Originations

Class MF-3 of Salomon Brothers Mortgage Securities VII Inc.'s commercial mortgage pass-through certificates series 2001-1, group 1, has been downgraded from BBB to BB by Fitch Ratings.In addition, the ratings on eight other classes in two transactions were affirmed. Fitch attributed the downgrade to a decline in overcollateralization levels.

Redwood Trust Inc., a financial institution based in Mill Valley, Calif., that invests in real estate loans, has priced a public offering of 1.05 million shares of common stock at $45.20 per share.The sole manager of the offering was JMP Securities LLC, which has 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 $45 million to $52 million, depending on whether the option is exercised, Redwood said. The company can be found on the Web at http://www.redwoodtrust.com.

There is definitely a housing bubble, but the good news is that it exists in only 20 big cities, according to economist Scott Franklin, a featured speaker at the MBA's Commercial Mortgage Asset Administration and Technology Conference in Nashville.However, these cities contribute to 50% of housing wealth in the United States overall, Mr. Franklin said. About the prospects for the economy, he said there are two distinct views, one bullish and the other bearish. To the bulls, indications point to gradually rising interest rates rather than large jumps, the way the Federal Reserve acted to raise rates in the recovery of 1994, according to Mr. Franklin. As for those in the bear camp, they say, "Wait a minute, this recovery is not built on rock -- it may not even be built on sand," he declared. The bears point to factors such as a high debt-to-income ratio for consumers and the fact that many homebuyers are using adjustable-rate mortgages, leaving economists speculating about whether they have long-term plans for the properties they are buying. Another point of concern is that homebuyers are paying prices that are out of line with property values, causing some to speculate about a conspiracy among appraisers, Mr. Franklin said.

While the prime side of the mortgage business is expected to slow somewhat this year in the absence of a strong refinancing market, the subprime sector could actually post some gains, says the chief economist of the Mortgage Bankers Association.Noting that nonprime, or alternative, lending is "much less interest rate sensitive" than the prime market (and will be the least affected by an improving economy), Doug Duncan told the MBA's Subprime Lending Conference in Washington that the sector might even see some growth in 2004, even as the rest of the mortgage market falters. "The times have never been better for subprime," agreed David Farrell, a senior vice president at Countrywide Financial Corp., West Hills, Calif., and chairman of the MBA's Nonconforming Credit Lending Committee. "I don't see much beyond blue skies ahead," he said, noting that Countrywide alone did $3 billion in alternative loans in April. Subprime represents "our growth potential for the next few years," he said. WMC Mortgage, Woodland Hills, Calif., is also going great guns, according to Simon Cobbin, WMC's director of national accounts. WMC's volume, which reached $8 billion last year, is running at over $1 billion a month so far this year, Mr. Cobbin reported.

Freddie Mac became too complacent and resistant to change under its previous leadership, according to its new top executive, who says he wants to make a clean break and "elevate" the enterprise's commitment to its housing mission and expanding homeownership.Freddie's chairman and chief executive Richard Syron said the mortgage giant has viewed its affordable housing goals as a regulatory requirement, instead of a core part of its mission as a government-sponsored enterprise. "We must rectify this by focusing on housing and on our special obligation as a GSE, and by taking a long-term view that achieving these obligations is integral to our financial success," he said in a speech at the LBJ School of Public Affairs in Austin, Texas. A former Federal Reserve Bank president, Mr. Syron took over the top job at Freddie Mac in January, replacing former chairman and chief executive Leland Brendsel, who was ousted last summer as a result of a $5 billion accounting scandal. Freddie is still restating its earnings, which Mr. Syron called an "embarrassment." But he said the company is making real progress to correct the situation and "rebuild our credibility."

The National Association of Mortgage Brokers has announced that Congress recently proclaimed June 7 National Mortgage Broker Day.Rep. Bob Ney, R-Ohio, led the effort to issue the proclamation, which was entered into the Congressional Record on May 11, the NAMB reported. The NAMB also announced that the association has declared June 2004 National Mortgage Broker Month. During the month, and throughout the year, NAMB members around the country will present a program titled "Are You Prepared to Head Down the Road to Homeownership?" The NAMB can be found online at http://www.namb.org.

There is about a one-in-seven chance of a general decline in home prices over the next two years, according to the PMI Risk Index, which has improved in recent months.The average value of the index for the 50 largest metropolitan statistical areas stood at 140 in May, down from 174 in February, said PMI Mortgage Insurance Co., the Walnut Creek, Calif.-based mortgage insurer that created the index. The index value means that these cities have on average a 14.0% probability of experiencing a home price decline in the next two years. San Jose, Calif., topped the index with a 442 (and therefore a 44.2% chance of a decline), followed by Denver, with 307, and the Charlotte-Gastonia-Rock Hill N.C.-S.C. MSA, with 303. PMI can be found online at http://www.pmigroup.com.

Freddie Mac and the National Association of Professional Mortgage Women have announced an educational alliance to strengthen the association members' origination and secondary-market knowledge and further their professional development.The offerings will include on-site and Web-based courses as well as customized classes provided by Freddie Mac. The NAPMW will award scholarships to members to attend alliance training courses. Training topics (for both novices and experienced professionals) include loan underwriting, loan pricing and delivery, and servicing. Freddie Mac offers more than 15 courses nationwide and over 30 online. The NAPMW can be found on the Web at http://www.napmw.org.

Countrywide Home Loans Inc., Calabasas, Calif., has announced the introduction of the Optimum Loan Program, which the company says can "help overcome common obstacles to qualifying for a mortgage loan."The special features of the program address obstacles such as nontraditional credit histories, minimal funds for a downpayment, commission-based salaries that vary from month to month, and high debt-to-income ratios. "Many individuals and families have personal finances and situations that do not easily fit within traditional financing guidelines," said Joe Anderson, senior managing director of Countrywide's Consumer Markets Division. ".... We want the Optimum Loan Program to prompt people to rethink their ability to buy a home." The program is available now via Countrywide's retail division and will be available soon through its wholesale channel. The company can be found online at http://www.countrywide.com.

The average 30-year fixed mortgage rate rose to 6.34% for the week ending May 14 from 6.12% the previous week, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate rose from 5.47% to 5.72%, and the average rate for one-year Treasury-indexed ARMs climbed from 3.76% to 3.90%. Fees and points averaged 0.7 of a point for all three mortgage categories. "Last month's huge surge in employment figures reaffirmed market expectations that the Fed will move sooner now rather than later," said Frank Nothaft, Freddie Mac's chief economist. "This put pressure on the bond market, and as yields grew, so did mortgage rates." A year ago, the average 30-year and 15-year fixed rates were 5.45% and 4.84%, respectively, and the average one-year ARM rate was 3.67%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

Fifteen classes of Credit Suisse First Boston commercial mortgage pass-through certificates, series 2002-FL2, have been downgraded by Moody's Investors Service.Classes A-2, A-X, A-Y-1, A-Y-2, and A-Y-3, all with notional values, were downgraded from Aaa to Aa1. The remainder of the downgrades, all floating-rate classes, were as follows: class B, from Aa2 to A1; class C, from A2 to Baa2; class D, from Baa2 to Ba2; class E, from Baa3 to Ba3; class F, from Ba1 to Ba3; class G, from Ba2 to B1; class H, from Ba3 to B3; class J, from B1 to Caa1; class K, from B2 to Caa2; and class L, from B3 to Caa3. Moody's said the certificates are collateralized by 19 mortgage loans ranging from 1.2% to 16.6% of the pool based on current principal balances. The rating agency attributed the downgrades to collateral performance that, while mixed, is below expectations overall. "The largest loan, the Fretus Portfolio Loan, has performed better than Moody's expectations, with the majority of the remaining loans performing worse," the rating agency said. "Loans secured by multifamily collateral in particular are performing poorly." Moody's can be found online at http://www.moodys.com.

Dynex Capital Inc., Glen Allen, Va., has reported a net loss to common stockholders of $6.6 million ($0.60 per share) for the first quarter, compared with net income of $12.5 million ($1.15 per share) for the same period last year.The company took a $7.2 million loan-loss provision in the first quarter, of which $6.1 million was related to its manufactured housing loan portfolio. Dynex said it expects to make a similar provision in the second quarter, but by the third quarter it will have substantially reserved its remaining net credit exposure on manufactured housing loans. The first-quarter loss includes a charge of $1.2 million stemming from preferred dividend arrears. As part of its recently approved recapitalization plan, Dynex's current preferred stock classes will be converted into a new series D preferred stock as well as 1.29 million shares of common stock. The series D preferred stock will pay a dividend of $0.95 per year; the arrears on the old preferred stock will be extinguished.

Total existing-home sales -- including condominiums and co-operatives -- stayed at near-record levels in the first quarter, rising in 42 states and the District of Columbia from the levels recorded a year earlier, according to the National Association of Realtors.The seasonally adjusted annual resales rate was 7.14 million units in the first quarter, up 7.2% from 6.66 million in the first quarter of 2003. However, the rate was down from 7.24 million in the fourth quarter, which was the second-highest level on record, the NAR reported. (The record rate of 7.36 million units was set in the third quarter of 2003.) The biggest year-over-year gains were recorded in Nevada, where the resale rate was up 44.3%; Alaska, up 30.5%; and Alabama, up 28.6%. The NAR can be found online at http://realtor.org.

Investment banker Sandler O'Neill, a long-time bull on Fannie Mae, has reduced its earnings estimates on the mortgage giant, citing the company's troubles with its $8 billion manufactured housing portfolio.Sandler O'Neill analyst Mike McMahon reduced his 2004 earnings estimate by $0.17 a share to $7.83. Mr. McMahon notes in an analyst report that Fannie will take an after-tax hit of between $156 million and $169 million on the MH portfolio. Sandler, though, is maintaining a "buy" rating on the company. "The primary risk to our target price continues to be headline/political risk," it says.

The Market Composite Index, an overall measure of mortgage applications, fell from 780.9 to 742.2 on a seasonally adjusted basis during the week ended May 7, while the ARM share of applications reached the highest level in nearly 10 years, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications fell 4.1% on the week and were down 45.2% from the level of a year earlier. The Purchase Index climbed from 482.5 to 494.3 on a seasonally adjusted basis, while the Refinance Index fell from 2516.0 to 2184.6. Refinancings represented 39.8% of total applications, down from 44.0% the previous week, while adjustable-rate mortgages accounted for 34.8%, the highest percentage since the 35.5% recorded in the week ended Dec. 2, 1994, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages rose from 6.10% to 6.32%, and points (including the origination fee) rose from 1.38 to 1.44 for loans with 80% loan-to-value ratios, the MBA reported. The MBA can be found online at http://www.mortgagebankers.org.

The Independent Community Bankers of America has announced the formation of a national alliance with Habitat for Humanity International to enable community bankers to help more low-income families attain "affordable, dignified" housing.The two organizations signed a formal agreement creating the alliance during the ICBA's annual Joint Committee Meetings in Washington, D.C. "Many of our members already work with Habitat for Humanity in their local communities," said Camden R. Fine, the ICBA's president and chief executive officer. The alliance "merely strengthens the common goal" to help provide affordable housing to every possible family, he said. The organizations can be found online at http://www.icba.org and http://www.habitat.org.

Members of the House Republican leadership have sent a letter urging Treasury Secretary John Snow to extend the "make available" requirement of the Terrorism Risk Insurance Act until Dec. 31, 2005, the Mortgage Bankers Association has reported.According to the letter, TRIA has brought "greatly needed stability" to the insurance market. "However, this year's expiration of the 'make available' provision may likely cause the disappearance of a viable market for terrorism insurance," the GOP representatives say. "An inadequate supply of terrorism insurance could trigger bond downgrades, destabilize the capital markets, and sharply reduce the availability of loan capital for commercial real estate. Under this scenario, the cost of borrowing would increase, thus undermining economic and employment growth in the vital construction and real estate sectors." The MBA reported that the letter is signed by Rep. Roy Blunt, House majority whip; Rep. Deborah Pryce, chairman of the House Republican Conference; Rep. Eric Cantor, House chief deputy majority whip; and Rep. Thomas M. Reynolds, chairman of the National Republican Congressional Committee.

Meanwhile, the National Association of Realtors is predicting that home sales will remain at near-record levels in the short run and then decline to levels that are still strong by historical standards.In the association's May real estate outlook, NAR chief economist David Lereah says economic growth should stay above historical averages over the next two years and that this should sustain home sales in spite of higher interest rates. "With mortgage interest rates bottoming out in March, we've had a big rush of homebuyers this year," Mr. Lereah said. "Home sales should hold close to record territory for a couple of months, then ease in the second half of the year but remain at historically strong levels." The NAR economist said the 30-year fixed mortgage rate should rise slowly, reaching 6.6% by the fourth quarter. This is an upward revision since the NAR's March outlook, when the association was projecting a 6.3% rate for the fourth quarter. The NAR can be found on the Internet at http://realtor.org.

Total home sales remain likely to set another record this year even though interest rate expectations have been revised upward and total originations will likely decline somewhat, according to Freddie Mac's latest economic forecast.In its May economic outlook, the government-sponsored enterprise predicts that home sales will total a record 7.29 million this year, slightly higher than sales in 2003 and up from the record 7.27 million Freddie Mac forecast in April. Amy Crews Cutts, Freddie Mac's deputy chief economist, said the GSE believes this could occur despite a rate-driven decline in its 2004 forecast for total originations from $2.8 trillion to $2.4 trillion. She said home sales will remain strong because purchase originations are expected to rise to record highs this year, offsetting a projected decline in rate-driven refinancing. Freddie Mac can be found online at http://www.freddiemac.com.

Ameriquest Mortgage Co., Orange, Calif., and the Texas Rangers have announced a 30-year agreement under which The Ballpark in Arlington has been rechristened Ameriquest Field in Arlington.Under the agreement, Ameriquest, the official mortgage company of Major League Baseball, will join the Rangers in a community outreach initiative to promote baseball and homeownership throughout the Arlington, Texas, area. A highlight of the initiative will be the Ameriquest/Rangers Habitat for Humanity program, the organizations said. Each year, Rangers and Ameriquest employees will join the Habitat for Humanity Council of North Central Texas to build three homes in the Dallas-Fort Worth metropolitan area for qualified families.