Originations

Sales of newly constructed homes hit a new record in June, and it appears that sales will remain brisk during the third quarter despite the recent rise in mortgage rates.The U.S. Census Bureau reported sales of new single-family homes rose from a seasonally adjusted annual rate of 1.11 million in May to a new monthly record of 1.16 million in June. The 4.7% increase in June sales ended the first half of a year in which sales are ahead of last year's record pace by 11.1%. Fannie Mae senior economist Orawin Velz said the pace of home sales this year has been "incredible." She said she expects sales to remain at a very high level through September before the market cools.

RAIT Investment Trust, Philadelphia, has reported net income of $8.4 million ($0.40 per share) for the second quarter, compared with $11 million ($0.62 per share) for the second quarter of last year.For the six months ended June 30, the commercial real estate investment trust reported net income of $20.8 million ($1.01 per share), compared with $20.4 million ($1.22 per share) for the first half of 2002. The REIT is paying a second-quarter dividend of $0.62 per share. The REIT can be found online at http://www.raitinvestmenttrust.com.

The myriad of state and local predatory lending laws is seriously affecting lenders' ability to provide credit, the chairman-elect of the Mortgage Bankers Association of America has warned the National Conference of State Legislatures.Robert M. Couch told the group that the mortgage industry supports strong enforcement of predatory lending laws, but that the cost of compliance with so many laws will only get passed along to the customer. Uniformity of laws is a necessary element to solving the problem of predatory lending, Mr. Couch said. Also needed are customer education, simplification of the mortgage process, and vigorous enforcement of existing laws, he said. The MBA can be found on the Web at http://www.mbaa.org.

The average 30-year fixed mortgage rate spiked to 5.94% for the week ending July 25 from 5.67% the previous week, according to Freddie Mac's Primary Mortgage Market Survey.The average 15-year fixed mortgage rate jumped from 5.00% to 5.27%, and the average rate for one-year Treasury-indexed adjustable-rate mortgages rose from 3.58% to 3.67%. Fees and points averaged 0.4 points for 30-year fixed-rate mortgages and 0.5 points for ARMs and 15-year fixed-rate mortgages. "Mortgage rates rose again for the third consecutive week, bringing long-term rates to about the same levels we saw at the start of the year," said Frank Nothaft, Freddie Mac's chief economist. "This may start to apply the brakes to the frenzy of refinancing that we are currently experiencing." A year ago, the average 30-year and 15-year fixed rates were 6.49% and 5.93%, respectively, and the average one-year ARM rate was 4.50%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.

The ratings on three classes of GS Mortgage Securities Corp. II's commercial mortgage pass-through certificates, series 1999-C1, have been lowered by Standard & Poor's.The ratings on seven other classes of the same deal were affirmed. "In December 2002, Standard & Poor's lowered its ratings on classes G and H due to the fact that five of the 10 delinquent loans in the pool at that time were in REO or foreclosure, and indications of value for the three lodging properties that were in REO at that time suggested that losses would be realized upon liquidation of those loans," S&P said. "Since that time, two of those REO lodging loans have been liquidated, resulting in a combined realized loss of $2.3 million. As a result, a total of $5.4 million in losses have been realized by the trust to date." S&P can be found online at http://www.standardandpoors.com.

Four classes of COMM 2001-J1 commercial mortgage pass-through certificates have been downgraded by Fitch Ratings.The downgrades were as follows: class F, from BBB to BBB-minus; class G, from BBB-minus to BB; class H, from BB to B; and class J, from BB to B-minus. In addition, Fitch affirmed the ratings on nine other classes in the deal. The rating agency attributed the downgrades chiefly to "the deteriorating performance of the Thayer Hotel Portfolio and 165 Market Halsey loans," although "no loan is or has been delinquent." The Thayer loan is secured by six full-service hotels in New Jersey, Louisiana, Florida, and Texas, and the Market Halsey loan is secured by a 16-story hotel in Newark, N.J. The rating agency can be found on the Web at http://www.fitchratings.com.

Wesley R. Edens has resigned as chairman, chief executive officer, and president of Capstead Mortgage Corp., Dallas, and has been succeeded by Paul M. Low as chairman and Andrew F. Jacobs as CEO and president.Capstead, a real estate investment trust, and Fortress Investment Group, a New York-based investment firm and Capstead shareholder, also reported that Robert I. Kauffman, a Fortress partner, has resigned as a Capstead director. Mr. Edens, who heads Fortress' private equity investment business, said, "In recent months, Fortress has sold most of its investment in the company, and so I believe it is an appropriate time for me to step down as chairman and CEO." Mr. Low is a Capstead founder and a member of its board of directors. Mr. Jacobs, who was most recently Capstead's executive vice president and chief financial officer, has also been elected to Capstead's board. Phillip A. Reinsch, senior vice president for control, has been promoted to CFO. Capstead can be found online at http://www.capstead.com.

The Market Composite Index, an overall measure of mortgage applications, fell to 1284.3 on a seasonally adjusted basis during the week ended July 18 from 1358.2 the week before, according to the Mortgage Bankers Association of America's Weekly Mortgage Applications Survey.On an unadjusted basis, applications were down 5.3% on the week but up 56.8% from the level recorded a year earlier. On a seasonally adjusted basis, the Purchase Index decreased from 447.2 to 442.4, and the Refinance Index declined from 6657.2 to 6181.2. Refinancings represented 68.7% of total applications, down from 70.1% the previous week, while adjustable-rate mortgages accounted for 16.7%. The average contract interest rate for 30-year fixed-rate mortgages jumped from 5.33% to 5.72%, and points (including the origination fee) increased from 1.47 to 1.53 for loans with 80% loan-to-value ratios, the MBA reported. The MBA can be found online at http://www.mbaa.org.

A just-released internal audit of the Freddie Mac restatement scandal blames former chief executive Leland Brendsel and president David Glenn, saying the two men "failed to take prompt corrective action" when it became clear that the company's corporate accounting department lacked the necessary "depth and expertise."The report, managed by outside counsel James Doty, says the two men ignored specific pleas by the board in the fall of 2001 and the spring of 2002 to fix the department. The Doty report says the two men controlled "the flow of information" and kept the board in the dark about its accounting and disclosure problems. The report also says Mr. Glenn attended a meeting where the company's former auditors (Arthur Andersen) expressed concerns that the corporate accounting department "lacked leadership," while complaining that compensation levels in the department were "too low" to retain critical talent. Messrs. Brendsel and Glenn could not be reached for comment. Freddie Mac can be found online at http://www.freddiemac.com.

Freddie Mac's new chairman has admitted that the company's previous management engaged in a campaign to manage earnings by abusing accounting rules and that the mortgage giant's new chief executive Greg Parseghian was aware of some of the transactions in question, but ultimately was not responsible.Freddie chairman Shaun O'Malley went out of his way to show his support for Mr. Parseghian, saying he has been cooperating with an internal probe of the company "in good faith." On Wednesday morning Freddie's board released the results of an internal investigation into the restatement of its earnings, accusing past top management -- in particular former chief executive officer Leland Brendsel and president David Glenn -- of keeping the board in the dark about its accounting problems. Mr. O'Malley confirmed that "several" Freddie Mac employees have been fired as a result of the scandal, but would not give a precise number. (Former company employees are implicated in the report as well.) The report, led by outside counsel James Doty, says that senior management "also knew that corporate accounting lacked the necessary skill and resources to assure [that] the company's activities in this regard remained within the boundaries of GAAP." Messrs. Brendsel and Glenn could not be reached for comment. A spokeswoman for Freddie Mac said Mr. Parseghian would not comment "today" [Wednesday] and that "we are going to let the report speak for itself." (See the July 28 issue of National Mortgage News for full details.)

Monmouth Real Estate Investment Corp., a real estate investment trust based in Freehold, N.J., has been added to the Morgan Stanley REIT Index as part of the quarterly rebalancing of the index.MREIC said the index is a market capitalization-weighted, total-return index of REITs that meet certain liquidity requirements. Stocks are selected "based on a prescribed set of selection criteria and rebalancing rules that should permit investors to replicate index performance," the net-leased industrial property REIT said.

The New York City Housing Development Corp. has announced the approval of $43.3 million in affordable housing transactions.The HDC board approved a $30 million fund to finance permanent first-mortgage loans for 1,000 to 1,200 newly constructed or rehabilitated units of affordable housing in conjunction with subsidy programs from the New York City Department of Housing Preservation and Development and other government lenders. Among the other transactions approved by the board was the issuance of $11 million in bonds for the acquisition of an 80-unit building in Midtown Manhattan.

Master Financial Inc., Orange, Calif., has unveiled Score Select, a score-based loan that it terms the company's broadest first-mortgage product.The loan, with amounts ranging up to $1 million, is available to borrowers with credit scores starting at 500, the company said. Borrowers with FICO scores above 620 can obtain loans with 100% loan-to-value ratios, and 95% LTVs are available to borrowers with a score above 580. Score Select offers competitive pricing across the entire credit spectrum and require no mortgage insurance, the company said. Master Financial purchases and services alternative lending products.

Joe McKone has been promoted to executive vice president of corporate operations at First Franklin Financial Corp., a national mortgage lender based in San Jose, Calif.Formerly senior vice president of the company's National Sales Group, Mr. McKone will be responsible for all facets of risk management, mortgage operations, compliance, corporate underwriting, business controls, and process improvement, First Franklin said. Before joining First Franklin in 1999, he was senior vice president and regional sales manager at Waterfield Financial Corp. and a vice president and area manager at Norwest Mortgage/Wells Fargo. First Franklin can be found online at http://www.first-franklin.com.

Len Israel has been appointed senior vice president and national director of correspondent services for IndyMac Bancorp Inc., Pasadena, Calif.Mr. Israel will be responsible for managing the overall correspondent sales and business development for IndyMac Bank, as well as pursuing expansion opportunities, the company said. In addition, Mr. Israel will focus on new program implementation in the bank's Capital Markets Group, and will take an active role in operational and technology-based initiatives. In nearly 20 years in the mortgage industry, Mr. Israel has held senior-level positions in secondary marketing, operations, and wholesale lending, the company said. IndyMac Bank can be found online at http://www.indymacbank.com.

Countrywide Financial Corp., Calabasas, Calif., has reported record earnings of $383 million ($2.74 per share) for the second quarter, up 101% from $191 million ($1.48 per share) in the second quarter of last year.Countrywide said it was the company's ninth consecutive quarter of record earnings. Pretax earnings by the company's mortgage banking operations totaled $402 million in the second quarter, up 77% from that of a year earlier. "Mortgage banking results have been exceptional," said Angelo R. Mozilo, Countrywide's chairman and chief executive officer. "Year-to-date total fundings were $233 billion, which compares favorably to $252 billion in fundings for all of calendar 2002." Countrywide has expanded its servicing portfolio to $559 billion, nearly double the $282 billion as of the beginning of the refinance boom in November 2000, Mr. Mozilo said. "Our [mortgage servicing rights] capitalization rate now stands at 92 basis points," he said. "This low valuation level bodes well for servicing earnings performance after rates rise. Even if the entire $2.3 billion impairment reserve is recovered, the capitalization rate would still be below 140 basis points." The company can be found online at http://www.countrywide.com.

Delinquencies of loans in commercial mortgage-backed securities monitored by Fitch Ratings rose to 1.62% in the second quarter, and the rating agency is forecasting a delinquency level of 2.0% by the end of the year.In 380 Fitch-monitored transactions, loan delinquencies rose 23 basis points from 1.39% in the first quarter on the rating agency's CMBS Loan Delinquency Index, Fitch said. Increased delinquencies occurred on loans in all major property types except retail, where the delinquent balance fell from $764 million to $724 million in the second quarter, Fitch said. "While delinquent hotel and retail loans continue to dominate the index, making up 60% of the total delinquent balance, there have been substantial increases in the delinquent balances of office, industrial, and multifamily loans over the past three months," said Mary O'Rourke, a Fitch senior director. Fitch can be found on the Web at http://www.fitchratings.com.

Lennar Corp., LNR Property Corp., and Newhall Land and Farming Co. have announced an agreement under which an entity owned half by Lennar and half by LNR will acquire Newhall Land, a Los Angeles-based planner of master-planned communities.The agreement provides that Newhall Land's unitholders will receive $40.50 per partnership unit in cash, which will increase at a rate of 5% annually beginning 270 days from July 21, the companies said. The purchase consideration will total approximately $990 million plus liabilities. The companies said the transaction is subject to the approval of the California Public Utilities Commission because of the change of control of Valencia Water Co. that would result from the purchase. When the transaction closes, LNR will buy existing income-producing commercial assets and Lennar will option certain homesites from the joint venture. Lennar is one of the nation's largest homebuilders, and LNR is a real estate investment, finance, and management company. Both are based in Miami.

Fidelity National Financial Inc., Irvine, Calif., has signed an agreement to purchase LandCanada Financial Services Ltd., Mississauga, Ontario.LandCanada, which is currently affiliated with LandAmerica Financial Group, Richmond, Va., will be renamed FNF Canada Co. and will be the second-largest provider of title insurance and related mortgage document production in that country. It will offer both residential and commercial title insurance; collateral, purchase, and refinance mortgage processing; remedies services; and document archiving and retrieval. The deal is expected to close in the third quarter.

California Insurance Commissioner John Garamendi has upheld an administrative law judge's ruling that Radian Lien Protection is title insurance.Mr. Garamendi had rejected the decision in April and offered all parties the chance to offer additional evidence. In a portion of his ruling called "Determination of Issues," the commissioner ruled that none of the additional evidence "is relevant to the legal question presented" and therefore did not consider the evidence in reaching his decision. The next sentence tersely states: "The Radian Lien Protection Policy constitutes title insurance pursuant to California Insurance Code Section 12340.1." The ruling means Philadelphia-based Radian Guaranty cannot offer the product anywhere in the U.S. without risking the loss of its license in California. "Radian should become a licensed title insurer to issue this product and submit to the regulatory oversight that is in place to safeguard consumers," said James Maher, executive vice president of the American Land Title Association. Radian said it will appeal the order. "We are disappointed with Commissioner Garamendi's decision, and we respectfully disagree with his assessment of our product," said Howard S. Yaruss, Radian's executive vice president and general counsel. "Radian, along with various consumer groups, will take this fight to the California State Legislature, in order to break the title insurance industry's monopoly and put an end to years of price gouging."