Originations

While New England's economic growth has tended to lag behind the nation's, the area's job data, population growth, and mortgage activity indicate it is not doing badly, according to Nicholas Perna, chief economist of Perna Associates and economic adviser to Webster Financial Corp."There might not be as many mortgages being written here as in Nevada, but the size of the loans in the area are a heck of a lot better," Mr. Perna said at the closing session of the 17th Annual New England Mortgage Banking Conference in Providence, R.I. "Based on job data, Connecticut rebounded, [and] Massachusetts was going through the roof but fell apart. Now, in Boston, mortgages have extended at a moderate rate, even though job growth has flattened out. We're still in much better shape than the banking system of years ago." With so many programs available, there is a way to get everyone into a home these days, but in a rising rate environment borrowers might not fully understand the risk they are taking by getting loans with variable-rate features, Mr. Perna said. "They have more risk than they might really know," he said. "No one benefits if people who qualify for loans can't pay them."

Sales of existing single-family homes fell 2.7% in August as higher mortgage rates earlier this summer took some stream out of the housing market.The National Association of Realtors reported that existing-home sales fell from a seasonally adjusted annual rate of 6.72 million in July to a 6.54 million rate in August. Despite two consecutive monthly declines, NAR chief economist David Lereah told reporters that housing sales are still 7% above last year's pace and that the August number reflects a more sustainable rate of sales in the longer term. He noted that the August sales decline reflected 6.2% mortgage commitment rates in May and June. However, rates dropped below 6% in August. "We could be getting another jump in home sales" in September and October because of lower rates, Mr. Lereah said. The August report also shows that there is a lean 4.6-month supply of unsold homes on the market. House prices rose 7.3% on an annual basis. The NAR can be found on the Internet at http://realtor.org.

Six classes of First Union National Bank - Chase Manhattan Bank Commercial Mortgage Trust commercial mortgage pass-through certificates, series 1999-C2, have been downgraded by Moody's Investors Service.The downgrades were as follows: class G, from Ba1 to Ba2; class H, from Ba2 to Ba3; class J, from Ba3 to B1; class K, from B1 to B3; class L, from B2 to Caa1; and class M, from B3 to Caa2. In addition, Moody's affirmed the ratings on eight other classes in the deal. The downgrades were attributed to "realized and anticipated losses from specially serviced loans, a decline in overall pool performance, and [loan-to-value] dispersion." The certificates are collateralized by 194 mortgage loans secured by commercial and multifamily properties, Moody's said. Twenty-seven loans have been liquidated, resulting in realized losses of approximately $6.8 million, and seven loans representing 2.6% of the pool are in special servicing, the rating agency said. Moody's can be found online at http://www.moodys.com.

CenterPoint Properties Trust, Oak Brook, Ill., and CalEast Industrial Investors have expanded and extended the lifespan of an industrial joint venture, CenterPoint Venture.The venture was originally formed in January 2000 by CenterPoint's taxable subsidiary and is now being given a five-year extension, CenterPoint said. The venture will continue to invest in "institutional quality" opportunities that are passed over by the real estate investment trust and to improve and sell them to fixed-income-oriented investors. The renegotiated venture will "engage in more build-to-suit development and turn its investments more rapidly" and undertake "up to double its historical activity," CenterPoint said. The venture's funding includes an equity commitment of $200 million by CalEast -- which is a real estate operating company owned by CalPERS and LaSalle Investment Management -- and $67 million by CenterPoint. The venture also expects to renew its line of credit, which is co-led by JP Morgan Securities and Banc of America Securities, and expand its capacity to $150 million, CenterPoint said.

Bedford Property Investors Inc., Lafayette, Calif., has announced that its board of trustees will undertake a strategic review of options that include the possible sale or merger of the company.The options also include selling certain properties and either reinvesting the proceeds in other properties or using them to pay dividends, Bedford reported. While the real estate investment trust is evaluating its strategic direction, it will suspend its previously announced search for a chief executive officer to succeed Peter Bedford, who plans to retire, the company said. The equity REIT can be found online at http://www.bedfordproperty.com.

Paragon Financial Corp., Ponte Vedra Beach, Fla., has announced the signing of a letter of intent to acquire Atlanta-based Accent Mortgage Services Inc. within the next 30 days.Paragon said the acquisition will give it a residential loan originating platform with licensing in 20 states. "The consolidating of mortgage brokerage firms across the country allows mortgage brokers access to a significantly higher level of licensing, a broader range of funding sources, and other marketing and support services," said George Deehan, Paragon's chairman and chief executive officer. "These two acquisition opportunities [the other involves a recently announced letter of intent to buy First Charleston Mortgage] plus others we are contemplating demonstrates a compelling level of confidence in our business plan." The companies can be found online at http://www.paragonfinancialcorp.com and http://www.accentmortgage.com.

The Massachusetts Mortgage Bankers Association has decided to form an independent philanthropic arm of the association with a nonprofit charitable group.The plan, announced at the 17th Annual New England Mortgage Banking Conference in Providence, R.I., is designed to provide financial assistance for debt management education and to improve the quality and availability of affordable housing in Massachusetts, the MMBA said. The new endeavor is starting off with $75,000 provided by the MMBA, said Kathleen Schreck, president of the foundation. The goal is to build $150,000 in capital in its fifth year. "This foundation formalizes the charitable giving process initiated by the MMBA and will broaden our outreach to the communities with which we serve," she said.

Lenders should lower the bar of entry for minority and immigrant borrowers by taking another look at their FICO scores, according to Angelo Mozilo, chairman and chief executive of Countrywide Financial Corp.Many times, scores of 450, 500, and even higher should be approved but are not, Mr. Mozilo told attendees Sept. 22 at the 17th Annual New England Mortgage Banking Conference in Providence, R.I. "The minority life experience is not that of the majority. Their FICO score is not going to be the same as white America," Mr. Mozilo said. "We as an industry and GSEs need to reach out and lower the bar of entry, take a risk that these borrowers might fail -- but most succeed." Zero downpayment is the way to go, he said, adding that a 10% downpayment is no way to improve a loan for such struggling borrowers. "Ten percent won't help them," Mr. Mozilo said. "I'm not saying all of them should be approved. But give them a shot."

The average 30-year fixed mortgage rate fell to 5.70% for the week ending Sept. 24 from 5.75% the previous week, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate fell from 5.13% to 5.10%, while the average rate for one-year Treasury-indexed ARMs declined from 4.03% to 4.00%. Fees and points averaged 0.7 of a point for all three mortgage categories. "[I]n the last four years, we have set records in housing starts, housing sales, low mortgage rates, refinancing volumes, and total mortgage originations," said Frank Nothaft, Freddie Mac's chief economist. ".... Our Primary Mortgage Market Survey results this week show mortgage rates slipping again, which will all but guarantee that the housing industry will continue at its robust pace and set, yet again, another record for both new construction and overall home sales." A year ago, the average 30-year and 15-year fixed rates were 6.01% and 5.30%, respectively, and the average one-year ARM rate was 3.81%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

In order to make Citigroup's "best practices" a reality, a coalition of civil rights and consumer groups is calling on the company to eliminate mandatory arbitration in subprime mortgage loans.Groups such as the AARP, the Leadership Conference on Civil Rights, the NAACP, the Consumer Federation of America, the National Association of Consumer Advocates, the National Consumer Law Center, Consumers Union, the U.S. Public Interest Research Group, and the Center for Responsible Lending say mandatory arbitration is out of step with the practices of Freddie Mac, Fannie Mae, and many of the largest mortgage lenders in the country. Citigroup and the Association of Community Organizations for Reform Now recently agreed to what they call a "landmark partnership" to collaborate on initiatives to promote homeownership in low- to moderate-income neighborhoods. By entering into the agreement, ACORN endorsed the lending initiatives and improvements that Citigroup has made since November 2000. Michael Shea, executive director of ACORN Housing Corp., Chicago, said Citigroup has made enough improvements to warrant the endorsement but that ACORN continues to disagree with the company on the issue of mandatory arbitration.

The First American Corp., Santa Ana, Calif., has announced the introduction of enhanced credit reporting services designed to benefit low- to moderate-income and first-time homebuyers, especially immigrants.The data provider said the services will help reduce obstacles for consumers who might otherwise be charged higher-than-market interest rates or be considered ineligible. First American said lenders often lack the resources to do the additional work required to serve such consumers and manage the associated risk. "We work directly with consumers on the lender's behalf to handle creditor verifications, credit bureau data discrepancies, credit scoring, nontraditional credit reporting, and consumer call-center services, all as one integrated service," said Mark F. Catone, a senior vice president with First American's credit information segment. The company can be found on the Web at http://www.firstam.com.

Most consumers are clueless when it comes to understanding credit scores, according to a survey sponsored by the Consumer Federation of America and Providian Financial.The survey, conducted by Opinion Research Corp. International, interviewed 1,027 consumers on their knowledge of what a credit score measures, what it means, and how to raise it. Of the 122 respondents who said their knowledge about credit scores is excellent, only 41% understood that a credit score measures risk, only 45% knew that Tenneco is not a credit bureau, and 56% incorrectly believed that a married couple has a combined credit score. "Now that credit scores are increasingly used by utilities, insurers, and employers, as well as creditors, it is essential for consumers to learn their score and what it means," said CFA executive director Stephen Brobeck. The CFA and Providian intend to conduct a follow-up survey next year.

Arsenal Real Estate Funds has been launched by a group of real estate professionals to develop multifamily projects in "densely populated, high-demand markets nationally."The Morristown, N.J.-based $350 million private equity enterprise will focus its development activities on the Northeast, California, and Florida, Arsenal said. The firm's principals include Gary Picone, John Maurer, and Joe Margolis, all former Prudential REI executives, and J. Brian O'Neill, a Philadelphia-based real estate developer, Arsenal said. "In real estate, creative reuse of land and manufacturing of housing provides the opportunity for outsized returns," Mr. Picone said. "Our fund will seek out these opportunities and drive exceptional returns to investors." Arsenal said it expects to "align its capital" with experienced local partners and seek out "high-margin transactions" including land development, new rental and for-sale housing development, residential redevelopment, and repositioning investments.

The Market Composite Index, an overall measure of mortgage applications, rose from 678.2 to 690.7 on a seasonally adjusted basis during the week ended Sept. 17, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications climbed 26.4% on the week but were down 1.5% from the level of a year earlier. The Purchase Index crept up from 455.7 to 456.6 on a seasonally adjusted basis, while the Refinance Index climbed from 1972.5 to 2052.5. (However, the MBA noted that the Purchase Index was up 13.6% on an unadjusted basis from its level of a year earlier, while the Refinance Index was down 15.5%.) Refinancings represented 44.5% of total applications, up from 43.2% the previous week, while adjustable-rate mortgages accounted for 33.1%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages fell from 5.68% to 5.66%, and points (including the origination fee) decreased from 1.36 to 1.29, for loans with 80% loan-to-value ratios, the MBA reported. The MBA can be found online at http://www.mortgagebankers.org.

Redwood Trust Inc., a financial institution based in Mill Valley, Calif., that invests in real estate loans and securities, has priced a public offering of 1.0 million shares of common stock at $58.60 per share.The lead manager of the offering was JMP Securities LLC. The underwriters have been granted a 30-day option to buy up to 150,000 additional shares to cover any overallotments. The net proceeds are expected to be $56 million to $65 million, depending on whether the option is exercised, Redwood said. The company can be found on the Web at http://www.redwoodtrust.com.

The Chicago Federal Home Loan Bank has awarded $16.5 million to 72 affordable housing organizations that work with a local FHLBank member institution to create or rehabilitate nearly 3,000 units of affordable housing.More than half of the units will be reserved for very-low-income households earning less than 50% of the area median income, the Chicago FHLBank said. The remaining units will be affordable to households at or below 80% of the area median income. In addition to these funds, the Bank reserved just over $6.9 million as of June 30 to provide downpayment and closing-cost grants of up to $5,000 for 1,476 eligible homebuyers through its Downpayment Plus Program. Each year, the Chicago FHLBank allocates 10% of its prior year's earnings to provide affordable housing subsidies. "This year's total of at least $39.4 million represents a 55% increase from the total amount awarded last year," said Eldridge Edgecombe, senior vice president and community investment officer at the Chicago FHLBank.

Servicers of loans in commercial mortgage-backed securities deals are using practices that have "dramatically increased" their responsiveness, according to Fitch Ratings."Dedicated surveillance teams and enhanced technology that has improved day-to-day work flow have dramatically increased servicer responsiveness to issues and improved operational efficiency," said Stephanie Petosa, a Fitch senior director. "Additionally, the advent of 24-hour borrower websites and borrower surveys has contributed to borrower satisfaction. Increasingly interactive investor websites that allow for customized portfolios and reports has also emerged as a best practice for the sector." Fitch's review of CMBS servicing, titled "Trends and Best Practices in CMBS Servicing," can be found on the rating agency's website at http://www.fitchratings.com.

Saxon Capital Inc., Glen Allen, Va., has priced the initial public offering of Saxon REIT Inc., at $22.75 per share.The company is converting to a real estate investment trust structure. It is selling 17.0 million shares of the new common stock, raising $386.8 million in gross proceeds. Furthermore, the underwriters have been granted a 30-day option to buy up to 2.55 million additional shares at the IPO price. Friedman, Billings, Ramsey & Co. is the lead manager, with Credit Suisse First Boston LLC, J.P. Morgan Securities Inc., and Jefferies & Co. Inc. as co-managers. The company announced Sept. 13 that its shareholders had approved the conversion to REIT status. Each current common share of Saxon will be exchanged for one share of Saxon REIT plus $4 cash. As of late morning on Sept. 21, Saxon was trading at $27.40 per share.

Single-family housing starts rose 0.4% in August to a near-record 1.667 million units on a seasonally adjusted annual basis, according to figures released Sept. 21 by the Commerce Department.The increase reflects activity from July to August. Compared with starts in the same month a year ago, new housing starts rose 11.6%. Commenting on the robust number, Greenwich Capital analyst Steve Stanley said, "I do not know when we are going to learn. We repeatedly underestimate the vigor and resilience of housing demand. In August, we believed that there was underlying strength but suspected that the weather might have caused a temporary slowing in groundbreaking. As it turns out, neither wind nor rain nor flooding can keep the homebuilder from completing his or her appointed rounds." Total starts, including multifamily construction, measured 2.06 million units. The Commerce number was released a day after the National Association of Home Builders said builder confidence "edged down" in August. The Commerce Department can be found online at http://www.doc.gov.

HomeBanc Corp., the Atlanta-based parent company of HomeBanc Mortgage, will be added to the Russell 3000 and Russell 2000 indices on Sept. 30, HomeBanc has announced.The Russell 3000 index is composed of the 3,000 largest U.S. stocks, ranked by total market capitalization, and the Russell 2000 Index is composed of the 2,000 smallest companies in the Russell 3000 Index. HomeBanc can be found online at http://www.homebanc.com.