Originations

The Market Composite Index, an overall measure of mortgage applications, inched up from 600.6 to 601.2 on a seasonally adjusted basis during the week ended June 18, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications fell 0.4% on the week and were down 59.7% from the level of a year earlier. The Purchase Index rose from 449.5 to 454.5 on a seasonally adjusted basis, while the Refinance Index fell from 1479.4 to 1454.6. Refinancings represented 33.4% of total applications, down from 33.8% the previous week, while adjustable-rate mortgages accounted for 33.5%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages fell from 6.34% to 6.21%, and points (including the origination fee) fell from 1.29 to 1.26 for loans with 80% loan-to-value ratios, the MBA reported. The MBA can be found online at http://www.mortgagebankers.org.

Ground has been broken on the nation's first for-sale workforce housing project financed entirely by institutional capital.Located near the Avenue 26 Gold Line metro station in Los Angeles' Lincoln Heights neighborhood, the 165-unit Avenue 26 Condominiums will range in price from $210,000 to $375,000, a range considered "affordable" by California's lofty standards. The 700- to 1,800-square-foot apartments will be marketed first to people earning 80%-200% of the area's median income, or from $50,000 to $110,000 a year. The property is being financed by the Genesis Workforce Housing Fund, a $100 million fund managed by the Los Angeles-based Phoenix Realty Group. Phoenix is dedicated to the creation and management of smart-growth equity funds that make socially responsible investments linking housing and commercial development to employment centers. "We have created a vehicle for banks, insurers, and pension funds to make investments that will help fill a void in the housing market," chief operating officer Jay Stark said. The Avenue 26 property is the first of six projects capitalized so far under the fund to reach the ground-breaking stage.

Meanwhile, a senior economist at Deutsche Bank has told an investors' meeting in New York that there is a housing bubble in the U.S. market and says he expects home prices to decline 10%-20%.Speaking at a meeting for Pfandbrief investors sponsored by the Association of German Mortgage Banks, Cary Leahy noted, however, that "we have never had declines in housing prices across the economy." And even though "it's going to end in tears," and "people are going to get hurt," their financial pain will be moderated by a good labor market, he said. Mr. Leahy said the U.S. economy is in good shape right now, with an improving labor market, a decline in core inflation, and a growing gross domestic product. The biggest difference between the U.S. economy and those of other economies is "consumer leverage," he said. Mr. Leahy said he expects the Federal Reserve Board to tighten monetary policy, and he sees a 300-basis-point hike in interest rates between June and the end of next year. "The big question in credit markets is 'Can they do 50 bps in August after 25 bps in June?' he said. "... The Fed does not want to cause a stink in an election year."

With lenders already pricing future increases in the federal funds rate into their rate quotes, mortgage rates should rise only modestly throughout the rest of the year, Fannie Mae chief economist David Berson predicted at a Tuesday briefing for reporters.Mr. Berson said he expects rates to climb only by about 50 more basis points and come to rest at just over 7% by year-end. But he doesn't expect the higher rates to derail the housing market. Indeed, he said he expects home sales for the year to break the record set in 2003. "A broad-based and strengthening job market and the resulting acceleration in wages and salaries should offset the negative impact of rising interest rates on housing affordability," the Fannie Mae economist said during his semiannual economic briefing for housing reporters. Total sales so far this year are 13% ahead of last year's pace. Fannie Mae can be found online at http://www.fanniemae.com.

Five classes of Calwest Industrial Trust commercial mortgage pass-through certificates, series 2002-CALW, have been downgraded by Moody's Investors Service.The downgrades were as follows: class A-FL, from Aaa to Aa1; class A, from Aaa to Aa1; class B-FL, from Aa2 to Aa3; class B, from Aa2 to Aa3; and class C, from A2 to A3. Moody's attributed the downgrades to collateral performance that has not lived up to expectations. Aggregate property occupancy declined from 93.7% at securitization to 88.5% as of March 2004. The rating agency said the transaction is supported by two cross-collateralized first-mortgage loans secured by industrial property: a $325 million floating-rate loan with an initial term of five years, and a $625 million fixed-rate loan with an initial term of 10 years. The properties are located in seven California markets (63.2%), as well as Seattle, Dallas, Phoenix, and Portland, Ore. The rating agency can be found online at http://www.moodys.com.

Simon Property Group, Indianapolis, and Chelsea Property Group, Roseland, N.J., have announced a merger agreement under which Simon will acquire all the outstanding stock and operating partnership units of Chelsea in a transaction valued at approximately $3.5 billion.Simon will also assume Chelsea's debt and preferred stock, which totaled approximately $1.3 billion as of March 31, the companies said. Under the agreement, which has been unanimously approved by each company's board of directors, Simon will pay a consideration of $66 per share for all Chelsea's outstanding common stock and units. The consideration will consist of $36 in cash, $15 of Simon common stock (based on a fixed conversion ratio of 0.2936 per Chelsea common share), and $15 of a new issue of Simon convertible preferred stock, the companies said. Simon is a real estate investment trust that owns, develops, and manages income-producing properties, chiefly regional malls and community shopping centers, and Chelsea is a REIT with interests in 60 premium-outlet and other shopping centers in 31 states and Japan. The REITs can be found online at http://www.simon.com and http://www.cpgi.com.

Wachovia Corp., Charlotte, N.C., is continuing its buying spree, having signed a merger agreement to acquire SouthTrust Corp., Birmingham, Ala., in a stock-for-stock transaction valued at $14.3 billion.Both companies are active in the mortgage market, with combined first-quarter production of $5.0 billion (on a pro forma basis) and a servicing portfolio of $10.3 billion, according to data compiled by National Mortgage News and the Quarterly Data Report. However Wachovia's first-quarter year-to-year mortgage activity is down some 47%, from $6.4 billion in the first quarter of 2003 to $3.4 billion for this year. SouthTrust had $1.7 billion in production in the past quarter. On the servicing side, SouthTrust has the larger portfolio, at $5.7 billion, versus Wachovia's $4.6 billion. Among the more recent acquisitions by Wachovia was First Union Corp.

Class M of Heller Financial Commercial Mortgage Asset Corp.'s mortgage pass-through certificates, series 1999 PH-1, has been downgraded from B-minus to CCC by Fitch Ratings.In addition, the rating agency upgraded five classes in the deal and affirmed the ratings on eight other Fitch-rated classes. The downgrade reflects an expected loss on the largest of four specially serviced loans in the pool, which is secured by an office building in Columbus, Ohio, Fitch said. The loan transferred to the special servicer, Lennar Partners Inc., due to a monetary default in February 2003 and is now real estate owned. An appraisal reduction of $10.8 million was taken in September 2003, and Fitch said it expects a loss to occur on the loan when it is sold from the trust.

JER Investors Trust, a newly formed associate of J.E. Robert Co., McLean, Va., has sold 11.5 million shares of common stock for gross proceeds of $172.5 million in a private placement.JER Investors Trust, which was set up to tap into the growing market for commercial real estate structured finance products, will use the net proceeds from the offering to acquire commercial mortgage-backed securities, mezzanine loans, bridge loans and other "high-yield" debt products, the company reported. JER Investors Trust will opt for real estate investment trust status for tax purposes, according to the company. Friedman, Billings, Ramsey was the financial advisor and placement agent for the transaction.

Property Intelligence Ltd., a subsidiary of the CoStar Group Inc., has purchased Scottish Property Network for approximately $1.3 million in cash."This acquisition fills an important missing piece of our U.K. coverage and greatly enhances our competitive position in the U.K.'s main property centers," said CoStar Group president and chief executive officer Andrew C. Florence. CoStar said the acquisition of the online commercial property information provider is not expected to significantly affect CoStar's earnings. CoStar can be found online at http://www.costar.com.

The Department of Housing and Urban Development has established an academy to train housing discrimination investigators and testers.Floyd May, general deputy assistant secretary for fair housing, said the training and certification requirement will insure effective and consistent enforcement of the Fair Housing Act nationwide. "It is extremely important ... to have an experienced, trained cadre of professionals who have the skills and abilities to address the problem of housing discrimination in this country," Mr. May said. The academy will be housed at Howard University in Washington. The first class will start on Aug. 4. There are 500 full-time investigators working at 101 state and local fair housing agencies.

The Treasury Department has decided to extend a key provision of the Terrorism Risk Insurance Act that requires commercial property and casualty insurers to provide terrorism insurance for another year.Under pressure from the real estate industry and Congress, Treasury officials acted more quickly than expected. Treasury officials had until Sept. 1 to extend the "make available" provision in the TRIA through 2005. However, they decided to extend it well in advance of that deadline "to avoid any potential disruption" in the terrorism insurance market, the department said. "The terrorism risk insurance program has been an important confidence builder as this country recovered from the attacks of September 11 and the recession," secretary John Snow said.

Housing, lender and consumer groups are asking the Department of Housing and Urban Development for more time to evaluate the HUD's proposed affordable housing goals for Fannie Mae and Freddie.The comment period on the affordable housing goals ends July 2, and the groups in a joint letter are asking for a 60-day extension. National Association of Home Builders chief executive Jerry Howard said the coalition of lender and real estate groups, consumer and low-income housing advocates, as well as state and local government organizations want to improve the HUD proposal. "We think the GSEs have to do more affordable housing," he said. However, HUD's proposal is very complex and "we need more time" and data to analyze it. NAHB would like the two government-sponsored enterprises to receive bonus points for rural housing, inner-city core housing and small suburban multifamily projects. At present, the HUD proposal does not provide bonus points that target specific underserved markets.

The National Affordable Housing Management Association, Alexandria, Va., has issued a new guidebook designed to help owners and managers of multifamily housing properties understand their responsibilities under HUD's recently revised guidelines.Titled "Managing Occupancy: A Companion Guide to HUD's Occupancy Handbook," the guidebook covers issues such as technical problems likely to be faced by front-line housing management staff. Those problems include how to determine annual and adjusted income or calculate rent, and larger policy issues of interest to senior-level managers and property owners. The guide, produced by The Compass Group of Washington, D.C., may be of interest to attorneys and housing consultants, individuals interested in multifamily housing management, housing regulators and contractors, or tenant advocates.

SL Green Realty Corp., a New York-based real estate investment trust, is acquiring two New York City office buildings in Midtown Manhattan for $480 million from TIAA-CREF.One building, 750 Third Avenue, is being acquired for $255 million, the REIT said, and being funded through SL Green's unsecured line of credit. The REIT said it expects to pay down most of the LOC drawings with proceeds from future property sales. The other property, 485 Lexington, is being acquired for $225 million in a joint venture with The City Investment Fund, with the REIT owning approximately 37.5% of the equity interest. The joint venture has arranged for a loan facility to fund 75% of the acquisition and "anticipated retenanting costs" of the property, according to SL Green. "We believe this is the right time in New York City's economic cycle to acquire 485 Lexington and 750 Third Avenue, which will represent the largest blocks of contiguous vacant space in a prime Midtown location," said Marc Holliday, president and chief executive officer of SL Green.

Five classes of Credit Suisse First Boston Mortgage Securities Corp.'s multifamily mortgage pass-through certificates, series 1995-M1, have been removed from Rating Watch Negative by Fitch Ratings.The affected classes were as follows: classes C, D, E, F-1, and F-2. The ratings on six classes of the series were affirmed. Fitch said the rating actions stemmed from the repayment of interest shortfalls to classes C, D, and E.

Class F of Chase Commercial Mortgage Securities Corp., series 2001-245 Park Avenue, has been downgraded from BBB-minus to BB-plus by Fitch Ratings and removed from Rating Watch Negative.Fitch also affirmed the ratings on seven other Fitch-rated classes in the deal. The rating agency attributed the downgrade to "significant interest shortfalls" totaling approximately $960,000 that may not be recovered. "The interest shortfalls, which have been occurring since July 2003, are due to the recovery of legal expenses incurred by the servicer, GMAC Commercial Mortgage, on behalf of the trust," Fitch said. "Fitch expects further legal expenses to be recovered by GMACCM in the near term. The legal expenses stem from the litigation surrounding the forced placement of terrorism insurance in 2002 by GMACCM." The rating agency can be found online at http://www.fitchratings.com.

Huntington Bancshares Inc., Columbus, Ohio, has announced a likely delay in the closing of its merger with Unizan Financial Corp., Canton, Ohio, due to the Federal Reserve Board's extension of its review, partly to assess the Community Reinvestment Act aspects of the merger.The closing date of the merger had been targeted for early July. Huntington said the Fed notified it that the agency needed to complete its review of the merger's CRA implications and to coordinate further with the Securities and Exchange Commission about the SEC's investigation of Huntington, Huntington said. No new target closing date has been set. Huntington can be found on the Web at http://www.huntington.com.

First Horizon Home Loans, Irving, Texas, has acquired the operations of The Equity Group Financial Inc., a mortgage banking company based in Livonia, Mich., for an undisclosed amount.Jay Bobel, EGF's president and founder, will become a senior vice president at First Horizon and will focus on recruiting more mortgage sales professionals, EGF reported. Licensed in Michigan and Ohio, EGF has grown from four associates to more than 100 over the past nine years, according to the company. It can be found online at http://www.egfloans.com.

The average 30-year fixed mortgage rate rose to 6.32% for the week ending June 18 from 6.30% the previous week, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate rose from 5.67% to 5.70%, while the average rate for one-year Treasury-indexed ARMs slipped from 4.14% to 4.13%. Fees and points averaged 0.5 of a point for fixed-rate mortgages and 0.7 of a point for ARMs. "The recent increase in mortgage rates has given the housing market a slight breather from the frantic pace in lending that has been prevalent over the last few years," said Frank Nothaft, Freddie Mac's chief economist. "That said, housing starts -- although down a little from the month before -- were still remarkably strong in May, with most of the decrease in overall construction coming from a dropoff in multi-unit building. Construction of new single-family homes, however, actually increased to the highest level since December." A year ago, the average 30-year and 15-year fixed rates were 5.21% and 4.60%, respectively, and the average one-year ARM rate was 3.54%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.