Originations

A law that makes Connecticut's second-lien mortgage regulations consistent with its first-lien regulations went into effect on Oct. 1.The law takes the definition of prepaid finance charges from the state's predatory lending legislation and applies it to secondary mortgage lenders as well as first-lien lenders. Odd-days' interest, interim interest, and fees paid to governmental agencies (such as those on FHA loans) are no longer included in the definition. Commissions payable to a lender or broker in connection with the sale of credit life, accident, health, disability, or unemployment insurance, are now defined as prepaid finance charges for the first time. The limit for such charges on second-lien loans is 8%.

A new predatory lending law went into effect in Nevada on Oct. 1, several days after Standard and Poor's Ratings Services said it would continue to rate structured finance transactions governed by the act.The law -- which pleased consumer groups for its provisions concerning equity stripping, unnecessary refinancing, and the packaging of credit insurance with mortgage loans -- does not contain the type of assignee liability that concerns rating agencies. Therefore, S&P said it will rate loan pools that include Nevada home loans with no additional credit enhancement.

Mike Fisher, the attorney general of Pennsylvania, has filed a lawsuit against a Philadelphia mortgage company for violating the state's "do not call" legislation.The attorney general argued that Liberty One Financial has been contacting Pennsylvanians without consulting the "do not call" list, even after being issued a warning to stop. Almost 50 complaints about Liberty One's alleged solicitations have been filed, according to Mr. Fisher. He is seeking to impose fines and a ban on the company's doing business in the state. For its part, Liberty One denied "any and all allegations," and said it had not yet been able to review the charges.

Greenlight Financial Services, Irvine, Calif., has announced the launch of the Greenlight Home Services division, which the company says offers one-stop shopping for home loans and real estate services.The company said the system will enable consumers to gain access to experienced local Realtors throughout the country and earn a 25% rebate on the commission. They can also search for homes on the division website. Each client is assigned a Personal Transaction Assistant who maintains contact with all involved parties, the company said. Don Clarke, the manager of Greenlight Home Services, said the division's offering "is the first of its kind to be implemented on a national scale." The new division can be found online at http://www.greenlighthomes.com.

For the first time ever, the Eleventh Federal Home Loan District Cost of Funds Index has fallen below the 2% mark.The index for August was 1.946%, down from 2.018% in July, according to the Federal Home Loan Bank of San Francisco. COFI is one of several indices that are popular for adjustable-rate mortgage loans. In recent weeks, fixed rates have been dropping as bond yields have declined. The national average for the 30-year fixed-rate mortgage stood at 5.98%, the first time it has fallen below 6% since the end of July, according to the most recent Freddie Mac Primary Mortgage Market Survey. COFI is an index of what FHLBank-SF members pay for money to make mortgages, much of which consists of deposits. Greg McBride, a senior financial analyst at Bankrate, commented that "a lack of job growth, wavering consumer confidence, and a manufacturing sector plagued by overcapacity have many viewing the economic recovery as a glass half-empty. The pessimism will weigh on deposit yields and delay any continued improvement." Therefore, it is likely that COFI, in a couple of months, will reflect the rise in deposit interest rates over the summer. But it might turn south yet again.

The Market Composite Index, an overall measure of mortgage applications, rose to 707.2 on a seasonally adjusted basis during the week ended Sept. 26 from 699.6 the week before, according to the Mortgage Bankers Association of America's Weekly Mortgage Applications Survey.On an unadjusted basis, applications were up 0.9% on the week. The Purchase Index decreased from 402.1 to 397.8 on a seasonally adjusted basis, while the Refinance Index rose from 2429.7 to 2506.8. Refinancings represented 53.1% of total applications, up from 51.9% the previous week, while adjustable-rate mortgages accounted for 23.4%. The average contract interest rate for 30-year fixed-rate mortgages fell from 5.85% to 5.67%, and points (including the origination fee) decreased from 1.29 to 1.26 for loans with 80% loan-to-value ratios, the MBA reported. The MBA can be found online at http://www.mbaa.org.

Rock Financial, Auburn Hills, Mich., has announced that it will be the title sponsor for the Detroit Pistons basketball team for the 2003-2004 season.As part of "Rock Financial presents the Detroit Pistons," the mortgage company's logo will be on all television, radio, and print advertisements for the team. The logo will appear on game tickets and pocket schedules, on the Pistons' website, on all turnstiles at the Palace in Auburn Hills, and in the arena itself. "This multi-tiered agreement allows us to leverage the Pistons' phenomenal success and popularity to drive business and create additional brand awareness for Rock Financial," said David Hall, Rock's senior vice president. He added that "several Piston celebrities will participate in Rock Financial radio spots throughout the season."

Delta Financial Corp., Woodbury, N.Y., has announced plans to redeem at par all outstanding 9.5% senior notes due 2004 on Oct. 30.Delta said the aggregate redemption price, including principal and accrued interest, is expected to be approximately $11 million. The company said it will have no unsecured long-term debt on its balance sheet after the redemption. Delta can be found online at http://www.deltafinancial.com.

Aames Financial Corp., Los Angeles, has reported profits of $29.2 million for fiscal year 2003, up from $4.5 million for the previous fiscal year.The company's fiscal year ended on June 30. Taking into account $13.4 million of dividends accrued on convertible preferred stock, Aames common shareholders had net income of $15.7 million, or $2.39 per share. Preferred stock dividends of $13.8 million in fiscal 2002 caused Aames to report a loss to common shareholders of $9.2 million, or $7.11 per share. Company chief executive A. Jay Meyerson noted that this is the first time in five fiscal years that Aames' common shareholders have seen a profit. The most recent results included a residual interest writedown of $34.9 million, up from $27.0 million the previous year. However, the most recent year also included debt extinguishment income of $31.7 million. Aames originated a record $4.4 billion during the fiscal year, up from $3.2 billion a year earlier. Aames can be found online at http://www.aames.net.

U.S. Restaurant Properties Inc., Dallas, has reported commitments for a new credit facility and term loan, among other developments, and announced that it will modify its method of calculating funds from operations.The real estate investment trust said it has received a commitment letter for a new three-year, $50 million secured revolving credit facility bearing an interest rate of 300 basis points above the London interbank offered rate, with Bank of America as the lead lender. In addition, the REIT said it has received a nonbinding indication of interest from the First Hawaiian Bank for a $12 million secured term loan. Regarding the calculation of FFO, the REIT said it has been informed by the Securities and Exchange Commission that the SEC's application of the standard definition of FFO to the REIT differs from the company's calculation. "The SEC's interpretation is that recurring impairments taken on real estate property may not be added back to net income in the calculation of FFO," the REIT said, adding that it will modify its own calculations to conform with the SEC's interpretation. The company can be found online at http://www.usrp.com.

Paul Gallagher has been named executive vice president for portfolio strategy at Health Care Property Investors, a Newport Beach, Calif.-based real estate investment trust.Mr. Gallagher was formerly managing director for strategic ventures in the real estate division of General Electric Commercial Finance, where he also held other posts. Before joining GE Commercial Finance, he was director of mortgage lending at E.F. Hutton Life Insurance Co. The REIT can be found online at http://www.hcpi.com.

Gov. Rick Perry of Texas has canvassed the results of the Sept. 13 constitutional amendment election, putting into effect a new state law on home equity lending.The highlights of the law include giving Texas lenders the right to extend home equity lines of credit for the first time and adding a cure provision to an earlier Texas law on home equity lending. Even with the new law, though, Texas remains the most restrictive state in the nation in relation to such lending.

A benchmark Fannie Mae survey of 101 lenders of all types, sizes, and locations found that origination costs for correspondents increased dramatically in the past year, rising 28%, from $1,601 per loan to $2,144.Wholesalers, meanwhile, saw their origination costs rise 14%, from $785 per loan to $916, while online lenders reported a slight drop in costs, from $1,846 to $1,831. The "Mortgage Focus 2003" study also found that "pull through" rates fell "sharply" for the wholesale channel while improving "somewhat" for the retail and Internet, or call-center, channels. The latter were the only ones showing an overall improvement in direct productivity. Fannie Mae cautioned that the annual study of origination costs should be viewed as a representative sample rather than as an industry average or statistical study. Nevertheless, the company says the results provide useful insights into lending costs. Not surprisingly, the survey found that automated underwriting is now the norm. It also said that the closer automation is to the point of sale, the greater the cost savings and the bigger the bump in productivity. In the retail sector, it costs $1,524 to write a loan when the process is integrated into the point of contact with the borrower. When underwriting manually, however, retailers spend an average of $2,549 to originate the loan. At the same time, direct productivity falls from 66 loans closed to 51 per full-time employee when humans get involved.

The big bruisers of the building business have been flexing their muscles, according to new research from the National Association of Home Builders, which found that the country's 10 largest firms have almost doubled their market share over the last five years.Expanding largely through mergers and acquisitions, the top 10 racked up 20% of all new home closings last year. In 1997, they had only an 11% market share. In numerical terms, the behemoths recorded 191,800 closings in 2002 versus 86,990 five years earlier, the research indicates. Though the market is still characterized by numerous small firms, the largest 60 builders were responsible for nearly 312,300 closings in 2002. In 1992, they closed only 111,900 deals. In total, the largest 60 builders have almost one-third of the entire new market. The largest 100 own 35.4% of the business. "Small builders still remain the dominant force in the housing industry," said NAHB economist Elaine Frey. "The question is, for how long?" In some place, the giants already dominate. In Austin, Texas, for example, the five largest builders now own 79% of the market, up from 52% a decade ago. In Denver, they have a 58% market share, up from 42%. The increase is even more dramatic in Miami, where the big five now have a 46% market share, up from only 13%.

Standard & Poor's has announced the addition of Heritage Property Investment Trust and Urstadt Biddle Properties to its S&P REIT Composite Index.Heritage will replace Chateau Communities, which is being acquired by Hometown America, after the close of trading on Sept. 30, S&P said. Urstadt Biddle will replace Mid-Atlantic Realty Trust, which is being acquired by Kimco Realty (a constituent of the index), after the close of trading on Oct. 1.

About two out of three Americans say they would be more likely to vote for a presidential candidate who offers a plan to make housing more affordable, according to a recent national survey.The new survey, presented by the National Association of Realtors at the National Summit on Housing Opportunities in Washington, D.C., found that up to 67% of the respondents "would be more likely to vote" for a candidate who makes a campaign issue of make housing more affordable. About 71% of these prospective voters "would like to see the government place a higher priority on making housing more affordable for renters and homeowners alike." Another 62% appear concerned about the impact of rising housing costs on teachers, policemen, firefighters, and other professional workers communities depend on, and up to 81% of Americans would like to see more affordable housing built to fulfill their needs. The NAR can be found online at http://realtor.org.

United Guaranty Residential Insurance Co., Greensboro, N.C., has announced that it plans to maintain its triple-A rating status despite the recent decision by the only other triple-A rated mortgage insurer to move voluntarily to double-A status."Although [Fannie Mae and Freddie Mac] place no particular value on the triple-A rating, both we and our mortgage lending customers see great benefit in United Guaranty's triple-A rating, including lower cost for certain mortgage-backed securities transactions," said H. G. "Tripp" Waddell III, executive vice president and chief financial officer of UGRIC's parent company, United Guaranty Corp. GE Mortgage Insurance announced Sept. 26 that it would reduce its capital to the double-A levels that prevail in the industry in order to improve its return on equity and make more efficient use of its capital. UGRIC can be found online at http://www.ugcorp.com.

Real estate developer Larry Silverstein has received a major setback in his efforts to get an insurance payout of about $7.2 billion on the collapsed World Trade Center properties.The U.S. Court of Appeals for the Second Circuit has not bought Mr. Silverstein's argument that the terrorist attacks on the World Trade Center constituted two occurrences for insurance purposes and should lead to a $7.2 billion payout (based on insurance of $3.6 billion per occurrence). The case will now go to a jury, which will decide the matter. Of the 24 insurers who had provided the WTC insurance, three who were responsible for about 3% of the coverage were specifically exempted from the two-occurrence argument because they had signed a "Wilprop" form that provided a specific definition of an insurable occurrence under which the WTC attacks constitute one occurrence. According to Swiss RE, one of the major insurers on the property, all the insurers are governed by the Wilprop form, rather than a separate Travelers policy that was issued on Sept. 14, after the attack. Swiss RE said it is "ecstatic about the decision," adding that "every court that has considered Silverstein's argument to recover beyond his stated insurance policy limit has rejected it outright. We are confident a jury will do the same." Howard J. Rubenstein, a Silverstein spokesman, said, "We are fully confident that a jury hearing all of the evidence will reject the insurers' attempts to avoid paying for the cost of rebuilding the World Trade Center."

Florida home prices and sales both rose significantly in August, according to the Florida Association of Realtors.The median price of a single-family home was $163,600 in August, up 13% from a year earlier. During the same period, total sales of detached single-family homes rose 19%, FAR said. August saw 19,787 homes change hands in the state; last August 16,595 homes were sold.

The median price for a home in California broke the $400,000 barrier for the first time in the state's history as sales also reached record numbers, according to the California Association of Realtors.Home prices rose 21.1% to $404,870 in August, compared with $334,270 a year earlier. Closed escrow sales of existing single-family detached homes in the state totaled a seasonally adjusted annual rate of 645,720 in August, 14.7% higher than the August 2002 total of 562,780. CAR can be found on the Web at http://www.car.org.