Originations

Last year was the most stressful year for commercial mortgage loans since the early 1990s, according to a Standard & Poor's study of such loans.The rating agency said defaults among S&P-rated commercial mortgage loans originated between 1993 and 2002 reached a total of 399 in 2003. This represents 30% of all S&P-rated mortgage loans that defaulted as of Dec. 31, 2003. However, the study found that credit support levels for existing commercial mortgage-backed securities transactions "are at comfortable multiples of the expected base-case loss." Dr. Joseph Hu, managing director of research in the S&P structured finance group, said the study results "imply that the credit performance of newly originated loans will be more resilient. The base-case loss is also likely to be substantially lower than those of the older vintages." The rating agency can be found online at http://www.standardandpoors.com.

New Century Financial Corp., a subprime mortgage lender based in Irvine, Calif., has reported that its board of directors has voted to convert the company into a real estate investment trust.The company said several factors figured in the decision, including tax efficiency and the potential for increased growth and shareholder return. The decision is subject to final board approval of legal, accounting, and financial details and to shareholder approval. New Century can be found online at http://www.ncen.com.

Neil P. Cullen has been named managing director and a member of the Office of the President of PW Funding Inc., the mortgage banking subsidiary of New York-based CharterMac.In addition, Mr. Cullen will oversee all the sales and marketing efforts for market-rate loan production for PWF, CharterMac said. He will join PWF's new office in Washington, D.C., and will share the responsibilities of the Office of the President with William Hyman and Kelly Schnur. Mr. Cullen was most recently principal and president of his own firm, The Cullen Cos., a Washington-based consulting company in the commercial and multifamily mortgage banking industry. CharterMac can be found online at http://www.chartermac.com.

Stewart Title of Pueblo, Colo., has acquired First American Title Co. of Southern Colorado, located in La Veta, which will be renamed Stewart Title of Huerfano County.The terms of the transaction were not disclosed. Stewart Information Services Corp. said Neal J. Cocco, the previous owner of First American, will serve as branch manager for the renamed company. Stewart Title Co., a wholly owned subsidiary of Stewart Information Services, has a majority interest in Stewart Title of Pueblo. (First American Title Insurance Co. had no ownership interest in First American Title Co. of Southern Colorado, Stewart said.) Stewart Title of Pueblo can be found at http://www.stewartpueblo.com.

Three classes of COMM 2000-FL3's commercial mortgage pass-through certificates have been downgraded by Fitch Ratings.The downgrades were as follows: class K-SR, from BBB to B; class L-SR, from BBB-minus to B-minus; and class D, from BB to BB-minus (and placed on Rating Watch Negative). In addition, class C was placed on Rating Watch Negative and the ratings on two other classes in the deal were affirmed. Fitch said the downgrades on classes K-SR and L-SR stemmed from "continuing concerns with the low occupancy and weak market conditions associated with Sunnyvale Research" and attributed the downgrade and Rating Watch placement of class D to "the deteriorating performance and refinance risk of the Whitehall Conference Center and Sunnyvale Research loans." Fitch can be found online at http://www.fitchratings.com.

Class M of Lehman Brothers Inc.'s LB 2002-LLF C3 commercial mortgage pass-through certificates has been downgraded from BB to BB-minus and removed from Rating Watch Negative by Fitch Ratings.The rating agency also upgraded three classes from the deal, removed two of them from Rating Watch Negative, and affirmed the ratings on 15 others. Fitch attributed the downgrade to the deteriorating performance of the Michigan Industrial Portfolio, which represents 17.8% of the pool, and to concerns about the Boulder Portfolio (8.1%) and the Decorative Center of Houston (4.3%). Fitch can be found online at http://www.fitchratings.com.

Debra A. Jones has resigned as executive vice president and co-chief operating officer of Richmond, Va.-based Cornerstone Realty Income Trust Inc., the real estate investment trust has reported.The multifamily REIT said Ms. Jones resigned to "spend more time with her family and pursue other interests." As a result of the resignation, the other EVP/co-COO, David L. Carneal, will become the COO. Cornerstone can be found online at http://www.cornerstonereit.com.

The SNL Equity REIT Index ended the first quarter at an all-time high as the real estate investment trust sector continued its strong performance, according to SNL Financial, a Charlottesville, Va.-based information provider.The index maintained by SNL posted a total return of 12.1% for the quarter, far outperforming the S&P 500 and the Russell 3000, which returned 1.3% and 2.2%, respectively, the company said. Of the various real estate sectors, retail REITs turned in the best performance, yielding an 18.9% return for the period, SNL said. Health care REITs were close behind, with a 17.2% return, and industrial REITs finished third, at 12.6%. Residential REITs returned only 4.6% on the quarter, SNL reported. The company can be found on the Web at http://www.snl.com.

The dollar volume of primary private mortgage insurance written during February totaled $14.4 billion, down 1.7% from $14.7 billion in January, according to data from the Mortgage Insurance Cos. of America.However, the number of certificates issued increased by 8.2% from 126,677 in January to 137,948 in February. (More certificates issued means more borrowers served.) A better sign of the interest rate environment in February was that application volume was up 12.8%, to 140,648 -- not as high as the levels seen during the refinance boom, but comparable to those of the last two months of 2003. Any industry data garnered since July 2003 must be taken with the caveat that it no longer includes The Radian Group, which withdrew as a MICA member. Another number that hit bottom in January was the cure/default ratio, which stood at 67.9%. In February that turned around and, for the first time since April 2003, there were more cures than defaults. The ratio is now 111.8%, with 45,900 cures and 41,010 defaults. MICA can be found online at http://www.micanews.com.

Falling interest rates forced the nation's mortgage bankers and brokers to add more workers in February, according to new employment numbers released Friday by the Bureau of Labor Statistics.Mortgage-related firms added 4,200 full-time workers during the month, bringing total industry employment to 436,700. Industry employment had been falling steadily since last July, when mortgage rates hit a 40-year low. Rates have risen steadily -- with a few hiccups -- since last summer, but over the past six weeks they have fallen again. However, the yield on the 10-year Treasury spiked Friday when new BLS figures showed the nation's overall employment rate rising. If the yield on the 10-year stays where it is (around 4.1%) or moves higher, mortgage firms may begin cutting workers once again. The yield on the 10-year recently stood at 3.71%. The BLS can be found online at http://stats.bls.gov.

Hanover Capital Mortgage Holdings Inc., Edison, N.J., has announced that it will notify the Securities and Exchange Commission of a late filing of its annual report on Form 10-K.Hanover, a mortgage real estate investment trust, said the reason for the delayed filing is a review of the accounting treatment for certain previously disclosed items relating to an amendment to a Contribution Agreement between the company and four of its executive officers. If the accounting treatment is revised, the company said its forthcoming annual report would contain a change to the earnings announced Feb. 23, and the company's compensation expense for 2003 would increase by approximately $1.26 million, or $0.22 per share. However, Hanover said there would be no effect on historical or future dividends.

Developers Diversified Realty, Cleveland, is purchasing a portfolio of 110 retail properties from Benderson Development Co. for a total price of about $2.3 billion.The real estate investment trust said the acquisition of the properties, totaling 18.8 million square feet, will be funded through a combination of assumed debt, new debt financing, asset sales, and public and private equity. DDR's Australian joint venture partner, Macquarie DDR Trust, might also invest in the acquisition, the retail REIT said. The Benderson portfolio includes properties in 11 states, with about 80% of the gross leasable area located in New York and New Jersey. The acquisition is expected to bring DDR's total holdings to 470 properties, encompassing over 100 million square feet, in 44 states. DDR said it plans to increase its common share dividend by 10.9% beginning in the third quarter, based on expectations of additional earnings following the acquisition.

For the second time in the past three months, the Eleventh Federal Home Loan District Cost of Funds Index has increased from a record a low.The index for February, as calculated by the Federal Home Loan Bank of San Francisco, stood at 1.841%, up 3 basis points from its all-time low of 1.811% in January. In December, the index climbed to 1.902% from its then-record low of 1.821%. COFI is one of several popular indices that are used to index adjustable-rate mortgages. Industry observers have noticed an increase in adjustable-rate mortgage activity since the beginning of the year, aided by the extremely low starting rates for ARMs. The Freddie Mac Primary Mortgage Market Survey for March 25 found that the one-year Treasury ARM had an average start rate of 3.36%, the lowest in survey history. The company recently announced changes to the Seller/Servicer guide that would make it easier to sell certain ARM products -- most notably loans indexed to the London interbank offered rate -- by making them a standard product.

New Jersey's new predatory lending law has prompted a "startling" decline in subprime lending in the state, according to a study conducted for the National Home Equity Mortgage Association and the National Association of Mortgage Brokers.NHEMA said the study by Richard F. DeMong, a finance professor at the University of Virginia, found that subprime cash-out refinance loans fell by 67.2% in New Jersey in just two months, and home improvement loans dropped by 75.4%. "The study's results are statistically significant and quite startling," Dr. DeMong said. "They show that the New Jersey Home Ownership Act has unintentionally sharply reduced legitimate lending to deserving borrowers. We estimate that lending through the lenders and mortgage brokers surveyed for this study fell by up to $1 billion in just two months." NHEMA can be found online at http://www.nhema.org.

The Illinois Appellate Court for the First Judicial District has ruled that the Illinois Interest Act pre-empts two federal laws that ban certain types of predatory lending.Justice Calvin Campbell's ruling could significantly affect mortgage lenders and homeowners in the state in regard to high-fee, high-interest, and subprime loans. The decision means that the vast majority of subprime lenders in Illinois could collect damages that include twice the total of all interest, discount, and charges due under the loan or paid by the homeowner. The move comes after a Circuit Court judge declared that the Depository Institutions Deregulation and Monetary Control Act and the Parity Act, both federal laws, pre-empted the state law. Several low-income homeowners facing foreclosure on subprime loans had counter-sued various banks in Circuit Court, alleging that the loans violated the Illinois Interest Act prohibition on combining fees in excess of 3% of the principal with an interest rate in excess of 5%.

The average 30-year fixed mortgage rate rose to 5.52% for the week ending April 2 from 5.40% the previous week, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate rose from 4.70% to 4.84%, and the average rate for one-year Treasury-indexed ARMs climbed from 3.36% to 3.46%. Fees and points averaged 0.6 of a point for all three mortgage categories. "In advance of what is hoped will be a strong jobs report [Friday], bond yields rose this week and, predictably, so did mortgage rates," said Frank Nothaft, Freddie Mac's chief economist. "The economy has been conducive to job gains for several months, but we have yet to see any significant rise in employment." A year ago, the average 30-year and 15-year fixed rates were 5.79% and 5.06%, respectively, and the average one-year ARM rate was 3.82%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

Countrywide Financial Corp., Calabasas, Calif., has announced its expansion into the commercial mortgage market with the formation of Countrywide Commercial Real Estate Finance Inc., a subsidiary of Countrywide Capital Markets Inc.Countrywide said it has hired principals from Coastal Capital Partners LLC, Sausalito, Calif. -- Stewart Ward, Boyd Fellows, Chris Tokarski, and Warren de Haan -- as executive vice presidents of the new commercial lending unit, as well as seven others from Coastal Capital. The new unit will be based in Calabasas, with a sales office in Sausalito, and Countrywide said it expects to establish additional offices in New York and Chicago. In other company news, Countrywide announced an addition and several promotions in its banking and insurance groups: Carlos Garcia was promoted to executive managing director of banking and insurance operations; Andrew Gissinger III was promoted to senior managing director and chief executive officer of the banking and insurance group; James S. Furash was promoted to senior managing director; and Robert V. James was hired as president and chief operating officer of Balboa Life & Casualty Group of Insurers. The company can be found online at http://www.countrywide.com.

Fieldstone Investment Corp., Columbia, Md., has reported a one-time adjustment that increases by $14 million its earnings for the fourth quarter and for all of 2003.The adjustment resulted from the recognition of a $14 million deferred tax asset in 2003, with a corresponding reduction of the company's federal and state income taxes, Fieldstone said. Fieldstone is taxed as a real estate investment trust, while its origination subsidiary, Fieldstone Mortgage Co., is a taxable REIT subsidiary. Fieldstone's filing of the TRS election in the fourth quarter required it to record a deferred tax asset on its books for "the temporary differences between the GAAP and tax basis of assets and liabilities within its financial statements," the company said.

Vestin Group Inc., a Las Vegas-based commercial mortgage lender, has announced that it will report a net loss of approximately $5.2 million ($1.16 per share) for 2003, compared with a net loss of $3.8 million ($0.54 per share) in 2002.The company said its final audited results will be delayed because of a recent change in auditors. For the fourth quarter, Vestin said it will report a net loss of approximately $2.4 million ($0.50 per share), compared with a net loss of $1.0 million ($0.23 per share) a year earlier. The losses were attributed to "a significant increase" in Vestin's sales and marketing expenses, increases in valuation losses and reserves, and "significantly lower loan demand due to economic conditions and increased competition from traditional lenders." Vestin recently engaged Moore, Stephens, Wurth, Frazer & Torbet LLP as its independent auditor to succeed Ernst & Young LLP.

DeepGreen Financial, Cleveland, has announced the creation of GreenMax, a new business channel that will deliver the company's home equity lending platform to banks, credit unions, and other financial services companies.The company said GreenMax will provide the services on either a private-label or a co-branded basis. "GreenMax is extremely flexible," said Jerome Selitto, DeepGreen's chief executive officer. "We will originate, buy, and service loans or originate and deliver the assets to clients; [and] we will accommodate our partner's underwriting guidelines, close in our name or our client's, or handle just underwriting or processing." The company said GreenMax will focus initially on home equity products, but expects eventually to offer other rules-based financial products such as student, personal, auto, and boat loans. DeepGreen can be found online at http://www.deepgreenfinancial.com.