Originations

The average 30-year fixed mortgage rate fell to 5.66% for the week ending Jan. 28 from 5.67% the previous week, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate fell from 5.15% to 5.14%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages declined from 5.05% to 5.02%, and the average rate for one-year Treasury-indexed ARMs rose from 4.11% to 4.18%. Fees and points averaged 0.6 of a point for fixed-rate mortgages and five-year hybrid ARMs and 0.8 of a point for one-year ARMs. "Until the market gets a better read of how the economy performed at the end of last year and how the Fed interprets that information, interest rates will likely remain calm," said Frank Nothaft, Freddie Mac's chief economist. A year ago, the average 30-year and 15-year fixed rates were 5.68% and 4.97%, respectively, and the average one-year ARM rate was 3.59%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

A recent report that the Colorado Department of Insurance may sanction nine title insurance companies for allegedly paying kickbacks to homebuilders in exchange for guaranteed business could have significant implications for the U.S. title insurance industry, according to Fitch Ratings.Fitch said it believes similar inquiries are under way in Washington and California about title insurance companies' reinsurance arrangements with "settlement producers," that is, people who are in a position to influence the selection of a title insurer. "In these reinsurance arrangements, a title insurer cedes a portion of title insurance premiums to a captive reinsurer that is at least partially owned by the settlement producer who is the source of the business," the rating agency said. "Fitch believes these inquiries are focused on two primary issues: whether there is any true risk transfer related to the reinsurance agreement, or whether the reinsurance premiums paid to captive reinsurers are in excess of the market rate for the risk being assumed." Under the Real Estate Settlement Procedures Act and many state statutes, it is illegal to pay referral fees to obtain title insurance business, Fitch said. The rating agency can be found online at http://www.fitchratings.com.

The U.S. homeownership rate ended 2004 at 69.2% -- a record level first attained in the second quarter, according to the U.S. Census Bureau.For the year, the homeownership rate averaged 69.0%, which surpasses the previous annual record of 68.3% set in 2003, according to the Department of Housing and Urban Development. "These numbers show that housing is still leading the way in our rapidly recovering economy," HUD Secretary Alphonso Jackson said. "President Bush is committed to building on these accomplishments so that people from every walk of life can have an opportunity to become homeowners." The Census Bureau reported that the homeownership rate rose from 69.0% in the third quarter to 69.2% in the fourth quarter. The fourth-quarter data indicate that the homeownership rate among blacks stood at 49.1%, down from 49.4% in the same period of 2003. Meanwhile, the Hispanic homeownership rate hit 48.9% in the fourth quarter, up from 47.7% a year earlier. The homeownership rate for whites was 76.2%, up from 75.5% in the fourth quarter of 2003.

National Health Realty Inc., a real estate investment trust based in Murfreesboro, Tenn., has reported receiving notification from the American Stock Exchange that it is not in compliance with requirements regarding the composition of its board of directors.The warning letter from Amex gives the REIT until May 31 to comply with the requirement that its board have a majority of independent directors, the company said. The REIT said it intends to correct the situation as soon as possible.

Classes C-1 and C-2 of Putnam Structured Products CDO 2001-1 Ltd. have been downgraded from BBB to BB-plus by Fitch Ratings.The rating agency also affirmed the ratings on five other classes in the transaction. Fitch said Putnam 2001-1 is a collateralized debt obligation, managed by Putnam Advisory Co., that closed Nov. 30, 2001. The portfolio backing the CDO consists of residential and commercial mortgage-backed securities, real estate investment trusts, consumer and commercial asset-backed securities, and other CDOs. The downgrades stem from increased pressure on excess spread caused by the current interest rate environment, Fitch said. "Consequently, the terms of the interest rate swap, which were negotiated at closing, have created an excessive cash outflow on the transaction," the rating agency said. Fitch can be found online at http://www.fitchratings.com.

Education Realty Trust Inc., a new Memphis-based company formed to own and manage student housing communities, has priced an initial public offering of 19 million shares of common stock at $16 per share.J.P. Morgan Securities Inc. and UBS Investment Bank were the joint book-running managers of the offering, the company said. The underwriters have been granted an option to buy up to 2.745 million additional shares to cover any overallotments. The shares of the new company are trading on the New York Stock Exchange under the symbol EDR. The company said it will elect to be taxed as a real estate investment trust.

Victims of predatory lending in the subprime mortgage market face up to a 50% greater risk of undergoing foreclosure because of prepayment penalties and balloon payments, according to a new University of North Carolina study.The study, reported by the Center for Community Capitalism at UNC Chapel Hill, indicates that subprime loans grew more than ninefold, from $35 billion to $332 billion, from 1994 to 2003. In the fourth quarter of 2003, 2.13% of subprime loans nationwide entered foreclosure, more than 10 times higher than the rate for prime loans. During a teleconference, Michael Stegman, director of the center, said 20.7% of all first-lien subprime refinance loans originated in 1999 had entered foreclosure by December 2003. Mr. Stegman said he hopes the study will encourage state and federal lawmakers to consider legislation that would ban prepayment penalties and balloon payments. The study shows that a prepayment penalty is costly when applied unfairly and offers no interest rate benefit, said Keith Ernst, senior policy counsel at the Center for Responsible Lending, which financed the study. "All prepayment penalties and balloon payments in the subprime market are predatory," Mr. Ernst said. "The study shows they are harmful to borrowers."

The Market Composite Index, an overall measure of mortgage applications, fell from 682.9 to 658.1 on a seasonally adjusted basis during the week ended Jan. 21, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications fell 10.7% on the week and were down 26.2% from the level of a year earlier. The Purchase Index fell from 448.1 to 439.0 on a seasonally adjusted basis, while the Refinance Index declined from 2048.6 to 1932.8. Refinancings represented 46.5% of total applications, down from 48.9% the previous week, while adjustable-rate mortgages accounted for 31.7%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages fell from 5.64% to 5.58%, and points (including the origination fee) decreased from 1.23 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.

Foreclosure activity in the Las Vegas metropolitan housing market began climbing in the fourth quarter after plunging from May through September, according to Foreclosures.com, a Fair Oaks, Calif.-based investment advisory firm.Defaults in Clark County, Nev., fell from 1,252 in May to 549 in September, but by December they had rebounded to 646 and may rise further, said Alexis McGee, president of Foreclosures.com. "We saw heavy speculative buying in the second half of 2004," she said. "And investor purchases tend to dampen foreclosure activity." But now that a "flat peak" is forming in the Las Vegas home price appreciation curve, investors are starting to take their profits, the company said. Pulte Homes, a major builder in the Las Vegas area, has cut prices by up to 20% on new homes, according to Foreclosures.com.

HRPT Properties Trust, Newton, Mass., has announced that it has increased its revolving bank credit facility from $560 million to $750 million and extended its maturity.The facility contains a feature that permits it to be expanded to as much as $1.5 billion under certain circumstances, the company said. The maturity of the facility was extended three years, to April 28, 2009, with an option to extend it an additional year. The facility's interest rate was reduced from 80 basis points above the London interbank offered rate to LIBOR plus 65 bps. Wachovia Securities acted as the lead arranger for the changes to the facility, which is being provided by a 32-member bank syndicate. HRPT, a real estate investment trust, can be found on the Internet at http://www.hrpreit.com.

Homestead Funding Corp., Albany, N.Y., and First Niagara, Lockport, N.Y., have announced an affiliation under which Homestead will operate in New York state under the name First Niagara Mortgage.First Niagara acquired a minority ownership in Homestead with its Jan. 14 purchase of Hudson River Bank & Trust. Under the First Niagara Mortgage name, Homestead will provide mortgage services to the markets served by all 68 First Niagara branches in eastern New York, the companies said. Mortgage loan origination staff from both Hudson River and First Niagara will join Homestead Funding. The companies can be found online at http://www.homesteadfundingcorp.com and http://www.firstniagaramortgage.com.

Sales of existing single-family homes slipped 3.3% in December, but the 12-month total for 2004 still beat the previous year's sales record by 9.4%.The National Association of Realtors reported that resales fell from a seasonally adjusted annual rate of 6.92 million in November to 6.69 million in December. However, sales of previously owned homes totaled 6.68 million for all of 2004, up from 6.1 million in 2003. NAR chief economist David Lereah noted that median home prices rose 8.3% last year (the highest rate since 1980) and the inventory of unsold homes fell to a 3.9-month supply -- the lowest ever. "Going into 2005, we have a lot of momentum," Mr. Lereah told reporters. Mortgages rate are low and sales should tail off a bit, which should take some pressure off inventories and increase the number of homes for sale, he said. The NAR economist is forecasting that resales will total 6.48 million in 2005, which would be the second-best year ever. "So we look forward to continued healthy housing activity as we enter 2005," he said. The NAR can be found online at http://www.realtor.org.

Countrywide Financial Corp., Calabasas, Calif., has announced the donation of $1 million over the next five years to the U.S. Conference of Mayors' National Dollar Wi$e Financial Literacy Campaign.The campaign, launched in 2004 by the Conference's Council on the New American City, encourages the development of local efforts to educate citizens about personal financial issues. The funds will be used to support the national Dollar Wi$e campaign and to create a program that will provide Capacity Grants to participants seeking to expand their Dollar Wi$e financial education programs, the company said. "High-quality financial literacy training is critical if we are to establish a new generation of educated consumers, who are not only able to secure a home, but who have the necessary financial management skills to retain it," said Countrywide's president and chief operating officer, Stanford L. Kurland. "In this way, programs like Dollar Wi$e benefit consumers by helping them become and remain homeowners, and the mortgage industry, as well, by helping to lower costs for originations and servicing." Countrywide can be found online at http://www.countrywide.com.

The growing popularity of interest-only home loans in the subprime mortgage market "may trap unwary New York metro area homebuyers into situations from which the only exit is default and foreclosure," according to Foreclosures.com, a Sacramento, Calif.-based investment advisory firm.Alexis McGee, president of Foreclosures.com, said homebuyers who take out such loans can find themselves with homes they can't afford when the loans convert to what she called "real world" mortgages. "These loans are very seductive," Ms. McGee said. "They offer below-market interest rates for two or three or five years, with no reduction of principal, and then convert automatically into fully amortized loans for the balance of the 30-year term."

The board of trustees of Glimcher Realty Trust, Columbus, Ohio, has elected Michael P. Glimcher the new chief executive officer of the company.Mr. Glimcher, 37, joined the company in 1991 and was appointed president in 1999, a title he will maintain. He has served as a member of the board since 1997. Herbert Glimcher, the founder of the company, will continue as chairman of the board. Glimcher Realty, a real estate investment trust, can be found on the Web at http://www.glimcher.com.

The Bond Market Association is going to be very involved in the legislative debate over predatory lending this year, according to TBMA's top lobbyist."We would like to see a uniform national standard to pre-empt state and local predatory statutes and ordinances in a way that provides for assignee liability that is based on clear and objective standards," TBMA executive vice president John Vogt told reporters. If done improperly, the assignee liability provision could hurt the secondary market and increase the cost of subprime loans, he warned. Mr. Vogt said there is a "significant interest" in Congress in pursuing a predatory lending bill, and "we will be there to help in any way we can." The association can be found on the Web at http://www.bondmarkets.com.

American Business Financial Services, Philadelphia, once a top-ranked subprime funder, has filed for Chapter 11 bankruptcy protection. The company filed in U.S. Bankruptcy Court in Delaware late Friday. ABFS, which has defaulted on several credit facilities, has secured a commitment for a $500 million debtor-in-possession financing from Greenwich Capital. In a filing with the Securities and Exchange Commission, the mortgage banker said "due to the previously disclosed liquidity issues" it has "significantly curtailed" loan originations. It is both a retail and wholesaler lender.

Class J of Merrill Lynch Mortgage Investors Inc.'s series 1997-C2 certificates has been downgraded from B-minus to CCC by Fitch Ratings.In addition, Fitch affirmed the ratings on eight other classes in the deal. The rating agency attributed the downgrade to expected losses on nine of the 13 specially serviced loans in the transaction. As of the January distribution date, the pool's aggregate principal balance had paid down 22.3%, from $686.3 million at issuance to $531.9 million. The certificates are collateralized by 125 commercial and multifamily mortgage loans, down from 147 loans at issuance.

Fannie Mae economists say they expect house price appreciation to drop from 10% in 2004 to 3.5% this year and remain within a range of 3.0%-3.5% for the next couple of years."Eventually, worsening affordability conditions and higher mortgage rates will slow housing demand -- especially for investors," said Fannie Mae chief economist David Berson and senior economist Orawin Velz. The Fannie economists say they believe record home sales in 2004 were "fueled in part" by investor purchases. For 2005, they are forecasting a 22% decline in originations to $2.19 trillion. However, Fannie Mae economists project that the adjustable-rate mortgage share of the loan market will decline slowly from about 38% in 2004 to 28%-30% by the end of 2005.

SPS Holding Corp., the Salt Lake City-based servicer of nonprime mortgage loans, says its stockholders have signed a letter of intent with Credit Suisse First Boston and its affiliate, DLJ Mortgage Capital, that will likely lead to a sale of the servicer to CSFB.Describing the deal as a "strategic agreement," SPS said it expects (as part of the pact) to enter into a servicing rights purchase agreement with CSFB to acquire servicing rights related to mortgage loans totaling about $6 billion over the next 12 months. SPS said it expects to begin acquiring servicing rights from CSFB in the near future. "Any transaction related to the stock of SPS will be subject to the satisfaction of due diligence by all parties," SPS said. The company said it expects the transaction to close within six months if a definitive agreement is signed. SPS, formerly known as Fairbanks Capital, services about 270,000 nonprime residential mortgage loans from facilities in Salt Lake City and Jacksonville, Fla.