Originations

PL Retail, a joint venture of Kimco Realty Corp. and DRA Advisors, is acquiring Price Legacy Corp., a San Diego-based shopping center operator, for approximately $696 million.Kimco, a New Hyde Park, N.Y.-based retail real estate investment trust, has a 15% interest in the joint venture, according to Price Legacy. DRA is a New York-based investment manager specializing in real estate. Price Legacy shareholders are to receive $18.85 per share in cash as consideration for the merger, a sum which could be adjusted upward, Price Legacy said. Approval of the transaction is required from Price Legacy shareholders, and the closing is also subject to certain other conditions.

TD Bank Financial Group, Toronto, and Banknorth Group, Portland, Maine, have announced that they are "holding discussions" about a possible merger transaction.Banknorth, according to the 2004 Mortgage Industry Directory, finished 2003 with $3 billion in loan originations, ranking 112th for the year. As of Dec. 31, 2003, it had a servicing portfolio of $2.7 billion, making it the 113th-largest servicer in the industry. TD Bank Financial Group is the parent of TD Canada Trust, a depository and mortgage lender north of the border. According to financial statements from TD Bank Financial, the company had C$52 billion of residential mortgages on its balance sheet as of April 30, 2004, the end of its second fiscal quarter. Another subsidiary is TD Waterhouse. A statement issued by both companies said they do not intend to make further comments until a deal is reached or negotiations end.

The co-managers of the Morristown, N.J., branch of Gateway Funding Diversified Mortgage Services LP are suing the company and its principals -- Regina Lowrie, Paul Catinella and Michael Karp -- in the Federal District Court of New Jersey.The complaint, according to a news release from John Field and Marty Witzburg and their attorneys Lowenstein Sandler, alleges violations of the Racketeer Influenced and Corrupt Organizations Act, fraud, and negligent misrepresentation. The pair also allege breach of contract. The attorney for Horsham, Pa.-based Gateway Funding, Stephen Orlofsky of the law firm Blank Rome LLP, said the lawsuit is without merit and that Gateway Funding intends to fight it vigorously. He added that the company would file a response in the court on Sept. 1 seeking dismissal of the charges.

The Pennsylvania Supreme Court has vacated a $350 million judgment against a Philadelphia national bank that interrupted a secondary-market transaction and denied a warehouse lender $1.7 million from the proceeds of a residential mortgage sale.Former warehouse lender Pioneer Commercial Lending, Los Angeles, maintained that the loan proceeds were protected by a bailee letter. But the state justices ruled that unusual circumstances surrounding the transaction "contradicted" the bailee letter. Pioneer's attorney Maurice Mitts is seeking a rehearing. If that fails, Mr. Mitts said an appeal would be filed with the U.S. Supreme Court. "This is a disaster for the mortgage industry," Mr. Mitts said, because lenders and warehouse lenders can no longer be sure a bailee letter will protect their ownership rights in the notes they are trying to sell. The $1.7 million was mistakenly wired to a lender's account instead of Pioneer's, according to Mr. Mitts. However, Corestates Bank NA, Philadelphia, seized the funds to cover losses from a massive check-kiting scheme by one of the lender's principals. Mr. Mitts is with the Philadelphia law firm of Frey, Petrakis, Deeb, Blum, Briggs & Mitts. Corestates is now owned by Wachovia Bank NA, Charlotte. N.C. In July 2000, a trial judge ordered Corestates to refund the $1.7 million to Pioneer and pay $13.5 million for contributing to the destruction of Pioneer's business and $337.0 million in punitive damages.

Sales of new single-family homes fell 6.4% in July from the level of the previous month, despite declining interest rates.The U.S. Census Bureau reported that new-home sales in July came in at a seasonally adjusted annual rate of 1.13 million, compared with 1.21 million in June. Such a large decline came as a surprise to economists at the National Association of Home Builders. "We were surprised that they had dropped like that," NAHB economist Michael Carliner told MortgageWire. "Most of the reports that we got from builders about July were pretty positive." Mr. Carliner is still optimistic about new-home sales for the month of August. "I think that the August number ought to be at least as high as the July number, which is still a very high number, and maybe a little higher," he said. However, "by the end of the year, we don't expect to see mortgage rates quite as favorable, and we don't expect to see sales as quite as strong," Mr. Carliner said.

Fitch Ratings says it expects the cumulative default rate on commercial mortgage-backed securities to hit 5% by year-end, based on the 13 years the rating agency has been tracking the securities.Fitch also predicts an average annual CMBS default rate of 1%. Retail-backed CMBS are of particular concern, since the rating agency says it expect a slowdown in the retail sector as higher interest rates cut down on opportunities for consumers to tap into their home equity, which has fueled much consumer spending in recent years. "Declining sales will ultimately cause increased CMBS defaults, particularly among large chain retailers focused on discretionary retail expenditures such as home furnishings and appliances," said Mary O'Rourke, a Fitch senior director. The rating agency says it also expects defaults on multifamily-backed CMBS to go up, primarily due to overbuilding in markets such as Dallas, Las Vegas, and Atlanta. Fitch sees improvement in the hotel sector, and says it expects defaults on hotel-backed loans to decline. However, the sector is seen as "still very vulnerable to geopolitical events."

In light of recent amendments to the New Jersey Home Ownership Security Act, Moody's Investors Service says certain New Jersey high-cost home loans originated after July 6, the effective date of the amended law, may be included in residential mortgage-backed securitizations without increasing risk to investors.The amended act does not have retroactive effect, the ratings agency said. Moody's will assess whether high-cost home loans or covered home loans subject to the original act, which went into effect Nov. 27, 2003, may be included in securitizations on a case-by-case basis. Under the new law, "flipping" is no longer a prohibited practice, and Moody's indicated that a high-cost home loan transaction could generally pass muster if 2% of the pool or less consists of purchase-money or refinanced high-cost home loans that fit neatly within clear, objective standards of compliance. This tolerance range could be reduced if the securitization trust faces exposure to other predatory lending statutes. Moody's said it will consider the adequacy of an issuer's compliance procedures, whether the loans included in the pool are purchase or refi, and the issuer's financial strength. Moody's can be found online at http://www.moodys.com.

A new Weston Edwards survey of affiliated business arrangements shows that real estate brokerage firms are favoring joint ventures with mortgage lenders over operating wholly owned mortgage subsidiaries.The Weston Edwards survey of 220 of the top 350 real estate brokerage firms found that 36% have wholly owned mortgage subsidiaries, compared with 45% in 1998. Meanwhile, 41% of the real estate brokerage firms have joint ventures with mortgage lenders compared with 37% in 1998. The survey also found that 66% of RE brokerage firms offer title and closing services. The new survey is expected to be released the week of Aug. 30. Sue Johnson, executive director of the Real Estate Settlement Providers Council, gave a sneak preview of the new survey at the annual convention of state real estate mortgage regulators in Washington.

Household International is not going to "weasel" out of its settlement agreement with 41 states to clean up its lending practices by changing to a national charter, a company official has told state regulators."There are a lot of regulators who still think Household is going to try to weasel out of this multistate agreement. That is not the case," Household's Jim Kauffman told the annual meeting of the American Association of Residential Mortgage Regulators in Washington. The company's chief compliance officer stressed that Household and its mortgage business will remain a state-regulated entity even though an affiliate, HSBC Bank, has converted to a national bank charter. In October 2002, Household agreed to a $484 million settlement with state regulators for overcharging loan customers, and it agreed to 24 separate restrictions on its business practices. Mr. Kaufman told the state residential mortgage regulators that Household just got a "clean audit" from PricewaterhouseCoopers showing that it is in compliance with the settlement agreement.

The pace of existing single-family home sales fell in July -- the first down month since January.According to figures compiled by the National Association of Realtors, resales fell by 2.9% to a seasonally adjusted annual rate of 6.72 million units. However, compared with those of the same month last year, sales rose 8.5%. "Prior to this year, the July sales pace would have been a real eye-popper," said NAR chief economist David Lereah. The trade group found that resales in the western U.S. suffered the most, declining 6.6%. The South had the best performance, with resales rising 0.4%. Meanwhile, the median price of an existing home rose 8.7%, to $191,300, compared with that of the same month last year. The NAR can be found online at http://realtor.org.

Classes D, E, and F of GMAC Commercial Mortgage Securities Inc.'s mortgage pass-through certificates, series 2002-FL-1, have been placed on Rating Watch Negative by Fitch Ratings.In addition, Fitch affirmed the ratings on four other classes in the deal. The rating agency attributed the Rating Watch placements to the declining performance of two loans, One Kendall Square and The Infomart. The One Kendall Square loan, the largest in the pool (representing 40.9%), is secured by nearly 640,000 square feet of office space, a cinema, and a parking garage, Fitch said. The Infomart loan, the second-largest in the pool (20.7%), is secured by a class A-minus office building with nearly 1.17 million square feet of space.

CBA Commercial, Stamford, Conn., has received $25 million from TH Lee Putnam Ventures, a private equity firm, that CBAC says it intends to use to purchase, warehouse, and securitize small-balance commercial mortgage and multifamily loans.The loans will be in the $100,000 to $3 million range, CBAC said. The company has developed loan programs in association with New Century Financial Corp. and has already begun purchasing and securitizing loans originated by New Century, CBAC said. "CBAC addresses a market need that has long been underserved by other originators and securitizers due to the market's fragmented nature and lack of standardization," said William K. Komperda, chairman and chief executive officer of CBAC. "Our entry will make it possible for mortgage originators to expand their universe of prospects with additional product offerings and provide a new asset class for Wall Street."

The preferred stock ratings of General Growth Properties Inc., Chicago, have been placed on review for possible downgrade by Moody's Investors Service and Fitch Ratings in the wake of GGP's announced agreement to acquire another real estate investment trust, The Rouse Co., Columbia, Md., for an estimated $12.6 billion.Moody's also placed its debt ratings on GGP's subsidiaries and its debt and preferred stock ratings on Rouse on review for possible downgrade, while Fitch placed its unsecured debt rating on Price Development Co. LP, a GGP subsidiary, on review for possible downgrade. Moody's said the strategic benefits of the transaction, such as scale, diversity, and increased market share, are "mitigated by the substantial pro forma leverage, and in particular variable-rate debt, and weaker coverage measures for General Growth over the short term." The acquisition should boost GGP's earnings, while "extending the REIT's competitive position with higher-end and fashion-oriented retailers," Moody's said. Fitch cited the "highly leveraged financing" of the proposed acquisition as the basis for its rating action. It said the acquisition of Rouse, especially its mall assets, is "consistent" with GGP's strategy and likely to "upgrade" the current GGP portfolio.

Regulators in Washington are developing a "new way" of examining lenders in their state, and they say that if the concept works as expected, it could become a universal system in which oversight is handled more quickly and less expensively in all 50 states."We're working on this, but in no way do we want to keep it to ourselves," said Chuck Cross of Washington's Department of Financial Institutions. "We want to export it nationally to see if it has any legs." As described by Mr. Cross at the American Association of Residential Mortgage Regulators' annual convention in Washington, D.C., software would use a list of "agreed upon" red flags that signal the possibility of abusive loan practices as well as a catalogue of possible compensating factors that could explain the reason the program marks certain loans. The challenge, according to Mr. Cross, who takes over this week as president of AARMR, will be in persuading lenders, consumer advocates, and regulators to agree on just where in the lending continuum a loan crosses the line and becomes predatory. Mr. Cross, the action director of his department's consumer services division as well as the division's chief enforcement officer, said if everyone signs off on the system, it holds the promise of allowing examiners to zero in more quickly on problem loans. He also said it will make it easier for lenders to deal with routine exams.

LNR Property Corp. subsidiary Lennar Partners Europe Ltd. has acquired commercial real estate loan servicer Hatfield Philips International.Jeffrey P. Krasnoff, president and chief executive officer of LNR Property Corp., said he and Mark Griffith, managing director of LNR's European operations, have worked closely with Hatfield Philips International chairman John Hatfield for "almost a dozen years." He added that, over the past seven years, he has watched closely "as the HPI team built a first rate operation in Europe." Mr. Hatfield said that his company "already had a wonderful working relationship with the LNR team" and that he is "thrilled to formally join forces with LNR in Europe." LNR can be found on the Web at http://www.lnrproperty.com.

General Growth Properties, Chicago, has signed an agreement to acquire The Rouse Co., Columbia, Md., in a deal valued at $12.6 billion.Shareholders of The Rouse Co. will receive $67.50 per share in cash. In addition, GGP will assume $5.4 million of The Rouse Co. debt. GGP was advised by Lehman Brothers, who rendered a fairness opinion to its board of directors. Other GGP advisors were Credit Suisse First Boston and Wachovia Bank and its legal advisors were Sullivan & Cromwell LLP and Neal, Gerber and Eisenberg LLP. Goldman Sachs and Deutche Bank advised Rouse and Fried, Frank, Harris, Shriver & Jacobson LLP and Piper Rudnick LLP were its legal advisors.

Countrywide Financial Corp., Calabasas, Calif., has started an exchange offer of up to $675 million of its Convertible Securities (also known as the "Exchange Securities") due in 2031 for an equal amount of its Liquid Yield Option Notes.It will trade $1,000 of the Exchange Securities plus $2.50 in cash for each $1,000 of the LYONs. Among the features being touted by Countrywide is that the Exchange Securities can be converted into a mix of cash and Countrywide stock, while the LYONs can only be exchanged for stock. The offer is good for 20 days after the "Launch Date" of Aug. 20.

The Department of Housing and Urban Development has suspended a branch office of Gateway Funding Diversified Mortgage Services, whose founder and chief executive is a vice chairwoman of the Mortgage Bankers Association.HUD suspended the branch office, which is located in Gateway's home office in Horsham, Pa., for having a high default rate on Federal Housing Administration single-family loans that is twice the national average. Gateway president and CEO Regina Lowrie explained that the number of defaulted loans has remained constant over the past two years, but the company's origination of FHA loans has dropped by nearly 50% since 2001. With a number of FHA loans declining, the percentage of defaulted loans increased to over 4% and HUD suspended the branch office from making FHA loans for six months under its Credit Watch program. "Unfortunately it is strictly a numbers game," Ms. Lowrie said in an interview. "I have not seen a decrease in the quality of our book of business," she added. HUD published its latest list of Credit Watch suspensions in the Aug. 20 Federal Register, which included Gateway and 21 other lenders.

Moody's Investors Service has lowered the ratings of Glimcher Realty Trust (preferred stock to B1) after completing its review following the resignation of PricewaterhouseCoopers LLP, Glimcher's auditors, on June 1.The real estate investment trust's rating outlook is stable. "The downgrade reflects Glimcher's continuing deterioration in credit metrics, particularly increased leverage and reduced fixed charge coverage," the rating agency said. In addition, Moody's said it "is concerned about management controls at the REIT, as well as the fact that the new accounting firm (BDO Seidman) will not have the opportunity to fully review Glimcher's financial reports and procedures until the new auditors have completed the year-end 2004 audit and released these financials in March 2005." Moody's can be found online at http://www.moody.com.

First Community Bancshares, Bluefield, Va., has found a buyer for its United First Mortgage Inc. subsidiary.The buyer is Access National Corp., Reston, Va., which is also a bank holding company. First Community announced on July 8 that it terminated the agreement to sell United First Mortgage to certain members of the mortgage company's management team. It has also announced UFM would exit the wholesale business. But as part of the Access announcement, the buyer said the deal gives it "a network of wholesale mortgage relationships that will be used to accelerate the expansion of a recently launched wholesale mortgage division." Access will take over offices in Midlothian, Fredericksburg and Staunton, Va. Access' office in the Richmond area will be combined into the Midlothian office. Other offices, including origination offices in Lynchburg and West Richmond will be closed and the corporate and back office functions of UFM in Richmond will be wound down. No financial terms of the deal were disclosed.