Originations

Standard & Poor's Ratings Services lowered its counterparty credit and financial strength ratings April 15 on ACE Capital Title Reinsurance Co. from AA to A-plus and then withdrew the ratings.The actions followed the filing of a Form S-1 registration statement in which Assured Guaranty Re Overseas Ltd. said it would transfer 100% of the stock ownership of ACE Capital to ACE Bermuda Insurance Ltd. in exchange for a promissory note of about $39.5 million that will be payable on completion of AGRO's initial public offering, according to the rating agency. S&P said ACE Capital "is effectively in run-off, though a marginal amount (about $5 million) of business will be written in 2004 under existing treaties." ACE Capital previously ceded part of its title business to Assured Guaranty Re International Ltd., and "AGRI in turn reinsured $100 million of limit in excess of $95 million to ACE Bermuda," S&P reported. In connection with the IPO, AGRI's reinsurance with ACE Bermuda will be terminated and ACE Capital's title business will be reinsured directly by ACE Bermuda, the rating agency said. S&P can be found online at http://www.standardandpoors.com.

HRPT Properties, Newton, Mass., is acquiring Dallas-based Hallwood Realty Partners for a total cash price of about $250 million.In addition, HRPT will either take on or prepay all of Hallwood Realty's outstanding debt, Hallwood said. Under the merger agreement, Hallwood, an owner and operator of office and industrial properties, will merge into a subsidiary of HRPT. Holders of Hallwood limited partnerships are to receive approximately $137.91 in cash per limited partnership unit, which is subject to adjustment in certain circumstances, Hallwood said. HRPT is also purchasing 330,432 units indirectly owned by Hallwood Group (the sole owner of Hallwood) and its related entities for about $66.8 million, subject to the price adjustments for the units. Anthony J. Gumbiner, chairman of Hallwood Group, said the merger "provides the best opportunity for all of our partners to realize the value of their interests in the partnership." The merger is subject to unitholder approval.

The NAHB Housing Market Index jumped in April, rising from 64 in March to 69, according to the National Association of Home Builders.In addition, the index gauging builder sentiment about the current single-family sales market rose six points to 76, as did the measure of expected sales over the next six months. The reading for prospective homebuyer traffic declined one point to 48, the NAHB said. "We expect the demand for single-family homes to remain quite strong in coming months, despite the rise in long-term mortgage rates, as growth in employment and household income accelerates," said NAHB chief economist David Seiders. Anything above 50 in the index and its components, which are based on surveys of hundreds of builders, means homebuilders believe that the single-family housing market is doing well. The NAHB can be found online at http://www.nahb.com.

Single-family housing starts rose 5.5% in March as construction activity accelerated in response to better weather, low mortgage rates, and strengthening economy.The U.S. Census Bureau reported that single-family starts increased from a seasonally adjusted annual rate of 1.52 million in February to 1.60 million in March. The February number was revised upward from 1.49 million. Despite a strong first quarter, economists at the National Association of Home Builders say they expect construction activity to slow in the second half of the year due to rising mortgage rates. "It may take a few months before the negative impact of higher rates kicks in, but it will matter," NAHB economist Michael Carliner said. The NAHB is forecasting 1.461 million single-family starts this year, down from 1.499 million in 2003. But the strong first-quarter numbers may prompt the NAHB economists to revise the 2004 number "up a little more," Mr. Carliner said. Meanwhile, multifamily starts jumped 11.2% in March to a seasonally adjusted annual rate of 377,000 units. The Census Bureau's construction statistics can be found online at http://www.census.gov/const/www/index.html.

CenterPoint Properties Trust, Oak Brook, Ill., has announced an agreement in principle to sell a $400-500 million portfolio to a U.S. real estate investment trust that will be a subsidiary of a yet-to-be-formed Australian listed property fund.If the transaction occurs, approximately 60% of the buildings would be sold in June, with the balance to close in the first quarter of 2005. CenterPoint said it expects to invest a majority of the proceeds in new build-to-suit developments, redevelopments, and other "value-added" investments. "The sale would allow the company to efficiently bundle the majority if its budgeted 2004 and 2005 sales to one buyer," said John S. Gates Jr., CenterPoint's co-chairman and chief executive officer. "In addition, it would fund -- and fix the cost of -- the preponderance of our capital needs for the next two years." The REIT can be found online at http://www.centerpoint-prop.com.

Meanwhile, industry experts at another conference said the recent 15% downdraft in real estate investment trust stock prices was overdue.Jon Fosheim, principal and co-founder of Green Street Advisors Inc., said REIT stocks were trading at a premium and the correction was necessary. "The time had come. The REITs were overpriced," he told a real estate conference sponsored by the Urban Land Institute Washington. "We think REITS are now trading right on top of their real estate values." Richard Kincaid, president and chief executive officer of Equity Office Properties Trust, noted that REIT stocks have outperformed the broader market for the past four years and said some investors decided it was time to rotate into other stocks. "We were due for a correction, as painful as it was," Mr. Kincaid said.

The real estate investment trust sector should yield an overall return of 12% for 2004, according to David Fick, a managing director with Baltimore-based Legg Mason.Speaking at a real estate investment trust investing conference sponsored by the New York Society of Security Analysts, Mr. Fick said, "Let's not get crazy and start thrashing ourselves over a couple of weeks' losses." He was referring to the negative impact on the REIT sector of recent signs of a strengthening economy. The long-term outlook still remains good for REITs, he said, considering the increasing demand for the securities, and given that there are few alternatives, especially for income-oriented investors. Legg Mason has projected that about five REITs will go private, merge, or liquidate this year. A rising interest rate environment poses a risk for the sector, according to Mr. Fick, but he noted that historically there has been a low correlation between rising interest rates and negative effects on REITs.

Karrison Compagnie Inc., Dallas, has reported the acquisition of all issued and outstanding shares of American Fidelity Inc., a mortgage banker based in Baton Rouge, La., in exchange for 9.2 million shares of Karrison's common stock.Karrison also announced that its board of directors has appointed Randal A. Gomez as chairman and president of Karrison, which has changed its name to American Fidelity Financial Services Inc. The company can be found online at http://www.americanfidelity.com.

JPMorgan Chase & Co., New York, and Bank One Corp., Chicago, which are expected to merge later this year (pending approval), have committed to investing $800 billion in home mortgages, small business lending, and community development lending across the country over the next 10 years.Key aspects of the initiative -- termed the largest of its kind -- include $675 billion in housing investments for minority and low-income communities and borrowers, and credit counseling, the companies said. Another $90 billion will assist community-based small businesses and nonprofits through loans and investments, in addition to technical support. And $35 billion, which includes $1 billion for community development financial institutions, is earmarked for affordable housing and commercial and economic development in low and moderate-income communities. In addition, several new offices, such as a homeownership preservation office and a financial education partnership office, will help people stay in their homes and provide financial education, anti-predatory lending programs, and other targeted assistance, the companies said.

Median home prices are likely to rise at an annual rate of 2.5% to 3.0% over the next five years, according to Prudential Real Estate Investors, Parsippany, N.J., which has developed a new model to predict housing prices.PREI said housing price appreciation is driven by three factors: income growth, interest rates, and the amount households are willing to spend on mortgage payments. "Some analysts have suggested that irrational exuberance has propelled the U.S. housing market and are predicting that the market is poised for a collapse in values," said Youguo Liang, managing director of research at PREI. "However, market drivers indicate that the market is structurally sound and should weather impending interest rate hikes without a catastrophe." The company said the national median home price has never fallen, and contends that even though rising interest rates could put downward pressure on prices, rising income should offset the effect of the rate increases. PREI is an investment management and advisory business of Prudential Financial Inc.

The Mortgage Bankers Association hiked its production forecast for 2004 on Wednesday but cautioned that the Federal Reserve could tighten credit sooner than most think -- maybe even by June.The MBA now believes that residential production will total $2.6 trillion this year, compared with its January forecast of $2 trillion and an April update to $2.5 trillion. The trade group's chief economist Doug Duncan said he believes the yield on the 10-year Treasury -- which has been rising steadily for two weeks -- should end the year at 4.4%. (At the close of business Wednesday, the 10-year was yielding 4.38%.) Mr. Duncan said that even though the yield has been increasing of late, he is confident that the run-up is not sustainable. Until recently many economists believed the Fed would not hike short-term rates until December, but better-than-expected job numbers and retail sales have spurred many Fed watchers to change their minds. (See the April 19 issue of National Mortgage News for more details.)

The average 30-year fixed mortgage rate rose to 5.89% for the week ending April 16 from 5.79% the previous week, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate rose from 5.12% to 5.23%, and the average rate for one-year Treasury-indexed ARMs climbed from 3.65% to 3.69%. Fees and points averaged 0.6 of a point for all three mortgage categories. "With economic news continuing to point to a growing economy, the financial markets are beginning to think about the likelihood of inflation again," said Frank Nothaft, Freddie Mac's chief economist. "Not only that, but jobs creation, retail sales, and consumer prices jumped in March, which buoyed market speculation that the Federal Reserve Board will raise rates sooner than expected. Add all that to the mix, and mortgage rates were bound to rise this week." A year ago, the average 30-year and 15-year fixed rates were 5.82% and 5.12%, respectively, and the average one-year ARM rate was 3.79%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

The federal Interagency Task Force on Fair Lending has published a Spanish-language version of a brochure that alerts consumers to borrowing pitfalls, including high-cost home loans, and offers tips for getting the best financing deal.The brochure, Utilizar su hogar como garantía para un préstamo es arriesgado (Putting Your Home on the Loan Line Is Risky Business), warns that borrowing from an unscrupulous lender, especially one that offers a high-cost loan using the home as security, could result in the loss of the home. Among the members of the task force are the Department of Housing and Urban Development, the Federal Deposit Insurance Corp., the Federal Housing Finance Board, the Federal Reserve Board, the Office of the Comptroller of the Currency, the Office of Federal Housing Enterprise Oversight, and the Office of Thrift Supervision. The brochure is available on the agencies' websites. HUD can be found online at http://www.hud.gov.

Mike Berkley has been named vice president and director of sales at Master Financial Inc., a mortgage banking company based in Orange, Calif.Master Financial said Mr. Berkley has been with the company for 11 years, including stints as a wholesale account executive, a technology salesman, and a manager of Southern California wholesale business. Master Financial, a subprime and alternative-A wholesale mortgage banker, can be found online at http://www.mfiloans.com.

A new initiative to help holders of federal housing rental vouchers become homeowners has been launched by Freddie Mac, the Montgomery County (Pa.) Housing Authority, and Harleysville National Bank and Trust Co.The Choose to Own Montgomery County campaign will provide holders of Section 8 Housing Choice rental vouchers greater access to special 30-year, fixed-rate Community Gold mortgages through Freddie Mac and Harleysville National Bank. Community Gold mortgages offer more underwriting flexibility and permit downpayments of as little as 2% of the purchase price, Freddie Mac said. "By purchasing mortgages made by Harleysville National Bank, Freddie Mac ensures a constant flow of mortgage credit to Montgomery County borrowers eligible for the Housing Choice voucher program," the government-sponsored enterprise said. The initiative is aimed at boosting the MCHA's existing effort to help qualified low-income residents use rental vouchers for homeownership. The housing authority was awarded a grant from the Montgomery County commissioners to provide closing-cost assistance in the form of a loan that is forgivable after eight years of homeownership, Freddie Mac said. The GSE can be found online at http://www.freddiemac.com.

Four critical "gaps" -- involving information, affordability, credit, and confidence -- must be addressed in order to close a fifth one, the gap between the overall homeownership rate and the minority homeownership rate, according to Fannie Mae's annual National Housing Survey.The survey found a significant difference in the levels of accurate homebuying information between the general public and minority communities, especially Hispanic households where Spanish is the predominant language. The survey also found an affordability gap between the general public and groups such as renters, lower-income families, and people who began, but did not complete, the homebuying process. A credit gap -- related to reported levels of experience with credit and debt -- was also found to exist between Spanish-dominant Hispanics and most other groups. Only 15% of Spanish-dominant Hispanics say they have a great deal of experience in this area, compared with 40% of the general public, Fannie Mae reported. Regarding confidence, the survey found that African-Americans and Spanish-dominant Hispanics were significantly less confident than the general public that they could successfully complete the homebuying process. Fannie Mae can be found online at http://www.fanniemae.com.

The Market Composite Index, an overall measure of mortgage applications, plummeted from 1012.9 to 788.6 on a seasonally adjusted basis during the week ended April 9, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications fell 21.5% on the week and were down 29.1% from the level of a year earlier. The Purchase Index declined from 477.5 to 432.2 on a seasonally adjusted basis, while the Refinance Index plunged from 4126.7 to 2861.6. Refinancings represented 50.4% of total applications, down from 57.1% the previous week, while adjustable-rate mortgages accounted for 29.4%. The average contract interest rate for 30-year fixed-rate mortgages rose from 5.75% to 5.77%, and points (including the origination fee) rose from 1.27 to 1.33 for loans with 80% loan-to-value ratios, the MBA reported. The MBA can be found online at http://www.mortgagebankers.org.

M.D.C. Holdings Inc., a Denver-based home builder and mortgage lender, has renewed its $600 million unsecured credit facility, increasing the total commitment amount to $700 million with an option to expand it to $850 million under certain circumstances.In addition, the term on the facility was extended to April 7, 2009. The lead arranger and sole book manager for the facility is Bank One Capital Markets Inc., and 15 other lenders are participating in the facility, the company said.

Scott Bice, commissioner of the Nevada Mortgage Lending Division, has issued a cease-and-desist order and a $10,000 fine to Omni Home Financing Inc., doing business as Complete Home Loans, for unlicensed activity, including the use of advertising simulating a government entity.The company, which has a Nevada license for its Las Vegas location, distributed direct mail to solicit business from a Nevada resident, listing an 800 number and an address in San Clemente, Calif., where the company's call center is located. The mailing included language suggesting that it was directed from a government entity. Under Nevada law, a mortgage broker cannot have an office licensed outside the state, and it must submit any advertisement to the division for approval. Complete Home Loans had no comment on the matter.

Countrywide Home Loans Inc., Calabasas, Calif., and Montana-based Coldwell Banker Wachholz & Co. have announced the formation of Granite Peak Mortgage Services in Kalispell, Mont.Granite Peak, an operating division of Countrywide Mortgage Ventures LLC, will offer more than 130 loan programs, including zero-downpayment loans and a variety of fixed- and adjustable-rate options. The companies said a homebuyer will have access to a Granite Peak consultant who works closely with Coldwell Banker Realtors to develop personalized financing options. Countrywide can be found on the Web at http://www.countrywide.com.