Originations

Sovereign Bancorp's shares reached a new 52-week high on Monday amid speculation that the thrift is a takeover target of Royal Bank of Scotland.As MortgageWire went to press on Tuesday Sovereign's shares were trading up slightly at $23.18. The Philadelphia-based company is a top 60 ranked residential lender and a top 50 ranked servicer. A Sovereign spokesman said the company, "doesn't comment on rumors and speculation." Earlier this year Sovereign chairman Jay Sidhu said he would sell the thrift but only if he was offered a price that he liked. The spokesman noted that Mr. Sidhu never specified what that price might be. According to the Independent of London, Royal Bank of Scotland recently made a $7.5 billion bid for Sovereign but was rejected. The thrift, a retail and wholesale mortgage funder, has branches in the mid-Atlantic and New England area. A call placed to Royal Bank of Scotland had not been returned at press time.

Nonprofit community development groups are setting up mortgage brokerage operations to provide their clients with better-priced loans and to further their relationships with major lenders who generally support their housing activities.A survey commissioned by the Local Initiatives Support Corp. found that 34 nonprofit community organizations have brokered 5,100 mortgage loans totaling $210 million. These community groups generally provide homeownership counseling and education and now they are taking the next step by originating the loans and selling them to banks. Some of the nonprofits are using the loans' fees to help pay for their counseling and educational activities. LISC has been working with Fannie Mae and Freddie Mac to help other nonprofits to get into the brokerage business, LISC vice president Buzz Roberts said.

There was a total of $36.7 billion of primary new mortgage insurance written in September by the members of the Mortgage Insurance Cos. of America, up some 5% from August's $34.9 billion.Since July, the industry data has not included information from Radian Guaranty, Philadelphia, which dropped out of MICA in a policy dispute. The number of applications, which declined by 25,886 between July and August, fell another 10% or 26,624 between August and September, from 265,792 to 239,168. New pool risk written was $601.5 million, with $17.1 billion of pool risk in force. The cure/default ratio declined slightly between August and September from 91.2% down to 87.2%. New cures totaled 39,990, while defaults were at 42,432.

San Jose, Calif. is the most likely metropolitan area to see a decline in home prices in the United States, according to The PMI Risk Index.PMI Mortgage Insurance Co., the Walnut Creek, Calif.-based mortgage insurer that created the index, uses it as one of its tools to assess and manage risk levels in its own portfolio. As of October, the index value of the top 50 largest metropolitan areas was 162, meaning these cities have on average a 16.2% probability of experiencing a home price decline in the next two years. The index for San Jose is 437. The other cities at the top of the scale are Portland Ore.-Vancouver, Wash. at 370; Detroit, 306; Seattle-Bellevue, Everett, Wash., 297; and Dallas, 297. At the other end of the scale are Riverside-San Bernardino, Calif., 63; Nassau-Suffolk (Long Island), N.Y., 74; Baltimore, 74; Las Vegas, 79; and Miami, 83.

The Eleventh Federal Home District Loan Cost of Funds reached another new low as it fell by over two basis points between August and September.The new index is 1.923%, as compiled by the Federal Home Loan Bank of San Francisco as a weighted average of the cost of mortgage origination money for its members in Arizona, California and Nevada. In August, the index was 1.946%, the first time ever the index had been below the 2% mark. Since one source of mortgage money for banks and thrifts is deposits, some trends may be discerned from looking at those interest rates. While there was little or no drop in the rates on the one month, three month and six month certificates of deposit between April and May (six months ago, the long end of the typical lag between rates and COFI), a huge drop took place between May and June (nearly 20 basis points in all three), according to data compiled by the Federal Reserve Bank of St. Louis. The rates then rebounded slightly the rest of the summer but between August and September remained unchanged in all three categories.

Option One, one of the largest subprime lenders in the United States, said its production volume could drop dramatically in New Jersey after a new law there goes into effect in late November.In an interview with MortgageWire Monday morning Option One executive vice president Steve Nadon said, "We could be doing 90% less loans" in New Jersey depending how the rating agencies react to the state's "Home Ownership Security Act." Based in Irvine, Calif., Option One, a subsidiary of H&R Block, funds about $80 million a month in nonconforming product in the state. The N.J. law is intended to reduce predatory lending but provisions of the act could hurt all nonconforming lenders because of what lenders feel are onerous provisions. Mr. Nadon is chairman of the Coalition for Fair and Affordable Lending, which is promoting Federal legislation to protect consumers from predatory lenders.

HomeLoanCenter.com, an online mortgage lender based in Irvine, Calif., has announced a discount of up to $5,000 for victims of the Southern California wildfires on closing fees for the purchase of a new home.The program, a cash credit toward escrow to offset closing costs on a home purchase, will be available to all wildfire victims until May 2004, the company said. The discount will be made at the point of sale upon verification that the borrower lived in the area affected by the wildfires. "This is the least we can offer to California fire victims in the aftermath of this tragic disaster," said Anthony Hsieh, founder and chief executive officer of HomeLoanCenter.com.

Commercial mortgage-backed securities delinquencies could temporarily rise as a result of the California wildfires, but there are unlikely to be any significant long-term effects, according to Fitch Ratings.Risks to CMBS collateral "at this point are minimal," Fitch said. "The bulk of properties destroyed by the fires have been residential, and past experience with these types of wildfires indicates that commercial property typically accounts for approximately 20% to 25% of insurer losses." The fires' effect on CMBS "would most probably be in the form of early loan payoffs," the rating agency said. Fitch can be found online at http://www.fitchratings.com.

IndyMac Bancorp Inc., Pasadena, Calif., the holding company for IndyMac Bank, has reported record net earnings of $49.7 million ($0.87 per share) for the third quarter, up 34% from earnings in the third quarter of 2002.Mortgage loan production totaled a record $8.5 billion in the third quarter, up 64% from the volume recorded a year earlier, IndyMac said. "Based on our ratelocks and pipeline at the end of the third quarter, our forecast for fourth-quarter production ranges from $5.8 billion to $6.6 billion, which represents a decline of 23% to 32% from the third quarter," said Michael W. Perry, IndyMac's chairman and chief executive officer. This would be significantly better than the 52% decline projected for the industry as a whole by the Mortgage Bankers Association of America, he noted. IndyMac declared a cash dividend of $0.20 per share, up from $0.15 per share in the previous quarter. The company can be found online at http://www.indymacbank.com.

Independence Community Bank Corp., New York, has announced that it will purchase substantially all the warehouse lines of credit issued by The Provident Bank, Jersey City, N.J.The purchase involves 19 lines with $207 million in commitments, Independence said. When it is completed, Independence will have $1.4 billion in warehouse credits outstanding to over 100 clients. According to Provident, which announced the move in its third-quarter earnings report, its management conducted a strategic review to see whether its current business lines met with the company's strategy of building and expanding customer relationships. Mortgage warehouse lending did not meet Provident's core business product criteria, and a decision was made to de-emphasize the warehouse business. Provident decreased its outstandings from $276.4 million at year-end 2002 to $215.3 million as of Sept. 30.

Starwood Hotels & Resorts Worldwide Inc., White Plains, N.Y., has reported that it plans to launch a previously announced tender offer for all the outstanding limited partnership units of Westin Hotels LP at an increased purchase price of $625 in cash per unit.Starwood said it intends to solicit the consent of WHLP's limited partners to proposals that would facilitate Starwood's purchase of 100% of the units. WHLP is the owner of the Westin Michigan Avenue hotel in Chicago. The company noted that there is a pending tender offer by Kalmia Investors LLC for approximately 54% of the units at $550 per unit. Starwood's previous tender offer price was $600 per unit. Starwood can be found on the Web at http://www.starwood.com.

NovaStar Mortgage Inc., Kansas City, Mo., has announced that it will cease doing business in New Jersey on Nov. 27 until a new state law imposing unlimited assignee liability is amended.NMI said rating agencies have indicated that, as of Nov. 27 (when the New Jersey Home Ownership Security Act of 2002 takes effect), they will not rate structured finance deals that include all forms of cash-out refinancing. The agencies have cited a lack of clarity about potential damages under the new law, NMI said, and the company wants the law's uncapped assignee liability to be limited. NMI noted that its parent company, NovaStar Financial Inc., is a real estate investment trust that invests in mortgage securities backed by mortgage loans originated by NMI. "A large percentage of mortgage securities with collateral in New Jersey will be unrated and, therefore, will not be marketable, resulting in NovaStar's decision to cease doing business in the state," NMI said.

Fortress Investment Group LLC, New York, has announced that Thomas J. Saylak, a managing partner, has decided to withdraw from the firm based on a company decision not to raise an independent real estate investment fund.Mr. Saylak said he joined Fortress earlier this year "to expand my work across asset classes, provided we could create a dedicated platform for real estate investing. As we started talking to Fortress's current investors this summer, we realized that a new fund would have to operate under too narrow an investment mandate." Fortress can be found online at http://www.fortressinv.com.

The housing markets in Buffalo, N.Y., and the Texas cities of Brownsville and Lubbock showed the biggest improvements in outlook in the latest mortgage risk index released by United Guaranty Corp., Greensboro, N.C.Brownsville's index ranking plunged from a 9 to a 4, due mostly to a decline in home price appreciation from 6.9% to 3.4%, UGC said. (The quarterly ACUFactor mortgage risk index uses a scale of 1 to 10, with 1 representing the least likelihood that an area will experience a significant decline in key economic indicators.) Lubbock's score fell from 5 to 2, thanks largely to slower price appreciation, and Buffalo's fell from 6 to 3, chiefly due to a spurt in its unemployment rate, the company said. The ACUFactor index projects geographic market risk for the top 200 metropolitan statistical areas over the next four to eight quarters. UGC can be found online at http://www.ugcorp.com.

Investors expect only a weak recovery for commercial real estate markets next year, which they view as a transition period, according to an annual survey of CRE industry experts.The report, Emerging Trends in Real Estate: 2004, says the respondents believe that any recovery will be tempered by corporate outsourcing of jobs overseas, employment weakness, and government fiscal problems. The market is still characterized by weak fundamentals such as high vacancy rates, falling rents, and rising property taxes and operating expenses, said the Urban Land Institute and PricewaterhouseCoopers, which jointly publish the report. "No one expects a sudden rebound -- rents will be flat in most sectors, down more for office," the report says. "Income returns carry the day, appreciation will be negligible and many office markets will experience value dips or worse." The organizations can be found online at http://www.uli.org and http://www.pwcglobal.com.

Fitch Ratings has announced that it will continue to rate loan pools containing mortgages from Oklahoma, including high-cost, or subsection 10, home loans.Since Oklahoma's assignee liability language is almost identical to the federal standard under the Home Ownership and Equity Protection Act, Fitch said it is able to quantify the risk of that liability. The rating agency said it may attach additional credit enhancement requirements to subsection 10 loans, which is consistent with its policy on high-cost mortgages originated in any jurisdiction. Oklahoma's law goes into effect on Jan. 1. Fitch can be found online at http://www.fitchratings.com.

The average 30-year fixed mortgage rate fell to 5.94% for the week ending Oct. 31 from 6.05% the previous week, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate fell from 5.39% to 5.26%, and the average rate for one-year Treasury-indexed adjustable-rate mortgages declined from 3.76% to 3.74%. Fees and points averaged 0.6 points for fixed-rate mortgages and 0.7 points for ARMs. "Gross domestic product numbers surprised everyone today, posting a much larger-than-expected increase and confirming the notion that the economy has finally turned the corner," said Frank Nothaft, Freddie Mac's chief economist. "Worry about disinflation should now be tempered somewhat, but fear of inflation is still unwarranted. And that should keep mortgage rates from rising too quickly or steeply anytime in the near future." A year ago, the average 30-year and 15-year fixed rates were 6.13% and 5.51%, respectively, and the average one-year ARM rate was 4.25%, Freddie Mac said.

First American Title Insurance Co., Santa Ana, Calif., is offering property owners who seek post-wildfire reconstruction loans a 50% reduction in the title insurance fees associated with securing those loans.The reduced rate will apply to any reconstruction loan taken two years after the date the disaster was declared. The company said the program has been available to California property owners for decades. One of the most recent uses for the product in Southern California came after the 1994 Northridge earthquake.

One Liberty Properties, a real estate investment trust based in Great Neck, N.Y., has priced a public offering of 3.25 million shares of common stock at $18.25 per share.The managing underwriters for the offering are Friedman, Billings, Ramsey & Co.; Ferris, Baker Watts Inc.; and Stifel, Nicolaus & Co. The underwriters have been granted a 30-day option to buy up to 487,500 additional shares to cover any overallotments. The REIT manages a diversified portfolio of properties under long-term net leases. It can be found online at http://www.onelibertyproperties.com.

Homeownership rates rose faster among African-Americans and Latinos in the 1990s than among whites in two age groups associated with first-time homebuying, according to research released by the Fannie Mae Foundation.The rates for blacks and Latinos in the 25- to 34-year-old age group increased 4.0 percentage points in the 1990s, compared with 1.9 points for whites in the same age group, the foundation reported. For those in the 35- to 44-year-old age group, homeownership rates rose 3.2 points for Latinos, 1.5 points for blacks, and 1.4 points for whites. "While previous analysis has noted a reversal in the national homeownership trend among younger adults during the 1990s, this important study highlights the rate of growth among younger minority homebuyers, who experienced the most severe homeownership declines during the 1980s," said Stacey D. Stewart, president and chief executive officer of the Fannie Mae Foundation. "What's critical to remember, though, is that even with these significant gains, the rate of homeownership among African-Americans and Latinos, in the age groups most associated with first-time homebuying, trails that of whites in the same age category by at least 20 percentage points." The research was conducted for the foundation by the University of Southern California. The foundation can be found online at http://www.fanniemaefoundation.org.