Originations

Freddie Mac has announced that its latest investment in a project backed by Low Income Housing Tax Credits brings its total LIHTC investments since 1988 to more than $3 billion.The latest equity investment of $5 million was in the rehabilitation of Jackson Park Terrace, a rental housing community on the south side of Chicago. "This project is preserving vital affordable housing while supporting neighborhood revitalization efforts," said Daryl Hall, vice president of multifamily asset management at Freddie Mac. "We have found LIHTC investments to be among the most effective ways we can expand the availability of affordable rental housing to people who need it most." Freddie Mac said it invests in LIHTC funds sponsored by nonprofit and for-profit syndicators, buys tax credits in the secondary market, and has its own investment fund, the Freddie Mac Equity Plus fund. Freddie Mac can be found online at http://www.freddiemac.com.

Fitch Ratings has expressed concern that "participated" commercial mortgage-backed securities loans, in which a single first-mortgage loan is split into more than one note and held by different parties, are becoming more and more complex.The rating agency says agreements that require multiple parties in servicing and workout decisions will frustrate borrowers, delay necessary action to preserve the collateral, increase trust expenses, and result in additional and unnecessary losses. "Fitch is concerned that recent participated loan structures are inefficient and the lack of uniform intercreditor provisions and servicing procedures are causing confusion in the market," said Daniel Chambers, a senior director at Fitch. In addition, the rating agency is concerned that "history will repeat itself, and the lessons we learned with syndicated loans from the early '90s will be forgotten." It also worried that the "excessive coordination required among servicers and multiple subordinate investors will slow servicer responsiveness, and delays will inevitably lead to greater loan losses." Fitch is seeing more participations in the post-9/11 environment, with issuers more inclined to split large loans so as to mitigate "event risk and diversity concerns."

Prime Retail Inc., Baltimore, has reported that its shareholders have voted in favor of its acquisition by an affiliate of The Lightstone Group, a New Jersey-based real estate company.Prime Retail, a real estate investment trust, said the total acquisition price is $115.5 million, plus the assumption of about $511 million of secured debt by the buyer. Prime Retail series A preferred shareholders are to be paid $18.40 per share in cash, the REIT's series B preferred shareholders $18.169 per share in cash, and the company's common shareholders $0.17 per share in cash. The company's series A preferred shareholders, mainly Merrill Lynch and Fortress Investment Trust II, had expressed their dissatisfaction with Prime's initial offer of $16.25 per share, causing the REIT to revise it upward. The payouts to the series B and common stockholders have been pared down, however, from an initial offer of $8.66 per share and $0.18 per share, respectively. The merger is expected to go through in the next month. Responding to this development, Prime Retail stock moved to $0.162 per share around midday Wednesday, up 16% from Tuesday's close of $0.14 per share. The REIT can be found online at http://www.primeretail.com.

The Market Composite Index, an overall measure of mortgage applications, rose to 663.2 on a seasonally adjusted basis during the week ended Nov. 14 from 626.0 the week before, according to the Mortgage Bankers Association of America's Weekly Mortgage Applications Survey.On an unadjusted basis, applications were down 6.6% on the week and down 51.9% from a year earlier. The Purchase Index rose from 375.4 to 425.9 on a seasonally adjusted basis, while the Refinance Index declined from 2084.2 to 2043.9. Refinancings represented 48.1% of total applications, down from 50.9% the previous week, while adjustable-rate mortgages accounted for 27.5%, their highest share in more than three years. The average contract interest rate for 30-year fixed-rate mortgages dropped from 5.94% to 5.64%, and points (including the origination fee) rose from 1.39 to 1.54 for loans with 80% loan-to-value ratios, the MBA reported. The MBA can be found online at http://www.mbaa.org.

General Electric plans to spin off its life and mortgage insurance units into a publicly traded $10 billion company called Genworth Financial.GE, which exited the residential origination/servicing business more than two years ago, will retain a 30% stake in the new unit. GE Mortgage Insurance, Raleigh, N.C., is the nation's third-largest mortgage insurer in terms of policies in force, and the fourth-largest in new policies written. (Both measures reflect units, not dollar volume, and are based on third-quarter rankings compiled by the Quarterly Data Report.) There are seven major MI firms operating in the United States. All are publicly traded or have a parent that is public. GE said it will file a registration statement with the Securities and Exchange Commission in January, and Genworth hopes to go public by midyear. About two months ago GEMI retreated from its triple-A rated status, a move that saved it about $1 billion. The switch to double-A was a harbinger of the initial public offering. Genworth will also include GE's international mortgage insurance and European payment protection businesses. "As a separate public company, Genworth will be able to pursue its own strategy with direct access to the capital markets to fund its own business initiatives," GE chairman and chief executive Jeff Immelt said. GE made the spinoff announcement Nov. 18.

The NAHB Housing Market Index fell three points to 69 in November after reaching its highest point in nearly four years in October, according to the National Association of Home Builders.In addition, the index gauging builder sentiment about the current single-family sales market fell one point, to 77, and the measure of expected sales over the next six months decreased three points, to 79. The reading for prospective homebuyer traffic fell six points, to 46, the NAHB said. "After the really solid sales activity of this summer and early fall, builders remain in very good spirits heading toward the holidays," said NAHB president Kent Conine, a home and apartment builder from Dallas. "However, we're seeing some slowdown in visitors to model homes." 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 jumped 5.7% in October to a new monthly record, and housing economists are wondering whether a 26-year-old annual record is about to fall.The Census Bureau reported that single-family starts increased from a seasonally adjusted annual rate of 1.53 million in September to 1.62 million in October. The annual record for single-family starts -- 1.45 million units -- was set in 1977. Last year, single-family starts totaled 1.36 million units. "Whether we are going to beat the 1977 total still depends on what happens the next couple of months," said Michael Carliner, an economist with the National Association of Home Builders. "But I think single-family starts will probably set a record. And we are fairly sure that single-family new-home sales and existing-home sales will set records." In 1997, there was a lot of overbuilding and building on speculation without a buyer lined up. "Today, there is very little spec building," Mr. Carliner said.

Cleveland-based KeyCorp. has announced that its real estate capital business has completed a $150 million syndicated transaction for Glimcher Realty Trust.KeyBank Real Estate Capital served as the sole lead arranger and administrative agent for the three-year secured line of credit, which was then syndicated, thereby helping Glimcher reposition its portfolio to free up capital for future acquisition and development opportunities, the company said. "The new credit facility lowers our interest rate cost, creates additional borrowing capacity, and allows us to maintain a large pool of unencumbered community center properties," said Michael P. Glimcher, president of Glimcher Realty. KeyCorp can be found on the Web at http://www.key.com.

Lynelle G. Dahn has been named chief financial officer of BridgeSpan Inc., a Frisco, Texas-based provider of real estate settlement and mortgage processing systems for lenders.Ms. Dahn, a certified public accountant, has provided financial and operational expertise to a variety of companies over a career spanning more than 20 years, BridgeSpan said. The company can be found on the Web at http://www.bridgespan.com.

FNB Southeast, Reidsville, N.C., has announced that it will establish a wholesale division of its mortgage subsidiary, FNB Southeast Mortgage Corp., in Greensboro, N.C., later this month.FNB Southeast said the division will initially have 12 employees and will work with independent mortgage brokers in the Carolinas, Virginia, Tennessee, Georgia, and Maryland to package and sell qualifying mortgage loans to investors. "Creation of the new division will allow us to expand the variety and quality of mortgage services we offer," said Ernest J. Sewell, president and chief executive officer of FNB Financial Services Corp., the parent company of FNB Southeast.

Equity analysts at Blaylock & Partners, New York, have initiated coverage of the mortgage insurance industry with a Buy rating on Radian Group and Hold ratings on MGIC Investment Corp. and PMI Group.In an overview of the sector, B&P analysts Joshua Shanker and Harry Fong characterize the industry as straddling the fence between a growth sector and a mature industry. Regarding Radian, the analysts said its transition into a diversified enhancement company may lead to reduced cyclicality in earnings. "Though mortgage defaults and weakening claims are likely to continue, Radian Group has the strongest geographic focus in its peer group, and Radian is currently reaping the benefit of high new business premiums," B&P said. The Hold rating on MGIC is based on an expectation that its losses will exceed the industry average due to its expansion into higher-yielding subprime mortgage loans and higher-default markets, B&P said. In the case of PMI, the analysts said they want to see how it handles its pending acquisition of Financial Guaranty Insurance Co., a bond insurer. B&P can be found online at http://www.blaylocklp.com.

Amstar Financial Services Inc., Jupiter, Fla., has reported a net loss of $272,610 for the third quarter.The company attributed the loss to expenses incurred in executing bulk loan sales that were not offset by revenues, and to expenses associated with starting its net branching program. Amstar said it would not receive any significant revenues from the branch partners program until the first quarter of 2004. During the third quarter, Amstar won legal judgments totaling $1.3 million and has started collection activities. But the company said it elected not to record a gain on the monies in the third quarter because it is early in the recovery process. Besides the net branching operation, Amstar has a reverse mortgage unit, America's Senior Financial Services, a retail production unit, Jupiter Mortgage, and a wholesale unit, Synergy Mortgage Solutions.

JLT Group, a diversified real estate development and investment company based in St. Paul, Minn., has reported plans for a one-billion-dollar St. Paul commercial real estate project.The so-called Bridges of St. Paul project envisages a mixed-use retail, residential, and entertainment complex encompassing approximately 550,000 square feet, JLT said. The site will include a hotel, a spa, movie theaters, and about 3,000 residential units. Jerry Trooien, founder and president of JLT Group, said the project "will provide a gathering place for the entire region by transforming the St. Paul waterfront into an enormous array of opportunities and experience." Financing for the project will come through a combination of public funding and private equity/financing, according to Jay Lindgren, a person associated with the project. JLT is seeking about $75 million in tax assistance from the city of St. Paul for building infrastructure related to the project, he said. Mr. Lindgren said mortgage financing is "very likely" to be involved, but he could not give any details.

Shurgard Storage Centers Inc., Seattle, has announced that Deloitte & Touche LLP has resigned as its outside auditor because of what Shurgard termed "perceived inconsistencies" in the company's communications with Deloitte.Shurgard said Deloitte's letter of resignation did not state a reason for the action, but that the accounting firm's conversations with the chairman of Shurgard's audit committee indicated that the company's communications with Deloitte about an overpayment "had led Deloitte to conclude it could no longer rely on representations of the company's management." The overpayment of approximately $1.4 million was made in connection with the liquidation of an affiliated limited partnership, the real estate investment trust said. W. Thomas Porter, chairman of Shurgard's audit committee, said the panel has reviewed the facts surrounding the overpayment and concluded that there had been "no malfeasance" and that it was "satisfied with management's resolution of the matter." The committee has begun a search for a new independent auditor, and the filing of Shurgard's Form 10-Q for the third quarter has been delayed by the resignation, the company said.

The MacArthur Foundation has announced a commitment to provide $50 million to help large nonprofit housing organizations purchase and maintain 100,000 units of affordable rental housing.The charitable foundation is providing $35 million in grants and low-cost loans to nonprofits to acquire, refinance, and renovate affordable rental housing. Another $10 million in low-cost loans will be provided to specialized lending intermediaries to finance transactions by nonprofits. The foundation has already allocated $6.5 million in lending commitments to three specialized lenders -- Housing Partnership Finance in Boston, Neighborhood Capital Corp. in Cleveland, and Prudential Mortgage Capital Co. in McLean, Va.

Classes E-3 and E-4 of TrizecHahn Office Properties Trust, series 2001-TZH, have been removed from Rating Watch Negative by Fitch Ratings.The rating agency said the action stemmed from "the positive cash flow effect of the substitution of 550 West Washington in Chicago for two lesser-quality assets, Clark Tower in Memphis and Park Central in Dallas, and the strong leasing activity in three Houston assets." In addition, Fitch affirmed the ratings on 15 other classes in the transaction.

Class B-8 of DLJ Commercial Mortgage Corp. commercial mortgage pass-through certificates, series 1999-CG1, has been placed on Rating Watch Negative by Fitch Ratings.The rating agency also affirmed the ratings on 13 other classes in the deal. The Rating Watch placement was attributed to concerns about expected losses on certain specially serviced loans that would lower the credit enhancement levels of the junior classes. Fitch said the largest such loan, the Holiday Inn New Orleans Veterans, is in foreclosure.

Two classes of Banc of America Large Loan Inc.'s series 2002-FLT1 have been downgraded by Fitch Ratings.Class H was downgraded from BBB to BBB-minus, and class J was downgraded from BB-plus to BB. In addition, five other classes in the deal were upgraded, and the ratings on five others were affirmed. The downgrades were attributed to a decline in market conditions for a loan secured by the Central Research Park office property in Sunnyvale, Calif. In a related action, Fitch downgraded two classes of Banc of America Structured Notes Inc., series 2002-1. Class A was downgraded from BBB to BBB-minus, and class B was downgraded from BB-plus to BB. The ratings on the BASN classes depend on the ratings of the underlying certificates, classes H and J of the BALL transaction.

Two classes of J.P. Morgan Commercial Mortgage Finance Corp.'s mortgage pass-through certificates, series 1999-C8, have been downgraded by Fitch Ratings.The downgrades were as follows: class J, from B-minus to CCC; and class K, from CC to D. Fitch also affirmed the ratings on 10 other Fitch-rated classes in the deal. The rating agency attributed the downgrades to the liquidation of two Horizon group properties -- the Sealy Outlet Center and the Nebraska Crossing Factory Store -- that resulted in losses of approximately $16.9 million. Fitch can be found online at http://www.fitchratings.com.

A voting agreement between two Prime Retail preferred directors and an affiliate of the Lightstone Group has been terminated, the Baltimore-based retail real estate investment trust has reported.The two directors had entered into the agreement with the Lightstone affiliate, which is looking to acquire Prime Retail for Lightstone, under which they had agreed to vote their Prime Retail shares in favor of the merger. The agreement has been terminated by David Lichtenstein, who owns 85% of the equity of the Lightstone affiliate, due to Prime's "inability to date to procure the necessary votes to effectuate the merger." Prime said it has confirmed with Howard Amster and Gary J. Skoien, the Prime directors involved in the voting arrangement, that they intend to vote in favor of the merger at a Nov. 18 meeting. Under an amendment filed with the Securities and Exchange Commission by Mr. Lichtenstein, he is eligible to purchase some Prime preferred stock and other obligations and real estate assets if the merger is not approved.