Originations

According to Freddie Mac's Primary Mortgage Market Survey, long-term mortgage rates continue to slowly increase in line with the current economic growth.Specifically, the 30-year fixed-rate mortgage averaged 5.94%, with an average 0.7 point, for the week ending April 22, 2004, up from last week when it averaged 5.89%. Last year at this time, the 30-year FRM averaged 5.79%. The average for the 15-year FRM this week is 5.25%, with an average 0.7 point, up slightly from last week when it averaged 5.23%. A year ago, the 15-year FRM averaged 5.12%. One-year Treasury-indexed adjustable-rate mortgages averaged 3.69% this week, with an average 0.7 point, unchanged from last week. At this time last year, the one-year ARM averaged 3.79%. "Although this past month's dramatic rise mortgage rates is consistent with an economic recovery, it will take more than one month of strong employment gains to verify if this recovery is sustainable," said Freddie's chief economist Frank Nothaft.

Commerce National Bank, Fullerton, Calif., said it has decided to terminate the planned opening of its mortgage division.The four-month old bank's president Mark Simmons said "it became clear to us that despite our best efforts we could not project a profitable mortgage operation with the loans we would be permitted to offer to the public." Instead, the bank has elected to create a real estate division and has hired Jo Pedrojetti as senior vice president in charge. Mr. Simmons said, "Jo brings 20 years of experience right here in Orange County in all types of construction lending as well as an expertise in permanent loans on commercial income property, commonly called Mini Perm loans. Adding Jo to our staff gives us the ability to make construction loans on small housing tracts, single-family homes, industrial buildings and office buildings."

Adjustable-rate lending specialist Golden West Financial, parent of World Savings Bank, earned $1.93 per share in the first quarter, up 16% from the same period a year earlier.Golden West chairman and CEO Herbert Sandler attributed the record $299.7 million in first quarter net earnings to the desirability of ARM products. Record lending volume of $9.4 billion in the first quarter exceeded loan payoffs, allowing Golden West to grow its portfolio by $4.8 billion, or 24%.

The National Association of Home Builders now expects the Federal Reserve Board to start tightening short-term interest rates by the end of summer.Chief economist David Seiders originally forecast the Fed would wait until after the November elections to raise the Federal Funds Rate, however improvements in job growth and higher core inflation are now likely to provoke some tightening in August, nearly 90 days before the Presidential election, Mr. Seiders said at the NAHB's Spring Forecast Conference in Washington. Mortgage Bankers Association chief economist is watching the inflation numbers carefully, but he told Mortgage Wire he is not yet ready to change his interest rate forecast. Fannie Mae's chief economist, David Berson, said his forecast, which calls for two and possibly three "tightenings" by the Fed this year, already accounts for a modest rise in inflation. "We're hoping that if inflation comes back with any sort of vengeance, the Fed will cut it off at the knees," Mr. Berson told MW. Mr. Seiders now thinks the central bank will take the federal funds rate to 1.5% by year's end. "The economic recovery process has now evolved from a jobless affair to a full-fledged expansion," he said. The NAHB economist's forecast for long-term fixed-rate mortgages is now 6.2% by the end of this year and 7% by the end of 2005. While the initial impact of higher rates could be positive in the short-term if buyers who were taking a wait-and-see stance decide to take the plunge before rates go any higher, he added, higher rates are "bound to exert some drag on (housing) demand over time."

SL Green Realty, a New York-based office real estate investment trust, has formed Gramercy Capital, a specialty finance company that will focus on originating and acquiring loans and other fixed-income investments secured by commercial real estate.Gramercy is filing a registration statement with the Securities and Exchange Commission for an initial public offering of common shares, SL Green reported. The offering is expected to raise up to $200 million, which will give Gramercy access to capital, "a public company platform", and the infrastructure to grow SL Green's structured finance business within New York City, as well as into other markets and property types. SL Green is not contributing its existing fixed-income investment portfolio in connection with the IPO, the REIT said, but it will invest up to $50 million in the IPO and own about 25% of Gramercy's post-IPO stock base. An SL Green subsidiary will manage Gramercy, which is also opting for REIT status, for a fee.

Lorain, Ohio-based National Bank has signed a non-binding agreement to acquire Mortgage One Banc, also headquartered in Lorain.Lorain National will pay an undisclosed amount of cash for the mortgage company. "We see this opportunity as a logical step for Lorain National Bank. We feel Mortgage Banc will substantially improve our presence in the consumer mortgage area," said James Kidd, president and chief executive of LNB Bancorp. Mortgage One operates through multiple delivery channels in Ohio. The transaction is expected to close in the third quarter.

Vienna, Va.-based VirPack has announced an agreement with Countrywide to enable correspondents to make imaged delivery of loans to Countrywide possible.The partnership is expected to reduce costs and cycle times, as well as improve the loan purchasing process. Using VirPack Direct, which conforms to Countrywide's image loan delivery specification, Countrywide correspondents will be able to retrieve loans identified for delivery to Countrywide and electronically deliver entire imaged loan files in a secure fashion to expedite purchase review. Virpack Direct, an electronic delivery tool, is offered free to VirPack customers. The tool is integrated with VirPack's scan capture and electronic document management systems and allows users to capture only those loans they wish to deliver to Countrywide, or fully take advantage of VirPack's imaging and document management capabilities to enhance their back-shop processes.

Countrywide Financial Corp. reported consolidated net earnings of $691 million in the first quarter, up 112% over net earnings of $326 million in the first quarter of last year.Earnings per diluted share increased 82% to $2.22, Countrywide said. Adjusted to reflect April's three-for-two stock split, EPS would have been $3.33. Total loan production was $76 billion for the quarter, essentially unchanged from the fourth quarter of last year but lower than the $102 billion originated in the first quarter of last year. That $76 billion volume exceeded the originations of Wells Fargo Home Mortgage and Washington Mutual, making Countrywide the largest home loan producer in the quarter. Countrywide's mortgage servicing portfolio rose by $38 billion during the quarter, ending at $683 billion.

Mortgage applications slid 5.6% on a seasonally adjusted basis for the week ended April 16, according to the Mortgage Bankers Association of America's Weekly Mortgage Applications Survey.On an unadjusted basis, applications were down 5.0% on the week, and 27.8% lower than they were a year earlier. On a seasonally adjusted basis, the Purchase Index inched up to 434.1 from 432.2, and the Refinance Index climbed fell to 2550.3.8 from 2861.6. Refinancings represented 47.3% of total applications, down from 50.4% the previous week, while adjustable-rate mortgages accounted for 32.7%. The average contract interest rate for 30-year fixed-rate mortgages increased to 5.84% from 5.77%, and points (including the origination fee) increased to 1.36 from 1.33 for loans with 80% loan-to-value ratios, the MBA reported. The MBA can be found online at http://www.mbaa.org.

General Electric -- which four years ago dumped its 'A' paper mortgage unit and is in the process of getting out of mortgage insurance -- has agreed to buy WMC Mortgage, Woodland Hills, Calif., the nation's 12th largest subprime funder.GE's consumer finance division is acquiring the online wholesale lender for an undisclosed amount from Apollo Management LP, New York, a group headed by famed bargain hunger Leo Black. Mr. Black bought WMC back in 1997 when it was called Weyerhaeuser Mortgage and was funding mostly conventional loans. According to figures compiled by National Mortgage News WMC services $2.4 billion in loans, ranking 29th among all subprime servicers. As MortgageWire went to press on Wednesday, officials from both GE and WMC could not be reached for comment. One former GE Mortgage Insurance official said of his former employer: "I don't know what their motivation is."

Commercial real estate property types across the country are likely to rebound over the next year, with some exceptions, according to a report from Moody's Investors Service.Based on a scoring system the rating agency has developed, Moody's reports that scores for all property types, except the hotel sector, improved in the last quarter of 2003. And 33 regional markets improved by 15 points or more. Of the different property types, the multifamily sector was the best performing for the fourth quarter. The retail sector saw scores rise to 82, from 74 for the previous period. In the office sector, downtown properties performed better than suburban properties, with the downtown score rising to 58 from its previous score of 53. The industrial sector's score improved from 59 to 63. "Full-service" hotel properties saw their score decline to 53, from 57 for the previous period, while the score for "limited-service" hotel properties remains at 55.

Former Mortgage Bankers Association president Herbert B. Tasker has joined the board of directors of American Residential Investment Trust Inc., San Diego.He is currently vice chairman and managing director of AIG Centre Capital Group Inc. Previously he was the chairman and chief executive of Mason McDuffie Mortgage Co. and All Pacific Mortgage Co. Both companies were sold to larger firms, Mason McDuffie to Weyerhaeuser Mortgage Co., and All Pacific to Inland Mortgage. Mr. Tasker currently serves on the board of First American Title Co. ARIT chief executive John M. Robbins said, "Herb's extensive contracts in both the residential and commercial aspects of the business will be invaluable as we optimize the opportunities that lie ahead."

Wells Fargo & Co., the nation's largest mortgage servicer, reported record net income of $1.8 billion in the first quarter, or $1.03 per share, up 18% and 17% from the first quarter of last year, respectively.But Wells Fargo Home Mortgage saw its revenue fall amid lower mortgage lending volume. Revenue from Wells Fargo's mortgage unit was $800 million in the first quarter, one-third lower than during the first quarter of 2003. Wells originated $65 billion of home loans in the first quarter. The company expects to see stronger loan origination activity in the second quarter due to a drop in interest rates in March. Wells took $119 billion in home loan applications in the first quarter, up from $46 billion in the fourth quarter of last year. And the company owned a portfolio of mortgage servicing rights on $725 billion of home loans, up 19% from a year earlier. The company valued its MSR portfolio at $6.1 billion, down from $6.9 billion at the end of 2003.

Washington Mutual earned $1.05 billion, or $1.18 per diluted share in the first quarter, up 10% on a per share basis from one year earlier.WaMu's first quarter results included a $644 million pretax income from the sale of its former subsidiary, Washington Mutual Finance Corp., offsetting pretax restructuring and technology related charges of $68 million, a pretax charge of $89 million related to the early retirement of high-cost FHLB borrowings, and a pretax reduction of $107 million as a result of a one-time effect from a change in accounting for gain from mortgage loans. Income from mortgage banking was $220 million, less than half of the $497 million in mortgage banking income reported in the first quarter of last year. Adjustable-rate mortgages accounted for 53% of WaMu's $47.9 billion in home loan volume during the quarter. WaMu reported $920 million of impairment, amortization and other reductions in the value of its mortgage servicing rights during the quarter, but this was offset by hedging gains. WaMu increased its common share dividend by one penny to $0.43 per share, payable May 14 to shareholders of record as of April 30.

PrivateBancorp Inc., Chicago, has agreed to purchase Corley Financial Corp., a Chicago-based mortgage banker.Corley originated $180.0 million in 2003. PrivateBancorp currently outsources its mortgage production to Corley in a business relationship that was established about three years ago. Corley will become The PrivateBank Mortgage Co. after the deal closes and its current owner and chief executive James Brady will remain as a managing director and head the unit. "The Corley acquisition will allow us to better serve our clients and lower our costs in mortgage origination, while adding highly experienced mortgage lenders to our client service teams," said Ralph B. Mandell, PrivateBancorp chairman, president and chief executive.

A recent study indicates that last year was the strongest on record for title industry revenues, according to the American Land Title Association.Gross revenue totaled $16.56 billion for the industry, up 31% from that of the previous year, ALTA reported. The loss ratio (losses as a percentage of total operating income) was 4.0%, compared with 4.6% in 2002. Net income after taxes totaled $1.11 billion, compared with $558.6 million the year before. "This report proves what our members have been telling us: that in 2003 they were busier than they have been in years," said Richard McCarthy, ALTA's director of research. "No one could have predicted that consumers would refinance multiple times in six months or a year due to interest rates that continued to spiral downward to 40-year lows." The trade group can be found online at http://www.alta.org.

Ameriquest Mortgage Co., Orange, Calif., has signed on to be the official mortgage company of Major League Baseball.The company, a leading home equity lender, will use the affiliation to help in its move into the mainstream mortgage market. Noting that baseball and homeownership are two of America's national pastimes, Senior Executive Vice President Adam Bass said "Ameriquest belongs in baseball." As part of the sponsorship agreement, the company will be the title sponsor of the All-Star Game's in-stadium balloting program as well as the online balloting program via MLB.com and other online balloting. It also will make a significant commitment to national broadcast rights holders over the course of the 2004 baseball season, sponsor several individual teams and a spring training program with 15 teams in 2005. The affiliation with baseball is part of an aggressive sports marketing campaign for Ameriquest. In an effort to build brand awareness, the company's nonprime affiliate, Argent Mortgage, sponsors golfer Jim Furyk, race car driver Danica Patrick and swimmer Michael Phelps, and has tie-ins with the Triple Crown.

Although any run up in interest rates will have a profound effect on homebuyers at the margin, the nation's largest secondary mortgage market outlets don't think higher loan rates will have a big impact on mainstream buyers.Speaking at the MBA's National Secondary Market Conference, Freddie Mac's Paul Peterson said that mortgage rates have been in the 8%-9% range on average since 1971. There's "still plenty of room for a significant increase in interest rates without a huge impact" on the market, he said. Ginnie Mae President Ronald Rosenfeld agreed, offering that housing is not in jeopardy because it is "a huge part of the nation's social fabric" and "something practically all families strive for." Fannie Mae's Vice Chair, Daniel Mudd, said rising rates that are driven by a strong economy "can be managed." But he said an increase caused by a shock to the economy such as an oil crisis presents "a very difficult picture." Raymond Christman, president and CEO of the Federal Home Loan Bank of Atlanta, said the folks feeling the pinch of higher rates the most will be lower income buyers who will either have to remove themselves from the market or focus on lower cost alternatives. "What worries me most is basic affordability," Mr. Christman said. "If interest rates grow by 200-250 basis points, it will add 30% annually to the principal and interest payments on a $200,000 house."

Freddie Mac is joining the bandwagon for interest-only mortgages.Beginning July 1, the big secondary market institution will purchase and securitize an entire suite of IOs. The new "Initial Interest" loans, the first new products for the company in a decade, include several ARM options and a pair of fixed-rate mortgages, one with an initial 10-year interest-only period and the other with 15 years of interest-only payments, the company said at the Mortgage Bankers Association's National Secondary Market Conference & Expo in Washington. The new products not only give borrowers a tool to manage their own particular financial situations, they also offer lenders "a range of options to build a robust product line and increase origination volumes, and a competitive secondary market outlet if they're already originating these types of mortgages," said David Stevens, senior vice president of mortgage sourcing at Freddie Mac. Fannie Mae has been making a market for IOs since April 2001.

Remaining bearish on mortgage insurance company stocks, Zacks.com, Chicago, has once again given Milwaukee-based MGIC Investment Corp. a rating of #4 Sell.Zacks.com, the online unit of Zacks Investment Research, gave MGIC the same rating in January 2003. In the most recent report on MGIC, dated April 16, Zacks said earnings estimates for this year "have moved lower by $0.11, or about 2%, from one month ago, including a slump of $0.03 in the past seven trading days. MGIC Investment should get on a better track as it works through the problems that it faces, but investors may want to stay patient at the moment and hold off on opening or deepening a position until its earnings estimates rise." In August 2003, Zacks gave a #4 Sell rating to The PMI Group, Walnut Creek, Calif., and it gave Radian Group, Philadelphia, a #5 Strong Sell rating in January of this year. Zacks issued a second report on Radian with the same rating in March.