Originations

As the Federal Reserve Board raises short-term interest rates over the next 15 months, the yield curve will flatten and the rate on the 30-year fixed-rate mortgage will rise to 6.6% by year-end and hover around 6.8% in 2005, according to a survey of economists by The Bond Market Association.The rise in interest rates "will not make housing unaffordable," said Richard Berner, chief economist for Morgan Stanley & Co. In fact the June survey shows that the economists expect 2004 will be another record year for home sales -- but by a very slim margin. (The survey was taken before the May existing- and new-home sales numbers came out, which established new monthly records.) While the respondents believe inflation will remain moderate, they are wary that an uptick could force the Fed to raise rates more aggressively. "There is some upside risk that shouldn't be overlooked," said Michael Decker, TBMA's senior vice president for research and policy. "Inflation could pick up if the economy grows faster than expected or labor costs increase."

Industry veteran Dale Kurland, a former managing director at Bear Stearns, has formed a new advisory firm, hoping to tap what could be a hot merger market for mortgage companies in the next few years."We anticipate a robust market for mergers, acquisitions, and overall consolidation in the mortgage business for the foreseeable future," said Ms. Kurland, who will serve as chief executive of her new firm, Classic Strategies Group LLC. The new company is based in New York. Prior to launching CSG, Ms. Kurland was a principal in DK Advisory Services. DKAS advised on several franchise-related deals, including the sale of First Town Mortgage, James Madison Mortgage, Knutson Mortgage, and others. In the early 1990s, Ms. Kurland was the head of mortgage banking M&A for Bear Stearns. CSG can be found online at http://www.classicsg.com.

The pricing of Freddie Mac participation certificates has "strengthened" and the company is optimistic that it can recapture most of its traditional share of the mortgage-backed securities market this year."Market share has improved significantly since 2003," chief operating officer Paul Peterson told investors during a conference call on the release of Freddie's 2003 earnings. "The current full-year outlook is expected to be just short of historical levels." In early 2003, Bank of America announced that it would no longer sell a majority of its loan production to Freddie Mac, which reduced its issuance of PCs. In addition, rapid prepayments on its PCs forced the secondary-market agency to step into the market and prop up the pricing of its newly issued PCs or mortgage-backed securities. As a result, Freddie's PC issuance declined relative to Fannie Mae's MBS issuance. This year, Mr. Peterson says he expects the PC portfolio to grow 7%-9%. "While continued progress will be challenging, we remain committed to returning market share to historical levels," the COO said. "We also remain focused on maintaining the performance of our MBS."

Freddie Mac has announced that its earnings dropped 52% to $4.9 billion in 2003, as the company continues to play catch-up in its financial reporting due to a $5 billion accounting scandal.In 2002, Freddie Mac posted $10.1 billion in profits, which included a $5.3 billion gain in the value of its derivatives. Overall, Freddie had a $39 million gain in the value of its derivative portfolio in 2003. But in the third quarter of 2003, Freddie Mac actually posted a $288 million quarterly loss primarily due to derivatives, which fell in value by $3.1 billion as interest rates rose. The giant mortgage company also revealed that it will not disclose audited 2004 financial results until March 31, 2005. Freddie Mac chairman and chief executive Richard Syron told investors that the company still relies on an army of consultants and manual systems to produce its financial reports. As a result, the government-sponsored enterprise will not provide quarterly reports this year while construction of the accounting systems and internal controls continues. However, Freddie Mac officials will conduct quarterly briefings for investors to provide progress reports and answer questions.

Ashford Hospitality Trust, a real estate investment trust based in Dallas, has been added to the Russell 3000 Index and the Russell 2000 Index.Membership in the Russell 3000, which remains in effect for one year, means automatic inclusion in either the large-capitalization Russell 1000 Index or the small-cap Russell 2000, Ashford said.. The REIT can be found online at http://www.ahtreit.com.

The ratings on Glimcher Realty Trust, a real estate investment trust based in Columbus, Ohio, have been placed on CreditWatch with negative implications by Standard & Poor's, which cited the unexpected resignation of Glimcher's outside auditor.The rating agency said PricewaterhouseCoopers LLP resigned after issuing a response letter to a recent Glimcher filing with the Securities and Exchange Commission, detailing its disagreement with Glimcher's characterization of a $700,000 reportable related-party transaction involving the company's Park City development project. S&P noted that PWC "provided a clean audit opinion" for the latest fiscal year-end and has reviewed Glimcher's Form 10-Q filing for the first quarter. "Standard & Poor's will monitor the board's progress in finding a replacement auditor and its ability to meet filing requirements," the rating agency said. "Ratings will be maintained if this was ultimately an isolated incident, but could be lowered if further issues surface surrounding PWC's resignation." S&P can be found online at http://www.standardandpoors.com.

Washington Mutual, citing the impact of rising interest rates on its mortgage banking unit, has officially lowered its earnings guidance for 2004.Higher interest rates have lowered mortgage production volume at a time when cost reduction plans have not yet fully taken effect, the company said. WaMu chief executive officer Kerry Killinger said shrinking mortgage volume is "likely to outpace the timing of ongoing cost reduction plans in our mortgage banking business." WaMu now estimates that its 2004 earnings will range from $3.00 to $3.60 per share. According to Thomson Financial's First Call, analysts had been expecting the company to earn $4.24 this year.

A new consumer-based service, Mortgage Grader, says it provides "an anonymous, sure-fire approach" to access wholesale "Blue Book" pricing for mortgage rates and to avoid discrimination and predatory lending.The providers of the service say it is race-neutral, since applicants feed only their financial information into the system. The identity of the person seeking the loan is not available to the prospective lender, thus the lender does not get any "noncore factors like race, ethnicity, age, location, or any other characterization," the company said. Borrowers apply online, in person, or over the telephone. "Not everyone applying for a mortgage is treated fairly," said Jeff Lazerson, the founder of Mortgage Grader. "Mortgage Grader 'stops the drip' and brings an end to discrimination, redlining, identity theft, and predatory lending. With the Mortgage Grader system, never again will consumers have to worry about being overcharged, their applications judged by race or surname, last-minute fees or penalties, or unwanted intrusions into their credit history, which can actually lower credit scores and make loan approval more difficult." Mortgage Grader is a division of Portfolio Mortgage Corp., Laguna Niguel, Calif.

Although Wells Fargo executives had not yet seen a lawsuit filed against it by ACORN Monday in California, the company's top home loan executive denied the accusations made by the consumer advocacy group Monday afternoon.Mark Oman, executive vice president of the home and consumer finance group for Wells Fargo & Co., Des Moines, Iowa, said ACORN has taken facts about Wells Fargo Financial's customer relationships out of context to paint a false and misleading picture. He said the allegations "are false and totally contrary to our ethical standards and business practices." Mr. Oman went on to say, "We do not tolerate any attempt to sell a customer any product or service unless the terms are fully disclosed. We do not lend to customers unless we believe they can make loan payments, period." ACORN also said that more than 2,000 of its members participated in a rally in Los Angeles to demand that Wells Fargo end allegedly predatory lending practices.

Northland Networks, an affiliate of Minneapolis-based Northland Securities, is opening a loan production and investment banking office in Las Vegas on July 1, Northland Securities reports.Kenneth Merkey, who has been in the banking and finance industry for over 25 years, according to Northland Securities, will be manager of the new office. Northland originates, places, and manages loans for member banks through its loan placement network program. The network offers bank loan financing to commercial real estate borrowers for asset-based, hospitality, gaming, and Native American projects. Loans provided are in the $5 million to $50 million range. The investment banking services to be provided at the Las Vegas location include financial advisory, mergers and acquisitions, and project finance structuring.

The world’s wealthiest individuals own $4.9 trillion of real estate investments, excluding their primary residences, according to ReasearchWorldwide.com.The company derived its information from a world weath report produced by Cap Gemini and Merrill Lynch. It reports that the world’s 7.7 million high net worth individuals each have, on average, $640,000 invested in real estate other than their homes. In 2003, real estate comprised 17% of the total assets of the world’s wealthiest people. The research company said wealthy investors are taking advantage of low borrowing rates to finance innovative ways to invest directly in the commercial and residential property markets.

The Association of Community Organizations for Reform Now said it plans to file a national lawsuit in California State Court June 28 against Wells Fargo on claims of alleged predatory lending.The suit charges the company with what ACORN calls a "broad range of unfair and deceptive lending practices" including misleading borrowers about the real terms and conditions of their loans, 'bait and switch' sales tactics, and routinely failing to inform borrowers with good credit that they can qualify for credit at significantly better rates and fees than those charged them by Wells, ACORN said. More than 2,000 ACORN members from all over the country will also participate in a march and rally in Los Angeles demanding Wells end these alleged predatory lending practices, ACORN said. "ACORN will not allow Wells Fargo to continue to swindle and steal from our communities," said Maude Hurd, ACORN national president. "We will fight until their abusive loan practices end and the Wells stagecoach is no longer delivering misery to homeowners." A spokesman for Wells Fargo was unavailable for comment by deadline time Monday.

The Mortgage Bankers Association launched the "Home Loan Learning Center," a new online consumer website (www.homeloanlearningcenter.com) that provides basic home buying and homeownership information for interested consumers.Topics include the importance of credit history and ways how to improve it before applying for a mortgage loan, how to find the right home, the mortgage lender and loan product that best fits their financial situation, and also how to select the right lender, offering a complete home buying and homeownership information resource. MBA president and CEO Jonathan L. Kempner said the MBA hopes the new site "will give people interested in becoming homeowners the knowledge they need to more confidently navigate through the mortgage transaction process."

KeyBank, a Cleveland-based subsidiary of KeyCorp, has agreed to acquire EverTrustBank, an Everett, Wash.-based subsidiary of EverTrust Financial Group, for $194.7 million.The acquisition, in the form of a $25.60-per-share cash distribution to EverTrust common shareholders, will add 12 bank offices in Snohomish and King counties to Key's office base in the Seattle-Cascades District. KeyBank said EverTrust's commercial real estate business -- which operates from two main offices in Tacoma and Portland, Ore., as well as branch offices in Seattle, Bellevue, and Everett -- is a "particularly strategic fit" with Key's commercial real estate lending operations. Jack Kopnisky, Key's head of consumer banking, said the acquisition will "significantly enhance our presence in the Puget Sound region's important Everett market and along the I-5 corridor," which Key sees as "high-growth, attractive communities contiguous to our current operations."

Existing-home sales set a new record in May, jumping 2.6% to a seasonally adjusted annual rate of 6.8 million units.Resales rose 15.8% compared with the level of a year earlier, according to sales figures compiled by the National Association of Realtors. Housing economists were expecting May resales to be more modest, in the 6.5-million-unit range. "You have the best of all worlds," said NAR economist David Lereah. "You've got a growing economy that's creating jobs and you've got low interest rates." The NAR says the median sale price of an existing home rose 10.3% (compared with that of a year earlier) to $183,600. The inventory of supply is at 2.38 million units, or 4.2 months. The NAR can be found on the Internet at http://realtor.org.

Entertainment Properties Trust, a real estate investment trust based in Kansas City, Mo., has agreed to sell 1 million shares of its common stock to JP Morgan and RBC Capital Markets.The company said it expects the net proceeds of the offering to total approximately $35.4 million. The underwriters have been granted an option to buy an additional 150,000 shares of the stock to cover any overallotments. The REIT specializes in the acquisition of high-quality real estate assets leased to entertainment operators.

Hines Interests LP, Houston, has announced an initial public offering of 200 million shares of common stock in Hines Real Estate Investment Trust at $10 each.Hines REIT is also offering up to 20 million shares of common stock at $9.50 per share under its dividend reinvestment plan, Hines Interests said. Hines Interests is a real estate investment and management firm that has been in the real estate financing and development area since 1957, according to the company. Hines REIT will invest in a "diversified portfolio of well-constructed office properties with quality tenants in desirable locations" in the United States. The REIT may also invest in non-office properties, mortgage loans, and ground leases outside the United States. Hines Real Estate Securities is managing the offering.

The average 30-year fixed mortgage rate fell to 6.25% for the week ending June 25 from 6.32% the previous week, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate fell from 5.70% to 5.64%, while the average rate for one-year Treasury-indexed ARMs was unchanged, at 4.13%. Fees and points averaged 0.6 of a point for fixed-rate mortgages and 0.7 of a point for ARMs. "This week's easing off in mortgage rates is rooted in the market's wait-and-see posture with regard to the Federal Reserve Board's upcoming actions on interest rates this year, starting with their meeting at the end of June," said Frank Nothaft, Freddie Mac's chief economist. "Mortgage rates have been remarkably stable and affordable, and borrowers responded enthusiastically in May by pushing up new-home sales nearly 15% -- the biggest one-month gain in more than 11 years." A year ago, the average 30-year and 15-year fixed rates were 5.24% and 4.63%, respectively, and the average one-year ARM rate was 3.45%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

New single-family home sales jumped 14.8% in May to set a new monthly record, signaling that 2004 will likely be another record year for sales.The U.S. Census Bureau reported that new-home sales rose to a seasonally adjusted annual rate of 1.37 million in May from 1.19 million in April. National Association of Home Builders economist Michael Carliner called it an "amazing" performance. "Lots of these sales are presales, so the builders have a backlog of orders and they are going to be busy," he said. Mr. Carliner also noted that builders are telling the association that potential homebuyers are deciding there is no point in waiting to sign a contract, with mortgage rates going up and the economy strengthening.

Class J of GMAC Commercial Mortgage Securities Inc.'s mortgage pass-through certificates, series 1997-C1, has been downgraded from CCC to D by Fitch Ratings.The rating agency attributed the downgrade to $5.4 million of realized losses that were applied to classes J and K since the transaction was last reviewed in February. Class K has been reduced to zero, while class J has been reduced by $1 million. Losses, totaling $35 million so far, were due to the disposition of two loans, Knights Inn-Seymour and Builder's Square-Miami, Fitch reported. The Knights Inn loan was collateralized by a 117-unit hotel property in Seymour, Ind., that was sold in February for $1 million, producing a $1.9 million loss to the trust. The Builder's Square loan was secured by a 107,388-square-foot retail property in Miami that was sold in April for $3.0 million, resulting in a $3.5 million loss. Fitch can be found online at http://www.fitchratings.com.