Originations

Rep. Mel Watt, D-N.C., is preparing to reintroduce his predatory lending bill, modeled after the North Carolina predatory lending law, very soon."North Carolina's predatory lending law has worked, and we think it is a good model for a federal predatory lending law," Rep. Watt told a Washington meeting of the Association of Community Organizations for Reform Now. He noted that studies have shown the 1999 North Carolina law has reduced abusive practices without restricting access to subprime loans. Reps. Watt and fellow North Carolina Democrat Brad Miller introduced a similar bill (H.R. 3974) last year. But this time the bill will prohibit binding mandatory arbitration and restrict prepayment penalties on loans with balances under the FHA loan limit ($312,895). Rep. Watt said he has not seen a predatory lending bill that Reps. Bob Ney, R-Ohio, and Paul Kanjorski, D-Pa., are expected to unveil soon. "We are going to [introduce] our bill, and then we will see if we can work together," Rep. Ney said.

American Community Properties Trust, St. Charles, Md., has reported that it will restate its audited financial statements for calendar years 2002 and 2003 and its unaudited financial statements for each of the previously reported quarters of 2004.The diversified real estate company said the adjustments, to correct certain accounting errors, will reduce net income per share by an estimated $0.14 to $0.16 for 2002, $0.40 to $0.44 for 2003, and $0.16 to $0.18 for 2004. The company said the restatements will correct the accounting for cash distributions received from limited partnerships in which it is a general partner; record minority interest expense for cash distributions paid to minority limited partners in consolidated partnerships; and change the accounting method from equity to consolidated for its general partner interest in Crossland Associates LP. The trust can be found online at http://www.acptrust.com.

Criimi Mae, a real estate investment trust based in Rockville, Md., has reported net income of $16.7 million ($1.06 per share) for 2004, compared with a net loss of $4.1 million ($0.27 per share) for 2003.For the fourth quarter, the commercial mortgage REIT reported net income of $5.4 million ($0.34 per share), a 108% increase from $2.6 million ($0.17 per share) in the fourth quarter of 2003. The REIT attributed the increase in fourth-quarter net income primarily to a $1.8 million gain on the "extinguishment of debt" and a $1.2 million decrease in other expenses. "As a result of our June 2004 refinancing, the percentage of our debt that is recourse to the company is the lowest ever," said Mark Jarrell, president and chief operating officer of Criimi Mae. "The principal balance of loans in special servicing has declined for the fourth quarter in a row." The REIT recently hired Citigroup to help it explore its strategic alternatives, including a sale of the company. Criimi Mae can be found online at http://www.criimimaeinc.com.

Clayton, a provider of loan-level compliance data based in Shelton, Conn., and AllRegs, a publisher of searchable guidelines for residential mortgage lenders based in Eagan, Minn., have announced a full integration of Clayton's High-Cost Analyzer with AllRegs' online legislative database.After running a fully automated regulatory compliance test, users of High-Cost Analyzer can now directly access the complete text of high-cost and anti-predatory-lending legislation without leaving the summary screen of the application, the companies said. Clients can access the text of legislation when engaging in compliance discussions with brokers or secondary-marketing personnel. "This creates the right combination of automated analytic results and detailed drill-down capability for compliance personnel as they cope with the critical and complex task of assuring regulatory compliance," said Glenn Ford, chairman and chief executive officer of AllRegs. The companies can be found online at http://www.clayton.com and http://www.allregs.com.

Three classes of Salomon Home Equity Loan Trust asset-backed pass-through certificates, series 2001-1, group 1, have been downgraded by Fitch Ratings.The downgrades were as follows: class MF-1, from AA to A; class MF-2, from BBB-minus to BB-minus; and class MF-3, from CC to C. In addition, the ratings on six classes in the deal were affirmed. Fitch attributed the downgrades to a decline in credit enhancement relative to applicable credit support requirements. The rating agency can be found online at http://www.fitchratings.com.

Class B of ABFC mortgage loan asset-backed certificates, series 2001-AQ1, has been downgraded from Baa2 to Ba2 by Moody's Investors Service.Moody's also upgraded four classes and confirmed one class from Ameriquest Mortgage Co. asset-backed securitization deals from 2001. The transactions consist of fixed-rate and adjustable-rate first-lien subprime mortgage loans. Ameriquest is the servicer and the originator on the transactions. The downgrade was attributed to credit enhancement levels that were deemed to be 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 rating agency can be found online at http://www.moodys.com.

David Fitch, president of Gables Residential, has been given the additional title of chief executive officer of the Boca Raton, Fla.-based real estate investment trust and named to its board of trustees.In conjunction with the promotion, Chris Wheeler has become executive chairman of the multifamily REIT. Gables also reported that the Nominating and Corporate Governance Committee of its board has retained FPL Associates to facilitate the search for an additional independent trustee. The company can be found on the Web at http://www.gables.com.

United Financial Mortgage Corp., Oak Brook, Ill., has announced a no-annual-fee Platinum Plus Rewards MasterCard, issued by MBNA America Bank NA, that helps cardholders pay down their UFMC mortgage balance.Cardholders earn one point for every dollar in net retail purchases charged to the card, the company said. Each time a cardholder accumulates 5,000 points, a check for $50 will be sent to the borrower to be used for principal reduction or other purposes. There are no annual limits on points or on how much can be applied to the reduction of mortgage principal, UFMC said. "Consumers now have a way to leverage the power of their everyday expenses to pay down their mortgages faster," said Steve Khoshabe, president and chief executive officer of UFMC. "Paying even a few hundred dollars extra each year toward mortgage principal can save thousands over the life of a 30-year mortgage." UFMC can be found online at http://www.ufmc.com, and MBNA can be found at http://www.mbna.com.

The National Association of Realtors has announced the development of the Pending Home Sales Index, a new leading indicator for the housing market.The index is based on pending sales of existing homes, including single-family, condominium, and cooperative. A sale is deemed pending when the contract has been signed but the transaction has not closed, a period that typically lasts one or two months, the NAR said. The association said the index "promises to provide advance information on future home sales activity and offers more solid information on changes in the direction of the market than any of the indicators currently available." The index for January stood at 120.6, 2.1% below its level in December but 8.6% above that of a year earlier. "The Pending Home Sales Index tells us that home sales activity in the near term is expected to be historically high, but is trending off of peak levels recorded in 2004," said David Lereah, the NAR's chief economist. The association can be found online at http://realtor.org.

General Electric, Fairfield, Conn., has announced that it will sell 82 million class A shares of the common stock of Genworth Financial, Richmond, Va.In addition, Genworth will purchase between $400 million and $500 million of class B common stock directly from GE. The sales will leave GE as the 51% share owner of Genworth, whose mortgage insurance subsidiary is headquartered in Raleigh, N.C. GE said the sale proceeds will be used to eliminate the "parent-supported" debt at its GE Capital unit and enable GE Capital to increase the dividend it pays to GE from 10% of its earnings to 40% starting in the second quarter. The global coordinator and bookrunner for the offering is Morgan Stanley, with J.P. Morgan and Merrill Lynch as joint lead managers and bookrunners. The initial public offering in May 2004 spun off 30% of Genworth to the public. As of 11 a.m. on March 7, the day the companies made the announcement, Genworth's shares were trading at $28.58, $0.17 down on the day, after opening at $0.50 down.

Regions Financial, Birmingham, Ala., has agreed to sell its wholesale mortgage operation to M&T Bank Corp., Buffalo, N.Y., for an undisclosed amount.At year-end, Regions ranked 30th among residential wholesalers, and M&T ranked 40th. Combined, the two wholesale divisions will rank 25th, based on fourth-quarter production. Regions Mortgage table-funds about $3.5 billion a year. Mortgage company chairman Robert Goethe said remaining in the wholesale channel would not "further the company's core strategies of growing its banking franchise and cross-selling Regions products and services to mortgage customers." It was widely known in the industry that the wholesale division of Regions was on the auction block. The sale does not include Regions' nonconforming wholesale division, EquiFirst, which is based in Charlotte, N.C. Regions said it will remain a correspondent lender of both prime and subprime loans.

The risk of default on newly originated nonprime mortgage loans remains steady, but the risk level has increased by 25% since 2003, according to University Financial Associates.The UFA's default risk index for the winter of 2005 registered 96 this quarter, up one point from the previous quarter. A reading of 100 means that the risk of default is equal to the average for the decade of the 1990s, and lower readings indicate a lower level of risk. "House price appreciation remains well above trend, but the prospects for future increases are eroding," said Dennis Capozza, professor of finance at the University of Michigan and a principal in UFA. The "constant quality" index measures the impact of the economy on the default prospects for new loans with the same borrower, loan, and collateral characteristics from quarter to quarter.

Created as an anti-flipping law, the borrowers' interest standard of the Massachusetts predatory lending law has created major headaches for the industry, according to David Cotney, deputy commissioner of the Massachusetts Division of Banks.Concerns have been raised that credit is being restricted in certain areas and that borrowers have refinanced homes in order to pay off credit card debt, Mr. Cotney told the Regulatory Compliance Seminar sponsored by the Massachusetts Mortgage Bankers Association and the Massachusetts Mortgage Association. The final regulations say refis must be put into a new home loan, but can also pay off other debt. The new law covers high-cost home mortgage loans and points and fees. Mortgage brokers must now include yield-spread premiums in fee calculations, and this could lead to a larger pool of loans that fall into the high-cost category, Mr. Cotney noted. A public hearing is scheduled for March 9 in Boston, and the division will take public comment through March 16.

Under the new Massachusetts predatory lending law, the Massachusetts Division of Banks can now impose penalties on lenders or mortgage brokers who have violated the law and can bar individuals from doing business in the state, according to a division official.David Cotney, deputy commissioner of the MDOB, told a regulatory compliance seminar near Boston that the division plans to use its new authority sparingly. "We did this because of the risk posed to the industry from a band of rogue players who move from place to place to set up shop," he said. Mr. Cotney said Community Reinvestment Act requirements are likely to pass, something many lenders don't want to hear. The division plans to begin fair-lending examinations in midyear for institutions that close at least 50 loans in a year. Mr. Cotney said lenders should make sure to set up procedures to verify Home Mortgage Disclosure Act data. The Regulatory Compliance Seminar was hosted by the Massachusetts Mortgage Bankers Association and the Massachusetts Mortgage Association in Braintree, Mass.

The Senate has voted to kill an amendment that would have prevented mortgage lenders from pursuing claims in bankruptcy court if they violated a federal anti-predatory-lending law.The Senate voted 58-40 against the amendment by Sen. Richard Durbin, D-Ill., who wanted to attach it to a consumer bankruptcy bill. Senator Durbin offered a similar amendment in 2001 and it failed by only one vote. The Illinois senator argued that predatory lenders should not be allowed to seek repayment in bankruptcy court if they "materially" violated the Home Ownership and Equity Protection Act. The Senate "wisely defeated" the amendment, said Wright Andrews, executive director of the Coalition for Fair and Responsible Lending, which represents subprime lenders. The problems of predatory lending should be addressed by comprehensive lending legislation, not in a bankruptcy bill, he said. "We hope that the new bipartisan bill that Reps. Bob Ney, R-Ohio, and Paul Kanjorski, D-Pa., have said they will introduce soon will offer a balanced and workable framework that Congress can use this year to pass comprehensive consumer protection legislation," Mr. Andrews said.

Employment in the overall mortgage industry hit a record 489,400 full-time positions in January, but broker jobs appear to be slipping.According to figures compiled by the Bureau of Labor Statistics, the number of "real estate credit" employees reached a record 366,300, but "mortgage and non-mortgage broker" jobs came in at 123,100 positions, the lowest reading since September of last year. (Added together, real estate credit employees and mortgage and non-mortgage brokers account for total industry employment.) In 2004 mortgage lenders funded $2.7 trillion in loans, according to National Mortgage News, the industry's second-best year ever. Employment in the industry is expected to remain strong as long as mortgage rates do not rise significantly. However, in the refinancing market -- where loan brokers play a more prominent role -- applications are continuing to decline. Two years ago the mortgage industry employed 421,000 full-timers.

US Mortgage Corp., Pine Brook, N.J., and its subsidiary CU National have announced a deal to sponsor the Red Cactus Racing #73 Chevrolet for certain events in the 2005 NASCAR Busch and Nextel Cup series.Under the agreement with the National Association of Stock Car Auto Racing, US Mortgage will sponsor the Red Cactus Chevy in 19 Busch Series events and two Nextel Cup races. The company can be found online at http://www.usmtg.com.

Home prices increased at a 10.7% rate nationwide in 2004, up from 8.4% the year before, according to Freddie Mac.In the fourth quarter, the annualized home price appreciation rate was 9.0%, Freddie Mac said in releasing the Conventional Mortgage Home Price Index. The index showed that the Pacific states recorded the largest gains in home prices, which rose 17.7% for the year. The South Atlantic states followed with a 14.1% growth rate, and the Middle Atlantic states of New Jersey, New York, and Pennsylvania finished third with a 13.5% rate. "We are forecasting annual home price appreciation nationally at between 7% and 8% in 2005," said Frank Nothaft, Freddie Mac's chief economist. "Strong home sales and higher values should propel purchase-money mortgage originations to another record this year -- at around $1.51 trillion, up from 2004's estimated $1.48 trillion -- but total originations will likely decline due to smaller refinance volumes caused by the predicted rise in interest rates." The index was jointly developed by Freddie Mac and Fannie Mae.

Legislation aimed at making the structure of real estate mortgage investment conduits more responsive to today's environment has been reintroduced by Reps. Mark Foley and Earl Pomeroy, according to the Mortgage Bankers Association.The REMIC structure governs commercial mortgage-backed securities transactions, and The REMIC Modernization Act seeks to make it more flexible. The MBA said the changes would enable commercial real estate property owners to upgrade the property and undertake some property management activities even after a mortgage has been securitized, and is subject to the REMIC structure, without the need to get "costly and burdensome" tax opinions. "The REMIC tax law is nearly 20 years old and has not kept pace with current transactional requirements and market structures," said Daniel Phelan, chairman of the MBA's commercial real estate/multifamily finance board of governors. "The legislation will make changes that will both protect the investments of CMBS bondholders and allow borrowers to make improvements to their property. It is good government at its best." The modernization of REMIC provisions in the tax code that the legislation seeks will not have much impact on federal tax revenue, the trade association said. The MBA can be found online at http://www.mortgagebankers.org.

One month after going public, PHH Corp., Mt. Laurel, N.J., has adopted a policy of not entering into "employment agreements" with any of its executives or workers, including its chief executive, Terence W. Edwards.The company, the parent of PHH Mortgage, the nation's 13th-largest residential lender, made the announcement in a filing with the Securities and Exchange Commission. Mr. Edwards had a contract with PHH but agreed to terminate it and continue to serve on an "at-will" basis. The company did not return telephone calls by MortgageWire's deadline. (See the March 7 issue of National Mortgage News for more details.)