay less than others. One author, University of Virginia Professor Richard F. DeMong, said the question of how risk factors and prepayment fees affect mortgage pricing arose last year when he testified before Congress, and that he "had to admit that I didn't know of any hard data on these issues." He said the latest studies "directly address the vital questions -- Is the mortgage market efficiently pricing loans based on risk? Are prepayment fee clauses on loans an option that really benefits consumers?" The studies, commissioned by the Birmingham, Ala., law firm Sirote and Permutt PC, found that each 10-point increase in a borrower's FICO score reduces a loan's annual percentage rate by 10 basis points. The association can be found online at http://www.nhema.org.

Sales of new homes rose 2.1% in May to a seasonally adjusted annual rate of 1.298 million units, the second-best reading ever for the industry.According to figures compiled by the Census Bureau and the Department of Housing and Urban Development, sales rose 4.4% compared with those of May 2004. (The 2.1% gain compares May sales to April's.) The sales figure is yet another sign that the housing market continues to be red hot. However, there could be storm clouds on the horizon. New homes sold in the Northeast fell 24.5% during the month, but the decline was offset by a 22.9% gain in the Midwest. Nationwide, the median sale price of a new home was $217,000 in May.

Health Care REIT Inc., Toledo, Ohio, has reported the closing of a three-year, $500 million unsecured revolving credit facility that replaces a $310 million facility scheduled to mature in May 2006.The real estate investment trust said the new facility provides greater financial flexibility, reduces all-in borrowing costs by about 50 basis points, includes an option to extend the term for a fourth year, and contains an accordion feature that permits the company to increase the amount by $50 million over the next 24 months. KeyBank NA acted as lead arranger and administrative agent for the facility and Deutsche Bank was lead arranger and syndication agent. The REIT can be found online at http://www.hcreit.com.

Freddie Mac has announced investments totaling approximately $326 million in military housing revenue bonds that it said will provide more than 11,000 units of new and rehabilitated affordable rental housing for military personnel and their families.One investment, totaling $210 million, was made in a Hawaii-based project that will finance the construction and rehabilitation of approximately 8,000 units of single-family and duplex housing, Freddie Mac reported. The housing will be spread among seven Army bases in Hawaii and will involve joint public-private ownership between the Pentagon and several developers. The second investment will take place at Fort Drum in New York, home of the 10th Mountain Division, which has been deployed to every major U.S. conflict since 1980, Freddie Mac said. The project will cost $116 million and will create more than 3,100 new and rehabilitated housing units consisting primarily of two-, three-, and four-bedroom apartments.

After two years of rapid economic expansion, the U.S. economy will slow to "a more sustainable pace," the American Bankers Association's economic advisory committee predicts."The economy has entered the Goldilocks Zone -- not too hot and not too cold," said Richard DeKaser, chairman of the committee and chief economist at National City Corp., Cleveland. The committee predicts that the economy will grow at an annual rate of 3.5% in real terms for the remainder of this year and slightly more than 3% in 2006. The committee predicts that the underlying inflation rate will stabilize around 2% through next year but expressed concern that a tight labor market, rising employment costs, and persistently high oil prices could push inflation higher than expected. The bank economists predict that the Fed will continue to raise the federal funds rate to between 4% and 4.25% by next spring, and they expect the conventional mortgage rate to reach 6.5% by the end of next year. Mr. DeKaser said the "conundrum" of persistently low long-term interest rates amid rising short-term rates is "anomalous and unlikely to persist."

The average 30-year fixed mortgage rate fell from 5.63% to 5.57% over the seven-day period ended June 23, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate decreased from 5.22% to 5.16%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages fell from 5.10% to 5.05%, and the average rate for one-year Treasury-indexed ARMs declined from 4.25% to 4.23%. 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. "Existing home sales in May were at the second-highest level ever recorded, suggesting the housing market still has a good head of steam," said Frank Nothaft, Freddie Mac's chief economist. "As a matter of fact, mortgage rates, which are fueling the vibrant housing market, are even lower in June than they were in May." A year ago, the average 30-year and 15-year fixed rates were 6.25% and 5.64%, respectively, and the average one-year ARM rate was 4.13%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

The National Association of Realtors is voicing concern about the growing use of interest-only loans and payment-option adjustable-rate mortgages, and is planning a consumer outreach effort later this summer.The NAR made the decision June 22 to move ahead with an educational campaign on these somewhat controversial products. According to figures compiled by National Mortgage News, IO production accounts for 21% of all loans funded in the United States. "We are going to provide educational brochures on these products," said NAR chief economist David Lereah, adding that the focus will be on IOs, payment-option loans, and negative amortization products. NAR president Al Mansell said in a statement that there are "insufficient disclosures" being made by lenders on these "riskier loan products." A spokeswoman for the Mortgage Bankers Association did not return a telephone call on the matter by MortgageWire's deadline.

Wachovia, GMAC Commercial Holding Corp., and Keybank Real Estate Capital ranked as the top originators of commercial and multifamily mortgage loans last year, according to a first-of-its-kind study by the Mortgage Bankers Association.The MBA said the study provides origination volumes in more than 140 categories and presents them in three volumes: for all companies, for regional companies, and for local companies. "This report covers 130 firms, ranging from local correspondent mortgage bankers to global financial services companies, and provides a first-ever view of the different roles played by different firms," said Sally Gordon, vice president and senior credit officer at the MBA. In addition to Wachovia, GMAC, and Keybank, five companies reported origination volumes of over $10 billion in 2004: Holliday Fenoglio Fowler, Wells Fargo, L.J. Melody, Bank of America, and Column Financial, the MBA reported. The study is titled "Commercial Real Estate/Multifamily Finance Firms -- Annual Origination Volumes." The MBA can be found online at http://www.mortgagebankers.org.

The chief economist of the Office of the Comptroller of the Currency is not so sure rising housing prices and the proliferation of exotic mortgage products necessarily add up to a housing bubble.There are many features of this housing boom that are different from others that ended in recession and declining house prices, Deputy Comptroller Nancy Wentzler told reporters June 22. "There are fundamentals that suggest there are some reasons for the prices we are seeing," she said. Just because banks and nonbanks are offering new instruments, such as interest-only loans and option adjustable-rate mortgages, "doesn't mean they are bad," she said. "The question is how do they perform." She stressed that this is not a simple issue and that it deserves careful study and better analysis. Simply looking at the raw data is not enough, and it could lead to "inappropriate" judgments, she said. Ms. Wentzler is working with bank supervisors at the OCC in assessing the risks associated with IO loans and option ARMs. The OCC plans to issue guidance on these loans to national banks and examiners in the fall.

Sales of existing homes fell 0.7% in May to a seasonally adjusted annual rate of 7.13 million units, the second-best reading ever for the industry.According to figures compiled by the National Association of Realtors, sales of single-family homes fell 1.1% but were offset by a 2.2% gain in condominiums and co-operatives. Meanwhile, home prices rose year over year by a robust 12.5%. Commenting on May's number, NAR chief economist David Lereah called homes sales "red hot," adding, "I don't see an end to this." Mortgage rates are near their historic lows, but so is fixed-rate mortgage production, the trade group said. The NAR can be found online at http://www.realtor.org.

The Market Composite Index, an overall measure of mortgage applications, fell from 887.0 to 786.8 on a seasonally adjusted basis during the week ended June 17, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications decreased 11.7% on the week but were up 29.6% from the level recorded a year earlier. The Purchase Index fell from a record high of 529.3 to 479.4 on a seasonally adjusted basis, while the Refinance Index declined from 2967.4 to 2575.0. Refinancings represented 45.6% of total applications, down from 46.4% the previous week, while adjustable-rate mortgages accounted for 30.7%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages crept up from 5.62% to 5.63%, and points (including the origination fee) decreased from 1.25 to 1.17 for loans with 80% loan-to-value ratios, the MBA reported. The MBA can be found online at http://www.mortgagebankers.org.

The title insurance industry remained strong in the first quarter, as after-tax profits declined less than 10% from their level in the first quarter of 2004, a record year, according to the American Land Title Association.ALTA reported that revenue totaled $3.70 billion in the first quarter, up slightly from $3.69 billion a year earlier, while losses and loss-adjustment expenses rose 35.4%, from $148.8 million to $201.5 million. "After the rise in business during 2002, 2003, and 2004, claims were expected to eventually catch up," the association said. The industry loss ratio rose from 4.03% to 5.45%. Pretax profits (before investment income) totaled $71.2 million in the first quarter, down 50% from $142.3 million a year earlier, but after-tax profits (after investment income) fell far less, from $123.0 million to $111.6 million, according to ALTA. The association can be found online at http://www.alta.org.

KKR Financial Corp., San Francisco, an affiliate of the leveraged buyout firm Kohlberg Kravis Roberts, is making an initial public offering of 29.167 million shares of its common stock.The shares, including approximately 2.909 million shares being sold by current stockholders, are expected to be priced between $23 and $25 per share and trade on the New York Stock Exchange, according to KKR Financial's offering prospectus. The company, which is opting for real estate investment trust status, said it plans to invest in four areas: residential mortgage loans and mortgage-backed securities; corporate loans and debt securities; commercial real estate loans and debt securities; and asset-backed securities. In addition, KKR Financial said it intends to "invest opportunistically in other types of investments from time to time." The company plans to use additional debt financing to maximize its investment potential. KKR Financial's principal executives are Saturnino S. Fanlo and David A. Netjes.

Homebuilders have taken steps to curtail speculative homebuying in the nation's hottest housing markets, and speculation in new single-family homes appears to be "quite limited," according to surveys conducted by the National Association of Home Builders.The NAHB found that 82% of the members of a panel of large builders said they would sell only to buyers for owner occupancy, 64% said they won't allow buyers to sell a home before closing, and 55% said they won't let buyers sell during the first year after purchase. And in a national survey of over 500 homebuilders in June, the NAHB found that only 4% of single-family homes were sold to investors in the first half of 2005. "Builders -- especially the largest builders -- early on recognized the dangers of excessive speculative activity and took steps to discourage sales to investors who did not intend to occupy the new homes," said NAHB chief economist David Seiders. "As a result of these proactive efforts, speculative activity in the national market for new single-family homes has been well contained." The NAHB can be found online at http://www.nahb.org.

Three classes of notes issued by HarbourView CDO III Ltd., a collateralized debt obligation that includes mortgage-backed securities, have been downgraded and removed from Rating Watch Negative by Fitch Ratings.The downgrades were as follows: class A, from AA-minus to A-minus; class B, from BBB-minus to CCC; and class C, from B-minus to C. The rating agency said the deal has been in a technical default since March, and that a majority of class A noteholders accelerated the maturity of the transaction. "As a result, all principal and interest proceeds available -- less senior transaction fees and expenses, including the hedge counterparty payment -- will be used to pay the class A interest and principal until the notes are paid in full," the rating agency said. Fitch said HarbourView III is composed of 35.0% residential MBS, 29.6% asset-backed securities, 16.4% commercial MBS, 8.6% real estate investment trusts, 7.8% CDOs, and 2.6% corporate debt. The rating agency can be found online at http://www.fitchratings.com.

Wayne, Pa.-based GHR Systems recently hit a milestone when its BrokerOneSource portal surpassed the 10,000-registered broker threshold.BOS is an online mortgage origination marketplace that connects wholesale lenders with mortgage brokers. Participating lenders use the site to approve new brokers, distribute their product and pricing information to more brokers, and obtain electronic loan applications. Participating brokers can become approved with new lenders, use the BestFit Loan Search capability to find lenders with eligible products, submit loans to lenders for approval, and order a variety of third-party services. GHR can be found on the Web at http://www.ghrsystems.com or http://www.brokeronesource.com.

Central Pacific Bank, Honolulu, has announced the signing of a letter of intent to acquire Hawaii HomeLoans Inc. for an undisclosed amount.Hawaii HomeLoans is a full-service mortgage broker with two offices, one in Honolulu and one in Kona on the island of Hawaii. It originated $555 million in residential mortgages in the fiscal year ended Feb. 28 and services approximately $750 million in loans owned by third parties, Central Pacific said. Tom Zimmerman, president of Hawaii HomeLoans, will oversee Central Pacific Bank's residential mortgage operations upon the completion of the deal. "With an expanded portfolio and the addition of top mortgage professionals, our bank will be better positioned to service larger residential real estate development projects, from start to finish," said Clint Arnoldus, chief executive officer of Central Pacific. The bank can be found online at http://www.centralpacificbank.com.

Fidelity National Financial Inc., Jacksonville, Fla., has announced an agreement to acquire Service Link LP, a title insurance agency and provider of title and closing services to national lenders, for an undisclosed amount.The purchase will also include Asset Link, a company owned by Service Link that manages and disposes of real estate owned. "The acquisition of Service Link provides FNF and its title insurance subsidiaries with centralized title and closing capabilities and improved direct access to national lender accounts for both refinance transactions and emerging lender-driven purchase transactions," said FNF president Raymond R. Quirk. "Service Link will operate as a distinct brand under our Chicago Title subsidiary and will establish underwriting agreements with the FNF family of title insurance underwriters." FNF can be found online at http://www.fnf.com.