Originations

Washington Mutual Inc., Seattle, has reported earnings of $2.88 billion ($3.26 per share) for 2004, down from $3.88 billion ($4.21 per share) in 2003.WaMu cited lower mortgage origination volume and a one-time reverse of loan loss reserves in 2003 as factors behind the decline in earnings. Home loan origination volume totaled $41.59 billion, down from $51.50 billion in the fourth quarter of last year. But WaMu chairman and chief executive Kerry Killinger said the mortgage unit exceeded his expectations. Earlier this year, he had warned that the mortgage unit's earnings might be "negative or slightly positive" for 2004 as the company struggled to overhaul its expense structure and deal with lower volume. But in a conference call with analysts, he said operational improvements and other factors resulted in higher-than-expected mortgage earnings. WaMu's mortgage banking segment earned $570 million for 2004, down from $1.30 billion in 2003. Mortgage servicing rights, including amortization and the effect of hedges, contributed a net cost of $277 million in the fourth quarter. WaMu can be found online at http://www.wamu.com.

CreditFlex Funding, Morgan Hill, Calif., the nonprime lending division of mortgage lender ComUnity Lending, has announced plans to more than double its number of offices nationwide this year.The first new office will open in Sacramento, Calif., in February. CreditFlex already has offices in Orlando, Fla., and the Seattle area, and the company said it plans to expand into Southern California, Utah, Missouri, the Middle Atlantic states, and Texas in 2005. "This ambitious expansion effort is part of our long-term plan to increase our overall market share and presence in the mortgage industry," said Scott Coburn, vice president and division manager for CreditFlex. The company can be found online at http://www.creditflexfunding.com.

New York-based iStar Financial, a commercial real estate financing company, is acquiring Falcon Financial Investment Trust for $7.50 per share, making for a total acquisition price of about $120 million, according to iStar.Falcon is a finance company that provides long-term capital to automotive dealers nationwide, iStar said. The company is going to commence a tender offer for Falcon's outstanding shares. "We continue to seek opportunities in the underserved segments of the real estate market," said Jay Sugarman, iStar's chairman and chief executive officer. "Having been Falcon Financial's sole source of warehouse financing for most of the last year, we fully appreciate the considerable challenges the company has encountered due to its size and reliance on the less-flexible securitization market for long-term financing." The board of directors of the two companies have approved the agreement, iStar said.

Paragon Financial Corp., Ponte Vedra Beach, Fla., has announced the closing of its previously announced acquisition of First Charleston Mortgage, Charleston, S.C., for an undisclosed amount.The company said it is the first of a series of planned acquisitions aimed at building a network of mortgage brokerages. "We have spent the past several months restructuring our management team and reducing operating overhead," said Paul Danner, Paragon's chief executive officer. "Now that those necessary adjustments are nearly complete, we're perfectly positioned to fully focus our energies on pursuing the original business strategy of acquiring mortgage origination companies with an eye to developing geographical diversification." Paragon can be found online at http://www.paragonfinancialcorp.com.

The average 30-year fixed mortgage rate fell to 5.67% for the week ending Jan. 21 from 5.74% the previous week, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate fell from 5.19% to 5.15%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages was unchanged at 5.05%, and the average rate for one-year Treasury-indexed ARMs inched up from 4.10% to 4.11%. Fees and points averaged 0.7 of a point for fixed-rate mortgages and 0.6 of a point for ARMs. "Financial markets see inflation as being well managed by the Fed, and that allows long-term interest rates to remain low, with mortgage rates even falling a little more this week," said Frank Nothaft, Freddie Mac's chief economist. "With housing starts in December near record levels, and November starts revised upward, the housing industry looks like it will remain vibrant in 2005." A year ago, the average 30-year and 15-year fixed rates were 5.64% and 4.95%, respectively, and the average one-year ARM rate was 3.56%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

Housing Secretary Alphonso Jackson says new affordable housing goals are encouraging Fannie Mae and Freddie Mac to increase their purchases of multifamily loans and loans to first-time homebuyers."The new goals are already affecting GSE behavior," Secretary Jackson told a U.S. Conference of Mayors meeting. "We are pleased to see both GSEs putting more effort into serving first-time homebuyers, because they traditionally have lagged behind other lenders in this area." (The new AH goals went into effect Jan. 1.) The secretary of Housing and Urban Development also told the mayors that the Bush administration will try again to get Congress to approve a new federally insured zero-downpayment loan program. The Federal Housing Administration has helped nearly 500,000 minority families become homeowners in the past two years. "That's a good record, and we're going to build on it," the secretary said in his prepared remarks.

Bank of America Corp., Charlotte, N.C., has reported net income of $14.14 billion ($3.69 per share) for 2004, up from $10.81 billion ($3.57 per share) in 2003.Mortgage banking income declined an unspecified amount as a result of lower origination volume and adjustments to the value of mortgage servicing rights, BoA said. The company touted its commercial MBS underwriting operations, declaring that it had become the top U.S. deal manager in CMBS in 2004. For the fourth quarter, BoA reported net income of $3.85 billion ($0.94 per share), up from $2.73 billion ($0.92 per share) a year earlier. The company can be found online at http://www.bankofamerica.com.

BayNorth Capital, a Boston-based asset manager for Charlesbank's real estate investments, has reported the closing of its BayNorth Realty Fund VI with $430 million.The fund has secured capital from 31 limited partners, including banks and pension funds, and expects to invest in over $1 billion of real estate. BayNorth typically invests in equity or mezzanine debt, usually in joint ventures with local developers or operating partners, BayNorth said, with the focus being on long-term relationships. The fund is interested in "a range of property types" and will invest in acquisitions, developments and redevelopments, repositionings, and recapitalizations. The target investment is between $15 million and $50 million per transaction, and BayNorth said it expects to invest the entire $1 billion over a four-year period. Charles F. Wu and W. P. Chip Douglas, co-founders of BayNorth, will lead the BayNorth team.

The New Jersey Department of Banking and Insurance has issued a proposed rule that would amend the prohibition on the use of personal items as collateral for first-lien mortgages, according to the Washington law firm Lotstein Buckman LLP.The department is seeking comment on a proposal that would permit certificates of deposit or shares of corporate stock to be used as collateral on first-lien loans. However, the proposed rule would also add household and personal goods such as furniture, electronic equipment, motor vehicles, appliances, and jewelry to the list of items that are prohibited from being used as collateral. The deadline to submit comments on the proposed rule is Feb. 18.

Commercial Net Lease Realty Inc., Orlando, Fla., and National Properties Corp., Des Moines, Iowa, have announced a merger agreement under which CNLR will acquire National Properties for an estimated total consideration of $61 million.CNLR said it will issue approximately 1.64 million shares of common stock in the transaction, and holders of National Properties common stock will be entitled to receive four shares of CNLR common stock for each National Properties share they own. The total consideration includes an assumption of debt and a special preclosing dividend of $20.8 million to be paid by National Properties to its shareholders. "This transaction reflects a continuation of our investment focus on high-quality retail properties subject to long-term net leases with established tenants," said Craig Macnab, CNLR's chief executive officer and president. "These properties will provide additional geographic and retail concept diversification." CNLR can be found on the Web at http://www.cnlreit.com.

The Market Composite Index, an overall measure of mortgage applications, rose from 587.8 to 682.9 on a seasonally adjusted basis during the week ended Jan. 14, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications rose 19.4% on the week but were down 27.4% from the level of a year earlier. The Purchase Index rose from 393.1 to 448.1 on a seasonally adjusted basis, while the Refinance Index climbed from 1720.5 to 2048.6. Refinancings represented 48.9% of total applications, down from 49.0% the previous week, while adjustable-rate mortgages accounted for 32.8%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages fell from 5.70% to 5.64%, and points (including the origination fee) fell from 1.32 to 1.23 for loans with 80% loan-to-value ratios, the MBA reported. The MBA can be found online at http://www.mortgagebankers.org.

Single-family housing starts jumped 13.1% in December to a seasonally adjusted annual rate of 1.678 million units, according to figures released Jan. 19 by the Commerce Department.Starts had fallen almost 11% in November from the level of the previous month. Analysts that cover the market blamed November's weak showing on near-record precipitation in the South and the West. December's reading was the second-best of the year. Multifamily housing starts rose during the month to a seasonally adjusted annual rate of 291,000 units, a 2% gain from November. According to the government, 1.953 million housing units were started in 2004, a 5.7% gain from the previous year's total. Meanwhile, the National Association of Home Builders has forecast that the housing market will decline by 3% to 4% in 2005.

Occupancy levels in the national office market have rebounded nearly to their pre-recession levels, according to Colliers International, a Boston-based commercial real estate manager.Today's occupancy rate stands at 84.5%, just 5.6 million square feet short of the level recorded in 2000, Colliers said. "Job gains, and specifically sustained growth in the 'office-using employment' sector in the final quarter of 2004, helped propel the office market," said Ross Moore, vice president and director of research at Colliers. Absorption in 2004 "significantly exceeded our initial bullish projections of 50-60 million square feet at the beginning of the year," he said. Absorption totaled 84.4 million square feet, up dramatically from 27 million square feet in 2003, Colliers said. The company can be found online at http://www.colliers.com.

Nexstar Financial, St. Louis, has announced the introduction of NexChoice, which it says brings a new level of client customization to business process outsourcing in the mortgage industry.The company said the program provides banks and other financial services institutions with options for retaining or outsourcing specific components of the mortgage process, such as: borrower acquisition; Internet origination; loan processing and underwriting; risk management; and post-closing and investor delivery. "We are finding that many lenders are looking for ways to move fixed costs to variable ones, improve the economics of their mortgage lending function, and mitigate risk," said Helen Garrity, executive vice president of Nexstar. "Our NexChoice program provides flexible solutions for all of these objectives and enables lenders to take advantage of our outsourcing capabilities while retaining activities they feel are their strengths."

Wells Fargo & Co. earned a record $1.8 billion ($1.04 per share) in the fourth quarter, up 10% from its earnings in the fourth quarter of 2003.But the mortgage unit saw its contribution to earnings decline from the record-setting 2003 performance, with Wells Fargo reporting origination volume of $87.7 billion in first mortgages and $52.2 billion in second mortgages during the quarter. For the full year, Wells Fargo originated $298 billion of residential mortgages, down 37% from the industry record of $470 billion the company set in 2003. The Wells Fargo owned mortgage servicing portfolio reached $805 billion, up 13% from that of 2003, the company said. Wells Fargo said the carrying value of its mortgage servicing rights totaled $7.9 billion at year-end, or 1.15% of loans serviced. That is up from an MSR valuation of $6.9 billion at the end of 2003. The company can be found on the Internet at www.wellsfargo.com.

Twenty-seven "urbanized" areas are facing a home price bubble because housing costs are growing faster than personal income, according to a new research report by Friedman, Billings, Ramsey & Co., Arlington, Va.The report, penned by FBR economist Michael D. Youngblood, notes that 20 of the 27 UAs (urbanized areas) facing a bubble are in California. FBR determined the existence of home price bubbles by creating a ratio of median house prices to per capita income. The UA with the highest bubble ratio is Santa Barbara, followed by Santa Cruz, San Luis Obispo, San Jose, and Salinas. (All are in California.) The investment banking firm said it anticipates that the price bubble will not burst until economic activity in each UA "has contracted for a minimum of four quarters."

Housing affordability in California was unchanged in November from the level recorded in October, although it was down by six percentage points from that of a year earlier, according to the California Association of Realtors.Housing affordability stood at 19% in November, down from 25% a year earlier, CAR said. The Housing Affordability Index indicates the percentage of households that can afford to buy a median-priced home in California, which cost $473,260 in November. The minimum household income needed to buy a median-priced home was $109,670, up from $90,270 a year earlier, CAR said. (The figures are based on an average effective mortgage rate of 5.70%, assuming a 20% downpayment.) CAR can be found on the Web at http://www.car.org.

JPMorgan Chase & Co., New York, has introduced a new brand of commercial mortgage-backed security called LDP, for "large diverse pools.""Each LDP transaction is expected to be at least $2 billion in size and will have a consistent core group of partners, although the exact mix of partners may vary from deal to deal," JPMorgan said. The first transaction is scheduled to come to market in February, and subsequent deals are planned on a quarterly basis. The company can be found online at http://www.jpmorganchase.com.

Los Angeles-based HCS Funding, a full-service independent mortgage banker and broker owned by United Pacific Mortgage, has announced an agreement with the charitable Web-portal, CauseYouCare.com, to offer residential mortgages that feature a philanthropic component.Under the agreement, HCS Funding will donate a significant portion of its closing fee per transaction to any nonprofit organization designated by the borrower via CauseYouCare. Currently, nonprofit organizations receive donations of $250 for loans ranging from $100,000 to $333,700, $500 for loans of $333,701 to $650,000, $1,000 for loans of $650,001 to $3 million, and $5,000 for loans over $3 million. HCS Funding can be found online at http://www.hcsfunding.com, and CauseYouCare can be found at http://www.causeyoucare.com.

A new study has found that, contrary to subprime industry claims, subprime borrowers subjected to prepayment penalties are given higher interest rates on purchase loans, with minority neighborhood homeowners being 35% more likely to get a prepayment penalty than their nonminority counterparts.While lenders maintain that they offer a lower interest rate on loans with a prepayment penalty, a study by the Center for Responsible Lending, Durham, N.C., found that in 2002, borrowers with a 30-year, fixed-rate purchase subprime mortgage with a prepayment penalty paid an interest rate 40 basis points higher than for a similar loan without the penalty. CRL estimates that borrowers who obtained a subprime loan in 2003 will pay up to $881 million in excess interest over the life of their loans. "Not only do prepayment penalties lock borrowers into the higher-cost subprime market or force them to give up the wealth they have built through homeownership, but they also turn out to offer no benefit to borrowers in the form of lower interest rates, as the subprime industry has claimed," said CRL president Mark Pearce. "These abusive prepayment penalties operate as a hidden fee that disproportionately affects both rural and minority neighborhoods."