Originations

Single-family housing starts jumped 5.3% in June as the pace of construction reached the highest level in five months.The U.S. Census Bureau reported that single-family starts increased from a seasonally adjusted annual rate of 1.39 million in May to 1.46 million in June. Single-family permits also rose 5.3%, and the pace of construction last month was 7.6% higher than in June 2002. The government also reported that multifamily starts fell 4.3% to 312,000 in June, and MF permits fell 12.7% to 323,000.

The acquisition-hungry RBC Mortgage Co., Chicago, has agreed to buy the mortgage banking division of Sterling Bancshares, Houston, for $100 million.The sale takes Sterling out of the residential business at a time when production volumes are booming. For the Canadian-owned RBC, the deal marks its second major purchase within two months. In early June, RBC inked a deal to buy the wholesale division of Bank One Corp., Chicago. Sterling's mortgage unit, Sterling Capital Mortgage Co., funded $4.5 billion in home loans last year and is on track to fund $7 billion this year. It employs 1,400 full-timers. The transaction is expected to close in the fall of 2003 and be accretive to RBC's earnings in 2004. (See the July 21 issue of National Mortgage News for more details.)

Correctional Properties Trust, Palm Beach Gardens, Fla., has announced plans for a public offering of 3.0 million common shares of beneficial interest.The underwriters have been granted an option to buy up to an additional 450,000 shares to cover any overallotments. The sole book-running manager for the offering is Citigroup Global Markets Inc., and Banc of America Securities LLC is the co-manager. The real estate investment trust can be found on the Web at http://www.correctionalpropertiestrust.com.

Mortgages helped Merrill Lynch earn net income of $1.2 billion ($1.05 per share) in the second quarter, compared with $634 million ($0.66 per share) for the same period in 2002.Mortgage originations at the company totaled $6 billion during the quarter. Merrill Lynch can be found online at http://www.merrilllynch.com.

Washington Mutual Inc., Seattle, has reported record earnings of $1.02 billion ($1.10 per share) for the second quarter, up from $990 million ($1.01 per share) a year earlier.Originations of single-family residential loans totaled $108.16 billion for the quarter, up from $50.17 billion a year earlier. The volume of home equity loans, home equity lines of credit, and multifamily loans totaled $9.46 billion, up 80% from $5.27 billion a year earlier, WaMu said. The company said it is on schedule to open approximately 250 retail banking stores and 70 home loan stores this year. WaMu also reported that its board of directors has declared a dividend of $0.40 per share of common stock, up 33% from $0.30 per share in the previous quarter. WaMu can be found online at http://www.wamu.com.

Independence Community Bank, a multifamily mortgage lender in the New York metropolitan market, is expanding its area of operation to the Baltimore-Washington market.The bank said it expects "to work closely" in this endeavor with Meridian Capital Group, an East Coast mortgage brokerage firm with a presence in the Baltimore-Washington region. Independence has an equity interest in Meridian, the bank said. Philip Jones Jr., a former director of multifamily capital markets with Fannie Mae, has joined the bank as a Maryland/D.C.-based senior vice president, Independence said. Most recently, Mr. Jones was a managing director for national real estate with National Cooperative Bank. "Working with Meridian, we look forward to bringing the same expertise that has made us a leader in New York to the dynamic Baltimore-Washington region," said Gary Honstedt, executive vice president for commercial real estate lending at Independence Bank.

The Market Composite Index, an overall measure of mortgage applications, rose to 1358.2 on a seasonally adjusted basis during the week ended July 11 from 1346.3 the week before, according to the Mortgage Bankers Association of America's Weekly Mortgage Applications Survey.On an unadjusted basis, applications were up 26.4% on the week and 85.8% from the level recorded a year earlier. On a seasonally adjusted basis, the Purchase Index increased from 414.1 to 447.2, and the Refinance Index declined from 6768.3 to 6657.2. Refinancings represented 70.1% of total applications, down from 72.1% the previous week, while adjustable-rate mortgages accounted for 15.4%. The average contract interest rate for 30-year fixed-rate mortgages fell from 5.37% to 5.33%, and points (including the origination fee) increased from 1.46 to 1.47 for loans with 80% loan-to-value ratios, the MBA reported. The MBA can be found online at http://www.mbaa.org.

The American Land Title Association has released figures that reveal a strong financial picture for the title insurance industry in the first quarter -- the busiest quarter in its history.Total operating income for the industry was up 28.9% in the first quarter from that of a year earlier, and the loss ratio (losses as a percentage of total operating income) was 3.5%, compared with 4.6% for the first quarter of last year, ALTA reported. The level of pretax profit (before investment income) was $188.4 million, up dramatically from $50.8 million in the first quarter of 2002. On an after-tax basis, industry profits totaled $185.9 million, up from $88 million a year earlier, according to the association. ALTA can be found on the Web at http://www.alta.org.

Wells Fargo & Co., San Francisco, has reported that mortgage banking and other consumer lending drove a 10% increase in its earnings per share in the second quarter, which reached a record level.Wells Fargo reported net income of $1.525 billion in the second quarter, or $0.90 per share. The company said it funded $135 billion in home loans during the second quarter, up $32 billion from its first-quarter volume. "The impact of the lowest interest rates in 40 years and the flood of home financing activity were best reflected in the record $204 billion of applications taken by Home Mortgage during the second quarter," said Mark Oman, group executive vice president of Home and Consumer Finance. The company serviced $582 billion of home loans at the end of the second quarter, an increase of $96 billion from that of a year earlier. The portfolio has a weighted average note rate of 6.21%.

A survey by the National Association of Realtors has found that first-time homebuyers typically made a downpayment of only 6%, and 28% financed the entire purchase price of the home."Less than one-fourth made a downpayment of 20%," the NAR said in its survey of consumers who bought or sold a home late last year or in early 2003. Forty percent of the 3,023 respondents were first-time homebuyers and 60% used their savings to make the payment. "Gifts and loans from friends or family members were also significant sources of downpayment funds," the NAR said. The NAR survey also found that 42% of homebuyers used the Internet "frequently" as part of their search for properties for sale. The NAR can be found on the Internet at http://realtor.org.

Institutional investors will increase their commercial real estate investments in the second half of 2003, targeting equity and mezzanine debt, according to Stan Ross, chairman of the board of the University of Southern California Lusk Center for Real Estate in Los Angeles.Mr. Ross said he expects that investment in commercial mortgage-backed securities and other forms of debt financing will also increase this year. "While foreign investment in U.S. properties could decline in the second half, institutional players will step up their investments as they continue to diversify their portfolios and meet allocation guidelines," he said. "Investors are betting that many commercial property markets are nearing the bottom of the cycle and could begin to recover next year." Mr. Ross also says companies are continuing to sell and lease back assets to free up capital tied up in real estate. He said he expects rating agencies to expand their coverage of real estate as technology evolves and more transparent reporting is put into place. This will lead to "pricing of real estate assets and securities that better reflects the underlying risks," he said.

Jeffery D. Rudolph has been named chief financial officer of Entrust Financial Services Inc., the Denver-based parent company of Entrust Mortgage Inc.Mr. Rudolph replaces David Hite, who resigned to pursue other opportunities but remains a company director. Entrust said Mr. Rudolph has "many years" of experience as a CFO, chief operating officer, and board member of several companies in various industries. Entrust can be found on the Web at http://www.entrustfs.com.

Despite missing analysts' consensus earnings estimate by one penny in the second quarter, Fannie Mae has increased its dividend by six cents.Fannie Mae's net income, at $1.1 billion ($1.09 per share) was down 24.3% from that of a year earlier. However, Fannie Mae's "core earnings" painted a rosier picture. Fannie Mae reported second-quarter core earnings per share of $1.86, just shy of the consensus estimate but up 20% from that of a year earlier. Core earnings exclude unrealized losses on purchased options used for hedging. Those unrealized losses must be factored into net earnings under generally accepted accounting principles. Meanwhile, Fannie Mae has raised its dividend on common shares from $0.39 per share to $0.45 per share. Timothy Howard, vice chairman and chief financial officer of the government-sponsored enterprise, said the dividend increase "reflects management's confidence in the strength and sustainability of the cash flows of Fannie Mae's business," as well as increased investor focus on dividend payouts as a result of recent tax changes. Fannie Mae can be found online at http://www.fanniemae.com.

The refi boom will lose steam and mortgage lending volume will contract after hitting an all-time record this year, according to the Mortgage Bankers Association of America's first three-year economic forecast.The MBA now predicts that mortgage volume will come in at $3.4 trillion this year, with refinancing accounting for 68% of the total. But gradually-rising rates will limit refinancing in 2004 and 2005, while home purchase lending will remain strong, MBA chief economist David Duncan said in a conference call with reporters. The MBA expects home loan volume to total $1.94 trillion next year (a decline of 43% from this year's projected volume) and $1.46 trillion in 2005. The association can be found online at http://www.mbaa.org.

Investment banker Credit Suisse First Boston is conducting due diligence on GMAC Commercial Mortgage, Horsham, Pa., the nation's largest commercial mortgage banker, sources have told MortgageWire.According to one commercial official, "CSFB is on its second or third round of due diligence." CSFB, G.E. Capital, and Deutsche Bank have been mentioned as finalists for the $160 billion servicer. A spokesman for CSFB declined to comment on the matter, as did a public relations official for General Motors, the parent company of GMACCM. (See the July 14 issue of National Mortgage News for full details.)

Mortgages helped Bank of America earn record second-quarter net income of $2.70 billion ($1.80 per share), compared with $2.22 billion ($1.40 per share) for the same period in 2002.Record mortgage banking revenue of $559 million and a 13% decline in loan chargeoffs from those of a year earlier contributed to the company's second-quarter results. BoA can be found on the Web at http://www.bankofamerica.com.

MGIC Investment Corp., Milwaukee, has reported net income of $143.8 million ($1.46 per share) for the second quarter, down from $170.9 million ($1.61 per share) for the same period in 2002.Curt S. Culver, president and chief executive officer of MGIC Investment Corp. and Mortgage Guaranty Insurance Corp., said the positive impact of the record volume of $49.5 billion of new insurance written in the first half was offset by the 45-year lows in mortgage interest rates and the lack of an economic recovery.

Lee S. Saltzman has been named senior vice president and chief investment officer of American Financial Realty Trust, a real estate investment trust based in Jenkintown, Pa.Mr. Saltzman will join the REIT on July 21 from Sidley Austin Brown & Wood LLP, where he is a partner in the Real Estate Practice Group. He was previously senior vice president of business units at The Rockefeller Group and The Shorenstein Co. and vice president at Salomon Brothers Inc. AFRT specializes in acquiring properties occupied by financial institutions. The REIT can be found online at http://www.afrt.com.

Developers Diversified Realty Corp., Cleveland, has priced the sale of $300 million of seven-year senior unsecured notes.The 4.625% notes, due Aug. 1, 2010, were priced at 99.843, the real estate investment trust said. Proceeds from the offering will be used to repay borrowings under the REIT's unsecured credit facility and to selectively prepay secured mortgage financing. Banc of America Securities and JP Morgan were the joint book-running managers for the offering. DDR, which specializes in owning and managing shopping centers, can be found on the Web at http://www.ddrc.com.

SWH Funding Corp., Hackensack, N.J., and New York City-based Newbridge Realty Capital have launched Hudson Realty Capital, which will sponsor two $25 million real estate funds.The first, Hudson Debt Fund I, will focus on the origination and acquisition of high-yielding real-estate-related debt instruments. The second, Hudson Opportunity Fund I, will invest in real estate and acquire underperforming mortgage loans. "Our investment strategy is to target underserved markets that offer superior yield-to-risk returns, in the range of 12% to 18%," said Sanford S. Herrick, a managing director of HRC. The Hudson Debt Fund is expected to have approximately $100 million of origination capability when combined with HRC's existing lines of credit, and the Hudson Opportunity Fund is expected to have $25 million of equity available for both large and small "opportunistic investments." Combined with additional borrowing capacity, the latter fund is also expected to have acquisition capability of over $75 million, the companies said.