Originations

Energy Producers Inc., Scottsdale, Ariz., has announced the signing of a letter of intent to acquire Montage Industries Inc., an Arizona-based real estate investment and advisory company, and its wholly owned subsidiaries.Under the tentative terms of the proposed acquisition, Energy Producers would purchase 100% of Montage in a share-for-share exchange that could represent a controlling interest in Energy Producers' outstanding stock, the company said. Energy Producers, which is focused on oil production, said Montage provides direct investment capital or advisory services in exchange for company or property ownership. The purpose of the acquisition is diversification, the company said.

The typical American family's ability to buy a median-priced existing home decreased in the second quarter, but was still at the second-highest level since 1973, according to the National Association of Realtors.The NAR's composite Housing Affordability Index stood at 143.4 in the second quarter, down from the 30-year high of 144.1 in the first quarter but up from 131.6 a year earlier. The latest index number means that the typical household in the United States had 143.4% of the income needed to buy a home at the second-quarter median resale price, which was $168,900. "Historically low mortgage interest rates largely offset higher home prices, keeping housing affordability close to a three-decade high," said NAR chief economist David Lereah. "With a recent rise in interest rates, the Housing Affordability Index can be expected to slide but remain very favorable." The index measures affordability for homebuyers making a 20% downpayment. An index level of 100 is defined as the point at which a median-income family has the income necessary to buy a median-priced existing home. The NAR estimated the median family income to be $53,285 in the second quarter. The NAR can be found online at http://realtor.org.

A proposed amendment to FAS 140 relating to certain special-purpose entities and the isolation of transferred assets is too restrictive, according to the Commercial Mortgage Securities Association.In a comment letter to the Financial Accounting Standards Board, the CMSA says the proposed statement "places too many restrictions on qualifying SPEs, and will likely preclude virtually all securitization special purpose entities from being qualifying SPEs." According to the CMSA, which represents the interests of the commercial mortgage-backed securities industry, some of the proposed language "would leave a chilling effect on CMBS if left unchanged." The CMSA said it opposes a provision that would bar a qualifying SPE from requiring a mortgage lender to repurchase a mortgage loan or indemnify against losses. The trade association also objected to precluding QSPEs from receiving assignments from lenders of derivative instruments that are part of the security for the underlying mortgage loan, or from entering into "passive," so-called plain vanilla interest rate and currency derivative transactions under certain conditions. The CMSA can be found online at http://www.cmbs.org.

The dollar volume of primary new mortgage insurance written in June totaled $36.4 billion, up 2.5% from $35.4 billion in May, but down from $37.2 billion a year earlier.But a simple look at the year-to-year totals does not tell the whole story. Of the June 2003 volume, $31.2 billion was traditional and $5.2 billion was bulk. In June 2002, bulk made up $14.7 billion of the total. Applications received were up 7.0% from May to June, to 334,385. There is $729.7 billion of primary insurance in force and $170.7 billion of primary risk in force. In June, $650.0 million of new pool risk was written. The cure/default ratio improved in June, rising from 81.3% in May to 90.5%. There were 43,560 cures and 48,156 defaults in June. MICA can be found on the Web at http://www.micanews.org.

Sussex Bancorp, Franklin, N.J., has announced the formation of a residential lending division that will act as an originator for secondary market investors, selling "substantially all" loans it originates.Samuel M. Chazanow, who was most recently an assistant vice president for an unnamed national mortgage lender, has been hired to head the division. "The formation of our residential lending division is another step in our efforts to produce fee income and make our company less dependent on net interest margin," said Donald L. Kovach, Sussex's chairman and chief executive officer. The company said it plans to market its residential loans in New York, New Jersey, and Pennsylvania. Sussex, the parent company of Sussex Bank, can be found online at http://www.sussexbank.com.

Fannie Mae chief economist David Berson has trimmed his 2003 originations forecast from $3.7 trillion to $3.4 trillion."The drop in refinancing activity drove the downward revision," Mr. Berson wrote in a weekly commentary on Fannie Mae's website. "Our forecast of purchase originations is down very modestly for the rest of the year, as we continue to believe that home sales and prices will moderate in the second half of the year." He blamed the rapid rise in rates in part on "certain investors unwinding poorly placed bets on the yield curve" and said he believed there was "panic selling" in the fixed-income market. "As investors regain their perspective and look more to the economic fundamentals and less to the technicals, it would not be surprising if long-term rates come down a bit in the weeks ahead," Mr. Berson said. Fannie Mae can be found online at http://www.fanniemae.com.

An investor group led by mortgage insurance giant The PMI Group has agreed to buy Financial Guaranty Insurance Co. from General Electric Capital for $2.16 billion.After the deal closes, PMI will own 42% of FGIC, a top player in the municipal bond market. The acquisition -- which has been in the works for several months -- will help further diversify PMI's operations. In the second quarter, PMI suffered a 14% decline in earnings due to rising claim payments on delinquent residential loans. The other co-investors in FGIC include: the Blackstone Group, the Cypress Group (each will own 23%), CIVC Partners (7%), and GE, which will maintain a 5% stake in the new company. FGIC, a triple-A rated company, will be run independently of PMI's other businesses. PMI expects net income per share from the investment to range between $0.20 and $0.30 in 2004, assuming the transaction closes by Dec. 31, 2003. PMI will be able to appoint five of FGIC's 14 directors, including the non-executive vice chairman slot, a position that will likely go to PMI chief executive Roger Haughton. PMI can be found on the Web at http://www.pmigroup.com.

United Dominion Realty Trust, Richmond, Va., has priced a $50 million offering of 4.5% senior unsecured notes due March 3, 2008.The notes represent a re-opening of the 4.5% senior notes due 2008 issued by the company on Feb. 27, and will, together with those notes, constitute a single series with an aggregate amount of $200 million, the company said. The proceeds are expected to be used to repay amounts outstanding under the company's $500 million unsecured credit facility. United Dominion, a multifamily real estate investment trust, can be found online at http://www.udrt.com.

The Rouse Co., Columbia, Md., has announced a new unsecured revolving credit facility that expands its line of credit from $450 million to $900 million.The three-year facility, which includes an option to renew for a fourth year, carries an interest rate of 90 basis points over the London interbank offered rate, a reduction of 10 bps from the rate on the old facility, the real estate development firm said. The facility also contains a competitive bid option (for up to half the total availability) that allows the company to hold auctions for lower pricing on short-term borrowings, Rouse said. The joint bookrunners and joint lead arrangers of the facility are J.P. Morgan Securities and Deutsche Bank Securities. Rouse can be found online at http://www.therousecompany.com.

The senior unsecured debt ratings on Summit Properties Partnership LP have been lowered from BBB-minus to BB-plus by Standard & Poor's Ratings Services.The corporate credit rating on Summit Properties Inc., Charlotte, N.C., was affirmed. S&P attributed the debt rating action to the company's closing of a new $200 million credit facility secured by nine properties that were previously unencumbered. The rating agency can be found online at http://www.standardandpoors.com.

IndyMac Bancorp Inc., Pasadena, Calif., the holding company for IndyMac Bank, has reported record net earnings of $41.4 million ($0.73 per share) for the second quarter, up 20% from $34.6 million ($0.56 per share) a year earlier.The Mortgage Banking Group produced a record $8.0 billion of loans in the second quarter, up 73% from the volume recorded a year earlier, IndyMac said. "In light of the recent significant increase in long-term Treasury and mortgage rates, the industry appears to be in for an abrupt return to a more normal purchase-dominated mortgage market," said Michael W. Perry, IndyMac's vice chairman and chief executive officer. "Given that the majority of our capital is devoted to investment portfolio activities as opposed to mortgage origination activities and we currently have $259 million of excess capital, we believe we are reasonably well positioned for this likely challenging transition." IndyMac declared a cash dividend of $0.15 per share, up from $0.10 per share in the previous quarter, and pointed to recent changes in the tax laws regarding dividends as the reason for the hike. The company also announced that Terrance G. Hodel, the former president and chief operating officer of North American Mortgage Co., has been appointed to IndyMac's board. IndyMac can be found online at http://www.indymacbank.com.

The Cost of Funds Index maintained by the Eleventh Federal Home Loan District stood at 2.113% in June, down nearly 2 basis points from May's 2.130%.With rates for the 30-year fixed-rate mortgage skyrocketing in recent weeks, the lag factor of the adjustable-rate mortgages indexed to COFI now makes them a more attractive loan product. COFI, which is calculated by the Federal Home Loan Bank of San Francisco, lags because it is a weighted average of the interest paid on the source of mortgage funds for thrifts in Arizona, California, and Nevada. Since much of that comes from deposits, the interest paid is spread out over an extended period. The lag is three to six months behind the movement of other rates.

Mortgage lenders added 4,800 employees to their payrolls in June, when it looked like the refinancing boom would never end and the average interest rate on the 30-year fixed-rate mortgage fell to around 5.2%.According to data released Aug. 1 by the U.S. Bureau of Labor Statistics, employment in the mortgage banker/broker sector jumped from 409,600 in May to 414,400 in June. (There is a one-month lag in getting mortgage industry data due to recent changes in the BLS employment report.) Over the past 12 months, employment in the mortgage industry has increased by 19%, or 66,900 new hires. But the employment situation in many other sectors of the economy remains bleak, particularly in manufacturing. While the unemployment rate declined from 6.4% in June to 6.2% in July, the economy lost another 44,000 jobs last month. Since January, the number of jobs has declined by 486,000, the BLS said.

Simon Property Group, Indianapolis, has reported net income of $50.3 million ($0.26 per share) for the second quarter, a steep 70% decline from $173.2 million ($0.97 per share) in the second quarter of last year.The retail real estate investment trust attributed the decline to net gains on the sale of real estate, primarily its interests in five "Mills-type" properties and a premium outlet center, that were recognized in the second quarter of 2002. Simon's funds from operations -- a supplemental measure of earnings that is widely used in the REIT industry but is not in conformance with generally accepted accounting principles -- increased to $196.9 million in the second quarter from $152.6 million a year earlier. David Simon, the company's chief executive officer, said that tenant sales were up and occupancy held firm. "We are also somewhat encouraged by early signs that the U.S. economy is recovering and have seen recent evidence of this in our portfolio, especially in some of our Florida and other tourism-driven properties that were most significantly impacted by the economic downturn," Mr. Simon said.

First Chesapeake Financial Corp., a Philadelphia-based mortgage lender, has reported the sale of 10 million newly issued shares of its common stock to All American Cos. for $300,000 and the sale of more than 3.67 million shares to All American by two top First Chesapeake executives.The executives are Mark Mendelson, the company's chairman and chief executive officer, and Mark Glatz, a director and chief financial officer of the company. If all conditions to the transaction are met, All American will own a controlling interest in First Chesapeake -- 68% of outstanding shares, or 58% on a fully diluted basis. "Under the terms of an escrow arrangement for both private transactions, All American Cos. is required to obtain by Oct. 30, 2003 the release of certain personal guaranties and liens that were granted by shareholders of First Chesapeake in connection with First Chesapeake's credit facility," First Chesapeake said. First Chesapeake is engaged in retail and wholesale mortgage banking, and All American is engaged in a variety of activities, including telemarketing and the provision of off-site clerical services to the medical industry.

The fallout from Freddie Mac's accounting scandal has pushed up mortgage rates and will crimp originations this year, according to Fannie Mae chief executive Franklin Raines.In a wide-ranging news conference, Mr. Raines said the restatement of Freddie Mac's earnings and the investigation into its accounting activities have injected uncertainty into the capital markets and pushed up rates. He pointed out that Fannie Mae economists just reduced their forecast for mortgage originations this year by $300 billion, to $3.4 trillion. Meanwhile, the markets are waiting for the Bush administration's response to Freddie Mac's "management failure," he said, which is adding to the uncertainty. Under questioning, he admitted that the Office of Federal Housing Enterprise Oversight's reputation has been "damaged" by the events at Freddie Mac. And he believes Congress wants to strengthen safety-and-soundness regulation of Freddie Mac and Fannie Mae, but not change their charters or mission. The Fannie Mae chairman and CEO complained, however, that the Freddie Mac news has inflicted "collateral damage" on his company. "Although the impact on us has not been as strong as it has been on Freddie Mac, it has been far stronger than is warranted by the facts," Mr. Raines said at the July 30 news conference. Fannie Mae can be found online at http://www.fanniemae.com.

The average 30-year fixed mortgage rate jumped to 6.14% for the week ending Aug. 1 from 5.94% the previous week, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate climbed from 5.27% to 5.44%, and the average rate for one-year Treasury-indexed adjustable-rate mortgages inched up from 3.67% to 3.68%. Fees and points averaged 0.5 points for all three mortgage categories. "Total home sales rose slightly in June from the previous month to an annualized pace that was almost 7% above all of 2002's record pace," said Frank Nothaft, Freddie Mac's chief economist. ".... Signs that the economy may have turned the corner led to slightly higher mortgage rates, and this will surely begin to slow the pace of refinancing as we go into the last quarter of the year." A year ago, the average 30-year and 15-year fixed rates were 6.43% and 5.84%, respectively, and the average one-year ARM rate was 4.45%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

Agree Realty Corp., Farmington Hills, Mich., has priced a public offering of 1.7 million shares of common stock at $23.50 per share.The real estate investment trust said the net proceeds are expected to be approximately $37.5 million. The underwriters, led by Friedman, Billings, Ramsey & Co., have been granted an option to purchase up to an additional 255,000 shares to cover any overallotments. The shopping center REIT can be found on the Internet at http://www.agreerealty.com.

Citigroup has announced an award of $2 million in grants to Habitat for Humanity International to help build homes in London and 42 U.S. cities.The grants are part of the Citigroup Builds Communities program, which brings together employees from the company's various business units -- including Citibank, CitiFinancial, and Citimortgage -- to build homes for families who could not otherwise afford it. Citigroup said it will place special emphasis on building Habitat homes in 10 leading Hispanic markets, including New York, Los Angeles, and Houston, and will offer a new financial education curriculum in those cities in English and Spanish. Citigroup said it will also participate in the Financial Services Roundtable Community Build with Habitat for Humanity on Aug. 2 in 13 U.S. cities and London. The company can be found online at http://www.citigroup.com.

GMAC Mortgage has announced the introduction of two new financial products aimed at helping immigrants and those with low to moderate incomes to obtain home loans.One program, Settle America, establishes a way for those without a traditional credit history to acquire home loans, a common challenge for immigrant homebuyers. When borrowers without credit histories have been able to get home loans in the past, they are often treated as risky, receiving expensive subprime loans. The GMAC program does not carry a rate premium. The other program, HomeStrength, is a downpayment assistance program similar to the company’s existing HomeStretch product, though the new offering is a conventional rather than a Federal Housing Administration loan product. Both HomeStretch and HomeStrength establish a forgivable second loan to aid with downpayment and closing costs.